Shree Ram Saw Mill, Howrah V. DCIT, CIR-47, KOLKATA, Kolkata

ITA 1198/KOL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8242 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 27-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHANKAR HALDER
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Capital asset; Gift; TDS
• Section: 40(a)(ia)

Judgement Text

1 ITA NO.1198/KOL/2016 SHREE RAM SAW MILL AY- 2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH, C AT KOLKATA () . . , . , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 1198/KOL/2016 ASSESSMENT YEAR: 2011-12 SHREE RAM SAW MILL [PAN: AANFS 0170 N] VS. DCIT, CIRCLE 47, KOLKATA APPELLANT RESPONDENT DATE OF HEARING 11.06.2019 DATE OF PRONOUNCEMENT 17.07.2019 FOR THE APPELLANT SHRI MIRAJ D SHAH, AR FOR THE RESPONDENT SHRI SHANKAR HALDER, JCIT, SR. DR ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) 14, KOLKATA DATED 29.03.2016 FOR AY 2011-12. 2. THE FIRST ISSUE IN RESPECT OF DISALLOWANCE OF RS . 8,72,045/- BEING 10% OF THE EXPENSES CLAIMED BY THE ASSESSEE. REGARDING THIS IS SUE BRIEF FACTS AS TAKEN NOTE BY A.O IS THAT THE APPELLANT FIRM HAS DEBITED CARRIAGE INWARD OF RS. 80,63,652/-, LABOUR CHARGES OF RS. 2,51,200/- AND WAGES TO MACHINE MAN OF RS. 4,05,600 /- IN ITS AUDITED PROFIT AND LOSS A/C. ACCORDING TO THE AO, THE ASSESSEE FIRM FAILED TO PR ODUCE THE VOUCHERS FOR THE EXPENSES CLAIMED, SO HE DISALLOWED 10% WAGE OF EXPENSES CLAI MED I.E, RS. 8,72,045/-. ON APPEALS, THE LD. CIT(A) HAS CONFIRMED THE ACTION OF A.O. HAV ING HEARD BOTH THE PARTIES WE NOTE THAT THE BOOKS OF THE ASSESSEE WERE NOT REJECTED AND THE REFORE THE A.O COULD NOT HAVE ESTIMATED THE INCOME OF THE ASSESSEE AND EVEN IF THE ASSESSEE HAD NOT PRODUCED THE VOUCHERS/BILLS IN RESPECT OF EXPENDITURE, THE A.O COULD HAVE DISALLOW ED ITEM-WISE EXPENDITURE AND COULD NOT HAVE BEEN RESORTED TO AD HOC DISALLOWANCE OF 10% OF EXPENDITURE WHICH ACTION OF A.O SMACKS OF ARBITRARINESS AND IS NOT IN CONFORMITY WI TH THE RULE OF LAW AND, THEREFORE, WE DELETE THE ADDITION. 3. THE SECOND ISSUE IN RESPECT OF DISALLOWANCE U/ S 40(A)(IA) OF TRANSIT PASS EXPENSES. ACCORDING TO THE AO, THE ASSESSEE HAS NOT DEDUCTED ANY TAX ON THE TRANSIT PASS. THEREFORE, 2 ITA NO.1198/KOL/2016 SHREE RAM SAW MILL AY- 2011-12 HE DISALLOWED THE EXPENSES TO THE TUNE OF RS. 26,18 ,523/-. AGGRIEVED THE ASSESSEE IS BEFORE US. 4. WE NOTE THAT THE ASSESSEE HAS MADE THE PAYMENT T O GOVT. OF WEST BENGAL, FOREST DEPTT. AND CLAIMED THE EXPENDITURE INCURRED FOR IT. THESE EXPENSES HAS BEEN INCURRED BY THE ASSESSEE ON THE PAYMENT MADE TO WEST BENGAL GOV ERNMENT, FOREST RANGE OFFICER CANNOT ATTRACT TDS AS PER THE PROVISION OF SECTION 196 OF THE ACT WHICH READS AS UNDER:- INTEREST OR DIVIDEND OR OTHER SUMS PAYABLE TO GOVE RNMENT, RESERVE BANK OR CERTAIN CORPORATIONS. 196. NOTWITHSTANDING ANYTHING CONTAINED IN THE FORE GOING PROVISIONS OF THIS CHAPTER, NO DEDUCTION OF TAX SHALL BE MADE BY ANY PERSON FROM A NY SUMS PAYABLE TO I. THE GOVERNMENT, OR II. THE RESERVE BANK OF INDIA, OR III. A CORPORATION ESTABLISHED BY OR UNDER A CENTRA L ACT WHICH IS, UNDER ANY LAW FOR THE TIME BEING IN FORCE, EXEMPT FROM INCOME-TAX ON ITS INCOME, OR IV. A MUTUAL FUND SPECIFIED UNDER CLAUSE (23D) OF S ECTION 10, WHERE SUCH SUM IS PAYABLE TO IT BY WAY OF INTEREST OR DIVIDEND IN RESPECT OF ANY SECURITIES OR SHARES OWNED BY IT OR IN WHICH IT HAS FULL BENEFICIAL INTEREST, OR ANY OTHER INCOME ACCRUING OR ARISING TO IT. THIS BEING PAYMENT MADE TO GOVERNMENT OF WEST BENGA L, NO TAX IS DEDUCTIBLE ON SUCH PAYMENT AND THE ADDITION MADE UNDER THIS HEAD IS LI ABLE TO BE DELETED IN FULL IN APPELLATE STAGE. 5. SINCE THE PAYMENT HAS BEEN MADE BY THE ASSESSEE TO THE GOVERNMENT OF WEST BENGAL AS PER SECTION 196 OF THE ACT NO TAX IS DEDU CTIBLE ON SUCH PAYMENT AND ALSO WE NOTE THAT IN EARLIER YEARS THESE EXPENSES WERE FULLY ALL OWED. THEREFORE, WE DELETE THE ADDITION. 6. THE THIRD ISSUE IN RESPECT OF CAPITAL OF PARTNER S OF RS. 20,00,000/-. THE AO DISALLOWED AND ADDED RS. 20,00,000/- BY OBSERVING A S UNDER: ON BEING ASKED TO EXPLAIN THE SOURCE OF RECEIPT OF RS. 20,00,000/- BY SHRI MURLISHAR PANDEY, ONE OF THE PARTNER OF THE FIRM. IT WAS STAT ED THAT THE MONEY WAS RECEIVED AS A GIFT FROM SMT. MAYA PANDEY WHO HAD GIVEN LOAN TO TH E FIRM AND THE SAME AMOUNT STANDING AS UNSECURED LOAN IN THE NAME OF SMT. MAYA PANDEY WAS GIFTED TO HER FATHER- IN-LAW AND THE PARTNER OF THE FIRM. IT WAS ALSO STA TED THE MODE OF PAYMENT OF ALLEGED GIFT TO SHRI MURLIDHAR PANDEY WAS THROUGH PAPER BOOK ENT RY. THE EXPLANATION GIVEN BY THE ASSESSEE CLEARLY INDICATES THAT THE MONEY BELONGS T O THE FIRM EITHER IN THE SHAPE OF UNSECURED LOAN OR IN THE SHAPE OF CAPITAL ASSETS OF THE PARTNER WHICH COMPELS TO FORM 3 ITA NO.1198/KOL/2016 SHREE RAM SAW MILL AY- 2011-12 ASSUMPTION THAT THE AMOUNT WAS RS. 20,00,000/- OF T HE FIRM, BY USING THE COLOURFUL DEVICE, IN THE SHAPE BOOK ENTRY SAID TO BE GIFTED T O SHRI MURLIDHAR PANDEY. AS SUCH THE AMOUNT OF RS. 20,00,000/- TREATED AS UNEXPLAINED AN D CONCEALED INCOME OF THE FIRM AND ADDED TO THE RETURNED INCOME OF THE FIRM. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD. CIT(A) WHO CONFIRMED THE SAME. AGGRIEVED THE ASSESSEE IS BEFORE US. 7. WE NOTE THAT SMT. MAYA PANDEY HAS GIVEN A LOAN O F RS. 20,00,000/- TO THE ASSESSEE FIRM IN PAST YEAR AS EARLY AS ON 31.03.2005. DURING THE YEAR UNDER ASSESSMENT, SMT. MAYA PANDEY HAS GIFTED THE LOAN AMOUNT IN FAVOUR OF HER FATHER-IN-LAW AND PARTNER OF THE FIRM MURLIDHAR PANDEY. THE AMOUNT WAS CREDITED IN THE BO OKS OF THE FIRM IN THE PAST YEAR AND ACCEPTED IN REGULAR ASSESSMENT. DURING THE YEAR ONL Y THE SUM OF LOAN WAS TRANSFERRED TO CAPITAL ACCOUNT BY WAY OF GENUINE FAMILY GIFT. THE ASSESSING OFFICER, HOWEVER, NOT APPRECIATING THE AFORESAID FACTS HAS ARBITRARILY AD DED BACK THE SAME TO THE FIRMS TAXABLE INCOME AS UN-EXPLAINED INCOME. THIS AMOUNT BEING A GIFT MADE BY SMT. MAYA PANDEY TO HER FATHER-IN-LAW SHRI MURLIDHAR PANDEY, IS NOT ASS ESSABLE IN THE HANDS UNDER THE FIRM AS UNEXPLAINED INCOME. SINCE THE SOURCE OF THE AMOUNT HAS BEEN EXPLAINED PROPERTY AND THAT THE DEPARTMENT HAS ACCEPTED THE LOANS GIVEN BY SMT. MAYA PANDEY TO THE TUNE OF RS.20 LAKH AS EARLY AS 31.03.2005, THERE IS NO QUESTION THAT T HE SAID AMOUNT WHEN LATER GIFTED BY THE LENDER MAYA TO PARTNER, HER OWN FATHER-IN-LAW CAN B E TERMED AS UNEXPLAINED. MOREOVER, SHRI MURALIDHAR PANDEY, BEING THE FATHER IN LAW OF SMT. MAYA PANDEY THE TRANSACTION OF GIFT IS CLEARLY EXEMPT U/S 56(2)(V) OF THE ACT. SO WE DIRE CT DELETION OF THE ADDITION. 8. THE NEXT ISSUE IS ADDITION OF RS. 5,27,439/- BE CAUSE OF ALLEGED DISCREPANCY IN SUNDRY CREDITORS. THE AO MADE THE DISALLOWANCE BY TAKING N OTE AS UNDER: AS PER INSPECTORS REPORT SUBMITTED ON 21.10.2013 TALLIED IN LEDGER ACCOUNTS OF BOTH THE SIDE AND AFTER RECONCILIATION OBTAINED FROM THE AR OF THE ASSESSEE FIRM THE POSITION COMES AS UNDER; 4 ITA NO.1198/KOL/2016 SHREE RAM SAW MILL AY- 2011-12 SL NO. NAME OF THE PARTIES AS PER PARTY AS PER ASSE SSEE DISCREPANCIES REMAINED 1 SINGH BROTHERS EXIM (P) LTD. 0 14898111.00 NIL 2 SHANKAR SAW MILLS PVT. LTD. 359157.00 12499981.00 NIL 3 PERFEX IMPEX (P) LTD. 6028362 5500923.00 527439.0 0 AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD. CIT(A) WHO CONFIRMED THE SAME. AGGRIEVED THE ASSESSEE IS BEFORE US. IN SPITE OF FULL RECONCILIATION OF CURRENT YEARS T RANSACTIONS WITH THE SUNDRY CREDITORS REPLY THE ASSESSING OFFICER ARBITRARILY AND WRONGLY ADDED BACK THE OPENING BALANCE DIFFERENCE WITH ONE PARTY AMOUNTING TO RS. 5,27,439 /- TO THE INCOME OF THE FIRM. THIS ADDITION IS ARBITRARY AND UNLAWFUL. FROM THE ASSESS MENT ORDER ITSELF AND THE LEDGER COPY OF THE PARTY ACCOUNT OF M/S. PREFEX IMPEX PVT. LTD. IT IS CLEAR THAT THERE IS NO DIFFERENCE IN TRANSACTION WITH THE PARTY DURING THE YEAR. THE DIFFERENCE IS DUE TO OPENING BALANCE. THE DIFFERENCE AS ALLEGED IS BEING OPENING BALANCE DIFFERENCE CANNOT BE ADDED TO THE TOTAL INCOME OF ASSESSEE DURING THE PERIOD UNDER AP PEAL. 9. HAVING HEARD BOTH THE PARTIES AND AFTER PERUSAL OF DOCUMENTS, WE NOTE THAT IN SPITE OF RECONCILIATION OF CURRENT YEARS TRANSACTIONS WITH T HE REPLIES OF THE SUNDRY CREDITORS, THE A.O ADDED BACK THE OPENING BALANCE DIFFERENCE WITH ONE PARTY AMOUNTING TO RS. 5,27,439/- TO THE INCOME OF THE FIRM. FROM A PERUSAL OF THE ASSESSMEN T ORDER AND THE LEDGER COPY OF THE PARTY ACCOUNT OF M/S. PREFEX IMPEX PVT. LTD. IT IS FOUND THAT THERE IS NO DIFFERENCE IN TRANSACTION WITH THE PARTY DURING THE YEAR. WE NOTE THAT THE DI FFERENCE IS DUE TO OPENING BALANCE. IN OUR OPINION THE DIFFERENCE AS NOTED IS BEING THE OPENIN G BALANCE DIFFERENCE WHICH CANNOT BE ADDED TO THE TOTAL INCOME OF ASSESSEE DURING THE PE RIOD UNDER CONSIDERATION OF THIS APPEAL. THEREFORE, WE REMAND THIS ISSUE BACK TO THE FILE OF AO TO VERIFY WHETHER THE AMOUNT SHOWN AT PAGE 74 OF THE PAPER BOOK ON 01.04.2010 I.E. RS. 5,27,439/- IS CARRIED FORWARDED AS OPENING BALANCE, IF SO THEN NO DISALLOWANCE IS TO B E MADE. 10. THE NEXT ISSUE IN RESPECT OF ADDITION OF RS. 25 ,000/-AS DONATION. THE AO HAS DISALLOWED DONATION CLAIM OF THE ASSESSEE TO THE TU NE OF RS. 25,000/- WHICH WAS CONFIRMED BY THE LD. CIT(A). IT WAS BROUGHT TO OUR NOTICE THA T THIS AMOUNT WAS ALREADY ADDED BACK IN 5 ITA NO.1198/KOL/2016 SHREE RAM SAW MILL AY- 2011-12 THE COMPUTATION OF INCOME AND THE LD. AR DREW OUR A TTENTION OF PAGE 75 OF THE PAPER BOOK WHEREIN WE NOTE THAT THE ASSESSEE HAD ALREADY ADDED IN THE COMPUTATION OF TOTAL INCOME OF RS. 25,000/-. THEREFORE THE IMPUGNED ADDITION IS A DOUBLE ADDITION AND CANNOT SUSTAIN IN THE EYES OF LAW AND IS THEREFORE ORDERED TO BE DELETED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 17TH JULY, 2019 SD/- SD/- (DR. A. L. SAINI) (ABY T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 17TH JULY, 2019 BISWAJIT (SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT SHREE RAM SAW MILL, 16, PTR SIDING, SHI BPUR, HOWRAH 711 102. 2 RESPONDENT DCIT, CIRCLE 47, 3, GOVT. PLACE (WES T), KOLKATA 700 001. 3 . THE CIT(A) 14, KOLKATA. 4. 5. CIT , DR, / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR/H.O.O ITAT, KOLKATA