Detailed Analysis and Outcome of ITA No.1613/DEL/2022: Legend Transport Solutions Pvt. Ltd. vs ITO – A Case of Alleged Undisclosed Business Income
In an intriguing decision by the Income Tax Appellate Tribunal Delhi Bench ‘E’, New Delhi, ITA No.1613/DEL/2022 was a notable case for the assessment year 2016-17, involving Legend Transport Solutions Pvt. Ltd., a company headquartered in New Delhi and the Income Tax Officer, Ward-15(2), New Delhi. This case revolved around the critical examination of undisclosed business income, bringing to light the complexities of taxation law and its enforcement in India.
Introduction
The case was filed against the order of the CIT(A)/National Faceless Appeal Centre (NFAC), New Delhi, dated 20.05.2022, which pertained to the assessment year 2016-17. The appellant, Legend Transport Solutions Pvt. Ltd., challenged the assessment completed at a higher figure based on what they argued were incomplete and inadequate inquiries by the Assessing Officer (AO), solely relying on unverified material supplied by a third party. The appeal sought justice and a fair assessment as per the law, arguing that natural justice was violated.
Background of the Case
Legend Transport Solutions Pvt. Ltd., served as a service provider of cab facilities to various multinational companies, earning income as cab hire charges. For the relevant assessment year, the company filed its return of income on time, reporting an income of Rs. 22,01,779/-. However, the case was selected for scrutiny, leading to a series of allegations and adjustments that culminated in the addition of contractual receipts of Rs. 4,85,76,223/- as undisclosed business income, a move contested by Legend Transport Solutions.
Arguments Presented
- The appellant contested the AO’s decision to complete the assessment based on incomplete and inadequate inquiries.
- They argued against the addition based on the frauds committed by a third person in connivance with alleged payer companies, misusing the appellant’s PAN number.
- The addition in the appellant’s hands of amounts it allegedly did not receive was also challenged.
- Finally, the appellant contested the interest liability under sections 234B and 234C of the Income Tax Act, 1961.
Tribunal’s Findings and Judgment
The Tribunal, after hearing arguments from both sides and perusing the records, noted several vital points that led to its decision. It was observed that the appellant had indeed not received the payments claimed by the AO. Moreover, the AO’s reliance on third-party information without proper verification or giving the appellant an opportunity for cross-examination was seen as a failure to adhere to principles of natural justice.
The Tribunal directed the AO to conduct a fresh assessment after properly considering the appellant’s submissions and verifying the facts. This decision highlighted the Tribunal’s commitment to fairness and the importance of thorough inquiries and verifications in the assessment process.
Conclusion
This decision on ITA No.1613/DEL/2022 stands as a testament to the intricate balance between law enforcement and the rights of taxpayers. It underscores the necessity for taxation authorities to conduct assessments with diligence, ensuring that justice is served, and natural justice principles are not overlooked. For Legend Transport Solutions Pvt. Ltd., the Tribunal’s decision allowed for a fair reassessment, providing an opportunity to rectify the disputed income allegations based on solid evidence and proper verification.
