Jnantosh Bhandari, Kolkata V. I.T.O Wd - 53(2),kolkata, Kolkata

ITA 2203/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4161 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 07-09-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 02-08-2013
• Court: TRIBUNAL
• Department Lawyers: RAJAT KUMAR KUREEL
• Assessee Lawyers: MONOJ DUTT
• Keywords: Unexplained cash credit; Business income; Income from undisclosed sources
• Section: 68

Judgement Text

ITA NO.2203/KOL/2013-JNANOTOSH BHANDARY A.Y.2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM ] I.T.A NO. 2203/KOL/ 2013 ASSESSMENT YEAR : 2005 -06 JNANOTOSH BHANDARY -VS.- I.T.O., WARD-5 3(2), KOLKATA KOLKATA [PAN : AEIPB5852P] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI MONOJ DUTT, FCA FOR THE RESPONDENT : SHRI RAJAT KUMAR KU REEL, JCIT, SR.DR DATE OF HEARING : 17.11.2016. DATE OF PRONOUNCEMENT : 9.12.2016. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 18.3.2013 OF CIT(A)- XXXIII, KOLKATA, RELATING TO AY 2005-06. 2. IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE O RDER OF THE CIT(A) WHEREBY THE CIT(A) CONFIRMED THE ORDER OF THE AO IMPOSING PENAL TY ON THE ASSESSEE U/S.271(1)( C ) OF THE INCOME TAX ACT, 1961 (ACT). 3. THE FACTS AND CIRCUMSTANCES UNDER WHICH PENALTY WAS IMPOSED ON THE ASSESSEE BY THE AO ARE AS FOLLOWS: THE ASSESSEE IS AN INDIVIDUAL. HE DERIVES INCOME F ROM THE BUSINESS OF ACTING AS CLEARING AND FORWARDING AGENT. THE ASSESSEE FIL ED HIS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR 2005-06 ON 29.10.2005 DECL ARING TOTAL INCOME AT RS.3,24,066/- AND THE RETURN WAS PROCESSED U/S. 143 (1) OF THE ACT. SUBSEQUENTLY, NOTICE U/S 143(2) WAS ISSUED AND THE ASSESSEE WAS R EQUIRED TO PRODUCE THE BOOKS OF ACCOUNTS, BILLS AND VOUCHERS ETC. THE ASSESSEE PROD UCED THE CASH BOOK, LEDGER AND ITA NO.2203/KOL/2013-JNANOTOSH BHANDARY A.Y.2005-06 2 OTHER BILLS AND VOUCHERS. THE ASSESSING OFFICER ON VERIFICATION FOUND THAT THE EXPENSES OF LENDING IN THE NAME OF ASHOK DAS ARE RE CORDED IN THE BOOKS ACCOUNTS BUT NOT VOUCHED FOR AMOUNTING TO RS.21,384/-, RS. 22,98 8/- AND RS.29,033/- ON 17.05.2004, 28.05.2004 AND 27.11.2004 RESPECTIVELY. SIMILARLY, VEHICLE CHARGES EXPENSES WERE RECORDED BUT SUPPORTED BY BILLS, AS P OINTED OUT BY ASSESSING OFFICER. SIMILARLY, BROKERAGE EXPENSES AND STEAMER EXPENSES WERE NOT VOUCHED. ACCORDINGLY, THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SE CTION 145(3) OF THE ACT AND REJECTED THE BOOK RESULTS. IT IS TO BE MENTIONED THAT THE AS SESSEE HAS NOT CHALLENGED THE REJECTION OF BOOK RESULTS EITHER BEFORE CIT (A) OR BEFORE THE TRIBUNAL IN THE QUANTUM PROCEEDINGS AND THAT MEANS THE BOOK RESULTS REJECTE D BY THE ASSESSING OFFICER HAS BECOME FINAL. THE ASSESSING OFFICER AFTER REJECTING THE BOOK RESULTS APPLIED NET PROFIT RATE @ 8% AS AGAINST THE DECLARED NET PROFIT AT 2.0 3% ON THE TOTAL TURNOVER OF RS.1,63,01,231/- AND ASSESSED THE SAME AT RS.13,04, 099/- AFTER EXCLUDING THE NET PROFIT DISCLOSED BY ASSESSEE AT RS.3,30,641/-. THE ASSESS ING OFFICER ALSO MADE ADDITION ON ACCOUNT OF UNSECURED LOANS/CASH CREDIT U/S 68 OF T HE ACT FOR AN AMOUNT OF RS.4,01,259/-. 4. ULTIMATELY THE TRIBUNAL IN THE QUANTUM PROCEEDI NGS DETERMINED THE TOTAL INCOME OF THE ASSESSEE BY ADOPTING A NET PROFIT @ 5% OF THE TURNOVER AND DELETED THE ADDITION WILL MEET THE END OF JUSTICE. AS REGARDS THE SEPARA TE ADDITION OF UNSECURED LOANS, SINCE THE INCOME OF THE ASSESSEE FROM BUSINESS WAS ESTIMA TED, THE TRIBUNAL HELD THAT FROM THE PATTERN OF RECEIPT OF UNSECURED LOANS IT WAS CL EAR THAT THE SAME WAS RECEIVED DURING THE YEAR AND AROSE OUT OF THE SAME BUSINESS INCOME, WHICH HAS ALREADY BEEN ADDED AND NO SEPARATE ADDITION OF UNSECURED LOAN SHOULD BE MA DE. THUS THE TRIBUNAL IN THE QUANTUM APPEAL DIRECTED THE ASSESSING OFFICER TO TA KE ONLY ONE ADDITION I.E. ESTIMATION OF NET PROFIT @ 5% AND ASSESS THE SAME. 5. THE AO INITIATED PENALTY PROCEEDINGS U/S.271(1)( C) OF THE ACT IN RESPECT OF THE ADDITIONS MADE IN THE QUANTUM PROCEEDINGS. THE CIT (A) AFTER TAKING NOTE OF THE ORDER OF THE TRIBUNAL UPHELD PENALTY IN RESPECT OF THE AD DITION OF CASH CREDIT THOUGH THAT ITA NO.2203/KOL/2013-JNANOTOSH BHANDARY A.Y.2005-06 3 ADDITION WAS DELETED BY THE TRIBUNAL IN THE QUANTUM APPEAL. THE FOLLOWING WERE THE REASONS ASSIGNED BY THE CIT(A) FOR DOING SO. 5. ALTHOUGH THE ASSESSING OFFICER HAD LEVIED PENAL TY IN RESPECT OF THE ASSESSED INCOME AS REDUCED AFTER FIRST APPEAL ORDER, THE ONLY ADDIT ION DISCUSSED IN THE PENALTY ORDER IS THAT OF UNEXPLAINED CASH CREDIT. IT IS TRUE THAT TH E TRIBUNAL AS, VIDE ITS ORDER DATED 09.03.2011 DELETED THE SEPARATE ADDITION FOR UNSECU RED LOAN. HOWEVER ON CAREFULLY GOING THROUGH THE ORDER IT IS SEEN THAT THE SAID AD DITION HAS NOT BEEN DELETED ON MERIT. RATHER, THE TRIBUNAL HAS OBSERVED AS -UNDER- 'AS REGARDS THE SEPARATE ADDITION OF UNSECURED LOAN S, WE ARE IN AGREEMENT WITH THE LD. COUNSEL FOR THE ASSESSEE THAT GOING BY THE PATTERN OF RECEIPT THAT THE SAME WAS RECEIVED DURING THE YEAR IS ARISING OU T OF THE SAME BUSINESS INCOME, WHICH HAS ALREADY BEEN ADDED AND NO SEPARAT E ADDITION OF UNSECURED LOAN SHOULD BE MADE. AS REGARDS THE ANOTHER PLEA OF THE ASSESSEE REGARDING REPETITIVE ADDITION OF INCOME DECLARED TO THE TOTAL INCOME OF THE ASSESSEE, WE ARE UNABLE TO AGREE WITH THE PLEA OF THE LD. COUNSE L FOR THE ASSESSEE AS THE ASSESSING OFFICER HAS CLEARLY REDUCED THE SAME FROM NET PROFIT, BUT HOWEVER, THE ASSESSING OFFICER IS DIRECTED TO TAKE ONLY ONE