M/S TRANSPORT WINGS (CAL) PVT. LTD.,KOLKATA vs. ITO, WARD-1(1), KOLKATA

Though the Registry has pointed out that the appeal is time barred, however, in view of the decision of the Hon’ble Supreme Court in the case of Miscellaneous Application No. 665 of 2021 in SMW(C ) No. 3 of 2020, the period of filing appeal during the COVID-19 pandemic is to be excluded for the purpose of counting the limitation period. In view of this, the appeal is treated as filed within the limitation period.

The issue raised in ground no. 1 & 2 are general in nature and need no specific adjudication.

The issue raised in ground no. 3 is not pressed. Therefore the ground is dismissed as not pressed.

Facts in brief are that during the course of assessment proceedings, the AO observed from the annual audited accounts that the assessee has long term borrowing at Rs. 1,13,88,854/- as on 31.3.2015 vis-à-vis Rs. 62,87,757/- as on 31.03.2014. The AO further noted that the short term borrowing has also increased from Rs. 3,49,94,572/- to Rs. 3,75,21,122/- during the same period and thus overall increase in the borrowed funds was Rs. 76,27,649/-. Accordingly the AO called upon the assessee to explain the same, however the assessee did not respond to the notice or appear personally. Again a show cause notice No. 672 dated 8.12.2017 was issued to the assessee fixing the date of compliance on 15.12.2017 which again remained non- complied with. Finally the AO added the same as unexplained cash credit u/s 68 of the Act for the reason that assessee has failed to prove the identity, creditworthiness and genuineness of the lenders.

In the appellate proceedings, the Ld. CIT(A) dismissed the appeal of the assessee by not condoning the delay by observing that the delay in filing the appeal was due to negligence on the part of the assessee.

After hearing the rival parties and perusing the material on record, we note that the AO has made the addition Rs. 51,01,097/- u/s 68 of the Act of long term borrowings as unexplained cash credit which represented the loans taken from Scheduled Banks, Non-Banking Financial companies the details whereof is given in the audited balance sheet . Similarly the AO made disallowance of Rs. 25,26,552/- as unexplained cash credit in respect of increase in cash credit limit from Bank of India. After examining the records before us, we have failed to understand as to how the loans from NBFCs borrowed on long term and short term basis were treated as unexplained cash credit. We also note that all these evidences and records comprising

The issue raised in ground no. 6 is against the addition of Rs. 12,73,925/- as made by the AO u/s 68 of the Act by treating the increase in other current liability as on 31.3.2015 vis a vis 31.3.2014 in the audited balance sheet.

Facts in brief are that the AO observed on the basis of submissions of the assessee that it has shown of Rs. 65,63,805/- under the head current liability as on 31.03.2015 vis-à-vis Rs. 52,90,880/- in the preceding year and thus the other current liability has increased by Rs. 12,72,925/- and finally added the same as bogus liability u/s 41 of the Act. The issue was not decided by Ld. CIT(A) in the appellate proceedings as the appeal was dismissed for not condoning the delay.

Having heard rival parties and perused the material on record, we find that the AO, on the basis of details filed during the assessment proceedings, noted that there is an increase in other current liability to the tune of Rs. 12,72,925/- as on 31.03.2015 vis-à-vis the corresponding amount under the head other current liability as on 31.03.2014. The AO simply added the difference i.e. increase in other current liability as unexplained without pointing out any mistake or the fact that liability has ceased

The issue raised in ground no. 7 is against the disallowance of 1% of lorry hire charges amounting to Rs. 18,63,232/- on an ad hoc basis.

Facts in brief are that the AO, on the basis of written submissions filed by the assessee and evidences therewith, observed that the assessee has shown freight income of Rs. 20,41,54,521/- as against lorry hire charges paid of Rs. 18,63,23,230/-. Finally the AO has made addition on the ground that the assessee has not cooperated in the assessment proceedings and the possibility of inflation of expenses could not be ruled out and accordingly disallowed a sum of Rs. 18,63,232/- on estimation basis being 1% of total hire charges paid and added the same to the income of the assessee. The Ld. CIT(A) did not consider the issue as the appeal was dismissed by not condoning the delay.

After hearing both the parties and perusing the material on record, we note that AO has simply made an ad hoc addition on the basis of presumptions and assumptions by observing that the inflation of expenses could not be ruled out and thus added 1% of total hire charges paid which comes to Rs. 18,63,232/- to the income of the assessee without pointing out any defect or deficiency in the documents filed by the assessee. In our considered view the disallowance on estimation basis is not permissible under the Act unless the AO has given specific finding as to defects in the books of accounts of the assessee justifying the disallowance. The case of the assessee is squarely covered by the decision of Hon’ble Co-ordinate Bench of Kolkata in the case of Biswanath Agarwala vs. ACIT in ITA No. 461/Kol/2016 for AY 2011-12 order dated

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