Sarover Trade Associates Ltd., Kolkata V. I.T.O Wd - 5(2),kolkata., Kolkata

ITA 221/KOL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3462 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 01-02-2013
• Court: TRIBUNAL
• Assessee Lawyers: M D SHAH LD
• Keywords: Unexplained cash credit; Business expenditure; Wrong claim; Revised return
• Section: 68; 144; 2

Judgement Text

ITA NO. 221/KOL/2013-B-AM M/S. SAROVER TRADE ASSOCIATES LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, K OLKATA BEFORE : SHRI N.V. VASUDEVAN, JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER I.T.A NO. 221/KOL/2013 A.Y : 2007-08 M/S. SAROVER TRADE ASSOCIATES LTD VS. I.T .O WARD 5(2), KOLKATA PAN: AAECE 2876H (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI M.D. SHAH, ADVOCATE , LD.AR FOR THE RESPONDENT: SHRI S.M SARBAVAZUT TAUHEED, JCIT/LD.SR.DR DATE OF HEARING: 20-01-2016 DATE OF PRONOUNCEMENT: 22 -01- 2016 ORDER SHRI M.BALAGANESH, AM THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE OR DER OF THE LEARNED CIT(A), VI, KOLKATA IN APPEAL NO. 162/CIT(A)-VI/WARD-5(2)/2010 -11 DATED 20/12/2012 FOR THE ASSESSMENT YEAR 2007-08 AGAINST THE ORDER OF ASSES SMENT FRAMED BY THE LEARNED AO U/S 144/143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL I S AS TO WHETHER THE LD.AO IS JUSTIFIED IN MAKING THE ADDITION OF RS.15,45,000/- ON ACCOUNT OF LOANS AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2.1. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE A SSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ELECTRONICAL LY ON 23-10-2007 DISCLOSING A LOSS OF RS.5,39,788/-. THE LD.AO PASSED THE ASSESSMENT O RDER U/S. 144 OF THE ACT AS NO DETAILS WERE FILED AND NONE APPEARED BEFORE HIM FROM THE SI DE OF THE ASSESSEE. WHILE FRAMING THE ASSESSMENT, THE LD.AO ADDED THE ENTIRE LOAN OUTST ANDING OF RS.91,52,281/- AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. ITA NO. 221/KOL/2013-B-AM M/S. SAROVER TRADE ASSOCIATES LTD 2 2.2 ON 1 ST APPEAL BEFORE THE LD.CIT(A) THE ASSESSEE STATED TH AT DURING THE RELEVANT FINANCIAL YEAR 2006-07, FRESH LOANS OF RS.41,65,00 0/- WERE TAKEN BY THE ASSESSEE COMPANY FROM THE FOLLOWING PARTIES:- A) M/S. ROOPACHERRA TEA CO. LTD RS.34,65,000/- B) M/S. BAGDOGRA INVESTMENT CO.PVT. LTD RS. 7,00, 000/- THE ASSESSEE ALSO STATED THE OTHER LOANS ARE ONLY CARRIED FORWARD BALANCES FROM THE EARLIER YEARS. THE LD.CIT(A) CALLED FOR REMAND REPO RT FROM THE LD.AO. THE LD.AO IN HIS REMAND REPORT HAS STATED THAT IN RESPECT OF LOAN A MOUNTS RECEIVED FROM M/S. ROOPACHERRA TEA CO. LTD AMOUNTING TO RS.34,65,000/ -, ONLY A SUM OF RS.26,20,000/- WAS REFLECTED IN THE BANK STATEMENT OF THE ASSESSEE , WHICH WERE RECEIVED BY CHEQUES AND ACCEPTED THE SAME AS GENUINE. THE LD.AO FURTHER S TATED THAT THE BALANCE AMOUNT OF RS.8,45,000/- (34,65,000-26,20,000) WERE NOT REFLEC TED/CREDITED IN THE BANK STATEMENT OF THE ASSESSEE. FURTHER IN RESPECT OF LOAN OF RS.7, 00,000/- AS RECEIVED FROM M/S. BAGDODRA INVESTMENT CO.PVT. LTD, THE LD.AO FOUND T HAT THE SAME WERE NOT REFLECTED IN THE BANK STATEMENT OF THE ASSESSEE. THE LD.AO FURTHER S TATED THAT DESPITE GIVING AMPLE OPPORTUNITIES TO THE ASSESSEE FOR EXPLAINING THE SAID DISCREPANCY, THE ASSESSEE CHOSE NOT TO PROVIDE ANY SATISFACTORY EXPLANATION THEREOF. T HE LD. CIT(A) ON GOING THROUGH THE REMAND REPORT OF THE LD.AO FOUND THAT NO FURTHER EX PLANATION WAS FURNISHED BY THE LD.AR BEFORE HIM. THE LD. CIT(A) HAS ALSO MENTIONED IN H IS ORDER THAT THE LD.AR OF THE ASSESSEE HAD ACCEPTED FOR CONFIRMATION OF ADDITION OF RS.15, 45,000/- DURING THE APPELLATE PROCEEDINGS. ACCORDINGLY, HE UPHELD THE ADDITION TO THE TUNE OF RS.15,45,000/- AS AGAINST SUM OF RS.91,59,281/- AS ADDED BY THE LD.AO IN THE ASSESSMENT PROCEEDINGS. AGGRIEVED, THE ASSESEE IS IN APPEAL BEFORE US ON THE FOLLOWIN G GROUND:- 3. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LEARNED COMMISSIONER OF INCOME TAX APPEAL ERRED IN CONFIRMI NG THE ADDITION OF RS.15,45,000/- ON ACCOUNT OF LOAN. SUCH ADDITION IS UNCALLED FOR AND UNJUSTIFIED AND HENCE THE SAME BE DELETED. 2.2. THE LEARNED AR ARGUED THAT THOUGH HE HAD AGR EED BEFORE THE LD.CIT(A) FOR CONFIRMATION OF ADDITION, SINCE THE LD.AO HAD GIVEN A CATEGORICAL FINDING IN HIS REMAND ITA NO. 221/KOL/2013-B-AM M/S. SAROVER TRADE ASSOCIATES LTD 3 REPORT THAT THE SUM OF RS.15,45,000/- WAS NOT REFL ECTED/CREDITED IN THE BANK STATEMENT OF THE ASESSEE, THE PROVISIONS OF SECTION 68 OF THE AC T COULD NOT BE INVOKED AT ALL IN THE FACTS AND CIRCUMSTANCES OF THE CASE. FOR THIS HE ALSO REL IED ON THE PROPOSITION THAT THERE CANNOT BE AN ESTOPPEL AGAINST THE LAW. HE ALSO RELIED ON T HE DECISIONS OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. MRP FIRM MUAR REPORTED IN 56 ITR 67(SC) AND HONBLE JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF M ODERN MALLEABLES LTD VS. CIT REPORTED IN 199 TAXMAN 331(CAL). IN RESPONSE TO THIS, THE LD. SR.DR VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND F URTHER STATED THAT LOAN BALANCES AS APPEARING IN THE BOOKS WOULD BE LIABLE TO BE ADDED/ TAXED AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. THE FACTS AS STATED HEREIN ABOVE REMAIN UNDISPUTED AND HENCE THE SAME ARE NOT REITERATED FOR THE SAKE OF BREVITY. WE FIND THAT THOUGH THE L OAN BALANCE OF RS.15,45,000/- IS NOT REFLECTED/CREDITED IN THE BANK STATEMENT OF THE ASS ESSEE, BUT THE SAME HAS BEEN DULY REFLECTED/CREDITED IN THE BOOKS OF ACCOUNT AND BAL ANCE SHEET OF THE ASSESSEE ALONG WITH THE RETURN OF INCOME FILED BY THE ASSESSEE. WE AGREE WI TH THE ARGUMENTS OF THE LD.AR OF THE ASSESSEE THAT THERE CANNOT BE AN ESTOPPEL AGAINST THE STATUTE. WE FIND THAT BALANCE OF RS.15,45,000/- HAS BEEN DULY REFLECTED/CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS LOAN CREDITORS. THE PRIMARY ONUS IS ON THE ASSESS EE TO PROVE THE IDENTITY OF THE CREDITORS, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITORS BEING THREE NECESSARY INGREDIENTS AS CONTEMPLATED U/S. 68 OF THE ACT. WE FIND THAT IN THE INSTANT CASE THE LD.AR OF THE ASSESSEE HAD NOT PROVED THE IDENTITY OF CRED ITORS IN AS MUCH AS THE AMOUNTS ALLEGED TO HAVE BEEN RECEIVED FROM TWO PARTIES MENTIONED BY THE ASSESSEE HAVE NOT BEEN CREDITED IN THE BANK STATEMENTS OF THE ASSESSEE. WE ALSO FIN D THAT IT IS NOT THE CASE OF THE ASSESSEE THAT FICTITIOUS CREDIT ENTRY HAD BEEN MADE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. MOREOVER, THIS IS NOT POSSIBLE BECAUSE UNDER DOUB LE ENTRY SYSTEM OF ACCOUNTING, THE CORRESPONDING EXPENDITURE ACCOUNT OR ASSET ACCOUNT IS TO BE DEBITED WHILE CREATING THE LOAN CREDITOR (BEING LIABILITY) IN THE BOOKS OF ACC OUNT. OTHERWISE THE BALANCE SHEET WOULD NOT TALLY. AS STATED EARLIER, THERE IS NO ESTOPPEL AGAINST THE STATUTE. THE CASE LAWS AS RELIED ITA NO. 221/KOL/2013-B-AM M/S. SAROVER TRADE ASSOCIATES LTD 4 UPON BY THE LD.AR SUIT THIS PROPOSITION. BUT THE FA CTS BEFORE THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT WERE THAT THE ASSESSEE HAS MAD E CERTAIN WRONG/FICTITIOUS ENTRY IN THE ACCOUNTS AND FILED REVISED RETURN DULY RECTIFYING THE SAME. UNDER THOSE CIRCUMSTANCES, THE HONBLE CALCUTTA HIGH COURT HELD THAT A PARTICULA R INCOME IS NOT TAXABLE UNDER THE INCOME-TAX ACT, THEN IT CANNOT BE TAXED ON THE BASI S OF ESTOPPEL OR ANY OTHER EQUITABLE DOCTRINE. THUS, THE LD.AR FOR THE ASSESSEE HAS PLAC ED HIS RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. MRP FIRM MUAR (SUPRA). WE FURTHER FIND THAT THE LD.AR OF THE ASSESSEE HAD NOT BROUGHT ANY MATERIAL ON RECORD TO PROVE THAT IT WAS ONLY FICTITIOUS CREDIT ENTRY CORRESPONDING WITH FI CTITIOUS ASSET OR EXPENSES DEBITED/POSTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. WE FIND TH AT THE ASSESSEE HAS FAILED TO PROVE THE PRIMARY ONUS OF THE IDENTITY OF THE CREDITORS AS A PPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE FORM OF LOAN CREDITORS , THE ADDITI ON U/S. 68 IS TO BE MADE. OTHERWISE THE VERY PURPOSE OF PROVISION OF SECTION 68 WOULD STAND DEFEATED. ACCORDINGLY, GROUND NO.3 AS RAISED BY THE ASSESSEE BEFORE US IS DISMISSED. 3. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE ADDITION OF RS.54,475/- COULD BE MADE TOWARDS INCREASE IN SUNDR Y CREDITORS IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3.1. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE A SSESSEE CREATED A LIABILITY FOR EXPENSES PAYABLE SHOWN AS ON 31-03-2007 IN ITS BOOKS OF ACC OUNT AS BELOW:- I) KOCHAR KULTHIA AUDIT FEES RS. 3306/- II) CALCUTTA STOCK EXCHANGE LISTING FEES RS.10500 /- III) MCLEOD & CO. LTD RENT & MAINTENANCE CHARGES RS.30,192/- IV) CENTRAL DEPOSITORY SERVICE- DEPOSIT R S. 4490/- V) NICHE TECHNOLOGIES RTA FEES RS. 5587/- VI) TRANS SCAN SECURITIES ANNUAL CHARGES RS. 40 0/ - TOTAL : RS.54,475/- 3.2 THE LD.AO DUE TO NON FURNISHING OF ANY DOCUMENT S FROM THE SIDE OF THE ASSESSEE BROUGHT THE SAME TO TAX AS BOGUS CLAIM. ON 1 ST APPEAL, THE LD.CIT(A) FOUND THAT THESE LIABILITIES WERE CREATED TOWARDS EXPENSES OF THE ASSESSEE. ULTIMATELY, HE SOUGHT TO CONFIRM THE ADDITION MADE BY THE AO, BUT SHIFTED HI S STAND TO DISALLOWANCE OF REVENUE ITA NO. 221/KOL/2013-B-AM M/S. SAROVER TRADE ASSOCIATES LTD 5 EXPENSES FROM BOGUS SUNDRY CREDITOR. AGGRIEVED, T HE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 4. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX APPEAL ERRED IN CONFIRMI NG THE ADDITION OF RS.54,475 ON ACCOUNT OF STATUTORY EXPENSES INCURRED . SUCH ADDITION IS UNCALLED FOR AND UNJUSTIFIED AND HENCE THE SAME BE DELETED. 3.3. THE LEARNED AR OF THE ASSESSEE PLEADED THAT T HESE EXPENSES ARE FROM THE VERY NATURE OF THE SAME GENUINE BUSINESS EXPENDITURE. H ENCE, HE PLEADED BEFORE US FOR ALLOWANCE OF THE SAME. IN RESPONSE TO THIS, THE LD.DR VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 3.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. WE FIND FROM THE EXPENSES AS STATED ABOVE ARE GENU INE BUSINESS EXPENDITURE. HENCE, THE SAME ARE SQUARELY ALLOWABLE AS DEDUCTION. ACCORDING LY, WE HAVE NO HESITATION IN DELETING THE SAME ADDITION MADE IN THE SUM OF RS.54,475/-. ACCORDINGLY, THE GROUND NO.4 AS RAISED BY THE ASSESSEE IS ALLOWED. 4. DURING THE COURSE OF HEARING THE LD.AR OF THE AS SESSEE INFORMED THE BENCH THAT HE IS NOT PRESSING GROUND NOS. 1,2,5 & 6. THIS IS TAKE N AS A STATEMENT FROM THE BAR. ACCORDINGLY, THESE GROUNDS OF THE ASSESSEE ARE DISM ISSED BEING NOT PRESSED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED AS STATED ABOVE. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 22 -01- 2016 SD/- ( N.V. VASUDEVAN, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE 22 -01-2016 ITA NO. 221/KOL/2013-B-AM M/S. SAROVER TRADE ASSOCIATES LTD 6 1.. THE APPELLANT: M/S. SAROVER TRADE ASSOCIATES L TD C/O D.J. SHAH & CO, KALYAN BHAVAN, 2 ELGIN ROAD, KOLKATA-700 020. 2 THE RESPONDENT-INCOME-TAX OFFICER, WARD 5(2), AA YKAR BHAVAN, 7 TH FL, P-7 CHOWRINGHEE SQ, KOL-69. 3 /THE CIT, 4.THE CIT(A ) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP SPS COPY OF THE ORDER FORWARDED TO:-