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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA
Before: Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal is preferred by Revenue against the order of Commissioner of Income Tax (Appeals)-Asansol dated 03.09.2013 for the Assessment Year
ITA No.2520 & CO 155/Kol/2013 A.Y.2010-11 ITO Wd-1(1) Asl. Vs. M/s East India Mining & Power Associates Page 2 2010-11 and the same is being disposed of along with Cross Objection (CO) filed by assessee being CO No.155/Kol/2013. Assessment was framed by JCIT, Range-1, Asansol u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 12.11.2012.
Shri U. Dasgupta, Ld Authorized Representative appeared on behalf of assessee and Shri Rajat Kumar Kureel, Ld. Departmental Representative appeared on behalf of Revenue.
First we take up Revenue’s appeal in ITA No.2520/Kol/2013 2. Sole ground raised by the Revenue per its appeal are as under:- “(1) That the Ld. CIT(A), Asansol has erred in law and on facts by allowing the relief of Rs.50.39.641/- on account of Unexplained expenditure u/s. 69C disallowance made by the AO. The decision of the Ld. CIT(A), Asansol is not acceptable on the issue, as the Ld. CIT(A) did not accept the evidence/information received from the trading party of the assessee by the AO during the course of scrutiny.”
In this appeal is that Ld. CIT(A) erred in deleting the addition made by Assessing Officer for Rs.50,39,641/- u/s 69C of the Act on account of unexplained expenditure.
Facts in brief as have been brought on record are that assessee is a partnership firm and engaged in the business of mining, transportation and construction. The assessee has filed its return of income on 30.03.2011 declaring total income of ₹2,96,183/-. Thereafter the case was selected for scrutiny under CASS module and accordingly notice u/s 143(2) r.w.s. 143(1) was issued upon assessee. During the year, assessee has shown purchases of fuel and lubricant and transport payment for an amount of ₹58,68,126/- from M/s Patesaria Brothers. The assessee has shown outstanding balance at the year- end against the above stated party for an amount of ₹13,57,226/-. During the course of assessment proceedings, AO on confirmation from the party M/s Patesaria Brothers found that there was a cash payment made to
ITA No.2520 & CO 155/Kol/2013 A.Y.2010-11 ITO Wd-1(1) Asl. Vs. M/s East India Mining & Power Associates Page 3 M/s Patesaria Brothers against the purchase of fuel and lubricant for an amount of ₹50,39,641/- which was not recorded in the books of account of assessee. Accordingly, AO inferred that the purchase and its payment of ₹50,39,641/- has been done by assessee outside its books of account. Accordingly, AO treated the same as unexplained expenditure u/s69C of the Act and added back to the total income of assessee.
Aggrieved, assessee preferred an appeal before Ld. CIT(A), whereas assessee submitted that no transaction of purchase and corresponding payment has been made with the above said party. The assessee further submitted that the onus lies on the department to prove that such expense has been incurred by assessee without recording the same in its books of accounts by producing some documents like receipt for payment by assessee or its agent and documents proving that the goods has been transferred to the assessee. Ld. CIT(A) after considering the submission of assessee deleted the addition which was made by AO.
Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us.
Before us Ld. DR submitted that the addition was made by AO on the basis of information received from M/s Patesaria Brothers and he relied on the order of AO.
On the other hand, Ld. AR before us filed a paper book which is running from pages from 1 to 59. He further submitted that assessee has denied the transactions with M/s Patesaria Brothers involving cash payment of Rs. 50,39,641/-. It was also submitted that confirmation received from M/s Patesaria Brothers was never confronted with the assessee in spite of specific request for cross-examination was made at the time of assessment proceedings and he relied on the order of Ld. CIT(A).
ITA No.2520 & CO 155/Kol/2013 A.Y.2010-11 ITO Wd-1(1) Asl. Vs. M/s East India Mining & Power Associates Page 4 7. We have heard rival contentions and perused the materials available on record. Both the parties relied on the order favouring to them. From the foregoing discussion, we find that AO has made the addition on the basis of information received from the information received under section 133(6) of the Act for the alleged purchase of fuels and lubricant worth of ₹50,39,641/- and corresponding payment was made in cash. However, Ld. CIT(A) deleted the addition. We further find that confirmation received from the party was never confronted with assessee for the cross-examination. The AO in the instant case has made the addition on the basis of third party evidence without finding any flaw/defects in its books of account of the assessee. In the instant case, the onus lies on the department to prove that assessee has made transaction for purchase of goods without recording the same in its books of account. However, we find that Ld. DR has not brought anything on record to the findings of Ld. CIT(A). We also find that information collected from M/s Patesaria Brothers was also not confronted with assessee. In this connection we rely in the judgement of In Yadu Hari Dalmia vs. CIT (1980) 17 CTR (Del) 234 : (1980) 126 ITR 48 (Del) : TC 42R.1522, the Delhi High Court had occasion to deal with a case in which expenditure on the marriage of the assessee was alleged to have been understated and, therefore, the Assessing Officer estimated the expenditure and treated the same as income from undisclosed sources ignoring the fact that the joint family of which the assessee is a member had incurred expenses for the marriage. It was held that the addition made by the Assessing Officer was not justified since no evidence was brought on record by the Revenue to prove the actual expenditure having been incurred and the fact that such expenditure was incurred by the assessee out of undisclosed income and unknown sources. It was further held that the addition must relate to a proved expenditure and failure to prove the expenditure would dis-entitle the Revenue to make the addition. It was further held that the provisions of section 69C are clarificatory in nature and that even otherwise an addition could be made in respect of income from undisclosed sources where the expenditure is actually incurred
ITA No.2520 & CO 155/Kol/2013 A.Y.2010-11 ITO Wd-1(1) Asl. Vs. M/s East India Mining & Power Associates Page 5 but the sources and amounts had not been satisfactorily explained. Further, where the assessee is an individual on whose marriage his joint family incurs expenses, the alleged unexplained expenditure, if any, cannot be added to the income of the assessee, i.e., the individual and the individual is entitled to the benefit of doubt because the probability is that if at all the expenditure is unexplained, the same would be regarded as part of the undisclosed income of the Hindu undivided family who incurred the same. In view of the judicial analysis of section 69C and having regard to the significance of actual expenditure being required to be proved by the Revenue, it would be essential to notice that failure of the Revenue to discharge its onus of proof in regard to actual expenditure having been incurred would clearly disentitle the Assessing Officer to make any addition under section 69C. Section 69C only deems the unexplained expenditure as income if the sources of such expenditure are not satisfactorily explained by the assessee. It does not deem an item of assumed amount as unexplained expenditure and, in turn, as undisclosed income. The expenditure must be certain and should have been actually incurred but proof of funds in regard to the sources of money for the expenditure must be lacking and only then, an addition under section 69C would be permissible but not otherwise. Even where expenses are disallowed under sections 29 to 44D of the Income-tax Act and/or sections 57 to 59 of the Income-tax Act, for reasons specified in the respective provision, it does not automatically follow that the disallowed expenditure would be in the nature of undisclosed income chargeable to tax in the hands of the assessee. It is not permissible to convert every item of expenditure as income liable to tax by resort to section 69C. Before invoking section 69C, the Revenue must, in every case, prove the amount of actual expenditure and should not be guided by any assumed or notional figure of imaginary expenditure so as to make addition thereof on ground of alleged unsatisfactory explanation. The cases of search and seizure and block assessments being made in pursuance thereof would not also warrant any adverse inference against the assessee to be drawn under section 69C to make additions of alleged unexplained expenditure which had
ITA No.2520 & CO 155/Kol/2013 A.Y.2010-11 ITO Wd-1(1) Asl. Vs. M/s East India Mining & Power Associates Page 6 not been actually incurred as a matter of fact. The taxpayers and tax authorities would, therefore, do well to be guided by the correct judicial analysis of section 69C in the light of the aforesaid judicial guidelines so, however, that frivolous and vexatious additions are not arbitrarily made by resort to section 69C to deem such imaginary expenditure as undisclosed income of the taxpayer. Levy of tax, interest and penalty, in all such cases, would be clearly unwarranted and unsustainable in law. In this view of the matter, we find no reason to interfere into the order of Ld. CIT(A). Hence, we uphold the order of Ld. CIT(A) and ground raised by Revenue is dismissed.
