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Income Tax Appellate Tribunal, KOLKATA BENCH “C”, KOLKATA
Before: SHRI SONJOY SARMA, HON’BLE & SHRI GIRISH AGRAWAL, HON’BLE
IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCH “C”, KOLKATA BEFORE SHRI SONJOY SARMA, HON’BLE JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, HON’BLE ACCOUNTANT MEMBER ITA No.53/Kol/2021 Assessment Year: 2017-18 ITO, Ward-25(4), Kolkata Shri Pabitra Majumder Vs. W/2, Akra Road, Bartala, Kolkata – 700 066. [PAN: AXZPM 1249 D] (Appellant) (Respondent) C.O. No.10/Kol/2021 (Arising out of ITA No. 53/Kol/2021) Assessment Year: 2017-18 Shri Pabitra Majumder ITO, Ward-25(4), Kolkata W/2, Akra Road, Bartala, Vs. Kolkata – 700 066. [PAN: AXZPM 1249 D] (Cross-Objector) (Respondent) Present for: Assessee by : Shri Manoj Kataruka, AR Revenue by : Shri Pradip Kumar Mandal, ACIT, DR Date of Hearing : 06.07.2022 Date of Pronouncement : 15.09.2022 O R D E R PER SONJOY SARMA, JM: This appeal is preferred by the Revenue against the order of ld. CIT(A) -7, Kolkata dated 24.08.2020 and consequent to that another Cross-Objection filed by the assessee being C.O. No. 10/Kol/2021. “i. That on the facts and in the circumstances of the case, the CIT(A) was correct in upholding the contention of the assessee in absence to any verifiable material to warrant the same.
2 ITA No.53/KOL/2022 & C.O. No. 10/Kol/2021 Shri Pabitra Majumder A.Y. 2017-18 ii. That on the facts and in the circumstances of the case, the finding recorded by the CIT(A) is contrary to the record and thus perverse.
iii. That on the facts and in the circumstances of the case it appears that the CIT(A) accepted fresh evidences in violation to the provisions of Rule 46A of IT Rules.
iv. That the appellant humbly craves leave to add, amend, alter withdraw, delete or substitute all or any of the grounds(s) of appeal at the time of hearing.”
Brief facts of the case are that the assessee filed his return of income for A.Y. 2017-18 on 27.10.2017 declaring total income of Rs. 13,55,310/-. The case of the assessee was selected for scrutiny through CASS and the AO added a sum of Rs. 109,16,560/- as an unexplained money u/s 69A of the Income-tax Act, 1961 and added to the total income of the assessee.
Aggrieved by the above order, the assessee preferred an appeal before the ld. CIT(A) where the appeal of the assessee was partly allowed by the ld. CIT(A) by observing as follows: “I have considered the submission of the AR of the appellant in the backdrop of the assessment order. I have also considered the various judicial decisions referred to by the AO as well as the AR in support of their respective stands in the matter. I have also considered the relevant materials on record in deciding the matter on merits. Therefore, the case needs to be decided against the background of an overall availability of information/data on record as follows: The AO found that the appellant had total deposits in his bank accounts as follows: Sl. Name of Bank Account Number Total Deposits No. 1 ICICI Bank 032851000003 3,44,79,712/- 2 ICICI Bank 032805004469 2,69,83,492/- 3 Bandhan Bank 10160007384576 4,39,15,865/- Total 10,53,79,069/-
Therefore, the AO was of the opinion that the difference between total deposit of Rs. 10,53,79,069/- and sales of Rs. 7,79,61,209/- being Rs.
3 ITA No.53/KOL/2022 & C.O. No. 10/Kol/2021 Shri Pabitra Majumder A.Y. 2017-18 2,74,17,850/- could be construed as unexplained deposit. In this respect, the appellant provided reconciliation in the matter as under: Particulars Amount Amount (Rs) (Rs.) 1. Inter Bank Transactions A. ICICI Bank 88,59,950/- (032851000003) B. ICICI Bank 41,21,800/- (032805004469) C. Bandhan Bank 66,56,728/- 1,96,38,478/- (10160007384576)
Received from 40,05,654/- debtors
Cash deposited 9,14,500/- in SBN from earlier savings
Cash gift received 25,00,000/- Total credits in 2,70,58,632/- bank account apart from sales figure shown in profit & loss account
Out of the inter-banking transactions of Rs. 1,96,38,478/- an amount of Rs.1,30,86,000/- was accepted and balance amount of Rs. 65,52,478/- was added back. The explanation of the appellant than an amount of Rs. 40,05,654/- was on account of realization form sundry debtors was not accepted and lastly the difference of the explained deposits, additions made and unexplained deposits of Rs. 3,58,428/- (2,74,17,860/- less 25,00,000/- + 9,14,500/- + 1,30,86,000/- + 65,52,478/- + 40,05,654/-) was added back.
4.3 Firstly the addition of Rs. 65,52,478/- is taken up. I find from record that there was no cash involved in the entire transactions of Rs. 1,96,38,478/- as they were in the nature of inter- bank deposits or rejection/ return of cheques. The bank statements and the details have been verified as available on record. It is seen that in the ICICI Bank (032851000003) out of the total inter-bank transactions of Rs.
4 ITA No.53/KOL/2022 & C.O. No. 10/Kol/2021 Shri Pabitra Majumder A.Y. 2017-18 88,59,950/- except for an amount of Rs. 9,950/- in respect of rejection of cheque the remaining amount Rs. 88,50,000/- was on account of transfer of funds from Majumder Hosiery the proprietorship concern of the appellant. The details of the date wise transfer with narration and amount is seen to be matching with the bank entries as per record and therefore there stands no discrepancy in the matter. In respect of ICICI Bank (032805004469)) out of the inter bank transactions of Rs. 41,21,800/- an amount of Rs. 36,06,000/- was on account of transfer of funds from Majumder Hosiery, an amount of Rs.4,85,950/- was rejection credit due to insufficient funds/exceeded arrangements, and lastly an amount of T29.850/- was payment stopped by the drawer. The details of the date wise transfer with narration and amount is seen to be matching with the bank entries and therefore there are no discrepancies as such. In respect of Bandhan Bank (10160007384576) out of the total inter-bank transactions of Rs. 66,66,728/- an amount of T32,30,726/- was on account of transfer of funds from Majumder Hosiery and remaining amount of Rs. 34,26,002/- was on account of credit due to cheque return due to insufficient funds/signature mismatch. Here also the details of the date wise transfer with narration and amount is seen to be matching with the bank entries and therefore there stands is no discrepancy. The same details were provided before the AO and clearly there was an error as to in partly accepting the submissions to the extent of Rs. 1,30,86,000/- and adding back the balance of Rs. 65,52,478/-. The AO has relied upon the decision of Sreelekha Banerjee & Ors. vs. CIT reported in 49 ITR 112(SC) which was dealing with the encashing the high denominations during the 1946 Demonetization Ordinance. The Hon’ble Supreme Court on the facts in this particular case confirmed the additions on the reason that cash balance was found to be wrong and the books of accounts of the assessee did not contain entries in respect of banks. Also it was observed by the Supreme Court that no central account for transfer were disclosed by assessee in respect of cash withdrawals from bank and sent to different branches and assessee failed to prove why he had kept such huge cash in hand in one place when he had in other places bank accounts. Further it was found that on the date of encashment of high value demonetized notes a sum of Rs. 45,000/- the assessee withdrew Rs. 45,000/- by cheque. Further the assessee transferred Rs. 16,000/- to Bokaro but Rs. 17000/- was withdrawn to meet that expense. Therefore on the totality of these facts the additions were upheld by Supreme Court and are not applicable to the facts of the case in hand. The decision which more aptly applies to the present facts would be the apex court decision of Mehta Parikh & Co vs. CIT
5 ITA No.53/KOL/2022 & C.O. No. 10/Kol/2021 Shri Pabitra Majumder A.Y. 2017-18 reported in 30 ITR 181 (SC) again dealing with case of en-cashing the high denominations during the 1946 Demonetization Ordinance. The addition made by AO was reduced by the Tribunal thereby accepting in part the explanation provided. The Hon’ble Supreme Court held that assessee had furnished a reasonable explanation and the Tribunal accepting in part and disallowing in part was not correct. In another decision of the Supreme Court in the case of Lalchand Bhaqat Ambica Ram vs. CIT 37 1TR 288(SC) relating to en-cashing the high denominations during the 1946 Demonetization Ordinance again explanation was accepted by Tribunal by reducing the disallowance of cash deposits. The Hon’ble Supreme Court deleted the entire addition made by the AO by observing that books of accounts of assessee were not challenged in any manner except in regard to impugned addition and it was not open to the Tribunal to accept the explanation of the assessee in part. In view of the foregoing discussion as well as the judicial precedents, I do not find any premise to endorse the action of the AO in making the impugned addition of Rs. 65,52,478/- as unexplained deposits u/s 69A of the Act. The same stands deleted.
4.4. The second addition of Rs. 40,05,654/- on account of realization from sundry debtors account is taken up. The appellant from the books of accounts showed the sundry debtors balance as on 31.3.2016 was Rs. 55,13,058/- out of which Rs. 40,05,654/-was received during the year. The sundry debtors as on 31.3.2016 was forming part of accepted sales for AY 2016-2017 as per the audited accounts furnished in the paper book. The confirmation of the sundry debtors parties submitted before the AO were disbelieved on the reason that the same was printed in the same manner. The confirmations of accounts are supported with detailed sheet of the debtors and the audited books of accounts. No addition can be made for realization of sundry debtors forming part of the sales reflected as income in the previous year. The books of accounts were not disturbed. The decision of Mehta Parikh & Co vs. CIT (supra) and Lalchand Bhagat Ambica Ram vs. CIT (supra) can again be applied here on the principle that once books of the appellant are not rejected and explanation furnished is reasonable no addition can be made. The fact that the realization from debtors was forming part of the books of account and the cash deposited is from the books no addition can made as held in the cases of DCIT vs. Smt. Veena Awasthi ITA No. 215/ LKW/2016 and the case of Neeta Breja v. ITO ITA No. 524/Del/2017. It is also established principle that once the sales are accepted or there is realization from sundry debtors no addition can be
6 ITA No.53/KOL/2022 & C.O. No. 10/Kol/2021 Shri Pabitra Majumder A.Y. 2017-18 made of the same sales again as it would amount to double addition. I am guided by the decision of the Delhi High Court in the case of CIT v. Kailash Jewellery House in ITA No. 613/2010 wherein cash of Rs. 24,58,400/- was deposited in bank account. The AO made the addition on the ground that nexus of such deposit was not established. The assessee claimed that it was duly recorded in the books on account of cash sales and was considered in the profit and Loss Account. The AO had verified the stock and cash position as per books and had accepted the same. Complete books of account and cash book were submitted to the AO and no discrepancy was pointed out. On this basis CIT(A) deleted the addition. Tribunal also observed that it is not in dispute that sum of Rs. 24,58,400/- was credited in the sale account and had been duly included in the profit disclosed by the assessee in its return. Therefore, cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The Hon’ble High Court dismissed the appeal filed by the Department. The Bombay High Court in the case of R.B. Jessaram Fetehchand (Sugar Dept.) v. CIT (1969) 75 ITR 33 (Bom), dealing with the issue of cash sales of sugar. The Assessing Officer required address of the buyers. The Hon’ble High Court in regard to the matter held as under:- "In the case of a cash transaction where delivery of goods is taken against cash payment, it is hardly necessary for the seller to bother about the name and address of the purchaser. In our opinion, therefore, the rejection of the results of the assessee's cash book by the Income-tax Officer was not at all justified and the Appellate Assistant Commissioner, therefore, was right in deleting the addition made by the Income-tax Officer. The Tribunal, it appears, has approached the matter on certain surmises and conjectures. In our opinion, the assessee's account books are to be accepted, unless, on verification, they disclosed any faults or defects, which cannot be reasonably and satisfactorily explained by the assessee. All the other transactions, except the cash transactions, which were verifiable, have been verified and scrutinized by the Income-tax Officer and there is nothing wrong whatsoever found with them. As to the cash transactions also, the quantity of sugar sold has not been disputed. The rates at which sugar was sold were not such as would excite suspicion by reason of being lower than the prevailing market rates." The Gujarat High Court in the case of CIT vs. Vishal Exports Overseas Ltd., in Tax Appeal No. 2471 of 2009, dealing with a situation where the assessee was an exporter and claimed deduction u/s 80HHC of the Act. On the basis of information received by the AO considered the export of Rs. 70 lacs as bogus. The AO denied benefit u/s 80HHC of the Act and he also made addition of Rs. 70 lacs in the income u/s 68 of the Act. It was held that once the assessee has already included the
7 ITA No.53/KOL/2022 & C.O. No. 10/Kol/2021 Shri Pabitra Majumder A.Y. 2017-18 amount of sale of Rs 70 lacs in the profit and loss account and determined the income on that basis no further addition could be made u/s 68 of the Act as it would tantamount to double taxation of same income. The Assessing Officer could only reject claim u/s 80HHC of the Act. The Delhi tribunal in the case of Singhal Exim Pvt. Ltd. vs. ITO in ITA No. 6520/Del/2018, wherein the assesses was importing mobile phones from China and sale consideration for high sea sales was received in cash. The AO with a view to verify the transactions of high sea sales issued notices to the buyers which were returned by postal authorities with remarks “left or not exist” and on this basis made addition of Rs.59.11 crores u/s 68. It was held that Section 68 was not applicable. Goods have been duly imported and there have been custom clearances for the same. There were agreements for sale of the goods on high sea basis. Once the goods have been sold, the buyer became the debtor and any receipt of money from him is the realization of such debt. Therefore. Section 68 cannot be applied. In view of the foregoing discussion as well as the judicial precedents, l do not find any premise to endorse the -action of the AO in making the impugned addition of Rs. 40,05,654/- as unexplained deposits u/s 69A of the Act. The same stands deleted.
4.5. The third part of the addition of Rs. 3,58,428/- is the result of the difference between the explanation sought by the AO in his show cause notice and the reconciliation Tiled -by the-appellant explaining such difference. Before me also the appellant has not been able to satisfactorily explain the difference and therefore the addition of Rs. 3,58,428/- stands confirmed.
4.6. The appellant has also challenged that no additions were warranted u/s 69A of the Act as the source of the deposits have been explained and that the books of accounts have not been rejected and more so that the entries are recorded in the books of accounts. In support of this contention the AR of the appellant had relied upon certain case laws. As the additions except for Rs. 3,58,428/- have been dealt with on merits and deleted it would be of no gain dealing with the legal issue here. 5. In the result, the appeal of the appellant is treated as partly allowed.”
Against the order passed by the ld. CIT(A), the revenue preferred an appeal before the Tribunal and consequent to that another cross-objection filed by the assessee also.
8 ITA No.53/KOL/2022 & C.O. No. 10/Kol/2021 Shri Pabitra Majumder A.Y. 2017-18
At the time of hearing, ld. DR submitted that revenue has raised almost 4 grounds of appeal. Ground no. 1 & 4 are general in nature and remaining ground 2 and 3 are inter connected, the main grievance of the revenue is that the findings given by the ld. CIT(A) was contrary and its perverse and therefore, it may liable to be set aside. On the other hand, ld. AR submitted before us that the order passed by the ld. CIT(A) is a reasoned order and the ld. CIT(A) discuss all the issues in length. However, the issue in respect of upholding the action of the ld. AO to make the addition of Rs. 3,58,428/- as an unexplained deposits in the hands of the assessee is bad in law and required to be deleted. He has submitted a detailed Paper Book containing total 98 pages and he further submitted that the dispute in the instant appeal is only in respect of following issues: (i) addition under the head of Rs. 65,52,478/- on account of inter banking transaction (ii) addition under the head of Rs. 40,05,654/- against realization of sundry debtors (iii) addition under the head of Rs. 3,58,428/- on account of difference in various accounts. The AR while submitting before us in respect of issues on board and he bring to our notice that the AO while framing the assessment he noticed that the assessee had total deposit in his three bank accounts of Rs. 10,53,79,069/- whereas total sales was 7,79,61,209/- which resulted in difference of Rs. 2,74,17,860/- and to substantiate its claim, assessee had submitted necessary details to prove the fact that the difference was due to (i) inter banking transaction of Rs. 1,96,38,478/- (ii) on account of repayment of sundry debtors outstanding of Rs. 40,05,654/-. Cash deposit from earlier savings of Rs. 9,14,500/-, cash gift of Rs. 25,00,000/- from his brother. However, the claim of the assessee was partly accepted by the AO in respect of inter banking transaction of Rs. 1,30,86,000/- and added back of Rs. 65,52,478/- as an unexplained deposit. Further, AO added Rs. 40,05,654/- on account of realization of sundry debtors and Rs. 3,58,428/- on account of unexplained difference. The ld. AR submitted before us that the AO did not ask any specific query or explanation from the assessee about which part of his submission made before the AO was not acceptable and he mechanically rejected certain transaction and accepted certain part and it had been done without rejecting books of accounts of the assessee and it was contrary to the material available on record although the assessee has filed all details in assessment proceeding
9 ITA No.53/KOL/2022 & C.O. No. 10/Kol/2021 Shri Pabitra Majumder A.Y. 2017-18 in the form of Paper Book containing break up of inter banking transaction. Thus view taken by the ld. AO was completely arbitrary and adhoc basis which is rightly deleted by the ld. CIT(A). However, the issue in respect of addition under sub head of Rs. 3,58,428/- on account of difference of figures as found by the AO is still in un- addressed by the ld. CIT(A) and the addition made u/s 69 r.w.s. 115BBE is not permissible and is liable to be deleted. Since the books of accounts submitted by the assessee was never rejected by the authorities below.
We after hearing the rival submission and perusal of the material available on record.
We take the addition of Rs. 65,52,478/- in this transaction, there was no cash involved in inter-banking deposit or rejection of return of cheques. The bank details have been submitted before us and it is seen that ICICI Bank out of total bank transaction except for an amount of Rs. 9,950/- in respect of rejection of cheque, the remaining amount of Rs. 88,50,000/- was on account of transfer of funds from Majumder Hosiery the proprietorship concern of the appellant. The details of the date wise transfer with narration and amount is seen to be matching with the bank entries as per record and therefore there is not discrepancy in the matter as alleged. Further, in respect of ICICI Bank (032805004469) out of inter-bank transactions of Rs. 41,21,800/, an amount of Rs. 36,06,000/- was on account of transfer of funds from Majumder Hosiery, an amount of Rs. 4,85,950/- was rejection credit due to insufficient funds/exceeded amount and Rs. 29,850/- payment stopped by the drawer. The details of date wise transfer with narration and amount is seem to be matching with the bank entries and there are no discrepancies found as alleged by the AO in his order. Further in respect of Bandhan Bank (10160007384576) out of the total inter-bank transactions of Rs. 66,66,728/-, an amount of Rs. 32,30,726/- was on account of transfer of funds from Majumder Hosiery and the remaining amount of Rs. 34,26,002/- was on account of credit due to cheque return due to insufficient funds/signature. Here also the date- wise details with narration and amount is seen to be matching with the bank entries and therefore there stands is no discrepancy in the accounts as alleged by the AO does not
10 ITA No.53/KOL/2022 & C.O. No. 10/Kol/2021 Shri Pabitra Majumder A.Y. 2017-18 sustained. The same details were provided by the assessee before the AO as well as ld. CIT(A), however the AO accepted partly submission of the assessee to the extent of Rs. 1,30,86,000/- and adding back the balance of Rs. 65,52,478/-. But the view taken by the ld. AO in respect of impugned addition of Rs. 65,52,478/- as unexplained deposit u/s 69A of the Act was deleted by the ld. CIT(A) since assessee clearly explained the transaction by furnishing details of date-wise transfer with narration and amounts are matching with bank entries and no discrepancies found in the transactions and therefore, we do not want to interfere in respect of this issue and view taken by the ld. CIT(A) is affirmed.
The another addition of Rs. 40,05,654/- on account of realization from sundry debtors account from the order of the ld. CIT(A), notice that sundry debtors balance as on 31.03.2016 was Rs. 55,13,058/- out of which Rs. 40,05,654/- was received during the year. The alleged sundry debtors as on 31.03.2016 was forming part of accepted sales for AY 2016-17 as per the audited accounts furnished in the Paper Book. However, the AO disbelieve the confirmation of sundry debtors only reasons the same was printed in the same manner. The confirmation submitted before the AO supported with detailed sheet and audited books of account in the case of assessee. The books of accounts were not disturbed and on the settled principle that once books of assessee are not rejected and explanation furnished is reasonable no addition can be made. The ld. CIT(A) also relied on the various decisions pronounced by the Hon’ble High Court as well as Hon’ble Apex Court and stand taken by the AO was deleted. We also going through the facturl matrix of the case, we do not want to interfere in the findings given by the ld. CIT(A) since one goods have been sold the buyer became the debtor and such in respect of money from him is nothing but realization of such debt. As such section 68 cannot be applied in the case of assessee and the addition made by the AO stand deleted by the ld. CIT(A) and we do not want to interfere in the order passed by the ld. CIT(A) in respect of this issue and ground taken by the revenue is dismissed.
The third part of addition at Rs. 3,58,428/- which was disallowed by the ld. CIT(A) while deciding the impugned order and the said addition of Rs. 3,58,428/- was
11 ITA No.53/KOL/2022 & C.O. No. 10/Kol/2021 Shri Pabitra Majumder A.Y. 2017-18 confirmed in the hands of the assessee while going through this issue and perusal of matter available on record and submission made by the ld. AR of the assessee, he submitted before us that the books of accounts have not been rejected and the entries are recorded in the books of account, therefore, addition made by the AO should be deleted. On perusal of the assessment order as well as the order passed by the ld. CIT(A), we noticed that the AO never rejected the books of accounts of the assessee and without rejecting the books of accounts, the addition made by the AO cannot be sustained and it is settled principle of law that without rejecting books of accounts, the addition made by the AO cannot be sustained and as such the addition of Rs. 3,58,428/- confirmed by the ld. CIT(A) is hereby deleted. In terms of our findings in the foregoing reason, the appeal of the revenue is dismissed and cross-objection filed by the assessee is allowed.
In the result, the appeal of the revenue is dismissed & C.O. filed by the assessee is allowed. Order pronounced in the open court on 15.09.2022.
Sd/- Sd/- (GIRISH AGRAWAL) (SONJOY SARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Kolkata, Dated: 15.09.2022. Biswajit, Sr. P.S. Copy to: 1. The Appellant: Shri Pabitra Majunder. 2. The Respondent: ITO, Ward-25(4), Kolkata. 3. The CIT, Concerned, Kolkata 4. The CIT (A) Concerned, Kolkata 5. The DR Concerned Bench.
//True Copy// [ By Order
Assistant Registrar ITAT, Kolkata Benches, Kolkata