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Income Tax Appellate Tribunal, KOLKATA BENCH “D” KOLKATA
Before: Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-XIV, Kolkata dated 01.11.2013. Assessment was framed by ITO Ward-28(1), Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide her order dated 31.12.2008 for assessment year 2006-07.
Shri Manish Tiwari, Ld. Authorized Representative appeared on behalf of assessee and Md.Ghyas Uddin, Ld. Departmental Representative represented on behalf of Revenue. A.Y. 2006-07 Balajia Construction Vs. ITO Wd-8(1) Kol. Page 2 2. The solitary issue raised in this appeal is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the disallowance of ₹12,46,096/- on account of unexplained cash credit u/s. 68 of the Act.
Briefly stated facts are that assessee, a firm, engaged in business of civil construction. The assessee for the year under consideration has shown the receipt of ₹98,296/- from Emami Paper Mills Ltd. (EPML for short). However, on confirmation u/s 133(6) of the Act it was revealed that the total transactions in the year under consideration with EPML was of ₹14,82,237/-. On question by the AO about the aforesaid mismatch the assessee admitted the discrepancy and offered 20% of such receipt as “income”. The assessee also clarified that the aforesaid bank account was not disclosed in the return as the same was opened by way of unfair means by the other partner. The assessee also submitted that the expense incurred in connection with aforesaid receipt has also not been booked in the books of account of assessee. However, AO disregarded the claim of assessee by observing that the details of the expenses not booked in relation to impugned receipt from EPML has not been substantiated. The AO also observed that there was an outstanding balance shown in the books of account of assessee in the name of EPML for ₹1,37,844/- only. Accordingly, AO treated a sum of ₹12,46,096/- (1482237 – [137844 + 98296]) as undisclosed cash credit u/s. 68 of the Act and added to the total income of assessee.
Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that AO erred in not considering the corresponding expense incurred in relation to impugned undisclosed receipt. Therefore, only gross profit should be brought to tax. However, Ld. CIT(A) disregarded the claim of assessee and confirmed the order of AO by observing as under:- “4.2 I have examined the impugned assessment order of the AO and considered the written submission and heard the verbal arguments of the AR of the appellant – assessee. However, I do not find any merits in the arguments of the AR of the appellant. In the assessment proceedings the AR was asked by the AO to explain the discrepancy and furnish the bank details of the account in which the receipts from Emami Paper Mills Ltd, were credited since the disclosed bank account does not reflect these receipts. He submitted that the accountant resorted to unfair mean in connivance with one of the partners due to which bank details was not available and is closed 20% of the escaped receipts. The A.Y. 2006-07 Balajia Construction Vs. ITO Wd-8(1) Kol. Page 3 AR has admitted the omission of receipts from Emami. His disclosure is not acceptable as the matter of relevant expenses not being booked/accounted is not substantiated. The total transactions less amount outstanding of Rs.1,37,844/- and the one already reflected of Rs.98,296/- is treated as undisclosed cash credit u/s. 68. The balance amount of Rs.12,46,096/- is added back to total income. The appellant admitted the mistake during assessment proceedings which had occurred due to the unfair connivance the accountant with one of the partners. 4.2.1 In view of the above discussion of facts, I declined to accept the contention of the AR and uphold the addition of Rs.12,46,096/- made by the AO. In the result, the appeal failed on this ground and I dismissed the instant appeal.”
Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us on the following ground:- “
2. For that the Ld. CIT(Appellants) is wrong, unjustified in confirming the addition of Rs.12,46,096/- made by the Ld. AO on account of unexplained cash credit u/s. 68 of the IT Act, 1961.
3. For that the Ld. CIT(Appeals) has erred in rejecting the offer of the appellant to tax only the income pertaining to the alleged receipts from Emami Paper Mills Ltd., being gross profit of Rs.2,64,710/- which comes to approx. 20% of the undisclosed gross receipts and also not accepting the tested legal precedent that only the profit earned out of undisclosed transactions can be brought to tax and not the entire gross receipts. The ld. CIT(Appeals) has not acted judiciously in not allowing the expenditure incurred by the appellant for earning the undisclosed income. The Ld. CIT(Appeals) also erred in not considering or not even discussing the ratio of judgement of Calcutta High Curt in the case of CIT vs. S.M. Omer (ITR 201) 68 (1990) on which the appellant had placed reliance during the curse of hearing. ”
5. Before us the Ld. AR reiterated the arguments as were made before the Ld. CIT(A) whereas Ld. DR for the Revenue vehemently relied on the order of Authorities Below.
We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the instant case relates to the addition made by AO and subsequently confirmed by Ld. CIT(A) on account of undisclosed receipts in the undisclosed bank account from EPML. There is no dispute about the facts of the case, therefore the same are not repeated for the sake of brevity. Admittedly, assessee has not offered to tax a receipts of ₹12,46,096/- from EPML. However, the A.Y. 2006-07 Balajia Construction Vs. ITO Wd-8(1) Kol. Page 4 undisclosed receipt was treated as unexplained cash credit u/s 68 of the Act. At this juncture, we find importance to reproduce the provision of Sec. 68 of the Act hereunder:- “Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: [Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) The person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) Such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory;
Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.]”