ITO,Ward-1(1), Midnapore, Midnapore V. Satyanarayan Agarwal, Paschim Medinipur

ITA 664/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75090 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 25-04-2012
• Court: TRIBUNAL
• Department Lawyers: SANJAY MUKHERJEE JDIT
• Assessee Lawyers: S M SURANA
• Keywords: Principle of natural justice
• Section: 260A

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 664/KOL/2012 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2003-04 INCOME-TAX OFFICER, WD-1(1), MIDNAPORE VS. SATYAN ARAYAN AGARWAL (PAN: ACNPA7586N) (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 05.03.2014 DATE OF PRONOUNCEMENT: 13.03.2014 FOR THE APPELLANT: SHRI SANJAY MUKHERJEE, JDIT, SR. DR FOR THE RESPONDENT: SHRI S. M. SURANA, ADVOCATE $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-XXXVI, KOLKATA IN APPEAL NO. 887/CIT(A)-XXXVI/KOL/R-1&2,MID/09-10 DATED 14.0 2.2012. ASSESSMENT WAS FRAMED BY ADDL.CIT, RANGE-1&2, MIDNAPORE U/S. 147/143(3) OF T HE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2003- 04 VIDE HIS ORDER DATED 24.12.2009. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE ADDITION MADE ON ACCOUNT OF DIFFERENCE BETWEEN AUDI TED A/CS FOR THE YEAR ENDED 31.03.2003 SUBMITTED WITH RETURN OF INCOME AND AUDITED A/CS FO R THE YEAR ENDED 31.03.2003 IMPOUNDED FROM THE BUSINESS PREMISES OF THE ASSESSEE. 3. BRIEFLY STATED FACTS ARE THAT THE AO MADE ADDITI ON ON THE BASIS OF SEPARATE SET OF ACCOUNTS SUBMITTED WITH THE BANK AUTHORITIES AS WEL L AS INCOME TAX DEPTT ALONG WITH RETURN OF INCOME. THE AO NOTED THE FIGURES OF DIFFERENCE FRO M ONE ANOTHER, WHICH IS AS UNDER: PARTICULARS AS PER AUDITED A/CS. FOR THE YEAR ENDED 31.03.03 SUBMITTED WITH RETURN OF INCOME AS PER AUDITED A/CS. FOR THE YEAR ENDED 31.03.03 IMPOUNDED FROM THE BUSINESS PREMISES OF THE ASSESSEE DIFFERENCE ADDED BACK BY THE AO CLOSING STOCK OF FINISHED GOODS (MUSTARD OIL & CAKE) RS.3,42,185/- RS.14,13,233/- RS.10,71,048/- 2 ITA NO.664/K/2012 SHRI SATYANARAYAN AGARWAL , AY:2003-04 ACCORDING TO AO, THERE BEING A DIFFERENCE I.E. SHOR TAGE OF STOCK IN THE RETURN OF INCOME SUBMITTED WITH THE RETURN OF INCOME WITH THAT OF TH E AUDITED ACCOUNTS SUBMITTED WITH THE BANK FOR OBTAINING HIGHER LOAN AT RS.10,71,048/-. ACCOR DING TO AO, AS THE ASSESSEE COULD NOT EXPLAIN THE DIFFERENCE HE MADE ADDITION. NOW, REVENUES GR IEVANCE IS THAT THE ASSESSEE HAS FILED TWO SETS OF AUDITED ACCOUNTS, ONE BEFORE THE AO I.E. WI TH THE REVENUE AND OTHER BEFORE THE BANK FOR OBTAINING LOAN, WHETHER THE DIFFERENCE IS TO BE ADD ED OR NOT. AFTER MAKING ADDITION, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETE D THE ADDITION BUT SUSTAINED THE NET PROFIT AS COMPUTED ON THE BASIS OF AUDITED ACCOUNTS SUBMIT TED WITH THE BANK AT RS.3,80,320/- AS AGAINST DECLARED NET PROFIT AT RS.76,800/-. THE CI T(A) SUSTAINED THE ADDITION OF NET PROFIT AT RS.3,80,320/- BUT DELETED THE DIFFERENCE IN STOCK B Y OBSERVING IN PARA 6.1 TO 6.3 AS UNDER: 6. 1 HOWEVER, WHAT THE INCOME TAX ACT REQUIRES IN ALL CASES IS ASSESSMENT OF CORRECT INCOME OF THE ASSESSEE. THE ULTIMATE AIM OF PASSING AN ASSESSMENT ORDER IS TO CORRECTLY COMPUTE THE INCOME OF AN ASSESSEE WHICH IS IN CONSO NANCE WITH LAW AND EVIDENCE AND AMENABLE TO PROOF. UNDOUBTEDLY THE AO HAS THE POWER S TO ESTIMATE INCOME TO HIS BEST JUDGMENT INVOKING THE PROVISIONS OF SECTION 145(3) OR 144 OF THE ACT BUT THE SAID ESTIMATION SHOULD BE FAIR AND HONEST ESTIMATE AND N OT ARBITRARY OR CAPRICIOUS. THE PRINCIPLES OF NATURAL JUSTICE OPERATE AS IMPLIED MA NDATORY REQUIREMENTS FOR FRAMING AN ASSESSMENT AND NON-OBSERVATION OF THE SAME AMOUNTS TO ARBITRARINESS AND DISCRIMINATION AS HELD IN MANY JUDICIAL PRONOUNCEMENTS. FURTHER, I T HAS BEEN HELD IN MANY JUDGEMENTS THAT EVIDENCE CANNOT BE PARTLY ACCEPTED AND PARTLY REJECTED. RELIANCE IS PLACED ON CIT VS. TARA DEVI GOENKA, REPORTED IN 122 ITR 14 (CALCU TA). 6.2 IN THIS CASE, INSTEAD OF TAKING INTO ACCOUNT T HE WHOLE OF THE AUDITED ACCOUNTS SUBMITTED TO THE BANK, THE AO HAS RESTORED TO PICK & CHOOSE METHOD WHILE ESTIMATING THE INCOME OF THE APPELLANT. THOUGH THE AO REJECTED THE AUDTED BALANCE SHEET ATTACHED WITH THE RETURN, BUT ADDITIONS UNDER VARIOUS HEADS WERE MADE BY HIM AFTER COMPARING THE DIFFERENCE BETWEEN TWO FINANCIAL STATEMENTS AND SUC H ADDITIONS WERE ALSO ADDED WITH THE DISCLOSED TOTAL INCOME AS PER RETUM. ONCE A BALANCE SHEET IS REJECTED, ITEMS OF THE SAME CANNOT OBVIOUSLY BE TAKEN FOR COMPARISON. THE CONTE NTION OF THE AR THAT THE OPENING STOCK SHOWN IN THE BALANCE SHEET FILED TO THE BANK WERE EXACTLY SAME AS THE CLOSING STOCK BALANCE SHOWN IN THE LAST YEARS BALANCE SHEET FILED WITH THE SAME BANK IS FOUND CORRECT. IN FACT THE APPELLANT HAS BEEN FILING A RATHER ROSY FINANCIAL STATEMENTS OVER THE YEARS TO THE SAME BANK FOR HEALTHY OVERDRAFT FACILITY AND SA ID INFORMATION WAS IN THE KNOWLEDGE OF THE AO AND THEREFORE, FIGURES SHOWN IN THE LAST YEA RS BALANCE SBEET FILED WITH THE BANK SHOULD HAVE BEEN TAKEN FOR COMPARISON SO FAR AS THE ITEMS LIKE OPENING STOCK AND SUNDRY DEBTORS ARE CONCERNED. FURTHER, THE AO HAS DDED THE DIFFERENCE OF PURCHASES OF RS.98.58 LAKHS, IGNORING DIFFERENCE OF SALES OF RS.111.09 LA KHS. HE ALSO ADDED THE DIFFERENCE OF CLOSING STOCK WITHOUT CONSIDERING THE POSSIBILITIES THAT A HIGHER CLOSING STOCK FIGURE IS CONSEQUENTIAL TO HIGHER PURCHASES AND SALES FIGURES . 6.3 IN VIEW OF THE FOREGOING, THE BALANCE SHEET FIL ED WITH THE BANK ALONE SHOULD BE CONSIDERED FOR DERIVING THE TOTAL INCOME OF THE APP ELLANT AS DECIDED BY MY PREDECESSOR IN THE APPEAL ORDER FOR A.Y. 2004-05 & A.Y. 2005-06. A ND HENCE, THE NET PROFIT DISCLOSED IN THE BALANCE SHEET FILED WITH THE BANK IS RS.3,80,32 0/-, THE AO IS DIRECTED TO ACCEPT THE SAME AS TOTAL INCOME. THE APPELLANT THUS GETS RELIE F OF RS.10,71,048/-. AGGRIEVED AGAINST DELETION, REVENUE PREFERRED APPEA L BEFORE TRIBUNAL. 3 ITA NO.664/K/2012 SHRI SATYANARAYAN AGARWAL , AY:2003-04 4. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SHRI S. M. SURANA, ADVOCATE FILED COPY OF JUDGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. NAZRUL HOSSAIN IN ITAT 123 OF 2012 IN GA 1502 OF 2012 DATED 04.09.2012, WHEREI N IT HAS BEEN HELD AS UNDER: THIS APPEAL IS AGAINST THE JUDGMENT AND ORDER OF T HE LEARNED TRIBUNAL IN RELATION TO ASSESSMENT YEAR 2006-07 DATED 19 TH AUGUST, 2011. WE ARE UNABLE TO ADMIT THE APPEAL EVEN AFTER CONSIDERING FORCEFUL ARGUMENTS OF MR. SA RAF AS THE LEARNED TRIBUNAL AS WELL AS THE CIT(APPEALS) ON 2 FACT RECORDED THAT THE ASSESSING OFFICER HAS RELIED ON THE PREVIOUS AUDITED BALANCE SHEET WITH GENERAL AUDIT REPORT DATED 8 TH MAY, 2006 WHICH WAS IMPLORED BY THE ASSESSEE TO TREAT THE SAME AS BEING CANCELLED. IN SPITE OF TH IS THE ASSESSING OFFICER RELIED ON THE SAME AUDITED BALANCE SHEET AND REPORT THEREOF. WE ARE IN COMPLETE AGREEMENT WITH THE LEARNED TRIBUNAL AS WELL AS THE CIT(APPEALS) THAT T HE APPROACH OF THE ASSESSING OFFICER WAS ABSOLUTELY UNFAIR. ON THE FACT FINDING OF ALL THE AUTHORITIES WE CANNOT EXERCISE DISCRETION UNDER SECTION 260A OF THE INCOME-TAX ACT . WE THUS DISMISS THE APPEAL WITHOUT ANY ORDER AS TO COSTS. ALL PARTIES SHALL ACT ON A XEROX SIGNED COPY OF THIS ORDER ON USUAL UNDERTAKINGS. (SENGUPTA, J.) LD. COUNSEL FOR THE ASSESSEE REFERRED TO TRIBUNAL S ORDER IN THE CASE OF DCIT VS. NAZRUL HOSSAIN IN ITA NO.373/K/2011FOR AY 2006-07 & CO NO. 47/K/2011 DATED 19.08.2011, WHEREIN THE FINDINGS OF CIT(A) IN BOTH THE ORDERS A RE EXACTLY IDENTICALLY WORDED. IN THE CASE OF NAZRUL HOSSAIN, SUPRA THE CIT(A)S ORDER IS IN PARA 5.4 AND 5.5 WHEREAS IN THE PRESENT CASE THE CIT(A)S ORDER PARA 6.1, 6.2 AND 6.3 EXCEPT DIFFERE NCE IN FIGURES. ON QUERY FROM THE BENCH THE LD. SR. DR COULD NOT SUPPORT OR COULD NOT CONTROVER T THAT THE ISSUE IS NOT COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF NAZRUL HOSSAIN, SUPRA. AS THE ISSUE IS COVERED, WE CONFIRM THE ORDER OF CIT(A) ON THIS ISSUE AND APPEAL OF REVENUE IS DISMISSED. 5. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 6. ORDER IS PRONOUNCED IN THE OPEN COURT ON 13.03.2 014. SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13TH MARCH, 2014 12 '3' 4 JD.(SR.P.S.) 4 ITA NO.664/K/2012 SHRI SATYANARAYAN AGARWAL , AY:2003-04 $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT- ITO, WARD-1(1), MIDNAPORE 2 ./,- / RESPONDENT SHRI SATYANARAYAN AGARWAL, NANOOR CH AWK, P.O. MIDNAPORE, DIST. PASCHIM MEDINIPUR, PIN-721101. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .