Case Number: ITA 663/DEL/2019
Appellant: Roop Kishore Madan, New Delhi
Respondent: DCIT, Central Circle-16, New Delhi
Assessment Year: 2012-13
Result: Appeal Partly Allowed
Case Filed On: 2019-01-30
Order Type: Final Tribunal Order
Date of Order: 2020-05-13
Pronounced On: 2020-05-13
Shri Roop Kishore Madan, an individual engaged in the business of trading fabric through his proprietorship firm M/s. Rhea Distribution Co., filed an appeal against the assessment order for the assessment year 2012-13. The appeal challenged the addition of Rs. 10 lakhs under section 69C of the Income Tax Act, 1961, and the addition of Rs. 24,50,91,663 on account of unexplained credit shown as an addition to the capital account in the proprietary concern.
During the assessment proceedings, the Assessing Officer (AO) observed that the appellant had achieved sales of Rs. 9,37,98,738 against purchases of Rs. 9,37,50,576. Despite having fixed assets worth Rs. 1.41 crores and incurring various business expenses, no business expenses other than audit fees were claimed in the Profit & Loss Account. The AO found this unusual and added Rs. 10 lakhs as unaccounted business expenses under section 69C of the Income Tax Act, 1961.
Furthermore, based on AIR information, the AO discovered significant cash deposits in the appellant’s bank accounts and payments towards credit card bills. The appellant was required to explain the source of these cash deposits and the addition of Rs. 24,50,91,663 to his capital account. However, the AO found the explanations unsatisfactory and made an addition of Rs. 34,23,51,163 under section 69 of the Income Tax Act, 1961.
The appellant contested the additions before the Commissioner of Income Tax (Appeals) [CIT(A)], who confirmed the AO’s findings. The appellant then filed an appeal before the Income Tax Appellate Tribunal (ITAT).
The appellant’s counsel, Shri Salil Agarwal and Shri Shailesh Gupta, argued that there was no evidence of the alleged unaccounted business expenses and that the burden of proof was on the AO to establish such expenses. Regarding the addition of Rs. 24,50,91,663, it was explained that the amount included cash received from previously surrendered income during a search operation and loans and advances received from various parties.
The ITAT, comprising Shri Bhavnesh Saini (Judicial Member) and Shri N.K. Billaiya (Accountant Member), examined the case details and submissions. The Tribunal found that the estimate of Rs. 10 lakhs as unaccounted business expenses was excessive and reduced the addition to Rs. 3 lakhs, considering the nature of the business and the absence of evidence of such expenses.
Regarding the addition of Rs. 24,50,91,663, the Tribunal noted that the appellant had surrendered Rs. 15.92 crores in the preceding assessment year, out of which Rs. 15 crores was yet to be received. This amount was subsequently received and introduced into the books of the appellant. The Tribunal found the explanation satisfactory and deleted the addition to this extent.
For the remaining amount, the Tribunal observed that the appellant had provided sufficient documentary evidence, including confirmations from creditors, balance sheets, and bank statements, to substantiate the loans and advances received. The Tribunal held that the appellant had adequately explained the source of the deposits in his bank accounts and the addition to the capital account.
Considering the totality of the facts and circumstances, the ITAT partly allowed the appeal, reducing the addition of unaccounted business expenses to Rs. 3 lakhs and deleting the entire addition of Rs. 24,50,91,663. The Tribunal directed the AO to allow depreciation as per law and provide reasonable opportunities to the appellant for any further evidence required.
Source: Income Tax Appellate Tribunal, Delhi Benches “F”, New Delhi
Disclaimer: This article provides an overview of the case and is not a substitute for professional legal advice. For detailed information, readers are encouraged to refer to the official case documents and consult with a qualified legal professional.
Roop Kishore Madan vs DCIT: Addition of Business Expenses and Unexplained Credits for AY 2012-13
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