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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI G.S.PANNU & SHRI PAWAN SINGH
ORDER PER G.S.PANNU,A.M:
These two appeals have been preferred by the assessee pertaining to assessment years 2008-09 and 2009-10 and as they involve certain common issues, they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
Since the facts and circumstances in both the appeals stand on similar footing, the appeal of the assessee for assessment year 2008-09 is taken as the lead case. This appeals is directed against an order passed by CIT(A)-39, Mumbai dated 24/01/2014, which in turn arises out of an order passed by the Assessing Officer under section 143(3) r.w.s. 153A of the Income Tax Act, 1961 (in short ‘the Act’) dated 30/12/2010. Although the assessee has raised multiple Grounds of appeal, but at the time of hearing, arguments have been made by the representative of the assessee only with respect to Grounds of appeal No.4 in the Memo of appeal, which reads as under:-
4. The Ld. CIT(Appeals) dismissed the claim of the assessee with respect to credit of Rs.43,29,789/- in the bank statement of the assessee as all the information was disclosed to the extent possible.
Notably, assessee is an individual who is a member of one Nagi Group, which was covered under the search action under section.132(1) of the Act and as a consequence, the impugned assessment has been made under section. 143(3) r.w.s. 153A of the Act. Notably, assessee is an individual, who is a retired Defence Personnel and receives pension. During the year the total income declared by the assessee comprised of income under the head ‘salaries, business income from proprietary concern, M/s. Sai Soham and income from other sources including interest on FDRs with Bank. In the context of dispute before us, the relevant discussion is contained in para-6 of the assessment order. As per the discussion therein, the Assessing Officer noted credits of Rs.46,79,798/- appearing in the bank accounts and in the absence of any explanation, the said amount was treated as unexplained credit within the meaning of section 68 of the Act.
Before CIT(A) assessee made detailed submissions and pointed out that the impugned sum comprised of two amounts namely Rs.39,42,415/- reflecting credit entries in Current account No.1022880880 in the name of M/s. Sai Soham and Rs.7,37,383/- reflecting credit entries in an Overdraft Account No.3037766. With regard to the credits appearing in the Current account of the proprietary concern M/s. Sai Soham, assessee asserted that the same has already been declared in return of income and the respective Profit and Loss Account and Balance sheet of the proprietary concern was filed. With regard to the credits in the Overdraft account, assessee explained that the same consisted of refund of deposit earlier given to the land lord of Rs.3,00,000/- and a transfer of Rs.3,50,000/- from the proprietary concern. The balance of Rs.87,383/- was painting hire received from DHL, which was duly accounted in the return of income filed by assessee’s spouse Mrs. Chandra Nagi and in support copy of her return of income was furnished. For all the said reasons, assessee pointed out that the Assessing Officer wrongly treated the credit of Rs.46,79,798/- in the bank account as unexplained credit under section. 68 of the Act.
4.1 We find that the CIT(A) accepted the explanation of the assessee only with respect to a sum of Rs.3,50,000/- transferred from the proprietary concern and upheld the balance addition of Rs.43,29,789/-. Against such a decision assessee is in further appeal before us.
Before us the Ld. Representative for the assessee has referred to the written submissions placed in the Paper Book to point out that the impugned addition sustained by the CIT(A) was wrong and in fact none of the amounts could be treated as unexplained.
We have carefully considered the rival submissions. We find that so far as the amount of Rs.39,42,415/- credited in the Current account of the proprietary concern is concerned, the assessee had explained that the same featured in the Balance sheet and the Profit & loss account of the proprietary concern and that it pertains to the business receipts. The CIT(A) did not accept the explanation on the ground that the sales credited in the proprietary concern during the year was only Rs.19,28,164/- and the debtors in its balance sheet stood at Rs.3,45,696/- and, therefore, according to him the receipts of Rs.39,43,415/- were not appropriately explained. In our view, the CIT(A) has not appreciated the explanation furnished by the assessee in its proper perspective. In this context, we are tempted to reproduce hereafter the relevant explanation of the assessee, forming part of the written submissions, which is as under:-
“Sai Soham is a proprietary concern of Mr. Amarjit Nagi and business was carried under the above said name. The deposits into the account pertains to the amount received from the customers. The details of Receipts are shown in Annexure-1. The learned assessing officer erred in adding the entire amount as income u/s 68 of the Income Tax Act,1961. Sundry Debtors opening Balance Rs.20,93,273 – as on 31.03.20007 (as per balance sheet 31.03.2007) Add: Sales during the year Rs.19,28,164/--as per profit and loss account 31.03.2008 Contract Receipts Rs. 1,87,649/- - as per profit and loss account 31.03.2008 Sales Tax/Other charges Rs.1,08,025/- Total Rs.43,17,111/- Less: Received during the year Rs.39,42,415/- - Sch 2a Less: TDS Rs. 29,000/- Balance As on 31.03.2008 Rs.3,45,696/-- as per balance sheet 31.03.2008 The sum of Rs.39,42,415/- credited in the current account of the proprietary concern of M/s Sai Soham pertains to receipt against Sales/receivables. It has been further explained that current account no 10128880880 pertains to Sai Soham, which account has already been declared by the assessee in the return and copy of Balance sheet and Profit and Loss have been filed in the name of Sai Soham.” From the above it is quite clear that the source of the credits in the bank account of Rs.39,42,415/- are the business receipts. So however, we find that the said aspect involves factual appreciation and, therefore, we deem it fit and proper to direct the Assessing Officer to verify the explanation and, thereafter, pass an order afresh limited to this aspect. Even with regard to the balance of credit of Rs.3,87,383/- reflecting in the Overdraft account, the matter is also remanded back to the file of Assessing Officer for appropriate verification, inasmuch as, assessee has duly explained that the sum of Rs.87,383/- has already been explained in the return of income of his spouse and the balance of Rs.3,00,000/- is a refund of a deposit earlier given to the landlord. Needless to mention, the Assessing Officer shall allow the assessee a reasonable opportunity of being heard and only thereafter, pass an order afresh on the aforesaid aspect as per law. In the result, the appeal of the assessee for assessment year 2008-09 is treated as partly allowed for statistical purposes.
In so far as the appeal for assessment year 2009-10 is concerned, the first issue raised therein is also similar to that considered by us in assessment year 2008-09 on account of credit Rs.4,98,516/- found in the bank account of the assessee. On this aspect also for the reasons noted in the earlier year, the same is remanded back to the file of the Assessing Officer for passing an order afresh after hearing the assessee, as per law.
The only other issue remaining in the appeal for assessment year 2009-10 is an adhoc disallowance of rs.1,00,000/- sustained by the CIT(A) out of expenses claimed. Notably, the Assessing Officer had disallowed 25% of the total expenses of Rs.15,40,124/- debited to the P&L account on an adhoc basis citing absence of complete documentary evidence.
8.1 The CIT(A) in para-6 of his order records that “all the expenses claimed have been duly recorded in the books of account maintained by it, payment in respect of most of the expenses have been made through cheques debited in its bank account and the expenses related to the business carried on. It is not the case of the A.O that the expenses are not genuine or are not related to the business carried on”. Inspite of the aforesaid finding the CIT(A), the CIT(A) proceeded to retain an addition of Rs.1,00,000/- in an adhoc manner and deleted the balance of Rs.2,85,031/-. Against such sustenance of adhoc addition, the assessee is in appeal before us.
8.2 In our considered opinion, having regard to the aforesaid finding of the CIT(A), no adhoc addition is sustainable, therefore, we set-aside the order of the CIT(A) and direct the Assessing Officer to delete the entire addition of Rs.3,85,031/-.
In the result, captioned appeals of the assessee are partly allowed as above.
Order pronounced in the open court on 23/03/2018.