A.C.I.T.,Circle-4(1), Kolkata, Kolkata V. M/s Duncans Tea Ltd, Kolkata

ITA 2089/KOL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6194 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 31-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Revised return
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SHRI ABY. T. VARKEY, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 2089/KOL/20 16 ASSESSMENT YEAR : 2006-0 7 ACIT, CIRCLE-4(1), KOLKATA -VS- M/S DUNCA NS TEA LTD. [PAN: AABCD 0201 A ] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SALLONG YADEN , ADDL. CIT, SR. DR FOR THE RESPONDENT : SHRI SUBASH AGARWAL, ADV OCATE DATE OF HEARING : 11.07.2018 DATE OF PRONOUNCEMENT : 13.07.2018 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)-8, KOLKATA [IN SHORT THE LD CIT (A)] IN APPEAL NO. CIT(A) KOLKATA-8/10065/2008-09 DATED 17.08.2016 AGAINST T HE ORDER PASSED BY THE ACIT, CIRCLE-4, KOLKATA [ IN SHORT THE LD AO] UNDER SECT ION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 17.12.2008 FOR TH E ASSESSMENT YEAR 2006-07. 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 32,50,543 /- ON ACCOUNT OF DAMAGED/LOSS OF PACKET TEA, IN THE FACTS AND CIRCUMSTANCES OF THE C ASE. 2 ITA NO.2089/KOL/2016 M/S DUNCANS TEA LTD. A.YR.2006-07 2 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF TRADING OF TEA. THE RETURN OF INCOME FOR THE ASS ESSMENT YEAR 2006-07 WAS FILED ON 20.11.2006 DECLARING TOTAL INCOME OF RS. NIL AFTER SETTING OFF BROUGHT FORWARD LOSS OF EARLIER YEARS AMOUNTING TO RS. 1,74,84,170/-. THE A SSESSEE HOWEVER PAID TAX ON BOOK PROFIT OF RS. 96,41,350/-. THE ASSESSEE LATER FILED REVISED RETURN ON 31.03.2008 DECLARING TOTAL INCOME OF RS. NIL AFTER SETTING OFF LOSS OF E ARLIER YEARS AT RS. 1,18,85,806/-. THE LD. AO OBSERVED THAT THE ASSESSEE WAS ENGAGED IN THE PR ODUCTION AND SALE OF PACKET TEA UNDER DIFFERENT BRAND NAMES. DIFFERENT GRADES OF TE A FOR THIS PURPOSE WERE PURCHASED FROM AUCTION AND PRIVATE PARTIES. FROM THE DETAILS OF MARKETING AND SELLING EXPENSES FILED BY THE ASSESSEE, THE LD. AO FOUND THAT A SUM OF RS. 32,50,543/- HAS BEEN INCURRED AS DAMAGED/LOSS OF PACKET TEA. HE OBSERVED THAT THE ASSESSEE COULD NOT PRODUCE ANY DETAILS RELATING TO SUCH LOSS AND ALSO COULD NOT ST ATE WHETHER ANY AMOUNTS WERE RECEIVED FROM THE INSURANCE COMPANY IN RESPECT OF SUCH LOSS. ACCORDINGLY, HE PROCEEDED TO DISALLOW THE SUM OF RS. 32,50,543/- IN THE ASSESSME NT. 3.1. THE ASSESSEE SUBMITTED THAT IT HAD SUBMITTED A LL THE DETAILS THAT WERE SOUGHT BY THE LD. AO ON THE QUESTIONNAIRE ISSUED BY HIM. THE SAID DETAILS WERE PRODUCED BEFORE THE LD. CIT(A) TOGETHER WITH COPY OF QUESTIONNAIRE ISSU ED BY THE LD. AO. FROM THE SAID QUESTIONNAIRE, THE ASSESSEE PROVED THAT DETAILS REL ATING TO DAMAGED/LOSS OF PACKET TEA WERE NEVER SOUGHT BY THE LD. AO. HENCE THE ASSESSEE COULD NOT SUBMIT THE DETAILS OF THE SAME. THE ASSESSEE SUBMITTED THAT ITS BUSINESS MODE L IS BASICALLY SIMILAR TO FMCG COMPANY WHERE THE FOCUS IS TO REACH EACH AND EVERY CONSUMER AND COMPETE WITH SIMILAR PRODUCTS IN THE MARKET. DURING THE PREVIOUS YEAR RELEVANT TO THIS ASSESSMENT YEAR, THE ASSESSEE HAD SOLD ITS TEAS UNDER THE BRAN D NAMES DOUBLE DIAMOND, SARGAM DUST, SARGAM LEAF, SHAKTI DUST, RUNGLEE RUNGLIOT NO .1 AND SUPER SHAKTI. FURTHER EACH OF THESE BRANDS HAD DIFFERENT PACK SIZES LIKE 1 KG, 500 GRAMS, 250 GRAMS, 100 GRAMS, RS. 10, RS. 5 AND RE 1 PACK. TEAS WERE SOLD BY THE COMPANY IN ALMOST ALL THE STATES OF INDIA THROUGH 22 DEPOTS/CFA/CSA. THE DEPOTS/CFA/CSA CATER TO NETWORK OF MORE 3 ITA NO.2089/KOL/2016 M/S DUNCANS TEA LTD. A.YR.2006-07 3 THAN 1200 KEY DISTRIBUTORS. EACH OF THESE DISTRIBUT ORS SOLD THE TEAS TO ABOUT 200 RETAILERS. IT WAS SUBMITTED THAT PACKET TEA AS A COMMODITY HAS A SHORTER SHELF LIFE. IT WAS SUBMITTED THAT PACKET TEA BEING FMCG IS MONITORED B Y PREVENTION OF FOOD ADULTERATION AUTHORITIES OF GOVT. OF INDIA. HENCE P ACKETS WHICH ARE DAMAGED OR FUNGUS AFFECTED ARE RETURNED BY THE RETAILERS TO THE KEY D EALERS, WHO, IN TURN, CLAIMED REIMBURSEMENT IN RESPECT OF PACKET TEA DAMAGED OR R ETURNED. THE TEAS WHICH ARE RETURNED BY THE KEY DEALERS ARE DESTROYED SINCE THE SE TEAS CANNOT BE SOLD IN THE MARKET. DURING THE PREVIOUS YEAR THE ASSESSEE HAD WRITTEN O FF A SUM OF RS. 32,50,543/- BEING LOSS OF PACKET TEA STOCK. THIS IS A NORMAL PRACTICE FOLLOWED IN THE TEA TRADE. CREDIT NOTES ARE ISSUED BY THE ASSESSEE COMPANY TO THE KEY DEALE RS FOR SUCH DAMAGED TEA. 4. THE LD. CIT(A) DULY APPRECIATED THE AFORESAID CO NTENTIONS AND ON VERIFICATION OF THE CREDIT NOTES ISSUED BY THE ASSESSEE TO THE KEY DEAL ERS AND AFTER TAKING NOTE OF THE FACT THAT THE SIMILAR DISALLOWANCES WERE DELETED BY HIS PREDECESSOR IN ASSESSEES OWN CASE, HE DELETED THE DISALLOWANCE OF RS. 32,50,543/-. AGG RIEVED THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE FACTS S TATED HEREINABOVE REMAIN UNDISPUTED IN RESPECT OF THIS ISSUE AND HENCE THE SAME ARE NOT REITERATED FOR THE SAKE OF BREVITY. THE LD. AO BEFORE US FURNISHED A COMPARATIVE CHART OF L OSS AS PERCENTAGE OF SALES ON ACCOUNT OF PACKET TEA FOR VARIOUS FINANCIAL YEARS AS UNDER: SL. NO. ASSESSMENT YEAR SALES (RS. CR.) DAMAGE/LOSS OF PACKET TEA RS. (RS. CR) LOSS AS A PERCENTAGE OF SALES 1. 2005-06 156.01 0.40 0.26% 2. 2006-07 148.47 0.33 0.22% 3. 2008-09 116.24 0.71 0.61% 4. 2009-10 117.94 0.14 0.12% 4 ITA NO.2089/KOL/2016 M/S DUNCANS TEA LTD. A.YR.2006-07 4 AVERAGE OF 4 YEARS 0.30% WE FIND THAT THE LD. CIT(A) HAD GRANTED RELIEF ON T HE GROUND THAT THIS LOSS ON ACCOUNT OF PACKET TEA IS INCIDENTAL TO THE TEA TRADING BUSINES S IN THE NORMAL COURSE OF ACTIVITY. THE ASSESSEE HAD ALSO DULY EXPLAINED MODUS OPERANDI AND THE CIRCUMSTANCES IN WHICH SUCH DAMAGED OR LOSS OF PACKET TEA HAPPENS WHICH HAS B EEN DULY APPRECIATED BY THE LD. CIT(A). MOREOVER, WE FIND THAT THE LD. CIT(A) HAD A LSO PLACED RELIANCE ON THE ORDER OF HIS PREDECESSOR. IN THIS REGARD, WE FIND THAT FOR T HE