P.C.GHOSH & S.N.GHOSH,HOOGHLY vs. ITO, WARD -24(2) HOOGLY, HOOGHLY

This is an appeal filed by the assessee against the order of Ld. CIT(A)-6, Kolkata dated 11.01.2017 for AY 2012-13. 2. The sole issue raised by the assessee is against the addition of Rs.26,47,418/- made u/s. 69 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) by the AO which has been confirmed by the Ld. CIT(A).

P.C. Ghosh & S. N. Ghosh, AY 2012-13 u/s. 133(6) of the Act on 23.01.2015. The AO noted that pursuant to the letter of the AO he received compliance from the Director of Rationing by a letter dated 24.02.2015 wherein the AO noticed few discrepancies which are given below in a chart form:

Sl. Description Amount paid as shown by Amount paid as Difference in Rs. No. the assessee in P/L A/c in Rs. confirmed in Rs. 1 APL Rice 11,47,512 2 APL Rice/Spl 6,92,040 Total 18,39,552 15,92,695 2,46,857 3 APL Wheat 1,03,13,772 APL Wheat/Spl 5,85,585 Total 1,08,99,357 98,27,780 10,71,577 4 BPL Rice 16,68,960 7,84,437(Pro)+ 5,36,683 3,47,840(Rice)= 11,32,277 5 BPL Wheat 37,96,857 31,75,208 6,21,649 6 AAY Rice 3,18,176 1,96,142 1,22,034 7 AAY Wheat 2,09,718 1,61,100 48,618 Total 26,47,418 Thereafter, the AO issued show cause notice to the assessee on 23.03.2015 asking the assessee as to why Rs.26,47,418/- should not be disallowed due to unexplained purchase during the relevant assessment year. The AO noticed that the assessee responded to the said notice by stating that the truth can be established only if an examination of the books of the Joint Director of Rationing is done side by side with those of the assessee. The AO did not heed to the said request of the assessee and he made additions of Rs.26,47,418/- as unexplained purchase. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the order on the ground that the assessee failed to furnish any explanation in respect to the discrepancy noted by the AO after examining the letter from the rationing authority. Aggrieved by the decision of the Ld. CIT(A), the assessee is before us.

P.C. Ghosh & S. N. Ghosh, AY 2012-13 “Now, obviously “to prove” means to establish the correctness, or completeness of the return by any mode permissible under law. The usual mode recognised by law for proving a fact is by production of evidence and evidence includes oral evidence of witnesses. The opportunity to prove the correctness or completeness of the return would, therefore, necessarily carry with it the right to examine witnesses and that would include equally the right to Cross-examine witnesses examined by the Sales Tax Officer. Here, in the present case, the return filed by the assessee appeared to the Sales Tax Officer to be incorrect or incomplete because certain sales appearing in the books of Hazi Usmankuttv and other wholesale dealers were not shown in the book's of account of the assessee. The Sales Tax Officer relied on the evidence furnished by the entries in the books of account of Hazi Usmankutty and other wholesale dealers for the purpose of coming to the conclusion that the return filed by the assessee was incorrect or incomplete. Placed in these circumstances, the assessee could prove the correctness and completeness of his return only by showing that the entries in the books of account of Hazi Usmankutty and other wholesale dealers were false, bogus or manipulated and that the return submitted by the assessee should not be disbelieved on the basis of such entries, and this obviously, the assessee could not do, unless he was given an opportunity of cross-examining Hazi Usmankutty and other wholesale dealers with reference to their accounts. Since the evidentiary material procured from or produced by Hazi Usmankutty and other wholesale dealers was sought to be relied upon for showing that the return submitted by the assessee was incorrect and incomplete, the assessee was entitled to have Hazi Usmankutty and other wholesale dealers summoned as witnesses for cross-examination. It can hardly be disputed that cross-examination is one of the most efficacious methods of establishing truth and exposing falsehood. Here, it was not disputed on behalf of the Revenue that the assessee in both cases applied to the Sales Tax Officer for summoning Hazi Usmankutty and other wholesale dealers for cross-examination, but his application was turned down by the Sales Tax Officer. This act of the Sales Tax Officer in refusing to summon Hazi Usmankutty and other wholesale dealers for cross-examination by the assessee clearly constituted infraction of the right conferred on the assessee.”

P.C. Ghosh & S. N. Ghosh, AY 2012-13

P.C. Ghosh & S. N. Ghosh, AY 2012-13

P.C. Ghosh & S. N. Ghosh, AY 2012-13 We have verified the reconciliation given above in respect to the APL rice special which is given at Sl. No. 2 there is no discrepancy at all. However, in respect of APL rice the amount shown by the assessee is Rs.11,47,512/- whereas Joint Director of Rationing has shown for APL Rice at Rs.9,00,655/- thus a difference of Rs.2,46,857/-. This figure of Rs.2,46,857/- has been reconciled by the assessee as to have got rebate for transportation of an amount of Rs.1,70,070/- and he drew our attention to page no. 12 of the paper book where we note that the assessee has purchased APL Rice for Rs.11,47,512/- and has got a rebate of Rs.17,070/- and has given dealer advance of Rs.13,641/- and the deposit with the Govt. of West Bengal is to the tune of Rs.4,070/- which details of the same have been filed from page nos. 13 to 18 of the paper book wherein we have seen the delivery orders and at page 16 the dealer advance bill is also noted. So, thus, we find that the amount of Rs.2,46,857/- has been duly reconciled by the evidence on record. Likewise, in respect to APL wheat, special there is no discrepancy at all. In respect to the APL wheat the assessee had claimed to have purchased APL wheat of Rs.1,03,13,772/- whereas as per the Joint Director of Rationing it was Rs.92,42,195/-. Thus, a difference of Rs.10,71,577/- which the assessee has explained in pages 24 and 25 of the paper book. On perusal of the purchase of APL wheat, we note that the assessee had made purchase of Rs.1,03,13,772/- and the assessee got a rebate in respect to the transportation of Rs.2,51,565/-, dealer advance bill of Rs.2,13,390/-, the deposit of Govt. of West Bengal Rs.33,140/- in excess of APL wheat comes to Rs.1,194/-. The amount deposited in March, 2011 but material lifted in April, 2011, Rs.3,00,291/- and the cheque issued in March, 2012 but material lifted in April, 2012 to the tune of Rs.2,71,997/-. Thus, an amount of Rs.10,71,577/- has been reconciled by the assessee by producing the delivery orders from pages 26 to 61 which we verified on test check basis and found to be correct. In the light of the fact that the assessee was able to reconcile the discrepancy which came to light after the Rationing authority’s letter to the AO stands reconciled. Moreover, as held by the Hon’ble Supreme Court, the sole basis for making the addition was after receipt of the letter from the Joint Director Rationing in respect to the purchase of rice by the assessee. The assessee’s books were audited and the AO could not find any defect in the same. However, based on the figures given by the Joint

P.C. Ghosh & S. N. Ghosh, AY 2012-13 Director, Rationing in respect to the purchase of rice and wheat, the AO made the addition in haste by providing only the assessee three days to reconcile. The assessee had requested the AO his desire to examine the books of the Joint Director along with the assessee which request was also not heeded to by the AO and he disbelieved the assessee without rejecting the audited books and the fact remaining that the entire purchase of assessee is made through banking channel and that too from Government. The AO ought to have given opportunity to the assessee to confront the Joint Director of Rationing along with its books of account to find out the veracity as to whose contention is correct as held by the Hon’ble Supreme Court in K. T. Shaduli Yusuff Etc. (supra) and without doing so the addition based on a letter of the Rationing Authority is vitiated and, therefore, the action of AO and consequent addition made by him and sustained by the Ld. CIT(A) cannot be upheld and, therefore, we order deletion of the impugned addition confirmed by the Ld. CIT(A).

Sr. Pvt. Secretary