I.T.O Wd - 1(1),kolkata, Kolkata V. M/s Sanwaria Steel Pvt Ltd., Howrah

ITA 2131/KOL/2013

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1088 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 15-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANKAR HALDER
• Assessee Lawyers: S P DUTTA
• Keywords: Unexplained investment; Business income
• Section: 43B; 143(3); 40(a)(ia); 69; 145

Judgement Text

ITA NO. 2131/KOL/2013 A.Y. 2007-2008 M/S. SANWARIA STEEL PVT. LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ) AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 2131/KOL/2013 ASSESSMENT YEAR: 2007-2008 INCOME TAX OFFICER,................................ .................................APPELLANT WARD-1(1), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. SANWARIA STEEL PVT. LIMITED,.................. ......................RESPONDENT 134/54K, GIRISH GHOSH ROAD, BELUR MATH, HOWRAH-711 202 [PAN: AAHCS 7892 J] APPEARANCES BY: SHRI SANKAR HALDER, ADDL. CIT, SR. D.R. , FOR THE APPELLANT SHRI S.P. DUTTA, ADVOCATE, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : NOVEMBER 27, 2018 DATE OF PRONOUNCING THE ORDER : NOVEMBER 30, 2018 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ):- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXIV, KOLKATA DATED 29.04.2013 ON THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION OF RS.26,03,899/- U/S.69 ON ACCOUNT OF SUNDRY CREDITOR S IN SPITE OF THE FACTS THAT ASSESSEE COULD NOT ESTABLIS H THE AFORESAID CREDITS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.1,10,000/- U/S.69 ON ACCOUNT OF UNEXPLAINED INVESTMENT. ITA NO. 2131/KOL/2013 A.Y. 2007-2008 M/S. SANWARIA STEEL PVT. LIMITED 2 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.3,27,751/- ON ACCOUNT OF CURRENT LIABILITIES LIK E C- FORM AND CST PAYABLE OF RS.13,665/- IN SPITE OF THE FACTS THAT ASSESSEE COULD NOT ESTABLISH THE AFORESAID CRE DITS. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.62,49,021/- U/S.69 ON ACCOUNT OF INVESTMENT IN S TOCK FOR MAKING UNDISCLOSED SALES. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS.2,23,598/- ON ACCOUNT OF PRE-OPERATIVE EXPENSES. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS.96,000/- ON ACCOUNT OF WATCH & WARD EXPENSES U/S40(A)(IA). 7. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) HAS ERRED IN LAW MAKING OBSERVATION THAT NO ADDITIONS U/S.68 OR U/S.69 OF THE IT ACT COULD N OT BE MADE WHERE BOOKS OF ACCOUNTS HAS BEEN REJECTED U/S. 145 OF THE IT ACT AND PROFIT HAS BEEN ESTIMATED. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS RUNNING AN IRON ORE CRUSHER PLANT. THE RETURN OF INCOME FOR TH E YEAR UNDER CONSIDERATION WAS FILED BY IT ON 09.02.2008 DECLARI NG TOTAL INCOME OF RS.1,38,978/-. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER FROM THE RELEVANT FIGURES OF SALES, PURCHASES, EXPENSES AND SUNDRY DEBTORS AS DECLARED BY THE ASSESSEE THAT THERE WAS SOME UNDISCLOSED SALES. WHEN THE ASSESESE -COMPANY WAS REQUIRED BY THE ASSESSING OFFICER TO OFFER ITS EXPL ANATION IN THE MATTER, A STATEMENT OF ITS OWN TRADING, PROFIT & LOSS ACCOUNT WAS FILED BY THE ASSESSEE-COMPANY PROJECTING SALES OF RS.1,58,59,107 /- AND PURCHASES OF RS.65,64,622/- AS AGAINST THE SALES AND PURCHASES O F RS.36,578/- AND RS.43,250/- RESPECTIVELY DISCLOSED IN THE RETURN OF INCOME. IN THE TRADING AND PROFIT & LOSS ACCOUNT FILED DURING THE COURSE O F ASSESSMENT ITA NO. 2131/KOL/2013 A.Y. 2007-2008 M/S. SANWARIA STEEL PVT. LIMITED 3 PROCEEDINGS, GROSS PROFIT RATE WAS SHOWN BY THE ASS ESSEE AT 54% WHILE THE NET PROFIT WAS SHOWN AT 20%. THEREAFTER THE ASS ESSEE-COMPANY AGAIN FILED ANOTHER TRADING AND PROFIT & LOSS ACCOUNT SHO WING GROSS PROFIT RATE OF 65% AND NET PROFIT RATE OF 21%. KEEPING IN VIEW THESE THREE DIFFERENT ACCOUNTS FILED BY THE ASSESSEE, WHICH WERE NOT IN C ONFORMATORY WITH EACH OTHER, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND DETERMINED THE BUSINESS INCOME OF THE ASSESSEE BY APPLYING A NET PROFIT RATE OF 30%. HE ACCORDINGLY ESTIMATED THE BUSINESS INCOME OF THE ASSESSEE AT RS .47,57,732/-. HE ALSO TREATED THE DIFFERENCE BETWEEN THE OPENING STOCK AN D CLOSING STOCK AMOUNTING TO RS.62,49,021/- AS THE CAPITAL INTRODUC ED BY THE ASSESSEE FOR THE PURPOSE OF UNACCOUNTED BUSINESS AND ADDED THE S AME TO THE TOTAL INCOME OF THE ASSESSEE UNDER SECTION 69 OF THE ACT. HE FURTHER MADE THE FOLLOWING ADDITIONS TO THE TOTAL INCOME OF THE ASSE SSEE:- (I) DIFFERENCE IN THE BALANCE OF SUNDRY CREDITOR RS.26,03,899/ - (II) DIFFERENCE IN THE LOANS AND ADVANCES ADDED UNDER SECTION 69 RS. 1,10,000/ - (III) DISALLOWANCE OF SALES TAX PAYABLE UNDER SECTION 43B RS. 3,27,751/ - (IV) DISALLOWANCE OF PRE- OPERATIVE EXPENSES RS. 2,33,598/ - (V) DISALLOWANCE OF WARD AND WATCH EXPENSES UNDER SECTION 40(A)(IA) RS. 96,000/ - ACCORDINGLY THE TOTAL INCOME OF THE ASSESSEE FOR TH E YEAR UNDER CONSIDERATION WAS DETERMINED BY THE ASSESSING OFFIC ER AT RS.1,20,04,470/- IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 29.12.2009. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEF ORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD . CIT(APPEALS) UPHELD ITA NO. 2131/KOL/2013 A.Y. 2007-2008 M/S. SANWARIA STEEL PVT. LIMITED 4 THE ACTION OF THE ASSESSING OFFICER IN REJECTING TH E BOOKS OF ACCOUNT OF THE ASSESSEE AND DETERMINING ITS BUSINESS INCOME ON EST IMATED BASIS. HE, HOWEVER, HELD THAT THE ESTIMATE MADE BY THE ASSESSI NG OFFICER BY APPLYING THE NET PROFIT RATE OF 30% WAS ON HIGHER S IDE AND FOUND IT FAIR AND REASONABLE TO RESTRICT THE SAME TO 25%. AS REGA RDS THE OTHER ADDITIONS MADE BY THE ASSESSING OFFICER TO THE TOTA L INCOME OF THE ASSESSEE, THE LD. CIT(APPEALS) HELD THAT THE SAME W ERE NOT SUSTAINABLE WHEN THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJE CTED AND THE INCOME OF THE ASSESSEE WAS DETERMINED ON ESTIMATED BASIS B Y APPLYING NET PROFIT RATE. TO ARRIVE AT THIS CONCLUSION, HE RELIED ON TH E DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF INDWELL CO NSTRUCTIONS VS.- CIT [232 ITR 776] AND THAT OF THE HONBLE ALLAHABAD HIG H COURT IN THE CASE OF CIT VS.- BANWARILAL BANSHIDHAR [229 ITR 229]. AGGR IEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE HAS PREFERRED THI S APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED BY THE ASSESS ING OFFICER AND THE INCOME OF THE ASSESSEE WAS DETERMINED ON ESTIMATED BASIS BY APPLYING A NET PROFIT RATE. ALTHOUGH THE LD. CIT(APPEALS) REDU CED THE ESTIMATE OF ASSESSEES INCOME AS MADE BY THE ASSESSING OFFICER BY APPLYING THE NET PROFIT RATE OF 25% AS AGAINST THE NET PROFIT RATE O F 30% ADOPTED BY THE ASSESSING OFFICER, THE ACTION OF THE ASSESSING OFFI CER IN REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE WAS UPHELD BY HIM. AFTER ESTIMATING THE BUSINESS INCOME OF THE ASSESSEE AT A SUBSTANTIALLY HIGHER FIGURE, THE ASSESSING OFFICER PROCEEDED FURTHER TO MAKE VARIOUS OTHER ADDITIONS ON THE BASIS OF BOOKS OF ACCOUNT OF THE ASSESSEE, WHIC H WERE REJECTED BY HIM. IN THE CASE OF CIT VS.- BANWARILAL BANSHIDHAR (SUP RA) RELIED UPON BY THE LD. CIT(APPEALS) IN HIS IMPUGNED ORDER WHILE DELETI NG THESE OTHER ADDITIONS MADE BY THE ASSESSING OFFICER, THE INCOME OF THE ASSESSEE WAS DETERMINED BY APPLYING A GROSS PROFIT RATE AND A FU RTHER DISALLOWANCE WAS ITA NO. 2131/KOL/2013 A.Y. 2007-2008 M/S. SANWARIA STEEL PVT. LIMITED 5 MADE ON ACCOUNT OF PURCHASES. HONBLE ALLAHABAD HIG H COURT HELD THAT THE DISALLOWANCE SO MADE BY THE ASSESSING OFFICER ON AC COUNT OF PURCHASES WAS NOT MAINTAINABLE BY OBSERVING THAT WHEN THE GRO SS PROFIT RATE WAS APPLIED, THAT WOULD TAKE CARE OF EVERYTHING AND THE RE WAS NO NEED FOR THE ASSESSING OFFICER TO MAKE SCRUTINY OF THE AMOUNT IN CURRED ON THE PURCHASES BY THE ASSESSEE. TO THE SIMILAR EFFECT IS THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF IN DWELL CONSTRUCTIONS VS.- CIT (SUPRA) RELIED UPON BY THE LD. CIT(APPEALS ) IN HIS IMPUGNED ORDER, WHEREIN IT WAS HELD THAT NO DISALLOWANCE COU LD BE MADE ON THE BASIS OF REJECTED BOOKS OF ACCOUNT. IT WAS HELD THA T IF AT ALL THERE WAS ANY DEFECT OR DEFICIENCY WARRANTING A DISALLOWANCE, THE SAME WAS TAKEN INTO CONSIDERATION WHILE ESTIMATING THE BUSINESS INCOME OF THE ASSESSEE BY APPLYING A NET PROFIT RATE ON TOTAL SALES AND NO SU CH DISALLOWANCE OR ADDITION COULD BE MADE SEPARATELY. KEEPING IN VIEW THE RATIO OF BOTH THESE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE LD . CIT(APPEALS) IN HIS IMPUGNED ORDER, WE ARE OF THE VIEW THAT THE ADDITIO NS MADE BY THE ASSESSING OFFICER ON THE BASIS OF REJECTED BOOKS OF ACCOUNT OVER AND ABOVE THE BUSINESS INCOME ESTIMATED BY HIM BY APPLY ING A NET PROFIT RATE WERE NOT SUSTAINABLE AND THE LD. CIT(APPEALS) WAS F ULLY JUSTIFIED IN DELETING THE SAME. IN THAT VIEW OF THE MATTER, WE U PHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) AND DISMISS THIS APPE AL OF THE REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 30, 2018. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER VICE -PRESIDENT (KZ) KOLKATA, THE 30 TH DAY OF NOVEMBER, 2018 COPIES TO : (1) INCOME TAX OFFICER, WARD-1(1), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 ITA NO. 2131/KOL/2013 A.Y. 2007-2008 M/S. SANWARIA STEEL PVT. LIMITED 6 (2) M/S. SANWARIA STEEL PVT. LIMITED, 134/54K, GIRISH GHOSH ROAD, BELUR MATH, HOWRAH-711 202 (3) COMMISSIONER OF INCOME TAX (APPEALS)-XXIV, KO LKATA, (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.