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Income Tax Appellate Tribunal, ‘’ SMC’’ BENCH, AHMEDABAD
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-5, Vadodara dated 16/11/2015( in short “Ld.CIT(A)”) arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961 (here-in- afterreferred to as "the Act") dt.18/03/2014 relevant to the Assessment Year 2011-2012.
The assessee has raised the following grounds of appeal; Under the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred both in laws and facts.
1. Confirming the addition to the total income made by AO of Rs.20,00,000/- ignoring facts and legal aspects of the matter. The appellant craves leave to amend, alter or delete any of the above ground of appeal.
The only issue raised by the assessee is that the Ld.CIT (A) erred in confirming the addition of Rs. 20 lakhs on account of unaccounted receivables under section 69 of the Act.
The facts in brief are that the assessee in the present case is a partnership firm and engaged in the wholesale trading of grains. There was a survey carried out at the business premises of the assessee dated 7th January 2011 under section 133A of the Act. The assessee during such survey proceedings furnished the statement on oath wherein certain additional unaccounted income was disclosed as detailed under:
Sr.No. Particulars Amounts Rs. 1. Difference in cash 8,16,018/- 2. Difference in stock 12,00,438/- 3. Receivables 20,00,000/- Total 40,16,456/- 2.1 The assessee subsequently filed its return of income without disclosing the additional income of Rs. 20 lakhs on account of receivables which was based on incriminating document found during the survey proceedings.
2.2 The assessee claimed that the income on account of receivables has already been disclosed in the form of difference in cash and stock as discussed above.
2.3 However the AO disagreed with the contention of the assessee by observing that the impugned receivables are based on the documents found during the survey i.e. pages 1 to 9 of Annexure A2. Further more, such income was admitted by the assessee in the statement furnished under section 133A of the Act during survey proceedings . Accordingly the AO added the sum of Rs. 20 lakhs under section 69 of the Act to the total income of the assessee.
Aggrieved assessee preferred an appeal to the Ld.CIT (A).
The assessee before the Ld.CIT (A) submitted that its books of accounts were duly audited under section 44 AB of the Act. There was no mention in the tax audit report and audited financial statements about such sundry debtors found during the survey proceedings.
3.1 The assessee further submitted that it had no dealing with the so-called receivables in the last 10 years which can be verified from the financial statements of different years.
3.2 However, the Ld. CIT (A) disregarded the contention of the assessee by observing that the addition of Rs. 20 lakhs on account of receivables is based on the incriminating documents and the statement furnished by the assessee.
Being aggrieved by the order of the Ld. CIT (A), the assessee is in appeal before us.
The Ld.AR before us filed a paper book running from pages 1 to 16 and submitted that it has requested for the copy of the statement recorded at the time of survey under section 133A of the Act vide letter dated 13.1.2011, 9.3.2011 and 26.2.2014 but the same was supplied by the Revenue just a week (approximate) prior to passing the order under section 143(3) of the Act dated 18th March 2014. Accordingly, the Ld. AR submitted that the statement furnished under section 133A of the Act was not retracted before the completion of the assessment by the AO under section 143(3) of the Act. The Ld. AR also submitted that the addition based on the statement cannot be sustained.
4.1 The Ld. AR alternatively submitted that the gross profit embedded in the receivables can be added to the total income of the assessee. The Ld. AR in support of his contention has drawn attention on the statement of fact filed before the Ld.CIT (A) demonstrating gross profit of the assessee during different assessment years.
On the other hand, the Ld. DR submitted that the application filed by the assessee vide letter dated 09-03-2011 for collecting the copy of the statement was not endorsed by the Income Tax Office. Therefore, the so- called application claimed to have been filed by the assessee with the income tax office is in doubt.
5.1 The Ld.DR further submitted that the assessee has not filed any retraction statement with the Income Tax Office. Therefore the statement furnished at the time of survey cannot be doubted.
5.2 The Ld. DR also submitted that the additions made by the concerned AO and upheld by the CIT(A) is based on the incriminating documents found during the survey proceedings as evident from the seized documents discussed above.
5.3 The Ld. DR also submitted that the impugned receivables cannot be treated as business receipts as there is no evidence qua this proposition suggested by the Ld. AR for the assessee. The Ld. DR also claimed that the impugned receipt may also represent the loan received by the assessee. The Ld.DR vehemently vehemently argued on the basis of findings culled by the AO and subsequently upheld by the CIT(A) in their respective orders.
We have heard the rival contentions of both the parties and perused the materials available on record. There was a survey carried out at the business premises of the assessee under section 133A of the Act. As a result of survey certain documents were seized and subsequently based on those documents the assessee admitted an income of Rs. 20 lakhs on account of receivables. But the assessee in its income tax return did not disclose such income. Therefore the addition was made by the AO which was subsequently confirmed by the Ld.CIT-A.
6.1 From the preceding discussion, we note that several issues emerge for our adjudication. However, 1st we take up the alternate contention of the Ld. AR for the assessee requesting before us to treat the impugned receivable as business receipts and work out the tax liability only for the gross profit embedded in such receivables. Admittedly, certain documents were found during the survey proceedings reflecting the receivables amounting to Rs. 20 lakhs as evident from the paper book filed by the Ld. AR for the assessee. Admittedly, the onus lies on the assessee to explain the nature of such receivables.
6.2 The Ld. AR before us has claimed that the entire amount cannot be treated as income of the assessee but the profit embedded should only be considered for working out the unaccounted income of the assessee. The contention of the Ld. AR for the assessee is not based on any documentary evidence suggesting that the entire impugned receipts are not taxable. But at the same time, there is no evidence available with the Revenue suggesting that the entire receipts are taxable. In such circumstances we are of the view that one has to see the application of the receipt.
6.3 For example, if the assessee has shown receivable for a sum of Rs. 20 lakhs from various parties, then one has to see with cogent reasons/documents suggesting that the source of such 20 lakhs of rupees based on trail of the transactions/documents. But on perusal of the order of the authorities below and other documents, we find no documentary evidence supporting the nature of receivables as discussed above.
6.4 Besides the above, a question also arises whether the assessee has actually received the so-called amount of receivables. If not, then the next question arises whether such amount of receivable represents the income of the assessee. In such a situation, we are of the considered view the impugned receivables cannot be treated as income of the assessee. We are also conscious to the fact that there is no documentary evidence found during the course of survey or subsequently suggesting that the assessee has actually received the so-called receivables.
6.5 Indeed, the documents found during the survey proceedings are presumed to be true as per the provisions of section 292-C of the Act. Accordingly, we presume that the documents found during the survey proceedings reflecting the receivable of Rs. 20 lakhs are true. But in our considered view such receivables cannot be termed as income of the assessee. The contention of the Ld. DR that the impugned amount may also represent the unexplained cash credit under section 68 of the Act does not hold good in view of the fact that there was no evidence that such amount was actually received by the assessee in the year under consideration or subsequently.
6.6 After considering the facts in totality as discussed above, we are of the view the justice will be served to the Revenue and the assessee, if the gross profit embedded in such receivable is treated as undisclosed income of the assessee. Accordingly we restore the matter to the file of the AO with the direction to work out the gross profit embedded in such receivables.
6.7 As we have decided the issue in terms of the above, we are not inclined to adjudicate other contentions raised by the Ld. AR for the assessee and the Ld. DR for the Revenue. Accordingly, we allow the ground of appeal of the assessee for the statistical purposes in terms of the above direction.
In the result the appeal of the assessee is allowed for the statistical purposes.
Order pronounced in the Court on 10/07/2019 at Ahmedabad.