Sri Tridip Roy, Howrah V. ITO, WD-46(4), KOLKATA, Kolkata

ITA 875/KOL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3314 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 15-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S MUKHERJEE
• Assessee Lawyers: M BANDYOPADHYAY
• Keywords: Income from undisclosed sources
• Section: 40A(3); 143(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SHRI M.BALAGANESH, AM & HONBLE S HRI S.S.VISWANETHRA RAVI, JM] I.T.A NO. 875/KOL/201 5 ASSESSMENT YEAR : 2008-0 9 SHRI TRIDIP ROY -VS- ITO, WARD-46(4), KOLK ATA [PAN: AGGPR 1974 C] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI M. BANDYOPADH YAY, AR FOR THE RESPONDENT : SHRI S. MUKHERJEE, ADDL . CIT DATE OF HEARING : 06.08.2018 DATE OF PRONOUNCEMENT : 24.08.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-14, KOLKATA [IN SHORT THE LD CI T(A)] IN APPEAL NO.176/CIT(A)- 14/WD-46(4)/2010-11 DATED 31.03.2015 AGAINST THE O RDER PASSED BY THE ITO, WARD- 46(4), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143(3) READ WITH SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATE D 02.12.2010 FOR THE ASSESSMENT YEAR 2008-09. 2. THE GROUND NOS. 1 & 6 RAISED BY THE ASSESSEE ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 2 ITA NO.875/KOL/2015 TRIDIP ROY A.YR. 2008-09 2 3. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN UPHOLDING THE ADDITION MADE IN THE SUM OF RS 41, 63,300/- TOWARDS CASH DEPOSITS MADE IN TWO SAVINGS BANK ACCOUNTS WHICH WERE UNDISC LOSED, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3.1. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASS ESSEE IS ENGAGED IN THE MANUFACTURING OF ELECTRICAL OVERHEAD MATERIALS AND OTHER COMPONENTS. THE ASSESSEE IS A PROPRIETOR OF M/S POWER INDIA. THIS BUSINESS HAD ONE CURRENT ACCOUNT WITH FEDERAL BANK, HOWRAH BRANCH AND AS PER AUDITED ACCOUNTS, THIS UNIT HAD SALES OF RS 1,19,42,517/- AND AFTER ADJUSTMENT OF DEBTORS RECEIVABLE, IT COMES TO RS 1,00,26,931/- . THE BANK ACCOUNT REVEALS THAT RS 89,01,076/- WAS DEPOSITED INTO THE BANK AND OUT OF WHICH, RS 85,43,776/- BY CHEQUE AND RS 3,57,300/- BY CASH. CERTAIN BUSINESS EXPEN DITURE WERE INCURRED IN CASH. TO MEET THESE CASH EXPENSES, RS 90,15,536/- WAS WITHDR AWN FROM THIS CURRENT ACCOUNT AND EXPENSES WERE INCURRED BY THE ASSESSEE. THE LD AO ALSO FOUND THAT THE ASSESSEE WAS ALSO HAVING TWO SAVINGS BANK ACCOUNTS WHEREIN A SUM OF RS 41,63,300/- WAS DEPOSITED IN CASH DURING THE YEAR UNDER CONSIDERATION. THE AS SESSEE STATED THAT THE CASH IN QUESTION WAS WITHDRAWN FROM THE CURRENT ACCOUNT MAINTAINED W ITH FEDERAL BANK AND DEPOSITED INTO THE SAVINGS BANK ACCOUNTS MAINTAINED IN HIS IN DIVIDUAL CAPACITY WITH INDIAN OVERSEAS BANK AND AXIS BANK. THE ASSESSEE FILED A CASH STATEMENT IN THIS REGARD SHOWING THE WITHDRAWALS , DEPOSITS IN SAVINGS BANK ACCOUNTS, EXPENSES INCURRED THEROEN ETC. THE LD AO OBSERVED THAT IT IS A FACT THAT THE RE WAS HUGE CASH WITHDRAWAL FROM THE CURRENT ACCOUNT OF THE PROPRIETARY CONCERN , BUT IT IS NOT ESTABLISHED THAT THE SAME CASH WAS TAKEN OUT BY THE ASSESSEE AND DEPOSITED INTO HI S SAVINGS BANK ACCOUNTS. ON THE CONTRARY, THE CAPITAL ACCOUNT OF THE ASSESSEE WITH THE PROPRIETARY CONCERN DOES NOT REFLECT ANY SUCH TRANSACTION BETWEEN THE ASSESSEE A ND THE PROPRIETARY CONCERN. THERE WAS NO SUCH REFLECTION OF THE SAID OUTFLOW OF CASH IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE VIS-A-VIS THE BALANCE SHEET OF THE PROPRIE TARY CONCERN OF THE ASSESSEE. THE LD AO ACCORDINGLY PROCEEDED TO ADD THE CREDITS IN THE BANK ACCOUNTS AS UNDISCLOSED 3 ITA NO.875/KOL/2015 TRIDIP ROY A.YR. 2008-09 3 INCOME OF THE ASSESSEE. THE ACTION OF THE LD AO WA S UPHELD BY THE LD CITA AFTER OBTAINING THE REMAND REPORT FROM THE LD AO. AGGRIEV ED, THE ASSESSEE IS IN APPEAL BEFORE US. 3.2. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND T HAT THE LD AO HAD ACCEPTED THE FACT THAT THE ASSESSEE HAD INDEED MADE HUGE CASH WITHDRA WALS FROM HIS CURRENT ACCOUNT MAINTAINED FOR HIS PROPRIETORY CONCERN M/S POWER IN DIA WHICH WAS A DISCLOSED BANK ACCOUNT. THESE CASH WITHDRAWALS WOULD BE AVAILABLE AS A SOURCE FOR EXPLAINING THE CASH DEPOSITS MADE IN UNDISCLOSED SAVINGS BANK ACCOUNTS MAINTAINED WITH IOB AND AXIS BANK BY THE ASSESSEE. BUT IT CANNOT BE BRUSHED ASI DE THAT THE ASSESSEE HAD ALSO INCURRED CERTAIN EXPENDITURE IN CASH OUT OF WITHDRAWALS MADE FROM THE CURRENT ACCOUNT. WE FIND THAT THE LD AR HAD SUBMITTED THE CASH STATEMENT ENC LOSED IN PAGES 45 TO 51 OF THE PAPER BOOK FILED BEFORE US CONTAINING THE CASH WITHDRAWAL S FROM CURRENT ACCOUNT, CASH DEPOSITS MADE IN VARIOUS BANK ACCOUNTS AND INCURREN CE OF CERTAIN EXPENSES IN CASH. THERE IS NO FACTUAL FINDING GIVEN BY THE LOWER AUTH ORITIES WITH REGARD TO THIS CASH STATEMENT. WE FIND THAT THE LD CITA HAD ALSO RECOR DED A FINDING THAT ASSESSEE HAD USED THE SAVINGS BANK ACCOUNTS FOR MAKING PAYMENTS /ADVA NCES TO WORKERS ETC. HENCE THE SAVINGS BANK ACCOUNTS BEING USED FOR BUSINESS OF TH E ASSESSEE IS ALSO PROVED BEYOND DOUBT. IN THESE FACTS AND CIRCUMSTANCES, IT WOULD BE JUST AND FAIR , IF ALL THE THREE BANK ACCOUNTS ARE CONSIDERED TOGETHER AND THE CONSOLIDAT ED CASH ACCOUNT IS PREPARED CONTAINING DATE WISE WITHDRAWALS, DATE WISE DEPOSIT S, DATE WISE INCURRENCE OF CASH EXPENDITURE, DATE WISE CASH RECEIPTS IF ANY TOWARDS SALE AND OTHER RECEIPTS . IT IS NOT THE CASE OF THE REVENUE THAT THE CASH WITHDRAWN FROM CU RRENT ACCOUNT OF M/S POWER INDIA BY THE ASSESSEE WAS UTILIZED FOR MAKING SOME OTHER INV ESTMENTS OR SPENT FOR PERSONAL PURPOSES BY THE ASSESSEE. HENCE WE DEEM IT FIT AND APPROPRIATE , IN THE INTEREST OF JUSTICE AND FAIR PLAY, TO REMAND THIS ISSUE TO THE FILE OF THE LD AO FOR DE NOVO ADJUDICATION OF THE ISSUE IN THE LIGHT OF DIRECTION S ISSUED HEREINABOVE. ACCORDINGLY, THE GROUND NO. 2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 4 ITA NO.875/KOL/2015 TRIDIP ROY A.YR. 2008-09 4 4. THE LAST ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE MADE U/S 40A(3) OF TH E ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.1. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE LD AO OBSERVED THAT THE ASSESSEE HAD MADE THE PAYMENTS TO THE FOLLOWING PARTIES OTHERWISE THA N BY WAY OF ACCOUNT PAYEE CHEQUE / DRAFT WHICH WAS IN VIOLATION OF PROVISIONS OF SECTI ON 40A(3) OF THE ACT :- 31.3.08 ANKITA STEEL RS 1,04,091 31.3.08 ANAND IRON & STEEL RS 31,480 31.3.08 BHARAT DIE CASTING RS 4,98,576 31.3.08 SUPER STEEL RS 52,008 31.3.08 GLOBAL INDUSTRIES RS 3,57,066 31.3.08 INDUSTRIAL ENTERPRISES RS 1,73,472 31.3.08 MA DURGA IRON WORKS RS 99,442 31.3.08 MAHA LAKSHMI TRADING CO. RS 52,076 31.3.08 MAHA LAKSHMI HARDWARE RS 47,840 -------------------- RS 14,16,051 THE LD AO DISALLOWED THE SUM OF RS 14,16,051/- U/S 40A(3) OF THE ACT IN THE ASSESSMENT. THE ACTION OF THE LD AO WAS UPHELD BY THE LD CITA. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4.2. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND T HAT THE LD CITA HAD SOUGHT FOR A REMAND REPORT FROM THE LD AO TO MAKE ENQUIRIES WITH REGARD TO EACH OF THE AFORESAID PARTIES. THE LD AO IN THE REMAND REPORT STATED THAT FROM THE LEDGER ACCOUNTS OF THOSE PARTIES, THERE IS NO SINGLE PAYMENT EXCEEDING RS 20 ,000/- MADE BY THE ASSESSEE IN A SINGLE DAY IN VIOLATION OF PROVISIONS OF SECTION 40 A(3) OF THE ACT. HOWEVER, HE STATED IN HIS REMAND REPORT THAT THE CONFIRMATION OF ACCOUNTS SUBMITTED BY THOSE PARTIES WERE NOT GENUINE AND IS AN AFTERTHOUGHT. SAME OBSERVATIONS WERE MADE BY THE LD AO IN RESPECT OF ALL THE PARTIES IN THE REMAND REPORT. WE FIND TH AT THE LD AO HAD ISSUED SUMMONS TO ALL THESE PARTIES U/S 131 OF THE ACT AND ALL THE PARTIE S APPEARED BEFORE THE LD AO AND 5 ITA NO.875/KOL/2015 TRIDIP ROY A.YR. 2008-09 5 CONFIRMED THE FACT OF RECEIVING CASH FROM THE ASSES SEE IN RESPECT OF SUPPLIES MADE BY THEM TO THE ASSESSEE. WE FIND THAT THE LD AO IN PA GE 3 PARA 8 OF HIS ORDER HAD RECORDED THAT BOOKS OF ACCOUNTS WERE NOT PROPERLY MAINTAINED BY T HE ASSESSEE ; THAT MOST OF THE EXPENSES WERE ACCOUNTED FOR ON THE LAST DAY OF THE ACCOUNTING YEAR I.E 31.3.2008 ; THAT MOST OF THE PURCHASES WERE MADE IN CASH AND MOST OF THE PAYMENTS WERE MADE KEEPING THE SINGLE PAYMENT BELOW RS 20,000/- SO THAT THE PA YMENTS DO NOT VIOLATE THE PROVISIONS OF SECTION 40A(3) OF THE ACT ; THAT THE DISCREPANCI ES AND IRREGULARITIES WERE POINTED OUT TO THE LD AR WHO COULD NOT PUT FORWARD AND COGENT R EASON FOR SUCH DISCREPANCIES AND IRREGULARITIES ; THAT THE BOOKS OF ACCOUNTS WERE IM POUNDED U/S 131(3) OF THE ACT ; THAT THE ACCOUNTS DO NOT REFLECT THE TRUE STATEMENT OF A FFAIRS OF THE ASSESSEE AND THE ASSESSEE HAD GENERATED HUGE UNACCOUNTED INCOMES WHICH WERE I NVESTED OUT OF THE BOOKS. SINCE THE UNDISCLOSED INVESTMENTS WERE ALREADY ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE, NO FURTHER ADVERSE FINANCIAL INFERENCE IS DRAWN ON THIS COUNT. THE LD AO HAVING RECORDED THE AFORESAID ALLEGED IRREGULARITIE S IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, OUGHT TO HAVE STRAIGHT AWAY REJECTED THE SAME AND RESORTED TO ESTIMATION OF PROFITS U/S 145(3) OF THE ACT, WHICH WAS NOT DONE I N THE INSTANT CASE. HENCE NO SEPARATE DISALLOWANCE COULD BE MADE U/S 40A(3) OF THE ACT WH EN THE LD AO HIMSELF HAD ADMITTED IN HIS ORDER THAT THE PAYMENTS REFLECTED IN THE BOO KS OF ACCOUNTS REFLECT PAYMENTS MADE LESS THAN RS 20,000/-. EVEN ON MERITS, THE ASSESS EE HAD EXPLAINED THE CIRCUMSTANCES LEADING TO THE BUSINESS EXPEDIENCY UNDER WHICH THE PAYMENTS WERE MADE TO THOSE 9 PARTIES IN CASH. ALL THE 9 PARTIES WERE SUPPLYING THE PRODUCTS TO THE ASSESSEE ON AN EMERGENCY BASIS IN ORDER TO MAINTAIN QUICK FLOW OF RAW MATERIALS, THE ASSESSEE HAD TO MAKE PAYMENTS IN CASH. FURTHER ALL THE 9 PARTIES TO WHOM PAYMENTS WERE MADE HAD ALSO APPEARED BEFORE THE LD AO IN RESPONSE TO THE SUMMON S ISSUED U/S 131 OF THE ACT AND HAD CONFIRMED THE TRANSACTIONS BEFORE THE LD AO. H ENCE THE GENUINITY OF THE TRANSACTION STAND ESTABLISHED. HENCE THERE CANNOT BE ANY DISAL LOWANCE ON THIS COUNT ALSO. RELIANCE IN THIS REGARD WAS RIGHTLY PLACED BY THE LD AR ON T HE DECISION OF THIS TRIBUNAL IN THE CASE 6 ITA NO.875/KOL/2015 TRIDIP ROY A.YR. 2008-09 6 OF NIRMAL KUMAR DAS VS ACIT IN ITA NO. 391/KOL/2014 FOR ASST YEAR 2010-11 DATED 11.12.2015 . ACCORDINGLY, THE GROUNDS 3 TO 5 RAISED BY THE ASSESSEE ARE ALLOWED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 24.08.2018 SD/- SD/- [S.S. VISWANETHRA RAVI] [ M.BAL AGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 24.08.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. SHRI TRIDIP ROY, 86/7, O ROAD, BELGACHIA, HOWR AH-711108, W.B. 2. ITO, WARD-46(4), KOLKATA, 3, GOVT. PLACE, KOLKAT A-700001. 3..C.I.T.(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S