AI Insights
The case involves Bolpur Krishija Bipanan Samabayan Samity Limited, which appealed against the order of the CIT(A), National Faceless Appeal Centre, Delhi, for the assessment year 2016-2017. The primary issues in the appeal were the sustenance of additions made for unexplained cash credit and the estimation of net profit at 5% of total turnover. The Tribunal found that the books of accounts were wrongly rejected and the income estimation was incorrectly applied. However, the Tribunal upheld the addition related to unexplained cash credit due to insufficient evidence provided by the assessee.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 126285 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-04-2025
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Assessment Year
2016-2017
Judgement Text
" आयकर अपीलीय अधिकरण, “ए” न्यायपीठ, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER आयकर अपील सं/ITA No.400/KOL/2024 (नििाारण वर्ा / Assessment Year : 2016-2017) Bolpur Krishija Bipanan Samabayan Samity Limited, Bandgora, PO/PS: Bolpur, District- Birbhum West Bengal Vs ACIT, Circle-3, Suri, Birbhum PAN No. :AAALB 0489 N (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) नििााररती की ओर से /Assessee by : Shri Dilip Chatterjee, Advocate राजस्व की ओर से /Revenue by : Shri Sailen Samadder, Addl. CIT-Sr. DR सुनवाई की तारीख / Date of Hearing : 06/02/2025 घोषणा की तारीख/Date of Pronouncement : 21/04/2025 आदेश / O R D E R Per Rajesh Kumar, AM : This is an appeal filed by the assessee against the order dated 05.01.2024 passed by the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2016-2017, on the following grounds :- 1. That the Ld. CIT (A) National Faceless Appeal Centre has erred-in-law as well as on facts by sustaining the order which is cryptic, improper and unwarranted. 2. That the Ld.CIT(A) National Faceless Appeal Centre has erred- in-law as well as in facts by sustaining the addition of Rs. 2,58,68,746/- made in respect of unexplained cash credit u/s 68 of the Income Tax Act, 1961 at Rs. 2,45,40,236/- and estimation of net profit @5% at Rs. 13,28,510/- without any reasonable basis was not justified and unsustainable which is contrary to the principles of natural justice and is otherwise bad-in-law as well as on facts 3. That the order passed by the Ld. CIT(A) National Faceless Appeal Centre being non-speaking and devoid of application of mind. It is unjustified and improper to treat advances shown in ITA No.400/KOL/2024 2 the balance sheet as unexplained cash credit u/s 68 of the L. Tax Act which is not just and proper because advances were received through banking channel/route. 4. That the appellant prays that the addition of Rs. 2,58,68,746/- made in respect of unexplained cash credit u/s 68 of the I. Tax Act and estimation of net profit of Rs. 13,28,510/- be deleted in toto. 5. That the order passed by the Ld.CIT(A) National Faceless Appeal Centre by confirming/upheld the order of the Ld.AO Suri, Birbhum based on his own observation which being cryptic, unlawful as it hits the principle of natural justice. 6. That the appellant craves leave to add, amend, alter vary any other grounds apart from above of this instant appeal at the time of hearing. 2. The common issues raised by the assessee in the various grounds with are regard to sustenance of aggregate additions of Rs.2,58,68,746/- by ld CIT(A) as made by the AO in respect of unexplained cash credit u/s.68 of the Act of Rs.2,45,40,236/- as well as estimation of net profit @5% at Rs.13,28,510/- of the total turnover of Rs. 2,65,70,197/-. 3. Facts in brief are that the assessee filed its return of income on 15.10.2016 declaring total loss at Rs.98,463/-. The asessee society is engaged in the business of wholesale and retail business of fertilizer insecticides, agriculture manure, seeds, stationery, grocery and feed. During the course of assessment proceedings, despite the repeated notices from the AO issued u/s.142(1) on 14.09.2018, 30.10.2018, 14.11.2018 & 29.11.2018, there was no-compliance on the part of the assessee. Thereafter a summon was issued by the AO u/s.131 of the Act to Shri Debashish Pal, who signed the return of income in the capacity of Assistant Manager, however, the same remained non-complied and finally the assessment was made ex-parte on the basis of information available ITA No.400/KOL/2024 3 with the AO. Thus finally the AO after rejecting the books of accounts u/s.145(3) of the Act applied rate of 5% on the total turnover of Rs.2,65,70,197/- and estimated the profit at Rs.13,28,510/-, The AO also added Rs.2,45,40,236/- in respect of outstanding liability in the balance sheet which could not be examined and verified for the want of evidences due to non cooperation on the part of the assessee. 4. In the appellate proceedings the assessee filed written submissions before the ld. CIT(A) submitting on the various points and furnishing the information /details only partly. The ld. CIT(A) also called for a remand report from the AO which was also furnished by the AO. The assessee was also confronted with the said remand report and finally the ld. CIT(A) restored certains issues/additions partly to the file pf the AO in respect of outstanding liability of Rs.30,310/- which comprised of professional tax(employees) of Rs.1913/- stated to be paid in next financial year, cooperative education fund of Rs.2884/- and brought forward amount of Rs.25,513/- of Bolapur Krishija Bipanan Samabay Samity Ltd. and directed the AO to decide the same after doing verification. Similarly the amounts of Rs.9700/- on account of audit fee paid in A.Y.2016-2017 and gratuity fund of Rs.3,71,496/- paid in next financial year were also restored to AO to allow after doing necessary verification. However, the ld. CIT(A) confirmed the addition party in respect of outstanding liability to the extent of Rs.2,41,78,730/- on the ground of that there was no supporting evidences furnished in the assessment proceedings or during remand proceedings or during appellate proceedings to explain the same. In respect of estimation of income, the ld. CIT(A) sustained and confirmed ITA No.400/KOL/2024 4 the order of AO in which the AO estimated the income @5% on the ground that there was non-cooperation from the assessee side and, therefore, books of accounts of the assessee were rejected u/s.145(3) of the Act. 4. After hearing the rival contentions of the parties and perusing the material available on record, we find that the books of accounts were audited and a perusal of the said report furnished by the statutory auditors appointed by the Registrar of Cooperative Societies, several serious lapses and instances of total mismanagement of the society were reported, which are extracted as under :- Management: The present board of the society came in existence in 2014-15, through the Annual General Meeting held on 13-12-2014. The Board has convened only 5 meetins during the year under audit. Going through the affairs of the Board, it is found that : 1) The Board has failed to submit the report of Compliance on the irregularities pointed out in the last audit report, and lieke previous years, has again contravened the provision of the Section 98 of the Act. 2) By not convening its consecutive meeting within a gap of two months, the society has contravened the provision Rule 38 of the Rules at 3 occasions during the year under audit. 3) The Management has not taken any step to recover the arrear house rent from calcitrant and willful house rent defaulter. No follow up action has been taken or initiated by the Board to collect arrear house Rent. On the date of audit, current and arrear house rent were not found paid by the tenant in due course properly. 4) The Management has not discussed regarding the amount recoverable from Director Sk. Kamaluddin as purchase made on credit, in its meeting after the AGM held on 31-12-2015. 5. Thereafter in the observation of report, the auditor also observed as under :- ITA No.400/KOL/2024 5 Observations : Going through the Statutory Audit of the society for the year 2015-16, it was found that the society has not complied the suggestions made in the last audit report, it was found that : 1. The management is not taken strong measure to increase its business, by augmenting the present business, and by introducing other business. 2. The management has failed to induce punctuality and responsibility among its staffs. Division of work has not been properly formulated and implemented among the staffs. Due to lack of responsibilities and to complete the work in schedule time, has led to completion of Statutory Audit of the society at wee hours of dead line 3. Purchase of Paddy from farmers has been made in hurry, and documents are not found maintained. It was found that society has purchased 16214.37 quintal of Paddy against permission of 30,000 quintals. In this aspect it was observed that: a. The society has not maintained purchase, stock and delivery register to mill according to day to day basis. b. Master role against some paddy purchase were not made available during the course audit. c. There is no record how much of paddy has been processed till the date of balance sheet kept with mill on behalf of society. 4. As the society is running under loss, no fresh appointment/ extension of service of retired employee should be made. The society in its AGM Dated 31-12-2015 vide resolution no. 7, has accepted that \"there is surplus staff, than the required strength\". 5. The Board in its meeting dated 12-09-2015, has resolved to merge the daily allowance with Basic Pay, to give the advantage in favour of the employees. By doing so, the management has neglected the advice given in previous Audit Report not to count the Daily Allowance for calculation of Provident Fund contribution. In addition to that I employees were given Rs 155/- extra p. m., the reason behind such payment is not justifiable. 6. General Ledger and other ledgers has not been maintained properly and balance of each and every head of account is not maintained after every day transaction. 7. Society has not maintained the ledger folio of Bank A/C separately Bank wise, and transaction should be made strictly on the book balance available at the society level. ITA No.400/KOL/2024 6 8. As stated in last audit report, Intt on House Repairing Loan has not been calculated on loan account on daily balance basis. Rate of Interest, and repayment terms are not determined by the management 9. Long pending receivables and payables outside of the society, are found lying unadjusted as the management has not taken any step to adjust for the same. 10. The society has not maintained the sale register of Fertilizers according to quantity wise as suggested in previous Audit Report. This will help the management of the society to adjudge actual performance in comparison to previous year. 11. The Member Register of the society should be maintained properly, it was found that some members has not signed in the member register. The serial number in the Membership Register should be maintained 12. Advance provided to Directors by way of Credit sale of Fertilizer during the year 2015-15, hasn't been realized during the year. This amount is un paid for more than 2 years. 6. We note that there was no compliance before the AO in original assessment proceedings. The assessment was framed u/s.144 of the Act. The AO framed the assessment on the basis of information available in the assessment after rejection of books of accounts u/s.145(3) of the Act thereby estimating the income at 5% of the total turnover thereby making addition of Rs.13,28,510/- as against the loss declared by the assessee at Rs.98,463/-. We observe from the assessment order as well as the remand port and the appellate order passed by the ld. CIT(A) that no prima facie case was made out for rejecting the books of accounts and disbelieving the result declared by the assessee. Therefore, we do not find any merit in the rejection of books of accounts u/s.145(3) of the Act to be on the valid reasons and grounds. Accordingly, we set aside the order of the ld. CIT(A) on the issue of rejection of books of account and hold ITA No.400/KOL/2024 7 that the books of accounts were wrongly rejected by the AO. Having decided the rejection of books of accounts in favour of the assessee, we also are of the view that the loss declared by the assessee was as per the audited books of accounts and accordingly, we delete the addition made by the AO by estimation the income @ 5% of the total turnover of the assessee. 7. So far as the addition of Rs.2,41,78,730/- is concerned, we find that there has been no explanation from the assessee’s side before the AO in the original assessment proceedings as well as in the remand proceedings and also before the ld. CIT(A) in the appellate proceedings qua the series allegations in running the society by management as is apparent from the above report. We also observe from the audit report of the statutory auditor appointed by the Registrar of the Societies, copy of which is available at page Nos.1 to 85 in the paper book, there was no compliance to the series lapses as pointed out by the in the audit report such as non furnishing of bills vouchers, corroboration of liabilities and non recovery of amounts due from the Director S.k. Kamaluddin on account of purchases made on credit. It has also been mentioned in the report that the society has not maintained purchase, stock and delivery register to mills on to day-to-day basis. It was also mentioned that the master roles against paddy purchases were not make available during the course of audit. It has also been mentioned that there was no records as to how much of paddy has been processed till the date of balance sheet on behalf of the society. The books of accounts were comprising general ledger and other ledgers not maintained properly. It has also ITA No.400/KOL/2024 8 been reported that the society has not maintained its accounts on day to day basis. Some papers like master roles against purchases of paddy were not placed during the course of audit. In para 12 of the report in the observations part, it has been mentioned that advance provided to Directors by way of Credit sale of Fertilizer during the year 2015-15, hasn't been realized during the year and this amount is unpaid for more than 2 years. No explanation has been submitted by the assessee before either of the authorities below. Accordingly, both the authorities below have decided the issue after proper appreciation of facts and records. Even before us no attempt was made to prove these liabilities with evidences despite being specifically called by the bench. Thus, we do not find any error in the order of the ld. CIT(A) so far as this issue is concerned and therefore same is hereby upheld. Accordingly, the ground raised by the assessee is dismissed. Consequently the addition in respect of estimation of profit at 5% is deleted whereas the addition in respect of liabilities of Rs. 2,41,78,730/- is sustained. 8. In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 21/04/2025. Sd/- (PRADIP KUMAR CHOUBEY) Sd/- (RAJESH KUMAR) न्यानयक सदस्य / JUDICIAL MEMBER लेखा सदस्य/ ACCOUNTANT MEMBER कोलकाता Kolkata; ददनाांक Dated 21/04/2025 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनतललपप अग्रेपर्त/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant- 2. प्रत्यर्थी / The Respondent- 3. आयकर आयुक्त(अपील) / The CIT(A), 4. आयकर आयुक्त / CIT ITA No.400/KOL/2024 9 आदेशािुसार/ BY ORDER, (Assistant Registrar) Income Tax Appellate Tribunal, Kolkata 5. विभागीय प्रविविवि, आयकर अपीलीय अविकरण, कोलकाता / DR, ITAT, Kolkata 6. गार्ड फाईल / Guard file. सत्यापपत प्रतत //True Copy// "
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