Dibyendu Jana, Purba Medinipur V. ITO, Ward 27(3), Kolkata, Purba Medinipur

ITA 779/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6411 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 19-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ATIN DAS
• Keywords: Unexplained investment; Set aside
• Section: 143(3)

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO.779/KOL/2017 ASSESSMENT YEARS: 2012-13 DIBYENDU JANA BHUBAN KALUA, KELOMAL, TAMLUK, PURBA MEDINIPUR, PIN-721627 [ PAN NO.AGDPJ 5316 M ] / V/S . INCOME TAX OFFICER WARD- 27(3), BASUDEVPUR, KHANJANCHAK, HALDIA, PURBA MEDINIPUR /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SUBASH AGARWAL, ADVOCATE & SHRI ATIN DAS, ADVOCATE & SHRI SUGATA DAS, ADVOCATE /BY RESPONDENT SHRI C.J. SINGH, JCIT-SR-DR /DATE OF HEARING 20-02-2019 /DATE OF PRONOUNCEMENT 08-05-2019 /O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2012-13 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-7, KOLKATAS O RDER DATED 14.02.2017 PASSED IN CASE NO.81/CIT(A)-7/KOL/WD.27(3)/15-16, INVOLVIN G PROCEEDINGS 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE(S) PERUSED. 2. THE ASSESSEE RAISES THE FOLLOWING SUBSTANTIVE GR OUNDS IN THE INSTANT APPEAL:- ITA NO.779/KOL/2017 A. Y. 2012-13 DIBYENDU JANA VS ITO WD-27(3), HOLDIA PAGE 2 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LEARNED. CIT(A) SHOULD HAVE QUASHED THE ASSESSMENT PROCEEDINGS AS T HE ORDER OF THE LD. AO WAS BARRED BY LIMITATION. 2.(A) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE LEARNED. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE A O IN MAKING THE ADDITION OF RS.26,88,038/- AS UNEXPLAINED INVESTMENT IN STOCK. (B) FOR THAT THE LD. CIT(A) OUGHT TO HAVE CONSIDERE D AND HELD THAT THE ESTIMATION OF GP @ 10% OF THE TURNOVER FOR ARRIVING AT THE ESTIMA TED STOCK VALUE ON THE DATE OF SURVEY WAS UNREASONABLE. (C) FOR THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN AF FIRMING THE ACTION OF THE AO IN TAKING THE VALUE OF OPENING STOCK AT RS.6,03,280/- IN RECONSTRUCTED TRADING ACCOUNT AS ON THE DATE OF SURVEY. 3. (A) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, LEARNED. CIT(A) ERRED IN AFFIRMING THE REJECTION OF BOOK RESULT U/S . 145(3) BY THE AO. (B) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ESTIMATION OF PROFIT AT RS.3,78,062/- AT 4.5% THOUGH THE AVERAGE NET PROFIT RATE FOR EARLIER THREE YEARS WAS 3.22%. 3. MR. AGARWAL STATES AT THE BAR THAT THIS TAXPAYER NO MORE WISH TO PRESS FOR ALL THE ABOVE EXTRACTED GROUNDS EXCEPT GROUND 2.(A). WE THE REFORE DECLINE ALL THE REMAINING GROUNDS RAISED IN THE INSTANT APPEAL AS NOT PRESSED . 4. COMING TO SOLE SURVIVING ISSUE OF CORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION MAKING UNEXPLAINED INVESTMENT IN STOCK ADDIT ION OF 26,88,038/-. LEARNED COUNSELS ONLY ARGUMENT DURING THE COURSE OF HEARIN G IS THAT BOTH THE LOWER AUTHORITIES HAVE WRONGLY MADE THE IMPUGNED ADDITION RATHER THAN ONADDING ONLY THE PROFIT ELEMENT REGARDING THE UNEXPLAINED INVESTMENT IN STO CK. THE REVENUE STRONGLY SUPPORT BOTH THE LOWER AUTHORITIES ACTION MAKING THE IMPUG NED ADDITION DURING THE COURSE OF HEARING. 5. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS. WE FIND THAT THE INSTANT SOLE ISSUE SURVIVING ISSUE AS TO WHETHE R IT IS THE ENTIRE UNDISCLOSED INVESTMENT IN STOCK OR ONLY THE GROSS PROFIT ELEMEN T DESERVES TO BE ADDED IN ASSESSEE IS NO MORE RES INTEGRA THIS TRIBUNALS CO-ORDINATE BENCHS DECISION IN M/S SUBARNA RICE MILL VS. ITO IN ITA NO.1781/KOL/2014 DECIDED ON 30.06.2015 HELD THAT IT HAS PROFIT ELEMENT RATHER THAN THE ENTIRE INVESTMENT WHICH DES ERVES TO BE ADDED AS UNEXPLAINED. THE REVENUE HAS FILED ITS APPEAL IN ITAT NO. 196 OF 2015 GA NO.4047 OF 2015 ITA NO.779/KOL/2017 A. Y. 2012-13 DIBYENDU JANA VS ITO WD-27(3), HOLDIA PAGE 3 BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT. THEIR LORDSHIP DECLINES THE SAME VIDE FOLLOWING DETAILED DISCUSSION:- THE COURT: THE LEGAL ISSUE THAT THE REVENUE HAS RAI SED IN THIS APPEAL IS WHETHER THE APPELLATE TRIBUNAL COULD HAVE DISREGARDED THE VALUE OF THE UNACCOUNTED PURCHASES MADE BY THE ASSESSEE AND REQUIRED ADDITIONAL TAX TO BE IMPOSED BY TAKING INTO ACCOUNT NOTIONAL SALES WHEN NO CORRESPONDING SALES HAD TAKEN PLACE DURING THE RELEVANT ASSESSMENT YEAR. IN COURSE OF SURVEY OPERATIONS CONDUCTED ON MARCH 2 4, 2010 AT THE RICE MILL OF THE ASSESSEE, IT WAS DISCOVERED THAT THERE WERE LARGE Q UANTITIES OF UNDISCLOSED STOCKS THE ASSESSING OFFICER DID NOT WEIGH THE ADDITIONAL STOC KS BUT WENT BY THE NUMBER OF BAGS SINCE THE BAGS, PRESUMABLY, WERE OF UNIFORM OR STAN DARD WEIGHT. THE ASSESSING OFFICER DISCOVERED THE UNDISCLOSED QU ANTUM OF PADDY TO BE TO THE EXTENT OF 37647 QUINTAL. THE EXCESS STOCK OF RICE WAS TO T HE EXTENT OF 581 QUINTAL AND THE EXCESS STOCK OF BRAND WAS TO THE EXTENT OF 45 QUINT AL. IT ALSO APPEARS THAT THE UNDISCLOSED, EXCESS STOCKS WERE CORROBORATED BY THE ENTRIES IN CERTAIN REGISTERS MAINTAINED AT THE RELEVANT POINT OF TIME AT THE RIC E MILL AND CERTAIN CONFESSIONAL STATEMENTS WERE MADE BY OR ON BEHALF OF THE ASSESSE E. ON THE BASIS OF THE ADDITIONAL STOCKS FOUND, THE ASSESSING OFFICER ASSESSED THE TO TAL TAXABLE INCOME TO BE TO THE EXTENT OF RS.3.92 CRORE AND A TAX DEMAND IN EXCESS OF RS.1 .61 CRORE WAS MADE ON THE ASSESSEE. THE ASSESSEES APPEAL BEFORE THE COMMISSIONER (APPE ALS) FAILED AND BY AN ORDER OF AUGUST, 25, 2014, THE ASSESSMENT ORDER OF MARCH, 28 , 2013 WAS UPHELD. THE COMMISSIONER LOOKED INTO THE FACTS, THE STATEMENTS MADE BY OR ON BEHALF OF THE ASSESSEE AND THE BOOKS OF THE ASSESSEE THAT HAD BEE N LOOKED INTO AT THE TIME OF SURVEY WHICH THE ASSESSEE SUBSEQUENTLY CLAIMED HAD BEEN LO ST OR DESTROYED AND, IN RESPECT WHEREOF, NO COMPLAINT HAD BEEN LODGED BY THE ASSESS EE. ON FACTS, THE COMMISSIONER (APPEALS) FOUND NO GROUNDS TO INTERFERE WITH THE QU ANTUM OF EXCESS STOCKS DISCOVERED BY THE ASSESSING OFFICER IN COURSE OF THE SURVEY. T HE COMMISSIONER ALSO AGREED WITH THE ASSESSING OFFICER AS TO THE QUANTUM OF INCOME W HICH HAD ESCAPED ASSESSMENT. THERE ARE TWO ASPECTS TO THE ORDER IMPUGNED DATED J UNE, 230,2015 PASSED BY THE APPELLATE TRIBUNAL: THE FACTUAL FINDINGS OF THE COM MISSIONER (APPEALS) AS APPEAR TO HAVE BEEN INTERFERED WITH BY THE APPELLATE TRIBUNAL ; AND, THE DIRECTION GIVEN FOR TAKING SALES OF RICE AND BRAN INTO ACCOUNT BEFORE A RRIVING AT THE ADDITIONAL INCOME WHICH COULD BE SAID TO HAVE ESCAPED ASSESSMENT. BEFORE THE COMMISSIONER (APPEALS), THE ASSESSEE HAD RELIED ON A DOCUMENT SIGNED BY AN OFFICIAL OF THE FOOD CORPORATION OF INDIA THAT E VIDENCED THE STOCK FIGURES AT THE RELEVANT POINT OF TIME. THE COMMISSIONER (APPEALS) DEALT WITH SUCH ASPECT OF THE MATER IN GREAT DETAIL AND BY REFERRING TO THE ADMIT TED STATEMENTS OF THE REPRESENTATIVES OF THE ASSESSEE, WHICH WERE NOT SOU GHT TO BE CONTROVERTED AT ANY POINT OF TIME ON BEHALF OF THE ASSESSEE CONCLUDED THAT IT WAS THE PHYSICAL VERIFICATION OF THE STOCKS UNDERTAKEN BY THE ASSESSING OFFICER IN COURS E OF THE SURVEY OPERATION THAT WAS TO BE GIVEN PRIMACY. INDEED, THE COMMISSIONER (APPE ALS) FOUND THAT THERE WAS NO EVIDENCE THAT THE FI OFFICIAL WHO HAD ISSUED THE CE RTIFICATE HAD UNDERTAKEN ANY PHYSICAL VERIFICATION OF THE STOCK T THE RICE MILL OF THE ASSESSEE AND THE DOCUMENT APPEARED TO HAVE BEEN FILLED UP BY THE ASSESSEE AND MERELY SIGNED BY THE FCI OFFICIAL. ITA NO.779/KOL/2017 A. Y. 2012-13 DIBYENDU JANA VS ITO WD-27(3), HOLDIA PAGE 4 SUCH PART OF THE ORDER OF THE COMMISSIONER (APPEALS ) WAS UNEXCEPTIONABLE AND COULD NOT HAVE BEEN INTERFERED WITH BY THE APPELLATE TRIB UNAL. INDEED, NO REASONS HAVE BEEN FURNISHED BY THE APPELLATE TRIBUNAL IN DISREGARDING THE PHYSICAL VERIFICATION OF THE STOCKS CARRIED OUT BY THE ASSESSING OFFICER. FURTHE R, THE AREA OF THE GODOWN AS INDICATE DIN THE FCI CERTIFICATE WAS OF NO CONSEQUE NCE SINCE THE ASSESSING OFFICER FOUND STOCKS PILED OUTSIDE THE GODOWN AT THE TIME O F THE SURVEY. ACCORDINGLY, TO THE EXTENT THAT THE APPELLATE TRIBU NAL ACCEPTED THE QUANTUM OF ADDITIONAL STOCKS ON THE BASIS OF THE CERTIFICATE I SSUED BY THE CONCERNED FCI OFFICIAL, SUCH ORDER IS UNACCEPTABLE AND IS SET ASIDE. THE OR DER OF THE COMMISSIONER (APPEALS) IN SUCH REGARD IN RESTORED. THE ADDITIONAL QUANTUM AS DISCOVERED DURING THE COURSE OF THE SURVEY OPERATION WILL FASTEN TO THE ASSESSEE. HOWEVER, THE OTHER ASPECT OF THE MATTER WAS DEALT W ITH BY THE APPELLATE TRIBUNAL ON A POINT OF PRINCIPLE AND SUCH MATER DOES NOT CALL FOR ANY INTERFERENCE. ACCORDING TO THE APPELLATE TRIBUNAL THE VALUE OF TH E ENTIRE QUANTITY OF ADDITIONAL STOCKS THAT WERE DISCOVERED IN COURSE OF THE SURVEY OPERATION COULD NOT BE REGARDED AS THE ADDITIONAL INCOME OF THE ASSESSEE AND AMENAB LE TO TAX. THERE WAS A SPECIFIC GROUND TAKEN BEFORE THE APPELLATE TRIBUNAL, WHICH W AS A LEGAL QUESTION, AS TO WHETHER THE UNDISCLOSED PURCHASE COULD BE TAKEN AT THE ADDITIONAL INCOME WITHOUT REFERENCE TO THE POSSIBLE SALE OF THE PADDY WHEN CO NVERTED. THE ASSESSEE REFERS TO A JUDGMENT OF THE GUJARAT HI GH COURT REPORTED AT 388 ITR 377. THE PRINCIPLE ENUNCIATED IN SUCH JUDGMENT IS THAT W HEN UNDISCLOSED PURCHASES OF SUCH NATURE ARE DISCOVERED, IT IS ONLY THE PROFIT EMBEDD ED IN THE TRANSACTIONS WHICH CAN BE ADDED TO THE TOTAL INCOME. THE GUJARAT HIGH COURT R ELIED ON SOME OF THIS PREVIOUS JUDGMENTS TO HOLD THAT NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT E LEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCO ME OF THE ASSESSEE . IN THE CIRCUMSTANCES AND PARTICULARLY SINCE THE FAC TUAL FINDINGS RENDERED BY THE COMMISSIONER (APPEALS) AS TO THE QUANTUM OF ADDITIO NAL STOCKS HAVE NOW BEEN RESTORED, THE ORDER IMPUGNED ON THE METHODOLOGY FOR THE ASCRTAINMENT OF THE INCOME WHICH ESCAPED ASSESSMENT WOULD PASS MUSTER. THE APP ELLATE TRIBUNAL MERELY DIRECTED THE GROSS PROFIT THAT THE ADDITIONAL PURCHASE WAS C APABLE OF GENERATING TO BE REGARDED AS THE ADDITIONAL INCOME FOR TAX TO BE ASS ESSED ON SUCH BASIS. SUCH VIEW OF THE APPELLATE TRIBUNAL DOES NOT CALL FOR ANY INTERF ERENCE. ACCORDINGLY, ITAT NO. 196 OF 2015 AND GA NO.4047 OF 2015 ARE DISPOSED OF BY MODIFYING THE JUDGMENT AND ORDER OF THE APPELLATE T RIBUNAL DATED JUNE 30,2015 AS INDICATED. 6. WE ADOPT ABOVE THEIR LORDSHIP ABOVE EXTRACTED DI SCUSSION MUTATIS MUTANDIS TO CONCLUDE THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN ADDING THE ENTIRE SUM OF UNEXPLAINED INVESTMENT IN STOCK ADDITION THAN ONLY THE PROFIT ELEMENT. THE ASSESSING ITA NO.779/KOL/2017 A. Y. 2012-13 DIBYENDU JANA VS ITO WD-27(3), HOLDIA PAGE 5 OFFICER IS ACCORDINGLY DIRECTED TO RE-COMPUTE THE I MPUGNED ADDITION AS PER ASSESSEES PROFIT RATE SHOWN / ACCEPTED ALREADY IN ITS BOOKS T HEREFORE. 7. THIS ASSESSEES APPEAL IS PARTLY ALLOWED IN ABOV E TERMS. ORDER PRONOUNCED IN OPEN COURT ON 08/05/2019 SD/- SD/- ( &) (( &) (J.SUDHAKAR REDDY) (S.S.GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER *DKP-SR.PS ) - 08/05/2019 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DIBYENDU JANA, BHUBAN KALUA, KELOMAL, TA MLUK, PURBA MEDNIPUR, PIN- 721627 2. /RESPONDENT-ITO, WARD-27(3), BASUDEVPUR, KHANJANCHA K,HALDIA DIST. PURBA ME DINIPUR 3. , - / CONCERNED CIT 4. - - / CIT (A) 5. . ((, , , /DR, ITAT, KOLKATA 6. 2 / GUARD FILE. BY ORD ER/ , /TRUE COPY/ ,,