I.T.O.Ward-27(3), Haldia V. Shri Azazul Haque, Puba Medinipur

ITA 565/KOL/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8325 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 19-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RANU BISWAS
• Keywords: Business income; Depreciation; TDS; Set aside; FORM 26AS
• Section: 32; 154; 143(3); 133(6); 194C; 143(1); 250; 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCH “C”, KOLKATA BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA No.565/Kol/2019 Assessment Year: 2010-11 ITO, Ward-27(3), Haldia Vs. Shri Azazul Haque, [Prop. of M/s. Haque Transport], Vill. + PO – Naranda, Panskura, Dist. Purba Medinipur, 721139 PAN: ABAPH9858E (Appellant) (Respondent) Present for: Appellant by : Smt. Swati Baid, FCA Respondent by : Smt. Ranu Biswas, Addl. CIT. Date of Hearing : 15.12.2021 Date of Pronouncement : 23.02.2022 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: The present appeal has been preferred by the revenue against the order passed u/s 250 of the Act dated 03.01.2019 by the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to AY 2010-11 which in turns arise out of the assessment order framed by the AO u/s 143(3) r.w.s. 263 of the Act. 2. The issue raised in ground no. 1 by the revenue is against the deletion of disallowance of Rs. 14,55,585/- by CIT(A) as made by the AO towards depreciation by ignoring the fact that assessee has not filed any appeal against the order passed u/s 143(1) as well as against the assessment framed u/s 143(3) and thus the right of the assessee got forfeited. ITA No.565/KOL/2019 Shri Azazul Haque A.Y. 2010-11 2 3. The facts in brief are that the assessee filed the return of income on 26.09.2010 declaring income of Rs. 3,96,310/- which was wrongly sated by the AO in the assessment order as Rs. 18,51,900/-. The return of the assessee was processed u/s 143(1) of the Act and income as per the intimation u/s 143(1) under the head business or Profession was taken at Rs. 18,51,900/-. This has resulted by reason of the fact that depreciation claim of the assessee of Rs. 14,55,585/- got rejected while processing was done. Thereafter, the case was selected for scrutiny and the assessment was framed u/s 143(3) vide order dated 28.03.2013 assessee’s income at Rs. 20,01,900/-. We note that on the first page of the assessment order, the AO has stated that assessee filed the return of income showing the total income of Rs. 18,51,900/- which is wrong and against the facts on record. The assessee also filed a rectification application u/s 154 of the Act dated 05.05.2016 requesting the AO to rectify the amount of income declared in the return of income which was wrongly mentioned as Rs. 18,51,900/- instead of Rs. 3,96,310/-. Thereafter the PCIT exercising the revisionary jurisdiction u/s 263 of the Act revised assessment and the AO was accordingly directed to frame the assessment in terms of the directions contained in the order passed u/s 263 of the Act . Again in the set aside assessment order r.w.s. 263 of the Act dated 13.03.2016 ,the AO mentioned wrong returned income by the assessee at Rs. 18,51,900/-. Aggrieved assessee filed an appeal before the Ld. CIT. The ld CIT(A), after giving detailed findings in para 6.1, allowed the appeal of the assessee by noting that assessee has declared income of Rs. 3,96,310/- in the return filed on 26.09.2010. The ld CIT(A) noted that the AO should have taken the returned income at Rs. 3,96,310/- while computing the total assessed income and, therefore, the income u/s 143(3) i.e. Rs. 20,01,900/- cannot be accepted. The Ld. CIT(A) noted that the ITA No.565/KOL/2019 Shri Azazul Haque A.Y. 2010-11 3 assessment u/s 143(3) pursuant to section 263 of the Act is in continuation to the assessment completed earlier and cannot be taken in isolation. The Ld. CIT(A) also observed the said amount of Rs. 18,51,900/- is arising out of processing of return u/s 143(1) which has wrongly been taken without discussing or examining as to how this has happened. The Ld. CIT(A) also observed that the difference between the returned income and income assessed u/s 143(1) has resulted from the denial of claim of depreciation amounting to Rs. 14,55,585/- in the order passed u/s 143(1) of the Act which was adopted by the AO while passing the order. The Ld. CIT(A) also referred to Form 3CD to give a finding that depreciation admissible u/s 32 of the Act has been calculated correctly. The ld CIT(A) also justified the depreciation allowance by referring to Explanation 5 to Section 32(1) which provides for allowing the claim of the assessee in respect of depreciation whether or not the same was claimed in the return of income or not. The Ld. CIT(A) also referred to the Coordinate Bench decision in the case of Bhagwati Sponge Pvt. Ltd. vs DCIT (2016) 72 taxman.com 40 Kolkata wherein it has been held that there is a mandate to grant depreciation to assessee whether or not such claim was made in the return of income in consonance with the provisions of Explanation 5 to Section 32(1) of the Act. 4. After hearing the rival parties and perusing the material on record including the impugned order, we find that the Ld. CIT(A) has correctly allowed the appeal of the assessee by directing the AO to rectify the mistake which has resulted from denial of depreciation of Rs. 14,55,585/- to the assessee. We also note that the AO while passing the original assessment as well as assessment in the set aside proceedings has taken wrong figure ITA No.565/KOL/2019 Shri Azazul Haque A.Y. 2010-11 4 of total income declared as per return of income filed on 25.09.2010 i.e. Rs. 18,51,900/- as against the correct figure of Rs. 3,96,310/-. In view of this, we do not find any infirmity in the order of CIT and accordingly same is hereby upheld by dismissing ground no. 1 of the revenue’s appeal. 5. The issue raised in ground no. 2 is against the deleting the addition of Rs. 60,54,990/- by CIT(A) as made by the AO on account of unexplained revenue receipts. 6. The facts in brief are that the AO during the course of assessment proceedings found that the assessee has introduced cash out of undisclosed source of income in the guise of business income, the AO compiled the details of cash from the reply received to notice issued u/s 133(6) of the Act at the time of original assessment and also in the set aside assessment as per the details given hereunder: “Revenue as per audited Balance Sheet Rs. 3,35,32,600/- Less: Reported by HCC Nil RW Division, Jaleswar 58,78,309/- Coal Mines 3,00,202/- OCC Ltd. 2,11,34,529/- Nitish Saha 1,65,070/- Rs. 2,74,78,110/- Difference Rs. 60,54,990/-” 7. The Ld. CIT(A) partly allowed the appeal of the assessee deleting the said addition partly and sustaining the addition to the tune of Rs. 1,27,736/- by observing as holding as under: “I have considered the submissions of the assessee and the facts of the case in the backdrop of the assessment order. It is seen that the appellant has reported a higher amount of revenue vis-a-vis 26AS data. The appellant has submitted a revenue breakup during the course of ITA No.565/KOL/2019 Shri Azazul Haque A.Y. 2010-11 5 assessment proceedings wherein details of revenues were provided. On examination, it is seen that HCC has on various occasions of assessment have given figures which are not uniform as evident from table 8.15 of the assessment order and again as per AO’s compilation under table provided above Para 8 of the Assessment order. The submission of HCC again lacks merit as the data under 26AS reports work done to the tune of Rs. 5,87,189/- (column 5 of table) whereas the reply by HCC u/s 133(6) is silent on the same making itself contradicting. The appellant has provided ledger copy of HCC evidencing receipt of Rs.40,77,680/- which is evidenced from bank statement submitted. Copy of cheque and payment memo of HCC has been submitted which demonstrates the payment by HCC in excess of what has been reported by the HCC in its own submission to be contradictory and unreliable. It is pertinent to state that the appellant has not booked any revenues for HCC during the relevant year but offered the receipt as revenues during the year which is not in accordance with the accounting and accrual principles even though if there is any dispute or uncertainty in respect of work done and reliability of revenues which ought to have been booked in the year of accrual. Be that as it may the revenues as reported on receipt cannot be treated as inadmissible and hence the quantum of revenues reported by the appellant in respect of HCC is accepted together with that of Coal mines with identical facts wherein the appellant has reported an amount of Rs.3,78,402/-. Further, in case of HCC Ltd., the party itself had acknowledged that certain amount of work allotted to the appellant during the ^relevant year was recorded by them in the subsequent year and thus the difference the revenue recorded vis-a-vis the appellant. The appellant has clarified the difference between the revenue recorded by him and as reported by the concerned parties through documents and reconciliation as well as TDS certificate which is a part of the submission of the appellant. It appears that the appellant has accounted for revenues net of departmental deduction which in the instant case involved retention of security deposit which has wrongfully been claimed by the appellant amounting to Rs.10,56,727/-. The same has been added by the AO rightfully and in respect thereto the appellant has not raised any ground and thus no separate adjudication is required in this regard. Further in the case of RW division Jaleswar, no inconsistency is being reported anywhere and hence the same is uniformly accepted. Further the appellant has reported a sum of Rs.15,96,701/- as revenues realized from small contracts from small parties and owing to inapplicability of Sec. 194C the same have not featured in the 26AS of the appellant. It is an admitted fact that not all revenues are reportable under 26AS as it caters to quantum involving ITA No.565/KOL/2019 Shri Azazul Haque A.Y. 2010-11 6 applicability of TDS under Chapter XVII of the Act. It is seen that no deposit of cash has been made in the bank statement which could suggest any introduction of unaccounted cash nor the submitted facts could invite ground for any adverse inference. In the instant case though the revenues have been submitted but the element of suppression of profit cannot be ruled out and hence it is found appropriate that an amount of 8% of Rs.15,96,701/- amounting to Rs.1,27,736/- is sustained as addition under this ground which is consistent with the position of law as laid down by the cited decision in Man Mohan Sadani and President Industries (as reported) and followed by the department while framing the assessment for AY 2009-10 in the instant case. In view of the facts and circumstances of the case as narrated in the foregoing, the addition made in this ground is restricted to Rs.1,27,736/-as determined above. The AO is directed accordingly.” 8. After hearing the rival parties and perusing the records as placed before us, we find that the Ld. CIT(A) has duly considered all the facts on record including correspondences from various parties who have made payments to the assessee on account of works carried out during the year. In the case of HCC Ltd., the said company has given contradictory replies which cannot be treated as reliable. Ld. CIT(A) also noted that the payment has been received from HCC Ltd. By referring to the payment memo of HCC Ltd. which demonstrates the payment by HCC in excess payment than reported by HCC Ltd. In response to reply filed to notice issued u/s 133(6) of the Act. Therefore, the revenue reported by the assessee cannot be treated as unexplained revenue on the basis incorrect and contradictory evidences filed by HCC Ltd. Ld. CIT(A) noted that the assessee has accounted for the revenue which inter alia included security deposit also. Similarly the assessee has received payments which have been duly accounted for and a finding of facts has been given by the ld CIT(A) to thus effect. Besides the assessee has reported a ITA No.565/KOL/2019 Shri Azazul Haque A.Y. 2010-11 7 receipts of Rs. 15,96,701/- as revenue arising from small works contracts which were not liable for deduction of tax at source u/s 194C of the Act and therefore not reportable in form 26AS. The Ld. CIT(A) also noted that there is no cash deposits in the bank account and, therefore, no adverse information can be drawn. The Ld. CIT(A) ,however, estimated the profit @ 8% on small contracts of Rs. 15,96,701/- as suppression of profit cannot be ruled out and thus sustained the addition to the tune of Rs. 1,27,736/-. Taking all these facts into consideration in totality, we do not find any infirmity in the order of the Ld. CIT(A) and accordingly the same is upheld by dismissing ground no. 2 of the revenue. 9. The issue raised in ground no. 3 is against the deletion of addition of Rs. 1,22,73,108/- by the Ld. CIT(A) as made by the AO under the head undisclosed bills receivable during the year. 10. The facts in brief are that the AO has calculated the amount of undisclosed receivable of Rs. 1,22,73,108/- on the basis of replies received from three parties detailed herein given as under: Name of the party Opening Balance Work Done Payments Closing Balance HCC 5021891 1600000 3421891 Coal Mines 113837 300202 300202 113837 OCC 8494332 21134529 20891481 8737389 Total 12273117 Reported by AO (error in point 11.1) 12273108 ITA No.565/KOL/2019 Shri Azazul Haque A.Y. 2010-11 8 11. On the above basis, the Ld. AO made an addition of Rs. 1,22,73,108/- on account of undisclosed receivables not disclosed in the balance sheet. In the appellate proceedings, Ld. CIT(A) allowed the appeal of the assessee by giving a finding of facts that that Rs. 1,22,73,108/- as calculated by the AO is in fact is part of opening debtors which have also considered while framing the assessment for A.Y. 2009-10 and there is no closing debtors for the current years. The Ld. CIT(A) also referred to the replies received from various parties namely HCC, Coal Mines and OCC Ltd. and recorded a finding that all these balances were already considered in the opening debtors which have also been duly shown in the books of accounts of the assessee. 12. Having heard the parties, we find that the AO has factually committed a mistake as making the addition on account of receivables which have in fact been recorded by the assessee in his books of accounts in A.Y. 2009-10. We also not that the ld CIT(A) has recorded a finding to this effect while allowing the appeal of the assessee on this ground. Therefore, we are inclined to uphold the order of ld CIT(A) on this issue by dismissing ground no. 3 of the revenue. 13. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 23.02.2022. Sd/- Sd/- (SANJAY GARG) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Kolkata, Dated:23.02.2022 Biswajit, Sr. P.S. ITA No.565/KOL/2019 Shri Azazul Haque A.Y. 2010-11 9 Copy to: The Appellant The Respondent The CIT, Concerned, Kolkata The CIT (A) Concerned, Kolkata The DR Concerned Bench //True Copy// [ By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata