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Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
Before: SHRI SANJAY GARG, HON’BLE & SHRI GIRISH AGRAWAL, HON’BLE
सुनवाई क" तारीख/Date of Hearing : 08/05/2022 घोषणा क" तारीख /Date of Pronouncement: 27/06/2022 आदेश/O R D E R
PER SANJAY GARG, JUDICIAL MEMBER :
The captioned appeals have been preferred by the revenue against the separate orders of the Learned Commissioner of Income Tax (Appeals)-7, Kolkata (hereinafter the “ld. CIT(A)”), even dt. 11/03/2019, passed u/s 250 of the Income Tax Act, 1961 (“the Act”), for Assessment Year 2014-15. Assessment Year: 2014-15 Marjina Bibi Assessment Year: 2014-15 Rupasana Bibi 2 2. As the issues involved in both these appeals are identical, they were heard together and are being disposed off by way of this common order for the sake of convenience and brevity.
First we take up Assessment Year 2014-15. The revenue in this appeal has taken the following grounds of appeals:- “1. Whether on the facts and in the circumstances of the case, the ld. CITA) was justified in deleting the addition of Rs. 1,59,23, 048/- even when the assessee failed to prove the identity, genuineness and creditworthiness of the Sundry Creditors.
2. Whether on the facts and in the circumstances of the case, the ld. CITA) was justified in reducing the rate of Net Profit determined by the Assessing Officer when the assessee failed to produce her books of account and other relevant documents in support of her return of income.
3. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in accepting fresh evidence in violation of Rule 46A of the I.T. Rules, 1962.
4. The appellant craves leave to add, alter and/ or modify any one or all of the above grounds of appeal, if so required in the course of appellate proceedings.”
4. Ground No.1:- Vide Ground No. 1, the revenue is aggrieved by the action of the ld. CIT(A) in deleting the addition of Rs.1,59,23,048/- which was made by the Assessing Officer on account of unexplained sundry creditors. Brief facts of the case are that the assessee is engaged in the business of trading in human hair. The assessee claimed a sum of Assessment Year: 2014-15 Marjina Bibi Assessment Year: 2014-15 Rupasana Bibi 3 Rs.1,59,23,048/- towards creditors’ liability in the balance sheet. The Assessing Officer issued summons to certain creditors for verifying the identity and creditworthiness of the transactions. In response to the summons, one of the creditors replied that he never transacted with the assessee. Another creditors did not submit any documents in relation to her business transactions with the assessee. As the assessee failed to discharge the onus of proving the identity, creditworthiness and genuineness of the creditors, the Assessing Officer proceeded to make the addition of Rs.1,59,23,048/- u/s 68 of the Act.
4.1. Being aggrieved by the above order of the Assessing Officer, the assessee preferred an appeal before the ld. CIT(A). The ld. CIT(A) deleted the additions so made by the Assessing Officer, observing as under:- “I have considered the submission of the AR of the appellant in the backdrop of the assessment order. I find that the impugned amount of 1,59,23,048/- was considered as an unexplained amount u/s 68 of the Act when the same represented an amount under sundry creditors. I find that the AO is totally off mark in treating the impugned amount as coming within the purview of section 68 when the same was actually an amount owed by the appellant to the vendors which would be the liability of the appellant. Section 68 of the Act talks about credit of any sum in the books of account of an assessee which is not explained. In the instant case, there is no credit of any sum in the accounts of the appellant as per section 68 of the Act but rather there was a liability to pay a sum of 1,59,23,048/-. The AO could have referred to the provisions of section 41 of the Act to justify his actions which is not the case here. Inter alia the various case laws cited (supra), the jurisdictional Tribunal in the case of Sri Bishnu Pada Ghosh v. JCIT, Malda in (supra) has held as under: "No addition could be made u/s 68 of the Act in respect of a trade creditor. We find that Ld. A.O. had not disputed (the purchase of materials made by the assessee from the said Sundry creditor and hence the corresponding credit entry i.e. credit to be account of Sundry Creditors cannot be doubted by the Ld. A.O." Under such facts and circumstances of the case and in tune with the judicial decisions as narrated above, I do not find any merit in the action of the AO in I.T.A. No. 1239/Kol/2019 Assessment Year: 2014-15 Marjina Bibi Assessment Year: 2014-15 Rupasana Bibi 4 making the impugned addition of 1,59,23,048/- which is now directed to be deleted.”
Further aggrieved, the revenue has come up in appeal before us.
We have heard the rival contentions and perused the material available on record. 7. The ld. A/R has invited our attention to the submissions made before the ld. CIT(A) and reiterated that all the details of the sundry creditors were submitted to the Assessing Officer. That the sundry creditors were small time interior side vendors of human hair who collected the same from beauty parlors and temples etc. The assessee had purchased human hair from them and further sold to big exporters of human hair. The Assessing Officer had issued summons to all the sundry creditors and that none of the summons were returned unserved. Even two creditors appeared before the Assessing Officer. Therefore, the identity of the creditors was proved.So far as denial of transactions by one Amit Nayak was concerned, it was explained that he was a small time vendor and got afraid from the name of Income Tax and hence answered in negation. However, the assessee had done the transaction of purchase through him and the entire amount was paid during the year. The other creditor had appeared and admitted the transactions. Even the sales have not been doubted and were admitted by the Assessing Officer. The ld. Counsel for the assessee has further submitted that even all the sundry creditors have been paid. Though the ld. D/R failed to rebut the above submissions of the ld. Counsel for the assessee. Assessment Year: 2014-15 Marjina Bibi Assessment Year: 2014-15 Rupasana Bibi 5 8. In view of the above, we do not find any reason to interfere with the order of the ld. CIT(A) and uphold the same. Accordingly, Ground No. 1 of the appeal is dismissed. 9. Ground No. 2:- The revenue has agitated against the action of the ld. CIT(A) in reducing the rate of net profit as against @5% made by the Assessing Officer.
9.1. The brief facts relating to the issue are that, during the course of assessment proceedings, the Assessing Officer noted that there was a very meager net profit i.e. @ 0.38% shown on the total turnover by the assessee. The Assessing Officer called for the books of accounts which the assessee could not furnish to the satisfaction of the Assessing Officer. Therefore, the Assessing Officer rejected the books of accounts and estimated the net profit rate @5% of the total turnover.
9.2. During the appellate proceedings before the ld. CIT(A), the assessee submitted that she is engaged in the business of trading in human hair and that it purchases hair from small vendors belonging to interior villages, mainly on cash basis. The assessee then sells the hair to big exporters located at Eluru (A.P.). The payments of sales to big exporters are always received through proper banking channels by the assessee in her State Bank of India account maintained in Contai Branch. As the purchase of hair is done from vendors and hawkers of village areas, no purchase bill are issued in majority and the assessee makes purchase vouchers in such cases. As far as sales made to the big exporters are concerned, proper bills are made containing all necessary details. Hence the sales side is completely Assessment Year: 2014-15 Marjina Bibi Assessment Year: 2014-15 Rupasana Bibi 6 verifiable. That the assessee also submitted certain documents before the Assessing Officer at the fag end of the assessment proceedings which were ignored by the Assessing Officer stating that the same were baseless and full of imagination and the Assessing Officer went on to estimate the net profit rate @ 5%. The assessee also furnished before the ld. CIT(A) the example of certain comparable cases to show that in the hair trading business, the net profit rate was generally very low. The assessee also relied upon the previous Assessment Years 2012-13 & 2013-14 to show that there was not much change in the net profit rate shown in the earlier years. The ld. CIT(A) taking note of all the facts and comparable cases and also taking note of the net profit rate of the earlier years, reduced the net profit rate @ 0.38% and granted relief to the assessee.
The ld. D/R could not controvert the aforesaid submissions of the ld. Counsel for the assessee, neither could he point out any infirmity in the order of the ld. CIT(A) which could call for any interference.
In view of the above, we uphold the order of the ld. CIT(A) on this issue and dismiss this ground of the revenue.
Ground No. 3:- Vide Ground No. 3, the revenue has agitated the action of the ld. CIT(A) in accepting the fresh evidence during the appellate proceedings. We find that the ld. CIT(A) has jurisdiction under Rule 46A of the Income Tax Rules, 1962 (hereinafter the ‘Rules’) to accept the additional evidence for the just and proper adjudication of the case. We find no Assessment Year: 2014-15 Marjina Bibi Assessment Year: 2014-15 Rupasana Bibi 7 infirmity in the order of the ld. CIT(A) in this respect and dismiss this Ground of revenue.
Ground No. 4 is general in nature. 14. In view of the above observation, we do not find any merit in this appeal of the revenue and the same is hereby dismissed.
Assessment Year 2014-15. 15. Both the ld. Representatives submitted that the facts and issues involved in this appeal are identical as in ITA No. 1239/Kol/2019. The grounds of appeal are also verbatim except for variance in figures. Hence, our findings and decision for is applicable mutatis mutandis to this appeal. Accordingly, this appeal of the revenue also stands dismissed.
16. In the result, both the appeals of the revenue are dismissed.
Order pronounced in the Court on 27th June, 2022 at Kolkata. GIRISH AGRAWAL SANJAY GARG [ACCOUNTANT MEMBER] [JUDICIAL MEMBER] Kolkata, Dated 27/06/2022 *SC SrPs