THE ACIT, MALAPPURAM vs. SRI.K.HAMZA, MALAPPURAM

Per CHANDRA POOJARI, ACCOUNTANT MEMBER:

This appeal filed by the Revenue is directed against the order of the CIT(A)-3,

Coimbatore dated 31/08/2016 for the assessment year 2012-13.

assessment u/s. 144 disallowed a sum of Rs.21,44,000/- which represents

unexplained cash deposits in ICICI Saving Bank account u/s. 69A of the Act. The

I.T.A. No.490/C/2016

Assessing Officer also disallowed the sum of Rs. 77,42,886/- on account of

unexplained business expenses. No explanation was offered with regard to the

fact that expenditure was incurred wholly and exclusively for the purpose of

business. However, the CIT(A) deleted the addition by observing as follows:

“3.0 I have considered the grounds raised by the appellant and the assessment order. As regards, the addition for unexplained cash deposits with ICICI Bank Ltd., the appellant’s AR was required to produce copies of bank accounts from which the internal transfer of funds have been made. The amounts deposited have been drawn from another account (account no. 211) maintained with the same bank. In view of this, the same cannot be treated as unexplained deposits. It is also to be taken note of that the deposits made to the tune of Rs.21,44,000/-is well within the turnover of the appellant at Rs.18.18 crore. The addition made for unexplained deposits by the Assessing Officer is not sustainable and is deleted.

4.0 The reason given by the Assessing Officer for making a disallowance of Rs,.70,82,737/- of business expenses is that the appellant’s profits at 0.58 percent of the turnover is very low considering the nature of the business. It has not been stated as to what extent it is low with respect to comparable cases or with regard to appellant’s own net profit for prior financial year 2010-11 relevant for assessment year 2011-12, which is at 0.60 per cent of the turnover. The addition made by the Assessing Officer is made on the basis of assumption without any concrete evidence. The addition is unsustainable and is deleted.

5.0 As regards expenditure incurred by way of credit cards, amounting to Rs.6,60,149/- it has been stated that they have been incurred for travel and other expenses in connection with business. This expenditure is not substantial when compared with the turnover and since it has been made through banking channel, disallowance is not called for. Though it has been discussed in the assessment order, addition to total income is not made in the computation. Hence this is not deleted”.

dispose of the appeal after hearing the Ld. DR. The main crux of the argument

I.T.A. No.490/C/2016

of the Ld. DR is that in the course of the appellate proceedings, the CIT(A)

considered the Saving Bank account maintained with the same Bank from where

funds are transferred to the impugned Bank account. Further, the CIT(A)

observed that the amount of Rs70,82,737/- was made on adhoc basis. He

compared the profits of the assessee of the earlier assessment years and

observed that the profits declared by the assessee is reasonable. Similarly, the

expenses of Rs.6,60,149 was incurred for travel and other expenses in

connection with business. In this case, the assessment order is ex parte order,

it was incumbent upon the CIT(A) to call for the remand report from the

Assessing Officer before deleting the addition and he failed to do so. Hence, in

the interest of justice, it is appropriate to remit the issue to the file of the

Assessing Officer for fresh consideration. Accordingly, the entire issue is

remitted to the file of the Assessing Officer for fresh consideration. The

Assessing Officer shall decide the issue in accordance with law after affording

reasonable opportunity of hearing to the assessee.

purposes. Pronounced in the open court on 29th January, 2018.

sd/- sd/- ( GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER Place: Kochi Dated: 29th January, 2018

I.T.A. No.490/C/2016

GJ Copy to: 1. Shri K. Hamza, Kuttanakavil, Pazhayangadi, Kondotty Post, Malappuram-673 638. 2. The Assistant Commissioner of Income-tax, Circle-1,Tirur. 3. The Commissioner of Income-tax(Appeals)-3,Coimbatore. 4. The Pr. Commissioner of Income-tax, Coimbatore. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order

(ASSISTANT REGISTRAR) I.T.A.T., Cochin