ITO, Ward - 53(1), Kolkata, Kolkata V. M/s. Baag Agencies, South 24 Parganas

ITA 257/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91911 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 16-02-2012
• Court: TRIBUNAL
• Department Lawyers: NILOY BARAN SOM
• Assessee Lawyers: V N PUROHIT
• Keywords: Business income
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI B. P. JAIN, AM ] I.T.A NO. 257 /KOL/20 12 ASSESSMENT YEAR : 200 5 - 0 6 INCOME - TAX OFFICER, WD - 5 3( 1 ), KOLKATA. VS. M/S. BAAG AGENCIES (PAN:AA DFB3322P ) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 2 3 .0 4 .2015 DATE OF PRONOUNCEMENT: 29 . 04 . 2015 FOR THE APPELLANT: SHRI NILOY BARAN SOM , JCIT FOR THE RESPONDENT: S HRI V. N. PUROHIT , FCA ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF CIT(A) - XXXII I , KOLKATA IN APPEAL NO. 166 / CIT(A) - XXXII I/ ITO WD - 53(1) / 07 - 08/KOLKATA DATED 22 . 11 .20 1 1 . ASSESSMENT WAS FRAMED BY ITO, WARD - 5 3 ( 1 ), KOLKATA U/S. 143(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR 200 5 - 0 6 VIDE HIS ORDER DATED 3 1 .12.20 07 . 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY AO ON ACCOUNT OF SUNDRY DEBTORS. FOR THIS, REVENUE HAS RAISED FOLLOWING TWO GROUNDS: 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) - XXXIII, KOLKATA, ERRED IN DELETING THE ADDITION OF RS.12,95,408/ - WITHOUT CONSIDERING THE FACTS OF THE CASE. 2. T HE LD. CIT(A) - XXXIII, KOLKATA, ERRED IN NOT ENHANCING THE ADDITION U/S. 251(1)(A) WHEN HE HIMSELF NOTED THE ARITHMETICAL MISTAKE IN THE ADDITION MADE BY THE ASSESSING OFFICER. 3 . BRIEFLY STATED FACTS ARE THAT DURING THE COURSE OF SURVEY U/S. 133A OF THE ACT BY THE REVENUE ON THE BUSINESS PREMISES OF THE ASSESSEE FOUND CERTAIN DOCUMENTS, WHICH WERE IMPOUNDED AS IDENTIFICATION MARK BAAG 60, 62. ACCORDING TO AO, THESE IMPOUNDED DOCUM ENTS WERE COMPUTER GENERATED SHEETS SHOWING SUNDRY DEBTORS AT RS.22,44,889/ - FOR THE PERIOD FROM APRIL, 2004 TO JULY, 2004. FURTHER, SUNDRY DEBTORS TO THE TUNE OF RS.55,08,708/ - FOR TEN MONTHS OF FY 2003 - 04 . IN VIEW OF THESE DOCUMENTS AO REACHED TO THE C ONCLUSION THAT THE ASSESSEE WAS ACTUALLY HAVING SUNDRY DEBTORS TO THE TUNE OF RS.60 LACS REPRESENTING SALES OVER AND ABOVE THE DISCLOSED SALES. WHEN 2 ITA NO. 257 /K/201 2 M/S. BAAG AGENCIES AY 200 5 - 0 6 CONFRONTED, ASSESSEE DENIED HAVING ANY CREDIT SALE AND, THEREFORE, NO SUNDRY DEBTORS. ACCORDING TO ASSESS EE S BOOKS OF ACCOUNT, THERE WAS NO SUNDRY DEBTOR. THE ASSESSEE CONTENDED THAT THE STATEMENT OF SUNDRY DEBTOR WAS IMAGINARY AND PREPARED ONLY FOR OBTAINING CASH CREDIT LIMIT FROM BANK AGAINST STOCK AND DEBTORS. BUT THE AO TREATED THE SUNDRY DEBTOR AS SUP PRESSED SALE AND APPLIED GROSS PROFIT @ 15.25% AND THEREBY ESTIMATED THE GROSS PROFIT ON THE TOTAL TURNOVER OF RS.22,95,918/ - . AS THE ASSESSEE HAS ALREADY DECLARED GROSS PROFIT AT RS.10,00,510/ - , THE BALANCE WAS ADDED AT RS.12,95,408/ - . AGGRIEVED, ASSESS EE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE ADDITION VIDE PARA 6.2 OF HIS APPELLATE ORDER AS UNDER: 6.2 I HAVE CONSIDERED FACTS OF THE CASE. IT IS TRUE THAT THE COMPUTER SHEETS SHOWING SUNDRY DEBTORS HAVE BEEN IMPOUNDED FROM THE PREMISES OF THE A PPELLANT AND THEREFORE THE NORMAL PRESUMPTION WOULD BE THAT THEY RELATE TO THE APPELLANT'S BUSINESS AND GIVE ITS TRUE PICTURE. HOWEVER, SUCH PRESUMPTION IS NOT ABSOLUTE AND THE ASSESSEE CAN REBUT THE PRESUMPTION BY BRINGING OUT THE FACTS BACKED BY MATERIAL EVIDENCE. IN THE APPELLANT'S CASE, IT IS ALL ALONG STATING THAT IT WAS NOT HAVING SUNDRY DEBTORS. ALTHOUGH THERE CANNOT BE ANY DIRECT EVIDENCE IN THIS REGARD, THE SURROUNDING CIRCUMSTANCES DO SUPPORT THE APPELLANT'S ASSERTION. ITS BALANCE SHEETS OVER THE YEARS DO NOT SHOW ANY SUNDRY DEBTORS. THE STATEMENT THAT THE NATURE OF BUSINESS IS SUCH THAT SALES ARE NOT ON CREDIT APPEARS TO BE REASONABLE. THE EXPLANATION GIVEN FOR THE COMPUTER SHEET SHOWING SUNDRY DEBTORS IS THAT THEY WAS ARTIFICIALLY GENERATED IN OR DER TO OBTAIN HIGHER CASH CREDIT LIMIT FROM THE BANK. IT IS COMMON KNOWLEDGE THAT BANKS GRANT CC LIMIT BASED ON FIGURE OF STOCK AND SUNDRY DEBTORS. BUSINESSMEN OFTEN INDULGE IN INFLATING THE FIGURES OF STOCK AND DEBTORS IN ORDER TO OBTAIN HIGHER CC LIMIT, SINCE BANK SELDOM MAKE INDEPENDENT VERIFICATION OF FIGURE SUPPLIED TO THEM. WHILE SUCH PRACTICE CANNOT BE APPROVED OF, PROPER ASSESSMENT SHOULD BE OF REAL INCOME, WHICH REQUIRES THAT SUCH PRACTICAL REALITY TO BE TAKEN NOTED OF. APART FROM THE SAID COMPUTER SHEETS NO EVIDENCE WAS GATHERED AT THE TIME OF SURVEY OR DURING THE ASSESSMENT REGARDING ANY UNDISCLOSED SALES. THE PERUSAL OF COMPUTER SHEETS SHOWS THAT THEY REPEAT CERTAIN NAMES SHOWING SMALL BALANCES DUE AT THE END OF VARIOUS MONTHS. THE APPELLANT'S AS SERTION THAT THEY WERE MADE UP IN ORDER TO OBTAIN CC LIMIT FROM THE BANK APPEARS TO BE CORRECT. THERE WAS ALSO MERIT IN THE ARGUMENT THAT, SINCE THE PURCHASES ARE ENTIRELY FROM THE REPUTED COMPANIES VIZ. HINDUSTAN LEVER LTD. AND AMUL, UNACCOUNTED PURCHASE AND CONSEQUENTLY UNDISCLOSED SALES ARE HARDLY POSSIBLE. THE ASSESSING OFFICER HAS ALSO ACCEPTED THAT IF ENTIRE AMOUNT OF SUNDRY DEBTORS IS TREATED AS UN - DISCLOSED SALE IT SHALL RESULT IN UNREALISTIC PROFIT RATE. THUS, IT APPEARS THAT THE COMPUTER SHEETS SH OWING SUNDRY DEBTORS DID NOT RE - PRESENT ACTUAL SUNDRY DEBTORS TO WHOM THE APPELLANT MADE UNDISCLOSED SALES ON CREDIT. IT MAY ALSO BE NOTED THAT IF SOME ASSESSEE MAKES UNDISCLOSED SALE SUCH SALES ARE NORMALLY MADE IN CASH AND NOT ON CREDIT. THEREFORE, THE P OSSIBILITY OF THE APPELLANT MAKING UNDISCLOSED SALES ON CREDIT SEEMS HIGHLY UNLIKELY, MORE SO WHEN THE DISCLOSED SALE SHOW NO SALE ON CREDIT. AS MENTIONED EARLIER, APART FROM THE COMPUTER SHEETS THERE WAS NO EVIDENCE REGARDING UNDISCLOSED SALE. NO DEFECT ( OTHER THAN SHORTAGE IN CASH BOOK DISCUSSED IN THE EARLIER GROUND) HAS BEEN POINTED OUT BY THE ASSESSING OFFICER. THEREFORE, IN MY OPINION, THE BOOK RESULTS OF THE APPELLANT CANNOT BE DISTURBED, MORE SO WHEN THE GROSS PROFIT SHOWN BY THE APPELLANT IS IN THE SAME RANGE AS SHOWN IN THE EARLIER YEARS AND ACCEPTED BY THE DEPARTMENT. IT WOULD ALSO NOT BE OUT OF PLACE TO MENTION THAT THE ASSESSING OFFICER HAS GIVEN NO BASIS WHATSOEVER FOR 7% RATE APPLIED BY HIM. THERE ALSO APPEARS TO BE SOME ARITHMETICAL ERROR IN HIS COMPUTATION OF PROFIT BECAUSE 7% OF TOTAL SALES DOES NOT MATCH WITH THE FIGURE TAKEN BY HIM. 3 ITA NO. 257 /K/201 2 M/S. BAAG AGENCIES AY 200 5 - 0 6 AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE HAS FILED COMPLETE DETAILS OF SALES AND PURCHASES, WHICH CLEARLY SHOW THAT SALES ARE NOT ON CREDIT RATHER IT IS BY WAY OF C ASH SALE OR ON RECEIP T OF CHEQUES. THE AO COULD NOT POINT OUT FROM THE BOOKS OF ACCOUNT THAT THERE IS CREDIT SALE. THE PURCHASES ARE ALSO MADE ENTIRELY FROM REPUTED COMPANIES LIKE HINDUSTHAN LEVER LTD. AND AMUL. CONSEQUENTLY UNACCOUNTED PURCHASES AND UNACCOUNTED SALES A RE NOT AT ALL POSSIBLE. EVEN THE ASSESSMENT ORDER DOES NOT SHOW OR DOES NOT PROVE ANYTHING BY COGENT EVIDENCE THAT ASSESSEE HAS INDULGED IN ANY UNACCOUNTED PURCHASES OR UNACCOUNTED SALES. THE ASSESSEE HAS GENERATED THE COMPUTER SHEETS REFLECTING SUNDRY D EBTORS JUST TO AVAIL THE CASH CREDIT LIMIT BASED ON THE FIGURES OF STOCK AND SUNDRY DEBTORS WHICH WERE NOT INFLATED FIGURES OF STOCK AND DEBTORS. AS THERE IS NO DEFECT POINTED OUT BY THE AO OR THE BOOK RESULT, WHICH WAS NOT REJECTED, WE FEEL THAT THE ADDI TION HAS RIGHTLY BEEN DELETED BY CIT(A) AND WE CONFIRM THE SAME. THE APPEAL OF REVENUE IS DISMISSED. 5 . IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 6 . ORDER IS PRONOUNCED IN THE OPEN COURT ON 2 9 . 0 4 . 2 0 1 5 S D / - S D / - ( B. P. JAIN ) (MAHAVIR SINGH) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED : 2 9 T H APRIL , 201 5 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . A PPELLANT ITO, WARD - 5 3( 1 ), KOLKATA . 2 RESPONDENT M/S. BAAG AGENCIES, NUNGI STATION ROAD, P.O. BATANAGAR, 24 PGS(S) - 700140 3 . THE CIT (A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .