ITO, Ward - 1, Raiganj, Uttar Dinajpur, Uttar Dinajpur V. Shri Nikunj Behari Paul, Uttar Dinajpur

ITA 1663/KOL/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54692 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 27-08-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MALAKAR
• Assessee Lawyers: S M SURANA
• Keywords: Income from undisclosed sources; Period of limitation; Reasonable cause; Time period of passing order
• Section: 143(3); 142(1); 133(6); 69

Judgement Text

, , , , , ,, , IN THE INCOME-TAX APPELLATE TRIBUNAL, B BENCH : KOLKATA [ ( (( ( ) )) ) , , , , , , , , . .. .!' !'!' !'. .. . , , , , #$ #$ #$ #$ ] ]] ] [BEFORE SRI MAHAVIR SINGH, JM & SRI C. D. RAO, A M] ITA NO. 1663/KOL/2008 : ASSESSMENT YEAR : 2004-05 INCOME TAX OFFICER/WARD-1 -VS.- SRI NIKUNJ BEHARI PAUL RAIGANJ, UTTAR DINAJPUR. RAIGANJ [PAN : ASYPP 8741 E] [ &' &' &' &' /APPELLANT ] ]] ] [ ( (( ()&' )&' )&' )&'/ // / RESPONDENT ] ] ] ] &' &' &' &' / FOR THE APPELLANT : SHRI S. K. MALAKAR ()&' ()&' ()&' ()&' / FOR THE RESPONDENT : SHRI S. M. SURANA +,- . '$ +,- . '$ +,- . '$ +,- . '$ /DATE OF HEARING : 09.11.2011 /0 . '$ /0 . '$ /0 . '$ /0 . '$ /DATE OF PRONOUNCEMENT : 25.11.2011 #1 /ORDER , ,, , PER MAHAVIR SINGH, J. M. THIS APPEAL BY REVENUE, IS EMANATING OUT OF ORDER O F COMMISSIONER OF INCOME TAX (APPEALS), JALPAIGURI, IN APPEAL NO.112/CIT(A)/RNJ/ JAL DATED 07.02.2008. ASSESSMENT WAS FRAMED BY ITO/W-1/RAIGANJ U/S. 143(3) OF THE INCOME -TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2004-05 VIDE HIS ORD ER DATED 28.12.2006. 2. THE APPEAL IS DELAYED BY 05 DAYS. IN THE CONDONA TION PETITION DATED 25.08.2008, ASSESSING OFFICER HAS GIVEN THE FOLLOWING REASONS F OR DELAY IN FILING THE APPEAL:- I WOULD LIKE TO STATE THAT I HAVE RECEIVED AN ORD ER OF CIT(A), JALPAIGURI VIDE ORDER NO.112/CIT(A), JAL/RNJ DATED 02.08.2008, ON 23.06.2008, IN THE CASE OF SRI NIKUNJA BEHARI PAUL AND THAT IS THE MY JOINI NG DATE IN THIS OFFICE. SINCE, THAT WAS THE FIRST DAY, I AM BADLY ENGAGED TO TAKE OVER THE CHARGE AND RECONCILE THE DOCUMENTS, AS I HAVE SENT THE APP EAL SCRUTINY REPORT I.R.O. THE ABOVE MENTIONED CASE ON 11.07.2008 BEFORE ADDL. CIT , RANGE-2, JALPAIGURI. [ITA NO. 1663KOL/2008 SHRI NIKUNJ BEHARI PAUL, A.Y. 04-05 ] 2 IN VIEW OF THE ABOVE, I REQUEST YOU TO CONDONE THE DELAY FOR SUBMISSION THE CASE SYMPATHETICALLY AND RECEIVED THE SAME, AND OBLIGE. AFTER CONSIDERING REASONS AS STATED BY THE ASSESSIN G OFFICER, WE ARE OF THE OPINION THAT THE DEPARTMENT WAS PREVENTED BY REASONABLE CAUSE FROM P REFERRING THE APPEAL WITHIN THE STIPULATED LIMITATION PERIOD. WE, ACCORDINGLY, CONDONE THE DEL AY AND PROCEED TO DECIDE THE APPEAL ON MERITS. 3. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) DELETING THE ADDITION OF RS.13,89,848/- & RS.2,86,258/- MADE ON ACCOUNT OF UNDISCLOSED INCOME BEING NO REFLECTION OF WORK IN PROGRESS OR BILLS RECEIVABLE. FOR THIS, REVENUE HAS RAISED THE FOLLOWING GROUND NO.1 :- (1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A), JALPAIGURI HAD ERRED IN DELETING THE ADDITION OF RS.13,89,848/ - & RS.2,86,258/- MADE ON ACCOUNT OF UNDISCLOSED INCOME AS THERE WAS NO REFLECTION OF TH E WORK IN PROGRESS OR BILL RECEIVABLE. THE LD. CIT(A) WAS NOT JUSTIFIED BY ACCEPTING THE P LEA OF THE ASSESSEE THAT ACCOUNT MAINTAINED BY HIM IS COMPLETING METHOD AND IGNORING THE REPORT OF AUDITOR IN AUDITED REPORT AND RENDERED HIS DECISION WITHOUT ANY MATERI AL EVIDENCES ON RECORD. 4. BRIEF FACTS LEADING TO ABOVE ISSUE ARE THAT ASSE SSEE IS A CONTRACTOR AND FILED HIS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR 2004-05 ON 01.1 1.2004. ASSESSING OFFICER SELECTED THE CASE FOR SCRUTINY AND ISSUED NOTICES UNDER SECTION 143(2) & 142(1) OF THE ACT. ASSESSING OFFICER NOTICED FROM THE DETAILS THAT IT HAS RECEIV ED PAYMENT OF RS.13,89,848 ON 12.05.2004 FROM UTTAR DINAJPUR ZILLA PARISHAD AND RS.37,04,776 /- ON 28.05.2004 FROM WEST BENGAL STATE RURAL DEVELOPMENT AGENCY, UTTAR DINAJPUR DIVISION, RAIGANJ. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY GROSS BILL AMOUNT SHOULD NOT BE A DDED TO THE TOTAL INCOME OF THE ASSESSEE AS IT HAS NOT REFLECTED ANY WORK IN PROGRESS IN THE BOOKS OF ACCOUNT AND HE HAS RECEIVED PAYMENT ON 12.05.2004 & 28,05.2004. THE ASSESSEE WAS ALSO REQU IRED TO FURNISH THE INFORMATION IN RESPECT OF DATE OF COMMENCEMENT OF WORK, DETAILS OF WORK FO R WHICH PAYMENT WAS RECEIVED, DATE OF COMPLETION OF WORK OR PART PORTION OF THE WORK COMP LETED FOR WHICH PAYMENT WAS RECEIVED AND DATE OF INSPECTION OF WORK. ASSESSEE REPLIED AS UND ER:- REGARDING BILL RECEIVABLE OF RS.13,89,848/-. THI S BILL WAS NOT RECEIVABLE AS ON 31.03.2004 DUE TO I HAVE NOT MADE PAYMENT OR NOT RECEIVED ANY PAYM ENT AGAINST THE SAID WORK DURING THE YEAR 2003-04, NO SUPPLIERS PRODUCED ANY BILL FOR PAYMENT , HENCE, NO QUESTION HAS ARISE AS BILL [ITA NO. 1663KOL/2008 SHRI NIKUNJ BEHARI PAUL, A.Y. 04-05 ] 3 RECEIVABLE. THE SAID BILL RECEIVED DURING THE YEAR 2004-05 AND ALSO MADE ALL THE PAYMENT DURING THE YEAR 2004-05 AND ALSO SHOWN AS INCOME IN THE YE AR 2004-05. REGARDING THE WORK OF ATIA TO MAJIHAR, WB-1514 I H AVE NOT MADE ANY PAYMENT AGAINST THE SAID WORK DURING THE YEAR 2003-04 AND NO SUPPLIERS PRODUCED ANY BILL FOR PAYMENT FOR SAID WORK AND THE GOVT. DEPARTMENT MADE PAYMENT IN THE YEAR 2 004-05 AND IT IS ALSO SHOWN AS INCOME IN THE YEAR 2004-05. ASSESSING OFFICER REQUIRED BOOKS OF ACCOUNTS FOR AS SESSMENT YEAR 2004-05 BUT ASSESSEE COULD NOT PRODUCE THE SAME. THE ASSESSEE REPLIED THAT THE SE PAYMENTS ARE INCLUDED IN THE RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 RELEVANT TO FINA NCIAL YEAR 2004-05.WHEN ACTUAL PAYMENTS WERE RECEIVED. THE ASSESSEE ALSO REPLIED THAT HE WA S FOLLOWING CASH SYSTEM OF ACCOUNT AND AS AND WHEN IT IS RECEIVED ACCOUNTED FOR. BUT ASSESSIN G OFFICER WAS NOT CONVINCED WITH THE REPLY OF ASSESSEE AND TREATED THESE AMOUNTS OF RS.13,89,8 48/- & RS.2,86,258/- AS UNDISCLOSED INVESTMENT OF ASSESSEE AND ADDED UNDER SECTION 69 O F THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE ADDITION BY G IVING FOLLOWING FINDINGS: AFTER CAREFUL CONSIDERATION OF THE SUBMISSION OF T HE APPELLANT ALONG WITH THE CERTIFICATE OF PAYMENT TO THE APPELLANT, NIKUNJA BEHARI PAUL, R AIGANJ DURING THE YEAR (FINANCIAL YEAR) 2004-05 ISSUED BY THE ADDITIONAL EXECUTIVE OF FICER, UTTAR DINAJPUR, ZILLA PARISHAD AND AFTER PERUSAL OF THE ASSESSMENT ORDER OF THE A.O, I FIND THAT THE PAYMENT OF RS.13,89,848/- WAS INCLUDED IN THE FINANCIAL YEAR 2 004-05 RELEVANT FOR THE ASSESSMENT YEAR 2005-06 BY THE ADDITIONAL EXECUTIVE OFFICER, U TTAR DINAJPUR ZILLA PARISHAD. THEREFORE, THE ADDITION OF RS.13,89,848/- IN THE IN COME OF THE APPELLANT BY THE A.O IN THE ACCOUNTING YEAR 2003-04 RELEVANT TO THE AY 2004-05 IS UNJUSTIFIED. HENCE, THE ADDITION OF RS.13,89,848/- IN THE INCOME OF THE APPELLANT BY THE AO IS HEREBY DELETED. AGAINST THE ADDITION OF RS.2,86,258/-, THE APPELLAN T HAS SUBMITTED THAT IN THE ASSESSMENT, THE AO FOUND THAT THE APPELLANT HAS RECEIVED THE SU M OF RS.37,04,776/- ON 28.05.2004 FROM THE WEST BENGAL STATE RURAL DEVELOPMENT AGENCY , UTTAR DINAJPUR DIVISION. IN RESPONSE TO THE AOS LETTER U/S. 133(6) OF THE INCO ME TAX ACT, 1961, THE EXECUTIVE ENGINEER, WBSRDA SENT A REPLY STATING THAT THE PAYM ENT WAS MADE ON 28.05.2004 FOR RS.37,04,776/- AS 1 ST R.A. BILL AND THE VALUE OF THE WORK MEASUREMENT WA S AT RS.2,86,258/- DURING THE YEAR 2003-04 AND WORK DONE VALUE WAS AT RS.2,34,760.44. THE AO ASKED THE APPELLANT TO EXPLAIN AS TO WHY RS.2,86 ,258/- SHOULD NOT BE INCLUDED IN THE TOTAL INCOME FOR THE AY 2004-05. THE APPELLANT EXP LAINED THAT THE APPELLANT MAINTAINED ITS ACCOUNTS ON WORK COMPLETION/PAYMENT BASIS. THE REFORE, THE RECEIPT OF THIS WORK RECEIVED ON 28.05.2004 VIDE VOUCHER NO. 25 HAS BEEN INCLUDED IN THE ACCOUNTS FOR THE FINANCIAL YEAR 2004-05 AND SHOWN IN THE RETURN OF I NCOME FOR THE AY 2005-06. THE AO WAS NOT SATISFIED WITH THE EXPLANATION AND ASKED TH E APPELLANT TO PRODUCED THE BILLS AND VOUCHERS IN RESPECT OF THE EXPENDITURE INCURRED FOR THIS WORK UPTO 31.03.2004. IT WAS EXPLAINED THAT THE RELEVANT EXPENSES FOR THIS WORK HAVE BE3EN DEBITED IN THE ACCOUNTS FOR THE FINANCIAL YEAR 2004-05 RELEVANT FOR THE AY 2005 -06. HOWEVER, THE AO ALLOWED ONLY 4 DAYS TIME TO PRODUCE THE RELEVANT BILLS AND VOUCH ERS BUT THE APPELLANT COULD NOT PRODUCE THE SAME IN ABSENCE OF THE ACCOUNTANT. THE AO ADDED THE AMOUNT OF RS.2,86,258/- AS INCOME FROM UNDISCLOSED SOURCES ON THE GROUND THAT THE APPELLANT HAD NOT SHOWN THIS AMOUNT AS WORK-IN-PROGRESS IN THE B ALANCE SHEET AS ON 31.03.2004. THE [ITA NO. 1663KOL/2008 SHRI NIKUNJ BEHARI PAUL, A.Y. 04-05 ] 4 OBSERVATION AND THE CONCLUSION OF THE AO IS WRONG. THE APPELLANT MAINTAINED ACCOUNT ON WORK COMPLETION/PAYMENT BASIS. THEREFORE, THE Q UESTION OF SHOWING SUCH AMOUNT IN THE BALANCE SHEET AS ON 31.03.2004 AS WORK IN PROGR ESS DOES NOT ARISE. IN THE ABSENCE OF ADEQUATE OPPORTUNITY, THE RELEVANT BILLS AND VOU CHERS COULD NOT BE PRODUCED. THE ABOVE PAYMENT RECEIVED BY THE APPELLANT FROM WBSRDA HAD BEEN DISCLOSED IN THE ACCOUNT FOR THE FINANCIAL YEAR 2004-05 RELEVANT FOR THE AY 2005-06. THE ADDITION MADE BY THE AO IS TOTALLY MISCONCEIVED AND WITHOUT ANY C OGENT REASON. THE SAME CANNOT BE SUSTAINED AND SHOULD BE DELETED. AGGRIEVED, NOW THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT LD. COUNSEL FOR THE ASSESSE E, AT THE TIME OF HEARING DREW OUR ATTENTION TO PAYMENT CERTIFICATE ISSUED BY UTTAR DINAJPUR ZIL LA PARISHAD ATTACHED AT PAGE 1 OF THE PAPER BOOK, WHEREBY HE HAS STATED THAT PAYMENTS ARE RECEI VED AND ACCOUNTED FOR IN THE FINANCIAL YEAR 2004-05, WHEN ARE ACTUALLY RECEIVED. HE ALSO DREW O UR ATTENTION TO AUDIT REPORT AT PAGE 4 OF ASSESSEES PAPER BOOK, WHEREIN HE HAS DECLARED THE METHOD OF ACCOUNTING EMPLOYED IN THE PREVIOUS YEAR AS ACCRUAL BASIS. HE HAS ALSO DREW OU R ATTENTION TO CERTIFICATE ISSUED BY UTTAR DINAJPUR ZILLA PARISHAD DURING FINANCIAL YEAR 2004- 05 RELEVANT TO ASSESSMENT YEAR 2005-06, WHICH IS ENCLOSED AT PAGES 15 & 16 OF THE PAPER BOO K. THE BENCH DREW ATTENTION OF LD. COUNSEL TO THE AUDIT REPORT, WHICH IS GIVEN AT ASSE SSEES PAPER BOOK AT PAGE 20 AND THE METHOD OF ACCOUNTING EMPLOYED IN THE PREVIOUS YEAR 2004-05 RELEVANT TO THE ASSESSMENT YEAR 2005-06, IS MERCANTILE SYSTEM OF ACCOUNTING. LD. COUNSEL IN REPLY TO THIS, STATED THAT, IN SUBSTANCE, FROM THE ENTRIES IN THE BOOKS OF ACCOUNTS THE ASSESSEE I S FOLLOWING CASH SYSTEM OF ACCOUNTING/RECEIPT BASIS WHICH IS THE SYSTEM FOLLOWED BY ASSESSEE BUT NOT MENTIONED IN THE AUDIT REPORT. EVEN OTHERWISE, ACCORDING TO HIM, IT IS ESTABLISHED PREC EDENT THAT THE METHOD OF ACCOUNTING IS BASED ON SUBSTANTIAL ENTRY SYSTEM AND NOT ON THE AUDITOR S REPORT. LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO ACCOUNTING SYSTEM FROM THE ACCOUNT S OF ASSESSEE FOR THE RELEVANT YEAR 2004-05 & 2005-06. LD. COUNSEL STATED THAT ASSESSEE IS CONS ISTENTLY FOLLOWING RECEIPT/CASH SYSTEM ACCOUNTING AND IT ACCOUNTS THE RECEIPTS, IN FACT, A S AND WHEN IT IS RECEIVED BY THE ASSESSEE AND THIS HAS BEEN CONSISTENT STAND BEFORE THE LOWER AUT HORITIES I.E BEFORE THE ASSESSING OFFICER AS WELL AS CIT(A) AND EVEN NOW BEFORE THE TRIBUNAL. LD . COUNSEL STATED THAT ASSESSEE HAS NOT MADE PAYMENTS AGAINST THE WORK DONE BY ASSESSEE AND NO SUPPLIER PRODUCED ANY BILL FOR PAYMENT OF WORK AGAINST WEST BENGAL STATE RURAL DEV ELOPMENT AGENCY, UTTAR DINAJPUR DIVISION. [ITA NO. 1663KOL/2008 SHRI NIKUNJ BEHARI PAUL, A.Y. 04-05 ] 5 7. WE FIND THAT ASSESSEE HAS RECEIVED PAYMENT OF RS .13,89,848/- FROM UTTAR DINAJPUR ZILLA PARISHAD AND RS.2,86,258/- FROM WEST BENGAL STATE R URAL DEVELOPMENT AGENCY, UTTAR DINAJPUR DIVISION ON 12.05.2004 & 28.05.2004 RESPEC TIVELY AFTER DEDUCTING I.T./S.T. AND SECURITY DEPOSIT ETC. THE ASSESSEE, FROM THE BEGINN ING, IS MAINTAINING ONE STAND THAT HE IS MAINTAINING HIS ACCOUNTS ON CASH/RECEIPT BASIS AND ON THAT BASIS PAYMENTS ARE ALSO MADE. NO DOUBT, ASSESSEE IS UNABLE TO FURNISH PURCHASE WISE EXPENSES DESPITE REPEATED REQUESTS, BUT IT IS A FACT THAT THESE PAYMENTS ARE RECEIVED ONLY IN FINAN CIAL YEAR 2004-05 I.E. ON 12.05.2004 & 28.05.2004 RESPECTIVELY AND THIS PAYMENT DOES NOT F ALL IN THE RELEVANT FINANCIAL YEAR 2003-04 RELEVANT TO THE ASSESSMENT YEAR 2004-05. IT IS ALSO A FACT THAT ASSESSEE HAS DISCLOSED THESE AMOUNTS IN THE RETURNS FOR FINANCIAL YEAR 2004-05 R ELEVANT TO THE ASSESSMENT YEAR 2005-06 AS HIS CONTENTION RECORDED BY THE ASSESSING OFFICER AS WEL L AS BY THE CIT(A) IN THEIR ORDERS. SINCE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING AS IT IS EVIDENT FROM THIS ACCOUNT AND THIS CONCLUSION WE HAVE REACHED ON THE BASIS OF ENTRIES. HENCE, WE ARE OF THE VIEW THAT CIT(A) HAS RIGHTLY DELETED THESE ADDITIONS AND WE CONFIRM THE SAME. 8. THE NEXT ISSUE IS AGAINST DELETING THE ADDITION OF RS.44,709/- OUT OF TOTAL ADDITION MADE BY ASSESSING OFFICER AT RS.89,419/- ON ACCOUNT OF V EHICLE MAINTENANCE AND HIRE CHARGES IN ABSENCE OF SUPPORTING BILLS AND VOUCHERS. FOR THIS REVENUE HAS RAISED FOLLOWING GROUND NO.2:- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), JALPAIGURI HAD ERRED IN DELETING THE ADDITION OF RS .44,707/- OUT OF ADDITION OF RS.89,419/- MADE ON ACCOUNT OF HIRED VEHICLE MAINTE NANCE CONSIDERING THE FACT THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE IN SUPPORTING THE BILL FOR SUCH EXPENSES. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSING OFFICER HAS DISALLOWED RS.89 ,419/- BEING VEHICLE MAINTENANCE EXPENSES IN THE ABSENCE OF SUPPORTING BILLS. LD. CIT(A) REST RICTED THE DISALLOWANCE AT 50% BY GIVING FOLLOWING FINDINGS:- AFTER CAREFUL CONSIDERATION OF THE SUBMISSION OF T HE APPELLANT AND AFTER PERUSAL OF THE ASSESSMENT ORDER OF THE AO, I FIND THAT THE DISALLOWANCE OF THE VEHICLE MAINTENANCE EXPENSES @ 50% OF THE TOTAL EXPENSES IS EXCESSIVE. THEREFORE, THE DISALLOWANCE RESTRICTED TO 50% OF THE TOTAL DISALLO WANCE. CONSEQUENTLY, THE ADDITION OF RS.44,702/- IS CONFIRMED AND THE ADDITI ON OF RS.44,709/- IS HEREBY DELETED. [ITA NO. 1663KOL/2008 SHRI NIKUNJ BEHARI PAUL, A.Y. 04-05 ] 6 WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) AS HE HAS RESTRICTED THE DISALLOWANCE TO 50% BEING REASONABLE. HENCE, WE DO NOT FIND ANY INTERFE RENCE IN THE ORDER OF LD. CIT(A). THIS GROUND OF THE REVENUE IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON 25.11.2011 SD/- SD/- [ . .. .!' !'!' !'. .. . , , , , #$ #$ #$ #$ ] [ , ] [ C. D. RAO ] [ MAHAVIR SINGH ] ACCOUNTANT MEMBER JUDICIAL ME MBER DATED : 25TH NOVEMBER, 2011. COPY FORWARDED TO THE - 1. INCOME TAX OFFICER/WARD-1, RAIGANJ, UTTAR DIN AJPUR. 2. SHRI NIKUNJ BEHARI PAUL, ASHOKPALLY, RAIGANJ , UTTAR DINAJPUR. 3. CIT(A)- (4) CIT- 4. D.R., I.T.A.T., KOLKATA. [TRUE COPY] BY ORDER DEPUTY/ASSISTANT REGISTRAR (KKC) I.T.A.T., KOLKATA.