Shri Dipankar Sahoo, Kolkata V. ACIT, CIR-51, KOLKATA, Kolkata

ITA 1123/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1545 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 12-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 23-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Commercial expediency

Judgement Text

1 ITA NO.1123/KOL/2016 DIPANKAR SAHOO, AY 2010-11 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA () BEFORE .., /AND . ' # $% % , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 1123/KOL/2016 ASSESSMENT YEAR: 2010-11 SHRI DIPANKAR SAHOO (PAN: AMRPS0218D) VS. ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-51, KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 12.06.2017 DATE OF PRONOUNCEMENT 12.07.2017 FOR THE APPELLANT SHRI SOUMITRA CHOUDHURY, ADVOCATE FOR THE RESPONDENT SHRI BISWANATH DAS, ADDL. CIT ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-15, KOLKATA DATED 18.03.2016 FOR AY 2010-11. 2. GROUND NO. 2 OF APPEAL OF ASSESSEE IS AGAINST TH E ACTION OF LD. CIT(A) IN ENHANCING THE DISALLOWANCE ORIGINALLY MADE BY THE AO OF RS.13 ,92,209/- IN RESPECT OF SUNDRY CREDITORS (MACHINE RENTAL CHARGES) TO RS.69,60,439/- BY THE L D. CIT(A). BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS THE PROPRIETOR OF M/S. MATRUSH AKTI SUPPLIERS WHICH WAS ENGAGED IN MINING OPERATIONS. THE ASSESSEE IN ORDER TO DO THE MINING HAD HIRED HEAVY EARTHMOVERS FROM 50 PERSONS AND THE AMOUNTS DUE TO THE SAID MAC HINE RENTAL CHARGES PAYABLE WAS SHOWN AS SUNDRY CREDITOR TO THE TUNE OF RS.69,60,439/-. THE AO SELECTED TWELVE PERSONS FROM THE LIST RANDOMLY AND LETTERS WERE SENT TO CONFIRM FROM THEIR ACCOUNTS. HOWEVER, SINCE NO CONFIRMATION WAS RECEIVED FROM THESE PERSONS, THE A O DISALLOWED 20% OF THE AMOUNT BY WHICH AN AMOUNT OF RS.13,92,209/- WAS TREATED AS BO GUS CLAIM. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO WAS O F THE OPINION THAT SINCE TWELVE PERSONS 2 ITA NO.1123/KOL/2016 DIPANKAR SAHOO, AY 2010-11 OUT OF 50 DID NOT REPLY TO THE NOTICE SENT BY THE A O, THE ENTIRE AMOUNT OUGHT TO HAVE BEEN DISALLOWED. SO, HE ISSUED ENHANCEMENT NOTICE ON 01 .03.2016 AND THEREAFTER HE NOTED THAT THE ASSESSEE FAILED TO FILE ANY CONFIRMATION OF THE SUNDRY CREDITORS SO HE DISALLOWED THE ENTIRE AMOUNT AND ENHANCED THE SAME TO RS.69,60,439 /-. AGGRIEVED BY THE AFORESAID DECISION OF THE LD. CIT(A), THE ASSESSEE IS BEFORE US. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE LD. AR ASSAILING THE DECISION OF THE LD. CIT(A) SUBMITTED THAT THE ASSESSEE IS INTO MINING OPERATIONS AND HAD TAKEN HEAVY EARTHMOV ERS ON HIRE BASIS. THE AMOUNT WHICH WAS OUTSTANDING AND PAYABLE TO THOSE PARTIES (MACHI NE RENTAL CHARGES) WAS SHOWN AS SUNDRY CREDITORS BY THE ASSESSEE AND THE SAID AMOUNT WAS T O THE TUNE OF RS.69, 60,439/-. THE AO RANDOMLY SELECTED TWELVE PERSONS OUT OF 50 SUNDRY C REDITORS AND ISSUED THEM NOTICES ASKING FOR CONFIRMATION FROM THEM. HOWEVER, SINCE THERE W AS NO CONFIRMATION FROM THESE PARTIES THE AO DISALLOWED 20% OF THE SAID AMOUNT TO THE TUN E OF RS.13,92,209/-. ON APPEAL, ACCORDING TO THE LD. AR, THE LD. CIT(A) SIMPLY ASKE D FOR CONFIRMATION FROM THE REST OF THE PARTIES AND GAVE THEM NOTICE FOR ENHANCEMENT DATED 01.03.2016 AND FIXED THE MATTER ON 16.03.2016. IT WAS BROUGHT TO OUR KNOWLEDGE THAT T HE ASSESSEE RECEIVED THE LETTER OF ENHANCEMENT ONLY AFTER FEW DAYS I.E. AFTER 07.03.20 16 AND, THEREFORE, THE ASSESSEE DID NOT GET ENOUGH TIME TO FURNISH THE CONFIRMATION FROM AL L THE PARTIES. THE LD. AR DREW OUR ATTENTION TO PAGE 22 OF THE PAPER BOOK WHERE THE TO TAL LIST OF SUNDRY CREDITORS FOR OUTSTANDING RENTAL CHARGES FOR THE RELEVANT ASSESSMENT YEAR UND ER CONSIDERATION HAS BEEN ANNEXED. WE HAVE PERUSED THE SAME WHICH SHOWS THAT THERE ARE 48 SUNDRY CREDITORS AND THE TOTAL AMOUNT OF RS.69,60,439/- WAS OUTSTANDING PAYABLE TO THE SU NDRY CREDITORS. THE LD. AR TOOK PAINS IN SHOWING THAT THE ASSESSEE HAD SQUARED UP ALL THE PAYMENTS IN THE NEXT ASSESSMENT YEAR WHICH IS EVIDENT FROM A PERUSAL OF PAGES 23 AND 24. FOR E.G. WE NOTE THAT THE AMOUNT OUTSTANDING FROM SHRI BINOD KR. VERMA AS ON 31.03.2 010 WAS RS.2,13,480/- AND IN THE SUBSEQUENT YEAR (AY 2011-12) AN ADDITIONAL AMOUNT O F RS.65,720/- WAS PAID MAKING THE TOTAL AT RS.2,79,200/- AND BALANCE AS ON 31.03.2011 TO THE SAID SUNDRY CREDITOR WAS ONLY RS.45,720/-. LIKEWISE, WE FIND THAT THE ASSESSEE H AD SQUARED UP THE OUTSTANDING PAYMENT FOR THIS RELEVANT ASSESSMENT YEAR IN THE NEXT ASSES SMENT YEAR 2011-12. THEREFORE, WE DO NOT 3 ITA NO.1123/KOL/2016 DIPANKAR SAHOO, AY 2010-11 FIND ANY REASON FOR MAKING THE DISALLOWANCE IN THE LIGHT OF THE EVIDENCE ON RECORD AND THE FACT THAT THE PAYMENTS HAVE BEEN MADE IN THE SUBSEQ UENT ASSESSMENT YEAR COULD NOT BE CONTRADICTED BY THE LD. DR, THEREFORE, WE ARE INCLI NED TO DELETE THE ADDITION MADE BY THE LD. CIT(A). THIS GROUND OF APPEAL OF ASSESSEE IS ALLOW ED. 4. GROUND NO. 3 IS REGARDING CONFIRMATION OF DISALL OWANCE OF THE FOLLOWING EXPENSES MADE BY AO: MEAL CHARGES .. RS. 5,52,344/- SITE EXPENSES .. RS. 29,136/- TRAVELLING & CONVEYANCE .. RS. 21,984/- TELEPHONE CHARGES .. RS. 25,609/- COMMISSION .. RS. 49,455/- BUSINESS PROMOTION .. RS. 19,584/- CAR OIL .. RS. 21,984/- SUBSCRIPTION .. RS. 26,450/- 5. BRIEF FACTS OF THE CASE ARE THAT IN RESPECT TO M EAL CHARGES CLAIMED BY THE ASSESSEE TO THE TUNE OF RS.5,52,344/- THE AO WAS OF THE OPINION THAT THESE EXPENSES ARE NOT RELATED TO THE BUSINESS OF THE ASSESSEE AND, THEREFORE, HE DIS ALLOWED THE ENTIRE CLAIM. THE LD. CIT(A) ALSO CONFIRMED THE SAME. AGGRIEVED, THE ASSESSEE I S BEFORE US. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE LD. AR SUBMITTED THAT THE NATURE OF WORK UNDERTAKEN BY THE ASSESSEE IS IN VERY REMOTE LOCATION INVOLVING LONG OUTSTATION WORK BY T HE EMPLOYEES OF THE COMPANY. SINCE THE MINING OPERATIONS ARE DONE IN REMOTE AREAS FAR AWAY FROM THE VILLAGES, THE ASSESSEE IN ORDER TO EXTRACT MAXIMUM WORK HAS TO KEEP EMPLOYEES WITH HIM AND FOR THAT HAD TO PROVIDE FOOD, TEA AND TIFFIN TO THE EMPLOYEES IN THE ABSENCE OF A NY RESTAURANTS NEAR THE MINING AREA AND WITHOUT UNDERSTANDING THE COMMERCIAL EXPEDIENCY THE AUTHORITIES BELOW HAVE MADE DISALLOWANCE @ 100% WHICH IS ARBITRARY EXERCISE OF POWER. BEFORE US, THE LD. AR PRODUCED THE MEAL CHARGES LEDGER ACCOUNT OF M/S. MA TRUSHAKTI SUPPLIERS WHICH IS SEEN FROM PAGE 29 TO 31 OF THE PAPER BOOK, THE DATE WISE LEDG ER ACCOUNT HAS BEEN PLACED FROM 02.04.2009 TO 31.03.2010 AND A TOTAL AMOUNT OF RS.5 ,52,344/- HAS BEEN CLAIMED. WE NOTE THAT THE ASSESSEE IS INTO MINING OPERATIONS IN REMO TE AREAS AND THE ASSESSEE SHOULD TAKE CARE 4 ITA NO.1123/KOL/2016 DIPANKAR SAHOO, AY 2010-11 OF THE WORKERS I.E, MINING LABOURERS AND PROVIDE TH EM MEAL ETC. TO EXTRACT MAXIMUM WORK FROM THEM. FOR THAT PURPOSE THE ASSESSEE IS PROVID ING THE MEALS, TEA AND TIFFIN TO THE EMPLOYEES. SINCE THERE IS A NEXUS TO THE EXPENDITU RE WITH THE BUSINESS THE SAME IS ALLOWABLE AND THE EXPENDITURE INCURRED WAS DUE TO C OMMERCIAL EXPEDIENCY AS STATED ABOVE AND, THEREFORE, WE ARE INCLINED TO ALLOW THE EXPEND ITURE CLAIMED IN RESPECT OF MEAL CHARGES AND, THEREFORE, THE ADDITION OF RS.5,52,344/- IS DI RECTED TO BE DELETED. 7. COMING TO THE OTHER DISALLOWANCES, THE LD. AR PO INTED OUT THAT ALL THE DISALLOWANCES HAVE BEEN MADE ON AN AD HOC BASIS OF 30% OF THE CLA IM. WE NOTE THAT IN RESPECT TO SITE EXPENSES 30% OF THE CLAIM HAS BEEN DISALLOWED AND F OR TRAVELLING AND CONVEYANCE 30% OF THE CLAIM HAS BEEN DISALLOWED, FOR COMMISSION 30% O F THE CLAIM HAS BEEN DISALLOWED, FOR CAR OIL 30% OF THE CLAIM HAS BEEN DISALLOWED. WE N OTE THAT THE AO HAS NOT POINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT OR HAS NOT ASKED TH E ASSESSEE TO PRODUCE ANY EVIDENCE BEFORE MAKING THE AD HOC DISALLOWANCE AS SUCH ITSELF IS AR BITRARY EXERCISE OF POWER WHICH IS AGAINST THE PRINCIPLE OF ARTICLE 14 OF THE CONSTITUTION. T HEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE AD HOC DISALLOWANCES ON THE AFORESAID DISA LLOWANCE NEED TO BE DELETED AND WE ORDER ACCORDINGLY. 8. COMING TO THE TELEPHONE EXPENSES, WE NOTE THAT T HE AO HAS DISALLOWED 30% OF THE CLAIM. THE LD. CIT(A) CONFIRMED IT. WE NOTE THAT T HE ASSESSEE IS RUNNING A PROPRIETARY CONCERN, THEREFORE, THERE MUST BE SOME PERSONAL EXP ENSES INCURRED FOR TELEPHONE EXPENSES. HENCE, WE CONFIRM 10 % OF THE DISALLOWANCE AND GIVE PARTIAL RELIEF BECAUSE 30% IS ON THE HIGHER SIDE. 9. REGARDING SUBSCRIPTION, THE ASSESSEE HAS CLAIMED RS.26,150/-. THE AO FULLY DISALLOWED THE AMOUNT WHICH, ACCORDING TO HIM, WAS NO WAY RELATED TO THE BUSINESS ACTIVITY OF THE ASSESSEE. THE LD. CIT(A) WAS PLEASED TO CON FIRM THE SAME. BEFORE US, THE LD. AR SUBMITTED THAT SINCE THE ASSESSEES BUSINESS IS CAR RIED OUT AT REMOTE AREAS AND THE ASSESSEE HAD TO DEPEND ON THE NEARBY VILLAGERS FOR PURCHASE OF FOOD GRAINS, LABOURERS ETC., THEREFORE, IN ORDER TO KEEP GOOD RELATIONSHIP WITH THE VILLAGE RS, AT TIMES FOR FESTIVALS AND OTHER 5 ITA NO.1123/KOL/2016 DIPANKAR SAHOO, AY 2010-11 IMPORTANT FUNCTIONS SOME FUNDS NEED TO BE GIVEN TO THESE VILLAGERS FOR SMOOTH FUNCTIONING OF THE BUSINESS OF THE ASSESSEE. FROM THE AFORESAI D EXPLANATION OF ASSESSEE, WE NOTE THAT EXPENDITURE INCURRED HAS NEXUS WITH THE BUSINESS OF THE ASSESSEE AND, THEREFORE, IS AN ALLOWABLE EXPENDITURE. WE NOTE THAT THE ASSESSEE I N PAGE 36 HAS KEPT THE LEDGER ACCOUNT FOR EXPENSES WHICH HAPPENED ON 17.07.2009, 21.08.2009, 01.09.2009 AND 21.09.2009 TO THE TUNE OF RS.26,450/- TAKING NOTE OF THE FACT THAT TH E ASSESSEE IS INTO MINING BUSINESS AND EXECUTES WORK AT FAR FLUNG REMOTE AREAS NO DOUBT HA D TO DEPEND ON THE NEARBY VILLAGERS FOR SUPPORT IN RUNNING THE CANTEEN OF THE ASSESSEE AND FOR HAVING GOOD AND CORDIAL RELATIONSHIP WITH THE LOCALS IS NECESSARY AND HAD TO GIVE SOME A MOUNT FOR FESTIVALS ETC. WHICH IS NECESSARY FOR SMOOTH FUNCTIONING OF THE ASSESSEES BUSINESS. SINCE THE LD. DR COULD NOT CONTROVERT THE FACTS, WE ARE OF THE CONSIDERED OPIN ION TO ALLOW THE CLAIM OF THE ASSESSEE AND DIRECT DELETION OF ADDITION OF RS.26,450/-. 8. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLO WED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 12.07.2017 SD/- SD/- (A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 12TH JULY, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT SHRI DIPANKAR SAHOO, BA-22, OM MOY HOUS ING COMPLEX, PRAFULLA KANAN, KRISHNAPUR, KOLKATA-700 101 2 RESPONDENT ACIT, CIRCLE-51, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY