M/s International Commercial Centre, Kolkata V. I.T.O Wd - 35(2),kolkata, Kolkata

ITA 1224/KOL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83158 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 13-05-2013
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Section: 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA AM ] I.T.A NO.1853/KOL/2013 ASSESSMENT YEAR: 2009-2010 I.T.O., WARD-35(2), VS. M/S INTERNATIONAL COMME RCIAL CENTRE, KOLKATA KOLKATA (APPELLANT) (RESPONDENT) (PAN:AAAFI 8021 K) I.T.A NO.1224/KOL/2013 ASSESSMENT YEAR: 2009-10 M/S.INTERNATIONAL COMMERCIAL CENTRE VS. I.T.O., WA RD-35(2), KOLKATA KOLKATA (APPELLANT) (RESPONDENT) (PAN:AAAFI 8021 K) DATE OF HEARING: 16.10.2014 DATE OF PRONOUNCEMENT: 21/10/2014. FOR THE ASSESSEE: SHRI RAJIV SAXENA, FOR THE DEPARTMENT: SHRI RAVI JAIN, CIT, DR ORDER PER SHRI SHAMIM YAHYA, AM : THESE APPEALS BY THE REVENUE AND THE ASSESSEE EMANA TE FROM THE ORDER OF CIT(A)-XX, KOLKATA DATED 12.03.2013 AND PERTAIN T O ASSESSMENT YEAR 2009-10. 2. THE GROUNDS OF APPEAL IN THE REVENUES APPEAL R EAD AS UNDER :- (I) FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DECIDING THAT WHEN BOOK RESULT IS REJECTED THEN THE BEST WAY TO MAKE ADDITION IS BY ESTIMATING PROFIT BASED ON COMPARABLE CASES/PROFIT OF THE SAME ASSESSEE FOR THE EARLIER/SUBSEQUENT YEARS. (II) FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) ERRED IN ESTIMATING THE INCOME FOR THE A.YR. 2009-10 ON THE ABSIS OF INCOME DECLARED FOR THE A.YRS. 2007-08 & 2008-09. (III) FOR THAT IN THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) ERRED IN ALLOWING THE EXPENDITURE OF RS.1,32,01,927/- FROM THE DISALL OWED EXPENDITURE OF RS.1,50,44,161/-. (IV) FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN ALLOWING THE EXPENDITURE OF RS.1,32,01,927/- FROM THE DISALL OWED EXPENDITURE OF RS.1,50,44,161/- ITA NO.1853/K/2013 & 1 224/KOL/2013 M/S.INTERNATIONAL C OMMERCIAL CENTRE. A.YR.2009-10 2 EVEN WHEN SUCH EXPENDITURE WAS ALSO LIABLE FOR DISA LLOWANCE U/S 40(A)(IA) OF THE I.T.ACT, 1961, BECAUSE NO TDS UNDER CHAPTER XVII-B WAS MADE FROM THE SAID EXPENDITURE. (V) FOR THAT THE APPELLANT CRAVES LEAVE TO URGE, TO ADD, TO ALTER AND TO AMEND FURTHER GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING ON APPEAL. 2.1. THE GROUNDS OF APPEAL IN THE ASSESSEES APPEAL READ AS UNDER :- (1) THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL A S ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.1,80,000/- AS SALARY PAID TO THE PARTNERS. (2) THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN DIRECTING TO COMPUTE NET PROFIT @ 8.5% AS AGAINST 2.34% RIGHTLY SHOWN BY THE ASSESSEE. (3) THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE ACTION OF THE AO IN INVOKING SECTION 41(1) OF IT ACT WHILE MA KING AN ADDITION OF RS.36,39,668/- ON ACCOUNT OF CESSATION OF LIABILITY. (4) THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN NOT APPRECIATING THE FACTS AND MATERIAL PLACED ON RECORD ABOUT DESTRUCTION OF BOOKS OF ACCOUNTS AND SUPPORTING DOCUMENTS AS A RESULT OF FIRE IN THE OFFICE PREMISE S DUE TO WHICH ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNT AND SUPPORTING DOCUMEN TS. (5) THAT THE LD. CIT(A) HAS FURTHER ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE ACTION OF THE AO IN MAKING ASSESSMENT UNDER SECTION 144 OF THE IT ACT. 3. THE ASSESSEE WAS A MARKETING AGENT OF GARDEN REA CH SHIPBUILDERS & ENGINEERS LTD. DURING THE COURSE OF ASSESSMENT PROC EEDINGS IN RESPONSE TO AOS ENQUIRY THE ASSESSEE SUBMITTED THAT ITS ACCOUNTS OF BUSINESS WERE DESTROYED IN FIRE ON 24.07.2009. IN THIS REGARD THE ASSESSEE SUBMITTED S OME PHOTOGRAPHS, A COPY OF THE DIARY LODGED WITH THE POLICE AND DOCUMENTS OF THE F IRE DEPARTMENT. AO OBSERVED THAT THE ASSESSEE HAS SUBMITTED TAX AUDIT REPORT FOR A.Y R.2009-10 DULY SIGNED BY THE QUALIFIED CHARTERED ACCOUNTANT WHICH WAS SIGNED ON 24.09.2009. FROM THIS TAX AUDIT REPORT HE ALSO OBSERVED THAT IN THE SAID AUDIT IT W AS MENTIONED THAT ASSESSEE HAS MAINTAINED CASH BOOK, JOURNAL, LEDGER ETC. WHICH WE RE EXAMINED AT THE TIME OF AUDIT. HENCE HE INFERRED THAT THE ASSESSEE WAS IN POSSESSI ON OF BOOKS OF ACCOUNT OF A.YR.2009-10 EVEN AFTER FIRE. BUT THE AO OBSERVED T HAT THE ASSESSEE HAS CHOSEN NOT TO PRODUCE BOOKS OF ACCOUNTS AND DOCUMENTS. AO PROCEED ED TO ASSESS THE INCOME OF THE ASSESSEE FIRM U/S 144 OF THE IT ACT. IN THE ASSESSM ENT ORDER AO MADE THE FOLLOWING ADDITIONS : AO TREATED THE EXPENDITURE CLAIMED ON ACCOUNT OF SU NDRY CREDITORS AMOUNTING TO RS.1,50,44,161/- AS BOGUS. AO ALSO ADDED AN AMOUNT OF RS.36,39,668/- ON ACCOUNT OF SUNDRY CREDITORS AS CESSATION OF LIABILITY AND AO ADDED PARTNERS SALARY AT RS.1,80,000/-. ITA NO.1853/K/2013 & 1 224/KOL/2013 M/S.INTERNATIONAL C OMMERCIAL CENTRE. A.YR.2009-10 3 4. UPON ASSESSEES APPEAL THE LD. CIT(A) HELD THAT HE DID NOT FIND ANY INFIRMITY IN THE ORDER OF THE AO IN INVOKING SECTION 144 OF THE ACT. THE LD. CIT(A) FURTHER NOTED THAT THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CO-RELATE THE SUNDRY CREDITORS WITH THE EXPENDITURE CLAIMED IN THE P&L A/C. THAT T HERE WERE VARIOUS DISCREPANCIES REGARDING THE SUNDRY CREDITORS. THAT THE ASSESSEE D ID NOT PRODUCE SUPPORTING BILLS AND VOUCHERS BEFORE THE AO AND THE NET PROFIT FOR THE Y EAR WAS SHOWN AT 2.34% ONLY. THE LD. CIT(A) CONCLUDED AS UNDER :- ON THESE FACTS, I FIND NO INFIRMITY IN THE ORDER O F THE AO IN INVOKING SECTION 144 OF THE I.T.ACT. HOWEVER, THE DISALLOWANCE HE HAD MADE, HAS TO BE RECONSIDERED. WHEN BOOK RESULT IS REJECTED THAN THE BEST WAY TO MAKE ADDITI ON IS BY ESTIMATING PROFIT BASED ON COMPARABLE CASES/PROFIT OF THE SAME ASSESSEE FOR TH E EARLIER/SUBSEQUENT YEARS. IN THIS CASE, I FIND THAT NET PROFIT SHOWN BY THE APPELLANT FOR THE ASSESSMENT YEAR 2007-08 AND 2008-09 WAS 8.27% AND 8.45% RESPECTIVELY. THEREBY, THE PROFIT SHOWN BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION AT 2.34% IS VER Y LOWER SIDE, AFTER CONSIDERING ALL THE RELEVANT FACTS, I DIRECT THE A.O. TO TAKE NET PROFI T AT 8.5% WHICH WORKS OUT TO RS.18,42,234/- AND THE BALANCE ADDITION AMOUNTING T O RS.1,32,01,927/- IS DIRECTED TO BE DELETED. 4.1. AS REGARDS ADDITION OF RS.36,39,668/- ON ACCOU NT OF CESSATION OF LIABILITY THE LD. CIT(A) NOTED THAT AO FOUND THAT THE CREDIT BALA NCES WERE SHOWN IN THE NAMES OF 53 PARTIES BUT THE ASSESSEE FAILED TO FURNISH RELEV ANT DETAILS AND ALSO FAILED TO PROVE THE VERY BASIS OF SUCH EXISTENCE OF SUCH SUNDRY CREDITO RS. THAT FURTHER VIDE LETTER DATED 07.11.2012 ADMITTED THAT THEY HAVE CREDITED RS.41,0 0,766/- TO THE P&L A/C FOR THE A.Y.2012-13 INVOKING SECTION 41(1) OF THE ACT IN WH ICH THE SAID AMOUNT OF RS.36,39,668/- HAS BEEN INCLUDED. THE LD. CIT(A) HE LD THAT THEREBY THE AO HAS RIGHTLY INVOKED SECTION 41(1) AND MADE ADDITION OF RS.36,39 ,668/-. HOWEVER, THE LD. CIT(A) DIRECTED THE AO TO VERIFY THE FACT FROM THE CASE RE CORD FOR THE A.Y.2012-13 AS TO WHETHER THE SUNDRY CREDITORS AMOUNTING TO RS.36,39, 668/- HAVE BEEN INCLUDED IN THE AMOUNT DISCLOSED U/S 41(1) OF THE I.T.ACT. IF IT IS SO, THE SAME WAS TO BE DELETED IN THAT YEAR OTHERWISE THERE WOULD BE DOUBLE ADDITION ON TH E SAME AMOUNT. AGAINST THE ABOVE ORDER THE ASSESSEE AND REVENUE AR E IN CROSS APPEALS BEFORE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND CAREFULLY PER USED THE RECORDS. WE FIND THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE ASSESSEES BOOKS OF ACCOUNT WERE ITA NO.1853/K/2013 & 1 224/KOL/2013 M/S.INTERNATIONAL C OMMERCIAL CENTRE. A.YR.2009-10 4 DESTROYED IN FIRE AND THE SAME WERE NOT PRODUCED BE FORE THE AO AND IN SUCH CIRCUMSTANCES WE DO NOT FIND INFIRMITY IN THE ORDER OF THE LD. CIT(A) FOR HOLDING THAT THE AO WAS RIGHT IN INVOKING SECTION 144 OF THE I.T .ACT. WE ALSO AGREE WITH THE LD. CIT(A) THAT WHEN THE BOOK RESULTS WAS REJECTED THAN THE BEST WAY TO MAKE ADDITION IS BY ESTIMATING PROFIT BASED ON COMPARABLE CASES/PROF IT OF THE SAME ASSESSEE FOR THE EARLIER AND SUBSEQUENT YEARS. HOWEVER, IN THIS REGA RD THE LD. COUNSEL OF THE ASSESSEES SUBMISSION WAS NOTEWORTHY THAT THE LD. CIT(A) HAS N OT TAKEN INTO ACCOUNT THE PROFIT OF THE SAME ASSESSEE IN THE SUBSEQUENT YEARS WHICH WER E ALSO ASSESSED U/S 143(3) OF THE ACT. THE LD. COUNSEL OF THE ASSESSEE HAS ALSO SUBMI TTED THAT THERE WERE SOME EXCEPTIONAL CIRCUMSTANCES DUE TO WHICH PROFIT FOR T HE YEAR UNDER CONSIDERATION WAS 2.24%. WE FIND THAT THE LD.CIT(A) ORDER HAS ALSO NO T DEALT WITH THIS ASPECT. UNDER THESE CIRCUMSTANCES IN OUR CONSIDERED OPINION, INTE REST OF JUSTICE WILL BE SERVED IF THE ISSUE IS REMITTED TO THE FILE OF AO. AO IS DIRECTED TO CONSIDER THE ISSUE OF ESTIMATION OF PROFIT AFRESH. AO SHALL TAKE INTO ACCOUNT ALL THE R ELEVANT FACTORS AND SUBMISSIONS OF THE ASSESSEE AND DECIDE AS PER LAW. 5.1. AS REGARDS ADDITION ON ACCOUNT OF CESSATION OF LIABILITY WE NOTE THAT LD. CIT(A) WHILE CONFIRMING AOS ORDER HAS NOTED THAT THE ASSE SSEE HAS ADMITTED THAT IN THE A.YR.2012-13 SOME AMOUNTS HAVE BEEN CREDITED BY THE ASSESSEE IN THE P&L A/C BY INVOKING SECTION 41(1) OF THE IT ACT. HOWEVER ADMIS SION IN A.Y.2012-13 CANNOT LEAD TO A CONCLUSIVE EVIDENCE THAT THOSE LIABILITIES HAD CEASED TO EXIST IN PRESENT ASSESSMENT YEAR 2009-10. ASSESSEE HAD SUBMITTED BEFORE THE LD . CIT(A) THAT DURING THE PRESENT ASSESSMENT YEAR DUE TO LOSS OF BOOKS OF ACCOUNTS AS SESSEE WAS NOT IN A POSITION TO PROPERLY ASCERTAIN THE LIABILITY. NEVERTHELESS CESS ATION OF LIABILITY HAS TO BE DETERMINED AS PER THE PROVISIONS OF SECTION 41(1) OF THE ACT. IN OUR CONSIDERED OPINION INTEREST OF JUSTICE WILL BE SERVED IF THE ISSUE IS REMITTED TO THE FILE OF AO TO CONSIDER THIS ISSUE AFRESH. HENCE THIS ISSUE IS ALSO REMITTED TO THE FI LE OF THE AO. 5.2. SINCE THE ISSUE OF ESTIMATION OF PROFIT AND CE SSATION OF LIABILITY HAVE BEEN REMITTED TO THE FILE OF THE AO THE ISSUE AS REGARDS ALLOWANCE OF PARTNERS SALARY ALSO STANDS REMITTED TO THE AO. ITA NO.1853/K/2013 & 1 224/KOL/2013 M/S.INTERNATIONAL C OMMERCIAL CENTRE. A.YR.2009-10 5 6. IN THE RESULT THE APPEALS OF THE REVENUE AND ASS ESSEE STAND ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN COURT ON 21/10/2014. SD/- SD/- [ MAHAVIR SINGH ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 21/10/2014. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. M/S.INTERNATIONAL COMMERCIAL CENTRE, 14, BENTICK ST REET, 1 ST FLOOR, KOLKATA- 700001. 2 I.T.O., WARD-35(2), KOLKATA 3 . CIT(A)-XX, KOLKATA 4. CIT - KOLKATA. 5. CIT-DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES