THOMASKATACHAMANI DANIEL RAJ,CHENNAI V. ITO, NCW-15(1), CHENNAI

ITA 1355/CHNY/2024

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Mr. Thomaskatachamani Daniel Raj, a wholesale dealer and distributor of food products in Chennai, appealed against the order of the Learned Commissioner of Income Tax, Appeal, Addl./JCIT (A), Panaji, which confirmed the disallowance of wages and the addition of Specified Bank Notes (SBNs) deposited during the demonetization period. The Assessing Officer (AO) had initially disallowed 10% of the wages claimed and added Rs.3,52,000 as unexplained cash deposit under section 69A of the Income Tax Act. The Tribunal, after considering the increase in business turnover and the context of the wage payments, reduced the wage disallowance and removed the addition of SBNs, citing that these were already accounted for in the business turnover and accepted income.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 106955 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-10-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 07-05-2024
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SABITHA
• Assessee Lawyers: M.S.PANDIAN
• Keywords: Business income

Judgement Text

"आयकर अपीलीय अिधकरण, ‘ए’ \u0001यायपीठ, चे\tई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI \u0001ी एबी टी. वक , \u000bाियक सद\u0011 एवं एवं एवं एवं \u0001ी जगदीश, लेखा सद\f क े सम\u0015 BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1355/Chny/2024 िनधा\u000eरणवष\u000e/Assessment Year: 2017-18 Mr. Thomaskatachamani Daniel Raj, Plot No.18, 3rd Street Royal Avenue, Mettukuppam, Duraipakkam, Chennai – 600 097. v. The ITO, NCW-15(1), Chennai. [PAN: AHOPD 4550 B] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) अपीलाथ\u0016 क\u001a ओर से/ Appellant by : Mr.M.S.Pandian, CA \u0017\u0018यथ\u0016 क\u001a ओर से /Respondent by : Ms.Sabitha, JCIT सुनवाईक\u001aतारीख/Date of Hearing : 10.10.2024 घोषणाक\u001aतारीख /Date of Pronouncement : 06.12.2024 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax, Appeal, Addl./JCIT (A), (hereinafter in short \"the Ld.CIT(A)”), Panaji, dated 08.03.2024 for the Assessment Year (hereinafter in short \"AY”) 2017-18. ITA No.1355/Chny/2024 (AY 2017-18) Mr. Thomaskatachamani Daniel Raj :: 2 :: 2. The assessee is aggrieved by the action of the Ld.CIT(A) confirming (i) Rs.6,87,950/- [wages disallowed by the AO @10%], (ii) confirmation of Specified Bank Notes (SBNs) deposited during demonetization period to the tune of Rs.3,52,000/-. 3. Coming to the addition of Rs.6,87,950/-, brief facts are that the AO noted that assessee had filed his return of income (RoI) for AY 2017-18 on 06.01.2018 admitting an income of Rs.12,38,380/-. The case was selected for complete scrutiny and the AO noted that the assessee has booked expenditure incurred on wages to the tune of Rs.68,79,469/-. According to the AO, there was a steep rise in the expenditure when compared with that of the earlier year which was only to the tune of Rs.46,39,075/-. Therefore, he show caused the assessee ‘as to why’ 50% of the wages should not be disallowed. The assessee furnished relevant documents like staff attendance register and explained that increase in wages was due to the fact that wages had to be paid to temporary/casual workers for delivery of goods to dealers during peak seasons. The assessee explained that he was dealing in wholesale business of food products and was supplying various food products and recharge vouchers in the name of “TJ Marketing” which increased the wages this year. The AO didn’t accept the submissions of the assessee and was pleased to disallow 10% of the wages claimed and added Rs.6,87,950/-. ITA No.1355/Chny/2024 (AY 2017-18) Mr. Thomaskatachamani Daniel Raj :: 3 :: 4. Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) who was pleased to confirm the same. 5. We have heard both the parties and perused the material available on record. We note that the assessee is a wholesale dealer and distributor of food products, consumable goods, cosmetics, etc., in some parts of Chennai [around OMR, Duraipakkam, ECR and some areas in south Chennai]. The assessee supplies the goods to the retails shops with own man power. It was explained by the assessee that for payment of wages for loading, unloading and supply of goods, assessee incurred expenses, extra man power etc when the supply increased and paid more wages and the cost of man power also had increased every year. And that it is a common knowledge that the profit margin of the distributed food products is low compared to other segments. It is noted that the assessee has returned income of Rs.12,38,380/- and it noted that the total sales turnover this year was to the tune of Rs.14,12,87,137/- when compared with the turnover of AY 2016-17 to the tune of Rs.12,73,08,757/-. Thus, we note that there is 11% increase in sales whereas wages increased by 48% but the net profit was at 11%. Having noted so, we note that the cost inflation from AY 2016-17 increased to 4%. Considering all these factors, for the ends of justice and fair play, we estimate the disallowance @5% i.e. and restrict the disallowance to Rs.3,43,975/- in place of Rs.6,87,950/-. Thus, assessee gets a relief of Rs.3,43,975/-. ITA No.1355/Chny/2024 (AY 2017-18) Mr. Thomaskatachamani Daniel Raj :: 4 :: 6. Coming to the next addition of Rs.3,52,000/- in respect of the SBNs deposited during demonetization period, we note that the assessee had deposited cash during demonetization to the tune of Rs.23,89,000/-. The assessee submitted that its cash book had cash balance of Rs.24,54,255/- as on 08.11.2016. The AO noted that the assessee has deposited Rs.1000/- notes between 05.11.2016 to 21.11.2016 which comes to Rs.3,52,000/-, which was treated as unexplained u/s.69A of the Act. However, it was brought to our notice that the audited books of accounts of the assessee has not been rejected by the AO and he has accepted the sales turnover shown by the assessee to the tune of Rs.14,12,87,137/- which includes the SBNs to the tune of Rs.3,52,000/- and the assessee’s returned income of Rs.12,38,380/- has been accepted by the AO. In such a scenario, without finding any infirmity in the books/cash book/stocks as maintained by the assessee, and when assessee asserts that SBNs of Rs.3,52,000/- to be trade receipt, it can’t be added u/s.69A of the Act unless there is any evidence/material to show that assessee had some other source of income or assessee has made certain investments which is not the case of the AO. Therefore, when Rs.3,52,000/- (SBNs) is part of the total turnover of Rs.14,12,87,137/- the action of the AO to make separate addition of Rs.3,52,000/- u/s.69 of the Act tantamounts to ITA No.1355/Chny/2024 (AY 2017-18) Mr. Thomaskatachamani Daniel Raj :: 5 :: double addition which is not permissible under law. Therefore, we direct the deletion of the same. 7. In the result, appeal filed by the assessee is partly allowed. Order pronounced on the 06th day of December, 2024, in Chennai. Sd/- Sd/- (जगदीश) (JAGADISH) लेखा सद\f/ACCOUNTANT MEMBER (एबी टी. वक ) (ABY T. VARKEY) \u0001याियक सद\bय/JUDICIAL MEMBER चे\tई/Chennai, !दनांक/Dated: 06th December, 2024. TLN, Sr.PS आदेश क\u001a \u0017ितिलिप अ$ेिषत/Copy to: 1. अपीलाथ\u0010/Appellant 2. \u0011\u0012थ\u0010/Respondent 3. आयकरआयु\u0018/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\u0011ितिनिध/DR 5. गाड फाईल/GF "