I.T.O Wd - 3(3),Purulia, Purulia V. Jamna Das Khothari(HUF), Purulia

ITA 2483/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1649 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 17-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 25-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT KUMAR KUREEL JCITSRDR
• Assessee Lawyers: ARVIND AGARWAL
• Keywords: Earning of tax free income
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 2459 & 2483 / KOL / 2013 ASSESSMENT YEAR :2008-09 JAMA DAS KOTHARI (HUF) PROP. OF SUKHDEODAS JAMUNDADAS, RANCHI ROAD, PURULIA-723101 [ PAN NO.AACHK 4506 M ] ITO WARD-3(3), INCOME TAX OFFICE, SOUTH LAKE ROAD, P.O. & DIT. PURULIA, PIN- 723101 V/S . V/S . INCOME TAX OFFICER,WARD-3(3), P.O. PURULIA, SOUTH LAKE ROAD, P.O. PURULIA, PIN-723101 JAMNA DAS KOTHARI (HUF), RANCHI ROAD, PURULIA, PIN-723101 /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI ARVIND AGARWAL, ADVOCATE /BY RESPONDENT SHRI RAJAT KUMAR KUREEL, JCIT-SR-DR /DATE OF HEARING 17-04-2017 ! /DATE OF PRONOUNCEMENT 02-06-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THESE ARE CROSS-APPEAL BY THE ASSESSEE AS WELL AS REVENUE IS DIRECTED AGAINST THE COMMON ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), ASANSOL DATED 19.08.2013. ASSESSMENT WAS FRAMED BY JCIT, RA AAAAAANGE-3, ASANSOL, U/S 144 OF THE INCOME TAX ACT, 1961 (HEREI NAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 03.11.2010 FOR ASSESSMEN T YEAR 2008-09. ITA NO.2459 & 2483/KOL/2013 A.Y. 2008-09 JAMNA DAS KOTHARI (HUF) VS. ITO WD-3(3) PURUL IA PAGE 2 SHRI ARVIND AGARWAL, LD. ADVOCATE APPEARED ON BEHAL F OF ASSESSEE AND SHRI RAJAT KUMAR KUREEL, LD. DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF REVENUE. 2. BOTH THE APPEALS ARE HEARD TOGETHER AND ARE BEIN G DISPOSED OF BY WAY OF COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BRE VITY. FIRST WE TAKE UP ASSESSEES APPEAL IN ITA NO.2459/K OL/2013 . 3. GROUND NO. 1 TO 6 ARE INTER-RELATED AND THEREFOR E BEING TAKEN UP TOGETHER FOR THE SAKE OF CONVENIENCE. THE FIRST ISSUE RAISED BY THE ASSESSEE IS THAT LD. CIT(A) ERRED IN ESTIMATING THE PROFIT @ 1.5% OF THE TOTAL TURNOVER. 4. THE FACTS IN BRIEF ARE THAT ASSESSEE IS A HINDU UNDIVIDED FAMILY AND IS ENGAGED IN WHOLESALE BUSINESS OF CLOTH. THE ASSESSI NG OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS REQUESTED THE ASSE SSEE TO FURNISH THE DETAILS IN RESPECT OF SEVERAL ITEMS SHOWN IN HIS FI NANCIAL STATEMENT. BUT THE ASSESSEE FAILED TO FURNISH THE SAME AND THEREFORE A O DISALLOWED THE SAME AS DETAILED HEREUNDER:- I) SUNDRY CREDITORS FOR GOODS 4860626 II) ADVANCE FROM THE CUSTOMERS OF 58,980/- III) VARIOUS EXPENSES OF 4,52,992/- IV) EXPENSES IN RELATION TO EXEMPT INCOME OF 91,893/- V) INTEREST EXPENSES OF 5,55,579/- THUS, THE ASSESSING OFFICER DISALLOWED THE ABOVE IT EMS OF SUNDRY CREDITORS, EXPENSES ETC., AND ADDED TO THE TOTAL INCOME OF ASS ESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT DULY AUDI TED FINANCIAL STATEMENTS ALONG WITH AUDITORS REPORT U/S 44AB OF THE ACT WER E FILED ALONG WITH RETURN OF INCOME. THUS, THE AO BEFORE MAKING ANY DISALLOWANCE SHOULD HAVE MADE REFERENCE TO THE AUDITED FINANCIAL STATEMENTS AS WE LL AS ANALYSIS WITH THE EARLIER YEARS FINANCIAL STATEMENT OF ASSESSEE. THE ASSESSEE BEFORE LD. CIT(A) ALSO SUBMITTED THAT THE DIFFERENCE IS ARISIN G BETWEEN THE AMOUNT OF SUNDRY CREDITORS DUE TO THE FACT THAT CERTAIN BILLS WERE RAISED AT THE FAG-END OF ITA NO.2459 & 2483/KOL/2013 A.Y. 2008-09 JAMNA DAS KOTHARI (HUF) VS. ITO WD-3(3) PURUL IA PAGE 3 THE FINANCIAL YEAR WHICH WERE NOT ENTERED IN ITS BO OKS OF ACCOUNT. HOWEVER, LD. CIT(A) OBSERVED THAT THE ASSESSEE FAILED TO PRO DUCE THE BOOKS OF ACCOUNT AND THEREFORE HE PROCEEDED TO ESTIMATE THE INCOME O N THE BASIS OF AVAILABLE INFORMATION. THUS, LD. CIT(A) PARTLY ALLOWED ASSESS EES APPEAL BY OBSERVING AS UNDER:- 12. IN THE SITUATION DESCRIBED ABOVE, A FAIR ASSESS MENT, IN MY VIEW IS TO ESTIMATE INCOME AT A PERCENTAGE OF TURNOVER. SINCE POWER OF CIT(A) IS CO- TERMINUS WITH THAT OF ASSESSING OFFICER AND IN VIEW OF EXPLANATION TO SECTION 251, I INVOKE THE POWER TO DETERMINE INCOME IN SUCH MANNER. THE GROSS PROFIT AND NET PROFIT DISCLOSED BY APPELLANT IS AS UNDER:- A.Y TURNOVER RATE OF GROSS PROFIT RATE OF NET PROFI T 2005-06 146394572 2.36% 0.26% 2006-07 148870624 2.56% 0.35% 2007-08 123418019 2.65% 0.44% 2008-09 117814321 2.80% 0.45% AS CORRECTNESS AND COMPLETENESS OF ACCOUNTS IS UNKN OWN PITCHING ESTIMATION CLOSED TO THE DISCLOSED RATE OF INCOME IN THE PRECE DING AY IS NOT FAIR. DISCREPANCIES WERE NOTED BY ASSESSING OFFICER IN RE GARD TO CUSTOMER BALANCE, EXPENDITURE DETAILS INCOMPLETENESS ETC. IF INCOME IS PITCHED CLOSE TO WHAT IS BEING DISCLOSED, NECESSARY ADJUSTMENTS AS W ARRANTED UNDER CHAPTER IV-D OF INCOME TAX ACT 1961 WILL NOT STAND EFFECTED . FURTHER PITCHING CLOSE TO GROSS PROFIT OF PRECEDING ACTS AS AN INCENTIVE TO N ON PRODUCTION OF BOOKS OF ACCOUNTS. HENCE I AM OF THE VIEW THAT A FAIR ESTIMA TION, WHICH IS IN NO MANNER HIGH PITCHED WILL BE TO 1.5% OF TURNOVER. THIS FIGU RE IS CONSIDERED KEEPING IN MIND JUDICIAL DECISIONS INCLUDING STATE OF KERALA V S. C VELUKUTTY (1966) 60 ITR 239 AND THE FACTS AND CIRCUMSTANCES OF THE CASE AND IS CONSIDERED A BALANCE BETWEEN UNDERPITCHED AND OVERPITCHED ESTIMATION. TH E ASSESSING OFFICER IS DIRECTED TO FIX INCOME ACCORDINGLY, SUBJECT TO DIRE CTIONS IN PARAGRAPHS 14 AND 15. 13. THE DECISION IN REGARD TO DISALLOWANCE 40(A))(I A) IS DEALT WITH NEXT. IT IS AN ARTIFICIAL DISALLOWANCE BASED ON A TECHNICAL DEFAUL T. SUCH DISALLOWANCE CANNOT BE ABSORBED IN THE ESTIMATION AS ABOVE BECAUSE IF T WO ASSESSEE IN EXACTLY IDENTICAL POSITION PERFORM DIFFERENTLY IN ASPECT OF COMPLIANCE TO A SPECIFIC PROVISION OF THE INCOME TAX ACT 1961 (HERE DEDUCTIO N OF TAX AT SOURCE UNDER SECTION 194A), HIS INCOME VARIES. THIS IS DUE TO TH E FACT THAT AS AGAINST REAL INCOME. INCOME TAX ACT 1961 TAXES INCOME COMPUTED I N THE MANNER STIPULATED IN THE ACT. THEREFORE I HOLD THAT ADDITI ON OVER AND ABOVE WHAT HAS BEEN DETERMINED ABOVE IS NEEDED. 14.ON THE DISALLOWANCE UNDER SECTION 40(A)(IA), I D IRECT THE ASSESSING OFFICER TO MAKE FURTHER ADDITION ONLY IN RESPECT OF THOSE P ERSONS TO WHOM INTEREST IS CREDITED AND FROM WHOM APPELLANT HAS NOT OBTAINED F ORM 15G. THE FORWARDING OF SUCH FORM 15G TO CIT IS NOT MATERIAL TO THE DECI SION TAKING CUE FROM THE DECISION IN ITO, WARD-2(3), KOLKATA VS. M/S LINK CO NSULTANTS PVT. LTD. OF ITAT A BENCH, KOLKATA DATED 29.11.2011. THE ASSESSING OFFICER IS DIRECTED TO ITA NO.2459 & 2483/KOL/2013 A.Y. 2008-09 JAMNA DAS KOTHARI (HUF) VS. ITO WD-3(3) PURUL IA PAGE 4 MAKE VERIFICATION OF RECORD I.E. WHETHER FORM 15G R ECEIVED IN TIME IN THIS REGARD AND IF RECEIVED, NOT TO EFFECT ANY ADDITION. 15. IT IS CLARIFIED THAT DEDUCTION UNDER SECTION 80 C AS ALLOWED IN ASSESSMENT IS TO GRANTED ON INCOME COMPUTE DIN MANNER SPECIFIED I N PARAGRAPH 12 AND 14. 16. THE DECISION IN PARAGRAPH 12 DISPOSES OF GROUND S 2A, 2B, 3, 4, 5, 6 AND 7 OF APPEAL. THE DECISION IN PARAGRAPH 14 DISPOSES OF GROUNDS 8 AND 9. THE APPEAL IS PARTLY ALLOWED. NOW, BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) BO TH ASSESSEE AND REVENUE CAME IN CROSS-APPEAL ON THE FOLLOWING GROUNDS:- THE GROUNDS RAISED BY ASSESSEE READ AS UNDER:- 1) FOR THAT, IN VIEW OF FACTS AND CIRCUMSTANCES OF THE CASE, LD. COMMISSIONER OF INCOME TAX (APPEAL), ASANSOL ERRED ON FACTS AS W ELL AS IN LAW IN ESTIMATING INCOME @ 1.5% OF THE TURNOVER AS PER HIS BEST JUDGM ENT WITHOUT CONSIDERING THE MATERIAL ON RECORD IN PROPER PERSPECTIVE. 2) FOR THAT, WITHOUT PREJUDICE TO ABOVE LD. COMMISS IONER OF INCOME TAX (APPEAL), ASANSOL ERRED IN LAW AS WELL AS ON FACTS IN NOT APPRECIATING THE FACT THAT BOOKS OF ACCOUNTS WERE DULY MAINTAINED FOR THE YEAR UNDER APPEAL AND WHICH WERE ALSO AUDITED BY A CHARTERED ACCOUNTANT A ND THERE WAS NO ADVERSE REMARK BY THE AUDITOR. 3)FOR THAT, WITHOUT PREJUDICE, LD. COMMISSIONER OF INCOME TAX (APPEAL), ASANSOL FAILED TO CONSIDER THE EXPLANATION THAT BO OK OF ACCOUNT FOR THE YEAR WERE MISPLACED ON ACCOUNT OF SERIOUS DISPUTES AMON G MEMBERS OF HUF AND BUSINESS OF THE HUF WAS ULTIMATELY CLOSED IN F.Y 20 09-2010. 4) FOR THAT, WITHOUT PREJUDICE TO ABOVE, LD. COMMIS SIONER OF INCOME TAX (APPEAL), ASANSOL ERRED ON FACTS AS WELL AS IN LAW IN ESTIMATING INCOME IN MOST ARBITRARY MANNER WHILE HE HIMSELF ADMITTED IN THE SAID ORDER THAT EXPLANATION FURNISHED TO THE QUERIES OF LD. AO IS P LAUSIBLE. 5) FOR THAT, WITHOUT PREJUDICE TO ABOVE, ESTIMATE O F INCOME MADE @ 1.5% OF TURNOVER AT RS.1767214/- E.G. MORE THAN 4.2 TIMES O F DISCLOSED INCOME AT RS.429331/- (BEFORE DEDUCTION U/S 80C) CAN NEVER BE CALLED BEST JUDGMENT ASSESSMENT EITHER IN LAW OR ON PAST ASSESSMENTS. 6) FOR THAT, WITHOUT PREJUDICE TO ABOVE, IN THE FAC TS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ADJUDICATED THE GROUNDS OF APPEAL ADDUCED BEFORE HI M IN FAVOUR OF THE APPELLANT THAT THERE IS PLAUSIBLE EXPLANATIONS FOR ALLEGED DISCREPANCIES POINTED OUT IN THE ASSESSMENT ORDER BY THE ASSESSING OFFICE R. THE REVENUE HAS RAISED PER ITS GROUND AS UNDER:- 1. THAT, LD. CIT(A), ASANSOL HAS ERRED IN LAW AND O N FACTS BY ALLOWING THE RELIEF OF RS.60,20,070/- DISALLOWANCES MADE BY THE AO ON ACCOUNT OF DIFFERENCE INCLOSING AND OPENING BALANCE IN LIABILI TIES OF SUNDRY CREDITOR OF GOODS. ITA NO.2459 & 2483/KOL/2013 A.Y. 2008-09 JAMNA DAS KOTHARI (HUF) VS. ITO WD-3(3) PURUL IA PAGE 5 6. BEFORE US LD. AR FOR THE ASSESSEE FILED TWO SET OF PAPER BOOKS WHICH IS RUNNING PAGES FROM 1 TO 142 AND 1 TO 290 RESPECTIVE LY AND SUBMITTED THAT THE INCOME ESTIMATED BY LD. CIT(A) IS ON HIGHER SIDE. I T IS BECAUSE THE ASSESSEE HAS BEEN DECLARING HIS NET PROFIT BETWEEN .26% AND .45% IN THE EARLIER YEARS. THOUGH THE LD. CIT(A) HAS ESTIMATED THE PROFIT @ 1. 5% WHICH IS HIGHLY UNREASONABLE WHEREAS LD. DR FOR THE REVENUE SUBMITT ED THAT ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNT AT THE TIME OF ASSE SSMENT PROCEEDINGS, THEREFORE THE ADDITION MADE BY THE AO SHOULD BE SUS TAINED. LD. DR VEHEMENTLY RELIED ON THE ORDER OF AO. 7. WE HAVE HEARD RIVAL CONTENTIONS OF THE PARTIES A ND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN THE INSTANT CASE RELATES TO THE INCOME ESTIMATED BY THE LD. CIT(A) @ 1.5% OF THE TURNOVER. AS PER THE ARGUMENT OF THE LD.AR THAT ASSESSEE HAS BEEN DECLARING INCOME B ETWEEN .26% AND .45% IN THE EARLIER YEARS. ADMITTEDLY, THE ASSESSEE FAIL ED TO PRODUCE THE BOOKS OF ACCOUNT AT THE TIME OF ASSESSMENT. IT IS ALSO A FAC T TO DETERMINE THE ACTUAL INCOME THE BOOKS OF ACCOUNT PLAY THE CRUCIAL ROLE. IN THE ABSENCE OF BOOKS OF ACCOUNT, WE FIND THAT LD. CIT(A) HAD TO RESORT TO A CCEPT TO DETERMINE THE INCOME TO THE BEST OF HIS JUDGMENT. HOWEVER, THE IN COME IN THE CASE OF BASED JUDGMENT ASSESSMENT SHOULD BE WORKED OUT REASONABLE AND SCIENTIFIC MANNER. AS FROM THE SUBMISSION OF LD. AR WE FIND TH AT INCOME DECLARED IN THE EARLIER YEAR IS QUITE LESS THAN 1.5% AND SAME WAS A LSO ACCEPTED BY REVENUE. CONSIDERING THE FACTS AND TOTALITY WE ARE OF THE VI EW THAT THE INCOME ON ESTIMATED BASIS SHOULD BE .80% TO THE GROSS TURNOVE R OF THE ASSESSEE. IT IS BECAUSE THE AMOUNT OF PROFIT SHOWN BY ASSESSEE IN T HE EARLIER YEARS CANNOT BE SET ASIDE WHILE DETERMINING THE INCOME ON THE BA SIS OF BEST JUDGMENT. THEREFORE AFTER CONSIDERING THE TREND OF THE ASSESS EES BUSINESS WE DIRECT THE AO TO RE-COMPUTE THE PROFIT @ .80% OF THE TURNOVER. THIS GROUND OF ASSESSEES APPEAL IS PARTLY ALLOWED. 7.1 NOW COMING TO THE REVENUES APPEAL. WE FIND THA T THE AO HAS MADE THE ADDITION ON ACCOUNT OF DIFFERENCE BETWEEN THE C REDITORS SHOWN BY ASSESSEE VIS--VIS SHOWN BY THE RESPECTIVE PARTIES THOUGH THE ASSESSEE HAS ITA NO.2459 & 2483/KOL/2013 A.Y. 2008-09 JAMNA DAS KOTHARI (HUF) VS. ITO WD-3(3) PURUL IA PAGE 6 FILED THE RE-CONCILIATION THE DIFFERENCE BY STATING THAT CERTAIN BILLS WERE RAISED AT THE FAG-END OF THE YEAR WHICH WAS ACCOUNTED FOR IN THE SUBSEQUENT YEAR. IN SUCH SITUATION, IF THE DIFFERENCES ARE ADDED TO THE TOTAL INCOME OF ASSESSEE THEN THIS WILL LEAD TO DOUBLE TAXATION IN THE HANDS OF ASSESSEE. THEREFORE, WE FIND THAT THE IMPUGNED ORDER PASSED BY LD. CIT(A) B Y ESTIMATING THE INCOME IN THE AFORESAID FACTS AND CIRCUMSTANCES IS REASONABLE ENOUGH TO DETERMINE THE ACTUAL TAX LIABILITY. THUS, WE DO NOT FIND ANY INFI RMITY IN THE ORDER OF LD. CIT(A). THUS APPEAL OF THE REVENUE IS DISMISSED. 8. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED PAR TLY AND THAT OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 0 2/06/2017 SD/- SD/- (#$) () (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S &'(- 02/06 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-JAMNA DAS KOTHARI (HUF), PROP. OF SUKHDEO DAS JAMUNADAS RANCHI ROAD, PURUL IA-723101 2. /REVENUE-ITO, WARD-3(3), P.O. PURULIA, SOUTH LAKE R OAD, P.O PURULIA,723101 3.'0'12 3 / CONCERNED CIT 4. 3- / CIT (A) 5.6 78$$12, 12!, / DR, ITAT, KOLKATA 6.8;<=> / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 12!, ITA NO.2459 & 2483/KOL/2013 A.Y. 2008-09 JAMNA DAS KOTHARI (HUF) VS. ITO WD-3(3) PURUL IA PAGE 7