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Facts
The assessee filed a return of income, which was processed and later selected for scrutiny. During scrutiny, the AO noticed large import values and cash deposits made by the assessee, which were not adequately explained or supported by business income.
Held
The Tribunal held that the CIT(A) erred in deleting the addition related to imports without proper verification, despite the AO's requests for comments. The Tribunal restored this issue to the AO for fresh adjudication.
Key Issues
Whether the CIT(A) was justified in deleting the addition without proper verification and whether the issue of cash deposit and imports needs to be remanded to the AO for fresh assessment.
Sections Cited
143(1), 68, 69C, 44AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, HON’BLE & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE
Assessment Year: 2015-16 DCIT, 42(3)(1), Mumbai M/s. Shradha Harshit Saiya 40, 3rd Floor Vs Moreshwar Building Lakhamshi Napoo Road Matunga - 400019 [PAN: AFPPD6268P] अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Assessee by : Shri Nishit Gandhi – Advocate & Aadnya Bhandari – Advocate, A/Rs Revenue by : Shri Bhangepatil Pushkaraj Ramesh, Sr. D/R सुनवाई की तारीख/Date of Hearing : 22/01/2025 घोषणा की तारीख /Date of Pronouncement: 29/01/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: & I.T.A. No. 5327/Mum/2024, are cross-appeals by the assessee and the revenue preferred against the order dated 29/08/2024 by NFAC Delhi [hereinafter ‘the ld. CIT(A)’], pertaining to AY 2015-16. I.T.A. No. 5297/Mum/2024 I.T.A. No. 5327/Mum/2024 2 2. Both these appeals were heard together and are disposed off by this common order for the sake of convenience and brevity. ITA No. 5327/Mum/2024; AY 2015-16 3. Briefly stated the facts of the case are that the assessee filed her return of income on 28/08/2015, declaring total income at Rs.8,77,950/-. The return was processed u/s 143(1) of the Act and subsequently selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee.
While scrutinising the return of income, the AO noticed that the assessee has done large value of imports amounting to Rs.5,14,06,752/-. The AO found that the assessee has not shown any income from business even though she has imported various items of Rs.5,14,06,752/- under proprietorship concern M/s. Shradha Industries and further found that the assessee has deposited cash of Rs.53,89,000/- for payment of demurrage charge for importing commodities by RR Traders.
4.1. The assesse was asked to furnish the details of imports and the cash deposited in The Greater Bombay Co-operative Bank. On receiving no plausible reply, insofar as the cash deposits were concerned, the AO made addition of the entire cash deposit of Rs. 53,89,000/- u/s 68 of the Act.
4.2. Insofar as the large value of imports of Rs.5,14,06,752/- is concerned, the AO observed that the assessee has not shown any income 3 from business though she has imported substantial amount of goods and paid custom duty of Rs.1,45,04,888/-. The assessee was asked to submit details along with invoices, bill of entry, bill of lading and challans of payment of custom duty. The assessee did not furnish any profit and loss account, bills/vouchers of imports and any income derived from these transactions. The assessee explained that she is doing job in CITIUS IT Solution Pvt. Ltd. and her father is looking after the business in her name by virtue of a general power of attorney and imported various items using her IEC code. The AO further observed that the AIR information could not be reconciled with any documentary evidence. The AO was left with no choice but to make the addition of Rs. 6,59,11,640/- being import of Rs.5,14,06,752/- plus custom duty of Rs.1,45,04,888/- u/s 69C of the Act.
The assessee challenged the addition before the ld. CIT(A) and reiterated that no import was done and no custom duty was paid though the same has been done using IEC code of the assessee by some unscrupulous brokers. It was brought to the notice of the ld. CIT(A) that a complain has been filed with the police authorities and also with the Commissioner of Customs. The details of such complaints were provided. In order to verify this contention of the assessee, the ld. CIT(A) called for the comments of the AO several times on 19/10/2022, 05/02/2024, 14/05/2024 and 10/06/2024 and on receiving no plausible reply/comments from the AO and simply quoting that no such entries 4 were found in the bank account of the assessee, the ld. CIT(A) deleted the addition of Rs.6,59,11,640/-.
5.1. Insofar as the addition on account of cash deposit is concerned, the same was upheld by the ld. CIT(A) for which the assessee is in appeal.
Before us, the ld. Counsel for the assessee reiterated what has been stated before the ld. CIT(A).
6.1. The ld. D/R strongly contended that the police complaints and the complaint with the Customs Authorities have been furnished for the first time before the ld. CIT(A) and the ld. CIT(A) deleted the addition merely on the strength of the submissions made by the assessee without any verification.
We have given a thoughtful consideration to the orders of the authorities below. It is true that letters of complaints were furnished for the first time before the ld. CIT(A) but it is equally true that the ld. CIT(A) called for comments of the ld. AO on four occasions and on not receiving the reply, the ld. CIT(A) went ahead in deleting the impugned addition. We are of the considered view that there was no pressure of the appeal getting time barred by limitation before the ld. CIT(A). Therefore, the ld. CIT(A) ought to have waited for the report of the AO. The ld. CIT(A) could himself have verified the veracity of the documents filed by the assessee as his powers are co-terminus to that of the AO. In our 5 considered opinion, this issue needs verification by the AO. Therefore, in the interest of justice, we restore this issue to the file of the AO. The assessee is directed to justify her claim that her IEC code was exercised by some unscrupulous brokers and demonstrate that she has never imported the impugned goods nor paid the impugned customs duty. The AO is also directed to verify from the Custom Department as to who has actually made the payment of the customs duty and from which bank account the payments were made and after examining the same, decide the issue afresh after affording a reasonable and proper opportunity of being heard to the assessee.
Coming to the appeal of the assessee in
AY 2015-16, the ld. Counsel drew our attention to the profit and loss account exhibited at page 22 of the paper book and pointed out that the assessee had sales of Rs.56.59 Lakhs. It is the say of the ld. Counsel that such sale should have been assessed u/s 44AD of the Act. 8% being the net profit and the same treatment should be given to the cash deposit found in The Greater Bombay Co-operative Bank.
8.1. Per contra, the ld. D/R stated that the assessee in her return of income has nowhere mentioned any income from business. Therefore, this claim of presumptive tax of 8% is an afterthought as the profit and loss account was never submitted before the AO and the AO has rightly made the addition of Rs.53.89 Lakhs and rightly confirmed by the ld. CIT(A).