Ita/158/2011 Of M/S.k.h.floor Gallery (P) Ltd v. The Assistant Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN &THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN MONDAY, THE 9TH DAY OF JULY 2012/18TH ASHADHA 1934 ITA.No. 158 of 2011 ( ) ----------------------- ITA.705/COCH/2010 of I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT:---------- M/S.K.H.FLOOR GALLERY (P) LTD. 111/1057A, MELE MANJALINGAL, KALLADIPATTA, PATTAMBI, PALAKKAD - 679 313.REPRESENTED BY ITS MANAGING DIRECTOR K.H.ABDUL GAFOOR. BY ADVS.SRI.K.I.MAYANKUTTY MATHER SMT.RUKHIYABI MOHD KUNHI SRI.R.JAIKRISHNA RESPONDENT : ------------ THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I, PALAKKAD. BY ADVS. SRI.P.K.R.MENON,SR.SC,FOR INCOME TAX SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON09-07-2012, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: DSV/- ITA.No. 158 of 2011 ( ) APPENDIX APPELLANT'S ANNEXURES: P.A.TO JUDGE DSV/- THOTTATHIL B. RADHAKRISHNAN & K. VINOD CHANDRAN, JJ. ---------------------------------------- I.T.A.No. 158 OF 2011 ----------------------------------------Dated this the 9[th] day of July, 2012 J U D G M E N T K. Vinod Chandran,J The assessee, the appellant herein, is engagedin the business of sanitary wares, marbles, granitesand vitrified tiles. While completing the assessmentfor the assessment year 2007-2008, the AssessingOfficer sought explanation regarding the amountsshown as advance in cash, in the accounts of theassessee coming to Rs.25,48,623/-. The assesseereplied stating that the same were advances frompersons who had made orders for specified marblesand granites but that the address and details of thepersons were not known to them. The AssessingOfficer hence made an addition to the income of theassessee for the relevant previous year treating it as unexplained cash credits. The assessee having notbeen able to furnish details with respect to twosundry creditors exceeding Rs.1,00,000/-, the samewas also disallowed and added to the incomereturned. The assessee having paid the freightcharges and not having deducted 'TDS', the freightcharge claimed also was disallowed under Section40(a)(ia) of the Income Tax Act, 1961 (hereinaftercalled 'the Act'). The assessee having unsuccessfullychallenged the additions/disallowance before thetwo Appellate Authorities is before this court. 2. The assessee has raised three substantialquestions of law as hereunder: “1. Whether the authorities below areright in law in sustaining the disallowanceof Rs.2,02,160/- by invoking Section 40(a)(ia) for non deduction of TDS on freight charges particularly when Section 194C hasno application to the context? 2. Whether the authorities below are right in law in invoking Section 41(1) tosustain the addition of Rs.2,19,670/- in thehands of the appellant in as much as thesaid head was a liability for the appellantand the same has not been ceased duringthe concerned accounting year? 3. Whether the authorities below arejustified in treating the advance amountsreceived by the appellant (amounting toRs.25,48,623/-) received from differentcustomers) for supply of materials as cashcredits under Section 68 of the Income TaxAct?” We have heard Sri.Mayankutty Mather, the learned counsel appearing for the appellant/assessee andSri. Jose Joseph, the learned Standing Counselappearing for the Revenue. Sri. Mayankutty Matherwould forcibly urge that the disallowance made by the Assessing Officer was on a wrong application ofthe provisions of the Act. Sri. Jose Joseph, however,would support the orders of the Lower Authorities. 3. Whether the authorities below arejustified in treating the advance amountsreceived by the appellant (amounting toRs.25,48,623/-) received from differentcustomers) for supply of materials as cashcredits under Section 68 of the Income TaxAct?” We have heard Sri.Mayankutty Mather, the learned counsel appearing for the appellant/assessee andSri. Jose Joseph, the learned Standing Counselappearing for the Revenue. Sri. Mayankutty Matherwould forcibly urge that the disallowance made by the Assessing Officer was on a wrong application ofthe provisions of the Act. Sri. Jose Joseph, however,would support the orders of the Lower Authorities. 3. The first Question raised by the assessee iswith respect to the disallowance of freight chargeson account of TDS not being deducted. The assesseewould contend that it had no privity of contract withthe transporter and since it was the supplier whoarranged for shipment of the goods, the liability topay freight charges was not on the assessee andconsequently there was no liability to deduct TDS.The Tribunal, on facts, found that the assessee hadmade the payment towards freight charges directlyto the transporter and it was not a case where suchpayments were debited to the supplier's account. Itwas found that the assessee had not produced any material to establish the contention of the assessee,but from making a bald assertion. It was also foundfrom the records that the assessee had made thepayment subsequently after the due date and theTribunal refused to consider the argument of theassessee that the department had entered thefinding of liability to freight charges merely on thefact of the subsequent deposit made. Thedisallowance was on facts and we are afraid that noquestion of law arises from the said issue. 4. The next question raised by the assessee iswith regard to the two sundry creditors totallingRs.2,19,670/-; whereagain the assessee had notproduced anything to show the subsisting liabilitytowards the alleged creditors. In fact, there was noevidence placed with respect to the payments made and no consequent acknowledgment of such creditswere proved by the assessee. The said addition also,in our opinion, does not give rise to any question oflaw. 5. The last question urged by the assessee iswith respect to the cash credits added on to theincome returned. On going through the assessmentorder, it is revealed that the assessee had contendedthe cash credits to be advances from customers whohad made orders for specified goods. This accordingto the assessee was received as any prudentbusinessman would do, towards future delivery ofproducts. However, in the same breath the assesseewould contend that the details of the persons whomade such advances were not known to them. Thisdisplay of ignorance would itself belie the contention of advance received in lieu of future delivery. Thedepartment's case that the said advances were cashinfused by the assessee into the business to make upthe short fall in cash was found by the Tribunal to bea fact evident and emanating from the assessee'sbooks of accounts. 7. The disallowance were made on all counts byvalid exercise of authority by the Assessing Officerand the assessee failed miserably in establishing itscontentions on a factual basis before all the LowerAuthorities. The order of the Tribunal upholding thedisallowances and the consequent addition made tothe income returned is one purely based on facts. Itdoes not give rise to any question of law. Thequestions raised by the assessee, extracted above,cannot at all be termed as questions of law. Hence despite the vehement arguments addressed by thelearned counsel appearing for the assessee, we areunable to persuade ourselves to exercise thejurisdiction conferred under Section 260A of the Act.As a consequence the appeal is rejected. Sd/-THOTTATHIL B. RADHAKRISHNAN, JUDGE Sd/- K. VINOD CHANDRAN, JUDGE /True Copy/ P.A. to JUDGE DSV/-