Shri Suman Kar, Durgapur V. ITO, Ward - 1(2), Durgapur, Durgapur

ITA 2186/KOL/2010

• Counselvise Citation: 218623514 RSA 2010
• Duration Of Justice: 4 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 09-12-2010
• Court: TRIBUNAL
• Department Lawyers: NILOY BARAN SOM
• Keywords: Bogus purchase; Unexplained cash credit; Rejection of books of accounts; Presumptive income; Business income; Corroborative evidences
• Section: 68; 143(3); 133(6)

Judgement Text

IT.A NOS. 21868 & 2140/ KOL/2010- B-AM- SRI SUMAN KAR 1 IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, K OLKATA BEFORE : SHRI M. BALAGANESH, ACCOUNTANT MEMBER, AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A NO. 2186/KOL/2010 A.Y 2007-08 SRI SUMAN KAR VS. I.T.O, WARD 1(2), DURGAPUR PAN: ALHPK7273P (APPELLANT/ASSESSEE) (RE SPONDENT/DEPARTMENT) I.T.A NO. 2140/KOL/2010 A.Y 2007-08 I.T.O, WARD 1(2), DURGAPUR VS. SRI SUMAN KAR (APPELLANT/DEPARTMENT) ( RESPONDENT/ASSESSEE) FOR THE APPELLANT/ASSESSEE: SHRI MIHIR KR. BANDOPADHYAY, RETD IRS, LD.AR FOR THE RESPONDENT/DEPARTMENT : SHRI N ILOY BARAN SOM, JCIT, LD.SR.DR DATE OF HEARING: 29-10-2015 DATE OF PRONOUNCEMENT: 18 -11-2015 ORDER SHRI M.BALAGANESH, AM THESE APPEALS OF THE ASSESSEE AND REVENUE ARISE OU T OF THE ORDER OF THE LEARNED CIT(A), DURGAPUR IN APPEAL NO. 51/CIT(A)/D GP/2009-10 DATED 28-09- 2010 FOR THE ASST YEAR 2007-08 PASSED AGAINST THE O RDER OF ASSESSMENT FRAMED BY THE LEARNED AO U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). IT.A NOS. 21868 & 2140/ KOL/2010- B-AM- SRI SUMAN KAR 2 2. THE ISSUES INVOLVED IN ASSESSEE AS WELL AS THE DEPARTMENTS APPEAL ARE IDENTICAL IN NATURE AND HENCE THEY ARE DISPOSED OF F TOGETHER BY WAY OF A COMMON ORDER FOR THE SAKE OF CONVENIENCE. ISSUE I ADDITION MADE U/S 68 OF THE ACT IN RESPEC T OF LOAN RECEIVED FROM FATHER RS. 2,50,000/- AND LOAN RECEIVED FROM MOTHER RS. 1,50,000/- BY THE ASSESSEE FOR HIS BUSINESS PURPOSE S 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE IS A RETAILER AND WHOLE SALE TRADER OF COMPUTER AND OTHER ACCESSORIES IN DURGAPU R. DURING THE ASSESSMENT YEAR UNDER APPEAL, HE BORROWED RS. 2,50,000/- FROM HIS FATHER AND RS. 1,50,000/- FROM HIS MOTHER FOR THE PURPOSE OF HIS BUSINESS. THE LEARNED AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS CONFRONTED THE ASS ESSEE AS TO WHY THE SAID LOANS RECEIVED SHOULD NOT BE TREATED AS UNEXPLAINED CASH CREDIT AND TREAT THE SAME AS INCOME OF THE ASSESSEE. IN RESPONSE TO THA T, THE ASSESSEE STATED HIS FATHER SHRI. MALAYENDRA KUMAR KAR ( A RETIRED GOVER NMENT SCHOOL TEACHER) HAD BORROWED LOAN FROM UNITED BANK OF INDIA TOBIN ROAD BRANCH, CALCUTTA, TO THE TUNE OF RS. 2,70,000/- ON 24.11.2006 AGAINST THE FI XED DEPOSIT OF RS. 3 LACS HELD BY HIM IN THE SAID BRANCH AND OUT OF THE SAME, ISSU ED A DEMAND DRAFT FOR RS. 2,50,000/- ON 25.11.2006 IN FAVOUR OF DURGAPUR MUNI CIPAL CORPORATION FOR AND ON BEHALF OF THE BUSINESS PURPOSES OF THE ASSESSEE HEREIN. AS FAR AS THE LOAN FROM MOTHER TO THE TUNE OF RS. 1,50,000/- , THE ASS ESSEE STATED HIS MOTHER SMT.GITA RANI KAR HAD ADVANCED HIM CASH LOAN OUT OF HER RETIREMENT BENEFITS. THIS LOAN WAS UTILIZED FOR PURCHASE AN ASSET AT SUH ATTA MALL, CITY CENTRE WHICH IS ADMITTEDLY FOR THE PURPOSE OF BUSINESS OF THE AS SESSEE. THE LEARNED AO DISBELIEVED THE RECEIPT OF SAID LOANS AND ADDED THE SAME U/S 68 OF THE ACT IN THE ASSESSMENT AS UNEXPLAINED CASH CREDIT. ON FIRST AP PEAL, THE LEARNED CITA ACCEPTED THE LOAN FROM FATHER TO THE TUNE OF RS. 2, 50,000/- AS GENUINE AND UPHELD IT.A NOS. 21868 & 2140/ KOL/2010- B-AM- SRI SUMAN KAR 3 THE ADDITION MADE TOWARDS LOAN RECEIVED FROM MOTHER TO THE TUNE OF RS. 1,50,000/- AS THE CONFIRMATION FILED BY THE MOTHER DOES NOT CONTAIN THE FIGURE AND HENCE CANNOT BE CONSTRUED AS GENUINE. AGGRIEV ED, BOTH THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US ON THE FOLLO WING GROUNDS OF APPEAL:- ASSESSEES APPEAL IN ITA NO. 2186 / KOL /2010 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) DURGAPUR ERRED IN CONFIRMING THE ADDITION U/S. 68 OF A SUM OF RS.1,50,000/- REPRESENTING LOANS TAKEN BY TH E APPELLANT FROM HIS MOTHER WHO WAS A SENIOR TEACHER( RANK:- SH IFT-IN- CHARGE) IN A SCHOOL RUN BY DURGAPUR STEEL PLANT UND ER STEEL AUTHORITY OF INDIA LTD- A GOVT. OF INDIA UNDERTAKIN G. REVENUES APPEAL IN ITA NO. 2140 / KOL /2010 A. THAT AS FAR AS FACTS AND CIRCUMSTANCES OF THE CASE IS CONCERNED, LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWING RELIEF AG AINST ADDITION MADE IN RESPECT OF CLAIMED LOAN AMOUNT RECEIVED FRO M THE FATHER OF THE ASSESSEE AMOUNTING TO RS.250000, PARTICULARL Y UNDER THE CIRCUMSTANCES WHEN THE ASSESSEE FAILED TO ESTABLIS H CORROBORATING REFLECTION OF THE IMPUGNED TRANSACTION IN THE BANK STATEMENT MAINTAINED BY HIS FATHER AS MENTIONED IN THE REMAND REPORT. B. THAT AS FAR AS FACTS AND CIRCUMSTANCES OF THE CAS E, LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS .150000 IN LIEU OF INVOKING OF PENAL PROVISION PURSUANT TO SEC. 271D CONSIDERING THE CIRCUMSTANCES OF THE CASE WHEN ACCEPTING OF CAS H LOAN AMOUNTING TO RS.150000 FROM THE MOTHER OF THE ASSES SEE WAS ADMITTEDLY ESTABLISHED IN THE INSTANT ORDER PASSED BY LD. CIT(A). 3.1. THE LEARNED AR ARGUED THAT IN RESPECT OF LOA N RECEIVED FROM MOTHER , THAT SHE IS A RETIRED SCHOOL TEACHER AND HAD WORKED AS A SENIOR TEACHER IN SCHOOL RUN BY STEEL AUTHORITY OF INDIA LTD (SAIL) IN DURGAPUR AS SHIFT-IN-CHARGE WHICH IS A SENIOR RANK POSITION IN THAT SCHOOL AND HENCE THE C REDITWORTHINESS OF THE MOTHER TO ADVANCE THE LOAN TO THE ASSESSEE CANNOT BE DOUBT ED. HE FURTHER ARGUED THAT IT.A NOS. 21868 & 2140/ KOL/2010- B-AM- SRI SUMAN KAR 4 THE CONFIRMATION FILED BY THE MOTHER CLEARLY STATED THE SOURCES OF ADVANCING THE LOANS TOGETHER WITH THE PURPOSE OF THE LOAN GIVEN T O THE ASSESSEE. HE FURTHER ARGUED THAT THE ASSESSEE IS THE ONLY SON OF HIS MOT HER AND THE ASSESSEE IS A POST GRADUATE STUDENT OF MSC (HONS.) CHEMISTRY HAVING SU FFICIENT SOFTWARE KNOWLEDGE AND DESPITE BEING A BRIGHT STUDENT, COULD NOT SECURE A JOB TO TAKE CARE OF HIMSELF AND HENCE HAD TO FORCIBLY GET INTO THE B USINESS. HE FURTHER STATED THAT IN THE PLACE LIKE DURGAPUR WHICH IS DOMINATED BY SA IL , IT IS VERY DIFFICULT FOR A BEGINNER TO SET UP HIS BUSINESS UNLESS HE IS FLUSHE D WITH THE REQUIRED FUNDS TO DO SO. IN THIS BACKGROUND, THE ASSESSEE CHOSE TO DRAW LOAN FROM HIS MOTHER TO THE TUNE OF RS. 1,50,000/- TO ENABLE HIMSELF TO ESTABL ISH HIS BUSINESS IN A COMPETITIVE LOCALITY LIKE DURGAPUR. IN VIEW OF TH ESE FACTS, HE ARGUED THAT GOING BY THE CAPACITY OF THE SENIOR RANK OF THE MOTHER AN D IN VIEW OF THE SMALLNESS OF THE AMOUNT INVOLVED HEREIN, GOING BY THE BACKGROUN D OF THE ASSESSEE AS STATED SUPRA, IDENTITY AND GENUINITY OF THE TRANSACTION IS PROVED BEYOND DOUBT BY THE CONFIRMATION FILED BY THE ASSESSEES MOTHER, PRAYED THAT THE THREE ESSENTIAL INGREDIENTS ARE DULY SATISFIED BY THE ASSESSEE AND HENCE NO ADDITION COULD BE MADE U/S 68 OF THE ACT FOR THE SAME. WITH REGARD TO LOAN FROM FATHER, HE ARGUED THAT THE ASSESSEES FATHER HAD RECEIVED A LOAN FROM UNITED BANK OF INDIA AS STATED ABOVE ON 24.11.2006 TO THE TUNE OF RS. 2,70,000/- AND HAD ADVANCED A SUM OF RS . 2,50,000/- BY DEMAND DRAFT TO ASSESSEE AND HENCE THE IDENTITY, GENUINITY AND CREDITWORTHINESS OF FATHER IS PROVED BEYOND DOUBT AND THERE CANNOT BE ANY ADDI TION U/S 68 OF THE ACT FOR THE SAID RECEIPT. 3.2. IN RESPONSE TO THIS, THE LEARNED DR STATED T HAT THE ASSESSEE HAD ORIGINALLY STATED BEFORE THE LEARNED AO THAT THE ENTIRE LOAN O F RS. 4 LACS WAS RECEIVED ONLY IT.A NOS. 21868 & 2140/ KOL/2010- B-AM- SRI SUMAN KAR 5 FROM HIS FATHER. BUT DURING FIRST APPELLATE PROCEE DINGS, THE ASSESSEE CHANGED HIS STAND THAT RS. 2,50,000/- WAS RECEIVED FROM FATHER AND RS. 1,50,000/- WAS RECEIVED FROM HIS MOTHER AS LOAN. IN RESPECT OF LO AN RECEIVED FROM FATHER, HE ARGUED THAT THE BANK STATEMENT EVIDENCING THE RECEI PT OF LOAN WAS NOT SUBMITTED BEFORE THE LEARNED AO EVEN DURING THE REMAND PROCEE DINGS BUT HOWEVER THE LEARNED CITA SOUGHT TO GIVE RELIEF BASED ON THE EVI DENCES AVAILABLE ON RECORD. IN RESPECT OF LOAN RECEIVED FROM MOTHER BY THE ASSE SSEE, THE SAME IS RECEIVED ONLY IN CASH AND CREDITWORTHINESS OF THE MOTHER IS NOT PROVED BY THE ASSESSEE EVENTHOUGH THE IDENTITY AND GENUINITY IS PROVED BY WAY OF CONFIRMATION FROM THE MOTHER. HE FURTHER ARGUED THAT IN THE SAID CON FIRMATION, NO FIGURE IS MENTIONED BY THE ASSESSEES MOTHER AND HENCE THE SA ME CANNOT BE TAKEN AS SACROSANCT. MOREOVER, THERE IS NO SCOPE FOR FURTHE R VERIFICATION BY THE REVENUE AS BOTH THE FATHER AND MOTHER OF THE ASSESSEE ARE N OT INCOME TAX ASSESSES AND ACCORDINGLY, HE PLEADED FOR CONFIRMATION OF THE ORD ER OF THE LEARNED AO. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. ADMITTEDLY, THE LOANS RECEIVED BY THE ASSE SSEE FROM HIS FATHER AND MOTHER WERE UTILIZED ONLY FOR PURCHASING A SHOP AT SUHATTA MALL, CITY CENTRE ADMITTEDLY FOR THE PURPOSE OF BUSINESS. ON THIS FA CT THERE IS NO DISPUTE. WITH REGARD TO THE LOAN RECEIVED FROM FATHER TO THE TUNE OF RS. 2,50,000/- , WE FIND THAT ALL THE THREE INGREDIENTS OF SECTION 68 NAMELY IDENTITY OF THE CREDITOR, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITOR ARE PROVED BEYOND DOUBT. WE FIND THAT THE BANK STATEMENT OF FATHER WAS FILED BEFORE US WHEREIN THE LOAN RECEIVED FROM UNITED BANK OF INDIA AND SUBSEQUENT LENDING TO ASSESSEE IS DULY REFLECTED AND WHEN THIS WAS PUT AC ROSS TO THE LEARNED DR, HE FAIRLY CONCEDED TO THE STAND OF THE ASSESSEE. HENC E THE ADDITION DELETED IN THAT REGARD BY LEARNED CITA DOES NOT REQUIRE ANY INTERFE RENCE. IT.A NOS. 21868 & 2140/ KOL/2010- B-AM- SRI SUMAN KAR 6 WITH REGARD TO THE LOAN RECEIVED FROM MOTHER TO THE TUNE OF RS. 1,50,000/- IN CASH, IT IS UNDISPUTED THAT THE ASSESSEE IS A SENIO R TEACHER IN A SCHOOL RUN BY SAIL AT DURGAPUR IN THE SENIOR RANK AS SHIFT IN CHA RGE. IT IS ALSO SEEN THAT THE ASSESSEE HAD PROVED THE IDENTITY OF CREDITOR (HIS MOTHER) AND GENUINENESS OF THE TRANSACTION THROUGH FILING THE CONFIRMATION FROM HE R MOTHER. WE ALSO FIND FROM THE CONFIRMATION PLACED ON RECORD THAT THE MOTHER H AD NOT MENTIONED THE LOAN AMOUNT ADVANCED BY HER TO THE ASSESSEE. BUT HOWEVE R, SHE HAD CLEARLY MENTIONED THE FACT OF ADVANCING THE LOAN AND THE PU RPOSE OF THE LOAN IN HER CONFIRMATION TOGETHER WITH THE SOURCE FOR ADVANCING THE LOAN. THE STATUS OF THE ASSESSEE THAT SHE IS A RETIRED SCHOOL TEACHER AND H AD HELD A SENIOR POSITION AS SHIFT INCHARGE IN A SCHOOL RUN BY SAIL AT DURGAPUR IS NOT DISPUTED BY THE REVENUE. HENCE IN THESE FACTS AND CIRCUMSTANCES, W E HOLD THAT THE ASSESSEE HAS ALSO PROVED THE CREDITWORTHINESS OF THE TRANSACTION AND HENCE NO ADDITION U/S 68 OF THE ACT COULD BE MADE IN THE HANDS OF THE ASSESS EE. ACCORDINGLY, THE GROUND NO. 1 RAISED BY THE ASSESSEE STANDS ALLOWED AND THAT OF THE REVENUE STANDS DISMISSED. WITH REGARD TO THE GROUND NO. 2 RAISED BY THE REVEN UE FOR SECTION 271D VIOLATION IN RESPECT OF CASH LOAN RECEIVED FROM MOTHER, WE FI ND THAT THE ISSUE OF LEVY OF PENALTY U/S 271D OF THE ACT IS NOT BEFORE US AND HE NCE THE SAME IS NOT ADJUDICATED HEREIN. ISSUE II ADDITION OF RS. 4,48,000/- TOWARDS INTRO DUCTION TO CAPITAL ACCOUNT BY THE ASSESSEE AND ADDITION MADE TOWARDS D IFFERENCE IN OPENING CAPITAL BALANCE OF RS. 3,76,922/- IN THE CA PITAL ACCOUNT 4. THE ASSESSEE HAD RAISED THE FOLLOWING GROUNDS I N HIS APPEAL :- IT.A NOS. 21868 & 2140/ KOL/2010- B-AM- SRI SUMAN KAR 7 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING AN ADDITION TO I NCOME OF A SUM OF RS.4,48,000 TREATING THE SAME AS FRESH INTRO DUCTION OF CAPITAL, WHEREAS, IN ACTUALITY, THE MATTER CROPPED UP DUE TO NEGLIGENCE AND MISTAKE OF THE APPELLANTS AUDITOR. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN CONFIRMING AN ADDITION OF R S.3,76,992/- ALLEGEDLY FOR BEING DIFFERENCE BETWEEN THE CLOSING BALANCE OF CAPITAL A/C IN LAST YEAR AND OPENING BALANCE OF CAP ITAL A/C IN THIS YEAR WHICH ALSO AROSE DUE TO MISTAKES OF THE AUDITO R OF THE APPELLANT. 4.1. THE ADDITION OF RS. 4,48,000/- WAS MADE TOWA RDS INTRODUCTION OF FRESH CAPITAL DURING THE ASSESSMENT YEAR UNDER APPEAL WHI CH WAS COMPLETELY DENIED BY THE ASSESSEE BEFORE THE LEARNED AO . SIMILARLY AN ADDITION OF RS. 3,76,922/- WAS ADDED BY THE LEARNED AO BASED ON THE DIFFERENCE BETWEEN THE CLOSING CAPITAL BALANCE OF EARLIER YEAR AND OPENING CAPITAL BALANCE OF THE CURRENT YEAR REFLECTED IN THE AUDITED ACCOUNTS FILED BEFORE THE LEARNED AO. THE ASSESSEE STATED BEFORE THE LEARNED AO THAT THE AUDITED ACCOU NTS SUBMITTED ALONG WITH THE RETURN OF INCOME APPARENTLY CONTAINS LOT OF DEFICIE NCIES AND HENCE THE SAME IS LIABLE TO BE REJECTED AND BUSINESS PROFITS BE ESTIM ATED ON PRESUMPTIVE BASIS BASED ON TURNOVER. HOWEVER, THIS REQUEST WAS NOT ACCEDED TO BY THE LEARNED AO AND ADDITIONS WERE MADE. ON FIRST APPEAL, BOTH THE ADDITIONS WERE CONFIRMED BY THE LEARNED CIT(A). 4.2. THE LEARNED AR APART FROM REITERATING THE FA CTS STATED BEFORE THE LEARNED AO ARGUED THAT BECAUSE OF THE MISTAKE COMMITTED BY THE ERSTWHILE CA OF THE ASSESSEE, THE ASSESSEE SHOULD NOT BE INVITED WITH T HE ADDITIONS. HE FURTHER ARGUED THAT ULTIMATELY ONLY THE INCOME ELEMENT IS T O BE TAXED FOR INCOME TAX PURPOSES AND THE LEARNED AO HAD MADE BOTH THE ADDIT IONS OF RS. 4,48,000/- AND IT.A NOS. 21868 & 2140/ KOL/2010- B-AM- SRI SUMAN KAR 8 RS. 3,76,992/- UNDER THE HEAD BUSINESS INCOME ONLY . HE ARGUED THAT THE BUSINESS IN WHICH ASSESSEE IS ENGAGED (BEING A RETA ILER AND WHOLESALE TRADER OF COMPUTER AND OTHER ACCESSORIES) IN WOULD NOT AT ANY STRETCH OF IMAGINATION YIELD THE BUSINESS PROFITS SUGGESTED BY THE LEARNED AO. MOREOVER, HE STATED THAT NO CORRESPONDING ASSETS / OUTGOINGS WERE FOUND BY THE LEARNED AO TO JUSTIFY THESE ADDITIONS. HE ARGUED THAT THIS POINT HAS NOT BEEN PROPERLY APPRECIATED BY THE LOWER AUTHORITIES. IN RESPONSE TO THIS, THE LEARNE D DR VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 4.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESEE IN HIS REPLY B EFORE THE LEARNED AO HAD STATED THAT ADMITTEDLY THERE WERE SOME MISTAKES IN THE AUDITED ACCOUNTS SUBMITTED BEFORE THE DEPARTMENT AND HENCE REQUESTED FOR REJECTION OF THE BOOKS OF ACCOUNTS TO THE LEARNED AO. WE FIND FROM THE ASS ESSMENT ORDER THAT THE ASSESSEE HAD STATED THAT NO CAPITAL WAS INTRODUCED IN THE SUM OF RS. 4,48,000/- DURING THE ASSESSMENT YEAR UNDER APPEAL AND THE DIF FERENCE BETWEEN THE CLOSING CAPITAL BALANCE OF EARLIER YEAR AND THE OPENING BAL ANCE OF ASSESSMENT YEAR UNDER APPEAL TO THE EXTENT OF RS. 3,76,922/- HAD OCCURRED DUE TO ACCOUNTING ERROR COMMITTED BY HIS ERSTWHILE CA DULY POINTED OUT BY T HE PRESENT CA WHO IS HANDLING THE AFFAIRS OF THE ASSESSEE. ACCORDINGLY , THE ASSESSEE REQUESTED THE LEARNED AO TO REJECT THE BOOKS OF ACCOUNTS DUE TO A FORESAID DEFICIENCIES BROUGHT ON RECORD AND REQUESTED TO DETERMINE HIS TA XABLE INCOME ON PRESUMPTIVE TAXATION AS A PERCENTAGE OF TURNOVER. THE LEARNED AO HAD NOT REJECTED THE BOOKS OF ACCOUNTS BUT INSTEAD PROCEEDE D TO MAKE INDEPENDENT ADDITION TOWARDS INCREASE IN CAPITAL ACCOUNT TO THE TUNE OF RS. 4,48,000/- AND DIFFERENCE IN OPENING BALANCE OF CAPITAL ACCOUNT TO THE TUNE OF RS. 3,76,922/-. FURTHER IT IS FOUND THAT THE LEARNED AO HAD MADE BO TH THE ADDITIONS ONLY UNDER IT.A NOS. 21868 & 2140/ KOL/2010- B-AM- SRI SUMAN KAR 9 THE HEAD INCOME FROM BUSINESS. HERE IS A CASE WHE REIN THE DEFICIENCIES IN THE AUDITED ACCOUNTS WERE DULY POINTED OUT BY THE ASSES SEE HIMSELF TO THE LEARNED AO AND IN SUCH A SCENARIO, THE RIGHT COURSE FOR THE LEARNED AO WOULD BE REJECT THE SAME AND DETERMINE THE PROFITS IN ACCORDANCE WI TH SECTION 145(3) OF THE ACT. WE FIND THAT THE ASSESSEE HAD STRONGLY DENIED THE F ACT OF INTRODUCTION OF ANY FRESH CAPITAL TO THE TUNE OF RS. 4,48,000/- IN THE BUSINESS DURING THE ASSESSMENT YEAR UNDER APPEAL. HENCE THE ADDITION HAS BEEN MAD E ONLY BASED ON THE DEFECTIVE CAPITAL ACCOUNT PRODUCED BEFORE THE LEARN ED AO WITHOUT GIVING ANY CATEGORICAL FINDING WITH REGARD TO THE INCOME ELEME NT CONTAINED THEREON. WE ALSO FIND THAT THE MISTAKE IN THE AUDITED BOOKS OF ACCOUNTS AS STATED BY THE ASSESSEE IS QUITE APPARENT FROM RECORDS FROM THE FA CT THAT THE CLOSING CAPITAL BALANCE OF EARLIER YEAR DOES NOT TALLY WITH THE OPE NING CAPITAL BALANCE OF ASSESSMENT YEAR UNDER APPEAL. HENCE THE CONTENTION OF THE ASSESSEE THAT BOOKS CONTAIN DEFICIENCIES AND HE IS NOT CONVERSANT WITH THE MAINTENANCE OF ACCOUNTS AND THE INCOME TAX AFFAIRS FINDS LOT OF FORCE AND I S PROVED BEYOND DOUBT. MOREOVER, IT IS ALSO FOUND FROM THE REMAND REPORT D ATED 16.8.2010 SUBMITTED BY THE LEARNED AO BEFORE THE LEARNED CITA, THAT , THIS STAND HAS BEEN REITERATED BY THE ASSESSEE BEFORE THE LEARNED AO. WE FIND THAT THE LEARNED AO COULD HAVE AS WELL SUMMONED THE CONCERNED CA WHO SIGNED THE AC COUNTS FOR HIS REBUTTAL AND ASCERTAINED THE TRUE FACTS IN THIS REGARD. WE ALSO FIND FROM THE RECORDS THAT THE ASSESEE HAD CHOSEN TO WRITE A LETTER DATED 11.1 .2010 I.E AFTER RECEIVING THE ASSESSMENT ORDER DATED 31.12.2009, TO THE PREVIOUS AUDITOR ASKING HIM TO EXPLAIN THE REASONS FOR SIGNING THE ACCOUNTS WITH DEFICIENC IES POINTED OUT IN THE ASSESSMENT ORDER WARRANTING HUGE ADDITIONS. THIS L ETTER WAS SENT BY SPEED POST BY THE ASSESEE AND IS PART OF OUR RECORDS. ADMITT EDLY, NO REPLY HAS BEEN RECEIVED FOR THE SAME BY THE ASSESSEE AND HENCE IN THIS SCENARIO, WE FIND THAT THE ASSESSEE HAS BEEN GENUINELY PREVENTED FROM REASONAB LE CAUSE TO PUT FORTH HIS IT.A NOS. 21868 & 2140/ KOL/2010- B-AM- SRI SUMAN KAR 10 CASE BEFORE THE FIRST APPELLATE AUTHORITY. HENCE WE FIND THAT THE ACTION OF THE LEARNED AO IN THIS REGARD IS NOT PROPER IN THE FAC TS AND CIRCUMSTANCES OF THE CASE AND NO ADDITIONS ARE WARRANTED IN THIS REGARD. ACCORDINGLY, THE GROUND NOS. 2 & 3 RAISED BY THE ASSESSEE STANDS ALLOWED. ISSUE III ADDITION OF RS. 13,07,328/- ON ACCOUNT OF DEBTORS IN REVENUE APPEAL 5. THIS ADDITION WAS MADE ON THE PREMISE THAT THE ASSESSEE HAD NOT OFFERED THE SALES IN RESPECT OF SUNDRY DEBTOR ARYABHATTA INSTIT UTE OF ENGINEERING & MANAGEMENT DURGAPUR, PANAGARH. THE LEARNED AO ADD ED A SUM OF RS. 13,06,650/- AS AMOUNT RECEIVABLE FROM THIS PARTY BA SED ON THE CONFIRMATION RECEIVED FROM THE SAID PARTY THAT THEY OWE THIS SUM TO THE ASSESSEE WHEREAS THE SAME IS NOT REFLECTED IN THE BOOKS OF THE ASSESSEE AS ON 31.3.2007. SIMILARLY IN RESPECT OF ANOTHER PARTY D.S.P. EMPLOYEES CO-OPERA TIVE SOCIETY LTD, THERE WAS A DIFFERENCE OF RS. 678/- BETWEEN THE BALANCE SHOWN BY THE ASSESSEE AND BALANCE AS PER CONFIRMATION OBTAINED BY THE LEARNED AO. TH E LEARNED ADDED THIS SUM OF RS. 678/- ALSO IN THE ASSESSMENT. ON FIRST APPE AL, THE LEARNED CITA OBSERVED THAT THE ASSESSEE HAD A RECOVERY SUIT PENDING AGAIN ST A DEBTOR AND THE FIGURE DISCLOSED IN HIS BALANCE SHEET DID NOT MATCH WITH T HAT OBTAINED BY THE LEARNED AO ON ENQUIRY. THE ASSESSEE STATED THAT THIS MIST AKE, IF ANY, HAD BEEN COMMITTED BY HIS PREVIOUS CA AND HENCE HE CANNOT BE FOUND FAULT WITH FOR THE SAME. THE ASSESSEE SUBMITTED THAT THE TURNOVER IN RESPECT OF THIS PARTY HAD BEEN DULY OFFERED TO TAX IN THE EARLIER YEARS BY THE ASS ESSEE AND IT IS ONLY OUTSTANDING DUES RECOVERABLE FROM THE PARTY FOR WHICH A SUIT HA S BEEN FILED AGAINST THE DEBTOR AND HENCE THERE IS NO CASE FOR MAKING ANY ADDITION IN THIS REGARD AS UNDISCLOSED INCOME. THE LEARNED CIT(A) OBSERVED THAT IN REMAND PROCEEDINGS, THE LEARNED IT.A NOS. 21868 & 2140/ KOL/2010- B-AM- SRI SUMAN KAR 11 AO HAD NOT DOUBTED THE INFORMATION GIVEN BY THE ASS ESSEE THAT THE SALES IN QUESTION RELATES TO FINANCIAL YEARS 2002-03 ; 2003- 04 AND 2004-05. HENCE THIS GOES TO PROVE THAT THE TURNOVER IS ALREADY REFLECTE D IN THE INCOME SIDE BY THE ASSESSEE IN THE EARLIER YEARS AND HENCE DELETED THE ADDITION. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING MOD IFIED GROUND:- C. THAT LD. CIT(A) FAILED TO APPRECIATE THE FACT TH AT THE OMISSION OF EARLIER YEARS DEBTORS IN THE ASSET SIDE OF THE B ALANCE SHEET LED TO EITHER VENTILATION OF TANTAMOUNT ASSET DURING THE YEAR WHICH WAS NEVER OFFICERED FOR TAXATION OR TANTAMOUNT CES SATION OF LIABILITY DURING THE YEAR UNDER CONSIDERATION WHICH HAD DUE IMPACT FOR DETERMINATION OF INCOME AGAINST THE YEAR IN QUESTION. 5.1. THE LEARNED AR REITERATED THE SUBMISSIONS AL READY MADE BEFORE THE LEARNED AO AND LEARNED CITA IN THIS REGARD AND STAT ED THAT THERE IS NO INCOME THAT HAD BEEN CONCEALED BY THE ASSESSEE WITH REGARD TO TRANSACTIONS WITH THESE TWO DEBTORS AND PLEADED FOR NON-INTERFERENCE IN THE LEARNED CITA ORDER. IN RESPONSE TO THIS, THE LEARNED DR VEHEMENTLY SUPPORT ED THE ORDER OF THE LEARNED AO. 5.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND WE FI ND THAT THE ASSESSEE HAD ALREADY DISCLOSED THE TURNOVER IN RESPECT OF THESE TWO PARTIES IN THE EARLIER YEARS AND JUST BECAUSE THE SUNDRY DEBTOR BALANCE IS NOT S HOWN IN THE BALANCE SHEET OF THE ASSESSEE , IT CANNOT BE ADDED AS INCOME OF THE ASSESSEE. MOREOVER, WE HAVE ALREADY HELD IN THE PREVIOUS GROUNDS THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE CONTAIN LOT OF DEFICIENCIES AND THIS WAS ALSO POINT ED OUT BY THE ASSESSEE BEFORE THE LEARNED AO. WE HAVE ALREADY HELD THAT THE RIGH T COURSE OF ACTION AVAILABLE WITH THE LEARNED AO COULD BE TO REJECT THE BOOKS OF ACCOUNTS AND DETERMINE THE PROFITS ON ESTIMATED BASIS U/S 145(3) OF THE ACT WH ICH HAS NOT BEEN DONE BY THE IT.A NOS. 21868 & 2140/ KOL/2010- B-AM- SRI SUMAN KAR 12 LEARNED AO IN THE INSTANT CASE. HENCE, WE HOLD TH AT NO ADDITION COULD BE MADE IN RESPECT OF BALANCE RECEIVABLE FROM SUNDRY DEBTOR S IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE AS THE SALES IN R ESPECT OF THEM HAVE ALREADY BEEN DISCLOSED BY THE ASSESSEE IN THE EARLIER YEARS WHICH FACT HAS NOT BEEN REFUTED BY THE LEARNED AO IN THE REMAND PROCEEDINGS . ACCORDINGLY, THE GROUND NO. 3 RAISED BY THE REVENUE IS DISMISSED. ISSUE IV ADDITION OF RS. 2,46,801/- ON ACCOUNT OF BOGUS SUNDRY CREDITORS IN REVENUE APPEAL 6. THE LEARNED AO OBTAINED THE LIST OF SUNDRY CRED ITORS FROM THE ASSESSEE AND SOUGHT TO CROSS VERIFY THE SAID BALANCES WITH THAT OF THE PARTIES, FOR WHICH PURPOSE , HE OBTAINED INFORMATION U/S 133(6) OF THE ACT AND HE FOUND THAT THE BALANCES WERE NOT MATCHING IN RESPECT OF THE FOLLOW ING THREE PARTIES:- SL.NO. NAME NATURE OF TRANSACTION AMOUNT SHOWN BY THE ASSESSEE AMOUNT AS PER PER CONFIRMATION DIFFERENCE REMARKS 1 SUPANI MUSIC PURCHASE 2,87,823.00 75,062.00 2,12,761.00 BOGUS PURCHASE 2 BERLIA COMPU SYSTEM PURCHASE RETURN 0.00 9,636.00 [5850.00 + 3786.00 9,636.00 NOT SHOWN IN THE BOOK OF THE ASSESSEE 3. MBT INFOSYS PURCHASE 1,07,724.00 1,32,128.00 24,404.00 UNDISCLOSED PURCHASE THE LEARNED AO DISBELIEVED THE EXPLANATIONS OFFERED BY THE ASSESSEE AND SOUGH TO BRING TO TAX THE DIFFERENCE IN SUNDRY CREDITORS BALANCE AS STATED ABOVE AS BOGUS CREDITORS. ON FIRST APPEAL, THE LEARNED CIT A CALLED FOR A REMAND REPORT FROM THE LEARNED AO, WHEREIN THE LEARNED AO SUBMITT ED THAT IN ONE OF THE IT.A NOS. 21868 & 2140/ KOL/2010- B-AM- SRI SUMAN KAR 13 CASES ONLY A COPY OF THE LEDGER ACCOUNT AHS BEEN SU BMITTED WITHOUT ANY SUPPORTING EVIDENCES AND IN ANOTHER, COPIES OF THE INVOICES SUBMITTED DID NOT CONTAIN VAT NUMBER OF THE SUPPLIER THOUGH VAT HAS B EEN CHARGED. THE LEARNED CITA OBSERVED THAT NOTHING PREVENTED THE LE ARNED AO TO MAKE FURTHER ENQUIRIES IN THIS REGARD AND JUST BECAUSE THE SUPPL IER HAD NOT MENTIONED HIS VAT REGISTRATION NUMBER, THE ASSESSEE CANNOT BE FAULTED WITH. THE LEARNED CITA FINALLY OBSERVED THAT NO ADVERSE COMMENTS HAVE BEEN MADE IN THE REMAND REPORT BY THE LEARNED AO ON THE RECONCILIATIONS SUBMITTED BY THE ASSESSEE BEFORE HIM AND ACCORDINGLY DELETED THE ADDITION. AGGRIEVED, T HE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING MODIFIED GROUND:- D. THAT LD. CIT(A) WAS NOT JUSTIFIED IN THE MATTER OF ALLOWING RELIEF AGAINST ADDITION MADE UNDER THE HEAD OF SUNDRY CRED ITORS/BOGUS PURCHASE WHEN ENTIRE ADDITION WAS SUPPORTED WITH CR UDE FACTS AND FIGURES DERIVED FROM DIFFERENT LEDGERS REQUISITIONE D FROM SEVERAL COMPANIES AND LD. CIT(A) ERRED IN ALLOWING RELIEF S IMPLY ON RELYING UPON RAMIFICATION OF FRIVOLOUS ARGUMENTS PL EDGED BY THE ASSESSEE TIME TO TIME CHANGING ITS STANCE. 6.1. THE LEARNED AR ARGUED THAT APART FROM REITER ATING THE FACTS STATED IN THE LEARNED CITA ORDER STATED THAT THE PURCHASES HAVE N OT BEEN DISPUTED BY THE LEARNED AO AND THE SAME HAS BEEN ACCEPTED. HE ARGU ED THAT HAVING DONE SO, THERE IS NO CASE FOR MAKING ANY ADDITION TOWARDS TR ADE CREDITORS. MOREOVER, IN THE FACTS OF THE INSTANT CASE, THERE IS NO DISCREPA NCY IN THE BALANCE OUTSTANDING OF SUNDRY CREDITORS AS COULD BE EVIDENT FROM THE FACT THAT NO ADVERSE COMMENTS WERE MADE BY THE LEARNED AO IN REMAND PROCEEDINGS. IN RESPONSE TO THIS, THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE LE ARNED AO. 6.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE LEARNED CIT(A) HAD DUL Y CALLED FOR A REMAND REPORT IT.A NOS. 21868 & 2140/ KOL/2010- B-AM- SRI SUMAN KAR 14 FROM THE LEARNED AO WHEREIN THE ENTIRE DISCREPANCIE S WITH REGARD TO BALANCES IN SUNDRY CREDITORS HAVE BEEN DULY RECONCILED AND NO A DVERSE COMMENTS WERE RECORDED BY THE LEARNED AO. ACCORDINGLY, THE LEARN ED CIT(A) SOUGHT TO GIVE RELIEF TO THE ASSESSEE. WE ALSO FIND THAT THE PURC HASES HAVE NOT BEEN DISPUTED BY THE LEARNED AO. ADMITTEDLY, THESE SUNDRY CREDITORS HAVE EMANATED ONLY OUT OF PURCHASES OF THE ASSESSEE AND HENCE WHEN PURCHASES (IE DEBIT ENTRY) HAVE BEEN ACCEPTED AS GENUINE, THERE IS NO SCOPE FOR TREATING THE CREDIT ENTRY (I.E SUNDRY CREDITORS) AS BOGUS. IN VIEW OF THESE FACTS AND C IRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARN ED CIT(A) IN THIS REGARD. ACCORDINGLY, THE GROUND NO. 4 RAISED BY THE REVENUE IS DISMISSED. 7. TO SUM UP, THE ASSESSEES APPEAL IN ITA NO. 2186 / KOL / 2010 FOR THE A.Y 2007-08 IS ALLOWED AND APPEAL OF THE REVENUE IN ITA NO. 2140 / KOL / 2010 FOR THE A.Y 2007-08 IS DISMISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 18 / 11 /2015 SD/- ( S.S VISWANETHRA RAVI, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE 18 /11/2015 IT.A NOS. 21868 & 2140/ KOL/2010- B-AM- SRI SUMAN KAR 15 COPY OF THE ORDER FORWARDED TO: 1.. THE APPELLANT/ASSESSEE: SHRI SUMAN KAR C/O M/ S. NETSOFT, IA, AKBAR ROAD, DURGAPUR-04. 2 THE RESPONDENT/DEPARTMENT- THE I.T.O, W 1(2) AAY KAR BHAVAN, AAYKAR BITHI, CITY CENTER, DURGAPUR 713216. 3 4.. /THE CIT, / THE CIT(A) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR ** PRADIP SPS