SREE KAMAKHYA TEA COMPANY PVT. LTD.,KOLKATA V. ITO, WARD-4(4), KOLKATA

ITA 2429/KOL/2024

AI Insights

The case involves Sree Kamakhya Tea Company Pvt. Ltd., which appealed against the order of the CIT(A), NFAC, Delhi, concerning the assessment year 2016-17. The appeal was against the assessment order passed under section 144 of the Income Tax Act, 1961, by the ITO, Ward-4(4), Kolkata. The main issues in the appeal included the addition of Rs. 1,16,828 as undisclosed sales, Rs. 1,21,55,862 for bad debts written off, and Rs. 15,13,335 for low interest income. The CIT(A) had dismissed the appeal on technical grounds of delay without substantive consideration of these issues. The Tribunal, however, focused on the merits of the case, examining the validity of the additions made by the Assessing Officer and found them to be unjustified.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126022 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Other Referred Cases: T.R.F Ltd. Vs. CIT [2010] 323 ITR 397 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHUTOSH KUMAR
• Assessee Lawyers: SOUMITRA CHOUDHURY; PRANABESH SARKAR
• Keywords: Set aside; Business income; Bad and doubtful debts; Principle of natural justice; Liquidation
• Section: 144; 234B

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, KOLKATA [Before Shri Rajesh Kumar, AM] I.T.A. No. 2429/Kol/2024 Assessment Year: 2016-17 Sree Kamakhya Tea Company Pvt. Ltd. 44, Hastings Park, Alipore, Kolkata- 700027. (PAN: AAECS4245E) Vs. ITO, Ward-4(4), Kolkata Appellant Respondent Date of conclusion of Hearing 24.03.2025 Date of Pronouncement 22.04.2025 For the Assessee Shri Soumitra Choudhury, Advocate & Shri Pranabesh Sarkar, Advocate For the Revenue Shri Ashutosh Kumar, Sr. Dr ORDER The appeal filed by the assessee is against the order of Ld. CIT(A), NFAC, Delhi dated 08.11.2024 for AY 2016-17 arising out of assessment order passed u/s. 144 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) by ITO, Ward-4(4), Kolkata dated 21.12.2018. 2. The assessee has raised the following grounds of appeal: “1. For That on the facts and in circumstances of the case and in law, the order passed by the Ld. C.I.T.(A) on 08.11.2024 is completely arbitrary, unjustified and illegal. 2. For that on the facts and in circumstances of the case and in law the Hon'ble C.I.T.(A) gravely erred in dismissing the appeal on the purported technical ground of delay in filing, without due consideration of the crucial fact that the appellant was entirely unaware of the demand raised or the order passed by the Ld. Jurisdictional Assessing Officer, Ward-4( 4), Kolkata. The delay, if any, is non-existent or duly excusable, as the appeal was filed promptly upon obtaining the certified copy of the assessment order, thereby demonstrating bona fide conduct and due diligence on the part of the appellant. 3. For that on the facts and in circumstances of the case and in law the Hon'ble C.I.T.(A) gravely erred in dismissing the appeal solely on the technical ground of delay in filing, without duly considering or adjudicating upon the legal tenability of the case, thereby depriving the assessee of a fair opportunity to present the rightful claim and defense as enshrined under the principles of natural justice. 2 ITA No. 2429/Kol/2024 Sree Kamakhya Tea Co. P. ltd. AY 2016-17 4. For that on the facts and in circumstances of the case and in law the Hon'ble C.I.T.(A) did not consider the well-established principle of law that justice should not be denied due to technicalities, especially when substantial justice is at stake. 5. For that on the facts and in circumstances of the case and in law, the Hon'ble C.I.T.(A) was not justified in confirming the addition of Rs. 1,16,828/- as 8% of the total sale as undisclosed sale made by the Ld. Assessing Officer in assessment order u/s. 144 of the Income Tax Act, 1961 which is completely arbitrary, unjustified, illegal, bad in law and should be set aside. 6. For that on the facts and in circumstances of the case and in law the Hon'ble C.I.T.(A) was not justified in confirming the ad-hoc disallowance made by the Ld. Assessing Officer which is completely arbitrary, unjustified, illegal, bad in law and should be set aside. 7. For that on 'the facts and in circumstances of the case and in law, the Hon'ble C.I.T.(A) was not justified in confirming the addition of Rs. 1,21,55,862/- made by the Ld. Assessing Officer in assessment order u/s. 144 of the Income Tax Act, 1961 on account of bad debt written off which is completely arbitrary, unjustified, illegal, bad in law and should be set aside. 8. For that on the facts and in circumstances of the case and in law, the Hon'ble C.I.T.(A) was not justified in confirming the addition of Rs. 15,13,335/- made by the Ld. Assessing Officer in assessment order u/s. 144 of the Income Tax Act, 1961 on account of low interest income which is completely arbitrary, unjustified, illegal, bad in law and should be set aside. 9. For that the charging interest of Rs. 3,48,909 u/s 234B of the Income Tax Act, 1961 is completely arbitrary, unjustified and illegal. 10. For that the appellant reserves the right to adduce any further ground or grounds, if necessary, at or before the hearing of the appeal.” 3. Ground nos. 1, 2, 3 and 4 are general in nature and need no specific adjudication. 4. The issue in ground no. 5 is against the confirmation of addition of Rs.1,16,828/- by Ld. CIT(A) as made by the Assessing Officer by applying 8% of the gross profit on total sale as undisclosed sale made by the assessee in assessment order u/s. 144 of the Act. 5. The facts in brief are that the assessee filed its return of income on 22.01.2017 declaring nil income. The assessee is engaged in the business of cultivation, manufacturing and sale of tea. The case of the assessee was selected for scrutiny through CASS and statutory notice along with questionnaire was duly issued and served on the assessee through ITBA which were not complied with and finally the Assessing Officer framed the assessment by making three additions namely, (i) by applying 8% on total sales treating the same as undisclosed sale thereby making addition of Rs.1,16,828/-; (ii) Rs.1,21,55,862/- on account of bad debts written off and (iii) Rs.15,13,335/- on account of low interest income declared 3 ITA No. 2429/Kol/2024 Sree Kamakhya Tea Co. P. ltd. AY 2016-17 by the assessee. In the appellate proceedings, the Ld. CIT(A) dismissed the appeal in limine by not condoning the delay. 6. After hearing the rival contentions and perusing the material available on record, we find that so far as the issue of addition of Rs.1,16,828/- is concerned, we observe that the Assessing Officer just on the estimation basis applied 8% on the undisclosed sale of Rs.14,60,344/- and made the above addition. However, on the other hand, we note that the assessee is a company whose accounts are duly audited by the auditor and the assessee has suffered huge loss of Rs.2,24,00,451/- during the year. The Assessing Officer has not even stated as to from where this figure of Rs.14,60,344/- was taken. The Assessing Officer just computed the suppressed sale by taking the cash in hand on 31.03.2015 at Rs.2,69,387/- and after reducing the same from cash in hand from 31.03.2016 i.e. Rs.17,29,131/- computed the difference of Rs.14,60,344/- and treated the same as suppressed sale which in our opinion, is grossly wrong which the Ld. CIT(A) has simply confirmed. In our opinion, there was no material to estimate the sales which is totally wrong and cannot be accepted. Accordingly, we set aside the order of Ld. CIT(A) and direct the Assessing Officer to delete the addition. 7. So far as the writing off of bad debts of Rs.1,21,55,862/- is concerned, we note that the assessee in the P&L Account has written off the debt which in our opinion, is sufficient to claim the deduction. We observe from page 131 of the paper book which is the details of bad debts written off by the assessee in respect of three parties viz., Kanoi Agro Tech Limited Rs.1,18,36,000/- as the company has gone into liquidation in FY 1998-99, The Buxa Dooars Tea Co. Pvt. Ltd. Rs.3,16,600/- as the company has gone into liquidation in FY 2003-04 and Hastings Park Estates Ltd. Rs.3,262/- outstanding since last five years which the company has written off. From page 74 of the paper book, we observe that the assessee’s assets have been sold by Punjab National Bank under Securitization Act from whom the assessee has borrowed funds and it was sold in favour of M/s. Suntok Tea Co. LLP and certificate of sale from Punjab National Bank, Asset Recovery Management Fund is attached . The case of the assessee also finds support from the decision of Hon’ble Apex Court in the case of T.R.F Ltd. Vs. CIT [2010] 323 ITR 397 (SC) wherein the Hon’ble Apex Court has held that it is not necessary for the assessee to establish that debt in fact has become irrecoverable it is enough 4 ITA No. 2429/Kol/2024 Sree Kamakhya Tea Co. P. ltd. AY 2016-17 that bad debt is written off as irrecoverable in the account of the assessee. Therefore, we respectfully following the decision of the Hon’ble Apex Court set aside the order of the Ld. CIT(A) and direct the Assessing Officer to delete the addition. 8. The third issue in respect of making the addition of Rs.15,13,335/- which was made by the Assessing Officer on account of interest income declared by the assessee. We observe from page 134 of the paper book that the assessee has given loan to M/s. Abcon Properties Pvt. Ltd. of Rs.8,17,500/- on which interest has been provided of Rs.1,35,000/- in two instalments as on 31.06.2015 Rs.67,500/- and on 31.03.2016 Rs.65,000/- which have been shown in the books of account which are duly audited by the auditor. The Assessing Officer took the figure from the Balance Sheet as on 31.03.2016 and applied interest thereon whereas these were only the business advances given by the assessee without taking into account the advances from the customers received of Rs.1,75,27,456/-. Therefore, considering these facts and circumstances, the addition merely on the basis of presumption and assumption cannot be sustained and accordingly, we set aside the order of ld CIT(A) and the AO is directed to delete the addition. 9. In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 22nd April, 2025 Sd/- (Rajesh Kumar) Accountant Member Dated: 22nd April, 2025 JD, Sr. PS Copy of the order forwarded to: 1. Appellant–Sree Kamakhya Tea Co. Pvt. Ltd. 2. Respondent – ITO, Ward-4(4), Kolkata 3. CIT(A), NFAC, Delhi 4. Pr. CIT 5. DR, ITAT, Kolkata, True Copy By Order Assistant Registrar ITAT, Kolkata Bench, Kolkata "