ACIT, CC-1(1), KOLKATA, KOLKATA vs. M/S JAI LOKENATH FLOUR MILLS PVT. LTD., KOLKATA

Per J. Sudhakar Reddy :-

This appeal filed by the revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals) Central-20, Kolkata (hereinafter the ‘ld. CIT (A)’), passed u/s 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 03/09/2015, for the Assessment Year 2006-07.

2 I.T.A. No. 1488/Kol/2015 Assessment Year: 2012-13 M/s. Jai Lokenath Flour undertaken in F.Y. 2011-12, we hereby offer a sum of Rs.5,00,000/- as our income for the F.Y. 2011-12 up to the period of search. We have been carrying out regular and bonafide transactions. However, we are not able to instantly produce all the relevant documentation or paperwork which may be required by the department. Hence to demonstrate our co operative attitude and to avoid necessary long drawn litigations with the department and to buy peace, we are offering an additional income of Rs.2,00,00,000/- for the F.Y. 2011-12 (including Rs.5,00,000/- based on impounded documents)”

3.1. The assessee offered Rs.1,50,00,000/-, as additional income u/s 132(4). The balance of Rs.50,00,000/- was offered as estimated income up to the date of search. The assessee claimed that while offering estimated income up to the date of search, depreciation of Rs.70,83,826/-, was not taken into account. It was his case that if depreciation amount is ignored, the profit actually exceeds Rs.74,00,000/-, against the estimated profit of Rs.50,00,000/-, reported during the course of search. The assessee had filed its return of income offering the Rs.1,50,00,000/-, disclosed as income. The Assessing Officer added Rs.50,00,000/- to this return filed by the assessee on the ground that the assessee backtracked on his statement and the disclosure was of Rs.2,00,00,000/- is over and above the disclosed income less depreciation in the books of account. The assessee carried the matter in appeal.

3.2. The ld. First Appellate Authority, granted relief.

3.2. Aggrieved with this order, the Revenue filed this appeal on the following ground/s:- “That on the facts and circumstances of the case, the CIT(A) erred in allowing depreciation on disclosure made for the current year. The disclosure was made on income determined over and above the income disclosed in the books of accounts. The allowance of depreciation resulted in total income to be reduced to a sum of Rs. 4,04,082/- on a total disclosure of Rs.50,00,000/-.”

3 I.T.A. No. 1488/Kol/2015 Assessment Year: 2012-13 M/s. Jai Lokenath Flour 4.1. The ld. CIT(A), at para 5 of his order has held as follows:- “5. During the appellate proceedings the AR has submitted written submissions along with copies of impounded the books of account and explanation regarding disclosure made at the time of survey. The AR has categorically submitted that the assessee has not retracted from the assessment and surrender of income made by its director Mr Rakesh Kumar Agarwal. The AR has further submitted that as disclosed at the time of survey Rs.l.5 crore as undisclosed income has been offered for taxation without any adjustment. However Rs.50 lakhs which was offered as an estimated income has actually been on the basis of estimate only. The AR has brought on record that in fact the estimated income of Rs.50 lakhs was not the actual income of the assessee rather the actual income was Rs. 74,87,908/-. Thus there was no reduction in the declared income rather there was an increase of more than Rs.24 lakhs over and above the estimated income declared on the basis of impounded documents at the time of survey. I have gone through the finding of the AO in the assessment order and the explanation/ submissions filed by the AR. I find that the assessee through its director disclosed the amount of Rs.2 crore in two parts. In part 1 Rs..1.5 crore was offered as undisclosed income and Rs.50 lakhs was offered as an estimated income of the director and the company upto the date of survey (based on the basis of impounded documents). I further find that the assessee company has offered Rs.l.5 crore as it is. However the estimated income of Rs.50 lakhs has been enhanced by the assessee to Rs. 74,87,908/-. I find nothing wrong on the part of the assessee as the assessee has shown an enhanced actual income against the disclosed estimated income. In any case depreciation has to be allowed as per the provisions of the I T Act, 1961 in case the assessee is so entitled for it. Asessee's claim of the depreciation cannot be denied. As the assessee has declared more income as actual income in the return of income against the estimated income declared at the time of survey. Therefore AO's action of further addition of RS.50 lakhs is not justified. Accordingly assessee's appeal on grounds no 1 and 2 are allowed.”

4 I.T.A. No. 1488/Kol/2015 Assessment Year: 2012-13 M/s. Jai Lokenath Flour Under these circumstances, we find no infirmity in the order of the ld. First Appellate Authority. Accordingly, we uphold the same and dismiss this appeal of the Revenue.

Kolkata, the 30th day of November, 2017. Sd/- Sd/- [S.S. Viswanethra Ravi] [J. Sudhakar Reddy] Judicial Member Accountant Member Dated : 30.11.2017 {SC SPS}

Copy of the order forwarded to: 1. Assistant Commissioner of Income Tax Aaykar Bhawan (Poorva) 110, Shantipally, 3rd Floor Kolkata – 700 107