ACIT, Circle - 46, Kolkata, Kolkata V. Mr. Narendra Kumar Jha, Kolkata

ITA 1809/KOL/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7247 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 21-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K CHAKRAVORTY
• Assessee Lawyers: S BANDYOPADHYAY
• Keywords: Opportunity of being heard
• Section: 69; 144

Judgement Text

, , , , , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [ . . . . , ,, , . .. . ! ! ! !. .. . , , , , '# '# '# '# , '# '# '# '# ] [BEFORE SHRI N. VIJAYAK UMARAN, JM & SHRI C. D. RAO, AM] $ $ $ $ / I.T.A NO.1809/KOL/2010 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR : 2007-08 ASSTT. COMMISSIONER OF INCOME TAX -VS.- MR. NARENHDRA KUMAR JHA CIRCLE-46, KOLKATA. KOLKATA [PAN : AEOPJ 87 93 H] [ *+ *+ *+ *+ /APPELLANT ] ]] ] [ -.*+ -.*+ -.*+ -.*+/ // / RESPONDENT ] ]] ] *+ *+ *+ *+ / FOR THE APPELLANT : SHRI P. K. CHAKRAVORTY -.*+ -.*+ -.*+ -.*+ / FOR THE RESPONDENT : SHRI S. BANDYOPADHYAY / 0 !# / 0 !# / 0 !# / 0 !# /DATE OF HEARING : 15.09.2011 1' 0 !# 1' 0 !# 1' 0 !# 1' 0 !# /DATE OF PRONOUNCEMENT : 11.10.2011 '2 /ORDER . . . . , PER N. VIJAYA KUMARAN, J. M. THIS REVENUE APPEAL FOR ASSESSMENT YEAR 2007-08 IS DIRECTED AGAINST ORDER OF LD. CIT(A)- XXX, KOLKATA DATED 24.06.2010. 2. WE SKIP FROM THE FIRST ISSUE AND GO TO THE SECON D ISSUE WHICH IS RELATED TO EXPENSES OF COMMISSION PAYMENT AS AN INCENTIVE PAYMENT. THIS AS SESSMENT ORDER DATED 24.11.2009 IS MADE UNDER SECTION 144 OF THE INCOME TAX ACT WHICH IS A BEST JUDGMENT ASSESSMENT. THE FACTS ARE THAT ASSESSEE IS A PROPRIETOR OF M/S. BOOK JOINT & CO., WHICH HAS STATED BY THE ASSESSEE AS MANUFACTURER AND DEALING IN WHOLE SALE AND RETAIL S ALE OF SCHOOL BOOKS. WHILE COMPLETING BEST JUDGMENT ASSESSMENT ASSESSING OFFICER WAS OF THE VI EW THAT THERE IS NO COMMISSION PAID IN THE EARLIER YEARS. THEREFORE, ASSESSEE DEBITED IN PROFI T & LOSS ACCOUNT A SUM OF RS.16,44,570/- AS COMMISSION PAID. 2.1 ON APPEAL TO THE LD. CIT(A), ASSESSEE FILED WRI TTEN SUBMISSION WHEREIN IT IS EXPLAINED THAT THE COMMISSION PAYMENT AS SHOWN ACTUALLY REFERS TO INCENTIVES TO CUSTOMERS. THE ASSESSEE ALSO ADMITS THAT THERE IS NO PAYMENT OF COMMISSION AND A CTUAL AMOUNT PAYABLE TO THE CUSTOMER AS [ ITA NO. 1809/KOL/2010] 2 INCENTIVE TO THE CUSTOMER. IN EARLIER YEARS ALSO I. E. 2006-07, IT WAS SHOWN AS INCENTIVE TO THE CUSTOMERS. HENCE, THE OBSERVATION OF THE ASSESSING OFFICER IS THAT THIS IS FIRST YEAR IN WHICH IT WAS CLAIMED. FURTHER, IN THE EARLIER YEARS THERE HAS BE EN NO DISALLOWANCE OUT OF THIS AMOUNT OF EXPENDITURE. IN TRADING PRACTICE, THIS PAYMENT OF I NCENTIVE OR DISCOUNT SOMETIMES LEISURELY CALLS AS COMMISSION. BEFORE LD. CIT(A) IT WAS CLAIMED THAT THE PAYMENT OF INCENTIVE IS DISCOUNT, IS AN INTEGRAL PART OF BUSINESS IN THE LINE OF PUBLICATIO N AND SALE OF BOOKS. WITHOUT PAYMENT OF INCENTIVE OR DISCOUNT THE BUSINESS OF PUBLISHING AND SELLING TEXT BOOKS CAN NOT RUN SMOOTHLY. THERE IS A STIFF COMPETITION IN THESE LINES OF BUSINESS. THE PUBLISH ERS HAS TO ALLOW INCENTIVE TO SCHOOLS WHO PRESCRIBE BOOKS PUBLISHED BY THE VERY PUBLISHERS FO R THE STUDENTS AS WELL AS INDIVIDUAL CUSTOMERS WHO WERE ALSO REQUIRED TO BE ALLOWED SUBSTANTIVE DI SCOUNT. LD. COUNSEL FURTHER EXPLAINED THAT WITHOUT THIS INCENTIVE OR DISCOUNT, THE BUSINESS OF PUBLISHING AS WELL AS SALE OF TEXT BOOKS CAN NOT RUN SMOOTHLY. THIS IS BUSINESS EXPEDIENCY, IS THE ARGUMENT OF LD. COUNSEL. 3. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE WHO OBJECTED FROM THE VERY BEGINNING OF THE ARGUMENT AND SUBMITTED THAT WHEN ASSESSEE HI MSELF HAS STATED AS COMMISSION, HE CAN NOT BE ALLOWED TO TURN AROUND AND EXPLAINED THAT IT IS NOT COMMISSION PAYMENT BUT INCENTIVE TO CUSTOMERS. THE STAND OF THE ASSESSEE IS SHIFTING ST AND AND CANNOT BE BELIEVED. HE READ OUT THE ORDERS OF THE ASSESSING OFFICER. 4. WE HAVE CONSIDERING THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. THE LAW IS WELL SETTLED THAT EXPENDITURE INCURRED F OR THE PURPOSE OF BUSINESS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS IS TO BE ALLOWED. HERE, IN THIS CASE, THERE IS NO COLUMN IN E-FILING TO MENTION THIS PAYMENT. HENCE , HAS SHOWN IT IN THE COLUMN COMMISSION PAYMENT. HOWEVER, BEFORE LD. CIT(A), IT HAS BEEN A MPLY BEEN EXPLAINED THAT IT IS IN THE NATURE OF INCENTIVE AND DISCOUNT WHICH IS PREVAILING IN ASSES SEES BUSINESS IN VIEW OF STIFF COMPETITION IN PROMOTING AND RUNNING BUSINESS AND THE ORDER OF LD. CIT(A) IS IN ACCORDANCE WITH LAW. HAD IT BEEN ACCEPTED AS COMMISSION PAYMENT THEN IT MAY A TTRACT THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT, BUT IT IS OUTSIDE THE POWER BEF ORE US WITH WHICH WE ARE CONCERNED. HOWEVER, THIS POINT WILL SUPPORT THE CASE OF THE ASSESSEE TH AT IT IS ONLY AN INCENTIVE AND DISCOUNT AND COMMISSION. THE ORDER OF THE LD. CIT(A) IS WELL REA SONED WHICH REQUIRE NO ADJUDICATION AND THE REMAND REPORT ALSO DOES NOT RAISE ANY SERIOUS OBJEC TION TO TREAT IT AS INCENTIVE AND DISCOUNT COUPLED [ ITA NO. 1809/KOL/2010] 3 WITH THE FACTS AND CIRCUMSTANCES OF THE CASE. HENCE , WE AGREE WITH THE LD. CIT(A) ON THIS ISSUE. 5. COMING TO THE THIRD GROUND WHICH IS ON THE ACCEP TANCE OF CASH DEPOSIT AS EXPENDITURE TO THE TUNE OF RS.13,05,000/-. ASSESSING OFFICER OBSER VED THAT ASSESSEE HAD DEPOSITED CASH OF RS.13,05,000/- ON 31.03.2007 IN THE SAVINGS BANK AC COUNT OF INDIAN OVERSEAS BANK, LANSDOWNE MARKET, KOLKATA AS PER ITS DETAILS. ASSESSING OFFIC ER REQUIRED THE SOURCE THEREOF AND NOT SATISFIED. ASSESSING OFFICER ADDED THE CASH DEPOSIT AS ADDITIO N TO THE INCOME OF THE ASSESSEE UNDER SECTION 69 OF INCOME TAX ACT. 5.1 ON APPEAL TO THE LD. CIT(A), IT WAS EXPLAINED T HAT THERE WAS NO CASH DEPOSIT ON 31.03.2007 AND THE SUBMISSIONS WERE FORWARDED TO TH E ASSESSING OFFICER VIDE OFFICE LETTER DATED 31.04.2010, ASKING HIM TO EXAMINE THE BANK ACCOUNT OF THE ASSESSEE BY WAY OF REMAND REPORT. ASSESSING OFFICER BY WAY OF REMAND REPORT ON 19.05. 2010 SUBMITTED THAT THERE WERE VARIOUS CASH DEPOSITS ENTRIES IN THE BANK ACCOUNT WHICH WERE EXP LAINED BY THE ASSESSEE TO BE OUT OF CASH SALES. HOWEVER, ASSESSING OFFICER COULD NOT VERIFY THE SOU RCE OF CASH DEPOSITS AS ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNT. HOWEVER, LD. CIT(A) WAS O F THE VIEW THAT AS HE HAS GOT REMAND REPORT WHEREIN ASSESSING OFFICER ADMITTED THAT THAT THERE IS NO SINGLE ENTRY OF CASH DEPOSIT AND THERE ARE VARIOUS CASH DEPOSIT ENTRIES FOUND IN THE ACCOUNT. THE EXPLANATION OF THE ASSESSEE WOULD BE THAT THE SOURCE IS OUT OF THE SALE PROCEEDS OF THE ASSES SEE. HERE, WE DIFFER WITH THE LD. CIT(A) AND SECTION 69 CLEARLY CROSSED THE BORDER THAT ASSESSEE HAS TO EXPLAIN THE NATURE AND SOURCE OF INVESTMENT AND THE EXPLANATION OFFERED BY THE ASSES SEE IS IN THE OPINION OF THE ASSESSING OFFICER SHOULD BE SATISFACTORY, OTHERWISE, ASSESSEE CANNOT ABSOLVE HIMSELF. THIS PROPOSITION MADE US TO REVERSE THE FINDINGS OF THE LD. CIT(A) ONLY ON THIS ACCEPTANCE OF CASH DEPOSITS AS SOURCE EXPLAINED. HOWEVER, WE REMIT THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WHO, IN TURN, ASCERTAINED THE POSITION AND IT IS THE BURDEN OF TH E ASSESSEE TO ESTABLISH THE SOURCE OF THE ABOVE CASH DEPOSITS FOUND IN THE SAVINGS BANK ACCOUNT OF THE ASSESSEE WITH WHICH WE ARE CONCERNED. IT IS NEEDLESS TO MENTION THAT ASSESSING OFFICER SHOUL D OFFER SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND ASSESSEE SHOULD COOPERATE WITH THE DEPARTMENT IN DECIDING THE ISSUE IN ACCORDANCE WITH LAW. 6. NOW, BASED ON THE ABOVE DISCUSSION, GROUND NO.1 BECOMES REDUNDANT AS LD. CIT(A) HAS CALLED FOR THE REMAND REPORT AND SUFFICIENT OPPORTU NITY HAD BEEN GIVEN TO THE ASSESSING OFFICER. [ ITA NO. 1809/KOL/2010] 4 HENCE, WE ARE OF THE VIEW THAT THERE IS NO VIOLATIO N OF RULE 46A OF THE INCOME TAX ACT. 7. IN THE RESULT, REVENUE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. '2 '2 '2 '2 #' #' #' #' 3 4 56 3 4 56 3 4 56 3 4 56 !# !# !# !# ORDER PRONOUNCED IN THE COURT ON 11. 10. 2011. SD/- SD/- [ . .. . ! ! ! !. .. . , ,, , '# '# '# '# ] [ . . . . , ,, , ] [ C. D. RAO ] [ N. VIJAYAKUMARAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER D ATED : 11TH OCTOBER, 2011. '2 0 -%% 7''/ COPY OF THE ORDER FORWARDED TO: 1. *+ /APPELLANT : ASSTT.COMMISSIONER OF INCOME TAX, CIR CLE-46, 3, GOVT. PLACE (WEST), KOLKATA-700 001. 2 -.*+ / RESPONDENT : MR. NARENDRA KUMAR JHA, BALLYGUNGE PARK TOWER, ROOM NO.6/8, 67B, BA LLYGUNGE CIRCULAR ROAD, KOLKATA-700 019. 3. %2 - / CIT, 4. %2 ()/ CIT(A), KOLKATA. 5. ?%4 -%/ DR, KOLKATA BENCHES, KOLKATA [. -%/ TRUE COPY] '2/ BY ORDER, /ASSTT REGISTRAR [KKC AB %C %D /SR.PS]