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Facts
The assessee, a partnership firm dealing in mobile phones, filed its return which was processed under Section 143(1). The AO initiated reassessment proceedings based on alleged cash deposits and purchases from M/s. Advance Computers & Mobile India Pvt. Ltd., treating them as unexplained. The assessee contended that the deposits were from sales proceeds and purchases were genuine.
Held
The Tribunal found that the authorities below had not properly considered the submissions and documents filed by the assessee. The disallowance of 10% of total purchases was also deemed arbitrary. Therefore, the Tribunal set aside the orders and remitted the case back to the AO for a fresh decision.
Key Issues
Whether the reassessment proceedings were validly initiated and whether the additions made on account of cash deposits and purchases were substantiated and properly considered by the AO and CIT(A).
Sections Cited
147, 144B, 148, 148A(b), 142(1), 37(1), 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the assessee challenging the order of NFAC, Delhi dated 19/12/2024 in respect of the A.Y. 2018-19 and raised the following grounds.
The brief facts of the case are that the assessee is a partnership firm engaged in the business of trading in mobile phones and its accessories. The assessee filed its return of income and the said return was processed and an intimation u/s. 143(1) was issued by accepting the said return. Thereafter the case was selected for scrutiny and the AO had alleged cash of Rs. 13,53,310/- was deposited into his bank account and therefore a notice u/s. 148A(b) of the Act was issued. The assessee submitted that the said cash deposits were into their overdraft account from the sale proceeds and submitted that the said deposits were reported under Income Tax Act as well as under the GST Act. The AO not accepted the said objection, had passed an order u/s. 148A(d) of the Act and treated the cash deposits as unexplained cash credits.
Thereafter notice u/s. 148 was issued and the assessee also filed his return of income pursuant to the said notice. Subsequently, during the reassessment proceedings, the AO issued a notice u/s. 142(1) of the Act and called for the details about the purchases made from M/s. Advance Computers & Mobile India Pvt. Ltd. The details were called for by the AO based on the information received from the DDIT(Inv), Unit – 5(2), Mumbai, which in turn was sourced from the Central Economic Intelligence Bureau(CEIB). In the said report, it was alleged that the CGST authorities had found that M/s. Advance Computers & Mobile India Pvt. Ltd. was involved in issuing and giving bogus invoices to facilitate the availing of the fraudulent ITC without actually supplying the goods. The assessee submitted the details about the said purchases from the said supplier but the assessing officer had not properly appreciated the said materials and passed an order u/s. 147 of the Act. Similarly the AO denied the 10% of the total purchases as not substantiated with any materials.
As against the said order, the assessee filed an appeal before the Ld.CIT(A) and the Ld.CIT(A) also without considering the facts in detail had dismissed the appeal by stating that the assessee had furnished incomplete information.
As against the said order, the assessee is in appeal before this Tribunal.
At the time of hearing, the Ld.AR submitted that the assessee had submitted the details of the cash deposits and also produced the cash book ledger insofar as the cash deposits are concerned. The Ld.AR further submitted that the AO had erred in treating the purchases made from M/s. Advance Computers & Mobile India Pvt. Ltd. as bogus when the assessee is having all the details of the purchases and the mode of transport and the mode of payment. The Ld.AR further submitted that the AO blindly followed the report of the other agencies when the assessee was able to demonstrate that all the purchases were genuine and also they had not claimed any ITC from the said seller to treat the said purchases as bogus. Further, the Ld.AR submitted that the disallowance of the purchases at 10% of the total purchases u/s. 37(1) is also without any basis. The Ld.AR also filed two
We have heard the arguments of both sides and perused the materials available on record.
We have seen from the assessment order, the AO had issued a notice u/s. 148A(b) of the Act to get the details for the cash deposits into his bank account. The assessee also submitted their explanations along with some documentary evidences. The AO not accepted the said explanations and made an order u/s. 148A(d) of the Act. Subsequently, while the reassessment proceedings are going on, the AO issued a notice u/s. 142(1) of the Act in which the AO sought for the details about the purchases made from M/s. Advance Computers & Mobile India Pvt. Ltd. The AO had issued a notice based on the report received from the CGST authorities that the seller M/s. Advance Computers & Mobile India Pvt. Ltd. are issuing only bogus bills in order to facilitate the customers like assessee to claim the bogus ITC. The assessee also submitted their objections to the said notice and also furnished various records to show that the said purchases are not bogus and in fact the said purchases are reflected in GSTR2 of the CGST Act which is an auto populated entry for the ITC. The assessee also produced the tax invoices issued by the said M/s. Advance Computers & Mobile India Pvt. Ltd. and also the copy of the letter given by the said M/s. Advance Computers & Mobile India Pvt. Ltd. appointing the assessee as a non- exclusive authorised distributor for the Davangere Area for Lenovo brand smart phones. The assessee also produced the ledger extract of the seller in which most of the transactions are done through the banking channels. Some of the documents filed before us were not produced either before the AO or before the Ld.CIT(A). On going through the said documents and also considering the fact that the assessee had almost submitted the details before the authorities in support of their claim that the cash deposits are out of the sale profits and also the purchases from M/s. Advance Computers & Mobile India Pvt. Ltd. are not bogus and also the assessee had not ITC, the question of availing the bogus ITC would not arise in the facts of the present case. Further, the AO as well as the Ld.CIT(A) had also disallowed u/s. 37 of the Act, 10% of the total purchases for the reason that no details were furnished by the assessee is also seems to be an arbitrary disallowance without considering the materials placed before the authorities. Before us, the assessee demonstrated that all the additions are not required in the facts and circumstances of the case. We are also of the view that the authorities below had not considered the issue properly.
Therefore we are satisfied that the authorities below had not considered the submissions as well as the documents field before them and therefore we are setting aside the said orders passed by the authorities below and remit the same to the AO to decide the issue afresh, after hearing the assessee and also after considering the documents filed by the assessee at the time of assessment proceedings.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 20th August, 2025.