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Facts
The assessee, a doctor by profession, failed to file an Income Tax Return for A.Y. 2013-14, leading to ex-parte reassessment proceedings under Section 144 read with Section 147 of the Income-tax Act. The Assessing Officer made various additions, including estimated speculation profit, professional fees treated as interest income, cash deposits, and unexplained investments in shares. The CIT(A) partly allowed the appeal but confirmed most additions, including unexplained investment under Section 69, while deleting an addition under Section 68.
Held
The Tribunal found that the CIT(A) erred by confirming additions without properly addressing the assessee's contentions or calling for a remand report. It was noted that the estimated speculation profit was upheld without verifying actual profit/loss, professional fees were incorrectly treated as interest, and cash deposit/share investment additions were confirmed without examining bank statements. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the case back to the Assessing Officer for fresh adjudication, directing the assessee to submit all relevant details.
Key Issues
1. Whether the CIT(A) was justified in confirming additions related to estimated speculation profit, professional fees, cash deposits, and unexplained investments under Section 69, despite the assessee's contentions and request for a remand report. 2. Whether the benefit of Section 44ADA was correctly denied for professional fees.
Sections Cited
Section 144, Section 250, Section 44ADA, Section 147, Section 148, Section 142(1), Section 69, Section 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI SUNIL KUMAR SINGH, JM
is filed by the assessee /appellant, Mr. Rushikesh Jagdishchandra Naik for A.Y. 2013-14, against the appellate order passed by National Faceless Appeal Centre, Delhi [the learned CIT (A)], dated 24th November, 2023, wherein the appeal filed by the assessee against the assessment order passed under Section 144 of the Income-tax Act, 1961 (the Act) dated
2. The assessee is aggrieved with the above appellate order raising five grounds of as under:-
“1. The order dated 24/11/2023 bearing No. ITBA/NFAC/S/250/2023-24/1058222336(1) passed under section 250 of Income Tax Act. 1961 by the Honorable C.I.T.[Appeal], National Faceless Appeal Centre [NFAC], Delhi, is excessive unreasonable, arbitrary, against the provisions of Income Tax Act, 1961 and therefore liable to be quashed.
ADDITION ON ACCOUNT OF ESTIMATED PROFIT OF RS.7,12,808/- IN SPECULATION BUSINESS.
(A) On facts and circumstances of the same, the Honorable C.I.T(A) has erred in confirming the addition of Rs.7,12,808/- being estimated profit @ 0.5% on the alleged speculation turnover, (B) Honorable C.I.T(A) ought to have appreciated the fact that profit in the speculation business activities can never be estimated at any percentage and further as requested by the Appellant, Global Report should have been referred to ascertain actual amount of profit & loss instead of confirming 0.5% of the turnover.”
3. ADDITION ON ACCOUNT OF PROFESSIONAL FEES.
B) Honorable CIT(A)-ought-to-have appreciated that said sum of Rs.1,72,397/-is not in the nature of interest but is professional fees received by the Appellant and Appellant is entitled to deduction in respect of expenses which was claimed @ 50% of the gross receipts as provided in Section 44ADA of Income Tax Act, 1961.
ADDITION ON ACCOUNT OF CASH DEPOSIT OF RS.2,00,000/- (A) On facts and circumstances of the case, the Honorable C.I.T(A) has erred in confirming the addition of Rs.2,00,000/- being cash deposit in the bank, rejecting the contention of the Appellant that the same was out of past savings.
ADDTION OF RS.1,01,28,895/- ΟΝ ACCOUNT OF UNEXPLAINED INVESTMENT IN SHARES UNDER SECTION 69.
(A) On facts and circumstances of the case and in law, the Honorable C.I.T(A) has erred in confirming the addition of Rs.1,01,28,895/- being unexplained investment in the purchase of the shares.
Addition of ₹1,01,28,895/- on account of unexplained investment in shares under Section 69.
(B) Honorable C.I.T(A) ought to have appreciated that no amount was invested by the Appellant and it was only periodical settlement and hence profit & loss needs to be added and not the whole amount of purchases. Even bank account of Appellant (copy enclosed) will not reflect any such investment being done by the Appellant.
The brief facts of the case shows that the assessee is an individual and Doctor by profession. He did not file any return of income for the assessment year and therefore, as per the non-filers of Income Tax Return, project the individual transactions were captured. It was noted that assessee has deposited cash of ₹2 lacs. Further, he has made sale of equity share in stock exchange of 1,01,80,102/- and also purchased equity shares of 1,01,28,895/-. Further, he has a turnover in equity shares settled otherwise than the actual delivery of ₹14,25,61,616/- and earned professional fees of ₹1,72,397/- on which tax has been deducted. 04. Therefore, proceedings, under Section 147 of the Act were initiated stating all these facts and notices under Section 148 of the Act was issued on 27th February, 2020. Assessee did not comply with the above notices. Subsequently, notice under Section 142(1), was issued on 28th September, 2020, which was also not replied to. During the course of assessment proceedings, seven
6. The learned Authorized Representative referred to paragraph no.1.4 of his written submission. Before the learned CIT (A), wherein it is stated that the notices issues by the learned Assessing Officer were at the email address of the Chartered Accountant and further, assessee has changed his residential address. Therefore, the notices issued by the learned Assessing Officer did not reach to the assessee and therefore, the same were not responded. He submitted that during the course of appellate proceedings, before the learned CIT (A) assessee repeatedly requested to call for remand report and given an opportunity of hearing but the learned CIT (A) did not call for the remand report and decided the issue on the written submission of the assessee. It was stated that on account of estimated profit of speculation business if the purchase and sale are considered real income only for actual amount of profit and loss is required to be taken into account. He further submits that so far as professional receipts are concerned assessee is entitled to the benefit of Section 44ADA of the Act. With respect to the cash deposit, it was submitted that the bank statement is furnished which shows that there is no deposit to the extent of of ₹2 lacs but is less than that. With respect to the purchase and sale of shares, he submits that the addition is sustained under Section 69 of the Act to the question of purchases as unexplained investment.
The learned Departmental Representative submitted that assessee has been given enough opportunity before the learned Assessing Officer as well as the learned CIT (A) and therefore, orders of the lower authorities may be sustained.
We have carefully considered the rival contentions and perused the orders of the lower authorities. The facts clearly shows that the assessee is a doctor by profession but largely carry on the speculation as well as the trading activity at the exchange. Assessee has not filed his return of income which has resulted into reopening and because of his failure to respond to several notices, resulted into re-assessment order passed ex-parte. The reasons given by the assessee is that mail id of Chartered Accountant was mentioned and further change in the residential address. He could not remain present before the learned Assessing Officer. Admittedly, before the learned CIT (A), the assessee made a request for calling remand report, however, the learned CIT (A) refused to call for the report stating that assessee has been given many opportunities
In the result, the appeal of the appeal is allowed for statistical purposes.
Order pronounced in the open court on 31.05. 2024.