M/s M. K. Amber Wear, Kolkata V. ITO, WD-53(3), KOLKATA, Kolkata

ITA 955/KOL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5140 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 29-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 40A(3)

Judgement Text

I.T.A. NO. 955/KOL./2015 ASSESSMENT YEAR: 2010-2011 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 955/KOL/ 2015 ASSESSMENT YEAR: 2010-2011 M/S. M.K. AMBER WEAR,.............................. ...............................APPELLANT C/O. S.L. KOCHAR, ADVOCATE, 86, CANNING STREET, KOLKATA-700 001 [PAN : AAJFM 2151 R] -VS.- INCOME TAX OFFICER,................................ .................................RESPONDENT WARD-53(3), KOLKATA, 2, GARIAHAT ROAD (SOUTH), KOLKATA APPEARANCES BY: SHRI ANIL KOCHAR, ADVOCATE, FOR THE ASSESSEE SHRI NILOY BARAN SOM, JCIT, SR. D.R., FOR THE DEPAR TMENT DATE OF CONCLUDING THE HEARING : DECEMBER 15, 2015 DATE OF PRONOUNCING THE ORDER : JANUARY 06, 2016 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-7, KOLKATA DATED 25.05.2015 FOR THE ASSESSMENT YEAR 2010-11. 2. GROUNDS NO. 1 & 2 RAISED BY THE ASSESSEE IN THIS APPEAL INVOLVE A COMMON ISSUE RELATING TO THE DISALLOWING OF RS.2,80 ,230/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPE ALS) UNDER SECTION 40A(3) ON ACCOUNT OF ELECTRICITY CHARGES PAID IN CA SH. 3. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF READYMA DE GARMENTS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY IT ON 21.09.2010 DECLARING TOTAL INCOME OF RS.6,12,230/-. DURING THE COURSE OF I.T.A. NO. 955/KOL./2015 ASSESSMENT YEAR: 2010-2011 PAGE 2 OF 6 ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSES SING OFFICER THAT THE ASSESSEE HAS PAID THE FOLLOWING AMOUNTS TOWARDS ELE CTRICITY CHARGES IN CASH IN EXCESS OF RS.20,000/-:- DATE PAYMENTS MADE TO CESC LTD. AMOUNT 30.04.2009 - DO - RS. 51,240/ - 30.05.2009 - DO - RS. 46,540/ - 30.06.2009 - DO - RS. 40,520/ - 31.07.2009 - DO - RS. 87,360/ - 28.08.2009 - DO - RS. 54,530/ - TOTAL RS.2,80,230/ - THE ASSESSEE, THEREFORE, WAS CALLED UPON BY THE ASS ESSING OFFICER TO EXPLAIN AS TO WHY THE ABOVE PAYMENTS MADE IN CASH T OWARDS ELECTRICITY CHARGES SHOULD NOT BE DISALLOWED UNDER SECTION 40A( 3) OF THE ACT READ WITH RULE 6DD OF THE INCOME TAX RULES. THE ASSESSEE , HOWEVER, DID NOT OFFER ANY EXPLANATION IN THIS MATTER AND, THEREFORE , THE ASSESSING OFFICER PROCEEDED TO MAKE A DISALLOWANCE OF RS.2,80,230/- U NDER SECTION 40A(3) OF THE ACT. 4. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U NDER SECTION 40A(3) WAS CHALLENGED BY THE ASSESSEE IN APPEAL FIL ED BEFORE THE LD. CIT(APPEALS) AND THE FOLLOWING SUBMISSION WAS MADE BY THE ASSESSEE IN WRITING IN SUPPORT OF ITS CASE THAT THE DISALLOWANC E MADE BY THE ASSESSING OFFICER UNDER SECTION 40A(3) WAS NOT MADE SUSTAINABLE:- GROUND NO. 4CHALLENGES THE ACTION OF THE A. 0. IN MAKING DISALLOWANCE OF RS.2,80,230/- WHICH IS PART OF THE TOTAL ELECTRICITY EXPENSES CLAIMED BY THE APPELLANT. THES E PAYMENTS HAVE BEEN MADE IN CASH TO THE CALCUTTA ELECTRIC SUP PLY CORPORATION. THESE ARE SOME PAYMENTS IN CASH OUT OF THE TOTAL ELECTRICITY EXPENSES AMOUNTING TO RS.6,,63,140/- AN D IT WAS NECESSITATED BECAUSE OF THE URGENCY IN PAYMENTS OF THE DUES IN TIME WHICH WAS MADE IN CASH AS OTHERWISE IT WOULD H AVE RESULTED IN NON-SUPPLY OF THE ELECTRICITY WHICH WOULD RESULT INSTALLING MANUFACTURING PROCESS OF THE APPELLANT. THE APPELLA NT IS IN THE BUSINESS OF MANUFACTURING OF GARMENTS HAVING SALES OF RS.2.15 CRORES. PAYMENT OF ELECTRICITY IS MADE IN CASH WHIC H IS ON THE LAST DATE OF PAYMENT TO CESC AND WAS THUS NECESSITA TED. FURTHER, I.T.A. NO. 955/KOL./2015 ASSESSMENT YEAR: 2010-2011 PAGE 3 OF 6 CONTENTION OF THE APPELLANT IS THAT THE CALCUTTA EL ECTRIC SUPPLY CORPORATION IS ASSESSED TO TAX AND ALL THESE RECEIP TS ARISING FROM SUPPLY OF ELECTRICITY BY THIS COMPANY TO THE APPELL ANT FORM PART OF THEIR INCOME AND SINCE THE PAYMENTS MADE BY THE APPELLANT TO CALCUTTA ELECTRIC SUPPLY CORPORATION ARE ALSO EMBED DED IN THE GROSS RECEIPTS BY THE SAID COMPANY, PROVISION OF SE C.40A(3) WOULD NOT BE STRICTLY ATTRACTED AND HENCE THE DISAL LOWANCE MADE BY THE A.O. IS NOT WARRANTED. THERE IS NO DOUBT ABO UT THE PAYMENTS MADE BY THE APPELLANT FOR USE OF ELECTRICI TY WHICH IS NECESSARILY FOR THE PURPOSE OF THE BUSINESS. IT MAY BE A CASE OF A TECHNICAL LAPSE BUT CANNOT BE CONSTRUED AS A VIOLAT ION OF THE PROVISIONS OF SEC.40A(3). 5. THE LD. CIT(APPEALS) DID NOT FIND MERIT IN THE A BOVE SUBMISSION MADE BY THE ASSESSEE. ACCORDING TO HIM, THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO EXPLAIN AS TO HOW THE IMPUGNED PAYM ENTS IN CASH ON ACCOUNT OF ELECTRICITY CHARGES WERE MADE IN THE EXC EPTIONAL CIRCUMSTANCES SPECIFIED IN THE RULE 6DD. HE, THEREF ORE, CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 40A(3) OF THE ACT. 6. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS PER THE S PECIFIC PROVISIONS OF SUB-SECTION (3) OF SECTION 40A, WHERE THE ASSESSEE INCURS AN EXPENDITURE IN RESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYME NTS MADE TO A PERSON IN A DAY OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A CHEQUE OR ACCOUNT PAYEE BANK DRAFT EXCEEDS RS.20,000/-, NO DE DUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. AS PER THE FIRST PROVISO TO SECTION 40A(3), NO SUCH DISALLOWANCE, HOWEVER, SHALL BE MAD E IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES, AS MAY BE PRESCRIBED, HAV ING REGARD TO THE NATURE AND EXTENT OF AVAILABLE FACILITIES, AVAILABL E CONDITIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. SUCH CASES A ND CIRCUMSTANCES ARE PRESCRIBED IN RULE 6DD OF INCOME TAX RULES, 1962 AN D THE ASSESSEE IN THE PRESENT CASE HAS FAILED TO ESTABLISH THAT THE IMPUG NED PAYMENTS MADE BY IT IN CASH TOWARDS ELECTRICITY CHARGES ARE COVERED BY SUCH CIRCUMSTANCES AS PRESCRIBED IN RULE 6DD EITHER BEFORE THE AUTHORI TIES BELOW OR EVEN BEFORE ME. I, THEREFORE, FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE I.T.A. NO. 955/KOL./2015 ASSESSMENT YEAR: 2010-2011 PAGE 4 OF 6 IMPUGNED ORDER OF THE LD. CIT(APPEALS) CONFIRMING T HE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40A(3). THE SAME IS, THEREFORE, UPHELD ON THIS ISSUE DISMISSING GROUNDS NO. 1 & 2 O F THE ASSESSEES APPEAL. 7. THE ISSUE INVOLVED IN GROUND NO. 3 RELATES TO TH E DISALLOWANCE OF RS.72,172/- MADE BY THE ASSESSING OFFICER AND CONFI RMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF FOREIGN TRAVEL EXPENSES CLAIMED BY THE ASSESSEE. 8. IN THE PROFIT & LOSS ACCOUNT FILED ALONG WITH IT S RETURN OF INCOME, A SUM OF RS.2,25,413/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF FOREIGN TRAVEL EXPENSES. ON SCRUTINY OF THE FOREIGN TRAVEL EXPENSES, THE ASSESSING OFFICER FOUND THAT A SUM OF RS.72,172/- CLAIMED BY THE ASSESSEE ON ACCOUNT OF FOREIGN TRAVEL EXPENSES WAS IN RELATION TO THE FOREIGN TRAVEL UNDERTAKEN BY ONE SHRI IMRAN HUSSAIN LASKAR, WHO WA S NEITHER A PARTNER NOR AN EMPLOYEE OF THE ASSESSEE-FIRM. HE, THEREFORE , DISALLOWED THE CLAIM OF THE ASSESSEE FOR FOREIGN TRAVEL EXPENSES TO THE EXTENT OF RS.72,172/-. 9. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE DI SALLOWANCE MADE BY THE ASSESSING OFFICER ON THIS ISSUE ON THE GROUND T HAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO PRODUCE ANY EVIDENCE TO ESTABLISH THAT THE EXPENSES ON THE FOREIGN TRAVEL UNDERTAKEN BY SHRI I MRAN HUSSAIN LASKAR WERE INCURRED IN CONNECTION WITH ITS BUSINESS. 10. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT SHRI IMRAN HUSSAIN LASKAR IS NEITHER A PARTNER NOR THE E MPLOYEE OF THE ASSESSEE-FIRM. ALTHOUGH THE LD. COUNSEL FOR THE ASS ESSEE HAS SUBMITTED THAT HE IS A MEMBER OF THE PARTNERS FAMILY AND, TH EREFORE, IS INVOLVED IN THE FAMILY BUSINESS, THERE IS NOTHING BROUGHT ON RE CORD TO SUPPORT AND SUBSTANTIATE THIS CLAIM. MOREOVER, AS RIGHTLY OBSER VED BY THE LD. CIT(APPEALS) IN HIS IMPUGNED ORDER, THERE IS NO EVI DENCE WHATSOEVER I.T.A. NO. 955/KOL./2015 ASSESSMENT YEAR: 2010-2011 PAGE 5 OF 6 FURNISHED BY THE ASSESSEE TO ESTABLISH THAT THE FOR EIGN TRAVEL EXPENSES INCURRED ON THE TOUR UNDERTAKEN BY SHRI IMRAN HUSSA IN LASKAR ARE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS. I, THEREFORE, FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(APPE ALS) CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THIS ISSUE AND UPHOLDING THE SAME, I DISMISS GROUND NO. 3 OF THE ASSESSEES APPEAL. 11. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 4 R ELATING TO THE DISALLOWANCE OF RS.18,803/- MADE BY THE ASSESSING O FFICER AND CONFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF REPAIRS AND M AINTENANCE EXPENSES, IT IS OBSERVED THAT THIS DISALLOWANCE IS MADE FOR I NVOLVEMENT OF UNVERIFIABLE ELEMENT IN THE EXPENSES INCURRED BY TH E ASSESSEE ON REPAIRS AND MAINTENANCE. A PERUSAL OF THE ORDER OF THE ASSE SSING OFFICER AS WELL AS THAT OF THE LD. CIT(APPEALS), HOWEVER, SHOWS THA T NOT A SINGLE INSTANCE HAS BEEN POINTED OUT BY THEM TO SHOW UNVERIFIABLE E LEMENT INVOLVED IN THE EXPENSES CLAIMED BY THE ASSESSEE ON REPAIRS AND MAINTENANCE. IN MY OPINION, THE DISALLOWANCE MADE OUT OF REPAIRS AND M AINTENANCE EXPENSES ON AD HOC BASIS WITHOUT POINTING OUT ANY INSTANCE OF UNVERIF IABLE ELEMENT IS NOT SUSTAINABLE AND DELETING THE SAME, I ALLOW G ROUND NO. 4 OF THE ASSESSEES APPEAL. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 06, 2016. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 6 TH DAY OF JANUARY, 2016 COPIES TO : (1) M/S. M.K. AMBER WEAR, C/O. S.L. KOCHAR, ADVOCATE, 86, CANNING STREET, KOLKATA-700 001 (2) INCOME TAX OFFICER, WARD-53(3), KOLKATA, 2, GARIAHAT ROAD (SOUTH), KOLKATA I.T.A. NO. 955/KOL./2015 ASSESSMENT YEAR: 2010-2011 PAGE 6 OF 6 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-7, KOLKAT A (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.