Debasish Banerjee, Hooghly vs Assessee

आयकर अपील य अधीकरण, यायपीठ - "A" कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH: KOLKATA (सम )Before ी महावीर संह, यायीक सद य एवं/and ी शामीम याहया, लेखा सद य) [Before Shri Mahavir Singh, JM & Shri Shamim Yahya, AM]

आयकर अपील सं या / I.T.A Nos.124 & 125/Kol/2014 नधॉरण वषॅ/Assessment Years: 2005-06 & 2006-07

Sri Debasish Banerjee Vs. Income-tax Officer, Wd-1(1), Kolkata (PAN:AHQPB4219B) (अपीलाथ /Appellant) ( यथ /Respondent)

Date of hearing: 15.01.2015 Date of pronouncement: 03.02.2015

For the Appellant: Shri Chiradip Mahalanabish, Advocate For the Respondent: Shri Aloke Nag, JCIT, Sr. DR ORDER Per Shri Mahavir Singh, JM

Both the appeals by assessee are arising out of separate orders of CIT(A)- XXXVI, Kolkata in Appeal No. 232/231/CIT(A)-XXXVI/Kol/Wd-1(1),Hg/10-11 dated 20.11.2013. Assessments were framed by ITO, Ward-1(1), Hooghly u/s. 147/143(3) of the Income-tax Act, 1961 (hereinafter referred to as the "Act" ) for AYs. 2005-06 & 2006-07 vide his separate orders both dated 15.12.2010.

2. The only common issue in these two appeals of assessee is against the orders of CIT(A) confirming the action of AO making addition of unexplained investment u/s. 69 of the Act on account of undisclosed purchases and profit thereon at Rs.16,66,292/- as purchases and profit of Rs.2,35,016/- and undisclosed purchases of Rs.6,42,767/- and profit thereon at Rs.40,361/- for AYs 2005-06 and 2006-07 respectively. For this, assessee has raised common ground and facts and circumstances are exactly identical in both the years. Hence, we will take the issue and facts from AY 2005-06 in ITA No.124/K/2014 and decide the issue. The grounds raised vide effective ground nos. 2 to 6 read as under:

"2. That the Ld.CIT(A) was not justified in sustaining addition of Rs.16,66,292/- made by the Assessing officer as unexplained investment u/s 69 towards undisclosed purchase and profit thereon.

3. That Ld.CIT(A) had not properly considered all facts & circumstances of the case where A.O. justified undisclosed purchase of Rs. 14,31,276/- as 2 ITA Nos.124 & 125/K/2014 Debasish Banerjee 2005-06 & 2006-07

undisclosed investment u/s 69.

4. That the Ld.CIT (A) was unjustified in applying the explanation to section 69 of I. T. Act. 1961.

5.That the Ld.CIT (A) was not justified in arriving at a profit figure of Rs.2,35,016/- on undisclosed purchase and the ratio calculation adopted by him in arriving at the said profit ( G.P./Purchase * 100 i.e. 16.42%) is considered as hypothetical and his further sustaining of the fact that the same would be under the ambit of section 69 of the Income Tax Act 1961.

6.That the Ld.CIT (A) was wrong in coming to the conclusion that entire value of undisclosed purchase and assumed profit element included thereon were unexplained."

3. Briefly stated facts are that the assessee is a trader in Indian made Foreign Liquor (IMFL). The assessee in its trading account debited purchases for an amount of Rs.78,32,073/-.. The AO during the course of assessment proceedings noticed from Tax Collection at Source (TCS) Certificates that purchases made by assessee are at Rs.93,38,984/-. Accordingly, net purchases stood at Rs.92,63,349/-. According to AO, there is a difference of Rs.14,31,276/- i.e. purchases as per TCS certificates at Rs.92,63,349/- and purchases debited in trading account at Rs.78,32,073/-. The AO requested the assessee to explain the difference by issuing letter as under:

"It is seen that during the previous year relevant to assessment year 2005-06 total purchase debited to P&L Account at Rs.78,32,073/-. But on examination of purchase based on TCS at Rs.75,635/- it is seen that total amount of purchase is Rs.93,38,984/-. Thus net purchase stands at Rs.92,63,349/- (93,38,984 - 75,635). Therefore, there is a difference of Rs.14,31,276/- (Rs.92,63,349-78,32,073) which has escaped assessment."

The assessee admitted that the purchases are to the tune of Rs.92,63,259/- but due to accounting procedure he has disclosed only Rs.78,32,073/- vide letter dated 08.11.2010 and the relevant as reproduced by AO is again reproduced by us for the sake of clarity, which reads as under:

"You intend to add this difference amount to profit, but you failed to mention under what section of the I. T. act empower you to add enhancement of purchase is to be added to profit. You determined the sale as constant. Therefore difference of purchase is to be added with purchase A/c. resultant effect is purchases will be Rs.78,32,073/- + Rs.14,31,186/- i.e. Rs.92,63,259/- profit will be diminish of loss. There is no law by which undisclosed purchase is to be added to profit. It is against the accounting principle. It cannot be said that all purchases are profit. Some percentage of purchase is profit. It is wise for the sake of revenue and for the end of justice to determine 5% profit on purchases u/s. 44AF.

Therefore estimated income of undisclosed purchases as you alleged Rs.14,31,186/- x 5% = 71,559/- is to be added to income."

3 ITA Nos.124 & 125/K/2014 Debasish Banerjee 2005-06 & 2006-07

Accordingly, the difference as not reconciled or not explained by the assessee, the AO added back Rs.14,31,186/- and also estimated profit @ 5% to the tune of Rs.2,35,016/-. Aggrieved, assessee preferred appeal before CIT(A). Before CIT(A) assessee pleaded that it is only an accounting procedure and if the entire purchase taken into consideration, there will be negative profit. According to assessee's counsel before CIT(A), there is no bills found by the AO. But CIT(A) considered the submissions in Paras 5.5 and 5.8 and held that the AO has correctly added the investment as undisclosed/unaccounted purchases being unexplained investment u/s. 69 of the Act by observing as under:

"5.5. During the course of appellate proceeding the appellant's AIR was asked to produce the cash book, ledger and the supporting evidence to identify the purchases which were shown in the books of account and the purchase which were not shown. However the AIR categorically stated that no books of account are available. Thus no evidence whatsoever was produced to show that the unaccounted purchase was spread over throughout the year over 30 purchases and only a part needs to be taken as unexplained investment U/S. 69 of the I. T. Act. Further on perusal of the return of income filed, it is seen that the assessee's accounts were audited by a Chartered accountant. In the Form No. 3CD it has been stated that the books of account maintained were cash book, ledger. stock register etc. In other words all the regular books of accounts were-maintained. Therefore the fact that a part of purchase was not shown in the books of account especially in stock register also indicate that the related sales was also not accounted for. In fact a part of purchase and sales was completely out of the books of account. In absence of production of any evidence regarding the unaccounted purchase, in fact by giving a false statement during appellate proceeding that no books of accounts are maintained, the appellant has clearly failed to discharge the onus cast upon him as per Section 69 of the I. T. Act.

5.8. The discussion in para 5.3 to 5.7, the case laws cited therein and the fact that the appellant has admitted to unexplained investment in purchase is taken note of. The appellant has not been able to discharge his onus for explaining the source thereof with any supporting evidence that the investment was rotated over the years for making the purchases. Further the A.O. has adopted the gross profit from the gross profit as shown by the assessee himself for his accounted for sales. Therefore it is held that the A.O. has correctly added the investment in unaccounted for purchase and the profit thereof as unexplained investment u/s. 69 of the I. T. Act."

4. Before us Ld. Counsel for the assessee Shri Chiradeep Mahalanabish, Advocate argued that the assessee considered the difference above as posting error in expenditure sought to be claimed, which do not tantamount to unexplained investment. According to him, the purchases cannot be construed as an income which is against all principles of accountancy. Ld. Counsel for the assessee relied on the proposition laid down in the case of CIT Vs. Daya Chand Jain Vaidya (1975) 98 ITR 280 (All). When a query was 4 ITA Nos.124 & 125/K/2014 Debasish Banerjee 2005-06 & 2006-07

put, ld. Counsel for the assessee could not answer, whether he can reconcile the difference before us or before the AO but stated that there is no question of any reconciliation because there is a difference exists as per TCS certificate issued by Govt. of West Bengal being purchases made of IMFL. He only admitted that this can be a posting error.

5. On the other hand, Ld. Sr. DR. Shri Aloke Nag relied on the order of AO as well as that of CIT(A). He stated that even now the assessee could not explain or could not reconcile the difference between the purchases recorded in the trading account or disclosed in the return of income and purchases as per TCS certificate, rather assessee's counsel admitted even now that there is difference.

6. We have heard rival submissions and gone through facts and circumstances of the case. Before us assessee could not reconcile the difference between purchases as debited in the trading account and purchases as per TCS certificate. Even the assessee could not produce books of account and clearly admitted that assessee being a trader in IMFL does not maintain books of account. There is clear cut difference in the purchases and unaccounted purchases in both the years could not be explained nor accounted for. The CIT(A) has rightly confirmed the addition as the assessee could not explain even now before us or could not reconcile the difference. In term of the above, we confirm the order of CIT(A) in confirming the action of AO in treating the same as undisclosed purchases added u/s. 69 of the Act. Both the appeals of assessee are dismissed.

7. In the result, appeals of assessee are dismissed.

8. Order is pronounced in the open court on 03.02.2015.

Sd/- Sd/- (Shamim Yahya) (Mahavir Singh) Accountant Member Judicial Member

Dated : 3rd January, 2015

व र ठ निज स चव Jd.(Sr.P.S.) 5 ITA Nos.124 & 125/K/2014 Debasish Banerjee 2005-06 & 2006-07

आदेश क त ल प अ े षतः- Copy of the order forwarded to:

1. अपीलाथ /APPELLANT - Shri Debasish Banerjee, 15, G. T. Road, Paltaghat, P.O. Champdani, Bhadreswar, Dist. Hooghly, Pin 712222. 2 यथ /Respondent - ITO, Ward-1(1), Kolkata.

3. आयकर क मशनर (अपील)/ The CIT(A), Kolkata

4. आयकर क मशनर/ CIT Kolkata

5. वभा गय तनीधी / DR, Kolkata Benches, Kolkata स या पत त/True Copy, आदेशानुसार/ By order,

सहायक पंजीकार/Asstt. Registrar.