CHENGALVARAYAN PATHAPATI,CHENNAI vs. ITO, CHENNAI

This appeal by the assessee is directed against the order passed by the Ld. Commissioner of Income Tax (Appeals)-9, Chennai dated 29.11.2016 in for the assessment year 2012-13 passed U/s.250(6) r.w.s.143(3) of the Act.

The assessee has raised several grounds in his appeal however the crux of the issue is that “the Ld.CIT(A) has erred by treating the amount of Rs.4,08,048/- as the undisclosed income of the assessee because he had failed to produce the confirmation letter from Shri Baskaran from whom the assessee had purchased bricks.”

The brief facts of the case are that the assessee is an individual engaged in the business of civil contract, filed his return of income for the assessment year 2012-13 on 29.12.2012 admitting income of Rs.7,56,938/-. The case was selected for scrutiny and finally order was passed U/s.143(3) of the Act on 16.03.2015, wherein the Ld.AO had made addition of Rs.8,58,148/- with respect to purchases, because the assessee had not produced bills and vouchers. On appeal, the Ld.CIT(A) sustained the addition of Rs.4,04,048/- because the assessee did not produced confirmation letter from Shri Baskaran, who was supposed to have supplied bricks to the assessee. Further the Ld.AO also could not communicate to Shri Baskaran because the summons issued to him was returned as un- served. Moreover the submission of the assessee was that the materials were directly delivered by Shri Baskaran to the assessee’s clients and the assessee had merely debited his client’s A/c and credited Shri Baskaran’s account.

Before me, the Ld. AR reiterated the submission made before the Revenue Authorities and pleaded that the assessee had not incurred any expenditure, it was merely an book entry passed in the books of the assessee by debiting the assessee’s client’s account and crediting Shri Baskaran’s account because Shri Baskaran has directly delivered the bricks to the assessee’s clients. It was therefore pleaded that the addition made in the hands of the assessee may be deleted. The Ld.DR on the other hand relied on the orders of the Ld.Revenue authorities.

I have heard the rival submissions and carefully perused the materials on record. From the facts of the case, it appears that the assessee’s client had directly procured the construction materials and mere book entries were passed in the books of the assessee to account for the materials consumed. The purchase of the building construction materials was directly made by the assessee’s client and the assessee do not have any control on the same. In this situation, I’m of the view that the assessee should not suffer with respect to the transaction directly made between the assessee’s client and the supplier of the building materials. Therefore I hereby direct the Ld.AO to delete the addition of Rs.4,04,048/- which was sustained by the Ld.CIT(A).

In the result the appeal of the assessee is allowed.