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Income Tax Appellate Tribunal, KOLKATA ‘A(SMC
Before: Shri P.M. Jagtap
This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals), Durgapur dated 25.03.2015 and the solitary issue involved therein relates to the addition of Rs.11,03,666/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) to the total income of the assessee on account of differences/discrepancy in the account of sundry creditors.
The assessee in the present case is a partnership firm, which is engaged in the business of dealing in M.S. Rods. The return of income for the year under consideration was filed by it on 04.10.2010 declaring total income of Rs.2,55,775/-. In the assessment completed under section ./2015 Assessment year: 2010-2011 Page 2 of 6 143(3), the additions of Rs.1,12,456/-, Rs.1,51,838/- and Rs.4,39,372/-, inter alia, were made by the Assessing Officer to the total income of the assessee for the following reasons:- “Discrepancy in purchase a/c.- The assessee furnished a ledger copy of Shriram Multicom in its books of account. To verify the purchase transaction a reference was made to the said concern and a ledger copy of the assessee in the books of the seller, Shriram Multicom, was obtained. On examining the two sets of ledger copy obtained from the seller, Shriram Multicom, and from the assessee in respect of total purchase transaction made by the asserssee, the following discrepancies were noted:
Purchase as per assessee's Books Sales as per Party A/c. Rs.3,72,14,767/- Rs.3,73,27,233/- So, it appears that the assessee had understated the purchase to the extent of Rs.1,12,456/-.
On the issue of understatement of purchase of Rs.1,12,456/- the assessee remained silent. Therefore, it is concluded that the assessee had admitted the understatement of the Purchase A/c. which has got an effect of enhancement of income to the tune of Rs.1,12,456/-. Here it may be mentioned that the assessee did not maintain any Stock Book (Auditor in Form No.3CD in column No.28 (a) Written as Not Applicable also) and the value of opening and closing stock cannot be relied upon. I, therefore, make an addition of Rs.1,12,456/- in the trading account”.
As per assessee's books of account sundry creditor balance of Rs.4,55,992/- in the name of the said Shri Ram Multicom is appearing in the balance sheet as at 31.3.2010. But the closing balance as per the creditor's books of account was found to be Rs.16,620/-. So, it appears that the assessee has inflated the liability to the extent of Rs.4,39,372/- (Rs.4,55,992/- less Rs.16,620/-) in the balance sheet by showing fictitious and inflated figure against the sundry creditor, Shri Ram Multicom, to make the both sides of the balance sheet tally. The assessee by a letter dt. 27.8.2012 was given an opportunity to explain the discrepancy as noted. On the issue of discrepancy in sundry creditor account to the tune of Rs.4,39,372/- the assessee remained silent. As such, it is held that the assessee in all possibility understated the income to the extent of Rs.4,39,372/- and by showing fictitious liability in the name of Shri Ram Multicom, the assessee had made an attempt to make the both sides of the Balance Sheet tally. Accordingly, the said sum of Rs.4,39,372/- is treated as assessee's income from some ./2015 Assessment year: 2010-2011 Page 3 of 6 undisclosed sources and added to the total income of the assessee.
Further, on examining the ledger copy of the assessee's account in the books of Seller Co., Shriram Multicom, it was noted that discount/incentive/credit note/consumer cash back discount against purchases made by the assessee was allowed during the year. The total of such cash benefits allowed by Shri Ram Multicom to the assessee amounted to Rs.5,51,838/-. But the assessee in its books of account did not disclose such income earned in the shape of discount/incentive/credit note/consumer cash back discount. So, there was an understatement of receipt or income in the books of account of the assessee to the extent of Rs.5,51,838/-. The assessee by a letter dt. 27.8.2012 was asked to explain of such discrepancy or understatement of income in the year under assessment. A statement showing date wise details of discount/incentive/credit note/cash back discount was annexed to the said letter for assessee's ready reference.
The explanation given by the assessee is vague on the issue of discount/credit note/ etc. to the tune of Rs.5,51,838/-. In other words, it can be concluded that the assessee had tacitly admitted the omission made to account for the said receipt of Rs.5,51,838/- during the year. The unaccounted income in the shape of discount/credit notes/incentive/consumer cash discount, amounting to Rs.5,51,838/- is added to the total income of the assessee”.
The above additions made by the Assessing Officer to its total income were disputed by the assessee in the appeal filed before the ld. CIT(Appeals). During the course of appellate proceedings before the ld. CIT(Appeals), reconciliation statement was prepared and furnished by the assessee duly supported by the following submission:- “However, the entire issue boils down to a question of reconciliation between the accounts of Shriram Multicom in the books of the appellant and vice versa. The Sundry Creditor balance in the books of the appellant in the name of Shriram Multicom was Rs.4,55,992/-. As the non-existent purchase shown by Shriram Mulacom in the amount of Rs.1,12,466/- in its books has to be adjusted the amount becomes Rs.5,68,458/- (Rs.4,55,992/- + Rs.1,12,466/-). From this figure the amount of discount/credit note/incentive/consumer cash back discount of Rs.5,51,838/-, as mentioned by the Ld. Assessing Officer himself, is to be deducted and such exercise yields a figure of Rs.16,620/- [Rs.5,68,458/- - Rs.5,51,838/-] which is the exact closing balance in the account of Shriram Multicom. The ./2015 Assessment year: 2010-2011 Page 4 of 6
reconciliation statement with Shriram Multicom with that the appellant is as under:
Closing Balance in the books of the appellant .....Rs.4,55,992.00(Cr.) Add: Difference in Purchase....................................Rs.1,12,466.00(Cr.) _______________________ Rs.5,68,458.00(Cr.)
Less: Discount/Credit Note/Incentive ................ Rs.5,51,838.00(Dr.) _______________________ Closing Balance in the books of Shriram Multicom.. Rs.16,620.00 _______________________ Thus complete reconciliation between the accounts of the appellant and that of Shriram Multicom is established. Accordingly, the additions in the amounts of Rs. 1,12,456/-, Rs. 5,51,838/- and Rs. 4,39,372/- are totally misconceived and being based on premises not amenable to reason are therefore liable to be deleted”.
The ld. CIT(Appeals) did not find merit in the submission made by the assessee. According to him, the reconciliation statement furnished by the assessee constituted additional evidence and since the same was not produced by the assessee at the assessment stage, it could not be admitted. He, therefore, declined to admit the reconciliation statement filed by the assessee and proceeded to confirm all the three additions in question made by the assessee for the following reasons given in paragraph no. 6 of his impugned order:- “6. I have considered the issue in the assessment order framed by the AO in light of the arguments made by the A/R of the appellant. The crux of the issue for my consideration is whether the additions made by the AO in relation to the discrepancies in the trading account with its supplier, Shriram Multicom, was correct of not. It was argued by the A/R that no opportunity was provided to the appellant to meet the action conceived by the A.O in this respect. Admittedly, the procedure enumerated by the A/R in his submissions in respect of issuance of summons u/s. 131 of the Act to the party and put it for cross examination was not done; however, the AO had categorically issued a show cause notice citing the discrepancies in the accounts of the appellant vis-a-vis that of Shriram Multicom. However, in its reply no effort was made on and behalf of the appellant to reconcile the discrepancy having regard to the information u/s. 133(6) of the Act gathered by the A.O from Shriram Multicom. The appellant was given an opportunity within the province of sec. 142(3) of the Act by issuing a show cause notice on 27.08.2012 which was not availed of by the appellant. Therefore, the argument of the A/R on this accounts falls flat and is rejected as unfounded. ./2015 Assessment year: 2010-2011 Page 5 of 6
It was found that the appellant had produced before me a reconciliation statement of its accounts of with that of Shriram Multicom. It was also found that this reconciliation was not produced before the AO at the assessment stage. The Rule 46A of the I.T. Rules, 1962 specifically provides for the ambit for admission of additional evidence. It is observed that adoption of procedure under Rule 46A is mandatory in case of additional evidence. When additional evidence is sought to be adduced on record, I am bound to adopt the procedure as laid down under Rule 46A, and that is what is implied and meant when it is stated that the said rule is mandatory in nature. It is only under such circumstances mentioned in the said rule, where the additional evidence adduced by the appellant is to be admitted and sought to be relied upon by him, or as otherwise, the mandate of Rule 46A shall have no application. At this stage, it is observed that the production of the additional evidence by the appellant is not in accordance with law and as such, the same is not admitted for adjudication of the issue. Therefore, there being no evidence adduced on record by the appellant to contradict the findings of the AO on the issue, I have no alternative but to concur with the AO in sustaining the additions of Rs. 1,12,456/-, Rs. 5,51,838/- and Rs.4,39,372/- made by him under the implied application of s. 69 of the I.T. Act. The ground nos. 1 to 3 of the appeal are, therefore, dismissed”.
Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
I have heard the arguments of both the sides and also perused the relevant material available on record. As rightly contended by the ld. counsel for the assessee, the reconciliation statement prepared and furnished by the assessee before the ld. CIT(Appeals) to explain the difference/discrepancy in the balances of concerned creditors cannot be treated as additional evidence filed by the assessee for the first time before the ld. CIT(Appeals) and even if the same was furnished by the assessee before the ld. CIT(Appeals) for the first time, the ld. CIT(Appeals) ought to have got it verified by the Assessing Officer instead of declining to entertain the same. Even the ld. D.R. has not been able to dispute or controvert this position, which is clearly apparent from the impugned order of the ld. CIT(Appeals). I, therefore, set aside the impugned order of the ld. CIT(Appeals) on this issue and restore the matter to the file of the Assessing Officer with a direction to verify the ./2015 Assessment year: 2010-2011 Page 6 of 6 reconciliation statement furnished by the assessee and to decide the issues relating to three additions in question afresh on such verification.