ITO, WARD-23(3), HOOGHLY, HOOGHLY vs. SHRI ARUNASIA SARKAR, HOOGHLY

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH ‘B’, KOLKATA [Before Shri P.M. Jagtap, AM and Shri Aby. T. Varkey, JM] I.T.A. No. 258/Kol/2015 Assessment Year: 2010-11 Arunashis Sarkar................................…………………………………..............................Appellant 16/M, Satish Ch. Ghosh Lane, Mahesh, Serampore, Hooghly – 712 202. [PAN : CBDPS 2458 G] Income Tax Officer..…………………………………………………………........................Respondent Ward No. 1(3), Hooghly, Aayakar Bhawan, 3rd Floor, Room No. 209, G.T. Road, Chinsurah, Hooghly – 712 101. I.T.A. No. 176/Kol/2015 Assessment Year: 2010-11 Income Tax Officer..………………………………………………………….............................Appellant Ward No. 1(3), Hooghly, Aayakar Bhawan, 3rd Floor, Room No. 209, G.T. Road, Chinsurah, Hooghly – 712 101. Arunashis Sarkar................................…………………………………...........................Respondent 16/M, Satish Ch. Ghosh Lane, Mahesh, Serampore, Hooghly – 712 202. [PAN : CBDPS 2458 G] C.O. No. 19/Kol/2015 (Arising out of ITA No. 176/Kol/2015) Assessment Year: 2010-11 Arunashis Sarkar................................…………………………………..............................Appellant 16/M, Satish Ch. Ghosh Lane, Mahesh, Serampore, Hooghly – 712 202. [PAN : CBDPS 2458 G] Income Tax Officer..…………………………………………………………........................Respondent Ward No. 1(3), Hooghly, Aayakar Bhawan, 3rd Floor, Room No. 209, G.T. Road, Chinsurah, Hooghly – 712 101. Appearances by: Shri K.M. Roy, FCA appearing on behalf of the Assessee. Shri S. Dasgupta, Addl. CIT (DR) appearing on behalf of the Revenue. Date of concluding the hearing : February 08, 2018 Date of pronouncing the order : February 14, 2018

2 I.T.A. Nos. 258 & 176/Kol/2015 & C.O. No. 19/Kol/2015 Assessment Year: 2010-11 Arunashis Sarkar ORDER Per P.M. Jagtap, AM These two appeals, one filed by the assessee being ITA No. 258/Kol/2015 and other filed by the revenue being ITA No. 176/Kol/2015 are cross-appeals which are directed against the order of Ld. CIT(A) – 6, Kolkata dated 30.12.2014 and the same are being disposed of along with the cross-objection filed by the assessee being C.O. No. 19/Kol/2015. 2. The assessee in the present case is an individual who is engaged in the business of trading in wall colours, distemper etc. The return of income for the year under consideration was originally filed by him in the physical form on 29.09.2010 declaring a total income of Rs. 2,04,475/-. Thereafter, the return of income of the assessee for the year under consideration was again filed electronically on 26.05.2011 declaring a total income of Rs. 1,58,475/-. The said return subsequently filed by the assessee in electronic form was selected for scrutiny. During the course of assessment proceedings, it was submitted by the assessee that the original return on 29.09.2010 in physical form was filed by him and since the subsequent return in electronic form on 26.05.2011 was not filed by him, the same should be ignored. It was also submitted by the assessee that the said return was filed by somebody else with ill intention giving higher figures of sale, purchase and other expenses. This stand of the assessee was not accepted by the A.O. He found that the relevant figures of sales, purchases and other items given in the trading and profit and loss

3 I.T.A. Nos. 258 & 176/Kol/2015 & C.O. No. 19/Kol/2015 Assessment Year: 2010-11 Arunashis Sarkar account filed along with the two returns of income of the assessee were completely different as under: Item Return filed on Return filed on 29.09.2010 26.05.2011 Opening Stock 1,60,972 1,91,44,436 Purchase 32,52,738 19,72,77,759 Carriage inward 17,290 15,96,758 Labour Charges 0 40,45,123 Other manufacturing 0 8,51,605 expenses Sales 38,02,510 21,29,01,163 Closing Stock 1,75,260 1,98,07,972 Gross Profit 5,46,770 97,93,454 G.P. Rate 14.38 4.60 Salary & Bonus 39,000 19,86,619 Electric Charges 17,950 56,923 Trav. & Conveyance 20,122 5,53,463 Repair & Maint. 3,568 65,300 Printing & Stati. 5,518 71,258 General Charges 9,537 2,02,158 Donation & Subs. 1,001 26,958 Accounting Charges 2,000 3,10,256 Gift Item 9,575 0 Fuel Charges 9,232 0 Misc. Expenses 4,520 0 Tea & Tiffin 9,272 0 Office Expenses 0 34,125 Rates & Taxes 0 18,652 Puja & Ent. Expenses 0 79,823 Sales Promotion 0 8,49,025 Advertisement 0 18,720 Telephone Charges 0 82,364 Staff Welfare 0 60,254 Carriage Outward 0 12,54,827 Postage & Stamps 0 21,526 Packing Charges 0 7,96,445 Commission paid 0 21,26,432 Bank Charges 0 25,481 Legal & Audit Fees 0 68,720 Depreciation 0 1,08,650 Net Profit 4,15,475 9,15,475

4 I.T.A. Nos. 258 & 176/Kol/2015 & C.O. No. 19/Kol/2015 Assessment Year: 2010-11 Arunashis Sarkar 3. The A.O. also noted that there was a remarkable difference in the balance sheet figures as well as the deductions claimed by the assessee under Chapter VIA as under: Item Return filed on Return filed on 29.09.2010 26.05.2011 Opening Capital 5,91,041 1,50,68,018 Sundry Creditors 0 1,34,05,692 Sundry Debtors 3,90,007 1,26,64,924 Unsecured loan from 0 42,00,000 relatives Loan to relatives 50,000 0 Cash & Bank 42,142 2,01,236 Chapter VIA deduction claimed u/s 80C 1,00,000 1,00,000 u/s 80G 12,000 0 u/s 80GG 24,000 24,000 u/s 80JJA 0 3,00,000 u/s 80QQB 0 2,00,000 u/s 80RRB 0 1,33,000 u/s 80U 75,000 0 During the course of assessment proceedings, the assessee could not produce the books of accounts so as to enable the A.O. to verify as to which of the figures furnished in the two returns of the assessee were correct. As a matter of fact, he agreed that no regular books of accounts were maintained by him. The A.O., therefore, treated the subsequent return filed by the assessee electronically on 26.05.2011 and selected for scrutiny as the revised return of the assessee and proceeded to complete the assessment with reference to the said return. In the assessment so completed under section 143(3) vide an order dated 18.03.2013, he made the following additions to the total income of the assessee: 1. Disallowance of deduction under Chapter VIA Rs. 7,57,000/- 2. Disallowance of commission Rs. 21,86,432/-

5 I.T.A. Nos. 258 & 176/Kol/2015 & C.O. No. 19/Kol/2015 Assessment Year: 2010-11 Arunashis Sarkar 3. Disallowance of Puja Exp. and donation Rs. 1,06,781/- 4. Disallowance of labour charges, manufacturing expenses depreciation and bank charges Rs. 50,16,053/- 5. Disallowance of bogus expenses (on estimated basis) Rs. 6,51,064/- 4. Against the order passed by the A.O. under section 143(3), an appeal was preferred by the assessee before the Ld. CIT(A). Although the assessee before the Ld. CIT(A) agreed that the subsequent return of income on 26.05.2011 was electronically filed by him, he submitted that the same was filed with the sole motive of obtaining bank loan. The assessee, however, could not produce any evidence to support and substantiate the figures furnished either in the return originally filed in physical form or in the returns subsequently filed in electronic form. Taking note of the same as well as keeping in view the fact that no books of accounts were regularly maintained by the assessee, the Ld. CIT(A) held that the income of the assessee was required to be estimated on some reasonable basis. Keeping in view the sales of more than 20 crores shown by the assessee in the return subsequently filed in electronic form, the Ld. CIT(A) held that it would be fair and reasonable to estimate the profit of the assessee by applying a net profit rate of 2% at Rs. 40,00,000/-. Having determined the income of the assessee on estimated basis, the Ld. CIT(A) deleted the individual additions made by the A.O. under the various heads. He however held that deduction claimed by the assessee under Chapter VIA was not allowable as there was no evidence produced by the assessee to support and substantiate the same. The appeal filed by the assessee before him thus was partly allowed by the Ld. CIT(A) vide his order dated 30.12.2014 and aggrieved by the same, the assessee

6 I.T.A. Nos. 258 & 176/Kol/2015 & C.O. No. 19/Kol/2015 Assessment Year: 2010-11 Arunashis Sarkar and revenue both have preferred their appeals before the Tribunal and the assessee has also filed a cross-objection. 5. We have heard the arguments of both the sides and also perused the relevant material available on record. In the revised grounds filed in his appeal, the assessee has raised a preliminary issue challenging the assessment made by the A.O. under section 143(3) on the basis of return of income subsequently filed on 26.05.2011 in electronic form by treating the same as the revised return. In this regard, the learned counsel for the assessee has contended that the original return of income filed by the assessee on 29.09.2010 against the due date of 31.07.2010 was a belated one and therefore the return of income filed on 26.05.2011 and treated by the Assessing Officer as the revised return was not a valid return. Elaborating further, he has submitted that the turnover of the assessee as shown in the original return of income was less than Rs. 40,00,000/- and since the assessee was not required to get his accounts audited, the due for filing his return of income for the year under consideration was 31.07.2010. He has submitted that the regular return of income filed by the assessee originally on 29.09.2010 thus was a belated one and the assessee was not entitled to file the revised return as per the provisions of sub-section 5 of section 139 as applicable to the year under consideration. He has contended that the return subsequently filed by the assessee on 26.05.2011 thus was an invalid return and the A.O. was not justified in making the assessment on the said return by treating it as revised return. He has contended that the matter, therefore, should go back to the Assessing Officer for making the assessment afresh in pursuance

7 I.T.A. Nos. 258 & 176/Kol/2015 & C.O. No. 19/Kol/2015 Assessment Year: 2010-11 Arunashis Sarkar of the return originally filed by the assessee on 29.09.2010 which was the only return validly filed by the assessee for the year under consideration. We find merit in this contention of the learned counsel for the assessee and since the learned DR has also not raised any objection in this regard, we set aside the impugned order passed by the Ld. CIT(A) and restore the case to the file of the A.O. for making the assessment afresh in pursuance of the return of income originally filed by the assessee on 29.09.2010 as the same is the only return validly filed by the assessee for the year under consideration. Needless to observe that the A.O. shall consider the entire material available on record before completing the assessment afresh and afford proper and sufficient opportunity of being heard to the assessee. 6. In the result, both the cross appeals as well as the cross- objection of the assessee are treated as allowed for statistical purposes. Order Pronounced in the Open Court on 14th February, 2018. Sd/- Sd/- (Aby.T. Varkey) (P.M. Jagtap) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 14/02/2018 Biswajit, Sr. PS Copy of order forwarded to: 1. M/s. CD Equifinance Pvt. Ltd., 37, Shakespeare Sarani, Kolkata – 700 017. 2. DCIT, CIR – 7(1), Aayakar Bhawan, Kolkata.

8 I.T.A. Nos. 258 & 176/Kol/2015 & C.O. No. 19/Kol/2015 Assessment Year: 2010-11 Arunashis Sarkar 3. The CIT(A) 4. The CIT 5. DR True Copy, By order, Sr. P.S. / H.O.O. ITAT, Kolkata