VILAS PRABHAKAR MUNGI,PUNE vs. INCOME-TAX OFFICER,

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.

“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.

2 ITA No.128/PUN/2016 A.Y.2007-08

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.

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.

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.

filed an appeal before us with the grounds extracted above.

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.

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.

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.

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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.

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.

of the total expenses debited in M/s. Pooja Agencies, another proprietary concern

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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.

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.