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Facts
The assessee is aggrieved by an order of the CIT(A) which confirmed additions made by the AO, including 8% of certain drafts/cheques and peak credit of alleged undisclosed business. The assessee contended these transactions were not related to him and that proper opportunities were not provided.
Held
The Tribunal noted that the assessee initially failed to provide documentary evidence and respond to notices. However, during the appellate stage, additional evidence in the form of affidavits and KYC details of persons involved in transactions was submitted. The Tribunal held that this new evidence requires examination and verification by the AO.
Key Issues
Whether the additions made by the AO and confirmed by the CIT(A) are justified, especially when the assessee has submitted additional evidence at the appellate stage, and whether proper opportunities were afforded to the assessee.
Sections Cited
253, 144, 147, 246A, 142(1), 144, 44AD, 131, 148, 147, 234A, 234B
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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI BHAGIRATH MAL BIYANI & SHRI PARESH M JOSHI
आदेश/ O R D E R
Per Paresh M Joshi, J.M.:
This is an appeal filed by the Assessee Under Section 253 of the Income Tax Act, 1961 (hereinafter referred to as the Act for sake of brevity) before this Tribunal. The assessee is aggrieved by order bearing Number ITBA/NFAC/S/ 250/2023- 24/1058500975(1) dated 06.12.2023 passed by Ld. CIT(A), u/s 250 of the Act which is hereinafter referred to as the “impugned order”. The relevant Assessment Year is 2015-16
Page 1 of 12 to 31.03.2015.
FACTUAL MATRIX 2.1 That as and by way of an assessment order dated 19.12.2019 the total income of the assessee exigible to tax was computed & assessed at Rs.82,12,200/-. The income shown as
per the return of income was at Rs.3,48,000/-. Addition of Rs.11,39,400/- [ 8% of Rs.1,42,42,485+Rs.67,24,800/-(peak credit) ] was made. That the aforesaid assessment order dated 19.12.2019 was made u/s 144/147 of the Act which is hereinafter referred to as the “Impugned Assessment Order”.
2.2 That the assessee being aggrieved by the aforesaid “Impugned Assessment Order” prefers first appeal u/s 246A of the Act, before the Ld. CIT(A) who by the “Impugned order” has partly allowed, the first appeal of the assessee on the grounds & reasons stated therein. The core ground on which the additions were sustained are as under:
Ground -2
Page 2 of 12 A.Y. 2015-16 7. This ground is in regard to the appellant's contention that AO passed the order u/s. 144/147 of the IT Act and proper opportunities were not allowed. As noticed from the assessment order the appellant was non-responsive and accordingly the AO summoned the appellant and the first statement under oath was recorded on 06.11.2019. In the statement the appellant stated that he has only made at par cheques/demand drafts against cash to the extent of Rs. 29,58,040/- and the balance amount of Rs. 1,42,42,485/- isn't related to the business of the appellant and other people has made at par cheques/demand drafts by the reference of the appellant. However no documentary evidences were submitted in support of the claim.
7.2 Further the AO issued notice u/s, 142(1) on 24.11.2019 for which the appellant failed to respond. The appellant was allowed final opportunity u/s. 144 of the IT Act on 13.12.2019 for which the appellant's representative replied on 16.12.2019 along with the submission. After considering the same the AO issued Show Cause Notice on 18.12.2019 posting the case on 19.12.2019 @ 04:00 PM. The appellant failed to respond to the same. Even though the AO allowed one day time for the show cause notice, the Appellant was well aware of the issue on hand from a long time but failed to submit any documentary evidence in support of the claim, which shows that the appellant doesn't have any documentary evidence in support of the claim. In view of the same and also as the appellant was well aware of the issue on hand but failed to submit any evidence in support of claim, the AO didn't have any option but to pass the exparte order. Hence this ground of appeal is dismissed. [ Ground No 3, 4 & 5: 8.1 These grounds of appeal are related to the addition made by the AO of 11,39,400/- being 8% of Rs. 1,42,42,45/-. The appellant has contested that the said amount doesn't pertain to him and are the transaction of the other parties and the AO didn't provide any opportunity for cross-examination. During the course of the assessment proceeding the appellant submitted the names of the person along with the declaration, however failed to establish the reason that why the parties has invested in the name of the appellant and accordingly the AO made the additions. During the course of the appellate proceeding the appellant has only submitted the list of the Page 3 of 12 S No Name of the party Amount 1 Mr. Vijay Potiwal Rs. 19,00,000 2 Mr. Krishna Raikwar Rs. 24,00,000 3 Mr. Ankush Sehgal Rs. 25,00,000 4 Mr. Vijay Rs 25,00,000 5 Mr. Sanjay Wankhede Rs 25,00,000 6 Mr. Sunil Yadav Rs 25,00,000 Total Rs.1,43,00,000/-
8.2 Apart from the list the appellant has not provided any documentary evidence in support of claim or the reason that why the parties has transacted in the name of the appellant. Even the relevant details of the parties such as their PAN, ITR Copy has not been submitted which are crucial to identify that whether the transacted amount has been declared in the return of Income of not. In regard to the cross examination, no request was made by the appellant during the assessment proceeding. Moreover it is very clear and accepted by the appellant as well that the transaction has been happened in the name of the appellant by the other parties, hence the onus lies on the appellant to prove that the transaction doesn't pertain to him and the relevant parties has declared the same in their return of Income. Merely stating that the transaction doesn't pertain to him doesn't have any force. The appellant has relied upon certain case laws, however the applicability of case law depends on the facts/details of the case, whereas in the instant case apart from stating the appellant has failed to produce any Page 4 of 12 A.Y. 2015-16 documentary evidence. In view of the above the appellant's claim cannot be accepted and the AO has rightly made the addition following the provisions of section 44AD of the IT Act. Hence, these grounds of appeal are dismissed. Ground No 6, 7 & 8 9.1 These grounds of appeal are in regard to the addition made by the AO of Rs. 67.24,800/- being the peak credit of alleged undisclosed business of the appellant. During the course of the assessment proceeding the appellant made the minimal response and only started responding in response to the summon issued u/s. 131 of the IT Act. During the course of the assessment proceeding the AO has asked for clarification over the undisclosed transaction, however every single time the appellant failed to produce genuine clarification along with the corroborating documentary evidences. During the course of the appellate proceeding he has only submitted that the said undisclosed transactions were related to third parties who used the appellant's name. However apart from the list of person names and the amount the appellant has not submitted any documents proving the appellant's claim and tried to make benefit out of the same. As the transaction remained un- clarified the AO instead of making the addition of the entire amount has opted for the Peak Credit which worked out to Rs. 67,24,800/-, In view of the above I found that the AO has rightly made the addition after considering the facts of the case. 9.2 In regard to the appellant's contention that the said amount wasn't proposed by the AO in the SCN, it should be noted that the in the SCN issued the AO has mentioned the entire undisclosed transaction and the Peak Credit has been worked out on the same. Had the appellant provided genuine clarification over the same, the AQ would have taken into consideration. The AO has made the addition after considering the facts of the case which in the instant cases not properly provided by the Appellant. Even during the appellate proceeding, the appellant has failed to furnish any factual clarification rather he has mentioned various case laws. The applicability of the case laws depends on the facts of the case. Since the appellant has not been able to controvert the findings of the AO with proper explanation/supporting evidences, the contentions raised by the appellant are found to be not acceptable. In view of the above discussion the appellant's contention cannot be allowed and these grounds of appeal are dismissed.”
Page 5 of 12 has preferred the instant second appeal before this Tribunal and has raised following grounds of appeal in form no.36 against the “Impugned Order” which are as under:-
“1.1 That on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) erred in confirming the act of the A.O. in respect of issuing notice for reopening of the assessment U/s 147/148 of the Act dated 26.03.2019 and framing the assessment thereon. The notice so issued and the reassessment order passed on the basis of such notice was without jurisdiction, illegal and bad-in-law. The same requires to be quashed 1.2 That on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) erred in confirming the act of the A.O. in issuing a notice under section 148 of the Act without having reason to believe of his own and moreso without assigning proper reason for reopening of the assessment under section 147 of the Act and without affording proper opportunity of being heard. The order so passed was therefore illegal and bad-in-law. The same requires to be quashed.” 1.3 That on the facts and in the circumstances of the case and in law, the L.d. CIT (A) erred in confirming the addition as made by the Ld. A.O. of Rs. 11,39,400/- to the Total Income being 8 percent of the amount of drafts/Cheques alleged to have been prepared by appellant from Kanha Credit Cooperative Society of Rs. 1,42,42,485 even when the said amount have no relation to the business of the appellant nor does is pertain to the appellant. The addition so made by the Ld. AO and maintained by the Ld. CIT(A) is patently wrong, and uncalled for. The same requires to be deleted in full. 1.4 That on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in confirming the adhoc addition as made by the Ld. A.O. of Rs. 67,24,800 as peak credit of alleged undisclosed business of the appellant, even when no such amount was found credited in the books of the appellant. The addition so made by the AO and maintained by the Ld. CIT(A) is wrong and uncalled for. The same deserves to be deleted in full. 1.5 That on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred erred in confirming the addition made by the Ld. AO by relying on third party evidence and without affording cross
Page 6 of 12 A.Y. 2015-16 examination and providing any related records, which is illegal and bad in law and therefore, deserves to be deleted in full. 1.6 That on the facts and in the circumstances of the case the Ld CIT(A) erred in confirming interest charged under section 234A of Rs. 1,65,011 and 234B of Rs. 12,68,022 respectively. The interest so charged is excessive and wrong. The same requires to be charged as per law. 1.7 The assessee reserve its right to add alter and modify the ground of appeal
3. Record of Hearing 3.1 That the hearing in the matter took place before this Tribunal on 25.08.2025 when the Ld. AR for and on behalf of the assessee appeared before us and interalia contended that the “Impugned Order” is illegal, bad in law, and not proper.The ld. AR has placed on the record of this Tribunal a paper book containing pages 1 to 106. A synopsis containing pages 1 to 7. The ld. AR contended that two broad additions have been made against the assessee, over and above the returned income of Rs.3,48,000/- the first being addition of Rs.11,39,400/- which is 8% of Rs.1,42,42,485/- and another being Rs.67,24,800/- being the amount of peak credit of business.
