LATE JAGMOHAN JALAN(HUF),KOLKATA vs. DCIT, CIRCLE-32, KOLKATA, KOLKATA

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ITA 1916/KOL/2016Status: DisposedITAT Kolkata27 June 2018AY 2013-143 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal reduced the disallowance on freight and delivery charges from 30% to 10%, considering it an ad-hoc disallowance. For professional service charges, the Tribunal accepted the assessee's plea based on a High Court ruling regarding the retrospective effect of a proviso to Section 40(a)(ia), leaving verification to the AO.

What were the facts?

The assessee, a distributor of consumer goods, claimed freight, delivery, and other charges. The Assessing Officer disallowed 30% of this expenditure for lack of supporting evidence, and the CIT(A) upheld this. The assessee also paid professional service charges without deducting TDS.

What were the issues?

Whether the disallowance of freight and delivery charges was excessive, and whether disallowance of professional service charges is warranted when the payees are assessed and a proviso to Section 40(a)(ia) applies.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 201(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BENCH ‘B’ KOLKATA

Before: Hon’ble Shri S.S.Godara, JM & Shri M.Balaganesh, AM ]

ORDER PER S.S.GODARA, JM:

This assessee’s appeal for A.Y.2013-14 arises against the ld. CIT(A)-9, Kolkata’s order dated 31.08.2016 passed in Appeal No.10/CIT(A)-9/Cir-32/2016- 17/Kol. upholding the Assessing Officer’s action disallowing/adding freight, delivery and other charges expenditure of Rs.26,96,065/- out of total amount of Rs.89,86,884/- legal consultancy and professional services of Rs.1,69,900/- and Rs.1,31,400/- paid in case of M/s Pan India Law Associates and Shri Sajal Kumar Pal Shri S.K.Pal for not having deducted TDS thereupon, respectively involving proceedings u/s 143(3) of the Income Tax Act, 1961 (Act). Heard both the parties reiterating their respective stands on both the issues. Case file perused.

2.

We advert to the former issue of debit/estimate of Rs.26,96,065/-@30% out of total expenditure of Rs.89,86,884/-. This assessee is a distributor of consumer goods. It claimed the above gross expenditure to have been incurred on freight, delivery and other charges. The Assessing Officer disallowed the same @30% coming to the impugned sum of Rs.26,96,065/- after alleging that the assessee failed to furnish all Lalit Jagmohan Jalan (HUF) A.Y.2013-14 2 the corresponding supporting evidence to substantiate the same during the course of scrutiny. The CIT(A) affirmed the Assessing Officer’s action in lower appellate order under challenge.

3.

We have given our thoughtful consideration to the rival submissions against and in favour of the impugned disallowance. Learned Departmental Representative fails to dispute the fact that such kind of expenditure is of a routine nature in assessee’s line of business involving distribution of consumer goods since involving freight, delivery charges. The fact also remains that the Assessing Officer as well as the CIT(A) have already accepted the impugned claim to the extent of 70% meaning thereby there is further no quarrel as far as genuineness of the claim in question is concerned. We observe in this peculiar facts that the impugned adhoc disallowance/estimated disallowance @30% is on a higher side. We take into account all these facts in assessee’s business as well as the relevant findings of the lower authorities to conclude that larger interest of justice would be met if the impugned disallowance is restricted to 10% and not 30% as is the case in the CIT(A)’s order. We therefore direct the AO to confine the impugned disallowance to Rs.8,98,688/- only. The assessee gets part relief. It is made clear that our instant estimation would not be taken as a precedent in any preceding or succeeding assessment year.

4.

Next is the issue of assessee’s legal consultancy and professional service charges of Rs.1,69,900/- and Rs.1,31,400/- paid to M/s Pan India Law Associates and Shri Sajal Kumar Pal. There is no doubt that the assessee has not deducted TDS thereupon in either of the two cases forming the reasons for invoking section 40(a)(ia) of the Act. Learned counsel’s only plea before us is that the said two payees stand assessed qua the above stated expenditure. He quotes section 40(a)(ia) 2nd proviso that the impugned disallowance does not come into play in case the tax payer is not an assessee in default u/s 201(1) 1st proviso of the Act. Hon’ble jurisdictional high court in PCIT vs Tirupati Construction Company ITAT No.287 of 2016 in G.A.No.2146 of 2016 has already concluded that the above second proviso to section 40(a)(ia) inserted by the Finance Act 2012 w.e.f. 01.04.2013 carries retrospective effect being curative Lalit Jagmohan Jalan (HUF) A.Y.2013-14 3 in nature. We therefore accept the assessee’s instant latter substantive ground in principle and leave it open for the Assessing Officer to carry out necessary verification as per law after affording adequate opportunity of hearing.

5.

This assessee’s appeal is partly allowed in the above terms.

Order pronounced in the Court on 27.06.2018.

Sd/- Sd/- [M.Balaganesh] [ S.S.Godara ] Accountant Member Judicial Member Dated : 27.06.2018. [RG Sr.PS] Copy of the order forwarded to: 1.Lalit Jagmohan Jalan (HUF), 26, Shakespeare Sarani, Kolkata-700017. 2 .D.C.I.T., Circle-32, Kolkata.. 3. C.I.T.(A)- 9, Kolkata 4. C.I.T-11, Kolkata 5. CIT(DR), Kolkata Benches, Kolkata. True Copy By order,

Senior Private Secretary Head of Office/D.D.O, ITAT Kolkata Benches

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