Santosh Kumar Soni, Kolkata V. ITO, Wd-45(2), Kolkata, Kolkata

ITA 403/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9195 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 12-01-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 07-03-2014
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA PRASAD
• Keywords: Unexplained investment; Capital asset converted into stock in trade; Question of law
• Section: 40A(3); 148

Judgement Text

I.T.A. NO. 403/KOL./2014 ASSESSMENT YEAR: 2005-2006 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C(SMC) BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 403/KOL/ 2014 ASSESSMENT YEAR: 2005-2006 SANTOSH KUMAR SONI,................................ ...................................APPELLANT 5, NARAYAN BABU LANE, KOLKATA-700 007 [PAN: ALPPS 8209 K] -VS.- INCOME TAX OFFICER,................................ .....................................RESPONDENT WARD-45(2), KOLKATA, 3, GOVERNMENT PLACE WEST, KOLKATA-700 001 APPEARANCES BY: SHRI SUBASH AGARWAL, ADVOCATE, FOR THE ASSESSEE SHRI RAJENDRA PRASAD , JCIT, D.R., FOR THE DEPARTME NT DATE OF CONCLUDING THE HEARING : MARCH 02, 2017 DATE OF PRONOUNCING THE ORDER : MARCH 24, 2017 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXX, KOLKATA D ATED 29.11.2013. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L, WHO FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION O N 31.07.2005 DECLARING TOTAL INCOME OF RS.1,01,390/-. THE SAID R ETURN WAS INITIALLY PROCESSED BY THE ASSESSING OFFICER UNDER SECTION 14 3(1) ON 18.08.2006. HE, HOWEVER, SUBSEQUENTLY RECEIVED INFORMATION ABOU T THE ASSESSEE HAVING MADE CASH PURCHASES OF RS.15,03,107/- FROM O NE SHRI KASHINATH DUTTA DURING THE YEAR UNDER CONSIDERATION. ON THE B ASIS OF THE SAID INFORMATION, THE ASSESSMENT OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS RE-OPENED BY THE ASSESSING OFFICE R AND A NOTICE UNDER SECTION 148 WAS ISSUED BY HIM TO THE ASSESSEE. IN R ESPONSE TO THE SAID NOTICE, THE RETURN OF INCOME WAS FILED BY THE ASSES SEE ON 20.09.2011 DECLARING TOTAL INCOME OF RS.1,22,490/-. ALONG WITH THE SAID RETURN, A I.T.A. NO. 403/KOL./2014 ASSESSMENT YEAR: 2005-2006 PAGE 2 OF 6 REVISED PROFIT & LOSS ACCOUNT AND BALANCE-SHEET WAS FILED BY THE ASSESSEE. IN THE REVISED PROFIT & LOSS ACCOUNT SO F ILED, THE PURCHASES OF RS.15,03,107/- MADE IN CASH FROM SHRI KASHINATH DUT TA WERE INCLUDED BY THE ASSESSEE BY INCREASING THE TOTAL PURCHASES TO T HAT EXTENT. THE CORRESPONDING SALES WERE ALSO INCREASED BY THE ASSE SSEE PROPORTIONATELY AFTER SHOWING THE GROSS PROFIT AT THE RATE OF 1.34% AND ACCORDINGLY THE TOTAL INCOME WAS SHOWN AT RS.1,22,490/- AS AGAINST THE TOTAL INCOME OF RS.1,02,463/- OFFERED IN THE RETURN OF INCOME ORIGI NALLY FILED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE, HOW EVER, COULD NOT EXPLAIN ANY EXCEPTIONAL CIRCUMSTANCES AS SPECIFIED IN RULE 8DD OF INCOME TAX RULES, UNDER WHICH HE WAS REQUIRED TO MAKE PAYM ENTS IN CASH AGAINST THE PURCHASES EXCEEDING THRESHOLD LIMIT OF RS.20,00 0/-. THE ASSESSING OFFICER, THEREFORE, INVOKED THE PROVISION OF SECTIO N 40A(3) OF THE ACT AND DISALLOWED THE ENTIRE PURCHASES OF RS.15,03,107/- M ADE BY THE ASSESSEE IN CASH IN THE ASSESSMENT COMPLETED UNDER SECTION 1 43(3)/147 VIDE AN ORDER DATED 30.12.2011. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3)/147, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) CHALLENGING THE DISALLOWANCE MADE BY T HE ASSESSING OFFICER UNDER SECTION 40A(3). DURING THE COURSE OF APPELLAT E PROCEEDINGS BEFORE THE LD. CIT(APPEALS), NEW STAND WAS TAKEN ON BEHALF OF THE ASSESSEE THAT THE PAYMENTS IN CASH AGAINST THE PURCHASES WERE MAD E IN THE AMOUNTS OF LESS THAN RS.20,000/-. A CHART GIVING DETAILS OF SU CH PAYMENTS MADE IN CASH WAS ALSO FILED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS). THIS NEW STAND TAKEN BY THE ASSESSEE BEFORE HIM WAS NOT ACCE PTED BY THE LD. CIT(APPEALS) KEEPING IN VIEW A SPECIFIC FINDING GI VEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT THE PAYMENTS M ADE IN CASH WERE MADE IN THE SUMS EXCEEDING RS.20,000/-. HE ALSO NOT ED THAT THE CLAIM MADE BY THE ASSESSEE OF HAVING PAID CASH IN THE SUM S LESS THAN RS.20,000/- ON THE SAME DATES WAS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. HE HELD THAT THE PATTERN OF CASH PAYMENTS ON SPECIFIC DATES AND ON THE SAME DATE ON MULTIPLE OCCASION AS SHOWN BY T HE ASSESSEE WAS I.T.A. NO. 403/KOL./2014 ASSESSMENT YEAR: 2005-2006 PAGE 3 OF 6 EXTREMELY IMPROBABLE AND BEYOND HUMAN PROBABILITY. HE, THEREFORE, UPHELD THE ACTION OF THE ASSESSING OFFICER IN MAKIN G A DISALLOWANCE MADE UNDER SECTION 40A(3) ON ACCOUNT OF PAYMENTS MADE IN CASH AGAINST THE PURCHASES. HE, HOWEVER, ACCEPTED THE ALTERNATIVE PL EA OF THE ASSESSEE THAT THE DISALLOWANCE ONLY TO THE EXTENT OF 20% OF SUCH CASH PAYMENTS WAS LIABLE TO BE MADE UNDER SECTION 40A(3) AS APPLICABL E TO THE ASSESSEE UNDER CONSIDERATION, I.E. A.Y. 2005-06. ACCORDINGLY , HE RESTRICTED THE DISALLOWANCE UNDER SECTION 40A(3) TO RS.3,00,621/-. AT THE SAME TIME, HE MADE A FURTHER ADDITION OF RS.3,00,621/- TO THE TOT AL INCOME OF THE ASSESSEE ON ACCOUNT OF ALLEGED INVESTMENT MADE BY T HE ASSESSEE IN THE UNDISCLOSED BUSINESS TRANSACTIONS OF PURCHASES AND SALES FOR THE FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORDER:- THE WHOLE PURCHASES, SALES AND PAYMENTS CONNECTED WITH THE UNDISCLOSED PURCHASE OF RS.15,00,000/- WER E OUTSIDE THE REGULAR BOOKS OF ACCOUNTS AND WERE IN M UCH EXCESS OF REGULAR TRANSACTIONS OF RS.2,83,250/-. TH US, IT IS CLEAR THAT SUBSTANTIAL PART OF THE BUSINESS OF THE ASSESSEE IS OUTSIDE THE REGULAR BOOKS OF ACCOUNTS. THE ASSESSEE HAS OFFERED ONLY RS.20,000/- ABOUT AS PROFIT ON UNDISCL OSED BUSINESS CONNECTED TO THE UNDISCLOSED PURCHASE OF RS.15,03,107/- OF JEWELLERY. TO SUSTAIN THE SAID UN DISCLOSED BUSINESS, UNDISCLOSED CAPITAL IS ALSO REQUIRED. THE ASSESSEE CLAIMS THAT SALE PROCEEDS WERE UTILIZED FOR PAYMENT OF PURCHASE AMOUNTS WITHOUT ANY BASIS. IT IS REASONABL E TO HOLD THAT A PERCENTAGE OF THE PURCHASE REPRESENTS UNDISCLOSED CAPITAL UTILIZED TO CARRY OUT SUCH TRAN SACTIONS. 20% OF THE UNDISCLOSED PURCHASE IS HELD TO REPRESEN T UNDISCLOSED CAPITAL EMPLOYED BY THE APPELLANT IN TH E SAID UNDISCLOSED BUSINESS. HENCE, FURTHER AMOUNT OF 20% OF RS.15,03,107/- IS HELD AS UNDISCLOSED INCOME REPRES ENTING UNDISCLOSED CAPITAL EMPLOYED BY THE APPELLANT. ACCO RDINGLY, FURTHER ENHANCEMENT OF INCOME OF RS.3,00,621/- IS M ADE TO THE TOTAL INCOME OF THE APPELLANT. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FO LLOWING GROUNDS:- (1) THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITIO N OF RS.3,00,621/- BY APPLYING THE PROVISION OF SECTION 40A(3) OF THE INCOME TAX ACT, 1961 WHEN THE SAID PROVISION WAS NOT APPLICABLE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. I.T.A. NO. 403/KOL./2014 ASSESSMENT YEAR: 2005-2006 PAGE 4 OF 6 (2) THAT THE LD. CIT(A) ERRED IN ESTIMATING RS.3,00,621 /- AS THE CAPITAL REQUIRED FOR THE PURCHASE OF DOING UNDISCLOSED BUSINESS WITHOUT ANY BASIS OR EVIDENCE. 5. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS T HE ISSUE INVOLVED IN GROUND NO. 1 RELATING TO THE DISALLOWANCE OF RS.3,0 0,621/- AS SUSTAINED BY THE LD. CIT(APPEALS) UNDER SECTION 40A(3), THE L D. COUNSEL FOR THE ASSESSEE HAS REITERATED BEFORE ME THE STAND TAKEN B EFORE THE LD. CIT(APPEALS) THAT ALL THE RELEVANT PAYMENTS MADE IN CASH AGAINST THE PURCHASES WERE IN THE SUMS LESS THAN RS.20,000/-. H OWEVER, AS RIGHTLY POINTED OUT BY THE LD. D.R. BY RELYING ON THE RELEV ANT PORTION OF THE LD. CIT(APPEALS)S ORDER, THIS STAND WAS NEVER TAKEN BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND ALTHOUGH A CHART WAS FILE D BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) GIVING THE DETAILS OF C ASH PAYMENTS, THE SAME WAS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. MORE OVER SUCH CASH PAYMENTS OF LESS THAN RS.20,000/- WERE SHOWN BY THE ASSESSEE ON THE SAME DATE ON MULTIPLE OCCASIONS AND THIS PATTERN, A S RIGHTLY OBSERVED BY THE LD. CIT(APPEALS), WAS EXTREMELY IMPROBABLE AND BEYOND HUMAN PROBABILITY. AS REGARDS THE RELIANCE PLACED BY THE LD. COUNSEL FOR THE ASSESSEE ON THE DECISION OF THE HONBLE CALCUTTA HI GH COURT IN THE CASE OF CIT VS.- CPL TANNERY [318 ITR 179 (CAL.)] IN SUPPO RT OF THE ASSESSEES CASE, IT IS OBSERVED THAT THE DISALLOWANCE MADE IN THE SAID CASE UNDER SECTION 40A(3) WAS MAINLY DELETED BY THE TRIBUNAL A FTER HAVING FOUND THAT THE CASE OF THE ASSESSEE WAS COVERED BY EXCEPT IONAL CIRCUMSTANCES AS SPECIFIED IN RULE 6DD OF THE INCOME TAX RULES AND T HE APPEAL FILED BY THE REVENUE CHALLENGING THE SAID DECISION OF THE TRIBUN AL WAS DISMISSED BY THE HONBLE CALCUTTA HIGH COURT HOLDING THAT THE SA ME DID NOT INVOLVE ANY QUESTION OF LAW. IN THE PRESENT CASE, NO CASE HAS B EEN MADE OUT BY THE ASSESSEE TO SHOW THAT THE PAYMENTS IN CASH AGAINST THE PURCHASES WERE MADE BY HIM UNDER ANY OF THE EXCEPTIONAL CIRCUMSTAN CES AS SPECIFIED IN RULE 6DD AND THIS BEING SO, I FIND THAT THE RATIO O F THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CPL TANN ERY (SUPRA) IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. I, THEREFOR E, FIND NO INFIRMITY IN THE I.T.A. NO. 403/KOL./2014 ASSESSMENT YEAR: 2005-2006 PAGE 5 OF 6 IMPUGNED ORDER OF THE LD. CIT(APPEALS) UPHOLDING TH E ACTION OF THE ASSESSING OFFICER IN MAKING DISALLOWANCE UNDER SECT ION 40A(3) ON ACCOUNT OF CASH PAYMENTS MADE BY THE ASSESSEE AGAIN ST PURCHASES. GROUND NO. 1 IS ACCORDINGLY DISMISSED. 6. AS REGARDS THE ISSUE RAISED IN GROUND NO.2 RELAT ING TO THE ADDITION MADE BY THE LD. CIT(APPEALS) HIMSELF FOR THE FIRST TIME ON ACCOUNT OF THE ALLEGED UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE IN THE UNDISCLOSED TRANSACTIONS OF PURCHASES AND SALES OF JEWELLERY, T HE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THERE WAS NOTHING BROUG HT ON RECORD BY THE LD. CIT(APPEALS) TO SHOW THAT SUCH INVESTMENT WAS A CTUALLY MADE BY THE ASSESSEE. AS RIGHTLY POINTED OUT BY HIM, A CONSISTE NT STAND IN THIS REGARD WAS TAKEN BY THE ASSESSEE RIGHT FROM THE ASSESSMENT STAGE THAT THE PAYMENTS AGAINST THE PURCHASES IN QUESTION WERE MAD E BY THE ASSESSEE FROM THE PROCEEDS OF CORRESPONDING SALES AND THERE IS NOTHING BROUGHT ON RECORD BY THE REVENUE TO DISLODGE THIS STAND TAKEN BY THE ASSESSEE AND TO SHOW THAT ANY INVESTMENT WAS ACTUALLY MADE BY THE A SSESSEE FOR MAKING THE UNDISCLOSED TRANSACTIONS OF PURCHASES AND SALES . I AM, THEREFORE, OF THE VIEW THAT THE ADDITION OF RS.3,00,621/- MADE BY THE LD. CIT(APPEALS) TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF T HE ALLEGED UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE IN THE UNDISCLOSED TRANSACTIONS OF PURCHASES AND SALES IS NOT SUSTAINABLE AND DELETING THE SAME, I ALLOW GROUND NO. 2 OF THE ASSESSEES APPEAL. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 24, 201 7. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 24 TH DAY OF MARCH, 2017 COPIES TO : (1) SHRI SANTOSH KUMAR SONI, 5, NARAYAN BABU LANE, KOLKATA-700 007 I.T.A. NO. 403/KOL./2014 ASSESSMENT YEAR: 2005-2006 PAGE 6 OF 6 (2) INCOME TAX OFFICER, WARD-45(2), KOLKATA, 3, GOVERNMENT PLACE WEST, KOLKATA-700 001 (3) COMMISSIONER OF INCOME TAX (APPEALS)-XXX, KO LKATA; (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.