Sri Jnanotosh Bhandari, Kolkata V. ITO, Ward - 53(2), Kolkata

ITA 452/KOL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9302 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 25-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K PRAMANIK
• Assessee Lawyers: R S MUKHOPADHYAY
• Keywords: Unexplained cash credit; Business income
• Section: 44AD

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA () BEFORE , , , , , /AND , . ! . '# ) [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SRI C. D. RAO, AM] $ $ $ $ / I.T.A NO. 452/KOL/2009 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR : 2005-06 SRI JNANOTOSH BHANDARI. -VS- INCOME-TAX OFFICER , WD-53(2),KOLKATA. (PA NO.AEIPB 5852 P) ( *+ /APPELLANT ) (,-*+/ RESPONDENT ) FOR THE APPELLANT: SHRI R. S. MUKHOPADHYAY FOR THE RESPONDENT: SHRI A. K. PRAMANIK '. / ORDER PER MAHAVIR SINGH, JM ( , ) THIS APPEAL FILED BY ASSESSEE IS ARISING OUT OF THE ORDER OF CIT(A)-XXXIII, KOLKATA IN APPEAL NO. 160/CIT(A)-XXXIII/WD-53(2)/07 -08 VIDE ORDER DATED 31.12.2008. THE ASSESSMENT WAS FRAMED BY ITO, WD-5 3(2), KOLKATA U/S. 144 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) FOR ASSESSMENT YEAR 2005- 06 VIDE ORDER DATED 28.12.2007. 2. THE THREE INTER-CONNECTED ISSUES RAISED BY ASSES SEE ARE AS REGARD TO THE ORDER OF CIT(A) CONFIRMING THE ACTION OF ASSESSING OFFICER IN ESTIMATING THE NET PROFIT @ 8% AND ALSO SUSTAINING THE ADDITION OF CASH CREDITS AT RS.3,50,262/- U/S 68 AND ALSO CONFIRMING THE DUPLICATION OF BUSINESS INCOME AT RS .3,24,066/-. FOR THESE ISSUES, ASSESSEE HAS RAISED THE FOLLOWING THREE GROUNDS : 1. FOR THAT THE C.I.T.(A) WAS UNJUSTIFIED IN DISMIS SING THE GROUND OF APPEAL WITHOUT PROPER EXPLAINING THE REASON FOR THE ESTIM ATION @8% ON THE TOTAL RECEIPTS. THE APPELLANT COULD NOT UNDERSTAND THE REASONS FOR UNREALIZABLE ESTIMATE I.E. 8% ON THE TOTAL RECEIPTS INCLUDING R ECEIPTS FROM BILLS FOR REIMBURSABLE EXPENSES. THE RATE 8% HAS NO RELEVAN T FOR APPLICATION OF SEC. 44AD OF THE I. T. ACT WHERE THE RECEIPT OF THE BUS INESS IS MORE THAN RS.40 LACS DURING THE RELEVANT FINANCIAL YEAR. THE C.I.T.(A) OUGHT TO HAVE CONSIDERED THE EARLIER ASSESSMENT AND THE REALITY OF THE BUSINESS, AS THE ORDER OF ASSESSMENT WAS PASSE D U/S. 144 OF THE I. T. ACT, 1961. 2 2. CIT(A) WAS ALSO NOT JUSTIFIED IN CONFIRMING THE ADDITION U/S. 68 OF THE INCOME TAX ACT AS LAID BY THE A.O. EXCEPT ONE, ON THE GR OUND THAT IN ALL CASES CREDIT WORTHINESS AND GENUINENESS OF THE LENDERS CANNOT BE ESTABLISHED INSPITE OF DETAILS OF LENDERS AND SOURCES OF THEIR INCOME WERE FURNISHED. 3. FOR COMPUTING TOTAL INCOME BY THE A.O INCOME AS DECLARED BY THE APPELLANT IN THE RETURN OF INCOME FOR THE A.Y. 2005-06 OF R S.3,24,066/- HAS BEEN ADDED WITH OTHER ADDITION U/S.143(3) OF THE I. T. ACT WH ICH RESULTING DUPLICATION OF BUSINESS INCOME OF RS.3,24,066/- WHEN INCOME FROM BUSINESS IS ESTIMATED @8% ON GROSS RECEIPTS. HENCE INCOME OF RS.3,24,06 6/- SHOULD BE DELETED IN COMPUTING TOTAL INCOME. 3. THE BRIEF FACTS LEADING TO THE ABOVE INTER-CONNE CTED ISSUES ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE RELEVANT ASSESSM ENT YEAR 2005-06 ON 29.10.2005 DECLARING TOTAL INCOME AT RS.3,24,066/- AND THE RET URN WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, NOTICE U/S. 143(2) WAS ISSUED A ND THE ASSESSEE WAS REQUIRED TO PRODUCE THE BOOKS OF ACCOUNTS, BILLS AND VOUCHERS E TC. THE ASSESSEE PRODUCED THE CASH BOOK, LEDGER AND OTHER BILLS AND VOUCHERS. THE ASS ESSING OFFICER ON VERIFICATION FOUND THAT THE EXPENSES OF LANDING IN THE NAME OF ASHOK D AS ARE RECORDED IN THE BOOKS OF ACCOUNTS BUT NOT VOUCHED FOR AMOUNTING TO RS.21,384 /-, RS.22,988/- AND RS.29,033/- ON 17.05.2004, 28.05.2004 AND 27.11.2004 RESPECTIVELY. SIMILARLY, VEHICLE CHARGES EXPENSES WERE RECORDED BUT SUPPORTED BY BILLS, AS P OINTED OUT BY ASSESSING OFFICER. SIMILARLY, BROKERAGE EXPENSES AND STEAMER EXPENSES WERE NOT VOUCHED. ACCORDINGLY, THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SEC TION 145(3) OF THE ACT AND REJECTED THE BOOK RESULTS. IT IS TO BE MENTIONED THAT THE A SSESSEE HAS NOT CHALLENGED THE REJECTION OF BOOK RESULTS EITHER BEFORE CIT(A) OR NOW BEFORE US AND THAT MEANS THE BOOK RESULTS REJECTED BY THE ASSESSING OFFICER HAS BECOME FINAL. THE ASSESSING OFFICER AFTER REJECTING THE BOOK RESULTS APPLIED NET PROFIT RATE @ 8% AS AGAINST THE DECLARED NET PROFIT AT 2.03% ON THE TOTAL TURNOVER OF RS.1,63,01,231/- AND ASSESSED THE SAME AT RS.13,04,099/- AFTER EXCLUDING THE NET PROFIT DISCL OSED BY ASSESSEE AT RS.3,30,641/-. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE HAS CLAIMED UNSECURED LOANS FROM FRIENDS AND RELATIVES AT RS.5,76,259/- AND OUT OF WHICH LOA NS OF RS. 1.60 LACS WERE OLD LOANS. THE ASSESSING OFFICER ISSUED SUMMONS TO THE CREDITO RS U/S. 131 OF THE ACT BUT THE ASSESSEE COULD NOT PRODUCE THE SAME AND ACCORDINGLY HE MADE ADDITION ON ACCOUNT OF 3 UNSECURED LOANS/CASH CREDIT U/S 68 OF THE ACT FOR A N AMOUNT OF RS.4,01,259/- FOR THE FOLLOWING : 1. SMT. BHARATI ROY RS. 17,000/- 2. SRI ABHIJIT CHATTERJEE RS. 18,000/- 3. ASHUTOSH BHANDARY RS. 97,844/- 4. D. BHANDARY RS. 93,906/- 5. DIPANKAR GHOSH RS. 79,925/- 6. MRS. RAJASHREE BHANDARY RS. 40,997/- 7. P. BANDARY RS. 53,587/- RS.4,01,259/- ONE MORE THING IS THAT AFTER ESTIMATING NET PROFIT AND UNEXPLAINED CASH CREDITS ADDED U/S. 68, THE ASSESSING OFFICER HAS ASSESSED THE INC OME OF THE ASSESSEE AT RS.16,98,782/-. AGGRIEVED ON ALL THE COUNTS, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AND HE ALSO CONFIRMED THE ADDITION EXCEPT THE DELETION OF CASH CREDIT IN RESPECT OF MRS. RAJASHREE BHANDARY AT RS.40,997/- AND BALANCE ADDITION OF RS. 3,50,262/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT AND ESTIMATION OF GP @ 8% W AS CONFIRMED. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEES REJECTION OF BOO K RESULTS WAS NOT CHALLENGED NEITHER BEFORE CIT(A) NOR BEFORE THE TRIBUNAL. WHEN CONFRO NTED, THIS FACT WAS ACCEPTED BY LD. COUNSEL FOR THE ASSESSEE DURING THE COURSE OF HEARI NG. THE LD. COUNSEL FOR THE ASSESSEE BEFORE US MADE ARGUMENT THAT HE IS NOT A CIVIL CONT RACTOR AND THE ESTIMATION OF NET PROFIT @ 8% BY APPLYING SECTION 44AD OF THE ACT IS ON HIGH ER SIDE. IT WAS STATED BY HIM THAT HIS TURNOVER WAS MORE THAN 40 LACS AND IN NO WAY TH E PROVISIONS OF SECTION 44AD OF THE ACT BE APPLIED IN HIS CASE. HE STATED THAT A REASON ABLE ESTIMATE OF 5% CAN BE MADE AND HE ALSO STATED THAT THIS INCOME IS AVAILABLE FOR TE LESCOPING AGAINST CASH CREDITS CONFIRMED BY CIT(A) AT RS.35,262/-. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT CASH CREDITS INTRODUCED DURING THE YEAR ARE OUT OF THE INCOME EA RNED BY ASSESSEE AND NO SEPARATE ADDITION CAN BE MADE FOR THAT. WE FIND FROM THE RE CORDS THAT THE ASSESSEES RECEIPTS ARE IN THE NATURE OF PAYMENTS TO SUB CONTRACTORS AND TD S HAVE BEEN DEDUCTED IN ALL SUCH CASES. IT MEANS THAT THE ASSESSEE HAS SUBLET THE C ONTRACT RECEIVED BY HIM AND HE HAS NOT CARRIED OUT THE COMPLETE CONTRACT AND ACCORDINGLY T HE APPLICATION OF 8% WILL BE ON HIGHER SIDE. ACCORDINGLY, A QUERY WAS PUT TO THE L D. COUNSEL FOR THE ASSESSEE WHAT IS 4 THE RATE OF NET PROFIT IN PREVIOUS YEARS OR FUTURE YEARS. BUT THE ASSESSEES COUNSEL COULD NOT GIVE ANY REPLY TO THE SAME AND HE COULD NOT PRO DUCE THE COMPARATIVE NET PROFIT RATES. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE AR E OF THE VIEW THAT A REASONABLE NET PROFIT @ 5% WILL MEET THE END OF JUSTICE. AS REGAR DS THE SEPARATE ADDITION OF UNSECURED LOANS, WE ARE IN AGREEMENT WITH THE LD. COUNSEL FOR THE ASSESSEE THAT GOING BY THE PATTERN OF RECEIPT THAT THE SAME WAS RECEIVED DURIN G THE YEAR IS ARISING OUT OF THE SAME BUSINESS INCOME, WHICH HAS ALREADY BEEN ADDED AND N O SEPARATE ADDITION OF UNSECURED LOAN SHOULD BE MADE. AS REGARDS THE ANOTHER PLEA O F THE ASSESSEE REGARDING REPETITIVE ADDITION OF INCOME DECLARED TO THE TOTAL INCOME OF THE ASSESSEE, WE ARE UNABLE TO AGREE WITH THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE A S THE ASSESSING OFFICER HAS CLEARLY REDUCED THE SAME FROM NET PROFIT, BUT HOWEVER, THE ASSESSING OFFICER IS DIRECTED TO TAKE ONLY ONE ADDITION IN THE PRESENT CASE I.E. ESTIMATI ON OF NET PROFIT @ 5% AND ASSESS THE SAME. THE ASSESSING OFFICER WILL COMPUTE THE INCOME ON THE ABOVE BASIS. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS IND ICATED ABOVE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED AS INDICATED ABOVE. 6. ORDER IS PRONOUNCED IN THE OPEN COURT ON 9 TH MARCH, 2011. SD/- SD/- . ! . , '# , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( !# !# !# !#) )) ) DATED 9 TH DAY OF MARCH, 2011 /0 %12 3 JD.(SR.P.S.) '. 4 ,5 6'5'7- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT SRI JNANOTOSH BHANDARI, M-243, BAISHNABGHATA, KOLKATA-700 094. 2 ,-*+ / RESPONDENT, ITO, WD-53(2), KOLKATA 3 . .% / THE CIT(A), KOLKATA 4. .% ( )/ CIT, KOLKATA. 5 . >? ,% / DR, KOLKATA BENCHES, KOLKATA -5 ,/ TRUE COPY, '.%@/ BY ORDER, 2 /ASSTT. REGISTRAR .