ITO, WD-25(3), KOLKATA, Kolkata V. Ashoke Kumar Das, Kolkata

ITA 376/KOL/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6350 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 07-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Gift
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TR IBUNAL KOLKATA A BENCH, KOLKATA [BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & S RI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER] I.T.A. NO. 319/KOL/2016 ASSESSMENT YEAR: 2007-08 ASHOKE KUMAR DAS..... .....APPELLANT C/O D J SHAH & CO KALYAN BHAVAN 2, ELGIN ROAD KOLKATA 700 020 [PAN: ADUPD 1860 C] ACIT CIRCLE-25, KOLKATA..... ....RESPONDENT FORMERLY ACIT, CIRCLE 52 AAYKAR DAKSHIN 2, GARIAHAT ROAD KOLKATA 700 068 I.T.A. NO. 376/KOL/2016 ASSESSMENT YEAR: 2007-08 ACIT CIRCLE-25, KOLKATA..... ........APPELLANT FORMERLY ACIT, CIRCLE 52 AAYKAR DAKSHIN 2, GARIAHAT ROAD KOLKATA 700 068 ASHOKE KUMAR DAS..... ......RESPONDENT C/O D J SHAH & CO KALYAN BHAVAN 2, ELGIN ROAD KOLKATA 700 020 [PAN: ADUPD 1860 C] APPEARANCES BY: SHRI MIRAJ D. SHAH, AR, APPEARED ON BEHALF OF THE A SSESSEE. SHRI SALLONG YADEN, ADDL. CIT, DR, APPEARING ON BEH ALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING: MARCH 21 ST , 2018 DATE OF PRONOUNCING THE ORDER: JUNE 15 TH , 2018 O R D E R PER S.S. VISWANETHRA RAVI, JM :- THESE ARE CROSS APPEALS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 7, KOLKATA, (HEREINAFTER THE LD. C IT (A)), PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (THE ACT), DT. 08/12/2015, RELATING TO ASSESSMENT YEAR 2007-08. 2 I.T.A. NO. 319/KOL/2016 ASSESSMENT YEAR: 2007-08 I.T.A. NO. 376/KOL/2016 ASSESSMENT YEAR: 2007-08 ASHOKE KUMAR DAS 2. FACTS IN BRIEF:- THE ASSESSEE IS AN INDIVIDUAL AND IS IN THE BUSINE SS OF MANUFACTURING AND TRADING OF INDUSTRIAL ELECTRICAL ITEMS. HE FILED HIS RETURN OF INCOME ELECTRONICALLY ON 31/10/2007, DISCLOSING INCOME OF RS.9,22,880/-. THE ASSESSING O FFICER STATES THAT, NOTICES U/S 133(6) OF THE ACT, WERE ISSUE TO ALL THE SUNDRY CREDITORS AND AS THERE WAS NO RESPONSE AND WERE RETURNED AS ADDRESSEE UNKNOWN, THE ASSESSING OFFI CER MADE AN ADDITION OF RS. 89,38,590/- BEING CREDIT BALANCES IN THE BOOKS OF T HE ASSESSEE FROM SIX PARTIES. 2.1. ON APPEAL, THE LD. FIRST APPELLATE AUTHORITY, FOUND THAT AN AMOUNT OF RS.89,38,590/-, DOES NOT PERTAIN TO PURCHASES MADE DURING THE CURRENT YEAR AND THESE ARE OPENING BALANCES AT THE BEGINNING OF THIS IMPUGNED FINANCIAL YEAR 2006-07. HE HELD THAT SECTION 41(1) OF THE ACT CANNOT BE INVOKED MERELY B ECAUSE THE NOTICES U/S 133(6) OF THE ACT, WERE RETURNED. HE DELETED THE ADDITION. REGARD ING THE AMOUNT OF RS.4 LAKHS, BEING CREDIT PURCHASES MADE DURING THE YEAR AND REFLECTED AS SUNDRY CREDITORS, HE HELD THAT THE ASSESSEE HAS NOT PROVED THE GENUINENESS OF PURCHASE S AND SUSTAINED THE ADDITION. AGGRIEVED, BOTH THE ASSESSEE AS WELL AS THE REVENUE IS IN APPEAL BEFORE US. 3. AFTER HEARING RIVAL CONTENTIONS, PERUSING THE PA PERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW, AS WELL AS CASE-LAW CITED, WE HO LD AS FOLLOWS:- 4. THE LD. D/R, COULD NOT CONTROVERT THE FACTUAL FI NDING OF THE LD. CIT(A) THAT THE AMOUNT OF RS.89,38,590/-, IS OPENING OUTSTANDING CR EDIT BALANCES CARRIED FORWARD FROM THE PREVIOUS YEAR. IN OTHER WORDS, THESE WERE PURCHASES MADE IN THE EARLIER YEARS AND ARE OPENING BALANCES OF THE CURRENT YEAR. THE LD. CIT(A ) HAS, RIGHTLY HELD THAT THIS ADDITION CANNOT BE MADE DURING THE YEAR AS NO EXPENDITURE IS CLAIMED DURING THE YEAR. HE ALSO RIGHTLY HELD THAT SECTION 41(1) OF THE ACT, CANNOT BE APPLIED SIMPLY BECAUSE NOTICES ISSUED U/S 133(6) OF THE ACT, WERE RETURNED. THERE IS NEIT HER REMISSION OR CESSATION OF LIABILITY AS REQUIRED UNDER THE SECTION. HENCE, THIS FINDING OF THE LD. CIT(A) IS UPHELD AND THE REVENUE APPEAL IS DISMISSED. 5. COMING TO THE DISALLOWANCE OF PURCHASES SUSTAINE D BY THE LD. CIT(A), WE FIND THAT AN AMOUNT OF RS.2 LAKHS/- WERE PURCHASES MADE FROM ROY ELECTRICAL AND ELECTRONICS. THIS FIRM HAD AN OPENING CREDIT BALANCE OF RS.12,22 ,906/- WITH THE ASSESSEE. SIMILARLY, AN 3 I.T.A. NO. 319/KOL/2016 ASSESSMENT YEAR: 2007-08 I.T.A. NO. 376/KOL/2016 ASSESSMENT YEAR: 2007-08 ASHOKE KUMAR DAS AMOUNT OF RS. 2 LAKHS/- WERE PURCHASES MADE FROM M/ S. LOKENATH ENTERPRISES. THE OPENING CREDIT BALANCE OF THIS CONCERN IN THE BOOKS OF THE ASSESSEE WAS RS.7,493/-. THE ASSESSING OFFICER HAS NOT DOUBTED THE PURCHASE. HE HAS ONLY ADDED THE SUNDRY CREDITORS FOR THE SOLE REASON THAT THE NOTICES GIVEN U/S 133(6) O F THE ACT, WERE RETURNED UNCOVERED. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MANOJ AGGARWAL VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -3 NEW DELHI, 113 ITD 37 7 , HELD AS FOLLOWS:- THE ARGUMENT THAT SECTION 68 IS NOT APPLICABLE WHER E AN ASSET IS SOLD AND THE SALE PROCEEDS ARE CREDITED IN THE BOOKS OF ACCOUNT, CANNOT BE ACCEPTE D HAVING REGARD TO THE SETTLED LEGAL POSITION THAT IT IS ALWAYS FOR THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF THE SUMS CREDITED IN HIS BOOKS OF ACCOUNT. THE SECTION DOES NOT RECOGNIZE ANY DISTINC TION BETWEEN AMOUNTS CREDITED IN THE BOOKS AS GIFTS OR LOANS OR PURE RECEIPTS, ON THE ONE HAND, A ND AMOUNTS CREDITED AS SALE PROCEEDS, ON THE OTHER. IN EITHER CASE, WHEN CALLED UPON, THE ASSESS EE IS BOUND TO EXPLAIN THE NATURE AND SOURCE OF THE AMOUNTS CREDITED. THERE MAY BE A FEW EXCEPTIONS TO THIS GENERAL RULE. FOR EXAMPLE, IN THE CASE OF CREDIT PURCHASES, THE ACCOUNT OF THE SUPPLIER IS CREDITED WITH THE AMOUNT PAYABLE. IN SUCH A CASE, WHERE THE PURCHASE IS ALLOWED AS EXPENDITURE, IT MA Y NOT BE POSSIBLE FOR THE ASSESSING OFFICER TO AGAIN CALL UPON THE ASSESSEE TO PROVE THE NATURE AN D SOURCE OF THE CREDIT, FOR THE REASON THAT THE PURCHASE ITSELF IS ALLOWED AS EXPENDITURE ONLY ON B EING SATISFIED THAT IT IS A GENUINE PURCHASE ON CREDIT. IMPLICITLY, THE NATURE AND SOURCE OF THE AM OUNT CREDITED HAS ALSO TO BE TAKEN AS HAVING BEEN EXPLAINED SATISFACTORILY. ANOTHER POSSIBLE ARGUMENT CAN BE THAT IN SUCH A CASE, THE AMOUNT CREDITED IS NOT A CASH CREDIT IN THE SENSE THAT SOME MONIES HAVE BEEN RECEIVED BY THE ASSESSEE, BUT THE CREDIT REPRESENTS A MERE LIABILITY PAYABLE BY THE ASSESSEE IN FUTURE. UNDER ACCOUNTING PRINCIPLES, A LIABILIT Y CAN ONLY BE BROUGHT INTO ACCOUNT BY MAKING A CREDIT ENTRY IN THE BOOKS OF ACCOUNT IN FAVOUR OF THE PERSON TO WHOM THE MONEY IS PAYABLE. THUS, THERE IS MARKED DIFFERENCE BETWEEN A CREDIT REPRESENTING A LIABILITY PAYABLE BY THE ASSESSEE AN D A CREDIT REPRESENTING MONIES RECEIVED FROM ANOTHER PERSON. IT IS BECAUSE OF THIS DISTINCTION T HAT, A LIABILITY FOR PURCHASE WHICH HAS BEEN CREDIT ED IN THE ACCOUNT OF THE SUPPLIER CANNOT BE ADDED UNDE R SECTION 68, MORE SO WHEN THE PURCHASE HAS BEEN ACCEPTED AS GENUINE AND A DEDUCTION THEREFOR H AS BEEN ALLOWED. 5.1. THE BASIS OF ADDITION CANNOT BE CHANGED BY THE LD. CIT(A) WITHOUT INVESTIGATION AND EVIDENCE. IN VIEW OF THE ABOVE DISCUSSION AND IN VI EW OF THE EVIDENCES FILED BY THE ASSESSEE IN SUPPORT OF THE PURCHASES WHICH WAS ACCEPTED BY THE ASSESSING OFFICER, THIS DISALLOWANCE SUSTAINED BY THE LD. CIT(A), IS HEREBY DELETED AND APPEAL OF THE ASSESSEE ALLOWED. 6. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO.3 76/KOL/2016, IS DISMISSED & APPEAL OF THE ASSESSEE IN ITA NO. 319/KOL/2016, I S ALLOWED. KOLKATA, THE 15 TH DAY OF JUNE, 2018. SD/- SD/- [J. SUDHAKAR REDDY] [S.S. VI SWANETHRA RAVI] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 15.06.2018 {SC SPS} 4 I.T.A. NO. 319/KOL/2016 ASSESSMENT YEAR: 2007-08 I.T.A. NO. 376/KOL/2016 ASSESSMENT YEAR: 2007-08 ASHOKE KUMAR DAS COPY OF THE ORDER FORWARDED TO: 1. ASHOKE KUMAR DAS C/O D J SHAH & CO KALYAN BHAVAN 2, ELGIN ROAD KOLKATA 700 020 2. ACIT CIRCLE-25, KOLKATA FORMERLY ACIT, CIRCLE 52 AAYKAR DAKSHIN 2, GARIAHAT ROAD KOLKATA 700 068 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHE S