Sri Arun Kumar Poddar, Kolkata V. DCIT, Circle - 44, Kolkata , Kolkata

ITA 2424/KOL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 3822 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 26-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S M SURANA
• Keywords: Principle of natural justice; Set aside
• Section: 147; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA C BENCH, KOLKATA (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER) I.T.A. NO. 2424/KOL/2016 ASSESSMENT YEAR: 2010-11 SRI ARUN KUMAR PODDAR..................APPELLANT 375, PRINCE ANWAR SAHA ROAD SOUTH CITY TOWER 1 FLAT 13K KOLKATA 700 068 [PAN : AFKPP 4352 B] VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-44, KOLKATA.........RESPONDENT APPEARANCES BY: SHRI S.M. SURANA, ADVOCATE, APPEARED ON BEHALF OF THE ASSESSEE. ALTAF HUSSAIN, JCIT, SR. D/R APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JULY 22 ND , 2019 DATE OF PRONOUNCING THE ORDER : AUGUST 14 TH , 2019 ORDER PER J. SUDHAKAR REDDY, AM :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 13, KOLKATA, (HEREINAFTER THE LD. CIT(A)), DT. 31/08/2016, PASSED U/S 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT), RELATING TO ASSESSMENT YEAR 2010-11. 2. THE ASSESSEE IS AN INDIVIDUAL AND DEALS IN THE BUSINESS OF DIAMOND IMITATION JEWELLERY, AS A PROPRIETOR, UNDER THE TRADE NAME A.P. JEWELLERS. HE DID NOT FILE HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12. HENCE, THE CASE WAS REOPENED U/S 147 OF THE ACT AND NOTICE WAS ISSUED U/S 148 OF THE ACT. THEREAFTER, THE ASSESSEE FILED A BELATED RETURN OF INCOME ON 31/03/2013, DECLARING TOTAL INCOME OF RS.17,94,149/-. A SURVEY U/S 132A OF THE ACT, WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 12/02/2010. AS PER THE ASSESSMENT ORDER, THE SURVEY TEAM HAD GIVEN THE FOLLOWING FINDINGS DURING THE COURSE OF SURVEY:- A) THE ASSESSEE FAILED TO PRODUCE THE STOCK REGISTER FOR THE FINANCIAL YEAR 2009-10. 2 I.T.A. NO. 2424/KOL/2016 ASSESSMENT YEAR: 2010-11 SRI ARUN KUMAR PODDAR B) THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNTS FOR THE FINANCIAL YEAR 2009- 10 UP TO THE DATE OF SURVEY. C) THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNTS FOR THREE EARLIER ASSESSMENT YEARS 2007-08, 2008-09 & 2009-10 THOUGH, HE CLAIMED TO MAINTAIN ACCOUNTS IN TALLY SOFTWARE VERSION 7.2. D) THE ASSESSEE COULD NOT PRODUCE PURCHASE VOUCHERS AS WELL AS MEMOS AND OTHER DETAILS FOR THE PERIOD 21/11/2009 AND 17/12/2009, TO THE DATE OF SURVEY. E) IN HIS DEPOSITION TAKEN ON 23/02/2010, THE ASSESSEE DECLARED AN ESTIMATE TURNOVER OF RS.40 LAKHS/- FOR THE SAID PERIOD FOR WHICH NO ENTRY WAS DONE. THE RETRIEVED ACCOUNT DISCLOSED SALES, FROM 05/11/2009 TO 25/12/2009 OF RS.1,50,58,480/-. THIS FIGURE WAS TAKEN INTO ACCOUNT IN DETERMINING CLOSING STOCK. F) NEGATIVE CASH BALANCE OF RS.35,46,044/- WAS DEDUCTED BY THE SURVEY TEAM AND THE ASSESSEE COULD NOT RECONCILE THE DIFFERENCE DESPITE OPPORTUNITIES. G) THE A/R FILED RECONCILIATIONS WHICH INCLUDED BANK TRANSACTIONS WHICH WERE NOT RECORDED AND THIS WAS TALLIED WITH THE BANK STATEMENTS OF VARIOUS BANK ACCOUNTS. H) THESE VOUCHERS PRODUCED TO EVIDENCE SALE OF GOLD ITEMS, CANNOT BE ACCEPTED, BECAUSE THE ASSESSEE FAILED TO ESTABLISH THAT THE SALES WERE VACATED BEFORE THE DATE OF SURVEY. I) THUS, PARTICULARS OF SALES IN CASH FURNISHED BY THE ASSESSEE AMOUNTING TO RS.23,23,759/-, FOR THE PERIOD 01/12/2009 TO 10/02/2010, CANNOT BE ACCEPTED. J) AN AMOUNT OF RS.22,56,014/- IS TREATED AS UNEXPLAINED CASH AND ADDED. K) ON STOCK, THE SURVEY TEAM FOUND DISCREPANCY OF RS.7.34 CRORES. IN THE ABSENCE OF STOCK REGISTERS, THE VALUE OF STOCK WAS CALCULATED AT RS.11.20 CRORES AS PER THE COMPUTERIZED ACCOUNTS OF THE ASSESSEE. L) THE DEPARTMENTAL VALUER VALUED THE CLOSING STOCK AT RS.3.86 CRORES ON PHYSICAL VERIFICATION OF THE CLOSING STOCK AS THE DATE OF SURVEY. 2.1. THUS, THE SURVEY TEAM ASSUMED THAT THE STOCK AMOUNTING TO RS.7.34 CRORES WERE SOLD WITHOUT ENTERING THE SAME INTO THE BOOKS OF ACCOUNTS. 3 I.T.A. NO. 2424/KOL/2016 ASSESSMENT YEAR: 2010-11 SRI ARUN KUMAR PODDAR 2.2. DURING THE COURSE OF HEARING, BEFORE THE ASSESSING OFFICER, THE LD. A/R PRODUCED CASH BOOKS, PURCHASE AND SALE DETAILS ALONG WITH BANK STATEMENTS BUT AS PER THE ASSESSING OFFICER THEY COULD NOT BE RELIED UPON, AS THEY WERE NOT SUPPORTED WITH DOCUMENTS. THUS, THE BOOKS OF ACCOUNTS ARE REJECTED U/S 145(3) OF THE ACT BY THE ASSESSING OFFICER AND THE TOTAL INCOME OF THE ASSESSEE IS COMPUTED BY RELYING UPON THE FINDINGS OF THE SURVEY TEAM AND BY RELYING ON PARTLY ON THE IMPOUNDED PAPERS DURING THE COURSE OF SURVEY AND ALSO BY RECASTING THE PROFIT AND LOSS ACCOUNT BY MAKING CERTAIN ASSUMPTIONS. THE GROSS PROFIT WAS DETERMINED AT RS.5,75,78,615/-. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE LD. FIRST APPELLATE AUTHORITY, FOR THE VARIOUS REASONS GIVEN IN HIS ORDER, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 3. FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 1 1) FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING NET PROFIT AS PER RECAST TRADING ACCOUNT OF RS. 1,55,94,000/- INSTEAD OF NET PROFIT OF RS. 22,28,611/- AS PER PROFIT & LOSS ACCOUNT OF PROPRIETORSHIP CONCERN A. P. JEWELLERS. 2 2) FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN NOT CONSIDERING THE GROUND TAKEN THAT LD. DCIT ERRED IN NOT CONSIDERING EXPENSES AND LOSSES OF RS. 7,46,887/- INCURRED IN PERSONAL PROFIT AND LOSS ACCOUNT WHILE COMPUTING INCOME UNDER THE HEAD INCOME FROM BUSINESS. 3) FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING ADDITION OF A SUM OF RS. 1,33,28,276/- ON THE ALLEGED ACCOUNT OF OUT OF BOOK SALE FOR THE PERIOD 1.4.2009 TO 12/2/2010 (BEING THE DATE OF SURVEY) 4) FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING ADDITION OF A SUM OF RS. 27,20,485/- ON ACCOUNT OF OUT OF BOOK SALES FOR THE PERIOD 13.2.2010 TO 31.3.2010 5) FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING ADDITION OF A SUM OF RS. 22,56,014/- ON ACCOUNT OF ALLEGED CASH SHORTAGE. 3 6) FOR THAT YOUR APPELLANT CRAVES LEAVE TO ADDUCE FURTHER OR OTHER GROUND/GROUNDS, IF ANY' ON OR BEFORE THE HEARING OF APPEAL. 4. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS:- 4 I.T.A. NO. 2424/KOL/2016 ASSESSMENT YEAR: 2010-11 SRI ARUN KUMAR PODDAR 5. THE MAIN GRIEVANCE OF THE ASSESSEE IS ON THE ISSUE OF ASSUMPTIONS OF INCOME MADE BY THE ASSESSING OFFICER, TO THE EXTENTS CONFIRMED BY THE LD. CIT(A). THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNTS AND THAT, THE BOOKS OF ACCOUNTS PRODUCED BY THE ASSESSEE AT A LATER STAGE WERE REJECTED BY THE ASSESSING OFFICER U/S 145(3) OF THE ACT AND A BEST JUDGMENT ASSESSMENT HAS BEEN PASSED. THE LD. CIT(A) AFTER CONSIDERING THE VARIOUS SUBMISSIONS OF THE ASSESSEE AND THE REPLIES OF THE ASSESSING OFFICER TO THE QUERIES RAISED BY THE LD. CIT(A), HELD AS FOLLOWS:- 1) THE AVERAGE GROSS PROFIT FOR THE ASSESSMENT YEAR 2006-07 TO 2009-10 IS 20.50%. 2) THE CLAIM OF THE APPELLANT FOR TAKING EXCESS OPENING STOCK VIDE RS.3,86,13,753/-, CANNOT BE ACCEPTED BECAUSE THE OPENING STOCK FOUND FROM THE COMPUTER DURING THE COURSE OF SURVEY DISCLOSES OPENING STOCK OF RS.9,34,98,067/-. 3) THE PURCHASES BETWEEN 01/04/2009 TO 01/12/2009 AND BETWEEN 02/12/2009 AND 04/12/2009 ARE TAKEN FROM THE COMPUTER PRINT OUT FOUND IN THE COMPUTER DURING THE COURSE OF SURVEY. 5.1. THUS, THIS WORKING OF THE SURVEY TEAM WAS ACCEPTED BY THE LD. CIT(A) WITH A SOLE CORRECTIONS OF GROSS PROFIT (GP) RATE APPLICABLE. THE GP RATE OF 20.50% WAS TAKEN IN PLACE OF 30% ADOPTED BY THE ASSESSING OFFICER. ON THIS GROSS PROFIT, EXPENSES WERE ESTIMATED AT RS.24,95,455/- AND THE BALANCE WAS TAKEN AS NET PROFIT. REGARDING THE PURCHASE FROM 01/04/2009 TO 01/12/2009 AND FROM 02/12/2009 TO 01/12/2009, THE GP RATE WAS TAKEN AT 20.50% AND BOOK STOCK WORKED OUT. THE DIFFERENCE BETWEEN SUCH BOOK STOCK AND THE ACTUAL STOCK FOUND DURING INSPECTION ON THE DATE OF SURVEY WAS TAKEN AS SUPPRESSED SALES AND THE PROFIT ON THE SAME WAS ESTIMATED AT 20.50% AND BROUGHT TO TAX. SIMILARLY, THE NEGATIVE CASH BALANCE ADDED BY THE ASSESSING OFFICER AS INCOME, WAS UPHELD BY THE LD. CIT(A) ON THE GROUND THAT THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE SAME. 6. AN EXAMINATION OF THE ORDER OF THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) DISCLOSES THAT THE OPENING STOCK FIGURE WAS TAKEN IS CORRECT AS THIS WAS THE CLOSING STOCK FIGURE IN THE FINAL ACCOUNTS WHILE COMPLETING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2009-10. WE FIND THAT THE CLOSING STOCK IS TAKEN ON THE BASIS OF COMPUTER PRINT OUTS, THOUGH, THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED AND THE AUTHORITIES HAVE HELD THAT THE 5 I.T.A. NO. 2424/KOL/2016 ASSESSMENT YEAR: 2010-11 SRI ARUN KUMAR PODDAR ASSESSEE IS NOT MAINTAINING PROPER STOCK REGISTERS. THUS, THE ADOPTION OF THE FIGURE FORM THE COMPUTER PRINT OUT, THOUGH SIGNED BY THE ASSESSEE DURING THE COURSE OF SURVEY, CANNOT BE THE BASIS OF DETERMINING THE CLOSING STOCK, SPECIFICALLY WHEN THE SURVEY TEAM HAS CONDUCTED AN INSPECTION AND THE DEPARTMENTAL VALUER HAS FOUND THE VALUE OF THE CLOSING STOCK AS ON THE DATE OF SURVEY AT RS.3,86,13,753/-. INCOMPLETE, UNRELIABLE AND REJECTED BOOKS OF ACCOUNTS AND STOCK BOOKS, CANNOT BE THE BASIS FOR COMPUTING PROFITS OR STOCKS. IF THE FIGURES OF THE VALUER, WHO HAS DONE PHYSICAL VERIFICATION. ARE TAKEN, THEN THE COST OF STOCK BASED ON THE GROSS PROFIT AND NET PROFIT DERIVED BY THE ASSESSEE HAS TO BE WORKED OUT FOR THE LAST FOUR YEARS. THIS EXERCISE HAS TO BE DONE BY THE ASSESSING OFFICER. REGARDING THE OTHER ADDITION ON THE GROUND THAT THERE IS CASH DEFICIT, WE HOLD THAT WHEN THE BOOKS OF ACCOUNTS ARE REJECTED, THE QUESTION OF COMING TO A CONCLUSION THAT THERE IS CASH DEFICIT IS WRONG. 7. THE COURTS HAVE, IN A NUMBER OF DECISIONS LAID DOWN THE PRINCIPLES ON WHICH A BEST JUDGMENT ASSESSMENT CAN BE DONE WHEN BOOKS OF ACCOUNTS ARE REJECTED. THIS ASSESSMENT HAS TO BE DONE BY COMPLYING WITH THE PRINCIPLES OF NATURAL JUSTICE AND BASED ON RELEVANT MATERIAL AND DATA. BEST JUDGMENT ASSESSMENT CANNOT BE ARBITRARY, IT SHOULD BE DONE WITHOUT ANY BIAS AND ON A RATIONAL BASIS. FOR THESE PROPOSITIONS, WE RELY ON THE FOLLOWING CASE-LAW:- STATE OF KERALA VS. C. VELUKUTTY [1966] 60 ITR 239 (SC) CST VS H.M. ESUFALI H.M. ABDULALI 90 ITR 271 (SC) 7.1. APPLYING THE PROPOSITION OF LAW LAID DOWN IN THESE CASE-LAW TO THE FACTS OF THE CASE ON HAND, WE HOLD THAT THE ASSESSING OFFICER CANNOT MAKE A BEST JUDGMENT ASSESSMENT BASED ON BOOKS OF ACCOUNTS OR STOCK REGISTERS OR ANY OTHER FIGURES IN THE COMPUTER PRINTOUTS WHICH HAVE BEEN FOUND BY THE ASSESSING OFFICER OR THE BOOKS WHICH HAVE BEEN FOUND TO BE DEFECTIVE AND INCOMPLETE AND HENCE WERE REJECTED BY INVOKING SECTION 145(3) OF THE ACT. THESE ARE NOT RELEVANT MATERIAL. THE ASSESSING OFFICER IS BOUND TO COMPLETE ASSESSMENT IN A RATIONAL MANNER, BASED ON RELEVANT MATERIAL. THE CLOSING STOCK SHOULD BE TAKEN AND THE FIGURE OF VALUER WHO CONDUCTED PHYSICAL VERIFICATION AT THE INSTANCE OF THE DEPARTMENT. WITH THESE OBSERVATIONS, WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION, IN ACCORDANCE WITH LAW. 6 I.T.A. NO. 2424/KOL/2016 ASSESSMENT YEAR: 2010-11 SRI ARUN KUMAR PODDAR THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE INCOME AFRESH BY KEEPING IN MIND THE OBSERVATIONS MADE IN THIS ORDER. THE ASSESSEE IS FREE TO MAKE ANY FURTHER SUBMISSIONS OR PRODUCE EVIDENCE DURING THE COURSE OF THIS FRESH ASSESSMENT PROCEEDING. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. KOLKATA, THE 14 TH DAY OF AUGUST, 2019. SD/- SD/- [ S.S. VISWANETHRA RAVI ] [ J. SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 14.08.2019 {SC SPS} COPY OF THE ORDER FORWARDED TO: 1. SRI ARUN KUMAR PODDAR 375, PRINCE ANWAR SAHA ROAD SOUTH CITY TOWER 1 FLAT 13K KOLKATA 700 068 2. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-44, KOLKATA 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES