LEATHER GRAPHICA,KOLKATA vs. ITO, WARD - 32(1), KOLKATA

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ITA 2108/KOL/2018Status: DisposedITAT Kolkata22 March 2019AY 2006-072 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal deleted the disallowance on cash payments, citing a jurisdictional High Court decision regarding the leather business. It also deleted the disallowance under Section 40(a)(ia) due to lack of nexus with contractual payments. The ground regarding undisclosed income was not pressed.

What were the facts?

The assessee challenged disallowances made by the lower authorities. These included 20% of cash payments exceeding ₹20,000 for purchases and disallowance under Section 40(a)(ia) for tanning charges paid to certain parties.

What were the issues?

Whether cash payments exceeding ₹20,000 in the leather business are disallowable and if tanning charges paid to certain parties constitute contractual payments attracting disallowance under Section 40(a)(ia).

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 194C

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, KOLKATA BENCH “SMC” KOLKATA

Before: Shri S.S, Godara

This assessee’s appeal for assessment year 2006-07, arises against the Commissioner of Income-tax (Appeals)-9, Kolkata’s order dated 29.05.2018 passed in case No.386/CIT(A)-9/Wd-32(1)/2014-15/Kol involving proceedings u/s. 143(3) r.w.s. 254 r.w.s. 251 of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused.

2.

The assessee’s first substantive ground challenges correctness of both the lower authorities’ action disallowing 20% its cash payments exceeding of ₹20,000/- amounting to ₹2.85 lac; coming to ₹57,000/- on account of purchases made from M/s S.R. Leathers. There is no dispute that this assessee is a dealer in tanning skin latter case revenue and latter hon'ble jurisdictional high court’s decision in CIT vs. CPL Tannery 318 ITR 179 (2008) (Cal) holds that cash payments in this line of leather business is covered under Rule DD(f)(ii) of the Income Tax Rules, 1962 as the ITA No.2108/Kol/2018 A.Y. 2006-07 Leather Graphica vs. ITO Wd-32(1), Kol. Page 2 payees/ suppliers had to be recognized as purchaser of hides/skin. I adopt the said detailed reasoning mutatis mutandis to delete this first disallowance of ₹57,000/-.

3.

Next comes undisclosed income addition. Mr. Agarwal is fair enough in not pressing for this ground keeping in mind smallness of the amount involved. I decline this second substantive ground in above terms accordingly.

4.

Next comes sec. 40(a)(ia) disallowance made of ₹3,04,122/- made in both lower proceedings. The Assessing Officer as well as CIT(A) treat assessee’s tanning charges paid to Md. Anwar and M/s R.H. Tannery to be contractual payments u/s/. 194C of the Act. There is no nexus in either in assessment order or CIT(A)’s findings that they are exceeded in earlier or written contract between assessee and these two payees. I therefore delete the impugned disallowance in this count alone.

5.

This assessee’s appeal is partly allowed in above terms. Order pronounced in open court on 22/03/2019 (S.S. Godara) Judicial Member Kolkata, *Dkp/Sr.PS "दनांकः- 22/03/2019 कोलकाता आदेश क" ""त"ल"प अ"े"षत / Copy of Order Forwarded to:- 1. अपीलाथ"/Appellant-Leather Graphica C/o Subash Agarwal & Associates Siddha Gibson, 1, Gibson Lane, Suite-213, 2nd Floor, Kolkaktg-69

2.

""यथ"/Respondent-ITO Wd-32(1), Aayakar Bhawan, Poorba, 110, Shantipally, Kolkata-107 3. संबं"धत आयकर आयु%त / Concerned CIT 4. आयकर आयु%त- अपील / CIT (A) 5. &वभागीय ")त)न"ध, आयकर अपील"य अ"धकरण कोलकाता / DR, ITAT, Kolkata 6. गाड+ फाइल / Guard file. By order/आदेश से, // सहायक पंजीकार आयकर अपील"य अ"धकरण, कोलकाता ।

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