ACIT, CENTRAL CIRCLE 3(3), CHENNAI V. PRAKASH SHIPPING AGENCIES, CHENNAI

MA 6/CHNY/2025

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The case involves Prakash Shipping Agencies, a partnership firm and custom house agent, which faced an income tax assessment for the year 2017-18. Initially, the firm declared an income of Rs.11,29,480 but later during a survey, offered an additional income of Rs.1,10,00,000. The Assessing Officer (AO) included this in the assessment, leading to a total income of Rs.1,21,29,480. The firm appealed, and the CIT(A) reduced the addition to Rs.14,44,200, which was sustained by the Tribunal after finding that the earlier addition amounted to double taxation. The Revenue's Miscellaneous Application contested this, leading to the Tribunal's current decision to sustain part of the addition while correcting the double taxation issue.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 469599 (ITAT-CHENNAI)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 10-03-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOUTHAMI MANIVASAGAM
• Assessee Lawyers: Y. SRIDHAR; F.C.A
• Keywords: Revenue expenditure; Depreciation
• Section: 40A(3); 133A

Judgement Text

"आयकर अपीलȣय अͬधकरण,‘ए’ Ûयायपीठ, चेÛन IN THE INCOME TAX APPELLATE TRIBUNAL‘A’ BENCH, CHENNAI Įी जॉज[ जॉज[ क े, उपाÚय¢ एवं Įी एस.आर.रघुनाथा, लेखा सदèय क े सम¢ BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT AND SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./M.A No.:6/CHNY/2025 (In ITA No.536/Chny/2024) िनधाᭅरण वषᭅ/Assessment Year:2017-18 Assistant Commissioner of Income Tax, Central Circle-3(3) Chennai. Vs. Prakash Shipping Agencies 247,Thambu Chetty Street, Mannadi, Chennai-600 001. PAN: AAEPF-1257-A (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮकᳱओरसे/Appellant by : Ms. Gouthami Manivasagam, JCIT ᮧ᭜यथᱮकᳱओरसे/Respondent by : Mr. Y.Sridhar, F.C.A सुनवाई कᳱ तारीख/Date of Hearing : 07.03.2025 घोषणा कᳱ तारीख/Date of Pronouncement : 10.03.2025 आदेश /O R D E R PER GEORGE GEORGE K, VICE PRESIDENT: This Miscellaneous Application filed by the Revenue arises out of Tribunal order dated 28.08.2024 in ITA No.536/Chny/2024. 2. Brief facts of the case are as follows:- The assessee is a partnership firm. It is a Custom house agent. For AY 2017-18, return of income was filed on 05.10.2017 declaring total income of Rs.11,29,480/-. A survey u/s.133A of the Act was conducted in assessee’s case on 12.11.2018. Pursuant to the - 2 - MA No. 6/CHNY/2025 survey, the assessee had offered additional income of Rs.1,10,00,000/- towards “incidental expenditure” for assessment year 2017-18. However, the assessee did not file revised return, including offer made during course of survey. The assessment was completed u/s.143(3) of the Act vide order dated 31.12.2019 assessing total income of Rs.1,21,29,480/-, by adding the income offered by the assessee during course of survey proceedings. 3. Aggrieved by assessment year, assessee preferred appeal before CIT(A). The CIT(A) vide order dated 17.01.2024 on the issue of addition of Rs.1,10,00,000/- being “incidental expenditure” deleted addition to the extent of Rs.95,55,800/- and restricted addition to Rs.14,44,200/-. 4. Aggrieved by the additions sustained to the extent of Rs.14,44,200/-, assessee preferred appeal before the Tribunal. The Tribunal vide order dated 28.08.2024 deleted addition sustained by the CIT(A) to the extent of Rs.14,44,200/- by holding that addition tantamounts to double taxation, as assessee had already disclosed Rs.1.10 crores as additional income. The relevant findings of the Tribunal reads as follows:- “24. At the time of hearing before us, the Id.counsel for the assessee read out question Nos.10, 11 & 11 and answer to the same and stated that the assessee has disclosed this sum of Rs.1.10 crores and. If separate addition is made for this amount - 3 - MA No. 6/CHNY/2025 of Rs 14,44,200/- on account of expenditure incurred during the year on account of incidental expenditure not supported by bills, the same tantamount to double addition, We noted that this plea of the assessee that this amount tantamount to double addition seems logical as the assessee has already disclosed a sum of Rs. 1.10 crores as additional income and further, making addition of this expenditure of incidental expenses of Rs.14,44,200/- makes no sense. Hence, we delete this addition and allow this issue of assessee's appeal. Accordingly, this appeal of the assessee is allowed.” 5. Aggrieved by order of the Tribunal, Revenue has filed present Miscellaneous Application. The learned DR submitted that offer made by the assessee to disclose the additional income of Rs.1.10 crores during course of survey u/s.133A was complied by assessee. The addition made by the AO was deleted to the extent of Rs.95,55,800/- and only sum of Rs.14,44,200/- was sustained by CIT(A). It was submitted by the learned DR that Tribunal has erred in deleting addition of Rs.14,44,200/-by holding that sustaining the same will tantamount to double taxation. It is submitted by the learned AR as the addition amounting to Rs.1.10 crores made in the assessment order dated 31.12.2019 has been restricted to Rs.14,44,200/- by CIT(A) and it does not pertain to any separate addition or enhancement by the CIT(A), the ITAT’S observation is factually incorrect and call for rectification u/s.254(2) of the Act. 6. The learned AR fairly submitted that there is no double taxation to the extent of Rs.14,44,200/- except for a sum of Rs.3,69,489/- - 4 - MA No. 6/CHNY/2025 which has been disallowed u/s.40A(3) of the Act. The learned AR did not have any objection for sustaining addition of Rs.10,74,711/- (i.e Rs.14,44,200 – 3,69,489). 7. We have heard rival submissions and perused material record. The solitary issue for AY 2017-18 was with regard to addition towards additional income admitted by the assessee during course of survey proceedings amounting to Rs.1,10,00,000/- but not admitted in the return filed by the assessee. The assessee before CIT(A) had contended that addition of Rs.1.10,00,000/- was made by the AO in the assessment year completed u/s.143(3) of the Act on 31.12.2019 is bad in law by giving following explanation:- “4. The total expenditure incurred by the appellant this year is Rs. 1,58,77,376/-, out of which depreciation and partners remuneration debited to profit and loss account amounts to Rs.11,04,684/- and Rs.8,30,000/- respectively. Thus, balance revenue expenditure claimed is Rs.1,39,42,693/- only, out of which expenditure met via banking channel is Rs.88,77,464/- and expenditure via cash is Rs.50,13,667/-. Further, cash expenditure in excess of threshold as specified u/s 40A(3) is only Rs.3,69,489/-. Thus, there is no justification or rational in adding Rs.1,10,00,000/- as income.” 8. The CIT(A) deleted addition out of Rs.1,10,00,000/- made by the AO a sum of Rs.95,55,800/- and sustained addition of - 5 - MA No. 6/CHNY/2025 Rs.14,44,200/- by observing that “incidental expenditure” incurred during relevant assessment year to the extent of Rs.14,44,200/- alone is not supported by any evidence. The relevant finding of the CIT(A) reads as follows:- “7.9 However, it is noticed from statement u/s 133A reproduced above that an amount Rs. 14,44,200/- has been incurred during the year towards 'Incidental Expenditure and it is not supported by any Bills. This fact was admitted by appellant while replying to question number 8,10 and 11. 7.10……………. 7.11.……………. 7.12 Hence, addition made by AO to the extent of Rs.95,55,800/-(Rs.1,10,00,000/- minus Rs 14,44,200/-) is hereby deleted as it represents admission of appellant towards 'Incidental Expenditure' of other years but not related to current year. The AO is directed to delete addition to the extent of Rs.95,55,800/-.Consequently, Grounds relating to the issue are partly allowed.” 9. The learned AR before the Tribunal in Miscellaneous Application filed has fairly submitted that there is no double taxation to the extent of Rs.14,44,200/-, since CIT(A) has deleted Rs.95,55,800/- as against total addition of Rs.1,10,00,000/- made by the AO. However, learned AR has brought on record that there has been disallowance u/s.40A(3) to the extent of to Rs.3,69,489/- - 6 - MA No. 6/CHNY/2025 and to this extent there is double taxation. Taking into consideration contentions of learned AR and learned DR, we are of the view that out of addition deleted by the Tribunal to the extent of Rs.14,44,200/-, there is only a sum of Rs.3,69,489/- which has suffered double taxation. Hence, we sustain addition to the extent of Rs.10,74,711/- (14,44,200 – 3,69,489). It is ordered accordingly. 10. The Miscellaneous application filed by the department is partly allowed. Order pronounced in the open court on 10th March, 2025. Sd/- Sd/- (एस.आर. रघुनाथा) (S.R. RAGHUNATHA) लेखा सदèय/ACCOUNTANT MEMBER (जॉज[ जॉज[ क े) (GEORGE GEORGE K) उपाÚय¢ /VICE PRESIDENT चेÛनई/Chennai, Ǒदनांक/Dated, the 10th March, 2025 DS आदेशकȧĤǓतͧलͪपअĒेͪषत/Copy to: 1. अपीलाथȸ/Appellant 2. Ĥ×यथȸ/Respondent 3. आयकरआयुÈत /CIT, Chennai/Madurai 4. ͪवभागीयĤǓतǓनͬध/DR 5. गाड[फाईल/GF. "