Ita/13/2018 Of Principal Commissioner Of Income Tax - 1, Kolkata v. M/S. Ahw Steels Limited

Form No.(J2) IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE Present : THE HON’BLE JUSTICE T.S. SIVAGNANAMA N D THE HON’BLE JUSTICE HIRANMAY BHATTACHARYYA ITA/13/2018 PRINCIPAL COMMISSIONER OF INCOME TAX-1, KOLKATA-Versus- For the Appellant: Mr. Smarajit Roychowdhury, Adv. Mr. Manabendranath Bandopadhyay, Adv. For the Respondent: Mr. Farhan Ghaffar. Adv. Heard on : 20.01.2022 Judgment on : 20.01.2022 T. S. SIVAGANANAM, J. : This appeal filed by the revenueunder Section 260A of the Income Tax Act, 1961 (the ‘Act’ inbrevity) is directed against the order dated February 3, 2016passed by the Income Tax Appellate Tribunal, “A” Bench, Kolkata(the ‘Tribunal’ in short) in ITA/960/Kol/2012 for the assessmentyear 2006-07. The appeal has been entertained on the following substantial question of law: Whether the decision of the Income Tax Appellate Tribunalin affirming the order of the Commissioner of Income Tax(Appeals) is perverse having regard to the materialsavailable on records and in particular the evidence ofChief Finance Officer of the Firm with whom the assesseeis alleged to have had transaction ? We have heard Mr. Smarajit Roychowdhury, learned counselassisted by Mr. Manabendranath Bandopadhyay, learned advocate forthe appellant/revenue and Mr. Farhan Ghaffar, learned counsel forthe respondent/assessee. The revenue has challenged the order passed by theTribunal granting relief to the assessee on the ground that theevidence of the Chief Finance Officer did not affirm with whom theassessee is alleged to have had transaction, which was notproperly appreciated leading to perversity in the order of theTribunal. The assessee filed their returns of income for theassessment year under consideration (A.Y. 2006-07) reporting aloss of Rs.2,58,03,527/-. The return was duly processed underSection 143(3) of the Act. The assessee is engaged with thebusiness of manufacturing of steel and trading of iron and steelproducts. The issue which is subject-matter of consideration inthis appeal is with regard to unexplained credits which has beendealt with by the assessing officer in paragraph 4 of his order dated 31[st] December, 2008 under Section 143(3) of the Act. Theassessing officer held that the reconciliation submitted by theassessee is unacceptable and accordingly the excess amount wascredited as unexplained credit under Section 68 of the Act.Aggrieved by the same, the assessee preferred appeal before theCommissioner of Income Tax (Appeals)-I, Kolkata (CIT(A)). By theorder dated 29[th] March, 2012 the appeal was allowed. The revenue,being aggrieved by such order, preferred appeal to the Tribunalwhich was dismissed by the impugned order dated 3[rd] February, 2016.We have perused the finding rendered by the CIT(A) quathe statements of the Chief Finance Officer which could be seenfrom paragraph 3 of the order passed by the CIT(A). The CIT(A)pointed out that the Chief Finance Officer was produced by theassessee company themselves before the assessing officer and astatement was recorded wherein he has stated that cheques wereactually received on 31[st] March, 2006. There is an error committedby the Data Entry Operators while entering the cheque numbers.CIT(A) after noting the statement given by the Chief FinanceOfficer proceeded to discuss as to the effect of such statement.The CIT(A) also took note of the remand report which was calledfor by him and submitted by the assessing officer and ultimatelythe assessing officer rejected the stand taken by the ChiefFinance Officer and also observed that the reply given by him wasabsolutely vague. Further, the CIT(A) also noted the various question which have been posed to the Chief Finance Officer andwhile answering question no.6, though he had stated that he couldproduce the bank statement, he did not produce the same. Theother documents and letters which were placed were alsoscrutinized by the CIT(A) and more particularly, thereconciliation statement. We find that CIT(A) has done anelaborate exercise to examine each one of the items in thereconciliation statement and also found that they were dulysupported by records and pointed out that the assessee hasproduced documents including the copy of the bank accountmaintained by the Bank of India. However, the other party namely,Ram Swaroop Industrial Corporation never produced its bank accountto substantiate its transaction. Furthermore, it was pointed thatthe assessing officer did not find any evidence of any other bankaccount in the name of the assessee company. Further, the CIT(A)held that the assessee was not given opportunity by the assessingofficer to cross-examine the Chief Finance Officer after takingnote of the notings in the order sheet which was placed beforehim. Thus, taking into consideration this factual material, theCIT(A) pointed out that even at the assessment stage no evidencewas available in the form of road challan or any accepted billswere produced before the assessing officer and, therefore, heldthat the addition was based on conjecture and surmise without anyevidence. This finding was tested by the tribunal for its correctness. The tribunal on its part re-examined the entirefacts and in particular the reconciliation statement filed by theassessee. From the statement recorded from the CFO the tribunalfound on facts that the reconciliation and the explanation wasduly supported by evidence which were on record. That apart, theassessee was called upon to explain various details which formedpart of the addition made under Section 68 of the Act by theassessing officer and the Tribunal has recorded that the assesseehas explained before it in entirety the reconciliation and alsoexplained all the discrepancies. It was further pointed out bythe tribunal that the AO ought to have asked to produce the billsand evidence of delivery of materials such as road challan andaccepted challan copy etc. and no enquiry was made by theassessing officer in this regard and he has been swayed entirelyby the statement of the CFO who was not allowed to be cross-examined. Thus, the tribunal on facts, concluded that thereconciliation is supported by evidence which is on record andthere is no difference in the balance sheet and in the books ofaccounts of the assessee and accordingly dismissed the appealfiled by the revenue.The above factual discussion has been set out by us inthe preceding paragraphs to demonstrate that the case on handinvolves adjudication and re-adjudication into facts. Thisexercise has been done by the CIT(A) as well as the tribunal and we are precluded from doing such an exercise in an appeal filedunder Section 260A of the Act where we are required to decide thequestion of law which in our considered opinion does arise in theinstant case.In the result, the appeal filed by the revenue isdismissed. (T.S. SIVAGNANAM, J.) I agree. (HIRANMAY BHATTACHARYYA, J.) S.Das