SHIB SHANKAR MONDAL & ORS.,KOLKATA vs. ITO, WARD-1(40, HOOGHLY, HOOGHLY

The assessee in the present case is a partnership firm which is carrying on the business as M.R. Distributor. The return of income for the year under consideration was filed by it on 27.09.2010 declaring a total income of Rs. 48,100/-. As noted by the A.O. during the course of assessment proceedings, there were credits of Rs. 9,79,323/- in the bank account maintained by the assessee with State Bank of India, Arambagh Branch. The explanation offered by the assessee in this regard before the A.O. was that the said amounts were received by it from the Government as mileage rebate. It was explained that the dealers situated above 8 k.m. distance from the godown of the distributor were eligible to get extra allowance on transport charges Assessment Year: 2010-11 Shib Shankar Mondal & Ors called as rebate mileage and such rebate mileage amounting to Rs. 9,79,323/- received during the year under consideration was distributed to the concerned dealers according to their eligibility. This explanation of the assessee was not found acceptable by the A.O. He noted that the similar amount of rebate mileage received by the assessee firm in the earlier two years was not distributed to the dealers. He also examined three of the dealers of the assessee and in their statement recorded by the A.O., the said dealers could not offer any satisfactory explanation to support and substantiate the case of the assessee. The A.O., therefore, treated the amount of Rs. 9+,79,323/- received by the assessee on account of mileage rebate as its undisclosed income and addition to that extent was made by him to the total income of the assessee in the assessment completed under section 143(3) vide an order dated 28.03.2013.

Against the order passed by the A.O. u/s 143(3), an appeal was preferred by the assessee before the Ld. CIT(A) and since the submissions made by the assessee in support of its case on the issue in dispute were not found acceptable by him, the Ld. CIT(A) proceeded to confirm the addition of Rs. 9,79,323/- made by the A.O. on account of mileage rebate for the following reasons given in paragraph no 5 of his impugned order: “5. I have considered the facts of the case and the appellant's submissions. The facts, in brief, are that the appellant's bank account with SBI, Armbagh Branch was found credited with various sums aggregating to Rs. 9,79,323/- on different dates. The amount was not found accounted for. The explanation given by the appellant was that the appellant had to give mileage rebate to M.R. Distributors whose piece of business is situated at a distance more than 8 Kms. from the distributor's godown.

Assessment Year: 2010-11 Shib Shankar Mondal & Ors Such rebate is reimbursed to the appellant by the Office of Sub-divisional Controller (F & S), Government of West Bengal. However, the year in which the rebate is paid to the M.R. Distributors may not match with the year in which the reimbursed by the Government is received. Thus, the receipts of Rs.9,79,323/- could not be treated as income. The AO examined the P&L Accounts for the financial years relevant to A.Ys. 2008-09, 2009- 10 and 2010-11 and found that only Rs. 1.49 lakhs was paid as rebate by the appellant in the financial year relevant to A.Y.2009-10. No rebate was paid in the financial years relevant to A.Ys. 2008-09 and 2009-10. Statements of three M.R. Dealers recorded revealed that they were making payments to the appellant only after deducting the rebate mileage allowable to them as per sale memos. Hence, according to the AO, there was no question of making further payments to the M.R. Dealers. As no rebate was paid to the M.R. Dealers during the previous year, the receipts of Rs.9,79,323/- were added as unaccounted receipts. During the appellate proceedings, the appellant has made submissions which are similar to those made at the stage of assessment. There is no dispute that the appellant had received rebate of Rs.9,79,323/- from the Government of West Bengal during the previous year which was not accounted for. The appellant's case is that the receipts represent reimbursement of mileage rebates paid by the appellant to M.R. Dealers in earlier years. The appellant also furnished statements of rebate for various periods during the financial year with copies of self made debit notes in respect of rebate and mileage charges, which apparently do not have any correlation with the amounts received by the appellant during the previous year. Moreover, the appellant has also not clarified as to why no debate is shown to be debited in the Profit and Loss Account. Be that as it may, the statements of the M.R. dealers reveal that the sales credited by the appellant were net of the rebates paid, if any, as the M.R. dealers were paying for their purchases as per amounts determined after deducting rebate in the sale memos. The main finding in the assessment order is that the receipts aggregating to Rs.979,323/- were not accounted for. The appellant has not disputed this finding. Hence, even if the receipts represented reimbursement of rebates distributed by the appellant in earlier years, it has not been explained with sufficient details or evidence as to why the receipts were not accounted for when the rebates paid had already been deducted from the sales. Thus, while expenses have been claimed as deduction, the corresponding reimbursement has not been offered for taxation. Hence, the addition of Rs.9,79,323/- is confirmed.”