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Income Tax Appellate Tribunal, “D”, BENCH KOLKATA
Before: SHRI A.T.VARKEY, JM & DR. A.L.SAINI, AM
IN THE INCOME TAX APPELLATE TRIBUNAL “D”, BENCH KOLKATA BEFORE SHRI A.T.VARKEY, JM & DR. A.L.SAINI, AM आयकर अपील सं./ITA No.777/Kol/2016 (�नधा�रण वष� /Assessment Year:2008-2009) Khandelwal Chemicals, Vs. The ITO, Room No.702, 7th Floor, Ward-25(3), Kolkata 32, Ezra Street, Kolkata- 700001 �थायी लेखा सं./जीआइआर सं./PAN/GIR No.: AAHFK 9060 B .. (अपीलाथ� /Appellant) (��यथ� / Respondent) Assessee by : Shri Jitendra Kaushik, Advocate Revenue by : Sh.S.K.Z.H.Tanveer, JCIT,Sr.DR सुनवाई क� तार�ख / Date of Hearing : 27/12/2016 घोषणा क� तार�ख/Date of Pronouncement 22/02/2017 आदेश / O R D E R Per Dr. Arjun Lal Saini, AM: The captioned appeal filed by the Assessee, pertaining to the Assessment Year 2008-09, is directed against the order passed by ld. Commissioner of Income Tax (Appeals)-10, Kolkata, in Appeal No.248/CIT(A)-10/Wd-.5(3)/13-14/Kol, dated 01.02.2016, which in turn arises out of an order passed by the Assessing Officer (AO) Under Section 143(3)/147 of the Income Tax Act 1961, (in short the ‘Act’), dated 27.01.2014. 2. Brief facts of the case qua the assessee are that the assessee filed its return of income on 19.08.2008 declaring total income of Rs.10,92,034/-. Assessee’s case was selected for scrutiny u/s.143(3) and the AO has completed the assessment by making various additions.
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Aggrieved from the order of the AO, assessee filed an appeal
before the CIT(A), who confirmed the additions made by the AO
observing the followings :-
Observations of CIT(A) for ground No.2 DECISION: 1. I have examined the action of the AO in disallowing the interest payments of Rs.35,344/- by invoking the provisions of Sec 40A(2) of the Income Tax Act, 1961.The AO has very clearly brought forth the relationship between the persons and the appellant-firm. I find merit in the finding of the AO that when the partner ids paid interest at 7%, there is no logic in paying interest at 12% to close family people. A difference of 5 % of interest is certainly to be considered excessive and cannot be a sound business principle. 2. I do not find any merit in the contention of the appellant that similar action had not been done in a previous year on completion of assessment, as each Assessment is a separate and distinct legal proceeding. It may not be correct to compare the bank lending rate to arrive at the principle of rates being excessive or not, as contended by the Ld.A.R, as the AO has considered the rates on interest being paid / being given within the information available in the return of the firm itself. That to me appears to be the correct base for comparison. In the circumstances emerging, I am of the considered opinion that the action of the AO in this matter does not call for any interference and the addition of Rs.35,344/- is sustained. This ground of appeal is accordingly adjudicated against the appellant.
Observations of CIT(A) for ground No.3 DECISION: After having perused the submissions and the documents submitted by the Ld.A.R, I find that the impugned amounts have been imposed by way of a penalty by the Sales Tax Authorities, though it is not very clear as to the circumstances of the imposition of the penalty. In my considered view, there is not much doubt that the amounts of Rs.2,000/- and Rs.220/- have been imposed for violations / infarctions of the law, for whatever reason. I am therefore not convinced by the submissions of the appellant/ Ld A.R and find that there is no reason to interfere with the findings of the A.O.
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The action of the AO is disallowing Rs.2,220/- as penalty amounts debited in the Profit and Loss account, is therefore sustained. This ground is decided against the appellant.
Not being satisfied with the order of ld. CIT(A), the assessee is in
appeal before us and has taken the following grounds of appeal :-
For that on the facts and circumstances of the case the Ld. Commissioner of Income Tax(Appeals) erred in not quashing the proceedings initiated u/s.147 of the IT Act 1961, by the ld. Income-tax officer who having been satisfied that there was no escapement of income on the basis of recorded reasons. 2. For that without prejudice to the Ground No.1, the ld. Commissioner of Income Tax(Appeals) erred in confirming disallowance of a sum of Rs.35,344/- made by the ld. Income- tax officer on the alleged ground of interest paid at excessive rate to relatives of the partners. 3. For that without prejudice to the Ground No.1, the ld. Commissioner of Income Tax(Appeals) erred in confirming disallowing of a sum of Rs.2,000/- being fee for late filing of a VAT Return.
Although in this appeal, the assesse has raised three grounds of
appeal but at the time of hearing the main grievance of the assesse has
been confined to ground No.1 and 2. Ground No. 3 has not been pressed
the assesse.
Ground No. 1: In this ground the assesse has challenged the validity of
proceedings initiated by the Assessing officer U/s 147 stating that there
was no escapement of income on the basis of recorded reasons.
6.1 ld AR for the assesse has submitted before us that assesse had filed
the revised return of income and accepted the difference of Rs.64,634/.
and as such the reasons for reopening the case had been complied with
by the assesse.
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6.2 On the other hand ld DR for the Revenue has stated that return of
income was filed by the assesse only in response to notice u/s 148 issued
by the Assessing Officer. As the return of income had been revised by the
Assessee to cover the point of addition U/s 147/148 of Rs. 64,634/-, and
the AO has accepted it. The ld AR further submitted that the Assessing
Officer was not precluded from making further additions, merely because
the item of escapement of income had been covered by the return of
income filed by the assessee. That is, during the reassessment
proceedings if the AO finds that other items has escaped assessment, he
may assess the same also.
6.3 Having heard the rival submissions, perused the material available on
record, we are of the view that there is merit in the submissions of the ld
DR for the Revenue. As the ld DR for the Revenue pointed out that the
Assessing officer was not precluded from making further additions, merely
because the item of escapement of income had been covered by the
return of income filed by the assessee. The Assessing Officer may make
addition on those items which were not covered by him in reasons
recorded by him, if he finds that income has escaped assessment. In the
present case, the addition has been made and reasons for reopening has
sustained, and therefore the Assessing Officer is free to investigate other
areas, and make additions where necessary. Accordingly, we do not find
any reason to interfere in the order passed by the ld CIT(A). We confirm
the order passed by the CIT(A).
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6.4 In the result, the appeal filed by the assesse on this ground is
dismissed.
Ground No.2 raised by the assesse is without prejudice to the Ground
No.1, and states that the ld. Commissioner of Income Tax (Appeals) erred in confirming disallowance of a sum of Rs.35,344/- made by the ld. Income-tax officer on the alleged ground of interest paid at excessive rate to relatives of the partners. 7.1 Ld AR for the assesse has submitted, before us, that in previous years
no any similar additions were done by the Assessing officer. The
Assessing officer has deviated from the principle of consistency. The ld
AR for the assesse has submitted before us the assessment order for
A.Y. 2007-08 (PB 8 to 14) where similar addition were not done by the
Assessing Officer.
7.2 On the other hand, ld. DR for the revenue has reiterated the stand
taken by the AO, which we have already noted in our earlier para and is
not being repeated for the sake of brevity.
7.3. Having heard the rival submissions, perused the material on record,
we are of the view that there is merit in the submissions of the assesse,
as the proposition canvassed by ld. AR for the assessee are supported by
the facts narrated by him above. As ld. AR submitted before us that
similar additions were not made by Assessing Officer in previous years.
The Assessing Officer should follow the principle of consistency. Keeping
in mind the principle of consistency, and smallness of the amount, we are
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of the view that addition made by the AO and confirmed by the CIT(A), needs to be deleted. Accordingly, we delete the addition. 7.4. In the result, appeal filed by the assesse on ground No.2 is allowed. Order pronounced in the open court on this 22/02/2017. Sd/- Sd/- ( A.T.VARKEY ) (DR. A.L.SAINI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER कोलकाता /Kolkata; �दनांक Dated 22/02/2017 �काश �म�ा/Prakash Mishra,�न.स/ PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant-Khandelwal Chemicals 2. ��यथ� / The Respondent.-ITO, Ward-35(3), Kolkata 3. आयकर आयु�त(अपील) / The CIT(A), Kolkata. 4. आयकर आयु�त / CIT �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Asstt. Registrar) आयकर अपील�य अ�धकरण, कोलकाता / ITAT, कोलकाता