JAVAHARLAL S DHARIWAL,SURAT vs. ITO WARD 1(2)(2), SURAT

Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of Ld. Commissioner of Income-Tax (Appeals)-2, Surat [for short to as “Ld.CIT(A)”] dated 30.01.2020 for assessment year 2013- 14, which in turn arises out assessment order passed by Income-tax Officer-ward-1(2)(2), Surat/Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 12.02.2016. The assessee has raised the following grounds of appeal:-

(A.Y 13-14) Javaharlal S Dhariwal 2. On the facts and circumstances of the case as well as law on the subject the learned CIT(A) has erred in partly confirming the action of Assessing Officer by sustaining the disallowance of Rs.2,46,915/- out of total disallowance of Rs.4,93,830/- on account of machinery salary expenses.

5. Appellant craves leave to add, alter or delete any ground(s) either of appeal.” 2. Brief facts of the case are that assessee is an individual, during the year under consideration, the assessee offered income from business and profession and from other sources. The assessee while filing his return of income offered at Rs.2,88,160/- as taxable income. The case was selected for scrutiny. During the assessment, Assessing Officer noted that assessee has shown various expenses, which includes transport expense paid to Kishan Tempowala of Rs.1,80,170/-; interest payment to Nareshbhai Kumbhani, Jograj Sampatraj & Co. and Jograj S. Rana (HUF) of Rs.68,958/-, Rs.48,125/- respectively. On payment of such expenses, the assessee has not deducted Taxes at Sources (TDS) as required under section 194C (A.Y 13-14) Javaharlal S Dhariwal r.w.s. 194A of the Act. The assessee was given show cause by the assessing officer as to such expenses may not be disallowed. The assessing officer recorded that no response was made nor any detailed like PAN, or addresses of the parties were furnished. The Assessing Officer in absence of detailed made a disallowance of Rs.3,45,378/- under section 40(a)(ia) of the Act. The Assessing Officer further noted that assessee has also paid Rs.24,69,150/- in cash on account of “machinery salary”. The assessee was asked to furnish details of such expense. Assessing officer recorded that no details were furnished by assessee nor name and address of person to whom said expenses were paid, were given. Accordingly, in absence of such details the assessing officer disallowed 20% of such expense, thereby worked out the disallowance of Rs.4,93,830/-. The Assessing Officer also noted that under the head “income from other sources” of Rs.36,693/-. The assessee claimed interest expenses of Rs.3,95,466/-. The assessee was asked to furnish relevant details. The Assessing Officer recorded that despite service of show cause notice, no details of parties nor evidence for justification of such expenses were (A.Y 13-14) Javaharlal S Dhariwal furnished. The Assessing Officer disallowed interest expense of Rs.3,95,466/- and back to the total income of assessee.

3. Aggrieved by the additions in the assessment order, assessee filed appeal before Ld. CIT(A). Before Ld. CIT(A) the assessee filed his detailed submission on various disallowances. The submission of assessee is recorded in para-5 of order of Ld. CIT(A). On the disallowance u/s 40(a)(ia) of Rs.3,45,378/-, the assessee submitted that payments to Kishan Tempowala for transport expenditure, the assessee furnished copy of PAN along with vouchers. Against expenses of interest payment to three parties, assessee submitted that they have furnished for 15G/15H relating to non-deduction of TDS as their income was less than basic exempt limit. On the machine salary expense, the assessee submitted that machine salary paid by assessee regarding machineries, which were running all the times and machine salary pertains to ten machines. The assessee submitted that during assessment proceedings, no such show cause notice issued by Assessing Officer regarding disallowances of machines salary expenses. On the disallowance of interest expense of Rs. 395,466/-, the (A.Y 13-14) Javaharlal S Dhariwal assessee submitted that assessee availed loan for investment in his proprietary concern, “Vitrag Creation”. The assessee furnished bifurcation of such expense, the assessee furnished capital account showing the interest expense claimed and confirmation of all the parties along with Income Tax Return shown that they have taken interest as “income in computation of their income”. The submission of assessee was remanded back to Assessing Officer for his remand report. The Assessing Officer furnished his remand report on 12.08.2016. In the remand report, the assessing officer objected for admissions of additional evidence. On the addition of interest expenses disallowances the assessing officer reported that assessee furnished computation of income, confirmation of account of all three persons namely Nareshbhai, Shah Jigraj Sampatraj & Co and Jograj S Rana. However, the details of form15G/15H were not furnished. Against deduction of interest expense under section 57, the assessing officer reported that the assessee was asked to file partwise details of interest expenses with justification of allowably under the head “other sources”. The deduction claimed in no way (A.Y 13-14) Javaharlal S Dhariwal incurred for the purpose of earning income offered under the head ‘other sources’ of Rs. 36,693/-. The assessee in his rejoinder submission, repeated the earlier submission made before Assessing Officer.

4. The Ld. CIT(A) after considering the submission of assessee granted partial relief to assessee. On disallowance u/s 40(a)(ia) of the Act, the Ld. CIT(A) held that out of total disallowance of Rs.3,45,378/- under section 40(a)(ia), the addition of Rs.1,65,208/- relates to interest expense and Rs.1,80,170/- on account of transport expense. The Ld. CIT(A) held that so far as addition of interest expense is concerned, if the Nareshbhai Kumbani, Jograj Sampatraj and Co. and Jogrtal S. Rana (HUF) have included interest in their ITR, the assessee would get relief provide as they fulfilled the condition of proviso to Section 40(a)(ia) r.w.s. 201(1) of the Act. However, assessee has not furnished required certificate as per Rule 31ACB in Form 26A so the condition was confirmed. On the other disallowance of transport expense, the Ld. CIT(A) held that assessee only provided PAN of the transporter and no other evidence, the Assessing Officer pointed out without various lacunae, (A.Y 13-14) Javaharlal S Dhariwal which has not been satisfactorily explained in rejoinder. Therefore, such addition was also confirmed by Ld. CIT(A). On the disallowance of Rs.4,93,830/- on account of machinery expenses, the Ld. CIT(A) restricted to 10%, against 20% disallowed by assessing officer. On other disallowance of interest expense, the Ld. CIT(A) held that no certificate as required under Rule 31ACB in Form 26A was furnished. Thus, the addition was upheld. Further aggrieved assessee has filed present appeal before the Tribunal.

(A.Y 13-14) Javaharlal S Dhariwal 6. On the other hand, Ld. Sr-DR for the Revenue submits that assessee has not furnished any other evidence except PAN of transporter though remaining all other submission as made by assessee has already been considered by Ld. CIT(A) while deciding the issue in question.