YOUTH POTENT POTATION,PURBA MEDINIPUR V. INCOME TAX OFFICER WARD 27(1) HALDIA, HALDIA

ITA 1382/KOL/2024

AI Insights

The case involves Youth Potent Potation, a firm engaged in retail/trading of liquor, appealing against the orders of the National Faceless Appeal Centre, Delhi, for the Assessment Year 2015-16. The primary issues in the appeal included the disallowance of partners' salaries, certain staff welfare expenses, accounting charges, and donation expenses. The Tribunal examined each ground of appeal, considering the partnership deed, the nature of expenses, and the lack of supporting evidence for some disallowances. The Tribunal's decision emphasized the need for proper substantiation of disallowances and adherence to the provisions of the Income Tax Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 24907 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHUTOSH KUMAR
• Assessee Lawyers: SIDDHARTH AGARWAL
• Keywords: Set aside; Corroborative evidences; TDS
• Section: 40(b); 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A(SMC)” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM ITA No.1382/KOL/2024 (Assessment Year:2015-16) Youth Potent Potation C/o Atin Das Advocate DaharpurTamlukPurba Medinipur, Purba Medinipur, West Bengal 721636 Vs. Income Tax Officer Ward 27(1) Haldia, Haldia Purba Medinipur, Haldia, West Bengal-721102 (Appellant) (Respondent) PAN No. AAAFY3860G Assessee by : Shri Siddharth Agarwal, AR Revenue by : Shri Ashutosh Kumar, DR Date of hearing: 25.03.2025 Date of pronouncement : 01.04.2025 O R D E R 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 04.04.2024 for the AY 2015-16. 02. At the outset, I observe from the appeal folder that there is a delay of 20 days in filing the appeal for which the condonation petition is filed. 03. After perusing the contents of the condonation petition and hearing both the parties, I am quite convinced that the reasons for delay are bonafide, genuine and sufficient and therefore, the delay is condoned and the appeal is admitted for adjudication. 04. The issue raised in ground no. 1 is against the confirmation of addition of ₹3,81,115/- by the ld. CIT (A) as disallowed by the ld. AO u/s 40(b) of the Act. Page | 2 ITA No.1382/KOL/2024 Youth Potent Potation; A.Y. 2015-16 05. After hearing the rival contentions and perusing the materials available on record I find that the ld. AO has disallowed the partners salary on the ground that the assessee could not prove whether all the 7 partners were working partners. The assessee firm is engaged in the business of retail/ trading of liquor in the name and style of M/s Youth Potent Potation. The inspector was deputed on 08.12.2017 to visit the business premises and verify the role/ business activities of the partners in the partnership firm but nothing conclusive was found. Finally, the AO allowed the salary of two partners only and disallowed the remaining salary of 5 partners and added the same to the income of the assessee. 06. I have perused the partnership deed and find that the salary paid to the partners was in consonance with the deed of partnership. The ld. CIT (A) affirmed the order of the ld. AO without giving any reasonings thereon. In our considered opinion the salary to partners has to be decided by the partners and has to be authorized by the deed of partnership subject to the overall limit as prescribed by section 40(b) of the Act. Accordingly, I am not in agreement with the conclusion drawn by the ld. CIT (A) and consequently, the order of ld. CIT (A) is set aside and the AO is directed to delete the disallowance of ₹3,81,115/-. The ground is accordingly allowed. 07. The issue raised in ground no.2, is against the confirmation of disallowance of ₹1,33,239/- by ld. CIT (A) as made by the ld. AO on account of salary & bonus and staff welfare expenses. 08. The facts in brief are that the ld. AO during the course of assessment proceedings called for the details of major expenses such as salary and bonus of ₹4,20,000/-, Carriage Outward of ₹1,24,545/-, staff welfare of ₹1,12,957/-, for which the details were produced by the Page | 3 ITA No.1382/KOL/2024 Youth Potent Potation; A.Y. 2015-16 assessee. According to the ld. AO, the assessee has not produced any details of salary, staff welfare expenses and accordingly, 25% of the total of both the expenses were disallowed. 09. Similarly, the ld. CIT (A) confirmed the same on the ground that no supporting evidences were found. 010. In our opinion the disallowance made by the ld. AO on estimation basis cannot be sustained and so the order passed by the ld. CIT (A) upholding the order of Assessing Officer. In our opinion either the total salary and bonus, staff welfare expenses could have been disallowed for treating the same as not genuine or otherwise, no partial disallowance is sustainable. Accordingly, are inclined to hold that the order passed by the ld. CIT (A) on this issue is incorrect and is accordingly, set aside the same and the ld. AO is directed to delete the addition of ₹1,33,239/-. The ground is accordingly allowed. 011. The issue raised in ground no.3, is against the confirmation of disallowance of ₹35,000/- by the ld. CIT (A) as made by the ld. AO on account of accounting charges paid to the accountant. 012. The facts in brief are that the ld. AO during the course of assessment proceedings, found that the assessee has paid ₹35,000/- as accounting charges without deduction of tax at source for which the assessee has not furnished any reply and accordingly, he disallowed and added back the same to the income of the assessee, which was confirmed by the ld. Commissioner of Income-tax (Appeals). 013. After hearing the rival contentions and perusing the materials available on record, I find that this is mainly the remuneration given by assessee to the part time accountant, who was writing the books of accounts of the assessee and therefore, no TDS is attracted on the Page | 4 ITA No.1382/KOL/2024 Youth Potent Potation; A.Y. 2015-16 said payment. Accordingly, I set aside the order of the ld. CIT (A) and directed the ld. AO to delete the addition. 014. The issue raised in ground no.4, is against the disallowance of donation expenses of ₹10,000/- by the ld. AO, which was confirmed by the ld. Commissioner of Income-tax (Appeals). 015. The facts in brief are that the assessee has incurred condonation expenses, which were given to various puja pandals in Kolkata. As the assessee is running a liquor shop in the city and such type of donation are essential in order to smoothly run the business. In our opinion, the said expenses were incurred by the assessee to be wholly and exclusively to run the shop and it is supported by series of decisions, wherein it have been held that the puja expenses paid to pedals on various occasions are allowable expense. Accordingly, I set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. 016. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 01.04.2025. Sd/- (RAJESH KUMAR) (ACCOUNTANT MEMBER) Kolkata, Dated: 01.04.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Page | 5 ITA No.1382/KOL/2024 Youth Potent Potation; A.Y. 2015-16 BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata "