Balaji Construction, Kolkata V. ITO, Wd-28(1), Kolkata, Kolkata

ITA 178/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1742 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 19-07-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 31-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MD GHYAS UDDIN J
• Assessee Lawyers: MANISH TIWARI
• Keywords: Unexplained cash credit
• Section: 143(3); 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.178/KOL/2014 ASSESSMENT YEAR:2006-07 BALAJI CONSTRUCTION 295, S.N.ROY ROAD, KOLKATA-700 038 [ PAN NO.AADFB 3146 R ] / V/S . INCOME TAX OFFICER, WARD-28(1), P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI MANISH TIWARI, FCA /BY RESPONDENT MD. GHYAS UDDIN, JCIT-DR /DATE OF HEARING 24-03-2017 /DATE OF PRONOUNCEMENT 12-05-2017 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XIV, KOLKATA DATED 01.11.2013. ASSESSMENT WAS FRAMED BY ITO WARD-28(1), KOLKATA U/S 143(3) OF THE INCOME TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HER ORDER DATED 31.1 2.2008 FOR ASSESSMENT YEAR 2006-07. SHRI MANISH TIWARI, LD. AUTHORIZED REPRESENTATIVE A PPEARED ON BEHALF OF ASSESSEE AND MD.GHYAS UDDIN, LD. DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF REVENUE. ITA NO.178/KOL/2014 A.Y. 2006 -07 BALAJIA CONSTRUCTION VS. ITO WD-8(1) KOL. PAGE 2 2. THE SOLITARY ISSUE RAISED IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY SUSTAINING THE DI SALLOWANCE OF 12,46,096/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE, A FIRM, ENGAGED IN BUSINESS OF CIVIL CONSTRUCTION. THE ASSESSEE FOR THE YEAR UNDER CONSI DERATION HAS SHOWN THE RECEIPT OF 98,296/- FROM EMAMI PAPER MILLS LTD. (EPML FOR SHOR T). HOWEVER, ON CONFIRMATION U/S 133(6) OF THE ACT IT WAS REVEALED THAT THE TOTA L TRANSACTIONS IN THE YEAR UNDER CONSIDERATION WITH EPML WAS OF 14,82,237/-. ON QUESTION BY THE AO ABOUT THE AFORESAID MISMATCH THE ASSESSEE ADMITTED THE DISCRE PANCY AND OFFERED 20% OF SUCH RECEIPT AS INCOME. THE ASSESSEE ALSO CLARIFIED TH AT THE AFORESAID BANK ACCOUNT WAS NOT DISCLOSED IN THE RETURN AS THE SAME WAS OPENED BY WAY OF UNFAIR MEANS BY THE OTHER PARTNER. THE ASSESSEE ALSO SUBMITTED THAT THE EXPENSE INCURRED IN CONNECTION WITH AFORESAID RECEIPT HAS ALSO NOT BEEN BOOKED IN THE BOOKS OF ACCOUNT OF ASSESSEE. HOWEVER, AO DISREGARDED THE CLAIM OF ASSESSEE BY OB SERVING THAT THE DETAILS OF THE EXPENSES NOT BOOKED IN RELATION TO IMPUGNED RECEIPT FROM EPML HAS NOT BEEN SUBSTANTIATED. THE AO ALSO OBSERVED THAT THERE WAS AN OUTSTANDING BALANCE SHOWN IN THE BOOKS OF ACCOUNT OF ASSESSEE IN THE NAME OF EPM L FOR 1,37,844/- ONLY. ACCORDINGLY, AO TREATED A SUM OF 12,46,096/- (1482237 [137844 + 98296]) AS UNDISCLOSED CASH CREDIT U/S. 68 OF THE ACT AND ADDE D TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT AO ERRED IN NOT CO NSIDERING THE CORRESPONDING EXPENSE INCURRED IN RELATION TO IMPUGNED UNDISCLOSE D RECEIPT. THEREFORE, ONLY GROSS PROFIT SHOULD BE BROUGHT TO TAX. HOWEVER, LD. CIT(A ) DISREGARDED THE CLAIM OF ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- 4.2 I HAVE EXAMINED THE IMPUGNED ASSESSMENT ORDER OF THE AO AND CONSIDERED THE WRITTEN SUBMISSION AND HEARD THE VERBAL ARGUMEN TS OF THE AR OF THE APPELLANT ASSESSEE. HOWEVER, I DO NOT FIND ANY ME RITS IN THE ARGUMENTS OF THE AR OF THE APPELLANT. IN THE ASSESSMENT PROCEEDINGS THE AR WAS ASKED BY THE AO TO EXPLAIN THE DISCREPANCY AND FURNISH THE BANK DET AILS OF THE ACCOUNT IN WHICH THE RECEIPTS FROM EMAMI PAPER MILLS LTD, WERE CREDI TED SINCE THE DISCLOSED BANK ACCOUNT DOES NOT REFLECT THESE RECEIPTS. HE SU BMITTED THAT THE ACCOUNTANT RESORTED TO UNFAIR MEAN IN CONNIVANCE WITH ONE OF T HE PARTNERS DUE TO WHICH BANK DETAILS WAS NOT AVAILABLE AND IS CLOSED 20% OF THE ESCAPED RECEIPTS. THE ITA NO.178/KOL/2014 A.Y. 2006 -07 BALAJIA CONSTRUCTION VS. ITO WD-8(1) KOL. PAGE 3 AR HAS ADMITTED THE OMISSION OF RECEIPTS FROM EMAMI . HIS DISCLOSURE IS NOT ACCEPTABLE AS THE MATTER OF RELEVANT EXPENSES NOT B EING BOOKED/ACCOUNTED IS NOT SUBSTANTIATED. THE TOTAL TRANSACTIONS LESS AMOU NT OUTSTANDING OF RS.1,37,844/- AND THE ONE ALREADY REFLECTED OF RS.9 8,296/- IS TREATED AS UNDISCLOSED CASH CREDIT U/S. 68. THE BALANCE AMOUNT OF RS.12,46,096/- IS ADDED BACK TO TOTAL INCOME. THE APPELLANT ADMITTED THE MI STAKE DURING ASSESSMENT PROCEEDINGS WHICH HAD OCCURRED DUE TO THE UNFAIR CO NNIVANCE THE ACCOUNTANT WITH ONE OF THE PARTNERS. 4.2.1 IN VIEW OF THE ABOVE DISCUSSION OF FACTS, I D ECLINED TO ACCEPT THE CONTENTION OF THE AR AND UPHOLD THE ADDITION OF RS. 12,46,096/- MADE BY THE AO. IN THE RESULT, THE APPEAL FAILED ON THIS GROUND AND I DISMISSED THE INSTANT APPEAL. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US ON THE FOLLOWING GROUND:- 2. FOR THAT THE LD. CIT(APPELLANTS) IS WRONG, UNJU STIFIED IN CONFIRMING THE ADDITION OF RS.12,46,096/- MADE BY THE LD. AO ON AC COUNT OF UNEXPLAINED CASH CREDIT U/S. 68 OF THE IT ACT, 1961. 3. FOR THAT THE LD. CIT(APPEALS) HAS ERRED IN REJEC TING THE OFFER OF THE APPELLANT TO TAX ONLY THE INCOME PERTAINING TO THE ALLEGED RECEIPTS FROM EMAMI PAPER MILLS LTD., BEING GROSS PROFIT OF RS.2,64,710 /- WHICH COMES TO APPROX. 20% OF THE UNDISCLOSED GROSS RECEIPTS AND ALSO NOT ACCEPTING THE TESTED LEGAL PRECEDENT THAT ONLY THE PROFIT EARNED OUT OF UNDISC LOSED TRANSACTIONS CAN BE BROUGHT TO TAX AND NOT THE ENTIRE GROSS RECEIPTS. T HE LD. CIT(APPEALS) HAS NOT ACTED JUDICIOUSLY IN NOT ALLOWING THE EXPENDITURE I NCURRED BY THE APPELLANT FOR EARNING THE UNDISCLOSED INCOME. THE LD. CIT(APPEALS ) ALSO ERRED IN NOT CONSIDERING OR NOT EVEN DISCUSSING THE RATIO OF JUD GEMENT OF CALCUTTA HIGH CURT IN THE CASE OF CIT VS. S.M. OMER (ITR 201) 68 (1990) ON WHICH THE APPELLANT HAD PLACED RELIANCE DURING THE CURSE OF H EARING. 5. BEFORE US THE LD. AR REITERATED THE ARGUMENTS AS WERE MADE BEFORE THE LD. CIT(A) WHEREAS LD. DR FOR THE REVENUE VEHEMENTLY RE LIED ON THE ORDER OF AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE INS TANT CASE RELATES TO THE ADDITION MADE BY AO AND SUBSEQUENTLY CONFIRMED BY LD. CIT(A) ON A CCOUNT OF UNDISCLOSED RECEIPTS IN THE UNDISCLOSED BANK ACCOUNT FROM EPML. THERE IS NO DISPUTE ABOUT THE FACTS OF THE CASE, THEREFORE THE SAME ARE NOT REPEATED FOR THE S AKE OF BREVITY. ADMITTEDLY, ASSESSEE HAS NOT OFFERED TO TAX A RECEIPTS OF 12,46,096/- FROM EPML. HOWEVER, THE ITA NO.178/KOL/2014 A.Y. 2006 -07 BALAJIA CONSTRUCTION VS. ITO WD-8(1) KOL. PAGE 4 UNDISCLOSED RECEIPT WAS TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. AT THIS JUNCTURE, WE FIND IMPORTANCE TO REPRODUCE THE PROVI SION OF SEC. 68 OF THE ACT HEREUNDER:- CASH CREDITS . 68 . WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF A N ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLA NATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE [ASSESSING] OFFICER, SATISFACTORY, THE SUM SO CREDI TED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PR EVIOUS YEAR: [PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY (NOT BEING A C OMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED), AND THE S UM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY, SHARE CAPITAL, SHARE PREMI UM OR ANY SUCH AMOUNT BY WHATEVER NAME CALLED, ANY EXPLANATION OFFERED BY SU CH ASSESSEE-COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS- (A) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUCH CRE DIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS AN EXPLANATION AB OUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND (B) SUCH EXPLANATION IN THE OPINION OF THE ASSESSING OF FICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY; PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRS T PROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM REFERRED TO THEREIN I S RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CAPITAL COMPANY AS REFERR ED TO IN CLAUSE (23FB) OF SECTION 10.] A BARE READING OF THE ABOVE PROVISION IS THAT WHERE ANY SUM IS FOUND CREDITED U/S 68 OF THE ACT CAN BE BROUGHT TO TAX IF IT IS RECORDED IN THE BOOKS OF ACCOUNT. IN THE INSTANT CASE, BEFORE US IT IS UNDISPUTED FACT THAT THE IMPU GNED SUM WAS NOT DISCLOSED IN THE BOOKS OF ACCOUNT. THEREFORE, THE PROVISION OF SEC. 68 OF THE ACT IS NOT APPLICABLE. ACCORDINGLY, THE ADDITION MADE U/S 68 OF THE ACT IS NOT SUSTAINABLE. A QUERY WAS RAISED TO THE LD. DR FROM THE BENCH FOR THE NON-APP LICABILITY OF SEC. 68 OF THE ACT TO THE IMPUGNED RECEIPT FROM EMPL WHO AGREED THAT THE PROVISION OF SEC. 68 OF THE ACT ARE NOT APPLICABLE. HOWEVER, LD. DR VEHEMENTLY SUBM ITTED THAT THE BENCH SHOULD SEE THE SUBSTANCE OVER THE FORM IN THE PRESENT FACTS AN D CIRCUMSTANCES OF THE CASE. THE LD. DR ALSO SUBMITTED THAT IT IS UNDISPUTED THAT THE IM PUGNED RECEIPT WAS NOT AT ALL DISCLOSED IN THE BOOKS OF ACCOUNT. LD. DR ALSO REQU ESTED THE BENCH TO RESTORE THE MATTER TO THE FILE OF AO FOR FRESH ADJUDICATION AND TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO SUBMIT THE DETAILS OF THE EXPENSE INCUR RED IN CONNECTION WITH THE IMPUGNED ITA NO.178/KOL/2014 A.Y. 2006 -07 BALAJIA CONSTRUCTION VS. ITO WD-8(1) KOL. PAGE 5 RECEIPT. WE FIND FORCE IN THE ARGUMENT OF THE LD. D R. IT IS JUST BECAUSE THERE IS NO DISPUTE TO THE FACT THAT THE IMPUGNED RECEIPT FROM THE EMPL WAS NOT DISCLOSED IN THE RETURN AND THEREFORE NON-MENTION OF CORRECT SECTION CANNOT CHANGE THE FACTUAL POSITION AND CHARACTER OF TAXABLE RECEIPT. HOWEVER IN THE I NTEREST OF JUSTICE & FAIR PLAY WE ARE INCLINED TO GIVE OPPORTUNITY TO THE ASSESSEE TO PRO DUCE THE NECESSARY EVIDENCE OF EXPENDITURE INCURRED IN RELATION TO THE IMPUGNED RE CEIPTS. HENCE AO IS DIRECTED TO ADJUDICATE THE ISSUE AFTER PROVIDING REASONABLE OPP ORTUNITY OF BEING HEARD TO ASSESSEE IN ACCORDANCE WITH LAW. THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 12/05/2017 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ! - 12/05/2017 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-BALAJI CONSTRUCTION, 295 S.N.ROY ROAD, K OLKATA-700038 2. /RESPONDENT-ITO WARD, 28(1), KOLKATA-X P-7, CHOWRIN GHEE SQUARE, KOL-69 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. P RIVATE SECRETARY HEAD OF OFFICE/DDO / /'#,