Smt. Asita Maity, Purba Medinipur V. I.T.O. Ward- 1, Haldia, Kolkata

ITA 1529/KOL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9324 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 21-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 31-08-2009
• Court: TRIBUNAL
• Department Lawyers: A K PRAMANIK
• Assessee Lawyers: S M SURANA
• Keywords: Business income; Depreciation; Capital receipt

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH B, KOLKATA () BEFORE . .. . . .. . , , , , , SHRI B.R.MITTAL, JUDICIAL MEMBER. /AND . .. .!' !'!' !'. .. . , #$ SHRI C.D.RAO, ACCOUNTANT MEMBER % % % % / ITA NO . 1529/KOL/2009 &' ()/ ASSESSMENT YEAR : 2005-06 (+, / APPELLANT ) SMT.ASITA MAITY (PAN : ADSPM 2391 D) - & - - VERSUS - . (./+,/ RESPONDENT ) I.T.O., WARD-1, HALDIA. +, 0 1 #/ FOR THE APPELLANT: SHRI S.M.SURANA ./+, 0 1 #/ FOR THE RESPONDENT: SHRI A.K.PRAMANIK #2 / ORDER ( (( ( . .. .!' !'!' !'. .. . ) )) ), , , , #$ PER SHRI C.D.RAO, AM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 27.05.2009 OF THE CIT(A)-XXXIII, KOLKATA PERTAINING TO ASSESSMENT YEA R 2005-06. 2. THE BRIEF FACTS OF THIS ISSUE ARE THAT WHILE DO ING THE ASSESSMENT U/S 144/143(3) THE AO HAS MADE ADDITION OF RS.10,91,191/- ON ACCOU NT OF UNDISCLOSED INVESTMENT AND FURTHER DISALLOWED A SUM OF RS.4,92,266/- ON ACCOUN T OF FUEL CHARGES AND RS.5,09,386/- ON ACCOUNT OF HIRE CHARGES BY OBSERVI NG AS UNDER :- A.UNDISCLOSED INVESTMENT : IT IS ASTONISHING TO FIND THAT THE BALANCE SHEET CO ULD BE PREPARED WITHOUT REFLECTION OF INVESTMENT MADE THAT TOO FROM A DISCL OSED BANK ACCOUNT. MORE SO, WHEN THE OPENING BALANCE AND CLOSING BALANCE OF THE BANK ACCOUNT WAS TALLYING WITH THE OPINION BALANCE AND CLOSING BALANCE AS REF LECTED IN THE BALANCE SHEET. IN FACT,THE ASSESSEE INTRODUCED CASH OF RS.1,60,000 /- ON 22-12-04, RS.1,60,000/- ON 23-12-04 RS.2,40,000/- ON 01-01-05 , RS.1,00,000/- ON 24-12- 04 AND RS.4,31,191/- ON 070 105 IN THE CASH BOOK AS IF THE CHEQUES ISSUED FOR INVESTMENT WERE CASH WITHDRAWAL FROM BANK. IN O RDER TO CONCEAL CASH 2 INTRODUCTION FROM UNDISCLOSED SOURCE SHE DID NOT DI SCLOSE THE SAID INVESTMENTS IN THE BALANCE SHEET B. FUEL CHARGES : IN THE ACCOUNT THE ASSESSEE CLAIMED FUEL CHARGES AT RS.I6,98,436/- AGAINST CONTRACT RECEIPT OF RS.51,19,570/- I.E. @ 33.17% OF THE CONTRACT RECEIPT. NO DOCUMENTS OR BOOKS OF ACCOUNT WERE PRODUCED IN SUPP ORT OF THE CLAIM. ACCORDINGLY THE RECORD OF ASSESSEE FOR THE F.Y.03-0 4 WAS EXAMINED AND IT WAS FOUND THAT DURING THE F.Y.03-04 THE ASSESSEE HAD CL AIMED FUEL CHARGES OF RS.3,5O,000/ AGAINST HIRE CHARGES RECEIPT RS.14,85 ,310/- I.E. @23.56% OF THE HIRE CHARGES RECEIPT. A LETTER DATED 03-12-2007 WAS ISSUED TO THE ASSESSEE INFORMING HER THAT FUEL CHARGES EXPENSES TO THE EXT ENT OF RS.4,92,266/- GOING TO BE DISALLOWED ON THE BASIS OF HER CLAIM MADE DURING THE F.Y.03-04. SHE WAS ALSO ASKED TO MAKE WRITTEN SUBMISSION AGAINST THE C ONTEMPLATED DISALLOWANCE WITH PROPER DOCUMENTS AND BOOKS OF ACCOUNT. THE ASS ESSEE FAILED TO MAKE ANY COMPLIANCE. ACCORDINGLY I RESTRICT THE CLAIM OF FUE L CHARGES TO THE EXTENT OF RS.12,O6,170/-, I.E. @23.56% OF THE CONTRACT RECEIP T, AND DISALLOW RS.4,92,266/-. C. HIRE CHARGES : IN THE ACCOUNT THE :ASSESSEE CLAIMED HIRE CHARGES A T RS.25,46,928/-. NO DOCUMENTS OR BOOKS OF ACCOUNT WERE PRODUCED IN SUPP ORT OF THE CLAIM. A LETTER DATED 03.12 2007 WAS ISSUED TO THE ASSESSEE INFORMI NG HER THAT FUEL CHARGES EXPENSES TO THE EXTENT RS.5,09,386/- WAS GOING TO B E DISALLOWED FOR WANT OF DOCUMENTS AND BOOKS OF ACCOUNT. SHE WAS ALSO ASKED TO MAKE WRITTEN SUBMISSION AGAINST THE CONTEMPLATED DISALLOWANCE WI TH PROPER DOCUMENTS AND BOOKS OF ACCOUNTS. THE ASSESSEE FAILED TO MAKE ANY COMPLIANCE. ACCORDINGLY, 20% OF RS.25,46,928/- I.E. RS.5,09,386/- IS DISALLO WED AND ADDED BACK TO THE TOTAL INCOME. 2.1. ON APPEAL, THE LD. CIT(A) HAS CONFIRMED THE SA ME BY MAINLY CONTENDING THAT UNDISCLOSED INVESTMENT : IT IS AN UNDISPUTED FACT THAT INVESTMENTS HAVE BEEN MADE BY THE ASSESSEE AND THESE ARE NOT REFLECTED IN THE BALANCE SHEET ON THE ASSETS SIDE. THESE ARE CLAIMED TO BE OUT OF DISCLOSED BANK ACCOUNT HENCE T HESE SHOULD HAVE NECESSARILY FOUND A PLACE ON THE BALANCE SHEET ON T HE ASSETS SIDE. IF THE BALANCE SHEET IS REDRAWN INCORPORATING THE ASSETS, THE LIAB ILITY SIDE WILL BE LESS BY THE SAME AMOUNT. IT IS NOT A CASE THAT THE BANK BALANCE S ARE HIGHER BY THE SAME AMOUNT AS THE BALANCE TAKEN IS THE CORRECT BALANCE IN THE BANK AT THE YEAR END. HENCE THE ONLY WAY IN WHICH THE ASSETS & LIABILITY SIDE WILL MATCH IS WHEN : 1) THERE IS AN UNDISCLOSED LIABILITY, WHICH HAS FIN ANCED THE ASSETS. 2) THE PROFITS ARE UNDERSTATED BY THE SAME AMOUNT A ND THIS HAS FINANCED THE ASSETS. 3) THE CAPITAL A/C IS NOT PROPERLY DRAWN I.E. THERE MAY BE CAPITAL RECEIPTS. THE ASSESSEE HAS NOT CLAIMED EXISTENCE OF ANY LIABI LITY OR CAPITAL RECEIPTS. IT HAS REFRAINED FROM PROVIDING THE BOOKS OF ACCOUNTS/ EVIDENCES BEFORE A/O AND 3 ALSO BEFORE ME. THE ONLY CONCLUSION IS THAT THE ASS ETS ARE FINANCED BY AN UNDISCLOSED SOURCE OR OUT OF UNDISCLOSED PROFITS WHETHER FROM THE BUSINESS OR OTHERWISE. IN ANY CASE THE INVESTMENTS ARE UNRECORD ED INVESTMENTS AND THEREFORE WILL HAVE TO BE CONSIDERED AS INCOME OF T HE ASSESSEE. HENCE THE ACTION OF THE AO IS TO BE UPHELD. THE ADDITION IS S USTAINED. THE CLAIM OF THE ASSESSEE THAT THE CASH FLOW STATEM ENT AS SHOWN BY THE AO SHOULD INCLUDE THE DEPRECIATION OF ALL EARLIER YEAR S IS NOT ACCEPTABLE SINCE THE AO HAS TAKEN THE OPENING AND CLOSING CASH BALANCES OF THE YEAR AND THEREFORE ONLY THE DEPRECIATION FOR THE YEAR WILL ACCRUE AS C ASH IN THE HANDS OF THE ASSESSEE AND THIS HAS BEEN CONSIDERED BY THE AO. FUEL CHARGES AND HIRE CHARGES : IN THE COUNTER COMMENTS, THE A/R HAS SUBMITTED THAT THE DISALLOWANCE FOR HIRE CHARGES AND FUEL CHARGES ARE ARBITRARY AND HIGHLY U NREASONABLE AND THEREFORE LIABLE TO BE DELETED. SUBSEQUENT TO THE RECEIPT OF REMAND REPORT THE ASSESSEE WAS PROVIDED OPPORTUNITY BY THE UNDERSIGNED TO PROD UCE BOOKS OF ACCOUNTS AND RELATED EVIDENCES/VOUCHERS FOR ITS CLAIM OF FUEL CH ARGES AND HIRE CHARGES. THE A/R AS HAS BEEN MENTIONED EARLIER ALSO ADMITTED THA T HE WAS NOT IN A POSITION TO PRODUCE ANY EVIDENCE IN RESPECT OF FUEL CHARGES/HIR E CHARGES OR THE BOOKS OF ACCOUNT. THE DETERMINATION OF INCOME HAS TO BE REVI EWED IN THIS CONTEXT. IN THE CASE OF THE ASSESSEE, THE BOOKS HAVE BEEN REJECTED BECAUSE THEY WERE NOT PRODUCED FOR VERIFICATION. THE BEST JUDGEMENT ASSES SMENT HAS BEEN MADE NOT AS A PERCENTAGE OF THE TURNOVER, BUT BY COMPARING T HE EXPENSES (AS A PERCENTAGE OF GROSS RECEIPT) WITH THE PRECEDING YEAR. THE ASSE SSING OFFICER HAS ANALYSED THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE, COMPARED IT TO HER OWN IMMEDIATELY PRECEDING YEAR PROFIT & LOSS A/C, FOUND THAT AS A P ERCENTAGE, THE EXPENSES ON FUEL AND HIRING ARE EXCESSIVE AND LIMITED THE SAME. THE ASSESSEE ON THE OTHER HAND DOES NOT PRODUCE BOOKS OF ACCOUNTS, VOUCHERS/B ILLS ETC TO SUBSTANTIATE ITS CLAIM; RATHER ADMITS THAT HE CANNOT PRODUCE THEM. U NDER THESE CIRCUMSTANCES THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE EXPENSES, PARTLY, IS TO BE UPHELD. THE ACTION IS NOT CAPRICIOUS AS CLAIMED BUT BASED ON PRECEDING YEAR RECORDS OF THE ASSESSEE ITSELF. EVEN WHILE DETERMIN ING THE INCOME AS A PERCENTAGE, THE EARLIER YEAR RECORDS ARE REQUIRED T O BE COMPARED. THE AO HAS NOT ONLY UNDERTAKEN THE SAME EXERCISE BUT HAS GONE ONE STEP AHEAD. HE HAS TAKEN INTO CONSIDERATION ITEMS OF INDIVIDUAL EXPENS ES AND ANALYSED THEM. NO FAULTS CAN BE FOUND IN THE ACTION OF THE AO WHO HAS ONLY BEEN MORE ACCURATE. THE DETERMINATION OF THE BUSINESS INCOME IS ON A SO UND FOOTING. OPPORTUNITIES AT ASSESSMENT/REMAND/APPEAL STAGE ARE NOT AVAILED B Y THE ASSESSEE. THE ACTION OF THE AO IS UPHELD. THE ADDITION IS SUSTAIN ED. 2.2. AGGRIEVED BY THIS THE ASSESSEE IS IN APPEAL BE FORE US. 3. AT THE TIME OF HEARING THE LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE HAS SUBMITTED THAT 4 THE AMOUNTS AS DISCUSSED AT PAGE TWO OF THE ASSESS MENT ORDER UNDER THE HEADING UNDISCLOSED INVESTMENTS ARE INDISPUTABLY OR IGINATED FROM THE BANK ACCOUNT VIDE ACCOUNT NO.CD-1257 OF CENTRAL BANK OF INDIA, HALDIA BRANCH. THE STATEMENT OF THE SAID BANK ACCOUNT WAS FURNISHE D BEFORE THE INCOME TAX OFFICER AND THE SOURCE OF RS.10,91,191.00 CAN CLEAR LY BE SEEN IN THAT BANK STATEMENT. SO THERE IS NO DISPUTE REGARDING THE SOU RCE OF THAT PARTICULAR AMOUNT. THE OMISSION OF THE INVESTMENT FROM THE BALANCE SHE ET OF THE ASSESSEE AS ON 31.03.2005 CAUSED DUE TO NON-AVAILABILITY OF THE BA NK STATEMENT AND THEREFORE THE FULL PARTICULARS OF THE BANK STATEMENT COULD NO T BE FURNISHED BY THE ASSESSEE AT THE RELEVANT TIME. THUS THE BALANCE SHEET PREPAR ED AND FILED WAS NOT A COMPLETE ONE. HOWEVER AS THE SOURCE OF INVESTMENTS IS NOT IN DISPUTE NO ADDITION IS WARRANTED. THE LD. INCOME TAX OFFICER, WARD-1, HALDIA, HAS COMPUTED AVAILABILITY OF FUNDS BY CASH FLOW STATEME NT. THE AMOUNT OF RS.10,91,191/- IS NOT AT ALL CASH INTRODUCTION IN A NY MANNER. THE TREATMENT OF THIS AMOUNT AS CASH CREDIT IS NOT THE CORRECT APPRE CIATION. THIS WAS EXPLAINED IN APPELLATE STAGE ALSO, BUT THE SAME WAS REJECTED BY THE COMMISSIONER OF INCOME TAX APPEALS-XXXIII, KOLKATA. IN THE SHOW CAUSE NOTICE DATED 03.12.2007 THE LD. I NCOME TAX OFFICER STATED THAT THERE WAS A FUND SHORTAGE TO THE EXTENT OF RS. 10,91,191/- AND THIS LED TO THE ADDITION AS CASH CREDIT. THE ASSESSEE HAD ENJOYED DEPRECIATION DURING THE EA RLIER YEARS AND SUCH DEPRECIATION HAS BEEN DEDUCTED FROM THE RESPECTIVE ASSETS. A CHART OF SUCH DEPRECIATION WAS WRONG TO ADD THE AMOUNT OF DEPRECI ATION ALLOWED IN EARLIER AS CASH HOLDING IN THE CASH FLOW STATEMENT. THE FUEL CHARGES CLAIMED IS NOT EXCESSIVE IN ANY MA NNER. FUEL IS THE MAIN ITEM ESSENTIAL TO RUN A POKLIN-EARTH CUTTING MACHINE AND THE RISE IN PRICE OF PETROL PRODUCTS LED TO THE RISE IN THE CLAIM. THE APPLICAT ION OF RULE OF THREE IN REGARD TO EVER RISING FUEL COST IS WRONG. THE RATE APPLIED FO R DISALLOWANCE ON THAT BASIS IS THEREFORE WRONG AND NOT JUSTIFIED. THIS DISALLOWANC E OF RS.4,92,266/- IS THEREFORE LIABLE TO BE DELETED. THE DISALLOWANCE OF HIRE CHARGES OF RS.5,09,386/- I S EQUALLY WRONG AND UNWARRANTED. THERE IS NO FINDING THAT THE CLAIM IS UNJUST AND EXCESSIVE. THE DISALLOWANCE IS MADE IN A ROUTINE MANNER AND IS THE REFORE IS LIABLE TO BE SET ASIDE. 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE REVENUE AUTHORITIES. 5. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF MATERIALS AVAILABLE ON RECORD, IT IS OBSERVED THAT THE AO HAS CATEGORICALLY MENTIONED IN HIS LETTER DATED 3.12.2007 WHICH IS AS UNDER :- ON AN EXAMINATION OF BANK ACCOUNT IT HAS BEEN FOUN D THAT DURING THE RELEVANT F.Y. YOU HAD INVESTED RS.5,60,000/- TOWARDS PURCHAS E OF MMDC, RS.1,00,000/- TOWARDS PURCHASE OF SECURITIES FROM P OST OFFICE AND RS.4,31,191/- TOWARDS LICI WHICH YOU FAILED TO DISCLOSE IN THE BA LANCE SHEET. SRI ROY WAS 5 ASKED TO EXPLAIN AS TO HOW THE BALANCE SHEET WAS PR EPARED WITHOUT DISCLOSING THESE INVESTMENTS BUT NO EXPLANATION HAS BEEN OFFER ED. CONSEQUENTLY, I HAVE PREPARED A FUND FLOW STATEMENT WHICH SHOWS THAT THERE WAS SHORTAGE OF FUND OF RS.10,91,191/- AND IN ORDER TO CONCEAL THAT SHORTAGE YOU DELIBERATELY DID NOT DISCLOSE THE INVESTMENT IN MMDC, POST OFFICE AND LICI. A COPY OF THE FUND FLOW STATEMENT IS ENCLOSED HEREWITH FOR YOUR READY REFERENCE. IN VIEW OF THE ABOVE, IT IS CLEAR THAT DURING THE F .Y. 04-05 YOU HAD INCOME OF RS.10,91,191/- FROM UNDISCLOSED SOURCE. 5.1. IN ADDITION TO THE ABOVE, HE MADE DISALLOWANC E OF RS.4,92,266/- ON ACCOUNT OF FUEL CHARGES AND RS.5,09,386/- ON ACCOUNT OF HIRE C HARGES. 5.2. AFTER TAKING INTO CONSIDERATION OF THE ABOVE FACTS OF THE ASSESSEE, SINCE THE INVESTMENT ARE ROUTED THROUGH THE DISCLOSED BANK AC COUNT OF THE ASSESSEE AND FURTHER THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE PAYMEN TS OF FUEL CHARGES AND HIRE CHARGES, IN OUR CONSIDERED OPINION, THE DISALLOWANCE OF EXPE NDITURE ON ACCOUNT OF FUEL AND HIRE CHARGES ARE JUSTIFIED ON ACCOUNT OF INSUFFICIENT CA SH BALANCES AS POINTED OUT BY THE AO. SINCE WE ARE OF THE VIEW THAT THIS DISALLOWANCE S ON ACCOUNT OF FUEL AND HIRE CHARGES ARE REQUIRED FOR WANT OF INSUFFICIENT CASH BALANCES, ON THE SAME ISSUE NO ADDITION ON ACCOUNT OF UNDISCLOSED ASSETS ARE REQUI RED. 5.3. KEEPING IN VIEW OF THE ABOVE OBSERVATIONS WE CONFIRM THE ADDITION ON ACCOUNT OF FUEL CHARGES AND HIRE CHARGES ON ACCOUNT OF UNDI SCLOSED ASSETS ARE DELETED. WE ORDER ACCORDINGLY. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED IN PART. 3 #2 4 5& 6 37 8 11.02.2011. ORDER PRONOUNCED IN THE COURT ON 11.02.2011. SD/- SD/- . .. . . .. . , , , , B.R.MITTAL, JUDICIAL MEMBER . .. .!' !'!' !'. .. . , ,, , #$ #$ #$ #$ , C.D.RAO, ACCOUNTANT MEMBER. ( (( ('$ '$ '$ '$) )) ) DATE: R.G.(.P.S.) 6 #2 0 .9 :#9(;- COPY OF THE ORDER FORWARDED TO: 1. SMT.ASITA MAITY, BASUDEVPUR, KHANJANCHAK, HALDIA, P URBA MEDINIPUR. 2 THE I.T.O., WARD-1, HALDIA. 3. THE CIT, 4. THE CIT(A)-XXXIII, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA /9 ./ TRUE COPY, #2&5/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES 7 .