INDIAN COAL AGENCY,KOLKATA vs. DCIT, CIRCLE-35, KOLKATA, KOLKATA

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ITA 868/KOL/2018Status: DisposedITAT Kolkata20 May 2025AY 2015-16Bench: SONJOY SARMA, JUDICIAL MEMBER & SRI RAKESH MISHRA (Accountant Member)1 pages

AI SummaryPartly Allowed

Facts

The assessee, Indian Coal Agency, filed appeals against separate orders concerning Assessment Years 2013-14 and 2015-16. These appeals involved issues such as the disallowance of advance rent, disallowance of commission payments, and disallowance of depreciation on motor cars. The Revenue also filed an appeal which was dismissed due to low tax effect.

Held

The Tribunal held that the disallowance of advance rent was not justified, allowing the appeal on this ground for AY 2015-16. The disallowance of commission payments was upheld for AY 2015-16, as the assessee failed to provide sufficient evidence of services rendered. The disallowance of depreciation on motor car was deleted. For AY 2013-14, the issue regarding net profit was not considered an error, and the disallowance under Section 14A was partly erroneous. The excess commission issue was allowed.

Key Issues

Whether the disallowance of advance rent, commission payments, and motor car depreciation was justified. Whether the calculation of net profit and disallowance under Section 14A were correct. Whether the Revenue's appeal should be admitted.

Sections Cited

Sec. 14A, Rule 8D(2)(ii), Rule 8D(2)(iii), Sec. 37(1), Sec. 40(b), Sec. 143(2), Sec. 142(1), Sec. 144, Sec. 263, Sec. 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘C’ BENCH, KOLKATA

Before: SONJOY SARMA & SRI RAKESH MISHRA

Date of concluding the hearing : February 19th, 2025 Date of pronouncing the order : May 20th, 2025 ORDER

PER RAKESH MISHRA, ACCOUNTANT MEMBER:

The captioned appeal for A.Y. 2013-14 and cross appeals for A.Y. 2015-16 filed by the assessee and Revenue are against separate orders of the Pr. Commissioner of Income Tax, Kolkata-12, Kolkata [hereinafter referred to Ld. 'Pr. CIT'] for AY 2013-14 and Commissioner of Income Tax (Appeals)-10, Kolkata [hereinafter referred to as ld. 'CIT(A)'] for AY 2015-16. Since the assessee in both the appeals is common, the appeals were heard together and are being decided vide this common order for the sake of convenience and brevity 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal: I. I.T.A. No.: 867/KOL/2018 Assessment Year: 2013-14:

1. That the learned CIT discussed what the terms "erroneous" and "prejudicial" means but did not discuss and was unable to prove how the instances provided by him have resulted in the assessment order passed by the ld. AO erroneous and prejudicial to the interests of the Revenue.

2. That the Appellant craves leave to add, amend, alter vary and / or withdraw any or all the above grounds of Appeal on or before the date of hearings.” The assessee has raised additional grounds of appeal for AY 2013- 2.1 14 as follows: “1. For that in view of the facts and in the circumstances, Ld. PCIT was wholly unjustified in passing direction to AO to consider the net profit as per Profit & Loss Account at Rs. 31,75,58,239/- instead of Rs. 28,58,02,415/- whereas the correct figure was only Rs. 28,58,02,415/- and the same also Page 2 of 28. Page 3 of 28. Page 4 of 28. Page 5 of 28. Page 7 of 28. Page 8 of 28. That the only departure made by section 13 of 1922 Act, from the tax legislation in England is that whereas under the English legislation the Commissioner is not obliged to determine the profits of a business venture, according to the method of accounting adopted by the assessee, under the Indian Income-tax Act, prima facie, the ITO has for the purpose of sections 10 and 12 of 1922 Act to compute the income, profits and gains in accordance with the method of accounting regularly employed by the assessee. If, therefore, there is a system of accounting regularly employed and by appropriate adjustments from the accounts maintained taxable profit may properly be deduced, the ITO is bound to compute the profits in accordance with the method of accounting. But where in the opinion of the ITO the profits cannot properly be deduced from the system of accounting adopted by the assessee it is open to him to adopt a more suitable basis for computation of the true profits. Among Indian businessmen, as elsewhere, there are current two principal systems of book-keeping. There is, firstly, the cash system in which a record is maintained of actual receipt and actual disbursements, entries being posted when money or money's worth is actually received, collected or disbursed. There is, secondly, the mercantile system, in which entries are posted in the books of account on the date of the transaction, i.e., on the date on which rights accrue or liabilities are incurred, irrespective of the date of payment. For example, when goods are sold on credit, a receipt entry is posted as of the date of sale, although no cash is received immediately in payment of such goods; and a debit entry is similarly posted when a liability is incurred although payment on account of such liability is not made at the time. There may have to be appropriate variations when this system is adopted by an assessee who carries, on a profession. Whereas under the cash system no account of what are called the outstandings of the business either at the commencement or at the close of the year is taken, according to the mercantile method actual cash receipts during the year and the actual cash outlays during the year are treated in the same way as under the cash system, Page 9 of 28. Regular mode of accounting only determines the mode of computing taxable income and point of time at which the tax liability is attracted. It cannot be relied on to determine whether income has, in fact, resulted or materialised in the assessee's favour, nor can it affect the range of taxable income or the ambit of taxation.