2017 (6) TMI 594 - AT - Income Tax

Reopening of assessment u/s 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 raised by the assessee is dismissed. Addition on account of unexplained investment u/s 69 - co-ownership - Held that - In view of the submission of the assessee, the addition 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 ₹ 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, Arun Chachad. In the said case, appeal is pending before the CIT(A). Accordingly, addition of ₹ 5,00,000/- is upheld in the hands of the assessee. - Decided against assessee Disallowance of transport charges - Held that - Since the assessee did not file details of the expenses, the Assessing Officer asked the assessee as to why reasonable disallowance should not be made on this account. During course of hearing, CA & AR of the assessee stated that only 5% disallowance would be accepted. However, the Assessing Officer made ad-hoc addition by disallowing 7.5% of the total lorry hire expenses and made addition. The CIT(A) restricted the same to 5% of the total expenses against which the assessee is in appeal. 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.- Decided against assessee Addition on account of cash introduced in the firm s account by the partners - Held that - As in the case of Jagatsingh Pratapsingh Jadhav, addition of ₹ 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 ₹ 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 ₹ 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. Disallowance of contract work charges, supervision charges and office expenses, vehicles expenses - Held that - In respect of expenses, these additions are upheld in the hands of the assessee on the ground that some of the expenses are supported by self made vouchers

Issues Involved:
1. Reopening of assessment under section 148 of the Income Tax Act.
2. Addition of ?5,00,000 on account of unexplained investments under section 69 of the Income Tax Act.
3. Disallowance of transport charges.
4. Disallowance of expenses on vehicles and telephone.
5. Addition of ?10,00,000 on account of cash introduced in the firm’s account by the partners.
6. Disallowance of ?25,000 out of labor charges, contract work charges, and supervision charges.
7. Disallowance of ?11,235 on account of office expenses and vehicle expenses.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 148:
The first issue raised by the assessee was against the reopening of the assessment under section 148 of the Act. The assessee had initially filed a return of income, which was processed under section 143(1)(a). The Assessing Officer received information about an escaped income related to an investment of ?10,00,000 for a plot purchase. Despite the assessee's initial non-compliance with notices under section 148 and 142(1), the proceedings under section 148 were initiated. The Tribunal held that since the assessee failed to furnish a return of income in response to the notice, they could not contest the reopening of the assessment. Thus, this ground of appeal was dismissed.

2. Addition of ?5,00,000 on Account of Unexplained Investments (Section 69):
During a search action under section 132, documents revealed the purchase of a plot for ?30,43,000, with ?10,00,000 credited in cash by the partners, including ?5,00,000 from the assessee. The assessee failed to explain the source of this cash, leading to an addition of ?5,00,000 under section 69. The CIT(A) confirmed this addition. The Tribunal upheld the addition, noting that the assessee conceded to the addition for peace of mind and proposed that the remaining ?5,00,000 be added in the hands of the other partner. Thus, this ground of appeal was dismissed.

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

4. Disallowance of Expenses on Vehicles and Telephone:
The Assessing Officer disallowed 1/3rd of car and telephone expenses, totaling ?76,413. The CIT(A) reduced this disallowance to 10%, amounting to ?22,924. The Tribunal found no merit in the assessee's appeal against this reduced disallowance and dismissed the ground.

5. Addition of ?10,00,000 on Account of Cash Introduced by Partners:
For the firm, the addition of ?10,00,000 was contested, with ?5,00,000 already upheld in the hands of one partner. The Tribunal directed that no double addition should be made for the same transaction. The Assessing Officer was instructed to adjust the addition based on the outcome of the partner's appeal. Thus, this ground was conditionally addressed.

6. Disallowance of ?25,000 out of Labor, Contract Work, and Supervision Charges:
The Tribunal upheld the disallowance of ?25,000 made by the Assessing Officer, as some expenses were supported by self-made vouchers. Thus, this ground of appeal was dismissed.

7. Disallowance of ?11,235 on Account of Office and Vehicle Expenses:
Similarly, the Tribunal upheld the disallowance of ?11,235 for office and vehicle expenses due to inadequate supporting documentation. Thus, this ground of appeal was dismissed.

Conclusion:
The appeals of the assessee 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, with specific directions to the Assessing Officer regarding the addition of ?10,00,000 based on the partner's appeal outcome. The order was pronounced on June 2, 2017.

← Previous Next →