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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI C.M. GARG, JM & SHRI L.P. SAHU, AM
per Section 194H of the Act, the assessee should have been deducted @10% on the entire payments made but he has deducted only 2% instead of 10% and the authorities below have rightly applied the provisions of Section 40A(3) of the Act for payments exceeding Rs.20,000/- in cash. Therefore, this ground of appeal should be dismissed.
After hearing both the sides and perusing the entire material available on record and the orders of the authorities below, we noticed that the assessee has made the payments to Shri Khagesh Patel. On perusal of the documents submitted before us, we notice that the assessee has not deducted TDS as per Section 194H of the Act. He has deducted @2% instead of 10%. It is also mentioned before us that major turnover has been achieved by the assessee from the public sector undertakings and how and why the assessee has paid commission to Shri Khagesh Patel for selling of goods. The entire payments have been received by the assessee in his bank accounts through cheques/RTGS. Further on perusal of the TDS return filed by the assessee along with details filed by the assessee, which is placed at paper book pages No.16 to 40, we noticed that in the case of many instances the tax has been deducted @1% or 2% as per Section 194C of the Act which is clear from the exact break up of TDS return. He has also deducted TDS @2% u/s.194C of the Act. Further on perusal of the copies of Income Tax Return produced by the assessee of Shri Khagesh Patel in the form of ITR-IV, It is clear that Shri Khagesh Patel has offered the amount received from the assessee company as per Section 44AD of the Act. Section 44AD of the Act relates to the civil contract works but not for the commission received. We noted from the documents and submissions of the assessee, there is contradictory in the submissions of the assessee as the assessee has taken plea before the authorities below that it is a commission payment towards selling of goods, whereas as per TDS return as well as copy of ITR-IV of Shri
Khagesh Patel, which is in the nature of contract payments. Therefore, in our considered opinion, to avoid confusion we think it fit to send back this issue to the file of AO for finding out the correct nature of payments made to Shri Khagesh Patel by the assessee company after providing reasonable opportunity of being heard to the assessee and the assessee is also directed to provide the documents and avoid in taking unnecessary adjournments. Therefore, this ground of appeal of the assessee is allowed for statistical purposes.
8. On further scrutiny of accounts, the AO noticed that the assessee has shown sundry creditors of Rs.3,85,36,367/- which includes an amount of Rs.1,30,52,427/- towards Black Diamond Explosives Ltd. It was noticed by the AO that besides manufacturing activities, he was also engaged in trading activity. The assessee had made trading purchase from Asansol, Dhanbad and Rourkela. It was also noticed by the AO that the creditor should have been shown in the name of Black Diamond instead of Black Diamond Explosives Pvt. Ltd. The assessee had purchased explosive items from one M/s Black Diamond Explosives Pvt. Ltd. for its Asansol purchase and he has also purchased Black Diamond, both ledger copies were produced before the AO but there was a difference noted by the AO and the closing balance of Rs.1,25,17,151/-, Black Diamond Pvt. Ltd. has been transferred into the ledger account of Dhanbad purchase. However, the assessee could not VAT returns for its Asansol and Dhanbad purchase. The AO calculated total purchase from Asansol and Dhanbad and he concluded that there was a difference of Rs.7,67,375/- and Rs.9,24,312/-. Therefore, he treated it as a discount receipt from the vendor, therefore, he disallowed the claim of Rs.16,91,687/-.
9. Aggrieved by the above additions, the assessee filed appeal before the CIT(A). The assessee filed details of VAT return and documents as an additional evidence but the CIT(A) denied to accept the additional evidence stating that in spite of providing ample opportunities to the assessee the assessee could not provide VAT returns and documents in support of his claim, therefore, he did not accept the additional evidence filed by the assessee and dismissed the appeal of the assessee.
10. Ld. AR submitted that the CIT(A) was not justified to accept the additional evidence filed before him. It was not an additional evidence which was a part of the record, which goes to the root of the matter, therefore, these documents should be accepted by the Bench and he requested for sending back the matter to the file of AO for readjudication of the issue.
11. Ld. DR, on the other hand, objected for accepting the additional evidence filed by the assessee and submitted that the AO had given ample opportunity to provide the details, however, the assessee has shown his inability to produce the same, therefore, it would be clear cut violation of Rule 46A of the Income Tax Rules, 1962.
After hearing both the sides and perusing the entire material available on record, we noted that the documents provided by the assessee go to the root of the matter which are part of the records, therefore, the contention of the assessee is accepted and the matter is sent back to the file of AO for consideration of the documents and decide the issue as per law. The assessee is directed to cooperate with the department for early disposal of the case. This ground of appeal of the assessee is allowed for statistical purposes.
13. In regard to ground No.3, the AO during the course of assessment proceedings, noticed that the assessee failed to produce copy of VAT return in the case of Asansol and Dhanbad purchase. He noticed that the VAT return was calculated at 12.5% on the purchased as shown by the assessee whereas as per the information of the AO which should have been calculated on the backward method. Accordingly, he calculated the VAT return amount of Rs.9,99,390/- on account of Asansol and Dhanbad purchases. The assessee was failed to produce the VAT return, therefore, he added to the total income of the assessee.
14. On appeal before the CIT(A), the assessee filed copy of the VAT return but the CIT(A) held that it is an additional evidence and dismissed the appeal of the assessee.
15. Before us, ld. AR of the assessee requested that it was not an additional evidence which were part of the record, therefore, he requested for sending the matter back to the file of AO for reconsideration to the issue to which the ld. DR objected to accept the VAT return filed.
After hearing both the sides and perusing the entire material available on record and the records produced before us, we find that the documents filed by the assessee before us go to the root of the matter, therefore, copy of the VAT return is accepted and accordingly, we send the issue back to the file of AO for adjudication of this issue.
The assessee is directed to cooperate with the AO to file necessary documents before the AO for early disposal of the case.
Further on scrutiny of accounts, it was noticed by the AO that the assessee has purchased raw material for manufacturing of slurry explosives worth of Rs.3,15,09,272/-. The assessee was asked to produce the copy of ledger accounts from whom the raw materials have been purchased. The assessee filed the same but the AO noticed that the desired information have not been filed by the assessee, therefore, he issued show cause notice which has been incorporated in the assessment order. The assessee was repeatedly asked by the AO to reconcile the difference noted by him but the ld. AR of the assessee also expressed his inability to furnish the additional details. Accordingly,
AO to the tune of Rs.27,99,978/- was claimed as bogus purchase and added to the total income of the assessee.
On appeal before the CIT(A), the assessee filed written submissions and submitted that the discrepancy in purchases is due to comprising of purchase with doubt and purchase without doubt. The assessee filed also a chart with due element along with ledger copies but these documents were not filed before the AO, therefore, he did not accept the documents filed before him and he dismissed the appeal of the assessee.
Ld. AR of the assessee submitted that it was a part of the records.
The CIT(A) should have accepted to proper adjudication on the issue. It does not file as additional evidence and he requested for sending back to the file of AO for proper adjudication.
Ld. DR, on the other hand, vehemently opposed for accepting the documents filed by the assessee. He submitted that an ample opportunity was given by the AO as well as the AO issued show cause notice to the assessee to reconcile the difference submitted by the department, therefore, he requested the order of the authorities below should be restored.
After hearing both the sides and perusing the entire material available on record and the documents submitted by the assessee,,
AO and CIT(A) with proper documentary supports. Therefore, the documents filed by the assessee are hereby accepted and this issue is also sent back to the file of AO for proper adjudication of the issue. The assessee is directed to cooperate with the AO with necessary documents. This ground of appeal is allowed for statistical purposes.
22. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 18/03/2020. Sd/- Sd/- (C.M.GARG) (L.P.SAHU) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER कटक Cuttack; ददनांक Dated 18/03/2020 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीऱाथी / The Appellant- 1. M/s Mahanadi Metal And Chemicals Private Limited, T/4/26/Civil Township, Rourkela-769004 प्रत्यथी / The Respondent- 2. ITO, Ward-1, Rourkela आयकर आयुक्त(अऩीऱ) / The CIT(A), 3. आयकर आयुक्त / CIT 4. ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, 5. Cuttack गार्ग पाईऱ / Guard file. 6. सत्यावऩत प्रयत //True Copy// आदेशािुसार/ BY ORDER,
(Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक / ITAT, Cuttack