2017 (6) TMI 346 - AT - Income Tax

Reopening of assessment under section 148 - Held that - The proceedings under section 148 of the Act were initiated against the assessee. However where the assessee had failed to furnish any return of income in response to the said notice issued under section 148 of the Act and in response to 142(1) /143(2) of the Act then the assessee at this juncture cannot raise issue against re-opening of assessment. Hence the ground of appeal No. 1 raised by the assessee is dismissed. Unexplained investment u/s 69 - Held that - Addition of Rs. 5, 00, 000/- on account of unexplained investment for purchase of plot u/s 69 of the Act is upheld in the hands of the assessee as the said plot is purchased in the name of two persons. The Ld. AR for the assessee has fairly conceded that balance sum of Rs. 5, 00, 000/- is to be added in the hands of other partner Shri Arun Chachad. In the said case appeal is pending before the CIT(A). Accordingly addition of Rs. 5, 00, 000/- is upheld in the hands of the assessee. Disallowance of transport charges - Held that - There is no merit in the plea of the assessee in this regard wherein the Ld. AR of the assessee had already accepted 5% of disallowance out of total lorry hire charges paid. Upholding the order of CIT(A) ground No. 3 raised by the assessee in appeal is dismissed. Disallowance out of total expenses on vehicles and telephone expenses - Held that - Assessing Officer had disallowed 1/3rd of the expenditure of car and telephone totaling Rs. 76, 413/-. The CIT(A) restricted the disallowance to 10% of the total expenses i.e Rs. 22, 924/-. There is no merit in the ground of appeal No. 4 raised by assessee and hence the same is dismissed. Addition on account of cash introduced in the firm s account by the partners - Held that - In appeal herein above in the case of Jagatsingh Pratapsingh Jadhav addition of Rs. 5, 00, 000/- on the same ground is upheld and accordingly no other addition on the same transaction is to be made in the hands of the firm and the same is deleted. In respect of other partner Shri Arun Chachad addition of Rs. 5, 00, 000/- has been made and appeal is still pending before the CIT(A). The Ld. AR for the assessee has proposed that the addition made in the hands of the partners on account of their cash contribution be upheld. In case no addition is confirmed in the hands of Shri Arun Chachad the balance addition of Rs. 5, 00, 000/- would be upheld in the hands of the assessee s firm. Otherwise in case it is added in the hands of the partner no addition in the hands of the assessee is valid. The Assessing Officer is directed to decide the ground No. 2 accordingly.

Issues Involved:
1. Reopening of assessment under section 148 of the Income Tax Act.
2. Addition of Rs. 5,00,000/- on account of unexplained investment under section 69 of the Act.
3. Disallowance of transport charges.
4. Disallowance of expenses on vehicles and telephone.
5. Addition of Rs. 10,00,000/- on account of cash introduced in the firm’s account by the partners.
6. Disallowance of Rs. 25,000/- on ad-hoc basis out of labor charges, contract work charges, and supervision charges.
7. Disallowance of Rs. 11,235/- on account of office expenses and vehicle expenses.
8. Direction to take further action for A.Y 2003-04 to verify an amount credited in the bank account.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 148:
The first issue raised by the assessee was against the reopening of assessment under section 148 of the Income Tax Act. The assessee had initially filed a return of income declaring Rs. 4,65,043/-. The Assessing Officer received information that income chargeable to tax had escaped assessment concerning an investment of Rs. 10,00,000/- for purchasing a plot. The notice under section 148 was issued, but the assessee did not file a return in response. The Tribunal held that since the assessee failed to furnish any return of income in response to the notice, the issue against the reopening of assessment cannot be raised at this juncture. Hence, the ground of appeal was dismissed.

2. Addition of Rs. 5,00,000/- on Account of Unexplained Investment under Section 69:
During a search action, certain documents revealed that the assessee, along with another partner, had invested in a plot. The source of Rs. 10,00,000/- deposited in the bank was unexplained. The Assessing Officer added Rs. 5,00,000/- as unexplained investment under section 69, which was confirmed by CIT(A). The Tribunal upheld the addition of Rs. 5,00,000/- in the hands of the assessee, acknowledging the submission that the balance sum of Rs. 5,00,000/- should be added in the hands of the other partner. Hence, the ground of appeal was dismissed.

3. Disallowance of Transport Charges:
The assessee was engaged in the transport business and had paid lorry hire charges, mostly in cash. The Assessing Officer made an ad-hoc disallowance of 7.5%, which was reduced to 5% by CIT(A). The Tribunal found no merit in the assessee’s plea, noting that the assessee’s representative had already accepted a 5% disallowance. Thus, the ground of appeal was dismissed.

4. Disallowance of Expenses on Vehicles and Telephone:
The Assessing Officer disallowed 1/3rd of the car and telephone expenses, totaling Rs. 76,413/-, which was reduced to 10% by CIT(A). The Tribunal found no merit in the assessee’s appeal against this disallowance and dismissed the ground.

5. Addition of Rs. 10,00,000/- on Account of Cash Introduced in the Firm’s Account by the Partners:
The firm’s appeal involved the addition of Rs. 10,00,000/- as unexplained cash introduced by the partners. The Tribunal noted that Rs. 5,00,000/- had already been upheld in the hands of one partner. The Tribunal directed that if the addition is confirmed in the hands of the other partner, no addition should be made in the firm's hands. The Assessing Officer was directed to decide accordingly.

6. Disallowance of Rs. 25,000/- on Ad-hoc Basis out of Labor Charges, Contract Work Charges, and Supervision Charges:
The Tribunal upheld the disallowance of Rs. 25,000/- made on an ad-hoc basis due to some expenses being supported by self-made vouchers. Hence, the ground of appeal was dismissed.

7. Disallowance of Rs. 11,235/- on Account of Office Expenses and Vehicle Expenses:
The Tribunal upheld the disallowance of Rs. 11,235/- on account of office and vehicle expenses, noting that some expenses were supported by self-made vouchers. Therefore, the ground of appeal was dismissed.

8. Direction to Take Further Action for A.Y 2003-04 to Verify an Amount Credited in the Bank Account:
The grounds of appeal related to this issue were not pressed by the assessee and hence were dismissed as not pressed.

Conclusion:
The appeals in ITA No. 696/PUN/2015 and ITA No. 676/PUN/2015 were dismissed. The appeal in ITA No. 371/PUN/2016 was partly allowed. The order was pronounced on 2nd June 2017.

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