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Facts
The assessee filed a return declaring income for AY 2016-17 and the case was selected for scrutiny. The Assessing Officer (AO) made additions on account of undisclosed business profit, income from other sources, and long-term capital gains, treating cash deposits in bank accounts as unexplained.
Held
The Tribunal noted that new explanations and documents were presented by the assessee for the first time. Consequently, the Tribunal restored the issues related to undisclosed business profit, income from other sources, and long-term capital gains to the AO for fresh consideration.
Key Issues
Whether the additions made by the AO on account of undisclosed business profit, income from other sources, and long-term capital gains are justified, especially when new evidence is presented before the Tribunal.
Sections Cited
44AD, 234A, 234B, 143(3), 250
AI-generated summary — verify with the full judgment below
Before: SHRI ANIKESH BANERJEE & SMT. RENU JAUHRI
आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi [Ld. CIT(A)], dated 12.01.2024 passed u/s. 250 of the Income Tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year 2016-17.
The assessee has raised the following grounds in this appeal.
“1) The Learned NFAC has erred in law & on facts in upholding the Learned AO's action of addition of Rs 14,92,643/- on account of NP on undisclosed turnover of Rs.45,41,050/- 2) The Learned NFAC has erred in law & on facts in upholding the Learned AC's action of addition of Rs.31,03,000/- under the head income from other sources. 3) The Learned NFAC has erred in law & on facts in upholding the Learned AO's action of addition of Rs.6,94,853/-under the head Long term capital gain. 4) The Learned NFAC has erred in law & on facts in upholding the Learned AO's action of addition of Rs.52,361/- under the head income from other sources, Nest premed 5) The Learned CIT (A) has erred in law & on facts in upholding the Learned AO's action of imposing interest under Section 234A of the Income Tax Act, 1961. 6) The Learned CIT (A) has erred in law & on facts in upholding the Learned AO's action of imposing interest under Section 234B of the Income Tax Act, 1961. 7) The Appellant craves leave to add to and/ or amend and/ or delete and/or modify and/or alter the aforesaid grounds of appeal as and when the occasion demands. 8) All the aforesaid grounds of appeal are independent, in the alternative and without prejudice to one another.”
Brief facts of the case are that the assessee filed return declaring total income of Rs. 23,80,150/- for AY 2016-17 on 06.03.2017. The case was selected for scrutiny. The assessee had shown business income from advertisement hoardings and declared profit on it as per the provisions of Section 44AD of the Act. The assessee has shown turnover of Rs.70,05,452/-and declared net profit of Rs.23,02,958/- which is @32.87% of the total turnover. As per AIR information available with the department, the assessee was found to have made cash deposits in his two saving bank accounts.
(i) Total cash of Rs.1,10,46,500/- was deposited in these two bank accounts during the year under consideration. Ld. AO, after rejecting the assessee’s explanation, held that cash deposits to the tune of Rs. 45,41,050/- were unexplained, after taking into account his declared sales turnover, (ii) Further, after examining the credit entries in these bank accounts amounting to Rs. 2,23,77,728/-, the AO came to the conclusion that out of these, four entries totalling Rs. 31,03,000/- remained unexplained and the same were treated as assessee’s income from other sources. (iii) In respect of the credit entry of Rs. 40 lacs in his ICICI bank account, the assessee had submitted that the same was on account of cancellation of the flat booked with M/s. Golden Beach Hotels and Resorts Private Limited. Ld. AO observed that the assessee had booked the flat in June 2010 and paid Rs. 21,73,876/- to the builder. Since the project could not be completed, he cancelled the booking in FY 2015-16 and got total consideration of Rs. 40 lacs from the builder. Accordingly, Ld. AO computed the long-term capital gain arising out of these transactions at Rs. 6,94,853/-. (iv) Finally, Ld. AO made another addition of Rs. 52,361/- being difference of income from other sources shown in the return (Rs.1,36,188/-) and total interest income actually earned during the year (Rs. 1,88,549/-).
3.1. The assessment was finalised at a total income of Rs. 77,23,000/- vide order u/s. 143(3) dated 30/12/2018. Aggrieved with the order, the assessee preferred an appeal before Ld. CIT(A). Vide order dated 12.01.2024, Ld. CIT(A) dismissed the assessee’s appeal. The assessee has filed an appeal before the Tribunal against the order of Ld. CIT(A).
Ground No.1: Undisclosed business profit Rs. 14,92,643/- Before us, Ld. AR has argued that complete facts of the case which were brought out before Ld. CIT(A), but these have not been properly appreciated. Ld. AR has filed written submissions in the form of a Fact Sheet wherein working of amounts to be excluded from unexplained cash deposits, treated as undisclosed business profit by the Ld. AO, has been given. Based on this working, it has been argued that the unexplained cash deposits where could be considered for undisclosed business profit, works out to be a negative figure and, therefore, the addition of Rs. 14,92,643/- made on account of profit calculated @ 32.87% on undisclosed business turnover is required to be deleted.
4.1. Ld. DR on the other hand, has pointed out that based on submissions made before Ld. CIT(A), a remand report was sought from the Ld. AO. However, the assessee did not respond to the notices issued by the AO during the remand proceedings and hence Ld. CIT(A) observed that the new explanation given by the assessee is not supported by any evidence and accordingly, the contention of the assessee was rightly rejected by the Ld. CIT(A).
4.2. We have heard the rival submissions and perused the material placed before us. Since the assessee has furnished a new working of the amount to be treated as undisclosed profit, in the interest of justice, we deem it appropriate to restore this issue to Ld. AO for fresh consideration after giving the assessee due opportunity of being heard.
Ground No.2: Addition under the head ‘income from other sources’ -Rs. 31,03,000/- Ld. AR has filed a written submission before us, wherein fresh explanation with regard to each of the four credit entries (totalling Rs. 31,03,000/-) has been made, along with supporting documents. As these have not been examined by the lower authorities, we deem it appropriate to restore this issue also to Ld. AO for verification and decision afresh after giving due opportunity to the assessee.
Ground No.3: Addition under the long-term capital gain – Rs. 6,94,853/- With regard to the transaction of booking and cancellation of the flat in a project at Chembur, Mumbai, the assessee has now furnished copies of confirmation from the builder as well as other documents for the first time, which require verification. In the interest of justice, we deem it appropriate to restore this issue as well as to the file of Ld. AO for fresh consideration after giving due opportunity to the assessee.
Ground No.4: Addition of Rs. 52,361/- under the head income from other sources. The assessee has not pressed this ground of appeal.
8. Ground No.5 & 6: Charging of interest u/s. 234A and 234B. Both these grounds being consequential need no separate adjudication.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 11.08.2025.
Sd/- Sd/- ANIKESH BANERJEE RENU JAUHRI (न्यानयक सदस्य/JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER) Place: म ुंबई/Mumbai दिन ुंक /Date 11.08.2025 दिव्य रमेश न ुंिग वकर/ स्टेनो आदेश की प्रनतनलनि अग्रेनित/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यानित प्रनत //True Copy// आदेशािुसार/ BY ORDER,