J.P. Enterprise, Purba Medinipur V. ITO, WD-27(3), HALDIA, Purba Medinipur

ITA 613/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9371 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 22-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 06-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT KUMAR KUREEL J
• Assessee Lawyers: ATIN DAS
• Keywords: Income from undisclosed sources
• Section: 143(3); 133(6)

Judgement Text

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.613/KOL/2016 ASSESSMENT YEAR:2009-10 J.P. ENTERPRISE MECHEDA, TAMLUK, PURBA MEDINIPUR PIN-721137 [ PAN NO.AAAAJ 0779 Q ] / V/S . INCOME TAX OFFICER, WARD-27(3), HALDIA BASUDEVPUR KHANJANCHAK, HALDIA, PURBA MEDINIPUR, PIN-721602 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI ATIN DAS, ADVOCATE /BY RESPONDENT SHRI RAJAT KUMAR, KUREEL, JCIT-DR /DATE OF HEARING 20-01-2017 /DATE OF PRONOUNCEMENT 24-02-2017 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-7, KOLKATA DATED 27.01.2016. ASSESSME NT WAS FRAMED BY ITO WARD-3, HALDIA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HERE INAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 26.09.2011 FOR ASSESSMENT YEAR 2009-10. SHRI ATIN DAS, LD. ADVOCATE APPEARED ON BEHALF OF A SSESSEE AND SHRI RAJAT KUMAR KUREEL, LD. DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF REVENUE. 2. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A PART NERSHIP FIRM AND ENGAGED IN BUSINESS OF CIVIL CONSTRUCTION. THE ASSESSEE FOR TH E YEAR UNDER CONSIDERATION HAS FILED ITS RETURN OF INCOME ON 29.09.2009 DECLARING TOTAL INCOME OF 3,04,090/- WHICH WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTICE U/S 143(2)/142(1) OF THE ACT WAS ISSUED UPON ASSESSEE. THE ITA NO.613/KOL/2016 A.Y. 2009-10 J.P.ENTERPRISE VS. ITO WD-27(3) HALDIA PAGE 2 ASSESSMENT WAS FRAMED U/S. 143(3) OF THE ACT AT A T OTAL INCOME OF 19,00,520/- AFTER MAKING CERTAIN ADDITIONS / DISALLOWANCES TO THE TOT AL INCOME OF THE ASSESSEE WHICH ARE DISCUSSED HEREIN BELOW. 3. FIRST ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY SUSTAI NING THE DISALLOWANCE OF 7,39,019/- ON ACCOUNT OF UNDISCLOSED CONTRACT WORK S. 4. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS SHOWN VALUE OF GROSS CONTRACT WORKS FOR 1,60,92,594/- ONLY. THE ASSESSEE CLAIMED TO HAVE EX ECUTED THE WORK FOR SINGLE PARTY NAMELY, KOLAGHAT THERMAL POWER STATION (KTPS FOR SHORT). THE AO, DURING THE COURSE OF ASSESSMENT PROCEEDING GATHERED INFORMATION FROM KTPS U/S.133(6) OF THE ACT AND FOUND THAT ASSESSEE HAS E XECUTED THE WORKS FOR 1,68,31,608/-. ACCORDINGLY, AO FOUND THE DIFFERENCE OF 7,39,014/- WHICH WAS UNDER-STATED BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT. ON QUESTION BY THE AO ABOUT THE AFORESAID DIFFERENCE THE ASSESSEE FAILED TO RECONCILE THE SAME TO THE SATISFACTION OF AO. FURTHERMORE THE EXPLANATION SUB MITTED BY ASSESSEE WAS ALSO TREATED AS BASELESS BY THE AO. ACCORDINGLY, AO TREA TED THE AMOUNT OF 7,39,014/- AS INCOME FROM UNDISCLOSED SOURCES AND ADDED TO THE TO TAL INCOME OF ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE SUBMITTED THAT THE AMOUNT 7,39,014/- WAS RECEIVED IN THE SUBSEQUENT FINANCIAL YEAR 2009-10 RELEVANT TO AY 2010-11. THE ASSESSEE FURTHE R SUBMITTED THAT THE AFORESAID SUM WAS RECEIVED THROUGH BANKING CHANNEL, WHICH WAS DULY DISCLOSED IN THE BOOKS OF ACCOUNT OF ASSESSEE. THEREFORE, THE ACTION OF AO TR EATING THE SAME AS INCOME FROM UNDISCLOSED SOURCE CANNOT STAND. HOWEVER, LD. CIT(A ) DISREGARDED THE CLAIM OF ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- 2.3 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT. THE APPELLANT HAS CONTENDED THAT THE DIFFERENCE WAS DUE TO OUTSTANDING RECEIVAB LE WHICH WAS RECEIVED IN THE MONTH OF APRIL, 2009 RELEVANT TO THE A.Y 2010-11. HOWEVER, T HE APPELLANT DID NOT DISPUTE THE TOTAL RECEIPT ACCRUED FOR THE FINANCIAL YEAR 2008-09 RELE VANT TO THE AY 20009-10 AT RS.1,68,31,608/-. DURING THE COURSE OF APPEAL PROCE EDINGS I HAVE ASKED THE A/R OF THE APPELLANT REGARDING THE CLAIM OF TDS. THE A/R OF TH E APPELLANT STATED THAT THE TDS WAS CLAIMED ON THE ENTIRE AMOUNT. FURTHER AS PER THE PR OFIT AND LOSS ACCOUNT IT IS NOTIFIED THAT THE APPELLANT IS FOLLOWING THE MERCANTILE SYSTEM OF ACC OUNTING AND THE APPELLANT REQUIRED TO ADMIT THE INCOME ON ACCRUAL BASIS NOT ON CASH BASIS . EVEN IF THE EXPLANATION OF THE APPELLANT IS CONSIDERED THE TOTAL RECEIPT OF RS.168,31,608/- SHOULD BE ASSESSED AS INCOME ON THE BASIS OF SYSTEM OF ACCOUNTING FOLLOWED BY THE APPELLANT. THE REFORE, THE AO RIGHTLY MADE THE ADDITION OF RS.7,39,014/- AND THE ADDITION IS CONFIRMED AND THIS GROUND OF APPEAL IS DISMISSED. ITA NO.613/KOL/2016 A.Y. 2009-10 J.P.ENTERPRISE VS. ITO WD-27(3) HALDIA PAGE 3 BEING AGGRIEVED, ASSESSEE CAME UP IN SECOND APPEAL BEFORE US ON THE FOLLOWING GROUND OF APPEAL. 1. THAT UNDER THE FACTS & CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.739019.00, AS AN UNDI SCLOSED CONTRACT WORK, INSTEAD OF ET PROFIT RATE ON ACCOUNT OF UNDISCLOSE D CONTRACT WORK. THIS IS QUITE UNJUSTIFIED, UNREASONABLE AND BAD IN LAW. SO THE NE T PROFIT RATE ON UNDISCLOSED CONTRACT WORK SHOULD BE ALLOWED. 6. BEFORE US LD. AR FILED PAPER BOOK WHICH IS RUNNI NG FROM PAGES 1 TO 40 AND REITERATED SAME SUBMISSIONS AS MADE BEFORE LD. CIT( A). ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW . 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE GRIEVANCE OF THE ASSESSEE IN THIS APPEA L IS WITH REGARD TO THE CONFIRMATION OF ADDITION OF RS. 7,39,014.00 ON ACCOUNT OF UNDISC LOSED CONTRACT WORK. THE AO DURING ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASS ESSEE HAS UNDERSTATED ITS CONTRACT RECEIPTS FROM M/S KTPS FOR THE AFORESAID AMOUNT. TH E AO DISCOVERED THIS UNDISCLOSED INCOME AS A RESULT OF MISMATCH FOUND IN PURSUANCE TO THE NOTICE ISSUED UNDER SECTION 133(6) OF THE ACT. THE ASSESSEE HAS S HOWN GROSS CONTRACT WORK IN THE YEAR UNDER CONSIDERATION FOR RS.1,60,92,594.00 FROM KTPS BUT ON CONFIRMATION UNDER SECTION 133(6) OF THE ACT FROM THE PARTY IT WAS ASC ERTAINED THAT THE GROSS CONTRACT WORK OF RS.1,68,31,608.00 WAS EXECUTED. ACCORDINGLY THE DIFFERENCE OF RS.7,39,014.00 WAS TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE WHICH WAS SUBSEQUENTLY CONFIRMED BY THE LEARNED CIT(A) . ADMITTEDLY, THE ASSESSEE IS FOLLOWING MERCANTILE SY STEM OF ACCOUNTING AND THIS AMOUNT WAS TO BE SHOWN IN THE YEAR UNDER CONSIDERAT ION AS INCOME. AS PER THE ASSESSEE THE SAID AMOUNT WAS RECEIVED IN THE SUBSEQ UENT FINANCIAL YEAR DATED 8 TH APRIL 2009 WHICH WAS SHOWN IN THE SUBSEQUENT ASSESSMENT Y EAR. INDEED AS PER ACCOUNTING PRINCIPAL THE ASSESSEE SHOULD HAVE SHOWN THIS AMOUN T AS INCOME IN THE YEAR UNDER CONSIDERATION BUT IT HAS BEEN SHOWN IN THE SUBSEQUE NT ASSESSMENT YEAR. AT THE SAME TIME THERE IS ALSO NO DISPUTE WITH REGARD TO THE AM OUNT OF THE TDS WHICH HAS BEEN CLAIMED IN THE YEAR UNDER CONSIDERATION ON SUCH AMO UNT. NOW THE QUESTION ARISES WHETHER THE AFORESAID AMOUNT HAS BEEN OFFERED TO TA X IN THE SUBSEQUENT YEAR OR NOT IF ITA NO.613/KOL/2016 A.Y. 2009-10 J.P.ENTERPRISE VS. ITO WD-27(3) HALDIA PAGE 4 THE ANSWER IS YES THEN THE ADDITION OF THE SAME WOU LD AMOUNT TO DOUBLE TAXATION I.E. IN THE YEAR UNDER CONSIDERATION AND SUBSEQUENT YEAR. I T IS IMPORTANT TO NOTE THAT THIS IS NOT THE OBJECT OF THE LEGISLATURE TO LEVY THE TAX O N THE SAME INCOME TWICE. AS PER THE VARIOUS PRINCIPLES LAID DOWN BY THE VARIOUS COURTS THE INCOME TAX SHOULD BE LEVIED AT THE CORRECT INCOME OF THE ASSESSEE. HOWEVER THE LEA RNED AR BEFORE US HAS NOT BROUGHT ANYTHING ON RECORD SUGGESTING THAT THE AFORESAID AM OUNT HAS BEEN OFFERED TO TAX IN THE SUBSEQUENT YEAR. HOWEVER, IN THE INTEREST OF JUSTIC E AND FAIR PLAY WERE INCLINED TO RESTORE THIS ISSUE TO THE FILE OF AO TO ADJUDICATE THE MATTER AFRESH AS PER LAW AND TO CHECK WHETHER THE SAME AMOUNT HAS BEEN OFFERED TO T AX IN THE SUBSEQUENT YEAR OR NOT. IN CASE IT HAS BEEN OFFERED THEN THERE WILL BE NO A DDITION IN THE YEAR UNDER CONSIDERATION IN THESE FACTS & CIRCUMSTANCES. IF IT IS A CASE THAT THE ASSESSEE INADVERTENTLY OMITTED TO SHOW THE AFORESAID AMOUNT AS INCOME OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION THEN THE SAME AMOUNT MUST HAVE BEEN SHOWN AS INCOME IN THE SUBSEQUENT YEAR. THERE IS NO DISPUTE WITH REGAR D TO THE PAYMENT RECEIVED BY THE ASSESSEE OF THE IMPUGNED AMOUNT. THE ASSESSEE BEFOR E US IS A PARTNERSHIP FIRM AND ITS ACCOUNTS ARE SUBJECT TO AUDIT UNDER SECTION 44AB OF THE ACT. SINCE THE AMOUNT IS COMING IN THE DISCLOSED BANK ACCOUNT OF THE ASSESSE E THEN ASSESSEE HAS TO OFFER THE SAME AS INCOME TO THE TAX AUTHORITIES. THE ARGUMENT OF THE LEARNED AR THAT THE ENTIRE AMOU NT CANNOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE AND ONLY PROFIT ELEMENT CAN BE ADDED AS UNDISCLOSED INCOME OF THE ASSESSEE ON SUCH AMOUNT, IS NOT REALLY CONVINCI NG. IT IS BECAUSE OF THE FACT ALL THE EXPENSES HAVE BEEN DULY CLAIMED BY THE ASSESSEE AND THERE IS NO WHISPER IN THE ORDER OF LOWER AUTHORITIES SUGGESTING THAT THE EXPENSES I N RELATION TO THE IMPUGNED INCOME HAS NOT BEEN CLAIMED IN THE PROFIT AND LOSS ACCOUNT . THEREFORE IF SUCH INCOME NEEDS TO BE ADDED THEN THE ENTIRE AMOUNT WILL BE LIABLE TO B E ADDED IN THE TOTAL INCOME OF THE ASSESSEE AS THE ASSESSEE ALREADY HAS CLAIMED THE EX PENSES IN RELATION TO SUCH INCOME. IN VIEW OF ABOVE WE ARE INCLINED TO RESTORE THIS IS SUE TO THE FILE OF AO FOR FRESH ADJUDICATION AS PER LAW. HENCE, THIS GROUND OF APPE AL OF THE ASSESSEE IS ALLOWED FOR THE STATISTICAL PURPOSES. ITA NO.613/KOL/2016 A.Y. 2009-10 J.P.ENTERPRISE VS. ITO WD-27(3) HALDIA PAGE 5 8. NEXT ISSUE IN GROUND NO.2 IS NOT PRESSED. HENCE, SAME IS DISMISSED AS NOT PRESSED. 9. LAST ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING THE ADDITI ON OF 7,21,874/- ON ACCOUNT OF VARIOUS EXPENSES ON AD HOC BASIS. 10. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HA S CLAIMED SEVERAL EXPENSES BUT FAILED TO SUBSTANTIATE THE SAME ON THE BASIS OF DOC UMENTARY EVIDENCE. THEREFORE, AO HAD NO OPTION EXCEPT TO MAKE THE DISALLOWANCE @ 5% OF TOTAL EXPENSE (16473483 X 5% = 7,21,874) ON ESTIMATED BASIS. THE AO ACCORDING LY DISALLOWED AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 11. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A). THE ASSESSEE SUBMITTED THAT ALL EXPENSES WERE INCURRED BY ASSESS EE IN THE COURSE OF BUSINESS. SIMILAR KIND OF EXPENSES WAS ALSO INCURRED IN EARLI ER YEARS AND SAME WERE ACCEPTED BY REVENUE. THE ASSESSEE FURTHER SUBMITTED THAT DISALL OWANCE OF 5% OF THE TOTAL EXPENSES ON ESTIMATED BASIS IS VERY HIGH AND UNREASONABLE. H OWEVER, LD. CIT(A) CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- 4.3 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND GONE THROUGH THE ASSESSMENT ORDER. THE AO DISALLOWED THE EXPENSES FOR THE APPELLANTS FAILURE TO SUBMIT ANY EVIDENCE IN SUPPO RT OF THE CLAIM OF EXPENSE UNDER VARIOUS HEADS. THE APPELLANT HAS GIVEN OPPORT UNITIES T THE REMAND STAGE TO PRODUCE THE BOOKS OF ACCOUNT AND TO PROVE THE GE NUINENESS OF THE EXPENSES. DURING THE REMAND STAGE ALSO THE APPELLANT DID NOT PRODUCE THE BOOKS OF ACCOUNT AND FURNISH THE EVIDENCES. THE APPELLANT HA S ADMITTED THE INCOME OF RS.3,04,090/- AGAINST THE TURNOVER OF RS.1,60,92,59 4/- WHICH WORKS OUT TO 1.89% WHICH WAS VERY LOW ON COMPARABLE CASES. THERE FORE, I DO NOT FIND ANY REASONS TO INTERFERE WITH THE AO AND THE ADDITION M ADE BY THE AO IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. BEING AGGRIEVED, ASSESSEE CAME IN SECOND APPEAL BEF ORE US ON THE FOLLOWING GROUNDS. 12. LD. AR BEFORE US REITERATED SAME SUBMISSION AS MADE BEFORE LD. CIT(A). ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF AUTHO RITIES BELOW. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE GRIEVANCE OF THE ASSESSEE IN THIS APPEA L IS WITH REGARD TO THE CONFIRMATION OF ADDITION OF RS. 7,21,874.00 ON AD HOC BASIS. AT THE OUTSET WE FIND THAT THE ASSESSEE FAILED TO FURNISH ANY DOCUMENTARY EVIDENCE IN SUPPO RT OF EXPENSES CLAIMED IN THE ITA NO.613/KOL/2016 A.Y. 2009-10 J.P.ENTERPRISE VS. ITO WD-27(3) HALDIA PAGE 6 PROFIT AND LOSS ACCOUNT BEFORE THE AO AS WELL AS LE ARNED CIT(A). THE ONUS LIES ON THE ASSESSEE TO JUSTIFY THE EXPENSE CLAIMED BY THE ASSE SSEE ON THE BASIS OF DOCUMENTARY EVIDENCE. IN SUCH SITUATIONS THE LOWER AUTHORITIES HAD NO OPTION EXCEPT TO MAKE THE DISALLOWANCES ON THE BASIS OF ESTIMATE. INDEED BEFO RE MAKING ANY DISALLOWANCES THE AO SHOULD HAVE VERIFIED THE REASONABLENESS OF THE D ISALLOWANCES AFTER MAKING COMPARISON WITH THE EARLIER YEAR FINANCIAL DATA OF THE ASSESSEE. IN THE INSTANT CASE THE AO HAS NOT MADE ANY REFERENCE TO THE EARLIER YEAR F INANCIAL DATA BEFORE MAKING ANY DISALLOWANCE. HOWEVER IT DOES NOT MEAN THE DISALLOW ANCES MADE BY THE AO IS UNREASONABLE IN THE GIVEN FACTS & CIRCUMSTANCES. TH E AO HAD TO RESORT TO THE DISALLOWANCES ON ESTIMATED BASIS IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE. HOWEVER IN THE INTEREST OF JUSTICE AND FAIR PLAY WE ARE INCLINED TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO JUSTIFY THE EXPENSES CLAIMED BY IT BEFORE THE AO. THEREFORE WE ARE RESTORING THIS ISSUE TO THE FILE O F AO FOR FRESH ADJUDICATION AS PER LAW. HENCE THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT, ASSESSEES APPEAL STANDS PARTLY ALLO WED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 24/02/2017 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ! - 24/02/2017 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-J.P. ENTERPRISE, MECHEDA, TAMLUK, PURBA MEDINIPUR-721137 2. /RESPONDENT-ITO WARD-27(3), BASUDEVPR KHANJANCHAK, HALDIA, PURBA MEDINIPUR, PI N-721602 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY ORDER/ , / '# ,