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2017 (1) TMI 1001 - ITAT KOLKATA

2017 (1) TMI 1001 - ITAT KOLKATA - TMI - Addition on account of difference in opening balance of sundry creditor namely MTA - Held that:- We find that the balance of sundry creditor was brought forward in the year under consideration from the previous financial year. As such, we find that the corresponding purchase in relation to impugned sundry creditor was booked by the assessee in the immediate preceding year which has been allowed in the earlier year. Therefore, in our considered view, the i .....

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booked the sundry creditor liability with MTA out of ignorance cannot form the basis for the addition of such sundry creditor. Similarly what policy is being adopted by MBC for recognizing the sales Revenue has no bearing to the facts of the case. On perusal of the ledger of MTA, we find that the accounts were settled in the year under consideration. - Decided in favour of assessee - Addition on account of non disclosure of income from interest - AO made the addition on account of difference .....

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figure was observed. Therefore after considering the submission of the assessee, we find no difference between amount of profit shown in the profit and loss account and in the computation of income. As such, we find no infirmity in the order of Ld. CIT(A). - Decided in favour of assessee - Addition on account of diversification of interest bearing fund to interest free loan - Held that:- There is no dispute with regard to amount of debtor shown in the balance-sheet vis-à-vis interest free l .....

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rrect and in accordance with law and no interference is called for - Decided in favour of assessee - Addition on account of difference in gross profit - Held that:- From the perusal of remand report, it is ample clear, that there is no cogent reason for rejecting the books of account and estimating the gross profit @ 0.41%. This fact has been duly accepted by AO in its remand report. In this view of the matter, we find no reason to interfere with the findings arrived by the Ld. CIT(A). Under .....

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een verified by Authorities Below. Needless to mention that the additional document was not submitted before Authorities Below but it does not mean that he should be deprived of justice. Thus restore the matter to the file of AO for fresh adjudication. This ground of assessee’s appeal is allowed for statistical purpose in terms of above. - ITA No. 1933 & 2446/Kol/2012 - Dated:- 11-1-2017 - Shri Waseem Ahmed, Accountant Member And Shri S. S. Viswanethra Ravi, Judicial Member By Assessee : Shri V. .....

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154/271(1)© of the Act vide his order dated 12.07.2012. Shri Rakesh Goyal, Ld. Departmental Representative appeared on behalf of Revenue and Shri V.N.Purohit, Ld. Authorized Representative appeared on behalf of assessee. 2. Both appeals are heard together and are being disposed of by way of consolidated order for the sake of convenience. First we take up Revenue s appeal in ITA No.1933/Kol/2012. 3. Facts in brief are that assessee is a partnership firm and acting as stockist of lottery tic .....

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ade by AO for ₹ 6,75,99,557/- on account of difference in opening balance of sundry creditor namely MTA. 4.1 The assessee in the immediate previous financial year has shown MTA as creditor for ₹ 6,99,16,984/- as on 31.3.2007 which was brought forward as opening balance to the year under consideration as on 01.04.2007. The Income Tax Inspector was deputed to verify the figure of sundry creditor as discussed above in the course of assessment proceedings. The IT Inspector in turn submit .....

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ted the difference of ₹ 6,75,99,577/- as bogus cash credit introduced in the year under consideration as on 01.04.2007 and added to the total income of assessee as unexplained creditor. 5. Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas assessee submitted that the M/s Best & Company (MBC for short) is the main organizer of the business of the lottery. The assessee used to buy the lottery tickets from MBC. But subsequently the MBC has created a sister company under the .....

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eedings. Accordingly the difference as observed by AO was reconciled. Further, assessee submitted that as per the accounting policy MBC never used to put the sale in the accounting books. It is because huge sale return and MBC used to book only net sales. Considering the facts and circumstances, Ld. CIT(A) deleted the addition made by AO by observing as under:- I have considered both the rival arguments. Best & Co. confirmed that they dispatched materials of ₹ 6,75,99,577.00 but they d .....

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g system. Even Best & Co. by not debiting the Appellant did not reduce the liability. In the event of any dispute the liability would fall on the Appellant on the date when they accepted the bill and challan. Their argument about the return of goods sold till the draw date does not reduce the liability of the Appellant. On careful consideration on the order passed by the AO, arguments submitted by the AR and confirmation of the party. AO is directed to delete the addition of ₹ 6,75,99, .....

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r state and as per the records of the assessee the corresponding figures are ₹ 80,051.50 (Dr) for WB state and ₹ 6,99, 16,984/- for other states. It is also to bring on record that Tiger Associates has confirmed such figure vide their reply dated 15.12.2010. Thus there is no difference in amount for the WB state and the sole difference of ₹ 6,75,99,577/- is attributable for other state only which was added as bogus cash credit. 2. Before the Ld. CIT(A), the stand of the appella .....

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07.02.2012 that no such entries were passed in the ledger account of M/s. Best & Company and M/s. Tiger Associates in the books of accounts of the assessee. No ostensible reason could be adduced as to why the assessee extinguished its liability to M/s. Best & Company only to create another liability of ₹ 7,20,74,288/- on 01.04.2007 in the account of M/s. tiger Associates. 3. In this regard, it is pertinent to refer to the remand report of the AO which speaks for itself. There were .....

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any liability as on 01.04.2007 to M/s. Best & Company. There is no brought forward liability as on 01.04.2007 from earlier years. ii) Why did the ledger copy of account of M/s. Tiger Associates in the books of the assessee firm for the F. Y.2007-08 not shown any credit entry (through Transfer) as on 01.04.2007 despite the assessee's claim that the liability to M/s. Best & company was transferred to M/s. Tiger & Associates as on 01.04.2007. iii) Why did the ledger copy of account .....

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e of assessment was not supplied with any details of sundry creditors for ₹ 9,43,82, 663/- as on 31.03.2008 as evident from his observation made in the order dated 30.12.2010 at para-2 of page-4. Similarly during the course of remand proceedings the assessee failed to furnish the details of sundry creditors as on 31.03.2008 shown at ₹ 9,43,82,663/-. Through the breakup of sundry creditors as on 31.03.2007 was produced before the AO and the AO observed that credit balance of ₹ 6 .....

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y on account of the alleged liability as on 01.04.2007 in their respective ledger account of assessee there is no reason to accept the assessee's claim that any liability to M/s. Best & Company or M/s. Tiger Associates to the tune of ₹ 6,99,16,984/- as on 31.03.2007 did actually exist and that its liability to M/s Best & Company as on 01.04.2007 was transferred to M/s. Tiger & Associates. There is no such bill or other dealings shown by M/s. Best & Company during the ye .....

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lthough the amount was so big and it could have got the attention of the Auditor. It shows that the entries now being shown and explained are an afterthought explanation. These are self serving documents of the assessee. The assessee never produced its books of accounts before the Assessing Officer for verification of these afterthought explanations. The remand report of the assessing Officer to CIT(A)-XXXVI, Kolkata in page 1 clearly and elaborately mentions as follows:- "The Ld. AR could .....

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ing Officer did state on page 3 in the first paragraph of submissions on point nO.1 as follows:- "Since both the parties namely M/s. Best & company and M/s. Tiger & Associates have not shown any debit entry on account of the alleged liability as on 01.04.2007 in their respective ledger account of M/s. Arti Bright company there is no reason to accept the assessee's claim that any liability to M/s. Best & Company or M/s. Tiger Associates to the tune of ₹ 6,99,16,984/- as .....

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& company was transferred to M/s. Tiger & Associates as on 01.04.2007. 5. In the respect it is submitted that the CIT(A) deleted such addition solely and exclusively relying on the reply of M/s. Best & Co. by acknowledging the system and account without going into questions raised by the AO in the remand report. It seems that the CIT(A) acted in haste in concluding that there was no difference between the assessee's accounts with that of Best & Co. In fact the AO has raised f .....

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ere introduced only in the appellate proceedings and not in the assessment proceedings. And when the veracity of the reply of Best & Co. was agitated by the AO in the remand report, the action of the CIT(A) to simply rely on such document as sacrosanct and give relief to the assessee is not within the framework of law. In fact the issues raised by the AO in the remand report was not gone into by the CIT(A). The order of the CIT (A) has a beneficial slant on the assessee without acknowledging .....

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d. AR relied on the order of Ld. CIT(A). 7. We have heard rival contentions and perused the materials available on record. From the foregoing discussion, we find that the addition was made by AO on account of difference in the amount of sundry creditors as on 01.04.2007 for ₹ 6,75,99,577/-. At the outset, we find that the impugned sundry creditor is arising out of purchase of lottery tickets which were purchased in the immediate preceding year. We find that the balance of sundry creditor w .....

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disallowance can be made. However on merit as well we find that the MBC has confirmed the value of the tickets sold to the assessee which is exactly matching as shown in the books of account of the assessee. To the contrary, Ld. DR has not brought any defect in the confirmation received from MBC. Simply assessee has booked the sundry creditor liability with MTA out of ignorance cannot form the basis for the addition of such sundry creditor. Similarly what policy is being adopted by MBC for recog .....

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t. 9. The assessee has shown net profit for ₹ 51,04,328/- in its audited profit and loss account. However, AO observed from the computation of income filed by assessee that net profit of ₹ 29,80,712/- was shown by assessee. Accordingly the difference between amount of profit shown in profit and loss account and profit shown in the computation of income arose for ₹ 21,23,616/- which was added by AO to the total income of assessee. 10. Aggrieved, assessee preferred an appeal befo .....

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ision of Sec. 40(b) of the Act. After considering the submissions of assessee, Ld. CIT(A) deleted the addition made by AO by observing as under:- I have examined all the documents and found them in order. One thing I must say that after apprehending all these short comings, the remand report was asked for but it is found from the remand report that no such effort was taken by the Assessing Officer. He simply tried to endorse the order but without sound argument. Why the depreciation as per IT Ru .....

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on of ₹ 21,23,616.00. This ground is allowed. Being aggrieved by this, Revenue has come up in appeal before us. 11. Before us Ld. DR submitted that the issue of remuneration is to be verified therefore same should be restored to the file of AO. The ld. DR vehemently supported the order of the AO. The Ld. AR for the assessee, on the other hand, relied on the order of Ld. CIT(A). The Ld. AR further drew our attention on page 4 of the paper book where profit and loss account was placed and al .....

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and loss a/c of assessee along with computation of income, we find that assessee in its profit and loss a/c has not shown any remuneration to the partners but same was shown in the profit and loss account appropriation. However the amount shown in the computation of income was after deduction of partner s remuneration. Therefore, mismatch in figure was observed. Therefore after considering the submission of the assessee, we find no difference between amount of profit shown in the profit and los .....

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ebtors as well as sundry creditor assessee failed to submit the same. Accordingly, AO treated the same as diversion of fund and disallowed the interest claimed by assessee for ₹ 14,18,161/- by adding to the total income of assessee. 15. Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas assessee submitted that the amount of sundry debtors is only 3.34% of the net sale shown by assessee. In earlier year no interest was charged from the debtor and the charging of interest from .....

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rt also failed to remove this confusion. The Authorized Representative of the appellant denied both the facts of interest free loan to relatives and interest to be charged from debtors which is 3.34% of the total sales. No interest free loan was given to relatives and appellant is under no obligation to charge interest from debtors. So, in absence of definite reason of addition I direct the Assessing Officer to delete the addition of ₹ 14,18,161.00. This ground is allowed. Being aggrieved .....

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has been diverted to its sister concerns and close relatives without any commercial consideration of charging of interest. Two main issues which arise are as follows:- i) Whether the loans given by the assessee to its sister concerns and relatives can be said to be out of the funds of the assessee which are borrowed from the Bank and such borrowed funds have been utilized in non-interest bearing loans and advances? ii) Whether there was any commercial expediency for grant of the loan to such pa .....

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d that "no interest was charged from debtors". Merely asserting that no interest bearing funds were advanced does not warrant deletion of addition which is based on strong logic. In fact there is no contradiction in this respect. It is the case of the AO that interest bearing funds were advanced to sister concern and relatives on which no interest was charged. Thus, the AO has correctly disallowed the entire claim of interest charges of ₹ 14,18,161/- on loans taken by it from the .....

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eport of the AO which was also not considered by the CIT(A) while deleting such addition, his order is liable to be set aside and that of the AO be restored. 8. The Hon'ble High Court of Delhi in the case of Elmer Havell Electrics v. Commissioner of Income-tax reported in [2005] 277 ITR 549 (Delhi)/[2005] 197 CTR 316 (Delhi) [2005] 148 TAXMAN 57 (Delhi) has held that where assessee had borrowed interest bearing loans from market and at same time it advanced interest-free loan to its sister c .....

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d in any case no substantial question of law arises for consideration in the present appeal." 9. Therefore, it is requested that the order of Ld. CIT (A) may be set aside and tat of the Assessing Officer be restored. On the other hand the Ld. AR relied on the order of Ld. CIT(A). 17. We have heard rival contentions of both the parties and perused the materials available on record. From the foregoing discussion, we find that AO observed that interest bearing fund has been diverted by assesse .....

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from such parties shown in the P & L A/c. Neither the copies of the creditors, nor the Debtors were filed. Therefore, 12% interest is liable to charged from the Debtors which comes to ₹ 19,18,963/-. As the assessee has paid the bank interest of ₹ 14,18,161/- to the bank [in the immediately preceding year, an interest of ₹ 6,30,510/- was debited to the P & L A/c in the AY 2007-08 and in the AY 2006-07 a sum of ₹ 63,922/- was paid to the bank]. Thus disallowance on .....

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ng with regard to diversion of fund we are not agreed with the arguments placed by Ld. DR. Similarly, we also find that it is the discretion of the assessee to charge or not to charge interest from the debtors. The AO cannot enter into the shoes of assessee for deciding to charge interest on the amount of debtor shown as on 31.03.2008 in its balance sheet. In the light of above reasoning, we hold that the order of the Ld. CIT(A) is correct and in accordance with law and no interference is called .....

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see preferred an appeal before Ld. CIT(A) who deleted the addition made by AO by observing as under:- The Assessing Officer considered the figure of ₹ 4,84,456.00 on the basis of 0.41% on turnover of ₹ 1,11,16,48,144.00 which is ₹ 45,57,757.00 against a disclosed gross profit of ₹ 40,73,301.00. So, the difference of (45,57,757.00 - 40,73,301.00) = ₹ 4,84,456.00 was added back. From the order, it is not clear how the Gross Profit percentage of 0.41 was determined. Th .....

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be applied. Fr this reason the addition of ₹ 4,84,456.00 on the ground of Gross Profit percentage is deleted. This ground is allowed. Being aggrieved by this, Revenue has come up an appeal before us. 21. At the outset, we find that it is important to reproduce the remand report of AO as under:- The Ld. AO has made an addition of ₹ 4,4,456/- under the head gross profit difference by rejecting the book result U/s 45 of the Income Tax Act, 1961. In the process he has adopted a Gross Pro .....

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the gross profit @ 0.41%. This fact has been duly accepted by AO in its remand report. In this view of the matter, we find no reason to interfere with the findings arrived by the Ld. CIT(A). Under the circumstances, this issue of Revenue s appeal is dismissed. 22. In the result, Revenue s appeal is dismissed. Coming to assessee s appeal in ITA No. 2446/Kol/2013. 23. Sole issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining t .....

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um of ₹ 19,22,662/- and added to the total income of assessee. 25. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who upheld the order of AO by observing as under:- 4.4 The appellant has further challenged that since the order was passed by JCIT, the rectification cannot be done by an ACIT. The above objection of the appellant is not sustainable. It is not necessary that the rectification order has to be made by the same officer who had earlier passed the order to be rectified. .....

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