TIRUPATI ENTERPRISES,KOLKATA vs. ITO, WD-43(4), KOLKATA, KOLKATA

The issue involved in Ground No. 1 relates to the disallowance of 10% of the job work charges made by the Assessing Officer, which is restricted by the ld. CIT(Appeals) to 5%.

The assessee in the present case is a partnership firm, which filed its return of income for the year under consideration on 29.09.2008 declaring total income at ‘nil’. In the profit & loss account filed along with the said return, job charges paid amounting to Rs.1,52,40,083/- were ./2016 Assessment year: 2008-2009 Page 2 of 4 debited by the assessee against the job charges received amounting to Rs.1,61,20,233/- credited in the Profit & Loss Account. In order to verify the compliance of TDS provision, the assessee was called upon by the Assessing Officer to furnish the relevant details of job charges paid. In reply, details were furnished by the assessee showing that tax at source was deducted from the payment of job charges to the extent of Rs.1,22,65,677/- while the balance amount of Rs.29,74,406/- was claimed to be the payments made to different workers not exceeding Rs.50,000/- during the year and Rs.20,000/- in a single payment. As most of these payments claimed to be made to different workers were in cash, the Assessing Officer held that they were not fully verifiable. Accordingly, the disallowance of Rs.2,97,441/- was made by him out of job charges being 10% of job charges paid by the assessee to different workers.

On appeal, the ld. CIT(Appeals) restricted the disallowance of 10% made by the Assessing Officer to 5% keeping in view the nature of the business of the assessee as well as the nature of expenditure in question being job charges, which are required to be incurred in the regular course of business of the assessee.

I have heard the arguments of both the sides and also perused the relevant material available on record. As rightly submitted by the ld. counsel for the assessee, the disallowance of 10% of the job charges was made by the Assessing Officer for unverifiable element involved in the said expenditure merely on the ground that the said expenditure was mostly incurred in cash. Not a single instance whatsoever, however, was pointed out by him to show any such unverifiable element involved in the relevant expenditure claimed by the assessee on account of job charges. I, therefore, agree with the contention of the ld. counsel for the assessee that the disallowance made by the Assessing Officer on this issue without pointing out any instance of unverifiable element was not sustainable and the ld. CIT(Appeals) is not justified even to restrict the same even at 5%. The disallowance made by the Assessing Officer on this issue and ./2016 Assessment year: 2008-2009 Page 3 of 4 sustained by the ld. CIT(Appeals) is, therefore, deleted and Ground No. 1 of the assessee’s appeal is allowed.

The issue raised in Ground No. 2 relates to the additions made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of difference in the ledger accounts of the following parties:- (i) M/s. Chandra Kala (P) Limited........................Rs.1,50,093/-; (ii)M/s. Saree House (P) Limited..........................Rs.5,22,773/-; (iii) M/s. Paridhi Saree (P) Limited......................Rs. 23,514/-.

The enquiries conducted by the Assessing Officer in order to verify the various transactions entered into by the assessee in the course of its business of trading in sarees by issuing notices under section 133(6) to the concerned parties revealed that there were differences in the balances of atleast three parties as appearing in their accounts and as appearing in the accounts of the assessee. Since the assessee could not satisfactorily explain or reconcile the said differences, the amount of such differences was added by the Assessing Officer to the total income of the assessee. On appeal, the ld. CIT(Appeals) confirmed the addition made by the Assessing Officer on this issue after rejecting the stand of the assessee that the differences in balances of the concerned parties were due to rate difference, which had remained unsettled as the same according to the ld. CIT(Appeals), was not supported by any evidence.

I have heard the arguments of both the sides and also perused the relevant material available on record. The ld. counsel for the assessee has invited our attention to the submissions made before the Assessing Officer vide letter dated 28.12.2010 (copy placed at pages 25 to 27 of the paper book) reconciling the differences in question and submitted that the differences pointed out by the Assessing Officer actually were in the opening balances as on 01.04.2007. He contended that the said differences thus pertained to the earlier years and even if the same stand un-reconciled, addition cannot be made on account of such un-reconciled ./2016 Assessment year: 2008-2009 Page 4 of 4 differences pertaining to the earlier years in the year under consideration. Although this contention of the ld. counsel for the assessee is acceptable in principle, the same specifically raised by the assessee for the first time before the Tribunal requires verification of relevant facts from the records as rightly contended by the ld. D.R. I, therefore, set aside the impugned order of the ld. CIT(Appeals) on this issue and restore the matter to the file of the Assessing Officer to decide the same afresh after verifying the claim of the assessee that the differences in question pertained to the earlier years and not to the year under consideration. The Assessing Officer is accordingly directed to consider this issue afresh in accordance with law.

In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the open Court on August 05, 2016. Sd/- (P.M. Jagtap) Accountant Member Kolkata, the 5th day of August, 2016 Copies to : (1) Tirupati Enterprises, 282, Rabindra Sarani, 3rd Floor, Room No. 308, Kolkata-700 007 (2) Income Tax Officer, Ward-43(4), Kolkata, 3, Government Place (West), Kolkata-700 001