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Facts
The assessee's appeal is against the order of NFAC/CIT(A) for AY 2020-21. The grounds raised include issues with the assessment based on a defective original return, addition on account of unexplained imports, addition on account of difference in stock, and levy of interest. The assessee did not press grounds 1 and 2. Grounds 3 and 4 pertain to additions made by the lower authorities.
Held
The Tribunal observed that the assessee's manual revised returns were not treated as valid by the AO and CIT(A) due to various discrepancies and failure to provide item-wise details. For unexplained imports, the Tribunal remitted the issue to the AO for reconsideration. For the difference in stock, the Tribunal also remitted the issue to the AO for fresh consideration after the assessee requested an opportunity to produce necessary details.
Key Issues
Whether the additions made on account of unexplained imports and difference in stock are justified. Whether the levy of interest under sections 234A, 234B and 234C is consequential.
Sections Cited
139(4), 139(9), 69C, 234A, 234B, 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal by assessee is directed against order of NFAC/CIT(A) for the assessment year 2020-21 dated 26.2.2024. The assessee raised following grounds: “1. General 1.1 The orders passed by Assessment Unit, National Faceless Assessment Centre (NaFAC) (hereinafter referred as "AU" for brevity) as confirmed by the learned Commissioner of Income-tax, Appeals, National Faceless Appeal Centre (NFAC) (hereinafter referred as "CIT(A)" for brevity) ["AU" and "CIT(A)" collectively referred as "lower authorities" for brevity] is bad in law and liable to be quashed. 1.2. The learned CIT(A) has erred in passing an unreasoned order without considering all the submissions and/or without appreciating the facts and circumstances of the case of the Appellant and the law applicable. 2. GROUND 2 - GROUNDS RELATING TO ASSUMPTION OF JURISDICTION:
ITA No.618/Bang/2024 Arrow Electronics India Private Limited, Bangalore Page 2 of 8 2.1 The learned CIT(A) erred in sustaining the assessment made by the AU on the basis of original return filed under section 139(4) without appreciating that these returns were communicated to be defective under section 139(9) of the Act. An assessment based on such invalid return is non est. 2.2 The learned CIT(A) has erred in concurring with the action of the AU in not accepting the rectified manual return during the assessment proceedings having regard to proyiso to section 139(9). 2.3 The learned CIT(A) erred in confirming the contradictory action of the AU concluding that e rectified manual return does not exist while making additions based on figures mentioned in such manual return and the additions so made proceed on the returned income offered by the Appellant in such manual return. 3. GROUND 3 - GROUNDS RELATING TO ADDITION ON ACCOUNT OF 'UNEXPLAINED IMPORTS'
3.1. The learned CIT(A) has erred in confirming the addition of Rs. 23,55,74,065 made by the AU under section 69C as 'unexplained imports'. 3.2. The learned CIT(A) has erred in confirming the impugned addition based on difference between the invoice value of imports shown in the 'Import Export Data' received from Customs department (being Rs. 53,94,07,692) and the actual imports undertaken by the Appellant (of Rs. 3.3. The learned CIT(A) has erred in confirming the additions based on Import Export Data from Customs department, details of which were never furnished to the Appellant despite repeated requests. 3.4. The learned CIT(A) has affirmed the contradictory stand of the AU whereby the revised return filed by the Appellant during the assessment proceedings has not been accepted while the imports to the extent, they are disclosed in the financial statements (being Rs. is accepted. 3.5. The learned CIT(A) has erred in not appreciating that the additions made under section 69C is not permissible without rejection of the books of accounts maintained by the Appellant.
3.6 The learned CIT(A) has erred in confirming the additions made under section 69C when no proper opportunity of being heard was given to the Appellant, as documents filed with the learned CIT(A) were alleged to be corrupted and the impugned addition was made without informing the same to the Appellant and asking it to file the details again. 4. GROUND 4 - GROUNDS RELATING TO ADDITION ON ACCOUNT OF 'DIFFERENCE IN STOCK'
ITA No.618/Bang/2024 Arrow Electronics India Private Limited, Bangalore
Page 3 of 8 4.1. The learned CIT(A) has erred in confirming the addition of Rs.23,38,30,371 made by the AU under section 69C as 'unexplained expenditure from unexplained source' in respect of difference in the opening stock of the current year (of Rs.35,54,28,156) as compared to the closing stock of the immediately preceding previous year (of Rs.12,15,97,785)
4.2. The learned CIT(A) has erred in adding the impugned difference based on original return of incomes filed by the Appellant for the respective years but rejected as defective under section 139(9) of the Act.
4.3. The learned CIT(A) has erred in concurring with the inconsistent stand of the AU wherein the opening stock disclosure in the financial statements filed by the Appellant along with the rectified manual returned (filed during assessment) was rejected while accepting the same while adjudging the matter of undisclosed imports.
4.4. Without prejudice, the learned CIT(A) erred in confirming the action of the AU of rejecting the rectified manual return for want of item wise details of stock of goods, which item wise details are not to be provided either by the mandate of the format of return of income or under section 139(6)/(6A), nor were these details specifically called for.
GROUND 5 - GROUND RELATING TO ADDITION OF INTEREST UNDER SECTION 234A. 234B AND SECTION 234C:
5.1.1. The learned CIT(A) erred in confirming the interest levied by the AU under section 234A, section 234B and section 234C. On facts and circumstances of the case and law applicable, interest under section 234A, section 234B and section 234C is not leviable. The Appellant denies its liability to pay any interest under section 234A, section 234B and section 234C.
The Appellant submits that each of the above grounds/ sub-grounds are independent and without prejudice to one another. The Appellant craves leave to add, alter, vary, omit, substitute, or amend the above grounds of appeal, at any time before or at the time of hearing, of the appeal, so as to enable the Income-tax Appellate Tribunal to decide the appeal according to law.”
At the time of hearing, the assessee not pressed ground Nos.1 & 2. Accordingly, these grounds are dismissed as not pressed. 3. Next ground No.3 for our consideration is with regard to additions on account of unexplained imports.
ITA No.618/Bang/2024 Arrow Electronics India Private Limited, Bangalore
Page 4 of 8 3.1 Facts of the case are that with respect to imports mismatch, the NFAC made an addition of imports as per the data available with the Income-tax department. The Company submitted that the imports made during the year amounted to INR 30,38,33,627/- which is with the amount recorded in the audited financial statements. Further, the had made multiple requests before NFAC to provide the source and data available with the Income-tax department so as to enable the Company to provide reconciliation. However, the same were ignored by the NFAC. 4. The ld. CIT(A) observed that as regards, disallowing INR 23,55,74,065/-being the difference between imports as per the data available with the Income-tax department (INR 53,94,07,692/) and the amount of imports (INR 30,38,33,627/-) recorded in the ITR. The AO has mentioned in the assessment order that Vide its response dated 22/09/2022, the assessee has submitted that that it has filed a revised income ITR during the course of assessment. But, it is seen that the assessee has not filed any updated /TR on Income Tax Portal. Further, it is also seen that the assessee has done the same thing in A. Y 2019-20 also wherein incorrect ITR has been filed by the assessee on portal and manual revised return was filed at a later date beyond due date of filing of ITR. Therefore, the revised ITR, manually filed by the assessee is not accepted. Further, the assessee has failed to furnish any details regarding import of Rs. 53,94,07,692/-, instead the assessee has claimed its import of Rs. 30,38,33,627/-. It is also seen that the assessee has shown Nil purchase in its ITR for A. Y. 2020-21. Therefore, it is clearly seen that the assessee is taking different stand in its response as against what is filed in its ITR. Hence, the claim of the assessee is not found tenable and accordingly, the amount i.e. Rs. 53,94,07,692/- is treated as out of books purchase of the assessee from unknown sources. During the appeal proceedings, the appellant was requested to submit the copy of the import invoices to justify the
ITA No.618/Bang/2024 Arrow Electronics India Private Limited, Bangalore
Page 5 of 8 value of purchases. The appellant didn't submit the same for verification. The files uploaded by the appellant in response were corrupt and could not be opened. As a result, the difference of imports of INR 23,55,74,065/- could not be explained by appellant. Considering the same the addition of Rs. 23,55,74,065/- is confirmed. The ground was dismissed by ld. CIT(A). Against this assessee is in appeal before us. 5. We have heard the rival submissions and perused the materials available on record. In this case, the addition sustained by ld. CIT(A) on the reason that though the NFAC asked the assessee to submit the copy of import invoices to justify the value of purchases which the assessee failed to submit the same for verification. The files uploaded by the assessee in response were corrupt and could not be opened. Hence, the addition was made. Before us, ld. A.R. pleaded one more opportunity to furnish the same. Considering the request of assessee, we remit the issue to the file of ld. AO for reconsideration. 6. Next ground No.4 is with regard to addition on account of difference in stock. 6.1 The ld. CIT(A) observed that as regards disallowing an amount of INR 23,38,30,371 being the difference between closing stock as on 31 March 2019 basis draft/ provisional financial statements and the opening stock as on 31 March 2020 basis draft/ provisional financial statements is concerned the AO has mentioned in the assessment order as follows:
“With respect to Large difference in the opening stock of current year (in Trading & Manufacturing account) and closing stock of previous year (in Trading & Manufactånng account a/c as per Return of Income), it is seen from ITR for the A. Y. 2019-20 that assessee had shown closing stock of finished stocks at Rs.12,15,97,785/-. However, in the ITR for the A. Y. 2020-21, assessee had shown opening stock of finished stocks at Rs. 35,54,28, 156/-. In show cause notice assessee was also requested to explain why these differences amount of Rs. 23,38,30,371/- should not be added to your income as unexplained investment. Vide its response dated 22/09/2022, the assessee has stated that it had filed manual I TR
ITA No.618/Bang/2024 Arrow Electronics India Private Limited, Bangalore
Page 6 of 8 for A. Y. 2019-20 as well as AY 2020-21. However, no perusal of Departmental records, it is seen that the assessee has not filed any revised return electronically and therefore, the manual I TR filed is not treated as valid I TR. Further, the assessee has claimed different amount of stocks in its manual I TR than what is claimed in ITR filed electronically. Since, the manual ITR is treated as invalid, the details claimed therein has no legal sanctity and the ITR filed electronically is treated as the base /TR while passing this assessment order Further, it is seen that from [TR for the A. Y. 2019-20 that assessee had shown closing stock of finished stocks at Rs. 12, 15,97,785/-, however, in the / TR for the A. Y. 2020-21, assessee had shown opening stock of finished stocks at Rs. 35,54,28, 156/-. 6.2 Show cause notice was issued to the assessee 19.09.2022, During the VC the assessee again stated that it had filed manual ITR for A. Y. 2019-20 as well as AY 2020-21. However, no perusal of Departmental records, it is seen that the assessee has not filed any revised return electronically and therefore, the manual ITR filed is not treated as valid ITR.
6.2 The ld. AO made the addition on the basis of not treating revised return as valid ITR. However the appellant has claimed the same before appellate authority. In the submissions filed the appellant has explained that the financial accounts could finalize very late and hence the revised ITR could not be e-filed within time. The appellant has given the following submission; As the ITR filed on the income-tax portal for A Y 2019-20 was base€ on draft financial statements, the Company suo-moto submitted the revised income-tax computation and ITR for A Y 2019-20 vide its submission dated 09 December 2021. Further, the Company had also filed audited financial statements for AY 2019-20 with the Ld. AO during the assessment proceedings in order to substantiate its claim. The closing stock of finished goods mentioned in Annexure 8 was INR l4,50,64,581/- which is in line with this year's (i.e., AY 2020-21) opening stock of finished goods disclosed in "Schedule Part A-Trading Account Indias" in the revised ITR which is attached as Annexure & Hence, there is no discrepancy in the value of finished goods. Although, the appellant has given reference to the late audit and manual ITR filed by the appellant for the claim of stock of goods but the item wise stock details have not been provided to verify the genuineness of the claim. In absence of such verification the ld.
ITA No.618/Bang/2024 Arrow Electronics India Private Limited, Bangalore
Page 7 of 8 CIT(A) did not allow the claim of the appellant of Rs. 23,38,30,371. The action of the ÄO was thus confirmed by him. Against this assessee is in appeal before us. 7. The ld. D.R. relied on the order of lower authorities. 8. We have heard the rival submissions and perused the materials available on record. On this issue assessee has given reference to the late audit and manual ITRs filed by the assessee for the claim of stock of goods. But the item-wise stock details have not been provided to verify the genuineness of the claim. In the absence of such verification, NFAC having no alternative, confirmed the addition. Before us, ld. A.R. pleaded for an opportunity to produce the necessary details to its claim. Considering the request of ld. A.R., we remit this issue to the file of ld. AO to file necessary details in support of the assessee’s claim. Thus, this ground of assessee is also remitted to the file of ld. AO for fresh consideration. 9. Last ground No.5 is with regard to levy of interest u/s 234A, 234B & 234C of the Act, which is consequential and mandatory in nature. 10. We have heard the rival submissions and perused the materials available on record. Levy of interest u/s 234A, 234B & 234C is consequential and mandatory in nature to be computed accordingly. 11. In the result, appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 5th Aug, 2024
Sd/- Sd/- (Chandra Poojari) (Keshav Dubey) Accountant Member Judicial Member
Bangalore, Dated 5th Aug, 2024. VG/SPS
ITA No.618/Bang/2024 Arrow Electronics India Private Limited, Bangalore
Page 8 of 8 Copy to:
The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order
Asst. Registrar, ITAT, Bangalore.