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Income Tax Appellate Tribunal, “A” BENCH : KOLKATA
Before: Hon’ble Shri A T Varkey, JM, & Shri M.Balaganesh, AM]
This appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax(Appeals)-Burdwan [in short the ld CIT(A)] in Appeal No. 251/CIT(A)/Asl/ACIT/Cir-2/BWN/2014-15 dated 23.05.2018 against the order passed by the ACIT, CC-VI , Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 29.03.2014 for the Assessment Year 2011-12.
The first issue to be decided in this appeal is as to whether the ld CITA was justified in upholding the disallowance made in the sum of Rs 48,500/- u/s 40A(3) of the Act in the facts and circumstances of the case.
M/s R.K. Industries A.Yr. 2011-12 2.1. The brief facts of this issue are that the assessee is a partnership firm running a rice mill and had filed its return of income for the Asst Year 2011-12 on 27.9.2011 declaring total income of Rs 5,09,968/-. The ld AO observed in his order that the authorized representative of the assessee appeared from time to time in the assessment proceedings and furnished the requisite details that were called for. The ld AO observed from the ledger of ‘Loading and Unloading Charges’ that assessee had paid an amount of Rs 48,500/- in cash in a single day and for want of satisfactory explanation regarding the reasons for paying the same in cash, the ld AO disallowed the same u/s 40A(3) of the Act. The assessee during the appellate proceedings submitted that loading and unloading operations demand involvement of many persons in a single day and that payment has been made to various labourers but entered in the cash book as amount paid to a single person. The ld CITA dismissed the ground of the assessee on the ground that the assessee had not submitted any documentary evidence or even details as to who were the persons to whom such payment of loading and unloading charges were made. Aggrieved, the assessee is in appeal before us.
2.2. We have heard the rival submissions. We find that the ld AR argued that the genuinity of expenses was not doubted by the revenue and hence the expenditure though paid in excess of Rs 20,000/- in cash should not be disallowed u/s 40A(3) of the Act. In this regard, we find that the ld AO never had an occasion to go into the genuineness of transactions nor the assessee furnished any details with supporting evidences to even look into the same. In fact the ld CITA had dismissed this ground for want of furnishing of details by the assessee. Even before us, except making a bald statement, no evidences were submitted by the assessee for incurrence of the said expenditure. Hence we hold that the ld CITA had rightly confirmed the disallowance u/s 40A(3) of the Act in the facts and circumstances of the case. Accordingly, the Ground No.1 raised by the assessee is dismissed.
M/s R.K. Industries A.Yr. 2011-12 3. The next issue to be decided in this appeal is as to whether the ld CITA was justified in confirming the addition of Rs 2,05,217/- towards undisclosed income in the facts and circumstances of the case.
3.1. The brief facts of this issue are that during the assessment proceedings, the ld AO noted that the assessee did not disclose TDS amounting to Rs 4,649/- and corresponding income of Rs 2,05,217/- received from Food Corporation of India, Krishnagar, Nadia. Hence the sum of Rs 2,05,217/- was added to the total income of the assessee by the ld AO for want of satisfactory explanation. During the appellate proceedings, the assessee submitted that the levy rice was supplied to Food Corporation of India (FCI in short) and transport charges incurred by it were reimbursed in full at the end of the season by FCI. The bill for the same was raised on 9.9.2010 for Rs 2,05,217/- and cheque was received for Rs 2,00,568/- and difference of Rs 4,649/- was accounted by the assessee as discount allowed in the absence of any advice or intimation or TDS certificate from FCI accompanying the cheque. It was contended that the transport charges being reimbursed in full, such transaction was not reflected in profit and loss account. The ld CITA observed that assessee had not entered the account in the appropriate accounting heads. Had it been a case of actual reimbursement, the concerned expense account as well as the party’s ledger account should have shown entires evidencing the actual transaction. The assessee’s contention of the sum being discount is factually incorrect as it was a case of TDS of Rs 4,649/- . The ld CITA observed that the ledger of transport charges recovery account now produced is a squared off account during the year. Since no vouchers, truck receipts or any of the acknowledgement by FCI were tendered as an evidence, he confirmed the addition made by the ld AO as undisclosed income in the sum of Rs 2,05,217/-. Aggrieved, the assessee is in appeal before us.
3.2. We have heard the rival submissions. We find that the assessee had furnished the ledger account of transport charges recovery account before the ld CITA and the ld 3
M/s R.K. Industries A.Yr. 2011-12 CITA acknowledges that it is a squared off account. This goes to prove that the transport charges incurred by the assessee on behalf of FCI had been debited in a separate account in Balance Sheet ( and not routed through profit and loss account as an expense) and thereafter the same was reimbursed by FCI to the assessee and on said reimbursement, the account gets squared off. Since FCI had paid transport charges , it had deducted TDS of Rs 4,649/-. Even though the said sum of Rs 4,649/- has been wrongly accounted as discount allowed by the assessee instead of TDS, the same would not automatically result in addition of undisclosed income of Rs 2,05,217/- in the facts of the instant case. We hold that the sum of Rs 2,00,568/- actually received by the assessee together with TDS thereon of Rs 4,649/- is only reimbursement of expenses which had been routed off as a balance sheet item and which account had been squared off in the said ledger during the year, cannot be brought to tax in the hands of the assessee. We find that the ld CITA having accepted the fact that the ledger of transport charges recovery account produced by the assessee is squared off account, ought not to have expected the assessee to first claim the expense incurred as an expenditure in its profit and loss account and thereafter credit the same on receipt of reimbursement of expenses. In either case, the effect on the net profits would be the same. Hence we have no hesitation in directing the ld AO to delete the said addition of Rs 2,05,217/- in the assessment but correspondingly the ld AO should disallow the sum of Rs 4,649/- which was wrongly claimed as discount allowed in the return of income. Accordingly, the Ground No.2 raised by the assessee is partly allowed.
The last issue to be decided in this appeal is as to whether the ld CITA was justified in upholding the disallowance of Rs 6,852/- towards delayed payment of provident fund in the facts and circumstances of the case.
4.1. The brief facts of this issue are that the ld AO from the perusal of the tax audit report observed that the assessee had made delayed remittance of employees provident 4
M/s R.K. Industries A.Yr. 2011-12 fund to the tune of Rs 19,460/- beyond the due dates prescribed under the PF Act. Accordingly, the same was disallowed in the assessment. The ld CITA observed from the chart of date of payments for each month, that the payments have been made before the due dates taking into account the grace period of 5 days by placing reliance on CPFC’s Circular NO. E.128(1) 60-III dated 19.3.1964 as modified by Circular No. E11/128(Section 14-B Amendment)/73 dated 24.10.1973. Accordingly, he granted relief to the extent of Rs 12,608/- taking into account the grace period fo 5 days and confirmed the remaining sum of Rs 6,852/- which were paid beyond the grace period of 5 days. Aggrieved, the assessee is in appeal before us.
4.2. We have heard the rival submissions. The dates of remittance of PF are duly recorded in the assessment order. From the same, it is seen that the PF had been duly remitted before the end of the previous year itself , of course with some delay. This issue has been held in favour of the assessee by the Hon’ble Jurisdictional High Court in the case of Vijay Shree Cement reported in 43 taxmann.com 396 (Cal HC). Respectfully following the same, we direct the ld AO to grant deduction of Rs 6,852/- to the assessee. Accordingly, the Ground No. 3 raised by the assessee is allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 24.10.2018