P.C.Ghosh & S.N.Ghosh, Hooghly V. ITO, Ward -24(2) Hoogly, Hooghly

ITA 337/KOL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1674 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 16-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 17-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 133(6)

Judgement Text

1 ITA NO.337/KOL/2017 P.C. GHOSH & S. N. GHOSH, AY 2012-13 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA () BEFORE .., /AND . ' # $% % , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 337/KOL/2017 ASSESSMENT YEAR: 2012-13 P. C. GHOSH & S. N. GHOSH (PAN: AAEFP7014M) VS. INCOME-TAX OFFICER, WD-24(2), HOOGHLY APPELLANT RESPONDENT DATE OF HEARING 20.06.2017 DATE OF PRONOUNCEMENT 16.08.2017 FOR THE APPELLANT SHRI SOMNATH GHOSH, ADVOCATE FOR THE RESPONDENT SHRI NICHOLAS MURMU, JCIT ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-6, KOLKATA DATED 11.01.2017 FOR AY 2012-13. 2. THE SOLE ISSUE RAISED BY THE ASSESSEE IS AGAINST THE ADDITION OF RS.26,47,418/- MADE U/S. 69 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER RE FERRED TO AS THE ACT) BY THE AO WHICH HAS BEEN CONFIRMED BY THE LD. CIT(A). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF SELLING RATION COMMODITIES WHICH IS PRO CURED FROM THE DIRECTOR OF RATIONING, CHINSURAH, HOOGHLY. THE ASSESSEE HAD FILED THE RET URN OF INCOME ELECTRONICALLY. LATER, THE CASE WAS SELECTED FOR SCRUTINY. THE AO NOTED THAT THE ASSESSEE HAS FILED THE COPY OF THE TAX AUDIT REPORT, DETAILS OF PURCHASE AND SALE OF RATIO N RICE AND WHEAT AND HAVE ALSO PRODUCED THE BANK BOOK. IN ORDER TO VERIFY THE PURCHASE OF RATION COMMODITIES IN RESPECT OF VARIOUS TYPES OF RICE AND WHEAT, THE AO ISSUED LETTER TO TH E JOINT DIRECTOR OF RATIONING, CHINSURAH 2 ITA NO.337/KOL/2017 P.C. GHOSH & S. N. GHOSH, AY 2012-13 U/S. 133(6) OF THE ACT ON 23.01.2015. THE AO NOTED THAT PURSUANT TO THE LETTER OF THE AO HE RECEIVED COMPLIANCE FROM THE DIRECTOR OF RATIONING BY A LETTER DATED 24.02.2015 WHEREIN THE AO NOTICED FEW DISCREPANCIES WHICH ARE GIVEN BE LOW IN A CHART FORM: SL. NO. DESCRIPTION AMOUNT PAID AS SHOWN BY THE ASSESSEE IN P/L A/C IN RS. AMOUNT PAID AS CONFIRMED IN RS. DIFFERENCE IN RS. 1 APL RICE 11,47,512 2 APL RICE/SPL 6,92,040 TOTAL 18,39,552 15,92,695 2,46,857 3 APL WHEAT 1,03,13,772 APL WHEAT/SPL 5,85,585 TOTAL 1,08,99,357 98,27,780 10,71,577 4 BPL RICE 16,68,960 7,84,437(PRO)+ 3,47,840(RICE)= 11,32,277 5,36,683 5 BPL WHEAT 37,96,857 31,75,208 6,21,649 6 AAY RICE 3,18,176 1,96,142 1,22,034 7 AAY WHEAT 2,09,718 1,61,100 48,618 TOTAL 26,47,418 THEREAFTER, THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE ON 23.03.2015 ASKING THE ASSESSEE AS TO WHY RS.26,47,418/- SHOULD NOT BE DIS ALLOWED DUE TO UNEXPLAINED PURCHASE DURING THE RELEVANT ASSESSMENT