Income Tax Appellate Tribunal - Kolkata
Dakshineswari Cold Storage Pvt. Ltd., ... vs Department Of Income Tax on 8 November, 2011
आयकर अपीलीय अधीकरण, Ûयायपीठ - "A", कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- A, KOLKATA
[सम¢ ौी एन ǒवजयकुमारन,
मारन Ûयायीक सदःय एवं ौी सी.
सी. डȣ.
डȣ. राव,
राव, लेखा सदःय ]
Before Sri N.Vijayakumaran, Judicial Member & Sri C.D. Rao, Accountant Member
आयकर अपील संÉया / ITA No. 138 (Kol) of 2011
िनधॉरण वषॅ/Assessment Year 2007-08
Asstt.Commissioner of Income-tax -वनाम- Dakshineswari Cold Storage P.Ltd.
Circle-1, Hooghly. -Versus- Hooghly, (PAN-AABCD2315B)
(अपीलाथȸ/APPELLANT) (ू×यथȸ/RESPONDENT)
अपीलाथȸ कȧ ओर से/ For the Appellant: ौी/Sri S.K. Roy
ू×यथȸ कȧ ओर से/For the Respondent: ौी/Sri Somnath Ghosh
सुनवाई कȧ तारȣख/Date ofHearing : 08/11/2011
घोषणा कȧ तारȣख/Date of Pronouncement : 11/11/2011
आदे श/ORDER
सी.
सी.डȣ.
(सी डȣ.राव), राव लेखा सदःय (C.D. Rao), Accountant Member :
The department has filed this appeal against the order dated 11.11.2010 of ld. C.I.T.(A)-XXXVI, Kolkata pertaining to assessment year 2007-08. The grounds raised in this appeal by the department read as under :-
"1. On the facts and circumstances of the case, Ld. C.I.T. (Appeals) had erred in deleting the addition of undisclosed investment in Plant &. Machinery amounting to Rs.52,37,840/- by not asking for a remand report from the Assessing Officer on the valuation submitted by the assessee. Not giving an opportunity to the Assessing Officer is against the principles of natural justice.
2. The Ld. C.I.T. (Appeals) had erred in deleting the addition of Rs.6,34,945/- in respect of commission payment disallowed u/s 40(a)(ia) of the I.T. Act as T.D.S. needs to be deducted when Commission payment exceeds Rs.2,500/- and not Rs.20,000/- u/s 194H of the I.T. Act. Further, Rule 30(1)(b)(i)(1) of the I.T. Rules states the time limit for payment of T.D.S. in the Govt. account is within two months from the end of the month if the payment is made in the last month. The Ld. C.I.T. (Appeals) had erred in accepting the fact that T.D.S. deducted in March, 2007 and deposited in Govt. account on 08.06.2007, i.e. before the due date of filing of return was valid."1
2. The assessee, a private limited company, carries on the business of running a cold storage. In the assessment year under consideration, the assessee as per Annexure-I of Tax Audit Report had disclosed the W.D.V. of Plant & Machinery at Rs.11,82,897/- and addition made to such existing machinery was in the sum of Rs.7,63,263/-. The A.O. relying on the value of Plant & Machinery insured at Rs.71,84,000/- by the Insurance Company made an addition of Rs.52,37,840/- u/s. 69 of the Act alleging undisclosed investment in the following manner :-
Sl. Description of items WDV + Addition Sum Insured Difference No. 1 Machinery Rs.11,82,897 Rs.71,84,000 Rs.52,37,840 Rs. 7,63,263 The A.O. has further alleged that the assessee has not deducted TDS as per provisions of sec. 194H of the Act on the commission paid of Rs.6,34,945/- to various agents, nor proof for payment thereof was produced. He, therefore, disallowed the said expenses incurred on commission payment by invoking provisions of sec. 40(a)(ia) of the Act and added the same to the total income of the assessee.
3. On appeal, the Ld. C.I.T.(A) deleted the addition of Rs.6,34,945/- made by the A.O. u/s. 40(a)(ia) of the Act by observing as under :-
"4.2. I have duly considered the submission filed by the AR of the appellant and examined the details enclosed. It is seen that the appellant paid agency commission excess of Rs.20,000/- each to seventeen persons, totaling to Rs.6,03,600/-, for which total tax of Rs.30,784/- was deducted at source in the month of March, 2007 and the same was deposited in Government a/c on 08/06/2007 i.e. before the due date of filing return. The balance commission of Rs.31,345/- was paid to 26 parties; each being less than Rs.20,000/- no tax was required to be deducted at source. This being the fact, I find that the addition of Rs.6,03,600/- made by the A0 was uncalled for and therefore, delete the same."
The Ld. C.I.T.(A) also deleted the addition of Rs.52,37,840/- made by the A.O. u/s. 69 of the Act towards undisclosed investment in machineries by observing as under:
"5.2. The submission of the Ld. AR of the appellant has been considered carefully in the light of material placed before me and the case law referred to. During the previous year relevant to the assessment year, appellant had added P & M to the tune of Rs.7,63,263/- with the existing machineries, w.d.v. of which was of Rs.11,82,897/-. The A.O. did not find any discrepancy on that and allowed 2 depreciation claimed by the appellant. However, from the 'Cover Note' of the Insurance Policy AO found that the appellant had got the said P & M valued at Rs. 71,84,000/- by a Govt. approved valuer for insurance purpose and arrived at the conclusion that the appellant was having undisclosed investments in P & M for the difference amount of Rs.52,37,840/- and added the same u/s. 69 of the Act. This action of AO is not sustainable. The provisions of section 69 can only be invoked after establishing a real difference between machineries existed in appellant's premises and machineries declared in the books. However, taking lead from this huge difference between books value of old machineries vis-à-vis valuation done by the appellant's valuer for insurance coverage, the AO should have undergone a detailed year-wise, item-wise and value-wise comparative study for each machinery as well as referred the case to the Government Valuer for fresh valuation and thereafter should have tried to find out year-wise discrepancies. The AO also could have investigated the matter with the Insurance Company to find out whether the appellant had encashed any insurance claim during the year using other than disclosed bank account, as this kind of practice is prevalent in this type of business. Instead of that he made the addition on surmises and conjectures, which is against the law.
5.3. In view of the foregoing, it is clear thatthere was no scope for addition in the current year for undisclosed investment in machineries as the AO did not pointed out any discrepancy in both W.D.V. and addition to P & M and allowed full depreciation claimed by the appellant. I, therefore, inclined to agree with the appellant that the addition of Rs.52,37,840/- was uncalled for and accordingly, deleted the same."
Hence this appeal by the department.
4. At the time of hearing, the Ld. Departmental Representative relied on the order of A.O., whereas the Ld. counsel for the assessee supported the order of the Ld. C.I.T.(A). In respect of ground No.2 of the department's appeal, the Ld. counsel submitted that the assessee had produced two separate lists of persons to whom commission was paid - one containing the names of persons to whom payments made were outside the ambit of sec. 194H of the Act and the other containing the names of those persons coming within the scope of Sec. 194H of the Act and the tax challan in proof of deduction of TDS was submitted before the A.O. Copies of details of agent commission with TDS and without TDS have been filed at pages 27 & 28 of the paper book and copies of TDS challan and TDS return for the assessment year under consideration are placed at pages 13 to 22 of the paper book. He, therefore, submitted that the A.O. made the addition of Rs.6,34,945/- by invoking provisions of sec. 40(a)(ia) 3 of the Act on misrepresentation of facts and the Ld. C.I.T.(A) has justifiably deleted the same, which should be upheld.
In regard to other addition of Rs.52,37,840/- vide ground No.1 of the department's appeal, the Ld. counsel submitted that the A.O. has not given any finding regarding any unrecorded investment having been made by the assessee in plant & machinery during the previous year relevant to assessment year under consideration, which is the principal requirement for invoking provisions of sec. 69 of the Act. He submitted that audit report in Form 3CD along with Balance Sheet and P/L Account for the assessment year under consideration was filed before the A.O. and no sort of irregularity and defect could be pointed out by him. Copies of these documents are placed at pages 63 to 91 of the paper book. In support of his submission, the Ld. counsel relied on the decision in the case of Ushakant N. Patel vs. CIT [282 ITR 553 (Guj)]. He further submitted that the A.O. while making addition on account of alleged unrecorded addition to the plant & machinery solely relied on the provisional policy schedule issued by the Insurance Company. He submitted that the assessee has been running the cold storage for a long time and due to impact of the provision of sec. 43(6) of the Act on the machineries, the W.D.V. of such assets had come down immeasurably as compared to their fair market value and the Insurance Company considered it appropriate according to its principles to insure such assets at their fair market value of Rs.71,84,000/-. He further submitted that the concept of arriving at the W.D.V. of an asset means the balance value remaining in the books after deducting depreciation allowed thereon year after year, whereas the determination of fair market value for the purposes of insuring the same is to find out the replacement cost of such asset. Therefore, the difference between the fair market value of the machinery adopted by the Insurance Company and the W.D.V. of such assets cannot be treated as unexplained investments. He further submitted that the Insurance Company had insured the impugned machineries at the same value in the preceding years also and, therefore, the assumption of the A.O. regarding unexplained investment has no basis. Copies of insurance receipts for A.Ys 2005-06 to 2007-08 are placed at pages 10 to 12 of the paper book. The Ld. counsel 4 submitted that the Ld. C.I.T.(A) has rightly deleted the addition made on such account and the same should be upheld.
5. We have heard the parties and perused the material placed on record. We have also gone through the orders of the authorities below. Apropos ground No.1 of the department's appeal in respect of deletion of addition of Rs.52,37,840/-, we observe that the A.O. basing on the cover note of the Insurance Policy found difference of Rs.52,37,840/- between the sum insured and WDV of the machineries and addition thereof during the year under consideration, which he added as undisclosed investment u/s. 69 of the Act. Section 69 of the Act reads as under :-
"69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.
Therefore, as per Sec. 69 of the Act, addition on account of unexplained investment is called for when the investment made by the assessee is not recorded in the books of account, if any, maintained by him and the assessee offers no explanation about the nature and source of the investment or the explanation offered by the assessee is not found satisfactory by the A.O. In the instant case, we observe that the A.O. has solely acted on the cover note of insurance policy for plant & machinery in support of his presumption that the assessee must have made fresh investments which were not disclosed in the books fully without pointing out or matching such discrepancy between value shown in the insurance cover note and value reflected in the audited accounts. In support of such presumption, the A.O. could not bring on record any evidence to establish that the assessee, in fact, made investments in plant & machinery during the assessment year under consideration which remained unrecorded in its books of account. The assessee has furnished all the possible evidences including the audited books of account and in such circumstances it was unfair on the part of the A.O. to treat the difference between WDV of plant & machinery and addition thereof during the assessment year under consideration and value shown in the insurance cover note as assessee's undisclosed investment u/s. 69 of the Act. In this connection, we derive 5 support from the decision of Hon'ble Supreme Court in the case of C.I.T. Vs. Noorjahan (P.K.)(Smt.), reported in 237 ITR 570 (SC), wherein it has been held that mere rejection of an explanation would not automatically entitle the A.O. to conclude that the assessee had concealed the particulars of income and for that purpose addition made under section 69 shall not be warranted. Keeping in view all the facts and circumstances of the case and the evidences on record, we uphold the order of Ld. C.I.T.(A) deleting the addition of Rs.52,37,840/-. Ground No. 1 of the department's appeal is thus dismissed. 5.1. Now coming to ground No.2 of the department's appeal, the A.O. disallowed the expenses of Rs.6,34,945/- incurred on payment of commission to several agents alleging non-deduction of TDS on such commission payments and added the same to the total income u/s. 40(a)(ia) of the Act on account of violation of provisions of sec. 194H of the Act. The Ld. C.I.T.(A) on perusal of the records observed that commission in excess of Rs.20,000/- each to 17 agents totalling to Rs.6,03,600/- was paid to 17 agents and total tax of Rs.30,784/- was deducted at source on such payments and deposited in the Govt. account. The balance commission totalling to Rs.31,345/- [Rs.6,34,945 - Rs.6,03,600] to 26 agents was less than Rs.2,500/- (wrongly mentioned by Ld. C.I.T.(A) as Rs. 20,000/-) each and hence no TDS was required to be deducted. In view of the above, in our considered opinion, the A.O. has wrongly disallowed the commission payment to the agents and the Ld. C.I.T.(A) has rightly deleted the addition made on this account.
Apropos the grounds of appeal, the department has stated that the time limit for payment of TDS in Govt. account is within two months from the end of the month if the payment is made in the last month and, therefore, the Ld. C.I.T.(A) erred in accepting the fact that TDS deducted in March, 2007 and deposited in Govt. account on 08/6/2007, i.e. before the due date of filing of return, was valid. We find that as per proviso (A) to sec. 40(a)(ia) of the Act, if tax is deducted during the last month of the previous year but paid after the said due date, i.e. on or before the due date of filing of return u/s. 139(1) of the Act, then such sum shall be allowed as deduction. In this case admittedly TDS of Rs.30,784/- deducted in March, 2007 was deposited in Govt. account on 08/6/2007, which was before the due date of filing of the return for the assessment 6 year under consideration. Therefore, in our considered opinion, there is no infirmity in the order of the Ld. C.I.T.(A) in allowing the claim of the assessee and deleting the addition made by the A.O. on this account. We, therefore, uphold the order of the Ld. C.I.T.(A) on this issue and ground No.2 of the department's appeal is thus dismissed.
6. In the result, the appeal of the department is dismissed.
Pronounced in the open Court on 11.11.2011.
Sd/- Sd/-
ौी एन ǒवजयकुमारन)
(ौी मारन Ûयायीक सदःय सी.
सी.डȣ.
(सी डȣ.राव)
राव लेखा सदःय
(N.Vijayakumaran) Judicial Member (C.D. Rao), Accountant Member
(तारȣख)
तारȣख) Date: 11 -11-2011
आदे श कȧ ूितिलǒप अमेǒषतः-
Copy of the order forwarded to:
1. अपीलाथȸ / The Appellant : A.C.I.T., Circle-1, Aayakar Bhawan, Khadinamore, Chinsurah, Hooghly-712 102.
2 ू×यथȸ / The Respondent : Dakshineswary Cold Storage Pvt. Ltd., Vill & PO-
Bhanderhati, Hooghly-712 405.
3. आयकर किमशनर (अपील) : The CIT(A)-XXXVI, Kolkata.
4. आयकर किमशनर/The CIT, Kol-
5. वभािगय ूितनीधी / DR, ITAT, Kolkata Benches, Kolkata
6. Guard file.
स×याǒपत ूित/True Copy, आदे शानुसार/ By order,
(dkp)
Asstt. Registrar.
7