ITO, WD-36(1), KOLKATA, KOLKATA vs. SRI RAVI SHARMA, KOLKATA

O R D E R

Per Dr. Arjun Lal Saini, AM:

2. Brief facts of the case qua the assessee are that the assessee filed its return of income for assessment year 2009-2010 on 10-09-2009 declaring total income of Rs.5,28,750/- and the same was processed u/s.143(1) of the Act. Later on, assessee’s case was selected for scrutiny u/s.143(3) of the Act and the AO has completed the assessment by making the disallowance of unexplained cash credit u/s.68 at Rs.48 lakhs. before the ld. CIT(A), who has deleted the addition made by the AO observing the followings :-

“The fact of the case is that the appellant claimed to have received an advance of Rs.48,00,000/- from M/s. Adbunik Corporation Ltd. during the F.Y. 2006-07 and brought forward the same to the AY. 2009-10 which was verified by the A.O. from his bank account. The A.O. concluded that the payment from the aforesaid co. was received against sales claimed to have been made to them. However, there was no business activity during the F.Y. 2006-07 of the appellant. The income in that A.Y. was shown only as income from other sources. The source of the amount of advance by the said company to the appellant was also not explained properly. Therefore, it was concluded that it was nothing but unexplained cash credits of the appellant in guise of bogus creditor being Adhunik Corporation Ltd., therefore, the same was assessed u/s.68 of the I.T. Act. However, the appellant argued that his assessment for A.Y. 2007-08 was reopened by the AO in which the receipts of Rs.48,00,000/-was taken into account as receipts towards sale of goods and accordingly assessment order was passed. Though it is not clear from the assessment order passed by the A.O. for the A.Y. 2007-08 that there was any business activity of the appellant during that year for which goods were sold and accordingly sale proceed was received. There is no discussion in the assessment order with regard to business activity of the appellant during the AY 2007-08. However, since the amount was shown to have been received during the A.Y.2007-08, the addition made in the A.Y.2009-10 is directed to be deleted.”

1. On the facts & circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs.48,00,000/- made by the AO on account of bogus creditors.

2. On the facts & circumstances of the case, the ld. CIT(A) ignored the reply of the alleged advance creditor while deciding the issue.

5.1 Ld. DR for the revenue has submitted that Rs.40 lakhs had been introduced by the assessee in the books of account as bogus creditors.

Therefore, it is bogus entry made by the assessee in the books of on the findings of the AO which we have already noted in our earlier para and is not being repeated for the sake of brevity.

5.2. On the other hand, ld. AR for the assessee has vehemently submitted that the assessee had trading business during the financial year 2006-07 relevant to A.Y. 2007-08, and sold goods worth of Rs.50,13,164/- to M/s Adhunik Corporation Ltd. As the assessee did not reveal any income or loss from business during the F.Y. 2006-07 and the assessment for A.Y. 2007-08 was accordingly re-opened u/s 147(c) of the I. T. Act, 1961. In such reassessment proceedings, the assessee admitted that he purchased goods worth of Rs.48 lakhs on credit and made the payments Rs.18,00,000/- on 28/02/2007 and Rs.30,00,000/- on 26/03/2007 against the purchases through his bank account being no.CA/6343 with The Federal Bank Limited, Burra Bazar, Kolkata after receiving the sales proceeds from M/s Adhunik Corporation Ltd. Accordingly, the assessment framed earlier u/s.143(3) of the Act, pertaining to Assesment Year 2007-08, dated 12.03.2013 has been rectified by the AO u/s.147 of the Act. While passing the rectification order u/s.147 of the Act, the AO has observed as under :-

“The assessee filed his return of income for the assessment year 2007-08 on 26/03/2008 declaring total income at Rs.1,10,510/-. The same was processed u/s 143(1) of the I-Tax Act, 1961 on 05/03/2009 raising a refund of Rs.15,040/-, which was duly issued to the assessee. During the course of scrutiny proceedings of this case for the assessment year 2009-10 it came to the notice that the assessee had trading business during the F.Y. 2006-07 and sold goods worth- Rs.50,13,164/- -to -M/s Adhunik Corporation Ltd. But the relevant assessment records of the assessee did not reveal any income or loss from business during the F.Y. 2006-07. The case of 4 Sri Ravi Sharma the assessee for the assessment year 2007-08 was accordingly re- opened u/s 147(c) of the I. T. Act, 1961 and a notice u/s 148 of the I. T. Act, 1961 was issued on 15/03/2012 and served upon the assessee on 19/03/2012. In compliance to the notice u/s 148, the assessee submitted a letter dated 08/08/2012, to this office on 13/08/2012, stating that his return of income for the assessment year 2007-08, submitted u/s 139 on 26/03/2008 should be treated as his return of income for the assessment year 2007-08 having been filed u/s 148. Further the assessee was also served with the reason for re-opening u/s 147 of the case for the assessment year 2007-08. Notices u/s 143(2) and 142(1) were also issued and served upon the assessee.

Therefore, as per reassessment order U/s 147, ( pertaining to A.Y. 2007- 08), the assessee admitted that he had earned a profit of Rs.2,13,164/-, on the sales of Rs.50,13,164/-, and offered the income for taxation for the assessment year 2007-08.

The Ld. AR for the assessee further submitted that the entire sum of Rs.50,13,164/- has been taxed in the assessment year 2007-08, therefore, there is no any liability on the assessee to tax this amount in consideration. About Rs.48 lakhs, it is coming in books of accounts of the assessee, as an opening balance in the balance sheet for the assessment year 2009-2010 relates to another transaction. The Ld. AR has pointed out that from the bank statement of the assessee’s account No.6343 with Federal Bank Ltd., Burra Bazar, Kolkata for the period 24.02.2007 to 10.04.2007, submitted by the assessee, also reveals that the said cheques of Rs.18 lakhs and Rs.30 lakhs were credited to the sale account on 28.02.2007 and 26.03.2007 and further the said sums were transferred to the bank account of M/s Sendoz Impex on 28.02.2007 and 27.03.2007, respectively. This way, the mistake was rectified by the AO in his order U/s 147 of the Act, hence there is no bogus creditors in the books of the assessee.

The ld AR for the assessee further argued that his assessment for A.Y. 2007-08 was reopened by the AO in which the receipts of Rs.48,00,000/-was taken into account as receipts towards sale of goods and accordingly assessment order was passed. Though it is not clear from the original assessment order passed by the A.O. for the A.Y. 2007-08 that there was any business activity of the appellant during that year for which goods were sold and accordingly sale proceed was received. There is no discussion in the assessment order with regard to business activity of the appellant during the AY 2007-08. However, since the amount was shown to have been received during the A.Y.2007-08, the addition made in the A.Y.2009-10 should be deleted.

6 Sri Ravi Sharma 5.3. Having heard the rival submissions, perused the material on record, we are of the view that there is merit in the submissions of the assessee, as the proposition canvassed by ld. AR for the assessee are supported by the facts narrated by him above. The Ld. AR for the assessee has pointed out that Rs.50,13,164/- has been taxed by the AO in rectification order u/s.147 relating to A.Y.2007-08, once taxed income in the previous year cannot be taxed in the subsequent assessment year, that is year under consideration. As ld AR for the assessee, submitted before us that assessee`s assessment for A.Y. 2007-08 was reopened by the AO in which the receipts of Rs.48,00,000/-was taken into account as receipts towards sale of goods and accordingly assessment order was passed. However, since the amount was shown to have been received during the A.Y.2007-08 by the assessee and assessed thereon in reopening proceedings, the addition made in the A.Y.2009- 10 should be deleted. Therefore, considering the factual position, we are of the view that the order passed by ld. CIT(A) is a reasoned order and does not require any interference. Accordingly, we confirm the order passed by ld. CIT(A). 5.4. In the result, appeal filed by the Revenue is dismissed. Order pronounced in the open court on this 31/01/2017. 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 31/01/2017 �काश �म�ा/Prakash Mishra,�न.स/ PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant-ITO Ward-36(1), Kolkata 2. ��यथ� / The Respondent.- Sri Ravi Sharma