ASST.C.I.T., SHIMOGA vs. M/S H. OMKARAPPA, SHIMOGA

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ITA 954/BANG/2015Status: DisposedITAT Bangalore30 June 2016AY 2008-094 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the CIT(A) did not refer to any material to support its conclusions regarding deposits being from unaccounted sales or the timely remittance of TDS. Therefore, the case was remitted back to the AO for fresh adjudication.

What were the facts?

The assessee, engaged in arecanut trading, filed a return disclosing a loss. The AO completed the assessment at a substantial income after disallowing commission and interest under Section 40(a)(ia). The CIT(A) directed re-computation of income by applying an 8% gross profit on suppressed sales and deleted the disallowances under Section 40(a)(ia).

What were the issues?

Whether the CIT(A) erred in directing re-computation of income based on suppressed sales without supporting evidence and in deleting disallowances under Section 40(a)(ia) without proper justification.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia)

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Income Tax Appellate Tribunal, ‘C’ BENCH, BANGALORE

Before: SMT. ASHA VIJAYARAGHAVAN & SHRI INTURI RAMA RAO

For Appellant: Shri Sunil Kumar Agarwala,JCIT(DR)
For Respondent: Shri V.Srinivasan, Advocate
Hearing: 21/06/2016Pronounced: 30/06/2016

O R D E R Per INTURI RAMA RAO, AM :

This is an appeal filed by the revenue directed against the order of the CIT(A) Davangere, dated 21/4/2015.

2.

The revenue raised the following common grounds: 1. “The order of the learned Commissioner of Income Tax(Appeals), Davangere, is opposed to the law and not on the facts and circumstances of the case.

Page 2 of 4 2. The Commissioner of Income Tax(Appeals), Davangere, erred in directing re-computation of the income by applying gross profit at 8% on the said quantum of suppression of sales to the extent of Rs.2,23,48,550/- determined, when the assessee has not produced any evidence to show that expenses were incurred for suppressed production.

3. The Commissioner of Income Tax(Appeals), Davangere, erred in deleting the disallowances made u/s.40(a)(ia) of the I T Act,1961 by ignoring the fact that the TDS has been deducted and remitted in the government account only after the end of the relevant financial year.

4.

For these reasons the order of the CIT(A) may be reversed and that of the AO may be restored.

5. For these and other grounds that may be urged upon, the order of the CIT(A) may be reversed and that assessment order be restored.

6. The appellant craves leave to add, alter, amend or delete any other grounds on or before hearing of the appeal.”

3.

Briefly, facts of the case are that the respondent-assessee is a HUF and is engaged in the business of trading in arecanut in the name and style of M/s.N.R.Halagappa & Sons, Shivamogga. Return of income for the assessment year 2008-09 was filed disclosing loss of Rs.6,65,534/-. After processing the return of income under the provisions of sec.143(1) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short], the case was selected for scrutiny and the assessment was completed us 143(3) vide order dated 31/12/2010 at a total income of Rs.3,15,59,735/- after making the following disallowances:

Page 3 of 4 i) Disallowance of commission u/s 40(a)(ia) ... Rs.35,19,920/- ii) Disallowance of interest u/s 40(a)(ia) ... Rs.56,59,536/-

4. Being aggrieved, an appeal was preferred before the CIT(A) who, vide impugned order, held that unexplained deposits are relatable to unaccounted sales and directed that only GP addition of 8% of the total turnover of Rs.2,23,40,550/- should be made following the following decision: i. CIT vs. President Industries (258 ITR 654)(Guj. ii. CIT vs. S.M.Omar (201 ITR 608) iii. Anis Ahmed & Sons vs. CIT(A) (297 ITR 441)(SC) and iv. ITO vs. Gurubachan Singh Juneja (216 ITR 99)(ITAT, Ahm.) (216 ITR 99) As regards the disallowance of commission and interest u/s 40(a)(ia) of the Act, the additions were deleted by the CIT(A) by observing that tax deducted or remitted to the Government of India before due date for filing return of income.

5.

Being aggrieved by this order, revenue has filed the present appeal before us.

6.

After hearing the rival submissions and perusing material on record, we observed that the CIT(A) had not referred to any material to come to conclusion that deposits were made out of sale proceeds outside books of account. The CIT(A) also not referred to any material came to conclusion that TDS on commission was remitted to Government of India within due date for filing of return of income. Hence, in our considered opinion, it is a fit case to remit the case back to the file of the AO for fresh

Page 4 of 4 adjudication in accordance with law after giving due opportunity to the assessee.

7.

In the result, the appeal filed by the revenue is treated as partly allowed for statistical purposes.

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