HASMUKH CHANDULAL SHAH,KOLHAPUR vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 2, KOLHAPUR

This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals)-2, Kolhapur [‘the CIT(A)’] dated 27.11.2018 for the assessment year 2007-08.

Briefly, the facts of the case are that the appellant is an individual engaged in the business of builders and developers. The Return of Income for the assessment year 2007-08 was filed on 10.10.2007 declaring total income of Rs.26,73,045/-. Subsequently, the return of income was revised on 29.12.2007 at total income of Rs.52,98,045/-. Against the said return of income, the assessment Dy. Commissioner of Income Tax, Circle-2, Kolhapur (‘the Assessing Officer’) vide order dated 06.11.2009 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at a total income of Rs.53,29,550/-. While doing so, the Assessing Officer made disallowance of Rs.31,500/- out of the business expenditure and also disallowed the claim for deduction of Rs.26,25,000/- made during the course of assessment proceedings. The factual background of the claim is as under : There was a survey operation u/s 133A of the Act on 26.11.2005 in the business premises of the appellant. During the course of survey proceedings, the appellant disclosed additional income of Rs.4,25,000/- for the assessment year 2005-06 and Rs.22,00,000/- for the assessment year 2006-07 forming part of the work-in-progress. During the course of assessment proceedings for the assessment year under consideration, the assessee sought deduction of Rs.26,25,000/- on the ground that it amounts to double addition. This contention was rejected by the Assessing Officer by holding that the amount disclosed during the course of survey proceedings was formed part of opening work-in-progress, since no income was offered to tax on sale of flats during the relevant assessment year, the work-in-progress is carried forward to the Explanation to section 69C of the Act. Even on appeal before the ld. CIT(A), the ld. CIT(A) confirmed the findings of the Assessing Officer. 3. Being aggrieved, the appellant is in appeal before us in the present appeal. 4. It is contended before us that the disclosure made during the course of survey proceedings is on account of unexplained income not on account of unexplained expenditure. In this connection, taking us through the statement recorded during the course of survey proceedings placed at page no.71 of the Paper Book, ld. AR submits that in view of the disclosure of income as additional income, the provisions of Explanation to section 69C have no application. 5. On the other hand, ld. Sr. DR submits that the order of the ld. CIT(A) is very reasoned one and based on the proper appreciation of facts does not require any interference. 6. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the allowability of the claim made during the course of assessment proceedings for Rs.26,25,000/- on account of double addition. We have gone through the assessment order for the assessment year 2005-06 placed at page no.11 of the Paper Book and for the assessment year 2006-07 placed at page no.31 of the Paper Book, wherein, it was clearly recorded that the income disclosed by the appellant during the course of survey proceedings was offered to tax. We have also gone through the statement recorded from the appellant making disclosure of Rs.26,25,000/-, wherein, it is clearly mentioned that the disclosure was made on account of undisclosed income. Then the question that arises for consideration before us is that whether the claim for deduction of Rs.26,25,000/- made during the course of assessment proceedings, amounts to double addition or not, which is a pure question of fact is required to be examined with reference to the evidence on record. Therefore, we remit the matter to the file of the Assessing Officer to examine the claim in it’s proper perspective and decide the issue in accordance with law. Needless to say, the Assessing Officer shall decide the issue after affording reasonable opportunity of being heard to the assessee. Thus, the grounds of appeal raised by the assessee stand partly allowed.