Matter remanded as higher addition u/s. 68 confirmed by ACIT as compared to addition alleged in notice

Ducati India Private Limited Vs ACIT (ITAT Delhi)

ITAT Delhi held that addition made under section 68 of the Income Tax Act is lower as alleged in show cause notice as compared to addition made by ACIT hence matter remanded for fresh consideration.

Facts- The assessee is in the wholesale distribution of sale of premium motorcycles manufactured by Ducati, Thailand to the dealers in India and in distribution of spare parts, accessories, clothing and merchandise imported from its Ducati group entities to the dealers in India.

During the course of assessment proceeding, the assessee was asked to submit the details of the creditors. The assessee was thereafter directed to file the confirmation of accounts from all the creditors and to explain the discrepancy arising in the balance outstanding against the creditors. As no response was made by the assessee, addition was made to the tune of 2,63,85,935/-treating the same as unexplained credits in the books of the assessee u/s 68 of the Act which was further confirmed by the First Appellate Authority. Hence the instant appeal.

Assessee contested that the show cause was only on the difference of amount of Rs. 1,89,47,593/- in the credit balance of M/s. Ducati Motor(Thailand) Company Limited and the accounts of assessee whereas the impugned addition has been made to the tune of Rs. 2,63,85,935/-. No show cause, therefore, was issued before making addition of the impugned amount by the ACIT and therefore the assessment proceedings is not sustainable in the eyes of law.

Conclusion- Held that we remit the issue to the file of the Ld. CIT(A) to consider the same afresh upon considering the evidence on record and the evidences which the assessee has filed before us and any other evidence which the assessee may choose to file in support of its case before him. We further direct the Ld. CIT(A) to grant an opportunity of being heard to the assessee and to pass order strictly in accordance with law. We also make it clear that, in the event the assessee does not co-operate with the Ld. CIT(A), the said authority would be at liberty to pass orders strictly in accordance with law.

FULL TEXT OF THE ORDER OF ITAT DELHI

The instant appeal filed by the assessee is directed against the order dated 21.03.2024 passed by the CIT(A), National Faceless Appeal Centre(NFAC),Delhi arising out of the assessment order dated 29.12.2019 passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the act’) by the ACIT, Circle 7(2) for Assessment Year 2017-18.

2. The brief facts leading to the case are that the assessee is in the wholesale distribution of sale of premium motorcycles manufactured by Ducati, Thailand to the dealers in India and in distribution of spare parts, accessories, clothing and merchandise imported from its Ducati group entities to the dealers in India filed its return of income declaring loss of 4,32,28,164/- on 30.11.2017 which was further revised on 30.03.2018 declaring income at nil after adjustment of brought forward losses. The case was selected for scrutiny through CASS and notice, accordingly, u/s 143(2) of the Act was issued and served upon the assessee.

3. During the course of assessment proceeding the assessee dresses was asked to submit the details of the creditors and the balances outstanding as against the creditors was submitted by the assessee which is reflecting at page 2 of the assessment order. The assessee was thereafter directed to file the confirmation of accounts from all the creditors and to explain the discrepancy arising in the balance outstanding against the creditors. As no response was made by the assessee, addition was made to the tune of 2,63,85,935/-treating the same as unexplained credits in the books of the assessee u/s 68 of the Act which was further confirmed by the First Appellate Authority. Hence the instant appeal before us.

4. During the course of hearing of the said appeal the Ld. Counsel appearing for the assessee submitted before us that during the course of appellate proceedings the assessee duly submitted the list of creditors along with details of the transactions thereof appearing at page 178 of the Paper Book filed before us and thus the show cause notice issued by the ACIT dated 18.12.2019 stating that confirmation of accounts not supplied by the assessee is factually incorrect. Moreso, the show cause was only on the difference of amount of Rs. 1,89,47,593/- in the credit balance of M/s. Ducati Motor(Thailand) Company Limited and the accounts of assessee whereas the impugned addition has been made to the tune of Rs. 2,63,85,935/-. No show cause, therefore, was issued before making addition of the impugned amount by the ACIT and therefore the assessment proceedings is not sustainable in the eyes of law. It was further contended by him that before the First Appellate Authority series of additional evidences though placed by filing an application dated 22.01.2021 being annexure A to F mentioned therein, the same was not considered by the Ld. CIT(A) while confirming the addition made by the Ld. Assessing Officer. In this regard he has drawn out attention to page 1 of the Paper Book filed before us being the screen shot of proof of such submissions of application before the CIT(A) and the Annexures to the said application sent through online. It was again reiterated by him that those documents was not considered by the Ld. CIT(A) while confirming the addition made by the Ld. Assessing Officer. In that view of the matter he pressed for remitting the issue to the file of the Assessing Officer for reappraisal of evidence already sought to be relied upon before the CIT(A) by filing the same as additional evidences. It is relevant to mention that even before us those documents were filed by the assessee a copy of each whereof has also supplied to the Ld. DR.

5. The Ld. DR on the other hand raised objections to this effect that since all these documents are to be filed before the Ld. Assessing Officer which the assessee failed to do, the same rightly not been admitted either by the CIT(A) or cannot be admitted by us. We however, cannot find such submissions made by the DR acceptable. Rather to prevent the miscarriage of justice, according to us, the assessee be given a further opportunity to represent its case before the authority effectively.

6. With the aforesaid observations, we, therefore, remit the issue to the file of the Ld. CIT(A) to consider the same afresh upon considering the evidence on record and the evidences which the assessee has filed before us and any other evidence which the assessee may choose to file in support of its case before him. We further direct the Ld. CIT(A) to grant an opportunity of being heard to the assessee and to pass order strictly in accordance with law. We also make it clear that, in the event the assessee does not co-operate with the Ld. CIT(A), the said authority would be at liberty to pass orders strictly in accordance with law.

Order pronounced in the open court on 30^th September,2024.