ITO, Ward - 25(1), Kolkata , Kolkata V. Shri Pradip Kumar Khetan , Kolkata

ITA 385/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2113 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 08-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Income from undisclosed sources; Accommodation entries
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM ./ITA NO.385/KOL/2018 ( / ASSESSMENT YEAR: 2014-15) ITO, WARD-25(1), KOLKATA VS. SHRI PRADIP KUMAR KHETAN 3/113/1, AZADGARH, TOLLYGUNGE, KOLKATA-700040 ./ ./PAN/GIR NO.: AINPK 2961 K (ASSESSEE) .. (REVENUE) ASSESSEE BY : SHRI A. K. SINGH, CIT DR RESPONDENT BY : NONE / DATE OF HEARING : 16/04/2019 /DATE OF PRONOUNCEMENT : 19/06/2019 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTA INING TO ASSESSMENT YEAR 2014-15, IS DIRECTED AGAINST THE ORDER PASSED BY TH E COMMISSIONER OF INCOME TAX (APPEAL)-7, KOLKATA, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT , 1961 (IN SHORT THE ACT) DATED 22/12/2016. 2. GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE TOWARDS BOGUS SUNDRY CRE DITORS OF RS. 18,03,16,081/- AND ADOPTING ONLY COMMISSION INCOME THEREON WHEN IT IS SHRI PRADIP KUMAR KHETAN ITA NO.385/KOL/2018 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 2 22 2 CLEARLY MENTIONED IN THE ASSESSMENT ORDER THAT THE AMOUNT IS BEING ADDED ON PROTECTIVE BASIS. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WITHOUT PREJUDICE TO GROUND NO. 1, THE LD. CIT(A) WAS NOT JUSTIFIED IN D ECIDING THE RATE OF COMMISSION FOR PROVIDING ACCOMMODATION ENTRY TO BE TAKEN AT 0.25% WITHOUT SPECIFYING THE BASIS OF ARRIVING AT SUCH FI GURE. 3. THAT WITHOUT PREJUDICE TO THE ABOVE, ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN NOT SPECIFICALLY DIRECTING THE ASSESSING OFFICER TO TAX THE OTHER INCOME (COMM ODITY INCOME) WITHOUT GIVING BENEFIT OF BUSINESS LOSS CLAIMED BY THE ASSE SSEE IN THE PROFIT & LOSS ACCOUNT, SINCE BOTH THE SALE AND PURCHASE WERE HELD TO BE ACCOMMODATION ENTRIES. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER AND/OR MODIFY ANY ONE OR ALL OF THE GROUNDS OF APPEAL MENTIONED ABOVE. 3. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F ASSESSEE IN SPITE OF ISSUANCE OF NOTICE FOR HEARING MORE THAN ONE OCCASION AND LD . DEPARTMENTAL REPRESENTATIVE(DR), WAS PRESENT FOR THE APPELLANT R EVENUE. IN THE ABSENCE OF ANY APPEARANCE BY THE ASSESSEE, THE APPEAL IS BEING DIS POSED OF EX PARTE QUA THE ASSESSEE, AFTER HEARING LD. DR FOR THE REVENUE ON M ERITS IN TERMS OF RULE 24 OF THE INCOME TAX APPELLATE, TRIBUNAL, RULES, 1963. 4. BRIEF FACTS QUA THE ISSUE ARE THAT DURING THE SC RUTINY PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE IS INVOLVED IN CR EDIT SALE AND PURCHASE; HENCE THE BUSINESS TRANSACTION CANNOT BE AUTHENTICATED BY BAN K STATEMENTS. THE ASSESSEE COULD NOT PROVE THE CREDITWORTHINESS OF THE ASSESSE E HIMSELF AS WELL AS THE CREDITOR OF THE ASSESSEE. SO THE EXPLANATION REGARDING HUGE AMOUNT OF SUNDRY CREDITOR WAS NOT ACCEPTABLE AS THE ASSESSEE COULD NOT PRODUCE HI S SUNDRY CREDITOR FOR CROSS VERIFICATION TO AUTHENTICATE THE SAME. IN VIEW OF T HE ABOVE DISCUSSION, THE ASSESSING OFFICER NOTICED THAT IT CAN BE INFERRED T HAT 1) THE ASSESSEE IS PROPRIETOR OF SOME PAPER COMPANY WHICH IS PROVIDING ACCOMMODAT ION ENTRIES TO SOME OTHER BENEFICIARY COMPANY AND GETTING SOME COMMISSION FRO M THEM OR 2) THE PROPRIETARY CONCERN IS GETTING ACCOMMODATION ENTRIE S FROM OTHER RELATED SHRI PRADIP KUMAR KHETAN ITA NO.385/KOL/2018 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 3 33 3 COMPANIES TO PROVE GENUINENESS OF HIS BUSINESS AND ADJUSTING OTHER INCOME LIKE INCOME FROM COMMODITY TRADING OR 3) HE HIMSELF IS D IRECTLY/INDIRECTLY CONNECTED WITH ANY OTHER COMPANY / ENTITY / CONCERN WHICH IS GETTING BENEFITTED BY THIS ACCOMMODATION ENTRIES. IN THE INSTANT CASE M/S. MSP METALLICS LTD. OR AMIT ENTERPRISES MAY BE THE BENEFICIARY OR THE ASSESSEE HIMSELF. THE ASSESSEE MAY ALSO BE A SMALL PART OF LAYERING CONNECTED WITH MONEY LA UNDERING OF SOME COMPANY OR GROUP OF COMPANIES WHICH REQUIRES ACCOMMODATION ENT RIES TO PROVE GENUINENESS OF THEIR TRANSACTIONS. BENEFICIARY COMPANIES MAY HA VE BROUGHT BACK THEIR UNACCOUNTED INCOME THROUGH LAYERING INTO THEIR REGU LAR BOOKS OF ACCOUNTS IN THE GUISE OF BOGUS SUNDRY DEBTORS / SUNDRY CREDITOR ETC . SINCE THE ASSESSEE COULD NOT PRODUCE THE RELATED PARTY FOR FURTHER INVESTIGATI ON, HENCE IT CANNOT BE CONCLUSIVELY DETERMINED THAT WHO IS THE FINAL BENEF ICIARY. SINCE THE AMOUNT INVOLVED IN THE INSTANT CASE IS HUGE, TO PROTECT TH E INTEREST OF REVENUE THE SUNDRY CREDITORS CLAIMED BY THE ASSESSEE AMOUNTING TO RS. 18,03,16,081/- WAS ADDED BACK BY ASSESSING OFFICER TO THE INCOME OF THE ASSESSEE AS BOGUS SUNDRY CREDITORS ON PROTECTIVE BASIS. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELETED THE ADDITION. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BE FORE US. 6. BEFORE US, THE LD. DR FOR THE REVENUE RELIED ON THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 7. AFTER HEARING THE LD. DR FOR THE REVENUE, WE NOT E THAT IN THE FIRST INSTANCE, THE ADDITION MADE BY THE A.O. OF BOGUS SUNDRY CREDITORS IS ON PROTECTIVE BASIS, THE ULTIMATE BENEFICIARY OF WHICH IS M/S MSP METALLICS LTD. WE NOTE THAT THE A.O. HAS MADE THE ADDITION OF SUNDRY CREDITORS OF RS. 1 8,03,16,081/- ALLEGING THEM TO BE BOGUS. HOWEVER, THE A.O. HAS NOT REJECTED THE BO OKS OF THE ASSESSEE AND HAS ACCEPTED THE PROFIT / LOSS ON THE SALES & PURCHASE OF THE GOODS. HENCE IT IS A SHRI PRADIP KUMAR KHETAN ITA NO.385/KOL/2018 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 4 44 4 CONTRARY STAND TAKEN BY THE A.O. WE NOTE THAT DUR ING THE APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED THAT SHRI ARUN KUMAR TEKRIW AL, THE PROPRIETOR OF M/S AMIT ENTERPRISE IS ALSO ASSESSED UNDER SECTION 143( 3), WHERE THE A.O HAS ACCEPTED THE SALES, HENCE IT IS CONFLICTING STAND TAKEN BY T HE A.O BY MAKING PROTECTIVE ADDITION. WE NOTE THAT IT IS ALSO EVIDENT FROM THE ASSESSMENT ORDER, THAT THE PURCHASE AND SALES TRANSACTIONS WERE MADE ON CREDIT BY THE ASSESSEE AND THE CLOSING BALANCE OF THE SUNDRY DEBTORS AND SUNDRY CR EDITORS WERE STANDING IN THE BOOKS OF THE ASSESSEE. ALSO NO PAYMENTS WERE MADE O R RECEIVED OUT OF THESE BALANCES. WE NOTE THAT LD. CIT(A) HAS REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE OBSERVING THE FOLLOWING: 5.3 THUS, FROM THE ABOVE, IT LOOKS LIKE THAT THE TR ANSACTIONS OF PURCHASES AND SALES ENTERED INTO BY THE ASSESSEE ARE OF THE PAPER TRANS ACTION ONLY TO PROVIDE ACCOMMODATION ENTRY. AS SUCH, IT IS A FIT CASE TO R EJECT THE BOOKS OF THE ASSESSEE AS WELL AS THE PURCHASE/SALES, DEBTORS/CREDITORS. IT I S SEEN THAT IN THESE KINDS OF TRANSACTIONS, ONLY COMMISSION AMOUNT IS CHARGED IN LIEU OF THE ENTRIES PROVIDED. THE TRANSACTION ENTERED BY THE ASSESSEE IS ALSO ONE OF THESE TYPES ONLY. THEREFORE, ONLY COMMISSION AMOUNT MUST BE THE AMOUNT OF INCOME EARNED HERE. WE NOTE THAT THE ADDITION OF ENTIRE SUNDRY CREDITO RS MADE BY THE A.O CANNOT BE SUSTAINED SINCE THE A.O HAS ACCEPTED BOTH THE PURCH ASES & SALES MADE BY THE ASSESSEE. IF THE PURCHASES ARE ACCEPTED, THE SUNDRY CREDITORS CANNOT BE TREATED AS BOGUS AS THEY ARE COUNTERPARTS OF THE SAME TRANSACT ION. ALSO, THE PARTY FROM WHICH THE PURCHASES HAVE BEEN MADE IS ALSO ASSESSED BY HI M ONLY WHERE HE HAS ACCEPTED THE SALES. THUS, THE ADDITION OF SUNDRY CREDITORS C ANNOT BE SUSTAINED. HOWEVER WE NOTE THAT THE FACT THAT THE AUTHENTICITY OF THESE T RANSACTIONS WERE NOT PROVED CANNOT BE DENIED. THE ASSESSEE INDULGED IN PROVIDING ACCOM MODATION ENTRIES OF PURCHASES & SALES, MUST HAVE CHARGED CERTAIN PERCENTAGE AS CO MMISSION. THE SAID COMMISSION INCOME EARNED BY THE ASSESSEE IS TO BE A DDED IN THE HANDS OF THE ASSESSEE. GENERALLY, THE BASIC PERCENTAGE OF COMMIS SION CHARGED IN THESE KIND OF TRANSACTIONS, RANGES BETWEEN 0.15% TO 0.25% OF THE TRANSACTION VALUE. THUS, COMMISSION INCOME @ 0.25% OF RS. 18, 03,16,081/- I. E. RS. 4,50,790/- IS TREATED AS THE INCOME EARNED BY THE ASSESSEE. THEREFORE, TH E ADDITION IS RESTRICTED TO RS. 4,50,790/-. IN THESE PECULIAR FACTS AND CIRCUMSTANC ES, WE NOTE THAT THERE IS NO SHRI PRADIP KUMAR KHETAN ITA NO.385/KOL/2018 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 5 55 5 INFIRMITY IN THE ORDER PASSED BY LD. CIT(A), HENCE WE DISMISS THE GROUND RAISED BY REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 19.06.2019 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; / DATE: 19/06/2019 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. ITO, WARD-25(1), KOLKATA 2. SHRI PRADIP KUMAR KHETAN 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES