ITO, Ward - 34(3), Kolkata, Kolkata V. Dhanpat Singh Dugal, Kolkata

ITA 1306/KOL/2010

• Counselvise Citation: 130623514 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K ROY
• Assessee Lawyers: V K SINGHI; R SAHA
• Keywords: Business income; Period of limitation; Reasonable cause
• Section: 133(6)

Judgement Text

, , , , , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [ . . . . . . . . , ,, , , ,, , . . . . . .. . ! ! ! ! , ' ' ' ' ] [BEFORE HONBLE SHRI B. R. MITTAL, JM & HONBLE SHRI S.V. MEHROTRA, AM] #$ #$ #$ #$ / I.T.A NO. 1306/KOL/2010 %& '() %& '() %& '() %& '()/ // / ASSESSMENT YEAR : 2006-07 INCOME TAX OFFICER/WARD-34(3) -VS.- DHANPAT SINGH DUGAR KOLKATA. KOLKATA, [PAN : ADPPD 7766 G] [ +, +, +, +, /APPELLANT ] ]] ] [ ./+, ./+, ./+, ./+,/ // / RESPONDENT ] ]] ] +, +,+, +, / FOR THE APPELLANT : SHRI S. K. ROY ./+, ./+, ./+, ./+, / FOR THE RESPONDENT : S/SHRI R. SAHA & V. K . SINGHI 0 /ORDER . . . . . .. . ! ! ! ! , ' ' ' ' PER S. V. MEHROTRA, A. M. THE ASSESSEE HAS PREFERRED THIS APPEAL FOR ASSESSM ENT YEAR 2006-07 AGAINST THE ORDER OF LD. CIT(A)-XX, KOLKATA DATED 25.03.2010. 2. THE DEPARTMENT HAS FILED THIS APPLICATION WHICH IS TIME BARRED BY 03 DAYS. IN THE CONDONATION PETITION DATED 23.06.2010, IT IS, INTER ALIA, STATED THAT DELAY OF 02 DAYS DATED 21 ST & 22 ND JANUARY, 2010 WAS CAUSED AS FORM NO.35 COULD NOT B E COLLECTED TIMELY. THE ASSESSEE VIDE REPLY DATED 12.07.2010 HAS OBJECTED TO CONDONATION, INTER ALIA, POINTING OUT THAT FORM OF FILING APPEAL IS ALWAYS AVAILABLE IN THE WEB SITE OF THE I NCOME TAX DEPARTMENT. 3. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE RECORD OF THE APPEAL. IN OUR OPINION, ON ACCOUNT OF NON-AVAILABIL ITY OF FORM NO.35, THE DEPARTMENT WAS PREVENTED BY REASONABLE CAUSE FROM FILING APPEAL WI THIN THE STATUTORY PERIOD OF LIMITATION. CONSIDERING THE FACT THAT DELAY IS OF 03 DAYS ONLY, IN VIEW OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. WEST BENGAL INFRASTRUCTURE D EVELOPMENT CORPN. LTD. [2011] 196 TAXMAN 321 (SC), WE CONDONE THE DELAY AND PROCEED TO DECID E THE APPEAL ON MERITS. ITA NO. 1306/KOL/2010 2 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, P ROPRIETOR OF M/S. OXYWELD ENGINEERS, IN THE RELEVANT ASSESSMENT YEAR, WAS ENGAGED IN THE BUSINE SS AS SUPPLIER OF WELDING, ENGINEERING & INDUSTRIAL STORES AS WELL AS SERVICE MAINTENANCE. H E HAD FILED RETURN OF INCOME SHOWING TOTAL INCOME OF RS.2,96,179/-. THE ASSESSMENT WAS COMPLET ED AT A TOTAL INCOME OF RS.27,59,690/- AFTER MAKING FOLLOWING DISALLOWANCES :- (I) ADD : TRAVELLING & FREIGHT EXPENSES RS. 2,74 ,616/- DISALLOWED. (II) ADD : SUNDRY CREDITORS RS.21,88,893/- LD. CIT(A) DELETED THE DISALLOWANCES AFTER CONSIDER ING THE REMAND REPORT. 5. BEING AGGRIEVED, DEPARTMENT IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT (APPEALS) ERRED IN DELETING THE SUNDRY CREDITORS OF RS.7,48,705/-. THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE EVEN AT REMAND STAGE TOO, THAT THESE SUNDR Y CREDITORS EXISTED INSPITE OF MATERIALS BROUGHT ON RECORD SHOWING THAT THERE WAS NO EXISTENCE OF THESE SUNDRY CREDITORS. II) ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE LD. CIT (APPEALS) ERRED IN DELETING THE BOGUS AND NON-EXISTING SUNDRY CREDITS OF RS.30,970/- INSPITE OF CLEAR STATEMENT FROM THREE PARTIES THAT THEY HAD NEVER KN OWN THE ASSESSEE OR HIS PROPRIETARY CONCERN & THEY HAD NO DUES RECEIVABLE F ROM THE ASSESSEE AS ON 31.03.07. III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT (APPEALS) FAILED TO DIRECT AS TO IN WHICH ASSESSMENT YEAR THE BOGUS AND / OR N ON-EXISTING SUNDRY CREDITORS SHOULD BE ADDED. IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT (APPEALS) FAILED TO CONSIDER THAT SUNDRY CREDITOR LIABILITY INCLUDING T HAT OF RS.30,970/- NEVER EXISTED & HENCE THESE UNCLAIMED LIABILITY CEASED TO EXIST. V) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD CIT (APPEALS) ERRED IN DELETING THE DISALLOWANCES OF RS.2,74,616/-. THE AS SESSEE HAD THE PRIMARY ONUS OF PROVIDING THE CORRECTNESS & GENUINENESS OF THE E XPENSES WHICH HE FAILED TO DO. VI) THE APPLICANT CRAVES TO ADD AND/OR ALTER THE G ROUNDS OF APPEAL WITH THE LEAVE OF THE HONOURABLE TRIBUNAL. 6. BRIEF FACTS APROPOS GROUND NO.(I) TO (IV) ARE TH AT ASSESSING OFFICER NOTICED FROM BALANCE SHEET AS ON 31.03.2006 THAT THERE WERE SUNDRY CREDI TORS OF GOODS AND EXPENSES TO THE TUNE OF RS.60,84,864/-. HE REQUIRED THE ASSESSEE TO FURNISH THE NAMES AND ADDRESSES OF THE SUNDRY ITA NO. 1306/KOL/2010 3 CREDITORS AND AMOUNTS DUE AS ON 31.03.2006. THE ASS ESSEE FILED HUGE LIST OF PERSONS WHO WERE SUNDRY CREDITORS AS ON 31.03.2006 AND POINTED OUT T HAT MOST OF THEM WERE VERY OLD. ASSESSING OFFICER ISSUED NOTICES U/S. 133(6) BY REGISTERED/SP EED POST TO SOME OF THEM ON GIVEN ADDRESSES. BUT, OUT OF THE LETTERS ISSUED, 178 LETTERS CAME BA CK, AS THE PERSONS COULD NOT BE FOUND BY THE POSTAL AUTHORITY AT THE GIVEN ADDRESSES WITH THE RE MARK NOT KNOWN. HE FURTHER OBSERVED THAT 03 PERSONS REPLIED STATING THAT THEY DID NOT HAVE ANY TRANSACTION WITH THE ASSESSEE AND HAD NIL BALANCE AS ON 31.03.2006 WITH THE ASSESSEE. ASSESSI NG OFFICER CONFRONTED WITH THE INFORMATION OBTAINED FROM THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE AND POINTED OUT THAT HE COULD NOT FURNISH THEIR CORRECT/CURRENT ADDRESSES AND ALSO CO ULD NOT EXPLAIN WHY THE PERSONS COULD NOT BE FOUND BY THE POSTAL AUTHORITY. HE FURTHER OBSERVED THAT IN THE LIST OF SUNDRY CREDITORS, IN SOME CASES, THE ASSESSEE HAD SHOWN TO HAVE REPAID THOSE PERSONS IN CASH AFTER 31.03.2006 BUT NO SUCH PROOF OF PAYMENT WAS EVER FILED OR PRODUCED. TAKING NOTE OF THE FACT THAT TOTAL NUMBER OF RETURNED LETTERS WAS 178 AND THE SUNDRY CREDIT BALANCE FOR T HESE 178 PERSONS WAS RS.21,57,923/- AND FURTHER TAKING NOTE OF THE FACT THAT 03 PERSONS HAD CATEGOR ICALLY DENIED EVEN KNOWING OR HAVING TRANSACTIONS WITH THE ASSESSEE AGGREGATE TO RS.30,9 70/-, MADE DISALLOWANCE OF RS.21,88,893/-. BEFORE LD. CIT(A), IT WAS CONTENDED THAT LIST OF 17 8 AND STATEMENT OF 03 CREDITORS WAS NEVER SUPPLIED BY THE ASSESSING OFFICER AND THE ASSESSEE WAS NOT ALLOWED REASONABLE OPPORTUNITY IN THIS REGARD. FURTHER, PAYMENTS WERE MADE IN THE SUBSEQUE NT YEARS TO MANY OF THE CREDITORS WHICH HAS ALSO BEEN ACCEPTED IN THE ASSESSMENT ORDER. IT WAS POINTED OUT THAT THE SUNDRY CREDITORS WERE BROUGHT FORWARD FROM EARLIER YEARS AND THERE WERE N O TRANSACTIONS WITH THE CREDITORS IN THE CURRENT YEAR. FURTHER, ASSESSEE DID NOT WRITE BACK THE LIAB ILITIES IN HIS ACCOUNTS AS THERE WERE NO REMISSION OR CESSATION OF LIABILITY AND THE PROVISIONS OF SEC TION 41(1) WERE NOT ATTRACTED. LD. CIT(A) HAD SENT TO THE ASSESSING OFFICER THE SUBMISSIONS MADE BY THE ASSESSEE FOR HIS REPORT WHICH WAS SUBMITTED ON 16.02.2010. THE SAID REPORT WAS CONFRO NTED TO THE ASSESSEE TO FILE HIS REJOINDER ON 15.03.2010. LD. CIT(A) NOTICED THAT EVEN IN THE REM AND PROCEEDINGS SUNDRY CREDITORS AMOUNTING TO RS.7,79,675/- [RS.30,970/- + RS.6,,12,055/- + RS .1,36,650/-] COULD NOT BE FOUND. IN THIS REGARD, ASSESSEE, INTER ALIA, SUBMITTED THAT ASSESSEE HAD M ADE THE PAYMENT IN SUBSEQUENT YEARS TO SOME OF THE CREDITORS. LD. CIT(A) DELETED THE ADDITION FOR THE FOLLOWING REASONS :- FIRSTLY, THAT THE IMPUGNED AMOUNT WAS BROUGHT FORWA RD FROM PRECEDING YEAR ; SECONDLY, THE IMPUGNED AMOUNT WAS NOT ASSESSABLE U/ S. 41(1) SINCE ASSESSEE CONTINUED TO SHOW THE AMOUNTS AS LIABILITY IN BALAN CE SHEET AND NO POSITIVE ITA NO. 1306/KOL/2010 4 EVIDENCE HAD BEEN BROUGHT ON RECORD BY THE ASSESSIN G OFFICER TO ESTABLISH THAT THE LIABILITIES WERE ACTUALLY CEASED TO EXIST. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. THE FINDINGS OF LD. CIT(A) THAT THE IMPUG NED AMOUNT PERTAINED TO EARLIER YEAR HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT. THEREFORE, IN ANY VIEW OF THE MATTER, THE ADDITION COULD NOT BE MADE IN THE CURRENT ASSESSMENT YEAR. FURTHER, TH ROUGH ASSESSING OFFICER HAD NOT GIVEN ANY SPECIFIC OBSERVATION IN REGARD TO APPLICABILITY OF SECTION 41(1), LD. CIT(A) HAS CONSIDERED THIS ISSUE ALSO AND HAS GIVEN A FINDING THAT THERE WAS N O CESSATION OF LIABILITY AS ASSESSEE CONTINUED TO SHOW THE LIABILITIES IN HIS ACCOUNTS. UNDER SUCH CI RCUMSTANCES, THE ONUS WAS ON ASSESSING OFFICER TO CONTRADICT THE ASSESSEES PLEA. NO POSITIVE MATE RIAL HAS BEEN BROUGHT ON RECORD TO DISREGARD THE CLAIM OF THE ASSESSEE. UNDER SUCH CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). HENCE, GROUND NOS. 1 TO 4 OF THE REVENUE ARE DISMISSED 8. BRIEF FACTS APROPOS GROUND NO.5 ARE THAT THE ASS ESSING OFFICER NOTICED THAT ASSESSEE HAD DEBITED TO THE PROFIT & LOSS ACCOUNT A SUM OF RS.11 ,90,880/- FOR FREIGHT INWARD AND DELIVERY CHARGES AND RS.15,55,280/- FOR TRAVELING AND CONVEY ANCE. HE OBSERVED THAT THESE EXPENSES WERE HIGH WHEN SEEN IN THE CONTEXT OF THE BUSINESS OF TH E ASSESSEE WHERE TOTAL SALES WAS LESS THAN RS.2.00 CRORES. HE FURTHER OBSERVED THAT ASSESSEE F AILED TO PRODUCE BILLS AND VOUCHERS OF THESE EXPENSES. HE, THEREFORE, DISALLOWED 10% OF THE TOTA L CLAIM MADE BY THE ASSESSEE ON ESTIMATE BASIS AND MADE AN ADDITION OF RS.2,74,616/-. BEFORE LD. C IT(A), IT WAS POINTED OUT THAT EXPENSES WERE INCURRED IN THE NORMAL COURSE OF BUSINESS. BOOKS OF ACCOUNT AND BILLS/VOUCHERS WERE DULY PRODUCED BEFORE THE ASSESSING OFFICER. ASSESSING OF FICER HAD NOT POINTED OUT ANY SPECIFIC ITEM OF EXPENSES WHICH WERE NOT GENUINE AND / OR NOT RELATE D TO BUSINESS. LD. CIT(A) DELETED THE ADDITION, INTER ALIA, OBSERVING THAT ASSESSING OFFICER HAD NO T EXPLAINED THE BASIS FOR HOLDING THAT THE CLAIMS WERE HIGH. FURTHER, NO FACT OR MATERIAL WAS BROUGHT ON RECORD TO SHOW THAT THE CLAIM OF EXPENSES WERE EXCESSIVE. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. IN THE WRITTEN SUBMISSION FILED BEFORE TH E LD. CIT(A), IT WAS POINTED OUT THAT ASSESSEE ACQUIRED MATERIAL FROM MANUFACTURERS BASED AT INDOR E, PONDICHERRY, MUMBAI, PUNE AND OTHER PARTS OF INDIA AND INCURS FREIGHT FOR THE SAME. IT WAS FU RTHER SUBMITTED THAT ASSESSEES BUSINESS WAS ITA NO. 1306/KOL/2010 5 MAINLY WITH RAILWAY, DEFENCE UNITS, STEEL PLANTS. F OR DELIVERY OF MATERIALS TO THEIR SITES IN DIFFERENT PART OF THE COUNTRY, HE HAD TO INCUR DELI VERY EXPENSES. THESE FACTS HAVE BEEN TAKEN INTO CONSIDERATION BY LD. CIT(A) WHILE EXAMINING THE ASS ESSING OFFICERS OBSERVATION REGARDING EXPENSES BEING EXCESSIVE. ASSESSEES CLAIM IS THAT ALL BILLS AND VOUCHERS WERE AVAILABLE AND WERE PRODUCED BEFORE THE ASSESSING OFFICER. HOWEVER, ASS ESSING OFFICER HAD OBSERVED THAT ASSESSEE FAILED TO PRODUCE ALL BILLS AND VOUCHERS OF THESE E XPENSES. CONSIDERING THE CONFLICTING CLAIMS AND KEEPING IN VIEW THE ENTIRETY OF THE FACTS AND CIRCU MSTANCES OF THE CASE AND ALSO KEEPING IN VIEW THE NET WORK OF ASSESSEES BUSINESS, WE ARE OF THE OPINION THAT DISALLOWANCE MADE BY ASSESSING OFFICER WAS EXCESSIVE AND, THEREFORE, WE DIRECT THA T THE DISALLOWANCE MAY BE RESTRICTED TO 5% OF THE TOTAL CLAIM BECAUSE OF UNVERIFIABILITY OF THE E XPENSES ON ACCOUNT OF VERY NATURE OF EXPENSES. THIS GROUND OF THE REVENUE IS PARTLY ALLOWED. 10. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS PARTLY ALLOWED. 0 0 0 0 '1 '1 '1 '1 2 1% 3 4 2 1% 3 4 2 1% 3 4 2 1% 3 4 5' 5' 5' 5' ORDER PRONOUNCED IN THE OPEN COURT ON 05. 08. 2011. SD/- SD/- [ . . . . . . . . , ,, , ] [ . . . . . .. . ! ! ! ! , ' ' ' ' ] [ B. R. MITTAL ] [ S.V. MEHROTRA ] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (5' 5' 5' 5') )) ) DATED : 5TH AUGUST, 2011. 0 8 .9 :9(/ COPY OF THE ORDER FORWARDED TO: 1. +, /APPELLANT : INCOME TAX OFFICER/WARD-34(3), 18, RA BINDRA SARANI, PODDAR COURT, KO LKATA-700 001. 2 ./+, / RESPONDENT : DHANPAT SINGH DUGAR, 215, OLD CHINA BAZAR STREET, KOLKATA-700 001 . 3. 0% / CIT, 4. 0% ()/ CIT(A), KOLKATA. 5. '3 .%/ DR, KOLKATA BENCHES, KOLKATA [/9 ./ TRUE COPY] 0%1/ BY ORDER, #A /ASSTT REGISTRAR [KKC 'BC %DA E' /SR.PS]