ITO-Ward-3(4), Kolkata, Kolkata V. M/s Bisco Steel Udyog Pvt. Ltd., Jharkhand

ITA 797/KOL/2012

• Counselvise Citation: 79723514 RSA 2012
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 17-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K K DAS
• Assessee Lawyers: M SATNALIWALA F
• Section: 69C; 133(6)

Judgement Text

I.T.A. NO.: 797/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA CORAM : SHRI R.S. SYAL, (ACCOUNTANT MEMBER) AND SH. GEORGE MATHAN (JUDICIAL MEMBER) I.T.A. NO.: 797/KOL./ 2012 ASSESSMENT YEAR : 2008-2009 INCOME TAX OFFICER, .............................. .........APPELLANT WARD-3(4), KOLKATA, 8/2, ESPLANADE EAST, DWARLIE HOUSE, KOLKATA-700 069 -VS.- M/S. BISCO STEEL UDYOG ( PVT.) LTD.,............... ...............RESPONDENT SANTOSH MANSION, R ROAD, BISTUPUR, BISTUPUR, JAMSHEDPUR, JHARKHANA-831 001 [PAN : AACCB 1389 C] APPEARANCES BY: SHRI K.K. DAS, JCIT, SR. D.R., FOR THE DEPARTMENT SHRI M. SATNALIWALA, F.C.A., FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : NOVEMBER 18, 2013 DATE OF PRONOUNCING THE ORDER : NOVEMBER 19 TH , 2013 O R D E R PER R.S. SYAL : 1. THIS APPEAL BY THE REVENUE IS ARISING OUT OF THE ORDER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, KOLKATA ON 29 TH FEBRUARY, 2012 IN RELATION TO THE ASSESSMENT YEAR 2008-09. 2. THE FIRST GROUND COMPRISES OF TWO DELETIONS, VIZ ., RS.15,38,350/- ON ACCOUNT OF SUPPRESSED PURCHASE AND RS.65,257/- ON A CCOUNT OF SALES TAX PENALTY. 3. FACTS CONCERNING THE FIRST COMPONENT OF THIS GRO UND ARE THAT THE ASSESSEE SHOWED SALES OF RS.2.29 CRORES. DURING THE COURSE OF ASSESSMENT I.T.A. NO.: 797/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO 5 PROCEEDINGS, ASSESSEE FILED LIST OF PURCHASES AND C REDITORS. NOTICE UNDER SECTION 133(6) WAS ISSUED TO SOME OF THE PARTIES. O NE SHRI K.S. AHLUWALIA RESPONDING TO THE ASSESSING OFFICERS NOTICE AND ST ATED THAT SALES TO THE TUNE OF RS.46,04,439/- WERE MADE TO THE ASSESSEE. A S AGAINST THAT, THE ASSESSEE HAD SHOWN PURCHASES FROM THIS PARTY ONLY T O THE TUNE OF RS.30,66,089/-. THE ASSESSING OFFICER MADE ADDITION FOR THE BALANCE AMOUNT OF RS.15,38,350/- AS `SUPPRESSION OF PURCHAS ES. THE LD. CIT(APPEALS) WAS PLEASED TO DELETE THIS ADDITION BY OBSERVING THAT IF THE AMOUNT OF PURCHASE WAS TO BE INCREASED, THEN THE AM OUNT OF PROFIT WOULD CORRESPONDINGLY STAND REDUCED. 5. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE ASSE SSING OFFICER OBSERVED DIFFERENCE IN THE AMOUNT OF PURCHASES RECORDED BY A SSESSEE FROM SHRI K.S. AHLUWALIA AND SALES SHOWN BY THAT PARTY. AS PER SHR I K.S. AHLUWALIA, HE MADE SALE TO THE ASSESSEE FOR RS.46.04 LAKHS AGAINS T WHICH THE ASSESSEE RECORDED ONLY RS.3.66 LAKHS. IT IS AXIOMATIC THAT T HE ASSESSEE RECORDED SHORT PURCHASES TO THE TUNE OF RS.15.38 LAKHS. IF T HIS DIFFERENCE IS CORRECT AND THE ASSESSEE MADE PURCHASES OUTSIDE THE BOOKS O F ACCOUNTS, THEN THE ADDITION ON ACCOUNT OF SUCH PURCHASES WAS RIGHTLY C ALLED FOR. IN OUR CONSIDERED OPINION, THE LD. CIT(APPEALS) WAS NOT JU STIFIED IN DELETING THIS ADDITION BY OBSERVING THAT INCREASE IN SUCH PURCHAS ES WOULD AFFECT THE CLOSING STOCK AND THUS NEUTRALISE THE DIFFERENCE. 5.1. SECTION 69C PROVIDES THAT WHERE IN ANY FINANCI AL YEAR, THE ASSESSEE HAS INCURRED AN EXPENDITURE AND HE OFFERS NO SOURCE OF SUCH EXPENDITURE OR PART THEREOF OR THE EXPLANATION, IF ANY, OFFERED BY HIM IS NOT IN THE OPINION OF ASSESSING OFFICER, SATISFACTORY, THEN TH E AMOUNT COVERED BY SUCH EXPENDITURE OR PART THEREOF MAY BE DEEMED TO B E INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. IT IS RELEVANT TO OBSERVE THE MANDATE OF THE PROVISO TO SECTION 69C WHICH WAS INSERTED BY TH E FINANCE (NO. 2) ACT, 1998 W.E.F. 1 ST APRIL, 1999. IT PROVIDES THAT SUCH UNEXPLAINED EXP ENDITURE I.T.A. NO.: 797/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO 5 AS REFERRED TO IN SECTION 69C, WHICH IS DEEMED TO B E INCOME OF THE ASSESSEE, SHALL NOT BE ALLOWED AS A DEDUCTION IN AN Y HEAD OF INCOME. THE CRUX OF THIS PROVISION, WHEN READ IN TOTALITY, IS T HAT IF ANY EXPENDITURE IS INCURRED OUTSIDE THE BOOKS OF ACCOUNT, FOR WHICH TH ERE IS UNSATISFACTORY EXPLANATION OF THE SOURCE, THEN THE ADDITION WOULD BE CALLED FOR U/S 69C AND THERE IS NO MANDATE FOR ALLOWING DEDUCTION FOR THE EXPENDITURE WHICH IS REPRESENTED BY SUCH ADDITION. THE REASONING GIVE N BY THE LD. CIT(APPEALS) FOR DELETING THE ADDITION IS IN CONTRA DICTION TO THE PRESCRIPTION OF PROVISO TO SECTION 69C. IF THE PURC HASES ARE FOUND TO BE UNRECORDED, THEN SUCH AMOUNT IS TO BE ADDED BUT THE RE CAN BE NO QUESTION OF ALLOWING ANY FURTHER DEDUCTION OF THIS SUM. IF THE ADDITION IS MADE U/S 69C FOR UNRECORDED EXPENSES AND DEDUCTION IS ALSO S IMULTANEOUSLY ALLOWED, IT WOULD NEUTRALISE THE ADDITION IN ALL CA SES AND THUS DEFEAT THE VERY PURPOSE OF THE SECTION. WE, THEREFORE, DO NOT APPROVE THE REASONING OF THE LD. FIRST APPELLATE AUTHORITY ON THIS COUNT, WHICH IS HEREBY SET ASIDE. 6. BE THAT AS IT MAY, LD. A.R. CONTENDED THAT THE A SSESSING OFFICER DID NOT CONFRONT THE ASSESSEE WITH THE DETAILS RECEIVED FROM SH. K.S. AHLUWALIA SHOWING THE SALES MADE TO THE EXTENT OF R S.46.04 LAKH. IT WAS PUT FORTH THAT THE PURCHASE SHOWN BY THE ASSESSEE A T RS.30.66 LAKH WERE CORRECT. IN OUR CONSIDERED OPINION, IT WOULD BE IN THE FITNESS OF THE THE THINGS IF THE IMPUGNED ORDER ON THIS ISSUE IS SET A SIDE AND THE MATTER IS RESTORED TO THE FILE OF ASSESSING OFFICER. WE ORDER ACCORDINGLY AND DIRECT THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH AF TER CONFRONTING THE ASSESSEE WITH THE STATEMENT OR OTHER MATERIAL SUBMI TTED BY SHRI K.S. AHLUWALIA IN SUPPORT OF HIS SUBMISSION THAT HE HAD MADE SALES OF RS.46.04 LAKH TO THE ASSESSEE. 7. THE SECOND COMPONENT OF THIS GROUND IS AGAINST T HE DELETION OF ADDITION OF RS.65,257/- ON ACCOUNT OF SALES TAX PEN ALTY. I.T.A. NO.: 797/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO 5 8. FACTS APROPOS THIS GROUND ARE THAT THE ASSESSING OFFICER MADE ADDITION OF RS.77,257/- BY TREATING THIS AMOUNT AS SALES TAX PENALTY. THE LD. CIT(APPEALS) REDUCED THIS ADDITION TO RS.12,000 /- BY OBSERVING FROM THE CHALLANS THAT THE AMOUNT OF PENALTY WAS ONLY RS .12,000/- AND THE REMAINING SUM WAS TOWARDS REGULAR DEMAND OF SALES-T AX. NO MATERIAL HAS BEEN PLACED ON RECORD BY LD. D.R. TO SHOW THAT THE FINDING RECORDED BY LD. CIT(APPEALS) IS INCORRECT IN ANY MANNER. WHEN THE POSITION AS NOTICED BY THE LD. FIRST APPELLATE AUTHORITY IS THAT ONLY A SU M OF RS.12,000/- WAS PAID BY THE ASSESSEE AS SALES TAX PENALTY, THEN THERE CA N BE ANY QUESTION OF MAKING ANY ADDITION OF RS.65,257/- WHICH WAS PAID A S REGULAR DEMAND OF SALES TAX. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER ON THIS ISSUE. 9. REVISED GROUND NO. 6 IS AGAINST THE DELETION OF RS.16,23,510/- MADE ON ACCOUNT OF CESSATION OF LIABILITY UNDER SECTIO N 41(1) OF THE ACT. 10. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THA T THE ASSESSEE HAD SHOWN OPENING BALANCE OF RS.2,00,000/- IN THE ACCOU NT OF M/S. ROY INDUSTRIES AND CLOSING DEBIT BALANCE OF RS.14,678/- . THE SAID PARTY HAD SHOWN OPENING BALANCE AT RS.18,23,510/- AND CLOSING BALANCE AT RS.16,23,510/-. THE ASSESSEE EXPLAINED THE DISCREPA NCY BY STATING THAT HARD COKE AMOUNTING TO RS.18,14,540/- PURCHASED FR OM THE PARTY WAS BAD IN QUALITY AND AFTER DISCUSSION THE SAME WAS DE STROYED. THE ASSESSEE ALSO STATED THAT THE AMOUNT OF RS.16,23,510/- WAS W RITTEN BACK IN THE EARLIER YEAR AND ONLY A SUM OF RS.2,00,000/- WAS CA RRIED FORWARD AS OPENING BALANCE IN THIS ACCOUNT. THE ASSESSING OFFI CER OPINED THAT THERE WAS NO OBLIGATION ON THE PART OF THE ASSESSEE TO PA Y OUTSTANDING BALANCE OF RS.16,23,510/-. THIS LED TO THE ADDITION OF THE EQUAL SUM UNDER SECTION 41(1) OF THE ACT. THE LD. CIT(APPEALS) DELETED THE ADDITION. 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE MATERIAL AVAILABLE ON RECORD, WE FIND FROM THE A/CS. OF ROY INDUSTRIES IN THE BOOKS OF ASSESSEE FOR THE YEAR IN QUESTION THAT THERE IS AN OPENING BALANCE OF I.T.A. NO.: 797/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO 5 RS.2,00,000/-. THIS PARTYS ACCOUNT IN THE ASSESSEE S BOOKS FOR THE EARLIER YEAR AS ON 31.02.2007 IS AVAILABLE AT PAGE 6 OF THE PAPER BOOK. FROM SUCH ACCOUNT IT CAN BE SEEN THAT A SUM OF RS.16.23 LAKHS WAS DEBITED ON 31.03.2007 WITH THE REMARKS SUNDRY CREDITORS WRITT EN OFF. THIS AMOUNT DEBITED TO THE ACCOUNT OF ROY INDUSTRIES WAS CREDIT ED TO THE `OTHER INCOME WITH THE REMARKS CREDIT BALANCE WRITTEN BA CK TOTALLING RS.72,51,225.80. THE LD. A.R. CONTENDED THAT THIS A MOUNT TO THE TUNE OF RS72.51 LAKH INCLUDED A SUM OF RS.16.23 LAKH, WHICH FACT WAS OBSERVED BY LD. CIT(APPEALS) FOR DELETING THIS ADDITION. THE L D. DR COULD NOT SHOW THAT IN THE PRECEDING YEAR THIS AMOUNT ABEIT DEBITE D TO THE ACCOUNT OF ROY INDUSTRIES, WAS NOT CREDITED TO THE PROFIT AND LOSS ACCOUNT. 12. BE THAT AS IT MAY, WE FIND THAT THE OPENING BAL ANCE OF THE ACCOUNT OF OF ROY INDUSTRIES FOR THE YEAR IN QUESTION IS ONLY RS.2 LAKHS. THE AMOUNT WRITTEN BACK IN THE PRECEDING YEAR CANNOT BE CONSID ERED AS INCOME FOR THE CURRENT YEAR UNDER SECTION 41(1). THIS SECTION CLEARLY PROVIDES THAT WHERE ANY ALLOWANCE OF DEDUCTION HAS BEEN MADE IN A SSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE, OR TRADING LI ABILITY INCURRED BY THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE OBTAINS WHETHER IN CASH OR IN ANY OTHER MANNER, THE AMOUNT OF SUCH LOSS OR EXPENDITURE ETC. BY WAY OF REMISSION OR CESSATIO N THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON SHALL BE DEEMED TO BE PROFI TS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE T O INCOME TAX AS INCOME OF THAT PREVIOUS YEAR. IT IS MANIFEST THAT T HE CHARGE UNDER SECTION 41(1) IS ATTRACTED IN THE YEAR IN WHICH THE CESSATI ON OR REMISSION TAKES PLACE AND NOT IN ANY OTHER YEAR. HERE IS A CASE IN WHICH THE CESSATION OR REMISSION TOOK PLACE IN THE PRECEDING YEAR WHEN THE ASSESSEE DEBITED THE ACCOUNT OF THIS PARTY WITH A SUM OF RS.16.23 LAKHS. NO EVENT HAPPENED IN THE CURRENT YEAR BY MEANS OF WHICH THE ASSESSEE REC EIVED ANY REMISSION OR CESSATION OF LIABILITY ON THIS ACCOUNT. AS SUCH, WE HOLD THAT THE CIT(APPEALS) WAS JUSTIFIED IN DELETING THIS ADDITIO N BECAUSE THE AMOUNT I.T.A. NO.: 797/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO 5 STOOD REMITTED IN THE EARLIER YEAR AND NOT THE CURR ENT YEAR. THE IMPUGNED ORDER IS UPHELD ON THIS ISSUE. 13. IN THE RESULT, APPEAL IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DAY OF NOVEMBER, 2013. SD/- SD/- GEORGE MATHAN R.S. SYAL (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 19 TH DAY OF NOVEMBER, 2013 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA *LAHA/SR. P.S.