I.T.O Wd - 6(1),kolkata., Kolkata V. M/s Compact Logistics Pvt Ltd, Kolkata

ITA 460/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4526 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 08-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 08-03-2013
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH JCITSR
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI M.BA LAGANESH, AM ] I.T.A NO. 460/KOL/201 3 ASSESSMENT YEAR : 2007-0 8 I.T.O., WARD-6 (1) -VS.- M/S COMPACT LOG ISTICS PVT.LTD. KOLKATA KOLKATA [PAN : AACCC 5156 E] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI KALYAN NATH, JCIT,SR.DR FOR THE RESPONDENT : NONE DATE OF HEARING : 08.06.2016. DATE OF PRONOUNCEMENT : 08.07.2016. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 26.12.2012 OF CIT(A)- VI, KOLKATA RELATING TO AY 2007-08. 2. GROUNDS RAISED BY THE REVENUE READ AS FOLLOWS :- 1. THAT LD. CIT[ A] HAS ERRED IN LAW AS WELL AS ON FACTS BY DELETING THE ADDITION OF RS. 22.76,573/- ON ACCOUNT OF NON-COMPLIANCE OF PROVISI ON U/S 40(A)(IA) READ WITH SECTION 194C. 2. THAT LD. CIT[A] HAS ERRED IN LAW AS WELL AS ON F ACTS BY DELETING THE ADDITION OF RS.7,59,063/- ON ACCOUNT OF COMMON FOREIGN TRAVELLI NG EXPENSES BILLED TO ANOTHER UNIT. 3. THAT LD. CIT[A] HAS ERRED IN LAW AS WELL AS ON F ACTS BY VIOLATING RULE 46A OF THE I T RULES. 4. THAT THE APPELLANT CRAVES FOR LEAVE TO ADD DELET E OR MODIFY ANY OF THE GROUNDS OF APPEAL BEFORE .OR AT THE TIME OF HEARING. 3. NOTICE OF HEARING OF THIS APPEAL WAS DIRECTED TO BE SERVED THROUGH THE DR. TODAY AT THE TIME OF HEARING THE LD. DR FILED BEFORE US SERV ICE OF NOTICE BY AFFIXTURE VIDE LETTER NO.ITO.WD-9(1)/KOL/COMPACT/12-13 TOGETHER WITH THE REPORT OF ITO-WARD- 6(1),KOLKATA EVIDENCING SERVICE OF NOTICE BY AFFIXT URE ON THE ASSESSEE. THE RELEVANT LETTERS AND REPORT ARE PLACED ON RECORD. NONE APPEA RED ON BEHALF OF THE ASSESSEE WHEN 2 ITA NO.460/KOL/2013 M/S. COMPACT LOGISTICS PVT.LTD. A.YR.2007-08 2 THE APPEAL WAS CALLED FOR HEARING. IN THE CIRCUMSTA NCE WE PROCEED TO DECIDE THE APPEAL AFTER HEARING THE SUBMISSIONS OF THE LD. DR 4. AS FAR AS GROUND NO.1 RAISED BY THE REVENUE I S CONCERNED THE FACTS ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF TR ADING AND EXPORTING OF GARMENTS. IT HAD CLAIMED AS DEDUCTION WHILE COMPUTING ITS INCOME FROM BUSINESS A SUM OF RS.22,76,573/- WHICH WAS CLAIMED UNDER THE HEAD MA NUFACTURING EXPENSES. THE AO WAS OF THE VIEW THAT THE ASSESSEE WAS UNDER AN OBLI GATION TO DEDUCT TAX AT SOURCE ON THE AFORESAID EXPENDITURE BUT FAILED TO DO SO. INVOKIN G THE PROVISION OF SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 (ACT) WHICH LAYS DOWN THAT NO DEDUCTION OF EXPENDITURE OF ANY SUM WOULD BE ALLOWED AS DEDUCTION WHILE COMPUTI NG INCOME FROM BUSINESS, UNLESS TAX AT SOURCE HAS BEEN DEDUCTED BY THE ASSESSEE ON THE SUM SO PAID WHERE OBLIGATION TO DEDUCT TAX SOURCE AT SOURCE EXISTS ON SUCH PAYMENT IN ACCORDANCE WITH THE PROVISION OF CHAPTER-XVII OF INCOME TAX ACT WHICH DEALS WITH AN OBLIGATION OF PERSONS MAKING PAYMENT TO DEDUCT TAX AT SOURCE. THE AO ACCORDINGLY DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF A SUM OF RS.22,76,573/-. 5. BEFORE CIT(A), THE ASSESSEE SUBMITTED MANUFACTU RING EXPENSES INCURRED WERE TO MAKE THE HOSIERY ITEMS SALEABLE EITHER IN THE LOCAL MARKET OR AS EXPORTS. THE MANUFACTURING EXPENSES WERE NOTHING BUT PRINTING CH ARGES PAID TO LABOUR FOR STITCHING/PASTING OF PATCHES ON GARMENTS. THE ASSES SEE GAVE MONTH WISE DETAILS OF QUANTITY AND THE RATE OF CHARGES. THE ASSESSEE POIN TED OUT THAT IT HAD NOT ENGAGED ANY PERMANENT LABOUR. PATCHING AND STITCHING/PASTING WA S ASSIGNED TO THE UNORGANIZED SECTOR WORKERS WHO ARE DAILY WAGERS. THEIR SKILLS ARE UP T O THE MARK OF SATISFACTION. SUCH WORK CANNOT BE ASSIGNED TO ANY PERSON EXCEPT TO A PERSON IN THIS LINE OF WORK AND ALL THESE WORKERS ARE PAID IN CASH. EACH PAYMENT WAS LESS THA N RS.20000/- AND WAS APPROVED BY THE ASSESSEE BEFORE ALLOTTING THE WORK TO THEM. THE ASSESSEE FURTHER SUBMITTED THAT BASICALLY, PERSONS IN THE UNORGANIZED SECTOR WERE I LLITERATE BUT EXPERTS IN SUCH WORK. THESE EXPENSES ARE EXCLUSIVELY AND WHOLLY PART OF T HE TOTAL COSTS OF GOODS. HENCE THERE WAS NO OCCASION TO DISALLOW SUCH EXPENSES UNDER THE GARB OF NON- COMPLIANCE WITH THE 3 ITA NO.460/KOL/2013 M/S. COMPACT LOGISTICS PVT.LTD. A.YR.2007-08 3 TDS PROVISION OF SUCH PAYMENTS. THEREFORE, THE ID.A O HAS WRONGLY INVOKED SEC.40A (IA) AND THIS IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE'S PAYMENTS MADE FOR STITCHING PATCHES ON GARMENTS. 6. THE CIT(A) CALLED FOR A REMAND REPORT FROM THE AO ON THE CLAIM MADE BY THE ASSESSEE. ACCORDING TO THE ASSESSEE THERE WAS NOTH ING THERE WAS NO ADVERSE FINDING IN THE REMAND REPORT EXCEPT THAT AFTER FILING OF DETAI LS NOBODY APPEARED BEFORE THE LD.A O. 7. THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND REMAND REPORT OF THE AO, DELETED THE ADDITION MADE BY THE AO OBSERVI NG AS FOLLOWS: 23. I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSE SSING OFFICER IN THE ASSESSMENT ORDER, AND SUBMISSIONS OF THE APPELLANT. THE ASSESSEE DID NOT ENGAGE ANY PERMANENT LABOUR FOR PATCHING AND STITCHING/PAS TING WHICH ARE ASSIGNED TO THE UNORGANIZED SECTOR WORKERS WHO ARE DAILY WAGERS . AS PER APPELLANT SUCH WORK CANNOT BE ASSIGNED TO ANY PERSON EXCEPT TO A P ERSON IN THIS LINE OF WORK AND ALL THESE WORKERS ARE PAID IN CASH. IT FURTHER SUBM ITTED THAT EACH PAYMENT WAS LESS THAN RS.20000/- AND WAS APPROVED BEFORE ALLOTTING T HE WORK TO THEM AND THE PERSONS IN THE UNORGANIZED SECTOR ARE ILLITERATE BU T EXPERTS IN SUCH WORK. THE APPELLANT HAS PRODUCED THE COPIES OF VOUCHERS ON WH ICH THE PAYMENTS HAVE BEEN MADE TO THE WORKERS UP TO RS.20,000/- EACH TIME. TH E APPELLANT HAS ALSO PRODUCED THE SAID EVIDENCE BEFORE THE ASSESSING OFF ICER WHO ALSO EXAMINED THE SAME AND DID NOT FIND ANY REASON TO SHOW THAT PAYME NTS VIOLATED THE PROVISIONS OF SECTION 40(A)(IA). 8. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HA S RAISED GROUND NO.1 BEFORE THE TRIBUNAL. GROUND NO.3 RAISED BY THE REVENUE IS COM MON TO BOTH GROUND NOS. 1 AND 2 RAISED BY THE REVENUE IN THE GROUNDS OF APPEAL. GRO UND NO.3 RAISED BY THE REVENUE IS WITH REGARD TO LACK OF AFFORDING OPPORTUNITY TO THE AO BY CIT(A) IN TERMS OF RULE 46A OF THE RULES. 9. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR., W HO BROUGHT TO OUR NOTICE THAT BEFORE CIT(A), THE ASSESSEE SUBMITTED CERTAIN ADDITIONAL E VIDENCES AND THE REMAND REPORT WAS CALLED FOR BY CIT(A) FROM THE AO ON THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE. IN THE REMAND REPORT DATED 30.05.2012 AS WELL AS 24.09 .2012 THE AO HAS SUBMITTED THAT THE ASSESSEE DID NOT COMPLY WITH THE DIRECTIONS OF THE AO. IN PARTICULAR OUR ATTENTION WAS DRAWN TO THE REMAND REPORT DATED 24.09.2012 BY THE AO IN WHICH THE AO HAS 4 ITA NO.460/KOL/2013 M/S. COMPACT LOGISTICS PVT.LTD. A.YR.2007-08 4 SPECIFICALLY INFORMED CIT(A) THAT THE ASSESSEE DID NOT FURNISH THE NAMES AND ADDRESS OF THE PERSONS TO WHOM THE PAYMENT OF RS.22,76,753/- W AS MADE FOR AFFIXING/PRINTING OF PATCHES ON GARMENTS ALONG WITH THE AMOUNT PAID TO T HOSE PERSONS. THE ASSESSEE DID NOT GIVE ANY DETAILS. OUR ATTENTION WAS DRAWN TO THE RE MAND REPORT DATED 18.10.2012 OF THE AO TO CIT(A) WHEREIN THE AO HAS POINTED OUT THAT TH E ASSESSEE FAILED TO COMPLY WITH THE DIRECTIONS OF THE AO IN THE REMAND PROCEEDINGS. THE LD. DR THUS SUBMITTED THAT THE CONCLUSIONS OF CIT(A) THAT THE PAYMENTS MADE ON ACC OUNT OF MANUFACTURING EXPENSES IN THE FORM OF LABOUR CHARGES FOR PATCHING, STITCHING AND PASTING WERE MADE TO THE WORKERS LESS THAN RS.20,000/- EACH TIME CANNOT BE SUSTAINED AND THEREFORE THE ADDITION MADE BY AO HAS TO BE RESTORED. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR AND ARE OF THE VIEW THAT THE CONCLUSIONS DRAWN BY CIT(A) IN PARAGRAPH 23 OF HIS ORDER THAT THE ASSESSEE PRODUCED COPIES OF VOUCHERS ON WHICH PAYMENTS HAVE BEEN MADE TO THE WORKERS UPTO RS.20,000/- EACH TIME IS CONTRARY TO THE FACTS ON RECORD. NO SU CH EVIDENCE WAS FILED BY THE ASSESSEE BEFORE AO NOR EXAMINED BY AO. IN THE CIRCUMSTANCES WE REVERSE THE ORDER OF CIT(A) AND RESTORE THE ORDER OF AO. GROUND NO.1 RAISED BY THE REVENUE IS ALLOWED. 11. AS FAR AS GROUND NOS. 2 AND 3 ARE CONCERNED TH E ASSESSEE HAD CLAIMED AS DEDUCTION A SUM OF RS.7,59.063/- ON ACCOUNT OF FOREIGN TRAVEL. THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.7,59,063/- CLAIMED UNDER THE HEAD FOR EIGN TRAVEL, SINCE THE BILLS FOR FOREIGN TRAVELLING WERE RAISED IN THE NAME OF M/S. CANON STEELS PVT. LTD. AND M/S. CANON INDUSTRIES PVT. LTD. 12. BEFORE CIT(A), THE ASSESSEE POINTED OUT THAT T HE AFORESAID EXPENSES WERE DISALLOWED JUST BECAUSE NAME OF THE ASSESSEE IN THE BILLS IS THAT OF THE OTHER OLD GROUP COMPANY I.E CANNON INDUSTRIES (P) LTD I.E CPIL. IT WAS SUBMITTED THAT THE ASSESSEES GROUP IS RECOGNIZED AS THE CANNON GROUP AND ALL THE PERSONS KNOWING THE ASSESSEE MOSTLY REFER TO IT AS THE CANNON GROUP. HENCE, THE BILLS ARE IN THE NAME OF CANNON BUT THE PAYMENT WAS MADE ON BEHALF OF THE ASSESSEE BY C ANNON BY DEBITING THE ASSESSEE CO. 'S A/C IN THE BOOKS OF ACCOUNT OF CANNON. THE A SSESSEE CO. CREDITED THE CIPL A/C AND 5 ITA NO.460/KOL/2013 M/S. COMPACT LOGISTICS PVT.LTD. A.YR.2007-08 5 DEBITED THE FOREIGN TRAVELLING EXPS. A/C AND THUS C URRENT A/CS OF BOTH THE COMPANIES WERE MAINTAINED BY EACH OTHER SO THAT THERE IS NO ILLEGA LITY AND THE TICKETS/EXPENSES UTILIZED BY THE ASSESSEE WERE CHARGED TO THE ASSESSEE. THE A SSESSEE GAVE DETAILS OF FOREIGN TRAVEL AND SUBMITTED THAT THESE EXPENSES WERE INCU RRED IN CONNECTION WITH THE BUSINESS OPERATIONS OF THE ASSESSEE. COPY OF LEDGER A/C IN T HE BOOKS OF CP IL WAS ALSO FILED BEFORE CIT(A). IT WAS ARGUED THAT THE AO DISALLOWE D EXPENSES JUST BECAUSE OF PAYMENT MADE BY CIP L AND HENCE NOT JUSTIFIED IN THE LIGHT OF FACTS AND EVIDENCE PLACED ON RECORD. 13. ON A CONSIDERATION OF THE ABOVE SUBMISSIONS, T HE CIT(A) DELETED THE ADDITION MADE BY THE AO, OBSERVING AS FOLLOWS: 25. I HAVE CAREFULLY CONSIDERED THE OBSERVATIONS O F THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, AND SUBMISSIONS OF THE APPELLANT. THE APPELLANT COMPANY BELONG TO CANON GROUP. THE PAYMENTS ARE DEBITED IN THE APPELLANT'S ACCOUNT IN THE BOOKS OF ACCOUNTS OF CANON INDUSTRIES PVT. LTD. THE BILL IS RAISED IN THE NAME OF APPELLANT BY M/S. CANON INDUSTRIES PVT. LTD. AND AN ACCOUNT OF THE APPELLANT IS DEBITED WHILE THE ACCOUNT OF FOREIGN TRAVELLING IS CREDITED IN THE ACCOUNT OF M/S. CANON INDUSTRIES PVT. LTD. THE BILLS ARE APPORTIONE D AND EXPENSES ARE TRANSFERRED BY WAY OF TRAVELLING EXPENSES AMONG THE GROUP COMPA NIES. 26. THEREFORE, THE EXPENSES INCURRED ON TRAVELLING CANNOT BE DELETED MERELY BECAUSE THE BILLS ARE NOT IN THE NAME OF THE APPELL ANT COMPANY AND ARE IN THE NAME OF THE GROUP COMPANY. THE ASSESSING OFFICER HA S NOT FOUND ANY EVIDENCE THAT THERE WAS ANY PERSONAL PURPOSE IN GOING TO THE FOREIGN COUNTRY OR MISUSE OF THE FUNDS OF THE COMPANY BY THE DIRECTORS OR THERE WERE PERSONAL REASONS OF THE DIRECTORS FOR WHICH THE EXPENDITURE HAS BEEN DEBITE D IN THE ACCOUNTS OF THE ASSESSEE. THEREFORE, THE ADDITION MADE BY THE ASSES SING OFFICER OF RS.7,59,063/- IS HEREBY DELETED. THIS GROUND OF APPEAL IS ALLOWED . 14. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE H AS RAISED GROUND NOS. 2 AND 3 BEFORE THE TRIBUNAL. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR AND WE FIND THAT NEITHER COPY OF THE LEDGER ACCOUNT IN THE BOOKS OF CPIL NOR THE BILLS IN THE NAME OF GROUP COMPANY WERE FILED BEFORE AO. CIT(A) HAS CONS IDERED THE ADDITIONAL EVIDENCES WITHOUT CONFRONTING THE SAME TO THE AO IN VIOLATION OF RULE 46A OF THE RULES. WE, THEREFORE SET ASIDE THE ORDER OF CIT(A) ON THIS ISS UE AND REMAND THE ISSUE TO THE AO FOR 6 ITA NO.460/KOL/2013 M/S. COMPACT LOGISTICS PVT.LTD. A.YR.2007-08 6 FRESH CONSIDERATION IN THE LIGHT OF THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE BEFORE CIT(A). AO WILL AFFORD OPPORTUNITY TO THE ASSESSEE OF BEING HEARD BEFORE DECIDING THE ISSUE. GROUND NOS 2 AND 3 RAISED BY THE REVENUE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 15. IN THE RESULT THE APPEAL BY THE REVENUE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 08.07.2016. SD/- SD/- [M.BALAGANESH] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 08.07.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.M/S. COMPACT LOGISTICS PVT. LTD., D-7, 2 ND FLOOR, 56/1, CANNING STREET, KOLKATA- 700001. 2I.T.O., WARD-6(1), KOLKATA. 3.. CIT(A)-VI, KOLKATA 4. CIT-II, K OLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES