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Facts
The assessee, engaged in draft discounting, filed its return declaring income. The case was selected for scrutiny due to large cash deposits and withdrawals. The AO treated credits of Rs 17,52,23,400/- as unexplained income and made an addition under Section 69A read with Section 115BE of the Act.
Held
The Tribunal noted that in a similar succeeding year, the AO accepted the assessee's business activities and only considered commission income. Therefore, in the interest of justice, the matter was restored to the AO for a de novo assessment to provide a reasonable opportunity of being heard to the assessee.
Key Issues
Whether the addition of unexplained income under Section 69A was justified when the assessee's business model was accepted in a subsequent year and whether Section 68 is applicable to bank credits without considering them as books of account.
Sections Cited
250, 143(3), 68, 69A, 115BE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
Before: SHRI RAJ KUMAR CHAUHAN, HON’BLE JUDICIAL & SMT. RENU JAUHRI, HON’BLE
PER RENU JAUHRI : The captioned appeal is filed by the assessee against the order datred 30.12.2023, passed by Ld. CIT(A)/NFAC, u/s 250 of the Income Tax Act, 1961 [hereinafter referred to as, “Act”] for A.Y. 2017-18. The assessment was framed u/s 143(3) of the Act vide Assessment Order dated 15.12.2019.
2. The assessee has raised following grounds of appeal: “1. That the Id. CIT(A) has erred on the facts and circumstances of the case. Accordingly, the order needs to be quashed.
1. 1.
That on the facts and circumstances of the case the ld. CIT(A) has failed to appreciate the statement of facts and grounds 1 | P a g e
1. 1. 915_DEL_2024_M.K.GUPTA AND SONS HUF of appeal filed by the appellant at the time of filling with Hon'ble Commissioner of Income Tax (Appeals).
3. The ld. CIT(A) has erred on facts and on in law in confirming the above addition by ignoring the fundamental concept of taxation of "REAL INCOMЕ".
That on the facts and in the circumstances of the case and in law, Id CIT(A) erred in sustaining the order passed by Ld AO u/s 143(3) without appreciating that appellant being consistently assessed as earning a commission (approximately 200 per lakh) from the business of draft discounting (refer various orders) which have been disregarded and not applied in the subject period for unfathomable reasons and on this count itself arbitrary and invalid addition sustained of ₹17,52,23,400 needs to be deleted at the outset.
5. That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 143(3) without appreciating that plausible explanation of appellant qua 17,52,23,400 being pertaining to genuine and accepted business of draft discounting where from appellant earned commission is rejected on mere ipse-dixit of Ld CIT-A and on this count itself arbitrary and invalid addition sustained of₹17,52,23,400 needs to be deleted.
6. That on similar grounds case of the appellant was selected for scrutiny u/s 143(3) for the A.Y. 2018-19; in that year, Ld AO had accepted the modus operandi of the appellant and the only question there was the rate of the commission which was disputed, therefor the rule of consistency should be applied.
That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 143(3) without appreciating that section 68 can't have any applicability to mere credits in bank a/c by assuming bank statement to be books of appellant u/s 68 of the Act and on this count itself arbitrary and invalid addition sustained of ₹17,52,23,400 needs to be deleted; furthermore, the bank statement itself reveal that all the cash deposits in the accounts were done from outside Delhi for whom the appellant is engaged in "Money Transfer Business" and it is beyond doubt that if appellant owned this cash then why would appellant deposit it to some other places far from his place of residence/business.
That on the facts and in the circumstances of the case and in law, Ld. CIT-A erred in sustaining the order passed by Ld AO u/s143(3) without appreciating that nowhere it is established that how appellant has earned this hypothetical and imaginary income of ₹17,52,23,400 which needs to be ostracized in toto. 2 | P a g e
That on the facts and in the circumstances of the case and in law, Id CIT-A erred in not restoring the returned income declared by the appellant in its return of income.
That the appellant craves permission to add, amend, alter or vary all or any of the grounds of appeal on or before the date of hearing of the appeal.”
Brief facts are that the assessee filed its return for AY 2017-18 on 9/01/2018 declaring income of ₹459150/-. The case was selected for limited scrutiny on the issue of large Cash deposits and cash withdrawals made during the year. The assessee submitted that he was engaged in the business of cheque/draft discounting and paid cash to various parties after deduction of his commission. In the absence of requisite documentary evidences, Ld. AO held that the credits of Rs 17,52,23,400/- in the bank account were unexplained income of the assessee. Accordingly, assessment was completed u/s 143(3) vide order dated 15/12/2019 vide which addition of Rs 17,52,23,400/- was made u/s 69A r.w.s. 115BE of the Act.
1. 3.1 Aggrieved, the assessee preferred and appeal before Ld. CIT (A) vide order dated 30/12/2023. Ld. CIT (A) dismissed the appeal on the ground that requisite evidences were not furnished by the assessee. Further aggrieved, the assessee is in appeal before the tribunal.
AND SONS HUF 4. Before us, Ld. AR has explained that the assessee is in the business of demand draft discounting wherein the traders traveling to Delhi from outside carry demand drafts and he facilitated the encashment of these drafts by the charging commission. However, with the advent of CBS in banks, the traders began depositing cash directly into the assessee's bank account from their respective cities, and the same was withdrawn and handed over to them by the assessee in Delhi after charging commission, which explained the large amount of cash deposits and withdrawals. He has further submitted that in the next year, the case was selected for scrutiny on the same ground and the Ld. AO accepted the assessee's business activities and completed the assessment after adding commission income. A copy of the order has also been placed on record.
1. 4.1 Ld DR, on the other hand relied on the order of the lower authorities and submitted that the assessee was not able to furnish requisite documentary evidences before the Ld. AO despite specific directions and therefore he was justified in making the impugned addition. Hence, the order of Ld. CIT(A) deserves to be upheld.
We have heard the rival submissions and perused the material on record. We note that under similar facts and circumstances, Ld. AO in the immediately succeeding year has considered only the commission income in the hands of the 4 | P a g e
AND SONS HUF assessee after accepting its business activities of cheque/draft discounting. Hence, in the interest of justice, we deem it appropriate to restore the matter to the Ld. AO for de novo assessment after giving reasonable opportunity of being heard to the assessee. The assessee is also directed to be make requisite compliance before Ld. AO.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 18 -03-2026.