ACIT, Berhampur V. T Biswanath Patro, Aska

ITA 105/CTK/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4383 (ITAT-CUTTACK)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 14-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 21-02-2011
• Court: TRIBUNAL
• Department Lawyers: AGITATES
• Keywords: Income from undisclosed sources; TDS

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL,CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 105/CTK/2011 AND C.O.NO.012/CTK/2011 (FILED BY ASSESSEE) (ASSESSMENT YEAR 2007 - 08) ASST.COMMISSIONER OF INCOME TAX, BERHAMPUR CIRCLE, BERHAMPUR. VERSUS SRI T.BISWANATH PATRO, LAXMI BAZAR,BUS STAND, ASKA, DIST. GANJAM. PAN : AAAHT 9890 D (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SMT. PARAMITA TRIPATHY, DR FOR THE RESPONDENT SH RI K.C.DAS, AR ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER : THIS APPEAL BY THE REVENUE AGITATES THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) INDICATING THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.9,17,569 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNDERSTATEMENT OF INCOME FROM COMMISSION EARNED AS A C & F AGENT AND INTEREST ON SECURITY DEPOSITS. 2. THE ASSESSEE DERIVES INCOME FROM WHOLESALE BUSINESS OF MEDICINES, COM MISSION AS C & F AGENT AND INTEREST ON SECURITY DEPOSITS. THE ASSESSEE FILED RETURN OF INCOME OF RS.36,89,160, WHICH WAS SUBJECTED TO SCRUTINY U/S.143(3). THE ASSESSING OFFICER ON PERUSING THE TRADING AND P & L ACCOUNT FOR THE YEAR ENDING 31.3.2007 ARITHME TICALLY COMPUTED THE TOTAL GROSS RECEIPTS RENDERED IN THE P & L ACCOUNT VIS - - VIS THE TOTAL GROSS RECEIPTS AS PER TDS CERTIFICATES ISSUED BY THE RESPECTIVE PAYERS FOR GIVING COMMISSION AND INTEREST. HE NOTICED THAT THE GROSS RECEIPTS INDICATED IN TDS CERTI FICATES WAS RS.1,28,01,622 AS AGAINST DECLARED BY THE ASSESSEE IN THE P & L ACCOUNT AT RS.1,18,84,053. HE TREATED THE DIFFERENCE OF RS.9,17,569 AS ASSESSES INCOME FROM UNDISCLOSED SOURCES. HE ALSO OBSERVED THAT THE METHOD OF ACCOUNTING BY THE ASSESSEE WAS HYBRID WHICH HAD LONG BEEN DONE AWAY WITH. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY BY 2 ITA NO. 105/CTK/2011 INDICATING THAT THE ASSESSEE MAINTAINS ONLY MERCANTILE SYSTEM OF ACCOUNTING THAT ONLY RESULTED IN ACCUMULATION OF THIS CREDIT DIFFERENCE OV ER A PERIOD OF THREE TO FOUR YEARS WHEN THE INCOME STOOD TAXED BY THE DEPARTMENT IN ACCORDANCE WITH THE TDS CERTIFICATES FOR WHICH CREDIT HAD BEEN GRANTED. MATCHING THE INCOME WITH THE TDS CERTIFICATES WAS THEREFORE CONSIDERED ERRONEOUS IN FINDING MISTAKE IN THE SYSTEM OF MAINTAINING BOOKS OF ACCOUNT. THE LEARNED CIT(A) AGREED TO THE PROPOSITION OF THE SUBMISSIONS OF THE ASSESSEE APPELLANT BEFORE HIM AND HE NOTED THAT THE APPELLANT IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING FOR THE WHOLESALE BUSINESS OF MEDICINE & ACCOUNTING OF THE COMMISSIONS & INTEREST RECEIVED FROM THE PRINCIPALS AS A CONSIGNMENT AGENT ON CASH BASIS REGULARLY & CONSISTENTLY SINCE LONG BACK, THE RECONCILIATION STATEMENT FOR THE YEAR SUBMITTED BY THE APPELLANT WAS REFERRED TO THE A.O. FOR HIS COMMENT VIDE THIS OFFICE LETTER NO.CIT(A)/BAM/REMAND REPORT/2010 - 11/440 DT.19.07.2010. THE A.O. IN HIS REPORT DT.16.08.2010 HAS INFORMED THAT THE RECONCILIATION STATEMENT FILED BY THE APPELLANT WITH RESPECT TO THE COMMISSION & INTEREST ON SECURITI ES WERE VERIFIED BY HIM WITH ACCOUNT, CASH BOOK AND COPIES OF BANK ACCOUNT. FURTHER, HE INFORMED THAT THE COMMISSION & INTEREST HAS BEEN ACCOUNTED FOR ON RECEIPT BASIS CONSISTENTLY. THE RECONCILIATION STATEMENT FILED BY THE APPELLANT WAS VERIFIED BY HIM AN D FOUND TO BE CORRECT. THE REMAND REPORT OF THE AO WAS CONSIDERED BY HIM. THE LEARNED CIT(A) FURTHER OBSERVED THAT OUT OF THE COMMISSION & INTEREST AS PER THE TDS CERTIFICATES PERTAINING TO THE ASSESSMENT YEAR 2004 - 05, THE APPELLANT RECEIVED RS.6,10,568 DU RING THE ASSESSMENT YEAR 2005 - 06. IT DISCLOSED RS.6,10,568 IN THE RETURN OF ASSESSMENT YEAR 2005 - 06. OUT OF THE COMMISSION & INTEREST AS PER THE TDS CERTIFICATE PERTAINING TO ASSESSMENT YEAR 2005 - 06, IT RECEIVED RS.3,58,779 DURING THE ASSESSMENT YEAR 2006 - 07. IT DISCLOSED RS.3,58,779 IN THE RETURN 3 ITA NO. 105/CTK/2011 OF ASSESSMENT YEAR 2006 - 07. OUT OF COMMISSION & INTEREST AS PER TDS CERTIFICATES PERTAINING TO ASSESSMENT YEAR 2006 - 07, IT RECEIVED RS.14,94,593 DURING THE ASSESSMENT YEAR 2007 - 08. IT DISCLOSED RS.14,94,593 IN THE RETURN OF THE ASSESSMENT YEAR 2007 - 08.SIMILARLY, OUT OF THE COMMISSION & INTEREST AS PER TDS CERTIFICATES, IT RECEIVED RS.28,64,965 DURING THE ASSESSMENT YEAR 2008 - 09. IT DISCLOSED RS.28,64,965 IN THE RETURN OF INCOME OF THE ASSESSMENT YEAR 2008 - 09. IT IN CLUDES COMMISSION OF RS.20,45,901 & INTEREST OF RS.8,19,064. THUS, THE APPELLANT IS CONSISTENTLY AND REGULARLY FOLLOWING CASH BASIS OF ACCOUNTING ON COMMISSION AND INTEREST EARNED BY IT AS A CONSIGNMENT AGENT. THE A.O. NOTICED THE DISCREPANCY OF RS.9,17,56 9 WITHOUT PROPER RECONCILIATION OF THE ACCOUNT WITH THE TDS CERTIFICATES THE DIFFERENCE IS RS 28,64,965, IF IT IS TO BE CONSIDERED ON MERCANTILE SYSTEM OF ACCOUNTING THE APPELLANT IS FOLLOWING FOR ITS WHOLESALE TRADING IN MEDICINES. BUT, SINCE THE APPELLA NT HAS NOT RECEIVED THE COMMISSION DURING THE YEAR UNDER CONSIDERATION, IT HAS NOT BROUGHT IT TO TAX THIS YEAR ON THE BASIS OF THE METHOD OF ACCOUNTING IT HAS ADOPTED REGULARLY. IN OTHER WORDS, IT HAS RECEIVED THE COMMISSION & INTEREST OF RS.28,64,965 DURI NG THE ASSESSMENT YEAR 2008 - 09 AND OFFERED FOR TAXATION. THUS, THERE IS NO LOSS TO THE REVENUE BY ADOPTING SUCH METHOD OF ACCOUNTING. MOREOVER, THE A.O. HAS NOT GIVEN ANY FINDING THAT ANY OF THE ENTRIES IN THE BOOKS OF ACCOUNT WERE INCORRECT, THAT THE APPE LLANT WAS NOT EMPLOYING A METHOD OF ACCOUNTING ON REGULAR BASIS AND IT WAS NOT THE FINDING OF THE A O THAT THE TRADING RESULT COULD NOT BE DEDUCED FROM THE ENTRIES IN THE BOOKS OF ACCOUNTS REGULARLY MAINTAINED. THE RATIO OF THE CASE RELIED BY THE APPELLAN T WAS APPLICABLE TO THE FACTS OF THE CASE. THEREFORE, THE LEARNED CIT(A) DELETED THE ADDITION OF RS.9,17,569. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AT LENGTH AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER HAS TRIED TO INVOKE THE 4 ITA NO. 105/CTK/2011 PROV ISIONS OF SECTION 145(1) WITHOUT RECONCILING THE DIFFERENCE BETWEEN THE TDS CERTIFICATES INCORPORATING THE GROSS RECEIPTS VIS - - VIS DISCLOSED IN THE FINANCIAL STATEMENTS. THEY ARE TO BE RECONCILED TO THE EXTENT THAT THE INCOME THEREIN HAS TO BE GIVEN CREDI T IN ACCORDANCE WITH THE YEAR TO YEAR TAXATION OF THOSE INCOMES. AS CAN BE PERUSED, THE LEARNED CIT(A) UPHELD THE CONTENTION OF THE ASSESSEE APPELLANT BEFORE HIM THAT IT WAS NOT THE CASE OF MAINTAINING OF BOOKS OF ACCOUNTS ON HYBRID SYSTEM WHICH HAD BEEN D ONE AWAY WITH BUT WAS REGULARLY MAINTAINED UNDER THE MERCANTILE SYSTEM OF ACCOUNTING WHICH RESULTED IN TAXING INCOME WHEN IT WAS EARNED BY THE ASSESSEE. THE INCOMES STAND TAXED THEREFORE COULD NOT BE BROUGHT TO TAX AS UNDISCLOSED INCOME IN THE IMPUGNED ASS ESSMENT YEAR. INSOFAR AS THIS DIFFERENCE RESULTED IN A LARGER SUM HAVING BEEN RECEIVED IN EARLIER YEARS WHICH WAS TAXED IN THE IMPUGNED ASSESSMENT YEAR. WE DO NOT FIND ANY MATERIAL TO HOLD THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNT FOR GI VING A DISTORTED INCOME FOR THE IMPUGNED ASSESSMENT YEAR. IT WAS NOT THE CASE OF THE ASSESSEE THAT HE ONLY ACCOUNTED FOR THE RECEIPTS ON INCOME ON CASH BASIS WHEN HE INDICATED THAT THE TDS HAS BEEN GIVEN CREDIT INSPITE OF THE DEPARTMENT OWING HIM AMOUNTS W HICH DIFFERENCE CONTINUED FROM EARLIER THREE YEARS AND WERE RENDERED TO TAX IN ACCORDANCE WITH THE MERCANTILE SYSTEM OF ACCOUNTING ONLY. FINDING NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) WE HAVE NO HESITATION IN DISMISSING THE APPEAL FILED BY THE REV ENUE. 4. HOWEVER, ON OUR OBSERVATION ON THE CROSS OBJECTION THAT THE ASSESSEE RESPONDENT HAS RAISED THE ISSUE WITH RESPECT TO ANNULLING THE PROCEEDINGS U/S.143(3) PRIOR TO INTIMATION U/S.143(1) WAS PROPOSED TO BE DEALT WITH BY THE LEARNED CIT(A) APPROPRIAT ELY. THE ASSESSEE SUBMITS FOR ANNULMENT OF THE ORDER OF THE ASSESSING OFFICER AT THE THRESHOLD. WE DO NOT FIND ANY MERIT IN THIS CONTENTION RAISED BY THE ASSESSEE RESPONDENT IN ITS CROSS OBJECTION AS IT 5 ITA NO. 105/CTK/2011 DOES NOT APPEAR TO BE PROPER ON THE BASIS OF FACTS AS NOTED BY THE LEARNED CIT(A) AGAINST WHICH THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT BEEN ABLE TO SUBMIT ANY MATERIAL. AS PER THE ORDER SHEET ENTRIES, THE RETURN WAS PROCESSED FIRST AND THEN NOTICE U/S.143(2) WAS ISSUED. AS PER THE PROVISO TO SECTION 14 3(1) IT WAS ONLY THE INTIMATION NOT TO BE SERVED AFTER EXPIRY OF ONE YEAR THEREFORE DOES NOT DILUTE THE PROCEEDINGS UNDERTAKEN BY THE ASSESSING OFFICER U/S.143(3). THIS GROUND IN THE CROSS OBJECTION THEREFORE IS DISMISSED. 5. IN THE RESULT, THE APPEAL FILE D BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON DT. 17 TH JUNE, 2011 S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 17 TH JUNE, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY . COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: ASST.COMMISSIONER OF INCOME TAX, BERHAMPUR CIRCLE, BERHAMPUR. 2. THE RESPONDENT: SRI T.BISWANATH PATRO, LAXMI BAZAR,BUS STAND, ASKA, DIST. GANJAM. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.