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Income Tax Appellate Tribunal, BANGALORE BENCH ‘ A ’
Before: SHRI VIJAY PAL RAO & SHRI INTURI RAMA RAO
Per Shri Vijay Pal Rao, J.M. : These two appeals by the revenue are directed against the two separate orders of Commissioner of Income Tax (Appeals) both Dt.05.06.2015 for the Assessment Years 2009-10 & 2010-11 respectively. following grounds :
3. Ground No.1 is general in nature and does not require any specific adjudication.
4. Ground No.2 is regarding addition made by the Assessing Officer on account of advance given to M/s. Chinmay Enterprises which was deleted by the CIT (Appeals) by considering the recast of balance sheet.
During the course of assessment proceedings in response to the letter assessee has shown an advance to M/s. Chinmay Enterprises, Mumbai of Rs.12,56,300. The assessee further submitted before the Assessing Officer that at the time of filing the classification of purchases and also the names of the suppliers of the material, the figures were interchanged. The amount of Rs.12,56,300 sent to M/s. Chinmay Enterprises, Chandigarh through bank transaction and was directly deposited into the bank by bigger HUF. The assessee thus contended that the said transaction has been recorded in the day book and also ledger account. However the balance sheet was filed before the Assessing Officer was stated to be rough balance sheet which were prepared earlier in its finalization and therefore the assessee filed the recasted balance sheet wherein this amount was shown. The Assessing Officer did not accept this explanation of the assessee and observed that the assessee is trying to alter the figures according to his convenience.
The Assessing Officer further stated that the assessee never produced the books of accounts it is only after forwarding the account extract the assessee is coming up with the books of accounts regarding the entries the recasted statement and made the addition on this account.
On appeal, the CIT (Appeals) accepted the recasted balance sheet and deleted the addition to the extent of Rs.12,56,300.
Before the Tribunal, the ld DR has referred to the findings of the Assessing Officer and submitted that only when the Assessing Officer has sent the extracts of the accounts, the assessee recasted its balance sheet and carried the entries as per its convenience. The CIT (Appeals) has accepted the recasted balance sheet without discussing the reason as to how this amount was not appearing in the original balance sheet filed by the assessee along with the return of income. The Assessing Officer has specifically pointed out that the CA denied having audited the recasted balance sheet and therefore the same cannot be accepted. He has relied upon the order of the Assessing Officer.
On the other hand, the learned Authorised Representative of the assessee has submitted that the total turnover recorded in the books of accounts and profit and loss account matches with the deposits in the bank account therefore there was no reason for suspecting the transaction of giving advance to the M/s. Chinmay Enterprises. He has was computed on the basis of books of accounts because in the earlier year the income was computed on presumption basis due to very small turnover. Further on the turnover of less than Rs.1 Crore, the Assessing Officer has assessed Rs.50 lakhs as income of the assessee which is not justified from any angle. The Assessing Officer has added the entire amount which cannot be assessed to tax and only the gross profit addition should be made. He has supported the order of the CIT (Appeals).
We have considered the rival submissions as well as the relevant material on record. The Assessing Officer has noted that the accounts as appearing in the books of accounts and the extracts of the three parties including M/s. Chinmay Enterprises showing a credit balance of Rs.12,56,300 confronted with the assessee for confirmation of balance.
Since this amount was not reflected in the balance sheet filed along with the return of income, the Assessing Officer specifically asked the assessee to explain the balance of this amount in the name of M/s.
Chinmay Enterprises. The assessee stated before the Assessing Officer that it has made the deposits of Rs.12,56,300 through bank transaction this amount should have been reflected in the balance sheet however it was not shown in the balance sheet filed along with the return of income. Therefore the assessee filed a recasted balance sheet. It is pertinent to note that in the recasted balance sheet, changes were made by the assessee is only to reflect this balance of Rs.12,56,300 in the name of M/s. Chinmay Enterprises which was found by the Assessing Officer in the ledger account. Therefore there is no dispute that this amount was already recorded in the books of accounts and was part of the ledger account of the party and the only deficiency in the accounts was regarding not showing in the balance sheet which was filed along with the return of income. Therefore rectifying the said mistake in the recasted balance sheet is not against the books of accounts but it is only to reflect the correct financial statements as per the books of accounts.
The Assessing Officer has not disputed the transaction of this amount through bank and therefore the genuineness of the transaction was not doubted or questioned by the Assessing Officer. The Assessing Officer has made the addition simply on the ground that this amount was not reflected in the original balance sheet and therefore this was added to has explained the source of this amount and the transaction through banking channel then no addition is justified as this amount was already shown in the books of accounts but was missed in the balance sheet filed along with the return of income which was rectified by the assessee by filing a recasted balance sheet. Accordingly, I do not find any error or illegality in the order of CIT (Appeals) qua this issue.
Ground No.3 is regarding addition made by the Assessing Officer on account of outstanding labour charges which was deleted by the CIT (Appeals). The Assessing Officer noted that the assessee has shown current liabilities of Rs.11,96,500 as outstanding under labour charges and wages outstanding in the balance sheet. The Assessing Officer asked the assessee to furnish the relevant details, names, address, account extracts and letter of confirmation of the current liabilities. In response the assessee submitted that the assessee has carried out and executed the work to the extent of Rs.88,91,403 which is not disputed. The labour charges are incurred in respect of the said work carried out by the assessee and part of which remains payable for the reason that some of the work may be incomplete. The assessee further submitted that the wages which are pending for want of measurement and settlement and as such the question of filing the confirmation letter does not arise. The Assessing Officer did not accept this explanation of the assessee and held that the assessee has not discharged the onus of genuineness of the claim. Therefore the Assessing Officer added the said amount of Rs.11,96,500 to the total income of the assessee.
On appeal, the CIT (Appeals) restricted the disallowance only to Rs.6,96,500 and granted a part relief of Rs.5 lakhs.
Before the Tribunal, the learned Departmental Representative has submitted that the CIT (Appeals) has restricted the disallowance on adhoc basis for want of production of books of accounts and vouchers and therefore when the assessee has failed to discharge its onus to establish the claim, relief granted by the CIT (Appeals) is not justified. He has relied upon the order of the Assessing Officer.
On the other hand, the learned Authorised Representative has submitted that the total claim of the labour charges is not found to be excessive in comparison to the total turnover of the assessee therefore be held as bogus. He has supported the order of the CIT (Appeals).
We have considered the rival submissions as well as the relevant material on record. Out of the total labour charges of Rs.17,87,947, the assessee has shown the outstanding of Rs.11,96,500. The Assessing Officer disallowed the claim of labour charges to the extent of outstanding amount on the ground that the assessee has failed to establish the claim as genuine because the assessee has not produced the books of accounts, vouchers as well as other details of the parties apart from the confirmation from the parties. There is no dispute that the assessee did not produced the relevant details and vouchers in support of the claim however, it is also not in dispute that the total claim of the labour charges is about 20% of the contract receipts. Therefore this claim is not found to be excessive. Hence in view of these facts and circumstances of the case when the claim of assessee is not found to be inflated or excessive having considering the contract receipts then the disallowance confirmed by the CIT (Appeals) for want of books of accounts and supporting vouchers is proper and justified. the Assessing Officer on account of amount deposited in the bank which was restricted by the CIT (Appeals) to the gross profit addition. The Assessing Officer noted that there are deposit transactions in the bank account of the assessee total amounting to Rs.12,95,573 which are not accounted in the books of accounts. There was a closing credit balance of Rs.5,772. Accordingly in the absence of any supporting evidence, the Assessing Officer made this addition of the total amount of Rs.13,01,345.
On appeal, the CIT (Appeals) restricted the addition to gross profit at 10%.
Before the Tribunal, the ld. DR has submitted that deposits in question was found in the bank account but was not accounted in the books of accounts therefore the said amount is an unexplained deposit and liable to be added to the income of the assessee.
On the other hand, the learned Authorised Representative has submitted that out of this addition of Rs.13,01,345 being deposit in the bank account to an amount the extent of Rs.11,73,573 was through cheques and only a small amount of Rs.1,22,000 was through cash.
Therefore the entire deposit in the bank represent the turnover of the deposit in the bank through cheques was received from the third party and therefore the same cannot be treated as unexplained income of the assessee. He has supported the order of the CIT (Appeals).
We have considered the rival submissions as well as the relevant material on record. The Assessing Officer has reproduced the details of the deposits in the bank account of the assessee which shows a total amounting to Rs.12,95,573 out of which a sum ofRs.11,73,573 was deposited through cheques. The Assessing Officer has not disputed that these cheques were received by the assessee from third parties and further when the total deposit in the bank is not exceeding the turnover of the assessee then the entire amount received through cheque from the third party cannot be treated as income of the assessee but only a gross profit of such contract receipts which are not accounted in the books of account can be assessed as income of the assessee. The CIT (Appeals) has discussed this issue in detail and given the finding that this amount represents the turnover of the assessee and therefore only a gross profit addition is required to be assessed. It is further pertinent to note that the majority of this amount was received by the assessee from unexplained investment or deposits of the assessee even if the said amount is not recorded in the books of accounts. In view of the above facts and circumstances of the case, we do not find any error or illegality in the impugned order of the CIT (Appeals) qua this issue.
Ground No.5 is regarding the addition made by the Assessing Officer of Rs.5 lakhs on account of advance received which was restricted by the CIT (Appeals) to the gross profit addition. The Assessing Officer on verification of the account extracts noted that the assessee received a sum of Rs.5 lakhs in cash for execution of building construction work.
The Assessing Officer stated in the assessment order that the assessee has not furnished any details such as name, address of the person from whom such advance is received. Further no document was produced regarding the purchases for which the advance was received by the assessee and the alleged construction of building. In the absence of any agreement regarding the transaction of construction of building against which the assessee claimed to have received the advance the Assessing Officer has made the addition of the said amount of Rs.5 lakhs as unexplained cash credit.
Assessing Officer only gross profit @ 10% in respect of the entire amount. The ld. DR has submitted that the Assessing Officer noted the said deposit in the bank account was not accounted in the books of accounts therefore, in the absence of any supporting evidence, the Assessing Officer added the said amount to the income of the assessee.
The CIT (Appeals) has restricted the addition by adopting the gross profit @ 10% of the total turnover without giving the finding that this amount represents advance for execution of work.
On the other hand, the learned Authorised Representative of the assessee has submitted that since the assessee is having no other source of income therefore, the deposit of Rs.5 lakhs represents only the turnover. He has supported the order of the CIT (Appeals).
We have considered the rival submissions as well as the relevant material on record. There is no dispute that this amount was found by the Assessing Officer as deposited in the bank account of the assessee.
This is a cash deposit and therefore when the assessee has failed to even explain the particulars and name of the party from whom this amount was received by the assessee the explanation of the assessee that it is acceptable. The assessee has not disputed the fact that the assessee failed to even explain and furnish the name of the person from whom this amount was received and the particulars of the work to be carried out by the assessee against which the alleged advance was received by the assessee. There is nothing in writing to support this transaction of receipt of advance. Further this amount was also not recorded in the books of accounts. Therefore it is a clear case of failure on the part of the assessee to support its claim either by furnishing the plausible explanation or by producing the supporting evidence. Hence the cash deposit cannot be treated as part of the turnover of the assessee so as to justify the gross profit addition. Accordingly, the impugned order of the CIT (Appeals) is set aside and the order of the Assessing Officer in making the addition of the amount of Rs.5 lakhs is restored.
For the Assessment Year 2010-11, the revenue has raised the following grounds :
23. Ground No.1 is general in nature and does not require any specific adjudication.
24. Ground No.2 is regarding addition made by the Assessing Officer on account of outstanding labour charges. This issue is common as for the Assessment Year 2009-10. Therefore in view of the finding on this issue for the Assessment Year 2009-10, the disallowance restricted by the CIT (Appeals) is upheld.
25. Ground No.3 is regarding the addition made on account of unaccounted sales which was restricted by the CIT (Appeals) to gross profit addition.
We have heard the learned Departmental Representative as well as learned Authorised Representative and considered the material on Assessment Year 2009-10. In view of our finding on this issue for the Assessment Year 2009-10, the addition restricted by the CIT (Appeals) to gross profit @ 10% is upheld.
In the result, the appeals of revenue for the Assessment Year 2009-10 is partly allowed and for the Assessment Year 2010-11 is dismissed.
Order pronounced in the open court on the 18th day of Aug.,2017.