SHRI NEELESH H. AGRAWAL,,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-5(2)(5),, AHMEDABAD

Grounds of appeal taken by the assessee are not in consonance with the Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963 - they are descriptive and argumentative in nature. Therefore, the Bench has directed to file a concise ground of appeal. Accordingly, assessee has filed concise ground, which reads as under:

Brief facts of the case are that the assessee is a distributor for Videocon, Hutch and Tata sky products. He has e-filed return of income on 19.12.2012 declaring total income at Rs.5,56,260/- which was processed under section 143(1) of the Act. The case of the assessee was selected for scrutiny assessment by issuance of notice under section 143(2) of the Income Tax Act, 1961. During the scrutiny assessment, the ld.AO has doubted some of the expenses claimed by the assessee viz. (a) interest expenses u/s.40(a)(ia) of Rs.1,24,056, (b) bad debts of Rs.52,087/-, (c) out of pocket expenses of Rs.20,000/-, (d) unexplained expenditure of Rs.4,64,994/-, and (e) lump sum addition on account of book result of Rs.7,50,000/-.

As regards interest expenses of Rs.99,721/- and Rs.6,034/- paid to Bajaj Capital and Reliance capital are concerned, the AO noticed that the assessee has not deducted TDS while making payment to these parties. The ld.AO did not find explanation of the assessee satisfactory. He accordingly made addition total interest amounting to Rs.1,24,056/- under section 40(a)(ia) of the Act. In appeal, the ld.CIT(A) confirmed the addition.

Before us, the ld.counsel for the assessee submitted that similar issue was travelled upto the Tribunal in assessee’s own case for the Asstt.Year 2011-12 in and the Tribunal vide order dated 4.12.2017 observed that if recipients i.e. payee have accounted the interest income received from the assessee, then no disallowance on account of non-

I have considered rival submissions and gone through the record carefully. I find that no disallowance under section 40(a)(ia)of the Act should be made against the assessee because the AO has not verified whether the payee has recorded the interest receipt in their books, accounted in the taxable income of the assessee. I also find that similar issue arose in the case of the assessee for the asstt.Year 2011-12 wherein Tribunal has set aside the issue to the file of the AO for verification as to whether such amount has been recorded in the books of payee as income. The relevant part of the order reads as under:

Before me, the ld.counsel for the assessee submitted that this amount relates to sales made in the past to Sai Electricals & sales services of Rs.28,872/-, and Shweta Electornics of Rs.23,215/- . This has been reflected in the relevant year. Since the amount was not recoverable and become very old, the accounting prudency demands writing off of the same. He further submitted that the assessee is not required to establish that the debts has in fact become bad, and it is sufficient that the amounts has been accounted for in the earlier, and such amount has been written off subsequently on becoming irrecoverable. For this he relied upon judgment of Hon’ble Supreme Court in the case of TRF Ltd. Vs. CIT, 323 ITR 397 (SC). On the other hand, the ld.DR relied upon the orders of the Revenue authorities.

On due consideration of the above facts of the case, I find that there is no merit in the action of the Revenue for disallowance bad debts of Rs.52,087/-. Assessee has submitted before the ld.CIT(A), the amount of bad debts was pertaining sales made to Sai Electricals & Sales Services of rs.28,872/- and Sweta Electornics of Rs.23,215/-. This amount has been accounted and reflected in the taxable income of the assessee. Since this amount has become irrecoverable and very old, the same has to be written off in the books of the assessee. Therefore, in the light of judgment of Hon’ble Supreme Court in the case of TRF Ltd. (supra) it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. I allow this part of ground, and delete disallowance of Rs.52,087/-.

As the facts emerges out from the record, assessee has claimed total expenses of Rs.92,341/- and debited the same to the profit & loss account. In the absence of sufficient proof with regard to this payment, the ld.AO made adhoc disallowance of Rs.20,000/- out of Rs.92,341/-. This addition was confirmed by the ld.CIT(A). Nothing was placed before me also to prove that adhoc disallowance made by the AO is unjustified. I uphold the impugned disallowance of Rs.20,000/- and dismiss this part of the ground.

Fourth part of the ground is that the ld.Revenue authorities are erred in making addition of Rs.4,64,994/- under section 69C of the Income Tax Act.

I find that during the assessment proceedings, the AO noticed that the assessee debited following expenditure by way of payments made to the credit card providers:

The ld.AO doubted the same and sought for details. The assessee explained that the same were supported by the bills and payments were made through cheque from SBI account. Therefore, there is no question of addition. Not satisfied with the explanation of the assessee, the AO made

Before me also the ld.counsel for the assessee reiterated submissions as were made before the Revenue authorities. He further submitted that similar expenditure was deleted by the Tribunal in the Asstt.Year 2011-12 by holding that credit card expenditure ought not to be added.

On due consideration of the above facts of the case, I find that the ld.CIT(A) has confirmed the impugned addition by following his order for the Asstt.Year 2011-12, which was deleted by the Tribunal vide vide order dated 4.12.2017. The assessee has furnished credit statement before the Revenue authorities to prove that all the payments were made through account payee cheques and for the purpose of the business. The ld.Revenue authorities have not considered the issue in right perspective. Hence, I do not find any merit in the action of the Revenue in making the impugned addition under section 69C of the Act. I delete impugned addition and allow this part of ground.

On due consideration of the above facts of the case, I find that both the authorities below failed to analyse the details submitted by the assessee. They simply made lumpsum addition without any basis. The assessee has submitted audited books of accounts and other details, and also comparative rates for the last two years. Auditors have not pointed out any discrepancy. Revenue authorities have not examined the details analytical instead a lumpsum addition has been made without any justifiable reasons. The assessee has explained that he was dealing in brand products, and the margin available to them is uniform across India, and the assessee has to pass on certain percentage of margin to the retailers depending on size of their purchases, therefore, margin available to the assessee is bound to vary. If the AO doubted the rate of margin provided, then he could have compared it with other distributors, which he failed to do so. I find force in this submission of the assessee. Therefore, there is no justifiable reason with the Revenue

In the result, the appeal of the assessee is partly allowed.