INCOME TAX OFFICER-1(1)(3), MUMBAI, MUMBAI V. GOLDEN EXPRESS PRIVATE LIMITED, MUMBAI

ITA 3039/MUM/2025

AI Insights

The case involves cross appeals by Golden Express Pvt. Ltd. and the Income Tax Officer against the order of the Commissioner of Income Tax (Appeals) which pertained to the assessment year 2018-19. The primary contention was regarding the addition made to the assessee's turnover, which was initially assessed at 100% by the Assessing Officer but later reduced to 5% by the CIT(A). The assessee, engaged in foreign currency exchange, had its operations scrutinized following allegations of involvement in illegal transactions similar to those of another company, M/s A.N. Forex Pvt. Ltd. The Assessing Officer rejected the books of accounts under section 145(3) and treated the entire turnover as unexplained credit under section 68 of the Income Tax Act, 1961. The CIT(A) upheld the rejection of the books but reduced the addition to 5% of the turnover. Both parties appealed against this order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780733 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: misc
• Appeal Filed On: 30-04-2025
• Other Referred Cases: M/s A.N.Forex Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN KANTI DATTA
• Assessee Lawyers: VIMAL PUNMIYA; RAJESH C. DALI
• Keywords: Unexplained cash credit; Rejection of books of accounts; Principle of natural justice; Bogus
• Section: 143(3); 142(1); 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE JUSTICE (RETD.) C V BHADANG, PRESIDENT & MS PADMAVATHY S, AM I.T.A. No. 1569/Mum/2025 (Assessment Year: 2018-19) Golden Express Pvt. Ltd., K Building, 24, Walchand Hirachand Marg, Opp REX Chambers, Ballard Estate, Maharashtra-400001. PAN: AAFCG6483M Vs. Income Tax Officer-1(1)(3), Aayakar Bhavan, M.K. Road, Mumbai-400020. Appellant) : Respondent) I.T.A. No. 3089/Mum/2025 (Assessment Year: 2018-19) Income Tax Officer-1(1)(3), Room No. 531A, Aayakar Bhavan, M.K. Road, Mumbai-400020. Vs. Golden Express Pvt. Ltd., K Building, 24, Walchand Hirachand Marg, Opp REX Chambers, Ballard Estate, Maharashtra-400001. PAN: AAFCG6483M Appellant) : Respondent) Assessee by : Shri Vimal Punmiya & Rajesh C. Dali- Advocate Revenue by : Shri Arun Kanti Datta, CIT-DR Date of Hearing : 18.09.2025 Date of Pronouncement : 10.10.2025 Printed from counselvise.com 2 ITA No. 1569 & 3089/Mum/2025 Golden Express Pvt. Ltd. O R D E R Per Padmavathy S, AM: These Cross Appeals by the assessee and the revenue are against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi [In short 'CIT(A)'] passed under section 250 of the Income Tax Act, 1961 (the Act) dated 04.02.2025 for Assessment Years (AY) 2018-19. The assessee is in appeal against the order of the CIT(A) for making an addition at 5% of the turnover of the company and the revenue is in appeal against the order of the CIT(A) for restricting the addition at 5% which the AO has made at 100% of the turnover. 2. The assessee is a company engaged in the business of dealing in foreign currency as a Full Fledged Money Changer (FFMC) licensed by the Reserve Bank of India (RBI). The assessee filed the return of income for AY 2018-19 on 24.10.2018 declaring total income of Rs. 3,82,420/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The assessment was completed under section 143(3) of the Act on 25.01.2021 accepting the income returned by the assessee. Subsequently the Income Tax Department received information from insight portal alleging that the assessee was involved in diverting foreign exchange to exporters in a manner similar to M/s A.N.Forex Pvt. Ltd. a company implicated in illegal transaction. Based on this information the AO initiated proceeding under section 148A and an order under section 148A(d) was passed on 30.03.2022 followed by a notice under section 148. The AO issued notice under section 142(1) and 143(2) called for various details and the assessee responded to the same. The assessee submitted before the AO that the turnover during the year was duly reflected in the audited accounts of the Printed from counselvise.com 3 ITA No. 1569 & 3089/Mum/2025 Golden Express Pvt. Ltd. assessee and the GST returns. The assessee further submitted that the turnover is fully supported by corresponding purchase of foreign currency amounting to Rs. 2,19,73,53,774/-. The assessee submitted before the AO the quantitative details of stock, purchase, sales, GST return, Form-9 and Form-9C filed under GST Law to substantiate the claim. The assessee also submitted that the increase in the turnover as compared to the previous year is due to normal business expansion and further demonstrated the same through comparative data of other foreign exchange companies. The assessee also submitted that the net profit shown by the assessee is in line with the profit declared by other companies in the similar business. The assessee brought on record before the AO that certain physical documents were destroyed in heavy rains during monsoon season of 2019 and therefore the books of accounts could not be produced. The AO did not accept the explanations of the assessee and by relying on the revocation of assessee's money changing licence by RBI vide order dated 26.12.2018 as well as the statement of Shri Aamil Fruitwala Director of M/s A.N. Forex Pvt. Ltd. the AO concluded that the turnover declared by the assessee as non-genuine. Accordingly, the rejected the books of account under section 145(3) and held the entire turnover of Rs. 2,19,84,66,920/- as unexplained credit under section 68 of the Act. 3. Aggrieved the assessee filed further appeal before the CIT(A). The assessee made similar submissions before the CIT(A). The assessee brought to the attention of the CIT(A) that in the case of M/s A. N. Forex Pvt. Ltd. the AO had himself estimated income at 0.5% of turnover instead of treating the entire turnover as unexplained cash credit. The CIT(A) upheld the rejection of books of accounts by the AO. The CIT(A) however held that it would not be justifiable to treat the entire turnover as income and accordingly restricted the addition to 5% of the turnover Printed from counselvise.com 4 ITA No. 1569 & 3089/Mum/2025 Golden Express Pvt. Ltd. thereby sustaining the addition to the tune of Rs. 10,99,23,346/-. Both the assessee and the revenue are in appeal before the Tribunal against the order of the CIT(A). 4. The ld. AR during the course of hearing submitted the books of account of the assessee and prayed that the assessee has managed to recreate the books of accounts which were destroyed during heavy monsoon in the year 2019. The ld. AR further submitted that the assessee could not submit the books of account within the time provided by the AO and that the same is produced now. The ld. AR also submitted that the assessee is in the business of forex exchange and that the AO without considering the audited financial statements has held the entire sales as bogus. The ld. AR argued that the profit ratio in the line of business of the assessee is in the range of 0.1% to 0.3% and the CIT(A) has charged the net profit ratio at 5% which is not correct. The ld. AR further argued that in the case of M/s A.N.Forex Pvt. Ltd. based on whose investigation the assessee's case is reopened, the AO himself has made an addition by applying 0.5% as net profit. The ld. AR prayed that since the lower authority have not examined the books of accounts and other supporting documents as called for, one more opportunity may be given to the assessee to represent the case properly. 5. The ld. DR on the other hand submitted that the assessee's case is reopened based on the findings of the Investigation Wing on the alleged bogus transactions by M/s A.N. Forex Pvt. Ltd. with whom the assessee had transactions during the year under consideration. The ld. DR further submitted that there has been a substantial increase in the purchase and the sales of the assessee as compared to the earlier year which supports the allegation that the assessee has entered into bogus transactions. The ld. DR also submitted that the assessee has not submitted the books of accounts and therefore the lower authorities could not verify the claim Printed from counselvise.com 5 ITA No. 1569 & 3089/Mum/2025 Golden Express Pvt. Ltd. of the assessee that the transactions entered into were genuine. The ld. DR drew our attention to the findings of the CIT(A) where he has held that there is no infirmity in invoking section 68 and having held so the CIT(A) is not correct in restricting the addition to 5% of the turnover. The ld. DR however fairly conceded that the issue has not been considered by the lower authorities on merits since the assessee did not produce the books of account and other relevant documents the issue may go back to the CIT(A). 6. We heard the parties and perused the material on record. Assessee's case is reopened based on the search operations conducted in the premises of M/s A.N. Forex Pvt. Ltd. and it was noticed that it was involved in physical transactions in dealing in foreign currency. The AO held that the assessee was also involved in similar transactions and accordingly reopened the assessment after passing order under section 148(A)(d) of the Act. The AO called for various details from time to time with regard to sale and purchase of foreign currency from various parties by the assessee. The assessee submitted the audited financial statements, GST returns etc. before the AO claiming that the transactions entered into by the assessee are genuine and AO however did not accept the submissions of the assessee. From the perusal of the order of the AO, we notice that the transactions of the assessee are held as bogus for the reason that during investigation of Shri Aamil Fruitwala Director of M/s A.N. Forex Pvt. Ltd. it is admitted that 75% of the transactions are only paper transactions. We further notice that the AO held the entire sale consideration as bogus for the reason that the assessee did not produce the books of accounts and accordingly rejected the same under section 145(3) of the Act. It is also noticed that the assessee did not furnish the details pertaining to the parties from whom the assessee had made purchases. Even before the CIT(A), it is noticed that the assessee did not furnish any further details and has reiterated the Printed from counselvise.com 6 ITA No. 1569 & 3089/Mum/2025 Golden Express Pvt. Ltd. submissions made before the AO. The CIT(A) has given relief to the assessee on the ground that it is an established practice settled by various Courts / Tribunal that the addition is generally restricted to the profit element embedded in the turnover. However, the CIT(A) while doing so has not recorded any finding on the merits or with regard to the verification of documentary evidences or books of accounts of the assessee. Before us the ld. AR drew our attention to the books of accounts recreated since the books based on which the audit was conducted was destroyed in the monsoon in the year 2019. In view of this discussion and considering the facts peculiar to the assessee's case, we are inclined to give one more opportunity to the assessee in the interest of natural justice and fair play. Accordingly, we remit the appeal back to the CIT(A) for denovo consideration by calling for the relevant details as may be required in order to decide the appeal in accordance with law. The assessee is directed to furnish the books of accounts and other details as may be called for substantiate the claim about the genuineness of the transactions and co-operate the appellate proceeding without seeking unnecessary adjournments. It is ordered accordingly. 7. In result, appeals filed by assessee and the revenue are allowed for statistical purposes. Order pronounced in the open court on 10-10-2025. Sd/- Sd/- (JUSTICE (RETD.) C.V. BHADANG) (PADMAVATHY S) President Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT Printed from counselvise.com 7 ITA No. 1569 & 3089/Mum/2025 Golden Express Pvt. Ltd. BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "