ACIT, CIRCLE - 39, KOLKATA, KOLKATA vs. M/S. FRISCO STORES, KOLKATA

SHRI M.BALAGANESH, AM This appeal of the revenue arises out of the order of the Learned CIT(A)-IV, Kolkata in Appeal No. 225/CIT(A)-IV/09-10 dated 29-10-2010 for the Asst Year 2007- 08 against the order of assessment framed u/s 143(3) of the Income Tax Act 1961 (hereinafter referred to as the ‘Act’).

1. Whether the ld.CIT(A) erred in allowing advances received from parties treating the same as genuine, whereas the assessee could not produced evidences regarding the receipts.

2. Whether the ld.CIT(A) erred in allowing the assessee of unexplained investment treating the same as whereas the assessee could not produced evidences to substantiate the investments.

3. Whether the ld.CIT(A) erred in allowing the assessee of cash credit whereas the reflection of same was not found in the individual balance sheet of the loanee.

4. Whether the ld.CIT(A) erred in allowing the expenses of loading & unloading charges whereas the assessee could not produce entire bills and vouchers.

5. Whereas the ld.CIT(A) erred in allowing entertainment expenses whereas assessee has failed to establish commercial expediency for the expenditure.

3. The brief facts of the case is that the assessee is a partnership firm and is wholesaler of IMFL products and beers. The Learned AO found that a sum of Rs. 7,20,000/- was received as advance from customers by the assessee (Ground No. 1 of the revenue) on various dates. The Learned AO feld that the genuineness, creditworthiness and identity of the parties were not proved by the assessee and accordingly sought to bring the advances received to tax u/s 68 of the Act. On first appeal, the Learned CITA felt that all the details were filed by the assessee and all these advances were subsequently converted into sales. Accordingly the Learned CITA deleted the addition. Aggrieved, the revenue is in appeal before us.

3.1. Similarly, with regard to the trade advances given by the assessee to various parties which are duly reflected in the books of accounts of the assessee to the tune of Rs. 7,2,0000/- (Ground No. 2 of the revenue), the assessee could not produce any details before the Learned AO during the assessment proceedings. On first appeal, the Learned CITA merely granted relief to the assessee on the ground that all the advances given by the assessee have been duly accounted in the books of the assessee and hence no addition needs to be made by the Learned AO. Aggrieved, the revenue is in appeal before us.

3.2. With regard to the loans received by the assessee to the tune of Rs. 2,45,000/- from D.L.Saha & N.L.Saha & Ors (Ground No. 3 of the revenue), the Learned AO found that the said transaction is not reflected in the balance sheet of D.L.Saha and accordingly sought to bring the said receipt of Rs. 2,45,000/- to tax as unexplained cash credit u/s 68 of the Act. On first appeal, the Learned CITA merely accepted the version of the assessee without giving any finding in this regard. Aggrieved, the revenue is in appeal before us.

5.1. The brief facts of this issue is that the assessee had debited a sum of Rs. 6,53,174/ - towards loading and unloading charges in his return but could not produce the bills / vouchers for the same before the Learned AO. The assessee merely stated before the Learned AO that expenses were incurred towards payments to local labourers for loading and unloading of goods and properly vouched and stated that no single payment exceeding Rs. 20,000/- was made to any party in a single day and no party has been paid beyond Rs. 50,000/- during the financial year so as to come under the ambit of TDS provisions thereon. The Learned AO not satisfied with this reply sought to disallow a sum of Rs. 1,30,634/- being 20% of Rs. 6,53,174/- u/s 40A(3) of the Act. On first appeal, the Learned CIT(A) held that the incurrence of this expenditure is inevitable in the line of business carried on by the assessee and accordingly granted relief to the assessee. Aggrieved, the revenue is in appeal before us.

5.2. We have heard the Learned DR. We find that no details were either submitted before the Learned AO or before the Learned CIT(A). We find that the Learned CIT(A) had merely granted relief by looking from the propriety angle of the expenditure. Even before Learned CIT(A), no evidences at least in the form of self made vouchers which are duly acknowledged by the payees were filed. We hold that assessee be given one last opportunity and hence we find in the facts and circumstances, to set aside this issue to the file of the Learned AO in the interest of justice and fair play, to decide this issue afresh. The assessee is given liberty to file complete details and fresh evidences, if any, in support of his contentions. Needless to mention that the assessee be given a reasonable opportunity of being heard. Accordingly, the ground no. 4 raised by the revenue is allowed for statistical purposes.

6.1. The brief facts of this issue is that the assessee had debited a sum of Rs. 1,17,920/- towards Entertainment expenses in his return. The assessee submitted the supporting documents and also explained the necessity of incurring such expenses in order to maintain cordial relation for running the business smoothly. The Learned AO sought to disallow the same on the ground that Fringe Benefit Tax was not suffered on the same. On first appeal, the Learned CITA held that the said expenditure is incurred on the ground of commercial expediency more so for the line of activity in which the assessee is engaged and accordingly granted relief to the assessee. Aggrieved, the revenue is in appeal before us.

6.2. We have heard the Learned DR. We find from the orders of the lower authorities that this expenditure has to be necessarily incurred by the assessee in order to have smooth conduct of his business and commercial expediency thereon is also proved. Hence we do not find any infirmity in the order of the Learned CIT(A) in this regard. Accordingly, the ground no. 5 raised by the revenue is dismissed.