SIDDHARTHA KANDAR,KOLKATA vs. ITO, WD-3, HALDIA, HALDIA

We have heard the arguments of both the sides and also perused the relevant material available on record. Grounds No. 1 & 2 raised by the assessee in this appeal are not pressed by the ld. counsel for the assessee at the time of hearing before me. The same are accordingly dismissed as not pressed.

As regards the issue involved in Ground No. 3 relating to the addition of Rs.1,75,200/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of the alleged bogus damages, it is observed that in the balance-sheet filed along with his return of income for the year under consideration, sundry debtors of Rs.1,75,200/- were shown by the assessee. On verification, the Assessing Officer, however, found that the said debtors shown by the assessee were bogus and therefore, he made an addition of Rs.1,75,200/- to the total income of the assessee on account of the alleged bogus sundry debtors. On appeal, the ld. CIT(Appeals) confirmed the said addition made by the Assessing Officer observing that the assessee must have collected the amounts due from the concerned debtors outside the books of account.

I have heard the arguments of both the sides on this issue and also perused the relevant material on record. As rightly contended by the ld. counsel for the assessee, the fact that the amount in question was shown by the assessee in his books of account as sundry debtors by itself is sufficient to show that the said amount was booked as sale by the assessee and duly offered to tax as his income. As further contended by ./2015 Assessment year: 2009-2010 Page 3 of 5 the ld. counsel for the assessee, even if the allegation of the ld. CIT(Appeals) that the said amount must have been collected by the assessee from the concerned party outside the books of account is taken to be true, such collection from debtors outside the books of account could not give rise to any income chargeable to tax in the hands of the assessee. Moreover, the ld. counsel for the assessee has also submitted that the amount received from the concerned debtors at the fag end of the year under consideration, was duly accounted for by the assessee in the books of account of the next year. Keeping in view all these facts of the case, I am of the view that the addition of Rs.1,75,200/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of alleged bogus sundry debtors is not sustainable and deleting the same, I allow Ground No. 3 of the assessee’s appeal.

I have heard the arguments of both the sides on this issue and also perused the relevant material available on record. The limited contention raised by the ld. counsel for the assesese by relying on the second proviso to section 40(a)(ia) is that the concerned recipients having been included the amount in question paid by the assessee on account of bus hire charges in their total income offered to tax, no disallowance under ./2015 Assessment year: 2009-2010 Page 4 of 5 section 40(a)(ia) can be made. In support of this contention, he has relied on the decision of this Tribunal rendered in the case of M/s. Abhoy Charan Bakshi –vs.- DCIT vide its order dated 06.04.2016 passed in and submitted that this matter may be sent to the file of the Assessing Officer for deciding the same afresh in the light of the said decision of the Tribunal after necessary verification. In the said decision, the effect of second proviso inserted under section 40(a)(ia) was considered by the Tribunal and it was held as under:- “15. We have given a very careful consideration to the rival submissions. The CIT(A) has held that the second proviso to Sec.40(a)(ia) of the Act will apply in the present case and that applicability of the second proviso to Sec.40(a)(ia) of the Act which was introduced by the Finance Act, 2012 w.e.f. 1.4.2013 was retrospective in operation and was to apply w.e.f. 1-4- 2005, being the date from which sub-clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004. The Hon'ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (I) Pvt. Ltd., in ITA NO.16012015 judgment dated 26.8.2015 has taken the view that the insertion of the second proviso to Sec 40(a)(ia) of the Act is retrospective and will apply from 1.4.2005. Once it is held that the Assessee is entitled to the benefit of 2nd proviso to Sec. 40(a)(ia) of the Act, the CIT(A) ought to have directed the AO to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. To the extent the recipients from the Assessee have so included the sum in their returns of income and filed the same, no disallowance u/s. 40(a)(ia) of the Act ought to have been sustained by the CIT(A). The CIT(A) ought to have also directed the AO that in case the recipient parties are not cooperating in providing details, the AO should call for the information u/s. 133(6) or 131 of the Act, for verification of the same. In this regard we also find that the Assessee has furnished all the details of assessment particulars of the recipients of payment from the Assessee. The AO therefore should not have any difficulty in making the required verification. We therefore set aside the order of the CIT(A) to the extent to which he had sustained the order of the AO on the disallowance u/s. 40(a)(ia) of the Act and remand the issue to the AO to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. To the extent the recipients from the Assessee have so included the sum in their returns of income and filed the same, no disallowance u/s. 40(a)(ia) of the Act should be made by the AO. In case the recipient parties are not cooperating in providing details, the AO should be directed to call for the information u/s. 133(6) or 131 of the Act, for verification of the same”. ./2015 Assessment year: 2009-2010 Page 5 of 5 I, accordingly, restore the issue relating to the disallowance of Rs.9,00,000/- under section 40(a)(ia) on account of payment of bus hire charges to the file of the Assessing Officer for deciding the same afresh in the light of the decision of the Tribunal in the case of Abhoy Charan Bakshi (supra) after verifying the claim of the assessee that the concerned recipients of the bus hire charges have already offered to tax the entire amount in question in their returns of income. Ground No.4 is accordingly treated as allowed for statistical purposes.

The issue raised in Ground No. 5 relating to the levy of interest under sections 234B, 234C and 234D is consequential and the Assessing Officer is accordingly directed to allow consequential relief to the assessee on this issue.

In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on September 28, 2016.