DCIT, CIR-10(1), KOLKATA, Kolkata V. M/s Tuscon Engineers (P) Ltd., Kolkata

ITA 816/KOL/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6635 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 05-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Assessee Lawyers: S K DASGUPTA
• Keywords: Unexplained cash credit
• Section: 142(1); 68; 37; 28

Judgement Text

1 ITA NO.816/KOL/2015 M/S TUSCON ENGINEERS PVT. LTD. A.Y.2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C KOL KATA [BEFORE HONBLE SHRI J.SUDHAKAR REDDY, AM & SHRI S.S.VISWANETHRA RAVI, JM ] ITA NO.816/KOL/2015 ASSESSMENT YEAR : 2011-12 D.C.I.T., CIRCLE-10(1) -VERSUS- M/S TUSCON ENGINE ERS (P)LTD. KOLKATA KOLKATA (PAN: AAACT 9758 M) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI SAURABH KUMAR, ADDL.CIT , SR.DR FOR THE RESPONDENT: SHRI S.K.DASGUPTA, AR DATE OF HEARING :23.04.2018. DATE OF PRONOUNCEMENT : 27.06.2018. ORDER PER S.S.VISWANETHRA RAVI, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 31.03.2015 PASSED BY C.I.T-(A)-4, KOLKATA FOR A.Y.2011-12. 2. THE ONLY ISSUE TO BE DECIDED IS AS TO WHETHER T HE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF SUNDRY CREDITORS UN DER THE PROVISION OF SECTION 68 OF INCOME TAX ACT, 1961 (ACT). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF CIVIL CONTRACTS. DURING THE COURSE OF ASSESSMENT PROCEEDING THE AO FOUND THAT THE ASSESSEE CLAIMED EXPENSES RELATING T O 19 CONSTRUCTION SITES TO AN EXTENT OF RS.2,55,15,443/-. FOR NON FURNISHING OF EXPLANAT ION THE AO ADDED THE SAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE BY TREATING THE SAME AS UNEXPLAINED CREDIT IN TERMS OF SECTION 68 OF THE ACT. THE CIT(A) HELD THAT THE AO IS WRONG IN ADDING THE SAID ADDITION U/S 68 OF THE ACT AS THE SAID AMOUNT IS NO T A CASH CREDIT WHEREAS THE ASSESSEE HAS CLAIMED THE SAME AS EXPENDITURE. ACCORDING TO C IT(A) THE ASSESSEE PRODUCED ALL THE DETAILS BEFORE THE CIT(A) AND THE SAME WERE SEN T TO THE AO SEEKING HIS REMARKS. THE CIT(A) CONSIDERING THE REMAND REPORT AND FOUND SATISFIED AND ALLOWED THE SAID 2 ITA NO.816/KOL/2015 M/S TUSCON ENGINEERS PVT. LTD. A.Y.2011-12 EXPENDITURE U/S 37 OF THE ACT THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREIN BELOW :- 5.3. DISCUSSION AND APPELLATE DECISION THE APPELLANT IS IN THE BUSINESS OF CIVIL CONSTRUCT ION AND ENGINEERING BUSINESS; MAINLY CONSTRUCTION OF CEMENT FACTORIES. ITS CLIENT'S PROJ ECT SITES ARE ALL OVER THE COUNTRY, AS ALSO OVERSEAS. DURING THE RELEVANT FINANCIAL YEAR, THERE WERE 19 CONSTRUCTION SITES. FOR, CONSOLIDATION OF THE ACCOUNTS OF THE DIFFERENT SITE S, ABBREVIATIONS ARE USED FOR THE PURPOSE OF QUICK IDENTIFICATION OF THE SITE. THUS T HE ABBREVIATIONS AS JUD FOR JUDE CEMENT LTD, JAINTIA HILLS, MEGHALAYA/ KUL FOR SAT Y AM SATYANARAYAN, JV, KULLU , GRV FOR GREEN VALLEY INDUSTRIES LTD, JAINTIA HILLS, MEG HALAYA/ MAI FOR MAIHAR CEMENT, SATNA, MP /CEN FOR CENTURY CEMENT LTD, BAIKUNTH, CH ATTISGARH/ TPSL FOR TIME STEEL PVT LTD, ROURKELA, ORISSA/ GOA FOR KMC CONSTRUCTION LTD, GOA / ESPL FOR EASTERN STEEL & POWER LTD, JHARSUGUDA, ORISSA/ PIL FOR PRAK ASH INDUSTRIES LTD, CHAMP A, ETC, ETC; AS ALSO FOR OVERSEAS SITES NAI FOR ATHI RIVER & MINING, NAIROBI/ TAN FOR MEWANI STONE LIME LTD, TANZANIA ETC., THE LIST OF THE SUNDRY CREDITORS FOR EXPENSES RUNS INTO 13 PAGES GIVING ALONGSIDE THE DETAILS/SUMMARY OF: THE NAME OF THE PARTIES/ADDRESS /NAME OF THE CLIENT'S SITES/OPENING CREDIT BALANCE/OPENING DEBIT BALANCE/BILLS RAISED F OR JOB WORK DURING 2010-11/ OTHER BILLS RAISED FOR MISC. WORKS/PAYMENT MADE DURING 20 10-11/ CLOSING CREDIT BALANCE/CLOSING DEBIT BALANCE/TDS. 5.3.1 ON THE ISSUE, AT THE OUTSET THE ASSESSING OFFICER H AS ERRED IN INVOKING AN INAPPLICABLE SECTION - SECTION 68. SECTION 68 IS CO NCERNING CASH CREDITS; WHEREAS THE FACTS OF THE ISSUE ARE CONCERNING EXPENDITURE. THUS , SECTION 68 IS SIMPLY OUT OF CONTEXT HERE. THE LIKELY REASON FOR THE MIX-UP IS BECAUSE OF THE COMMON WORD 'CREDIT'. THE DISTINCTION IS THAT CASH CREDIT CONCERNS 'CASH' - B EING CATEGORY OF REAL ASSET ACCOUNTS AND THEREFORE THE ACCOUNTING PRINCIPLE IS THAT IN T HE BOOKS OF ACCOUNTS WHEN CASH COMES IN, IT IS CREDITED. WHEREAS 'SUNDRY CREDITORS FOR EXPENSE' RELATE TO EXPENDITURE BEING CATEGORY OF EXPENSE ACCOUNTS, AND SO THOUGH D EBITED IN THE PROFIT & LOSS A/C, THE OUTSTANDING UNPAID BALANCE APPEARS IN THE BALANCE S HEET AS CREDIT. 5.3.2 BE AS IT MAY, THE FUNCTIONS AND POWER OF CIT( A) BEING COTERMINOUS WITH THAT OF THE ASSESSING OFFICER, EVEN IF CONSIDERED FROM THE PERS PECTIVE OF THE APPLICABLE SECTIONS 28 AND 37, I ALSO FIND THAT THE PROPER FACTS HAVE NOT BEEN COMPLETELY APPRECIATED. THESE ARE HEREUNDER: 5.3.2.1 WHAT HAS BEEN ADDED BACK IS ONLY THE OUTSTANDING BA LANCES . THIS MEANS THAT THE EXPENDITURES ALREADY PAID [AND TO THE SAME PART IES] HAVE BEEN ACCEPTED. I HAVE GONE THROUGH THE DETAILED ACCOUNT EXTRACTS SUBMITTE D IN THE PAPER BOOKS. THE DETAILED COLUMNS ARE: NAME OF THE PARTIES/ADDRESS/NAME OF TH E CLIENT'S SITES/OPENING CREDIT BALANCE/OPENING DEBIT BALANCE/BILLS RAISED FOR JOB WORK DURING 2010-11 / OTHER BILLS RAISED FOR MISC. WORKS/PAYMENT MADE DURING 2010- 11 / CLOSING CREDIT BALANCE /CLOSING DEBIT BALANCE/TDS. WHAT IS APPEARING IN THE BALANCE SHEET IS ONLY THE CLOSING CREDIT 3 ITA NO.816/KOL/2015 M/S TUSCON ENGINEERS PVT. LTD. A.Y.2011-12 BALANCE. THUS, WHEN PAYMENTS ALREADY MADE ARE NOT D OUBTED, THEN IT IS CONTRADICTORY TO DOUBT THE OUTSTANDING BALANCES. 