ITO, Ward - 11(4), Kolkata, Kolkata V. Royal Securities Guarding Pvt. Ltd., Kolkata

ITA 1519/KOL/2010

• Counselvise Citation: 151923514 RSA 2010
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 02-08-2010
• Court: TRIBUNAL
• Department Lawyers: P S DUTTA
• Assessee Lawyers: S K SARKAR
• Keywords: Assessment record; Revised return
• Section: 143(3)

Judgement Text

1 , A , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- A , KO LKATA [ . . . . . .. . , ,, , . . . . . .. . !' !' !' !' , # ] BEFORE SHRI B.R.MITTAL, JUDICIAL MEMBER & SRI S.V.MEHROTRA, ACCOUNTANT MEMBER $ $ $ $ / I.T.A. NO. 1519 (KOL) OF 2010 %& '( / ASSESSMENT YEAR 2004-05 INCOME-TAX OFFICER, WARD-11(4), KOLKATA. ROYAL SECURITIES GUARDING P.LTD KOLKATA. (PAN-AACCR4100R) (+, /APPELLANT ) - % - - VERSUS - ( /0+,/ RESPONDENT ) C.O. NO. 143 (KOL) OF 2010 $ $ $ $ / I.T.A. NO. 1519 (KOL) OF 2010 %& '( / ASSESSMENT YEAR 2004-05 ROYAL SECURITIES GUARDING P.LTD. KOLKATA. (PAN-AACCR4100R) INCOME-TAX OFFICER, WARD-11(4) KOLKATA. ( /APPLICANT ) - % - - VERSUS - ( /0+,/ RESPONDENT ) FOR THE DEPARTMENT : SRI P.S. DUTTA FOR THE ASSESSEE : SRI S.K. SARKAR 1 / ORDER ( . . . . . .. . ), (B.R.MITTAL), JUDICIAL MEMBER : THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION O F THE ASSESSEE BOTH ARE DIRECTED AGAINST THE ORDER OF LD. C.I.T.(A)-XII, KO LKATA DATED 27.05.2010 PERTAINING TO ASSESSMENT YEAR 2004-05. FOR THE SAKE OF CONVENIEN CE, THIS APPEAL AND THE CROSS OBJECTION ARE DISPOSED OFF BY THIS CONSOLIDATED ORD ER. 2. THE ONLY GROUND RAISED IN THIS APPEAL BY THE DE PARTMENT READS AS UNDER :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN CANCELING ADDITION MADE U/S. 69A BY DIRECTING ESTIMATED PROFIT @ 10% O F SUCH UNDISCLOSED DEPOSITS DESPITE CONCEDING THAT THE ASSESSEE HAD FAILED TO P ROVE GENUINENESS OF EXPENDITURE. 2 3. THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING SECURITY SERVICES TO VARIOUS CLIENTS. IT FILED RETURN FOR THE ASSESS MENT YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF RS.13,253/-, WHICH WAS PROCESSED U/ S. 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS REOPENED U/S.148 OF THE ACT AND ASSESSMENT WAS COMPLETED U/S. 147/ 143(3) OF THE ACT ON A TOTAL INCOME OF RS .24,56,230/- MAKING THEREBY ADDITION OF RS.23,28,601/-, INTER ALIA, ON ACCOUNT OF UNDISCLOSED INCOME U/S. 69A OF THE ACT. IN RESPONSE TO NOTICE U/S. 148 OF THE ACT, THE ASSESSEE ADMITTED THE ENTIRE DEPOSIT OF RS. 23,28,601/- IN THE UNDISCLOSED BANK ACCOUNT AS RECEIPTS FROM CLIENTS FOR PROVIDING SECURITY SERVICES. THE ASSESSEE ALSO CLA IMED EXPENDITURE AMOUNTING TO RS.22,84,504/- AGAINST SUCH RECEIPTS TOWARDS ADMINI STRATIVE EXPENSES AND COST OF DRESSES & SHOES. TO VERIFY THE CLAIM OF THE ASSESS EE, THE A.O. CONDUCTED ENQUIRIES WITH RESPECT TO PAYMENT MADE TO ONE MAHESH KR. AGAR WAL TOWARDS DRESS & SHOES AND PAYMENTS TO SECURITY GUARDS, THE DETAILS OF WHICH H AVE BEEN ELABORATED AT PAGES 4 TO 23 OF THE ASSESSMENT ORDER. ON SUCH ENQUIRY, THE A.O. HELD THE EXPENSES CLAIMED BY THE ASSESSEE ON THE ABOVE ACCOUNTS AS NOT GENUINE AND T HUS DISALLOWED THE ENTIRE CLAIM OF EXPENSES MADE AGAINST UNDISCLOSED RECEIPTS OF RS.23 ,28,601/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE U/S. 69A OF THE AC T. 4. ON APPEAL, THE LD. C.I.T.(A) AFTER PERUSING THE ASSESSMENT ORDER AND CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND CASE LAWS RELIE D UPON IN SUPPORT OF SUCH SUBMISSIONS OBSERVED THAT THE ASSESSEE COULD NOT PR ODUCE ORIGINAL BILLS, WAGES/SALARIES REGISTER AND EVEN PROPER IDENTITY OF GUARDS EMPLOYE D BY IT WITH THEIR PHOTOGRAPHS. LD. C.I.T.(A) FURTHER POINTED OUT THAT THE A.O. COULD H AVE VERIFIED THE PAYMENTS MADE TO MAKESH KR. AGARWAL FOR DRESSES ETC. FROM THE HIS AS SESSMENT RECORDS. HE FURTHER OBSERVED THAT THE ASSESSEE AS WELL AS A.O. HAD NOT FURNISHED ANY COMPARABLE CASES OF RATE OF PROFIT IN SIMILAR LINE OF BUSINESS, THOUGH THE ASSESSEE PLEADED FOR TAKING NET PROFIT RATE AT 5% OF THE GROSS RECEIPTS. CONSIDERIN G THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. C.I.T.(A) ESTIMATED THE RATE OF NET PROFI T AT 10% ON BOTH DISCLOSED AND UNDISCLOSED RECEIPTS OF THE ASSESSEE AND DIRECTED T HE A.O. ACCORDINGLY. WHILE DOING SO, LD. C.I.T.(A) OBSERVED AS UNDER :- 3 I HAVE CAREFULLY PERUSED THE IMPUGNED ASSESSMENT O RDER, SUBMISSIONS MADE AND THE JUDICIAL DECISIONS RELIED UPON BY THE LD. AR. I AM CONVINCED THAT THE RECORDS AND EVIDENCES IN RESPECT OF TRANSACTIONS ROUTED THROUGH UNDISCLOSED BANK ACCOUNT ARE NOT PROPERLY MAINTAINED AND PERHAPS THAT MAY BE THE REA SON FOR INITIALLY NOT DISCLOSING THE SAID BANK ACCOUNT. THE APPELLANT COULD NOT PRODUCE ORIGINAL BILLS, ORIGINAL WAGES/ SALARIES REGISTER AND EVEN THE PROPER IDENTITY OF P ERSONS EMPLOYED BY HIM AS SECURITY GUARDS. EVEN THE PHOTOGRAPHS OF THE GUARDS ALLEGEDL Y EMPLOYED BY THE APPELLANT COULD NOT BE PRODUCED. ACCORDINGLY, I ALSO DO NOT FULLY R ELY UPON THE CORRECTNESS OF THE RECORDS7 PRODUCED IN THIS REGARD BY THE APPELLANT T HOUGH THERE MIGHT BE PRACTICAL DIFFICULTIES FOR THE APPELLANT TO PRODUCE SECURITY GUARDS FOR VERIFICATION AS THERE IS A TENDENCY TO CHANGE THE JOBS FREQUENTLY. FURTHER IN RESPECT OF PAYMENTS MADE TO MR. MAHESH KR. AGARWAL REGARDING THE DRESSES ETC, THE A .O. COULD HAVE VERIFIED FROM THE ASSESSMENT RECORDS OF MR. AGARWAL. HOWEVER, IT IS VERY IMPORTANT TO NOTE HERE THAT SO FAR AS RECEIPT PORTION OF THE UNDISCLOSED BANK ACCOUNT IS CONCERNED, THERE IS NO DISPUTE BETWEEN THE A.O. AND THE APPELLANT IN RESPECT OF QUANTUM AND NATURE OF THE R ECEIPTS OF THE SAID UNDISCLOSED BANK ACCOUNT. IN OTHER WORDS, IT IS UNDISPUTED FACT THAT THE RECEIPTS IN THE UNDISCLOSED BANK ACCOUNT WERE IN THE NATURE OF CHARGES FOR PROVIDING SECURITY SERVICES AND NOTHING ELSE. THE COMPARATIVE CHART OF EXPENSES VIS--VIS DISCLOSED AND UNDISCLOSED RECEIPTS AS FURNISHED BY THE APPELLANT HIMSELF IS AS UNDER: DISCLOSED % OF RECEIPT UNDISCLOSED % OF RECEIPT (RS.) (RS.) RECEIPTS 2395973 2328601 EXPENDITURE COST OF DRESSES 232837 1 0% 286000 12% DIRECT EXPENDITURE 1700972 71% 1963845 84% 1933179 2249845 THE CHART FURNISHED BY APPELLANT ITSELF SHOWS THAT THE RATIO OF DIRECT EXPENSES TO GROSS RECEIPTS IS QUITE HIGHER IN RESPECT OF UNDISC LOSED RECEIPTS AND THEREFORE THE CLAIM OF THE APPELLANT CANNOT BE ACCEPTED IN TOTO. SIMILA RLY, THE STAND OF A.O. THAT NO EXPENSES HAVE BEEN INCURRED FOR EARNING THE UNDISCL OSED PART OF RECEIPTS CANNOT BE ACCEPTED BECAUSE, THE ACTION OF A.0 IN TREATING THE WHOLE RECEIPTS IN UNDISCLOSED BANK ACCOUNT AS INCOME OF THE APPELLANT IS CONSIDERED AS CORRECT, THE RATE OF NET PROFIT OF THE DISCLOSED AND UNDISCLOSED PORTION TAKEN TOGETHER WO ULD BE MORE THAN 50% OF THE GROSS RECEIPTS. BY NO STRETCH OF IMAGINATION, THIS RATE O F NET PROFIT IS LIKELY TO BE IN THE BUSINESS OF PROVIDING SECURITY SERVICES, THE A.O. H ELD THAT THE EXPENSES REQUIRED FOR EARNING DISCLOSED PORTION OF RECEIPTS HAVE BEEN ALR EADY DEBITED IN DISCLOSED EXPENSES CLAIMED AGAINST DISCLOSED RECEIPTS WHEREAS APPELLAN T CLAIMS THAT 95% OF UNDISCLOSED GROSS RECEIPTS HAVE BEEN INCURRED AS EXPENSES OVER AND ABOVE WHAT ARE DISCLOSED EXPENSES. IN MY OPINION THE TRUTH LIES IN BETWEEN T HE TWO CONTENTIONS. THE A.O. AND THE APPELLANT BOTH HAD NOT FURNISHED ANY COMPARABLE CASES OF RATE OF PROFIT IN SIMILAR 4 LINE OF BUSINESS AND THOUGH THE AR PLEADED FOR TAKI NG NET PROFIT RATE AT 5% OF GROSS RECEIPTS BECAUSE OF FIRST YEAR OF THE OPERATION OF THE APPELLANT. I AM OF THE OPINION THAT CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE, THE ESTIMATION OF RATE OF NET PROFIT @ 10% OF GROSS RECEIPTS (BOTH DI SCLOSED & UNDISCLOSED PORTION) AFTER CONSIDERING BOTH DIRECT AND INDIRECT EXPENSES WOULD FAIRLY MEET THE ENDS OF JUSTICE. THE A.O. IS DIRECTED TO ACT ACCORDINGLY. GROUND NO. 1 IS PARTLY ALLOWED. BEING AGGRIEVED, THUS, THE DEPARTMENT HAS FILED THI S APPEAL AND THE ASSESSEE HAS ALSO FILED CROSS OBJECTION. 5. AT THE TIME OF HEARING BEFORE US, THE LD. A/R S UBMITTED THAT THE ENTIRE DEPOSIT OF RS.23,28,601/- MADE IN UNDISCLOSED BANK ACCOUNT MAI NTAINED WITH HDFC BANK IS NOT DISPUTED BY THE ASSESSEE. THE A.O. WITHOUT CONSIDE RING THE EXPENDITURE INCURRED FOR EARNING SUCH UNDISCLOSED INCOME, WHICH WAS TO THE E XTENT OF RS.22,84,504/-, ADDED BACK THE ENTIRE RECEIPTS TO THE TOTAL INCOME OF THE ASSESSEE U/S. 69A OF THE ACT. HE FURTHER SUBMITTED THAT IN THE SUCCEEDING ASSESSMENT YEAR, I.E. A.Y. 2007-08, PROFIT @ 6% WAS CONSIDERED BY THE SAME A.O. AND, THEREFORE, THE ADDITION SHOULD BE RESTRICTED TO 6% OF THE UNDISCLOSED RECEIPTS AS AGAINST 10% ES TIMATED BY LD. C.I.T.(A). A COPY OF ASSESSMENT ORDER FOR A.Y. 2007-08 HAS ALSO BEEN FIL ED BEFORE US. 6. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTAT IVE SUBMITTED THAT IN THE SUBSEQUENT ASSESSMENT YEAR, I.E. A.Y. 2007-08, THE UNDISCLOSED RECEIPT WAS OF A MEAGER AMOUNT OF RS.2,87,785/- AND, THEREFORE, IT I S NOT COMPARABLE TO THE UNDISCLOSED INCOME OF THE ASSESSMENT YEAR UNDER CONSIDERATION W HERE THE UNDISCLOSED RECEIPT WAS TO THE TUNE OF RS.23,28,601/-. HE SUBMITTED THAT TH E SAID UNDISCLOSED RECEIPT WAS DEPOSITED IN THE UNDISCLOSED BANK ACCOUNT AND THE A .O. WAS JUSTIFIED TO CONSIDER THE ENTIRE DEPOSIT AS UNEXPLAINED INCOME OF THE ASSESSE E U/S. 69A OF THE ACT. 7. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL PLACED ON RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITI ES BELOW. IN THIS CASE, PROCEEDING U/S. 148 OF THE ACT WAS INITIATED AND IN RESPONSE T O NOTICE U/S. 148 OF THE ACT, THE ASSESSEE FILED REVISED RETURN ADMITTING THE ENTIRE DEPOSIT OF RS.23,28,601/- MADE IN UNDISCLOSED BANK ACCOUNT MAINTAINED WITH HDFC BANK WHICH THE ASSESSEE CLAIMED TO HAVE BEEN RECEIVED FROM CLIENTS FOR PROVIDING SECUR ITY SERVICES TO THEM. THE ASSESSEE 5 ALSO CLAIMED EXPENDITURE AMOUNTING TO RS.22,84,504/ - AGAINST SUCH UNDISCLOSED RECEIPTS TOWARDS ADMINISTRATIVE EXPENSES AND TO MEE T THE COST OF DRESSES & SHOES FOR THE GUARDS. TO VERIFY THE CLAIM OF THE ASSESSEE, TH E A.O. ISSUED NOTICE U/S. 131 OF THE ACT TO MAHESH KR. AGARWAL, TO WHOM PAYMENT OF RS.2, 86,000/- IN CASH WAS MADE BY THE ASSESSEE FOR SUPPLYING DRESS ETC. FOR SECURITY GUARDS. HOWEVER, THAT PERSON DID NOT APPEAR NOR THE ASSESSEE COULD PRODUCE HIM BEFORE TH E A.O. DESPITE SEVERAL OPPORTUNITIES PROVIDED. THE A.O. ALSO ISSUED SUMMON S U/S. 131 TO TEN SECURITY GUARDS OUT OF TOTAL 77 AND EXCEPT TWO PERSONS, NO ONE EITH ER APPEARED OR TRACEABLE BY THE INSPECTOR. ACCORDING TO THE A.O. FURTHER, THE ASSES SEE COULD NOT PRODUCE ORIGINAL BILLS OR WAGE REGISTER AND EVIDENCES IN RESPECT OF INDIRE CT EXPENSES CLAIMED BY THE ASSESSEE. IN THE ABOVE CIRCUMSTANCES, THE A.O. HELD THE EXPEN DITURE CLAIMED BY THE ASSESSEE AS NOT GENUINE AND THUS ADDED BACK THE ENTIRE RECEIPTS OF RS.23,28,601/- DEPOSITED IN THE UNDISCLOSED BANK ACCOUNT AS ASSESSEES UNEXPLAINED MONEY U/S. 69A OF THE ACT. THE LD. C.I.T.(A) DID NOT ENDORSE THE STAND OF THE A.O. THAT NO EXPENSES HAVE BEEN INCURRED FOR EARNING THE UNDISCLOSED PART OF RECEIPTS. IN T HAT CASE, THE RATE OF NET PROFIT ON BOTH DISCLOSED AND UNDISCLOSED PORTION OF RECEIPTS WOULD BE MORE THAN 50%, WHICH, ACCORDING TO HIM, IS ILLOGICAL IN THE LINE OF BUSIN ESS THE ASSESSEE INVOLVED. HE, THEREFORE, ESTIMATED THE RATE OF NET PROFIT @ 10% O F GROSS RECEIPTS (BOTH DISCLOSED & UNDISCLOSED PORTION) AFTER CONSIDERING DIRECT AND I NDIRECT EXPENSES CLAIMED BY THE ASSESSEE. 7.1. WE OBSERVE FROM PAGE-7 OF LD. C.I.T.(A)S ORD ER THAT AS PER BANK STATEMENT THERE WERE REGULAR MONTH-WISE CASH WITHDRAWALS TOTA LLING TO RS.22,82,716/- AGAINST DEPOSIT OF AMOUNTS IN THE UNDISCLOSED BANK ACCOUNT AGGREGATING TO RS.22,89,910/- AND, THEREFORE, IT CAN BE SAID THAT THE SAID WITHDRAWALS WERE UTILIZED TOWARDS ASSESSEES DIRECT AND INDIRECT EXPENSES IN RUNNING OF ITS SECU RITY GUARD SERVICES, MORE SO WHEN THE A.O. COULD NOT BRING ON RECORD ANYTHING CONTRARY AB OUT UTILIZATION OF SUCH WITHDRAWALS. IN OUR CONSIDERED OPINION, THEREFORE, THE A.O. WAS NOT JUSTIFIED IN ADDING BACK THE ENTIRE RECEIPTS OF RS.23,28,601/- AS UNEXP LAINED INVESTMENT U/S. 69A OF THE ACT. WE FURTHER OBSERVE THAT THE ENTIRE DEPOSIT MAD E IN THE UNDISCLOSED BANK ACCOUNT 6 WAS RECEIVED BY CHEQUES FROM THE CLIENTS AND THE EX PENDITURE CLAIMED TO HAVE BEEN INCURRED BY THE ASSESSEE FOR ITS BUSINESS PURPOSES HAS BEEN DESCRIBED ON PAGE-8 OF LD. C.I.T.(A)S ORDER. AS RIGHTLY POINTED OUT BY LD. C .I.T.(A), IF THE ACTION OF A.O. IN TREATING THE ENTIRE RECEIPTS IN UNDISCLOSED BANK AC COUNT AS INCOME OF THE ASSESSEE IS CONSIDERED TO BE CORRECT, THE RATE OF NET PROFIT OF THE DISCLOSED AND UNDISCLOSED PORTION TAKEN TOGETHER WOULD BE MORE THAN 50% OF THE GROSS RECEIPTS, WHICH IS UNLIKELY IN THE LINE OF BUSINESS THE ASSESSEE IS CARRYING ON, MORE SO WHEN THE A.O. HIMSELF FOR A.Y. 2007-08 HAS TAKEN THE NET PROFIT OF THE ASSESSEE AT 6%. THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , WE FIND NO INFIRMITY IN THE ORDER OF LD. C.I.T.(A) IN ESTIMATING THE NET PROFIT @ 10% ON THE AGGREGATE RECEIPTS OF BOTH THE DISCLOSED AND UNDISCLOSED PORTION. WE, THEREFORE, UPHOLD THE SAME AND DIRECT THE A.O. ACCORDINGLY. THE GROUND OF APPEAL OF THE DEPARTMENT , THEREFORE, FAILS. 8. THE ASSESSEE IN ITS CROSS-OBJECTION HAS DISPUTE D THE ESTIMATE OF NET PROFIT AT 10% BY THE LD. C.I.T.(A) AS AGAINST 5% DECLARED BY IT O N GROSS RECEIPTS. IN THE REVENUES APPEAL, WE FOR THE REASONS MENTIONED THEREIN HAVE A LREADY UPHELD THE ORDER OF LD. C.I.T.(A) IN ADOPTING THE RATE OF NET PROFIT AT 10% . THAT BEING SO, THE GROUND RAISED BY THE ASSESSEE IN ITS CROSS-OBJECTION STANDS DISMISSE D. 9. IN THE RESULT, THE APPEAL OF THE REVENUE AS WEL L AS CROSS-OBJECTION OF THE ASSESSEE BOTH ARE DISMISSED. ! 1 #2 3 2% 4 !5 THIS ORDER IS PRONOUNCED IN OPEN COURT ON 22.07.2011. SD/- SD/- ( . . . . . .. . !' !' !' !' ,) # ( . . . . . .. . ) (S.V.MEHROTRA) ACCOUNTANT MEMBER (B.R.MITTAL) JUDICIAL MEMBER ( (( (6# 6# 6# 6#) )) ) DATE: 22-07-2011 7 $ $ $ $ / I.T.A. NO. 1519 (KOL) OF 2010 & C.O.- 143 (KOL) OF 2010 1 7 /8 9 8':- COPY OF THE ORDER FORWARDED TO: 1. +, / THE APPELLANT : I.T.O., WARD-11(4), KOLKATA. 2 /0+, / THE RESPONDENT : M/S. ROYAL SECURITIES GUARDING PVT . LTD., 83/A, NAYAPATTY ROAD, KOLKATA-700 055. 3. 1% () : THE CIT(A)-XII, KOLKATA. 4. 1%/ THE CIT, KOL- 5 >4 /% / DR, ITAT, KOLKATA BENCHES, KOLKATA 6 GUARD FILE . 08 // TRUE COPY, 1%2/ BY ORDER, (DKP) ASSTT. REGISTRAR .