PATKAI PLASTICS PRIVATE LIMITED,DIBRUGARH vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, DIBRUGARH

The present appeal is directed at the instance of the assessee against the order of the learned Commissioner of Income Tax (Appeals) – Dibrugarh, (hereinafter the “ld. CIT(A)”) dt. 16/01/2019, passed u/s 250 of the Income Tax Act, 1961 (“the Act’), for Assessment Year 2009-10. 2. The assessee has raised the following grounds of appeal:- “1. For that the learned A.O. is not justified in making addition u/s 68 of the I.T. Act, 1961 of Rs.22,00,000/- even when the said amount was recorded in the books of accounts (as detailed in assessment order) and A.O. has computed the income without rejecting books of accounts.

Brief facts of the case are that the assessee is a private limited company engaged in pipe supply and installation work. Survey u/s 133A of the Act was conducted on 10/02/2015 at the business premises of the assessee. Thereafter, filed return of income declaring income of Rs.41,01,290/- for the Assessment Year 2015-16 on 27/09/2015. Case selected for scrutiny through CASS followed by notice u/s 143(2) and 142(1) of the Act. So far as the issue under consideration regarding addition of Rs.22,00,000/- made by the Assessing Officer u/s 68 of the Act is concerned, the ld. Assessing Officer noticed that during the course of survey, the team unearthed concealed income of Rs.22,00,000/- in the form of bogus share application money from fictitious persons. Since no specific disclosures were made in the income tax return for the said sum, the ld. Assessing Officer made the addition. 3.1. When the assessee carried the matter before the ld. CIT(A), stating that the assessee has offered the alleged sum by reducing its expenditure, in other words against the actual expenditure of Rs.66,61,203/-, the assessee has only claimed Rs. 44,61,203/- and in this manner, the alleged sum has been offered to tax. However, the ld. CIT(A) was not satisfied with this arguments and he confirmed the addition observing as follows:- “5.3 I have carefully considered the matter. As stated earlier, entries in the form of share application money were found in the cash book of assessee in course of survey u/s 133A. Entries were made in the months of April and May, 2014 i.e., in the initial months of the Financial year. When survey was Assessment Year: 2015-16 M/s. Patkaai Plastics Private Limited 3 conducted on 10.02.2015, i.e., towards the close of the financial year, assessee was unable to substantiate the entries regarding share application money. Hence, the same was offered as income from other sources in a statement recorded in course of survey. In course of appeal proceeding, the A/R heavily argued that the books of accounts were examined and accepted by the AO. Therefore, the AO was contradicting himself in resorting to addition. This contention of the appellant is not acceptable. The AO had specifically mentioned that expenses claimed were supported mainly by internal debit vouchers-only. Because of this fact, he had rejected the contention of assessee regarding adjustment of undisclosed income with additional expenses claimed. On examination of ledger for labour wages, it is seen that what was claimed in P & L Account was Rs. 39,21,037/-. Claim of assessee is that labour wages actually incurred was Rs. 42,36,009/-. The excess of Rs. 42,36,009/- over what was claimed in P & L Account was stated to be adjusted with unexplained cash deposit of Rs. 22,00,000/-. The explanation given lacks in credibility. The seven heads of expenses are mainly in the nature of small frequent payments mainly incurred in cash. They were paid in cash only. As the AO stated in his order, the payments were supported by internal vouchers only. 5.3.1 Survey u/s 133A was conducted on 10.02.2015 is towards the end of the Financial Year. The appellant had no evidence to show that details of expenses claimed under labour wages, fooding expenses, carriage outward, fuel & lubricants, misc. expenses, printing and stationery, repairs & maintenance as well as travelling expenses were already available at the time of proceeding u/s 133A. Bogus additional expenses can always be booked especially when vouchers are self-generated. The stand taken by appellant is not acceptable in view of facts and circumstances of the case.”

Aggrieved the assessee is now in appeal before this Tribunal.

The ld. Counsel for the assessee took us through the ledger account placed at page 7 to 42 indicating that in various heads of expenditure at the year and a specific amount has been apportioned towards the surrendered income of Rs.22,00,000/-on account of fictitious share capital. Reference was also made to the audited financial statements in support of the contention that the income unearthed during the course of survey has been offered to tax. On the Assessment Year: 2015-16 M/s. Patkaai Plastics Private Limited 4 other hand, the ld. D/R, argued supporting the orders of the lower authorities. 6. We have heard rival contentions and perused the material placed before us. 7. The assessee is aggrieved with the finding of the ld. CIT(A) confirming the addition of Rs.22,00,000/- made by the Assessing Officer u/s 68 of the Act towards the bogus share capital unearthed during the course of survey carried out u/s 133A of the Act on 10/02/2015. We notice that during the proceedings before the lower authorities and before us, the assessee has stated that the amount of ₹ 22 lakhs, towards undisclosed income has been offered to tax, not directly offering the said sum in the profit and loss account but indirectly by reducing the expenditure claimed. Reference was made to the following chart which has been filed by the assessee:-

Since in the instant case, the Assessing Officer has not rejected the book results and has not found any discrepancy in the books of account regularly maintained by the assessee, we are of the considered view that since the alleged sum of ₹ 22 lakhs has already been offered to tax by way of claiming reduced expenses, sustaining of the Assessment Year: 2015-16 M/s. Patkaai Plastics Private Limited