PIYA EGG CENTRE., Purba Medinipur V. I.T.O Wd - 4,Haldia., Purba Medinipur

ITA 1804/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83014 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 07-12-2012
• Court: TRIBUNAL
• Department Lawyers: USMANI
• Keywords: Unexplained cash credit; Unexplained investment
• Section: 194C; 68; 144

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , . . . . ! ! ! ! /AND ' #!' ' #!' ' #!' ' #!' , ) [BEFORE SHRI P. K. BANSAL, AM & SHRI MAHAVIR SINGH, JM] !$ / I.T.A NO.1804/KOL/2012 #% &'/ ASSESSMENT YEAR: 2005-06 PIYA EGG CENTRE VS. INCOME-TAX OFFICER, WD-4, HALDIA (PAN: AAIFP2951P) ()* /APPELLANT ) (+,)*/ RESPONDENT ) & !$ / I.T.A NO.1834/KOL/2012 #% &'/ ASSESSMENT YEAR: 2005-06 INCOME-TAX OFFICER, WD-4, HALDIA VS. PIYA EGG CE NTRE ()* /APPELLANT ) (+,)*/ RESPONDENT ) DATE OF HEARING: 22.07.2014 DATE OF PRONOUNCEMENT: 01.08.2014 FOR THE ASSESSEE: SHRI SUBASH AGARWAL, ADVOCATE FOR THE REVENUE : SHRI S. H. USMANI, JCIT, SR. D R / ORDER PER SHRI MAHAVIR SINGH, JM : THESE CROSS APPEALS BY ASSESSEE AND REVENUE ARE ARI SING OUT OF ORDER OF CIT(A)-XXXIII, KOLKATA IN APPEAL NO149/CIT(A)-XXXIII/ITO.WARD-4 DA TED 04.09.2012. ASSESSMENT WAS FRAMED BY ITO, WARD-4, HALDIA U/S. 144/145(3) OF TH E INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2005- 06 VIDE HIS ORDER DATED 28.12.2007. 2. FIRST WE TAKE UP ITA NO. 1804/K/2012. AT THE OU TSET, LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NOS. 1 AND 2. HENCE, THE SAME A RE DISMISSED AS NOT PRESSED. 3 . LD. COUNSEL FOR THE ASSESSEE CONTESTED ADDITIONS MA DE ON ACCOUNT OF RE-DRAWN TRADING AND P&L ACCOUNT, UNEXPLAINED INVESTMENT AND CASH CR EDIT VIDE GROUND NOS. III, IV AND V, WHICH ARE AS UNDER: III. FOR THAT THE LD. CIT(A)-XXXIII HAS WRONGLY UP HELD THE UNJUSTIFIED ADDITION OF RS.10,90,795/- AS INCOME AS PER REDRAWN TRADING AND PROFIT & LOSS ACCOUNT WHICH IS MADE BY THE ASSESSING OFFICER. 2 ITA NOS. 1804 & 1834/K/2012 PIYA EGG CENTRE AY 2005-06 IV. FOR THAT THE LD. CIT(A)-XXXIII AS WELL AS THE L EARNED ASSESSING OFFICER IS WRONG IN MAKING ADDITION OF RS.50,727/- AS UNEXPLAINED INVES TMENT. V. FOR THAT THE LD. CIT(A-XXXIII HAS WRONGLY UPHELD THE UNJUSTIFIED ADDITION, AS MADE BY THE ASSESSING OFFICER, OF RS.4,84,108/- AS CASH CREDIT UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. LD. COUNSEL FOR THE ASSESSEE ALSO STATED THAT ADDIT ION MADE BY REDRAWING TRADING & P &L ACCOUNT BY AO AT RS.10,90,795/- BE TELESCOPED AGAI NST ADDITIONS OF UNEXPLAINED INVESTMENT AND CASH CREDIT. FOR THIS, LD. COUNSEL FOR THE ASS ESSEE FILED ADDITIONAL GROUND, WHICH READS AS UNDER: WITHOUT PREJUDICE TO THE MERIT OF ADDITIONS SUSTA INED BY THE LD. CIT(A) CHALLENGED VIDE GROUND NO. I TO VI, THE ADDITIONS M ADE ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT OF RS.50,727/- AND ALLEGED UNEXPLAINED C ASH CREDIT OF RS.4,84,109/- BE TELESCOPED AGAINST THE ADDITION SUSTAINED ON ACCOUN T OF NET PROFIT AS PER RECASTED PROFIT & LOSS A/C. 4. LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO PARA 5.5 OF CIT(A)S ORDER, WHICH READS AS UNDER: 5.5. THUS, IT CAN BE SEEN THAT NO SPECIFIC EXPLANA TION HAS BEEN OFFERED IN RESPECT OF THE AFORESAID THREE ADDITIONS MADE BY THE ASSESSING OFF ICER. THE SUBMISSION OF GENERAL NATURE MADE HAD ALREADY BEEN DISCUSSED AND FOUND T O BE INADEQUATE. AS STATED EARLIER, THE THREE ADDITIONS MADE BY THE ASSESSING OFFICER W ERE BASED ON DETAILED ANALYSIS OF DOCUMENTS SUCH AS PURCHASE INVOICE, ROAD CHALLANS, SALE MEMOS ETC. THE APPELLANT HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN THE WORKING MADE BY THE ASSESSING OFFICER. CONSIDERING THIS, THE ADDITIONS MADE IN RESPECT OF NET PROFIT AS PER REDRAWN TRADING AND P&L ACCOUNT, UNEXPLAINED INVESTMENT AND UNEXPLAINED CASH CREDIT ARE CONFIRMED. 5. HE EXPLAINED THAT THE CIT(A) HAS CONFIRMED ALL T HE ADDITIONS. LD. COUNSEL FOR THE ASSESSEE FURTHER TOOK US TO THE ASSESSMENT ORDER AN D ARGUED THAT THE ASSESSEE FIRM WAS ENGAGED IN THE BUSINESS OF WHOLESALE OF EGGS. HE STATED TH AT THE AO REJECTED THE BOOKS OF ACCOUNT BY INVOKING THE PROVISION OF SECTION 145(3) OF THE ACT AND REDRAWN THE TRADING & P&L ACCOUNT AND FRAMED ASSESSMENT U/S. 144 OF THE ACT. LD. COU NSEL FOR THE ASSESSEE STATED THAT THE AO REDRAWN THE TRADING RESULTS BASED ON THE FOLLOWING FACTS: I) OPENING STOCK WAS TAKEN AT NIL AS REPORTED IN A UDITED TRADING ACCOUNT SINCE THIS WAS FRST YEAR OF BUSINESS. II) PURCHASE IN QUANTITY AS WELL AS VALUE WAS TAKEN ON THE BASIS OF PURCHASE INVOICE PRODUCED. III) IN TRADING ACCOUNT SUBMITTED WITH RETURN OF IN COME THE PURCHASE WAS INCLUSIVE OF INSURANCE, TRAY PURCHASE, A PART OF TRANSPORTATI ON EXPENSES, ETC. IN REDRAWN TRADING, PROFIT & LOSS ACCOUNT THESE EXPENSES WERE SHOWN SEP ARATELY. 3 ITA NOS. 1804 & 1834/K/2012 PIYA EGG CENTRE AY 2005-06 IV) SALES IN QUANTITY AS WELL AS VALUE HAD BEEN TAK EN ON THE BASIS OF SALE MEMO PRODUCED. V) CASH SALES TO THE EXTENT THERE WAS NO STOCK FOR SALE HAD BEEN EXCLUDED. V ) THE CLOSING STOCK IN REDRAWN TRADING, PROFIT & LOSS ACCOUNT HAD BEEN TAKEN TO BE 1,58,760 PCS OF EGGS AS REPORTED IN THE AUDIT REPOR T BECAUSE THE CLOSING STOCK OF 13,78,440 PCS. OF EGG I.E. PURCHASE FOR LAST 15 DAY S IN STOCK DID NOT APPEAR LOGICAL AS EGG IS A PERISHABLE GOODS. VII) THE DIFFERENCE OF 12,19,680 (13,78,440-1,58,76 0) PCS. OF EGG HAD BEEN CONSIDERED AS SALE NOT RECORDED IN SALE MEMO PRODUC ED BEFORE THE UNDERSIGNED BECAUSE NO BREAKAGE, DAMAGE, SHORTAGE AND EXCESS OF STOCK H AD BEEN REPORTED IN AUDIT REPORT . FURTHER THE STOCK WAS FOUND TO BE INSURED AND THER E HAD BEEN NO CLAM OF DAMAGE OF STOCK VIII) THE VALUE OF UNRECORDED SALE HAD BEEN TAKEN A T THE RATE OF RS.1.45 PER PIECE BEING THE YEARLY AVERAGE RATE OF SALE BECAUSE THE U NRECORDED SALE SHOULD HAVE TAKEN PLACE DURING A LONG PERIOD. IN VIEW OF ABOVE THE UN RECORDED SALE WAS TAKEN TO BE RS.17,68,536/-. IX) OTHER INDIRECT EXPENSES WAS TAKEN AS CLAIMED I N THE LOSS ACCOUNT SUBMITTED WITH THE RETURN OF INCOME. ACCORDINGLY, THE AO ESTIMATED THE BOOK PROFIT AT RS .10,90,795/- BEING THE DIFFERENCE IN PIECES OF EGGS NOT RECORDED IN THE SALE MEMO. LD. COUNSEL FOR THE ASSESSEE STATED THAT HE IS ONLY SEEKING RELIEF THAT IN THE REDRAWN TRADING & P&L AC COUNT THE ADDITION ON ACCOUNT OF SALE NOT RECORDED AS PER SALE MEMO AT RS.10,90,795/- IS EXCE SSIVE. ACCORDING TO HIM, THE AO HAS TAKEN THE FIGURE AT 1,58,760 PIECES OF EGGS IN THE REDRAW N TRADING & P&L ACCOUNT BUT AS PER AUDIT REPORT CLOSING STOCK WAS AT 13,78,440 PIECES OF EG GS I.E. PURCHASES MADE IN LAST 15 DAYS. HE HAS NOT DISPUTED THESE FACTS AS REGARDS TO THE ADDI TION OF 12,19,600 PIECES OF EGGS BUT STATED THAT THE AO HAS NOT ALLOWED REBATE ON ACCOUNT OF BREAKAG E, DAMAGES, SHORTAGE AND EXCESS OF STOCK AS REPORTED IN THE AUDIT REPORT. EVEN ACCORDING TO LD. COUNSEL FOR THE ASSESSEE, THE SALE VALUE OF PER PIECE OF EGG TOOK BY THE AO AT RS.1.45 IS HIGHE R BECAUSE THIS IS NOT A CONSTANT FIGURE. IT CAN VARY FROM RS.1/- TO RS.1.45. FOR THESE FACTORS HE R EQUESTED FOR REASONABLE ESTIMATE. FOR BALANCE ADDITION OF RS.50,727/- BEING UNEXPLAINED INVESTMEN T AND RS.4,84,108/- ON ACCOUNT OF CASH CREDIT BE TELESCOPED AGAINST THIS ADDITION. 6. ON QUERY FROM THE BENCH, THE LD. SR. DR HAS NOT DISPUTED TELESCOPING OF THIS ADDITION BUT STATED THAT THE AO HAS MADE FAIR ESTIMATE IN RE DRAWING THE TRADING & P&L ACCOUNT WHICH IS BASED ON SALE MEMO PRODUCED BEFORE HIM. 4 ITA NOS. 1804 & 1834/K/2012 PIYA EGG CENTRE AY 2005-06 7. WE FIND THAT THE AO HAS REDRAWN THE TRADING & P& L ACCOUNT AND ESTIMATED THE BOOK PROFIT FOR THE RELEVANT ASSESSMENT YEAR AT RS.10,90 ,795/- BUT FAILED TO CONSIDER THE PLEA OF THE ASSESSEE ON BREAKAGE, DAMAGES, SHORTAGE AND EXCESS OF STOCK AS HAVE BEEN REPORTED IN THE AUDIT REPORT. EVEN THE AVERAGE RATE TAKEN ON YEARLY BASI S IS LITTLE HIGHER. CONSIDERING THESE FACTS, WE ARE OF THE VIEW THAT THE BOOK PROFIT ESTIMATED ON T HE BASIS OF REDRAWN TRADING & P&L ACCOUNT, A FURTHER REDUCTION OF ABOUT 20% CAN BE GIVEN. THE AO IS DIRECTED TO RECOMPUTE THE BOOK PROFIT BY ALLOWING A DEDUCTION OF 20% AND RECOMPUTE THE AD DITION. AS REGARDS TO THE ADDITIONS MADE BY AO OF UNEXPLAINED INVESTMENT OF RS.50,727/- AND CASH CREDIT U/S. 68 OF THE ACT AT RS.4,84,108/- BE TELESCOPED AGAINST THE ADDITION O F REDRAWN BOOK PROFIT BECAUSE CASH CREDITS ARE ADDED ON ACCOUNT OF SALE MEMO NOT RECORDED IN T HE BOOKS OF ACCOUNT AND EVEN UNEXPLAINED INVESTMENT IS ARISING FROM THE SAME. IN SUCH CIRCU MSTANCES, WE DELETE THE ADDITION OF UNEXPLAINED INVESTMENT AND CASH CREDIT BY DIRECTING THE AO THAT THE SAME BE TELESCOPED AGAINST THE BOOK PROFIT OF REDRAWN TRADING & P&L ACCOUNT. IN TERM OF THE ABOVE, THIS APPEAL OF ASSESSEE IS PARTLY ALLOWED. 8. COMING TO REVENUES APPEAL IN ITA NO. 1834/K/201 2. AT THE OUTSET, IT IS SEEN THAT THE ONLY ISSUE IN REVENUES APPEAL IS AGAINST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE U/S. 40A(IA) OF THE ACT BASED ON JUDGMENT OF SPECIAL BEN CH OF ITAT, VISHAKAPATNAM BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ACIT (201 2) 136 ITD 23 (SB). THE FOLLOWING GROUNDS ARE RAISED BY REVENUE: 1.THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE CITA) ERRED IN DELETING THE DISALLOWANCE U/S. 40(A)(IA) OF THE I. T. ACT OF RS. 10,81,500/- READ WITH SECTION 194C OF THE ACT TO THE AMOUNT ACTUALLY PAYABLE AT THE END OF TH E YEAR AND NOT TO THE PART WHICH HAS ALREADY BEEN PAID. 2. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE THE CIT(A) ERRED IN DELETING THE DISALLOWANCE U/S. 40(A)(IA) OF THE I. T. ACT RELYIN G ON THE JUDGMENT IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORT LTD. VS. ACIT, ITA NO. 477/VIZAG/2008 OF SPECIAL BENCH OF ITAT, VISHAKHAPATNAM AND THAT OF M/S. WOODPLAST AGENCY VS. ITO IN ITA NO. 241/KOL/2010 OF ITAT, KOLKATA. 9. LD. COUNSEL FOR THE ASSESSEE FAIRLY STATED THAT THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPOR TS SUPRA, HAS BEEN REVERSED BY THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISS IONER OF INCOME TAX, VS. CRESCENT EXPORT SYNDICATE IN ITAT NO. 20 OF 2013 IN GA 190 OF 2013 DATED 3 RD APRIL, 2013, BUT HE STATED THAT THE CIT(A) HAS NOT CONSIDERED THE ISSUE ON MERITS OF THE CASE THAT THERE ARE NO CONTRACT BETWEEN THE PARTIES. HE NCE, FOR THE SAME, ISSUE CAN BE REMITTED BACK 5 ITA NOS. 1804 & 1834/K/2012 PIYA EGG CENTRE AY 2005-06 TO THE FILE OF CIT(A). ON THIS, LD. SR. DR FAIRLY AGREED THAT THE ISSUE CAN GO BACK FOR TAKING A VIEW ON MERITS OF THE CASE. CONSIDERING THE ABOVE PLEA OF THE ASSESSEE, WE REVERSE THE ORDER OF CIT(A) BUT RESTORE THE MATTER BACK TO HIS FILE FOR FRESH ADJUDICATION ON MERITS OF THE CASE WHETHER, ANY CONTRACT EXISTS OR NOT. ACCORDINGLY, T HIS APPEAL OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALL OWED AND THAT OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 11. ORDER IS PRONOUNCED IN THE OPEN COURT ON 01.08. 2014 SD/- SD/- , . . . . , ' #!' ' #!' ' #!' ' #!' , (P. K. BANSAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 ST AUGUST, 2014 -. #/0 #1 JD.(SR.P.S.) 2 +##3 43&5- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT PIYA EGG CENTRE, VILLAGE KANAKPUR, P.O. PANSKURA, R.S. DISTRICT PURBA MEDINIPUR, WEST BENGAL-721 152 2 +,)* / RESPONDENT ITO, WARD-4, HALDIA 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 3:#; +# / DR, KOLKATA BENCHES, KOLKATA ,3 +#/ TRUE COPY,