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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI & SHRI G. PAVAN KUMAR
आदेश / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
These two appeals by Department are directed against common order of the Commissioner of Income Tax (Appeals)-10, Chennai, dated 28.03.2016 for the above assessment years. Since the issue in these three appeals are common in nature, these appeals
ITA Nos.1910 & 1911/2016 :- 2 -: are combined, heard together, and disposed of by this common order for the sake of convenience. For the sake of convenience, we take up of assessment year 2006-2010.
The first common ground raised by the Department in these 2. two appeal is that the ld. Commissioner of Income Tax (Appeals) erred in deleting the disallowance made u/s.40(a)(ia) of the Act for non deduction of tax at source. For the sake of convenience, we take up of assessment year 2009-2010 for adjudication. The Brief facts of the case are The ld. Assessing Officer 3. noticed that the assessee had paid labour charges of �53,70,401/- for the Assessment year 2009-10 respectively and did not deduct TDS on the payments. The AO called for the explanation and the assessee replied that section 40(a)(ia) would be applicable only to the expenditure payable at the end of the year and not the expenditure paid on which no tax deduction was made and by relying on the Finance Bill 2004 stated that the words 'paid' and 'payable' were separate and distinct and separate consequences had been provided in the Act for non- deduction and non-payment of tax. The Assessing Officer did
ITA Nos.1910 & 1911/2016 :- 3 -: not accept the reply of the assessee and disallowed the amount of �53,70,401/- u/s 40(a)(ia) as these contract payments fell under Section 194C and the assessee should have deducted TDS on them. Aggrieved by the order, assessee filed an appeal before the Commissioner of Income Tax (Appeals).
In the appellate proceedings, the ld. Commissioner of 4.
Income Tax (Appeals) deleted the disallowance by following the order of Special Bench in the case of Merilyn Shipping and Transports vs. Addl. CIT (136 ITD 23) (Vizag) (SB) whereas it was held that provisions of Sec. 40(a)(ia) of the Act are only applicable to the amount shown as payable on date of the Balance sheet and it cannot be applied to the expenditure already paid by the assessee and also ld. Commissioner of Income Tax (Appeals) considered that provisions of Sec. 40(a)(ia) of the Act cannot be applied in view of the second proviso to Sec. 40(a)(ia) of the Act w.e.f. 01.04.2013 relevant to the assessment year 2013-2014 and subsequent years in view of the judgment of Delhi High Court in the case of CIT vs. Ansal Land Mark Township (P) Ltd (2015) 377 IIR 635 wherein it is held that the aforesaid amendment which is curative in nature should be applicable retrospectively. Respectfully relying on the decision of the Hon’ble
ITA Nos.1910 & 1911/2016 :- 4 -:
Delhi High Court, the Commissioner of Income Tax (Appeals) directed the ld. Assessing Officer to delete the disallowance u/s.40(a) (ia) of the Act in respect of those payments in which the assessee has submitted the details of PAN by way of affidavits. Aggrieved by the order, the Revenue filed an appeal before Tribunal.
None appeared on behalf of the assessee. However, we 5. proceed to dispose the appeals after hearing the ld. Departmental Representative. We perused the material on record and judicial decisions cited supra. In our opinion similar issue came for consideration before this Tribunal in the case of T. Palanivelu vs. Income Tax Officer, in dated 29.04.2015 wherein it was held as under:-
We have heard both the sides and perused the material on record. We find that the Special Bench of the Tribunal in the case of Merilyn Shipping and Transports vs. ACIT (2012) 136 ITD 23 (Visakhapatnam) and judgment of Gujarat High Court in the case of CIT vs. M/s. Vector Shipping Services (P) Ltd in of 2013 dated 09.7.2013 held that sec 40(a)(ia) is not applicable when there is no outstanding balance at the end of the close of the year relevant to the assessment yea in respect of these payment. However, the assessee has not brought on record, the details of outstanding expenses or schedule of sundry creditors showing whether the impugned amount is outstanding at the end of the close of the previous year relevant to the assessment year either in the name of the party or ITA Nos.1910 & 1911/2016 :- 5 -:
outstanding expenses. Hence, in the interest of justice, we are remitting the issue back to the file of the Assessing Officer with direction to verify the claim of the assessee and the assessee shall place necessary evidence in support of his claim.
Further, we make it clear that if the impugned amount is not outstanding at the end of the close of the assessment year in respect of the expenses either as outstanding expenses or as sundry creditors, this amount cannot be disallowed. This ground is remitted back to the Assessing Officer for fresh consideration’’.
So, we do not find any infirmity in this issue. The payment which is not outstanding at the end of the close of the financial year cannot be disallowed. In the present case, the ld. Departmental Representative is not able to show that the impugned amount outstanding at the end of the close of the financial year. Accordingly, we are in agreement with the findings of the Commissioner of Income Tax (Appeals) on this issue. This ground raised by the Revenue is dismissed in both the appeals.
5. The next ground in raised by the Revenue is that the ld. Commissioner of Income Tax (Appeals) erred in deleting the addition of �30,10,838/- made towards unexplained cash credit in the account of the partner Mrs. Jayakodi.
The Brief facts of the case are that in the AY 2009-10, 6. the AO observed that an amount of �30,10,838/- had been ITA Nos.1910 & 1911/2016 :- 6 -: credited in the current account of one of the partner Mr. P. Jayakodi on various dates from April 2008 to October 2008, apart from �3,OO,000/-- of salary and �18,02,105/- being 90% of share profit for the that it was out of withdrawal during the year. The AO observed that the current account showed withdrawal of above 1 lakh only from November 2008, and before November 2008 withdrawals were of small amounts. The assessee replied that the amount was agricultural income derived from the agricultural lands of 18 acres in his HUF at Theni and a net debit of �12,82,007/- for the year ended 31.03.2008 was utilized for investment in the current account for the year ended 31.03.2009 with M/s. Enrec Engineers. Further the assessee submitted the copies of family partition deed and chitta and adangal in support of its claim. The AO did not accept the reply of the assessee and observed that mere partition deed and chitta and adangal would not suffice to prove the source for the amounts credited in the current account. The AO further observed that if the assessee had balance out of the last year withdrawal, it should have credited the same in the current account as on 31.03.2008 itself and the ITA Nos.1910 & 1911/2016 :- 7 -: cash on hand as on 31.03.2008 should have been shown in the balance sheet also. As the assessee has not produced any detail as to the cultivation and evidence that the amount was earned out of the agricultural produce and also as no return of income was filed for the AY 2009-10, the AO disallowed the cash credits of �.30,10,838/- in the partner's account u/s 68 and added to the total Income. Aggrieved by the order, assessee filed an appeal before the Commissioner of Income Tax (Appeals).
In the appellate proceedings, the ld. Commissioner of Income Tax (Appeals) observed that the cash credit in the partner's account of �30,10,838/ -, the ld. Assessing Officer has made the addition on the ground that the assessee did not submit the details for the agricultural income. The assessee 's AR has submitted a copy of the partition deed and the evidences for having grown coconut trees in 19.13 acres by the HUF. The assessee's AR has submitted that although these details were submitted before the AO, the same was not considered. When the assessee was asked to work out the peak credit in respect of the aforesaid cash credits in view of earlier cash
ITA Nos.1910 & 1911/2016 :- 8 -: withdrawals, the assessee 's AR has worked out the peak credit at �4,20,746/ -. As the AO has not considered the assessee 's claim of earlier cash withdrawals as a source for future cash credits. The ld. Commissioner of Income Tax (Appeals) convinced that adopting peak credit is a fair proposition under such facts and circumstances. Therefore, the ld. Commissioner of Income Tax (Appeals) directed the ld. Assessing Officer to restrict the addition on account of cash credit in partner's account of �30,10,838/- to �4,20,746/. Agrieved by the order, the Revenue assailed an appeal before the Tribunal.
Before us, the plea of the ld. Departmental Representative that assessee has not furnished partners financial statements so as to verify the availability of funds with partners to make investment in assessee company. Being so, in our opinion, the assessee has to explain not only identity of the partners, but also capacity of the partners to invest this impugned amount in assessee firm.
Accordingly, we remit this issue in dispute to the file of the ld. Assessing Officer for fresh consideration with a direction to assessee to prove the capacity and genuineness of the transactions alongwith
ITA Nos.1910 & 1911/2016 :- 9 -: identity of the partners. This ground of the Revenue is partly allowed for statistical purpose.
In the result, the appeals of the Revenue in is partly allowed for statistical purpose and ITA No.1911/Mds/2016 is dismissed.
Order pronounced on Wednesday, the 21st day of September, 2016, at Chennai.