In the result, Revenue’s appeal is dismissed.
Coming to assessee’s CO No.155/Kol/2013. 9. The assessee has taken the following grounds in its CO as under:- “1) For that on the facts of the case the Ld. CIT(A) was not justified in directing the AO for further verification on the issue of Security Deposit of Rs.9,01,295/- on the face of a clear finding by the CIT(A) himself, that said figure has been netted against Sundry Creditors by way of journal entries, and as such the addition made may please be deleted.
2) For that on the facts of the case the Ld. CIT(A) was not justified in sustaining the addition of Rs.2,62,279/-, on A/c of Sundry Creditors, without any basis and ignoring the confirmed figures in regular books, and as such the addition may please be deleted.
3) For that on the facts of the case the Ld. CIT(A) was not justified in setting aside the GROUND No.7, relating to addition of Rs.10,48,295/- u/s. 40(a)(ia) of the Act’61 to the AO, without a proper finding, when deduction of TDS, and deposit of the same to Govt. A/c has been made by the appellant (wherever applicable), and a such the addition may please be deleted.
4) For that when full set of books of account were produced and examined by the AO and the CIT, and no specific defects were found by either, the book results are to be accepted and all other additions may please be deleted.
ITA No.2520 & CO 155/Kol/2013 A.Y.2010-11 ITO Wd-1(1) Asl. Vs. M/s East India Mining & Power Associates Page 7 5) For that the respondent craves leave to add, alter, amend any further grounds of cross objection before or at the time of hearing.”
First issue raised by assessee in its CO is that Ld. CIT(A) erred in directing the Assessing Officer for further verification of security deposit for an amount of ₹9,01,285/-.
During the course of assessment proceedings, AO observed that contractor has deducted a sum of ₹ 9,01,285/- from the contract receipt towards the security deposit and as per AO, this security deposit should have been reflected on the asset side on the balance-sheet of assessee but same was not appearing therein. On query, about the mismatch arising from the figures of balance-sheet assessee failed to explain the same. Therefore, AO has disallowed the security deposit of ₹ 9,01,285/- and added to the total income of assessee.
Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas assessee submitted that said amount of security deposit has been netted against the sundry creditors. After considering the submission of assessee Ld. CIT(A) examined the books of account of assessee and admitted the relevant journal entries adjusting in its books of account. However, Ld. CIT(A) directed the AO to delete the addition only after the considering the explanation of assessee and other surrounding circumstances.
Being aggrieved by this order of Ld. CIT(A) assessee came in cross-objection before us.
Before us Ld. AR drew our attention at page 22 of the paper book where balance-sheet of assessee was placed. The assessee also submitted list of creditors at gross value without adjusting the amount of security deposits and prayed before the Bench to set aside the order of Ld. CIT(A). On the other hand, Ld. DR vehemently relied on the order of Authorities Below.
ITA No.2520 & CO 155/Kol/2013 A.Y.2010-11 ITO Wd-1(1) Asl. Vs. M/s East India Mining & Power Associates Page 8 14. We have heard the rival contentions and perused the materials available on record. At the outset, we find that security deposit was shown in the balance-sheet of assessee after adjusting the sundry creditors of assessee. We further find that no defects has been pointed out by Authorities Below in the books of account of assessee and Ld. CIT(A) has given clear-cut finding that the entry adjusting the security deposit with the sundry creditors is very much existing in the books of account of assessee. In view of above, we do not find any reason to treat the security deposit as unexplained and accordingly no addition can be made with regard to security deposit. We reverse the order of Authorities Below and ground raised by assessee in its CO is allowed. AO is directed accordingly.
Next issue in assessee’s CO is not pressed hence the same is dismissed as not pressed.
Next issue in assessee’s CO is that Ld. CIT(A) erred in setting aside the issue of making the addition u/s 40(a)(ia) of the Act for an amount of ₹10,48,295/-.
The assessee for the year under consideration has made the payment of the transport expense without deducting the Tax Deducted at Source (TDS for short). The assessee submitted that no TDS was required to be made from transport payments with effect from 01.10.2009 against furnishing of PAN No. of the transporters. However, AO during the course of assessment proceedings found that certain payment has been made prior to date of 01- 10.2009 as detailed under:- a) Paid to Monoj Kr. Dhameja Rs.1,50,000/- on 03.07.2009 b) Paid to M/s Raja Transport Rs.1,50,000/- on 03.07.2009 c) Paid to Rajpal Singh Rs.7,48,295/- on 04.07.2009
ITA No.2520 & CO 155/Kol/2013 A.Y.2010-11 ITO Wd-1(1) Asl. Vs. M/s East India Mining & Power Associates Page 9 Accordingly, AO found that assessee has violated the provision of Sec. 40(a)(ia) of the Act by not deducting the TDS on the aforesaid payments to the transporters. Accordingly, AO has disallowed the same and added to the total income of assessee.
Aggrieved, assessee preferred an appeal before Ld CIT(A) who remitted the mater back to the file of AO with a direction to verify whether From 15-I has been submitted by eligible person and to verify the TDS details in respect of each transport.
Being aggrieved by this order of Ld. CIT(A) assessee came in CO before us.
At the outset, before us Ld. AR drew our attention on page 35 of the paper book where the details of the transporters were mentioned, He further submitted that payments were made after deducting TDS. Ld. AR in support of assessee’s claim submitted the acknowledgment of TDS return along with payment of TDS challan which are placed on pages 37 and 38 of the paper book. In rebuttal, Ld DR failed to bring anything contrary to the advanced argument placed by Ld. AR. In view of the above, we find that assessee has not violated the provision of Sec. 40(a)(ia) of the Act and we reverse the order of Authorities Below and ground raised by assessee in its CO is allowed. AO is directed accordingly.
Next issue raised by assessee’s CO is that the book results are to be accepted and other additions be deleted.
We find that this issue in assessee’s CO are co-related with Revenue’s appeal and as we have already dismissed the appeal of Revenue. Hence, we dismiss this issue of assessee’s CO as infructuous.
ITA No.2520 & CO 155/Kol/2013 A.Y.2010-11 ITO Wd-1(1) Asl. Vs. M/s East India Mining & Power Associates Page 10 22. Last issue of assessee’s CO is general in nature and does not require any adjudication.
In the result, assessee’s CO is partly allowed.
In the result, appeal of Revenue stands dismissed and that assessee’s CO is partly allowed. Order pronounced in open court on 12/08/2016 Sd/- Sd/- (S.S.Viswanethra Ravi) (Waseem Ahmed) Judicial Member Accountant Member *Dkp �दनांकः- 12/08/2016 कोलकाता / Kolkata आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. आवेदक /Assessee-M/s East India Mining 7 Power Associates Ranipur Colliery, H/o Jitendra Singh, PO Narayanapur, PS Neturia, Dist. Purulia 2. राज�व/Revenue-ITO Wrd-1(1), Sahana Apartment, Lower Chelidanga, Asansol-713304, Burdwan 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file.
By order/आदेश से, /True Copy/ उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, कोलकाता