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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Shri Mahavir Prasad & Shri Amarjit Singh
आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This assessee’s appeal for A.Y. 2010-11, arises from order of the CIT(A)-2, Ahmedabad dated 06-02-2015, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
The assessee has raised following grounds of appeal:-
Page No 2 Gurukrupa Stone vs. ITO “1. The Learned Commissioner of Appeals-11 has erred in facts and in law, in confirmed addition Amt. of Rs. 5,31,540/- as a Tractor carting expenses for non deducting the TDS U/s. 40 (a) (ia) of I. T. Act.
2. The Learned Commissioner of Appeals-11 has erred in facts and in law, in confirmed addition Amt. of Rs. 3,84,906/- as a Electric expenses paid by cash to Uttar Gujarat Vij Company Ltd.
The Learned Commissioner of Appeals-11 has erred in facts and in law, in confirmed addition Amt. of Rs. 5,18,000/- as a unexplained Unsecured Loan received from various Loanee during the year.”
3. The fact in brief is that return of income declaring loss of Rs. 4,92,383/- was filed on 15th Sep, 2010. The case was subject to scrutiny and notice u/s. 143(2) of the act was issued on 21st Sep, 2011. The assessment order u/s. 143(3) of the act was passed on 22nd March, 2013 and total income was assessed at Rs. 9,71,170/-. The assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. The relevant facts pertaining to the issues in the appeal are discussed while adjudicating the grounds of appeal of the assessee as under:-
Ground No. 1 (Disallowance of Rs. 5,31,450/ u/s. 40(a)(ia) of the act) 4. During the course of assessment, the assessing officer noticed that assessee had debited tractor carting expenses of Rs. 14,19,658/- and out of these expenses Rs. 5,31,540/- was credited to the account of Shri Ravjibhai Mohanbhai Sorathia. On perusal of the detail of payment, the assessing officer observed that each payment was not exceeded Rs. 20,000/- however the total of such payment exceeded Rs. 50,000/-. Therefore, the assessing officer observed that as per section 194C of the act the assessee was liable to deduct tax on the payment of Rs. 5,31,540/- made to the above cited party. Since the assessee has not deducted the tax, therefore, the same amount was disallowed u/s. 40(a)(ia) of the act.
Page No 3 Gurukrupa Stone vs. ITO
Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee.
We have heard the rival contentions and perused the material on record. During the course of appellate proceedings, the ld. counsel has submitted that the Co-ordinate Bench of the ITAT vide & 1178/Ahd/2016 in the case of Hipoline Ltd. vs. ITO order 12-06-2019 has adjudicated the similar issue on same fact wherein the total disallowance was restricted to 30% of the total addition made u/s. 40(a)(ia) of the act. We have perused the above cited decision of the Co-ordinate Bench and the Co- ordinate Bench has adjudicated the similar issue on identical facts as under:- “5. Heard the respective parties, perused the relevant materials available on record including the judgment relied upon by the authorized representative appearing for the assessee. The relevant portion of the said judgment passed by the Hon'ble Delhi ITAT Bench while dealing in the identical issue is as follows: "6. We have considered rival submissions and find that issue is covered in favour of the assessee by order of ITAT Jaipur Bench in the case of Shri Raiendra Yadav vs. ITO and Smt. Sonu Khandelwal vs. ITO. In these orders it was held that the disallowance u/s 40(a)(ia) to be restricted to 30% of the addition. In these orders the Tribunal has considered the amended provisions of section 40(a)(ia) of I. T. Act. In these orders the assessment year's involve was 2007-08 and 2008-09. In ITA No. 6312/Del/20l6 Smt. Kanta Yadav vs. ITO the present appeal the assessment year is 2012-13. Therefore facts are identical. In this view of the matter and following the above decisions of Jaipur Bench, we set aside and modify the orders of the authorities below and direct the Assessing Officer to restrict the addition to 30% of the total addition made on account of deduction of TDS u/s 40(a)(ia) of the Act. " We find substance in the contentions and/or submissions made by the assessee's Counsel taking into consideration the observation made by the Hon'ble ITAT Delhi Bench as above. It also appears that the issue is squarely covered by the aforesaid judgment. Hence, respectfully following the same we set aside and modify the orders passed by the authorities below. We further direct the Learned AO to restrict the addition to 30% of the total addition made on account of deduction of TDS u/s 40(a)(ia) of the Act.”
Respectfully following the decision of Co-ordinate Bench as cited above, we direct the assessing officer to restrict the addition to the extent of 30% of the total addition made on account of non-deduction of tax u/s. Page No 4 Gurukrupa Stone vs. ITO 40(a)(ia). Accordingly, this ground of appeal of the assessee is partly allowed.
Ground No. 2 (Confirming addition of Rs. 3,84,906/- as electric expenses) 7. At the time of assessment, the assessing officer observed that assesse debited electricity expenses of Rs. 5,14,630/- out of which payment of Rs. 3,85,706/- has been made in cash to Uttar Gujarat Viz Company Ltd. towards electricity bill. The assessing officer was of the view that payment of such expenses exceeding Rs. 20,000/- was in violation of section 40A(3) of the I.T. Act. Therefore, an amount of Rs. 3,84,906/- claimed as electricity expenses was disallowed and added to the total income of the assessee.
Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee.
We have heard the rival contentions and perused the material on record. During the course of appellate proceedings before us, the ld. counsel has submitted a copy of order of the Co-ordinate Bench of the ITAT vide in the case of M/s. Shiv Krupa Tin Containers Order dated 09-06-2016 wherein the identical issue on similar fact was decided in favour of the assessee. The relevant part of decision as cited by the assessee is reproduced as under:- “4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The issue in the present ground is with respect to disallowance u/s.40A(3) of the Act. It is an undisputed fact that assessee has made cash payments for expenses and these payments have been made to Electricity Company for the supply of Electricity. The payment of Electricity was the purpose of business, the payee to whom the assessee has made the payment has not been doubted by the AO; meaning thereby that the genuineness of payment and identity of the payee are not in doubt. In such a situation, we find that the Hon'ble Page No 5 Gurukrupa Stone vs. ITO
Jurisdictional High Court in the case of Anupam Tele Services vs. ITO reported at (2014) 366 ITR 122 (Guj.) has held that the paramount consideration of section 40A(3) is to curb and reduce the possibilities of black money transactions and section does not eliminate considerations of business expediencies. Before us, Revenue has not placed any contrary binding decision. In view of the aforesaid facts and after placing reliance on the aforesaid decision of Hon'ble Gujarat High Court, we are of the view that in the present case the expenditure cannot be disallowed. Thus, this ground of assessee is allowed.”
Respectfully following the decision of Co-ordinate bench as cited above, this ground of appeal of the assessee is allowed.
Ground No. 3 (Addition of Rs. 5,18,000/- as unexplained unsecured loan) 10. At the time of assessment the assessee has claimed unsecured loan from the following persons:- 1. Unsecured loan received from Smt Kailsben Dhirajlal Patel 1,18,000/- 2. Unsecured loan received from: Amrutbhai Kodarbhai Patel 2,00,000/- 3. Unsecured loan received from Nanabhai Fakirbhai Patel 1,00,000/- 4. Unsecured loan received from Narendrabhai Amritbhai Patel 1,00,000/- --------------- 5,18,000/- The assessing officer has examined the aforesaid depositors u/s. 131 of the act and stated that the depositors claimed that the source of deposit was out of agricultural income and out of the income earned from sale of milk. However, the depositors have not furnished the relevant proof of agricultural income and the income earned from sale of milk. Therefore, the assessing officer has held that creditworthiness of the depositors have not been proved. Accordingly, the assessing officer has disallowed the aforesaid unsecured loan of Rs. 5,18,000/- and added to the total income of the assessee as unexplained.
Page No 6 Gurukrupa Stone vs. ITO
The assessee has preferred appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the asessee.
We have heard the rival contentions and perused the material on record. The assessing officer has made an addition of unsecured loan of Rs. 5.18 lacs received from 4 different persons treating the same as unexplained stating the creditworthiness of the depositors were not proved for want of relevant evidence of having agricultural income and income from sale of milk. In this regard, we have noticed that assessee has submitted in his explanation before the ld. CIT(A) that assessing officer has unilaterally rejected the explanation without calling any further evidences if at all required from the depositors and the assessee has come to know the reason for disallowance of the amount of unsecured loan only on receipt of the assessment order. Therefore, during the course of appellate proceedings before the ld. CIT(A), the assessee has referred such evidences of sale of agricultural produce and the certificate of secretary of village Panchayat certifying that the depositors were bonafide farmers owning agricultural land and expenditure of their income from agricultural activities, however, the ld. CIT(A) has not admitted the additional evidences stating that there was no reasonable cause for not producing the same earlier before the assessing officer. In this regard on perusal of the record, it is observed that assessing officer has not brought to the notice of the assessee that any further evidences were required from the depositors before treating the unsecured loan as unexplained. Therefore, we are of the view that action of the ld. CIT(A) of not admitting the evidences is not justified. In view of the above facts and circumstances, we restore this issue to the file of assessing officer Page No 7 Gurukrupa Stone vs. ITO for deciding afresh after examination and verification of the additional evidences furnished by the assessee. Therefore, this ground of the assessee is allowed for statistical purposes.