MR DEBAYAN BHATTACHARYA,KOLKATA vs. ACIT, CIRCLE-50, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “D”, BENCH KOLKATA BEFORE SHRI S.S.VISWANETHRA RAVI, JM & DR. A.L.SAINI, AM आयकर अपील सं./ITA No.32/Kol/2014 (�नधा�रण वष� / Assessment Year :2008-2009) Mr. Debayan Bhattacharya Vs. ACIT, Circle-50, DB-29/B-4, Sector-1, Manicktalla Civic Centre, Salt Late City, Uttarapan Complex,DS-II Kolkata-700064 Ultadanga, Kolkata-700054 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAJPB 2128 D .. (अपीलाथ� /Appellant) (��यथ� / Respondent) �नधा�रती क� ओर से /Assessee by : Shri Manish Tiwari, FCA राज�व क� ओर से /Revenue by : Shri Rajat Kumar Kureel, JCIT सुनवाई क� तार�ख / Date of Hearing : 23/02/2017 घोषणा क� तार�ख/Date of Pronouncement 05/04/2017 आदेश / O R D E R Per Dr. Arjun Lal Saini, AM: The captioned appeal filed by the Assessee, pertaining to the assessment year 2008-2009, is directed against the order passed by the ld. Commissioner of Income Tax (Appeals)-XXXII, Kolkata, in Appeal No.226/XXXII/10-11/Cir-50/Kol, dated 04.10.2013, which in turn arises out of an order passed by the AO u/s.143(3) of the Income Tax Act 1961, (hereinafter referred to as the ‘Act’), dated 31.12.2010. 2. Brief facts of the case qua the assessee are that the assessee filed his return of income for the assessment year 2008-09 on 10.10.2008 disclosing total income of Rs.10,46,879/-. The return of assessee was processed u/s.143(1) of the I.T.Act. Later on, the assessee’s case was selected under scrutiny u/s.143(3) of the Act and the AO completed the assessment by making addition @ 1.25% of Rs.193,279,555 which

2 ITA No.32/Kol/2014 Mr. Debayan Bhattacharya

comes at Rs.24,15,994 ( estimated addition on undisclosed bank

account).

filed an appeal before the ld CIT(A), who has confirmed the order passed

by the AO observing the followings :-

“4. Decision:

The facts of the case are duly considered. It is seen that the assessee has kept at least two business related bank account outside his books of accounts. The transactions especially involving cash deposits are not routed through the cash books. During the appellate proceedings the AR also could not produce the details called for e.g. the personal Balance Sheet and the Income & Expenditure Statement of the assessee; details of TDS violations (as seen in assessment order for 2006-07, 2007-08 and 2009-10); details of capital and current a/c of the assessee in his Proprietory Concerns; account statement of the suppliers etc. No books of account were produced or offered to be produced. There is no argument that all transactions are reflected in the assessee's books of account. The AR in his written submission has given break-up of deposits in one bank a/c No. 34317 but the actual accounts on whose basis the additions have been made are different. The AO has, on taking cognizance of everything, made the addition as stated in the assessment order. During appellate proceedings also several crucial details were not filed. The AR has also not been able to sufficiently explain the bank deposits and explained why the banks were not declared in the Balance Sheet. The AO in his remand report dated 01.04.2013 has also commented that the cash deposits & other transactions were not routed through the Firm's cash book. The assessee's written submissions accept that the accounts are not properly disclosed. Under the circumstances it has to be presumed that the books of account of the assessee are unreliable and defective or incomplete. The AO may not have mentioned section 145 but for all practical purposes the AO has rejected the books of account and adopted a N.P. rate 1.25%. However, it is seen that the AO has made a few mistakes while making the additions in the assessment order. As per the Final Accounts of the two proprietory concerns of the assessee, the details of turnover and net profit-are as-under

Details Esdee Enterprises Esdee Communication Total turnover including 17,52,85,868 1,79,93,687 incentive Net Profit declared 8,29,818 4,22,377 Net Profit Ratio 0.47% 2.34%

3 ITA No.32/Kol/2014 Mr. Debayan Bhattacharya

The transactions in the two unreported bank account relate to M/s Esdee Enterprises since these two bank accounts have payments related to M/s Vodafone etc. Therefore, the AO should have considered the total credit in the two bank accounts i.e. Rs.6,59,31,882/- as the suppressed turnover of M/s Esdee Enterprises and then adopted the N.P. rate of 1.25%. Therefore, the AO should have calculated the net profit from M/s Esdee Enterprises at Rs.30,15,222/- [i.e. 1.25% of Rs.24,12,17,750/-] and the AO should not have disturbed the results of M/s Esdee Communication since the N.P. declared therein is much more than 1.25% and the two bank accounts are not related to it.

As a result, the income of the assessee should have been computed as under:-

Profit & Gains from Business & Profession:

In addition the following directions are issued to the AO for compliance:

1) To allow loss from House Property as claimed by the assessee in his computation of income after ascertaining the facts.

2) To tax the Income from Other Sources as declared by the assessee in his computation of total income.

3) To allow the deduction under Chapter VI A as claimed by the assessee in his computation of income after verification.

further appeal before us and has taken the following grounds of appeal :-

1 (a) That the observations of Ld. CIT(A) that Assessing Officer estimated business profit @ 1.25% by rejecting books of account U/s.145 of I. T. Act, 1961 are erroneous since no such comments are available in the Assessment Order.

4 ITA No.32/Kol/2014 Mr. Debayan Bhattacharya 1(b) That the findings of Ld. CIT(A) that books of account are unreceivable, defective and incomplete are unfounded and opposed to his own observation which reads "No books of accounts were produced or offered to be produced". 1 (c) That the Ld. CIT(A) is wrong and unjustified in confirming the rate of net profit from business unit Esbee Enterprises @ 1.25% without adjudicating the contentions of the appellant and without a speaking order. 1 (d) That the findings of Ld. CIT(A) that the assessee kept SB Alc. No.43701 0100112864 and No. 775010100007675 with Axis Bank outside his books of account are contrary to his own findings wherein it was concluded that no books of account were produced. 1(e) That on the facts and in the circumstances of the case, Ld. C.I.T.(A) has erred in holding that total credits in aforesaid bank accounts represented suppressed turnover of business unit Esbee. Enterprises and thereby recasting taxable income of this unit at Rs.30,15,222/-. 2. That without prejudice to ground No.1 and on the facts and in the circumstances of the case the order U/s.250 dt.04.10.2013 passed by Ld. CIT(A) to determine assessed total income at a higher figure is bad in law and liable to the quashed in the absence of issue of any notice U/s. 251 (2) of I .T.Act, 1961. 3. That the appellant craves leave to add, alter, adduce or amend any ground or grounds on or before the date of hearing of the appeal.

could not produce books of accounts and other details before the

Assessing officer because books of accounts were destroyed by fire.

There was a fire in the office premises of the assessee therefore, all

books of accounts and documents were destroyed by fire. The ld AR also

pointed out that the assessee`s computer was also crashed therefore he

could not produce print out of ledger accounts and other details before the

Assessing Officer. The ld AR for the assessee further submitted that the

assessee used to maintain Saving Account No.025010100296465 with

5 ITA No.32/Kol/2014 Mr. Debayan Bhattacharya Axis Bank Panihati Branch. During the financial year 2007-08 total credit

was Rs.38,03,043/- and he also maintains another Saving Accounts

025010100296465 with Axis Bank Salt lake Branch and in this account

during the financial year 2007-08 total credit was Rs.60,302,970/-. So

total credit of his two Saving Accounts comes to Rs. 6,41,06,013/-.

During the assessment proceedings the Assessing Officer pointed out

that from Trading Account of M/s Esdee Communication and M/s Esdee

Enterprises total credit comes to Rs.17,993,687/- and Rs.175,285,868/-

respectively. So total credit comes to Rs.193,279,555/-. Balance Sheet of

M/s Esdee Communication as on 31.03.2008 furnished by the assessee

during the course of assessment proceedings envisages no bank

accounts. On perusal of Balance Sheet of M/s Esdee Enterprises as on

31.03.2008 Bank balance appears at Rs.72816. The assessee could not

file any personal capital accounts and Balance Sheet as on 31.03.2008.

But assessee used to maintain both saving accounts in his own name.

The assessee also could not file bank statement. As a result, the

assessing officer could not able to match credit of both proprietary

concern i.e. M/s Esdee Communication and M/s Esdee Enterprises to the

tune of Rs.193,279,555/- with total credit with both Banks which comes to

Rs.6,41,06,013/-. Therefore, the AO found logical to estimate @ 1.25% of

Rs.193,279,555/-, which comes Rs.24,15,994/-. The Ld AR for the

assessee has submitted that the estimation @ 1.25% is not acceptable

because the said estimate is based on surmise, guess and conjecture.

6 ITA No.32/Kol/2014 Mr. Debayan Bhattacharya The ld AR for the assessee has submitted that the ld CIT(A) has

enhanced the assessment observing that the transactions in the two

unreported bank account relate to M/s Esdee Enterprises since these two

bank accounts have payments related to M/s Vodafone etc. Therefore,

the AO should have considered the total credit in the two bank accounts

i.e. Rs.6,59,31,882/- as the suppressed turnover of M/s Esdee

Enterprises and then adopted the N.P. rate of 1.25%. Therefore, the AO

should have calculated the net profit from M/s Esdee Enterprises at

Rs.30,15,222/- [i.e. 1.25% of Rs.24,12,17,750/-] and the AO should not

have disturbed the results of M/s Esdee Communication since the N.P.

declared therein is much more than 1.25% and the two bank accounts are

not related to it.

Therefore, the ld CIT(A) has enhanced the assessment as follows:

Profit & Gains from Business & Profession:

The AO is directed to adopt the figure of Rs.34,37,599/- as Profit & Gains from Business & Profession instead of Rs.24,15,994/-.

The ld AR for the assessee has submitted that, the ld CIT(A) has

enhanced the assessment as explained above without giving an

opportunity of being heard to the assessee. The Assessing officer

computed the business profit at Rs. 24,15,994/- and ld CIT(A) has further

7 ITA No.32/Kol/2014 Mr. Debayan Bhattacharya enhanced the same at Rs. 34,37,599/- without providing an opportunity of

being heard to the assessee which is against the natural justice.

Therefore, ld AR for the assessee has submitted that on the facts and in

the circumstances of the case the order U/s.250 dt.04.10.2013 passed by

Ld. CIT(A) to determine assessed total income at a higher figure is bad in

law and liable to the quashed in the absence of issue of any notice U/s.

251 (2) of I. .T Act, 1961.

AO, which we have already noted in our earlier para and is not being

repeated for the sake of brevity.

perused the material available on records, we are of the view that there is

merit in the submissions of the assesse, as the propositions canvassed by

the ld AR for the assesse are supported by the facts narrated by him

above. As he pointed out that the Assessing officer computed the

business profit at Rs. 24,15,994/- and ld CIT(A) has further enhanced the

same at Rs. 34,37,599/- without providing an opportunity of being heard

to the assessee which is against the natural justice. Therefore, we are of

the view that this issue requires to be sent to the file of the ld CIT(A). We

direct the ld CIT(A) to provide adequate opportunity to the assessee to

explain, about the enhance assessment and adjudicate the issue

accordingly.

8 ITA No.32/Kol/2014 Mr. Debayan Bhattacharya 8. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on this 05/04/2017. Sd/- Sd/- (S.S.VISWANETHRA RAVI) (DR. A.L.SAINI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER कोलकाता /Kolkata; �दनांक Dated 05/04/2017 �काश �म�ा/Prakash Mishra,Sr.PS. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant- Mr. Debayan Bhattacharya 2. ��यथ� / The Respondent.-ACIT, Circle-50, Kolkata-54 3. आयकर आयु�त(अपील) / The CIT(A), Kolkata. 4. आयकर आयु�त / CIT �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 5. 6. गाड� फाईल / Guard file. स�या�पत ��त //True Copy// आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Asstt. Registrar) आयकर अपील�य अ�धकरण, कोलकाता / ITAT, Kolkata