DCIT, CIRCLE-1, SILIGURI, SILIGURI vs. M/S COCETRA TRADE LINK P LTD, SILIGURI

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ITA 1716/KOL/2016Status: DisposedITAT Kolkata09 April 2018AY 2009-104 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the decision of the CIT(A) to delete the addition. The AO's own assessment indicated that the expenses were explained, and the addition was made solely to address an audit objection that was subsequently settled after the assessment order was passed.

What were the facts?

The Assessing Officer (AO) reopened the assessment of the assessee company and added expenses of Rs. 1,36,94,103/- to its income as unexplained expenditure under Section 69 of the Income Tax Act. The AO made this addition despite his own observation that the expenses were explained, primarily due to an pending audit objection.

What were the issues?

Whether the AO was justified in making an addition for unexplained expenditure when he himself was satisfied that the expenses were explained, and the addition was made due to an audit objection.

Which sections of the Income-tax Act were involved?

Section 69,Section 143(3),Section 147,Section 148,Section 69A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH: KOLKATA

Before: Shri J. Sudhakar Reddy & Shri S.S. Viswanethra Ravi

ORDER Shri S.S.Viswanethra Ravi, JM:

This appeal by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals), Siliguri dt. 23-06-2016 for the A.Y 2009-10.

2.

The only issue is to be decided as to whether the CIT-A is justified in deleting the impugned addition made by the AO u/s. 69 of the Act in the facts and circumstances of the case.

3.

The brief facts of the case are that the assessee is a company and derives its income from letting out of godown. The assessee filed its return declaring a total income of Rs. 16,74,620/- for the A.Y 2009-10 i.e. under consideration, which was accepted u/s. 143(3) of the Act. The AO reopened the said assessment detecting certain income escaped assessment. Notice u/s. 148 of the Act was issued. In response to which, the assessee filed its e-return on 11-11-2014 declaring the same total income i.e at Rs.16,74,620/- as declared in the original return of income.

4.

In the said proceedings, on perusal of balance sheet as on 31- 03-09, the AO found that the assessee made addition in fixed assets under the head’ building’ of Rs. 3,27,76,071/- and claimed expenses of Rs.1,36,94,103/-. The assessee was asked to produce relevant documents regarding the expenses incurred on the building during the assessment proceedings, according to AO, assessee failed to produce the same. In absence of any bills and vouchers, the claim of expenses of Rs.1,36,94,103/- treating the same as unexplained and added the same to the total income of assessee as unexplained expenditure u/s. 69 of the Act.

5.

The assessee challenged the same before the CIT-A and contended before him that during the course of re-assessment proceedings u/s. 147 the assessee filed all ledger copies of building account and item-wise details of purchase and other expenses. The assessee made all payments through bank. The AO examined the same and added the impugned amount as unexplained expenditure only on the objections raised by the Revenue audit and contended that this action of the AO is arbitrary and uncalled for.

6.

The CIT-A considering the above submissions, examining the material on record and particularly considering the observation of JCIT deleted the impugned addition by stating as under:-

“5.2. Interestingly, it is seen from the assessment records that on 27/05/2015, the AO wrote to the AAO, Revenue Audit, giving his 'observation' to the audit objection, which is reproduced below: " As per submission of the assessee Rs.2,23,94,552/- was WIP as on 01/04/2008 which included land of Rs.33,12,584/- (non-depreciable assets) and addition of Rs. 1,36,94,103/- was made during the current year (F.Y. 2008-09). So, after transferring the amount of Rs.33,12,584/- towards the block of land, closing balance of building as on 31103/2009 was Rs.3,27,76,071/-. This fact has been verified from records available. A copy of the relevant portion of balance sheet and its enclosure including depreciation schedule is enclosed for your ready reference, which is self explanatory.

This office does not find any merit in the audit observation, as such the impugned addition of fixed assets (Building) amounting to Rs.1 ,03,81 ,519/- remains explained and treating it as unexplained investment u/s 69A of the Act is uncalled for."

Endorsing AO's observation, the JCIT, vide his letter dated 28/0512015, suggested for dropping the Audit Para. It is found from the assessment records that on the basis of the reply of the AO and JCIT, the Revenue Audit 'settled' the Audit Para, vide letter dated 08/06/2015, received in the office of the AO on 31107/2015, i.e. after passing the instant assessment order on 23/07/2015. Thus, it is clear that the AO though satisfied that the additions to fixed asset (building) were properly explained by the assessee, but made the addition for the reason of pending settlement of Audit Para. 5.3. In view of the foregoing discussions, the AO was not justified in making addition of Rs.1,36,94,103/-. The same is ordered to be deleted.” 7. The ld.DR relied on the order of the AO. On the other hand, the ld.AR reiterated his same submissions as made before the CIT-A.

8.

Heard ld. DR and perused the material on record. On perusal of impugned order of the CIT-A, we find that the AO wrote a letter to the AAO, Revenue Audit, giving his ‘observation’ to the audit objection. According to AO, the impugned amount of Rs.1,03,81,519/- remains explained and the opinion that the same is unexplained investment u/s. 69A of the Act, by the AAO, Revenue Audit) is uncalled for. We find that the AO though satisfied that the additions to fixed asset (building) were properly explained, but made the said addition for the reason of pending settlement of Audit objection. The JCIT vide his letter dt. 28-05-2015 requested to drop audit para and basing on their replies of AO & JCIT, the AAO (Revenue audit) settled the audit para vide its letter dt. 8-6-15, which was received by the AO on 31-07-2015 i.e. after passing the instant assessment order on 23-07-15 u/s. 143(3)/147 of the Act. We find that the CIT-A considering the submissions of assessee and on an examination of records deleted the said addition and we do not find any reason to interfere with the finding of the CIT-A and it is justified. Therefore, the ground nos. I, II & III raised by the revenue on this issue are dismissed.

9.

In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 09-04-2018

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