RAJEEV GARG & SONS (HUF),FARIDABAD vs. ITO, FARIDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA No.4971/Del/2016 Assessment Year 2010-11 Rajeev Garg & Sons (HUF) Vs. ITO, Ward-II(2), Through Karta Rajeev Garg Faridabad. 785, Sector-15, Faridabad. PAN: AABHR 3428L (Appellant) (Respondent) Revenue by : Ms. Bedobani Chaudhuri, Sr.D.R. Assessee(s) by : Shri Alok Kumar Gupta, CA सुनवाई क� तार�ख/Date of Hearing : 25/04/2017 घोषणा क� तार�ख /Date of Pronouncement: 28/04/2017 ORDER This appeal of the assessee arises from the order of learned CIT(A), Faridabad, vide order dated 22.07.2016 for the assessment year 2010-11. The assessee has raised the grounds of appeal as under: 1. That the order passed by Ld. CIT(A), Faridabad is bad in law and additions confirmed deserves to be deleted. 2.That the Ld. CIT(A), Faridabad was not justified in confirming additions of Rs. 604832/- u/s. 40(a)(ia) in total income for not deducting TDS from various payments. 3. That the Ld. CIT(A), Faridabad was not justified in confirming additions of Rs.950000/- in total income u/s.68 on account of unsecured loans taken from Smt. Madhu Garg and Shri Ankush Garg. 4. That the Ld. CIT(A), Faridabad was not justified in confirming disallowance of Rs. 12140/- in total income out of telephone expenses on account of personal use. 5That the Ld. CIT(A) , Faridabad was not justified in confirming disallowance of Rs. 23780/- in total income out of car expenses for personal use. 6.That the appellant seeks the leave of honorable ITAT to add, modify, amend or delete any grounds of appeal at the time of hearing or before it. 2. The assessee does not press grounds no.4 and 5, therefore, same are dismissed as not pressed.

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ITAT Visakhapatnam in the case of Merilyn Shipping & Transports vs. ACIT which is placed at pages 66 to 97 of the paper book. The relevant portion are reproduced hereinbelow: “The only word put in the provision of section 40(a)(ia) is payable and not paid or credited, rather Legislature consciously replaced the word ‘amounts credited or paid’ with the word ‘payable’ in the final enactment and such change was done with a purpose…… In the Finance bill both the words paid and payable were used. However, the word ‘paid’ was subsequently, dropped which shows that section 40(a)(ia) was meant to be applicable only if the amounts covered therein was ‘payable’ at the end of the year…… In the present case, section 40(a)(ia) creates a legal fiction for the amount outstanding or remains payable, i.e., at the end of every year as on 31st March and it cannot be extended for taxing the amounts already paid. In fact, section 201 itself takes care of tax to be collected in the hands of the payee and other TDS provisions under chapter XVII-B of the Act. No further legal fiction from elsewhere in the statute can be borrowed to extend the field of section 40(a)(ia). This fiction cannot be extended any further and, therefore, cannot be invoked by Assessing Officer to disallow the genuine and reasonable expenditure on the amounts of expenditure already paid. [Para 101 In view of the above discussion and in view of the provisions of section 40(a)(ia), on comparison between the proposed and enacted provision, the only conclusion which one can reach is that the legislature consciously replaced the words 'amounts credited or paid' with the word 'payable' in the final enactment. By changing the words from 'credited' or 'paid' to 'payable', the Legislative intent has been made clear that only outstanding amounts or the provisions for expenses liable for TDS under chapter XVII-B of the Act are sought to be disallowed in the event there is a default in following the obligations casted upon the assessee under Chapter XVII-B of the Act.” Also reliance is placed upon the decision of Hon’ble High Court of Allahabad in the case of CIT Vs. Vector Shipping Services P. Ltd., copy of which is placed at pages 98 to 100 of the paper book and the relevant portion of the decision is reproduced hereinbelow: “10. it is to be noted that for disallowing expenses from business and profession on the ground that TDS has not been deducted, the amount should be payable and not which has been paid by the end of the year.”

Further reliance is placed upon the decision of ITAT Delhi Bench ‘B’

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New Delhi in the case of Cadtrium Engineering Solutions (P) Ltd. vs. ITO, reported in (2013) 33 taxmann.com 269 (Del. Tri) and the relevant portion is reproduced hereinbelow: “12. We have heard the rival submissions and perused the material available on record. It is not disputed that the payments were made during the year and no amount was payable at the end of the financial year. This fact is not controverted by the Revenue. the Hon’ble Special Bench in the case of Merilyn Shipping & Transports (supra) has held as under: “6…… The provisions of s. 40(a)(ia) of the Act was introduced in order to ensure compliance of TDS but assigned the term ‘payable in the provision of s. 40(a)(ia) of the Act. On a comparison between the proposed and enacted provision, the only conclusion, which can be reached, is that legislature consistently replaced the word ‘amount credited’ or ‘paid with the word ‘payable’ in the final enactment and such change was not done without any purpose. It is a basic presumption that an enactment brought in by the legislature is well thought of and property worded in order to given meaning to its intent by changing the words from ‘credited’ or ‘paid’ to payable. The legislative intent has been made clear that only the outstanding amount or the provision for expense liable for TDS is sought to be disallowed in the event there is a default of TDS. Respectfully following the ratio laid in Merilyn Shipping & Transports (supra), this ground of the assessee’s appeal is allowed. The Assessing Officer is directed to delete the addition made on this basis.” Also reliance is placed upon the decision of Hon’ble High Court of Punjab & Haryana in the case of CIT vs. Rajinder Parshad Jain, reported in (2015) 61 taxmann. com 310 (P&H) and relevant portion is reproduced at page 110 of the paper book. “Following the abovesaid parity of reasoning, we direct the Assessing Officer to verify the stand of the assessee and in case the said amounts have been paid by the assessee during the year under consideration, no disallowance is warranted out of the said payments in line with the provisions of section 40(a)(ia) of the Act.” 7. In the circumstances and facts of the case, the Assessing Officer cannot make any disallowance and disallowance so made is directed to be deleted. Accordingly, the grounds no.2 and 3 is allowed.

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Rs.5,00,000/- and Rs.4,50,000/- respectively. The Assessing Officer has verified bank account of Smt. Madhu Garg & Shri Ankush Garg amounting to Rs.5,00,000/- and Rs.4,50,000/- respectively. The Assessing Officer has verified bank account of Smt. Madhu Garg maintained with axis bank where she has deposited cash Rs.2,50,000/- on 15.03.2010 and issued cheque of Rs.2,50,000/- to the assessee. Similarly on 17.03.2010, she deposited cash of Rs.2,50,000/- and issued cheque of the same amount on 18.03.2013 to the assessee, which have been credited in the assessee's bank account maintained with HDFC Bank. As per statement of Smt. Madhu Garg she was asked to explain the source of cash deposit of Rs.2,50,000/- each on 15.03.2010 and 17.03.2010, she stated that this is out of her truck income and capital. When she was asked how much income she earned from plying trucks, she stated that from each truck she earned Rs.3 to 4 thousand per month after meeting all expenses on trucks. 9. As per bank account statement maintained with Axis Bank, Sh. Ankush Garg deposited cash Rs.4,50,000/- on 30.03.2010 and issued the cheque of Rs. 4,50,000/- to the assessee on the same day which have been credited in the assessee's bank account maintained with Corporation Bank. The counsel of the assessee produced Shri Ankush Garg on 27.02.2013 and his statement was recorded. In his statement he deposed that he is an income tax assessee having PAN: ALGPG5795H and he is filling his income tax return in ward-1(3), Faridabad. He earned income from plying trucks and he has four trucks in his name. He also stated that he has given a loon of Rs.4,50,000/- to Sh. Raieev Garg, who is his uncle. When he was asked to explain the source of cash deposit of Rs.4,50,000/- on 30.03.2010, he stated that this is out of his truck income and capital. When he was asked how much income he earned from plying truck, he stated from each truck he

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earned Rs.3 to 4 thousand per month after meeting all expenses on trucks. 10. Since the assessee could not explain the source of such deposit of cash to the satisfaction of the Assessing Officer. Accordingly he added the same to the income of the assessee.