Case Law Details
Rina Egg Centre Vs ITO (ITAT Kolkata)
Conclusion: Since the matter was affected by lack of proper persuasion before the lower authorities and Tribunal was unable to examine detailed account matching, turnover from bank accounts, or vouchers for expenses, therefore, the matter need to be sent back to AO to give assessee an opportunity to prove the authenticity of their income claim.
Held: During scrutiny assessment of assessee, AO made several additions for cash deposited in the bank account, for differences in accounts with Dhanlaksmi Poultries for difference in turnover disclosed and gross receipts evidenced from the bank account, difference in the accounts of assessee and one M/s. G Traders and M/s. M Poultries, disallwances from various expenses claimed and disallowed u/s 40(a)(ia). Aggrieved by the additions made by AO, assessee filed an appeal before CIT(A), who upheld the findings of AO. Assessew filed a further appeal before the Tribunal, raising grounds that the order of the CIT(A) was bad in law and in fact. Assessee argued that CIT(A) had made an incorrect and unfair decision by agreeing with AO, who added ₹11,20,000 under Section 69A. The addition was made without considering that assessee deposited this cash during the demonetization period as per the Reserve Bank of India (RBI) instructions. Further CIT(A) erred in confirming AO’s decision to add ₹2,68,165 as profit from undisclosed business, based on incorrect calculations, ignoring inter-bank transactions and inter-branch transfers. Additionally, CIT(A) wrongly upheld an addition of ₹16,67,83,605 for unexplained investment in undisclosed stocks, based on a reply to a notice, without allowing assessee to justify the claim or considering that no transactions occurred in the relevant financial year. Both additions were unjustified and should be removed. Also, CIT(A) wrongly confirmed AO’s decision to disallow ₹11,51,363 (5% of ₹2,80,18,601) for transport charges, despite ledger accounts being submitted. It was held that this case suffered on account of lack of proper persuasion before the authorities below. It was felt that the minute details of matching of accounts, working out the exact quantum of turnover from the bank accounts and matching of vouchers with expenses claimed could not be done by this Bench of ITAT. However, it was clear that this matter need to be remanded back to AO to enable assessee a chance to prove the bona fides of the claim of income before AO. It was felt that it would be in the interest of assessee to present all necessary documents and evidences before AO to enable a correct and fair assessment of income. With these remarks, the matter was remanded to the file of AO for a fresh adjudication after giving an opportunity of being heard to assessee.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
In this case, the appellant is engaged in the business of wholesale trading of eggs. The appellant filed his return of income on 27.03.2018 and thereafter the case was picked up for scrutiny, as a result of which the following additions have been made:
a) Rs. 11.20 Lakh on account of cash deposited in bank account.
b) Rs. 263,165/- on account of difference in turnover disclosed and gross receipts evidenced from the bank account.
c) Rs. 16,67,83,650/- added on account of difference between the accounts of assessee and one Dhanlaksmi Poultries.
d) Rs. 13,19,354/- on account of difference in the accounts of appellant and one M/s. Gopal Krishna Traders and M/s. Mulpuri Poultries.
e) Rs. 11,51,363/- on account of disallowances from various expenses claimed.
f) Rs.28,800/- disallowed u/s 40(a)(ia) of the Act.
1.1. The additions made by the ld. AO were confirmed by the ld. CIT(A) and aggrieved with this action, the appellant is before us through the following grounds of appeal:
“1. That on the facts and in the circumstances of the case the Ld. CIT(A), NFAC is wrong, unjust and has erred in law in confirming the action of Ld. Assessing Officer in holding the addition of Rs. 11,20,000/- made u/s 69A of the Income Tax Act, 1961 without appreciating the fact that that the Appellant had deposited cash hi form of SBN during demonetization period according to the instruction of RBI out of the Cash in Hand as on 08/11/2016, the impugned addition made by the Assessing officer is arbitrary and should be deleted.
2. That on the facts and in the circumstances of the case the Ld. CIT(A), NFAC is wrong, unjust and has erred in law in confirming the action of Ld. Assessing Officer in holding the addition of profit earned out of undisclosed business of Rs. 2,68,165/- having wrongly considered the difference between total of all credits in all banking Accounts and the turnover as per Audited Profit N Loss Account without considering inter Bank transactions and/or Inter Branch transfers which should not be considered as undisclosed sales, the impugned addition made by the Assessing officer is arbitrary and without any basis and should be deleted.
3. That on the facts and in the circumstances of the case the Ld. CIT(A), NFAC is wrong, unjust and has erred in law in confirming the action of Ld. Assessing Officer treating as unexplained investment made in undisclosed stocks out of books and thus making an addition of Rs. 16,67,83,605/- as per the provision of section 69 of the Act calculated on the basis of reply submitted against notice u/s 138(6) of the I.T. Act, 1961 without providing opportunity to the Appellant to justify the claim and without considering the fact that no transaction was made during the financial year under appeal, the impugned addition made by the Assessing officer is arbitrary and without any basis and should be deleted.
4. That on the facts and in the circumstances of the case the Ld. CIT(A), NFAC is wrong, unjust and has erred in law in confirming the action of Ld. Assessing Officer in treating as unexplained expenditure and thus making addition of Rs. 13,19,354/- calculated wrongly on the basis of reply submitted against notice u/s 133(6) of the LT. Act, without considering the fact there actually was no difference of transaction and the addition made by him on the basis of wrong calculation and the allegation of unexplained expenditure was due to limited exposure and the impugned addition made by the Assessing officer is arbitrary and without any basis and should be deleted.
5. That on the facts and in the circumstances of the case the Ld. CIT(A), NFAC is wrong, unjust and has erred in law in confirming the action of Ld. Assessing Officer in holding the disallowance of expenses including Transport Charges on Ad hoc basic i.e. 5pc of Rs. 2,80,18,601/-amounting to Rs. 11,51,363/- on the alleged ground that the supporting evidence was not produced without considering that ledger accounts were submitted and the impugned disallowance made by the Assessing officer is arbitrary and without any basis and should be deleted.
6. That on the facts and in the circumstances of the case the Ld. CIT(A), NFAC is wrong, unjust and has erred in law in confirming the action of Ld. Assessing Officer in holding the disallowance of 30 pc of accounting Charges of Rs. 96,000/- debited in Profit N Loss Account of Rs. 28,800/- without considering the fact that the same will not liable to deduct tax and the impugned disallowance made by the Assessing officer is arbitrary and without any basis and should be deleted.
7. That, the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/ or rescind any or all of the above grounds.”
1.2. Right at the outset, the ld. A/R averred that in spite of some details filed before the Assessing Officer (hereinafter referred to as ld. ‘AO’) it has been mentioned in several places in the assessment order (especially on page 2 of the order of the ld. AO) that as many as 11 notices sent were either not responded to or in some cases only part compliance made thereon. The ld. A/R also pointed out that even the ld. CIT(A) has recorded in para 4 of page 3 of the impugned order that notices sent from time to time were not responded to. Be that as it may the ld. A/R vehemently asserted that considerable details were filed before both the lower authorities and they could have evaluated the documents before them easily.
1.3. The ld. A/R pointed out that the adverse presumptions drawn by the ld. AO were not justified considering that considerable details were already filed before the ld. AO and any difference in the accounts of trade creditors could be easily explained in case a proper opportunity had been allowed to the assessee. The ld. A/R took pains to point out the details of bank accounts, trade creditors etc. through a detailed paper book running into 220 pages. The additions have already been briefly mentioned in para 1 (supra) and incidentally these additions correspond with the six grounds of appeal in that sequence. In fact, for the addition made on account of Dhanlaksmi Poultries, it was pointed out that there was no transaction during FY 2016-17 and in spite of that the amount of Rs. 16,67,83,6058/- was added. The ld. A/R took pains to take us through all the grounds of appeal and relied on various documents purportedly filed before the ld. AO.
1.4. The ld. D/R supported the orders of the authorities below and stated that certain aspects of this case which appear to be in such black and white manner in favour of the appellant before the Hon’ble ITAT could well have been presented before the ld. AO who would have duly considered the documents and arrived at a reasonable conclusion.
2. We have considered the arguments of ld. AR/DR and perused the documents before us. It is clear that this case suffered on account of lack of proper persuasion before the authorities below. It is felt that at this stage the minute details of matching of accounts, working out the exact quantum of turnover from the bank accounts and matching of vouchers with expenses claimed cannot be done by this Bench of ITAT. However, it is clear that this matter needs to be remanded back to the ld. AO to enable the appellant a chance to prove the bona fides of the claim of income before the ld. AO. It is felt that it would be in the interest of the appellant to present all necessary documents and evidences before the ld. AO to enable a correct and fair assessment of income. With these remarks, the matter is remanded to the file of the ld. AO for a fresh adjudication after giving an opportunity of being heard to the appellant.
3. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 18th November, 2024.
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