ITO, Ward - 2(3), Hooghly V. Sailendra Nath Sadhukhan, Hooghly

ITA 1295/KOL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48225 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2011
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 24-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 28-07-2009
• Court: TRIBUNAL
• Department Lawyers: S M SURANA LD
• Assessee Lawyers: A K PRAMANIK LD
• Keywords: Income from undisclosed sources
• Section: 40A(3); 143(3)

Judgement Text

ITA NO.1268,1023,1777 &1 295/KOL/2009 SRI SAILENDRA NATH SADHUKHAN, AY 2004-05, 05-06 & 0 6-07 1 , B IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH : KOLKATA BEFORE HON. SRI MAHAVIR SINGH, JM & HON. SRI C.D. RAO, AM () , . !., , , , '# $ / I.T.A NOS. 1268, 1023 & 1777/KOL/2009 %& '( / ASSESSMENT YEARS : 2004-05, 05-06 & 06-07 SAILENDRA NATH SADHUKHAN VS. INCOME-TAX OFFICER PAN : AKKPS-5514P WARD 2(3), HOOGHLY (*+ /APPELLANT ) (,-*+/ RESPONDENT ) & $ / I.T.A NO.1295/KOL/2009 %& '( / ASSESSMENT YEAR : 2005-06 INCOME-TAX OFFICER VS. SAILENDRA NAT H SADHUKHAN WARD 2(3), HOOGHLY PAN: AKKPS-5514P ( DEPARTMENT ) ( ASSESSEE ) *+ / FOR THE APPELLANT/ASSESSEE : . / SHRI S.M SURANA, LD. AR ,-*+ / FOR THE RESPONDENT/DEPARTMENT : . / SHRI A.K.PRAMANIK, LD.DR '/ / ORDER , SHRI MAHAVIR SINGH, JUDICIAL MEMBER : THESE THREE APPEALS BY ASSESSEE AND ONE BY REVENU E ARE ARISING OUT OF SEPARATE ORDERS OF CIT(A)-XXXVI, KOLKATA IN APPEAL NOS.06/KO L/CIT(A)-XXVI/ AKKPS5514P/2005-06, 20/KOL/CIT(A)-XXXVI/AKKPS5514P/ 2007-08, 21/KOL/ CIT (A)-XXXVI/AKKPS5514P/2005-06 AND 20/KOL/CIT(A)-XXXV I/AKKPS5514P/2007- 08 VIDE DATED 27-02-2009, 23-03-2009, 29-07-2009 AN D 23-03-2009 RESPECTIVELY. ASSESSMENTS WERE FRAMED BY THE I.T.O, WARD 2(3), HO OGHLY FOR ASSESSMENT YEAR 2004- 05 U/S. 143(3) OF THE INCOME TAX ACT, 1961 , FOR AYS. 2005-06 & 2006-07 U/S. 147/143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT) VIDE HIS ORDERS DATED 26-12-2006 (FOR AY 2004-05) AND 31-12-2007 (FOR 20 05-06 AND 2006-07). ITA NO.1268,1023,1777 &1 295/KOL/2009 SRI SAILENDRA NATH SADHUKHAN, AY 2004-05, 05-06 & 0 6-07 2 2. THE FIRST COMMON ISSUE IN THESE THREE APPEALS OF ASSESSEE IS AS REGARD TO ADDITION MADE BY AO AND CONFIRMED BY CIT(A) ON ACCOUNT OF PU RCHASE MADE OUTSIDE BOOKS OF ACCOUNT TREATING THE SAME AS UNACCOUNTED PURCHASES . FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS FOR THE ASSESSMENT YEAR S 2004-05, 2005-06 & 2006-07:- A.Y 2004-05: 2. FOR THAT THE LD.CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.45,99,773/- FOR PURCHASE OUT SIDE THE BOOKS WHEN IT WAS PROVED THAT THERE WAS NO PURCHASE OUTSIDE BOOKS, THE GOODS OF THE SAID VALUE WAS KEPT BY THE PARTY WITH THE APPELLANT FOR SALE ON THEIR BEHALF WHICH WAS SOLD AND AS SUCH THERE WAS NO INVE STMENT NOR ANY QUESTION OF PURCHASE OF ANY MATERIAL. 3. FOR THAT EVEN OTHERWISE THE LD.CIT(A) ERRED IN C ONFIRMING THE ADDITION OF THE ENTIRE AMOUNT OF RS. 45,99,773/- WH EN THERE WAS NO EVIDENCE TO SHOW THAT THE ASSESSEE MADE ANY INVESTM ENT FOR ANY PURCHASE OF GOODS. 4. FOR THAT THE LD.CIT(A) ERRED IN CONFIRMING THE A DDITION OF THE ENTIRE SUM OF RS.45,99,773/- WHEN AT BEST THE NET P ROFIT ON SUCH PURCHASE SHOULD HAVE BEEN ADDED. A.Y 2005-06 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORDER OF THE ASSESSIN G OFFICER ADDING BACK THE AMOUNT OF ALLEGED UNDISCLOSED CASH LOAN O F RS.4,14,516/- WITHOUT APPRECIATING THAT THE SO-CALLED CASH LOANS HAD BEEN DULY RECORDED IN THE SEIZED BOOKS AS PURCHASES AND SALES ONLY. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN NOT ONLY UPHOLDING THE ORDER OF TH E ASSESSING OFFICER ADDING BACK THE AMOUNT OF RS.62,691/- ON A CCOUNT OF ALLEGED UNEXPLAINED PURCHASES BUT ALSO IN ENHANCIN G THE SAME TO RS.11,85,380/- WITHOUT EVEN ISSUING ANY PROPER NOT ICE FOR ENHANCEMENT. A.Y 2006-07: ITA NO.1268,1023,1777 &1 295/KOL/2009 SRI SAILENDRA NATH SADHUKHAN, AY 2004-05, 05-06 & 0 6-07 3 2 FOR THAT THE LD.CIT(A) ERRED IN CONFIRMING THE A DDITION OF RS.1434595/- ON ACCOUNT OF GROSS PROFIT AND SHOULD HAVE LOOKED INTO THE FACTS AND CIRCUMSTANCES OF THE CASE AS EXP LAINED. 3. FOR THAT EVEN OTHERWISE THE LD.CIT(A) ERRED IN C ONFIRMING THE ADDITION OF RS.1434595/- BEING THE DIFFERENCE CALC ULATED IGNORING EXPLANATION AND FURTHER THERE WAS NO REASON TO TREA T THE ENTIRE DIFFERENCE BETWEEN SALE AND PURCHASE AS INCOME FROM UNDISCLOSED SOURCES AS GROSS PROFIT. 5. FOR THAT THE LD.CIT(A) ERRED IN CONFIRMING THE A DDITION OF RS.414360/- BEING LOAN GIVEN AS UNDISCLOSED ASSET WHEN SUCH PAYMENTS WERE OUT OF THE BALANCES AVAILABLE IN THE BOOKS AND CANNOT BE TREATED AS UNDISCLOSED ASSET. 6. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE ADDITION OF RS.414360/- WAS JUSTIFIED. 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STAT ED IN REGARD TO ADDITION OF UNDISCLOSED INCOME MADE ON THE GROUND OF PURCHASES OUTSIDE THE BOOKS OF ACCOUNT AND BOOKS OF ACCOUNT IMPOUNDED DURING SURVEY U/S.133A OF THE ACT ON 26-11-06. THE LD. COUNSEL FOR THE ASSESSEE ALSO STATED THAT IN THE FIRST AY I.E. 2004-05, ASSESSEE PRODUCED A LETTER RECEIVED FROM M/S PIRATALI S.K.U.S LTD BEFORE AO AN D EVEN BEFORE CIT(A), WHICH CAN BE VERIFIED FROM THE ORDERS AO AND LD.CIT(A). RELEVANT LETTER READS AS UNDER: TRANSLATION OF BENGALI LETTER BY M/S. PIRATALI S.K .U.S. LTD. TO MIS. SAILENDRA NATH SADHUKHAN, PANDUA, HOOGHLY. DATE 21.07.2003 TO, MIS, S. N. SADHUKHAN, PANDUA, HOOGHLY . SIR, YOU ARE HEREBY INFORMED THROUGH THIS LETTER THAT TH E FERTILIZERS WHICH WERE DAMAGED DUE TO FLOOD IN THE LAST YEAR WE RE SENT TO YOUR GODOWN. UNDER THIS CIRCUMSTANCES, AS PER YOUR REQUE ST, YOU HAVE REQUESTED US TO GIVE PERMISSION TO SALE THE FERTILI ZERS IN RETAIL. ACCORDINGLY ON THE LAST MEETING DATED 19.07.2003, T HE EXECUTIVE COMMITTEE OF THE SOCIETY, YOU ARE HEREBY INFORMED T HAT YOU CAN SALE TO ITA NO.1268,1023,1777 &1 295/KOL/2009 SRI SAILENDRA NATH SADHUKHAN, AY 2004-05, 05-06 & 0 6-07 4 CULTIVATORS ON OUR BEHALF THROUGH A MASTER ROLE AND SEND THE SALE VALUE TO OUR SOCIETY. YOU SHALL HANDOVER THE MASTER ROLE TO OUR OFFICE AF TER SALE OF THOSE FERTILIZERS. MAY IT BE NOTED THAT YOU WILL NO T BE ENTITLED TO ANY PROFIT OR COMMISSION OR ANY OTHER BENEFITS ON ACCOU NT OF THOSE SALES. THOSE BENEFITS ARE FOR RETAIL CULTIVATORS ONLY. THANKING YOU, YOURS FAITHFULLY, DATED: 21.07.2003 SD/ FOR M/S. P1RATALI S.K.U.S. LTD. ASSESSEES REPLY IS AS UNDER:- TRANSLATION OF BENGALI LETTER BY SAILENDRA NATH S ADHUKHAN TO THE SECRETARY, PIRATALI S.K.U.S LTD. DATED 11.07.2OO3 TO, THE MANAGER, PIRATALI S.K.U.S LTD . S R, I STATE HEREBY FOR YOUR INFORMATION THAT THE FERTIL IZER DAMAGED DUE TO FLOOD IN THE LAST YEAR, WHICH YOU SE NT TO MY GODOWN COULD NOT BE SOLD TO DEALERS, IN SUCH CIRCUM STANCES, THOSE FERTILIZERS CAN BE SOLD TO GENERAL CULTIVATOR S AND SEND THE MONEY TO YOU. BUT AS I DO NOT POSSESS LICENSE TO RE TAIL SALE TO CULTIVATORS, I MAY BE PERMITTED TO SALE THOSE FERTI LIZERS THROUGH A MASTER ROLE AND I CAN SEND THE SALE PRICES TO YOU . IN THE ABOVE CIRCUMSTANCES, I REQUEST YOU TO GIVE P ERMISSION TO RETAIL SALE THOSE FERTILIZERS THROUGH MASTER ROLE FOR WHICH ACT OF KINDNESS, ISHALL REMAIN EVER GRATEFUL. THANKING YOU, YOURS FAITHFULLY, SD/- BASUDEB GHOSH, MANAGER PIRATALI S.K.U.S. LTD. 11.07.2003 (S. N. SADHUKHAN) 4. THE LD. COUNSEL FOR THE ASSESSEE, AT THE TIME OF HEARING, DREW OUR ATTENTION TO THE RECONCILIATION OF STOCK AND SALES STATEMENT COMPUT ED BY ASSESSEE, WHICH IS AT PAGES 7 & 8 OF ASSESSEES PAPER BOOK, AS UNDER:- ITA NO.1268,1023,1777 &1 295/KOL/2009 SRI SAILENDRA NATH SADHUKHAN, AY 2004-05, 05-06 & 0 6-07 5 M/S. SAILENDRA NATH SADHUKHAN BENEPARA, KALNA ROAD, P.O PANDUA, DIST, HOOGHLY COMPUTATION OF GROSS PROFIT-F.Y 2003-2004 AY 2004-0 5 HEADS FINDING OF I.T.O AS PER FIGURE STATEMENT PREPARED AS PER RETURN OPENING BALANCE 87,220.00 87,220.00 PURCHASE 1,31,23,638.00 1,28,88,613.00 82,88,840.00 SALES 1,11,02,408.00 1,30,21,298.00 85,34,428.00 CLOSING STOCK 30,92,534.00 44,032.00 44,032.00 GROSS PROFIT 52,75,540.00 89,497.00 2,02,400.00 GROSS PROFIT % 47.52% 0.68% 2.37% M/S. SAILENDRA NATH SADHUKHAN BENEPARA, KALNA ROAD, P.O PANDUA, DIST, HOOGHLY SALES STATEMENT PREPARED FOR THE YEAR 2003-2004 AY 2004-05 L.F NO NAME OF THE PARTY AS PER ITO AS PER RETURN ADDITION AL SALES TO BE UPTO A/C 54/25 G.P TRADERS 14,32,000.00 14,31,286.00 54/21 GOURI SHANKAR KUNDU 25,21,300.00 34,12,950.00 891650.00 54/27 BEURI S.K.U.S LTD 1,02,743.00 1,02,743.00 54/29 SHIB DAS PAN 3,30,500.00 4,30,500.00 1,00,000 .00 54/32 NEPAL CH KUNDU 2,47,225.00 2,47,225.00 54/34 NEMAL CH. KUNDU 1,39,830.00 - 54/40 PARIKSHIT NANDY 7,14,940.00 7,14,940.00 54/57 SANJOY KUNDU 5,81,145.00 5,81,145.00 54/42 RAMEN MONDAL 46,800.00 - 54/44 PAIKARA-O-RUDRA SANDADA S.K.U.S LTD 55,500.00 - 53/83 SORUB UDDIN SARKAR 1,23,005.00 3,65,135.00 2, 42,130.00 51/51 JAYANTA DAS 3,00,595.00 3,00,595.00 53/78 S.K.PATU 3,89,325.00 - 6,85,110.00 54/52 EBED ALI 6,46,985.00 6,46,985.00 53 RATTAN DHOLEY 79,100.00 - 53 SITARAM SHAW 74,720.00 - 53/94 BHOLANATH ROY 318925.00 3,00,924.00 53 AKAS ALI MONDAL 41,450.00 - 53 ABHAYA CH. SADHUKHAN 1,56,800.00 - 53 GOUR SADHAN NANDY 3,77,245.00 - ITA NO.1268,1023,1777 &1 295/KOL/2009 SRI SAILENDRA NATH SADHUKHAN, AY 2004-05, 05-06 & 0 6-07 6 53 KASHI NATH KUNDU 1,64,500.00 - 53. KANAL GHOSH 9,18,245.00 - 53 MRITYUNJOY SADHUKHAN 11,35,900.00 - 53 MAHADEB DHALI 1,20,500.00 - 53 MANIK SADHUKHAN 87,070.00 1,11,02,408 8534428.00 1918890.00 5. IN VIEW OF THIS, THE LD. COUNSEL FOR THE ASSESSE E ALSO DREW OUR ATTENTION TO THE RECONCILIATION STATEMENT AND FOR TEST CHECK BASIS H E DREW OUR ATTENTION THAT THERE IS A DISCREPANCY IN THE LEDGER FOLIO 54/21 IN THE CASE O F GOURI SHANKAR KUNDU, WHEREIN AS PER RETURN, ASSESSEE HAS DECLARED ITS SALES AT RS.34,12 ,950/- AS AGAINST DETERMINED BY AO AT RS.25,21,300/-. CONSEQUENTLY, THERE IS A DIFFERENCE OF RS. 8,91,650/- AND TO THAT EXTENT, ASSESSEES SALE WILL BE AN ADDITIONAL SALE. 6. IN VIEW OF THIS DISCREPANCY, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THIS ISSUE REQUIRES RECONSIDERATION AT THE LEVEL OF THE AO AS THESE FIGURES ARE REQUIRED TO RECONCILE IN VIEW OF RECONCILIATION STATEMENT SUBMITTED BY ASSES SEE. ON QUERY FROM THE BENCH LD. SR. DR COULD NOT POINT OUT ANY INSTANCE THAT AO OR CIT( A) HAS CONSIDERED THESE FACTS AND DOCUMENTS DESPITE THE FACT THESE WERE REFERRED BY T HE ASSESSEE. 7. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE C ASE, WE ARE OF THE VIEW THAT THIS ENTIRE ISSUE IN ALL THESE THREE AYS UNDER CONSIDERA TION IS REQUIRED TO BE SET ASIDE. HENCE, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO AND A O WILL DECIDE THE ISSUE DE NOVO FOR ALL THESE THREE ASSESSMENT YEARS AFTER CONSIDERING THE RECONCILIATION STATEMENT SUBMITTED BY ASSESSEE. ACCORDINGLY, THIS ISSUE IS SET ASIDE TO T HE FILE OF AO AND HE WILL FRAME DE NOVO ASSESSMENT ON THIS ISSUE. 8. THE NEXT COMMON ISSUE IN THESE THREE APPEALS OF ASSESSEE IS AGAINST THE ORDERS OF CIT(A) CONFIRMING THE DISALLOWANCE MADE BY AO U/S.4 0A(3) OF THE ACT. FOR THIS, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- ITA NO.1268,1023,1777 &1 295/KOL/2009 SRI SAILENDRA NATH SADHUKHAN, AY 2004-05, 05-06 & 0 6-07 7 A.Y 2004-05 : 5. FOR THAT THE LD.CIT(A) ERRED IN CONFIRMING THE A DDITION OF RS.5,01,756/- BY APPLYING SECTION 40A(3) OF THE I. T ACT 1961 WHEN THE PAYMENTS WERE GENUINE PAYMENTS MADE FOR PURCHA SE OF GOODS WHICH WAS NOT DISPUTED IN SOME CASES THE PAYMENT WAS LESS THAN 20,000/- IN A DAY AND EVEN OTHERWISE THE PROVISION OF SECTION 40A(3) WERE NOT APPLICABLE. A.Y 2005-06 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORDER OF THE ASSESSIN G OFFICER MAKING DISALLOWANCE U/S. 40A(3) OF THE ACT, TO THE EXTENT OF RS.42,92,087/- A.Y 2006-07 4. FOR THAT THE LD.CIT(A) ERRED CONFIRMING THE ADD ITION OF RS.245656/- U/S.40A(3) WHEN THE PAYMENT WERE GENUI NE AND WERE MADE AS PER BUSINESS EXPEDIENCY FOR WHICH THE CONFI RMATION LETTERS WERE ALSO FILED. 9. LD. COUNSEL FOR THE ASSESSEE STATED THAT NEITHER AO NOR CIT(A) HAS GONE INTO THE DETAILS SUBMITTED BY ASSESSEE, WHEREIN ASSESSEE HAS MADE PAYMENTS IN SEVERAL INSTALLMENTS AND AO TOOK ENTIRE PURCHASES AS ONE ITEM AND MADE D ISALLOWANCE BY INVOKING PROVISION OF SECTION 40A(3) OF THE ACT. HENCE, LD. COUNSEL FOR T HE ASSESSEE STATED THAT THIS ISSUE NEEDS RECONSIDERATION AT THE LEVEL OF AO. ON QUERY FROM THE BENCH, LD. SR. DR IN ALL FAIRNESS AGREED FOR THE SAME. WE, IN THE INTEREST OF JUSTICE AND AS THE AO HAS NOT VERIFIED WHETHER THE PAYMENT IS ONE INSTALLMENT OR SEVERAL INSTALL MENTS FOR THE PURCHASES MADE, REFER THE MATTER TO THE FILE OF AO. HENCE THIS ISSUE IS ALSO SET ASIDE TO THE FILE OF AO. 10. COMING TO THE REVENUES APPEAL BEING ITA NO.1 295/KOL/09 FOR THE A.Y 2005-06. WE FIND THAT ON THE SAME UNACCOUNTED PURCHASES THE CI T(A) HAS DIRECTED TO ADOPT THE GROSS PROFIT AT RS. 4,41,937/- AS AGAINST THE ENTIRE ADDI TION AND ANOTHER ISSUE IN THE REVENUES APPEAL IS IN REGARD TO DELETION OF ADDITION MADE BY THE AO U/S.40A(3) AT RS.95,400/-. 11. SINCE THESE ISSUES ARE INTER-CONNECTED WITH ASS ESSEES APPEAL BEING ITA NO.1023/KOL FOR THE A.Y 2005-06, THIS ISSUE IS ALSO SET ASIDE TO THE FILE OF AO FOR RECONSIDERATION. ITA NO.1268,1023,1777 &1 295/KOL/2009 SRI SAILENDRA NATH SADHUKHAN, AY 2004-05, 05-06 & 0 6-07 8 12. IN THE RESULT, ALL THE THREE APPEALS OF ASSESSE E AND APPEAL OF REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. '/ #0' 1 0% 2 3 !# ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- [ . !., , , , '# ] [ , ] C.D. RAO, ACCOUNTANT MEMBER MAHAVIR SINGH, JUDICIAL MEMBER (!#) DATED : 22 -06-2011 *PP 45 %67 8 /SR.P.S. '/ 9 ,: ;':'<- COPY OF THE ORDER FORWARDED TO: 1 . *+ /APPELLANT- DR. SAILENDRA NATH SADHUKHAN,BENEPARA , KALNA ROAD, P.O PANDUA,DIST:HOOGHLY-712149. 2 ,-*+ / RESPONDENT : INCOME TAX OFFICER WARD 2(3), HOOGHL Y 3 . /% / THE CIT, 4 . /% ( )/ THE CIT(A), KOLKATA 5 . C2 ,% / DR, KOLKATA BENCHES, KOLKATA -: ,/ TRUE COPY , '/%0/ BY ORDER , 7 /ASSTT. REGISTRAR