Mukul Roy, Siliguri v. ITO, Ward - 2(1), Siliguri, Siliguri

1 B IN THE INCOME TAX APPELLATE TRIBUNAL BENCH- B KO LKATA [ . . . . . .. . . .. . ! ! ! !. .. . '# ] BEFORE SHRI B.R.MITTAL JUDICIAL MEMBER & SRI C.D. RAO ACCOUNTANT MEMBER $ $ $ $ / ITA NO. 191 (KOL) OF 2010 %& '( / ASSESSMENT YEAR 2004-05 MUKUL ROY SILIGURI (PAN-ADEPR8586R) INCOME-TAX OFFICER WARD-2(1) SILIGURI . (+ / APPELLANT ) - % - - VERSUS - (/0+ / RESPONDENT ) $ $ $ $ / ITA NO. 452 (KOL) OF 2010 %& '( / ASSESSMENT YEAR 2004-05 INCOME-TAX OFFICER WARD-2(1) SILIGURI . MUKUL ROY SILIGURI (PAN-ADEPR8586R) (+ / APPELLANT ) - % - - VERSUS - (/0+ / RESPONDENT ) ASSESSEE BY : SRI SUBASH AGARWAL DEPARTMENT BY : SRI PIYUSH KOLHE '1 / ORDER ( . .. . ! ! ! !. .. . ) '# (C.D. RAO) ACCOUNTANT MEMBER : THESE CROSS APPEALS FOR ASSESSMENT YEAR 2004-05 AR E FILED BY THE ASSESSEE AND THE DEPARTMENT AGAINST ORDER OF LD. C.I.T.(A) SILIGURI DATED 20/11/2009. AS COMMON ISSUES ARE INVOLVED IN THESE TWO APPEALS THEY ARE BEING D ISPOSED OF BY THIS COMMON ORDER. 2. THE FIRST GROUND IN THE ASSESSEES APPEAL IS AG AINST CONFIRMING THE ADDITION OF RS. 2 64 661/- BY THE LD. C.I.T.(A) AS INCOME FROM UNDI SCLOSED SOURCES. THE ASSESSEE IS A DISTRIBUTOR OF THE PRODUCTS OF HINDUSTAN LEVER LTD. AND INDEXPORT LTD AND HE RUNS THIS PROPRIETARY BUSINESS UNDER THE NAME & STYLE OF M/S. P.M. ENTERPRISE. THE ASSESSEES BOOKS OF ACCOUNT ARE DULY AUDITED. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS THE A.O. IMPOUNDED THE BOOKS OF ACCOUNTS AND ON VERIFIC ATION OF PAGES 32 TO 36 WHICH WERE THE CASH BOOK HE OBSERVED THAT ALTHOUGH THERE WAS NEGATIVE CASH BALANCE BUT THE 2 ASSESSEE DEPOSITED CASH IN HIS BANK ACCOUNT ON THRE E CONSECUTIVE DATES ON 3 RD 4 TH & 5 TH JUNE 2003. DETAILS OF THE CASH BOOK ON THE RELEVAN T DATES HAVE BEEN REPRODUCED ON PAGES 2 & 3 OF THE ASSESSMENT ORDER. THE A.O. STATE D THAT IN SPITE OF OPPORTUNITY GIVEN THE ASSESSEE COULD NOT EXPLAIN THE SHORTAGE OF CASH IN THE SUMS OF RS.86 623/- RS.1 39 239/- AND RS.38 799/- AS ON 3/6/2003 4/6/2 003 AND 5/6/2003 RESPECTIVELY. SHE THEREFORE TREATED THE AGGREGATE SUM OF RS.2 54 661 /- AS UNEXPLAINED CASH AND ADDED BACK THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 3. THE ASSESSEE CAME IN APPEAL BEFORE THE LD. C.I. T.(A) AND SUBMITTED THAT HE MAINTAINED A MANUAL CASH BOOK WHERE BALANCE WAS DRA WN PAGE-WISE AND NOT DATE-WISE WHICH RESULTED IN NEGATIVE BALANCE. HE ALSO PRODUC ED BEFORE THE LD. C.I.T.(A) A COMPUTER PRINT OUT OF CASH BOOK ABSTRACTED FROM MAN UAL CASH BOOK SHOWING DAY-TO-DAY CASH BALANCE IN SUPPORT OF HIS SUBMISSION THAT THER E WAS NO NEGATIVE CASH BALANCE AS ALLEGED BY THE A.O. THE LD. C.I.T.(A) AFTER CONSID ERING THE SUBMISSIONS OF THE ASSESSEE AND PERUSING THE ASSESSMENT ORDER UPHELD THE ADDIT ION OF RS.2 64 661/- BY OBSERVING AS UNDER :- I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF TH E ASSESSEE AND ALSO PERUSED THE ASSESSMENT ORDER. THE SUBMISSION OF THE ASSESSEE I S FOUND TO BE BASELESS. FIRSTLY IN COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE ONLY PRODUCED ANOTHER CASH BOOK WHICH WAS IMPOUNDED BY THE LD. AO. WHEN THE SHOW-CA USE WAS GIVEN THE ASSESSEE FAILED TO SUBMIT THAT HE HAD ANOTHER COMPUTERIZED C ASH BOOK SHOWING DAY-TO-DAY BALANCE. SECONDLY IN NORMAL COURSE UL BUSINESS A S PER ACCOUNTANCY POLICY DAY-TO- DAY CASH BALANCE IS DRAWN IN THE CASH BOOK NOT PAG E-WISE. THIRDLY THE ASSESSEE FAILED TO FURNISH ANY EXPLANATION BEFORE THE LD AO. FOURTHLY THE COMPUTERIZED COPY FURNISHED BY THE ASSESSEE CLAIMED TO BE THE EXTRACT OF HIS ORIGINAL CASH BOOK WAS NOT CORROBORATED WITH ANY OTHER EVIDENCE. EVEN THE COR RESPONDING LEDGERS WERE NOT PRODUCED. ONLY ONE SMALL PART OF THIS CASH BOOK WAS PRODUCED NOT THE CASH BOOK FOR THE WHOLE PERIOD. FIFTHLY IN THIS PART OF THE CASH BOOK. THE ASSESSEE HAS SHOWN HUGE CASH BALANCE ACCUMULATED IN HIS HAND AND ONE POINT OF TIME IT HAS EXCEEDED RS.15 72 317/- WHICH WAS IMPOSSIBLE CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE. [HERE WAS NO REASON WHY THIS HUGE CASH TH E ASSESSEE KEPT WITH HIM WHEN HE WAS HAVING HUGE OUTSTANDING LOAN FROM THE BANK. SIXTHLY THE OPENING CASH BALANCE AS PER HIS COMPUTERIZED CASH BOOK US ON 3 1 .05.2003 WAS RS.15 72 317/- WHEREAS IN THE CASH BOOK PRODUCED BEFORE THE LD AU SHE FOUND THE OPENING CASH BALANCE OF RS.49 72 1.35 ONLY. EVEN PAGE-WISE BALAN CE WAS DRAWN BY THE ASSESSEE THIS MUCH DIFFERENCE CANNOT ARISE. SEVENTHLY IN CO URSE OF APPELLATE PROCEEDINGS. WHEN THE ASSESSEE FILED ONE REVISED SUBMISSION ON 1 7.1 1.2009 HE COULD NOT RECONCILE THIS ISSUE WITH ANY DOCUMENTARY EVIDENCE. 3 IN VIEW OF THE ABOVE FACT IT IS HELD THAT THE CO PY OF THE COMPUTERIZED CASH BOOK PRODUCED BY THE ASSESSEE IN COURSE OF APPELLATE HEA RING HAS NO BASIS AND I FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. AO. T HE SAME IS CONFIRMED. 4. AT THE TIME OF HEARING BEFORE US THE ASSESSEE S LD. COUNSEL SUBMITTED THAT THE LD. C.I.T.(A) OUGHT TO HAVE APPRECIATED THE COMPUTER PR INT OUT OF CASH BOOK DRAWN ON DAY- TO-DAY BASIS DEPICTING ACTUAL CASH POSITION AND THA T NOT BEING DONE THE ALLEGATION OF SHORTAGE OF CASH IN COMPARISON TO CASH DEPOSITED IN THE BANK ON THREE DATES WAS BEYOND THE ACTUAL FACTS ON THIS ISSUE AND HENCE THE ADDITI ON SUSTAINED IN THIS RESPECT WAS ARBITRARY AND SHOULD BE DELETED. IN SUPPORT OF HIS SUBMISSION HE REFERRED TO PAGES 5 TO 20 AND 21 TO 29 OF THE PAPER BOOK WHICH ARE COPIES OF COMPUTERIZED CASH BOOK AND MANUAL CASH BOOK RESPECTIVELY. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUPPORT THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL PLACED ON RECORD. WE OBSERVE THAT DURING COURSE OF ASSESSMENT PROCEEDING S WHEN THE BOOKS OF ACCOUNT WERE CALLED FOR THE ASSESSEE SUBMITTED THE SAME WHICH I NCLUDED CASH BOOK ALSO. THE A.O. IMPOUNDED THAT CASH BOOK AND FINDING SHORTAGE OF CA SH ON THREE CONSECUTIVE DATES AS AGAINST CASH DEPOSITS MADE IN THE BANK ACCOUNT ON T HOSE DATES HE ISSUED SHOW CAUSE NOTICE TO EXPLAIN SUCH SHORTAGE. THE ASSESSEE THEN ONLY PRODUCED ANOTHER COMPUTERIZED CASH BOOK SHOWING DAY-TO-DAY BALANCE AND CLAIMED TH AT CASH BALANCE WAS DRAWN ON PAGE-WISE. IN SUCH CIRCUMSTANCES WE ARE OF THE VI EW THAT THE LD. C.I.T.(A) HAS RIGHTLY INFERRED THAT AS PER ACCOUNTING POLICY DAY-TO-DAY CASH BALANCE IS DRAWN IN THE CASH BOOK AND NOT PAGE-WISE AS CLAIMED BY THE ASSESSEE. BEFORE US ALSO THE ASSESSEE COULD NOT SATISFACTORILY EXPLAIN TO DISCARD THE FINDING O F LD. C.I.T.(A). FURTHER AS STATED ABOVE THE ASSESSEE FILED THE COMPUTERIZED CASH BOOK AFTER RECEIPT OF SHOW CAUSE NOTICE AND THEREFORE POSSIBILITY CANNOT BE IGNORED THAT SUCH COMPUTERIZED CASH BOOK WAS AN AFTERTHOUGHT. WE FURTHER FIND THAT THE ASSESSEE DID NOT PRODUCED CORRESPONDING LEDGERS BEFORE THE AUTHORITIES BELOW. IT HAS ALSO NOT BEEN EXPLAINED HOW THE ACCUMULATED CASH BALANCE EXCEEDING RS.15 72 317/- WAS LYING IN THE C OMPUTERIZED CASH BALANCE AT ONE POINT OF TIME. IT IS FURTHER PERTINENT TO NOTE THAT IN THE CASH BOOK PRODUCED FOR THE FIRST TIME BEFORE THE A.O. THE OPENING BALANCE WAS FOR A SUM OF RS.49 721/- WHICH ROSE UP TO THE EXTENT OF RS.15 72 317/- IN THE COMPUTERIZED CASH BOOK DRAWN ON 32/5/2003. 4 THIS DISCREPANCY COULD NOT BE EXPLAINED WITH ANY EV IDENCE. IN VIEW OF THE ABOVE WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. C .I.T.(A). WE THEREFORE UPHOLD HIS ORDER IN CONFIRMING THE ADDITION OF RS.2 64 661/- O N ACCOUNT OF SHORTAGE FOUND IN THE CASH BOOK. 6. THE NEXT GROUND OF THE ASSESSEE WAS AGAINST CON FIRMATION OF ADDITION TO THE TUNE OF RS.1 493/- OUT OF THE TOTAL ADDITION OF RS.17 88 387/- MADE BY THE A.O. AS BOGUS LIABILITY WHEREAS THE REVENUE HAS AGITATED DELETIO N OF ADDITION TO THE EXTENT OF RS. 17 86 894/- ALTHOUGH IN THE GROUND OF APPEAL THE DEPARTMENT HAS WRONGLY MENTIONED THE AMOUNT OF RS.17 88 387/-. 6.1. THE A.O. ISSUED NOTICE U/S. 133(6) OF THE ACT AND REQUISITIONED COPIES OF ACCOUNTS WITH THE ASSESSEE FROM HINDUSTAN LEVER AND INDEXPORT LTD. AND ON VERIFICATION OF THE SAME SHE FOUND HUGE DISCREPANCY BETWEEN THE ACCOUNTS OF THE AFORESAID TWO COMPANIES AND TRANSACTIONS SHOWN BY THE ASSESSEE AS UNDER :- SUPPLIER ADVANCE RECEIVED (AS PER STATEMENT FURNISHED BY THE COMPANY U/S. 133(6) OUTSTANDING LIABILITY (AS PER BALANCE SHEET OF THE ASSESSEE) DIFFERENCE HINDUSTAN LEVER LTD. 6 80 798 9 91 293 16 72 091 INDEXPORT LTD. 20 426 95 87 0 1 16 296 TOTAL 17 88 387 ALTHOUGH THE ASSESSEE DURING THE COURSE OF ASSESSME NT PROCEEDINGS FILED A RECONCILIATION STATEMENT BUT THE A.O. FOUND THE SAME TO BE UNSATI SFACTORY WITHOUT THERE BEING ANY SUPPORTING EVIDENCE. THE A.O. THEREFORE TREATED T HE ENTIRE DIFFERENCE OF RS.17 88 387/- AS BOGUS LIABILITY AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 7. THE ASSESSEE CAME IN APPEAL BEFORE THE LD. C.I. T.(A). THE ASSESSEE CLARIFIED THE MATTER BEFORE THE LD. C.I.T.(A) AND THE SAME HAS BE EN SUMMARIZED BY HIM IN THE FOLLOWING MANNER :- REGARDING THE ADDITION OF RS.16 72 091/- THE ASSE SSEE SUBMITTED THAT AS PER THE LEDGER ACCOUNT FURNISHED BY HLL THEY HAD RECEIVED ADVANCE PAYMENT OF RS.6 80 798/- FROM ME AT THE YEAR END WHEREAS AS P ER MY BALANCE SHEET A SUM OF RS.9 9 I 293/- WAS SHOWN PAYABLE TO THEM AS ON 31 03.2004. HENCE AS PER THE AO THERE WAS DISCREPANCY OF RS.16 72 091/- AS ON 31-0 3-2004. 5 THE ASSESSEE THUS SUBMITTED THAT AS PER TH E PREVAILING SYSTEM. CHEQUES ARE GIVEN IN ADVANCE TO HLL BY THE DISTRIBUTOR AND IMME DIATELY ON THE DISPATCH OF GOODS THEY DISCOUNT THE CHEQUES FOR THE CORRESPONDI NG AMOUNT FROM THEIR BANK AND INTIMATE TO THE DISTRIBUTOR ACCORDINGLY. DURING THE RELEVANT PERIOD THERE WERE THREE CHEQUES WHICH WERE DISCOUNTED BY THEM FROM THEIR BA NKER BUT THE SAME COULD NOT BE ENCASHED FROM MY BANK ACCOUNT DUE TO INSUFFICIENT B ALANCE. HOWEVER THE CREDIT EFFECT HAS BEEN SHOWN AGAINST ALL THREE CHEQUES DIS COUNTED BY THEM IN THE STATEMENT FURNISHED TO THE AO. SUBSEQUENTLY HE MADE PAYMENTS BY DEMAND DRAFTS IN LIEU OF THOSE THREE CHEQUES DURING THE SAME FINANCIAL YEAR AND CREDITS WERE GIVEN IN THE STATEMENT AGAINST THOSE DEMAND DRAFTS. THUS IN THE STATEMENT FURNISHED BY HLL THERE ARE DOUBLE CREDITS FOR THOSE THREE AMOUNTS - ONE AT THE TIME OF DISCOUNTING OF CHEQUES AND SECONDLY AT THE TIME OF RECEIPT OF DEMA ND DRAFTS. DETAILS OF THOSE TRANSACTIONS WERE AS UNDER: DATE OF CREDIT AGAINST DISCOUNTING OF CHEQUES DATE OF CREDIT AGAINST RECEIPT OF DEMAND DRAFTS AMOUNT 26/02/2004 18/03/2004 2 13 215.74 04/03/2004 27/03/2004 2 03 466.00 08/03/2004 27/03/2004 2 62 623.64 TOTAL 6 79 305.38 THE ASSESSEE FURTHER SUBMITTED THAT HLL RE VERSED (DEBITED) THE CREDITS GIVEN EARLIER AGAINST THE DISHONORED CHEQUES ON 04/05/200 4 I.E. IN THE NEXT FINANCIAL YEAR AS MAY BE FOUND FROM THE STATEMENT FURNISHED BY THE M. IN VIEW OF THE ABOVE FACTS THE CORRECT ADVANCE FIGURE AS ON 31/03/2004 AS PER THE STATEMENT FURNISHED BY HLL WAS GIVEN IN THE NEXT PAGE :- PARTICULARS AMOUNT (RS.) ADVANCE AS PER STATEMENT 6 80 798.57 LESS: CREDITS SHOWN TWICE IN THE STATEMENT 6 79 305.38 BALANCE 1 493.19 REGARDING THE OUTSTANDING AMOUNT OF RS.9 91 293/- A S SHOWN IN HIS BALANCE SHEET THE ASSESSEE SUBMITTED THAT THE PAYMENTS AGAINST FI VE CHEQUES AGAINST THE SALE BILLS WERE CREDITED BY HLL DURING THE YEAR 2003-04 ITSEL F BY DISCOUNTING THE CHEQUES BUT THE SAME WERE ACCOUNTED FOR IN HIS BOOKS IN THE NEXT ASSESSMENT YEAR I.E. FIN YEAR 2004-05 AS THE PAYMENTS WERE DEBITED BY MY BAN K IN THE FIN YEAR 2004-05. HOWEVER THE PURCHASES WERE RECORDED IN HIS BOOKS IN THE FIN YEAR 2003-04. THUS THOUGH THERE WAS OUTSTANDING AMOUNT PAYABLE AS PER HIS BOOKS BUT THESE WERE NOT OUTSTANDING AS PER THE STATEMENT OF HLL. T HEN HE HAS GIVEN THE DETAILS OF THE OUTSTANDING PAYMENTS AS UNDER: DATE OF CREDIT (AS PER DATE OF PAYMENT (AS PER CHEQ UE NOS. AMOUNT 6 STATEMENT OF HINDUSTAN LEVER LTD.) BANK STATEMENT AND BOOKS OF THE ASSESSEE) 18/03/2004 03/04/2004 471126 1 72 211.02 22/03/2004 07/04/2004 471127 1 18 758.77 25/03/2004 07/04/2004 471128 96 924.03 29/03/2004 12/04/2004 471129 3 42 707.77 31/03/2004 15/09/2004 471130 2 60 691.59 TOTAL 9 91 293.18 THE ASSESSEE HAS FURNISHED COPIES OF STAT EMENT OF HLL BANK STATEMENT (FY 2004-05) AND LEDGER ACCOUNT OF HINDUSTAN LEVER LTD. IN HIS BOOKS FOR A.Y 2004- 05). IN VIEW OF THE ABOVE FACTS AND DOCUMENTARY EVI DENCES DISCREPANCY SHOULD BE RS.1 403.10 ONLY WHICH WAS DUE THE DEBIT / CREDIT N OTES. REGARDING ADDITION OF RS. 1 16 296/- ON ACC OUNT OF THE TRANSACTIONS WITH M/S INDEXPORT THE ASSESSEE SUBMITTED THAT [HE OUTSTAND ING AMOUNT RELATES TO THE ACCOUNTING OF PURCHASE BILLS RECEIVED BY HIM DURING THE FIN YEAR 2003-04 BUT ACCOUNTING OF THE PAYMENTS AGAINST THE SAME WAS MAD E IN THE FIN. YEAR 2004-05 AS PER THE DEBITS SHOWN IN HIS BANK STATEMENT. HOWEVER THE CREDITS WERE GIVEN BY THE SUPPLIER IN THE FIN YEAR 2003-04 THEMSELVES. THE NA TURE OF TRANSACTIONS IS SIMILAR TO THE TRANSACTIONS DISCUSSED IN THE CASE OF M/S. HLL. DATE OF CREDIT (BY INDEX PORT) DATE OF PAYMENT (AS PER BANK STATEMENT OF THE APPELLANT) CHEQUE NOS. AMOUNT(RS.) 22/03/2004 05/04/2004 471139 10 710.36 25/03/2004 05/04/2004 471140 29 714.28 29/03/2004 15/04/2004 471141 38 995.67 31/03/2004 19/04/2004 471152 16 450.22 TOTAL 95 870.53 THE ADVANCE SHOWN BY INDEX PORT IS DUE TO THE CREDIT NOTES WHICH COULD NOT BE ADJUSTED IN FIN YEAR 2003-04 IN HIS BOOKS OF ACCOUN T. THE ASSESSEE ALSO FILED COPIES OF THE STATEMENT OF INDEX PORT BANK STATEMENT OF T HE APPELLANT (F.Y. 2004-05) AND LEDGER ACCOUNT IN THE BOOKS OF YOUR APPELLANT (F.Y. 2004-05) WITH HIS SUBMISSION. THE ASSESSEE THUS SUBMITTED THAT IN VIEW OF THE ABO VE FACTS AND DOCUMENTARY EVIDENCES THE ADDITIONS MADE IN PART-C OF THE ASSE SSMENT ORDER CANNOT HE SUSTAINED. 8. ON THE ABOVE SUBMISSIONS OF THE ASSESSEE THE L D. C.I.T.(A) DISCUSSED THE ISSUE WITH THE A.O. WHO ALSO ACCORDING TO HIM FAILED TO CLA RIFY THE ACTUAL POSITION. THE ASSESSEE ALSO FILED COPIES OF RELEVANT DOCUMENTS. AFTER CONSIDER ING ALL THESE THE LD. C.I.T.(A) RESTRICTED THE ADDITION TO RS.1 493/- FOR LACK OF RECONCILIATI ON BY THE ASSESSEE IN THE CASE OF INDEXPORT 7 LTD. AND THE BALANCE ADDITION OF RS.17 86 894/- [RS .17 88 387 RS.1 493] WAS DELETED. THE FINDING OF THE LD. C.I.T.(A) IS REPRODUCED BELO W :- I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE ASSESSEE AND ALSO PERUSED THE ASSESSMENT ORDER. 1 HAVE ALSO GONE THROUGH THE DOCU MENTS SUBMITTED BY THE ASSESSEE IN SUPPORT OF HIS CLAIM. THERE IS LACK OF CLARITY I N THIS PART OF THE ASSESSMENT ORDER. THEREFORE THE ISSUES WERE DISCUSSED WITH THE AO WH O ALSO FAILED TO CLARIFY THE ACTUAL POSITION. THEN ANOTHER OPPORTUNITY WAS PROV IDED TO THE ASSESSEE FOR FURTHER CLARIFICATION ALONG WITH SUPPORTING DOCUMENTS. THE ASSESSEE ALSO FILED REVISED SUBMISSION WITH XEROX COPIES OF THE RELEVANT DOCUME NTS. ON VERIFICATION OF THE RECORD ALONG WITH THE BANK STATEMENT THE SUBMISSIO N MADE BY THE ASSESSEE APPEARS TO BE CORRECT. IN VIEW OF THE SAME THE ADDITION MA DE BY THE LD. AO IS DELETED EXCEPT THE ADDITION OF RS.1 493/- WHICH COULD NOT B E RECONCILED IN CASE OF M/S INDEXPORT LTD. THUS ADDITION TO THE EXTENT OF RS.L 493/- IS CONFIRMED. AGAINST THE CONFIRMATION OF ADDITION OF RS.1 493/- THE ASSESSEE IS IN APPEAL WHEREAS THE REVENUE HAS ALSO FILED APPEAL VIDE GROUND NO.1 OF THE APPEAL AGAINST SUCH DELETION OF ADDITION OF RS. 17 86 894/-. 9. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL PLACED ON RECORD. WE HAVE ALSO GONE THROUGH SEVERAL DOCUMENTS PLACED IN THE P APER BOOK OF THE ASSESSEE. ON CONSIDERATION OF ALL THESE WE OBSERVE THAT THE A.O . ON THE BASIS OF LEDGER ACCOUNT FURNISHED BY HINDUSTAN STEEL LTD. (HLL) FOUND THAT HLL HAD RECEIVED ADVANCE PAYMENT OF RS.6 80 798/- FROM THE ASSESSEE WHEREAS AS PER BALANCE SHEET OF THE ASSESSEE SUM OF RS.9 91 293/- WAS SHOWN AS PAYABLE TO HLL AS ON 31/3/2004. THEREFORE THE A.O. FOUND DISCREPANCY OF RS.16 72 0 91 (RS.6 80 798 + RS. 9 91 293). IN RESPECT OF DISCREPANCY OF RS.6 80 798/- THE ASSESS EES LEARNED COUNSEL EXPLAINED THAT AS PER PREVAILING SYSTEM CHEQUES ARE GIVEN IN ADVANCE TO HLL AND ON DISPATCH OF GOODS HLL DISCOUNT THE CHEQUES FOR THE CORRESPONDING AMOU NT FROM ITS BANK AND INTIMATE ACCORDINGLY TO THE ASSESSEE. IT WAS FURTHER SUBMITT ED THAT DURING THE YEAR UNDER CONSIDERATION ALTHOUGH THE ASSESSEE HAD ISSUED THR EE CHEQUES TO HLL FOR THE AGGREGATE SUM OF RS.6 79 305/- BUT THE SAME COULD NOT BE DIS COUNTED BY HLL DUE TO INSUFFICIENT BALANCE IN ASSESSEES BANK ACCOUNT. HOWEVER CREDIT EFFECT AGAINST THESE THREE DISHOUNOURED CHEQUES HAS BEEN SHOWN BY HLL IN THE S TATEMENT FURNISHED TO THE A.O. SUBSEQUENTLY THE ASSESSEE ISSUED DEMAND DRAFT FOR THE SUM OF RS.6 79 305/- AGAINST THOSE THREE UNDISCOUNTED CHEQUES TOWARDS PAYMENT TO HLL DURING THE SAME ASSESSMENT YEAR AND HLL GAVE CREDIT OF THIS AMOUNT ALSO IN THE IR STATEMENT WHICH HAS RESULTED IN 8 DOUBLE CREDIT FOR THE SAME THREE CHEQUES ONE AT TH E TIME OF DISCOUNTING OF CHEQUES AND SECONDLY AT THE TIME OF RECEIPT OF DEMAND DRAFT. I T WAS POINTED OUT BY THE LEARNED COUNSEL REFERRING TO PAGE-54 OF THE PAPER BOOK THAT HLL DEBITED (REVERSED) THE CREDITS GIVEN EARLIER AGAINST THE DISHONOURED CHEQUES IN TH E NEXT ASSESSMENT YEAR ON 04/5/2004 AND THE CORRECT ADVANCE FIGURE AS ON 31/3/2004 AS P ER STATEMENT OF HLL STOOD AS UNDER:- ADVANCE AS PER STATEMENT OF HLL RS.6 80 798 LESS : CREDIT SHOWN TWICE IN THE STATEMENT RS.6 79 305 RS.1 493/- IN REGARD TO OTHER OUTSTANDING AMOUNT OF RS.9 91 29 3/- SHOWN IN THE BALANCE SHEET OF THE ASSESSEE IT WAS EXPLAINED THAT FIVE CHEQUES TOTALI NG TO RS.9 91 293/- AGAINST SALE BILLS WERE ISSUED BY THE ASSESSEE IN FAVOUR OF HLL BETWEE N 18/3/2004 AND 31/3/2004 RELEVANT TO A.Y. 2004-05 AND THE PROCEEDS OF THESE CHEQUES WERE CREDITED BY HLL DURING A.Y. 2004-05 ITSELF BY DISCOUNTING THE CHEQU ES. HOWEVER AS THE BANK OF THE ASSESSEE DEBITED THE ASSESSEES ACCOUNT BY AFORESAI D AMOUNT OF FIVE CHEQUES ON SUBSEQUENT DATE FALLING WITHIN A.Y. 2005-06 THE AS SESSEE ACCOUNTED FOR THESE PAYMENTS IN ITS ACCOUNTS IN THE SUBSEQUENT ASSESSMENT YEAR O N THE BASIS OF DEBIT ENTRY OF THE BANK ALTHOUGH PURCHASES MADE IN A.Y. 2004-05 WERE RECORD ED IN THAT ASSESSMENT YEAR ITSELF. THEREFORE IN THE BOOKS OF THE ASSESSEE ALTHOUGH TH ERE APPEARED TO BE OUTSTANDING AMOUNT PAYABLE BY THE ASSESSEE BUT AS PER STATEMEN T OF HLL THE AMOUNT OF THE FIVE CHEQUES AMOUNTING TO RS.9 91 293/- WAS NOT OUTSTAND ING. COPIES OF STATEMENT OF HLL STATEMENT OF ACCOUNT OF THE ASSESSEE FOR A.Y. 2005- 06 AND LEDGER ACCOUNT OF HLL ARE PLACED ON RECORD. ON CONSIDERATION OF THE ABOVE WE ARE OF THE VIEW THAT THE DIFFERENCE FOUND BY THE A.O. ON THE BASIS OF STATEMENT OF HLL HAS BEEN CLARIFIED BY THE ASSESSEE ON THE BASIS OF EVIDENCE ON RECORD AND THERE IS ACT UALLY NO DIFFERENCE BETWEEN THE ACTUAL PAYMENT BY THE ASSESSEE AND RECEIPT THEREOF BY HLL EXCEPT THE SUM OF RS.1 493/- BEING THE DIFFERENCE OF AMOUNT OF UNDISCOUNTED CHEQUE AND SUBSEQUENT DEMAND DRAFT IN LIEU OF SUCH UNDISCOUNTED CHEQUE. IN VIEW OF THE ABOVE WE FIND NO INFIRMITY IN THE ORDER OF LD. C.I.T.(A) IN DELETING THE ADDITION OF RS. 17 86 894/- OUT OF TOTAL ADDITION OF RS.17 88 387/- . WE THEREFORE UPHOLD THE ORDER OF LD. C.I.T.(A) ON THIS ISSUE AND GROUNDS OF APPEAL OF BOTH THE ASSESSEE WELL AS REVENUE STAND REJECTED. 9 10. THE ONLY OTHER GROUND RAISED IN THE REVENUES APPEAL IS AGAINST GRANT OF RELIEF OF RS.4 73 516/- BY THE LD. C.I.T.(A) ON ACCOUNT OF UN DISCLOSED INCOME. THE FACTS IN BRIEF ON THIS ISSUE ARE THAT THAT THE A.O. ON VERIFICATIO N OF ASSESSEES BANK STATEMENT WITH REFERENCE TO HIS BOOKS OF ACCOUNT FOUND THAT THERE WERE SOME DEPOSITS IN THE BANK ACCOUNT THROUGH TRANSFER ENTRIES. THE ASSESSEE STAT ED THAT HE RECEIVED CHEQUES FROM HIS CUSTOMERS AGAINST CREDIT SALES WHICH WAS NOT ACCEP TED BY THE A.O. THE DETAILS OF WHICH ARE GIVEN ON PAGE-5 OF THE APPELLATE ORDER. ACCORDI NG TO THE A.O. IN THE CASE OF M/S. K.M. CONSTRUCTION THE ASSESSEE HAD PRODUCED EVIDEN CE OF 11 CREDIT SALES FOR THE PERIOD 11/5/2003 TO 18/9/2003 BUT THE NAME OF THIS PARTY HAS NOT BEEN MENTIONED IN THE LEDGER OF THE ASSESSEE. THEREFORE THE A.O. DISBELIEVED TH E TOTAL SALE FIGURE OF RS.3 68 237/- SHOWN IN THE CASH BOOK AGAINST K.M. CONSTRUCTION AS CREDIT SALES AND PAYMENT RECEIVED AGAINST SUCH ALLEGED CREDIT SALE WAS DISALLOWED BY THE A.O. IN REGARD TO OTHER PARTY M/S. PRAKASH BROS. THE A.O. OBSERVED THAT THERE WAS NO SUCH CREDIT SALE APPEARED IN THE LEDGER OF THE ASSESSEE ALTHOUGH THE INVOICE DATED 31.11.2003 FOR THE AMOUNT OF RS.80 863/- WAS FOUND TO BE THE CREDIT SALE MEMO AN D THE ASSESSEE CLAIMED THE SAME AS CASH SALE. THE A.O. THEREFORE HELD THAT THE ASSES SEE HAD INTRODUCED HIS OWN MONEY IN THE GUISE OF SALES AND THUS SHE ADDED RS.4 73 516/- TO THE TOTAL INCOME OF THE ASSESSEE AS HIS UNDISCLOSED INCOME. 11. THE ASSESSEE CAME IN APPEAL BEFORE THE LD. C.I .T.(A) AND SUBMITTED THAT IN RESPECT OF M/S. PRAKASH BROS. CREDIT SALE WAS MADE TO THAT PARTY VIDE BILL NO. 1188 DATED 30.11.2003 AND WAS DULY POSTED IN THE LEDGER ACCOUNT. HE FURTHER STATED THAT THE A.O. MISDIRECTED HIMSELF IN ALLEGING THAT THE ASSES SEE MADE CASH SALES BECAUSE THERE WAS AGGREGATE SALE OF RS.1 26 431/- BOTH IN CASH AN D BY CHEQUE OUT OF WHICH CREDIT SALE TO THE SAID PARTY WAS FOR RS.80 863/- AND THE REMAI NING AMOUNT OF SALE WAS BY CASH ONLY. SUBSEQUENTLY ON 18.12.2003 WHEN THE ASSESSEE RECEIVED THE CHEQUE FOR RS.78 516/- AGAINST CREDIT SALE OF RS.80 863/- THE SAME WAS DULY RECORDED IN THE LEDGER. HE THEREFORE SUBMITTED THAT THE ALLEGATION OF THE A.O. THAT THERE WAS CASH SALE TO M/S. PRAKASH BROS. NOT RECORDED IN THE BOOKS WAS UNTRUE AND BEYOND THE FACTS OF THE CASE. IN REGARD TO M/S. K.M. CONSTRUCTION THE ASSESSEE SUBM ITTED THAT THE ACCOUNTING PROCEDURE FOLLOWED IN RESPECT OF M/S. PRAKASH BROS WAS ALSO F OLLOWED IN THE CASE OF THIS PARTY I.E. 10 BOTH CREDIT AS WELL AS CASH SALES WERE RECORDED IN THE CASH BOOK AND THE CORRESPONDING CREDIT SALES WERE RECORDED IN THE LEDGER ACCOUNT. ALL THE LEDGER ACCOUNTS AND CASH BOOK WERE PRODUCED BEFORE THE A.O. WHO HAS VERIFIED THE SAME. THE CASH BOOK PRODUCED BEFORE THE A.O. ALSO SHOWED ENTRY OF RECEIPT OF CHE QUE OF RS.3 75 000/- ON 14.8.2003 WHICH WAS DEPOSITED ON THE SAME DAY WITH THE ASSESS EES BANK ACCOUNT WITH S.B.I. IN SUPPORT OF THE SUBMISSIONS THE ASSESSEE ALSO PRODU CED BEFORE THE LD. C.I.T.(A) COPIES OF LEDGER ACCOUNT AND CASH BOOK. THE LD.C.I.T.(A) OBS ERVED THAT ON THE FACTS OF THE CASE AND EVIDENCE ON RECORD NO ADDITION CAN BE SUSTAINE D ALLEGING UNDISCLOSED DEPOSITS IN THE BANK. HE THEREFORE DELETED THE ADDITION OF R S.4 73 516/- MADE BY THE A.O. WITH THE FOLLOWING OBSERVATION :- I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE A SSESSEE AND ALSO PERUSED THE ASSESSMENT ORDER. I HAVE ALSO PERUSED THE DOCUMENT S SUBMITTED BY THE ASSESSEE IN COURSE OF HEARING. THE SUBMISSION MADE BY THE ASSE SSEE IS FOUND TO BE ACCEPTABLE. APPARENTLY THE LD. AO COULD NOT FOLLOW THE BASIS O F ACCOUNTING PRINCIPLE OF THE ASSESSEE. ACTUALLY THE ASSESSEE RECEIVED THOSE PA YMENTS AGAINST CREDIT SALES MADE BY THE ASSESSEE IN EARLIER OCCASIONS AND THE ASSESS EE RECEIVED THE PAYMENT BY CHEQUE SUBSEQUENTLY. THE SAME HAS BEEN RECORDED IN THE CA SH BOOK AND IN THE CORRESPONDING LEDGERS. ON THE OTHER HAND TO MAKE ADDITION U/S. 68 OF THE ACT THE LD. AO DID NOT CONDUCT ANY ENQUIRY REGARDING THE PA RTICULARS OF THE CHEQUES FOUND TO HAVE BEEN DEPOSITED IN THE BANK A/C OF THE ASSES SEE. NO MATERIAL WAS BROUGHT TO RECORD. IN VIEW OF THE AFORESAID FACT THE ADDITION MADE BY THE LD. AO CANNOT BE SUSTAINED. THE SAME IS DELETED. 12. THE LD. COUNSEL FOR THE ASSESSEE REITERATED TH E SUBMISSIONS MADE BEFORE THE LD. C.I.T.(A). A PAPER BOOK HAS ALSO BEEN FILED WHICH INTER ALIA CONTAINED COPIES OF RELEVANT PAGES OF CASH BOOK & LEDGER ACCOUNT OF M/S . K.M. CONSTRUCTION AND M/S. PRAKASH BROS. (PAGES 35 TO 40) SALE BILLS IN RESPE CT OF THE SAID TWO PARTIES (PAGES 41 TO 52) AND RECONCILIATION STATEMENT SHOWING PAYMENT BY CHEQUE AND CLEARED IN THE NEXT FINANCIAL YEAR (PAGES 56 & 57). HE SUBMITTED THAT CASH AS WELL AS CREDIT SALES ARE RECORDED IN THE CASH BOOK FIRST AND WHEN CHEQUE IS RECEIVED AGAINST CREDIT SALE THE SAME IS RECORDED IN THE LEDGER ACCOUNT OF THE RESPECTIVE PARTIES AND DEPOSITED TO THE BANK ACCORDINGLY. HE FURTHER SUBMITTED THAT THE A.O. HAS CONFUSED HIMSELF IN APPRECIATING THIS ACCOUNTING SYSTEM FOLLOWED BY THE ASSESSEE AND WHEN SHE ONLY CONSIDERED THE AGGREGATE AMOUNT OF SALES REFLECTED ON THE RECEIPT SIDE OF THE CASH BOOK AS CASH SALES BUT OMITTED TO GO THROUGH THE CORRESPONDING ENTRY IN TH E NAME OF THE SAID PARTIES ON THE 11 DISBURSEMENT SIDE OF THE SAME CASH BOOK ON THE SAME DAY. HE FURTHER SUBMITTED ALL THE CASH AND CREDIT SALES ARE DULY RECORDED IN THE CASH BOOK AND LEDGER ACCOUNT OF THE RESPECTIVE PARTIES AND THE SAME WERE PRODUCED BEFOR E THE AUTHORITIES BELOW. ACCORDING TO HIM FURTHER THE LD. C.I.T.(A) HAS RIGHTLY APPRE CIATED THE FACTS OF THE CASE ON THIS ISSUE AND THEREFORE THE ADDITION DELETED BY HIM SHOULD BE UPHELD. 13. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OT HER HAND RELIED ON THE REASONING ADOPTED BY THE A.O. IN HER ASSESSMENT ORDER. HE FU RTHER SUBMITTED THAT ALTHOUGH THE ASSESSEE STATED THAT THE TRANSACTIONS WERE RECORDED IN THE LEDGER ACCOUNTS OF THE PARTIES BUT NO NAME OF THE PARTY WAS MENTIONED AGAINST SUCH ENTRIES IN THE LEDGER ACCOUNT. THEREFORE IN ABSENCE OF SUCH DETAILS IN THE LEDGER ACCOUNT THE A.O. HAS RIGHTLY DOUBTED UNDISCLOSED INCOME OUT OF UNDISCLOSED SOURCE OF INV ESTMENT INTRODUCED IN HIS BUSINESS. HE THEREFORE SUBMITTED THAT THE ORDER OF THE LD. C.I.T.(A) ON THIS ISSUE SHOULD BE QUASHED AND THAT OF A.O. BE RESTORED. 14. WE HAVE HEARD THE PARTIES AND PERUSED THE MAT ERIAL PLACED ON RECORD. THE A.O. ON THE BASIS OF BANK STATEMENT FOUND THAT ALTHOUGH THERE WAS NO CORRESPONDING ENTRY IN THE LEDGER/CASH BOOK BUT CASH DEPOSITS ON DIFFEREN T DATES WERE MADE BY THE ASSESSEE TO HIS BANK ACCOUNT. IT WAS THE CLAIM OF THE ASSESSEE THAT CREDIT AS WELL AS CASH SALES ARE RECORDED IN THE CASH BOOK AND WHEN THE CHEQUE AGAIN ST CREDIT SALE IS RECEIVED NECESSARY ENTRY IS MADE IN THE LEDGER ACCOUNT AND THE CHEQUE IS DEPOSITED TO THE BANK ON THE SAME DAY. IT WAS ALSO SUBMITTED THAT THE A.O. FAILED TO LOOK INTO THE DISBURSEMENT SIDE OF THE CASH BOOK WHEN HE ONLY ACTED ON THE BASIS OF RECEIP T SIDE OF THE SAID CASH BOOK. WE HAVE PERUSED THE COPIES OF LEDGER ACCOUNTS IN RESPE CT OF THE AFORESAID PARTIES AND CASH BOOK WHICH ARE PLACED IN THE PAPER BOOK. ON GOING THROUGH THE SAME WE FIND SUBSTANCE IN THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. MOREOVER THE A.O. HAS TREATED THE SALES AS ASSESSEES UNDISCLOSE D INCOME EARNED FROM UNDISCLOSED SOURCE WHICH IS COVERED BY THE PROVISIONS OF SEC. 68 OF THE ACT. IN OUR CONSIDERED OPINION THE A.O. HAS NOT ENQUIRED INTO THE MATTER AS REQUIRED UNDER THE SAID SECTION. THERE IS NO EVIDENCE ON RECORD TO HOLD THAT THE A.O . ISSUED ANY NOTICE TO THE PARTIES CONCERNED TO VERIFY THE CASH/CREDIT SALES WITH THEM . HE HAS ALSO NOT OBTAINED ANY REPORT FROM THE BANK WHERE THE ASSESSEE HAD DEPOSITED CHEQ UES WHICH IN THE OPINION OF THE 12 A.O. WERE TRANSFER ENTRIES. BEFORE COMING TO A CONC LUSION THAT THE DEPOSIT OF AMOUNTS BY WAY OF CHEQUES TO THE BANK CLAIMED TO HAVE BEEN RECEIVED FROM M/S. K.M. CONSTRUCTION AND M/S. PRAKASH BROS. ON SALES MADE T O THEM WAS TRANSFER ENTRIES ONLY OUT OF ASSESSEES UNDISCLOSED INCOME THE A.O. SHOU LD HAVE VERIFIED THE AUTHENTICITY OF THE TRANSACTIONS FROM THOSE PARTIES AND BANK THE D ETAILS OF WHICH WERE AVAILABLE TO HIM. BUT WE FIND THAT THERE WAS NO SUCH EFFORT BEING TAK EN BY THE A.O. THEREFORE IN OUR OPINION THE A.O. HAS NOT VERIFIED AND EXAMINED THE MATTER IN PROPER PERSPECTIVE AND MADE THE ADDITION ON HIS WHIMS AND SUSPICION WITHOU T APPRECIATING THE LEDGER ACCOUNTS AND CASH BOOK IN APPROPRIATE MANNER. IN VIEW OF THE ABOVE WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. C.I.T.(A) IN DELETI NG THE ADDITION OF RS. 4 73 516/-. THE SAME IS UPHELD AND THE GROUND OF APPEAL OF THE DEPA RTMENT ON THIS ISSUE IS DISMISSED. 15. IN THE RESULT BOTH THE APPEALS BY THE ASSESS EE AND THE DEPARTMENT ARE DISMISSED. 2 '1 #3' 4 3% 5 26 THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 28.02 .2011. SD/- SD/- ( . . . . . . . . ) ( . .. . ! ! ! !. .. . ) '# (B.R.MITTAL) JUDICIAL MEMBER (C.D.RAO) ACCOUNTANT MEMBER ( (( (!# !# !# !#) )) ) DATE: 28 - 02-2011 '1 7 /8 9'8':- COPY OF THE ORDER FORWARDED TO: 1. + / THE APPELLANT : MUKUL ROY M/S. P.M.ENTERPRISE ROY BHAWAN BAGDOGRA S ILIGURI. 2 /0+ / THE RESPONDENT : I.T.O. WARD-2(1) SILIGURI. 3. 1% () : THE CIT(A) SILIGURI 4. 1%/ THE CIT SILIGURI 5 >5 /% / DR ITAT KOLKATA BENCHES KOLKATA 6 GUARD FILE . 08 // TRUE COPY '1%3/ BY ORDER (DKP) ? @ / DY./ASSTT. REGISTRAR .