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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri M. Balaganesh, AM & Shri S. S. Viswanethra Ravi, JM]
ORDER Per Shri M. Balaganesh, AM:
This appeal by assessee is arising out of order of CIT(A)-XX, Kolkata vide Appeal No. 100/CIT(A)-XX/Ward-1(4)/11-12/Kol dated 13.03.2013. Assessment was framed by ITO, Ward-1(4), Kolkata u/s. 144 of the Income tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2006-07 vide his order dated 31.12.2008.
The Ground Nos. 2 & 5 raised by the assessee are general in nature and does not require any adjudication.
The only ground to be decided in this appeal is as to whether the ld CITA is justified in upholding the following additions made by the ld AO in the facts and circumstances of the case :-
(a) Addition under the head undisclosed transport charges - Rs. 92,86,521/- (b) Disallowance of Salary u/s 40A(2)(b) of the Act - Rs. 2,00,000/- (c ) Disallowance of Keyman Insurance Premium - Rs. 1,40,000/-
The brief facts of this appeal is that the assessee is a private limited company carrying on the business of transporting of goods on behalf of its clients by hiring trucks from the market and also have some own trucks. The assessee company has credited its Profit & Loss a/c with an amount of Rs.3,06,72,646/- on account of Transport Charges
Eastern Quick Movers Pvt. Ltd., AY 2006-07 (Net). In course of assessment proceedings the Ld. AR submitted that the word ‘Net’ given against this ‘Transport Charges’ was an inadvertent mistake and the amount be taken as gross transport charges. The Ld. AR also filed a party wise statement of bills, which aggregates to the aforesaid amount of transport charge. However, this party wise detail does not tally with similar details available in TDS certificates and ITS data of the departmental computer system. The Ld. AR was also provided with a copy of ITS detail with a request to tally the same with the accounts of the assessee company and thereby to reconcile the two. As no details and explanation were made available by the assessee on this issue, the highest of the figures of amounts credited/received from each person as available in (i) TDS certificates, (ii) ITS data and (iii) party-wise statement of bills filed by the Ld. A/R were treated to be amount received or earned by assessee. The difference between the total of such figures and the total credit in the Profit and Loss A/c was therefore treated as concealed income of the assessee and the same was added to the total income. The amount received by assessee from its customers is deduced in the following manner: Name of Customers Credit/Payment Credit/Payment Credit/Payment Highest Among as per ITS as per TDS as per assessee the Three (Rs.) (Rs.) (Rs.) Amounts (Rs.) Alstom Projects India Ltd 1,446,000 2,309,135 2,309,135 Anchor Auxi -ch em Pvt Ltd 198,000 198,000 Apna Organics Pvt Ltd 14,247 14,247 Aries Agrovet Industries Ltd 1,200,923 1,284,959 1,190,406 1,284,959 Bharat Bijlee Ltd 2,151,16 2,151,160 1,159,870 2,151,160 Blue Star Ltd 38,750 38,750 Bokoraro Laminate Industries 17,250 17,250 Bokoraro Polylam Industries 16,300 16,300 Caprihans India Ltd 516,160 516,160 496,504 516,160 Chika Overseas Pvt Ltd 465,689 465,689 Cogent Export Ltd 999,648 999,648 Crompton Grieves Ltd 1,095,507 758,319 709,306 1,095,507 Crown International 110,400 110,400 110,400 110,400 Diamond Dye-Chem Ltd 208,694 208,694 208,694 208,694 ELMACH Packages (I) Ltd 50,600 50,600 Everest Kanto Cylinder Ltd 126,656 126,656 131,156 131,156 Flakt India Ltd 41,100 41,100 Fosroc Chemicals India Pvt Ltd 740,134 740,134 765,246 765,246
Eastern Quick Movers Pvt. Ltd., AY 2006-07 Glassex (India) Pvt Ltd 46,000 46,000 46,637 46,637 Grauer & Well (1) Ltd 237,605 357,447 407,235 407,235 Grindwell Norton Ltd 59,000 154,833 327,077 327,077 Gulf Oil Corporation Ltd 43,400 90,813 90,813 ICI India Ltd 187,777 195,049 195,049 Industrial Laminates (India) Ltd 299,402 344,315 382,449 382,449 Ion Exchange India Ltd 148,013 148,013 Jaiprakash Associates Ltd 11,387,592 8,911,773 11,387,592 Jay Guru Enterprise 25,640 25,640 Larsen & Tubro Ltd 232,524 86,541 232,524 Mahindra & Mahindra Ltd 4,414,080 6,005,800 6,005,800 Mercantile& Industrial Dev Co Ltd 50,000 50,000 62,634 62,634 Meridian Overseas Pvt Ltd 7,000 7,000 Nipra Industries Pvt Ltd 3,379,183 40,737 44,837 3,379,183 Oriental Veneer Products Ltd 969,155 1,222,921 1,029,613 1,222,921 Pidi1ite Industries Ltd 102,208 102,208 102,208 Pitel Engineering Pvt. Ltd 596,654 143,902 331,685 596,654 Rainbow International 18,891 18,891 18,891 18,891 Rossari Biotech 776,243 776,243 776,243 RPG Cabels Ltd 192,150 192,150 Saraf Organics Pvt Ltd 191,000 224,500 224,500 Shanti Polypac Industries 63,500 63,500 Shrachi Engineering & Industries 652, 100 652, 100 652, 100 Ltd Shriram Industries 57,600 64,600 64,600 Siemens Ltd 990,180 990,180 SRMB Udyog Ltd 500 500 Superfast Transport 11,050 11,050 Surgical Export Corporation 15,000 15,000 Swapna Printing Works 52,267 52,267 Synthetic Dyes & Chemicals 256,764 256,764 257,564 257,564 Tantia Construction Ltd 84,900 84,900 Tawakkal Wood Products Pvt Ltd 1,383,895 1,067,158 1,095,587 1,383,895 Uni Abex Alloy Products Ltd, 45,930 45,930 Vidyet Metallics Pvt Ltd 47,000 47,000 World Wide Enterprise 28,050 28,050
Eastern Quick Movers Pvt. Ltd., AY 2006-07 Thus, the total receipt or receivable by assessee was computed at Rs.3,99,59,167/-. Therefore, the excess receipt receivable so computed over the amount credited in Profit and Loss A/c, i.e., Rs.9,286,521/- (Rs.3,99,59,167/- minus Rs.3,06,72,646/-) was added to the assessee's income under business head, as undisclosed income.
4.1. During the course of assessment proceedings, the ld AO stated that the representative of the assessee had mentioned that Mr Tilak Raj Singhal, director of the assessee company, controls the affairs of the assessee company and that Mrs Neelam T Singhal who is the other director of the assessee company is not fully aware of the affairs of the assessee company. The ld AO observed that a sum of Rs. 1,40,000/- was paid as premium for the keyman insurance policy of LIC of India showing Mrs Neelam T Singhal as the keyperson. The authorized representative responded before the ld AO that Mrs Neelam T Singhal was the key person of the assessee company and the managing director of company had also confirmed the same which was also supported by the Board resolution to that effect. The ld AO concluded that it is only Mr Tilak Raj Singhal who is the vital key person and not Mrs Neelam T Singhal and accordingly the keyman insurance policy has been taken only for personal purposes of the directors and it has nothing to do with the business of the assessee company. Based on these observations, he proceeded to disallow a sum of Rs. 1,40,000/- towards keyman insurance premium in the assessment.
4.2. The ld AO observed that salary of Rs. 1,00,000/- each was paid to Mr Jayant Singhal and Ms Rakhi Singhal who are related persons as mentioned in section 40A(2)(b) of the Tax Audit Report. The ld AO concluded that these persons have not given any contribution to the assessee company and accordingly the salary paid is considered excessive or unreasonable and hence to be disallowed in the assessment.
Before the ld CITA , no appearance was made by the assessee either in person or through his authorized representative and hence the ld CIT(A) confirmed the action of the ld AO by repeating whatever the ld AO had stated in his order.
Aggrieved, the assessee is in appeal before us on the following ground nos. 1, 3 and 4:-
Eastern Quick Movers Pvt. Ltd., AY 2006-07 “1. The Learned Commissioner of Income Tax (Appeals)-XX Kolkata has passed the order dated 13/03/2013 without service of hearing notice properly and without providing any reasonable opportunity of being heard to the Appellant Company.
3. That the Learned Commissioner of Income Tax (Appeals)-XX Kolkata has erred in law and in facts in confirming the following additions made by the Assessing Officer (i) Addition under the head undisclosed Transport Charges Rs. 92,86,521 (ii) Disallowance of Salary under section 40A(2)(b) Rs. 2,00,000 (iii) Disallowance of Key-man Insurance Premium Rs. 1,40,000 4. That the Learned Commissioner of Income Tax (Appeals) XX Kolkata has confirmed the above additions without properly looking to the assessment records of the Appellant Company.”
The ld AR prayed for setting aside of the entire appeal to the file of the ld AO as the assessment has been framed u/s 144 of the Act without properly considering the explanations offered by the assessee during the course of assessment. With regard to the first addition made in the sum of Rs. 92,86,521/-, it was explained that the assessee had recorded the net transport charges in its profit and loss account whereas the TDS certificates reflect the gross amount. Hence there is bound to be some difference, which could be easily reconciled. With regard to other disallowances viz Disallowance of keyman insurance premium and disallowance of salary u/s 40A(2)(b), no proper opportunities were given by the ld AO to the assessee for offering its explanations. The ld AR argued that the ld AO had on one hand framed the assessment u/s 144 of the Act without considering the details filed by the assessee and on the other hand, believes the information given by the representative of the assessee in piecemeal to the extent that it is convenient to the revenue. He argued that Mrs Neelam T Singhal is the very vital director of the assessee company hailing from a very affluent family and is very important for the business of the assessee company. The keyman insurance premium paid by the company for her has been approved by the Board of Directors and hence the disallowance of the same is not warranted. He also argued that the keyman insurance premium is allowable as a deduction under the head business as per CBDT Circular NO. 762 dated 18.2.1998. The ld AR argued that the ld AO had not brought any comparable cases to justify the disallowance of salary u/s 40A(2)(b) of the Act. He further argued that nowhere the ld AO had even doubted that Mr Jayant Singhal and Mrs Rakhi Singhal were not the employees of the assessee company. He only prayed for one more opportunity for the assessee in the interest of justice so that the assessee would co- operate with the ld AO and furnish all the details in support of these three additions and Eastern Quick Movers Pvt. Ltd., AY 2006-07 complete the proceedings expeditiously. In response to this, the ld DR vehemently relied on the orders of the lower authorities.
We have heard the rival submissions and perused the materials available on record. We find lot of force in the arguments advanced by the ld AR that all the three additions have been made without proper appreciation of the facts and submissions of the assessee. Hence in the interest of justice and fair play, we deem it fit and appropriate to set aside this appeal to the file of the ld AO for de novo adjudication , in accordance with law. Needless to mention that the assessee be given reasonable opportunity of being heard. The assessee is directed to furnish all the evidences afresh in support of these three issues before the ld AO and co-operate in completion of the de novo assessment expeditiously. Accordingly, the Ground Nos. 1,3 & 4 are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.