JCIT(IN-SITU), CC-1(4), KOLKATA, KOLKATA vs. K & K MINERALS PVT LTD, KOLKATA

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ITA 566/KOL/2026Status: DisposedITAT Kolkata14 August 2026AY 2011-1212 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to delete the addition on stock difference, finding no discrepancy. It also agreed with the CIT(A)'s partial allowance of interest expenses and deletion of disallowances for freight and repairs, considering the circumstances and evidence presented.

What were the facts?

The assessee company's return was taken up for scrutiny, and the Assessing Officer (AO) made additions for unexplained stock difference, disallowed expenses for freight and repairs, and treated a donation as bogus due to lack of evidence. The AO also disallowed interest expenses for non-deduction of TDS.

What were the issues?

Whether additions made by the AO for stock difference, disallowed expenses, and interest were justified, especially considering the assessee's inability to produce all documents due to seizure by another department.

Which sections of the Income-tax Act were involved?

Section 144,Section 143(2),Section 40A(ia)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, KOLKATA

Before: Shri Rajesh Kumar & Shri Pradip Kumar Choubey

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA Before Shri Rajesh Kumar, Accountant Member and Shri Pradip Kumar Choubey, Judicial Member ITA No.566/KOL/2026 Assessment Year: 2011-12 JCIT(In-situ), cc-1(4),..............................................................................................Appellant Aayakar Bhawan Poorva, 110 Shanti Pally, Kolkata- 700107. [PAN No. AACCK4857G] Vs. K & K Minerals Pvt Ltd,....…………..………………….................……….Respondent Kanksa Road, Panagarh Bazar, Bardhaman- 713148, Burdwan, West Bengal- 713148. Appearances by: Saikat Maulik, A.R., appeared on behalf of the Appellant. Dipu Koley, Addl. CIT, Sr. DR.,appeared on behalf of the Respondent. Date of concluding the hearing : July 06, 2026 Date of pronouncing the order :August 14 ,2026 ORDER Per Pradip Kumar Choubey, Judicial Member: This appeal filed by the assessee is directed against the order dated 25.08.2025 of the National Faceless Appeal Centre (NFAC), passed under Section 144 of the Assessment Year 2011-12 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”).

At the very outset, it appears from the report of the Registry that the appeal filed by the Revenue after a delay of 106 days. Revenue has filed a petition to condone the delay. The Ld. AR did not raise any objection in

ITA No.566/Kol/2026 Assessment Year- 2011-12 condoning the delay. Going over the contents of the petition delay is hereby condoned.

2.

The brief facts of the case of the assessee is that the assessee being a company filed its return of income for the AY 2011-12 on 08.03.2013 declaring total income of Rs. 33,98,178/-. Thereafter, the same return was taken up for compulsory scrutiny and notice u/s 143(2) of the IT Act 1961 on 23.09.2013 which was duly served upon the assessee on 24.09.2013. Thereafter, assessment was completed by passing an order u/s 144 of the IT Act, 1961 on 31.03.2014 with an assessed income of Rs. 3,52,08,380/- In the assessment order passed u/s 144 on 31.03.2014, following additions/disallowances were made:

1.

Out of books purchases: -During the assessment proceedings, it was seen from ITR that closing stock as on 31.03.2011 is at Rs. 1,19,71,569/- and opening stock as on 01.04.2011 was taken at Rs. 3,36,45,053/-. The assessee was requested to kindly reconcile the above difference of Rs. 2,16,73,484/-(Rs. 3,36,45,053/- minus Rs. 1,19,71,569/-). Despite repetitive opportunities offered to assessee to explain the difference, the assessee could not explain and explain the difference in stock of Rs. 2,16,73,484/-, Hence, the differential amount of Rs. 2,16,73,484/- was supposed to get treated as purchase made out of books and same was added to the total income of the assessee. 2

ITA No.566/Kol/2026 Assessment Year- 2011-12 2. Disallowance of expenses: - The assessee had claimed expenses as freight of Rs. 22,73,165/- & Repairs of Machinery of Rs. 6,94,222/-. Since, the assessee preferred extreme non-compliance, hence, in absence of copies of Ledgers, bank books and audit report, the above expenses of Rs. 29,67.387/- (Rs.22.73,165/- Plus Rs.6,94,222/-) was disallowed and added back to total income.

3.

Disallowance of donation: During the year under consideration, it was seen that the assessee had claimed donation of Rs. 10,000/- and claimed as expenditure. However, the assessee did not provide any documentary evidences. Hence, the donation was treated as bogus and accordingly disallowed and added back to total income.

4.

Disallowance of Interest: -During the assessment proceedings, it was seen that the assessee had debited interest of Rs. 67,70,068/- out of which it was presumed that a considerable crunch was directed to SREI wherefrom the assessee had claimed to have purchased some equipment during the year under consideration. Further, it was seen from bank statement furnished by the assessee that interest accrued was at Rs. 21,47,533/-, Since, the assessee did not furnish audit report, hence the then incumbent AO could not be ascertained as to whether the interest of Rs. 21,47,533/- was actually debited to Profit and Loss A/c or not. Since, there was a ambiguity of claiming expense 3

ITA No.566/Kol/2026 Assessment Year- 2011-12 of interest of Rs. 21,47,533/-, hence applicability of TDS was deducted u/s 194C

could not be ascertained.

3.

Aggrieved by the said order assessee preferred appeal before the CIT(A)

wherein appeal of the assessee has been partly allowed by the CIT(A) by

observing thus: -

8.4-1 have duly considered the facts of the case and submission of the appellant. I find from the details furnished by the appellant that in the preceding year ie A.Y 2010-11, the assessee was engaged in the contractual business although it was doing manufacturing of ballast. But no trading of ballast has happened in the last year So, the assessee has prepared the Profit & Loss account only for the contractual business and therefore the opening and the closing stock, purchases and receipt figure appearing in the Profit & Loss account in the year ending 2010 was relating to the contractual business. The figures relating to closing stock of ballast was shown in the Balance Sheet in the figure of closing stock. This figure of closing stock of ballast in Balance Sheet was shown as net figure of Rs.84,90,489/- which was calculated as opening stock of ballast figure of Rs.2.16,73,484/- minus corresponding expenditure of Rs.1.31,82,985/- so in this why I find merit in the submission of the appellant that closing stock of last year in contractual business (as shown in the P & L account) and the closing stock of the business of the assessee include the closing stock of Rs.1.19.71.579/- from the ballast of Rs.2.16.73.484/- (as reflected in the Balance sheet). So, the assessee has a total closing stock in the business of Rs. 1.19.71.579/- plus Rs.2.16.73.484/-Rs.3.36.45.063/- which has been taken as the opening stock in the Profit & loss account of the assessee for the year under consideration. In view of the facts discussed above. I do not find any discrepancy in the closing stock shown of Rs.3.36.45.063/- (Rs.1,19.71.579/- plus Rs.2.16.73,484/-) shown in the books of account of the assessee for the preceding year and the opening stock of Rs.336.45.063/- shown in the Profit & Loss account for the instant year Therefore, the addition made of Rs.2.16.73,484/- on account of discrepancy in the closing stock of preceding year and opening stock of current year is not found sustainable in this case. Hence the addition of Rs.2.16,73,484/- is deleted. 8.5 The assessee has further challenged the addition of Rs.46,22,535/- as disallowance of interest payment claimed as expenses for the business on account of non-deduction of TDS u/s 40a(ia) of the Act. The appellant in its submission has stated that the AO has wrongly disallowed the interest payment on loan to SBI Burdwan and SREI which is a public listed company and a NBFC merely on the basis of suspicion that TDS might not been deducted on these payments. The appellant has stated in its submission that the AO has failed to appreciate the fact that interest payment made to SBI on account of CC loan does not attract the provision of TDS deduction. The AO himself accepted in disallowance of interest payment of Rs.10.40.902/- u/s 40a(ia) of the Act. Therefore, the addition up to Rs.31,56,910/ out of total addition of Rs.46,22,535/ is allowed and the balance amount of Rs.14,65,625/- is confirmed. 4

ITA No.566/Kol/2026 Assessment Year- 2011-12 8.7 The assessee has also challenged the addition of Rs.22.73.165/- on account of freight expenses and Rs.6.94.222/- on account of repairs of machinery expense stating that in the case of non-compliance from the assessee, the said expenses are non-verifiable However, the appellant in its submission has stated that the AO has made this disallowance of expenses only on the basis of suspicion and assumption. Which is bad in law The appellant has further stated that all these expenses exceeding Rs 20,000/- have been paid to the parties through banking channel and only the small portion of these expenses that to below Rs.20,000/-figure have been paid in cash. All necessary compliance has been made while making the payments of these expenses. These expenses are regular in nature and have been claimed regularly in the business of the assessee. The AO failed to understand that in any business transportation of goods are the basic character and some expenses are bound to happen on account of transportation. Furthermore, repair and maintenance are also not an unusual nature of expenses which the AO cannot understand as a requirement for the smooth running of the business. The assessee is in the nature of contractual business and production of ballast. So, these expenses cannot be taken as bogus expenses. Further, the assessee has also stated that the Hon'ble Supreme Court in the case of Omar Salav Mohamed Sait reported in (1959) 37 ITR 151 (SC) had held that no addition can be made on the basis of surmises, suspicion and conjectures. I find merit in the submission of the appellant that the AO has made the addition of Rs 22.73.165/- on account of freight expenses and Rs.6,94,222/- on account of repairs of machinery expense by way of disallowance only on the basis of suspicion and presumption and conjectures. Which is not as per the law. Therefore, the addition of Rs.22.73.165/- on account of freight expenses and Rs.6.94,222/-on account of repairs of machinery expense is deleted. 8.8 The appellant has also challenged the disallowance of Rs.25,36,800/- as payments made in violation of section 40A(3) of the Act. In the assessment proceeding, the AO has examined the bank statement of the assessee and highlighted certain instances where cash payment exceeding Rs.20,000/- to certain individuals have been made. The total amount computed by the AO comes to Rs.25,36,800/-. The AO has taken this as payments in violation to the provision of section 40A(3) of the act and therefore, made the disallowance Rs.25,36,800/-in his assessment order. In the appellate proceeding, the assessee has stated that the AO has wrongly held the amount shown as withdrawal in cash from the bank account by certain individuals as payment in cash exceeding Rs.20,000/- and therefore has made such an erroneous addition. Whereas, in fact the nature of the business of the assessee is the execution of civil contract and working site was the far-flung is Naxalite infested in the Ramgarh of Jharkhand state. Working in that far-flung area with daily wagers is quite a difficult task, and where the payment to the local workers/labourers has to be made in cash, because there is no banking facility in the jungle area of that region. These amounts are withdrawn by the small labourer heads and that has to be distributed on site to the labourers on the daily basis and the figures for the payment to the individual labourers always far below the figure of Rs.20,000/- Therefore, the finding of the AO on this account is of no merit because not a single payment in cash has been made of the amount exceeding Rs.20,000/- as per the books of account of the assessee. The AO has taken this myopic view only by looking the small cash withdrawal for the labour payment in the bank account. I have perused the fact of the case and the submission of the appellant. I find merit in the submission of the appellant that the AO has made the addition u/s 40A(3) only on the basis of cash withdrawal shown in the name of certain individuals in the bank

ITA No.566/Kol/2026 Assessment Year- 2011-12 account. His addition is not based on the any observation from the books of account. Further, there is also merit in the submission of the appellant that in the far-flung area, where banking facilities are hardly available. payment has to be made to the labourers in cash. However, since no books of account were produced before the AO and in the appellate proceeding although the ledger are produced but it very difficult to verify each and every payment in cash for its genuineness. Therefore, I take a view that 10% of this amount of Rs.25.36,800/ i.e. Rs.2,53,680/- be disallowed and the balance amount of Rs.22,83,120/- is allowed. DEPAN As a result, the appeal is partly allowed. 4. Being aggrieved by and dissatisfied the Revenue preferred appeal by taking following grounds; -

1.That on the facts and circumstances of the case and in law, whether the Ld.CIT(A) is correct in deleting the addition of Rs. 2,16,73,484/- pertaining to the difference between the closing stock of the last financial year FY 2009-10 and the opening stock of the financial year 2010-11.

2.

That on the facts and circumstances of the case and in law, whether the Ld.CIT(A) is correct in restricting the addition to Rs. 2,53,680/- being 10% of the disallowance of Rs. 25,36,800/ made by the Assessing Officer under section 40A (3) of the Income-tax Act, 1961, even though there is no scope for estimation in payments in cash exceeding the specified limit under section 40A (3) of the Act.

3.

That on the facts and circumstances of this case and in law, whether the Ld.CIT(A) is correct in deleting the disallowance of expenses of Rs. 29,67,387/-, even though the assessee did not submit proper evidence to substantiate its claim of such expenses.

ITA No.566/Kol/2026 Assessment Year- 2011-12 4. That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or at the time of hearing of this appeal.

5.

Contrary to that Ld. AR supports the impugned order thereby submitting that Ld. Assessing Officers did not consider the case of the assessee and passed an assessment order u/s 144 of the Act ignoring the realities that all the documents and supporting papers were seized are taken away by bureau of investigation Department of Government of West Bengal, that was the main reason that the assessee could not be able to produce all the specific details with reference to the documents seized by the bureau of investigation The Ld. AR submits that Ld. AO has not properly scrutinized the documents in his possession and considered the profit and loss part of the ITR for the Assessment Year 2010-11. The Ld. AR submits that for the Assessment Year 2010-11, there was no trading activity and during this Assessment Year, assessee has income only from contractual business and assessee prepared profit and loss account for the Assessment Year 2010-11 only for contractual business. The Ld. AR further submits that Assessing Officers has made an entire addition of Rs. 29,67,387/- by picking the expenditure on transporting charges and repair and maintenance and make a remark that there was non- compliance. The Ld. AR submits that ledger copy reveals that majority of expenses are paid through bank account cheque or adjusted various advances

ITA No.566/Kol/2026 Assessment Year- 2011-12 made to our directors to make payment at working site. The Ld. AR further submits that AO has not properly scrutinized the documents in his possession, failed to cross verify the balance sheet part of ITR. The learned AR further submits that it is true that closing stock as mentioned in the profit and loss portion of the ITR is Rs. 1,19,71,569/- but in the balancesheet closing stock has been mentioned in Rs. 2,04,62,068/-, hence it is very much clear that the closing stock is mentioned in the balancesheet is much more than the closing stock as mentioned in ITR-Profit and loss part for this AY 2010-2011, but AO did not consider this fact. The Ld. AR further submits that interest expenses disallowed by the AO for non-deduction of TDS, ignoring the facts that both SBI &SREI were listed entities and duly filed their ITR for the Assessment Year under consideration and offered tax on the income received. The submission of the AR is that there is no infirmity in the impugned order as the CIT(A) after calling the remand report, scrutinized the documents and thereafter passed the order in favour of the assessee.

6.

Upon hearing the submission of the counsel of the respective parties and on perusal of the impugned order we find that assessee having income from contractual Railway Workers. The Ld. ACIT had passed the assessment order u/s144 by holding that the assessee failed to produce any cognizable documents in support of his claim. It is pertinent to mention here that all the

ITA No.566/Kol/2026 Assessment Year- 2011-12 documents and supporting papers were seized and taken away by Bureau of Investigation, Department of West Bengal and because of this assessee could not be able to comply all the specific details. Assessing Officers made an addition of Rs. 2,16,73,484/- for the Assessment Year- 2010-11 being the differential amount of closing stock and opening stock. It is important to mention here that the assessee has shown the closing stock figure in the balance Sheet and audited balance-sheet is the part of the audited accounts, the stock of ballast was not shown as there was no trading of such business in the Assessment Year 2010-11.Further we find that corresponding expenditure amounting to Rs. 1,31,82,985/- was also not part of profit and loss account in the Assessment Year- 2010-11 and only the net figures were shown in the balancesheet of assessment year 2010-11. Further Opening Stock of Ballast of Rs 2,16,73,484/- plus cost of production of Ballast during this A.Y-2011-2012 (which is Rs 61,82,123/- as reflected in Note No-17of the Audited Books of Accounts for the A.Y-2011-2012 as well as reproduced in remand report Page No-07) has been reflected as closing stock of Ballast of Rs 2,78,55,607/-(Rs 2,16,73,484 plus Rs 61,82,123/- Rs 1,78,55,607/-) for the A.Y-2011-2012 because there was no trading business of Ballast during the year under scrutiny. Hence for this A.Y-2011-2012 there was no impact on profit earned by the assessee from contractor business. The Contractor profit has not been

ITA No.566/Kol/2026 Assessment Year- 2011-12 reduced by bringing the Last year stock of Ballast (Rs 2.16.73,484/-) in the Profit as Loss Account. Assessing officer also admitted the fact that there was no trading business of Ballast during the A.Y-2011-2012 which he also clearly mentioned in the Assessment Order

6.1. Further we find that payments above Rs. 20,000/- during the Assessment Year 2011-12 were made through banking channels and only small payments below Rs. 20,000/- were made through cash which is evident from the ledger copy of the assessee. The Ld. AO disallowed the interest expense for non- deduction of tedious ignoring the facts that both SBI and SREI were listed entities and duly filed an ITR and offered tax on the income received.

7.

Going over the discussion made above and considering the order passed by the CIT(A) we do not find any infirmity in the impugned order.

Accordingly, the appeal of the Revenue is hereby dismissed.

Kolkata, the 14th August , 2026. Sd/- Sd/-

[Rajesh Kumar] [Pradip Kumar Choubey] Accountant Member Judicial Member

ITA No.566/Kol/2026 Assessment Year- 2011-12 DC Dated: 14.08.2026.

Copy of the order forwarded to: 1. Appellant - 2. Respondent - 3. CIT(A)- 4. CIT- 5. CIT(DR)

//True copy// By order Deputy Registrarr, Kolkata Benches

3 11

ITA No.566/Kol/2026 Assessment Year- 2011-12

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