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Income Tax Appellate Tribunal, KOLKATA BENCH ‘SMC’, KOLKATA
Before: Shri P. M. Jagtap
ORDER This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income-Tax (Appeals)-XXXVI, Kolkata dated 30.12.2013 for the assessment year 2007-08.
The assessee in the present case is an individual, who is engaged in the business of dealing in cigarette and cloth under the name and style of his proprietary concern M/s. J.N. Traders and Jay Netai Bhander. The return of income for the year under consideration was filed by him on 31.10.2007 declaring total income of Rs.2,51,520/-. During the course of assessment proceedings, it was noticed by the AO from the confirmation received from M/s. VST Industries Ltd., one of the suppliers of the assessee that credit notes totaling to Rs.18,53,325/- were issued by the said party in favour of the assessee during the year under consideration and the same were adjusted against the amount payable by the assessee against the purchase made from the said party.
It was further noticed by the AO that the assessee in his books of accounts however had accounted for the credit notes only of the value of Rs.16,46,019/-. He, therefore required the assessee to explain the difference of Rs.2,07,306/-. In reply, a reconciliation statement was prepared and furnished by the assessee explaining the said difference. According to AO, the said explanation however was not verifiable in the absence of supporting documentary evidence. He, therefore, treated the difference of Rs.2,07,306/- as undisclosed income of the assessee and added the same to his total income. During the course of assessment proceedings, it was also noticed by the AO that no tax at source was deducted by the assessee from the interest of Rs.1,08,000/- paid on the unsecured loan taken from one Shri S. Debnath. In this regard, explanation offered by the assessee that Shri S. Debnath has given form no.15G for non-deduction of tax was not accepted by the AO in the absence of copy of such form filed by the assessee. Accordingly, he invoked the provisions of section 40(a)(ia) and disallowed interest of Rs.1,08,000/-. The withdrawal shown by the assessee during the year under consideration for family expenses of Rs.30,500/- were also found to be low by the AO considering the status of the assessee. He, therefore, estimated the personal and household expenses of the assessee for the year under consideration at Rs.60,000/- and added the difference of Rs.29,500/- to the total income of the assessee on account of low withdrawals. Accordingly, the total income of the assessee was computed by the AO at Rs.5,96,330/- in the assessment completed under section 143(3) vide an order dated 30.12.2009.
Against the order passed by the AO under section 143(3), appeal was preferred by the assessee before the ld. CIT(A) disputing all the 3 Sri Balaram Debnath Assessment Year: 2007-08 three additions made by the AO. During the course of appellate proceedings before the ld. CIT(A), reconciliation statement was furnished by the assessee explaining the difference in the amount of credit notes accounted for in his books of accounts and the amount of credit notes as per the confirmation of M/s. VST Industries Ltd. as under:
“Total credit note as per assessee books of account Rs.16,46,019.41 Add: Advance payment to VST DSL Co.Pvt. Ltd. and shown in the books of account’s for 06-07 A.Y. which has been adjusted by credit note by VST Industries Ltd. for 07-08 A.Y. as amalgamated with VST DSL Co. Pvt. Ltd. Rs. 1,43,832.65 Add: Claimed credit note receivable from the said company and shown in the books of accounts for the 06-07 A.Y. which has been adjusted by Credit note by VST Industries Ltd. for 07-08 A.Y. Rs. 1,27,154.50 Rs.19,17,006.56 Less: Claimed credit note receivable from the company and shown in the books of A/c for 07-08 A.Y. but adjusted the same by credit note by VST Industries Ltd. for 08-09 A.Y. Rs. 98,829.00 Rs.18,18,177.56 Add : Credit note of Rs.35,146,44 has been adjusted as Contra Entry i.e. by ledger adjustment. As a result the same has not shown in my business final A.Vc. i.e. profit & loss account. Rs. 35,146.44 Rs.18,53,324.00” Total credit note as per company statement The above reconciliation furnished by the assessee was forwarded by the ld. CIT(A) to the AO seeking the latter’s comments. In the remand report submitted to the ld. CIT(A), the AO stated of having seen the reconciliation furnished by the assessee, but did not make any adverse comments thereon. Although this position was clearly pointed out by the assessee in the counter-comments offered before the ld. CIT(A) on the remand report of the AO, the ld. CIT(A) still proceeded to confirm the addition of Rs.2,07,306/- made on account of difference in the 4 Sri Balaram Debnath Assessment Year: 2007-08 amount of credit notes observing that there was no documentary evidence filed by the assessee in the form of claim made or confirmation from the company to support and substantiate the explanation offered in the reconciliation statement. Before the ld. CIT(A), a copy of form no.15G issued by Shri S. Debnath duly acknowledged by the concerned I.T. authority was also filed by the assessee. When the said copy was forwarded by the ld. CIT(A) to the AO, the latter did not make any adverse comments thereon except stating that the same was not produced by the assessee during the course of assessment proceedings inspite of sufficient opportunity afforded to him. The ld. CIT(A), however did not find the photo copy of form 15G filed by the assessee as admissible evidence as the same was only a photo copy and there was no original copy filed by the assessee. Accordingly, he confirmed the disallowance made by the AO under section 40(a)(ia) on account of interest paid by the assessee to Shri S.Debnath. Similarly, the addition made by the AO on account of low withdrawals was also confirmed by the ld. CIT(A) observing that the estimation of withdrawals of the assessee as made by the AO @Rs.5,000/- per month was reasonable. Accordingly, the appeal of the assessee was dismissed by the ld. CIT(A) confirming all the three additions made by the AO. Aggrieved by the order of the ld. CIT(A), the assessee has preferred this appeal before the Tribunal on the following grounds:
“1) For that on the facts and in the circumstances of the case the appeal order of the Ld. C.I.T. (Appeals)- XXXVI, Kolkata was not fair and proper and on the other hand it was made contrary to law, sound and adequate principles.
2) For that on the facts and in the circumstances of the case, Ld. C.I.T. (Appeals) was not at all justified in confirming the addition of Rs. 2,07,306.00 & he should have considered the written 5 Sri Balaram Debnath Assessment Year: 2007-08 submission of the appellant in this regard as well as remand report of the Ld. I.T.O. and the reasons adduced in confirming the additions of Rs. 2,07,306.00 are not at all convincing and as such the same should be deleted.
3) For that on the facts and in the circumstances of the case the Ld. C.I.T.(Appeals) was wrong in disallowing the sum of Rs. 1,08,000.00 on account of interest on unsecured loan account u/s. 40(a)(ia) of the LT. Act, when the necessary evidences were produced at the appellate stage in terms of Rules 46A of the LT. Rules, 1962.
4) For that having regards to the facts of the case the Ld. C.LT. (Appeals) was not at all justified in confirming the addition of Rs. 29,500.00 on account of low drawings without considering the written submission & rejoinder given at the appellate stage & remand stage by the humble appellant.
5) For that both the Ld. C.I.T. (Appeals) and the Ld. LT.O. erred both in points of law and on facts.
6) For that the humble appellant craves leave to take additional grounds and amend grounds at the time of hearing.”
I have heard the arguments of both the sides and perused the relevant material on record. As submitted by the ld. Counsel for the assessee. Ground nos. 1,5 and 6 raised in this appeal of the assessee are general in nature, which do not call for any specific adjudication.
As regards the issue raised in ground no.2 relating to the addition of Rs.2,07,306/- made by the AO and confirmed by the ld. CIT(A) on account of difference in the amount of credit notes, it is observed that a reconciliation statement was furnished by the assessee before the ld. CIT(A) explaining the said difference. When the said reconciliation was forwarded by the ld. CIT(A) to the AO, the latter did not make any adverse comments thereon and although this position was specifically pointed out by the assessee, the ld. CIT(A) still confirmed the addition made by the AO on this issue observing that there was no documentary 6 Sri Balaram Debnath Assessment Year: 2007-08 evidence filed by the assessee in order to enable verification of the reconciliation statement as pointed out by the AO. At the time of hearing before us, the ld. Counsel for the assessee has taken us through the copy of remand report submitted by the AO to the ld. CIT(A) to show that there was no such adverse comment offered by the AO in his remand report regarding lack of any documentary evidence and the reconciliation statement furnished by the assessee was actually accepted by him. It is also seen from the reconciliation statement furnished by the assessee that the major difference, as explained by the assessee, was on account of difference in the years, in which some credit notes were accounted for by both the sides. Having regard to all these facts of this case, I am of the view that the addition made by the AO on this issue was not sustainable and the ld. CIT(A) is not justified to confirm the same without appreciating the reconciliation statement filed by the assessee explaining the difference in the amount of credit notes. In that view of the matter, I delete the addition made by the AO and confirmed by the ld. CIT(A) on this issue and allow ground no.2 of the assessee’s appeal.
As regards the issue involved in ground no.3 relating to the disallowance of Rs.1,08,000/- made on account of interest on unsecured loan under section 40(a)(ia) of the Act for non-deduction of tax at source, it is observed that the said disallowance was made by the AO due to failure of the assessee to file during the course of assessment proceedings form no.15G claimed to be issued by Shri S. Debnath, the recipient of the interest. Before the ld. CIT(A), the assessee however filed a photo copy of relevant form no.15G with a stamp thereon acknowledging receipt thereof by the concerned authority. The ld. CIT(A) however did not admit this relevant evidence on the ground that a photo copy of form no.15G was filed by the assessee and not the 7 Sri Balaram Debnath Assessment Year: 2007-08 original. I am unable to subscribe to the view taken by the ld. CIT(A) on this issue. At the time of hearing, the ld. Counsel for the assessee has filed a photo copy of the said form no.15G duly certified as a true copy and keeping in view the relevance of this documentary evidence, I consider it fair and proper to restore this issue to the file of the AO for deciding the same afresh after verifying the authenticity and reliability of the form no.15G of Shri S. Debnath filed by the assessee. Ground no.3 is accordingly treated as allowed for statistical purposes.
As regards the issue raised in ground no.4 relating to addition made on account of low withdrawals, it is observed that reasonableness of the withdrawals of Rs.29,500/- shown during the year under consideration was duly explained by the assessee before the AO as well as before the ld. CIT(A). In the said explanation, all the relevant aspects including the single status of the assessee living in the joint family leading a simple life were specifically pointed out by the assessee. It appears that the AO as well as ld. CIT(A), however, has overlooked all these relevant aspects and estimated the withdrawals of the assessee for personal and household expenses at Rs.60,000/- without giving any sound or convincing basis whatsoever. I, therefore, find no justification in the addition made by the AO on this issue and confirmed by the ld. CIT(A) and deleting the same. I allow ground no.4 of the assessee’s appeal.
In the result, the appeal filed by the assessee is allowed, as indicated above. Order Pronounced in the Open Court on 7th October, 2015. Sd/- (P.M.Jagtap) ACCOUNTANT MEMBER Dated: 07/10/2015 Talukdar/Sr.PS Copy of order forwarded to: 1 Sri Balaram Debnath, C/o- P.S. Gupta (Advocate), 100, Bank Lane, Hatar Para, P.O. Krishnagar, Dist- Nadia, Pin – 741 101 2 ITO, Ward-4, Nadia 3 The CIT(A), 4 CIT, 5. D.R. 5 True Copy, By order,