SHRI. SURESH KUMAR HARISHANKAR,BENGALURU vs. THE INCOME TAX OFFICER, WARD 2(2)(1), BENGALURU, BENGALURU

The brief facts of the case are that the assessee is an individual and in the business of garments. The assessee filed his return of income on 29/10/2022. The return was processed u/s. 143(1) of the Act. Thereafter, the case of the assessee was selected for the scrutiny under the CASS. The AO had selected the case for scrutiny on the information in verification cases upload through CRIU as search action was conducted on M/s. JM Jain LLP & Others on 28/05/2022. On the basis of the search, the revenue had found out the parallel server was maintained by the said Jain group in which the transactions between the vendors and customers containing cheque and cash components were recorded. The said unaccounted transactions were managed under and controlled by the employee of M/s. JM Jain. The seized documents and the digital data in the parallel books of accounts of JM Jain were found from their offices and the same were seized. Based on the said seized documents, an allegation was made by the revenue that the assessee has done transaction amounting to Rs. 1,04,49,650/- which is evidenced from the excel sheets seized. On the said basis, it was concluded that the transactions are bogus and therefore the AO had proposed to disallow the same and added the same to the total income of the assessee. The assessee had not responded to the said notices issued by the AO and therefore, the AO had treated the said financial transactions as unexplained expenditure u/s. 69C of the Act. Similarly, the AO had found that the assessee had not deducted the TDS while making payment to one Veena Kumari. A show cause notice was also issued by the AO, that why the transaction amount with JM Jain group should not be treated as a bogus and therefore, the expenditure towards the same could not be treated as unexplained expenditure u/s. 69C of the Act. The AO had also proposed to add the payment made to Veena Kumari since the TDS was not deducted by the assessee. The assessee had not responded to the said show cause notice also and therefore, the AO had confirmed the proposals and made the additions.

As against the said additions, the assessee filed an appeal before the Ld.CIT(A) with a delay of 644 days. The assessee filed an application to condone the said delay. The assessee had submitted that the proceedings initiated by the AO were not known to the assessee since he was under the Bonafide belief that the return has been accepted as such u/s. 143(1) of the Act. The notices were also sent to the assessee’s auditor’s earlier email address and therefore, the auditor was also not aware about the assessment proceedings. Further, it was stated that the auditor had also suffered with serious eye problems from 03/06/2024 to 05/07/2025 and also enclosed the medical reports and submitted that, in such circumstances, the above said delay has been happened. The Ld.CIT(A) also without considering the reasons given by the assessee and also without considering the genuine reason of the illness happened to the auditor, had dismissed the delay condonation application and consequently, he has not adjudicated the grounds on merits and dismissed the appeal.

Against the said order, the present appeal has been filed by the assessee before this Tribunal.

At the time of hearing, the Ld.AR submitted that Ld.CIT(A) had not considered the genuine reasons stated by the assessee and also not considered the medical report enclosed along with the delay condonation application and therefore, the order of the Ld.CIT(A) is not a reasoned order. The Ld.AR further submitted that apart from the transactions recorded in the books of the assessee, he has no other transaction with the said JM Jain group and also relied on the excel sheet which was seized at the premises of the M/s. Jain Group in which it was clearly mentioned in column 3 the name of the dealer as Shri Collection whereas the business run by the assessee is in the name of Tanushree Exports and therefore, submitted that the authorities instead of fixing the liability on the said Shri Collection wrongly made the assessment in the name of the assessee. The Ld.AR further submitted that the assessee could not be able to point out the mistakes before the AO as well as before the Ld.CIT(A) and therefore, prayed an opportunity to appear before the AO along with the documents. The Ld.AR also submitted that the disallowance u/s. 40(a)(ia) of the Act is not correct.

The Ld.DR submitted that the additions were made on the basis of the search conducted in the premises of M/s. JM Jain Group and also the said fact was not disputed by the assessee before the AO and in such circumstances, the additions made by the AO is in order. The Ld.DR also submitted that the reasons stated in the application to condone the delay is also not genuine reasons and therefore, prayed to dismiss the appeal.

We have heard the arguments of both sides and perused the materials available on record.

In the present appeal, the Ld.CIT(A) had not considered the reasons given by the assessee for condoning the delay even though the reasons were explained along with the medical records. We, therefore, inclined to condone the delay in filing the appeal before the Ld.CIT(A). On merits, we have also perused the show cause notice issued by the AO as well as the assessment order in which the authorities had proposed to make the addition based on the excel sheet seized from the business premises of M/s. JM Jain group. In the said excel sheet relied on by the revenue, it was clearly mentioned the name of the business as Shri Collection whereas the concern of the assessee is Tanushree Exports. The assessee had also explained that the said Shri Collection is also having the business address as No. 6, 2nd Floor, KCS Compound, Ground Floor, Tulsi Tota Main Road, AS Char Street, Bangalore – 560 061. In the excel sheet seized, the PAN of the assessee has been mentioned in column 8. In column number 11, the address of the said Shri Collection was mentioned. In such circumstances, we are not sure how the AO had made the assessment in the name of the assessee. Unfortunately, the assessee had not appeared before the AO and the Ld.CIT(A) also had no occasion to consider the issue on merits.

It seems that the AO had not conducted any enquiry to find out the genuineness of the transaction in the hands of the assessee. We are satisfied that the issue requires further examination in the hands of the AO. We, therefore, set aside the orders of the AO as well as the Ld.CIT(A) and remit the issue to the file of the AO for considering the issue afresh after conducting proper enquiry including the disallowance made u/s. 40(a)(ia) of the Act. It is needless to mention that the AO would grant a reasonable opportunity of being heard to the assessee while passing the assessment order. We also permit the assessee to produce the documents in support of his case.

In the result, the appeal filed by the assessee is allowed for statistical purposes.