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Income Tax Appellate Tribunal, KOLKATA ‘A(SMC
Before: Shri P.M. Jagtap
Date of concluding the hearing : July 11, 2017 Date of pronouncing the order : July 14, 2017 O R D E R This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-13, Kolkata dated 21.03.2016, whereby he confirmed the additions of Rs.17,96,663/- and Rs.15,05,000/- made by the Assessing Officer on account of alleged difference in sales and unexplained source of capital contribution by the partners respectively.
The assessee in the present case is a partnership firm, which is engaged in the business of trading in iron and manufacturing of C.I. Casting. The return of income for the year under consideration was filed by it on 30.09.2008 declaring total income of Rs.9,21,618/-. In the assessment originally completed under section 143(3) vide an order dated 31.12.2010, the total income of the assessee was determined by the Assessing Officer at Rs.19,15,172/-. The said assessment was subsequently set aside by the ld. CIT vide an order dated 19.03.2013 ./2016 Assessment year: 2008-2009 Page 2 of 6 passed under section 263, inter alia, for the errors on the part of the Assessing Officer to take into account the correct sales and his failure to examine the fresh capital introduced by the partners of the assessee-firm. As per order of the ld. CIT passed under section 263, fresh assessment proceedings were initiated by the Assessing Officer. During the course of the said proceedings, the assessee was called upon by the Assessing Officer to explain the difference of Rs.17,96,663/- in the sales as per the VAT return (Rs.8,26,33,097/-) and as shown in the Profit & Loss A/c. (Rs.8,08,36,434/-). Although it was explained by the assessee that the said difference was due to sales return and Central Sales Tax paid, the said explanation of the assessee was not found tenable by the Assessing Officer in the absence of any documentary evidence to support and substantiate the same. He accordingly added the difference of Rs.17,96,663/- in sales to the total income of the assessee in the assessment completed under section 143(3)/263 of the Act vide order dated 28.03.2014. In the said assessment, the Assessing Officer also made an addition of Rs.15,05,000/- on account of the difference in the capital introduced by the partners of the assessee-firm Shri Vijay Shankar Beriwal (Rs.65,05,000/-) and Smt. Babita Beriwal (Rs.50,50,000/-) as against the amounts of Rs.55,00,000/- and Rs.45,50,000/- reflected in their Bank accounts and loan details respectively. As noted by the Assessing Officer in his assessment order, the assessee was unable to explain the said difference satisfactorily.
3 Against the order passed by the Assessing Officer under section 143(3)/263, an appeal was preferred by the assessee before the ld. CIT(Appeals). During the course of appellate proceedings before the ld. CIT(Appeals), it was submitted by the assesese that the amount of sales as reflected in the VAT return is bound to be different from the sales reflected in the financial accounts as the sales as defined in VAT Law is entirely different from the definition of sales given in the relevant Accounting Standard. It was pointed out that if the delivery charges are charged separately in the invoice, they are excluded from the amount of ./2016 Assessment year: 2008-2009 Page 3 of 6 sales as reflected in the financial statements and credited to Delivery Charges A/c, while the same are treated as part of the sale as per the relevant provisions of VAT. It was also pointed out that the State VAT laws are different from the Central Sales Tax and so the inter-State sales are not reflected in the sales declared in the VAT return. It was contended on behalf of the assessee before the ld.CIT(Appeals) that the difference in sales as per the VAT return and as per the Profit & Loss A/c. thus was on account of delivery charges, sales return and CST. The reconciliation statement claimed to be filed before the Assessing Officer was also furnished by the assessee before the ld. CIT(Appeals). The ld. CIT(Appeals), however, did not find merit in the submissions made by the assessee on this issue and proceeded to confirm the addition made by the Assessing Officer on account of difference in sales on the ground that the relevant documentary evidence to support and substantiate its explanation was not filed by the assessee.
As regards the difference of Rs.15,05,000/- in the capital contribution by the partners, it was submitted on behalf of the assessee before the ld. CIT(Appeals) that there were two entries of Rs.10,00,000/- and Rs.5,00,000/- in the capital accounts of Shri Vijay Shankar Beriwal and Smt. Babita Beriwal respectively, which were reversed on the same day. It was submitted that the said reverse entries did not obviously reflect in the Bank accounts of the partners but the Assessing Officer failed to appreciate the same. It was also submitted that the balance difference of Rs.5,000/- represented the contribution made by Shri Vijay Shankar Beriwal on 27.07.2007 out of his old and continuing bank balance. It was also contended that there was thus no difference of Rs.15,05,000/- as alleged by the Assessing Officer calling for any addition on this count. This contention of the assessee was not found acceptable by the ld. CIT(Appeals) on the ground that the same was not offered by the assessee before the Assessing Officer and it was offered for the first time before him without any supporting evidence. He accordingly ./2016 Assessment year: 2008-2009 Page 4 of 6 confirmed the addition of Rs.15,05,000/- made by the Assessing Officer on this issue.
Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal on the following grounds:- (1) For that on the facts and in the circumstances of the case, the ld. CIT(A) was not justified in confirming the addition of Rs.17,96,663/- made by the AO on account of alleged difference in sales amount as per Profit & Loss account and as per VAT returns.
(2) For that on the facts and in the circumstances of the case, the ld. CIT(A) was not justified in confirming the addition of Rs.15,05,000/- made by the AO on account of capital introductions by the partners in the assessee-firm.
I have heard the arguments of both the sides and also perused the relevant material available on record. Although the ld. counsel for the assessee has made a detailed submission to explain the difference in sales as well as the difference in the capital introduction by the partners of the assessee-firm, which are treated by the Assessing Officer as well as by the ld. CIT(Appeals) as unexplained and has also referred to and relied upon the relevant documentary evidence placed in the paper book in support thereof, it is observed that there is no discussion or mention in the order of the Assessing Officer to show that the said explanation was offered by the assessee before the Assessing Officer during the course of assessment proceedings, as rightly pointed out by the ld. D.R. There is also nothing in the paper book filed by the assessee to show that the said submissions were specifically made by the assessee during the course of assessment proceedings before the Assessing Officer. No doubt, a detailed written submission was filed by the assessee before the ld. CIT(Appeals) explaining the difference between the sales as well as the capital contributions by the partners, but the ld. CIT(Appeals) appears to have declined to entertain the same and consider it on merit mainly on the ground that it was not furnished by the assessee before the Assessing Officer. He also observed that the explanation offered by the assessee was ./2016 Assessment year: 2008-2009 Page 5 of 6 not supported by the relevant documentary evidence. A perusal of the paper book filed by the assessee, however, shows that the relevant documentary evidence to support and substantiate its explanation was placed on record and even the difference in the sales as well as the capital contribution by the partners was also apparently explained on the basis of the said agreements. At the time of hearing before the Tribunal, even the ld. D.R. has not been able to dispute this position. He, however, has contended that neither the Assessing Officer nor the ld. CIT(Appeals) having examined/verified the explanation of the assessee in the light of the evidence placed on record by the assessee on merit, both the issues may be sent back to the Assessing Officer for giving an opportunity to him for such examination/verification. I find merit in this contention of the ld. D.R. Accordingly, the impugned order of the ld. CIT(Appeals) on both the issues under consideration is set aside and the matter is restored to the file of the Assessing Officer for deciding the same afresh after examining/verifying the explanation of the assessee in the light of the evidence placed on record.
In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the open Court on July 14, 2017.