SRI AMITABH KAR,BHUBANESWAR vs. JCIT, RANGE-2, BHUBANESWAR

This is an appeal filed by the assessee against the order of CIT(A)-

2, Bhubaneswar, dated 21.12.2016 for the assessment year 2011-12.

separate adjudication by me.

that the CIT(A) erred in confirming the addition of Rs.4,50,000/- made

u/s.68 of the Act.

that the assessee has introduced capital of Rs. 12,00,000/- in the capital

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account in the books of Kedrnath Fuels, Konark. Before the Assessing

Officer, the assessee submitted that the capital introduction of Rs.

7,50,000/- was from Kedarnath Fuel, Sakhigopal to Kedarnath Fuel,

Konark. The assessee submitted the date-wise transactions of funds.

However, for the balance capital introduction of Rs. 4,50,000/-, the

assessee could not furnish the evidence to establish the source and,

therefore, the Assessing Officer made the addition of Rs.4,50,000/- as

unexplained cash credit u/s.68 of the Act

observing that neither during the assessment proceedings nor during the

appeal proceedings, the assessee was able to furnish any evidence

regarding capital introduction of Rs. 4,50,000/- in Kedarnath Fuels,

Konark .

Kar u/s.44AB of the Act and argued that it will be observed from the

balance sheet of M/s. Kedarnath Fuels, Sakhigopal as on 31.3.2011 that

Rs.7,50,000/- was transferred to Kedarnath Fuels, Konark during the

financial year 2010-2011. Further, he pointed out from the balance sheet

of M/s. Kar Transport, Bhubaneswar as at 31.3.2011 that the assessee

has drawings of Rs.4,50,000/- during the financial year 2010-2011 and

submitted that this was the source of capital introduced in Kedarnath

Fuels, Konark. Thus, he submitted that this is how Rs.12 lakhs was the

capital introduced by the assessee in his proprietary business Kedarnath

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Fuels, Konark. He submitted that the assessee was the proprietor of all

the three business concerns namely Kedarnath Fuels, Konark, Kedarnth

Fuels, Sakhigopal and Kar Transport, Bhubaneswar. Hence, it was his

submission that addition made of Rs.4,50,000/- should be deleted.

authorities.

authorities and materials available on record. In the instant case, the

undisputed facts are that the Assessing Officer found that the assessee

has introduced Rs.12,00,000/- as capital in its business in M/s. Kedarnath

Fuel, Konark. When required to explain the source of the same, the

assessee filed details of Rs.7,50,000/-, which was the amount withdrawn

from proprietary business of the assessee M/s. Kedarnath Fuel,

Sakhigopal and the same was introduced as capital in the business of M/s.

Kedarnath Fuel, Konark. In absence of explanation for the balance

amount of Rs.4,50,000/-, the Assessing Officer made addition of the

same as unexplained cash credit u/s.68 of the Act.

of the assessee wherein, balance sheet and profit & loss account of three

business concern of the assessee namely, Kedarnath Fuel, Sakhigopal,

Kedarnath Fuel, Konark and Kar Transport, Bhubaneswar are attached.

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From the balance of Kar Transport, Bhubaneswar as on 31.3.2011, he has

pointed out that Rs.4,50,000/- was withdrawn and introduced as capital

in the business of M/s. Kedarnath Fuel, Konark. Thus, the source of

introduction of capital in Kedarnath Fuel, Konark of Rs.4,50,000/- was

explained and it was his prayer to delete the addition of Rs.4,50,000/-

u/s.68 of the Act. He has also submitted that said audited statement of

accounts were filed by the assessee with the return of income and were

available with the Assessing Officer at the time of assessment.

Assessing Officer and, therefore, the matter should be restored back to

the file of the Assessing Officer for re-examination.

were filed by the assessee alongwith the return of income and, therefore,

they were available with the Assessing Officer. The assessee has not filed

any new documents before me. From the audited statement of accounts,

he has shown that Rs.4,50,000/- was withdrawn from the proprietary

business of Kar Transport, Bhubaneswar, which was deposited as capital

in his another proprietary business M/s. kedarnath Fuel, Konark. Thus,

the source of Rs.4,50,000/- was satisfactorily explained by the assessee

and hence, addition made u/s.68 of the Act of Rs.,4,50,000/- is not called

for. Hence, I set aside the orders of lower authorities and delete the

addition of Rs.4,50,000/- made under section 68 of the Act and allow this

part of ground of appeal of the assessee.

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was not justified in confirming the disallowance of Rs.1,32,978/-

u/s.40(a)(ia) of the Act.

13.1 The brief facts of the case are that the Assessing Officer observed

that in the profit and loss account of M/s. Kar Transport, the assessee has

debited interest of Rs.1,32,978/-, which was paid to Tata Finance Limited,

a non-banking financial company. As per the provisions of section 194A,

the assessee has to deduct TDS on the payment of interest to NBFC. He

observed that the assessee has not deducted TDS as per provisions of

section 194A and, therefore, by invoking the provisions of section

40(a)(ia) of the Act, he disallowed deduction of Rs.1,32,978/-.

13.2 On appeal, the CIT(A) confirmed the action of the Assessing Officer.

13.3 Before me, ld A.R. has filed order dated 7.6.2017 of Bangalore

Benches of the Tribunal in the case of Shri Azmath ulla vs ACIT in ITA

No.144/Bag/2017 for A.Y. 2013-14, wherein, the Tribunal held that if the

recipients of interest in question have already considered the same for

computing their income offered to tax then the disallowance u/s.40(a)(ia)

is not attracted. Hence, it was the submission of ld A.R. that in

assessee’s case, the payment of interest was made to Tata Finance

Limited, a non-banking financial company, who has considered the same

in the return of income filed and paid due tax thereon. Therefore, in view

of the decision of Bangalore Benches of the Tribunal in the case of Shri

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Azmath ulla (supra) no disallowance of interest expenditure was called

for.

13.4 Ld D.R. relied on the orders of lower authorities.

13.5 I have considered the rival submissions, perused the orders of lower

authorities and materials available on record. In the instant case, the

assessee has paid interest of Rs.1,32,978/- to Tata Finance Limited, a

non-banking financial company, on which tax at source was not deducted

u/s.194A of the Act. Therefore, the Assessing Officer disallowed

deduction u/s.40(a)(ia) of the Act to the assessee, which was confirmed

in appeal by the CIT(A). The contention of ld A.R. of the assessee is that

the recipient of the interest namely, Tata Finance Limited has considered

this amount in their return of income filed and paid tax thereon,

therefore, no disallowance of interest is called for. In these

circumstances, I am of the considered view that the Assessing Officer has

to verify whether Tata Finance Limited has shown Rs.1,32,978/- being

interest paid by the assessee in the return of income and paid tax thereon

or not. If the Assessing Officer finds that Tata Finance Limited has shown

Rs.1,32,978/- in their income in the return of income filed for the

assessment year 2011-12, no disallowance of expenditure can be made in

the hands of the assessee. I, therefore, set aside the orders of lower

authorities on this issue and restore the matter back to the file of the

Assessing Officer for adjudication afresh in the light of the discussion

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made hereinabove after allowing reasonable opportunity of hearing to the

assessee. This part of ground of appeal is allowed for statistical purposes.

is that the CIT(A) was not justified in confirming the adhoc disallowance

of expenditure made by the Assessing officer under the following heads:

“2(3) -disallowance of road tax expenses : Rs.14,743/- 2(4) – disallowance of repair & maint. Expenses : Rs.39,585/- 2(5) -disallowance of fuel & lubricant expenses : Rs.1,38,157/- 2(6) disallowance of sales promotion expenses : Rs.45,700/- 2(7) disallowance of sales promotion expenses : Rs.33,753/- 2(8) disallowance of staff welfare expenses : Rs.20,550/- 2(9) disallowance of travelling expenses : Rs. 7,200/-

case are that the Assessing Officer made disallowance of Rs.14,743/-

under the head “road tax expenses” on the ground that the assessee was

not able to product documentary evidence in respect of excess claim of

road tax expenses of Rs.14,743/-.

15.1 On appeal, the CIT(A) confirmed the action of the Assessing Officer.

15.2 Before us, ld A.R. could not produce any evidence in regard to

excess claim of road tax of Rs.14,743/-. Therefore, the disallowance

made by the Assessing Officer and confirmed by the CIT(A) is confirmed

and this part of the ground of appeal is dismissed.

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the Assessing Officer made disallowance of Rs.39,585/- under the head

“repairs and maintenance expenses” on the ground that the vouchers

produced by the assessee are self-made and not verifiable due to which

the genuineness of the expenses is not proved. Therefore, he made

estimated disallowance of 15% out of total claim of Rs.2,63,900/-, which

was confirmed in appeal by the CIT(A).

16.1 Similarly, in regard to Ground No.2(5), the brief facts of the case

are that the Assessing Officer made disallowance under the head “fuel

and lubricant expenses” under the ground that the vouchers are self-

made and not verifiable due to which the genuineness of the expenses is

not proved. Therefore, he made estimated disallowance of 10% out of

total claim of Rs.13,81,570/-, which was confirmed by the CIT(A) in

appeal.

Assessing Officer made disallowance of Rs.33,753/- under the head “sales

promotion expenses” under the ground that the vouchers are self-made

and not verifiable due to which the genuineness of the expenses is not

proved. Therefore, he made estimated disallowance of 15% out of total

claim of Rs.2,25,000/-/-, which was confirmed by the CIT(A) in appeal.

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Assessing Officer made disallowance of Rs.20,550/- under the head “staff

welfare expenses” under the ground that the vouchers are self-made and

not verifiable due to which the genuineness of the expenses is not proved.

Therefore, he made estimated disallowance of 10% out of total claim of

Rs.2,05,500/-, which was confirmed by the CIT(A) in appeal.

Assessing Officer made disallowance of Rs.7200/- under the head

“travelling expenses” under the ground that the vouchers are self-made

and not verifiable due to which the genuineness of the expenses is not

proved. Therefore, he made estimated disallowance of 10% out of total

claim of Rs.72,00/-, which was confirmed by the CIT(A) in appeal.

A.R. of the assessee submitted that the adhoc disallowance made by the

Assessing Officer out of genuine business expenditure of the assessee

was not sustainable in law as he has not pointed out which specific

vouchers were not produced by the assessee before him and which

vouchers are not verifiable.

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the Assessing officer has not pointed out for which specific expenditure

claimed by the assessee, the vouchers were not produced before him for

verification. In the absence of the same, the adhoc disallowance made in a

summary manner cannot be sustained in law. Therefore, I set side the

orders of lower authorities and delete the disallowance made by the

Assessing Officer and confirmed by the CIT(A) of Rs.29,585/- out of

repairs & maintenance expenses, Rs.1,38,157/- out of fuel & lubricant

expenses, Rs.33,753/- out of sales promotion expenses, Rs.20,550/- out

of staff welfare expenses and Rs.7,200/- out of travelling expenses and

allow the above grounds of appeal of the assessee.

the Assessing Officer made disallowance of Rs.45,700/- on account of

sales promotion expenses on the ground of nexus between the gift

articles and business of the assessee, which was confirmed in appeal by

the CIT(A).

positive material to prove the nexus between the gift articles with the

business of the assessee. Therefore, I do not find any infirmity to

interfere with the order of the CIT(A), which is hereby confirmed and this

part of ground of appeal of the assessee is dismissed.

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Order pronounced in the open court on 10 /08/2017. Sd/- (N.S Saini) ACCOUNTANT MEMBER

Cuttack; Dated 10/08/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The appellant : Amitabh Kar, Sri International Finance Lgd., Plot No.206/605, Gajapati Nagar, Bhubaneswar 2. The Respondent. JCIT, Range-2, Bhubaneswar 3. The CIT(A) -2, Bhubaneswar 4. Pr.CIT-2, Bhubaneswar 5. DR, ITAT, Cuttack BY ORDER, 6. Guard file. //True Copy// SR.PRIVATE SECRETARY ITAT, Cuttack