Shri Tripti Kumar Chatterjee., Kolkata V. I.T.O Wd 28(3),Kol, Kolkata

ITA 1686/KOL/2012

• Counselvise Citation: 168623514 RSA 2012
• Duration Of Justice: 3 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 19-11-2012
• Court: TRIBUNAL
• Assessee Lawyers: B B PAYRA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH SMC, KOLKATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM] ITA NO.1686/KOL/2012 ASSESSMENT YEAR : 2007-08 SHRI TRIPTI KUMAR CHATTERJEE -VERSUS- I.T.O., WAR D-28(3), KOLKATA. KOLKATA (PAN:ADLPC 9549 C) (APPELLANT ) (RESPONDENT) FOR THE APPELLANT : SHRI B.B.PAYRA, ADVOCATE FOR THE RESPONDENT : SHRI ANIL KUMAR PANDEY, ADDL .CIT DATE OF HEARING : 02.12.2015. DATE OF PRONOUNCEMENT : 09.12.2015. ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 19.09.2012 OF CIT(A)-XIV, KOLKATA RELATING TO A.Y.2007-08. 2. GROUND NO.1 RAISED BY THE ASSESSEE READS AS FOLL OWS :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS.1,95,266/- PAID TO BANK ON OVERDRAFT AMOUNT UTILIZED FOR THE PURPOSE OF THE APPELLANTS BUSINESS ONLY. 3. THE ASSESSEE IS AN INDIVIDUAL. HE IS ENGAGED IN THE BUSINESS OF RUNNING A BAR AND RESTAURANT BY NAME M/S. DUKE BAR & RESTAURANT. AO NOTICED THAT ASSESSEE HAD CLAIMED AS DEDUCTION IN THE PROFIT AND LOSS ACCOUNT A SUM OF RS.1,95,226/- BEING INTEREST PAID ON BANK OVERDRAFT FROM SYNDICATE BANK . HE NOTICED THAT THE BORROWED FUNDS ON WHICH INTEREST WAS PAID BY THE ASSESSEE AN D CLAIMED AS DEDUCTION IN COMPUTING INCOME FROM BUSINESS, HAD BEEN ROUTED THR OUGH THE PARTNERS CAPITAL ACCOUNT AND WITHDRAWN BY THE ASSESSEE. THE AO THERE FORE HELD THAT THE BORROWED FUNDS ON WHICH INTEREST WAS PAID WERE NOT USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND ACCORDINGLY THE CONDITIONS NECESSARY F OR ALLOWING DEDUCTION U/S 36(1)(III) ITA NO.1686/KOL/2012 SHRI TRIPTI KUMAR CHATTERJEE A.YR.2007-08 2 OF THE ACT WERE NOT FULFILLED. THE ASSESSEE PUT FOR TH THE PLEA BEFORE THE AO THAT THERE WAS A DEVASTATING FIRE IN THE RESTAURANT ON 9.11.19 95 AND EXTENSIVE DAMAGE TO THE RESTAURANT BUILDING DUE TO FIRE AND THE FUNDS WITHD RAWN WERE USED FOR RENOVATION AND REPAIRING WORK OF THE RESTAURANT. THE ASSESSEE THUS SUBMITTED THAT THE BORROWED FUNDS HAD BE USED FOR RENOVATION OF THE BUSINESS PREMISES AND THEREFORE USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. ACCORDING TO AO ASSES SEE COULD NOT SUBSTANTIATE THE AFORESAID PLEA AND ACCORDINGLY AO DISALLOWED THE CL AIM OF THE ASSESSEE FOR DEDUCTION WHICH WAS CONFIRMED BY THE CIT(A). 4. BEFORE ME THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THE BREAK- UP OF CAPITAL ACCOUNT SINCE 2006-07. IT WAS HIS SUBMISSION THAT T HE EXPENDITURE WERE INCURRED OVER A PERIOD OF TIME AND IT WAS NOT POSSIBLE FOR THE AS SESSEE TO PRODUCE CONCRETE PROOF FOR HAVING CARRIED OUT REPAIRS AND MAINTENANCE. ACCORDI NG TO THE ASSESSEE SINCE THE REPAIRS AND MAINTENANCE WERE CARRIED OUT AT THE PRE MISES THE CONDITIONS ALLOWING FOR DEDUCTION U/S 36(1)(III) OF THE ACT WERE FULLY SATI SFIED. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNE D COUNSEL OF THE ASSESSEE AND ARE OF THE VIEW THAT THE CONTENTIONS PUT FORTH BEFO RE US ARE GENERAL AND ARE NOT SUBSTANTIATED BY ANY EVIDENCE. IN THE LIGHT OF THE ADMITTED POSITION THAT THE BORROWED FUNDS WERE ROUTED TO THE CAPITAL ACCOUNT AND IN THE ABSENCE OF UTILIZATION OF THE FUNDS WITHDRAWN FROM THE CAPITAL ACCOUNT FOR THE PURPOSE OF BUSINESS, I HOLD THAT THE DISALLOWANCE WAS RIGHTLY MADE BY THE REVENUE AUTHOR ITIES. 6. GROUND NO.2 RAISED BY THE ASSESSEE READS AS FOLL OWS :- 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.2,48,950/- BEING 21.58% OF CASH PURCHASE MADE BY THE APPELLANT. 7. GROUND NO. 2 OF THE APPEAL RELATES TO DISALLOWAN CE OF RS.2,48,950/- ON ACCOUNT OF CASH PURCHASES MADE. DURING THE PERIOD RELEVANT TO ABOVE ASSESSMENT YEAR THE ASSESSEE INCURRED CASH EXPENDITURE OF RS.11,53,319/ - FOR PURCHASE OF RAW MATERIALS. FOR RUNNING HIS RESTAURANT THE ASSESSEE HAD TO PURC HASE GREEN VEGETABLES, FISH, EGGS, CHICKEN, MEAT ETC. FROM THE OPEN MARKET ON THE BASI S OF DAY TO DAY CONSUMPTION. ITA NO.1686/KOL/2012 SHRI TRIPTI KUMAR CHATTERJEE A.YR.2007-08 3 ACCORDING TO THE ASSESSEE, AS THE AFORESAID GOODS A RE HIGHLY PERISHABLE, IT IS UNWISE TO PURCHASE THE SAME IN HUGE QUANTITY AND STORE THE SA ME FOR FUTURE CONSUMPTION. THE ASSESSEE EXPLAINED THAT IT PURCHASES THE SAME FROM DIFFERENT SELLERS IN THE OPEN MARKET. FOR SUCH PURCHASES NO SELLER ISSUES ANY BIL L/CASH MEMO. RECORDING OF THE AFORESAID CASH PURCHASES ARE MADE IN THE BOOKS OF A CCOUNTS MAINTAINED ON THE BASIS OF SELF-MADE VOUCHERS SUPPORTED WITH SLIPS SUBMITTE D BY THE CONCERNED PERSONS ENTRUSTED WITH THE JOB OF PURCHASING THE AFORESAID RAW MATERIALS. THE SAID SELF MADE VOUCHERS WERE PRODUCED BEFORE THE A.O. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS. BUT THE A. O. INSISTED ON PRODUCTION OF PARTY-WISE DETAILS AND BILLS IN SUPPORT OF CASH PURCHASES MADE FOR PURCHASES OF ALL THE AFORESAID R AW MATERIALS. ACCORDING TO THE ASSESSEE IT WAS QUITE IMPRACTICAL IN THE LINE OF BU SINESS CARRIED ON BY THE ASSESSEE TO COMPLY WITH THE REQUIREMENT AS CALLED FOR BY THE AO . IT WAS EXPLAINED BEFORE THE A.O. THAT RECORDING OF CASH PURCHASES OF RAW MATERIALS I N THE LINE OF HOTEL AND RESTAURANT BUSINESS ARE MADE IN THE SIMILAR MANNER AS FOLLOWED BY THE ASSESSEE. THE A.O. DID NOT ACCEPT THE SUBMISSION MADE ON BEHALF OF THE ASS ESSEE. ACCORDING TO THE AO, ASSESSEES IN SIMILAR LINE OF BUSINESS WERE EARNING 6% MARGIN ON TURNOVER. ACCORDING TO THE AO, THE PROFIT MARGIN ON THAT BASI S IN THE CASE OF THE ASSESSEE WOULD BE RS.4,61,331 (6% ON TURNOVER OF RS.76,88,857) AS AGAINST RS.17,115/- DECLARED BY THE ASSESSEE. THE AO ACCORDINGLY DISALLOWED RS.2,4 8,950/- WHICH WAS 21.58% OF RS.11,53,319 EXPENDITURE ON PURCHASE OF FISH, CHICK EN, VEGETABLES ETC. ON ESTIMATE BASIS. 8. BEFORE CIT(A), THE ASSESSEE SUBMITTED THAT THE ADDITION WAS MADE ARBITRARILY OUT OF SUSPICION AND SURMISE AND ON AN ERRONEOUS ASSUMP TION THAT NET 'PROFIT OF THE ASSESSEE SHOULD BE 6%. OF THE TURNOVER. IT WAS CON TENDED THAT EARNING OF NET PROFIT DEPENDS ON VARIOUS ASPECTS AND THE AO IS NOT THE CO MPETENT AUTHORITY TO DECIDE WHAT SHOULD BE NET PROFIT IN A PARTICULAR BUSINESS. NET PROFIT DECLARED BY THE ASSESSEE WAS BASED ON BOOKS OF A/CS. MAINTAINED AND WHICH IS DUL Y AUDITED BY THE CHARTERED ACCOUNTANT. HENCE, THERE WAS NO JUSTIFICATION ON TH E PART OF THE A.O. TO ESTIMATE NET PROFIT ON HIS OWN AND TO JUSTIFY THE SAME TO DISALL OW EXPENDITURE ON ESTIMATE BASIS. THE DISALLOWANCE MADE BY THE A.O. WITHOUT CONSIDERI NG THE PRACTICAL .DIFFICULTIES, IS. ITA NO.1686/KOL/2012 SHRI TRIPTI KUMAR CHATTERJEE A.YR.2007-08 4 CONTRARY TO LAW. THE ENTIRE EXPENDITURE INCURRED BY THE ASSESSEE FOR PURCHASE OF RAW MATERIALS IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF HIS BUSINESS. HENCE, IN. THE INTEREST OF JUSTICE, DISALLOWANCE MADE BY THE A. O . ARBITRARILY SHOULD BE DELETED. 9. THE CIT(A) HOWEVER CONFIRMED THE ORDER OF THE A O. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSEE HAS RAISED GROUND NO.2 BEFO RE THE TRIBUNAL. 10. I HAVE HEARD THE SUBMISSIONS OF THE LEARNED CO UNSEL FOR THE ASSESSEE WHO REITERATED THE CONTENTIONS AS PUT FORTH BEFORE THE CIT(A). THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). 11. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN M Y VIEW THE DISALLOWANCE WAS ARBITRARY AND CANNOT BE SUSTAINED IN LAW. THE AO H AS NOT BROUGHT ON RECORD ANY EVIDENCE TO SHOW THAT THE ASSESSEES PROFIT MARGINS WERE LESS THAN WHAT WAS DECLARED IN THE PAST, SO AS TO DRAW ANY INFERENCE OF ATTEMPT TO SUPPRESS PROFITS. THE BOOKS OF ACCOUNTS WERE NOT REJECTED. THE PROFIT MARGIN EARN ED BY ASSESSEES ENGAGED IN SIMILAR LINE OF BUSINESS CANNOT BE THE BASIS TO COM E TO A CONCLUSION THAT THE ASSESSEE WAS SUPPRESSING PROFITS. AS RIGHTLY CONTENDED BY T HE ASSESSEE IT IS NO POSSIBLE TO PRODUCE BILLS FOR PURCHASES MADE ON A DAY TO DAY BA SIS FROM SMALL TRADERS. CONSIDERING THE NATURE OF BUSINESS AND THE NEEDS OF BUSINESS AND SCALE OF BUSINESS OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE ADDITION MADE CANNOT BE SUSTAINED. THE SAME IS DIRECTED TO BE DELETED. GR.NO.2 RAISED BY THE ASSESSEE IS ALLOWED. 11. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 9.12.2015. SD/- [N.V.VASUDEVAN] JUDICIAL MEMBER DATE: 9.12.2015. R.G.(.P.S.) ITA NO.1686/KOL/2012 SHRI TRIPTI KUMAR CHATTERJEE A.YR.2007-08 5 COPY OF THE ORDER FORWARDED TO: 1. SHRI TRIPTI KUMAR CHATTERJEE, C/O DUKE BAR, 11, C.R.AVENUE, KOLKATA- 700072. 2 THE I.T.O., WARD-28(3), KOLKATA. 3. THE CIT-X, KOLKATA. 4. THE CIT(A)-XIV, KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES