Loading judgment…
Facts
The assessee, engaged in the money transfer business, declared an income of Rs. 2,85,690/- for AY 2017-18. The Assessing Officer (AO) made additions of Rs. 8,78,000/- and Rs. 73,55,436/- (8% of cash deposits) based on cash deposits of Rs. 9,28,20,950/-. The CIT(A) deleted the first addition and reduced the second addition to 4% of cash deposits.
Held
The Tribunal held that the CIT(A) erred by admitting additional evidence during the appeal proceedings without following the prescribed procedure under Rule 46A of the Income Tax Rules. The assessee had not submitted these documents before the AO. Therefore, the matter was remanded back to the CIT(A) for fresh adjudication.
Key Issues
Whether the CIT(A) correctly admitted and acted upon additional evidence without following the due procedure, and whether the estimation of income by the AO and CIT(A) was justified.
Sections Cited
250 of the Income Tax Act, 1961, 143(3) of the Act, Rule 46A of the Income Tax Rule
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI & SHRI DINESH MOHAN SINHA
Appellant by : Shri Ravindra Manek, Ld. AR Respondent by : Shri Abhimanyu Singh Yadav, Ld. Sr. DR Date of Hearing :03/06/2025 Date of Pronouncement :01/08/2025 आदेश / O R D E R PER DINESH MOHAN SINHA, JM:
Captioned appeal filed by the assessee, pertaining to Assessment Year 2017-18, is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”),National Faceless Appeal Centre (NFAC)-Delhi, Commissioner of Income-tax (AY 2017-18) Alkaben N.Bujad v. ITO (Appeal), dated 27.05.2024, which in turn arises out of an order passed by the Assessing Officer, u/s 143(3)of the Act, on 25.12.2019.
Grounds of appeal raised by the assessee are as follows:
1. The Hon. CIT(A) has erred in law as well as in facts in adopting 4% of cash deposit of Rs. 9.28.20.950/- to estimate income of appellant without considering nature of business, normal rate of retum, past history, books of accounts, other comparable cases, etc. while confirming addition made by the Ld. AO
2. The Hon. CIT(A) has erred in law as well as in facts in estimating income of appellant at Rs. 37,12,838/-, being 4% of total cash deposit made during the year.
3. The appellant craves leave to add, amend, alter, or withdraw any aforesaid grounds of appeal.
Brief facts of the case that the appellant is an individual assessed to tax with ITO Ward 2(7) Jamnagar. Return of Income for the A.Y. 2017-18 was filed on 31.03.2018 declaring total income of Rs. 2,85,690/-. Based on information with department about cash deposit by appellant in the Bank, the case was selected for limited scrutiny and appellant was asked to explain the aggregate cash deposit of Rs. 9,28,20,950/- during the year under consideration. Briefly stated that that appellant is engaged in the business of money transfer and is an authorized Master Distributor of Forbes Technology Limited and Hermes I Tickets Private Limited. Cash received by us for money transfer from various local customers, retailers and smaller distributors, have been accumulated by us and thereafter deposited in Bank account to buy TIME BALANCE from main company. For this money transfer TIME BALANCE distribution service, we receive small commission which is our gross income. We also incur other direct and administrative expenses against this commission of 8%, as the AO estimated income @8% of gross receipt in this case. The business model was duly explained to the Ld. AO at the time of assessment proceedings, the assessment order was passed by making two additions; (AY 2017-18) Alkaben N.Bujad v. ITO a. One Addition of Rs. 8,78,000/-, being amount deposited in SBN during demonetization. b. Second addition is of Rs. 73,55,436/- being 8% of cash deposit of Rs. 9,19,42,950/-.
That the assessee filed an appeal against the order of the Ld. AO, dated 25.12.2019.In the office of the Ld. CIT(A), Rajkot. That the Ld. CIT(A) partly allowed the appeal by order dated 27.05.2024, whereby the addition of Rs. 8,78,000/- was deleted and the income estimated by AO of @8% on 73,55,436/- was reduced to at @4% estimated income.
That the assessee filed an appeal against the impugned order dated 27.05.2024 before this Tribunal.
During the course of hearing, the Ld. AR of the assessee submitted that the assessee is doing the business of money transfer and is an authorized Master Distributor of Forbes Technology Limited, and we have no other income, and the addition confirmed by Ld. CIT(A) may kindly be deleted.
On the other hand, the Ld. Sr. DR has relied upon the order of the Ld. CIT(A), and the Ld. Sr. DR filed a Cross Objection stating that the Ld. CIT(A) has adjudicated the additional evidences in violation rule 46A of the Income Tax Rule.
We have heard both the parties and perused the documents available on record and also perused the order of the LD. CIT(A) and perused the paper- book submitted in this case. We note that various notices have been issued by the Ld. CIT(A), in response to that, the appellant has submitted additional evidences during the course of hearing, such as, Copy of final accounts containing Balance Sheet, Profit and Loss account, Copy of Bank Book of assessee's Andhra Bank account and SBI Bank Account, Cash Book, Cash Flow statement etc. which were not available at the time of original assessment before the Assessing Officer. The Ld. CIT(A) disposed off the appeal on the basis of additional evidences without following the prescribed procedure established by Law. The action of Ld. CIT(A) is in direct violation of Rule 46A of the Income Tax Rule, which stipulates that additional evidences can only be admitted if assessee satisfies certain conditions, for non-submission of documents during the assessment proceedings. In this case, the assessee not submitted the documents before the AO, consequently, the additional evidences should not have been considered by the CIT(Appeals). In view of the above discussion, we therefore remand the matter back to the file of Ld. CIT(A) for fresh adjudication on merit after following the prescribed procedure for admission of additional evidences as prescribed by law and after giving due opportunity to explain the case and adjudicate the matter according to law.
10.That the Cross objection of the revenue (CO No. 11/Rjt/2025 for AY 2017-18) is disposed off with above terms.
Order pronounced in the open court on 01-08-2025.