SHRI T. JOHN RAJASEKAR,MADURAI vs. DCIT, CC-1, MADURAI

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ITA 3289/CHNY/2019Status: DisposedITAT Chennai04 August 2022AY 2016-174 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal noted that the firm's profit and the assessee's share percentage were correctly reflected in the firm's audited accounts and its return. Therefore, the differential amount added by the AO was deleted.

What were the facts?

The assessee declared a higher share of income from a firm in his return than what was reflected in the firm's audited accounts and its own return of income. The Assessing Officer (AO) added the difference as undisclosed income.

What were the issues?

Whether the addition made by the AO on account of the difference between the provision for share income and the actual share of income as per audited accounts is justified.

Which sections of the Income-tax Act were involved?

Section 56

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI

Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL

Hearing: 04.08.2022Pronounced: 04.08.2022

आदेश /O R D E R

PER MAHAVIR SINGH, VICE PRESIDENT:

1.

This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-19, Chennai in dated 30.09.2019. The assessment was framed by the DCIT, Central Circle-1, Madurai for the assessment year 2016- 17 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 31.12.2018.

2.

The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of AO in making addition of Rs.31,75,804/- being difference between provision figure of share income adopted in the return of income and the actual figure of share of income as per the audited accounts of the firm M/s. Monica Surgicals. For this, assessee has raised various grounds which are argumentative and hence, need not be reproduced.

3.

At the outset, we noted that the AO during the course of assessment proceedings noticed that the assessee is a wholesale dealer in medical products and equipments. He is one of the partners in M/s. Monica Surgicals. The AO while framing assessment proceedings noted from the computation of income where share income from M/s. Monica Surgicals is shown at Rs.99,63,237/- but finally in the return of income declared only profit at Rs.67,87,433/- The AO noted that the assessee’s share income from M/s. Monica Surgicals is at 95% declared by assessee whereas actually it is 90% and it works out to Rs.67,87,433/- out of the firms return of income of Rs.75,41,592/-. The AO has not accepted the submissions of the assessee and made addition of differential amount of Rs.31,75,804/- by observing in para 5 as under:-

“5. While going through the submissions, it is noted that the assessee has claimed Rs.99,63,237/- as his 95% share of income from M/s. Monica Surgicals (PAN:AAYFM1300M) (in Annexure-1). Whereas the total net profit as per the firm’s return of income for the relevant year is only Rs.75,41,592/- (Annexure-3 & 4) and the share percentage of the assessee is only 90% which works out to Rs.67,87,433/-. When this was pointed out vide questionnaire dated 06.01.2018, the assessee replied which is as per Annexure-2. The reply is not acceded to. Hence the difference of Rs.31,75,804/- (Rs.99,63,237/- - Rs.67,87,433/-) is disallowed and treated as undisclosed amount u/s 56 of the I.T. Act, 1961.” Aggrieved, assessee preferred appeal before CIT(A).

4.

The CIT(A) also confirmed the action of the AO without deliberating on the issue. Aggrieved, now assessee is in appeal before the Tribunal

5.

We have heard rival contentions and gone through facts and circumstances of the case. We noted that actually in the return of income of the firm, the profit before taxes is declared at Rs.75,41,592/- and assessee’s share is 90% and not 95% as computed by assessee in his computation of income as well as computed by Revenue authorities. The assessee has wrongly declared the profit from M/s.Monica Surgicals, the firm at Rs.99,63,237/- and his share at 95%. The documents produced before us i.e., Trading, Profit & Loss account of M/s. Monica Surgicals categorically shows the profit at Rs.75,41,591/-. Hence

Rs.31,75,804/- cannot be added. We delete the same.

6.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 4th August, 2022 at Chennai.

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