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Facts
The assessee, a partnership firm, filed appeals against orders related to three assessment years. The firm had reconstituted and obtained a new PAN, but continued to file returns under the new PAN while an old PAN remained active. The Assessing Officer (AO) reopened assessments for the years based on Bills of Entry for imports found under the old PAN.
Held
The Tribunal held that the addition made by the AO was untenable and amounted to double taxation. They noted that the assessee had offered income for taxation under the new PAN, and purchases were reflected in audited accounts. The lower authorities failed to provide sufficient reasons for treating the import expenditure as unexplained.
Key Issues
Whether the AO was justified in making additions under Section 69C for unexplained expenditure when the income and related imports were reflected under a new PAN, and if such additions constitute double taxation.
Sections Cited
148, 147, 144B, 69C, 142(1), 44AB
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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI S.R. RAGHUNATHA
आदेश /O R D E R
PER S. R. RAGHUNATHA, AM :
The assessee had filed three appeals against the orders of learned Commissioner of Income Tax, National Faceless Appeal Centre (NFAC), Delhi dated 26.03.2025, for the Assessment Years (A.Y.) 2015-16, 2016-17 and 2017- 18. Since, the facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are being disposed of by this common order. 942 & 943/Chny/2025
The brief facts of the case are as follows. The assessee is a partnership firm consisting of two partners, which was reconstituted in the A.Y.2010-11, after the death of one of the partners in April 2009. The PAN of the old firm is AAAFS8685H. After the reconstitution of the firm, a new PAN ABUFS1001L was obtained, and the assessee was filing its return of income under this new PAN since A.Y.2010-11. Further, no returns of income were filed under the old PAN since A.Y.2010-11. The assessee, however, did not surrender its old PAN. For the various years under challenge, i.e., A.Ys. 2015-16, 2016-17 and 2017-18, a notice of reopening u/s.148 of the Income Tax Act,1961 (“Act”) was issued by the Assessing Officer(AO) on 24.03.2021, 23.03.2021 and 23.03.2021 respectively, to the assessee for the reason that the Bill of Entry for imports for assessable value of Rs.2,34,89,325/-, Rs.2,53,31,893/- and Rs.2,65,10,380/- respectively was found, however no return of income was filed by the assessee. These reopening notices were issued with respect to the old PAN. The assessee, during the course of assessment proceedings had explained that owing to pending tax credit issues, the old PAN was not surrendered and that the bankers failed to note down the new PAN despite informing them of the new PAN. The assessee had also filed the audited financial statements, tax audit report as well as bank statement, in response to the notices u/s.142(1) pertaining to the new PAN. The Assessing Officer, however, proceeded to pass the assessment order for all the three assessment years u/s.147 r.w.s 144B of the Act by making an addition of Rs.2,34,89,325/-, Rs.2,53,31,890/-, Rs.2,65,36,297/- respectively, u/s.69C as unexplained expenses. That apart interest income was also added to the tune of Rs.21,981/- for A.Y.2015-16 and Rs.25,917/- for A.Y.2017-18. Consequential demand was also raised to the tune of Rs.2,02,18,335/- for A.Y.2015-16 alone. There were nil demands for A.Y.2016-17 and A.Y.2017-18. The case of the Assessing Officer is that, under the old PAN no return of income was filed; copy of ITR filed and the taxes paid under the new PAN was also not provided to the Assessing Officer and that the new PAN does not lie within his jurisdiction and therefore, no document relating to the new PAN is available for examination. Consequently, the Assessing 942 & 943/Chny/2025 Officer proceeded to treat the Bill of Entry for imports as an unexplained expenditure u/s.69C of the Act.
Aggrieved by the order of the AO, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), NFAC (first appellate authority, hereinafter referred to as “FAA”). Before the FAA, the assessee submitted the copy of ITR filed under the new PAN, computation of total income, ledger account and invoices of purchases / imports, form 26AS and written submissions. The assessee reiterated its stand taken before the AO, that, the income was offered in the new PAN and the purchases / imports are all reflected in the books of accounts, which were also audited u/s.44AB. Hence, the Bill of Entry for imports is not unexplained expenditure u/s.69C of the Act. The assessee had explained that for A.Y.2015-16, the gross total income that was offered to tax was Rs.33,33,071/-, for A.Y.2016-17, it was Rs.20,63,200/-, for A.Y.2017-18, it was Rs.21,55,900/-. However, the FAA dismissed the appeal of the assessee and held that since the assessee never informed the registrar of firms and the AO about the reconstitution of firm, the AO has been kept in dark with respect to the business carried on by the assessee. Further, the customs authorities and bank were reporting the transactions under the old PAN and hence the AO is correct in assessing the transactions in the hands of the old PAN and raising the tax demand in the old PAN.
Aggrieved by the order of the FAA, the assessee is in appeal before us. The Ld.AR of the assessee once again reiterated the submissions made before the lower authorities and prayed that the addition made u/s.69C of the Act be deleted. The Ld. AR took us through the paper book filed in support of the case and argued that the addition made is untenable and is against the basic tenets of taxation, since the addition would squarely be covered under the ambit of double taxation.
Per contra, the Ld.DR supported the orders passed by the lower authorities and prayed that the appeal be dismissed. 942 & 943/Chny/2025
We have heard the arguments of both the parties perused the grounds of appeal and material available on record along with the paper book filed by the assessee. The undisputed facts of the case are that the assessee had filed its income tax returns under the new PAN, for the assessment years under challenge and did not use the old PAN to file its return of income. From the paper book filed by the assessee, it is seen that income has been offered to tax under the new PAN. The case of the assessee was also audited u/s.44AB and the financial statements and ledger account reflect the Bill of Entry for the imports under the head purchases. The assessee had also filed the copies of invoice to prove the same. The Bill of Entry for imports is reflected in the income offered under the new PAN. When such is the case, merely because the Bill of Entry for imports is reflected in the old PAN and no return of income is filed under the old PAN, addition cannot be made in old PAN, when the return of income along with the corresponding Bill of Entry for imports gets reflected in the return of income filed under the new PAN. In the present facts of the case, we are in agreement with the submissions made by the assessee, in stating that if the additions are sustained, it would amount to double taxation. Further, we find that both the AO as well as the FAA never brought out any reason as to why the addition is made u/s.69C of the Act as an unexplained expenditure. The provisions of section 69C, being deeming provisions, require stricter burden of proof to be discharged by the AO, before making the addition. Despite the assessee filing all the relevant records before the lower authorities, both the authorities did not appreciate the same and had made the addition only for the reason that no return of income is filed under the old PAN, which captures the transaction of Bill of Entry for imports. In our view, it’s a pedantic approach completely eliminated from the surrounding circumstances of facts. Therefore, in the peculiar facts and circumstances of the case, we are of the considered view the addition made by the AO does not have any legs to stand. 942 & 943/Chny/2025
The Ld. AR did not press the grounds relating to reopening and hence the same is not adjudicated. We, thus, allow the appeal of the assessee and direct the AO to delete the additions made u/s.69C of the Act for all the three assessment years.
In the result all the three appeals filed by the assessee for the A.Y. 2015- 16, 2016-17 and 2017-18 are allowed.
Order pronounced in the court on 21st August, 2025 at Chennai.