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Facts
The Revenue is in appeal against the order of the CIT(A) who deleted certain additions made by the AO. The AO had made additions on account of alleged suppression of contractual receipts, interest income not reflected in books, unexplained cash deposit, and unverified expenses. The CIT(A) deleted these additions.
Held
The Tribunal noted discrepancies in the assessee's receipts shown in Form 26AS and the return of income. While the interest income issue was largely agreed with the CIT(A), the issues of contractual receipts and unverified expenses were remanded back to the AO for fresh examination. The issue of unexplained cash deposit was decided against the Revenue.
Key Issues
Whether the CIT(A) was justified in deleting the additions made by the AO on account of contractual receipts, interest income, cash deposits, and unverified expenses. Whether the issues of contractual receipts and unverified expenses require further examination by the AO.
Sections Cited
1961, Section 250, 1961, Section 144, 1961, Rule 46A
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Income Tax Appellate Tribunal, “PATNA BENCH” PATNA
Assessment Year: 2010-11 Assistant Commissioner of Income-tax, Circle-4(1), Patna, 4th Floor, Lok Nayak Jai Prakash Bhawan, Dak Bunglow Road, Patna .....................…...…………….... Appellant vs. Amit Kumar Singh, 2nd Floor, Divya Lok Complex, East Boring Canal Road, Patna - 800001 [PAN: AZPPS7985Q] ...........…..…........................ Respondent Appearances by: Assessee represented by : Shri Nishant Maitin, CA Department represented by : Ashwani Kr. Singal, JCIT Date of concluding the hearing : 15.01.2025 Date of pronouncing the order : 17.01.2025
ORDER PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
The present appeal arises from order dated 11.09.2018, passed u/s 250 of the Income Tax Act, 1961 (hereafter ‘the Act’) by the Ld. Commissioner of Income Tax (Appeals)-Patna-2.
1.1 In this case, the Ld. AO passed order dated 31.03.2013, u/s 144 of the Act by enhancing the returned income to Rs. 7,12,55,750/- as against returned income of Rs. 50,68,030/-. Aggrieved with this action, the assessee approached the Ld. CIT(A), where he met with some success, after a remand report was called for on the basis of new evidence filed (a) Addition of Rs. 3,63,50,267/- made on account of alleged suppression of contractual receipts.
(b) The deletion of addition of interest income amounting to Rs. 12,16,547/- which was allegedly not reflected in the books of accounts.
(c) The deletion of addition on account of alleged unexplained cash deposit amounting to Rs. 21,64,000/-.
(d) The deletion of addition of alleged unverified expenses amounting to Rs. 36,91,994/-.
1.2 Aggrieved with this action of Ld. CIT(A), the Revenue is in appeal with the following grounds: “
1. The Ld. CIT(A) has erred in deleting addition of Rs. 3,63,50,267/- made by A.O. on account of suppression evasion of contractual receipts of Rs. 4,92,25,360/-, disregarding the fact that the assessee failed to reconcile the receipts in 26AS statement with the Profit and Loss account.
2. The Ld. CIT(A) has erred in deleting addition of Interest Income of Rs. 12,46,547/- which is not reflected in his books of account. 3 The Ld. CIT(A) has erred in deleting addition of unexplained cash deposits of Rs. 21,64,000/-source of which is not verified by the assessee. 4 The Ld. CIT(A) has erred in deleting addition of unverified expenses of Rs. 36,91,994/- ignoring the fact that assessee has failed to establish genuineness of the expenditure claimed. 5 Any other ground taken at the time of hearing.”
2. Before us, the Ld. DR has submitted that in the remand report the Ld. AO had mentioned that the contractual receipts shown were not matching with the details of receipts available in Form 26AS. The Ld. DR assailed the action of Ld. CIT(A) in distinguishing between “caretaker services” and “civil services”, even when the audit report in Form 3CD Amit Kumar Singh clearly mentioned that the business of the assessee is “civil construction and security” regarding the alleged undisclosed interest income of Rs. 12,46,547/-. The Ld. DR pointed out that the Ld. CIT(A) has given the benefit of addition of Rs. 34,50,000/- which was made by the Ld. AO as unexplained introduction of capital and the same was confirmed by the Ld. CIT(A), to hold that the cash deposit would be subsumed in the addition of capital introduction as also due to another confirmed addition of unsecured loan amounting to Rs. 45,63,822/-. It was argued that there was no visible co-relation between figures of capital introduction and unsecured loan with respect to the impugned cash deposits. Lastly, regarding the deletion on account of alleged unverified expenses amounting to Rs. 36,91,994/-. The Ld. DR stated that it is recorded in the impugned order itself at page 29 that bills and vouchers pertaining to expenses were neither made available during assessment proceedings nor even during the proceedings of remand. On this basis, the Ld. CIT(A) should have confirmed the action of Ld. AO rather than down-sizing the adhoc addition @ 15% of expenses to 5% of expenses.
2.1 The Ld. AR vehemently argued that the action of Ld. CIT(A) was justified and he pointed out that the Ld. CIT(A) passed a well-reasoned order on the basis of remand report submitted by the Ld. AO. He pointed out that on pages 8 and 9 of the impugned order, the Ld. CIT(A) has discussed the issue of relationship between receipts as per Form 26AS and whatever has been claimed in the return of income. He also pointed out there was a substantial payment of about Rs. 1.20 Crore reflected in the Form 26AS, relating to an earlier year (AY 2009-10). Furthermore, it was averred that the interest income was erroneously mentioned in the Form 26AS and the Ld. CIT(A) merely corrected the error after receiving necessary documents in this regard. Regarding the alleged unverified cash deposit of Rs. 21,64,000/- he said that the Ld. CIT(A) had merely given the benefit of telescoping with regard to addition confirmed by him under 3 Amit Kumar Singh the head “unsecured loans” and “introduction to capital”. The Ld. AR stated that in case the cash deposit has to be considered as an addition then it was only reasonable that the assessee gets the benefit of additions confirmed under the two heads discussed earlier. Lastly, regarding the so- called unverified expenses, the Ld. AR stated that relevant documents in possession of the assessee were filed and, on that basis, the Ld. CIT(A), took a reasonable view and reduced the quantum of addition. The Ld. AR also took us through the paper book filed by him and the various documents enclosed therein.
We have carefully considered the submissions from both sides and also gone through documents before us. Right at the outset, it needs to be mentioned that there are considerable gaps in the findings of the Ld. CIT(A) to the extent that the receipts in Form 26AS do not match the receipts shown for the purposes of the return of income. However, there is considerable merit in the assessee’s submission that they have supplied a number of documents under Rule 46A of the Rules, which should have been sufficient to decide the issue one way or another. In this regard, the Ld. AR also pointed out that even at the stage of remand, the Ld. AO has continued to doubt that the receipts were fit to be reconciled. In this regard, we deem it fit to remand this issue back to the file of Ld. AO so that he may examine the documents present with the assessee and determine whether the receipts are reconcilable or not. In this regard, it is also important that there may be a considerable quantum of receipts pertaining to an earlier year which would certainly not form part of the receipts disclosed for the present year. Accordingly, we direct that the Ld. AO that he must examine this issue afresh.
3.1 Regarding the issue of interest income, we are inclined to believe the finding of Ld. CIT(A) but for the sake of clarity in this regard, we direct that the Ld. AO must examine the relevant documents in this regard and if the 3.2 Regarding the unexplained cash deposit of Rs.21,64,000/-, we are inclined to agree with the Ld. CIT(A) that the benefit of telescoping should be given to the assessee since two additions on account of capital introduction and unsecured loan have been confirmed by the Ld. CIT(A). Accordingly, Ground No. 3 is decided against the Revenue.
3.3 Regarding the issue of unverified expenses it is felt that in the interest of substantive justice, the assessee deserves a chance to present the vouchers etc. pertaining to such expenses and demonstrate their allowability before the Ld. AO. The issue in Ground of appeal No. 4 is also remanded back to the file of Ld. AO for a fresh examination, after affording an opportunity of being heard to the assessee.
With the above discussion, the issues in Grounds of appeal No. 1, 2 and 4 are remanded back to the Ld. AO and the ground of appeal No. 3 of Revenue is dismissed.
In the result, the appeal of the Revenue is partly allowed.