Loading judgment…
Facts
The appellant, KTK Infortronics Private Limited, filed its return of income for AY 2017-18. The Assessing Officer (AO) passed an ex-parte assessment order under section 144, making additions on account of cash deposits during demonetization and disallowance under section 40(a)(ia). The CIT(A) dismissed the appeal concerning the cash deposit addition and remanded the issue of the second addition.
Held
The Tribunal condoned the delay in filing the appeal due to a director's illness. Since the appellant did not appear, the case was decided based on the available material. The Tribunal found it proper to remand the issue of cash deposits back to the AO to provide the assessee with an opportunity to explain the source of these deposits.
Key Issues
Whether the addition made on account of cash deposits during the demonetization period is justified without providing adequate opportunity to the assessee to explain the source.
Sections Cited
250, 68, 115BBE, 143(2), 142(1), 144, 270A, 40(a)(ia), 139(1), 44AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI NARENDRA KUMAR CHOUDHRY & SHRI RATNESH NANDAN SAHAY
O R D E R
Per : Ratnesh Nandan Sahay, Accountant Member:
This appeal has been filed by the appellant against the Order of the Ld. CIT (Appeals) passed u/s. 250 of the Income Tax Act [the ‘Act’ in short] KTK Infortronics Private Limited; A. Y.2017-18 vide DIN & Order No. ITBA/NFAC/S/250/2023-24/1060731124(1) Dated 09/02/2024 for the Assessment Year 2017-18. 2. Following grounds of appeal have been raised by the appellant: 1. “The learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in determining the income of the appellant company at Rs.79,94,710/- as against declared income at Rs.18,59,880/- in an appellate order passed dated 09.02.2024 under section 250 of the Act.
2. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in confirming the addition of cash sales to the extent of Rs.56,73,000/- made during the period of post demonetization and erroneously held to be unexplained credit u/s 68 of the Act read with section 115BBE of the Act.
3. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the approach adopted to assume and hold that some part of the cash sales for the period of post demonetization represent unexplained cash credits is illegal, invalid and untenable.
4. That while making the above addition, the learned Commissioner of Income(Appeals) has failed to appreciate the factual substratum of the case, statutory provisions of law and as such, addition so made is highly misconceived, totally arbitrary, wholly unjustified and therefore, unsustainable.
5. That furthermore the learned Commissioner of Income Tax (Appeals) has proceeded to make the addition on mere speculation, theoretical assumptions and allegations and assertions, without there being any supporting evidence and is therefore not in accordance with law.
6. That once the learned Commissioner of Income Tax (Appeals) has not disputed that sales made were duly disclosed in VAT return and also in books of accounts maintained by the appellant audited under the Companies Act, 2013 and also under section 44AB of the Act, no adverse inference could be drawn in respect of the declared sales by the appellant company.
KTK Infortronics Private Limited; A. Y.2017-18 7. That the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that having accepted books of accounts, sales made could not be regarded as unexplained credits.
That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that aforesaid sales as made by the appellant were supported by availability of stock in the books of accounts (as per stock book) whose availability is not disputed and denied and is otherwise too supported by genuineness of purchase bills, creditors and also sales bills maintained in accordance with law and as such, there was neither any legal justification nor any valid basis to assume or presume that such genuine cash sales by the appellant in the instant year were not sales made by the appellant.
That the learned Commissioner of Income Tax (Appeals) has even otherwise failed to appreciate that cash sales since have already been offered as income by the appellant could not presumptively be rejected and held as unexplained money so as to tax the same under section 68 of the Act, when the section 68 of the Act itself is wholly inapplicable to the income already offered as income by the appellant in the return of income.
That the appellant craves leave to reserve itself to add, delete, amend and forgo any ground at or before the time of hearing.”
The facts of the case, in brief, are that the appellant is a Private Limited Company engaged in the business of trading in electronic goods and ancillary services. The appellant filed its return of income on 14/09/2017for the assessment year 2017-18 computing its total income at Rs.18,98,730/- The appellant also got its books of accounts audited as required u/s. 44AB of the Act and submitted the same on 23/08/2017. The KTK Infortronics Private Limited; A. Y.2017-18 case of the appellant was selected for scrutiny under CASS. The reasons for selection under a scrutiny were:
1. 1. Abnormal increase in cash deposits during demonetization period as compared to pre-demonetization period.