3.2 In so far as the Kanha Credit Co-operative Society amount of Rs.1,42,42,485/- it was stated that the assessee does not Page 7 of 12 the demand drafts over the counter on the payment of cash. That the assessee had just referred about 8 to 10 persons who had in fact obtained the demand drafts for themselves. The demand drafts were prepared by “such other persons” and that the assessee was only a point of reference and nothing else. In so far as the peak credit is concerned, its details are not with the assessee. Ld. AR then invited our attention to para 3 of the “Impugned Assessment Order” and read out its contents. It was stated by him that few certain original affidavits of persons who had obtained the demand draft by taking his name from the point of view of reference only was infact filed before the Ld. AO and that the assessee has not kept the copy of the same. However, now from pages 83 to 106 of PB these are copy of the affidavits and ID proofs of few persons who had infact obtained the demand drafts by taking the name of the assessee at Kanha Credit Cooperative Society. These affidavits are now filed before the Tribunal as the originals which were filed before the Ld. AO it’s photocopy were not kept by the assesee hence this new exercise was conducted in support of assessee’s contentions (supra). Our
Page 8 of 12 was a copy of reply filed by the assessee before the Ld. AO. In brief the Ld. AR contended that the assessee is a small business man and carries on business in the name and style of “Ganesh Rumal and Cap”. He purchases the goods from Colcutta, Delhi, Mumbai, Surat, Ahmadabad etc. in the bulk and sell the same at his shop at Indore. The Ld. AR has also contended that few persons who had obtained the Demand Drafts from the Kanha Credit Cooperative Society by using his name as point of reference had filed self certified declaration to that effect before the Ld. AO and relied upon para 2 of Ld. AO order in support thereof. The department’s allegation that the assessee’s business is of Rs.1,72,00,525/- basis information from Kanha Credit Cooperative Society is an incorrect one. The Ld. AR finally prayed that the matter be remanded to the Ld. AO so that the assessee can now file affidavits afresh of persons which are from pages 83 to 106 of paper book in support so that correct assessable income can be computed.Per contra, Ld. DR for the revenue stated that basis page 20 of paper book that in fact only three letters of traders/persons are on record and relied
Page 9 of 12 106 (PB) are affidavits and KYC details of 5 persons only and these material are by way of additional evidence which were not there before the Ld. AO and therefore, it would be in the fitness of things that the matter be remanded back to Ld. AO so that a fresh adjudication can be done. In so far as RTI application of assessee is concerned our attentions was drawn to page 6 & 7 of paper book and it was stated by Ld. DR that no appeal has been filed against the said order before appellate authority under RTI Act and therefore, it goes to show that the assessee is satisfied with the order made under RTI Act. Assessee grievance stands satisfied.
Observations findings & conclusions 4.1 We have to decide the legality, validity and proprietary of the “impugned order” basis records of the case and the contentions canvassed before us.
4.2 We have carefully perused the records of the case.
4.3 We basis records of the case and after hearing and upon examining the rival contentions are of the considered opinion
Page 10 of 12 that though the assessee has filed the written submission but no documentary evidence is enclosed. Now before this Tribunal the assesee has filed basis paper book pages 83 to 106 the affidavit and KYC details of those persons who had obtained the demand drafts by using assessee’s name as point of reference for themselves, before Kanha Credit Cooperative Society. Earlier as pointed out by the Ld. DR only that three confirmatory letters were only placed on record before the Ld. AO. The Ld. DR has stated that now before this tribunal these new documents i.e. affidavits and KYC details are in the nature of additional evidence which needs examination and verification by the Ld. AO so that correct income of the assessee could be computed and assessed.
We are inclined to consider the submission of the Ld. DR. We hold that while before the Ld. AO basis para 2 of the “Impugned Assessment Order” only self certified declaration of few persons were available but now the assessee has placed on record of this Tribunal fresh and additional evidence basis PB pages 83 to 106 (supra) which needs to be checked and verified which exercise the Ld. AO alone can do as he exercises the Page 11 of 12 the matter be relegated back to the file of Ld. AO. Accordingly we set aside the Impugned Order & Remand the case back to the file of Ld. AO on denovo basis.
Order 5.1 In the premises set out herein above, we set aside the Impugned Order as and byway of Remand back to Ld. AO on denovo basis.
5.2 In result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in open court on 29.08.2025.