Amount Received from Sale of Khadi Yarn already added to Taxable Income: Delhi HC directs Re-adjudication to verify Additional Documents [Read Order]

In a significant case, the Delhi High  Court directed the Re-adjudication to verify additional documents amount received from the sale of khadi yarn already added to taxable income.

RTPL Marketing Private Limited, the petitioner challenged the order passed under Section 148A(d) of the Income Tax Act, 1961 [“Act”]. The principal allegation against the petitioner is that the purported sale transaction that it entered into with Sethi International, a proprietor concerned, is not verifiable. The value of the transaction has been pegged at Rs.31, 00,000/-. 

According to the respondent/revenue, the proprietor of Sethi International, one Mr Manjeet Singh, has not filed his Return of Income (ROI) in the AY in issue, i.e., AY 2019-20.  The reassessment proceeding has been initiated against the petitioner/assessee on account of suspicious transactions flagged by the concerned bank, i.e., Punjab National Bank (PNB). In the period in issue, i.e., AY 2019-20, Rs.31,00,000/- was found credited to the subject bank account. 

A notice dated 13.03.2023 was issued under Section 148A(b) of the Income Tax Act, 1961 [“Act”]. The petitioner responded to the said notice via reply dated 16.03.2023. The stand that the petitioner took was that it had sold goods worth Rs.31,00,000/- to an entity going by the name, of Sethi International. Sethi International, concededly, is a proprietorship concern of, one, Mr Manjeet Singh. 

The Assessing Officer (AO), after considering the reply and the material on record, passed an order dated 25.03.2023 under Section 148A(d) of the Act. The petitioner had furnished copies of invoices, as well as the transporter receipts. The record revealed that the petitioner has sold khadi yarn to Sethi International. 

Mr. Sunil Agarwal, senior standing counsel, who appeared on behalf of the respondent/revenue, pointed out that the transporter's receipts do not provide the G.R. Number, thus requiring further inquiry by the AO in the course of the assessment proceedings.

On being queried, Mr Gautam Jain, who appeared on behalf of the petitioner/assessee, says that the petitioner/assessee is not a manufacturer of khadi yarn.  A Division bench comprising Justice Rajiv Shakdher and Justice Girish Kathpalia directed Mr Jain to place on record the supplier’s invoices, and the attendant documents via which supplies were received. 

Since the petitioner, has filed certain additional documents, which include invoices and documents seeking to establish the movement of the goods in issue, i.e., khadi yarn, from the petitioner to the purchaser, which, as indicated on 12.07.2023, is a proprietorship concern going by the name Sethi International, the Court directed the AO to pass a fresh order. 

To Read the full text of the Order CLICK HERE

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