2. Lower amount disallowed u/s. 40(a)(ia) in ITR in comparison to tax audit report.
4. Accordingly, notices u/s. 143(2) and 142(1) of the Act were issued from time to time, however, there was no response from the appellant side. The Ld. AO has noted in the impugned assessment order that despite given several opportunities of being heard to the assessee, there was no compliance from the assessee and thus, the Ld. AO passed the assessment order ex-parte u/s. 144 of the Act and made an addition of Rs.61,34,730/- on account of cash deposits of Rs.56,73,000/- made during the demonetization period and treated the same as unexplained cash credits u/s. 68 of the Act which is subjected to tax u/s. 115BBE of the Act. Penalty proceedings u/s. 270A of the Act was also initiated by the Ld. AO separately. Another disallowance of Rs.4,61,730/- was made u/s. 40(a)(ia) of the Act on the ground that the assessee had deducted TDS of Rs.78,061/- but the same was not paid on or before the due date specified in section 139(1) of the Income Tax Act.
KTK Infortronics Private Limited; A. Y.2017-18 5. Aggrieved by the order of the Ld. AO, the assessee filed appeal before the Ld. CIT(A) who dismissed the appeal on the ground that the assessee could not establish, with corroborative evidences, the nexus between business receipts and cash deposits made in the bank account. On the second addition of Rs.4,61,730/- made u/s. 40(a)(ia) of the Act, the Ld. CIT(A) remanded the issue to the Ld. AO and directed him to examine the veracity of the contention of the assessee while giving appeal effect to the order of the Ld. CIT(A).
Aggrieved by the order of the Ld. CIT(A), this appeal has been filed before us. It was found during the appellate proceedings before us, that there was a delay of 35 days in filing this appeal for which the appellant has submitted a petition for the condone of delay along with an affidavit specifying the reasons for the delay. The reasons are given as under:- i. “The delay in filing the appeal arises due to the unexpected and severe illness of Sumedha Thakur one of the directors of KTK Infotronics Private Limited. This Illness had a severe impact on the director's ability to attend to legal matters. The Xerox copy of medical certificate and related documents are attached as per Annexure 1.
KTK Infortronics Private Limited; A. Y.2017-18 ii. The illness rendered Sumedha Thakur incapacitated and unable to fulfill their duties and responsibilities, including overseeing the legal matters related to the appeal before this Honorable Bench. iii. Due to the above reason prompt steps were taken after the director's illness by Appointing Hiren Sanghvi & Associates as a legal counsel to appear who will hereafter appear before income tax appellate tribunal, tribunals as and when necessary to make submissions before them and to produce documents, accounts, evidences, etc. in respect of the proceedings before the tribunals. iv. The delay occurred without any intention to bypass the legal obligations or to cause prejudice to any party involved. We acknowledge the importance of adhering to procedural timelines and assure the Honorable Bench that steps have been taken to prevent such delays in the future.” We have considered the above submissions and accordingly, condone the delay in filing appeal before the ITAT considering the medical ground of the director.
During the appellate proceedings before us, none appeared from the appellant side. Thus, we have considered the case on the basis of the material available on record. It is found that the Ld. AO has passed the assessment order ex-parte u/s. 144 of the Act on the ground that the KTK Infortronics Private Limited; A. Y.2017-18 assessee didn’t explain the source of the said cash deposits made in the bank account during the demonetization period. We, therefore, think it proper to remand the issue back to the file of the Ld. AO to provide adequate opportunity of being heard to the assessee to explain the source of the cash deposits made in its bank account. The appellant is also directed to avail that opportunity to explain the same.
In the result, the appeal is allowed for statistical purpose. Order pronounced in the open court on 28.08.2024.
Sd/- Sd/- NARENDRA KUMAR CHOUDHRY RATNESH NANDAN SAHAY JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 28.08.2024. Snehal C. Ayare, Stenographer Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench //True Copy//
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.