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Facts
The assessee, an individual engaged in land development, filed a return of income. The Assessing Officer (AO) made additions based on non-deduction/payment of TDS, cash payments exceeding Rs. 20,000, and unexplained cash credit. The CIT(A) deleted all these additions.
Held
The Tribunal restored all three issues (TDS disallowance, cash payment disallowance, and unexplained cash credit addition) to the Assessing Officer for fresh adjudication. The Tribunal found the CIT(A)'s orders cryptic and lacking proper reasoning, and also noted potential procedural issues.
Key Issues
Whether the CIT(A) erred in deleting additions related to TDS disallowance, cash payment violations, and unexplained cash credit without proper appreciation of facts and evidence. Whether procedural irregularities occurred regarding opportunity of being heard and admission of additional evidence.
Sections Cited
143(2), 142(1), 40(a)(ia), 40A(3), 68, 133(6), 46(A)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & SHRI VINAY BHAMORE
This appeal filed by the Revenue is directed against the order dated 28.06.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2013-14.
Facts of the case, in brief, are that the assessee is an individual and is having income from business in development of land. He filed his return of income on 27.09.2013 declaring total income of Rs.37,81,788/-. The case was selected for scrutiny under CASS and accordingly statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee in response to which the assessee filed the requisite details from time to time.
During the course of assessment proceedings the Assessing Officer noted that the assessee failed to make the payment of tax deducted at source and the tax auditor in the audit report has qualified that the assessee has not made the payment of TDS. He noted that in the computation of total income the assessee has disallowed the amount of TDS. Rejecting the arguments advanced by the assessee and invoking the provisions of section 40(a)(ia) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) he made addition of Rs.14,69,187/- being the difference between Rs.16,02,430/- less TDS amount of Rs.1,33,243/-. Further, on account of failure of the assessee to deduct TDS on the payment of security charges to M/s. Shani Security & Allied Services, the Assessing Officer disallowed further amount of Rs.1,15,275/-.
The Assessing Officer similarly made addition of Rs.26,38,500/- by invoking the provisions of section 40A(3) of the Act on the ground that the assessee has made cash payments exceeding Rs.20,000/- otherwise than by an account payee cheque or demand draft or electronic payment. The Assessing Officer also made addition of Rs.2,80,33,688/- by invoking the provisions of section 68 of the Act on the ground that the assessee failed to furnish the details of the identity and creditworthiness of loan creditors and the genuineness of the transactions in respect of the following parties: Sr. No. Name Amount of Loan taken during the year 1 Khandve Associates 2,52,05,000/- 2 Jacob Anthony 6,14,750/- 3 Jaswantraj Kankariya 1,82,131/- 4 Monterio Robert 10,32,400/- 5 Preety Kankariya 1,99,407/- 6 Santosh Moze 8,00,000 2,80,33,688/-
Thus, the Assessing Officer completed the assessment determining the total income of the assessee at Rs.3,60,38,440/-.
In appeal, the Ld. CIT(A) / NFAC deleted all the above additions made by the Assessing Officer.
7. So far as the deletion of Rs.15,84,462/- on account of disallowance u/s 40(a)(ia) of the Act is concerned, the Ld. CIT(A) / NFAC deleted the same by observing as under: “From the perusal of the section 201 of the income tax act, 1961 it is very much clear that if a deductor does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act be deemed to be taxed considering the deductor as an assessee in default and so also interest shall be charged. In the eyes of the appellate authority there is no provision for disallowing the amount of expenditure on which tax has already been deducted. It is the default committed by the deductor of not paying the TDS amount to the credit of the Government account and therefore, the provisions of section 40(a)(ia) on such amount of expenditure claimed by the appellant will not be applicable. So, the contentions of the appellant assessee in the eyes of the appellate authority have enough weight and this issue of the appellant assessee is hereby allowed.”
So far as the disallowance of Rs.26,38,500/- made by the Assessing Officer u/s 40A(3) of the Act is concerned he deleted the same by observing as under: “1. This appellate authority after considering the submissions and judgments provided by the appellant assessee, finds weight in the contentions of the appellant assessee. So, the appellate authority decides this issue in favour of the appellant assessee. Hence this issue is hereby allowed.”
So far as the addition of Rs.2,80,33,688/- on account of unexplained cash credit is concerned, he deleted the same by observing as under:
“The appellant assessee have provided relevant evidences in support of its contentions and the above judicial pronouncements, this appellate authority finds weight in the submissions and documentary evidences provided by the appellant assessee to this appellate authority. Consequently, from the above discussed facts and judicial pronouncements provided by the appellant assessee, this appellate authority is in the view that this issue is decided in favour of the appellant assessee. Hence, this issue of the appellant assessee is hereby allowed.”
Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds:
1. The Ld CIT(Appeals) has erred in deleting the addition of Rs.15,84,462/- on account of disallowance u/s 40(a)(ia) of the Act made by the AO.
2. The Ld CIT(Appeals) has erred in not appreciated the facts mentioned by the AO where the assessee has not made TDS on the payment of Rs.15,84,462/-. The fact is also mentioned by the Auditor in his audit report for A.Y. 2013-14.
3. The Ld. CIT(A) has erred in not discussing the facts of the case in relation to non-deduction of TDS on payments of Rs. 1 ,15,275/- paid to security charges by the assessee to M/s Shanti Security & Allied Services.
4. The Ld CIT(A) has erred in not appreciating the facts that the assessee had made cash payments more that Rs.20000 /- to a single person.
5. The Ld. CIT (A) has erred in not providing an opportunity to the AO which was required as the assessee had submitted additional evidences before the CIT (A) in regards to payment made to labours in cash of Rs.26,38,500/-, which were not submitted before the AO. Hence, it is against the provisions of Rule 46(A) of the Income Tax Act.
6. The Ld. CIT (A) has erred in not providing an opportunity to the AO which was required as the assessee had submitted additional evidences before the CIT (A) in regards to submission of all the relevant documents in relation to the unsecured loans of Rs.2,80,33,688/- which were not submitted before the AO. Hence, it is the violation of provisions of Rule 46(A) of the Income Tax Act.
7. The order of the CIT (A) be vacated and the order of the AO be restored.
8. The appellant craves leave to add, amend or alter any grounds of appeal.
The Ld. DR strongly challenged the order of the Ld. CIT(A) / NFAC in deleting the additions / disallowances made by the Assessing Officer by passing a very cryptic order and admitting additional evidences in violation of Rule 46A.
He submitted that the provisions of section 40(a)(ia) of the Act cannot apply to a part of the payment instead of the whole amount. Similarly, in absence of any exceptional reasons for making the cash payments exceeding the prescribed limits, the Ld. CIT(A) / NFAC should not have deleted the additions. The Ld. DR submitted that for accepting any cash credit as genuine, the onus always lies on the assessee to prove to the satisfaction of the Assessing Officer regarding the identity and creditworthiness of the loan creditor and genuineness of the transaction. However, the assessee in the instant case has failed to prove the same, therefore, the Ld. CIT(A) / NFAC was not justified in deleting the same.
The Ld. Counsel for the assessee on the other hand strongly relied on the order of the Ld. CIT(A) / NFAC. He submitted that there is no violation of Rule 46A of the Income Tax Rules, 1962 and the grounds raised
by the Revenue are void ab initio since no additional evidence was furnished before the Ld. CIT(A) / NFAC. The Ld. Counsel for the assessee submitted that the assessee during the course of assessment proceedings has made submissions before the Assessing Officer on various dates which are placed at pages 36 to 57 of the paper book and the dates are as under:
1. Copy of Submission dated 22/01/2015 2. Copy of Submission dated 23/11/2015 3. Copy of Submission dated 10/12/2015 4. Copy of Submission dated 22/01/2016 5. Copy of Submission dated 01/02/2016 6. Copy of Submission dated 04/02/2016
Copy of Submission dated 16/02/2016 8. Copy of Submission dated 11/03/2016
Similarly, the assessee during the course of appeal proceedings, has made submissions before the Ld. CIT(A) / NFAC on various dates, the details of which are placed at pages 71 to 114 of the paper book and the dates are as under:
Copy of Submission dated 30/01/2018 2. Copy of Submission dated 20/06/2018 3. Copy of Submission dated 27/02/2019 4. Copy of Submission dated 15/03/2023 5. Copy of Submission dated 25/06/2024
He submitted that the Ld. CIT(A) / NFAC has called for a remand report from the Assessing Officer. However, the Assessing Officer did not provide any report of the same. He submitted that since the assessee has filed the requisite details before the Assessing Officer as well as before the Ld. CIT(A) / NFAC and the Ld. CIT(A) / NFAC has called for a remand report from the Assessing Officer to which the Assessing Officer has failed to provide the same, therefore, in absence of any additional evidence filed before the Ld. CIT(A) / NFAC, the order passed by the Ld. CIT(A) / NFAC deleting the various additions / disallowances made by the Assessing Officer is justified and the grounds raised by the Revenue be dismissed.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. The first issue raised by the Revenue in the grounds of appeal
relates to the order of the Ld. CIT(A) / NFAC in deleting the addition of Rs.15,84,462/-. In this connection we find admittedly the assessee has not deposited the TDS amounting to Rs.1,33,243/- on payment of Rs.16,02,430/-. Similarly the assessee has also not deducted any TDS on payment of security charges amounting to Rs.1,15,275/- paid to M/s. Shani Security & Allied Services. We find the provisions of section 40(a)(ia) of the Act as they stood at the relevant time read as under: “Amounts not deductible.
40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",— (a) in the case of any assessee— (i)….. (ia) any interest, commission or brokerage, [rent, royalty,] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, "[has not been paid on or before the due date specified in sub-section (1) of section 139:] Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid : Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso.
A perusal of the above shows that for various types of payments mentioned therein on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139 of the Act, the same cannot be allowed as deduction. However, if the assessee has deducted tax in the subsequent year or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such amount shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. However, a perusal of the order of the Ld. CIT(A) / NFAC shows that he has not considered the provisions properly. Further, the dates of payment of tax is not forthcoming from the order of the Ld. CIT(A) / NFAC. It is also the contention of the Ld. Counsel for the assesee that no proper opportunity was granted by the Assessing Officer. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to provide due opportunity of being heard to the assessee to substantiate with evidence to his satisfaction that the taxes so deducted have been paid within the stipulated time so as not to attract the provisions of section 40(a)(ia) of the Act. The first issue raised by the Revenue in the grounds of appeal is accordingly allowed for statistical purposes.
The second issue raised by the Revenue in the grounds of appeal relates to the order of the Ld. CIT(A) / NFAC in deleting the addition made by the Assessing Officer on account of violation of provisions of section 40A(3) of the Act.
A perusal of the assessment order shows that the assessee has made cash payments exceeding Rs.20,000/- to different parties amounting to Rs.26,38,500/-, the details of which are given by the Assessing Officer at pages 5 to 7 of the order. Similarly, he has also given the photo copies of certain vouchers at pages 7 to 9 wherein it is clearly visible that the cash payments exceeding Rs.20,000/- have been made to different parties. However, the Ld. CIT(A) / NFAC without any valid reason has deleted such additions by passing a cryptic order, the details of which have already been reproduced in the preceding paragraphs. Since it is the submission of Ld. Counsel for the assessee that the assessee has not made any cash payments exceeding Rs.20,000/- to any person and that the AO failed to submit the remand report to the Ld. CIT(A) / NFAC, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore this issue to the file of the Assessing Officer with a direction to decide the issue afresh and in accordance with law after giving due opportunity of being heard to the assesse. The second issue raised by the Revenue in its grounds of appeal is accordingly allowed for statistical purposes.
19. The third issue raised by the Revenue relates to the order of the Ld. CIT(A) / NFAC in deleting the addition of Rs.2,80,33,688/-.
20. A perusal of the submissions made by the assessee shows that the assessee has taken unsecured loans from the following six parties, out of which the assessee was able to give the confirmations in respect of four parties but could not give the confirmations in respect of two parties namely Jaswantraj Kankariya and Preety Kankariya:
Sr. No. Name Amount of Loan taken during the year 1 Khandve Associates 2,52,05,000/- 2 Jacob Anthony 6,14,750/- 3 Jaswantraj Kankariya 1,82,131/- 4 Monterio Robert 10,32,400/- 5 Preety Kankariya 1,99,407/- 6 Santosh Moze 8,00,000/- 2,80,33,688/-
It is also an admitted fact that the notices u/s 133(6) of the Act were issued to the unsecured laon creditors but no replies were received from the above creditors. The assessee was also not provided with any opportunity to produce those creditors before the Assessing Officer. Although the Ld. CIT(A) / NFAC has called for a remand report from the Assessing Officer on the basis of the submissions made by the assessee however, it is an admitted fact that the Assessing Officer has not given any comments. It is not understood as to how in absence of two confirmations, the Ld. CIT(A) / NFAC has deleted the entire addition. Further, in respect of remaining four sundry creditors neither those parties were produced before the Assessing Officer nor their bank accounts produced. It is the settled proposition of law that for accepting any cash credit as genuine, the onus lies on the assessee to prove to the satisfaction of the Assessing Officer regarding the identity and creditworthiness of loan creditors and the genuineness of the transactions. In the instant case, admittedly the same has not been fulfilled since the full details were not produced. The Ld. CIT(A) / NFAC merely on the basis of submissions made by the assessee has deleted the addition by relying on certain judicial decisions. Since the order of the Ld. CIT(A) / NFAC on this issue is also very cryptic, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore this issue to the file of the Assessing Officer with a direction to decide the issue afresh and in accordance with law after granting due opportunity of being heard to the assesse. We hold and direct accordingly. The third issue raised by the Revenue in its grounds of appeal is accordingly allowed for statistical purposes.
In the result, the appeal filed by the Revenue is allowed for statistical purposes.
Order pronounced in the open Court on 28th July, 2025.