In a recent case before the Income-tax Appellate Tribunal (ITAT), Nagpur the tribunal quashed ex-parte additions made under Section 69 of the Income Tax Act ( the Act from hereon) and remarked on the difference between Total Business Turnover and Business Income.
The assessee, Akash Anand Puri filed an appeal challenging the impugned order passed by Commissioner of Income Tax ( Appeals ), for the assessment year (AY) 2017-18.
The assessee had failed to file his return of income for the AY. The assessee was engaged in the business of distribution of Vodafone Sim Card and easy recharge vouchers, in the name and style of Rashi Traders.
The assessing officer (AO) received information from the Income Tax Department saying that during the preceding financial year 2015-16, the assessee had deposited cash amounting to One hundred fifty-three million Rupees.
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The department contended that the notice dated 27/03/2021 issued through e-proceedings under section 148 of Income tax act was said to have not been received by the assessee, and failed to file his return of income in response to the notice under section 148 of Income Tax act.
The department also raised that contention that the department had issued notices under section 143(2) and 142(1) of the Income Tax Act which was also said to be not received by the assessee through e-proceedings portal. Even the notice sent by Registered Post with A/D was also said to have not been received by the assessee.
There was no response from the side of assessee to notices issued by the AO under section 142 (1) of the Act during the course of assessment proceedings. Therefore the assessing officer passed an ex-parte order by invoking provisions of section 144 of the act. A mail was issued with a request to submit the details.
Despite all the aforesaid notices no response was recorded from the side of assessee the AO made an addition of One hundred fifty-three million rupees on account of unexplained money aggrieved by which the assessee filed appeal before the first appellate authority.
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The assessee had filed a reply before CIT(A) NFAC which was not considered by the CIT(A) and the appeal of assessee was dismissed.
The assessee displeased with the order passed by CIT(A) filed an appeal before the tribunal.
The assessee’s counsel Advocate Manoj G Moryani argued that the assessee did not deposit any cash in the Bank of Maharashtra during the year 2015-16.
The counsel submitted that the amount received from sale were business receipts deposited in the bank during previous year relevant to the AY 2017-2018 and not the AY 2016-2017, as stated in the assessment order and reinvested in purchase of new sim cards and vouchers from Vodafone Mobile Services Limited.
As the income earned was below the prescribed limit, the assessee did not file return of income. The assessee had received One hundred fifty-three million for the year under consideration customers by way of sale of sim cards, recharge vouchers and easy vouchers and said amounts were directly paid to Vodafone through cheque and RTGS for purchase of new sim cards and vouchers.
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The payment was made by proper banking channel directly to Vodafone which was also reflected in the bank statement of assessee.
The assessee did not receive any notice under the sections 148 and 142(1) either. The assessee was aware of it only when he received recovery notice from the department, and of the ex-parte assessment was framed.
Upon such receipt of notice for recovery of demand the assessee had taken immediate steps. The assessing officer did not give any opportunity of being heard and had acted in lack of merit.
There existed consistent rotation of funds in the bank statement submitted by the assessee, the statements clearly shows that a commission and incentive were received by the assessee.
The tribunal comprising of Judicial Member Durga Rao and Accountant Member K.M.Roy observed that the CIT(A), NFAC, did not consider did not point out any defect in documents furnished by the assessee and made addition of entire sale as business income and confirmed the addition made by the Assessing Officer at around One hundred fifty-three million rupees, without considering the same being business turnover.
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The tribunal directed the AO to calculate estimated profit @1% at around One hundred fifty-three thousand rupees, on transactions of One hundred fifty-three million rupees being the net income of the assessee which will meet the ends of justice. The addition made section 69A of the Act was quashed, though the assessee shall have tax liability and interest was exempted.
The appeal filed by the assessee was allowed on the aforesaid terms.
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