Income Tax Addition on Account of Unexplained Investment u/s 69B of Income Tax Act due to Failure of Assessee to Compile Data and Information Due Covid-19 Pandemic: ITAT Restores matter to AO

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that due to unprecendent situation of Covid-19 the assessee could not explain the facts of his case, hence there is absence of relevant facts available to draw any conclusion. Thus restored the matter back to the file of the Assessing Officer (AO) for de novo  adjudication.

The assessee Golden Traders is a partnership firm was formed with the object to do business of trading of Scrap etc. The assessee procures the scrap from the factories / industries and sells them in the same form or after dismantling.

During the Assessment Year(AY) 2018-19, being the subject matter of the present proceedings, assessee had undertaken total scrap purchases for Rs. 3,55,59,446 and out of that made total sales for Rs. 2,78,57,115 and left with closing stock amounting to Rs. 97,76,370.

The assessee had maintained proper books of account, which were audited under Income Tax Act 1961 and Audit Report in Form 3CB-3CD was uploaded on Income Tax Portal along with audited balance sheet and Profit and Loss account.

The assessee’s case for the subject assessment year was selected for scrutiny for the reasons "Large squared up loans during the year" as per the Tax Audit Report and “Low income from TCS receipts - Scrap." in comparison to Form 26AS. A notice under Section 143(2) of Income Tax Act was issued for the purposes of scrutiny.

The assessment proceedings were undertaken during the period of Covid-19 when the entire Globe was under complete lockdown and movement within our country was also severely restricted.

The assessee was thus unable to compile the data and information sought by AO during the assessment proceedings due to unavailability of their accountant and back up staff handling their assessment matter due to ongoing Covid-19 pandemic. The applicant was totally handicapped and helpless to comply with the notices.

The AO held that as seen from the Annual Information Statement i.e., Form-26AS available with the department, the assessee has made purchases to the tune of Rs. 4,08,66,492  from M/s Indus Towers Limited and TCS was deducted at Rs.4,08,665, whereas the purchases reported in the P&L account is Rs. 3,55,59,446. Since, the assessee has not submitted any information, the difference amount of Rs.53,07,046 (4,08,66,492 - 3,55,59,446) was treated as unexplained expenditure and added back to total income.

Aggrieved by the order the assessee appealed before the Commissioner of Income Tax (Appeals) [CIT(A)], which upheld the addition made by the AO.

Further aggrieved the assessee filed an appeal before the Tribunal. The assessee submitted that submits that the assessee could not explain the facts of his case due to an unprecedented situation of Covid-19 and the Assessing Officer made addition by not appreciating the facts and data in correct perspective.

The Authorised Representative of the assessee contended that assessee never received any notices towards the proceedings before Commissioner of Income Tax (Appeals) as emails were being sent to santoshkumar.965@rediffmail.com which does not belong to them.

Further he submitted that submitted that the CIT(A) dismissed the appeal ex-parte and confirmed the addition made by  AO due to failure of consultant in this regard and due to Covid-19 pandemic before AO. The Assessee was thus again deprived to make his submissions and documents with correct facts before the CIT(A) .

The Departmental Representative (DR) supported the action of the AO and CIT(A) and submitted that the assessee is a habitual defaulter and neither attended before the AO nor availed the opportunity given at the stage of CIT(A) and therefore, on the face of such a proverbial neglect displayed by the assessee, the action of the Revenue Authorities were correct and righteous.

The Bench comprising of Pradip Kumar Kedia, Accountant Member and Yogesh Kumar US, Judicial Member noted that it is common knowledge that Covid-19 caused unprecedented disruption across the globe at the relevant time when the assessment and the first appellate order were made.

It was observed that in the same vein, in the absence of relevant facts available before the lower authorities it is not possible to draw any conclusion on the correctness of the plea on merits by the Tribunal at this stage.

Therefore the Tribunal found it just and proper to summarily restore the matter back to the file of the AO for de novo consideration of the subject matter and fresh determination of the issues involved in the light of relevant facts and in accordance with law after giving proper opportunity to the assessee.

And further the assessee was directed to extend full co-operation to the AO in this regard failing which the AO shall be at liberty to draw appropriate inference. Therefore, all the issues involved in the present appeal were set aside and remitted back to the file of the AO for determination thereof afresh.

Hence the appeal of the assessee was allowed for statistical purpose.

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