Shri Souren Paul, Kolkata V. ITO,Ward-41(1), Kolkata, Kolkata

ITA 1747/KOL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9360 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2011
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 08-09-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 14-10-2009
• Court: TRIBUNAL
• Department Lawyers: PIYUSH KOLHE
• Assessee Lawyers: S M SURANA
• Keywords: Business income; Opportunity of being heard
• Section: 133(6); 144

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH A, KOLKATA () BEFORE . .. . . .. . , , , , , SHRI B.R.MITTAL, JUDICIAL MEMBER. /AND . .. .!' !'!' !'. .. . , #$ SHRI C.D.RAO, ACCOUNTANT MEMBER % % % % / ITA NO . 1747/KOL/2009 &' ()/ ASSESSMENT YEAR : 2005-06 (+, / APPELLANT ) SHRI SOUREN PAUL (PAN: AHQPP 2434 G) - & - - VERSUS - . (./+,/ RESPONDENT ) THE I.T.O., WARD-41(1) KOLKATA +, 0 1 #/ FOR THE APPELLANT: SHRI S.M.SURANA ./+, 0 1 #/ FOR THE RESPONDENT: SHRI PIYUSH KOLHE #2 / ORDER ( (( ( . .. .!' !'!' !'. .. . ) )) ), , , , #$ PER SHRI C.D.RAO, AM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 24.08.2009 OF THE CIT(A)-XII, KOLKATA PERTAINING TO A.YR. 2005-06. 2. THE BRIEF FACTS OF THIS ISSUE ARE THAT WHILE DOING THE SCRUTINY ASSESSMENT THE AO HAS MADE AN ADDITION OF RS.5,04,676/- ON ACCOUNT OF UNDISPOSED STOCK, AN AMOUNT OF RS.1,15,138/- AND RS.1,34,929/- ON ACCOUNT OF UNDIS CLOSED PURCHASES AND FURTHER DISALLOWED AN EXPENDITURE OF RS.14,813/- BY OBSERV ING AS UNDER :- ON ACCOUNT OF UNDISCLOSED STOCK ON SCRUTINIZING BANK STATEMENT, IT APPEARS THAT TOT AL CASH DEPOSITS DURING THE F.YR. 2004-05 WAS RS.81,29,500/- AND ANOTHER RS.5,2 2,452/- WAS CREDITED IN THE ACCOUNT BY CLEARING, WHICH MAY BE SALE ON CREDI T CARD. DURING THIS YEAR, WITHDRAWAL OF CASH FROM THE BANK IS RARE. MOREOVER, HE HAS CLAIMED EXPENSES OF RS.2,32,789/- IN THE P&L A/C., MAJOR PORTION OF WHICH PROBABLY EXPENDED FROM CASH IN HAND. CASH DEPOSITS ARE MADE FROM DAIL Y CASH SALE. AS PER BANK STATEMENT, AFTER TAKING INTO ACCOUNT OF CASH DEPOSI TS AND CLEARING THE TOTAL SALES 2 COMES TO RS.86,51,952/- WHEREAS ASSESSEE HAS SHOWN SALE OF RS.85,40,670/-. HENCE, ASSESSEES CONTENTION THAT CERTAIN CREDIT SA LE MADE ON RETURN BASIS HAS BEEN TAKEN IN SALES ACCOUNT IS NOT CORRECT. IF HE H AD SUCH SALE H HAD NOT SHOWN IT IN THE SALES ACCOUNT. ASSESSEE HAS TAKEN PLEA OF SUNDRY DEBTORS OF RS.5, 00,150/-. THE ASSESSEE WAS GIVEN OPPORTUNITY BY LETTER DTD.01-11-07 TO SUB MIT DETAILS OF SUNDRY DEBTORS WITH NAMES AND ADDRESSES SO THAT CROSS VERI FICATION MAY BE MADE. BUT THE ASSESSEE COULD NOT FURNISH ANY DETAIL. ON THE O THER HAND BY TAKING PLEA OF S.DEBTORS THE ASSESSEE HONESTLY ADMITTED THE DIFFER ENCE IN CASH BALANCE. IT HAS ALREADY BEEN ESTABLISHED THAT IF HE HAD ANY DEBTOR THAT WAS DUE TO UNDISCLOSED SALES. IN ORDER TO RECONCILE THE OVERDRAFT BALANCE, ASSESSEE HAS TWO OPTIONS EITHER TO RECONCILE THE STOCK OR PROPOSITION OF SUN DRY DEBTOR. REGARDING STOCK, IT IS STATED THAT THE VALUE OF STOCK WAS TAKEN AT COST PRICE. DURING THE COURSE OF HEARING, ASSESSEE COULD NOT FURNISH ANY DETAIL OF C LOSING STOCK VALUED AT RS.2,80,600/-. THOUGH HE HAS STATED THAT A LIST OF CLOSING STOCK OF GOODS ARE ENCLOSED WITH THE SUBMISSION DATED 14.9.07. IT MAY BE MENTIONED THAT IN NEXT YEAR I.E. AY 2006-07 ASSESSEE HAS INCREASED STOCK T O 9,32,600/-. HOWEVER IN THIS YEAR ALSO THERE IS NO DEBTOR. STOCK STATEMENT FILED BY THE ASSESSEE BEFORE THE SBI HAS BEEN COLLECTED. IT APPEARS FROM THE STA TEMENT THAT THE ASSESSEE FURNISHED DETAILS OF STOCK AS ON 31.3.2005 VALUED A T RS.7,85,276/-. DISCREPANCY OF STOCK COMES TO DISCREPANCY IN BANK BALANCE. AS S UCH RS.5,04,676/- IS ADDED BACK TO TOTAL INCOME OF THE ASSESSEE AS UNDISCLOSED STOCK ON ACCOUNT OF UNDISCLOSED PURCHASES : DURING THE COURSE OF HEARING, ASSESSEE HAS FILED P ARTY WISE PURCHASE LIST. IN RESPONSE TO NOTICE U/S 133(6) KARUNA MANAGEMENT SERVICES (P)LTD HAS SENT A STATEMENT SHOWING DETAILS OF SALE. THE ASSESSEE WAS SUPPLIED COPY OF THE SAME AND REQUESTED BY LETTER DATED 3.12.07 TO RECONCILE THE DISCREPANCY. BUT HE HAS NOT FURNISHED ANY EXPLANATION OR RECONCILIATION. I HAVE REASON TO BELIEF ASSESSEE HAS ADMITTED THE DISCREPANCY. AFTER TAKING INTO CON SIDERATION OF DISCOUNTS ALLOWED BY THE PARTY TOTAL PURCHASE COMES TO RS.9,3 3,593/-. HOWEVER, IN THE PURCHASE LIST, ASSESSEE HAS SHOWN PURCHASE FROM THE PARTY AS RS.8,18,455/-. REGARDING THE DISCREPANCY, ASSESSEE FAILED TO SUBMI T ANY EXPLANATION. HENCE, THE DIFFERENCE RS.1,15,138/- IS ADDED BACK AS UNACC OUNTED PURCHASE. IN CASE OF JALAN INFOSYSTEM PVT. LTD. TOTAL SALES AS PER PARTYS CONFIRMATION IS RS.41,21,261/-. AFTER GIVING CREDIT OF SALE DISCOUNT OR CREDIT NOTE SALES COMES TO RS,.40,60,962/-. PURCHASE SHOWN BY THE ASSESSEE RS.39,26,033/-, DISCREPANCY OF RS.1,34,929/- IS ADD ED BACK AS UNACCOUNTED PURCHASE. IN THE P&L ACCOUNT ASSESSEE CLAIMED SUBSC RIPTION OF RS.1001/- IN SUPPORT OF THE EXPENSES ASSESSEE COULD NOT PRODUCE ANY EVIDENCE. SAME IS DISALLOWED AND ADDED BACK TO TOTAL INCOME. ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE : THE ASSESSEE HAS CLAIMED ELECTRIC CHARGES RS.29,478 /-, CONVEYANCE RS.8,337/- AND TELEPHONE CHARGES RS.36,252/-. THE ASSESSEE COU LD NOT FURNISH ANY EVIDENCE THAT THE EXPENDITURE WAS MADE WHOLLY AND E XCLUSIVELY FOR BUSINESS PURPOSE. AS SUCH 20% I.E. RS.14,813/- IS DISALLOWED AS EXCESSIVE AND UNREASONABLE. 3 2 .1. ON APPEAL, THE LD. CIT(A) HAS CONFIRMED THE ACTION OF THE AO BY OBSERVING AS UNDER :- ON ACCOUNT OF UNDISCLOSED STOCK : I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT. I HAVE ALSO PERUSED THE IMPUGNED ORDER AND TAKEN A NOTE OF THE FINDINGS STATED BY THE AO IN HIS REMAND REPORT. AS SEEN FROM THE FACTS OF THE CASE, I AM OF THE VIEW THAT THE APPELLANT HAS NOT COMPLIED PROPERLY BEFORE THE AO AT THE TIME OF SCRUTINY ASSESSMENT PROCEEDINGS OR AT THE REMAND REPORT STAG E. IT IS A FACT THAT THE AO HAS NOTICED CERTAIN DISCREPANCIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS INCLUDING THE OVER DRAFT OF RS.5,04,675/-. MOREOVER , THE ASSESSEE FAILED TO PRODUCE A STOCK STATEMENT BEFORE THE AO. HE ALSO NO TICED THAT THE ASSESSEE DECLARED MORE STOCK TO THE TUNE OF RS.5,04,676/- WH ICH IS EQUIVALENT TO THE OVER DRAFT AMOUNTS. DURING THE COURSE OF APPELLATE PROCE EDINGS THE LD.AR OF THE APPELLANT ARGUED THAT FOR THE PURPOSE OF BANK ONLY THE VALUE OF GOODS WERE SHOWN AT A HIGHER FIGURE AND THAT THERE WAS NO DIFF ERENCE IN QUANTITY AND QUALITY. THE AO IN HIS REMAND REPORT OBSERVED THAT THE ASSESSEE REMAINED SILENT REGARDING DISCREPANCY OF BANK BALANCE AND TH AT INCREASED VALUE OF STOCK WAS TAKEN FOR THE ASSESSMENT AS THE ASSESSEE COULD NOT GIVEN ANY EXPLANATION/RECONCILIATION OF NEGATIVE BANK BALANCE OF RS.5,04,676/-. TAKING INTO CONSIDERATION THE TOTALITY OF THE FACT S OF THE CASE AND THE DISCREPANCIES NOTICED, I JUSTIFY THE ADDITION MADE BY THE AO TO THE EXTENT OF RS.5,04,676/- TOWARDS UNDISCLOSED STOCK. THE APPELL ANTS GROUND IS DISMISSED ON THIS COUNT. ON ACCOUNT OF UNDISCLOSED PURCHASES : THE AO IN HIS REMAND REPORT OBSERVED THAT IN THE CA SE OF KARUNA MANAGEMENT SERVICES P.LTD AFTER RECONCILIATION OF DISHONOURED CHEQUES AND GOODS RETURNED, THE AMOUNTS ARE ALMOST TALLIED EXCEPT FOR RS.167/-. AS THE DIFFERENCE IS VERY MEAGER THE SAME CAN BE IGNORED. AS REGARDS JALAN IN FOSYTEM P.LTD. THE AO HAS ARRIVED THE DIFFERENCE AT RS.47,765/- AND STATED TH AT THE ASSESSEE DID NOT IDENTIFY THE GOODS RETURNED OF RS.40,679/- AS CLAIM ED. ON THE OTHER HAND THE LD. AR ARGUED THAT IN THE ACCOUNT COPY SENT BY THE PART Y ITSELF THE DETAILS OF GOODS RETURNED SHOWN AND HENCE THE ISSUE OF IDENTIFICATIO N OF GOODS RETURNED DOES NOT EXIST. TO THIS EXTENT THE LD. AR SUBMITTED A COMPUT ER PRINT OUT OF JALAN INFOSYSTEM P. LTD. INDICATING THE LEDGER ACCOUNT OF M/S. SPC CELLULAR SHOP. HOWEVER, THE SAID LEDGER EXTRACT HAS NOT BEEN SIGNE D BY THE ABOVE SAID COMPANY. AS SUCH, THE AUTHENTICITY OF SUCH DOCUMENT IS NOT RELIABLE AND HENCE REJECTED. IN VIEW OF THE MATTER THE DISCREPANCY NOT ICED BY THE AO TO THE EXTENT OF RS.47,765/- IS SUSTAINED AS UNDISCLOSED PURCHASE S. THE APPELLANTS GROUND IS THUS PARTLY ALLOWED. 2.2. THE LD. CIT(A) CONFIRMED THE ACCOUNT OF EXPEND ITURE THOUGH THE ASSESSEE HAS TAKEN SPECIFIC GROUND I.E. GROUND NO.3 BEFORE THE CIT(A). 3. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.14,813/- DISALLOWED ON AD-HOC BASIS FROM THE EXPENSES WHICH WERE FULLY VERIFIABLE WITH 4 REFERENCE TO THE BOOKS OF ACCOUNTS WERE QUITE REASO NABLE AND INCURRED FOR BUSINESS PURPOSES. 2.3. THE LD. CIT(A) HAS NOT ADJUDICATED THE SAME BY OBSERVING THAT GROUND NOS 1,2 AND 3 ARE GENERAL IN NATURE AND HENCE NO ADJUDICATI ON IS REQUIRED. 2.4 . AGGRIEVED BY THIS THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L APPEARING ON BEHALF OF THE ASSESSEE HAS SUBMITTED THAT ON ACCOUNT OF UNDISCLOS ED STOCK FIRSTLY THE AO MADE THE ADDITION ON THE GROUND THAT THERE WAS DISCREPANCY W ITH REGARD TO THE VALUE SHOWN BY THE ASSESSEE IN THE ACCOUNTS AND TO THE BANK AND SE CONDLY NO LIST OF STOCK WAS FILED. IT IS SUBMITTED THAT LIST OF THE STOCK WAS FILED BEFOR E THE AO IN THE ASSESSMENT PROCEEDINGS BUT EVEN IF IT IS PRESUMED THAT WHAT TH E I.T.OS SAY IS CORRECT THEN SUCH LIST WAS FILED BEFORE THE LD. C.I.T(A) AND A COPY O F THE SAME WAS FORWARDED BY THE LD CIT(A) TO THE AO FOR VERIFICATION. THE LIST OF CLOS ING STOCK AND VALUATION THEREOF IS IN PAPER BOOK PAGE NO. 16 AND 17 AND THE LIST SUBMITTE D TO THE BANK APPEARS IN PAPER BOOK PAGE 18. BOTH WERE AVAILABLE TO THE AO IN THE REMAND PROCEEDINGS. HE HAS NOT POINTED OUT ANY DIFFERENCE IN THE QUANTITY OR QUALI TY THOUGH HE FULLY EXAMINED THE SAME. FURTHER, HE ALSO EXAMINED THE VALUATION OF EA CH AND EVERY ITEM AND COULD POINT OUT DISCREPANCY ONLY IN FEW ITEMS AFTER SCRUTINIZIN G THE SAME AND FOUND THAT DISCREPANCY IN VALUATION APPEARED IN 5 PCS OF HAND SETS. THAT DEFICIENCY WORKS OUT TO RS. 8400/- + RS. 4320/- + RS, 3560/- RS. 266/- + RS I 500/- = RS 18046/- ONLY. THE ASSESSEES EXPLANATION WAS THAT THE STOCK WAS VALUE D ON ACTUAL COST AND NOT ON ANY METHOD. WHATEVER PIECE OF HAND SET REMAINED IN THE STOCK THE SAME WAS VALUED AT COST. IN ANY CASE EVEN IF THE VALUATION IS NOT FOUN D PROPER FOR FIVE SETS THE AO COULD HAVE BEEN ADDED RS 18046/-SINCE ADMITTEDLY THE STOC K WAS VALUED AT COST IN THE ACCOUNTS AS IN EARLIER YEARS WHICH IS ALSO NOT DISP UTED. THE OTHER GROUND OF THE LD CIT (A) IS THAT OVER DRAFT WAS NOT SHOWN IN THE BALANCE SHEET. IT IS SUBMITTED THAT AN EXPLANATION WAS FILED BEFORE THE AO RECONCILING THE SAID AMOUNT OF THE BALANCE SHEET BUT EVEN OTHERWISE IF SOME LIABILITY WHICH IS PROVE D TO BE GENUINE IS NOT SHOWN IN THE ACCOUNTS THE SAME CANNOT BE TREATED AS INCOME IN AN Y CIRCUMSTANCES PARTICULARLY WHEN 5 THE SAME WAS BANK LOAN. THEREFORE THE ADDITION MADE BY THE AO AND RETAINED BY THE LD. I.T (A) MAY BE DELETED 3.1. ON ACCOUNT OF UNDISCLOSED PURCHASES THE AO MIS SED TO LOOK INTO THE CONFIRMATION ON WHICH HE HIMSELF RELIED ON FOR MAKI NG THE ADDITION. THE LD. CIT (A) CONFIRMED THE ADDITION ON THE BASIS OF THE REMAND R EPORT OF THE AO. THE AO AS WELL AS THE LD C1T(A) SHOULD HAVE LOOKED INTO THE CONFIRMAT ION ACCOUNT SENT BY THE PARTY WHEREIN THE SALES RETURN OF RS. 32,027/- APPEARS IN PAPER BOOK PAGE 26 AND ANOTHER SALES RETURN FOR RS. 8669/- APPEARS IN PAPER BOOK P AGE 30 MAKING TOTAL RS. 40,696/-. FURTHER THE AO HAS NOT POINTED OUT ANY PAYMENT SHOW N AS RECEIVED BY THE PARTIES WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. HENCE THE ADDITION WAS NOT CALLED FOR. 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF THE REVENUE AUTHORITIES. 5. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL CONSIDERATION OF MATERIALS AVAILABLE ON RECORD, AS REGARDING UNDISCLOSED STOCK , WE ARE OF THE VIEW THAT NEITHER THE AO NOR THE LD. CIT(A) IS JUSTIFIED IN MAKING THE AD DITION BY OBSERVING THAT THE ASSESSEE HAS NOT DISCLOSED OD ACCOUNT MAKING THE AD DITION ON ACCOUNT OF SHORTAGE OF STOCK. AT THE SAME TIME IT IS FURTHER OBSERVED THAT THE ASSESSEE IS ALSO NOT PROPERLY EXPLAINED BY THE ORDER OF THE ACCOUNT OF THE ASSESS EE AS NOT DISCLOSED IN THE REGULAR BOOKS OF ACCOUNTS. IN OUR CONSIDERED OPINION, THIS REQUIRES FURTHER VERIFICATION. THEREFORE, WE SET ASIDE THE ISSUE AND RESTORE THE S AME TO THE FILE OF THE AO. THE AO WILL DECIDE THE SAME AFRESH AS PER LAW AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESEE. 5.1. AS REGARDING UNDISCLOSED PURCHASES OF RS.47,7 65/-ON ACCOUNT OF M/S.JALAN INFOSYS IT IS OBSERVED THAT THE ASSESSEE HAS CATEG ORICALLY MENTIONED THAT THE SALES RETURN OF RS.32,027/- APPEARS IN PAGE-26 OF THE PAP ER BOOK AND ANOTHER SALES RETURN OF RS.8,669/- APPEARS AT PAGE-30 OF THE PAPER BOOK. SI NCE THE REVENUE HAS NOT DISPUTED THE FILING OF LEDGER ACCOUNT BEFORE THEM WE FIND NO REASON TO ADD THE SAME. IN THE RESULT THIS GROUND IS ALLOWED. 5.2. AS REGARDING DISALLOWANCE OF EXPENDITURE IT IS OBSERVED THAT THE LD. CIT(A) HAS NOT DECIDED THIS ISSUE. SINCE WE HAVE SET ASIDE THE ISSUE ON ACCOUNT OF UNDISCLOSED STOCK AND THE AO HAS PASSED AN EX-PARTE ORDER U/S 1 44 WE CONSIDER IT FIT TO SET ASIDE 6 THIS ISSUE TO THE AO AFTER FRESH ADJUDICATION AS PE R LAW AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESEE. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED IN PART FOR STATISTICAL PURPOSES. 4 #2 5 6& 7 48 9 4 #2 5 6& 7 48 9 4 #2 5 6& 7 48 9 4 #2 5 6& 7 48 9 ORDER PRONOUNCED IN THE COURT ON 04.02.2011. SD/- SD/- . .. . . .. . , , , , B.R.MITTAL, JUDICIAL MEMBER . .. .!' !'!' !'. .. . , ,, , #$ #$ #$ #$ , C.D.RAO, ACCOUNTANT MEMBER. ( (( ('$ '$ '$ '$) )) ) DATE: 04.02.2011. #2 0 .: ;#:(<- COPY OF THE ORDER FORWARDED TO: 1. SHRI SOUREN PAUL, 163/B, BADRIDAS TEMPLE ROAD, KOLK ATA-700004. 2 THE I.T.O., WARD-41(1), KOLKATA 3. THE CIT, 4. THE CIT(A)-XII, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA /: ./ TRUE COPY, #2&6/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES R.G.(.P.S.)