MUKESH HIMATMAL SHAH HUF,MUMBAI vs. INCOME TAX OFFICER-WARD 23(2)(6), MUMBAI

The Learned Commissioner of Income Tax Appeals - National Faceless Appeal Center [“Ld. CIT(A)”] has erred in confirming the addition of Rs. 25,00,000/- made by the Learned Assessing Officer [“AO”] under section 68 of the Act. On the facts and circumstances of the case and in law the addition ought to be deleted.

The Ld. CIT(A) has erred in law and on facts in upholding the action of the Ld. AO, which is arbitrary, unjustified, and bad in law, inter alia, on the following grounds: a) The Ld. AO, vide show cause notice dated 18.02.2021, had initially proposed to make an addition under Section 56(2)(x) of the Act on a protective basis, and had called upon the Appellant to offer the said amount to tax and discharge the tax liability thereon in AY 2021-22; b) Pursuant thereto, the Appellant, in good faith and relying upon the aforesaid proposal, agreed to offer the said amount to tax in A.Y. 2021–22 (considering the applicable limitation period) and duly discharged the tax liability thereon vide challan no. 90129 dated 20.04.2021, which was also furnished to the Ld. AO during the course of assessment proceedings; c) Subsequently, on 25.08.2021, the Ld. AO issued another show cause notice proposing to make an addition under Section 68 of the Act, thereby fundamentally changing the basis and nature of the proposed addition; d) However, in the final assessment order, the Ld. AO proceeded to make addition under Section 68 of the Act without affording a proper, adequate, and effective opportunity of being heard to the Appellant in respect of such change; The aforesaid action of the Ld. AO is in clear violation of the principles of natural justice and is therefore deserves to be deleted.

Without prejudice and in the alternative, the Ld. CIT(A) has failed to appreciate that the Appellant has already offered the sum of Rs. 25,00,000/- to tax in A.Y. 2021-22 and paid taxes thereon based on the draft assessment order; accordingly, sustaining the addition again in A.Y. 2018-19 results in double taxation. On the facts and circumstances of the case and in law, the addition to be deleted and/or suitable directions be issued to grant corresponding relief/credit to avoid double taxation.

Brief facts of the case are that the assessee, a Hindu undivided family, is engaged in the business of manufacturing of grey cloth under P a g e | 3 A.Y. 2018-19 Mukesh Himatmal Shah HUF the name of Sree Navkar Tex-Weave. The assessee purchases yarn and gives it for sizing and weaving to produce the final product. For the relevant year,itwas found by the AO that the assessee had received Rs 25 lakh from one Pushpendra Trading Private Limited comprising of Rs.15,00,000/- on 23/2/2018 and Rs 10,00,000/- on 22/3/2018. No interest had been paid on this money received by the assessee till date and no service/goods had been provided by it to the said concern in exchange for this receipt of money. The AO noted that the entity saiddid not respond to the notices issued to cross-verify such information. It was gathered from the Ministry of Corporate Affairs website that this concern had been struck off by the