Sri Anandraj Jhawar, Alipurdual V. DCIT, CIR-2, JALPAIGURI, Jalpaiguri

ITA 712/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0808 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 22-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHOWNGTHU
• Keywords: Business income; Speculation loss
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI M.B ALAGANESH, AM ] I.T.A NO. 712/KOL/201 5 ASSESSMENT YEAR : 2010-1 1 SHRI ANANDRAJ JHAWAR -VS- DCIT, CIRCLE-2, KOLKATA [PAN: ACOPJ 1967 H] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI ANIL KOCHAR , ADVOCATE FOR THE REVENUE :SHRI DAVID Z. CHOWNGTHU, ADDL .CIT, SR. DR DATE OF HEARING : 27.11.2017 DATE OF PRONOUNCEMENT : 08.12.2017 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-JALPAIGURI [ IN SHORT THE LD C ITA] IN APPEAL NO. 35/CIT(A)/JAL/2013-14 DATED 26.03.2015 AGAINST THE ORDER PASSED BY THE DCIT, CIRCLE-2, KOLKATA [ IN SHORT THE LD AO] UNDER SECT ION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 26.03.2015 FOR TH E ASSESSMENT YEAR 2010-11. 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE LD. AO TO APPLY 6.75% OF THE TOTAL SALES AS ESTIMATED INCOME FROM CARTAGE AND HANDLING CHARGES OF THE ASSESSEE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 ITA NO.712/KOL/2015 ANANDRAJ JHAWAR A.YR.2010-11 2 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS CARRYING ON BUSINESS OF FOOD GRAIN AND CARTAGE WORK ETC. UNDER TRADE NAME M/S R.R. AGR OTECH AT DELHI AND ALSO CARRYING FOOD GRAIN BUSINESS IN THE TRADE NAME OF M/S ANAND RAJ JHAWAR, AT ALIPURDUAR AND FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-1 1 ON 26.03.2011 DECLARING TOTAL INCOME OF RS. 63,34,380/-. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE LD. AO OBSERVED THAT THE ASSESSEE HAS SHOWN NET CARTAGE AN D HANDLING CHARGES RECEIVED TO THE TUNE OF RS. 10,32,153/- AS UNDER: CARTAGE AND HANDLING CHARGES RECEIVED RS. 2,63,0 4,653/- LESS CARTAGE AND HANDLING CHARGES PAID RS. 2,52,7 2,500/- NET INCOME RS. 10,32,153/- THE LD. AO OBSERVED THAT THIS NET INCOME OF RS. 10, 32,153/- WORKS OUT TO 3.92% OF GROSS CARTAGE AND HANDLING CHARGES RECEIVED. THE LD . AO OBSERVED THAT THE ASSESSEE HAD REPORTED NET INCOME FROM PADDY HANDLING CONTRACT AT 8.15% IN ASSESSMENT YEAR 2009-10 AND 10.64% OF NET INCOME FROM WHEAT HANDLING CONTRA CT IN ASSESSMENT YEAR 2009-10. BASED ON THESE OBSERVATIONS AND FOR WANT OF ANY DOC UMENTARY EVIDENCES FROM THE ASSESSEE, THE LD. AO RESORTED TO ESTIMATE THE PROFI T FROM CARTAGE AND HANDLING CHARGES FOR THE ASSESSMENT YEAR 2010-11 AT 8% WHICH WORKED OUT TO RS. 21,04,372/-. FROM THIS, SUM OF RS. 10,32,153/- WHICH WAS ALREADY OFFERED BY THE ASSESSEE WAS DEDUCTED AND REMAINING SUM OF RS. 10,72,219/- WAS BROUGHT TO TAX BY THE LD. AO. 4. THE LD. CIT(A) DIRECTED THE LD. AO TO ADOPT NET PROFIT OF 6.78% OF CARTAGE AND HANDLING CHARGES RECEIVED BASED ON THE AVERAGE NET PROFIT DISCLOSED BY THE ASSESSEE FOR ASSESSMENT YEARS 2008-09 AND 2009-10 I.E. IMMEDIATE LY PRECEDING TWO YEARS. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWIN G GROUNDS: 1. FOR THAT THE LD. CIT(A) OUGHT TO HAVE PROPERLY A PPRECIATED THE FACTUAL ASPECT OF THE CASE OF THE APPELLANT AND OUGHT NOT TO HAVE DIRECTED THE AO TO APPLY 6.78% ON THE TOTAL SALES TO ESTIMATE THE INCOME FRO M CARTAGE AND HANDLING CHARGES. 3 ITA NO.712/KOL/2015 ANANDRAJ JHAWAR A.YR.2010-11 3 2. FOR THAT THE LD. CIT(A) HAVING APPRECIATED THE F ACT THAT THE AO HAVING NOT FOUND ANY DEFECT IN THE BOOKS OF ACCOUNTS AND HAVIN G NOT REJECTED THE ACCOUNTS, QUESTION OF ESTIMATION OF INCOME DID NOT ARISE AT A LL AND IN THIS VIEW OF THE MATTER THE DIRECTION GIVEN BY THE LD. CIT(A) TO DETERMINE INCOME FROM CARTAGE AND HANDLING CHARGES ON ESTIMATE WAS WRONG AND UNCALLED FOR. 5. THE LD. AR PRAYED BEFORE US THAT THE LD. CIT(A) HAD MERELY ADOPTED THE AVERAGE NET PROFIT REPORTED IN THE EARLIER TWO YEARS. HE PRAYED FOR ADOPTION OF NET PROFIT OF 5% DURING THE YEAR UNDER APPEAL. IN RESPONSE TO THIS, THE LD. DR VEHEMENTLY OBJECTED TO THE SAME AND STATED THAT THE LD. CIT(A) HAD FAIRLY DETE RMINED THE NET PROFIT BASED ON THE AVERAGE IN EARLIER TWO YEARS. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THA T THE ASSESSEE HAD REPORTED 3.92% OF THE GROSS RECEIPTS AS NET PROFIT IN THE YEAR UNDER CONSIDERATION. THE AVERAGE NET PROFIT OF THE EARLIER TWO YEARS WORKS OUT TO 6.78%. WE HOLD T HAT ADOPTION OF NET PROFIT OF 5% WOULD MEET THE ENDS OF JUSTICE IN THE FACTS AND CIR CUMSTANCES OF THE CASE. ACCORDINGLY, GROUNDS NO. 1 AND 2 RAISED BY THE ASSESSEE ARE PART LY ALLOWED. 7. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE MADE IN THE SUM OF RS. 27,07,104/- ON ACCOUNT OF FORFEITURE OF EARNEST MONEY IN THE FACTS AND CIR CUMSTANCES OF THE CASE. 8. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE HAS CLAIMED A SUM OF RS. 27,07,104/- IN ITS PROFIT AND LOSS ACCOUNT AS EARNEST MONEY FOR FEITED (NET). THE ASSESSEE WAS ASKED TO EXPLAIN THE SAME WITH NECESSARY DETAILS AND SUPPORT ING EVIDENCES JUSTIFYING THE CLAIM OF DEDUCTION THEREON. THE ASSESSEE FILED A COPY OF LED GER ACCOUNT CONTAINING DEBIT ENTRIES AND CREDIT ENTRIES MENTIONING NAME OF ONE M/S MAN GLA RICE MILLS U.K. AND STATED THAT THE EARNEST MONEY FORFEITED AND DEBITED IN THE PROFIT AND LOSS ACCOUNT RELATES TO BUSINESS ACTIVITY OF THE ASSESSEE AND THAT HAS BEEN OCCURRED DUE TO UNAVOIDABLE CIRCUMSTANCES. THE LD. AO OBSERVED THAT THE ASSESSE E HAD FAILED TO FURNISH FULL ADDRESS 4 ITA NO.712/KOL/2015 ANANDRAJ JHAWAR A.YR.2010-11 4 OF THE CONTRACTEE, CONTRACTUAL AGREEMENT AND OTHER RELEVANT DETAILS. ACCORDINGLY, HE PROCEEDED TO DISALLOW THE EARNEST MONEY FORFEITED A MOUNT (NET) OF RS. 27,07,104/- IN THE ASSESSMENT. THE LD. CIT(A) PASSED A CRYPTIC ORDER B Y TREATING THE SAID SUM OF RS. 27,07,104/- AS SPECULATIVE LOSS INCURRED BY THE ASS ESSEE. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS : 3. FOR THAT THE LD. CIT(A) ERRED IN NOT PROPERLY CO NSIDERING THE FACTS SUBMITTED BY THE APPELLANT WITH REGARD TO THE FORFEITURE OF E ARNEST MONEY OF RS. 27,07,104/- AND IN CONFIRMING THE ADDITION MADE BY THE AO ON TH E ALLEGED GROUNDS. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THA T THE LD. AR HAD PLACED THE LEDGER ACCOUNT OF EARNEST MONEY FORFEITED WHEREIN, IN RES PECT OF MANGLA RICE MILLS U.K. A SUM OF RS. 32,50,000/- WAS PAID BY CHEQUE DATED 11. 01.2010 BY THE ASSESSEE FOR IMPORT OF 5000 METRIC TONNE OF SUGAR. THE LD. AR STATED TH AT DUE TO ADVERSE MARKET SITUATION THE ASSESSEE DECIDED NOT TO IMPORT THE MATERIAL FRO M U.K AND ACCORDINGLY CHOSE TO GET THE ADVANCE PAID FORFEITED WHICH WAS DULY DEBITED T O EARNEST MONEY FORFEITED AND WRITTEN OFF AS TRADING LOSS. SIMILARLY THERE WERE T WO OTHER PARTIES FROM WHOM THE ASSESSEE HAD RECEIVED MONIES NAMELY KRISHNA & CO. K ANPUR (RS. 4,68,452/-) AND SEWAK INDUSTRIES (LKH) (RS. 74,444/-) WHICH WERE TR EATED AS NO LONGER PAYABLE BY THE ASSESSEE AND ACCORDINGLY THE SAME WERE WRITTEN BACK TO EARNEST MONEY FORFEITED ACCOUNT. ACCORDINGLY, THE NET AMOUNT OF RS. 27,07,1 04/- WAS CLAIMED AS NET EXPENDITURE BY THE ASSESSEE AND CONSEQUENTIAL DEDUCTION THEREON . HE PLEADED THAT THIS ADVANCE TO M/S MANGLA RICE MILLS U.K. WAS MADE IN THE REGULAR COURSE OF BUSINESS BY THE ASSESSEE TOWARDS SUPPLIER PAYMENTS. WE FIND EXCEPT MAKING AN ORAL STATEMENT THERE IS ABSOLUTELY NO EVIDENCE BROUGHT ON RECORD BY THE LD. AR TO JUST IFY THE FACT THAT THIS ADVANCE WAS MADE IN THE REGULAR COURSE OF BUSINESS OF THE ASSES SEE. HENCE, THE REQUEST OF THE LD. AR TO REMAND THIS ISSUE TO THE FILE OF LD. AO DOES NOT DESERVE ANY MERIT. ACCORDINGLY WE DISMISS THE GROUND NO.3 RAISED BY THE ASSESSEE. 5 ITA NO.712/KOL/2015 ANANDRAJ JHAWAR A.YR.2010-11 5 10. WE FIND THAT THE ASSESSEE HAS RAISED ANOTHER GR OUND TOWARDS DISALLOWANCE OF DONATION OF RS. 51,209/- WHICH WAS DISMISSED BY THE LD. CIT(A) FOR WANT OF ANY DETAILS. WE FIND NO ARGUMENTS WERE ADVANCED BY THE ASSESSEE BEFORE US IN THIS REGARD. ACCORDINGLY, WE UPHOLD THE DISALLOWANCE MADE BY THE LD. CIT(A) AND DISMISS THE GROUND NO. 4 RAISED BY THE ASSESSEE. 11. THE GROUND NO. 5 RAISED BY THE IS GENERAL IN NA TURE AND DOES NOT DESERVE ANY SPECIFIC ADJUDICATION. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 08.12.2017 SD/- SD/- [N.V. VASUDEVAN] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 08.12.2017 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. ANANDRAJ JHAWAR, MARWARI PATTY, POST & DIST.-ALI PURDUAR 2. DCIT, CIRCLE-2, KOLKATA, C.R. BUILDING, NAYABAST I, P.O. & DIST.: JALPAIGURI-735101 3..C.I.T.(A)- , KOLKATA 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S