Litton Sen, Kolkata V. I.T.O Wd - 50(2),Kol, Kolkata

ITA 1763/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75055 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 10-10-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 03-12-2012
• Court: TRIBUNAL
• Department Lawyers: SABOORUL HASAN USMANI
• Assessee Lawyers: VIZYANESHW AR NATH DATTA; R S GHOSAL
• Keywords: Rejection of books of accounts; Sham transactions
• Section: 40A(3); 37(1); 145; 37; 144

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 1763/KOL/2012 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2009-10 LITTON SEN (PAN: AMAPS3782M) VS. INCOME-TAX OFFIC ER, WD-50(2), KOLKATA (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 14.02.2014 DATE OF PRONOUNCEMENT: 19.02.2014 FOR THE APPELLANT: S/SHRI R. S. GHOSAL & VIZYANESHW AR NATH DATTA, ADVOCATES FOR THE RESPONDENT: SHRI SABOORUL HASAN USMANI, J CIT, SR. DR $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XXXII, KOLKATA IN APPEAL NO. 179/XXXII/11-12/50(2)/KOL DATED 08.10.2012. ASSESS MENT WAS FRAMED BY ITO, WARD-50(2), KOLKATA U/S. 144 OF THE INCOME-TAX ACT, 1961 (HEREI NAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2009-10 VIDE HIS ORDER DATED 30.12. 2011. 2. THE FIRST INTER-CONNECTED ISSUE IN THIS APPEAL O F ASSESSEE IS AGAINST THE ADDITION UNDER THE HEAD PURCHASE ON ESTIMATE BASIS AT RS.9,06,891/- AN D ESTIMATED ADDITION UNDER THE HEAD SUPPRESSED SALES AT RS.5,03,655/- WITHOUT REJECTING THE BOOKS OF ACCOUNTS. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 3 TO 5: 3. FOR THAT WITHOUT REJECTING THE BOOKS OF ACCOUNT S AS WELL AS WITHOUT FINDING ANY DEFECT IN THE BOOKS OF ACCOUNT THE ADDITION IN THE TRADING ACCOUNT SUCH AS PURCHASE & SALE ACCOUNTS IS UNJUST, OPPOSED TO REQUIREMENT OF LAW A ND BAD IN LAW. 4. FOR THAT THE ADDITION OF RS.9,06,891/- UNDER THE HEAD PURCHASE ACCOUNT ON THE BASIS OF ESTIMATION AND WITHOUT HAVING ANY BASIS AS WELL AS IS NEITHER TENABLE IN LAW NOR IN FACTS. 5. FOR THAT THE ADDITION OF RS.5,03,655/- UNDER THE HEAD SUPPRESSED SALE ON THE BASIS OF ESTIMATION AND WITHOUT HAVING ANY BASIS AS WELL AS IS NEITHER TENABLE IN LAW NOR IN FACTS. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEFLY STATED FACTS OF THE CASE ARE THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE AO REQUESTED THE ASSESSEE TO PRODUCE THE BILLS AND VOU CHERS OF PURCHASE FOR VERIFICATION OF PURCHASE OF OLD GOLD AS THE ASSESSEE COULD NOT FURN ISH THE BILLS AND VOUCHERS BUT FURNISHED THE MAILING ADDRESS OF THE PARTIES. THE AO BY ESTIMATI NG THE CASH PURCHASES AT RS.90,68,916/- 2 ITA NO.1763/K/2012 LITTON SEN, AY:2009-10 ESTIMATED THE DISALLOWANCE AT 10% AND ADDED A SUM O F RS.9,06,891/-. SIMILARLY, THE AO REQUIRED THE ASSESSEE TO PRODUCE THE SALE REGISTER AND AFTER VERIFYING THE SAME HE FOUND THAT THE ASSESSEE PURCHASED GOLD BARS AND ALSO SOLD GOLD BAR S OF 24 CT. IN THE MARKET IN THE SAME RATE BUT AT A LOWER RATE THAN THE PURCHASE RATE AS WELL AS T HE STANDARD MARKET RATE. HE GAVE FEW EXAMPLES WHERE RATE VARIES AT 2 TO 3% AND FINALLY, HE TREATED 5% OF THE GROSS SALE AS SUPPRESSED SALE AND ADDED TO THE RETURNED INCOME VIDE PARA 8(B ) AS UNDER: 8(B). IN VIEW OF THE ABOVE DISCUSSION AND OBSERVATI ON, IT IS CLEARLY EVIDENT THAT THE ASSESSEE HAS SUPPRESSED HIS SALE CONSIDERATION OF G OLD BAR (24 CARAT). DURING THE YEAR UNDER ASSESSMENT THE ASSESSEE CLAIMED TO HAVE SOLD GOLD BAR AMOUNTING TO RS.1,00,73,115/-. THEREFORE, IT IS HOLD THAT THE A SSESSEE SUPPRESSED HIS SALE OF GOLD BAR. HENCE, 5% OF RS.1,00,73,115/- I.E. RS.5,03,910/-, I S ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ON BOTH THE COUNTS UPHELD THE ADDITION. AGGRIEVED, ASSESSEE CAME IN APPEAL BEFOR E US. 4. WE HAVE GONE THROUGH THE ASSESSMENT ORDER AND FI ND THAT THE CIT(A) HAS MERELY ESTIMATED THE PURCHASE AS WELL AS SUPPRESSED SALES. THERE IS NO IOTA OF ANY FINDING THAT THERE IS DEFECT IN THE BOOKS OF ACCOUNT OR THE BOOKS OF ACCO UNTS ARE NOT PROPERLY MAINTAINED BY THE ASSESSEE IN THE PRESENT CASE. WE HAVE ALSO GONE TH ROUGH THE ORDER OF CIT(A) AND FOUND THAT THERE MAY BE VARIATION IN PURCHASE AND SALE PRICE A S ON DATE. NONE OF THE AUTHORITIES BELOW HAVE VERIFIED THE FACTS FROM THE CONCERNED PARTIES I.E. PURCHASERS OR TO WHOM SALES ARE MADE. IN SUCH CIRCUMSTANCES, WHETHER AO CAN REJECT THE BOOKS OF ACCOUNTS OR NOT ? FROM THE ASSESSMENT ORDER THERE IS NO FINDING OR THERE IS NO EVIDENCE T O SHOW EITHER THE SALES MADE BELOW THE MARKET PRICE WERE SHAM TRANSACTIONS OR THAT THE MARKET PRI CE WERE IN FACT PAID BY THE PURCHASERS. THE MERE FACT THAT THE GOODS WERE SOLD AT CONCESSIONAL RATE WOULD NOT ENTITLE THE REVENUE TO ASSESS THE DIFFERENCE BETWEEN THE MARKET PRICE AND THE PRI CE PAID BY THE ASSESSEE AS SUPPRESSED SALE. WHETHER THE ASSESSEE PAID PRICE FOR PURCHASE OF GOO DS AT HIGHER RATE THAN THE MARKET PRICE PRESCRIBED BY THE GOVERNMENT, IT MAY BE HELD, ON FA CTS OF THE EACH CASE, THAT PRICE ACTUALLY PAID BY THE ASSESSEE MUST BE TAKEN INTO CONSIDERATION IN COMPUTING THE INCOME OF THE ASSESSEE. IN SUCH CIRCUMSTANCES, WHETHER THE AO HAS COMPLIED WIT H THE ELEMENT OF SECTION 145 OF THE ACT. WHEN THE AO HAS EXAMINED THE ACCOUNTS OF THE ASSESS EE HE HAS TO CONSIDER (I) WHETHER THE ASSESSEE HAS REGULARLY EMPLOYED A METHOD OF ACCOUNT ING, (II) EVEN IF REGULARLY ADOPTION OF A METHOD OF ACCOUNTING IS THERE, WHETHER THE ACTUAL P ROFITS CAN BE PROPERLY DEDUCED FROM THE METHOD EMPLOYED OR NOT, (III) WHETHER THE ACCOUNTS ARE CORRECTLY MAINTAINED OR NOT, (IV) WHETHER THE ACCOUNTS MAINTAINED ARE COMPLETE AND TH ERE IS NO OMISSION. IF THE FINDING ON ANY OF THE ABOVE QUESTIONS IS IN THE NEGATIVE, IN THAT EVENTUALITY, THE PROVISIONS OF SECTION 145(2) OF THE ACT CAN BE APPLIED AND THE AO CAN MAKE THE BEST JUDGMENT ASSESSMENT IN THE MANNER 3 ITA NO.1763/K/2012 LITTON SEN, AY:2009-10 PROVIDED IN SECTION 144 OF THE ACT. THE FIRST PROV ISO TO SECTION 145(1) OR SECTION 145(2) OF THE ACT CAN BE INVOKED ONLY IF AND WHETHER THE ELEMENTS ATTRACTING EITHER OF THOSE PROVISIONS ARE FOUND TO EXIST. A CLEAR FINDING TO THAT EFFECT ALO NG WITH MATERIAL ON WHICH SUCH FINDING IS BASED HAS TO BE MADE OUT AND GIVEN BY THE AO. NO ASSESSM ENT UNDER THE FIRST PROVISO TO SECTION 145(1) OF THE ACT OR SECTION 145(2) OF THE ACT CAN BE SUSTAINED IF THE AO HAS NOT CONSIDERED AND RECORDED A FINDING AGINST THE ASSESSEE AS TO WH ETHER HE HAS BEEN REGULARLY EMPLOYED A METHOD OF ACCOUNTING OR WHETHER HIS INCOME, PROFITS OR GAINS, CAN BE PROPERLY DEDUCED FROM THIS METHOD OF ACCOUNTING, IF THERE HAS BEEN REGULA RLY EMPLOYED A METHOD OF ACCOUNTING OR WHETHER THE ACCOUNTS ARE CORRECT AND COMPLETE. THE AOS DECISION ON THESE MATTERS IS NOT A SUBJECTIVE OR ARBITRARY DECISION BUT A JUDICIAL DEC ISION AND CANNOT BE ACCEPTED IF THERE IS NO MATERIAL TO SUPPORT HIS FINDING. AS IN THE PRESENT CASE BEFORE US, THERE IS NO MATERIAL WHICH SUGGESTS REJECTION OF BOOKS OF ACCOUNT AND IN THE P RESENT CASE MORE GLARING ASPECT IS THAT NO REJECTION OF BOOKS OF ACCOUNTS AT ALL. IN SUCH CIR CUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT THE AO AND CIT(A) HAS PASSED THEIR JUDGMENT ON CON JECTURE AND SURMISES AND ARBITRARILY MADE THE ADDITIONS. WE DELETE THE SAME AND THIS COMMON ISSUE OF ASSESSEES APPEAL IS ALLOWED. 5. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) APPLYING SECTION 40A(3) OF THE ACT AND DISALLOWING A SUM OF RS.2,00, 000/- AND ALSO DISALLOWANCE OF PENALTY PAYMENT OF VAT AT RS.5000/- AND INTEREST AT RS.244/ -. FOR THIS, ASSESEE HAS RAISED FOLLOWING GROUND NOS. 6: 6. FOR THAT THE ASSESSING OFFICER ERRED IN DISALL OWING THE FOLLOWING- I) RS.2,00,00/- UNDER THE HEAD PURCHASE ACCOUNT APPLYI NG SECTION 40A(3) OF THE ACT. II) RS.5000/- AND RS.244/- UNDER HEAD PAYMENT OF VAT III) THE ADDITION OF RS.6,825/- UNDER THE HEAD BANK INTE REST. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE AO NOTED THE CASH PURCHASES OF RS.2,00,000/- AN D DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT BY OBSERVING AS UNDER: 5. ON PERUSAL OF THE DOCUMENTS PROCURED FROM THE A SSESSEE, IT IS SEEN THAT HE HAD PURCHASED GOLD IN CASH FOR RS.45,76,598/- AND RS.46 ,92,318/- TOTALING TO RS.92,68,916/-. OUT OF WHICH, HE HAD MADE CASH PURCHASE RS.1,00,000 /- AND RS.1,00,000/- ON 02.04.2008 AND 11.04.2008 RESPECTIVELY, FROM MALA PAUL, WHICH WAS MORE THAN RS.20,000/- CASH PURCHASE IN SINGLE OCCASION AND IN VIOLATION OF SEC . 40A(3) OF THE INCOME TAX ACT, 1961. 6. IN VIEW OF THE CASH PURCHASE OF RS.2,00,000/- AS DISCUSSED ABOVE, IT IS DISALLOWED U/S. 40A(3) OF THE INCOME TAX ACT, 1961, AND ADDED TO TH E TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). BEFORE CIT(A), ASSESSEE ONLY MADE SUBMISSIONS THAT THE SELLERS WERE IN NEED OF SELLIN G FAMILY USED GOLD TO MEET UP THE EMERGENCY EXPENDITURE FOR THE PURPOSE OF MEDICAL TREATMENT OF ANY FAMILY MEMBER OR TO MEET UP ANY EXPENDITURE FOR MARRIAGE OR OTHER RITUAL CEREMONY W HEN THERE IS NO TIME LEFT FOR ISSUING 4 ITA NO.1763/K/2012 LITTON SEN, AY:2009-10 CHEQUE/DRAFT OR RECEIVING CHEQUE/DRAFT. THE CIT(A) CONSIDERED THIS AND NOTED THAT THIS IS ONLY A GENERAL EXPLANATION AND NOTHING SPECIFIC OR ANY EME RGENCY WAS NOT BROUGHT OUT. FOR THIS, CIT(A) HAS RECORDED HIS FINDING AS UNDER: CONSIDERING THE ABOVE FINDING AND THE FACTS OF THE CASE I AM OF THE VIEW THAT THE ACTION OF THE A.O IS AS PER LAW FOR DISALLOWING RS.2,00,00 0/- U/S. 40A(3) OF THE I. T. ACT. HENCE I CONFIRM THE ADITION MADE BY THE A.O. OF RS.2,00,0 00/- U/S. 40A(3) OF THE I. T. ACT MADE BY THE AO. HENCE THIS GROUND IS NOT ALLOWED. EVEN NOW BEFORE US, ASSESSEE CONCEDED THAT HE HAS N O EXPLANATION WHATSOEVER AND THE EXPLANATION IS GENERAL IN NATURE. SINCE THE EXPLAN ATION OF THE ASSESSEE IS GENERAL IN NATURE AND IT IS NOT BACKED BY ANY EVIDENCE, WE HAVE NO HESITA TION IN CONFIRMING THE ORDER OF CIT(A) AND THE SAME IS HEREBY UPHOLD. THIS GROUND OF APPEAL O F ASSESSEE IS DISMISSED. 7. THE NEXT DISALLOWANCE ON ACCOUNT OF PENALTY ON V AT PAYMENTS AND INTEREST. ACCORDING TO AO AS WELL AS CIT(A) THIS IS FOR BREACH OF LAW A ND ANY EXPENSES DEBITED FOR BREACH OF LAW IS NOT AN ALLOWABLE EXPENDITURE. IN VIEW OF THE EXPLA NATION TO SECTION 37(1) OF THE ACT AS THE ABOVE PAYMENTS ARE IN THE NATURE OF PENALTY FOR PAY MENT OF VAT I.E. DELAYED PAYMENT AND THE SAME SQUARELY FALLS UNDER EXPLANATION TO SECTION 37 (1) OF THE ACT. CIT(A) HAS RIGHTLY CONFIRMED THIS ADDITION. WE ALSO CONFIRM THE SAME. THIS GRO UND OF APPEAL OF ASSESSEE IS ALSO DISMISSED. 8. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALL OWED. 9. ORDER IS PRONOUNCED IN THE OPEN COURT ON 19 TH FEBRUARY, 2014 SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 19TH FEBRUARY, 2014 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT SHRI LITTON SEN, 61, K.N.C. ROAD, NORTH 24 PARGANAS, KOLKATA-700 124 2 ./,- / RESPONDENT ITO, WARD-50(2), KOLKATA. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .