Income Tax Appellate Tribunal - Kolkata
Santosh Kumar Soni, Kolkata vs Ito, Wd-45(2), Kolkata, Kolkata on 24 March, 2017
I . T. A . N o. 4 0 3 / KO L . / 2 0 1 4
Assessment year: 2005-2006
Page 1 of 6
IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'C(SMC)' BENCH, KOLKATA
Before Shri P.M. Jagtap, Accountant Member
I.T .A. No. 403/KOL/ 2014
Assessment Year: 2005-2006
Santosh Kumar Soni, ...................................................................Appellant
5, Narayan Babu Lane,
Kolkata-700 007
[PAN: ALPPS 8209 K]
-Vs.-
Income Tax Officer,.....................................................................Respondent
Ward-45(2 ), Kolkata,
3, Government Place West,
Kolkata-700 001
Appearances by:
Shri Subash Agarwal, Advocate, for the assessee
Shri Rajendra Prasad , JCIT , D.R., for the Department
Date of concluding th e hearing : March 02, 2017
Date of pronouncing the order : March 24, 2017
O R D E R
This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-XXX, Kolkata dated 29.11.2013.
2. The assessee in the present case is an individual, who filed his return of income for the year under consideration on 31.07.2005 declaring total income of Rs.1,01,390/-. The said return was initially processed by the Assessing Officer under section 143(1) on 18.08.2006. He, however, subsequently received information about the assessee having made cash purchases of Rs.15,03,107/- from one Shri Kashinath Dutta during the year under consideration. On the basis of the said information, the assessment of the assessee for the year under consideration was re-opened by the Assessing Officer and a notice under section 148 was issued by him to the assessee. In response to the said notice, the return of income was filed by the assessee on 20.09.2011 declaring total income of Rs.1,22,490/-. Along with the said return, a I . T. A . N o. 4 0 3 / KO L . / 2 0 1 4 Assessment year: 2005-2006 Page 2 of 6 revised Profit & Loss Account and Balance-sheet was filed by the assessee. In the revised Profit & Loss Account so filed, the purchases of Rs.15,03,107/- made in cash from Shri Kashinath Dutta were included by the assessee by increasing the total purchases to that extent. The corresponding sales were also increased by the assessee proportionately after showing the gross profit at the rate of 1.34% and accordingly the total income was shown at Rs.1,22,490/- as against the total income of Rs.1,02,463/- offered in the return of income originally filed. During the course of assessment proceedings, the assessee, however, could not explain any exceptional circumstances as specified in Rule 8DD of Income Tax Rules, under which he was required to make payments in cash against the purchases exceeding threshold limit of Rs.20,000/-. The Assessin g Officer, therefore, invoked the provision of section 40A(3) of the Act and disallowed the entire purchases of Rs.15,03,107/- made by the assessee in cash in the assessment completed under section 143(3)/147 vide an order dated 30.12.2011.
3. Against the order passed by the Assessing Officer under section 143(3)/147, an appeal was preferred by the assessee before the ld. CIT(Appeals) challenging the disallowance made by the Assessing Officer under section 40A(3). During the course of appellate proceedings before the ld. CIT(Appeals), new stand was taken on behalf of the assessee that the payments in cash against the purchases were made in the amounts of less than Rs.20,000/-. A chart giving details of such payments made in cash was also filed by the assessee before the ld. CIT(Appeals). This new stand taken by the assessee before him was not accepted by the ld. CIT(Appeals) keeping in view a specific finding given by the Assessing Officer in the assessment order that the payments made in cash were made in the sums exceeding Rs.20,000/-. He also noted that the claim made by the assessee of having paid cash in the sums less than Rs.20,000/- on the same dates was not supported by any documentary evidence. He held that the pattern of cash payments on specific dates and on the same date on multiple occasion as shown by the assessee was I . T. A . N o. 4 0 3 / KO L . / 2 0 1 4 Assessment year: 2005-2006 Page 3 of 6 extremely improbable and beyond human probability. He, therefore, upheld the action of the Assessing Officer in making a disallowance made under section 40A(3) on account of payments made in cash against the purchases. He, however, accepted the alternative plea of the assessee that the disallowance only to the extent of 20% of such cash payments was liable to be made under section 40A(3) as applicable to the assessee under consideration, i.e. A.Y. 2005-06. Accordingly, he restricted the disallowance under section 40A(3) to Rs.3,00,621/-. At the same time, he made a further addition of Rs.3,00,621/- to the total income of the assessee on account of alleged investment made by the assessee in the undisclosed business transactions of purchases and sales for the following reasons given in his impugned order:-
"The whole purchases, sales and payments connected with the undisclosed purchase of Rs.15,00,000/- were outside the regular Books of Accounts and were in much excess of regular transactions of Rs.2,83,250/-. Thus, it is clear that substantial part of the business of the assessee is outside the regular Books of Accounts. The Assessee has offered only Rs.20,000/- about as profit on undisclosed business connected to the undisclosed purchase of Rs.15,03,107/- of Jewellery. To sustain the said undisclosed business, undisclosed capital is also required. The assessee claims that sale proceeds were utilized for payment of purchase amounts without any basis. It is reasonable to hold that a percentage of the purchase represents undisclosed capital utilized to carry out such transactions. 20% of the undisclosed purchase is held to represent undisclosed capital employed by the appellant in the said undisclosed business. Hence, further amount of 20% of Rs.15,03,107/- is held as undisclosed income representing undisclosed capital employed by the appellant. Accordingly, further enhancement of income of Rs.3,00,621/- is made to the total income of the appellant".
4. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal on the following grounds:-
(1) That the ld. CIT(A) erred in confirming the addition of Rs.3,00,621/- by applying the provision of section 40A(3) of the Income Tax Act, 1961 when the said provision was not applicable on the facts and circumstances of the case.
I . T. A . N o. 4 0 3 / KO L . / 2 0 1 4 Assessment year: 2005-2006 Page 4 of 6 (2) That the ld. CIT(A) erred in estimating Rs.3,00,621/-
as the capital required for the purchase of doing undisclosed business without any basis or evidence.
5. I have heard the arguments of both the sides and also perused the relevant material available on record. As regards the issue involved in Ground No. 1 relating to the disallowance of Rs.3,00,621/- as sustained by the ld. CIT(Appeals) under section 40A(3), the ld. counsel for the assessee has reiterated before me the stand taken before the ld. CIT(Appeals) that all the relevant payments made in cash against the purchases were in the sums less than Rs.20,000/-. However, as rightly pointed out by the ld. D.R. by relying on the relevant portion of the ld. CIT(Appeals)'s order, this stand was never taken by the assessee before the Assessing Officer and although a chart was filed by the assessee before the ld. CIT(Appeals) giving the details of cash payments, the same was not supported by any documentary evidence. Moreover such cash payments of less than Rs.20,000/- were shown by the assessee on the same date on multiple occasions and this pattern, as rightly observed by the ld. CIT(Appeals), was extremely improbable and beyond human probability. As regards the reliance placed by the ld. counsel for the assessee on the decision of the Hon'ble Calcutta High Court in the case of CIT -vs.- CPL Tannery [318 ITR 179 (Cal.)] in support of the assessee's case, it is observed that the disallowance made in the said case under section 40A(3) was mainly deleted by the Tribunal after having found that the case of the assessee was covered by exceptional circumstances as specified in Rule 6DD of the Income Tax Rules and the appeal filed by the Revenue challenging the said decision of the Tribunal was dismissed by the Hon'ble Calcutta High Court holding that the same did not involve any question of law. In the present case, no case has been made out by the assessee to show that the payments in cash against the purchases were made by him under any of the exceptional circumstances as specified in Rule 6DD and this being so, I find that the ratio of the decision of the Hon'ble Calcutta High Court in the case of CPL Tannery (supra) is not applicable to the case of the assessee. I, therefore, find no infirmity in the I . T. A . N o. 4 0 3 / KO L . / 2 0 1 4 Assessment year: 2005-2006 Page 5 of 6 impugned order of the ld. CIT(Appeals) upholding the action of the Assessing Officer in making disallowance under section 40A(3) on account of cash payments made by the assessee against purchases. Ground No. 1 is accordingly dismissed.
6. As regards the issue raised in Ground No.2 relating to the addition made by the ld. CIT(Appeals) himself for the first time on account of the alleged unexplained investment made by the assessee in the undisclosed transactions of purchases and sales of jewellery, the ld. counsel for the assessee has contended that there was nothing brought on record by the ld. CIT(Appeals) to show that such investment was actually made by the assessee. As rightly pointed out by him, a consistent stand in this regard was taken by the assessee right from the assessment stage that the payments against the purchases in question were made by the assessee from the proceeds of corresponding sales and there is nothing brought on record by the Revenue to dislodge this stand taken by the assessee and to show that any investment was actually made by the assessee for making the undisclosed transactions of purchases and sales. I am, therefore, of the view that the addition of Rs.3,00,621/- made by the ld. CIT(Appeals) to the total income of the assessee on account of the alleged unexplained investment made by the assessee in the undisclosed transactions of purchases and sales is not sustainable and deleting the same, I allow Ground No. 2 of the assessee's appeal.
7. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open Court on March 24, 2017.
Sd/-
(P.M. Jagtap) Accountant Member Kolkata, the 24 t h day of March, 2017 Copies to : (1) Shri Santosh Kumar Soni, 5, Narayan Babu Lane, Kolkata-700 007 I . T. A . N o. 4 0 3 / KO L . / 2 0 1 4 Assessment year: 2005-2006 Page 6 of 6 (2 ) Income Tax Officer, Ward-45(2 ), Kolkata, 3, Government Place West, Kolkata-700 001 (3) Commissioner of Income Tax (Appeals)-XXX, Kolkata;
(4) Commissio ner of Income Tax- ,
(5) The Depart ment al Represent ative
(6) Guard File
TRUE COPY
By order
Assistant Registrar,
Income Tax Appellate Tribunal,
Kolkata Benches, Kolkata
Laha/Sr. P.S.