SRI TUTUL CHOWDHURY,KOLKATA vs. ACIT, CIRCLE-50, KOLKATA, KOLKATA

2.1. The brief facts of this issue is that the assessee is an individual engaged in the business relating to Transportation, Handling, Logistics with various Multi-National Telecom Companies in the name & style of M/s ATC India. The assessee had filed the Sri Tultul Chowdhury A.Yr.2012-13 return of income for the Asst Year 2012-13 on 16.6.2012 declaring total income of Rs 75,73,920/- which was processed u/s 143(1) of the Act. The ld AO observed that the assessee is following mercantile system of accounting and the total turnover declared by the assessee in the return was Rs 6,99,49,897/- during the year under consideration. The ld AO observed that the assessee is also a director in M/s ATC Logistics Pvt Ltd, ATCIS Technology Pvt Ltd and Prama Builtech Pvt Ltd from where remuneration of Rs 18 lakhs was received by the assessee and duly offered to tax. Apart from this, the assessee had derived interest income on fixed deposits which were also offered under the head ‘income from other sources’. The ld AO observed that as per Form 26AS, the following receipts were stated to have been given to assessee towards interest income and contract receipts :- S.No. Name of parties from whom TDS made As per 26 AS income earned u/s Receipts TDS 01. Orient Bank of Commerce 194A 177971 17798 02. HDFC Bank 194A 1490296 149032 1668267 03. Rahimafrooz Batteries Ltd. 194C 344281 3447 194I 208000 20800 04. Dishnet Wireless Ltd. 194C 5995456 70512 05. DHL Lemiur Logistics Pvt.Ltd. 194C 223545 2492 06. Bharti Telemedia Ltd. 194C 1583655 18590 194J 187540 18758 07. Transcend Infrastructure Pvt.Ltd 194C 1255842 17577 194I 688968 68896 08. Nokia Siemens Networks 194C 39038630 780771 Pvt.Ltd 09. Bharti Airtel Ltd. 194C 25814679 272725 194I 281697 28170 194J 390735 39077 10. Nokia Solutions and Networks 194C 15979491 319591 India Pvt. Ltd. Total Contract Receipt 9,19,92,519 1828236 2.2. The ld AO observed that the assessee had declared contract receipts in the profit and loss account only to the tune of Rs 6,99,49,897/- whereas as per Form 26AS, it was 2

Sri Tultul Chowdhury A.Yr.2012-13 Rs 9,19,92,519/- . He also observed that the assessee however had claimed the full credit for TDS amount as disclosed in Form 26AS. Similarly the ld AO observed that as per Form 26AS, the interest income derived by the assessee was RS 16,68,267/- whereas the interest credited in profit and loss account was only Rs 13,47,584/-. The assessee was asked to reconcile the said difference. In response the assessee submitted his reply as under:- “ Please find-attached ledger copy of sundry debtors of M/s ATC Logistics Pvt. Ltd. where clearly mentioned that they have considered the amount in the name of M/s Nokia Solutions and Networks India Pvt Ltd. as GT though the said company (M/s Nokia Solutions and Networks India Private Ltd) unfortunately booked their TDS return in the name of ATC India. I Further state that some of bills raised by M/s A TC Logistics Pvt Ltd in favour of M/s Nokia Solutions and Networks India Pvt Ltd but unfortunately the said company booked and released payment in favour of ATC India Instead of A TC Logistics Pvt Ltd". It is my humble request to you to kindly consider the case at your lenient view and not to charge any tax for above mentioned cases and also expect to be continued with my elevated image."

2.3. The assessee submitted statement of party wise receipts and from the same the ld AO observed that the assessee did not provide any logical reason in support of certain receipts remaining unaccounted for in the profit and loss account of assessee though the TDS for the same had been duly claimed in the return of income. The ld AO accordingly observed that the difference to the tune of Rs 2,99,57,204/- towards contract receipts from Nokia Siemens Networks Pvt Ltd and Nokia Solutions and Networks India Pvt Ltd remained unreconciled and unaccounted in the books of assessee and accordingly brought the same to tax as undisclosed receipt of the assessee. The ld AO also observed that it is pertinent to mention that the assessee claimed all the expenses related to earning of the undisclosed receipt in the profit and loss account and hence full amount of undisclosed receipt would have to be considered as undisclosed profit of the assessee for the year under consideration.

Sri Tultul Chowdhury A.Yr.2012-13 2.4. The ld AO similarly brought the difference in interest income on deposits as above to the tune of Rs 3,20,683/- as undisclosed interest receipts and brought the same to tax .

2.5. Before the ld CITA, the assessee submitted that there was a group company in the name of M/s ATC Logistics Pvt Ltd in which assessee was one of the directors. This company was incorporated in Asst Year 2009-10 and it carried on the same business activities. Difference in gross receipt was due to the fact that actual payment was made to M/s ATC Logistics Pvt Ltd but TDS was uploaded in the name of the proprietory concern, ATC Logistics. It was further submitted that during assessment prcoeedigns in the case of ATC Logistics Pvt Ltd, the AO noticed that Nokia group had made a payment of Rs 2,73,57,525/- to this company but no tax was deducted on these payments and this amount did not appear in Form 26AS as well. Accordingly the assessee submitted that there is still an unreconciled amount of Rs 25,99,979/-. It was also alternatively submitted that in any case the entire difference on account of turnover cannot be added as undisclosed income of the assessee and only the net profit thereon should be brought to tax. Reliance in this regard was placed on several decisions. The assessee also submitted that the additional profit of the assessee may reasonably by estimated at 6.4% of the difference in gross receipts.

2.6. The ld CITA observed in his order as under:- “I have carefully considered the facts of the case and the submissions of the assessee. Perusal of the assessment order in the case of M/s A TC Logistics Pvt. Ltd. for assessment year 2012-13, shows that among many other issues, addition of Rs. 90,10,087/- has been made for suppression of gross receipts by the concerned company. In the reconciliation statement, submitted during the assessment proceedings by M/s A TC Logistics Pvt. Ltd. that company has shown receipts of Rs. 2,73,57,525/- from Nokia Siemens Networks Pvt. Ltd, whereas Form 26AS did not report any receipts from this party. Assessee has shown receipts of Rs.2,50,60,917 from this party but Form 26AS shows receipt of Rs.3,90,38,630/-. Thus under reporting of receipt from Nokia Siemens Networks Pvt. Ltd. when we consider the assessment records of M/s ATC Logistics Pvt. Ltd. Stands explained when we consider the assessment records of M/s ATC Logistics Pvt. Ltd. However, 4

Sri Tultul Chowdhury A.Yr.2012-13 assessee has also received Rs. 1,59,79,491/-, as per Form 26AS, from Nokia Solutions and Networks India Pvt. Ltd. No receipts are shown in the books of M/s ATC Logistics Pvt. Ltd. from this party. Hence, entire amount appears to be suppressed income. Assessee has tried to narrow the gap by clubbing receipts from both Nokia group companies, but it is not acceptable. M/s ATC Logistics Pvt. Ltd. has not shown even a single rupee of receipts from M/s Nokia Solutions and Networks India Pvt. Ltd. Hence, not only to the extent of reconciled difference of Rs.25,99,979/-, but entire receipts of Rs. 1,59,79,491/- from Nokia Solutions and Networks India Pvt. Ltd. remains unreconciled. Hence, it is held to be the suppressed income of the assessee. A.O. is also directed to restrict credit for TDS in the case of Nokia Siemens Networks Pvt. Ltd. corresponding to the receipt of Rs. 2,50,60,917/- and allow full TDS credit in the case of Nokia Solutions and Networks India Pvt. Ltd. Now coming to the alternative submission of the assessee, I would like to mention here that the judgments/decisions cited by the assessee are in respect of sale of goods/ properties. In these cases suppression of sale was detected and under the facts and circumstances of that particular case, it has been held that only the profit elements in the suppressed sale should be brought to tax. However, in assessee's case services have been provided and receipts in respect of these services have been suppressed. AO has mentioned that assessee has claimed all the expenses related to the earning of the undisclosed receipts. Appellant has not brought anything on record to rebut this contention of the AO. As all the expenses have been claimed, the ratio of the judgments/decisions are not applicable to the facts of assessee's case and addition to the extent of Rs. 1,59,79,491/- is confirmed.

2.7. Aggrieved, the assessee is in appeal before us on the following grounds :- “

2.For that the Ld. CI.T(A) erred in confirming the addition of Rs. 15979491/ - as un-reconciled difference when such difference was duly explained.

3. For that even otherwise the Ld. CI.T(A) erred in confirming the entire addition of Rs. 15979491/- and Rs. 3,05037/- as un-reconciled difference and should have added only the profit on difference of freight receipts if any.”

2.8. The ld AR reiterated the submissions made before the ld CITA and prayed for adoption of net profit on the unreconciled differences in the sum of Rs 1,59,79,491/- at 6.4% thereon towards freight receipts. He stated that the net profit declared by the assessee was 6.4%. and hence the same may kindly be adopted. He placed reliance on the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs S.M.Omer reported in ( 1992) 201 ITR 608 (Cal). None appeared on behalf of the revenue when 5

Sri Tultul Chowdhury A.Yr.2012-13 the case was called for hearing and no adjournment petition was even preferred by the revenue before us. Hence we proceed to dispose off the appeal after hearing the ld AR.

2.9. We have heard the ld AR.. The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. The short point that arises for our consideration is as to whether the net profit on unreconciled freight receipts could be brought to tax in the facts and circumstances of the case. It is true that the assessee was not able to reconcile the difference in freight receipts between Form 26AS and profit and loss account. But at the same time, we hold that Nokia Siemens Networks Pvt Ltd having made the payment to M/s ATC Logistics Pvt Ltd had uploaded the TDS return by mentioning the PAN of the assessee instead of PAN of the said company. This mistake has been accepted as genuine by the ld CITA. We find that there is no basis for the finding of the ld AO that the assessee claimed all the expenses related to earning of undisclosed receipt in the profit and loss account. In these circumstances, we hold that only the profit on unreconciled freight receipts are to be brought to tax.. The assessee had reported net profit of 6.4% and hence we direct the ld AO to adopt the net profit of 6.4% on the unreconciled freight receipt of Rs 1,59,79,491/- and determine the income of the assessee accordingly. With regard to the addition made in the sum of Rs.3,05,037/- towards variation in transportation charges is concerned, we find that the ld. AO had noticed that the assessee claimed Rs.6,29,57,169/- under transportation handling (loading/unloading) scrot and other handling charges, whereas he submitted details of tranportation charges to the tune of Rs.6,32,62,206/- thereby leading to a difference of Rs.3,05,037/- which was added by the ld. AO. This action was confirmed by the ld. CIT(A). We find that our findings given towards the difference in freight charges above would apply with equal force for this additon also. Accordingly we direct the ld. AO to adopt the net profit of 6.4% on the unreconciled transportation charges of Rs.3,05,037/- and determine the Sri Tultul Chowdhury A.Yr.2012-13 income of the assessee in this regard. Accordingly, the Ground No. 2 raised by the assessee is dismissed and Ground No. 3 is partly allowed.

3.1. The ld AO observed that the assessee had overdrawn a sum of Rs 1,00,98,555/- from M/s ATC Logistics Pvt Ltd, a company in which he is a director and also holding 86.66% of voting power. He also observed that the said company has got accumulated profits as on 31.3.2012 to the tune of Rs 3,19,70,605/-. Accordingly, he sought to invoke the provisions of section 2(22)(e) of the Act for the excess amount drawn by the assessee shareholder as loan . In response to the show cause notice thereon, the assesse replied as under:- “During the A.Y. 2012-13 M/s ATC Logistics Ltd has advance to ATC India a sum of Rs.1,00,98,555/- against transportation and handling charges. The said amount was adjusted in the following A.Y. 2013-14 against services rendered.

Accordingly the above amount is not covered under section 2(22)(e) of the Income Tax Act 1961 as this was for business purpose as part of regular business transaction.”

Accordingly the assessee claimed that the said lending was done by M/s ATC Logistics Pvt Ltd as trade advances in the normal course of business which has been adjusted with services rendered in Asst Year 2013-14 and hence is outside the purview of provisions of section 2(22)(e) of the Act. The ld AO however did not agree to this contention of the assessee and made an addition u/s 2(22)(e) of the Act in the sum of Rs 1,00,98,555/- in the assessment.

Sri Tultul Chowdhury A.Yr.2012-13 3.2. Before the ld CITA, it was pleaded that the assessee is maintaining a current account with M/s ATC Logistics Pvt Ltd and accordingly the same would be outside the purview of provisions of section 2(22)(e) of the Act. But the ld CITA did not agree to this contention and upheld the addition made by the ld AO. Aggrieved, the assessee is in appeal before us on the following ground:- “4. For that the Ld. CI.T(A) erred in confirming the addition of Rs.10098555/ - u/s 2(22)(e)”.

3.3. The ld AR argued that the advance was made in the nature of trade is quite evident from the fact that the said advances were duly adjusted with the transportation and handling services rendered by the assessee to M/s ATC Logistics Pvt Ltd. It is not in dispute that both the assessee as well as ATC Logistics Pvt Ltd is engaged in the same line of business. Hence the advance takes the character of trade advances and once it is in the nature of trade advance, the issue is covered by the recent Circular of the CBDT vide Circular No. 19/2017 dated 12.6.2017.

3.4. We have heard the ld AR. We find that the issue as to whether the subject mentioned advance is a trade advance or not has not been examined in the right perspective by the lower authorities. The ld AR also had not produced any evidence to prove that the said advance has been duly adjusted with the rendering of services in Asst Year 2013-14 (i.e the subsequent asst year). It is not clear from the records that whether any evidences to this effect were filed before the ld AO or before the ld CITA by the assessee. Once it takes the character of trade advance, then we agree with the ld AR that the issue would be covered by the recent Circular of the CBDT supra. Accordingly, we deem it fit and appropriate, in the interest of justice and fair play, to set aside this issue to the file of the ld AO to give a clear finding as to whether the said advance is a trade advance or not in the light of evidences to be submitted by the assessee. Accordingly, the Ground No. 4 raised by the assessee is allowed for statistical purposes. 8

Sri Tultul Chowdhury A.Yr.2012-13

4.1. The brief facts of this issue is that the ld AO observed that the assessee debited an amount of Rs 1,22,000/- in the Profit and Loss Account on account of Donation & subscription during the year. In support of the claim, the assessee submitted copy of account of Donation & Subscription account wherein the entires were shown without any narration. The assessee was asked to furnish the details with narration and evidences. In the absence of these details, the ld AO proceeded to disallow the same in the assessment. The ld CITA observed from perusal of the ledger account that most of the payments herein were made in cash and were made right from April 2011 to Feb 2012. He observed that Durga puja celebrations occur during the month of October- November and hence it is apparent that payments are not only for puja celebration. Accordingly he upheld the disallowance made by the ld AO. Aggrieved, the assessee is in appeal before us on the following ground:- 5. For that the Ld. CI.T(A) erred in confirming the addition of Rs.1,22,000/ - being donation and subscription paid to small Pooja Commiittees which was allowable deduction.

4.2. The ld AR argued that the issue is covered by the decision of the Hon’ble Jurisdictional High Court in favour of the assessee in the case of Bata India Ltd reported in 201 ITR 884 (Cal). 4.3. We have heard the ld AR. We find that the details were not submitted with narration and evidences in the form of receipts before the lower authorities. From the perusal of the case relied upon by the ld AR in the case of CIT vs Bata India Ltd reported in (1993) 201 ITR 884 (Cal), we find that the issue before the Hon’ble Calcutta High Court was whether the interest paid on security deposit to employees would fall 9

Sri Tultul Chowdhury A.Yr.2012-13 within the ambit of disallowance u/s 40A(8) of the Act. For the sake of convenience, the head notes is reproduced below:- Section 40A(8) of the Income-tax Act, 1961 – Business disallowance – Interest on deposits - Assessment year 1984-85 – Whether security deposits received from shop managers, who were employees of assessee company, did not fall within meaning of 'deposit' given in Explanation to section 40A(8) - Held, yes – Whether, therefore interest paid on aforesaid security deposits should not be disallowed under section 40A(8) - Held, yes Hence we hold that the said case does not support the case of the assessee as the facts are totally distinguishable. We find that the assessee was not able to produce any details for the same even before us. Hence we do not find any reason to interfere with the order of the ld CITA. Accordingly, the Ground No. 5 raised by the assessee is dismissed.

Order pronounced in the Court on 07.07.2017