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Income Tax Appellate Tribunal, ‘’ SMC’’ BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-4, Ahmedabad, dated 16/05/2018 arising in the matter of assessment order passed under s.143(3) r.w.s 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2011-2012.
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The assessee has raised the following grounds of appeal:
On the facts and in the circumstances of the case, the learned CIT. (Appeals) erred in rejecting the appellant’s ground of appeal challenging the validity of the reassessment proceedings initiated u/s.147 and the consequential reassessment order passed by the Assessing Officer. 2. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance of Rs.1,16,000/- made by the Assessing Officer on the assumption that the aforesaid labour and freight expenses were not allowed by virtue of section 40A(3) of the I.T Act. 3. On the facts and in the circumstances of the case the learned CIT (Appeals) erred in confirming the disallowance of freight and transportation expenses of Rs.10,u/s.271(1)(c) of the Act,449/- made by the Assessing Officer on the ground that the appellant-company failed to deduct tax at source in respect of the aforesaid expenditure with the result that the same was hit by the provisions of section 40(a)(ia) of the I.T Act. 4. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.
The facts in brief are that the assessee in the present case is a limited company and engaged in the business of manufacturing of detergents. The assessee in the year under consideration filed its return of income declaring loss of Rs.(-)57,98,714/- which was assessed u/s 143(3) of the Act on 28/02/2014 after making the disallowance of Rs. 7423.00 under section 14A of the Act. Thereafter notice u/s 147 of the Act was issued dated 24/02/2016 on account of income escaping assessment after recording the reasons as discussed below. "On verification of details available on record, it is seen that assessee had claimed various expense under different heads such as labour charges, Freight charges etc. It is seen from such amounts apart from so many small cash payments, the assessee has also make payments exceeding Rs.35,000/- in cash, which is in contravention of section 40A(3). As per the provisions of section 40A(3), in case of payment made for plying, hiring or leasing goods carriages, the provisions of sub - sections (3) and 3(A) shall have effect as if for the words "twenty thousand rupees", the words "thirty five thousand rupees" had been substituted. In the case of the assessee company, it is seen that there are so many incidents where payments of a sum exceeding Rs. 35,000/- was made otherwise tahan by an account payee cheque drawn on a bank or account payee bank draft. As per the provisions of section 40A(3) all such payments shall be deemed to be the profit and gains of business and accordingly chargeable to tax as income of the assessee for the year under consideration. Date Head of Payment Particular Voucher type Amount (in Rs.) 30.04.2010 Cash Book Cash Payment 42,665/- Labour Charges (F) 31.05.2010 41,091/- Cash Book Cash Payment Labour Charges (F)
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30.06.2010 Cash Book Cash Payment 51,750/- Labour Charges (F) 28.05.2010 Cash Book Cash Payment 70,000/- Freight Charges (UP & Bihar) 31.05.2010 46.000/- Cash Book Cash Payment Freight Charges (UP & Bihar) 01.07.2010 Cash Book Cash Payment 70,000/- Freight Charges (UP & Bihar) 31.07.2010 40,000/- Cash Book Cash Payment Freight Charges (UP & Bihar) 30.09.2010 45,000/-/ Cash Book Cash Payment Freight Charges (UP & Bihar) 29.06.2010 Cash Book Cash Payment 63,732/- Freight Charges (UP & Bihar) Total 4,70,238/- In respect of details of IDS deducted and paid to the Govt. A/c. it is seen that on the following payments made on account of freight charges paid, the assessee had failed to deduct the TDS or after deduction TDS failed to deposit the same in the Govt. A/c. Moreover, no intimation as required of the Transporters for non deduction of TDS have been furnished to the department in the format and time prescribed for the same. In view of the same, following payments made are under assessment and required to be disallowed u/s 40a(ia) of the Income Tax Act, 1961: Date Particular Vch type Vch No. Amount Total 06.10.2010 UP Bihar Journal JV1 01 1/1 0/008 51200 Roadlines Voucher 20.10.2010 Do Do JV1 01 1/1 0/053 88300 11.12.2010 Do Do JV1 01 1/1 2/021 57000 17.01.2011 Do Do JV101 1/01/100 54400 11.12.2010 Do Do JV1011/12/19 37600 288500 03.09.2010 Vimal, Journal JV1 01 1/09/010 41630 Transport Voucher 03.09.2010 Do Do JV1 01 1/09/011 41760 20.09.2010 Do Do JV1 01 1/09/064 39305 01,01.2011 Do Do JV101 1/01/001 41116 05.01.2011 Do Do JV101 1/01/015 41000 12.01.2011 Do Do JV1 01 1/01/023 39400 14.02.2011 Do Do JV1 01 1/02/021 41856 07.03.2011 Do Do JV1 01 1/03/007 39425 404179 10.03.2011 DO Do JV1011/03/028 39347
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18.06.2010 Jay Bikaner Do JV1011/06/019 43200 Transport Co. 21.07.2010 New Bikaner Do JV1011/11/041 58300 Punjab Haryana Roadlines 15.11.2010 Do Do JV1011/11/041 54790 01.01.2011 Do Do JV1011/01/002 59400
172490 07.02.2011 Adiya Road Do JV1011/02/011 58330 Carriers 15.04.2010 Do Do JV1011/04/07 60750 119080 Total 1027449 In view of the above facts, I have reason to believe that above amount of Rs. 4,70,2387- paid in cash in excess of Rs. 35,0007-against the misc expenses is escaped assessment and required to be disallowed u/s 40A(3) of the income tax act, 1961 and Rs. 10,27,4497- is escaped assessment as the assessee has failed to deduct IDS thereon and required to be disallowed u/s 40a(ia) of the Income tax Act, 1961. Therefore, it is a fit case for reopening of this assessment by invoking the provisions of section 147 of the Income Tax Act, 1961. Accordingly, notice u/s 148 of this act is issued."
The Ld. AR before us contended that the reassessment proceedings were initiated after the period of four years from the end of relevant assessment year and there was no finding of the AO in the reason recorded that there was failure on the part of the assessee to disclose all the materials facts necessary for the assessment as mandated in the first proviso to section 147 of the Act. Accordingly, the Ld.AR claimed that the reassessment proceedings u/s 147 of the Act is bad in law and liable to be quashed.
On the other hand Ld. DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the reassessment proceedings were initiated u/s 147 of the Act, after the expiry of the four years from the end of the relevant assessment year. The first proviso to section of 147 of the Act mandates that the case of the assessee can be reopened beyond four years if there was failure
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on the part of the assessee to disclose all the materials facts necessary for the assessment. However, on perusal of the reasons recorded by the AO we do not find such finding of the AO that there was failure on the part of the assessee. Accordingly we are of the view that the reassessment proceedings initiated u/s 147 of the Act are not sustainable. Hence, we quash the same.
6.1 As we have decided the technical issue in favour of the assessee, we not find any reason to adjudicate the grounds of appeal raised by the assessee on merit. As such the grounds of appeal on merit become infructuous. Thus, accordingly we dismiss them as infructuous.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 04/03/2021 at Ahmedabad.
Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 04/03/2021 Manish