ASSESSMENT YEAR 2008-09 AND 2009- 10 THE REVENUE HAD COME ON APPEAL BEFORE THIS TRIBU NAL. WE FIND IN THE STATEMENT OF FACTS AND GROUNDS OF APPEAL RAISED BY THE REVENUE, THE REVENUE HAD ITSELF ACCEPTED THE ORDER OF THE LD. CIT(A). ACCORDINGLY, THE APPEALS O F THE REVENUE WERE DISMISSED BY THIS TRIBUNAL AS DEFECTIVE AND INASMUCH AS THERE WAS NO GRIEVANCE AS SUCH FOR THE REVENUE. THE ORDERS FOR ASSESSMENT YEARS 2008-09 AND 2009-10 WERE PASSED BY THIS TRIBUNAL IN I.T.A. NO. 1244/KOL/2014 FOR ASSESSMENT YEAR 2008-0 9 DATED 29.12.2015 AND IN I.T.A. NO. 1245/KOL/2014 FOR ASSESSMENT YEAR 2009-10 DATED 11.10.2017. 5.1. IN VIEW OF THE AFORESAID OBSERVATIONS AND BY R ESPECTFULLY FOLLOWING THE DECISION OF THIS TRIBUNAL FOR ASSESSEES OWN CASE AND IN VIEW O F THE FACT THAT THE REVENUE HAD ACCEPTED THE ORDERS OF THE LD. CIT(A) IN THE EARLIE R YEARS. WE DISMISS THE GROUND NO. 1 RAISED BY THE REVENUE. 6. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE U/S 40A (IA) OF THE ACT, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD. AO OBSERVED THAT THE ASSESSEE HAS INCURRED CERTAIN EXPENDITURE WITHOUT DEDUCTION OF TAX AT SOU RCE AS UNDER: 5 ITA NO.2089/KOL/2016 M/S DUNCANS TEA LTD. A.YR.2006-07 5 ADVERTISEMENT EXPENDITURE RS. 13,85,321/- COMMISSION ON SALES RS. 1,28,462/- PRIMARY FREIGHT RS. 10,14,296/- WAREHOUSE/COLLECTION CHARGES RS. 1,62,986/- RS. 26,91,065/- ACCORDINGLY, SUM OF RS. 26,91,065/- WAS DISALLOWED BY THE LD. AO U/S 40A(IA) OF THE ACT. SIMILARLY, THE LD. AO OBSERVED FROM THE DETAIL S OF PACKETING CHARGES THAT IN RESPECT OF RAHUL PACKERS, WHO WAS THE CONTRACTOR AT CHALSA (JALPAIGURI), THE AMOUNT OF PACKETING CHARGES AS PER ACCOUNTS WAS RS. 16,34,069 /-, WHEREAS TDS HAS BEEN MADE ONLY ON RS. 14,32,352/-. THE DIFFERENCE AMOUNT OF R S. 2,01,717/- WAS ACCORDINGLY DISALLOWED U/S 40A(IA) OF THE ACT BY THE LD. AO. SI MILARLY IN THE CASE OF CAMELIA INDUSTRIES, KANPUR, PACKETING CHARGES AS PER ACCOUN TS WAS RS. 26,13,985/-, WHEREAS TDS HAS BEEN MADE ONLY ON 23,82,543/-. THE DIFFEREN CE OF RS. 2,31,442/- WAS DISALLOWED U/S 40A(IA) OF THE ACT BY THE LD. AO. IN EFFECT THE LD. AO MADE DISALLOWANCE ON ACCOUNT OF PACKETING CHARGES IN THE SUM OF RS. 4 ,33,159/- (201717 + 231442) AND RS. 26,91,065/- IN RESPECT OF ABOVE MENTIONED SPECI FIC FOUR ACCOUNT HEADS U/S 40A(IA) OF THE ACT IN THE ASSESSMENT. THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT NO DETAILS WERE ASKED BY THE LD. AO IN THIS REGARD. HOWEVER, I T IS STATED THAT THE ASSESSEE HAD INDEED MADE DEDUCTION OF TAX AT SOURCE IN RESPECT O F CERTAIN PAYMENTS, AND HAD NOT DEDUCTED TAX AT SOURCE PURSUANT TO CERTIFICATE OBTA INED U/S 197(1) OF THE ACT FROM THE INCOME TAX DEPARTMENT IN RESPECT OF RELEVANT PAYEES . THE DETAILS OF THE SAME WERE FURNISHED BEFORE THE LD. CIT(A). ALL THESE DETAILS WERE SOUGHT TO BE REMANDED TO THE FILE OF THE LD. AO BY THE LD. CIT(A). THE LD. CIT(A) WAI TED FOR THE REMAND REPORT FOR A PERIOD OF 5 YEARS APPROXIMATELY AND SINCE NO REMAND REPORT WAS FORTHCOMING FROM THE AO, HE PROCEEDED TO DISPOSE OFF THIS APPEAL BY APPR ECIATING THE EVIDENCES AVAILABLE ON RECORD. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A ) AS UNDER: IN RESPECT OF DISALLOWANCE MADE FROM PAYMENTS TO M/S RAHUL PACKER S, THE ASSESSEE SUBMITS THAT AS 6 ITA NO.2089/KOL/2016 M/S DUNCANS TEA LTD. A.YR.2006-07 6 PER THE BOOKS OF ACCOUNTS. TOTAL AMOUNT PAYABLE TO THE PARTY WAS RS.16,04,980/- WHICH WAS INCLUSIVE OF A SUM OF RS 1,72,778/- BEING REIMB URSEMENT OF EXPENSES RELATING TO STICKERING INCURRED BY THE CONTRACTOR. THE PACKETIN G CHARGES INVOLVED WAS TO THE EXTENT OF RS.14,32,532/-IN RESPECT OF WHICH TDS MADE U/S 1 94C. IN RESPECT OF THE BALANCE AMOUNT. NO TDS WAS MADE SINCE THESE AMOUNTS WERE PA ID SEPARATELY ON ACCOUNT OF REIMBURSEMENT OF EXPENSES OTHER THAN PACKETING CHAR GES. A STATEMENT SHOWING THE DETAILS OF THE AMOUNTS ON WHICH TDS WAS NOT MADE, I S ENCLOSED. SINCE THERE WAS NO REQUIREMENT TO DEDUCT TDS FROM THE SAID AMOUNTS, TH ERE WAS NO DEFAULT ON THE PART OF THE APPELLANT WHICH CALLED FOR DISALLOWANCE OF RS.2 .01,717/- U/S 40A(IA). AS REGARDS THE AMOUNT OF RS.2,31,442/- DISALLOWED U/S 40A(IA) ON A CCOUNT OF CAMELIA INDUSTRIES, WE HAVE TO STATE THAT TDS AMOUNTING TO RS. 5,180/- WAS DEDUCTED FROM THIS AMOUNT AND THE SAME WAS DEPOSITED ON 07.11.2005 VIDE CHALLAN NO. 1 0454. A COPY OF THE LEDGER ACCOUNT WHEREIN THE FIGURES HAVE BEEN REFLECTED IS ENCLOSED FOR YOUR KIND PERUSAL. SINCE TDS HAS BEEN MADE FROM THE AMOUNT OF RS.2,31,442/-, NO AMOUNT SHOULD BE DISALLOWED U/S 40A(IA). IT IS HUMBLY PRAYED THAT THE DISALLOWA NCE AMOUNTING TO RS.26,91,065/- AND RS.4,33,159/- MADE IN THE ASSESSMENT ORDER U/S 40A( IA), MAY KINDLY BE DELETED BASED ON THE DETAILS/DOCUMENTS FURNISHED NOW. THE LD. CIT(A) APPRECIATED THE AFORESAID CONTENTION S OF THE ASSESSEE VIS--VIS THE EVIDENCES SUBMITTED THEREON AND DELETED THE DISALLO WANCE U/S 40A(IA) OF THE ACT. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS. AT THE TIME OF HEARING, THE LD. AR FAIRLY CONSIDERED THE LATER ISSUE BE EXAMINED BY THE LD. A O ON FACTS IN THE INTEREST OF JUSTICE. WE ARE INCLINED ACCORDINGLY TO REMAND THIS ISSUE TO THE FILE OF THE LD. AO WITH A DIRECTION TO EXAMINE THE APPLICABILITY OF PROVISION S OF SECTION 40A(IA) OF THE ACT. IN THE LIGHT OF EVIDENCES SUBMITTED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND IN THE LIGHT OF 7 ITA NO.2089/KOL/2016 M/S DUNCANS TEA LTD. A.YR.2006-07 7 CONTENTIONS RAISED BY THE ASSESSEE . ACCORDINGLY GR OUND NO. 2 RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 13.07.2 018 SD/- SD/- [A.T. VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 13.07.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. ACIT, CIRCLE-4(1), KOLKATA, P-7, CHOWRINGHEE SQU ARE, 8 TH FLOOR, KOLKATA-700069. 2. M/S DUNCANES TEA LTD., DUNCAN HOUSE, 4 TH FLOOR, 31, N.S. ROAD, KOLKATA-700001. 3. C.I.T(A)- 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