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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM
These two appeals by two different assessees are directed against the
order of Commissioner of Income Tax (Appeals)-III, Pune of even date i.e. 09.10.2014 in their respective cases for the assessment year 2009-10.
Since, the issues involved in both these appeals are similar and are
arising from same set of facts, these appeals are taken up together for
adjudication and are disposed of vide this common order.
The brief facts of the case as emanating from records are: Both the
assessees belong to the same group. The assessee in ITA No.102/PUN/2015
is a company and the assessee in ITA No.103/PUN/2015 is a partnership firm. A survey action u/s.133A of the Income Tax Act, 1961 (hereinafter
referred to as ‘the Act’) was carried out on the business premises of the
assessees on 18.02.2009. During the course of survey, physical verification of
cash and stock was undertaken. Excess cash and stock vis-a-vis cash/stock recorded in books of account was found in the case of both the assessees.
Statement of Shri Aslam H. Tamboli, Director/Partner of assessees was
recorded. He offered the difference in cash and stock as additional income in
the hands of assessee company/firm. The Assessing Officer made addition of
the excess cash and stock as deemed income u/s.69 of the Act. Apart from above, disallowance u/s.40(a)(ia) of the Act was made by the Assessing Officer
in respect of both the assessees.
3 ITA Nos. 102 & 103/PUN/2015 A.Y.2009-10
Aggrieved by the assessment orders passed u/s.143 (3) of the Act, both
the assessees filed appeal before the Commissioner of Income Tax (Appeals) in
their respective cases. The Commissioner of Income Tax(Appeals) rejected the
contention of the assessee and confirmed the assessment order in toto. Now,
both the assessees are in second appeal before the Tribunal assailing the
findings of Commissioner of Income Tax(Appeals).
ITA No. 102/PUN/2015 A.Y. 2009-10
The assessee in ITA No.102/PUN/2015 has raised following grounds:
“1.On the facts and in the circumstances of the case and in law the Learned Assessing Officer erred in treating the additional income of Rs.60,01,286/- declared during the survey action u/s.133A. as income from other sources by considering it as deemed income u/s.69 of the Income Tax Act, 1961 by disregarding the fact that on the basis of tentative trading and Profit & Loss account as well as partner's statement recorded on oath that the declaration belongs to same business, therefore appellants claim of treating this income as business income shall be accepted. 2. On the facts and in the circumstances of the case and in the law the Lower authorities have erred in not allowing set off of current year losses against declaration made u/s.133(A) of the Income Tax Act, 1961 a sum of Rs.60,01,266/-being declaration on account of excess stock/cash. 3. On the facts and in the circumstances of the case and in the law the Lower authorities have erred in making a disallowance of sum of Rs.6,87,882/- by invoking provisions of section 40(a)(ia) of the Income Tax Act, 1961 by disregarding appellants contention in this regards. 4. On the facts and in the circumstances of the case and in the law the Lower Authorities have erred in making an addition of Rs.21,624/- on account of interest received from MSEDCL. The appellant craves for to leave, add, alter, modify, delete above ground of appeal before or at the time hearing, in the interest of natural justice.”
Shri Pramod Shingte appearing on behalf of assessee submitted that
the assessee is engaged in trading activity of wheat products like Atta, Maida,
Rawa, Soozi, Bran etc. The assessee filed its return of income on 30.09.2009
declaring loss of Rs.54,73,477/-. In survey action u/s.133A of the Act
conducted on 18.02.2009, excess cash of Rs.8,99,389/- and stock to the tune
of Rs.51,01,877/- was found. Shri Aslam H. Tamboli, Director of assessee-
4 ITA Nos. 102 & 103/PUN/2015 A.Y.2009-10
company offered excess cash and stock aggregating to Rs.60,01,266/- as
additional income for the Financial Year 2008-09. The Director admitted that
additional income is over and above the regular business income of the
assessee company. However, the Authorities below have erred in holding that
the excess cash and stock found during survey are not part of the business
activities of the assessee and denied the set off of the additional income
declared against loss in the statement of total income.
5.1 The ld. AR further submitted that during the course of scrutiny
assessment proceedings, the Assessing Officer made disallowance of
Rs.6,87,882/- u/s.40(a)(ia) of the Act in respect of payment of
brokerage/contract labour charges without deduction of tax at source. The ld.
AR submitted that the issue can be remitted to the file of Assessing Officer in
view of the second proviso inserted by the Finance Act, 2012 for verification.
The ld. AR further submitted that the assessee would furnish necessary
details/ documents before the Assessing Officer to show that the recipients of
the amount have offered to tax the brokerage in their respective return of
income. As regards retrospective applicability of newly inserted proviso to
section 40(a)(ia) of the Act, the ld. AR placed reliance on the decision of
Hon'ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township
(P) Ltd reported as 337 ITR 635.
5.2 In respect of ground No. 4, the ld. AR submitted that he is not pressing
the same on account of smallness of the amount involved.
On the other hand, Shri Mukesh Jha representing the Department
vehemently defended the order of Commissioner of Income Tax(Appeals) in
confirming the additions made by the Assessing Officer. The ld. DR submitted
that the assessee has not furnished any evidence to substantiate that the
5 ITA Nos. 102 & 103/PUN/2015 A.Y.2009-10
excess cash and stock found during survey was part of regular business. The
ld. DR prayed for dismissing the appeal of assessee and confirming the
findings of Commissioner of Income Tax(Appeals).
We have heard the submissions made by representatives of rival sides
and have perused the orders of Authorities below. The assessee in appeal has
primarily assailed the findings of Commissioner of Income Tax (Appeals) on
two counts viz.
(i) Treating the additional income Rs.60,01,286/- declared during survey as deemed income u/s. 69 of the Act. (ii) Disallowance of Rs.6,87,882/-u/s.40(a)(ia) of the Act in respect of payment of brokerage and labour contract charges.
It is an undisputed fact that during the course of survey action
u/s.133A of the Act cash inventory to the tune of Rs.51,01,877/- and stock of
Rs.8,99,389/- was found excess as against cash/stock recorded in regular
books of account of the assessee. The case of the assessee is that excess cash
and stock is generated in the regular course of business activities carried out
by the assessee. However, before the Authorities below, the assessee has not
furnished any cogent evidence in support of his submissions. In the absence
of any document indicating generation of excess cash and stock during
regular business activity, the Assessing Officer made addition of the same
u/s.69 of the Act as unexplained investment.
The ld. AR has prayed before us that if an opportunity is afforded to the
assessee, the assessee would substantiate that excess cash and stock found
during survey was part of business income of the assessee. Taking into
consideration entire facts of the case and in view of the prayer made by the
ld. A.R., without commenting on merits of addition, the issue is restored back
to the file of Assessing Officer for re-adjudication after considering fresh
6 ITA Nos. 102 & 103/PUN/2015 A.Y.2009-10
evidence, if any, filed by the assessee to substantiate generation of excess
cash and stock in regular business activities of assessee. The Assessing
Officer shall grant reasonable opportunity of hearing to the assessee before
adjudicating the issue afresh, in accordance with law. Thus, the ground No.1
raised in appeal by the assessee is allowed for statistical purpose.
In ground No. 2 of the appeal, the assessee is seeking set off of current
year losses against declaration made u/s.133A of the Act. The relief sought in
ground No. 2 of the appeal is corollary to ground No.1. Since, we have
remitted the issue raised in ground No.1 of appeal for examination of the
additional income declared during survey, we deem it appropriate to remit the
ground No.2 as well. If the assessee is successful in establishing that excess
cash and stock is part of regular business income, the Assessing Officer is
directed to allow the benefit of set off of current year losses to the assessee.
The ground No. 2 raised in appeal by the assessee is allowed for
statistical purpose in the terms aforesaid.
The ground No. 3 raised in appeal by the assessee is with respect to
disallowance of Rs.6,87,882/- u/s. 40(a)(ia) of the Act. The assessee has
made following payments without deduction of tax at source.
Sr. Name of the party Nature of Amount payment 1. Dalal Adinath Canvassing Brokerage 4,904/-
Dalal Shreyas Broker Brokerage 85,006/-
Dalal Govindbhai Brokerage 5,000/-
Rajtulla Khan Contract Labour 5,92,972/-
Total Rs. 6,87,882/-
7 ITA Nos. 102 & 103/PUN/2015 A.Y.2009-10
The ld. AR has prayed that in view of second proviso to section 40(a)(ia)
of the Act, the issue may be restored to the file of Assessing Officer for
verification.
The Finance Act, 2012 has inserted following proviso to section 40(a)(ia)
of the Act.
“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 the 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.”
Though the proviso was inserted by the Finance Act, 2012 w.e.f.
01.04.2013, the Hon'ble Delhi High Court in the case of CIT Vs. Ansal Land
Mark Township (P) Ltd (supra) has held the proviso to be declaratory and
curative in nature. The proviso is held to be applicable retrospectively w.e.f.
1st April, 2005. In the facts of the present case, we deem it appropriate to
remit this issue back to the file of Assessing Officer to consider documentary
evidences furnished by assessee indicating that the recipients of the
brokerage/ labour contract charges have offered the amount received from
assessee to tax and has paid tax thereon. The Assessing Officer after
examining relevant documents shall decide this issue, in accordance with
law. Thus, ground No.3 raised in appeal by the assessee is allowed for
statistical purpose.
The ld. AR for the assessee has stated at the Bar that he is not pressing
ground No. 4 on account of smallness of the amount involved. Accordingly,
ground No. 4 raised in appeal by assessee is dismissed as not pressed.
8 ITA Nos. 102 & 103/PUN/2015 A.Y.2009-10
In the result, appeal of assessee in ITA No.102/PUN/2015 is partly
allowed for statistical purpose.
ITA No.103/PUN/2015 A.Y. 2009-10
The assessee in ITA No.103/PUN/2015 has raised following grounds:
“1. On the facts and in the circumstances of the case and in law the Learned Assessing Officer erred in treating the additional income of Rs.6,91,664/- declared during the survey action u/s.133A. as income from other sources by considering it as deemed income u/s.69 of the Income Tax Act, 1961 by disregarding the fact that on the basis of tentative trading and Profit & Loss account as well as partner's statement recorded on oath that the declaration belongs to same business, therefore appellants claim of treating this income as business income shall be accepted. 2. On the facts and in the circumstances of the case and in the law the Lower authorities have erred in disallowing remuneration to partners a sum of Rs.1,30,262/- claimed on account of disclosure made during the course of survey of excess stock/cash. 3. On the facts and in the circumstances of the case and in the law the Lower authorities have erred in disallowing a sum of Rs.9,95,840/- being interest of debit balance of partners' capital account by disregarding appellants contention in this regards. 4. On the facts and in the circumstances of the case and in law the Lower authorities have erred in disallowing a sum of Rs.8,88,554/- by invoking the provisions of section 40(a)(ia) of the Income Tax Act, 1961 by disregarding appellant’s contention in this regards. 5. On the facts and in the circumstances of the case and in law the Lower authorities have erred in making an addition of Rs.97,844/- being difference in balance of sundry creditors account by disregarding appellant’s contention in this regards. The appellant craves for to leave, add, alter, modify, delete above ground of appeal before or at the time hearing, in the interest of natural justice.”
The ld. AR submitted that the issue involved in ground No. 1 and 2 of
appeal is similar to the issue raised in ground No. 1 and 2 in ITA No.
102/PUN/2015. During survey action, excess cash of Rs.2,02,317/- and
excess stock of Rs.4,89,357/- were found. Shri Aslam H. Tamboli, partner of
assessee firm in his statement recorded during the course of survey action
offered the amount Rs.6,91,674/- as additional income in the hands of firm.
9 ITA Nos. 102 & 103/PUN/2015 A.Y.2009-10
The contention of assessee is that the additional income declared is part of
undisclosed business income of assessee; whereas, the Assessing Officer and
Commissioner of Income Tax (Appeals) have treated the same as unexplained
investment u/s. 69 of the Act.
In respect of ground No.3 of the appeal, the ld. AR contended that
Authorities below have erred in disallowing Rs.9,95,840/- being interest of
debit balance of partner’s capital account. The Authorities below have failed
to take note of the fact that there are debit balances, as well as credit balance
in the partner’s capital account. The assessee is not charging any interest in
respect of credit balances in the partner’s capital account. To support his
submissions, the ld. AR referred to the capital account balances reproduced
by the Assessing Officer in Para 7 at page-5 of the assessment order.
