SHARAD KUMAR SINGH,KOLKATA V. ACIT, CIR. 37(1), KOLKATA

ITA 692/KOL/2024

AI Insights

This case involves an appeal by Sharad Kumar Singh against the orders of the National Faceless Appeal Centre, Delhi, concerning the assessment year 2013-14. The primary issues revolved around disallowances made by the AO and affirmed by the CIT(A), including disallowed interest on bank loans, non-deduction of tax at source on payments to a non-resident entity, and disallowances on cash purchases and commissions paid to relatives. The Tribunal examined each issue in light of relevant legal provisions and precedents, ultimately finding in favor of the assessee on most grounds.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 776447 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2025
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 04-04-2024
• Other Referred Cases: CIT Vs. Reliance Utilities and Power Ltd., CIT Vs. HDFC Bank Ltd., SA Builders vs. CIT, Radhasoami Satsang, Saomi Bagh, Agra vs CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAPIL MONDAL
• Assessee Lawyers: SUNIL SURANA
• Keywords: Set aside; Corroborative evidences; Bogus purchase; TDS; Residential status; Bogus
• Section: 40A(3); 40(a)(ia)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No. 692/KOL/2024 (Assessment Year: 2013-14) Sharad Kumar Singh 10A, Norode Behari Mullick road, Kolkata-700006, West Bengal Vs. ACIT, Circle-3(1), Income Tax Office 3, Government Place, West Bengal-700001 (Appellant) (Respondent) PAN No. ALQPS3842K Assessee by : Shri Sunil Surana, AR Revenue by : Shri Kapil Mondal, DR Date of hearing: 22.07.2025 Date of pronouncement: 17.09.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 05.02.2024 for the AY 2013-14. 2. The issue raised in ground no.1 is against the conformation of disallowance of interest by the ld. CIT (A) as made by the ld. AO of ₹6,54,236/- on account of interest paid to bank. 2.1. The facts in brief are that during the assessment proceedings, the ld. AO found that assessee has taken loan of ₹1.86 crores on which interest of ₹18.17 lacks was paid. Since, the assessee paid Rs. 68.00 lacs advances to various concerns free of interest and therefore, accordingly, the ld. AO disallowed the Printed from counselvise.com Page | 2 ITA No. 692/KOL/2024 Sharad Kumar Singh; A.Y. 2013-14` interest attributable to advancing of interest free money to various concerns which comes to ₹6,54,236/-. The ld. CIT (A) affirmed the order of the ld. AO in the appellate proceedings. 2.2. After hearing the rival contentions and perusing the materials available on record, we find that these advances were given for business purposes only and no diversion of funds have ever taken place. We also note that assessee had more than sufficient funds to make the advances as is evident from the balance sheet filed at page no.12 of the Paper Book. Therefore, the case of the assessee is squarely covered by the decision of the Bombay High Court in case of CIT Vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 and CIT Vs. HDFC Bank Ltd., in ITA No. 330 of 2012 vide order dated 23.07.2014, wherein it has been held that if the interest free funds available with the assessee are more than the interest free loans given then no disallowance is called for. Therefore, we set aside the order of the ld. CIT (A) and direct the ld. AO to delete the addition. Hence, the appeal of the assessee in ground no.1 is allowed. 3. The issue raised in ground no.2 is against the confirmation of disallowance as made by the ld. AO u/s 40(a)(ia) of the Act for non- deduction of tax at source of ₹2,01,804/- paid to non-resident M/s Johnson matthey Noble Export who was non-resident having no PE in India and also no works were carried out in India. 3.1. The facts in brief are that the assessee paid to M/s Johnson matthey Noble Export a sum of ₹2,01,804/-, who was the non- resident of India and also have no any PE in India. No work was carried out in India and payment was also made in foreign currency. No TDS was deducted on the said payment. During the Printed from counselvise.com Page | 3 ITA No. 692/KOL/2024 Sharad Kumar Singh; A.Y. 2013-14` course of assessment proceedings, the ld. AO noted that since the assessee has not deducted the TDS at source, the amount was liable to tax in terms of Section 40(a)(ia) of the Act and same was added to the income of the assessee. 3.2. In the appellate proceedings, the ld. CIT (A) affirmed the order of the ld. Assessing Officer. 3.3. After hearing the rival contentions and perusing the materials available on record, we find that since the recipient of the money is non-resident and having no PE in India and also no work was carried out in India. Besides, the payment was made in foreign currency. Then the provisions of Section 195 of the Act are not applicable and accordingly, we set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. Ground no.2 is allowed. 4. The issue raised in ground no.3 is against the confirmation of addition by the ld. CIT (A) as made by the ld. AO by disallowing 20% of the cash purchase made during the year amounting to ₹23,56,486/-. 4.1. The facts in brief are that the ld. AO during the course of assessment proceeding disallowed 20% of the cash purchases made during the year, whereby making disallowance of ₹23,56,486/-, simply to protect the interest of the Revenue. The ld. AO has not recorded any finding as to the unreasonable profit or recorded any finding as to the bogus purchases. The total purchases of the assessee were more than 26.00 crores and the total cash payments were only 1.17 crores which is less than 5% of the total purchases and also there was no purchase exceeding Printed from counselvise.com Page | 4 ITA No. 692/KOL/2024 Sharad Kumar Singh; A.Y. 2013-14` the specified limit u/s 40A(3) of the Act. Therefore, the addition made by the ld. AO was just on estimated basis which was affirmed by the ld. CIT (A). 4.2. After hearing the rival contentions and perusing the materials available on record, we find that there was no basis given by the ld. AO to make these disallowances. The disallowance to protect the interest of the Revenue on estimated basis has no unsustainable in law. Therefore, the addition cannot be sustained. Accordingly, we set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. Ground no.3 is allowed. 5. The issue raised in ground no.4 is against the confirmation of disallowance by the ld. CIT (A) as made by the ld. AO equal to 50% paid to the relatives. 5.1. During the year the assessee paid commission to 4 relatives for rendering services in the business of the assessee. The ld. AO found that the payments were made to the related parties and accordingly, disallowed 50% of the said commission and added the same to the return income of the assessee. Similar commission was also paid in the immediately preceding assessment year which was also added by the ld. AO but allowed by the ld. CIT (A) by directing the ld. AO to delete the disallowance. Copy of the appellate order is available at page no.55 of the Paper Book. The ld. AO disallowed the said commission without making any comparative analysis as to unreasonableness of the amount paid. Therefore, the sum disallowed by the ld. AO on the ground that it was paid to the related parties was not a ground for making disallowance when Printed from counselvise.com Page | 5 ITA No. 692/KOL/2024 Sharad Kumar Singh; A.Y. 2013-14` same is not shown to be unreasonable having record to the similar comparable cases. It is for the assessee to decide which expenses to be incurred for the business of the assessee and the AO cannot sit on the armchair of the businessman to decide how much is reasonable and how much is not reasonable and unless any comparable are brought on record to show the unreasonableness of the expenses to record. The case of the assessee is covered by the decision of Hon'ble Apex Court in the case of SA Builders reported in 288 ITR 1 (SC). Ground no.4 is allowed. 6. Ground no.5 is against the order of ld. CIT (A) confirming the disallowance as made by the ld. AO of 25% of the assembling charges on estimated basis. 6.1. After hearing the rival contentions and perusing the materials available on record, we find that during the course of assessment proceedings, the ld. AO found that assessee has incurred the assembling charges of ₹8,00,000/-, for which the bills, vouchers were not produced. The said expenses were paid to the related parties and accordingly, 50% of the expenses were disallowed and added to the income of the assessee. 6.2. In the appellate proceedings, the ld. CIT (A) restricted the disallowance to 25% of the total expenses, thereby deleting ₹4 lacs and sustained the remaining ₹4 lacs. The said expenses are being constantly incurred from year-to-year basis and were not even disallowed during scrutiny assessment in the preceding assessments. A sample copy of the assessment order is enclosed at page no.4 to 37 of the Paper Book. Accordingly, we set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. Hence, ground no.5 is allowed. Printed from counselvise.com Page | 6 ITA No. 692/KOL/2024 Sharad Kumar Singh; A.Y. 2013-14` 7. Ground no. 6, is not pressed, hence, dismissed. 8. Ground No.7, is against the confirmation of disallowance as made by the ld. AO nearly 50% of the usage of gold in the manufacturing process amounting to ₹24,67,500/- on estimated basis. 8.1. The facts in brief are brief are that during the assessment proceedings the ld. AO observed that the assessee has debited huge expenditure towards high value metal charges like gold, etc., for which assessee could not submit supporting evidences. Accordingly, the ld. AO disallowed ₹49,35,000. 8.2. In the appellate proceedings, the ld. CIT (A) restricted the disallowance to 50%, which comes to 24,57,500/-. 8.3. After hearing the rival contentions and perusing the materials available on record, we find that similar disallowance was made in the preceding assessment year also which has been deleted by the ld. CIT (A) in Para no.7.3 of page no.14 of the appellate order which is available at page no. 51 of the Paper Book. Accordingly, maintaining the consistency as there is no change of facts and circumstances of the present case, we are inclined to set aside the order of ld. CIT (A) and direct the ld. AO to delete the disallowance by following the decision of Hon'ble Apex court in the case of Radhasoami Satsang, Saomi Bagh,Agra vs CIT 1991 (1992) 193 ITR 321 (SC). Hence, ground no.7 is allowed. 9. The issue raised in ground no.8 is against the confirmation of disallowance by the ld. CIT (A) as made by the ld. AO on estimated basis at the rate of 15% in respect of car expenses. Printed from counselvise.com Page | 7 ITA No. 692/KOL/2024 Sharad Kumar Singh; A.Y. 2013-14` 9.1. After hearing the rival contentions and perusing the materials available on record, we find that the disallowance has been made for the reason that assessee has not maintained log book. We note that the assessee has maintained regular books of accounts and the ld. AO has not pointed out any defect or deficiency therein. In these circumstances, we do not find any reason to make the disallowance on estimated basis. Accordingly, we set aside the order of ld. CIT (A) and directed the ld. AO to delete the disallowance. Hence, ground no.8 is allowed. 10. In the result, the appeal of the is partly allowed. Order pronounced in the open court on 17.09.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated:17.09.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "