Chandan Kumar Pahari, Purba Medinipur V. ITO, Ward - 4, Haldia, Purba Medinipur

ITA 955/KOL/2010

• Counselvise Citation: 95523514 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 03-08-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 10-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K ROY
• Assessee Lawyers: SWAPAN MUKHOPADHY AY
• Keywords: Rejection of books of accounts; Set aside
• Section: 40A(3); 133A

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [ . . . . , ,, , . . ! !! ! . , ] [BEFORE SHRI N. VIJAYA KUMARAN, J. M. & SHRI C. D. RAO, A.M.] $ $ $ $ / I.T.A NO.955/KOL/2010 / // / ASSESSMENT YEAR : 2004-05 CHANDAN KUMAR PAHARI -V S.- INCOME TAX OFFICER/WARD-4 PURBA MEDINIPUR [PAN : ALTPP 6217 G] HALDIA. [ + + + + /APPELLANT ] ]] ] [ -.+ -.+ -.+ -.+/ // / RESPONDENT ] ]] ] + + + + / FOR THE APPELLANT : SHRI SWAPAN MUKHOPADHY AY -.+ -.+ -.+ -.+ / FOR THE RESPONDENT : SHRI S. K. ROY 0 ! 0 ! 0 ! 0 ! /DATE OF HEARING : 15. 11. 2011 0 ! 0 ! 0 ! 0 ! /DATE OF PRONOUNCEMENT : 25.11.2011 [ /ORDER . . . . , PER N. VIJAYA KUMARAN, J. M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A)-XXXIII, KOLKATA DATED 29.01.2010 FOR ASSESSMENT YEAR 2004-05. 2. THE ASSESSEE WAS SUBJECT TO SURVEY UNDER SECTION 133A ON 22.11.2005. DURING SURVEY BOOKS OF ACCOUNTS WERE INVENTORISED AND IMPOUNDED A ND THE ASSESSEE WAS FOUND TO BE NOT MAINTAINING BOOKS OF ACCOUNTS. ASSESSING OFFICER PR OCEEDED ON 144 BEST JUDGMENT READ WITH SECTION 147. ON APPEAL TO THE LD. CIT(A), LD. CIT(A ) AGREED WITH THE ASSESSING OFFICER ON THESE THREE GROUNDS OF ADDITION. 3. THE FIRST GROUND IS ON THE PRAYER OF THE ASSESSE E THAT TOTAL PURCHASE PERIOD IN A YEAR HAS TO BE CALCULATED AND THE BASIS OF 307 DAYS ONLY AS THE CULTIVATION AND HARVESTING PERIOD AND THE [ ITA NO. 955/KOL/2010] 2 BUYERS OF THE VILLAGE AREA USUALLY WILL NOT COME TO THE MARKET AND TRANSACT DURING THE PERIOD ALMOST NIL. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON P ERUSAL OF THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HAS N OT CONSIDERED THE ISSUE IN PROPER PERSPECTIVE AND THE LD. CIT(A) HAS BRUSHED ASIDE THE CLAIM OF T HE ASSESSEE. THE ASSESSEE IS A TRADER. THE SURVEY IMPOUNDED BOOK WAS MARKED AS CP-I. IT SHOWS THE PURCHASES FOR BUSINESS DURING THE PERIOD 25.03.2003 TO 31.03.2004. BASED ON THE ABOVE AVAILABLE EVIDENCE FOR THAT PERIOD ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS OF THE ASSES SEE AND WENT ON DETERMINING THE TOTAL PURCHASES FOR THE WHOLE YEAR BASED ON THE PURCHASES REFLECTED IN THE IMPOUNDED BOOKS FOR THE PERIOD 25.03.2003 TO 31.03.2004. IT IS JUSTIFIED THAT ESTI MATION CAN BE ARRIVED AT BASED ON THE IMPOUNDED BOOKS FOR THE WHOLE FINANCIAL YEAR. AT THE SAME WAY , ASSESSEES CONTENTION IS THAT IT IS NOT THE PURCHASE FOR ALL THE 365 DAYS AND HAS RIGHTLY CONTE NDED THAT THIS PURCHASE HAS TO BE CALCULATED ON THE BASIS OF 307 DAYS ONLY WHICH WILL BE MORE PRACT ICAL AND PARTICULARLY ON THE FACT THAT THE PERIOD OF CULTIVATION AND HARVESTING HAS TO BE CONSIDERED FOR EXCLUSION. THE ASSESSEE IS RESIDING IN REMOTE AREAS. IT IS THE PRACTICE OF THE FARMERS AND BUYERS THAT DURING THE PERIOD OF CULTIVATION AND HARVESTING PARTIES WILL NOT COME TO THE MARKET DURI NG THOSE LEAN PERIOD. THE MARKET TRANSACTION IS ALSO NIL. 5. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE HEAVILY RELIED ON THE IMPOUNDED BOOK WHICH WAS OUT OF SURVEY. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE PRECEDENTS. THE CONTENTION OF THE ASS ESSEE WOULD BE QUITE JUSTIFIED. THE SEIZED DIARY GAVE THE PURCHASE DETAILS ONLY FOR THE PERIOD 25.03 .2003 TO 31.03.2004. LAW IS SETTLED THAT THE DEPARTMENT CAN ESTIMATE THE PURCHASE BASED ON THE F RACTIONAL DAYS COMPRISES IN THE CORRESPONDING PREVIOUS YEAR OR FINANCIAL YEAR. AT THE SAME TIME, THE ESTIMATION HAS TO BE ON RATIONAL BASIS. THE ASSESSEE IS A CULTIVATOR AND HE RESIDES IN A REMOTE VILLAGE. DURING CULTIVATION AND HARVESTING, THERE IS NO MARKET TRANSACTION AND THE MARKET TRANSACTION WILL BE ALSO NIL. THOSE DAYS CAN NOT BE TAKEN INTO CONSIDERATION AS THE DATE OF PURCHASE AS THE C ULTIVATION AND HARVESTING TIME HAS TO BE EXCLUDED FOR THE PURPOSE OF ARRIVING AT A TOTAL PURCHASE DAY S IN A YEAR. HENCE, WE AGREE WITH THE CONTENTION OF THE ASSESSEE AND THE PURCHASE HAS TO BE CALCULAT ED ON THE BASIS OF 307 DAYS WHICH WILL BE THE [ ITA NO. 955/KOL/2010] 3 CORRECT COMPUTATION AS HARVESTING AND CULTIVATION P ERIOD HAS TO BE EXCLUDED FROM THE WHOLE OF 365 DAYS. HENCE, WE SET ASIDE THE ORDERS OF THE AUTHORI TIES BELOW AND ALLOW GROUND NO.1 OF THE ASSESSEE. 7. COMING TO GROUND NO.2 REGARDING DISALLOWANCE UND ER SECTION 40A(3) OF THE ACT AS CONFIRMED BY THE LD. CIT(A). THIS ALSO EMANATES FRO M THE IMPOUNDED BOOK CP-1 THAT THE PAYMENT HAS BEEN MADE IN CASH TO THE EXTENT OF RS.9 ,23,249/-. THE ASSESSEE WAS ASKED TO GIVE EXPLANATION. BEFORE THE ASSESSING OFFICER, HE HAS N OT GIVEN ANY EXPLANATION TO THE SATISFACTION OF THE ASSESSING OFFICER. BEFORE LD. CIT(A), IT IS CON TENDED THAT IN THEIR COUNTER COMMENTS IT WAS SUBMITTED BY THE A/R THAT NO SPECIFIC DISCREPANCY H AS BEEN POINTED OUT BY THE ASSESSING OFFICER IN THE EXPLANATION GIVEN. IT WAS SUBMITTED THAT ASS ESSEE DEALS IN SEVERAL ITEMS LIKE TEA, BISCUITS, ELACHI, MILK POWDER, BEETLENUTS, PANMASALA, GUTKHA, TOBACCO, SOAP, CIGARETTES, KHAINI, SUGAR, FLOUR, ATTA, CANDELS, COMBS, MIRRORS, PERFUMES, AGA RBATTI, PAPER NAPKINS, DISPOSABLE PLATE AND GLASSES, POLY BAGS, MILK FOODS, STATIONARY GOODS AN D MANY OTHER ITEMS. IT WAS CONTENDED THAT THERE IS NO TRADER IN KOLKATA FROM WHOM ALL OF THES E ITEMS CAN BE PURCHASED. AND THEREFORE THE ASSESSEE HAD TO MAKE PURCHASES FROM NUMBER OF SELLE RS AND FOR PAYING THEM HE HAD TO CARRY LUMP SUM MONEY WITH HIM FOR USE AT KOLKATA FOR PURCHASES OF GOODS. IT WAS ONCE AGAIN MENTIONED THAT CERTAIN FIGURES HAD BEEN WRONGLY PICKED UP FROM CP- 1 AND THAT THESE WERE ACTUALLY BELOW RS.20,000/-. IT WAS CONTENDED THAT THE ACTUAL FIGUR E WHICH QUALIFIED UNDER SECTION 40A(3) IS ONLY RS.1,89,659/-. IT WAS FURTHER SUBMITTED THAT THE DE CISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. BANWARI LAL BANSHIDHAR [1998] 229 ITR 229 (ALL.) BE TAKEN INTO CONSIDERATION WHILE DECIDING THIS ISSUE. LD. CIT(A) WAS OF THE VI EW THAT HE FORWARDED THE SAME FOR THE COMMENTS OF THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAS STATED THAT ASSESSEE ERRONEOUSLY TAKEN RS.2,59,659/-. BUT ACTUAL CLAIM COMES TO ONLY RS.1,89,659/-. LD. CIT(A) WAS OF THE VIEW THAT OUT OF THE TOTAL DISALLOWANCE HE RESTRICTED IT TO RS.37,932/- AND HE PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 8. BEFORE US, LD. COUNSEL FOR THE ASSESSEE RELIED O N THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. BANWARI LAL BANSHIDHAR [1998] 229 ITR 229 (ALL.). THE ASSESSEE DEALS IN ITEMS LIKE TEA, BISCUITS, ELACHI, MILK POW DER, BEETLENUTS, PANMASALA, GUTKHA, TOBACCO, SOAP, CIGARETTES, KHAINI, SUGAR, FLOUR, ATTA, CANDE LS ETC. IT IS ALSO EXPLAINED THAT THERE WAS NO [ ITA NO. 955/KOL/2010] 4 TRADER IN KOLKATA FROM WHOM ALL THESE ITEMS CAN BE PURCHASED. THE ASSESSEE HAS TO MAKE PURCHASE FROM NUMBER OF SELLERS AND FOR PAYING THEM HE HAD T O CARRY LUMP SUM MONEY WITH HIM FOR USE TO KOLKATA FOR PURCHASE OF GOODS. THE ACTUAL FIGURE IS ONLY RS.1,89,659/- WHICH IS ALSO ACCEPTED IN THE REMAND REPORT. IT IS ALSO SUBMITTED THAT MOST O F THESE AMOUNTS ARE BELOW RS.20,000/- I.E. THE PRESCRIBED LIMIT AND THAT BEING FOR THE DECISION OF HONBLE ALLAHABAD HIGH COURT (SUPRA) WHICH IS APPLICABLE IN THIS CASE. HENCE, RESPECTFULLY FOLLOW ING THE SAME, WE SET ASIDE THE ENTIRE DISALLOWANCE AND ALLOW THE CLAIM OF THE ASSESSEE. 9. GROUND NO.3 IS REGARDING ADDITION UNDER THE HEAD WORKING CAPITAL REQUIREMENT TO THE TUNE OF RS.1,30,000.00. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE PRECEDENTS. SO MUCH EXERCISE HAS BEEN DONE BY THE DEPARTMENT IN SUSTAINING THE ADDITION. ASSESSING OFFICER WAS OF THE VIEW THAT TH E TOTAL CAPITAL EMPLOYED BY THE ASSESSEE AS PER THE VALID RETURN AND SALES ACHIEVED WAS RS.2,80,631 /-. ASSESSING OFFICER, THEREFORE, MADE THE ADDITION OF RS.32,97,701/- AS UNDISCLOSED CAPITAL E MPLOYED. THE LD. CIT(A) WAS LENIENT ENOUGH THAT WHILE COMPUTING ADDITIONAL CAPITAL ASSESSING O FFICER HAS TAKEN BOTH FIXED CAPITAL AND WORKING CAPITAL WHICH IS NOT JUSTIFIED. ACCORDING TO LD. CI T(A), ONLY WORKING CAPITAL SHOULD HAVE BEEN CONSIDERED BY THE ASSESSING OFFICER TO DETERMINE TH E ADDITIONAL CAPITAL REQUIREMENT IS THE VIEW OF THE 1 ST APPELLATE AUTHORITY. HENCE, HE RESTRICTED THE ADDI TION UNDER THE HEAD ADDITIONAL CAPITAL EMPLOYED FOR THE REASONS IN HIS ORDER TO THE EXTENT OF RS.1,30,000/-. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO FURTHER CAPITAL WAS REQUIRED TO B E INVESTED DURING THE YEAR AND IN THIS NATURE OF BUSINESS I.E. ROTATION OF STAFF ONLY 20 DAYS WHEREA S LD. CIT(A) TAKING THE WORKING CAPITAL ON 45 DAYS ROTATION STOCK. 11. LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE O RDERS OF THE AUTHORITIES BELOW. THE IMPOUNDED BOOKS, CASH FLOW STATEMENT AS PER DATA AV AILABLE AND THE DECISION ARRIVED AT BY THE LD. CIT(A) THAT HE HAS TAKEN ONLY WORKING CAPITAL FOR T HE PURPOSE OF DETERMINING THE ADDITIONAL CAPITAL REQUIREMENT COMPARED TO THE SALE WHICH WAS BROUGHT DOWN TO LOWER FIGURE OF RS.71,50,432/- ON THE BASIS OF SEIZED BOOK CP-1. THIS FIGURE OF SALES REQUIRED TO BE CONSIDERED. THE ROTATION OF STOCK AVAILABILITY OF MATERIAL ON CREDIT AND THE PERIOD O F CREDIT ALLOWED TO THE BUYER HAS ALSO BEEN DULY CONSIDERED BY THE LD. CIT(A). HE, THEREFORE, RESTRI CTED THE ADDITION TO THE TUNE OF RS.1,30,000/-. [ ITA NO. 955/KOL/2010] 5 WE ARE OF THE VIEW THAT THE ADDITION IS QUITE JUSTI FIED WHICH REQUIRES NO INTERFERENCE. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 3 3 3 3 ! ! ! ! ORDER PRONOUNCED IN THE COURT ON 25.11.2011. SD/- SD/- [ . . . . . . ! !! ! . , ] [ . . . . , ,, , ] [ C. D. RAO ] [ N. VIJAYAKUMARAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER D ATED : 25TH NOVEMBER, 2011. 0 - 7/ COPY OF THE ORDER FORWARDED TO: 1. + /APPELLANT : CHANDAN KUMAR PAHARI, C/O. M/S. USHA VARIETY STORES, BHIMESWARI BAZAR , EGRA, PURBA DINAJPUR-721165. 2 . -.+ / RESPONDENT : INCOME TAX OFFICER/WARD-4, INCOME T AX BUILDING, BASUDEVPUR, KHA NJANCHAK, PURBA MEDINIPUR. 3. - / CIT, 4. ()/ CIT(A), KOLKATA. 5. -/ DR, KOLKATA BENCHES, KOLKATA [. -/ TRUE COPY] / BY ORDER, /ASSTT REGISTRAR [KKC AB C /SR.PS]