M/s. Doss Enterprise, Bankura V. I.T.O, Ward - 1, Bankura, Bankura

ITA 461/KOL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9330 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 03-03-2010
• Result in Favour of: Set Aside
• Court: TRIBUNAL
• Department Lawyers: A K PRAMANIK
• Assessee Lawyers: S M SURANA; D K SEN
• Keywords: Principle of natural justice; Additional evidence
• Section: 40A(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH B, KOLKATA () BEFORE . .. . . .. . , , , , , SHRI B.R.MITTAL, JUDICIAL MEMBER. /AND . .. .!' !'!' !'. .. . , #$ SHRI C.D.RAO, ACCOUNTANT MEMBER % % % % / ITA NO . 461/KOL/2010 &' ()/ ASSESSMENT YEAR : 2006-07 (+, / APPELLANT ) M/S.DOSS ENTERPRISE, BANKURA (PAN: AAEFD 0358 G) - & - - VERSUS - . (./+,/ RESPONDENT ) I.T.O., WARD-I, BANKURA +, 0 1 #/ FOR THE APPELLANT: SHRI S.M.SURANA & SHRI D.K.SEN ./+, 0 1 #/ FOR THE RESPONDENT: SHRI A.K.PRAMANIK #2 / ORDER ( (( ( . .. .!' !'!' !'. .. . ) )) ), , , , #$ PER SHRI C.D.RAO, AM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 28.01.2010 OF THE CIT(A)-DURGAPUR PERTAINING TO A.YR. 2006-07. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS OF APPEAL :- 1. FOR THAT THE ORDER OF ASSESSMENT IS ARBITRARY, I LLEGAL AND BAD IN LAW AS THE DISCREPANCY IN GROSS RECEIPT DELIBERATELY AVOIDED B Y THE LD.ASSESSING OFFICER. 2. FOR THAT THE LD. ASSESSING OFFICER ERRED IN MAKI NG ADDITION OF RS.3,58,892.00 ON ACCOUNT E.P.FUND AND ADDITION OF RS.38,000/- U/S 40A(3) AND LASTLY RS.3,07,902.00 BEING ADDITION AS UNDISCLOSED SECURI TY DEPOSIT. 3. FOR THAT THE LD. ASSESSING OFFICER IN CONSIDERAT ION OF FACTS AND CIRCUMSTANCES OF THE MATTER ERRED IN MAKING ADDITION OF RS.15,40, 190.00 AS UNDISCLOSED CHEQUE IN HAND. 4. FOR THAT THE APPELLANT RESERVES IT RIGHT TO ADD TO, TO ALTER TO AMEND THE GROUND/S TAKEN AND/OR TO ADDUCE PAPER/S AND DOCUMEN T/S AT THE TIME OF HEARING. 2 3. GROUND NO.1 OF THE APPEAL IS GENERAL IN NATURE WHICH DOES NOT REQUIRE ANY ADJUDICATION. THE SAME IS DISMISSED. 4. ` IN GROUND NO.2 ADDITION ON ACCOUNT OF E.P.FUND AND ADDITION MADE US 40A(3) ARE NOT PRESSED BY THE LD. COUNSEL APPEARING ON BE HALF OF THE ASSESSEE. THEREFORE BOTH THESE ISSUES ARE DISMISSED AS NOT PRESSED. 5. AS REGARDING GROUND NO.2 IN RESPECT OF ADDITION OF RS.3,07,902/- ON ACCOUNT OF UNDISCLOSED SECURITY DEPOSIT AND IN GROUND NO.3 AD DITION OF RS.15,40,190/- IN RESPECT OF UNDISCLOSED CHEQUE IN HAND THE AO WHILE DOING T HE SCRUTINY ASSESSMENT HAS MADE THE ABOVE ADDITIONS BY OBSERVING AS UNDER :- 6. THE FACTS RELATING TO THE OTHER GROUNDS ARE THA T WHILE DOING THE SCRUTINY ASSESSMENT THE AO MADE ADDITIONS ON ACCOUNT OF FREI GHT, UNLOADING EXPENSES AND SHORTAGE BY OBSERVING AS UNDER :- UNDISCLOSED SECURITY DEPOSIT : FROM THE CORRESPONDING WITH M/S SIMPLEX INFRASTRUCT URES LTD IT IS NOTED THAT THE ASSESSEE HAD A BALANCE OF RS.4,04,558 AS SECURI TY DEPOSIT WITH THE SAID CONCERN. ASSESSEE DID NOT DISCLOSE THE ENTIRE AMOUN T IN IS BALANCE SHEET. ONLY AN AMOUNT OF RS 96,656 IS REFLECTED IN THE BALANCE SHEET. IN A LETTER DATED 4.12.2008, ASSESSEE WAS ASKED TO SHOW CAUSE IN THIS REGARD. IN REPLY, A/R OF THE ASSESEE STATED THAT- THE FIGURE OF SECURITY DEPOSI T HAS BEEN SHOWN @ 10% OF THE TOTAL PAYMENT SHOWN BY THE COMPANY IN FORM NO. 16A AS PER NORMS OF THE COMPANY. AS THE COMPANY DID NOT ISSUE ANY DETAILS O N THE MATTER ANYTIME, THE FIGURE OF SECURITY DEPOSIT WAS SHOWN ON THE BASIS O F DECLARED NORMS OF THE COMPANY. THEREFORE, THE MISTAKE POINTED OUT BY YOU IN YOUR LETTER UNDER REFERENCE WAS NOT ANY WILLFUL MISTAKE. IT WAS ONLY DUE TO THE MISGUIDANCE OF THE COMPANY. EXPLANATION OFFERED BY THE A/R OF THE ASSESEE IS NOT ACCEPTABLE WITH A VIEW THAT THE ASSESSEE MAINTAINED REGULAR BO OKS OF ACCOUNTS AND AUDITED THE SAME. DEDUCTION FOR SECURITY DEPOSIT COULD BE C OMPUTED AT THE FINALIZATION OF ACCOUNTING STAGE EVEN IF NO SUCH STATEMENT WAS S UPPLIED BY THE PRINCIPAL CONCERN. THEREFORE, UNDERSTATEMENT OF SECURITY DEPO SIT TO THE TUNE OF RS.3,07,902 IS CONSIDERED AS PURELY CONCEALMENT AND MADE OUT OF INCOME OF THE ASSESSEE HENCE, RS. 3,07,902 IS INCLUDED TO THE INCOME OF THE ASSESSEE U/S.69 OF THE I.T.ACT. UNDISCLOSED CHEQUES IN HAND : FROM THE PAYMENT SCHEDULE OF M/S. SIMPLEX INFRASTRU CTURES LTD., PRINCIPAL CONCERN OF THE ASSESSEE (FROM WHICH IT RECEIVED PAY MENT AS SUB-CONTRACTOR), THAT AN AMOUNT OF .RS.17,47,639.15 PAID ON 31.03.20 06. IT IS ALSO VERIFIED FROM THE BANK STATEMENT OF THE ASSESSEE THAT THE SAID AM OUNT WAS NOT CREDITED WITHIN THE RELEVANT PREVIOUS YEAR. TDS TO THE TUNE OF RS,L 9,608 WAS. MADE FROM THE SAID AMOUNT. IT MEANS, CHEQUES FOR AN AMOUNT OF RS. 17,28,031.15 WERE REMAINED AT THE HAND OF THE ASSESSEE FOR ENCASHMENT . IN OTHER WORDS, ASSESSEE 3 HAD TO SHOW IT IN ITS BALANCE SHEET AS CHEQUES IN H AND IN THE ASSET SIDE. A DISCREPANCY IN THE SHAPE OF UNDISCLOSED CHEQUES IN HAND TO THE TUNE OF RS. 17,28,031.15 IS DETECTED. ASSESSEE WAS ASKED TO SHO W CAUSE AS TO WHY THE SAME WOULD NOT BE TREATED AS UNDISCLOSED ASSET. IN RESPO NSE., THE A/R OF THE ASSESSEE EXPLAINED THE DISCREPANCY IN THIS WAY- REGARDING T HE NON-REFLECTION OF THE FIGURE AMOUNTING TO RS. 17,47,639 VIDE CHEQUE DATED 31/3/2006 RECEIVED FROM THE SIMPLEX INFRASTRUCTURES LTD. IN THE BALANCE SHE ET AS CHEQUE IN HAND,. I AM TO STATE THAT THIS IS MERELY A TECHNICAL MISTAKE. I F THE SAME WERE ACTUALLY REFLECTED IN THE BALANCE SHEET AS CHEQUE IN HAND IN THE ASSET SIDE OF THE BALANCE SHEET, OUTSTANDING LIABILITIES FOR EXPENSES COMPRIS ING DIFFERENT PURCHASES OF MATERIAL WHICH WERE MOSTLY PAID AFTER THE CLOSE OF THE FINANCIAL YEAR WOULD HAVE ALSO BEEN SHOWN IN THE LIABILITIES SIDE OF THE BALANCE SHEET THEREBY ADJUSTING WITH THE VALUE OF CHEQUE IN HAND, WHICH W ERE NOT SIMILARLY REFLECTED IN THE LIABILITIES SIDE OF THE BALANCE SHEET. IT IS FURTHER STATED THAT THE ENTIRE PAYMENT MAD TO THE FIRM AS REFLECTED IN THE FORM N O. 16A INCLUDING THE AMOUNT POINTED OUT BY YOU HAS BEEN DULY ACCOUNTED F OR IN THE P & L A/C. OF THE CASE AND NET PROFIT HAS BEEN ARRIVED AT. AS SUCH TH ERE IS NO REASON AS TO WHY THE SUM OF RS.17,47,639 WOULD BE ADDED BY YOU IN THE TO TAL INCOME OF THE FIRM MERELY BECAUSE OF THE TECHNICAL FAULT. THE CONTENT ION OF THE A/R OF THE ASSESSEE IS NOT TENABLE IN THE POINT OF VIEW OF THE LAW. ASSESSEE HAD A RESPONSIBILITY TO MAINTAIN REGULAR BOOKS OF ACCOUNT S. THE BOOKS OF ACCOUNTS WERE THOROUGHLY AUDITED. NOW, AT THE STAGE OF ASSES SMENT PROCEEDING, HOW ONE CAN TAKE SUCH A PLEA THAT IT WAS MERELY. A TECHNICA L FAULT. WHEREAS. ALL PAYMENTS WERE RECEIVED THROUGH ITS BANK A/C. HOWEVER, IN COU RSE OF VERIFICATION, A CONFIRMED DEBIT BALANCE OF RS.1,87,840.53 IS FOUND IN THE NAME OF CREDITOR, M/S. SENCO OF DURGAPUR. THE GROSS RECEIVABLE AMOUNT ADJUSTED UP TO THAT AMOUNT OF THE SAID DEBIT BALANCE ON FOLLOWING PRINC IPLE OF NATURAL JUSTICE. HENCE, RS.15,40,190.62 OR SAY, RS.15,40,190 (BEING THE DIFFERENCE OF RS.17,28,031.15 1,87,,840.53) IS CONSIDERED AS UN DISCLOSED INCOME OF THE ASSESSEE IN THE ASSESSMENT YEAR 2006-07 AND INCLUDI NG TO THE TOTAL INCOME OF THE ASSESSEE. 6.1. ON APPEAL THE LD. CIT(A) HAS SET ASIDE THE MAT TER ON ACCOUNT OF UNDISCLOSED SECURITY DEPOSIT BY OBSERVING THAT 6. I HAVE CONSIDERED THE MATTER. THE LEARNED A/R S UBMITTED THAT THE SECURITY DEPOSIT HAD BEEN DEDUCTED FROM THE GROSS RECEIPTS P AYABLE TO THE ASESSEE BY M/S. SIMPLEX. IT IS STATED THAT THE ASSESSEE HAS IN CLUDED THE GROSS RECEIPTS IN ITS TURNOVER IN THE P&L A/C AND HENCE AN ADDITION AGAIN WOULD RESULT IN TAXING THE SAME AMOUNT TWICE. IT WAS STATED THAT THE SECURITY DEPOSIT WAS NOT SHOWN IN THE BALANCE SHEET AS THE REQUISITE STATEMENT REGARDING DEDUCTION OF SECURITY DEPOSITS FROM THE GROSS RECEIPTS WAS NOT RECEIVED I N TIME FROM M/S. SIMPLEX. THE LEARNED A/RS CONTENTION IN THIS REGARD SEEMS T O BE CORRECT. HOWEVER, THE SAME NEEDS TO BE VERIFIED WITH REFERENCE TO THE PAY MENT CERTIFICATES AND THE P & L A/C BEFORE RELIEF CAN BE GRANTED. I, THEREFORE, DIRECT THE ASSESSEE TO PRODUCE BEFORE THE AO THE NECESSARY PAYMENT CERTIFICATES AN D IF IT IS FOUND THAT THE 4 AMOUNT OF SECURITY DEPOSIT ALREADY STANDS INCLUDED IN THE PAYMENTS CREDITED BY THE ASSESSEE IN THE P & L A/C, THE ADDITION ON THIS ACCOUNT STANDS DELETED. 6.2. THE LD. CIT(A) FURTHER CONFIRMED THE ADDITION ON ACCOUNT OF UNDISCLOSED CHEQUE IN HAND BY OBSERVING THAT I HAVE CONSIDERED THE MATTER. THE BASIC EXPLANATIO N THAT THE CASE TO ALL INTENTS AND PURPOSES WAS A NO-ACCOUNTS CASE, CANNOT BE ACCE PTABLE EXPLANATION. BOOKS ARE BEING MAINTAINED WHICH ARE GOING THROUGH THE PR OCESS OF AUDIT INCLUDING TAX AUDIT. NON-REFLECTION OF AN ASSET AMOUNTING TO RS.1540,190/- IS CLEAR CONCEALMENT AS THERE WOULD HAVE BEEN MATCHING CAPIT AL ON THE LIABILITIES SIDE. THE EXPENSES ALREADY STAND BOOKED AS THERE ARE NO L IABILITIES FOR EXPENSES IN THE BALANCE SHEET. UNDER THE CIRCUMSTANCES, I AM OF THE OPINION THAT THE AO RIGHTLY ADDED BACK RS.15,40,190/- AND THIS GROUND I S DISMISSED. AGGRIEVED BY THIS THE ASSESSEE IS IN APPEAL BEFORE US. 7. AT THE TIME OF HEARING THE LD.COUNSEL HAS SUBMIT TED THAT 7.1. THERE WAS NO DISPUTE THAT THE RECEIPT WAS DULY SHOWN IN THE PROFIT & LOSS ACCOUNT HENCE THE ADDITION OF THE SAME AMOUNT WAS A DOUBLE ADDITION. THE ASSESSEE FURTHER SUBMITTED BEFORE THE LD CIT(A) THAT THE AO MISSED TO LOOK INTO THE TDS CERTIFICATE FROM WHICH IT WAS CLEAR THAT THE TOTAL RECEIPTS SHOWN IN THE P.L. ACCOUNT WAS RS.96,56,601/- WHICH WAS AS PER THE SAID TDS CE RTIFICATE ISSUED BY THE CONTRACTEE M/S. SIMPLEX INFRASTRUCTURE LIMITED. HOWEVER, THERE WAS ADVANCE OF RS. 19.70 LAKHS WHICH WAS ADJUSTED AGAINST FINAL BILL BUT THE SAID AMOUNT WAS AGAIN INCLUDED WHILE MENTIONING THE FINAL BILL HENCE THE SAME WAS DOUBLY TAKEN RESULTING THAT THE SUM OF RS. 19.70 LAKHS WAS DOUBLY TAKEN AS RECEIPT. THIS A MOUNT IS TO BE REDUCED FROM GROSS RECEIPTS AND THE ACTUAL RECEIPT WILL BE R. 76,86,60 1/- IN PLACE OF 96,56,601/- .THE RESULT WILL BE LOSS OF RS. 15,83,500/- (RS.65500/- THE PROFIT + RS. 3,21,000/-- SALARY TO PARTNERS 9,70,000/-). THIS SHOWS THAT THE LOSS WAS BECAUSE OF NON INCLUSION OF THE CHEQUE OF RS. 15,40,190/- IN THE ASSET SIDE. THE AD DITION IS TO BE REDUCED BY RS. I9.70 LAKHS IN VIEW OF DOUBLE. THE LOSS AND P.L. ACCOUNT COMES ON THIS RECONCILIATION BECAUSE THE RECEIPTS OF RS. 15,40,190/- WAS NOT TAK EN INTO ACCOUNT AND THEREFORE THERE WAS LOSS. THIS CONTENTION THAT THE SUM OF RS. 19,70 ,000/- TAKEN DOUBLY HAS TAKEN CARE OF THE ADDITION OF RS. 1540190/- HAS NOT BEEN CONSI DERED BY THE CIT(A). HENCE THE ADDITION MAY BE REDUCED BY RS. 19,70,000/- LAKHS. 5 7.2. AS REGARDS THE ADDITION OF RS. 307902/- IT IS SUBMITTED THAT SECURITY DEPOSIT WAS RETAINED DURING THE YEAR FROM THE CONTRACT FOR SATI SFACTORY COMPLETION OF THE CONTRACT TO BE PAID COMPLETION OF THE PERIOD CANNOT BE TREAT ED AS INCOME BUT SHALL BE TREATED AS INCOME ONLY IN THE YEAR WHEN ACTUALLY PAID. THEREFO RE THE SAME CANNOT BE TREATED AS INCOME DURING THE YEAR. THE FOLLOWING DECISIONS ARE CITED: SIMPLEX CONCRETE PILES (P LTD. 179 ITR 8 (CAL) IGNIFLUID BOILERS P LTD. 283 IYT PAGE 295 (MAD) ASSOCIATED CABLES LTD. 286 ITR PAGE 596 (BOMBAY) EAST COAST CONSTRUCTION 283 ITR 297 (MADRAS) P. & C CONSTRUCTION 3 ITR PAGE 113 (MAD) 8. ON THE OTHER HAND, THE LD. DR APPEARING ON BEHAL F OF THE REVENUE RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 9. AFTER HEARING THE RIVAL SUBMISSIONS AND ON A CAR EFUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD IT IS OBSERVED THAT ON ACCOUNT OF UNDISCLOSED SECURITY DEPOSIT THE LD. CIT(A) HAS SET ASIDE THE ISSUE TO THE FILE OF T HE AO TO VERIFY THE NECESSARY PAYMENT CERTIFICATES. IT IS FOUND THAT THE AMOUNT OF SECURI TY DEPOSIT ALREADY STANDS INCLUDED IN THE PAYMENTS CREDITED BY THE ASSESSEE IN THE P&L A/ C, THE ADDITION ON THIS ACCOUNTS STANDS DELETED. SINCE THIS ISSUE HAS BEEN SET ASIDE TO THE FILE OF THE AO WE FIND NO INFIRMITY IN THE ORDERS OF THE REVENUE AUTHORITIES THIS GROUND OF THE ASSESSEE IS DISMISSED. 9.1. AS REGARDING UNDISCLOSED CHEQUE IN HAND, IT IS OBSERVED THAT THE ASSESSEE HAS TAKEN BEFORE US A PLEA AS NARRATED IN THE PRECEDING PARAGRAPH 7.1. WHICH IS NOT BEFORE THE REVENUE AUTHORITIES. THIS REQUIRES FURTHER VERI FICATION. THEREFORE, IN THE INTEREST OF JUSTICE WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO TO RE-DECIDE THE SAME AS PER LAW AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEAR D TO THE ASSESSEE. THE ASSESSEE IS AT LIBERTY TO SUBMIT THE ADDITIONAL EVIDENCES IN SUPPO RT OF THE SUBMISSIONS MADE BEFORE US. 6 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED IN PART FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 11.02.2011. SD/- SD/- . .. . . .. . , , , , B.R.MITTAL, JUDICIAL MEMBER . .. .!' !'!' !'. .. . , ,, , #$ #$ #$ #$ , C.D.RAO, ACCOUNTANT MEMBER. ( (( ('$ '$ '$ '$) )) ) DATE: 11.02.2011. #2 0 .3 4#3(5- COPY OF THE ORDER FORWARDED TO: 1. M/S.DOSS ENTERPRISE, P.O.GANGAJALGHATI, DIST. BANKU RA. 2 THE I.T.O., WARD-1, BANKURA 3. THE CIT, 4. THE CIT(A)-DURGAPUR. 5. DR, KOLKATA BENCHES, KOLKATA /3 ./ TRUE COPY, #2&:/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES R.G.(.P.S.)