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Facts
The assessee filed an appeal against the order of the CIT(Appeals) for AY 2013-14. The Assessing Officer (AO) reopened the case based on information about accommodation entries in commodity trading. The assessee declared income under Section 44AE, which the AO found inappropriate for commodity trading.
Held
The Tribunal observed that the lower authorities had not properly investigated whether the information received from the investigation wing pertained to income already declared by the assessee. Merely receiving information does not presume non-declaration. The addition was made on the basis of income declared under the wrong section.
Key Issues
Whether the addition made by the AO and sustained by the CIT(A) was justified when the assessee had already declared the income under a different, albeit potentially incorrect, section and the transaction's details were not properly verified.
Sections Cited
44AE, 44AD, 148, 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AGRA (SMC
Before: SHRI S. RIFAUR RAHMAN
The assessee has filed this appeal against the order of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre(NFAC), Delhi dated 28.05.2025 for the Assessment Year 2013-14.
Brief facts of the case are, the assessee has filed his return of income for the assessment year 2013-14, declaring total income of Rs.2,94,690/-. The Assessing Officer received information from Investigation Wing, Kanpur that on the survey carried on in the case of M/s. Gauri Traders, it was found that huge cash was deposited in the bank account of M/s. Gauri Traders, proprietor Smt. Amita Gupta and the cash so deposited was transferred to the bank account of M/s. PCS Traders, Prop. Smt. Sudha Gupta who issues cheques onward to different beneficiaries. On the basis of statement recorded from Smt. Amita Gupta, Prop. M/s. Gauri Traders and Shri Santiosh Kumar Gupta, Shri Prateek Omer S/o Smt. Sudha Gupta, Prop M/s. PCS Traders, the Assessing Officer observed that they provide accommodation entries in the garb of commodity trading and issue fake bills and cheques to its clients in lieu of cash. Assessing Officer observed that the assessee is one of the beneficiaries, who has received accommodation entries from PCS traders to the extent of Rs.3,01,155/-. Accordingly, based on the above reasons recorded and obtained approval from the competent authority, notice u/s. 148 was issued and served upon the assessee. Assessee filed its return of income in response to the above notice. Accordingly, notice u/s. 143(2) was issued and served on the assessee. In response, the assessee submitted that it is in the business of cloth trading and commodity trading business and declared Rs.55,082/- and Rs.3,00,000/- respectively. The assessee submitted that the assessee has declared the above said amount in its books of account, which was received by the assessee through his bank account. Since the assessee is not maintaining books of account, the assessee has declared the above said amount u/s. 44AE of the Act and also declared other business income @ 8%. The Assessing Officer observed that the above said income was declared u/s. 44AE of the Act, whereas it is applicable for the business of plying, hiring and leasing of 2 | P a g e goods carriages and not for commodity trading. Accordingly, the explanation given by the assessee is dismissed and addition was made to the income of the assessee.
Aggrieved with the above order, assessee preferred appeal before NFAC, Delhi and filed a detailed submission. After considering the detailed submission of the assessee, learned CIT(Appeals) observed that the case of assessee was reopened for the purpose of verification of accommodation entries. However, Assessing Officer has rejected the submissions of the assessee on the basis that the assessee has declared above income u/s. 44AE of the Act instead of section 44AD of the Act. He observed that the assessee has not submitted any evidence to show that the assessee has transacted with PCS traders. Since he failed to explain the above transaction from commodity trading, which assessee has already declared in the return of income, in the absence of contract note, ledger account, it cannot be said that the amount disclosed in the return of income is the same amount. In absence of relevant documents and details of the transactions, he proceeded to sustain the addition made by the Assessing Officer.
Aggrieved, the assessee is in appeal before ITAT, raising following grounds :
3 | P a g e “01. The Assessment order passed by the Assessing Officer and upheld by the CIT(A) is illegal, unlawful and against the principle of natural justice.
2. THAT the AO has arbitrarily in adding income of Rs.3,00,000/- on making the profit u/s.44AE from business of plying, hiring and leasing of goods carriages, the CIT(A)/NFAC has also upheld the same, which is bad in law and contrary to the provisions of law be quashed.
THAT, the CIT(A)/NFAC as well as AO has failed to appreciate that the assessee has also shown the income of Rs.3,00,000/- in his return and computation of income, the addition of Rs.3,00,000/- made by the AO and upheld by the CIT(A)/NFAC is contrary to facts, bad in law be quashed.
THAT, the AO as well as CIT(A) without appreciation of the fact has added the amount of Rs.3,00,000/-u/s.44AE, whereas the fact that the said profit are from commodity of business, which has already shown in the income tax return and computation of income, hence action of AO are contrary to fact, bad in law be deleted.” None is present on behalf of the assessee. Considered the material available on record.
I observe that the case of the assessee was reopened on the basis of information from investigation wing that the assessee has acquired accommodation entries of commodity trading. I observe from the record that the assessee has declared the above said transactions in his return of income u/s. 44AE of the Act and other income u/s. 44AD of the Act. It is not clear from the orders of the lower authorities that the assessee has transacted more than the transactions declared by the assessee on presumptive basis. The Assessing Officer has made the addition on the basis of declaration of income under wrong section and learned
4 | P a g e CIT(Appeals) has sustained the addition with the observation that the assessee has already declared the income. However, the alleged transaction is not traceable from the income declared by the assessee. I observe that the assessee has declared both income, which was earned by the assessee in his books of account. The lower authorities have not investigated properly whether the information received from investigation wing is for the same income, which the assessee has already declared in the books of account or not. Merely because the information was received from investigation wing, they cannot presume that the assessee has not declared the same in his return of income. Therefore, I am inclined to delete the above said addition for the improper verification made by the lower authorities and failed to substantiate their claim
In the result, appeal filed by the assessee is allowed.