5.3.2.2 THE ASSESSING OFFICER'S CRUX REASON IS THAT OF 'INSUFFICIENT ADDRESS'. BUT THE REALITIES THAT THE APPELLANT IS CARRYING WORK OF CO NSTRUCTING OF FACTORIES/ CEMENT FACTORIES - AND SUCH FACTORIES OBVIOUSLY ARE LOCATE D IN FAR-OFF AND REMOTE AREAS. THE PERSONS CARRYING OUT THE VARIETY OF MISCELLANEOUS W ORKS OBVIOUSLY WILL NOT BE RESIDING AT THE PROJECT SITE. THEY COME AND GO AS AND WHEN T HE WORK REQUIRES. OR THEY DEPUTE THEIR PERSONS. AS FAR AS THE APPELLANT IS CONCERNED FOR INCOME TAX MATTERS IS THAT IF TDS IS APPLICABLE, THEN THE APPELLANT IS TO DEDUCT TDS, WHICH IMPLIES THAT ONLY PAN IS REQUIRED. THE APPELLANT HAS DEDUCTED TDS IN MANY CA SES. THE APPELLANT IS NOT IN THE BUSINESS THERE TO VERIFY THE ADDRESSES OF THE PERSO NS. 5.3.2.3 IN THE OUTRIGHT ENTIRE ADDITION OF THE SUND RY CREDITORS FOR EXPENSE, HAVE ALSO BEEN OUTRIGHT ADDED EVEN THE REGULAR HEAD OFFICE LI ABILITIES LIKE SALARY, ETC., ACCRUED IN THE MONTH OF MARCH AND PAID IN APRIL. 5.3.2.4 OTHER FLAWS WHEN LOOKING AT THE BALANCE SHE ET ARE: 'SUNDRY CREDITORS' COMPRISE OF: SCHEDULE-E CURRENT LIABILITIES AND PROVISIONS: CURRENT LIABILITIES: SUNDRY CREDITORS- FOR CAPITAL GOODS 1094389.19 1825365.54 FOR OTHER GOODS 8329676.67 8802309.12 FOR EXPENSES 24996921.81 25515443.99 TOTAL(I) 34420987.67 361431185.65 (I)THE AO HOWEVER HAS CHERRY-PICKED ONLY THE CRED ITORS FOR EXPENSES. (II)THE ENTIRE CREDITORS FOR EXPENSE HAD BEEN ADDED BACK - WHICH JUST CANNOT BE SO. THIS IS EXTREME VIEW TAKEN. (III)SUNDRY CREDITORS FOR EXPENSE IS NOT A NEW PH ENOMENON. IT HAS ALWAYS BEEN THERE EVERY YEAR. 5.3.2.5 THE ID. AR IN THE SUBMISSIONS HAS ALSO STAT ED HEREUNDER: THAT THE LD. ASSESSING OFFICER STATED IN HIS ORDER, HE ISSUED NOTICE U/S 142(1) ON 19.08.2013, WHICH IS NOT A FACT. WE ARE ENCLOSING H EREWITH THE COPY OF THE NOTICE AS ISSUED BY THE LD. ASSESSING OFFICER. THE SAME WILL PROVE THAT IT WAS NEVER ISSUED OR SENT IN THE MONTH OF OCTOBER. BUT IT WAS ISSUED IN THE MONTH OF DECEMBER, WHICH WAS RECEIVED BY THE APPELLANT FIRM ON 16.12.2013 AND IN THE SAID LETTER, THE LD. ASSESSING OFFICER ASKED TO SUBMIT AS MERRY AS 92 QUESTIONS AN D THE DATE WAS FIXED ON 17.12.2013 I.E. THE APPELLANT WAS SUPPOSED TO REPLY SO MANY QUESTIONS WITHIN ONE DAY INSTEAD OF 4 MONTHS. HOWEVER, IN REPLY TO QUESTION REGARDING OUTSTANDING LIABILITIES, NAMES & ADDRESSES ETC., THE ASSESSEE REPLIED GIVING THE DETAILS OF THE NAME TO WHOM 4 ITA NO.816/KOL/2015 M/S TUSCON ENGINEERS PVT. LTD. A.Y.2011-12 THE AMOUNT WAS SUPPOSED TO BE PAID AND INDICATING T HE NAME OF THE CAMP SITE IN SHORT WORDS SUCH AS JUD MEANS JUD CEMENTS LTD. HOWEVER, F ROM THE COPY OF THE ASSESSMENT ORDER AND NOTICE, IT WILL BE PROVED THAT THE LD. ASSESSING OFFICER ASKED THE ASSESSEE TO COMPLY WITH THE 92 QUESTIONS WITHIN ONE DAY AND SUBSEQUENTLY HE ALLOWED SOME TIME AND COMPLETED THE ASSESSMENT WITHIN 10 TH MARCH, 2014 I.E. THE APPELLANT HAD TO REPLY MORE THAN 90 QUESTIONS IN DETAIL AND T HE LIST OF SUNDRY CREDITORS WAS ALSO FILED. THE ASSESSING OFFICER NEVER RAISE ANY OBJECT ION TO THAT BUT COMPLETED THE ASSESSMENT DISALLOWING THE ENTIRE SUNDRY CREDITORS AND LIABILITIES FOR EXPENSES AMOUNTING TO RS.2,55,15,443.99 AND COMPUTED THE ASS ESSMENT WITHIN 83 DAYS I.E. 56 WORKING DAYS. BE THAT IT MAY, IN THE APPEAL PROCEEDINGS THE APPEL LANT HAS BEEN ALLOWED TO PRESENT THE ENTIRE DETAILS AND SUBMISSIONS, AND THE AO HAS BEEN ACCORDED OPPORTUNITY AND REMAND REPORT SUBMITTED. 5.3.2.6 AS REGARDS THE REMAND REPORT, IT AGAIN IS O NLY ON THE SINGLE LIMITED ISSUE OF 'POSTAL ADDRESS' ONLY, WITHOUT COMMENTING WHOLISTIC ALLY UPON THE EXPLANATIONS AND ARGUMENTS AND GAMUT OF THE ISSUE. 5.3.2.7 THE LD. AR HAS ALSO MADE AN ARGUMENT FROM T HE PROFITABILITY ANGLE. THOUGH THIS MAY NOT BE POSSIBLE TO DIRECTLY CORRELATE WITH THE ISSUE, YET IT IS PERTINENT MATERIAL TO SHOW THAT THERE HAS NOT BEEN DENT ON THE PROFITS, R ATHER THE PROFITS HAVE BEEN HEALTHIER. 5.3.2.8 THE LD. AR HAS ALSO RAISED ARGUMENT THAT TH E BOOKS OF ACCOUNTS WERE NOT REJECTED U/S 145(3); THEREFORE THAT THE ADDITION HA TH NOT BEEN AS PER SEQUENCE OF PROCEDURE REQUIRED BY LAW. THIS IS ALSO A NOTABLE P OINT; HOWEVER AS I HAVE ALREADY GIVEN RELIEF IN PARAS ABOVE ON BASIC PROMINENT FACT S AND PERSPECTIVES, I DO NOT FEEL IT NECESSARY TO DWELL ON THIS; BUT IT IS A POINT. 5.3.3 FOR THE ABOVE DISCUSSIONS AND REASONS, THUS, THE IMPUGNED ADDITION MADE AT RS. 2,55,15,444/- IS HEREBY DELETED. 4. IN VIEW OF THE ABOVE WE FIND NO INFIRMITY IN THE ORDER OF CIT(A). ACCORDINGLY IT IS JUSTIFIED. THIS GROUND RAISED BY THE REVENUE IS DISMISSED. 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. O RDER PRONOUNCED IN THE OPEN COURT ON 27.06.2018. SD/- SD/- [J.SUDHAKAR REDDY] [ S.S.VISWANETHRA RAVI ] ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED : 27.06.2018. [RG SR.PS] 5 ITA NO.816/KOL/2015 M/S TUSCON ENGINEERS PVT. LTD. A.Y.2011-12 COPY OF THE ORDER FORWARDED TO: 1.M/S TUSCON ENGINEERS PVT. LTD., 124 B, S.P.MUKHE RJEE ROAD, KOLKATA-26. 2. D.C.I.T., CIRCLE-10(1), KOLKATA. 3. C.I.T.(A)-4 KOLKATA 4. C.I.T.-4 , KOLKATA.. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHES