ITO, WD-41(2), KOLKATA, Kolkata V. Shri Narayan Majumdar, Kolkata

ITA 1435/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1571 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 25-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SOUMITRA CHOW DHURY
• Section: 69C; 143(3); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SRI A.T.VARKEY, JM & SHRI M.BALAG ANESH, AM ] I.T.A NO. 1435/KOL/20 14 ASSESSMENT YEAR : 2009-1 0 I.T.O., WARD-41(2) -VS.- SHRI NARAYAN M AJUMDAR KOLKATA KOLKATA [PAN : ANVPM 3502 F] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : NONE FOR THE RESPONDENT : SHRI SOUMITRA CHOWDHURY , ADVOCATE DATE OF HEARING : 13.06.2017. DATE OF PRONOUNCEMENT : 07.07.2017 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL OF THE REVENUE ARISES OUT OF THE ORD ER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -XIX , KOLKATA [ IN SHORT THE LD CITA] IN APPEAL NO. 334/CIT(A)-41(2)/KOL/12-13 DATED 24.03.2014 AGAINST THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD 41(2), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143(3) OF THE ACT DATED 21.11.2011 FOR THE ASST YEAR 2009-10. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL OF T HE REVENUE IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN REDUCING THE ADDITION MADE TO WARDS SUNDRY CREDITORS, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS A PROPRIETOR OF M/S NARAYAN ART STUDIO , WHICH RUNS THE BUSINESS OF INTERIOR AND EX TERIOR DECORATION ON CONTRACT. THE LD AO OBSERVED THAT THE ASSESSEE APART FROM FILING VAR IOUS DETAILS AS CALLED FOR , PRODUCED THE LIST OF SUNDRY CREDITORS WITHOUT ANY ADDRESSES. THE LD AO DREW AN ADVERSE INFERENCE 2 ITA NO.1435/KOL/2014 SHRI NARAYAN MAJUMDAR. A.YR.2009-10 2 ON THE SAME AS THEY REMAINED UNVERIFIABLE. THE LD A O OBSERVED IN HIS ORDER THAT WHEREVER IN THE LEDGER OF SUNDRY CREDITORS WERE SET TLED THROUGH BANK TRANSACTIONS , THE SAME WAS ACCEPTED AS GENUINE , EVEN THOUGH NO BILLS AND CASH MEMOS WERE PRODUCED. HE ALSO CHOSE TO IGNORE THE CREDITORS BALANCES LESS THAN RS 1 LAKH AT THE END OF THE YEAR. HE LISTED OUT THE FOLLOWING PARTIES WHEREIN HE HELD THAT THE IDENTITIES AND THEIR CREDITWORTHINESS WERE NOT ESTABLISHED BY THE ASSESS EE :- AJOY AGARWAL = RS.246532/- ASIT PATRA = RS.252000/- BIBEK KUMAR SAHOO = RS.345306/- BIKASH GUPTA = RS. 33545/- BIKASH SARKAR = RS225896/- CHANDAN DAS = RS.304620/- DEBASHIS MUKHERJEE = RS.304690/- DINESH AGARWAL = RS.232801/- DINESH GUPTA = RS.198668/- KAUSIK SARKAR = R.278540/- KUSHAL BHAT = RS.213495/- MAHESH ASARA = RS.145875/- PAWAN GUPTA = RS.207393/- P.K.AGARWAL = RS315600/- RAMESH GUPTA = RS.305230/- RITESH GUPTA = RS274596/- SANJAY AGARWAL = RS.194855/- SANJAY MISHRA = RS.245014/- SANKAR SINHA = RS.306682/- SHAYMAL SAHA = RS358208/- S.N.CHOWDHURY = RS.325475/- SUBHASH JAISWAL = RS.345967/- SUDIP PAUL = RS.245068/- SUNIL KUMAR = RS.305369/- SWAPAN BURMAN = RS.193600/- SWAPAN DAS = RS.292298/- TAPAS DAS = RS.304570/- THE LD AO TREATED THE AFORESAID SUNDRY CREDITORS TO THE TUNE OF RS 70,01,893/- AS UNVERIFIED SUNDRY CREDITORS AND ADDED THE SAME TO T HE TOTAL INCOME. 3 ITA NO.1435/KOL/2014 SHRI NARAYAN MAJUMDAR. A.YR.2009-10 3 4. THE ASSESSEE PRODUCED THE DETAILS BEFORE THE LD CITA WHICH WERE SUBJECTED TO REMAND PROCEEDINGS TO THE LD AO. THE REMAND REPORT DATED 29.12.2013 FROM THE LD AO WAS FORWARDED TO THE LD CITA WHEREIN IT WAS REPORTE D THAT THE LIABILITY TOWARDS SUNDRY CREDITORS EXISTED ONLY ON PAPERS AND WOULD AMOUNT T O CESSATION OF LIABILITY U/S 41(1) OF THE ACT. THE ASSESSEE SUBMITTED HIS REJOINDER TO THE REMAND REPORT BY WAY OF WRITTEN SUBMISSION VIDE HIS LETTER DATED 10.2.2014 BY STATI NG THAT THE LD AO HAD SIMPLY BRUSHED ASIDE HIS RESPONSIBILITY OF VERIFYING THE FACT THAT THESE SUNDRY CREDITORS WERE LIVE IN VIEW OF THE FACT THAT THE ASSESSEE HAD FURNISHED THE LED GER ACCOUNTS OF THESE CREDITORS FOR THREE YEARS CLEARLY DEPICTING HOW THE PAYMENTS WERE MADE TO THESE CREDITORS. IT WAS ALSO SUBMITTED THAT THE LD AO GROSSLY ERRED IN MAKING AD DITION IN THE SUM OF RS 70,01,893/- WHEN THE TOTAL PURCHASES MADE DURING THE YEAR ITSEL F WAS ONLY RS 43,64,157/-, THEREBY MAKING ADDITION TOWARDS THE OPENING BALANCE OF SUND RY CREDITORS WHICH IS NOT PERMISSIBLE IN LAW. 5. THE LD CITA PARTLY GRANTED RELIEF TO THE ASSESS EE BY OBSERVING AS UNDER:- 7.1. THE ASSESSMENT ORDER, THE REMAND REPORTS OF T HE AOS AND THE SUBMISSIONS OF THE APPELLANT ON THE ISSUE HAVE BEEN DULY GONE THRO UGH FOR NECESSARY ADJUDICATION IN THE MATER AS PER THIS GROUND OF APPEAL. FROM THE MATERIALS AVAILABLE ON RECORD AND CONSIDERING THE CONTENTIONS OF THE AR OF THE AP PELLANT ON THE ISSUE, I FIND THAT IT IS AN ADMITTED FACT AS CONCEDED BY THE AR THAT S OME OF THE CREDITORS ARE NOT BEING PAID AS INDICATED IN THE LIST FOR THE TWO AYS 2009-10 & 2010-11 SUBMITTED. NOW THE MOOT QUESTION IS WITH REGARD TO THE DISALLO WANCE TO BE MADE AGAINST WHICH SUNDRY CREDITOR AS PER THE LIST. I FIND THAT THE APPELLANT HAD SALES OF RS. 93,55,378/- ON WHICH GROSS PROFIT WAS RS. 22,31,207 /- I.E. APPROXIMATELY 24%. THE TOTAL PURCHASE FOR THE YEAR WAS RS.43,64,157/- WHIC H THE APPELLANT CLAIMED AS FROM THE PARTIES WHO WERE REPRESENTED AS SUNDRY CREDITOR S. OUT OF THE TOTAL CREDITORS OF RS.70,04,889/- A SUM OF RS.43,64, 157 WAS ON ACCOUN T OF ADDITION FOR THIS YEAR. THE BALANCE CREDITORS WERE FOR EARLIER YEARS. THE AO AD DED THE ENTIRE SUNDRY CREDITORS AS THEY WERE NOT FOUND/ PROVED TO BE IN EXISTENCE. I FIND THAT UNDER THE IT ACT EACH ASSESSMENT YEAR IS A SEPARATE UNIT. THUS THE ITEMS PERTAINING TO A PARTICULAR YEAR COULD NOT BE ADDED IN ANOTHER YEAR. FURTHER THE PRO VISIONS OF SECTION 41 (1) OF THE ACT COULD APPLY ONLY IF THE APPELLANT WRITES OFF TH E CREDITOR. IN THIS CASE THE APPELLANT DID NOT WRITE OFF THE CREDITORS, HENCE TH E SAID SECTION HAD NO APPLICATION. I THEREFORE HOLD THAT THE ADDITION OF OPENING CREDI TORS OF RS.26,40,732 4 ITA NO.1435/KOL/2014 SHRI NARAYAN MAJUMDAR. A.YR.2009-10 4 (RS.70,04,889 RS.43,64,157) WAS NOT JUSTIFIED AND IS DIRECTED TO BE DELETED. WITH RESPECT TO THE BALANCE AMOUNT OF RS.43,64, 157, I F IND THAT THIS AMOUNT REPRESENTED THE ENTIRE PURCHASE OF THE YEAR. IF THIS AMOUNT IS DISALLOWED THEN THE GROSS PROFIT WOULD INCREASE TO RS.65,95,364/- ON A TURNOVER OF R S. 93,55,378/- WHICH WOULD BE A GROSS MARGIN OF 70.50%. SUCH MARGIN IN THE TRADE OF INTERIOR DECORATION IS UNHEARD OF. CONSIDERING THE ENTIRE FACTS AND CIRCUM STANCES, IT CAN AT BEST BE HELD THAT THE APPELLANT MADE SOME MANIPULATIONS IN THE PURCHASES. THE CREDITORS REPRESENTED PURCHASES, WHICH IF HELD TO BE BOGUS TH EN THE SALES COULD NOT HAVE TAKEN PLACE LOGICALLY. I THEREFORE HOLD THAT THERE WAS NO JUSTIFICATION OF ADDING THE ENTIRE CREDITORS OF RS. 43,64,157 /- PERTAINING TO THE CURRENT YEAR. THE AO SHOULD HAVE ADDED A PART OF THE SAME FOR POSSIBLE SAVING OF VAT AND POSSIBLE INFLATION OF EXPENSES. UNDER THE CIRCUMSTANCE, I AM OF THE OPINI ON THAT DISALLOWANCE @ 25% OF THE CURRENT YEAR'S PURCHASE WOULD MEET THE ENDS OF JUSTICE IN THIS REGARD. THE AO IS THEREFORE DIRECTED TO RESTRICT THE ADDITION TO 25% OF' RS. 43,64,157/- (WHICH SHOULD WORK OUT TO RS.,91,039/-. 8. IN VIEW OF THE ABOVE, THE APPEAL OF THE APPELLAN T IS TREATED AS PARTLY ALLOWED. 6. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 1.ON THE FACTS AND UNDER THE GIVEN CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN RESTRICTING THE ADDITION OF RS. 70, 01,893/- TO RS. 43,64,157/-WITHOUT ANY BASIS AND CONTRARY TO THE MATERIALS ON RECORD. 2.LD. CIT(A) OUGHT TO HAVE FOLLOWED THE DECISIONS O F THE HIGHER JUDICIARIES THAT IT IS ABSURED TO CONTINUE WITH THE SUNDRY CREDITOR'S VALU E ONLY BECAUSE THE ASSESSE HAS NOT WRITTEN THAT OFF. 3.LD. CIT(A) OUGHT NOT TO HAVE IGNORED A JUDICIAL P RECEDENT WITHOUT CITING ANY DECISION IN CONTRADICTION. 4. LD. CIT (A) OUGHT NOT TO HAVE MINGLED THE SOURCE OF PURCHASE, WHICH OTHERWISE ATTRACTS SECTION 69C WITH THE INCIDENCE OF PURCHASE 5. THAT THE APPELLANT CRAVES THE LEAVES ,TO ADD, AL TER, MODIFY, INCLUDE OR DELETE ANY GROUND OF APPEAL. 7. NONE APPEARED ON BEHALF OF THE REVENUE WHEN THE CASE WAS CALLED FOR HEARING AND NO ADJOURNMENT PETITION WAS PREFERRED BY THE REVENUE B EFORE US. HENCE WE PROCEED TO DISPOSE OFF THE APPEAL AFTER HEARING THE LD AR. WE HAVE HEARD THE LD AR.. WE FIND THAT THE LD CITA HAD RIGHTLY OBSERVED THAT NO ADDITION C OULD BE MADE IN RESPECT OF OPENING BALANCE OF SUNDRY CREDITORS AS EACH ASSESSMENT YEAR IS A SEPARATE UNIT BY ITSELF AND INCOME OF ONE YEAR CANNOT BE TAXED IN ANOTHER YEAR. HE HAS ALSO RIGHTLY HELD THAT THE 5 ITA NO.1435/KOL/2014 SHRI NARAYAN MAJUMDAR. A.YR.2009-10 5 PROVISIONS OF SECTION 41(1) OF THE ACT CANNOT BE IN VOKED IN THE INSTANT CASE AS THE ASSESSEE HAD NOT WRITTEN BACK THE CREDITORS AS NO L ONGER PAYABLE ON THE GROUND OF CESSATION OF LIABILITY. HOWEVER, IT CANNOT BE IGN ORED IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THAT THE ASSESSEE HAD PROVED THE GENUINE NESS OF HIS PURCHASES BEYOND DOUBT. HENCE BY GIVING DUE CREDENCE TO THE GROSS PROFIT AN D NET PROFIT DECLARED BY THE ASSESSEE VIS A VIS SALES REFLECTED THEREON, THE LD CITA DISA LLOWED 25% OF TOTAL PURCHASES AS NOT PROVED AND RESTRICTED THE ADDITION TO RS 10,91,039/ - . AGAINST THIS DIRECTION, THE ASSESSEE HAD NOT PREFERRED ANY APPEAL BEFORE US. IN OUR CONSIDERED OPINION, THE ACTION OF THE LD CITA IS JUSTIFIED AND REASONABLE TO PREVENT ANY ABNORMAL PROFITABILITY FOR THE ASSESSEE IN THE LINE OF BUSINESS HE IS ENGAGED IN. HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD CITA. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 07.07.2017 SD/- SD/- [A.T.VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 07.07.2017 [RG PS] COPY OF THE ORDER FORWARDED TO: 1.SHRI NARAYAN MAJUMDAR, 105/2B, BIDHAN NAGAR ROAD, KOLKATA-700067. 2. I.T.O., WARD-41(2), KOLKATA. . 3..C.I.T.(A)-XIX, KOLKATA 4. C.I.T.-XIV, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S 6 ITA NO.1435/KOL/2014 SHRI NARAYAN MAJUMDAR. A.YR.2009-10 6