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Facts
The assessee, engaged in wholesale cloth trading, filed a return of income. The Assessing Officer (AO) initiated reassessment proceedings under Section 147, alleging that an amount of Rs. 89,73,795/- was routed to M/s LMK Texfab through M/s Hariram Jagdish Prasad, which was treated as the assessee's unexplained income.
Held
The Tribunal held that the Revenue failed to prove that the assessee entered into any transaction with M/s Hariram Jagdish Prasad. The assessee provided explanations and bank statements, but the Revenue did not provide cogent evidence, and the reassessment proceedings also suffered from procedural irregularities.
Key Issues
Whether the addition of Rs. 89,73,795/- as unexplained income is justified and whether the reassessment proceedings were conducted in accordance with law and principles of natural justice.
Sections Cited
250, 139(1), 69A, 147, 144B, 151, 148, 142(1)
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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: DR. B.R.R. KUMAR, VICE-SHRI SIDDHARTHA NAUTIYAL
(Assessment Year: 2017-18) Vivek Madan Karnani, The Income-tax Officer, Vs. 202, Indraprasth, Ward-1(1)(3), 10, Palm Court, Bodekdev, Ahmedabad Ahmedabad-380054 [PAN : BVYPK 1910 M] (Appellant) .. (Respondent) Appellant by : Shri Anil Kshatriya, Advocate Respondent by: Shri Yogesh Mishra, Sr. DR Date of Hearing 08.01.2025 Date of Pronouncement 07.03.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT :
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as "CIT(A)" for short) dated 28.12.2023 passed under Section 250 of the Income-tax Act, 1961 [hereinafter referred to as "the Act" for short], for Assessment Year (AY) 2017-18. 2. The grounds of appeal raised by the Assessee are as follows:-
1. On the facts and circumstances of the case and in law, the Order so passed by the Ld. CIT(A) NFAC is bad in law, illegal besides being in violation of the principle of natural justices & equity, as having been passed without considering the material already placed on records; as such liable to be quashed and set aside. Vivek Madan Karnani Vs. ITO Asst. Year : 2017-18 - 2–
On the facts and circumstances of the case and in law, the Ld. CIT(A) NFAC has grossly erred in dismissing grounds of appeal so raised before him and thereby, further erred in concurring with the A.O. in making addition of Rs.89,73,795/- u/s.69A, when there is no justification. The impugned additions so made by the A.O. may kindly be deleted."
The assessee has also raised following additional ground of appeal :-
On the peculiar facts and circumstances of the case and in law, the Ld. Assessing Officer has erred in assuming a valid jurisdiction without following the law laid down by the Hon’ble Courts and thereby further erred in passing the re-assessment order u/s 147 r.w.s. 144B of the I.T. Act, 1961 dated 30.03.2022 which is void ab-initio, bad in law, illegal and invalid, being without assuming a valid jurisdiction.
4. The brief facts of the case are that the assessee is an individual engaged in the business of wholesale trading in cloth in the name and style of M/s Lakshi Mills and earned income from commission and bank interest etc. The assessee, for the year under consideration, has furnished his return u/s 139(1) of the Act on 07.01.2018 declaring total income of Rs.9,75,450/- 4.1 Information was received by the Assessing Officer in this case that an amount of Rs. 89,73,795/- has been routed to M/s. LMK Texfab by M/s. Hariram Jagdish Prasad. Hariram Jagdish Prasad is a partnership firm running parallel banking systems to unidentified parties and facilitating them with conversion of cash into cheque/DD, DD into cheque into cheque on commission basis. The DDIT(Inv.), Unit-6, Kolkata had issued summons to Ratnakar Bank Ltd. in the case of M/s. Hariram Jagdish Prasad and investigation was made about the amounts credited in the bank account of the said firm. After examining bank accounts, it has been found that there have been deposits of funds in respect of Hariram Jagdish Prasad with Vivek Madan Karnani Vs. ITO Asst. Year : 2017-18 - 3– Ratnakar Bank through cheque deposits and RTGS and cash deposits and immediately these funds were transferred to different banks from April 2016 to March 2017. Therefore, the Revenue alleged that this is the process of converting unaccounted cash of parties into cheque and earning commission thereon, paying taxes on commission.
4.2 An amount of Rs. 89,73,795/-, which was found to have been routed to M/s. LMK Texfab by M/s. Hariram Jagdish Prasad, was brought to tax being the unexplained income of the assessee u/ s. 69A of the Act.
Aggrieved by the order of the Assessing Officer, the assessee has filed appeal before the ld. CIT(A) who dismissed the appeal of the assessee.
Aggrieved by the order of the Ld. CIT(A), the Assessee is now in appeal before the Tribunal.
Before us, the Ld. Counsel for the assessee contended that the assessment proceedings in this case have been reopened u/s 147 of the Act without providing detailed reasons, sanction u/s 151 as well as basic and relied documents to the assessee. He further submitted that despite repeated requests made to the Assessing Officer, the assessee was not provided with the necessary information, which ultimately hindered the effective presentation and argument of the case. The ld. Counsel for the assessee also submitted that the assessee submitted his return of income on 03.03.2022 showing total income at Rs.9,75,450/-; once the return is furnished by the assessee u/s 148 of the Act, the Assessing Officer was under the legal obligation for providing a copy of reasons recorded for Vivek Madan Karnani Vs. ITO Asst. Year : 2017-18 - 4– initiating proceedings u/s 147 of the Act, but the Assessing Officer did not provide the reasons recorded by him for issuing such notice. For this proposition, he relied upon the judgement of Hon’ble Jurisdictional High Court in the case of Sahkari Khand Udhoyg Mandal Ltd Vs. ACIT, reported in [2015] 370 ITR 107 (Guj.). The Ld. Counsel for the assessee thus submitted that the orders of the authorities below deserve to be quashed and set aside.
On the merits of the case also, the Ld. Counsel for the assessee contended that 9. The Ld. DR, on the other hand, relied on the orders of the authorities below.
Heard both the parties and perused the material available on record.
During the course of the assessment proceedings the JAO issued a notice u/s.142(1) of the Act, dated 13.11.2021 whereby, vide item no.5 of the annexure, asked the assessee to submit ledger folio for assessee’s alleged transaction with M/s Hariram Jagdish Prasad (PAN: AACFN046N) and to explain the nature of the entries therein. In response to the same the assessee vide his letter dated 05.03.2022 categorically stated that the assessee does not have any transaction with M/s Hariram Jagdish Prasad (PAN: AACFN046N). The Assessing Officer issued a show cause notice dated 29.03.2022, which was digitally signed at 23.54.37 Hrs of 29.03.2022, asking the assessee to submit his response by 23.59 hours of 29.03.2022. Thus, the time given to the assessee hardly 5 minutes. The time given could Vivek Madan Karnani Vs. ITO Asst. Year : 2017-18 - 5– not be said to be a reasonable time, as held by the Hon'ble Jurisdictional High Court of Gujarat in the case of M/s. Advance Realty Developers in SCA No.7731 of 2021. Thus, there has been violation of principle of natural justice as well as provisions of section 144B of the Act.
Further, we find that Revenue could not prove that the assessee had entered into any sort of transaction during the year under consideration with M/s. Hariram Jagdish Prasad. The assessee has submitted before the Revenue Authorities his explanation and furnished copies of all his bank statements to corroborate his contentions. The Department has neither provided any material documents nor he was confronted with the alleged information nor brought anything on record to prove that the assessee has indeed received any money from M/s Hariram Jagdish Prasad (PAN: AACFN046N). When the assessee has categorically stated that the assessee has never ever entered into transaction with the referred party M/s Hariram Jagdish Prasad, it is for the department to prove and bring on record the fact that cash was converted into cheque/DD and the amount in question has been routed into the bank account of "LKM Tax Fab" and therefore to substantiate the claim that no such amount is transferred into the bank account of assessee, copy of bank statement of account no. 1111624840 with Kotak Mahindra Bank, Ahmedabad Branch for the period 01.04.2016 to 31.03.2023 was submitted before the authority along with a letter dated 25.09.2023 regarding closer of bank account no. 1111624840 w.e.f. 23.05.2016 along with copy of other bank account no. 4811768586 of Kotak Mahindra Bank in the name of Vivek M. Karnani & account no. 026919300006352 with HDFC Bank, R.S Puram Branch, Coimbatore in the name of Vivek M. Karnani and Bank account no.8911328626 held with Vivek Madan Karnani Vs. ITO Asst. Year : 2017-18 - 6– Kotak Mahindra Bank, Ahmedabad Branch in the name and style of Lakshmi Mills, another proprietary concern of the assessee. No such amount was either transferred or credited in these bank accounts. Further, we find that during the course of assessment proceedings, neither the Assessing Officer has provided copy of bank statement of Ratnakar Bank Ltd. in the name of M/s. Hariram Jagdish Prasad to the assessee as to prove and substantiate that such sum of Rs.89,73,795/- was in fact transferred into the above said bank account of the assessee, nor the so-called bank statement is made part of assessment order on record. The onus lies on the person who alleges so and the allegation so made by the department which is not discharged by bringing any cogent evidence in the form of any other bank account held by the assessee.
Hence, we find that there is absolutely no justification in making the impugned addition made by the Assessing Officer and sustained by the Ld. CIT(A).
In the result, the appeal of the assessee is allowed.