KINGSTAR ENTERPRISES,PERUBAVOOR V. ITO, WARD-2, ALUVA

ITA 33/COCH/2024

AI Insights

The case involves M/s. Kingstar Enterprises, a partnership firm engaged in the business of dealing in plywood, which appealed against the order of the National Faceless Assessment Centre / Commissioner of Income-tax (Appeals) for the assessment year 2017-2018. The firm had declared a total income of Rs.3,06,930, which was significantly increased by the Assessing Officer to Rs.46,69,530, primarily due to disallowances related to purchases from unregistered dealers and unexplained cash deposits. The CIT(A) upheld these additions, leading to the appeal before the Tribunal. The Tribunal, after considering the submissions and the lack of adequate reasoning in the CIT(A)'s order, decided to remand the matter for a de novo consideration.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470737 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LEENA LAL; SENIOR
• Assessee Lawyers: KRISHNA K
• Keywords: Business income; Opportunity of being heard; Cost of acquisition

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, COCHIN Before Shri Inturi Rama Rao, Accountant Member ITA No.33/Coch/2024 : Asst.Year 2017-2018 M/s.Kingstar Enterprises Pallikavala Mudickal Mouloodepura Perumbavoor Ernakulam – 689 547. PAN : AANFK8482H. v. The Income Tax Officer Ward 2 Aluva. (Appellant) (Respondent) Appellant by : Ms.Krishna K, Advocate Respondent by : Smt.Leena Lal, Senior AR Date of Hearing : 03.02.2025 Date of Pronouncement : 06.02.2025 O R D E R This appeal filed by the assessee is directed against the order of the National Faceless Assessment Centre / Commissioner of Income-tax (Appeals) [“CIT(A)” hereinafter] dated 19.12.2023 having DIN & Order No.ITBA/NFAC/S/250/2023-24/1058870664(1) for the assessment year 2017-2018. 2. Briefly, the facts of the case are that the assessee is a partnership firm, engaged in the business of dealer in plywood. The assessee has filed its return of income for the assessment year 2017-2018 on 14th February, 2018 declaring total income of Rs.3,06,930. Against the said return, the Assessing Officer, i.e., Income Tax Officer, Ward-2, Aluva (“the AO” hereinafter) vide order dated 27.12.2019 passed u/s.143(3) of the Income-tax Act, 1961 (“the Act” hereinafter)assessed the total ITA No.33/Coch/2024. Kingstar Enterprises. 2 income at Rs.46,69,530. While doing so, the AO made an addition of Rs.32,12,598 by disallowing 5% of the total cost of purchase by holding that the assessee purchased rubber from unregistered dealer, i.e., agriculturists. The A.O. also made an addition of Rs.11,50,000 for alleged failure of the assessee to explain cash deposits made in the bank account. 3. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A), who vide the impugned order rejected the book results and estimated the business income of the assessee at Rs.35,19,528. The CIT(A) also confirmed the addition made as unexplained cash deposit of Rs.11,50,000, under the provisions of section 115BBE of the Act. 4. Aggrieved with the order of the CIT(A), the assessee is in appeal before us in the present appeal. When the appeal was called for, nobody was present on behalf of the assessee despite due service of notice. Therefore, after hearing the learned Sr.DR, I proceed to dispose of the appeal on merits on the basis of the written submissions filed by the assessee. 5. I have heard the learned Senior DR and perused the material available on record. The first grounds of appeal, i.e., Ground Nos. A, K and L are general in nature, do not require any specific adjudication. Thus, these grounds are dismissed as infructuous. Ground Nos.B to E are in respect of challenging the addition made by the AO on account of purchase cost. 6. A perusal of the assessment order, it would reveal that the AO made an addition at the rate of 5% of the purchase cost by ITA No.33/Coch/2024. Kingstar Enterprises. 3 holding that the assessee made purchases of rubber from unregistered dealers. On appeal before the CIT(A), the CIT(A) by rejecting the books of account of the assessee, estimated the profit at Rs.35,19,528. In the process, the CIT(A) confirmed the addition made by the AO. In my opinion, the CIT(A) had neither given any comparable instances nor the reasons justifying the rejection of book results. Thus, the order passed by the CIT(A) is arbitrary and unreasonable. Therefore, in my considered opinion, the matter requires to be remanded back to the file of the CIT(A) for fresh adjudication in accordance with law after affording a reasonable opportunity of hearing to the assessee. Thus, Ground Nos.B to E stand partly allowed for statistical purposes. 7. Ground Nos.F to J challenges the addition of Rs.11,50,000 being alleged unexplained money. During the course of assessment proceedings, the AO found that the assessee made cash deposits of Rs.31,00,000 with Axis Bank Limited, during demonetization period. Out of this amount, the AO treated a sum of Rs.19,50,000 as explained, since the same was available as cash withdrawn on 10.11.2016, and the balance amount of Rs.11,50,000 was treated as unexplained money. The AO thus made addition of Rs.11,50,000 by invoking the provisions of section 115BBE of the Act. Before the AO as well as the CIT(A), the assessee took plea that the cash deposits were made out of the available cash balance of Rs.34,83,000 as per books of account as on 09.11.2016. The CIT(A) without adverting to the explanation offered by the assessee during the course of appellate proceedings, merely confirmed the addition without assigning any reasons whatsoever. Thus, the order passed by the CIT(A) is arbitrary and an unreasoned order. Therefore, ITA No.33/Coch/2024. Kingstar Enterprises. 4 in the facts and circumstances of the case and in order to meet the ends of justice, the matter is remanded back to the file of the CIT(A) for de novo consideration in accordance with law. Needless to say, the CIT(A) shall afford a reasonable opportunity of being heard to the assessee, before passing any order. Thus, these grounds are partly allowed for statistical purposes. 8. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced on this 6th day of February, 2025. Sd/- (Inturi Rama Rao) ACCOUNTANT MEMBER Cochin; Dated : 06th February, 2025. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT, Cochin. 4. The DR, ITAT, Cochin. 5. Guard File. Asst.Registrar/ITAT, Cochin "