Itat/223/2023 Ia No.ga/2/2023 Principal Commissioner Of Income Tax 2, Kolkata v. Rankup Footweare Industries Pvt. Ltd

IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE ITAT/223/2023IA NO.GA/2/2023PRINCIPAL COMMISSIONER OF INCOME TAX 2, KOLKATAVS.RANKUP FOOTWEARE INDUSTRIES PVT. LTD. BEFORE : THE HON’BLE THE CHIEF JUSTICE T.S. SIVAGNANAMAndTHE HON’BLE JUSTICE HIRANMAY BHATTACHARYYADate : 22[nd] January, 2024 Appearance : Mr. Om Narayan Rai, Adv.Mr. Soumen Bhattacharjee, Adv.…for appellantMr. Soumitra Chowdhury, Adv.Mr. Avra Mazumder, Adv.Mr. Suman Bhowmik, Adv.Mr. Kausheyo Roy, Adv.Mr. Samrat Das, Adv.…for respondent The Court :- Heard Learned Counsel appearing on either side. This intra-Court appeal filed by the revenue under Section 260A of theIncome Tax Act, 1961 is directed against the order dated 16.03.2023 passed bythe Income Tax Appellate Tribunal “A” Bench, Kolkata (the Tribunal) in ITA no.427/Kol/2022 for the assessment year 2017-18. The revenue has raised thefollowing substantial questions of law for consideration :- (i)Whether the Learned Tribunal has committed substantial error inlaw in deleting the addition of Rs.1,49,54,000/- made by theAssessing Officer on account of unexplained cash credit u/s 68 of the IT Act, 1961 ignoring the fact that the assessee had recordedunaccounted income in the garb of unsubstantiated cash saleswhich had all ingredients of unexplained credit under section 68 ofthe Income Tax Act, 1961? (ii) Whether the Learned Tribunal has committed substantial error inlaw in deleting the addition of Rs.1,49,54,000/- by focussing only onthe accounting aspect of the issue but not examining and takingdue cognizance on the ingenuity and improbability of thetransactions carried out under the garb of sales ? (iii) Whether the Learned Tribunal has committed substantial error inlaw in failing to appreciate that the assessee miserably failed todischarge its burden and ones to prove and establish thegenuineness of the transactions and the source of the cash flow? The assessee filed its return of income for the assessment year underconsideration i.e. A.Y. 2017-18 on 18.01.2018 declaring a return of income ofRs.6,51,620/-. The assessee has engaged in the business of manufacturing andtrading goods. The case was selected for scrutiny and the notice under Section143(2) dated 9.8.2018 was issued and subsequently notice under Section 142(1)dated 5.8.2019 was issued and in response to such notice the assesseefurnished certain papers and documents and explanation submittedelectronically. Thereafter, show-cause notice was issued on 24.12.2019 statingthat from the documents produced by the assessee seeking that yearly sales inthe month of October 2016 was Rs.1,66,56,727/- which was made by cash andout of those sales the assessee had deposited Rs,.1,49,54,000/- in cash into The assessee filed its return of income for the assessment year underconsideration i.e. A.Y. 2017-18 on 18.01.2018 declaring a return of income ofRs.6,51,620/-. The assessee has engaged in the business of manufacturing andtrading goods. The case was selected for scrutiny and the notice under Section143(2) dated 9.8.2018 was issued and subsequently notice under Section 142(1)dated 5.8.2019 was issued and in response to such notice the assesseefurnished certain papers and documents and explanation submittedelectronically. Thereafter, show-cause notice was issued on 24.12.2019 statingthat from the documents produced by the assessee seeking that yearly sales inthe month of October 2016 was Rs.1,66,56,727/- which was made by cash andout of those sales the assessee had deposited Rs,.1,49,54,000/- in cash into three bank accounts during the demonetisation period. Therefore, the assessingofficer was of the prima facie view that the assessee received money from theundisclosed sources and they wanted to account for the said money by showingsales which were alleged to be not genuine. The assessee was directed to show-cause as to how the deposited money of Rs.1,49,54,000/- should not be treatedas undisclosed and added back with the total income. The assessee wasdirected to upload the reply within 26.12.2019. The assessing officer whilecompleting the assessment under Section 143(3) of the Act by the order dated27.12.2019 recorded that no reply was uploaded by the assessee in response tothe show-cause notice. Accordingly, the said amount was added back to the totalincome of the assessee. The assessee preferred appeal before the NationalFaceless Appeal Center. The Appellate Forum by order dated 27.06.2022dismissed the appeal largely on the ground that the assessee claimed the salesnil during the month of October, 2016 i.e. the month preceding thedemonetisation. The assessee’s explanation that they manufacture special pujadesigns of Chappals and Shoes and sales were done during puja season in WestBengal was considered and the Appellate Forum concluded that the claim isunrealistic. Further, the Appellate Forum held that most of the receipts fromcash sales i.e. Rs.1,49,54,000/- out of Rs.1,58,63,555/- effected in the month ofOctober 2016 was still available for deposit in banks after demonetisation wasannounced. Further the Appellate Forum doubted as to how assessee wasfinancing its alleged business operation without spending the alleged cashreceipts. Further on examination of the bank statement of two of the bankaccounts maintained in Bank of Baroda and SBI it was seen that the deposits of demonetized cash were immediately followed by transfer to other bank accountsand most of the transfer of deposit cash were to Ashoka Hawai and Shoes Pvt.Ltd. Therefore, the claim of the assessee was held to be palpably wrong and theappeal stood dismissed. The assessee carried the matter on appeal to thelearned Tribunal and upon impugned order the learned Tribunal allowed theappeal. It is submitted by the learned Advocate for the respondent/assessee wasthat voluminous paper book was filed before the Tribunal contending all recordswhich were perused by the Tribunal and thereafter the appeal was allowed. Ongoing through the impugned order we find that the discussion in paragraph 5 ofthe impugned order wherein the Tribunal holds that after considering thecircumstances and documentary evidence furnished by the assessee and booksof accounts of the assessee have not been rejected and the sales having beenaccepted the Tribunal did not find any justification on the part of the lowerauthorities in making the additions and accordingly, deleted those additions. Inour considered view, since the learned Tribunal is the last authority which canappreciate and re-appreciate factual position the explanation offered by theassessee supported by document are required to be considered and theconsideration should be reflected by way of certain observations and finding inthe order to be passed. Since we find that no such specific finding has beenrecorded by the learned Tribunal, we are of the view that learned Tribunalshould reconsider the matter in examining the voluminous records which havebeen filed by the assessee before learned Tribunal and thereafter examine thecorrectness of the findings recorded by the CITA more particularly the findingsin paragraphs 4.3, 4.3.1. For the above reasons, the appeal filed by the revenue is allowed and theorder passed by the learned Tribunal is set aside and the matter is remanded tothe learned Tribunal for fresh consideration in the light of the observations madeabove. Consequently, the substantial questions of law are left open. (T.S. SIVAGNANAM) CHIEF JUSTICE (HIRANMAY BHATTACHARYYA, J.) Pkd/GH.