ITAT deleted additions u/s 69 (of Income Tax Act, 1961) based only on the admission of assessee's director
ITAT deleted additions u/s 69 (of Income Tax Act, 1961) based only on the admission of assessee's director
Assessee was running coaching classes. During survey, various cash receipts were found which were not reflected in books of account. AO added Rs.65.50 lakhs as undisclosed income u/s 69A (of Income Tax Act, 1961), Rs.8,27,275 on account of deferred revenue on advertisement expenses. CIT(A) confirmed additions. ITAT deleted additions u/s 69 (of Income Tax Act, 1961) as it was based only on the admission of assessee's director during survey, and on expenses as they were found to be genuine.-501192
1. Assessee company provideed coaching classes to students/aspirants. It filed return of income declaring total loss of Rs.29,78,771.69. During a survey conducted u/s 133A (of Income Tax Act, 1961) in its business premises at various cash receipts were found and impounded. These cash receipts were correlated with the ledger account for the relevant period and it was noticed that these receipts were not reflected in the regular books of accounts of the assessee company.Subsequently, the assessment was completed u/s 143(3) (of Income Tax Act, 1961) making the two additions i.e. (i) Rs.65.50 lakhs as undisclosed income u/s 69A (of Income Tax Act, 1961) in respect of cash receipts found and impounded during the course of survey action and Rs.8,27,275/- on account of deferred revenue expenses on account of advertisement expenses for the month of March 2007.
2. CIT (A) confirmed the additions.
3. On appeal, the ITAT held as under:
"4. We have heard both the sides and perused the material. Relying only on the statement made by Shri Suri at the time of survey, the lower authorities cannot saddle the impugned addition in the light of the retraction made by Shri Suri wherein he have reconciled the receipts found during survey and has explained the receipt as that of inter branch transfer and without examining the veracity of the claim of the assessee, the AO jumped into a conclusion based only on the admission made by Shri Suri during survey cannot be countenanced.
In the light of the above facts and circumstances, we are of the considered opinion that the ld. CIT (A) erred in upholding the conclusion of the AO based only on the admission during survey made by Shri Suri at the wee hours (i.e. between 3.00 AM - 4.00 AM) to fasten the liability when Shri Suri was able to explain and reconcile the receipts. The AO did not bother to enquire into the veracity of the explanation given by the assessee. The AO could have easily called for details from the branches of the assessee at Janakpuri and tested the explanation given by the assessee in respect to interbranch transfer of cash to the Head Office, without doing so, the addition made solely on the basis of admission during survey cannot be upheld as held by the Hon'ble Supreme Court in CIT vs. S.Khader Khan Song (supra) and in a similar case of Hon'ble jurisdictional High Court in CIT vs. Dhingra Metal Works (supra). Therefore, the orders of the lower authorities are bad in law and are set aside on this issue. These grounds are allowed.
We find that the assessee had produced the ledger and bills of the advertisement expenses before the lower authorities below and explained that entire expenditure has been incurred wholly and exclusively for the purpose of business. The AO has not pointed out any discrepancy or any reason explained even inadmissible in the nature as per section 37 (of Income Tax Act, 1961). Just because the assessee has not offered for tax in the previous years, it cannot be the ground for disallowing the expenses. It should be remembered that there is no estoppel against the law. It is a trite law that if the expenses are wholly and exclusively for the purpose of business or profession and if it is not a capital expenditure or personal expenditure then the expenditure need to be allowed. From the ledger of the advertisement expenditure (Pages 163 to 168 of PB), we find that the assessee company had incurred advertisement expenditure on advertising the same in newspapers and magazines. In the light of the fact that there were no other justifiable reasons given by both the authorities below to disallow the advertisement expenditure, cannot be countenanced. Therefore, we delete the addition made by the authorities below and the ground is allowed.”
Case Reference - M/s. Sahil Study Circle Pvt. Ltd., vs. DCIT, Circle 7 (1)
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH 'G' : NEW DELHI)
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND
SHRI A.T. VARKEY, JUDICIAL MEMBER
ITA No.1434/Del./2013
(ASSESSMENT YEAR : 2007-08)
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