Satyanarayan Agarwala, Paschim Medinipur V. ITO, Ward - 1, Midnapore, Midnapore

CO 17/KOL/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9595 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 05-05-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 11-03-2011
• Court: TRIBUNAL
• Department Lawyers: D J MEHTA
• Assessee Lawyers: S M SURANA
• Keywords: Principle of natural justice
• Section: 133A; 260A

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' / I.T.A NOS.131 & 132/KOL/2011 #$ %&/ ASSESSMENT YEARS: 2004-05 & 2005-06 INCOME-TAX OFFICER, WD-1(1), MIDNAPORE VS. SATYAN ARAYAN AGARWALA (PAN:ACNPA7586N) (() /APPELLANT ) (*+()/ RESPONDENT ) & C.O. NO. 17/KOL/2011 IN ' / I.T.A NO.132/KOL/2011 #$ %&/ ASSESSMENT YEAR: 2005-06 SATYANARAYAN AGARWALA VS. INCOME-TAX OFFICER, WD -1(1), MIDNAPORE (CROSS OBJECTOR) (RESPONDENT) DATE OF HEARING: 05.05.2014 DATE OF PRONOUNCEMENT: 05.05.2014 FOR THE REVENUE : SHRI D. J. MEHTA, JCIT, SR. DR FOR THE ASSESSEE: SHRI S. M. SURANA, ADVOCATE / ORDER PER BENCH: APPEALS BY REVENUE BEING ITA NOS. 131 & 132/K/2011 ARE ARISING OUT OF SEPARATE ORDERS OF CIT(A)-XXXVI, KOLKATA IN APPEAL NOS. 804 & 884/CIT(A)-XXXVI/KOL/R- 2,MID./09-10 DATED 08.11.2010 RESPECTIVELY AND CROS S OBJECTION BY ASSESSEE BEING C.O NO. 17/KOL/2011 IS ARISING OUT OF ORDER OF CIT(A)-XXXVI , KOLKATA IN APPEAL NO. 884/CIT(A)- XXXVI/KOL/R-2,MID./09-10 DATED 08.11.2010. ASSESSM ENTS WERE FRAMED BY ADDL. CIT, RANGE-1&2, MIDNAPORE U/S. 147/143(3) OF THE INCOME- TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEARS 2004-05 AND 2005-06 VIDE HIS SEPARATE ORDERS BOTH DATED 24.12.2009. 2. FIRST WE TAKE UP ITA NO. 131 & 132/KOL/2011. TH E ONLY COMMON ISSUE IN THESE TWO APPEALS OF REVENUE IS AS REGARDS TO THE ISSUE OF AD DITION MADE BY AO BEING DIFFERENCE IN OPENING STOCK OF RAW MATERIAL AND FINISHED GOODS, P URCHASES, CLOSING STOCK, OPENING CAPITAL, 2 ITA NOS. 131 & 132/K/2011 CO NO. 17/KOL/2011 SATYANARAYAN AGARWAL. AY 2004-05 & 2005-06 SUNDRY DEBTORS ON THE BASIS OF AUDIT REPORT SUBMITT ED WITH THE RETURN OF INCOME AND ANOTHER ONE WITH THE BANK FOR OBTAINING CREDIT LIMITS. THE REV ENUE IN BOTH APPEALS CHALLENGED THE DELETION OF ADDITION. 3. THE FACTS WE WILL TAKE UP FROM AY 2004-05 IN ITA NO . 131/K/201 WHICH IS A LEAD YEAR. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS AN IN DIVIDUAL RUNNING AN OIL MILL IN THE NAME AND STYLE OF M/S. BHAWANI OIL MILLS. A SURVEY ACTION U /S. 133A OF THE ACT WAS CONDUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE ON 14.09.2007 FRO M WHERE TWO SEPARATE SETS OF AUDITED ACCOUNTS INCLUDING BALANCE SHEETS WERE FOUND AND IM POUNDED BY THE REVENUE. ONE SET WAS FOUND TO BE GIVEN TO BANK FOR AVAILING OVERDRAFT CR EDIT FACILITY. ANOTHER SET WAS FILED ALONGWITH RETURN OF INCOME. THE AO OBSERVED THAT AUDITED ACCO UNTS FILED WITH THE RETURN OF INCOME WAS AUDITED BY ONE AUDITOR BROOK & CO., WHILE THE AUDIT ED ACCOUNTS FILED WITH THE BANK WAS AUDITED BY ROY GHOSH & ASSOCIATES. THE AO NOTED THE DIFFER ENCE IN BOTH THE BALANCE SHEETS AND THE RELEVANT DETAILS ARE AS UNDER: PARTICULARS AS PER AUDITED A/C FOR THE YEAR ENDED 31.03.04 SUBMITTED WITH RETURN OF INCOME AS PER AUDITED A/C FOR THE YEAR ENDED 31.03.04 IMPOUNDED FROM THE OFFICE OF THE ASSESSEE. DIFFERENCE OPENING STOCK 3,42,185 8,78,956 5,36,771 PURCHASES (MUSTARD SEEDS) 27,87,642 1,52,03,853 1,2 4,16,211 COST OF PRODUCTION 29,09,696 1,58,03,853 1,28,94,15 7 SALES OF MUSTARD OIL & CAKE 34,50,498 1,64,69,244 1,30,18,746 CLOSING STOCK OF FINISHED GOODS (MUSTARD IUK & CAKE) 3,48,000 18,75,280 15,27,280 GROSS PROFIT 5,07,085 14,75,438 9,68,353 NET PROFIT 80,760 5,30,477 4,49,717 SALES TAX 1,14,715 3,04,681 1,89,966 BANK INTEREST & CHARGES 2,45,227 (5,500 + 2,43,727) 4,35,085 THE AO ADDED THE FOLLOWING DIFFERENCES: 1. DIFFERENCE IN OPENING STOCK (RAW MATERIALS) RS. 8,78,956/- 2. DIFFERENCE IN OPENING STOCK (FINISHED GOODS) RS. 10,71,048/- 3. DIFFERENCE IN PURCHASES RS.1,24,61,372/- 4. DIFFERENCE IN CLOSING STOCK RS. 18,75, 280/- 5. DIFFERENCE IN OPENING CAPITAL RS. 28,6 6,461/- 6. SUNDRY DEBTORS RS. 12,50,109/- 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT( A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE SUSTAINED THE ADDITION OF NET PROFIT AS PER AUDITED ACCOUNTS FILED WITH THE BANK AT RS.5,30,477/- AND DELETED THE BALA NCE ADDITION OF DIFFERENTIAL UNDER VARIOUS HEADS AT RS.1,99,53,509/- BY OBSERVING IN PARA 6, 6 .1 TO 6.3 AS UNDER: 3 ITA NOS. 131 & 132/K/2011 CO NO. 17/KOL/2011 SATYANARAYAN AGARWAL. AY 2004-05 & 2005-06 6. THE SUBMISSION OF THE APPELLANT HAS BEEN CONSID ERED CAREFULLY IN THE LIGHT OF MATERIAL PLACED BEFORE ME AND THE CASE LAWS REFERRED TO. TH ERE IS NO DISPUTE THAT THE APPELLANT HAD PREPARED TWO AUDITED FINANCIAL STATEMENTS, ONE FILED WITH THE DEPARTMENT AND ANOTHER SUBMITTED TO THE BANK PURPORTEDLY FOR HIGHE R CASH CREDIT FACILITY. AS BROUGHT OUT IN THE TABLE AT PARAGRAPH 4 OF THE FINANCIAL STATEM ENT SUBMITTED TO THE BANK SHOWED HIGHER VALUE OF ALL ITEMS INCLUDING PURCHASES, SALE S, CLOSING STOCK COMPARED TO THE FINANCIAL STATEMENT DISCLOSED TO THE DEPARTMENT FIN ANCIAL STATEMENT SUBMITTED TO THE BANK SHOWED HIGHER VALUE OF ALL ITEMS INCLUDING PURCHASE S, SALES, CLOSING STOCK COMPARED TO THE FINANCIAL STATEMENT DISCLOSED TO THE DEPARTMENT . THE NET PROFIT DISCLOSED IN THE BALANCE SHEET FILED WITH THE BANK IS RS.5,30,477/- THAN THAT OF RS.80,760/- DISCLOSED TO THE DEPARTMENT. THE LD. AR THOUGH ARGUED VEHEMENTLY THA T THE APPELLANT HAVE BEEN FILING HEALTHY BALANCE SHEETS OVER THE YEARS WITH THE BANK FOR THE SOLE PURPOSE OF BETTER OVERDRAFT FACILITY, BUT HAS NOT BEEN ABLE TO JUSTIF Y AS TO WHY THE FIGURES REPORTED TO THE BANK SHOULD NOT BE RELIED UPON WHEN THEY NOT ONLY S HOW FINER DETAILS BUT ALSO PROPERLY AUDITED. THERE IS NO DISPUTE ALSO THAT THE FINANCIA L STATEMENT FILED WITH THE BANK HAD PLAYED A DETERMINING ROLE IN DECIDING THE QUANTUM O F OVERDRAFT FACILITY. THEREFORE, THE DECSON OF THE AO IN ACCEPTING THE BALANCE SHEET F ILED WITH THE BANK IS SUSTANED ON PRINCIPLE. 