I.T.O, Ward - 53(1), Kolkata, Kolkata v. M/S. Bina Cement Works, South 24 Parganas

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI D. K. TYAGI JM & HONBLE SRI C. D. RAO AM] I.T.A. NO.354KOL/2010 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER WD-53(1) KOLKATA. -VS- M/S. BINA CEMENT WORKS (APPELLANT) (RESPONDENT) & I.T.A. NO.37KOL/2010 ASSESSMENT YEAR: 2006-07 M/S. BINA CEMENT WORKS -VS- INCOME-TAX OFFICER WD-53(1) KOLKATA (PA NO.AAGFB 1951 P) (APPELLANT) (RESPONDENT) APPELLANT BY : S/SRI SOUMITRA CHOWDHURY/T. K. CHAK RABORTY RESPONDENT BY : SRI NEERAJ SINGH O R D E R PER D. K. TYAGI JM: THESE APPEALS PREFERRED BY THE REVENUE AND THE ASSE SSEE RESPECTIVELY ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) KOLKATA DATED 16.09.2009 FOR ASSESSMENT YEAR 2006-07. FOR THE SAKE OF CONVENIENCE BOTH THESE AP PEALS HAVE BEEN HEARD AND DISPOSED OF TOGETHER BY THIS CONSOLIDATED ORDER. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL : 1. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND IN FAC T BY ESTIMATING BUSINESS INCOME AT RS.12 73 563/- WHEREAS THE ASSESSEE HAS DISCLOSED B USINESS INCOME OF RS.49 45 673/-. 2. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND IN FACT BY ESTIMATING THE BUSINESS INCOME WHEREAS THE ASSESSEE HAS FAILED TO PRODUCE/SUBMIT B OOKS OF ACCOUNTS. 3. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL : 1. FOR THAT THE LD. CIT(A) ERRED BOTH IN LAW AND I N FACT BY CONFIRMING ESTIMATED NET PROFIT TO THE EXTENT OF RS.12 73 563/- AS AGAINST R S.1 80 780/- DISCLOSED BY THE APPELLANT WITHOUT ANY BASIS AND/OR REASONS. 2. FOR THAT THE LD. CIT(A) ERRED BOTH IN LAW AND IN FACT BY CONFIRMING THE ADDITION OF A SUM OF RS.7 08 007/- UNDER THE HEAD OF UNDISCLOSED INCOME ON ACCOUNT OF INCREASE IN PARTNERS CAPITAL AND DECREASE IN SUNDRY CREDITORS AND OTHER LIABILITIES WITHOUT APPRECIATING ACTUAL FACTS OF THE CASE. AT THE OF HEARING BEFORE US THE ASSESSEE HAS ALSO T AKEN THE FOLLOWING ADDITIONAL GROUND : 2 FOR THAT THE LD. CIT(A) FAILED TO CONSIDER THE PAR TNERS REMUNERATION PAID BY THE APPELLANT FIRM AND THE RESPECTIVE PARTNERS ALSO PAI D TAX THEREON IN THEIR RESPECTIVE FILES TO ALLOW THE SAME IN COMPRISING THE NET PROFIT OF T HE FIRM. 4. THE REVENUE HAS AGITATED AGAINST THE ACTION OF T HE LD. CIT(A) IN ESTIMATING THE BUSINESS INCOME OF THE ASSESSEE AT RS.12 73 563/- WHEREAS THE ASSESSEE HAS DISCLOSED BUSINESS INCOME OF RS.49 45 673/-. FACTS OF THE CA SE ARE THAT THE ASSESSEE ALONG WITH THE RETURN OF INCOME SUBMITTED 7 TDS CERTIFICATES. 6 TDS CERTIFICATES RELATED TO CONTRACT SERVICES HAVING TOTAL CONTRACT INCOME OF RS.61 81 0 76/-. THE 7 TH CERTIFICATES RELATED TO RENTAL INCOME OF RS.3 60 000/-. THE AO HOWEVER F OUND THAT THE GROSS RECEIPT OF THE ASSESSEE WERE ONLY RS.20 90 868/- AND THIS INCLUDED RS.12 20 316/- AS SERVICE CHARGES AND RS.1 90 474/- AS GODOWN RENT DECLARING NET PROF IT OF RS.4 05 465/-. THE ASSESSEE WAS REQUIRED TO RECONCILE THE DISCREPANCY IN RESPEC T TO WHICH THE ASSESSEE FILED FRESH AUDITED ACCOUNT WHEREIN HE INCLUDED NEW HEADS OF IN COME AND ALSO INCREASED ITS CLAIM OF EXPENDITURE. COMPARISON OF THE ORIGINAL ACCOUNT AND THE REVISED ACCOUNT IS GIVEN ON PAGE 2 OF THE ASSESSMENT ORDER AO FOUND THAT EXPEN SES CLAIMED IN THE REVISED ACCOUNT WERE SUBSTANTIALLY HIGHER. HE THEREFORE DIRECTED THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS FOR VERIFICATION OF ITS CLAIM. THE A/R OF THE ASSESSEE SUBMITTED STATEMENT OF LORRY HIRE CHARGES AND LABOUR CHARGES SUPPORTED WIT H PHOTOCOPY OF VOUCHERS. SINCE THE BOOKS OF ACCOUNTS WERE NOT PRODUCED THE AO WAS OF T HE OPINION THAT TWO SEPARATE ACCOUNTS HAD BEEN PREPARED BY THE ASSESSEE FOR THE SAME FINANCIAL YEAR. HE CONSIDERED THE GROSS RECEIPT AS MENTIONED IN THE TDS CERTIFICA TE AND ALLOWED EXPENSES TO THE EXTENT CLAIMED IN THE ORIGINAL RETURN AND DETERMINED THE P ROFIT FROM BUSINESS AT RS.49 45 673/-. EXCESS CLAIM WAS NOT ENTERTAINED AS IT WAS NOT SUPP ORTED BY PROPER DOCUMENTS AND BOOKS OF ACCOUNT AND ALSO FOR THE FACT THAT THE CLA IM OF EXCESS DEDUCTION WAS NOT MADE BY FILING OF REVISED RETURN OF INCOME. IN APPEAL T HE LD. CIT(A) DIRECTED THE AO TO TAKE RS.12 73 563/- AS BUSINESS INCOME OF THE ASSESSEE A S AGAINST RS.49 45 673/- DETERMINED BY HIM AND ALLOWED THE ASSESSEES APPEAL PARTLY. T HE ASSESSEE IS ALSO AGGRIEVED BY THE ACTION OF THE LD. CIT(A) WHO IN APPEAL CONFIRMED T HE ESTIMATED NET PROFIT TO THE EXTENT OF RS.12 73 563/- AS AGAINST RS.1 80 780/- DISCLOSE D BY THE ASSESSEE. THE ASSESSEE FURTHER AGGRIEVED BY THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF A SUM OF RS.7 08 007/- UNDER THE HEAD OF UNDISCLOSED INCO ME ON ACCOUNT OF INCREASE IN PARTNERS CAPITAL AND DECREASE IN SUNDRY CREDITORS AND OTHER LIABILITIES. AGGRIEVED BY THE SAID ORDER NOW THE REVENUE AS WELL AS THE ASSESSEE IS IN APPEAL BEFORE US. 3 3. AT THE TIME OF HEARING BEFORE US THE LD. DR RELI ED ON THE ORDER OF THE AO AND SUBMITTED THAT THE AO HAS RIGHTLY ESTIMATED THE BUS INESS INCOME OF THE ASSESSEE AT RS.49 45 673/- AS THE ASSESSEE HAS FAILED TO PRODU CE/SUBMIT BOOKS OF ACCOUNTS. HE THEREFORE URGED BEFORE THE BENCH TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THAT OF THE AO. 4. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE WHILE REITERATING HIS SAME SUBMISSIONS AS SUBMITTED BEFORE THE LOWER AUTHORITI ES FURTHER SUBMITTED THAT THE LD. CIT(A) WITHOUT ANY BASIS OR REASONS CONFIRMED THE E STIMATED NET PROFIT TO THE EXTENT OF RS.12 73 563/- AS AGAINST RS.1 80 780/- AS DISCLOSE D BY THE ASSESSEE. HE ALSO SUBMITTED THAT SOME ERRORS HAD OCCURRED BECAUSWE THE ACCOUNT ANT HAD LEFT THE SERVICES WHICH LED TO WRONG PREPARATION OF ACCOUNTS. THE AO ARRIVED AT WRONG CONCLUSION IN DETERMINING OF INCOME OF THE ASSESSEE IT WAS WITHIN THE POWER OF THE APPELLATE AUTHORITY TO CORRECT THE ERROR IN THE WAY MOST SUITABLE IN THE CIRCUMSTA NCES OF THE CASE. HE ALSO SUBMITTED THAT THE AO CONSIDERED THE TURNOVER AS REFLECTED IN THE TDS CERTIFICATE BUT DID NOT ALLOW ANY EXPENSES AGAINST THE INCREASED TURNOVER HE AL SO ARGUED THAT THE INCOME DETERMINED BY THE AO IS ABSURD. HE THEREFORE SUBMITTED THAT THE PROFIT MARGIN MAY BE DETERMINED KEEPING PROFIT MARGIN WHICH COULD ACCRUE IN HIS L INE OF BUSINESS. HE THEREFORE URGED BEFORE THE BENCH TO ACCEPT THE NET PROFIT AS DISCL OSED BY THE ASSESSEE AT RS.1 80 780/-. AFTER HEARING BOTH THE PARTIES THE ADDITIONAL GROUN D WAS ADMITTED. SINCE THE FACTS ARE ALREADY ON RECORD AND WHICH WERE ALSO AVAILABLE BEF ORE THE LOWER AUTHORITIES AND IT IS GOING TO THE ROOT OF THE MATTER THE ADDITIONAL GRO UND IS ADMITTED FOR HEARING. 5... WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT(A) HAS DEALT THE ISSUE AS UNDER : I HAVE GONE THROUGH THE OBSERVATIONS OF THE ASSESS ING OFFICER SUBMISSION OF THE A/R AND THE BOTH PROFIT & LOSS ACCOUNT OF THE ASSESSEE I.E. ORIGINAL AND REVISED STATEMENT. THERE IS SOME TRUTH IN THE IN THE EXPLANATION OF TH E ASSESSEE THAT NOT ALLOWING ANY EXPENSES AGAINST ENHANCED TURNOVER LEADS TO ABSURD PROFIT. AT THE SAME TIME IT IS TRUE THAT THE ASSESSEE DID NOT SUBSTANTIATE ITS CLAIM OF INCREASED EXPENSES MENTIONED IN THE REVISED PROFIT & LOSS ACCOUNT. THE PROFIT INCREASE SHOWN BY THE ASSESSEE AFTER INCORPORATING THE FULL TURNOVER WAS A PALTRY RS.15 000/- WHEN THE TURNOVER INCREASED FROM RS.20 90 868/- TO RS.59 54 035/- IN THE REVISE D STATEMENT. THE INCOME AS SUBMITTED BY THE ASSESSEE IN THE REVISED STATEMENT IN NOT ACC EPTABLE AS IT IS UNSUPPORTED. THE STAND OF THE A.O IN ADDING THE TOTAL TURNOVER IS AL SO NOT CORRECT. IN ABSENCE OF BOOKS OF ACCOUNTS AND PROPER DOCUMENTATION AND UNRECONCILED TURNOVER THE INCOME OF THE ASSESSEE IS REQUIRED TO BE ESTIMATED. THE INCOME ES TIMATION IS DONE AS UNDER: 3.3. ESTIMATION OF INCOME: REVISED STATEMENT SUBMITTED BY THE ASSESSEE SUFFERS FROM INFIRMITY IN THAT ITS ACCOUNTS FOR TURNOVER OF ONLY RS.59 54 035/- WHEREAS TDS CER TIFICATE SHOW THE TURNOVER AT 4 RS.66 31 076/-. THE ASSESSEE HAS NOT BEEN ABLE TO R ECONCILE THE DIFFERENCE IN TURNOVER EVEN BEFORE ME AND THEREFORE THE TURNOVER AS PER TD S CERTIFICATE IS TO BE CONSIDERED FOR DETERMINATION OF INCOME. THE COMPARISON OF THE DIFF ERENT INCOMES STREAMS IN THE ORIGINAL AND REVISED STATEMENT GIVEN A PICTURE AS S HOWN IN THE ANNEXURE-A. THE DIFFERENT REVENUE STREAMS HAVING ADDITIONAL TUR NOVER WOULD RESULT IN ADDITIONAL PROFIT TO THE ASSESSEE. ADDITIONAL PROFIT ON ADDITI ONAL TURNOVER HAS BEEN DETERMINED BY CONSIDERING PROFIT ON ACCOUNT OF LABOUR @ 8% PROFI T ON ACCOUNT OF LORRY HIRE AND OTHER SERVICE CHARGE @ 15%. ADDITIONAL PROFIT ON GODOWN R ENT HAS BEEN CONSIDERED AT 100% AS IT IS CONSIDERED THAT NO ADDITIONAL EXPENSES OVE R AND ABOVE EXPENSES ALREADY DEBITED IN THE ORIGINAL PROFIT & LOSS ACCOUNT WOULD BE REQU IRED TO EARN THIS INCOME. THE DIFFERENCE BETWEEN TDS AND REVISED STATEMENT IS ON ACCOUNT OF SERVICE CHARGES AND THEREFORE PROFIT ON THIS IS ALSO TAKEN @ 15%. THIS GIVES TOTAL ADDITIONAL INCOME ON ACCOUNT OF UN-RECORDED TURNOVER AT RS.8 68 098/- WH ICH TOGETHER WITH THE PROFIT AS DISCLOSED IN THE ORIGINAL PROFIT & LOSS ACCOUNT GIV ES THE BUSINESS INCOME OF THE ASSESSEE AT RS.12 73 563/-. THE ASSESSING OFFICER I S DIRECTED TO TAKE THIS AS THE BUSINESS INCOME OF THE ASSESSEE AS AGAINST RS.49 45 6731- DE TERMINED BY HIM. THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. AT THE TIME OF HEARING BEFORE US BOTH THE REPRESEN TATIVES OF ASSESSEE AND THE REVENUE DID NOT CONTROVERT THE AFORESAID FINDINGS OF THE LD . CIT(A) BY PRODUCING ANY COGENT MATERIAL/EVIDENCE. HENCE IN THE ABSENCE OF ANY MA TERIAL WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS HERE BY UPHELD. THE APPEAL OF THE REVENUE AND GROUND NO. 1 OF THE ASSESSEES APPEAL A RE DISMISSED. 6. IN RESPECT OF GROUND NO. 2 AND THE ADDITIONAL GR OUND OF THE ASSESSEES APPEAL FACTS OF THE CASE ARE THAT THE AO ADDED A SUM OF RS .7 08 007/- AS UNDISCLOSED INCOME OF THE ASSESSEE ON ACCOUNT OF INCREASE IN PARTNERS CAP ITAL AND DECREASE IN SUNDRY CREDITORS AND OTHER LIABILITIES BY OBSERVING THAT IN THE REVI SED STATEMENTS THE SUNDRY CREDITORS LIABILITIES WAS REDUCED BY RS.3 89 908/- AND OTHER LIABILITIES REDUCED BY RS.2 80 950/- WHEN COMPARED TO ORIGINAL STATEMENT FILED ALONG WIT H RETURN. HE ALSO OBSERVED THAT PARTNERS CAPITAL HAD INCREASED BY RS.37 149/-. THE AO CONSIDERED THE REDUCTION IN THE REVISED COMPUTATION IN THE LIABILITIES OF THE ASSES SEE AS UNDISCLOSED INCOME AND MADE AN ADDITION OF RS.7 08 007/-. IN APPEAL THE LD. CIT(A ) CONFIRMED THIS ACTION OF THE AO. AGGRIEVED BY THE SAID ORDER NOW THE ASSESSEE IS IN APPEAL BEFORE US. 7. AT THE TIME OF HEARING BEFORE US THE LD. COUNSE L FOR THE ASSESSEE WHILE REITERATING HIS SAME SUBMISSIONS AS SUBMITTED BEFOR E THE LOWER AUTHORITIES FURTHER SUBMITTED THAT 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE TIME OF HEARING BEFORE US THE LD. C OUNSEL FOR THE ASSESSEE DID NOT PRODUCE ANY MATERIAL/EVIDENCE TO CONTROVERT THE FIN DINGS OF THE LD. CIT(A). FOR THE SAKE OF BREVITY RELEVANT PORTION OF HIS ORDER REPR ODUCED BELOW : 5 I HAVE GONE THROUGH THE STATEMENTS OF ACCOUNTS BO TH ORIGINAL AND REVISED. IT IS SEEN THAT THE SUNDRY CREDITORS LIABILITIES FOR OTHER EXP ENSES ARE SHOWN AT REDUCED FIGURE IN THE REVISED STATEMENT AS COMPARED TO THE ORIGINAL. IT IS HOWEVER ALSO SEEN THAT SUNDRY DEBTORS IN THE REVISED STATEMENT IS ALSO REDUCED AN D SO HAS THE CASH IN HAND. THE SUNDRY DEBTORS ARE SHOWN AS HAVING BEEN REDUCED FRO M RS.5 09 650/- TO RS.90 000/- AND CASH IN HAND FROM RS.1 23 663/- TO RS.18 175/-. TDS IS ALSO SHOWN AT DIFFERENT FIGURE. FROM THE ABOVE IT APPEARS THAT BALANCING FI GURE HAVE BEEN PLACED AGAINST DIFFERENT ASSETS AND LIABILITIES IN THE BALANCE SHE ET BOTH IN THE ORIGINAL STATEMENT AS WELL AS IN THE REVISED STATEMENT. HOWEVER IT IS TO BE KE PT IN MIND THAT ONCE SUNDRY CREDITORS OR EXPENSES FOR LIABILITIES ARE DETERMINE FOR THE B USINESS IT IS NOT POSSIBLE TO HAVE THEM AT REDUCED FIGURE UNLESS THERE IS COMMONALITY IN TH E DEBTORS AND THE CREDITORS. ONLY THE OTHER POSSIBILITY IS THAT CREDITORS HAVE BEEN PAID OUT OF UNDISCLOSED SOURCES. THE ASSESSEE HAS NOT SHOWN THAT THERE WERE CONTRA ENTRI ES BETWEEN DEBTORS AND CREDITORS. THEREFORE IT WILL HAVE TO BE PRESUMED THAT THE PAYM ENTS TO CREDITORS WERE MADE OUT OF UNDISCLOSED SOURCES OF THE ASSESSEE. THE ADDITION I S THEREFORE CONFIRMED. THIS. GROUND OF THE ASSESSEE FAILS. IN VIEW OF THE ABOVE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THIS GROUND OF APPEAL O F THE ASSESSEE IS ALSO DISMISSED. 9. AFTER HEARING BOTH THE PARTIES THE ADDITIONAL GR OUND TAKEN BY THE ASSESSEE WAS ADMITTED AND THE MATTER IS RESTORED TO THE FILE OF THE LD. CIT(A) FOR ADJUDICATION. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS DI SMISSED AND THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 10. THE ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- (C. D. RAO) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22 ND APRIL 2010 COPY TO : 1. M/S. BINA CEMENT WORKS AMTALA BARUIPUR DIST. 24 PARGANAS (S) PO KANYANAGAR. 2. ITO WARD-53(1) KOLKATA. 3. CIT(A) KOLKATA. 4. CIT KOLKATA. 5. D.R. ITAT KOLKATA. TRUE COPY BY ORDER DEPUTY REGISTRAR JD.(SR.P.S.) I.T.AT. KOLKATA