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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: S/SHRI SANJAY ARORA & AMARJIT SINGH
IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI
BEFORE S/SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND AMARJIT SINGH, JUDICIAL MEMBER आयकर अपील सं/ I.T.A. No.6866/Mum/2014 ("नधा"रण वष" / Assessment Year: 2010-11) Asst. Commissioner of Shri Himanshu K. Modi बनाम/ Income Tax 25(2) Prop.M/s.Vitrag Vs. Room No.108, 1st Floor, Construction, C-4/406, Bldg. No.C-11, Yogi Nagar, Borivali (W) Pratyakshakar Bhavan, Mumbai - 400091 Bandra Kurla Complex, Bandra (East), Mumbai - 400051 "थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AACPM8724B .. (अपीलाथ" /Appellant) (""यथ" / Respondent)
Assessee by: Shri Vimal Punmiya Department by: Shri S.K.Mishra सुनवाई क" तार"ख / Date of Hearing: 22.06.2016 घोषणा क" तार"ख /Date of Pronouncement: 22.09.2016 आदेश / O R D E R PER AMARJIT SINGH, JM:
The revenue has filed the present appeal against the order dated 23.08.2014 passed by the Commissioner of Income Tax (Appeals)-35, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2010-11. 2. The revenue has raised the following grounds:- Assessment Year: 2010-11
On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition on account of retention money of Rs.1,33,10,162/- as part of the turnover, without considering the fact that the TDS was deducted on the gross amount and same has been credited by the assessee in relevant assessment year. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in appreciating the fact that the assessee follows mercantile system of accounting and as such the retention money in consideration had accrued during the period under consideration. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made u/s.69C of the Act as unexplained expenditure to the tune of Rs.3,07,40,640/- without considering the fact that the assessee had failed to established during the assessment proceedings that the transactions were wholly and exclusively for the purpose of business. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying upon judgment in the case of CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd. without appreciating that the facts involved in the appellant’s case are different from the facts of the above case law.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made u/s.40(a)(ia) of Rs.5,59,349/- without appreciating the fact that the assessee failed to submit from 15G before the due date of filing return.
The appellant prays that the order of the ld.CIT(A) on the above ground be set aside and that of the Assessing Officer be restored.
The brief facts of the case are that the assessee filed his return of income on 12.10.2010 declaring total income to the tune of Rs.2,69,21,600/-. The return was processed u/s.143(1) of the Income Tax Act, 1961( in short “the Act”). Subsequently the case
2 Assessment Year: 2010-11
was selected for scrutiny and notice u/s.143(2) of the Act was issued on 29.09.2011 which was duly served upon the assessee. Thereafter the notice u/s.142(1) of the Act was also issued. The assessee was a Civil Engineer and registered with MCGM & PWD. The assessee was the proprietor of M/s.Vitrag Construction Co. which was engaged in road construction both concrete and Asphalt. It undertakes other civil works like Nalah etc. The Assessing Officer was of the view that the retention money to the tune of Rs.1,33,10,162/- was liable to be taxed and also was of the view that the purchases aggregating to Rs.3,07,40,640/- was unexplained and was liable to be taxed and the assessee paid the interest to the tune of Rs.3,98,354/- to G. E. Capital TFS Ltd. but no tax deduction at source, therefore the interest claimed to the tune of Rs.3,98,354/- was disallowed u/s.40(a)(ia) of the Act and assessed the income of the assessee to the tune of Rs.7,19,31,100/-. Feeling aggrieved the assessee filed the appeal before the CIT(A) and the CIT(A) allowed the above said disallowance, therefore the revenue has filed the present appeal before us.
ISSUE NO.1&2:-
Issue no.1 and 2 are interconnected, therefore are being taken up together for adjudication. Under these issues the contention of the revenue is that the retention money to the tune of Rs.1,33,10,162/- is liable to be taxed in accordance with law. Before going further it is necessary to advert the finding of the CIT(A)on record:-
3 Assessment Year: 2010-11
“I have gone through the facts of the case, contention of the AO and submissions of the appellant in this regard. It is an undisputed fact that the amount of Rs.1,33,10,162/- is only a receivable from the Municipal Corporation of Greater Mumbai. It is also a fact and part of contract that retention money @ 5% of the bill amount shall be deducted from each Running Account Bill on which no interest shall be paid. It is also a fact that the appellant has subsequently been receiving the retention money on different dates and has paid the tax thereupon in the subsequent years. Similarly, in this year, on the retention money received pertaining to earlier year, taxes have been paid in this year. The contract deposit / retention money shall be paid to the contractor only on finalisation of the final bill or settlement of accounts of work by the contractor in all respects or after the completion of the defect liability period, whichever is later. From the submissions and the facts, it can be noticed that the appellant is following the recognized method of accounting as per AS9 of ICAI which lays down that when uncertainties exist regarding determination of the amount or its collectability, the revenue shall not be treated as accrued and hence, shall not be recognized until collection. The recognition of the revenue on accrual basis pre-supposes the satisfaction of two conditions (a) that the revenue is measurable and (b) that the revenue is collectible with certainty. In this case, while the first is applicable, however, the second is not. Reference is 4 Assessment Year: 2010-11
made to the decision in the case of DIT(International Taxation) Vs Ballast Nedam International 2013 34 Taxmann.com 270 Gujarat High Court wherein it has been held that “where the assessee was awarded a contract by a company and in terms of contract, certain amount was withheld by the said company towards retention money for satisfactory execution of the contract, retention money did represent assessee’s accrued income. The clause is very clear and specific in defining the modalities of how and when the payment shall be released. In the light of this, I am in agreement with the submissions of the appellant and also guided by the decision of Hon’ble Madras High Court in the case of Madras High Court in the case of East Coast Construction and Ind. Ltd. 283 ITR 293 referred supra that in this present case, when the assessee has no right to receive has actually generated real income. On a similar issue, my predecessor has decided in favour of the appellant for an earlier year i.e.2009-10 in order No.CIT(A)-35/JCIT- 25(2)/ITA.385/11-12 dt. 21.05.2012. In the result, the addition of Rs.1,33,10,162/-.
The learned Departmental Representative did not produced any distinguishable facts of the above said finding. Nothing came into the notice that the order passed by the CIT(A) is wrong against law and facts. The CIT(A) has decided the matter of controversy on the basis of the decision in case of DIT(International Taxation)
5 Assessment Year: 2010-11
Vs. Ballast Nedam International 2013 34 Taxman.com 270 Gujarat High Court and also placed reliance on the decision of the Hon’ble Madras High Court in the case of East Coast Construction and Ind. Ltd. 283 ITR 293. Moreover, the revenue has already allowed the retention money as non-taxable in the assessee’s own case for the assessment year of 2009-10 decided by the CIT(A) on 21.05.2012. In view of the said circumstances we are in the agreement that the CIT(A) has passed the order judiciously and correctly which does not require to be interfere with at this appellate stage.
ISSUE NO.3 &4:-
Under these issues the Revenue has challenged the deletion of disallowance of the unexplained expenditure to the tune of Rs.3,07,40,640/- u/s.69C of the Act. The Assessing Officer received the information from the sales tax department regarding the purchase from some of the parties who were bogus therefore Assessing officer suspected bogus suppliers. The parties are being listed below:-
Sr. Name of the party No. 1 Divine Enterprises 2 Kumar Enterprise 3 Niddhish Impex Pvt. Ltd. 4 Rohit Enterprise 5 Shreyas Marketing Agencies 6 Samarth Enterprises 7 Shree Ganesh Trading Co. 8 Tulsiani Trading Pvt. Ltd. 9 Vruksha Enterprise
6 Assessment Year: 2010-11
The Assessing Officer issued the notice u/s.133(6) of the Act to the above said 9 parties and the notices received back unserved. The Assessing Officer asked the assessee to produce the said parties but the assessee was unable to do so. Therefore, the Assessing Officer was of the view that the purchase to the tune of Rs.3,07,40,640/- is unexplained expenditure u/s.69C of the Act, therefore the unexplained expenditure was treated as income of the assessee. However, the assessee filed an appeal before the CIT(A) and the CIT(A) allowed the said unexplained expenditure, therefore, the revenue has been filed the present appeal before us.
We have heard the parties, and perused the material on record. The Assessing Officer has invoked section 69C of the Act. The same reads as under:-
“Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year. Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.” The section, thus, gets attracted when an assessee is unable to explain, or satisfactorily explain, i.e., in the opinion of the 7 Assessment Year: 2010-11
Assessing Officer, any expenditure or part thereof, incurred by the Assessee. The incurring of expenditure by the assessee – a works contractor, is therefore admitted. The same is even otherwise borne out by the fact of the assessee having executed the work, which stands further certified (by the competent authority), with bills in its respect having been passed by the contractee. The only issue therefore is with regard to the source of the expenditure. The source of the same is reflected in assessee’s accounts in-as-much as all the payments in its respect have been made from the assessee’s bank account/s, which stands reflected in his regular books of accounts. Sure, the bank account/s reflects payments to the ostensible suppliers, who were admittedly not produced nor have been shown as genuine suppliers. But, where, then, is the question of any payments being made to them, so that the monies ‘paid’ to them, being only ostensible suppliers, can only be considered as flowing back to the assessee. It is this sum (reflected in the assessee’s accounts) that then explains the source of the payments made toward expenditure incurred in undertaking the work executed. It is infact on only a perusal of the assessee’s accounts accompanying his return that the Revenue proceeded to require him to, in verification thereof, produce the parties from whom goods/services are stated to be acquired. The quantum of the expenditure is, again, not in doubt. Not so doing would imply an admitted expenditure on one hand, and admitted undisclosed cash (funds), in the same amount, with the assessee on the other - clearly a contradiction. We, therefore, find no basis in the 8 Assessment Year: 2010-11
Revenue’s stands and, accordingly, uphold the order of the ld CIT(A). We decide accordingly.
ISSUE NO.5:-
Under this issue the revenue has challenged the deletion of the addition to the tune of Rs.5,59,349/- u/s.40(a)(ia). Before going further it is necessary to advert the finding of the CIT(A) on record:-
“The next ground of addition relates to non-deduction of tax at source while paying interest to some of the parties. These are as under:-
Sr. Name PAN Amount No. 1. K.G.Shah AWPPS3553D 60,000 2. Amita K. Shah AWRPS8413Q 60,000 3. Prafula P. Mody ACPPM1166Q 30,000 4. Pragna R. Vohra ADWPV7478G 24,000 5. Shushilaben V. Barvalia Not Available 60,000 6. Beena Shah ALVPS5393R 1,15,000 7. Bhavesh K. Shah (HUF) ACHB2997P 1,32,000 8. Rupa Dharmendra Mehta AJIPM4562C 41,967 9. Umedlal V. Gandhi (HUF) AABHG0526Q 35,290 10. Divya D. Shah (Below limit) AALPS0975N 888 Total 5,59,345
It was the submission of the appellant before the AO that these parties had filled up Form 15G. However, the said forms were not submitted to CIT(TDS) before the due date
9 Assessment Year: 2010-11
of filing of return. Instead the appellant mentioned the fact of submission of Form 15H in his e-TDS return. As per the provisions of the Act, the appellant was to submit the said forms to the office of the CIT(TDS) before the due date of return of income which he failed to do and therefore, the AO has made a disallowance u/s.40A(ia). During appeal, the appellant has once again reiterated the argument that considering the Section 194A r.w.s. 197A of the I.T.Act, there is no tax to be deducted at source from interest payable or paid when Form 15G or 15H is received from the parties and therefore, the appellant has not deducted TDS at the time of crediting the interest or paying interest to the payee. It is also the contention of the appellant that Section 40(a)(ia) is applicable only in respect of TDS default if amount is payable and not if it is actually paid and tax is not deducted. The appellant has relied on the following decisions:
i. Teja Constructions V. CIT [2010] 39 SOT 13 (Hyd.)
ii. Merilyn Shipping & Transports V. CIT [2012] 20 Taxmann.com 244 (Vishakhapatnam)
iii. S.S.Warad V. CIT [2012] 19 ITR (Trib) 35 (Bang.)
iv. T.T.Kuruvilla V. CIT [2012] 149 TTJ (Coch.) 533
v. Emdee Apparels V. CIT [2012] 54 SOT 600 (Bang.)
10 Assessment Year: 2010-11
vi. Bartronics India Ltd. V. CIT [2012] 32 SOT 188 (Hyd.)
To substantiate his point, it is the submission of the appellant that there is only a procedural error in submitting the Form 15H before the CIT(TDS). So, the provisions of Section 40(a)(ia) cannot be invoked.
Undoubtedly, the assessee did not deduct the TDS on the payments made to the above said ten parties. The parties had fill up the form no.15G which has not been submitted before the CIT(TDS) before the due date of return. It is not in dispute that the assessee was not liable to be deduct the TDS on payment of interest if the parties submitted the form No.15G. The form 15G submitted late. The CIT(A) was of the view that it was the procedural error and there was no effect on revenue, therefore, deleted the addition u/s.40(a)(ia) and was also view that the section 40(a)(ia) of the Act was not applicable to the effective of the case. On appraisal of the entire facts and circumstances mentioned above, we found no illegality and irregularity in the finding of the CIT(A) on this issue, therefore we affirm the finding of the CIT(A) and decide this issue against the revenue in favour of assessee.
In the result, the appeal of the revenue is hereby Dismissed.
11 Assessment Year: 2010-11
Order pronounced in the open court on 22nd September, 2016 (SANJAY ARORA) (AMARJIT SINGH) लेखा सद"य / ACCOUNTANT MEMBER "या"यक सद"य/JUDICIAL MEMBER मुंबई Mumbai; "दनांक Dated : 22nd September, 2016 MP MP MP MP
आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant 2. ""यथ" / The Respondent. 3. आयकर आयु"त(अपील) / The CIT(A)- 4. आयकर आयु"त / CIT 5. "वभागीय ""त"न"ध, आयकर अपील"य अ"धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड" फाईल / Guard file. आदेशानुसार/ BY ORDER, स"या"पत ""त //// उप/सहायक पंजीकार (Dy./Asstt.