Dr Pallab Ghosh, Kolkata V. I.T.O Wd - 55(1),kolkata, Kolkata

ITA 659/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9469 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 26-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S ALONG YADEN
• Keywords: Opportunity of being heard; Period of limitation; Corroborative evidences
• Section: 69C; 143(3); 37; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.659/KOL/2013 ASSESSMENT YEAR:2008-09 DR. PALLAB GHOSH 52, RIPON STREET, KOLKATA-700016 [ PAN NO.ADGPG 4320 E ] / V/S . ITO WARD-55(1), 54/1, RAFI ADHMED KIDWAI ROAD, KOLATA-700 016 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SOUMITRA CHOUDHURY, ADVOCATE /BY RESPONDENT SHRI SALONG YADEN, ADDL-CIT-DR /DATE OF HEARING 19-12-2016 /DATE OF PRONOUNCEMENT 08-02-2017 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XXXVI, KOLKATA DATED 06.02.201 3. ASSESSMENT WAS FRAMED BY ITO WARD-55(1), KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 29.1 2.2010 FOR ASSESSMENT YEAR 2008-09. THE GROUNDS RAISED BY THE ASSESSEE PER ITS APPEAL A RE AS UNDER:- 1. FOR THAT ON THE FACTS OF THE CASE, THE ORDER PAS SED BY THE LD. C.LT.(A) IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 2. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.LT. (A) WAS WRONG IN CONFIRMING THE DISALLOWANCE OF RS.389 ,550 / - AS CAPITALIZATI ON OF PAST SAVINGS U/ S. 69A OF THE LT. ACT WHICH IS COMPLETELY ARBITRARY, UNJUSTIF IED AND ILLEGAL. ITA NO.659/KOL/2013 A.Y. 2008 -09 DR. P. GHOSH VS. ITO WD-55(1) KOL. PAGE 2 3. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.LT. (A) WAS WRONG IN DITTOING THE ORDER OF THE A.O. AND CONFIRMING THE ADDITION U/ S. 40A(IA) OF THE INCOME TAX ACT AMOUNTING TO RS.439,560/- AS NON- DEDUCTION ON PROFESSIONAL FEES WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 4. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) SHOULD HAVE CONSIDER THE FACTS THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TD S UNDER ANY PROVISIONS OF THE INCOME TAX ACT, THEREFORE, NO DISALLOWANCE U/S. 40( A)(IA) SHOULD HAVE BEEN MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) AM OUNTING TO RS. 439,560/- WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLE GAL. 5. FOR THAT ON THE FACTS OF THE CASE, THE LD CIT(A) WAS WRONG IN ADDING PAYMENTS ALREADY MADE TO JUNIOR DOCTORS FROM RIPON NURSING HOME UNDER SECTION 40(A)(IA), ALTHOUGH SECTION 40(A)(IA) IS ON LY APPLICABLE TO AMOUNT PAYABLE, THEREFORE, THE WHOLE ADDITION IS COMPLETEL Y ARBITRARY, UNJUSTIFIED AND ILLEGAL. 6. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.LT. (A) WAS WRONG IN DITTOING THE ORDER OF THE A.O. AND CONFIRMING THE ADDITION U/ S. 41(1) OF THE INCOME TAX ACT AMOUNTING TO RS.656,835/- AS CESSATION OF LIABILITY WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 7. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I.T .(A) WAS WRONG IN DITTOING THE ORDER OF THE A.O. AND CONFIRMING THE ADDITION U/S. 23(4)(B) OF THE INCOME TAX ACT AMOUNTING TO RS.84,000/- AS NOTIONAL RENT WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 8. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I.T .(A) WAS WRONG IN DITTOING THE ORDER OF THE A.G. AND CONFIRMING THE ADDITION AMOUN TING TO RS.38,940/- AS RATES & TAXES VIZ. MUNICIPAL TAXES AND OTHER TAXES WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 9. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I.T .(A) WAS WRONG IN DITTOING THE ORDER OF THE A.G. AND CONFIRMING THE ADDITION AMOUN TING TO RS.22,996/- AS VARIOUS HEADS OF EXPENDITURE ON ESTIMATE BASIS WHIC H IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 10. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I. T.(A) WAS WRONG IN DITTOING THE ORDER OF THE A.G. AND CONFIRMING THE ADDITION AMOUN TING TO RS.28,000/- AS ACCRUED INTEREST ON TAXABLE HDFC BOND WHICH IS COMP LETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 11. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I. T.(A) WAS WRONG IN CONFIRMING FOREIGN TRAVEL EXPENSES AMOUNTING TO RS.3,26,345/- DISALLOWED BY THE A.O. U/S. 69C WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. ITA NO.659/KOL/2013 A.Y. 2008 -09 DR. P. GHOSH VS. ITO WD-55(1) KOL. PAGE 3 12. FOR THAT THE INTEREST U/ S. 2348 & 234C AMOUNTI NG TO RS.3,40,211/- AND RS.5,278/ - RESPECTIVELY CHARGED MECHANICALLY IS WR ONG & ILLEGAL. 13. FOR THAT THE APPELLANT RESERVES THE RIGHT TO AD DUCE ANY FURTHER GROUND OR GROUNDS, IF NECESSARY, AT OR BEFORE THE HEARING OF THE APPEAL. SHRI SOUMITRA CHOUDHURY, LD. ADVOCATE APPEARED ON B EHALF OF ASSESSEE AND SHRI SALLONG YADEN, LD. DEPARTMENTAL REPRESENTATIVE APPE ARED ON BEHALF OF REVENUE. 2. FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL AND ENGAGED AS MEDICAL PRACTITIONER. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAS FILED HIS RETURN OF INCOME DATED 19.09.2008 DECLARING THE TOT AL INCOME 8,28,575/- UNDER THE HEAD BUSINESS AND PROFESSION . THEREAFTER THE CASE WAS SELECTED UNDER SCRUTINY AND ACCORDINGLY NOTICE U/S 143(2)/142(1) WERE ISSUED UP ON ASSESSEE. THE ASSESSMENT WAS FRAMED U/S 143(3) BY MAKING CERTAIN ADDITIONS / DIS ALLOWANCE AT TOTAL INCOME OF 34,25,875/-. THE DISALLOWANCE MADE BY ASSESSING OFF ICER WERE SUBSEQUENTLY CONFIRMED BY LD. CIT(A). AGAINST THESE ADDITIONS/ D ISALLOWANCES THE ASSESSEE HAS FILED APPEAL BEFORE US, WHICH ARE DISCUSSED HERE IN BELOW. 3. FIRST ISSUE RAISED BY ASSESSEE IN THIS APPEAL IN GROUND NO.2 IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING T HE DISALLOWANCE OF 3,89,550/- U/S 69A OF THE ACT. 4. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS INTRODUCED CAPITAL IN THE FORM OF CASH ON 01.04.2007 IN HIS CAPITAL ACCOUNT. ON QU ESTION BY AO ABOUT SOURCE OF CAPITAL INTRODUCTION, THE ASSESSEE SUBMITTED THAT I T IS ARISING OUT OF PAST SAVINGS OF 22 YEARS. HE FURTHER SUBMITTED THAT THE AFORESAID AMOU NT HAS BEEN SHOWN IN THE PERSONAL STATEMENT OF BALANCE SHEET. HOWEVER, AO DISREGARDED THE PLEA OF ASSESSEE BY OBSERVING THAT:- A) THE DRAWING FROM THE BALANCE-SHEET OF ASSESSEE IS NOT REFLECTING. B) THERE WAS NO POINT TO KEEP SUCH HUGE MONEY FOR SUCH A LONG TIME IN THE FORM OF CASH THOUGH ASSESSEE IS MAINTAINING PERSONAL BAN K ACCOUNT. C) ASSESSING OFFICER ALSO OBSERVED THAT ASSESSEE HA S ALSO INTRODUCED CASH AS CAPITAL IN HIS FIRM IN THE EARLIER YEARS; ITA NO.659/KOL/2013 A.Y. 2008 -09 DR. P. GHOSH VS. ITO WD-55(1) KOL. PAGE 4 IN VIEW OF THE ABOVE, ASSESSING OFFICER DISALLOWED THE SAME U/S 69A OF THE ACT AND ADDED THE INTRODUCTION OF CASH OF 3,89,550/- TO THE TOTAL INCOME. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT THERE WAS DRAWINGS IN THE EARLIER YE ARS AND THIS INVESTMENT IS ARISING OUT OF SUCH DRAWINGS. HOWEVER, LD. CIT(A) DISREGARD ED THE PLEA OF THE ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- THE SUBMISSION OF THE A/R, GROUNDS OF APPEAL AND A SSESSMENT ORDER WERE DULY CONSIDERED. APPELLANT HAS SHOWN INTRODUCTION OF RS. 3,89,550/- OUT OF PAST SAVINGS IN PAST 22 YEARS. IT IS A AFTERTHOUGHT STOR Y. WHY HE HAS NOT KEEP ALL THESE PART SAVINGS IN BANK A/C IN THIS WORLD OF MOD ERNIZED BANKING? APPELLANT IS A EDUCATED PERSON TO HANDLE BANKING TRANSACTIONS . HENCE, AO WAS RIGHT IN ADDING A SUM OF RS.3,89,550/- U/S. 69A OF INCOME TA X ACT. APPEAL OF APPELLANT IS DISMISSED ON THIS ISSUE. AGGRIEVED BY THIS ORDER, ASSESSEE HAS COME UP IN AP PEAL BEFORE US. 6. BEFORE US LD AR FILED PAPER BOOK WHICH IS RUNNIN G PAGES FROM 1 TO 71 AND STATED THAT ASSESSEE HAS SHOWN DRAWING FOR 15,88,171/- WHICH BEGINNING FROM AYS 2004-05 TO 2007-08 RESPECTIVELY. HE IN SUPPORT OF A SSESSEES CLAIM HAS SUBMITTED THE YEAR-WISE DETAILS OF DRAWINGS WHICH IS PLACED ON PA GE 13 OF THE PAPER BOOK. LD. AR STATED THAT ISSUE MAY BE DECIDED ON MERIT. ON THE OTHER HAND, LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. 7. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION, WE FIND THAT ASSESSEE HAS SHOWN INTRODUCTION OF CAPITAL IN THE FORM OF CASH AS ON 0 1.04.2007 FOR 3,89,550/- AND ASSESSEE CLAIMED THAT SUCH INTRODUCTION OF CASH MAD E OUT OF PAST SAVINGS FROM SEVERAL YEARS. HOWEVER, AUTHORITIES BELOW DISREGARDED THE A RGUMENT OF ASSESSEE AND ACCORDINGLY THE ADDITION WAS MADE U/S 69A OF THE AC T. NOW THE ISSUE BEFORE US ARISES SO AS TO WHETHER THE ADDITION MADE BY THE AUTHORITI ES BELOW U/S. 69A OF THE ACT IS JUSTIFIABLE IN THE FACTS AND CIRCUMSTANCES OF THE F ACTS OF THE CASE. IN THIS REGARD, WE FIND THAT ADMITTEDLY THE DRAWING WAS MADE BY THE AS SESSEE IN THE EARLIER YEARS BUT THE QUESTION ARISES WHETHER THE SAME DRAWINGS WAS INTRO DUCED AS CAPITAL IN THE YEAR UNDER CONSIDERATION. ON PERUSAL OF ASSESSMENT ORDER WE FI ND THAT THE ASSESSEE HAS INTRODUCED CASH AS CAPITAL IN THE EARLIER YEARS AS DETAILED UN DER : ITA NO.659/KOL/2013 A.Y. 2008 -09 DR. P. GHOSH VS. ITO WD-55(1) KOL. PAGE 5 S.NO. FINANCIAL YEAR AMOUNT (RS.) 1. 2002-03 RS. 2,18,613.00 2. 2003-4 NIL 3. 2004-05 RS. 9,00,000.00 4. 2005-06 RS. 9,10,000.00 THE ASSESSEE HAS SHOWN THE DRAWINGS IN THE EARLIER YEARS AS UNDER : 1. 2002-03 NO INFORMATION 2. 2003-4 RS. 1,32,263.00 3. 2004-05 RS. 1,79,145.00 4. 2005-06 RS.10,32,676.00 5. 2006-07 RS. 2,44,087.00 FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE HAS W ITHDRAWN AND INTRODUCED THE CAPITAL IN THE EARLIER YEARS. ON VERIFICATION OF THE DRAWIN G AND CAPITAL INTRODUCTION, WE FIND THAT THERE WAS HARDLY ANY SURPLUS FUND AVAILABLE TO THE ASSESSEE FOR INFUSION OF FRESH CAPITAL. THE ASSESSEE MUST ALSO BE SPENDING MONEY O N ACTUAL PERSONAL EXPENSES. IN VIEW OF ABOVE WE ARE OF THE VIEW THAT THE ASSESSEE FAILED TO EXPLAIN THE SOURCES OF CASH WITH SUPPORTING EVIDENCE. THEREFORE THE GROUND OF A PPEAL OF THE ASSESSEE IS DISMISSED. 8. NEXT ISSUE RAISED BY ASSESSEE IN THIS APPEAL IN GROUNDS NO. 3 TO 5 IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTA INING THE ADDITION OF 4,39,560/- U/S 40(A)(IA) OF THE ACT. 9. THE ASSESSEE, IN THE YEAR UNDER CONSIDERATION HA S CLAIMED CERTAIN EXPENDITURES TOWARDS THE PAYMENT OF SEVERAL DOCTORS AMOUNTING TO 4,39,560/-. ON SUCH PAYMENT THE ASSESSEE DID NOT DEDUCT ANY TDS U/S 194J OF THE ACT. ON QUESTION BY AO FOR NON- DEDUCTION OF TDS ON THE AFORESAID PAYMENTS ASSESSEE SUBMITTED THAT GROSS RECEIPT IN THE FINANCIAL YEAR 2006-07 WAS LESS THAN PRESCRIBED LIMIT AS SPECIFIED U/S. 44AB OF THE ACT. THEREFORE, THE PROVISION OF TDS AS SPECIFIED U /S. 194J OF THE ACT IS NOT APPLICABLE. HOWEVER, AO OBSERVED THAT THE GROSS REC EIPT OF ASSESSEE FOR THE FINANCIAL YEAR 2006-07 EXCEEDED THE LIMIT AS PRESCRIBED U/S. 44AB OF THE ACT. THEREFORE, THE ITA NO.659/KOL/2013 A.Y. 2008 -09 DR. P. GHOSH VS. ITO WD-55(1) KOL. PAGE 6 PROVISIONS OF TDS FOR THE FINANCIAL YEAR 2007-08 AR E VERY MUCH APPLICABLE UPON THE ASSESSEE. THUS THE AO DISALLOWED THE SUM OF 4,39,560/- ON ACCOUNT OF NON- DEDUCTION OF TDS AND ADDED THE SAME TO THE TOTAL IN COME OF ASSESSEE. 10. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT NO FEES TO THE DOCTORS WERE PAYABLE AT THE END OF THE FINANCIAL YEAR AND THEREFORE NO TDS REQUIRED TO BE DEDUCTED IN TERMS O F ITAT ORDER SPECIAL BENCH IN THE CASE OF M/S MARILYN SHIPPING & TRANSPORS VS. ACIT, RAANGE-1, VISAKHAPATNAM IN ITA NO.477/VIZ/2008 RELATING TO ASSESSMENT YEAR 2005-06 REPORTED IN 13 6 ITD PAGE 23 & 146 TTJ PAGE 1. HOWEVER, LD. CIT(A) SUSTAINED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- THE SUBMISSION OF A/R, GROUNDS OF APPEAL AND ASSES SMENT ORDER WERE DULY CONSIDERED. THE AO DISALLOWED A SUM OF RS.4,39,560/ - FOR NON-DEDUCTION OF TDS ON PROFESSIONAL FEES. APPELLANT RELIED ON THE O RDER OF HON'BLE ITAT SPECIAL BENCH JUDGEMENT M/S MERILYN SHIPPING & TRAN SPORTS VS. ACIT, RANGE- 1, VISHAKHAPATNAM ITA NO. 477/VIZ/2008, AS NOTHING IS PAYABLE, ADDITION SHOULD BE DELETED. BUT THE OPERATION OF THE AFORESA ID JUDGMENT HAS BEEN STAYED BY HON'BLE HIGH COURT OF ANDHRA PRADESH TILL FURTHE R ORDERS. HENCE, DISALLOWANCE MADE BY AO U/S 40(A)(IA) OF RS.4,39,56 0/- IS SUSTAINED . AGGRIEVED BY THIS, ASSESSEE HAS COME UP IN APPEAL B EFORE US. 11. BEFORE US LD. AR REITERATED SAME SUBMISSIONS AS MADE BEFORE LD. CIT(A). FURTHER HE SUBMITTED THAT THE MONEY RECEIPT FROM NU RSING HOME IS LESS THAN PRESCRIBED LIMIT AS SPECIFIED U/S. 44AB OF THE ACT. LD. AR FUR THER SUBMITTED THAT THE RECEIPT SHOWN IN THE FINANCIAL YEAR 2006-07 IS OF 7.50 LACS ONLY. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. 12. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING D ISCUSSION, WE FIND THAT THE PAYMENTS MADE TO THE DOCTORS WERE DISALLOWED BY AUT HORITIES BELOW ON ACCOUNT OF NON-DEDUCTION OF TDS U/S. 194J OF THE ACT. TO THIS ISSUE, ARGUMENT PLACED BY LD. AR FOR THE ASSESSEE BEFORE US WAS THAT THE GROSS RECEI PT OF ASSESSEE IN THE IMMEDIATE PROCEEDING FINANCIAL YEAR WAS LESS THAN AS PRESCRIB ED LIMIT U/S 44AB OF THE ACT. HOWEVER ON PERUSAL OF THE SUBMISSION OF THE ASSESSE E WE FIND THAT THE ASSESSEE HAS SHOWN INCOME FROM TWO SOURCES (1) MEDICAL PROFESSIO NAL RECEIPTS (2) NURSING HOME RECEIPTS. THE RECEIPTS FROM BOTH THE SOURCES ARE OF RS. 14,34,833/- ONLY IN THE ITA NO.659/KOL/2013 A.Y. 2008 -09 DR. P. GHOSH VS. ITO WD-55(1) KOL. PAGE 7 IMMEDIATE PRECEDING FINANCIAL YEAR 2006-07. IN OUR VIEW FOR THE APPLICABILITY OF THE PROVISIONS OF SECTION 44AB OF THE ACT AND 194J OF T HE ACT, THE GROSS RECEIPTS FROM BOTH THE SOURCES SHALL BE CLUBBED. ACCORDINGLY WE F IND THAT THE GROSS RECEIPTS FOR THE TAX AUDIT FOR THE FY 2006-07 IS OF MORE THAN RS. 10 LACS SO IT IS CLEAR THAT THE ASSESSEE WAS LIABLE FOR TAX AUDIT FOR THE FY 2006-07, CONSEQ UENTLY THE TDS PROVISIONS WILL BE APPLIED FOR THE YEAR UNDER CONSIDERATION. HENCE THE ASSESSEE HAS DEFAULTED IN THE TDS DEDUCTION ON THE PROFESSIONAL PAYMENT TO DOCTORS, T HEREFORE THE DEDUCTION FOR THE SAME SHALL NOT BE ALLOWED. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS HEREBY DISMISSED. 13. NEXT ISSUE IN THIS APPEAL OF ASSESSEE RAISED IN GROUND NO.6 IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING T HE DISALLOWANCE OF 6,56,835/- U/S 41(1) OF THE ACT. 14. ASSESSEE IN ITS BALANCE-SHEET AS ON 31.03.2008 HAS SHOWN CLOSING SUNDRY CREDITOR FOR 9,36,441/- WHEREAS THE OPENING SUNDRY CREDITOR AS ON 01.04.2007 WAS SHOWN FOR 6,56,835/-. ON QUESTION BY AO TO PRODUCE NECESSARY DETAILS OF ALL THE SUNDRY CREDITORS SUCH AS NAME, ADDRESS, BILL NO. DA TE OF CREDIT ETC. IN COMPLIANCE THERETO, ASSESSEE SUBMITTED THAT OUT OF OPENING SUN DRY CREDITORS OF 5,56,835/- A SUM HAS BEEN OFFERED FOR TAXATION IN THE FINANCIAL YEAR 2009-10 AND THE BALANCE OF 2.23 LACS WILL BE OFFERED FOR TAXATION IN FINANCIAL YEAR 2010-11. HOWEVER, AO OBSERVED THAT THE OPENING SUNDRY CREDITORS OF 6,56,835/- ARE THE FAKE CREDITORS AND THEREFORE SAM E WAS TO BE DELETED U/S. 41(1) OF THE ACT AND ADDED T O THE TOTAL INCOME OF ASSESSEE. 15. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT AO CANNOT MAKE THE ADDITION OF THE L IABILITY U/S. 41(1) OF THE ACT UNTIL AND UNLESS THERE IS A CESSATION OF TRADING LIABILIT Y. THE PERIOD OF LIMITATION AS PROVIDED IN THE LIMITATION ACT IS NOT APPLICABLE IN THE INST ANCE CASE BECAUSE THE TRADING LIABILITY HAS ACTUALLY NOT BEEN WRITTEN OFF IN THE BOOKS OF A CCOUNT OF ASSESSEE. THE EXPENDITURES CORRESPONDING TO SUCH TRADING LIABILITY WERE CLAIME D IN AYS 2005-06 AND 2007-08 AND NO DISALLOWANCE WAS MADE BY AO. HOWEVER, LD. CIT(A) CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- THE SUBMISSION OF THE A/R, GROUNDS OF APPEAL AND A SSESSMENT ORDER WERE DULY CONSIDERED. THE AO ADDED A SUM OF RS.6,56,835/- U/S . 41(1) OF INCOME TAX ACT. THE ISSUE HAS BEEN DEALT BY THE AO IN DETAIL IN ASS ESSMENT ORDER. APPELLANT IN ITA NO.659/KOL/2013 A.Y. 2008 -09 DR. P. GHOSH VS. ITO WD-55(1) KOL. PAGE 8 THE ASSESSMENT PROCEEDING COULD NOT VERIFY THE CRED ITORS. THESE CREDITORS ARE 2- 3 YEARS OLD AND THEIR GENUINENESS COULD NOT BE ESTA BLISHED BEFORE AO. APPELLANT HAS TAKEN A PLEA THAT I HAVE DISCLOSED TH ESE CREDITORS U/S. 41(1) IN A.Y 2010-11 AND A.Y 2011-12. FROM THE DISCLOSURE OF APPELLANT IT IS CLEAR THAT THESE CREDITORS ARE UNEXPLAINED. HENCE, A.O WAS RIG HT IN TREATING THE SUM OF RS.5,56,835/- AS UNEXPLAINED SUNDRY CREDITORS AND A DDING U/S 41(1) OF INCOME TAX ACT AS FAKE CREDITORS HAVING NO LIABILITY OF AP PELLANT. THE ADDITION MADE U/S. 41(1) TO THE TUNE OF RS.6,56,835/- IS SUSTAINE D. AGGRIEVED BY THIS, ASSESSEE HAS COME UP IN APPEAL B EFORE US. 16. BEFORE US LD. AR SUBMITTED THAT THE LIABILITIES WERE NOT WRITTEN OFF IN THE BOOKS OF ACCOUNT ASSESSEE AND THEREFORE SAME CANNOT BE HE LD AS CEASED TO EXIST. LD. AR FOR ASSESSEE IN SUPPORT OF ASSESSEES CLAIM DREW OUR AT TENTION ON PAGE 68 OF THE PAPER BOOK WHERE THE SCHEDULE-C OF THE BALANCE-SHEET OF T HE ASSESSEE WAS PLACED SHOWING THE AMOUNT OF SUNDRY CREDITORS. ON THE OTHER HAND, LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. 17. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE LIA BILITY CEASED TO EXIST IF IT IS WRITTEN OFF BY ASSESSEE IN ITS BOOKS OF ACCOUNT. IN CASE ON HAND WE FIND THAT THE LIABILITY IS VERY MUCH REFLECTING IN THE BALANCE-SHEET OF ASSESS EE. THEREFORE THE SAME CANNOT BE ADDED UNDER THE PROVISIONS OF SECTION 41(1) OF THE ACT. HENCE THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 18. NEXT ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING THE ADDITI ON OF 84,000/- U/S 23(4)(B) OF THE ACT. 19. ASSESSEE IS OWNER OF TWO INDIVIDUAL PROPERTIES - FIRST PROPERTY IS LOCATED AT 52, RIPON STREET, KOLKATA COMPRISING OF GROUND FLOOR PL US 3 FLOORS AND SECOND PROPERTY IS A FLAT AT HIGHLAND PARK, KOLKATA. ACCORDINGLY, AO I SSUED NOTICE TO ASSESSEE VIDE LETTER NO.999 DATED 02.12.2010 FOR MAKING THE ADDITION OF RENTAL INCOME U/S. 23(4)(B) OF THE ACT ON NOTIONAL BASIS. IN COMPLIANCE THERETO, ASSES SEE SUBMITTED THAT THE BUILDING LOCATED AT RIPON STREET IS USED FOR THE PURPOSE OF BUSINESS AND ALSO RENTAL INCOME IS DERIVED FROM SUCH PROPERTY. THE FLAT LOCATED AT HIG HLAND PARK IS ALSO USED FOR ITA NO.659/KOL/2013 A.Y. 2008 -09 DR. P. GHOSH VS. ITO WD-55(1) KOL. PAGE 9 RESIDENTIAL PURPOSE OF ASSESSEE. THE AO DEPUTED AN INSPECTOR FOR PHYSICAL VERIFICATION OF IMMOVABLE PROPERTY OF ASSESSEE. THE SAID INSPECT OR, IN TURN SUBMITTED HIS REPORT THAT ASSESSEE IS RUNNING ITS NURSING HOME AT THE GR OUND AND FIRST FLOOR OF BUILDING LOCATED AT RIPON STREET AND SECOND FLOOR OF THE BUI LDING HAS BEEN RENTED OUT AND ASSESSEE IS EARNING RENTAL INCOME OF 1,200/- PER MONTH. THE THIRD FLOOR OF THE SAID BUILDING IS USED BY ASSESSEE FOR HIS RESIDENTIAL PU RPOSE. ACCORDINGLY, AO OBSERVED THAT THE FLAT LOCATED AT HIGHLAND PARK IS NOT USED FOR RESIDENTIAL PURPOSE AND HE WORKED OUT MARKET RATE ON NOTIONAL BASIS @ 10,000/- P.M. THEREFORE, AO ADDED THE NOTIONAL RENT IN THE HANDS OF ASSESSEE. 20. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT NOTIONAL RENT WORKED OUT BY AO SHOUL D BE RESTRICTED AT 14,400/- FOR THE ENTIRE YEAR. THE ASSESSEE SUBMITTED THAT SECOND FLOOR OF RIPON STREET HAS BEEN LET OUT FOR 1,200/- P.M. AND THE SAME RATE SHOULD ALSO BE APPL IED IN THE CASE OF FLAT LOCATED AT HIGHLAND PARK. AFTER CONSIDERING THE SAM E, LD. CIT(A) DISREGARDED THE CLAIM OF ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- THE SUBMISSION OF THE A/R, GROUNDS OF APPEAL AND A SSESSMENT ORDER WERE DULY CONSIDERED AO HAS DEALT WITH THE ISSUE IN DETAILS. I DO NOT FIND ANY DISCREPANCY IN THE ORDER OF AO ON THIS ISSUE. HENCE, ADDITION M ADE BY AO ON THIS ISSUE OF RS.84,000/- U/S 23(4)(B) IS SUSTAINED . AGGRIEVED BY THIS, ASSESSEE HAS COME UP IN APPEAL B EFORE US. 21. BEFORE US LD. AR STATED THAT FLAT LOCATED AT HI GHLAND PARK IS EXCLUSIVELY USED FOR RESIDENTIAL PURPOSE OF ASSESSEE AND THE THIRD F LOOR OF THE BUILDING LOCATED AT RIPON STREET IS PART AND PARCEL OF THE NURSING HOME WHICH IS RUNNING FROM GROUND AND FIRST FLOOR OF SAID BUILDING. THE THIRD FLOOR IS USED BY ASSESSEE FOR THE PURPOSE OF REST WHEN THE ASSESSEE IS TIRED AFTER PERFORMING TEDIOUS PROF ESSIONAL DUTIES FOR WHICH THIRD FLOOR CANNOT BE SAID TO BE USED FOR THE PURPOSE OF HIS RE SIDENCE PURPOSE. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. 22. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET WE FIND THAT THE LEARNED AR HAS NOT BROUGHT ANYTHING ON RECORD TO DEMONSTRATE THAT THE FLAT AT HIGH LAND PARK IS USED FOR THE PURPOSE OF ASSESSEE RESIDENCE. IN THE ABSENCE OF AN Y DOCUMENTARY EVIDENCE WE FIND NO ITA NO.659/KOL/2013 A.Y. 2008 -09 DR. P. GHOSH VS. ITO WD-55(1) KOL. PAGE 10 INFIRMITY IN THE ORDER OF LD. CIT(A). HENCE THIS GR OUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 23. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO.8 IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING OF 38,940/- ON ACCOUNT OF NON-AVAILABILITY OF SUPPORTING EVIDENCE. 24. ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAS C LAIMED EXPENDITURE ON RATES AND TAXES FOR 38,940/- BUT FAILED TO PRODUCE SUPPORTING EVIDENCE. THEREFORE, AO HAS DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME O F ASSESSEE. 25. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT MUNICIPAL AND OTHER TAXES IN CONNECT ION WITH NURSING HOME HAS BEEN PAID FOR AN AMOUNT OF 38,940/- WHICH IS LIABLE FOR DEDUCTION U/S. 37 OF T HE ACT. HOWEVER, LD. CIT(A) DISREGARDED THE CLAIM OF ASSESS EE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- THE SUBMISSION OF THE A/R, GROUNDS OF APPEAL AND A SSESSMENT ORDER WERE DULY CONSIDERED AO DISALLOWED A SUM OF RS.38,940/- ON AC COUNT OF RENT AND TAXES AS NO BILLS WERE PRODUCED AS SUPPORTING EVIDENCES A ND NONE OF THE BILLS PERTAIN TO THE ASSESSMENT YEAR UNDER CONSIDERATION. I AGREE WITH THE VIEWS OF AO AND HENCE ADDITION MADE OF RS.38,940/- ON ACCOUNT OF D ISALLOWANCE OF MUNICIPAL TAXES IS SUSTAINED . AGGRIEVED BY THIS, ASSESSEE HAS COME UP IN APPEAL B EFORE US. 26. BEFORE US LD. AR FOR THE ASSESSEE REITERATED SA ME SUBMISSIONS AS MADE BEFORE LD. CIT(A) AND FURTHER STATED THAT THE SUPPORTING E VIDENCE TO JUSTIFY THE EXPENDITURE INCURRED ON THE RATES AND TAXES WERE NOT AVAILABLE AT THE TIME OF ASSESSMENT PROCEEDINGS. HOWEVER, THESE DOCUMENTS ARE NOW AVAIL ABLE WITH ASSESSEE. ACCORDINGLY, AR PRAYED TO RESTORE THE ISSUE TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. 27. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE LIMITED ISSUE IN THE INSTA NT CASE RELATES TO DISALLOWANCE OF EXPENDITURE CLAIMED BY ASSESSEE UNDER THE HEAD RATES AND TAXES ON ACCOUNT OF NON- AVAILABILITY OF SUPPORTING EVIDENCE. THE VIEW TAKEN BY AO WAS SUBSEQUENTLY UPHELD ITA NO.659/KOL/2013 A.Y. 2008 -09 DR. P. GHOSH VS. ITO WD-55(1) KOL. PAGE 11 BY LD. CIT(A). BUT LD. AR BEFORE US PLEADED THAT SU PPORTING EVIDENCE WAS NOT AVAILABLE AT THE ASSESSMENT PROCEEDINGS AS WELL AS APPELLATE STAGE. BUT THE DOCUMENTS ARE NOW AVAILABLE. ACCORDINGLY, LD. AR REQUESTED BE FORE THE BENCH TO RESTORE THE SAME TO THE FILE OF AO FOR FRESH ADJUDICATION. HOWE VER, AR DID NOT PRODUCE ANY SUPPORTING EVIDENCE FOR OUR REFERENCE. AS THE LD. A R FAILED TO BRING SUPPORTING EVIDENCE, WE ARE NOT INCLINED TO RESTORE THIS ISSUE TO THE FILE OF AO. HAD THERE BEEN SUPPORTING EVIDENCE AVAILABLE WITH THE ASSESSEE, IN OUR VIEW, IT SHOULD HAVE BEEN SUBMITTED NOW BEFORE US. AS NO RELEVANT DOCUMENT HA S BEEN SUBMITTED BEFORE US, THEREFORE WE UPHOLD THE ORDER OF LD. CIT(A) AND THI S GROUND OF ASSESSEE IS DISMISSED. 28. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO. 9 I S THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING THE DISALL OWANCE OF 22,996/- ON ACCOUNT OF NON-AVAILABILITY OF SUPPORTING EVIDENCE IN ASSESSEE S PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON 31.03.2008. THE ASSESSEE HAS CLAIMED FOLLOWING EXPENDITURE:- SL.NO HEAD OF EXPENDITURE AMOUNT 1 DOCTORS REFRESHMENT 46,890 2 GENERAL CHARGES 25,524 3 ACCOUNTING CHARGES 18,000 4 GENERAL CHARGES 12,564 5 ACCOUNTING CHARGES 12,000 1,14,978 AT THE TIME OF ASSESSMENT PROCEEDINGS, ASSESSEE SUB MITTED LEDGER COPY OF THE AFORESAID EXPENDITURES BUT FAILED TO PROVIDE SUPPOR TING EVIDENCE IN SUPPORT OF HIS CLAIM. ASSESSING OFFICER ALSO OBSERVED THAT THE PAY MENT FOR THE AFORESAID EXPENDITURE HAS BEEN MADE THROUGH CASH AND ONLY SELF-MADE VOUCH ERS HAVE BEEN MAINTAINED. ACCORDINGLY, AO HAS DISALLOWED 20% OF THE AFORESAID EXPENSES AND ADDED A SUM OF 22,996/- TO THE TOTAL INCOME OF ASSESSEE. 29. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT AO HAS DISALLOWED THE EXPENDITURE ON AD HOC BASIS. THE ASSESSEE PRAYED TO RESTRICT THE DISALLOWANCE TO 5% OF SUCH E XPENDITURE. HOWEVER, LD. CIT(A) ITA NO.659/KOL/2013 A.Y. 2008 -09 DR. P. GHOSH VS. ITO WD-55(1) KOL. PAGE 12 DISREGARDED THE CLAIM OF ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- THE SUBMISSION OF THE A/R, GROUNDS OF APPEAL AND A SSESSMENT ORDER WERE DULY CONSIDERED AO DISALLOWED 20% OF VARIOUS EXPENSES OF RS.1,14,978/- IN THE ABSENCE OF PROPER BILLS AND VOUCHERS. THIS HAS BEEN MENTIONED IN AUDIT REPORT, DISALLOWANCE OF 20% OF SUCH EXPENSE IS QUITE REASON ABLE. HENCE, ADDITION MADE OF RS.22,996/- IS THEREFORE SUSTAINED . AGGRIEVED BY THIS, ASSESSEE HAS COME IN APPEAL BEFO RE US. 30. BEFORE US LD. AR REITERATED SAME SUBMISSIONS AS MADE BEFORE LD. CIT(A) AND HE STATED THAT ISSUE MAY BE DECIDED ON MERIT. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. 31. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. ADMITTEDLY THE ASSESSEE FAILED TO FURNISH THE EVIDENCE IN SUPPORT OF THE EXPENDITURE CLAIMED IN THE PROFIT AND LOSS A CCOUNT BEFORE THE AO AND THE LEARNED CIT(A). INDEED THE ONUS LIES ON THE ASSESSE E TO JUSTIFY THE EXPENSES CLAIMED IN THE P&L ACCOUNT. HOWEVER IN THE ABSENCE OF ANY DOCU MENTARY EVIDENCE THEN THE LOWER AUTHORITIES CAN ALSO REFER SUCH AMOUNT OF EXP ENDITURE CLAIMED IN THE EARLIER YEARS BEFORE MAKING THE DISALLOWANCE FOR THE PURPOS E OF COMPARISON AND TO CHECK THE CONSISTENCE. AS SUCH WE FIND NO REFERENCE WAS MADE TO THE EARLIER YEAR EXPENDITURE CLAIMED BY THE ASSESSEE. THEREFORE IN THE INTEREST OF JUSTICE AND FAIR PLAY WERE INCLINED TO LIMIT THE DISALLOWANCE AT THE RATE OF 1 0% OF SUCH EXPENDITURE. HENCE THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 32. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO.10 I S THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING DISALLOWAN CE OF 28,000/- ON ACCOUNT OF ACCRUED INTEREST ON TAXABLE HFC BOND. 33. THE ASSESSEE HAS MADE INVESTMENT IN THE FINANCI AL YEAR 2004-05 @ 8% TAXABLE HDFC BOND FOR 3.50 LAKH. ON PERUSAL OF THE RECORD, AO OBSERVED TH AT THE CORRESPONDING INTEREST INCOME ON SUCH BOND HAS NOT BEEN OFFERED TO TAX. THE AO ALSO OBSERVED THAT THE ACCRUED INTEREST ON OTHER FIXED D EPOSIT FOR 48,658/- WAS OFFERED TO TAX AND SIMILARLY THE INTEREST ACCRUED OF PPF WAS A LSO CAPITALIZED. THUS, AO WAS OF THE VIEW THAT ASSESSEE IS OFFERING THE INTEREST INC OME ON ACCRUAL BASIS AND HE ALSO ITA NO.659/KOL/2013 A.Y. 2008 -09 DR. P. GHOSH VS. ITO WD-55(1) KOL. PAGE 13 OBSERVED FROM THE NOTES TO ACCOUNTS THAT ASSESSEE I S FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. AS SUCH, AO WORKED OUT THE INTEREST ON 3.50 LAKH AND ADDED THE INTEREST INCOME OF 28,000/- TO THE TOTAL INCOME OF ASSESSEE. 34. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHEREAS ASSESSEE DEMONSTRATED THAT AS PER THE AGREEMENT WITH HDFC BA NK THE INTEREST WILL BE GIVEN ON MATURITY AND ACCORDINGLY HDFC BANK WILL DEDUCT TDS ON MATURITY OF TAXABLE BONDS. THE ASSESSEE ALSO SUBMITTED THAT THERE WOULD HAVE B EEN MISMATCH IN THE AMOUNT OF INTEREST AND TDS IN THE YEAR OF MATURITY OF SUCH BO NDS IF THE INTEREST INCOME WOULD HAVE BEEN OFFERED TO TAX ON YEAR TO YEAR BASIS. THE REFORE, SAME WILL BE OFFERED IN THE YEAR OF MATURITY OF TAXABLE BONDS. HOWEVER, LD. CIT (A) DISREGARDED THE CLAIM OF ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- THE SUBMISSION OF THE A/R, GROUNDS OF APPEAL AND A SSESSMENT ORDER WERE DULY CONSIDERED. AO ADDED A SUM OF RS.28,000/- ON ACCOUN T OF INTEREST FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING. APPELLANT PLEA DED THAT THIS SHOULD E INCOME OF THE YEAR IN WHICH INTEREST IS RECEIVED. O N PERUSAL OF BALANCE SHEET OF THE APPELLANT IT WAS FOUND THAT HE IS FOLLOWING MER CANTILE SYSTEM OF ACCOUNTING. APPELLANT DOES NOT HAVE FREEDOM TO FOLLOW TWO SYSTE M OF ACCOUNTING. HENCE AO WAS RIGHT IN TAKING INTEREST INCOME ON MERCANTILE S YSTEM OF ACCOUNTING. ADDITION MADE BY AO OF RS.28,000/- ON ACCOUNT OF I NTEREST IS SUSTAINED . AGGRIEVED BY THIS, ASSESSEE HAS COME UP IN APPEAL B EFORE US. 35. BEFORE US LD. AR FOR THE ASSESSEE STATED THAT A SSESSEE GOT THE MATURED VALUE OF TAXABLE BONDS ALONG WITH INTEREST IN THE FINANCIAL YEAR 2009-10 WHICH WAS OFFERED TO TAX IN FINANCIAL YEAR 2009-10. HE IN SUPPORT OF ASS ESSEES CLAIM SUBMITTED THE COPY OF BALANCE-SHEET ALONG WITH ITR WHICH IS PLACED ON PAG ES 27 TO 31 OF THE PAPER BOOK. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. 36. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION, WE FIND THAT ASSESSEE HAS NOT OFFERED THE INTEREST INCOME ON THE TAXABLE BOND ON THE GROUND THAT INTEREST INCOME HAS BEEN OFFERED TO TAX AT THE TIME OF MATURITY OF THE AFORESAID BOND I.E. FINANCIAL YEAR 2009-10. HOWEVER, WE FIND THAT AUTHORITIES BELOW OB SERVED THAT ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING THEN ASSESSEE HAS T O OFFER THE INTEREST INCOME TO TAX ON ACCRUAL BASIS. ACCORDINGLY, AUTHORITIES BELOW DI SALLOWED THE CLAIM OF ASSESSEE. ON PERUSAL OF RECORDS AND AFTER CONSIDERING THE SUBMIS SIONS RAISED BY BOTH THE PARTIES, WE ITA NO.659/KOL/2013 A.Y. 2008 -09 DR. P. GHOSH VS. ITO WD-55(1) KOL. PAGE 14 FIND THAT ASSESSEE HAS ALREADY OFFERED THE INTEREST INCOME IN THE FINANCIAL YEAR 2009-10 AND ADDITION THE SAME IN THE YEAR UNDER CONSIDERATI ON WOULD AMOUNT TO DOUBLE TAXATION OF THE SAME INCOME EARNED BY ASSESSEE. TO PUT THIS ONGOING DISPUTE TO REST AND IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE RE MIT BACK THIS ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION AS PER LAW WITH A DIRECTION TO AO TO CHECK WHETHER THE INTEREST INCOME HAS BEEN OFFERED TO TAX IN THE ASSESSMENT YE AR 2010-11 AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO ASSESSEE. IF SO, THEN THE ADDITION NEEDS TO BE DELETED. HENCE, IN TERMS OF ABOVE, ASSESSEES GROUN D IS ALLOWED FOR STATISTICAL PURPOSE. 37. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO.11 I S THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING THE DISALL OWANCE OF 3,26,345/- FOR THE FOREIGN TRAVEL EXPENSES. 38. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED FROM THE BANK ACCOUNT OF HSBC BANK THAT ASSESSEE HAS INCURRED FOR EIGN TRAVELLING EXPENSES FOR 3,26,345/- WHICH HAS NOT BEEN SHOWN IN THE FINANCIA L STATEMENT OF ASSESSEE. THE AO FURTHER OBSERVED THAT ASSESSEE HAS SHOWN DRAWING IN THE YEAR UNDER CONSIDERATION FOR 2,79,788/- ONLY. ACCORDINGLY, AO OBSERVED THAT FORE IGN TRAVELLING EXPENSE HAS BEEN INCURRED FROM UNDISCLOSED SOURCE OF ASSESSEES INCO ME AND HE ADDED THE SAME TO THE TOTAL INCOME OF ASSESSEE. 39. AGGRIEVED, ASSESSEE PREFERRED AN ADDITION APPEA L BEFORE LD. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT THE ALL PAYMENTS TOWARDS FO REIGN TRAVELLING EXPENSES HAD BEEN MADE FROM THE DISCLOSED BANK ACCOUNT. THEREFORE, TH E ADJUDICATION OF AO THAT SUCH EXPENDITURE HAS BEEN INCURRED FROM THE UNDISCLOSED SOURCE IS BASELESS AND IRRELEVANT. HOWEVER, LD. CIT(A) DID NOT ADMIT THE ADDITIONAL GR OUND OF APPEAL FILED BY ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER :- VIDE NOTE SHEET ENTRY DT. 26/11/2012, THE A/R WAS ASKED TO FILE COPY OF ADDITIONAL GROUND TAKEN, TO FILE RE-CASTED BALANCE SHEET SHOWING FOREIGN TRAVELLING ETC. BUT NO SUCH REPLY WAS FILED. A/R WA NTED TO WITHDRAW ADDITIONAL GROUND VIDE NOTE SHEET ENTRY DT. 28/01/2013 BUT DID NOT SUBMIT AN REPLY. SINCE ADDITIONAL GROUND OF APPEAL WERE NOT SUBMITTED, SAM E ARE NOT ADJUDICATED. AGGRIEVED BY THIS, ASSESSEE HAS COME UP IN APPEAL B EFORE US. ITA NO.659/KOL/2013 A.Y. 2008 -09 DR. P. GHOSH VS. ITO WD-55(1) KOL. PAGE 15 40. BEFORE US LD. AR FOR THE ASSESSEE REITERATED SA ME SUBMISSIONS AS MADE BEFORE LD. CIT(A). HE DREW OUR ATTENTION AT PAGES 35 TO 39 OF THE PAPER BOOK WHERE DETAILED BANK STATEMENT SHOWING THE FOREIGN TRAVEL EXPENSE W AS PLACED. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. 41. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION, WE FIND THAT FOREIGN TRAVELLING EXPENSE INCURRED BY ASSESSEE WAS HELD BY AO AS INCU RRED FROM UNDISCLOSED SOURCE OF ASSESSEES INCOME. ACCORDINGLY, AO INVOKED THE PROV ISION OF SEC.69C OF THE ACT WHICH WAS SUBSEQUENTLY CONFIRMED BY LD. CIT(A). HOW EVER, ON PERUSAL OF ASSESSMENT ORDER WE FIND THAT AFORESAID EXPENSE WAS INCURRED OUT OF DISCLOSED BANK ACCOUNT AS EVIDENT FROM THE FINDING OF AO WHICH IS REPRODUCED BELOW:- IT IS FOUND FROM THE BANK ACCOUNT OF HSBC BANK, GA RIAHAT BRANCH, S/B ACCOUNT NO. 023-057912-006 THAT THE ASSESSEE HAS DR AWN THE FOLLOWING AMOUNTS (A PER TABLE BELOW) FOR TRAVELLING WHICH WA S NOT REFLECTED IN THE BALANCE SHEET A DRAWING AGAINST TRAVELLING. FROM THE ABOVE OBSERVATION OF AO, IT IS CLEAR THAT THE AFORESAID FOREIGN TRAVELLING EXPENSES WERE INCURRED FROM THE DISCLOSED BANK ACCO UNT. THEREFORE, IN OUR CONSIDERED VIEW, THE QUESTION OF INCURRING EXPENSE FROM UNDISC LOSED INCOME DOES NOT ARISE. 42. WE ALSO FIND THAT THE SAME ISSUE HAS NOT BEEN A DJUDICATED BY LD. CIT(A) ON MERIT AND LD. CIT(A) DID NOT ADMIT ADDITIONAL GROUN D OF ASSESSEE BY OBSERVING THAT ASSESSEE FAILED TO PRODUCE THE RE-CASTED FINANCIAL STATEMENT SHOWING THE FOREIGN TRAVELLING EXPENSES . HOWEVER, ON PERUSAL OF ADDITIONAL GROUND, WE FIND THAT THE MATTER GOES TO THE ROOT OF THE CASE AND THE ISSUE I S ARISING FROM THE ORDER OF AO. THEREFORE, THE ADDITIONAL GROUND NEEDS TO BE ADMITT ED BY LD. CIT(A) IN TERMS OF JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF N TPC REPORTED IN 229 ITR 383. IT IS ALSO IMPORTANT TO NOTE THAT THE DRAWING SHOWN BY THE ASSESSEE IS LESS THAN THE AMOUNT OF TRAVELLING EXPENSES. THEREFORE WE ARE OF THE VIEW THE ISSUE REQUIRES TO BE CONSIDERED BY THE LD. CIT(A). HENCE, IN TERMS OF AB OVE, ASSESSEES GROUND IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO.659/KOL/2013 A.Y. 2008 -09 DR. P. GHOSH VS. ITO WD-55(1) KOL. PAGE 16 43. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO.12 I S THAT LD. CIT(A) ERRED IN INTEREST U/S. 234B/234C OF 3,40,211 AND RS.5,278/-. 44. AT THIS STAGE, LEVY OF INTEREST U/S. 2324B/234C IS CONSEQUENTIAL, THEREFORE, GROUND NO.12 IS LIABLE TO BE DISMISSED AND IS ACCOR DINGLY DISMISSED. 45. LAST ISSUE IN GROUND NO.13 IN GENERAL SEEKING N O SPECIFIC DECISION FROM US. 46. IN THE RESULT, ASSESSEES APPEAL STANDS PARTLY ALLO WED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 08/02/2017 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP SR.P.S ! - 08/02/2017 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DR. PALLAB GHOSH, 52, RIPON STREET, KOLK ATA-16 2. /RESPONDENT-ITO WARD-55(1), 54/1 RAFI AHMED KIDWAI ROAD, KOLKATA-16 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY ORDER/ , /TRUE COPY/ / '#,