Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, SMC BENCH, PUNE
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the assessee against the order of CIT(A)-1, Nashik, dated 02-09-2015 for the Assessment Year 2010-11.
Grounds raised by the assessee read as under :
“1. The Appellant request for condonation of delay in filing the appeal, as appellant was under suffering from “jaundice and was under treatment since 1-10-2015 to 04-02-2016. Therefore, he could not contact to the counsel and handed over the relevant papers for preparation of appeal. Hence, there is delay. Appellant had received the said notice about in the 6th October, 2015 and accordingly, appeal was due to be filed on or before 6th of December, 2015. Thus, there is delay about 2 month and 20 days. Therefore, appellant sincerely request to please condone the delay in filing the appeal and it may please be admitted to deliver the justice. 2. On the facts and in the prevailing circumstances of the case and the CIT(A) has erred in confirming the additions of unrecorded sale of Rs.4,84,905/-, though profit thereon and peak amount of Rs.1,90,180/- was offered by the appellant in the return of income. The aforesaid addition being arbitrary, devoid of merits and hence, addition may please be deleted.
On the facts and in the prevailing circumstances of the case and the CIT(A) has erred in confirming the disallowance of expenses at Rs.10,000/-, out of the amount of Rs.25,000/- made by the AO. As it is disallowances out of the expenses incurred for Telephone, Shop, Transport and Petrol expenses supported by bills and hence disallowances on adhoc basis on assumption and presumptions, is not justified. Hence, addition confirmed by the CIT(A) may please be deleted.”
Request for condonation of Delay of 81 days : At the outset, before
us, Ld. Counsel for the assessee submitted that there is delay of 81 days in
filing of this appeal. Ld. Counsel brought our attention to the affidavit
dated 20-02-2016 and stated that, during the relevant point of time
i.e. 01-10-2015 to 04-02-2016, the assessee suffered with jaundice and
therefore, he could not contact his counsel and hand over the relevant
papers.
After hearing both the sides and considering the contents of the
affidavit, we are of the opinion that the delay of 81 days in filing of the
appeal can be condoned in view of the reasonable cause. Therefore, the
appeal is admitted for adjudication. Accordingly, Ground No.1 raised by
the assessee is allowed.
Briefly stated relevant facts needed for adjudication of the Ground
Nos. 2 & 3 include that the assessee is a wholesale trader in General Mal
Bidi, Gutkha, Cigarette, Tobacco, Pan Masala Etc. Assessee filed the return
of income declaring total income of Rs.22,07,300/-. This is a case where
assessee was surveyed u/s.133A of the Act on 08-09-2010 and a statement
of Shri Haresh Nandlal Narayani, Proprietor of Sai Agency was recorded on
the said date. Assessee offered the following income as additional income
during the survey action amounting to Rs.19,35,182/-. Break-up details
are given as under :
Sr.No. Nature in respect of which Amount discrepancies noticed disclosed (Rs.) 1 Excess stock 8,85,612/- 2 Excess cash 3,50,000/- 3 GP on unrecorded sales 24,485/- 4 Unrecorded purchase of Bidi 6,75,085/- Total 19,35,182/-
However, in the return of income filed by the assessee, AO noticed in the
return of income that the above said disclosure of income was not offered in
toto. Special reference is made to the said sum of Rs.6,75,085/-. At the
end of the assessment proceedings, AO made various additions and
quantified the assessed income at Rs.27,67,706/-. AO added the said
income of Rs.6,75,085/-, which is part of the gross disclosure of
Rs.19,35,182/- and it relates to the addition on account of unrecorded
purchases of Bidi. Ground No.2 raised by the assessee before us revolve
around this addition. Assessee offered only Rs.2,14,615/- in place of
Rs.6,75,085/-.
Regarding the said Ground No.2, relevant facts include that the
assessee quantified the unaccounted purchases of Rs.6,75,085/- and on
sale of the same, assessee earned the gross profit of Rs.24,485/-. These
sales pertain to the period from 21-06-2009 to 26-08-2009. As per
assessee, the peak purchases works out to Rs.57,745/- and peak credit for
the said period works out to Rs.1,32,435/-. Thus, the peak purchases and
peak credit works out to Rs.1,90,180/-. The same is offered to tax on this
account. Thus, gross profit of Rs.24,485/- and peak purchases credit of
Rs.1,90,180/- (totalling to Rs.2,14,615/-) were eventually offered to tax by
the assessee in the return of income in place of original offer of
Rs.6,75,085/- during the survey action. This offer of Rs.2,14,615/- out of
Rs.6,75,085/- was not acceptable to the AO. Therefore, as per assessee, no
separate addition is called for on this account. However, the AO dismissed
the said submission of the assessee as per the discussion given in Para No.
5.1(c) of the assessment order. Therefore, the entire amount of
Rs.6,75,085/- should be added in view of the admission given by the
assessee during the survey action. AO relied heavily on the said statement.
6.1 During the First Appellate proceedings, assessee made various
written submissions. Contents of Para No.4.2 of the order of CIT(A) is
relevant. Eventually, the CIT(A) dismissed the appeal of the assessee on
this issue as per the reasoning/discussion given in Para No.4.3. In the said
paragraph, CIT(A) held that the assessee cannot back-track and state that
only peak credit plus gross profit should only be added. CIT(A) also
observed that the assessee failed to substantiate its claim with cogent
documentary evidences in support of the assessee’s claim. Assessee failed
to link the unaccounted purchases of Bidis to the account sales of the
bidis. CIT(A) also dismissed the assessee’s submission stating that the
assessee was not in proper frame of mind when the declaration of entire
unaccounted purchases are given during survey action. Thus, the CIT(A)
confirmed the entire addition of unaccounted purchases after netting the
income offered by the assessee in the return of income.
Aggrieved with the same, assessee is in appeal before us with the
grounds extracted above.
Before us, the case of the assessee is that unrecorded purchases of
Bidi worth Rs.6,75,085/- was offered originally during the survey action
without much application of mind on the issue. However, considering the
fact that the said unrecorded transactions is part-and-parcel of the
business transactions, the assessee quantified the relevant profits of the
said unrecorded purchases and worked out the same at Rs.24,485/- which
was included while filing the return of income. Further, assessee also
offered peak credit based investment in the said purchases. Therefore, as
per assessee, taxing of income of Rs.2,14,615/- (Rs.24,485 + Rs.1,90,180/-
(supra) on this discrepancy is fair instead of Rs.6,75,085/- on account of
unrecorded purchases.
On the other hand, it is the case of Ld. DR for the Revenue that
survey resulted in discovery of unrecorded purchases amounting to
Rs.6,75,085/- and the same were not recorded in the books of account.
Survey u/s.133A of the Act took place on 08-09-2010 and incorporation of
the same in the books of account subsequently constitutes an afterthought.
Finalisation of the return of income for the year based on the said updated
books of account constitutes an afterthought. Further, the assessee’s
failure to link the unaccounted purchases to unaccounted sales, does not
give rise to a valid peak credit addition. Therefore, it is a case of back-
tracking the statement given by the assessee and the same is
unsustainable.
We heard both the parties on this issue. The undisputed facts
include the discovery of unrecorded purchases amounting to
Rs. 6,75,085/-. The same are subsequently recorded in the books of
account before filing the return of income. In the return, assessee
disclosed the additional income of Rs.24,485/- on account of gross profit
on the unrecorded sales over Rs.1,90,180/- on account of peak credit on
the unrecorded purchases totalling to Rs.2,14,615/- (Para No.4.2 of order
of CIT(A). It is the case of the assessee that there is no case of making
entire unaccounted purchases of Rs.6,75,085/- when the above referred
working is within the scope of the peak credit linked principles. Further,
we find the principle of peak credit is a valid and sustainable method of
arriving at the income linked to unaccounted purchases/sales. This is the
case where the AO failed to bring any contrary evidence to deny the benefit
of peak credit additions. Considering the same, we are of the opinion that
the related investment in the said purchases and related profits on the
unaccounted sales stand taxed. Therefore, making addition merely relying
on the statement given by the assessee is not sustainable. Accordingly, we
reverse the order of CIT(A) on this issue. Thus, the ground No.2 raised by
the assessee is allowed in favour of the assessee.
Ground No.3 relates to confirmation of expenses of Rs.10,000/- by
the CIT(A). AO disallowed Rs.25,000/- out of the expenses claimed by the
assessee on various accounts of Telephone, Shop, Transport & Petrol. AO
reasoned that the assessee has not maintained details of the vouchers. In
the absence of supporting vouchers, AO disallowed a sum of Rs.25,000/-
out of the said expenditure on adhoc basis. However, in the First Appellate
proceedings, the CIT(A) restricted the said disallowance to Rs.10,000/-
again on adhoc basis in view of the possible element of personal use of the
phones, vehicles etc.
After hearing both the sides on this issue of disallowance of expenses,
we find it relevant to extract the finding given by the CIT(A) in Para No.6.2.
The same is reproduced as under :
“6.2 I have considered facts of the case, the submission of the appellant and the order of the Assessing Officer. It is observed the AO has made the disallowance on estimation. However, the interest of personal use cannot be ruled out. Conceding the facts and circumstances of the case the AO is directed to restrict the expenditure to Rs.10,000/-.”
In our view, no case is made out by the assessee that the assessee
maintained any log book showing the use of these facilities. Therefore, we
concur with the above finding of the CIT(A). Assessee failed to substantiate
the expenditure is for wholly and exclusively for the business activity of the
assessee. We therefore confirm the order of CIT(A) on this issue. Thus, the
ground No.3 raised by the assessee is dismissed.
In the result, appeal of the assessee is partly allowed.
Order pronounced on this 25th day of April, 2018.
Sd/- Sd/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 25th April, 2018. Satish
आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Nashik 3. आयकर आयु� / The CIT-1, Nashik 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “एक सद�य 5. एक सद�य” / एक सद�य एक सद�य DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार
//True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune