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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI R.S. SYAL & SHRI S.S. VISWANETHRA RAVI
PER R.S.SYAL, VP :
This appeal by the assessee is directed against the order dated 05-10-2016 passed by the CIT(A)-6, Pune in relation to the assessment year 2007-08.
The additional ground raised by the assessee was not pressed. The same is, therefore, dismissed.
2 ITA No. 405/PUN/2017 M/s. Travelline International
The only issue raised in the appeal is against the
confirmation of addition of Rs.14.00 lakh.
Briefly, stated, the facts of the case are that the assessee
was subjected to survey action u/s.133A of the Income-tax
Act, 1961 (hereinafter called ‘the Act’) on 13-03-2007. In the
course of survey, statement of the partner was recorded. In
response to question nos.7, 8, and 10, he made a declaration of
income to the tune of Rs.56.00 lakh, comprising of Rs.26.00
lakh towards unexplained business promotion expenses;
Rs.25.00 lakh towards unaccounted receipts; and Rs.5.00 lakh
towards other omissions and errors. However, the return was
filed with the additional income of Rs.17.00 lakh. The
Assessing Officer (AO) made addition of Rs.39.00 lakh
(Rs.56.00 lakh – Rs.17.00 lakh) on the ground that the
assessee ought to have declared the income offered during the
course of survey. The ld. CIT(A) sustained the addition at
Rs.14.00 lakh thereby deleting the addition of Rs.25.00 lakh
on account of undisclosed income. The assessee is in appeal
3 ITA No. 405/PUN/2017 M/s. Travelline International
before the Tribunal urging for the deletion of the addition
sustained.
We have heard the rival submissions and gone through
the relevant material on record. The assessee was subjected to
survey action. In the course of survey, the statement of the
partner was recorded, a copy of which has been placed for our
consideration. In response to question no.7, he admitted to
have paid commission between 5% to 10% for securing
customers for its Hotel and other Tourism places business,
which was not recorded in the books of account. In response
to question no.8, he admitted that there were unaccounted
receipts to the tune of Rs.25.00 lakh. In response to question
no.10, he surrendered Rs.5.00 lakh on account of other
omissions and commissions. The assessee actually offered a
sum of Rs.17.00 lakh in the return of income with the
following chart, as has been incorporated on page 3 of the
assessment order :
4 ITA No. 405/PUN/2017 M/s. Travelline International
Particulars Amount (Rs.) Unaccounted Investment in residential flat made out of 10,71,000 withdrawals from the firm Unexplained business promotion expenses admitted at the 26,00,000 survey Total 36,71,000 Less : Unaccounted receipts utilized for aforesaid 25,00,000 payments Balance (shortfall) 11,71,000 Additional income offered to cover all omissions & 5,00,000 commissions to avoid any possible litigation & to buy peace of mind Total 16,71,000 Income offered (rounded off to the nearest Rs.1,00,000/-) 17,00,000
It can be seen from the above chart that the assessee
offered Rs.10,71,000/- on account of unaccounted investment
in residential flat, which has no connection with the surrender
of Rs.56.00 lakh made by the assessee in total. Obviously, this
amount ought to have been included by the assessee in the
return. Thereafter, there is an item of Rs.26.00 lakh, which
was on account of business promotion expenses admitted by
the assessee at the time of survey incurred in the shape of
commission paid to certain parties who were bringing in
customers for the assessee’s hotel business. The assessee
admitted to have received Rs.25.00 lakh over and above the
accounted receipts. Both the figures of receipts and expenses
5 ITA No. 405/PUN/2017 M/s. Travelline International
are emanating from the statement of the assessee. Apart from
that, there is no reference to any evidence divulging the receipt
or payment of undisclosed income/expenditure.
One needs to differentiate between the two situations, viz.,
one in which undisclosed income is earned and unexplained expenditure is incurred, which spending is de hors the earning
of income and two, in which undisclosed income is earned by
spending undisclosed expenditure. For example, if
undisclosed income is earned and the same is spent in
purchase of jewellery, in such a case, there will be addition
only for the earning of the unexplained income because the
outflow of the income in the shape of expenditure will be from
the inflow of the undisclosed income. On the other hand, if
some undisclosed income is earned and for earning that
income some undisclosed expenditure is also incurred, then it is the net of income vis-a-vis expenditure, which will be
added. It is so because the unexplained expenditure for earning
the undisclosed income would be met out of such undisclosed
income. In the instant case, we are confronted with the facts
6 ITA No. 405/PUN/2017 M/s. Travelline International
which are germane to the second situation, in which some
undisclosed business income was admitted to have been
earned and simultaneously some undisclosed expenditure was
also incurred for the incurring of income. In such a scenario, it
is only the excess of one over the other, which can be charged
to tax. Adverting to the facts of the instant case, it is seen that
there is net outflow of Rs.1.00 lakh which calls for addition in
as much as the assessee received business receipt of Rs.25.00
lakh outside the books of account and also spent business
expenses of Rs.26.00 lakh outside of the books of account.
The payment of commission to certain persons for fetching
customers has direct relation with the running of Hotel
business from which unaccounted receipts of Rs.25.00 lakh
were earned. Further, the payment of commission is a normal
incidence of business and is not hit by Explanation 1 to section
37(1) of the Act. Once this is the position, we fail to
appreciate as to how any addition other than Rs.1.00 lakh on
this score can be made, apart from addition of Rs.10,71,000/-
on account of investment in flat and Rs.5,00,000/- towards
additional income offered by the assessee on account of
7 ITA No. 405/PUN/2017 M/s. Travelline International
omissions and commissions. When these three amounts are
added up, the total comes to Rs.16,71,000/-. As against that,
the assessee offered Rs.17.00 lakh as additional income. In
this view of the matter, there is no reason for making or
sustaining any addition over and above this amount. We,
therefore, order to delete the addition of Rs.14.00 lakh
sustained by the ld. CIT(A).
In the result, the appeal is allowed.
Order pronounced in the Open Court on 16th
December, 2019.
Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT
पुणे Pune; �दनांक Dated : 16th December, 2019 सतीश
8 ITA No. 405/PUN/2017 M/s. Travelline International
आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत आदेश आदेश आदेश अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. 3. The CIT(A)-6, Pune 4. The Pr. CIT -5, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे 5. “बी” / DR ‘B’, ITAT, Pune गाड� फाईल / Guard file 6. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
Date 1. Draft dictated on 10-12-2019 Sr.PS 2. Draft placed before author 11-12-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *