Shri Arpan Kumar Ghosh, Howrah V. ITO, WARD-48(1), KOLKATA, Kolkata

ITA 1536/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4292 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 16-07-2014
• Court: TRIBUNAL
• Assessee Lawyers: T P KAR
• Keywords: Depreciation; Corroborative evidences
• Section: 194C

Judgement Text

I.T.A. NO. 1536/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C(SMC) BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 1536/KOL/ 2014 ASSESSMENT YEAR: 2008-2009 ARPAN KUMAR GHOSH,................................. ..........................APPELLANT 27, SURESH CHANDRA GANGULY LANE, SALKIA, HOWRAH-711 106 [PAN: ADXPG 4044 N] -VS.- INCOME TAX OFFICER,................................ .........................RESPONDENT WARD-48(1), KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 APPEARANCES BY: SHRI T.P. KAR, FCA, FOR THE ASSESSEE SHRI ARUN KANTI SINHA, ADDL. CIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : AUGUST 18, 2016 DATE OF PRONOUNCING THE ORDER : OCTOBER 21, 2016 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXX, KOLKATA D ATED 31.03.2014. 2. THE ISSUE RAISED IN GROUND NO. 1 RELATES TO THE DISALLOWANCE OF RS.13,31,842/- MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) AND CONFIRMED BY THE LD. CIT(APPEALS). 3. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L, WHO IS ENGAGED IN THE BUSNESS OF MANUFACTURING OF HOSIERY GOODS UNDER THE NAME AND STYLE OF HIS PROPRIETARY CONCERN M/S. V.K. TEXTILE. THE R ETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY HIM DECLARING TOTAL INCOME OF RS.2,33,320/-. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS MADE TOTAL I.T.A. NO. 1536/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 2 OF 6 PAYMENTS OF RS.6,01,300/- ON ACCOUNT OF MAKING CHAR GES TO THREE PARTIES, RS.3,98,951/- ON ACCOUNT OF DYEING CHARGES TO TWO P ARTIES AND RS.3,31,591/- AGAINST KNITTING CHARGES TO THREE PAR TIES. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE WAS REQUIRED TO DED UCT TAX AT SOURCE UNDER SECTION 194C FROM ALL THESE PAYMENTS MADE TO THE DIFFERENT PARTIES AND SINCE THERE WAS FAILURE ON THE PART OF THE ASSE SSEE TO DO SO, HE INVOKED THE PROVISIONS OF SECTION 40(A)(IA) AND DIS ALLOWED THE ENTIRE EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF MAKI NG CHARGES, DYEING CHARGES AND KNITTING CHARGES AGGREGATING TO RS.13,3 1,842/-. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE SAID DISALLOWANC E MADE BY THE ASSESSING OFFICER AS THE ASSESSEE FAILED TO DEMONST RATE BEFORE HIM AS TO HOW THE PAYMENTS IN QUESTION WERE NOT GOVERNED BY THE PROVISION OF SECTION 194C. 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ALTHOUGH THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED BY RELYING, INTER ALIA, ON T HE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF KHADIM S HOES PVT. LIMITED [134 TAXMAN 297] THAT THE AMOUNT IN QUESTION HAVING BEEN PAID BY THE ASSESESE FOR OUTSOURCING OF THE MANUFACTURING ACTIV ITIES, THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE, I FIND IT DIFFICUL T TO ACCEPT THIS CONTENTION. IN THE CASE OF KHADIM SHOES PVT. LIMITE D RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE, THE ASSESSEE HAD PURC HASED GOODS FROM OTHER MANUFACTURERS AFTER PAYMENT OF SALES TAX, EXCISE DU TY, ETC. AND IN THESE FACTS AND CIRCUMSTANCES AS INVOLVED IN THE SAID CAS E, IT WAS HELD BY THE HONBLE CALCUTTA HIGH COURT THAT THE PROVISIONS OF SECTION 194C WERE NOT ATTRACTED. AS RIGHTLY POINTED OUT BY THE LD. D.R., THE PAYMENTS IN QUESTION WERE MADE BY THE ASSESSEE IN THE PRESENT CASE ON AC COUNT OF LABOUR CHARGES AND IT IS THUS NOT A CASE OF OUTSOURCING OF MANUFACTURING ACTIVITY AS SOUGHT TO BE CONTENDED BY THE LD. COUNSEL FOR TH E ASSESSEE. IT IS THUS A CASE OF WORKS CONTRACT TO WHICH PROVISIONS OF SECTI ON 194C ARE CLEARLY APPLICABLE AND SINCE THERE WAS A FAILURE ON THE PAR T OF THE ASSESSEE TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS IN QUESTION MADE TOWARDS WORKS I.T.A. NO. 1536/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 3 OF 6 CONTRACT AS REQUIRED BY THE PROVISIONS OF SECTION 1 94C. I AM OF THE VIEW THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) AND CONFIRMED BY THE LD. CIT(APPEALS) IS FULLY SUSTAINABLE. I, THEREFORE, FIND NO MERIT IN GROUND NO. 1 RAISED BY THE ASSESSEE AND DISMISS THE SAME. 5. THE ISSUE RAISED IN GROUND NO. 2 RELATES TO THE DISALLOWANCE OF RS.7,458/- MADE BY THE ASSESSING OFFICER AND CONFIR MED BY THE LD. CIT(APPEALS) OUT OF VARIOUS EXPENSES. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, PAR T OF THE EXPENSES CLAIMED BY THE ASSESSEE UNDER THE HEADS TRAVELLING AND CONVEYANCE, CARRIAGE OUTWARD, CARRIAGE INWARD AND GENERAL CHARGES WERE FOUND BY THE ASSESSING OFFICER TO BE MADE BY THE ASSESSEE THROUGH SELF-MADE VOUCHERS. ACCORDING TO THE ASSESSING OFFICER, THE S AID EXPENSES, THEREFORE, WERE NOT FULLY VERIFIABLE AND ACCORDINGL Y DISALLOWANCE OF RS.7,458/- BEING 5% ON TOTAL EXPENSES OF RS.1,04,95 0/- CLAIMED UNDER THE RESPECTIVE HEADS WAS MADE BY HIM. ON APPEAL, THE LD . CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE AFTER HAVING FOUND THE SAME TO BE REASONABLE. 7. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AT THE TIME OF HEARING BEFORE THE TRIBUNAL, NOTHING HAS BEEN BROUGHT ON RE CORD BY THE LD. COUNSEL FOR THE ASSESSEE TO REBUT OR CONTROVERT THE FINDING RECORDED BY THE ASSESSING OFFICER THAT PART OF THE EXPENSES CLA IMED BY THE ASSESSEE UNDER THE RELEVANT HEADS WAS NOT FULLY VERIFIABLE A S THEY WERE MERELY SUPPORTED BY SELF-MADE VOUCHERS. THE DISALLOWANCE O N ACCOUNT OF THE INVOLVEMENT OF UNVERIFIABLE ELEMENT IN THE SAID EXP ENSES THUS WAS CALLED FOR AND I FIND MYSELF IN AGREEMENT WITH THE LD. CIT (APPEALS) THAT THE SAME AS MADE BY THE ASSESSING OFFICER AT 5% OF THE TOTAL EXPENSES WAS FAIR AND REASONABLE. I, THEREFORE, FIND NO JUSTIFIABLE REASO N TO INTERFERE WITH THE I.T.A. NO. 1536/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 4 OF 6 IMPUGNED ORDER OF THE LD. CIT(APPEALS) ON THIS ISSU E AND DISMISS GROUND NO. 2 OF THE ASSESSEES APPEAL. 8. THE ISSUE RAISED IN GROUND NO. 3 RELATES TO THE DISALLOWANCE OF ASSESSEES CLAIM MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF DEPRECIATION ON TELEVISI ON SET. 9. THE DEPRECIATION CLAIMED BY THE ASSESSEE ON TELE VISION SET ON THE GROUND THAT THE RELEVANT TELEVISION SET WAS BUSINES S ASSET BEING INSTALLED IN HIS OFFICE WAS DISALLOWED BY THE ASSESSING OFFIC ER IN THE ASSESSMENT FOR THE REASON THAT THE SAME WAS NOT SUPPORTED BY ANY D OCUMENTARY EVIDENCE. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THIS ISSUE AFTER H AVING FOUND THAT THERE WERE NOT MANY WORKERS AND EMPLOYEES EMPLOYED BY THE ASSESSEE GOING BY THE FACT THAT THE PAYMENT MADE TOWARDS SALARY AN D BONUS WAS ONLY RS.1,35,000/-. 10. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN MY OPINION, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOU NT OF ASSESSEES CLAIM FOR DEPRECIATION ON TELEVISION SET AND CONFIRMATION OF THE SAME BY THE LD. CIT(APPEALS) ARE NOT WELL FOUNDED. IF THE RELEVANT TELEVISION SET WAS INSTALLED IN THE OFFICE OF THE ASSESSEE AS CLAIMED, IT WAS USED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE AND DEPRECI ATION THEREON THUS WAS RIGHTLY CLAIMED. THE ACTION OF THE ASSESSING OF FICER IN DISALLOWING THE SAME FOR WANT OF ANY SUPPORTING EVIDENCE AS WELL AS THE ACTION OF THE LD. CIT(APPEALS) IN CONFIRMING SUCH DISALLOWANCE ON THE BASIS OF LESS NUMBER OF EMPLOYEES, IN MY OPINION, IS NOT WELL FOUNDED. I , THEREFORE, DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONF IRMED BY THE LD. CIT(APPEALS) ON THIS ISSUE AND ALLOW GROUND NO. 3 O F THE ASSESSEES APPEAL. I.T.A. NO. 1536/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 5 OF 6 11. THE ISSUE RAISED IN GROUND NO. 4 RELATES TO THE DISALLOWANCE OF RS.90,338/- MADE BY THE ASSESSING OFFICER OUT OF IN TEREST EXPENDITURE AND CONFIRMED BY THE LD.CIT(APPEALS). 12. IN THE PROFIT & LOSS ACCOUNT FILED ALONG WITH H IS RETURN OF INCOME, A SUM OF RS.2,34,540/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF INTEREST PAID ON LOAN TAKEN FROM DENA BANK AND ICICI BANK. I N THIS REGARD, IT WAS NOTED BY THE ASSESSING OFFICER THAT A SUM OF RS.5,0 0,000/- WAS ADVANCED BY THE ASSESSEE TO HIS WIFE FREE OF INTEREST. IN TH IS REGARD, IT WAS EXPLAINED BY THE ASSESSEE THAT THE AMOUNT OF RS.5,0 0,000/- WAS ADVANCED BY HIM TO HIS WIFE, PROPRIETOR OF M/S. RUPALI HOSIE RY, FOR THE PURPOSE OF HIS BUSINESS. IT WAS ALSO CLAIMED BY THE ASSESSEE T HAT HE HAD SUFFICIENT FUNDS OF HIS OWN IN THE FORM OF CAPITAL RESERVES AT THE RELEVANT TIME TO GIVE THE ADVANCE OF RS.5,00,000/- TO HIS WIFE. THIS CASE OF THE ASSESSEE, HOWEVER, WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER AND HE PROCEEDED TO DISALLOW THE CLAIM OF THE ASSESSEE FOR INTEREST TO THE EXTENT OF RS.90,338/- AS ATTRIBUTABLE TO THE ADVANCE OF RS .5,00,000/- GIVEN BY THE ASSESSEE TO HIS WIFE. ON APPEAL, THE LD. CIT(AP PEALS) DISMISSED THE RELEVANT GROUND RAISED BY THE ASSESSEE DISPUTING TH E DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF INTEREST BY HOLDING THAT THE SAME DID NOT REQUIRE ANY ADJUDICATION. 13. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE FROM THE RELEVA NT FACTS AND FIGURES DISCUSSED BY THE ASSESSING OFFICER HIMSELF IN THE A SSESSMENT ORDER, THE ASSESSEES OWN FUND AT THE RELEVANT TIME IN THE FOR M OF CAPITAL ALONE WERE TO THE EXTENT OF RS.13,53,380/- AND SINCE THE SAME WERE SUFFICIENT TO GIVE THE ADVANCE OF RS.5,00,000/- IN QUESTION BY THE ASS ESSEE TO HIS WIFE, I FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SAID ADVANCE IS DEEMED TO HAVE BEEN GIVEN BY THE ASSESES E OUT OF HIS OWN FUNDS AND NOT OUT OF BORROWED FUNDS. THERE IS THUS NO DIVERSION OF BORROWED FUND FOR ANY PERSONAL PURPOSE AS ALLEGED B Y THE AUTHORITIES I.T.A. NO. 1536/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 6 OF 6 BELOW CALLING FOR ANY DISALLOWANCE OUT OF INTEREST PAID ON BORROWED FUNDS. I, THEREFORE, DELETE THE DISALLOWANCE MADE B Y THE ASSESSING OFFICER OUT OF INTEREST AND CONFIRMED BY THE LD. CIT(APPEAL S) AND ALLOW GROUND NO. 4 OF THE ASSESSEES APPEAL. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 21 ST , 2016. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 21 ST DAY OF OCTOBER, 2016 COPIES TO : (1) SHRI ARPAN KUMAR GHOSH, 27, SURESH CHANDRA GANGULY LANE, SALKIA, HOWRAH-711 106 (2) INCOME TAX OFFICER, WARD-48(1), KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 (3) COMMISSIONER OF INCOME TAX(APPEALS)-XXX, KOLK ATA; (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.