Shri Sanjeev Kejriwal, Kolkata V. ITO, Ward - 30(3), Kolkata, Kolkata

ITA 371/KOL/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8039 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 16-05-2011
• Assessment Year: misc
• Appeal Filed On: 18-02-2010
• Court: TRIBUNAL
• Assessee Lawyers: S K TULSIYAN
• Keywords: Unexplained cash credit; Rejection of books of accounts; Source of fund; Bad and doubtful debts
• Section: 68; 144

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH A, KOLKATA () BEFORE , ,, , , SHRI MAHAVIR SINGH, JUDICIAL MEMBER. /AND . .. . ! ! ! !. .. . , '# SHRI C.D.RAO, ACCOUNTANT MEMBER $ $ $ $ / ITA NO . 371/KOL/2010 %& '(/ ASSESSMENT YEAR : 2006-07 (*+ / APPELLANT ) SHRI SANJEEV KEJRIWAL, KOLKATA (PAN:AEVPK 7424 H ) (,-*+/ RESPONDENT ) I.T.O., WARD-30(3), KOLKATA *+ . / '/ FOR THE APPELLANT: SHRI S.K.TULSIYAN ,-*+ . / '/ FOR THE RESPONDENT: SHRI A.K.SINGH 0%1 . !# /DATE OF HEARING : 23.10.2012. 2' . !# /DATE OF PRONOUNCEMENT : '3 / ORDER . .. . ! ! ! !. .. . , '# PER SHRI C.D.RAO, AM THE ABOVE APPEAL IS FILED BY ASSESSEE AGAINST ORDER DATED 23.11.2009 OF THE LD. CIT-(A)-XIV, KOLKATA PERTAINING TO A.YR. 2006-07. 2. IN THIS APPEAL THE ASSESSEE HAS TAKEN THE FOLLO WING GROUNDS :- 1. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE LD. CIT (A), KOLKATA ERRED IN CONFIRMING THE ADDITION OF RS.25,00,000/- MADE BY T HE ASSESSING OFFICER AS AN INCOME FROM UNDISCLOSED SOURCE IGNORING THE FACT THAT ENTI RE BANK DEPOSIT IS OUT OF REALIZATION FROM DEBTORS. 2. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE L D. CIT (A), KOLKATA ERRED IN ENHANCING THE ADDITION FROM RS.25,00,000/- AS ASSES SED BY THE ASSESSING OFFICER BY A FURTHER SUM OF RS.2,12,06,226/-, THUS MAKING THE TO TAL ADDITION OF RS.23706226/-. 3. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE L D. CIT (A), KOLKATA ERRED IN INVOKING THE PROVISION OF SEC 68 IN RESPECT OF REALIZATION O F DEBTORS ARISING OUT OF SALE ON CREDIT N THE EARLIER YEAR AND WHEREAS PART OF DEBTORS WERE R EALISED DURING THE YEAR UNDER CONSIDERATION. I TA NO.371/KOL/2010 2 4. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE L D. CIT (A), KOLKATA ERRED IN NOT APPRECIATING THE FACT THAT DEBTORS AS ON 31/03/2005 WAS TO THE EXTENT OF R.75445999/- WHICH WAS SUBSEQUENTLY REDUCED TO RS.52069195/ AND WHEREAS ENTIRE REALISED AMOUNT FROM DEBTORS AMOUNTING TO RS 23706226/- WERE DEPOSI TED IN BANK AND CREDITORS WERE PAID BY A/C PAYEE CHEQUE. 5. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE L D. CIT (A), KOLKATA ERRED IN NOT APPRECIATING THE FACT THAT PROVISION OF SEC 68 IS N OT APPLICABLE IN CASE OF SUBSTITUTION OF ONE ASSET BY ANOTHER ASSET AS THERE WAS EITHER ANY ADVANCE NOR ANY DEPOSIT RECEIVED FROM ANY PARTY 6. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE L D. CIT (A), KOLKATA ERRED IN TRAVELING BEYOND THE SUBJECT MATTER OF ASSESSMENT IGNORING TH E FACT THAT HE HAS NO POWER OF ENHANCEMENT RELATING TO ANY INCOME WHICH HAS NOT BE EN SUBJECT MATTER OF ASSESSMENT. 7. THE APPELLANT PRAYS FOR DELETION OF THE ENTIRE A DDITION MADE BY THE ASSESSING OFFICER AND ALSO ENHANCEMENT MADE BY THE CIT (A) AND ALSO R EQUESTS FOR CANCELLATION OF PENALTY PROCEEDING INITIATED U/S 271(1)(C). 8. THE APPELLANT CRAVES LEAVE TO ALTER AMEND OR SUB STITUTE ANY GROUND OR GROUNDS OF APPEAL BEFORE OR AT TIME OF THE HEARING OF THE APPE AL. 3. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT WHIL E DOING THE BEST JUDGEMENT ASSESSMENT U/S 144 OF THE IT ACT THE AO HAS ADDED A N AMOUNT OF RS.25,00,000/- BY OBSERVING AS UNDER :- THE ASSESSEE IS PROPRIETOR OF RAJEEV TRADING CO. F ROM WHICH HE EARNS COMMISSION. AS PER AUDITORS REPORT U/S 44AB AND STATEMENT OF A/CS OF RAJEEV TRADING CO. FOR THE PREVIOUS YEAR 2004-05, THE ASSESSEE WAS ENGAGED IN THE TRADING OF SAWN TIMBER. NO INCOME FROM THIS ACTIVITY HAS BEEN REPORTED THIS YE AR. STATEMENT OF SAVINGS BANK A/C. NO.327-1-030091-7 WAS OBTAINED FROM STANDARD CHARTE RED BANK, RASH BEHARI AVENUE, KOLKATA. PERUSAL OF THE SAID STATEMENT REVEALS THAT DURING THE YEAR UNDER CONSIDERATION, THERE WAS CASH DEPOSIT ON DIFFERENT DATES TOTALING RS.50,09,700/-. THE ASSESSEE COULD NOT OFFER ANY EXPLANATION IN THIS REGARD, INSPITE OF RE PEATED OPPORTUNITIES. HOWEVER, THE BANK A/C STANDS IN THE JOING NAME OF NIRMAL KEJRIWA L AND SANJEEV KEJRIWAL. CONSIDERING THE FACTS AND CIRCUMSTANCES AS DISCUSSE D IN PRECEDING PARAGRAPHS, A SUM OF RS.25,00,000/- OUT OF TOTAL CASH DEPOSIT TO SAVINGS BANK A/C.NO.327-1-030091- 7, IS TREATED AS ASSESSEES INCOME FORM UNDISCLOSED SOURCES, AND ADDED BACK IN COMPUTATION. 3.1. ON APPEAL THE LD. CIT(A) AFTER DISCUSSING THE VARIOUS LAPSES COMMITTED BY THE AO AT PAGE NOS.9 TO 13 ENHANCED THE INCOME OF ASSES SEE BY RS.2,12,06,226/- OVER AND ABOVE WHICH RS.25,00,000/- ADDED BY AO BY STATING A T PARA NO.7 AS UNDER :- 7. I HAVE CAREFULLY CONSIDERED ALL THE FACTS AND C IRCUMSTANCES OF THIS CASE AND THE SUBMISSIONS MADE BY THE ARS OF THE ASSESSEE IN RESP ECT OF THE GROUNDS OF APPEAL AND ALSO REGARDING THE NOTICE OF ENHANCEMENT GIVEN BY M E. IN THIS CASE IT CAN BE NOTED THAT DURING THE ASSESS MENT PROCEEDINGS THE AO. COULD EXAMINE THE BUSINESS AFFAIRS OF THE ASSESSEE ONLY P ARTIALLY. WHEN THE A.O. ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF CASH DEPOSITED IN HIS JOINT BANK ACCOUNT WITH HIS FATHER HE DID NOT FURNISH AN EXPLANATION DESPITE THE FACT THAT A NUMBER OF OPPORTUNITIES WERE I TA NO.371/KOL/2010 3 GIVEN TO HIM SINCE THE ASSESSEE DID NOT FURNISH ANY EXPLANATION DURING THE ASSESSMENT PROCEEDINGS THE A.O. HAD TO COMPLETE THE ASSESSMENT EXPARTE ON WHATEVER LITTLE INFORMATION WAS AVAILABLE WITH HIM AT THAT TIME. HE ACTED VERY REASONABLY AND ADDED ONLY HALF OF THE CASH DEPOSITED IN THE JOINT BANK A CCOUNT BELIEVING THAT IN A JOINT ACCOUNT OF TWO PERSONS ONLY HALF OF THE AMOUNT CAN BE TAXED IN THE HANDS OF ONE PERSON. DURING APPELLATE PROCEEDINGS THE ASSESSEE CAME WITH AN EXPLANATION THAT THE CASH OF ABOUT RS,50,00,000/- DEPOSITED IN THE ABOVE MENTIONED JOINT BANK ACCOUNT WAS A PART OF THE CASH OF RS.2,37,06,226/- RECEIVED FROM DEBTORS OF HIS PROPRIETORY CONCERN M/S. RAJEEV TRADING CO. TO WHOM TIMBER WAS SOLD DUR ING FINANCIAL YEAR 2004-05. HERE, WE HAVE TO UNDERSTAND THAT WHEN THE ASSESSEE IS SHO WING RECEIPT OF CASH FROM THE DEBTORS OF LAST YEAR HE IS CREDITING THIS CASH IN H IS BOOKS OF ACCOUNTS IN THE LEDGER ACCOUNTS OF THE DEBTORS. THUS, IT IS CLEARLY A CASH CREDIT IN THE BOOKS OF ACCOUNTS OF THE PROPRIETORY CONCERN OF THE ASSESSEE. THE PROVISIONS OF SECTION 68 OF THE I T ACT, 1961 ARE AS FOLLOWS: 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS O F AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATI ON ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, I N THE OPINION OF THE [ASSESSING] OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE C HARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. FROM THIS IT CAN BE SEEN THAT ANY TYPE OF SUM FOUND CREDITED IN THE BOOKS OF THE A/CS OF THE ASSESSEE IS COVERED BY SECTION 68. THE CASH AMOUNTS WHICH ARE CLAIMED TO BE RECEIVED FROM THE DEBTORS DURING THE PREVIOUS YEAR UNDER CONSIDERATION ARE VERY MUCH SUMS FOUND CREDITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE MAINTAINED FOR THE PREVIOUS YEAR 2005-06. THEREFORE, THE ASSESSEE IS REQUIRED T O EXPLAIN THE NATURE AND SOURCE OF THESE SUMS. THE AR OF THE ASSESSEE IN THE ABOVE REP RODUCED SUBMISSION HAS CLAIMED THAT THESE SUMS CANNOT BE TREATED AS CASH CREDITS A S PROVIDED IN SECTION 68 BECAUSE CASH CREDIT APPEARS WHEN A LIABILITY IS INCURRED BY WAY OF CREDIT ENTRY IN CASH AND HERE THERE IS NO QUESTION OF INCURRENCE OF ANY LIABILITY BECAU SE THE SUNDRY DEBTORS ARE BEING REALIZED IN CASH. IT IS CLAIMED THAT THIS IS A CASE WHERE ONE ASSET I.E. DEBTORS HAS BEEN REPLACED BY OTHER ASSET I.E CASH. I DO NOT AGREE WI TH THIS CONTENTION OF THE AR OF THE ASSESSEE. A CAREFUL READING OF SECTION 68 WOULD REV EAL THAT IN THIS SECTION NO WHERE IT IS MENTIONED THAT THIS SECTION IS TO BE INVOKED ONLY W HEN A LIABILITY IS CREATED. THE SECTION SIMPLY SAYS THAT WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR. THIS LANGUAGE CLEARLY IMPLIE S THAT WHENEVER ANY SUM IS CREDITED IN THE BOOKS OF THE ASSESSEE ITS NATURE AND SOURCE HAS TO BE EXPLAINED WHETHER SUCH CREDITING IS CREATING A NEW LIABILITY OR THIS CREDI TING IS BEING DONE IN RESPECT OF SUMS ALREADY EXISTING AS DEBIT ENTRIES. IN THIS SECTION THE SIMPLE INTENTION OF THE LEGISLATURE WAS THAT WHENEVER ANY SUM IS RECEIVED BY THE ASSESS EE. IT IS THE DUTY OF THE ASSESSEE TO EXPLAIN THE SOURCE OF SUCH MONEY. IF THIS RECEIPT I S IN THE NATURE OF HIS INCOME HE SHOULD CONSIDER IT FOR THE PURPOSE OF TAXATION OTHERWISE H E SHOULD SATISFACTORILY EXPLAIN THE NATURE AND SOURCE OF THIS RECEIPT. IN VIEW OF THE A BOVE DISCUSSION THIS CLAIM OF THE AR OF THE ASSESSEE CANNOT BE ACCEPTED. IN SHOW CAUSE LETTER TO THE ASSESSEE IT WAS CLEARLY BROUGHT HIS NOTICE THAT AS PER THE PRINCIPLES LED DOWN BY HONBLE SUPREME COURT IN RES PECT OF SECTION 68 THE ASSESSEE WAS REQUIRED TO EXPLAIN (I) THE IDENTITY OF THE PERSONS FROM WHOM THE MONEY WAS CLAIMED TO BE RECEIVED, (II) THE CAPACITY OF SUCH PERSONS TO G IVE THE MONEY AND (III) THE GENUINENESS OF THE TRANSACTION. TO PROVE THESE THREE ASPECTS TH E FIRST IMPORTANT THING WAS THAT THE ASSESSEE SHOULD IDENTIFY THE PERSONS FROM WHOM HE C LAIMED TO HAVE RECEIVED THIS CASH. THE ASSESSEE HAS GIVEN ONLY THE NAMES OF THE PERSON S WHO ARE CLAIMED TO BE THE DEBTORS OF HIS TIMBER BUSINESS CLAIMED TO BE CARRIED ON LAS T YEAR. WHEN HE WAS ASKED TO PROVIDE I TA NO.371/KOL/2010 4 THE ADDRESSES OF THESE PERSONS AND ALSO SHOW THE BI LLS OF LAST YEAR THROUGH WHICH SALES WERE MADE TO THESE PARTIES HE REFUSED TO PROVIDE TH ESE DETAILS SAYING THESE DOCUMENTS HAD BEEN MISPLACED AND THE ADDRESSES OF THE PARTIES WERE NOT ENTERED IN THE COMPUTER. IN HIS SUBMISSION REPRODUCED ABOVE THE AR OF THE ASSES SEE HAS OBJECTED TO REQUISITIONING OF THESE DETAILS ON THE GROUND THAT THESE DETAILS C ANNOT BE CALLED AS THEY ARE RELATED TO EARLIER YEARS. THIS ARGUMENT OF THE AR CANNOT BE AC CEPTED BECAUSE THE GENUINENESS OF THE TRANSACTION I.E. WHETHER THE GOODS WERE ACTUALL Y SOLD TO THE PARTIES SHOWN AS DEBTORS OR NOT CAN BE DETERMINED ONLY BY THE SALE BILLS OF LAST YEAR. SINCE THE SALE BILLS ARE IMPORTANT DOCUMENT TO ESTABLISH WHETHER THE PERSONS CLAIMED AS DEBTORS ARE REALLY DEBTORS OR NOT THE ASSESSEE WILL HAVE TO PRODUCE TH ESE SALE BILLS EVEN THOUGH THEY MAY BE RELATED TO AN EARLIER YEAR. OVER AND ABOVE THIS THE ADDRESS OF THE SO CALLED DEBTORS HAVE TO BE PROVIDED BY THE ASSESSEE OTHERWISE THE IDENTI TY OF THE PERSONS CLAIMED AS A DEBTORS WILL NOT BE PROVED AT ALL. I FAIL TO UNDERSTAND IF THE TRANSACTIONS OF THE ASSESSEE ARE GENUINE WHY SHOULD HE BE RELUCTANT IN PROVIDING THE SE BASIC DETAILS ABOUT HIS BUSINESS TRANSACTIONS. THE CLAIM OF THE AR OF THE ASSESSEE F OR HAVING MAINTAINED THE STOCK REGISTER ETC. DOES NOT HAVE ANY MEANING SINCE THE B ASIC DETAILS REGARDING THE ADDRESS OF THE DEBTORS HAVE NOT BEEN PROVIDED. THE VARIOUS COU RT CASES CITED BY THE AR OF THE ASSESSEE ARE NOT APPLICABLE IN THE INSTANT CASE BEC AUSE THE FACTS OF THOSE CASES ARE TOTALLY DIFFERENT. FURTHER, THE AR HAS ARGUED THAT CIT(A) DOES NOT HAV E POWER TO ENHANCE THE ASSESSMENT BY ASSESSING NEW SOURCES OF INCOME OUTSI DE THE SUBJECT MATTER OF ASSESSMENT APPEALED AGAINST. IN THIS RESPECT HE HAS CITED THE JUDGMENTS OF HON.BLE SUPREME COURT IN THE CASE OF CIT V/S. SHAPOORJI PALLONJI (44 ITR 891 ) AND CIT V/S. HARDULROJ CHAMARIA (66 ITR 443). HENCE, IN THE INSTANT CASE IT CAN BE SEEN THAT NO NEW SOURCE OF INCOME IS BEING ASSESSED. THE AO HAS ADDED RS. 25 LAKH IN THE HANDS OF THE ASESSEE ON THE GROUND THAT THE CASH DEPOSITED IN THE JOINT BANK A/C OF TH E ASSESSEE AND HIS FATHER WAS UNEXPLAINED. DURING THE APPELLATE PROCEEDINGS IT EM ERGED THAT THE ASSESSEE CLAIMED THE OWNERSHIP OF THE WHOLE OF THE CASH DEPOSITED IN THI S BANK A/C. DURING THE APPELLATE PROCEEDINGS CASH WAS ALSO FOUND DEPOSITED IN THE BA NK A/C IN THE NAME OF HIS PROPRIETORY CONCERN. THIS WHOLE CASH WAS VERY MUCH A SUBJECT MA TTER OF THE ASSESSMENT PROCEEDINGS. AS DISCUSSED IN EARLIER PARAS THE ASSE SSEE HAS FAILED TO EXPLAIN THE NATURE AND SOURCE OF THIS CASH WHICH HAS BEEN CREDITED IN THE BOOKS OF A/CS. OF THE ASSESSEE. THE SOURCE OF THIS CASH IS THE SAME WHICH WAS CONSIDERE D BY THE AO DURING THE ASSESSMENT PROCEEDINGS. IN THE APPELLATE PROCEEDINGS NO NEW SO URCE IS BEING DISCOVERED. IT IS ONLY THE SAME ITEM OF INCOME WHICH IS BEING ENHANCED. TH E WHOLE OF THIS CASH AMOUNTING TO RS.2,37,06,226/- SHOULD HAVE BEEN ADDED U/S. 68 OF THE IT. ACT. HOWEVER THE AO ADDED ONLY RS.25,00,000/-. THEREFORE, IT IS VERY MUCH IN THE POWER OF THE CIT(A) TO ENHANCE THE INCOME OF THE ASSESSEE BY RS.2,12,06,226/- OVER AND ABOVE RS.25,00,000/- ADDED BY THE AO. WITHOUT PREJUDICE TO HIS ARGUMENTS DISCUSSED ABOVE THE AR OF THE ASSESSEE HAS TAKEN AN ALTERNATIVE ARGUMENT. HE HAS SUBMITTED THA T SUNDRY DEBTORS OF THE ASSESSEE HAVE