M/s G. Paul & Sons, Kolkata V. Pr. CIT-15, Kolkata, Kolkata

ITA 810/KOL/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3353 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-11-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 21-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Keywords: Assessment record; TDS; Set aside
• Section: 201; 263

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 810 / KOL / 2017 ASSESSMENT YEAR :2011-12 M/S G. PAUL & SONS 167, NETAJI SUBASH ROAD, RAJAKATRA, KOLKATA-700 007 [ PAN NO.SSVGH 4738 R ] V/S . PRINCIPAL COMMISSIONER OF INCOME TAX-15, 3, GOVERNMENT PLACE, KOLKATA-700 001 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI VIGYANESHWAR NATH DATTA, ADVOCATE /BY RESPONDENT DR. P.K. SRIHARI, CIT-DR /DATE OF HEARING 04-11-2019 /DATE OF PRONOUNCEMENT 15 -11-2019 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2011-12 ARISES AGAINST THE PRINCIPAL COMMISSIONER OF INCOME TAX-15 KOLKATAS O RDER DATED 10.02.2016 PASSED IN M.NO. PCIT-15/KOL/U/S263/15-16/6882-84 IN VOLVING PROCEEDINGS U/S 263 OF THE INCOME TAX ACT, 1961; THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. IT EMERGES FROM THE PERUSAL OF THE CASE FILE THA T ASSESSEES INSTANT APPEAL SUFFERS FROM 375 DAYS DELAY IN FILING. IT HA S PLACED ON RECORD A CONDONATION PETITION / AFFIDAVIT DATED 20.04.2017 S OLEMNLY PLEADING THEREIN THAT ITS MANAGING PARTNER, LOOKING AFTER ALL THE AC COUNTS AS WELL AS TAXATION MATTERS SUFFERED FROM VARIOUS HEALTH AILMENTS AS PE R THE RELEVANT MEDICAL ITA NO.NO.810/KOL/2017 A.Y. 2011-12 M/S G.PAUL & SONS VS. PCIT-15,KOL. PAGE 2 CERTIFICATES / TREATMENT RECORDS ANNEXURED WITH THE PETITION. ALL THESE PLEADINGS HAVE GONE UNREBUTTED FROM THE REVENUE SIDES. WE QUO TE HON'BLE APEX COURTS LANDMARK JUDGMENT IN COLLECTOR, LAND ACQUISITION VS. MST. KATIJI (1987) 167 ITR 471 (SC) THAT THE CAUSE OF SUBSTANTI AL JUSTICE MUST PREVAIL OVER ALL OTHER TECHNICAL CONSIDERATIONS AND CONDONE THE IMPUGNED DELAY OF 375 DAYS DELAY IN FILING. 3. WE NOW ADVERT TO MERITS OF THE MAIN APPEAL. THE ASSESSEE ADMITTEDLY IS A PARTNERSHIP FIRM ENGAGED IN RE-SELLING TEA BUSINE SS. IT IS SUBMITTED ITS RETURN ON 28.09.2011 DISCLOSING TOTAL INCOME OF 3,78,365/- WHICH STOOD PROCESSED ON 23.03.2013 ACCEPTING THE RETURNED INCOME. THE AS SESSING OFFICER THEREAFTER FRAMED THE ASSESSEES REGULAR ASSESSMENT IN ISSUE ON 21.02.2014 ADDING THE ALLEGED UNDER-VALUATION OF CLOSING STOCK AMOUNT OF 15,91,226/- ON ACCOUNT OF THE STOCK VALUATION DISCLOSED AT THE AS SESSEES BEHEST IN THE BOOKS VIS--VIS THOSE STATED BEFORE THE CREDITOR BA NK FOR ASSESSMENT ORDER AVAILING CREDIT FACILITIES THEREFROM. 4. WE FIND THAT ASSESSEE PREFERRED APPEAL BEFORE TH E CIT(A) AGAINST THE SAID ADDITION. THE PCIT IN THE MEANTIME ISSUED HIS SHOW CAUSE NOTICE DATED 26.09.2014 ASSUMING SEC. 263 REVISION JURISDICTION ON THE GROUND AT THE ABOVE STATED REGULAR ASSESSMENT FRAMED ON 21.02.2014 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE INTER ALIA ON THE GROUND THAT THE ASSESSING OFFICER HAD NOT INVOKED SEC. 145(3) ONCE HE HIMSELF WAS NOT SATISFIED WITH THE CORRECTNESS OF THE ACCOUNTS DUE TO WHICH CLOSING STOCK REVEALED UNDER-VALUATION, DEDUCTION OF A PARTNERS SALARY U/S40(B)(V) WAS ALLOWED ALTHOUGH PARTNERSHIP DEED NOWHERE CONTAINED NAMES OF THE PARTNERS OR QUANTUM OF THEIR SALARY AND BROKERAGE WAS PAID T O VARIOUS TEA BROKERS WITHOUT TDS DEDUCTION ETC. 5. THE ASSESSEE APPEARED AND FILED ITS REPLY ALONGI WTH ITS BALANCE-SHEET, PROFIT AND LOSS ACCOUNT, STOCK STATEMENT, STOCK REG ISTER, DAILY SALE BREAK-UP, ITA NO.NO.810/KOL/2017 A.Y. 2011-12 M/S G.PAUL & SONS VS. PCIT-15,KOL. PAGE 3 PARTY-WISE BROKER LIST, PARTNERS DEED AND RELEVANT PURCHASE BILLS. THE SAME STAND REJECTED IN THE PCITS ORDER UNDER CHALLENGE AS UNDE:- ACCORDINGLY THE SHOW CAUSE DATED 26/09/2014 WAS IS SUED TO THE ASSESSEE PROPOSING TO PASS A SUITABLE ORDER AND THE CASE WAS POSTED FOR HEARING ON 16/10/2014. THE A/R APPEARED ON 16/12/2014 AND FURN ISHED A WRITTEN SUBMISSION ALONGWITH AUDITED BALANCE SHEET, P/L ACCOUNT, RELEV ANT STOCK STATEMENT, STOCK REGISTER, SALES BREAKUP (DAILY BASIS), PURCHASE & S ALES REGISTER, PARTY-WISE BROKERAGE LIST, PARTNERSHIP DEED & RELEVANT PURCHASE BILL. TH E CONTENTIONS OF THE PARTNER ARE REPRODUCED BELOW:- (A) BEING AGGRIEVED BY THE ORDER OF THE LD. AO WE H AVE CARRIED THE MATER IN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX APPEAL (XXX KOL.) ON 27/03/2014. (B) THAT WE HAVE BEEN FOLLOWING CONSISTENT METHOD O F ACCOUNTING SINCE THE FORMATION OF THE FIRM AND OPENING STOCK & CLOSING S TOCK HAVE BEEN TAKEN AND VALUED ON THE BASIS OF PRINCIPLE OF COST PRICE OR MARKED PRICE WHICHEVER IS LESS. (C) THAT WE HAVE BEEN SUBMITTING MONTHLY STOCK STAT EMENT OF THE FIRM TO OUR BANKER FOR THE OVERDRAFT FACILITIES FOR WHICH REGUL AR STOCK STATEMENT PER MONTH HAS TO BE FURNISHED. IT IS STATED THAT STOCK STATEMENT ON THAT ITEM PRODUCED TO THE BANK MERELY ON ROUGH ESTIMATED BASI S WITH THE OBJECT TO COVER COMPLIANCE OF THEE TERMS AND CONDITIONS OF TH E BANK TO ENJOY THE OVERDRAFT AMOUNT BEING SANCTIONED. WE ARE ENCLOSING HEREWITH THE MONTH- WISE STOCK STATEMENT DERIVED FROM OUR BOOKS OF ACCO UNT AND REGISTERS, BEING MAINTAINED REGULARLY. THE DETAILS OF SOCK STA TEMENT INCLUDE THE QUANTITY OF THE OPENING STOCK, PURCHASE AND SALES & ALSO THE CLOSING STOCK, WHERE THE VALUE IN EACH CASES HAS BEEN RECOR DED & GIVEN TO YOUR KIND PERUSAL AND NECESSARY VERIFICATION. THAT YOUR HONOUR MAY GO INTO THE STATEMENT AND FIND THAT THERE IS A DIFFERENCE OF OP ENING STOCK IN QUANTITY WITH THE BOOKS AND STATEMENT PRODUCED TO THE BANK. (D) THAT YOUR HONOUR HAS POINTED OUT IN THE SHOW CA USE NOTICE THAT STOCK OF 825 KG. TEA PURCHASED @ 142/ PER KG. ON 31/03/2011 HAS BEEN VALUED AT 123/- PER KG. FOR INCOME TAX PURPOSE AND125/- TO TH E BANK. IT CAN BE STATED THAT PURCHASE PRICE CANNOT BE ALTERED BY US IN ANY CASE. WE FOLLOW THE PRINCIPAL OF COST PRICE OR MARKET PRI CE WHICHEVER IS LESS. HENCE THE STOCK WAS VALUED AT COST PRICE BECAUSE TH ERE IS A REGULAR FUTURES IN OUR TEA MARKET FOR FLUCTUATION OF PRICES OF THE PRODUCT. IF THE EXPORTED GOODS IS LANDED IN THE COUNTRY THE FLUCTUA TION RATE IS OCCURRED VERY FREQUENTLY OVER WHICH WE HAVE NO CONTROL AT AL L. (E) THAT YOUR HONOUR WE ARE PRODUCING EVIDENCES IN RESPECT OF TAX INVOICE RELATING TO THE PERIOD OF MARCH ENDING 201 AND FIRS T PART OF APRIL 2011 FROM WHERE IT CAN BE FOUND THAT THE PRICE OF TEA PER KG. HAD BEEN REDUCED CONSIDERABLY COMPELLING US TO VALUE THE STOCK OF GO ODS AT THE END OF THE MARCH 2011 AT MARKET PRICE, OR REALIZABLE VALUE. WE ARE ENCLOSING HERE WITH THE XEROX COPY OF THE BILLS IN SUPPORT OF OUR ARGUMENT. (F) THAT OUR PARTNERSHIP DEDUCTION PROVIDED VERY C LEARLY THE MANNER OF QUANTIFYING REMUNERATION TO WORKING PARTNERS, WE HA VE BEEN FOLLOWING THE PROVISION OF SECTION 40(B)(V) STRICTLY. YOUR HONOUR MY HAVE A LOOK AT OUR PARTNERSHIP DEDUCTION, IF DEEMED NECESSARY. (G) THAT WE HAVE PURCHASED MATERIALS FROM THE REGIS TERED PARTIES WHO HAVE RAISED THE TAX INVOICE UPON US MENTIONING THE DETAI LS OF THE PARTICULARS SUCH AS RATE, PRICE, AND QUANTITY PARTICULARS OF GO ODS PURCHASED, VAT, SERVICE TAX AND THE AMOUNT OF BROKERAGE. EVERYTHING IS INCLUDED IN THE TAX INVOICE AND WE USUALLY HAVE DEBITED THE ENTIRE AMOU NT EXCEPT VAT AND ITA NO.NO.810/KOL/2017 A.Y. 2011-12 M/S G.PAUL & SONS VS. PCIT-15,KOL. PAGE 4 SERVICE TAX. WE DO NOT PAY THE BROKERAGE SEPARATELY . HOWEVER, THE BROKERAGE AMOUNT RECEIVED HAS BEEN SHOWN AS INCOME IN THE RETURN OF INCOME TAX OF THE RESPECTIVE PARTIES. THE A/R ALSO INFORMED THAT APPEAL HAS BEEN FILED ON THE GROUND OF INAPPROPRIATE/DISPUTED VALUATION OF CLOSING STOCK. ANOTHER WRITTEN SUBMISSION WAS FILED ON 05.02.2016 IN RESPECT OF DISPUTED CLOSING STOCK WHICH IS ALLEGED BY THE AO AS UNDERVALUED. THE RELEVANT PORTIONS OF THE CONTENTI ON OF THE AO IS REPRODUCED BELOW:- (A) THAT, YOUR ASSESSEE HAS BEEN MAINTAINING BOOKS OF ACCOUNT REGULARLY AND CONSISTENT METHOD OF ACCOUNTANCY HAS BEEN FOLLOWED AND ACCOUNTS HAVE BEEN PREPARED ON THE BASIS OF ACCEPTED ACCOUNTING P RINCIPLES. (B) THAT, THE CLOSING STOCK HAS BEEN VALUED ON THE PRINCIPAL OF AT COST MARKET PRICE WHICHEVER IS LESS IN ORDER TO HOW A CORRECT A MOUNT OF PROFIT OF THE FIRM. THE DETAIL OF VALUATION OF CLOSING STOCK IS A TTACHED HEREWITH FOR YOUR KIND PERUSAL AND NECESSARY RECORDS. THE VALUATION O F CLOSING STOCK HAS BEEN MADE ON THE BASIS OF INVOICE PRICE AND VALUE P LACED ON EACH ITEM ACCORDING TO THE COST PRICE. IT IS STATED THAT DIFF ERENT QUALITY AND DESCRIPTION OF GOODS AT THE END OF THE YEAR HAS BEEN SHOWN IN H T STOCK STATEMENT AND DIFFERENT VALUE OF EACH ITEM HAS ALSO BEEN SHOWN IN THE SAID STATEMENT. AS YOUR ASSESSEE HAS BEEN CARRYING ON BUSINESS SINC E LONG LONG BACK SOME ASSERTED ITEM OF GOODS HAVE BEEN SHOWN IN THE CLOSING STOCK WHERE ACTUAL VALUE COULD BE ASCERTAINED BUT THE AVERAGE P RICE HAS BEEN TAKEN INTO CONSIDERATION. (C) THAT, YOUR ASSESSEE DEALS IN TEA AND THE PRICE OF THE GOODS DOES NOT REMAIN THE SAME THROUGHOUT THE YEAR. THE PRICE IS B EING FLUCTUATED FROM TIME TO TIME. HERE IT IS PERTINENT TO MENTION THAT THE PRICE OF THE GOODS HAS BEEN FALLEN CONSIDERABLY N THE MONTH OF APRIL 2011. (D) THAT, YOUR ASSESSEE HAS PROVIDED REMUNERATION T O PARTNERS IS ACCORDANCE WITH THE PARTNERSHIP DEDUCTION WHICH HAS BEEN ACCEP TED BY THE DEPARTMENT SINCE THE INTRODUCTION OF THE PROVISIONS AND NO REMUNERATION TO THE PARTNERS WAS PAID OR PAYABLE BEYOND THE PROV ISIONS OF THE ACT. (E) THAT, YOUR ASSESSEE HAS PAID SOME AMOUNT OF BRO KERAGE TO THE TEA AUCTIONEERS AT THE TIME OF PURCHASE AND ENTIRE BROK ERAGE AMOUNT HAS BEEN CHARGED TO THE PURCHASE ACCOUNT AND IT HAS NOT BEEN SHOWN SEPARATELY IN THE TRADING OR PROFIT & LOSS A/C. IT IS STATED FURTHER THAT THE RECIPIENT HAS GIVEN US THE CERTIFICATES MENTIONING THEREIN THAT THE SAID BROKERAGE HAS BEEN SHOWN AS INCOME IN THEIR RETURN. I HAVE CAREFULLY CONSIDERED THE ISSUES WITH SPECIFI C REFERENCE TO THE RELEVANT ASSESSMENT RECORDS AS WELL AS ADMISSION MADE BY THE ASSESSEE IN HIS WRITTEN SUBMISSION. THE FACTS NARRATED ABOVE AND SUBMISSION MADE BY THE ASSESSEE INDICATES THAT SOME ASPECTS REMAINED TO BE SEEN BY THE AO DURING THE ASSESSMENT PROCEEDINGS. NON-APPLIANCE OF SECTIONS OF 145(3), A LLOWANCE OF PARTNERSHIP SALARY AND BROKERAGE, ETC., HAS RESULTED IN THE ORDER DATE D 21/02/2014 AS PREJUDICIAL AND ERRONEOUS TO THE INTEREST OF THE REVENUE. IN VIEW OF THE ABOVE, THE ORDER DATED 21/02/2014 PA SSED BY ITO W-43(1), KOLKATA IS FOUND TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERE ST OF REVENUE AND HENCE SET ASIDE WITH THE DIRECTION TO PASS FRESH ASSESSMENT ORDER A FTER EXAMINING THE EVIDENCES AND DOCUMENTS IN RESPECT OF VARIOUS ISSUES RAISED AFTER GIVING OPPORTUNITY TO THE ASSESSEE AND IN ACCORDANCE WITH LAW. 6. LEARNED COUNSEL VEHEMENT SUBMITS DURING THE COUR SE OF HEARING THAT THE PCIT HAS ERRED IN LAW AND ON FACT IN REVISING T HE ABOVE REGULAR ITA NO.NO.810/KOL/2017 A.Y. 2011-12 M/S G.PAUL & SONS VS. PCIT-15,KOL. PAGE 5 ASSESSMENT ON THE ABOVE THREE COUNTS((SUPRA). HIS C ASE IS THAT THE SAID REGULAR ASSESSMENT IS NEITHER ERRONEOUS NOR IT CAUS ES PREJUDICE TO INTEREST OF THE REVENUE SINCE THE ASSESSING OFFICER HAD RIGHTLY NOT REJECTED BOOKS US/ 145(3) OF THE ACT AND FURTHER ALLOWED DEDUCTION OF PARTNERS SALARY AS WELL AS BROKERAGE PAID TO THE VARIOUS TEA VENDOR(S). LEARNE D CIT-DR ON THE OTHER HAND SUBMITS THAT PCIT HAS RIGHTLY ASSUMED REVISION JURISDICTION IN THE FACTS OF THE INSTANT CASE SINCE SOME OF THE CLINCHING ASPECT S HEREINABOVE REMAINED TO BE EXAMINED BY THE ASSESSING OFFICER DURING ASSESSM ENT PROCEEDINGS. 7. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL PLEADINGS. THERE CAN HARDLY BE ANY DISPUTE ABOUT THE SETTLED LEGAL P OSITION REGARDING SEC. 263 REVISION JURISDICTION AS PER HON'BLE APEX COURTS L AND MARK JUDGMENT IN MALABAR INDUSTRIAL CO. LTD. VS. COMMISSIONER OF INCOME TAX (2000) 243 ITR 83 (SC) THAT BEFORE AN ASSESSMENT IS HELD AS ERRONEOUS CAUS ING PREJUDICE TO THE INTEREST OF THE REVENUE., IT IS NECESSARY FOR THE C IT TO SIMULTANEOUSLY SATISFY BOTH THESE LIMBS. AND ALSO THAT AN ASSESSMENT CANNO T FORM SUBJECT-MATTER OF REVISION UNLESS IT HAS PROVED THAT THE ASSESSING OF FICER HAS NOT TAKEN ONE OF THE POSSIBLE VIEW ON FACTS OF THE CASE. HON'BLE DEL HI HIGH COURTS DECISION IN COMMISSIONER OF INCOME TAX VS. D. G HOUSING PROJECT S HELD THAT THE CIT CANNOT RESTORE THE ASSESSMENT BACK TO THE ASSESSING OFFICER IF IT IS NOT A CASE NO ENQUIRY IN EARLIER ROUND. WE KEEP IN MIND THE SA ME AND A PROCEED TO DEAL WITH THE ISSUE. IT IS CLEAR FROM A PERUSAL OF THE P CITS FOREGOING REVISION DIRECTIONS THAT HIS SHOW CAUSE NOTICE ON ONE HAND H AD MADE IT CLEAR THAT THE ASSESSING OFFICER HAD NOT ACTED OF 145(3) OF THE AC T AND WRONGLY ALLOWED PARTNERS SALARY AND BROKERAGE WITHOUT DEDUCTION OF TDS. HIS FINDINGS UNDER CHALLENGE SPEAK OTHERWISE WHEREIN THE PCIT IS OF TH E VIEW OF SOME ASPECTS REMAINED TO BE SEEN BY THE ASSESSING OFFICER DURING ASSESS MENT PROCEEDINGS. WE FIND NO REASON TO SUSTAIN THE SAME. WE NOTICE THAT THE ASSESSEE HAS SUCCESSFULLY CHALLENGED THE ASSESSING OFFICERS ACTION MAKING UNDER-VALUED CLOSING STOCK OF ADDITION 15,91,226/- IN APPEAL ITA NO.1751/KOL/2016 BEFORE THE TRIBUNAL DECIDED ON 02.02.2018. COUPLED WITH ITA NO.NO.810/KOL/2017 A.Y. 2011-12 M/S G.PAUL & SONS VS. PCIT-15,KOL. PAGE 6 THIS, WE ALSO MAKE IT CLEAR THAT THE PCIT HAS NOWHE RE REBUTTED THE ASSESSEES EXPLANATION THAT ITS PARTNERSHIP DEED NOT ONLY QUAN TIFIED REMUNERATION TO ITS WORKING PARTNERS BUT ALSO THE RELEVANT DETAILS TO T HIS EFFECT FORMED PART OF ASSESSMENT ROUNDS. LASTLY COMING TO THE BROKERAGE P AID TO VARIOUS TEA BROKERS WITHOUT DEDUCTION OF TDS, LEARNED CIT-DR FA ILS TO DISPUTE THE CLINCHING FACT THAT SAME CANNOT BE DISALLOWED SINCE RECIPIENTS HAVE DULY CERTIFIED THAT THEY HAVE INCLUDED THE AMOUNT IN ISS UE AS INCOME IN THEIR RETURNS. WE KEEP IN MIND ALL THESE FACTS TO HOLD TH AT THE PCIT HAS ERRED IN ASSUMING HIS REVISION JURISDICTION IN FACTS OF THE INSTANT CASE, AND THAT TOO, WITHOUT HOLDING ASSESSMENT IN ISSUE TO BE ERRONEOUS CAUSING PREJUDICE TO INTEREST OF THE REVENUE. WE REVERSE HIS ORDER UNDER CHALLENGE DATED 10.02.2016 THEREFORE. 8. THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 15 /11/2019 SD/- SD/- ( %) (' %) ( A.L.SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP (- 15 / 11 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S G.PAUL &SONS 167, NETAJI SUBASH ROAD , RAJAKATRA, KOLKATA-007 2. /RESPONDENT-PCIT-15, 3, GOVT. PLACE, KOLKATA-700 00 1 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 ''3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ 3,