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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI G.S. PANNU, AM & SHRI AMARJIT SINGH, JM
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 30.07.2014 passed by the Commissioner of Income Tax (Appeals)-34, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009- 10.
The assessee has raised the following grounds:-
ITA. No.6283/M/2014 A.Y. 2009-10 “1. Additions u/s 41(1) for non payment of crditors Rs.3,01,212/- 2. Additions of Rs.2,70,000/- (being 3% of total payments) u/s 40A(2)(b) for payment of sub contract charges to sister concerns aggregating to Rs.90 lacs 3. The Hon’ble Tribunal be pleased to vacate the above additions/disallowances.
The appellant craves leave to add, amend, alter or withdraw any of the grounds of appeal.” The brief facts of the case are that the assessee filed its return of 3. income for the A.Y. 2009-10 on 28.09.2009 declaring total income to the tune of Rs.40,85,145/-. The case was selected for scrutiny under CASS. Statutory notices u/s 143(2) and 142(1) of the I.T. Act, 1961 were issued and served upon the assessee. The assessee was a partnership firm and engaged in the business of Civil Contractors. During the year, the assessee has declared Net profit of Rs.41,62,583/- @7.62% on gross turnover of Rs.5,45,97,222/-. The audit report u/s 44AB of the Act in form no. 3CB & 3CD along with audited balance- sheet and profit & loss account was also filed. Apart from the said business income, assessee declared the income from the house property of Rs.10,20,235/-. The assessee submitted the list of creditors of M/s. Giriraj Sand Supplier, M/s. Sai Enterprise, M/s. Ramani Enterprise, M/s. Balaji Transport (Excavation Divn). Since the payment detail was not filed and the account was not running account, therefore, the credit to the tune of Rs.3,01,212/- was disallowed and added to the income of the assessee. It was also observed that the assessee made the payment to the sub-contract (sister concerns) total amount to the tune of Rs.90,00,000/- which was found in excess.
ITA. No.6283/M/2014 A.Y. 2009-10 Therefore 3% of the said payment to the tune of Rs.2,70,000/- was disallowed and added to the income of the assessee and total income of the assessee was assessed to the tune of Rs.47,40,370/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who confirmed the said addition, therefore, the assessee has filed the present appeal before us. ISSUE NO. 1:- 4. Under this issue the assessee has challenged the disallowance of the amount payable to the creditors to the tune of Rs.3,01,212/-. The Ld. Representative of the assessee has argued that the assessee has filed the confirmation of all the four parties and also explained the matter before the AO by virtue of letter dated 15.12.2011 and the amount was not fall within the purview of Section 41A of the Act, therefore, the said credit was not required to be disallowed in the interest of justice. In support of his contention, the Ld. Representative of the assessee has placed reliance upon the law settled in ACIT Vs. Superb Agrovet Industries (P.) Ltd. (2015) 61 taxmann.com 369 (Chandigarh- Trib.) & ACIT Circle (1)Bangalore v/s Alvares & Thomas Vs. ACIT (2015) 62 taxmann.com 286 (Bangalore Tribunal). However, on the other hand, the Ld. Representative of the Department has strongly relied upon the order passed by the CIT(A) in question. We have heard the argument advanced by the Ld. Representative of the parties and perused the record. We noticed that ITA. No.6283/M/2014 A.Y. 2009-10 the claim of the non-payment of sundry creditors to the tune of Rs.3,01,212/- has been declined being not proved but the Assessing Officer declined the claim of the assessee on account of non- confirmation. The confirmation of both the parties is on the record which lies at page no. 5 to 9 of the paper book. The assessee also rendered the explanation on account of non-payment of the outstanding amount by virtue of letter dated 15.11.2012. The AO as well as CIT(A) nowhere discussed the confirmation of the parties. No contrary evidence was produced on record. Anyhow the evidence adduced by the Assessee nowhere considered and discussed. The applicability of the provision of Section 41A does not also seems to be justifiable because nothing came into notice that the assessee’s claim on account of the remission and cessation of liability leads to deemed income u/s 41(1). Taking into account of all the facts and circumstances, we set aside the finding of the CIT(A) on this issue and remand this issue before the AO to decide the matter afresh in view of the confirmation/evidence adduced by the Assessee.. Needless to say that the Assessing Officer would provide an opportunity of being heard to the assessee in accordance with law. Accordingly, this issue is being decided in favour of the assessee against the revenue. ISSUE NO. 2:- 5. Issue no. 2 is in connection with the addition of Rs.2,70,000/- (being 3% of total payments) to the sister concerns u/s 40A(2)(b) of ITA. No.6283/M/2014 A.Y. 2009-10 the Act. The assessee firm assigned the sub-contract to sister concerns and paid an amount to 90,00,000/- to the five parities namely M/s. Construction Co., M/s. Ramani construction Co., M/s. R.S. Enterprise, M/s. Shivram Enterprise and M/s Shivom enterprise. The assessee company paid the total amount to the tune of Rs.90,00,000/-. The Assessing Officer ad hoc disallowed 3% of the said payment i.e., to the tune of Rs.2,70,000/-. The assessee company produced the payment bill vide letter dated 24.11.2012 which lies at page no. 7 of the paper book. The assessee company as well as the sister concerns were paying the tax at maximum marginal rate. The Assessing Officer nowhere bring any material on record to arrive at this conclusion that the payment was excessive specifically the circumstances when the assessee has taken the plea of special services which can only be done by the skilled labours. The very base to disallow the claim is ot on record. The books of account have not been rejected. Audited report u/s 40A(2)(b) of the Act along with audit balance-sheet and profit and loss account were on record which nowhere in doubt. The facts and circumstances of the present case is quite similar to the facts and circumstances of the case title as Principal Commissioner of Income-tax-2 Vs. Gujarat Gas Financial Services Ltd., (2015) 60 taxmann.com 483 and decision of Hon’ble Chandigarh Bench in the case of ACIT Vs. Superb Agrovet Industries (P.) Ltd., (2015) 171 TTJ 475 dated 19.05.2015. Taken into consideration of the facts and circumstances of the present case and law discussed above, we are ITA. No.6283/M/2014 A.Y. 2009-10 of the view that the adhoc disallowance is not justifiable, therefore, we delete the same and decide this issue in favour of the assessee against the revenue.