Income Tax Appellate Tribunal - Kolkata
Seema Chatterjee, Hooghly vs Assessee on 17 July, 2014
आयकर अपीलीय अधीकरण, Ûयायपीठ - "C" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH: KOLKATA
(सम¢)Before ौी महावीर िसंह, Ûयायीक सदःय एवं/and ौी शामीम याह
याहया,
या लेखा सदःय)
[Before Shri Mahavir Singh, JM & Shri Shamim Yahya, AM]
आयकर अपील संÉया / I.T.A No.2174/Kol/2010
िनधॉरण वषॅ/Assessment Year: 2005-06
Seema Chatterjee V Income-tax Officer, Wd-1(2), Hooghly
(PAN: ACEPC7775L)
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
Date of hearing: 02.07.2014
Date of pronouncement: 17.07.2014
For the Appellant: Shri Soumitra Chowdhury
For the Respondent: Md. Giyasuddin Ansari, JCIT, Sr. DR
आदे श/ORDER
Per Shri Mahavir Singh, JM :
This appeal by assessee is arising out of order of CIT(A)-XXXVI, Kolkata in Appeal No. 233/CIT(A)-XXXVI/Kol/37/07-08 dated 18.10.2010. Assessment was framed by ITO, Ward-1(2), Hooghly u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2005-06 vide his order dated 31.12.2007.
2. The first common issue in this appeal of assessee is against the order of CIT(A) confirming the action of AO by making the disallowance of construction charges for non- deduction of TDS u/s. 194C of the Act by invoking the provisions of section 40A(ia) of the Act. For this, assessee has raised ground nos. 1 and 5, which read as under:
"1. For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the addition of Rs.13,11,212/- made by the AO by wrongly invoking the provisions of section 40(a)(ia).
5. For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the addition of Rs.11,73,495/- made by the AO by wrongly invoking the provisions of section 40(a)(ia)."
3. We have heard rival submissions and gone through facts and circumstances of the case.
In respect to first ground, the assessee received contract work from Mackintosh Burn Ltd. for construction of RCC Bridge over drainage canal at Mukundpur. The assessee made payment of Rs.13,11,202/- for this contractual payments but without deduction of TDS. CIT(A) confirmed the disallowance by observing as under:
"Considering the above, I am of the view that the amount of Rs.13,11,212/- paid/payable to M/s. Sailaja Suppliers were contractual payments as referred to in 2 ITA No.2174/K/2010 Seema Chatterjee AY 2005-06 section 40(a)(ia) r.w.s. 194C of the I. T. Act. Therefore, the appellant was required to deduct tax at source for the above payments. Since admittedly TDS was not made, AO was correct in disallowing the said expenditures/payments as per provisions of sections 40(a)(ia) r.w.s. 194C of the I. T. Act. Accordingly, the disallowance of Rs.13,11,212/- made by the Assessing Officer is confirmed."
4. At the time of hearing before us, Ld. counsel for the assessee stated that this issue is covered in favour of the assessee and against the revenue for the reason that the assessee is an individual namely, Smt. Seema Chatterjee and assessment year involved is 2005-06 and herein the dispute is contractual payment made without deduction of TDS u/s. 194C of the Act. According to him, this issue is squarely covered by the decision of Coordinate Bench in ITA No. 161/Kol/2010 for AY 2006-07 in Shri Kishan Madhogaria Vs. Addl. Commissioner of Income-tax, dated 27.01.2014, wherein the Hon'ble Calcutta High Court decision in the case of CIT Vs. Shri Rinku Mallick, ITAT No. 96 of 2012 in G.A. No. 1368 of 2012 dated 15.06.2012 has been considered. Coordinate Bench in ITA No. 161/K/2010 vide para 6 has held as under:
"6. We have heard rival submissions and gone through facts and circumstances of the case. We find that the assessee is an individual namely Shri Kishan Madhogaria and assessment year involved is 2006-07. At the outset, Ld. counsel for the assessee filed copy of the decision of Hon'ble Calcutta High Court in the case of CIT Vs. Shri Rinku Mallick, ITAT No. 96 of 2012 in G.A. No. 1368 of 2012 dated 15.06.2012 and stated that the following substantial questions of law were placed before the Hon'ble Court:
"1. Whether on the facts and in the circumstances of the case the Tribunal was justified in law in deleting the disallowance under section 40(a)(ia) read with section 194C(2) on the ground that the assessee is an individual.
ii) Whether on the facts and in the circumstances of the case the Tribunal was justified in law in holding the assessee is an individual despite the fact that the provision of section 194C(1) is applicable to an individual with effect from 1.6.2007 which is contrary to the assessment year involved in the instant case."
And the Hon'ble High Court dismissed the revenue's appeal by observing as under:
"We have heard the Ld. counsel Smt. Sinha (Das De), appearing for the appellant, and we have gone through the impugned judgment and order. We are of the view that this appeal does not require admission for hearing as the applicability of law involved herein is admittedly settled. It is admitted position that the matter relates to the assessment year 2006-07, whereas Section 194C(1) has been made applicable to the individual assessee with effect from 1.6.2007. There is no dispute that the respondent is an individual assessee.
Considering the position of the law, the learned Tribunal has consistently held that Section 194C(1) cannot be made applicable for the assessment year 2006-
07."
In view of the above principle laid down by Hon'ble jurisdictional High Court that the provisions of section 194C(1) of the Act has been made applicable to the individuals w.e.f. 01.06.2007, this provisions will not apply to the facts of the present case.
3 ITA No.2174/K/2010Seema Chatterjee AY 2005-06 Respectfully following the decision cited supra, we dismiss this ground of appeal of revenue."
As the issue is covered, we delete the disallowance and this issue of assessee's appeal is allowed.
5. Similarly, issue is exactly identical to the above issue i.e. the assessee made contractual payment aggregating to Rs.11,73,495/- to M/s. Deb Engineering without deduction of tax. According to AO, the assessee has violated the provision of section 194C of the Act, therefore, he disallowed the contractual payment of Rs.11,73,495/- by invoking the provisions of section 40(a)(ia) of the Act. According to AO, the payments are falling u/s. 194C of the Act. The CIT(A) also confirmed the action of the AO vide para 10.1 page 12, which reads as under:
"10.1. The issues involved here are of similar nature as in the case of M/s. Sailaja Suppliers, where AO's findings, Appellant's version, AO's remand report and appellant's reply to the same has been discussed in the preceding paragraphs No. 3.1, 4, 5 and 6. Therefore, the same is not repeated. This issue has been dealt by me at paragraph 7.1 of this order. For the same reasons, I am of the view that the amount of Rs.11,73,495/- paid/payable to M/s. Dev Engineering were contractual payments as referred to in section 40(a)(ia) r.w.s. 194C of the I. T. Act. Therefore, the appellant was required to deduct tax at source for the above payments. Since admittedly TDS was not made, AO was correct in disallowing the said expenditures/payments as per provisions of sections 40(a)(ia) r.w.s. 194C of the I. T. Act. Accordingly, the disallowance of Rs.11,73,495/- made by the Assessing Officer is confirmed."
As we have already discussed the facts in the above issue and facts being similar and issue being covered by the decision of Hon'ble jurisdictional High Court in the case of Rinku Mallick, supra, respectfully following the same, we delete the disallowance and this issue of assessee's appeal is also allowed.
6. The next issue in this appeal of assessee is against the order of CIT(A) confirming the action of AO in making addition on account of bogus purchases. For this, assessee has raised following ground no.2:
"2. For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the addition of Rs.10,59,192/- made on account of bogus purchase."
7. Briefly stated facts are that the assessee has debited purchases of Rs.13,39,480/- in the books of account as purchase from one Shri Debangshu Banerjee, proprietor of M/s. Sailaja Suppliers. However, Shri Debangshu Banerjee denied the sales made except for the sum of Rs.3 lacs. The CIT(A) as well as the AO has noted this fact that even the books of account of M/s. Shailaja Suppliers was examined, which shows that quantitative details of purchases, sales and consumption of raw material by the assessee from this party is at Rs.3 lacs only. In view of these facts the CIT(A) confirmed the action of AO by observing as under:
4 ITA No.2174/K/2010Seema Chatterjee AY 2005-06 "The claim of the AR of the appellant that the appellant was not given opportunity to cross examine Shri Banerjee is also not correct as the appellant was show caused by the aO in this regard and she did not avail the opportunity of cross examination. Further, in reply to AO's comments in the remand report, the AR simply stated that "... it was quite possible that the value of purchases as mentioned by the supplier may relate to some other period." If that was the case, it was for him to submit necessary evidences showing reconciliation of purchases booked by the appellant in the books of account. But expecting a typed statement and ledger extracts, no such details/evidences have been submitted. Without evidences, appellant's submission cannot be relied upon specially when the supplier has categorically stated that he made total sales to the appellant for about Rs.3,00,000/-. After considering the facts and circumstances, I am of the opinion that the appellant had inflated her purchases to the tune of Rs.10,59,192/-. Accordingly, the addition of Rs.10,59,192/- is confirmed."
Aggrieved, assessee came in appeal before us.
8. We have heard rival submissions and gone through facts and circumstances of the case. At the outset, Ld. counsel for the assessee stated that even though the purchases are bogus the entire purchases cannot be added because corresponding sales is also there. He accordingly, agreed that a net profit rate can be applied. On query from the Bench, the Ld. Sr. DR also stated that a reasonable rate can be applied that will suffice the matter. We find that the plea of the Ld. counsel for the assessee is reasonable that the entire purchases cannot be added because corresponding sale is also there. Accordingly, we direct the AO to compute the net profit @ 10% on these bogus purchases. We direct accordingly. This issue of assessee's appeal is partly allowed.
9. The next issue in this appeal of assessee is against the order of CIT(A) confirming the addition of Rs.4,15,242/- made by AO by invoking the provisions of Section 40A(3) of the Act. For this, assessee has raised following ground nos. 3 and 4:
"3.For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in giving a part relief of Rs.22,000/- out of the total addition of Rs.4,37,242/- made by the AO by wrongly invoking the provisions of section 40(A)(3).
4. That the Ld. CIT(A) ought to have deleted the entire addition Rs.4,38,242/- made by the AO by wrongly invoking the provisions of section 40(A)(3)."
10. Briefly stated facts are that the assessee had made purchases to the tune of Rs.1,81,758/- from M/s. I. D. Enterprises, a proprietary concern of Shri Ratan Dey. AO during the course of assessment proceedings examined assessee's ledger and bank account No. CC-25990 with UBI, Uttarpara Branch and noted that the assessee has made total payment of Rs.6,19,000/- to Shri Ratan Dey by way of bearer cheque in the previous year. The AO disallowed a sum of Rs.36,351/- by invoking the provisions of section 40A(3) of the Act and the balance payment was added as undisclosed cash loan to Shri Ratan Dey for an amount of Rs.4,37,242/-. Aggrieved, assessee preferred appeal before CIT(A), who confirmed the addition of Rs.4,15,242/- by observing in para 8.2 as under:
5 ITA No.2174/K/2010Seema Chatterjee AY 2005-06 "8.2. So the appellant has furnished two altogether different versions. The excess payment of Rs.4,15,242/- (after reconciliation) was first claimed as payments towards outstanding lìability expenses and subsequently claimed as cash withdrawals through Sri Ratan Dey, with whom appellant was having a cordial relationship for the purpose of 'cash withdrawals'. The AR further submitted that AO had not obtained any confirmation / evidence from Sri Dey in this regard and the cash withdrawals were duly recorded in the cash book. However, the said claim was never made before the AO. On this issue, AO in his remand report has commented that Cash book and relevant ledger account have been verified and it is seen that a sum of Rs.20,000/- was considered twice. Therefore, the amount of addition on this head should be Rs.4,15,242/- instead of Rs.4,37,242/-. The AR has responded to the remand report stating "In respect of these grounds, the Ld. AO in his Remand Report has accepted the plea of the assessee that certain figures have been taken twice. However, at paragraph 4 of the remand report, the Ld. AO has wrongly taken the figure considered twice as Rs.20,000/- in place of the actual figure of Rs.22,000/-."
Thus it is quite clear that the appellant has failed to defend her claim. The AR has not adduced any evidence, even at the time of remand, to substantiate either of the claims. In response to AO's observation in the remand report, he could only point out that a figure of Rs.22,000/- was taken twice by the AO to arrive at the total figure of Rs.4,37,242/- (which is found to be correct). Therefore, addition made on this count is confirmed to the extent of Rs.4,15,242/-."
Aggrieved, assessee came in appeal before us.
11. We have heard rival submissions and gone through facts and circumstances of the case. Before us, Ld. counsel for the assessee Shri Soumitra Chowdhury drew our attention to assessee's paper book pages 30 and 31 whereby at page 30 of the ledger copy of I. D. Enterprise's account in assessee's books is given. As per this, the total purchases is at Rs.1,81,758/-. He also drew our attention to page 31 of assessee's paper book by virtue of which there are bank withdrawal to the extent of Rs.5,97,000/-. According to him, these bank withdrawals are made by Shri Ratan Dey and handed over the cash to the assessee. According to Ld. counsel, Shri Ratan Dey is close associate of the assessee apart from running his own proprietorship concern i.e. M/s. I. D. Enterprises. We have gone through page 31 of assessee's paper book and the table showing analysing the transactions reflected in the cash book relating to Shri Ratan Dey, proprietor of M/s. I. D. Enterprises, who withdrew this amount and there are deposits also. At the best, this can be treated as purchases and a reasonable profit can be estimated @ 10%. We are of the view that the sum of Rs.37,241/- can also be treated as purchases out of the books of account, which is sale out of books of account. A reasonable net profit @ 10% should be estimated. We direct the AO accordingly. This issue of assessee's appeal is partly allowed.
12. The next issue in this appeal of assessee is against the order of CIT(A) confirming the estimated addition of Rs.2,58,300/- @ 25% of the purchases for a sum of Rs.10,33,198/- from M/s. Dev Engineers. For this, assessee has raised following ground no. 6:
6 ITA No.2174/K/2010Seema Chatterjee AY 2005-06 "6. For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in giving a part relief of Rs.51,660/- out of the total estimated addition of Rs.2,58,300/-, being 25% of Rs.10,33,198/- on account of purchases from M/s. Dev Engineers."
13. We have heard rival submissions and gone through facts and circumstances of the case. We find that the AO made addition of Rs.2,58,300/- being 25% of purchases made from M/s. Dev Engineers as the assessee failed to produce purchase bills. We find that the AO estimated on the basis of 25% of disallowance and CIT(A) also restricted the disallowance at 20% by estimating on assumptions and presumptions by observing in para 11.3 of his appellate order as under:
"11.3. It is apparent from the assessment order that the AO made the estimation of disallowance in a routine manner. He did not discuss about the nature and amount of the purchase bills which were not produced before him. Non-existence of the supplier in the given address may prompt the AO for disallowance on estimated basis but that alone cannot be the yardstick. The AO did not make quantitative study of purchase and consumption of materials to arrive at estimated disallowance of 25% of purchases. At the same time, the appellant could not produce any new evidence, except claiming that the disallowance was excessive. After considering the facts and circumstances of the issue, I am of the opinion that it could meet the end of justice if the estimation of disallowance is restricted to 20%. The AO is directed accordingly. The appellant gets relief of Rs.51,660/-."
We find that there is no basis for making such disallowance because the AO has accepted the purchases and part purchase cannot be disallowed without any basis. As there is no basis for this addition, we delete the addition and this issue in assessee's appeal is allowed.
14. In the result appeal of assessee is partly allowed as indicated above.
15. Order is pronounced in the open court on 17.07.2014.
Sd/- Sd/-
शामीम याहया,
याहया लेखा सदःय महावीर िसंह, Ûयायीक सदःय
(Shamim Yahya ) (Mahavir Singh)
Accountant Member Judicial Member
Dated : 17th July, 2014
वǐरƵ िनǔज सिचव Jd.(Sr.P.S.)
आदे श कȧ ूितिलǒप अमेǒषतः- Copy of the order forwarded to:
1. अपीलाथȸ/APPELLANT - Ms. Seema Chatterjee, 91/1, J. K. Street, Uttarpara, Hooghly-712258.
2 ू×यथȸ/ Respondent -ITO, Ward-1(2), Hooghly.
3. आयकर किमशनर (अपील)/ The CIT(A), Kolkata
4. आयकर किमशनर/ CIT Kolkata
5. ǒवभािगय ूितनीधी / DR, Kolkata Benches, Kolkata स×याǒपत ूित/True Copy, आदे शानुसार/ By order, सहायक पंजीकार/Asstt. Registrar.