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Income Tax Appellate Tribunal, “A” BENCH : KOLKATA
Before: Hon’ble Shri M.Balaganesh, AM & Shri S.S.Viswanethra Ravi, JM]
ORDER Per M.Balaganesh, AM
This appeal by the Revenue arises out of the order of the Learned Commissioner of Income Tax(Appeals)-7, Kolkata [in short the ld CIT(A)] in Appeal No.12/CIT(A)- 7/Cir-27/14-15 dated 31.03.2015 against the order passed by the ACIT, Circle-27, Haldia [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 12.03.2014 for the Assessment Year 2011-12.
The revenue has raised following grounds of appeal:
1. That the Ld. CIT(A) erred in deleting the addition to the tune of Rs. 4,71,889/- being the quantum of loss on account of sale of shares on the basis of the remand report addressed the issue very bleakly & it appears to be vogue on certain points. Therefore, the Ld. CIT(A) should not have placed absolute reliance over the remand report submitted by the AO without going into the merits of the case.
2 Shyamsundar Das A.Yr. 2011-12 2. That the Ld. CIT(A) should not have deleted Rs. 82,93,494/- added on account of unaccounted sales based on the findings of remand report. The Ld. CIT(A) erred in placing reliance over the remand report completely not perusing the merits over the case.
The appellant craves leave to add, to alter or modify any one or all of the grounds of appeal mentioned above.
3. The brief facts of this case is that the assessee is an individual and engaged in trading business. The assessee is a proprietor of M/s Das Tubes. The assessee has filed his return of income for the assessment year 2011-12 on 17.03.2012 declaring total income of Rs. 37,38,380/-. The assessee has also declared capital gains in its return of income. The assessee also claimed loss of Rs. 7,06,637/- from sale of shares, for which the assessee filed explanation along with copy of transaction of shares made with M/s BMA Wealth Creators Pvt. Ltd.. The Ld. AO accepted the shares transaction carried out by the assessee as business of the assessee, but on perusal of the transaction statement with M/s BMA Wealth Creators Pvt. Ltd, he observed that the total entries of debit and credit thereon comes to Rs. 58,79,584/- and Rs. 56,44,834/- respectively. Accordingly, he observed that the loss as per the statement of BMA Wealth Creators Pvt. Ltd. was only Rs. 2,34,738/- (5879584 – 5644854). Based on this conclusion he held that the assessee had not filed the correct statement of affairs before him and had accordingly claimed excess loss of Rs. 4,71,829/- (706637 – 234738) which was sought to be disallowed by him in the assessment.
A survey u/s 133A was conducted in the business premises of the assessee on 28.03.2011 and certain books of accounts in the form of tax invoice book and bill books were impounded among others. The Ld. AO observed that the examination of these impounded books indicated that the turnover declared by the assessee in the sum of Rs. 13,26,76,184/- is not reliable. The Ld. AO considered the impounded sales book vide reference no. DT-9/Bengal(Serial No. 501-600) for the period from 19.01.2011 to 3 Shyamsundar Das A.Yr. 2011-12 09.02.2011 wherein the total sales were recorded in that book for Rs. 34,08,179/-. The Ld. AO extrapolated the sales recorded in the said impounded documents for 22 days and estimated total transaction for the whole year in the same proportion and worked out the sales at Rs. 5,65,44,788/- (3408179/22x365).
4.1. The Ld. AO verified the impounded sales book vide reference DT-15/Central(Serial No. 1-100) containing sales book for the period 19.11.2010 to 29.01.2011 and wherein the sales for 72 days were recorded at Rs. 43,59,757/-. The Ld. AO extrapolated the said sales for Rs. 365 days in the same proportion and worked out the sale of Rs. 2,21,01,545 (4359757/72x365).
4.2. Similarly the Ld. AO verified the impounded sales book vide reference bill DT/21(Serial Nos. 193 to 240) containing sales book for the period 08.09.2010 to 26.10.2010, wherein the sales for 49 days were recorded at Rs. 95,09,653/-. The Ld. AO extrapolated the sales for the whole year on estimated basis and arrived at the total sales figure of Rs. 7,08,37,211/-(9509653/49x365).
4.3. The Ld. AO accordingly by reference to aforesaid three impounded sales book as worked out the total sales ought to have been made by the assessee during the year under appeal at Rs. 14,94,83,544/- (56544788 + 22101545 + 70837211). The Ld. AO assumed that this sale of Rs. 14,94,83,544 was inclusive of VAT at 4%. Accordingly, he excluded the VAT portion thereof and arrived at the net sales figures of Rs. 14,37,34,176/- and compared the same with the total sales reported by the assessee at Rs. 13,26,76,184/-. The Ld. AO accordingly arrived at the difference of Rs. 1,10,57,992/- as unaccounted sales by the assessee. Later he assumed that the volume of sales were not at the same rate on each and every day and moreover, the assessee had closed his business operation on certain dates, for which he granted 25% reduction on
Before the Ld. CIT(A) the assessee with regard to the first addition made in the sum of Rs. 4,71,829/- towards excess loss on sale of shares, the assessee pleaded that the loss on sale of shares are to be worked out only based on purchase and sale of shares made by the assessee and not based on total debits and credits in the ledger account of M/s BMA Wealth Creators Pvt. Ltd.. It was pleaded that the said statement of M/s BMA Wealth Creators Pvt. Ltd. admittedly included cheques that were given by the assessee for which assessee’s account has been credited, dividend payments that were credited in the said statement etc. Hence, it was pleaded that it would be incorrect on the part of the Ld. AO to ascertain the loss arising on sale of shares out of total of debit and credits entries in the said transaction statement of M/s BMA Wealth Creators Pvt. Ltd. The assessee also filed reconciliation statement in that regard before the Ld. CIT(A). These papers were treated as additional evidence submitted by the Ld. CIT(A) and accordingly a Remand Report was sought from the Ld. AO in that regard. The Ld. AO in the remand proceedings observed that the assessee submitted all the relevant details in connection with the loss incurred on account of sale of shares. The Ld. AO in the remand report observed that the contention of the assessee is correct. The Ld. CIT(A) by placing reliance on the remand report submitted by the Ld. AO deleted the addition made in the sum of Rs. 4,71,829/- towards excess loss arising on account of sale of shares.
5.1. With regard to the addition made towards unaccounted sales in the sum of Rs. 82,93,494/- on estimated basis the assessee filed complete reconciliation statement of sales vis-à-vis impounded documents and pleaded that the entire sales as reflected in the impounded documents were duly accounted in the books of accounts of the assessee and is already included in the total sales report by the assessee in the return of income. The assessee also pleaded that in any case the Ld. AO had accordingly arrived at the total 4
5 Shyamsundar Das A.Yr. 2011-12 sales figure on an estimated basis by simply extrapolating the sales made for few dates as reflected in the impounded materials for the whole year in the same proportion, which cannot be the basis for making any addition under the Act. The Ld. CIT(A) forwarded the additional evidences filed by the assessee to the Ld. AO and sought remand report in that regard. The Ld. AO accepted the stand of the assessee by placing reliance on the report of the Inspector who was deputed to verify each and every entry in the impounded materials vis-à-vis the sales recorded in the ledger account of the assessee. Based on the clean chit given by the Inspector in his report, the Ld. AO accepted the contention of the assessee in the remand report. The Ld. CIT(A) by placing reliance on the said remand report deleted the addition made by the ld. AO in the sum of Rs. 82,93,494/- towards unaccounted sales.
Aggrieved the Revenue is in appeal before us.
We have heard the rival submissions. The Ld. DR before us argued that the Ld. AO had not passed a speaking order in his remand report as far as first addition is concerned and had not independently applied his mind and had merely placed reliance on the report of the Inspector of Income Tax as far as second addition is concerned. He argued that since the remand report of the Assessing Officer was not a speaking order, the reliance on the same by the Ld. CIT(A) is misplaced accordingly he pleaded for setting aside of these entire issues to the file of Ld.AO for de novo adjudication.
7.1. In response to this the Ld. AR merely placed reliance on the remand report of the ld. AO and the order of the Ld. CIT(A).
7.3. We find that in response to first addition of Rs. 4,71,899/- towards excess loss arising on sale of shares, the said loss should be worked out based on purchase and sales transaction made by the assessee and not based on total of debits and credits in the 5
6 Shyamsundar Das A.Yr. 2011-12 transaction statement of M/s BMA Wealth Creators Pvt. Ltd. The Ld. AO in the remand report after due examination of the entire documents submitted before him had furnished the report as under: “As per the AO in respect of loss of Rs. 7,06,637/- on account of sale of shares, the assessee has not shown correct statement of facts and had claimed excess loss of Rs. 4,71,899/-. Accordingly the AO added this amount of Rs. 4,71,899/- to the total income of the assessee. During the remand report proceedings the assessee submitted that all the relevant details in connection with the loss incurred on account of sale of shares were submitted before the AO. However, the AO has not taken cognizance of the entire facts. On verification of the details the assessee’s contention appears to be correct. The statement furnished by the assessee regarding sale of shares is revealing loss as claimed by the assessee.”
Hence, we hold that the Ld. CIT(A) had rightly placed reliance on the remand report with regard to the issue. We hold that the ld. AO having accepted the stand of the assessee in the remand report ought not to have preferred any appeal before this Tribunal. Accordingly, ground no. 1 raised by the Revenue is dismissed.
With regard to second addition made in the sum of Rs. 82,93,494/- towards unaccounted sales, we find that the Ld. AO had accepted the stand of the assessee. The contents of his remand report in this regard are as under: “During the course of scrutiny proceedings, based on impounded documents the AO concluded that the turnover shown by the assessee is not reliable and accordingly, AO estimated the sales for the financial year 2010-11. The impounded sales book marked as DT-9(Bengal), DT-15(Central) and DT-21 were the basis of AO’s estimation of Sales. On this score Rs. 82,93,494/- was added to the total income of the assessee. During the remand report proceedings, the assessee pleaded that not only his sales are as per sale register which has been subjected to audit but are as per impounded material may be verified to confirm his sales shown in the return of income. Accordingly, efforts were made to verify the sales as per impounded books and as per sales register maintained by the assessee. The inspector attached to the office was directed not only to verify all the sales as per the above mentioned three impounded books viz. DT-9(Bengal), DT-15(Central) and DT-21 on the basis of which the AO has arrived to some conclusion in the assessment order but also to verify on random basis the other impounded material with the sales register. The inspector has submitted her 6
7 Shyamsundar Das A.Yr. 2011-12 report stating that all the entries in the impounded material including the above referred three impounded books have duly been reflected in the sale register maintained & has been offered by the assessee for taxation. As such the AO’s action of estimation of sales appear to be without any supporting.”
Hence, we hold that the Ld. CIT(A) had rightly placed reliance on the remand report with regard to the issue. We hold that the ld. AO having accepted the stand of the assessee in the remand report ought not to have preferred any appeal before this Tribunal. Accordingly, ground no. 2 raised by the Revenue is dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Court on 07.02.2018