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Income Tax Appellate Tribunal, KOLKATA ‘C’ BENCH, KOLKATA
Before: Shri P.M. Jagtap & Shri S.S. Vishwanethra Ravi
Per Shri P.M. Jagtap, A.M.: This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-XIV, Kolkata dated 30.03.2012 for the assessment year 2004-05.
2. Grounds No. 1 & 5 raised by the assessee in this appeal are general, which do not call for any specific adjudication.
3. The issues raised in Grounds No. 2 & 3 relate to the additions of Rs.4,02,008/- and Rs.2,23,500/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of disallowance of purchases and renovation expenses respectively. ./2012 Assessment year: 2004-2005 Page 2 of 7
4. The assessee in the present case is an individual, who is engaged in the business of dealing in Foreign Liquor. The return of income for the year under consideration was filed by him on 31.10.2004 declaring total income of Rs.3,64,723/-. The said return was processed by the Assessing Officer under section 143(1) on 07.03.2006. Thereafter the assessee filed a revised return on 30.03.2006 showing a total income of Rs.4,08,710/- . In order to regularize the said revised return, a notice under section 148 was issued by the Assessing Officer, in reply to which it was submitted by the assessee that the revised return filed by him on 30.03.2006 be treated as the return filed in response to notice under section 148. In the revised return, additional expenditure on account of purchases amounting to Rs.4,02,008/- was claimed by the assessee. In this regard, it was submitted by the assessee before the Assessing Officer that the relevant goods received by him before the closing day of the year were taken into the stocks, but the bills in respect of such goods having been received after 31st March were not recorded in the accounts originally finalized. The Assessing Officer, however, found that the sundry creditors in the revised accounts had not been increased by the amount of such purchases, the bills in respect of which were claimed to be received by the assessee after 31st day of March. He also noted that the gross profit rate of 12.74% as declared by the assessee in the original account was quite comparable with the gross profit rates of A.Y. 2002-03 and 2003-04 while the gross profit rate of 10.14% as reflected in the revised accounts was comparatively low. He, therefore, rejected the revised accounts of the assessee as unreliable and disallowed the claim of the assessee for additional purchases of Rs.4,02,008/-. Similarly the claim of the assessee for renovation expenses of Rs.2,23,500/- as made in the revised return/accounts was disallowed by the Assessing Officer as he found it difficult to accept the stand of the assessee that the said expenses incurred in cash were not reflected in the original Cash Book, which was duly audited. ./2012 Assessment year: 2004-2005 Page 3 of 7
5. The disallowance made by the Assessing Officer on account of purchases and renovation expenses as claimed in the revised return was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and keeping in view the submissions made by the assessee in support of his case on these issues, a remand report was sought by the ld. CIT(Appeals) from the Assessing Officer on the revised accounts of the assessee. As reported by the Assessing Officer in the remand report, the following questions were asked by him to the assessee:- “(1) The assessee claimed during scrutiny assessment proceedings that purchases of Rs.4,02,008/- from eleven (11) parties were not considered in the purchase account as per original return as bills of the same were received in the month of April of next financial year whereas the alleged purchases were included in the closing stock account. Obviously a question was put forward to him to explain as to why the said purchases were not included to the sundry creditors account in the revised account if the alleged purchases were made on credit? On the other hand, if the purchases were made in cash in the said financial year, then, how he cast cash account after the end of the financial year when cash account is mandatory to keep on day to day basis as per principle of accountancy?
The assessee claimed that the account was maintained in the computer. It was pointed to him that when the stock book was updated with the new arrivals, the accounting package would automatically update the purchase account, the cash or bank account and the sundry creditors account. Moreover, the auditor who has audited the original account has to verify the stock register as well as purchase register with respect to the purchase bills. In this case that was not done. So, in view of findings in Para 1 & 2, it was conveyed to him that alleged purchases claimed in the revised return were bogus. This matter was put forward to him for his comment.
The assessee claimed during scrutiny assessment proceedings that renovation of Rs.2,23,500/- was not accounted for in the original account due to mistake and the same was incorporated in the revised account. In this connection, the question raised how he made entry in cash book after the end of financial year when cash account is mandatory to keep on day to day basis as per principle of accountancy?
./2012 Assessment year: 2004-2005 Page 4 of 7
He claimed Rs.17/ - more under the head travelling & conveyance in the revised account. The question rose about the reason for change and how he made entry in cash account after the end of the financial year.
He was asked to explain. the reason for squaring up the credit note receivable account in the revised balance sheet and where it was squared up and against what account?
