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Income Tax Appellate Tribunal, KOLKATA BENCH ‘SMC’, KOLKATA
Before: Shri P. M. Jagtap
M/s. Ply Palace Vs ITO, Ward-39(2), PAN: AADFP 7641P Kolkata (APPELLANT) (RESPONDENT) Appellant by : Shri V. K. Jhunjhunwala, CA Respondent by : Shri S.M.Sarfarazul Tauheed, JCIT, Sr.DR Date of Hearing : 11.09.2015 Date of Pronouncement : 16.09.2015 ORDER This appeal is preferred by the assessee against the order of the Commissioner of Income-Tax (Appeals)-II, Kolkata dated 03.03.2015 for the assessment year 2010-11 and the solitary issue raised therein relates to the addition of Rs.1 lakh made by the AO and sustained by the ld. CIT(A) on account of difference in the balance of one debtor, M/s. Sen & Associates.
The assessee, in the present case, is a partnership firm, which is engaged in the business of trading in plywood and laminates. The return of income for the year under consideration was filed by it on 28.09.2010 declaring total income of Rs.1,38,643/-. During the course of assessment proceedings, it was noticed by the AO that the debit balance shown, as per the books of accounts of the assessee, in the name of one debtor, M/s. Sen & Associates as on 31.03.2010 was Rs.18,96,137/- as against the credit balance of Rs.17,59,322/- shown by the said party in their confirmation. Although the difference of Rs.1,36,815/- in these two balances was attempted to be explained by the assessee, the AO did not accept the same. He accordingly added the said difference of Rs.1,36,815/- to the total income of the assessee 2 M/s. Ply Palace Assessment Year: 2010-11 treating the balance in the account of the concerned sundry debtor as bogus to that extent.
The addition of Rs.1,36,815/- made by the AO was challenged by the assessee in the appeal filed before the ld. CIT(A). During the course of appellate proceedings before the ld. CIT(A), it was submitted by the assessee that the balance in the account of the concerned debtor, as per its books of accounts, was a result of sales made to the said party and since the entire sales made to the said party were already accounted for by the assessee, the difference added by the AO resulted in double addition. The difference was also explained by the assessee by stating that certain payments claimed to have been made by the said party in cash at the fag end of the financial year 2011-2012 have not been received by it. In this regard, the ld. CIT(A) found that the difference to the extent of Rs.36,815/- was on account of difference in the opening balance. He, therefore, held that the same could not be added to the total income of the assessee for the year under consideration. As regards the balance difference of Rs.1 lakh, he found that payments to that extent stated to be made by M/s. Sen & Associates to the assessee in cash in the month of March, 2010 were not reflected in the books of accounts of the assessee. According to him, the said amount received in cash might have been either spent by the assessee out of books of accounts or would have been available with the assessee. He held that the amount of Rs.1 lakh, thus, was liable to be added to the total income of the assessee either under section 69A or section 69C of the Act and accordingly the addition made by the AO on account of difference in balance was sustained by him to that extent. Aggrieved by the order of the ld. CIT(A), the assessee has preferred this appeal before the Tribunal.
3 M/s. Ply Palace Assessment Year: 2010-11 4. I have heard the arguments of both the sides and perused the relevant documents. As rightly contended by the ld. Counsel for the assessee, when the debit balance in the account of M/s. Sen & Associates was a result of sales made to the said party by the assessee and the entire sales made to the said party were duly accounted for by the assessee in its books of accounts, the difference in the balance arisen as a result of any payment made by the said party but not accounted for by the assessee cannot be treated as income of the assessee, as the same would result in double addition. It is observed that this stand was taken by the assessee even before the ld. CIT(A), but he proceeded to sustain the addition made by the AO to the extent of Rs.1 lakh observing that the payment made by the concerned debtor having not been accounted for by the assessee in its books of account, the same might have been spent out of books of accounts or was available with the assessee. He accordingly held that the addition to the extent of Rs.1 lakh was liable to be made under section 69A or 69C of the Act. In my opinion, this altogether new basis adopted by the ld. CIT(A) while sustaining the impugned addition, was not supported by any evidence and the same being based on mere surmises and conjectures is not tenable. I, therefore, delete the addition made by the AO on this issue and sustained by the ld. CIT(A) and allow this appeal of the assessee.