H.K. Dutta & Co. Vs ACIT (ITAT Kolkata)
The case of H.K. Dutta & Co. Vs. ACIT was brought before the Income Tax Appellate Tribunal (ITAT) Kolkata. The dispute primarily revolved around multiple additions and disallowances made by the Assessing Officer during the assessment year 2013-14. Among them, the significant issue was the addition under Section 69 of the Income Tax Act related to a gold loan obtained from a partner, which was recorded in the books of the firm.
The assessee, a partnership firm involved in the business of manufacturing and selling gold jewelry, faced several additions and disallowances during the assessment proceedings. One of the contentious issues was the addition under Section 69 concerning a gold loan received from one of the partners, Mr. Pradip Kumar Gupta, in the form of 4132.20 grams of gold during the financial year 1997-98. The loan was declared under the Voluntary Disclosure of Income Scheme (VDIS), and the value of the gold loan was recorded in the firm’s books at that time.
The Assessing Officer sought to invoke Section 69 of the Act, claiming that the value of the gold loan had increased, and Mr. Pradip Kumar Gupta had not reported the same in his income tax return or wealth tax return. However, the Tribunal found that both preliminary conditions to invoke Section 69 were not satisfied. Firstly, the loan was duly recorded in the firm’s books of accounts, and secondly, the nature and source of the gold loan were adequately explained during the assessment proceedings.
The Tribunal emphasized that the loan was still standing in the books and the genuineness of the transaction was not disputed. It also clarified that any future increase in the value of the gold loan when repaid would be accounted for as an expenditure in the hands of the firm and income in the hands of the partner. Therefore, no addition under Section 69 was justified, as it was merely anticipation of a future transaction and not unexplained investment.
Conclusion: The ITAT Kolkata allowed the appeal of H.K. Dutta & Co. Vs. ACIT, deleting the addition made under Section 69 of the Income Tax Act for the gold loan received from a partner, which was duly recorded in the books of the firm. This ruling highlights the importance of maintaining proper books of accounts and providing satisfactory explanations to tax authorities to avoid unnecessary additions and disallowances.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present appeal is directed at the instance of the assessee against the order of the Learned Commissioner of Income Tax (Appeal)-11, Kolkata, (hereinafter the “ld. CIT(A)”) dt. 30/08/2019, passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Year 2013-14 which is arising out of the assessment order framed u/s 143(3) of the Act dt. 23/02/2016.
2. The assessee has raised the following grounds of appeal:-
“1. That on the facts and in the circumstances of the case, Ld. CIT(A) has erred in confirming the action of AO who disallowed claim of assessee for weighted deduction u/s 35(1)(ii) amounting to Rs. 26,25,000/- @ 175% in respect of donation of Rs. 15,00,000/- to School of Human Genetics and Population.
2. That on the facts and in the circumstances of the case, Ld. CIT(A) has erred in partly allowing the addition on account of under valuation of closing stock made by AO and confirming the addition of Rs. 8,77,921/- by making his own calculation.
3. That on the facts and circumstances of the case, Ld. CIT(A) has erred in confirming the addition of Rs. 1,05,57,773/- u/s 69 of the Income Tax Act, 1961 on account of gold loan obtained from partner Mr. Pradip Kumar Gupta and carried forward from earlier years.
4. That on the facts and in the circumstances of the case, Ld. CIT(A) has erred in confirming the disallowance of Rs.1,74,745/- made by AO u/s 40A(3) of Income Tax Act, 1961
5. That on the facts and in the circumstances of the case, Ld. CIT(A) erred in not adjudicating the additional grounds raised in course of hearing in respect of addition on account of making charges of Rs.3,39,000/- included in closing stock by AO.
6. That the appellant craves leave to add, alter, adduce or amend any ground or grounds on or before the date of hearing of the appeal.”
3. Brief facts of the case as culled out from the records are that the assessee is a partnership firm engaged in the business of manufacturing and sale of gold jewellery through showroom located at Bowbazar and Garia. Return of income, e-filed for Assessment Year 2013-14 on 29/09/2012 declaring income of Rs. 2,31,95,241/-. Case selected for scrutiny through CASS followed by issuing notice u/s 143(2) and 142(1) of the Act. Various informations were called for in the questionnaire issued u/s 142(1) of the Act. Submissions were filed and income assessed at Rs. 5,87,39,440/- after making following additions/disallowances
