ITO, Ward - 3(2), Kolkata, Kolkata V. M/s. Savera Suppliers (P) Ltd., Kolkata

ITA 1924/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48242 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 12-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M BHATACHARYA
• Keywords: Source of fund
• Section: 131

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND , . !' . #$ ) [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SHR I C. D. RAO, AM] % % % % / I.T.A NO. 1924/KOL/2010 &' () &' () &' () &' ()/ // / ASSESSMENT YEAR : 2007-08 INCOME-TAX OFFICER, WD-3(2), KOLKATA VS M/S. SAVE RA SUPPLIERS (P) LTD. (PAN-AADCS 5704 P) ( +, /APPELLANT ) (-.+,/ RESPONDENT ) FOR THE APPELLANT: SHRI M. BHATACHARYA FOR THE RESPONDENT: SHRI SUBASH AGARWAL #/ / ORDER PER MAHAVIR SINGH, JM ( , , , , ) THIS APPEAL BY REVENUE IS ARISING OUT OF THE ORDER OF CIT(A)-1, KOLKATA IN APPEAL NO.377/CIT(A)-1/WD-3(2)/09-10 VIDE DATED 26.07.2010 . THE ASSESSMENT WAS FRAMED BY ITO, WD-3(2), KOLKATA U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2007-08 VIDE HIS ORDER DATED 21.12.2009. 2. THE FIRST ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED BY ASSESSEE BY TREATING THE SAME AS UNEXPL AINED U/S. 68 OF THE ACT. FOR THIS, REVENUE HAS RAISED THE FOLLOWING GROUND NO.1: 1. THE LD. CIT(A) ERRED IN DELETING THE ADDITION O F RS.21,50,000/- WITHOUT APPRECIATING THE FACTS THAT ON VERIFICATION OF DOCUMENTS PRODUCE D BY THE ASSESSEE AND DUE TO ASSESSEES FAILURE TO PRODUCE THE SHAREHOLDERS FOR NECESSARY V ERIFICATION, THE AO HAD RIGHTLY HELD THAT IDENTITY AND CREDITWORTHINESS OF SHAREHOLDERS AND GENUINENESS OF TRANSACTIONS RELATING TO CONTRIBUTION OF SHARE CAPITAL AND PREMI UM WERE NOT SATISFACTORILY PROVED/ESTABLISHED. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY AMOUNTING TO RS.21.50 LACS FROM FOLLOWING FOUR SHARE APPLICANTS. I) RANJAN KUMAR SINGH - RS.3,00,000/- II) SHIVANAND YADAV - RS.7,00,000/- III) SUNITA GUPTA - RS.5,00,000/- 2 ITA 1924/K/2010 M/S. SAVERA SUPPLIERS (P) LTD. A.Y .06-08 IV) MAMTA BANERJEE - RS.6,50,000/- THE ASSESSING OFFICER ADDED THIS SHARE APPLICATION MONEY BY STATING THAT CREDITWORTHINESS OF THESE PARTIES IS NOT PROVED. A GGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND HE DELETED THE ADDITION BY OBSERV ING AS UNDER: DURING THE APPELLATE PROCEEDINGS THE AR OF THE ASS ESSEE FILED COPIES OF ACCOUNTS, BANK STATEMENTS/PASS BOOK, SOURCE OF FUNDS AND INCO ME TAX RETURN FILING ACKNOWLEDGMENTS FOR ASSESSMENT YEARS 2007-08 OF ALL THE 4 INDIVIDUAL SHARE APPLICANTS. I HAVE CAREFULLY GONE THROUGH ALL THE P APERS RELATING TO 4 SHARE APPLICANTS AND FIND THAT THE SOURCE OF THEIR INVESTMENTS ARE F ULLY SUPPORTED BY DOCUMENTARY EVIDENCES, ALL THE PAYMENTS TOWARDS APPLICATION MON EY WERE MADE THROUGH ACCOUNT PAYEE CHEQUES AND ALL THE APPLICANTS ARE INCOME TAX ASSESSES REGULARLY FILING THEIR RETURNS OF INCOME. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND FIND THAT THE ADDITION WAS MADE BY LD. AO WAS ON THE GROUND THAT CREDIT WORTHINESS OF THE APPLICANTS COULD NOT BE ESTABLISHED. I HAVE CAREFULLY GONE THROUGH THE DOCU MENTARY EVIDENCES AND SUPPORTING FILED BY THE AR DURING THE COURSE OF APPEAL HEARING AND IS OF THE OPINION THAT BOTH THE CONDITIONS OF CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTION HAS BEEN ESTABLISHED BY THE AR AND HENCE THE ADDITION ON ACCOUNT OF UNE XPLAINED CASH CREDIT U/S 68 AMOUNTING TO RS.21,50,000/- IS HEREBY DELETED. 4. WE FIND THAT THE ASSESSEE RECEIVED SHARE APPLICA TION MONEY AND FILED COPIES OF ACCOUNT, BANK STATEMENT/PASS BOOK, SOURCES OF FUND AND I. T. RETURNS OF ALL FOUR SHARE APPLICANTS. THE DISCUSSION IN REGARD TO EACH APPLI CANT IS AS UNDER: A) RANJAN KUMAR SINGH - THE APPLICATION AMOUNT OF R S.3,00,000/- WAS MADE OUT OF SALE OF 3000 SHARES OF M/S. HANURANG MERCANTILES PVT. LT D ON 14.12.2006 AT A SALE PRICE OF RS.3,00,000/- WHICH WERE RECEIVED BY ACCOUNT PAYEE CHEQUE ON 27.02.2007. THE CREDIT WORTHINESS IS ESTABLISHED FROM THE FACT THAT THE AM OUNT INVESTED IS OUT OF SALE PROCEEDS OF PREVIOUS SHARE HOLDING OF A DIFFERENT COMPANY. A S REGARD TO PERSONAL ATTENDANCE SUMMONS U/S 131 COULD HAVE EASILY BEEN SERVED UPON THE SAID ASSESSEE, WHICH COURSE HAS NOT BEEN ADOPTED BY AO THOUGH HE HAD FULL RIGHT TO DO SO. B) SHIVANAND YADAV - THE APPLICATION AMOUNT OF RS.7 ,00,000/- WAS MADE OUT OF SALE OF 1500 SHARES OF M/S. JAGRITI VANIJYA PVT. LTD, 4000 SHARES OF M/S ARPAN TIEUP PVT. LTD & 1500 SHARES OF M/S NAANAGAR METCOKE PVT. LTD ON 18. 12.2006 AT A SALE PRICE OF RS.7,00,000/- WHICH WERE RECEIVED BY ACCOUNT PAYEE CHEQUE ON 27.02.2007. THE CREDIT WORTHINESS IS ESTABLISHED FROM THE FACT THAT THE AM OUNT INVESTED IS OUT OF SALE PROCEEDS OF PREVIOUS SHARE HOLDINGS OF DIFFERENT COMPANIES. AS REGARD TO PERSONAL ATTENDANCE SUMMONS U/S 131 COULD HAVE EASILY BEEN SERVED UPON THE SAID ASSESSEE, WHICH COURSE HAS NOT BEEN ADOPTED BY AO THOUGH HE HAD FULL RIGHT TO DO SO. C) SUNITA GUPTA - THE APPLICATION AMOUNT OF RS.5,00 ,000/- WAS MADE OUT OF SALE OF 5000 SHARES OF M/S. AKSHAT DEVELOPERS PVT. LTD ON 23.12. 2006 AT A SALE PRICE OF RS.5,00,000/- WHICH WERE RECEIVED BY ACCOUNT PAYEE CHEQUE ON 26.0 2.2007. THE CREDIT WORTHINESS IS ESTABLISHED FROM THE FACT THAT THE AMOUNT INVESTED IS OUT OF SALE PROCEEDS OF PREVIOUS SHARE HOLDING OF A DIFFERENT COMPANY. AS REGARD TO PERSONAL ATTENDANCE SUMMONS U/S 131 COULD HAVE EASILY BEEN SERVED UPON THE SAID ASS ESSEE, WHICH COURSE HAS NOT BEEN ADOPTED BY AO THOUGH HE HAD FULL RIGHT TO DO SO. D) MAMTA BANERJEE - THE APPLICATION AMOUNT OF RS.6, 50,000/- WAS MADE OUT OF SALE OF 5000 SHARES OF M/S. JAGRITI VANHJYA PVT. LTD ON 27. 12.2006 AT A SALE PRICE OF 3 ITA 1924/K/2010 M/S. SAVERA SUPPLIERS (P) LTD. A.Y .06-08 RS.5,00,000/- WHICH WERE RECEIVED BY ACCOUNT PAYEE CHEQUE ON 02.02.2007 AND OUT OF CASH IN HAND OF RS. L,50,000/- GENERATED OUT OF HER EARNINGS OF THE CURRENT FINANCIAL YEAR. THE CREDIT WORTHINESS IS ESTABLISHED FROM THE FACT THAT THE MAJOR CHUNK OF AMOUNT INVESTED IS OUT OF SALE PROCEEDS OF PREVIOUS SHARE HOLDING OF A DIFFERENT COMPANY AND THE BALANCE AMOUNT IS ESTABLISHED FROM DAY TO DAY CASH FLOW STATEMENT FILED DURING THE COURSE OF HEARING. AS REGARD TO PERSONAL ATTENDANCE SUMMONS U/S 131 COULD HAVE EASILY BEEN SERVED UPON THE SAID ASSESSEE, WHICH COURSE HA S NOT BEEN ADOPTED BY AO THOUGH HE HAD FULL RIGHT TO DO SO. IN VIEW OF ABOVE, WE FIND THAT THE ORDER OF CIT(A) NEED NO INTERFERENCE AND ACCORDINGLY, WE CONFIRM THE SAME. 5. THE NEXT ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF LOSS. FOR THIS, REVEN UE HAS RAISED THE FOLLOWING GROUND NO.2: THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW TRADING LOSS OF RS. 11,76,558/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAI LED TO ADDUCE ADEQUATE EVIDENCE IN SUPPORT OF TRADING LOSS IN TEXTILE BUSINESS WHICH W AS INCURRED YEAR AFTER YEAR. 6. WE FIND THAT THE ASSESSEE IN ITS BOOKS OF ACCOUN T OF TEXTILE BUSINESS INCURRED LOSS OF RS.11,76,558/-. THE ASSESSEE PURCHASED TEXTILES WORTH RS.52,37,530/- AND SOLD AT RS.40,60,922/-. THE ASSESSEE PRODUCED COMPLETE BOO KS OF ACCOUNT, BILLS AND VOUCHERS RELATING TO THIS BUSINESS BUT ASSESSING OFFICER REQ UIRED THE ASSESSEE TO EXPLAIN THE LOSS. ASSESSEE STATED THAT TRADING IN TEXTILE IS ONE OF OUR REGULAR BUSIN ESS ACTIVITY AND THE SAID BUSINESS WE ARE CARRYING OUT FOR LAST SEVERAL YEARS. AS A PRUDENT BUSINESSMAN IT IS OUR CONSTANT EFFORT TO EARN PROFIT OUT OF ANY BUSIN ESS ACTIVITY BUT SOMETIMES IT HAPPENS THAT LOSSES DO OCCUR FOR SOME TRANSACTIONS NOT FOR SOME TRANSACTION PROFIT MAY BE EARNED. DURING THE PRESENT YEAR IN SPITE OF OUR BEST EFFOR TS TO EARN PROFIT WE HAVE SUFFERED LOSSES IN TEXTILE TRADING. WE SHOULD LIKE TO MENTI ON THAT WE TRIED OUR LEVEL BEST TO EARN PROFIT FROM THE SAID TRANSACTION BUT FAILED TO EARN IT BUT OUR EFFORT WAS GENUINE. IN SUCH CIRCUMSTANCES WE PRAY BEFORE YOUR HONOUR NOT TO DRA W ANY ADVERSE INFERENCE FROM THE SAID TRANSACTION. 7. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANA TION. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE DIS ALLOWANCE OF LOSS BY GIVING FOLLOWING REASONS: 4 ITA 1924/K/2010 M/S. SAVERA SUPPLIERS (P) LTD. A.Y .06-08 FROM THE DETAILS FILED BY LD. A.R IT IS EVIDENT TH AT ALL THE TRANSACTIONS WERE THROUGH ACCOUNT PAYEE CHEQUES AND THE ASSESSEE IS REGULARLY INVOLVED IN TRANSACTION OF PURCHASE AND SALES OF TEXTILES FOR LAST 4 YEARS AS IS EVIDENT FROM AUDITED ACCOUNTS AND TAX AUDIT REPORT AS WELL AS THE ASSESSEE IS AUTHORI SED BY ITS OBJECT CLAUSE STATED IN MEMORANDUM AND ARTICLES OF ASSOCIATION FILED DURING THE COURSE OF APPEAL HEARING. I AM OF THE OPINION THAT THE TRANSACTIONS ARE GENUINE AND A PRUDENT BUSINESSMAN CAN SUFFER LOSSES IN SOME TRANSACTIONS AND WILL EARN PR OFIT IN OTHER TRANSACTION AND IT IS NO CASE OF THE A.O. TO GUIDE A BUSINESSMAN HOW TO RUN HIS BUSINESS AND HENCE I DELETE THE DISALLOWANCES OF RS.11,76,558/- MADE ON THIS ACCOUN T. 8. WE FIND THAT ASSESSEE HAS PRODUCED COMPLETE BOOK S OF ACCOUNT INCLUDING BILLS AND VOUCHERS BEFORE ASSESSING OFFICER AND HE COULD NOT POINT OUT ANY DEFECT IN THE BOOKS OF ACCOUNT AND WITHOUT POINTING OUT ANY DEFEC T IN THE BOOKS OF ACCOUNT, ASSESSING OFFICER HAS NO RIGHT TO DISALLOW THE LOSS CLAIMED B Y ASSESSEE. EVEN OTHERWISE, ASSESSEE TO CARRY ON ITS BUSINESS AS A PRUDENT BUSINESSMAN T OOK A DECISION TO CONTINUE WITH THE SAME. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) DELETING THE DISALLOWANCE IN VIEW OF THE ABOVE REASONS. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 9. THE NEXT ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF LIAISON CHARGES. FOR THIS, REVENUE HAS RAISED THE FOLLOWING GROUND NOS. 3 AND 4: 3. THE LD. CIT(A) ERRED IN DIRECTING THE AO TO DEL ETE THE DISALLOWANCE OF RS.45,000/- MADE ON ACCOUNT OF LIAISON CHARGES WITHOUT APPRECIA TING THAT THE ASSESSEE FAILED TO ADDUCE NECESSARY EVIDENCE TO PROVE THE GENUINENESS OF THE SAID EXPENDITURE. 4. THE LD. CIT(A) ERRED IN DIRECTING THE AO TO DELE TE THE DISALLOWANCE OF RS.45,000/- MADE ON ACCOUNT OF LIAISON CHARGES BY ACCEPTING ADD ITIONAL EVIDENCE IN CONTRAVENTION OF RULE 46A OF THE I. T. RULES, 1962. 10. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSING OFFICER HAS MADE ADDITION BY OBSERVING AS UNDER: THE ASSESEE HAD DEBITED A SUM OF RS.45,000/- ON AC COUNT OF LIAISON CHARGES, BUT THE SAID LIAISON CHARGE IS DISALLOWED FOR WANT OF EVIDENCE. 11. WE FIND THAT ASSESSING OFFICER HAS NOT RAISED A NY QUERY QUA THE DISALLOWANCE AND IN THE ABSENCE OF THE SAME, WE CANNOT INTERFERE WITH THE ORDER OF CIT(A). EVEN, CIT(A) HAS GIVEN A FINDING THAT ASSESSEE HAS FILED CONFIRMATIONS BEFORE HIM AND ON THE BASIS OF THIS CONFIRMATION, HE ALLOWED THE EXPENDIT URE. ACCORDINGLY, THESE GROUNDS OF REVENUES APPEAL ARE DISMISSED. 5 ITA 1924/K/2010 M/S. SAVERA SUPPLIERS (P) LTD. A.Y .06-08 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 13. ORDER PRONOUNCED IN OPEN COURT. SD/- SD/- . !' !'!' !' . #$ , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( '$ '$ '$ '$) )) ) DATED 23RD DAY OF JUNE, 2011 01 &23 4 JD.(SR.P.S.) #/ 5 - 6#(7- COPY OF THE ORDER FORWARDED TO: 1 . +, / APPELLANT ITO, WARD-3(2), KOLKATA. 2 -.+, / RESPONDENT, M/S. SAVERA SUPPLIERS (P) LTD., 703A, BLOCK-P, NEW ALIPORE, KOLKATA-700 053. 3 . /& ( )/ THE CIT(A), KOLKATA 4. /& / CIT, KOLKATA 5 . >? -& / DR, KOLKATA BENCHES, KOLKATA . -/ TRUE COPY, #/&@/ BY ORDER, 3 /ASSTT. REGISTRAR .