ALREADY BEEN REDUCED FROM RS.7,54,45,999/- TO RS. 5 ,20,69,195/- ON ACCOUNT OF REALIZATION OF THE DEBTORS. IF THE AMOUNT OF REDUCT ION IS ADDED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE I T ACT. IT WOULD MEAN THAT NO REALIZ ATION HAS BEEN MADE AGAINST THE SUNDRY DEBTORS. IN SUCH A SCENARIO, THE SUNDRY DEBTORS, AL READY REDUCED BY THE ASSESSEE, SHALL HAVE TO BE TREATED AS BAD DEBTS WRITTEN OFF DUE TO REDUCTION IN BALANCE WHICH WILL RESULT IN BUSINESS LOSS OF THE ASSESSEE. NOW THE ACTION PR OPOSED TO BE MADE AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT SHALL HAVE TO BE SET OFF AGAINST THE SAID BUSINESS LOSS RESULTING IN THE SAME NET PROFIT AS DISCLOSED BY TH E ASSESSEE. THUS, THE PROFIT OF THE ASSESSEE WILL NOT BE AFFECTED EVEN AFTER THE PROPOS ED ADDITION IS MADE OWING TO THE FACT I TA NO.371/KOL/2010 5 THAT SUNDRY DEBTORS HAVE ALREADY BEEN ELIMINATED AN D COGNIZANCE OF THIS FACT HAS TO BE TAKEN BY THE DEPARTMENT. THIS ARGUMENT OF THE AR CANNOT BE ACCEPTED BECAUSE AS PER THE PROVISION OF SECTION 36 (1)(VII) THE ASSESSEE CAN CLAIM AS A DED UCTION ONLY THAT PART OF THE DEBT WHICH HAS BECOME BAD AND IS WRITTEN OFF AS IRRECOVERABLE. IN THIS APPEAL ORDER IN THE ABOVE PARAS IT HAS BEEN HELD THAT THE AMOUNT OF RS. 2,37, 06,226/- IS NOT A REALIZATION FROM THE DEBTORS. HENCE IT HAS BEEN HELD THAT AT THE END OF F.YR. 2005-06 DEBTORS REMAIN AT THE SAME LEVEL AS THEY WERE AT THE END OF 2004-05. THE ASSESSEE HAS NOT SHOWN THESE DEBTORS AS BAD IN THE RETURN. HENCE NO DEDUCTION CAN BE ALL OWED FOR THE SAME U/S 36(I)(VII). FURTHER, FROM THE DETAILS OF THE DEBTORS FROM WHOM THE DEBTS ARE CLAIMED TO HAVE BEEN REALIZED, IT IS SEEN THAT OUT OF 20 PARTIES FULL DE BT IS CLAIMED TO HAVE BEEN RECEIVED FROM 7 PARTIES ONLY AND FROM THE REMAINING 13 PARTIES SO ME AMOUNT IS STILL SHOWN TO BE OUTSTANDING EVEN ON 31.03.2006. THESE DETAILS SHOW THAT THE DEBTS OF THE ASSESSEE HAVE NOT BECOME BAD AND CANNOT BE WRITTEN OFF AS IRRECOV ERABLE. HENCE, THIS ARGUMENT OF THE AR IS ALSO REJECTED. IN VIEW OF THE ABOVE FACTS IT IS CLEAR THAT IN RESP ECT OF THE AMOUNT OF RS. 2,37,06,226/- CREDITED IN THE BOOKS OF ACCOUNT OF T HE PROPRIETORY CONCERN OF THE ASSESSEE M/S RAJEEV TRADING CO. THE ASSESSEE HAS FAILED TO E XPLAIN THE IDENTITY OF THE PERSONS IN WHOSE NAMES THIS AMOUNT IS CREDITED, THE CAPACITY O F SUCH PERSONS AND THE GENUINENESS OF THE TRANSACTIONS. THEREFORE, THE ASSESSEE HAS FA ILED TO SATISFACTORILY EXPLAIN THE NATURE AND SOURCE OF THIS CREDITED AMOUNT OF RS.2,33,76,80 4/-. HENCE, THIS AMOUNT IS ADDED IN THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE I T ACT, 1961. SINCE RS. 25,00,000/- HAS ALREADY BEEN ADDED ON THIS ISSUE BY THE ASSESSING O FFICER IN THE ASSESSMENT ORDER THEREFORE, AS A RESULT OF THIS APPEAL THE ADDITION MADE BY THE A.O. STANDS CONFIRMED AND THE INCOME OF THE ASSESSEE IS FURTHER ENHANCED BY R S. 2,12,06,226/-. 3.2. AGGRIEVED BY THIS ASSESSEE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L APPEARING ON BEHALF OF ASSESSEE HAS SUBMITTED THAT THE ASSESSEE IS CARRYIN G OUT ITS BUSINESS OF TRADING OF TIMBER IN M/S.RAJIV TRADING COMPANY FOR A.YR. 2005- 06 BEING YEAR PREVIOUS TO THE YEAR UNDER APPEAL. THE ASSESSEE HAS SHOWN SALES FRO M TIMBER BUSINESS AT RS.7,56,49,544/- AGAINST THE PURCHASE OF RS.7,53,05 ,721/- AND SHOWN THE NET PROFIT OF RS.1,20,305/- WHICH WAS DULY OFFERED FOR TAXATION A ND ACCEPTED BY THE REVENUE. THE CLOSING DEBTORS AS ON 31.3.2005 AS PER THE BALANCE SHEET IS RS.7,54,45,999/- SINCE MOST OF THE SALES WERE MADE ON CREDIT. SIMILARLY THE CLO SING CREDITORS ARE ALSO AT RS.7,91,60,460/- AS MOST OF THE PURCHASES ARE MADE ON CREDIT. THE ASSESSEE MAINTAINED TWO SEPARATE BANK ACCOUNTS AND ALL THE RECEIPTS ARE DEPOSITED IN BOTH THE SAID BANK ACCOUNTS. DURING THE ASSESSMENT YEAR 2006-07 WHICH IS UNDER DISPUTED THE ASSESSEE HAS REALIZED RS.2,33,76,804/- FROM THE DATE STANDIN G AS ON 31.03.2005. THE ENTIRE I TA NO.371/KOL/2010 6 REALIZATION WAS MADE IN CASH. OUT OF THE SAID REALI ZATION AN AMOUNT OF RS.2,20,71,875/- WAS DULY DEPOSITED BY THE ASSESSEE IN HIS TWO BANK ACCOUNTS. THE DETAILS OF REALIZATION ARE ALSO QUOTED BY THE CIT(A ) AT PAGE OF HIS ORDER. AGAIN OUT OF THE SAID BANK DEPOSIT PAYMENTS WERE MADE TO THE SUN DRY CREDITORS TO THE TUNE OF RS.2,01,97,323/-. NO REJECTION OF BOOKS OF ACCOUNTS HAS BEEN MADE BY THE REVENUE AUTHORITIES. THE ISSUE THAT THE REALIZATION FROM DE BTORS FORMS THE SOURCE OF THE INCOME IN THE HANDS OF ASSESSEE WAS NOT RAISED AND DISCUSS ED BY AO THAT MENS REA REALIZATION FROM DEBTORS ARE NOT THE ISSUE BEFORE THE LD. CIT(A ). BASED ON THESE SUBMISSIONS HE SUBMITTED THAT THE ADDITIONS MADE BY THE AO TO THE EXTENT OF RS.25,00,000/- AND FURTHER ENHANCEMENT MADE BY THE CIT(A) IS LIABLE TO BE DELETED. 4.1. ALTERNATIVELY HE ALSO ARGUED THAT IF THE REALI ZATION FROM THE DEBTORS ARE NOT ACCEPTED AS HAS BEEN DONE BY THE LD. CIT(A) THEN TH E DEBTORS TO THE EXTENT OF THE REALIZATION HAVE TO BE CONSIDERED AS DEBTS SINCE TH E DEBTORS ARE STANDING IN THE BOOKS ONLY AT THE REDUCED FIGURE BASED REALISATION. HE RE LIED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF TRF LIMITED VS CIT 323 IT R 397 (SC). HE FURTHER GAVE WRITTEN SUBMISSIONS IN RESPECT OF POWER OF ENHANCEM ENT AVAILABLE TO THE CIT(A) BASED ON THE VARIOUS RATIOS LAID DOWN BY VARIOUS HIGH COU RTS AND APEX COURT. IN THE RESULT HE REQUESTED TO DELETE THE ADDITION MADE BY THE AO AS WELL AS THE LD. CIT(A). 5. ON THE OTHER HAND, THE LD. DR APPEARING ON BEHAL F OF THE REVENUE HAS REITERATED THE OBSERVATIONS MADE BY THE LD. CIT(A) AT PAGES 9 TO 13 AND THE FINDINGS OF THE LD. CIT(A) AT PARA NO.7 AND HE REQUESTED TO UPHELD THE ACTION OF THE LD. CIT(A). 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW OF THE FACT TH AT WHEN ONCE THE REVENUE HAS ACCEPTED THE FIGURES OF SUNDRY CREDITORS AS WELL AS SUNDRY DEBTORS AS ON 31.3.2005 WHICH ARE NOT DISPUTED EITHER BY AO OR BY THE LD. C IT(A). THE CONTENTION OF ASSESSEE THAT THE REALIZATION MADE BY THE ASSESEE IN CASH FR OM THE SUNDRY DEBTORS AND SUBSEQUENT PAYMENTS TO THE SUNDRY CREDITORS ARE DUL Y REFLECTED IN THE BOOKS OF ACCOUNTS ARE NOT REJECTED BY THE REVENUE AUTHORITIE S FOR THE ASSESSMENT YEAR 2006-07 I TA NO.371/KOL/2010 7 WHICH IS UNDER DISPUTE. WE FIND NO JUSTIFICATION ON THE PART OF THE REVENUE TO MAKE EITHER ADDITIONS OF RS.25,00,000/- BY AO OR ENHANCE MENT MADE BY THE LD. CIT(A)TO THE EXTENT OF RS.2,37,06,226/- IS NOT SUSTAINABLE I N THE EYES OF LAW, KEEPING IN VIEW OF THE FACT THAT NEITHER THE AO NOR THE LD. CIT(A) HAS REJECTED THE BOOKS OF ACCOUNTS MAINTAINED BY ASSESSEE NOR DISPUTED THAT THE ASSESS EE IS SHOWING SUNDRY DEBTORS AS WELL AS SUNDRY CREDITORS AS ON 31.03.2005 WHICH WER E SUBSTANTIALLY REDUCED AS ON 31.03.2006. UNDER THESE CIRCUMSTANCES, THE ADDITION MADE BY AO AND ENHANCEMENT MADE BY LD. CIT(A) ARE LIABLE TO BE DISMISSED. SINC E WE HAVE EXPRESSED OUR OPINION IN REGARDING THE ADDITION AS WELL AS THE ENHANCEMENT M ADE BY LD. CIT(A), WE CONSIDER THAT THE ARGUMENTS PUT FORTH BY THE LD. COUNSEL FOR ASSESSEE AS REGARDING THE WRITING OFF BAD DEBTS AS WELL AS THE POWERS OF LD. CIT(A) FOR ENHANCEMENT ARE ACADEMIC IN NATURE. AS SUCH WE DELETE THE ADDITION MADE BY AO A ND ENHANCEMENT MADE BY LD. CIT(A). 7. IN THE RESULT THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 9.11.2012. SD/- SD/- , , , , MAHAVIR SINGH, JUDICIAL MEMBER . .. . ! ! ! !. .. . , , , , '# '# '# '# , C.D.RAO, ACCOUNTANT MEMBER. ( (( (!# !# !# !#) )) ) DATE: 9.11.2012 R.G.(P.S.) '3 . ,4 5'4'6- COPY OF THE ORDER FORWARDED TO: 1. SANJEEV KEJRIWAL, 6/1B,PALM AVENUE, KOLKATA-700019. 2 I.T.O., WARD-30(3), KOLKATA. 3. THE C.I.T. 4. CIT(A)-XVI, KOLKATA 5. THE CIT(DR), KOLKATA BENCHES, KOLKATA -4 ,/ TRUE COPY, '3%0/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES I TA NO.371/KOL/2010 8