TARGET INTERNATIONAL., Kolkata V. I.T.O Wd - 45(2),kolkata, Kolkata

ITA 1934/KOL/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4658 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 31-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH
• Assessee Lawyers: NIRMAL KAUS HIK FCA LD
• Keywords: Commercial expediency
• Section: 45(2); 142(1)

Judgement Text

1 ITA N O. 1934/KOL/2012 M/S. TARGE T INTERNATIONA IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, K OLKATA BEFORE : SHRI P.M JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A NO. 1934/KOL/2012 A.Y. 2007-08 TARGET INTERNATIONAL VS. I.T.O WARD 45(2), KOLK ATA PAN: AABFT 5358B (APPELLANT) (RESPONDENT) FOR THE APPELLANT/ASSESSEE : SHRI NIRMAL KAUS HIK, FCA, LD.AR FOR THE RESPONDENT/DEPARTMENT: SHRI KALYAN NATH, ADDL.CIT DATE OF HEARING : 15-06-2016 DATE OF PRONOUNCEMENT: 10 -08-2016 ORDER SHRI S.S. VISWANETHRA RAVI, JM THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE ORDER OF THE CIT(A)-XXX, KOLKATA IN APPEAL NO.174/CIT(A)-XXX/WD-45(2)/2009-10 DATED 30-10-2012 FOR THE ASSESSMENT YEAR 2007-08 ON THE FOLLOWING EFFECTIVE GROUND:- FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFI RMING DISALLOWANCE OF RS.605325/- OF STITCHING AND WASHIN G CHARGES. 2. THE SOLE GROUND IN THIS APPEAL TO BE DECIDED IS AS TO WHETHER CIT-A WAS JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO ON AC COUNT OF STITCHING AND WASHING CHARGES. 2 ITA N O. 1934/KOL/2012 M/S. TARGE T INTERNATIONA 3. THE ASSESSEE IS A FIRM AND ENGAGED IN MANUFACTUR ING AND TRADING OF READYMADE GARMENTS. THE ASSESSEE FILED ITS RETURN OF INCOME O N 26-10-2007 DECLARING A TOTAL INCOME OF RS.1,76,007/- AND UNDER SCRUTINY NOTICES UNDER SECTION 143(2) AND 142(1) OF THE ACT WERE ISSUED AND AR REPRESENTING THE ASSESSE E APPEARED. 4. DURING THE COURSE OF SCRUTINY PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE DEBITED AN AMOUNT OF RS.41,95,619/- AND RS.4,86,490 /- UNDER THE HEAD STITCHING AND WASHING CHARGES RESPECTIVELY. THE A.O FURTHER OBSER VED THAT VERIFICATION LETTERS WERE ISSUED TO CERTAIN PARTIES AS PER LIST PROVIDED BY T HE ASSESSEE IN RESPECT OF ABOVE CHARGES, WHICH WERE RETURNED UN-SERVED BY THE DEPARTMENT OF POSTS. THE DETAILS OF THE SAME AS PER THE AO ARE REPRODUCED AS UNDER: SI. NO. NAME OF KARIGARS TOTAL AMOUNT PAID REMARKS OF THE POSTAL DEPARTMENT 1 MOFIZUL MOLLAH 48,032 NOT KNOWN 2 HASAN ALI MOLLAH 46,048 -DO- 3 SASIUL 44,791 INCOMPLETE ADDRESS 4 PINTU NAIYA 45,576 NOT KNOWN 5 ZAKIR 49,136 NO TRACE, INCOMPLETE NAME & ADDRESS 6 KHOKON 47,622 NO TRACE, INCOMPLETE NAME & ADDRESS 7 M/S. STCIHER CO 3,25,000 NOT KNOWN 8 M/S. KIRAN LAUNDRY 48,000 NOT KNOWN 9 M/S.HOLLYWOOD BOLYWOOD 41,100 NOT KNOWN 10 KOUSAR 48,512 NOT FOUND 11 ZULFIKAR 45,103 INCOMPLETE NAME, HENCE CANNOT BE DELIVERED 12 M/S.NISHA LAUNDRY 48,250 NOT KNOWN 13 NIKHIL 45,730 NO SUCH PERSON IN THIS ADDRESS. HENCE, NOT KNOWN 14 M/S. KAMAL LAUNDRY 47,425 NOT KNOWN 3 ITA N O. 1934/KOL/2012 M/S. TARGE T INTERNATIONA 5. ACCORDING TO THE AO, THAT THE ENTIRE PAYMENT WA S MADE IN CASH AND THE ASSESSEE DID NOT OFFER ANY EXPLANATION AND THE ASSE SSEE COULD NOT IDENTIFY THE PERSONS NOR ESTABLISH THE GENUINENESS OF THE TRANSA CTIONS. THE A.O NOTICED THAT THE ASSESSE DEDUCTED TDS FROM M/S. STICHER CO. IN MARC H, 2007 AND DEPOSITED BELATEDLY IN MAY, 2007 AND EVEN THE AMOUNT OF RS.3, 25,000/- MADE TO M/S. STICHER CO. WAS NOT ALLOWED AND DISALLOWED ENTIRE AMOUNT O F RS.9,30,325/-. 6. IN 1 ST APPEAL THE ASSESSE SUBMITTED THAT THE STITCHING AN D WASHING CHARGES WERE PERFORMED BY THE SKILLED JOB WORKERS AT THEIR RESPECTIVE RESIDENTIAL PREMISES IN MUFFUSIL AREAS IN HOWRAH, HOOGHLY, SOUTH 24-PAR GANAS & NORTH 24 PARGANAS DISTRICTS AND IS MAJOR PART IN THE MANUFACTURING OF READYMADE GARMENTS. FURTHER SUBMITTED THAT THE ASSESSEE FURNISHED NAMES AND ADD RESSES OF SUCH JOB WORKERS TO AO AND THE COST OF STITCHING AND WASHING CHARGES WA S ECONOMISED FROM 36.82% IN 2005-06 TO 29.66% IN 2007-08. IT WAS FURTHER SUBMIT TED THAT THE SAID EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS AN D FOR COMMERCIAL EXPEDIENCY AND WAS AN INTEGRAL PART OF THE ASSESSEES BUSINESS . THE ASSESEE CHALLENGED THE ACTION OF AO IN DISALLOWING AN AMOUNT OF RS.3,25,00 7/- TO M/S. STICHER CO. WITHOUT CONSIDERING THE FACT THE SUBMISSION OF TDS CERTIFICATE AND COMPLETE DETAILS OF SUCH ENTITY WHICH WAS ALSO PRODUCED BEFORE THE C IT-A. 7. CONSIDERING THE ABOVE SUBMISSIONS THE CIT-A ALL OWED THE CLAIM OF THE ASSESSE IN RESPECT OF M/S. STICHER CO INVOLVING AN AMOUNT OF RS.3,25,007/- AND OBSERVED AS UNDER: THE SUBMISSION OF THE APPELLANT HAVE BEEN CONSIDERE D AND IT IS SEEN THAT THE AO HAD ISSUED NOTICES OF VERIFICATION IN S UPPORT OF THE STITCHING AND WASHING CHARGES TO PARTIES AS PER LIS T AND ADDRESS GIVEN 4 ITA N O. 1934/KOL/2012 M/S. TARGE T INTERNATIONA BY THE APPELLANT WHICH COULD NOT BE SERVED IN RESPE CT OF 14 PARTIES TO WHOM PAYMENT TO RS.9,30,325/- HAD BEEN SHOWN. THE A O HAS HELD THAT THESE PAYMENTS ARE MOSTLY IN CASH AND SINCE TH E IDENTITY OF THESE PERSONS OR THE TRANSACTION COULD NOT BE VERIFIED, T HE PAYMENTS WERE DISALLOWED BY HIM. IT IS HOWEVER SEEN THAT ONLY IN THE CASE OF M/S. STICHER CO. WHERE PAYMENT OF RS.3,25,000/- HAD BEE N MADE ON THE SUBMISSIONS OF THE APPELLANT CAN BE CONSIDERED. IN THIS CASE