ACIT-5(1)(1), MUMBAI, MUMBAI V. CRYSTAL IMPEX LIMITED, MUMBAI

ITA 985/MUM/2025

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The case involves an appeal by the revenue against the order of the CIT(A) which had partly deleted the additions made by the AO in the reassessment proceedings under section 148 of the Income-tax Act, 1961. The AO had made substantial additions to the assessee's income based on discrepancies in sales reported through Amazon and issues related to share application money and listing fees. The CIT(A) reduced the additions after examining the submissions and evidence provided by the assessee, which the revenue contested in the Tribunal. The Tribunal's decision focused on the verification of sales figures and the substantiation of expenses claimed under listing fees.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315661 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Other Referred Cases: Lakshman Prasad Agarwal vs. UOI, Subodh Agarwal vs. State of UP, Gujarat Ambuja Exports Ltd. vs. DCIT, Amit Polyprints (P.) Ltd. vs. DCIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA JOSHI
• Assessee Lawyers: KETAL VAJANI
• Keywords: Set aside; Business expenditure; Rule 8D; Bogus
• Section: 147; 148; 142(1); 271(1)(c); 68; 37; 14A

Judgement Text

" IN THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI ‘C’ BENCH BEFORE SHRI SAKTIJIT DEY, VICE-PRESIDENT AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.985/MUM/2025 Assessment Year: (2015-16) (Physical Hearing) ACIT, Circle – 5(1)(1), Mumbai Vs. Crystal Impex Ltd., Gr. Floor, My Home Apartment, V. N. Malik X Laten, Forjeet, Gawalia Tank, Mumbai - 400036 ᭭थायीलेखासं./जीआइआरसं./PAN/GIR No: AAAAC1264F (Appellant) (Respondent) Appellant by Shri Rajendra Joshi, Sr. DR Respondent by Shri Ketal Vajani, AR Date of Hearing 13/05/2025 Date of Pronouncement 15/05/2025 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the revenue emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 17.12.2024 by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment years (AY) 2015-16. 2. The grounds of appeal raised by the revenue are as under: “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition of Rs.3,32,48,807/- made on account of discrepancy in sales made through Amazon to Rs.8,28,808/-, ignoring the fact that the assessee failed to submit substantial documentary evidence to explain the discrepancy in sales made through Amazon? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made u/s 68 of Rs.1,29,65,000/-, ignoring the fact that the assessee could not establish the genuineness of the transaction and 2 ITA No.985/MUM/2025/AY.2015-16 Crystal Impex Limited satisfy the conditions laid down u/s 68 in respect of the amount received as share application money? 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made u/s 37 of Rs.29,98,664/-, ignoring the fact that the assessee has failed to submit any documentary evidence to explain the discrepancy of Rs.29,89,664/- claimed under the head listing fees, either during the assessment or appellate proceedings? 4. The appellant prays that the order of the CIT(A) on the ground be set aside and confirm the order of the AO. 5. The appellant craves leave to add, amend r alter all or any of the grounds of appeal. 3. Facts of the case in brief are that the assessee e-filed return of income on 29.09.2015, declaring total income at Rs.83,36,780/-. The return was processed u/s 143(1). Subsequently, the case was reopened by issue of notice u/s 148 of the Act dated 16.08.2018. The reasons for reopening the assessment was that due to investigation in cases of top four e-commerce companies, it was revealed that the assessee had understated sale to the extent of Rs.3,32,48,807/- in respect of transactions entered into with Amazon. The assessee filed return u/s 148 of the Act on 18.09.2018, declaring the same total income of Rs.83,36,780/-. The reason for reopening was given to the assessee. Subsequently, statutory notices u/s 143(2) and 142(1) of the Act were issued. After considering the reply of the assessee, the Assessing Officer (in short, ‘ÁO’) has reiterated the findings of the investigation report of the Intelligence and Criminal Investigation Unit (I&CI) and added Rs.3,32,48,807/-. He has separately initiated penalty u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income. 3 ITA No.985/MUM/2025/AY.2015-16 Crystal Impex Limited 3.1 The AO also disallowed Rs.34,612/- u/s 14A read with Rule 8D of the Income-tax Rules, 1962. 3.2 The AO further found that there was share application money of Rs.1,29,65,000/- as on 31.03.2014 but the same was shown at Rs. Nil as on 31.03.2015. In response to the query raised in this regard, the appellant submitted that the share application money was transferred to the loan account due to non- allotment of shares. As the assessee did not furnish details such as resolution for cancelling share application money, proceeds of share application money, date of receipt of share application money and conversion of share application into unsecured loans, the claim of the share application money received by assessee was not found to be genuine. He added the same u/s 68 of the Act. 3.3 The AO also found that assessee had debited Rs.1,52,78,358/- under the head promotion expenses, being listing fees paid to Amazon Seller Services Private Limited. On verification of details, the AO found that listing fees incurred by assessee was only Rs.1,22,88,694/- and not Rs.1,52,78,358/-. Accordingly, the difference was added to the total income. In the result, the total income was determined at Rs.6,41,28,880/- as against the returned income of Rs.83,36,780/-. 4. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The appellant raised grounds against the validity of reassessment as well as merits of various additions made by the AO. The CIT(A) has extracted the statement of facts, relevant part of the assessment order and submission of the assessee during appellant proceedings. The CIT(A) dismissed the ground on validity of reopening by 4 ITA No.985/MUM/2025/AY.2015-16 Crystal Impex Limited relying on various decisions, namely, Lakshman Prasad Agarwal vs. UOI, (2022) 140 taxmann.com 15 (Cal.), Subodh Agarwal vs. State of UP, (2023) 149 taxmann.com 448 (Allahabad), Gujarat Ambuja Exports Ltd. vs. DCIT, (2017) 86 taxmann.com 69 (Gujarat) and Amit Polyprints (P.) Ltd. vs. DCIT, (2018) 94 taxmann.com 393 (Gujarat). 4.1 On merits of addition, the CIT(A) sustained addition to the extent of Rs.8,28,808/- and deleted Rs.3,24,19,999/-. The appellant had submitted that the total sale as per the Amazon Website (net sales without taxes) was Rs.47,46,94,306/- and amount of VAT was Rs.4,52,81,600/-. Therefore, the sales inclusive of VAT was Rs.51,99,75,904/-. The appellant also submitted that this amount needs to be reduced by Rs.1,21,476/- on account of the sale which has already been considered in the earlier assessment year. Such variation was on account of timing difference of the sale by way of cash on delivery. The net difference was only Rs.8,28,808/-. The said difference was confirmed by the CIT(A) and the remaining amount was deleted. 4.2 Regarding addition of Rs.1,29,65,000/- u/s 68 of the Act on account of share application money, the CIT(A) allowed relief by observing that the share application money was transferred to the loan account as the share allotment was cancelled. The share application money was received from Crystal Natural Food Processors Private Limited, which was transferred to the loan account in the subject assessment year. 5 ITA No.985/MUM/2025/AY.2015-16 Crystal Impex Limited 4.3 As regards, the disallowance of Rs.29,89,664/- on account of listing fees paid to Amazon, the CIT(A) deleted the addition after considering the copies of all ledger accounts submitted by appellant before him. In the ledger account of Amazon expenses, the listing fee was included which has been transferred to the listing fee’s account from the Amazon commission expenses. The CIT(A) observed that changes in the figures only result in changes to business expenses and thus no disallowance could be made. Thus, the appeal was partly allowed by the CIT(A). 5. Aggrieved by the order of CIT(A), the revenue has filed appeal before the Tribunal. The learned Senior Departmental Representative (ld. Sr. DR) of the revenue relied on the order of AO. He submitted that the case was reopened on the basis of credible information received from the DIT(I&CI) and the addition have been made after calling for relevant details from the appellant. Due to failure of the assessee to furnish complete details, AO has rightly made the additions. The relief granted by the CIT(A) is, therefore, not justified. 6. On the other hand, the learned Authorized Representative (ld. AR) of the assessee filed paper book and submitted that the relevant password was shared with the AO and complete details were given to him. He referred to the submission made to the AO on 12.06.2019 wherein it was submitted that the information in the reasons for reopening is incorrect. Further, in support of its claim, the appellant submitted soft copy of details of sales including both electronic transactions and cash on delivery sales, which was downloaded from the Amazon Online Portal. The appellant also provided reconciliation of the difference which 6 ITA No.985/MUM/2025/AY.2015-16 Crystal Impex Limited was only Rs.5,29,609/-. It was also submitted that the difference in income was only Rs.8,28,808/-, which is also not the actual difference but was due to cut off date variance of the books of the appellant and the Amazon. However, the AO ignored these details and made the addition only on the basis of the information received from the DIT(INCI). Regarding share application money, the ld. AR submitted that the same was received on 20.08.2012, the details of which are at page 36 of the paper book. Regarding disallowance of listing fees, the ld. AR referred to page 42 onwards and submitted that the listing fees is at page 45 of the paper book. The details of the expenses are available at pages 46 onwards in the paper book. He requested that the order of CIT(A) deserves to be upheld. 7. We have heard both the parties and perused the materials available on record. Ground No.1 pertains to restriction of the addition to Rs.8,28,808/- as against the addition of Rs.3,32,48,807/- made by the AO. The AO made the addition on the basis of the information received from the DIT(I&CI). The AO had called for various details, which were duly replied to by the assessee. However, according to the AO, the assessee has not submitted the relevant information and the sales remain un-reconciled. Before the CIT(A), assessee submitted written submission and details which were duly verified by the CIT(A). We find that the appellant had submitted the details even to the AO, who failed to verify the same and added the impugned amount with the remark that the assessee failed to furnish documentary evidences. It is seen from the details that the total sale without taxes was Rs.47,46,94,304/- and if the VAT is included, it comes to 7 ITA No.985/MUM/2025/AY.2015-16 Crystal Impex Limited Rs.51,99,75,902/-. There was some small difference, which was due to timing difference of cash on delivery sales. The assessee records sales when the goods have left the premises but Amazon records the sales when the money is received. However, after reconciliation, there was still a difference of Rs.8,28,808/-. This is admitted by the appellant as well. The same was sustained by the CIT(A). After considering the facts of the case and details of the submission of the appellant, we find that the CIT(A) has confirmed the un-reconciled sales after due verification. Hence, we do not find any infirmity in the findings of the CIT(A). The ground No.1 of the revenue is accordingly dismissed. 8. Ground No.2 pertains to addition of Rs.1,29,65,000/- u/s 68 of the Act towards the share application money. The appellant had received share application money from Crystal Natural Food Processors Ltd. on 28.08.2012 (AY.2013-14) through banking channel, i.e., cheques/RTGS of Rs.99,00,000/- and Rs.30,65,000/-. This was appearing as opening balance as on 01.04.2014. Subsequently, the assessee transferred the said amount to loan account due to cancellation of allotment of shares of Crystal Impex Limited in favour of Crystal Natural Food Pvt. Ltd. These facts are supported by the entries in the relevant ledger accounts at pages 35 and 36 of the paper book. Therefore, it is clear that share application money was received in AY.2013-14, but was subsequently transferred to the loan account in the subject AY.2015-16. Hence, the addition made u/s 68 of the Act is not justified and relief allowed by the CIT(A) is found to be corrected both on fact and in law. Hence, ground No.2 is dismissed. 8 ITA No.985/MUM/2025/AY.2015-16 Crystal Impex Limited 9. Ground No.3 pertains to disallowance of listing fees of Rs.29,89,664/-. The appellate has submitted copies of ledger accounts under various heads during the appellant proceedings. Copies of the same have also been submitted before us, which are at pages 42 to 72 of the paper book. It is seen that the appellant has transferred the listing fees from Amazon commission expenses, which is noted at pages 45 and 72 of the paper book. The total Amazon commission expenses was Rs.2,37,24,829/- out of which listing fees of Rs.1,52,78,358/- was transferred on 31.03.2015. We agree with the observation of the CIT(A) that change in figures will only result in change of business expenses under different heads but no change in the overall expenditure. However, we find that the AO has given a categorical finding that listing fees incurred by assessee was only Rs.1,22,88,694/- and remaining amount is not supported by documentary evidence. The ld. AR of the assessee fairly submitted that invoices from April to August, 2014 are not available and the assessee has filed only the ledger account. Hence, there is no dispute that the entries passed by the assessee supports expenses to the extent of Rs.1,22,88,694/- only. The remaining expenses of Rs.29,89,664/- under the head listing fee is not supported by any documentary evidences. Therefore, in absence of the primary documentary evidences, the addition made by the AO cannot be entirely deleted. On considering the entirety of facts, we find that the impugned expenses were unverified but not bogus expenses. In our view, the ends of justice would be met if 25% of unverified expenses of Rs.29,89,664/- is disallowed. The 9 ITA No.985/MUM/2025/AY.2015-16 Crystal Impex Limited AO is accordingly direct to add Rs.7,47,416/- and delete Rs.22,42,248/-. The ground No.2 is partly allowed. 10. During the course of hearing, the appellant raised the grounds regarding validity of the reopening u/s 147 of the Act. This ground was taken up by the appellant before the CIT(A). The CIT(A) after detailed discussion and upon reliance upon various decisions of Hon’ble High Courts has dismissed the ground. The ld. AR has not seriously argued this issue before us. Such objection was also not raised before the AO. We have already deleted the major addition except the un- reconciled sales and 25% of unverified expenses. Hence, the issue raised by the appellant becomes academic in nature and does not require adjudication. 11. In the result, the appeal of revenue is partly allowed. Order pronounced on 15/05/2025. Sd/- Sd/- (SAKTIJIT DEY) (BIJAYANANDA PRUSETH) VICE PRESIDENT ACCOUNTANT MEMBER Mumbai ᳰदनांक/ Date: 15/05/2025 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Mumbai 6. Guard File By Order // TRUE COPY // Assistant Registrar/Dy. Registrar/Sr. PS "