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2016 (2) TMI 168 - ITAT CHENNAI

2016 (2) TMI 168 - ITAT CHENNAI - TMI - Deemed dividend addition u/s 2(22)(e) - CIT(A) deleted the addition - whether the advance made by M/s Adampur Distributors Pvt. Ltd. is for business transaction or it is a loan or advance? - Held that:- The ledger extract of M/s Adampur Distributors Pvt. Ltd. clearly establishes that M/s Adampur Distributors Pvt. Ltd. purchased gold from M/s Mustafa Gold Mart, a proprietary concern of the assessee. It is also not in dispute that upto 2007-08, M/s Adampur D .....

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nce, the advance paid by M/s Adampur Distributors Pvt. Ltd. to M/s Mustafa Gold Mart cannot be construed either as loan or advance. Therefore, this Tribunal is of the considered opinion that the provisions of Section 2(22)(e) of the Act cannot be applied to a business transaction. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly, the order of the CIT(Appeals) is confirmed. - Decided in favour of assessee

Disallowance under .....

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the case of the Revenue that the payment of commission is not required. The only contention of the Assessing Officer is that the payment is unreasonable and excessive. As rightly submitted by the Ld.counsel for the assessee, the recipient Shri Ishtiaq Ahmed has disclosed the receipt of commission and paid taxes. The Assessing Officer accepted the income declared by the above said Shri Ishtiaq Ahmed as commission. In those circumstances, as rightly found by the CIT(Appeals), the disallowance made .....

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e barred under the provisions of Limitation Act, however, the right of the creditor to recover the amount still exists by other modes. In other words, what is barred is filing civil suit to recover the money but the other means are not barred at all. Moreover, the liability is shown in the year under consideration also. Therefore, the assessee accepted liability during the year under consideration. When the assessee accepted the liability, the period of limitation gets extended. In those circums .....

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locality where he resides. Therefore, naturally the parents of the girl would give gold jewellery as Sthreedhan property. This is a customary practice which prevails in the country. The customary practice that prevails in this part of the country cannot be brushed aside by the Assessing Officer to disbelieve the claim of the assessee. By taking into consideration the customary practice prevails in the country and the society of the assessee where he resides, this Tribunal is of the considered o .....

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to 20% claimed by the assessee.

Disallowance made in respect of exemption claimed under Section 10 - assessee has also claimed travelling allowance as exempted - Held that:- The uniform allowance and conveyance allowance to the extent of ₹ 42,000/- and ₹ 9,600/- respectively have to be allowed since it is for the purpose of business or the employment carried out by the assessee. In respect of travelling expenses, the claim of the assessee was that he had to travel for adv .....

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; 1,16,700/- is not justified. Accordingly, the order of the CIT(Appeals) is set aside in respect of travelling allowance to the extent of ₹ 1,16,700/- and the Assessing Officer is directed to make addition of ₹ 1,16,700/- towards travelling expenses.

Charging of interest under Section 234B - Held that:- The return filed consequent to the notice issued under Section 153A has to be taken for computing interest under Section 234B of the Act. - ITA Nos.1676, 1677, 1678 & 1679 .....

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all these appeals, we heard these appeals together and disposing of the same by this common order. 2. First let s take Revenue s appeals in the case of the assessee Shri Mustaq Ahmed. 3. Shri A.B. Koli, the Ld. Departmental Representative, submitted that the first issue arises for consideration is with regard to addition made by the Assessing Officer under Section 2(22)(e) of the Income-tax Act, 1961 (in short 'the Act'). According to the Ld. counsel, the assessee is a shareholder and Di .....

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nd that the total export sales was of ₹ 4,83,83,050/-. This sale constituted export of food products to the extent of ₹ 4.03 Crores and export of perishable goods to the extent of ₹ 62.33 Crores. The Assessing Officer further found that funds were transferred from M/s Adampur Distributors Pvt. Ltd. to M/s Mustafa Gold Mart on various dates. The Assessing Officer further found that transaction between M/s Mustafa Gold Mart, the proprietary concern of the assessee and M/s Adampur .....

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₹ 34,06,371/- was treated as deemed dividend. According to the Ld. counsel, in the absence of any business transaction between the proprietary concern of the assessee and M/s Adampur Distributors Pvt. Ltd., the sum advanced by M/s Adampur Distributors Pvt. Ltd. has to be construed as deemed dividend, therefore, the CIT(Appeals) is not justified in deleting the addition made by the Assessing Officer. 4. On the contrary, Sh. N. Devanathan, the Ld.counsel for the assessee, submitted that M/s .....

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e contention of the assessee, found that the advance paid by M/s Adampur Distributors Pvt. Ltd. is only in the nature of trade transaction, therefore, it cannot be equated to a loan or advance. To establish that the transaction is only a business transaction and the assessee has supplied gold to M/s Adampur Distributors Pvt. Ltd., the CIT(Appeals) verified the copies of ledger account of M/s Mustafa Gold Mart in the books of M/s Adampur Distributors Pvt. Ltd. for the financial years 2000-01 to 2 .....

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red the rival submissions on either side and perused the relevant material available on record. The Assessing Officer made addition under Section 2(22)(e) of the Act for the assessment years 2009-10 to 2011-12. In fact, for the assessment year 2009-10, a sum of ₹ 3,55,851/- was added under Section 2(22)(e) of the Act. Similarly, a sum of ₹ 68,46,548/- and ₹ 34,06,371/- were added for the assessment year 2010-11 and 2011-12 respectively. It is not in dispute that the assessee is .....

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f the assessee. It is also not in dispute that upto 2007-08, M/s Adampur Distributors Pvt. Ltd. engaged in the business of jewellery and later on, the business was diversified. To revive the gold jewellery business, M/s Adampur Distributors Pvt. Ltd. advanced money to M/s Mustafa Gold Mart for purchasing gold jewellery. In fact, M/s Mustafa Gold Mart delivered gold jewellery to M/s Adampur Distributors Pvt. Ltd. In those circumstances, it is obvious that the transaction between M/s Adampur Distr .....

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s confirmed. 6. The next ground of appeal is with regard to disallowance made by the Assessing Officer under Section 40A(2)(b) of the Act in respect of the commission paid to Shri Ishtiaq Ahmed. 7. Shri A.B. Koli, the Ld. Departmental Representative, submitted that this issue arises for consideration for the assessment years 2010-11 and 2011-12. The Assessing Officer disallowed a sum of ₹ 62,77,648/- for the assessment year 2010-11 and another sum of ₹ 63,28,400/- for the assessment .....

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nt of commission to Shri Ishtiaq Ahmed was made in order to create awareness among the people about the fair deals of Mustafa Gold Mart. According to the Ld. D.R., the Assessing Officer found that the commission paid to Shri Ishtiaq Ahmed was excessive and unreasonable. 8. The Ld. Departmental Representative further submitted that the assessee is an individual and Shri Ishtiaq Ahmed is none other than brother of the assessee. In the earlier assessment years, the assessee had paid only salary to .....

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d to Shri Ishtiaq Ahmed for the service rendered by him. The recipient Shri Ishtiaq Ahmed disclosed the receipt of commission and paid taxes. In fact, the Assessing Officer accepted the income declared by Shri Ishtiaq Ahmed. Therefore, the Assessing Officer cannot take a contrary decision by disallowing the payment in the assessee s hand. According to the Ld. counsel, the payment of commission is not disputed. The question is whether it is excessive or unreasonable. According to the Ld. counsel, .....

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submissions on either side and perused the relevant material available on record. Admittedly, Shri Ishtiaq Ahmed is none other than brother of the assessee. It is not in dispute that in the earlier assessment years, Shri Ishtiaq Ahmed was paid only salary. During the years under consideration, namely, assessment years 2010-11 and 2011-12, the assessee paid commission to Shri Ishtiaq Ahmed. Therefore, the Assessing Officer doubted the correctness of the payment. As rightly submitted by the Ld.cou .....

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n that payment of commission is required, then the Assessing Officer cannot step into the shoes of the assessee and say that the payment of commission is not required. In this case, it is not the case of the Revenue that the payment of commission is not required. The only contention of the Assessing Officer is that the payment is unreasonable and excessive. As rightly submitted by the Ld.counsel for the assessee, the recipient Shri Ishtiaq Ahmed has disclosed the receipt of commission and paid t .....

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₹ 5,61,53,855/- under Section 41(1) of the Act. 12. Shri A.B. Koli, the Ld. Departmental Representative, submitted that as on 31.03.2011, the assessee has shown a sum of ₹ 5,61,53,855/- as sundry credit. The Assessing Officer found that the above credit was outstanding from the assessment year 2005- 06. There was no movement in the sundry credit for the last seven years. According to the Ld. D.R., the assessee has not filed any confirmation letter. The assessee explained before the A .....

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e assessee, submitted that the sundry credit exists from assessment year 2005-06. In fact the credit was accepted for the assessment year 2005-06 and no addition was made. Since the Assessing Officer admitted that the sundry credit existed from assessment year 2005-06, no addition can be made for the assessment year under consideration. According to the Ld. counsel, if at all any addition can be made, it has to be made for assessment year 2005- 06 in which the sundry credit appeared in the books .....

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pired. The assessee accepted the liability in the books and therefore, the liability does not cease to exist. All these trade credits existed in the books. Therefore, according to the Ld. counsel, the assessee is liable to pay the money. In the absence of any waiver of the credit by the respective sundry creditors, according to the Ld. counsel, there is no question of any cessation of liability. 14. The Ld.counsel further submitted that the name and address of the creditors were furnished in the .....

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credit of ₹ 5,61,53,855/- existed from the assessment year 2005-06. It is not the case of the Revenue that the credit was entered in the books of account first time in the year under consideration. Therefore, the genuineness of the credit has to be examined during the assessment year 2005-06 and definitely not in the year under consideration. Even assuming for the argument sake that the assessee has to establish the genuineness of the credits, then the addition has to be made only for the .....

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t of the creditor to recover the amount still exists by other modes. In other words, what is barred is filing civil suit to recover the money but the other means are not barred at all. Moreover, the liability is shown in the year under consideration also. Therefore, the assessee accepted liability during the year under consideration. When the assessee accepted the liability, the period of limitation gets extended. In those circumstances, there is no question of any cessation of liability. It is .....

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₹ 21.49 lakhs. 18. Shri A.B. Koli, the Ld. Departmental Representative, submitted that during the course of search operation, the Revenue authorities found a locker in Andhra Bank, Neelangani Branch, Chennai, and gold jewellery to the extent of 803.400 grms was also found. At the residence of the assessee, the Revenue authorities found gold jewellery to the extent of 342 grms. When the assessee was examined on 22.12.2010, the assessee explained that he had no purchase bill for the jeweller .....

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nce of any documentary evidence to Sthreedhan gift, the Assessing Officer has rightly made the addition, therefore, the CIT(Appeals) is not justified in deleting the addition made by the Assessing Officer. 19. On the contrary, Sh. N. Devanathan, the Ld.counsel for the assessee, submitted that no doubt, the Revenue authorities found jewellery in the locker and at the residence of the assessee. According to the Ld. counsel, at the time of marriage, assessee s wife was given gold jewellery by her p .....

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considered the rival submissions on either side and perused the relevant material available on record. Admittedly, during the course of search operation, the Revenue authorities found 803.400 grms of jewellery in the bank locker and another 342 grms of gold jewellery at the residence of the assessee. The main contention of the assessee is that these are jewellery of his wife given by her parents at the time of marriage. It is a customary practice in this part of the country to present gold jewel .....

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y evidence was found. It is not known what kind of document can be produced when the girl s parents gifted gold ornaments to her daughter. If it is immovable property like land, then registration of document is compulsory. In the case of property like gold jewellery, it is only the statement of the individual that has to be relied upon. Other than this, this Tribunal is of the considered opinion that the assessee would not be able to produce any documentary evidence to establish that the parents .....

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during her marriage and also would have received gifts on the occasions like marriage, birthday, etc. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly deleted the addition made by the Assessing Officer. Accordingly, the order of the CIT(Appeals) is confirmed. 21. The next ground of appeal is with regard to disallowance of expenses to the extent of ₹ 22,04,085/-. 22. Shri A.B. Koli, the Ld. Departmental Representative, submitted that the assessee has .....

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ic to purchase gold from M/s Mustafa Gold Mart in various part of the city throughout the year. The Assessing Officer found that the statement of the assessee is totally untrue since there was no increase in the turnover of Mustafa Gold Mart during the year under consideration. The assessee has made only self-made vouchers in the name of various individuals. During examination on 06.02.3013, the assessee explained that the assessee could not give the address of the persons said to be employed by .....

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through loud speakers. The assessee employed casual labourers. The assessee could obtain the self-made vouchers from such kind of persons. Therefore, the CIT(Appeals) found that disallowance of 20% of the expenditure would meet the ends of justice. In the absence of any proper vouchers, according to the Ld. counsel, the CIT(Appeals) restricted the disallowance to 20% of the expenses incurred. Therefore, the Revenue cannot have any grievance at all. 24. We have considered the rival submissions o .....

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laimed by the assessee. This Tribunal is of the considered opinion that the CIT(Appeals) has rightly restricted the claim to 20% by taking into consideration the material facts available on record. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly, the order of the CIT(Appeals) is confirmed. 25. The next ground of appeal arises for consideration is with regard to disallowance made in respect of exemption claimed under Section 10 of th .....

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details of the exemption claimed were available in Form 16A itself. In fact, according to the Ld. counsel, the assessee claimed conveyance allowance of ₹ 9,600/- and uniform allowance of ₹ 42,000/-. The assessee has also claimed travelling allowance of ₹ 1,16,700/- as exempted. Considering the fact that the assessee had to travel for advertisement and such purposes, the expenditure claimed by the assessee was rightly allowed by the CIT(Appeals). 28. We have considered the rival .....

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claiming expenditure for the commission, the assessee has claimed salary and other expenses for making advertisement. Therefore, it may not be correct to say that the assessee had to travel for advertisement purpose. In other words, the travelling expenses for making advertisement was included in the expenditure claimed by the assessee for commission receipt. Therefore, another claim of ₹ 1,16,700/- is not justified. Accordingly, the order of the CIT(Appeals) is set aside in respect of tr .....

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) of the Act in the regular course. The CIT(Appeals) treating the return filed in response to the notice issued under Section 153A of the Act, directed the Assessing Officer to compute the interest from the date of return filed consequent to the notice issued under Section 153A of the Act. According to the Ld. D.R., regular assessment means the assessment made under Section 143(3) of the Act, therefore, the original return filed under Section 139(1) of the Act has to be considered for the purpos .....

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