ITO, Ward-28(1), Kolkata, Kolkata V. Sri Supran Chaudhuri, Kolkata

ITA 1680/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1708 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 14-08-2014
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Assessee Lawyers: MIRAJ D. SHAH
• Section: 143(3); 133(6); 144; 154

Judgement Text

1 ITA NO.1680/KOL/2014 SUPRAN CHAUDHURY, AY 2005-06 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE .., /AND ... , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] / I.T.A NO. 1680/KOL/2014 / ASSESSMENT YEAR: 2005-06 INCOME-TAX OFFICER, WD-28(1), KOLKATA VS. SHRI SUPRAN CHAUDHURY (PAN:ACPPC7011G) ( /APPELLANT ) ( / RESPONDENT ) DATE OF HEARING 27.03.2017 DATE OF PRONOUNCEMENT 09.06.2017 FOR THE APPELLANT/ SHRI SAURABH KUMAR, ADDL. CIT, DR. FOR THE RESPONDENT/ SHRI MIRAJ D. SHAH, AR / ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-XIV, KOLKATA DATED 25.03.2014 FOR AY 2005-06. 2. THE SOLE ISSUE RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS.1,35,65,506/- (IT IS POINTED OUT THAT THE FIGURE IS ERRONEOUS IT SHOULD BE RS.1,04,05,506/-). BRIEF FACTS OF THE CASE AS NOTED BY THE LD. CIT(A) IS THAT THE AO HAS PASSED AN EX PARTE ORDER U/S. 144 OF THE INCOME-TAX ACT, 1961 (HEREINA FTER REFERRED TO AS THE ACT). ACCORDING TO AO, ANOTHER COMPANY WHICH IS DOING THE SAME BUSI NESS M/S. TALWAR ENTERPRISES HAS SHOWN HIGHER NET PROFIT SO, HE MADE AN ADDITION OF RS.1,23,035/- BEING THE DIFFERENCE IN THE PROFIT RATE OF THE ASSESSEE WHEN COMPARED TO THAT O F THE TURNOVER OF M/S. TALWAR ENTERPRISES. THE AO ALSO NOTED THAT THE ASSESSEE HAD PURCHASED R AW HIDE AND SKIN FROM OUTSTATION PARTIES AND THE NOTICES ISSUED TO THEM FOR VERIFICATION CAM E BACK UNSERVED ON THEM. THE AO ALSO NOTED THAT THE NOTICES ISSUED TO PARTIES SUPPLYING CHEMICAL AND FREIGHT VENDORS WERE ALSO 2 ITA NO.1680/KOL/2014 SUPRAN CHAUDHURY, AY 2005-06 RETURNED UNSERVED AND AS SUCH THE AO HELD THAT THE TRANSACTION OF RS.1,35,65,506/- COULD NOT BE VERIFIED SINCE NOTICES COULD NOT BE SERVED ON T HEM AND, THEREFORE, HE CAME TO THE CONCLUSION THAT THE SAID TRANSACTIONS ARE BOGUS AND HE ADDED THE ENTIRE PURCHASE AMOUNT SHOWN BY THE ASSESSEE TO THE TOTAL INCOME OF THE AS SESSEE. THEREAFTER THE ASSESSEE MOVED SECTION 154 APPLICATION BEFORE THE AO WHO WAS PLEAS ED TO CORRECT THE FIGURE FROM RS.1,35,65,506/- TO RS.1,04,05,560/- BY AN ORDER DA TED 02.03.2012. AGGRIEVED BY THE AFORESAID ADDITION, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE LD. CIT(A), WHO WAS PLEASED TO ALLOW THE APPEAL AND ORDERED DELETION OF THE ADD ITION. AGGRIEVED BY THE AFORESAID ACTION OF THE LD. CIT(A), THE REVENUE IS BEFORE US. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE LD. CIT(A) WHILE PASSING TH E IMPUGNED ORDER HAS EXAMINED THE ASSESSMENT ORDER, THE REMAND REPORT, THE SUBMISSION OF THE ASSESSEE, PAPER BOOKS, THE RELEVANT CASE LAWS, THE PAST ASSESSMENT ORDERS OF T HE ASSESSEE AND THE PROFIT TREND OF THE ASSESSEE BEFORE PASSING THE IMPUGNED ORDER. THE AS SESSEE IS ENGAGED IN EXPORT AS WELL AS SALE OF LEATHER AND LEATHER GOODS. DURING THE RELE VANT ASSESSMENT YEAR THE ASSESSEE HAD A TURNOVER OF RS.255.95 LACS AND HE DISCLOSED A GROSS PROFIT OF RS.44.73 LACS, WHICH COMES TO 17.48%. THE LD. CIT(A) APPRECIATED THAT THE AUDITE D ACCOUNTS GIVE THE DETAILS OF OPENING STOCK, PURCHASE, PRODUCTION AND CLOSING STOCK OF HI DE AND SKIN BOTH FOR DOMESTIC AND EXPORT DIVISION. THE LD. CIT(A) ALSO FOUND THAT THE DETAI LS INCLUDE THE NUMBER OF PIECES AND VALUE OF THE HIDE AND SKIN. THE LD. CIT(A) HAS NOTED THA T THE ACCOUNTS OF THE ASSESSEE ARE AUDITED AND THE QUANITATIVE DETAILS ARE ON RECORD. THE LD. CIT(A) HAS ALSO NOTED THAT THE ASSESSEE HAD FILED THE COPIES OF THE BILLS, WAY BILLS WHICH ARE DULY VERIFIED BY THE WEST BENGAL SALES TAX CHALLAN, FREIGHT BILLS, PURCHASE BILLS OF CHEMI CALS ETC. IT HAS BEEN TAKEN NOTE BY THE LD. CIT(A) THAT DURING THE ASSESSMENT PROCEEDINGS THE A O ISSUED NOTICES TO THE PARTIES AND OUT OF FOURTEEN NOTICES ISSUED ONLY TWO RETURNED UNSERV ED AND THUS TWELVE NOTICES WERE NEITHER RETURNED NOR ANY REPLY WAS RECEIVED. THE AO HAS MA DE THE ADDITION OF RS.1,35,65,506/- (WHICH FIGURE HAS BEEN REDUCED TO RS.1,04,05,560/- BY THE AO U/S. 154 OF THE ACT), ON THE SOLE REASON THAT THE NOTICES ISSUED U/S. 133(6) OF THE ACT WERE RETURNED BACK AND SO, HE CONCLUDED THAT THE PURCHASES WERE ALL BOGUS. IT IS ELEMENTARY THAT WITHOUT PURCHASES THERE 3 ITA NO.1680/KOL/2014 SUPRAN CHAUDHURY, AY 2005-06 COULD NOT HAVE BEEN ANY SALES. THE AO HAS ACCEPTED THE SALE FIGURES SO, THEREFORE, QUESTION OF REJECTING THE PURCHASES SIMPLY BECAUSE SOME NOTI CES WERE RETURNED BACK CANNOT BE THE SOLE REASON TO MAKE THE ADDITION. IT IS TO BE KEPT IN MIND THAT THE AMOUNT OF SALES BY ITSELF CANNOT REPRESENT THE INCOME OF THE ASSESSEE. THE S ALE ONLY REPRESENTED THE PRICE RECEIVED BY THE SELLER OF THE GOODS FOR THE ACQUISITION OF WHIC H IT HAS ALREADY INCURRED THE COST. IT IS THE REALIZATION OF EXCESS OVER THE COST INCURRED THAT O NLY FORMS PART OF THE PROFIT INCLUDED IN THE CONSIDERATION OF SALES. IT IS NOT THE CASE OF THE AO THAT INVESTMENT BY WAY OF INCURRING THE COST IN ACQUIRING THE GOODS WHICH HAS BEEN SOLD HAS BEEN MADE BY THE ASSESSEE AND THAT HAS ALSO NOT BEEN DISCLOSED. IN THE ABSENCE OF SUCH FI NDING OF FACT, THE QUESTION WHETHER THE ENTIRE SUM OF PURCHASE CANNOT BE TREATED AS INCOME IN THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE HAD A TURNOVER OF RS.255.95 LACS AND HAS D ISCLOSED A GROSS PROFIT OF RS.44.73 LACS. FOR THE PURPOSE OF EARNING THIS INCOME THE ASSESSEE HAS TO CERTAINLY MAKE SOME EXPENDITURE. THE ASSESSEE HAS EXPORTED AND SUPPLIED THE GOODS AF TER INCURRING CERTAIN COST CANNOT BE REJECTED ONLY BECAUSE THE SELLERS DID NOT RESPOND T O THE NOTICES OF THE AO. THE LD. CIT(A) HAS TAKEN NOTE OF THE FACT THAT IN THE FY 2003-04 T HE ASSESSEE HAD A GROSS MARGIN OF 19.37%; IN FY 2004-05 THE ASSESSEE HAS A GROSS MARGIN OF 17 .48% AND IN FY 2005-06 THE ASSESSEE HAS A GROSS MARGIN OF 16.82%. THE LD. CIT(A) ALSO TOOK NOTE OF THE FACT THAT IN AY 2006- 07 THE ASSESSMENT WAS COMPLETED UNDER SCRUTINY U/S. 143(3) OF THE ACT AND THE AO ACCEPTED THE TRADING RESULTS. THE LD. CIT(A) ALSO TOOK NOTE OF THE SCRUTINY ASSESSMENT IN THE SUCCEEDING YEAR WHEREIN THE GROSS MARGIN OF 16.82% WAS ACCEPTED BY THE DEPARTMENT. WE NOTE THAT AFTER THE IMPUGNED ADDITION OF RS.1.35 CR . WAS MADE BY THE AO, THE NET PROFIT RATE COMES TO MORE THAN 50% WHICH IS PER SE VERY HIGH AN D CANNOT STAND TO LOGIC AND REASON. THE ASSESSEE HAD PRODUCED THE DOCUMENTS NECESSARY T O PROVE THAT THE ASSESSEE HAS PURCHASED THE GOODS FROM THE SELLERS AND THE AO HAS NOT FOUND ANY FAULT IN THE EVIDENCE PRODUCED BY THE ASSESSEE TO SUBSTANTIATE HIS CLAIM. ONLY BECAUSE THE NOTICES COULD NOT BE SERVED IN THE FIRST ROUND AND THE ADDITIONS WERE MA DE TREATING THE ENTIRE PURCHASE AS BOGUS WHEREAS DURING REMAND PROCEEDING THE AO ACCEPTED TH E FACT THAT OUT OF FOURTEEN NOTICES ONLY TWO COULD NOT BE SERVED. TAKING INTO CONSIDER ATION THE RELEVANT EVIDENCE FURNISHED BY THE ASSESSEE, THE ADDITION HAS BEEN RIGHTLY DELETED BY THE LD. CIT(A) AND WE DO NOT FIND ANY 4 ITA NO.1680/KOL/2014 SUPRAN CHAUDHURY, AY 2005-06 INFIRMITY IN THE ORDER IMPUGNED BEFORE US AND SO, W E ARE RELUCTANT TO INTERFERE IN THE ORDER OF THE LD. CIT(A) AND THEREFORE, THE APPEAL OF THE REV ENUE IS DISMISSED. 4. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 09.06.201 7. SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) (...) ( ..) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 9 TH JUNE, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT ITO, WARD-28(1), KOLKATA. 2 RESPONDENT SHRI SUPRAN CHAUDHURY, 48/53, SWISS P ARK, KOLKATA-700 033. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY .