M/s. Sivagamy Traders, CHENNAI V. ACIT, CHENNAI

ITA 1055/CHNY/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4558 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 23-01-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 28-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: N ARJUN RAJ
• Keywords: Unexplained expenditure; TDS
• Section: 69C; 143(3); 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C BENCH, CHENNAI . , . , BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.1055/CHNY/2016 / ASSESSMENT YEAR: 2012-13) M/S. SIVAGAMY TRADERS, NO.660, MTH ROAD, MANNURPET, CHENNAI 600 050. VS THE ACIT, NON CORPORATE CIRCLE 7, CHENNAI. PAN: AAAFS1488G ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI N. ARJUNRAJ, CA / RESPONDENT BY : SHRI CLEMENT RAMESH KUMAR, ADDL.CIT /DATE OF HEARING : 18.03.2019 /DATE OF PRONOUNCEMENT : 14.05.2019 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-7, CHENNAI, DATED 23.06.2016 IN ITA NO.82/CIT(A)-7/2014-15 FOR THE ASSESSMENT YEAR 2012-13 PASSED U/S.250(6) R.W.S. 143(3) OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS APPEAL HOWEVER THE CRUXES OF THE ISSUE ARE THAT 2 ITA NO.1055/CHNY/2016 (I) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD.AO WHO HAD MADE PARTIAL DISALLOWANCE OF COMMISSION PAID AMOUNTING TO RS.7,20,110/- INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. (II) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD.AO WHO MADE DISALLOWANCE OF RS.1,89,429/- U/S.40(A)(IA) OF THE ACT TOWARDS NON-DEDUCTION OF TDS ON INTEREST PAYMENTS. (III) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD.AO WHO HAD MADE ADDITION OF RS.1,60,124/- AS UNEXPLAINED EXPENDITURE U/S.69C OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN RETAIL TRADE OF IRON AND STEEL, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 ON 30.08.2012 ADMITTING TOTAL INCOME OF RS.43,95,030/-. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) & 142(1) OF THE ACT WAS ISSUED ON 08.08.2013 & 26.05.2014 RESPECTIVELY. FINALLY ASSESSMENT ORDER WAS PASSED U/S.143(3) OF THE ACT ON 12.02.2015 WHEREIN THE LD.AO MADE SEVERAL ADDITIONS. 4. GROUND NO.2(I) : DISALLOWANCE OF RS.7,20,110/- TOWARDS COMMISSION PAID INVOKING SECTION 40A(2)(B) OF THE ACT:- 3 ITA NO.1055/CHNY/2016 DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD INCURRED EXPENDITURE OF RS.16,43,021/- TOWARDS COMMISSION PAYMENT. IT WAS FURTHER OBSERVED THAT OUT OF THE TOTAL EXPENDITURE OF RS.16,43,021/- ONE SINGLE PAYMENT OF RS.15,00,000/- WAS MADE TO M/S. KANDAN STEEL, A RELATED PARTY. IT WAS FURTHER OBSERVED THAT THE COMMISSION PAID TO M/S. KANDAN STEEL WAS AT THE RATE OF 2.03% ON SALES WHILE AS THE AVERAGE COMMISSION PAID TO UNRELATED PARTIES WERE 0.625%. SINCE THE ASSESSEE COULD NOT JUSTIFY THE EXORBITANT PAYMENT OF COMMISSION TO ITS RELATED PARTY, THE LD.AO INVOKED THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT AND DISALLOWED THE COMMISSION EXPENDITURE OF RS.7,20,110/-. WHILE DOING SO, THE LD.AO HAD ALLOWED THE COMMISSION EXPENDITURE @ RS.1.67% ON SALES WHICH WAS FAIRLY MORE THAN THE COMMISSION PAID TO UNRELATED PARTIES. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO BY AGREEING WITH HIS VIEW. 4.1 THE LD.AR ARGUED BEFORE US BY STATING THAT THE ASSESSEES RELATED PARTY HAD TO UNDERTAKE EXTRAORDINARY PROMOTIONAL ACTIVITIES DUE TO WHICH THE ASSESSEE COULD ACHIEVE HIGH TURNOVER. IT WAS FURTHER SUBMITTED THAT THE ASSESSEES RELATED PARTIES HAS INCLUDED THE COMMISSION RECEIVED FROM THE ASSESSEE AS ITS INCOME AND PAID 4 ITA NO.1055/CHNY/2016 TAX. HENCE IT WAS PLEADED THAT THE ADDITION MADE BY THE LD.AO WHICH WAS FURTHER CONFIRMED BY THE LD.CIT(A) MAY BE DELETED. THE LD.DR ON THE OTHER HAND RELIED ON THE ORDERS OF THE LD.REVENUE AUTHORITIES AND PLEADED FOR CONFIRMING THE SAME. 4.2 AFTER HEARING BOTH SIDES, WE DO NOT FIND MUCH MERIT IN THE SUBMISSION OF THE LD.AO. THE ASSESSEE HAD PAID COMMISSION TO UNRELATED PARTIES @ OF 0.625% ON TURNOVER AND AT THE SAME INSTANCE THE ASSESSEE HAS PAID COMMISSION TO ITS RELATED PARTIES AT THE RATE OF 2.03% ON THE TURNOVER WHICH IS NOT JUSTIFIABLE. FURTHER THE LD.AO WAS FAIR ENOUGH TO ALLOW DEDUCTION TOWARDS COMMISSION EXPENDITURE TO THE EXTENT OF 1.67% ON TURNOVER AND THE SAME IS UPHELD BY THE LD.CIT(A). IN THIS SITUATION WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDERS OF THE LD.REVENUE AUTHORITIES ON THE ISSUE AS THOSE ORDERS ARE QUITE JUDICIOUS. 5. GROUND NO.2(II): DISALLOWANCE OF RS.1,89,429/- U/S.40(A)(IA) OF THE ACT TOWARDS NON-DEDUCTION OF TDS ON INTEREST PAYMENTS:- DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD CREDITED INTEREST PAYMENTS EXCEEDING THE THRESHOLD LIMIT OF RS.5,000/- TO CERTAIN PARTIES 5 ITA NO.1055/CHNY/2016 ACCOUNT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AGGREGATING TO RS.1,89,429/- WITHOUT DEDUCTING TAX AT SOURCE U/S.194 OF THE ACT. THEREFORE THE LD.AO INVOKED THE PROVISIONS OF SECTION 40A(IA) OF THE ACT AND DISALLOWED THE EXPENDITURE OF RS.1,89,429/- IN THE HANDS OF THE ASSESSEE. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO AS THE ASSESSEE FAILED TO FURNISH ANY OTHER ARGUMENT IN SUPPORT OF HIS CASE. BEFORE US ALSO THE LD.AR COULD NOT FURNISH ANY EXPLANATION TO SUPPORT HIS CASE. THEREFORE WE DO NOT FIND ANY OTHER OPTION BUT TO CONFIRM THE ORDERS OF THE LD.REVENUE AUTHORITIES ON THIS ISSUE. ACCORDINGLY THIS GROUND RAISED BY THE ASSESSEE IS DEVOID OF MERITS. 6. GROUND NO.2(III) : ADDITION OF RS.1,60,124/- AS UNEXPLAINED EXPENDITURE U/S.69C OF THE ACT:- IT WAS FURTHER OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD MADE CASH PAYMENTS AMOUNTING TO RS.1,60,124/- TOWARDS REPAYMENT OF LOAN, THE SOURCE OF WHICH WAS NOT EXPLAINED. THEREFORE THE LD.AO INVOKING THE PROVISIONS OF SECTION 69C OF THE ACT, AND ADDED THE SAME IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED EXPENDITURE. BEFORE THE LD.CIT(A) ALSO THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF REPAYMENT OF LOAN BY WAY OF CASH. THEREFORE THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO. HOWEVER ON PERUSING THE CASE OF 6 ITA NO.1055/CHNY/2016 THE ASSESSEE, WE FIND THAT THE ASSESSEE HAD DECLARED TOTAL INCOME OF RS.43,95,030/-. CONSIDERING THE TOTAL INCOME DECLARED BY THE ASSESSEE WE ARE OF THE CONSIDERED VIEW THAT THE ADDITION MADE BY THE LD.AO AMOUNTING TO RS.1,60,124/- IS NOT JUSTIFIABLE BECAUSE THE ASSESSEE HAS SUFFICIENT SOURCE OF INCOME TO EXPLAIN THE REPAYMENT OF LOAN OF RS.1,60,124/-. THEREFORE WE HEREBY DIRECT THE LD.AO TO DELETE THE ADDITION MADE IN THE HANDS OF THE ASSESSEE FOR RS.1,60,124/- INVOKING THE PROVISIONS OF SECTION 69C OF THE ACT. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 14 TH MAY, 2019 AT CHENNAI. SD/- SD/- ( ) (DUVVURU R.L REDDY) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER /CHENNAI, /DATED 14 TH MAY, 2019 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. /GF