ITO-Ward-5(4), Kolkata, Kolkata V. M/s Morning Vinimay Pvt. Ltd., Kolkata

ITA 813/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83118 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 01-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 21-05-2012
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Income from undisclosed sources; Opportunity of being heard; Additional evidence

Judgement Text

ITA NO.813/KOL/2012-B-AM M/S. MORNING VINIMAY PVT. LTD. 1 , B IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH: KO LKATA ( ) , , BEFORE HONBLE SRI MAHAVIR SINGH, , JM & HONBLE SRI SHAMIM YAHYA, AM / ITA NO. 813/KOL/2012 A.Y 2007-08 I.T.O, WARD 5(4), KOLKATA - - - VERSUS - . M/S. MORNING VINIMAY PVT. LTD. PAN:AAECM2977R ( ' / APPELLANT ) ( #$' / RESPONDENT ) FOR THE APPELLANT: FOR THE RESPONDENT : /SHRI RAVI JAIN, LD. CIT/SR.DR / SHRI RUDRA DHAR, ADVOCATE, LD.AR ' ( /DATE OF HEARING: 01-09-2014 ' ( /DATE OF PRONOUNCEMENT: 5/9/-2014 / ORDER , SHRI SHAMIM YAHYA, AM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A) DATED 16.01.2012 PERTAINING TO ASSESSMENT YEAR 200 7-08. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA D AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD.CIT(A) ERRED IN LAW IN DELETING THE ADDITIONS MADE BY THE AO ON AC COUNT OF BOGUS SUNDRY CREDITORS OF RS.5,84,151/- & RS. 4,42,170/- RESPECT IVELY FROM TWO PARTIES AS UNEXPLAINED EXPENDITURE AND BOGUS SUNDRY DEBTORS O F RS.5,00,000/-, RS.2,55,615/- & RS.78,375/- RESPECTIVELY FROM THESE PARTIES AS INCOME FROM UNDISCLOSED SOURCES AND ALSO UNEXPLAINED CLOSING ST OCK OF RS.24,166/- AS INCOME FROM OTHER SOURCES WITHOUT VERIFYING THE GE NUINENESS AND CREDITWORTHINESS OF THE PARTIES INVOLVED IN THE T RANSACTIONS WITH THE ASSESSEE BY WAY OF PURCHASES AND SALES. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A) ERRED IN LAW IN TREATING THE BUSINESS AS GENUINE ON THE BA SIS OF RECEIPT AND PAYMENT BASIS WHERE THE PAYMENT WAS FOUND TO BE FAL SE AND DURING ASSESSMENT STAGE, BUSINESS ACTIVITY AS CLAIMED BY THE ASSESSEE WAS PROVED FALSE IN ABSENCE OF ANY CIRCUMSTANTIAL AND SUPPORT IVE EVIDENCE. ITA NO.813/KOL/2012-B-AM M/S. MORNING VINIMAY PVT. LTD. 2 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD.CIT(A) ERRED IN LAW IN CONSIDERING THE ASSESSEES SUBMISSION AND/OR EXPLANATION FURNISHED DURING APPEAL STAGE AS FRESH/ADDITIONAL EVIDENCE IS CONTRARY TO THE PROVISIONS AS LAID DOWN IN RULE-46A OF THE I.T RULE S. 3. IN THIS CASE THE AO FOUND THAT THE ASSESSEE HA S NOT DONE ANY BUSINESS ACTIVITY IN THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION. THERE WAS NO PURCHASE AND SALES BY THE ASSESSEE. HOWEVER, THE AO EXAMINED THE SUNDRY CRE DITOR, SUNDRY DEBTOR AND CLOSING STOCK, AO ALSO DEPUTED AN INSPECTOR. THE AO CONCLU DE AS UNDER:- (A) M/S. SHILPASHREE SAREE AND M/S. S.S TEXTILES SO LD TO THE ASSESSEE COMPANY WORTH OF RS.5,84,151 AND RS.4,42,170 RESPEC TIVELY. THERE IS NO REASON TO ASK ME THAT THEY SELECTED THE ASSESSEE C OMPANY FOR THEIR WHOLE SALE. THEY MIGHT SELL TO OTHER CUSTOMERS ALSO. THEI R VOLUME OF TRANSACTION SPEAKS THAT THEY MIGHT HAVE BANK ACCOUNT, IF THEY REALLY RUN BUSINESS. THEY ALSO DEAL IN SHARE, BUT HAVE NO BANK ACCOUNT I T IS NOT TENABLE. (B) THE ENTRIES IN THE BANK BOOKS AND ACCOUNTS TEST IMONY THAT THE PAYMENT WERE MADE TO M/S. SHILPASHREE SAREE AND M/S . S.S TEXTILES WHO ARE NOT AVAILABLE FOR VERIFICATION. IF THE PAYMENTS WERE GIVEN INSTEAD OF M/S. SHILPASHREE SAREE AND M/S. S.S. TEXTILES WHY T HE SAME ARE NOT REFLECTED TO THE BANK BOOKS. (C ) THE PAYMENTS WERE GIVEN TO M/S. KALNA MACHINES PVT. LTD., VIKASH CHOWDHURY, ONE OF THE DIRECTORS OF THE ASSESSEE COM PANY, SARITA CHOWDHURY, WIFE OF VIKASH CHOWDHURY INSTEAD OF SELL ER. THE SHARES WHICH WERE SOLD (AS CLAIMED) TO M/S. SHILPASHREE SAREE A ND M/S. S.S TEXTILES HAD NOT BEEN REGISTERED IN THE COMPANY IN THEIR NAM ES. IT PROVES THAT THE MONEY HAD BEEN CIRCULATED BACK TO DIRECTOR AND HIS FAMILY UNDER CAMOUFLAGE OF PURCHASE. (D) THE COMPANY HAD NO BUSINESS ESTABLISHMENT AS DI SCUSSED ABOVE. ALL THESE CIRCUMSTANTIAL EVIDENCES PROVE THAT THERE HAD NOT BEEN PURCHASE BY THE ASSESSEE. HENCE, THE ARGUMENT OF THE ASSESSE E IS REJECTED AND RS.5,84,151 AND RS.4,42,170/- ARE ADDED TREATING S AME AS UNEXPLAINED EXPENDITURE. AGAIN, SPINTER SAREE WAS THE DEBTOR IN THE BOOKS O F THE ASSESSEE COMPANY FOR RS.77,900 AND S.S CREATION WAS THE DEB TOR OF THE ASSESSEE COMPANY FOR RS.1,98,430, BUT THE ASSESSEE COMPANY D ID NOT KEEP ANY INFORMATION OF THE DEBTORS. IT IS HEARD TO BELIEVE . WHERE THERE HAD NOT ITA NO.813/KOL/2012-B-AM M/S. MORNING VINIMAY PVT. LTD. 3 BEEN PURCHASED, THERE HAD NOT BEEN SALE. IN RESPECT TO SALE, THE SUBMISSION IS ALSO NOT TENABLE. HENCE, RS.5,00,000, RS.2,55,6 15 AND RS.78,375 ARE ADDED TO THE TOTAL INCOME TREATING THE SAME AS INC OME FROM UNDISCLOSED SOURCES. 4. AGAINST THE ABOVE ORDER, THE ASSESSEE APPEALED FILE BEFORE THE LD.CIT(A) 5. IN THE COURSE OF APPELLATE PROCEEDINGS THE LD.CI T(A) HAS ALSO OBTAINED THE REMAND REPORT FROM THE AO AND REJOINDER FROM THE ASSESSEE. WITH REGARD TO REMAND REPORT THE LD.CIT(A) NOTED THAT THE AO WAS ASKED TO ENQUIRE A LL PURCHASES AND SALES MADE BY THE ASSESSEE. HOWEVER, NO VERIFICATION WAS MADE FROM M /S. SHILPASHREE SAREE AND M/S.SPINTER SAREE. MOREOVER, NO LETTER WAS SENT TO M/S. AMBEY SAREE CENTRE, DELHI INSPITE OF WRITTEN REQUEST OF THE