DCIT, Circle - 38, Kolkata, Kolkata V. Ujjal & Co., Kolkata

ITA 126/KOL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9347 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2011
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 21-01-2010
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Keywords: Unexplained cash credit; Business income
• Section: 40A(3); 133(6); 68; 145

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA () BEFORE . . , , SHRI D.K.TYAGI, JUDICIAL MEMBER. . !'# /AND ..$, % , SHRI B.K.HALDAR, ACCOUNTANT MEMBER #& /I .T.A NO. 126/KOL/2010 '() '*+/ ASSESSMENT YEAR : 2004-05 DY.COMMISSIONER OF INCOME-TAX -VS- UJJAL & CO. CIR.38 KOLKATA. PAN:AABFU 4591M (-. /APPELLANT ) (/-./ RESPONDENT ) -. / FOR THE APPELLANT : 0 / SHRI H.N.SINGH, SR.DR /-. / FOR THE RESPONDENT : 1 ($# / NONE 2 /ORDER ..$, % , SHRI B.K.HALDAR, ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XXIV, KOLKATA DATED 17-11-2009 FOR THE ASSESSMENT YEAR 2004-05. 2. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPE AL:- 1. THE LD CIT(A) HAS ERRED IN LAW AS WELL AS IN FAC T IN DELETING THE ADDITION OF RS. 979576/- TOWARDS UNDISCLOSED SALE. 2 THE LD. C1T(A) HAS ERRED IN LAW AS WELL AS IN FAC T IN DELETING OF ADDITION OF RS. 15,36,1241- TOWARDS UNDISCLOSED PURCHASE. 3. THE LD. C1T(A) HAS ERRED IN LAW AS WELL AS IN FA CT IN DELETING THE ADDITION OF UNEXPLAINED CASH CREDIT OF RS 1774558/- 4. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN FA CT IN DELETING THE ADDITION OF RS. 19,58,0941- U/S 40A(3). 5. THE LD.C[T(A) HAS ERRED IN LAW AS WELL AS IN FAC T OF THE CASE IN REJECTING THE BOOKS OF ACCOUNTS U/S 145 OF THE IT ACT AND EST IMATING THE NET PROFIT AT RS 640,000/- 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, M ODIFY, INCLUDE OR DELETE THE OTHER GROUNDS OF APPEAL. 3. THE APPEAL WAS FIXED FOR HEARING ON VARIOUS DAT ES RIGHT FROM 02-03-2010. HOWEVER, NONE APPEARED ON BEHALF OF THE ASSESSEE. F INALLY, NOTICE DATED 01-11-2010 FIXING THE HEARING ON 17-01-2011 WAS SERVED THROUGH THE DEPARTMENT. THE CONFIRMATION ITA NO.126/KOL/2010-BKH 2 OF THE SAME HAS BEEN SENT BY THE DCIT,CIRCLE-38, KO LKATA VIDE HIS LETTER NO.DCIT-C- 38/SCRUTINY/10-11/476 DATED 24-12-10. HOWEVER, EVE N ON THIS DATE NETHER ANY BODY ATTENDED NOR THERE WAS ANY ADJOURNMENT APPLICATION ON BEHALF OF THE ASSESSEE. WE, THEREFORE, PROCEEDED TO HEAR THE CASE EX-PARTE QUO THE RESPONDENT-ASSESSEE. 4. DURING THE ASSESSMENT PROCEEDINGS THE AO ISSUED NOTICES U/S. 133(6) OF THE ACT TO THE FOLLOWING PARTIES:- 1) M/S. AMB INDUSTRIES 2) M/S. N.J PLYWOOD PRODUCTS 3) M/S. GOVIND KARSAN PATEL & CO. 4) M/S. TEJAS TIMBER AND 5) M/S. V.G PATEL 4.1 THE DETAILS OF TRANSACTION ENTERED INTO BY THE ASSESSEE WITH THE SAID PARTIES AS SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNT DID N OT TALLY WITH THE DETAILS OF TRANSACTION FURNISHED BY THE SAID PARTIES. THE AO, THEREFORE, REQUIRED THE ASSESSEE TO SHOW-CAUSE AS TO WHY NECESSARY ADDITIONS ON A/C OF SUCH DISCREPANCIES SHOULD NOT BE MADE. 4.2 IT WAS ALSO NOTICED BY THE AO THAT THE ASSESSEE PURCHASED GOODS FROM 41 DIFFERENT PARTIES SITUATED OUTSIDE WEST BENGAL MAINLY IN NAGP UR, ALLAHABAD, RAIPUR ETC. AND THE ENTIRE PURCHASES WERE MADE IN CASH. THE ASSESSEE, WAS, THEREFORE, ASKED TO SHOW-CAUSE AS TO WHY NECESSARY DISALLOWANCE U/S.40A(3) SHOULD NOT BE MADE. 4.3 THE REPLY OF THE ASSESSEE WAS AS UNDER:- IN REPLY TO YOUR NOTICE NO. AC.CIR-38/KOL./2006-07 DATED 30.11.2006, WE LIKE TO SUBMIT BE YOU THE FOLLOWING FACTS :- 1. THE NATURE OF OUR BUSINESS IS SUCH THAT ANY AMOU NTS RECEIVED FROM ANY CUSTO HAPPEN ALWAYS TO BE IN CASH. IN OUR BOOKS OF ACCOUNTS ACCORDINGLY THE RECEIPTS I BEEN SHOWN. BUT THE BOOKS OF AMBIKA INDUSTRIES AND N.J.PLYWOOD PRODUCTS MAY HAVE SHOWN THE PAYMENTS MA DE BY THEM IN INSTALLMENTS DIFFERENT FROM SHOWN BY US FOR REASONS NOT KNOWN TO US. 2. IN CASE OF GOVIND KARSAN PATEL & CO. IT IS A FAC T THAT WE HAVE MADE THEN, PAYMENTS BY DEMAND DRAFT ONLY WHICH HAVE BEEN WRONGLY SHOWN AS CASH PAY IN OUR BOOKS OF ACCOUNTS DUE TO MISPLACEME NT OF THE DD SLIPS. IT MAY BE NOTED ALL PAYMENTS MADE BY US TOWARDS PURCHA SES MADE FROM THE 41 DIFFERENT PARTIES I BEEN THROUGH DD ONLY. IF YOU BE KIND ENOUGH TO GIVE US SOME TIME, WE BELIEVE WILL BE ABLE TO LOCATE THE MISPLACED DD SLIPS AND PRODUCED THE SAME BEFORE YOU WE HOPE THE POSITION HAS BEEN MADE CLEAR TO YOU. ITA NO.126/KOL/2010-BKH 3 4.4 HOWEVER, AS THE ASSESSEE DID NOT FILE ANY RECO NCILIATION TOGETHER WITH DOCUMENTARY EVIDENCE THE AO DID NOT ACCEPT THE EXPL ANATION FURNISHED BY THE ASSESSEE AND MADE THE FOLLOWING ADDITIONS :- A. U/S. 40A(3) 20% OF RS.97,90,471/- RS.19,58,094/- B. UNDISCLOSED SALES RS. 9,79,576/- C. UNDISCLOSED PURCHASE RS. 15,36,124/- D. UNDISCLOSED CASH CREDIT U/S. 68 RS.17,74,558 5. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE L D.CIT(A). 6. THE LD.CIT(A) HAS DISCUSSED THE ADDITIONS MADE B Y THE AO IN DETAILS. FIRST ADDITION MADE BY THE AO IS ON A/C OF UNDISCLOSED SA LES MADE TO M/S.AMBICA INDUSTRIES. THE LD.CIT(A) HAS NOTED THAT TOTAL SALES MADE TO M/ S. AMBICA INDUSTRIES AS SHOWN BY THE ASSESSEE IN ITS BOOKS OF A/C AMOUNTS TO RS.5,22,721 /-. THIS FIGURE TALLIES WITH THE PURCHASE DISCLOSED BY M/S. AMBICA INDUSTRIES. HOWEV ER, M/S. AMBICA INDUSTRIES HAD SHOWN AN OUTSTANDING BROUGHT FORWARD BALANCE AMOUN TING TO RS.9,79,576/- WHICH IS NOT REFLECTED IN THE ACCOUNTS OF M/S. AMBICA INDUSTRIES IN THE BOOKS OF THE APPELLANT. HE, THEREFORE, CONCLUDED THAT THIS AMOUNT OF RS.9,79,57 6/- COULD NOT BE BROUGHT TO TAX AS UNDISCLOSED SALES IN THE AY UNDER CONSIDERATION. 6.1 SIMILARLY FROM DETAILED DISCUSSION ON THE ISSU E OF ADDITIONS OF UNDISCLOSED PURCHASE OF RS.15,36,124/- AND UNEXPLAINED CASH CR EDIT OF RS.17,74,558/-, THE LD.CIT(A) CAME TO THE CONCLUSION THAT THE VERACITY OF THE ENTIRE BOOKS OF THE ASSESSEE WAS IN DOUBT. THUS, HE REJECTED THE BOOKS OF ACCOU NT OF THE ASSESSEE U/S.145 OF THE ACT AND PROCEEDED TO ESTIMATE THE INCOME OF THE ASSESS EE ON THE BASIS OF INFORMATION CALLED FROM THE AO IN RESPECT OF PROFIT PERCENTAGE DISCLO SED BY OTHER APPELLANTS IN THE SIMILAR LINES OF TRADE. 6.2 TAKING INTO CONSIDERATION THE TURNOVER OF THE ASSESSEE HE WORKED OUT THE GP RATE OF SIMILAR BUSINESS AT 13.40%. HOWEVER, WHILE ES TIMATING THE GP RATE TO BE APPLIED IN ASSESSEES CASE, THE LD.CIT(A) TOOK THE AVERAGE OF GP OF SIMILAR BUSINESS AND THAT ACTUALLY DISCLOSED BY THE ASSESSEE, WHICH WORKED OUT TO. 8%. ACCORDINGLY, GROSS PROFIT OF THE ASSESSEE WAS WORKED OUT TO RS.8,99,830/- . A FTER ALLOWING THE EXPENSES CLAIMED BY THE ASSESSEE IN THE P & L ACCOUNT THE NET PROFIT OF THE ASSESSEE WAS WORKED OUT AT RS.6,40,000/-. HE, THUS, ALLOWED A RELIEF OF RS.36, 50, 258/- ON THIS ACCOUNT. ITA NO.126/KOL/2010-BKH 4 6.3 AS REGARDS THE ADDITION OF RS.19,58,094/- U/S.4 0A(3) OF THE ACT, THE LD.CIT(A) DELETED THE SAME RELYING ON THE DECISION OF THE HO NBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. BANWARILAL BANSHIDHAR REPORTED I N 229 ITR 229. 7. AGGRIEVED THE REVENUE HAS FILED APPEAL BEFORE TH E TRIBUNAL. 8. BEFORE US THE LD.DR HAS RELIED ON THE ORDER OF T HE AO. IT WAS FURTHER SUBMITTED BY HIM THAT THE LD.CIT(A) SHOULD HAVE AT LEAST APPLIE D THE GP RATE OF 13.40% AND NOT THE AVERAGE OF GP IN SIMILAR BUSINESS AND THAT ACTUALL Y DISCLOSED BY THE ASSESSEE (13.40 +2.48)/2 9. WE HAVE HEARD THE LD.DR AND PERUSED THE RECORD. WE ARE IN AGREEMENT WITH THE SUBMISSION OF THE LD.DR THAT THE LD.CIT(A) SHOULD H AVE APPLIED THE GP RATE @13.40%. ACCORDINGLY, THE GP OF THE ASSESSEE IS WORKED OUT T O RS.15,07,200/-. ALLOWING THE EXPENSES CLAIMED IN THE P & L ACCOUNT AMOUNTING TO RS.2,69,686/-, THE NET PROFIT OF THE ASSESSEE IS WORKED OUT TO RS.12,37,500/-. 10. AS REGARDS THE DELETION OF ADDITION U/S.40A(3) OF THE ACT, NO BINDING DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OR SUPREME CO URT HAS BEEN BROUGHT TO OUR NOTICE. IN THIS VIEW OF THE MATTER, GROUND TAKEN BY THE RE VENUE BEING GROUND NO. 4 IS REJECTED. 11. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWE D IN PART. . THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 21-0 2-2011 SD/- SD/- (. . ), ( ..$ ), % , (D.K.TYAGI), JUDICIAL MEMBER. ) (B.K.HALDAR, ACCOUNTANT MEMBER) %) DATE :21-02-2011 *PP / SR. PRIVATE SECRETARY : 2 3 /''4 54*6- COPY OF THE ORDER FORWARDED TO: 1. (-. / APPELLANT ) : DCIT,CIR-38, 18 RABINDRA SARANI, PODDAR COURT, 8 TH FL., KOL-700001. 2. ( /-./ RESPONDENT) : M/S. UJJAL & CO. 19 JORABAGAN ST, KOL -700 006. 3. '2( ( )/ THE CIT(A) 4. '2( ( )/ THE CIT 5. '8' /'( / DR, KOLKATA BENCH 6. GUARD FILE 4 /'/ TRUE COPY, 2(9/ BY ORDER, $ #: / ASST T. REGISTRAR