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Income-tax Officer, Wd-12 (3) , Kolkata Versus M/s. Arpee Builders & Promoters Pvt. Ltd. And Vice-Versa

2018 (2) TMI 864 - ITAT KOLKATA

Addition under the head salary - assessee was unable to prove the attendance of the employee through attendance register - Held that:- In the FY 2012-13, the assessee company has itself got registered with the PF authorities retrospectively from FY 2007-08 onwards and that in the present FY i.e. 2008-09 the liability towards PF has been remitted and for the relevant assessment year under consideration the assessee has produced before us the list of 21 employees for whom the PF has been remitted. .....

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in figures of bad debts, commission - Held that:- AO has made the disallowance merely on the basis that the Postal Department has returned the notice issued to them with the remarks that ‘Not Known’ which action we don’t countenance. We note that the Ld. CIT(A) has appreciated the facts in the right perspective and therefore rightly deleted the addition of ₹ 3,14,392/- since the bad debt is an allowable deduction u/s. 36(1)(vii). Once the assessee has written off the bad debt as irrecover .....

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ent made to M/s. Todi Investors - allowable busniss expenses - Held that:- CIT(A) has allowed the claim of the assessee that the borrowed capital was used in its business either for the purchase or for day to day financial necessity. The genuinity of the borrowing and interest payment were verified and confirmed by the AO of the assessee from the AO of the Todi Investor i.e. ITO, Ward 31(4), Kolkata. In the light of the aforesaid facts without bringing any material to show that the assessee had .....

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lowance to ₹ 1,29,563/-. Since the assessee has not pressed the disallowance restricted by the Ld. CIT(A) the same is confirmed and the Ld. CIT(A)’s action of deleting ₹ 2,24,773/- which is an allowable expenditure as per the ratio decidendi of the Hon’ble jurisdictional High Court in Ravi Marketing (P) Ltd. (2005 (1) TMI 20 - CALCUTTA High Court ), we confirm the order of Ld. CIT(A) - Addition of advance from customers - Held that:- CIT(A) has clearly made a finding that the ad .....

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- Held that:- The registration of a vehicle has to be done as per the procedure prescribed by the Motor Vehicles Act governing the subject. The extra expenses other than registration fees applicable as per the Motor Vehicles Act of West Bengal is not an allowable expenditure unless the assessee is able to prove with cogent evidence as to the genuineness of the expenditure. In this case, since the assessee has been able to only file the affidavit of an employee Shri Rabindra Nath Bhattacharya whi .....

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redited or paid was not liable for TDS u/s. 194C, CIT(A) has rightly deleted the disallowance made by the AO u/s. 40(a)(ia) of the Act - I.T.A. No. 303/Kol/2014, C.O. 52/Kol/2014 And I.T.A. No. 303/Kol/2014 - Dated:- 5-2-2018 - Shri J. Sudhakar Reddy, AM And Shri A. T. Varkey, JM For The Appellant : Shri Saurabh Kumar, Addl. CIT, DR For The Respondent : Shri V. N. Purohit, FCA ORDER Per Shri A.T.Varkey, JM This appeal filed by the revenue and the Cross Objection filed by the assessee are against .....

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in deleting the addition made by the AO under the head Salary amounting to ₹ 7,46,614/- when assessee was unable to prove the attendance of the employee through attendance register. And ground no. 1(a) of Cross Objection is - 1(a) By sustaining ₹ 1,50,459/- against disallowance by AO ₹ 897073/- being claim for staff salary. 2.1. This ground relates to common issue, i.e, deletion of addition under the head salary amounting to ₹ 7,46,614/- and confirming the addition of  .....

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staff. He, therefore, disallowed payment to the extent of ₹ 8,97,073/- against the claim of ₹ 13,41,079/-. On appeal, the Ld. CIT(A) gave partial relief to the assessee to the tune of ₹ 7,46,614/- and confirmed the addition to the extent of ₹ 1,50,459/- by observing that the claim of the assessee company to have paid ₹ 1,50,459/- to temporary employees are not supported by any acquaintance role and the proof in respect to identity of the payee to establish the genui .....

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ing on business of retail dealership of scooters manufactured by Honda Motors Scooters Pvt. Ltd. under the trade name Vikash Motor Co. We note that the dealership from Honda Motors was originally taken by the proprietorship firm of Shri Om Prakash, who is presently a director of the assessee company. The proprietorship was converted into a private limited company and thus the assessee company became a dealer of Honda Scooters/bikes. It is also noted that the assessee is also providing service fa .....

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ournment petition on 21.09.2011 at 01.45 p.m. seeking time till second week of October, 2011. Books of accounts were produced on 12.10.2011, but Attendance Register was produced only on 02.11.2011 after mentioning about such non-production during hearing on 12.10.2011. It has been found from the Attendance Registers produced that staff varies from 20 to 29 during F.Y. 2008-09. The assessee claimed that these are permanent staff, which does not tally with the submission made on 09.08.2011. The st .....

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at one Sri Javed Ali of 39, Free School Street, Kolkata - 16 is still working while in the first submission he has been shown as 'left'. Therefore, there are discrepancies in the own statements filed by the assessee from time to time. It has been claimed in the submission dt. 14.11.2011 that the payments to other staff were made through vouchers. It is not acceptable that Attendance Registers have not been maintained for all staff. On the contrary, the average number as computed i.e. 24. .....

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e job. It has also been stated that the advances have been realized from them "more or less". Therefore, the assessee is claiming that the staff who did not work for even a single day during the F.Y. 2008-09 have received advances and they have not refunded the advances amount till 31.03.2009, which is again an unrealistic situation. In view of the above findings, claim of Salary, Bonus etc. is allowed only to the following extent applying the ratio of number of staff found in the Atte .....

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e PF authorities retrospectively from FY 2007-08 onwards and that in the present FY i.e. 2008-09 the liability towards PF has been remitted and for the relevant assessment year under consideration the assessee has produced before us the list of 21 employees for whom the PF has been remitted. This particular fact though stated before the Ld. CIT(A) have not been verified by the Ld. CIT(A), therefore, we are of the considered view that this fact of the assessee getting the registration under the P .....

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for statistical purposes. 3. Ground no. 2 of revenue s appeal is as under: 2. That on the facts and in the circumstances of the case and as per law Ld. CIT(A) erred in deleting the addition of discrepancies in figures of bad debts, commission amounting to ₹ 3,14,392/-. 3.1. This ground relates to deletion of addition of discrepancies in figures of bad debts, commission amounting to ₹ 3,14,392/-. Briefly stated facts are that the assessee claimed bad debt written off amounting to  .....

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rving as under: I have considered the findings of the Assessing Officer, the submissions of the appellant and perused material placed on record. The fact that the claim of bad debt was included under the head "miscellaneous expenses" debited in the profit and loss account did not make the claim by itself invalid, particularly when the claim is reflected in the audited statements of account and the details furnished by the appellant during the course of assessment proceedings. Bad debit .....

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n the profit and loss account is not a write off at all - CIT v. Hotel Ambassador [2002] 121 Taxman 437 (Ker.). Though no particular form or manner of writing off a debt is prescribed, a debt may be written off as irrecoverable in the individual account of the debtor. It is not for the assessee to establish that the debt had become bad in the previous year. In other words, it is not obligatory for assessee to place demonstrative proof for establishing a debt as bad - Ajitkumar C. Kamdar v. CIT [ .....

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410. In the appellant's case, it is established that the appellant had written off the amount as irrecoverable. It is also established that all these debts were included in sales in earlier years. Having regard to the facts end the principle of low laid down by the Hon'ble Supreme Court and different Benches of the) ITAT, I am of the view that the Assessing Officer was not justified in disallowing the claim of bed debt in this case. Therefore, the addition of ₹ 3,14,392/- is hereby .....

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ff were included in sales in earlier years. Since these debts were unrealizable, the bad debts in the name of Sukant Motors of ₹ 33,428/-, Mohima Motors of ₹ 51,489/- and Mobike Point of ₹ 2,29,475/- which were shown by the assessee as sales in the earlier years were written off as the assessee company felt that the said amount is unrealizable. The AO has made the disallowance merely on the basis that the Postal Department has returned the notice issued to them with the remarks .....

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r in question has to be allowed. We note that these debts were included in sales in earlier years and, therefore, relying on the decision of the Apex Court in the case of TRF Ltd. Vs. CIT (2010) 190 taxman 391 (SC), we confirm the order of Ld. CIT(A) and dismiss this ground of appeal of revenue. 4. Ground no. 3 of revenue s appeal is as under: 3. That on the facts and in the circumstances of the case and as per law Ld. CIT(A) erred in deleting the addition of payment made to M/s. Todi Investors .....

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see to furnish various details for transaction with M/s. Todi Investor. In response, the assessee filed documentary evidence i.e. loan confirmations etc. However the AO noted that in respect of utilization of funds it has only been stated by the assessee that funds were utilized for business purposes without furnishing any details. During the course of assessment proceedings, the assessee was asked to establish the transactions with the said party and to prove whether the fund was for the purpos .....

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f occasions, the assessee had made repayment to the said concern and curiously advanced excess money, the reasons for such a practice have not been explained by the assessee. The AO noted that the assessee submitted copy of Bank statement only for the month of March, 2009 to avoid explanation on this issue. The AO noted that the assessee maintains overdraft facility from the bank so the AO wondered as to why excess amount was advanced from its sister concern? The AO wondered as to when the credi .....

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ee was not found acceptable to AO and he disallowed the sum of ₹ 1,91,641/- as not related to the business activity of the assessee and added back the same to the total income of the assessee. Aggrieved, assessee preferred appeal before the Ld. CIT(A), who while deleting the addition has observed as under: I have considered the submissions and also perused the material placed on record. The genuineness of the borrowing and interest payment have not been doubted by the Assessing Officer as .....

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hasizes on its user capital and not user of asset which comes into existence as a result of borrowed capital, unlike section 37 (1) which expressly excludes an expense of a capital nature. Legislature has, therefore, made no distinction in section 36(1 )(iii) between 'capital borrowed for a revenue purpose and capital borrowed for a capital purpose and an assessee is entitled to claim interest paid on borrowed capital provided that capital is used for business purpose irrespective what may b .....

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herefore, Aggrieved, revenue is in appeal before us. 4.2. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the Ld. CIT(A) has allowed the claim of the assessee that the borrowed capital was used in its business either for the purchase or for day to day financial necessity. The genuinity of the borrowing and interest payment were verified and confirmed by the AO of the assessee from the AO of the Todi Investor i.e. ITO, Ward 31(4), Kolkata. In .....

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unting to ₹ 3,54,336/- on the ground that the incentive and discount claimed by the assessee was not actually passed to the customers. Ground no. 1(b) of Cross Objection is as under: 1(b). By sustaining ₹ 129563/- against claim of ₹ 3,54,336/- disallowed by AO towards incentives and discounts. 5.2. This ground of revenue relates to deletion of addition of ₹ 3,54,336/- on the ground of incentive and discount and the assessee has challenged the addition of ₹ 1,29,563/ .....

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ments made to dealers to the extent of ₹ 1,29,563/- this amount is liable to be disallowed and taxed u/s. 40(a)(ia) of the Act and accordingly he directed the AO to add back this amount as disallowance u/s. 40(a)(ia) of the Act while giving effect to this order and, therefore, the assessee got relief of ₹ 2,24,773/- on this ground. Aggrieved, the revenue is in appeal against the relief granted by the Ld. CIT(A) and the assessee has filed Cross Objection against the confirmation of di .....

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the principals in this case i.e. the Honda Motors which have been found to be correct by the Ld. CIT(A). The Ld. CIT(A) has relied on the decision of the Hon ble jurisdictional High Court in the case of Ravi Marketing (P) Ltd. Vs. CIT (2005) 147 Taxman 299 (Cal) wherein the Hon ble High court has held that promotion of sale is always expedient for the promotion of business and, therefore, in this competitive market, sales promoted by the assessee by granting incentive and discount has to be all .....

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rt in Ravi Marketing (P) Ltd. (supra), we confirm the order of Ld. CIT(A) and dismiss both the grounds of appeal and the Cross Objection filed by the revenue and the assessee respectively. 6. Ground nos. 5 & 6 of revenue s appeal are as under: 5. That on the facts and in the circumstances of the case and as per law Ld. CIT(A) erred in deleting the advance from customers amounting to ₹ 20,50,555/- which was added by the AO because assessee was unable to submit the evidence in support of .....

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ssment proceedings the AO noted that the assessee has shown advance from customers to the extent of ₹ 69,67,170/-. The AO, therefore, required the assessee to furnish complete details of the advances and addresses of the persons who had deposited the advances. In reply the assessee furnished complete list of advances, but could not furnish complete address of few parties. Thereafter, the AO sent notice u/s. 133(6) of the Act to few customers which were returned unserved. Therefore, the AO .....

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ieved, the revenue is in appeal before us. 6.2. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee had received advances from customers against the booking of vehicles from customers directly and also through sub-dealers/agents of the assessee company. According to the assessee, the customers who were purchasing the vehicles directly from the assessee s show room knew the assessee, but the customers who were brought by the agents a .....

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rs because of this modus operandi adopted by the agents, the assessee company could not furnish the full details of the customers before the AO. It was brought to the notice of the authorities below that the assessee company furnished full details of advances received with break-up of advance received in current year and the amount brought forward segregating the same into direct customers advance and individual dealer s advance break-up customer-wise and the detailed break-up also reflected as .....

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o be refunded. It was brought to our notice that in most of the cases these details contain the details of adjustment made in the subsequent year by way of issue of sale invoice. The sample sets of documents were produced before the AO wherein booking advance received in earlier years were reflected but the addresses were not given. As per the advice of the Principal Honda Motors and as per the registration requirements of the Transport Department of the Govt. of West Bengal, bills were made dir .....

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of these four persons were ₹ 57,280/-, ₹ 57,280/-, ₹ 57,353 and ₹ 57,280/- and it was further explained that as per the details submitted about the advance from customers list, those advances got adjusted against the assessee s invoice in the next year. These facts have not been found to have been incorrect by the AO and the Ld. CIT(A) has found that the amounts in advance were received by the assessee either through sub-dealers or through agents or directly is supported .....

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ne of the advances received against booking of vehicles could be treated as unexplained. The Ld. CIT(A) has clearly made a finding that the advances given to the assessee for purchase of vehicles is nothing but trade advances and not cash credits. The Ld. CIT(A) has found that for the advances given by the customers, the assessee has supplied the goods (vehicles) and, therefore, there is no justification for the AO to treat these cash advances as unexplained cash credits u/s. 68 of the Act and, .....

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e to prove the genuineness of expenses during the course of assessment. The Ld. CIT(A) deleted the addition on the basis of fresh evidence in violation of rule 46A of the I. T. Act. Ground no. (c) of Cross Objection of assessee is as under: c) By sustaining ₹ 89,303/- against disallowance of ₹ 4,46,518/- made by AO being expenses on registration charges. 7.1. This ground of appeal of revenue relates to deletion of addition of ₹ 4,46,518/- and the ground of cross objection of as .....

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e considered the arguments advanced on behalf of the appellant and the material placed on record. This is a case where the appellant had made payments made through agents to get the motor cycles and scooters registered with the transport authorities. The fact that the dealers are constrained to other some incentives in the form of free registration to customers to boost the sales. However, payment to agents for other services are not supported with proper vouchers. Having regard to the facts, I .....

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5,487/- towards registration expenses while it had recovered ₹ 4,78,969/- only from the customers thereby claiming loss of ₹ 4,46,518/- from the said transactions. The assessee claimed to have registration expenses from its own coffers at the time of selling of vehicles which according to the AO, was an expenditure incurred in excess which was denied to the assessee. The Ld. CIT(A) took note of the fact that the assessee company had employed one of its staff Shri Rabindra Nath Bhatta .....

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tomers to boost the sale and since the assessee could not produce proper vouchers in respect to the payments made to the agents, the Ld. CIT(A) restricted the disallowance to 20% of the expenses which he worked out as ₹ 89,303/- and the assessee got a relief of ₹ 3,57,215/-. We note that the amount of ₹ 4,46,518/- has claimed to have been expended by the assessee company for touts/brokers who makes a quick buck by liaison work with the Transport department. The registration of .....

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other evidence to prove that the amount has been spent legally it cannot be allowed. Therefore, we reverse the order of Ld. CIT(A) and uphold the disallowance of ₹ 4,46,518/- as made by the AO. This ground of appeal of revenue is allowed and the ground of cross objection of assessee is dismissed. 8. Ground no. 8 of revenue s appeal is as under: That on the facts and in the circumstances of the case and as per law Ld. CIT(A) erred in deleting the addition made by the AO under the head 40(a .....

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e filed a proforma invoice issued by M/s. Vinab Marketing Udyog. The AO took note of the fact that tax was not deducted on the payment of the said amount of ₹ 59,920/- which, according to him, attracted section 194C of the Act. Hence, the AO found the assessee in default of not deducting TDS u/s. 194C of the Act and disallowed the amount of ₹ 59,920/- u/s. 40(a)(ia) of the Act for the said default. On appeal, the Ld. CIT(A) deleted the addition by observing as under: I have carefully .....

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