2024 (10) TMI 1563 - AT - Income Tax

Addition ex parte and taxed the assessee u/s 115BBE - unexplained money u/s 69A - Consideration of cash deposits as business receipts - HELD THAT - Assessee being a distributors of sim card, vouchers and easy vouchers of Vodafone Mobile Services Limited and earned commission on sale of Sim Card sale to various retail shops in and around the city. The amount received out of the sales were business receipts deposited in the bank account of the assessee and reinvested in purchase of new sim cards and vouchers from Vodafone Mobile Services Limited. There is a consistent rotation of funds in the Bank statement. We also find that the assessee has furnished bank statement of Bank of Maharashtra showing the entire deposits and payments made to Vodafone Mobile Services Limited. CIT(A), NFAC, has not considered the fact as well as documents submitted by the assessee and has not pointed out any defect in the documents furnished by the assessee and made addition of entire sale as business income and confirmed the addition made by the AO at ₹ 1,53,31,937, without considering the same being business turnover and consequent abatement of payment were made to Vodafone Mobile Services Limited for purchase of Sim Card and vouchers. He only harped upon about the non compliance of various notices. Considering the facts of the case, we hereby direct the AO to calculate estimated profit @1% at ₹ 1,53,311, on transactions of ₹ 1,53,31,060, being the net income of the assessee which will meet the ends of justice. Consequently, the addition made u/s 69A of the Act is hereby quashed since the nature and source of deposit is clearly established. Needless to mention here that there will be tax liability in the hands of the assessee since income is below basic exemption limit. Thus, grounds no.1 to 9, are allowed in terms indicated above and the assessee gets relief of ₹ 1,51,77,749 i.e., ₹ 1,53,31,060 ( ) ₹ 1,53,311 . Levy of interest u/s 234A, 234B and 234C - Assessee has denied the liability of interest charged under section 234A, 234B and 234C of the Act. Since the income of the assessee is below taxable limit, there is no scope of charging any interest. We need to add here that these types of cases should be dealt with very carefully and the Assessing Officer being an adjudicator and investigator cannot remain a silent spectator. Assessee appeal allowed.

Issues Involved:

1. Legality of the order passed by CIT(A) NFAC.
2. Non-receipt of notice under Section 148 by the assessee.
3. Validity of notice issued under Section 148 without prior approval.
4. Non-provision of reasons recorded for issuing notice under Section 148.
5. Rejection of documents filed by the assessee under Section 46A.
6. Addition of unexplained money under Section 69A.
7. Consideration of cash deposits as business receipts.
8. Alleged typographical error regarding cash deposits.
9. Treatment of income below the prescribed limit.
10. Liability of interest under Sections 234A, 234B, and 234C.

Detailed Analysis:

1. Legality of the Order Passed by CIT(A) NFAC:
The assessee challenged the order of CIT(A) NFAC as illegal and invalid. The Tribunal found that the CIT(A) did not adequately consider the submissions and documents provided by the assessee. The Tribunal directed the Assessing Officer to reassess the income based on the evidence submitted, thus implying a flaw in the CIT(A)'s order.

2. Non-receipt of Notice Under Section 148:
The assessee claimed not to have received the notice under Section 148, which led to the non-filing of the return. The Tribunal noted that the Department's attempts to serve notices through various means, including speed post, were unsuccessful in eliciting a response from the assessee. However, the Tribunal emphasized the need for proper service of notice and the opportunity for the assessee to be heard.

3. Validity of Notice Issued Under Section 148 Without Prior Approval:
The assessee argued that the notice under Section 148 was issued without obtaining prior approval as required under Section 151. The Tribunal did not specifically address this procedural aspect but focused on the overall handling of the case by the Department.

4. Non-provision of Reasons Recorded for Issuing Notice Under Section 148:
The assessee contended that the reasons for issuing the notice were not provided, rendering the subsequent assessment invalid. The Tribunal highlighted the importance of transparency and communication in tax proceedings, suggesting that procedural lapses contributed to the appeal's success.

5. Rejection of Documents Filed by the Assessee Under Section 46A:
The CIT(A) rejected the documents filed by the assessee under Section 46A. The Tribunal found this rejection unjustified, as the documents were crucial for understanding the nature of the transactions. The Tribunal's decision to allow the appeal indicates that the evidence should have been considered.

6. Addition of Unexplained Money Under Section 69A:
The Assessing Officer added Rs. 1,53,31,060 as unexplained money. The Tribunal found that the amount represented business receipts from the sale of sim cards and vouchers, which were reinvested in the business. The Tribunal quashed the addition under Section 69A, directing the Assessing Officer to calculate profit at 1% of the transactions.

7. Consideration of Cash Deposits as Business Receipts:
The assessee argued that the cash deposits were business receipts. The Tribunal agreed, noting the consistent rotation of funds and the evidence provided, including bank statements and sales records. The Tribunal's decision to direct a reassessment based on a 1% profit rate supports the assessee's position.

8. Alleged Typographical Error Regarding Cash Deposits:
The assessee highlighted a typographical error in the assessment order regarding cash deposits. The Tribunal acknowledged the error and its impact on the assessment, contributing to the decision to allow the appeal.

9. Treatment of Income Below the Prescribed Limit:
The assessee claimed that the income was below the taxable limit, justifying the non-filing of a return. The Tribunal accepted this argument, noting that the reassessed income would be below the basic exemption limit, negating the need for filing.

10. Liability of Interest Under Sections 234A, 234B, and 234C:
The assessee denied liability for interest under Sections 234A, 234B, and 234C, arguing that the income was below the taxable threshold. The Tribunal agreed, stating that there was no scope for charging interest given the revised income assessment.

In conclusion, the Tribunal found significant procedural and substantive issues with the assessment and appellate process, leading to a favorable decision for the assessee. The Tribunal emphasized the importance of proper notice, consideration of evidence, and fair assessment practices.

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