M/s. Travelline International, Pune V. Income tax Officer, Pune

ITA 405/PUN/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1476 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-04-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 17-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Unexplained expenditure; Business income; Business expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 405/PUN/2017 / ASSESSMENT YEAR : 2007-08 M/S. TRAVELLINE INTERNATIONAL, KHANDELWAL JAIN & ASSOCIATES CHARTERED ACCOUNTANTS, IST FLOOR, ALANKAR CINEMA BUILDING, NEAR RAILWAY STATION, PUNE 411 001 PAN : AADFT0998F VS. ITO, WARD-8(3), PUNE APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 05-10-2016 PASSED BY THE CIT(A)-6, PUNE IN RELATION TO THE ASSESSMENT YEAR 2007-08. 2. THE ADDITIONAL GROUND RAISED BY THE ASSESSEE WAS NOT PRESSED. THE SAME IS, THEREFORE, DISMISSED. APPELLANT BY SHRI RAJIV THAKKAR RESPONDENT BY SHRI AJAY DHOKE DATE OF HEARING 10-12-2019 DATE OF PRONOUNCEMENT 16-12-2019 ITA NO. 405/PUN/2017 M/S. TRAVELLINE INTERNATIONAL 2 3. THE ONLY ISSUE RAISED IN THE APPEAL IS AGAINST THE CONFIRMATION OF ADDITION OF RS.14.00 LAKH. 4. BRIEFLY, STATED, THE FACTS OF THE CASE ARE THAT THE ASSES SEE WAS SUBJECTED TO SURVEY ACTION U/S.133A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) ON 13-03-2007. IN THE COURSE OF SURVEY, STATEMENT OF THE PARTNER WAS RECORDED. IN RESPONSE TO QUESTION NOS.7, 8, AND 10, HE MADE A DECLAR ATION OF INCOME TO THE TUNE OF RS.56.00 LAKH, COMPRISING OF RS.26.0 0 LAKH TOWARDS UNEXPLAINED BUSINESS PROMOTION EXPENSES; RS.25.00 LAKH TOWARDS UNACCOUNTED RECEIPTS; AND RS.5.00 LA KH TOWARDS OTHER OMISSIONS AND ERRORS. HOWEVER, THE RETURN WAS FILED WITH THE ADDITIONAL INCOME OF RS.17.00 LAKH. THE ASSESSING OFFICER (AO) MADE ADDITION OF RS.39.00 LAKH (RS.56.00 LAKH RS.17.00 LAKH) ON THE GROUND THAT THE ASSESSEE OUGHT TO HAVE DECLARED THE INCOME OFFERED DURING THE COURSE OF SURVEY. THE LD. CIT(A) SUSTAINED THE ADDITION AT RS.14.00 LAKH THEREBY DELETING THE ADDITION OF RS.25.00 LAKH ON ACCOUNT OF UNDISCLOSED INCOME. THE ASSESSEE IS IN APP EAL ITA NO. 405/PUN/2017 M/S. TRAVELLINE INTERNATIONAL 3 BEFORE THE TRIBUNAL URGING FOR THE DELETION OF THE ADDITION SUSTAINED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE WAS SUBJEC TED TO SURVEY ACTION. IN THE COURSE OF SURVEY, THE STATEMENT OF THE PARTNER WAS RECORDED, A COPY OF WHICH HAS BEEN PLACED FOR OUR CONSIDERATION. IN RESPONSE TO QUESTION NO.7, HE ADMITTED TO HAVE PAID COMMISSION BETWEEN 5% TO 10% FOR SECURING CUSTOMERS FOR ITS HOTEL AND OTHER TOURISM PLACES BUSINESS, WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNT. IN RESP ONSE TO QUESTION NO.8, HE ADMITTED THAT THERE WERE UNACCOUNTED RECEIPTS TO THE TUNE OF RS.25.00 LAKH. IN RESPONSE TO QUE STION NO.10, HE SURRENDERED RS.5.00 LAKH ON ACCOUNT OF OTHE R OMISSIONS AND COMMISSIONS. THE ASSESSEE ACTUALLY OFFERED A SUM OF RS.17.00 LAKH IN THE RETURN OF INCOME WITH THE FOLLOWING CHART, AS HAS BEEN INCORPORATED ON PAGE 3 OF T HE ASSESSMENT ORDER : ITA NO. 405/PUN/2017 M/S. TRAVELLINE INTERNATIONAL 4 PARTICULARS AMOUNT (RS.) UNACCOUNTED INVESTMENT IN RESIDENTIAL FLAT MADE OUT OF WITHDRAWALS FROM THE FIRM 10,71,000 UNEXPLAINED BUSINESS PROMOTION EXPENSES ADMITTED AT THE SURVEY 26,00,000 TOTAL 36,71,000 LESS : UNACCOUNTED RECEIPTS UTILIZED FOR AFORESAID PAYMENTS 25,00,000 BALANCE (SHORTFALL) 11,71,000 ADDITIONAL INCOME OFFERED TO COVER ALL OMISSIONS & COMMISSIONS TO AVOID ANY POSSIBLE LITIGATION & TO B UY PEACE OF MIND 5,00,000 TOTAL 16,71,000 INCOME OFFERED (ROUNDED OFF TO THE NEAREST RS.1,00, 000/-) 17,00,000 6. IT CAN BE SEEN FROM THE ABOVE CHART THAT THE ASSESSEE OFFERED RS.10,71,000/- ON ACCOUNT OF UNACCOUNTED INVES TMENT IN RESIDENTIAL FLAT, WHICH HAS NO CONNECTION WITH THE SURRENDER OF RS.56.00 LAKH MADE BY THE ASSESSEE IN TOTAL. OBVIOUSLY, THIS AMOUNT OUGHT TO HAVE BEEN INCLUDED BY THE ASSESSEE IN THE RETURN. THEREAFTER, THERE IS AN ITEM OF RS.26.00 LAKH, W HICH WAS ON ACCOUNT OF BUSINESS PROMOTION EXPENSES ADMITTED B Y THE ASSESSEE AT THE TIME OF SURVEY INCURRED IN THE SHAPE O F COMMISSION PAID TO CERTAIN PARTIES WHO WERE BRINGING IN CUSTOMERS FOR THE ASSESSEES HOTEL BUSINESS. THE ASSES SEE ADMITTED TO HAVE RECEIVED RS.25.00 LAKH OVER AND ABOVE THE ACCOUNTED RECEIPTS. BOTH THE FIGURES OF RECEIPTS AND EXPE NSES ITA NO. 405/PUN/2017 M/S. TRAVELLINE INTERNATIONAL 5 ARE EMANATING FROM THE STATEMENT OF THE ASSESSEE. APART FRO M THAT, THERE IS NO REFERENCE TO ANY EVIDENCE DIVULGING THE REC EIPT OR PAYMENT OF UNDISCLOSED INCOME/EXPENDITURE. 7. ONE NEEDS TO DIFFERENTIATE BETWEEN THE TWO SITUATIONS, VIZ ., ONE IN WHICH UNDISCLOSED INCOME IS EARNED AND UNEXPLAINED EXPENDITURE IS INCURRED, WHICH SPENDING IS DE HORS THE EARNING OF INCOME AND TWO, IN WHICH UNDISCLOSED INCOME IS EARNED B Y SPENDING UNDISCLOSED EXPENDITURE. FOR EXAMPLE, IF UNDISCLOSED INCOME IS EARNED AND THE SAME IS SPENT IN PURCHASE OF JEWELLERY, IN SUCH A CASE, THERE WILL BE ADDITION ONLY FOR THE EARNING OF THE UNEXPLAINED INCOME BECAUSE TH E OUTFLOW OF THE INCOME IN THE SHAPE OF EXPENDITURE WILL BE FROM THE INFLOW OF THE UNDISCLOSED INCOME. ON THE OTHER HAND, IF SOME UNDISCLOSED INCOME IS EARNED AND FOR EARNING THAT INCOME SOME UNDISCLOSED EXPENDITURE IS ALSO INCURRED, THEN IT IS THE NET OF INCOME VIS-A-VIS EXPENDITURE, WHICH WILL BE ADDED. IT IS SO BECAUSE THE UNEXPLAINED EXPENDITURE FOR E ARNING THE UNDISCLOSED INCOME WOULD BE MET OUT OF SUCH UNDISCLOSED INCOME. IN THE INSTANT CASE, WE ARE CONFRONTED WITH THE FAC TS ITA NO. 405/PUN/2017 M/S. TRAVELLINE INTERNATIONAL 6 WHICH ARE GERMANE TO THE SECOND SITUATION, IN WHICH SOME UNDISCLOSED BUSINESS INCOME WAS ADMITTED TO HAVE BEEN EARNED AND SIMULTANEOUSLY SOME UNDISCLOSED EXPENDITURE W AS ALSO INCURRED FOR THE INCURRING OF INCOME. IN SUCH A SCEN ARIO, IT IS ONLY THE EXCESS OF ONE OVER THE OTHER, WHICH CAN BE CH ARGED TO TAX. ADVERTING TO THE FACTS OF THE INSTANT CASE, IT IS SEEN THAT THERE IS NET OUTFLOW OF RS.1.00 LAKH WHICH CALLS FOR ADDITION IN AS MUCH AS THE ASSESSEE RECEIVED BUSINESS RECEIPT OF RS. 25.00 LAKH OUTSIDE THE BOOKS OF ACCOUNT AND ALSO SPENT BUSINESS EXPENSES OF RS.26.00 LAKH OUTSIDE OF THE BOOKS OF ACCO UNT. THE PAYMENT OF COMMISSION TO CERTAIN PERSONS FOR FETCHING CUSTOMERS HAS DIRECT RELATION WITH THE RUNNING OF HOTEL BUSINESS FROM WHICH UNACCOUNTED RECEIPTS OF RS.25.00 LAKH WERE EARNED. FURTHER, THE PAYMENT OF COMMISSION IS A NO RMAL INCIDENCE OF BUSINESS AND IS NOT HIT BY EXPLANATION 1 TO SECTION 37(1) OF THE ACT. ONCE THIS IS THE POSITION, WE FAIL TO APPRECIATE AS TO HOW ANY ADDITION OTHER THAN RS.1.00 LAKH ON THIS SCORE CAN BE MADE, APART FROM ADDITION OF RS.10,71,0 00/- ON ACCOUNT OF INVESTMENT IN FLAT AND RS.5,00,000/- TOWARDS ADDITIONAL INCOME OFFERED BY THE ASSESSEE ON ACCOUNT OF ITA NO. 405/PUN/2017 M/S. TRAVELLINE INTERNATIONAL 7 OMISSIONS AND COMMISSIONS. WHEN THESE THREE AMOUNTS ARE ADDED UP, THE TOTAL COMES TO RS.16,71,000/-. AS AGAINST THAT, THE ASSESSEE OFFERED RS.17.00 LAKH AS ADDITIONAL INCOME. IN THIS VIEW OF THE MATTER, THERE IS NO REASON FOR MAKING OR SUSTAINING ANY ADDITION OVER AND ABOVE THIS AMOUNT. WE, THEREFORE, ORDER TO DELETE THE ADDITION OF RS.14.00 LAKH SUSTAINED BY THE LD. CIT(A). 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH DECEMBER, 2019. SD/- SD/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESI DENT PUNE; DATED : 16 TH DECEMBER, 2019 ITA NO. 405/PUN/2017 M/S. TRAVELLINE INTERNATIONAL 8 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-6, PUNE 4. THE PR. CIT -5, PUNE 5. , , / DR B, ITAT, PUNE 6. / GUARD FILE / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 10-12-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 11-12-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *