M/s A.S. Syndicate Warehousing (P) Ltd., Kolkata V. I.T.O, Wd -11(3), Kolkata, Kolkata

ITA 2095/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4149 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 28-09-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 10-07-2013
• Court: TRIBUNAL
• Keywords: Depreciation; Earning of tax free income; Additional evidence; Speculation loss; Competent authority
• Section: 143(3); 14A; 133(6)

Judgement Text

I.T.A. NO. 2095/KOL./2013 ASSESSMENT YEAR: 2007-2008 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER I.T.A. NO. 2095/KOL/ 2013 ASSESSMENT YEAR: 2007-2008 M/S. A.S. SYNDICATE WAREHOUSING (P) LIMITED,....... ...............APPELLANT 23C, AHIRPUR 1 ST LANE, KOLKATA-700 019 [PAN: AACCA 5112 A] -VS.- INCOME TAX OFFICER,................................ ...............................RESPONDENT WARD-11(3), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: SHRI SUBASH AGARWAL, ADVOCATE, FOR THE ASSESSEE SHRI S.M. SARFARAZUT TAUHEED, JCIT, SR. D.R., FOR T HE DEPARTMENT DATE OF CONCLUDING THE HEARING : DECEMBER 12, 2016 DATE OF PRONOUNCING THE ORDER : DECEMBER 09, 2016 O R D E R PER SHRI M. BALAGANESH, A.M .: THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE O RDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XII, KOLKATA V IDE APPEAL NO. 778/XII/11(3)/09-10 DATED 15.03.2013. ASSESSMENT WA S FRAMED BY THE INCOME TAX OFFICER, WARD-11(3), KOLKATA UNDER SECTI ON 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) FOR ASSESSMENT YEAR 2007-08 VIDE HIS ORDER DATED 24.12. 2009. 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(APPEAL) IS JUSTIFIED IN UPHOLDING THE ADDITION OF RS.58,57,062/- MADE BY THE ASSESSING OFFICER UNDER SECTION 41(1) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS A CLEARING AND FORWARDING AGENT EARNING INCOME FROM COMMISSION AND INTEREST IN THE I.T.A. NO. 2095/KOL./2013 ASSESSMENT YEAR: 2007-2008 PAGE 2 OF 6 FORM OF SERVICE CHARGES. THE ASSESSEE HAD SHOWN A S UM OF RS.58,57,062/- UNDER SUNDRY CREDITORS, WHICH IS INCLUDED IN THE TO TAL SUNDRY CREDITORS OF RS.93,70,611/-. WHEN THE SUNDRY CREDITORS WERE SUBJ ECTED TO VERIFICATION BY THE ASSESSING OFFICER, DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED THAT THIS SUM OF RS.58,57,06 2/- REPRESENTS THE AMOUNT RECEIVED FROM M/S. SHAW WALLACE & CO. LIMITE D IN RESPECT OF FINE PAID BY THE ASSESSEE TO CUSTOMS DEPARTMENT ON BEHAL F OF M/S. SHAW WALLACE & CO. LIMITED IN THE CAPACITY OF CLEARING & FORWARDING AGENT. IT WAS ALSO REPLIED THAT THIS SUM WAS CONTINUED TO BE SHOWN AS LIABILITY BECAUSE THE ASSESSEE HAD AGITATED THE LEVY OF FINE IMPOSED BY THE CUSTOMS AUTHORITIES BEFORE THE COMPETENT AUTHORITY AND DEPENDING UPON THE OUTCOME OF THE SAID APPEAL, IT WOULD BE DECIDED WHETHER THIS SUM IS REQUIRED TO BE PAID BACK TO M/S. SHAW WALLACE & CO. LIMITED BASED ON THE AMOUNT OF REFUND THAT COULD BE RECEIVED FROM THE CU STOMS DEPARTMENT. THE ASSESSEE HAS ALSO SHOWN THE PAYMENT OF FINE TO THE CUSTOMS AUTHORITIES UNDER THE HEAD CURRENT ASSETS AS DEP OSIT. THE ASSESSING OFFICER MADE CROSS VERIFICATION OF THE BALANCE AMOU NT SHOWN BY THE ASSESSEE THAT M/S. SHAW WALLACE & CO. LIMITED HAD I SSUED NOTICE UNDER SECTION 133(6) OF THE ACT, WHICH REPLIED THAT THERE IS NO AMOUNT RECEIVABLE FROM THE ASSESSEE AS ON 31.03.2007. ACCO RDINGLY, THE ASSESSING OFFICER PROCEEDED TO TREAT THE SAID LIABILITY TO HA VE BEEN CEASED IN VIEW OF THE PROVISIONS OF SECTION 41(1) OF THE ACT AND ADDE D THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THIS ACTION OF THE ASSESSIN G OFFICER WAS UPHELD BY THE LD. CIT(APPEALS). AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FO LLOWING GROUND:- FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMIN G THE ADDITION OF RS.58,57,062/- MADE BY THE A.O. ON ACCO UNT OF SUNDRY CREDITOR BY WRONGLY INVOKING THE PROVISIO NS OF SECTION 41(1) OF THE ACT. 4. THE LD. A.R. AGREED THAT THE ASSESSEE HAD NOT CL AIMED ANY DEDUCTION TOWARDS CREATING THIS LIABILITY IN THE EARLIER YEAR S. IT HAD SIMPLY PAID THE FINE TO THE CUSTOMS AUTHORITIES ON BEHALF OF M/S. S HAW WALLACE & CO. LIMITED AND HAD REFLECTED THE SAME UNDER CURRENT A SSETS IN ITS BALANCE- I.T.A. NO. 2095/KOL./2013 ASSESSMENT YEAR: 2007-2008 PAGE 3 OF 6 SHEET. THE ASSESSEE HAD ALSO RAISED A DEBIT NOTE ON M/S. SHAW WALLACE & CO. LIMITED AND RECEIVED THE SAID SUM FROM M/S. SHA W WALLACE & CO. LIMITED AND SHOWED THE SAME AS OTHER SUNDRY CREDITO RS. THE ASSESSEE HAD PREFERRED AN APPEAL BEFORE THE COMPETENT AUTHORITY AGAINST THE LEVY OF FINE IMPOSED BY THE CUSTOMS AUTHORITIES AND IN CASE , IF THE ASSESSEE SUCCEEDS IN THE SAME FINE PAID TO THE CUSTOMS AUTHO RITIES WOULD BE REFUNDED TO THE ASSESSEE, WHICH, IN TURN, HAD TO BE REFUNDED BACK TO M/S. SHAW WALLACE & CO. LIMITED AND ACCORDINGLY, THE ASS ESSEE IS JUSTIFIED IN SHOWING IT UNDER SUNDRY CREDITORS AS ON 31.03.2007. THE LD. A.R. ALSO MADE AN ALTERNATIVE ARGUMENT THAT IN THE ASSESSMENT YEARS 2008-09, 2009-10 AND 2010-11, THE ASSESSEE HAD WRITTEN BACK THIS LIABILITY TO INCOME AND OFFERED THE SAME ON ITS OWN. HE ALSO MAD E AN ARGUMENT THAT THIS VERY ACTION DOES NOT AUTOMATICALLY CONCLUDE TH AT THE LIABILITY CEASED TO EXIST AS ON 31.03.2007 RELEVANT TO ASSESSMENT YE AR 2007-08 (I.E. YEAR UNDER APPEAL). IN RESPONSE TO THIS, THE LD. D.R. VE HEMENTLY RELIED ON THE ORDER OF LD. CIT(APPEALS). THE LD. A.R. FOR THE ASS ESSEE HAS PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF THIS ARGUM ENT:- (I) CIT VS.- SUGAULI SUGAR WORKS (P) LIMITED [236 ITR 518 (SC)]; (II) GOODRICKE GROUP LIMITED VS.- CIT [338 ITR 11 6 (CAL.)]; (III) CIT VS.- CHOUGULE & CO. (P) LIMITED [189 IT R 473 (BOM.)]; (IV) STEEL AND GENERAL MILLS CO. LIMITED VS.-CIT[ 96 ITR 438 (DEL]; (V) CIT VS.- ANCHERRY PAUOO KAKKU [1986] 160 ITR 88 (KER.); (VI) AMBICA MILLS LIMITED VS.- CIT [54 ITR 167 (G UJ.)]; (VII) CIT VS.- SILVER COTTON MILLS CO. LIMITED [2 54 ITR 728 (GUJ.). THE LD. A.R. ALSO FILED ADDITIONAL EVIDENCE TOGETHE R WITH THE PRAYER FOR RECEIPT OF ADDITIONAL EVIDENCE SHOWING THE EVIDENCE FOR WRITING BACK OF THIS LIABILITY TO INCOME IN ASSESSMENT YEARS 2008-0 9 TO 2010-11 IN PART. HE FAIRLY SUBMITTED THAT THESE PAPERS WERE NOT SUBM ITTED BEFORE THE LOWER AUTHORITIES. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSE SSEE IS A C &F AGENT I.T.A. NO. 2095/KOL./2013 ASSESSMENT YEAR: 2007-2008 PAGE 4 OF 6 AND IN THAT CAPACITY IMPORTED CERTAIN AMOUNT OF GOO DS ON BEHALF OF M/S. SHAW WALLACE & CO. LIMITED IN THE YEAR 1995 AND IN THAT SAID WORK DUE TO CERTAIN DEFECTS, A FINE OF RS.55,00,000/- WAS IMPOS ED BY THE CUSTOMS AUTHORITIES. THE ASSESSEE HAD DEPOSITED THE SAID FI NE ON BEHALF OF M/S. SHAW WALLACE & CO. LIMITED, WHICH WAS SHOWN ON THE ASSETS SIDE IN ITS BALANCE-SHEET. THE SAID FINE WAS LATER REIMBURSED B Y M/S. SHAW WALLACE & CO. LIMITED, WHICH WAS SHOWN SEPARATELY UNDER THE H EAD SUNDRY CREDITORS BY THE ASSESSEE IN VIEW OF THE PENDING L ITIGATION BEFORE THE COMPETENT AUTHORITY ON THE VALIDITY OF LEVY OF FINE . WE FIND FROM THE RECORDS THAT THE ASSESSEE HAD NOT CLAIMED ANY DEDUC TION IN THIS REGARD FOR PAYMENT OF FINE IN ITS RETURN OF INCOME. HENCE, AT THE THRESHOLD, THE PROVISIONS OF SECTION 41(1) OF THE ACT CANNOT BE IN VOKED AND WE HOLD THAT THE LOWER AUTHORITIES HAD GROSSLY ERRED IN THIS REG ARD BY INVOKING THE SAID SECTION. IN VIEW OF THIS FINDING, WE DO NOT DE EM IT FIT TO ADJUDICATE THE ABOVE ADDITIONAL EVIDENCES FILED BY THE ASSESSE E AND THE SUBSEQUENT WRITE BACK OF THE SAID LIABILITY TO INCOME IN SUBSE QUENT YEARS BY THE ASSESSEE AND THE CASE LAWS RELIED UPON BY THE ASSES SEE. ACCORDINGLY, GROUND NO. 1 RAISED BY THE ASSESSEE IS ALLOWED. 6. THE LAST ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD. CIT(APPEALS) IS JUSTIFIED IN REDUCING THE DISALLOWA NCE OF EXPENDITURE TO RS.2,00,000/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, OBSERVED AS UNDER :- TOTAL RECEIPTS INTEREST RS.1,05,772/- COMMISSION RS.3,27,746/- LONG-TERM CAPITAL LOSS RS. 34,508/- SHORT TERM CAPITAL LOSS RS.1,48,754/- SPECULATION LOSS RS. 7,628/- RS.6,24,408/- TOTAL EXPENSES CLAIMED RENT, RATES AND TAXES RS.2,970/- EMPLOYEES EXPENDITURE RS.3,44,738/- REPAIR AND MAINTENANCE RS.2,08,581/- DEPRECIATION RS.1,12,338/- I.T.A. NO. 2095/KOL./2013 ASSESSMENT YEAR: 2007-2008 PAGE 5 OF 6 OTHER EXPENSES RS.13,88,210/- RS.20,56,837/- EXPENSES RELATING TO LONG TERM CAPITAL LOSS (205683 7 /624408 X 34508)= RS.1,13,671/- EXPENSES RELATING TO SHORT TERM CAPITAL LOSS (20568 37 /624408 X 148754) = RS.4,90,005/- EXPENSES RELATING TO SHARE DEALING LOSS (2056837/62 4408 X 7628) = RS.25,127/-. THUS THE TOTAL EXPENDITURE OF RS.6,28,803/- (113671 + 490005 + 25127) IS CONSIDERED AS NOT RELATED TO BUSINESS INC OME AND DISALLOWED IN COURSE OF COMPUTATION OF BUSINESS INC OME/LOSS. THE LD. CIT(APPEALS) BROUGHT DOWN THIS DISALLOWANCE TO RS.2,00,000/-. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE U S. 8. THE LD. A.R. ARGUED THAT THE ASSESSING OFFICER H AD NOT EVEN INDICATED UNDER WHICH SECTION OF THE ACT HE HAD CON TEMPLATED TO DISALLOW THIS EXPENDITURE OF RS.6,28,803/-, WHICH WAS LATER REDUCED TO RS.2,00,000/- BY THE LD. CIT(APPEALS). FROM THE PER USAL OF THE ASSESSMENT ORDER, IT COULD BE PRESUMED THAT THE ASSESSING OFFI CER WAS ONLY CONTEMPLATING TO DISALLOW THE SAID EXPENDITURE BY I NVOKING THE PROVISIONS OF SECTION 14A OF THE ACT WITH REGARD TO LONG-TERM CAPITAL LOSS, SHORT-TERM CAPITAL LOSS AND SHARE DEALING LOS S CLAIMED BY THE ASSESSEE. THE LD. A.R. PRAYED THAT 1% OF THE DIVIDE ND INCOME COULD BE DISALLOWED UNDER SECTION 14A OF THE ACT FOR THE YEA R UNDER APPEAL AS THE PROVISIONS OF RULE 8D COULD NOT BE MADE APPLICABLE. HE ALSO AGREED FOR DISALLOWANCE OF RS.25,127/- BEING THE EXPENSES RELA TING TO SPECULATION LOSS TO BE DISALLOWED UNDER SECTION 14A. IN RESPONS E, THE LD. D.R. RELIED ON THE ORDERS OF THE LD. CIT(APPEALS). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE FACTS STATED HERE INABOVE REMAINED UNDISPUTED AND HENCE, THE SAME ARE NOT REITERATED F OR THE SAKE OF BREVITY. WE FIND FROM THE RECORD THAT THE DISALLOWANCE OF EX PENDITURE HAS BEEN MADE WITHOUT MENTIONING ANY SECTION AND FROM THE SP IRIT OF THE LANGUAGE I.T.A. NO. 2095/KOL./2013 ASSESSMENT YEAR: 2007-2008 PAGE 6 OF 6 USED BY THE ASSESSING OFFICER, IT COULD BE SAFELY P RESUMED THAT HE WAS ONLY CONTEMPLATING TO DISALLOW THE EXPENDITURE UNDE R SECTION 14A OF THE ACT. WE FIND THAT THE HONBLE CALCUTTA HIGH COURT I N THE CASE OF CIT VS.- M/S. R.R. SEN & BROTHERS PVT. LTD. IN G.A. NO. 3019 OF 2012 IN ITAT NO. 243 OF 2012 DATED 04.01.2013 HAS HELD THAT IN RESPE CT OF DISALLOWANCES UNDER SECTION 14A FOR THE ASSESSMENT YEARS PRIOR TO ASSESSMENT YEAR 2008-09, THE SUM HAS TO BE RESTRICTED TO 1% OF EXEM PT INCOME. WE DIRECT THE ASSESSING OFFICER ACCORDINGLY TO DISALLOW 1% OF EXEMPT INCOME. WE ALSO DIRECT THE ASSESSING OFFICER TO DISALLOW A SUM OF RS.25,127/- AS THE EXPENSES DIRECTLY RELATABLE TO SPECULATION LOSS, WH ICH HAS BEEN FAIRLY CONCEDED BY THE LD. A.R. WE DIRECT THE ASSESSING OF FICER ACCORDINGLY. THE GROUND NO. 2 RAISED BY THE ASSESSEE IS PARTLY ALLOW ED. 10. GROUND NO. 3 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER 9 TH , 2016. SD/- SD/- (N.V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT ME MBER KOLKATA, THE 9 TH DAY OF DECEMBER, 2016 COPIES TO : (1) M/S. A.S. SYNDICATE WAREHOUSING (P) LIMITED, 23C, AHIRPUR 1 ST LANE, KOLKATA-700 019 (2) INCOME TAX OFFICER, WARD-11(3), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (3) COMMISSIONER OF INCOME TAX (APPEALS)-XII, KOLKA TA, (4) COMMISSIONER OF INCOME TAX- , KOLKATA; (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.