ITO, Ward - 11(3), Kolkata, Kolkata V. Wanson Leather Industries Pvt. Ltd., Kolkata

ITA 1542/KOL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78392 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 11-11-2011
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , KOLKATA [BEFORE HONBLE SRI P.K.BANSAL, AM & HONBLE SRI GEORGE MATHAN, JM] ITA NO.1542/KOL/2011 ASSESSMENT YEAR : 2003-04 ( APPELLANT ) - (RESPONDENT) I.T.O., WARD-11(3), M/S.WANSON LEATHER INDUSTRI ES KOLKATA -VERSUS- PVT.LTD., KOLKATA (PAN : AAACW 4523 D) FOR THE APPELLANT: SMT.RANU BISWAS, JCIT, SR.DR FOR THE RESPONDENT: NONE DATE OF HEARING : 24.07.2014 DATE OF PRONOUNCEMENT : 24.07.2014. ORDER PER SHRI P.K.BANSAL, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-XXII, KOLKATA DATED 30.08.2011 FOR A.YR.2003-04 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS :- 1. THAT ON THE FACT AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A), HAS ERRED IN RESTRICTING THE DISALLOWANCE OF CARRIAGE OUTWARD AN D DELIVERY CHARGES AGGREGATING RS.22,50,867/- TO RS.6,45,417/-. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD.CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF RS.61,61,344/- U/S 40A(3) WHERE THE ASSESSEE FAILED TO PROVE THAT THE SELLERS WERE ORIGINAL GROWERS OR PRODUCER OF RAW HIDE. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE. AN APP LICATION FOR AN ADJOURNMENT WAS FILED BEFORE US AS THE CASE IS VERY OLD AND ON EARLIER OCCASIONS ALSO THE ADJOURNMENT HAS BEEN SOUGHT WHENEVER THE CASE WAS F IXED ON BEHALF OF THE ASSESSEE AND SERVED. THEREFORE, IN THE ABSENCE OF ANY PLAUSI BLE REASON WE REJECTED THE ADJOURNMENT AND DECIDED TO DISPOSE OF ON MERIT AFTE R HEARING THE LD. DR. ITA NO.1542/KOL/2011 M/S.WANSON LEATHER INDUSTRI ES PVT. LTD. A.YR.2003-04 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE SUBMITTED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.15,12,185/-. THE ASSES SMENT WAS COMPLETED U/S 143(3) OF THE ACT ON A TOTAL INCOME OF RS.99,40,970/- BY MAKI NG THE FOLLOWING DISALLOWANCES : I) ON ACCOUNT OF CARRIAGE OUTWARD AND DELIVERY CHAR GES RS.22,50,867/- II) DISALLOWANCE U/S 40A(3) IN RESPECT OF CASH PAYM ENT FOR PURCHASE OF RAW HIDE AND SKIN COMING UNDER THE EXEMPTED CATEGORY UNDER RULE 6DD RS.61,61,3 44/- 3.1. THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT (A). THE LD. CIT(A) REDUCED THE ADDITION OF RS.22,50,867/- TO RS.6,45,417/- BY OBSE RVING AS UNDER :- 6. I HAVE CAREFULLY CONSIDERED THE WRITTEN SUBMISS ION AND ASSESSMENT ORDER IT IS NOTICED THAT APPELLANT HAD DEBITED A SUM OF RS.29,19,306/- ON ACCOUNT OF CARRIAGE OUTWARD AND DELIVERY CHARGES ON A TOTAL TURN OVER OF RS.12,90,8 3,477/- WHICH IS 2.26% OF THE TOTAL TURNOVER. THE A.O. HAS MADE AN ADDITION OF RS.22,50 ,867/- ON THE BASIS THAT MOST OF THE SALES (APPROXIMATELY 75% OF THE SALES) HAVE BEEN MA DE TO TWO SISTER CONCERNS OF THE ASSESSEE COMPANY HAVING SAME ADDRESS OF THE ASSESSE E COMPANY. THE ASSESSEE HAS CONTENDED THAT GODOWNS ARE SCATTERED IN VAST AREA A ND DELIVERY OF FINISHED GOODS IS A LABOUR INTENSIVE JOB AND HANDLING OF THE FINISHED L EATHER REQUIRES A DUE CARE AND IN THE A.Y.2002-03 (IMMEDIATE LAST YEAR) ASSESSEE HAS DEBI TED RS.8,33,433/- AS CARRIAGE OUTWARD AND RS.18,97,292/ AS DELIVERY CHARGES WHICH COMES TO 21.3% OF THE TOTAL TURNOVER IN THAT ASSESSMENT YEAR WHICH IS COMPARABL E TO 2.26 EXPENSES DEBITED IN THIS FINANCIAL YEAR. HOWEVER, SINCE THE ASSESSEE DID NOT PRODUCE THE COMPLETE VOUCHERS FOR THESE EXPENSES AN ESTIMATED DISALLOWANCE NEEDS TO B E MADE. KEEPING IN VIEW THE ABOVE FACTUAL MATRIX IT IS REASONABLE TO ESTIMATE THE DIS ALLOWANCE UNDER THESE HEADS OF EXPENSES @0.5% OF TOTAL TURNOVER OF RS.12,90,83,477/- I.E. RS.6,45,417/-. THEREFORE, THE ASSESSEE GETS RELIEF OF RS.15,96,450/-. HENCE, THE GROUND NO .1 IS PARTLY ALLOWED. AGAINST THE SAID DECISION THE REVENUE HAS TAKEN GRO UND NO.1 BEFORE US. 4. WE HAVE HEARD THE LD.DR. WE NOTED THAT THE ASSES SEE HAS DEBITED A SUM OF RS.29,19,306/- AS CARRIAGE OUTWARD AND DELIVERY CHA RGES WHICH WAS 2.26% OF THE TOTAL TURNOVER. OUT OF THE SAID CHARGES APPROXIMATELY 75% AMOUNTING TO RS.22,50,867/- WAS PAID TO THE SISTER CONCERNS. THE AO DISALLOWED THE SAME AS THE ASSESSEE COULD NOT PRODUCE THE COMPLETE VOUCHERS FOR THESE EXPENSES. W E NOTED THAT WHEN THE MATTER WENT TO THE LD. CIT(A) THE CIT(A) HAS GIVEN A CATEG ORICAL FINDING THAT SINCE IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR THE ASSESSEE HA D DEBITED A SUM OF RS.8,33,433/- AS CARRIAGE OUTWARD AND RS.18,97,292/- AS DELIVERY CHARGES WHICH COMES TO 2.13% OF THE TOTAL TURNOVER AS COMPARED TO 2.26% EXPENDITURE INCURRED BY THE ASSESSEE OF THE ITA NO.1542/KOL/2011 M/S.WANSON LEATHER INDUSTRI ES PVT. LTD. A.YR.2003-04 3 TOTAL TURN OVER. ON THIS BASIS THE LD. CIT(A) SUSTA INED THE ADDITION TO THE EXTENT OF RS.6,45,417/- I.E. 0.5% OF TOTAL TURNOVER. THE LD. DR EVEN THOUGH VEHEMENTLY RELIED ON THE ORDER OF AO BEFORE US BUT COULD NOT ADDUCE A NY COGENT MATERIAL OR EVIDENCE TO SUPPORT HIS CONTENTION. THE LD. CIT(A) HAS GIVEN A FINDING THAT RELYING ON THE RESULTS OF THE PRECEDING YEAR WE ARE OF THE VIEW THAT IT IS NOT A FIT CASE TO INTERFERE IN THE ORDER OF THE LD. CIT(A). WE ACCORDINGLY DISMISS GROUND NO .1 TAKEN BY THE REVENUE. 5. IN RESPECT OF GROUND NO.2 WHICH RELATES TO THE D ELETION OF DISALLOWANCE U/S 40A(3) OF THE ACT WE NOTED THAT THE FACTS RELATING TO THE GROUND ARE THAT THE AO NOTED THAT THE ASSESSEE MADE THE PAYMENT BY BEARER CHEQUE S DRAWN ON CANARA BANK AMOUNTING TO RS.3,08,06,721/- AGAINST VARIOUS PAYME NTS MADE BY HIM. AO THEREFORE DISALLOWED 20% OF THE TOTAL PAYMENTS AMOUNTING TO R S.61,61,344/- BY APPLYING THE PROVISION OF SECTION 40A(3) OF THE ACT. WHEN THE MA TTER WENT BEFORE THE LD. CIT(A) THE CIT(A) DELETED THE ADDITION BY OBSERVING AS UND ER : 4. I HAVE CAREFULLY CONSIDERED THE WRITTEN SUBMISS ION AND ASSESSMENT ORDER IT IS NOTICED THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING OF FI NISHED LEATHER. IF PURCHASES RAW HIDES FROM VARIOUS AGENTS AND PRODUCES FINISHED LEATHER B Y USING CHEMICALS AND THEN THE LEATHER PRODUCTS MADE FROM THESE FINISHED LEATHER A RE SOLD AND THE BOOKS OF ACCOUNTS WERE PRODUCED BEFORE THE A.O. THE ADDITION OF RS.61 ,61,344/ HAS BEEN MADE SINCE PAYMENTS HAVE BEEN MADE TO SIX RAW HIDE SUPPLIERS B Y BEARER CHEQUES U/S 40A(3). THE AO HAS NOT DOUBTED THE GENUINENESS OF THESE PAYMENT S FOR PURCHASES AND ALSO BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED BY THE AO. THE ASSE SSEE HAS RELIED UPON THE VARIOUS ITAT DECISIONS IN SUPPORT OF HIS CLAIM THAT RULE 6D D(F) IS APPLICABLE SINCE ASSESSEE MADE PURCHASE OF RAW MATERIAL OF HIDE AND SKINS IN ITS NATURAL FORM AND AFTER CHEMICAL TREATMENT AND OTHER RELATED PROCESSES IT CAN BE SOL D AS HIDE AND SKIN. KEEPING IN VIEW OF THIS FACT AND THE DECISIONS OF CALCUTTA TRIBUNAL (S UPRA) IT IS HELD THAT RULE 6DD(F) IS APPLICABLE TO ASSESSEES CASE AND ADDITION MADE IS DELETED. THEREFORE, GROUND NO.2 IS ALLOWED. 6. WE HAVE HEARD THE LD. DR.. EVEN THOUGH WE HAD CO NSIDERED HIS SUBMISSIONS ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW WE NOTED THAT THE LD. CIT(A) WHILE DELETING THE ADDITION HAS RELIED ON THE DECISION OF THE ITAT KOKATA BENCH IN THE CASE OF PYARELAL BAJAJ VS CIT VIDE ITA NO.1877/KOL/2066. NO COGENT MATERIAL WAS PROVIDED BY THE LD. DR WHICH MAY PROVE THAT THE CAS E OF THE ASSESSEE DO NOT FALL UNDER RULE 6DD(F). IN THE ABSENCE OF ANY SUCH MATERIAL OR EVIDENCE WE DO NO FIND ANY OTHER ITA NO.1542/KOL/2011 M/S.WANSON LEATHER INDUSTRI ES PVT. LTD. A.YR.2003-04 4 ALTERNATIVE EXCEPT CONFIRMING THE ORDER OF THE LD. CIT(A) ON THIS GROUND. THUS GROUND NO.2 OF THE REVENUE STANDS DISMISSED. 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE ST ANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 24.07.2014. SD/- SD/- [GEORGE MATHAN ] [P.K.BANSAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 24.07.2014. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. M/S.WANSON LEATHER INDUSTRIES PVT. LTD., 119/2, MAT HESWARATALA ROAD, KOLKATA- 700046. 2 I.T.O., WARD-11(3), KOLKATA 3 . CIT KOLKATA 4 . CIT(A)- XII, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES