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Income Tax Appellate Tribunal, BENCH ‘C’ KOLKATA
Before: Hon’ble Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM ]
ORDER PER N.V.VASUDEVAN, JM:
This is an appeal by the Assessee against the order of C.I.T.(A)-11, Kolkata dated 12.04.2017 relating to A.Y.2011-12.
2. The Assessee is an individual. He carries on business of distribution of various products of Vodafone South Ltd like distribution of hand sets, modem, SIM card etc. He carries on the said business in the name and style of Anu Telelinks.
In the profit and loss account of Anu Telelinks there was a credit of Rs.62,75,862/- comprising of incentive of Rs.59,15,200/- and DD commission of Rs.3,60,662/-. The entire amount of Rs.62,75,862/- was received from Vodafone South Ltd. The AO addressed a letter u/s 133(6) of the Income Tax Act, 1961 (Act) to Vodafone South Ltd. As per the records of Vodafone South Ltd they had recorded that a sum of Rs.1,07,33,206/- was the incentive paid to the assessee. The AO called upon the assessee to reconcile the difference between the figure of incentive received from Vodafone South Ltd as shown by the assessee in his books of accounts and as shown by Vodafone South Ltd in their books of accounts. -17 Shri Sumit Kotak A.Y.2011-12
4. The assessee filed a reconciliation which was as follows :-
The AO accepted the reconciliation of difference as between the incentive received as per the books of Vodafone South Ltd and as per the books of accounts of the assessee. The AO however added a sum of Rs.30,67,267/- which was shown by the assessee in his books of accounts as amount directly paid to retailers of Rs.30,67,267/- to the total income of the assessee on the ground that this sum was not credited by the assessee in the books of accounts and therefore it cannot be claimed as deduction against the total incentive received from Vodafone South Ltd of Rs.62,75,862/-. The following were the relevant observations of the AO :- “It was contended that the amount of Incentive received by assessee, both as per books of a/cs and as per books of a/cs of Vodafone South Ltd, was Rs 32,08,595/- and, therefore, the difference stands reconciled.
There is an apparent fallacy in above-noted argument. The reconciliation statement shows Incentive of Rs 70,56,937/-, which is stated to have been directly credited by Vodafone South Ltd to retailers' a/cs. It further transpires from the Profit & Loss A/c of Anu Telelinks that the assessee has debited a sum of Rs 48,37,037/- under the head "Incentive to Retailers & AD". The AR stated Shri Sumit Kotak A.Y.2011-12 that the debit includes following amounts on which the assessee has paid Service Tax :-
Sl.No. Date Amount (Rs.) 1 31/07/2010 1,60,350/- 2 25/10/2010 3,974/- 3 31/03/2011 29,02,943/- 30,67,267/- The AR also stated that the sum of Rs 30,67,267/- is included in Incentive of Rs 70,56,937/- directly credited to retailers. He was asked to explain as to why in view of this fact Incentive of Rs 30,67,267/- should not be credited to assessee's a/cs as the assessee has claimed payment of Service Tax on such amount. The AR admitted the discrepancy and stated that there was no objection to addition on account of Incentive of Rs 30,67,267/- In the light of discussions above, incentive of Rs.30,67,267/- is treated as assessee’s income for the year under consideration and added back in computation.”
6. Aggrieved by the aforesaid addition made by the AO the assessee preferred appeal before CIT(A). There was another addition of Rs.94,662/- made to the total income of the assessee on account of difference between stock statement submitted by the assessee to the bank and the value of stock as reflected in the books of accounts. This addition was deleted by CIT(A) and we are concerned in this appeal with the aforesaid addition.
7. As far as the addition of Rs.30,67,267/- made by the AO to the total income of the assessee is concerned, the CIT(A) in the course of appellate proceedings addressed a show cause notice dt. 21.02.2017 to the assessee for enhancement of assessment. The show cause notice issued by the CIT(A)was that the AO ought to have added the difference between the sum of Rs.1,07,33,206/- which is incentive shown in the books of accounts of Vodafone South Ltd and a sum of Rs.62,75,826/- which was incentive received shown by the assessee as received from Vodafone South Ltd. The show cause notice reads as follows :- “To Shri Sumit Kotak A.Y.2011-12 Sri Sumit Kotak Belda. Dist- Midnapore (W)
Sub: Appellate proceeding in the case No. 53/ CIT ( A)/14-15 In the case of Sri Sumit KotakAssessement Year-1l-12/AFJPK5203R - reg.
Please refer to the above.
During the course of present proceedings ground has been raised by you against the action of the A.O. to add Rs. 30,67,267/- on account of suppression of incentive received.
I have perused the submissions made by you in the present proceedings as well as the submissions made by you during the proceedings of regular assessment and the assessment record which include information received from M/s. Vodafone. One of the statement called from M/s. Vodafone is the ledger amount of incentive paid to you by M/s. Vodafone. As per this statement an amount of Rs. 1,07,33,206/- have been shown to have been paid to you during the assessment year as incentive.
3. The entire ledger has been maintained by Vodafone in your name and as per this ledger the entire payment has been made to you.
However from the perusal of the record and the written statement submitted before the and resigned you have claimed that an amount of Rs. 70,56,938/- has been paid by M/s Vodafone directly to the dealers. However, no such mention has been made by M/s. Vodafone in its ledger a/c. Submitted for the assessment year.
5. In the present situation you are asked to explain as to why the entire amount of Rs. 1,07,33,206/- shown not be added as incentive received by you during the assessment year.
It is further noted that amount of Rs. 48,37,037/- has been shown as to be incentive paid to retailer and AD in your P & P A/c. The amount of Rs. 30,67,267/- which has been added by the A. O. as incentive received by you has also been claimed to be part & parcel of the incentive paid to the dealers. During the course of assessment you have not submitted any evidence which suggest that this amount was paid to retailers.
The remaining amount of Rs. 17,69,770/- have also been shown to have been paid in cash to the retailer. From the assessment record it is apparent that the entire amount has been shown to have been paid in cash. Additionally there is no mention of name of any party to which the payment has been made. Shri Sumit Kotak A.Y.2011-12
In view of the above, you are asked to explain as to (i) why the receipt from Vodafone as incentive should not be taken at Rs. 1,07,33,206/- instead of amount of Rs. 62,75,861/- as has been shown to be incentive received during the assessment year.
(ii) You are further asked to explain as to why the entire amount of incentive shown to have been paid by you to Retailers and AD amounting to Rs. 48,37,037/- should not be disallowed for want of sufficient proof that these expenditure as actually been made.
(iii) You are further asked to explain as to why penalty U/S 271 (l)(c) should not be levied on the concealment arising out of the proposal of addition/enhancement made herein above. "
Your reply, if any, t09 this letter should positively by received by the undersigned by 27th feb. 2017. Otherwise the case will be decided on the basis of record available with the undersigned. If you want to avail the opportunity to submit evidences against the proposal made herein above along with documentary evidences your personal presence is also required. For reason that you have admitted concealment on a/c. Of wrong claim of incentive before the Assessing Officer.”
8. It can be seen from the aforesaid show cause notice that the case was fixed for hearing for a reply by the assessee on 27.02.2017. Para 5.3.8 of the CIT(A)’s order mentions the fact that on 27.02.2017 the authorised representative along with the assessee appeared and accepted that on the basis of the entries in the ledger account incentives paid to the assessee was Rs.1,07,33,206/-. In the next sentence it has been mentioned as follows :- “He sought another opportunity to explain his case by furnishing relevant document by 15/04/2017.This admission by the' assessee is part of the order sheet entry of even date.
It is pertinent to note that even after giving an opportunity of more than 45 days no rebuttal or evidence contrary to the provision made in the so called notice was submitted by the assessee.
Non-submission of any evidence or document contrary to the proposition . made in the show cause notice needs to be viewed along with the admission made by the AR of the assessee at the time of assessment proceedings. As discussed in paragraph 5.3.1 above, the sole reason for the admission at the time of Shri Sumit Kotak A.Y.2011-12 assessment proceeding and agitating again the admitted point in the present proceeding appear to be with the sole motive of frustrating the investigation being carried out by the AO. The moment CIT(A) initiated investigation again by virtue of power conferred upon him u/s 250(4). The assessee again finds itself in a situation where he does not have any fact or evidence to prove his point. “
9. The CIT(A) thereafter proceeded to enhance the assessment by a sum of Rs.57,59,341/- by adding the total income of the assessee a sum of Rs.39,89,671/- as incentives received which was not disclosed by the assessee and another sum of Rs.17,69,770/- which was a sum claimed to have been paid by the assessee as incentive to its retailer or authorised dealer, which the CIT(A) disallowed.
Aggrieved by the aforesaid order of the CIT(A) the assessee has filed the present appeal before the Tribunal raising the following grounds of appeal :-
1. For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in upholding the addition of Rs.30,67,267/- in the hands of the assessee on account of incentive paid by 'Vodafone South Ltd. [formerly Vodafone Essar South Ltd.] directly to the retailers.
2. For that on the facts and in the circumstances of the case, the Ld. CIT(A) erred in making an enhancement of Rs. 39,89,671/- in the hands of the assessee on account of incentive transferred by Vodafone South Ltd. [Formerly Vodafone Essar South Ltd.] directly to retailers out of the total such amount of Rs.70,56,938/-.
3. For that on the facts and in the circumstances of the case, the Ld. CIT(A) erred in making enhancement of the sum of Rs. 17,69,770/- by disallowing the expenditure incurred by the assessee on account of payment of incentives to the retailers.
4. For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in making total enhancement of Rs. 57,59,341/- (Rs. 39,89,671/- + Rs. 17,69,770/-) without giving reasonable opportunity of hearing.
5. That the appellant craves leave to add, alter or delete all or any of the grounds of appeal.” -17 Shri Sumit Kotak A.Y.2011-12
We have heard the rival submissions. It can be seen from the order of CIT(A) that in paragraph 5.3.8 the CIT(A) has mentioned the date of hearing as 15.04.2017 whereas the CIT(A) has passed the order as early as 12.04.2017. The ld. Counsel for the assessee has filed an affidavit of the authorised representative of the assessee who appeared before CIT(A). In the aforesaid affidavit, the authorised representative has stated as follows :- “1.That Sri Sumit Kotak of Belda, Dist. Midnapore (W), West Bengal had filed an appeal before the CIT(A) being aggrieved with the assessment order dated 28.03.2014 for the A.Y.: 2011 - 2012.
2. I was briefed in the matter to make appearances before the Ld. CIT(A).
3. During the course of appellate proceedings, the Ld. CIT(A) issued a show- cause notice for enhancement and asked the appellant to appear before him on 27.02.2017.
4. That on the said date I alongwith the appellant appeared before him and the matter was further adjourned to 15.03.2017 but the date is wrongly mentioned by him as 15.04.2017 in his order dated 12.04.2017.
5. That on 15.03.2017 when I reached for hearing, I found that the Ld. Commissioner was absent. I again went on the next day and I was told that the Ld. Commissioner was out of station and a fresh notice would be issued.
6. That on 27.04.2017 when I went again to enquire about fresh date, if any, I was told that the order was already passed.
7. That the facts stated in para 1 to 6 are true to the best of my knowledge and belief. “
The ld.. counsel for the assessee before us submitted that the entire reconciliation was ready and could have been explained to the CIT(A) but the CIT(A) did not afford opportunity of being heard to the assessee. It is also seen from the order of CIT(A) that the only date of hearing of the appeal as mentioned therein was 27.02.2017 and thereafter there has been no hearing. It is thus evident that the assessee did not have proper opportunity of pleading his case before CIT(A). We therefore set aside the order of CIT(A) and remand the issue with regard to the Shri Sumit Kotak A.Y.2011-12 addition of Rs.30,67,267/- as well as the proposed enhancement by the CIT(A) to the AO for fresh consideration. The AO will consider the original addition as well as the proposed enhancement by CIT(A) afresh after affording the assessee opportunity of being heard. The AO will decide the issue uninfluenced by the observations of the CIT(A) in the impugned order both with regard to the addition of Rs.30,67,267/- as well as the enhancement of Rs.39,89,671/-. With the above observations, the appeal of the assessee is treated as allowed for statistical purposes.
In the result the appeal of the assessee is treated as allowed for statistical purposes.
Order pronounced in the open Court on 02.02.2018.
Sd/- Sd/- [M.Balaganesh] [ N.V.Vasudevan ] Accountant Member Judicial Member Dated : 02.02.2018. [RG Sr.PS] Copy of the order forwarded to: 1.Shri Sumit Kotak, Belda, Dist. Midnapore (W), Pin Code – 721424. 2. D.C.I.T., Circle-39, Kolkata. 3. C.I.T.(A)-11, Kolkata 4. C.I.T.-13, Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata. True Copy By order,
Senior Private Secretary Head of Office/D.D.O., ITAT, Kolkata Benches ITA No.1010/Kol/20-17 Shri Sumit Kotak A.Y.2011-12 Shri Sumit Kotak A.Y.2011-12