ADDITION IN THE PRESENT CASE I.E. ESTIMATION OF NET PROFIT @ 5% AND ASSESS THE S AME. THE ASSESSING OFFICER WILL COMPUTE THE INCOME ON THE ABOVE BASIS. ACCORDI NGLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS INDICATE ABOVE. ' THUS, THE TRIBUNAL HAD CONFIRMED ESTIMATION OF PROF IT AT THE RATE OF 5% AND HAS FELT THAT SINCE THE UNSECURED LOANS MUST HAVE COME OUT OF SAM E BUSINESS INCOME, NO SEPARATE ADDITION WAS REQUIRED TO BE MADE. IN OTHER WORDS, T HE ADDITION FOR UNSECURED LOAN HAS NOT BEEN DELETED PER SE, BUT BENEFIT OF ITS TELESCO PING HAS BEEN ALLOWED WITH THE ADDITION MADE FOR NET PROFIT. SINCE THE ADDITION MADE BY WAY OF ESTIMATION OF NET PROFIT WAS HIGHER THAN THE UNSECURED LOAN OF RS.3,60,262/- CONFIRMED IN FIRST APPEAL, THE SAME W AS CONSIDERED TO BE COVERED BY THE ADDITION TO NET PRO FIT. 6. SO FAR AS MERITS OF THE ADDITION IN RESPECT OF U NSECURE LOANS ARE CONCERNED, THE SAME HAVE BEEN DISCUSSED IN THE ORDER DATED 31.12.2008 P ASSED BY MY PREDECESSOR IN APPEAL NO. 160/CIT (A) - XXXIIII WD - 53(2)107-08. IN THIS , HE HAS DISCUSSED FACTS RELATING TO ALL THE UNSECURED LOANS AND HAS CONCLUDED THAT EXCE PT FOR LOAN FROM SMT. RAJASHRI BHANDARI, THE APPELLANT HAD NOT BEEN ABLE TO ESTABL ISH GENUINENESS OF LOAN TRANSACTIONS OR CREDIT WORTHINESS OF THE CREDITOR. THE ADDITION WAS ACCORDINGLY CONFIRMED TO THE EXTENT OF RS. 3,60,262/-. ANOTHER IMPORTANT FACT TO NOTE IS, THAT THE APPELLANT WAS NOT ABLE TO EFFECTIVELY COUNTER THIS FINDING OF CIT (A) BEFORE THE TRIBUNAL ON MERIT AND ONLY TELESCOPING BENEFITING WAS ALLOWED. THIS INDICATES THAT HON'BLE TRIBUNAL ALSO DID NOT FIND ANY MERIT IN THE APPELLANT'S CASE IN RESPECT OF THI S ISSUE. IN FACT THE TRIBUNAL'S OBSERVATION THAT THE SAID UNSECURED LOANS WERE ARISING OUT OF S AME BUSINESS INCOME SHOWS THAT IT HAS, IN PRINCIPLE, UPHELD THE FINDING THAT THE LOAN S UNDER CONSIDERATION WERE NOT GENUINE. SHOWING CASH CREDIT, SUCH AS LOAN, IS A WELL KNOWN METHOD OF INTRODUCING UNACCOUNTED INCOME IN BOOKS OF ACCOUNTS. THIS DEFINITELY AMOUNT S TO CONCEALMENT AS WELL AS FURNISHING INACCURATE PARTICULARS OF INCOME, MORE S O IN VIEW' OF EXPLANATION 1 TO SECTION 271 (1) OF INCOME TAX ACT, 1961. THEREFORE PENALTY UNDER SECTION 271 (1) (C) IS, IN MY OPINION, LEVIABLE IN RESPECT OF ADDITION OF RS. 3,6 0,262/-. 7. HOWEVER, THE REMAINING AMOUNT OF PENALTY PERTAIN S TO ESTIMATION OF NET PROFIT. IN THE ASSESSMENT THE ESTIMATION WAS MADE AT THE RATE OF 8 %, WHICH WAS CONFIRMED IN FIRST ITA NO.2203/KOL/2013-JNANOTOSH BHANDARY A.Y.2005-06 4 APPEAL AND THE TRIBUNAL REDUCED THE SAME TO 5% INCL USIVE OF THE AMOUNT OF RS. 3,60,262/- DISCUSSED ABOVE. THUS THE CONFIRMED AMOU NT OVER AND ABOVE RS. 3,60,262/- IS NOT FOR ANY SPECIFIC ADDITION BUT ON ACCOUNT OF ESTIMATION OF PROFIT, WHICH, IN MY OPINION, DOES NOT CALL FOR LEVY OF PENALTY UNDER SE CTION 271(1)(C) OF INCOME TAX ACT, 196. 8. CONSIDERING THE ABOVE DISCUSSION, THE PENALTY IS UPHELD IN RESPECT OF THE ADDITION OF RS.3,60,262/- AND THE BALANCE AMOUNT IS DELETED. TH E ASSESSING OFFICER IS DIRECTED TO REDUCE THE PENALTY ACCORDINGLY. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. WE HAVE HEARD THE RIVA L SUBMISSIONS. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT PENALTY CAN NOT BE IMPOSED IN RESPECT OF AN ADDITION THAT HAS BEEN DELETED AND TO THIS EXTENT T HE REASONING OF THE CIT(A) IS WRONG. THE G.P. ADDITION HAS BEEN MADE ON THE BASIS OF EST IMATION AND THAT ESTIMATION WAS SUFFICIENT TO EXPLAIN THE UNEXPLAINED CASH CREDITS. WHEN THAT IS THE SITUATION, THE TOTAL INCOME OF THE ASSESSEE STANDS ASSESSED ONLY ON THE BASIS OF ESTIMATE OF INCOME FROM BUSINESS BY THE AO. THE LAW IS WELL SETTLED THAT G ENERALLY WHEN INCOME IS ESTIMATED THERE CANNOT BE A CHARGE OF CONCEALMENT OF INCOME, UNLESS THERE ARE EXCEPTIONAL CIRCUMSTANCES THAT PREVAIL IN A PARTICULAR CASE. T HE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). 7. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. WE ARE OF THE VIEW THAT THE ADDITION ULTIMATELY SUSTAINED WAS AN ADDITION BY ESTIMATING INCOME OF THE ASSESSEE APPLYING 5% RATE OF NET PROFIT ON THE TURNOVER OF THE ASSESSEE. THE SAID ADDITION WAS HELD BY THE TRIBUNAL TO BE SUFFICIENT TO TAKE CARE OF THE UNEXPLAINED CASH CREDITS TO THE EXTENT OF RS.3,60,262/-. THE LAW IS WELL SETTLED THAT WHEN ADDITION MADE TO TOTAL INCOME BY RESORTING TO AN ESTIMATION OF IN COME BY APPLYING A PROFIT PERCENTAGE ON TURNOVER DECLARED BY THE ASSESSEE THERE CANNOT B E ANY IMPOSITION OF PENALTY ON SUCH ADDITION, UNLESS THERE ARE SOME OTHER STRONG C IRCUMSTANCES TO SHOW CONTUMACIOUS CONDUCT OF THE ASSESSEE. WE ARE OF THE VIEW THAT I N THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE NO SUCH CIRCUMSTANCES EXIST TO DRAW AN Y ADVERSE INFERENCE AGAINST THE ASSESSEE. WE ARE THEREFORE OF THE VIEW THAT IMPOSI TION OF PENALTY IN THE FACTS AND ITA NO.2203/KOL/2013-JNANOTOSH BHANDARY A.Y.2005-06 5 CIRCUMSTANCES OF THE PRESENT CASE WAS NOT JUSTIFIED . ACCORDINGLY THE PENALTY IMPOSED IS DIRECTED TO BE CANCELLED. THE APPEAL OF THE ASS ESSEE IS ALLOWED. 8. IN THE RESULT APPEAL BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 9.1 2.2016. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 9.12.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.SHRI JNANOTOSH BHANDARY, M-243, BAISHNABGHATA, KO LKATA-700094. 2. I.T.O., WARD-53(2), KOLKATA 3. CIT(A)-XXXIII, KOLKATA 4. CIT XVIII, KOLK ATA 5..CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT. REGISTRAR, KOLKATA BENCHES