Biswanath Agarwala, Kolkata V. ACIT, CIR-43, KOLKATA, Kolkata

ITA 461/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1276 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 17-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHERJEE
• Assessee Lawyers: SOUMITRA CHOWRDHURY
• Keywords: Unexplained cash credit; Depreciation
• Section: 143(3); 133(6); 131; 68; 6

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.461/KOL/2016 ASSESSMENT YEAR:2011-12 BISWANATH AGARWALA 52/1/2, STRAND ROAD, 1 ST , FLOOR, KOLKATA-700 007 [ PAN NO.ACYPA 5189 L ] / V/S . ACIT, CIRCLE-43, 3, GOVT. PLACE (WEST), KOLKATDA-700 001 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SOUMITRA CHOWRDHURY, ADVOCATE /BY RESPONDENT SHRI ARINDAM BHATTACHERJEE, ADDL. CIT-DR /DATE OF HEARING 01-02-2018 /DATE OF PRONOUNCEMENT 21-03-2018 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-13, KOLKATA DATED 30.12.2015. ASSESSMENT WAS FRAMED BY JCIT, RANGE-44,KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 19.03.2014 FO R ASSESSMENT YEAR 2011-12. THE GROUNDS RAISED BY THE ASSESSEE PER ITS APPEAL ARE A S UNDER:- 1. FOR THAT ON THE FACTS OF THE CASE, THE ORDER PA SSED BY THE LD. CIT(A) IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 2. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN DITTOING THE ORDER OF THE AO AND CONFIRMING THE ADDITION CASH CR EDIT U/S. 68 AMOUNTING TO RS.64,05,408/- WHICH IS COMPLETELY ARBITRARY, UNJUS TIFIED AND ILLEGAL. ITA NO.461/KOL/2016 A.Y . 2011-12 BISWANATH AGARWALA VS. ACIT, CIR-43, KO L. PAGE 2 3. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) SHOULD HAVE CONSIDER THE ACTS THAT ALL DEPOSITS ARE AGAINST SALES CARRIED ON DAY TO DAY BASIS AND SALES ARE DULY REFLECTED IN THE SALES REGISTER AND THE SA ID SALES TO THE 19 PARTIES WERE ACCEPTED IN ASSESSMENT MADE U/S. 143(3) IN THE PRES ENT YEAR, THEREFORE, NO ADDITION U/S. 68 SHOULD HAVE BEEN MADE BY THE AO AN D CONFIRMED BY THE LD. CIT(A) AMOUNTING TO RS.64,05,408/- WHICH IS COMPLET ELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 4. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN NOT CONSIDERING THE FACT THAT THE AO WITHOUT ISSUING NO TICE U/S 133(6) OR 131 OF THE IT ACT HAS WRONGLY ADDED CASH CREDIT ON SALES U/S. 68 AND CONFIRMED BY THE LD. CIT(A) AMOUNTING TO RS.64,05,408/- WHICH IS COMPLET ELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 5. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN DITTOING THE ORDER OF THE AO AND CONFIRMING THE ADDITION 10% OUT OF MOTOR CAR EXPENSES FOR PERSONAL USE AMOUNTING TO RS.39,738/- ON ESTIMA TE BASIS WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 6. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN DITTOING THE ORDER OF THE AO AND CONFIRMING THE ADDITION 10% OUT OF TELEPHONE EXPENSES FOR PERSONAL USE AMOUNTING TO RS.37,454/- ON ESTIMATE B ASIS WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 7. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN DITTOING THE ORDER OF THE AO AND CONFIRMING THE ADDITION SHRI SOUMITRA CHOWDHURY, LD. ADVOCATE APPEARED ON B EHALF OF ASSESSEE AND SHRI ARINDAM BHATTACHERJEE, LD. DEPARTMENTAL REPRESENTAT IVE APPEARED ON BEHALF OF REVENUE. 2. GROUND NO.1 GENERAL IN NATURE AND DOES NOT REQUI RE ANY SEPARATE ADJUDICATION. 3. GROUND NO. 2, 3 AND 4 ARE INTERCONNECTED AND THE REFORE BEING TAKEN UP TOGETHER. 4. THE FIRST ISSUE RAISED BY THE ASSESSEE IS THAT L D. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING THE ADDITION FOR RS. 64,0 5,408/- ONLY UNDER SECTION 68 OF THE ACT. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS RUNNING A PROPRIETORSHIP CONCERN UNDER THE TRADE NAME M/S MURALILAL RAMESH K UMAR. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF WHOLESALE SUGAR TRADING AS IMPOR TER & COMMISSION AGENT. THE SUPPLY OF SUGAR IS COVERED UNDER THE ESSENTIAL COMM ODITIES ACT AND WEST BENGAL SUGAR DEALERS LICENSING ORDER 2009 AND IS REGULATED BY STATE FOOD & SUPPLY DEPARTMENT AND ENFORCEMENT BRANCH OF WEST BENGAL. THE ASSESSEE IS PURCHASING THE SUGAR DIRECTLY FROM MILLS AND MAKING THE SALES TO T HE RETAILERS/ WHOLESALERS. ITA NO.461/KOL/2016 A.Y . 2011-12 BISWANATH AGARWALA VS. ACIT, CIR-43, KO L. PAGE 3 1. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS SH OWN RECEIPT OF CASH FROM CERTAIN PARTIES. THE CASH RECEIPTS FROM SUCH PARTIE S WAS EITHER ADJUSTED AGAINST THE SALES, BROKERAGE & SALARY OR REFUNDED TO THEM D URING THE YEAR. THE AO DURING THE ASSESSMENT PROCEEDINGS TO ESTABLISH THE AUTHENTICITY OF THE TRANSACTIONS I.E. CASH RECEIPTS REQUIRED THE ASSESS EE TO PRODUCE THE IDENTIFICATION OF THE PARTIES, PAN, ADDRESSES AND DETAILS OF COMPL ETE TRANSACTION. 1.1 THE ASSESSEE IN COMPLIANCE THERETO REPLIED THAT THE RE ARE CERTAIN UNKNOWN TRADERS WHO DEPOSITS CASH WITH THE ASSESSEE IN THE SMALL QUANTITY FOR THE PURCHASE OF SUGARS BEFORE TAKING DELIVERY OF THE SA ME FROM THE ASSESSEE. 1.2 THESE SMALL TRADERS COME TO THE PLACE OF THE BUSIN ESS OF THE ASSESSEE FROM FAR OFF PLACES TO DEPOSIT THE MONEY WITH THE ASSESSEE. THE ASSESSEE USED TO ACCEPT THE MONEY IN THE SMALL QUANTITY BEFORE MAKING THE A CTUAL SALE TO SUCH PARTIES TO AVOID POSSIBILITY OF NON-RECOVERY OF THE SAME IN FU TURE. 1.3 THE ASSESSEE ALSO CLAIMED THAT IT IS THE GENERAL PR ACTICE IN THE TRADE OF SUGAR BUSINESS TO ACCEPT THE MONEY IN THE SMALL QUANTITY BEFORE MAKING THE SALE & DELIVERY OF THE GOODS TO SUCH PARTIES. 1.4 THE ASSESSEE FURTHER SUBMITTED THAT THE AMOUNT OF C ASH RECEIVED FROM SUCH PARTIES IS TALLYING WITH THE SALES REGISTERS MAINTA INED BY IT ALONG WITH THE QUANTITY AS PER THE REQUIREMENT OF FOOD AND SUPPLY DEPARTMENT OF WEST BENGAL. 1.5 THE ASSESSEE ALSO SUBMITTED THAT THERE WAS NO DISCR EPANCY/ MISMATCH IN THE AMOUNT OF PURCHASES, SALES AND CLOSING STOCK. 1.6 THE ASSESSEE ALSO FILED THE LIST OF 19 PARTIES FROM WHOM THE CASH WAS ACCEPTED DURING THE YEAR AND EXPRESSED HIS INABILITY TO PROD UCE SUCH PARTIES AS THE TRANSACTION WITH THEM WAS TAKEN PLACE 3 YEARS BACK. MOREOVER THESE ARE NOT THE REGULAR PARTIES OF THE ASSESSEE. AS PER THE ASSESSE E THESE PARTIES COME FROM FAR OFF PLACES ONCE OR TWICE IN THE WHOLE YEAR. HOWEVER, THE AO OBSERVED THAT THE IDENTIFICATION OF THE PARTIES HAS NOT BEEN FURNISHED BY THE ASSESSEE. ITA NO.461/KOL/2016 A.Y . 2011-12 BISWANATH AGARWALA VS. ACIT, CIR-43, KO L. PAGE 4 1.7 THE AUTHENTICITY OF THE MAILING ADDRESS FURNISHED B Y THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS WAS NOT EVIDENCED ON THE BAS IS OF THE BILLS, CASH MEMO & CHALLAN. 1.8 THE SUGAR IS FREELY AVAILABLE IN THE MARKET THEREFO RE THERE WAS NO REASON THAT THE PARTIES FROM THE DISTANT PLACES WILL COME TO TH E ASSESSEE TO DEPOSIT THE CASH FREQUENTLY FOR RS. 20,000 OR LESS. IN VIEW OF ABOVE THE AO OPINED THAT THE AMOUNT OF C ASH DEPOSITED BY THE PARTIES FOR THE RS.54,14,842.00 REPRESENTS THE OWN MONEY OF THE ASSESSEE WHICH WAS EARNED FROM UNDISCLOSED SOURCES AND THE SAME WAS ROUTED IN ITS BUSINESS THROUGH UNEXPLAINED CASH CREDIT. ACCORDINGLY THE AMOUNT OF RS. 54,14,842.00 WAS TREATED UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT BY THE AO AND AD DED TO THE TOTAL INCOME OF THE ASSESSEE. SIMILARLY THE ASSESSEE HAS SHOWN CASH RECEIPT OF RS .5,37,250/- IN RESPECT OF ONE PARTY NAMELY M/S GANESH TRADERS WHICH WAS ADJUSTED AGAINS T THE SALE OF SUGAR PARTLY FOR RS. 4,37,250.00 AND THE BALANCE AMOUNT OF RS.1 LACS WAS REFUNDED IN 5 EQUAL INSTALLMENTS OF RS.20,000 AS BROKERAGE. HOWEVER, TH E AO DURING THE ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE FAILED TO FU RNISH THE NECESSARY DETAILS / EVIDENCES FOR THE SERVICES RENDERED BY M/S GANESH T RADERS FOR GETTING THE BROKERAGE THEREFORE THE AMOUNT OF CASH DEPOSIT OF RS.1 LACS W AS TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT BY THE AO AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. SIMILARLY THE ASSESSEE HAS SHOWN RECEIPT OF CASH FO R RS. 6.40 LACS FROM 3 PARTIES WHICH WAS CLAIMED AS ADVANCE AGAINST THE SALE BUT THE SAM E WAS REFUNDED TO THE PARTIES ON THE GROUND THAT SALES HAS NOT BEEN MATERIALIZED. TH E ASSESSEE SUBMITTED THAT THE SALES WAS NOT MATURED THEREFORE THE CASH WAS RETURNED TO THEM AND TO SUCH TRANSACTIONS THE PROVISIONS OF SECTION 68 CANNOT BE APPLIED AS THE M ONEY WAS RECEIVED IN CONNECTION WITH SALES TRANSACTIONS. BUT IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE SUCH AS IDENTIFICATION OF THE PARTY AND CURRENT MAILING ADD RESS THE AMOUNT WAS TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT BY THE AO AND ADDED TO THE TOTAL INCOME. THE ASSESSEE DURING THE YEAR HAS CLAIMED TO HAVE RE CEIVED A SUM OF RS.1 LAC FROM HIS PERSONAL ACCOUNT WHICH WAS SUBSEQUENTLY SQUARED UP DURING THE YEAR BUT THE ASSESSEE HAS NOT PRODUCED THE DETAILS/ CASH FLOW STATEMENT T O JUSTIFY THE SOURCE OF CASH. ITA NO.461/KOL/2016 A.Y . 2011-12 BISWANATH AGARWALA VS. ACIT, CIR-43, KO L. PAGE 5 THEREFORE, THE AO IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE TREATED THE SUM OF RS.1 LACS AS UNEXPLAINED CASH CREDIT AND ADDED TO T HE TOTAL INCOME OF THE ASSESSEE. 2. THE ASSESSEE DURING THE YEAR HAS SHOWN THE CASH REC EIPT OF RS.1,50,566/- FROM SRI RAM SEVAK MISHRA AN EMPLOYEE OF THE ASSESSEE. B UT THE ASSESSEE FAILED TO FURNISH THE IDENTIFICATION OF THE PERSON ALONG WITH THE CURRENT MAILING ADDRESS OF SHRI RAM SEVAK MISHRA. ACCORDINGLY THE AO TREATE D THE SAME AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IN VIEW OF ABOVE THE AO HAS MADE THE ADDITION U/S 6 8 OF THE ACT FOR RS. 64,05,408/- ( 54,14,842.00+1,00,000.00+6,40,000.00+1,00,000.00+1, 50,566.00 ) AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 6. AGGRIEVED ASSESSEE HAS PREFERRED AN APPEAL BEFOR E LD. CIT(A) . THE ASSESSEE BEFORE THE LD.CIT(A) SUBMITTED THAT THE AO DURING T HE ASSESSMENT PROCEEDING HAS ACCEPTED THE SALES TO 9 PARTIES AMOUNTING TO RS.53, 15,781/- ONLY OUT OF THE TOTAL ADDITION OF RS. 64,05,408/- ONLY. SIMILARLY THE ASSESSEE HAS GIVEN MONEY TO SHRI RAM SEVAK EMPLOYEE OF THE ASSESSEE TIME TO TIME. THERE IS A DEBIT BALANCE IN THE NAME OF SUCH EMPLOYEE. THEREFORE THERE IS NO QUESTION OF APPLYING THE PROVISIONS OF SECTION 6 8 OF THE ACT TO SUCH TRANSACTION. SIMILARLY THE ASSESSEE HAS TAKEN A SUM OF RS.1 LAC FROM HIS INDIVIDUAL/ PERSONAL ACCOUNT WHICH WAS SQUARED UP DURING THE YEAR. THERE FORE THERE IS NO QUESTION FOR INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT TO SUCH TRANSACTION. THE SALE TRANSACTION IN RESPECT OF 3 PARTIES WAS NO T MATERIALIZED DURING THE YEAR, THEREFORE THE AMOUNT RECEIVED FROM THEM FOR RS.6.40 LAKH WAS RETURNED BACK TO THEM. THUS, THE IMPUGNED TRANSACTION IS OUTSIDE THE PURVI EW OF THE PROVISIONS OF SECTION 68 OF THE ACT. HOWEVER THE LD. CIT(A) DISREGARDED THE CONTENTION O F THE ASSESSEE AND CONFIRMED THE ORDER OF THE AO BY OBSERVING AS UNDER:- I HAVE GONE THROUGH THE CONTENTION OF THE ASSESSEE , THE ORDER PASSED BY THE AO AND THE SUBMISSIONS MADE BY THE APPELLANT. GROUN D 2,3 A& 4 RELATES TO THE ADDITION OF THE AO WHILE ASSESSING THE CASE DEMANDE D THE IDENTIFICATION OF THESE PERSONS AS EXCEPT SERIAL NO.2,9,10,11 WERE NO T PROPER. THE AO HAS SEEN ITA NO.461/KOL/2016 A.Y . 2011-12 BISWANATH AGARWALA VS. ACIT, CIR-43, KO L. PAGE 6 THAT THE ASSESSEE HAS DEPOSITED CASH INVARIABLY RS. 20000/- IN THE NAME OF 19 PERSONS. PERSONS-WISE DEPOSITS IN CASH ARE AS UNDER :- NAME RS. 1. CHAHYA GHOSH 492548 2. RAM SEVAK MISHRA 150566 3 AMRITLAL KUNDU SITARAM KUNDU 470255 4 SITARAM KUNDU 425643 5 GANESH TRADERS 537250 6 GURUDAS GUPTA 202530 7 SHANKER SINGH 133300 8 RAM GOPAL AGRAWAL 173043 9 AJAY KUMAR DUTTA 200000 10 LALIJI DUBBEY 320000 11 A.K. GUPTA 120000 12 B AGGARWAL 100000 13 SUBRATA GHOSH 1019200 14 AJIT SAHA 145800 15 BALAKNATH GUPTA 303590 16 MUKESH AGARWAL 237165 17 MOHANLAL AGARWAL 707790 18 RADHESHYAM GUPTA 314441 19 SURESH KUMAR AGARWAL 355287 TOTAL 6405408 THE ABOVE DEPOSITS WERE STATED TO BE THE CASH DEPOS IT FROM DIFFERENT PARTIERS AS AN ADVANCE FROM SUGAR PURCHASES. AS PRODUCTS OF SUG AR ARE ESSENTIAL COMMODITY AND PURCHASES ARE MADE DIRECTLY FROM MILL S AND SOLD THE SMALL WHOLESALE & RETAILERS. THE ABOVE DEPOSITS IS FROM S MALL TRADER WHO COME FROM FATHER DISTRICT AND VILLAGES OR FARTHER PLACES AND THEY PAY THE MONEY IN ADVANCE IN CASH AND THE GOODS ARE SOLD LATER ON. IF THE SAL ES IS NOT METALLISED THE CASH IS REPAID. THE AO FURTHER OBSERVED THAT SUGAR PRODUCT WAS AVAI LABLE IN THE OPEN MARKET TOO AND IT WAS AVAILABLE TO THE PURCHASES. IT WAS F URTHER OBSERVED BY THE AO THAT THE AFORESAID PURCHASES WILL NOT TRAVEL 50 KM FOR DEPOSITING AND GETTING BACK THEIR AMOUNT OF RS.20000/- EACH TIME AND CONCL UDED THAT ABOVE CASH DEPOSITED ARE NOTHING BUT THE ASSESSEE HAS ROUTED H IS UNDISCLOSED INCOME IN THE GRAVE OF CREDIT FROM SO CALLED BUYERS. CONSIDERING THE ABOVE THE APPELLANT ARGUMENTS THAT THEY SALE IN CASH TO SUCH PURCHASES BECAUSE SUBSEQUENTLY RECOVERY IS DIFFICULT APPELLANT AS THEY ARE FROM FU RTHER PLACES SMALL PARTIES AND FROM VILLAGES. IT IS MERELY STATEMENT WHICH IS NOT SUPPORTED BY ANY EVIDENCE PARTICULARLY PURSING AROUND ENTRY OF RS.20000/- DEP OSITED IN THE BOOKS ON DIFFERENT DATE & AT THE END ONE OF ALL ENTRY SINGLE ENTRY OF ODD FIGURE WAS MADE, CLEARLY SHOWS THAT THESE DEPOSITS ARE NOT MADE AS P ER THE RATE OF SUGAR OR THE BUSINESS TRANSACTIONS. IN NO CASE ALL THE DEPOSITS WILL BE MADE OF RS.20000/- AND AT THE LAST SINGLE ENTRY WOULD MADE OF ODD FIGU RE JUST TO SHOW THE TOTAL IN ITA NO.461/KOL/2016 A.Y . 2011-12 BISWANATH AGARWALA VS. ACIT, CIR-43, KO L. PAGE 7 ODD FIGURE WITH AT LEAST TO MATCH THE PRICE OF SUGA R AND TO MAKE NON-GENUINE TRANSACTIONS OF CASH DEPOSIT AS GENUINE. HENCE, THI S GROUND OF THE APPELLANT IS DISMISSED AND THE ACTION OF THE AO IS UPHELD. AGGRIEVED, ASSESSEE FURTHER COMES UP BEFORE US WITH AN APPEAL AGAINST THE ORDER OF LD. CIT(A). 7. THE LD. AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 63 AND SUBMITTED IN MANY CASES THE ADDRESS OF THE PARTIES WERE DULY GIVEN TO THE AO BUT HE FAILED TO ISSUE ANY NOTICE TO THEM U/S 133(6) OF TH E ACT. THE COPIES OF THE LEDGER CONTAINING THE ADDRESSES ARE PLACED ON PAGES 5 TO 2 9 OF THE PAPER BOOK. ON THE OTHER HAND THE LD. DR VEHEMENTLY SUPPORTED T HE ORDER OF THE AO. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORDS. THE ISSUE INVOLVED IN THIS CASE IS RELATED TO THE A DDITION MADE U/S 68 OF THE ACT WITH REGARD TO THE CASH DEPOSITED AMOUNTING TO RS. 64,05 ,408/- ONLY. THE ADDITION WAS MADE BY THE AO FOR THE REASONS THAT THE ASSESSEE HA S NOT PROVIDED THE ADDRESSES OF THE PARTIES WHICH DEPOSITED CASH WITH THE ASSESSEE FOR THE PURPOSE OF VERIFICATION. ACCORDINGLY THE AO WAS OF THE VIEW THAT THE ASSESSE E HAS ROUTED ITS OWN MONEY INTO THE BUSINESS IN THE FORM OF CASH CREDIT. THUS THE A O TREATED THE SAME AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. THE VIEW T AKEN BY THE AO WAS SUBSEQUENTLY CONFIRMED BY THE LD CIT(A). ON PERUSAL OF THE LEDGERS OF THE PARTIES PLACED ON PAGES 5 TO 29 OF THE PAPER BOOK IT WAS REVEALED THAT IN MANY OF THE CASES THE ADDRESSE S OF THE PARTIES WERE DULY MENTIONED BUT THE AO FAILED TO ISSUE THE NOTICES TO THEM FOR THE PURPOSE OF VERIFICATION. WE ALSO NOTE THAT THE AO WAS SUPPLIED THE ADDRESS OF ALL THE PARTIES AS EVIDENT HIS OBSERVATION IN THE ORDER WHICH IS REPRO DUCED BELOW:- THE AUTHENTICITY OF MAILING ADDRESS MENTIONED IN RESPECT TO THE AFORESAID LETTER IS NOT EVIDENCED BY THE BILLS, CASH MEMOS & CHALLANS SHOWING COMPLETE MAILING ADDRESS AND OTHER ADDRESS PROOF DOCUMENTS I N RESPECT OF SALES AS CLAIMED BY THE ASSESSEE IN SL. NO. 1,3, 4, 5, 6, 7, 8,13, 14,15, 16, 17, 18 & 19 FROM THE ABOVE WE FIND THAT THE AO WAS IN POSSESSIO N OF THE ADDRESSES OF THE PARTIES WHICH WAS NOT RELIED BY HIM FOR THE REASON STATED A BOVE. IN OUR CONSIDERED VIEW THE ITA NO.461/KOL/2016 A.Y . 2011-12 BISWANATH AGARWALA VS. ACIT, CIR-43, KO L. PAGE 8 AO BEFORE REJECTING THE ADDRESSES FURNISHED BY THE ASSESSEE SHOULD HAVE ISSUED NOTICES UNDER SECTION 133(6) OF THE ACT IN ORDER TO VERIFY THE AUTHENTICITY OF THE TRANSACTIONS. 8.1 IN THE CASE ON HAND THE ASSESSEE CLAIMED TO HAV E MADE SALES TO THE PARTIES FOR RS. 53,15,781/- OUT OF TOTAL CASH CREDIT OF RS.64, 05,408/- WHICH WAS DULY ACCEPTED BY THE AO. THUS IN OUR CONSIDERED VIEW THE AMOUNT OF S ALE ACCEPTED BY THE AO CANNOT BE TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE AC T. IN CASE THE AO TREATS THE AMOUNT OF SALE AS UNEXPLAINED CASH CREDIT THEN HE HAS TO R EDUCE THE AMOUNT OF SALE BY THE AMOUNT OF CASH CREDIT WHICH THE AO HAS FAILED TO DO SO. THEREFORE IN OUR CONSIDERED VIEW THE AMOUNT OF CASH SALE FOR RS. 53,15,781/- CA NNOT BE TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. SIMILARLY WE NOTE THAT THE ASSESSEE HAS ADVANCED MO NEY TO ITS EMPLOYEE SHRI RAM SEVAK MISHRA AND ACCORDINGLY DEBIT BALANCE IN THE N AME OF THE EMPLOYEE IS APPEARING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE PROVI SIONS OF SECTION 68 OF THE ACT ARE ATTRACTED TO ENTRIES OF CASH FOUND CREDITED IN THE BOOKS OF ACCOUNTS. BUT THERE IS NO ENTRY OF CASH CREDIT FOUND IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IN THE NAME OF SHRI RAM SEVAK MISHRA. THEREFORE TO SUCH TRANSACTION THE PROVISIONS OF SECTION 68 CANNOT BE APPLIED. 8.2 SIMILARLY WE NOTE THAT THE AMOUNT RECEIVED BY T HE ASSESSEE FROM M/S GANESH TRADERS WAS ACCEPTED IN PART TO THE TUNE OF RS. 4,3 7,250.00 AND THE BALANCE OF RS. 1 LAC WAS TREATED AS UNEXPLAINED CASH CREDIT UNDER SE CTION 68 OF THE ACT. IN THIS REGARD WE NOTE THAT THE AO ERRED IN ACCEPTING PART OF THE CASH RECEIPT FROM M/S GANESH TRADERS AND THE BALANCE WAS NOT ACCEPTED ON THE GRO UND OF NON-IDENTIFICATION AND MAILING ADDRESS OF THE PARTY. IN THE PRESENT CASE W E ARE OF THE VIEW THAT THE AO ERRED IN ACCEPTING PART OF THE TRANSACTION. IN CASE THE A O HAS DOUBT ON THE IDENTIFICATION OF THE PARTY THEN HE SHOULD HAVE DISALLOWED THE ENTIRE AMOUNT. HE CANNOT IN SUCH A SITUATION ACCEPT PART OF THE TRANSACTION AND REJECT THE PART OF THE TRANSACTION DUE TO NON IDENTIFICATION OF THE PARTY. IN RESPECT OF OTHER TRANSACTIONS THE ALLEGATION OF THE AO IS THAT THESE ENTRIES HAVE BEEN ACCEPTED BY THE ASSESSEE IN ORDER TO MEET THE NEED OF BANKING TRANSACTIONS AND FOR OTHER TRANSACTIONS. IN THIS REGARD, WE OBSERVE THAT THE AO HAS NOT BROUGHT ANYTHING ON ITA NO.461/KOL/2016 A.Y . 2011-12 BISWANATH AGARWALA VS. ACIT, CIR-43, KO L. PAGE 9 RECORD EXPLAINING THE NEED OF THE BANKING TRANSACTI ONS OR OTHER BUSINESS TRANSACTIONS FOR WHICH THE MONEY WAS ACCEPTED IN THE BUSINESS BY THE ASSESSEE. EVEN FOR THE SAKE WE ASSUMED THAT THERE WAS SOME NEED OF BANKING TRAN SACTION OR OTHER BUSINESS TRANSACTION THEN THE AO SHOULD HAVE BROUGHT SUCH FA CT ON RECORD. BUT THE AO HAS ALSO NOT BROUGHT ON RECORD THE DETAILS OF CASH BOOK OF T HE ASSESSEE TO JUSTIFY THAT THE CASH CREDIT ENTRIES WERE TAKEN COVER-UP THE NEGATIVE CAS H BALANCE IN THE CASH BOOK OF THE ASSESSEE. IN THE ABSENCE OF SUFFICIENT DOCUMENTARY EVIDENCE WE DO NOT CONCUR WITH THE VIEW OF THE LOWER AUTHORITIES. 8.3 BESIDES THE ABOVE, WE ALSO NOTE THAT THE ASSESS EE HAS SHOWN TOTAL TURNOVER OF RS.152 CRORES IN HIS AUDITED FINANCIAL STATEMENTS A ND SIMILARLY THE ASSESSEE HAS SHOWN CASH BALANCE AS ON 31.03.2011 FOR RS.19,66,095/-, T HEREFORE IT CAN BE INFERRED THAT THERE CAN BE SEVERAL BUSINESS TRANSACTIONS WHICH HA VE NOT BEEN MATURED DURING THE YEAR UNDER CONSIDERATION BUT THAT CANNOT LEAD AN IN FERENCE OF UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. ACCORDINGLY, NO ADVERS E INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE IS SUCH CIRCUMSTANCES. MOREOVER, IT IS ALSO OBSERVED THAT THE SUGAR COMES UNDER ESSENTIAL COMMODITIES ACT AND WEST BENGAL SUG AR DEALERS LICENSING ORDER 2009 AND ACCORDINGLY IT REGULATED BY STATE FOOD & SUPPLY DEPARTMENT AND ENFORCEMENT BRANCH. THEREFORE, WE OBSERVE THAT THE TRANSACTIONS MADE BY THE ASSESSEE ARE CONTROLLED BY THE GOVERNMENT OF WEST BENGAL. NO INF IRMITY HAS BEEN REPORTED BY THE STATE GOVERNMENT WITH THE REGARD TO THE TRANSACTION S CARRIED OUT BY THE ASSESSEE DURING THE YEAR. IT IS UNDISPUTED FACT THAT THERE I S NO DISPUTE WITH REGARD TO THE AUDITED BALANCE SHEET, BOOKS OF ACCOUNT, SALES REGISTER, PU RCHASE REGISTER AND STOCK REGISTER. IN VIEW OF THE ABOVE AND AFTER CONSIDERIN G THE FACTS IN TOTALITY WE REVERSE THE ORDER OF AUTHORITIES BELOW. HENCE THE GROUNDS OF AP PEAL FILED BY THE ASSESSEE ARE ALLOWED. 9. THE NEXT ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 5 & 6 IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING T HE DISALLOWANCE OF RS.39,738/- AND RS.37,454/- IN RESPECT OF MOTOR CAR EXPENSES INCLUD ING DEPRECIATION AND TELEPHONE EXPENSES ON ACCOUNT OF PERSONAL USE OF THE ASSESSEE . 10. THE AO DURING THE ASSESSMENT PROCEEDINGS HELD T HAT THE PERSONAL USE OF MOTOR CAR EXPENSES AND TELEPHONE EXPENSES CANNOT BE RULED OUT IN THE ABSENCE OF SUFFICIENT ITA NO.461/KOL/2016 A.Y . 2011-12 BISWANATH AGARWALA VS. ACIT, CIR-43, KO L. PAGE 10 DOCUMENTARY EVIDENCES JUSTIFYING OTHERWISE. ACCORDI NGLY THE AO HAS TAKEN A VIEW THAT 10% OF THE TOTAL EXPENSES AS MENTIONED ABOVE A RE THE PERSONAL EXPENSES OF ASSESSEE. FURTHER ASSESSEE HAS PREFERRED AN APPEAL BEFORE LD. CIT(A), WHO IN TURN UPHELD THE DECISION OF LD.AO. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E FURTHER COMES UP BEFORE. 11. THE LD. AR BEFORE US SUBMITTED THAT THE CAR EX PENSES AND TELEPHONE EXPENSES WERE INCURRED EXCLUSIVELY FOR THE PURPOSE OF THE BU SINESS. THEREFORE NO DISALLOWANCE CAN BE MADE FOR SUCH EXPENSES ON AD HOC BASIS. ON THE OTHER HAND THE LD. DR VEHEMENTLY SUPPORTED T HE ORDER OF THE AO. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORDS. IN THE PRESENT CASE THE AO HAS TREATED THE PART OF THE EXPENSES BEING A MOTOR CAR EXPENSES AND TELEPHONE EXPENSES ARE PERSONAL IN NAT URE. ACCORDINGLY, THE SAME WAS DISALLOWED AT THE RATE OF 10% ON AD HOC BASIS. IT IS OUR SETTLED PROVISION OF LAW THAT NO EXPENSE CAN BE DISALLOWED ON AD-HOC BASIS. FROM THE ORDER OF THE AO IT IS CLEAR THAT THE AO HAS NOT POINTED OUT ANY SPECIFIC DETAILS IN THE EXPENSES CLAIMED BY THE ASSESSEE WHICH IS PERSONAL IN NATURE. IN THESE CIRC UMSTANCES, WE ARE OF VIEW THAT THE ESTIMATED DISALLOWANCE IS NOT SUSTAINABLE IN THE EY ES OF LAW. IN THIS CONNECTION, WE ALSO RELY IN THE ORDER OF CO-ORDINATE BENCH OF ITAT KOLKATA IN THE CASE OF ANIMESH SADHU VS. ACIT IN ITA NO.11/KOL/2013 DATED 12.11.2014. THE RELEVANT EXTRACT IS REPRODUCED BELOW.:- 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS DISALLOWED 20% OF THE EXPENSES ON ESTIMATE BASIS ON THE GROUND THAT NO INDEPENDENT VERIFICATIO N TO BE MADE TO FIND OUT THE AUTHENTICITY OF THE EXPENSES. LD. CIT(APPEALS) HAS REDUCED THE SAME ON THE SAME GROUND. HOWEVER, WE ARE OF THE VIEW THAT NO ESTIMAT ED DISALLOWANCE SCAN BE MADE FOR INABILITY TO MAKE INDEPENDENT VERIFICATION. IF ANY SPECIFIC EXPENDITURE IS UNVERIFIABLE OR IS UN-VOUCHED, THEN SUCH SPECIFIC EXPENDITURE IS DISALLOWABLE. HER NO SUCH SPECIFIC IDENTIFICATION HAS BEEN DONE. IN THESE CIRCUMSTANCE S, WE ARE OF THE VIEW THAT THE ESTIMATED DISALLOWANCE AS CONFIRMED BY THE LD. CIT( APPEALS) IS UNSUSTAINABLE. CONSEQUENTLY THE SAME STANDS DELETED. IN THE RESULT , GROUNDS NO. 2 & 3 OF THE ASSESSEES APPEAL STAND ALLOWED. RESPECTFULLY, FOLLOWING THE ORDER OF THE CO-ORDINAT E BENCH (SUPRA), WE DELETE THE ADDITION MADE BY THE LOWER AUTHORITIES. HENCE, THIS GROUND OF ASSESSEE IS ALLOWED. ITA NO.461/KOL/2016 A.Y . 2011-12 BISWANATH AGARWALA VS. ACIT, CIR-43, KO L. PAGE 11 13. GROUND NO. 7 NOT PRESSED, HENCE, SAME IS DISMI SSED AS NOT PRESSED. 14. NEXT ISSUE IN GROUND NO.9 IS WITH REGARD TO INT EREST U/S 234B/234D WHICH IS CONSEQUENTIAL. 15. LAST ISSUE IN GROUND NO.10 IS GENERAL IN NATURE AND NEED NO ADJUDICATION. 16. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS PART LY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON /03/2018 SD/- SD/- ( % ') ( ') (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ) - 21/03/2018 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT- BISWANATH AGARWALA, 52/1/2, STRAND ROAD , 1 ST FLOOR, KOL-07 2. /RESPONDENT-ACIT, CIR-43, 3, GOVT. PLACE (WEST), KO LKATA-001 3. , - / CONCERNED CIT 4. - - / CIT (A) 5. . %%, , , / DR, ITAT, KOLKATA 6. 2 / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY HEAD OF OFFICE/DDO ,,