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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
आदेश / ORDER
PER D. KARUNAKARA RAO, AM
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-1, Pune dated 10.11.2014 for assessment year 2007-08.
The assessee has raised following grounds of appeal:
“1.The learned CIT(A), Pune erred in law and on facts in affirming the addition made by the learned AO on account of Capital introduction in M/s Kalpana Agencies of Rs. 2,00,000/- by treating it as unexplained amount.
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The learned CIT(A), Pune erred in law and on facts in affirming the addition made by the learned AO on account of disallowance of expenses debited in M/s Kalpana Agencies of Rs.1,00,000/- treating it as unexplained expenditure. 3. The learned CIT(A), Pune erred in law and on facts in affirming the addition made by the learned AO on account of ad-hoc disallowance of Rs.1,96,190/- being 30% of the total expenses debited in M/s Pooja Agencies. 4. The appellant craves to add/modify/alter/ delete all/ any of the grounds of appeal.”
The Ld. Counsel for the assessee referred to an Affidavit dated 07.01.2016
filed by assessee and submitted that there is delay of 220 days in filing this appeal.
The delay is occurred due to insufficient funds for filing appeal before Hon'ble
Income Tax Appellate Tribunal, the instant appeal could not be filed with the
prescribed time limit of 60 days. Therefore, the Ld. Counsel of assessee prayed for
admitting the appeal for adjudication condoning the delay in filing the appeal.
After hearing both the sides and considering the contents of Affidavit dated
07.01.2016 filed by the assessee, we are of the opinion that the delay of 220 in
filing appeal is required to be condoned and taken up the appeal for adjudication.
Briefly stated relevant facts of the case are that the assessee is engaged in
the business as distributor of consumer goods under the name and style of M/s.
Pooja Agencies. The assessee filed return of income declaring total income on gross
profit Rs.10,24,127/- on the total sales of Rs. 1.17 crores ( rounded off). In the
assessment proceedings, the Assessing Officer made various additions determining
total income Rs.17,40,250/-. The details of the additions are as under:
“11. Subject to this, total income of the assessee is computed as under: Net Profit from Pooja Agency 1,89,826/- Add: i) addition under the head income from other Sources as discussed in para 10.II above 9,33,322/- ii) Income from ‘KALPANA AGENCY’ taken at Rs. 3 Lac as against net profit Rs. 51, 896/- Discussed in para 10.III above 3,00,000/- iii) addition on account of expenses disallowed
3 ITA No.128/PUN/2016 A.Y.2007-08
for ‘POOJA AGENCY’ ad discussed in Para 10.v above 1,96,190/- iv. addition on account of vat payable as per provisions of section 43B of the I.T. Act, 1961 as discussed in para 10.v above 1,70,914/- Gross total income 17,90,252 Less : Deduction under Chapter VIA 50,000 Total Income 17,40,252 i.e. 17,40,250”
During the First Appellate proceedings, the assessee raised various grounds
requesting for deletion of additions. However, the Commissioner of Income Tax
(Appeals) gave part relief to the assessee. The Commissioner of Income Tax (Appeal)
confirmed the additions at Sl. No. (ii) and (iii) above.
Aggrieved with the order of Commissioner of Income Tax (Appeals), assessee
filed an appeal before us with the grounds extracted above.
We shall now proceed to give the ground wise adjudication. Ground No. 1
relates to addition of Rs.2,00,000/- on account of capital introduction in M/s.
Kalpana Agencies., proprietary concern of the assessee. The ground No. 2 relates to
ad-hoc disallowance of Rs.1,00,000/- out of the total expenditure of Rs.1,39,999/-
debited to M/s. Kalpana Agencies. The Commissioner of Income Tax (Appeals)
discussed these issues in para 8.2 of his order which reads as under:
“8.2 I have carefully perused the submissions made by the Ld. Counsel. It is seen from the material placed on record that in the Proprietor's capital account for the year ended on 31.03.2007 in the case of M/s Kalpana Agencies, there is a credit entry of Rs. 2,00,000/- with the narration 'By Addition', which means fresh capital of Rs. 2,00,000/- was introduced by the appellant during the year. The appellant argued in the present proceedings that capital introduced in M/s Kalpana Agency was debited in the books of M/s Pooja Agency. But, on verification of Proprietor's capital account for the year ended on 31.03.2007 in the case of M/s Pooja Agencies, no such debit entry of Rs.2,00,000/- was found except general drawings of Rs.2,70,000/-. There is no date wise correlation between these drawings and the capital of Rs.2,00,000/- introduced in M/s Kalpana Agencies. As regards the disallowance 'of expenditure of Rs1,00,000/- debited in the case of Kalpana Agency, it is trite law that for claiming any expenditure, the onus is always on the assessee to prove with credible evidence than the expenditure is genuine
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and it is incurred wholly and exclusively for the purpose of business of the assessee. In the case of the appellant, even in the present proceedings, no supporting evidence was produced to prove the genuineness of expenditure of Rs.1,39,999/- debited in the case of M/s. Kalpana Agency. The case law relied upon by the appellant i.e. decision of ITAT Delhi Bench in the case of ACIT Vs. Ganpati Enterprises Ltd. is also not of much assistance to the appellant because the decisions pertains to the case of a company whereas the case on hand is a proprietary concern, where possibility of debiting same expenses twice cannot be ruled out when the appellant is the proprietor of two concerns and the business is carried out from the same premises. In such circumstances and in the absence of any evidence produced by the appellant in support of the sources of capital and the expenditure debited to the accounts, the addition of Rs.2,00,000/- on account of unexplained capital introduced and addition of Rs.1,00,000/- (including net profit of Rs.51,896/- shown by the appellant in the P & L' a/c of Kalpana Agencies) on account of disallowance of expenditure made by the Assessing Officer cannot be said to be unjustified. Accordingly, the aggregate addition of Rs.3,00,000/-made on this ground is affirmed. Ground of appeal No.4 thus, fails.
Eventually, after considering the submissions of assessee on this issue, the
Commissioner of Income Tax (Appeals) confirmed both the addition of
Rs.2,00,000/-on account of capital introduction in M/s.Kalpana Agencies and Rs.
1,00,000/- on disallowance made out of expenses claimed in the said concern.
Aggrieved with the same, the assessee raised ground No. 1 and 2 on the
issues of capital introduction of Rs.2,00,000/-and Rs.1,00,000/- disallowance of
adhoc expenditure. It is the case of assessee that the said sum of Rs.2,00,000/-
was introduced out of funds of M/s. Pooja Agency. However, on verification of the
books of capital account of M/s. Pooja Agency, the Assessing Officer and
Commissioner of Income Tax (Appeal) came to the conclusion that no such debit
entry of Rs. 2,00,000/- was found except general drawing of Rs. 2,70,000/-.
Considering the assessee’s failure to provide any evidence to prove date wise
correlation between these drawings, the Commissioner of Income Tax (Appeals)
confirmed the same.
With regard to other addition of Rs.1,00,000/- of disallowance on adhoc
expenditure, it is the case of Revenue that disallowance is required since the
assessee failed to discharge onus by providing the credible evidences in support of
his claim.
5 ITA No.128/PUN/2016 A.Y.2007-08
On hearing both the parties, regarding the addition of Rs. 2,00,000/-, we
find M/s. Pooja Agency, proprietary concern of assessee, has shown the withdrawal
Rs.2,70,000/- in its account. The same is an undisputed fact. Mere, failure to
produce evidence on correlating the dates of withdrawal of capital introduction of
Rs.2,00,000/- in M/s. Kalpana Agency with the said withdrawal of Rs.2,70,000/-,
the Authorities below have proceeded to make additions without establishing the
fact that Rs. 2,70,000/- has not been utilized by the said assessee for some other
purpose. In our view, the said additions is not called for considering the
undisputed fact of withdrawal of Rs. 2,70,000/- in the books of account of M/s.
Pooja Agency. Accordingly, Ground No. 1 is allowed.
Regarding disallowance on adhoc disallowance of Rs. 1,00,000/-, it is the
case of assessee that said disallowance out to total expenditure claim of
Rs.1,33,999/- is extremely on higher side and evidences are available to support
the claim. But the Revenue authorities needed third party evidences in this regard
and obtaining the same for such miscellaneous expenditure is not a practical
propositions.
On hearing both the parties on this issue, we find this is the issue of ad-hoc
addition. We find there is no justification for the Revenue for disallowing Rs.
1,00,000/- out of total claim Rs. 1,33,999/- without ignoring the fact of earning
income by the concern party. It is not the case of the Revenue that business is
bogus or expenses are not genuine. In our view, disallowance of Rs.1,00,000/- out
of the same is extremely arbitrary and on the higher side. Therefore, we are of the
opinion that disallowance of nominal sum of Rs.25,000/- on this account should
meet the ends of justice. Accordingly, ground No. 2 is partly allowed.
The ground No. 3 relates to ad-hoc disallowance of Rs.1,96,190/- being 30%
of the total expenses debited in M/s. Pooja Agencies, another proprietary concern
6 ITA No.128/PUN/2016 A.Y.2007-08
of assessee. Reasons for disallowance are similar to the one at ground No. 2 mentioned above. Arguments of the parties are also the same. It is a case of assessee’s failure to furnish third party’s evidences. Assessing Officer never doubted the genuineness of expenditure.
On hearing both the parties, on this ad-hoc disallowances, we are of the view that making disallowance at 10% on entire expenditure, in the place of 30%, should meet the ends of justice. We direct the Assessing Officer accordingly. Hence, ground No. 3 raised by assessee is partly allowed.
In the result, appeal of the assessee is partly allowed.
Order pronounced on 26th day of March, 2018.
Sd/- Sd/- (सुषमा चावला / Sushma Chowla ) (डी.क�णाकरा राव/D. Karunakara Rao) �या�यक सद�य /JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER
पुणे / Pune; �दनांक / Dated : 26th March, 2018. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals)-1, Pune. 4. The CIT-1, Pune. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, पुणे / DR, ITAT, “SMC” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
�नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.