I.T.O WD - 2(2),KOLKATA, KOLKATA vs M/S AHILYA COMMERCIAL PRIVATE LIMITED., KOLKATA

Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA

Before: Shri P.M. Jagtap & Shri A.T. Varkey

Date of concluding the hearing : May 16, 2017 Date of pronouncing the order : May 24, 2017 O R D E R Per Shri P.M. Jagtap, A.M..: This appeal is preferred by the Revenue against the order of ld. Commissioner of Income Tax (Appeals)-I, Kolkata dated 11.10.2012, whereby he deleted the additions of Rs.1,56,75,974/- and Rs.68,61,094/- made by the Assessing Officer to the total income of the assessee on account of undisclosed brokerage income and undisclosed cash receipts respectively.

The assessee in the present case is a Company, which is engaged in the business of share trading on its own as well as on brokerage basis as a member of Calcutta Stock Exchange. The return of income for the year under consideration was filed by it on 30.10.2005 declaring total income of Rs.82,520/-. There was a survey operations carried out in the case of the assessee under section 133A on 28.12.2004 and 22.03.2005 and after taking into consideration the findings of the said operation, assessment under section 143(3) was completed by the Assessing Officer vide an order dated 28.12.2007 determining the total income of the assesese at Rs.8,50,540/-. The I.T.A. No. 152/KOL./2013 Assessment year: 2005-2006 Page 2 of 6 said assessment was subsequently set aside by the ld. CIT vide an order dated 27.01.2010 passed under section 263 with a direction to the Assessing Officer to frame the assessment afresh after making proper and adequate enquiries. Accordingly fresh assessment proceedings were initiated by the Assessing Officer and since there was no satisfactory compliance on the part of the assessee during the course of said proceedings, the assessment was completed by the Assessing Officer to the best of his judgment under section 144/263 vide an order dated 30.12.2010. In the assessment so completed, he rejected the book results of the assessee and adopted the total turnover of the assessee at Rs.3,105.19 crores, out of which Intra Day Trading through Demat account was Rs.2,982.12 crores while the delivery Based Trading and Auction Trading was Rs.121.91 crores. As regards the rate of brokerage, the Assessing Officer found on the basis of information collected by him that the average rate of brokerage for Intra Day Trading was 0.072%, whereas the rate of brokerage for Delivery Based Trading and Auction Trading was 0.438%. Applying the said rates to the turnover adopted by him, the brokerage income of the assessee was estimated by him at Rs.2,68,11,280/- and since the brokerage income of Rs.1,11,35,306/- was already disclosed by the assessee, the balance amount of Rs.1,56,75,974/- was treated by the Assessing Officer as undisclosed income of the assessee from brokerage received in cash. In the reconciliation sheet claimed to have been prepared by the assessee on the basis of its Bank book, an entry of Rs.2,25,37,068/- was appearing as ‘Cash Receipts’. As the assessee did not offer any satisfactory explanation as regards the source of the said cash receipts, the Assessing Officer treated the amount of Rs.1,56,75,974/- taken by him as brokerage income received in cash as source of the said cash receipts to that extent and the balance amount of Rs.68,61,094/- was treated by him as the undisclosed cash credit. Accordingly the total addition of Rs.2,25,37,068/- was made by the Assessing Officer to the total income of the assessee in the assessment completed under section 144/263 vide an order dated 30.12.2010.

Against the order passed by the Assessing Officer under section 144/263, an appeal was preferred by the assessee before the ld. CIT(Appeals) and the various submissions made by the assessee in support of its case in the light of the material placed on record as well as the facts of the case were discussed by the ld. CIT(Appeals) in para 1 of his impugned order:- ./2013 Assessment year: 2005-2006 Page 3 of 6 “1. After careful consideration of written submission along with paper book and the assessment order, it is noticed that assessment in this case was completed under section 143(3) on 28.12.2007 after survey operation u/s 133A on 28.12.2004 and 22.03.2005. Assessee was share broker in the Calcutta Stock Exchange and maintaining accounts on a software package approved by Calcutta Stock Exchange in the relevant Assessment year. By order u/s 263 dated 27.01.2010 CIT-I, Kolkata set aside the above order in a respect of issues as per show cause notice 18.08.2009 as no proper enquiry and reconciliation were made by assessing officer while passing the order u/s 143(3) and certain deficiencies regarding brokerage, turnover of share transactions, improper reconciliation of bank transactions and share trading loss claimed by the assessee mentioned in the show cause notice dated 18.08.2009 were noticed by the CIT-I, Kolkata. The assessing officer determined the total income at Rs.2,95,74,390/- in his ordered dated 30.12.2010 he determined the gross brokerage income at Rs.2,68,11,280/- by rejection of books of accounts u/s 145(3) as against Rs.1,11,35,306/- credited in Profit & Loss Account by the assessee. While rejecting the accounts the assessing officer adopted the mean brokerage rates down loaded from the websites of National Stock Exchange & Bombay Stock Exchange in respect of brokerage firms tabulated at the page 5 of assessment order and gross sales turnover for calculation of brokerage income as per Sauda-book was Rs.31,05,19,06,637/-. He made additions of Rs.66,25,660/- as per Explanation to section 73 of the Income tax Act. He further made additions of Rs.68,61,094/- as cash credits u/s 68 on account of money receipt from clients in this financial year for Rs.2,25,37,068/-. As per Profit & Loss accounts for financial year ended 31.03.2005 assessee had shown net-income from operations for Rs.41,72,146/- this income credited in Profit & Loss account was net of the brokerage income for Rs.1,11,35,306/- and share trading loss Rs.69,63,160/- while the assessee had shown traded turnover was Rs.1,11,40,370/- which was per Form 10DB for STT but actual the assessee had shown purchase of Rs.92,66,545/- and sale of Rs.22,56,385/-, aggregating to Rs.1,15,22,930/- which is more than Rs.1,11,40,370/. Since, it included Non-STT turnover also. Assessee was maintaining 8(eight) bank accounts for Clients, O/D account and on his self account as per paper book page 88 where reconciliation of sales & purchases vis-a-vis receipts & payments was produced. While the assessing officer considered only 6(six) bank accounts, since the assessing officer could not consider Canara Bank (Princep St.) and OBC(GTB-self account). Assessee had produced certificate from auditors dated 17.08.2012 as corroborative evidence along with reports of the receipts & payments in all bank accounts. The A/R also produced a detailed cash book containing all cash transaction in the financial year and also produced bank wise abridged details of deposits and withdrawals together with respective bank reconciliation statements”. ./2013 Assessment year: 2005-2006 Page 4 of 6 4. After making the above discussion, the ld. CIT(Appeals) proceeded to delete the additions of Rs.1,56,75,974/- and Rs.68,61,094/- made by the Assessing Officer for the following reasons given in paragraphs no. 3 & 4 of his impugned order:-

“3. At page 12 of the assessment order AO rejected the books of accounts on the basis of differences in gross turnover of shares as per Form 10DB and difference of brokerage to the extent of Rs.12,450/-. The other reasons related to reconciliation of various bank accounts. The A/R contended that books of accounts were audited under section 44AB and books were maintained on an approved accounting package by Calcutta Stock Exchange and further submitted that turnover as per Form 10DB is only in respect of transactions carried out through stock exchange which have suffered STT. Since, the assessee had also carried out transactions not suffering STT, the turnover as per assessee is more than the same mentioned on Form10DB. The A/R further refer to the detailed bank reconciliation and cash book wherein the alleged difference in cash account and bank account are reflected and reconciled. The A/R expressed his inability to reconcile the brokerage income for Rs.12,450/-. Keeping in view the above factual matrix and circumstances of the case referred in Para-1, the rejection of books of accounts by the AO and addition of Rs.1,56,75,974/-on the basis of rate of brokerage lifted from websites is deleted. However, the specific addition of Rs.12,450/- in the brokerage account is confirmed. Therefore ground no.3 is partly allowed.

The unexplained cash credit for Rs.68,61,094/- relating to cash receipts of Rs.2,25,37,068/- from clients as per page of 15 of the assessment order. The A/R submitted a copy of the detailed cash book containing all transaction from 01.04.2004 to 31.03.2005 on 03.10.2012. The cash book entries reflect cash received from various clients against trades executed by them, in the whole financial year. The transaction against which the cash was received from clients were already routed through sauda book and brokerage was duly accounted for and reflected in Profit and Loss A/c. The A/R also contended that there was no dispute regarding the above cash collection from clients in the original assessment order u/s 143(3) and in the order u/s 263 by the CIT-I, Kolkata and CIT-I, Kolkata's order dated 27.01.2010 u/s 263 or show- cause dated 18.08.2009 did not dispute these receipts in cash from clients. Keeping in view the above factual matrix and circumstances mentioned in Para -1 addition of Rs.68,61,094/- is deleted. Therefore ground no. 6 is allowed”.

Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal on the following grounds:-

(1) That on facts and circumstances of the case CIT(A) erred in deleting additions of undisclosed brokerage income of Rs.1,56,75,974/-. ./2013 Assessment year: 2005-2006 Page 5 of 6 (2) That on the facts and circumstances of the case CIT(A) erred in deleting additions of undisclosed cash receipts of Rs. 68, 61, 094/-. (3) That on the facts and circumstances of the case CIT(A) erred in deleting assessing officer's order u/s 145(3) of the I. T. Act, 1961 rejecting Books of Accounts. (4) That on the facts and circumstances of the case CIT(A) erred in accepting fresh evidence viz. details of cash book containing all transaction in the F. Y.2004-05 and bank wise abridged details of deposits and withdrawals together with respective Bank Reconciliation Statements in violation of provision under Rule 46A of the I. T. Rules 1962

6. At the time of hearing fixed on 16.05.2017, none has appeared on behalf of the assessee. Even there was no appearance of the assessee at the time of hearings fixed earlier on 18.10.2015, 23.12.2015, 15.02.2016, 26.04.2016, 04.07.2016, 26.09.2016, 05.12.2016, 01.03.2017 and 06.04.2017 despite the fact that notices of the said hearings were sent either by Registered Post with A/D or through Department. Keeping in view this non-compliant attitude of the assessee, this appeal of the Revenue is being disposed of ex-parte qua the respondent-assessee after hearing the arguments of the ld. D.R. and perusing the relevant material available on record. As rightly pointed out by the ld. D.R. from paragraph no. 1 of the impugned order of the ld. CIT(Appeals), additional evidence in the form of two Bank accounts of the assesese with Canara Bank and OBC as well as a certificate from auditors dated 17.08.2012 along with reports on the receipts and payments of all Bank accounts was filed by the assessee before the ld. CIT(Appeals) for the first time and the same was considered and relied upon by the ld. CIT(Appeals) to give relief to the assessee on both these issues involved in this appeal of the Revenue without giving any opportunity to the Assessing Officer to verify the same. As further pointed out by the ld. D.R., a detailed Bank Reconciliation and Cash Book were also produced by the assessee before the ld. CIT(Appeals) for the first time and the same constituting additional evidence was also considered and relied upon by the ld. CIT(Appeals) to give relief to the assesese without giving any opportunity to the Assessing Officer to verify the same. In our opinion, there is thus a clear violation of Rule 46A by the ld. CIT(Appeals) and keeping in view the same as well as all the facts of the case, we find merit in the plea of the Revenue that the impugned order of the ld. CIT(Appeals) is liable to be set aside and the matter be restored to the file of the I.T.A. No. 152/KOL./2013 Assessment year: 2005-2006 Page 6 of 6 Assessing Officer for deciding the same afresh after verifying the additional evidence filed by the assessee before the ld. CIT(Appeals). Accordingly, we set aside the impugned order of the ld. CIT(Appeals) on both the issues involved in this appeal of the Revenue and restore the matter to the file of the Assessing Officer for deciding the same afresh after verifying the additional evidence filed by the assessee for the first time before the ld. CIT(Appeals). Needless to observe that the Assessing Officer shall afford proper and sufficient opportunity of being heard to the assessee.

In the result, the appeal of the Revenue is treated as allowed for statistical purposes.

Order pronounced in the open Court on May 24, 2017.

Sd/- Sd/- (A.T. Varkey) (P.M. Jagtap) Judicial Member Accountant Member Kolkata, the 24th day of May, 2017 Copies to : (1) Income Tax Officer, Ward-2(2), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700 069 (2) M/s. Ahilya Commercial Private Limited, 52, Weston Street, 6t h Floor, Room No. 604, Kolkata-700 012 (4) Commissioner of Income Tax(Appeals)-I, Kolkata; (5) Commissioner of Income Tax ,Kolkata (6) The Departmental Representative (7) Guard File By order

Senior Private Secretary, Head of Office/DDO Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.

I.T.O WD - 2(2),KOLKATA, KOLKATA vs. M/S AHILYA COMMERCIAL PRIVATE LIMITED., KOLKATA