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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: Shri P.M. Jagtap
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-12, Kolkata dated 25.03.2015. Although the assessee has raised total three grounds therein, the ld. Counsel for the assessee has not pressed Grounds No. 1 & 2 at the time of hearing before me, the same are accordingly dismissed as not pressed.
The only issue that now survives for my consideration as raised in Ground No. 3 of the assessee’s appeal relates to the addition of Rs.6,86,898/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of undisclosed purchases.
The assessee in the present case is an individual, who is engaged in the business of running a Petrol Pump. The return of income for the year under consideration was filed by him on 30.09.2009 declaring total ./2015 Assessment year: 2009-2010 Page 2 of 5 income of Rs.3,64,667/-. During the course of assessment proceedings, a notice under section 133(6) of the Act was issued by the Assessing Officer to HPCL in order to confirm the purchase of Petrol, diesel, etc. claimed to be made by the assessee for HPCL. In the confirmation issued by HPCL, total purchases made by the assessee were shown at Rs.8,24,31,644/- as against purchases from HPCL shown by the assessee at Rs.8,17,44,745/-. When the assessee was called upon by the Assessing Officer to explain this difference of Rs.6,86,898/-, the assessee accepted the mistake in recording the purchases to the extent of Rs.6,86,898/-. He, however, submitted that the entire amount against purchases made from HPCL was paid through Bank and there was no ill-motive on his part not to record the purchases to the extent of Rs.6,86,898/-. This submission of the assessee was not accepted by the Assessing Officer and the amount of undisclosed purchases of Rs.6,86,898/- was added by him to the total income of the assessee.
The addition of Rs.6,86,898/- made by the Assessing Officer on account of undisclosed purchases was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and the following submissions in writing were made by him before the ld. CIT(Appeals) in support of his case that the said addition made by the Assessing Officer was not sustainable:- “In this regard the appellant submit that difference in purchase arose purely due to oversight and is unintentional in nature. However, it has been submitted before the learned Income Tax Officer that the payment of such purchase was made vide cheque No.837381 dated 25-07-2008 for Rs.5,04,207.90 the Bank statement reflecting such payment has been placed on record before the learned Income Tax Officer in the course of assessment. When the payment has been made by cheque from the Bank account of the business, it is sufficient proof that the source of income is the appellant working capital which is generated during the normal course of business. Even in wildest imagination the omission to record the purchase of Rs.6,86,898.90 cannot be said to be made undisclosed Source of income. ./2015 Assessment year: 2009-2010 Page 3 of 5
Hence, the appellant submit that the order passed by learned Income Tax Officer u/s. 143(3) has no legal basis and the demand raised needs to be drop.
Without prejudice to the above submission it may also be stated that if higher purchase of Rs.6,86,898.57 is consider and would have been debited to profit and loss account the returned total net profit would have been reduced by Rs.6,86,898.57. Accordingly the tax liabilities also would have reduced. However, the Income Tax Officer while computing the income of the appellant although added undisclosed purchase but correspondingly did not reduced the total income as explained above".
The ld. CIT(Appeals) did not find merit in the submissions made by the assessee and proceeded to confirm the addition made by the Assessing Officer on this issue for the following reasons given in paragraph no. 6.2 of his impugned order:- “I have considered the facts of the case and the appellant’s submission. During the assessment proceedings, it was stated that the entire difference of Rs.6,86,898/- had been entered in the stock register and paid for by cheque. During the appellate proceedings, a similar submission was made in respect of purchases worth Rs.5,04,208/-, without specifying or actually showing as to which purchases had been actually recorded in the stock register but not in the ledger and for which payment had been made. In other words, the appellant has made a general submission without any corroborative evidences, or without explaining the exact entries in the ledger/stock register/purchase register or producing the relevant invoice. In fact, it has been admitted that the purchases amounting to Rs.6,86,898/- have not been accounted for. It has been claimed that payment of Rs.5,04,208/- has been accounted for without correlating the payments in any manner with the impugned undisclosed purchases which were recorded in the stock register but not the ledger/books of account. The appellant’s contention that the purchases would go towards reducing the profit also cannot be accepted as the corresponding sales can also be safely inferred to be not accounted for. Hence, the addition of Rs.6,86,898/- is confirmed. In view of the unexplained difference in the purchases made by the appellant, the fourth ground of appeal regarding proper maintenance of books of account and absence of any material defects or specific discrepancy in the books of account, is also rejected”.
Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal. ./2015 Assessment year: 2009-2010 Page 4 of 5
I have heard the arguments of both the sides and also perused the relevant material available on record. The main contention raised by the ld. Counsel for the assesee before me is that if the corresponding sales made by the assesese out of the undisclosed purchases are also accounted for by the assessee as inferred by the ld. CIT(Appeals) in his impugned order, only the gross profit from such sales can be added to the total income of the assesese and not the entire amount of undisclosed purchases. However, as rightly contended by the ld. D.R., if the purchases to the extent of Rs.6,86,898/- are not admittedly accounted for by the assessee, the entire amount of undisclosed purchases has to be added to the total income of the assessee as unexplained expenditure, if the assessee has failed to disclose the source of funds utilized for making such purchases. In this regard, he has pointed out from the relevant portion of the impugned order of the ld. CIT(Appeals) that the assessee clearly failed to correlate any payment made to HPCL with the undisclosed purchases. The ld. Counsel for the assessee has submitted that the account of HPCL is a running account with total purchases exceeding Rs.8,00,00,000/- and payments are made from time to time against such purchases. He has contended that it is, therefore, difficult to correlate any specific payment directly with the undisclosed purchases. In my opinion, even if there is some merit in the contention of the ld. Counsel for the assessee, it should not be difficult for the assessee to establish from the running account that the payment against undisclosed purchases was made through Bank and such payment was duly reflected in his books of account. Moreover, if at all the claim of the assessee of having made the payment against undisclosed purchases of Rs.6,86,898/- through Bank is factually correct, the same can be proved by obtaining confirmation from HPCL. I, therefore, consider it fair and proper and in the interest of justice to restore this matter to the file of the Assessing Officer with a direction to decide the same afresh after giving the assessee an opportunity to establish his claim of having paid the amount against undisclosed purchases through Bank, which is duly reflected in ./2015 Assessment year: 2009-2010 Page 5 of 5 his books of account. Ground No. 3 of the assessee’s appeal is accordingly treated as allowed for statistical purposes.