MANISH H SHAH HUF ,MUMBAI V. NATIONAL FACELESS APPEAL CENTRE (NFAC), DELHI

ITA 4455/MUM/2024

AI Insights

The case involves Manish H Shah HUF, who appealed against the order of the National Faceless Appeal Centre (NFAC), Delhi, which sustained an addition of Rs.64,18,160 as business income for the Assessment Year 2019-20. The AO had reopened the assessment under section 147 of the Income Tax Act, based on bank transaction data showing that the assessee had not filed a return of income for the relevant assessment year. The AO computed the net profit by applying an 8% rate on the total turnover, which included credit entries not declared by the assessee. The Tribunal found that the AO had not considered debit entries in the bank account, leading to an incorrect computation of profit.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 27250 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2019-2020
• Laws Referred To: Income Tax Act
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: R.R. MAKWANA
• Assessee Lawyers: VIMAL PURMIYA
• Keywords: Business income; Opportunity of being heard
• Section: 147; 148

Judgement Text

" Page | 1 ITA No. 4455/Mum/2024 AY 2019-20 Manish H Shah HUF Vs. ITO, Mumbai IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, V.P. AND SHRI GIRISH AGRAWAL, A.M. ITA Nos.4455/Mum/2024 Vs. A.Y.2019-20 Manish H Shah HUF, Room No. 72, Balkrishna Niwas, Panjra Pole, Girgaon, Mumbai-400004 Income Tax Officer-19(2)(2), Piramal Chamber, Parel, Mumbai-400012 (Appellant) (Respondent) PAN AALHM 0484P Assessee by Shri Vimal Purmiya Revenue by Shri R.R. Makwana, Addl. CIT Date of hearing 16.01.2025 Date of pronouncement 28.01.2025 O R D E R PER SAKTIJIT DEY, V.P.: 1. This is an appeal by the assessee against order dated 23.08.2024 passed by National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year (AY) 2019-20. 2. The dispute in the present appeal is confined to the addition made of Rs.64,18,160/- as business income. 3. Briefly, the facts are, the assessee is a resident Hindu Undivided Family (HUF). As observed by the Assessing Officer (AO) in the assessment order, data available with the department revealed that in the previous year Page | 2 ITA No. 4455/Mum/2024 AY 2019-20 Manish H Shah HUF Vs. ITO, Mumbai relating to the assessment year under dispute, the assessee’s Bank account revealed certain transaction. Whereas, it was found that for the assessment year under dispute, assessee had not filed any return of income. Thus, based on such information, the assessment was reopened u/s. 147 of the Act. After initiating the assessment proceeding as aforesaid, the AO called upon the assessee to furnish information/details relating to the bank transactions. However, as observed by the AO, though the assessee filed the return of income in response to notice u/s. 148 of the Act, however, compliance to various queries raised from time to time was catchy and partial. Thus, ultimately, the AO concluded that the credit entries appearing in the bank account represents the total turnover of the assessee. He observed, since the assessee has declared net profit of 2.77 percent on the turnover of Rs.4,00,73,136/-, no profit has been offered on the remaining credit entries of Rs.5,15,24,495/-. Thus, he was of the view that profit has to be computed on such credit entries. Having held, so he rejected the net profit rate applied by the assessee and computed net profit by applying the rate of 8% on the entire turnover of Rs.9,15,97,631/-. After giving credit to the profit declared by the assessee, the AO added back profit computed at Rs.64,18,160/-. Though, the assessee contested the aforesaid addition by filing an appeal before the First Appellate Authority, however, the addition was sustained. Page | 3 ITA No. 4455/Mum/2024 AY 2019-20 Manish H Shah HUF Vs. ITO, Mumbai 4. Before us, learned counsel appearing for the assessee submitted that the AO has considered only the credit entries appearing in the bank account for computing the profit without considering the debit entries. Thus, he submitted, the addition made by the AO by considering only the credit entries is unsustainable. Further, he submitted the debit entries and expenditure incurred by the assessee having not been considered at all by the Departmental authorities, the issue may be restored back for re- examination by the AO. 5. The learned DR, though, relied upon the observations of the Departmental Authority, however, he submitted that the issue can be re- examine by the AO. 6. We have considered rival submissions and perused the materials on record. It appears, the assessee is in the business of importing accessories of shoes. It is the specific case of the assessee before us that while computing profit, the AO has only considered the credit entries without taking note of the debit entries in the Bank account. On a perusal of the impugned assessment order, we find merit in the aforesaid submission of learned counsel for the assessee. It is observed, while the assessee has computed the profit at Rs.4,00,73,136/-, the AO has taken the total turnover at Rs.9,15,97,631/- by aggregating the credit entries appearing in the bank account. In our view, credit entries cannot be considered for computing the Page | 4 ITA No. 4455/Mum/2024 AY 2019-20 Manish H Shah HUF Vs. ITO, Mumbai profit without examining the debit entries. The Departmental Authorities having failed to examine the debit entries appearing in the bank account, we are inclined to restore the issue to the AO for fresh adjudication after providing due and reasonable opportunity of being heard to the assessee. Grounds are allowed for statistical purposes. 7. In the result, appeal is allowed for statistical purposes. Order pronounced in the open court on 28/01/2025. Sd/- Sd/- (GIRISH AGRAWAL) (SAKTIJIT DEY) (ACCOUNTANT MEMBER) (VICE PRESIDENT) Mumbai, Dated:28 .01.2025 Aks/- Copy of the Order forwarded to : The Appellant, The Respondent, The CIT, The DR ITAT & Guard File BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai "