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Facts
The assessee filed a return of income showing a loss. The Assessing Officer (AO) made additions totaling Rs. 58,60,583/- on account of undisclosed business income, interest income, and a difference in trade receivables. The CIT(A) dismissed the assessee's appeal, sustaining the additions.
Held
The Tribunal held that both the AO and the CIT(A) failed to consider the assessee's submissions and documentary evidence. The lower authorities were directed to verify the assessee's claims regarding commission income, interest income, and trade receivables before deciding the matter.
Key Issues
Whether the additions made by the AO on account of commission income, interest income, and trade receivables were justified without proper verification of the assessee's submissions and evidence.
Sections Cited
Sec 194H, Sec 143(2), Sec 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI SANDEEP GOSAIN & SHRI OM PRAKASH KANT
ORDER PER OM PRAKASH KANT, AM
This appeal has been preferred by the assessee against order dated 13.06.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2021-22, raising following grounds:
1. On the facts and circumstances of the case and in law, the learned CIT (A) erred in dismissing the appeal w.r.t addition of Rs. 58,60,583/- as undisclosed business income without taking into consideration the submitted supporting
M/s Farlin Commodities Pvt. Ltd. M/s Farlin Commodities Pvt. Ltd. documents and facts of the documents and facts of the case. The bifurcation of addition made by the Ld AO and confirmed by The bifurcation of addition made by the Ld AO and confirmed by The bifurcation of addition made by the Ld AO and confirmed by the CIT (A) is as below: the CIT (A) is as below: Sr. No. Particulars Amounts Amounts 1 Commission Income as undisclosed Commission Income as undisclosed Rs. 44,04,037/- Rs. 44,04,037/ business income business income 2 Interest income from Punjab National Interest income from Punjab National Rs. 90,133/- Rs. 90,133/ Bank as Income from other sources Bank as Income from other 3 Differential amount between opening Differential amount between opening Rs. 13,66,413/- Rs. 13,66,413/ and closing trade receivable after and closing trade receivable after deducting sales amount declared in deducting sales amount declared in ITR. ITR. Total Additions Total Additions Rs. 58,60,583/- Rs. 58,60,583/ 2. Briefly stated, facts of the case are that assessee filed return of Briefly stated, facts of the case are that assessee filed return of Briefly stated, facts of the case are that assessee filed return of income for the year under consideration on 19.07.2021 declaring income for the year under consideration on 19.07.2021 declaring income for the year under consideration on 19.07.2021 declaring loss for the current year amounting to Rs.( loss for the current year amounting to Rs.(-)4,83,37,535/ )4,83,37,535/-. The return of income filed by the assessee was selected for scrutiny return of income filed by the assessee was selected for scru return of income filed by the assessee was selected for scru assessment and notice u/s 143(2) notice u/s 143(2) under the Income under the Income-tax Act, 1961 (in short ‘the Act’) was issued and served upon the assessee. (in short ‘the Act’) was issued and served upon the assessee. (in short ‘the Act’) was issued and served upon the assessee. However, the assessee did not comply to the s However, the assessee did not comply to the subsequent notices ubsequent notices issued u/s 142(1) of the Act on 28.06.2022, 05.08.2022, (1) of the Act on 28.06.2022, 05.08.2022, (1) of the Act on 28.06.2022, 05.08.2022, 14.10.2022 and 07.11.2022. The Assessing Officer then finally .2022 and 07.11.2022. The Assessing Officer then finally .2022 and 07.11.2022. The Assessing Officer then finally issued a show cause notice dated 07.12.2022 which was partly issued a show cause notice dated 07.12.2022 which was partly issued a show cause notice dated 07.12.2022 which was partly complied by the assessee. On verification of the assessment complied by the assessee. On verification of the assessment complied by the assessee. On verification of the assessment records, the Assessing Officer found that as per the form No. 26AS records, the Assessing Officer found that as per the form No. 26AS records, the Assessing Officer found that as per the form No. 26AS tax deducted at source on d at source on commission income u/s 194H of commission income u/s 194H of Rs.44,04,037/- and Rs.4,64,845/ and Rs.4,64,845/- was deducted by M/s Samdani was deducted by M/s Samdani Coal Pvt. Ltd. and also Coal Pvt. Ltd. and also tax was deducted on interest income of interest income of Rs.90,133/- received by the assessee received by the assessee from Punjab National Bank from Punjab National Bank. The Assessing Officer a The Assessing Officer also observed net trade receivable of trade receivable of Rs.1,37,62,293/- added during the year added during the year as against the sales done of as against the sales done of M/s Farlin Commodities Pvt. Ltd. M/s Farlin Commodities Pvt. Ltd.
Rs.1,23,94,880/-. The Assessing Officer accordingly asked the . The Assessing Officer accordingly asked the . The Assessing Officer accordingly asked the assessee regarding variation of Rs.13,66,413/ assessee regarding variation of Rs.13,66,413/- between trade receivable added during the receivable added during the year under consideration and sales year under consideration and sales reported in profit and loss account. reported in profit and loss account. Though the assessee filed Though the assessee filed submissions, but however the Assessing Officer did not consider the but however the Assessing Officer did not consider the but however the Assessing Officer did not consider the submission of the assessee and made addition of Rs.58,60,583/- submission of the assessee and made addition of Rs.58,60,583/ submission of the assessee and made addition of Rs.58,60,583/ for three additions as unde for three additions as under:
Sr. No. Particulars Amounts Amounts 1 Commission Income as undisclosed Commission Income as undisclosed Rs. 44,04,037/- Rs. 44,04,037/ business income business income 2 Interest income from Punjab National Interest income from Punjab National Rs. 90,133/- Rs. 90,133/ Bank as Income from other sources Bank as Income from other sources 3 Differential amount between opening Differential amount between opening Rs. 13,66,413/- Rs. 13,66,413/ and closing trade receivable after and closing trade receivable deducting sales amount declared in deducting sales amount declared in ITR. ITR. Total Additions Total Additions Rs. 58,60,583/- Rs. 58,60,583/ 3. On further appeal also the Ld. CIT(A) without verifying the On further appeal also the Ld. CIT(A) without verifying the On further appeal also the Ld. CIT(A) without verifying the claim of the assessee simply sustained the addition made by the claim of the assessee simply sustained the addition made by the claim of the assessee simply sustained the addition made by the AO.
