MAYANK KUMAR JAIN,SILIGURI vs. D.C.I.T.,CIRCLE-2, SILIGURI

The assessee in the present case is an individual, who was carrying on the business as a Civil Contractor during the year under consideration under the name of his proprietary concern M/s. Builders India upto 15.02.2015. The said proprietary concern was stated to be converted into a partnership firm w.e.f. 16.02.2015 and the return of income of the said firm for the year under consideration was claimed to be separately filed. In the return of income filed for the year under consideration on Assessment Year: 2015-2016 Mayank Kumar Jain 31.03.2016 declaring total income of Rs.16,63,850/-, the assessee had declared the profit of his proprietary business of contracting for the period from 01.04.2014 to 15.02.2015. During the course of assessment proceedings, the assessee, however, failed to produce any evidence to show the conversion of his proprietary concern into partnership firm w.e.f. 16.02.2015 as claimed. In order to verify the balances of certain creditors appearing in the balance-sheet of the assessee, notices under section 133(6) of the Income Tax Act, 1961 were issued by the Assessing Officer. As noted by the Assessing Officer in the assessment order, some of the said notices were returned un-served while the reply received from two parties revealed some differences as under:- Name of the Balance as per Balance as per Difference Creditors Books Party M/s. Shree Balaji Rs.12,78,169/- Notice returned Rs.12,78,169/- Bricks Field M/s. Ramsarup Rs. 5,15,631/- Notice returned Rs. 5,15,631/- Utpadak M/s. New Siliguri Rs. 3,07,800/- Notice returned Rs. 3,07,800/- Builders M/s. Shiv Steels Rs. 4,05,644/- NIL Rs. 4,05,644/- M/s. Jindal Traders Rs.29,18,218/- Rs.27,40,968/- Rs. 1,77,250/- TOTAL Rs.26,84,494/- The aforesaid adverse findings of his enquiry conducted by the Assessing Officer were confronted to the assessee and an opportunity was given to the assessee to explain/reconcile the same. The assessee, however, failed to offer any explanation in order to reconcile the difference pointed out by the Assessing Officer. The said difference amounting to Rs.26,84,494/- was accordingly treated by the Assessing Officer as unexplained and an addition to that extent was made by him to the total income of the assessee. The enquiry conducted by the Assessing Officer directly from M/s. Shyam Steel Industries Limited revealed that the assessee had shown total purchases of Rs.62,91,755/- as made from the said party, while the sales to the assessee as shown by the said party were to the tune of Rs.1,96,36,982/-. In the absence of any satisfactory explanation 2 Assessment Year: 2015-2016 Mayank Kumar Jain forthcoming from the assessee regarding the said difference of Rs.1,33,45,227/-, the Assessing Officer treated the same as unaccounted purchases and net profit of Rs.4,11,032/- calculated @ 3.08% was added by him to the total income of the assessee. During the course of assessment proceedings, the assessee failed to prove the creditworthiness of the two creditors namely Smt. Bela Agarwal and Shri Pramod Kumar from whom loans of Rs.13,25,000/- and Rs.3,00,000/- respectively were taken during the year under consideration. The Assessing Officer, therefore, treated the said amounts as unexplained cash credit and an addition of Rs.16,25,000/- made by him to the total income of the assessee. As noticed by the Assessing Officer from the relevant Form No. 26AS, the assessee had not accounted for the contract receipts of Rs.23,25,460/-, interest of Rs.4,46,675/- and rent of Rs.1,79,955/-. The said amount aggregating to Rs.29,52,090/- accordingly was treated by the Assessing Officer as undisclosed income of the assessee and an addition to that extent was also made by him to the total income of the assessee. The total income of the assessee for the year under consideration accordingly was determined by the Assessing Officer at Rs.93,36,466/- in the assessment completed under section 143(3) vide an order dated 29.12.2017.

Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals) challenging all the four additions made by the Assessing Officer to his total income and in the absence of satisfactory compliance on the part of the assessee, the ld. CIT(Appeals) dismissed the appeal of the assesese vide his appellate order dated 23.08.2019 passed ex-parte thereby confirming all the four additions made by the Assessing Officer to the total income of the assessee by observing that there was failure on the part of the assessee to reconcile/explain the difference and anomalies pointed out by the Assessing Officer. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.

We have heard the arguments of both the sides and also perused the relevant material available on record. As submitted by the ld. Counsel for the assessee, the proprietary concern of the assessee was converted into a partnership firm w.e.f. 16.02.2015 and the profit earned by the said firm from the business of contracting for the period 16.02.2015 to 31.03.2015 was separately declared in the return of income filed by the said partnership firm for the year under consideration i.e. A.Y. 2015-16. Insofar as the profit of the contracting business carried on by the proprietary concern of the assessee for the period 01.04.2014 to 15.02.2015, the same was declared by the assessee in his return of income filed for the year under consideration in the individual capacity and the income so declared was taken as the starting point by the Assessing Officer for computing the total income of the assessee for the year under consideration in the order passed under section 143(3). As submitted by the ld. Counsel for the assessee, the contracting business carried on by the assessee in the name of his proprietary concern thus was closed on 15.02.2015 and the same was taken over and continued by the partnership firm. On the basis of the books of account separately maintained for his proprietary concern, Profit & Loss Account and Balance-sheet were prepared by the assessee for the period 01.04.2014 to 15.02.2015 and the same were duly furnished along with the return of income filed for the year under consideration. As rightly pointed out by the ld. Counsel for the assessee, the balances reflected in the said balance-sheet belonging to the proprietary concern as on 15.02.2015 were attempted to be confirmed/verified by the Assessing Officer with the corresponding balances of the concerned parties as on 31.03.2015. Similarly he made a mistake of comparing the figures reflected in the Profit & Loss Account of the proprietary concern for the period 01.04.2015 to 15.02.2015 with the figures reflected in the Form No. 26AS for the entire year which included the figures related to proprietary concern as well as the partnership firm. The ld. Counsel for the assessee Assessment Year: 2015-2016 Mayank Kumar Jain has contended that there is thus a fallacy in the very basis adopted by the Assessing Officer while making all the four additions on account of unexplained or un-reconciled differences and urged that the matter may be sent back to the Assessing Officer so as to give the assessee an opportunity to explain/reconcile the relevant figures relating to the proprietary concern as on 15.02.2015 with that of the balances appearing in the books of the concerned parties. Keeping in view the submission made by the ld. Counsel for the assessee in the light of the facts and circumstances of the case, even the ld. D.R. has agreed that the matter can appropriately go back to the Assessing Officer for proper verification. As regards the impugned order passed by the ld. CIT(Appeals) ex-parte, the ld. Counsel for the assessee has submitted that no notice of hearing whatsoever was received by the assessee from the ld. CIT(Appeals), which resulted in non-compliance on the part of the assessee before the ld. CIT(Appeals). We accordingly set aside the impugned order passed by the ld. CIT(Appeals) and restore the matter to the file of the Assessing Officer for making the assessment afresh properly on the basis of facts and figures relating to the proprietary concern of the assessee after giving the assessee proper and sufficient opportunity of reconciling/explaining the differences, if any, with the balances of the concerned parties.

In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the open Court on June 09, 2020.

Sd/- Sd/- (Satbeer Singh Godara) (P.M. Jagtap) Judicial Member Vice-President) Kolkata, the 9th day of June, 2020 Copies to : (1) Shri Mayank Kumar Jain, Neelkamal Apartment, Pranami Mandir Road, Siliguri-734001 Assessment Year: 2015-2016 Mayank Kumar Jain