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Before: Shri Amit Shukla & Shri B.R.R. Kumar
ORDER Per Amit Shukla, J.M.: The aforesaid appeal has been filed by the assessee against impugned order dated 20.05.2016, passed by the ld. CIT(A)-20 for the quantum of assessment passed u/s. 143(3) of the IT Act for the assessment year 2012-13.
In the grounds of appeal, the assessee has challenged following two additions :
“2. That the Ld. Commissioner of Income Tax (Appeals)-XX has wrongly, arbitrarily and against the law and facts of the case, confirmed the addition/disallowance of Rs 10,00,000/- made on adhoc/estimated basis to the income of the assessee being disallowance on account of unverifiable purchases out of total purchases of Building Material amounting to Rs 2,47,54,135/- whereas the Books of Account along with details of purchases from various suppliers with bills and vouchers in evidence of purchase of the same were duly produced during the course of assessment proceedings.
That the Ld. Commissioner of Income Tax (Appeals)-XX has wrongly, arbitrarily and against the law and facts of the case, confirmed the addition of Rs 24,07,842/- to the income of the assessee being disallowance u/s 40(a)(ia) on account of non deduction of TDS on interest amounting to Rs 24,07,842/- paid to PNB Housing Finance Limited whereas the same has been shown by PNB Housing Finance Limited as its income and requisite tax has been paid by them.”
The brief facts are that the assessee is a developer and civil contractor. He and purchases plots and then after construction, sells it as apartments. The ld. Assessing Officer, on perusal of the trading and Profit & Loss account, observed that the assessee has debited a sum of Rs.1,49,93,760/- on account of purchases of building material of Rs.2,47,54,135/-. The Assessing Officer required the assessee to furnish the bills and vouchers which were duly produced and checked by the Assessing Officer. However, the Assessing Officer observed that some of the bills were missing or were self generated. Accordingly, he proceeded to make adhoc disallowance of Rs.10,00,000/- on account of unverifiable purchases. The ld. CIT(A) had confirmed the said addition.
3. After hearing both the parties and on perusal of the relevant findings given in the impugned order, we find that the assessee had produced books of account along with bills and vouchers in response to the show cause notice issued by the Assessing Officer. The Assessing Officer has neither pin-pointed nor supplied the list of missing vouchers nor has asked for any missing vouchers during the course of assessment proceedings, which is evident from the assessee’s submissions made before the CIT(A), as mentioned at page 3 of the appellate order. In fact, it has been stated that the assessee has never given any explanation that any bills or vouchers has been missing. If the books of accounts along with all the bills have been produced and trading account has been accepted, then such an adhoc disallowance on account of purchases cannot be made based on general observations. If there were discrepancies and defects, then A.O. could have rejected the books of account and trading result.
Here, it is not a case where any evidence has not been produced and even the Assessing Officer has failed to specify or point out any defect in the books of account produced by the assessee. Accordingly, we do not find any reason as to why such adhoc disallowance on account of purchases can be made. Thus, ground No. 2 is allowed and the addition is deleted.
In so far as addition of Rs.24,07,842/- on account of non-deduction of TDS on interest paid to PNB Housing Finance Ltd. made u/s. 40(a)(ia) is concerned, the assessee has paid interest on housing loan to PNB Housing Finance Ltd.. The Assessing Officer held that the assessee should have deduct tax at source on payment of such interest and accordingly, he proceeded to make disallowance u/s. 40(a)(ia) of the Act.
Before the ld. CIT(A), the assessee had submitted that it was a bona fide belief that the PNB Housing Finance Ltd. is a wholly owned subsidiary of Punjab National Bank and being a banking company, no TDS is required to be deducted.
It was further submitted that PNB Housing Finance Ltd. has shown this interest payment in its return of income and has paid tax thereon, therefore, no disallowance should be made. However, the ld. CIT(A) observed that the assessee has not filed any supporting evidence and accordingly, the addition was confirmed.
Before us, the ld. counsel reiterated the same contention that PNB Housing Finance Ltd. is a subsidiary of Punjab National Bank and as such falls within the exception provided u/s. 194A(3)(iii) of the IT Act. He further submitted that PNB Housing Finance Ltd. is listed company and has offered the interest income received from the appellant in its return of income and therefore, no case of disallowance in terms of proviso to section 40(a)(ia) read with first proviso to section 201(1) of the Act can be made. In so far as the applicability of proviso brought by the Finance Act, 2012, he relied on the judgment of Hon’ble Delhi High Court in the case of CIT vs. Ansal Land Mark Township P. Ltd. (2015) 377 ITR 635 to contend that it has to be applied retrospectively.
On the other hand, the ld. DR strongly relied upon the order of the ld. CIT(A) and submitted that PNB Housing Finance Ltd. cannot be treated as a Nationalized Bank. It is just mere a subsidiary of Punjab National Bank and therefore, such a payment will not fall u/s. 194A(3)(iii). In so far as offering of interest income by PNB Housing Finance Ltd. in its return of income, he submitted that no such proof has been submitted by the assessee in prescribed form.
After considering the aforesaid submissions and the relevant findings given in the impugned order, we are unable to agree with the contention of the ld. counsel that the interest payment on housing loan paid to PNB Housing Finance Ltd. fall within the category of payment as specified u/s. 194A(3)(iii) because it not a Nationalized Bank albeit it is merely a subsidiary of Punjab National Bank. Therefore, the interest paid by the assessee was liable for deduction of tax at source. However, we agree with the alternate contention of the ld. counsel that if the PNB Housing Finance Ltd. has offered interest income in its return of income, then no disallowance can be made in terms of proviso to section 40(a)(ia) read with first proviso to section 201(1). Accordingly, the issue is restored back to the file of the Assessing Officer to examine whether said interest payment has been offered to tax in the return of income filed by PNB Housing Finance Ltd. In this regard, the Assessing Officer shall call for the certificate by issuing notice u/s. 133(6) to PNB Housing Finance Ltd. and the assessee shall also make endeavor to place the certificate in prescribed form for the said purpose. Accordingly, ground No. 2 is partly allowed for statistical purposes.
In the result, the appeal is partly allowed.
Order pronounced in the open court on 14/10/2019.