Prakash Chandra Sahu, V. ITO, Berhampur

ITA 496/CTK/2011

• Counselvise Citation: 49622114 RSA 2011
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 09-12-2011
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: K C DAS
• Keywords: Unexplained investment; Deemed to accrue or arise in india
• Section: 6; 44AD; 143(3); 142(1)

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, ACCOUNTANT MEMBER ITA NO. 496/CTK/2011 (ASSESSMENT YEAR 2005 - 06) SRI PRAKASH CHANDRA SAHU, MAIN ROAD, MOHANA, DIST.GAJAPATI, PAN: AGVPS 33768 L. VERSUS INCOME - TAX OFF ICER, WARD - 3, BERHAMPUR CIRCLE, AMBAPUA,BERHAMPUR (GM). (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI K.C.DAS, AR FOR THE RESPONDENT SHRI S.C.MOHANTY, DR DATE OF HEARING : 12.03.2012 DATE OF PRONOUNCEMENT : 16.03.2012 ORDER SHRI K.K.GUP TA, AM : THIS APPEAL BY THE ASSESSEE RAISES THE FOLLOWING GROUNDS. 1. FOR THAT THE ORDERS OF THE FORUMS BELOW ARE CONTRARY TO THE PROVISION OF LAW, WEIGHT OF EVIDENCE AND CIRCUMSTANCES OF THE CASE. 2. FOR THAT THE APPELLANT HAS ADMITTEDLY RECEIVED AN AMO UNT OF 5,87,129 FROM OSCSC, , BUT THE FORUMS BELOW HAVE ADOPTED THE SAME AT 6,39,634 WHICH IS ARBITRARY. 3. FOR THAT MOOHANA VILLAGE IS SITUATED IN THE UNDEVELOPED GAJAPATI DISTRICT. THEREFORE, THE EXPENDITURES OF THE APPELLANTS FAMILY CONSISTED OF HIMSELF, HIS MOTHER, HIS WIFE AND A CHILD WILL NOT EXCEED 2,600 A MONTH WHEN THE FAMILY RESIDES IN ITS OWN HOUSE AT MOHANA AND PADDY YIELD FROM FAMILY LAND IS SUFFICIENT TO MEET THE FAMILY NEED. THEREFORE, FURTHER ESTIMATION OF FAMILY EXPENDITURE BY THE LEARNED C IT(A) AT 15,000 A YEAR OVER AND ABOUT 31,200 A YEAR OR AT 2600 A MONTH IS ARBITRARY. 4. FOR THAT PROCEEDINGS U/S.148 HAS BEEN INITIATED N THE BASIS OF ANNUAL INFORMATION RETURN WHICH REVEALS THAT THE APPELLANT HAS MADE CASH DEPOSIT OF 25,63,300 IN THE UNION BANK OF INDIA, PARLAKHEMUNDI IN GAJAPATI DISTRICT. THE APPELLANT HAS EXPLAINED THAT HE WAS APPOINTED AS A STORAGE AGENT FOR MOHANA BLOCK BY THE OSCSC. HE USE TO LIFT STOCK OF ESSENTIAL COMMODITIES ON PAYMENT OF MONEY THROUGH DRAFT TO OSCSC AND US E TO SUPPLY SUCH ESSENTIAL COMMODITIES AMONG THE VARIOUS SECRETARIES OF DIFFERENT PANCHAYAT AND RECEIVES CONSIDERATION FOR THE SAME WHICH WERE DEPOSITED IN THE BANK PRIOR TO THE PURCHASE OF DRAFT. HENCE THERE IS NO JUSTIFICATION FOR THE FORUMS BELOW TO DIS TURB THE RETURNED FIGURES. 5. FOR THAT THE APPELLANT IS HAVING A SAVINGS ACCOUNT WITH UNION BANK OF INDIA AT PARLAKHEMUNDI AND CURRENT ACCOUNT WITH RUSHIKULYA GRAMYA BANK AT MOHANA. THE COLLECTIVE AGENT OF THE APPELLANT USE TO DEPOSIT THE SALE PROCEEDS OCC ASIONALLY AT UNION BANK, PARLAKHEMUNDI (SAVINGS A/C) INSTEAD OF AT MOHANA IN THE ITA NO.496/CTK/2011 2 CURRENT ACCOUNT ON GOOD FAITH WITHOUT UNDERSTANDING THE IMPLICATION THEREIN. WHEN THE ONEY DEPOSITED AT PARLAKHEMUNDI BANK IS SUBSEQUENTLY UTILISED FOR PURCHASE OF DRAFTS PAYA BLE TOWARDS GOODS LIFTED FROM THE OSCSC, THE PRESUMPTION OF THE LEARNED CIT(A) THAT IT IS SURPLUS MONEY IS HIGHLY UNCHARITABLE. 6. FOR THAT WHEN THE APPELLANT HAS FILED RECONCILIATION STATEMENTS BEFORE THE ASSESSING OFFICER WHO FINDING NO WAY OUT OF DISTUR B THE RETURNED FIGURE HAS PRESUMED EXCESS FAMILY EXPENSES AND THEREBY DISTURBED THE FUND AVAILABLE WITH THE APPELLANT JUSTIFYING FOR AN ARBITRARY ASSESSMENT. 7. FOR THAT UNDISPUTEDLY WHEN THE FACT THAT THE APPELLANT WAS CARRYING ON BUSINESS DURING 1987 TO 1997 THERE IS NO JUSTIFICATION FOR THE FORUMS BELOW TO ARRIVE AT A CONCLUSION THAT THE APPELLANT WAS NOT HAVING CASH IN HAND RELATED TO THE INCOME FOR THOSE YEARS FOR THE SIMPLE REASON NO RETURNS WERE FILED FOR THOSE YEARS. HENCE, THE ORDER OF THE LEARNED CIT(A) IS NOT JUST AND PROPER. 8. FOR THAT THE LEARNED CIT(A) HAS FAILED TO CONSIDER GROUND NOS.4 AND 6 OF THE 1 ST APPEAL PETITION IN ITS TRUE SPIRIT. 2. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD AND PUT FORTH BY THE LEARNED COUNSEL FOR THE ASSESSE E ARE THAT THE ASSESSEE - APPELLANT HAS BEEN CARRYING ON BUSINESS IN GROCERY ARTICLES SINCE 1987 AT MOHANA. HE HAS FURNISHED RETURNS UNDER I.T.ACT SINCE 1997 - 98. THE ASSESSEE WAS APPOINTED. AS A STORAGE AGENT FOR MOHANA BLOCK BY THE ORISSA STATE CIVIL SUPPLY C OR POR ATION. THEREFORE HE HAS BEAN CARRYING IN GROCERY BUSINESS ALONG WITH THE STORAGE AGENCY. THE ASSESSEE USE TO LIFT THE ESSENTIAL COMMODITIES FROM CIVIL SUPPLY CORPORATION ON PAYMENT OF ITS VALUE THROUGH DRAFT. HE USE TO SUPPLY SUCH COMMODITIES TO THE SECRETARIES OF DIFFERENT PANCHAYATSAND RECEIVES THE CONSIDERATION FOR THE SAME. THE VALU E RECEIVED FROM DIFFERENT PANCH A YAT SECRETARIES, THE ASSESSEE USE TO DEPOSIT IN BANKS AND PURCHASES DRAFT FOR THE VALUE OF GOODS LIFTED FROM ORISSA CIVIL SUPPLY CORPOR ATION . THUS THE ASSESSEE USE TO DEPOSIT THE SALE PROCEEDS O F THE CO MMODITIES IN BANK AND THEREAFTER USE TO PURCHASE DRAFTS F OR THE GOODS LIFTED FROM THE ORIS S A CIVIL SUPPLY CORPORATION. IN THIS PROCESS THERE HAS BEEN DEPOSITS AMOUNTING TO 25,63,300 IN THE UNION BANK OF INDIA, PARLAKHAMUNDI OF DISTRICT GAJAPATI. THE LEARNED ASSESSING OFFICER CONSEQUENT UPON THE RECEIPT OF THE ANNUAL ITA NO.496/CTK/2011 3 INFORMATION RETURN ISSUED NOTICE U/S.148. W HAN THE ASSESSEE WAS ISSUED WITH NOTICE U/S.143(!) & 142(1) THE ASSESSEE HAS FURNISHED RECONCILIATION STATEMENT ON SEVERAL OCCASIONS WITH REGARD TO THE VALUE OF STOCK LIFTED AND SOURCE OF MONEY AVAILABLE WITH HIM FOR PAYMENT OF THE GOODS LIFTED. THE ASSESSING OFFICER HAS ADMITTED AT PARS 3 OF HIS ASSESSMENT ORDER THAT THE APPELLANT HAS RECEIVED 5,87,L29 ON ACCOUNT OF TRANSPORT CHARG E S, INCIDENTAL CHARGES, STORAGE CHARGES & AGENTS COMMISSION WHICH IS IN CONF IRMITY W ITH THE 105 CERTIFICATE S IN FORM NO.16 A ISSUED BY ORISSA STAT E CIVIL SUPPLY CORPORATION. BUT IN THE SAME ORDER ITSELF STATED T HAT T HE APPELLANT HAS RECEIVED 1 ,65,698 TOWARDS STORAGE AGENTS MARGIN, INCIDENTAL CHARGES 426, STORAGE CHARGES 266 , TRANSPORT CHARGES 4,73,586 TOTALING TO 6,39,969 AS AGAINST 5,87,129 AS PER TDS . THUS PRESUMED EXCESS RECEIPT OF 52,840 BY THE ASS ESSEE . FURTHER THE LEARNED A.O. HA S PRESUMED THE ENTIRE AMOUNT OF STORAGE MARGIN , INCIDENTAL CHARGES, STORAGE CHARGES TO BE NET INCOME OF THE ASSESSEE CONTRARY TO THE TERMS OF THE STORAGE AGENT AGREEMENT. SINCE THE OSCSC HAS TAKEN ALL THE RECORDS MAINTAINE D BY THE ASSESSEE TOWARDS HIS STORAGE BUSINESS THE ASSESSEE HAS FURNISHED HIS RETURN U/S. 44 AD OF THE IT ACT IN RESPECT OF RECEIPT FROM OSCSC. BUT THE LEARNED ASSESSING OFFICER HAS ADOPTE D SEC.44 AD IN RESPECT OF TRANSPORT CHARGES AND THE REST TREATED AS NET INCOME. FURTHER THE LEARNED ASSESSING OFFICER HAS ADDED A SUM OF 1,33,24 6 U/S.69A OF THE IT ACT BEING UNEXPLAINED INVESTMENT MADE FOR THE PURPOSE OF PURCHASE OF D.D. THUS DETERMINED THE INCOME AT 3,92,87 4 AGAINST THE DISCLOSED INCOME 1,02,660. A GGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A),WHO PARTIALLY ALLOWED RELIEF BY REDUCING THE ADDITION FROM 3,92,874 TO 2,23,663. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO.496/CTK/2011 4 3. THE LEARNED COUNSEL FOR THE ASSESSEE I NITIATING HIS ARGUMENTS SUBMITTED THAT THE ADDITIONS AND DELETIONS BY THE RESPECTIVE AUTHORITIES HAVE BEEN MADE ON MERE ASSUMPTION AND PRESUMPTION WHEN THEY HAVE THEMSELVES AGREED TO THE FACTS AS HAVE BEEN BROUGHT ON RECORD. THE LEARNED CIT(A) THEREFORE ER RED IN CONSIDERING THE INCOME FROM STORAGE AGENCY AT 65,566 AS AGAINST 46,970 DECLARED BY THE ASSESSEE UNDER THE DEEMING PROVISION OF SECTION 44AD. THEREFORE, THE ASSESSING OFFICER AND THE LEARNED CIT(A) WERE AWARE OF THE FACT THAT THE AGENCY COMMISSION HAS TO BE SUBJECTED TO EXPENSES WHICH THE ASSESSEE HAD BEEN INCURRING IN THE FORM OF SO MANY ACTIVITIES CARRIED ON BEING THE STORAGE CHARGES, TRANSPORT CHARGES, INCIDENTAL CHARGES WHEN THE VERY FACT WAS THAT THE ASSESSEE WAS MAKING CASH DEPOSITS WHICH RESULTED IN SCRUTINY OF THE ASSESSEES RETURN UNDER TH E PROVISIONS OF SECTION 143(3) R.W.S. 147. AS NO SPECIFIC FINDING HAS BEEN GIVEN BY THE ASSESSING OFFICER TO SUSTAIN THE REMAINING AMOUNT AS OTHERWISE RETURNED BY THE ASSESSEE, THE LEARNED CIT(A) HAS PURELY GRANTED RELIEF KEEPING IN VIEW THAT THE ASSESSING OFFICER HAD CALLED FOR INFORMATION FROM THE OSCSC WHO HAVE FURNISHED CERTIFICATES TO THE EFFECT THAT THE PAYMENTS ARE SUBJECT TO TAX DEDUCTION AT 2.2%. THE NATURE OF PAYMENT AS AGENCY MARGIN, TRANSPORT CHARGES, INCIDENTAL CHARGES THEREFORE CANNOT BE SEGR EGATED FOR INCREASING THE INCOME OF THE ASSESSEE. WITH RESPECT TO THE SECOND ISSUE RELATING TO PURCHASE OF DRAFT, WHEN THE LEARNED CIT(A) CONSIDERED THE ADDITION U/S.69A TO BE RESTRICTED TO 1,02,414 WAS ON THE BASIS OF ASSESSING OFFICER PRESUMING PERSONAL EXPENDITURE OF THE ASSESSEE OVER A PERIOD OF 7 YEARS FROM 1997 - 98 TO 2004 - 05 CANNOT BE CONSIDERED FOR ASSUMING EXPENSES INCURRED WHEN THE I.T.PROVISONS ARE FOR TAXATION ONLY. BY TRYING TO HOLD THAT THE ASSESSEE OUGHT TO BE SPENDING MORE THAN THE INCOME, THE ASSESSING AUTHORITIES HAVE DEFAULTED IN TRYING TO IDENTIFYING THE DEEMED INCOME IN ITA NO.496/CTK/2011 5 PURCHASES IN THE IMPUGNED ASSESSMENT YEAR WHEN THE MAGNITUDE OF DEPOSITS IN CASH BY THE ASSESSEE IN THE BANK HAS BEEN RECEIVED BY WAY OF INFORMATION FROM T HE BANK AT 25,63,300. IN OTHER WORDS, THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT IT WAS NEVER THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAD SAVED CASH TO BE DEPOSITED FROM ITS OWN SOURCE WHEN THE OSCSC ARE IDENTIFYING AND MAKING REPAYMENT OF CASH TRANSACTIONS COLLECTED BY THE ASSESSEE FROM RETAILERS OF THE ESSENTIAL COMMODITIES DEALT WITH BY THE OSCSC FOR REIMBURSEMENT. HE, THEREFORE, STATED THAT THERE IS NO BASIS FOR THE LEARNED CIT(A) TO CONFIRM THE ADDITION OF THE RESIDUAL AMOUNT OF 1 ,02,414 PARTICULARLY BECAUSE THE SOURCE OF CASH WAS TO BE EXPLAINED BY THE ASSESSEE NLY AND NOT BECAUSE IT WAS PRESUMED BY THE ASSESSING AUTHORITIES THAT HE MUST HAVE HAD INCURRED MORE EXPENDITURE THEN THE INCOME. HE PRAYED THAT BOTH THESE ADDITIONS SUSTAI NED BY THE LEARNED CIT(A) BE DELETED. 4. THE LEARNED DR OPPOSED THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE NATURE OF CASH DEPOSITS IN BANK INSOFAR AS THE ASSESSEES ACCUMULATED CASH WA S T O BE ASCERTAINED ON THE BASIS OF INCOME GENERATED AND REASONABLE EXPENDITURE INCURRED FOR HOUSEHOLD EXPENSES. THE ASSESSING OFFICER IN HIS ORDER HAS CATEGORICALLY GIVEN A FINDING THAT THE INCOME OF THE ASSESSEE FROM OSCSC WAS TO BE VERIFIED WHEN THE LEARN ED ASSESSING OFFICER INDICATED THAT THE BOOKS OF ACCOUNT ARE NOT MAINTAINED TO INCORPORATE THE CASH DEALING ON BEHALF OF OSCSC. HAVING ACCEPTED THE CASH TRANSACTION AS PER THE BANK, THE ASSESSING OFFICER WAS AT LIBERTY TO COMPUTE THE ACTUAL AMOUNT WHICH WA S AVAILABLE WITH THE ASSESSEE TO BALANCE THE INFORMATION AVAILABLE FROM OSCSC. FURTHERMORE HE ARGUED THAT THE OSCSC ARE GIVING AGENCY COMMISSION TO THE ASSESSEE AGAINST WHICH NO PROPER DOCUMENTATION OF INCURRING EXPENDITURE WAS BROUGHT ON RECORD BY THE ASS ESSEE. THEREFORE, THE LEARNED CIT(A) ERRED IN ITA NO.496/CTK/2011 6 DELETING THE MAJORITY OF THE INCOME BY HOLDING A VIEW THAT A TOTAL EXPENDITURE OF 1 LAKH TO BE ALLOWED WHICH WAS WITHOUT ANY BASIS. HE FULLY RELIED ON THE ORDER OF THE ASSESSING OFFICER FOR HIS PART SUBMISSIONS. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. I FIND THAT THE ADDITIONS HAVE BEEN SUS TAINED BY THE LEARNED CIT(A) ON THE BASIS OF ESTIMATION WHEN THE ASSESSING OFFICER ALSO BEGAN HIS ASSESSMENT ON ESTIMATION OF CASH HOLDING. NO CORROBORATIVE EVIDENCE HAVE BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO ESTABLISH THAT THE INFORMATION MA DE AVAILABLE FROM OSCSC WAS TO BE CORRESPONDINGLY ADOPTED BY THE ASSESSEE WHO HAS NOT MAINTAINED THE BOOKS OF ACCOUNT WAS THEREFORE AT LIBERTY TO RENDER INCOME ON ACCOUNT OF RETAIL GROCERY BUSINESS AND STORAGE AGENT CONTRACTOR UNDER THE PROVISIONS OF SECTI ON 44AF AND 44AD RESPECTIVELY. THE ASSESSING OFFICER ACCEPTED THE INCOME FROM GROCERY UNDER THE PROVISIONS OF SECTION 44AF THEREFORE OUGHT NOT HAVE MADE ADDITION U/S.44AD SEPARATELY AND MORE SO THE CASH DEALINGS WERE ON BEHALF OF OSCSC BUT PURELY ON PRESU MPTION AND ASSUMPTIONS WHEN THE ASSESSEE WAS EQUIPPED WITH THE TDS CERTIFICATE S FROM OSCSC WHO COLLECTED PAYMENTS WERE FOR AGENCY MARGIN, TRANSPORT CHARGES, INCIDENTAL CHARGES SUBJECT TO DEDUCTION OF TDS AT 2.2%. THIS MEANS THE AVAILABILITY OF CASH IN ABSEN CE OF BOOKS OF ACCOUNT WAS ALREADY AVAILABLE TO THE ASSESSING OFFICER INSOFAR AS THE PAYMENT FROM OSCSC WAS ALSO ROUTED THROUGH BANK DID NOT REQUIRE THE ASSESSEE TO MAINTAIN THE BOOKS OF ACCOUNT TO ESTABLISH THAT HIS DRAWINGS ARE MORE THAN THE INCOME TO BE TAXED IN THE IMPUGNED ASSESS MENT YEAR. I DO NOT FIND ANY INFIRMITY IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE INSOFAR AS THE INCOME FROM OSCSC WHICH HAS BEEN SUSTAINED AT 65,556 BY THE LEARNED CIT(A) IS DIRECTED TO BE ACCEPTED AT 46,970 AS RETURNED BY THE ASSESSEE . ITA NO.496/CTK/2011 7 6. WITH RESPECT TO THE ADDITION ON ACCOUNT OF D.D. PURCHASE BROUGHT TO TAX U/S.69A, THE LEARNED CIT(A) HAS PARTLY CONFIRMED THE ADDITION OF 1,02 414 WHICH IN MY CONSIDERED VIEW SHOULD NOT HAVE HAPPENED. THE TOTAL D.DS PURCHASE AMOUNT TO 9,16,556 WHE N THE ASSESSING OFFICER ASSUMED THAT THE CASH AVAILABLE WAS LESS THAN THE AMOUNT OF DRAFT PURCHASED DID NOT KEEP IN MIND THAT THE ASSESSEE WAS ALSO DEALING IN CASH TRANSACTIONS FOR GROCERY BUSINESS. THE CASH WAS THEREFORE AVAILABLE NOT BECAUSE THE DRAWINGS OF THE ASSESSEE WERE MORE THAN THE INCOME IN THE EARLIER YEAR BUT CANNOT BE ISOLATED AS CONSIDERED BY THE LEARNED CIT(A) BY HOLDING A VIEW THAT THE ASSESSEE CANNOT BE SAID TO BE INCURRING HOUSE HOLD EXPENSES LESS THAN 20,000 PER ANNUM FOR THE PAST SEVEN YEARS. I AM UNABLE TO SATISFY MYSELF TO THIS PRESUMPTION OF THE LEARNED CIT(A) AND I HAVE NO HESITATION IN DIRECTING TO DELETE THE ADDITION IN RESPECT OF THE ADDITION IN RESPECT D.DS PURCHASED U/S.69 RESTRICTED TO 1,02,414 AS AGAINST 1,33,246 MADE BY THE ASSESSING OFFICER. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. S D/ - DATE: 16.03.2012 (K. K.GUPTA) ACCOUNTANT MEMBER H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: SRI PRAKASH CHANDRA SAHU, MAIN ROAD, MOHANA, DIST.GAJAPATI, 2. THE RESPONDENT: INCOME - TAX OFFICER, WARD - 3, B ERHAMPUR CIRCLE, AMBAPUA,BERHAMPUR (GM). 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.