Income Tax Appellate Tribunal - Kolkata
Sales Emporium (South), Kolkata vs Acit Circle 26, Kolkata, Kolkata on 11 December, 2019
ITA Nos. 808 & 809/KOL/2017
Assessment Years:2009-2010 & 2010-2011
&
C.O. No. 21/KOL/2019
(in ITA No. 809/KOL/2017)
Assessment year: 2010-2011
Sales Emporium (South)
IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'A' BENCH, KOLKATA
Before Shri P.M. Jagtap, Vice-President
and Shri A.T. Varkey, Judicial Member
I.T .A. Nos. 808 & 809/KOL /2017
Assessment Years: 2009-2010 & 2010-2011
Sales Emporium (So uth),..............................................................Appellant
226, Diamond Harbour Road,
Kolkata-700060
[PAN: AAWFS6903J]
-Vs.-
Assistant Commissioner of Income Tax,.... .................................Respondent
Circle-26, Ko lkata,
Aayakar Bhawan Dakshin,
2, Gari ahat Ro ad (So uth),
Kolkata-700068
&
C.O. No. 21/KOL/2019
(arising out o f I.T.A. No. 809/KOL/2017)
Assessment Year: 2 010-2011
Sales Emporium (So uth),..............................................................Cross Objec tor
226, Diamond Harbour Road,
Kolkata-700060
[PAN: AAWFS6903J]
-Vs.-
Assistant Commissioner of Income Tax,.... .................................Respondent
Circle-26(1 ), Ko lkata,
Aayakar Bhawan Dakshin,
2, Gari ahat Ro ad (So uth),
Kolkata-700068
Appearances by:
Shri V. Nath Datta, Advocate, fo r th e Assessee
Smt. Ranu Biswas, Additional CIT, for the Departmen t
Date of concluding th e hearing : November 25, 2019
Date of pronouncing the order : December 11, 2019
1
ITA Nos. 808 & 809/KOL/2017
Assessment Years:2009-2010 & 2010-2011
&
C.O. No. 21/KOL/2019
(in ITA No. 809/KOL/2017)
Assessment year: 2010-2011
Sales Emporium (South)
O R D E R
Per Shri P.M. Jagtap, Vice-President:-
These two appeals filed by the assessee are directed against a common order of ld. Commissioner of Income Tax (Appeals)-7, Kolkata dated 20.02.2017 for assessment years 2009-10 and 2010-11 and since the issues involved therein are common, the same have been heard together and are being disposed of along with the Cross Objection filed by the Revenue for assessment year 2010-11 being C.O. No. 21/KOL/2019 for the sake of convenience.
2. The assessee in the present case is a partnership firm, which is engaged in the business of dealing in electrical and electronics goods and gadgets. The returns of income for the years under consideration were filed by it on 29.09.2009 declaring total income of Rs.23,75,351/- and Rs.41,18,748/- for assessment years 2009-10 and 2010-11 respectively. The return filed by the assessee for assessment year 2009-10 was initially processed by the Assessing Officer under section 143(1) of the Act, while the assessment for assessment year 2010-11 was completed under section 143(3) vide an order dated 26.11.2012 determining the total income at Rs.1,06,09,936/-. Thereafter the information was received by the Assessing Officer that M/s. Latest Publicity House to whom advertisement charges of Rs.10,65,000/- and Rs.15,75,000/- were claimed to be paid by the assessee for assessment year 2009-10 and 2010-11 was a sham entity as its existence was not traceable. On the basis of the said information, assessments for both the years under consideration were reopened by the Assessing Officer after recording the reasons and notices under section 148 were issued by him to the assessee on 13.03.2015. In reply, a letter was filed by the assessee on 25.03.2015 stating therein that the returns originally filed on 29.09.2009 and 2 ITA Nos. 808 & 809/KOL/2017 Assessment Years:2009-2010 & 2010-2011 & C.O. No. 21/KOL/2019 (in ITA No. 809/KOL/2017) Assessment year: 2010-2011 Sales Emporium (South) 29.09.2010 be treated as the returns filed in response to the notices under section 148 for A.Y. 2009-10 and 2010-11 respectively. During the course of assessment proceedings, summons under section 131 was issued by the Assessing Officer to M/s. Latest Publicity House at the address given by the assessee to verify the genuineness of the relevant transactions through Departmental Inspector, who reported that the said party was not inexistence at the address given in the corresponding bills. The assessee also failed to produce the said party for verification before the Assessing Officer and made the following submissions in writing before the Assessing Officer in this regard:-
"1. That o ur client is expressing th eir inability to pro duce the part y of M/s. Lat est Publicity House. Prop. Sh n Prak ash Agarwal a. Since o ur client has no business t ransactions at present with th e said party. As such our client is not aware of their present where about .
2. Th at the above said part y was assessed to Income-tax by the I.T .O. Ward 35(1), Kolkat a.
3. Th at the part y was h aving his Bank A/ c. wh ere he h as encased the Cheque. issued by our client .
4. The I.T . Depart ment has issued PAN No. to the said party with his photo ident it y,
5. We understand from the I.T .O. Ward 35(1) that refund voucher was issued t o the said party who has encased the refund.
6, The I.T . Act h as conferred vide power to your honour. Your honour may use the same.
7, That our client has transactio ns a few years back . The party may h ave changed their address o r might have shifted elsewhere in Kolkat a &/ or in West Bengal or outside West Bengal .
8. That o ur client do es not agreed about t he non-existence of the said part y. The party might have avoided appearance before the I.T. Autho rities.3
ITA Nos. 808 & 809/KOL/2017 Assessment Years:2009-2010 & 2010-2011 & C.O. No. 21/KOL/2019 (in ITA No. 809/KOL/2017) Assessment year: 2010-2011 Sales Emporium (South)
9. It will not be out of place to mention h ere th at the said party deputed his lawyer Mr. Mano j Bhudhia, Advocat e in the case of M/s. Sales Empo rium (ULG), a sister/ associate concern whom filed his Vak alat nama. Th at one Mr. Mano j Budhia, Advocate wit h Vak alatnama appeared before the
1.T. O. Ward 41(2) in the case of Sales Emporium (ULG). This leads to th e inference being drawn th at Shri P rakash Agarwal a is no no n-existence person but h e was very much there in Kolkat a carrying o n his business. He has not onl y worked fo r Sales Emporium (G aria) but he has also work ed for many other parties. He filed befo re his I.T.O. Audit ed account s duly audit ed by M/ s. J ajoo & Associat es, Chartered Accountants, Pro p. Sh ri A.K. J ajoo. The Ld. A.O. Ward 35(1) should have enquired fro m M/s. Jaioo & Associates, C .A. who h ave audited his accounts.
Under th e circumst ances, our client do es not accept the non- existence of the part y. He might be avoiding the service of notices &/ or appearance befo re the authorit ies &/ or he might h ave ch anged the pl ace of his business".
3. The above submission made by the assessee was not found acceptable by the Assessing Officer for the following reasons given in the assessment order:-
"1. The assessee vide this office letter No. ACIT/C IR- 26/148/A.Y.2009-10/2C15-16 dated l1 9.01.2016 was requested to produce the said party i.e. M/s. Latest Publicity House Prop. Shri Prakash Agarwala 9, Old China Bazar St reet , 6th Floor, Kolkat a-700001 on 22.01.2016 but in response to which the assessee failed to produce the said party. The assessee h as al ready been already informed/ intimated t hat the said part y is non- existent. Now, the onus was upon the assessee to produce the said party befo re th e undersigned but it failed to do so. The assessee was expressing its inability to produce th e said party as it h as made bogus t ransaction. Such party h as never been its existence. Hence, the contention of th e assessee is not accept able and hence reject ed.
2. M/s. Latest Publicity House Prop. Sh ri Prak ash A garwal a 9, Old China Bazar St reet , 6th Floor, Kolkata-700001 has no tangible asset in the Balance sheet though it is claimed that he is running a huge advertisement business and after the matter was detected by the department there is no business t ransact ion in the accounts of Sri Prakash Agarwal a and he is not even filing any ret urn. So , the 4 ITA Nos. 808 & 809/KOL/2017 Assessment Years:2009-2010 & 2010-2011 & C.O. No. 21/KOL/2019 (in ITA No. 809/KOL/2017) Assessment year: 2010-2011 Sales Emporium (South) assessment of Sh ri Prak ash Agarwala was of the type of Protective Assessment by IT.O. Ward 35(1). The assessee should know that demand may be reco vered from o nly existent entity and not fro m the part y which is non - existent. M/ s. Lat est Publicit y House is "sham' and all the transactions ent ered with this party are bogus. Hence, the contention of the assessee is not accept able and hence rejected.
3. From the KYC received fro m Bank it is found th at while opening Bank acco unt, the identit y was given co py of " PAN Card" and for address proof "an old Bank statement" . So , the assessee is frequently ch anging the Bank accounts after completion of sh am transactions in a Bank account and close it to o pen a new Bank account. It is also found fro m the Bank accounts th at nat ure of t ransaction in Bank A/c's is deposit by cheque and immediate withdrawal of similar amount by cheques. It appears th at the receipts in th e Bank account s are expenses debited by vario us parties- The amounts credited in the Bank account of Sri Prak ash Agarwal were fo rthwith transferred to the account s of the various co mpanies. All these expenses are not genui ne expenses. Th ere are plethora of cases to show that payments made by cheques are not allowed as true expenditure. So, mere the fact that th e party h as e ncased your ch eque, does not pro ve that th e expenses are genuine. Having, Bank a/c and encashment of cheque does not mean that t ransactions are genuine. Hence, the contention of the assessee is not accept able and hence reject ed.
4. Merely Issuing of PAN Card by I.T. Department is not proof of est ablishing identit y of th e part y and onus lies on the assessee to proof that the said party is not a fictitio us entity. In this regard, the Hon'ble Supreme Court in the case of Navodaya C astle Pvt. Lt d. v/s Commissioner of Income T ax [Special leave to Appeal No . C(C374 of 2015) dated 16.01.2015 has upheld the o rder of Hon'ble High Court of Delhi in I.T.A. No. 320 of 2012 dated 25.08.2014 that Merely possessio n of PAN C ard issued by Inco me Tax Department is not proof of est ablish ing ident ity of the party and onus lies o n the assessee to proof that the said party is not a fictitio us entit y.
5. There is not any exist ence of any advertising agency namely M/s. Latest Publicity prop. Sh ri Prakash Agarwala. Fro m various so urces like KMC and oth ers, it has been pro ved th at M/s. Latest Publicit y is 'sh am' . Hence, encashment of refund vo uchers does not proof th at your 5 ITA Nos. 808 & 809/KOL/2017 Assessment Years:2009-2010 & 2010-2011 & C.O. No. 21/KOL/2019 (in ITA No. 809/KOL/2017) Assessment year: 2010-2011 Sales Emporium (South) transaction is genuine. Hence, the co ntention of the assessee is not accept able and hence reject ed.
6. The assessee vide this office letter No. AC IT/CIR- 26/148/A.Y.2009-l0/20l5-16 dated 19.01.2 016 has al ready informed th at M/s. Latest Publicit y H ouse Prop. Sh ri Prak ash Agarwala is non-exist ent and fake. It was the onus of the assessee to pro duce th e party but th e assessee failed to discharge its onus. The I.T. Depart ment has alre ady conferred that the said part y is 'non-exist ent'. Hence, th e contention of the assessee is not accept able and hence rejected.
7. Onus to st ate the whereabouts of the part y was on the assessee. But , the assessee failed to discharge it s onus. Hence, t ransactions made with th e said part y are t reat ed as bogus and the contention of th e assessee is not accept able and hence rejected.
8. The persons associated with th e advertisement market also informed that th ere is no existence of any advert ising agency namely M/s. Latest Publicity H ouse From the records of Kolkata Municipal Corpo ration, it is al so found that no KMC t ax was ever been paid/ deposited by M/s. Latest Publicity House. Inco me T ax Department h as made enquiries and it is revealed th at the said party h as never been any exist ence. Hence, it is concluded that exi stence and act ivities of M/ s. Latest Publicity are fake. Hence, the contention of the assessee is not accept able and hence rejected.
9. As claimed by th e assessee that the said party h as deputed his lawyer Mr. Mano j Bhudhia. In this regard, the assessee has been informed that in the said Vak alatnama, no address was provided. On request, the A/R ment ioned his address as 10A, Hospit al St reet, Kolkat a-700012. Thereafter he also vanish ed. The advocate was also not traceable at that address and th e letter was ret urned by post as 'Not Known'. At the time of assessment proceedings in th e case of Shri Prak ash Agarwala it was revealed and pro ved th at the said party is "fake" and. all the transactions entered with the said parties are bogus. Hence, the contention of th e assessee is not accept able and hence rejected".
4. For the reasons given above, the advertisement charges of Rs.10,65,000/- and Rs.15,75,000/- claimed to be paid by the assessee to 6 ITA Nos. 808 & 809/KOL/2017 Assessment Years:2009-2010 & 2010-2011 & C.O. No. 21/KOL/2019 (in ITA No. 809/KOL/2017) Assessment year: 2010-2011 Sales Emporium (South) M/s. Latest Publicity House were treated as bogus by the Assessing Officer and additions to that extent were made by him to the total income of the assessee for A.Ys. 2009-10 and 2010-11 in the assessments completed under section 147/143(3) of the Act vide orders dated 28.01.2016.
5. Against the order passed by the Assessing Officer under section 147 read with section 143(3) for both the years under consideration, appeals were preferred by the assessee before the ld. CIT(Appeals) challenging, inter alia, the additions of Rs.10,65,000/- and Rs.15,75,000/- made by the Assessing Officer on account of disallowance of advertisement charges paid to M/s. Latest Publicity House. However, keeping in view the failure of the assessee to produce any further evidence to corroborate its claim on account of advertisement charges paid to M/s. Latest Publicity House, the ld. CIT(Appeals) dismissed the case of the assessee on this issue and confirmed the disallowance made by the Assessing Officer for both the years under consideration. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred these appeals before the Tribunal.
6. We have heard the arguments of both the sides and also perused the relevant material available on record. As submitted by the ld. Counsel for the assessee, a similar issue relating to the disallowance made on account of advertisement charges paid to M/s. Latest Publicity House was also involved in the case of assessee's sister concern M/s. Sales Emporium (ULG) and vide its order dated January 10, 2018 passed in ITA No. 332/KOL/2017, the 'SMC' Bench of this Tribunal decided the said issue in favour of the assessee and deleted the disallowance made by the Assessing Officer on account of advertisement charges paid to M/s. Latest Publicity House. He has also placed a copy of the said order and perusal 7 ITA Nos. 808 & 809/KOL/2017 Assessment Years:2009-2010 & 2010-2011 & C.O. No. 21/KOL/2019 (in ITA No. 809/KOL/2017) Assessment year: 2010-2011 Sales Emporium (South) of the same shows that a similar issue was decided by the Tribunal in favour of the assessee for the following reasons given in paragraph no. 6:-
"I have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that copies of bills raised by Lat est Publicity House for ho arding ch arges (co pies at page no 1, 2 & 3 of the assessee's Paper Book no. 3 ) were filed by t he assessee before the authorit ies below. As claimed by the assessee befo re the authorities below as well as before the Tribunal , payments against the said bills were made by acco unt payee cheques after deduct ion of tax at source. A confirmation lett er of M/s. Latest Publicity House (co py at page 44 of Paper Book no 1) was also filed by the assessee before the A.D. giving permanent account number of the said party as well as other income t ax part iculars incl uding the copy of acknowledgement o f IT ret urn. for the year under consideration. Having regard to this documentary evidence placed on record, I find merit in th e cont ention of the learned counsel fo r the assessee that the claim o f the assessee for deduct ion of at least the hoarding charges of Rs. 11 ,25,000/- paid to M/s. Latest Publicity House was duly supported and subst antiated by the relevant documentary evidence and the authorities below were not justified in disallowing the same merely on the ground that th e same was not verifiable in the absence of co rrect address of the said part y given by th e assessee. In my opinion, when th e permanent account number as well as other particulars of the income tax assessment of the said party were placed on reco rd befo re the A.D., he could have easily verified t he claim of th e assessee directl y with the said part y instead of harping on the failure of the assessee to give the correct address or produce t he said party fo r verificat ion".
7. At the time of hearing before us, no case has been made out by the ld. D.R. to point out any distinction in the material facts involved in the present case as compared to the case of M/s. Sales Emporium (ULG) decided by this Tribunal vide its order dated January 10, 2018. We, therefore, respectfully follow the said order of the Tribunal passed in the case of the sister concern of the assessee on a similar issue involving similar facts and delete the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of advertisement 8 ITA Nos. 808 & 809/KOL/2017 Assessment Years:2009-2010 & 2010-2011 & C.O. No. 21/KOL/2019 (in ITA No. 809/KOL/2017) Assessment year: 2010-2011 Sales Emporium (South) charges paid to M/s. Latest Publicity House for both the years under consideration.
8. As a result of the aforesaid decision rendered by us deleting the disallowance made on account of advertisement charges paid to M/s. Latest Publicity House for both the years under consideration, the other issues raised by the assessee in its appeals as well as by the Revenue in its Cross Objection relating to the validity of the assessments made by the Assessing Officer under section 147 read with section 143(3) have become infructuous or academic and we do not consider it necessary or expedient to decide the same.
9. In the result, both the appeals of the assessee are allowed, while the Cross Objection of the Revenue is dismissed.
Order pronounced in the open Court on December 11, 2019.
Sd/- Sd/-
(A.T. Varkey) (P.M. Jagtap)
Judicial Member Vice-President)
Kolkata, the 11 t h day of December, 2019
Copies to : (1) M/s. Sales Emporium (Sou th),
226, Diamond Harbour Road, Kolkata-700060 (2) Assistant Commissioner of Income Tax, Circle-26, Ko lkata, Aayakar Bhawan Dakshin, 2, Gariahat Road (Sou th), Kolkata-700068 (3) Commissioner of Inco me T ax (Appeals)-7, Kolkata; (4) Commissioner of Inco me T ax, Kolkat a- , Kolkata;
(5) The Depart ment al Represent ative
(6) Guard File
By order
Assistant Registrar,
Income Tax Appellate Tribunal,
Kolkata Benches, Kolkata
Laha/Sr. P.S.
9