2026 (1) TMI 687 - AT - Income Tax

Unexplained money characterised as Shroff business: ITAT orders fresh verification and directed AO to afford further hearing and decide afresh

The text addresses taxation of unexplained credits alleged to arise from a Shroff business and the evidentiary burden on the assessee to prove ... Unexplained money u/s. 69A as taxed u/s.115BBE - Characterization as Shroff business - assessee explained that it has been engaged in the Shroff business and earning commission income by issuing cheques to various parties, wherein the parties returned the money within short period along with his commission - CIT(A) who restricted the addition at 1% of the total credit and also chargeable at normal provisions of the Act being the commission income earned by the assessee - HELD THAT:- CIT(A) failed to verify whether the assessee obtained statutory license to run the Shroff business?; Why the assessee not filed the regular Return of Income? and what is the Return of Income for the previous year or subsequent year, whether that includes this Shroff business income. Thus without making any such verification Ld. CIT(A) considered the transaction as Shroff business of the assessee and restricted the addition to 1% of the total credits in the bank account, which in our considered view is not correct proposition of law more particularly assessee has never filed the Return of Income. Thus the conclusion arrived by the Ld. CIT(A) is against the provisions of law. Therefore we hereby set-aside the order passed by Ld. CIT(A) with a direction to the Jurisdictional Assessing Officer to give one more opportunity of hearing to the assessee to establish its case whether genuine Shroff business was conducted by the assessee for the present assessment year and pass orders in accordance with the provisions of law. Appeal filed by the Revenue is treated as allowed for statistical purpose. Issues: Whether the CIT(A) was correct in restricting the addition to 1% of total bank credits by treating the transactions as Shroff business without verifying licence, prior or subsequent returns and without affording further opportunity to the assessee; and whether the appellate order should be set aside and remitted for fresh consideration.Analysis: The Tribunal noted that the assessing officer made additions treating large bank credits as unexplained and charged under special provisions. The CIT(A) reduced the addition to 1% treating the receipts as commission in a Shroff business, but did so without verifying whether the assessee held statutory licence for such business, why regular returns were not filed, and without examining earlier or later returns to confirm the business nature. The Tribunal observed that the appellate conclusion was reached without necessary verification and that the assessee repeatedly failed to prosecute the appeal and did not appear despite service. The Tribunal therefore found the CIT(A)'s factual and legal basis for restricting the addition insufficient and remitted the matter to the Assessing Officer to give the assessee another opportunity and to decide after proper verification in accordance with law.Conclusion: The CIT(A)'s order restricting the addition to 1% is set aside; the matter is remitted to the Jurisdictional Assessing Officer for further opportunity and verification and fresh decision in accordance with law. The Revenue's appeal is allowed for statistical purposes.