Sanjiv Tantia, Purulia V. I.T.O Wd - 3(4) Purulia, Purulia

ITA 1772/KOL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4998 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 06-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P J BHIDE FCA SHRI SALLO
• Assessee Lawyers: DIST PURULIA
• Keywords: Depreciation
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI N.V.VASUSDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1772 / KOL / 2013 ASSESSMENT YEAR :2008-09 SANJIV TANTIA SANJIV TRADING CO., U.B. STREET, SADAR PARA, PURULIA, PIN-723 101 [ PAN NO ABYPT 0976 B ] V/S . INCOME TAX OFFICER, WARD-3(4), NORTH LAKE ROAD, P.O. & DIST. PURULIA /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI P.J.BHIDE, FCA /BY RESPONDENT SHRI SALLONG YADEN, JCIT, SR-DR /DATE OF HEARING 02-03-2016 /DATE OF PRONOUNCEMENT 11-03-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F COMMISSIONER OF INCOME TAX (APPEALS)-ASANSOL IN APPEAL NO.420/CIT(A )/ASL/W.3(4)/PUR.10-11 DATED 07.03.2013. ASSESSMENT WAS FRAMED BY ITO WARD -3(4), PURULIA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT) VIDE HIS ORDER DATED 27.12.2010 FOR ASSESSMENT YEAR 2008 -09. GROUNDS RAISED BY ASSESSEE ARE REPRODUCED BELOW:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. COMMISSIONER OF INCOME-TAX (APPEALS), ASANSOL, ERRE D IN UPHOLDING THE ADDITION OF RS.66,298/- BEING THE AMOUNT CREDITED I N THE EARLIER YEAR AND REVERSE ENTRY PASSED IN THE YEAR DUE TO DENIAL BY M /S SETH BROTHERS. ITA NO.1772/KOL/2013 A.Y. 2008-09 SANJIV TANTIA V. ITO WD-3(4) PUR. PAGE 2 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS), ASANSOL, ERRE D IN UPHOLDING THE ADDITION OF RS.2,98,340/- BEING THE AMOUNT OF PROVI SION FOR INCENTIVE PROVIDED IN THE ACCOUNTS. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS), ASANSOL, ERRE D IN UPHOLDING THE ADDITION OF RS.17,245/- ON ACCOUNT OF CAR EXPENSES AND DEPRECIATION THEREOF AND RS.25,848/- ON ACCOUNT OF CASH DISCOUNT ALLOWED. SHRI P.J.BHIDE, LD. AUTHORIZED REPRESENTATIVE APPEA RING ON BEHALF OF ASSESSEE AND SHRI SALLONG YADEN, LD. DEPARTMENTAL R EPRESENTATIVE APPEARING ON BEHALF OF REVENUE. 2. AT THE TIME OF HEARING, LD. AR FAIRLY CONCEDED T HAT HE HAS INSTRUCTED NOT TO PRESS GROUND NO.3, HENCE, SAME IS DISMISSED AS N OT PRESSED. 3. FIRST WE TAKE UP GROUND NO.1 WHICH STATES THAT L D. CIT(A) ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER BY MAKIN G THE ADDITION OF 66,298/- WHICH WAS CREDITED IN EARLIER YEAR BUT REVISED IN T HE YEAR UNDER CONSIDERATION. 4. FACTS IN BRIEF ARE THAT ASSESSEE IS AN INDIVIDUA L AND ENGAGED IN TRADING BUSINESS OF CYCLE AND ITS SPARE PARTS. THE ASSESSEE WAS BUYING THE GOODS FROM M/S SETH INDUSTRIAL CORPORATION (MSIT FOR SHOR T). AS PER UNDERSTANDING WITH THE PARTY, THE ASSESSEE WAS ENTITLED FOR A DIS COUNT OF 66,298/- IN THE PRECEDING FINANCIAL YEAR I.E. 2006-07. ACCORDINGLY, ASSESSEE BOOKED THE PURCHASE BY ANTICIPATED AMOUNT OF DISCOUNT WHICH AS SESSEE WAS SUPPOSED TO RECEIVE IN THAT FINANCIAL YEAR 2006-07. HOWEVER, IN THE FINANCIAL YEAR UNDER CONSIDERATION, THE MSIT DENIED TO PROVIDE THE DISCO UNT OF THE SAID AMOUNT. THEREFORE, ASSESSEE HAD TO MAKE PAYMENT OF THIS AMO UNT ON 24.04.2007 BY WAY OF CHEQUE NO.047929 FOR AMOUNT OF 66,298/- AND THIS ANTICIPATED DISCOUNT WAS DEBITED IN HIS PROFIT AND LOSS ACCOUNT . DURING THE COURSE OF ASSESSMENT PROCEEDING, AO ISSUED A NOTICE U/S 133(6 ) OF THE ACT TO MSIT SEEKING THE CLARIFICATION ABOUT SUCH DISCOUNT AS CL AIMED BY ASSESSEE IN HIS ITA NO.1772/KOL/2013 A.Y. 2008-09 SANJIV TANTIA V. ITO WD-3(4) PUR. PAGE 3 BOOKS OF ACCOUNT AS EXPENDITURE. IN COMPLIANCE THER ETO, MSIT DID NOT MENTION ANYTHING ABOUT SUCH DISCOUNT. THEREFORE, AO DISALLO WED THE SUM AND ADDED IT TO THE INCOME OF ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO CONFIRMED THE ACTION OF AO BY CONSIDERING THE REPLY OF MSIT U/S. 133(6) OF THE ACT WHICH IS SILENT ABOUT THE SAID DISCOUNT. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS BEFORE US. BEFORE US LD. AR SUBMITTED THAT DURING THE FINANCIA L YEAR 2006-07 ASSESSEE WAS EXPECTING THE DISCOUNT OF 66,298/- ON BOOKING THE CONSIGNMENT PURCHASE. HOWEVER THE MSIT DENIED TO PROVIDE SUCH D ISCOUNT. THEREFORE, IT WAS DEBITED IN HIS PROFIT AND LOSS ACCOUNT BY MAKIN G THE ACTUAL PAYMENT AS AFORESAID. LD. AR FURTHER REQUESTED THE BENCH TO RE STORE THIS MATTER TO AO FOR LIMITED PURPOSE TO VERIFY WHETHER SUCH AMOUNT OF DI SCOUNT OF 66,298/ WAS CLAIMED IN THE FY 2006-07 OR NOT, IF IT WAS NOT CLA IMED IN THAT FY I.E., 06-07 THEN IT SHOULD BE ALLOWED IN THE YEAR UNDER CONSIDE RATION AS IT HAS BEEN ASCERTAINED IN THE PRESENT YEAR ONLY. LD. AR FURTHE R SUBMITTED THAT THE PAYMENT TOWARDS THE ANTICIPATED DISCOUNT OF 66,298/- WAS DULY MADE TO MSIT THROUGH BANKING CHANNEL. ON THE OTHER HAND, LD . DR VEHEMENTLY RELIED ON THE ORDERS OF AUTHORITIES BELOW. 7. FROM THE AFORESAID DISCUSSION, WE UNDERSTAND THA T ASSESSEE HAS INCURRED THE EXPENSE ON PURCHASES WHICH ENTITLED A DISCOUNT OF 66,298/- IN FY 2006-07 BUT MSIT HAS NOT GIVEN SUCH DISCOUNT TO ASSESSEE. SO THE ASSESSEE HAS PAID BY WAY OF CHEQUE TO MSIT. FROM TH E FACTS OF THE CASE, WE FIND THAT IT IS A GENUINE EXPENDITURE INCURRED BY A SSESSEE. NOW THE QUESTION BEFORE US THAT THE DEDUCTION IN THE RELEVANT YEAR F OR 66,298/- SHOULD NOT ITA NO.1772/KOL/2013 A.Y. 2008-09 SANJIV TANTIA V. ITO WD-3(4) PUR. PAGE 4 AMOUNT TO DOUBLE DEDUCTION- FIRSTLY, IN THE AY 2006 -07 AND SECONDLY IN THE FY 2007-08. IN THIS VIEW OF THE MATTER, WE ARE INCLINE D TO RESTORE THIS MATTER TO THE FILE OF AO WITH A DIRECTION TO VERIFY WHETHER THE D ISCOUNT WAS ALLOWED IN THE FY 2006-07 OR NOT, IF SUCH DISCOUNT HAS NOT BEEN ALLOW ED IN FY 2006-07 THEN IT SHOULD BE ALLOWED IN THE YEAR UNDER CONSIDERATION A S THIS DISCOUNT HAS BECOME ASCERTAINED EXPENDITURE IN THE YEAR UNDER CO NSIDERATION ACCORDINGLY. THE AO SHALL PROVIDE THE ADEQUATE OPPORTUNITY TO TH E ASSESSEE AND ADJUDICATE THE MATTER IN LIGHT OF AFORESAID DIRECTI ON AS PER LAW. HENCE, GROUND RAISED BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPO SE. 8. NEXT GROUND RAISED BY ASSESSEE IS THAT LD. CIT(A ) ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER BY SUSTAINING THE A DDITION OF 2,98,340/- BEING THE AMOUNT OF PROVISION FOR INCENTIVE PROVIDED IN H IS BOOKS OF ACCOUNT. 9. AT THE TIME ASSESSMENT, ASSESSEE SUBMITTED THAT IT IS THE PRACTICE OF MSIT TO GIVE INCENTIVE TO THE SALESMAN AS PER THEIR PERFORMANCE. ACCORDINGLY, ASSESSEE HAS CREATED THE PROVISION FOR 2,98,340/- WHICH PERTAINS TO INCENTIVE OF SALESMAN. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, AO OBSERVED THAT SUCH PROVISION IS UNASCERTAIN LIABILI TY AND THEREFORE NOT ALLOWED AS BUSINESS EXPENSE. THEREFORE, AO DISALLOWED EXPEN SE CLAIMED AS PROVISION FOR INCENTIVE AND ADDED IT TO THE TOTAL INCOME OF A SSESSEE. 10. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A). BEFORE LD. CIT(A) ASSESSEE DEMONSTRATED THAT INCENTIVE PAYABLE TO THREE SALESMAN (1) SHRI DIPAK FOR 1 LAC (2) SHRI S. MUKHERJEE FOR 1,38,841/- (3) SHRI K. DEY FOR 29,500/- AND OTHER SALESMAN FOR RS.30,399/- AND THI S IS A CERTAIN LIABILITY WHICH HAS BEEN BOOKED IN HIS BOOKS OF ACCOUNT. THIS EXPENSE TOWARDS THE INCENTIVE IS DETERMINED AT THE END OF YEAR BY ANALY ZING THE PERFORMANCE OF SALESMAN AND SUCH INCENTIVE PERTAINS TO THE RELEVAN T YEAR UNDER CONSIDERATION. HOWEVER, THE INCENTIVE PAYMENT IS MA DE IN THE SUBSEQUENT YEAR. THEREFORE, PAYMENT CREATED TOWARDS THE SALES INCENTIVE SHOULD BE ITA NO.1772/KOL/2013 A.Y. 2008-09 SANJIV TANTIA V. ITO WD-3(4) PUR. PAGE 5 ALLOWED. HOWEVER, LD. CIT(A) DISREGARDED SUCH CLAIM OF ASSESSEE BY OBSERVING THAT CASH AWARD HAS NEITHER BEEN PAID DUR ING THE YEAR NOR THE PAYMENT DATE HAS FINALIZED. MOREOVER THE INCENTIVE PROVIDED IN THE BOOKS WILL INCREASE THE PRODUCTIVITY IN THE SUBSEQUENT ASSESSM ENT YEAR I.E. 2009-10. THEREFORE THE LIABILITY HAS NOT BEEN CRYSTALLIZED I N THE YEAR UNDER CONSIDERATION. FURTHER LD. CIT(A) OBSERVED THAT ASS ESSEE HAS ALSO NOT DEDUCTED THE TDS AS REQUIRED U/S 192 OR 194H OF THE ACT. THEREFORE, IT IS CLEAR-CUT VIOLATION U/S 40(A)(IA) OF THE ACT AND FI NALLY LD. CONFIRMED THE ACTION OF ASSESSING OFFICER. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E PREFERRED SECOND APPEAL BEFORE US. 11. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. BEFORE US LD. AR SUB MITTED THAT ASSESSEE HAS JUST CREATED THE PROVISION IN ITS BOOKS OF ACCOUNT FOR ASCERTAIN LIABILITIES. THE ASSESSEE HAS ALSO PROVIDED THE NAMES OF SALESMAN TO WHOM THE PAYMENT OF INCENTIVE WAS TO BE MADE. REGARDING TDS LD. AR SUBM ITTED THAT TDS HAS BEEN DEDUCTED FROM THE PAYMENT OF INCENTIVE TO THE SALESMAN IN THE SUBSEQUENT YEAR I.E. IN THE YEAR OF PAYMENT. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF AUTHORITIES BELOW. 11.1 FROM THE AFORE SAID DISCUSSION, WE FIND THAT A SSESSEE HAS CLAIMED THE EXPENSE FOR THE INCENTIVE TO BE GIVEN TO EMPLOYEES BUT ASSESSEE HAS SHOWN IN ITS BOOKS OF ACCOUNT AS PROVISION FOR INCENTIVE AND AO HAS DISALLOWED THE SAME AS UNDER THE INCOME TAX NO PROVISION IS ALLOWE D WHILE WORKING OUT THE PROFIT UNDER ACT. THE PROVISION UNTIL BECOMES ASCER TAIN AND ACTUALLY LIABLE CANNOT BE ALLOWED AS EXPENSES. HOWEVER, IN THE INST ANT CASE, WE FIND THAT ASSESSEE HAS GIVEN THE NAME OF EMPLOYEES TO WHOM IN CENTIVE AS REQUIRED TO BE PAID. THEREFORE, IT IS ASCERTAIN LIABILITY AND E NTITLE FOR DEDUCTION FROM THE BUSINESS PROFIT OF ASSESSEE. HOWEVER, LD. CIT(A) HA S RIGHTLY OBSERVED IF IT IS ITA NO.1772/KOL/2013 A.Y. 2008-09 SANJIV TANTIA V. ITO WD-3(4) PUR. PAGE 6 ASCERTAIN LIABILITY THEN IT IS THE DUTY OF ASSESSEE TO DEDUCT TDS AT THE TIME OF BOOKING THE EXPENSE IN ITS BOOKS OF ACCOUNT IRRESPE CTIVE OF PAYMENT. IN VIEW OF ABOVE, WE ARE INCLINED TO DISMISS THE GROUND RAI SED BY ASSESSEE. 12. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT 11/0 3/2016 SD/- SD/- (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 11 / 03 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-SANJIV TANTIA, SANJIV TRADING CO. U.B. S TREET, SADAR PARA, PURULIA, PIN 7 23 101 2. /RESPONDENT- ITO WARD-3(4), NORTH LAKE ROAD, P.O. & DIST. PURULIA 3. ) *+ , , - / CONCERNED CIT ASANSOL 4. , , -- / CIT (A) ASANSOL 5. 012 33*+, , *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , , /TRUE COPY/ / , *+ ,