ACIT, Circle - 25, Kolkata, Kolkata V. Sri Saunak Mitra, Kolkata

ITA 1977/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1085 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 05-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Assessee Lawyers: K M ROY
• Keywords: Assessment record
• Section: 40(a)(ia); 133(6); 194C; 201(1)

Judgement Text

1 ITA NO. 1977/KOL/2017 SAUNAK MITRA., AY 2009-10 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 1977/KOL/2017 ASSESSMENT YEAR: 2009-10 ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-25, KOLKATA. VS. SHRI SAUNAK MITRA (PAN: AHSPM6241J) APPELLANT RESPONDENT DATE OF HEARING 06.09.2018 DATE OF PRONOUNCEMENT 30.11.2018 FOR THE APPELLANT SHRI ROBIN CHOUDHURY, ADDL. CIT, SR. DR FOR THE RESPONDENT SHRI K. M. ROY, FCA ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE REVENUE IS AGAINST THE ORDER OF THE LD. CIT(A)-7, KOLKATA DATED 16.05.2017 FOR AY 2009-10. 2. GROUND NO.1 IS AGAINST THE ACTION OF THE LD. CIT (A) IN DIRECTING THE AO TO VERIFY THE DISALLOWANCE MADE OF RS.2,59,770/- IN VIEW OF THE 2 ND PROVISO TO SEC. 40(A)(IA) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT). 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN ADVERTISING AGENT WHO CARRIES OUT ITS BUSINESS THROUGH HIS PROPRIETARY CONCERN M/S. COLOU R PURPLE. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSES SEE PAID STUDIO HIRE CHARGES TO VARIOUS PARTIES AS GIVEN BELOW AND CLAIMED TOTAL AMOUNT OF EXPENDITURE TO THE TUNE OF RS.2,92,384/- UNDER THE HEAD STUDIO HIRE CHARGES: SL. NO. NAME OF PARTY AMOUNT PAID DURING THE YEAR 1. 2. 3. R. K. ENTERPRISE DIMENSION NEXT CENTURY COMMUNICATION RS.21,000/- (SINGLE PAYMENT) RS.1,50,000/- RS.88,770/- RS.2,59,770/- 2 ITA NO. 1977/KOL/2017 SAUNAK MITRA., AY 2009-10 ACCORDING TO AO, THE EXPENDITURE INVOLVED HAD AN EL EMENT OF CONTRACT AND SO IT ATTRACTS THE PROVISION OF SEC. 194C OF THE ACT WHICH REQUIRES TH E ASSESSEE TO DEDUCT TAX AT SOURCE FROM THE AMOUNT OF EXPENSES IN QUESTION. SINCE THE ASSE SSEE DID NOT DEDUCT ANY TAX AT SOURCE, THE AO INVOKED THE PROVISION OF SEC. 40(A)(IA) OF THE A CT AND DISALLOWED THE EXPENDITURE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. AGGR IEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO WAS PLEASED TO DIRECT AO TO VERIFY THE CLAIM OF ASSESSEE IN LIGHT OF SECOND PROVISO TO SEC. 40(A)(IA) OF THE ACT AND GIVE RELIEF IN ACCORDANCE TO LAW. AGGRIEVED, THE REVENUE IS BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE LD. CIT(A) WHILE ADJUDICATI NG THE ISSUE HAS DIRECTED THE AO TO VERIFY AS TO WHETHER THE PAYEES HAVE INCLUDED THIS AMOUNT IN THEIR RESPECTIVE RETURNS AND IF THEY HAVE REFLECTED THIS INCOME IN THEIR RETURN, TH EN AS PER THE SECOND PROVISO TO SEC. 40(A)(IA) READ WITH SEC. 201(1) OF THE ACT, THEN NO DISALLOWANCE SHOULD BE MADE. WE HAVE CONSISTENTLY HELD THAT THE SECOND PROVISO TO SEC. 4 0(A)(IA) READ WITH SEC. 201(1) OF THE ACT IS CURATIVE/CLARIFICATORY IN NATURE AND, THEREFORE, RE TROSPECTIVE AND THE LD. CIT(A) HAS ONLY DIRECTED THE AO TO VERIFY AS TO WHETHER THE PAYEES HAVE REFLECTED THE INCOME FROM THE ASSESSEE IN THEIR RESPECTIVE RETURNS AND IF SO NO D ISALLOWANCE OF EXPENSES IS WARRANTED WHICH ACTION OF THE LD. CIT(A) NEEDS NO INTERFERENCE AND, THEREFORE, WE DISMISS THIS GROUND OF APPEAL OF REVENUE. 5. THE SECOND GROUND OF APPEAL OF THE REVENUE IS AG AINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.1,28,18,201/- MADE BY A O ON ACCOUNT OF DIFFERENCE IN BALANCE OF SUNDRY CREDITORS. 6. BRIEF FACTS OF THE CASE ARE THAT THE AO NOTED TH AT THE ASSESSEE HAS CLAIMED TO HAVE MADE VARIOUS BUSINESS TRANSACTIONS WITH A PARTY LIK E ORIENT PUBLICITY SERVICES PVT. LTD. AND SELVEL ADVERTISING PVT. LTD. THE AO ISSUED 133(6) NOTICE TO BOTH THE PARTIES AND FROM THE REPLY RECEIVED FROM ORIENT PUBLICITY SERVICES PVT. LTD. IT WAS FOUND THAT THE OUTSTANDING LIABILITY OF THE ASSESSEE TOWARDS THE PARTY AS ON 3 1.03.2009 WAS RS.5,82,769/- WHEREAS THE 3 ITA NO. 1977/KOL/2017 SAUNAK MITRA., AY 2009-10 ASSESSEE CLAIMED ITS LIABILITY TOWARDS THE SAID PAR TY AT RS.15,99,832/-, THUS THE AO FOUND A DIFFERENCE OF RS.10,17,063/-. LIKEWISE, IN THE CAS E OF SELVEL ADVERTISING PVT. LTD. PURSUANT TO THE NOTICE U/S. 133(6) NOTES THE SAID PARTY REPL IED THAT THE OUTSTANDING LIABILITY TOWARDS IT WAS RS.46,45,200/- AS AGAINST THE ASSESSEES CLAIM OF RS.1,64,46,338/-, THEREFORE, THE AO FOUND A DIFFERENCE OF RS.1,18,01,138/-. SO, THE AO WAS OF THE OPINION THAT THE LIABILITY OF THE ASSESSEE TO THE TUNE OF RS.1,18,01,138/- + RS.1 0,17,063/- CEASED TO EXIST AS ON 31.03.2009 AND, THEREFORE, HE INVOKED SEC. 41(1) OF THE ACT AND ADDED IT TO THE INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED AN APP EAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO DELETE THE SAME BY HOLDING AS UNDER: 4.2. I HAVE PERUSED THE ASSESSMENT ORDER, SUBMISS ION OF THE ASSESSEE AND THE ASSESSMENT ORDER. IT WAS INDEED SURPRISING THAT ON A TURNOVER OF RS. 3.09 CRORE AND ON A CAPITAL OF RS. 4.5 LAKHS THERE WOULD BE SUCH MASSIVE DIFFERENCE IN THE FIGURE OF SUNDRY CREDITORS THAT TOO AGAINST REPUTED SUNDRY CREDITORS PARTY LIKE SELVEL ADVERTIS ING PVT. LTD. PERUSAL OF THE ASSESSMENT RECORD ALSO REVEALS THAT IN CASE OF GEE PEE INFOTEC H (P) LTD. FROM PARTY'S CONFORMATION STATEMENT IT IS SEEN THAT DEBIT BALANCE OF GEE PEE INFOTECH (P) LTD COMES TO RS. 22,42,305/- WHILE THE DEBIT BALANCE AS PER ASSESSEE'S BOOKS TOW ARDS GEE PEE INFOTECH (P) LTD IS RS. 1,17,90,606/-. THIS DIFFERENCE WAS QUITE EVIDENT, H UGE AND WAS THERE BEFORE THE ASSESSING OFFICER. HOWEVER THE ASSESSING OFFICER HAS NOT MADE ANY COMMENT ON THIS DISCREPANCY. THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT SO METIMES THE ADVERTISING AGENCIES LIKE SELVEL ADVERTISING PVT. LTD. ETC. RECEIVED PAYMENT DIRECTLY FROM CLIENT [LIKE GEE PEE INFOTECH (P) LTD] AND, THEREFORE THE CREDIT BALANCE FOR ADVE RTISING SERVICES GETS REDUCED IN THE BOOKS OF ADVERTISING AGENCIES LIKE SELVEL ADVERTISING PVT. L TD. WHILE IN THE BOOKS OF THE ASSESSEE THE CREDIT BALANCE STILL REMAINS AND IS RECONCILED AT A LATER DATE. IN VIEW OF THE LARGE DISCREPANCY IN BOTH DEBTORS AND CREDITORS, THE EXPLANATION GIVE N BY THE ASSESSEE SEEMS TO BE CORRECT. THE ASSESSING OFFICER HAS ONLY TAKEN THE DISCREPANCY IN THE CREDITOR'S BALANCE WHILE THE LARGE DISCREPANCY IN THE DEBTOR'S BALANCE HAS BEEN IGNORE D BY THE ASSESSING OFFICER. IN VIEW OF THE ABOVE I AM INCLINED TO AGREE TO THE SUBMISSIONS MAD E BY THE LD. AUTHORIZED REPRESENTATIVE THAT THE DISCREPANCY IN THE DEBTOR AND CREDITORS' ARE MO STLY COMPENSATORY IN NATURE DUE TO DIFFERENT ACCOUNTING TREATMENT OF THE SAME TRANSACT ION BY DIFFERENT PARTIES. HOWEVER DURING THE COURSE OF HEARING THE ASSESSEE W AS NOT ABLE TO RECONCILE THE BALANCE OF DEBTOR ~D CREDITORS. THEREFORE SOME DISCREPANCY/MAN IPULATION CANNOT BE RULED OUT AND THEREFORE THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE HEREBY REJECTED AND PROFIT OF THE ASSESSEE ARE ESTIMATED. THE NET PROFIT OF THE ASSESSEE MAY B E ESTIMATED AT 8% OF THE OPERATING INCOME OF RS. 3,09,71,045/-. IN THE RESULT THIS GROUND OF APPEAL IS PARTLY ALLOWED. AGGRIEVED, THE REVENUE IS BEFORE US. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE HAD A TOTAL TURNOV ER OF RS.3.09 CR. THE LD. CIT(A) HAS TAKEN NOTE THAT THE AO HAS ISSUED NOTICE TO BOTH TH E CREDITORS AND DEBTORS AND HAS ONLY RECORDED THE DIFFERENCE IN THE CASE OF CREDITORS ON LY WHEREAS THE LD. CIT(A) FOUND THAT THE 4 ITA NO. 1977/KOL/2017 SAUNAK MITRA., AY 2009-10 SUNDRY DEBTOR M/S. GEE PEE INFOTECH PVT. LTD. HAS S HOWN DEBIT BALANCE TO ASSESSEE TO THE TUNE OF RS.22,42,305/- WHEREAS AS PER ASSESSEES BO OKS TOWARDS THE SUNDRY DEBTORS IS RS.1,17,90,606/-. THUS, THERE WAS EVIDENTLY HUGE D IFFERENCE IN BOTH THE CREDITORS AS WELL AS THE DEBTORS. THE DISCREPANCY, THE ASSESSEE EXPLAINE D TO THE LD. CIT(A) THAT THIS WAS DUE TO THE FACT THAT THE ADVERTISING AGENCIES LIKE M/S. SE LVEL ADVERTISING PVT. LTD. RECEIVED PAYMENT DIRECTLY FROM THE CLIENT (LIKE GEE PEE INFO TECH PVT. LTD.) AND, THEREFORE, THE CREDIT BALANCE FOR ADVERTISING SERVICES GET REDUCED IN TH E BOOKS OF ADVERTISING AGENCIES LIKE SELVEL ADVERTISING PVT. LTD., WHILE IN THE BOOKS OF ASSESS EE, THE CREDIT BALANCE STILL REMAINS THE SAME AND COULD BE RECONCILED ONLY LATER. TAKING NO TE OF THE DISCREPANCY IN BOTH THE DEBTORS AND CREDITORS AND TAKING INTO CONSIDERATION THE PLA USIBLE EXPLANATION GIVEN BY THE ASSESSEE THE LD. CIT(A) WHO ENJOYS THE CO-TERMINUS POWER AS THAT OF THE AO HAS RESORTED TO REJECT THE BOOKS OF ACCOUNT AND HAS ESTIMATED THE INCOME A T 8% OF THE OPERATING INCOME OF RS.3.09 CR. WHICH ACTION OF THE LD. CIT(A) IN THE PECULIAR FACTS AND CIRCUMSTANCES REQUIRES NO INTERFERENCE FOR THE REASONS STATED ABOVE. THEREFO RE, THIS GROUND OF APPEAL OF REVENUE IS DISMISSED. 8. COMING TO THE REVENUES GROUND OF VIOLATION OF R ULE 46A OF THE RULES, WE DO NOT FIND THAT ANY NEW EVIDENCE BEING BROUGHT BEFORE THE LD. CIT(A) FOR THE FIRST TIME BY THE ASSESSEE. THEREFORE, THE LD. CIT(A) WHO ENJOYS CO-T ERMINUS POWERS AS THAT OF THE AO HAS CORRECTLY ADJUDICATED THE ISSUE WHICH ACTION DOES N OT REQUIRE ANY INTERFERENCE FROM OUR SIDE AND SO IT IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30/11/201 8 SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30TH NOVEMBER, 2018 JD.(SR.P.S.) 5 ITA NO. 1977/KOL/2017 SAUNAK MITRA., AY 2009-10 COPY OF THE ORDER FORWARDED TO: 1 APPELLANT ACIT, CIRCLE-25, KOLKATA. 2 RESPONDENT SHRI SAUNAK MITRA, 39, MAHANIRBAN ROAD , GROUND FLOOR, KOLKATA-700 029. 3 4 5 CIT(A)-7, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY