What did the Tribunal hold?

The Tribunal found that the assessee's accounting practices were confusing, with income and expenditure disclosed in separate accounts. However, it held that expenditure relatable to earning income must be allowed.

The assessee, engaged in the manufacture and export of jute products, claimed expenses in their personal income and expenditure account which were disallowed by the Assessing Officer. The assessee argued these expenses were incurred for business purposes.

What were the issues?

Whether expenses claimed in the personal income and expenditure account, which are relatable to business income, are allowable deductions.

Sri Shib Narayan Basu, North 24… vs ACIT | ITAT Kolkata 2018

Income Tax Appellate Tribunal, KOLKATA ‘D’ BENCH, KOLKATA

Before: Sri J. Sudhakar Reddy & Sri S.S. Viswanethra Ravi]

Sri Shib Narayan Basu…………………….…….………………………………………………….……..Appellant 28/A, East Santrapara Rahara 24-Parganas (North) Pin- 700 118 [PAN : AAJPB 1957 A] Assistant Commissioner of Income Tax, Circle-51, Kolkata…..……………………..Respondent Aayakar Bhawan Uttar Manicktala Civic Centre Uttarapan Complex DS-3 Kolkata – 700 054 Appearances by: Shri Rip Das, FCA, appeared on behalf of the assessee. Shri A. Bhattacharya, Addl. CIT, appearing on behalf of the Revenue Date of concluding the hearing : May 16th, 2018 Date of pronouncing the order : July 4th, 2018 O R D E R Per J. Sudhakar Reddy :-

This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax (Appeals)-15, (hereinafter the ‘Ld. CIT(A)’), dt. 14/09/2016, passed u/s 250 of the Income Tax Act, 1961 (hereinafter the ‘Act’), relating to Assessment Year 2011-12.

The assessee is an individual and is in the business of manufacture and export of jute products. The issue that arises for our consideration is disallowance of expenses claimed in the personal income and expenditure account of the assessee amounting to Rs.31,83,697/-. Similarly, the disallowance of Puja donation and subscription of Rs.29,651/-, and the disallowance of deduction u/s 10(34) of Rs. 11,129/-, are also disputed.

Assessment Year: 2011-12 Sri Shib Narayan Basu 3. The assessee’s case is that it runs a sole proprietor concern under the name and style of M/s World Wide Traders, as sole proprietor. It was submitted that the assessee has taken into account the income from business, in the personal, income and expenditure account of the assessee and thereafter claimed expenses on this business income in the personal income and expenditure account and the net profit only offered to tax. He submitted that the nature of expenditure squarely demonstrates that the expenditure in question was incurred for the purpose of business. He prayed that this was wrongly disallowed and hence the same should be allowed. The ld. D/R, relied on the order of the ld. CIT(A).

After considering rival contentions, we are of the considered opinion that the accounting and financial statement of the assessee have not been properly appreciated by the Income Tax Officer. Instead of maintaining a single account, the assessee confused the authorities by disclosing income and expenditure in two different accounts. Be it as it may, the expenditure relatable to earning income has to be allowed. Hence, we set aside this issue to the file of the Assessing Officer for fresh adjudication, in accordance with law. The assessee is directed to draw up a consolidated profit and loss account for all the activities as well as the personal account and submit the books and other details before the Assessing Officer, for fresh adjudication, in accordance with law.

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

Kolkata, the 4th day of July, 2018.

SRI SHIB NARAYAN BASU,NORTH 24 PARGANAS vs. ACIT, CIRCLE-51, KOLKATA, KOLKATA

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