Kejriwal Auto Electric Engineering Works, Kolkata V. DCIT, CIR-MURSHIDABAD, Murshidabad

ITA 760/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9358 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 22-04-2016
• Court: TRIBUNAL
• Department Lawyers: SK Z H TANWEER
• Assessee Lawyers: V N PUROHIT
• Section: 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENC H KOLKATA BEFORE SHRI A.T.VARKEY, JM & DR. A.L.SAINI, AM ITA NO.760/KOL/2016 ( / ASSESSMENT YEAR:2007-2008) KEJRIWAL AUTO ELECTRIC ENGINEERING WORKS, 1/4C, KHAGENDRA CHATTERJEE ROAD, KOLKATA-700002 VS. DCIT, CIRCLE-MURSHIDABAD, AYAKAR BHAWAN, 39, R.N.TAGORE ROAD, P.O. BERHAMPORE-742101 DIST MURSHIDABAD ./ ./PAN/GIR NO.: AADFK 3389 H ( /APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI V.N.PUROHIT, CA REVENUE BY : SK.Z.H.TANWEER, JCIT, SR.DR / DATE OF HEARING : 27/12/2016 /DATE OF PRONOUNCEMENT 23/02/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERTAINI NG TO THE ASSESSMENT YEAR 2007-08, IS DIRECTED AGAINST THE OR DER PASSED BY LD. CIT(A)-21, KOLKATA IN APPEAL NO.1339/DCIT.C-MURSHID ABAD/CIT(A)- 21/KOL/14-15, DATED 01.03.2016, WHICH IN TURN ARISE S OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER (AO) UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961, (HEREINAFTER REFERRED TO AS THE ACT ), DATED 27.11.2009. 2. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THA T THE ASSESSEE IS ENGAGED IN MANUFACTURING, REPAIRING AND TRADING OF BATTERY AND BATTERY PRODUCTS. THE ASSESSEE ALSO WORKS AS A COMMISSION A GENT. THE ASSESSEE FILED ITS E-RETURN OF INCOME ON 29.10.2007 DISCLOSING ITS TOTAL INCOME AT RS.NIL. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND THE AO FRAMED THE ASSESSMENT DISALLOWING INTEREST ON CC A/C RS.13,36,747/- AND TERM LOAN A/C RS.2,06,389/- U/S.43B(E) OF THE A CT. ITA NO.760/16 KEJRIWAL AUTO ELECTRIC ENGINEERING WORKS 2 3. AGGRIEVED FROM THE ORDER OF AO, THE ASSESSEE FIL ED AN APPEAL BEFORE THE LD. CIT(A), WHO HAS CONFIRMED THE ADDITI ONS MADE BY THE AO OBSERVING THE FOLLOWINGS :- OBSERVATION OF CIT(A) FOR GROUND NO.1 IT MAY BE NOTED THAT THERE WAS NO AUTO PENALTY ON THE WCTL INTEREST OF RS 5,43,973/-AND TERM LOAN INTEREST OF RS. 2,06, 386/- AS WOULD BE EVIDENT FROM THE COPIES OF BANK STATEMENTS SUBMITTE D HEREWITH. IN THE CASE OF CASH CREDIT LIMIT ALSO NO AUTO PENALTY WAS CHARGED IN SEPTEMBER AND OCTOBER 2006 AND THE AMOUNT OF PENALT Y WHEREVER CHARGED VARIED FROM RS. 5 TO RS.602 WITHOUT HAVING ANY LINKAGE TO THE QUANTUM OF INTEREST CHARGED. IN THE CASE OF PEN AL INTEREST IT IS ALWAYS LINKED TO SOME RATE AND THE AMOUNT OF SUCH P ENAL INTEREST CANNOT HAVE SUCH VARIATION. THE BANK LEVIES THE PEN ALTIES FOR DELAY IN SUBMISSION OF PERIODICAL RETURNS, STOCK STATEMENT A ND ANNUAL ACCOUNTS IN ORDER TO ENSURE THAT THE RETURNS ARE FI LED AND SUBMITTED IN TIME. WITHOUT PREJUDICE TO THIS, SIMPLY LEVYING OF PENALTY CANNOT CONCLUDE THAT INTEREST HAS NOT BEEN PAID BUT ACTUAL LY ACCOUNTED FOR ON PERUSAL OF THE BORROWINGS FROM BANKS, WHEN COMPA RED TO THE PRECEDING YEAR, IT WILL BE SEEN THAT THE BORROWINGS HAVE BEEN REDUCED IN THE CASE OF TERM LOAN AND WCTL WHEREAS I N THE CASE OF CASH CREDIT IT HAS INCREASED BY A SMALL AMOUNT OF R S. 50,000/-WHICH IS WITHIN THE SANCTION LIMIT. NATURE OF LOANS BORROWING AS ON 31.03.2006(RS.) BORROWING AS ON 31.03.2007(RS.) INCREASE/DECREASE( RS.) CASH CREDIT 49,44,010.93 49,94,189.93 (50179) WCTL 34,99,427.00 32,87,864.00 2,11,563 TERM LOAN 14,57,584.00 12,20,156.00 2,37,428 TOTAL 99,01,021.93 95,02,209.93 3,98,812 THE ABOVE FIGURES ARE AFTER PAYMENT OF INTEREST WHI CH THE BANK HAD CHARGED. LEADING TO A CONCLUSION THAT SUCH INTEREST HAS DULY BEEN PAID. ON PERUSAL OF THE BANK STATEMENTS IT WILL BE SEEN THAT THERE ARE VARIOUS CREDIT ENTRIES IN ALL THE ABOVE LOANS. IN T HE CASE OF WCTL AND TERM LOAN THERE ARE SPECIFIC CREDITS AGAINST INTERE ST CHARGED. IN ADDITION, THE DEBITS IN CASH CREDIT ACCOUNT WHICH I S A DEMAND LOAN TANTAMOUNT TO PAYMENTS SO LONG IT DOES NOT EXCEED T HE SANCTION LIMIT WHICH IN THIS CASE HAS NOT EXCEED THE SANCTION LIMI T WHICH IN THIS CASE HAS NOT EXCEEDED.' . THE AO HAS REPORTED 'THE AO CONCLUDED AFTER DISCUSS ING IN DETAILS THAT UNPAID INTEREST CANNOT BE ALLOWED DEBITED IN T HE P/L. A/C. AS PER PROVISION PRESCRIBED IN SECTION 43B(C) READ WITH EX PLANATION 3D AND ACCORDINGLY DISALLOWED RS.13,36,747/- AND RS. 2,06, 386/- CLAIMED AS INTEREST PAID BY THE ASSESSEE. ITA NO.760/16 KEJRIWAL AUTO ELECTRIC ENGINEERING WORKS 3 IN VIEW OF ABOVE AND THE MATERIAL AVAILABLE ON RECO RD, THE DISALLOWANCE MADE BY THE AO IS CONFIRMED AND APPEAL ON THIS GROUND IS DISALLOWED. OBSERVATION OF CIT(A) FOR GROUND NO.3 THE AO HAS REPORTED THAT 'IN THE COMPUTATION OF TOT AL INCOME FOR THE A.Y.2006-07 THE ASSESSEE ADDED RS. 3,92,164/- TO TH E NET PROFIT AS INADMISSIBLE U/S 40(A). BUT FOR THE ASSESSMENT YEAR 2007-08, THE ASSESSEE IN HIS SUBMISSION BEFORE LD. CIT(A)-XXXVI, KOLKATA HAS CLAIMED DEDUCTION OF EXACTLY THE SAME AMOUNT OF RS. 3.92,164/-. IN COURSE OF HEARING, NO DOCUMENTARY EVIDENCE IN SUPPO RT OF CLAIM FOR DEDUCTION 40(A) IS FURNISHED BY THE ASSESSEE. EVEN DURING THE COURSE OF INSTANT APPEAL PROCEEDING THE APPELLANT FAILED T O SUBSTANTIATE THE CLAIM AS MADE IN THE GROUNDS OF APPEAL. IN VIEW OF ABOVE AND THE MATERIAL AVAILABLE ON RECO RD, THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE CLAIM AND APPEAL ON THIS GROUND IS NOT ALLOWED. 4. NOT BEING SATISFIED WITH THE ORDER OF LD. CIT(A) , THE ASSESSEE IS IN FURTHER APPEAL BEFORE US AND HAS TAKEN THE FOLLOWIN G GROUNDS OF APPEAL :- (1) THAT THE COMMISSIONER OF INCOME TAX HAS ERRED BOTH ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, IN D ISALLOWING INTEREST ON CC A/C RS.13,36,747/- AND TERM LOAN A/C.RS.206389/- U/S.43B(E) (2) THAT THE CIT(A) HAS FURTHER ERRED LIKEWISE IN MAKING ADDITION OF RS.2,52,639/- U/S.40(A)(IA) OF THE I.T.ACT.1961. (3) THAT THE CIT(A) HAS FURTHER ERRED LIKEWISE, IN MAKING ADDITION OF RS.3,92,164/- U/S.40(A) OF THE I.T.ACT. 1961. 5. ALTHOUGH IN THIS APPEAL THE ASSESSE HAS RAISED T HREE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING THE MAIN GRIEVAN CE OF THE ASSESSE HAS BEEN CONFINED TO GROUND NO.1 AND GROUND NO.3. THE G ROUND NO.2 HAS NOT BEEN PRESSED BY THE ASSESSEE. 5.1 GROUND NO. 1 RAISED BY THE ASSESSE RELATES TO D ISALLOWANCE OF INTEREST U/S 43B (E) OF THE ACT, IN RESPECT OF CC A CCOUNT AT RS. 13,36,747/- AND TERM LOAN ACCOUNT RS.2,06,389/-. ITA NO.760/16 KEJRIWAL AUTO ELECTRIC ENGINEERING WORKS 4 5.2 LD. AR FOR THE ASSESSEE HAS SUBMITTED BEFORE U S THAT THE ASSESSE HAS PAID THE INTEREST OF RS.13,36,747/-. THE ASSESS E HAD BEEN PAYING THE INTEREST MONTHLY DURING ACCOUNTING YEAR 2006-07 REL EVANT TO THE ASSESSMENT YEAR 2007-08. THE LD AR FOR THE ASSESSE HAS PRODUCED BEFORE US THE DETAILS OF INTEREST PAID TO UCO BANK FOR CC ACCOUNT AND INTEREST PAID ON WORKING CAPITAL TERM LOAN (WCTL). THE SAME DETAILS WERE PRODUCED BY THE ASSESSE BEFORE LD AO AND LD CIT(A) BUT THEY DID NOT CONSIDER THE SAME. ASSESSEE ALSO PRODUCED BEFORE US THE INTEREST PAID ON TERM LOAN. THE BANK USED TO CHARGE THE PENAL INT EREST ON MONTHLY DELAY DONE BY THE ASSESSE WITHIN THE YEAR. BUT THE ASSESSE HAS PAID THE ENTIRE INTEREST WITHIN THE YEAR, THAT IS, UP TO MAR CH 31,2007 THEREFORE, THERE IS NO VIOLATION OF PROVISIONS OF SECTION 43B (E ) OF THE ACT 5.3. LD. DR FOR THE REVENUE HAS ALSO PRIMARILY RELI ED ON THE FINDINGS OF THE AO WHICH WE HAVE ALREADY NOTED IN OUR EARLIER P ARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 5.4. HAVING HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE SUBMI SSIONS OF THE ASSESSE, AS THE PROPOSITION CANVASSED BY LD. AR FOR THE ASSE SSEE ARE SUPPORTED BY THE FACTS NARRATED BY HIM ABOVE. AS LD. AR FOR THE ASSESSEE HAS RIGHTLY POINTED OUT THAT THE BANK USED TO CHARGE THE PENAL INTEREST ON MONTHLY DELAY DONE BY THE ASSESSE WITHIN THE YEAR. BUT THE ASSESSE HAS PAID THE ENTIRE INTEREST WITHIN THE YEAR, THAT IS, UP TO MAR CH 31,2007 THEREFORE, THERE IS NO VIOLATION OF PROVISIONS OF SECTION 43B (E ) OF THE ACT. THEREFORE, ITA NO.760/16 KEJRIWAL AUTO ELECTRIC ENGINEERING WORKS 5 WE ARE OF THE VIEW THAT ADDITION MADE BY THE AO AND CONFIRMED BY THE LD CIT(A) NEEDS TO BE DELETED. ACCORDINGLY, WE DELETE THE ADDITION. 6. THE THIRD GROUND RELATES TO ADDITION OF RS. 3,92 ,164/- U/S 40(A) OF THE I.T.ACT. 6.1 LD AR FOR THE ASSESSEE SUBMITTED BEFORE US THAT ASSESSE HAD PAID THE AMOUNT TO VARIOUS PERSONS AND DEDUCTED TDS UNDER SE CTION 194A AND 194H OF THE I.T.ACT, THE SO DEDUCTED TDS HAS BEEN P AID BY THE ASSESSE TILL MARCH 31,2006 THEREFORE, THE ASSESSE IS ENTITL ED TO CLAIM THE EXPENDITURE. 6.2 ON THE OTHER HAND, THE LD DR FOR THE REVENUE IS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER AND LD CIT (A). THE AO HAS REPORTED THAT IN THE COMPUTATION OF TOTAL INCOME F OR THE A.Y. 2006-07 THE ASSESSE ADDED RS. 3,92,164/- TO THE NET PROFIT AS I NADMISSIBLE U/S 40(A). BUT FOR THE ASSESSMENT YEAR 2007-08, THE ASSESSE IN HIS SUBMISSION BEFORE LD CIT(A)-XXXVI, KOLKATA HAS CLAIMED DEDUCTI ON OF EXACTLY THE SAME AMOUNT OF RS. 3,92,164/-. IN THE COURSE OF HEA RING, NO DOCUMENTARY EVIDENCE IN SUPPORT OF CLAIM FOR DEDUCTION U/S 40(A ) IS FURNISHED BY THE ASSESSE. EVEN DURING THE COURSE OF INSTANT APPEAL P ROCEEDINGS THE APPELLANT FAILD TO SUBSTANTIATE THE CLAIM AS MADE I N THE GROUNDS OF APPEAL. 6.3 HAVING HEARD THE RIVAL SUBMISSION, PURSED THE M ATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT IN T HE SUBMISSION OF THE ASSESSE, AS THE PROPOSITION CANVASSED BY THE LD AR FOR THE ASSESSE ARE SUPPORTED BY THE FACTS NARRATED BY HIM ABOVE. AS TH E LD. AR FOR THE ITA NO.760/16 KEJRIWAL AUTO ELECTRIC ENGINEERING WORKS 6 ASSESSEE EXPLAINED THAT TDS ON RS. 392163/- HAS ALR EADY BEEN PAID BY THE ASSESSEE, THEREFORE, THE ASSESSEE IS ENTITLED T O CLAIM THE EXPENDITURE. CONSIDERING THE FACTUAL POSITION, WE ARE OF THE VIE W THAT ADDITION MADE BY AO AND CONFIRMED BY LD CIT(A) NEEDS TO BE DELETED. ACCORDINGLY, WE DELETE THE ADDITION. THUS, THIS GROUND OF APPEAL IS ALLOWED. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23/02 /2017. SD/ - (A.T.VARKEY) SD/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; ! DATED 23/02/2017 ' $%&/PRAKASH MISHRA , 0 . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) % & , / ITAT, 1. / THE APPELLANT-KEJRIWAL AUTO ELECTRIC ENGG. WORKS 2. / THE RESPONDENT.-DCIT, MURSHIDABAD 3. 1 ( ) / THE CIT(A), KOLKATA. 4. 1 / CIT 5. 234 0056 , 56 , / DR, ITAT, KOLKATA 6. 478 / GUARD FILE. 2 0 //TRUE COPY//