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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: Sri Manish Borad & Sri Sonjoy Sarma
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘SMC’ BENCH, KOLKATA [Virtual Court] (Before Sri Manish Borad, Accountant Member & Sri Sonjoy Sarma, Judicial Member) I.T.A. No.: 234/Kol/2021 Assessment Year: 2017-18 Melcon (Vizag) Private Limited................................................Appellant [PAN: AACCM 3631 N] Vs. i) Income Tax Officer, Ward-4(2), Kolkata ii) Commissioner of Income Tax (Appeals)-2, Kolkata...........Respondent
Appearances by: Sh. Om Prakash Baid, A/R, appeared on behalf of the Assessee. Sh. Surendra Kumar Mishra, Addl. CIT, appeared on behalf of the Revenue. Date of concluding the hearing : February 16th, 2022 Date of pronouncing the order : February 25th, 2022 ORDER Per Manish Borad, Accountant Member:
This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2017-18 is directed against the order of ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC) [in short ld. “CIT(A)”] dated 16.04.2021 vide Appeal No. CIT(A), Kolkata-2/10492/2019- 20 which is arising out of the assessment order framed u/s 143(3) of the Income Tax Act, 1961 (in short the “Act”) dated 11.12.2019 by ITO, Ward- 4(2), Kolkata.
The assessee is in appeal before the Tribunal raising the following grounds:
“1. That Ld Commissioner of Income Tax (Appeal), NFAC, Delhi (‘Appellate Authority’ in brief) has erred in law as well as in fact and or has misdirected himself/ herself in sustaining and or upholding on alleged ground addition of Rs 6,61,299/- erroneously and or illegally made on alleged ground by Ld Income Tax Officer, Ward 4(2) Kolkata (‘AO’ or Assessing Officer in brief) in respect of a trading/ business loss of said Rs 6,61,299/- debited by the Appellant under the head “Advance Forfeited” in their Profit and Loss Account. That Ld Assessing Officer appears to have erroneously and or illegally changed interest under section 234.B of the Income Tax Act 196(‘Act’ in brief) through said section 234B of the Act
2 I.T.A. No.: 234/Kol/2021 Assessment Year: 2017-18 Melcon (Vizag) Private Limited. is not attached, applicable and or attributable in the instant case even otherwise, interest charged u/s 234B and also u/s 234D of the Act is excessive. 2. That impugned assessment order together with the (Tax) Computation Sheet thereto attached and forming part thereof and also the impugned Appellate Order so far as it/ they relate to the said addition of Rs 6,61,299/- and interest under section 234B is otherwise illegal and or void ab-initio: Prayer and Relief Claimed: 3. That Hon’ble Income Tax Appellate Tribunal (‘Tribunal’ in brief)may be pleased to delete or directing the authorities below so to do the entire addition of Rs 6,61,299/-erroneously and or illegally made by Ld Assessing Officer and similarly upheld/ sustained by Ld Appellate Authority on alleged ground. 4. The Appellant craves leave to add to, amend, alter, substitute and or otherwise modify all or any of the said Grounds of Appeal and 5. That Appellant craves leave to adduce/ produce evidence including Additional Evidence as may be required, at or before.” 3. At the outset, the ld. Counsel for the assessee submitted that there is a delay of 42 days in filing of the appeal. This delay was stated to be neither deliberate nor intentional but was due to the pandemic circumstances prevailing at that time. We take note of the pandemic situation where the movement of people were restricted and because of such practical situation, it was always not possible to follow the time of limitation regarding filing of appeal before various forums. This fact was also observed and taken cognizance of by the Hon’ble Supreme Court of India, in Civil Original Jurisdiction, Suo Moto Writ Petition (Civil) No. 3 of 2020 dated 8th March, 2021. The assessee has also filed separately condonation petition. The ld. D/R agreed for the condonation of delay of 42 days. After hearing the parties and taking guidance from the decision of the Hon’ble Supreme Court (supra), we condone the delay of the assessee and proceed to hear the case on merits.
Sole grievance of the assessee relates to disallowance of trading/business loss claimed at Rs.6,61,299/- on account of advance forfeited. Brief facts pertaining to this issue are that the assessee is a private limited company and has declared income of Rs.24,93,790/- in the return of income filed on 23.10.2017. The case selected for scrutiny under CASS followed by serving of notices u/s 143(2) and 142(1) of the Act. As far as the issue of the appeal is concerned, we find that the assessee has given
3 I.T.A. No.: 234/Kol/2021 Assessment Year: 2017-18 Melcon (Vizag) Private Limited. advance of Rs.6,61,299/- to M/s. Ridhi Siddhi Crusher and Land Transport LLC, Fujairah, UAE (in short ‘Ridhi Siddhi) for importing certain raw materials used in cement factories. A contract dated 14.12.2016 was entered between assessee and ‘Ridhi Siddhi’ but the same was subsequently cancelled as the assessee expected a discount in the purchases but the same was not acceptable to M/s. Ridhi Siddhi. To settle the matter USD 9772 (Indian Rs.6,61,299/-) was paid and claimed as advance forfeited under the head ‘business loss’. The ld. AO disallowed this claim. When the matter was carried before the ld. CIT(A), he also confirmed the view of the AO and also stated that the signed copy of the said contract was not placed on record.
Aggrieved, the assessee is now in appeal before this Tribunal. Ld. Counsel for the assessee vehemently argued referring to paper book containing 144 pages and further stated that Mr. Kamal Khara who signed the contract with M/s. Ridhi Siddhi is expired before some time. The alleged amount of Rs.6,61,299/- is purely a business loss which needs to be allowed. Reference was further made to another paper book dated 06.12.2021 containing 52 pages.
Per contra, ld. D/R vehemently argued supporting the order of both the lower authorities.
We have heard the rival contentions and perused the records and carefully gone through the documents filed before us. The assessee’s sole grievance is that ld. CIT(A) erred in not allowing the claim of business loss of Rs.6,61,299/- incurred on account of advance forfeited by a foreign seller namely M/s. Ridhi Siddhi constituted at UAE.
7.1. We notice that the assessee is engaged in business and turnover during AY 2017-18 is 59.60 crores (approx) and profit before tax is Rs.24,70,215/-. The assessee used to purchase low silica high grade limestone from M/s. Ridhi Siddhi in the past. Invoice dated 12.12.2016 placed at page 131-132 support this fact. The assessee also entered into a sale and purchase contract on 14.12.2016 and certain terms and conditions
4 I.T.A. No.: 234/Kol/2021 Assessment Year: 2017-18 Melcon (Vizag) Private Limited. were finalized. A copy of agreement is placed at page 107-117 of the paper book. In Clause 6.0 of this agreement a condition is mentioned as per which in the event of the buyer not purchasing the material, an amount of USD9772 (Indian Rs.6,61,299/-) will be deducted out of the advance amount as commitment/incidental charges.
7.2. Further, we notice that the assessee gave certain orders for purchase of material but could not reach to a consensus for the discount on the purchases and the seller did not accept the proposal. Due to this reason, the assessee cancelled the contract and for doing this act the advance amount to the extent of Rs.6,61,299/- was forfeited. All these series of facts and looking to the gross turnover of the assessee company, we find merit in the contention of the ld. Counsel for the assessee that the alleged amount is purely a business loss which is incurred in the regular course of doing the business of purchase and sale. We are also satisfied that the alleged amount cannot be treated as capital advance as it was paid for purchasing raw material used by the cement industries.
Under these given facts and circumstances, we are of the considered view that the ld. CIT(A) erred in denying the claim of advance forfeited of Rs.6,61,299/- as an expenditure. We direct the AO to allow this claim of the assessee. The finding of the ld. CIT(A) is set aside and grounds raised by the assessee challenging the disallowance on advance forfeited at Rs.6,61,299/- are allowed and remaining grounds, being general and consequential in nature, need no adjudication.
In the result, the appeal of the assessee is allowed. 9. Kolkata, the 25th February, 2022. Sd/- Sd/- [Sonjoy Sarma] [Manish Borad] Judicial Member Accountant Member Dated: 25.02.2022 Bidhan (P.S.)
5 I.T.A. No.: 234/Kol/2021 Assessment Year: 2017-18 Melcon (Vizag) Private Limited. Copy of the order forwarded to: 1. Melcon (Vizag) Private Limited, C/o. Baid & Company, Chartered Accountants, 10C, Ballygunge Circular Road, Kolkata-700 019. 2. i) Income Tax Officer, Ward-4(2), Kolkata. 3. ii) Commissioner of Income Tax (Appeals)-2, Kolkata. 4. CIT(A)- National Faceless Appeal Centre (NFAC). 5. CIT- 6. CIT(DR), Kolkata Benches, Kolkata.