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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Before: Shri Mahavir Singh, JM & Shri M. Balaganesh, AM]
Per Shri Mahavir Singh, JM:
This appeal by revenue is arising out of order of CIT(A)-XIX, Kolkata vide Appeal No. 26/CIT(A)-XIX/ITO,Wd.31(1)/Kol/11-12 dated 01.12.2011. Assessment was framed by ACIT, Inv. Cir-17(1)/Cal u/s. 143(3)/251 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 1997-98 vide his order dated 30.03.1994.
The first issue in this appeal of revenue is against the order of CIT(A) deleting the addition made by AO on estimated profit on estimated turnover of sale of newspaper prints. For this, revenue has raised following ground no.1: “1. Whether on the facts & circumstances of the case Ld. CIT(A)-XIX, Kolkata was justified in deleting the addition of Rs.50,00,000/-, ignoring the facts brought on record on the basis of investigation which indicates that the assessee has been indulging in trading activities other than supply of newspaper print on commission.”
3. Briefly stated facts are that the assessee carries on business in the name of M/s. Paper & Industries of lifting of newsprints for numerous papers having allotment of newsprints on commission basis from State Trading Corporation (STC). The assessee filed his return of income on 13.06.1987 for the relevant AY 1987-88. Subsequently, a search action u/s. 132 of the act was conducted on the business and residential premises of the assessee on 05.10.1988. During the course of search on the business and residential premises of the assessee books of account, ledger account, cash book etc. were seized and marked as identification no. PTI 1 to 263. The AO during the course of assessment proceedings originally framed assessment u/s. 143(3) of the Act on 27.03.1991 assessing the total income at Rs. 62,92,890/-. Subsequently, Uttam Jain, AY 1987-88 this assessment was set aside by CIT(A) to the file of the AO for framing de novo assessment vide his order dated 30.12.1991 and the AO framed assessment u/s. 143(3)/251 of the Act vide order dated 30.03.1994 (the impugned order of the AO). The CIT(A) dismissed the appeal of the assessee for non-compliance on 03.05.1995 but Tribunal set aside the order of CIT(A) vide order dated 26.04.2004. Finally, the CIT(A) passed the impugned order dated 01.12.2011. The AO in his assessment order passed u/s. 143(3)/251 of the Act dated 30.03.1994 required the assessee to file the details in respect to amount payable to STC for the newsprints, interest payable to STC, details of custom duty, details of labour charges and clearing charges, details of local transportation, cost of reel cutting and details of bank interest including assessee’s financing, servicing and handling commission charge at 3% from the newspaper companies. Ld. Counsel for the assessee before AO stated that these details are in the seized papers lying with the department but the AO noted that the assessee procures the authority from the respective newspapers spread over different parts of India and on the strength of such authority the assessee takes delivery of the newsprints on behalf of the consumer newspapers after making the payment to STC. Accordingly, newspapers are delivered to the consumer newspapers and newsprints were stated to have been taken delivery by the respective newspapers at their cost from the assessee’s godown and payments were made by the papers to the assessee. The AO noted that the assessee could not produce any evidence of having dispatched the newsprints to the numerous papers which runs more than 200 in numbers and there is no record showing the issue of dispatch of newsprints to the respective papers. According to AO, no such documents were found from the seized documents. According to AO, there is no evidence regarding transportation of these newsprints to the respective newspapers having been dispatched through couriers. The AO noticed from the accounts of the assessee that it has shown total turnover of Rs.3,40,54,750/- and this amount is received/receivable from allottees on account delivery of newspapers prints. The assessee has claimed closing stock of Rs.51,95,508/- and claimed expenses totaling to Rs.3,92,75,106/- and disclosed a meager profit of Rs.98,206/-. According to AO, as the assessee could not produce any documentary evidence in respect to delivery of newsprints to the newspapers owners there are no evidence of expenses. Hence, he invoked the provisions of section 145 of the Act and estimated the turnover of the assessee at Rs. 5 crore and accordingly, taking a margin of 10% of net profit he estimated the income of the assessee from this business at Rs. 50 lacs. Aggrieved, assessee preferred appeal before CIT(A).
Uttam Jain, AY 1987-88 4. The CIT(A) deleted the addition for the reason that the AO has not gone into the seized documents, which were evidenced by the bills and vouchers, books of accounts and other documents, which proves that the assessee was only lifting the newsprints for allotting the same to newspapers owners and not selling the newsprints in cash in unauthorized market. According to him, there are ample evidence in the seized documents that newsprints were lifted by assessee for the newspaper owners on the basis of authorization issued to parties by STC and accordingly, payment was also received from them. The assessee produced copies of ledger account of these parties and this ledger accounts were seized during the course of search. According to CIT(A), these parties were supplied newsprints and payment was also received by assessee from them. The assessee collected the newsprints from STC only on the strength of authorization by the consumers and not otherwise. The CIT(A) also examined the Panchnama prepared during the course of search on 05.10.1988 and the inventory of books of accounts and documents seized and observed that large number of books and files were seized as per the description of inventory. But the AO has not discussed anything about these seized documents i.e. file containing documents relating to supply of newsprints and newsprints account of all the newspapers and periodicals on behalf of whom the assessee had lifted the newsprints from STC. Even during remand report, the AO was silent and in both the assessment orders i.e. the original assessment order dated 27.03.1991 u/s. 143(3) and the impugned assessment order there is no discussion of any seized documents which support the view of the AO. Even the ledger account of the parties, the ledger & books of account seized, clearly revealed that the parties mentioned in assessment order like Indian Punch, Buddha Mark, Hamara Nara and Samara Kshetra who denied to have made any payment to the assessee rather clearly recorded in the seized ledger and in that case the parties cannot deny the transaction unless and until all those are examined. In view of these facts, CIT(A) deleted the estimated addition. Aggrieved, revenue came in second appeal before Tribunal.
We have heard rival submissions and gone through facts and circumstances of the case. On careful consideration of the facts and on perusal of various documents and material on record, I am of the opinion that the AO was not justified in estimating the turnover as well as the profit of the assessee for the year under appeal. It is a matter of fact that the assesee had acted as a newsprint handling agent and he was enlisted so by the Registrar of Newspapers for India under the Ministry of Information & Broadcasting, New Delhi. During the relevant period, Uttam Jain, AY 1987-88 newsprint was an item, the distribution of which was regulated by the Government regulations. The State Trading Corporation used to issue the allotment letters to various newspapers and periodicals to lift their requirement of newsprints. The assessee being a handling agent, on the strength of authorization from the consumer newspapers and periodicals, used to collect the newsprints from STC which was to be ultimately lifted by the respective allottees. Thus, the assessee could collect the paper from STC only on the strength of authorization by the consumers and not otherwise. Both, the assessee as a handling agent as well as the consumer newspapers and periodicals were required to give account of newsprints issued and consumed to the Registrar of Newspapers for India. It is observed that the AO has stated that there was no evidence that newsprint after collecting from the STC by the assessee, was supplied to the respective allottees. That, the assessee had sold the newsprints in unauthorized market earning much higher income than the income declared in the return of income. We do not agree with the view of the AO, specifically, in the absence of any evidence on record that the assessee had sold the newsprints in the unauthorized, market. If the contention of the AO is accepted, it, would mean that on the authorization of allottees of newsprint, the assessee lifted the newsprint from STC and sold it in unauthorized market. If, it is so, from where the allottees newspapers and periodicals would had shown the consumption of newsprints which was allotted to them by the STC for the purpose of printing the newspapers and periodicals? Does it mean that the allottees newspapers and periodicals did not get supply of newsprint from the assesse which was lifted by him on their authorization and that the allottee newspapers and periodicals did not print the newspapers and periodicals? However, it was no so and there is no evidence on record in this regard. Hence, it cannot be said that the newsprints lifted by the assessee from STC was sold by him in the unauthorized market. We find that the assessee before AO had filed confirmations from the allottees of the newsprints and same were not accepted by the AO and doubted their authenticity for the reason that the confirmations were issued in the year 1990 confirming the receipt of newsprints in the year 1985-86. We, in view of this fact, are of the opinion that if the AO was having any reservations about the authenticity of the confirmations filed by the assessee, onus was on him to examine the correctness of the confirmations filed by the assessee and without doing anything, the confirmations filed by the assessee could not be rejected outrightly. During assessment proceedings, the AO has not doubted about the genuineness of confirmations filed before him. On perusal of copy of Panchnama and the Inventory of books of Uttam Jain, AY 1987-88 accounts and documents seized in the course of search on 05/10/1988, it is observed that a large number of books and files were seized. As per the description in the inventory, the files were containing documents relating to supply of newsprints and newsprint account of all the papers and periodicals on behalf of whom the assessee had lifted the newsprint from STC. In the assessment order, the AO has not discussed anything about these" seized documents 'and he had simplv stated that in the seized documents no evidence' about the supply of newsprints to the allottees were found. During the remand proceedings by CIT(A), the AO was asked to examine the seized documents to find out as to whether there is any document which may suggest that the assessee had sold the newsprint in unauthorized market which may lead to rejection of books of account and estimation of income. However, in the remand report, the AO has kept silence on this issue. In fact, in both the assessment orders, i.e., the original order u/s. 143(3) dt. 27/3/1991 and the order under appeal, there is no discussion of any of the seized documents which may support the view of the AO that the assessee, after lifting the newsprints from the STC, was selling the same in the unauthorized market. We find from assessment order, that the AO had made a presumption that generally the citizens are law abiding and hence they would not make payment to the assessee for newsprints otherwise than crossed cheque or bank draft in violation to provisions of Sec. 40A(3) of the Act, whereas, the assessee had shown most of the receipts by way of cash or uncrossed demand drafts. In view of the facts, we are of the view that as far as the assessee is concerned, he had shown receipt of cash and not an expenditure in cash. We find that the assessee had shown receipts in cash from the allottee newspapers and periodicals, it does not mean that the assessee himself was selling the newsprints in cash in unauthorized market. The assessee produced copies of ledger accounts of these parties. The said ledger account was seized during the course of search. On perusal of ledger account of these parties it is observed that the newsprint was supplied to them and payment was also received by the assessee. The said ledger account clearly mentioned the authorization number and date, date of receipt, size of paper, number of reels, weight, number and date of memo of delivery and amount etc. Hence, we are of the view that it cannot be said that either these parties did not make the payment to the assessee or did not lift the newsprints. Therefore, on the basis of 3-4 parties out of about 200 allottees, the adverse inference cannot be drawn in the hands of assessee. In the case of assessee, he had maintained proper books of account and there is no material on record to show that the he had made sale of newsprints in unauthorized market. Hence, the books of account of the Uttam Jain, AY 1987-88 appellant cannot be rejected by invoking section 145(2) and the turnover/profit cannot be estimated. In view of above, in the absence of any evidence of selling the newsprints in unauthorized market by the assessee, the CIT(A) had rightly held that the AO was not justified in rejecting the books of account and estimating either the turnover or the profit of the assessee for the year under appeal. Accordingly, we confirm the order of CIT(A) and this issue of revenue’s appeal is dismissed.
The next issue in this appeal of revenue is against the order of CIT(A) deleting the unexplained cash credit of Rs.7.86 lacs.
Briefly stated facts are that the AO during the course of assessment proceedings noted that the assessee has shown cash credit in the name of following persons: “Shri Balsinger Singh ` Rs. 28,000/- Shri A. K. Mullick Rs. 15,000/- Shri S. K. Mullick Rs. 15,000/- Shri Biman Behari Saha Rs. 28,000/- Mamoni Films Rs.7,00,000/- Rs.7,86,000/-”
According to AO, assessee could not produce anything to support this cash credit, hence, he added the same as unexplained cash credit. Aggrieved, assessee preferred appeal before CIT(A).
CIT(A) after going through the loan confirmations and other documents filed by the assessee in support of his claim of genuineness of loan transactions deleted the addition by observing that “on perusal of loan confirmations of Shri Balsinger. Singh, Biman Behari Saha, A.K. Mullick and Shri S.K. Mullick, it is observed that the loan of Rs.27,000/- each from Shri Balsinger Singh, Biman Behari Saha and loan of Rs.15,000/- each from Shri A.K. Mullick and Shri S.K. Mullick were received through cheque. All the creditors had confirmed the loan given by them and also mentioned their GIR number and addresses. The A.O. has not doubted the genuineness and correctness of the loan confirmations and hence, I am of the opinion that there is no reason to make the addition aggregating to Rs.86,000/- on account of the loan taken by the appellant from the above-mentioned four parties. The AO, is directed to delete the addition of Rs.86,000/-. Similarly, it is observed that from M/s. Mamoni Films, the appellant had taken loan of Rs. 7 lakh by cheque on 20.5.1987. The said loan was returned by him on 12/11/1987. On perusal of Balance-sheet and Profit & Loss a/c of M/s. Mamoni Films for the year ended 14/4/1987, it is observed that the said concern was engaged in the business of production and film distribution etc. M/s. Mamoni Films had also filed loan confirmation giving the address and Uttam Jain, AY 1987-88 GIR No. In the course of remand proceedings the AO has not doubted about the correctness of the loan confirmation filed by the said concern. Hence, I am of the opinion that no addition u/s. 68 can be made on account of loan taken from M/s. Mamoni Films. I also find force in the submission of the appellant that the loan of Rs. 7 lakh from M/s. Mamoni Films was taken in the previous year relevant to AY 1988-89 and not in the previous year relevant to AY 1987-88.” Aggrieved, revenue came in appeal before Tribunal.
We have heard rival submissions and gone through facts and circumstances of the case. We find that the CIT(A) after taking loan confirmations and other documents deleted the addition respect to loan creditors to the extent of rs.86,000/- in the names of Shri Balsinger Singh, Shri A. K. Mullick, Shri S. K. Mullick and Shri Biman Behari Saha. In respect to loan creditor M/s. Mamoni Films of Rs.7,00,000/- there is a categorical finding recorded by CIT(A) that the loan pertains to AY 1988-89 and not to the relevant AY 1987-88. Once this is the position, the same was confronted to Ld. Sr. DR whether he has some material to controvert the same, he could not reply. In such circumstances, we are of the view that CIT(A) has rightly deleted the addition in respect to cash credits and we confirm the same. This issue of revenue’s appeal is dismissed.
The next issue in this appeal of revenue is against the order of CIT(A) deleting the addition of unexplained cash credit of Rs. 2 lacs.
Briefly stated facts are that the AO noticed from the seized documents that one M/s. Industrial Papers was found to be functioning from assessee’s business premises No.
Bentinck Street, Kolkata, which is the same address for assessee’s concern Paper Process & Industries also. According to this Paper Process & industries, M/s. Industrial paper is under the ownership of one Shri Ram Balak Singh. As per these documents, Sri Ram Balak Singh is benami of the assessee and in reality, according to AO, this Industrial Paper belongs to assessee and there is cash introduction of Rs. 2 lacs as on 31.03.1987. Accordingly, the AO made addition of this Rs.2 lacs as unexplained cash credit in the hands of the assessee. Aggrieved, assessee preferred appeal before CIT(A), who deleted the addition by observing as under: “Under the circumstances, I am of the opinion that merely for the reason that certain books or documents of the business of Shri Ram Balak Singh were found at the premises of the appellant, then it would conclusively prove that it was appellant's benami business. I am also of the opinion that to treat business of a person as benami business of another person, the onus is on the AO to prove the same. However, as mentioned above, there is nothing on record to prove the same, except the presumption made in the order u/s. 132(5) of the Act. However, on mere presumption, business of a person could not be treated as benami business of another person. In view of the above, I am Uttam Jain, AY 1987-88 of the opinion that it cannot be said that the business in the name of M/s Industrial Paper was the benami business of the appellant and that, he had deposited the sum of Rs. 2, lakh in the bank account of Shri Ram Balak Singh. Therefore, the AO was not justified in making addition of Rs.39,000/- on account of estimated profit and addition of Rs. 2 lakh on account of unexplained cash credit. He is directed to delete both the additions.”