He was asked to explain the reason for change in Advance to Staff account' in the revised balance sheet and to explain how the refund took place in cash or bank account after the end of the financial year?
7. Another question pointed out to him about increase in drawing account in the revised balance sheet and was asked to explain how he withdrew the cash or bank after the end of the financial year.
The last question put forward to him about change in cash balance as per revised balance sheet. It was noted that the cash balance arrived at the end of the year cannot be changed under any circumstances as the same is mandatory to keep on day to day basis.
6. As further reported by the Assessing Officer in the remand report, the Authorized Representative of the assessee could not offer any satisfactory reply to the questions raised by him. On the other hand, he agreed for the addition of Rs.6,69,516/- on account of “sundry creditors written off” amounting to Rs.6,69,516/- as shown in the revised accounts/return. He also agreed that the other changes made in the revised accounts including the additional claim for purchases and renovation expenses were made with a motive to adjust the gain on account of sundry creditors written off. Keeping in view these comments made by the Assessing Officer in the remand report, the addition made by the Assessing Officer on account of additional purchases of Rs.4,02,008/- and renovation expenses of Rs.2,23,500/- were confirmed by the ld. CIT(Appeals) treating the same as bogus.
We have heard the arguments of both the sides and also perused the relevant material available on record. At the time of hearing before us, ./2012 Assessment year: 2004-2005 Page 5 of 7 the ld. counsel for the assessee has not been able to offer any satisfactory explanation as regards the failure of the assesese to substantiate the claims made on account of additional purchases and renovation expenses in the revised return/accounts during the course of remand proceedings before the Assessing Officer except stating that the case of the assessee was not properly represented before the Assessing Officer during the course of remand proceedings. It is also observed that specific and pertinent questions were raised by the Assessing Officer in respect of claims made by the assessee in the revised accounts/return on account of additional purchases and renovation expenses and no explanation whatsoever was offered by the assessee to reply or clarify the same. On the other hand, it was agreed on behalf of the assessee before the Assessing Officer that the said clams were made in order to adjust the additional income offered in the revised return on account of sundry creditors written back. Having regard to all these facts of the case, we find no infirmity in the impugned order of the ld. CIT(Appeals) confirming the additions made by the Assessing Officer on account of additional purchases and renovation expenses as claimed in the revised return/accounts by treating the same as bogus and upholding the same on this issue, we dismiss Grounds No. 2 & 3 of the assessee’s appeal.
8. The issue raised in Ground No. 4 relates to the addition of Rs.6,69,517/- made by the ld. CIT(Appeals) on account of sundry creditors written back by way of enhancement.
Keeping in view the remand report submitted by the Assessing Officer, wherein the Authorized Representative was stated to be agreed for the addition of Rs.6,69,516/- on account of sundry creditors written back on substantive basis, enhancement notice was given by the ld. CIT(Appeals) to the assessee and since there was no objection raised on behalf of the assessee in this regard, the Assessing Officer was directed by the ld. CIT(Appeals) to make the addition of Rs.6,69,516/- to the total income of the assessee on substantive basis. ./2012 Assessment year: 2004-2005 Page 6 of 7
We have heard the arguments of both the sides and also perused the relevant material available on record. The limited contention raised by the ld. counsel for the assessee on this issue is that the addition of Rs.6,69,516/- was already made by the Assessing Officer on account of sundry creditors written back on substantive basis vide his order dated 12.03.2008 passed to give effect to the order of the ld. CIT(Appeals) dated 08.02.2008 passed in the case of the assessee for A.Y. 2000-01. He has invited our attention to the copy of the said order placed at page no. 3 of his paper book and submitted that the direction given by the ld. CIT(Appeals) vide his impugned order to add the same amount again to the total income of the assessee on substantive basis, which has been duly complied by the Assessing Officer while giving effect to the order of the ld. CIT(Appeals) vide his order passed on 23.04.2012 has resulted in double addition. Although this position clearly evident from the relevant two orders passed by the Assessing Officer (copies placed at page nos. 1 and 3 of the paper book) is not disputed by the ld. D.R., he has submitted that the Assessing Officer may be given opportunity to verify this aspect. Since the ld. counsel for the assessee has not raised any objection in this regard, we restore this issue to the file of the Assessing Officer for the limited purpose of verifying the grievance of the assessee of double addition and to allow appropriate relief accordingly. Ground No. 4 of the assessee’s appeal is accordingly treated as allowed for statistical purposes.
In the result, the appeal of the assessee is treated as partly allowed for statistical purposes. Order pronounced in the open Court on August 10, 2016.