Income Tax Appellate Tribunal - Kolkata
Dcit, Cc-Viii, Kolkata, Kolkata vs M/S Jute Felt (India) Pvt. Ltd., Kolkata on 15 December, 2017
M/s. Jute Felt (India) Pvt. Ltd.
I.T.(SS) No.62/Kol/2014
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH: KOLKATA
Before: Shri Waseem Ahmed, Accountant Member and
Shri S.S. Viswanethra Ravi, Judicial Member
I.T.(SS) No.62/Kol/2014
(B.P 01.04.1988 to 21.04.1998)
D.C.I.T, Central Circle-VIII, Kolkata Appellant
[PAN: AABCJ 0569 P]
Vs
M/s. Jute Felt (India) Pvt. Ltd. Respondent
For the Appellant : Md. Usman, CIT(DR)
For the Respondent : Shri Ravi Tulsiyan, FCA
Date of hearing : 02.11.2017
Date of pronouncement : 15.12.2017
ORDER
Shri S.S. Viswanethra Ravi, JM:
This appeal filed by the revenue against the order dated 21.01.2014 passed by the Commissioner of Income Tax (A)-Central -
I, Kolkata for Block Period ending 21.04.1998.
2. The revenue has raised the following grounds of appeal:
"1. That on the facts and circumstances of the case the ld. CIT(A) has erred in deleting Rs.36,29,109/- on account of alleged 'Peak amount of bogus sundry creditor' has undisclosed income of the assessee.
2. That on the facts and circumstances of the case the ld. CIT(A) has erred in restricting addition of Rs.37,20,893/- on account of undisclosed income for the F.Y 1995-96 to Rs.57,874/-.
3. That on the facts and circumstances of the case the ld. CIT(A) has erred in restricting the addition of Rs.37,12,162/- on account of undisclosed income for the F.Y 1996-97 to Rs.50,000/-.
4. That on the facts and circumstances of the case the ld. CIT(A) has erred in deleting the addition of Rs.40,94,323/- on account of undisclosed income for the F.Y 1997-98/-.
5. The department craves the right to add, alter or modify grounds of appeal during the course of appellate proceedings at any stage."
Page | 1 M/s. Jute Felt (India) Pvt. Ltd.
I.T.(SS) No.62/Kol/2014
3. The first issue raised by the revenue in Ground No.1 is that the CIT(A) erred in deleting the addition made by the AO for Rs.36,29,109/- on account of undisclosed income.
4. Briefly stated facts are that the assessee is private limited company and engaged in the business of manufacturing, trading and laying of jute Felts using bitumen as main raw material. A search & seizure operation was carried out in the factory and office premises of the assessee on 21.04.1998. Accordingly, the books of accounts and documents were seized from the premises of the assessee. Subsequently, notice u/s 158BC of the Act was issued on 17.09.1999 and assessment was framed u/s 158BC/143(3) of the Act for the block period beginning from 01.04.1988 to 21.04.1998. The assessee was framed at a income of Rs.1,51,56,487/- after making several additions to the total income of the assessee.
5. Subsequently, the assessee against the assessment order filed an appeal before the CIT(A) who confirmed the order of AO. Thereafter, the appeal was preferred before the Tribunal wherein AO was directed to make fresh assessment vide order dated 12.06.2009.
6. The AO during assessment proceedings directed the assessee to produce full details and purchases of bitumen as well as sundry creditors as on the last days of all the previous years included in the block periods. The assessee in compliance thereto filed a list of sundry creditors on 21.04.1998 and no other details were filed by it.
Therefore, the AO treated the amount of peak credit for Rs.36,29,109/- as undisclosed income of the assessee.
7. Aggrieved, the assessee preferred an appeal to CIT(A) who has deleted the addition made by the AO by observing the followings:
"7. I have perused the relevant assessment orders and considered the submissions of the assessee. The AO has made the addition basically on the basis of two considerations :
first, that the enquiries conducted during the assessment proceedings in regard to the sundry creditors led to adverse results against the assessee; and, secondly, that a partner of the assessee firm had admitted in his statement recorded u/s 131 that some purchases shown in the books of account were in the name of paper entities. It was explained that the admission made u/s 131 had already been retracted by filing sworn affidavit which has not been disputed by the AO in his assessment order. The AO has Page | 2 M/s. Jute Felt (India) Pvt. Ltd.
I.T.(SS) No.62/Kol/2014 simply ignored the retraction and has not even discussed the same in his assessment order. I find merit in the contention that the AO has erred in law in relying on a statement which was later retracted and which is not supported by any corroborative material found in the search. I am of the considered view that addition in block assessment cannot be made simply by relying on a statement recorded from an assessee at the time of search or otherwise. Further corroborative material should have been found or recovered from the premises of the assessee to support any such statement recorded in course of the search. In the absence of any corroborative material, a mere statement will not act as evidence of undisclosed transactions warranting addition in the hands of the assessee. But, in the present case, no evidence supporting such allegation has been found from the premises of the assessee during search. The entire thrust of the addition and subsequent actions thereafter emanate from a mere statement recorded from the assessee during search without there being any corroborative evidence found during search. It is not understandable as to why a prudent person would suddenly make a statement in relation to his creditors during search declaring them as non-genuine when no adverse material or evidence was found in the search. This gives further credence to the retraction of the assessee in his affidavit that the said statement was extracted through coercion. It is thus clear that the addition made by the AO is not based on any material except a statement made by the assessee at the time of the search, which was subsequently retracted, and therefore, cannot be relied upon in view of the aforesaid judicial decisions and the instructions of the CBDT. .Furthermore, it is clear that no evidence was found in course of the search which could show that the creditors were bogus. The allegation of the AO is based on the enquiry conducted by him during the course of assessment. It is a matter of record that the creditors stood duly recorded in the books of account at the time of the search. All the transactions with the said creditors also stood duly recorded. Therefore, the said creditors cannot be termed to fall within the definition of undisclosed income under this Chapter. Under the Income Tax Act, Block Assessment proceedings u/s 158BC are separate from regular assessment proceedings as held by the Hon'ble Supreme Court in the case of ACIT vs Hotel Blue Moon reported in 321 ITR 362. In Block Assessment proceedings, income has to be determined only on the basis of the incriminating material found in course of the search. The issues pertaining to regular assessment which are duly recorded in the regular books of account on the date of the search are required to be dealt with in regular assessment proceedings as held in a number of cases including DCIT vs Suresh Chand Bafna 5 ITR (Trib.) 675 (Chennai), CIT vs Vivek Dougall 305 ITR 27O (DeI), CIT vs Arman Sheikh 293 ITR 266 (Gau), etc. In the present case also, it is an undisputed fact that no evidence was found in the course of the search which could show that the creditors were non-existent. Therefore, the issue of creditors could not have been raised and dealt with in the Block Assessment proceedings.
In fact, such enquiry itself was not permissible in the Block Assessment proceedings as it was not based on any seized document. The enquiry based on the regular books of account therefore could have been conducted only within the domain of the regular assessment proceedings. It was argued before me that the entire enquiry was conducted behind the back of the assessee and the Inspector's report and the DDIT's report was not even confronted to the assessee which is contrary to the principles of natural justice. The AO has also relied on seized documents found from the premises of one Sri K K Kedia who was also separately searched by the department to conclude that such documents show purchase of bitumen by the assessee from Sri K K Kedia. The AO has not specified the nature and content of such seized documents in his assessment order. It also appears that the AO has not confronted the seized documents to the assessee before placing reliance on them. Furthermore, it is a settled position of law that no addition can be made by simply relying on notings made in documents found from the possession of third parties. The AO has erred in law in relying on the seized documents found from a third party when there was no corroborative material on record to link those documents with the assessee. The contention of the assessee is supported by the order of the Hon'ble 'A' Bench of the jurisdictional ITAT in the case of DCIT vs Sitaram Sureka in ITA No. IT(SS)/ 140Kol/2004. In that case, the Hon'ble ITAT has relied on the judgment of the Apex Court in the case of CBI vs V C Shukla & Others 3 SCC 410 wherein it was held that entries even if relevant are only corroborative evidence and without any independent evidence, no liability could be fastened. The case of the assessee is also covered by the judgment of the Hon'ble Supreme Court in Jain Hawala Case AIR 1996 SC 3386. In view of the above, I am of the opinion that no addition on account of bogus sundry creditors could have been lawfully made by the AO. The addition of Rs.36,29,109/- is deleted. Ground No.3 is allowed."
8. Being aggrieved by the order of ld. CIT(A), revenue is in second appeal before us. The ld. DR before us vehemently supported the order of AO whereas the ld. AR before us filed a paper book which is running from Pages 1 to 177.
Page | 3 M/s. Jute Felt (India) Pvt. Ltd.
I.T.(SS) No.62/Kol/2014
9. Heard rival submissions and perused the material available on record. At the outset, we find that in the identical facts & circumstances this Tribunal in the group case of the assessee in the case of DCIT Vs. M/s. Hindusthan Tar Products in IT(SS) A No.63/Kol/2014 the order dt:13-09-2017 has decided the issue in favour assessee. The relevant findings of ITAT are as follows:
4. After hearing the rival contentions, we hold as follows:-
The Assessing Officer, based his addition on a statement recorded from one of the partners,Mr. Praveen Kumar Chharia, thought this statement was retracted. The Assessing Officer has nowhere stated the fact there was a retraction of the statement, nor has he given his reasons for his rejecting the retractions of the said statement by Mr. Praveen Kumar Chharia. He relied on certain material found and seized from the premises of one Sri K KKedia, whose premises was also simultaneously searched u/s 132 of the Act, for making these additions. This material was not confronted to the assessee. There is no incriminating material found or seized from the premises of the assessee based on which the additions in question were made. Hence such additions cannot be sustained. Material found in the premises of a third party cannot be the basis of assessment unless and until the same is confronted to the assessee. Similarly, no addition can be made on a retracted statement.
The Central Board of Direct Taxes in its letter issued on 11/03/2003 bearing no. F.No 286/2/2003/IT(inv), held as follows:-
"Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely."
4.2 In view of the above, and also in view of the retraction, we are of the opinion that the ld. First Appellate Authority was right in holding that the addition in question cannot be made on the basis of such statement. As far as the reliance placed by the Assessing Officer, on the seized documents found from the premises of one Sri K KKedia, we are of the opinion that the ld. CIT(A) was right in deleting the addition by observing that the assessee was never confronted with the seized documents and that notings in the diary/document found in the possession of the 3rdparty cannot be the basis of arriving at conclusions that there is unaccounted income/wealth in the hands of the assessee, without corroborative material.
5. In view of the above, we uphold the finding of the ld. CIT(A), that the addition in question could not have been made in a Block Assessment u/s 158BC of the Act, in the absence of any incrimination material has held by the Hon'ble Delhi Court in the case of CIT vs. Ravi Kant Jain (2001) 250 ITR 0141 & CIT vs. Pooja Forge Ltd. [2016] 389 ITR 382 (Del).
In the result, Ground No. 1 of the Revenue is dismissed.
10. From the above, we note that the facts in the present case are exactly identical to the facts as discussed in IT(SS) A No.63/KOl/2014. Therefore, respectfully following the same, we do not find any infirmity in the order of CIT(A). Hence, this ground of appeal is dismissed.
Page | 4 M/s. Jute Felt (India) Pvt. Ltd.
I.T.(SS) No.62/Kol/2014
11. The second issue raised by the revenue in Ground Nos.2, 3 & 4 is that CIT(A) erred in restricting/deleting the addition made by the AO to Rs.57,874/-, Rs.50,000/- and Nil in F.Y 1995-96, 1996-97 & 1997-98 respectively on account of undisclosed income.
(i) Undisclosed income for F.Y 1995-96:
During the search and seizure operation a ledger was seized and marked HT/37 and the seized cash book HT/35 was incomplete. In the original block assessment order the difference between sales & income and purchases & expenses was treated as income of the assessee. This amount comes to Rs.36,78,913/- (88,93,226 - 52,14,313/-). The total unpaid amounts of sales-tax, P.F, ESI & P.Tax of Rs.41,975/- (35,112 + 4999_1613+255) was disallowed u/s 43B. Thus, the total undisclosed income for the F.Y 1995-96 was computed at Rs.37,20,892/- as undisclosed income during the F.Y 1995-96 and added to the total income of the assessee.
(ii) Undisclosed income for F.Y 1996-97:
The AO adopted the same method for determining the undisclosed income of the assessee as computed in the F.Y 1995-96. Accordingly, the AO determined the undisclosed income of Rs.37,12,162/- and added to the total income of the assessee.
(iii) Undisclosed income for F.Y 1997-98:
The AO adopted the same method for determining the undisclosed income of the assessee as computed in the F.Y 1996-97. Accordingly, the AO determined the undisclosed income of Rs.40,94,323/- and added to the total income of the assessee.
12. Aggrieved, the assessee preferred an appeal before the ld. CIT(A) who has allowed the appeal of the assessee in part by observing as under:
Page | 5 M/s. Jute Felt (India) Pvt. Ltd.
I.T.(SS) No.62/Kol/2014
(i) Undisclosed income for F.Y 1995-96:
9. I have considered the relevant orders and the submissions of the assessee and copy of the seized material placed in the paper-book filed in course of the appellate proceedings.
I find that the contention of the assessee that the AO has adopted a pick and choose method in computing the income for the relevant year is factually correct. For sales, the AO has adopted the figure of Rs.88,93,226/- as shown by the assessee in its audited accounts filed at page 42-51 of the paper-book in place of Rs.31,53,784/- which was found recorded in the seized documents HT/37 filed at page 52-53 of the paper-book. But, in case of purchases and expenses, the AO has done the reverse in as much as he has adopted the figure of Rs.52,14,313/- as found recorded in the seized documents in place of Rs.88,41,331/- as shown by the assessee in its audited accounts. This method of computing the income of an assessee is contrary to the principles of natural justice and is not permitted in law. Either the AO has to treat the seized material as sacrosanct and compute the income on the basis of such material or he has to compute the income on the basis of the audited accounts of the assessee after due verification. The AO cannot treat part of the seized documents as reflecting the correct state of affairs and the other part as unreliable; and then, adopt a different figure from the audited accounts which in his own view is not reliable. For purchases and expenses, the AO has treated the figures as found recorded in the seized documents as the correct figures of actual transactions whereas in case of sales & other income, he has disregarded the figures found recorded in the same seized documents and has accepted the figures as appearing in the audited accounts as correct. This action of the AO is clearly arbitrary and without any basis. I have perused the updated cash book of the assessee filed at pages 6-36 of the paper- book wherein it has given details of date wise transactions in the case of each item whether of revenue or expense nature. The AO has not examined the cash book at all; he has instead ignored the same on the assumption that the expenses recorded therein over and above the seized documents are bogus. The correct approach for the AO would have been to examine the expenses together with the supporting documents and then work out the income of the assessee. I have also examined the other details and comparison between the seized documents and the audited accounts as filed in the paper book at pages 37-55 wherein the assessee has reconciled and explained the differences between the seized documents and the audited accounts. It is apparent from the said comparison that some of the expenses which were not taken into account in the seized documents were of a statutory nature or payments to various authorities or government concerns or were journal entries in the nature of Bad Debts and others which cannot be termed as bogus. It therefore appears that the AO has computed the income of the assessee without proper verification. In case the AO had examined the said expenses, then the difference in cash balance as per the seized documents and that as per the audited accounts would have also stood reconciled as is evident from the updated cash book filed by the assessee. In the alternative, the AO could have rejected the audited accounts and computed the income solely on the basis of the seized documents which again would have lead to no addition as same would result in a loss of Rs.21,67,265/-. As regards the cash balance as per the seized documents, the same would have then to be adopted as the cash balance as on 31-03-1996 as standing recorded in the seized books and no addition on that account would also be possible. In other words, no addition could have been made either in respect of purchases and expenses or in respect of difference in cash. As regards the addition made by the AO by applying section 43B, it was contended that the same was not justified as the statutory liability had been paid before the due date for filing of the return. The assessee placed on record at pages 37-41 of the paper- book copy of challans totalling to Rs.35,996/- as against claim of Rs.41,975/-. In view of the above, the addition of Rs.36,63,018/- (Rs.37,2O,892/- minus Rs.51,895/- being the income as per the audited accounts since no regular return was filed plus Rs.5,979/- on account of section 43B) is deleted."
(ii) Undisclosed income for F.Y 1995-96:
"11. I have considered the rival submissions. The assessee has filed copy of the seized books HT/40 at Page 56-61 and also a reconciliation of the revenue between the seized documents and as disclosed in the return of income at page 62 of the paper-book. It is seen from the said reconciliation that the assessee has not only considered part of the bills raised in FY 1996-97 in the income for FY 1997-98 but has also considered some receipts from FY 1995-96 in the income for FY 1996-97 on the basis that income is recognized by the assessee when the bills raised by it on its principals are approved by them being government organizations. It is seen that the assessee raises bills on its principals; and, it is only on approval of such bills by the principals that the income is recognized by the assessee in its accounts. The assessee has followed the same system in the past years including FY 1995-96 which is also included in the present block assessment proceedings. Since the assessee has been following this system from year to year, therefore it cannot be altered unless the AO is of the opinion that such system does not reflect the correct income of the assessee. But, in the present case, the AO has not given any such finding in his assessment order. In my opinion, the system followed by Page | 6 M/s. Jute Felt (India) Pvt. Ltd.
I.T.(SS) No.62/Kol/2014 the assessee has a sound basis since the income would only accrue once the bill is approved by the principal who has the option of not approving the entire bill or part thereof; and, in that case, if the income is included in the return, then it would show an incorrect state of affairs. I therefore find no fault in the basis of income recognition by the assessee. This view is also supported by the Accounting Standard on Revenue Recognition which clearly states that revenue shall not be recognized unless it has become certain. In any case, since the income has already been included in FY 1997 -98 which is also part of the Block Period, therefore no separate addition can be made in FY 1996-97 as the same would lead to double taxation which is not permitted in law. In view of the above, the addition of Rs.6,47,308/- is deleted. The AO has made the addition of Rs.30,14,854/- as undisclosed income being the difference of cash balance as standing recorded in the seized book and as appearing in the audited accounts filed by the assessee. The assessee has submitted that the seized cash book was incomplete at the time of the search and the audited accounts have been drawn after updating the same. The assessee has filed a detailed comparison of the expenses as standing recorded in the seized cash book and as shown in the P & L A/c at page 110 of the paper-book. The assessee has also filed date-wise updated cash book at pages 64-98 of the paper-book. The material placed on record by the assessee explains the reason for difference in the balance as per seized cash book and as per audited cash book. It is seen that in the seized cash book, not only expenses or out-goings have not been taken into account but also substantial withdrawals from bank have not been taken into account. No doubt can be raised in respect of withdrawals from bank which clearly indicates that the seized cash book was not updated. Similarly, the statutory dues like payment of central excise, PF, Professional Tax, Permit Fees, etc. had also not been recorded in the seized cash book further indicating that it was incomplete. Further payments like directors' remuneration, electricity, rent, etc. which are necessary expenses and are easily verifiable had also not been recorded in the seized cash book. All these clearly support the contention of the assessee that the seized cash book was incomplete. The AO has not examined any of these aspects while framing his assessment order. The AO has made no effort to verify the contentions of the assessee by trying to examine the transactions with its supporting documents. Therefore, it is clear that the addition of Rs.30,14,854/- has been made on wrong assumptions. The addition based on such assumption is clearly not sustainable; and so, the same is directed to be deleted. In result, the addition made by the AO is restricted to Rs.50,000/-."
(iii) Undisclosed income for F.Y 1997-98:
"13. I have considered the submissions. The assessee has filed a comparative chart of the amount of purchases as per the audited accounts and those as per the audit report reflecting the difference for each item placed at page 115 of the paper-book. It was argued that the major difference of Rs.8,74,232.67 was on account of Hessian which is used for manufacture of Felt Rolls. The assessee has on the same page also shown figures of quantitative production and consumption of Hessian thereby showing that if Form 3CD was to be believed, then the consumption ratio of Hessian would come down to 30.32% in FY 1997-98 as compared to 34.57% in FY 1996-97. While the quantitative production has increased from 8064 units to 9161 units, the actual consumption is reduced from 2,78,797 units to 2,77,812 units. I therefore find merit in the submission that this anomaly was only due to the mistakes in the Audit Report. I find merit in the contention that once the assessee had produced party-wise break up of purchases, then it was incumbent upon the AO to verify the genuineness of the purchases from such parties instead of simply relying on the comparison of the Audited Accounts and the Audit Report which was clarified as being erroneous by the assessee. The AO has treated the Audit Report as sacrosanct but has held that the audited accounts were incorrect. Both the documents having been certified by the same Auditor Sri Bimal Kumar Basu, it was incumbent upon the AO to either call the auditor to get his explanation in the matter or in the least made efforts to himself verify the purchases when the party-wise break up was available before him. The AO has no independent material in support of his action. He has simply relied on the Audit Report and rejected the audited accounts. But, even otherwise, the matter of purchases was within the domain of the regular assessment; and so, this issue could not have been added in the block assessment. In view of the above, the addition of Rs.13,93,459/- is deleted. As regards the difference in cash balance as worked out by the AO and that as reflected in the balance sheet, I have already dealt with this issue in detail for FY 1996-97. Following my discussion and findings for FY 1996-97, the addition of Rs.27,00,870/- in F.Y 1997-98 is deleted. It would not be out of place to mention that even the AO has in his assessment order accepted that the cash book was incomplete and that he has tried to arrive at a cash balance on the basis of the bank book without considering the aspect that there may be other cash transactions which have no connection with the bank book. Therefore, the basis of addition in this case from the very beginning was erroneous. Ground no 4 is partly allowed. Ground no 5 is general in nature."
Page | 7 M/s. Jute Felt (India) Pvt. Ltd.
I.T.(SS) No.62/Kol/2014
13. Being aggrieved by the order of CIT(A), the revenue is in second appeal before us. The ld. DR vehemently supported the order of AO. On the other hand, the ld. AR relied on the order of CIT(A).
14. Heard rival submissions and perused the material available on record. At the outset, we find that in the identical facts & circumstances this Tribunal in the group case of the assessee in the case of DCIT Vs. M/s. Hindusthan Tar Products in IT(SS) A No.63/Kol/2014 the order dt:13-09-2017 has decided the issue in favour assessee. The relevant grounds of appeal & findings of ITAT are as follows:
2. That on the facts and circumstances of the case the Ld. CIT(A) has erred in deleting Rs. 9,67,250/- on account of undisclosed income of the assessee for the F.Y. 1995-96.
3. That on the facts and circumstances of the case the Ld. CIT(A) has erred in deleting Rs. 8,09,591/- on account of undisclosed income for the F. Y. 1996-97.
4. That on the facts and circumstances of the case the Ld. CJT(A) has erred in restricting addition of Rs. 9,09,365/- on account of undisclosed income for the F. Y. 1996-97 to Rs.
99,774/-.
5. That the Ld. CIT(A) has violated Rule 46A of the I.T. Rules while allowing the Cash Book of the assessee at the time of appellate proceedings to reconcile the same with that of seized Cash Book, which was never produced before the A.O. and deleted the above mentioned addition of Rs. 8,09,591/- and restricting the addition of Rs. 9,09,365/- to Rs.99,774/-.
6. That on the facts and circumstances of the case the Ld. CIT(A) has erred in deleting Rs. 11,42,700/- on account of undisclosed income of the assessee for the F. Y. 1997-98.
7. The department craves the right to add, alter or modify grounds of appeal during the course of appellate proceedings at any stage."
We find that as follows:
"6. Ground No. 2 is against the addition of undisclosed income for the Financial Year 1995-96. The addition is based on the statement recorded from Sri Praveen Kr. Chharia that, Bitumen was purchased from private parties at prices which were 30-40 per cent lower than those quoted by the Oil Companies. As held by us while disposing off Ground No. 1, the statement in question cannot be made the basis of any addition as the same was retracted and as the Assessing Officer has not brought on record any corroborative evidence for making the additions. There is no material with the Assessing Officer to conclude that the assessee has wrongly recorded these purchases in its books of accounts. The assessee claims that the purchases and sales are recorded correctly in the regular books of account i.e. at the rate at which they were purchased which was in fact 30 to 40 per cent below the rate quoted by the Oil Companies and there is no inflation or suppression of purchases or sales. In the absence of any incriminating material found during the search and when there is no specific finding that the assessee has not correctly recorded the transactions in its books of account, and merely because open market purchases were made at rates which were 30-40 per cent lower than those quoted by the Oil Companies, no addition can be made. Hence, in the absence of incriminating material and in the absence of proof of wrong recordings of transactions in the books of account, this addition has been rightly deleted by the ld. CIT(A).
Thus, this Ground of the Revenue is dismissed.
7. Ground Nos. 3,4, & 5 are on the addition made as undisclosed income for the Financial Year 1996-97. The Assessing Officer observed that the cash balances as per seized books for the Financial Year 1996-97, did not match with that which was reflected Page | 8 M/s. Jute Felt (India) Pvt. Ltd.
I.T.(SS) No.62/Kol/2014 in the balance sheet. The assessee explained that the cash books was complete on the date of search. The Assessing Officer rejected the explanation given by the assessee and made the addition.
7.1. The ld. CIT(A), relied on the cash summary furnished by the assessee, prepared after payments were made to sundry creditors. The assessee submitted that the two additions, on account of excess cash reflected in the seized books and on account of excess creditors, are not related. The ld. CIT(A) examined this cash summary and accepted the reconciliation made by the assessee and deleted the additions.
7.2. The only contention of the ld. DR, is that the Assessing Officer should have been given an opportunity to examine the cash summary. We find that this cash summary was before the ld. Assessing Officer. This is the second round of assessment proceedings and the ld. CIT(A), issued a notice to the Assessing Officer, as in all cases, when hearing of an appeal are fixed before him. The Assessing Officer could have appeared on the date of hearing and placed his view on the matter before the ld. CIT(A). Having not availed the opportunity, the Assessing Officer cannot plead violation of principles of natural justice. Before us the ld. DR, has not pointed out the error in the factual finding of the ld. CIT(A) based on the said cash summary. Thus, we uphold the finding of the ld. First Appellate Authority and dismiss the Ground Nos. 3,4, & 5 of the Revenue.
8. The last Ground is against the deletion of the addition of Rs.11,42,700/-, on account of undisclosed income for the Financial Year 1997-98. The addition was made on the ground that there is a mismatch between the balances as appearing in the books of the assessee and that which appeared in the books of its sister concern M/s Jute Felt (I) Ltd.
8.1. The ld. CIT(A) examined the contentions of the assessee that the differences in question were reconciled and granted relief. We find that the variation were reconciled properly. The ld. DR could not point out any infirmity or error in the reconciliation of accounts.
9. Hence we find no infirmity in the order of the ld. CIT(A), on this issue. Hence Ground No. 6, of the Revenue is dismissed.
10. In the result, the appeal of the Revenue is dismissed."
15. Respectfully following the ratio in IT(SS)A No.63/Kol/2014 dt. 13-09-2017, we find no infirmity in the order of ld. CIT(A). We uphold the same. Therefore, the grounds raised by the revenue are dismissed.
16. In the result, the appeal filed by the revenue is dismissed.
Order pronounced in the open court on 15.12.2017.
Sd/- Sd/-
Waseem Ahmed S.S. Viswanethra Ravi
Accountant Member Judicial Member
Dated : 15.12.2017
Place : Kolkata
RS(SPS)
Page | 9
M/s. Jute Felt (India) Pvt. Ltd.
I.T.(SS) No.62/Kol/2014
Copy of the order forwarded to:
1. Appellant - D.C.I.T, Central Circle-VIII, Kolkata, Room No.403, 4th Floor, Aayakar Bhawan, Poorva, 110, Shanti Pally, E.M. Bye-pass, Kolkata - 700 107. 2 Respondent - M/s. Jute Felt (India) Pvt. Ltd., 98, B.K. Paul Avenue, Kolkata -
700 005.
3. The CIT(A), Kolkata
4. CIT , Kolkata
5. DR, Kolkata Benches, Kolkata //True Copy// By order, Sr.PS/H.O.O ITAT, Kolkata Page | 10