JCIT, (OSD), CIR-2(2), KOLKATA, KOLKATA vs. M/S WEST BENGAL TOURISM DEVELOPMENT CORPORATION LTD., KOLKATA

आयकर अपील�य अधीकरण, �यायपीठ – “B” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH “B” KOLKATA Before Shri S.S.Godara, Judicial Member and Dr. A.L. Saini, Accountant Member ITA No.636/Kol/2016 Assessment Year :2009-10 JCIT(OSD), Circle-2(2), V/s. M/s West Bengal Tourism Aayakar Bhawan, P-7, Development Corporation Chowringhee Sqr. Ltd., 12, Hemanta Bhawan, 4th Floor, B.B.D. Kolkta-69 Bag East, Kolkata- 001 [PAN No.AAACW 3093 Q] .. अपीलाथ� /Appellant ��यथ�/Respondent Shri S. Dasgupta, Addl. CIT-DR अपीलाथ� क� ओर से/By Appellant Shri G.R. Saha, Advocate ��यथ� क� ओर से/By Respondent 16-05-2018 सुनवाई क� तार�ख/Date of Hearing 24-05-2018 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R PER S.S.Godara, Judicial Member:- This Revenue’s appeal for assessment year 2009-10 arises against Commissioner of Income Tax (Appeals)-10, Kolkata’s order dated 22.01.201, passed in appeal No.406/CIT(A)-10/Cir.2/2014-15/Kol, in proceedings u/s 143(3) of the Income Tax Act, 1961; in short as ‘the Act’.

ITA No.636/Kol/2016 A.Y. 2009-10 JCIT(OSD) Cir-2(2) Kol. Vs. M/s West Bengal Tourism Development Corpn. Ltd. Page 2 This ground is related to the addition by the AO of Rs.45,25,959/- on account of ‘Disallowance of expenditure regarding sundry creditors’. This issue has been dealt by the AO in assessment order as under:- ‘The assessee company has shown sundry creditors to the tune of Rs.1,86,07,720/- in its balance sheet. Notices u/s. 133(6) were issued to some of the creditors to verify the transactions on test check basis. From the replies received and also from the reconciliation statement provided by the assessee company the discrepancy in respect of the following parties are noticed as per table below:- Name of the A per books of As per third Difference creditors assessee party company Pres & Rs.62,64,269 Rs,18,59,533 Rs.44,04,736 publicity syndicate Pvt. Ltd. Milan Marine Rs.1,21,223 Nil Rs.1,21,223 Services Total Rs.45,25,959 In view of the above, it is concluded that the assessee company claimed bogus expenditure as a result of which excess liability towards sundry creditors were shown to the tune of Rs.45,25,959/-. Therefore, the said amount of Rs.45,25,959/- is now being added back to the income of the assessee company. Penalty proceedings u/s. 2771(1)(c) is being initiated separately, on this ground for furnishing inaccurate particulars.” 08. During the course of appellate proceeding, the A//R of the appellant has made the following submission:- ‘The Third Ground of appeal relates to an amount of Rs.45,25,959 which according to the AO represents “Bogus Purchases”. He held so on the basis of confirmations obtained behind the back of the Appellant from the concerned creditors. His inference is based on some accounting discrepancies between the figu9res confirmed by the creditors and that stated in the books of account of the Ape. It is submitted that the accounts of the appellant are subject to statutory audit under the Companies Act 1956, Tax Audit u/s. 44AB of Income Tax Act and mandatory audit of the CAG, the Appellant being a Government company. In none of these three audits, any discrepancy in the Sundry Creditor’s account has been found or mentioned. The confirmations have been obtained without any reference to the Appellant. Besides, the discrepancies were explained with adequate evidence. There is no mention of thee Reconciliation statements filed by the Appellant. (Annexure C). On the basis of such perfunctory scrutiny and suspicion without any substance, the AO has made such large addition. In fact, the Appellant has duly purchased goods/services from the two parties involved who are very old and reputed suppliers of publicity materials to many business houses besides rendering other services to the Appellant. A glance at the confirmation provided by the

ITA No.636/Kol/2016 A.Y. 2009-10 JCIT(OSD) Cir-2(2) Kol. Vs. M/s West Bengal Tourism Development Corpn. Ltd. Page 3 party would show the reasons for the difference in the respective figures. The disallowance needs to be deleted.’ 09 DECISION: 1. I have examined the matte relating to the action of the AO in making the disallowance of Rs.45,25,959/-, wherein, on the basis of difference of figures of reconciliation, the AO has concluded that the assessee company claimed “bogus expenditure” as a result of which excess liability towards Sundry Creditor were shown to the tune of the same amount. 2. The said disallowance has been made on the basis of seeking information from the creditors, and matching with the amounts disclosed by the appellant as “Sundry Creditors”. It is also to be observed that it appears that the information gathered by the AO was not confronted to/with the appellant during the assessment procedure. It is seen that out of the total sum of Rs.1,86,07,720/- appearing as sundry creditor during the year, the AO has found ambiguity / discrepancy to the extent of Rs.45,25,959/- (about24%) only. 3. The AO has not mentioned the section under which he has made the impugned addition; however, as he has initiated the penalty u/s. 271(1)(c) of the Income Tax act 1961, it appears that he has invoked the provisions of Sec 68 of the Income Tax Act, 1961. It has to be observed that in the context of the provisions of section 68, it would not be out of place to mention that one has to keep in mind the legal maxim lex non cogitad impossibila which means the law does not compel any person to do that which he cannot possibly perform. It is abundantly clear that the AO did not try to make any efforts to check the differences as gathered by him, or confront the assessee-appellant with the information, and accordingly the appellant was unable to defend itself before the AO. 4. The Learned Assessing Officer has made the addition with respect to credits standing in the name of M/s Press & Publicity Syndicate Pvt Ltd and M/s Milan Marine Services. As per the appellant these two parties were reputed parties. In the circumstances, I find merit in the claim of the Learned A.R that the appellant has duly purchased goods / services from the two parties involved, who are very old and reputed suppliers of publicity, materials to many business houses besides rendering other services to the Appellant. Accordingly, in my considered opinion, there was enough information before the AO to ascertain the position of the parties in some detail, and attempt reconciliation, before making the impugned addition. 5. The other contentions of the appellant, namely that the accounts of the Appellant are subjected to Statutory Audit under the Companies Act 1956, Statutory Tax Audit u/s. 44B of Income Tax Act and Mandatory Audit of the CAG, and that in none of these three audits any discrepancy in the Sundry Creditor’s account has been found or mentioned and that the appellant is wholly owned by the State Government, do not in my considered opinion quality for any different or lenient view, and such arguments do not primarily tilt the case in the appellant’s favour. 6. The important finding is that the if the Assessing Officer was going to add the amounts on the basis of then un-reconciled differences should have been intimated to the assessee, as a very basic requirement of natural

ITA No.636/Kol/2016 A.Y. 2009-10 JCIT(OSD) Cir-2(2) Kol. Vs. M/s West Bengal Tourism Development Corpn. Ltd. Page 4 justice. This has clearly not been done by the AO. this, in my considered opinion is clearly a violation of the principles of natural justice, weakening the assessment procedure and in the process rendering the order bad in law. 7. Having regard to the facts and in the circumstances of the case, and the reconciliation statement of the Sundry Creditors, I am of the view that the Assessing Officer was not justified in making the impugned addition of Rs.45,25,959/-. The same is hereby directed to be deleted.” 3. Mr. S. Dasgupta, (Learned Addl. CIT-DR) vehemently contends that the Assessing Officer had rightly made the impugned addition since the assessee failed to prove unreconciled difference pertaining to M/s Press & Publicity Syndicate Pvt Ltd and M/s Milan Marine Services involving sums of ₹44,04,736/- and ₹1,21,223/-; respectively. He places reliance upon the said parties confirmation in this regard furnished to the Assessing Officer. We do not see any reason to accept Revenue’s instant arguments. It has come on record first of all that the assessee had duly filed its reconciliation statement (Annexure-C) before the Assessing Officer. Neither that statement has been discussed in assessment order nor the same forms part of record before us which could highlight any such shortfall. Coupled with this, the Assessing Officer had also not furnished the said third party’s correspondence; if any, to the assessee before making the impugned addition. We make it clear that the CIT(A)’ clinching findings that the very parties are assessee’s regular suppliers have gone unrebutted from the Revenue’s side. We thus see no reason to accept Revenue’s instant former substantive ground. The same stands declined.

