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Income Tax Appellate Tribunal, C/“SMC” BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI
आदेश / O R D E R
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal is filed by the assessee, aggrieved by the order of the Learned Commissioner of Income Tax(A)-5, Chennai dated 27.07.2017 pertaining to assessment year 2013-14.
The assessee has raised the following grounds for adjudication.
1. The order of The Commissioner of Income Tax (Appeals) 5, Chennai dated 27.07.2017 in l.T.A.No.72/CIT(A)-5/2016-17 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.
2. The CIT (Appeals) erred in confirming the assessment of Rs.7,68,000I- being the interest payment to M/s RTG Exchange P Ltd. in the computation of taxable total income without assigning proper reasons and justification. 3. The CIT (Appeals) failed to appreciate that having noticed the frequency of transactions between the appellant and the said company, the disallowance of such sum on wrong presumption of facts and for want of further evidence especially overlooking the reply letter dated 14.3.2016 was wrong, erroneous, unjustified, incorrect and not sustainable in law. 4. The CIT (Appeals) failed to appreciate that the conclusions reached from para 5 of the impugned order were wholly unjustified and ought to have appreciated that the failure to cross examine the company would vitiate the said findings of the First Appellate Authority in sustaining the addition. 5. The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law. 6. The Appellant craves leave to file additional grounds/arguments at the time of hearing.
The brief facts of the case are that the assessee is trader in steel business in the name and style of N/s. Real Metal & Alloys. In response to notices issued u/ 143(2) & 142(1) by ld. Assessing Officer, the assessee flied details documents on the basis of which return of income was filed along with other information / documents as called for u/s 142(1) during the course of assessment proceedings. After verification of the same and taking into the record available during the course of assessment proceedings, the assessment is finalized by the ld. Assessing Officer in the following manner.
3.1 The assessee has shown credit balance of Rs.70,91,200/- in the name of M/s.RTG Exchange Pvt Ltd. However, in that party book it had shown debit balance of Rs.60,52,379/- only in the name of the assessee. On scrutiny, it is found that entry for the interest amounting to Rs.7,68,000/- has not been confirmed by the said company.
Hence, the assessee was requested vide order sheet entry dated 17/03/2016 to show cause why this amount of Rs,7,68,000/- should not be disallowed. In this regard the AR of the assessee has stated that the letter dated 14/03/2016 may be treated as reply to this. The contents of the said letter is reproduced below:-
“These explanation is in continuation to earlier explanation of RTG Exchange Ltd., I would like to mention that Initial loan was taken month of June 2008 and the same was squared off in F,Y.2011-12. Interest were provided from F.Y.2008-09 to F.Y.2011-12 and loan was paid off with interest on 20th June 2011. A fresh loan was taken on 2gth March, 2012 which was carried forwarded in F. V.2012-13. So, it is clearly evident that I provide interest every year and close the loan after few years with interest. I am enclosing ledge copies from F.Y.2008-09 to F.Y.2011-12 and bank statements showing acceptance and repayment transaction’ 3.2 From the above letter, ld. Assessing Officer found that earlier loan was taken in the year 2008 and the same was squared off in F.Y.2011-12. He has not given any explanation regarding the query raised in the show cause pertaining to the allowability of interest pertaining to the A.Y.2013-Therefore, a sum of Rs.7,68,000/- is hereby added to the income returned in this regard. Aggrieved by the order of ld. Assessing Officer, the assessee carried the appeal before the Ld.CIT(A). On appeal, Ld.CIT(A) confirmed the addition on the reason that M/s.RTG Exchange Pvt Ltd., is not confirmed the receipt of such amount.
I have heard both the parties and perused the material on record. Admittedly, in this case, the assessee followed the Mercantile system of accounting and the assessee provided interest on outstanding balance and also deducted TDS from the said amount, which was disclosed to the Department. More so, M/s.RTG Exchange Pvt Ltd., paid the interest receipt on cash basis. As such, the ld. Assessing Officer cannot be found fault with the assessee for not disclosing the said receipt by M/s.RTG Exchange Pvt Ltd. In my opinion, the claim of assessee is to be allowed as business deduction and the same is allowed.
In the result, the appeal of assessee is allowed. Order pronounced on 08th December, 2017. Sd/-
(चं� पूजार�) (CHANDRA POOJARI) लेखा सद�य /ACCOUNTANT MEMBER