ITO,Ward-53(1), Kolkata, Kolkata V. Sri Dipak Dutta, Kolkata

ITA 1154/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87659 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 09-08-2012
• Court: TRIBUNAL
• Department Lawyers: AMITABH CHOUDHURY
• Section: 133(6)

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA ( ) BEFORE , /AND , ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA , AM ] / I.T.A NO. 115 4 /KOL/201 2 / ASSESSMENT YEAR : 200 6 - 0 7 INCOME - TAX OFFICER, WD - 53(1), KOLKATA. VS. SRI DIPAK DUTTA (PAN:AESPD5883N) ( /APPELLANT ) ( / RESPONDENT ) DATE OF HEARING: 27 . 01 .201 5 DATE OF PRONOUNCEMENT: 27 . 01 .201 5 FOR THE APPELLANT: SHRI AMITABH CHOUDHURY, JCIT, SR. DR FOR THE RESPONDENT: SHRI SUBASH AGARWAL, ADVOCATE / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF CIT (A) - XXXII I , KOLKATA IN APPEAL NO. 19 3/CIT(A) - XXXIII/ITO WD - 53(1)KOLKATA/08 - 09 DATED 0 4 . 0 6 .201 2 . ASSESSMENT WAS FRAMED BY ITO, WARD - 53(1), KOL U/S. 1 43(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR 200 6 - 0 7 VIDE HIS O RDER DATED 29 . 1 2 .20 0 8 . 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION OF SUNDRY CREDITORS. FOR THIS REVENUE HAS RAISED FOLLOWING GROUND NOS. 1 AND 2: 1. THAT THE LD. CIT(A), KOLKATA HAS ERRED IN ACCEPTING THE SUNDRY CREDITORS OF THE ASSESSEE AS GENUINE, WITHOUT THE SAME BEING INCLUDED BY THE ASSESSEE IN HIS REGULAR BOOKS OF A/CS, WHICH IS NOT IN CONFORMITY WITH ANY PRESCRIBED ACCOUNTING STANDARDS. 2. THA T THE LD. CIT(A), FAILED TO APPRECIATE THAT THE ASSESSEE HAS APPROPRIATED THE SUMS CLAIMED AS LIABILITY FOR HIS OWN PERSONAL USE, THEREBY CONFIRMING THAT HIS CLAIM OF SUNDRY CREDITORS WAS INGENUINE AND THE SAME REFLECTED HIS UNDISCLOSED INCOME ARISING FROM THE UNSPENT MONEY FROM THE LUMP SUMS RECEIVED FROM HIS CLIENTS. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE IS A CLEARING AND FORWARDING AGENT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS LIABILITY OF RS.37,87,600/ - AS ADVANCE FROM PARTIES DURING AY 2005 - 06. ACCORDING TO HIM, THERE IS TOTAL LIABILITY ON ACCOUNT OF 2 ITA NO. 115 4/K/2012 SHRI DIPAK DUTTA AY 200 6 - 0 7 SUNDRY CREDITORS AT RS.28,75,318/ - RELATED TO THIS YEAR I.E. FRESH LIABILITY APART FROM EARLIER YEAR S CARRIED FORWARD LIABILITIES. ACCORDING TO AO, NOTICES ISSUED , TO 18 PARTIES /SUNDRY CREDITORS AS NOTED IN THE ASSESSMENT ORDER , REMAINED NON - C OMPLIED WITH EITHER NOT SERVED OR NO N COMPLI ANCE BY THE PARTIES. THEREFORE, THE AO TREATED THE SAME AS BOG US LIABILITY AND ADDED A SUM OF RS.28,75,318/ - . AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO RESTRICTED THE ADDITION AT RS.2,99,573/ - BY OBSERVING IN PARA 3.3 AS UNDER: 3.3. I HAVE CONSIDERED FACTS OF THE CASE. THE ADDITION MADE BY THE ASSESSIN G OFFICER WAS BASED ON TWO POINTS. THE FIRST WAS, THAT THE AMOUNT OF SUNDRY CREDITORS WAS MUCH HIGHER THAN THE AMOUNT OF THE EXPENSES SHOWN IN THE PROFIT AND LOSS ACCOUNT. SECONDLY, THE NOTICE ISSUED TO ONE OF THE CREDITORS COULD NOT BE SERVED, WHEREAS OTH ERS DID NOT RESPOND TO THE NOTICES. REGARDING THE FIRST OBJECTION, AS EXPLAINED BY THE APPELLANT, HE IS ENGAGED IN BUSINESS OF CLEARING AND FORWARDING AGENCY. IN THE NORMAL COURSE OF HIS BUSINESS, HE RECEIVED CERTAIN SUMS FROM HIS CLIENTS, WHICH WERE UTILI ZED TOWARDS EXPENSES INCURRED ON BEHALF OF THE CLIENTS. IN HIS PROFIT AND LOSS ACCOUNT. ONLY THE SERVICE CHARGES AND HIS OWN EXPENSES WERE SHOWN AND THE EXPENSES INCURRED ON BEHALF OF CLIENTS AND AMOUNT RECEIVED AS ADVANCE IN RESPECT OF THE SAME ARE NOT RO UTED THROUGH THE PROFIT AND LOSS ACCOUNT. HOWEVER, SINCE THE ADVANCE RECEIVED, TO EXTENT IT IS NOT SPENT, REMAINS A LIABILITY TOWARDS THE CLIENT, THE SAME IS SHOWN IN THE BALANCE SHEET AS SUNDRY CREDITOR. IF THIS PECULIAR FEATURE OF THE APPELLANT'S BUSINES S IS TAKEN INTO CONSIDERATION, THE PHENOMENON OF SUNDRY CREDITORS BEING OF MUCH HIGHER AMOUNT AS COMPARED TO THE EXPENSES DEBITED IN PROFIT AND LOSS ACCOUNT DOES NOT APPEAR TO BE STRANGE OR DUBIOUS, AS VIEWED BY THE ASSESSING OFFICER. ALSO, THE APPELLANT H AS PROVIDED CONFIRMATIONS IN RESPECT OF LIABILITY OF SEVERAL CREDITORS INCLUDING M/S. AA ENTERPRISE TO WHOM NOTICE U/S. 133(6) COULD NOT BE SERVED BY THE ASSESSING OFFICER AND THE PARTIES WHO HAD NOT RESPONDED TO THE ASSESSING OFFICER. IN ALL, CONFIRMATION LETTERS HAVE BEEN PROVIDED IN RESPECT OF NINE CREDITORS. IT IS SEEN THAT ALMOST ALL THESE PARTIES ARE ASSESSED TO INCOME TAX AND THE TRANSACTIONS ARE MOSTLY THROUGH BANK. IN HIS REPORT, THE ASSESSING OFFICER HAS NOT FOUND ANY DISCREPANCY IN THE EXPLANATION OFFERED OR WITH THE CONFIRMATION LETTERS. THEREFORE, IN MY OPINION SUNDR Y CREDITORS LIABILITY CANNOT BE TERMED NON - GENUINE, SO FAR AS THEY RELATE TO THOSE PARTIES IN RESPECT OF WHOM PROPER CONFIRMATIONS HAVE BEEN PRODUCED HOWEVER, IT IS SEEN THAT OUT OF THE PARTIES IN WHOSE NAMES FRESH LIABILITY HAS BEEN SHOWN DURING THE YEAR, CONFIRMATIONS HAVE NOT BEEN PRODUCED IN RESPECT OF FOUR PARTIES VIZ. M/S. B.E. OFFICE AUTOMATION, COMTECH INTERNATIONAL LTD., DAS ENTERPRISE AND TRADE IMPEX. THE FRESH LIABILITY FOR THE YEAR IN THE NAMES OF THESE PARTIES ARE OF RS. 75,000/ - , RS. 87,771/ - , RS. 49,368/ - AND RS. 87,434/ - RESPECTIVELY WHICH AGGREGATE TO 2,99,573/ - . SINCE NO CONFIRMATION LETTER OR OTHER EVIDENCE IN RESPECT OF THESE LIABILITIES PERTAINING TO THE YEAR UNDER CONSIDERATION HAS BEEN PRODUCED, THE SAME REMAIN UNEXPLAINED. CONSIDERING THIS, THE ADDITION IS CONFIRMED IN RESPECT THESE PARTIES AND DELETED FOR OTHER PARTIES. AS A RESULT THE ADDITION IS REDUCED TO RS.2,99,573/ - . AGGRIEVED, NOW REVENUE IS IN APPEAL BEFORE US. 4. BEFORE US, LD. SR. DR STATED THAT EVEN DURING REMAND PROCE EDINGS, THE ASSESSEE IS UNABLE TO SUPPLY INFORMATION IN RESPECT TO NOTICES ISSUED U/S. 133(6) OF THE ACT TO VARIOUS PARTIES. ACCORDING TO LD. SR. DR, THE AMOUNT OF SUNDRY CREDITORS WERE MUCH HIGHER THAN 3 ITA NO. 115 4/K/2012 SHRI DIPAK DUTTA AY 200 6 - 0 7 THE AMOUNT OF EXPENSES DISCLOSED IN THE P&L ACCOUNT AND ONCE THIS IS THE POSITION, THE LIABILITY SEEMS TO BE BOGUS. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(A). 5. WE FIND THAT THE C IT (A) HAS GONE THROUGH THE INFORMATION SUPPLIED BY THE ASSESSEE CALLED BY THE AO THROUGH NOTICES U/S. 133(6) OF THE ACT RELATING TO THESE SUNDRY CREDITORS CONCERNING 18 PARTIES. AO SEN D HIS REMAND REPORT VIDE NO. ITO/WD.53(1)/KOL/REMAND/11 - 12/463 DATED 29.07.2011 AND THE RELEVANT PARA OF THE REMAND REPORT READS AS UNDER: 1. S/CREDITORS LIABILITIES OF RS.28,75,318/ - ASSESSEE CLAIMED IN HIS BALANCE SHEET S/CREDITORS LIABILITY FOR RS.46,00,850/ - IN HIS PROPRIETORSHIP CONCERN, M/S. OM SAI ENTERPRISE. IT IS ALSO OBSERVED FROM THE P&L A/C OF M/S. OM SAI ENTERPRISE THAT IT RECEIVED SERVICE C HARGES OF RS.6,68,600/ - AND CLAIMED EXPENDITURE OF RS.6,10,123/ - . THE ASSESSEE CALCULATED NET PROFIT OF M/S. OM SAI ENTERPRISE AT RS.58,447/ - . THE FRESH S/CREDITORS LIABILITY WAS CALCULATED IN THE ASST. ORDER FOR RS.28,75,318/ - . FROM THE ABOVE, IT IS VERY CLEAR THAT THERE WAS NO MATCHING CLAIM OF TRADE EXPENSES FOR WHICH S/CREDITORS LIABILITY OF THE ASSESSEE COULD HAVE COME INTO EXISTENCE. THEREFORE , S/CREDITORS LIABILITY IS NOTHING BUT BOGUS LIABILITY TREATING IT AS UNDISCLOSED INCOME OF THE ASSESSEE UNDER THE GRAB OF S/CREDITORS LIABILITY. FROM THE ABOVE REMAND REPORT IT IS CLEAR THAT THE INFORMATION WAS PASSED ON BY THE CIT( A ) TO THE AO BUT HE NEVER TRIED TO INVESTIGATE THIS INFORMATION WITH THAT OF THE PARTIES BECAUSE ALL THE PARTIES ARE LOCAL PA RTIES AND THIS FACT HAS BEEN ADMITTED BY LD. SR. DR NOW BEFORE US. EVEN OTHERWISE, WE FIND THAT IN THE NORMAL COURSE OF BUSINESS OF CLEARING AND FORWARDING AGENCY , NORMALLY PARTY RECEIVES A LUMP SUM AMOUNT FROM HIS CLIENT AND PART OF WHICH IS USED TOWARDS EXPENSES INCURRED ON BEHALF OF THE CLIENT. T HE ASSESSEE RAISES THE BILLS FOR THE SERVICES RENDERED WHICH IS DEBITED TO THE CLIENT S ACCOUNT AND A S LONG AS THE AMOUNT IS NOT SQUAR ED OFF , THE BALANCE IS CARRIED FORWARD AND DISCLOSED AS SUNDRY CREDITORS. SIN CE IN THE CASE OF THE ASSESSEE THERE IS ON - GOING BUSINESS WITH THE SAME CLIENTS FROM YEAR TO YEAR , THE ASSESSEE HAS TO MAINTAIN SUFFICIENT CUSHION IN THE FORM OF ADVANCE SO THAT THE BUSINESS OF THE CLIENTS DO NOT SUFFER IN THE ABSENCE OF SUFFICIENCY OF FUN DS. IN THE PECULIAR NATURE OF THE ASSESSEE S BUSINESS THERE IS MISMATCH BETWEEN EXPENSES DEBITED AND SUNDRY CREDITORS BALANCES. ALL THE PARTIES HAVE CONFIRMED THE POSITION IN RESPECT TO THE SUNDRY CREDITORS AND NONE HAVE DENIED AS IS THE INFORMATION FILED BY THE ASSESSEE BEFORE CIT(A) ALTHOUGH IT WAS CALLED BY THE AO U/S 133(6) OF THE ACT AND IT WAS REFERRED BACK TO AO BY CIT(A) THROUGH REMAND PROCEEDINGS . THE AO DURING REMAND PROCEEDINGS NEVER TRIED TO VERIFY THE INFORMATION FROM THE PARTIES DESPITE THE FACT THAT ENTIRE INFORMATION WAS AVAILABLE BEFORE HIM. IN RESPECT TO THE INFORMATION NOT RECEIVED FROM THE SUNDRY CREDITORS, 4 ITA NO. 115 4/K/2012 SHRI DIPAK DUTTA AY 200 6 - 0 7 DESPITE NOTICES U/S. 133(6) OF THE ACT , THE CIT(A) HAS RESTRICTED THE ADDITION AT RS.2,99,573/ - AS NOTED IN THE ORDER OF THE C IT(A) AND REPRODUCED ABOVE. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND THE SAME IS CONFIRMED. APPEAL OF REVENUE IS DISMISSED. 6 . IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 7 . ORDER IS PRONOUNCED IN THE OPEN COURT . SD/ - SD/ - , , ( SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH JANUARY , 201 5 JD.(SR.P.S.) - COPY OF THE ORDER FORWARDED TO: 1 . / A PPELLANT ITO, WARD - 53(1), KOLKATA . 2 / RESPONDENT SHRI DIPAK DUTTA, 132, DASPARA ROAD, THAKURPUKUR, BEHALA, KOLKATA - 700 063. 3 . ( )/ THE CIT(A), KOLKATA 4. 5. / CIT KOLKATA / DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, / BY ORDER, /ASSTT. REGISTRAR .