DHRUB NARAYAN BHADANI,KOLKATA vs. ACIT, CIR-39, KOLKATA, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH ‘A’, KOLKATA [Before Shri P.M. Jagtap, AM and Shri S.S. Viswanethra Ravi, JM] I.T.A. No. 28/Kol/2016 Assessment Year: 2009-10 Dhrub Narayan Bhadani..............................………………………………………...Appellant C/o. B.S. Sahay & Co., Room No. 431, Centre Point, 21, Hemanta Basu Sarani, Kolkata - 700001 [PAN : AKDPB3207D] A.C.I.T., Cir 39, Kolkata………………………………………………......................Respondent 3, Govt. Place, Kolkata - 700001 Appearances by: Shri R.S. Sahay, FCA appearing on behalf of the Assessee. Shri D.Z. Chowngthu, Addl. CIT appearing on behalf of the Revenue. Date of concluding the hearing : November 08, 2017 Date of pronouncing the order : November 10, 2017 ORDER Per P.M. Jagtap, AM This appeal filed by the assessee is directed against the order of Ld. CIT (Appeals) – 11, Kolkata dated 16.10.2015. 2. Ground no 1 raised by the assessee in this appeal reads as under: “The Ld. CIT (A) is not justified in confirming the addition of Rs. 4,05,130/- being 50% of total purchases on estimate made by the Ld. A.O. and has also been unjustified in further enhancing the same by Rs. 4,05,130/- by erroneously holding the same to be Violative of Provisions of Section 40A(3) without appreciating the fact that section 40A(3) was not applicable. The addition is based on surmises and conjectures and totally against facts of the case itself as there has been no single instance of payment exceeding 20,000/- to any party on any daty.”

2 I.T.A. No. 28/Kol/2016 Assessment Year: 2009-10 Dhrub Narayan Bhadani 3. The assessee in the present case is an individual who is engaged in the business of trading in Mica Scrap at Jhumritelaiya, Jharkhand. The return of income for the year under consideration was filed by him on 23.03.2010 declaring a total income of Rs. 35,02,690/-. During the course of assessment proceedings, it was noticed by the A.O. that the assessee has made purchase of raw materials amounting to Rs. 9,10,260/- for which payments were made in cash not exceeding Rs. 20,000/- on any single occasion. According to the A.O. this was done by the assessee to get over the provisions of Section 40A(3) of the Act. He also rejected the explanation of the assessee that the nature of business of trading in Mica Scrap is such that all the purchase of raw materials are required to be made in cash as the concerned suppliers refused to accept any payment by cheque. He accordingly disallowed 50% of the purchases of raw materials made by the assessee in cash and made a disallowance of Rs. 4,05,130/-. 4. The disallowance made by the A.O. out of purchase of raw materials in cash was challenged by the assessee in the appeal filed by the Ld. CIT (A) and keeping in view the findings given by the A.O. that the payments made against purchase of raw materials in cash were split by the assessee in order to avoid application of Section 40A(3), the Ld. CIT (A) held that Section 40A(3) was applicable in the case of the assessee as aggregate of payments made in cash was more than Rs. 20,000/-. He accordingly disallowed the entire purchases made by the assessee in cash amounting to Rs. 9,10,260/- by applying provision of Section 40A(3) and enhanced the addition of Rs. 4,05,130/- made by the A.O. to Rs. 9,10,260/-.

3 I.T.A. No. 28/Kol/2016 Assessment Year: 2009-10 Dhrub Narayan Bhadani 5. We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. As pointed out by the learned counsel for the assessee from the relevant details placed at page no 17 to 26, none of the cash payments made against purchase of raw materials during the year under consideration exceeded to Rs. 20,000/- attracting the provisions of Section 40A(3). This factual position was even accepted by the A.O. in the assessment order and that is why no disallowance was made by him by invoking the provisions of Section 40A(3). Although the Ld. CIT (A) has held in his impugned order that the provisions of Section 40A(3) are applicable even in the case where aggregate of payments made in cash exceeds the moneytary limit, we find that same is not supported by the relevant provisions of the Act. Even the learned DR has not been able to raise any contention to support this view taken by the Ld. CIT (A). A perusal of the assessment passed by the A.O. also shows that not even a single instance was pointed out by him to show any unverifiable element involved in the expenditure claimed by the assessee on purchase of raw materials in cash. There is no reason whatsoever given by the Assessing Officer to doubt the genuineness of the said expenditure except that the same was incurred in cash. Keeping in view all these facts of the case, we are of the view that the addition made by the A.O. on this issue and further enhanced by the Ld. CIT (A) is not sustainable and deleting the same, we allow ground no 1 of the assessee’s appeal.

4 I.T.A. No. 28/Kol/2016 Assessment Year: 2009-10 Dhrub Narayan Bhadani 6. In ground no 2, the assessee has challenged the disallowance made by the A.O. and confirmed by the Ld. CIT (A) out of depreciation on car, travelling expenses, carriage and miscellaneous expenses. 7. We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the claim of the assessee of depreciation on car is disallowed to the extent of 30% of the authorities below on account of personal use of the car by the assessee. As rightly submitted by the learned counsel for the assessee, the said disallowance to the extent of 30% on account of personal use is on the higher side and it would be fair and reasonable to restrict the same to the extent of 15% as per the stand consistently taken by the Tribunal on the similar issue. Similarly, the disallowance of 50% made by the authorities below out of travelling expenses on the basis of substantial increase in such expenses incurred by the assessee during the year under consideration as compared to the immediately preceding year without pointing out any specific instance to doubt the genuineness of the expenditure or to show any unverifiable element involved therein, in our opinion, is on the higher side and it would be fair and reasonable to restrict the same to 25%. As regards the disallowance made by the authorities below out of carriage and miscellaneous expenses for unverifiable element involved therein, we find that such disallowance made to the extent of 15% of the total expenses claimed by the assessee which were not properly supported by the relevant bills and vouchers is quite fair and reasonable and we find no justifiable reason to interfere with the same. We accordingly direct the A.O. to re-compute the

5 I.T.A. No. 28/Kol/2016 Assessment Year: 2009-10 Dhrub Narayan Bhadani disallowance out of depreciation on car and travelling expenses and allow partly ground no 2 of the assessee’s appeal. 8. In the result, the appeal of the assessee is partly allowed. Order Pronounced in the Open Court on 10th November, 2017. Sd/- Sd/- (S.S. Viswanethra Ravi) (P.M. Jagtap) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 10/11/2017 Biswajit, Sr. PS Copy of order forwarded to: 1. Dhrub Narayan Bhadani, C/o. B.S. Sahay & Co., Room No. 431, Centre Point, 21, Hemant Basu Sarani, Kolkata – 700001. 2. ACIT, Cir 39, 3, Govt. Place, Kolkata – 700001. 3. The CIT(A) 4. The CIT 5. DR True Copy, By order, Sr. P.S. / H.O.O. ITAT, Kolkata