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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI
ORDER This is an appeal by the assessee against order dated 26.02.2020 of Learned Commissioner of Income-Tax (Appeals)-25, New Delhi for the assessment year 2016-17.
The dispute in the present appeal is confined to addition of an amount of Rs.2,15,340 made under Section 44AD of the Act.
Briefly, the facts are that the assessee is an individual engaged in the business of trading in leather products and readymade garments.
For the assessment year under dispute, assessee filed his return of income on 26.7.2016 declaring income of Rs.3,36,286.
In course of assessment proceeding, the Assessing Officer, while verifying the material on record, noticed that in the year under consideration, the assessee has exported goods worth Rs.25,03,399.
Therefore, he called upon the assessee to furnish necessary details and explain why such receipts should not be treated as income of the assessee. In response to the query raised, the assessee accepted that he had made exports of the amount in question and furnished copy of draft bill of lading. Alleging that the assessee failed to furnish any other information, the Assessing Officer treated 50% of the export value as his income and the rest 50% as the expense incurred by him for purchasing the exported goods. Thus, in effect, he added back the amount of Rs.25,03,399 representing the export value of goods.
Assessee contested the aforesaid addition by filing appeal before Learned Commissioner (Appeals). Partly accepting the contention of the assessee, Learned Commissioner (Appeals) held that the entire amount relating to export of goods cannot be added but profit estimated at 10% of the export value of the goods is to be added.
Accordingly, he restricted the addition to Rs.2,50,340.
I have heard Ms. Sumangla Saxena, learned counsel appearing for the assessee and Shri Om Prakash, learned Departmental Representative. Though, it is a fact that in the year under consideration, the assessee had exported goods worth Rs.25,03,399 to a party in Trinidad & Tabago, however, before Learned Commissioner (Appeals), the primary contention of the assessee was to the effect that the assessee follows cash system of accounting and in the year under consideration, he has not received any amount towards the export of goods. The assessee had submitted that after much persuasion, the assessee could receive part of the payment i.e. USD 20,000 on 30th May 2019 and the amount was offered to tax in the relevant assessment year. Of course, the assessee took an alternative argument to the effect that in worst case, the addition can be made under Section 44AD of the Act. As it appears, Learned Commissioner (Appeals) while completely ignoring the primary contention of the assessee has accepted the alternative contention by restricting the addition to 10% of the export value. This, in my view, is totally unjustified. When assessee’s claim that he is following cash system of accounting and no part of the export sales was received during the year is not controverted, no addition, even, on presumptive basis should have been made. More so, when it is the case of the assessee that the part payment in respect of exported goods received in assessment year 2020-21 has been offered to tax in the said assessment year.
In view of the aforesaid, I do not find any valid reason to uphold the addition of Rs.2,50,340 sustained by Learned Commissioner (Appeals). Accordingly, the addition is deleted.
In the result, the appeal is allowed.