Upkar Distributors Pvt. Ltd., Cuttack V. ITO, Ward - 8(3), Kolkata

ITA 2024/KOL/2009

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3417 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 30-11-2009
• Court: TRIBUNAL
• Department Lawyers: R K KUREEL JCIT LD
• Assessee Lawyers: SUBASH AGARWAL LD
• Keywords: Depreciation; Earning of tax free income; Retrospective amendment; Corroborative evidences
• Section: 143(3); 14A; 133(6); 68

Judgement Text

ITA NO. 2024/KOL/2009-C-AM M/S. UPKAR DISTRIBUTORS PVT. LTD., KOL. 1 IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, K OLKATA BEFORE : SHRI MAHAVIR SINGH,JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER I.T.A NO. 2024/KOL/2009 A.Y : 2005-06 UPKAR DISTRIBUTORS PVT. LTD VS. ITO, WA RD 8(3), KOLKATA PAN: AAACU5459Q (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI SUBASH AGARWAL, ADV OCATE, LD.AR FOR THE RESPONDENT: SHRI R.K KUREEL, JCIT, LD.SR.DR DATE OF HEARING: 17-12-2015 DATE OF PRONOUNCEMENT: 20 -01 -2016 ORDER SHRI M.BALAGANESH, AM THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE ORDE R OF THE LEARNED CIT(A), VIII, KOLKATA IN APPEAL NO. 518/CIT(A)-VIII/KOL/07-08 D ATED 28-10-2009 FOR THE ASSESSMENT YEAR 2005-06 AGAINST THE ORDER OF ASSES SMENT FRAMED BY THE LEARNED AO U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE FIRST GROUND TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER AN ADDITION IN THE SUM OF RS. 96,88,781/- COULD BE MADE IN RESPECT OF UNVERIFIED SUNDRY CREDITORS IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRADING IN SHARES, TIMBE RS AND JUTE. THE RETURN OF INCOME FOR THE ASST YEAR 2005-06 WAS FILED BY THE ASSESSEE DECLARING TAXABLE INCOME OF RS. 44,910/-. THE LEARNED AO DURING THE COURSE OF ASSE SSMENT PROCEEDINGS CALLED FOR DETAILS OF SUNDRY CREDITORS. IN RESPONSE TO THE SA ME, THE ASSESSEE SUBMITTED THE NAMES AND ADDRESS OF THE SUNDRY CREDITORS AS BELOW:- ITA NO. 2024/KOL/2009-C-AM M/S. UPKAR DISTRIBUTORS PVT. LTD., KOL. 2 [ FIGURES IN RUPEES/-] (A) APSON SALES PROMOTION P LTD 40/4, STRAND ROAD, KOLKATA 700001 48,85,4 68/- (B) PANCHRATNA TRADELINK (P) LTD 40/4, STRAND ROAD, KOLKATA 700001 24,84,3 65/- (C ) ORTEM FINANCE (P) LTD 6C, MIDDLETON STREET, KOLKATA 700071 16,27 ,578/- (D) NARAYANI JUTE TRADERS 6C, MIDDLETON STREET, KOLKATA 700071 32,18 ,658/- 2.2. THE LEARNED AO ISSUED NOTICE U/S 133(6) OF TH E ACT TO THE ABOVE SUNDRY CREDITORS. REPLIES FROM ALL THE FOUR WERE SIGNED B Y SHRI.P.K.JHUNJHUNWALA , DIRECTOR OF ASSESSEE COMPANY AND SENT TO THE LEARNED AO. T HE LEARNED AO FOUND THAT THE BALANCE OUTSTANDING STATED IN THE CONFIRMATION RECE IVED FROM PANCHRATNA TRADELINK (P) LTD MATCHED WITH THE ASSESSEE BALANCE AS STATED IN THE RETURN AND ACCORDINGLY ACCEPTED THE SAME. WITH REFERENCE TO THE OTHER THREE PARTI ES TOTALING TO RS. 96,88,781/- , THE LEARNED AO BROUGHT THE SAME TO TAX AS BOGUS AND UNC ONFIRMED LIABILITY AND ADDED THE SAME U/S 68 OF THE ACT. ON FIRST APPEAL, THE LEA RNED CITA FOUND THAT IDENTITY OF THE SUNDRY CREDITORS ARE NOT DOUBTED BY THE LEARNED AO. BUT THE GENUINENESS OF THE TRANSACTIONS HAVE BEEN QUESTIONED DUE TO ASSESSEES INABILITY TO EXPLAIN WITH REFERENCE TO THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS WITH R EGARD TO THE POINTED DISCREPANCIES. ACCORDINGLY THE ADDITION WAS UPHELD BY THE LEARNED CIT(A). AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING REVISED GRO UND:- 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.96,88,781/- MADE BY THE A.O. ON ACCOUNT OF ALLEGED UNCONFIRMED SUNDR Y CREDITORS. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BEFORE US BY THE ASS ESSEE WHICH WERE ALSO FILED BEFORE THE LOWER AUTHORITIES. WE FIND THAT THE HARD DIS K OF THE ASSESSEE HAD CRASHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH FACT IS ALSO RECORDED IN THE ASSESSMENT ORDER. THE ACCOUNTS WERE MAINTAINED IN THE COMPU TER AND IN VIEW OF CRASHING OF HARD ITA NO. 2024/KOL/2009-C-AM M/S. UPKAR DISTRIBUTORS PVT. LTD., KOL. 3 DISK, THE ASSESSEE COULD NOT FURNISH THE BOOKS OF A CCOUNTS IN FULL AND DETAILS WITH SUPPORTING EVIDENCES REGARDING THE VARIOUS QUERIES RAISED BY THE LEARNED AO. THE LEARNED AR ARGUED THAT THESE ARE GENUINE PURCHASES MADE BY THE ASSESSEE AND FAIRLY CONCEDED THAT THE ENTIRE BOOKS OF ACCOUNTS COULD NO T BE PRODUCED BEFORE THE LOWER AUTHORITIES DUE TO CRASHING OF HARD DISK. HE FURT HER STATED BEFORE US THAT THE BOOKS OF ACCOUNTS WERE FINALLY RETRIEVED AND THE SAME ARE PR ESENTLY AVAILABLE AND ALL THE DISCREPANCIES POINTED OUT BY THE LEARNED AO COULD B E EASILY ADDRESSED BY THE ASSESSEE AND PRAYED FOR ONE MORE OPPORTUNITY TO BE SET ASIDE TO THE FILE OF THE LEARNED AO TO EXPLAIN THE REAL FACTS BEFORE THE LEARNED AO. WE A LSO FIND THAT THE CONFIRMATION OF BALANCES FROM THE AFORESAID SUNDRY CREDITORS WERE A LSO FILED TOGETHER WITH THE BALANCE SHEET AND INCOME TAX RETURNS OF THE SUNDRY CREDITOR S WHICH REQUIRES TO BE EXAMINED BY THE LEARNED AO. THE LEARNED DR DID NOT RAISE ANY O BJECTION FOR EXAMINATION OF THESE DOCUMENTS BY THE LEARNED AO AFRESH. IN THESE CIRCU MSTANCES, WE DEEM IT FIT AND APPROPRIATE, IN THE INTEREST OF JUSTICE AND FAIR PL AY, TO SET ASIDE THIS ISSUE TO THE FILE OF THE LEARNED AO AND DECIDE THIS ISSUE AFRESH, IN ACC ORDANCE WITH LAW. NEEDLESS TO MENTION THAT THE ASSESSEE BE GIVEN REASONABLE OPPOR TUNITY OF BEING HEARD. THE ASSESSEE IS ALSO AT LIBERTY TO FILE ADDITIONAL DOCU MENTS AND EVIDENCES IN SUPPORT OF ITS CLAIM IN ORDER TO EXPEDITE THE COMPLETION OF ASSESS MENT PROCEEDINGS AT THE EARLIEST. ACCORDINGLY, THE GROUND NO. 1 (REVISED) RAISED BY T HE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 3. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER A SUM OF RS. 1,68,70,181/- TOWARDS SECURED LOAN OUTSTANDING AS O N 31.3.2005 AS PAYABLE TO WAJILAM EXPORTS SINGAPORE PVT LTD COULD BE ADDED AS INCOME OF THE ASSESSEE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3.1. THE ASSESSEE HAD SHOWN SECURED LOAN AS ON 31. 3.2005 OF RS. 1,68,70,181/- FROM WAJILAM EXPORTS SINGAPORE PVT LTD IN ITS BALANCE SH EET. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE EXPLAINED THAT IT HAD NOT AVAILED ANY SECURED LOAN ITA NO. 2024/KOL/2009-C-AM M/S. UPKAR DISTRIBUTORS PVT. LTD., KOL. 4 FROM THIS PARTY AND INSTEAD IMPORTED TIMBER LOGS FR OM THIS PARTY AND IT HAS BEEN ERRONEOUSLY SHOWN IN THE BALANCE SHEET AS LOANS INS TEAD OF SUNDRY CREDITORS. THE ASSESSEE ALSO PRODUCED DETAILS OF PURCHASES ALONG W ITH SHIPPING BILLS, BANKER CERTIFICATES IN SUPPORT OF THE PURCHASES MADE BY TH E ASSESSEE. THE ASSESSEE ALSO HAS MADE HIGH SEA SALES TO M/S SHIVANG TREXIM PVT LTD , HOWRAH 711106 FOR RS. 1,72,13,585/-. AFTER MAKING THIS SALE, THE BALANCE STOCK IS SHOWN AS CLOSING STOCK AS ON 31.3.2005 TO THE TUNE OF RS. 1,68,70,181/- BY TH E ASSESSEE. THE LEARNED AO BROUGHT THE SAID SUNDRY CREDITOR OF RS. 1,68,70,181 /- TO TAX IN THE ASSESSMENT. ON FIRST APPEAL, THE LEARNED CIT(A) UPHELD THE ADDITION. A GGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING REVISED GROUND:- 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OFRS.1,68,7 0,181/- MADE BY THE A.O. IN RESPECT OF THE AMOUNT WHICH REMAINED OUTSTA NDING AS ON 31.03.2005 ON ACCOUNT OF PURCHASES MADE FROM WAJILA M EXPORTS SINGAPORE PVT. LTD. 3.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BEFORE US BY THE ASS ESSEE WHICH WERE ALSO FILED BEFORE THE LOWER AUTHORITIES. WE FIND THAT THE ASSESSEE HAD ACTUALLY IMPORTED TIMBER LOGS FROM M/S WAJILAM EXPORTS SINGAPORE PVT LTD IN SEPT 2004 BY OBTAINING LETTER OF CREDIT FROM CITY UNION BANK LTD IN FAVOUR OF THE SUPPLIER PAYABLE. THE ASSESSEE HAS PLACED THE BANK CERTIFICATE CONFIRMING THE ISSUANCE OF LET TER OF CREDIT ON BEHALF OF THE ASSESSEE TO THE FOREIGN SUPPLIER. HENCE THE PURCHASES MADE BY THE ASSESSEE CANNOT BE DOUBTED. DURING THE COURSE OF HEARING, THE LEARNED AR PRAYED FOR ONE MORE OPPORTUNITY TO BE PROVIDED TO ASSESSEE FOR EXPLAINING THE FACTS OF TH E CASE IN A BETTER FASHION FOR WHICH THE LEARNED DR ALSO FAIRLY CONCEDED. HENCE IN THES E CIRCUMSTANCES, WE DEEM IT FIT AND APPROPRIATE, IN THE INTEREST OF JUSTICE AND FAI R PLAY, TO SET ASIDE THIS ISSUE TO THE FILE OF THE LEARNED AO AND DECIDE THIS ISSUE AFRESH, IN ACCORDANCE WITH LAW. NEEDLESS TO MENTION THAT THE ASSESSEE BE GIVEN REASONABLE OPPOR TUNITY OF BEING HEARD. THE ASSESSEE IS ALSO AT LIBERTY TO FILE ADDITIONAL DOCU MENTS AND EVIDENCES IN SUPPORT OF ITS ITA NO. 2024/KOL/2009-C-AM M/S. UPKAR DISTRIBUTORS PVT. LTD., KOL. 5 CLAIM IN ORDER TO EXPEDITE THE COMPLETION OF ASSESS MENT PROCEEDINGS AT THE EARLIEST. ACCORDINGLY, THE GROUND NO. 2 (REVISED) RAISED BY T HE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 4. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE DISALLOWANCE OF DEPRECIATION ON BUILDING AMOUNTING TO RS. 4,09,574/ - COULD BE MADE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.1. THE ASSESSEE CLAIMED TO HAVE MADE AN ADDITION OF RS. 33,14,010/- TOWARDS BUILDING DURING THE ASSESSMENT YEAR UNDER APPEAL BU T NO EVIDENCE FOR THE SAME WAS PRODUCED BY THE ASSESSEE BEFORE THE LEARNED AO TO S UPPORT ITS CLAIM OF DEPRECIATION. HENCE THE LEARNED AO DISALLOWED THE DEPRECIATION CL AIMED THEREON AMOUNTING TO RS. 4,09,574/-WHICH WAS ALSO UPHELD BY THE LEARNED CIT( A). AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 3. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLO WANCE OF RS 4,09,574/- MADE BY THE A.O. ON ACCOUNT OF DEPRECIATION ON BUIL DING WITHOUT CONSIDERING THE FACT THAT THE SAID BUILDING HAS BEE N UTILISED FOR BUSINESS PURPOSE. 4.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE DISALLOWANCE OF DEPRECIATI ON HAS BEEN MADE BY THE REVENUE ONLY FOR WANT OF NECESSARY DOCUMENTS AND EVIDENCES FOR ADDITIONS TO BUILDING. DURING THE COURSE OF HEARING, THE LEARNED AR PRAYED FOR ONE MORE OPPORTUNITY TO BE PROVIDED TO ASSESSEE FOR EXPLAINING THE EVIDENCES B EFORE THE LEARNED AO FOR WHICH THE LEARNED DR ALSO FAIRLY CONCEDED. HENCE IN THESE CI RCUMSTANCES, WE DEEM IT FIT AND APPROPRIATE, IN THE INTEREST OF JUSTICE AND FAIRPLA Y, TO SET ASIDE THIS ISSUE TO THE FILE OF THE LEARNED AO AND DECIDE THIS ISSUE AFRESH, IN ACC ORDANCE WITH LAW. NEEDLESS TO MENTION THAT THE ASSESSEE BE GIVEN REASONABLE OPPOR TUNITY OF BEING HEARD. THE ITA NO. 2024/KOL/2009-C-AM M/S. UPKAR DISTRIBUTORS PVT. LTD., KOL. 6 ASSESSEE IS ALSO AT LIBERTY TO FILE ADDITIONAL DOCU MENTS AND EVIDENCES IN SUPPORT OF ITS CLAIM IN ORDER TO EXPEDITE THE COMPLETION OF ASSESS MENT PROCEEDINGS AT THE EARLIEST. ACCORDINGLY, THE GROUND NO. 3 (REVISED) RAISED BY T HE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. THE LAST GROUND TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE DISALLOWANCE U/S 14A OF THE ACT COULD BE MADE IN THE SUM OF RS. 2,00 0/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 5.1. THE LEARNED AO OBSERVED THAT THE ASSESSEE HAD EARNED EXEMPT INCOME IN THE FORM OF DIVIDEND OF RS. 2,00,000/- BUT NO DISALLOWANCE U /S 14A OF THE ACT WAS MADE BY THE ASSESSEE IN THE RETURN. THE LEARNED AO ACCORDINGLY DISALLOWED RS. 2,000/- TOWARDS SECTION 14A OF THE ACT WHICH WAS ALSO CONFIRMED BY THE LEARNED CIT(A). AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWIN G REVISED GROUND:- 4. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE A.O. I N MAKING DISALLOWANCE OF RS.2,0001-BY WRONGLY INVOKING THE PROVISIONS OF SEC. 14A. 5.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT DURING THE ASSESSMENT YEAR UND ER APPEAL, THOUGH PROVISIONS OF RULE 8D OF THE IT RULES COULD NOT BE MADE APPLICABL E, BUT DISALLOWANCE U/S 14A OF THE ACT HAS TO BE MADE AS IT IS INTRODUCED IN THE STATU TE WITH RETROSPECTIVE EFFECT FROM 1.4.1962 ONWARDS. THE DISALLOWANCE HAD TO BE MAD E ONLY ON AN ESTIMATED BASIS WITH REGARD TO THE EXPENDITURE INCURRED FOR THE PURPOSE OF EARNING TAX FREE INCOME. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS M/S R.R.SEN & BROTHERS P LTD IN GA NO. 3019 OF 2012 IN ITAT NO. 243 OF 201 2 DATED 4.1.2013 HAD HELD AS UNDER:- THE ASSESSEE DID NOT SHOW ANY EXPENDITURE INCURRE D BY HIM FOR THE PURPOSE OF EARNING THE MONEY WHICH IS EXEMPTED UNDER INCOME TA X. THE TRIBUNAL HAS ITA NO. 2024/KOL/2009-C-AM M/S. UPKAR DISTRIBUTORS PVT. LTD., KOL. 7 COMPUTED EXPENDITURE AT 1% OF SUCH DIVIDEND INCOME, WHICH, ACCORDING TO THEM, IS THE THUMB RULE APPLIED CONSISTENTLY. WE F IND NO REASON TO INTERFERE. THE APPEAL IS DISMISSED. WE FIND THAT 1% OF EXEMPT INCOME WORKS OUT TO RS. 2 ,000/- AND THAT IS THE FIGURE DISALLOWED BY THE LEARNED AO ALSO IN THE ASSESSMENT . HENCE WE DONT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE LOWER AUTHORITI ES IN THIS REGARD. ACCORDINGLY, THE GROUND NO. 4 (REVISED) IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 20 -01- 2016 1. . THE APPELLANT: M/S. UPKAR DISTRIBUTORS PVT. LTD C/ O M/S. PATRO & CO, CHARTERED ACCOUNTANT, BANDHABASELI, DAGARPARA, CHANDINICHOWK, CUTTACK 2 THE RESPONDENT- INCOME TAX OFFICER, IT WARD 8(3), KOLKATA. 3 / THE CIT, 4.THE CIT(A) 5 . DR, KOLKATA BENCH 6 . GUARD FILE . TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP SPS SD/- ( MAHAVIR SINGH, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE 20/ 01/2016 COPY OF THE ORDER FORWARDED TO:-