THE APPELLANT HAD NOT ONLY DEDUCTED TDS ON THE PAYMENT OF RS 3,25,000/-, BUT ALSO ISSUED TDS CERTIFICATE TO THIS PARTY WHICH HAD ITS FULL ADDRESS AS WELL AS PAN. THEREFORE THE PAYMENT CAN NEITHER B E CONSIDERED AS UNVERIFIABLE NOR BE DISALLOWED BY THE AO U/S. 40(A) (IA) ON THE GROUND TDS HAD NOT BEEN DEPOSITED BY 31ST MARCH, IN VIEW O F THE DECISION OF HON'BLE ITAT IN PIYUSH C. MEHTA VS. ACIT RELYING ON THE DECISION OF KOLKATA HIGH COURT IN CIT VS VIRGIN CREATIONS IN IT A NO.302 OF 2011 DATED 23-11-2011. IN WHICH IT HAS BEEN HELD T HAT THE AMENDMENT BROUGHT IN FINANCE BILL 2010 HAD RETROSPE CTIVE AFFECT REGARDING DEPOSIT ON TAX DEDUCTED OR BEFORE THE DUE DATE OF FILING THE RETURN U/S. 139(1) BY THE ASSESEE AND THEREFORE SUC H PAYMENTS WERE NOT DISALLOWABLE U/S. 40(A)(IA). THEREFORE, IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, IT IS HELD THAT THE DISALLOWANCE MADE BY THE AO IN RESPECT OF PAYMENT OF RS.3,25,000/- TO M/S. STICHER CO. FOR VIOLATION OF SEC. 40(A)(IA) IS NOT JUSTIFIED AND THE SAME IS DEL ETED. HOWEVER IN RESPECT OF THE REMAINING CASH PAYMENTS TO 13 PARTIE S WHICH COULD NOT BE VERIFIED, IT IS SEEN THAT THE APPELLANT HAS NOT GIVEN ANY EVIDENCE TO SUBSTANTIATE ITS CLAIM AND SINCE NOTICE BY THE AO H AD BEEN ISSUED ON THE ADDRESS GIVEN BY THE APPELLANT ONLY, THE APPELL ANT'S PLEA FOR ALLOWABILITY OF THESE PAYMENTS CANNOT BE ACCEPTED. EVEN IF THE EXPENDITURE IS HELD TO BE FOR BUSINESS PURPOSE THE AO WAS WELL WITHIN HIS JURISDICTION TO VERIFY THE GENUINENESS OF THE S AME AS TO WHETHER THESE EXPENSES HAD BEEN INFLATED BY THE APPELLANT. THE APPELLANT HAS NOT EVEN SUBMITTED ANY CORROBORATIVE EVIDENCE TO ES TABLISH THE GENUINENESS OF THE TRANSACTIONS OTHER THAN WHAT WAS GIVEN TO THE AO IN THE FORM OF COPIES ACCOUNT OF THESE PERSONS, ALL EGEDLY SIGNED BY THEM. THE VERIFICATION NOTICES ISSUED BY THE AO WER E RETURNED UN- SERVED WITH THE REMARKS NOT KNOWN, NO SUCH PERS ON IN THIS ADDRESS ETC., IT IS CLEAR THAT IN ASSESSMENT PROCEEDINGS, N EITHER THE GENUINENESS OF THE TRANSACTIONS NOR THE PARTIES COU LD BE ESTABLISHED, NOR THERE IS ANY EVIDENCE TO THE CONTRARY BEFORE M E IN APPEAL. 5 ITA N O. 1934/KOL/2012 M/S. TARGE T INTERNATIONA THEREFORE, CONSIDERING THE TOTALITY OF THE CIRCUMST ANCES, THE DISALLOWANCE MADE BY THE AO IN RESPECT OF THE 13 PA YMENTS TOTALING TO RS.6,05,325/- AS PER LIST IN PARA 2 ABOVE, IS HELD TO BE JUSTIFIED AND UPHELD (RELIEF RS.3,25,000/-). 8. AGGRIEVED BY THE ORDER OF CIT-A, THE ASSESSE BEF ORE US BY THIS APPEAL. IN SUPPORT OF GROUNDS OF APPEAL, THE LD.AR THAT IT WAS A GENUINE EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS OF ASSESSEE AND THE ACC OUNTS OF THE ASSESSE WERE AUDITED AND THE EXPENSES ARE NOW GONE DOWN. THEY AR E ALL SKILLED WORKERS ARE IN ORGANIZED SECTOR AND THE TRANSACTIONS CAN NOT BE DO UBTED. IN REPLY, THE LD.DR SUBMITS THAT ALL THE WORKERS ARE NOT ORDINARY PERSO NS AND THEY COULD HAVE RESPONDED TO THE NOTICES ISSUED BY THE AO AND IT IS WRONG TO SAY THAT THEIR WHERE ABOUTS ARE NOT KNOWN TO THE ASSESSE AND THERE IS NO INGREDIENT OF GENUINE PERSON. 9. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THAT ACCORDING TO THE AO THAT ALL THE PARTIES TO WHOM THE AO ISSUE D LETTERS RETURNED UNSERVED AND EVEN THE PARTY ON WHOM THE TDS WAS DEDUCTED REMAINE D UNTRACEBLE. THE AO EVEN DISALLOWED THE AMOUNTS WHICH WERE PAID TO THE M/S. STICHER CO. WITHOUT CONSIDERING THE FACT THE TDS ON SUCH AMOUNT WAS DEP OSITED WITH GOVERNMENT PROOF OF WHICH A CERTIFICATE TO THAT EFFECT WAS FUR NISHED BEFORE THE AO, INSPITE OF WHICH MAKING DISALLOWANCE IS UNWARRANTED. THEREFORE , IT SHOWS THE TRANSACTIONS ARE GENUINE AND RELIABLE TO THE FACT, THAT, AS PER THE SUBMISSIONS OF THE LD.AR THAT THEY ARE ALL SKILLED WORKERS AND CAUSE EFFECT JOB W ORKS ENTRUSTED TO THEM ARE BEING PERFORMED AT THEIR RESIDENTIAL PREMISES AND ALL ARE FROM MOFFUSIL AREAS, IF THAT IS THE CASE, WE NOTICED THAT MOST OF THE PARTIES ARE CONDU CTING THEIR BUSINESS UNDER THE NAME AND STYLE AS M/S. STICHER CO, M/S HOLLYWOOD BO LYWOOD AND M/S NISHA LAUNDRY ETC.., THEREFORE, WE ARE OF THE OPINION THE IDENTITY OF THE PARTIES ARE VERY 6 ITA N O. 1934/KOL/2012 M/S. TARGE T INTERNATIONA MUCH AVAILABLE BEFORE THE AO AND WITH REGARD TO GEN UINENESS OF BUSINESS TRANSACTION ALSO PROVED TO BE CORRECT IN THE CONTEX T OF THE BUSINESS ACTIVITY OF THE ASSESSE AND IN CONNECTION THERETO THE JOB WORKS PER FORMED BY THE PARTIES THEREIN MENTIONED IN PAGE-2 OF ORDER OF AO AND THE AO COULD NOT BRING ON RECORD ANY EVIDENCE CONTRARY TO THE EVIDENCE PRODUCED BY THE A SSESSEE. THEREFORE, WE ARE OF THE OPINION, THAT THE DISALLOWANCE OUGHT NOT TO HAV E MADE BY THE AO IN VIEW OF THE DISCUSSION ABOVE AND THE ADDITION CONFIRMED BY THE CIT-A TO THE EXTENT OF RS.6,05,325/- IS DELETED AND THE SOLE GROUND RAISED BY THE ASSESSE IS ALLOWED. 10. IN THE RESULT THE APPEAL OF THE ASSESSE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2016 SD/- SD/- P.M JAGTAP S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:10 -08-2016 **PP/SPS COPIES OF ORDER FORWARDED TO :- (1) M/S.TARGET INTERNATIONAL C/O SRI R.P SHARMA, ADVOCA TE, 19D MUKTARAM BABU STREET, KOL-7. (2) INCOME TAX OFFICER WARD 45(2) 3 GOVT PLACE(W), KOL- 1. (3) COMMISSIONER OF INCOME-TAX (APPEALS)-, KOLKATA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA