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Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy & Sri S.S. Viswanethra Ravi]
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA [Before Sri J. Sudhakar Reddy, Accountant Member & Sri S.S. Viswanethra Ravi, Judicial Member]
I.T.A. No. 1116/Kol/2017 Assessment Year: 2011-12 Smt. Sarathi Majumdar…………...……….………………………………………………….………..Appellant C/o. Dilip Kumar Majumder 54, Chanda Park Mahananda Para Govt. Saw Mill Road Siliguri – 734 005 [PAN : AEWPM 1786 M] Income Tax Officer, Ward-2(3), Siliguri…………………………………………………..…..Respondent Hill Cart Road Hakimpara SIliguri – 734 001 I.T.A. No. 1227/Kol/2015 Assessment Year: 2011-12 Income Tax Officer, Ward-2(3), Siliguri…………………………………………………..…..Respondent Hill Cart Road Hakimpara SIliguri – 734 001 Smt. Sarathi Majumdar…………...……….………………………………………………….………..Appellant C/o. Dilip Kumar Majumder 54, Chanda Park Mahananda Para Govt. Saw Mill Road Siliguri – 734 005 [PAN : AEWPM 1786 M] Appearances by: Shri S.K. Tulsiyan, Advocate, appeared on behalf of the assessee. Shri Md. Usman, CIT, DR appearing on behalf of the Revenue. Date of concluding the hearing : November 27th, 2017 Date of pronouncing the order : December 21st , 2017
O R D E R Per J. Sudhakar Reddy :-
This cross appeal is directed against the order of the ld. Commissioner of Income Tax (Appeals)-Siliguri, (hereinafter the ‘ld. CIT (A)’), passed u/s 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 03/07/2015, for the Assessment Year 2011- 12.
2 I.T.A. No. 1116/Kol/2017 Assessment Year: 2011-12 I.T.A. No. 1227/Kol/2015 Assessment Year: 2011-12 Smt. Sarathi Majumdar
Facts in brief:- The assessee is an individual and is a distributor of cigarettes and candies. She filed her return of income on 20/03/2012, for the assessment year 2011-12, declaring total income of Rs. 4,44,610/-. The Assessing Officer re-opened the assessment under section 147 of the Act, and issued notice under section 148 of the Act, dated 10/05/2013. The assessment was completed on 30/03/2015, by rejecting the books of accounts and thereafter making various additions and determining the total income at Rs. 53,85,910/-. The assessee carried the matter in appeal. The ld. CIT(A), deleted some of the additions made by the Assessing Officer and also deleted certain additions. He modified the estimate of the ld. Assessing Officer.
2.1. Aggrieved, the assessee and the revenue are in appeal before us against this order of the ld. CIT(A).
The ld. counsel for the assessee challenged the reopening of assessment by submitting that, there is no allegation that there is escapement of income, in the reasons recorded by the Assessing Officer. He relied on case-law, which we would be referring in due course, for the proposition that the Assessing Officer should expressly record, in his reasons for reopening, that income subject to tax has escaped assessment and the reasons, have to be read as it is, and nothing should be added or substituted.
3.1. He further argued that no addition, whatsoever, was made in the Assessment Order, on the issues on which the reasons were recorded for reopening the assessments and that under such circumstances, the other additions made on issues which are not connected with the reasons recorded, cannot be made. He further submitted that the Assessing Officer has rejected the books of accounts and has estimated the profits and under those circumstances, separate additions cannot be made of items of income/expenditure in the trading and profit & loss account of the assessee. For this he relied on the decision of the
3 I.T.A. No. 1116/Kol/2017 Assessment Year: 2011-12 I.T.A. No. 1227/Kol/2015 Assessment Year: 2011-12 Smt. Sarathi Majumdar Jurisdictional High Court in the case of Commissioner of Income Tax, Kolkata-1 versus M/s. Infinity Infotech Parks Ltd. in I.T.A. No. 60 of 2014, order dt. 10th September, 2014.
The ld. D/R, on the other hand, relied on the order of the AO and argued that addition was made in the assessment order on the issue on which income which is alleged to have escaped assessment in the reasons recorded. He drew the attention of the Bench to para 6.1. of the Assessment Order and submitted that an amount of Rs. 48,87,702/- is added to the total income of the assessee. He pointed out that there were discrepancies in the books of accounts of the assessee and as the same was rejected, this addition was subsumed in the total addition. He read the reasons and submitted that the wording “implying that the entire receipts from Godfrey Philips (I) Ltd. may have suppressed” points out that the Assessing Officer believed that income subject to tax has escaped assessment and that not saying so in exact words of the legislature is not correct.
4.1. On the revenue appeal, he submitted that the ld. CIT(A) was wrong in reducing the addition by directing the Assessing Officer to take the business income of the assessee at Rs. 14,42,828/-. He relied on the order of the ld. Assessing Officer.
After hearing the rival contentions, we hold as below:- The reasons recorded for reopening are brought out at page 3 of the assessment order, which is extracted for ready reference.:-
“In this case information in writing is passed to the undersigned by the Income- tax Officer (Intelligence & Criminal Investigation), Hakimpara, Siliguri that the assessee during the F.Y. 2010 had made cash deposits of Rs.89,10,640/- in one saving bank account no. 2432101004623 since maintained by her in Canara Bank, Siliguri Branch, However, the assessee had violated the provisions of Section 139A(5) by not quoting her PAN while making cash deposits. Further, when summoned u/s. 131 by the Income Tax Officer (Intelligence & Criminal Investigation), Hakimpara, Siliguri to explain the sources of such cash deposits,
4 I.T.A. No. 1116/Kol/2017 Assessment Year: 2011-12 I.T.A. No. 1227/Kol/2015 Assessment Year: 2011-12 Smt. Sarathi Majumdar Sri Nimalaya Chakaraborty, Advocate appeared on behalf of assessee as per authorized representative and submitted before the ITO the bank details of such deposits and stated that these deposits were made out of the sale proceeds of whole sale cigarette business of the assessee run under her proprietorship concern “Next Zen”, but could not produce any supporting documents to substantiate the said statement. Besides as per 26AS details of the assessee since extracted online from AST, it is found that during the concerned period, i.e. F.Y. 2010-11, the assessee had received a total amount of Rs.17,36,460/- from one Godfrey Philips (I) Ltd. on which an amount of Rs.17,363/- was deducted as taxed u/s 194C. However, in the E-filed return for the A.Y. 2011-12 uploaded by the assessee on 28.03.2012 and since downloaded online from AST and placed on records, it is found that the claim for any TDS has been made, thus implying that the entire receipt from Godfrey Philips (I) Ltd. may have suppressed.”
A perusal of these reasons demonstrate that the assessing officer did form a reasonable belief that income of the assessee which is subject to tax of the assessee, has escaped assessment, as the entire receipts from Godfrey Philips (I) Ltd., may have been suppressed. Though the wording “escaped assessment” has not been used, the sum and substance of the reasons demonstrate that the assessing officer had reason to believe based on the tangible material that income chargeable to tax has escaped assessment. Thus, this argument of the ld. counsel for the assessee is dismissed as devoid of merit and the re-opening of assessment is upheld.
6.1. The second argument is that, no addition has been made on the issue on which the assessment was reopened and hence the other addition which have no relation or nexus with the reasons recorded are bad in law. The assessment was reopened on the ground that there was cash deposits of Rs. 89,10,640/-, in one savings bank account maintained in Canara bank, Siliguri Branch and that no evidence was produced by the assessee in support of the contentions that these deposits were out of sale proceeds of cigarettes. The Assessing Officer has come to a conclusion that the undisclosed cash receipts was Rs.48,82,702/-, which he treated as income at Para 6(i) of his order. Thus, irrespective of the fact, whether
5 I.T.A. No. 1116/Kol/2017 Assessment Year: 2011-12 I.T.A. No. 1227/Kol/2015 Assessment Year: 2011-12 Smt. Sarathi Majumdar this addition is ultimately made in the same manner or not, the fact remains that an addition was made on the issue on which the re-opening has been done. Thus, this argument of the ld. Counsel for the assessee fails.
6.2. On merits, the ld. Counsel for the assessee, pointed out that at para 6(i), page 12 of the Assessment Order that, there is an assumption, that unexplained receipt of Rs.48,82,702/-, is presumed to have been withdrawn from the business. Such presumption cannot be countenanced. Such an inference cannot be upheld. Even debit entries found in the current account of Sarathi Majumdar with the Bank of Rs.9,77,240/- are held as undisclosed profits which were withdrawn. Such conclusion of the Assessing Officer is without any basis and hence bad in law.
6.2.1 We agree with this submission. When the deposits in a Savings Bank Account, are the subject matter of enquiry, we do not understand how there can be a presumption of withdrawal of a huge amount of Rs.48,82,702/-, in cash from business. 6.2.2. M/s. Godfrey Philips India Ltd., issued to the assessee, credit notes, totalling to Rs.73.56.250/-. Out of this, display and scheme receipts, was a figure of Rs.55,57,483/-. The surplus from the same was Rs.22,39,198/-, after meeting the expenses. This was credited to the Profit & Loss Account of the assessee under the head “Display & Scheme” receipts. Under the head “Distribution of Subsidy”, the assessee received credit notes of Rs.17,83,767/-. The surplus from this account was Rs.2,34,350/-, after expenses. This was credited to the profit and loss account under the head “Miscellaneous Income”. These facts and figures have not been controverted by the ld. D/R.
6.3. Be it as it may, the books of account of the assessee have been rejected and this issue has not been challenged before us. Under these circumstances, the only issue that remains is as to whether the Assessing Officer can made separate additions of items of expenditure reflected in the P & L A/c, when he rejects the books of accounts and estimate the profit as a percentage of turnover.
6 I.T.A. No. 1116/Kol/2017 Assessment Year: 2011-12 I.T.A. No. 1227/Kol/2015 Assessment Year: 2011-12 Smt. Sarathi Majumdar 7. The Kolkata ‘C’ Bench of the Tribunal in the case of Income Tax Officer vs M/s. Aakash Developers in I.T.A. No. 859/Kol/2012, for the Assessment Year 2007-08, order dt. 20/11/2015, held that when books of account have been rejected, and net profit estimated, such assumption shall cover all the other addition made for bogus purchase and expenses disallowed, while holding reliance on the decision of the Special Bench of the Tribunal in the case of Income-Tax Officer vs Kenaram Saha And Subhash Saha [2008] 301 ITR 171 (Kol).
7.1. Applying the propositions of law laid down by the Special Bench of the Tribunal in the case of Income-Tax Officer vs Kenaram Saha And Subhash Saha (supra), we uphold the contention of the assessee that, once the books of account have been rejected and the net profit has been estimated as a percentage of turnover by the Assessing Officer, no further additions on account of unverifiable expenditure and of items claimed in the profit and loss account etc., can be made. Gross receipts from M/s. Godfrey Philips (I) Ltd., cannot be treated as income of the assessee. Such action is against the facts of the case. Hence, this argument of the assessee is upheld and the addition estimated at 2 per cent of the turnover as determined by the Assessing Officer, is sustained. The balance of the additions are hereby deleted.
In the result, the appeal of the assessee is allowed in part, and the appeal of the revenue is dismissed.
Kolkata, the 21st day of December, 2017. Sd/- Sd/- [S.S. Viswanethra Ravi] [J. Sudhakar Reddy] Judicial Member Accountant Member Dated : 21 .12.2017 {SC SPS}
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Copy of the order forwarded to: 1. Smt. Sarathi Majumdar C/o. Dilip Kumar Majumder 54, Chanda Park Mahananda Para Govt. Saw Mill Road Siliguri – 734 005 2. Income Tax Officer, Ward-2(3), Siliguri Hill Cart Road Hakimpara SIliguri – 734 001
CIT(A)- 4. CIT- , 5. CIT(DR), Kolkata Benches, Kolkata.