The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) deleted the addition made under Section 68 of the Income Tax Act, 1961, holding that the amount was already declared as business income and that there was no evidence of money laundering.
Kamal Clearing and Forwarding Agency Pvt. Ltd., the assessee, a customs clearing services provider, had received a payment of Rs. 19,31,004, which was originally due from Romex International, from a third party, Mr. Ravi Prakash.
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The AO observed that Ravi Prakash had deposited Rs. 1.57 crores in his bank account before transferring the funds to the assessee, treating the transaction as unexplained cash credit and potential money laundering. So, the AO added Rs. 54,77,918 under Section 68, which was upheld by the CIT(A).
On appeal before the ITAT, the assessee argued that the payment was received through proper banking channels and was already accounted for as business income. The assessee’s counsel provided necessary details, including Ravi Prakash’s PAN and bank account information, and contended that services rendered to Romex International were undisputed. The assessee argued that the addition could lead to double taxation because the income was already reported.
The revenue defended the addition, citing the untraceability of Ravi Prakash and the large cash deposit in his account before making the payment.
The two-member bench comprising Omkareshwar Chidara (Accountant Member) and Kavitha Rajagopal (Judicial Member) observed that the reopening of the assessment under Section 147 was valid but the reassessment order lacked substantive findings.
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The tribunal observed that the department failed to prove that the transaction was fictitious or that the assessee was involved in money laundering and the amount was already declared as business income in the assessee’s books, and taxing it again would lead to double taxation.
So, the tribunal deleted the addition made under Section 68 of the Income Tax Act, 1961, and the appeal was allowed.
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