INCOMETAX OFFICER, WARD-1(1), HYDERABAD vs. M/S ALI FOREX PRIVATE LIMITED, HYDERABAD

आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A‘ Bench, Hyderabad �ी रिवश सूद,�ाियक सद� एवं �ी मधुसूदन साविड़या लेखा सद� सम� | Before Shri Ravish Sood, Judicial Member A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No. 921/Hyd/2025 (िनधा�रण वष�/Assessment Year: 2017-18) Income Tax Officer Vs. Ali Forex Private Ltd Ward 1(1) Hyderabad Hyderabad PAN: AAFCA3812J (Appellant) (Respondent) िनधा�रती �ारा/Assessee by: Advocate Mohd. Afzal राज� व �ारा/Revenue by: Smt. Seema Meena, CIT(DR) सुनवाई की तारीख/Date of hearing: 30/06/2026 घोषणा की तारीख/Pronouncement: 29/07/2026 आदेश/ORDER Per Madhusudan Sawdia, A.M.:

This appeal is filed by the Revenue feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) (“Ld. CIT(A)”) dated 06.03.2025 for the A.Y. 2017-18. 2. The Revenue has raised the following grounds of appeal: “1. The Ld. CIT erred on facts as well as law. 2. The Ld. CIT(A) erred in giving a finding that the amounts received in Bank account out of which cash withdrawals were made, are from agents, and they were distributed to designated beneficiaries without item-wise verification.

2 3. The Ld. CIT(A) grossly erred in deleting the addition of Rs.104,03,09,121/- without making any verification. The Ld. CIT (A) solely relied on the grounds of appeal raised by the assessee in this aspect, failing to make proper verification of through calling of remand report on the issue, which is in violation of Rule 46A of IT Rules, 1962. 4. Any other ground that may be added subsequently.” 3. The brief facts of the case are that the assessee is a company engaged in the business of foreign exchange. The assessee did not file its return of income for the assessment year 2017-18 under section 139 of the Income-tax Act, 1961 (“the Act”). On the basis of the information available with the Department, the Learned Assessing Officer (“Ld. AO”) noticed that during the year under consideration, the assessee had received commission and brokerage income, on which tax was deducted at source under section 194H and 194C of the Act amounting to ₹9,47,070 and ₹1500 respectively, and had made cash withdrawals from its current bank accounts aggregating to ₹105,41,10,000. Accordingly, the Ld. AO initiated reassessment proceedings under section 147 of the Act and issued notice under section 148 of the Act dated 29.03.2021. In response to the notice issued under section 148 of the Act, the assessee filed its return of income on 27.04.2021 declaring a loss of ₹33,621. During the reassessment proceedings, the Ld. AO observed that against the total cash withdrawals of ₹105,41,10,000, the assessee had disclosed only gross revenue of ₹1,38,00,879 in its return of income. According to the Ld. AO, the assessee had failed to explain the source and purpose of the substantial cash withdrawals. Accordingly, the Ld. AO treated the difference of ₹104,03,09,121 between the total cash withdrawals and the gross revenue disclosed by the assessee as unexplained and added the same under section 68 of the

3 Act. The Ld. AO further made an addition of ₹9,47,070 on account of commission and brokerage income reflected in Form No. 26AS. Consequently, the assessment was completed by the Ld. AO under section 147 read with section 144B of the Act vide order dated 29.03.2022 assessing the total income of the assessee at ₹104,12,22,570. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) partly allowed the appeal of the assessee. 5. Aggrieved by the relief granted by the Ld. CIT(A), the Revenue is in appeal before us. Ground Nos. 1 and 4 raised by the Revenue are general in nature. No specific arguments were advanced by either side in support of these grounds. Accordingly, the same require no adjudication and are dismissed. 6. Ground Nos. 2 and 3 of the Revenue relate to the deletion of the addition of ₹104,03,09,121 made by the Ld. AO. In this regard, the Learned Departmental Representative (“Ld. DR”) submitted that during the reassessment proceedings the Ld. AO specifically called upon the assessee to explain the cash withdrawals aggregating to ₹105,41,10,000. In response thereto, the assessee merely submitted that it was engaged in the business of sub-agency of Western Union & Money Gram and that the money received from the principal agencies was withdrawn from the bank accounts and paid to the designated beneficiaries. It was further submitted by the assessee before the Ld. AO that it had withdrawn only approximately ₹30 crores during the year and not ₹105 crores. Inviting our attention to page no. 4 of the assessment order, the Ld. DR submitted that

4 the Ld. AO had categorically recorded that the assessee had failed to disclose the transactions carried out through two HDFC Bank accounts while explaining the cash withdrawals. It was further submitted that the assessee failed to furnish the purpose of the cash withdrawals as well as the source of the funds deposited in the bank accounts despite specific opportunities granted during the assessment proceedings. Accordingly, the difference between the total cash withdrawals and the income disclosed by the assessee was rightly brought to tax. The Ld. DR further invited our attention to para no. 6 of the order of the Ld. CIT(A) and submitted that though the Ld. CIT(A) had called for a remand report, the Ld. AO in the remand proceedings reported that during the year under consideration the actual amount of withdrawals by the assessee from its Bank Account are aggregating to ₹78,88,31,494. During the remand proceedings it was noticed that though there were no cash withdrawals in one HDFC Bank accounts, there was substantial cash withdrawal of ₹49,33,88,731 from another HDFC Bank account which had not been disclosed by the assessee during the original assessment proceedings. The Ld. DR submitted that the non-disclosure of the said bank account during the original assessment proceedings clearly established the lack of bona fides on the part of the assessee. It was contended that the assessee disclosed the said account only after the Ld. AO had specifically pointed out the non-disclosure of 2 Bank Accounts with HDFC Bank during the assessment proceedings. The Ld. DR further submitted that even during the remand proceedings the assessee failed to produce complete documentary evidence establishing the source of funds deposited in the bank accounts, the details of the beneficiaries, and the utilization of the cash withdrawn.

5 According to the Ld. DR, the assessee merely reiterated that it was acting as a sub-agent of Western Union & Money Gram without substantiating the same with complete documentary evidence. 7. Inviting our attention to page no. 39 of the appellate order, the Ld. DR submitted that the Ld. CIT(A) had recorded findings that the assessee received money from the principal agencies which was thereafter paid to the designated beneficiaries and that such remittances represented money sent by relatives residing abroad. However, no reasons whatsoever have been assigned by the Ld. CIT(A) as to how such conclusions were arrived at or what material was relied upon for recording such findings. It was, therefore, submitted that the Ld. CIT(A) deleted the additions without proper verification and in violation of Rule 46A of the Income-tax Rules, 1962. Accordingly, it was prayed that the order of the Ld. CIT(A) be set aside and that of the Ld. AO be restored. 8. Per contra, the Learned Authorized Representative (“Ld. AR”) supported the order of the Ld. CIT(A). Inviting our attention to para no. 6 of the appellate order, he submitted that the contention of the Revenue that no remand report was called for is factually incorrect. The Ld. CIT(A) had in fact obtained a remand report from the Ld. AO, which was received on 20.11.2024, and only after considering the remand report and the submissions of the assessee, granted relief. The Ld. AR further invited our attention to page no. 3 of the assessment order and submitted that even before the Ld. AO, the assessee had specifically explained that it was engaged in the business of sub-agency of Western Union & Money Gram and that the amounts received from the principal agencies were paid to the

6 designated beneficiaries after withdrawing cash from the bank accounts after deducting the amount of commission. It was also submitted that the assessee had furnished before the Ld. AO a summary of money transfer receipts and payments made during the relevant financial year. Therefore, according to the Ld. AR, the contention of the Revenue that the assessee had failed to furnish the relevant details before the Ld. AO is factually incorrect. He accordingly submitted that no interference with the order of the Ld. CIT(A) is called for. 9. We have heard the rival submissions and perused the material available on record. At the outset, we have gone through the submissions made by the assessee before the Ld. AO as reproduced at page no. 3 of the assessment order, which is to the following effect:

7 10. On perusal of the above, we find that the assessee had merely submitted that it was engaged in the business of sub-agency of Western Union & Money Gram and had furnished only a summary of money transfer receipts and payments during the financial year relevant to the assessment year under consideration. However, the assessee has failed to demonstrate before us, or point out any material placed before the Ld. AO, to establish that it had furnished the complete details of the persons from whom the money was received in the bank accounts, the respective beneficiaries for whom such remittances were intended, and the details of payments made to each beneficiary out of the cash withdrawn from the bank accounts. Therefore, we reject the contention of the assessee that all the requisite details had already been furnished before the Ld. AO. We have also gone through the relevant observations recorded by the Ld. AO at page no. 4 of the assessment order, which is to the following effect:

8 11. On perusal of the above, we find that the Ld. AO has categorically recorded that the assessee failed to disclose the entire transactions carried out through two HDFC Bank accounts while explaining the cash withdrawals. Further, from the remand report, we find that there was substantial cash withdrawal amounting to ₹49,33,88,731 from one of the HDFC Bank accounts which had not been disclosed by the assessee during the original assessment proceedings. Once substantial cash withdrawals from one of the HDFC Bank accounts were not disclosed before the Ld. AO, the contention of the assessee that complete details of deposits and withdrawals had already been furnished before the Ld. AO cannot be accepted. We further find that the Ld. AO has categorically recorded that the assessee failed to explain the purpose of the cash withdrawals as well as the source of the funds deposited in the bank accounts despite specific opportunities granted during the assessment proceedings. In this regard we have gone through the relevant para of page nos. 38 & 39 of the order of the Ld. CIT (A), which is to the following effect:

“The comments of the AO were examined. It is apparent that in the remand proceedings the appellant has provided all the relevant documents to the AO. During the remand proceedings the appellant has submitted the copies of agreements with EBIX Money Exchange P. Ltd. and WallStreet Finance and as per the RBI license granting the appellant as ‘Money Changer’ it was clear that the appellant was engaged in the money exchange business. After making necessary verification, the AO has reported in remand proceedings that the total cash withdrawals from the bank accounts amounting to Rs. 78,88,31,494/-instead of Rs. 1,05,41,10,000/- as mentioned in assessment order. Accordingly, the appellant has also accepted in its rejoinder that during the year under consideration it has made cash withdrawals of Rs. 78,88,31,494/-. Thus, total cash withdrawals from

9 the bank accounts amounting to Rs. 78,88,31,494/ is verified. The appellant receives money in its bank account(s) from agency, which is paid to the designated beneficiaries after withdrawing the same from Bank Account. The Cash Withdrawals are made for Payment to the beneficiaries for whom the Amount has been transferred from Abroad from their relatives via Agency (Western Union, MoneyGram). Hence, it is proved that the said withdrawals of cash from bank account is not income of the assessee. Hence, considering the submission of the assessee and also the remand report of the AO on this ground, the appeal of the assessee on this ground is allowed and accordingly, the addition made by the assessing Officer in the order u/s 143(3) is deleted” 12. On perusal of the above, we find that the Ld. CIT(A), without assigning any reasons or discussing the evidences available on record, has simply observed that the assessee received money in its bank accounts from the principal agencies and paid the same to the designated beneficiaries after withdrawing cash from the bank accounts. The Ld. CIT(A) has further observed that the remittances represented money sent by relatives of the beneficiaries residing abroad. However, we do not find any discussion in the appellate order indicating the basis on which such findings have been recorded. The Ld. CIT(A) has neither referred to any documentary evidence nor explained how he was satisfied regarding the identity of the remitters, the designated beneficiaries, the correlation between the deposits and the withdrawals, or the actual payment of cash to the beneficiaries. In our considered opinion, such findings could not have been recorded without proper verification of the relevant documentary evidences. The appellate authority is expected to pass a reasoned and speaking order dealing with the findings recorded by the Ld.

10 AO. In the present case, the impugned order does not disclose any reasons for disagreeing with the specific findings recorded by the Ld. AO. Although the Ld. AR has submitted that the Ld. CIT(A) had obtained a remand report from the Ld. AO, we find that neither the remand report nor the impugned order establishes any one-to-one correlation between the amounts received in the bank accounts and the corresponding payments made to the beneficiaries after cash withdrawals. Similarly, there is no proper verification regarding the source of the funds credited into the bank accounts or the purpose of the cash withdrawals. Having regard to the totality of the facts and circumstances of the case, we are of the considered opinion that the issue requires fresh examination at the level of the Ld. CIT(A). Accordingly, in the interest of justice, we set aside the impugned order of the Ld. CIT(A) on this issue and restore the matter to his file with a direction to adjudicate the issue afresh after obtaining a comprehensive remand report from the Ld. AO. The Ld. CIT(A) shall specifically direct the Ld. AO to verify the complete details of all bank accounts maintained by the assessee during the relevant previous year, the source and nature of every credit appearing therein, the particulars of remittances received from the principal agencies, namely Western Union & Money Gram, the identity of the beneficiaries, the correlation between the amounts credited in the bank accounts and the corresponding cash withdrawals, and the evidences establishing that the cash withdrawn was actually disbursed to the respective beneficiaries. The assessee has also submitted that in the process of the sub-agency business, the assessee earned commission income. Therefore, the assessee is also required to reconcile the commission income received from each of the beneficiaries along with the amount paid to

11 the respective beneficiaries. The Ld. CIT(A) shall thereafter consider the remand report, the objections of the assessee thereto, and all documentary evidences that may be placed on record by both the parties and thereafter pass a reasoned and speaking order in accordance with law after affording adequate opportunity of being heard to both the assessee as well as the Revenue. Accordingly, Ground Nos. 2 and 3 of the Revenue’s appeal are allowed for statistical purposes. 13. In the result, the appeal filed by the Revenue is allowed for statistical purposes. Order pronounced in the Open Court on 29th July, 2026. Sd/- Sd/- (RAVISH SOOD) (MADHUSUDAN SAWDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 29th July, 2026. Vinodan/sps Copy to: S.No Addresses 1 ALI FOREX PRIVATE LIMITED 11-3-394 , NEW MALLEPALLY HYDERABAD 500001 2 Income Tax Officer Ward-1(1), 7th Floor, B Block, IT Towers, Hyderabad 500004 3 Pr. CIT, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order

TIRUPATI Digitally signed by TIRUPATI YAMINI YAMINI NAGA NAGA MALLESWARI Date: 2026.07.29 MALLESWARI 16:03:10 +05'30'