THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), GUNTUR vs. SAI BALAJI CONSTRUCTIONS, GUNTUR

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ITA 465/VIZ/2018Status: DisposedITAT Visakhapatnam25 September 2019AY 2006-075 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s order, agreeing that Section 69C is not applicable as the AO did not doubt the source of expenditure, only the proof of purchase. The addition was deleted as there was no evidence to suggest the funds were outside the books.

What were the facts?

The Assessing Officer reopened the assessment and added the cost of machinery under Section 69C, stating the assessee failed to prove the purchase with evidence. The CIT(A) deleted the addition, holding that Section 69C applies when the source of expenditure is unexplained, which was not the case here.

What were the issues?

Whether the addition made under Section 69C for unexplained expenditure is justified when the source of funds is not doubted, but the proof of purchase of an asset is lacking.

Which sections of the Income-tax Act were involved?

Section 69C,Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM

Before: SHRI V. DURGA RAO& SHRI D.S. SUNDER SINGH

For Appellant: DR प्रत्यधथी की ओर से /
Hearing: 23.09.2019Pronounced: 25.09.2019

Per Shri D.S.Sunder Singh, Accountant Member : Delay : There is a delay of delay of 1 day in filing the appeal by the revenue. The revenue filed condonation petition and requested to condone the delay. After going through the application filed, we observe that there is

2 I.T.A. No.465/Viz/2018, A.Y.2006-07 M/s Sai Balaji Constructions.,Guntur sufficient cause for the delay in filing the appeal, hence, we condone the delay and admit the appeal. This appeal is filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-1, Guntur vide Appeal No.99/2014-15 dated 26.06.2018 for the Assessment Year (A.Y.) 2006-07.

2.

All the grounds of appeal in this case are related to the addition made by the Assessing Officer (AO) u/s 69C of the Income Tax Act, 1961 (in short ‘Act’). Though the tax effect is below Rs.50 lakhs, the department has raised ground No.4, stating that this case is covered by the exceptions provided under Clause (c) of para 10 of CBDT Circular No.03/2018, dated 11.07.2018. The same exception is also provided in the latest Circular issued by the Board bearing No.17/2019 dated 8th August 2019 .

3.

Brief facts of the case are that the assessee filed the return of income declaring total income of Rs.25,16,663/- and the assessment was completed u/s 143(3) on total income of Rs.25,60,039/- by an order dated 24.12.2008.

3.1. Subsequently, the Assessing Officer (AO) reopened the assessment u/s 147 of the Act and passed the order u/s 143(3) r.w.s. 147 on

3 I.T.A. No.465/Viz/2018, A.Y.2006-07 M/s Sai Balaji Constructions.,Guntur 21.03.2014 determining total income at Rs.34,95,660/-. In the reassessment made u/s 143(3) r.w.s. 147 of the Act, the AO made the disallowance of Rs.1,54,920/- u/s 69C of the Act relating to the purchase cost of machinery. It is found from the assessment order that in the original assessment, the assessee has stated to have purchased the machinery worth Rs.1,54,920/- and claimed the depreciation of Rs.43,376/- on the said asset. According to the AO, the assessee has not purchased the machinery worth Rs.1,54,920/-, hence made the addition of the entire cost of asset u/s 69C of the Act.

4.

Against the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) deleted the addition made by the AO observing that the provisions of section 69C are applicable, in case where the assessee failed to explain the source for incurring the expenditure. In the instant case, the AO has not doubted the source of the expenditure incurred, therefore, held that there is no case for making the addition. For the sake of clarity and convenience, we extract relevant part of the order of the Ld.CIT(A) which reads as under : “The AO made an addition of Rs. 1,54,920/- u/s.69C of the Act. In the original assessment, depreciation was disallowed on a machinery for which proper evidence was not produced by the appellant. In the reassessment proceedings, the AO brought the cost of the machinery to tax. In this connection, the appellant claimed that the cost of the machinery was sourced from the books of account, hence, invoicing the provisions of Sec.

4 I.T.A. No.465/Viz/2018, A.Y.2006-07 M/s Sai Balaji Constructions.,Guntur 69C of Act is not correct. The submissions made by the appellant and the material fact available on record have been verified. It is a fact that the mid1ihey was purchased but the same was not proved beyond doubt with proper evidences. If the money was spent outside the books to acquire any machinery, then sec. 69C of the Act is applicable. However, in this case, there is no evidence brought on record by the AO to say that the machinery was purchased from the funds outside the books. Hence, there is merit in the contention of the appellant and this ground is allowed. The addition made by the AO is hereby deleted.“ 5. We have heard both the parties and perused the material placed on record. As seen from the assessment order, the assessee had failed to produce evidence for purchase of machinery worth Rs.1,54,920/-. There is no dispute that the assessee has not claimed the said amount of Rs.1,54,920/- as expenditure in the P&L account. The only issue is the assessee had purchased the capital asset for which the assessee failed to produce any evidence to the satisfaction of the AO. As per provisions of section 69C of the Act, where in any financial year, the assessee had incurred any expenditure for which the assessee failed to explain the source may be deemed to be the income of the assessee for such financial year. In the instant case, there is no dispute that the AO did not doubt the source of expenditure incurred. From the assessment order, it is found that the AO held that the purchase of asset is not established with proper evidence. Therefore, there is no case for making the addition u/s 69C of the Act. Thus, we do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld.

5 I.T.A. No.465/Viz/2018, A.Y.2006-07 M/s Sai Balaji Constructions.,Guntur

6.

In the result, appeal of the revenue is dismissed. Order pronounced in the open court on 25th September, 2019

Sd/- Sd/- (िी.दुगाा राि) (धड.एस. सुन्दर धसंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER नवशधखधपटणम /Visakhapatnam नदनधंक /Dated : 25.09.2019 L.Rama, SPS आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. रधजस्व/The Revenue - Dy. Commissioner of Income Tax, Circle-1(1), Guntur 2. ननधधाऩरती/ The Assessee - M/s Sai Balaji Constructions, B-8, SVN Colony, Guntur 3. The Pr.Commissioner of Income Tax, Guntur 4. The Commissioner of Income Tax (Appeals)-1, Guntur 5. तिभागीय प्रतितिति, आयकर अिीिीय अतिकरण, तिशाखािटणम/DR, ITAT, Visakhapatnam 6.गार्ड फ़ाईि / Guard file

आदेशािुसार / BY ORDER // True Copy //

Sr. Private Secretary ITAT, Visakhapatnam

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