PRASANTA K BHATTACHARYA,HOOGHLY vs. I.T.O WD - 2(4),HOOGHLY, HOOGHLY
What did the Tribunal hold?
The Tribunal held that the assessee was entitled to the benefit of the opening peak balance. It also upheld the CIT(A)'s decision to restrict additions to peak credit and confirmed the deletion of disallowance under Section 40A(3) as payments were covered by Rule 6DD(e)(i).
What were the facts?
The assessee, engaged in cold storage and trading businesses, had his income assessed at a significantly higher amount than declared due to additions for undisclosed investment, Section 40A(3) violations, and unexplained sales. The CIT(A) partially deleted additions, limited others to peak credit, and allowed benefit of opening balance.
What were the issues?
Whether additions for undisclosed investment should be limited to peak credit and if payments for potato purchases qualify for exceptions under Section 40A(3).
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy & Sri S.S. Viswanethra Ravi]
Heard together (2 matters)
Read from the judgment's own cause title. This page is filed under one of them.
Assessment Year: 2008-09 Income Tax Officer, Ward-2(4), Kolkata …………...…………..…………….……………………..……...Appellant Prasanta K. Bhattacharya…………...………………..……....………………..…………….…………..…. Respondent C/o Shri Somnath Ghsoh, Advocate Seven Brothers’ Lodge P.O. Chinsurah Dist. Hooghly PIN- 712 105 [PAN : AEOPB 9130 Q] Appearances by: Shri Somnath Ghosh, Advocate, appeared on behalf of the assessee. Shri Saurabh Kumar, Addl. CIT, DR, appearing on behalf of the Revenue. Date of concluding the hearing : May 1st, 2018 Date of pronouncing the order : May 16th , 2018 O R D E R Per J. Sudhakar Reddy :-
These are cross appeals directed against the order of the ld. Commissioner of Income Tax (Appeals) – XXXVI, Kolkata, (hereinafter the ‘ld. CIT (A)’), passed u/s 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 18/12/2012, relating to Assessment Year 2008- 09.
The assessee is an individual and is in the business of cold storage, saw milling business, potatoe trading business etc. He filed his return of income for the Assessment Year 2008-09 on 29/09/2008, declaring total income at Rs.4,93,510/-. The Assessing Officer completed the assessment u/s 143(3) on 31/12/2010, determining the total income at Rs.1,25,79,562/- interalia making addition on account of undisclosed 2 Assessment Year: 2008-09 I.T.A. No. 403/Kol/2013 Assessment Year: 2008-09 Prasanta K. Bhattacharya investment in an undisclosed bank account, violation of Section 40A(3) of the Act and on account of unexplained sales. Aggrieved the assessee carried the matter in appeal. 2.1. The ld. First Appellate Authority, deleted the addition made on the ground that the assessee has unaccounted sales. On the issue of unaccounted investment, the ld. CIT(A) directed that the addition be limited to the peak which was worked out at Rs.14,52,775/-. At para 7.2. of his order he held that, the assessee will be entitled to the benefit to the extent of opening peak balance as on 01/04/2007 of a sum of Rs.3,85,217/-. Further, at para 8 he held that the payments were made to firms for the purchase of potatoes and hence the payment is covered within the scope of Rule 6DD(e)(i) of the Income Tax Rules, 1962 (hereinafter the ‘Rules’) and hence no disallowance can be made u/s 40A(3) of the Act.
Aggrieved, both the assessee as well as the revenue is in appeal before us.
We have heard the rival contentions. After perusing papers on record, orders of the authorities below and case-law cited, We hold as follows:- First we take up the assessee’s appeal being I.T.A. No. 341/Kol/2013; Assessment Year: 2008-09.
The sole issue that is agitated in the assessee’s appeal is that benefit to the extent of opening peak balance as on 01/04/2007 has to be given to the assessee. We find that the ld. CIT(A) at para 7.2. last line of his order accepted this contention of the assessee. Thus, we direct the Assessing Officer to delete the amount of Rs.3,85,217/-, from the peak credit of Rs.18,42,911/- sustained by the ld. CIT(A). Accordingly, the assessee gets relief of Rs.3,85,217/-.
In the result, appeal of the assessee is allowed.
We now take up the revenue’s appeal being I.T.A. No. 403/Kol/2013; Assessment Year: 2008-09.
Ground Nos. 1 & 2 are on the issue of direction by the ld. CIT(A) to take the peak credit as undisclosed investment. The ld. First Appellate Authority has in his order considered the facts of the case and at para 8 held as follows:- “8. However, the action of the AO of resorting to the addition of the total deposits in the bank account, without giving benefit of withdrawals made from time to time, is not justified in the circumstances. The AO also did not understand the proximity of the transactions undertaken by the appellant in relation to the bank account. It was the requirement in law to understand the rotation of transactions made by the appellant and the failure of the AO in this respect renders his action unsustainable in law. Therefore, the addition made on this issue is sustained on principle but is restricted to an amount of Rs. 18,42,911/- in place and stead of Rs. 29,71,798/- made by the AO and as such, the ground nos. 1 to 3 of the appeal is allowed in part. Appellant gets a relief of Rs. 11,28,887/-.
8.1. This decision is in line with the proposition of law laid down by the Kolkata Bench of the Tribunal in the case of Uday Shankar Mahawar, Kolkata vs Income Tax Officer, Assessment Year : 2006-07. The Kolkata ‘A’ Bench of the Tribunal in the case of Prasanta Kumar Bhattacharya vs. ITO in ITA No. 02/Kol/2013 & ITA No. 187/Kol/2013; Assessment Year 2007-08, upheld the theory of peak credit for making the addition on account of undisclosed bank deposit. 8.2. Respectfully following the same, we dismiss Ground No. 1 & 2 of the revenue’s appeal.
Ground No. 3 is against the deletion of disallowance made u/s 40A(3) of the Act.
We find that the payments in question were made to firms for the purchase of potatoes. Such payments are covered within the scope of Rule 6DD(e)(i) of the Rules, for the purpose of Section 40A(3) of the Act. Thus, this ground of the revenue is dismissed.
Ground Nos. 4 to 6 are against the deletion of an addition of Rs.89,64,254/-, made by the Assessing Officer as undisclosed sales. The ld. CIT(A) in his order has given a factual finding that the assessee has an opening stock of Rs.93,41,400/-, as on 01/04/2007 and this was disclosed under the head “owned stock” in the balance sheet filed along with the income tax return for the Assessment Year 2007-08. What was sold by the assessee during the year was from this opening stock. The ld. D/R could not controvert these factual findings of the ld. CIT(A). The ld. CIT(A) held that the Assessing Officer’s finding in the remand report as well as in the assessment order were perverse and against the facts of the case. We find no infirmity in such findings. Thus we dismiss all these grounds of the revenue.
Ground No. 7, is general in nature.
In the result, appeal of the revenue is dismissed.
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