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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: SRI MANISH BORAD & SRI SONJOY SARMA
order
: June 29th, 2022 ORDER
Per Manish Borad, Accountant Member:
This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2014-15 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals)-10, Kolkata [in short ld. “CIT(A)”] dated 30.07.2018 arising out of the assessment order framed u/s 143(3) of the Act dated 15.12.2016.
The assessee is in appeal before the Tribunal raising the following grounds:
I.T.A. No.: 2105/Kol/2018 Assessment Year: 2014-15 M/s. Parsan Brothers. “1. That the Appeal Order passed by Learned Commissioner of Income Tax (Appeals) - 10 / Kol is unlawful, unwarranted and against natural justice. 2.That the disallowance of Commission Paid amounting to Rs.44,25,705/- for business purpose be directed to be allowed. [Relief claimed - Deletion of Rs.44,25,705/-].
That the disallowance of Interest Paid amounting to Rs.6,56,140/- and addition for Bogus Loan Creditors amounting to Rs. 18,50,000/- is against Law and natural justice and hence prayed to be deleted. [Relief Claimed - Deletion of Rs.6,56,140/- & Rs. 18,500,000/-].
That your Appellant craves leave to urge, to add, to alter, to amend or to adduce further Grounds of Appeal
on or before the date of appeal hearing.”
3. Brief facts of the case as culled out from the records are that the assessee is a partnership firm engaged in the wholesale business of bonded goods. Income of Rs. 55,91,330/- declared in the return of income filed on 27.09.2014 for AY2013-14. Case selected for scrutiny through CASS followed by serving of notices u/s 143(2) & 142(1) of the Act. Various details were called for during the course of assessment proceedings. Ld. Assessing Officer (in short ld. “AO”) framed the assessment order after making various additions totalling to Rs. 88,70,666/- thereby assessing the income at Rs. 1,44,61,996/-.
4. Aggrieved, the assessee preferred appeal before ld. CIT(A) and partly succeeded and now the assessee is in appeal before this Tribunal against the following additions made by ld. AO which is confirmed by ld. CIT(A). a) Disallowance of commission expenditure Rs. 44,25,705/- b) Addition for bogus loans Rs. 18,50,000/- I.T.A. No.: 2105/Kol/2018 Assessment Year: 2014-15 M/s. Parsan Brothers. c) Disallowance of interest paid on alleged bogus loans Rs. 6,56,140/- 5. Ld. Counsel for the assessee vehemently argued referring to the orders passed by the lower authorities and also referring to the paper book running into 173 pages dated 29.06.2021, paper book dated 16.12.2021 containing 57 pages and another paper book dated 14.09.2021 containing documents for supporting the genuineness of commission expenditure. The crux of the arguments made by ld. Counsel for the assessee are that as far as the commission expenditure is concerned, they have been consistently claimed by the assessee and details of all the commission agents including PAN, confirmations have been filed and they all are genuine expenditures incurred in the regular course of business. As regards the addition u/s 68 of the Act it is contended that in the past also the assessee has taken loan from these companies and they were not found to be ingenuine by the Revenue authorities and the interest disallowance is also uncalled for as it is mostly paid on the opening balances of loans brought forward from preceding years.
Per contra ld. D/R vehemently argued supporting the orders of the lower authorities.
We have heard rival contentions and perused the records placed before us. Ground no. 1 is general in nature which needs no adjudication.
Ground no. 2 relates to the disallowance of commission paid at Rs. 44,25,705/-. Revenue authorities have alleged that these I.T.A. No.: 2105/Kol/2018 Assessment Year: 2014-15 M/s. Parsan Brothers. are non-genuine expenditure and the assessee could not substantiate the claim with any document. We, however, on perusal of the records and specially the list of the persons/concerns to whom the commission has been paid placed at page 6 to 7A of the paper book dated 29.06.2021, observe that except few, most of the commission expenditure are paid to the persons regularly since last many years and have been accepted by the Revenue authorities. The assessee is into the trade of selling liquor to various hotel industries. Complete details of the persons receiving commission including their addresses, PAN nos., confirmations, agreement of the terms and conditions for providing services against the commission received have been filed. Payments of the commission is through banking channel and tax has been deducted at source on the said sum. Copies of income tax returns of the most of the persons have also been filed. Considering all these details available on record which specifically remains uncontroverted by the Revenue authorities, considering the total turnover of the assessee firm which is approx 28.72 crores and the consistency of claiming such commission expenditure, we are of the considered view that disallowance of commission expenditure was not called for as the assessee has furnished sufficient documentary evidences to prove the genuineness of the said claim of commission expenditure incurred by the assessee for business purposes for selling its goods. Thus, ground no. 2 raised by the assessee is allowed.
Now coming to ground no. 3 which includes the disallowance of interest expenditure at Rs. 6,56,140/- and bogus loan creditors I.T.A. No.: 2105/Kol/2018 Assessment Year: 2014-15 M/s. Parsan Brothers. at Rs. 18,50,000/-, we first take up the issue of unexplained cash credit of Rs. 18,50,000/- which consists of the following: a) Sourav Shipping India Pvt. Ltd. Rs. 10,00,000/- b) M/s. Dharmaraj Trading Co. Rs. 1,00,000/- c) Gunius Wax & Chemicals Pvt. Ltd. Rs. 7,50,000/- 10. Out of the above three in the case of Sourav Shipping India Pvt. Ltd. it is a fresh loan taken during the year. The director of this company namely Chandan Mondal has accepted to have provided accommodation entry in the nature of unsecured loans to Parsan Brothers in lieu of commission. Further, Chandan Mondal has subsequently sworn in an affidavit declaring that statements made by him on 18.11.2016 before the Revenue authorities were not true and correct. We, however, find no merit in this contention of the assessee that it is a genuine loan because during the assessment proceedings itself detailed statement was taken from Chandan Mondal and this person in his full understanding and knowledge has accepted to have provided accommodation entry to the assessee through the alleged company. We, thus, fail to find any merit in the contention of the ld. Counsel for the assessee. In our considered view, ld. AO was justified in making addition of Rs. 10,00,000/- u/s 68 of the Act for the loan taken from M/s. Sourav Shipping India Pvt. Ltd and the said addition is confirmed.
As regards the remaining two cash creditors i.e. M/s. Dharmaraj Trading Co. at Rs. 1,00,000/- and Gunius Wax & Chemicals Pvt. Ltd. at Rs. 7,50,000/- is concerned, we find that Page 5 of 7 I.T.A. No.: 2105/Kol/2018 Assessment Year: 2014-15 M/s. Parsan Brothers. both these concerns are having an opening balance in the books of the assessee. In the case of Dharmaraj Trading Co. opening balance is Rs. 7,07,658/- and that of Gunius Wax & Chemicals Pvt. Ltd. is Rs. 1,63,090/-. No adverse material is found by the Revenue authorities and the addition has been made solely for the reason that these two parties did not reply to the notice u/s 133(6) of the Act but no further enquiry was conducted by the Revenue authorities. Complete details of the address, PAN No. and other financial documents stood filed before the Revenue authorities. The genuineness of the opening balance of the loan has not been doubted by the ld. AO. Under this given facts and circumstances we fail to find any merit in the action of the ld. AO making addition for unexplained cash credit received from M/s. Dharmaraj Trading Co. at Rs. 1,00,000/- and from Gunius Wax & Chemicals Pvt. Ltd. at Rs. 7,50,000/-and the same is deleted. Thus, out of total addition of Rs. 18,50,000/- u/s 68 of the Act, we confirm the addition at Rs. 10,00,000/-.
As regards the interest disallowance of Rs. 6,56,140/- is concerned we find that Rs. 78,247/- paid to Sourav Shipping India Pvt. Ltd. and Rs. 2,04,000/- paid to Sourav Film City Pvt. Ltd. remains to be sustained for the reason that the directors of both these companies have stated before the Revenue authorities to be an accommodation entry provider and failed to rebut this fact by placing any material in its favour. Except the interest of Rs. 2,82,247/- all the remaining interest amount are paid on the opening balances of the loans brought forward from last year and therefore, interest disallowance is not justified. Therefore, against the total addition of Rs. 6,56,140/-, we confirm the disallowance Page 6 of 7 I.T.A. No.: 2105/Kol/2018 Assessment Year: 2014-15 M/s. Parsan Brothers. of interest at Rs. 2,82,247/- and delete the remaining disallowance of Rs. 3,73,893/- and partly allow the claim of the assessee. Thus, Ground no. 3 raised by the assessee is partly allowed.
Ground no. 4 is general in nature which needs no adjudication.
In the result, the appeal filed by the assessee is partly allowed as per the terms indicated herein above. Kolkata, the 29th June, 2022. Sd/- Sd/- [Sonjoy Sarma] [Manish Borad] Judicial Member Accountant Member Dated: 29.06.2022 Bidhan (P.S.) Copy of the order forwarded to:
1. 1. M/s. Parsan Brothers, 18B, Sukeas Lane, 1st Floor, Kolkata- 700 001. 2. ACIT, Circle-35, Kolkata. 3. CIT(A)- 10, Kolkata. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata.