ITO, GULBARGA vs. M/S BASAVESHWARA DRUG AND SURGICALS, GULBARGA

Whether on the facts and in circumstances of the case the learned CIT(A), has erred in deleting the addition of Rs.1,20,00,000/-' in respect of non deduction of TDS as the learned CIT(A) has not considered the Board Circular No. 10/DV/2013 dated 16.12.2013 wherein the Board has clarified that in context of section 40(a)(ia) of the Act the statutory provisions are amply clear and the term 'payable' would include 'amounts which are paid during the year'.

Whether on the facts and in circumstances of the case the learned CIT(A), has erred in deleting the additions made by the Assessing Officer of Rs.1,20,00,000/- even though the assessee has failed to deduct TDS on rent paid by the assessee of Rs.1,20,00,000/- to its sister concern M/s HKE Society and even though the assessee firm did not receive any tax exempt certificate from its sister concern and did not give any reasons for paying such huge rent as against fair rent.

Whether on the facts and in circumstances of the case the learned CIT(A), has erred in deleting the addition of Rs.1,20,00,000/- in respect of non deduction of TDS and has not considered the decision of Hon'ble Apex Court in case of McDowell reported in (1985) 3 SCC230, 1986 AIR 649, 1985 SCR (3) 791 wherein it is concluded that where the transaction is not genuine but a colorable device there could be no question of tax planning, as in the present case also the rent paid is much higher than the rent as per the fair rent certificate and also the assessee has failed to deduct TDS without receiving any tax exempt certificate from its sister concern.

Whether on the facts and in circumstances of the case the learned CIT(A), has erred in deleting the additions made by the AO of Rs. 10,00,000/- on account of unexplained cash credit u/s 68 of the IT Act even though the assessee was unable to explain the difference of Rs. 10,00,000/- between the opening balance of bank account as on 01.04.2011 of Rs.14,42,407/- and closing balance of same bank account as per books of Rs. 4,42,407/-, during assessment proceedings.

Whether on the facts and in circumstances of the case the learned CIT(A), has erred in deleting the additions made of Rs. 10,00,000/- towards unexplained cash credit u/s 68 and erred in admitting the additional evidences during the appellate proceedings on 23.02.2016 & 26.02.2016 without giving an opportunity to the Assessing Officer to examine the contention of the assessee as per Rule 46A(3) of the Income Tax Rules,1962, since the assessee did not file any explanation during the assessment proceedings for the difference in cash balance.

Whether on the facts and in circumstances of the case the learned CIT (A), has erred in deleting the additions made of Rs. 10,00,000/- towards unexplained cash credit u/s 68 and erred in admitting the additional evidences during the appellate proceedings on 23.02.2016 & 26.02.2016 even though the case does not fall under any of the exceptional circumstances laid down in Rule 46A(1) of the Income tax Rule' 1962. 9. Whether on the facts and in circumstances of the case the learned CIT(A), has erred in deleting the additions made by the AO of Rs. 10,00,000/- on account of unexplained cash credit u/s 68 of the IT Act wrongly relying upon submission made during appellate proceedings on 23.02.2016 & 26.02.2016 that cheques were duly accounted in books however, the creditor has deposited the said cheques in succeeding month i.e. in April 2011 however the issue under dispute was related to F.Y. 2010-11 and audit report u/s 44AB of the IT Act was submitted on 30.09.2011 after verifying each & every issue and even after verifying bank reconciliation statement and the assessee has failed to offer any explanation even during the assessment proceedings which was concluded on 27.02.2015. 10 Whether on the facts and in circumstances of the case the learned CIT(A), has erred in accepting the contention of the assessee that the creditors has deposited cheques in succeeding month i.e. in April 2011 which could not be submitted during the assessment proceedings which is nothing but an afterthought. 11. The appellant craves leave to add, amend or alter any of the grounds of appeal either before or at the time of hearing? 3. The grounds raised by the assessee in its CO are as under. “1. The orders of the lower authorities in so far as they are against the Respondent / Cross-Objector is opposed to law, equity and weight of evidence, probabilities, facts and circumstance of the case. 2. The learned Commissioner of Income-tax (Appeals) is not justified in sustaining the addition of Rs. 1,61,875/- being the notional interest on the facts and circumstances of the case. 3. The authorities below are not justified in bringing to tax the above notional interest amounts which do not constitute the real income of the assessee more so when there is no specific provision to treat the same as income on the facts and circumstances of the case. 4. Without prejudice, the computation of the interest is erroneous in as much as the advances were made during the year and hence were not outstanding for the whole year and therefore the notional interest could not have been computed for the whole year on the facts and circumstances of the case.

The Respondent/ Cross objector craves to leave to add, alter or delete or substitute any of the grounds of cross objection urged above. 6. In view of the above and the other grounds that may be urged at the time of hearing of the Appeal, the Respondent/ Cross objector prays that the cross objection may be allowed and the Appeal filed by the Appellant/ Revenue may be dismissed for the advancement justice and equity.” 4. It was submitted by ld. DR of revenue that ground no. 1 is general and as per ground nos. 2 to 5, only one issue is involved regarding deletion of the addition of Rs. 120 lakhs made by the AO in respect of payment of rent without TDS. He supported the assessment order. As against this, the ld. AR of assessee supported the order of CIT(A). He further submitted that CIT(A) has decided the issue on the basis of second proviso to section 40(a)(ia) and although this second proviso has been inserted w.e.f. 01.04.2013 but it was held in several judicial pronouncements that this proviso is retrospective and in support of his contention, reliance has been placed by him on judgement of Hon’ble Delhi High Court rendered in the case of CIT Vs. Ansal Land Mark Township (P.) Ltd. as reported in 377 ITR 635 (Delhi). At this juncture, a query was raised by the bench that what is the evidence that the payee has paid tax on the income declared by him in the return of income filed by him including the amount of rent paid by the assessee as required under the first proviso to section 201(1) of the I.T. Act, 1961. In reply, it was submitted by ld. AR of assessee that for this factual verification, the matter may be restored back to the file of AO because such evidence is not readily available. 5. We have considered the rival submissions and we are of the considered opinion that if the assessee can establish that the payee has filed return of income and included this amount of Rs. 120 lakhs paid by the assessee in its income and paid tax on that income then no disallowance can be made u/s. 40(a)(ia) of the Act even if no TDS has been deducted by the assessee as per second proviso to section 201 which has been held to be retrospective. But for the purpose of factual verification as to whether the deductee has paid tax as per law or not, we restore the matter back to the file of AO for fresh decision with the direction that he should examine this factual aspect as to whether the tax has been paid by the deductee or not on this amount of Rs. 120 lakhs paid

Regarding ground nos. 6 to 10 of revenue’s appeal, the ld. DR of revenue supported the assessment order and he also submitted that the CIT(A) has admitted additional evidence in violation of Rule 46A of I T Rules, 1962. The ld. AR of assessee supported the order of CIT(A) and he also submitted that no new records has been brought on record before the CIT(A). He drawn our attention to page no. 35 of the paper book and pointed out that there is a bank statement and it has been made available before the AO and CIT(A) both and as per the same, the cheque of Rs. 10 lakhs was issued by the assessee to HKES Society on 31.03.2011 but the same was cleared on 18.04.2011 and for this reason, there was difference in the bank balance as per the books of the assessee and as per the bank statement. Thereafter he drawn our attention to copy of bank statement available on page 27 of paper book and pointed out that cheque no. 717943 has been cleared on 18.04.2011.

We have considered the rival submissions. In view of the factual position as discussed above, we find no infirmity in the order of CIT(A) on this issue and therefore, we decline to interfere in the order of CIT(A) on this issue. Regarding this contention of the ld. DR of revenue in respect of Rule 46A, we find no merit in this contention also because as per the paper book, the bank Reconciliation statement has been made available before the AO and CIT(A) both and no defect has been pointed out by ld. DR of revenue in the certificate appearing in the paper book. Hence these grounds of revenue’s appeal are rejected.

In the result the appeal filed by the revenue is partly allowed for statistical purposes. 9. Regarding the Cross Objection of the assessee, it was submitted by ld. AR of assessee that only one issue is involved and this issue is regarding addition of

In the combined result, the appeal filed by the revenue is partly allowed for statistical purposes and the Cross Objection filed by the assessee is dismissed.