ITO, Ward - 50(4), Kolkata, Kolkata V. Shri Probir Roy, Kolkata

ITA 1524/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54734 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 02-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K PRAMANIK
• Keywords: Business income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE . . , ! '# '# '# '# /AND ' $# , ! ) [BEFORE SHRI S. V. MEHROTRA, AM & SRI MAHAVIR SINGH , JM] #% #% #% #% / I.T.A NO. 1524/KOL/2010 $&' '() $&' '() $&' '() $&' '()/ // / ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER, WD-50(4), KOLKATA VS. SHRI PRO BIR ROY, KOLKATA AUTO (PAN:ADKPR 7715 C) (+, /APPELLANT ) (-.+,/ RESPONDENT ) DATE OF HEARING: 29.11.2011 DATE OF PRONOUNCEMENT: 21.12.2011 FOR THE APPELLANT: SHRI A. K. PRAMANIK FOR THE RESPONDENT: SHRI SUBASH AGARWAL / / ORDER PER MAHAVIR SINGH, JM ( ' $# ' $# ' $# ' $#, , , , ! ! ! ! ) THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-XXXII, KOLKATA IN APPEAL NO.119/CIT(A)-XXXII/08-09/50(4)/KOL DATED 30.04.201 0. ASSESSMENT WAS FRAMED BY ITO, WARD-50(4), KOLKATA U/S.143(3) R.W.S. 145(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE H IS ORDER DATED 30.12.2008. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING ADDITION OF UNACCOUNTED SALES REGARDING RECHARGE PRODUCT OF AIRTEL OF RS.13,93,980/- AND ALSO PROFIT OF RS.55,759/-, THEREBY TOTAL DELETION OF RS.14,49,739 /-. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND: UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A)-XXXII, KOLKATA WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.14,49,739 /-. PURCHASE REGARDING RECHARGE PRODUCTS OF AIRTEL HAD BEEN ENTERED IN PURCHASE ACC OUNT, WHILE THE SALES CONSIDERATION RELATED TO THE RECHARGE PRODUCT HAD NOT BEEN ENTERE D IN SALES BOOK AND THE TOTAL SALES INCOME WAS SUPPRESSED. THE SALES AMOUNT SHOULD BE INCREASED BY RS.13,93,980/- (PURCHASE BY CHEQUE RS.13,93,980/- + PROFIT THEREON @ 4% ON RS.13,93,980/- I.E. RS.55,759/-). TOTAL SALES (RS.13,93,780 + RS.55,75 9) I.E. RS.14,49,739/- WAS NOT RECORDED IN SALES REGISTER AND WITH A VIEW TO REDUCE THE TAX LIABILITY AND THE SAME WAS ADDED BACK. 3. THE BRIEF FACTS ARE THAT ASSESSEE FILED ITS RETU RN OF INCOME FOR ASSESSMENT YEAR 2006-07 ON 27.10.2006 ALONG WITH AUDITED BALANCE SHEET AND P & L ACCOUNT. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY BY ISSUING NOTICE U/S. 143(2) OF THE ACT DATED 23.10.2007, WHICH WAS 2 ITA 1524/K/2010 SHRI PROBIR ROY. A.Y.06-07 SERVED ON 26.10.2007. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF MOBILE HANDSETS AND DECLARED FOLLOWING PURCHASES, SALES AND GROSS PROFIT: PURCHASE 1,01,52,207.40 SALE 1,03,93,291.78 GROSS PROFIT 3,09,544.38 NET PROFIT 2,16,972.43 THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEE DINGS WAS REQUIRED TO FURNISH THE LIST OF PARTIES FROM WHOM AGGREGATE PURCHASES EXCEEDING RS. 5 LACS WAS MADE DURING THE RELEVANT FY 2005-06. DURING THE COURSE OF SCRUTINY OF LIST OF PARTIES OF PURCHASES, AO NOTICED THAT ASSESSEE MADE PURCHASES REGARDING RECHARGE PRODUCT OF AIRTEL BY CHEQUE AMOUNTING TO RS.13,93,980/-, BY CASH RS.6,26,002/- AND ALSO CLAIMED INCENTIVE CL AIM OF RS.28,065/- FROM M/S.GOENKA MARKETING & SERVICES. ASSESSING OFFICER ALSO VERIFI ED LEDGER COPY OF M/S. GOENKA MARKETING & SERVICES AND VERIFIED TRANSACTIONS ENTERED WITH T HE ASSESSEE DURING THIS YEAR. THE ASSESSING OFFICER FROM SALES AND PURCHASES ACCOUNT NOTICED TH AT SALES ARE MADE ON ACCOUNT OF HANDSETS ONLY AND TRANSACTIONS OF SALE IN RESPECT TO RECHARG E PRODUCT OF AIRTEL WAS NOT RECORDED IN ITS BOOKS OF ACCOUNT. ACCORDINGLY, ASSESSING OFFICER A DDED THESE SALES OF RECHARGE PRODUCT OF AIRTEL AT RS.13,93,980/-, WHICH IS PURCHASE AMOUNT BY CHEQUE, INCLUDING PROFIT @ 4% AT RS.55,759/- BY REJECTING THE BOOKS OF ACCOUNT U/S. 145(3) OF THE ACT. THE ASSESSING OFFICER RECORDED THE REASONS AS UNDER: AS THE RECEIPTS AGAINST THESE PAYMENTS BY CHEQUE WH ICH HAS BEEN ENTERED IN PURCHASE ACCOUNT, WHILE THE SALES CONSIDERATION RELATED TO T HE RECHARGE PRODUCTS HAVE NOT BEEN ENTERED IN SALES BOOK, THE TOTAL SALES INCOME IS SU PPRESSED. AND THAT IS THE ANSWER OF THE QUESTION WHY THE GROSS PROFIT IS SO LOW. IN OTHER WORDS, NOT INCLUDING THE SALES CONSIDERATION OF THE SALE VALUE OF THE RECHARGE PRO DUCT HAS MADE THE ACCOUNTS BOOK INCOMPLETE AND THEREBY SHOWING INCORRECT PROFIT. AC CORDINGLY, THE BOOKS OF ACCOUNTS AND P&L ACCOUNT IS REJECTED UNDER SECTION 145(3) OF THE I. T. ACT. SINCE THE PROVISION U/S. 145(3) EMPOWERS A.O. TO COMPUTE THE INCOME OF BUSIN ESS OF ASSESSEE IN THE MANNER PROVIDED U/S. 144 OF THE I. T. ACT, I FEEL BUSINESS INCOME COMPUTED BY HIM CAN BE RECTIFIED IF THE SUPPRESSED AMOUNT OF INCOME WHICH IS COMPUTE D BELOW IS ADDED IN TOTAL BUSINESS INCOME COMPUTED BY HIM. PURCHASE BY CHEQUE 13,93,980 ADD PROFIT @ 4% 55,759 SUPPRESSION OF SALES RS.14,49,739 THE CREDIT SIDE OF P&L ACCOUNT IS TO BE INCREASED B Y RS.14,49,739/- AS THE SALES OF RECHARGE PRODUCT NOT RECORDED. PENALTY PROCEEDING U/S. 271(1)(C) SHALL BE INITIATED SEPARATELY. 3 ITA 1524/K/2010 SHRI PROBIR ROY. A.Y.06-07 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT( A), WHO DELETED THE ADDITION BY TREATING THIS ADDITION OF SALES AS BEING ADDITION M ADE ON ACCOUNT OF UNDISCLOSED PURCHASE BY GIVING FOLLOWING FINDINGS: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE A/R IN THIS REGARD. AS REGARDS THE PURCHASES OF RECHAR GE FACILITIES TO THE TUNE OF RS.13,93,980/- IS CONCERNED, THE ASSESSEE HAS ADMIT TED TO HAVE MADE THESE PURCHASES. THE A.O. HAS ALSO POINTED OUT THAT THE PAYMENT FOR THOSE PURCHASES WERE MADE BY THE ASSESSEE BY WAY OF CHEQUES. SINCE THE PURCHASES OF RS.13,93,980/- FROM GOENKA MARKETING AND SERVICES HAS BEEN ADMITTED BY THE ASSESSEE AND PAID FOR THROUGH PROPER BANKING CHANNELS, THE TREATMENT OF THE SAME BY THE A.O. AS UNDISCLOSED PU RCHASES IS NOT JUSTIFIED. IT IS NOT THE A.OS CLAIM THAT THE PAYMENT FOR SUCH PURCHASES WAS MADE BY THE ASSESSEE FROM HIS UNDISCLOSED SOURCES. IN FACT, IF THE ASSESEE HAD N OT RECORDED SUCH PURCHASES IN HIS ACCOUNTS, HIS PROFITS WOULD HAVE SWELLED BY THAT AM OUNT. SINCE IT IS ABUNDANTLY CLEAR FROM THE PERUSAL OF THE SALE BILLS REGARDING SALE O F MOBILE HANDSETS THAT THE RECHARGE VOUCHERS WERE PROVIDED BY THE ASSESSEE TO HIS CUSTO MERS FREE OF CHARGE ON SALE OF MOBILE PHONE HANDSETS. THEREFORE, THE ADDITION OF RS.13,93,980/- MADE BY THE A.O. DESERVES TO BE DELETED. AS REGARDS THE ADDITION OF SUM OF RS.55,759/- MADE BY THE A.O. BEING 4% PROFIT ON THE PURCHASES OF RS.13,93,980/- IT IS CLEAR THAT SUCH RECHARGE FACILITIES WERE PROVIDED BY THE ASSESSEE TO ITS CUSTOMERS FREE OF COST ALONG WITH NEW MOBILE HANDSETS SOLD BY HIM. THE A.O. HAS NOT BROUGHT ANYTHING ON RECORD TO SHOW THE ASSESSEE HAD MADE ANY SALES OUTSIDE THE BOOKS OF ACCOUNT. SINCE, AS DISCUSSED ABOVE, NO MOUNT WAS CHARGED FOR SUPPLYING RECHARGE VOUCHERS TO HIS CUSTOMERS BY TH E ASSESSEE, NO QUESTION OF ANY PROFIT ACCRUING ON SUCH GOODS ARISES, THEREFORE, THE ADDIT ION OF RS.55,759/- MADE BY THE A.O. IS MISCONCEIVED AND THEREFORE, THE SAME IS DELETED. AS A RESULT THE ADDITION OF RS.14,49,739/- IS DELE TED AND GROUND NO.2 OF THE APPEAL IS ALLOWED. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 5. BEFORE US LD. SR DR SHRI A. K. PRAMANIK STATED T HAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THIS ADDITION FOR THE REASON THAT THE PURC HASES REGARDING RECHARGE PRODUCT OF AIRTEL HAS BEEN ENTERED INTO PURCHASE ACCOUNT AND ALSO PAYMENT IS MADE BY CHEQUES. WHEREAS THE ASSESSEE HAS NOT RECORDED SALES CONSIDERATION RELAT ED TO RECHARGE PRODUCT IN ITS BOOKS OF ACCOUNT AS SALES AND HENCE, SALES TO THAT EXTENT IS SUPPRES SED. IT IS ALSO ARGUED THAT ONCE PURCHASES CLAIMED AS DEDUCTION, ASSESSEE CANNOT CLAIM THAT ON LY PROFIT IS TO BE ASSESSED. ACCORDING TO LD. SR DR, PROFIT IS TO BE ASSESSED BUT SUPPRESSED SALE IS ALSO TO BE INCLUDED IN THE INCOME. ACCORDING TO HIM, AO RIGHTLY MADE ADDITIONS BUT CIT (A SHOULD NOT HAVE DELETED THE SAME. ON THE OTHER HAND, THE LD. COUNSEL SHRI SUBASH AGARWAL ARGUED THAT RECHARGE FACILITIES PURCHASED FROM M/S. GOENKA MARKETING & SERVICES WERE ISSUED B Y THE ASSESSEE TO HIS CUSTOMERS FREE OF COST ON SALE OF MOBILE HANDSETS AND ACCORDING TO AS SESSEE, SUCH SCHEME WAS DEVISED TO SURVIVE IN THE COMPETITIVE MARKET OF MOBILE PHONES. ACCOR DING TO HIM, SUCH RECHARGE FACILITIES WERE 4 ITA 1524/K/2010 SHRI PROBIR ROY. A.Y.06-07 ISSUED FREE OF COST AND NO SALE ON THAT ACCOUNT WAS BOOKED SEPARATELY BY ASSESSEE. ON THIS, BENCH QUERIED FROM LD. COUNSEL TO GET US VERIFIED T HAT THE RECHARGE FACILITIES WERE GIVEN FREE OF COST BY ASSESSEE TO CUSTOMERS, EVEN THOUGH HE HAS P RODUCED SOME COPIES OF BILLS OF SALE BUT ON THESE IT IS WRITTEN THAT RECHARGE FACILITIES OF A P ARTICULAR AMOUNT IS GIVEN FREE OF COST BUT NO AMOUNT IS ATTRIBUTED TO THE SAME. DESPITE THIS, LD. COUNSEL STATED THAT FROM COPIES OF SALE BILLS, WHICH JUSTIFIED THAT RECHARGE VOUCHERS WERE ISSUED ALONG WITH MOBILE HANDSETS AND FOR THAT NO SEPARATE AMOUNT WAS CHARGED FOR SUCH RECHARGE VOUCH ERS. THESE WERE THE ARGUMENTS OF LD. COUNSEL. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. ADMITTED FACTS ARE THAT THE ASSESSEE HAS MADE PURCH ASES OF RECHARGE VOUCHERS OF AIRTEL AMOUNTING TO RS.13,93,980/- FROM M/S. GOENKA MARKET ING & SERVICES FOR WHICH AMOUNT WAS PAID BY CHEQUE AND PURCHASES WERE RECORDED IN THE BOOKS OF ACCOUNT AND CLAIMED DEDUCTION. THE ASSESSEE HAS NOT DISCLOSED SALES OF THESE RECHA RGE VOUCHERS IN ITS BOOKS OF ACCOUNTS BUT CLAIMED THAT SUCH RECHARGE FACILITIES WERE ISSUED T O HIS CUSTOMERS FREE OF COST AND NO SALE ON THAT ACCOUNT WAS BOOKED SEPARATELY. WE HAVE GONE TH ROUGH SOME OF COPIES OF BILLS PRODUCED BEFORE US AND FOUND THAT THE ASSESSEE HAS NOT RECOR DED ANY AMOUNT OF FREE RECHARGE VOUCHERS. FROM THE LIST OF PURCHASE PARTIES I.E. M/S. GOENKA MARKETING & SERVICES IT IS CLEAR THAT THE ASSESSEE HAD MADE PURCHASES RECHARGE PRODUCT OF AIR TEL OF RS.20,48,047/- AS UNDER: BY CHEQUE RS.13,93,980/- BY CASH RS. 6,26,002/- BY INCENTIVE & CLAIM RS. 28,065/- TOTAL : RS.20,48,047/- IT IS ALSO A FACT THAT THE ASSESSEE PURCHASED THESE RECHARGE PRODUCT AMOUNTING TO RS.13,93,980/- AND ALL PAYMENTS WERE MADE THROUGH CHEQUES AND ALSO CLAIMED THESE PURCHASES IN PURCHASE ACCOUNT AND CLAIMED THE SAME AS DEDUCTION. AS THE RECEIPT AGAINST RECHARGE PRODUCT MADE BY CHEQUE WAS ENTERED IN THE PURCHASE ACCOUNT, THE SAL E CONSIDERATION RELATED TO THESE RECHARGE PRODUCT HAVE NOT BEEN ENTERED IN THE SALE BOOK AND SALE OF THIS AMOUNT HAS BEEN SUPPRESSED BY THE ASSESSEE. THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE ENTIRELY ON WRONG PREMISE THAT THE PURCHASES ARE MADE THROUGH BANKING CHANNEL AND THE PURCHASES CANNOT BE TREATED AS UNDISCLOSED. WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HAS NO WHERE STATED THAT PURCHASES ARE UNACCOUNTED. HE CLEARLY ADMITTED THAT PURCHASE S ARE ACCOUNTED AND ASSESSEE HAS CLAIMED DEDUCTION OF SALE BUT SALES ARE SUPPRESSED AND ONCE THE SALES ARE SUPPRESSED THIS HAS TO BE ADDED TO THE TRADING ACCOUNT OF THE ASSESSEE AND CO NSEQUENTIAL GROSS PROFIT IS ALSO TO BE ADDED. 5 ITA 1524/K/2010 SHRI PROBIR ROY. A.Y.06-07 WE FIND NO INFIRMITY IN THE ORDER OF ASSESSING OFFI CER, HENCE WE CONFIRM THE SAME AND REVERSE THAT OF THE CIT(A). APPEAL OF THE REVENUE IS ALLOW ED. 7. IN THE RESULT, APPEAL OF REVENUE IS ALLOWED. 8. ORDER PRONOUNCED IN OPEN COURT ON 21.12.2011. SD/- SD/- . . ! ' ' ' ' $# $# $# $# , ! (S. V. MEHROTRA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( 0 0 0 0) )) ) DATED: 21ST DECEMBER, 2011 '12 $&34 $5' JD.(SR.P.S.) / 6 -$$7 87(9- COPY OF THE ORDER FORWARDED TO: 1 . +, / APPELLANT ITO, WARD-50(4), KOLKATA. . 2 -.+, / RESPONDENT, SHRI PROBIR ROY, 596, JESSORE ROAD, K OLKATA-700 074. 3 . $/& ( )/ THE CIT(A), KOLKATA 4. $/& / CIT, KOLKATA 5 . '$? -$& / DR, KOLKATA BENCHES, KOLKATA .7 -$/ TRUE COPY, /&@/ BY ORDER, #4 /ASSTT. REGISTRAR .