Asit Baran Biswas, Hooghly V. ITO, Ward 1(2),Hg, Hooghly

ITA 1482/KOL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1500 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 13-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 14-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 68

Judgement Text

1 ITA NO.1482/KOL/2016 ASIT BARAN BISWAS, AY 2008-09 , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE .., /AND . ' # $% % , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 1482/KOL/2016 ASSESSMENT YEAR: 2008-09 ASIT BARAN BISWAS (PAN: AFWPB7208J) VS. INCOME-TAX OFFICER, WD-1(2), HOOGHLY APPELLANT RESPONDENT DATE OF HEARING 20.06.2017 DATE OF PRONOUNCEMENT 06.09.2017 FOR THE APPELLANT SHRI SOMNATH GHOSH, ADVOCATE FOR THE RESPONDENT SHRI NICHOLAS MURMU, JCIT ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-21, KOLKATA DATED 08.06.2016 FOR AY 2008-09. 2. THE FIRST TWO GROUNDS OF THE ASSESSEE ARE AGAINS T THE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.8,30,462/- BY ESTIMAT ING THE GROSS PROFIT OF THE ASSESSEE WITHOUT REJECTING THE BOOKS OF ACCOUNT OF THE ASSES SEE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS THE PROPRIETOR OF M/S. ASIT BARAN BISWAS, WHOSE CASE WAS TAKEN UP FOR SCRUTINY. DURI NG THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS NOT DISCLOSED THE REA L SALE FIGURE BECAUSE THE ASSESSEE HAS NOT RECORDED PROPERLY THE PURCHASE MADE BY HIM SINCE TH E QUANTITY OF PURCHASES MADE DID NOT MATCH THE ENTRIES IN THE PURCHASE REGISTER PRODUCED BY THE ASSESSEE AND LIKEWISE THE SALES WERE ALSO NOT PROPERLY RECORDED. WHEN CONFRONTED, THE ASSESSEE ON 06.03.2007 FILED THE RE- CASTED ACCOUNTS THEREIN SHOWING HIGHER SALES WHICH HAD NOT BEEN DISCLOSED EARLIER IN THE ORIGINAL P&L ACCOUNT WITH THE RETURN OF INCOME. TH E AO THEREAFTER MADE A CHART WHICH IS REPRODUCED IN PAGE 1 OF HIS ORDER WHEREIN HE HAS SH OWN THE DIFFERENCE IN FIGURES IN RESPECT 2 ITA NO.1482/KOL/2016 ASIT BARAN BISWAS, AY 2008-09 TO PURCHASES, WHICH COMES TO RS.69,55,255/- AND SAL ES DIFFERENCE OF RS.75,03,301/-. THE AO NOTED THAT THE GP RATE IN THE ORIGINAL P&L ACCOU NT IS 11.07% WHEREAS THE GP RATE PURSUANT TO RECASTING DONE HAD COME DOWN TO 7.49%. TAKING NOTE OF THIS FACT OF DECREASE IN GP PERCENTAGE, THE AO WAS OF THE OPINION THAT SI NCE THE ASSESSEE HAD DECLARED IN THE ORIGINAL P&L ACCOUNT GP RATE AT 11.07% AND WHEN TH E RE-CASTED SALES WAS TO THE TUNE OF RS.1,31,22,423/-, THE ACTUAL GP SHOULD HAVE BEEN AT GP RATE OF 11.07% WHICH COMES TO RS.14,52,652/- AND SINCE THE ASSESSEE HAD DECLARED LESS GP OF 7.49%, WHICH COMES TO RS.6,22,190/-, THE DIFFERENCE OF THE GP OF RS.8,30, 462/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED AN APP EAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO CONFIRM THE SAME. AGGRIEVED THE ASSESSE E IS BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE MAIN CONTENTION OF THE ASSE SSEE IS THAT THOUGH THERE WAS SOME DISCREPANCY IN THE ORIGINAL P&L ACCOUNT, THE ASSESS EE RE-CASTED HIS P&L ACCOUNT AND BROUGHT THE BOOKS OF ACCOUNT BEFORE THE AO. THE AO COULD NOT FIND ANY DEFECT IN THE ACCOUNTS MAINTAINED BY THE ASSESSEE IN ITS REGULAR BUSINESS. ACCORDING TO ASSESSEE, WITHOUT FINDING ANY FAULT AND REJECTING THE BOOKS OF ACCOUN T OF THE ASSESSEE, THE AO OUGHT NOT TO HAVE MADE ADDITIONS. FOR THE AFORESAID PROPOSITION OF LAW, THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT O F CALCUTTA IN ITA NO. 219 OF 2001 IN M/S. SWADESHI COMMERCIAL CO. LTD. VS. CIT DATED 18. 12.2008, WHEREIN THE GROUNDS OF APPEAL, WHICH WERE PREFERRED BY THE ASSESSEE WAS, WHETHER THE TRIBUNAL MISDIRECTED ITSELF IN LAW IN HOLDING THAT THE GROSS PROFIT WAS REQUIRE D TO BE ESTIMATED THOUGH THE BOOKS OF ACCOUNT WERE NOT REJECTED AND ITS PURPORTED FINDING IN THIS BEHALF ARE ARBITRARY, UNREASONABLE AND PERVERSE? . TO THE AFORESAID QUESTION OF LAW, THE HONBLE H IGH COURT ANSWERED THE FOLLOWING: FURTHERMORE SINCE THE RELEVANT FACT THAT THE BOOKS OF ACCOUNTS WERE NOT REJECTED AND HAD BEEN TAKEN INTO ACCOUNT FOR THE PURPOSE OF DECIDING THIS QUESTION WHICH HAS BEEN RAISED IN THIS APPEAL, WE ALLOW THE APPEAL AND ANSWER THE QUESTION IN THE AFFIRMATIVE IN FAVOUR OF THE ASSESSEE. 5. IN THE LIGHT OF THE AFORESAID DECISION OF THE HO NBLE CALCUTTA HIGH COURT, THE LD. AR ARGUED THAT WITHOUT FINDING ANY FAULT OR DISCREPANC Y IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE IN ITS REGULAR COURSE OF BUSINESS, THE AO OUGHT NOT TO HAVE MADE ESTIMATION AND OUGHT TO HAVE FOLLOWED PROCEDURE ENVISAGED IN SECTI ON 145(3) OF THE INCOME-TAX ACT, 1961 3 ITA NO.1482/KOL/2016 ASIT BARAN BISWAS, AY 2008-09 (HEREINAFTER REFERRED TO AS THE ACT) BEFORE MAKIN G ANY ESTIMATION AS DONE IN THIS CASE. WE NOTE THAT IT WAS A FACT THAT THERE WAS SOME DISCREP ANCIES NOTED BY THE AO AFTER GOING THROUGH THE P & L ACCOUNT VIS--VIS THE BOOKS OF A CCOUNT MAINTAINED BY THE ASSESSEE. THE AO HIMSELF FOUND FAULT WITH THE ASSESSEES FIGURES REFLECTED IN SALE AND PURCHASE IN THE P&L ACCOUNT AFTER GOING THROUGH THE BOOKS MAINTAINED BY THE ASSESSEE AND WHEN THE ASSESSEE WAS CONFRONTED OF THESE DISCREPANCIES, THE ASSESSEE PROMPTLY FILED THE RE-CASTED FINANCIALS BEFORE THE AO. WE NOTE THAT IN THE RE-CASTED FINAN CIALS, THE AO COULD NOT POINT OUT ANY FAULT OR DISCREPANCY. WITHOUT BRINGING OUT ANY DEF ECTS IN THE RE-CASTED FINANCIALS BROUGHT BEFORE THE AO, THE AO OUGHT NOT TO HAVE MADE ESTIMA TION WITHOUT RESORTING TO THE PROCEDURE LAID DOWN IN SECTION 145(3) OF THE ACT. MOREOVER, WE NOTE THAT THE AO HAS NOT GIVEN ANY REASON AS TO APPLY GP RATE OF 11.07%. MERELY BECAU SE THE ASSESSEE IN ITS ORIGINAL FINANCIALS HAD SHOWN 11.07% CANNOT BE THE SOLE BASIS FOR ADOPT ING 11.07% WHEN THE FACT OF THE MATTER WAS THAT IT WAS WRONGLY MADE ON THE BASIS OF MISTAK EN FIGURES IN SALES AS WELL AS PURCHASES. IN SUCH A SCENARIO, THE AO OUGHT TO HAVE ESTIMATED THE INCOME ONLY IF THERE WAS ANY VIOLATION OF SEC. 145(3) OF THE ACT. FURTHER, WE N OTE THAT THE AO HAS MADE THE ESTIMATION WITHOUT BRINGING ANY COMPARABLES TO JUSTIFY THE GP PERCENTAGE OF 11.07% WHEN THE ASSESSEE HAD SHOWN 7.49% WHICH ACTION OF AO WAS NOT WARRANTE D AND THE IMPUGNED ACTION OF THE LD. CIT(A) CONFIRMING THE SAME WITHOUT SHOWING ANY COGENT REASON CANNOT BE SUSTAINED AND, THEREFORE, WE DIRECT THE DELETION OF THE ADDIT ION OF RS.8,30,462/-. THEREFORE, THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 6. THE NEXT GROUND OF APPEAL RAISED BY THE ASSESSEE IS AGAINST THE ADDITION MADE U/S. 68 OF THE ACT OF RS.8,72,396/-. 7. BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSE SSMENT PROCEEDINGS, THE AO NOTED THAT ASSESSEE HAS DISCLOSED PURCHASE AGGREGATING TO RS.1 ,18,05,440/- FROM 26 PARTIES OUT OF WHICH PAYMENTS TO THE TUNE OF RS.67,85,858/- REMAIN ED OUTSTANDING TOWARDS 16 PARTIES. ACCORDING TO AO, OUT OF THE OUTSTANDING AMOUNT OF R S.67,85,858/- THE ASSESSEE COULD NOT CONFIRM THE TRANSACTION OF ANOTHER FOUR CREDITORS W HICH COMES TO A TOTAL AMOUNT OF RS.8,72,396/-, THEREFORE, HE MADE THE ADDITION. AG GRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO CONFIRM T HE SAME. AGGRIEVED, THE ASSESSEE IS BEFORE US. 4 ITA NO.1482/KOL/2016 ASIT BARAN BISWAS, AY 2008-09 8. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT DURING THE ASSESSMENT PROCEEDIN GS, THE AO NOTED THAT THE ASSESSEE HAS SHOWN SUNDRY CREDITORS TO THE TUNE OF RS.67,85,858/ -. SO THE AO ASKED THE ASSESSEE TO ESTABLISH THE SUNDRY CREDITORS BY FURNISHING DOCUME NTARY EVIDENCE TO PROVE THAT PURCHASES HAVE BEEN MADE BY THE ASSESSEE FROM THEM OR BY PROD UCING THE SUNDRY CREDITOR ITSELF. WE NOTE THAT THE AO HAD SENT A SHOW CAUSE NOTICE TO TH E ASSESSEE WHICH HAS BEEN REPRODUCED AT PAGE 2 OF THE AOS ORDER WHEREIN THE AO HAS STATED THAT THE TRANSACTION WITH FOUR SUNDRY CREDITORS TO THE TUNE OF RS.8,72,391/- COULD NOT BE ESTABLISHED BY THE ASSESSEE, SO, HE ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE AMOUNT OF RS.8,72,396/- COULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE REPLIED THAT HE IS A TRADER OF RAW JUTE WHICH IS AN AGRICULTURAL PRODUCE AND THE PURCHASES ARE GENERALL Y SETTLED IN CASH. IT WAS BROUGHT TO THE KNOWLEDGE OF THE AO THAT SINCE HE HAILS FROM THE DI STRICT OF NADIA AND THERE WAS DELAY IN RECEIPT OF PAYMENT FROM THE JUTE MILLS, THE PAYMENT S TOWARDS THE SALES OF JUTE GETS DELAYED. IT WAS BROUGHT TO THE KNOWLEDGE OF THE AO THAT MOST OF THE CREDIT PURCHASES ARE FROM THE NATIVE