2019 (5) TMI 542 - AT - Income Tax

Tribunal decision on disputed additions: Interest, commission, expenses allowed; personal charges partly upheld.

ACIT, Circle-35, Kolkata Versus M/s. Kwality Steel Processors

ACIT, Circle-35, Kolkata Versus M/s. Kwality Steel Processors - TMI Issues Involved:1. Deletion of addition on account of diversion of interest-bearing funds for giving interest-free advances.2. Deletion of addition on account of payment of commission.3. Deletion of addition under the head “cutting charges”.4. Deletion of addition of telephone and fax charges for personal use.5. Deletion of addition on account of motor car fuel expense and depreciation for personal use.6. Deletion of addition under the head “carriage inward”.7. Deletion of addition on account of undisclosed TDS.Issue-wise Detailed Analysis:1. Deletion of Addition on Account of Diversion of Interest-Bearing Funds for Giving Interest-Free Advances:The Revenue raised concerns regarding the CIT(A)’s action in deleting the addition made by the AO due to the alleged diversion of interest-bearing funds for interest-free advances to two associate entities. The AO calculated interest at 9% on the alleged interest-free loan and added Rs. 71,70,707 to the total income. The CIT(A), however, found that these were trade advances for commercial expediency, referencing the Supreme Court’s judgment in S.A. Builders Ltd. and other relevant cases. The Tribunal found no infirmity in the CIT(A)’s order and dismissed the Revenue’s ground.2. Deletion of Addition on Account of Payment of Commission:The AO doubted the genuineness of commission expenses amounting to Rs. 41,28,331, treating them as bogus. However, the CIT(A) found that the assessee had provided sufficient evidence, including tax invoices, proof of payment, TDS certificates, and P&L accounts of the agents. Relying on the Calcutta High Court’s decision in Rajarani Exports Pvt. Ltd., the CIT(A) deleted the addition. The Tribunal upheld the CIT(A)’s order, finding no infirmity and dismissed the Revenue’s ground.3. Deletion of Addition Under the Head “Cutting Charges”:The AO added Rs. 7,01,459 to the total income citing the absence of details regarding job expenses for cutting charges. The CIT(A) noted that the assessee had submitted the required details, including TDS certificates, and found the addition unsustainable. The Tribunal found no infirmity in the CIT(A)’s order and dismissed the Revenue’s ground.4. Deletion of Addition of Telephone and Fax Charges for Personal Use:The AO added 10% of Rs. 1,36,145 under the head “telephone and fax charges” for personal use, citing a lack of suitable explanation. The CIT(A) deleted the addition, observing that the AO failed to pinpoint specific vouchers for personal use. The Tribunal, however, restored the AO’s order, finding the disallowance reasonable and not excessive.5. Deletion of Addition on Account of Motor Car Fuel Expense and Depreciation for Personal Use:The AO added 10% of Rs. 5,28,528 for motor car fuel and depreciation, suspecting personal use. The CIT(A) deleted the addition, noting the absence of specific evidence pointing to personal use. The Tribunal restored the AO’s order, finding the addition reasonable and not excessive.6. Deletion of Addition Under the Head “Carriage Inward”:The AO added 10% of Rs. 19,44,313 for carriage inward expenses due to a lack of supporting bills/vouchers. The CIT(A) found that the assessee had submitted relevant documents, including ledger copies and bills, and held the addition unsustainable. The Tribunal found no infirmity in the CIT(A)’s order and dismissed the Revenue’s ground.7. Deletion of Addition on Account of Undisclosed TDS:The AO added Rs. 10,70,117 based on ITS details, which the assessee denied. The CIT(A) noted that the AO later reduced the addition to Rs. 1,70,117 and found the addition unsustainable due to the lack of independent inquiry by the AO. The Tribunal upheld the CIT(A)’s order, finding no infirmity and dismissed the Revenue’s ground.Conclusion:The Tribunal dismissed the Revenue’s grounds on issues 1, 2, 3, 6, and 7, upholding the CIT(A)’s deletions. However, it restored the AO’s order on issues 4 and 5, finding the disallowances reasonable. The appeal of the Revenue was partly allowed.