TRADERS INTERNATIONAL,KOLKATA vs. ITO, WD-39(3), KOLKATA, KOLKATA

The issue raised in Ground No. 1 relates to the addition of Rs.4,885/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of difference in the balance of M/s. Asha Builders.

The assessee in the present case is a partnership firm, which is engaged in the business of trading of sanitaryware. The return of income for the year under consideration was filed by it on 30.10.2007 declaring a loss of Rs.2,95,993/-. In the balance-sheet filed along with the return of income, a sum of Rs.48,194/- was shown by the assessee as receivable ./2015 Assessment year: 2007-2008 Page 2 of 7 from M/s. Asha Builders. In the confirmation furnished by M/s. Asha Builders in response to notice issued by the Assessing Officer under section 133(6), the amount payable to the assessee was shown by M/s. Asha Builders as Rs.43,309/-. There was thus a difference of Rs.4,885/-, which, according to the Assessing Officer, could not be reconciled by the assessee. The said difference, therefore, was added by the Assessing Officer to the total income of the assessee.

Before the ld. CIT(Appeals), the assessee pointed out that M/s. Asha Builders had shown to have paid to the assessee cash of Rs.4,800/- and Rs.85/- on 12.12.2006 and 13.12.2007 respectively, but the said cash was never received by the assessee. It was also pointed out by the assessee that the said customer, in fact, had paid the entire amount by cheque in the next year after deducting the discount of Rs.782/- offered by the assessee. This explanation of the assessee was not found acceptable by the ld. CIT(Appeals) for want of supporting evidence and the addition of Rs.4,885/- made by the Assessing Officer was confirmed by him.

I have heard the arguments of both the sides on this issue and also perused the relevant material available on record. As explained on behalf of the assessee before the ld. CIT(Appeals) as well as before me, the amount of Rs.4,885/- shown to be paid in cash by M/s. Asha Builders was never received by the assessee and the fact that the entire outstanding of Rs.48,194/- was received by the assessee in the immediately succeeding year after deducting a discount of Rs.782/- offered by the assessee, in my opinion, is sufficient to support and substantiate the explanation of the assessee that the cash of Rs.4,885/- was never received by it in the year under consideration as shown by M/s. Asha Builders. The difference of Rs.4,885/- thus, in my opinion, was satisfactorily explained by the assessee and the addition made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of such difference is not sustainable. I, therefore, delete the same and allow Ground No. 1 ./2015 Assessment year: 2007-2008 Page 3 of 7

The issue raised in Ground No. 2 relates to the addition of Rs.4,235/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of difference in the balance of M/s. Cera Sanitaryware Limited.

In the Balance-sheet filed along with the return of income, a sum of Rs.2,66,365/- was shown to be payable by the assessee to M/s. Cera Sanitaryware Limited. In the confirmation furnished by the said party in response to the notice issued by the Assessing Officer under section 133(6), the amount receivable from the assessee was shown at Rs.2,70,600/-. Since this difference of Rs.4,235/- could not be reconciled by the assessee, the Assessing Officer added the same to its total income.

Before the ld. CIT(Appeals), it was explained by the assesese that the purchase made by it from M/s. Cera Sanitaryware Limited amounting to Rs.4,235/- on 31.01.2007 was on approval basis and since the same was not finally approved, no entry in the books of account was made. This explanation of the assessee again was not accepted by the ld. CIT(Appeals) for want of evidence and the addition of Rs.4,235/- made by the Assessing Officer was confirmed by him.

I have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the explanation offered by the assessee for the difference of Rs.4,235/- that the same represented purchases made from M/s. Cera Sanitaryware Limited on approval basis and no entry was made since the purchase was not finally approved, is not accepted by the ld. CIT(Appeals) for want of evidence ignoring that the amount in question representing purchase was the business expenditure of the assessee and there was no justifiable reason for the assessee not to claim the same. The explanation offered by the assessee, in my opinion, for this difference, is quite plausible and the same cannot be denied merely on the ground that there was no specific proof to support the same. I, therefore, delete the disallowance made by ./2015 Assessment year: 2007-2008 Page 4 of 7 the Assessing Officer and confirmed by the ld. CIT(Appeals) on this issue and allow Ground No. 2.

The issue raised in Ground No. 3 relates to the disallowance of Rs.53,050/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 40(a)(ia) on account of transportation charges.

During the year under consideration, the assessee had paid transportation charges of Rs.53,050/- to M/s. Dasgupta Carriers. As noted by the Assessing Officer, the said payment, however, was made without deduction of tax at source as required by section 194C. He, therefore, invoked the provision of section 40(a)(ia) and disallowed the transportation charges of Rs.53,050/- paid by the assessee to M/s. Dasgupta Carriers. Before the ld. CIT(Appeals), it was submitted by the assessee that an amount of Rs.53,050/- paid to M/s. Dasgupta Carriers was inclusive of a sum of Rs.4,200/- paid on account of reimbursement of detention charges for not unloading the goods within the stipulated time and since the amount of transportation charges paid was below the threshold limit of Rs.50,000/-, no TDS was required to be done. This explanation of the assessee was not found acceptable by the ld. CIT(Appeals) in the absence of any bill produced by the assessee showing levy of detention charges and the disallowance made by the Assessing Officer under section 40(a)(ia) on account of transportation charges was confirmed by him.

I have heard the arguments of both the sides and also perused the material available on record. It is observed that the claim of the assessee for payment of a sum of Rs.4,200/- to M/s. Dasgupta Carriers towards reimbursement of detention charges is duly supported by a letter dated 09.02.2007 issued by M/s. Dasgupta Carriers (copy placed at page no. 24 of the paper book) and keeping in view the same, I am of the view that the ld. CIT(Appeals) was not justified to reject the explanation of the ./2015 Assessment year: 2007-2008 Page 5 of 7 assessee for want of bills for detention charges. In my opinion, the said letter dated 09.02.2007 issued by M/s. Dasgupta Carriers is sufficient to show that the amount of transportation charges paid by the assessee to the said party during the year under consideration was only Rs.48,850/- and the same being below the threshold limit of Rs.50,000/-, no tax at source was required to be deducted by the assessee and there was no question of making disallowance under section 40(a)(ia). I, therefore, delete the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on this issue and allow Ground No. 3.

The issue raised in Ground No. 4 relates to the disallowance of Rs.39,500/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of interest paid by the assesee to Shri Samar Kumar Bagchi.

On verification of the interest expenditure claimed by the assesee in respect of unsecured loans, it was found by the Assessing Officer that the interest expenditure claimed by the assessee was inclusive of two amounts of Rs.39,500/- payable to Shri Samar Kumar Bagchi, one for financial year 2005-06 and the other for financial year 2006-07. Since one of the two amounts was relating to the immediately preceding year, i.e. A.Y. 2006-07, the Assessing Officer disallowed the same treating as prior period expenses. Before the ld. CIT(Appeals), it was contended by the assessee that the liability on account of interest payable for financial year 2005-06 had accrued during the year under consideration as a result of revision in the rate of interest and accordingly, the same was claimed in this year. This claim of the assessee, however, was not found to be correct by the ld. CIT(Appeals) as the amount of loan taken by the assesese from Shri Samar Kumar Bagchi was Rs.3,95,000/- and interest @ 10% per year was payable by the assessee for F.Y. 2005-06 as well as 2006-07. The ld. CIT(Appeals) also found that only the amount pertaining to F.Y. 2006-07 was paid by the assessee and the amount pertaining to F.Y. 2006-07 had remained outstanding. He, therefore, did not accept the ./2015 Assessment year: 2007-2008 Page 6 of 7 claim of the assessee that the interest liability for F.Y. 2005-06 had accrued or crystallized in the year under consideration and proceeded to confirm the disallowance made by the Assessing Officer on this issue.

I have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that one of the two amounts of Rs.39,500/- debited by the assessee in the year under consideration as interest on loan taken from Shri Samar Kumar Bagchi was pertaining to the immediately preceding year, i.e. A.Y. 2006-07 and although the liability for the same was claimed to be crystallized during the year under consideration, there is nothing brought on record to support and substantiate the same. On the other hand, as found by the ld. CIT(Appeals) after taking into consideration the amount of loan as well as the rate of interest, the interest of Rs.39,500/- was pertaining to the F.Y. 2005-06 relevant to A.Y. 2006-07 and the same, therefore, was not allowable in the year under consideration being prior period expenses. I, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) confirming the addition made by the Assessing Officer on this issue and upholding the same, I dismiss Ground No. 4.

The issue raised in Ground No. 5 relates to the disallowance of Rs.27,000/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of interest paid to Mrs. Manjushree Bagchi without deduction of tax at source.

The amount of interest on unsecured loan paid to Mrs. Manjushree Bagchi amounting to Rs.27,000/- was disallowed by the Assessing Officer by invoking the provisions of section 40(a)(ia) as there was failure on the part of the assessee to deduct tax at source from the said interest. On appeal, the ld. CIT(Appeals) confirmed the said disallowance made by the Assessing Officer. ./2015 Assessment year: 2007-2008 Page 7 of 7

I have heard the arguments of both the sides on this issue and also perused the relevant material available on record. Although the ld. Counsel for the assessee has submitted that the income of Mrs. Manjushree Bagchi for the year under consideration was below taxable limit and the declaration in Form No. 15H given by her was filed before the ld. CIT(Appeals), I find that there is no evidence brought on record by him to show that the said declaration was filed in the Office of the concerned CIT within the stipulated time as required by the relevant provision. In the absence of the same, the assessee, therefore, was liable to deduct tax at source from the interest paid to Mrs. Manjushree Bagchi and having failed to do so, the disallowance of interest made by the Assessing Officer under section 40(a)(ia), in my opinion was rightly confirmed by the ld. CIT(Appeals). I, therefore, uphold the impugned order of the ld. CIT(Appeals) on this issue and dismiss Ground No. 5.

In the result, the appeal of the assessee is partly allowed.