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आदेश/Order
PER N.K. SAINI, VICE PRESIDENT
This is an appeal by the Assessee against the order dt. 04/09/2019 of the Ld. CIT(A), Patiala.
In the present appeal Assessee has raised the following grounds:
1. That the Ld. Commissioner of Income Tax Appeals has wrongly upheld the addition of Rs. 14,69,990/- under section 40(a)(ia) of Income Tax on account of non deduction of TDS without appreciating the fact that the payees has paid taxes on income received from appellant.
2. That the Ld. Commissioner of Income Appeals has erred by not deciding the disallowance of Rs. 2 Lakhs which was made by assessing officer without pointing out any specific defect in bills and vouchers. 3. Vide Ground No. 1 grievance of the assessee relates to the sustenance of addition of Rs. 14,69,990/- made by the A.O. under section 40(a)(ia) of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’).
Facts of the case in brief are that the assessee filed the return of income on 29/09/2012 declaring an income of Rs. 67,57,580/- which was processed under section 143(1) of the Act. Later on the case was reopened under section 147 r.w.s 148 of the Act. In response the assessee submitted that the return of income already filed on 29/09/2012 may be treated in response to the notice under section 148 of the Act.
During the course of assessment proceedings the A.O. noticed that the assessee had paid interest amounting to Rs. 32,26,980/- to NBFC against the term loan raised for purchase of Plant & Machinery to the following companies:
Religare finvest Ltd. Rs. 93,87,98/- 2. Magma Fincorp. Ltd. Rs.97,86,92/- 3. Mahindra and Mahindra Financial Services Ltd. Rs. 49,13,00/- 4. Srie Equipment Finance Ltd. Rs. 81,81,89/- Total 32,26,980/- The A.O. required the assessee to show cause as under:
“ You have not collected T.D.S on the payment amounting to Rs. 32,26,980/- to NBFCs i.e. Religare Finvet Ltd., Magma Fincorp, Ltd., and Mahindra & Mahindra and Srie equipment Finance Company. Please show cause why these payment may not be disallowed as per the provision of Section 40(a)(ia).”
5.1 In response the assessee submitted as under:
“The assessee company has paid interest to the non-banking financial company during the period under consideration. It is not out of the place to mention here that all the payments were made by way of cheques and the said non banking company has duly accounted for in their respective books of account. They have shown the said paid interest as there income during the period under consideration. It will be hardship on the assessee company if this interest paid amount is disallowed by your goodself. It is therefore prayed to your honour not to disallow the interest paid and oblige.” 5.2 However the A.O. did not find merit in the submissions of the assessee and made the addition of Rs. 32,26,980/- by observing as under:
“The reply of the assessee has duly been considered, but found not tenable, the assessee had made financial charge of Rs. 32,26,980/- to NBFCs i.e. Religare Finvest Ltd., Magma Fincorp. Ltd., and Mahindra & Mahindra and Srie equipment Finance Company. The assessee was required to dedut TDS in accordance with the provisions of Section 194A, but assessee had failed to do so, further assessee has neither produced Form 26A, as per the provisions of Section 201(1) nor produced any certificate from N.B.F.Cs/parties. The assessee has violated the provisions of section 40(a)(ia) read with section 201(1) and rule 31ACB. Considering the above facts, interest paid to NBFCs amounting to Rs. 32,26,980/- is disallowed by invoking the provisions of Section 40(a)(ia) of the Income Tax Act, 1961 and the same is added back to the returned income of the assessee.”
Being aggrieved the assessee carried the matter to the Ld. CIT(A) and submitted as under:
"The assessee company is engaged in the work of civil construction. The learned Assessing Officer has disallowed interest for non-deduction of tax at source during the year under consideration. The assessee company has made the payment of interest along with installment through cross payee cheques. Since the payment has been made through cheques as such all the companies has accounted for in their books of accounts. All the companies i.e. Shriram equipment Finance Co,. Religare finvest Ltd, Magma Fincorp Ltd, Mahindra & Mahindra Financial Services, SREI Infrastructure Finance Ltd are big NBFC's who make advances mainly for civil constructions equipment. All the companies are filling their Income tax returns. The assessee company could only obtained their PANs and audited balance sheets in which they have duly accounted for the amount of interest paid. I am enclosing herewith copies of balance sheet and list of PANs of the above said companies. It is very hard for the assessee company to obtain certificate from Chartered Accountant of the said companies as their Head Offices are somewhere in Mumbai, Chennai etc. and none of their employees are co-operating with the assessee company. As far as short deduction of TDS deducted of the firm M/s. JGB Construction is concern copy of acknowledgement receipt has already been submitted before the Assessing Officer. The said firm has filed its income tax Return vide acknowledgement receipt No. 650224901300313 on 30-03-2013. It is therefore prayed to your honor to please delete the addition for the sake of justice and oblige.
6.1 Ld. CIT(A) however sustained the addition of Rs. 14,69,990/- by observing in the impugned order as under:
During the appellate proceedings, I wrote to M/s Religare Finvest Ltd., Magna Fincorp Ltd., Srei Equipment Finance Ltd. and M/s Mahindra & Mahindra Financial Ltd. seek as to whether the interest received from the appellant has been duly reflected in the P & L accounts of the parties and whether tax has been paid thereon. The details of the parties to whom the Appellant has paid interest without deduction of Tax Source and the final information thereon after due enquiries during appellate proceedings are as under:
Sr No. Name of Party Interest Paid Status 1. 9,38,798.00 Religare Finvest Pvt Ltd. Chartered/accountants Certificate and Confirmation as to inclusion of the interest in the Income has been filed 2. 9,78,692.46 Magma Fincorp Ltd. There is no response even after writing a number of times to the party 3. 8,18,189.49 Srei Equipmet Finance Chartered/accountants Ltd. Certificate and Confirmation as to inclusion of the interest in the Income has been filed 4. 4,91,300.26 M/s Mahindra & There is no response even after Mahindra Financial writing a number of times ot the Services Ltd party Total 32,26,980.18
In view of the above factual matrix it is my considered view that the appellant has failed to supply any evidence as per law that the NBFCs Magma Fincorp Ltd. &M/s Mahindra &
Mahindra Financial Services Ltd have paid the tax/ included the stated interest in their returned income and therefore , the addition is directed to be restricted to 14,69,990/- (9,78,692.46+4,91,300.26) It is ordered accordingly. The appellant partly succeeds on this ground of appeal.
Now the assessee is in appeal.
Ld. Counsel for the Assessee submitted that the Ld. CIT(A) without considering the submissions of the assessee and without asking to produce the evidence relating to this fact that the companies in question have paid the tax on the interest in their return of income was not justified in restricting the addition of Rs. 14,69,990/-. It was submitted that the assessee produced relevant evidence relating to the interest received from the assessee which had been duly reflected in the P&L Account of the parties namely M/s Magma Fincorp Ltd. and M/s Mahindra & Mahindra Financial Services Ltd. for the amount of Rs. 9,78,692.46 and Rs. 4,91,300.26 respectively and that the assessee can produce those evidences. Therefore the addition sustained by the Ld. CIT(A), was not justified.
In his rival submissions the Ld. DR strongly supported the impugned order passed by the Ld. CIT(A).
We have considered the submissions of both the parties and perused the material available on the record. In the present case it appears that the Ld. CIT(A) sustained the addition in the absence of relevant evidence relating to the inclusion of the interest income by the parties in question in their respective returned income. The Ld. Counsel of the Assessee stated at bar that the assessee is in a position to produce those evidences now. We therefore deem it appropriate to set aside this issue back to the file of the Ld. CIT(A) to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee.
As regards to the issue raised in Ground No. 2 the Ld. Counsel for the Assessee submitted that this issue was raised before the Ld. CIT(A) but the same had not been adjudicated by him.
The aforesaid contention of the Ld. Counsel for the Assessee was not controverted by the Ld. Sr. DR. We therefore set aside this issue back to the file of the Ld. CIT(A) to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee.
In the result, appeal of the Assessee is allowed for statistical purposes.
(Order pronounced in the open Court on 02/11/2020)