ACIT, Circle-30, Kolkata, Kolkata V. Shri Sudesh Ch. Talwar, Kolkata

ITA 327/KOL/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7646 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 14-07-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 12-02-2010
• Court: TRIBUNAL
• Department Lawyers: D J MEHTA
• Keywords: Bogus purchase; Unexplained expenditure; Gift; Source of fund
• Section: 143(3)

Judgement Text

1 , B , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- B, KOL KATA [ , . .. . . .. . , , , , !' ] BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER & SRI C.D. RAO, ACCO UNTANT MEMBER # # # # / ITA NO. 327 (KOL) OF 2010 $% &' / ASSESSMENT YEAR 2005-06 ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE-30, KOLKATA. SRI SUDESH CH. TALWAR, KOLKATA. (PAN-ABVPT0525F) (*+ / APPELLANT ) - $ - - VERSUS - (./*+/ RESPONDENT ) *+ 0 1 !/ FOR THE APPELLANT: / SRI D.J. MEHTA ./*+ 0 1 ! / FOR THE RESPONDENT: / SRI SOUMITRA CHOUDHURY 2$3 0 ' / DATE OF HEARING : 14/11/2011 4& 0 ' / DATE OF PRONOUNCEMENT : 06/01/2012 !5 / ORDER ( . .. . . .. . ), !' (C.D. RAO), ACCOUNTANT MEMBER : THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST T HE ORDER OF LD. C.I.T.(A)-XIV, KOLKATA DATED 13/11/2009 FOR ASSESSMENT YEAR 2005-0 6. 2. THE ASSESSEE DERIVES INCOME FROM EXPORT BUSINES S AND OTHER SOURCES. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE F ILED RETURN SHOWING INCOME OF RS.1,62,41,750/-. ASSESSMENT U/S. 143(3) OF THE AC T WAS, HOWEVER, COMPLETED ON A TOTAL INCOME OF RS.2,60,33,700/-, MAKING THEREBY SEVERAL ADDITIONS TO THE RETURNED INCOME OF THE ASSESSEE. THE LD. C.I.T.(A) GAVE PARTIAL RELIE F TO THE ASSESSEE. THE DEPARTMENT BEING AGGRIEVED AGAINST SUCH RELIEF IS IN APPEAL BE FORE THE TRIBUNAL. 3. THE FIRST GROUND RAISED IN THIS APPEAL BY THE DE PARTMENT READS AS UNDER :- 1) THE LD. CIT(A)-XIV, KOLKATA HAS ERRED ON FACTS AND IN CIRCUMSTANCES OF THE CASE BY DELETING THE ADDITION OF RS.1,90,147/- WHICH WAS 20 % OF THE TOTAL EXPENSES CLAIMED ON TRAVELING AND CONVEYANCE. IT IS NOT ACCEPTABLE THAT ALL THE EXPENSES ON TRAVEL & CONVEYANCE ARE RELATED TO BUSINESS ONLY. ELEMENT O F PERSONAL NATURE IN THE EXPENSES CLAIMED CANNOT BE RULED OUT. APPEAL IS STRONGLY REC OMMENDED 2 3.1. THE ASSESSEE CLAIMED EXPENDITURE OF RS.9,50,7 33/- ON TRAVELLING AND CONVEYANCE. THE LD. A.O. CONSIDERING POSSIBILITY OF PERSONAL NA TURE OF EXPENSES INVOLVED IN SUCH TRAVELLING & CONVEYANCE DISALLOWED ON ESTIMATE BASI S 20% OF TOTAL EXPENDITURE OF RS. 9,50,733/-, RESULTING IN ADDITION OF RS.1,90,147/-. 3.2. BEFORE THE LD. C.I.T.(A), THE ASSESSEE CONTEN DED THAT THE ASSESSEE PAID TO HIS EMPLOYEES RS.9,50,733/- AS PART OF THE SALARIES BY WAY OF REIMBURSEMENT OF THEIR TRAVELLING & CONVEYANCE EXPENDITURE INCURRED FOR TH E SAKE OF THE ASSESSEES BUSINESS AND HENCE THERE WAS NO ELEMENT OF PERSONAL EXPENSES BY THE ASSESSEE HIMSELF, WHO MET HIS PERSONAL EXPENSES FROM HIS SELF DRAWINGS. THE LD. C.I.T.(A) FOUND THE EXPLANATION OF THE ASSESSEE TO BE SATISFACTORY AND THUS DELETED TH E ADDITION MADE ON THIS ACCOUNT. 3.3. WE HAVE HEARD THE PARTIES AND PERUSED THE MAT ERIAL PLACED ON RECORD. THE LD. A.O. DISALLOWED 20% OF THE EXPENDITURE PRESUMING PE RSONAL EXPENDITURE BY THE ASSESSEE, WHEREAS THE ASSESSEE CLAIMS THAT THE ENTI RE EXPENDITURE WAS INCURRED BY HIS EMPLOYEES WHICH WERE REIMBURSED TO THEM ALONG WITH THE SALARY. ON THESE FACTS, THE LD. C.I.T.(A) HELD THAT THESE EXPENSES WERE RELATED ONL Y TO TRAVEL & CONVEYANCE UNDERTAKEN BY THE EMPLOYEES AND HENCE THERE CANNOT BE ANY PERS ONAL TRAVEL BY THE ASSESSEE INVOLVED IN THIS. THE LD. DEPARTMENTAL REPRESENTA TIVE COULD NOT CONTROVERT THIS FINDING OF THE LD. C.I.T.(A) BY ADDUCING ANY EVIDENCE IN SU PPORT OF THE PRESUMPTION OF THE LD. A.O. WE, THEREFORE, FIND NO JUSTIFICATION TO INTE RFERE WITH THE ORDER OF THE LD. C.I.T.(A) ON THIS ISSUE AND THE DELETION OF ADDITIO N OF RS.1,90,147/- IS THUS CONFIRMED. THIS GROUND OF THE DEPARTMENT IS DISMISSED. 4. THE NEXT GROUND OF THE DEPARTMENT READS AS UNDE R :- 2) THE LD. CIT(A)-XIV, KOLKATA HAS ERRED ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE BY NOT CLARIFYING THE LOGIC RESTRICTING THE DI SALLOWANCE OUT OF EXPORT PROMOTION TO 20% OF THE TOTAL EXPENSES CLAIMED FOR EXPORT PRO MOTION INSTEAD OF 25% AS DISALLOWED BY THE AO IN THE ASSESSMENT ORDER. THERE FORE, APPEAL IS STRONGLY RECOMMENDED 4.1. THE ASSESSEE CLAIMED EXPORT PROMOTION EXPENSE S TO THE EXTENT OF RS. 2,65,399/- FOR THE ASSESSMENT YEAR UNDER APPEAL INC URRED DURING HIS FOREIGN TRIPS. 3 ALTHOUGH THE LD. A.O. HAS CONCEIVED THAT IN RESPECT OF FOREIGN TRIPS IT WAS NOT POSSIBLE TO KEEP EVIDENCE FOR EACH AND EVERY EXPENSE, HE ON ESTIMATE BASIS DISALLOWED 25% OF THE SAID EXPENDITURE AND MADE ADDITION OF RS.20,66, 350/- FOR NOT BEING FULLY VOUCHED AND SUPPORTED BY EVIDENCE. 4.2. BEFORE THE LD. C.I.T.