Mr. Abhijit Sen, Kolkata V. ACIT, Circle - 11, Kolkata, Kolkata

ITA 169/KOL/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4761 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 26-07-2016
• Assessment Year: 1997-1998
• Appeal Filed On: 02-02-2012
• Court: TRIBUNAL
• Assessee Lawyers: R K PATODI
• Keywords: Unexplained cash credit; Business income
• Section: 80HHC; 68

Judgement Text

1 ITA NO. 169/KOL/2012 ABHIJIT SEN, AY 1997-98 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA [BEFORE SHRI M. BALAGANESH, AM & SHRI K. NARASIMHA CHARY, JM] I.T.A NO. 169/KOL/2012 ASSESSMENT YEAR: 1997-98 ABHIJIT SEN (PAN: ALWPS5716N) VS. ASSISTANT COMMIS SIONER OF INCOME-TAX, CIRCLE-11, KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 26.07.2016 DATE OF PRONOUNCEMENT: 03.08.2016 FOR THE APPELLANT: SHRI R. K. PATODI, FCA FOR THE RESPONDENT: SHRI SALLONG YADEN, ADDL. CIT ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XIX, KOLKATA VIDE APPEAL NO. 84/CIT(A)-XIX/ACIT, CIR-11/KOL/11-12 DATED 21.1 1.2011. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-11, KOLKATA U/S. 263/147/143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 1997-98 VIDE HIS O RDER DATED 31.03.2006. 2. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT RE QUIRE ANY ADJUDICATION. 3. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL O F ASSESSEE IS AS TO WHETHER ADDITION IN THE SUM OF RS.2,10,400/- COULD BE MADE TOWARDS INTRODUC TION OF CAPITAL IN THE PROPRIETARY CONCERN OF THE ASSESSEE IN THE FACTS AND CIRCUMSTAN CES OF THE CASE. 4. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASS ESSEE IS THE PROPRIETOR OF M/S. SEN EXPORTS. DURING THE YEAR UNDER APPEAL, THE ASSESSEE INTRODUC ED A SUM OF RS.2,90,400/- TOWARDS CAPITAL IN HIS PROPRIETARY CONCERN WHICH WAS DULY R EFLECTED IN THE BALANCE SHEET OF THE PROPRIETARY CONCERN. THE LD. AO OBSERVED THAT THE ASSESSEE FROM HIS PERSONAL ACCOUNT COULD NOT EXPLAIN THE SOURCES FOR INTRODUCTION OF T HIS CAPITAL AND ACCORDINGLY, ADDED THE SUM AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. DUR ING THE FIRST APPELLATE PROCEEDINGS, THE LD. CIT(A) FOUND THAT THE ASSESSEE HAS GOT CASH BALANCE OF RS.80,000/- WHICH WOULD EXPLAIN THE SOURCE FOR CAPITAL INTRODUCTION IN PART AND ACCORDI NGLY, CONFIRMED THE ADDITION FOR THE 2 ITA NO. 169/KOL/2012 ABHIJIT SEN, AY 1997-98 BALANCE SUM OF RS.2,10,400/-. AGGRIEVED, THE ASSES SEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND NO.2: 2. FOR THAT THE LD. ASSESSING OFFICER AS WELL AS LD. CIT(A) HAS ERRED IN ADDING BACK THE SUM OF RS.2,10,400/- ON A/C OF INTRODUCTION OF CAPITAL, THOUGH THESE ITEM ARE FORMING PART OF THE ACCOUNTS WHICH HAD BEEN AUDITED U/S. 44AB & DULY AT TACHED WITH THE I. T. RETURN. 5. THE LD AR ARGUED THAT THE ASSESSEE DURING THE YE AR PAID A SUM OF RS. 2 LAC BY CHEQUE TO HIS PROPRIETARY CONCERN VIDE CHEQUE NO. 25782 DA TED 26.02.1997. THE ASSESSEE HAD DRAWN A SUM OF RS. 1 LAC FROM HIS PROPRIETARY CONCE RN ON 17.03.1997 VIDE CHEQUE NO. 72164 DATED 17.03.1997. THE BALANCE SUM OF RS. 1 LAC REM AINING IN THE ADVANCE ACCOUNT IN THE BOOKS OF PROPRIETARY CONCERN WAS TRANSFERRED TO CAP ITAL ACCOUNT OF THE ASSESSEE ON 31.03.1997 BY PASSING A JOURNAL ENTRY. HE RELIED O N THE LEDGER ACCOUNT STYLED AS ADVANCE ACCOUNT AS APPEARING IN THE BOOKS OF M/S. SEN EXPO RTS FOR THE PERIOD 01.04.1996 TO 31.03.1997 IN SUPPORT OF HIS ARGUMENT. ACCORDINGLY , HE STATED THAT THE SOURCE OF RS. 1 LAC FOR INTRODUCTION OF CAPITAL IN THE PROPRIETARY CONC ERN STANDS EXPLAINED. WITH REGARD TO THE REMAINING SUM OF RS.1,10,400/-, THE LD. AR ARGUED T HAT THE ASSESSEE PAID SALARY TO MR. SURESH MENON (RS.55,200/-) AND MR. DEBASISH ROY (R S.55,200/-) WHO ARE EMPLOYEES OF M/S. SEN EXPORTS, ON BEHALF OF THE PROPRIETARY CONC ERN WHICH WAS CREDITED TO THE ASSESSEES CAPITAL ACCOUNT IN THE BOOKS OF M/S. SEN EXPORTS BY PASSING THE FOLLOWING JOURNAL ENTRY:- SALARIES & WAGES A/C DR. RS.1,10,400/- TO CAPITAL ACCOUNT RS.1,10,400/- (BEING ADJUSTMENT MADE FOR THE SALARY PAID BY THE PROPRIETOR) 6. HE ARGUED THAT THE ASSESSEE BEING AN INDIVIDUAL/ PROPRIETOR HAD PAID SALARIES TO TWO EMPLOYEES ON BEHALF OF HIS PROPRIETARY CONCERN AND THE SAID PROPRIETARY CONCERN HAD DULY RECOGNIZED THE SAID PAYMENT BY PASSING THE AFORESAI D JOURNAL ENTRY BY DUE CREDIT TO CAPITAL ACCOUNT OF THE ASSESSEE. HENCE, THE SOURCE OF RS.1 ,10,400/- ALSO STANDS EXPLAINED. ACCORDINGLY, HE ARGUED THAT THERE IS NO SCOPE FOR M AKING ANY ADDITION TOWARDS CAPITAL INTRODUCTION IN THE SUM OF RS.2,10,400/-. IN RESPO NSE TO THIS, THE LD. DR VEHEMENTLY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THRO UGH FACTS AND CIRCUMSTANCES OF THE CASE INCLUDING THE MATERIAL AVAILABLE IN PAPER BOOK SUBMITTED BY THE ASSESSEE COMPRISING OF AUDITED FINANCIAL STATEMENT OF M/S. SEN EXPORTS FOR THE PERIOD ENDED 31.03.1997 INCLUDING 3 ITA NO. 169/KOL/2012 ABHIJIT SEN, AY 1997-98 CERTIFICATE OF CHARTERED ACCOUNTANT FOR CLAIMING DE DUCTION U/S. 80HHC OF THE ACT (PAGES 1 TO 9), THE LEDGER ACCOUNT STYLED AS ADVANCE ACCOUN T FOR THE PERIOD 01.04.1996 TO 31.03.1997 AS APPEARING IN THE BOOKS OF M/S. SEN EX PORTS VIDE PAGES 32 AND 33 OF THE PAPER BOOK, DECLARATION BY THE ASSESSEE AND CHARTERED ACC OUNTANTS CERTIFICATE TO THE EFFECT OF INTRODUCING RS.1 LAC TOWARDS CAPITAL ACCOUNT IN PRO PRIETARY CONCERN VIDE PAGE 34 OF PAPER BOOK, DECLARATION AND CERTIFICATE FROM A CHARTERED ACCOUNTANT EXPLAINING THE SOURCE OF CAPITAL INTRODUCTION IN THE SUM OF RS.1,10,400/- VI DE PAGES 35 OF PAPER BOOK. WE FIND THAT THE ASSESSEE HAD CLEARLY DEMONSTRATED THE SOURCE FO R RS. 1 LAC OUT OF THE BALANCE MONIES LYING IN THE ADVANCE ACCOUNT OF M/S. SEN EXPORTS WHICH WERE PAID BY ASSESSEE BY CHEQUE AND WHICH HAS BEEN CONVERTED INTO CAPITAL AC COUNT ON 31.03.1997 BY PASSING A JOURNAL ENTRY. HENCE, THE SOURCE FOR RS. 1 LAC IN THE CAPITAL INTRODUCTION STANDS CLEARLY EXPLAINED. WE FIND THAT THE ASSESSEE HAS PAID SALA RIES TO MR. SURESH MENON AND MR. DEBASISH ROY TOTALING TO RS.1,10,400/- OUT OF HIS P ERSONAL SOURCES FOR AND ON BEHALF OF HIS PROPRIETARY CONCERN M/S. SEN EXPORTS. IT IS NOT IN DISPUTE THAT MR. SURESH MENON AND MR. DEBASISH ROY ARE EMPLOYEES OF M/S. SEN EXPORTS. WE ALSO FIND FROM THE AUDITED FINANCIAL STATEMENT OF M/S. SEN EXPORTS THAT A SUM OF RS.1,10 ,400/- IS THE ONLY SALARY DEBITED IN THE PROPRIETARY CONCERN BY CREDITING THE ASSESSEES CAP ITAL ACCOUNT. WE ALSO FIND THAT SUFFICIENT MONIES ARE LYING IN THE CAPITAL ACCOUNT OF THE ASSE SSEE WHICH WOULD CLEARLY PROVE THE SOURCE FOR ASSESSEE MAKING THESE PAYMENTS FOR AND ON BEHAL F OF THE PROPRIETARY CONCERN. HENCE, THERE IS NO CASE FOR TREATING THE SAID PAYMENTS AS UNEXPLAINED. ACCORDINGLY, WE HOLD THAT THE INTRODUCTION OF CAPITAL IN THE SUM OF RS.2,10,4 00/- WHICH IS IN DISPUTE BEFORE US STANDS CLEARLY EXPLAINED AND ACCORDINGLY, WE ALLOW GROUND NO. 2 IN FAVOUR OF THE ASSESSEE. 8. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) IS JUSTIFIED IN DISALLOWING THE PAYMENT OF LETTER OF C REDIT PURCHASE IN THE SUM OF RS.4,86,741/- TOWARDS PURCHASE OF SOYA IN THE FACTS AND CIRCUMSTA NCES OF THE CASE. 9. THE LD. AO OBSERVED THAT DURING THE YEAR UNDER A PPEAL NO SOYA WAS PURCHASED BY THE ASSESSEE BUT PAYMENT OF RS.4,86,741/- WAS MADE TO M/S. RUCHI SOYA INDUSTRIES, INDORE ON ACCOUNT OF DIFFERENTIAL PRICE OF PURCHASE MADE I N EARLIER YEARS BY THE ASSESSEE. THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE IN THIS REGARD BUT HAD CLAIMED DEDUCTION U/S. 80HHC OF THE ACT FOR THE ENTIRE PROF IT DERIVED FROM THIS BUSINESS IN M/S. SEN EXPORTS. THE LD. AO FOR WANT OF EVIDENCE DISALLOWE D A SUM OF RS.4,86,741/- IN THE 4 ITA NO. 169/KOL/2012 ABHIJIT SEN, AY 1997-98 ASSESSMENT WHICH WAS ALSO UPHELD BY THE LD. CIT(A). AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND: 3. FOR THAT A LEGITIMATE PAYMENT OF RS.4,86,741/- PAID TO THE BANK ON A/C OF L/C CHARGES WERE DENIED AS ALLOWABLE EXPENDITURE WHICH IS UNJUS T & UNFAIR PARTICULARLY AS NO TIME WAS INTIMATED/PROVIDED TO THE ASSESSEE/APPELLANT TO PRO DUCE SUCH EVIDENCE BEFORE LD. CIT(A). 10. THE LD. AR ARGUED THAT THE NATURE OF BUSINESS O F THE ASSESSEE IS NOT DISPUTED AND THE PROFITS DERIVED FROM THE EXPORT ACTIVITY OF THE ASS ESSEE AND CORRESPONDING CLAIM OF DEDUCTION U/S. 80HHC OF THE ACT IS NOT DISPUTED BY THE REVENUE. ADMITTEDLY, THIS PAYMENT OF DIFFERENTIAL PRICE IN THE CASE OF PURCHASE OF SO YA MADE TO M/S. RUCHI INDUSTRIES WAS ONLY IN CONNECTION WITH ITS BUSINESS AND ANY DISALLOWANC E MADE THEREON WOULD ONLY BE BUSINESS INCOME OF THE ASSESSEE WHICH WOULD AUTOMATICALLY EN TITLE THE ASSESSEE TO CLAIM DEDUCTION U/S. 80HHC OF THE ACT AND HENCE, THERE IS NO QUESTI ON OF MAKING ANY ADDITION SEPARATELY ON THAT ACCOUNT. IN ANY CASE, NO DISALLOWANCE NEED TO BE MADE IN RESPECT OF THIS PAYMENT AS THE SAID PAYMENT WAS MADE ONLY TOWARDS DIFFERENCE IN CO ST OF PURCHASE OF SOYA MADE IN EARLIER YEARS WHICH GOT CRYSTALLIZED DURING THE YEAR UNDER APPEAL. IN RESPONSE TO THIS, THE LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHO RITIES. 11. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE INCLUDING THE MATERIAL AVAILABLE IN PAPER BOOK SUBMITTED BY THE ASSESSEE COMPRISING OF LEDGER ACCOUNT OF RUCHI SOYA INDUSTRIES FOR THE PER IOD 01.04.1996 TO 31.03.1997 AS APPEARING IN THE BOOKS OF M/S. SEN EXPORTS WHICH IS ENCLOSED AT PAGE 36 OF THE PAPER BOOK. IT IS NOT IN DISPUTE THAT THE PROFITS DERIVED FROM M/S. SEN EXPORTS WOULD BE ELIGIBLE FOR DEDUCTION U/S. 80HHC OF THE ACT. IT IS NOT IN DISP UTE THAT THE PAYMENT OF RS.4,86,741/- MADE BY THE ASSESSEE TO M/S. RUCHI SOYA INDUSTRIES TOWARDS ADDITIONAL COST OF PURCHASE OF SOYA. THIS PAYMENT ADMITTEDLY FALLS ONLY IN THE NA TURE OF REGULAR BUSINESS CARRIED ON BY THE ASSESSEE WHICH IS ELIGIBLE FOR DEDUCTION U/S. 80HHC OF THE ACT. WE FIND NO DOCUMENTARY EVIDENCE WERE PRODUCED BY THE ASSESSEE IN RESPECT O F HIS CLAIM THAT THE DIFFERENTIAL COST OF PURCHASE GOT CRYSTALLIZED ONLY DURING THE YEAR UNDE R APPEAL. HOWEVER, WE FIND LOT OF FORCE IN THE ALTERNATIVE ARGUMENT OF THE LD. AR THAT EVEN THE DISALLOWANCE OF RS.4,86,741/- TOWARDS PURCHASE OF SOYA IS TO BE SUSTAINED, THEN I T WOULD ONLY ADD TO THE REGULAR BUSINESS INCOME OF THE ASSESSEE WHICH WOULD IN TURN INCREASE THE CLAIM OF DEDUCTION U/S. 80HHC OF THE ACT. UNDER THESE CIRCUMSTANCES, WE HOLD THAT R S.4,86,741/- BEING THE DISALLOWANCE UNDER THE HEAD INCOME FROM BUSINESS AND AGAIN INC REASE THE CLAIM OF DEDUCTION U/S. 5 ITA NO. 169/KOL/2012 ABHIJIT SEN, AY 1997-98 80HHC OF THE ACT AND HENCE, THERE IS NO SCOPE FOR M AKING SEPARATE DISALLOWANCE ON THAT ACCOUNT. ACCORDINGLY, WE ALLOW GROUND NO. 3 OF ASS ESSEES APPEAL. 12. GROUND NO. 4 RAISED BY THE ASSESSEE IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.08.2016. SD/- SD/- (K. NARASIMHA CHARY) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 3 RD AUG, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT MR. ABHIJIT SEN, C/O, M/S. SEN EXPORTS, 85, S. N. BANERJEE ROAD, KOLKATA-700 014. 2 RESPONDENT ACIT, CIRCLE-11, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .