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Facts
The assessee filed a return of income, which was revised twice, declaring total incomes of Rs. 47,31,352/-, Rs. 30,00,854/-, and Rs. 29,00,854/-. The Assessing Officer (AO) noticed a difference between the salary received by the assessee (Rs. 63,75,681/-) and the salary shown in the revised return (Rs. 29,00,854/-). The AO added the difference of Rs. 34,56,827/- to the total income under section 68 of the Income-tax Act, 1961, citing a fraudulent claim of refund.
Held
The Tribunal noted that the assessee's main contention was that the alleged fraudulent claim was lodged by Mr. Rajesh Tiwari, who was not a competent Chartered Accountant and had no degree. The assessee claimed they never availed of such a fraudulent claim. The Tribunal considered that the AO had made additions under section 68 on the ground of fraudulent refund claims and the assessee's AR had expressed inability to produce documentary evidence. Therefore, a reasonable opportunity was to be provided to the assessee.
Key Issues
Whether the addition made by the Assessing Officer under section 68 of the Income-tax Act for alleged fraudulent refund claim is justified, and whether the assessee should be given an opportunity to present their case.
Sections Cited
68, 250, 251, 143(2), 142(1), 133(6), 234B, VI-A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “F”,MUMBAI
Before: SHRI.NARENDER KUMAR CHOUDHRY & MISS. PADMAVATHY S.
O R D E R Per N.K. Choudhry (JM): This appeal has been preferred by the Assessee, against the order dated 31/10/2017 impugned herein passed by the Commissioner of Income- tax, Circle-2, Kalyan (in short ’Ld. Commissioner’) under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) for the A.Y.2015-16.
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The following are the grounds raised
by the Assessee: - “On being aggrieved bythe order of the learned Commissioner of Income-tax (Appeal)-3, Thane [„CIT(A)‟] passed undersection 250 read with section 251 of the Income tax Act, 1961 ('the Act') dated
1. March 2019 (received on 26. March 2020), the present appeal is being preferred on the funds amongst others which, it is prayed, may be considered without prejudice to one another. Ground 1 : Additions under section 68 of the Income-tax Act. 1961 ('the Act') 1.1 Based on the facts and circumstances of the case and in law, the learned Assessing Officer ('AO') / CIT(A) has erred in making additions under section 68 of the Act as unexplained cash credit on the difference between the Assessed Income and the Returned Income.
1.2 Based on the facts and circumstances of the case and in law, the learned AO/ CIT(A) has erred in not considering the difference as Salary Income of the Appellant as already conceded during the AssessmentProceedings. Ground 2 :Leyy of interest under section 234B of the Act On the facts and circumstances of the case and in law, the learned AO has erred in levying interest amounting to INR 42,856 under section 234B of the Act.”
This is a recalled matter. Earlier, the appeal was disposed of by an e-parte order dated 22/12/2022, however, vide order dated 03/11/2023 passed in MA No.322/Mum/2023, the ex-parte order of the Tribunal was recalled for providing one more opportunity to the Assessee owing to the principles of natural justice. Thus, the matter has come up for hearing again.
The brief facts of the case are that the Assessee being an individual, e- filed his return of income on dated 26/08/2015 declaring total income of Rs.47,31,352/- which was revised twice on dated 17/12/2016 & 05/09/2016 declaring total income of Rs.30,00,854/- and Rs.29,00,854/-, respectively. Subsequently the case of the Assessee was selected for scrutiny under CASS
3 ITA 1440/Mum/2022 Shri Vijay Kashinath Jagtap and statutory notices dated 06/07/2017 and 26/07/2017 respectively under section 143(2) and 142(1) of the Act were issued and served on the Assessee. 4.1 In the course of scrutiny, the Assessing Officer, on perusal of copy of 26AS & Form 16 noticed that the Assessee has received salary of Rs.63,75,681/- during F.Y. 2014-15 relevant to A.Y. 2015-16; however, the Assessee has shown salary received at Rs.,29,00,854/- in revised return filed on 05/09/2016. To verify the claim of the Assessee, notices under section 133(6) were issued to M/s Pfizer Limited. The reply received from M/s Pfizer revealed that Assessee had received salary of Rs.63,75,681/- during the financial year relevant to the assessment year under consideration. The Assessee was accordingly show caused on 23/10/2017 to explain the difference by 27/10/2017 and as to why the difference of Rs.34,56,827/- should not be brought to tax as ‘salary income’.
4.2 The Assessee’s representative attended the office of the Deputy Commissioner of Income-tax, Circle-2, Kalyan and expressed his inability to explain the difference and voluntarily offered the difference amount of Rs.32,80,434/- for taxation. Accordingly, the Assessing Officer added a sum of Rs.32,80,434/- to the total income of the Assessee under section 68 of the Act.
Being aggrieved, the Assessee filed first appeal before the Ld. Commissioner and raised the issue of treating Rs.32,80,434/- under section 68 of the Act, instead as ‘Salary income’.
The Ld. Commissioner, however, after quoting the relevant portion of the assessment order, dismissed the appeal of the Assessee by observing as under: -
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“5.1 In this case, the appellant was working with M/s. Pfizer Limited and took Voluntary Retirement Service. As per Form No. 26AS, the gross total income of the appellant works out to Rs.63,58,458/-. In this case, the issue of refund fraud in connivance with the AR of the appellant has been established by the Department and accordingly, the appellant has filed the original return on 26.08,2015 declaring net income of Rs.45,31,698/-, first revised return was filedon 05.09.2016, declaring net income of Rs.23,26,687/- and second revised return was filed on 17.02.2016, declaring net salary income of Rs.24,26,682/-, In thisregard, in the assessment proceedings, the AO has discussed in para 5 of the order and has made addition of Rs.34,56,827/- u/s 68 of the Act as the appellant has fraudulently claimed refund, which is not eligible to the appellant as per the Act.
After considering the submission of the appellant and the observation of the AO in the assessment order, I am of the considered view that, the addition made by the AO is justified and also, all the more, since the appellant has fraudulently claimed refund by filing revised return twice, which is not permissible as per law, therefore, the addition made by the assessing officer, without allowing deduction under Chapter-VI-A is justified. The appeal of the appellant is dismissed.”
Still aggrieved, the Assessee is in appeal before the Tribunal.
8. Heard the parties and perused the materials available on record. In this case the Assessing Officer made the addition of Rs.34,56,827/- under section 68 of the Act on the ground that the Assessee has fraudulently claimed refund by filing revised return twice, which is not permissible as per law and for which the Assessee is also not eligible. Therefore, the addition
5 ITA 1440/Mum/2022 Shri Vijay Kashinath Jagtap made by the Assessing Officer without allowing deduction under Chapter VI- A is justified. 8.1 The Assessee’s main contention is that that the Ld. AR Mr. Rajesh Tiwari on whose premises a search and seizure action under section 132 of the Act was carried out, wherein it was found that Mr. Rajesh Tiwari has been indulging in claim of fraudulent refunds by fictitious claim of deductions, which was unearthed by the Income-tax Department. The Assessee was one such person for whom Mr. Rajesh Tiwari had filed return of income and made false claims of refund of tax. The Assessee further claimed that without the knowledge of Assessee, Mr. Rajesh Tiwari has filed revised return and requested passbook, etc. and kept with him. Therefore, there was no fault of the Assessee in filing the revised return, so as to claim the alleged fraudulent refund. Even otherwise said refund as claimed was never issued to the Assessee. The Assessee further claimed that the lodging of alleged fraudulent claim of refund was done by Mr. Rajesh Tiwari and Assessee was bonafide in its action and there was no fault on Assessee’s side. The Assessee in order to substantiate the said contention also filed the newspaper clipping as published in Economic Times on 09th November, 2022 wherein it is clearly published that Mr. Rajesh Tiwari has made evasion by fake certificate of CA. The Assessee also claimed that the Assessee has earned the income from services only and has no other source of income during the year under consideration and even otherwise, not maintaining any books of account, therefore, the addition under section 68 of the Act is at all, not warranted. 7.2 We have given thoughtful consideration to the peculiar facts and circumstances of the case. Since the allegations against the Assessee and its Counsel have been made by the authorities below for fraudulent claim of 6 ITA 1440/Mum/2022 Shri Vijay Kashinath Jagtap refund and the Assessee’s main contention is that the alleged fraudulent claim if any, has been lodged by Mr. Rajesh Tiwari, who was in fact had no degree of Chartered Accountant and even otherwise, not competent to file the relevant income-tax proceedings/compliances. The Assessee’s specifically claimed that he never availed such kind of fraudulent claim, as alleged by the revenue department. The Assessee also claimed that even otherwise addition under section 68 is not warranted sans books of account, as the Assessee has not maintained any books of account during the year under consideration. Since before the Assessing Officer, as recorded in para 6 of the order that the Assessee’s AR has expressed its inability to produce any documentary evidence qua deductions claimed under Chapter VIA as well as in order to substantiate the difference of Rs.34,56,827/- (Rs.63,75,681/- (-) Rs.29,00,854/-). Therefore, the Assessee’ s claim is that the Assessee’s tax consultant / AR has not demonstrated the facts in proper manner and in its right perspective, therefore, a reasonable opportunity may be provided to the Assessee to demonstrate the proper facts and circumstances and documents. Considering the said claim of the Assessee and allegation leveled by the Department qua lodging of fraudulent claim of deduction, we are inclined to remand the instant case/issue to the file of the Ld. Commissioner for decision afresh, suffice to say, by affording reasonable opportunity of being heard to the Assessee. We clarify that primary onus to substantiate its claim and by filling specific affidavit/documents to disprove the role of Assessee in lodging the fraudulent claim if any, by the Ld. AR, would be on the Assessee. Further, the Assessee is directed to file the relevant documents as would be essential for proper adjudication of the issue and should also appear in case necessitates by the revenue authorities and in case of default, shall not be entitled for any leniency.
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In the result, appeal filed by the Assessee stands allowed for statistical purpose.
Order pronounced in the open court on 31/01/2024.