IN INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH Before: Shri S. S. Godara, Judicial Member and Shri Manish Borad, Accountant Member ITA No. 1168/Ahd/2012 Assessment Year 2009-10 ACIT, M/s. Vasudev Circle-9, Electrical Corporation, Surat Vs 1 st Floor, Umiya Niwas, (Appellant) Nr. Resham Bhavan, Laldarwaja, Station Road, Surat-395001 PAN: AACFV9238P (Respondent) Revenue by: Shri Satish Solanki, Sr. D.R. Assessee by: Shri M.K. Patel, A.R. Date of hearing : 22-07-2016 Date of pronouncement : 16-09-2016 ORDER PER : S. S. GODARA, JUDICIAL MEMBER:- This Revenue s appeal for A.Y. 2009-10, arises from order of CIT(A)-V, Surat, dated 28-02-2012 in appeal no. CAS/V/204/11- 12, in proceedings under section 143(3) of Income Tax Act, 1961; in short Act . I.T.A No.1168/Ahd/2012 A.Y. 2009-10 Page No 2 ACIT vs. M/s. Vasudev Electrical Corporation 2. Revenue s sole substantive ground pleads CIT(A) has erred in deleting disallowance of Rs. 36,59,832/- made by Assessing Officer in assessment order dated 29-12-2011 thereby declining expenses claimed against unaccounted income disclosed during survey of Rs. 2,04,36,558/-. 3. We come to relevant facts first. assessee firm trades in electrical goods and executes electrical labour contracts as well. department conducted survey in its case on 25-06-2008. assessee s partner Shri Jaswantbhai Manubhai Patel disclosed unaccounted income of Rs. 2,04,36,558/- comprising cash, stock, renovation expenses and sales in course thereof. 4. assessee filed its return on 30-09-2009 stating income of Rs. 1,03,79,960/-. This followed revised return dated 07-09-2010 enhancing above stated income to Rs. 1,43,97,610/-. same was processed. Assessing Officer took up scrutiny thereafter. He came across assessee s income declared coming to be less than survey disclosure hereinabove. assessee pleaded inter alia that its GP @ 15.63% was already higher than that @ 4.33% in immediate preceding assessment year and it sought to justify its income coming to be less than survey disclosure to legitimate increase in depreciation cost. Assessing Officer treated same as retraction of survey disclosure to add impugned differential sum of Rs. 36,59,832/- in nature of various expenses I.T.A No.1168/Ahd/2012 A.Y. 2009-10 Page No 3 ACIT vs. M/s. Vasudev Electrical Corporation claimed against differential amount of income declared during survey and one returned. 5. CIT(A) reverses Assessing Officer s findings as follows:- 4.3. I have carefully gone through assessment order as well as submission of AR. After considering facts of cases I found .that A.O. highly relied on ground that appellant surreptitious retracted from statement on oath recorded during survey and disclosed less income in return filed by him then what is disclosed during survey. In case of appellant, on verification of copy of account submitted before me, I found that appellant disclosed total amount of Rs. 2,05,36,558/- and claimed various expenses against same. Therefore, as appellant duly disclosed total addition income declared at time of survey which is duly reflected in books of appellant, same cannot be treated as retraction. Further, disclosure includes of cash, stock, sales etc and appellant has right to claim genuine business expenditure against unaccounted sales and stock which ultimately resulted in gross profit earned on such unaccounted sales/stock. appellant submitted before A.O. calculation showing head wise increase in various expenses. He further explained reasons for increase in all such expenditures vide annexure attached with submission. major increase in expenditures are in nature of depreciation, partner's salary and interest to partner's as well as banks. All these expenditure is mere result of calculation and A.O. also accepted same as genuine. .second major part of expenditure is in nature of salary to staff. Regarding same, appellant produced copy of salary and wages registers and explained that increase in this expense due to employment of additional workers at new site at Bhiwandi and as it is first year of business at Bhiwandi all cost of salary not recovered which directly resulted in decline of net profit of assessee. I found that as claim of appellant is genuine in nature and proved with supporting evidences like salary and wages register. A.O., during assessment proceedings, also did not comment about any inaccuracy or incompleteness in accounting records of appellant. Further I.T.A No.1168/Ahd/2012 A.Y. 2009-10 Page No 4 ACIT vs. M/s. Vasudev Electrical Corporation gross profit ratio of appellant also showing increasing trend compared to preceding previous year in term of overall gross profit as well as pre survey and post survey rate; hence, there was no point of doubt in declared result of appellant. Further, it is found that A.O. did not point out any defect in books of accounts, method of accounting and did not reject books of appellant. addition made by AO merely based on facts that returned profit is less than disclosed income by applying decision of ITAT Ahmedabad in case of Whiteline Chemicals. In case of Whiteline Chemicals GP shown by assessee was drastically reduced and hence based on above findings A.O. rejected books of appellant by pointing out several deficiencies and estimated GP. same case is not applicable in case of appellant, as in case of appellant, GP rate is increasing compared to last year and also A.O. did not reject books of appellant. Merely lower returned income than disclosed income does not itself justify in holding that books resulted disclosed by appellant was incorrect. Hence, in view of above, addition made on this account is not justified. Therefore, addition made is hereby deleted and ground of appeal is allowed. 6. Heard both sides. Revenue strongly argues in support of Assessing Officer s action disallowing various expenses of depreciation expenses, partners remuneration and interest to partners claimed at assessee s behest against survey disclosure hereinabove. We notice from paper book page 24 that assessee has in fact not reduced its income as disclosed during survey vis- - vis that stating in return since former one duly stands incorporated in its trading account. Revenue is fair enough in not disputing its books and other evidence in support as there is no question of genuineness of expenses before us. We find in these facts that co-ordinate in ITA 767/Ahd/2011 ACIT vs. Saloni I.T.A No.1168/Ahd/2012 A.Y. 2009-10 Page No 5 ACIT vs. M/s. Vasudev Electrical Corporation Industries upholds similar assessee s claim of expenditure against unaccounted income disclosure during survey as under:- 5. We have heard both parties and gone through case file. Relevant facts stated in preceding paragraphs are not repeated for sake of brevity. Revenue seeks to assess assessee s additional income of Rs. 75,16,725/- as deemed income u/s. 69 to 69C of Act not entitled for any deduction alike ones u/s 14 of Act. Its case is that same was unearthed only during survey not stated in any of books. It pleads that this additional income is not entitled for any deduction prescribed u/s. 14 of Act. assessee strongly supports lower appellate findings under challenge. dispute between parties is qua treatment of assessee s additional unaccounted income disclosed during survey hereinabove. In other words, whether this income is to be treated under heads prescribed in section 14 so as to be eligible partners remuneration u/s. 40b(V) of Act. hon ble jurisdictional high court in (2010) 329 ITR 01 (Guj) CIT vs. M/s Radhe Developers consider earlier case law of Fakir Mohd (supra) and hold that provisions of Act do not envisage any income not falling under various heads prescribed u/s. 14 of Act. very view is reiterated in (2013) 219 TAXMANN 279 (Guj) CIT vs. Shilpa Dying and Printing Pvt. Ltd. co-ordinate bench of tribunal in DCIT vs. M/s New Umiya Vijay Saw Mill (2012) 40 CCH 413 holds that such bifurcation of additional income disclosed in survey is not permissible. Revenue fails to point out any distinction on facts or law. We therefore follow above stated judicial precedence and uphold CIT(A) s findings under challenge. Revenue s arguments on its both substantive grounds fail. Revenue fails to point out any distinction on facts or law. We accordingly conclude that once assessee has already declared its unaccounted income followed by its incorporation in trading account, it is very much entitled to claim various business expenses against same as held by co-ordinate bench hereinabove. Revenue s sole substantive ground fails. I.T.A No.1168/Ahd/2012 A.Y. 2009-10 Page No 6 ACIT vs. M/s. Vasudev Electrical Corporation 7. This Revenue s appeal is dismissed. Order pronounced in open court on16-09-2016 Sd/- Sd/- (MANISH BORAD) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 16/09/2016 Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT Ahmedabad 6. Guard file. By order ACIT, Circle-9, Surat v. M/s. Vasudev Electrical Corporation