In respect of ground No. 4 relating to disallowance u/s.40(a)(ia) of the
Act, the ld. AR submitted that assessee has made payment of Rs.3,21,210/-
on account of advertisement expenses and payment of Rs.5,67,344/- on
account of interest on vehicle loan to M/s. Tata Capitals. The ld. AR prayed
that in view of second proviso to section 40(a)(ia) of the Act inserted by
Finance Act, 2012, the issue may be remitted back to the file of Assessing
Officer for verification.
On the other hand, the ld. DR vehemently defended the findings of
Commissioner of Income Tax (Appeals) and prayed for dismissing the appeal
of assessee.
Both sides heard. The issue raised in ground No. 1 of the present
appeal is identical to ground No. 1 raised in ITA No.102/PUN/2015. We have
restored the issue back to the file of Assessing Officer for fresh adjudication.
10 ITA Nos. 102 & 103/PUN/2015 A.Y.2009-10
Our findings while deciding ground No.1 raised in ITA No.102/PUN/2015
would mutatis-mutandis apply to ground No.1 raised in the present appeal.
Thus, ground No. 1 raised in the present appeal is allowed for statistical
purpose.
The ground No. 2 raised in the present appeal is interlinked to ground
No.1. Since the ground No.1 is restored to the Assessing Officer for fresh
adjudication, the issue raised in ground No. 2 of the present appeal is also
remitted back to the file of Assessing Officer for re-adjudication along with
ground No. 1 of the appeal. Hence, ground No.2 raised in appeal by
assessee is allowed for statistical purpose.
In ground No. 3 of appeal, the assessee has assailed disallowance of
Rs.9,95,840/- on account of interest on debit balance of partner’s capital
account. The ld. AR has pointed that there are credit balances as well and the
assessee is not charging interest on the credit balances of the partners. We
are of considered view that this issue requires verification. The issue is
restored to Assessing Officer for verification. The Assessing Officer shall
decide the issue afresh after re-verification. Thus, the ground No. 3 of the
appeal is allowed for statistical purpose.
In ground No. 4, the assessee has assailed disallowances u/s. 40(a)(ia)
of the Act in respect of following payments without deducting TDS.
“1. M/s. Concept Creator – Advertisement expenses Rs.3,21,210/- 2. Interest on vehicle loan- M/s. Tata Capitals Rs.5,67,344/- Total Rs.8,88,554/-”
We have adjudicated similar issue in ground No.3 of ITA No.
102/PUN/2015 above. Our findings on the issue above would mutatis-
11 ITA Nos. 102 & 103/PUN/2015 A.Y.2009-10
mutandis apply to ground No.4 of the present appeal. Accordingly, we direct
the Assessing Officer to decide the issue afresh after considering relevant
evidences furnished by assessee, in accordance with law. Thus, ground No.4
raised in appeal by the assessee is allowed for statistical purpose.
In ground No. 5 of the appeal, the assessee has assailed addition of
Rs.97,844/- on account of difference in balance of sundry creditors. The ld.
AR has failed to substantiate as to how the findings of the Commissioner of
Income Tax (Appeals) are perverse. Since no material contrary to the findings
of Commissioner of Income Tax (Appeals) has been brought before us, we
uphold the addition. Accordingly, ground No. 5 raised in appeal by the
assessee is dismissed.
In the result, appeal of the assessee in ITA No.103/PUN/2015 is partly
allowed for statistical purpose.
To sum up, ITA No.102 & 103/PUN/2015 are partly allowed for
statistical purpose.
Order pronounced on Friday, the 29th day of June, 2018.
Sd/- Sd/- (डी. क�णाकरा राव/D. KARUNAKARA RAO) (�वकास अव�थी /VIKAS AWASTHY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER
पुणे / Pune; �दनांक / Dated : 29th June, 2018 SB
12 ITA Nos. 102 & 103/PUN/2015 A.Y.2009-10
आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals)-III, Pune. 4. The CIT-III, Pune. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.