Parikh Patel & Co., Kolkata V. ACIT, Circle - 31, Kolkata, Kolkata

ITA 967/KOL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87684 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 01-07-2011
• Court: TRIBUNAL
• Department Lawyers: K L KANAK
• Assessee Lawyers: DR SOMNATH GHOSH
• Keywords: Income from undisclosed sources; Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM ] I.T.A NO. 9 6 7 /KOL/201 1 ASSESSMENT YEAR : 200 6 - 0 7 PARIKH PATEL & CO. VS. ASSISTANT COMMISSIONER OF INCOME - TAX, (PAN:AAEFP2971R) CIRCLE - 31, KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 16 .0 2 .2015 DATE OF PRONOUNCEMENT: 20 .02 .2015 FOR THE APPELLANT: DR. SOMNATH GHOSH, CA FOR THE RESPONDENT: S HRI K. L. KANAK, JCIT ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT (A) - X I X , KOLKATA IN APPEAL NO. 350 / CIT(A) - X I X/ ACIT,CIR - 31/KOL/08 - 09 DATED 17 . 0 3 .201 1 . THE A SSESSMENT W AS FRAMED BY ACIT, CIRCLE - 31, KOLKATA U/S. 143(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT ) FOR AY 200 6 - 0 7 VIDE HIS ORDER DATED 30 . 1 2 .20 0 8 . 2. O NLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ADDITION OF RS.7,31,352/ - BEING THE DIFFERENCE IN AMOUNT RECEIVABLE IN THE ACCOUNTS OF THE ASSESSEE AND THAT OF M/S. HENNA TEX. FOR THIS, ASSESSEE HAS RAISED FOLLOWING TWO GROUNDS: 1. FOR THAT THE IMPUGNED ORDER OF THE CIT(A) - XIX IS UNJUST, UNREASONABLE, ARBITRARY AND BAD IN LAW. 2. FOR THAT UNDER THE FACT AND CIRCUMSTANCES OF THE CASE CONFIRMATION OF THE ADDITION OF RS.731352/ - TO PROFIT IS UNJUST AND UNREASONABLE AND T HE SAME REQUIRES DELETION. 3. THE AO , DURING THE COURSE OF ASSESSMENT PROCEEDINGS , AFTER NOTIC ING FOLLOWING FACT , DECIDES THE ISSUE BY OBSERVING AS UNDER : 4.3. IN THE COURSE OF THESE PROCEEDINGS A LETTER, DATED 15.09.2008, WAS ISSUED TO M/S. HENNA TEX, 30, VASAI TALUK, GORAI PADA, VASAI (E), THANE - 401 202, CALLING FOR THE STATEMENT OF AFFAIRS AS IT STANDS WITH THE ASSESSEE - M/S. PARIKH PATEL & CO. AS ON 31.03.2006. UPON RECEIVING THE REPLY FROM M/S. HENNA TEX IT WAS SEEN THAT RS.5,18,422.72 WAS RECEIVABL E BY THEM FROM THIS ASSESSEE WHEREAS THE SUNDRY CREDITORS LIST OF THE ASSESSEE REFLECTS THAT RS.12,49,774.48 AS PAYABLE TO M/S. HENNA TEX. IT IS APPARENT FROM THIS THAT THE ASSESSEE HAD INTRODUCED MONEY RS.7,31,351.76 2 ITA NO. 967 /K/201 1 PARIKH PATEL & CO. , AY 200 6 - 0 7 (RS.12,49,774.48 RS.5,18,422.72) FRO M HIS UNDISCLOSED SOURCES UNDER THE GUISE OF INFLATED SUNDRY CREDITORS. WHEN THE AR WAS ASKED TO EXPLAIN THIS HE COULD NOT OFFER ANY EXPLANATION. HE WAS INFORMED THAT IN ABSENCE OF ANY EXPLANATION RS.7,31,351.76 WOULD BE INCLUDED IN THE TOTAL INCOME AS T HE ASSESSEE S UNEXPLAINED INCOME FOR THE PREVIOUS YEAR RELEVANT TO THIS ASSESSMENT YEAR UNDER SCRUTINY, THE AR CONCURRED WITH THIS VIEW OF THE DEPARTMENT (REF. HEARING DATED 29.12.2008). IN VIEW OF THE ABOVE RS.7,31,351.76 IS BEING ADDED BACK AS THE ASSE SSEE S INCOME FROM UNDISCLOSED SOURCES FOR THE RELEVANT ASSESSMENT YEAR. PENAL PROCEEDINGS U/S. 271(1)(C) TO BE INITIATED SEPARATELY. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 4 . THE CIT(A) ALSO CONFIRMED THE ACTION OF AO VIDE PARA 5 AS UNDER: (5) I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND PERUSED THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE COPIES OF LEDGER ACCOUNTS OF M/S. HENNA TEX IN THE BOOKS OF APPELLANT FROM F.Y. 2002 - 03 TO F.Y. 2005 - 06 AND THE COPY OF ACCOUNT OF THE APPELLANT IN THE BOOKS OF M/S. HENNA TEX FROM F.Y. 2002 - 03 TO 2005 - 06. THE REMAND REPORT OF THE A.O. AND REJOINDER OF THE APPELLANT ARE ALSO CONSIDERED. ON PERUSAL OF LEDGER ACCOUNTS IT IS OBSERVED THAT ALL THE PURCHASE AND SALE TRANSACTIONS ARE DULY REFLECTED IN THE BOOKS OF ACCOUNTS OF BOTH THE PARTIES. HOWEVER, THERE WAS CERTAIN DISPUTE WITH REGARD TO DEFECT IN CERTAIN MACHINERIES PURCHASED BY THE APPELLANT AND, THEREFORE, THE DISCUSSIONS AND NEGOTIATIONS TOOK PLACE BETWEEN THE TWO PARTIES. IT IS OBSERVED THAT APPELLANT HAS DEBITED CERTAIN AMOUNT OF EXPENSES IN THE ACCOUNT OF M/S. HENNA TEX WHICH WERE INCURRED ON THE TRAVEL ETC. ON BEHALF OF M/S. HENNA TEX, BUT THE SAID PARTY HAS NOT TAKEN INTO CONSIDERATION SUCH EXPENSES IN ITS BOOKS OF ACCOUNT. FURTHER, THE PARTY M/S. HENNA TEX HAS CLAIMED BAD DEBT OF RS. 11,10,955/ - DURING F.Y. 2003 - 04. HOWEVER, NO SUCH ENTRY OF WRITING OFF OF THE CREDIT BALANCE WAS THERE IN THE BOOKS OF APPELLANT. THE NON - CONSIDERATION OF EXPENSES INCURRED BY THE APPELLANT ON B EHALF OF M/S. HENNA TEX AND CLAIM OF BAD DEBT BY THE SAID PARTY HAS RESULTED INTO DIFFERENCE IN THE BALANCES IN THE BOOKS OF ACCOUNTS OF THE TWO PARTIES. ON CAREFUL CONSIDERATION OF THE FACTS, I AM OF THE OPINION THAT IN THE HANDS OF APPELLANT THE ADDITION OF RS. 7 ,31,351/ - IS LIABLE TO BE MADE U/S. 41(1) OF THE ACT AND NOT AS INCOME FROM UNDISCLOSED SOURCES, BECAUSE IT IS EVIDENT THAT THE DIFFERENCE IN THE AMOUNT OF RS.7,31,351/ - HAS BEEN ARISEN BECAUSE THE DEBTOR OF THE APPELLANT M/S. HENNA TEX HAS FOREG ONE THE CLAIM TO THE EXTENT OF RS.11,10,955/ - . THUS, AS ON 31.03.2006, THE APPELLANT HAS LIABILITY TOWARDS THE DEBTOR M/S. HENNA TEX TO THE EXTENT OF RS.5,18,423/ - ONLY AND NOT TO THE EXTENT OF RS.12,49,774. - AS SHOWN IN THE BALANCE SHEET. SINCE THE APP ELLANT HAS CLAIMED THE DEDUCTION IN THE PROFIT & LOSS ACCOUNT ON ACCOUNT OF PURCHASE OF MACHINERIES AND HENCE, THE CLAIM FOREGONE BY THE DEBTOR IS TAXABLE IN THE HANDS OF APPELLANT U/S. 41(1) OF THE ACT. IN VIEW OF THE ABOVE, THE ADDITION OF RS.7,31,352/ - MADE BY THE A.O IS CONFIRMED. THE GROUND NO.2 IS DISMISSED. AGGRIEVED, ASSESSEE CAME IN SECOND APPEAL BEFORE TRIBUNAL. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE RELIED ON THE PAPER BOOK FI LED BY IT CONSISTS OF PAGES 1 TO 38, WHICH 3 ITA NO. 967 /K/201 1 PARIKH PATEL & CO. , AY 200 6 - 0 7 WE HAVE GONE THROUGH. WE HAVE ALSO GONE THROUGH WRITTEN SUBMISSIONS GIVEN AT PAGES 1 TO 4 INCLUDING THE SO CALLED RECONCILIATION, WHICH IS AS UNDER: FINANCIAL YEAR ENDED ON CREDIT BALANCE IN THE BOOKS OF ACCOUNT OF PARIKH PATEL & CO. (ASSESSEE) (RS.) DEBIT BALANCE IN THE BOOKS OF ACCOUNT OF HENNA TEX M(RS.) DIFFERENCE ON 31 ST MARCH OF EACH YEAR (RS.) 31.03.2003 31.03.2004 31.03.2005 31.03.2006 3,83,494.48 15,60,347.48 15,48,375.48 12,49,774.48 4,30,470.72 5,12,7 23.72 5,18,422.72 5,18,422.72 (46,976.24) 10,47,623.76 10,29,952.76 7,31,351.76 IN THIS PAPER BOOK THE ASSESSEE HAS ALSO ENCLOSED COPIES OF ACCOUNTS IN THE BOOKS OF M/S. HENNA TEX THAT OF THE ASSESSEE. IN THE BOOKS OF M/S. HENNA TEX FOR FY 2003 - 04 RELEVANT AY 2004 - 05 THERE IS A WRITTEN OF F BAD DEBT OF RS.11,10,955/ - . THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THIS IS THE REASON THAT THE DIFFERENCE OF RS.7,31,352/ - WHICH IS SUBJECT MATTER OF ADDITION. LD. COUNSEL FOR THE ASSESSEE ADMITTED THE DIFFERENCE OF RS.7,31,352/ - , WHICH THE ASSESSEE HAS TO MAKE PAYMENT TO HENNA TEX ON ACCOUNT OF PURCHASE OF MACHINERY BUT THAT WAS NOT PAID AND THE PARTY HAS UNILATERALLY WRITTEN OFF THE BAD DEBTS. LD. COUNSEL ALS O ADMITTED ACTUALLY THIS AMOUNT WAS TO BE PAID BUT EVEN NOW TILL DATE NEITHER THE PAYMENT IS MADE NOR THAT PARTY HAS DEMANDED AND ACTUALLY THE AMOUNT IS WRITTEN OFF AS BAD DEBTS. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THIS IS AN INCOME OF THE ASSE SSEE BECAUSE THE ASSESSEE HAS ALREADY CLAIMED THIS AS AN EXPENDITURE ON ACCOUNT OF PURCHASE OF MACHINERY FROM THAT PARTY. ONCE THIS IS THE POSITION, WE ARE OF THE CONSIDERED VIEW THAT THE AO HAS RIGHTLY TREATED THIS DIFFERENCE AS INCOME AND CIT(A) CONFIRM ED THE SAME. WE ALSO CONFIRM THE ACTIONS OF THE LOWER AUTHORITIES. THIS ISSUE OF ASSESSEE S APPEAL IS DISMISSED. 6. IN THE RESULT, APPEAL OF ASSESSEE IS DISMISSED. 7 . ORDER IS PRONOUNCED IN THE OPEN COURT ON 20.02.2015 SD/ - SD/ - ( SHAMIM Y AHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED : 20TH FEBRUARY , 201 5 JD.(SR.P.S.) 4 ITA NO. 967 /K/201 1 PARIKH PATEL & CO. , AY 200 6 - 0 7 COPY OF THE ORDER FORWARDED TO: 1 . A PPELLANT PARIKH PATEL & CO.N - 414, IDEAL PLAZA, 4 TH FLOOR, 11/1, SARAT BOSE ROAD, KOLKATA - 700 020. 2 RESPONDENT ACIT, CIRCLE - 31, KOLKATA . 3 . THE CIT (A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .