QUEEN GEMS PRIVATE LIMITED,MUMBAI vs. ITO, WARD 2(1)(1), SURAT., SURAT

This is a Quantum-Appeal directed against the order of first appeal dated 13.08.2025 passed by learned Commissioner of Income-tax (Appeals)-NFAC, Delhi [“Ld. CIT(A)”], which in turn arises out of the assessment-order dated 23.05.2023 passed by Assessment Unit, Income Tax Department [“Ld. AO”] u/s 147 r.w.s. 144B of the Income-tax Act, 1961 [“Act”] for assessment-year [“AY”] 2013-14.

Briefly stated, the facts of the case are such that the assessee- company, engaged in the business of export-import and trading of diamond, filed its return of income u/s 139 declaring a total income of Rs. 1,21,720/- which was assessed at Rs. 1,88,900/- u/s 143(3) vide order dated 07.03.2016. Subsequently, taking into account an information that the assessee was involved in providing accommodation entry with Hollistar & Co. and Mohd. Afroz Hassanfatta, the Ld. AO re-opened asessee’s case u/s 147 through a notice dated 27.07.2022 u/s 148. Thereafter, the Ld. AO also issued notices u/s 142(1)/show-cause notice which the assessee complied with. Ultimately, the Ld. AO completed re-opened assessment at a total income of Rs. 3,60,02,404/- after making these two additions, namely (i) addition of Rs. 1,59,00,000/- in connection with the transactions with M/s Hollistar & Co. u/s 69A and (ii) addition of Rs. 1,99,13,512/- on account of business profit u/s 44AD. Aggrieved, the assessee carried matter in first-appeal before Ld. CIT(A) whereupon the Ld. CIT(A) dismissed assessee’s appeal and confirmed AO’s order. Still aggrieved, the assessee has come in present appeal before us.

The assessee has raised following grounds in this appeal:

This ground is not pressed. Accordingly the same is dismissed as non-pressed.

By means of these grounds, the assessee is challenging the addition of Rs. 1,59,00,000/- made by Ld. AO u/s 69A and upheld by Ld. CIT(A).

Ld. AR for assessee submitted that the Ld. AO has made impugned addition through Para 3(i) to (viii) of assessment-order. This addition has been made in respect of a sum of Rs. 1,59,00,000/- received by assessee from M/s Hollistar & Co. During proceedings, the assessee explained to Ld. AO that the said sum was the money given by M/s Hollistar & Co. towards supply of goods but since the assessee was unable to make supply, the same was returned. The assessee also filed copy of ledger a/c, bill and bank statement to Ld. AO; this factum of filing documents is acknowledged by Ld. AO in Para 3(vii) of assessment-order. Thereafter, Ld. AR referred Page No. 37 to 40 of Paper-Book where these documents are placed. Drawing our attention to same, the Ld. AR explained that the assessee actually received a sum of Rs. 1,67,80,000/- from M/s Holilistar & Co. against which the assessee made a part supply for Rs. 8,05,000/- on 28.01.2013 and the rest of the advance of Rs. 1,59,00,000/- was refunded (the difference of Rs. 75,000/- was due to another payment made to party). The bill issued by assessee for sale of Rs. 8,05,000/- is available at Page No. 38 of Paper-Book. The bank statement of assessee showing the transactions of receipts from and refunds to M/s Hollistar & Co. is filed at Pages 39 to 40 of Paper-Book. Thus, Ld. AR contended, when the receipt from Holistar is fully squared up during the year, partly by way of sale of goods and remaining by refund to the party, there cannot be any addition u/s 69A. Hence, the addition is unsustainable and must be deleted.

Ld. DR for revenue supported the orders of lower authorities.

We have heard the rival submissions and perused the material available on record. We find that the assessee explained before the Ld. AO that the impugned amount represented a business advance received from M/s Hollistar & Co. against the proposed supply of goods, which was subsequently settled partly through the supply of goods worth Rs.

By means of these grounds, the assessee is challenging the addition of Rs. 1,99,13,512/- made u/s 44AD by Ld. AO and upheld by Ld. CIT(A).

Ld. AR for assessee submitted that AO has made this addition through Para 3(ix) of assessment-order on the premise that the audit report of assessee available on website of department is not proper and the same does not disclose any sale, purchase or profit. On this basis, the AO has invoked section 145(3) and estimated business profit of Rs. 2,01,02,404/- @ 8% of turnover of Rs. 25,12,80,049/-; given credit of the income of Rs. Rs. 1,88,892/- declared by assessee in the return of income; and made addition for difference of Rs. 1,99,13,512/-. Ld. AR submitted that the audit report u/s 44AB was e-filed on 06.09.2013, a screenshot of income- tax portal is filed in support. Further, the assessee again filed a copy of audit report to AO during assessment-proceeding on 17.04.2023, copy of e- filing acknowledgement is placed in Paper-Book at Page No. 56.

Ld. DR for revenue suggested that this issue may be remanded to Ld. AO.

We have heard the rival submissions and perused the material available on record. The Ld. AR has submitted that the audit report u/s 44AB was duly e-filed on 06.09.2013 as evidenced by screenshot of portal of income-tax department and that a copy thereof was also furnished before the Ld. AO during the reassessment proceedings on 17.04.2023 as evidenced by the e-filing acknowledgement placed at page 56 of the Paper Book. Since the estimation of business income by the Ld. AO was based on the alleged inadequacy of the audit report available on the Department’s portal, we consider it appropriate to restore this issue to the file of the Ld. AO for fresh adjudication. The Ld. AO shall verify the audit report and any other document as the assessee may furnish and decide this issue afresh in accordance with law after affording the assessee a reasonable opportunity of being heard. Ground No. 3 and Additional Ground No. 2 are accordingly allowed for statistical purposes.

Accordingly, this Quantum-Appeal is allowed in terms mentioned above.

This is a Penalty-Appeal directed against the order of first appeal dated 13.08.2025 passed by Ld. CIT(A), which in turn arises out of the penalty-order dated 23.02.2024 passed by Ld. AO u/s 271B of the Act for AY 2013-14.

We have considered the rival submissions and perused the material available on record. This appeal challenges the penalty of Rs. 1,50,000/- imposed by Ld. AO u/s 271B. The case of the Ld. AO is that the audit report furnished by the assessee was not proper; no sale/purchase value and profit/loss had been filled up; audit report was not available for verification during the assessment proceedings. On the other hand, the Ld. AR has placed reliance on the evidence of electronic filing of the audit report on 06.09.2013 and the subsequent furnishing of a copy thereof before the Ld. AO on 17.04.2023. Having regard to the material on record, we find that the levy of penalty u/s 271B must be examined with reference to the specific statutory default contemplated by that provision, namely, failure to get the accounts audited or to furnish the audit report as required u/s 44AB. Mere objection regarding the particulars contained in the report, without establishing the requisite statutory default, would not, by itself, justify the levy of penalty u/s 271B. Since the evidence on record establishes that the assessee had obtained the audit report and furnished it within the applicable statutory requirements, the basis adopted by the Ld. AO does not sustain the impugned penalty. Accordingly, we direct the Ld. AO to delete the penalty of Rs. 1,50,000/- imposed u/s 271B of the Act.

However, we direct the assessee to furnish a clearly legible copy of the audit report, if required by Ld. AO, for the limited purpose of completion of the quantum proceedings.

Accordingly, this Penalty-Appeal is allowed.

In result, both appeals are allowed in terms as mentioned above.