YEAR. THE AO NOTICE D THAT THE ASSESSEE RESPONDED TO THE SAID NOTICE BY STATING THAT THE TRUTH CAN BE ESTABLISHED ONLY IF AN EXAMINATION OF THE BOOKS OF THE JOINT DIRECTOR OF RATIONING IS DONE SIDE BY SIDE WI TH THOSE OF THE ASSESSEE. THE AO DID NOT HEED TO THE SAID REQUEST OF THE ASSESSEE AND HE MAD E ADDITIONS OF RS.26,47,418/- AS UNEXPLAINED PURCHASE. AGGRIEVED, THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO WAS PLEASED TO CONFIRM THE ORDER ON THE GROUND THAT THE ASSESSEE FAILED TO FURNISH ANY EXPLANATION IN RESPECT TO THE DISCREPANCY NOTED BY THE AO AFTER EXAMINING THE LETTER FROM THE RATIONING AUTHORITY. AGGRIEVED BY THE DECISION OF THE LD. CIT(A), THE ASSESSEE IS BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF RATIONING COMMODITIES LIKE RICE AND WHEAT OF DIFFERENT VARIET IES. THE ASSESSEE HAS PRODUCED THE TAX AUDIT REPORT, DETAILS OF PURCHASE AND SALE AND ALSO PRODUCED BANK BOOK BEFORE THE 3 ITA NO.337/KOL/2017 P.C. GHOSH & S. N. GHOSH, AY 2012-13 AUTHORITIES BELOW. THE AO IN ORDER TO ASCERTAIN TH E VERACITY OF THE CLAIM OF PURCHASE OF RATION RICE AND WHEAT ASKED FOR THE DETAILS THROUGH NOTICE U/S. 133(6) OF THE ACT TO THE JOINT DIRECTOR, RATIONING VIDE LETTER DATED 23.01.2015 WH ICH WAS REPLIED BY THE RATIONING AUTHORITY VIDE LETTER DATED 24.02.2015. AFTER PERU SAL OF THE LETTER FROM THE RATIONING AUTHORITY, THE AO FOUND CERTAIN DISCREPANCY IN THE PURCHASE AND ASKED THE ASSESSEE AS TO WHY THE DIFFERENCE OF AN AMOUNT OF RS.26,47,418/- S HOULD NOT BE ADDED AS UNEXPLAINED PURCHASE VIDE LETTER DATED 23.03.2015. THE ASSESSE E REPLIED TO THE AO THAT IN ORDER TO FIND THE TRUTH, THE BOOKS OF THE JOINT DIRECTOR OF RATIO NING HAVE TO BE EXAMINED SIDE BY SIDE WITH THAT OF THE ASSESSEE. THE SAID REQUEST OF THE ASSES SEE WAS NOT HEEDED TO BY THE AO AND WAS OF THE OPINION THAT IT IS QUITE IMPRACTICABLE TO VE RIFY THE BOOKS AT THE SHORT NOTICE AND HE PASSED THE ORDER ON 30.03.2015. THE LD. CIT(A) CON FIRMED THE SAME ON THE REASON THAT ASSESSEE COULD NOT EXPLAIN THE DIFFERENCE IN PURCHA SE MADE FROM THE RATIONING AUTHORITY. BEFORE US, THE LD. AR POINTED OUT THAT THE DISCREPA NCY WAS BROUGHT TO THE NOTICE OF THE ASSESSEE VIDE SHOW CAUSE NOTICE DATED 23.03.2015 AN D THE AO HAS PASSED THE IMPUGNED ORDER ON 30.03.2015. ACCORDING TO THE LD. AR OF TH E ASSESSEE, THE ASSESSEE RECEIVED THE LETTER ONLY ON 27.03.2015 AND THE ASSESSEE IMMEDIAT ELY REPLIED TO THE AO THAT IN ORDER TO FIND OUT THE TRUTH THE BOOKS OF RATIONING AUTHORITY HAS TO BE EXAMINED SIDE BY SIDE WITH THAT OF THE BOOKS OF THE ASSESSEE WHICH REQUEST WAS BRUS HED ASIDE BY THE AO AND HE PASSED THE IMPUGNED ORDER IN HASTE ON 30.03.2015. IT WAS CONT ENDED BY THE LD. AR THAT ASSESSEE HAS PURCHASED RICE AND WHEAT ONLY FROM GOVERNMENT AND T HAT TOO THE TRANSACTION WAS THROUGH BANKING CHANNEL. SO, ACCORDING TO THE LD. AR, THE P RINCIPLES OF NATURAL JUSTICE HAS BEEN VIOLATED AND IN ORDER TO FIND THE TRUTH, HE SHOULD HAVE BEEN GIVEN AN OPPORTUNITY TO CROSS CHECK THE VERACITY OF THE BOOKS OF THE RATIONING AU THORITY. ACCORDING TO LD. AR, THE AO HAS SIMPLY RELIED ON THE LETTER OF THE RATIONING AU THORITY AND HAS COMPLETELY DISBELIEVED THE ASSESSEES CONTENTION WITHOUT REJECTING THE BOOKS O F ACCOUNT OF THE ASSESSEE. THE LD. AR BROUGHT TO OUR NOTICE THE ORDER OF THE HONBLE SUPR EME COURT (A JUDGMENT OF THREE JUDGES BENCH) IN THE CASE OF STATE OF KERALA VS. K. T. SHA DULI YUSUFF ETC. 1977 SCC (2) 777 WHEREIN THE HONBLE JUSTICE P. N. BHAGWATI HAS OBSE RVED AS UNDER: 4 ITA NO.337/KOL/2017 P.C. GHOSH & S. N. GHOSH, AY 2012-13 NOW, OBVIOUSLY TO PROVE MEANS TO ESTABLISH THE C ORRECTNESS, OR COMPLETENESS OF THE RETURN BY ANY MODE PERMISSIBLE UNDER LAW. THE U SUAL MODE RECOGNISED BY LAW FOR PROVING A FACT IS BY PRODUCTION OF EVIDENCE AND EVI DENCE INCLUDES ORAL EVIDENCE OF WITNESSES. THE OPPORTUNITY TO PROVE THE CORRECTNESS OR COMPLETENESS OF THE RETURN WOULD, THEREFORE, NECESSARILY CARRY WITH IT THE RIG HT TO EXAMINE WITNESSES AND THAT WOULD INCLUDE EQUALLY THE RIGHT TO CROSS-EXAMINE WI TNESSES EXAMINED BY THE SALES TAX OFFICER. HERE, IN THE PRESENT CASE, THE RETURN FILE D BY THE ASSESSEE APPEARED TO THE SALES TAX OFFICER TO BE INCORRECT OR INCOMPLETE BEC AUSE CERTAIN SALES APPEARING IN THE BOOKS OF HAZI USMANKUTTV AND OTHER WHOLESALE DEALER S WERE NOT SHOWN IN THE BOOK'S OF ACCOUNT OF THE ASSESSEE. THE SALES TAX OFFICER R ELIED ON THE EVIDENCE FURNISHED BY THE ENTRIES IN THE BOOKS OF ACCOUNT OF HAZI USMANKU TTY AND OTHER WHOLESALE DEALERS FOR THE PURPOSE OF COMING TO THE CONCLUSION THAT TH E RETURN FILED BY THE ASSESSEE WAS INCORRECT OR INCOMPLETE. PLACED IN THESE CIRCUMSTAN CES, THE ASSESSEE COULD PROVE THE CORRECTNESS AND COMPLETENESS OF HIS RETURN ONLY BY SHOWING THAT THE ENTRIES IN THE BOOKS OF ACCOUNT OF HAZI USMANKUTTY AND OTHER WHOLE SALE DEALERS WERE FALSE, BOGUS OR MANIPULATED AND THAT THE RETURN SUBMITTED BY THE ASSESSEE SHOULD NOT BE DISBELIEVED ON THE BASIS OF SUCH ENTRIES, AND THIS OBVIOUSLY, T HE ASSESSEE COULD NOT DO, UNLESS HE WAS GIVEN AN OPPORTUNITY OF CROSS-EXAMINING HAZI US MANKUTTY AND OTHER WHOLESALE DEALERS WITH REFERENCE TO THEIR ACCOUNTS. SINCE THE EVIDENTIARY MATERIAL PROCURED FROM OR PRODUCED BY HAZI USMANKUTTY AND OTHER WHOLESALE DEALERS WAS SOUGHT TO BE RELIED UPON FOR SHOWING THAT THE RETURN SUBMITTED BY THE A SSESSEE WAS INCORRECT AND INCOMPLETE, THE ASSESSEE WAS ENTITLED TO HAVE HAZI USMANKUTTY AND OTHER WHOLESALE DEALERS SUMMONED AS WITNESSES FOR CROSS-EXAMINATION . IT CAN HARDLY BE DISPUTED THAT CROSS-EXAMINATION IS ONE OF THE MOST EFFICACIOUS ME THODS OF ESTABLISHING TRUTH AND EXPOSING FALSEHOOD. HERE, IT WAS NOT DISPUTED ON BE HALF OF THE REVENUE THAT THE ASSESSEE IN BOTH CASES APPLIED TO THE SALES TAX OFF ICER FOR SUMMONING HAZI USMANKUTTY AND OTHER WHOLESALE DEALERS FOR CROSS-EX AMINATION, BUT HIS APPLICATION WAS TURNED DOWN BY THE SALES TAX OFFICER. THIS ACT OF THE SALES TAX OFFICER IN REFUSING TO SUMMON HAZI USMANKUTTY AND OTHER WHOLESALE DEALE RS FOR CROSS-EXAMINATION BY THE ASSESSEE CLEARLY CONSTITUTED INFRACTION OF THE RIGH T CONFERRED ON THE ASSESSEE. 5. IN THE INSTANT CASE, WE NOTE THAT THE ASSESSEE H AD PRODUCED THE BOOKS OF ACCOUNT AND THE BANK STATEMENT BEFORE THE AO. WE NOTE THAT THE ENTIRE PURCHASE HAS BEEN MADE FROM THE RATIONING AUTHORITY OF THE GOVT. OF WEST BENGAL THR OUGH CHEQUES ONLY. ACCORDING TO THE ASSESSEE, THE DIFFERENCE OF THE AMOUNT IS DUE TO TH E NON-CONSIDERATION OF REBATE, ADJUSTMENT OF LESS QUANTITY SUPPLIED, DEALER ADVANCE RAISED ON DISTANCE OF TRANSPORTATION, ADVANCE PAYMENT MADE FOR THE NEXT ASSESSMENT YEAR IN MARCH WITHOUT LIFTING THE RICE/WHEAT. THE LD. AR BROUGHT TO OUR NOTICE THE RECONCILIATION OF THE ENTIRE AMOUNT OF RS.26,47,418/- WHICH IS AS BELOW: 5 ITA NO.337/KOL/2017 P.C. GHOSH & S. N. GHOSH, AY 2012-13 6 ITA NO.337/KOL/2017 P.C. GHOSH & S. N. GHOSH, AY 2012-13 7 ITA NO.337/KOL/2017 P.C. GHOSH & S. N. GHOSH, AY 2012-13 WE HAVE VERIFIED THE RECONCILIATION GIVEN ABOVE IN RESPECT TO THE APL RICE SPECIAL WHICH IS GIVEN AT SL. NO. 2 THERE IS NO DISCREPANCY AT ALL. HOWEVER, IN RESPECT OF APL RICE THE AMOUNT SHOWN BY THE ASSESSEE IS RS.11,47,512/- WHER EAS JOINT DIRECTOR OF RATIONING HAS SHOWN FOR APL RICE AT RS.9,00,655/- THUS A DIFFEREN CE OF RS.2,46,857/-. THIS FIGURE OF RS.2,46,857/- HAS BEEN RECONCILED BY THE ASSESSEE A S TO HAVE GOT REBATE FOR TRANSPORTATION OF AN AMOUNT OF RS.1,70,070/- AND HE DREW OUR ATTENTIO N TO PAGE NO. 12 OF THE PAPER BOOK WHERE WE NOTE THAT THE ASSESSEE HAS PURCHASED APL RICE FOR RS.11,47,512/- AND HAS GOT A REBATE OF RS.17,070/- AND HAS GIVEN DEALER ADVANCE OF RS.13,641/- AND THE DEPOSIT WITH THE GOVT. OF WEST BENGAL IS TO THE TUNE OF RS.4,070/- W HICH DETAILS OF THE SAME HAVE BEEN FILED FROM PAGE NOS. 13 TO 18 OF THE PAPER BOOK WHEREIN W E HAVE SEEN THE DELIVERY ORDERS AND AT PAGE 16 THE DEALER ADVANCE BILL IS ALSO NOTED. SO, THUS, WE FIND THAT THE AMOUNT OF RS.2,46,857/- HAS BEEN DULY RECONCILED BY THE EVIDE NCE ON RECORD. LIKEWISE, IN RESPECT TO APL WHEAT, SPECIAL THERE IS NO DISCREPANCY AT ALL. IN RESPECT TO THE APL WHEAT THE ASSESSEE HAD CLAIMED TO HAVE PURCHASED APL WHEAT OF RS.1,03, 13,772/- WHEREAS AS PER THE JOINT DIRECTOR OF RATIONING IT WAS RS.92,42,195/-. THUS, A DIFFERENCE OF RS.10,71,577/- WHICH THE ASSESSEE HAS EXPLAINED IN PAGES 24 AND 25 OF THE PA PER BOOK. ON PERUSAL OF THE PURCHASE OF APL WHEAT, WE NOTE THAT THE ASSESSEE HAD MADE PURCH ASE OF RS.1,03,13,772/- AND THE ASSESSEE GOT A REBATE IN RESPECT TO THE TRANSPORTAT ION OF RS.2,51,565/-, DEALER ADVANCE BILL OF RS.2,13,390/-, THE DEPOSIT OF GOVT. OF WEST BENGAL RS.33,140/- IN EXCESS OF APL WHEAT COMES TO RS.1,194/-. THE AMOUNT DEPOSITED IN MARCH , 2011 BUT MATERIAL LIFTED IN APRIL, 2011, RS.3,00,291/- AND THE CHEQUE ISSUED IN MARCH, 2012 BUT MATERIAL LIFTED IN APRIL, 2012 TO THE TUNE OF RS.2,71,997/-. THUS, AN AMOUNT OF R S.10,71,577/- HAS BEEN RECONCILED BY THE ASSESSEE BY PRODUCING THE DELIVERY ORDERS FROM PAGE S 26 TO 61 WHICH WE VERIFIED ON TEST CHECK BASIS AND FOUND TO BE CORRECT. IN THE LIGHT OF THE FACT THAT THE ASSESSEE WAS ABLE TO RECONCILE THE DISCREPANCY WHICH CAME TO LIGHT AFTER THE RATIONING AUTHORITYS LETTER TO THE AO STANDS RECONCILED. MOREOVER, AS HELD BY THE HON BLE SUPREME COURT, THE SOLE BASIS FOR MAKING THE ADDITION WAS AFTER RECEIPT OF THE LETTER FROM THE JOINT DIRECTOR RATIONING IN RESPECT TO THE PURCHASE OF RICE BY THE ASSESSEE. TH E ASSESSEES BOOKS WERE AUDITED AND THE AO COULD NOT FIND ANY DEFECT IN THE SAME. HOWEVER, BASED ON THE FIGURES GIVEN BY THE JOINT 8 ITA NO.337/KOL/2017 P.C. GHOSH & S. N. GHOSH, AY 2012-13 DIRECTOR, RATIONING IN RESPECT TO THE PURCHASE OF R ICE AND WHEAT, THE AO MADE THE ADDITION IN HASTE BY PROVIDING ONLY THE ASSESSEE THREE DAYS TO RECONCILE. THE ASSESSEE HAD REQUESTED THE AO HIS DESIRE TO EXAMINE THE BOOKS OF THE JOINT DIRECTOR ALONG WITH THE ASSESSEE WHICH REQUEST WAS ALSO NOT HEEDED TO BY THE AO AND HE DIS BELIEVED THE ASSESSEE WITHOUT REJECTING THE AUDITED BOOKS AND THE FACT REMAINING THAT THE E NTIRE PURCHASE OF ASSESSEE IS MADE THROUGH BANKING CHANNEL AND THAT TOO FROM GOVERNMEN T. THE AO OUGHT TO HAVE GIVEN OPPORTUNITY TO THE ASSESSEE TO CONFRONT THE JOINT D IRECTOR OF RATIONING ALONG WITH ITS BOOKS OF ACCOUNT TO FIND OUT THE VERACITY AS TO WHOSE CON TENTION IS CORRECT AS HELD BY THE HONBLE SUPREME COURT IN K. T. SHADULI YUSUFF ETC. (SUPRA) AND WITHOUT DOING SO THE ADDITION BASED ON A LETTER OF THE RATIONING AUTHORITY IS VITIATED AND, THEREFORE, THE ACTION OF AO AND CONSEQUENT ADDITION MADE BY HIM AND SUSTAINED BY TH E LD. CIT(A) CANNOT BE UPHELD AND, THEREFORE, WE ORDER DELETION OF THE IMPUGNED ADDITI ON CONFIRMED BY THE LD. CIT(A). 6. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 16.08.2017 SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 16TH AUGUST, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT P.C. GHOSH & S.N. GHOSH, C/O, S. N. GHO SH & ASSOCIATES, ADVOCATES, SEVEN BROTHERSLODGE, PO BUROSHIBTALA, PS. CHINSURAH, DIST. HOOGHLY, PIN-712 105. 2 RESPONDENT ITO, WARD-24(2), HOOGHLY. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY