M/S APEX BUILDERS, LUDHIANA vs. ITO, W-2(1), LUDHIANA

IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCHES, “SMC” CHANDIGARH

HEARING THROUGH: HYBRID MODE

BEFORE: SHRI. LALIET KUMAR, JUDICIAL MEMBER

आयकर अपील सं./ ITA No. 1284/Chd/2018
िनधाŊरण वषŊ / Assessment Year : 2012-13

Apex Builders
620, Ambey Building, Lakkar Bazar
Ludhiana
बनाम

The ITO
Ward 2(1), Ludhiana
˕ायीलेखासं./PAN NO: AAOFA5873B
अपीलाथŎ/Appellant
ŮȑथŎ/Respondent

िनधाŊįरती की ओर से/Assessee by :
Shri Vinamar Gupta, CA (Virtual Mode)
राजˢ की ओर से/ Revenue by :
Shri Vivek Vardhan, Addl. CIT, Sr. DR

सुनवाई की तारीख/Date of Hearing :
07/05/2025
उदघोषणा की तारीख/Date of Pronouncement : 28/05/2025

आदेश/Order

PER LALIET KUMAR, J.M

This is an appeal filed by the Assessee against the order of the Ld. CIT(A)-1,
Ludhiana dt. 30/01/2018 pertaining to A.Y. 2012-13. 2. At the outset the Registry has pointed out that the appeal filed by the Assessee is barred by limitation by186 days.
3. After considering the condonation application filed by the assessee in the present appeal, we condone the delay for which sufficient cause is shown, and admit the appeal for adjudication.
4. Briefly, the facts of the case are that M/s Apex Builders, a firm engaged in civil and road construction work, filed its return of income for the Assessment
Year 2012–13, declaring an income of Rs . 4,52,050/-. The return was filed electronically on 30.09.2012 and was processed under Section 143(1) of the Income Tax Act, 1961, on 19.05.2013. The case was later selected for scrutiny under the Computer-Aided Scrutiny Selection (CASS) and a notice under 2

Section 143(2) was issued on August 19, 2013. Further, a questionnaire along with a notice under section 142(1) was issued on 05.02.2014. The assessee was represented by its authorized representative, Chartered Accountant Mr. Pankaj
Garg, who attended the proceedings and furnished the required details and books of account for verification.
4.1
The AO observed that the assessee had paid interest amounting to Rs.20,079/- to Kotak Mahindra Prime Ltd. and Rs.2,04,226/- to HDB Financial
Services Ltd. without deduction of tax at source (TDS) as required under section 194A. The assessee submitted that these NBFCs had assured them that no TDS was necessary due to their exemption status, but failed to produce any certificate to that effect. Based on CBDT Circular No. 10/DV/2013, which clarified that even paid amounts fall under the purview of section 40(a)(ia), the AO disallowed the entire amount of Rs . 2,24,305 under the said section.
4.2
Further, the AO noted multiple instances of cash purchases exceeding Rs .
20,000/- made to the same party on the same day, in violation of section 40A(3) of the Act. The total amount of such purchases aggregated to Rs . 16,33,037/-.
No satisfactory explanation for seeking the deduction and falling under the exception mentioned in Rule 6DD was provided by the assessee. Therefore, the Assessing Officer had disallowed the entire amount of Rs. 16,33,037/-.
4.3 Additionally, the AO observed another set of cash purchases totaling Rs.
10,24,000/-, for which the names of the parties were not disclosed, leading to the conclusion that these were non-genuine transactions. As no adequate clarification was submitted, this amount was also added back to the income of the assessee.
4.4
With respect to personal expenditures, the AO found that vehicle repairs and maintenance, car insurance, car depreciation, telephone expenses, and mobile depreciation amounting to Rs.2,56,919 were debited to the profit and loss account. As no log books or call registers were maintained, and considering the likelihood of personal use, 1/5th of these expenses (Rs.51,384) was disallowed.
4.5
Finally, the AO noticed that an advance of Rs.1,00,000 was made to Mr.
Pankaj Garg, C.A., which was outstanding as on 01.04.2011. While the assessee had borrowed funds on which interest was paid, no interest was charged on this advance. Applying the rationale of the Punjab & Haryana High Court in the case of CIT vs. Abhishek Industries Ltd., the AO disallowed notional interest of Rs.12,000 under section 36(1)(iii).
4.6
As a result of these additions, the AO computed the total assessed income at Rs.33,96,780/- and initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income.
5. Against the order of the AO, the assessee went in appeal before the Ld.
CIT(A). The Ld. CIT(A) reviewed the case of M/s Apex Builders, who had filed an appeal against the assessment made by the AO for the Assessment Year 2012–
13. The firm had originally declared an income of Rs.4,52,050/-, but after scrutiny, the AO assessed it at Rs.33,96,776/-, leading to a significant increase in tax liability. One of the main issues was the disallowance of interest payment of Rs.2,04,226/- made to financial institutions without deducting tax at source (TDS).
The firm argued that the recipients had already paid tax on this income, but since they could not provide the necessary certificates to prove it, the Ld. CIT(A) upheld the AO’s decision to disallow the expense.
5.1
Another issue was related to cash payments amounting to Rs.16,33,037/- made in excess of the limit prescribed under section 40A(3) of the Income Tax
Act. The firm claimed that these were payments to transporters, which have a higher permissible limit. However, the AO found that these payments were actually for retail purchases and not transportation, and the firm could not prove otherwise. Therefore, this disallowance was also confirmed. Additionally, the AO had disallowed Rs.10,24,000/- worth of cash expenses recorded in the 4

books as "cash paid as per voucher" without providing the names of recipients or purposes of payment. Since the firm failed to give proper explanations during both assessment and appeal, the Ld. CIT(A) considered these expenses non- genuine and upheld the disallowance.
5.2
Regarding vehicle expenses, the AO had disallowed 1/5th of the total amount assuming personal use. The Ld. CIT(A) felt this was excessive and reduced the disallowance to 1/10th, stating that no clear evidence was presented to show personal use. Lastly, the AO had disallowed an interest amount of Rs.12,000 on the grounds that the firm had advanced Rs.1 lakh to a Chartered Accountant for future services without any benefit to the business.
However, since the AO did not prove that this advance came from borrowed funds, the Ld. CIT(A) allowed this amount and deleted the disallowance.
5.3
Accordingly, the Ld. CIT(A) partly allowed the appeal of the Assessee. The disallowance under Section 36(1)(iii) was deleted, and the disallowance for personal use was restricted to one-tenth. Other additions were confirmed.
6. Feeling aggrieved by the order of the Ld. CIT(A) the assessee came in appeal before me.
6.1
During the course of hearing the Ld. AR submitted that M/s Apex Builders is a genuine civil construction firm, and the additions made by the AO were unjustified. On the interest payment of Rs. 2,04,226/-, the Ld. AR argued that although TDS was not deducted, the recipients had disclosed the income and paid taxes. Hence, disallowance under section 40(a)(ia) was not warranted, relying on Merilyn Shipping and Vector Shipping rulings.
6.2
Regarding the cash payments of Rs. 16,33,037/-, the LD. AR contended these were made to transporters under business compulsion, and such payments are exempt under Rule 6DD, with the threshold limit being Rs. 35,000/-.

The Ld. AR relied upon the legal submission and the judgments filed in this regard.
6.3
On the disallowance of Rs. 10,24,000/- towards unverified cash expenses, the Ld. AR maintained that these were legitimate and supported by vouchers, and the AO made the disallowance without concrete evidence.
6.4
The Ld. AR concluded by requesting full relief, stating that the additions were based on assumptions and not facts.
7. Per contra, the Ld. DR relied on the order of the lower authorities. The Ld.
DR supported the AO’s assessment, stating that all disallowances were made as per law. Regarding the interest of Rs. 2,04,226, the DR argued that since TDS was not deducted and no certificate was provided to show that tax was paid by the recipient, disallowance under Section 40(a)(ia) was proper. Regarding cash payments of Rs. 16,33,037/-, the Ld. DR maintained that these violated section 40A(3) and were not covered under Rule 6DD, especially as they were for purchases and not transport, as falsely claimed.
7.1
The Ld. DR further supported the disallowance of Rs. 10,24,000/- in cash expenses, as the appellant failed to provide any details or proof of purpose. On car expenses, the DR justified the estimated disallowance for personal use due to lack of records. Lastly, the DR defended the Rs. 12,000/- disallowance under section 36(1)(iii), stating there was no evidence that the advance was not from borrowed funds. Therefore, the appeal should be dismissed.
8. We have heard the rival contention and perused the material available on the record. Coming to the disallowance under Section 40(a)(ia) of Rs.2,24,305/-, the assessee made interest payments to Kotak Mahindra Prime Ltd.
and HDB Financial Services Ltd. without deducting TDS, claiming exemption based on verbal assurances but failed to produce Form 26A or any supporting documentary evidence.

Date
Vouchers Nos.
Party
Nature of Transaction
Amount
18/06/2011
101 to 106, 169
Tulsi Transport
Co.
Claimed as freight, found as purchase
1,18,450/-
26/09/2011
174-175
Baba Road
Lines
Cash against
GR Nos. 839-
840
40,000/-
28/09/2011
180-183
Baba Road
Lines
Cash against
GR Nos. 847-
850
80,000/-
06/12/2011
232-236
Baba Road
Lines
Cash against
GR Nos. 893-
897
1,00,000/-

(SC) laid down the law that in taxing statutes, there is no equity, and a provision must be interpreted strictly based on its language. It was held that “taxing statutes have to be construed strictly. The court cannot add or subtract words in the provisions of taxing laws. The intention of the Legislature is to be gathered from the language used in the statute. Once the language is unambiguous, effect must be given to it irrespective of the consequences.”
15. In the present case, the assessee has not brought any material on record to establish that the impugned cash payments were covered under any exceptions listed under Rule 6DD. In the absence of any such evidence, and considering the amended provision which is clear, objective, and leaves no scope for ambiguity, the assessee's contention cannot be sustained. Moreover, decisions that continue to apply Atar Singh Gurmukh Singh without addressing the amended law are rendered per incuriam and are not of binding precedent value.
16. Accordingly, applying the binding statutory language, the strict rule of interpretation endorsed by the Hon’ble Supreme Court in Commissioner of Income Tax-III v. Calcutta Knitwears, Ludhiana (supra) and finding no valid explanation under Rule 6DD, we uphold the disallowance made by the Assessing Officer under Section 40A(3) of the Act.
17. Accordingly, the disallowance under Section 40A(3) is upheld.In the result, this ground raised by the Assessee is dismissed.
18. Concerning the disallowance of Rs.10,24,000/- on account of unverifiable purchases, the Ld. AR submitted that the disallowance is unwarranted as the assessee had duly furnished vouchers in support of the purchases in question. In contrast, the Ld. DR relied on the findings of the lower authorities, asserting that the assessee failed to produce party-wise names or vouchers for several cash purchases. It was pointed out that the entries were vague and non-descriptive, such as “cash paid as per voucher,” and therefore, the addition ought to be sustained.

JUDICIAL MEMBER
AG

आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to :

आदेशानुसार/ By order,
सहायक पंजीकार/