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Facts
The assessee filed a return declaring Nil income, but the Assessing Officer completed an ex-parte assessment determining a total income of Rs. 1,97,38,900. This involved estimating business income, adding unexplained investments under Section 69, and adding unsecured loans under Section 68. The CIT(A) upheld the Assessing Officer's order.
Held
The Tribunal partly allowed the appeal. It reduced the estimated business income from 8% to 1% of turnover. It allowed the appeal regarding the addition under Section 69, stating it was an opening balance from the previous year. The addition for unsecured loans under Section 68 was remanded to the CIT(A) for a detailed examination of bank accounts.
Key Issues
Whether the estimation of business income at 8% was justified, whether the addition for investments was correct, and whether the additions for unsecured loans were properly confirmed without proper verification of bank statements.
Sections Cited
145(3), 144, 144B, 69, 68, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: DR. B.R.R. KUMAR, VICE-Ms. SUCHITRA KAMBLE
Vertool Consultancy LLP, The Deputy Commissioner of Vs. 503, Murlidharr Complex, Income Tax, Opp. Fatehpura Post Office, Circle-2(1)(1), Paldi, Ahmedabad-380007. Nadiad. [PAN :AANFV1223 F] (Appellant) .. (Respondent) Appellant by : Shri Aseem L Thakkar, AR Respondent by: Shri B.P Srivastava, Sr DR Date of Hearing 08.05.2025 Date of Pronouncement 16.05.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-
The captioned appeal has been filed by the assessee against the order dated 30.03.2024 passed by the Ld. Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre, Delhi, relating to the Assessment Year 2018-19.
The assessee has raised the following grounds of appeals:
1 The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi has erred in confirming action of the Assessing officer in computing the total income at Rs. 1,97,38,900/- as against that of Rs. Nil declared by the appellant in the return of income filed on 31/10/2018.
2. The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi has erred in confirming Ex parte assessment order passed by the Assessing Officer without providing copy of material, information, documents statements etc. received by him from the office of DDIT(Inv) Unit-1(3), Ahmedabad and without granting cross examination of the persons/third parties in whose case search was conducted and statements recorded during the search. Hence the same being illegal and bad in law requires to be cancelled.
The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi has erred in confirming the action of the Assessing Officer in rejecting the audited books of accounts of the appellant/s.145(3) of the Act and estimating the business income at Rs.13,67,570/- at the 8 percent of the sales of & 1132/Ahd/2024 Vertool Consultancy LLP Vs. DCIT Asst. Years : 2017-18 & 2018-19 - 2– Rs.1,70,94,635/-ignoring the loss of Rs.24,91,347/- declared by the appellant in Profit and loss account. He thereby erred in making total addition of Rs.38,58,917/- by disallowing the losses without any basis. 4 The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi has erred in confirming addition of Rs.1,03,13,435/- made by the Assessing Officer holding the purchase transactions of penny stock scrip of Prerna Infrabuild Ltd. And Padmanabh Industries (now known as Nichem Industries Ltd.) as alleged accommodation entries treating the same as alleged unexplained investment u/s.69 of the I.T. Act, 1961 and taxing the same applying the special rate provided u/s.115BBE of the Act.
5. The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi has erred in confirming addition of Rs.80,57,897/- made by the Assessing Officer treating the unsecured loans during the year as alleged unexplained cash credits u/s.68 of the LT. Act, 1961 and taxing the same applying the special rate provided u/s. 115BBE of the Act.
The Appellant craves leave to add, alter, amend or modify any of the grounds of appeal on or before the date of hearing of appeal.
3. The brief facts of the case are that the assessee filed return of income for the year under consideration on 31.10.2018 declaring total income at Rs. Nil. The assessment u/s 144 r.w.s. 144B of the Act has been completed by the Assessing Officer on 24.05.2021 determining the total income at Rs.1,97,38,900/-, with the following additions :- a) Estimation of business income @ 8% - Rs. 13,67,570/- b) Addition u/s 69 of the Act - Rs.1,03,13,435/- c) Addition u/s 68 of the Act - Rs. 80,57,897/-
4. Aggrieved by the order of the Assessing Officer, the Assessee filed appeal before the Ld. CIT(A) who upheld the order of the Assessing Officer.
We have heard the arguments of both the parties and perused the material available on record, including the appellate order and the paper book filed by the assessee which consist of the submission made before the Revenue authorities.
& 1132/Ahd/2024 Vertool Consultancy LLP Vs. DCIT Asst. Years : 2017-18 & 2018-19 - 3– Estimation of profits 6. The assessee is a broker and has shown Revenue from operation of Rs.1.70 crores. The Assessing Officer estimated profit @ 8% on the turnover which the Ld. CIT(A) has confirmed. We find that the profit estimated @ 8% in the case of sub- broker is unrealistic and hence we determine profit @ 1% to the total turnover. The ground of appeal on this issue is partly allowed.
Addition u/s. 69 of the Act
We have gone through the balance-sheet as on 30.03.2017 & 30.03.2018 and find that these investments have been duly reflected in the balance-sheet of 30.07.2017 pertaining to AY 2017-18. Thus, this is opening balance for the Assessment Year 2018-19 and hence no addition can be made in the instant year. The ground of appeal on this issue is allowed.
Unsecured Loans
The Assessing Officer has made addition of Rs.80,57,798/- during the assessment and the Ld. CIT(A) confirmed the same by observing as under:
“…5.7. During the assessment proceedings, the appellant was silent on this issue & did not file any submission. However, during the appellate proceedings, the appellant furnished the confirmation of creditors, PAN and return of income filed by the creditors. The appellant also furnished the bank account statements but the same are not clearly legible. Also it is noted that the income returned by the creditors is not commensurate with the amount of unsecured loans given by them to the appellant firm. In the absence of clear & legible bank account statements, it is also not verifiable that whether there was any cash deposits or not before giving loan to the appellant firm. Thus identity of the creditors is proved but genuineness of transactions & creditworthiness of the creditors could not be established during the assessment as well as appellate proceedings. Hence there is no need to take a divergent view from the view taken by the AO during the assessment proceedings…”
Both the parties fairly submitted that the addition has been confirmed owing to absence of clear bank statements which has become a handicap for the Ld. CIT(A) to arrive at accurate conclusion. The Ld. AR prayed that, given an & 1132/Ahd/2024 Vertool Consultancy LLP Vs. DCIT Asst. Years : 2017-18 & 2018-19 - 4– opportunity, due details would be submitted before the ld. CIT(A). We find that no prejudice would be caused to the Revenue if the issue is remanded to the file of the Ld. CIT(A) for a detailed examination of the bank accounts and then to pass a detailed order. The appeal of the assessee on this ground is allowed for statistical purposes.
In the result, the appeal filed by the assessee is partly allowed.
The order is pronounced in the open Court on 16.05.2025