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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 1368/JP/2019
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 1368/JP/2019 fu/kZkj.k o"kZ@Assessment Years : 2016-17 cuke Smt. Nisha Jain The ACIT/DCIT, Vs. 149, Ballabhbari, Gumanpura, Central Circle-1, Kota. Kota. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABLPJ 8118 L vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal jktLo dh vksj ls@ Revenue by : Smt. Runi Pal (ACIT) a lquokbZ dh rkjh[k@ Date of Hearing : 09/12/2020 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 03/02/2021 vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M.
The assessee has filed the present appeal against the order of ld. CIT(A)-II, Udaipur dated 30.09.2019 pertaining to assessment year 2016-17 wherein the assessee has taken the following grounds of appeal:- “1. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 24,69,065/- by treating the expenses claimed to that extent as inflated based on page 97 of Annexure A-8 and statement of husband of assessee which stood retracted by ignoring the audited financial statement.
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The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs. 8,27,656/- being difference between the original return of income and revised return of income by not accepting the contention of assessee that the original return includes the advertisement receipt of Rs. 49,23,773/- billed in the name of Bhagat Singh Public Sr. Sec. School but since the order was not implemented, the same was reduced from receipt with corresponding reduction of the cost of Rs. 40,96,117/- in the revised return resulting into reduction in income by Rs. 8,27,656/- (49,23,773-40,96,117) on the ground that reversal of sales by the assessee remains unsubstantiated.”
During the course of hearing, the ld AR submitted that the assessee is proprietor of Quick Advertising Co. engaged in the business of advertising agency since November, 1989. Return was filed on 16.10.2016 declaring income of Rs.81,73,080/- which was revised on 16.10.2017 at income of Rs.73,45,420/-. A survey was conducted on 02.02.2017 at business premises of Naresh Jain, husband of assessee. During survey certain papers were found marked as Annexure A-8. At Pg 97 of that annexure [copy attached with the order of Ld. CIT(A)] a statement of various expenditure as per audit report and as per Income & Expenditure A/c is noted. On comparison of the amount under these heads, it is found that expenditure as per the audited accounts is higher by Rs.27,91,592/-. Statement of Naresh Jain on this difference is recorded where in reply to Q.No.23 he stated that the paper relates to Quick Advertising Co. and from the look of the paper it is seen that in FY 2016-17 genuine expenses incurred is recorded but in the P&L A/c as per the audit report the expenditure is inflated. Accordingly, he surrendered the same. Sh. Naresh Jain thereafter by filing an affidavit dt. 14.02.2017, i.e. just 12 days after the date of survey retracted from
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such statement after giving detailed reasons for the same as per Para 4-9 of the affidavit. In course of assessment proceedings, assessee filed detailed explanation in respect of each of the expenditure noted on the said paper. The AO, however, by relying on the statement of Sh. Naresh Jain observed that assessee has inflated the expenses which are supported only with self made cash vouchers and thus made addition of Rs.27,91,592/-. The Ld. CIT(A) held that under various heads of expenses where there is variation, they are supported only by internal vouchers and not verifiable independently. The affidavit of Naresh Jain without supporting evidence is only a self-serving document. However, with reference to the variation under the heading “bank interest”, he accepted that expenses noted at Rs.79,56,743/- under the head audit report as against Rs.76,34,216/- noted under the head income & expenditure account is correct and thus, deleted the addition to the extent of Rs.3,22,527/-. Accordingly, addition of Rs.24,69,065/- is confirmed.
In above factual background, the ld. AR submitted that the only basis of addition is the difference between the amount noted under various heads of expenses under the heading as per audit report and as per income & expenditure. The amount noted under the head income & expenditure is prepared some time during the subsequent year and is not the expenditure for the entire year. This is evident from the fact that under the head bank interest the actual expenditure is Rs.79,56,743/- whereas the amount recorded under the head income & expenditure is Rs.76,34,216/-, leaving a difference of Rs.3,22,527/- which is accepted by the Ld. CIT(A). Similarly the amount recorded
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under the head depreciation as per audit report is Rs.9,22,183/- whereas it is Rs.8,20,972/- as per income & expenditure leaving a difference of Rs.1,01,211/-. The claim of depreciation as per audited accounts has been accepted by AO at Rs.9,22,183/-. Hence, the addition to this extent is apparently incorrect. Similarly the difference in the interest expenditure is Rs.34,012/- which is incorrect in as much as the interest is paid either to the bank or to M/s R.C. Jain Invest & Fin Pvt. Ltd. and therefore, it cannot be a case of inflation of expenses. All these instances prove that the amount recorded under the head income & expenditure in the said paper do not reflect the correct expenditure.
It was submitted that the assessee at PB 27-28 has filed a statement giving the reasons as to why there is a variation in the amount noted on the said paper under the various heads as per audit report and as per income & expenditure account. The main reason for such difference is that expenditure incurred at Indore site is not incorporated in the said paper while mentioning the amount of expenditure as per Income & Expenditure A/c. The complete details of these expenditure are at PB 29-62. Only because the expenditure is incurred in cash or is supported only by internal voucher cannot be a basis for alleging the difference as inflation of expenses ignoring that even the expenditure which has been accepted by the lower authorities are also paid in cash and supported by internal vouchers.
It was further submitted that the lower authorities have made/ confirmed the disallowances by relying on the statement of Sh. Naresh Jain without considering the fact that the said statement stood retracted
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immediately after survey and the reasons for the difference has been explained in course of assessment proceedings in which the lower authorities have not pointed out any specific discrepancy after making general observations.
Per contra, the ld. DR relied upon the order of ld. CIT(A) which reads as under:- “4.3.1 The contention that the impounded document, Pg 97, Ann A-8, may have been prepared sometime during the year and not at the year end is contrary to facts. The impounded document contains a column of amount of expenses tilted "As per audit report" and these figures tally with the expenses for the whole F.Y 2015-16, appearing in the audited balance sheet for the F.Y 2015-16. Therefore it is clear that Pg 97, Ann A-8 has been prepared considering position for the entire year. It is also relevant to note that, on sample basis, it is seen that the heads of expenses, under which inflated expenses are noted. such as "Security Service Expenses" of Rs.6,05,280/- and "Travelling Expenses" of Rs.8,23,987/-, have been incurred entirely in cash, are only supported by internal vouchers, and not verifiable independently. 4.23.2 The assessee has relied on the order of the Hon. Supreme Court in the case of Pullangode Rubber Co. Ltd. vs. State of Kerala [1973] 91 ITR 18. On perusal of the cited decision, it is seen that the Supreme Court has held that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect. Any statement recorded under section 133A would have evidentiary value only if supported with materials and form the basis for assessment. The cited decision in fact supports the A.O's , and not the assessee's case, because the
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admission of Sh. Naresh Jain, that inflated expenses were claimed in the audited accounts, is in fact supported by material in the form of the impounded paper, Pg 97, Ann. A- 8. 4.3.3 As regards affidavit of Sh. Naresh Jain dt.14.02.2017, an affidavit, without supporting evidence, is only a self serving document; a person making a stateroath must show with evidence that his statement was wrong. This proposition is supported by the following case law authority- 4.3.4 The Hon. Bombay High Court, in the case Dr. Dinesh Jain, 45 taxmann.com 442 (Bombay), order dt. 24.03.2014, after referring to the decision of the Hon. SC in case of Khader Khan Sons, has held that where loose paper fdund in survey showed receipts in hands of assessee, and assessee admitted same as his undisclosed income but in assessment reverted back from said admission, since he could not furnish evidence to justify his stand, said receipts be treated as undisclosed income of assessee. Thus in the case before Hon. Mumbai HC, even though the assessee had filed a retraction of admission made during survey, addition on the basis of the admission made in survey was upheld because the assessee could not justify the retraction with evidence. 4.3.5 Also, the Hon. Delhi High Court, in the case of Raj Hans Towers (P.) Ltd. Vs CIF, taxmann.com 67 (Delhi), order dt. 27.01.2015, after referring to CIT v. Dhingra Metal Works 328 ITR 384, held that where assessee had not offered any satisfactory explanation regarding surrendered amount being not bona fide and it was also not borne out in any contentions raised before lower authorities, additions so made after adjusting expenditure were justified. 4.3.6 Only with regard to 'Bank Interest", I find that the admission made during the course of survey, by Sh. Naresh Jain (assessee's husband and manager of her proprietorship concern, Quick Advertising Co.) and agreed by the assessee,
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namely that inflated claim of Rs.79,56,743/- was made in the audited accounts, whereas actual expense under this head was Rs.76,34,216/-, i.e excess claim of Rs.3,22,527/-, is controverted with evidence. Therefore, out of addition of Rs. 27,91,592/-, made by the A.0 on account of inflated claim of expenses, addition of Rs. 3,22,527/- is hereby deleted and addition of Rs. 24,69,065/- is sustained. The ground of appeal is thus partly allowed.”
We have heard the rival contentions and perused the material available on record. It has been contended that the assessee has filed a statement before the lower authorities giving the reasons as to why there is a variation in the amount noted on the said paper marked as Annexure A-8 under the various heads as per audit report and as per income & expenditure account and the main reason for such difference is that expenditure incurred at Indore site is not incorporated in the said paper while mentioning the amount of expenditure as per income & expenditure account. We believe that this contention goes to the root of the matter and we hereby direct the Assessing officer to verify the same and thereafter, decide the matter a fresh as per law. In view of the same, rest all contentions are kept open. In the result, the ground of appeal is allowed for statistical purposes.
In Ground no. 2, the assessee has challenged the action of the ld CIT(A) in confirming of the addition of Rs.8,27,656/-, being difference between the original return of income and revised return of income by not accepting the contention of assessee that the original return includes the advertisement receipt of Rs.49,23,773/- billed in the name of Bhagat Singh Public Sr. Sec. School but since the order was not
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implemented, the same was reduced from receipt with corresponding reduction of the cost of Rs.40,96,117/- in the revised return resulting into reduction in income by Rs.8,27,656/- (49,23,773-40,96,117) on the ground that reversal of sales by the assessee remains unsubstantiated.
In this regard, the ld. AR submitted that the AO observed that assessee has filed the return declaring total income of Rs.81,73,080/- but the same was revised on 16.10.2017 at Rs.73,45,420/-. The explanation given for the revision is not convincing because the return was filed after finalizing the audit report. If the order was cancelled, it should have been considered at the time of audit report or it could have been claimed in the next year. Details of cancelled order are not submitted. He therefore, made the addition of Rs.8,27,660/-.
It was submitted that the Ld. CIT(A) confirmed the addition stating that assessee has not furnished any categorical statement from Bhagat Singh Public Senior Secondary School that they have not claimed expenditure of Rs.49,23,773/- in FY 2016-17. Therefore, the reversal of sale of Rs.49,23,773/- and corresponding reversal cost of Rs.40,96,117/- remains unsubstantiated. Accordingly, the addition was confirmed.
It was further submitted that assessee has received an order for advertisement from Bhagat Singh Public Senior Secondary School and accordingly it raised the bill including service tax of Rs.49,23,773/-. The assessee therefore also provided for the corresponding cost of material at Rs.40,96,117/-. However, the order was not implemented and
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therefore, the revised return was filed where both the sales and cost of goods were reversed resulting into reduction of net profit by Rs.8,27,656/- [Rs.76,63,463/- - Rs.68,35,807/-]. The fact that Bhagat Singh Public Senior Secondary School has not claimed such expenditure is evident from the copy of advertising expenses placed at PB 8. Further in the ledger account of the assessee in the books of Bhagat Singh Public Senior Secondary School such amount is not credited. Thus, when assessee has not executed the order of Bhagat Singh Public Senior Secondary School, only because in the audited accounts the assessee has passed entry to this effect cannot be a reason to make the addition particularly when it is a settled law that making of accounting entries in the books of accounts is not relevant for determination of income under the Income Tax Act as held by Supreme Court in case ofKedarnath Jute Manufacturing Co. Ltd. 82 ITR 363 and Satluj Cotton Mills Vs CIT 116 ITR 1.
Per contra, the ld. DR relied upon the order of ld. CIT(A) which reads as under:- “7.3.1 The contention in appeal is that the assessee had billed Bhagat Public School Rs.48,18,961/- for advertisement charges and considered these bills in turnover. Subsequently, the order was not implemented so the effect of reduction of such sales, relevant cost and resultant Net Profit had been considered in the revised return as under:- GROSS TURNOVER Reduction in revised NEWS PAPER ADVERTISEMENT 48,18,961/- SERVICE TAX 1,04,812/- TOTAL 49,23,773/- Cost of Material 40,96,117/-
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Resultant difference in receipts 8,27.656/- and cost of Material
7.3.2 Despite specific query in appeal, the assessee hasnot been able to furnish a categorical statement from Bhagat Singh Pub. Sr. Sec. School that they have not claimed expenditure of Rs. 49,23,773/- in FY 2015-16. Considering that Bhagat Singh Pub. Sr. Sec. School is a family concern of the assessee, in the absence of such a statement from the schoold, despite specific query in appeal, the reversal of sales of Rs.40,96,117/- by the assessee remains unsubstantiated. Further, no basis is given for the reversal of cost of Rs. 36,90,12,603/- against such sales. As such the figure of reversal of profits of Rs.8,27,656/- remains unsubstantiated. Accordingly, it is held that the A.0 has rightly rejected the claim of reduction of profits of Rs.8,27,656/-. Ground 5 of appeal is thus dismissed.”
We have heard the rival contentions and perused the material available on record. It has been contended by the ld AR that the reason for revision of the return of income was that the order of Bhagat Singh Public School was not executed and as a result, both revenues and corresponding costs were reversed and revised return of income was filed resulting in reduction of net profits by Rs 827,656/-. Per contra, the position of the Revenue is that the assessee has not furnished any categorical statement from Bhagat Singh Public Senior Secondary School that they have not claimed expenditure of Rs.49,23,773/- in FY 2016-17. Against the said contention of the Revenue, the assessee has submitted ledger account of advertising expenses as well as assessee’s accounts in the books of Bhagat Singh Public Senior Secondary School where no such amount has been claimed or credited. We find that
11 ITA No. 1368/JP/2019 Smt. Nisha Jain vs. ACIT/DCIT since these ledger accounts have been filed for the first time before us, the same needs to be verified by the AO and the matter is thus set- aside to the file of the AO to verify the same and decide as per law. In the result, the ground of appeal is allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 03/02/2021. Sd/- Sd/- ¼ lanhi xkslkbZ ½ ¼foØe flag ;kno½ (Sandeep Gosain) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
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