6.1. HOWEVER, WHAT THE INCOME TAX ACT REQUIRES IN A LL CASES IS ASSESSMENT OF CORRECT INCOME OF THE ASSESSEE. THE ULTIMATE AIM OF PASSING AN ASSESSMENT ORDER IS TO CORRECTLY COMPUTE THE INCOME OF AN ASSESSEE WHICH IS IN CONSO NANCE WITH LAW AND EVIDENCE AND AMENABLE TO PROOF. UNDOUBTEDLY THE AO HAS THE POWER S TO ESTIMATE INCOME TO HIS BEST JUDGMENT INVOKING THE PROVISIONS OF SECTION 145(3) OR 144 OF THE ACT BUT THE SAID ESTIMATION SHOULD BE FAIR AND HONEST ESTIMATE AND N OT ARBITRARY OR CAPRICIOUS. THE PRINCIPLES OF NATURAL JUSTICE OPERATE AS IMPLIED MA NDATORY REQUIREMENTS FOR FRAMING AN ASSESSMENT AND NON-OBSERVATION OF THE SAME AMOUNTS TO ARBITRARINESS AND DISCRIMINATION AS HELD IN MANY JUDICIAL PRONOUNCEMENTS. FURTHER, I T HAS BEEN HELD IN MANY JUDGEMENTS THAT EVIDENCE CANNOT BE PARTLY ACCEPTED AND PARTLY REJECTED. RELIANCE IS PLACED ON CIT VS. TARA DEVI GOENKA, REPORTED IN 122. ITR 14 (CALCUTTA ). 6.2. IN THIS CASE, INSTEAD OF TAKING INTO ACCOUNT T HE WHOLE OF THE AUDITED ACCOUNTS SUBMITTED TO THE BANK, THE AO HAS RESTORED TO PICK & CHOOSE METHOD WHILE ESTIMATING THE INCOME OF THE APPELLANT. THOUGH THE AO REJECTED THE AUDITED BALANCE SHEET ATTACHED WITH THE RETURN, BUT ADDITIONS UNDER VARIOUS HEADS WERE MADE BY HIM AFTER COMPARING THE DIFFERENCE BETWEEN TWO FINANCIAL STATEMENTS AND SUC H ADDITIONS WERE ALSO ADDED WITH THE DISCLOSED TOTAL INCOME AS PER RETURN. ONCE A BALANC E SHEET IS REJECTED, ITEMS OF THE SAME CANNOT OBVIOUSLY BE TAKEN FOR COMPARISON. THE CONTE NTION OF THE AR THAT THE OPENING STOCK AND THE OPENING CAPITAL SHOWN IN THE BALANCE SHEET FILED TO THE BANK WERE EXACTLY SAME AS THE CLOSING STOCK AND CLOSING CAPITAL BALAN CE SHOWN IN THE LAST YEARS BALANCE SHEET FILED WITH THE SAME BANK IS FOUND CORRECT. IN FACT THE APPELLANT HAS BEEN FILING A RATHER ROSY FINANCIAL STATEMENTS OVER THE YEARS TO THE SAME BANK FOR A HEALTHY OVERDRAFT FACILITY AND SAID INFORMATION WAS IN THE KNOWLEDGE OF THE AO AND, THEREFORE, FIGURES SHOWN IN THE LAST YEARS BALANCE SHEET FILED WITH T HE BANK SHOULD HAVE BEEN TAKEN FOR COMPARISON SO FAR AS THE ITEMS LIKE OPENING STOCK, OPENING CAPITAL BALANCE AND SUNDRY DEBTORS ARE CONCERNED. FURTHER, THE AO HAS ADDED T HE DIFFERENCE OF PURCHASES OF RS.124.61 LAKHS, IGNORING DIFFERENCE OF SALES OF RS .130.18 LAKHS. HE ALSO ADDED THE DIFFERENCE OF CLOSING STOCK WITHOUT CONSIDERING THE POSSIBILITIES THAT A HIGHER CLOSING STOCK FIGURE IS CONSEQUENTIAL TO HIGHER PURCHASES A ND SALES FIGURES. 6.3. IN VIEW OF THE FOREGOING, THE BALANCE SHEET FI LED WITH THE BANK ALONE SHOULD BE CONSIDERED FOR DERIVING THE TOTAL INCOME OF THE APP ELLANT. AS DISCUSSED ABOVE, THE NET PROFIT DISCLOSED IN THE BALANCE SHEET FILED WITH TH E BANK IS RS.5,30,477/-. THE AO IS 4 ITA NOS. 131 & 132/K/2011 CO NO. 17/KOL/2011 SATYANARAYAN AGARWAL. AY 2004-05 & 2005-06 DIRECTED TO ACCEPT THE SAME AS TOTAL INCOME. THE A PPELLANT THUS GETS RELIEF OF RS.19,53,509/. AGGRIEVED, REVENUE IS NOW IN APPEALS BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ON EACH OF THE ITEMS THE AO FOUND DIFF ERENCES. THE ASSESSEE HAS EXPLAINED THE DIFFERENCE AS REGARDS TO OPENING STOCK. THE AO FOU ND THE DIFFERENCE OF RS.8,78,956/- IN THE OPENING STOCK OF RAW MATERIAL, RS.10,71,048/- IN OP ENING STOCK OF FINISHED GOODS, RS.1,24,61,372/- IN PURCHASES, RS.18,75,280/- IN CL OSING STOCK, RS.28,66,461/- IN OPENING CAPITAL AND RS.12,50,109/- DIFFERENCE IN FIGURES OF SUNDRY DEBTORS AND MADE ADDITION OF ALL THE ABOVE DIFFERENTIAL AMOUNTS. THE ASSESSEES CONTENTI ON BEFORE THE LOWER AUTHORITIES AND EVEN NOW BEFORE US IS THAT THE FIGURE OF OPENING CAPITAL , OPENING STOCK, SALE IN THE BALANCE SHEET AND PROFIT WAS SUFFICIENT TO COVER UP THE INCOMINGS AND OUTGOINGS. THE OPENING STOCK AND CLOSING STOCK OF RAW MATERIAL AND FINISHED GOODS, THE PURCH ASES AND SUNDRY DEBTORS WERE MATCHING FIGURES AS PER THE BALANCE SHEET FILED WITH THE BAN K. THERE IS NO UNDISCLOSED STOCK WHICH REMAINED AFTER CONSIDERING THE PURCHASES AS WELL AS SALES. THE OPENING STOCK AND RAW MATERIAL AND FINISHED GOODS EXACTLY MATCHING WITH THE CLOSIN G CAPITAL AND STOCK OF THE LAST YEARS BALANCE SHEET FILED WITH THE BANK (WHICH IS AVAILAB LE BEFORE THE AO AT THE TIME OF ASSESSMENT). THE CLOSING CAPITAL IN THE BALANCE SHEET WAS AT RS. 34,66,633/- WHICH WAS MATCHING WITH THE OPENING CAPITAL OF LAST YEAR. SIMILARLY, OPENING S TOCK IN THE BALANCE SHEET WAS AT RS.8,78,956/-, FOR RAW MATERIAL AND FOR FINISHED GOODS AT RS.14,13 ,233/-. THESE AMOUNTS ARE EXACTLY MATCHING WITH THE LAST YEARS CLOSING STOCK. THE CLOSING ST OCK IN THE BALANCE SHEET WITH THE BANKER WAS AT RS.9,51,965/- FOR RAW MATERIAL AND RS.22,23,280/- F OR FINISHED GOODS. THEREFORE, THE OPENING STOCK IS PARTLY COVERED BY WORKING SHOWN IN THE P&L ACCOUNT THE PURCHASES AND SALES DURING THE YEAR. DEFINITELY THERE HAS TO BE CREDIT FOR TH E AVAILABILITY OF EXCESS OPENING STOCK WHILE CONSIDERING THE CLOSING STOCK. EVEN THE DIFFERENCE IN PURCHASES OF RS.1,24,61,372/- CANNOT BE THE SUBJECT MATTER OF ADDITION BECAUSE FROM THE BAL ANCE SHEET FILED BEFORE THE BANK THE PURCHASED GOODS WERE SOLD AND PURCHASES WERE SOURCE D FROM THE SALE PRICE. THE SOURCE OF PURCHASES WAS COVERED AND AS REGARDS TO ADDITION OF SUNDRY DEBTORS THE SAME IS COVERED BY THE SALES MADE. IN SUCH CIRCUMSTANCES, ON MERITS THE A SSESSEE HAS EXPLAINED HIS CASE. 6. AS THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ISSUE IS COVERED BY THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VSA. NAZRUL HOSSAIN IN ITAT 123 OF 2012 IN 2012 IN GA 1502 OF 2012 DATED 04.09.2012, WHEREIN I T HAS BEEN HELD AS UNDER: 5 ITA NOS. 131 & 132/K/2011 CO NO. 17/KOL/2011 SATYANARAYAN AGARWAL. AY 2004-05 & 2005-06 THIS APPEAL IS AGAINST THE JUDGMENT AND ORDER OF T HE LEARNED TRIBUNAL IN RELATION TO ASSESSMENT YEAR 2006-07 DATED 19 TH AUGUST, 2011. WE ARE UNABLE TO ADMIT THE APPEAL EVEN AFTER CONSIDERING FORCEFUL ARGUMENTS OF MR. SA RAF AS THE LEARNED TRIBUNAL AS WELL AS THE CIT(APPEALS) ON 2 FACT RECORDED THAT THE ASSESSING OFFICER HAS RELIED ON THE PREVIOUS AUDITED BALANCE SHEET WITH GENERAL AUDIT REPORT DATED 8 TH MAY, 2006 WHICH WAS IMPLORED BY THE ASSESSEE TO TREAT THE SAME AS BEING CANCELLED. IN SPITE OF TH IS THE ASSESSING OFFICER RELIED ON THE SAME AUDITED BALANCE SHEET AND REPORT THEREOF. WE ARE IN COMPLETE AGREEMENT WITH THE LEARNED TRIBUNAL AS WELL AS THE CIT(APPEALS) THAT T HE APPROACH OF THE ASSESSING OFFICER WAS ABSOLUTELY UNFAIR. ON THE FACT FINDING OF ALL THE AUTHORITIES WE CANNOT EXERCISE DISCRETION UNDER SECTION 260A OF THE INCOME-TAX ACT . WE THUS DISMISS THE APPEAL WITHOUT ANY ORDER AS TO COSTS. ALL PARTIES SHALL ACT ON A XEROX SIGNED COPY OF THIS ORDER ON USUAL UNDERTAKINGS. (SENGUPTA, J.) WE FIND THAT TRIBUNAL IN THE CASE OF DCIT VS. NAZRU L HOSSAIN IN ITA NO.373/K/2011FOR AY 2006-07 & CO NO. 47/K/2011 DATED 19.08.2011, WHEREI N THE FINDINGS OF CIT(A) IN BOTH THE ORDERS ARE EXACTLY IDENTICALLY WORDED HAS DELETED T HE ADDITION. IN THE CASE OF NAZRUL HOSSAIN, SUPRA THE CIT(A)S ORDER IS IN PARA 5.4 AND 5.5 WHE REAS IN THE PRESENT CASE THE CIT(A)S ORDER PARA 6.1, 6.2 AND 6.3 EXCEPT DIFFERENCE IN FIGURES. ON QUERY FROM THE BENCH THE LD. SR. DR COULD NOT SUPPORT OR COULD NOT CONTROVERT THAT THE ISSUE IS COVERED OR NOT BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NA ZRUL HOSSAIN, SUPRA. AS THE ISSUE IS COVERED, AND ON THE FACTS ALSO THE ASSESSEE HAS EXP LAINED THE POSITION, WE CONFIRM THE ORDER OF CIT(A) DELETING THE ADDITION AND APPEAL OF REVENUE IS DISMISSED. 7. SIMILAR IS THE ISSUE AND THE FACTS ARE EXACTLY IDENTICAL EXCEPT THE DIFFERENCE IN FIGURES IN THIS ITA NO. 132/K/2011 FOR AY 2005-06, WHAT WE HAV E ALREADY ADJUDICATED FOR THE AY 2004- 05 ABOVE. HENCE, TAKING A CONSISTENT VIEW, WE DISM ISS THIS APPEAL OF REVENUE. 8. CROSS OBJECTION OF ASSESSEE ARISING IN ITA NO. 1 32/K/2011 FOR AY 2005-06 IS SUPPORTIVE IN NATURE AND THE SAME IS ALSO DISMISSED . 9. IN THE RESULT, BOTH APPEALS OF REVENUE AND CROSS OBJECTION OF ASSESSEE ARE DISMISSED. 10. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- , ! , (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 5 TH MAY, 2014 ./ #01 2 JD.(SR.P.S.) 6 ITA NOS. 131 & 132/K/2011 CO NO. 17/KOL/2011 SATYANARAYAN AGARWAL. AY 2004-05 & 2005-06 3 *4 5 4%6- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT ITO, WARD-1(1), MIDNAPORE 2 *+() / RESPONDENT SHRI SATYANARAYAN AGARWALA, NANOOR CH AWK, P.O. MIDNAPORE, DIST. PASCHIM MEDINIPUR, PIN-721101 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 4:; *# / DR, KOLKATA BENCHES, KOLKATA +4 */ TRUE COPY, #