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Income Tax Appellate Tribunal, “C” BENCH,
Before: Shri P.M. Jagtap & Shri S.S.Viswanethra Ravi
IN THE INCOME TAX APPELLATE TRIBUNAL, “C” BENCH, KOLKATA Before : Shri P.M. Jagtap , Accountant Member and Shri S.S.Viswanethra Ravi, Judicial Member I.T.A No. 1566/Kol/2010 A.Y. 2007-08
I.T.O Ward 3(4), Kolkata Vs. M/s. Bisco Metal & Power Pvt.Ltd PAN:AACCB2515L (Appellant) (Respondent)
For the Appellant/department : Shri A.K.Pande, JCIT, Ld.Sr.DR For the Respondent/assessee: Shri M.Satnaliwala, B.com, LLB,FCA, Ld.AR
Date of Hearing: 27-04-2016
Date of Pronouncement: 17 -06-2015 ORDER SHRI S.S.VISWANETHRA RAVI, JM This appeal of the revenue arises out of the order of the CIT(A)-I, Kolkata in Appeal No. 511/CIT(A)-I/Wd-3(4)/09-10 dated 02-06-2010 against the order of assessment framed by the AO u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).
The appellant Revenue has raised the following grounds:- (i) Ld. CIT(A) has erred on the facts & circumstances of the case in deleting the addition of Rs. 6,68,741/- which was made by the Assessing officer for undisclosed expenditure incurred for earning commission. (ii) Ld. CIT(A) has erred on the facts & circumstances of the case by allowing of Rs.32,300/- paid for subscription, fees & taxes which was disallowed by the AO for non furnishing of documents in support of payments.
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(iii) Ld. CIT(A) has erred on the facts & circumstances of the case in deleting the addition of Rs. 46,15,761/- which was made by the Assessing officer U/s 40(a)(ia) for failure to deduct TDS as per section 194C of the IT Act against carriage inward / transport charges.
(iv) That Ld CIT(A) has erred by accepting the assessee's contention that assessee had not claimed any transportation charges since goods were purchased on F.O.R basis hence the assessee was not liable for deduction of TDS as per section 194C .
(v) Ld. CIT(A) has erred on the facts & circumstances of the case in deleting the addition of Rs.11 ,42,075/- which was made by the AO u/s 41 (1) for cessation of trading liability.
(vi) Ld. CIT(A) has erred on the facts & circumstances of the case in deleting the addition of Rs. 15,83,278/- on account of undisclosed purchase of raw material without properly appreciating the fact that the AO has brought adequate evidence on record to prove that assessee had purchase out of books.
(vii) Ld. CIT(A) has erred on the facts & circumstances of the case in deleting the addition of Rs. Rs.56,78,595/- on account of undisclosed production without properly appreciating the fact that the AO has brought adequate evidence on record to prove that assessee had undisclosed production.
(viii) On the facts & circumstances of the case the order of Ld CIT (A) is perverse, hence same may be set aside and order of AO be restored.
(ix) The appellant craves leave to amend, modify and alter any grounds of appeal during course of hearing of the case.
The brief facts of the case are that the assessee is a company and is a manufacturer of sponge Iron. The Assessee filed its return of income declaring a total income of Rs.14,790/-. As it was selected for scrutiny notices U/Sec’s 143(2) and 142(1) were issued and in response to which, according to AO the authorized representative appeared and submitted details partly.
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The 1st ground relating to addition made under the head unexplained 4. expenditure of Rs. 6,68,741/- . The A.O was of view that the assessee earned commission and for not furnishing any details regarding such commission and the AO treated 10% of such commission income as expenses for earning such commission and added back as unexplained expenditure. The CIT(A) observed that if any expenditure incurred for earning the commission income and if any expenditure was not claimed, the same can not be added to the income as it is allowable as revenue expenditure. The Ld.DR contends that CIT (A) failed to appreciate the fact that the assessee did not claim any expenditure in books of account and not produced any details in the assessment proceedings and it should be treated as unexplained expenditure u/s 69C of the Act as rightly added by the AO and relied on the order of AO. The Ld. AR submits that the AO did not found anything contrary to assessee without any basis added the 10% of such commission as expenditure on estimation which is against law. The CIT-A examined and found all the expenditure were claimed under different heads for earning different incomes for manufacturing dealing and commission, along with salary and other expenses were debited to the profit & loss account. There was nothing brought on record by the AO to establish that any expenditure was separately incurred by the assessee in relation to commission income. In order to attract provision U/Sec 69C of the Act, the onus is on the AO to show that the assessee has actually incurred expenditure and that has remained unexplained. In the present case, we find that the AO added such amount on mere presumption without any basis and it is not permissible under law, therefore, we find no infirmity in the order of CIT-A, accordingly ground no-1 is dismissed.
Ground no-2 is relating to disallowance of subscriptions, fess & taxes to an extent of Rs.32,300/- In the assessment proceedings the assessee claimed a
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total expenses of Rs.66,324/- towards fees, subscription and taxes in the profit and loss account. The assessee submitted details of such expenses to an extent of Rs.34,024/- only, but could not produce any details regarding the amount to an extent of Rs.32,300/- and for such failure, the AO added the same to the income of assessee. Before the CIT-A, the assessee contended that all details of entire expenditures were furnished at the assessment proceedings and sum constituted thereon was incurred towards payment of fees to renewal of mining license, consent fees to WBPCB and CIT-A found all the details were available before the AO and deleted the said addition. The only contention of Ld. DR before us is that Ld CIT -A failed to appreciate the findings of A.O that the assessee remained silent in response to show cause dated 4-11-2009 where AO issued such notice to produce the evidence in support of the claimed expenditure. The Ld. AR reiterates the submissions as contended before the CIT-A, that all the details were available before the AO and all were incurred towards payments to Government of West Bengal by way of challans. We find that the A.O added an amount of Rs.32,300/- as the assessee failed to furnish evidence in support of the expenses claimed. The CIT-A found that all the details were available before the AO and incurred such amount of Rs.32300/- constituted fees towards the renewal of mining license, consent fees to WBPCB, sampling and analysis charges paid to WBPCB Fees paid to West Bengal Directorate Employees Associations & fees paid for liasoning. In view of the same, We agree with the finding of CIT-A that all the payments were incurred for fees & subscription made to the Government for the purposes of assessee’s business and we find no merit in the ground raised, accordingly ground no-2 is dismissed.
Ground no-3 involving the addition u/s 40(a)(ia) on disallowance for non deduction of TDS on expenditure claimed as carriage inwards of Rs. 46,15,761/-
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The AO found that the assessee did not show transportation charges or carriage inward separately in the accounts and the AO calculated average percentage of carriage inward with respect of purchase and concluded that the minimum expenditure for carriage inward borne by the assessee company was @ 17.57% of purchase i.e Rs.46,15,761/-. The assessee submitted before the CIT-A that the assessee had not claimed any transportation charges as the goods were purchased on FOR basis. The CIT -A accepted assessee's contention and found that when no transportation charges were claimed the question of deducting TDS does not arise and gave relief to assessee by deleting the said addition. In this regard, the Ld. DR contends that the CIT -A has failed to appreciate the findings of AO that the assessee purposely claimed the transportation charges with the cost of material to avoid the liability of deducting TDS and assessee did not bifurcate the transportation charges from cost of goods and did not furnish the same separately in order to avoid the liability of deduction of TDS. The Ld.AR submits that the assessee submitted all the details before the AO and AO could not appreciate it proper manner and all those details are filed in the paper book. We find that the goods were purchased on F.O.R. basis are evident from the purchase bills of raw materials placed in the paper book and copies of bills which were produced before the A.O and CIT-A having examined such copies of bills showing the value of goods and relying on such evidence, the CIT-A opined that the contention of the assessee was correct and question of deducting TDS does not arise. Therefore, we are of the view that the order of CIT-A is justified and therefore, we confirm the same, accordingly the ground no-3 fails, thus dismissed.
Ground no- 4 refers to addition of Rs.11,42,075/- u/s 41 (1) of the Act. During the course of assessment proceedings the AO found that from the list of
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creditors as furnished by the assessee that the transactions of involving capital goods are old and for non production of bill no’s with amount, date of credit and status as on that date, the AO made the addition on account of cessation of liability. Before the CIT-A, assessee submitted that the liability was recorded in books of accounts for capital goods and it was not written off in the books of account. Confirmations of the said creditors filed and subsequently the entire amount was paid. All the details of payments and confirmation for the parties were filed before the AO. The CIT –A found that the trading liability was not ceased and payments were made thereafter and deleted the said addition. The Revenue before us agitated that CIT (A) failed to appreciate that the failure of the assessee in providing the requisite details as asked by the AO during the assessment proceedings and relied on AO’s order. The Ld.AR reiterated the submissions made before the CIT-A and relied on the order of CIT-A. We agree with finding of CIT-A of which reproduced herein:
As per section 41(l) where an allowance or deduction has been made in the assessment in respect of loss, expenditure or trading liability incurred by the assessee and subsequently during the previous year the assessee obtained, whether in cash or in any manner whatsoever any amount of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation, that amount can be added u/s 41 (1) of I.T. Act. In the instant case, however no trading liability ceased accordingly to the Ld. A/R.
I have considered the contention of the A.O. and the arguments of the A/R. It appears that the A/R is correct as no trading liability 'had ceased' as the creditors had confirmed the same and subsequently payments were also made. Moreover, it was not a trading liability in that sense at all. In view of this fact the addition of Rs.11, ,42,075/- unsustainable and is deleted.
We find that the trading liability was not ceased and payments were made thereafter as the CIT-A examined the liability was recorded in books of accounts for capital goods and it was not written off in the books of account and
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confirmations of the said creditors filed and subsequently the entire amount was paid. In view of the same the application of section 41 (1) of the Act was not justified. Therefore, ground no-4 is stands dismissed.
5th ground as raised regarding addition on account of undisclosed 9. purchase of raw material and undisclosed production of finished goods of Rs.72,61,873/- The AO made a comparative chart showing month wise consumption of raw materials and production of finished goods and calculated percentage of production ratio with consumption of raw materials. The AO found variation of 11.08 to 25.25 and found other variation of 302.43 to 1245.50 in electrical consumption and production of finished goods as units consumed per M.T production from a chart of month wise. According to him, is abnormal and for not giving any satisfactory explanation of such variation and the AO concluded that assessee had undisclosed production as well as unaccounted purchase. The AO made addition under the head unaccounted purchase Rs. 15,83,278/- and undisclosed production of Rs.56,78,595/- totaling to Rs.72,61 ,873/- .
Before the CIT-A, the assessee contended that all the details of consumption of raw material, production of Goods, consumption of electricity month wise were furnished. The assessee submitted that production can not be estimated on the basis of electric consumption. The A.O. did not point out any defect in stock register and production register showing day to day transaction and did not reject the books of accounts and relied on a decision in the case of Hans Castings Pvt. Ltd. vs Collector of C. Excise, Kanpur, wherein it was decided that production can not be estimated on the basis of electricity consumption alone.
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After considering the submissions of the asseessee the CIT-A found as under:
I have considered the order of the A.O. and the arguments of the A/R. The A.O. has not pointed out any defects in the books or accounts. The addition was purely on estimate and based on presumption. In view of this facts us stated above, the addition of Rs. 72,61,873/- stands deleted.
The Ld. DR points out that CIT –A did not consider that G.P rate shown by the assessee was very low compared to other years and it was due to undisclosed purchase and production as found by the AO and relied on the order of AO. The Ld.AR submits that the addition can not be made on presumption and relied on CIT-A’s order. In our view that the CIT-A has opined that the percentage of production with respect to consumption of raw materials varies from month to month and the consumption of electricity per metric ton also varied from month to month. In this regard, he relied on the on a decision in the case of Hans Castings Pvt. Ltd. vs Collector of C. Excise, Kanpur where it held that the production can not be estimated on the basis of consumption of electricity. We find no justification in the order of AO in making addition on the basis of electric consumption in calculating the production on such estimation. Ground no-5 is dismissed.
Ground no-6 relating to disallowance of excess depreciation of Rs.1,50,223/- . The AO disallowed depreciation as claimed by the assessee on new assets as assessee could not furnish bills and related documents in support of its claim on fixed assets. In first appeal, the assessee contended that in spite of filing all details of fixed assets relating to bills above Rs.50,000/- and without
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considering the same the AO added the same to its income. The CIT-A found as under:
I have considered the contention of A.O. and the A/R. All the purchases appear vouched from the bills. In the circumstances. the addition of Rs. 1,50,223/- is deleted.
The submission of the Ld DR is that the assessee failed to produce the produce bills regarding addition of assets valuing over Rs.50,000/-. The assessee filed such details for the first time before the CIT-A and CIT-A failed to appreciate the findings of AO that though assessee was asked to produce such details assessee did not produced the same before the AO and it has to be examined by the AO. The Ld.AR relied on the order of CIT-A. We find from the page no-6 of assessment order wherein the AO acknowledged the details of addition of fixed assets were before him and asked the assessee to explain the justification of claiming depreciation and referring to further bills as not produced by the assessee is only an assumption and the addition made thereon does not have any support to stand for legal scrutiny as it was made on presumption. Therefore, the order of the CIT-A stands confirmed and ground no-6 is dismissed.
In the result, the appeal of the revenue is dismissed.
THIS ORDER IS PRONOUNCED IN OPEN COURT ON 17 /06/2016
Sd/- Sd/- P.M.Jagtap S.S.Viswanethra Ravi Accountant Member J Judicial Member Date 17 /06/2016
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Copy of the order forwarded to: 1.. The Appellant/department: The I.T.O Ward 3(4), 8/2 Esplanade East, Dwarli House, 3rd Floor, Kolkata-69. 2 The Respondent/assessee: M/s. Bisco Metal & Power Pvt. Ltd Santokh Mansion, Bistupur, Jamshedpur Jharkhand 831001. 3 /The CIT,
/The CIT(A) 4.. 5. DR, Kolkata Bench 6. Guard file. True Copy, By order, Asstt Registrar
** PRADIP SPS
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