LD.AR. THE LD.CIT(A) HAS PROCEEDED TO DELETE THE ADDITIONS BY HOLDING AS UNDER:- THE MATERIALS AVAILABLE ON RECORD SHOW THAT DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE FACTS OF CLOSURE OF BU SINESS OF THE CREDITORS/DEBTORS AND THE CHANGE OF ADDRESS HAS DUL Y BEEN INFORMED TO THE ASSESSING OFFICER. LATER ON DIFFERENT ADDRESSES WER E GIVEN BY THE APPELLANT AS BECAUSE IT IS PRACTICALLY POSSIBLE THAT CREDIT ORS HAVE LATER ON CHANGED THEIR BUSINESS OR OCCUPATIONS AND THE FACTS COULD KNOWN TO THE APPELLANT AT THE SUBSEQUENT STAGE. IN ANY CASE, THE APPELLANT HAD DISCHARGED ITS ONUS OF PROOF. FURTHER, IN THIS CASE, THE ASSESSING OFFI CER HAS MADE ADDITIONS ON ACCOUNT OF BOTH RECEIPTS AND PAYMENTS, CLOSING STO CK AS ALSO DEPOSITS IN BANK AND CASH IN HAND TREATING THE SAME AS INCOME OF THE APPELLANT FROM OTHER SOURCES. EVEN IF THE BUSINESS IS HELD TO BE A SHAM AFFAIR AND THE RECEIPTS ARE HELD TO BE BOGUS, IT IS BEYOND THE STR ETCH OF IMAGINATION THAT THE OTHER PARTS OF THE TRADING ACCOUNT/PROFIT AND L OSS ACCOUNT OR BALANCE- SHEET COULD ALSO BE ADDED AS THE INCOME OF THE APPE LLANT FROM OTHER SOURCES. AS FAR AS THE FACTS GO, THE APPELLANT, HAS , DURING THE YEAR SHOWN AVAILABILITY OF FUNDS IN THE FOLLOWING MANNER- RECEIPTS (I)RECEIPTS FROM SUNDRY DEBTORS (M/S. ROOP LAXMI SA REES PVT. LTD RS.500,000/- (II)RECEIPTS FROM DEBTORS (M/S. SPRINTEX SAREES) RS.200,000/- (III) RECEIVED CASH FROM M/S. SPRINTEX SAREES RS. 55,615/- (IV)RECEIPTS FROM SUNDRY DEBTORS (AMBEY SAREE CENT RE) RS. 78,375/- ITA NO.813/KOL/2012-B-AM M/S. MORNING VINIMAY PVT. LTD. 4 (V)CLOSING STOCK RS. 24,116/- (A) TOTAL RS. 8,58,106 /- THE DETAILS OF PAYMENTS ARE SHOWN AS UNDER: PAYMENTS: (I) PAYMENT TO SUNDRY CREDITOR (SHILPASHREE SAREE) RS.5,84,151/- (II) PAYMENT TO SUNDRY CREDITOR (M/S.S.S TEXTILES) RS.4,42,170/- (B) TOTAL RS.10,26,321/- DIFFERENCE (B-A) RS.1,68,215/- THE ASSESSING OFFICER HAS ADOPTED A METHOD OF EATIN G THE CAKE AND HAVING IT TOO. IF THE PURCHASES AS WELL AS THE CREDITORS A RE HELD TO BE BOGUS, THERE COULD NOT BE ANY SALES OR REALIZATION FROM THE SUND RY DEBTORS. IF SALES ARE HELD TO BE BOGUS, NATURALLY THE PURCHASES OR SUNDRY CREDITORS OUGHT TO HAVE BEEN NIL. IN ANY CASE, THERE COULD NOT BE ADDI TION ON BOTH THE COUNTS. EVEN IF IT IS ASSUMED THAT THE RECEIPTS ARE BOGUS, AGAIN THERE COULD NOT BE ADDITION ON ACCOUNT OF SUNDRY CREDITORS, AND IF AT ALL THERE COULD BE ANY ADDITION, IT COULD BE OF THE EXCESS DIFFERENCE AMOU NT, I.E. THE BENEFIT DERIVED BY THE APPELLANT COMPANY. HOWEVER, IN THE INSTANT CASE SUCH DIFFERENCE IS A DEFICIT FIGURE, I.E. LIABILITIES O VER ASSETS, WHICH IN NO CASE COULD BE A SUBJECT MATTER OF ADDITION. THIS APART, THE MATERIALS AVAILABLE ON RECORD INCLUDING THOSE BROUGHT ON RECORD AS A R ESULT OF REMANDING THE CASE CLEARLY ESTABLISH THE VERACITY OF THE SALES. W HEN THIS IS SO, THERE IS NO DOUBT ABOUT THE SOURCES OF DEPOSITS IN THE BANK ACC OUNT, OR ABOUT THE SUNDRY CREDITORS. IT IS NOT THE CASE OF THE APPELLA NT THAT IT HAD STARTED THE BUSINESS DURING THE YEAR, NOR HAD CLOSED DOWN THE B USINESS DURING THE YEAR UNDER CONSIDERATION. THE BUSINESS IS SHOWN TO HAVE BEEN STARTED IN THE FINANCIAL YEAR 20005-06 AND CONTINUED IN THE S UCCEEDING ASSESSMENT YEARS. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THERE APPEARS NO WARRANT IN MAKING ADDITIONS BOTH IN RESPECT OF TH E SUNDRY CREDITORS AND SUNDRY DEBTORS, NOR THE BANK DEPOSITS OR CASH BALAN CE AS PER CASH BOOK AND ON ACCOUNT OF CLOSING STOCK. IN VIEW OF THE ABOVE OBSERVATION AND CONSIDERING T HE FACTUAL AND LEGAL POSITION, THE ADDITIONS MADE BY THE AO BEING UNJUSTIFIED AND UNWARRANTED ARE HEREBY DELETED. 6. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEA L BEFORE US. ITA NO.813/KOL/2012-B-AM M/S. MORNING VINIMAY PVT. LTD. 5 7. WE HAVE HEARD BOTH THE LD. COUNSEL AND PERUSED T HE RECORD. THE LD. DR HAS RELIED ON THE ORDER OF THE AO. HE SUBMITTED THAT THE LD.CI T(A) HAS GRANTED RELIEF TO THE ASSESSEE WITHOUT PROPER JUSTIFICATION. THE LD. COUNSEL OF THE ASSESSEE ON THE OTHER HAND, HAS RELIED ON THE ORDER OF THE LD.CIT(A). HE FURTHER SUBMITTED THAT THE REVENUE SHOULD NOT HAVE FILED APPEAL AGAINST THE ORDER OF THE LD.CIT(A), WHICH WA S DECIDED UPON THE FACTS OF THE CASE AND ALSO RELIED ON THE CBDTS INSTRUCTION THAT THE FINDINGS AND FACTS OF THE LD.CIT(A) SHOULD HAVE BEEN ACCEPTED BY THE REVENUE. 8 UPON CAREFUL CONSIDERATION, WE FIND THAT THE AO HAS MADE HIS FINDINGS IN THIS CASE AND IT IS ALSO APPARENT FROM EXAMINATION OF RECORDS THAT THE ASSESSEE HAS NOT CONDUCTED ANY BUSINESS ACTIVITY DURING THE YEAR. THERE WAS NO PU RCHASE AND SALES DURING THE YEAR UNDER CONSIDERATION. HOWEVER, SOME TRANSACTIONS ARE THER E IN RESPECT OF SUNDRY CREDITORS AND SUNDRY DEBTORS. WE FIND THAT THE AO HAS MADE EXAMIN ATION IN THIS CASE AND FOUND THAT THEY ARE NOT GENUINE. THE LEDGERS IN THE NAME OF M/S.SHI LPASHREE SAREE AND M/S. S.S TEXTILES IN THE BOOKS OF THE ASSESSEE COMPANY REVEALED THAT SOM E PAYMENTS WERE GIVEN BY CHEQUES. THE BANK MANAGER WAS REQUESTED TO FURNISH THE COPI ES OF THE CHEQUES ISSUED TO M/S. SHILPASHREE SAREE AND M/S. S.S TEXTILES. THE COPIES OF THE CHEQUES AS COLLECTED FROM THE BANK ASCERTAINED THAT THE ASSESSEE DID NOT ISSUED CHEQUES TO M/S. SHILPA SHREE SAREE AND M/S. S.S TEXTILES, BUT ISSUED TO M/S. KALNA MACHINE S PVT. LTD AND VIKASH CHOWDHURY, ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY. IT IS CLE ARLY SEEN THAT THE AOS EXAMINATION REVEALED THAT THE TRANSACTIONS WERE NOT ABOVEBOAR D. HOWEVER, THE ASSESSEE HAS MADE SUBMISSIONS BEFORE THE LD.CIT(A), WHICH INCLUDED T HE MATERIALS, WHICH WAS NOT PRODUCED BEFORE THE AO DURING THE COURSE OF ASSESSMENT. THE LD. CIT(A) IN HIS APPELLATE ORDER HAS FOUND THAT THE AO WAS BEING ASKED TO ENQUIRE THE T RANSACTIONS. BUT HE HAS NOT MADE NECESSARY VERIFICATION/EXAMINATION. WE NOTE THAT THE POWERS OF THE LD.CIT(A) ARE CO- TERMINUS WITH THAT OF THE AO. IF THE AO HAS FAILED TO PERFORM THE NECESSARY EXAMINATION, THEN IT WAS INCUMBENT ON THE LD.CIT(A) TO MAKE NE CESSARY VERIFICATION AND SATISFY HIMSELF. HOWEVER, READING OF THE APPELLATE ORDER SHOWS THAT THE LD.CIT(A) HAS DRAWN ADVERSE INFERENCE BY FINDING THAT THE AO HAS NOT M ADE PROPER EXAMINATION. THE LD. ITA NO.813/KOL/2012-B-AM M/S. MORNING VINIMAY PVT. LTD. 6 CIT(A) HAS OBSERVED THAT EVEN IF THE BUSINESS IS H ELD TO BE A SHAM AFFAIR AND THE RECEIPTS ARE HELD TO BE BOGUS, IT IS BEYOND THE STRETCH OF IMAGINATION THAT THE OTHER PARTS OF THE TRADING ACCOUNT/PROFIT AND LOSS FROM OTHER SOURCE S. WE FIND THAT THIS NOT A PROPER FINDING. WE FURTHER FIND THAT THE HONBLE SUPREME COURT IN T HE CASE OF KAPURCHAND SHRIMAL VS. CIT REPORTED IN (1981) 131 ITR 431 (SC) HAS HELD T HAT IT IS THE DUTY OF THE APPELLATE AUTHORITY TO CORRECT THE LACUNA IN THE PROCEEDINGS OF THE AUTHORITIES BELOW AND ALSO TO REMIT THE MATTER, IF REQUIRED. 8.1 THE LD. COUNSEL OF THE ASSESSEE HAS SUBMITTED THAT THE REVENUE SHOULD NOT HAVE APPEALED AS THE LD.CIT(A) HAS DECIDED THE ISSUE ON THE FACTS OF THE CASE. WE FIND THAT THIS IS NOT CORRECT AS THE LD.CIT(A) HAS NOT GIVEN PROPE R FINDINGS AFTER DUE EXAMINATION. IN THIS VIEW OF THE MATTER, IN OUR CONSIDERED OPINION THE M ATTER NEEDS TO BE REMITTED TO THE FILE OF THE AO. THE AO SHALL VERIFY ALL THE TRANSACTIONS, DENEVO TAKE INTO ACCOUNT THE SUBMISSION OF THE ASSESSEE. HENCE, AO IS DIRECTED TO CONSIDER THE ISSUE AFRESH AFTER GIVING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSE. + ( ORDER PRONOUNCED IN THE OPEN COURT ON 5 /09/2014 SD/- SD/- [ , ] [ , ] [ MAHAVIR SINGH, JUDICIAL MEMBER ] [ SHAMIM YAHYA, ACCOUNTANT MEMBER ( ( ) DATED : 5/9 /2014 ** PRADIP SPS ' #. /. / COPY OF THE ORDER FORWARDED TO: 1. . ' / THE APPELLANT : I T O, W 5(4), P-7 CHOWRINGHEE SQ, 5 TH FL., KOL-69. 2 #$' / THE RESPONDENT- M/S. MORNING VINIMAY PVT. LTD, 247/1, P.K GUHA ROAD, KUMARPARA, KOL-28. 3. / THE CIT, 4. ( )/ THE CIT(A) ITA NO.813/KOL/2012-B-AM M/S. MORNING VINIMAY PVT. LTD. 7 5. # / DR, KOLKATA BENCH 6.GUARD FILE . $. # / TRUE COPY, / BY ORDER, / ASSTT REGIST RAR ITA NO.813/KOL/2012-B-AM M/S. MORNING VINIMAY PVT. LTD. 8