Income Tax Appellate Tribunal - Mumbai
S&D Chemicals Ltd.,C/O. Azelis Uk Ltd, ... vs Assistant Commissioner Of Income Tax, ... on 16 March, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
"I" BENCH MUMBAI
BEFORE HON'BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER &
HON'BLE SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER
ITA No. 2180/Mum/2025
(Assessment Year: 2019-20)
M/s S&D Chemicals Ltd. Vs.
Assistant Commissioner
Flat No. B-3, JK Villa, of Income Tax - 4 (2)(1)
Soorya Apartments, New No. International Tax -
2 , Cross Street, Srinagar 4(2)(1)
Colony, Saidapet, Chennai- 17 th floor, Air India
600015 Building, Nariman
Point Mumbai
PAN/GIR No. AABCS4433M
(Applicant) (Respondent)
Assessee by None
Revenue by Shri Krishna Kumar (SR. DR.)
Date of Hearing 17.02.2026
Date of Pronouncement 16.03.2026
आदे श / ORDER
PER SANDEEP GOSAIN, JM:
The present appeal has been filed by the assessee challenging the impugned order 06.01.2025 passed u/s 147 r.w.s. 144 of the Income Tax Act, 1961 ('the Act'), by the Income Tax Circle 4(2)(1), Mumbai for the assessment year 2019-20. The following grounds are reproduced below:
"1. General 2 ITA No. 2180/Mum/ 2025 1.1. The final assessment order of the Assistant Commissioner of Income Tax, Assessing Officer (hereinafter referred to as "AC") pursuant to the directions of the Dispute Resolution Panel -2 (hereinafter referred to as "DRP"), is contrary to law, facts and circumstances of the case.
2. Reopening is Invalid.
2.1. The reopening is invalid and without jurisdiction and as such it is liable to be set aside.
2.2. The Notice under section 148 is Issued by the JAO in a non-faceless manner and as such it is bad in law, 2.3. The AO/DRP erred in not appreciating that reopening is not valld in the absence of escapement of income.
3. Remittance of surplus funds to head office regarded as unexplained investment under section 69 of the Act amounting to Rs. 2,45,36,997/-
3.1. The AD/DRP erred in law by invoking section 69 of the Act (unexplained investment) without appreciating that the Appellant has merely remitted the surplu s funds to the head office (after remitting appropriate taxes in India) and was not in nature of investment.
3.2. The AD/DRP failed to acknowledge that surplus funds were reported both in financial statements and tax retum of AY 2017-18, and as such the provisions of section 69 are not applicable and unsustainable.
3.3. The AO/DRP failed in deliberating the material available on record that appellant had duly obtained all necessary approvals, Including No Objection Certificate (NOC) from his good office f or closure of the branch office and remittance of surplus funds.
3.4. The AD/DRP failed in appreciating that the Appellant has taken efforts in obtaining bank statement to substantiate the genuineness of the transaction despite the bank account being considered Inoperative.
3.5. The AO/DRP ought to have appreciated that the Appellant was not required to file return of Income for the 3 ITA No. 2180/Mum/ 2025 AY 2019-20 as the operation has been closed in AY 2017 -
18.
4. Purchase of foreign currency amounting to Rs.
2,42,31,672/-
4.1. The AO/DRP erred in adding Rs. 2,42,31,672, as reported by the banker in SFT -008, without recognizing that this amount had already been included In Ground 3, thereby leading to a double disallowance, which violates the principle of natural justice.
4.2. The AO/DRP erred in initiating reassessment proceedings without verifying the accuracy of the transaction reported by the banker In SFT -008, which is meant solely for purchase of shares and is not applicable for purchase of foreign currency.
4.3. The AO/DRP erred in making addition of Rs.
2,42,31,672 on the premise that amount reported In SFT is different from the amount reflected in Form 15CA/CB.
4.4. The AO/DRP failed to appreciate the fact that difference was due to bank and other charges deducted by the barik while remitting the funds to head office.
5. Miscellaneous 5.1. The AO/DRP has erred in treating purchase of foreign currency as Rs. 2,45,36,997/-instead of Rs. 2,42,31,672/-
5.2. The AD has erred in issuing a defective show cause notice without mentioning the proposed variation in Income, rendering the notice invalid and the re -
assessment proceedings unsustainable in law.
5.3. The AO/DRP erred in levying Interest under section 234A, 2348 and 234F of Rs. 2,01,60,935/ -, Rs.
2,66,27,650/- and Rs. 10,000 respectively.
6. The Appellant craves leave to add, alter, amend, substitute and/or modify in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal."
4 ITA No. 2180/Mum/ 20252. At the very outset, we noticed that none appeared on behalf of the assessee when the case was called repeatedly. From the case file, we observed that on the previous dates also adjournments were sought on one ground or another. Even today, no one appeared on behalf of the assessee, whereas the Ld. DR present in the court is ready with the arguments. Therefore, we see no reason to grant an adjournment in the present appeal and have accordingly decided to proceed with the hearing of the appeal ex parte. From the records, we noticed that the assessee had filed an application for admission of additional evidence, the contents of which are reproduced herein below:
Petition for Admission of Additional Evidence The Appellant was established as a Branch Office (BO) in India after obtaining prior approval from the Reserve Bank of India (RBI) on 31st October 2001. It was engaged in the business of import and export of chemicals, which includes pharmaceuticals, cosmetics, and chemical intermediates. The Branch Office was officially closed with effect from 31st March 2017 by obtaining necessary approvals. The same was also intimated to the regulatory authorities. Post closure, the BO did not have any income generating activities and as such there was no necessity to have the accounts audited nor to file its return of income for AY 2018- 19 onwards.
The case was reopened under the provisions of section 147 of the Income Tax Act for AY 2019-20, and the draft assessment order was passed on 30th March 2024 determining the taxable income of Rs. 4,87,68,690 (Receipt of remittance by a non- resident or by a foreign company-Rs. 2,45,36,997 and Purchase of foreign currency-Rs. 2,42,31,672) as unexplained investment under section 69 of the Act. The Appellant filed objections before the Dispute Resolution Panel against the draft assessment order, wherein the DRP has upheld the draft order passed by Assessing Officer (AO) vide its directions dated 5th December 2024. Accordingly, reassessment proceedings were completed by the AO based on the directions passed by DRP vide order dated 6th January 2025, determining the total income of Rs. 4,87,68,689 as unexplained investment under Section 69 of the Act Aggrieved against the said re-assessment order, the Appellant has filed an appeal before the Income Tax Appellate Tribunal ("ITAT"), Mumbai. The Appellant submits that the assessment order is not in accordance with law, and the amounts in 5 ITA No. 2180/Mum/ 2025 question have been legitimately repatriated with the approval of jurisdictional income tax authorities.
In this connection, the Appellant intends to rely on certain additional evidence, other than those submitted before the AO/ DRP during the course of reassessment /DRP proceedings. The additional evidence which the Appellant intends to submit, and the reasons for filing such additional evidence are as follows:
1. SBI Belapur Branch Letter dated 12th April 2018 for repatriation of surplus funds (Refer Annexure 1 and Grounds of appeal No.: 3.1, 4.3 & 4.4.) We submit that during the course of reassessment proceedings, the Appellant submitted all relevant documents to justify the repatriation of surplus funds and demonstrated that the two amounts (Receipt of remittance Rs. 2,45,36,997 and Purchase of foreign currency Rs. 2,42,31,672) relate to the same transaction. These documents included the audited balance sheet explaining the source of funds, Form A2 filed with the AD bank for foreign currency purchase (stating that the beneficiary may not receive the full remittance due to bank charges), Form 15CA/CB, and a No Objection Certificate from the Income Tax Department confirming no outstanding dues and permitting repatriation.
Despite the above, the DRP, in its directions dated 5th December 2024, stated that no evidence was provided to explain the difference between the two amounts. In this regard, to further substantiate our claim, we are now furnishing a letter from the AD bank, confirming the transaction relates to repatriation of closure proceeds, which was also acknowledged by AO while initiating reassessment proceedings under Section 148A for AY 2020-21.
From the letter issued by AD Banker it is evident that the amounts repatriated are only closure proceeds. Further, the difference in relation to the Forex purchased and the remittance amount reported in Form 15CB is only due to the commission/charges deducted by the AD banker before repatriation. Therefore, the enclosed letter serves as a crucial additional evidence explicitly confirming the actual fact that the amount repatriated is nothing but what was lying the account as accumulated inward remittances over a period of time, which is now repatriated as closure proceeds.
2. Copies of relevant extracts of audited balance sheet and income tax returns since Branch Office inception, substantiating cumulative Head Office balance in Branch books. (Refer Annexure 24 & 2B and Grounds of Appeal No.: 3.1 & 3.2) We submit that the Liaison Office was converted into a Branch Office in 2001, and the closing balance of Rs. 30,34,069 in the Liaison Office books was duly transferred to the Branch Office. Thereafter, the Head Office made regular remittances to India to support Branch operations, which was duly reflected in the audited financial statements for the relevant financial years. During the year ended 31 March 2017, the Branch Office had a bank balance of Rs. 2,39,04,047, reflecting funds to be remitted to Head Office recorded in the Branch Office's books. The bank account remained active in order to receive outstanding income tax refunds. Subsequently, Rs. 2,45,36,997 comprising the Head office balance and income tax refunds was repatriated to the Head Office.
6 ITA No. 2180/Mum/ 2025We submit that during the course of reassessment proceedings (including DRP proceedings), the Appellant furnished all necessary documentation (as detailed in Point 1) to establish that the remittance was a legitimate repatriation of capital funds and hence, it is not a taxable income in India. However, the DRP, vide its directions dated 5th December 2024, erroneously held that no documentary evidence were provided and that the source of funds remained unexplained. In this regard, to further substantiate our claim, we furnish herewith details of the amounts received from the Head Office since the inception of the Branch Office, along with the cumulative balance lying in the books of the Branch Office as of 31st March 2017 in the below mentioned table.
*Balance as at 31 March 2017-Rs. 2,39,04,047 (2,43,99,037 less 4,94,990 (loss of FY 2016-17)) This evidence clearly demonstrates that the repatriated amount represents only the Head Office balance lying in Branch Office, rather than any revenue receipts or income, and was duly repatriated to the Head Office upon the closure of the Branch Office. Accordingly, the said amount does not constitufe taxable income.
3. Mail Correspondence with AD Banker and Order under Section 148A(3) for AY 2020-21 (Refer Annexure 3 & Annexure 4; Grounds of Appeal No. 3.4) 7 ITA No. 2180/Mum/ 2025 The said email communication with AD Banker clearly demonstrates Appellant's continuous efforts to obtain the bank statements during the reassessment proceedings for AY 2019-20, which could not be furnished earlier due to the closure of its Indian Branch Office in 2017 and the dissolution of the UK Head Office in 2021, resulting in the inability to meet KYC requirements. These circumstances were beyond the Appellant's control and led to the non-submission of the required documents.
Subsequently, AO passed an order under section 148A(3) of the Act for AY 2020-21, which includes the same transaction which was already under dispute in the present appeal. As part of the 148A proceedings, a notice under section 133(6) was issued to SBI Bank on 30.04.2025 seeking the bank statement for the period 01.04.2018 to 31.03.2020, to which the bank responded on 03.05.2025. Upon reviewing the bank statement, the AO observed that only one debit transaction of Rs. 2,42,34,521 occurred on 19.04.2018, pertaining to AY 2019-20. Relevant extract of the said order is reproduced below for your reference:
"To verify the claim, a notice u/s 133(6) of the Act was issued to State Bank of India, Belapur Bhavan Branch, Navi Mumbai on 30.04.2025, calling for the bank statement for the period from 01.04.2018 to 31.03.2020. The bank submitted its response on 03.05.2025. On perusal of the bank statement, it is observed that the assessee has brought forward balance in the relevant account of Rs. 2,45,36,348/- and a debit transaction of Rs. 2,42,34,521/-occurred on 19.04.2018 and of Rs. 2,367/-on 18.05.2018 and closing balance as on 31.03.2020 is of Rs. 2.98,162/- The assessee has also submitted a letter by the SBI bank, dated 12.04.2018, with a subject- repatriation of closure proceeds of branch office to principal amounting to Rs. 2,45,36,997/-"
From the above, it is clearly established that the remittance of Rs. 2,45,36,997 and the corresponding purchase of foreign currency of Rs. 2,42,31,672/- (as per SFT data) pertain to the same transaction executed in AY 2019-20. Treating these as two separate unexplained investments under Section 69 of the Act leads to erroneous addition which is factually incorrect and legally untenable. The order passed under Section 148A(3), following independent verification by the AO, substantiates the Appellant's contention that there was only a single legitimate repatriation of the Head Office balance lying in the Branch Office's books, and further corroborates that the transaction is not taxable income but a capital repatriation upon closure of the Branch Office, duly supported by Form 15CA/CB, RBI approvals, and audited financials.
In light of the above, the Appellant respectfully prays that the Hon'ble ITAT may kindly be pleased to admit the above-mentioned additional evidences which goes to the root of the matter and may be considered while adjudicating the appeal. The Appellant further prays that the Hon'ble Tribunal may take the additional evidence into account and pass such order as may be deemed fit and proper in the interest of justice.
Place: Mumbai For S&D Chemicals
Limited
8 ITA No. 2180/Mum/ 2025
3. Ld. DR submitted that the documents now being filed by the assessee by way of additional evidence may not be admitted, as the assessee had not filed these documents at the proper time before the Revenue Authorities. In the alternative, it was also argued that in case these documents are admitted at this stage, then in that eventuality the matter be restored back to the file of the AO for verification.
4. We have heard the Ld. DR and perused the material placed on record. We noticed that the assessee has specifically mentioned that he wants to place on record documents in the shape of a letter dated 12.04.2018 of SBI Belapur Branch for repatriation of surplus funds and also wants to place on record copies of relevant extracts of the audited balance sheet and income tax returns since the branch office's inception in order to substantiate the cumulative head office balance in the branch books, email correspondence with the AD Banker, and the order passed u/s 148A(3) for AY 2020-21.
5. In our view, these documents are necessary for adjudicating the controversy in the present case and goes to the root of the matter. They are essential for reaching to a legitimate conclusion and, therefore, placing reliance upon the decision of CIT vs. Text Hundred India Pvt. Ltd. (2011), Velji Deoraj & Co. v. Commissioner Of Income-Tax (1968) 68 ITR 708 (Bomb), we allow the application filed by the assessee for admission of additional evidence 9 ITA No. 2180/Mum/ 2025
6. Consequently, the documents filed by the assessee are allowed to be taken on record as additional evidence. Since we have allowed the application for leading additional evidence, we set aside the order passed by the Ld. CIT(A) and restore the matter to the file of the AO for verification of the additional evidence and to pass a fresh order.
7. Before parting, we make it clear that our decision to restore the matter back to the file of AO shall in no way be construed as having any reflection or expression on the merits of the dispute which shall be adjudicated by AO independently in accordance with law.
8. In the result, the appeal filed by the assessee stands allowed with no order as to cost.
Order pronounced in the open court on 16.03.2026
Sd/- Sd/-
(PRABHASH SHANKAR) (SANDEEP GOSAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated 16/03/2026
आदे श की प्रतितिति अग्रेतिि/Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. सं बंधित आयकर आयु क्त / The CIT(A)
4. आयकर आयु क्त(अपील) / Concerned CIT
5. धिभागीय प्रधतधिधि, आयकर अपीलीय अधिकरण,मु म्बई/ DR, ITAT, Mumbai
6. गार्ड फाईल / Guard file.10 ITA No. 2180/Mum/ 2025
/ आदे शानुसार BY ORDER, सत्याधपत प्रधत //True Copy// उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai