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Before: SMT. P. MADHAVI DEVI
Assessment Year: 2012-13 Suram Srinivas, vs. Income-tax Officer, Secunderabad. Ward – 15(3), Hyderabad. PAN – AVYPS 8511 K Appellant Respondent Assessee by: Shri B. Shanthi Kumar Revenue by: Shri Sunku Srinivas Date of hearing: 01/01/2020 Date of pronouncement: 17/01/2020 O R D E R
This is an appeal filed by the assessee against the order of CIT(A) – 7, Hyderabad dated 18/07/2018 for AY 2012-13.
The brief facts of the case are that the assessee, an individual, who is in the business of trading in agro-based products filed his return of income for AY 2012-13 on 30/09/2012 declaring taxable income of Rs. 8,55,350/-. Since the return of income was picked up for scrutiny under CASS, notices u/s 143(2) dated 08/08/2013 and u/s 142(1) along with a questionnaire dated 23/04/2014 were issued and duly served on the assessee requiring the assessee to produce the information mentioned therein. Since the assessee did not furnish relevant information, the AO completed the assessment u/s 144 of the IT Act by treating the additional capital introduced by the assessee of Rs. 10,26,000/- as unexplained credit u/s 68 of the Act. He also disallowed the expenditure which is in excess of the expenditure over 0.30% of the turnover and also disallowed an amount of Rs. 1,35,650/- f u/s 40(a)(ia) of the Act or not making the TDS u/s 194H of the Act.
Aggrieved, the assessee preferred an appeal before the CIT(A), who confirmed the above additions and the assessee is in second appeal before the Tribunal by raising the following grounds of appeal: “1. The CIT(Appeals) erred both in law and on facts in confirming the addition of Rs,10,26,800/- and disallowances of Rs,14,05,748/- and Rs.1,35,650/-.
2. The CIT(Appeals) is not justified in confirming the addition of Rs.10,26,800/- by rejecting the facts put forth by the assessee and by ignoring the remand report submitted by the Assessing Officer.
3. The CIT(Appeals) is not justified in confirming the disallowance of expenditure of Rs,14,05,748/- in the facts of assessee's case.
4. The CIT(Appeals) is not justified in confirming the disallowance of Rs.1,35,650/- made u/s 40(a)(ia) without taking into consideration the fact that the commission payments were below the threshold limits.
5. Any other ground that may be urged at the time of hearing.”
4. As far as the 1st of addition of Rs. 10,26,000/- is concerned, ld. counsel for the assessee submitted that the assessee had received an unsecured loan of Rs. 11,75,000/- from Kesari Enterprises on 19/08/2011, which has been adjusted against the material supplied by the assessee of the value of Rs. 1,48,200/- and the balance of Rs. 10,26,800/- was used by the assessee in his business. He has drawn our attention to the confirmation letter of the proprietor of Kesari Enterprises, which is reproduced by the CIT(A) at para 5.4 of his order.
4.1 With regard to the disallowance of expenditure, ld. counsel for the assessee submitted that in the earlier AYs assessee had shown loading and unloading charges separately, whereas, during the relevant AY, the same has been shown as wages. He contended that the AO and CIT(A) erroneously have not considered the loading and unloading charges claimed in the earlier year for the earlier AY to arrive at the requisite ratio of expenditure vis-à-vis of turnover, of the current AY. 4.2 As regards the commission paid to relevant parties without making TDS, ld. counsel for the assessee submitted that all the payments were below Rs. 2,500/- and, therefore, TDS provisions of section 194Hare not applicable and, hence, no disallowance u/s 40(a)(ia) of the Act, can be made.
The ld. DR, on other hand, supported the orders of revenue authorities.
Having regard to the rival contentions and material on record, I find that the sum of Rs. 11,75,000/- has been shown as received from Kesari Enterprises and the said amount was also received through banking channels towards supply of maize to them, for which, a sum of Rs. 1,48,200/- has been debited. On a query from the bench, ld. counsel for the assessee submitted that the balance amount of Rs. 10,26,000/- has been adjusted against the sales subsequently. Therefore, it needs verification by the AO and accordingly, I direct the AO to reconsider the issue and verify if the balance amount of Rs. 10,26,000/- has been adjusted against the material supplied by the assessee to the said company and if it is found to be so, then, no addition shall be made. Even otherwise, since the amount has been received from Kesari Enterprises, and it is also confirmed by the said company, it can be treated as a loan and creditworthiness of the said company can be examined. The AO is directly accordingly. Accordingly, ground Nos. 1 & 2 are treated as allowed for statistical purposes.
6.1 As regards the second issue of calculation of percentage of expenditure vis-à-vis its turnover also, I find that the AO has considered the salaries and wages of the earlier AY against the salary and labour charges/wages of the current year for arriving at the ratio of expenditure. According to the assessee, AO should consider the loading and unloading charges also as wages only and the total should be considered as the expenditure for the earlier AY. The AO is, therefore, directed to consider the components of ‘wages’ for the year ended 31/03/2012 for arriving at the percentage of expenditure as against the salary, wages and loading & unloading charges for the year ending 31/03/2012 for arriving at the percentage of expenditure over the turnover and if the expenditure claimed by the assessee is over and above such percentage of expenditure, then only such expenditure shall be disallowed. Thus, ground No. 3 is allowed for statistical purposes.
6.2 As regards the addition of Rs. 1,35,650/- u/s 40(a)(ia) is concerned, ld. counsel for the assessee has drawn attention of the bench to the details of the commission paid, placed at pages 18 to 19 of the paper book. I find that there are names of the persons to whom such commission has been paid, but, there are no other details such as address etc. Each of the commission paid is below Rs. 2,500/-, ld. counsel for the assessee submitted that since assessee is trading in agro- based products, the payments have to be made in cash and the details of the persons could not be recorded. Since each of the payment is below Rs. 2,500/-, I am of the opinion that provisions of section 194H are not attracted in this case and, therefore, the disallowance made u/s 40(a(ia) is also not called for and the same is deleted. The assessee, therefore, gets relief on this issue. Ground No. 4 is allowed.
In the result, appeal of the assessee is treated as partly allowed for statistical purposes.
Pronounced in the open court on 17th January, 2020.