Mahesh Kumar Narula, Kolkata V. JCIT, R-35, KOLKATA, Kolkata

ITA 1094/KOL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4150 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 30-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 19-05-2016
• Court: TRIBUNAL
• Department Lawyers: H R SINGH
• Assessee Lawyers: MAHAVEER PRASAD AGARWA L
• Keywords: Business income; Business expenditure; Wrong claim
• Section: 143(3); 194C

Judgement Text

1 ITA NO.1094/KOL/2016 MAHESH KR. NARULA, AY 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA [BEFORE SHRI M. BALAGANESH, AM & SHRI S. S. VISWAN ETHRA RAVI, JM] I.T.A NO. 1094/KOL/2016 ASSESSMENT YEAR: 2010-11 MAHESH KR. NARULA VS. JOINT COMMISSIONER OF INC OME-TAX, (PAN: ABOPN8174H) RANGE-35, KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 30.11.2016 DATE OF PRONOUNCEMENT: 09.12.2016 FOR THE APPELLANT: SHRI MAHAVEER PRASAD AGARWA L, AR FOR THE RESPONDENT: SHRI H. R. SINGH, JCIT ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-10, KOLKATA VIDE APPEAL NO. 126/CIT(A)-10/R-35/13-14/KOL DATED 17.02.2016. ASSE SSMENT WAS FRAMED BY JCIT, RANGE- 35, KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2010-11 VIDE HIS ORDER DATED 07.03.2013. 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN UPHOLDING THE DISALLOWANCE MADE U/S 40(A)(IA) OF TH E ACT IN THE SUM OF RS. 2,10,000/- PAID TO NATIONAL TRADING CO. IN THE FACTS AND CIRCUMSTAN CES OF THE CASE. 2.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASS ESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF WHOLESALE TRADING BUSINESS OF TEA AND R UNNING HIS BUSINESS UNDER THE NAME AND STYLE OF MAHESH TRADING CO. THE GENERALLY PURCHAS E TEA FROM KOLKATA AND SILIGURI AUCTION AND SELL THEM TO LOCAL PARTIES AND ALSO INTER-STATE PARTIES AND BUSINESS CONCERN HAD ITS BRANCH OFFICE CUM SALES OFFICE AT RAMPURAPHUL, PUNJAB. TH E LD AO OBSERVED FROM THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE CLAIMED AN AMOUNT OF RS. 2,10,000/- UNDER THE HEAD TRADE HANDLING CHARGES. THE ASSESSEE WAS ASKED TO FURN ISH THE NAME, FULL MAILING ADDRESS WITH AMOUNT OF THE PARTIES TO WHOM IT PAID THE CHARGES T OGETHER WITH THE DEDUCTION AND REMITTANCE OF TDS THEREON TO THE GOVERNMENT ACCOUNT . THE ASSESSEE REPLIED THAT THE ENTIRE AMOUNT WAS PAID TO ONE CONCERN VIZ. NATIONAL TRADIN G CO. OF 3, AMRATALA STREET, KOLKATA 2 ITA NO.1094/KOL/2016 MAHESH KR. NARULA, AY 2010-11 01 AND STATED THAT NO DEDUCTION OF TAX AT SOURCE WA S MADE ON THE SAID PAYMENT AS THE SAID PAYMENT WAS MADE ONLY ON ACCOUNT OF OFFICE RENT, SA LARY, MAINTENANCE CHARGES ETC DURING THE YEAR, WHEREIN NATIONAL TRADING CO. HAD INCURRED CERTAIN OFFICE EXPENDITURE ON BEHALF OF THE ASSESSEE WHICH WERE LATER ON REIMBURSED TO THEM BUT THE SAID PAYMENTS WERE NOMENCLATURED AS TRADE HANDLING CHARGES. HOWEVER THE LD AO NOT SATISFIED WITH THE REPLY PROCEEDED TO DISALLOW THE EXPENDITURE U/S 40(A)(IA) OF THE ACT FOR VIOLATION OF PROVISIONS OF SECTION 194C OF THE ACT. THIS ACTION OF THE LD AO WAS UPHELD BY THE LD CITA. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWIN G GROUND:- 1. FOR THAT THE LD. CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF PAYMENT OF RS.2,10,000/- PAID TO M/S. NATIONAL TRADING CO. AS OFFICE EXPENSE S, SALARY, MAINTENANCE CHARGES, ETC. UNDER SECTION 40(A)(IA) OF THE ACT UNDER THE ERRONEOUS IM PRESSION THAT THE PAYMENTS CAME IN THE AMBIT OF SECTION 194C OF THE ACT FROM WHICH TAX WAS DEDUCTIBLE AT SOURCE. 2.2. THE LD AR REITERATED THE SUBMISSIONS MADE BEF ORE THE LOWER AUTHORITIES AND ARGUED THAT IT IS A FACT THAT NATIONAL TRADING CO. HAD DUL Y REFLECTED THE AMOUNTS RECEIVED FROM THE ASSESSEE IN ITS RETURNS AND PRAYED FOR SETTING ASID E OF THIS ISSUE TO THE FILE OF THE LD AO FOR VERIFICATION OF THIS FACT FROM HIS SIDE AND IF FOUN D TO BE CORRECT, THEN BASED ON THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT WHICH HAS B EEN HELD TO BE RETROSPECTIVE IN OPERATION BY THE RECENT DECISION OF THE HONBLE DELHI HIGH CO URT IN THE CASE OF ANSAL LANDMARK TOWNSHIP PVT LTD, REPORTED IN 377 ITR 635 (DEL), WH ICH WAS LATER FOLLOWED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF TIRUPATI CONSTR UCTION IN G.A. NO. 2146 OF 2016 WITH ITAT NO. 287 OF 2016 DATED 23.08.2016, THE ASSESSEE MAY BE GIVEN THE RELIEF FROM DISALLOWANCE U/S 40(A)(IA) OF THE ACT. IN RESPONSE TO THIS, THE LD DR FAIRLY AGREED FOR RE- EXAMINATION OF THIS ISSUE IN THE LIGHT OF THE SECON D PROVISO TO SECTION 40(A)(IA) OF THE ACT. 2.3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THRO UGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT IN THE LIGHT OF THE DECISION OF THE HONBLE DELHI HIGH COURT AND HONBLE CALCUTTA HIGH COURT CITED SUPRA, IF THE PAYEE HAS D ISCLOSED THE SAID RECEIPT IN HIS RETURN AND PAID TAXES THEREON THE ASSESSEE SHOULD NOT BE INVIT ED WITH DISALLOWANCE U/S. 40(A)(IA) OF THE ACT BY TREATING HIM AS THE ASSESSEE IN DEFAULT. WE DIRECT THE AO TO VERIFY THE SAME AND DISPOSE OF THE ISSUE ACCORDINGLY. GROUND NO.1 OF A PPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 3 ITA NO.1094/KOL/2016 MAHESH KR. NARULA, AY 2010-11 3. THE LAST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF RS. 72,832/- TOWARDS PETTY FREIGHT , WAREHOUSING AND TRANSPORTATION EXPENSES IN THE FACTS AND CIRCUMSTAN CES OF THE CASE. 3.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASS ESSEE DEBITED A SUM OF RS. 3,69,082/- TOWARDS FREIGHT, TRANSPORTATION AND WAREHOUSING CHA RGES AND THE ASSESSEE WAS ASKED TO FURNISH THE NAME, FULL MAILING ADDRESS WITH AMOUNT OF THE PARTIES TO WHOM IT PAID THE CHARGES TOGETHER WITH THE DEDUCTION AND REMITTANCE OF TDS THEREON TO THE GOVERNMENT ACCOUNT. THE ASSESSEE FURNISHED THE DETAILS WITH P ROPER DOCUMENTS WITH TDS DETAILS TO THE TUNE OF RS. 2,96,250/- AND ACCORDINGLY THE LD AO DI SALLOWED THE BALANCE SUM OF RS. 72,832/- ( 3,69,082 2,96,250) AS BOGUS CLAIM MADE BY THE ASSESSEE. THIS ACTION OF THE LD AO WAS UPHELD BY THE LD CITA. AGGRIEVED, THE ASSES SEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- FOR THAT THE LD. CIT(A) ERRED IN UPHOLDING THE EN TIRE AMOUNT OF RS.72,832/- COMPRISING PETTY EXPENSES. 3.2. THE LD AR ARGUED THAT THE ASSESSEE HAD FACTUA LLY SUBMITTED DETAILS BEFORE THE LD AO TO THE TUNE OF RS. 3,25,104/- AS AGAINST RS. 2,96,2 50/- WRONGLY STATED BY THE LD AO. THE LD AR ALSO FILED THE COPY OF THE DETAILS FILED BEFORE THE LD AO BEFORE US . THE BALANCE SUM OF RS. 43,978/- REPRESENTS PETTY EXPENSES INCURRED BY THE ASSESSEE THROUGHOUT THE YEAR FOR WHICH PARTY WISE DETAILS COULD NOT BE GATHERED IN V IEW OF INNUMERABLE NUMBER OF PARTIES AND THE NUMBER OF TRANSACTIONS. GOING BY THE TREND OF THE BUSINESS OF THE ASSESSEE, THESE EXPENSES ARE NOTHING BUT THE ROUTINE FREIGHT AND T RANSPORTATION CHARGES FALLING OUTSIDE THE AMBIT OF TDS PROVISIONS DUE TO THE RESPECTIVE LIMIT PRESCRIBED U/S 194C OF THE ACT. ACCORDINGLY HE PRAYED FOR ALLOWING THE ENTIRE EXPEN DITURE AS A DEDUCTION FROM BUSINESS INCOME OF THE ASSESSEE. IN RESPONSE TO THIS, THE L D DR STATED THAT FOR THE REMAINING SUM OF RS. 43,978/-, NO DETAILS WERE FURNISHED BY THE ASSE SSEE AND HENCE THE DISALLOWANCE MAY BE RESTRICTED TO SUCH AMOUNT. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASSESSEE IN T HIS REGARD. WE FIND THAT THE DETAILS FOR RS.3,25,104/- HAVE BEEN DULY FILED BY THE ASSESSEE DULY COMPLYING WITH THE PROVISIONS OF TDS WITH DUE REMITTANCE THEREON. IN RESPECT OF THE BALANCE SUM OF RS. 43,978/-, THE LD AR 4 ITA NO.1094/KOL/2016 MAHESH KR. NARULA, AY 2010-11 ARGUED THAT THE SAME ONLY REPRESENTS PETTY FREIGHT AND TRANSPORTATION EXPENSES INCURRED ON VARIOUS DATES THROUGHOUT THE YEAR BY MAKING PAYMENT S TO VARIOUS PARTIES WHICH DO NOT WARRANT ANY DEDUCTION OF TAX AT SOURCE IN VIEW OF T HE LIMIT PRESCRIBED U/S 194C OF THE ACT. WE FIND THAT THE ASSESSEE HAD FURNISHED THE DETAILS OF VARIOUS EXPENSES AS AND WHEN CALLED FOR BY THE LD AO DURING THE COURSE OF ASSESSMENT PR OCEEDINGS. WE FIND LOT OF FORCE IN THE ARGUMENT OF THE LD AR THAT THIS IS A GENERAL ROUTIN E BUSINESS EXPENDITURE INCURRED BY THE ASSESSEE AND ACCORDINGLY HAVE NO HESITATION IN DIRE CTING THE LD AO TO DELETE THIS DISALLOWANCE. ACCORDINGLY, THE GROUND NO. 2 RAIS ED BY THE ASSESSEE IS ALLOWED. 4. THE GROUND NO. 3 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 09.12.2016 SD/- SD/- (S. S. VISWANETHRA RAVI) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 9 TH DECEMBER, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT SHRI MAHESH KR. NARULA, 3, AMRATOLLA ST REET, 1 ST FLOOR KOLKATA-1. 2 RESPONDENT JCIT, RANGE-35, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .