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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
O R D E R
PER DR. A. L. SAINI, ACCOUNTANT MEMBER:
Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2015-16, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) [in short “the ld. CIT(A)”] in Appeal No. ITBA/NFAC/S/250/2021-22/1032226450(1) dated 06.04.2021, which in turn arises out of an assessment order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as the “Act”] dated 26.12.2017.
Grounds of appeal
raised by the assessee are as follows: “1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals) has erred in confirming the disallowance of Indirect Expenses of Rs.1,11,554/- and Interest of Rs.1,79,944/- on Partner’s Capital.
2. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals) has erred in confirming action of the assessing officer assessing income of the assessee at Rs.16,65,499/- by treating Income declared during Survey as Deemed Income not includible under any of the heads of Income prescribed u/s 14 of the Income Tax Act, 1961.”
ITA.108/SRT/2021/AY.2015-16 Siddhivinayak & Co.
Brief facts of the issue in dispute are stated as under. During the scrutiny proceedings, the assessing officer noted that in the Income Tax Return, the assessee has credited the income of Rs.16,65,000/- in its profit and loss account under the head “Indirect Income –Undisclosed income.” The assessing officer observed that assessee has not offered this income as “Business Income” or “Income from other sources” in its Profit and Loss account. Therefore, during the assessment proceedings, the assessing officer issued a show cause notice to the assessee to explain the transaction. In response, the assessee submitted that it is a business income and earned during the course of business and therefore claimed some business expenditure out of the said business income. However, assessing officer rejected the contention of the assessee and held that assessee has not assigned any head to the additional income disclosed i.e. whether it is business income or income from other sources. Therefore, assessing officer made addition to the tune of Rs.16,65,000/- u/s 69A of the Act. As the deemed income of Rs.16,65,000/- u/s 69A of the Act is not computed under any particular head of income therefore, no deduction on account of any expenditure can be allowed from it. Therefore, assessing officer made additions of Rs.1,11,554/- on account of Indirect expenses debited and Rs.1,79,944/- on account of interest on partner’s capital account debited in the profit and loss account.
On appeal, ld CIT(A) confirmed the action of the assessing officer. Aggrieved, the assessee is in appeal before us.
Shri Hardik Vora, Learned Counsel for the assessee, pleads that during the course of assessment proceedings, on being show caused by the assessing officer, the assessee submitted its detailed reply and explained that receipt of Rs.16,65,000/- in question is its business receipt and explained the nature of it and the assessing officer has not disapproved assessee's contention. The ld Counsel further submitted that said Cash Receipt of Rs.16,65,000/- is part of assessee's business receipt and is part of regular business profit and hence it is taxable under the head Profits and Gains of Business and assessee can claim the expenses also. Therefore, ld Counsel prays the Bench that addition made by the assessing officer may be deleted.
ITA.108/SRT/2021/AY.2015-16 Siddhivinayak & Co.
On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
We have given our thoughtful consideration to rival contention. Case files as well as paper books perused with the able assistance of Learned Counsel representing the assessee. Before us, assessee is a Partnership Firm and engaged in the business as Builders and Developers. In assessee's case, on 26/12/2014 Survey Action U/s 133A of the Act was carried out by the department and during the course of Survey, in the statement recorded on oath on 02/01/2015, assessee's Partners Shri Sandesh Khot stated that the cash component accepted by assessee per unit ranged between Rs.50,000/- to Rs.60,000/- and assessee had booked 30 units of flats. Based on the statement by assessee's Partners, Shri Sandesh Khot, total cash receipts of Rs.16,65,000/- (30 * 55500) earned from booking of flats.
During the course of assessment proceeding, on 29/11/2017, statement of Mr. Sandesh Khot was again recorded u/s 131(1) of the Act and in the said statement Mr. Sandesh Khot explained that it is a business income. We note that during the assessment proceedings, the assessee submitted written submission on 20/12/2017. Relevant contents of the same are reproduced below: “1) Assessee's Net Profit of Rs.13,73,501/- for the year is the net result of Sales made, Construction expenses, Direct & Indirect Expenses incurred during the year and said Unaccounted amount of Rs.16,65,000/- admitted during survey. 2) Indirect expenses are normal and regular expenses incurred by the assessee during the carrying on of assessee’s business and it has nothing to do with the said unaccounted receipt. These expenses are duly supported by bills / vouchers/ evidences and during the course of assessment proceedings the assesses has provided copies of the same to your honour. 3) These expenses are the expenses which the assesses would he required to incur irrespective of ‘on money’ receipts. Further, interest of Rs.1,79,944/- is as per the provisions of Section 40(b) of the I T. Act 1961. Remuneration to working partners is allowable irrespective of quantum of Profit / loss. Further, Interest paid to Partners is separately taxable in the Partner's hand.”
From the above factual position, it is vivid that expenses are duly supported by bills / vouchers/ evidences. Unaccounted amount of Rs.16,65,000/- admitted
ITA.108/SRT/2021/AY.2015-16 Siddhivinayak & Co. during survey, is business income, as explained by the assessee twice in his statement. Now, burden is on the assessing officer to disprove it. However, we note that assessing officer has not refuted or discredited these evidences. The assessing officer does not mention why he is not accepting these evidences. Thus, it is abundantly clear that assessing officer has not made any adverse finding in any of these documents even, though all the details were furnished by the assessee before him. The assessing officer ought to have examined all these details and refuted / rejected them, with a cogent adverse findings and discernable line of reasoning, in order to arrive at a conclusion and to make the addition. On the contrary, the assessing officer has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled Law that when an assessee has all the possible evidence in support of its claim, they cannot be brushed aside based on surmises. Therefore, based on this factual position, we direct the assessing officer to treat the amount of Rs.16,65,000/- under the head “ Income from business” and allow Rs.1,11,554/- on account of Indirect expenses and Rs.1,79,944/- on account of interest on partner’s capital account.
In the result, appeal filed by the assessee is allowed.
Order is pronounced in the open court on 06/05/2022 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963.