Sri Kiran Bhagat, Uttar Dinajpur V. JCIT, R-2, JALPAIGURI, Jalpaiguri

ITA 1325/KOL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4248 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 13-06-2016
• Court: TRIBUNAL
• Department Lawyers: G HUKUNGA
• Section: 133(6); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENC H KOLKATA BEFORE SHRI S.S.VISWANETHRA RAVI, JM & DR. A.L.SAI NI, AM ./ ITA NO.1325/KOL/2016 ( / ASSESSMENT YEAR:2011-2012) SRI KIRAN BHAGAT, PROP. BISHAL ENTERPRISE, DIST- UTTAR DINAJPUR, PIN-733 202 VS. JCIT, RANGE-2, JALPAIGURI ./ ./PAN/GIR NO. : AJEPB 1680 N ( /APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI SUBHASH AGARWAL, ADVOCATE REVENUE BY : SHRI G.HUKUNGA, JCIT / DATE OF HEARING : 26/10/2016 /DATE OF PRONOUNCEMENT 23/11/2016 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAIN ING TO THE ASSESSMENT YEAR 2011-2012, IS DIRECTED AGAINST AN O RDER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS), JALPAIGURI IN APPEAL NO.02/JAL/CIT(A)/JAL/2014-15, DATED 28.04.2016, WHI CH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER (AO) UN DER SECTION143(3) OF THE INCOME TAX ACT 1961, (IN SHORT THE ACT), DATE D 17.02.2014. 2. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THA T THE ASSESSEE FILED THE RETURN OF INCOME ON 30.02.2012 SHOWING TOTAL IN COME AT RS.3,60,240/- . THE CASE WAS SELECTED FOR SCRUTINY U/S.143(3) OF THE ACT AND THE AO HAS COMPLETED THE ASSESSMENT AFTER MAKING ADDITION OF R S.5,12,186/- ON ACCOUNT OF BOGUS EXPENDITURE ( DISCOUNT ALLOWED BY THE ASSESSEE WAS TREATED BY THE AO AS BOGUS EXPENDITURE). DURING THE COURSE OF HEARING WHILE VERIFYING THE CLAIM OF EXPENDITURE IN THE PRO FIT AND LOSS ACCOUNT OF ITA NO.1325/16 SRI KIRAN BHAGAT 2 THE ASSESSEE FOR THE RELEVANT PERIOD IT IS NOTICED THAT HE HAD CLAIMED AN EXPENDITURE OF RS.14,22,455/- UNDER THE HEAD DISCO UNT. THE ASSESSEE GAVE DISCOUNT TO 23 DEALERS AGAINST THE SALE OF RS. 7,64,63,660/-. THE ASSESSEE FILED DETAIL AND NAME AND ADDRESS OF ALL 2 3 PARTIES. OUT OF 23 PARTIES ONLY 11 PARTIES COMPLIED TO THE ABOVE NOTIC E AND CONFIRMED THE RECEIPT OF DISCOUNT AGAINST PURCHASE GIVEN BY THE A SSESSEE DURING THE FINANCIAL YEAR 2010-11. THE BALANCE 12 PARTIES TO W HOM NOTICE U/S.133(6) WAS ISSUED, RETURNED UNSERVED. THE ASSESSEE COULD N OT PRODUCE ANY OF THE 12 PERSONS BEFORE THE AO, THEREFORE, THE AO MAD E THE ADDITION OF RS.5,12,186/-, OBSERVING THAT THE ASSESSEE COULD NO T PROVE THE GENUINENESS OF THE EXPENDITURE. 3. AGGRIEVED FROM THE ORDER OF LD. AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A), WHO HAS CONFIRMED THE ADDITI ONS MADE BY THE AO, BY OBSERVING THE FOLLOWINGS :- 4. I HAVE DULY CONSIDERED THE SUBMISSION OF THE AS SESSEE. THE ASSESSEE IS A DISTRIBUTOR OF AIRTEL GSM . HE CLAIME D TO HAVE HAD PAID DISCOUNT TOTALLING TO RS.14,22 455/- TO 23 NUM BERS DEALERS. THE AO SENT NOTICE U/S. 133(6) TO ALL 23 SUB-DEALERS, O UT OF WHICH 11 SUB-DEALERS HAD CONFIRMED RECEIPTS OF DISCOUNT AND THE OTHER 12 NOTICES WERE RETURNED UNSERVED BY THE POSTAL AUTHOR ITY AS THOSE PERSONS WERE NOT FOUND AT THE GIVEN ADDRESSES. THE AO FIRST ASKED THE ASSESSEE TO FURNISH CONFIRMATION FROM THOSE 12 PARTIES, WHICH HE FAILED. THEREAFTER, THE AO ASKED THE ASSESSEE TO PRODUCE THOSE 12 PERSONS BEFORE HIM FOR EXAMINATION AND VERIFICAT ION OF GENUINENESS OF PAYMENTS MADE TO THEM TOTALLING TO R S.5,12,186/. THE ASSESSEE AGAIN FAILED TO PRODUCE THOSE PARTIES. THE AO FURTHER OBSERVED FROM THE BOOKS OF ACCOUNT THAT THE ASSESSE E FOLLOWED A SIMILAR PATTERN OF ALLEGED PAYMENTS OF DISCOUNT BY CASH ONLY TO THOSE 12 PARTIES. THE AO, THEREFORE, HELD THAT THER E WAS NO ACTUAL SALE MADE THROUGH THOSE 12 PARTIES AND DISCOUNTS WE RE BOOKED AGAINST THOSE PARTIES FOR THE SOLE PURPOSE OF REDUC TION OF TOTAL INCOME. HE THEREFORE DISALLOWED RS.5,12,186/- AS BO GUS EXPENDITURE BOOKED IN ACCOUNTS IN THE GUISE OF PAYM ENTS OF DISCOUNTS AGAINST SALE. AGAINST THESE FINDINGS OF T HE AO, LD. AR ITA NO.1325/16 SRI KIRAN BHAGAT 3 HAS MADE A GENERAL STATEMENT THAT THE SUB- DEALERS WERE VERY SMALL SOAP OWNERS; THEY CHANGED THEIR IINE OF BUSIN ESS OR WENT ELSEWHERE AND IT WAS NOT POSSIBLE TO GET REPLY FROM ALL THOSE SUB- DEALERS. THE AR ALSO SHOWN SOME COPY OF AGREEMENTS WITH THOSE SUB-DEALERS, BUT COULD NOT EXPLAIN WHY THOSE DOCUME NTS WERE NOT PRODUCED BEFORE THE AO. 5. IN THE LIGHT OF ABOVE DISCUSSION, I AM INCLINED TO ACCEPT AO'S FINDINGS THAT THE ASSESSEE HAS NOT DISCHARGED EVEN THE PRIMARY ONUS BY SUBMITTING CONFIRMATION OF TWELVE ALLEGED R ECIPIENTS OF DISCOUNTS ON SALE, ESPECIALLY WHEN THE NOTICES ISSU ED U/S. 133(6) TO THEM WERE RETURNED UNSERVED BY THE POSTAL AUTHORITY . IT IS WELL SETTLED LAW IN ORDER TO CLAIM AN EXPENDITURE FALLS U/S. 37(1), THE BURDEN OF PROVING THE NECESSARY FACTS IN THAT CONNE CTION IS ON THE ASSESSEE, AS POINTED OUT BY AO IN HIS ORDER. THESE FACTS COUPLED WITH THE FINDINGS OF THE AO THAT ENTIRE DISCOUNTS T O THOSE TWELVE PARTIES WERE PAID ONLY BY CASH, FORCED THE AO TO FO RM A LEGITIMATE BELIEF THAT THE ALLEGED PAYMENTS OF DISCOUNTS TOTAL LING TO RS.5,12, 186/- TO THOSE TWELVE PARTIES WERE BOGUS. IN VIEW O F SUCH, I DO NOT FIND ANY REASON TO DISTURB THE ASSESSMENT. THE ADDI TION OF RS.5,12,186/- IS THEREFORE, CONFIRMED. 6. IN THE RESULT, THE APPEAL IS DISMISSED. 4. BEFORE THE LD. CIT(A), THE ASSESSEE APART FROM THE SUBMISSIONS MADE BEFORE THE AO, SUBMITTED THAT THE SUB-DEALERS WERE GENERALLY VERY SMALL SHOP OWNERS, EVEN A ROADSIDE CIGARETTE SHOPS , SELLS SIM CARD. MANY A TIME THOSE PEOPLE CHANGE THEIR LINE OF BUSIN ESS OR WENT ELSEWHERE AND IT WAS NOT POSSIBLE TO GET REPLY FROM THEM, THA T IS , ALL THOSE SUB- DEALERS. THE ASSESSEE ALSO SUBMITTED THAT HE HAD G OT COPY OF THE AGREEMENT WITH ALL THE PARTIES AS SUB-AGENT. IN ADD ITION TO THAT, THE LEDGER ACCOUNT OF ALL THE PARTIES ARE, ALSO AVAILABLE FOR THESE PERSONS AND, THEREFORE, THE DISCOUNT ALLOWED THEM IS GENUINE. I GNORING ALL THE SUBMISSIONS OF THE ASSESSEE, LD. CIT(A) HAD CONFIRM ED THE ACTION OF THE AO. NOT BEING SATISFIED WITH THE ORDER OF THE LD. C IT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US AND HAS TAKEN FOLLOWING GR OUNDS OF APPEAL :- ITA NO.1325/16 SRI KIRAN BHAGAT 4 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISA LLOWANCE OF RS.5,12,186/- MADE BY THE A.O. ON ACCOUNT OF DISCOU NT AGAINST SALE OF SIM CARDS BY WRONGLY THE TREATING THE SAME AS BO GUS EXPENDITURE. 2. FOR THAT THE LD. CIT(A) OUGHT TO HAVE ACCEPTED T HE FACT THAT THE SUB - DEALERS WERE VERY SMALL ROAD SIDE VENDORS, AS SUCH, IT WAS NOT POSSIBLE TO GET THE CONFIRMATION OF SALES FROM ALL OF THEM. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ALL OR ANY OF THE GROUNDS OF APPEAL. HOWEVER, THE ASSESSEE, IN THIS APPEAL, HAS RAISED T HE MULTIPLE GROUNDS OF APPEAL BUT AT THE TIME OF HEARING THE MAIN GRIEVANC E OF THE ASSESSEE HAS BEEN CONFIRMED TO THE ISSUE AS TO WHETHER THE DISCO UNT ALLOWED BY THE ASSESSEE TO VARIOUS PARTIES AGAINST THE SALE OF SIM CARDS IS GENUINE OR NOT. 4.1. THE LD. AR FOR THE ASSESSEE HAS VEHEMENTLY SUB MITTED THAT BEFORE THE LD. AO, 11 PARTIES APPEARED AND CONFIRMED THE R ECEIPT OF DISCOUNT. THE PARTIES, WHO HAVE CONFIRMED THE RECEIPT OF DISC OUNT WERE HAVING PAN CARD, VOTER ID. THE ASSESSEE HAS SUBMITTED A COPY O F AGREEMENT BEFORE THE LD. CIT(A), IN RESPECT WITH ALL THE PARTIES, WH O HAVE NOT CONFIRMED THE RECEIPT OF DISCOUNT. AS THE ASSESSEE HAD SUBMITTED COPY OF THE AGREEMENTS WITH THOSE SUB-DEALERS TO THE LD. CIT(A) AND IN ORDER TO VERIFY THE GENUINENESS, HE COULD OBTAIN A REMAND REPORT FR OM THE AO. BUT THE LD. CIT(A) NEITHER SENT THE COPY OF THE AGREEMENT TO TH E AO FOR HIS VERIFICATION, NOR HE HIMSELF VERIFIED. LD. AR FOR T HE ASSESSEE, BEFORE US, SUBMITTED A STATEMENT OF SALES AND DISCOUNT AND SCH EME ALLOWED SHOWING THE SALES FIGURE AND THE DISCOUNT FIGURE AL ONG WITH NAME AND ITA NO.1325/16 SRI KIRAN BHAGAT 5 ADDRESS OF RECIPIENTS. APART FROM THIS, LD. AR HAS EXPLAINED BEFORE US THAT EVEN THE DISCOUNT UNDER CONSIDERATION SHOULD BE ALL OWED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. LD. AR ALSO POINTED OU T THAT SINCE THE COMMISSION PAYMENT WAS ESTABLISHED BY WAY OF AGREEM ENT, PAN CARD, VOTER ID, NAME AND ADDRESS OF THE RECIPIENTS. THESE PAYMENTS WERE MADE FOR THE PURPOSE OF BUSINESS. LD. AR FOR THE AS SESSEE HAS ALSO RELIED ON THE FOLLOWING JUDGMENTS :- I) KULWANT RAI, 291 ITR 36 : IT IS WELL-SETTLED LEGAL POSITION IN RESPECT OF IN COME-TAX ASSESSMENT PROCEEDING THAT ALTHOUGH STRICT RULES OF EVIDENCE A CT DO NOT APPLY TO INCOME-TAX PROCEEDINGS, ASSESSMENTS CANNOT BE MADE ON THE BASIS OF IMAGINATION AND GUESS WORK. REFERENCE IN T HIS RESPECT MAY BE MADE TO THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF DHAKESWARI COTTON MILLS LTD. VS. CIT (1954) 26 ITR 775 AND A HOST OF SUPREME COURT AND HIGH COURT'S JUDGMENTS THEREAF TER ON THE SUBJECT. WE, THEREFORE, DIRECT DELETION OF THE SUM OF RS. 17,00,892 ASSESSED BY THE ASSESSING OFFICER BY WAY OF HALF SH ARE OF THE ASSESSEE IN THE ALLEGED EARNEST MONEY. II) SIGMA PAINTS LTD., 188 ITR 6 : THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTI ON 37(1) IN RESPECT OF AMOUNT PAID AS SECRET COMMISSION THE SUM AND SUBSTANCE OF THESE JUDGMENTS ARE THAT W HERE THE ASSESSEE INCURS ANY EXPENDITURE FOR THE PURPOSE OF BUSINESS, HE IS ENTITLED TO CLAIM THE DEDUCTION U/S.37(1) OF THE ACT. 4.2. ON THE OTHER HAND, LD. DR FOR THE REVENUE HAS POINTED OUT THAT ASSESSEE UNDER CONSIDERATION HAS A TURNOVER TO THE TUNE OF RS.115,538,442/- SHOWS THE NET PROFIT TO THE TUNE O F RS.3,50,160/-. THE NET PROFIT DECLARED BY THE ASSESSEE IS NOT EVEN 1% OF THE TURNOVER/SALES OF ITA NO.1325/16 SRI KIRAN BHAGAT 6 THE ASSESSEE. LD. DR ALSO POINTED OUT THAT THE DISC OUNT AND SCHEME EXPENSES ARE EXCESSIVE, CONSIDERING THE NATURE OF T HE BUSINESS OF THE ASSESSEE AND THE TURNOVER OF THE ASSESSEE. IN ADDIT ION TO THIS, LD. DR FOR THE REVENUE HAS ALSO RELIED ON THE FINDINGS OF THE LD. AO, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 4.3. HAVING HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT I N THE SUBMISSIONS OF THE ASSESSEE, AS THE PROPOSITIONS CANVASSED BY THE LD. AR FOR THE ASSESSEE ARE SUPPORTED BY THE ABOVE CITED JUDGMENTS AND THE FACTS NARRATED BY HIM. HE HAS POINTED OUT THAT THE ASSESSEE HAD SUBMI TTED COPY OF AGREEMENT, VOTER ID, PAN CARD OF THOSE PERSONS, TO WHOM THE DISCOUNT WERE ALLOWED. LD. CIT(A) HAD NEITHER SENT THE AGREE MENT TO THE AO FOR HIS VERIFICATION, NOR HE HAS VERIFIED HIMSELF. LD. AR A LSO SUBMITTED BEFORE US THAT MERELY BECAUSE SOME OF THE PARTIES DID NOT APP EAR BEFORE THE AO, DOES NOT MEAN THAT THE ASSESSEES TRANSACTION ON AC COUNT OF DISCOUNT ALLOWED, IS WRONG. FROM THE COPY OF THE AGREEMENT, VOTER ID, NAME AND ADDRESS OF THE PERSONS TO WHOM THE DISCOUNT WERE GI VEN AND THEIR PAN NOS. WERE AVAILABLE. NEITHER THE CIT(A) NOR THE AO COULD ESTABLISH THAT THE DISCOUNT ALLOWED BY THE ASSESSEE IS NOT GENUINE . THEREFORE, CONSIDERING THE ABOVE CITED FACTUAL POSITION AND TH E JUDGMENTS RELIED ON BY THE LD. AR, WE ARE OF THE VIEW THAT ADDITION MA DE BY THE LD. CIT(A) NEEDS TO BE DELETED. WE ACCORDINGLY DELETE THE ADDI TION. ITA NO.1325/16 SRI KIRAN BHAGAT 7 4.4. IN THE RESULT, APPEAL FILED BY THE ASSESSEE, ( ON ALL THE GROUNDS), IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23/1 1/2016. SD/ - (S.S.VISWANETHRA RAVI) S D/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; ! DATED 23/11/2016 ' $%& /PRAKASH MISHRA , 0 . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) % & , / ITAT, 1. / THE APPELLANT-SHRI KIRAN BHAGAT 2. / THE RESPONDENT.-JCIT, RANGE-2, JALPAIGURI 3. 1 ( ) / THE CIT(A), KOLKATA. 4. 1 / CIT 5. 23 4 0056 , 56 , / DR, ITAT, KOLKATA 6. 4 78 / GUARD FILE. 2 0 //TRUE COPY//