SHRI G.R. SRINIVASAN,CHENNAI vs. ITO, CHENNAI

आदेश / O R D E R

(i) The Ld.CIT(A) has erred in confirming the order of the Ld.AO who had made addition of Rs.15,40,000/- being the cash deposit made in the bank account by treating it as unexplained investment U/s.69 of the Act.

(ii) The Ld.CIT(A) has erred in confirming the order of the Ld.AO, who had made addition of Rs.21,97,073/- being the expenditure incurred by way of payment made through credit cards.

(iii) The assessee is aggrieved by the order of the Revenue for charging interest U/s.234B of the Act.

Subsequently the case was selected for scrutiny and finally order U/s.143(3) of the Act was passed on 25.03.2014, wherein the Ld.AO added Rs.15,40,000/- & Rs.21,97,073/- to the income of the assessee as unexplained investment in banks and unexplained expenditure spent through credit cards respectively and further levied interest U/s.234B of the Act.

During the course of assessment proceedings it was observed by the Ld.AO that the assessee had made payments through credit card for Rs.21,97,073/- and had deposited Rs.15,40,000/- in his bank account. It was further observed that the assessee had utilized the amount deposited in the bank account for making payment to the credit card. It was explained by the assessee that he had purchased medicines to persons who have come from abroad for the purpose of his business which was duly reimbursed by them. The reimbursed amount was deposited in the bank account and thus the payment was made towards the purchase of medicines which was handed over to the foreign buyers. Since the assessee could not provide sufficient evidence before the Ld.AO to substantiate his claim, the Ld.AO made addition with respect to the amount of Rs.15,40,000/- deposited in the bank account of the assessee as well as the amount of Rs.21,97,073/- being the amount spent by the assessee for purchase of medicines, by rejecting the explanation offered by the assessee because of the following reasons:-

“1. The assessee failed to establish that the Medicines were purchased for their foreign clients only; 2. At present days Authorised FX Dealers are available in many placed of the city. There is every opportunity for the foreigners to convert their currency in advance. Hence the assessee has met out the expenses for the foreigners is not acceptable; 3. The usage of Credit Cards and Deposits in the bank were not occurred in One or Two occasions rather it occurred on various dates. It establishes there is no extraordinary/emergency situation. Hence the assessee's claim is baseless and not acceptable; 4. The assessee has not explained what prevented the foreign buyers from converting their currencies prior to their purchase of goods; 5. As seen from the Bills produced by the assessee, the credit card was used for purchase of Anti Cancer Medicines. In that case, the foreigners are well aware in well advance that the medicine has to be purchased. In these circumstances it is not acceptable that the foreigners depended upon the assessee for the purchase; 6. It is stated by the assessee that the foreign buyers stay for 10 to 11 months. In that case they are aware of the quantum of amount required for their stay well advance. In these circumstances, it is not acceptable that the foreigners depended upon the assessee for the purchase;”

4.1 On appeal, the Ld.CIT(A) also confirmed the order of the Ld.AO by agreeing with his views.

4.2 At the outset, I do not find merit in the order of both the Revenue authorities for making addition with respect the amount spent through credit card for Rs.21,97,073/- because the assessee had not claimed the same as expenditure in his books of account. Hence, addition cannot be made for Rs.21,97,073/.

Therefore, I hereby delete the addition made by the Ld.AO which is further sustained by the Ld.CIT(A) for Rs.21,97,073/-. The Revenue may have reasons to believe that the amount deposited by the assessee in his bank account for Rs.15,40,000/- may be from his unaccounted income because it is not proved with evidence that the amount was reimbursed by the persons who had come from abroad. However considering the earnings of the assessee, personal resources and his own savings, I’m of the considered view that an allowance should be given at least to the extent of Rs.10 lakhs. Accordingly, I hereby confirm the addition made by the Ld.AO with respect to unexplained investment in bank to the extent of Rs.5,40,000/-.

As regards charging of interest U/s.234B of the Act, it has been consistently held that it is consequential in nature; hence the ground is accordingly disposed off.

Order pronounced on the 3rd Aug, 2017 at Chennai.