Amitsinh Nababha Rana Vs ITO (ITAT Rajkot)
It was alleged by the AO that the assessee has received a contractual amount from the party namely for an amount of Rs.20,91,670.00 which was not disclosed in the books of accounts. Accordingly the same was added to the total income of the assessee. However the learned CIT-A found that out of the contractual amount of Rs.20,91,670.00, a sum of Rs.8,90,000 has already been accounted for in the books of accounts of the assessee which was offered to tax. Thus, the balance amount of Rs.12,01,860 which has been claimed as an expense by the assessee was subject matter of dispute. As the assessee failed to furnish the supporting evidences for the so-called expenses of Rs.12,01,860.00, the learned CIT-A confirmed the addition for 2 reasons. Firstly, there was no documentary evidence in support of such expenses and therefore the same cannot be allowed as deduction under the provisions of section 37 of the Act. Secondly, the assessee has not deducted the TDS on such expenses amounting to Rs.12,01,860 under the provisions of section 40(a)(ia) of the Act. Thus, the learned CIT-A confirmed the addition made by the AO to the tune of Rs.12,01,860.00 after giving part relief of Rs. 8,90,000.00 only.
From the preceding discussion, we note that there is no ambiguity to the fact that the amount received by the assessee from the company namely IVRCL LTD. for Rs.20,91,760.00 represents the contract receipt/business receipts. Thus the entire amount cannot be added to the total income of the assessee. In our considered view only a percentage of profit embedded in such amount of contractual receipts can be brought to tax. In this regard we find support and guidance from the order of the Hon’ble Gujarat High Court in the case of CIT vs. President Industries reported in 258 ITR 654 where it was directed to make the addition only to the extent of gross profit of undisclosed business receipts. The relevant extract of the order is reproduced as under:
‘The amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represent the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that the investment by way of incurring cost in acquiring goods which have been sold has been made by the assessee and that has also not been disclosed, the question whether entire sum of undisclosed sales proceeds can be treated as income, answers by itself in the negative.”
However, in the given facts and circumstances we note that the assessee has already offered an income of Rs.8,90,000 against such contract receipt of Rs.20,91,760 which constitute 42% approximately. Accordingly, we are of the view that no further addition can be made under the provisions of section 37 of the Act despite the fact that the assessee failed to furnish the supporting evidences.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
This is assessee’s appeal against the order of ld.CIT(A)-3, Rajkot dated 9.12.2018 relating to the Asst.Year 2012-13.
2. The grounds raised by the assessee are descriptive in nature, which in fact raise and interconnected issue that is the learned CIT-A erred in confirming the addition made by the AO in part amounting to Rs.12,01,860.00 and Rs.80,259.00 instead of deleting the same in entirety.
3. The facts in brief are that the assessee in the present case is an individual and is a proprietor of the firm namely M/s Vijay trading Co. and Vasuki Trading Co. The assessee is also a partner in the partnership firm. The AO during the assessment proceedings found that the assessee has, inter-alia, not shown certain receipts/income from various parties despite the fact that these parties have deducted the TDS in the name of the assessee as evident from form 26AS. The necessary details of the parties, amount of gross income, amount of TDS is detailed below:
