TaxTMI 
TaxTMI 
2022 (8) TMI 955
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....ound of disallowance of expenses in arbitrary manner without any evidence and basis surmises and conjectures. 4. That on facts and circumstances of the case the learned CIT(A) erred in confirming addition of Rs. 32,699 on the issue of a difference in balance sheet claimed receivable or payable by the assessee without seeking any explanation before such disallowances. The assessee had paid the amount and duly entered in the books. Thus, the addition made is liable to be deleted. 5. That the Id. ITO has erred in law and against natural justice in making the addition without issuing a show cause notice and giving adequate opportunity of being heard to the assessee. 6. Any other grounds as may be urged at the time of hearing. 3. Ground Nos. 2, 4 and 5 were not pressed while Ground No. 6 is general in nature so these grounds do not require any comment on our part. 4. Vide Ground No. 1 the grievance of the assessee relates to the confirmation of addition of Rs. 5,01,20,544/- made by the AO under section 69C of the Income Tax Act, 1961 (hereinafter referred to as 'Act'). 5. Facts of the case in brief are that the assessee e-filed the return of income on....
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....d herewith as Annexure- PI. As per Para No 6 of the order the Learned AO made addition on account of unexplained expenditure u/s 69C of Rs.51048700.00 without appreciating the explanation offered by the AR of the assessee, as he supplied copies of sales ledger and License Fee ledger in support of the assessee claim. The AR of the assessee has furnished the details or License Fee paid and sales are as under: Gross sales as per books Rs. 156033500.00 License Fee paid as per books Rs. 51048700.00 Net Sales shown in trading a/c Rs. 104984800.00 The addition cannot be made on suspicion and guesswork and without bringing the corroborative material on record. I am submitting the additional explanation in the shape reconciliation statement of sales as per books of accounts and as per Audited Trading & Profit and loss Account for the year under consideration as Annexure-P2 The assessee has got his accounts audited. As the proper audit for the purposes would ensure that the books of accounts and other records are properly maintained. That they faithfully reflect the income of tax payer and claim for deduction are correctly made by him. Statutory A....
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.... not applicable as there was no accounted expenditure." The Hon'ble Kerala High court (2012) 347 ITR 367: (2011) 245 CTR 471 in the case of CIT Vs Lakshmi Hospital held: That section 69C will not apply to a case of expenditure made out of gross receipts. In the case of Sibnath Dawn Vs ITO the Hon'ble Kolkata Tribunal 2017 ITL 2889 ITA No 307/Kol/2017 held: "The assessee has contended from the beginning that the source of payment was sale proceeds of these unrecorded purchases were made and thus, no addition is called for the unrecorded purchases as the GP on this unrecorded purchases has already been taxed. The assessee has explained the reconciliation of purchases and sales which are not recorded. Therefore, the source of purchases was explained by the assessee and hence, it is not a fit case to make addition u/s 69C of the Income Tax Act, 1961." Further it has been held in the case of Saraswthi Oil Traders Vs CIT 254 ITR 259 (SC) that: 'When the sales have not been doubted then there was no question to doubt the purchases and the addition should have been made only to the extent of gross profit." The Mumba....
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....flected, the total sales for the year had been shown at Rs. 10,49,84,800. 6.3 The Ld. CIT(A) observed that when the information obtained from the Excise & Taxation Department about the License Fee was confronted to the assessee, another set of ledger account for sale bearing page no. 125 to 136 was filed which revealed that total sales had been shown at Rs. 15,60,33,500/- out of which the License Fee of Rs. 5,10,48,700/- had been reduced and net sales had been worked out at Rs. 10,49,84,800/-. The Ld. CIT(A) reproduced the copy of the ledger account (page no. 143) at page no. 16 of the impugned order. The Ld. CIT(A) was of the view that it was an afterthought which was clearly established from the facts that the assessee had filed (before he was confronted by the AO about non-accounting of the License Fee amounting to Rs. 5,10,48,700/-) a ledger account (page no. as 71) of the License Fee the details was reproduced at page no. 17 of the assessee's compilation. He further observed that the amount of Rs. 9,28,156/- mentioned at page no. 71 of the ledger account had been transferred to purchase account on 31/03/2015. The Ld. CIT(A) reproduced copy of the ledger having purchase acco....
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....er the ledger account of the sales were reflected in the P&L Account by the assessee as such and the License Fee and Excise Duty were credited to the purchase account during the F.Y. 2015-16 relevant to the A.Y. 2016-17, the assessee debited (wrongly mentioned as credited) License Fee of Rs. 7,11,35,098/- and Excise Duty of Rs. 2,56,77,000/- to the purchase account giving the total of purchase account at Rs. 21,64,04,119/- which was debited to the P&L Account for the said year whereas during the F.Y. relevant to the A.Y under consideration, the assessee debited License Fee of Rs. 9,28,156/- only to the purchase of Rs. 10,23,57,982/- giving the details of the net purchase at Rs. 10,32,86,138/-. 6.6 The Ld. CIT(A) observed that during the year under consideration the assessee had not accounted for the full License Fee of Rs. 5,10,48,700/- in its books of accounts and only an amount of Rs. 9,28,156/- had been accounted for and added in the purchase account. The balance payment on account of License Fee amounting to Rs. 5,01,20,544/- (Rs. 5,10,48,700 - Rs. 9,28,156/-) remained unexplained and required to be added to the income of the assessee under section 69C of the Act as unexplai....
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....therefore, there was no justification on the part of the AO in holding that the assessee made the payment of License Fee from undisclosed sources, therefore, the Ld. CIT(A) was not justified in sustaining the addition made by the AO. The reliance was placed on the following case laws: • CIT, Bangalore Vs. J.H. Gotla, Yadagiri (1985) 156 ITR 323 (SC) • Principal CIT Vs. Vaman International P. Ltd. (2020) 422 ITR 520 (Bom) • CIT Vs. Lakshmi Hospital (2012) 347 ITR 367 (Ker) • CIT Vs. Smt. P.K. Noorjahan (1999) 237 ITR 570 (SC) • CIT Vs. HCL Technologies Ltd. (2018) 16 SCC 709 (SC) 9. In his rival submissions the Ld. DR reiterated the observations made by the authorities below in their respective orders and strongly supported the impugned order passed by the Ld. CIT (A). It was further stated that the assessee did not reflect License Fee in the P&L Account and the Department got the information from the Excise Department that the payment of License Fee amounting to Rs. 5,10,48,700/- had been made by the assessee, as the same was not reflected in the P&L Account, the addition was rightly made by the AO and the Ld. CIT(....
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.... net amount of the sales after reducing the License Fee which is evident from the copies of the ledger account furnished by the assessee before the AO and the Ld. CIT(A), copies of the same are available at page nos. 21 to 32 and 55 of the paper book furnished by the assessee. It is also noticed that the Ld. CIT(A) in the impugned order had mentioned that in the succeeding year also the assessee had not shown License Fee separately in the "Trading and P&L Account" and debited the same to the purchase account. The Ld. CIT(A) accepted that the assessee debited License fee of Rs. 9,28,156/- on 31/03/2015 to the purchase account but doubted the remaining amount of License from 01/04/2014 onwards amounting to Rs. 5,10,48,700/- which was debited in the sales account and accordingly net figure of sales amounting to Rs. 10,49,84,800/- after reducing the license fee of Rs. 5,10,48,700/- from the gross sales of Rs. 15,60,33,500/-, was shown by the assessee in the "Trading and P&L Account". In the present case, for the year under consideration the assessee instead of debiting the License Fee in the purchase account reduced it from the sales as such the impact on the profitability was NIL beca....
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....he disallowance of Rs. 1,00,000/- by observing in para 4.3 of the impugned order as under: The facts of the case, basis of addition/disallowance made by the AO and the arguments of the AR during the course of appellate proceedings have been considered Even during the appellate proceedings, the assessee has not offered to get the expenses verified by producing the relevant bills/vouchers or any other document in support of genuineness of the expenses. It is also relevant to mention that during the appellate proceedings, the AR filed a copy of the assessment order dated 29.12.2018 for assessment year 2016-17, perusal of which shows that in the similar circumstances, the addition of Rs. 1,00,000/- was made after discussion with the counsel and accountant of the assessee for Irregularities and the discrepancies regarding expense in cash without complete name and address or preparation of vouchers and on account of un-vouched expenses. Therefore, keeping in view the facts and circumstances of the case and the history of the case, the disallowance during the year is also restricted to Rs. 1,00,000/- and the appellant gets relief of the balance amount. 14. Now the Assessee is ....