M/s. Darpan Publication Pvt. Ltd., Siliguri V. The Addl. C.I.T., Range-2, Siliguri, Siliguri

ITA 1899/KOL/2009

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3127 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2013
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 13-11-2009
• Court: TRIBUNAL
• Department Lawyers: K N JANA
• Assessee Lawyers: S K TULSIYAN
• Keywords: Rejection of books of accounts; Search and seizure; Assessment record

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , KOLKATA [ () . .. . . .. . , ,, , , ! ' #!' ' #!' ' #!' ' #!', ,, , ] ]] ] [BEFORE HONBLE SRI N.S.SAINI AM & HONBLE SRI M AHAVIR SINGH, JM] !% !% !% !% /ITA NO.1899/KOL/2009 #& '(/ ASSESSMENT YEAR : 2005-06 (*+ / APPELLANT ) - - ( -.*+ /RESPONDENT) M/S. DARPAN PUBLICATION (P)LTD ADDITIONAL C.I.T. , RANGE-2, SILIGURI -VERSUS- SILIGURI (PAN : AABCD 2349 H) *+ / 0 / FOR THE APPELLANT: SHRI S.K.TULSIYAN -.*+ / 0 / FOR THE RESPONDENT: SHRI K.N.JANA, SR.DR 1 2 / 3 /DATE OF HEARING : 11.06.2013 4' / 3 /DATE OF PRONOUNCEMENT : 18.06.2013. 5 / ORDER PER SHRI N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)-SILIGURI DATED 19.08.2009. 2. GROUND NOS. 1 AND 4 OF THE APPEAL ARE GENERAL I N NATURE AND HENCE REQUIRE NO ADJUDICATION. GROUND NOS.2 AND 3 OF THE APPEAL READ AS FOLLOWS :- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS.3,60,000/- MADE ON ACC OUNT OF ALLEGED ABNORMAL SALE OF NEWSPAPER TO SHRI SATYANARAYAN SONI WITHOUT TAKING INTO ACCOUNT THE REAL FACT OF SALE OF SPECIAL PUBLICATION, OVER AND ABOVE THE REGULAR SAL E OF NEWSPAPER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN UPHOLDING THE REJECTION OF BOOKS OF ACCOUNTS OF THE APPELLANT AND ADDITION MADE ON ACCOUNT OF NEGATIVE CASH BALANCE IN THE REGULAR BOO KS, WHEN IT WAS DULY EXPLAINED WITH DOCUMENTARY EVIDENCE THAT THE DIRECTOR OF THE APPEL LANT-COMPANY SRI KULDIP CHOWDHURY PROVIDED TEMPORARY ACCOMMODATION OUT OF HIS AVAILAB LE CASH BALANCE TO MEET CERTAIN STATUTORY PAYMENTS OF THE COMPANY. 3. AS THE FACTS AND ISSUE INVOLVED ARE SAME AND AS THE LD. CIT(A) HAS ALSO ADJUDICATED THEM TOGETHER THEY ARE BEING AND DECIDE D AS UNDER : IT A NO.1899/KOL/2009 M/S.DARPAN PUBLICATION PVT.LTD.SIL IGURI VS ADDL.CIT.RANGE-2,SILIGURI A.YR.2006- 07 2 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE CARRIES ON BUSINESS OF NEWSPAPER AND COMMERCIAL PRINTING. THE AO FOUND THA T ON 31.03.2006 CASH DEPOSIT OF R.3,60,000/- WERE SHOWN WHICH WAS EXPLAINED AS CASH RECEIPT FROM ONE SHRI SATYA NARAYAN SONI FOR SALE OF SPECIAL PUBLICATION. THE L D. AR WAS REQUESTED TO PRODUCE SHRI SATYA NARAYAN SONI TO PROVE HIS CREDITWORTHINE SS AND THE AR FAILED TO PRODUCE HIM AND ALSO FAILED TO PRODUCE CONFIRMATION LETTER FROM SHRI SATYA NARAYAN SONI. THE AO ON FURTHER EXAMINATION OF THE CASH BOOK FOUND TH AT DURING THE PERIOD 31.05.05 TO 09.06.05 AND FROM 15.07.05 TO 17.07.05 THERE WAS NE GATIVE CASH BALANCE AND THEREFORE THE AO INFERRED THAT THE BOOKS OF ACCOUNT WERE NOT REGULARLY MAINTAINED. ON A SHOW CAUSE NOTICE REGARDING THE NEGATIVE CASH BALANCE TH E ASSESSEE SUBMITTED THAT AT THE RELEVANT TIME THE COMPANY WAS IN URGENT NEED OF PAY MENT OF TDS, BANK DEPOSITS AND SOME OTHER PAYMENTS AND SUFFICIENT CASH WAS NOT AVA ILABLE, THEREFORE SHRI KULDIP CHOWDHURY, DIRECTOR OF THE COMPANY PROVIDED TEMPORA RY ACCOMMODATION BY MAKING PAYMENTS ON BEHALF OF THE COMPANY AND TOOK BACK THE MONEY WHEN THE FUNDS WERE AVAILABLE. IT WAS SUBMITTED THAT MAXIMUM AMOUNT FOR ACCOMMODATION MADE WAS RS.1,88,297.82 ON 02.06.2005. THESE ENTRIES OF PAYM ENTS WERE PASSED IN THE BOOKS OF THE COMPANY. THIS CAUSED THE REFLECTION OF NEGATIVE CASH BALANCE IN THE BOOKS OF DARPAN PUBLICATIONS PVT. LTD. SHRI KULDIP CHOWDHURY POSSESSED SUFFICIENT CASH IN HAND AT THAT TIME . HE WITHDREW CASH OF RS.3,00,000 /- FROM HIS PROPRIETORY CONCERN M/S. CHOWDHURY & BROTHERS ON 31.05.2005 AND RETURNE D THE SAME TO HIS PROPRIETORY ON 20.07.2005. DURING THIS PERIOD HE HAD CASH IN HA ND WHICH HE USED TO ACCOMMODATE THE COMPANY TO COME OUT OF TEMPORARY REQUIREMENT. A LEDGER COPY OF SHRI KULDIP CHOWDHURY WITH M/S. CHOWDHURY & BROTHERS WAS ALSO F ILED. THE AO FOUND THAT EXPLANATION OF THE ASSESSEE COMPANY WAS NOT SATISFA CTORY. ACCORDING TO THE AO WHEN ANY DIRECTOR HAS PAID ANY AMOUNT IN CASH TO THE COM PANY, IT SHOULD ALSO BE ENTERED IN THE BOOK. THEREFORE THE EXPLANATION WAS AN AFTER TH OUGHT ARRANGEMENT WHICH WAS REJECTED BY THE AO AS IT WAS NOT REASONABLE. 4.1. APART FROM THAT THE AO FURTHER FOUND FROM THE CASH BOOK THAT THE ASSESSEE HAS SHOWN A SUM OF RS.50,000/- IN EACH MONTH AS WASTE S ALE TO WHOM THESE SALES WERE MADE WERE NOT MENTIONED IN THE BOOK. SUBSEQUENTLY T HE ASSESEE FILED THE NAME OF ONE PERSON SHRI PRAMOD KUMAR SINGH OF JOY MITRA STREET, KOLKATA-5 WHO PURCHASED THE IT A NO.1899/KOL/2009 M/S.DARPAN PUBLICATION PVT.LTD.SIL IGURI VS ADDL.CIT.RANGE-2,SILIGURI A.YR.2006- 07 3 WASTE MATERIALS FROM THE ASSESSEE. A CONFIRMATION C ERTIFICATE WAS ALSO FILED WHICH WAS SIGNED BY SOME OTHER PERSON ON BEHALF OF SHRI PRAMO D KUMAR SINGH. NO LEDGER ACCOUNT WAS MAINTAINED BY THE ASSESSEE IN THE NAME OF SHRI PRAMOD KUMAR SINGH. THE AO HELD THAT GENUINENESS OF SUCH WASTE SALE WAS NOT ESTABLISHED. IN VIEW OF THE ABOVE FINDINGS AND ALSO TAKING INTO CONSIDERATION T HE NEGATIVE CASH BALANCE THE AO HELD THAT THE BOOK RESULT SHOWN BY THE ASSESSEE COM PANY CANNOT BE RELIED AS CORRECT AND TRUE. HE REJECTED THE BOOKS OF ACCOUNT U/S 145( 3) OF THE ACT AND ESTIMATED THE INCOME AT RS.60,00,000/- AGAINST THE DISCLOSED INCO ME OF RS.47,59,640/-. 4.2. BEING AGGRIEVED THE ASSESSEE FILED AN APPEAL B EFORE THE LD. CIT(A). THE LD.CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESEE HELD AS UNDER :- I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD AR AND ALSO PERUSED THE ASSESSMENT ORDER. THE ASSESSMENT RECORD HAS ALSO BE EN EXAMINED. IT APPEARS THAT NO CASH WAS RECEIVED FROM SRI SATYA NARAYAN SONI. ON G OING THROUGH THE LEDGER ACCOUNT, IT IS APPARENT THAT SRI SONI WAS LIFTING NEWSPAPERS RE GULARLY AND AT THE END OF THE MONTH BILLS WERE RAISED ON HIM. BUT CASH PAYMENTS WERE BE ING MADE THROUGHOUT THE MONTH. THE MONTHLY BILL AMOUNTS WERE AROUND RS.2,00,000/- PER MONTH. BUT SUDDENLY ON 31.03.2006, A SALE OF RS.3,60,000/- HAS BEEN ENTERE D AND INCLUDING THE ARREAR AMOUNTS PER MONTH, CASH RECEIPT OF RS.5,94,374/- WAS RECORD ED ON THE SAME DATE. THIS WAS AN ADDITION TO THE NORMAL PURCHASE MADE DURING THE MON TH OF MARCH, 2006. THOUGH THE AR EXPLAINED IT TO BE A SALE OF SPECIAL PUBLICATION, BUT HE FAILED TO EXPLAIN THE NATURE OF THAT PUBLICATION AND CORRESPONDING CLARIFICATION AN D CONFIRMATION FROM SHRI SONI. AS ALL OTHER PAYMENTS WERE SHOWN IN CASH WHICH VARIED FORM RS.15,000/- TO RS.20,000/-, THIS HUGE CASH PAYMENT OF RS.5,94,374/- OBVIOUSLY REMAIN A QUESTION MARK WHICH THE AR FAILED TO EXPLAIN. SIMILARLY, THE ALLEGED PURCHASER OF THE WASTE PAPERS SRI PRAMOD KR.SINGH DID NOT SIGN THE CONFIRMATION HIMSELF. THE DECISION CIT ED BY THE LD. AR IS ALSO NOT APPLICABLE TO THE FACT OF THE CASE. IN THIS CASE, EVERY MONTH THE SAME PERSON USED TO COLLECT THE WASTE PAPERS FROM THE ASSESSEE. THE CASH MEMOS SUBM ITTED IN THIS REGARD IS ALSO INCOMPLETE AS THE WEIGHT OF THE WASTE PAPER, RATE, PRICE ETC. HAVE NOT BEEN MENTIONED THERE. EVERY MONTH SIMILAR QUANTITY OF WASTE PAPERS CANNOT BE GENERATED SO THAT A PRE- DETERMINED AMOUNT WAS FIXED FOR SELLING THE SAME. T HE AR DID NOT EXPLAIN THESE RELEVANT ISSUES. THIRDLY, THE EXPLANATION OFFERED BY TH E LD.AR REGARDING THE SHORTAGE OF CASH IN THE CASH BOOK DURING THE PERIOD HIGHLIGHTED BY THE LD.AO IS ALSO NOT CONVINCING SO FAR AS, THE FACT OF THE CASE IS CONCERNED. NO ACCOUNTIN G PRINCIPLE CAN SUPPORT THE SAME. I AM AFRAID, HOW THE AUDITOR OF THE ASSESSEE COMPANY WHO IS ALSO THE AR OF THE ASSESSEE HAS MISSED THIS FACT AND DID NOT HIGHLIGHT THE SAME IN THE AUDIT REPORT. THE LD. AO SHOULD HAVE QUESTIONED THE AUDITOR REGARDING THE IRREGULAR ITY. AT THE SAME TIME IF THE SUBMISSION OF THE AR IS ACCEPTED AS TRUE, THEN THE ASSESSEE COMPANY IS LIABLE TO PENAL ACTION U/S 271D OF THE ACT. ANYWAY, HAD THE DIRECTOR MADE ANY PAYM ENT TO THE COMPANY, EVEN AS A TEMPORARY ACCOMMODATION, THE SAME SHOULD HAVE BEEN REFLECTED IN THE CASH BOOK OF THE ASSESSEE AND CORRESPONDING LOAN ACCOUNT IN THE NAME OF THAT DIRECTOR. BUT NO SUCH ENTRY FOUND TO HAVE BEEN MADE. NO PAYMENT CAN BE MADE IN ABSENCE OF THE FUND WITH THE IT A NO.1899/KOL/2009 M/S.DARPAN PUBLICATION PVT.LTD.SIL IGURI VS ADDL.CIT.RANGE-2,SILIGURI A.YR.2006- 07 4 PAYERS. THEREFORE, THE BOOKS OF ACCOUNTS, THOUGH AU DITED, CANNOT BE RELIED ON ALONG WITH THE AUDIT REPORT OF THE ASSESSEE-COMPANY. THUS , IT IS SAID THAT THE AO HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE IN COME. HOWEVER, REGARDING THE ESTIMATION OF I NCOME, THE LD. AO HAS NOT GIVEN ANY REASON FOR DOING SO. IT IS THE OBLIGATION OF THE AO TO MAKE FAIR AND REASONABLE ESTIMATE WHEN BOOKS OF A/CS ARE REJECTED. UNDER THE CIRCUMST ANCES, FOR THE SAKE OF JUSTICE, IN MY OPINION, THE ADDITION SHOULD BE RESTRICTED TO THE E XCESS AMOUNT SPENT DURING THE PERIOD WHEN CASH SHORTAGE WAS NOTICE (WHICH IS EQUIVALENT TO THE ALLEGED ACCOMMODATION MADE BY THE DIRECTOR) PLUS THE UNEXPLAINED AMOUNT OF RS. 3,60,000/- SHOWN AS ALLEGED ABNORMAL SALE OF NEWSPAPER TO SHRI SATYANARAYAN SON I. THE ASSESSEE IS DIRECTED TO PRODUCE THE CASH BOOK BEFORE THE AO WHILE GIVING TH E APPEAL EFFECT SO THAT THE AO CAN ASCERTAIN THE AMOUNT SPENT INSPITE OF SHORTAGE OF C ASH. AS A RESULT, THIS GROUND IS PARTIALLY ALLOWED. 5. THE LD. AR OF THE ASSESSEE REITERATED THE SUBMIS SIONS MADE BEFORE THE LOWER AUTHORITIES WHEREAS THE LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. WE F IND THAT IN THE INSTANT CASE THE BOOKS OF ACCOUNT OF THE ASSESSEE WAS REJECTED BY TH E AO AND THEREAFTER THE INCOME OF THE ASSESSEE WAS ESTIMATED BY THE AO AT RS.60,00,00 0/- IN PLACE OF RETUNED INCOME OF RS.47,59,640/-. 6.1. ON APPEAL THE LD. CIT(A) THOUGH UPHELD THE RE JECTION OF BOOKS OF ACCOUNT BUT HELD THAT ENHANCEMENT OF RETURNED INCOME SHOULD BE ON SOME REASONABLE BASIS. THE LD. CIT(A) RESTRICTED THE ADDITION TO RS.3,60,000/- ON ACCOUNT OF ABNORMAL SALE SHOWN IN THE NAME OF SHRI SATYA NARAYAN SONI AS WELL AS THE NEGATIVE CASH FOUND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. 6.2. IN RESPECT OF AMOUNT OF RS.3,60,000/- THE LD. AR OF THE ASSESSEE SUBMITTED THAT AS THIS AMOUNT WAS SHOWN AS SALE AND THEREFORE INCO ME IN THE RETURN OF INCOME AND THEREFORE AGAIN ADDITION OF THE SAME TANTAMOUNTS TO DOUBLE ADDITION WHICH IS NOT JUSTIFIED. THE DR ON THE OTHER HAND SUPPORTED THE O RDER OF THE LD. CIT(A). 6.3. WE FIND THAT IT IS NOT IN DISPUTE THAT RS.3,60 ,000/- WAS SHOWN BY THE ASSESSEE AS INCOME IN THE BOOKS OF ACCOUNT AND THEREFORE FORMS PART OF THE RETURNED INCOME. SEPARATE ADDITION AGAIN OF THIS AMOUNT WILL RESULT IN DOUBLE ADDITION OF THE SAME IT A NO.1899/KOL/2009 M/S.DARPAN PUBLICATION PVT.LTD.SIL IGURI VS ADDL.CIT.RANGE-2,SILIGURI A.YR.2006- 07 5 AMOUNT. NO ERROR COULD BE POINTED OUT BY THE LD. DR IN RESPECT OF THE ABOVE PROPOSITION. THEREFORE WE DELETE THE ADDITION OF RS .3,60,000/- ON ACCOUNT OF ABNORMAL SALE SHOWN BY THE ASSESSEE. HENCE THIS GROUND OF AP PEAL OF THE ASSESSEE IS ALLOWED. 6.4. AS REGARDS GROUND NO.3 OF THE APPEAL THE LD. A R OF THE ASSESSEE CONTENDED THAT THE NEGATIVE CASH BALANCE WAS BECAUSE OF NON RECORD ING TEMPORARY ADVANCE RECEIVED FROM SHRI KULDIP CHOWDHURY, DIRECTOR OF THE COMPANY WHICH WAS ALSO REPAID DURING THE YEAR. HE ALSO SUBMITTED THAT SHRI KULDIP CHOWDH URY POSSESSED CASH IN HAND AT THE RELEVANT TIME WAS EVIDENCED BY THE LEDGER OF THE PR OPRIETORY CONCERN NAMELY M/S. CHOWDHURY & BROS. 6.5. WE DO NOT FIND ANY FORCE IN THE ARGUMENT OF TH E LD. AR. WE FIND THAT NO EXPLANATION WOULD BE GIVEN FOR NOT ENTERING OF THIS AMOUNT ALLEGEDLY RECEIVED FROM THE DIRECTOR IN THE CASH BOOK OF THE ASSESSEE COMPA NY WHEN THE EXPENDITURE INCURRED OUT OF THE ALLEGED MONEY WAS DULY RECORDED IN THE B OOKS OFACCOUNT. NO EVIDENCE COULD BE PRODUCED BEFORE US TO REBUT THE CONTENTION OF THE LOWER AUTHORITIES THAT THE EXPLANATION OFFERED DURING THE ASSESSMENT PROCEEDIN GS WAS AN AFTER THOUGHT. IN ABSENCE OF THE SAME WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). THUS THIS GROUND OF APPEAL OF THE ASSES SEE IS DISMISSED. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 18.06.2013. SD/- SD/- [ .' #!' , ] [ .., ,, , ] [MAHAVIR SINGH ] [N.S.SAINI] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (3 3 3 3) )) ) DATE: 18.06.2013. R.G.(.P.S.) IT A NO.1899/KOL/2009 M/S.DARPAN PUBLICATION PVT.LTD.SIL IGURI VS ADDL.CIT.RANGE-2,SILIGURI A.YR.2006- 07 6 5 / -##6 76'8- COPY OF THE ORDER FORWARDED TO: 1. M/S. DARPAN PUBLICATION PVT. LTD., HILL CART ROAD, SILIGURI-734 001. 2 ADDITIONAL C.I.T., RANGE-2, SILIGURI. 3 . CIT KOLKATA 4. CIT (A)-SILIGURI 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY 51/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES