Leader Construction Pvt. Ltd., Kolkata V. ITO, WD-9(3), KOLKATA, Kolkata

ITA 742/KOL/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99819 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 05-05-2009
• Court: TRIBUNAL
• Department Lawyers: P K CHAKRABORTY
• Assessee Lawyers: K K GOSWAMI
• Keywords: Unexplained cash credit; Depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3); 133(6); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M.BALAGANESH, AM ] ITA NO.742/KOL/2009 ASSESSMENT YEAR : 2003 - 04 ( A PPELLANT ) (RESPONDENT) LEADER CONSTRUCTION PVT. LTD. - VERSUS - I.T.O., WARD - 9(3), KOLKATA KOLKATA (PAN: AAACL 8338 D) FOR THE APPELLANT : SHRI K.K. GOSWAMI, ADVOCATE FOR THE RESPONDENT : SHRI P.K.CHAKRABORTY, ADDL.CIT DATE OF HEARING : 15 .09 .2015. DATE OF PRONOUNCEMENT : 21.09.2015. ORDER PER SHRI M.BALAGANESH, AM 1 . THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE ORDER OF THE LEARNED CITA IN APPEAL NO. 53 3/ CIT(A) - VI/08 - 09/WD.9(2) DATED 02.02.2009 PASSED AGAINST THE ORDER OF ASSESSMENT FOR THE ASST YEAR 2003 - 04 FRAMED BY THE LEARNED AO U/S 143(3) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LEARNED CITA IS JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 7,33,418/ - ALLEGING THE SAME AS BOGUS CREDITORS IGNORING THE FACTS AND CIRCUMSTANCES OF THE CASE. 2.1. THE BRIEF FACTS IS THAT THE ASSESSEE IS DEALING IN HOTEL BUSINESS DURING THE ASSESSMENT YEAR UNDER APPEAL UNDER THE NAME AND STYLE AS HOTEL HAVELI . THE BOOKS OF ACCOUNTS WERE NOT PRODUCED BEFORE THE LEARNED AO FOR VERIFICATION EXCEPT FURNISHING DETAILS IN RESPECT OF INCREASE IN SHARE APPLICATION MONEY RECEIVED, CONFIRMATION OF UNSECURED LOAN, DETAILS OF SECURED LOAN, SUNDRY CREDITORS FOR CAPITAL GOODS, CREDITORS FOR EXPENSES, OTHER FINANCE, SUNDRY DEBTOR, SECURITY D EPOSIT AND DETAILS OF FIXED ASSETS PURCHASED. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE FURNISHED THE DETAILS OF SUNDRY CREDITORS FOR CAPITAL GOODS AND IN RESPECT OF TWO SUNDRY CREDITORS VIZ M/S BIJITA ELECTRONICS AND M/S SANU ELECTRONICS , THE NOTICES U/S 133(6) ITA NO. 742/KOL/2009 LEADER CONSTRUCTION PVT. LTD. A.YR. 2003 - 04 2 OF THE ACT SENT BY THE LEARNED AO FOR VERIFICATION WAS RETURNED UNSERVED AND ACCORDINGLY THE LEARNED AO ISSUED SUMMONS U/S 131 OF THE ACT TO PRODUCE THE SAID SUNDRY CREDITORS FOR VERIFICATION. THE ASSESSEE COULD NOT ENSURE THE PRESENCE OF THE SAID SUNDRY CREDITORS BEFORE THE LEARNED AO AS THEY HAD EITHER CLOSED THEIR BUSINESS OR SHIFTED ELSEWHERE. HENCE THE LEARNED AO TREATED THE SAID SUNDRY CREDITORS AS BOGUS CREDITORS AND BROUGHT THE BALANCE OUTSTANDING TO THEIR ACCOUNT AS ON 31.3.2 003 TO THE TUNE OF RS. 4,34,168 / - (BIJITA ELECTRONICS) AND RS. 2,99,250/ - (SANU ELECTRONICS) AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. ON FIRST APPEAL, THE LEARNED CITA UPHELD THE ADDITION BY GIVING THE FOLLOWING FINDINGS : - 3.2. THE A.O. CONFIRM ED THE CREDITORS AS BOGUS WITHIN THE MEANING OF SEC.68 OF THE IT ACT AND MADE AN ADDITION. DURING THE COURSE OF APPELLATE PROCEEDINGS THE A.R. COULDN T PROVE THAT THE COMPANY HAS PURCHASED ASSETS FROM M/S. BIJITA ELECTRONICS AND M/S. SANU ELECTRONICS. THE AR ONLY SUBMITTED THAT SINCE THE DEPRECIATION ON THE SAID FIXED ASSETS IS NOT CHARGED IN THE BOOKS OF ACCOUNT AND THERE IS NO LOSS OF REVENUE. IN THE ABSENCE OF ANY EVIDENCE IT IS DIFFICULT TO ASCERTAIN WHETHER THE CREDITORS MENTIONED ABOVE ARE ON ACCOUNT OF CAPITAL EXPENDITURE OR REVENUE EXPENDITURE. IN VIEW OF THIS, I HAVE NO OPTION TO CONFIRM THE ADDITION MADE BY THE A.O. THIS GROUND OF APPEAL IS DISMISSED. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND: - 1. THAT THE LD. COM MISSIONER OF INCOME TAX (APPEALS0 - VI/KOLKATA, HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS.7,33,418/ - MADE BY THE HON BLE AO ON ACCOUNT OF BOGUS CREDITORS. 2.2. SHRI.K.K.GOSWAMI, ADVOCATE, THE LEARNED AR ARGUED ON BEHALF OF THE ASSESSEE AND SHRI. P.K.CHAKRABORTY, ADDITIONAL CIT, THE LEARNED DR ARGUED ON BEHALF OF THE REVENUE. 2.3. THE LEARNED AR REFERRED TO THE WRITTEN SUBMISSIONS FILED DURING THE COURSE OF HEARING ON 15.9.2015 AND ARGUED THAT THE ASSESSEE HAD STARTED ITS HOTEL BUSINESS DURING TH E ASSESSMENT YEAR UNDER APPEAL AND HAD INCURRED CAPITAL EXPENDITURE TOWARDS THE SAME AND FOR THIS PURPOSE, HAD MADE PURCHASE OF FIXED ASSETS FROM BIJITA ELECTRONICS AND SANU ELECTRONICS IN THE FOLLOWING MANNER: - ITA NO. 742/KOL/2009 LEADER CONSTRUCTION PVT. LTD. A.YR. 2003 - 04 3 BIJITA ELECTRONICS VALUE OF FIXED ASSETS P URCHASED DURING THE YEAR 7,76,958 LESS: PAID DURING THE YEAR 3,42,790 --------------- BALANCE OUTSTANDING AS ON 31.3.2003 4,34,168 --------------- SANU ELECTRONICS VALUE OF FIXED ASSETS PURCHASED DURING THE YEAR 8, 06,090 LESS: PAID DURING THE YEAR 5,06,840 --------------- BALANCE OUTSTANDING AS ON 31.3.2003 2,99,250 --------------- TOTAL VALUE OF A FORESAID TWO SUNDRY CREDITORS 7,33,418 HE ARGUED THAT ALL THE DETAILS OF CREDIT ORS WERE DULY SUBMITTED BY THE ASSESSEE BEFORE THE LEARNED AO. HE ARGUED FURTHER THAT THE LEARNED AO HAD ACCEPTED THE PAYMENTS MADE TO THE AFORESAID SUNDRY CREDITORS TOWARDS CAPITAL ACCOUNT AND HAVING DONE SO, HIS ACTION OF TREATING THE BALANCE PAYABLE AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT IS NOT WARRANTED. HE FURTHER ARGUED THAT THE MOVING OF CREDITORS FROM THEIR PLACE CANNOT BE CONCLUSIVE EVIDENCE THAT THE CREDITORS ARE BOGUS OR NOT IDENTI FIABLE AS THE SHIFTING OF ADDRE SS HAS LEFT THE ASSESSEE OU T OF CONTROL TO VERIFY THE CREDITORS. EVEN OTHERWISE, IT IS ONLY CAPITAL CREDITORS AND HENCE NO ADDITION U/S 68 WOULD LIE. MOREOVER, HE ARGUED THAT THERE IS NO LOSS OF REVENUE AS NO DEPRECIATION IS ALSO CLAIMED BY THE ASSESSEE ON THE SAID FIXED ASSETS D URING THE ASSESSMENT YEAR UNDER APPEAL. THIS FACT IS ALSO STATED IN PARA 3.2 OF CIT ( A ) ORDER. IN RESPONSE TO THIS, THE LEARNED DR ARGUED THAT IT IS HIGHLY UNLIKELY THAT THE CREDITORS HAVE COMPLETELY STOPPED COMMUNICATION WITH THE ASSESSEE WHEN THEY ARE E NTITLED FOR SOME PAYMENTS DUE FROM THE ASSESSEE. ACCORDINGLY, HE PLEADED FOR CONFIRMATION OF THE ORDERS OF THE LOWER AUTHORITIES ON THIS GROUND. 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE SUNDRY CREDITORS ARE ONLY CAPITAL CREDITORS AND IN ANY EVENT, ITA NO. 742/KOL/2009 LEADER CONSTRUCTION PVT. LTD. A.YR. 2003 - 04 4 NO ADDITION COULD BE MADE U/S 68 OF THE ACT. WE ALSO FIND THAT THE LEARNED AO HAD DULY ACCEPTED THE PAYMENTS MADE TO THE AFORESAID TWO PARTIES AS GENUINE AND HE CANNOT TAKE A DIFFERENT STAND WITH REGARD TO THE BALANCE PAYABLE TO THE SAID SUNDRY CREDITORS. WE ALSO FIND THAT THE ASSESSEE HAD DULY DISCHARGED HIS COMPLETE ONUS BY FURNISHING THE COMPLETE DETAILS ABOUT THE SUNDRY CREDITORS AND JUST BECAUSE THE CREDITORS HAVE SHIFTED THEIR ADDRES SES, THE ASSESSEE COULD NOT BE FAULTED WITH AND MOREOVER THE PROVISIONS OF SECTION 68 OF THE ACT PER SE ARE NOT APPLICABLE TO THE FACTS OF THE CASE. ACCORDINGLY, THE GROUND NO. 1 RAISED BY THE ASSESSEE IS ALLOWED. 3. THE NEXT ISSUE TO BE DECIDED IN TH IS APPEAL IS AS TO WHETHER THE LEARNED CITA IS JUSTIFIED IN DISALLOWING 50% OF CASH EXPENSES ON AN ADHOC BASIS . 3.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE HAD NOT PRODUCED THE BOOKS OF ACCOUNTS FOR VERIFICATION OF EXPENSES. OUT OF THE TOTA L EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT IN THE SUM OF RS. 8,35,061/ - , THE LEARNED AO FOUND THAT RS. 2,22,067/ - HAS BEEN EXPENDED BY CHEQUES AND THE SAME HAS BEEN ACCEPTED AS GENUINE. AS FAR AS THE BALANCE SUM OF RS. 6,12,994/ - INCURRED IN CASH, HE DISALLOWED 50% OF THE SAME ON AN ADHOC BASIS FOR WANT OF EVIDENCES WHICH WAS ALSO UPHELD BY THE LEARNED CITA. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND: - 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - VI/KOLKATA, HAS GR OSSLY ERRED IN CONFIRMING THE ADDITION OF RS.,3,06,494/ - MADE BY THE HON BLE AO ON ACCOUNT OF EXPENSES. 3.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ENTIRE ADDITION HAS BEEN MADE ONLY AN ADHOC BASIS FOR NON PRODUCTION OF BOOKS OF ACCOUNTS BY THE ASSESSEE BEFORE THE LEARNED AO. HOWEVER WE FIND THAT DISALLOWANCE OF 50% IS ON HIGHER ACCOUNT. HENCE WE HOLD THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, DISALLOWANCE OF 20% OF THE CASH EXPENDI TURE OF RS. 6,12,994/ - WILL MEET THE ENDS OF JUSTICE AND ACCORDINGLY DIRECT THE LEARNED AO TO DISALLOW ONLY 20% OF RS. 6,12,994/ - AS AGAINST 50%. ACCORDINGLY, THE GROUND NO. 2 IS PARTLY ALLOWED. ITA NO. 742/KOL/2009 LEADER CONSTRUCTION PVT. LTD. A.YR. 2003 - 04 5 4. THE OTHER GROUNDS ARE PERTAINING TO CHARGING OF INTE REST U/S 234 A & 234 B AND LEVY OF PENALTY. THEY ARE CONSEQUENTIAL IN NATURE AND HENCE NOT ADJUDICATED HEREIN. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNC ED IN TH E COURT ON 2 1.09.2015. SD/ - SD/ - [MAHAVIR SINGH] [M.BALAG ANESH] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 21.09.2015. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO : 1 . LEADER CONSTRUCTION PVT. LTD., 17, BALMUKUND MACKER ROAD, KOLKATA - 700007. 2 THE I.T.O., WARD - 9(3), KOLKATA. 3 . THE CIT - II , KOLKATA , 4. THE CIT(A) - VI , KOLKATA. 5 . DR, KOLKATA BENCHES, KOLKATA TRUE COPY , BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES