Sri Pranab Chatterjee, Kolkata V. A.C.I.T Cir - 30,kolkata., Kolkata

ITA 320/KOL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1765 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 20-03-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 14-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure; Revised return
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SHRI ABY. T. VARKEY, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 320/KOL/201 3 ASSESSMENT YEAR : 2007-0 8 SHRI PRANAB CHATTERJEE -VS- ACIT, CIRCLE -30, KOLKATA [PAN: ACQPC 3756 K] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SAUMITRA CHOU DHURY, ADVOCATE FOR THE RESPONDENT : NONE DATE OF HEARING : 11.07.2017 DATE OF PRONOUNCEMENT : 11.08.2017 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- XIV, KOLKATA [ IN SHORT THE L D CITA] IN APPEAL NO. 302/CIT(A)-XIV/09-10 DATED 30.12.2012 AGAINST THE ORDERS PASSED BY THE ITO, WARD- 30(4), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 144 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 31.12.2009 FOR THE ASSESSM ENT YEAR 2007-08. 2. THE GROUND NOS. 1 & 10 RAISED BY THE ASSESSEE AR E GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 3. DURING THE COURSE OF HEARING, THE LD AR STATED T HAT THE GROUND NO.3 RAISED BY THE ASSESSEE IS NOT PRESSED. THE SAME IS RECKONED AS A STATEMENT FROM THE BAR AND HENCE THE SAME IS DISMISSED AS NOT PRESSED. 2 ITA NO.320/KOL/2013 SHRI PRANAB CHATTERJEE A.YR.2007-08 2 4. THE FIRST INTERCONNECTED ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN CONFIRMING THE ADDITION MADE TOWARDS CAPITAL INTRODUCTION OF RS 5,76,982/- IN PRANAB CHATERJEE & ASSOCIATES AND C APITAL INTRODUCTION OF RS 8,35,000/- IN FIRM STYLED AS M/S VISWAKARMA, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE IS A PROPRIETOR OF M/S PRANAB CHATERJEE & ASSOCIATES ENGAGED IN THE BUSINESS OF CONSULTANTS, ARCHITECTS AND INTERIOR DECORATORS. HE IS ALSO A PROPRIETOR OF ANOTHER PR OPRIETORY CONCERN STYLED AS M/S MODULE, ENGAGED IN THE BUSINESS OF PROMOTING, DEVE LOPING AND REAL ESTATE. THE ASSESSEE IS ALSO A PARTNER IN A PARTNERSHIP FIRM ST YLED AS M/S VISWAKARMA AND ALSO A KARTA OF HUF. THE ASSESSEE WAS IN RECEIPT OF SAL ARY INCOME, RENTAL INCOME AND MAINTENANCE CHARGES, PARTNERS REMUNERATION, SHARE O F PROFIT FROM FIRM AND HUF, BUSINESS INCOME , SHORT TERM CAPITAL GAINS ON SALE OF SHARES, LONG TERM CAPITAL GAINS ON SALE OF GOLD, INTEREST INCOME FROM NSC, KVP, PPF AN D CLUBBING OF MINORS INCOME. THE ORIGINAL RETURN OF INCOME FOR THE ASST YEAR 200 7-08 WAS FILED BY THE ASSESSEE ON 2.11.2007 DECLARING TOTAL INCOME OF RS 1,95,432/- A ND LATER THE ASSESSEE REVISED HIS RETURN ON 12.3.2009 DECLARING TOTAL INCOME OF RS 3, 41,756/-. THE LD AO OBSERVED THAT THE ASSESSEE FAILED TO SUBMIT HIS BOOKS OF ACCOUNTS AND DOCUMENTS IN SUPPORT OF HIS CONTENTION AND THAT THERE WERE SOME DISCREPANCIES B ETWEEN THE BALANCE SHEET FILED EARLIER AND REFLECTION OF CLOSING CAPITAL BALANCE T HEREON WITH THE OPENING CAPITAL BALANCE IN THE NEXT YEAR AND ACCORDINGLY PROCEEDED TO FRAME THE ASSESSMENT ON BEST JUDGEMENT BASIS U/S 144 OF THE ACT. THE LD AO OBSERVED THAT THE ASSESSEE HAD INTRODUCED CAPITAL FOR RS 5,76,982/- AND OBSERVED THAT THE ASSESSEE HA D FAILED TO PROVIDE THE SOURCE OF SUCH INTRODUCTION OF CAPITAL, THE SAME WAS TREATED AS UN EXPLAINED INCOME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. SIMILARLY THE LD AO OBSERVED THAT THE ASSESSEE FAILED TO PROVIDE SPECIFIC SOURCE OF HIS INVESTMENT OF CAPITA L INTRODUCTION IN THE FIRM VISWAKARMA IN THE SUM OF RS 8,35,000/- AND ACCORD INGLY ADDED BACK THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 3 ITA NO.320/KOL/2013 SHRI PRANAB CHATTERJEE A.YR.2007-08 3 4.2. IT WAS EXPLAINED BEFORE THE LD CITA THAT THE D ETAILED BOOKS OF ACCOUNTS WERE MAINTAINED IN THE REGULAR COURSE OF BUSINESS OF VAR IOUS PROPRIETORY CONCERNS, FIRMS AND HUF WHICH ARE ALSO DULY SUPPORTED BY BILLS AND VOUC HERS. IT WAS FURTHER SUBMITTED THAT THE BOOKS OF ACCOUNTS WERE DULY AUDITED U/S 44AB OF THE ACT, WHEREVER APPLICABLE. THE CHARTERED ACCOUNTANT OF THE ASSESSEE APPEARED O N 4 DIFFERENT DATES ON RECORD BEFORE THE LD AO EXPLAINED THE POINTS AND DETAILS AS REQUI RED BY THE LD AO AND HAD ALSO PRODUCED AND PRESENTED ALL THE RELEVANT PAPERS, DOC UMENTS, BANK ACCOUNTS, COMPUTATION OF INCOME, AUDITED FINANCIAL STATEMENTS OF PRANAB C HATERJEE & ASSOCIATES, FINANCIAL STATEMENTS OF MODULE, PERSONAL BALANCE SHEET & INCO ME AND EXPENDITURE ACCOUNT OF PRANAB CHATTERJEE, COPY OF FINANCIAL STATEMENTS OF VISWAKARMA AND COPY OF RETURN AND FINANCIAL STATEMENT OF PRANAB CHATERJEE (HUF) . IT WAS ALSO SUBMITTED THAT THE LD AO HAD CONSIDERED ALL THE FIGURES FROM THE FINANCIAL S TATEMENTS OF ASSESSEE AND SO IT IS EVIDENT THAT HE HAD ACCEPTED ALL THE FIGURE OF THE FINANCIAL STATEMENTS PRESENTED AT ASSESSMENT LEVEL OTHER THAN THE POINTS WHICH HE SPE CIFICALLY RAISED. MOREOVER, IN THE COMPUTATION POTION OF THE ORDER, THE LD AO HAD STAR TED WITH THE INCOME DISCLOSED IN THE REVISED RETURN. SO IT IS EVIDENT THAT THE LD AO HA D ACCEPTED THE REVISED RETURN SUBMITTED BY THE ASSESSEE. DURING THE COURSE OF HEARING, IT WAS SUBMITTED THAT THE SOURCE OF RS 5,76,982/- TOWARDS CAPITAL WAS MADE OUT OF DRAWINGS TO THE TUNE OF RS 6,58,500/- AND HENCE THE SOURCE IS DULY EXPLAINED AND THERE IS NO CASE FOR MAKING ANY ADDITION IN THIS REGARD. WITH REGARD TO CAPITAL INTRODUCTION IN T HE FIRM VISWAKARMA IN THE SUM OF RS 8,35,000/-, IT WAS EXPLAINED THAT THE DRAWINGS HAVE BEEN MADE FROM THE SAID FIRM TO THE TUNE OF RS 9,01,900/- WHICH EXPLAINS THE SOURCE FOR FUTURE INVESTMENT OF CAPITAL IN THE SAID FIRM. 4.3. THE LD CITA THOUGH OBSERVED THAT THE ASSESSEE HAD INDEED FILED THE FUND FLOW STATEMENT EXPLAINING THAT THE SOURCES WERE MET OUT OF DRAWINGS FROM THE OTHER BANK ACCOUNT. BUT HE OBSERVED THAT THE ASSESSEE HAD NOT EXPLAINED THE SOURCE OF DRAWINGS. ACCORDINGLY HE CONFIRMED THE ADDITION MADE BY THE L D AO IN THE SUM OF RS 5,76,982/-. 4 ITA NO.320/KOL/2013 SHRI PRANAB CHATTERJEE A.YR.2007-08 4 SIMILARLY, HE OBSERVED THAT THERE IS NO SATISFACTOR Y EVIDENCE THAT CASH WITHDRAWALS FROM M/S VISWAKARMA EXPLAINS THE SOURCE OF INTRODUCTION OF CAPITAL IN THE SAID FIRM AND ACCORDINGLY CONFIRMED THE ADDITION OF RS 8,35,000/- MADE BY THE LD AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GR OUNDS:- 2. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN CONFIRMING CAPITAL INTRODUCTION OF RS. 5,76,982/- IN PRANAB C HATTERJEE & ASSOCIATES WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLE GAL. 3. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN CONFIRMING CAPITAL INTRODUCTION OF RS. 8,35,000/- IN M/S VISW AKARMA AS UNEXPLAINED INCOME OF THE ASSESSEE WHICH IS COMPLETELY ARBITRAR Y, UNJUSTIFIED AND ILLEGAL. 4.4. WE HAVE HEARD THE LD AR. NONE APPEARED FOR THE REVENUE WHEN THE CASE WAS CALLED FOR HEARING. NO ADJOURNMENT PETITION HAS BEEN MOVE D BY THE REVENUE ON THE DATE OF HEARING. HENCE WE PROCEED TO HEAR THE LD AR AND B ASED ON MATERIALS AVAILABLE ON RECORD. WE HAVE GONE THROUGH THE RELEVANT PAGES O F THE PAPER BOOK FILED BY THE LD AR COMPRISING OF (I) FINANCIAL STATEMENTS OF VARIOUS P ROPRIETORY CONCERNS AND PERSONAL BALANCE SHEET (ENCLOSED IN PAGES 1 TO 37 OF PB) ; ( II) STATEMENT SHOWING FLOW OF DRAWINGS AND CAPITAL INTRODUCTION IN PRANAB CHATERJ EE & ASSOCIATES BY THE PROPRIETOR (ASSESSEE HEREIN) ( ENCLOSED IN PAGES 38 & 39 OF PB ) AND (III) STATEMENT SHOWING FLOW OF DRAWINGS AND CAPITAL INTRODUCTION IN VISWAKARMA BY THE ASSESSEE ALONG WITH BANK STATEMENT (ENCLOSED IN PAGES 43 TO 53 OF PB). WE FIND FROM PAGES 38 & 39 OF THE PAPER BOOK PLACED ON RECORD THAT THE ASSESSEE HAD DULY EX PLAINED THE SOURCE OF CAPITAL INTRODUCTION MADE ON EACH DATE IN M/S PRANAB CHATER JEE & ASSOCIATES STARTING FROM 1.6.2006 TO 7.2.2007 TOTALLING TO THE TUNE OF RS 5, 76,982/- . THE SOURCE HAS BEEN EXPLAINED OUT OF CASH WITHDRAWALS FROM THE PERSONAL BANK ACCOUNT OF THE ASSESSEE ON EACH DATE WITH SPECIFIC REFERENCE TO THE CHEQUE NUM BERS WHICH ARE CROSS VERIFIABLE WITH THE CORRESPONDING BANK STATEMENT. WE ALSO FIND THAT ASSESSEE HAD INCURRED BUSINESS EXPENDITURE OF PRANAB CHATERJEE & ASSOCIATES BY MAK ING PAYMENT TO SPA CONSULTANTS (STRUCTURAL ENGINEER) ON 23.10.2006 BY ISSUING CHEQ UE FROM HIS PERSONAL BANK ACCOUNT 5 ITA NO.320/KOL/2013 SHRI PRANAB CHATTERJEE A.YR.2007-08 5 TO THE TUNE OF RS 10,000/- WHICH WAS TREATED AS CAP ITAL INTRODUCTION IN THE BOOKS OF THE PROPRIETORY CONCERN PRANAB CHATERJEE & ASSOCIATES . HENCE THE SOURCE IS ALSO EXPLAINED FOR THE SAME. SIMILARLY THE ASSESSEE H AD PAID A SUM OF RS 982/- TOWARDS BANK CHARGES ON 3.10.2006 ON BEHALF OF THE PROPRIET ORY CONCERN, WHICH WAS TREATED AS CAPITAL INTRODUCTION BY THE ASSESSEE IN THE SAID PR OPRIETORY CONCERN. WE ALSO FIND THAT THE ASSESSEE HAD EPXLAIEND THE SOURCE OF CASH DEPOS IT OF RS 30,000/- ON 7.2.2007 TO BE MADE OUT OF DRAWINGS MADE FROM THE FIRM M/S VISWAKA RMA. HENCE WE FIND THAT THE SOURCES OF CAPITAL INTRODUCTION IN THE PROPRIETORY CONCERN M/S PRANAB CHATERJEE & ASSOCIATES IN THE SUM OF RS 5,76,982/- (MORE DETAIL ED IN PAGES 38 & 39 OF PB) STAND EXPLAINED IN THE FOLLOWING MANNER:- A) PARTLY OUT OF CASH WITHDRAWALS FROM PERSONAL BAN K ACCOUNT OF ASSESSEE ; B) PARTLY OUT OF CHEQUES ISSUED FROM PERSONAL BANK ACCOUNT OF ASSESSEE ON BEHALF OF PROPRIETORY CONCERN ; AND C) PARTLY OUT OF WITHDRAWALS FROM PARTNERSHIP FIRM M/S VISWAKARMA. HENCE THERE IS NO NEED TO MAKE ANY ADDITION TOWARDS THE CAPITAL INTRODUCTION IN PRANAB CHATERJEE & ASSOCIATES AS THE SOURCES FOR THE SAME STAND CLEARLY EXPLAINED. ACCCORDINGLY, THE GROUND NO. 2 RAISED BY THE ASSESS EE IS ALLOWED. 4.4.1. SIMILARLY WE FIND FROM PAGE 43 OF THE PAPER BOOK PLACED ON RECORD THAT THE ASSESSEE HAD DULY EXPLAINED THE SOURCE OF CAPITAL I NTRODUCTION MADE ON EACH DATE IN THE FIRM M/S VISWAKARMA STARTING FROM 31.10.2006 TO 31. 1.2007 TOTALLING TO THE TUNE OF RS 8,35,000/- . THE DETAILS OF THE SAME ARE AS UNDER: - 31.10.2006 CASH INTRODUCED - RS 1,00,000 10.11.2006 CASH INTRODUCED - RS 35,000 7.12.2006 CHEQUE TRANSFER FROM PERSONAL BANK A/C - RS 2,00,000 27.12.2006 CHEQUE TRANSFER FROM PERSONAL BANK A/C - RS 2,00,000 8.1.2007 CHEQUE TRANSFER FROM PERSONAL BANK A /C - RS 1,00,000 31.1.2007 - EXPENSE PAID FROM PERSONAL A/C ON BEHALF OF VISWAKARMA - RS 2 ,00,000 ------------- ------ RS 8,35,000 6 ITA NO.320/KOL/2013 SHRI PRANAB CHATTERJEE A.YR.2007-08 6 ------------------- WE FIND FROM PAGE 43 OF PAPER BOOK CORROBORATED WIT H THE CORRESPONDING BANK STATEMENTS, THE ASSESSEE HAD WITHDRAWN CASH FROM M/ S VISWAKARMA ON VARIOUS DATES RANGING FROM 3.4.2006 TO 31.1.2007 TOTALLING TO RS 5,70,900/- WHICH WERE DEPOSITED IN THE PERSONAL BANK ACCOUNT OF ASSESSEE. LATER WHEN THE CASH WAS REQUIRED TO BE INTRODUCED IN THE FIRM M/S VISWAKARMA, THE ASSESSEE HAD WITHDRAWN CASH FROM HIS PERSONAL BANK ACCOUNT AND DEPOSITED THE SAME IN CAS H IN VISWAKARMA ACCOUNT TO THE TUNE OF RS 1,35,000/- ( I.E 31.10.06 1,00,000 & 1 0.11.06 35,000). HENCE THE CASH DEPOSIT OF RS 1,35,000/- STOOD CLEARLY EXPLAINED OU T OF CASH WITHDRAWALS. WITH REGARD TO THE FURTHER INVESTMENT IN THE FIRM BY CHEQUE TO THE TUNE OF RS 7,00,000/- FROM 7.12.2006 TO 8.1.2007, WE FIND THAT THESE WERE NOTH ING BUT CHEQUE TRANSFERS MADE FROM PERSONAL BANK ACCOUNT TO THE BANK ACCOUNT OF THE FI RM M/S VISWAKARMA BY THE ASSESSEE. WITH REGARD TO THE REMAINING SUM OF RS 2,00,000/- I NTRODUCED IN THE FIRM M/S VISWAKARMA ON 31.1.2007, THE SAME REPRESENTS EXPENS ES PAID BY THE ASSESSEE ON BEHALF OF THE FIRM TO MR GANESH DEB MALLICK (LANDLORD OF 5 2, GOLF CLUB PROJECT) FROM HIS PERSONAL ACCOUNT. WE FIND THAT THE ASSESSEE HAD I NDEED FILED BEFORE THE LD AO THE COPY OF PERSONAL BALANCE SHEET, INCOME AND EXPENDITURE A CCOUNT, BALANCE SHEET OF THE FIRM M/S VISWAKARMA. THE LD CIT(A) HAVING OBSERVED THAT THE FUND FLOW STATEMENT HAS BEEN FILED BY THE ASSESSEE FOR EXPLAINING THE SOURC ES, FAILED TO APPRECIATE THE SAME AND CONFIRMED THE ADDITION. ALL THESE TRANSACTIONS STA ND DULY CORROBORATED WITH THE CORRESPONDING BANK STATEMENTS. MOREOVER, IT IS NOT IN DISPUTE THAT BOTH THE PRANAB CHATERJEE (HUF) AND M/S VISWAKARMA ARE ASSESSED TO INCOME TAX INDEPENDENTLY. IN THESE FACTS AND CIRCUMSTANCES, WE HAVE NO HESITATIO N IN DIRECTING THE LD AO TO DELETE THE ADDITION OF RS 8,35,000/- TOWARDS CAPITAL INTRODUCT ION IN THE FIRM M/S VISWAKARMA. ACCORDINGLY THE GROUND NO. 3 RAISED BY THE ASSESSEE IS ALLOWED. 5. THE NEXT INTERCONNECTED ISSUE IS AS TO WHETHER T HE LD CITA WAS JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF NET PRIOR PERIOD EXP ENSES OF RS 1,47,285/- AND 7 ITA NO.320/KOL/2013 SHRI PRANAB CHATTERJEE A.YR.2007-08 7 CONFIRMING THE ADDITION OF PRIOR PERIOD INCOME OF R S 9,41,900/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 5.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD A O SIMPLY OBSERVED THAT THE ASSESSEE HAD CLAIMED PRIOR PERIOD EXPENSES OF RS 1,47,285/- WHIC H IS TO BE DISALLOWED AS THE SAME IS NOT INCURRED DURING THE RELEVANT PERIOD UNDER APPEA L. THE LD AO FURTHER OBSERVED THAT THE ASSESSEE HAD UNRECORDED INCOME UNDER VARIOUS HE ADS AMOUNTING TO RS 9,41,900/- WHICH WAS NETTED OFF WITH THE PRIOR PERIOD EXPENSES WITHOUT MENTIONING THE PERIOD OF WHICH THE SAME WERE RELATED. HOWEVER, HE CONCLUDED THAT THE UNRECORDED INCOME OF RS 9,41,900/- AS PERTAINING TO THE YEAR UNDER APPEAL A ND ADDED THE SAME TO THE TOTAL INCOME. 5.2. THE LD CITA OBSERVED THAT THE ASSESSEE HAD FIL ED ONE STATEMENT OF PRIOR PERIOD EXPENSES AND PRIOR PERIOD INCOME IN THE PAPER BOOK. IT WAS SUBMITTED THAT THE CERTAIN EXPENSES AMOUNTING TO RS 10,89,185/- WERE DEBITED A S EXPENDITURE DURING THE YEAR WHICH PERTAINED TO THE EARLIER YEAR, BUT WERE OMITT ED TO BE ACCOUNTED AS EXPENDITURE IN THE EARLIER YEAR. SIMILARLY THE UNRECORDED INCOME PERTAINING TO THE EARLIER YEAR AMOUNTING TO RS 9,41,900/- WAS OMITTED TO BE RECORD ED IN THE EARLIER YEAR AND HENCE THE SAME WAS OFFERED TO TAX ON FINDING OUT THE SAME IN THE YEAR UNDER APPEAL. ACCORDINGLY THE NET PRIOR PERIOD EXPENSES AMOUNTING TO RS 1,47, 285/- ( 10,89,185 9,41,900) WAS CLAIMED AS EXPENDITURE BY THE ASSESSEE. THE ENTIRE DETAILS OF BOTH PRIOR PERIOD EXPENSES AND PRIOR PERIOD INCOME WERE DULY FILED. HOWEVER, THE LD CITA DID NOT HEED TO THE SAID CONTENTIONS AND CONFIRMED THE DISALLOWANCE AND ADDI TION MADE BY THE LD AO IN THE TOTAL SUM OF RS 10,89,185/- ( 9,41,900 + 1,47,285). AGGR IEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 5. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN CONFIRMING THE DISALLOWANCE OF PRIOR PERIOD EXPENSES AMOUNTING TO RS. 1,47,285/- WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 6. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN CONFIRMING THE ADDITION OF UNRECORDED INCOME AMOUNTING TO RS. 9,41 ,900/- WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 8 ITA NO.320/KOL/2013 SHRI PRANAB CHATTERJEE A.YR.2007-08 8 5.3. WE HAVE HEARD THE LD AR. WE FIND FROM PAGE 58 OF THE PAPER BOOK PLACED ON RECORD, THE DETAILS OF PRIOR PERIOD EXPENSES (NET) ARE AS UNDER:- 9 ITA NO.320/KOL/2013 SHRI PRANAB CHATTERJEE A.YR.2007-08 9 WE FIND THAT THE EXPENDITURE LISTED ABOVE WERE PURE LY BUSINESS EXPENDITURE OF THE ASSESSEE TO THE TUNE OF RS 10,89,185/-. NOW THE SH ORT QUESTION TO BE DECIDED IS WHETHER THE PRIOR PERIOD EXPENSES OF RS 10,89,185/- IS ALLO WABLE AS DEDUCTION IN THE YEAR UNDER APPEAL. THE LD AR ARGUED THAT THERE WAS NO DIFFERE NCE IN THE TAX RATES IN BOTH THE YEARS AND DOES NOT MAKE ANY DIFFERENCE IF THE SAID EXPEND ITURE IS ALLOWED IN THE EARLIER YEAR OR IN THE YEAR UNDER APPEAL. HE ARGUED THAT THE BILLS AND VOUCHERS FOR THE SAID EXPENDITURES WERE RECEIVED AFTER 31 ST MARCH AND HENCE WAS OMITTED TO BE ACCOUNTED AS EXP ENDITURE IN THE EARLIER YEAR. WE FIND THAT THE ISSUE OF ALLOWA BILITY OF PRIOR PERIOD EXPENSES HAD BEEN THE SUBJECT MATTER OF ADJUDICATION BEFORE THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS JAGATJIT INDUSTRIES LIMITED IN ITA NO. 848 / 2010 DATED 6.9.2010 WHEREIN IT WAS HELD AS UNDER:- 16. THE PRESENT FACTUAL MATRIX HAS TO BE TESTED ON THE TOUCHSTONE AND ANVIL OF THE AFORESAID ENUNCIATION OF LAW. ON A SCRUTINY OF THE FACTS THAT HAVE BEEN BROUGHT ON RECORD, IT IS DISCERNIBLE THAT THE ASSES SEE HAS BEEN CLAIMING PRIOR PERIOD OF EXPENSES ON THE GROUND THAT THE VOUCHER O F SUCH EXPENSES FROM THE EMPLOYEES/BRANCH EMPLOYEES WERE RECEIVED AFTER 31ST MARCH OF THE FINANCIAL YEAR. IT HAS ALSO COME AS A MATTER OF FACT THAT THE ASSESSEE HAS BRANCH OFFICES THROUGHOUT THE COUNTRY. THE ASSESSEE HAS BEEN DEBIT ING THE EXPENDITURE SPILL OVER TO THE SUBSEQUENT YEARS AND THE ASSESSING OFFICER H AD BEEN ALLOWING THE SAME. THE SAID ACCOUNTING PRACTICE HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE AND ACCEPTED BY THE DEPARTMENT. IF A PARTICULAR ACCOUNT ING SYSTEM HAS BEEN FOLLOWED AND ACCEPTED AND THERE IS NO ACCEPTABLE REASON TO D IFFER WITH THE SAME, THE DOCTRINE OF CONSISTENCY WOULD COME INTO PLAY. THE S AID ACCOUNTING SYSTEM HAS BEEN FOLLOWED FOR A NUMBER OF YEARS AND THERE IS NO PROOF THAT THERE HAS BEEN ANY MATERIAL CHANGE IN THE ACTIVITIES OF THE ASSESS EE AS COMPARED TO THE EARLIER YEARS. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW T HAT THERE HAS BEEN DISTORTION OF PROFIT OR THE BOOKS OF ACCOUNT DID NOT REFLECT T HE CORRECT PICTURE IN THE ABSENCE OF ANY REASON WHATSOEVER, THERE WAS NO WARRANT OR J USTIFICATION TO DEPART FROM THE PREVIOUS ACCOUNTING SYSTEM WHICH WAS ACCEPTED B Y THE DEPARTMENT IN RESPECT OF THE PREVIOUS YEARS. 10 ITA NO.320/KOL/2013 SHRI PRANAB CHATTERJEE A.YR.2007-08 10 WE FIND THAT THE EXPENDITURES CATEGORIZED AS PRIOR PERIOD EXPENDITURE ARE REGULAR BUSINESS EXPENDITURES OF THE ASSESSEE AND IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAD CLAIMED THE SAME IN THE EARLIER YEAR A LSO. HENCE THERE IS NO QUESTION OF DOUBLE CLAIM. WE ALSO FIND THAT THE LD AO HAD NOT DISPUTED THE GENUINITY OF THESE EXPENDITURE. IT IS NOT THE CASE OF THE LD AO THAT THEY ARE NOT INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IN VIEW OF THESE FACTS AN D RESPECTFULLY FOLLOWING THE AFORESAID JUDICIAL PRECEDENT , WE HOLD THAT THE PRIOR PERIOD EXPENSES OF RS 10,89,185/- IS SQUARELY ALLOWABLE AS DEDUCTION IN THE YEAR UNDER APPEAL AND WE DIRECT THE LD AO TO GRANT DEDUCTION FOR THE SAME. WITH REGARD TO THE UNRECOR DED INCOME OF RS 9,41,900/- IS CONCERNED, WE FIND THAT THE ASSESSEE HIMSELF HAD DU LY OFFERED THE SAME AS PRIOR PERIOD INCOME IN THE YEAR UNDER APPEAL. SINCE THE PRIOR P ERIOD EXPENSES OF RS 10,89,185/- IS DIRECTED TO BE ALLOWED AS DEDUCTION, THE PRIOR PERI OD INCOME OF RS 9,41,900/- HAS BEEN RIGHTLY SET OFF WITH THE PRIOR PERIOD EXPENSES AND NET PRIOR PERIOD EXPENSES OF RS 1,47,285/- HAD BEEN RIGHTLY CLAIMED AS DEDUCTION BY THE ASSESSEE. ACCORDINGLY, THE GROUND NOS. 5 & 6 RAISED BY THE ASSESSEE ARE ALLOWE D. 6. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN CONFIRMING THE ADDITION OF RS 10,50,000/- AS UNE XPLAINED INCOME IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 6.1. THE BRIEF FACTS OF THIS ISSUE IS THAT IN THE P ROPRIETORY CONCERN M/S MODULE, THE CAPITAL INTRODUCTION OF RS 10,50,000/- WAS REFLECTE D. FOR WANT OF PROPER EXPLANATION OF THE SAME, THE LD AO ADDED THE SAME AS INCOME OF THE ASSESSEE WHICH WAS CONFIRMED BY THE LD CITA. AGGRIEVED, THE ASSESSEE IS IN APPEAL B EFORE US ON THE FOLLOWING GROUND:- 7. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN CONFIRMING THE ADDITION OF INTRODUCTION OF CAPITAL AS UNEXPLAINED INCOME AMOUNTING TO RS. 10,50,000/- WHICH IS COMPLETELY ARBITRARY, UNJUSTIF IED AND ILLEGAL. 11 ITA NO.320/KOL/2013 SHRI PRANAB CHATTERJEE A.YR.2007-08 11 6.2. WE HAVE HEARD THE LD AR. THE LD AR STATED THA T THE INVESTMENT IN MODULE WAS REFLECTED IN THE BALANCE SHEET TO THE TUNE OF RS 5, 45,600/- IN PRANAB CHATERJEE (HUF) AND TO THAT EXTENT THE CAPITAL INTRODUCTION IN MODU LE STANDS EXPLAINED. HE FAIRLY STATED THAT THE REMAINING SUM OF RS 5,04,400/- ( 10,50,000 5,45,600) REQUIRES TO BE SUSTAINED. WE FIND THAT THE ADDITION OF RS 5,04,4 00/- IS DIRECTED TO BE SUSTAINED AS THE BALANCE OF RS 5,45,600/- HAD BEEN PROPERLY EXPLAINE D BY THE ASSESSEE. ACCORDINGLY, THE GROUND NO. 7 RAISED BY THE ASSESSEE IS PARTLY ALLOW ED. 7. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS 1,90 ,000/- U/S 40(A)(IA) OF THE ACT TOWARDS COMMISSION , IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 7.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD A O OBSERVED THAT THE ASSESSEE HAD DEBITED RS 1,90,000/- ON ACCOUNT OF BROKERAGE WITHOUT DEDUC TION OF TAX AT SOURCE. HENCE THE SAME WAS DISALLOWED U/S 40(A)(IA) OF THE ACT. THE ASSESSEE SUBMITTED THAT THIS BROKERAGE WAS INCURRED IN THE PROPRIETORSHIP CONCER N MODULE AND THE TURNOVER OF MODULE DURING THE YEAR UNDER APPEAL WAS BELOW THE L IMITS PRESCRIBED U/S 44AB OF THE ACT AND HENCE THERE IS NO OBLIGATION TO DEDUCT TAX AT SOURCE U/S 194H OF THE ACT. THE LD AR ALSO SUBMITTED THAT THE TURNOVER OF MODULE IN TH E IMMEDIATELY PRECEDING YEAR WAS ALSO LESS THAN THE LIMITS PRESCRIBED U/S 44AB OF TH E ACT. THE YEAR UNDER APPEAL IS THE SECOND YEAR OF OPERATION OF MODULE. THE LD CITA CO NFIRMED THE ACTION OF THE LD AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON T HE FOLLOWING GROUNDS:- 8. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN CONFIRMING THE BROKERAGE PAID DISALLOWED U/S 40A(IA) OF THE I.T. A CT AMOUNTING TO RS. 1,90,000/- WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLE GAL. 9. FOR THAT ON THE FACTS OF THE CASE, THE ORDER OF THE LD. CIT(A) WAS WRONG IN CONFIRMING THE ADDITION U/S 40A(IA) AMOUNTING TO RS . 1,90,000/- ON BROKERAGE PAID WITHOUT CONSIDERING THE FACT THAT SECTION 194H OF I.T. ACT WAS NOT APPLICABLE TO THE ASSESSEE, THEREFORE, THE ACTION OF THE CIT(A ) IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 12 ITA NO.320/KOL/2013 SHRI PRANAB CHATTERJEE A.YR.2007-08 12 7.2. WE HAVE HEARD THE LD AR. WE FIND THAT ASSESSEE IS NOT LIABLE FOR TAX AUDIT BASED ON ITS TURNOVER AND ACCORDINGLY NOT LIABLE FOR DEDUCTI ON OF TAX AT SOURCE U/S 194H OF THE ACT. HENCE NO DISALLOWANCE COULD BE MADE U/S 40(A) (IA) OF THE ACT. ACCORDINGLY, THE GROUND NOS. 8 & 9 RAISED BY THE ASSESSEE ARE ALLOWE D. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 11.08.2017 SD/- SD/- [A.T. VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11.08.2017 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. SHRI PRANAB CHATTERJEE, 240, LAKE ROAD, KOLKATA- 700029 2. ACIT, CIR-30, KOLKATA, 2, GARIAHAT ROAD (SOUTH ) , KOLKATA-700068 3..C.I.T.(A)-XIV, KOLKATA 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S