Recently, the Income Tax Appellate Tribunal ( ITAT ) of Delhi has directed the Assessing Officer (AO) to reappraise evidence in a case involving Ducati India Private Limited. The assessee-company had appealed against a tax demand resulting from an addition of Rs. 2.63 crore made by the tax authorities, which exceeded the amount indicated in the show cause notice ( SCN ). The ITAT found that the addition was made without due process, as the SCN pertained to a lower amount of Rs. 1.89 crore.
The assessee, Ducati India, engaged in the wholesale distribution of premium motorcycles and accessories imported from its Thailand-based parent company, filed its income tax return for the assessment year 2017-18, declaring a loss of Rs. 4.32 crore. This was later revised to nil, adjusting for prior losses. The case was selected for scrutiny, and the tax authorities asked Ducati India to provide details of its creditors and confirm outstanding balances.
Understanding Common Mode of Tax Evasion with Practical Scenarios, Click Here
During the assessment, the AO noted discrepancies in the credit balance of Rs. 1.89 crore with Ducati Motor ( Thailand ) Company Limited and requested confirmations. However, the final addition to Ducati India’s income was Rs. 2.63 crore, a figure significantly higher than that mentioned in the SCN. This discrepancy became the basis of the assessee’s appeal, with the company arguing that the addition was made without issuing a fresh notice and that additional evidence provided during the appellate process was ignored.
Representing the assessee, Shri Bhaumik Goda argued before the ITAT that the assessee-company had submitted all necessary documents and that the discrepancy identified by the AO was limited to Rs. 1.89 crore, not the full Rs. 2.63 crore. It was further contended that the additional evidence submitted, including creditor confirmations, was not considered by the first appellate authority, the Commissioner of Income Tax (Appeals) [CIT(A)].
Understanding Common Mode of Tax Evasion with Practical Scenarios, Click Here
The ITAT, consisting of Judicial Member Madhumita Roy and Accountant Member Brajesh Kumar Singh, agreed with the assessee’s arguments. The tribunal highlighted the procedural lapse in making an addition that was not covered by the SCN. In its order, the ITAT stressed that the assessee must be given a fair opportunity to present its case. It also criticized the CIT(A) for not considering the additional evidence provided during the appeal.
To prevent any miscarriage of justice, the ITAT remitted the case back to the CIT(A) for fresh consideration, instructing the authority to examine all evidence, including that which had been previously overlooked. The tribunal also directed that the assessee be given a chance to present further evidence, if necessary, and warned that if the company fails to cooperate, the CIT(A) is free to proceed in accordance with the law.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