Before us, the Ld. counsel for the assessee has filed a Paper Before us, the Ld. counsel for the assessee has filed a Paper Before us, the Ld. counsel for the assessee has filed a Paper Book containing pages 1 to 166. Book containing pages 1 to 166.
We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused the relevant materials on record the relevant materials on record. Regarding the commission income, . Regarding the commission income, the assessee has claimed that sa the assessee has claimed that said income is already part of the id income is already part of the commission income of Rs.1,23,95,880/ commission income of Rs.1,23,95,880/- received from M/s received from M/s Samdani Coal Pvt. Ltd. and which Samdani Coal Pvt. Ltd. and which has been offered for tax been offered for tax under sale of services i.e. commission income under the head ‘business rvices i.e. commission income under the head ‘business rvices i.e. commission income under the head ‘business
M/s Farlin Commodities Pvt. Ltd. M/s Farlin Commodities Pvt. Ltd. and profession’. Regarding the interes and profession’. Regarding the interest from Punjab National Bank, t from Punjab National Bank, the assessee submitted that total interest income of Rs.3,15,731/- the assessee submitted that total interest income of Rs. the assessee submitted that total interest income of Rs. which comprised of interest of Rs.90,133/ which comprised of interest of Rs.90,133/- from PNB and income from PNB and income- tax refund of Rs.2,25,598/ 2,25,598/- and same was offered to tax as and same was offered to tax as ‘other income’ under the head ‘business and profession’ in the Income under the head ‘business and profession’ in the Income-tax under the head ‘business and profession’ in the Income Return. Regarding the variation Return. Regarding the variation in sales declared in the profit and sales declared in the profit and loss account and the trade receivable loss account and the trade receivable added during the year added during the year, the assessee submitted that same was due to the treatment of GST by assessee submitted that same was due to the treatment of GST by assessee submitted that same was due to the treatment of GST by M/s Samdani Coal Pvt. Ltd. as inclusive of GST, however, whereas M/s Samdani Coal Pvt. Ltd. as inclusive of GST, however, whereas M/s Samdani Coal Pvt. Ltd. as inclusive of GST, however, whereas the assessee has taken exclusive of the GST. the assessee has taken exclusive of the GST.
5.1 Having heard the submission of the Having heard the submission of the both parties both parties, we are of the opinion that it is a matter of only verification of the commission opinion that it is a matter of only verification of the commission opinion that it is a matter of only verification of the commission income appearing in Form No. 26AS with the commission income aring in Form No. 26AS with the commission income aring in Form No. 26AS with the commission income reported by the assessee in its books of accounts. Similarly, the reported by the assessee in its books of accounts. Similarly, the reported by the assessee in its books of accounts. Similarly, the interest income from PNB is also reported by the assessee as part of interest income from PNB is also reported by the assessee interest income from PNB is also reported by the assessee the other income and need verification at the the other income and need verification at the end of the Assessing of the Assessing Officer. Regarding the issue of variation in sales as compared to the cer. Regarding the issue of variation in sales as compared to the cer. Regarding the issue of variation in sales as compared to the increased in trade receivable also the Assessing Officer need to increased in trade receivable also the Assessing Officer need to increased in trade receivable also the Assessing Officer need to verify the claim of the assessee rather than outright rejecting. We verify the claim of the assessee rather than outright rejecting. We verify the claim of the assessee rather than outright rejecting. We find that both the authorities have nd that both the authorities have not considered the su not considered the submission of the assessee and rejected the claim of the assessee. As quasi the assessee and rejected the claim of the assessee the assessee and rejected the claim of the assessee judicial authorities, t judicial authorities, the Income-tax Authorities are required to tax Authorities are required to follow principles of natural justice and follow principles of natural justice and examine the claim of the examine the claim of the assessee in the light of documentary evidences in the light of documentary evidences. As the ld CIT(A) and the ld CIT(A) and M/s Farlin Commodities Pvt. Ltd. M/s Farlin Commodities Pvt. Ltd.
AO has failed to the ld AO has failed to examine the documents of the assessee examine the documents of the assessee properly , we set aside the orde we set aside the order of the Ld. CIT(A) and restore r of the Ld. CIT(A) and restore the matter back to the file of the Assessing Officer with the direction to matter back to the file of the Assessing Officer with the direction to matter back to the file of the Assessing Officer with the direction to verify the claim of the assessee rela claim of the assessee related to addition under dispute addition under dispute with income-tax return, financial statement tax return, financial statements and books of accounts and books of accounts of the assessee and then decide in accordance with law. It is of the assessee and then decide in accordance with law. It is of the assessee and then decide in accordance with law. It is needless to mention that assessee shall be afforded adequate needless to mention that assessee shall be afforded adequate needless to mention that assessee shall be afforded adequate opportunity of being heard. opportunity of being heard. Accordingly, the sole ground of appeal he sole ground of appeal of the assessee is allowed for statistical purposes. of the assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for statistical purposes. statistical purposes.