ITO, WD-12(1), KOLKATA, Kolkata V. M/s Sudha Jewellers Pvt. Ltd., Kolkata

ITA 437/KOL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0588 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 14-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VARKEY JUDIC IA L M EMBER
• Assessee Lawyers: KALYAN NATH DR SHRI SOUM
• Keywords: Document seized; Corroborative evidences; Documents seized
• Section: 133A; 133(6); 194C; 154

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI ABY.T VARKEY, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 437 / KOL / 2016 ASSESSMENT YEAR :2010-11 ITO WARD-12(1), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKTA-69 V/S . M/S SUDHA JEWELLERS PVT. LTD., 2/1A GARIA HAT ROAD, KOLKATA-19 [ PAN NO.AADCS 6713 N ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI KALYAN NATH, DR /BY RESPONDENT SHRI SOUMITRA CHOUDHURY, ADVOCATE /DATE OF HEARING 18-10-2017 /DATE OF PRONOUNCEMENT 15-12-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-4, KOLKATA DAT ED 22.12.2015. ASSESSMENT WAS FRAMED BY ITO WARD-12(1), KOLKATA U/ S 143(3)/147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDER DATED 04.03.2015 FOR ASSESSMENT YEAR 2010-11. THE REVENUE HAS RAISED FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED BY THE TREATING THE IMPOUNDED INCRIMINATING DOCUMEN T FOUND IN COURSE OF SURVEY IN CASE OF THE ASSESSEE, AS DUMB DOCUMENT FO R ITS EVIDENTIARY WHEREAS, THE ONUS IS ON THE ASSESSEE TO PROVE THE N ATURE OF ENTRIES MADE IN THAT PARTICULAR DOCUMENT WITH SUPPORTING EVIDENCES WHICH THE ASSESSEE FAILED. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED BY OVERLOOKING THE FACT THAT THE INCRIMINATING PAPE R, FOUND IN COURSE OF SURVEY, WAS MEANT FOR CALCULATION OF ADVANCE TAX, BUT THE A D OBSERVED THAT THE ASSESSEE HAD NOT MADE THIS PAPER FOR CORRECT PAYMEN T OF TAXES. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED BY NOT APPRECIATING THE FACT THAT THE AD ALLOWED TH E CLAIM OF THE ASSESSEE FOR ITA NO.437/KOL/2016 A.Y. 20 10-11 ITO WD-12(1) KOL. VS. M/S SUDHA JEWE LLERS PVT. LTD. PAGE 2 THE AMOUNT WHICH WAS SHOWN AS ' ACTUAL ' IN THE SAID SHEET OF PAPER SIMPLY AND IN EXCESS OF THAT WAS DISALLOWED, THEREBY, THE COMPARISON OF FIGURES OF EXPENSES IN P&L ACCOUNT WITH THE FIGURES DRAWN UP B Y ADDING THE FIGURES UNDER THE HEAD 'ACTUAL' AND ' AFTER ADDING ' DOES NOT ARISE AND FACT OF THE CASE WAS NOT CONTRARY TO THE JURISDICTIONAL FACTS OF THE CASE. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED BY ERRED BY IGNORING THE FACT THAT THE ASSESSEE FAI LED TO PRODUCE ANY EVIDENCE IN COURSE OF ASSESSMENT TO REBUT THE INFERENCE THAT CAN BE DRAWN FROM THE SAID SHEET OF PAPER FOUND FROM THE ASSESSEE'S BUSIN ESS PREMISES WITH SUPPORTING EVIDENCES AND MORE SO, THE ASSESSEE FAIL ED TO FILE THE LIST OF KARIGARS RESPECT OF CLAIM OF MAKING CHARGES SO THAT THE FURTHER VERIFICATION OF GENUINENESS OF THE SAME COULD HAVE BEEN MADE. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD/ALTER/MOD IFY THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. SHRI KALYAN NATH, LD. DEPARTMENTAL REPRESENTATIVE A PPEARED ON BEHALF OF REVENUE AND SHRI SOUMITRA CHOUDHURY, LD. ADVOCATE A PPEARED ON BEHALF OF ASSESSEE. 2. GROUND NO. 1 TO 5 ARE INTER-RELATED AND THEREFOR E BEING TAKEN UP TOGETHER. THE INTER-RELATED ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A SSESSING OFFICER FOR 34,23,550/- ON ACCOUNT OF DIFFERENCE IN THE EXPENS ES CLAIMED BY THE ASSESSEE ON THE BASIS OF SURVEY DOCUMENTS. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A PRIV ATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF JEWELLERY. A SURVEY OPER ATION U/S 133A WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE DATED 14.09.2010. DURING THE SURVEY PROCEEDINGS A DOCUMENT WAS SEIZED WHICH WAS REFLECTING THE PROFIT AND LOSS ACCOUNT OF ASSESSEE AS ON 31.03.2010. THE SEIZED DOCUMENT WAS CONTAINING A LIST OF ACTUAL EXPENSE AS WELL A CORRE SPONDING INFLATED EXPENSES. THE AO ON THE BASIS OF SEIZED DOCUMENTS OBSERVED TH E FOLLOWING:- SL. PARTICULARS ACTUAL EXPENSE INFLATED EXPENSE *(B ) 1 MAKING CHARGES 35,34,550 49,25,550 13,91,000 2 INDIRECT EXPENSES 55,96,223 93,03,137 37,06,914 THE AO IN ASSESSMENT PROCEEDINGS OBSERVED THE DIFFE RENCE OF 35,34,550/- WHEREAS THE ACTUAL DIFFERENCE IS AT 37,06,914/- BUT THE MISTAKE WAS RECTIFIED BY THE AO U/S 154 OF THE ACT. ITA NO.437/KOL/2016 A.Y. 20 10-11 ITO WD-12(1) KOL. VS. M/S SUDHA JEWE LLERS PVT. LTD. PAGE 3 IN VIEW OF THE ABOVE, THE AO SOUGHT AN EXPLANATION FROM THE ASSESSEE. THE ASSESSEE IN COMPLIANCE THERETO SUBMITTED AS UNDER:- A) THE SEIZED DOCUMENTS WERE WORKING PAPER WHICH WA S PREPARED FOR THE CALCULATION OF ADVANCE TAX. AS SUCH THE SEIZED PAPER IS NOTHING BUT A ROUGH SHEET AND THEREFORE NO COGNIZANCE OF IT CAN BE TAKEN; B) THE SURVEY WAS CONDUCTED ON 14.09.2010 WHEREAS T HE AUDITED FINANCIAL STATEMENT WAS PREPARED ON 02.09.2010 WHIC H WAS DULY SINGED BY THE AUDITOR AND THE DIRECTOR OF THE ASSESSEE-COM PANY. AS SUCH ON REFERENCE TO THE AUDITED PROFIT AND LOSS ACCOUNT IT CAN BE FOUND OUT THAT NO INFLATED EXPENSE HAS BEEN CLAIMED AS SHOWN IN TH E SEIZED DOCUMENT. HOWEVER, THE AO DISREGARDED THE CONTENTION OF THE A SSESSEE AND MADE THE ADDITION OF 13.91 LAKHS AND 35,34,550/- (CORRECT AMOUNT RS. 37,06,914.00) WHICH WAS ADDED TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THE INFLA TED EXPENSES CLAIMED IN THE SEIZED DOCUMENTS DO NOT MATCH WITH THE AMOUNT O F EXPENSES CLAIMED IN THE AUDITED FINANCIAL STATEMENT AS DETAILED UNDER:- SL. PARTICULARS SEIZED DOCUMENT ACTUAL INFLATED AUDITED P&L A /C 1. MAKING CHARGES 35,35,550 49,25,5 50 42,06,200 2. INDIRECT EXPENSES 55,96,223 93,03,137 31,3 7,602 FROM THE ABOVE, ASSESSEE SUBMITTED THAT THE INFLATE D EXPENSES WERE NOT CLAIMED IN THE AUDITED PROFIT AND LOSS ACCOUNT. THE ASSESSEE FURTHER SUBMITTED THAT THE MAKING CHARGE CLAIMED BY IT IS COMING AT 1 1.74% IN RELATION TO THE RAW MATERIAL CONSUMED DURING THE YEAR. THE SAME AMOUNT OF EXPENSE WAS CLAIMED BY IT IN THE EARLIER YEARS. THE ASSESSEE IN SUPPORT OF ITS CLAIM HAS GIVEN THE DETAILS OF GROSS PROFIT FOR THE YEARS BEG INNING FROM ASSESSMENT YEARS 2007-08 TO 2009-10. THE ASSESSEE ALSO SUBMITT ED THAT IN THE INDUSTRY OF GOLD AND DIAMOND JEWELLERY THE MAKING CHARGES RANGE BETWEEN 8 TO 14% ITA NO.437/KOL/2016 A.Y. 20 10-11 ITO WD-12(1) KOL. VS. M/S SUDHA JEWE LLERS PVT. LTD. PAGE 4 WHEREAS IN THE INSTANT CASE ASSESSEE HAS CLAIMED 11 .74% WHICH IS QUITE REASONABLE. THE ASSESSEE BEFORE LD. CIT(A) ALSO SUB MITTED THAT THE EXPENSE SHOWN UNDER THE HEAD INFLATED EXPENSE IN THE SEIZE D DOCUMENT DO NOT MATCH WITH THE EXPENSE SHOWN IN THE AUDITED PROFIT AND LOSS ACCOUNT. AS SUCH, THE EXPENSE SHOWN UNDER THE HEAD INFLATED EXPENSE IN THE SEIZED DOCUMENT EXCEEDS THE ACTUAL EXPENSE CLAIMED BY ASSESSEE IN I TS AUDITED PROFIT AND LOSS ACCOUNT. THE ASSESSEE IN SUPPORT OF ITS CLAIM HAD S UBMITTED THE FOLLOWING DETAILS:- HEAD OF EXPENSE AS PER AUDITED ACCOUNTS(RS) AFTER ADDING (RS) A MOTOR CAR REPAIRING EXPENSES 2,81,166.64 4,10,000.00 B TRAVELLING CHARGES 79,451.85 2,30,000.00 C COMMISSION ON SALESMAN 3,00,000.00 5,00,000.00 D PRINTING & STATIONERY 26,464.50 1,25,000.00 E MAKING CHARGES 42,06,200.00 49,25,550.00 F TELEPHONE CHARGES 1,36,617.00 1,37,001.55 G REPAIRING & MAINTENANCE 1,58,387.36 2,30,000.00 THE ASSESSEE FURTHER SUBMITTED THAT THE SEIZED DOCU MENTS CANNOT BE RELIED UPON AS IT REPRESENTS TO ROUGH CALCULATION MADE FOR THE PURPOSE OF ADVANCE TAX LIABILITY. LD. CIT(A) AFTER CONSIDERING THE SUB MISSION OF THE ASSESSEE OBSERVED AS UNDER:- 1) THE MAKING CHARGES WERE PAID TO THE KARIGARS AFT ER DEDUCTING TDS AND ALL THE KARIGARS WERE INCOME TAX PAYEE; 2) THE MAKING CHARGES CLAIMED BY ASSESSEE WERE REAS ONABLE AS THE SIMILAR AMOUNT OF MAKING CHARGES WERE CLAIMED BY TH E OTHER JEWELERS; 3) NO EVIDENCE WAS BROUGHT ON RECORD BY AO SUGGESTI NG THAT THE INFLATED EXPENSE WERE INCURRED BY THE ASSESSEE WITH OUT RECORDING IN THE BOOKS OF ACCOUNTS/ OUTSIDE THE BOOKS OF ACCOUNTS. 4) ACTUAL EXPENSE CLAIMED BY ASSESSEE IN THE AUDITE D PROFIT AND LOSS ACCOUNT ASSESSEE WERE MUCH LESSER THAN THE AMOUNT E XPENSE SHOWN IN THE SEIZED PAPERS. ITA NO.437/KOL/2016 A.Y. 20 10-11 ITO WD-12(1) KOL. VS. M/S SUDHA JEWE LLERS PVT. LTD. PAGE 5 IN RELATION TO INDIRECT EXPENSE A) AO HAS NOT BROUGHT ANYTHING ON RECORD THAT ASSES SEE HAS INCURRED THE INFLATED EXPENSE AS SHOWN IN THE SEIZED DOCUMEN TS. B) THE ACTUAL EXPENSE CLAIMED BY THE ASSESSEE IN IT S AUDITED FINANCIAL STATEMENTS ARE MUCH LESSER THAN THE EXPENSE CLAIMED IN THE SEIZED DOCUMENTS. IN VIEW OF THE ABOVE, LD. CIT(A) HELD THAT SEIZED D OCUMENT IS REPRESENTING THE ROUGH WORKING MADE BY THE ASSESSEE FOR THE PURPOSE OF ADVANCE TAX LIABILITY AND ACCORDINGLY NO COGNIZANCE CAN BE TAKEN OF SUCH PAPERS. THUS, THE ADDITION MADE BY THE AO WAS DELETED BY LD. CIT(A). THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S. 5. BEFORE US LD. DR VEHEMENTLY RELIED ON THE ORDER OF AO WHEREAS LD. AR FOR THE ASSESSEE SUBMITTED THAT SEIZED DOCUMENTS DO ES NOT CONTAIN THE NAME OF ASSESSEE AND THEREFORE NO COGNIZANCE OF SUCH SEI ZED DOCUMENT CAN BE TAKEN FOR THE PURPOSE OF ASSESSMENT. THE LD. AR FUR THER SUBMITTED THAT THE AUDIT WAS COMPLETED ON 02.09.2010 WHEREAS THE SURVE Y WAS CONDUCTED ON 14.09.2010 WHICH SHOWS THAT THE ACCOUNT OF THE ASSE SSEE WAS FINALIZED FOR THE YEAR ENDING ON 31.03.2010 BEFORE THE DATE OF SU RVEY. 5.1 ALL THE MAKING CHARGES WERE PAID TO THE KARIGAR S AFTER DEDUCTION OF TDS U/S 194C OF THE ACT AND SAME AMOUNT OF EXPENSE HAS BEEN SHOWN IN THE AUDITED FINANCIAL STATEMENTS. THEREFORE IT CANNOT B E SAID THAT THE ASSESSEE HAS CLAIMED INFLATED EXPENSE. THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE DULY ACCE PTED AND NO DEFECT WAS POINTED OUT BY THE AO. THE ADDITION WAS MERELY MADE ON THE BASIS OF SEIZED DOCUMENTS. THE LD. AR RELIED OF THE ORDER OF LD. CI T(A) 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ADDITION WAS MADE BY AO ON THE BASIS OF SEIZED DOCUMENT WHICH WAS INTER ALIA CONTAINING THE INFORMATION OF ACTUAL EXPENSE AS WELL AS INFLATED E XPENSE FOR THE YEAR ENDING I.E. ON 31.03.2010. HOWEVER, ON PERUSAL OF THE SEIZ ED DOCUMENTS WITH THE AUDITED PROFIT AND LOSS ACCOUNT OF THE ASSESSEE, WE NOTE THAT EXPENSE SHOWN ITA NO.437/KOL/2016 A.Y. 20 10-11 ITO WD-12(1) KOL. VS. M/S SUDHA JEWE LLERS PVT. LTD. PAGE 6 IN THE SEIZED DOCUMENT UNDER THE HEAD INFLATED EXPE NSES ARE MUCH HIGHER THAN THE EXPENSE CLAIMED BY ASSESSEE IN THE AUDITED PROFIT AND LOSS ACCOUNT. HAD THE ASSESSEE CLAIMED INFLATED EXPENSE AS REFLEC TED IN THE SEIZED DOCUMENTS THEN THE SAME EXPENSE SHOULD HAVE BEEN CL AIMED IN THE AUDITED FINANCIAL STATEMENT. BUT IT WAS OBSERVED MUCH LESS EXPENSE HAS BEEN CLAIMED BY ASSESSEE IN ITS AUDITED PROFIT AND LOSS ACCOUNT. WE ALSO NOTE THAT NO DEFECT HAS BEEN POINTED OUT BY THE AO IN THE BOOKS OF ACCO UNT OF ASSESSEE DESPITE OF THE FACT THAT AO WAS EMPOWERED TO REJECT THE SAM E U/S. 145(3) OF THE ACT. THE ADDITION MADE BY THE AO HAS NOT BEEN SUPPORTED WITH ANY EVIDENCE EXCEPT THE SEIZED DOCUMENTS. THEREFORE, WE ARE OF T HE CONSIDERED OPINION THE IMPUGNED ADDITION CANNOT BE SUSTAINED IN THE ABSENC E OF OTHER DOCUMENTARY EVIDENCE. 6.1 WE ALSO NOTE THAT NO NOTICE U/S 133(6) OF THE A CT HAS BEEN ISSUED BY THE AO TO THE KARIGARS TO ASCERTAIN THE AMOUNT RECE IVED BY THEM. IN VIEW OF ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PA SSED BY LD. CIT(A). WE HOLD ACCORDINGLY. CONSEQUENTLY INTER-RELATED GROUNDS RAI SED BY REVENUE ARE DISMISSED. 7. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 15 /12/2017 SD/- SD/- (ABY. T. VARKEY) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP #- 15 / 12 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ITO WARD-12(1), AAYAKAR BHAWAN, P-7, CHOWRI NGHEE SQ. KOL-69 2. /RESPONDENT-M/S SUDHA JEWELLERS PVT. LTD. 2/1A, GARIA HAT ROAD, KOLKATA-19 3. / 0 / CONCERNED CIT KOLKATA 4. 0- / CIT (A) KOLKATA 5. 3 66/, /, / DR, ITAT, KOLKATA 6. 9 / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO /,