ITO, Ward-2(1), Midnapore, Paschim Medinipur V. Shri Binod Kumar Agarwala, Paschim Medinipur

ITA 325/KOL/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4946 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-08-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 22-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDIPTA GUHA
• Assessee Lawyers: SANJAY BHAUMIK
• Keywords: Reopening of assessment; Source of fund; Competent authority
• Section: 133A; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A, KOLKATA (BEFORE SHRI P. M. JAGTAP, A.M. & SHRI S.S.VISWANET HRA RAVI, J.M.) ITA NO. 325/KOL/2011 : AS STT. YEAR : 2004-2005 I.T.O., WARD-2(1) MIDNAPORE VS BINOD KUMAR AGARWALA (PAN: ADDPA 3576F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDIPTA GUHA, JCIT, SR.DR RESPONDENT BY : SHRI SANJAY BH AUMIK, ADVOCATE DATE OF HEARING : 04.01.2016 DATE OF PRONOUNCEMENT : 02-03-2016 ORDER PER SHRI S.S.VISWANETHRA RAVI, J.M . THIS APPEAL IS FILED BY THE REVENUE HAVING AGGRIEVE D BY THE ORDER DATED 01.12.2010 PASSED BY THE CIT(APPEALS)-XXXVI, KOLKATA IN APPEAL NO.997/CIT(A)-XXXVI/KOL/R-2,MID./09-10 FOR T HE ASSESSMENT YEAR 2004-05 FRAMED UNDER SECTION 147/143(3) OF I.T .ACT. 2. CHALLENGING THE IMPUGNED ORDER ABOVE, THE APPELL ANT REVENUE RAISED FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-XXXVI/ KOLKATA HAS ERRED IN GIVING OPINION T HAT THE NET PROFIT DISCLOSED IN THE BALANCE SHEET FILED WIT H THE BANK OF RS.5,23,660/- SHOULD BE CONSIDERED AS TOTAL INCO ME OF THE ASSESSEE IN PLACE OF ASSESSED INCOME OF RS.1,53,03, 900/- WITHOUT APPRECIATING THE FACTS THAT THE FIGURES UND ER DIFFERENT HEADS SHOWN IN AUDITED ACCOUNTS SUBMITTED ALONG WITH THE RETURN OF INCOME WERE FAR DIFFER FROM THE FIGURES UNDER THE SAME HEADS SHOWN IN THE AUDITED ACCOUNTS SUBMITTED TO THE BANK. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-XXXVI/ KOLKATA HAS ERRED IN DELETING THE ADD ITION OF 2 ITA NO.325/KOL/2011 B INOD KUMAR AGARWALA ASSESSMENT YEAR: 2004-05 RS.7,50,000/- MADE BY THE A.O. UNDER THE HEAD PURCH ASE OF RICE MILL FROM UNDISCLOSED SOURCES. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A N INDIVIDUAL AND OWNER OF A RICE MILL CONDUCTING HIS BUSINESS IN THE NAME AND STYLE AS JHARGRAM RICE MILL AND FILED HIS RETURN OF INCOME ON 01.11.2004 ALONG WITH AUDITED ACCOUNTS DECLARING A TOTAL INCOM E OF RS.2,01,480/- FOR THE ASSESSMENT YEAR 2004-05. THE ASSESSEE HAS A LSO CASH CREDIT FACILITY WITH UNITED BANK OF INDIA, SEPOY BAZAR BRA NCH, MIDNAPUR. 4. IN THE COURSE OF A SURVEY ACTION CONDUCTED UNDER SECTION 133A OF THE ACT ON 14.02.2008, A SEPARATE SET OF AUDITED BA LANCE SHEET WAS FOUND AND IMPOUNDED BY THE AO, WHICH WAS SUBMITTED TO THE BANK BY THE ASSESSEE FOR AVAILING CASH CREDIT FACILITY. AO OBSERVED THAT THE BALANCE SHEET FILED WITH THE RETURN U/SEC 139 OF TH E ACT WAS AUDITED BY NAREDI & CO AND THE BALANCE SHEET FILED WITH THE BA NK WAS AUDITED BY ROY GHOSH & ASSOCIATES. HE THEN OBTAINED A CONFIRMA TORY LETTER FROM THE PARTNER OF ROY GHOSH & ASSOCIATES THAT THEY IND EED EXAMINED AND AUDITED THE BALANCE SHEET OF THE ASSESSEE WHICH WAS FILED WITH THE BANK AND THE AO TABULATED THE DIFFERENCE OF AMOUNTS BETW EEN TWO BALANCE SHEETS UNDER MAJOR HEADS AS UNDER: PARTICULARS AS PER AUDITED A/C FOR THE YEAR ENDED 31.03.04 SUBMITTED WITH RETURN OF INCOME AS PER AUDITED A/C FOR THE YEAR ENDED 31.03.04 IMPOUNDED FROM THE OFFICE OF THE ASSESSEE DIFFERENCE OPENING STOCK 3,34,551 30,60,172 30,25,621 CLOSING STOCK 12,57,231 40,61,152 28,03,921 PURCHASES 4,79,30,960 4,90,94,578 11,63,618 OPENING CAPITAL 15,88,519 40,67,915 24,79,396 MILLING CHARGES 1,01,004 --- 1,01,004 COMMISSION PAID 6,00,000 --- 6,00,000 DEBTORS 23,22,246 1,25,470 21,96,776 UNSECURED LOAN 19,82,080 --- 19,82,080 3 ITA NO.325/KOL/2011 B INOD KUMAR AGARWALA ASSESSMENT YEAR: 2004-05 5. THE AO, NOTICING THE ABOVE DISCREPANCIES UNDER T WO AUDITED ACCOUNTS FILED BY THE ASSESSEE FOR THE SAME ASSESSM ENT YEAR, FOUND THAT THE BALANCE SHEET FILED WITH THE BANK WAS THE TRUE AND AS IT SHOWED CORRECT FINANCIAL STATEMENTS OF ASSESSEE AND ACCORD INGLY, REJECTED THE BALANCE SHEET FILED ALONG WITH THE RETURN AND PROCE EDED TO MAKE THE UNDER MENTIONED ADDITIONS TOTALING TO RS. 1,53,03,9 00/- INCLUDING THE RETURNED INCOME OF RS.2,01,480/- FILED IN NORMAL PR OCEDURE U/S 139 OF THE ACT. 1. DIFFERENCE IN OPENING STOCK (RAW MATERIALS)- RS .30,25,621/- 2. DIFFERENCE IN CLOSING STOCK -RS.28,03, 921/- 3. DIFFERENCE IN PURCHASES -RS.11,63,618 /- 4. DIFFERENCE IN OPENING CAPITAL -RS.24,7 9,396/- 5. DIFFERENCE IN SUNDRY DEBTORS -RS.12,50 ,109/- 6. UNSECURED LOAN CREDITORS -RS.21,96,776/ - 7. MILLING CHARGES FOR NON DEDUCTION OF TDS -RS. 1,01,004/- 8. COMMISSION PAID FOR NON DEDUCTION OF TDS-RS. 6,00,000/- 6. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED FIRST APPEAL BEFORE THE CIT-A, AND HE WAS OF THE VIEW TH AT THE AO HAS RESORTED TO PICK AND CHOOSE METHOD BETWEEN THE AUDI TED ACCOUNTS SUBMITTED TO THE BANK AND WITH THE REGULAR PROCESS OF RETURN FILED,WHILE ESTIMATING THE INCOME OF THE ASSESSEE AND FOUND FAU LT WITH THE AO ORDER, THAT INSPITE OF REJECTION OF AUDITED BALANCE SHEET FILED WITH THE RETURN HE PROCEEDED TO MAKE ADDITIONS UNDER VARIOUS HEADS BY COMPARING THE DIFFERENCE BETWEEN TWO FINANCIAL STAT EMENTS. THE CIT-A TREATED RS.5,23,660/- AS TOTAL INCOME OF THE ASSESS EE AS IT WAS SHOWN AS NET PROFIT IN THE BALANCE SHEET FILED WITH THE BANK . 7. REGARDING THE GROUND NO. 2, ON 14.02.2008, DURIN G THE COURSE OF SURVEY U/S. 133A OF THE ACT AND AO IMPOUNDED, A DEE D OF AGREEMENT DATED 24.04.03 WHEREIN IT WAS NOTICED BY HIM THAT THE ASSESSEE HAS PURCHASED A RICE MILL UNDER THE NAME 'MAHALAXMI RIC E MILL' OF 4 ITA NO.325/KOL/2011 B INOD KUMAR AGARWALA ASSESSMENT YEAR: 2004-05 LODHASULI, JHARGRAM, MIDNAPORE(W) FROM SRI PRASANTA KHAN OF BACHURDOBA, JHARGRAM, MIDNAPORE(W) FOR RS.7.5 LAKHS AND ON CONFIRMATION BY THE CONCERNED AUTHORITIES, THE AO A DDED RS.7,50,000/- BEING PURCHASE VALUE OF A RICE MILL FROM UNDISCLOSE D SOURCES. IN AN APPEAL, CIT-A, ON THE CONTENTION OF THE ASSESSEE TH E TRANSACTION OF TRANSFER DID NOT MATERIALIZE EVENTUALLY AS THE VEND OR FAILED TO DELIVER POSSESSION OF THE MILL DELETED THE ADDITION OF RS. 7,50,000/-. 8. CHALLENGING THE ORDER OF THE CIT-A, THE REVENUE BEFORE US CONTENDED THAT DURING SURVEY THE AN AGREEMENT REGAR DING PURCHASE OF A RICE MILL AND TWO BALANCE SHEETS WERE FOUND AND THE ASSESSEE DELIBERATELY PREPARED TO TWO BALANCE SHEETS, ON COM PARISON OF SUCH STATEMENTS, THE DISCREPANCIES FOUND THEREON WERE RI GHTLY ADDED BY THE AO. THE ASSESSEE FAILED TO DISCLOSE, REGARDING THE SOURCE OF FUNDS IN PURCHASING THE RICE MILL AND IT WAS ALSO RIGHTLY AD DED BY THE AO AS UNDISCLOSED INCOME AND RELIED ON THE ORDER OF AO,S ORDER. 9. IN REPLY THE AR SUBMITTED THAT THE CIT-A CONSIDE RED BOTH THE BALANCE SHEETS ONE WHICH WAS IMPOUNDED DURING SURVE Y AND OTHER BEING FILED ALONG WITH THE INITIAL RETURN OF INCOME. THE CIT-A DID NOT RELY ON ANY NEW DOCUMENT AND RELIED ON THE SAME DOCUMENTS W HICH WERE PLACED BEFORE THE AO AND DREW OUR ATTENTION TO THE PAGE NO -11 OF PAPER BOOK. REGARDING THE GROUND NO-2, THE AGREEMENT WHICH WAS SAID TO BE IMPOUNDED DURING SURVEY WAS NOT AT ALL ACTED UPON. FURTHER, THE AR SUBMITTED THE ORDER OF THE CIT-A IS WELL CONSIDERED AND SOUGHT TO DISMISS THE APPEAL FILED BY THE REVENUE. 10. HEARD BOTH THE REPRESENTATIVES AND PERUSED THE RECORD. IT IS EVIDENT FROM THE RECORD THAT THE PRESENT APPEAL WAS CARRIED ON AN 5 ITA NO.325/KOL/2011 B INOD KUMAR AGARWALA ASSESSMENT YEAR: 2004-05 ASSESSMENT U/SEC 147/143(3) OF THE ACT. THE APPELLA NT REVENUE PROCESSED THE ORIGINAL RETURN FILED BY THE ASSESSEE UNDER NORMAL PROCEDURE U/SEC 143(1) OF THE ACT AND ACCEPTED THE INCOME DECLARED BY THE ASSESSEE IN THE ABOVE PROCEDURE AT RS.2,01,480/ -. AGAIN UNDER SCRUTINY ASSESSMENT PROCEEDINGS, THE AO COMPLETED T HE ASSESSMENT U/SEC 144 OF THE ACT AT RS.30,05,400/-. 11. IT IS PERTINENT TO NOTICE THAT ON APPEAL FROM T HE ORIGINAL ASSESSMENT ORDER THE CIT-(A) CONSIDERED THE VARIATI ONS IN THE TWO BALANCE SHEETS. HE ALSO TABULATED THE VARIATIONS IN THE TWO BALANCE SHEETS. FURTHER, CIT-(A) OBSERVED THAT THE FINAL AC COUNTS SUBMITTED TO BANK SHOWED LESSER SALES AND HIGHER PURCHASES THAN THE FIGURES OF SALES AND PURCHASES APPEARING IN THE AUDITED BALANCE SHEE T FURNISHED TO THE APPELLANT REVENUE. CIT-(A) FURTHER NOTED THAT THOUG H THE FIGURE OF CLOSING STOCK IN THIS ESTIMATED BALANCE SHEET WAS I NFLATED ALMOST THREE TIMES THE CLOSING STOCK WITH THE BALANCE SHEET SUBM ITTED WITH THE ORIGINAL RETURN U/SEC 139 OF THE ACT, THE GROSS PRO FIT SHOWN TO THE BANK WAS RS.5,23,659/- WHEREAS THE SAME SHOWN IN AUDITED ACCOUNTS FURNISHED TO THE APPELLANT REVENUE WAS ONLY RS.2,01 ,479/-. ON ANALYSIS OF THE VARYING FIGURES OF THE TWO ACCOUNTS HE CONCL UDED THAT THE HIGHER NET PROFIT OF RS.5,23,659/- IN THE ACCOUNTS FURNISH ED TO THE BANK SHOULD SUBSTITUTE ITSELF FOR THE NET PROFIT OF RS.2,01,479 /- DISCLOSED BY THE ASSESSEE TO THE APPELLANT REVENUE. THE SAID ORDER ACCEPTING THE HIGHER NET PROFIT OF RS.5,23,659/- AS DISCLOSED BY THE ASS ESSEE IN THE DISPUTED BALANCE SHEET FURNISHED TO THE BANK, WAS NOT CHALL ENGED BY EITHER OF THE PARTIES IN APPEAL IN HIGHER FORUM. THEREFORE OR DER IN ORIGINAL ASSESSMENT IS BINDING AND ATTAINED FINALITY I.E THE ORIGINAL ASSESSMENT GOT MERGED WITH THE ORDER OF THE CIT-(A). IN OUR VI EW, REOPENING OF ASSESSMENT ON THE BASIS OF SAME SET OF FACTS I.E CO NSIDERING AND 6 ITA NO.325/KOL/2011 B INOD KUMAR AGARWALA ASSESSMENT YEAR: 2004-05 COMPARING THE TWO BALANCE SHEETS AGAIN FOR THE PURP OSE OF REASSESSMENT IS BAD UNDER LAW. THEREFORE, WE DEEM IT APPROPRIATE TO TREAT THE HIGHER NET PROFIT OF RS.5,23,659/- AS DETERMINED BY CIT-(A ) IN APPEAL AGAINST THE ORIGINAL ASSESSMENT ORDER AS INCOME OF THE ASSE SSEE AND THAT THE APPEAL FILED BY THE APPELLANT REVENUE HAS DEVOID OF MERIT AND DISMISS THE GROUND NO-1. 12. REGARDING GROUND NO-2, DURING THE SURVEY AN AGR EEMENT FOR SALE WAS FOUND. THE AO RELIED ON THE FACT THAT THE ASSES SEE OBTAINED A LICENCE COMPETENT AUTHORITY I.E FROM THE CONTROLLER OF FOOD TO OPERATE THE MILL. BUT, HOWEVER THE AR SUBMITTED THAT THE AG REEMENT WAS NEVER ACTED UPON AND IT CAN BE SEEN FROM THE ORDER OF THE CIT-(A) WHERE HE EXAMINED AFFIDAVIT OF THE ASSESSEE DT:21/07/2010 WH ERE HE DEPOSED THAT DUE TO SOME SERIOUS OBSTACLES FROM THE LAND OWNER T HE SAID AGREEMENT NEVE ACTED UPON, AFFIDAVIT OF SHRI PRASANTA KHAN WH O IS THE LAND LORD (MILL OWNER) HIMSELF CONFIRMED THE DECLARATIONS MAD E BY THE ASSESSEE IN HIS AFFIDAVIT, COPY OF A LETTER DT:17-02-2004 BY TH E SHRI PRASANTA KHAN TO THE DISTRICT CONTROLLER (F & S), MIDNAPORE AS A PROPRIETOR OF MAHALAXMI RICE MILL, COPY OF CERTIFICATE DT:08-04-2 004 ISSUED BY THE GRAM PRADHAN, CHARGING TAX OF RS.100/- FROM SHRI PR ASANTA KHAN THE OWNER OF RICE MILL, LASTLY, COPY OF AGREEMENT OF LE ASE DT:11-06-2004 INDICATING THAT SHRI PRASANTA KHAN HAD LEASED THE S AID RICE MILL TO SHRI DEBABRATA SAHA. BUT, HOWEVER, THE AO WAS IN THE IMP RESSION THAT THE IN VIEW OF THE DISCOVERY OF THE AGREEMENT OF SALE, THA T THE ASSESSEE TOOK OVER THE MILL AND HAD OPERATED THE MILL. THE AGREEM ENT ONLY SHOWS THAT THE ASSESSEE AGREED TO PURCHASE A RICE MILL FOR CON SIDERATION OF RS.7,50,000/-WHICH WAS NEVER ACTED UPON BY THE BETW EEN THE PARTIES THEREIN, THE AO FAILED TO SHOW ANY OTHER EVIDENCE T O THE CONTRARY TO THE MATERIAL ON RECORD. THEREFORE, WE ARE OF THE VIEW T HAT THE CIT-A RIGHTLY 7 ITA NO.325/KOL/2011 B INOD KUMAR AGARWALA ASSESSMENT YEAR: 2004-05 DELETED THE ADDITION MADE BY THE AO. THUS, THE GROU ND NO-2 OF THE APPELLANT REVENUE IS DISMISSED. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND MARCH, 2016. SD/- SD/- ( P.M.JAGTAP) (S.S.VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 02/03/2016 COPY OF ORDER FORWARDED TO: 1 BINOD KUMAR AGARWALA, BALARAMDIHI, P.O.- JHARGRAM, DIST- PASCHIM MEDINIPUR. 2 I.T.O., WARD-2(1), MIDNAPORE 3 THE CIT(A), 4 5 CIT, 5. D.R. TRUE COPY, BY ORDER, ASSTT. REGISTRAR , ITAT, KOLKATA TALUKDAR/SR.PS