M/S. RL EXPORTS INTERNATIONAL,NEW DELHI vs. ACIT, NEW DELHI

Ground No.2 in assessment year 2001-02 and ground no.1 in assessment year 2002-03 relate to the addition of Rs.15,000/- and Rs.3,52,500/- on the basis of certain entries from the Pen Drive seized from the possession of the partner of the assessee, Shri Chetan Gupta by the Punjab Vigilance Bureau, Ludhiana and handed over to the Income-tax Department. In both the years, on the basis of the entries in the Pen Drive, the AO initiated the proceedings u/s 147 in the case of the assessee and ultimately completed the assessment in the respective year making the addition in the case of the assessee which were confirmed by the CIT (A).

I have heard the rival submissions and carefully considered the same along with the orders of the tax authorities below. I have also gone through the decision of the Tribunal in the case of Chetan Gupta vs. DCIT – 144 ITD 344. I noted that Bench ‘B’ of this Tribunal in the case of Chetan Gupta, in whose case the assessment has been reopened on the basis of some Pen Drive, accepted the working of the peak credit as computed by the assessee in respect of the transaction being recorded in the Pen Drive. For the assessment year 2002-03, a sum of Rs.36,89,310/- was held to be the undisclosed income of Chetan Gupta but I noted assessment for assessment year 2001-02 was quashed due to non-service of the notice on the assessee since the assessment for assessment year 2001- 02 was quashed in the case of Chetan Gupta. In that decision, therefore, I do not agree with the plea of the ld. Counsel that the same addition based on the Pen Drive has also been added in the hands of the Chetan Gupta. I accordingly dismiss ground no.2 taken by the assessee in assessment year 2001-02.

Now, coming to the addition of Rs.3,52,500/- in assessment year 2002-03, I noted that the Tribunal has given a finding under para 6.26 in respect of the working of the peak credit by Chetan Gupta at Rs.36,89,310/- to be correct and treated the same as undisclosed income for the assessment year 2002-03. The peak credit has been worked out as observed in this decision on the basis of the transaction recorded in the alleged Pen Drive. I, therefore, agree with the submission of ld. Senior Counsel that there cannot be any double addition. Accordingly, I delete the addition of Rs.3,53,500/-, thus ground no.1 in assessment year 2002-03 is allowed.

Ground No.2 in assessment year 2002-03 relate to the disallowance of Rs.2,82,804/-.

I heard the rival submissions in this regard and I noted that the AO found that the assessee has claimed deduction for an expenditure of Rs.18,85,360/- to have been incurred for the purpose of the business but the AO disallowed 15% of this expenditure amounting to Rs.2,82,804/-.

The next ground is with regard to the depreciation amounting to Rs.48,255/-.

After hearing the rival submissions and going through the order of the tax authorities below, I noted that the said disallowance is made by the AO in respect of a property at Jalandhar. By rejecting the claim of the assessee that assessee was doing export business from Delhi as well as Jalandhar. When the assessee went in appeal before the CIT (A) the CIT (A) confirmed the disallowance by observing that the said property is a residential premises and the onus was on the assessee to lead the evidences by way of documentary evidences and by way of any permission from sales-tax or other authorities registration of certificate etc. to prove that the said premises were indeed used for business premises. He also observed that the assessee could have produced the electrical or telephone bills or other evidences which could have reflected that the premises have been used for the business purposes. I noted that in this case, the proceedings u/s 147 has been initiated on the basis of reasons recorded for the escapement of the income of Rs.3,53,500/- i.e. the income on the basis of which the reasons have been recorded. It is a case where the original assessment has not been completed u/s 143(3). The provisions of section 147 empowers the AO to make the addition in respect of any other income which escaped the assessment provided addition has been made in respect of the income for which the reasons to believe were recorded. The Pen Drive has been found from Chetan Gupta during the course of search and seizure operation conducted by the Punjab Vigilance Bureau at Ludhiana pertaining to the Ludhiana City Centre scam. It is proved that the assessee was having office in Punjab. In the subsequent assessment year i.e. assessment year 2005-06, I noted that no such disallowance in respect of the depreciation was made by the AO while completing the assessment. I, therefore, set aside the order of the CIT (A) on this issue and delete the disallowance of depreciation. Ground No.3 is allowed.

In the result, the appeal for the assessment year 2001-02 stands dismissed while the appeal for the assessment year 2002-03 stands allowed.