PRAMENDER KUMAR,GHAZIABAD V. INCOME TAX OFFICER, GHAZIABAD

ITA 2234/DEL/2024

AI Insights

The case involves Pramender Kumar, the appellant, who appealed against the order of the National Faceless Appeal Centre (NFAC), Delhi, concerning the assessment year 2016-17. The primary issues in the appeal were the additions made to the assessee's income, which included unexplained income and estimated business profits. The Assessing Officer (AO) had made significant additions to the assessee's income based on discrepancies and non-compliance in providing necessary documents during the scrutiny assessment. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld some of these additions, leading to the current appeal. The Tribunal found that the CIT(A) and AO had not adequately considered the assessee's submissions and the documents provided, leading to the decision to remit the issues back to the AO for a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126754 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2016-2017
• Other Referred Cases: CIT vs Paradise Holidays [(2010) 325|TR13(Del)]
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR HANSRA
• Assessee Lawyers: SAURABH KUMAR
• Keywords: Business income; Opportunity of being heard; Additional evidence; Capital receipt; Gift
• Section: 143(3); 143(2); 68; 44AD; 145

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F”, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI SUDHIR KUMAR, JUDICIAL MEMBER ITA NO. 2234/Del/2024 A.YR. : 2016-17 Pramender Kumar, H.No. 74, Garhi Sablu, Loni, Ghaziabad (PAN: CLVPK9246A) VS. Income Tax Officer, Ward 2(2)(1), Ghaziabad Uttar Pradesh (APPELLANT) (RESPONDENT) Appellant by : Shri Saurabh Kumar, CA Respondent by : Shri Harpreet Kaur Hansra, Sr. DR Date of hearing : 22.04.2025 Date of pronouncement : 25.04.2025 ORDER PER SHAMIM YAHYA, AM: The Assessee has filed the instant Appeal against the Order of the NFAC, Delhi dated 30.01.2024, relating to assessment year 2016-17. 2. Brief facts of the case are that assessee e-filed his return on 05.07.2017, disclosing income of Rs. 8,29,750/-. The assessee is an individual and engaged in business in the name and style of M/s Bansal Traders and declared net profit 2 | P a g e of Rs. 8,80,500/-. Subsequently, the case was selected for scrutiny through ITBA under CASS for Complete Scrutiny for the following reasons:- - Mismatch in sales turnover reported in Audit report and ITR (Form 3CD and Total Sales/Gross Receipt in Part A-P&L of ITR). - Low income compared to large commission receipts (Commission receipts in P&L Account and Total income in Part B-TI of ITR). 2.1 Accordingly, notice u/s. 143(2) of I.T. Act, 1961 dated 04.07.2017 was issued by the AO through ITBA for compliance on 25.7.2017. AO has mentioned in his order that the assessee had submitted his partial reply on 21.11.2018 and not furnished books of accounts / documents/ bills and vouchers which were necessary for verification in the office of the undersigned on fixed date. While concluding the assessment, AO had assessed total income at Rs. 1,36,33,326/- thereby making following additions to the income of the assessee vide his order u/s. 143(3) of the Act dated 28.11.2018:- Add: unexplained income - Rs. 6,50,577/- Income from commission - Rs. 44,28,189/- Business income - Rs. 77,24,810/- Total addition - Rs. 1,28,03,576/- 3. Upon assessee’s appeal, Ld. CIT(A) deleted the income from commission amounting to Rs. 44,28,189/-, however, he deleted the same. As regards unexplained income of Rs. 6,50,577/- as per the assessment order, in the balance sheet, AO found Rs. 6,50,577/- as addition made in capital account since books of accounts have not produced alongwith bills and vouchers, the 3 | P a g e AO treated the same as unexplained income. Upon assessee’s appeal, Ld. CIT(A) elaborately disused the issue and held as under:- “The appellant had explained that addition of Rs 6,50,577/- was due to fresh capital introduction in his Capital Account. the source for the same was stated to be gifts of Rs 2,00,0000/- each received from his father, mother and wife. The balance amount of Rs 50,577l- was claimed to be from the appellant's own savings. Beyond the explanation given, there is no apparent documentary evidence such as Gift Deed or confirmation of the donors or evidence to show the creditworthiness of the donor. The appellant has claimed that the receipts are not taxable as these are from family members, Therefore, onus was on the appellant to substantiate the claim that he had indeed received gifts from his family members. The appellant has neither produced any gift deed or confirmation in assessment proceedings or in the appellate proceedings. The receipts claimed to be out of the gifts are credited to the Capital Account of appellant in the Books of Accounts maintained. Therefore, the credits are subject matter of provisions of Sec 68 of the I T Act. The appellant has only produced the Aadhar Card of the donors. No further evidence to substantiate the creditworthiness of the donors is given or the genuineness of the transactions is proved. Hence, the addition of Rs 6,00,000/- is covered u/s 68 of the IT Act. In respect of the balance amount of Rs 50,577/-, the appellant has not led any evidence to prove that the amount was from his past savings. Hence, provisions of Sec 68 of the I T Act are applicable for the amount of Rs 50,577/- also. Therefore, the explanation given by the appellant in respect of the capital introduction of Rs 6,50,577/- is not found to be plausible. Hence, the addition made by Assessing Officer of Rs 6,50,577/- is confirmed. The ground of appeal raised in this regard at ground 6(A) is rejected.” 4. Against the above order, assessee is in appeal before us. 5. We have heard both the parties and perused the records. As regards addition of Rs. 6,50,577/- is concerned, we find that Ld. CIT(A) has confirmed 4 | P a g e the addition on the ground that no explanation in respect of the capital introduction of Rs. 6,50,577/- was found to be plausible as well as there is no apparent documentary evidence such as gift deed or confirmation of the donors or evidence to show the creditworthiness of the donor. We find that without any documentary evidences, it has been correctly held that the said amount cannot be treated as capital receipt. However, we note that it was the claim of the assessee that several documents including the books of accounts were submitted before the Ld. CIT(A) and the same have not been included in the orders of the authorities below, hence, in the interest of justice, we remit back the instant issue to the file of the Assessing Officer with the directions to consider the issue, afresh, after giving adequate opportunity of being heard to the assessee. We hold and direct accordingly. 6. As regards addition of Rs. 77,24,810/- on account of estimation the profits of business @8% of the gross receipts is concerned, we find that AO has noted that assessee has shown in Profit and Loss Account total sales of Rs. 9,65,60,135/-. However, books of accounts were not produced and no compliance was made, hence, AO proceeded to estimate business income @ 8% which comes to Rs. 77,24,810/-. Upon assessee’s appeal, Ld. CIT(A) considered the issue and held as under:- “In the Ground of Appeal No 6(C), the appellant has contested the addition made of Rs 77,24,810/- made by estimating the profits of the business at 8% of the Gross Receipts considered at Rs 96,560,135/-. The appellant has stated that its accounts have been audited and the audited books of accounts have been submitted to 5 | P a g e the Assessing Officer. Hence, the provisions of Sec 44AD of the | T Act are not applicable to its case. Hence, the estimation of income @ 8% is incorrect. The appellant has also argued that the submissions made by it during the assessment proceedings have not been considered by the Assessing Officer. The appellant has stated that the audited books of accounts have not been rejected by the Assessing Officer after finding some defect in the method of accounting followed or any other finding which would show that the books of accounts were unreliable for computing the profits. The appellant relied upon the Hon'ble Delhi High Court's judgment in the case of CIT vs Paradise Holidays [(2010) 325|TR13(Del)]. On the basis of the judgment, it is further argued that the estimation of income is also excessive as it is neither based on comparable case or on Appellant's track record. The appellant's argument that its accounts are audited and hence provisions of Sec 44AD of the Act are inapplicable is found to be correct. Moreover, the provisions of Sec 44AD of the I T Act are also not applicable as the appellant is running an Agency and is also in receipt of commission. However, the appellant's subsidiary record which is the primary evidence for the entries in the books of accounts has not been verified. The appellant claims that it did not get proper opportunity to produce the subsidiary record. But even if it is presumed that the appellant was prevented by genuine reason to produce the subsidiary record in the assessment proceedings, it is also true that appellant has not made any application for producing the subsidiary record as additional evidence under Rule 46A of the I T Rules in the appellate proceedings. Therefore, the appellant's claim that the subsidiary record could not be produced for reasons not attributable to it is not correct. Therefore, the averment that claim of expenditure against its turnover is entirely justifiable on the basis of its demonstrated claim that submissions made by it were not considered is not tenable. It can be seen from the Tax Audit Report that the appellant is not maintaining any record for stock of recharge vouchers and other items that it is selling. The purchases debited to the Profit & Loss Account at Rs 101,313,614/-constitutes more than 95% of its expenditure. The expenditure on Purchase is verifiable only from the purchase bills which are not verified as on date. The Closing stock at Rs 1629800/- has not been physically verified or checked as all the relevant columns in the Tax Audit Report related to quantitative Stock are reported as NIL. There is a fall of more than 3% in the gross Profit and nearly 2% in the Net profit. But for the Other Income of Rs 1,688,567/-, the income of the appellant from the 6 | P a g e agency of IDEA Cellular Ltd and Sistema Smart Technologies Ltd is a loss and such loss has been masked by the appellant by including the Other Income in the Cellular business. No adverse comment has been made by the Auditor on such masking. Therefore, it is clear that the financial statements do not depict the correct picture of the business of the appellant. Hence, it can be concluded that the books of accounts are not reliable for showing the correct profits of the business. In the circumstances, the books of accounts are rejected u/s 145 of the Income Tax Act by exercising the powers available to the Commissioner of Income Tax (Appeals) which are co-terminus with the powers of an Assessing officer. In the given factual circumstances end of justice shall meet on estimation of the profit from the business of agency of IDEA Cellular Ltd and Sistema Smart Technologies Ltd at 5% of the Gross Receipts from Sales and Commission. The income from \"Other Income\" credited to Profit & Loss Account shall be estimated @ 8% of the aggregate receipts after excluding receipts in nature of interest etc. Such income assessable under the head 'Income from Other Sources\" is taxable entirely unless appellant demonstrates that some expenditure was incurred on earning the interest or similar receipts. The ground of Appeal 6(C) is decided accordingly.” 7. Against the aforesaid action of the Ld. CIT(A), assessee is in appeal before us. 8. We have heard both the parties and perused the records. We find that it is the claim of the assessee that several documents were submitted before the Ld. CIT(A) and the same were not properly considered by the Ld. CIT(A). Even the Ld. CIT(A) has referred to the assessee claim that he did not get proper opportunity to produce the subsidiary record, but has not accepted its ground for producing the subsidiary record as additional evidence under Rule 46A of the I.T. Rules on the ground that necessary application has not been made. 7 | P a g e Therefore, in our considered opinion, interest of justice will be served if the matter is remitted back to the file of the Assessing Officer with the directions to consider the instant issue, afresh, after giving adequate opportunity of being heard to the assessee. We hold and direct accordingly 9. In the result, the Appeal filed by the Assessee is allowed for statistical purposes. Order pronounced on 25/04/2025. Sd/- (SUDHIR KUMAR) Sd/- (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER SR Bhatnagar Copy forwarded to:- 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT Assistant Registrar "