Zaid Enterprises, Karimnagar V. ITO, Ward-2, Karimnagar

ITA 270/Hyd/2023

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Zaid Enterprises, a partnership firm engaged in trading beedi leaves, appealed against the order of the Commissioner of Income Tax (Appeals) which upheld an addition of Rs. 15,44,567 as unexplained expenditure under section 69C for the assessment year 2018-19. The addition was based on a perceived discrepancy between the purchases reported by the assessee and the TCS collected by a supplier. The Tribunal examined the assessee's detailed accounting of purchases, GST, and other expenses, finding that when these were properly accounted for, the figures matched the invoice amount, leaving no unexplained expenditure. The Tribunal's decision emphasized the importance of considering all relevant financial details and the permissible accounting methods under tax law.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133382 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-06-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 16-05-2023
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Cost of acquisition; FORM 26AS
• Section: 69C

Judgement Text

आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “SMC”, HYDERABAD BEFORE SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER आ.अपी.सं / ITA No. 270/Hyd/2023 (निर्धारण वर्ा / Assessment Year: 2018-19) Zaid Enterprises, Mukrampura, Karimnagar [PAN No. AAAFZ6402F] Vs. Income Tax Officer, Ward-2, Karimnagar अपीलधर्थी / Appellant प्रत्‍यर्थी / Respondent निर्धाररती द्वधरध/Assessee by: Smt. S. Sandhya for Shri M.V. Anil Kumar, AR रधजस्‍व द्वधरध/Revenue by: Shri T. Venkanna, DR सुिवधई की तधरीख/Date of hearing: 07/06/2023 घोर्णध की तधरीख/Pronouncement on: 22/06/2023 आदेश / ORDER Aggrieved by the order dated 18/03/2023 passed by the learned Commissioner of Income Tax (Appeals)- National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), in the case of Zaid Enterprises (“the assessee”) for the assessment year 2018-19, assessee preferred this appeal. 2. Brief facts of the case are that, the assessee is a partnership firm carrying on business of trading in beedileaves at Karimnagar. For the assessment year 2018-19, assessee filed the return of income on 10/10/2018 declaring net taxable income of Rs. 3,16,540/-. During the scrutiny, the learned Assessing Officer found that a sum of Rs. 8,67,191/- ITA No. 270/Hyd/2023 Page 2 of 5 (as per TRACES form 26AS TCS) was collected by Chattisgarh Rajy Laghu Vanopaj Sahakari Union Maryadit of an amount of Rs. 1,73,43,820/-. Since the assessee disclosed only an amount of Rs. 96,65,593/- on account of purchase of beedi leaves in the profit and loss account, learned Assessing Officer called for the reasons for difference. Assessee, then produced a revised form 26AS showing the total purchase amount of Rs. 1,12,10,160/- and still there was a difference of Rs. 15,44,567/-, which the learned Assessing Officer added as ‘un-explained expenditure’ of the assessee under section 69C of the Act. 3. Assessee preferred appeal before the learned CIT(A) and submitted that as a matter of fact, the net purchases subject to TCS was only Rs. 94,70,358/- and other expenses were to the tune of Rs. 1,95,235/-, whereas the CGST at 9% was Rs. 8,69,903/- and SGST at 9% was Rs. 8,69,903/-. Assessee, therefore, submitted that the learned Assessing Officer failed to notice the fact that the amount on which TCS was collected is different from the total invoice amount and because no opportunity was afforded to the assessee, the assessee could not explain the same to the satisfaction of the learned Assessing Officer. 4. Learned CIT(A), however, brushed aside this contention of the assessee on the ground that even if the contention of the assessee is accepted, the purchase amount from Chattisgarh Rajy Laghu Vanopaj Sahakari Union Maryadit of Rs. 1,20,53,205/- including the CGST/SGST whereas the assessee has disclosed only Rs. 96,67,593/-, leaving a balance of Rs. 15,44,567/-, if the GST at 18% was considered, there is a difference of about Rs. 2 lakhs which according to the learned CIT(A) is remained un- explained. Learned CIT(A), therefore, dismissed the appeal. 5. Assessee is, therefore, before me in this appeal stating that the exclusive method treatment of taxes in the accounting followed by the assessee is not considered by the authorities below in fact such a method ITA No. 270/Hyd/2023 Page 3 of 5 of accounting for taxes is permissible under law and also accepted by the department in earlier assessment years. Learned AR further contended that there are certain expenses like godown rent, charges on late payment etc., to the tune of Rs. 1,95,235/- on which TCS was not collected, but only added to the purchase cost in the profit and loss account and this fact was not considered by the authorities below. She submitted that if these other expenses which were not subjected to TCS, but added to the purchase cost in the profit and loss account is considered, the alleged difference found out by the learned CIT(A) will not be there. She, therefore, prayed that the addition may be deleted. 6. I have gone through the record in the light of the submissions made on either side. According to the latest form 26AS furnished by the assessee before the learned Assessing Officer, the invoice amount was Rs. 1,12,10,160/-. According to the profit and loss account of the assessee, the purchase chase was Rs. 96,65,593/- the difference of Rs. 15,44,567/- is straightaway added by the learned Assessing Officer to the income of the assessee under section 69C of the Act. 7. Learned CIT(A), however, considered the contention of the assessee that the invoice includes the CGST and SGST at 9% each. By calculating the same, the learned CIT(A) reached a figure of Rs. 17,39,811/-, which he included it to the cost price as per the profit and loss account and observed that this amount is Rs. 2 lakhs more than the invoice amount and, therefore, the contention of the assessee cannot be accepted. 8. On a calculation of the CGST and SGST at 9% each on the net purchase amount as pleaded by the assessee at Rs. 94,70,358/-, I find that cumulative GST comes to Rs. 17,39,806/- and this amount has to be added not to the total amount of purchase as found in the profit and loss account, which includes the other expenses relating to the purchase, but to the amount which was subject to TCS. In that case, it comes to ITA No. 270/Hyd/2023 Page 4 of 5 Rs. 1,12,10,164/-. This amount tallies with the invoice amount of Rs. 1,12,10,160/-. The difference of Rs. 2 lakhs, observed by the learned CIT(A), was due to the non-consideration of the contention of the assessee by the learned CIT(A) that there are other expenses like godown rent, charges on late payment etc., to the tune of Rs. 1,95,235/-; and when that amount is considered, absolutely there is no difference and highly probablises the case of the assessee. I, therefore, do not see any discrepancy in the case of the assessee. The addition is not warranted. Accordingly, the addition is directed to be deleted and the appeal of assessee is allowed. Order pronounced in the open court on this the 22 nd day of June, 2023. Sd/- (K. NARASIMHA CHARY) JUDICIAL MEMBER Hyderabad, Dated: 22/06/2023 TNMM ITA No. 270/Hyd/2023 Page 5 of 5 Copy forwarded to: 1. Zaid Enterprises, C/o. M. Anandam & Co., Chartered Accountants, Flat No. 7A, Surya Towers, S.P.Road, Secunderabad. 2. Income Tax Officer, Ward-2, Karimnagar. 3. DR, ITAT, Hyderabad. 4. GUARD FILE. TRUE COPY ASSISTANT REGISTRAR ITAT, HYDERABAD