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Income Tax Appellate Tribunal, HYDERABAD ‘A’ BENCH : Hyderabad
Before: Smt. P. Madhavi Devi & Shri A. Mohan Alankamony
O R D E R Per Smt. P. Madhavi Devi, J.M. Both these appeals are Cross Appeals filed by the Assessee as well as Revenue against the order of Ld.CIT(A)-4, Hyderabad dated 24.03.2016 for the A.Y. 2009-10.
These Cross appeals were taken up for hearing on 30.09.2020 through video conferencing and both the parties were heard. and ITA 983/Hyd/2016 AY 2009-10 25 Frames Media House
Brief facts of the case are that the assessee, a partnership firm, has filed its return of income for A.Y. 2009-10 on 19.04.2010 declaring an income of Rs.15,76,900/-. Consequent to selection of the return under CASS for scrutiny, the assessment proceedings u/s 143(3) were completed and the assessee was directed to furnish various information. The assessee filed the relevant information. Thereafter, the AO disallowed media expenses u/s 40(a)(ia) for non-deduction of TDS and 50% of the expenditure claimed by assessee, in the absence of books of accounts and made addition towards sundry creditors for an amount of Rs.56,90,000/- for want of confirmation from the parties. Aggrieved, assessee preferred an appeal before the CIT(A) who granted partial relief to the assessee. As regards disallowance u/s 40(a)(ia) of the I.T.Act, 1961 the CIT(A) followed the decision of the Visakhapatnam Special Bench of the Tribunal in the case of Merilyn Shipping & Transports Visakhapatnam vs. ACIT, Range 1, Visakhapatnam reported in 136 ITD 23. 2.1. With regard to disallowance of 50% of the expenditure, the CIT(A) observed that assessee has filed details before her which are forwarded to the AO and a remand report were called for. After considering the remand report, she held that the action of the AO in disallowing 50% of the misc. expenses and salaries was not justifiable, and that if any expenses were to be disallowed, at the most it should be of administrative expenses. As regards sundry creditors, she directed that the addition may be deleted by observing that these creditors were regular creditors continuing for years and payments were also made for subsequent years. She further directed the AO to assess the income at 8% of the gross receipts and deleted additions made by AO towards undisclosed income.
Aggrieved by the relief granted by the CIT(A), the Revenue is in appeal before us, while the assessee is in appeal before us on estimation of income @ 8% of gross receipts. and ITA 983/Hyd/2016 AY 2009-10 25 Frames Media House 4. The Ld.Counsel for the assessee submitted that estimation of income @ 8% of the gross receipts is too high as against the profit offered by assessee @ 2%. He submitted that there is no basis for estimation of income @ 8% as done by the CIT(A). With regard to disallowance u/s 40(a)(ia), he fairly accepted that the issue is covered against the assessee by the decision of Hon’ble Supreme Court in the case of Palam Gas Service (2017) (SC) reported in 394 ITR 300, and since the CIT(A) has not decided the appeal on merits he prayed that the issue may be remitted to the CIT(A).
Ld.DR, on the other hand supported the orders of the AO and submitted that both the issues may be remitted to the file of AO.
Having regard to rival contentions and material placed on record, we find that the CIT(A) has followed the decision of the Special Bench of the Tribunal at Visakhapatnam in the case of Merylin Shipping & Transports Visakhapatnam (supra) which held that since payments have already been made, the disallowance u/s 40(a)(ia) is not warranted. However, the Hon’ble Supreme Court in the case of Palam Gas Service vs. CIT (2017) reported in 394 ITR 300 has held that the Provisions of Sec.40(a)(ia) of the Act are applicable to all the cases of failure to make TDS whether paid or payable. Therefore, the decision of the Special Bench is no longer in force. Since the CIT(A) has not decided the issue on merits, we deem it fit and proper to remand the issue to the file of CIT(A). Similarly, the issue of sundry creditors and estimation of income is also remitted to the file of CIT(A) for re- adjudication. The Assessee is directed to file the confirmations of the sundry creditors before the CIT(A), who shall consider such evidence in accordance with law. As regards estimation of income, CIT(A) is directed to estimate the income after taking into consideration the gross profit earned by similar assessees. Accordingly, both the appeals of Revenue as well as Assessee are remitted to the file of CIT(A). and ITA 983/Hyd/2016 AY 2009-10 25 Frames Media House
In the result, both the appeals are treated as allowed for statistical purposes. Order pronounced on 06th October, 2020.