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TMI Blog2016 (9) TMI 1427X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (Appeals) erred in adding Rs. 4,36,258/ - on account of ECL. The assessee did not have any transaction with them. The addition is not justified and the same be deleted. " 4. The Assessee is an individual. He is engaged in the business of sale of oil Flow Meters and derives income from executing contract job work. In the course of assessment proceedings, the AO found that as per Form No.26AS declaration, (which is the declaration of Tax Deducted at Source), the contract receipts for executing the job work on which tax was deducted by the persons who made payments to the Assessee was Rs. 50,25,326/-. Whereas the assessee had reflected the receipts on account of executing of job work of only Rs. 43,28,316/-. The difference of Rs. 7,03,010/- was added by the AO as undisclosed receipts from executing the contract job work. 5. Before the CIT(A) the Assessee submitted there was a discrepancy between the contract receipts as shown by the Assessee and as shown by the persons who made to the Assessee. The Assessee however submitted that he had done contractual job work for M/s Eastern Coalfields Ltd. Rajmahal (ECL) for a total sum of Rs. 27,338/-. However, in the 26AS, ECL has declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - only and not at least Rs. 436258/94p for which TDS statement in 26AS is available. No confirmation from ECL has been filed validating the assessee's claims. The CIT(A) also held that the assessee's claim that the receipts found in the undisclosed bank account with United Bank of India was already included in his trading as well as job work receipt was not true as the Assessee failed to substantiate his claim in this regard. 7. The AO obtained a Remand Report dated 22.08.13 from the AO in which the AO pointed out that the total undisclosed contract receipt was Rs. 55,21,437/- + Rs. 8,42,459/- (found in the undisclosed bank account) and after reducing the disclosed contract receipts of Rs. 43,22,316/-, the net difference was Rs. 11,99,121/- and the addition made by the AO should be enhanced to Rs. 11,99,121/-. 8. In the rejoinder to the remand report filed on 11.09.2013, the assessee accepted the manner of calculation done by the AO but claimed that since the AO has not accounted for trading receipts of spare parts of Rs. 4,75253/-, the addition be restricted to Rs. 11,99,121/- minus Rs. 4,75,253/- i.e. Rs. 7,22,866/- only. 9. The CIT(A) however enhanced the addition made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it can be said that the said withdrawals were utilized towards assessee's direct and indirect expenses in running of its security guard services, more so when the AO. could not bring on record anything contrary about utilization of such withdrawals. In our considered opinion, therefore, the AO. was not justified in adding back the entire receipts of Rs. 23,28,60l/- as unexplained investment u/s. 69A of the Act. We further observe that the entire deposit made in the undisclosed bank account was received by cheques from the clients and the expenditure claimed to have been incurred by the assessee for its business purposes has been described on page-8 of Id. C.I.T.(A)'s order. As rightly pointed out by Id. C.I.T.(A), if the action of AO. in treating the entire receipts in undisclosed bank account as income of the assessee is considered to be correct, the rate of net profit of the disclosed and undisclosed portion taken together would be more than 50% of the gross receipts, which is unlikely in the line of business the assessee is carrying on, more so when the AO. himself for AY. 2007-08 has taken the net profit of the assessee at 6%. Therefore, considering the totality of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that the Hon'ble Calcutta High Court in its decision has specifically observed that various payments were made from the deposits in the bank account. Such facts are not present in the case of the assessee and therefore the decision of the Hon'ble Calcutta High Court should not be deleted. 13. I have given a very careful consideration to the rival submissions. The plea put forth by the ld. Counsel for the assessee has to be accepted. As rightly contended by the ld. Counsel for the assessee the entire contract receipts cannot be added as income. The assessee derives income from executing the contract job work and in doing so is bound to incur expenses. It is not the case of the revenue that all expenses including the expenses relatable to the undisclosed receipts from execution of contract job work has already been taken into consideration while arriving at the total income of the assessee declared in the return of income by the assessee. In such circumstances I am of the view that the belief of taxing 31.75% which is the disclosed gross profit of the assessee on the undisclosed contract receipts is just and fair and the plea of the Assessee in this regard is directed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir return of income and showed the amounts received from the assessee as total income. If the persons to whom the assessee made payments have included the receipts in their total income the addition u/s 40(a)(ia) of the Act should be deleted. In this regard our attention was made to the decision of this Bench rendered in the case of M/s. Abhoy Charan Bakshi vide ITA NO.1492/Kol/2015 order dated 06.04.2016 where in similar direction was given by ITAT. 17. I have given a careful consideration to the submissions made by the ld. Counsel for the assessee. This Tribunal in the case of M/s. Abhoy Charan bakshi (supra) has held as follows :- 15. We have given a very careful consideration to the rival submissions. The CIT(A) has held that the second proviso to Sec.40(a)(ia) of the Act will apply in the present case and that applicability of the second proviso to Sec.40(a)(ia) of the Act which was introduced by the Finance Act, 2012 w.e.f. 1.4.2013 was retrospective in operation and was to apply w.e.f. 1-4-2005, being the date from which sub-clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004. The Hon'ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Town ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. The said disallowance is unjustified and the same be deleted." 20. The assessee debited an amount of Rs. 79,500/- towards Admission Expenses. During the course of hearing it was found that all payments in support of these expenses were made by cash and were supported only by self-made vouchers. The Assessee claimed the aforesaid expenditure related to education expenses of employee's children. The AO however held that since no business purpose is served by such expenses, the same cannot be allowed as a deduction u/s 37 of the Act and he added back the said sum to the total income of the assessee. On appeal by the assessee the CIT(A) confirmed the order of AO. 21. Before me, the limited prayer of the ld. Counsel for the assessee was that the assessee should be given an opportunity to explain that the expenses in question were actually incurred for the education of children of the employees of the assessee. In this regard the ld. Counsel for the assessee placed before me the decision of the Hon'ble Karnataka High Court in the case of Mysore Kirloskar Ltd. Vs CIT 166 ITR 836 (Kar) wherein the Hon'ble Karnataka High Court took a view that the expenses incurred for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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