Kapil Dey, Kolkata V. ITO, Ward - 49(2), Kolkata, Kolkata

ITA 854/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54707 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-07-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 30-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MALAKAR
• Keywords: Business income
• Section: 44AD; 69C; 143(3); 147; 68; 69; 148

Judgement Text

, , , , , ,, , IN THE INCOME-TAX APPELLATE TRIBUNAL, B BENCH: K OLKATA [ ( (( ( ) )) ) , , , , , , , , . .. .!' !'!' !'. .. . , , , , #$ #$ #$ #$ ] ]] ] [BEFORE SRI MAHAVIR SINGH, JM & SRI C. D. RAO, AM ] ITA NOS. 854, 855 & 856/KOL/2010: ASSESSMENT YEARS: 2003-04, 2005-06 & 2006-07 KAPIL DEY, KOLKATA. -VS- INCOME TAX OFFICER/WA RD-49(2) [PAN: AEWPD 5405 Q] KOLKATA. [ &' &' &' &' /APPELLANT ] ]] ] [ ()&' ()&' ()&' ()&'/ // / RESPONDENT ] ] ] ] &' &' &' &' / FOR THE APPELLANT : SHRI ANANDA SEN ()&' ()&' ()&' ()&' / FOR THE RESPONDENT : SHRI S. K. MALAKAR +,- . '$ +,- . '$ +,- . '$ +,- . '$ /DATE OF HEARING : 09.11.2011 /0 . '$ /0 . '$ /0 . '$ /0 . '$ /DATE OF PRONOUNCEMENT : 25.11.2011 #1 #1 #1 #1 / ORDER PER BENCH THESE THREE APPEALS FILED BY THE ASSESSEE, ARE ARIS ING OUT OF ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XXXII, KOLKATA, IN APPEAL NO.2 61, 260 & 259/CIT(A)-XXXII/08- 09/49(2)/KOL. DATED 22.12.2009. ASSESSMENTS WERE FR AMED BY ITO, WARD-49(2), CURRENT WARD 50(1), KOLKATA U/S. 147/143(3) OF THE I. T. ACT, 19 61 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS SEPARATE ORDERS DATED 26.12.2008 FOR AYS 2003-0 4, 2005-06 AND 2006-07. SINCE GROUNDS ARE COMMON AND FACTS ARE IDENTICAL, WE DISPOSE OF T HESE APPEALS BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY ISSUE IN THESE APPEALS OF ASSESSEE IS AGAI NST ORDER OF CIT(A) CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKING ADDITION OF BANK DEPOSITS U/S 69 OF THE ACT WHICH ARE HAVING DIRECT NEXUS WITH RECEIPTS OF THE ASSESSEE BEING ASSESSED UNDER SECTION 44AF OF THE ACT. FOR THIS, ASSESSEE HAS RAISED FOL LOWING COMMON GROUNDS FOR ALL THREE ASSESSMENT YEARS: 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF LD. CIT(A) WAS PERFUNCTORY, CASUAL AND NOT BASED ON CONSIDERAT ION OF RELEVANT AND MATERIAL FACTS. [ITA NO. 854, 855 & 856KOL/2010 KAPIL DEY A.Y. 03-04, 05-06 & 06-07] 2 2. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE ORDER OF CIT(A) IS LEGALLY UNTENABLE INASMUCH AS, THE FAILURE TO APPLY MANDATORILY BINDING PROVISION OF SEC. 44AF WAS OVERLOOKED AND WAS NOT EVEN NOTICED A S APPLICABLE EVEN WHERE THE A.O. FAILED TO APPLY THE SAID PROVISION. 3. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF CIT(A) FAILED TO CONSIDER THAT THE LOGIC ADOPTED TO TREAT MAJOR P ART OF BANK DEPOSIT AS UNEXPLAINED WAS CONTRARY TO THE ACCOUNTING LOGIC AND PRINCIPLE AND THE RESULTANT ADDITION MADE WAS THUS UNSUSTAINABLE. 4. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) ERRED IN NOT GIVING, AT LEAST, ONE SPECIFIC OPPORTUNITY TO THE A PPELLANT TO EXPLAIN THE NATURE AND SOURCE OF BANK DEPOSIT AND ERRED IN UPHOLDING ADDIT ION OF ALLEGED UNEXPLAINED BANK DEPOSIT WITHOUT ALLOWING REASONABLE AND SUFFICIENT OPPORTUNITY TO THE APPELLANT TO EXPLAIN THE SAME. 5. THAT, ON THE FACT AND IN THE CIRCUMSTANCES OF T HE CASE, LD. CIT(A) FAILED TO INVOKE HIS POWER OF ENQUIRY U/S. 250(4) EITHER ON HIS OWN OR THROUGH REMAND TO THE A.O. FOR PROPER AND COMPREHENSIVE ENQUIRY ON GUIDELINE TO BE ISSUED BY THE CIT(A). 6. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN OBSERVING THAT ADDITIONS OF BANK DEPOSITS WAS MADE U/S. 69 ALTHOUGH THE ASSESSMENT ORDER SHOWS THEM TO HAVE BEEN MADE U/S. 69C. 7. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN NOT STRIKING DOWN THE ADDITION MADE U/S. 69C WHEN NO EX PENDITURE WAS IDENTIFIED OR EVEN MENTIONED AND BANK DEPOSITS WOULD NOT BE HELD AS EX PENDITURE UNEXPLAINED. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF SUPPLY OF BUILDING MATERIAL ON RETAIL BASIS AND SUBMITTED ITS RETURN OF INCOME AS ON 31.03.2004 , 16.11.2005 & 31.03.2007 FOR THE RELEVANT ASSESSMENT YEARS 2003-04, 2005-06 & 2006-07 UNDER S ECTION 139(4) OF THE ACT. ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 25.02.2008 IN THESE THREE YEARS AND ASSESSEE REPLIED THAT RETURNS FILED ORIGINALLY BE T REATED AS RETURN FILED IN RESPONSE TO THE NOTICES UNDER SECTION 148 OF THE ACT. SUBSEQUENTLY, NOTICES UNDER SECTION 143(2) OF THE ACT WERE ISSUED AND ASSESSMENTS WERE FRAMED BY PASSING ASSESSMENT O RDERS UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT ON 26.12.2008. THE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCOUNTS AND ONLY MAINTAINED KATCHA EXERCISE BOOKS FROM WHERE COPIES OF SALES/PURCHASE WERE RECORDED. THE ASSESSEE BEING A RETAILER IN BUSINESS HAVING TU RN OVER LESS THAN RS.40.00 LAKHS IS BEING COVERED UNDER DEEMING PROVISIONS OF SECTION 44AF OF THE ACT, WHICH IS ON THE BASIS OF KATCHA BOOKS. THE ASSESSEE PREPARED PROFIT AND LOSS ACCOUN T, BALANCE SHEET & TRADING ACCOUNT AND ALSO NOTED TURNOVER CALCULATED ON THE BASIS OF THES E KATCHA BOOKS. THE TURN OVER AND OTHER DETAILS FOR THESE THREE ASSESSMENT YEARS ARE AS UND ER:- [ITA NO. 854, 855 & 856KOL/2010 KAPIL DEY A.Y. 03-04, 05-06 & 06-07] 3 SL. NO. ASSESSMENT YEAR TURNOVER 5% OF TURNOVER RETURNED INCOME ASSESSED INCOME 1. 2003-04 RS.8,01,748 (PG 5 OF PB) RS.40,087 RS.78,550 (PG. 3 OF PB) RS.1,51,170 (PG 35 OF PB) 2. 2005-06 RS.15,02,382 (PG 4 OF PB) RS.75,114 RS.1,19,600 (PG 3 OF PB) RS.15,31,800 (PG 33 OF PB) 3. 2006-07 RS.17,40,450 (PG 4 OF PB) RS.87,022 RS.97,870 (PG 3 OF PB) RS.4,60,880 (PG 26 OF PB) 4. THE ASSESSEE FILED ALL RETURNS UNDER SECTION 44 AF OF THE ACT AS THE ASSESSEE CARRIED ON BUSINESS OF SALE AND PURCHASE OF BUILDING MATERIAL ON RECEIPT BASIS AND HIS TURN OVER IS FAR BELOW RS.40 LACS AND COMPUTED HIS INCOME ON DEEMING BASIS UNDER SECTION 44AF OF THE ACT WHICH ARE SQUARELY APPLICABLE IN ALL THREE ASSESSME NT YEARS UNDER APPEAL. THE ASSESSEE COULD NOT LAY HIS HAND ON BANK STATEMENT FOR ASSESSMENT Y EAR 2004-05 FOR WHICH DEPOSITS ADDED BY AO ARE MERELY RS.72,617/- AND THE TURN OVER IS AT R S.8,01,748/-. SIMILARLY DEPOSITS AND WITHDRAWAL GIVEN BY ASSESSEE ARE AS UNDER:- ASSESSMENT YEAR TOTAL DEPOSIT (RS.) TOTAL WITHDRAWAL (RS.) DIFFERENCE 2003-04 ----- ---- BANK COULD NOT FURNISH THE STATEMENT FOR THIS PERIOD 2005-06 1468750.00 1483930.00 2006-07 433042.00 444205.00 5. FURTHER, ASSESSEES CONTENTION WAS THAT OUT OF T HE DEPOSITS, RS.668250/- AND RS.318009/- RESPECTIVELY FOR ASSESSMENT YEARS 2005- 06 AND 2006-07 ARE BY CLEARING CHEQUES AND BALANCE OF DEPOSITS REPRESENTS DEPOSITS IN CASH BY WAY OF BUSINESS RECEIPTS. IT WAS ARGUED BEFORE US THAT FOR ASSESSMENT YEAR 2005-06 AND 2006 -07 ALREADY SEVEN AND SIX YEARS PASSED BEFORE THE PRESENT ASSESSMENT YEAR AND THAT BOOKS O F ACCOUNT AND VOUCHERS ARE NOT READILY TRACEABLE IN SPITE OF THOROUGH SEARCH EVEN THOUGH A SSESSEE MADE MAXIMUM POSSIBLE EFFORT TO GIVE AS MUCH DETAIL AS POSSIBLE. EVEN DETAILS OF C HEQUES DEPOSITS ARE NOT AVAILABLE FROM THE BANK INSPITE OF REQUEST FOR BOTH THE ASSESSMENT YEA RS 2005-06 AND 2006-07. FURTHER FROM MEMORY, ASSESSEE HAS BEEN ABLE TO TRACE OUT THE FOL LOWING CASH DEPOSITS OUT OF THE BANK STATEMENTS, THE NAME AND ADDRESS OF THE RESPECTIVE PAYERS, WHOSE PAYMENTS WERE DIRECTLY DEPOSITED INTO BANK ARE GIVEN BELOW. SL. NO. DATE OF DEPOSIT BY THE ASSESSEE IN THE BANK ACCOUNT AMOUNT (RS.) NAME AND ADDRESS OF THE PAYER 1. 10.05.2002 45000.00 SUROJIT SEN, NO.3, CHANDIGAR H [ITA NO. 854, 855 & 856KOL/2010 KAPIL DEY A.Y. 03-04, 05-06 & 06-07] 4 MADHYAMGRAM 2. 09.01.2003 25000.00 SEKHAR DEY, PASCHIM CHANDIGA RH, MADHYAMGRAM 3. 08.01.2005 73000.00 ASHOK KUMAR RAYCHOUDHURY NO .4, CHANDIGARH, MADHYAMGRAM 4. 21.12.2005 45000.00 NIKHIL PAL, PASCHIM CHANDIGA RH, MADHYAMGRAM. 6. WE FIND THAT ASSESSING OFFICER DENIED COMPUTATIO N OF INCOME UNDER SECTION 44AF OF THE ACT TO ASSESSEE ON THE GROUND THAT HE HAS MAINT AINED BOOKS OF ACCOUNT IN ALL THREE YEARS BUT BY GOING THROUGH ACCOUNTS PREPARED BY ASSESSEE AND ARGUED BY THE COUNSEL THAT THESE ARE MAINTAINED BY ASSESSEE ON THE BASIS OF ROUGH/KATCHA BOOKS WHERE SALES AND PURCHASES ARE RECORDED AND THESE ARE STRICTLY FOLLOWED. EVEN OTHE RWISE, THERE IS NO REQUIREMENT OF SECTION 44AF OF THE ACT THAT FOR THE APPLICABILITY OF THIS PROVISION, BOOKS OF ACCOUNTS NEED NOT BE MAINTAINED BUT INCOME IS TO BE ASSESSED ON THE BASI S OF TURN OVER AND IN CASE TURNOVER IS BELOW RS.40 LACS, THE PROVISIONS WILL APPLY FOR ALL ABOVE THREE ASSESSMENT YEARS. THE ASSESSEE SHOWED DEEMED PROFIT AND IT IS NOT THE CASE FOR MAKING SEP ARATE ADDITION OF BANK DEPOSITS WHICH HAVE DIRECT NEXUS WITH SALES AND PURCHASES. FOR THIS, OU R REASONING IS THAT TURN OVER AND DEPOSITS ARE ALMOST CO-RELATING IN ALL THE THREE YEARS. WE FIND THAT IN ASSESSMENTS ORDER IT CLEARLY SHOWS THAT ADDITIONS OF BANK DEPOSITS ARE ON THE BASIS OF BUSI NESS RECEIPTS AND WITHDRAWALS FOR BUSINESS PAYMENT BUT NEITHER AO NOR CIT(A) HAVE NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW OR INDICATE THAT THERE IS NO NEXUS WITH THAT OF RECEIP TS OF SALES OR PURCHASES WITH THAT OF DEPOSITS MADE IN BANK BY ASSESSEE. ACCORDINGLY, WE ARE OF T HE VIEW THAT, THERE IS NO SCOPE TO MAKE SUCH ADDITION EITHER UNDER SECTION 69C OR UNDER SECTION 69 OF THE ACT AS HAS BEEN DONE BY THE ASSESSING OFFICER AND CITA). EVEN OTHERWISE, THIS VIEW OF OURS IS SUPPORTED BY HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SURINDER PAL ANAND [2011] 242 CTR 61 (P&H), WHEREIN THE RATIO LAID DOWN IS THAT WHERE A SSESSMENT BEING MADE US 44AB OF THE ACT, ASSESSEE IS NOT UNDER OBLIGATION TO EXPLAIN INDIVID UAL ENTRY OF CASH DEPOSIT IN THE BANKS UNLESS SUCH ENTRIES HAD NO NEXUS WITH THE GROSS RECEIPTS A ND, THEREFORE, HONBLE PUNJAB & HARYANA HIGH COURT RIGHTLY DELETED THE ADDITION MADE UNDER SECTION 68 OF THE ACT. HONBLE HIGH COURT CONSIDERED THE PROVISIONS OF SECTION 44AD AND HELD AS UNDER:- 6. WE HAVE CONSIDERED THE SUBMISSION OF LEARNED COU NSEL FOR THE APPELLANT AND DO NOT FIND ANY MERIT IN THE SAME. 7. SEC. 44AD OF THE ACT WAS INSERTED BY FINANCE ACT , 1994 W.E.F. 1ST APRIL, 1994. SUB- S. (1) OF S. 44AD CLEARLY PROVIDES THAT WHERE AN AS SESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION OR SUPPLY OF LABOUR FOR CIVIL CO NSTRUCTION, INCOME SHALL BE ESTIMATED AT 8 PER CENT OF THE