CHANDAN CHATTERJEE,BANKURA vs. ITO, WARD - 3(1), BANKURA, BANKURA

The captioned appeal filed by the assessee, pertaining to assessment year 2013-14, is directed against the order passed by the Commissioner of Income Tax (Appeal)-Durgapur, in appeal no. 33/CIT(A)/DGP/2016-17, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (in short the “Act”) dated 18/03/2016.

Ground no. 1 relates to addition of Rs. 1,17,445/- made by the A.O. on account of alleged difference in the closing balance of sundry debtors.

The facts of the case which can be stated quite shortly are as follows: The A.O. (refer Pg. 3 of assessment order), on perusal of statement received from M/s Electrosteel Castings Ltd.(ESCL) as called for u/s 133(6) of the Act, it was Chandan Chatterjee Assessment Year:2013-14 observed that the closing balance as on 31.3.2013 in the books of the said company in respect of the assessee was Rs.8,48,755/- (Cr.) whereas the assessee had shown the amount receivable as Rs.7,31,310/- (Dr.). Accordingly, the A.O. added the difference of Rs. 1,17,445/- (Rs. 848,755 – Rs. 731,210).

On appeal, ld. CIT(A) confirmed the addition. Aggrieved the assessee is in appeal before us.

We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that CIT(A) has dealt with the issue at Pg. 19 of his order. Before the CIT(A), the assesee had filed a corrigendum audit report. The said report is placed at Pg. 27 of paper book. In the said corrigendum audit report, the auditor has certified that there was some compensating error while preparing the balance sheet. Accordingly, he rectified the sundry debtor’s balance and cash in hand figure as on 31.03.2013 as Rs.8,48,755/- and Rs.5,57,055/- respectively. The CIT(A) rejected the revised figures after calling for the remand report (copy placed at Pg. 15 of PB). The CIT(A) has held that it is a kind of unilateral action of the assessee and the same is without any evidence. We note that in the accounting process it is quite common to have compensating errors and the action of the assessee is not unilateral since the revised balance sheet is backed by a certificate issued by an auditor who is a qualified chartered accountant. The auditor has certified that there was compensatory error which has resulted into difference of Rs. 1,17,445/-. The ld. CIT(A)has failed to bring on record any cogent evidence which shows that revised balance sheet filed by the assessee is wrong. The ld CIT(A) also failed to examine the compensating errors in assessee`s books of accounts. Therefore, we are of the view that one more opportunity should be given to the assessee to explain the compensating errors. Hence we remit this issue back to the file of the AO to examine the compensating errors and allow the claim of the assessee in accordance to law. For statistical purposes, the ground raised by the assessee is allowed. Page | 2

Ground no. 3 relates to addition of Rs. 3,99,240/- (Rs. 8,25,094/- - Rs. 4,25,854/-) being difference between purchased motor car valued and value of motor car shown by the assessee.

The facts of the case which can be stated quite shortly as follows: The A.O. has dealt with the issue at Pg.5 of the assessment order. According to the A.O. as per ITS details, assessee purchased motor car valued at Rs.8,25,094/-while the assessee hadshown the value of motor car at Rs. 4,25,854/- in the asset side of the balance sheet. The difference of Rs.3,99,240/-(8,25,094 – 4,25,854) was added to the total income of the assessee as undisclosed investments.

On appeal, the ld. CIT(A) confirmed the addition made by the Assessing Officer. Aggrieved the assessee is in appeal before us.

The ld. Counsel for the assessee has submitted before us that the motor car in question was purchased in the name of the assessee, in his personal account while the A.O. has compared the new purchased car with the balance sheet of the assessee’s proprietary concern viz. Shri Ganesh Enterprise. Hence, this difference is because of presentation in the different Balance Sheets of different motor car therefore addition made by AO needs to be deleted.On the other hand, the ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity.

We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that the CIT(A) has dealt with the issue at Pg. 24 of his order. Before the ld. CIT(A), the assessee submitted that the motor car in question was purchased in the name of the assessee, in his personal account while the A.O. has compared the new purchased car with the Chandan Chatterjee Assessment Year:2013-14 balance sheet of the assessee’s proprietary concern viz. Shri Ganesh Enterprise. The said purchase is duly reflected in the personal balance sheet of the assessee as on 31.03.2013 (paper book Pg.32). The schedule of motor car is placed at Pg. 31 of paper book,from where it can be seen that the purchase of motor car during F.Y. 12-13 is shown at Rs.8,43,559 - (inclusive of incidental expenses). The same was financed partly by M & M Financial Services to the tune of Rs.4,00,000/- (copy of statement of account of the said company is placed at paper book Pg. 38) and through internal accruals. All these documents were submitted before CIT(A) who called for a remand report (copy of remand report is placed at paper book Pg. 15). The A.O. in the remand report has rejected the assessee’s contention without giving any plausible reasoning. The ld CIT(A) has also dismissed this ground (finding is given at Pg. 24) on irrelevant considerations. It is submitted that both the authorities below have not denied the genuineness of documents submitted before them. We note that assessee has explained that the motor car in questions was purchased in the name of assessee in his personal account whereas Assessing Officer has compared the new purchased car with the balance sheet of the assessee’s proprietary concern. That is, car has been purchased in personal account and not in the name of proprietary concern, and this fact has not been disputed by the Assessing Officer. The assessee has also explained the source from which the new car was purchased; stating that partly it was financed by M&M Financial Services and partly by internal accruals. Before us ld. D.R. for the revenue has failed to bring any cogent evidence on record to show that the facts narrated by the assessee and explanation given by assessee about source of funds were false. Considering the factual position narrated above, we delete the addition of Rs. 3,99,240/-.

Ground no. 4 raised by the assessee relates to addition of Rs. 15,82,470/- on account of peak credit.

Facts of the case which can be stated quite shortly are as follows: During the assessment proceedings, the Assessing Officer noticed that assessee has seven undisclosed bank accounts. The A.O proceeded to add the peak balance of the individual bank accountand made addition ofRs. 15,82,470/-. Page | 4

The ld. Counsel for the assessee has relied on the submissions made before ld. CIT(A) and on the other hand, the ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity.

We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other material available on record. The ld. Counsel for the assessee submitted before us that instead of taking the peak credit of individual bank account, the A.O. ought to have taken the combined peak credit. The statement of combined peak credit is enclosed at Pg.41 of Paper Book. However, ld. D.R. for the revenue submitted before us that peak credit of individual bank account should be considered. We are of the view that it would be fair and in the interest of justice if the combined peak credit is added to the total income of the assessee. Therefore, we direct the Assessing Officer to examine the combined peal credit statement of the assessee and make addition based on combined peak credits. The ground raised by the assessee is allowed for statistical purposes.

Ground no. 5 relates to addition on account of donation & subscription of Rs.65,316/-. According to A.O. (refer pg.7 of the assessment order), the said expenditure was not fully and exclusively for the purpose of business,therefore, AO disallowed the same.

On appeal, the ld. CIT(A) confirmed the addition made by Assessing Officer. Aggrieved the assessee is in appeal before us.

We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other material available on record. The ld. Counsel for the assessee

In the result, the appeal of the assessee is partly allowed for statistical purposes.