2010 (6) TMI 882 - AT - Income Tax

Summary

Issues involved: Appeal against order of ld. CIT(A)-XXXIII, Kolkata for Assessment Year 2005-06 disputing additions/disallowances made by AO.

Grounds of appeal:
1. AO and ld. CCIT's reason for initiating security proceedings not provided.
2. Ld. CIT(A) unjustified in holding order passed within stipulated time.
3. Ld. CIT(A) opinion on jurisdiction beyond scope.
4. Deduction of Rs. 60,000/- & Rs. 30,000/- wrongly disallowed u/s 40A(3).
5. Disallowance of labour payment u/s 40(a)(ia) justified, illegal, arbitrary.
6. Disallowance of Rs. 1,60,000/- to Guffar Mullah for purchase of Bricks illegal, excessive.
7. Payment of Rs. 1,75,000/- to Chowdhury and sons excessive, illegal.
8. Disallowance of Rs. 60,000/- to Sujit Sengupta unjustified, illegal, excessive.
9. Disallowance of Rs. 87,000/- to Banku Pal illegal, unjustified, excessive.
10. Disallowance of Rs. 23,100/- of donation illegal, unjustified, excessive.
11. Disallowance of Rs. 30,000/- from brokerage illegal, unjustified, excessive.

Dispute over disallowance to Guffar Mollah:
- Payment of Rs. 1,60,000/- made in cash for purchase of bricks.
- Disallowed 20% u/s 40A(3) as cash payment exceeded Rs. 20,000 on each occasion.
- Assessee claimed payment covered by Rule 6DD(g) of IT Rules.
- Tribunal directed AO to reconsider under Rule 6DD(g) for cottage industry purchases.

Dispute over donation disallowance:
- Payment of Rs. 23,100/- to puja committees and clubs.
- Claimed as essential business expenditure.
- Tribunal allowed deduction based on Calcutta High Court precedent.

Dispute over brokerage disallowance:
- Payment of Rs. 30,000/- as brokerage without TDS deduction.
- Disallowed under section 40(a)(ia) for non-compliance with TDS provisions.
- Tribunal upheld disallowance based on non-deduction of TDS.

Conclusion:
- Appeal partially allowed for statistical purposes.
- Tribunal directed reassessment on Rule 6DD(g) for cash payments.
- Donation expenditure allowed as essential business expense.
- Brokerage disallowance upheld due to non-compliance with TDS provisions.