DISTRICT OF NADIA. IN ORDER TO PROVE THE VE RACITY OF THE CLAIM, THE ASSESSEE HAD PRODUCED THE HATCHASI BILLS AND FILED THE EVIDENCE AND PROOF OF THE CREDITORS. IT WAS ALSO BROUGHT TO THE KNOWLEDGE OF THE AO THAT THE ASSESSE E GOT THE SALE CONSIDERATION IN CHEQUE FROM THE JUTE MILLS AND, THEREFORE, ACCORDING TO AS SESSEE, THE FACT OF SALES OF JUTE TO JUTE MILLS IS CONFIRMED AND IT IS THE CONTENTION OF ASSESSEE T HAT WHEN THE SALES OF JUTE TOOK PLACE, THAT CANNOT HAPPEN WITHOUT MAKING PURCHASE OF JUTE FROM CREDITORS. ACCORDING TO ASSESSEE, THE AO DID NOT GIVE ANY CREDENCE TO THE AFORESAID CONTE NTION OF THE ASSESSEE AND MADE AN ADDITION OF RS.8,72,396/-. ON APPEAL, THE LD. CIT( A) CONFIRMED THE SAME EVEN AFTER GOING THROUGH THE REMAND REPORT SUBMITTED BY AO. WE NOTE THAT THE ASSESSEE IN ORDER TO PROVE THE IDENTITY OF THE SUNDRY CREDITORS FILED THE VOTERS I. D OF ALL THE FOUR CREDITORS (ALONG WITH LEDGERS) WHICH IS EVIDENT FROM PAGES 21 TO 30 OF TH E PAPER BOOK. COPIES OF THE PURCHASE BILLS FROM THESE PARTIES HAVE BEEN SEEN PLACED FROM PAGES 44 TO 50 OF THE PAPER BOOK. WE NOTE THAT THE MAIN PLEA OF THE ASSESSEE IS THAT THE CREDITS APPEARING IN THE NAME OF THE FOUR PERSONS DID NOT REPRESENT DEPOSIT OF CASH BY THEM W ITH THE ASSESSEE, WHEREAS THE CREDITS IN HIS BOOKS REPRESENTED THE VALUE OF THE GOODS SUPPLI ED BY THESE FOUR PARTIES TO THE ASSESSEE, THEREFORE, THESE ARE TRADE CREDITS AND SO THE ADDIT ION IN QUESTION CANNOT ATTRACT SECTION U/S. 68 OF THE ACT. WE NOTE THAT THE AO HAS ACCEPTED THE P URCHASE AND SALE FIGURES SHOWN BY THE 5 ITA NO.1482/KOL/2016 ASIT BARAN BISWAS, AY 2008-09 ASSESSEE. WHEN THE SALE FIGURES HAVE BEEN ACCEPTED BY THE AO, THE CORRESPONDING PURCHASES CANNOT BE IGNORED MERELY BECAUSE THE NOTICES U/S. 1 33(6) OF THE ACT WAS NOT RESPONDED OR THE NOTICES WERE RETURNED UNSERVED. WE NOTE THAT T HE ASSESSEE HAS PRODUCED EVIDENCE TO PROVE THE IDENTITY (VOTER I. CARD) AND GENUINENESS OF THE TRANSACTION BY PRODUCING THE LEDGER COPIES OF THESE PARTIES WHICH WE DISCUSSED A BOVE AND MOREOVER, THE AMOUNTS IN QUESTION REPRESENTED THE PURCHASES MADE BY THE ASSE SSEE ON CREDIT, WHICH IS NOTHING BUT TRADE CREDITS AND SO, THE ADDITION U/S. 68 OF THE A CT CANNOT BE FASTENED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. WE RELY ON THE ORDER OF THE HONBLE ALLAHABAD HIGH COURT IN CIT VS. PANCHAM DASS JAIN (2006) 156 TAXMAN 507 (AL L), WHEREIN THEIR LORDSHIPS HAS HELD AS UNDER: 8. THE SUBMISSION IS MISCONCEIVED. THE TRIBUNAL HA S RECORDED A CATEGORICAL FINDING OF FACT BASED ON APPRECIATION OF MATERIALS AND EVIDENCE ON RECORD THAT THE ASSESSING OFFICER HAD ACCEPTED THE PURCHASES, SALES AS ALSO THE TRADING R ESULT DISCLOSED BY THE ASSESSEE. IT HAD RECORDED A FINDING THAT THE AFORESAID TWO AMOUNTS R E RESENTED THE PURCHASES MADE BY THE ASSESSEE ON CREDIT AND, THEREFORE, THE PROVISIONS O F SECTION 68 OF THE ACT COULD NOT BE ATTRACTED IN THE PRESENT CASE. WE FULLY AGREE WITH THE VIEW TAKEN BY THE TRIBUNAL ON THIS ISSUE, INASMUCH AS, ON THE BASIS OF THE FINDINGS RE CORDED BY IT THAT THESE TWO AMOUNTS REPRESENTED PURCHASES MADE BY THE RESPONDENT - ASSE SSEE ON CREDIT AND THE PURCHASES AND SALES HAVING BEEN ACCEPTED BY THE DEPARTMENT, THE Q UESTION OF ADDITION OF THE AFORESAID TWO AMOUNTS UNDER SECTION 68 OF THE ACT DID NOT ARISE I NASMUCH AS THE PROVISION OF SECTION 68 OF THE ACT WOULD NOT BE ATTRACTED ON THE PURCHASES MAD E ON CREDIT. 9. IN THE LIGHT OF THE ABOVE FACTS, WE NOTE THAT TH E ASSESSEE HAS DISCLOSED PURCHASED AGGREGATING TO RS.1,18,05,440/- FROM 26 PARTIES OUT OF WHICH PAYMENT TO THE TUNE OF RS.67,85,858/- REMAINED OUTSTANDING TOWARDS 16 PART IES. OUT OF THE SAID AMOUNT ONLY RS.8,72,396/- WAS ADDED BY THE AO AND ALL THE OTHER SUNDRY CREDITORS HAVE CONFIRMED TO HAVE SOLD JUTE ON CREDIT. ONLY IN RESPECT OF FOUR P ARTIES THE CONFIRMATION TO THE SATISFACTION OF THE AO COULD NOT BE FILED NU THE ASSESSEE. THE AO HAS DISBELIEVED THE DOCUMENTS PRODUCED BY THE ASSESSEE EVEN IN THE REMAND REPORT BY RELYING ON THE ITIS REPORT STATING THAT THE CREDITORS WHEN CONFRONTED BY HIM WERE BEHA VING AS IF THEY WERE TUTORED. IF THE AO HAD DOUBTED THE CREDITORS AS PER THE REPORT OF THE ITI THEN, IN ALL FAIRNESS SHOULD HAVE GIVEN A COPY OF THE ITI REPORT WHICH IS ADVERSE AGAINST THE ASSESSEE AND SHOULD HAVE GIVEN AN OPPORTUNITY TO THE ASSESSEE TO REBUT OR EXPLAIN THE FACTS. AFTER DOING THAT STILL IF THE AO DISBELIEVED THE ASSESSEE, THEN HE SHOULD HAVE SUMMO NED THESE CREDITORS TO HIS OFFICE AND THEN THE ASSESSEE SHOULD HAVE BEEN GRANTED AN OPPOR TUNITY TO CROSS EXAMINE THEM. WITHOUT DOING SO, THE REMAND REPORT BASED ON ITIS REPORT C AN AT BEST BE CALLED A HEAR-SAY EVIDENCE 6 ITA NO.1482/KOL/2016 ASIT BARAN BISWAS, AY 2008-09 WHICH CANNOT BE RELIED UPON FOR DRAWING ADVERSE INF ERENCE AGAINST THE ASSESSEE, WITHOUT BEING TESTED BY CROSS EXAMINATION AS HELD BY THE HO NBLE SUPREME COURT IN ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF CENTRAL EXCI SE 62 TAXMAN.COM 3. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE A RE INCLINED TO ALLOW THE APPEAL OF THE ASSESSEE AND DIRECT THE DELETION OF RS. 8,72,396/-. THIS GROUND OF APPEAL OF ASSESSEE IS ALSO ALLOWED. 10. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 06.09.2017 SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 6TH SEPTEMBER, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT ASIT BARAN BISWAS, C/O, S. N. GHOSH & A SSOCIATES, ADVOCATES, SEVEN BROTHERSLODGE, PO BUROSHIBTALA, PS. CHINSURAH, DIST. HOOGHLY, PIN-712 105. 2 RESPONDENT ITO, WARD-1(2), HOOGHLY. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY