Basanta Jena, Bhubaneswar V. ITO, Bhubaneswar

ITA 214/CTK/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2670 (ITAT-CUTTACK)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 05-04-2013
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: C R JENA
• Keywords: Business income; Income from undisclosed sources; Condonation of delay; Reassessment proceedings

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRIK.K.GUPTA,ACCOUNTANT MEMBER. /AND , HONBLE SHRI GEORGE MATHAN, JUDICIAL MEMBER / I.T.A.NO S . 214 AND 215/CTK/2013 / ASSESSMENT YEAR S 2008 - 09 AND 2009 - 10 SRI BSANTA JENA, PLOT NO.3095, KOLATHIA,KHANDAGIRI,BHUBANESWAR 751 019 PAN:AFGPJ 3662 N - - - VERSUS - INCOME - TAX OFFICER, WARD 1(3), BHUBANESWAR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI C.R.JENA, AR / FOR THE RESPONDENT: / SHRI N.K.NEB, SR.DR / DATE OF HEARING: 04.06.2013 / DATE OF PRONOUNCEMENT: 04.06.2013 / ORDER . . , , SHRIK.K.GUPTA,ACCOUNTANT MEMBER. THESE APPEALS FILED BY THE ASSESSEE ARE BARRED BY LIMITATION AS NOTED BY THE REGISTRY RESPECTIVELY BY 196 DAYS FOR WHICH PETITION FOR CONDONATION OF DELAY HAS BEEN PLACED ON RECORD AND PERUSED. THE LEARNED DR HAS RAISED NO OBJECTION THEREOF AFTER PERUSING THE PETITION FOR ADM ITTING THE APPEALS FOR HEARING WHICH DELAY IS CONDONED AND THE APPEALS ARE ADMITTED FOR HEARING. 2. THESE APPEALS FOR THE ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 ARE ON A COMMON ISSUE WITH RESPECT TO THE ESTIMATION OF INCOME BY THE ASSESSING OFFICER IN THE RE SPECTIVE AYS WHEN THE ASSESSEE DERIVING INCOME FROM EXECUTION OF WORKS CONTRACT FILED RETURNS OF INCOME WERE SUBJECTED TO REASSESSMENT PROCEEDINGS U/S.147/148 ON THE BASIS OF DISCREPANCY FOUND IN INCOME TAX APPELLATE TRIBUNAL, CUTTACK B ENCH, CUTTACK 2 I.T.A.NOS.214 AND 215/CTK/2013 THE GROSS RECEIPTS NOTED IN THE AS - 26 FORM VIS - - VIS THE CLA IM OF CREDIT FOR TAX DEDUCTED AT SOURCE CERTIFICATES CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER THEREAFTER IN THE REASSESSMENT PROCEEDINGS SOUGHT TO VERIFY THE SUNDRY CREDITORS FOR BOTH THE AYS WHEN ON THE BASIS OF THE ASSESSEES INABILITY TO EXPLAIN THE DISCREPANCIES PROPOSED TO INCREASE THE NET PROFIT FROM THE GROSS RECEIPTS AS RETURNED BY THE ASSESSEE AT 8% HOLDING THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNT AS REQUIRED U/S.44AA.HE PROPOSED TO ENHANCE THE INCOME FOR THE AYS 2008 - 09 DECLARED BY THE ASSESSEE AT RS.2,63,195 TO RS.7,83,023 WHEN HE SOUGHT TO CONSIDER THE UNEXPLAINED LIABILITY ON ACCOUNT OF SUNDRY CREDITORS AMOUNTING TO RS.5.03,063 FOR TAXATION . FOR THE ASSESSMENT YEAR 2009 - 10 THE ASSESSING OFFICER ESTIMATED THE INCOME AT 8% ON THE ASSESSEE DECLARING INCOME OF RS.3,83,184 TO RS.13,2,721 WHEN HE PROPOSED TO TAX UNEXPLAINED LIABILITY ON ACCOUNT OF SUNDRY CREDITORS AMOUNTING TO RS.6,85,654 FOR TAXATION . ACCEPTING THE ESTIMATION AT A HIGHER RATE AS RETURNED BY THE ASSESSEE, THE ASSESSEE OBJECTED BEFORE THE FIRST APPELLATE AUTHORITY IN APPEAL OF BRINGING TO TAX THE SUNDRY CREDITORS BY THE ASSESSING OFFICER FOR BOTH THE AYS WHEN FOR THE ASSESSMENT YEAR 2009 - 10 THE ASSESSING OFFICER HAD ALSO HELD INCOME FROM OTHER SOURCE S AMOUNTING TO RS.15,070 TO BE TAXED SEPARATELY WAS CONSIDERED BY THE LEARNED CIT(A) AS TO HOW THIS SEPARATE ADDITION COULD BE MADE WAS DIRECTED BY THE LEARNED CIT(A) TO BE VERIFIED WHETHER WAS GENERATED FROM THE INTEGRATED BUSINESS OF THE ASSESSEE CONTRACT OR WHEN THE DEPOSITS EARNING INTEREST WERE HELD BY THE CONTRACTEES WHETHER COULD FORM PART OF 8% ESTIMATION. THE ASSESSEE IN HIS APPEAL WITH RESPECT TO THE SUNDRY CREDITORS AS CONFIRMED BY THE LEARNED CIT(A) AS HE HAD RELIED ON CASE LAWS INCOME TAX APPELLATE TRIBUNAL, CUTTACK B ENCH, CUTTACK 3 I.T.A.NOS.214 AND 215/CTK/2013 WHICH INDICATE TH AT THERE WAS NO PROHIBITION FOR BRINGING TO TAX AMOUNTS AS CASH CREDIT BY WAY OF A SEPARATE ADDITION EVEN WHEN THE BUSINESS INCOME IS ENHANCED. 3. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED THAT THE LEARNED CIT(A) MISPLACED THE INTERPRETATION OF THE DECISION OF JUDICIAL FORUM AS MAY BE PERUSED , INSOFAR AS THE FACTS CLEARLY INDICATE THAT THEY WERE NOT CASH CREDITS BUT WERE SUNDRY CREDITORS FOR EXPENSES WHICH PURCHASES WERE ACCOUNTED FOR IN THE PROFIT AND LOSS ACCOUNT ON BEHALF O F THE CONTRACTEES WHEN THE CONTRACTEES REIMBURSED THESE AMOUNTS AND THE INCOME HAS BEEN SHOWN AS GROSS RECEIPTS HAVE ALREADY BEEN RENDERED TO TAX @8%. THE LEARNED CIT(A) THEREFORE MISDIRECTED HIMSELF TO HOLD THAT THESE SUNDRY CREDITORS WERE NOT PART OF THE BOOKS OF ACCOUNT FOR REJECTION THEREOF ARE TO BE SEPARATELY CONSIDERED FOR ADDITION. HE POINTED OUT THAT ASSUMING BUT NOT ACCEPTING THESE AMOUNTS TO BE HELD AS CASH CREDITS ARE LESS THAN THE ENHANCEMENT MADE BY THE ASSESSING OFFICER O N THE VERY FACT THAT THE INCOME SO ENHANCED IS TO BE HELD AS CASH CREDITS IN THE HANDS OF THE ASSESSEE ON THE REJECTION OF BOOKS OF ACCOUNT AND THE ACCEPTANCE OF THE CREDITS ALSO CANNOT GO HAND IN HAND. HE THEREFORE, PRAYED THAT THESE TWO ADDITIONS ON ACCOUNT OF SUNDRY CREDITO RS , ALREADY FORMING PART OF THE INCOME HELD BY THE ASSESSEE EITHER IN THE FORM OF STOCK ON THE BASIS OF REIMBURSEMENT BY THE CONTRACTEES COULD NOT BE SUBJECT TO TAX AS NOTED BY THE LEARNED CIT(A) MAY KINDLY BE DIRECTED TO BE DELETED. HOWEVER, FOR THE ASSES SMENT YEAR 2009 - 10 HE SUPPORTED THE DIRECTION OF THE LEARNED CIT(A) TO THE ASSESSING OFFICER THAT THE NEXUS FOR GENERATING THIS INCOME OTHER THAN FROM BUSINESSWAS TO BE VERIFIED BY THE ASSESSING OFFICER WHETHER INCOME TAX APPELLATE TRIBUNAL, CUTTACK B ENCH, CUTTACK 4 I.T.A.NOS.214 AND 215/CTK/2013 COULD FORM PART OF THE ESTIMATION OR TO BE S EPARATELY TAXED AS INCOME FROM OTHER SOURCES. 4. THE LEARNED DR SUPPORTED THE IMPUGNED ORDER OF THE AUTHORITIES BELOW FOR HIS PART OF SUBMISSIONS. HE POINTED OUT THAT THE LAW IS CLEAR THAT SUNDRY CREDITORS CANNOT BE CONSIDERED AS PART AND PARCEL OF THE EST IMATION OF INCOME INSOFAR AS THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUGGESTED THAT THE ENHANCEMENT IN THE INCOME TAKES CARE OF THE SUNDRY CREDITORS SO BROUGHT TO TAX ACCEPTABLE TO HIM WILL BE DOUBLE TAXATION. HE THEREFORE, PRAYED THAT THE ORDER OF THE LE ARNED CIT(A) BE UPHELD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO FIND JUSTIFICATION IN THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE ON THE COMMON GROUND RELATING TO BRI NGING TO TAX SUNDRY CREDITORS OVER AND ABOVE THE ENHANCEMENT ACCEPTABLE TO THE ASSESSEE APPELLANT FOR BOTH THE AYS. THE FACTS CLEARLY INDICATE THAT THE AMOUNT SOUGHT TO BE TAXED AS SUNDRY CREDITORS ARE LESS THAN THE AMOUNT OF INCOME ON ENHANCEMENT AS ESTIM ATION. EVEN OTHERWISE THE FACT REMAINS THAT REJECTION OF BOOKS CANNOT BE TAKEN AS AN ADVANTAGE TO THE ASSESSEE CLAIMING EXPENDITURE WHICH REMAIN PAYABLE AT THE END OF THE FY AS A BOGUS LIABILITY FOR TAXATION AS ASSESSEES OWN FUND S PLOUGHED BACK AS CASH CREDITS. THE LEARNED DR HAS NOT BEEN ABLE TO POINT OUT IN GIVING A FINDING AS NOTED BY THE LEARNED CIT(A) AS TO HOW THE BOOKS OF ACCOUNT REJECTED WHETHER COULD INDICATE ANY UNACCOUNTED INCOME IN THE HANDS OF THE ASSESSEE EITHER IN THE FORM OF CLOSING STOCK OR IN THE FORM OF CASH IN HAND OR BANK WHICH ANY BUSINESS MAN WOULD BE OBLIGE D TO HOLD AS TAXABLE INCOME. THEREFORE, IT WAS THE ASSESSING OFFICER AND THE LEARNED INCOME TAX APPELLATE TRIBUNAL, CUTTACK B ENCH, CUTTACK 5 I.T.A.NOS.214 AND 215/CTK/2013 CIT(A) HOLDING A VIEW THAT A SUNDRY CREDITOR HAS TO BE EXPLAINED BY THE ASSESSEE WHEN I N THE SAME BREATH TH E Y ARE ACCEPTING THE PURCHASES TO THE EXTENT OF ACCEPTING 92% OF THE EXPENDITURE FOR EARNING THE INCOME IN THE FORM OF GROSS RECEIPTS. IN OTHER WORDS, THE 92% HAVING EXPLAINED AS EXPENDITURE TO BE INCURRED CANNOT AGAIN BE CONSIDERED FOR TAXATION OF SUNDRY CREDITORS WHICH BUSINESS TRANSACTION IS AMOUNTS PAYABLE ASSUMING BUT NOT ACCEPT THAT THEY ARE BOGUS AND ARE NOT HELD AS CASH, BANK DEPOSITS OR CLOSING STOCK IN THE BUSINESS. THIS CLEARLY INDICATES THAT THE ENHANCEMENT WAS ACCEPTABLE TO THE ASSESSEE NOT BECAUSE THE SUNDRY CREDITORS WERE TO BE EXPLAINED OVER AND ABOVE FOR TAXATION AGAIN. WE DO FIND MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE CASE LAWS RELIED UPON BY THE FIRST APPELLATE AUTHORITY DO NOT RELATE T O THE FACTS AS HAVE BE EN BROUGHT ON RECORD BY THE ASSESSING OFFICER AND FURTHER MORE HAVE NOT BEEN CONTROVERTED BY THE LEARNED DR AS OF NOW. THIS COMMON GROUND BY THE ASSESSEE IN BOTH THE AYS, IS THEREFORE ALLOWED AND THE ADDITION ON ACCOUNT OF SUNDRY CRED ITORS IS DIRECTED TO BE DELETED IN BOTH THE AYS. WITH RESPECT TO THE DIRECTION TO THE ASSESSING OFFICER BY THE LEARNED CIT(A) TO VERIFY WHETHER THE INTEREST INCOME AMOUNTING TO RS.15,070 COULD BE TAXED AS INCOME FROM OTHER SOURCES FOR THE ASSESSMENT YEAR 2009 - 10 IS TO BE VERIFIED INSOFAR AS THE LEARNED CIT(A) NOTED THAT THE ASSESSING OFFICER HAS NOT CLARIFIED AS WHY IT SHOULD BE BROUGHT TO TAX SEPARATELY BEING INTEGRAL PART OF THE BUSINESS OF THE ASSESSEE WHICH THE ASSESSING OFFICER HAS ESTIMATED AT 8%. W E DO NOT FIND ANY INFIRMITY IN THE DIRECTION OF THE LEARNED CIT(A). INCOME TAX APPELLATE TRIBUNAL, CUTTACK B ENCH, CUTTACK 6 I.T.A.NOS.214 AND 215/CTK/2013 6. IN THE RESULT, THE APPEAL FOR THE ASSESSMENT YEAR 2008 - 09 IS ALLOWED AND THAT FOR THE ASSESSMENT YEAR 2009 - 10 IS PARTLY ALLOWED. SD/ - SD/ - ( ) , (GEORGE MATHAN ),JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 04.06.2013 (PRONOUNCED IN OPEN COURT) - COPY OF THE ORDER FORWARDED TO: 1. / THE APPELLANT : SRI BSANTA JENA, PLOT NO.3095, KOLATHIA,KHANDAGIRI,BHUBANESWAR 751 019 2 / THE RESPONDENT: INCOME - TAX OFFICER, WARD 1(3), BHUBANESWAR. 3. / THE CIT, 4. ( ) / THE CIT(A), 5. / DR, CUTTACK BENCH 6. GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 04.06.2013 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING ME MBER 04.06.2013 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHIC H THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S 05.06.2013 . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 05.06.2013 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER .. ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY.