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Income Tax Appellate Tribunal, C/“SMC” BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI
आदेश / O R D E R
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal is filed by the assessee, aggrieved by the order of the Learned Commissioner of Income Tax(A)-13, Chennai dated 14.07.2017 pertaining to assessment year 2014-15.
The assessee has raised the following grounds for adjudication.
1. The order of The Commissioner of Income Tax (Appeals) 13, Chennai dated 14.07.2017 in l.T.A.No.79/CIT(A)-13/2014-15 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.
2. The CIT (Appeals) erred in confirming the estimated addition of Rs.73,8451- upon reworking the net profit at 0.5% of the sales turn over as against the reported net profit computed at 0.07% of the sales turn over without assigning proper reasons and justification.
3. The CIT (Appeals) failed to appreciate that the enhancement of net profit without valid reason was wrong, erroneous, unjustified, incorrect and not sustainable in law and ought to have appreciated that there was no scientific approach adopted by the Assessing Officer to rework the net profit for the purpose of taxation.
4. The CIT (Appeals) erred in sustaining the addition of `4,40,000/- on the presumption of cessation of sundry creditors balance within the scope of section 41(1) of the Act in the computation of taxable total income without assigning proper reasons and justification.
The CIT (Appeals) failed to appreciate that the misreading of the financial statements of the appellant would vitiate the the presumption of cessation of liability and ought to have appreciated that the transaction between partners with the relative was wrongly construed as the transaction between the appellant and the partners’ relative.
The CIT (Appeals) failed to appreciate that the submissions filed in writing were not considered in proper perspective and ought to have appreciated that the presumption of wrong facts would vitiate both the additions made in the computation of taxable total income.
The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law.
The brief facts of the case are that the appellant filed return of income for assessment year 2014-15 declaring total income at `10,540/-. The case was selected for scrutiny under CASS The assessee has turnover from the business for `l,47,69,118/- and has shown net profit for Rs.10,541/-. To arrive at this profit, the assessee has deducted interest on capital for `72,000/-, remuneration to partners for `1,50,000/- and has claimed depreciation. According to the assessee, the firm is acting as middleman and therefore the profits so declared is justified. However, according to AO, considering the size of the business and the nature of the business, net profit so declared is very low. Therefore, the AO estimated net profit of the firm @ 0.5% on sales turnover of `1,47,69,118/- and the same works out to `73,845/- and added to the total income of the assessee. The assessee has shown an amount of `4,40,000/- as liability in the earlier years under the head ‘sundry creditors’ in the names of Shri J.
Mohaideen Abdul Samadani. However, the same creditor is not appearing in the balance sheet for AY 2014-15. Before the AO, the assessee has clarified that the sum of `4,00,000/- was received on 29.06.2011 and `40,000/- on 11.06.2012 as gift from Shri J.
Mohaideen Abdul Samadani, Sb. one of the partner Shri N.P.
Jahubar Hussaina and brother of partner Shri J. Aludeen. However, the accountant has shown the said receipt inadvertently under the head Sundry creditors. However, the assessee has further contended before the AO that on realizing the mistake they have rectified the same and the receipt is now shown as in respective partners current A/c. However, such clarification was not acceptable to the AO.
Therefore, the AO treated the same as the cessation of liability u/s.41(1) of the Act and added to the total income. Aggrieved by this, the assessee carried the appeal before the Ld.CIT(A). On appeal, the Ld.CIT(A) endorsed the view of the ld. Assessing Officer . Against the order of Ld.CIT(A), now the assessee is in appeal before us.
At the time of hearing, the ld.A.R argued the only ground with regard to treatment of `4,40,000/- as cessation liability u/s.41(1) of the Act. It was submitted before the me that one of the close relative of the partners Shri J. Mohaideen Abdul Samadani, who is the brother of one partner, viz. Shri J. Aludeen and it was inadvertently shown as sundry creditors instead of gift to the partners. In my opinion, this is to be verified at the end of the ld. Assessing Officer whether it is a gift or sundry creditors and the assessee has to substantiate the claim by providing necessary evicences.
Accordingly, this issue is remitted to the file of lao for fresh consideration.
4.1 The ld.A.R has not put any argument with regard to other grounds raised in this appeal. Accordingly, other grounds stand dismissed as not pressed.