GROSS RECEIPTS PAID OR PAYABLE TO THE ASSESSEE IN THE PREVIOUS YEAR ON ACCOUNT OF SUCH BUSINESS OR A SUM HIGHER THAN TH E AFORESAID SUM AS MAY BE [ITA NO. 854, 855 & 856KOL/2010 KAPIL DEY A.Y. 03-04, 05-06 & 06-07] 5 DEC1ARED BY THE ASSESSEE IN HIS RETURN OF INCOME NO TWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SS. 28 TO 43C OF THE ACT. THI S INCOME IS TO BE DEEMED TO BE THE PROFITS AND GAINS OF SAID BUSINESS CHARGEABLE OF TA X UNDER THE HEAD PROFITS AND GAINS OF BUSINESS. HOWEVER, THE SAID PROVISIONS ARE APPL ICABLE WHERE THE GROSS RECEIPTS PAID OR PAYABLE DO NOT EXCEED RS. 40 LACS. 8. ONCE UNDER THE SPECIAL PROVISION, EXEMPTION FROM MAINTAINING OF BOOKS OF ACCOUNT HAS BEEN PROVIDED AND PRESUMPTIVE TAX @ 8 PER CENT OF THE GROSS RECEIPTS ITSELF IS THE BASIS FOR DETERMINING THE TAXABLE INCOME, THE ASSES SEE WAS NOT UNDER OBLIGATION TO EXPLAIN INDIVIDUAL ENTRY OF CASH DEPOSIT IN THE BAN K UNLESS SUCH ENTRY HAD NO NEXUS WITH THE GROSS RECEIPTS. THE STAND OF THE ASSESSEE BEFORE CIT(A) AND THE TRIBUNAL THAT THE SAID AMOUNT OF RS. 14,95,300 WAS ON ACCOUNT OF BUSINESS RECEIPTS HAD BEEN ACCEPTED. LEARNED COUNSEL FOR THE APPELLANT WITH RE FERENCE TO ANY MATERIAL ON RECORD, COULD NOT SHOW THAT THE CASH DEPOSITS AMOUNTING TO RS.14,95,300 WERE UNEXPLAINED OR UNDISCLOSED INCOME OF THE ASSESSEE. 7. IN VIEW OF THE ABOVE FACTS THAT THE DEPOSITS AND WITHDRAWAL ARE MATCHING WITH THE TURNOVER FOR ALL THE THREE ASSESSMENT YEARS AND ASS ESSEE HAS DECLARED ITS INCOME U/S. 44AF OF THE ACT AND MOREOVER, THE ASSESSEES RECEIPTS HAS N EXUS WITH DEPOSITS, THE DEPOSITS ASSESSED BY THE LOWER AUTHORITIES U/S. 69 AND 69C OF THE ACT IS WITHOUT ANY BASIS, HENCE DELETED. EVEN OTHERWISE, THE ISSUE IS SUPPORTED BY THE DECISION O F HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SURINDER PAL ANAND (SUPRA), WHEREIN THE FACTS ARE EXACTLY IDENTICAL, FOLLOWING THE SAME WE ALLOW THIS ISSUE OF ASSESSEES APPEAL. 8. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE A LLOWED. #1 $+# #1 $+# #1 $+# #1 $+# 2 +, 3 4 2 +, 3 4 2 +, 3 4 2 +, 3 4 ORDER PRONOUNCED IN OPEN COURT ON 25.11.2011 SD/- SD/- [ . .. .!' !'!' !'. .. . , , , , #$ #$ #$ #$ ] [ , ] [C. D. RAO] [ MAHAVIR SINGH] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25TH NOVEMBER, 2011. COPY FORWARDED TO THE: - 1. KAPIL DEY, WEST CHANDIGARH, MADHYAMGRAM, KORA -CHANDIGARH, KOLKATA-130. 2. INCOME TAX OFFICER/WARD-49(2), 169, A.J.C. B OSE ROAD, BAMBOO VILLA, KOLKATA-14. 3. CIT(A)- (4) CIT- 4. D.R., I.T.A.T., KOLKATA 5. [TRUE COPY] BY ORDER DEPUTY/ASSISTANT REGISTRAR (KKC) I.T.A.T., KOLKATA.