ITA No.636/Kol/2016 A.Y. 2009-10 JCIT(OSD) Cir-2(2) Kol. Vs. M/s West Bengal Tourism Development Corpn. Ltd. Page 5 ‘Coming to the additional Ground, it is submitted that the Appellant received dividend of Rs.7,25,760/- from Nicco Parks Ltd. (Kindly see Sch. E14 of the audited accounts submitted herewith) during the year. Due to ignorance of the person who prepared the details for filing the Return of Income this amount was not excluded from the computation of income. As dividend is exempt u/s.10(34) of the Act it needs to be deleted. In similar circumstances, in the immediately earlier year similar deduction was kindly allowed in appeal by the Learned. CIT(Appeals). As the omission is inadvertent, it needs to be corrected and deduction allowed.’ 14. DECISION: 1.. As the submission of the appellant was by way of an dial ground, a copy of such additional ground was sent to the AO on 02.12.2015, requesting for his comments and observations, and objections if any. However, no communication or reply has been received from the AO in this matter, and the matter is decided accordingly. 2. It was submitted by the appellant received dividend of Rs.7,25,760//- from M/s Nicco Parks Ltd. (as disclosed at Sch. E14 of the audited accounts submitted during appeal) during the year. As penalty the Learned AR, due to ignorance of the person who prepared the details for filing the Return of Income this amount was not excluded from the computation of income. as dividend is exempt u/s. 10(34) of the Act it needs to be deleted. In similar circumstances, in the immediately earlier year similar deduction was kindly allowed in appeal by the Learned. CIT(Appeals). 3. Further, as per the Learned AR, as the omission was inadvertent, it needs to be corrected and deduction allowed. 4. In this matter, it is relevant that in the case of Sam Global Securities Ltd 360 ITR 628, it has been held that an assessee is entitled for a claim of deduction under the Income Tax Act, 1961 if it is eligible for the same, even if the said amounts have not been claimed in the return of Income filed by the assessee. 5. In the case at hand, it is seen that the appellant has disclosed dividend income of Rs.7,25,760/- in its P&L account, which is exempt prima facie u/s. 10(34), even in a situation when the claim has not been made in the return of income. 6. The AO is therefore directed to verify the claim of this deduction from accounts of the appellant-corporation for the A.Y 2009-10, and allow the same after necessary verification. This ground of appeal, subject to the necessary verification, thus allowed in favour of the appellant.”

ITA No.636/Kol/2016 A.Y. 2009-10 JCIT(OSD) Cir-2(2) Kol. Vs. M/s West Bengal Tourism Development Corpn. Ltd. Page 6 5. We have given thoughtful consideration to both the parties reiterating their respective stands in favour of and against the impugned disallowance. Scheudle-E14 (assessee’s audited accounts) suggest that the impugned sums represented earlier assessment year’s adjustment written off in the impugned assessment year as bad debts. Learned Departmental Representative fails to indicate any material in the case file suggesting that Assessing Officer had ever doubted genuineness of assessee’s write off claim or that the same does not satisfy the relevant conditions envisaged in Section 36(1) & (2) of the Act. We accordingly affirm the CIT(A)’s appeal above extracted findings qua this latter issue as well.