ITO, Ward - 30(4), Kolkata, Kolkata V. Shri Suresh Kumar Agarwal, Kolkata

ITA 2035/KOL/2010

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1480 (ITAT-KOLKATA)
• Duration Of Justice: 7 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 11-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: H B BHARDWAJ
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SHRI M.BALAGANESH, AM & HONBLE S HRI S.S.VISWANETHRA RAVI, JM] I.T.A NO. 2035/KOL/20 10 ASSESSMENT YEAR : 2004-0 5 ITO, WARD-30(4), KOLKATA -VS- SURESH KUM AR AGARWAL [PAN: ADBPA 2778 H] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SALLONG YADEN , ADDL. CIT FOR THE RESPONDENT : SHRI H.B. BHARDWAJ, FC A DATE OF HEARING : 14.02.2018 DATE OF PRONOUNCEMENT : 19.02.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE REVENUE ARISES OUT OF THE OR DER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XIV, KOLKATA [IN SHORT THE LD C IT(A)] IN APPEAL NO.260/CIT(A)-XIV/08-09 DATED 06.08.2010 AGAINST TH E ORDER PASSED BY THE ITO, WARD-30(4), KOLKATA[ IN SHORT THE LD AO] UNDER SECT ION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 11.11.2008 FOR THE ASSESSMENT YEAR 2004-05. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE ADDITION OF RS 8,09,768/- COMPRISIN G OF DIFFERENCE IN C&F SERVICE CHARGES AND OTHERS TO THE TUNE OF RS7,85,768/- AND RS 24,000/- TOWARDS INTEREST INCOME, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 ITA NO.2035/KOL/2010 SURESH KUMAR AGARWAL A.YR. 2004-05 2 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF CLEARING & FORWARDING AGENCY. THE ASS ESSEE HAD FILED HIS RETURN OF INCOME FOR THE ASST YEAR 2004-05 DECLARING TOTAL INCOME OF RS 2,46,400/-. THIS RETURN WAS PROCESSED U/S 143(1) OF THE ACT ALLOWING CREDIT FOR TDS IN THE SUM OF RS 1,06,328/-. THE LD AO LATER ON PERUSAL OF PROFIT AND LOSS ACCOU NT OF THE ASSESSEE OBSERVED THAT ASSESSEE HAD REPORTED THE FOLLOWING INCOMES:- I) C&F SERVICE CHARGES - RS 14,37,361/- II) FIXED REIMBURSEMENT - RS 17,32,620/- --------------------- RS 31,69,981/- III) INTEREST ON SECURITY DEPOSIT - RS 24,000 /- --------------------- RS 31,93,981/- BUT AS PER TDS CERTIFICATE FILED ALONG WITH THE RET URN OF INCOME, THE TOTAL RECEIPTS WERE DISCLOSED AS UNDER:- I) C&F SERVICE CHARGES & FIXED REIMBURSEMENT - RS 1 7,32,620/- II) BROKERAGE & COMMISSION - RS 6,41,536/- III) INTEREST ON SECURITY DEPOSIT - RS 24,0 00/- --------------------- RS 40,03,749/- ACCORDINGLY THE LD AO OBSERVED THAT THE DIFFERENCE OF RS 8,09,768/- REPRESENTING INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THER EFORE, NOTICE U/S 148 OF THE ACT WAS ISSUED ON 12.10.2007 AND DULY SERVED ON THE ASS ESSEE. THE ASSESSEE FILED A REPLY VIDE LETTER DATED 27.8.2008 STATING THAT THE RETURN FILED ON 28.10.2004 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE A CT. DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS, THE STATED THAT HE HAD RECEIVED DURING THE YEAR REIMBURSEMENT OF EXPENSES ON ACTUAL BASIS AND AS THE EXPENSES WHICH ARE NOT D EBITED TO THE PROFIT AND LOSS ACCOUNT AND NEITHER CREDITED TO THE PROFIT AND LOSS ACCOUNT , AND AS SUCH THERE IS NO SUPPRESSION OF THE INCOME ON THE PART OF THE ASSESSEE. WITH REGARD TO INTEREST INCOME ON SECURITY DEPOSIT, HE STATED THAT INTEREST OF RS 48,000/- AS SHOWN IN TDS CERTIFICATE ACTUALLY REPRESENTS INTEREST AMOUNT OF TWO ASST YEARS I.E AS ST YEARS 2003-04 AND 2004-05 . 3 ITA NO.2035/KOL/2010 SURESH KUMAR AGARWAL A.YR. 2004-05 3 SINCE ASSESSEE MAINTAINS ACCOUNTS ON MERCANTILE BAS IS, HE HAS ACCOUNTED FOR RS 24,000/- AS INTEREST INCOME IN ITS ACCOUNTS FOR THE ASST YEA R 2003-04. THE LD AO DID NOT AGREE TO THESE CONTENTIONS OF THE ASSESSEE AND PROCEEDED TO MAKE AN ADDITION TOWARDS THE DIFFERENTIAL SUM OF RS 8,09,768/- IN THE ASSESSMENT . 4. THE LD CITA DELETED THE ADDITION BY OBSERVING AS UNDER:- 5. I HAVE CONSIDERED ALL THE FACTS AND CIRCUMSTANC ES OF THIS CASE. FIRST OF ALL, I WOULD LIKE TO DEAL WITH THE DIFFERENCE IN THE INTEREST AM OUNT ADDED BY THE AO. THE AR HAS CLARIFIED THAT THE ASSESSEE WAS TO RECEIVE INTEREST OF RS. 24,000/- EVERY YEAR FROM ONE OF ITS PRINCIPALS NAMELY, CORPORATE STATIONERY PVT. LT D. THE ASSESSEE INCLUDED THIS INTEREST IN HIS BOOKS OF ACCOUNTS EVERY YEAR ON ACCRUAL BASI S. HOWEVER, DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2004-05 THE ASSESSEE RE CEIVED INTEREST OF RS. 48,000/- INCLUDING THE INTEREST OF RS. 24,000/- FOR EARLIER YEAR ALSO. THE PRINCIPAL DEDUCTED TDS ON THE WHOLE AMOUNT OF RS. 48,000/- AT THE TIME OF PAYMENT OF THE INTEREST. SINCE THE INTEREST RELATED TO THE EARLIER YEAR IS ALREADY INC LUDED IN THE INCOME FOR ASSESSMENT YEAR 2003-04 THEREFORE IT CANNOT BE INCLUDED IN THE ASSE SSMENT YEAR UNDER CONSIDERATION. ON THIS ISSUE I AGREE WITH THE SUBMISSION OF THE AR. S INCE, INTEREST OF RS. 24,000/- HAS ALREADY BEEN SHOWN ON ACCRUAL BASIS IT CANNOT BE AD DED AGAIN ON RECEIPT BASIS. THEREFORE, THIS ADDITION IS DELETED. AS REGARDS THE DIFFERENCE OF RS. 7,85,768/- ADDED O N ACCOUNT OF DIFFERENCE IN REIMBURSEMENT EXPENSES. I FIND THAT THE ASSESSEE HA S SUBMITTED A LOT OF DOCUMENTS TO EXPLAIN THE EXPENSES WHICH WERE REIMBURSED TO HIM B Y HEINZ INDIA PVT. LTD. THE ASSESSEE HAS ALSO FURNISHED A CERTIFICATE FROM HEIN Z INDIA PVT. LTD. IN WHICH IT IS MENTIONED THAT THEY HAVE DEDUCTED TDS ON ALL THE EX PENSES REIMBURSED TO THE ASSESSEE INCLUDING THE VARIABLE EXPENSES REIMBURSED ON ACTUA L BASIS. FROM THE DETAILS FURNISHED BY THE ASSESSEE IT IS SEEN THAT FOR THE PREVIOUS YE AR UNDER CONSIDERATION THE ASSESSEE WAS TO RECEIVE FOLLOWING AMOUNT FROM HEINZ INDIA PV T. LTD. (I) FIXED REMUNERATION RS. 17,32,620/- (II) ACTUAL EXPENSES TO BE REIMBURSED RS. 7,37,675/- (III) VARIABLE COMMISSION RS. 6,49,552/- THE ENTRIES AT NO. (I) AND (III) HAVE BEEN REFLECTE D IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. THE ENTRY NO. (II) IS RELATED TO VARIOUS EXPENSES WHICH WERE INCURRED ON BEHALF OF HEINZ INDIA AND WHICH WERE REIMBURSED BY THIS C OMPANY ON SUBMISSION OF BILLS AND 4 ITA NO.2035/KOL/2010 SURESH KUMAR AGARWAL A.YR. 2004-05 4 VOUCHERS BY THE ASSESSEE. THE ASSESSEE HAS PRODUCE D THE DETAILS OF THESE EXPENSES. HEINZ INDIA HAS CONFIRMED THAT THEY DEDUCTED TDS ON ALL THE AMOUNTS PAID TO THE ASSESSEE INCLUDING THE REIMBURSEMENT OF EXPENSES. T HUS THE AMOUNT OF RS. 7,37,675/- GOT REFLECTED IN THE TDS CERTIFICATE BUT IT DID NOT COME IN THE PROFIT AND LOSS ACCOUNT AS THE ASSESSEE DID NOT TREAT IT AS HIS RECEIPT OR EXP ENSES. I FEEL THAT THERE IS NOTHING WRONG IN THIS APPROACH AS THIS AMOUNT IS ACTUALLY NOT ASS ESSEES EXPENSES BUT OF THE PRINCIPAL I.E. HEINZ INDIA. THE REMAINING AMOUNT OF RS. 48,09 2/- IS ALSO SIMILAR IN NATURE BUT RELATED TO EARLIER YEAR 2002-03. IN VIEW OF THE ABO VE I FEEL THAT THE DIFFERENCE OF RS. 7,85,768/- BETWEEN THE TDS CERTIFICATE RECEIPTS AND THE RECEIPTS SHOWN IN THE PROFIT AND LOSS ACCOUNT IS ALSO SATISFACTORILY EXPLAINED. HENC E, I DELETE THE ADDITION OF RS. 8,09,768/- MADE BY THE ASSESSING OFFICER. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 1. THAT THE LD. CIT(A) ERRED IN FACT AND LAW IN DEL ETING THE ADDITION OF RS. 8,09,768/- AS THE TDS CERTIFICATES REVEALED THAT TH E TOTAL AMOUNT RECEIVED BY THE ASSESSEE ON ACCOUNT OF INTEREST ON SECURITY, C & F CHARGES AND FIXED REIMBURSEMENT DURING THE RELEVANT YEAR WAS RS. 40,0 3,749/- AS AGAINST RS. 31,93,981/- DISCLOSED BY THE ASSESSEE IN HIS ACCOU NTS. 2. THAT THE ORDER OF THE LD. CIT(A) IS PERVERSE ON LAW AND FACT AS IT HAS PRESUMED THAT THE ASSESSEE HAD SPENT AN AMOUNT OF R S. 7,85,768/- ON BEHALF OF HEINZ INDIA PVT. LTD. WHICH HAS NOT BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT, BY SIMPLY RELYING ON THE VERSION OF THE ASSESSEE WH ICH WAS NEITHER BEEN BACKED BY DOCUMENT AS EVIDENCE NOR BY ANY ENTRY IN THE BOO KS OF ACCOUNTS. 3. THAT THE LD. CIT(A) ERRED IN FACT AND LAW IN DE LETING THE ADDITION OF RS. 7,85,868/- BY HOLDING THAT THE SAME NEED NOT BE TRE ATED AS RECEIPT ON THE GROUND THAT IT HAS NOT BEEN DEBITED AS EXPENSES IN PROFIT AND LOSS ACCOUNT IS NOT BASED ON ANY RECOGNIZED PRINCIPLES OF ACCOUNTING AND DOES NO T REFLECT THE TRUE STATE OF AFFAIRS OF THE BUSINESS. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. WITH REGA RD TO INTEREST INCOME OF RS 24,000/- ON SECURITY DEPOSIT , THE LD CITA HAD OBSERVED THAT THE ASSESSEE HAD OFFERED RS 24,000/- ON ACCRUAL BASIS IN ASST YEAR 2003-04 SEPARATELY AN D FOR ASST YEAR 2004-05 SEPARATELY. BUT THE PARTY IE. M/S CORPORATE STATIONERY PVT LTD HAD DEDUCTED TDS ON PAYMENT BASIS TAKING INTO ACCOUNT BOTH THE YEARS INTEREST AT RS 4 8,000/-. IT IS NOT THE CASE OF THE 5 ITA NO.2035/KOL/2010 SURESH KUMAR AGARWAL A.YR. 2004-05 5 REVENUE THAT ASSESSEE HAD NOT OFFERED INTEREST INCO ME OF RS 24,000/- IN ASST YEAR 2003- 04. HENCE WE FIND THAT THERE IS NO ESCAPEMENT OF I NTEREST INCOME FROM THE ASSESSEES SIDE. THIS FACT HAS BEEN DULY APPRECIATED BY THE L D CITA AND ADDITION WAS DELETED TO THAT EXTENT. HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD CITA IN THIS REGARD. 6.1. WITH REGARD TO THE REMAINING ADDITION OF RS 7, 85,768/- , THE ASSESSEE HAD DULY FURNISHED VARIOUS EVIDENCES TO PROVE THAT THESE WER E MERE REIMBURSEMENT CLAIMED BY THE ASSESSEE FROM M/S HEINZ INDIA PVT LTD IN RESPEC T OF EXPENSES INCURRED IN THE CAPACITY OF C&F AGENT FOR AND ON BEHALF OF THE ASSE SSEE. THERE WAS NO PROFIT ELEMENT INVOLVED IN THE SAID REIMBURSEMENT AND THE SAME WER E PAID BY HEINZ INDIA PVT LTD ON ACTUAL BASIS SUBJECT TO PRODUCTION OF NECESSARY EVI DENCES BY THE ASSESSEE. ADMITTEDLY THESE EVIDENCES WERE PRODUCED BY THE ASSESSEE BEFOR E THE AUTHORITIES BELOW WHICH FACT HAS BEEN VERIFIED AND ACKNOWLEDGED BY THE LD CITA I N PAGE 6 OF HIS ORDER. THE ASSESSEE ALSO FURNISHED A CERTIFICATE FROM M/S HEINZ INDIA P VT LTD WHEREIN THEY MENTIONED THAT THEY HAD DEDUCTED TAX AT SOURCE ON THE REIMBURSEMEN T PORTION ALSO ALONG WITH OTHER PAYMENTS MADE TO THE ASSESSEE. IT IS THE CASE OF TH E ASSESSEE, THAT HE HAS TO RECEIVE A SUM OF RS 48,092.38 AS OPENING BALANCE TOWARDS REIM BURSEMENT OF EXPENSES FROM M/S HEINZ INDIA PVT LTD AND FURTHER SUM OF RS 7,37,675/ - FOR THE FINANCIAL YEAR 2003-04 BEING THE ACTUAL EXPENSES INCURRED BY THE ASSESSEE FOR AND ON BEHALF OF M/S HEINZ INDIA PVT LTD. THE SAID TRANSACTIONS WERE KEPT IN SEPARAT E LEDGER ACCOUNT IN THE NAME OF M/S HEINZ INDIA PVT LTD IN THE ASSET SIDE OF THE BALANC E SHEET BY THE ASSESSEE AND THE AMOUNTS AS AND WHEN RECEIVED TOWARDS REIMBURSEMENT , WERE CREDITED TO THE SAID ASSET ACCOUNT. HENCE IT HAD NOT BEEN REFLECTED IN THE PR OFIT AND LOSS ACCOUNT OF THE ASSESSEE. BUT SINCE THE PARTY HAD DEDUCTED TAX AT SOURCE ON A LL PAYMENTS MADE TO THE ASSESSEE INCLUDING THE REIMBURSEMENT PORTION, THERE IS BOUND TO BE DIFFERENCE BETWEEN THE RECEIPTS REPORTED IN TDS CERTIFICATE AND THAT REPOR TED IN THE PROFIT AND LOSS ACCOUNT. WE HOLD THAT THE DIFFERENCE HAD BEEN SATISFACTORILY EX PLAINED BY THE ASSESSEE WITH COGENT 6 ITA NO.2035/KOL/2010 SURESH KUMAR AGARWAL A.YR. 2004-05 6 EVIDENCES ENCLOSED IN THE PAPER BOOK. WE FIND THAT THE LD CITA HAD RIGHTLY APPRECIATED THESE EVIDENCES AND DELETED THE ADDITION AND WE DO NOT FIND ANY INFIRMITY IN THE SAID ORDER OF THE LD CITA. ACCORDINGLY, THE GROUNDS RAI SED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 19.02.2018 SD/- SD/- [S.S. VISWANETHRA RAVI] [ M.BAL AGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 19.02.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. I.T.O, WARD-30(4), KOLKATA, AAYAKAR BHAWAN, DAKS HIN, 2, GARIAHAT ROAD, SOUTH, KOLKATA-700068. 2. SURESH KUMAR AGARWAL, 107A, RASH BEHARI AVENUE, KOLKATA-29. 3..C.I.T.- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S 7 ITA NO.2035/KOL/2010 SURESH KUMAR AGARWAL A.YR. 2004-05 7