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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri M. Balaganesh, AM & Shri Partha Sarathi Chaudhury, JM]
ORDER
Per Shri M. Balaganesh, AM:
This appeal by assessee is arising out of order of CIT(A), Asansol vide appeal No. 329/CIT(A)/Asl/W-2(1)/Asl/11-12 dated 09.10.2013. Assessment was framed by ITO, Ward-2(1), Asansol u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2009-10 vide his order dated 27.12.2011.
The first issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in upholding the disallowance made u/s. 40(a)(ia) of the Act in respect of transport charges in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is the proprietor of M/s. Tirupati Balajee Enterprises engaged in trading in iron ores. During the course of assessment proceedings the AO observed that assessee has debited a sum of Rs.11,62,000/- as freight charges in his P&L Account and out of that a sum of Rs.9,50,000/- was paid to M/s. Baba Transport, Rs. 1 lac paid to M/s. Maa Jagadamba Transport and Rs. 1 lac to Shiv Shakti Roadlines without deduction of tax at source. Accordingly, he proceeded to disallow the same u/s. 40(a)(ia) of the Act for violation of section 194C of the Act. This addition was confirmed by the Ld. CIT(A) in first appeal. Aggrieved, the assessee is in appeal before us on the following grounds:
2 Sri Ram Niwas Goel, AY 2009-10 “3. For that on the facts of the case the Ld. CIT(A) was not legally justified in sustaining the addition of Rs.9,50,000/- on A/c of payments made to M/s. Baba Transport, u/s. 40(a)(ia) and the same may please be deleted.
For that on the facts of the case the Ld. CIT(A) was not legally justified in sustaining the addition of Rs.1,00,000/- on A/c of payments made to M/s. Ma Jagdamba Transport, u/s. 40(a)(ia) and the same may please be deleted.
5. For that on the facts of the case the Ld. CIT(A) was not legally justified in sustaining the addition of Rs.1,00,000/- on A/c of payments made to M/s. Shiv Shakti Road Lines, u/s. 40(a)(ia) and the same may please be deleted.”
4. The Ld. AR argued that he was able to get a confirmation from M/s. Baba Transport in the form of certificate from the said party stating that it had duly considered the amount received in the sum of Rs.9,50,000/- from the assessee by cheque in its accounts and in its income tax returns. Accordingly, he prayed for admission of this additional evidence in terms of Rule 29 of the Income-tax Rules, 1962 and prayed for setting aside this aspect of the issue to the file of the AO to verify the same from the records of M/s. Baba Transport and if found to be true, the assessee should not be invited with disallowance u/s. 40(a)(ia) of the Act. In support of this, he also placed reliance on the second proviso to section 40(a)(ia) of the Act which was introduced in Finance Act, 2012. He also argued that the said provision was held to be retrospective in operation by the decision of the Hon’ble Delhi High Court in the case of CIT Vs. Ansal Landmark Township Pvt. Ltd. reported in 377 ITR 635.
5. With regard to other two payments made by the assessee to M/s. Maa Jagadamba Transport and M/s. Shiv Shakti Roadlines amounting to Rs. 1,00,000/- each by account payee cheques, he stated that even at this stage, the assessee is not able to procure the certificate from the said parties that it had disclosed the same in their income-tax return and paid taxes thereon. He requested for setting aside of this aspect of the issue also to the file of the AO so that in the meantime the assessee would make earnest efforts in obtaining the certificate from the said parties to support the case of the assessee. In response to this, the Ld. DR objected to the very admission of additional evidence in terms of Rule 29 of ITAT Rules by arguing that the certificate enclosed in the additional evidence is given by M/s. Baba Transport and not by the Chartered Accountant of M/s. Baba Transport as provided in second proviso to section 40(a)(ia) and sec. 201(1) of the Act. Apart from this,
We have heard rival submissions and have perused the records very carefully. We find that the assessee had filed additional evidence in terms of rules 29 of ITAT Rules in the form of certificate from M/s. Baba Transport which is enclosed in page 1 of the paper book and from the said certificate it is seen that M/s. Baba Transport had duly accounted for in their books and in the income tax return the receipt of monies from the assessee to the tune of Rs.9,50,000/-. It is also seen that the said certificate admittedly contains PAN and income tax particulars of M/s. Baba Transport. We find that even though the said certificate is not signed by the Chartered Accountant of M/s. Baba Transport, but still in the interest of justice and fair-play, we deem it fit and appropriate to set aside this issue to the file of the AO to examine the veracity of the contents of the said certificate given by M/s. Baba Transport, and if found to be correct, the assessee would be entitled for taking the benefit of second proviso to sec. 40(a)(ia) of the Act read with section 201(1) of the Act which has been held to be retrospective in operation by the decision cited supra and accordingly, the issue should not be invited with disallowance u/s. 40(a)(ia) of the Act.
With regard to other two payments in the sum of Rs. 1,00,000/- each to M/s. Maa Jagadamba Transport and M/s. Shiv Shakti Transport, we find that the assessee was not able to adduce any evidence even before us. However, in view of the fact that the said payments were made by account payee cheques and those parties being residing at a far away location, we deem it fit and proper in the interest of justice and fair play to set aside this aspect of the issue (i.e in respect of these two parties only) also to the file of the AO to decide the same afresh in accordance with law. The assessee is at liberty to adduce fresh evidence in support of his contentions. Accordingly, ground nos. 3 to 5 raised by the assessee are allowed for statistical purposes.
6. The next issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in upholding the disallowance of payments made to labourers for screening work by invoking the provisions of section 40(a)(ia) of the Act in the facts and circumstances of the case.
4 Sri Ram Niwas Goel, AY 2009-10 7. Brief facts of this issue are that the assessee debited a sum of Rs.12,90,000/- under the head “Screening Account” in his P&L Account. The AO called for the details of such expenses. During the course of such assessment proceedings the assessee filed ledger of screening account. From the said ledger account, the AO observed that the assessee had paid a sum of Rs.4,70,000/- on 31.08.2008 to one labour sardar Shri A. K. Goala; a sum of Rs.4,20,000/-on 07.09.2008 paid to one labour sardar Sanja and a sum of Rs.4,00,000/- on 08.09.2000 to labour association. The said ledger also contained that assessee has paid @ Rs.300/- per day for various labourers at the rate of Rs.200/- per day for various Kamins towards screening work. It was also explained that since assessee is engaged in the business of trading of iron ore, screening of ore is very important and it is mainly labour oriented job and labours are used for such manual screening for separation of boulders etc. from iron ore, for purification. It was stated that these payments were made through labour sardar and through labour association available in the said locality and accordingly, the same does not fall under the ambit of any contract within the meaning of section 194C of the Act and hence, the provisions of section 40(a)(ia) of the Act could not be invoked on the assessee. The AO not convinced with this reply proceeded to make the disallowance u/s. 40(a)(ia) of the Act in the sum of Rs.12,90,000/- in the assessment. The same was upheld by the Ld. CIT(A) . Aggrieved, the assessee is in appeal before us on the following ground:
6. For that on the facts of the case the Ld. CIT(A) was not legally justified in sustaining the addition of Rs.12,90,000/- on A/c of payments made to labourers for screening work and the provisions of section 40(a)(ia) is not applicable to such payments and the addition on this count may please be deleted.
The Ld. AR filed the complete wage sheet comprising of payments made towards screening to various labourers through labour sardar together with their attestation in the form of signature/thumb impression clearly stating the number of days worked and the rate per day as an additional evidence and prayed for admission of the same by this Tribunal as admittedly these papers could not be gathered from the concerned sites and produced before the lower authorities. He stated that these facts in the form of muster roll of wage register for payment of wages through labour sardar goes into the root of the matter and 5 Sri Ram Niwas Goel, AY 2009-10 clearly supports the case of the assessee and fairly stated that the same be duly examined by the AO and accordingly prayed for setting aside of this issue.
In response to this, the Ld. DR stated that this additional evidence should not be entertained by the Tribunal as it contains muster roll for wage register of various payments paid for various dates whereas in the ledger account furnished by the assessee before the AO which states that the said payment is made in cash on a single day to labour sardar/labour association. Accordingly, the Ld. DR objected to the basic veracity of the said evidence filed before the Tribunal by the assessee. He also stated that the AO had stated in his order that the payments were made by the assessee through account payee cheques on three different dates whereas the ledger account furnished by the assessee and the additional evidence in the form of wage register reflects the payment made by cash. In view of this contradictory fact he stated that the disallowance needs to be confirmed. He also stated that normally the payments to labourers would be made every week and not in one lumpsum.
In defence, the Ld. AR argued that the AO had wrongly mentioned the payments made in account payee cheques. Factually the said payments were made by bearer cheques as could be evidenced from bank statement which is enclosed in page 33 of assessee’s paper book. He also stated that the screening work is carried on only during a particular period and hence, the single payment is made to labour sardar for onward distribution to various labourers based on number of days worked by them for which separate wage sheet is maintained which is now filed as additional evidence.
We have heard rival submission and have carefully perused the material available on record. We find from the bank statement enclosed in page 33 of the paper book, the names of the three parties viz., A. K. Goala, Sanja and labour association are duly reflected therein on three different dates. This clearly proves that the assessee had issued bearer cheques to those three parties. Hence, the finding of the AO that payments were made by account payee cheques is factually incorrect. We also find that the assessee had filed ledger account before the AO which clearly proves that the payments were made to two labour sardars and one labour association for payment to labourers for various dates.
6 Sri Ram Niwas Goel, AY 2009-10 This fact is also supported by wage sheet filed by the assessee in the form of additional evidence before us. However, since wage sheet was not available before the lower authorities for their examination, we deem it fit and appropriate in the interest of justice and fair play, to set aside this issue to the file of the AO to examine the wage sheet and the contention of the assessee that the payments were made to labour sardar and labour association and if the same are found to be true, the assessee should not be invited with disallowance u/s. 40(a)(ia) of the Act as the same does not fall within the ambit of provisions of section 194C of the Act. Accordingly, ground no. 6 raised by the assessee is allowed for statistical purposes.
During the course of hearing the Ld. AR stated that ground nos. 7 and 8 raised by the assessee are not pressed for which necessary endorsement has been made in the file. Accordingly, ground nos. 7 and 8 raised by the assessee are dismissed as not pressed.
The last issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in sustaining the addition in the sum of Rs.8,34,070/- made on account of difference in the value of sundry creditors in the facts and circumstances of the case.
The brief facts of this issue is that the AO during the course of assessment proceedings sought details of purchases from the assessee. The assessee produced party wise purchase ledger. The AO issued notice u/s. 133(6) of the Act calling for information from various parties. Out of the same, one such party Mr. Nirmal Kumar Pradip Kumar informed the AO that there is no outstanding payment receivable by him from the assessee as on 31.03.2009. The AO observed that assessee had shown a sum of Rs.8,34,070/- as sundry creditors in the name of Mr. Nirmal Kumar Pradip Kumar as on 31.03.2009. The assessee was accordingly asked to reconcile the said difference. Since no reply was forthcoming from the assessee, the AO made an addition on account of difference in sundry creditors treating the same as bogus and added a sum of Rs.8,34,070/- in the assessment. The said addition was sustained by the Ld. CIT(A) in first appeal. Aggrieved, the assessee is in appeal before us on the following ground: “9. For that on the facts of the case the Ld. CIT(A) was not justified in sustaining the addition of Rs.8,34,070/-, made by the AO on A/c of sundry Creditors difference, without an opportunity of cross examination, and without giving copies of materials gathered behind the back of the appellant, and as such the addition made on suspicion may please be deleted.”
7 Sri Ram Niwas Goel, AY 2009-10 15. The Ld. AR placed reliance on page 61 of the paper book containing the ledger account of Mr. Nirmal Kumar Pradip Kumar as appearing in the books of the assessee for the period 01.04.2008 to 31.03.2009. In the said ledger there is an opening balance of Rs.22,06,533/- payable by the assessee to the said party. The assessee had made purchases of Rs.2,73,034/- during the year from the said party. The assessee had made payments by account payee cheques to the tune of Rs.16,45,497/- during the year to the said party. Accordingly, there is a balance of Rs.8,34,070/- payable to the said party as on 31.03.2009. The assessee was able to get a statement of account from the said party Mr. Nirmal Kumar Pradip Kumar and the same is filed as additional evidence before us and from the said statement, he stated that there is a difference of Rs. 5 lacs in the opening balance with the said party in view of the fact that the said party is showing a debit balance of Rs.17,06,533/- as on 01.04.2008 whereas the assessee is showing an opening credit balance of Rs.22,06,533/-. He stated that there is no dispute on the total purchase made from the said party. There were three payments made by the assessee during the year to the tune of Rs.16,45,497/- which is also duly reflected in the statement of account of the said party. Apart from this, the said party had credited two sums one i.e. on 26.05.2008 Rs. 3 lacs vide cheque no. 609001 and on 31.03.2009 the sum of Rs.34,070/- vide cheque no. 256194. The Ld. AR argued that these two payments (i.e. Rs. 3 lacs and Rs.34,070/-) were not paid by the assessee to the said party. Accordingly, there is a genuine difference between the assessee’s books and the balance shown by the said creditor. He argued that the entire bank statements were produced before the AO and nothing prevented the AO from verifying the said bank statement to ensure whether at all any payments were made by the assessee in the sums of Rs.3 lacs and Rs.34,070/- to the said party. However, he fairly stated let this issue be re-examined by the AO by allowing the opportunity of cross examination of the said party to the assessee as admittedly the statement was obtained by the AO u/s. 133(6) of the Act behind the back of the assessee. In any case, he argued that no addition could be made in the sum of Rs. 5 lacs in respect of opening difference in sundry creditors.
In response to this, the Ld. DR argued that the assessee was indeed confronted with the statement of account obtained from the said supplier by the AO during the course of 8 Sri Ram Niwas Goel, AY 2009-10 assessment proceedings and was directed to reconcile the difference thereon. The assessee cannot seek opportunity of cross examination at this stage. He also sought direction from the Bench to assess the difference in the opening balance of Rs. 5 lacs in AY 2008-09 or any other earlier year instead of AY 2009-10.
We have heard rival submissions and gone through facts and circumstances of the case. We find lot of force in the argument advanced by the Ld. AR that no addition could be made in respect of the opening balance difference in sundry creditors to the tune of Rs.5 lacs. Accordingly, we direct the AO to delete the same. In respect of balance sum of Rs.3,34,070/- being the two cheque payments purported to have been paid by the assessee to the said party the same could be easily verified by the AO from the bank statements of the assessee. Hence, we direct the AO to obtain the details of cheques credited by the said party Nirmal Kumar Pradip Kumar and produce the same to the assessee and match the same with the bank statement of the assessee to understand the factual position as to whether the assessee had indeed made any payment to the said party in the sum of Rs. 3 lacs and Rs.34,070/-. This, in our considered opinion, would meet the ends of justice. We are not inclined to accept the argument of the Ld. DR to give direction to the AO for assessment of Rs. 5 lacs in the earlier years instead of AY 2009-10 as, in our considered opinion, the same cannot be given as it is not relevant for the disposal of the year under appeal. In the result, addition made towards Rs. 5 lacs is directed to be deleted and addition in the remaining sum of Rs.3,34,070/- is directed to be verified by the AO. Hence, ground no. 9 raised by the assessee is partly allowed for statistical purposes.
In the result, the appeal of assessee is partly allowed for statistical purposes.