M/S. AGH BATWAWALA,,KOLHAPUR vs. INCOME-TAX OFFICER,,

आदेश / ORDER

PER VIKAS AWASTHY, JM

This appeal by assessee is directed against the order of Commissioner of Income Tax (Appeals), Kolhapur dated 18.12.2013 for the assessment year 2010-11.

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is a wholesale trader of Vanaspati oil, Rava, Maida, Aata, Sugar etc. The

assessee filed its return of income for the impugned assessment year on

06.10.2010 declaring total income of Rs.12,86,290/-. The case of the assessee

was selected for scrutiny. Accordingly, statutory notice u/s.143(2) of the

Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) was issued to the

assessee on 27.09.2011 which was duly served on the assessee. During the

course of scrutiny assessment proceedings, the Assessing Officer made

following additions/disallowances:

Sr. Additions/disallowances made by Rs. No. Assessing Officers

Rs.41,25,640/- 1. Addition made on account of Unexplained Cash credit u/s.68 of the Act.

appeal before the Commissioner of Income Tax (Appeals). The Commissioner of

Income Tax (Appeals) vide impugned order confirmed the additions made by

the Assessing Officer. Now, the assessee is in second appeal before the

Tribunal assailing the findings of Commissioner of Income Tax (Appeals)

confirming the additions. The grounds raised by assessee in appeal are as

under:

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“1. The learned C.I.T.[A] has grossly erred in confirming the addition of Rs.41,25,640.00 made by the learned Assessing Officer u/s.68 of the IT. Act, 1961. While doing so the learned CIT[A] has failed to appreciate that the impugned amounts were discounts received which were offered for taxation in the subsequent years on receipt of the intimation from the supplier/upon reconciliation of accounts according to the method of accounting regularly followed by the appellant assessee. The said addition being devoid of merits the same may please be deleted.

Additional Ground :

“Without prejudice to Ground of appeal No.1 and by way of an alternate prayer the appellant assessee would like to submit that the addition of Rs.41,25,640.00 made by the learned Assessing Officer u/s. 68 of the I.T.Act 1961 on account of discount allegedly received by the appellant assessee during the relevant previous year from its various suppliers is confirmed by the Hon. Bench then a direction may please be issued to the learned Assessing Officer that the amounts of said discounts offered for taxation by the appellant for subsequent years be reduced from the taxable incomes of the respective years.”

Assessing Officer has erred in making addition of Rs.41,25,640/- on account

of unexplained cash credit. During assessment proceedings, the Assessing

Officer found difference in balances as per party’s accounts and as per

assessee’s books of account. The assessee explained that the difference is on

account of discount given by the parties to the assessee. The Assessing Officer

held that since the assessee is following mercantile system of accounting, the

entire amount of discount received/receivable should have been accounted for

and offered for taxation in assessment year 2010-11. However, the assessee

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has offered the amount to tax as and when the discounts offered by suppliers

are confirmed.

4.1 The ld. AR pointed that the assessee has already offered the amount of

discount under consideration to tax in the subsequent assessment years. The

assessee declare discount in his return of income as and when they are

allowed to the assessee by suppliers. Since, the assessee has offered the

discounts to tax in subsequent years, the addition made in the assessment

year under appeal has resulted in double taxation of the same amount. The ld.

AR contended that in the assessment year under consideration and

subsequent assessment years, the income of the assessee is taxable at

maximum tax rate, therefore, there is no loss of the revenue. The assessee has

no intention of postponement of tax or to avoid payment of taxes.

4.2 The ld. AR made alternate prayer without prejudice to his earlier

submissions, by way of additional ground that if the addition of

Rs.41,25,640/- is to be confirmed then the discount offered for taxation in

subsequent assessment years may be reduced from taxable income in the

respective assessment years.

Authorities below have erred in making disallowance of Rs.4,89,436/-. The

assessee has paid interest on deposits to four persons aggregating to

Rs.4,89,436/- No tax at source was deducted on the interest payment as

Form-15G was received from the said persons. The Assessing Officer made

addition of the aforesaid amount merely on the ground that there was delay in

furnishing copy of Form-15G to the office of Commissioner of Income Tax-I,

Kolhapur. The ld. AR pointed that Co-ordinate Bench of the Tribunal in the

case of Smt. Anandidevi Gairola Vs. Commissioner of Income Tax (Appeals) in

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ITA No.1247/PN/2012 for assessment year 2006-07 decided on 30.09.2013 in

similar circumstances, deleted the addition where Form-15G/15H were

furnished belatedly.

the Act, the ld. AR submitted that the assessee had paid annual salary of

Rs.83,200/- each to i) Asama Dhankwala ii) Shakishta H. Dhankwala and iii)

Safina G. Dhankwala. Undisputedly, these three ladies are covered under

section 40A(2)(b) of the Act. All these three ladies are Graduate and are

helping the assessee in conducting business. The ld. AR contended that

assessee carries its business from various locations. The assessee has a shop

near Kolhapur Municipal Corporation and three godowns at Market Yard,

Kolhapur. The assessee has shortage of staff. The assessee is receiving goods

from various places and are delivered to various different places. The above

said persons are assisting the assessee in managing business affairs.

6.1 The ld. AR submitted that keeping in view the fact that above said

persons are Graduate and are receiving monthly salary of Rs.6,900/-, the

salary paid to the said persons is under reasonable. The Assessing Officer

disallowed 40% of the salary paid to the above said persons without any basis.

The Commissioner of Income Tax (Appeals) confirmed the disallowance in a

mechanical manner.

submitted that the assessee had claimed expenditure of Rs.1,05,552/- in P &

L account on account of subscription & contribution, travelling expenses and

vehicle maintenance etc. The Assessing Officer without giving any reason,

made ad-hoc disallowance of Rs.15,000/- from aforesaid expenditure.

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vehemently defended the order of Commissioner of Income Tax (Appeals). The

ld. DR submitted that the impugned order is well-reasoned and balanced. The

assessee has failed to substantiate his submissions before Authorities below

with cogent evidence.

and have perused the orders of Authorities below.

9.1 In ground No. 1 of appeal the assessee has assailed addition of

Rs.41,25,640/- on account of unexplained cash credit u/s. 68 of the Act. The

ld. AR of the assessee contended that this amount represents discount. The

Commissioner of Income Tax (Appeals) has rejected the contentions of

assessee by observing as under:

“4.Before the undersigned, the explanation of the assessee remains the same. It was submitted that since the purchases made by the assessee from various parties have been proved, the credit entries pertaining to corresponding purchases should be accepted. Having considered assessee's explanation, I find that the appellant's contention that discount is accounted for as and when received is not backed by evidence. It cannot be accepted that the appellant does not maintain accounts of customers and in case it maintains, the same cannot be reconciled customer-wise. Plain confirmation filed before the assessing officer without account extracts cannot be accepted on face value. Before me, the authorized representative of the appellant has filed a chart showing therein that discounts have been credited in financial years 2010-11, 2011-12 and 2012-13. There is no reconciliation of how much was the discount received, how much was credited and there is no evidence regarding crediting of the amounts in these years. Therefore, explanation of appellant cannot be accepted. The ground is rejected and addition is sustained.”

Before us, the ld. AR of the assessee could not controvert the findings of

the Commissioner of Income Tax (Appeals). The only submission by ld.AR is

that the difference is on account of discounts received from suppliers. Merely

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on bald assertions the addition cannot be deleted. Accordingly, ground No. 1

raised in appeal by assessee is dismissed.

9.2 The ld. AR of the assessee has raised alternate plea by way of additional

ground to reduce the amount of discount offered by assessee in subsequent

assessment years from taxable income. The ld. AR submitted that assessee

has offered discounts in the subsequent assessment years, as and when they

were confirmed by the suppliers. The addition of the discount in the

assessment year under appeal would result in double taxation of the same

amount. We find merit in the submissions made by ld. AR of the assessee.

However, this ground requires verification of facts. Accordingly, we deem it

appropriate to remit the additional ground raised by assessee in appeal to the

file of Assessing Officer for verification of the facts. If the assessee has offered

discounts in the subsequent assessment years, the same may be reduced from

taxable income of the respective assessment years, in accordance with law.

Accordingly, additional ground raised by assessee is allowed for statistical

purposes.

Rs.4,89,436/- u/s. 40(a)(ia) of the Act. It has been submitted by the ld. AR of

the assessee that this disallowance has been made as assessee has furnished

Form-15G belatedly. We find that Pune Bench of Tribunal in the case of Smt.

Anandidevi Gairola Vs. Commissioner of Income Tax (Appeals) (supra.) has

allowed the claim of assessee where Form-15G were furnished beyond the time

specified under the Act. The relevant extract of the order of Tribunal is

reproduced herein below:

“9. In the case of Vipin P. Mehta Vs. ITO (supra) the assessee had paid interest to 34 parties aggregating Rs.7,87,291/ - but did not deduct tax at

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source u/s.194A. It was claimed by the assessee that all the payees to whom the interest was paid have furnished declarations in Form No. 15G/15H to the assessee. The assessee stated before the Assessing Officer that the said forms were filed belatedly by mistakes. The Tribunal also observed that even if the assessee have belatedly filed the declarations with the office of CCIT /CIT beyond the time limit specified in Sec.197A(2) that amount to omission or default for which the penalties prescribed and no disallowance u/s. 40(a)(ia) can be made.

Thus, in view of the facts of the case and decision of Co-ordinate Bench

of the Tribunal, we find merit in the ground raised by assessee. Accordingly,

disallowance of Rs.4,89,436/- is directed to be deleted. Thus, ground No. 2

raised in appeal by assessee is allowed.

u/s. 40A(2)(b) of the Act, The assessee has paid salary to i) Asama Dhankwala

ii) Shakishta H. Dhankwala and iii) Safina G. Dhankwala at the rate of

Rs.83,200/- per annum each. The ld. AR submitted that all the above said

persons are graduate and are assisting assessee in managing business. The

assessee is conducting its business from various places. The assessee has a

shop near Kolhapur Municipal Corporation and three go-downs at Market

Yard. The above said persons are helping the assessee in managing affairs of

9 ITA No.368/PUN/2014 A.Y.2010-11

business efficiently. In so far as reasonability of expenditure is concerned, the

ld. AR of the assessee stated at Bar that all the three ladies are graduate.

Taking into consideration entirety of facts, we are of considered view that

salary of Rs.83,200/-per annum for each of the ladies, appears to be

reasonable. The Assessing Officer before making disallowance of 40% has not

made any enquiries to find out the salary paid for conducting similar work.

The Assessing Officer made ad-hoc disallowance and the Commissioner of

Income Tax (Appeals) upheld the same in a mechanical manner. Therefore, in

our view the disallowance of Rs.99,840/- u/s.40A(2)(b) is not warranted and

thus, the same is directed to be deleted. Accordingly, ground no. 3 raised in

appeal by assessee is allowed.

disallowance of Rs.15,000/-. The assessee has claimed total expenditure of

Rs.1,05,552/- on account of vehicle maintenance, repairs etc. The Assessing

Officer made ad-hoc disallowance of Rs.15,000/- as the expenses were

supported by self made vouchers and on the premise that there is an element

of personal expenditure. The disallowance of lump sum amount of

Rs.15,000/- in the facts of the case appears to be reasonable and justified.

We are, therefore, not inclined to interfere with the findings of Assessing

Officer/ Commissioner of Income Tax (Appeals). Accordingly, ground No. 4

raised in appeal by assessee is dismissed.

requires no adjudication.

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Order pronounced on Wednesday, the 25th day of April, 2018.

Sd/- Sd/- (डी. क�णाकरा राव/D. KARUNAKARA RAO) (�वकास अव�थी /VIKAS AWASTHY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 25th April, 2018 SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (appeals), Kolhapur. 4. The CIT-I/II, Kolhapur /CIT (Central), Kolhapur. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

//True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.