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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 ld. Commissioner of Income Tax (Appeals)-XXXVI, Kolkata dated 31.01.2013 for the assessment year 2007-08, whereby he sustained the various additions made by the Assessing Officer to the extent given hereunder:- Particulars Addition made by Addition the A.O. sustained by the CIT(Appeals) Undisclosed purchases Rs. 45,129/- Rs. 16,866/- Disallowance of expenses Rs. 23,652/- Rs. 10,000/- Undisclosed investment Rs.1,85,906/- Rs.1,85,906/- in construction of house property
The assessee in the present case is an individual, who is engaged in the business of trading of Country Sprit. The return of income for the
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year under consideration was filed by the assessee on 29.10.2007 declaring total income of Rs.3,10,590/-. During the course of assessment proceedings, it was noticed by the Assessing Officer that the purchases made by the assessee from M/s. Bhattacharyya Bottling Plant Pvt. Ltd. as recorded in the books of accounts were Rs.97,76,726/- while the total sales made to the assessee as per books of the said party were to the tune of Rs.98,18,474/- showing the difference of Rs.41,748/-. Similarly there was a difference in the purchases claimed to be made by the assessee from M/s. I.F.B. Agro Industries Ltd. amounting to Rs.3,401/-. In this regard, the explanation offered by the assessee for the said difference was not found acceptable by the Assessing Officer and treating the amount of difference as undisclosed purchases of the assessee, he added a sum of Rs.45,149/- to be the total income of the assessee. From the balance-sheet of the assessee, it was also noticed by the Assessing Officer that the assessee has invested a sum of Rs.5,80,596/- in the construction of house building at Karimpur, Nadia during the year under consideration. In order to verify the correctness of the said amount disclosed by the assessee, commission under section 142A was issued by the Assessing Officer to the Departmental Valuation Officer, Kolkata. In his report submitted to the Assessing Officer on 21.10.2009 the cost of construction incurred by the assessee during the year under consideration was estimated by the DVO at Rs.7,66,862/-. When the difference of Rs.1,85,906/- was brought to the notice of the assessee by the Assessing Officer, various objections/contentions were raised by the assessee. According to the Assessing Officer, all these contentions/ objections had already been raised by the assessee before the DVO and the same having been considered by the DVO, the explanation offered by the assessee for the difference of Rs.1,85,906/- was not acceptable. Accordingly, the said difference amount was treated by the Assessing Officer as undisclosed investment made by the assessee during the year under consideration and addition to that extent was made by him to the total income of the assessee. In the Profit & Loss A/c., various expenses
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were claimed by the assessee under different heads. On verification of the same, the Assessing Officer found that the same were not fully verifiable and also involved personal element. He, therefore, disallowed the said expenses partly to the extent of Rs.23,652/-. Accordingly, the assessment was completed by the Assessing Officer under section 143(3) vide an order dated 29.12.2009 determining the total income of the assessee at Rs.6,02,880/-.
Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals) challenging all the three additions made by the Assessing Officer on account of alleged undisclosed purchases, alleged undisclosed investment in construction of house and disallowance out of various expenses. Regarding the undisclosed purchases alleged by the Assessing Officer on the basis of difference noted in the accounts of the concerned two parties, such difference to the extent of Rs.28,283/- in the account of M/s. Bhattacharyya Bottling Plant Pvt. Ltd. was explained by the assessee as the excess amount refunded by the said party to the assessee. This explanation of the assessee was found acceptable by the ld. CIT(Appeals). As regards the balance difference of Rs.13,465/- in the account of the said party, the explanation of the assessee that the same was owing to the adjustment of cost of bottles returned to the Company at the time of purchase of Country Spirit, however, was not found acceptable by the ld. CIT(Appeals) in the absence of any evidence to support and substantiate the same. Similarly the explanation of the assessee regarding the difference of Rs.3,401/- in the account of M/s. I.F.B. Agro Industries Limited was also not found acceptable by the ld. CIT(Appeals). He accordingly sustained the addition of Rs.45,149/- made by the Assessing Officer on account of alleged undisclosed purchases to the extent of Rs.16,866/-. 4. As regards the alleged undisclosed investment made by the assessee in the construction of house, various contentions were raised on
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behalf of the assessee before the ld. CIT(Appeals). One of such contentions raised by the assessee was that the construction expenses having been duly recorded in the books of account and no defect whatsoever having been found by the Assessing Officer in the said books of account as well as the supporting vouchers produced for verification before him during the course of assessment proceedings, the addition made by the Assessing Officer on the basis of DVO’s alone was not sustainable in law. In support of this contention, reliance was placed by the assessee on the decision of the Hon’ble Rajasthan High Court in the case of CIT –vs.- Pratapsingh Amrosingh Rajendra Singh & Deepak Kumar reported in 200 ITR 788 (Raj.). Although this plea specifically raised by the assessee along with other submissions made before him was forwarded by the ld. CIT(Appeals) to the Assessing Officer for his comments, the Assessing Officer did not offer any comment on this plea specifically raised by the assessee. This aspect, therefore, was specifically brought to the notice of the ld. CIT(Appeals) by the assessee in his counter comments offered on the remand report of the Assessing Officer. The ld. CIT(Appeals), however, overlooked the same and proceeded to confirm the addition made by the Assessing Officer on account of alleged undisclosed investment made by the assessee in the construction of house without making any observation thereon. As regards the disallowance of Rs.23,652/- made by the Assessing Officer out of various expenses, the ld. CIT(Appeals) held that such disallowance was called for as the involvement of personal element in the expenses claimed by the assessee on telephone, miscellaneous, etc. could not be ruled out. He, however, held that the disallowance of Rs.23,652/- made by the Assessing Officer was on the higher side and found it fair and reasonable to restrict the same to Rs.10,000/-. The appeal filed by the assessee before him thus was partly allowed by the ld. CIT(Appeals) by his appellate order dated 31.01.2013, which is impugned by the assessee in the present appeal filed before the Tribunal.
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I have heard the arguments of both the sides and perused the relevant material available on record. As regards the addition made by the Assessing Officer and sustained by the ld. CIT(Appeals) partly on account of undisclosed purchases, it was observed that the same was based on the difference noted by the Assessing Officer in the total amount of transactions made by the assessee with two parties. As regards the difference in the account of M/s. Bhattacharyya Bottling Plant Pvt. Ltd. the explanation of the assessee on account of such difference to the extent of Rs.23,283/- was found acceptable by the ld. CIT(Appeals). The balance difference of Rs.13,465/- was explained by the assessee as owing to the adjustment of cost of bottles returned to the Company at the time of purchase of Country Spirit, but the same was not accepted by the ld. CIT(Appeals) without giving any cogent reason except saying that the detailed reply filed by the assessee could not explain the said difference. As submitted by the ld. counsel for the assessee at the time of hearing before me, there is a common practice to return the empty bottles of Country Spirit at the time of purchase and there being nothing in the impugned order of the ld. CIT(Appeals) or even brought on record by the ld. D.R. at the time of hearing to controvert the same, I do not see any justifiable reason for not accepting this explanation of the assessee for the difference of Rs.13,465/-. As regards the difference of Rs.3,401/- in the account of M/s. I.F.B. Agro Industries Limited, I, however, find that the same has not been satisfactorily explained by the assessee either before the authorities below or even before me. I, therefore, sustain the addition made on this issue to the extent of Rs.3,401/-. 6. As regards the addition of Rs.1,85,906/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of alleged unexplained investment made by the assessee in the construction of house, it is observed that the same was based on the valuation report of the D.V.O. estimating the cost of construction made by the assessee during the year under consideration at a higher value than what was declared by the assessee. In this regard, the ld. counsel for the assessee
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at the time of hearing before me has reiterated the stand taken before the authorities below that when the construction expenses incurred by the assessee were duly recorded in the books of account and the said books of account were not rejected by the Assessing Officer even though the same were produced by the assessee for verification before him along with the supporting vouchers, the addition cannot be made on account of the alleged unexplained investment made in the construction of the house merely on the basis of valuation report. The ld. counsel for the assessee has also invited my attention to the submissions made by the assessee before the ld. CIT(Appeals), wherein this point was specifically raised. He has also taken me through the remand report of the Assessing Officer to show that no adverse comment was offered by the Assessing Officer on this aspect when the same was specifically confronted by the ld. CIT(Appeals) to the Assessing Officer for his comments. A perusal of the assessment order as well as the remand report shows that the books of account regularly maintained by the assessee were produced before the Assessing Officer for verification and the same reflecting the construction expenses incurred by the assessee were not rejected by him. In the similar facts and circumstances involved in the case of Pratapsingh Amrosingh Rajendra Singh & Deepak Kumar (supra) cited by the ld. counsel for the assessee, it was held by the Hon’ble Rajasthan High Court that the addition made on account of alleged investment in construction merely on the basis of DVO’s report without rejecting the books of account regularly maintained by the assessee is not sustainable. Respectfully following the said decision of the Hon’ble Rajasthan High Court and keeping in view the facts of the case, I find myself in agreement with the ld. counsel for the assessee that the addition made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of alleged unexplained investment in the construction of house is not sustainable. I, accordingly, delete the same.
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As regards the disallowance of Rs.23,652/- made by the Assessing Officer out of various expenses, which is sustained by the ld. CIT(Appeals) to the extent of Rs.10,000/-, it is observed that nature of some of the expenses claimed by the assessee under different heads is such that the involvement of personal element therein cannot be ruled out. I, therefore, agree with the ld. CIT(Appeals) that some disallowance on account of such personal element is called for in the facts and circumstances of the case and keeping in view that such disallowance sustained by the ld. CIT(Appeals) to the extent of Rs.10,000/- is fair and reasonable, I find no infirmity in the impugned order of the ld. CIT(Appeals) calling for any interference on this issue.
In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on October 7th, 2015.
Sd/- (P.M. Jagtap) Accountant Member Kolkata, the 7th day of October, 2015 Copies to : (1) Sri Haridas Maitra, C/o. P.S. Gupta, Advocate, 100, Bank Lane, Hater Para, Krishnanagar, Dist. Nadia-741101 (2) Income Tax Officer, Ward-4, Nadia, Krishnanagar-741 101 (3) Commissioner of Income-tax (Appeals)-XXXVI, Kolkata (4) Commissioner of Income Tax, Kolkata (5) The Departmental Representative (6) Guard File
By order
Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.