Chandra Sales Agency Vs ACIT (ITAT Kolkata)
In a significant judgment, the Income Tax Appellate Tribunal (ITAT) in Kolkata has allowed a Sikkimese resident proprietor to claim an income tax exemption under Section 10(26AAA) of the Income Tax Act, 1961. The tribunal’s ruling in the case of Chandra Sales Agency Vs ACIT overruled the Assessing Officer’s (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)]’s decision, which had denied the claim on the technicality of an incorrect PAN being used.
The case originated from an assessment for the financial year 2017-18, where the assessee, a proprietorship concern named M/s. Chandra Sales Agency, was selected for scrutiny due to substantial cash deposits during the demonetization period. The proprietor, Mrs. Menuka Devi Agarwal, is a resident of Sikkim who has been a settled resident prior to April 1, 1975. The assessee’s case was initially handled ex-parte under Section 144 due to a lack of compliance with notices.
During the assessment, the AO noted that the assessee was a proprietary concern but was using a PAN that was registered in the status of a partnership firm. On this basis, the AO denied the exemption under Section 10(26AAA), which exempts the income of Sikkimese residents. The AO then estimated the company’s net profit at 8% of its total turnover, making an addition of over Rs. 1.16 crore, along with another addition for unexplained credits. The CIT(A) upheld this decision, even after the assessee presented evidence and referenced a Supreme Court judgment.
