INCOME TAX OFFICER, GANGTOK V. BHUMIKA RAI , NAMCHI, SIKKIM

ITA 1581/KOL/2024

AI Insights

The case involves an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals)- NFAC, Delhi, which had allowed the exemption under section 10(26AAA) of the Income Tax Act, 1961 to the assessee, Bhumika Rai. The Revenue contested the CIT(A)'s decision on grounds including the improper admission of fresh evidence without a remand report from the AO, and the lack of verification of facts from Indian Oil Corporation Limited regarding payments made by the assessee. The Tribunal found that the CIT(A) had erred in accepting additional evidence without proper procedure, leading to the setting aside of both the CIT(A)'s and the AO's orders, and restoring the matter for a de novo assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 46761 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside; Opportunity of being heard; Additional evidence; Unexplained investment; TDS
• Section: 147; 144; 250; 69; 69A; 10

Judgement Text

"आयकर अपीलीय अधिकरण कोलकाता 'सी' पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘C’ BENCH, KOLKATA श्री संजय गगग, न्याधयक सदस्य एवं श्री राक ेश धमश्रा, लेखा सदस्य क े समक्ष Before SRI SANJAY GARG, JUDICIAL MEMBER & SRI RAKESH MISHRA, ACCOUNTANT MEMBER I.T.A. No.: 1581/KOL/2024 Assessment Year: 2017-18 Income Tax Officer, Gangtok Vs. Bhumika Rai (Appellant) (Respondent) PAN: BPVPR1351G Appearances: Department represented by : Rajat Mitra, CIT DR. Assessee represented by : Siddharth Agarwal, AR. Date of concluding the hearing : January 7th, 2025 Date of pronouncing the order : January 23rd, 2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: The present appeal filed by the Revenue pertaining to the AY 2017- 18 is against the order of the Commissioner of Income Tax (Appeals)- NFAC, Delhi [hereinafter referred to as ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (in short, the 'Act') dated 14.06.2024 arising out of the assessment order framed u/s 147/144/144B of the Act dated 24.03.2022. Page | 2 I.T.A. No.: 1581/KOL/2024 Assessment Year: 2017-18 Bhumika Rai. Page 2 of 7 2. The Revenue is in appeal before the Tribunal raising the following grounds of appeal: “1. That the Ld. CIT(A), NFAC, Delhi is not justified both in law and in fact, to allow exemption u/s.10(26AAA) of the I.T. Act, 1961 to the assessee on addition treated as undisclosed income and unexplained income u/s 69A of the I.T. Act, 1961 and Unexplained Investment u/s 69 of the act allowing exemption u/s. 10(26AAA) of the I.T. Act on income which remained unexplained with regards to the sources of such income during the course of assessment proceedings. 2. That the Ld. CIT(A), NFAC, Delhi is not justified both in law and in fact, to delete the addition made by the Assessing Officer relying on fresh evidence which were not produced before the A.O. during the course of assessment proceedings. The CIT(A) NFAC, Delhi erred by admitting fresh evidences without calling remand report from the AO which contravenes Rule 46A(3) of the Income Tax Rule, 1962. 3. That the Ld. CIT(A), NaFAC, Delhi has not discussed in his appellate order the reasons of accepting additional evidences and the situation which prevented the assessee from producing such evidence before the AO during the course of assessment proceedings. Therefore, the appellate authority has erred in accepting additional evidences without discussing the circumstances that prevented the assessee from producing the same before the AO during the course of assessment proceedings. 4. That, the Ld. CIT(A), NaFAC, Delhi is not justified in law and in fact in striking down the addition made by the assessing officer treating the assessee as an exempted u/s.10(26AAA) of the I T Act, 1961 without calling for confirmation of accounts from Indian Oil Corporation Limited to whom payments were allegedly made by the assessee. There is no evidence with audited books of accounts etc. maintained and submitted by the assessee. The legislative intent of Scheme of exemption u/s 10(26AAA) of the I.T. Act, 1961 is to exempt the individual Sikkimese from tax liability on income accruing or arising to him/her from sources within the state of Sikkim.” 3. Brief facts of the case are that the assessee is engaged in the business of LPG cylinders under the name and style of M/s Nayuma Indane and DTH services. She is an authorized dealer of Indian Oil Corporation Limited and received commission income on DTH services from Dish Infra Services Private Limited in the district of Namchi, Page | 3 I.T.A. No.: 1581/KOL/2024 Assessment Year: 2017-18 Bhumika Rai. Page 3 of 7 Sikkim. The assessment for AY 2017-18 was re-opened by the Ld. AO by issuing a notice to the assessee as the assessee had not filed the return of income and the assessee had made several financial transactions during the year. The assessee responded that she was exempted from income tax as per clause (26AAA) of section 10 of the Act and had been regularly paying the GST on other income vide GST No. 11BPVPRG1ZU. The details of Dish TV recharge where even the TDS was deducted regularly were also attached. The Ld. AO examined the reply and required the assessee to furnish proof of residency of Sikkim along with documentary evidence and also to justify with documentary evidence as to how the assessee was eligible for exemption u/s 10(26AAA) of the Act. Since the required details were not filed, the deposits in the bank account of Rs. 8,92,81,690/- were treated as unexplained money and added u/s 69A of the Act while the sum of Rs. 15,08,694/- for purchase of vehicle was added as unexplained deposit u/s 69 of the Act. Further, the commission income of Rs. 11,62,481/- from M/s Dish Infra Services Private Limited on which TDS was deducted was also added to the income of the assessee in absence of any reply to the notice issued and the order u/s 147 r.w.s. 144 r.w.s. 144B of the Act was made at the total income of Rs. 9,19,53,065/-. However, the assessee’s claim of exemption under section 10(26AAA) was denied by the Ld. AO. 4. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who allowed the appeal and directed the Ld. AO to delete the addition by giving the finding as under: “From the documents filed, it is observed that the appellant is a Sikkimese individual holding a valid certificate of identification. Since the appellant is Page | 4 I.T.A. No.: 1581/KOL/2024 Assessment Year: 2017-18 Bhumika Rai. Page 4 of 7 a Sikkimese citizen and all the income was earned within the state of Sikkim, the total income of the appellant is exempt u/s 10(26AAA) of the Act. The provision defines “Sikkimese” to mean: • an individual, whose name is recorded in the register maintained under the Sikkim Subjects Regulation, 1961 read with the Sikkim Subject Rules, 1961 (\"Register of Sikkim Subjects\"), immediately before 26 April 1975; or • an individual, whose name is included in the Register of Sikkim Subjects by virtue of the Government of India Order No. 26030/36/90-I.C.I., dated the 7 August 1990 and Order of even number dated the 8 April 1991; or • any other individual, whose name does not appear in the Register of Sikkim Subjects, but it is established beyond doubt that the name of such individual's father or husband or paternal grandfather or brother from the same father (“close relatives”) has been recorded in that register. The income of the appellant is hence exempt u/s 10(26AAA) of the Act.” 5. Aggrieved with the order of the Ld. CIT(A), the revenue has filed the appeal before the Tribunal. 6.Rival contentions were heard and the record and the submissions made have been examined. Our attention was drawn by the Ld. AR to page 3 of the assessment order and para 5 of the Ld. CIT(A)’s order and it was also submitted that ledger account was submitted before the Ld. AO and Ld. CIT(A). 7. We have gone through the facts of the case and perused the record and the submissions made. Ground no. 1 of the appeal relates to the relief allowed by deleting the addition u/s 69A of the Act. Ground nos. 2 & 3 relate to the Ld. CIT(A) admitting fresh evidences without calling remand report from the Ld. AO which contravenes Rule 46A(3) of the Income Tax Rules, 1962. Ground No. 4 relates to the income being treated as income without verification of facts from the Indian Oil Corporation Ltd. In this context it is relevant to refer to Section 10 under Chapter III of the Act which deals with incomes which do not form a Page | 5 I.T.A. No.: 1581/KOL/2024 Assessment Year: 2017-18 Bhumika Rai. Page 5 of 7 part of total income. As per the provisions of clause (26AAA) of Section 10 of the Act, in computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included— “[(26AAA) in case of an individual, being a Sikkimese, any income which accrues or arises to him— (a) from any source in the State of Sikkim; or (b) by way of dividend or interest on securities. Explanation.—For the purposes of this clause \"Sikkimese\" shall mean— (i) an individual, whose name is recorded in the register maintained under the Sikkim Subjects Regulation, 1961 read with the Sikkim Subject Rules, 1961 (hereinafter referred to as the \"Register of Sikkim Subjects\"), immediately before the 26th day of April, 1975; or (ii) an individual, whose name is included in the Register of Sikkim Subjects by virtue of the Government of India Order No. 26030/36/90-I.C.I., dated the 7th August, 1990 and Order of even number dated the 8th April, 1991; or (iii) any other individual, whose name does not appear in the Register of Sikkim Subjects, but it is established beyond doubt that the name of such individual's father or husband or paternal grand-father or brother from the same father has been recorded in that register; or (iv) any other individual, whose name does not appear in the Register of Sikkim Subjects but it is established that such individual was domiciled in Sikkim on or before the 26th day of April, 1975; or (v) any other individual, who was not domiciled in Sikkim on or before the 26th day of April, 1975, but it is established beyond doubt that such individual's father or husband or paternal grand-father or brother from the same father was domiciled in Sikkim on or before the 26th day of April, 1975;]” 8. The Ld. CIT(A) accepted the additional evidence being the certificate of identification and allowed the relief only on the basis of the certificate without allowing an opportunity of being heard to the Ld. AO of verifying whether the conditions of section 10(26AAA) were fulfilled. Therefore, the order of the Ld. CIT(A) being in contravention of Rule Page | 6 I.T.A. No.: 1581/KOL/2024 Assessment Year: 2017-18 Bhumika Rai. Page 6 of 7 46A(3) of the I.T. Rules, 1962 is liable to be set aside. Both the Ld. DR as well as the Ld. AR were agreeable to the proposal. Hence, in the interest of justice and fair play, since the assessee could not file the required evidence for claiming exemption before the Ld. AO, both the orders of the Ld. CIT(A) as well as of the Ld. AO are hereby set-aside and the assessment proceedings are restored before the Ld. AO to be done afresh. The Ld. AO shall allow an opportunity of being heard to the assessee who shall file necessary evidence for claiming the relief and the assessment order shall be done de novo after verifying the certificate of identification filed by the assessee (which is an additional document) and any other evidence which the assessee wishes to file in support of the claim for exemption u/s 10(26AAA) of the Act. The assessee shall not seek unnecessary adjournment. Accordingly, all the grounds taken by the Revenue in this appeal are allowed for statistical purposes. 9. In the result, the appeal filed by the Revenue is allowed for statistical purposes. Order pronounced in the open Court on 23rd January, 2025. Sd/- Sd/- [Sanjay Garg] [Rakesh Mishra] Judicial Member Accountant Member Dated: 23.01.2025 Bidhan (P.S.) Page | 7 I.T.A. No.: 1581/KOL/2024 Assessment Year: 2017-18 Bhumika Rai. Page 7 of 7 Copy of the order forwarded to: 1. Income Tax Officer, Gangtok. 2. Bhumika Rai, C-55, The Old Cottage, Bhanjyang Road, Namchi, Gangtok, Sikkim, 737126. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata "