SAR LAYOUT PLANNERS PRIVATE LIMITED,RATNAGIRI vs. DEPUTY COMMISSIONER OF INCOME TAX,CIRCLE-1,KOLHAPUR, KOLHAPUR

This appeal by the assessee arises out of the order dated 28-12-2022 passed by the CIT(A) in National Faceless Appeal Centre, Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2017-18.

The only ground involved in this appeal is against the confirmation of addition of Rs.15.90 lakh made by the Assessing Officer (AO) u/s.68 of the Act.

At the outset, the ld. AR submitted that the part of the ground concerning the challenge to the confirmation of addition of Rs.90,000/- was not pressed. The same is, therefore, dismissed as not pressed.

Coming to the remaining addition of Rs.15.00 lakh, the factual matrix is that the assessee deposited cash of Rs.15.00 lakh in his bank account. On being called upon to explain the source of the amount, the assessee submitted that cash of Rs.15.00 lakh was received from Kokan Hill Farms as a business advance. The AO called upon the assessee to furnish the ledger account of Kokan Hill Farms corresponding to the total revenue of Rs.37,64,683/- claimed to have been received from it. The AO also requested the assessee to furnish the detail of nature of services and also the Permanent Account Number (PAN) of Kokan Hill Farms along with their Profit and loss account and Balance sheet for the year under consideration and two earlier years. The assessee furnished a letter in response to the AO’s requisition stating that the services offered to Kokan Hill Farms were liasoning work, construction work liasoninig which involved demarcation of plot, NA work, 7/12 extract submission, town planning submission work etc. The assessee also furnished PAN of Kokan Hill Farms along with confirmation from Ms. Snehal Santosh Chavan, proprietor of Kokan Hill Farms, to the effect of having given business advance of Rs.15.00 lakh to the assessee. The AO found some deficiency in the PAN mentioned in the confirmation, which was duly explained that, inadvertently, the PAN of the proprietor’s husband was mentioned. The correct PAN was submitted. The AO did not further dispute the PAN controversy. He perused the return of income filed by Ms. Snehal Santosh Chavan, proprietor of Kokan Hill Farms for the year under consideration and found that income only of Rs.3,47,144/- was shown after deduction of certain expenses. Nature of income shown in such return was `Commission’. In the absence of Ms. Snehal Santosh Chavan showing payment of Rs.15.00 lakh as advance to the assessee in her return of income, the AO made addition for such sum u/s.68 of the Act. The ld. CIT(A) affirmed the addition, against which the assessee has approached the Tribunal.

Having heard the rival submissions and gone through the relevant material on record, it is seen that the assessee submitted confirmation from Kokan Hill Farms to the effect that a sum of Rs.15.00 lakh was paid in cash during the period 21-10-016 to 08-11-2016 against contract assigned to the assessee for carrying out land development, liasoning and other construction works in relation to their site at Rehale Bhagadi, Chiplun, Ratnagiri. A copy of such confirmation has been placed at page 17 of the paper book. The AO examined the Income-tax return of Ms. Snehal Santosh Chavan, proprietor of Kokan Hill Farms and found that the amount of Rs.15.00 lakh shown by the assessee as trade payable was not shown by her as receivable in the detail of assets. On this basis, he proceeded to make the addition u/s.68 of the Act. On one hand, there was confirmation before the AO from Ms. Snehal Santosh Chavan that she gave trade advance of Rs.15.00 lakh to the assessee and on the other there was Income-tax return of Ms. Snehal Santosh Chavan not indicating disclosure of business advance of Rs.15.00 lakh having been given to the assessee. Without carrying out further investigation as to which of the two versions was correct, the AO simply rejected the confirmation and proceeded to decide on the basis of the Income-tax return that no amount of cash was given by Ms. Snehal Santosh Chavan to the assessee. In my considered opinion, this course of action is not known to law. If there are two conflicting evidences before the AO – one supporting the case of the assessee and other of the Revenue – then, before accepting the evidence in favour of the Revenue, it becomes duty of the AO to establish as to how the evidence supporting the assessee’s stand is not correct. He needs to controvert the veracity of such an evidence.

Adverting to the facts of the instant case, it is found that the AO simply chose to go with the income-tax return of Ms. Snehal Santosh Chavan, not depicting the amount receivable from the assessee, in disregard to the confirmation given by her of having given business advance to the assessee. Before reaching any conclusion, he ought to have examined Ms. Snehal Santosh Chavan, proprietor of Kokan Hill Farms to find out whether her confirmation was correct or the return not showing the amount paid. Nothing of the sort has been done in this case, which vitiates the one-sided view of the AO.

Further, the advance of Rs.15.00 lakh received by the assessee during the year under consideration was adjusted against the work done by the assessee in the immediately succeeding year ending on 31.3.2018. A copy of ledger account of Kokan Hill Farms for such year has been placed on record with opening balance of Rs.15.00 lakh adjusted against ‘Works contract receipts’ of equal amount leaving closing balance at Nil. It is further borne out from the record that the first notice u/s 143(2) was issued to the assessee on 13.08.2018, which is much prior to completing the work by the assessee.

In the given facts and circumstances of the case, I am satisfied that the addition was wrongly made and sustained. I, therefore, overturn the impugned order on this score.

In the result, the appeal is partly allowed. Order pronounced in the Open Court on 26th July, 2023.