Kanoi Tea Pvt. Ltd., Kolkata V. DCIT, Central-XI, Kolkata, Kolkata

ITA 1792/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4300 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 15-09-2014
• Court: TRIBUNAL
• Assessee Lawyers: N O N E
• Keywords: Unexplained expenditure; Proportionate interest
• Section: 69C

Judgement Text

I.T.A. NO. 1792/KOL./2014 ASSESSMENT YEAR: 2008-2009 & I.T.A. NO. 1415/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C(SMC) BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 1792/KOL/ 2014 ASSESSMENT YEAR: 2008-2009 & I.T.A. NO. 1415/KOL/ 2014 ASSESSMENT YEAR: 2009-2010 KANOI TEA PVT. LIMITED,............................ ........................APPELLANT 3, TRANSPORT DEPOT ROAD, KOLKATA-700 088 [PAN: AABCK 2868 E] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ..........RESPONDENT CIRCLE-XI, KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLY, KOLKATA-700 107 APPEARANCES BY: N O N E, FOR THE ASSESSEE (W/SUBMISSION FILED) 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 THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST TWO SEPARATE ORDERS PASSED BY THE LD. COMMISSIONER OF I NCOME TAX (APPEALS), CENTRAL-1, KOLKATA DATED 21.07.2014 AND 07.04.2014 FOR A.Y. 2008-09 AND 2009-10 RESPECTIVELY AND THE SAME HAVE BEEN HEARD T OGETHER AND ARE BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDER FO R THE SAKE OF CONVENIENCE. 2. THE SOLITARY ISSUE INVOLVED IN THE APPEAL OF THE ASSESSEE FOR A.Y. 2008-09 BEING ITA NO. 1792/KOL/2014 RELATES TO THE DISALLOWANCE OF RS.2.88 LAKHS MADE BY THE ASSESSING OFFICER AND CON FIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF INTEREST EXPENDITURE. I.T.A. NO. 1792/KOL./2014 ASSESSMENT YEAR: 2008-2009 & I.T.A. NO. 1415/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 2 OF 5 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF TEA, WAREHOUSING AND TRADING. THE R ETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION, I.E. A.Y. 2008-09 WAS FILED BY IT ON 25.09.2008 DECLARING TOTAL INCOME OF RS.9,94,690/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSES SING OFFICER THAT THE ASSESSEE HAS BORROWED A LOAN OF RS.3.61 CRORES ON I NTEREST, BUT THE SAME WAS NOT FULLY UTILIZED FOR THE PURPOSE OF ITS BUSIN ESS. IN THIS REGARD, HE NOTED THAT A SUM OF RS.24,00,000/- OUT OF THE BORRO WED FUNDS WAS INVESTED BY THE ASSESSEE IN SHARES. SINCE THE ASSES SEE WAS NOT CARRYING ON ANY BUSINESS OF SHARE TRADING, THE PROPORTIONATE IN TEREST EXPENDITURE AS ATTRIBUTABLE TO THE INVESTMENT OF RS.24,00,000/- MA DE IN SHARES CALCULATED BY APPLYING THE RATE OF 12% AMOUNTING TO RS.2.88 LAKHS WAS DISALLOWED BY THE ASSESSING OFFICER. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE MADE BY THE ASSESSI NG OFFICER BY OBSERVING THAT THE INVESTMENT MADE BY THE ASSESSEE IN SHARES WAS NOT FOR THE PURPOSE OF ITS BUSINESS. 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THE PROPORTIONATE INTEREST ATTRIBUTABLE TO THE INVESTME NT OF RS.24,00,000/- MADE BY THE ASSESSEE IN SHARES HAS BEEN DISALLOWED BY THE AUTHORITIES BELOW ON THE GROUND THAT THE SAID INVESTMENT WAS NO T MADE BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. IN THE WR ITTEN SUBMISSION FILED BEFORE THE TRIBUNAL, THE ASSESSEE HAS NOT BEEN ABLE TO CONTROVERT OR REBUT THE FINDINGS RECORDED BY THE AUTHORITIES BELOW IN T HIS REGARD BY ESTABLISHING ANY NEXUS WHATSOEVER OF THE INVESTMENT MADE IN THE RELEVANT SHARES WITH ITS BUSINESS. IT IS THUS CLEAR THAT THE BORROWED FUNDS TO THE EXTENT OF RS.24,00,000/- WERE NOT UTILIZED BY THE A SSESSEE FOR THE PURPOSE OF ITS BUSINESS AND THE INTEREST EXPENDITURE CLAIME D BY THE ASSESSEE AS ATTRIBUTABLE ON SUCH INVESTMENT IS LIABLE TO BE DIS ALLOWED BEING NOT I.T.A. NO. 1792/KOL./2014 ASSESSMENT YEAR: 2008-2009 & I.T.A. NO. 1415/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 3 OF 5 WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF ASSESSEES BUSINESS. I, THEREFORE, FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING O FFICER ON THIS ISSUE AND UPHOLDING THE SAME, I DISMISS THE APPEAL OF THE ASSESSEE FOR A.Y. 2008-09. 5. NOW I TAKE UP THE APPEAL OF THE ASSESSEE FOR A.Y . 2009-10 BEING ITA NO. 1415/KOL/2014, WHICH INVOLVES A SOLITARY ISSUE RELATING TO THE ADDITION OF RS.83,278/- MADE BY THE ASSESSING OFFIC ER AND CONFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF SERVICE CHARGES BY TREATING THE SAME AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE AC T. 6. IN THE PROFIT & LOSS ACCOUNT FILED ALONG WITH IT S RETURN OF INCOME FOR A.Y. 2009-10 DECLARING A TOTAL INCOME OF RS.13, 76,718/-, A SUM OF RS.6,63,291/- PAID TO M/S. PDK EXPORT & IMPORTS (PV T.) LIMITED ON ACCOUNT OF SERVICE CHARGES WAS DEBITED BY THE ASSES SEE. ENQUIRY MADE BY THE ASSESSING OFFICER WITH THE SAID PARTY, HOWEVER, REVEALED THAT A SUM OF RS.7,46,570/- WAS ACTUALLY PAID BY THE ASSESSEE TO THE SAID COMPANY. SINCE THE ASSESSEE COULD NOT OFFER ANY SATISFACTORY EXPLANATION IN THIS REGARD, THE DIFFERENCE OF RS.83,278/- IN THE SERVIC E CHARGES PAID BY THE ASSESSEE TO M/S. PDK EXPORT & IMPORTS (PVT.) LIMITE D WAS ADDED BY THE ASSESSING OFFICER TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED EXPENDITURE. ON APPEAL, THE LD. CIT(APPEALS) CONFIR MED THE SAID ADDITION MADE BY THE ASSESSING OFFICER ON THE GROUND THAT TH E ASSESSEE COULD NOT OFFER ANY SATISFACTORY EXPLANATION EVEN BEFORE HIM AS REGARDS THE DIFFERENCE OF RS.83,278/- NOTICED BY THE ASSESSING OFFICER IN THE AMOUNT PAID TO M/S. PDK EXPORT & IMPORTS (PVT.) LIMITED ON ACCOUNT OF SERVICE CHARGES. 7. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS SUBMITTED BY THE AS SESSEE IN THE WRITTEN I.T.A. NO. 1792/KOL./2014 ASSESSMENT YEAR: 2008-2009 & I.T.A. NO. 1415/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 4 OF 5 SUBMISSION FILED BEFORE THE LD. CIT(APPEAL) AS WELL AS BEFORE THE TRIBUNAL, THERE WERE THREE SEPARATE ACCOUNTS MAINTAINED BY IT IN THE NAME OF M/S. PDK EXPORT & IMPORTS (PVT.) LIMITED AND THE TOTAL A MOUNT PAID TO THE SAID PARTY TAKING ALL THESE THREE ACCOUNTS TOGETHER WAS RS.7,92,091/-. IT APPEARS THAT THE ASSESSING OFFICER AS WELL AS THE L D. CIT(APPEALS), HOWEVER, HAVE CONSIDERED ONLY ONE ACCOUNT AND THE R EMAINING TWO ACCOUNTS SHOWING PAYMENTS OF RS.33,800/- AND RS.95, 000/- MADE TO THE SAID PARTY HAVE BEEN IGNORED BY THEM WHILE MAKING T HE IMPUGNED ADDITION ON ACCOUNT OF DIFFERENCE OF RS.83,278/- BY TREATING THE SAME AS UNEXPLAINED EXPENDITURE. IF THE TOTAL PAYMENT MADE BY THE ASSESSEE TO THE SAID PARTY AS REFLECTED IN THREE ACCOUNTS MAINT AINED BY THE ASSESSEE IS TAKEN INTO CONSIDERATION, THERE IS ACTUALLY NO SUCH DIFFERENCE AND KEEPING IN VIEW THE SAME, I HOLD THAT THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) ON THIS ISSUE IS NOT SUSTAINABLE. I, THEREFORE, DELETE THE SAME AND ALLOW THE APPEAL OF THE ASSESSEE FOR A.Y. 2009-10. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR A. Y. 2008-09 IS DISMISSED, WHILE THE APPEAL OF THE ASSESSEE FOR A.Y . 2009-10 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 21, 2 016. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 21 ST DAY OF OCTOBER, 2016 COPIES TO : (1) KANOI TEA PVT. LIMITED, 3, TRANSPORT DEPOT ROAD, KOLKATA-700 088 (2) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-XI, KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLY, KOLKATA-700 107 I.T.A. NO. 1792/KOL./2014 ASSESSMENT YEAR: 2008-2009 & I.T.A. NO. 1415/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 5 OF 5 (3) COMMISSIONER OF INCOME TAX(APPEALS), CENTRAL-1 , KOLKATA; (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.