KAMAL CLEARING AND FORWARDING AGENCY PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER, WARD 6(3)(3), , MUMBAI
Facts
The assessee company, engaged in customs clearing services, received Rs. 19,31,004 from Mr. Ravi Prakash instead of M/s Romex International. The Revenue added this amount as unexplained cash credit, considering it as money laundering, as Mr. Ravi Prakash was untraceable.
Held
The Tribunal held that the reopening of assessment was valid as the AO provided specific reasons and information from the Investigation Wing. Furthermore, the Tribunal found that the assessee discharged its duty by identifying the payer, and the fact that Mr. Ravi Prakash's source of funds was unexplained did not concern the assessee, especially since the income was offered as business income.
Key Issues
Whether the addition made by the AO as unexplained cash credit is sustainable, and whether the reopening of assessment was valid.
Sections Cited
68, 147, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI
Before: MS. KAVITHA RAJAGOPAL & SHRI OMKARESHWAR CHIDARA
PER OMKARESHWAR CHIDARA, AM
This appeal by the assessee is directed against order dated 20.02.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2018-19.
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While filing an appeal While filing an appeal before the Income before the Income-tax Appellate Tribunal (ITAT), the assessee company renders services as customs Tribunal (ITAT), the assessee company renders services as customs Tribunal (ITAT), the assessee company renders services as customs clearing services, filed only one ground of appeal as follows: clearing services, filed only one ground of appeal as follows: clearing services, filed only one ground of appeal as follows:
On the facts and circumstances of the case and in law, the ld. On the facts and circumstances of the case and in law, the ld. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in sustainin CIT(A) has erred in sustaining the addition made by the Ld. AO u/s 68 g the addition made by the Ld. AO u/s 68 of the Act of Rs.54,77,918/ of the Act of Rs.54,77,918/- on account of unexplained cash credit. on account of unexplained cash credit. 3. The Ld. AO has stated the assessee company rendered The Ld. AO has stated the assessee company rendered The Ld. AO has stated the assessee company rendered services to M/s Romex International and it had to receive an services to M/s Romex International and it had to receive an services to M/s Romex International and it had to receive an amount of Rs.19,31,004/ amount of Rs.19,31,004/- from this company. Instead of getting the this company. Instead of getting the amount from M/s Romex International, the appellant company amount from M/s Romex International, the appellant company amount from M/s Romex International, the appellant company received the money from one Mr. Ravi Prakash. As Mr. Ravi Prakash received the money from one Mr. Ravi Prakash. As Mr. Ravi Prakash received the money from one Mr. Ravi Prakash. As Mr. Ravi Prakash has deposited cash of Rs.1.57 crores in his bank account, the ld. has deposited cash of Rs.1.57 crores in his bank account, the ld. has deposited cash of Rs.1.57 crores in his bank account, the ld. AO held that the appellant c AO held that the appellant company is the beneficiary of the same. ompany is the beneficiary of the same. The Ld. AO received information from The Ld. AO received information from Investigation Wing Investigation Wing of Income- tax Department that Mr. Ravi Prakash is not traceable. As the tax Department that Mr. Ravi Prakash is not traceable. As the tax Department that Mr. Ravi Prakash is not traceable. As the payments were not received from Mr. Romex International and payments were not received from Mr. Romex International and payments were not received from Mr. Romex International and huge cash was deposited in th cash was deposited in the bank account of Mr. Ravi Prakash from e bank account of Mr. Ravi Prakash from where appellant company received money, the pellant company received money, the Ld. AO treated the Ld. AO treated the same as unexplained credit u/s 68 of the Act and added an amount same as unexplained credit u/s 68 of the Act and added an amount same as unexplained credit u/s 68 of the Act and added an amount of Rs.19,31,004/- while finalizing the assessment. The while finalizing the assessment. The while finalizing the assessment. The Ld. CIT(A) has also confirmed th has also confirmed the addition made by the Ld. AO by holding that e addition made by the Ld. AO by holding that it is a case of money laundering, as Mr. Ravi Prakash who paid it is a case of money laundering, as Mr. Ravi Prakash who paid it is a case of money laundering, as Mr. Ravi Prakash who paid money to the appellant company to discharge the liability of M/s money to the appellant company to discharge the liability of M/s money to the appellant company to discharge the liability of M/s
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Romex International is not traceable. The Ld. CIT(A) has also held Romex International is not traceable. The Ld. CIT(A) has also held Romex International is not traceable. The Ld. CIT(A) has also held that the sources of Mr. Ravi Prakash remained unexplained s of Mr. Ravi Prakash remained unexplained s of Mr. Ravi Prakash remained unexplained because Mr. Ravi Prakash deposited huge cash into his bank because Mr. Ravi Prakash deposited huge cash into his bank because Mr. Ravi Prakash deposited huge cash into his bank account. Hence, the addition made by the Ld. AO was upheld by the account. Hence, the addition made by the Ld. AO was upheld by the account. Hence, the addition made by the Ld. AO was upheld by the First Appellate Authority. First Appellate Authority.
Aggrieved by the order by the orders of the Ld. AO and Ld. CIT(A), the of the Ld. AO and Ld. CIT(A), the appellant filed an appeal before the ITAT with the only ground of appellant filed an appeal before the ITAT with the only ground of appellant filed an appeal before the ITAT with the only ground of appeal mentioned in page 1 of this order. Subsequently, an appeal mentioned in page 1 of this order. Subsequently, an appeal mentioned in page 1 of this order. Subsequently, an additional ground of appeal was filed on 23.10.2024 by the additional ground of appeal was filed on 23.10.2024 by the additional ground of appeal was filed on 23.10.2024 by the appellant which is reproduced below: appellant which is reproduced below:
“On the facts and circumstances of On the facts and circumstances of the case and in law, the the case and in law, the impugned assessment proceedings are without jurisdiction in impugned assessment proceedings are without jurisdiction in impugned assessment proceedings are without jurisdiction in as much as they are in viol as much as they are in violation of section 147 of the Act. ation of section 147 of the Act.” 4.1 Again another petition dated 12.11.2024 which was received Again another petition dated 12.11.2024 which was received Again another petition dated 12.11.2024 which was received by the ITAT Registrar on 21.11.2024 which sta by the ITAT Registrar on 21.11.2024 which states that the appellant tes that the appellant wanted to raise another additional ground as follows: wanted to raise another additional ground as follows: wanted to raise another additional ground as follows:
“On the facts and circumstances of the case and in law, the On the facts and circumstances of the case and in law, the On the facts and circumstances of the case and in law, the impugned reassessment order passed u/s 147 of the Act is impugned reassessment order passed u/s 147 of the Act is impugned reassessment order passed u/s 147 of the Act is bad in law in as much as it is only a draft order which does bad in law in as much as it is only a draft order which does bad in law in as much as it is only a draft order which does not contain material facts and finding, and cannot be ot contain material facts and finding, and cannot be ot contain material facts and finding, and cannot be characterized as an order of assessment. characterized as an order of assessment.” 5. During the hearing proceedings, the Ld. AR of the appellant During the hearing proceedings, the Ld. AR of the appellant During the hearing proceedings, the Ld. AR of the appellant has argued extensively and the summary of his arguments are as has argued extensively and the summary of his arguments are as has argued extensively and the summary of his arguments are as follows:
(a) As mentioned in the (a) As mentioned in the first additional ground raised first additional ground raised challenging the reopening of the assessment u/s 148 of challenging the reopening of the assessment u/s 148 of challenging the reopening of the assessment u/s 148 of
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the Act, the Ld. AO mentioned that the words used by Ld. the Act, the Ld. AO mentioned that the words used by Ld. the Act, the Ld. AO mentioned that the words used by Ld. AO are “at para 3 of reasons for AO are “at para 3 of reasons for reopening reopening are “suspicious” and “needs ” and “needs thorough investigation” and thorough investigation” and hence no “reason to belief” that there are no escapement hence no “reason to belief” that there are no escapement hence no “reason to belief” that there are no escapement of income. (b) As the Ld. AO received information from Investigation (b) As the Ld. AO received information from Investigation (b) As the Ld. AO received information from Investigation Wing of Amritsar, to the same is borrowed satisfaction Wing of Amritsar, to the same is borrowed satisfaction Wing of Amritsar, to the same is borrowed satisfaction and hence reopening is not valid. and hence reopening is not valid. (c) The second additional ground of appeal raised by the ond additional ground of appeal raised by the ond additional ground of appeal raised by the appellant is that the order received assessee is only draft appellant is that the order received assessee is only draft appellant is that the order received assessee is only draft assessment order and the same does not contain facts assessment order and the same does not contain facts assessment order and the same does not contain facts and findings. and findings. (d) On merits, the Ld. AR of appellant argues that, as far (d) On merits, the Ld. AR of appellant argues that, as far (d) On merits, the Ld. AR of appellant argues that, as far they are concerned, the they are concerned, they have given all particulars like y have given all particulars like PAN card, address of Mr. Ravi Prakash who discharged PAN card, address of Mr. Ravi Prakash who discharged PAN card, address of Mr. Ravi Prakash who discharged the liability on behalf of M/s Romex International who is the liability on behalf of M/s Romex International who is the liability on behalf of M/s Romex International who is - ---client. (e) Services rendered to M/s Romex International were (e) Services rendered to M/s Romex International were (e) Services rendered to M/s Romex International were not disputed by the Ld. CIT(A). not disputed by the Ld. CIT(A). (f) They have (f) They have admitted the receipt as their business admitted the receipt as their business income and hence it cannot be added again because Mr. income and hence it cannot be added again because Mr. income and hence it cannot be added again because Mr. Ravi Prakash is not traceable. Ravi Prakash is not traceable. 6. The Ld. Departmental Representative (DR) relied on the orders The Ld. Departmental Representative (DR) relied on the orders The Ld. Departmental Representative (DR) relied on the orders of the lower authorities and submitted that the addition made by of the lower authorities and submitted that the addition made by of the lower authorities and submitted that the addition made by Ld. AO may be confirmed for the reasons mentioned in their order. Ld. AO may be confirmed for the reasons mentioned in their order. Ld. AO may be confirmed for the reasons mentioned in their order.
Heard both sides and the decision of the Bench adjudicates Heard both sides and the decision of the Bench adjudicates Heard both sides and the decision of the Bench adjudicates that the addition made by the Ld. AO is deleted for the following that the addition made by the Ld. AO is deleted for the following that the addition made by the Ld. AO is deleted for the following reasons :
(a) Even though the words used in the reasons for (a) Even though the words used in the reasons for (a) Even though the words used in the reasons for reopening eopening eopening are are are “suspicious” “suspicious” “suspicious” and and and needs needs needs thorough thorough thorough investigation, if all the three paras of “Reasons for investigation, if all the three paras of “Reasons for investigation, if all the three paras of “Reasons for
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Reopening” recorded are to be Reopening” recorded are to be read together. The Ld. AO together. The Ld. AO has has has given given given detailed detailed detailed reasons reasons reasons and and and the the the information information information mentioned is not vague and general. A specific mentioned is not vague and general. A specific mentioned is not vague and general. A specific information was received from Investigation Wing of the tion was received from Investigation Wing of the tion was received from Investigation Wing of the Department after due enquiries and when the AO has Department after due enquiries and when the AO has Department after due enquiries and when the AO has specifically mentioned in 4th para that he has reasons to specifically mentioned in 4th para that he has reasons to specifically mentioned in 4th para that he has reasons to believe, the same cannot be questioned in view of the believe, the same cannot be questioned in view of the believe, the same cannot be questioned in view of the decision of Hon’ble Supreme Court in the cas decision of Hon’ble Supreme Court in the cas decision of Hon’ble Supreme Court in the case of Raymond Woolen Mills Ltd. 276 ITR 34 (SC) where it was Raymond Woolen Mills Ltd. 276 ITR 34 (SC) where it was Raymond Woolen Mills Ltd. 276 ITR 34 (SC) where it was held that “what is to the held that “what is to the seen at the time of reopening of at the time of reopening of the case is only sufficient or correctness of the material. the case is only sufficient or correctness of the material. the case is only sufficient or correctness of the material. In view of this decision, the reopening of the assessment In view of this decision, the reopening of the assessment In view of this decision, the reopening of the assessment is upheld. (b) The second additional ground raised was submitted The second additional ground raised was submitted The second additional ground raised was submitted on 21.11.2024, whereas the case was on 21.11.2024, whereas the case was heard on heard on 12.11.2024. As the petition 12.11.2024. As the petition for raising additional ground for raising additional ground was received after the completion of hearing, the same is was received after the completion of hearing, the same is was received after the completion of hearing, the same is not entertained and dismissed. As far as the merits are not entertained and dismissed. As far as the merits are not entertained and dismissed. As far as the merits are concerned, the assessee cannot raise this ground concerned, the assessee cannot raise this ground concerned, the assessee cannot raise this ground because the appellant company knows all the facts and because the appellant company knows all the facts and because the appellant company knows all the facts and based on the same, first and second appeals were filed the same, first and second appeals were filed the same, first and second appeals were filed before the Ld. CIT(A)/ITAT and no prejudice was caused before the Ld. CIT(A)/ITAT and no prejudice was caused before the Ld. CIT(A)/ITAT and no prejudice was caused to the appellant as it has full information and even a to the appellant as it has full information and even a to the appellant as it has full information and even a demand notice attached to assessment order which is demand notice attached to assessment order which is demand notice attached to assessment order which is important. (c) Coming to the merits of the case (c) Coming to the merits of the case, the appellant has , the appellant has discharged his duty in indentifying the person who paid discharged his duty in indentifying the person who paid discharged his duty in indentifying the person who paid to them through banking channels by giving his PAN to them through banking channels by giving his PAN to them through banking channels by giving his PAN card, bank statement details etc., the appellant company card, bank statement details etc., the appellant company card, bank statement details etc., the appellant company is not concerned with Mr. Ravi Prakash deposit of cash in is not concerned with Mr. Ravi Prakash deposit of cash in is not concerned with Mr. Ravi Prakash deposit of cash in his bank accou his bank account when it is not the case of Department nt when it is not the case of Department that he is the benami company or company’s money was that he is the benami company or company’s money was that he is the benami company or company’s money was deposited in the Ravi Prakash’s bank account. As far as deposited in the Ravi Prakash’s bank account. As far as deposited in the Ravi Prakash’s bank account. As far as the appellant is concerned, they the appellant is concerned, they rendered services to M/s services to M/s Romex International and Mr. Ravi Prakash paid mo Romex International and Mr. Ravi Prakash paid mo Romex International and Mr. Ravi Prakash paid money on on on behalf behalf behalf of/on of/on of/on the the the instruction instruction instruction of of of M/s M/s M/s Romex Romex Romex International who is International who is a debtor of appellant company, a debtor of appellant company, through banking channel. It is not the contention of banking channel. It is not the contention of banking channel. It is not the contention of Department that Ravi Prakash or Romex International are Department that Ravi Prakash or Romex International are Department that Ravi Prakash or Romex International are fictitious entries and benamis of company. fictitious entries and benamis of company.
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(d) It is not disputed by the Department that the money ) It is not disputed by the Department that the money ) It is not disputed by the Department that the money received by appellant company is business income and received by appellant company is business income and received by appellant company is business income and the same was was offered as such already in its books of offered as such already in its books of account. Once the income is offered as “business income” account. Once the income is offered as “business income” account. Once the income is offered as “business income” again by AO. by appellant, the same cannot be added by appellant, the same cannot be added again by AO. 8. In view of the above, the appeal of the appellant company is In view of the above, the appeal of the appellant company is In view of the above, the appeal of the appellant company is allowed.
Order pronounced in the open Court on Order pronounced in the open Court on 31 31/12/2024.
Sd/- Sd/- Sd/ (KAVITHA RAJAGOPAL (KAVITHA RAJAGOPAL) (OMKARESHWAR CHIDARA OMKARESHWAR CHIDARA) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 31/12/2024 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.
BY ORDER, BY ORDER, //True Copy//
(Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai
