M/S STROKES ADVERTISING PVT. LTD.,,RANCHI vs. DCIT,C-2, RANCHI

आयकर अपीऱीय अधिकरण, “एस.एम.सी” न्यायपीठ, रााँची IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, RANCHI श्री चन्द्र मोहन गगग, न्द्याययक सदस्य के समऺ । BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER आयकर अऩीऱ सं./ITA No.81/RAN/2019 (नििाारण वषा / Assessment Year :2013-2014) M/s Strokes Advertising Pvt Ltd Vs. DCIT, Circle-2, Ranchi C/o Sri Vinay Kumar Jalan, M/s O.P.Jalan and Associates Consultants LLP, 48 Cart Sarai Road, Upper Bazaar, Ranchi, Jharkhand, Pin-834001 स्थायी ऱेखा सं./ जीआइआर सं./ PAN/GIR No. : AANCS 6471 M (अऩीऱाथी /Appellant) (प्रत्यथी / Respondent) .. यनधागररती की ओर से /Assessee by : Shri Vinay Kumar Jalan, FCA राजस्व की ओर से /Revenue by : Shri P.K.Mondal, ACIT(DR) सुनवाई की तारीख / Date of Hearing : 24/05/2019 घोषणा की तारीख/Date of Pronouncement 26/07/2019 आदेश / O R D E R This appeal has been filed by the assessee against the order of Commissioner of Income Tax (Appeals), Ranchi, Jharkhand, dated 31.10.2018 passed in First Appeal No.CIT(A), Ranchi/10077/2017-18 for the assessment year 2013-2014. 2. The assessee has raised the following grounds of appeal :- “1. Under the facts and circumstances of the case the Ld. CIT(A) erred in confirming the 50% of total disallowance made by the Ld. Assessing Officer amounting to Rs.2,53,884/- with respect to the amounts debited in the P&L account relating to Fuel Expenses, Fabrications Works, Mounting of flex and Site Expenses 2. Under the facts and circumstances of the case the Ld. CIT(A) erred in confirming the addition made by the Ld. Assessing Officer amounting to Rs.6,47,400/ considering it to be commission paid without deduction of TDS.”

2 ITA No.81/Ran/2019 3. Brief facts of the case are that the assessee is a company engaged in the business of advertising and filed its return of income on 04.10.2013 declaring total income at Rs.20,51,160/- which was processed and selected for scrutiny and notices u/s.143(2) & 142(1) of the Act were issued by the Assessing Officer to the assessee. Accordingly, the authorised representative of the assessee appeared before the Assessing Officer and the Assessing Officer after verification of necessary details, assessed the total income of the assessee at Rs.29,52,445/- making additions on various heads. Against which the assessee carried the matter to the CIT(A). In the appellate proceedings the CIT(A) partly allowed the appeal of the assessee. 4. Aggrieved by the order of CIT(A), now the assessee is in further appeal before the Tribunal. 5. With regard to ground No.1, ld. AR submitted that the CIT(A) has erred in confirming the 50% of total disallowance made by the AO with respect to the amounts debited in the P&L account relating to Fuel Expenses, Fabrications Works, Mounting of flex and Site Expenses. Ld. AR further submitted that the assessee has submitted all the details as required by the AO during the assessment proceedings. Therefore, the addition made by the AO and confirmed by the CIT(A) deserves to be deleted. 6. On the other hand, ld. DR relied on the order of Assessing Officer. 7. I have heard rival submissions of both the parties and perused the material available on record. On careful consideration of the above rival

3 ITA No.81/Ran/2019 submissions, I find that the AO in the assessment order while making the above additions has mentioned that the assessee could not produce the required bills and vouchers. The CIT(A) considering the facts and circumstances of the case, allowed 50% of the total disallowance made by the AO after observing as under :- “4. Ground No.(i):- Books of Accounts are duly Audited and produced before the AO. Additions made on estimated basis. As per the Assessment Order, the AO has disallowed 20% of fuel expenses, 5% of fabrication works, 5% of mounting or flex and 5% of the site expenses. The total disallowance under these heads totals to Rs.2,53,884/-. The AR has represented that the case of the appellant is covered under tax audit u/s.44AB and the AO has made estimated disallowances which is not correct. As per the Assessment Order, the AO has stated that the appellant could not produce all the requisite bills & vouchers, therefore, made adhoc disallowance of certain percentage. The contention of the appellant is not acceptable as the AO is empowered to verify the bills & vouchers and if any discrepancy is found, necessary disallowances can be made, although, the case of the appellant is a tax audit case. The onus is on the appellant to establish that all the expenses have been incurred wholly and exclusively for the purpose of business which is supported by necessary third party evidences. At the same time, the AO ought to have pointed out the specific discrepancy and worked out the exact quantum disallowance. Therefore, after considering the facts and circumstances of the case, I am of the opinion that 50% of total disallowance out of Rs.2,53,884/- worked out by the AO would meet the ends of justice. Accordingly, out of the total disallowance of Rs.2,53,884/-, the disallowance to the extent of Rs.1,26,942/- is confirmed and the remaining disallowance of Rs.1,26,942/- is deleted. Accordingly, this ground of appeal is partly allowed.” From the above observations of the CIT(A), I do not find any good reason to interfere in the findings recorded by this CIT(A) in this regard and accordingly, I uphold the same and dismiss the ground No.1 of appeal of the assessee. 8. Ground No.2 is with regard to disallowance made u/s.40(a)(ia) of the Act.

4 ITA No.81/Ran/2019 9. The ld. Assessee’s Representative (AR) submitted that the AO has concluded that the TDS was not deducted on the commission amount totalling to Rs.6,47,400/- and, hence, the AO made addition dismissing the explanation of the assessee. Ld. AR also submitted that the assessee is in the business of advertising and as per requirement of business operations the assessee has to pay commission of various vendors who rendered services of providing business and managing the field affairs of the assessee. Ld.AR submitted that the assessee has deducted TDS on the impugned amount of commission paid by it more than Rs.40 lakhs but the TDS was not deducted on the impugned payment as these were aggregating of small amounts paid to the persons sticking posters at various places and these amounts were below Rs.5000/-, therefore the TDS cannot be deducted on the same. Ld.AR also submitted that since these are pity daily wage workers having no PAN Number, therefore, it was not practically possible to deduct TDS on the small payments made to them which was below Rs.5000/- a day per a person. Ld. AR submitted that as the amount paid is below rs.5000/-, thus, the same does not attract provision of Section 194H of the Income Tax Act, 1961 (for short ‘the Act’). Therefore, the AO was not right in invoking provisions of Section 40(a)(ia) of the Act. Finally, ld. AR prayed that the addition made by the AO and confirmed by the CIT(A) may kindly be deleted. 10. Replying to the above, ld. DR strongly supported the action of AO and submitted that the AO has rightly held that the commission paid in excess of Rs.5000/- totalling to Rs.6,47,400/- was to be disallowed

5 ITA No.81/Ran/2019 u/s.40(a)(ia) of the Act. Ld. DR vehemently pointed out that the assessee had not furnished any documentary evidence in support of the claim of the assessee during the assessment proceedings and assessee took contradictory stand during the assessment and first appellate proceedings as against the reply given by the assessee during the assessment proceedings the assessee categorically accepted the default, therefore, the addition made kindly be upheld. 11. Placing rejoinder to the above, ld. AR drew our attention towards copy of the payment of commission of Rs.48,01,675/- during 01.04.2012 to 31.03.2013 and submitted that the amount of Rs.6,47,400/- is payable or cash payments made by the assessee which are below Rs.5000/-, therefore, provision of Section194H of the Act does not attract. Ld. AR submitted that the payees of commission are small and daily-wager labourer having no PAN, therefore, it was not practically possible to deduct TDS on the commission paid to them, therefore, the action of the AO was not justified and correct as per provisions of the Act and the ld. CIT(A) was also not justified in upholding the same. 12. On careful consideration of the above rival submission, I am of the view that the assessee has filed details of payment of commission before the authorities below, wherein the total details of payment of commission of Rs.48,01,675/- have been given. Further from these three pages statements, I clearly observe that the assessee has made payments in cash on various dates which is below Rs.5000/- and other payments on which TDS has been deducted are more than Rs.5000/- and payments

6 ITA No.81/Ran/2019 has been made through proper banking channels after deducting the TDS which has been accepted by the AO. Undisputedly, the assessee is in the advertising business for which the assessee requires support of various persons in the form of procuring business and doing filed work for fixing posters and taking security of other advertising material lying in the open field and on the roads. Certainly, the daily-wage labourer, which is receiving commission in cash below Rs.5000/- having no taxable income are not required to have PAN Number. In this situation, these payments are less than Rs.5000/- per a person in a day in cash, then the provision of Section 194H of the Act is not applicable as per proviso attached thereto and effect for A.Y.2013-2014. 13. In view of the foregoing discussion, I reached to a conclusion that when the provision of Section 194H of the Act is not applicable to the impugned amount of commission payments, then the disallowance u/s.40(a)(ia) of the Act cannot be made. Thus, I am inclined to hold that the AO was not correct in making disallowance and the ld. CIT(A) was also not correct in upholding the same as the findings of the authorities below are perverse and not in accordance with the provisions of the Act. Accordingly, ground No.2 of the assessee is allowed. 14. In the result, appeal of the assessee is partly allowed. Order pronounced in pursuance with Rule 34/4 of ITAT Rules, 1963 by putting copy of the same on Notice Board on 26/07/2019, at Ranchi. Sd/- (CHANDRA MOHAN GARG) न्यानयक सदस्य / JUDICIAL MEMBER रााँची/Ranchi; ददनांक Dated 26/07/2019 Prakash Kumar Mishra, Sr.P.S.

7 ITA No.81/Ran/2019 आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीऱाथी / The Appellant- . 1. M/s Strokes Advertising Pvt Ltd C/o Sri Vinay Kumar Jalan, M/s O.P.Jalan and Associates Consultants LLP, 48 Cart Sarai Road, Upper Bazaar, Ranchi, Jharkhand, Pin-834001 2. प्रत्यथी / The Respondent- DCIT, Circle-2, Ranchi आयकर आयुक्त(अऩीऱ) / The CIT(A), 3. आयकर आयुक्त / CIT 4. 5. ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, रााँची / DR, ITAT, Ranchi 6. गार्ग पाईऱ / Guard file. आदेशािुसार/ BY ORDER, सत्यावऩत प्रयत //True Copy// (Senior Private Secretary) आयकर अपीऱीय अधिकरण, रााँची / ITAT, Ranchi