M/s. Sonex TV Appliances Pvt. Ltd., Kolkata V. ITO, Ward-8(4), Kolkata, Kolkata

ITA 1593/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1742 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 30-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NICHOLAS MURMU JCT
• Assessee Lawyers: MANOJ KATARUKA
• Section: 43B; 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENCH KOLKATA BEFORE SHRI A.T.VARKEY, JM & DR. A.L.SAINI, AM ./ ITA NO.1593/KOL/2014 ( / ASSESSMENT YEAR : 2011-2012) M/S SONEX TV APPLIANCES PVT.LTD 3C, COWRINGHEE LANE, KOLKATA-700016 VS. ITO, WARD-8(4), KOLKATA- 700069 ./ ./PAN/GIR NO. : AAFCS 7583 Q ( /APPELLANT ) .. ( / RESPONDENT ) AND ./ ITA NO.1802/KOL/2014 ( / ASSESSMENT YEAR : 2011-2012) ITO, WARD-8(4), KOLKATA- 700069 VS. M/S SONEX TV APPLIANCES PVT.LTD 3C, COWRINGHEE LANE, KOLKATA-700016 ./ ./PAN/GIR NO. : AAFCS 7583 Q ( /APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI MANOJ KATARUKA ADVOCATE /REVENUE BY : SHRI NICHOLAS MURMU, JCT SR.DR / DATE OF HEARING : 09/05/2017 /DATE OF PRONOUNCEMENT: 04/08/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE, PERTAINING TO ASSESSMENT YEAR 2011-12, ARE DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX(APPEALS)-VIII, KOLKATA IN APPEAL NO.51/CIT(A)-VIII/KOL/14-15, DATED 24.07.2014, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER U/S.143(3) OF THE INCOME TAX ACT 1961, (HEREINAFTER REFERRED TO AS THE ACT), DATED 28.03.2014. 2. THESE TWO CROSS APPEALS RELATE TO THE SAME ASSESSEE, SAME ASSESSMENT YEAR, IDENTICAL ISSUES ARE INVOLVED, THEREFORE, THESE HAVE ITA NO.1593&1802/14 M/S SONEX TV APPLIANCES PVT. LTD. 2 BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE CONVENIENCE AND BREVITY. 3. FIRST WE TAKE ASSESSEE`S APPEAL IN ITA NO.1593/KOL/2014, WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWING GRUNDS OF APPEALS: GROUNDS RAISED BY ASSESSEE IN ITA NO.1593/KOL/2014 (AY:2011-12) : 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ACTION OF THE LD CIT(A) IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.603150/ U/S 40A(3) OF THE IT ACT IS CONTRARY TO THE MATERIAL EVIDENCES ON RECORD AND THE ADDITION MADE IS BAD IN LAW. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ACTION OF THE LD CLT(A) IN CONFIRMING THE ADDITION OF RS.603150/ U/S 40A(3) OF THE IT ACT EVEN WHERE PAYMENTS WERE MADE AND THERE WAS NO APPLICABILITY OF SECTION 40A(3), THE ADDITION CONFIRMED BY THE LD CIT(A) IS BAD IN LAW. 3. THAT THE ACTION OF THE LD CLT(A) IN CONFIRMING THE ADDITION OF RS.603150/ U/S 40A(3) MADE BY THE ASSESSING OFFICER IS ARBITRARY EXCESSIVE AND ILLEGAL. 4. THAT THE ABOVE GROUNDS OF APPEAL SHALL BE ARGUED IN DETAIL AT THE TIME OF HEARING AND THE APPELLANT CRAVES LEAVE TO SUBMIT, ADD, ALTER, MODIFY, AMEND ANY GROUNDS OF APPEAL OR SUBMIT ANY ADDITIONAL GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 4. ALTHOUGH, IN THIS APPEAL, THE ASSESSEE HAS RAISED A MULTIPLE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING, THE MAIN GRIEVANCE OF THE ASSESSEE HAS BEEN CONFINED TO THE ISSUE THAT ADDITION OF RS.603150/- U/S 40A(3) MADE BY THE ASSESSING OFFICER IS ARBITRARY EXCESSIVE AND ILLEGAL. 4.1 THE BRIEF FACTS QUA THE ISSUE ARE THAT DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND OUT THAT THE ASSESSEE HAS CREDITED ITA NO.1593&1802/14 M/S SONEX TV APPLIANCES PVT. LTD. 3 RS.6,03,150/- IN THE BOOKS OF M/S CHARCO ELECTRONICS PVT. LTD. ON 6.10.2010 THROUGH BOOK ENTRY. THE AO HELD THAT THE ASSESSEE HAS PAID TO ITS CREDITOR M/S CHARCO ELECTRONICS PVT. LTD. NOT BY ACCOUNT PAYEE CHEUQE NOR BY ACCOUNT PAYEE DRAFT BUT THROUGH BOOK ENTRY. HOWEVER, THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE ASSESSEE DID NOT PAY RS.6,03,150/- TO M/S CHARCO ELECTRONICS PVT. LTD. DIRECTLY BUT PAID THE SAID AMOUNT TO M/S SHIVAM ON THE INSTRUCTIONS FROM M/S CHARCO ELECTRONICS PVT. LTD. THEREFORE, THE MISCHIEF OF SECTION 40A(3) DOES NOT APPLY IN THIS CASE. APART FROM THIS, THE SAID ADJUSTMENT ENTRY DOES NOT FALL UNDER RULE 6DD OF THE I.T.RULES. HOWEVER, THE AO IGNORING THE SUBMISSIONS OF THE ASSESSEE HELD THAT RS.6,03,150/- IS LIABLE TO BE DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND, THEREFORE, THE AO ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 4.2 AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO HAS CONFIRMED THE ADDITION MADE BY THE AO. THE CIT(A) IN RESPECT OF ADDITION OF RS.6,03,150/- OBSERVED THAT THE SAID AMOUNT IS PAID BY THE ASSESSEE TO M/S SHIVAM ENTERPRISES ON THE INSTRUCTIONS OF ITS CREDITORS M/S CHARCO ELECTRONICS PVT. LTD, SINCE THE AO CONCLUDED THAT EXPLANATION TO RULE 6DD ARE NOT APPLICABLE IN THIS CASE AND THE PAYMENT OF RS.6,03,150/- WAS DISALLOWED BY INVOKING SECTION 40A(3). THE ASSESSEE HAS SUBMITTED BEFORE THE LD. CIT(A) THAT IT IS JUST MERELY AN ADJUSTMENT ENTRY NEITHER THE RULE 6DD NOR PROVISIONS OF SECTION 40A(3) ARE APPLICABLE. THE ASSESSEE HAS PAID RS.6,03,150/- TO M/S ITA NO.1593&1802/14 M/S SONEX TV APPLIANCES PVT. LTD. 4 SHIVAM ENTERPRISES AS INSTRUCTED BY ITS CREDITOR M/S CHARCO ELECTRONICS PVT. LTD.. THIS IS MERELY AN ADJUSTMENT ENTRY AND IN FACT THE AMOUNT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUE, THEREFORE, THERE IS NO QUESTION OF DISALLOWANCE U/S.40A(3) OF THE ACT, HOWEVER, THE LD. CIT(A) IGNORED THE SUBMISSIONS OF THE ASSESSEE AND CONFIRMED THE ADDITION MADE BY THE AO AT RS.6,03,150/-. AGGRIEVED BY THE ORDER OF THE LD CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 4.3 THE LD COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS PAID RS.6,03,150/- TO SHIVAM ENTERPRISES ON THE INSTRUCTION OF ITS CREDITOR M/S CHARCO ELECTRONICS PVT. LTD. I.E. THE ASSESSEE INSTEAD OF PAYING TO M/S CHARCO ELECTRONICS PVT. LTD., CREDITOR OF THE ASSESSEE, AS PER THE INSTRUCTIONS OF THE CREDITOR, HE PAID TO M/S SHIVAM ENTERPRISES RS.6,05,150/- THROUGH ACCOUNT PAYEE CHEQUE. IN OTHER WORDS, TO SIMPLIFY THE ISSUE UNDER CONSIDERATION THE ASSESSEE PURCHASED GOODS FROM M/S CHARCO ELECTRONICS PVT. LTD. OF WORTH RS.6,03,150/- AND THEREFORE, HE SUPPOSED TO PAY M/S CHARCO ELECTRONICS PVT. LTD, BUT THE CREDITOR OF M/S CHARCO ELECTRONICS PVT. LTD. HAS INSTRUCTED THE ASSESSEE NOT TO PAY HIM BUT THE PAYMENT IS TO BE MADE DIRECTLY TO M/S SHIVAM ENTERPRISES. THEREFORE, IT IS A PAYMENT THROUGH ACCOUNT PAYEE CHEQUE AND THERE IS NO VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT. BESIDES, THE ASSESSEE RELIED ON THE FOLLOWING JUDGMENTS :- I) ANUPAM TELE SERVICES, (2014) 43 TAXMANN.COM 199 (GUJ HC) ITA NO.1593&1802/14 M/S SONEX TV APPLIANCES PVT. LTD. 5 SECTION 40A(3) DOES NOT ELIMINATE CONSIDERATIONS OF BUSINESS EXPEDIENCIES, THUS WHERE ASSESSEE WAS COMPELLED TO MAKE CASH PAYMENTS, DISALLOWANCE MADE BY INVOKING SECTION 40A(3) WAS NOT JUSTIFIED. II) CIT VS. MUTHOOT BANKERS (2000) 111 TAXMANN 0385 SECTION 40A(3) HAS NO APPLICATION WHERE INTEREST IS CREDITED TO CREDITOR`S ACCOUNT AND THERE IS NO CASH PAYMENT; IF IT IS TREATED AS CASH PAYMENT THE QUESTION OF APPLICABILITY OR RULE 6DD HAS TO BE CONSIDERED 4.4 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THERE IS NO VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT. AS IT IS ABUNDANTLY CLEAR FROM THE FACTS THAT THE ASSESSEE HAS PAID RS.6,03,150/- TO SHIVAM ENTERPRISES ON THE INSTRUCTION OF ITS CREDITOR M/S CHARCO ELECTRONICS PVT. LTD, THROUGH ACCOUNT PAYEE CHEQUE. THERE IS NO CASH PAYMENT AT ALL. THEREFORE, WE ARE OF THE VIEW THAT ADDITION MADE BY ASSESSING OFFICER AND CONFIRMED BY LD CIT(A) NEEDS TO BE DELETED. ACCORDINGLY, WE DELETE THE ADDITION OF RS.6,03,150/- 4.5 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE, ( IN ITA NO. 1593/KOL/2014), IS ALLOWED. 5. NOW, WE SHALL TAKE THE APPEAL FILED BY THE REVENUE IN ITA NO.1802/KOL/2014. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READS AS UNDER: GROUNDS RAISED BY REVENUE IN ITA NO.1802/KOL/2014 (AY:2011-12) : I) THAT LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.70,00,000/ U/S 40A(3A) OF IT ACT JUST BY PLACING RELIANCE ON THE TRIBUNAL DECISION IN THE CASE OF DCIT VS. BHARTIYA HOTELS LTD. (ITA NO.941/KOI/2011) (A.Y.0708), INTERPRETING THE MEANING OF PAYMENT OTHER THAN BY A/ C PAYEE CHEQUE OR BANK DRAFT. ITA NO.1593&1802/14 M/S SONEX TV APPLIANCES PVT. LTD. 6 II) THAT LD. CIT(A) HAS ERRED BY IGNORING THE AOS INTERPRETATION OF THE MALPRACTICE IN ACCOUNTS ADOPTED BY THE ASSESSEE IN TRANSFERRING THE AMOUNT OF RS.70,00,000/ FOR SUNDRY CREDITOR TO LOAN CREDITOR WITH THE MOTIVE TO HOODWINK THE REVENUE. III) THAT LD. CIT(A) HAS ERRED IN RECOGNISING THE FACT THAT THERE IS NO THIRD PARTY INVOLVEMENT IN PASSING THE ALLEGED JOURNAL ENTRY TO TRANSFER THE SAID AMOUNT OF RS.70,00,00 FROM SUNDRY CREDITOR TO LOAN CREDITOR WHICH DOES NOT HAVE ANY BEARING IN THIS CIRCUMSTANCES. IV) THAT LD. CIT(A) HAS ERRED IN INTERPRETING THE PROVISION U/S 40A(3A) OF I.T. ACT BY ACCEPTING THE ASSESSEE'S PLEA REGARDING THE SAID JOURNAL ENTRY TO TRANSFER THE AMOUNT FROM SUNDRY CREDITOR TO LOAN CREDITOR IN SPITE OF ITS INABILITY TO EXPLAIN THE REASON FOR PASSING SUCH JOURNAL ENTRY. V) THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION U /S 2 (24 )(X) READ WITH SECTION 36( 1) (VA) AMOUNTING TO RS.2813/ ON ACCOUNT OF EMPLOYEES' CONTRIBUTION TO ESI & RS.63,299/ ON ACCOUNT OF EMPLOYEES' CONTRIBUTION TO EPF FOR PAYMENT AFTER DUE DATES SPECIFIED BY THE RESPECTIVE ACT. VI) THAT LD CIT(A) HAS ERRED IN ACCEPTING THE DECISION OF CASE LAWS CITED BY THE ASSESSEE IGNORING THE TWO CASE LAWS CITED BY THE A.O. ( I.E. BENGAL CHEMICAL & GUJARAT STATE ROAD TRANSPORT CORPN. (SUPRA) ALONGWITH THE ELABORATE DISCUSSION MADE BY THE A.O. IN THE ASSESSMENT ORDER REGARDING APPLICABILITY OF SEC 2(24) (X) READ WITH 36(1)(VA) OF I.T. ACT INSTEAD OF SECTION 43B OF IT. ACT. 5.1 GROUNDS NO. I) TO IV) RAISED BY THE REVENUE RELATE TO ONE ISSUE, THAT IS, TRANSFER THE AMOUNT OF RS.70,00,000/- FOR SUNDRY CREDITOR TO LOAN CREDITOR WITH THE MOTIVE TO HOODWINK THE REVENUE. 5.2 THE BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12, ON 30.09.2011 DECLARING A TOTAL INCOME OF RS.13,13,180/-. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY U/S.143(2) OF THE ACT AND THE AO COMPLETED THE ASSESSMENT BY MAKING VARIOUS ADDITIONS. THE AO DURING THE ASSESSMENT PROCEEDINGS, NOTED THAT ITA NO.1593&1802/14 M/S SONEX TV APPLIANCES PVT. LTD. 7 SUNDRY CREDITORS, AS ON 1 ST APRIL, 2010 AND 31.03.2011 IN COMPARISON WITH LOAN CONFIRMATIONS FURNISHED BY THE ASSESSEE, IT WAS FOUND THAT THE ASSESSEE MADE PAYMENT OF RS.70,00,000/- TO ONE OF ITS SUNDRY CREDITORS, I.E. M/S ROLATAINERS NIRYAT PVT. LTD BUT DID NOT MAKE IT IN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE DRAFT BUT MADE THROUGH THE BOOK ENTRY ON A SINGLE OCCASION ON 1 ST APRIL, 2010, AND THEREFORE, AO HELD THAT IT CLEARLY ATTRACTED THE PROVISIONS OF DISALLOWANCE U/S.40A(3) OF THE ACT. HOWEVER, THE ASSESSEE SUBMITTED BEFORE THE AO THAT NO PAYMENT HAS BEEN MADE TO M/S ROLATAINERS NIRYAT PVT. LTD. BY MAKING GENERAL ENTRY OF RS.70,00,000/- ON 1-4-2010 AND ONLY TRANSFERRED THE TRADING LIABILITY OF THE SAID PARTY TO UNSECURED LOAN TO CREDITOR ACCOUNT CREDITED ON 1.4.2010 IN THE NAME OF M/S ROLATAINERS NIRYAT PVT. LTD. BUT WHEN A BOOK ENTRY IS MADE ON THE DEBIT SIDE IN THE CREDITORS LEDGER ACCOUNT THEN THE TRADING LIABILITY BY THAT AMOUNT IS IMPLIED TO HAVE BEEN PAID TO THE CREDITOR AND AS A RESULT THE TRADING LIABILITY IS ALSO REDUCED BY THAT AMOUNT (I.E REDUCED TO NIL IN THIS CASE). THEREFORE, AO HELD THAT IN ASSESSEE`S CASE, THE OLD TRADE LIABILITY AMOUNTING TO RS.70,00,000/- IS SAID TO HAVE BEEN PAID TO M/S ROLLATANIERS NIRYAT PVT. LTD. BY PASSING THE NECESSARY JOURNAL ENTRY/BOOK ENTRY. PAYMENT (THROUGH DEEMED) TO THE TRADE CREDITOR THROUGH THIS BOOK ENTRY IS DEEMED TO BE THE INCOME OF THE ASSESSEE AS PER PROVISION LAID DOWN IN SECTION 40A(3) OF I.T.ACT. IT IS NOT COMING IN THE PURVIEW OF THE EXCEPTION CLAUSE U/S.6DD OF I.T.RULES. BUT THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE TRANSACTIONS WAS GENUINE AND THE IDENTITY OF THE CREDITOR/PAYEE IS ALSO NOT DOUBTED, THE MISCHIEF OF SECTION 40A(3A) IS NOT ATTRACTED. IGNORING ITA NO.1593&1802/14 M/S SONEX TV APPLIANCES PVT. LTD. 8 THE SUBMISSIONS OF THE ASSESSEE THE AO DISALLOWED THIS AMOUNT OBSERVING THAT IDENTITY OF THE CREDITOR HAS NOT BEEN ESTABLISHED AND THE FICTITIOUS BOOK ENTRY MAY ALSO GENERATE THE BLACK MONEY. THEREFORE, THE AO NOTED THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS LAID DOWN IN SECTION 40A(3) OF THE I.T.ACT AND HELD TO BE TREATED AS INCOME IN ASSESSMENT YEAR 2011-12, THEREFORE, RS.70,00,000/- IS TREATED AS INCOME OF THE ASSESSEE IN ASSESSMENT YEAR 2011-12 BY INVOKING PROVISIONS OF SECTION 40A(3) OF THE ACT. 5.3 REGARDING ADDITION OF RS.70,00,000/- MADE BY THE AO U/S.40A(3) OF THE ACT, THE LD. CIT(A) OBSERVED THAT THE CREDITOR REMAINS THE SAME I.E. M/S ROLLATANIERS NIRYAT PVT. LTD., INTER ALIA, THE NATURE OF LIABILITY HAS CHANGED FROM TRADE CREDITOR TO LOAN CREDITOR. IT CANNOT BE SAID THAT ANY PAYMENT HAS BEEN MADE. M/S ROLLATANIERS NIRYAT PVT. LTD. WAS SHOWN AS A CREDITOR IN THE ASSESSEES BOOKS OF ACCOUNT BUT THE ASSESSEE HAS CHANGED THE NOMENCLATURE AND MADE IT UNSECURED LOAN FROM SAME PARTY, M/S ROLLATANIERS NIRYAT PVT. LTD. THE LIABILITY REMAINED SAME, ONLY NOMENCLATURE HAS BEEN CHANGED AND THIS FACT HAS NOT BEEN DISPUTED BY THE AO THAT THE LIABILITY OF RS.70,00,000/- WILL EXCEED AND ONLY THE ASSESSEE HAS CONVERTED THE TRADE LIABILITY OF RS.70,00,000/-, TO UNSECURED LOAN FROM THE SAID PARTY. THE LD. CIT(A) ALSO OBSERVED THAT IN THIS TRANSACTION NO ANY THIRD PARTY IS INVOLVED AND NO LIABILITY DISCHARGED BY THE ASSESSEE, THE PROVISION OF SECTION 40A(3) IS NOT ATTRACTED. THEREFORE, THE LD CIT(A) HELD THAT THE AOS ACTION CANNOT BE SUSTAINED. THE LD CIT(A) ITA NO.1593&1802/14 M/S SONEX TV APPLIANCES PVT. LTD. 9 ALSO RELIED ON THE THIRD MEMBER JUDGMENT IN THE CASE OF DCIT VS. BHARATIYA HOTELS LIMITED, ITA NO.941/KOL2011, A.Y.2007-08, WHICH CLEARLY EXPLAINS THAT SECTION 40A (3) OF THE ACT USES THE EXPRESSION IN SUM WHICH INDICATES THAT IT IS ONLY WHEN PAYMENT IS MADE IN MONETARY TERMS/CASH. IN THE ASSESSEE`S CASE UNDER CONSIDERATION, THE PAYMENT HAS NOT BEEN MADE ONLY NOMENCLATURE HAS CHANGED. THEREFORE, THE CIT(A) DELETED THE ADDITION OF RS.70,00,000/-. DISSATISFIED WITH THE ORDER OF THE LD CIT(A), ON THIS PARTICULAR ISSUE, THE REVENUE IS IN APPEAL BEFORE US. 5.4 LD. DR FOR THE REVENUE HAS STATED THAT THE ASSESSEE HAD TRANSFERRED AMOUNT OF RS.70,00,000/ ON 1.4.2010 FROM SUNDRY CREDITORS TO THE LOAN AMOUNT OF THE SAME PARTY NAMELY M/S ROLLATANIERS NIRYAT PVT. LTD. IN THE BOOKS OF M/S ROLLATANIERS NIRYAT PVT. LTD., THE AMOUNT OF RS.70,00,000/- IS REFLECTED AS SUNDRY CREDITORS AS ON 31.3.2011, THEREFORE, IN THE ASSESSEES BALANCE SHEET IT SHOULD BE REFLECTED AS A SUNDRY CREDITOR, WHEREAS THE ASSESSEE HAS CHANGED IT AS A LOAN CREDITOR, THEREFORE, IT IS NOT ALLOWED. 5.5 ON THE OTHER HAND, LD. COUNSEL HAS SUBMITTED THAT, THIS IS JUST CHANGE IN NOMENCLATURE. THE SUNDRY CREDITOR HAS BEEN CHANGED AND RENAMED AS SUNDRY LOAN, JUST BECAUSE OF CHANGE IN NOMENCLATURE DOES NOT MEAN THAT THE ASSESSEE HAS PAID THE LIABILITY. IN THE BOOKS OF ASSESSEE THE LIABILITY REMAINED THE SAME. THERE IS NO PAYMENT MADE AS PER THE MEANING OF THE WORD PAYMENTS. THEREFORE, JUST BECAUSE THE ITA NO.1593&1802/14 M/S SONEX TV APPLIANCES PVT. LTD. 10 ASSESSEE HAS RENAMED THE TRADE LIABILITY OF RS.70,00,000/-, TO UNSECURED LOAN FROM THE SAME PARTY M/S ROLLATANIERS NIRYAT PVT. LTD. DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2011-12, DOES NOT MEAN THAT THE ASSESSEE HAD PAID THE SAID LIABILITY. THEREFORE, THE LIABILITY REMAINED THE SAME I.E. M/S ROLLATANIERS NIRYAT PVT. LTD.(CREDITOR), THE ONLY NATURE OF LIABILITY HAS CHANGED FROM TRADE CREDITOR TO LOAN CREDITOR AND BECAUSE OF THE CHANGE IN NOMENCLATURE, IT CANNOT BE SAID THAT ANY PAYMENT HAS BEEN MADE. THE AO HAS NOT DISPUTED THE FACT THAT THE LIABILITY OF RS.70,00,000/-, REMAINED SAME. SINCE NO THIRD PARTY IS INVOLVED AND NO LIABILITY HAS BEEN DISCHARGED BY THE ASSESSEE, THE PROVISIONS OF SECTION 40A(3) IS NOT ATTRACTED AND, THEREFORE, THE ACTION OF THE AO CANNOT BE SUSTAINED. THE LD. COUNSEL ALSO RELIED ON THE THIRD MEMBER JUDGMENT IN THE CASE OF DCIT VS. BHARATIYA HOTELS LTD. (A.Y. 2007-08) (SUPRA). 5.6 HAVING HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THE ASSESSEES CREDITOR M/S ROLLATANIERS NIRYAT PVT. LTD. HAS BEEN RENAMED IN THE BOOKS OF ASSESSEE AS A LOAN CREDITOR AND JUST TO RENAME THE LIABILITY DOES NOT MEAN THAT THE LIABILITY HAS BEEN PAID BY THE ASSESSEE. THE SAME LIABILITY REMAINED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE PAYMENT HAS NOT BEEN MADE BY THE ASSESSEE. THE AO ALSO DID NOT DISPUTE THE FACT THAT THE LIABILITY OF RS.70,00,000/-, DID NOT EXIST IN THE BOOKS OF THE ASSESSEE. JUST BECAUSE THAT THE TRADE CREDITOR HAS BEEN RENAMED BY THE ASSESSEE, AS UNSECURED LOAN DOES NOT MEAN THAT THE ASSESSEE HAS PAID ANY LIABILITY OR HAS DONE ITA NO.1593&1802/14 M/S SONEX TV APPLIANCES PVT. LTD. 11 ANY ILLEGAL ACTIVITY TO CONCEAL THE PARTICULARS OF INCOME. THEREFORE, CONSIDERING THE FACTUAL POSITION, WE ARE OF THE VIEW THAT THERE IS NO ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). THEREFORE, WE CONFIRM THE ORDER PASSED BY THE LD.CIT(A). 5.7 IN THE RESULT, APPEAL FILED BY THE REVENUE IN GROUNDS NOS.1 TO 4 ( IN ITA NO. 1802/KOL/2014) ARE, DISMISSED. 6. GROUND NOS. V) AND VI) RAISED BY THE REVENUE RELATE TO PAYMENT OF ESI RS. 2813/- AND PAYMENT OF EPF RS.63,299/- AFTER DUE DATE AND IN VIOLATION OF PROVISIONS OF SECTION 36(1) (VA) OF THE I.T.ACT. 6.1 THE BRIEF FACTS QUA THE ISSUE ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE DELAYED IN MAKING THE PAYMENT OF EMPLOYEES CONTRIBUTION TO EPF AND ESI AMOUNTING TO RS.63,299/- AND RS.2,813/- RESPECTIVELY. THE AO FOUND THAT THE ASSESSEE HAD PAID THE EMPLOYEES CONTRIBUTION TO THE EPF AGGREGATING TO RS.63,299/- AFTER THE RESPECTIVE DUE DATE OF THE PAYMENTS AS PER THE EPF ACT, AND VIOLATING THE INCOME PROVISIONS OF SECTION 2(24)(X) R.W.S.36(I)(VA) OF THE I.T.ACT. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE EPF IS COVERED BY THE EXPRESSION U/S.2(24)(X) R.W.S. 36(1)(VA) OF THE I.T.ACT. THE ASSESSEE SUBMITTED THAT FOR LATE PAYMENT OF PF/ESI THE ASSESSEE HAS TO BEAR THE PENAL INTEREST AND THE SUBSEQUENTLY PENALTY, THEREFORE, THE ASSESSEE SHOULD NOT PENALIZED FURTHER. IGNORING THE SUBMISSIONS OF THE ASSESSEE THE AO MADE THE ADDITION OF RS.63,299/- AND RS.2,813/- ON ACCOUNT OF PAYMENT OF EMPLOYEES CONTRIBUTION TO PF & ESI RESPECTIVELY. ITA NO.1593&1802/14 M/S SONEX TV APPLIANCES PVT. LTD. 12 6.2 DISSATISFIED WITH THE ORDER OF AO, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO HAS ALLOWED THE ASSESSEES APPEAL. REGARDING DISALLOWANCE OF EMPLOYEES CONTRIBUTION TO PROVIDE FUND OF RS.63,299/- AND ESI OF RS.2813/- U/S.36(1)(VA), LD. CIT(A) HELD THAT THE JURISDICTIONAL KOLKATA HIGH COURT IN THE CASE OF CIT VS. M/S VIJAY SHREE LIMITED, ITAT NO.245 OF 2011, HELD THAT EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AND ESI, IF THESE ARE DEPOSITED WITHIN DUE DATE OF FILING OF INCOME TAX RETURN THEN THESE SHOULD NOT BE ADDED BANK U/S.36(1)V) OF THE ACT. THE LD. CIT(A) ALSO RELIED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSION LTD., 319 ITR 306(SC), WHEREIN IT WAS HELD THAT IF THE PROVIDENT FUND AND ESI IS DEPOSITED BY THE ASSESSEE WITHIN THE DUE DATE OF FILING OF RETURN OF INCOME, THEN THERE SHOULD NOT BE ANY DISALLOWANCE U/S.36(1)(VA) OF THE ACT. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 6.3. THE LD. DR FOR THE REVENUE HAS STATED THAT THE ASSESSEE HAS NOT PAID THE ESI OF RS.2813/- AND THE EMPLOYEES CONTRIBUTION TO THE EPF TO RS.63,299/- AS PER THE DUE DATES SPECIFIED IN SECTION 36(1)(VA) R.W.S 2(24)(X) OF THE ACT, THEREFORE, THE AO WAS JUSTIFIED IN ADDING THIS AMOUNT IN THE ASSESSEES TOTAL INCOME. 6.4 ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS PAID THE EMPLOYEES CONTRIBUTION TO ESI OF RS.2813/- AND RS.63,299/- ON EMPLOYEES CONTRIBUTION TO EFP BEFORE THE ITA NO.1593&1802/14 M/S SONEX TV APPLIANCES PVT. LTD. 13 DATE OF FILING THE INCOME TAX RETURN. THE LD. COUNSEL ALSO RELIED ON THE JUDGMENT OF JURISDICTIONAL KOLKATA HIGH COURT IN THE CASE OF CIT VS. VIJAY SHREE LTD., ITA NO.245 OF 2011, WHEREIN IT HAS BEEN HELD THAT IF THE ASSESSEE PAYS THE EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AND ESI WITHIN DUE DATE OF FILING THE RETURN, THEN THERE SHOULD NOT BE ANY DISALLOWANCE U/S.36(1)(VA) OF THE ACT. 6.5. HAVING HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL ON RECORD, WE NOTICE THAT IN THE INSTANT CASE THE ASSESSEE HAS PAID ESI LIABILITY OF RS.2813/- AND PROVIDENT FUND LIABILITY OF RS.63299/- WITHIN THE DUE DATE OF FILING THE INCOME TAX RETURN. IT IS A SUFFICIENT COMPLIANCE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF JURISDICTIONAL KOLKATA HIGH COURT IN CASE OF CIT VS. VIJAY SHREE LTD. (SUPRA), WE ARE OF THE VIEW THAT THERE IS NO ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). HENCE, WE CONFIRM THE ORDER PASSED BY LD. CIT(A). 6.6 IN THE RESULT, APPEAL FILED BY THE REVENUE (IN ITA NO.1802/KOL/2014), ON GROUND NOS.5 TO 6, ARE DISMISSED. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE (IN ITA NO.1593/KOL/2014), IS ALLOWED AND THE APPEAL FILED BY THE REVENUE (IN ITA NO.1802/KOL/2014), IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 04/08/2017. SD/ - (A.T.VARKEY) SD/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; DATED 04/08/2017 /PRAKASH MISHRA ,SR.PS. ITA NO.1593&1802/14 M/S SONEX TV APPLIANCES PVT. LTD. 14 / COPY OF THE ORDER FORWARDED TO : BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/D.D.O, I.T.A.T, KOLKATA BENCHES, KOLKATA . 1. / THE ASSESSEE M/S. SONEX TV APPLIANCES PVT. LTD. 2. / THE REVENUE - ITO, WARD-8(4), KOLKATA 3. ( ) / THE CIT(A), KOLKATA. 4. / CIT 5. , , / DR, ITAT, KOLKATA 6. / GUARD FILE. //TRUE COPY//