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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
ORDER Per:Anikesh Banerjee, JM: The instant appeal of the assessee was filed against the order of the ld. Commissioner of Income Tax (Appeals) -1, Ludhiana,[in brevity the ‘CIT (A)’] order passed u/s 250 (6) of the Income Tax Act 1961, [in brevity ‘the Act’] for A.Y. 2014-15.The impugned order was emanated from the order of ld. Income Tax Officer, Ward-3(1), Srinagar, order passed u/s 144 of the Act.
The assessee has taken the following grounds:-
“1. The Ld. CIT (Appeal) has erred in both facts and laws by confirming the order of AO which is bad in law. 2. The Ld. CIT (Appeal) has erred in both facts and laws by confirming the Addition of Rs.541,726.00 as unexplained expenditure the deposits made in the credit card account, when the said deposits were made through bank transfer and where made out of the contract receipts duly disclosed. 3. That the Appellant craves leave to add/ amend any ground of appeal at the time of hearing.”
3. Brief fact of the case is that the assessment was completed u/s 144 with addition amount of Rs.6,41,726/- for payment to the credit card by the assessee. The source of the payment was unexplained before the ld. AO. The addition was confirmed amount to Rs. 6,41,726/- u/s 68 of the Act& assessment order was framed. The aggrieved assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) considered the submission of the assessee and the addition was restricted to amount of Rs.5,41,726/-. Being aggrieved on the appeal order, the assessee filed an appeal before us.
4. When the hearing was called for none was present on behalf of the assessee. The assessee placed the written submission and prayed for adjudication the matter on basis of the written submission. The appeal is taken up and adjudicated after hearing of the ld. DR. 4.1 As stated in the written submission, the assessee is a small contractor and carrying the business of construction mostly from the government agencies and had filed ITR with a total income of Rs.2,94,200/- u/s 44AD of the Act. The case was selected for scrutiny. The assessee could not made the compliance due to the fact that the entire valley was under curfew and strikes was continued from July to December 2016. The ld. AO while framing assessment had made addition amount of Rs.6,41,726/- u/s 68 of the Act.
5. The ld. AO had taken the following reason which is extracted in paragraph 4 of the assessment order. The relevant paragraph4 is extracted as below: “4. It has been discussed supra that the assessee has made payment against credit card to the sum of-Rs.6,41,726/- during the assessment year 2014-15 but the assessee has not filed any documentary evidence to explain the source of deposit and payment. Further, during the assessment proceedings the assessee has neither furnished any reply of whatsoever in response to the notices/questionnaires issued. Therefore, it is very reasonably inferred that the assessee has made credit card payment amounting to Rs.6,41,726/-. Out. of his undisclosed and unexplained income during the assessment year 2014-15.”
5.1 The ld. CIT(A) considered the submission of the assessee. The relevant paragraphs from 4 to 7of the appeal order are extracted as below:
“4. In the written submissions, it was also averred that credit payments were made only to the tune of Rs.5,41,726/-, though the AO has added an amount of Rs.6,41,726/-. The details regarding the aforesaid payment have been stated as follows: S. Date Amount Source/Details 1. 10-05- 300.00 Cash 2. 10-06- 94500. KCC 462 3. 05-08- 99453. SB 12150 4. 10-10- 100000 CD 251 5. 10.12.201 100000 KCC 462 6. 10-01- 100000 KCC 462 7. 10-03- 47473. CD 251 Total 541726
The appellant also raised a legal ground that the impugned addition could not have been made under the provisions of section 68 of the Act and referred to some case laws to advance the aforesaid proposition. However, it is noted from the impugned order of assessment that the AO has not invoked the provisions of section 68. The appellant's submission on this account is, thus, considered misdirected. And in any case invocation of a wrong section is a curable defect.
Since the appellant has not been able to explain with evidence theclaimofexpenditure through credit card for the purposes of business, no relief canbeaccorded to him. However, considering the appellant's averment regarding payment of only Rs.5,41,726/- through credit card as true and correct, the AO is directed to restrict the addition to Rs.5,41,726/-. It is ordered accordingly. 7. In the result, the appeal is partly allowed as indicated above.”
6. The ld. DR argued and fully relied on the order of the revenue authorities.
We heard the rival submission and relied on the documents available in the record. The assessee paid the amount to credit card and the source was duly explained before the appellate authority. Also, the explanation was filed in the submission before the bench. The assessee filed the bank statement of J & K bank Ltd. bearing A/c No. 5555000000396018 and the payment was duly reflected in the bank account, APB page-6 to 9. The ld. CIT(A) considered the submission but placed that the reasons of expenses was not explained. The assessee is filing his return u/s 44AD on presumptive basis of tax. So, the explanation of expenses is not required as per the Act. The ld. CIT(A) has not rejected the application of Section 44AD which is duly covered the assessee during filing return. Quick look on the section 44AD of the Act.
“Special provision for computing profits and gains of business on presumptive basis.
44AD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" : [Provided that this sub-section shall have effect as if for the words "eight per cent", the words "six per cent" had been substituted, in respect of the amount of total turnover or gross receipts which is received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed] during the previous year or before the due date specified in sub-section (1) of section 139 in respect of that previous year.] (2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed”. The ld. DR had not strongly objected the fact. Considering the above discussion, we set aside the order of the ld. CIT(A) and the addition modified by the CIT(A) amount to Rs.5,41,726/- is quashed.
In the result, the appeal of the assessee bearing is allowed.
Order pronounced in the open court on 22.05.2023