DCIT, CC-4(1), KOLKATA, Kolkata V. M/s B. S. Agarwal, Dhanbad

ITA 235/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0846 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 10-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBASH AGARWAL LD
• Assessee Lawyers: KALYAN NATH
• Keywords: Unexplained investment; Revision of order; Search and seizure; Assessment record
• Section: 143(3); 263; 132; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BE NCH, KOLKATA BEFORE : SHRI P.M. JAGTAP, ACCOUNTANT MEMB ER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 235/KOL/2015 A.Y 2009-10 DEPUTY COMMISSIONER VS. M/S. B.S.AGARWAL OF INCOME-TAX, CC-4(1) PAN: AACFM 6525C KOLKATA [APPELLANT ] [RESPONDENT ] APPLICANT/APPELLANT BY : SHRI KALYAN NATH, SR .DR RESPONDENT/DEPARTMENT BY : SHRI SUBASH AGARWAL , ADVOCATE, LD.AR DATE OF HEARING : 13-09-2017 DATE OF PRONOUNCEMENT : 06-12-2017 ORDER SHRI S.S.VISWANETHRA RAVI, JM: THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DT. 19-01-2015 OF THE CIT-A, 21, KOLKATA FOR THE A.Y 2009-10. 2. THE ONLY ISSUE IS TO BE DECIDED AS TO WHETHER TH E CIT-A IS JUSTIFIED IN DELETING THE IMPUGNED ADDITION OF RS. 71,93,038/- MADE U/S. 69 OF THE ACT IN THE FACTS AND CIRCUMSTANCES O F THE CASE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM AND DERIVING ITS INCOME FROM CONTRACT WORKS. T HE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.2 8,16,797/-. A SEARCH AND SEIZURE OPERATION U/S. 132 OF THE ACT WA S CONDUCTED. THE AO COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT ON 23-12-2010 ACCEPTING THE TOTAL INCOME AS RETURNED. 4. THE RELEVANT FACTS RELATING TO THE ISSUE IN HAND ARE THAT VIDE HIS ORDER PASSED U/S. 263 THE LD. CIT SET ASIDE THE ORD ER OF THE AO DECLARING THAT THE SAID ASSESSMENT ORDER IS ERRONEO US AND PRE-JUDICIAL ITA NO.235/KOL/2015 M/S. B.S. AGARWAL 2 TO THE INTEREST OF THE REVENUE AND DIRECTED THE AO TO MAKE FRESH ASSESSMENT BY EXAMINING THE RELEVANT RECORDS, THE C IT HAS OPINED THAT AO DID NOT CONSIDER PROPERLY THE AMOUNT OF DE MAND DRAFT RS.71,93,038/- AS SHOWN IN THE ASSET SIDE OF BALANC E SHEET AND WHICH SHOULD HAVE BEEN TAXED FOR THE A.Y UNDER CONSIDERAT ION AS IT WAS SHOWN OVER A PERIOD OF 2 YEARS. IN GIVING EFFECT OF THE PROCEEDINGS THE AO ASKED THE ASSESSEE TO EXPLAIN WHY THE SAID A MOUNT SHOULD NOT BE TREATED AS UNEXPLAINED INVESTMENT. IN RESPONSE TO SAID OBJECTION, THE ASSESSEE SUBMITTED THAT THE VALUE OF DRAFT AS S HOWN IN THE ASSET SIDE OF BALANCE SHEET IS AN AMOUNT TO BE REALIZED F ROM SUNDRY DEBTOR. SUCH DRAFT WAS NOT DEPOSITED IN THE BANK ACCOUNT ON CERTAIN ISSUES BETWEEN THE PARTNERS AND SINCE THE TIME PERIOD OF S UCH DRAFT IS ONLY 6 MONTHS AND IT CANNOT BE REALIZED AFTER SUCH PERIOD. THE ASSESSEE ALSO CONTENDED THAT THE SAME CANNOT BE TREATED AS UNEXPL AINED INVESTMENT AND REQUESTED THE AO TO TREAT THE SAME A S RECEIVABLE FROM DEBTORS. THE SAID SUBMISSION FOUND NOT ACCEPTA BLE TO THE AO AND ADDED THE SAME AS UNEXPLAINED INVESTMENT VIDE H IS ORDER DT. 20- 12-2013 PASSED U/S. 263 R.W.S 143(3) OF THE ACT 5. AGGRIEVED BY SUCH ORDER OF THE AO PASSED U/S.263 /143(3) OF THE ACT, THE ASSESSEE CHALLENGED THE SAME BEFORE TH E CIT-A. 6. BEFORE THE CIT-A THE CONTENTION OF THE ASSESSEE WAS THAT THE ASSESSEE HAD MADE INVESTMENTS IN FIXED DEPOSIT IN V ARIOUS BANKS SITUATED IN BOKARO IN EARLIER YEARS. OUT OF THE TOT AL FIXED DEPOSITS, A SUM OF RS.71,93,038/- WAS PRE-MATURED IN THE A.Y 20 08-09 I.E YEAR UNDER CONSIDERATION AND THE BANKS ISSUED DRAFTS TO THE TUNE OF RS.71,93,038/- IN FAVOUR OF THE ASSESSEE. BUT DUE T O SOME DISPUTES BETWEEN THE PARTNERS OF THE ASSESSEE FIRM, THE SAID DRAFT COULD NOT BE ENCASHED IN TIME. ACCORDINGLY, THE ASSESSEE FIRM RE DUCED THE SUM OF FD FROM ITS BOOKS OF ACCOUNTS AND SHOWN THE SAME AT RS.71,93,038/- IN THE A.Y UNDER CONSIDERATION AS DRAFT IN HAND IN ITS FINAL ACCOUNTS. BEFORE HIM THE ASSESSEE ALSO CONTENDED THAT THE SA ID DRAFTS OF ITA NO.235/KOL/2015 M/S. B.S. AGARWAL 3 RS.71,93,038/- WERE NOT ENCASHED AND WAS LYING AS R S.71,93,038/- IN THE ASSET SIDE OF THE ASSESSEE FIRM UNDER THE HE AD DRAFT IN HAND. 7. THE CIT-A AFTER CONSIDERING THE ABOVE SUBMISSION S OF ASSESSEE SOUGHT REMAND REPORT FROM THE AO. DURING THE REMAND PROCEEDINGS THE ASSESSEE WAS APPEARED BEFORE THE AO AND EXPLAIN ED THE CASE OF ASSESSEE WITH THE HELP OF RELEVANT EVIDENCES. CONS IDERING THE SAME THE AO REPORTED THE CIT-A THAT THE CONTENTION OF TH E ASSESSEE WAS CORRECT. 8. CONSIDERING THE SUBMISSIONS OF ASSESSEE TOGETHER WITH THE REMAND REPORT OF THE AO, THE CIT-A DIRECTED THE AO TO DELETE THE IMPUGNED ADDITION. RELEVANT PORTION OF THE CIT-A OR DER IS REPRODUCED HEREIN BELOW:- 5. SINCE, THERE WAS CHANGE IN THE EXPLANATION ABOU T SOURCE OF DRAFTS IN HAND AS SUBMITTED BEFORE THE AO AND SUBMITTED IN THE COURSE OF APPELLATE PROCEEDINGS AND THAT THE APPELLANT HAS SUBMITTED THE COPIES OF ALL THE B ANK DRAFTS AND BANK STATEMENT ETC., THEREFORE, THE COPY OF THE SUBMISSION AND DOCUMENTS FILED BY THE APPELLANT WERE FORWARDED TO THE AO VIDE LETTER NO.CIT(A)-21/KOL/RE MAND REPORT/BSA/14-15/558 DATED 12.12.2014. THE AO WAS ASKED TO VERIFY THE CONTENTI ON OF THE APPELLANT WITH REFERENCE TO THE DOCUMENTS FILED AND THE ASSESSMENT RECORDS THAT THE DRAFTS WERE ISSUED BY THE BANKERS OF THE APPELLANT FIRM OUT THE FIXED DEPOSIT S WITH THE BANK. IN RESPONSE, THE AO SUBMITTED HIS REPORT VIDE LETTER NO. DCIT/CC-4(1)/K OL/REMAND REPORT/2014- 15/404 DATED 08.01.2015. IN HIS REPORT, IT IS SUBMITTED BY THE AO THAT ORIGINAL ASSESSMENT WAS SET ASIDE U/S 263 OF THE ACT DUE TO REVENUE AUDIT O BJECTIONS. IN THE REMAND REPORT THE AO REPRODUCED THE FINDINGS IN THE ASSESSMENT ORDER TO MAKE ADDITION ON ACCOUNT OF DRAFTS IN HAND AND THE SUBMISSION FILED BY THE ASSE SSEE FIRM IN THE COURSE OF APPELLATE PROCEEDINGS. IT IS SUBMITTED BY THE AO THAT THE CON TENTION OF THE ASSESSEE HAS BEEN EXAMINED WITH REFERENCE TO THE RECORDS AVAILABLE AN D APPEARS TO BE IN ORDER. 5.1 THE COPY OF THE REMAND REPORT SUBMITTED BY THE AO WAS FORWARDED TO THE APPELLANT FOR COUNTER COMMENTS, IF ANY. IN RESPONSE, IT IS SU BMITTED BY THE APPELLANT THAT IN THE REMAND PROCEEDINGS, THE A.R. OF THE. ASSESSEE APPEA RED BEFORE THE AO AND EXPLAINED THE CASE OF THE ASSESSEE WITH THE HELP OF RELEVANT EVIDENCES WHICH WERE ON THE RECORD OF THE AO. AFTER CONSIDERING THE SAID DETAILS, THE AO HAS ACCEPTED IN THE REMAND REPORT THAT THE CONTENTION OF THE ASSESSEE IS IN ORDER. THUS, T HE AO HAS NOT DISPUTED THE CONTENTION OF THE ASSESSEE AS PER THE SUBMISSION AND HE WAS CO MPLETELY SATISFIED WITH IT. THEREFORE, THE ADDITION MADE BY THE AO U/S 69 OF THE ACT MAY B E DELETED AND THE GROUND MAY PLEASE BE ALLOWED. 6. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLA NT AND PERUSED THE ASSESSMENT ORDER. IT IS OBSERVED THAT IN THE CASE OF APPELLANT FIRM T HE ORIGINAL ASSESSMENT FOR THE A.Y. 2009-10 WAS COMPLETED U/S 143(3) OF THE ACT ON 23.1 2.2010 DETERMINING THE TOTAL INCOME AT RS.28,16,797/-. HOWEVER, DUE TO REVENUE A UDIT OBJECTIONS ON THE POINT OF DRAFTS IN HAND, THE ORDER U/S 143(3) WAS SET-ASIDE BY THE CIT, CENTRAL-ILL, KOLKATA BY INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT V IDE ORDER DATED 07.03.2013. ON PERUSAL OF THE REMAND REPORT SUBMITTED BY THE AO, I T IS OBSERVED THAT THE REVENUE AUDIT WAS OF THE VIEW THAT THE ASSESSEE FIRM HELD DRAFT-I N-HAND WERE NOT VALID FOR MORE THAN SIX MONTHS, THE INVESTMENT WOULD BE UNEXPLAINED INV ESTMENT BY THE FIRM AND THE VALUE OF INVESTMENT WOULD BE DEEMED TO BE INCOME OF THE A SSESSEE FOR THE FINANCIAL YEAR 2008-09 RELEVANT TO THE A.Y. 2009-10. ON EXAMINATIO N OF THE BALANCE SHEET OF THE APPELLANT AS ON 31.03.2008 IT IS OBSERVED THAT THE APPELLANT HAD ENCHASED THE FDR OF RS.12,70,69,991/-. HOWEVER, DUE TO DISPUTE AMONGST THE PARTNERS, THE DRAFTS OF RS.71,93,038/- WERE NOT DEPOSITED IN THE BANK ACCOU NT OF THE ASSESSEE FIRM AND, THEREFORE, REFLECTED SEPARATELY IN THE BALANCE SHEE T UNDER THE NOMENCLATURE 'D/D IN HAND' . SIMILAR WAS THE POSITION IN THE YEAR UNDER CONSIDERATION I.E. THE A.Y. 2009-10 THAT THE DRAFTS OF RS.71,93,038/- WERE STILL LYING UN-DEPOSITED IN THE BANK ACCOUNT AND AS ITA NO.235/KOL/2015 M/S. B.S. AGARWAL 4 SUCH REFLECTED IN THE BALANCE SHEET AS ON 31.03.200 9. IT IS NOT KNOWN THAT ON WHAT BASIS AND UNDER WHICH LAW THE REVENUE AUDIT OPINED THAT T HE DRAFTS IN HAND REFLECTED IN THE BALANCE SHEET AS ON 31.03.2009, ARE TO BE TREATED A S UNEXPLAINED INVESTMENT BECAUSE THEIR LIFE HAD ALREADY BEEN EXPIRED AFTER SIX MONTH S. IT IS OBSERVED THAT ON THIS POINT THE ORIGINAL ASSESSMENT ORDER WAS SET-ASIDE U/S 263 OF THE ACT. IN THE COURSE OF RE- ASSESSMENT PROCEEDINGS THE APPELLANT FIRM EXPLAINED THE FACTS BEFORE THE AO AND FILED A SUBMISSION THAT NO .ADDITION ON ACCOUNT OF DRAFT IN HAND COULD BE MADE U/S 69 OF THE ACT. HOWEVER, IN THE ORDER UNDER APPEAL, THE AO DID NOT ACCEPT THE SUBMISSION OF THE APPELLANT AND MADE THE ADDITION OF RS. 71, 93,038/- U/S 69 OF THE ACT. THOUGH, IN THE ASSESSMENT ORDER, THE AO MADE ADDITION U/S 69 OF TH E ACT ON ACCOUNT OF DRAFTS IN HAND AS OPINED BY THE REVENUE AUDIT BUT HE DID NOT GIVE ANY REASON FOR NOT ACCEPTING THE EXPLANATION OF THE APPELLANT FIRM FILED IN THE COUR SE OF ASSESSMENT PROCEEDINGS. ON CAREFUL CONSIDERATION OF THE FACTS AND IN LAW, I AM OF THE OPINION THAT UNDER NO CIRCUMSTANCES, THE DRAFTS IN HAND WHICH WERE REFLEC TED IN THE BALANCE SHEET OF THE APPELLANT COMPANY CAN BE TREATED AS UNEXPLAINED ASS ETS AND CONSEQUENTLY NO ADDITION CAN BE MADE U/S. 69 OF ACT ON ACCOUNT OF UNEXPLAINE D INVESTMENT. I AM OF THE OPINION THAT ONCE THE DRAFTS HAD BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE APPELLANT FIRM AND DULY DISCLOSED IN THE BALANCE SHEET, THEY CANNOT BE TREATED AS UNEXPLAINED EVEN IF THE LIFE SPAN OF SUCH DRAFTS WAS ONLY FOR THE SI X MONTHS. IF THE PERIOD OF SIX MONTHS HAS BEEN LAPSED, IT DOES NOT MEAN THAT THE MONEY HA D GONE FOREVER AND THE DRAFTS CANNOT BE REVALIDATED OR RE-ISSUED BY THE ISSUING B ANK BY PRODUCING THE EXPIRE DRAFTS TO THE BANK. IN FACT, IN THE COURSE OF APPELLATE PROCE EDINGS IT IS SUBMITTED BY THE APPELLANT THAT OUT OF THE DRAFTS OF RS.71,93,038/-, THE DRAFT S OF RS.49,00,000/- WERE CANCELLED BY THE BANK ON 12.02.2013 AND A FRESH DRAFT OF RS.49,0 0,000/- WAS ISSUED ON THE SAME DATE. THE BALANCE DRAFTS WERE STILL LYING WITH THE APPELLANT FIRM AS DRAFTS IN HAND SINCE THE DISPUTES BETWEEN THE PARTNERS ARE STILL CONTIN UING. IN VIEW OF ABOVE, IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS.71,93,038/- ON ACCOUNT OF DRAFTS IN HAND TREATING THEM AS UNEXPLAINED ASSETS U/S. 69 OF THE ACT. HE IS DIRECTED TO DELETE THE ADDITION MADE BY HIM. THE GROUND NO. 1 IS ALLOWED. 9. THE LD. DR RELIED ON THE AO. HE ALSO SUBMITS BEF ORE US THAT THE CIT-A WAS NOT JUSTIFIED IN ALLOWING RELIEF TO THE A SSESSEE OF RS.71,93,038/-. 10. ON THE OTHER HAND, THE LD.AR RELIED ON THE ORDE R OF THE CIT-A IN ALLOWING THE SAME. 11. HEARD RIVAL SUBMISSIONS AND PERUSED THE RECORD. WE FIND THAT THE CIT-A EXAMINING THE SUBMISSIONS OF ASSESSEE SOU GHT REMAND REPORT FROM THE AO, WHEREIN THE AO HAD ACCEPTED THE CONTENTION OF THE ASSESSEE BY WHICH THE CIT-A FOUND THAT THE BANK CANCELLED THE SAID DRAFT TO AN EXTENT OF RS. 49,00,000/- ON 12-02 -2013 AND ISSUED A FRESH DRAFT FOR THE SAME AMOUNT ON THE SAME DATE ITSELF. THEREFORE, IT IS TO BE NOTED THAT OUT OF TOTAL IMPU GNED AMOUNT OF DRAFTS RS.71,93,038/-, THE ASSESSEE REALIZED RS. 49 ,00,000/-. IT IS ALSO OBSERVED THAT THE ASSESSEE STATED DUE TO SOME PROBLEMS BETWEEN THE PARTNERS THAT DRAFT INITIALLY NOT ENCAS HED IN TIME AND IT CLEARLY SHOWS THAT THE SAID AMOUNT IS TO BE REALIZE D BY A PROCESS IN ITA NO.235/KOL/2015 M/S. B.S. AGARWAL 5 THE BANK. IT IS ALSO NOTED THAT THE ASSESSEE REQUES TED THE AO TO TREAT THE DRAFT AMOUNT AS RECEIVABLE FROM DEBTORS AND THE SAME CANNOT BE TREATED AS UNEXPLAINED INVESTMENT. IN OUR OPINION, THERE IS FORCE IN THE CONTENTION OF THE ASSESSEE IN STATING THAT THE SAID DRAFT AMOUNT ACTUALLY WAS NOT ENCASHED DURING THE VALIDITY OF TH E DRAFT AND THE SAME CANNOT BE TREATED AS UNEXPLAINED INVESTMENT. I N THIS REGARD, WE MAY REFER TO THE PROVISION OF SECTION 69 OF THE ACT FOR F.Y 2008 RELEVANT TO A.Y UNDER CONSIDERATION (2009-10), WHIC H IS AS UNDER:- SECTION - 69, INCOME-TAX ACT, 1961-2008 UNEXPLAINED INVESTMENTS. 33 69. WHERE IN THE FINANCIAL YEAR IMMEDIATELY PRECEDING T HE ASSESSMENT YEAR THE ASSESSEE HAS MADE INVESTMENTS WHICH ARE NOT RECORDE D IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINED BY HIM FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF THE INVESTMENTS OR T HE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE 32 [ASSESSING] OFFICER, SATISFACTORY, THE VALUE OF THE INVESTMENTS MAY BE DEEMED TO BE THE INCOME OF THE A SSESSEE OF SUCH FINANCIAL YEAR. 12. A PLAIN READING OF THE ABOVE PROVISION EXPLAINS THAT IN ORDER TO MAKE ADDITION U/S. 69 THE AO HAS TO SATISFY THAT TH E INVESTMENTS AS FOUND BY HIM WERE NOT RECORDED IN THE BOOKS OF ACCO UNT AND FOR NOT OFFERING PROPER EXPLANATION ABOUT THE NATURE AND SO URCE OF INVESTMENT. IF THE AO FINDS THAT THE EXPLANATION OF FERED BY THE ASSESSEE REGARDING THE NATURE AND SOURCE OF INVESTM ENT IS NOT ACCEPTABLE, HE CAN PROPOSE TO ADD THE SAME U/S. 69 OF THE ACT. IN THE PRESENT CASE, THE ASSESSEE HAS SHOWN THE VALUE OF D RAFT IN ASSET SIDE IN BALANCE SHEET, THEREFORE, THE QUESTION OF NOT RE CORDING THE SAME IN THE BOOKS OF ACCOUNT DOES NOT ARISE AT ALL. WE FIND THE ASSESSEE HAS ALSO EXPLAINED THE NON ENCASHMENT OF SAID DRAFT DUE TO SOME DISPUTES BETWEEN THE PARTNERS, WHICH CANNOT BE IGNORED. THER EFORE, THE ADDITION MADE BY THE AO U/S. 69 OF THE ACT IS MISCO NCEIVED AND IT IS NOT MAINTAINABLE UNDER LAW. THEREFORE, THE CIT-A WA S JUSTIFIED IN DELETING THE SAME. WE FIND NO INFIRMITY IN THE IMPU GNED ORDER OF THE CIT-A. THEREFORE, THE SOLE GROUND RAISED BY THE REV ENUE IN THIS REGARD FAILS AND IT IS DISMISSED. ITA NO.235/KOL/2015 M/S. B.S. AGARWAL 6 13. IN THE RESULT, THE APPEAL FILED BY THE REVE NUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06-12-2017 SD/- SD/- P.M. JAGTAP S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :06-12-2017 PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPLICANT/DEPARTMENT : THE DCIT, CC-4(1), KOLKATA AAYKAR BHAVAN POORVA, 110 SHANTI PALLI, E M BYE PAS S, 4 TH FLOOR, KOLKATA-107. 2 RESPONDENT/ASSESSEE: M/S. B.S AGARWAL, GANESHALAYA, JHARUDIH, DHANBAD-826001. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER SR.P.S, HEAD OF OFFICE ITAT KOLKATA