(A), THE ASSESSEE SUBMIT TED THAT EXPORT PROMOTION EXPENSES WERE INCURRED IN CONNECTION WITH THE EXPORT BUSINES S FOR ATTENDING INTERNATIONAL LEATHER TRADE FAIRS AND ALSO ATTENDING BUYERS AND SELLERS M EETING ABROAD AS WELL AS EXPLORE NEW MARKETS. IT WAS FURTHER SUBMITTED THAT THE DEPARTM ENT IN THE IMMEDIATELY PRECEDING TWO ASSESSMENT YEARS THE DISALLOWANCE WAS RESTRICTE D TO 20% ONLY FOR WANT OF SUPPORTING VOUCHERS ETC. THEREFORE, THE LD. A.O. W AS NOT JUSTIFIED TO ENHANCE THE DISALLOWANCE TO 25% INSTEAD OF 20% MADE IN EARLIER YEARS. THE LD. C.I.T.(A) ON THE ABOVE FACTS HELD THAT AS THE ASSESSEE WAS NOT ABLE TO PRODUCE BILLS/VOUCHERS FOR ALL THE EXPENSES DURING HIS FOREIGN TRIPS, SOME DISALLOWANC E IS WARRANTED. HE, THEREFORE, RESTRICTED THE DISALLOWANCE TO 20% INSTEAD OF 25% M ADE BY THE LD. A.O. 4.3. AFTER HEARING THE PARTIES, WE OBSERVE THAT IN THE IMMEDIATELY PRECEDING TWO ASSESSMENT YEARS, I.E. A.YS 2003-04 & 2004-05, DISA LLOWANCE UNDER THE HEAD EXPORT PROMOTION EXPENSES HAS BEEN RESTRICTED TO 20% OF T HE TOTAL EXPENDITURE FOR THE SAME REASON OF LACK OF COMPLETE BILLS & VOUCHERS. COPIE S OF THE ORDERS OF THE AUTHORITIES BELOW FOR THESE TWO YEARS ARE PLACED IN THE PAPER B OOK AT PAGES 15 TO 24 OF THE ASSESSEES PAPER BOOK. WE FURTHER OBSERVE THAT THE LD. A.O. HIMSELF HAS AGREED THAT IN RESPECT OF FOREIGN TOURS, KEEPING FULL DETAILS, BIL LS & VOUCHERS IS IMPOSSIBLE FOR A HUMAN BEING. THEREFORE, CONSIDERING THE PAST ACCEPTED PO SITION AND THERE BEING NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE FOR THE ASS ESSMENT YEAR UNDER APPEAL, WE FIND NO JUSTIFICATION TO DEVIATE FROM THE PAST ACCEPTED POSITION. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER OF THE LD. C.I.T.(A) IN REST RICTING THE DISALLOWANCE UNDER THIS HEAD TO 20%, WHICH IS UPHELD. THIS GROUND OF THE DEPART MENT, THEREFORE, FAILS. 5. THE NEXT GROUND IN THIS DEPARTMENTAL APPEAL IS AS UNDER :- 3) THE LD. CIT(A)-XIV, KOLKATA HAS ERRED ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE BY DELETING THE ADDITION OF RS.31,332/- WHICH THE ASSESSEE HAD WITH M/S. SES ENTERPRISES. DURING THE REMAND PROCEEDINGS THE TRA NSACTIONS OF THE ASSESSEE WITH 4 M/S. SES ENTERPRISE COULD NOT BE VERIFIED. THEREFO RE, APPEAL ON THIS POINT IS STRONGLY RECOMMENDED. 5.1. IN ORDER TO VERIFY THE GENUINENESS OF THE PUR CHASE OF RS.31,332/-, THE LD. A.O. SENT LETTER TO M/S. SES ENTERPRISES, WHICH WAS RETU RNED UNSERVED BY THE POSTAL AUTHORITIES. HE, THEREFORE, HELD THAT THE ASSESSEE HAS SHOWN BOGUS PURCHASE AGAINST THE SAID PARTY AND THE SAME WAS ADDED TO THE ASSESS EES TOTAL INCOME. 5.2. DURING THE COURSE OF APPELLATE PROCEEDINGS BE FORE THE LD. C.I.T.(A), THE ASSESSEE PRODUCED SOME DOCUMENTS IN SUPPORT OF THE PURCHASES MADE FROM M/S. SES ENTERPRISES. THE LD. C.I.T.(A) CALLED FOR A REMAND REPORT AND THE LD. A.O. REPORTED THAT THE INSPECTOR OF THE DEPARTMENT FOUND THE OFFICE OF THAT PARTY UNDER LOCK & KEY AND IT HAS BEEN REPORTED BY THE CARETAKER THAT THE SAID CO NCERN HAS BEEN CLOSED SINCE 2006. THE LD. C.I.T.(A) AFTER PERUSING THE EVIDENCES AND CONSIDERING THE SUBMISSIONS OF THE ASSESSEE FOUND THE PURCHASES TO BE GENUINE AND DELE TED THE ADDITION BY OBSERVING AS UNDER :- AS REGARDS M/S SES ENTERPRISES IT IS SEEN THAT DURI NG THE REMAND PROCEEDINGS THE OFFICE OF THIS CONCERN WAS FOUND LOCKED AND THE CAR ETAKER INFORMED THAT THIS CONCERN HAD CLOSED IN 2006. IN THIS RESPECT THE AR OF THE ASSESSEE HAS CLAIMED THAT THE PURCHASES FROM THIS CONCERN ARE GENUINE AS THE PAYMENTS FOR THE PURCHASE HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE AND ARE REFL ECTED IN THE HSBC BANK ACCOUNT OF THE ASSESSEE. THE BILLS ISSUED BY THIS CONCERN HAVE ALSO BEEN PRODUCED. I FIND THAT THE ASSESSEE PURCHASED SOME ADHESIVE AND RUBBER SOLUTION FROM THIS PARTY. THE BILLS ARE IN SMALL AMOUNTS OF RS.1000 TO 2000 A ND THERE IS ONE MAJOR AMOUNT OF RS.12,360/-. THE PAYMENTS FOR THESE PURCHASES HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES. THE TOTAL PURCHASES FROM THIS CONCERN DUR ING THE PREVIOUS YEAR UNDER CONSIDERATION ARE 31,332/- AND THERE IS NO LIABILIT Y AT THE END OF THE YEAR. LOOKING TO THESE FACTS IT CANNOT BE SAID THAT THESE PURCHAS ES ARE BOGUS. 5.3. WE HAVE HEARD THE PARTIES AND PERUSED THE MAT ERIAL PLACED ON RECORD. ON PERUSAL OF THE RECORDS, THE LD. C.I.T.(A) FOUND THA T THE PAYMENTS AGAINST PURCHASES MADE FROM M/S. SES ENTERPRISES WERE MADE BY ACCOUNT PAYEE CHEQUES AND THE SAME IS REFLECTED IN THE ASSESSEES BANK ACCOUNT. COPIES O F LEDGER ACCOUNT OF M/S. SES ENTERPRISE IN THE BOOKS OF THE ASSESSEE HAVE ALSO B EEN FILED IN THE ASSESSEES PAPER BOOK AND NO LIABILITY AT THE END OF THE YEAR IS SHO WN THEREIN. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE ABOVE FACTU AL POSITION SUPPORTED BY EVIDENCES. IN THIS VIEW OF THE MATTER, WE ARE OF THE OPINION T HAT THE LD. C.I.T.(A) HAS RIGHTLY 5 DELETED THE ADDITION OF RS.31,332/- MADE BY THE A.O . ALLEGING BOGUS PURCHASE FROM M/S. SES ENTERPRISE AND NEEDS NO INTERFERENCE AT OUR END . THIS GROUND OF THE DEPARTMENT IS, THEREFORE, DISMISSED. 6. THE LAST GROUND OF THE DEPARTMENT IS AS UNDER : - 4) THE LD. CIT(A)-XIV, KOLKATA HAS ERRED ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE BY DELETING THE ADDITION OF RS.21,00,000/- AS DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS PROVIDED AMPLE OPPORTU NITIES TO PROVIDE DOCUMENTARY EVIDENCE OF THE SOURCE OF FUNDS WHICH HE FAILED TO DO AND HENCE THE AMOUNT WAS ADDED BACK AS UNDISCLOSED INCOME. APPEAL IS STRONG LY RECOMMENDED. 6.1. THE LD. A.O. OBSERVED THAT THE ASSESSEE HAS C LAIMED TO HAVE MADE DONATIONS TO DIFFERENT PERSONS AGGREGATING TO RS.21,00,000 ON SE VERAL DATES DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, WHICH IS SHOWN UNDER THE HEAD GIFTS TO OTHERS. AS THE SAME WAS NOT REFLECTED IN THE BALANCE SHEET OR RECEIPTS & PAYMENTS ACCOUNT OF THE ASSESSEE INDIVIDUAL AND HIS PROPRIETARY CONCERN, THE LD. A.O . DISBELIEVED THE DONATIONS AND ADDED THE SAME TO HIS TOTAL INCOME AS INCOME FROM UNDISCL OSED SOURCES. 6.2. THE LD. C.I.T.(A) ON GOING THROUGH THE BALANC E SHEET, RECEIPT & PAYMENT ACCOUNT, BANK STATEMENT ETC. OF THE ASSESSEE-INDIVIDUAL FOUN D THAT THE DONATIONS ARE DULY REFLECTED IN THOSE DOCUMENTS. HE, THEREFORE, HELD T HAT THE LD. A.O. WAS NOT JUSTIFIED IN ADDING RS.21,00,000/- AS UNDISCLOSED EXPENDITURE, W HICH HE DELETED. 6.3. BEFORE US ALSO, THE ASSESSEE HAS FILED COPIES OF STATEMENT OF DONATIONS WITH RELEVANT RECEIPTS ISSUED BY THE DONEES (PAGES 35 TO 48 OF THE P/B), PERSONAL BANK ACCOUNT WITH HSBC BANK REFLECTING DONATIONS MADE (P AGES 49 TO 60 OF THE P/B) AND BALANCE SHEET WITH INCOME & EXPENDITURE ACCOUNT AND RECEIPTS & PAYMENT ACCOUNTS ETC. (PAGES 61 TO 80 OF THE P/B). ON PERUSAL OF THE SAME AND CONSIDERING THE OBSERVATIONS OF THE LD. C.I.T.(A), WE FIND THAT THE DONATIONS TO SEVERAL PARTIES WERE MADE BY ACCOUNT PAYEE CHEQUES AND THE SAME ARE DULY REFLECTED IN THE ASSESSEES INDIVIDUAL ACCOUNTS. THEREFORE, THE DONATIONS ARE DULY VERIFIED AND THE LD. A.O. FAILED TO BRING ON RECORD ANY EVIDENCE TO HOLD THOSE DONAT IONS AS ASSESSEES UNEXPLAINED EXPENDITURE, WARRANTING ANY ADDITION TO HIS TOTAL I NCOME. CONSIDERING THE TOTALITY OF 6 THE FACTS AND EVIDENCES ON RECORD, WE HOLD THAT THE LD. C.I.T.(A) HAS RIGHTLY DELETED THE ADDITION OF RS.21,00,000/-, WHICH IS UPHELD. THIS GROUND OF THE DEPARTMENT ALSO FAILS. 7. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. SD/- SD/- ( ) ( . .. . . .. . ) !' (MAHAVIR SINGH) JUDICIAL MEMBER (C.D. RA O), ACCOUNTANT MEMBER ( (( ( ' ' ' ') )) ) DATE: 06 -01-2012 !5 0 .6 7!6&8- COPY OF THE ORDER FORWARDED TO: 1. *+ / THE APPELLANT : ACIT, CIRCLE-30, KOLKATA 2 ./*+ / THE RESPONDENT : SRI SUDESHS CH. TALWAR, 8, DOVER PARK, KOL-700 019 3. 5$ () : THE CIT(A) XIV, KOLKATA. 4. 5$/ THE C.I.T., KOL - 5 <= .$ / DR, ITAT, KOLKATA BENCHES, KOLKATA 6 GUARD FILE . /6 ./ TRUE COPY, !5$2/ BY ORDER, (DKP) ASSTT. REGISTRAR .