Income Tax Appellate Tribunal - Kolkata
Anil Kumar Paik, Kolkata vs J.C.I.T (Osd) Under Cit - Iii, Kol, ... on 21 June, 2017
I . T. A . N o. 2 2 9 7 / KO L . / 2 0 1 3
Assessment year: 2009-2010
Page 1 of 13
IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'A' BENCH, KOLKATA
Before Shri P.M. Jagtap, Accountant Member and
Shri A.T. Varkey, Judicial Member
I.T .A. No. 2297/KOL/ 2013
Assessment Year: 2009-2010
Anil Kumar Paik,............................................................................Appellant
Flat 2ABC, 2B, S.N. Roy Road,
Behala, Kolkata-700 034
[PAN: AFLPP 6567 R]
-Vs.-
Joint Commissioner of Income Tax (OSD), ...................................Respondent
C.I.T.-III,
Aayakar Bhawan,
P-7, Chowringhee Square,
Kolkata-700 069
Appearances by:
Shri Mihir Bandyopadhyay, A.R., for the assessee
Shri Saurabh Kumar, Additio nal C IT, D.R., for the Depart ment
Date of concluding th e hearing : May 17, 2017
Date of pronouncing the order : Ju ne 21, 2017
O R D E R
Per Shri P.M. Jagtap, A.M..:
This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-VIII, Kolkata dated 23.01.2013.
2. The relevant facts of the case giving rise to this appeal are as follows. The assessee is an individual, who is engaged in the business of Construction, Trading in Country Spirit and running a Medical Shop. The return of income for the year under consideration was filed by him declaring total income of Rs.21,00,893/-. The case of the assessee was selected for scrutiny by the Assessing Officer and in the assessment completed under section 143(3) vide an order dated 08.12.2011, the total I . T. A . N o. 2 2 9 7 / KO L . / 2 0 1 3 Assessment year: 2009-2010 Page 2 of 13 income of the assessee was determined by the Assessing Officer at Rs.55,23,192/- after making various additions/disallowances.
3. Against the order passed by the Assessing Officer, an appeal was preferred by the assessee before the ld. CIT(Appeals) and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) confirmed some additions/disallowances made by the Assessing Officer while deleting other additions/disallowances or sustaining the same partly. The ld. CIT(Appeals) thus allowed the appeal of the assessee partly vide his appellate order dated 23.01.2013, which is impugned by the assessee in the present appeal filed before the Tribunal on the following grounds:-
"1. The Ld CIT(A) erred in confirming addition against interest to the extent of Rs. 2,34,084/-.
2. The Ld CIT CA) erred in treating total receipts of Rs. 3,33,468/- against service charges, license fees an d misc. receipts realised from Tata Teleservices Ltd as not includible in the turnover while computing profits U/S 44AD in the Appellants business relating to construction and sale of building flat.
3. The Ld. CIT(A) erred in restricting the disallowance of Rs.1,50,097/- to Rs.1,00,000/- in connection with interior decoration of the appellant's Country Spirit Shop.
4. The Learned CIT(A) erred in restricting the disallowance of Rs.1,90,531/- to 50% of the same in respect of Repairs and Maintenance expenses of the old Country Spirit Shop of the appellant.
5. The Learned CIT CA) erred in confirming the disallowance of Rs.1,41,953/- spent by the appellant for music etc in the liquor shop of the appellant during festive occasion.
6. The Ld. CIT(A) erred in confirming the disallowance against expenses on snacks, peanuts, fried grams etc provided to customers to the extent of 50% of the claim.
7. The Ld. CIT(A) erred in confirming the disallowance against expenses on Tea and Tiffin provided to staff to the extent of 50% of the claim.
I . T. A . N o. 2 2 9 7 / KO L . / 2 0 1 3 Assessment year: 2009-2010 Page 3 of 13
8. The LD. CIT(A) erred in confirming the disallowance against conveyance expenses to the extent of 25% of the claim.
9. The Ld CIT(A) erred in confirming the disallowance against expenses on carriage inward to the extent of 50% of the claim.
10. The Ld. CIT(A) erred in confirming the disallowance made @ 20% against telephone charges.
11. The Ld. CIT (A) erred in confirming the addition of the entire transport charges directly paid to truck owners for alleged absence of T.D.S".
4. As noted at the outset, there is a delay of 117 days on the part of the assessee in filing this appeal before the Tribunal. In this regard, an application is filed by the assessee seeking condonation of the said delay and keeping in view the reasons given therein, which are duly supported by an affidavit filed by the assessee as well as medical certificate issued by a Doctor, we are satisfied that there was a sufficient cause for the delay of 117 days on the part of the assessee in filing his appeal before the Tribunal. Even the ld. D.R. has not raised any material objection in this regard. We, therefore, condone the said delay and proceed to dispose of the appeal of the assessee on merit.
5. At the time of hearing before us, the ld. counsel for the assessee has filed a written submission in support of the assessee's case on the various issues raised in this appeal. The ld. D.R., on the other hand, has relied on the impugned order of the ld. CIT(Appeals) in support of the revenue's case by stating that the same is well reasoned and well discussed on all the issues raised by the assessee in this appeal.
6. We have considered the rival submissions and also perused the relevant material available on record including the orders of authorities below as well as the written submission filed by the ld. counsel for the assessee. At the time of hearing before us, the ld. counsel for the assessee I . T. A . N o. 2 2 9 7 / KO L . / 2 0 1 3 Assessment year: 2009-2010 Page 4 of 13 has not pressed Ground No. 1 raised by the assessee in this appeal. The same is accordingly dismissed as not pressed.
7. As regards the issue raised in Ground No. 2, it is observed that the profit of the construction business was declared by the assessee at specified rate as per the provisions of section 44AD on the turnover of the said business. The turnover adopted by the assessee for this purpose, however, was inclusive of a sum of Rs.3,33,468/- received from M/s. Tata Tele Services Limited on account of Service Charges, Licence Fees, etc. According to the Assessing Officer, the said amount was chargeable to tax in the hands of the assessee under the head "income from other sources"
separately and the same, therefore, was not eligible for inclusion in the turnover while computing the income of the assesese by applying the specified net profit rate. Although it was contended on behalf of the assessee in this regard before the ld. CIT(Appeals) that the receipts from Tata Tele Services Limited were part and parcel of the business receipts of sale of flats as flats were sold along with the services provided by the Tata Tele Services Limited, the ld. CIT(Appeals) did not accept the same as the assessee could not substantiate his claim with any documentary evidence. At the time of hearing before us, the ld. counsel for the assessee has reiterated the submission made on behalf of the assessee before the ld. CIT(Appeals). He, however, has failed to establish on the evidence that the amount in question received from M/s. Tata Tele Services Limited on account of service charges, licence fees, etc. was part of the total turnover or gross receipts of the assesee on account of construction business and this being so, we find no infirmity in the impugned order of the ld. CIT(Appeals) upholding the action of the Assessing Officer in not taking into account the said amount for the purpose of computing the income of the assessee from construction business by applying the prescribed net profit rate as per the provisions of section 44AD. The same is, therefore, upheld and ground no. 2 of the assessee's appeal is dismissed.
I . T. A . N o. 2 2 9 7 / KO L . / 2 0 1 3 Assessment year: 2009-2010 Page 5 of 13
8. As regards the issue raised in Ground No. 3 relating to the disallowance made by the Assessing Officer and sustained partly by the ld. CIT(Appeals) on account of expenses claimed to be incurred by the assessee on interior decoration, it is observed that the expenses claimed by the assessee on renovation of shop were disallowed by the Assessing Officer as the assesese was not the owner of any fixed assets as seen from the relevant balance-sheet. Moreover, the assessee could not produce any evidence before the Assessing Officer in support of his claim for the said expenses. Before the ld. CIT(Appeals), a different stand was taken by the assessee by submitting that the expenses in question were actually incurred for the purpose of publicity and to attract more customers by decorating the shop particularly during Durga Puja, Deepavali, Christmas, Bengali and English New Year, Holi, etc. by colourful lights etc. Although this new stand taken by the asessee was also not supported by any bills/vouchers, the ld. CIT(Appeals) considered it reasonable that some expenses of this nature might have been incurred by the assessee during festive seasons. He accordingly restricted the disallowance of Rs.1,50,097/- made by the Assessing Officer on this issue to Rs.1,00,000/- .
9. At the time of hearing before us, the ld. counsel for the assessee has reiterated the stand taken by the assessee on this issue before the ld. CIT(Appeals). He has also pointed out that the expenditure incurred by the assessee on renovation/decoration is only 0.80% of the total turnover of the liquor shop. However, keeping in view all the facts of the case including the nature of the assessee's business as well as his failure to produce any bills/vouchers to support his claim for renovation/decoration expenses, we are of the view that the disallowance sustained by the ld. CIT(Appeals) on this issue at Rs.1,00,000/- is quite fair and reasonable and his impugned order on this issue does not call for any interference. Ground No. 3 of the assessee's appeal is accordingly dismissed.
I . T. A . N o. 2 2 9 7 / KO L . / 2 0 1 3 Assessment year: 2009-2010 Page 6 of 13
10. As regards the issue raised in Ground No. 4 relating to the disallowance made by the Assessing Officer and sustained partly by the ld. CIT(Appeals) on account of repairs and maintenance, it is observed that the expenditure claimed by the assessee on repairs and maintenance was disallowed by the Assessing Officer as the assessee during the year under consideration had no assets except a water filter. Moreover, the assessee also failed to furnish the relevant details and documents in support of his claim for the said expenditure. Before the ld. CIT(Appeals), it was submitted by the assessee that the stock of liquor was required to be kept in old racks and showcases maintained in the shop and the expenditure in question was incurred for the same. Although the ld. CIT(Appeals) found some force in this submission made by the assessee, he held that the expenses of Rs.1,90,531/- claimed by the assessee on repairs and maintenance was on the higher side. Accordingly, he sustained the disallowance made by the Assessing Officer on this issue to the extent of 50%.
11. At the time of hearing before us, the ld. counsel for the assessee has submitted in the written submission that the expenditure in question incurred by the assesese on repairs and maintenance of old racks did not result in creation of any new asset and the same being only 1% of the total turnover of the liquor business, the ld. CIT(Appeals) is not justified in sustaining the disallowance made by the Assessing Officer on this issue to the extent of 50%. We are unable to accept this contention of the ld. counsel for the assessee. As rightly observed by the ld. CIT(Appeals), the expenditure claimed by the assessee on repairs and maintenance was certainly on the higher side keeping in view the nature of the said expenditure as well as the nature of the business of the assessee. Moreover, the relevant details and documents were not furnished by the assesese to support and substantiate his claim for the said expenditure. Having regard to all these facts of the case, we are of the view that the impugned order of the ld. CIT(Appeals) sustaining the disallowance made by the Assessing Officer on this issue to the extent of 50% does not call I . T. A . N o. 2 2 9 7 / KO L . / 2 0 1 3 Assessment year: 2009-2010 Page 7 of 13 for any interference being fair and reasonable. We accordingly uphold the same and dismiss the Ground No. 4 of the assessee's appeal.
12. The issue raised in Ground No. 5 relates to the disallowance of Rs.1,41,953/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of entertainment expenses. The expenses of Rs.1,41,953/- claimed to be incurred by the assesese on payment of contribution to local Club, Association, etc. who arranged cultural programmes were disallowed by the Assessing Officer on the ground of lack of business expediency. Before the ld. CIT(Appeals), it was contended by the assessee that he had to give away passes/tickets of various cultural or musical programmes to some of his regular customers for maintaining good client relationship. However, keeping in view the nature of the business of the assessee of purchase and sale of liquor on retail basis, the ld. CIT(Appeals) did not accept this contention of the assessee by observing that there was no need of entertainment of customers in this type of business. He also noted that no supporting bills or documents were produced by the assessee to establish the exact nature of the expenses or the business expediency thereof. At the time of hearing before us, the ld. counsel for the assessee in the written submission has reiterated the stand taken on behalf of the assessee before the ld. CIT(Appeals). We, however, find no merit in the same keeping in view the nature of the business of the assesese which, in our opinion, hardly justified any customer entertainment by providing passes/tickets of various cultural or musical programmes. Moreover, as categorically noted by the ld. CIT(Appeals), no details or any documentary evidence could be filed by the assessee either before the Assessing Officer or even before the ld. CIT(Appeals) to support and substantiate his claim of entertainment expenditure. We, therefore, uphold the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer on this issue and dismiss Ground No. 5.
I . T. A . N o. 2 2 9 7 / KO L . / 2 0 1 3 Assessment year: 2009-2010 Page 8 of 13
13. As regards the issue involved in Ground No. 6 relating to the disallowance made by the Assessing Officer and sustained partly by the ld. CIT(Appeals) on account of cost incurred by the assessee for providing snacks to the customers, it is observed that the disallowance on this issue was made by the Assessing Officer in the absence of any supporting evidence produced by the assessee. Before the ld. CIT(Appeals), it was contended by the assessee that he distributed packets of dry snacks like nuts, chips, etc. free of cost to customers, who lifted larger quantity of liquors. Keeping in view the nature of the assessee's business, the ld. CIT(Appeals) held that incurring of certain expenditure of this nature could not be ruled out. However, keeping in view the absence of any supporting evidence, he found it fair and reasonable to restrict the disallowance to 50% as against 100% made by the Assessing Officer. Having considered the submissions made by the assessee in writing as well as the material available on record including the orders of the authorities below, we are of the view that the order of the ld. CIT(Appeals) allowing the claim of the assessee on this issue to the extent of 50% is quite fair and reasonable keeping in view the nature of the assessee's business as well as the failure of the assessee to produce any documentary evidence to support and substantiate his claim. We, therefore, uphold the impugned order of the ld. CIT(Appeals) on this issue and dismiss Ground No. 6.
14. The issue involved in Ground No. 7 relates to the disallowance made by the Assessing Officer and sustained partly by the ld. CIT(Appeals) on account of tea & tiffin expenditure and staff welfare claimed by the assessee.
15. The expenditure claimed under the head "tea and tiffin" and "staff welfare" were explained by the assessee before the Assessing Officer as the expenses incurred for providing lunch, snacks, etc. to staff during duty hours. It was, however, noted by the Assessing Officer that the assessee had also claimed shop expenses and general expenses I . T. A . N o. 2 2 9 7 / KO L . / 2 0 1 3 Assessment year: 2009-2010 Page 9 of 13 separately. He, therefore, held that the tea & tiffin expenses and staff welfare expenses claimed by the assessee were in the nature of personal expenditure not related to his business and the same were disallowed by him. On appeal, the ld. CIT(Appeals) restricted the disallowance made b y the Assessing Officer on this issue to 50% observing that the disallowance only to that extent was justified on account of personal and non-verifiable element involved in the relevant expenditure. After considering the submissions made by the assessee as well as the material available on record, we find no infirmity in the impugned order of the ld. CIT(Appeals) on this issue. Even though the personal and non-verifiable elements were involved in the tea & tiffin expenses and staff welfare expenses claimed by the assessee as pointed out by the Assessing Officer, the disallowance of the entire claim of the assessee as made by the Assessing Officer was not justified in the facts of the case including the nature of the assessee's business and in our opinion, the disallowance made by the Assessing Officer on this issue was rightly restricted by the ld. CIT(Appeals) to 50% keeping in view the involvement of personal element as well as non-verifiable element. We, therefore, uphold the impugned order of the ld. CIT(Appeals) on this issue and dismiss Ground No. 7.
16. The issue involved in Ground No. 8 relates to the disallowance of 50% made by the Assessing Officer out of conveyance expenses, which is restricted by the ld. CIT(Appeals) to 25%.
17. The expenses of Rs.2,08,259/- claimed by the assessee on account of conveyance were disallowed by the Assessing Officer to the extent of 50% keeping in view the nature of the business of the assessee to run liquor shop. He held that hardly any expenditure on conveyance was required to be incurred for the business of the assessee and also noted that the entire expenses incurred by the assessee in cash on conveyance were claimed on the basis of self-made vouchers. On appeal, the ld. CIT(Appeals) found the disallowance of 50% made by the Assessing I . T. A . N o. 2 2 9 7 / KO L . / 2 0 1 3 Assessment year: 2009-2010 Page 10 of 13 Officer to be excessive and restricted the same to 25% keeping in view the nature of business activities of the assessee as well as the volume of turnover.
18. After considering the submissions made by the assessee as well as the material available on record, we are of the view that the involvement of personal element in conveyance expenses claimed by the assessee cannot be ruled out. Keeping in view the same as well as the fact that the entire claim for the conveyance expenses incurred in cash was made by the assessee on the basis of self-made vouchers without giving the relevant details, we find that the disallowance as finally made by the ld. CIT(Appeals) to the extent of 25% of the assessee's claim for conveyance expenses is quite fair and reasonable. The impugned order of the ld. CIT(Appeals) on this issue is accordingly upheld and Ground No. 8 of the assessee's appeal is dismissed.
19. As regard the issue involved in Ground No. 9 relating to the disallowance made by the Assessing Officer and sustained partly by the ld. CIT(Appeals) on account of carriage inward, it is observed that the expenses claimed by the assessee on carriage inward amounting to Rs.5,14,222/- were disallowed by the Assessing Officer as he found that similar expenses incurred for taking of delivery of liquor bottles and sending empty bottles were separately claimed by the assessee as delivery expenses. He also noted that there was failure on the part of the assessee to furnish any relevant details or documents to support his claim on account of carriage inward expenses. Before the ld. CIT(Appeals), it was submitted by the assessee that the carriage inward expenses related to bringing loaded bottles to the shop premises while delivery charges related to returning of empty bottles. It was also brought to the notice of the ld. CIT(Appeals) by the assessee that the expenses incurred on carriage inward were only to the extent of 2.76% of his turnover. The ld. CIT(Appeals) found some merit in the submissions I . T. A . N o. 2 2 9 7 / KO L . / 2 0 1 3 Assessment year: 2009-2010 Page 11 of 13 made by the assessee. He accordingly restricted the disallowance made by the Assessing Officer on account of carriage inward expenses to 50%.
20. At the time of hearing before us, the ld. counsel for the assessee has submitted that considering the huge number of bottles brought in and large number of trips involved, the expenditure claimed by the assessee on carriage inward which is only 2.76% of his turnover is quite reasonable and the same should be fully allowed. We are unable to accept this contention of the ld. counsel for the assessee keeping in view the facts and circumstances of the assessee's case. It is observed that separate claim on account of delivery expenses was made by the assesese and although the same was explained before the ld. CIT(Appeals) as related to returning of empty bottles, there is nothing brought on record by the assessee to show that any income by way of sale of empty bottles was declared by the assessee. Moreover, the relevant details and documents to support and substantiate his claim for carriage inward expenses were not furnished by the assessee either before the Assessing Officer or even before the ld. CIT(Appeals). Keeping in view all these facts of the case, we are of the view that the disallowance of 50% out of carriage inward expenses as finally made by the ld. CIT(Appeals) is fully justified. We accordingly uphold the impugned order of the ld. CIT(Appeals) on this issue and dismiss Ground No. 9.
21. Ground No. 10 is not pressed by the ld. counsel for the assessee at the time of hearing before us. The same is accordingly dismissed.
22. The issue involved in Ground No. 11 relates to the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of transport charges.
23. While explaining transport charges of Rs.3,34,397/- claimed by him, it was submitted by the assessee before the Assessing Officer that as per I . T. A . N o. 2 2 9 7 / KO L . / 2 0 1 3 Assessment year: 2009-2010 Page 12 of 13 C&F Agreement, transport charges on inward delivery were to be borne by principal while that on outward delivery were to be borne by agent. The relevant details in this regard, however, could not be furnished by the assessee. The Assessing Officer also noted that no tax at source was deducted by the assessee from the payment of transport charges as required by section 194C. Keeping in view the failure of the assessee to furnish the relevant details as well as the copy of agreement and his failure to deduct tax at source as required by section 194C, the transport charges claimed by the assessee were disallowed by the Assessing Officer. On appeal, the ld. CIT(Appeals) confirmed the said disallowance for the same reasons as given by the Assessing Officer in the assessment order.
24. At the time of hearing, the ld. counsel for the assessee has contended that there was no written contract between the assessee and the transport agents and in absence of the same, the provisions of section 194C were not applicable as held by the Hon'ble Punjab & Haryana High Court in the case of CIT(TDS), Chandigarh -vs.- United Rice Land Limited [174 Taxman 286]. We are unable to accept this contention of the ld. counsel for the assessee. First of all, it is observed that the relevant details and documents to support and substantiate this contention are not placed on record before us. Secondly, it was claimed on behalf of the assessee himself before the Assessing Officer that the outward delivery charges were borne by the agent as per C&F Agreement, but the copy of the said agreement was never produced by the assessee. Even the relevant details of the transport charges were not furnished by the assessee. The disallowance on account of transport charges thus was made not only because of the failure of the assessee to deduct tax at source but also because of the failure of the assessee to file the relevant details and documents to support and substantiate his claim for deduction on account of transport charges. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer on account of transport I . T. A . N o. 2 2 9 7 / KO L . / 2 0 1 3 Assessment year: 2009-2010 Page 13 of 13 charges and upholding the impugned order of the ld. CIT(Appeals) on this issue, we dismiss Ground No. 11 of the assessee's appeal.
25. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open Court on June 21, 2017.
Sd/- Sd/-
(A.T. Varkey) (P.M. Jagtap)
Judicial Member Accountant Member
Kolkata, the 21 s t day of June, 2017
Copies to : (1) Shri Ani l Kumar Pai k,
Flat 2ABC, 2B, S.N. Roy Road,
Behala, Kolkata-700 034
(2) Joint Commissioner of Income Tax (OSD),
C.I.T.-III,
Aayakar Bhawan,
P-7, Chowringhee Square,
Kolkata-700 069
(3) Commissioner of Income Tax (Appeals)-VIII, Kolkata;
(4) Commissioner of Income Tax ,Kolkata
(5) The Depart ment al Represent ative
(6) Guard File
By order
Senior Private Secretary,
Head of Office/DDO
Income Tax Appellate Tribunal,
Kolkata Benches, Kolkata
Laha/Sr. P.S.