RITU ROAD LINES,JODHPUR vs. DCIT, CENTRAL CIRCLE-02, JODHPUR

आदेश/ ORDER

PER DR. DIPAK P. RIPOTE, AM:

are as under :

1. The ld.CIT(A) has erred in upholding the order passed by Id. AO u/sl43(3) without appreciating the facts of the case. The order so made is bad in law and bad on facts.

3. The ld.CIT(A) has erred in upholding the Id. AO’s addition of Rs.90,140/- on for alleged unaccounted spare parts. The addition so made is bad in law and bad on facts.

4. The ld.CIT(A) has erred in uploading the Id. AO’s action in charging tax under section 115BBE on sale of scrap estimated.

5. The ld.CIT(A) has erred in uploading charging of interest under section 234B.

Brief facts of the case : 2. In this case, the assessee had e-filed Return of Income on 28.10.2018 declaring loss of Rs.28,74,639/-. There was a search in Ritu Group on 14.03.2018. During the search, residential premises of Shri Hitendra Goyal and Smt.Kavita Goyal were also covered under section 132 of the Act.

2.1 The Assessing Officer(AO) has made addition of Rs.15 lakhs and Rs.90,140/- to the total income of the assessee. The relevant para 6 & 7 of the assessment order are reproduced hereasunder : “6. During the course of assessment proceedings, statement of Shri Hitendra Goyal, partner of the assessee firm were recorded. In his statement, Shri Hitendra Goyal, Partner of the assessee firm admitted to surrender Rs. 15,00,000/- undisclosed income on account of scrap sale. However, the assessee has not declared the same in return of income filed u/s 139 of the I.T. Act, 1961. Accordingly, vide order sheet entry dated the assessee was asked to asked to show cause why the same should not be treated as undisclosed income and added to the total income and taxed accordingly.

In response to the same, vide reply dated 29.12.2019, the assessee has submitted as below:

“As regards scrap sales of Rs. 15,00,000/- is concerned, it is submitted that this is again an estimated income without any martial evidence found during the course of search. No material was found to suggest any such sale being made by the assessee. Normally the old parts given in exchange and even for tyres. When the new tyres are purchased, old tyres are given in exchange for which the price of new tyre is being reduced. Sometimes the old tyres are being alos used in retrade and the same are being used as additional / extra wheel. Therefore there would be no basis to estimate this income. Alternatively this may be taken as out of business income of Ritu Roadlines. ” The submission of the assessee has been taken into consideration, however, the same is not found satisfactory. Although the income of Rs.15,00,000/- on account of scrap sale was admitted to be surrendered during the search proceedings, however, the same is not disclosed by the assessee in return of income for the year under consideration. Since the assessee has agreed to the said addition, accordingly, the amount of Rs.15,00,000/- is being treated as undisclosed business income and added to the total income of the assessee. Since, the assessee has under reported its income for the year under consideration by not disclosing the same in its return of income, Penalty proceedings u/s 270A(1) of the Income Tax Act are also being initiated separately. (Addition of Rs.15,00,000/-)

spare parts amounting to Rs. 90,140/- from the premise of the assessee. Shri Hitendra Goyal, Partner of the assessee firm, in his statement, admitted to surrender Rs. 90,140/- undisclosed expenditure on account of unexplained purchase of spare parts. However, the assessee has not declared the same in return of income filed u/s 139 of the I.T. Act, 1961. Accordingly, vide order sheet entry dated 27.12.2019, the assessee was asked to asked to show cause why the same should not be treated as undisclosed income and added to the total income and taxed accordingly.

In response to the same, vide reply dated 29.12.2019, the assessee has submitted as below:

“No material or paper was found during the course of search to indicate any such purchase. The assessee is having large fleet of vehicles and regularly purchases are being made. Simply on the basis of physical spare parts found in the premises it cannot be concluded that the same is not recorded in the regular books of the assessee. During the course of search the amount of Rs. 90,140/- was determined on this account. Your honour may verify the purchase of spare parts in various concerns, which is running in lakhs and the alleged surrender of such amount is apparently unjustified, incorrect and without any basis, Altenatively the same may be taken out of business income of Ritu Roadlines. ”

The submission of the assessee has been taken into consideration, however, the same is not found satisfactory. Although unexplained investment of Rs. 90,140/- on account of unexplained purchase of spare parts was admitted to be surrendered during the search proceedings, however, the same is not disclosed by the assessee in return of income for the year under consideration. Since the assessee has agreed to the said addition, accordingly, the amount of Rs. 90,140/- is being treated as unexplained investment u/s 69 of the Income Tax Act and added to the total income of the assessee and subjected to tax as per the provisions of section 115BBE of the Act. Penalty proceedings u/s 271AAC are being initiated separately on this issue. (Addition of Rs. 90,140/-)”

Addition of Rs.15 lakhs : 5.1 The Assessing Officer has made addition of Rs.15 lakhs exclusively on the basis of so-called statement of the partner of the assessee-firm. It is alleged by the AO, that during the year assessee had sold scrap which was generated in the business of Ritu Road Lines and assessee had not offered any income in the Return of Income on account of sale of so-called scrap. Assessee explained that whenever new tyres are purchased, old tyres are given in exchange which results in reduction of costs. However, neither the AO, nor the ld.CIT(A) has reproduced the so-called statement of the partner Mr.Hitendra Goyal. The AO has not rebutted the explanation filed by the assessee. No document was found to denote the so-called sale of scrap. In these facts and circumstances of the case, we are of the considered opinion that the addition is based on surmises and conjectures without any basis. Hence, Assessing Officer is directed to delete the addition of Rs.15,00,000/-.Accordingly, Ground No.2 raised by the assessee is Allowed.

Addition of Rs.90,140/- : 6. During the search, excess physical stock of spare parts of Rs.90,140/- was found in the premises. It was also observed that same was not recorded in the regular books. The AO asked assessee to file an explanation. However, assessee merely stated that in this business spare parts of lakhs of rupees are purchased and the difference is miniscule. However, it is a fact that excess physical stock of spare parts of Rs.90,140/- was found and it was also not recorded in the regular books of accounts. The assessee has not offered a proper explanation. In these facts and circumstances of the case, the addition of Rs.90,140/- is upheld. Accordingly, Ground No.3 raised by the assessee is Dismissed.

Ground No.4 : 7. Assessing Officer had charged tax under section 115BBE of the Act for the additions made. The AO had invoked section 69 for making addition of Rs.90,140/-. It is the fact that excess stock of spare parts was found which was not recorded in the books. It means assessee had invested Rs.90,140/- in purchase of the said stocks. This investment is not reflected in the books of accounts. It means the said investment is unexplained investment. Therefore, AO has rightly invoked section 69 of the Act and section 115BBE of the Act. Section 115BBE is applicable whenever there is an addition under section 68, 69, 69A, 69B, 69C and 69D. Therefore, we uphold Assessing Officer’s action of invoking provisions of section 115BBE. Accordingly, Ground No.4 of the assessee is dismissed.