ASHOK SHARMA,KOLKATA V. ITO, WARD-40(4), KOLKATA

ITA 432/KOL/2024

AI Insights

The case involves Ashok Sharma, the appellant, contesting several additions made to his income by the Income Tax Officer (ITO), Ward-40(4), Kolkata, for the Assessment Year 2010-11. The primary issues revolved around the estimation of income based on a Gross Profit (GP) rate of 18.82% applied to total turnover, and several additions treated as unexplained cash credits and income from undisclosed sources. The Tribunal's decision addressed the proper allowance of expenses against the estimated income, the treatment of bank deposits and withdrawals, and the handling of loans and advances as well as interest deposits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 25393 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Assessee Lawyers: SOUMITRA CHOUDHRY
• Keywords: Set aside; Unexplained cash credit; Depreciation; Income from undisclosed sources

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.432/KOL/2024 (Assessment Year: 2010-11) Ashok Sharma 3rd, Sitar, 6, Commissariat Road, Hastings, Kolkata, West Bengal, 700022 Vs. ITO, Ward-40(4) 3, Govt. Place west, Kolkata, West Bengal, 700001 (Appellant) (Respondent) PAN No. AKJPS0470K Assessee by : Shri Soumitra Choudhry, AR Revenue by : Shri Ranu Biswas, DR Date of hearing: 17.03.2025 Date of pronouncement : 01.04.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 03.01.2024 for the AY 2018-19. 02. The issue raised in ground no. 1 to 3 are general in nature and do not require any specific adjudication. 03. The issue raised in ground no.4,5 and 6 is against the order of ld. CIT (A) confirming the addition of ₹43,28,864/- as made by the ld. AO by estimating the income by applying the GP rate 18.82% of the total turnover i.e. 2,30,01,402/-. Page | 2 ITA No.432/KOL/2024 Ashok Sharma; A.Y. 2010-11 04. The facts in brief are that this is second round of litigation before the Tribunal. During the first round the appeal was restored to the file of the ld. AO with a direction that the income of the assessee may be estimated by taking into account the GP rate at 18.82% in para no.3 of the appellate order in ITA No. 1378/KOL/2016 for A.Y. 2010-11 vide order dated 03.05.2019. Accordingly, the ld. AO applied the said GP rate on the total turnover and added ₹43,28,864/- to the income of the assessee by applying the GP rate at 18.82% on the turnover of ₹2,30,01,402/- without making any allowance towards expenses incurred by the assessee. 05. The ld. CIT (A) simply affirmed the said addition by upholding the order of ld. AO when the assessee did not make any submission before the ld. CIT (A). 06. After hearing the rival contentions and perusing the materials available on record, we find from the perusal of the trading and Profit and Loss account for the year ended 31.03.2010, that the expenses incurred by the assessee have not been allowed from the gross profit computed by the AO as per direction of the Tribunal. The total expenses were ₹66,07,286/- and after taking the credit of service tax in the profit and loss account of ₹28,62,240/-, the net profit worked out to 3,26,859/-. In our opinion, the credit has to be allowed for the expenses incurred by the assessee from the gross profit determined by the AO as per tribunal direction. For ready reference the profit and loss account is extracted below:- CLIFFORD FACILITY SERVICES Prof:- Col. Ashok Sharma (Retd). PAN No. AKJPS0470K Recusted as per direction order dt. 03.05.2019 Trading Account for the year ended 31.03.2010 Page | 3 ITA No.432/KOL/2024 Ashok Sharma; A.Y. 2010-11 Particulars Amount Particulars Amount Salary & Wages 17162553.00 Total Receipts 23001402.00 ESI Contribution 107856.00 PF Contribution 862661.00 Uniform Expenses 796427.00 Gross Profit (Ratio 18%) 4071905.00 23001402.00 Profit & Loss Account for the year ended 31.03.2010 Printing & Stationary 328820.00 Gross Profit 4071905.00 Staff Welafare 121154.00 Service Tax 2862240.00 General Expenses 223426.00 Office Rent 144000.00 Mess Charges 903664.00 Travelling Expenses 373449.00 Bank Charges 73302.00 Rates & Taxes 370.00 Professional Charges 60000.00 Serve Tax 2862240.00 Audit Fees 2000.00 Telephone Charges 87865.00 Motor Car & Repair 409334.00 Repair & Maintenance 350816.00 Professional Fees 8000.00 Misc Expenses 207008.00 Legal Charge 50500.00 Advertisement 54310.00 Subscription & Donation 6374.00 Office Expenses 75260.00 Professional Tax 33520.00 NHAI Interest 180536.00 Depreciation 51338.00 Net Profit Transfer ToCapital A/c 326859.00 6934145.00 6934145.00 07. On perusal of the above Profit and Loss account it is had revealed that the expenses incurred by the assessee are to be allowed and the income cannot be estimated on the basis of GP rate alone. Accordingly, we set aside the order of the ld. CIT (A) and direct the ld. AO to allow the deduction of expenses to the assessee as per the above Profit and Loss account. The appeal of the assessee on this issue is allowed. Page | 4 ITA No.432/KOL/2024 Ashok Sharma; A.Y. 2010-11 08. The issue raised in ground no.7, is against the confirmation of addition of ₹15,82,148/- by ld. CIT (A) as made by the ld. AO on account of cash deposited in the bank by treating the same as unexplained cash credit. 09. The facts in brief are that the assessee has made a huge deposits into and withdrawals from the bank account which according to the ld. AO were not reconciled and he accordingly added Rs.15,82,148/- to the income of the assessee as unexplained cash credit. However, on the other hands, we note that the assessee has deposited and withdrawn the money from the same bank account and these were repeated transactions done by the assessee and all are reported in the books of accounts maintained by the assessee for the business purposes. Moreover, the addition made by the ld. AO on account of deposits and withdrawals of money and any discrepancy therein cannot be made where the income has been estimated by apply the GP rate. Therefore, we set aside the order of the ld. CIT (A) and direct the ld. AO to delete the addition. The ground raised by the assessee is allowed. 010. Similarly, in ground no.8, the ld. CIT (A) confirmed the addition of ₹8,40,000/- as made by the ld. AO on account of loan and advances treating the same as income from undisclosed sources. Since, we have decided ground no.7, where the income has been estimated by applying the GP rate no additions was called for. Accordingly, we set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. The ground is accordingly allowed. 011. The issue in ground no.9 is addition of ₹1,87,488/- on account of interest deposit. Page | 5 ITA No.432/KOL/2024 Ashok Sharma; A.Y. 2010-11 012. After hearing the rival contentions and perusing the materials available on record, we find that the said interest represented the interest accrued on FDR with UCO bank. Therefore, the same was correctly added by the ld. AO in the assessment order and sustained by the ld. Commissioner of Income-tax (Appeals). Accordingly, we upheld the order of ld. CIT (A) on this issue by dismissing the ground no.9 of the assessee. 013. Ground no.10,11,12,13, are general in nature and do not require any adjudication. 014. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 01.04.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 01.04.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata "