KESOT TRADING CO. JALLANDHAR PVT. LTD.,HOOGHLY vs. A.C.I.T.,CIRCLE-23(1), HOOGHLY

At the time of hearing, we notice that the appeal is barred by limitation by 102 days. The Ld. Counsel for the assessee has filed condonation petition and submitted that all the relevant papers, evidence and orders having been retained by the erstwhile Counsel who did not file the appeal in time nor returned the documents and thus the Assessment Year: 2014-15 Kesot Trading Co. Jallandhar Pvt. Ltd. appeal got time barred. The ld. Counsel for the assessee also submitted that the assessee was constrained to procure the same with the assistance of some other professional accountant. After perusing the condonation petition we find that it is a reasonable cause to condone the delay of filing the appeal. Accordingly we condone the delay of 102 days and admit the appeal for adjudication.

The only effective issues are raised by the assessee in the various grounds of appeal is against the order of Ld. CIT(A) upholding the disallowance as made by the AO @ 20% of the reimbursement of expenses as made by the AO without rejecting books of account.

Facts in brief are that the assessee filed return of income on 26.09.2014 declaring total income of Rs. 2,95,000/-. The case of the assessee was selected for scrutiny under CASS and assessment order was passed u/s 143(3) of the Act on 18.11.2016. Thereafter the case of the assessee was reopened u/s 148 of the Act on 15.11.2017 which was complied with by the assessee by filing return of income on 03.09.2018 declaring total income of Rs. 2,95,000/-. The reasons for reopening the assessment was that there was difference between the gross receipt as per Form 26AS and as per profit and loss account of Rs. 60,60,540/- resulting into escapement and underassessment of income to the tune of Rs. 21,28,803/-. During the course of assessment proceedings, the assessee filed reconciliation of this difference before the AO which extracted is as under:

In the appellate proceedings, the Ld. CIT(A) allowed the appeal in respect of addition made of Rs. 9,02,730/- whereas the second addition of Rs. 4,25,553/- was affirmed. The revenue has not challenged the deletion of addition of Rs. 9,02,730/- whereas the assessee has preferred an appeal challenging the confirmation of addition before us.

After hearing the rival contentions and perusing the material on record, we find that the addition was just based upon the conjectures, estimation and guess work of the AO. We note that this amount was received by the assessee from Birla Tyres byn way of re-imbursement in terms of the agreement under which the assessee was to be reimbursed the expenses incurred by it on behalf of the principal. During the year, the assessee incurred Rs. 21,27,764/- which were reimbursed by the principal. We note that these expenses were not charged into profit and loss account of the assesseeand whatever receipts/bills were received were in fact forwarded to the principal for making the reimbursement. Under these circumstances, we are not in agreement with the conclusion drawn by the Ld. CIT(A) on this issue. The Ld. CIT(A) affirmed the order of AO merely on the ground that reimbursement have to be supported with bills and vouchers by simply ignoring the agreement with the principal. We have also perused the agreement of the assessee with principal which provides for reimbursement of expenses incurred by the assessee on behalf of principal. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to delete the addition.