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Income Tax Appellate Tribunal, “A(SMC
Before: Shri A. T. Varkey, JM]
1 ITA No.2291/Kol/2019 AY. 2005-06 Munish Jhajharia आयकर अपील�य अधीकरण, �यायपीठ –“A(SMC)” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL “A(SMC)” BENCH: KOLKATA (सम�) �ी ए.ट�. वक�,�या�यक सद�य) [Before Shri A. T. Varkey, JM]
ITA No. 2291/Kol/2019 Assessment Year: 2005-06
Munish Jhajharia Vs. I.T.O Ward 45(2), Kolkata PAN: ACUPJ 0260B Appellant Respondent
Date of Hearing 02.07.2020 Date of Pronouncement 07 .07.2020 For the Appellant Shri Subash Agarwal, Advocate, ld.AR For the Respondent Shri Jayanta Khanra, JCIT, ld. Sr.DR
ORDER This is an appeal preferred by the assessee against the order of Ld. CIT(A)-21, Kolkata dated 09-08-2019 for the assessment year 2005-06.
Ground no. 1, which has been substituted by revised grounds of appeal is against the action of the ld. CIT(A) for re-opening of original assessment u/s. 147 of the Income-tax Act, 1961 ( in short, the referred to as the ‘Act’) without jurisdiction, which is a legal issue. The ld. AR of the assessee drew my attention to the reasons recorded by the AO before re- opening of assessment. It is noted that the AO got an information from the AIR data that the assessee had credit card of Standard & Chartered Bank and on 31-03-2005, the assessee had transacted an amount of Rs. 2,43,026/-, which fact has not been disclosed by him in the Income Tax Return (ITR). From a perusal of the ITR acknowledgement filed/placed at page-4 of the paper book, it is noted that there is a column number 14 in Form No. 2D SARAL ITS-2D, wherein details of “Credit-Card, Credit-Card Number and Issued by’ has not been filled by the assessee, which omission on the part of the assessee prompted the AO to reopen his case when he got the AIR information that assessee had transacted an amount of Rs.2,43,026/-, which were the basis for the AO to believe escapement of income, which consequently resulted in the AO to reopen the assessment. Taking note of the
2 ITA No.2291/Kol/2019 AY. 2005-06 Munish Jhajharia aforesaid facts, I do not find any merit in the contention of the ld. AR that AO without satisfying the condition precedent stipulated in sec. 147 of the Act, has usurped the jurisdiction and therefore, the same is dismissed. 3. Coming to the merits of the addition are concerned, the ld. AR of the assessee drew my attention to the table showing ground wise disallowance of expenses, which action of AO has been sustained by the ld. CIT(A) is as follows:
Sl. Ground Nature of Amount Amount Amount No. No. expense Claimed Disallowed Sustained 1. Ground no.2 Sales promotion Rs.3,01,012.60 Rs.1,50,506.30 Rs.1,50,506.30 ½ (50%) Expenses 2. Ground no.3 Tours & Rs.3,46,868.82 Rs.71,196.47 Rs.71,196.47 1/6th Travelling and Conveyance 3. Ground no.4 Telephone Rs.57,750/- Rs. 13,743/- Rs. 13,743/- expenses 4. Ground no.5 Mobile phone Rs.65,209.80 Rs.16,302.45 Rs.16,302.45 1/4th expenses Rs. 20,759/- 5. Ground No.6 Delivery Rs.1,38,392/- Rs.20,759/- 15% charges and Coolie & Cartage 6. Ground No. 7 Excess Receipts Rs. 8,38,090.04 Rs. against Work 8,38,090.04 Contract
At the outset itself it is noted that the ld.AR has not pressed ground no. 4, which is the addition of Rs. 13,743/- made towards telephone expenses, therefore, the addition is confirmed. 5. Coming to ground nos. 2,3,5 & 6 are concerned, these are all expenses on sales promotion expenses, tours & travelling and conveyance, Mobile phone expenses, delivery charges, Coolie & Cartage, it is noted that assessee’s accounts are audited. The books of account of the assessee have not been rejected by the AO. Therefore, the AO could not have made estimated disallowance. The AO could have resorted to estimation only when the AO after examining the books, is not satisfied about the correctness or completeness of the account of the assessee or where the method of accounting provided in sub-section (1) of Section 145 has not been regularly followed by the assessee or income
3 ITA No.2291/Kol/2019 AY. 2005-06 Munish Jhajharia has not been computed in accordance with the standards notified under sub-section (2) of section 145 of the Act, then the AO may make an assessment in the manner provided u/s. 144 of the Act, which is termed as the “Best Judgment Assessment’. However this is not the case wherein AO has rejected the books of account after finding any grounds as stipulated u/s 145 of the Act and thereafter resorted to estimation of the income of assessee u/s. 144 of the Act. Therefore, the estimation could not have been done by the AO as evident from a perusal of the table supra, which will reveal that assessee has claimed expenditure in respect of sales promotion expenses, tours & travelling, Mobile phones, delivery & coolie expenses and the AO has simply resorted to disallow ad-hoc disallowance on the plea inter- alia alleging cash payments, self-made vouchers etc and on the suspicion that some part of the expenses could have been incurred for personal purpose, the AO has resorted to ad-hoc disallowances. This action/approach of AO cannot be countenanced. As noted supra, the assessee’s books are duly audited and the books were produced for inspection of AO and if the AO was not satisfied with the correctness or completeness of the books and as required u/s. 145 of the Act supra, then AO could have rejected the books and ventured to estimate the income of the assessee, which the AO has not bothered to do in this case. However, citing the reasons stated above, has resorted to disallow ad-hoc disallowance cannot be accepted. And it is added that if the AO was not satisfied with the genuineness of the expenses claimed by the assessee, he was at liberty to disallow item wise expenses and not resorted to ad-hoc disallowance as done in this case The action of AO is, therefore, arbitrary and is based on surmises and conjectures and therefore could not have disallowed 50%, i.e 1/2 th , 1/6th , 1/4th& 15% on estimation. Therefore, I direct deletion of addition of Rs. 1,50,506/-, Rs. 71,196/-, Rs. 16,302/- and Rs. 20,759/-. These grounds are allowed. 6. Ground no. 7 is in respect of excess receipts against work contract, the AO has made the addition by noting as under:-
(xi) The assessee has shown receipts against Works Contract at Rs. 38,00,530.30, Whereas, as per the TDS certificates (Rs. 93,206/- in total), total receipts of the assessee for the Asst. Year 2005-06 for his contract work comes to Rs. 46,38,620.34. The assessee failed to furnish any explanation or reconciliation against this discrepancy. Hence, I’ve no alternative but to add Rs. 8,38,090.04 [ Rs. 38,00,530.30 + Rs. 46,38,620.34] with the total income of the assessee for the Asst. Year 2005-06 as undisclosed income.
4 ITA No.2291/Kol/2019 AY. 2005-06 Munish Jhajharia Aggrieved, the assessee preferred appeal before the ld. CIT(A), who was pleased to confirm the same. Aggrieved, the assessee is before this Tribunal. 7. Heard both the parties and perused the material available on records. Due to mis- match of the TDS Certificate figures and the corresponding income shown by the assessee, the AO added the difference amount as undisclosed income of the assessee. It is noted that the assessee is into the business of manufacture of design tiles and also executing works on contract. The assessee’s accounts are audited. Therefore, assessee’s income falls under the head business, which means only net income should be taxed and not the gross receipt. The net income should be arrived at after giving deduction to the outgoing/expenditure. Therefore, the action of AO to tax the entire difference of amount i.e, Rs. 8,38,090/-is incorrect and only the profit element from gross receipt need to be taxed. It is noted that the assessee has shown GP rate 38.02%. So I direct the AO to apply the GP at 38.02% of Rs. 8,38,090/- which comes to Rs. 3,18,641.81 rounded to Rs. 3,18,642/- and sustain only to that extent and balance amount of Rs. 8,38,090 - Rs. 3,18,642 = Rs.5,19,448/- is to be deleted.
In the result, the appeal of assessee is partly allowed.
Order is pronounced in the open court on 07 July 2020 Sd/- (Aby. T. Varkey) Judicial Member Dated :, 07 July 2020 **PP(Sr.P.S.)
Copy of the order forwarded to:
Appellant –Shri Munish Jhajharia C/o SDP & Associates, 46C Chowringhee Road, Everst House, Flat 14G, Kolkata-71. Respondent –ITO, W-45(2), 3 Govt Place (W), Kolkata-1 2 3. CIT(A)-4, Kolkata (sent through e-mail)
CIT- , Kolkata. 5. DR, ITAT, Kolkata. (sent through e-mail) By order, /True Copy, Assistant Registrar