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Income Tax Appellate Tribunal, KOLKATA BENCH “A” KOLKATA
Before: Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the assessee is against the order of Commissioner of Income Tax (Appeals)-XIX, Kolkata in appeal No. 169/CIT(A)-XIX/ITO,Wd-32(4), Kol/10- 11 dated 27.07.2011. Assessment was framed by ITO Ward-23(4), Kolkata u/s 254/144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 21.12.2010 for assessment year 2005-06.
Pratap Kr. Biswal v. ITO Wd-32(4) Kol. Page 2 2. In this appeal various revised grounds have been raised out of which ground 1 and ground No.5 are general in nature and do not require any separate adjudication. The other revised grounds raised by the assessee per its appeal are as under:- “2. For that no proper opportunities is provided to the assessee.
3. For that the addition of Rs.1,71,81,741/-, received from the concern party treated as unexplained cash credit is neither tenable in law nor in facts.
4. For that the CIT(A) erred in confirming the disallowance of whole expenses of Rs.22,79,875/- of the business income.”
Shri V.N.Dutta, Ld. Authorized Representative appeared on behalf of assessee and Shri Sallong Yaden, Ld. Departmental Representative appeared on behalf of Revenue.
First we take up issue No.2 which is that Ld. CIT(A) passed order without giving opportunity of being heard to assessee.
At the outset, it was observed that this appeal is arising out of the order passed u/s. 254 r.w.s. 144 of the Act for same Assessment Year (05-06). The assessee has earlier filed an appeal before Tribunal in dated 12.06.2009, wherein the Tribunal restored the matter to the file of AO with a direction to pass fresh assessment order as per law and assessee will be at liberty to file fresh evidence. It is clear that sufficient opportunities have already been provided to assessee. Therefore, the ground raised by assessee regarding sufficient opportunity of being heard has not been provided, hence, same is dismissed.
Next issue is that Ld. CIT(A) erred in confirming the action of Assessing Officer by sustaining addition of ₹1,71,81,741/- on account of unexplained cash credit.
Brief facts are that assessee in the present case is an individual and engaged in export business and has shown liability in his balance-sheet of the following parties:- “1. Advance from M/s Interlink, amounting to Rs.2544750 2. Advance from Firm to the tune of Rs.11019801 3. Other advance from firm to the tune of Rs.3617190 Pratap Kr. Biswal v. ITO Wd-32(4) Kol. Page 3 On question by Assessing Officer, assessee failed to substantiate the aforesaid advances on the basis of supporting documents. Therefore, AO added the same to the total income of assessee by treating the unexplained cash credit u/s. 68 of the Act..
Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas assessee submitted that advances were received from following parties:- Name of party Amount (Rs) received. a) M/s Inter-linked Pvt. Ltd. 25,44,750/- b) Advance from firm 1,10,19,801/- c) Advance from firm 36,17,190/- Advance received from M/s Inter-link Pvt. Ltd. was for finding out the foreign buyers in China, the same money was deposited in City Bank on 08.03.2005 . The assessee further submitted that he was the partner in M/s Bharat Minmet Corporation and received advance of ₹ 1 crore from the firm along with other advances from same firm for ₹36,17,190/-. The assessee also furnished PAN of the Firm of M/s Bharat Minmet Corporation i.e. AAGFB 2429J and same is assessed within the jurisdiction of the AO. Therefore the money received cannot be taxed in the hands of assessee. However, Ld. CIT(A) disregarded the claim of assessee by upholding the action of AO by observing as under:- “(8) I have considered the submission of the appellant and perused the original assessment order as well as the order under appeal. It is observed that the AO had made addition u/s 68 aggregating to Rs.1,71,81,741/- in the original assessment order as well as order u/s. 254/144 of the Act. The said amount was claimed by the appellant, to have been received from M/s Interlink Private Ltd and M/s. Bharat Minmet Corporation as advances. However neither during the curse of original assessment proceedings nor during the proceedings u/s. 254, the appellant did file any documentary evidence in support of his claim. During the appellate proceedings also the appellant did not file any short of documentary evidences including copy of ledger accounts and bank statements of the respective creditors. No confirmation of accounts etc., was filed either before the AO or during the appellant proceedings. In fact, at the time of appellate proceedings it was stated by the appellant’s AR that he is not in a position to file any confirmation etc. Under the circumstances, impugned order am of the opinion that the AO was justified in making the addition of Rs.1,71,81,741/- u/s 68 of the Act because the appellant has failed to discharge Pratap Kr. Biswal v. ITO Wd-32(4) Kol. Page 4 primary onus cost on him, to prove the genuineness of the transactions and creditworthiness of the creditors. In view of above the addition made by the AO u/s 68 of the Act is confirmed. The ground no. 4 is dismissed.
(9) In ground no. 5 the assessee has contested action of the AO making disallowance of expenses of Rs.22,79,875/-. During the original assessment proceedings the AO made the disallowance of the expenses aggregating to Rs.22,97,875/- for the reason that the assessee could not produced any supporting documents or bills and vouchers in support of his claim of various expenses. In the order u/s. 253/144 the AO repeated the aforesaid disallowance as no compliance was made before him and no documentary evidence were produced.
(10) During the appellate proceedings the appellant had submitted as under: ‘It is admitted fact, and accepted that the assessee has business income deriving from foreign commission to the tune of Rs.31,63,452/- which is assessed as business income. The whole expenses of Rs.22,79,875/- for earning of such income could not be disallowed as such it is neither tenable in law.”
(11) I have considered the submission of the appellant and perused the assessment order. On careful consideration of the facts I am not inclined to agree with the submission of the appellant because the onus is on the assessee to produce the documentary evidences in support of expenses claimed and debited to the profit and loss account. Since the appellant has failed to submit the details and documentary evidences of expenses claimed by him, either before the AO or during the appellate proceedings, I am of the opinion that the AO was justified in making the disallowance of Rs.22,79,875/-. The disallowance made by the AO is upheld. The ground no 5 is dismissed.
(12) In ground no.6 the assessee has contested addition of Rs.3,904/- under the head interest income. During the course of original assessment proceedings it is observed by the AO that the assessee has received interest of Rs.3,904/- from ICICI Bank which has not been offered for taxation. Hence he made the addition of Rs.3,904/- to the total income of the assessee. In the absence of any explanation, the Assessing Officer repeated the addition in the order u/s. 254/144 of the Act.
(13) During the course of appellate proceedings no submission was made by the appellant with reference to addition of Rs.3,904/-. On careful consideration of the facts, I am of the opinion that the AO has rightly made addition of Rs.3,904/- on account of interest income. The addition made by the AO is confirmed. The ground no.6 is dismissed.”
Pratap Kr. Biswal v. ITO Wd-32(4) Kol. Page 5 Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us.
Before us Ld. AR filed paper book which is running pages from 1 to 62; together with copy of notary certificate and Deed of partnership which are kept with record. Ld. AR submitted that all the books of account and other relevant documents were seized by police authority. Therefore the relevant documents could not produce before the authorities below. Ld. AR in support of assessee’s claim submitted copy of order of Ld. Chief Metropolitan Magistrate which placed on pages 10 to 14 of the paper book. He also submitted that seizure memo for the documents seized by police authority were also produced before Ld. Metropolitan Magistrate which is placed from pages 15 to 44 of the paper book. Ld. AR further submitted that assessee in the present case was under police custody. The ld. AR drew our attention regarding submission of bail petition before Ld. Magistrate court which is placed on pages 45 to 52 of the paper book. Regarding loan from M/s Interlink Private Ltd., for an amount of ₹25,44,750/- our attention was drawn on page 55 of the paper book where the bank statement of assessee is placed. He further drew our attention on page 58 of the paper book where the receipt of ₹ 1 crore from M/s Bharat Minmet Corporation in the bank a/c of assessee was recorded. Ld. AR in support of assessee’s claim submitted the deed of partnership along with Income Tax Return, PAN of assessee, import-export code issued by Ministry of Commerce, Sales Tax certificate of the partnership firm and prayed to reverse the order of Authorities Below.
On the other hand, Ld. DR submitted that assessee did not cooperate in assessment proceeding as well as appellate proceedings and has not submitted relevant documents in support of assessee’s claim. He vehemently relied on the order of Authorities Below.
We have heard rival contentions and perused the materials available on record. From the foregoing discussion, we find that Authorities Below made the addition for the above stated amount on account of non-production of supporting evidence.
Pratap Kr. Biswal v. ITO Wd-32(4) Kol. Page 6 However, from the facts of the case, we find that assessee has received the advance from two parties – namely – M/s Interlink Pvt. Ltd. and M/s Bharat Minmet Corporation and submitted the bank statement where the receipt from M/s Interlink Pvt. Ltd. is very much reflecting in the bank statements. These facts of the present case were disregarded by the Authorities Below. The claim of assessee is that the AO has not issued any notice to M/s Interlink Pvt. Ltd., u/s 133(6) of the Act before making the addition. Similarly, no notice u/s 133(6) of the Act has been issued to M/s Bharat Minmet Corporation to verify the amount of advance received by assessee. In the instant case, assessee has substantiated the amount of advance from M/s Interlink Pvt. Ltd., on the basis of assessee’s bank statement. However, in the case of M/s Bharat Minmet Corporation, assessee has substantiated the amount received of ₹ 1 crore only on the basis of bank statement. From the facts of the case, we find that the documents were seized by police authority and this fact is not in doubt, it was also submitted that assessee was in police custody. Therefore, the documentary evidence was not produced before Authorities Below and again this fact is not in dispute. We observe that before disregarding the plea of assessee, it was the duty of the Authorities Below to acquire sufficient evidence to prove the plea of assessee false and for that purpose various powers have been empowered to the Authorities Below. However, we find that those powers have not been exercised by the Authorities Below and they resorted to make the addition to the total income of assessee, which in our considered view, is not correct. In the instant case, it was necessary for the AO to issue notice u/s 133(6) of the Act either to the parties from whom the advance was received or to the Assessing Officers having jurisdiction over the aforesaid parties. In view of the above facts, we reverse the order of Authorities Below and inclined to give relief to assessee for the advance received from M/s Interlink Pvt. Ltd., for an amount of ₹25,44,750/-. However, in case of M/s Bharat Minmet Corporation, the assessee has showed the bank entry for ₹ 1 crore only. Therefore, we reverse the order of Authorities Below and to give relief to the assessee for the advance of Rs.1 crore and difference of the amount received by assessee for ₹46,36,991/- has not been substantiated from the documents. Therefore, we are inclined to sustain the addition of ₹46,36,991/-. AO is directed accordingly. This ground of assessee’s appeal is partly allowed.
Pratap Kr. Biswal v. ITO Wd-32(4) Kol. Page 7 10. Next issue in this appeal of assessee is that Ld. CIT(A) erred in confirming the action of AO by disallowing expense of ₹22,79,875/- on account of non-production of supporting evidence.
During the year, assessee has shown the income of ₹31,63,452/- by way of 11. commission from foreign party and against the aforesaid income assessee claimed an expense of ₹22,79,875/-. However, assessee could not produce any documentary evidence at the time of assessment proceedings. Therefore, AO has disallowed the same and added to the total income of assessee.
Aggrieved, assessee preferred an appeal before Ld. CIT(A) who has upheld the action of AO. Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before.
Before us Ld. AR reiterated same submission as before Ld. CIT(A) that assessee was in police custody and all the documents were seized by said Police Authority, therefore, relevant documents were not placed at the time of assessment proceedings. Ld. AR prayed that the expenses incurred by assessee are genuine and therefore it should be allowed in favour of assessee. On the other hand, Ld. DR vehemently relied on the order of Authorities Below.
We have heard rival contentions and perused the materials available on record. From the foregoing discussion, we find that the addition was made by lower authorities because assessee failed to produce the documentary evidence in support of his claim. However, from the perusal of assessment order as well as appellate order, we find that the commission income of assessee has not been doubted by lower authorities and we also find that for running a business organization lot of direct and indirect expenses are required to be incurred. In the instant case the assessee was genuinely prevented for submission of necessary documents in support of his expense before the lower authorities as the said documents were earlier seized by Police Authority and the assessee himself was detained in police custody. Considering the Pratap Kr. Biswal v. ITO Wd-32(4) Kol. Page 8 facts of the case, in totality, we are inclined to limit the disallowance of aforesaid expenses to the extent of 50% i.e., Rs.11,39,937/-. Hence, we give partly relief to assessee after setting aside the order of authorities below. AO is directed accordingly.