DIPAK CHOWDHURY,KOLKATA vs. I.T.O WD - 40(1),KOLKATA., KOLKATA

The first issue in relation to grounds No. 1 to 3 raised in this appeal is that Ld. CIT(A) erred in confirming the action of Assessing Officer by disallowing a sum of ₹26,99,386/- on account of hire charges.

Aggrieved, assessee preferred an appeal before Ld. CIT(A) who has confirmed the action of AO.

We have heard rival submissions of both the parties and perused the materials available on record. Before us Ld. AR submitted paper book which is running pages from 1 to 35. Our attention was drawn on pages 6 to 20 where PAN cards, voter ID cards, RC of vehicle, medical insurance certificate etc. were placed in support of the identity of the persons to whom the payments were made. The Ld. AR further submitted that assessee has incurred same expenses in AY 2008-09 but the identity of above party was not disputed. Accordingly the ld. AR pleaded that payment were made to genuine parties only and prayed for the allowance of the expenses. The Ld. AR also submitted that regarding the provision of TDS there is an amendment in the Finance Act, 2012 which states that if the recipient has made the provision for tax then disallowance should not be made u/s 40(a)(ia) of the Act. On the contrary, Ld. DR vehemently relied on the orders of authorities below. -968/Kol/2013 A.Ys. 06-07 & 08-09 Dipak Chowdhury v. ITO, Wd-40(1) Kol. Page 4

From the aforesaid discussion, we find that expense incurred by assessee on hiring, repair and maintenance of dumpers were disallowed on account of two reasons – firstly the identity and genuineness of the parties were not produced before authorities below and secondly – TDS provision were not complied by assessee while making the above payments. We find force from the submission of Ld. AR regarding the genuineness of the parties as necessary details were placed on record. We also note that the payments to the same parties were also made in AY 2008-09 and the identities of the parties were not disputed. Therefore, the disallowance on account of identity of party cannot me made. Further, we also find that there is amendment of proviso to Sec. 40(a)(ia) of the Act r.w.s 1st proviso to Sec. 201, wherein, if any payee has paid the taxes by offering / disclosing the said receipt in its return of income, then the payer (the assessee herein) should not be treated as assessee in default. Accordingly no disallowance u/s. 40(a)(ia) of the Act could operate in that scenario. The said proviso though inserted by the Finance Act 2012 w.e.f 1-4-2013 has been held to be retrospective in operation by recent decision of the Hon'ble Delhi High Court in the case of CIT v. Ansal Land Mark Township (P) Ltd. (2015) 61 taxmann.com 45 (Del) wherein the question raised before the court and the decision rendered thereon is reproduced herein below for the sake of clarity:- “Question: Whether the second proviso to Section 40(a)(ia) (inserted by the Finance Act, 2012), which states that TDS shall be deemed to be deducted and paid by a deductor if resident recipient has disclosed the amount in his return of income and paid tax thereon, is retrospective in nature or not?” Held: Section 40(a)(ia) was introduced by the Finance (No.2) Act, 2004 to ensure that an expenditure should not be allowed as deduction in the hands of an assessee in a situation where income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. Hence, section 40(a)(ia) is not a penalty provision for tax withholding lapse but it is a provision introduced to compensate any loss to the revenue in cases where deductor hasn’t deducted TDS an amount paid A.Ys. 06-07 & 08-09 Dipak Chowdhury v. ITO, Wd-40(1) Kol. Page 5 to deductee and, in turn, deductee also hasn’t offered to tax income embedded in such amount The penalty for tax withholding lapse per se is separately provided under section 271C and, therefore, section 40(a)(i) isn’t attracted to the same. Hence, an assessee could not be penalized under section 40(a)(ia) when there was no loss to revenue.

Next issue raised by assessee is that Ld. CIT(A) erred in confirming the action of AO by making an addition of Rs.20,000/- on account of balance- sheet difference by wrongly treating it as unexplained investment. This addition relates to difference in the opening balance of the party M/s Bengal Emta Coal Mines Ltd. (BECML for short) and as per the confirmation received from the said party the work-in-progress was shown for ₹5,93,863/- whereas assessee has shown the balance in its books of account for Rs.5,73,863/-. -968/Kol/2013 A.Ys. 06-07 & 08-09 Dipak Chowdhury v. ITO, Wd-40(1) Kol. Page 6 The difference between the figures was treated as unexplained investment by AO and added to the total income of assessee.

Aggrieved, assessee preferred an appeal before Ld. CIT(A) who confirmed the action of AO.

We have heard rival contentions of both the parties and perused the materials available on record. Before us Ld. AR submitted that assessee has followed the mercantile system of accounting and all the bills were raised to the parties were duly recorded in its books of account and showed in its return of income also. Therefore, the difference between the books of assessee with that of party does not bring any undisclosed income and deserves to be deleted. On the contrary, Ld. DR vehemently relied on the orders of authorities below.

From the aforesaid discussion, we find that during the course of assessment proceedings AO found the difference of small amount at Rs.20,000/- between ledger provided by party and amount show by assessee its books of account. However, we find from the order of authorities below that the addition was made by the AO on account of the difference in the balance- sheet item but without disputing gross income declared by assessee. The difference of ₹20,000/- is arising from the ledger of the party of assessee which is a regular party and to whom assessee raises the bill for the services provided. In our view the AO failed to bring on record the bill of income which has not been recorded in the books. Therefore, we find that the difference crept out of the balance-sheet item does not result as understatement of income. Accordingly we are convinced by the reasoning adduced by assessee. Accordingly in our considered view, the addition made by AO on account of unexplained investment for Revenue account which subsequently A.Ys. 06-07 & 08-09 Dipak Chowdhury v. ITO, Wd-40(1) Kol. Page 7 confirmed by Ld. CIT(A) is without any sound basis. We therefore are inclined to reverse the orders of authorities below and delete the same accordingly. This ground of assessee’s appeal is allowed.

In the result, assessee’s appeal is partly allowed for statistical purpose. Coming to for AY 08-09.

Issue raised in ground No. 1 to 3 are exactly identical except amount as we have already discussed in AY 2006-07 and in terms of above, we restore this matter before Assessing Officer for fresh adjudication in the light of amended provision of Finance Act, 2012. Hence, this ground of assessee’s appeal is allowed for statistical purpose.

Last ground raised by assessee is that Ld. CIT(A) erred in disallowing the expenditure of ₹2,99,459/- towards the cost of fuel by invoking u/s 69C of the Act.

Aggrieved, assessee preferred an appeal before Ld. CIT(A) who confirmed the action of AO.

We have heard rival contentions and perused the materials available on record. Before us Ld AR submitted that assessee was engaged by M/s BECML for lifting and loading coal to trucks and rail wagons. As per agreement the fuel cost for running of dumpers was to be paid by BECML when the dumper is in the custody of it and the will be adjusted from the gross bill raised by assessee. However when the dumpers are not in the custody of BECML i.e. not used for the business of BECML then the fuel cost was to be paid by the assessee. Accordingly, the ld. AR submitted that the fuel cost incurred for the running of the dumper from the place of dumper owner to the work place of BECML was paid by the assessee himself. Therefore the difference of ₹2,99,459/- for the fuel cost was paid directly towards the running of the dumper between the place of dumper owner to the work place of BECML. So the amount of ₹2,99,459/- was not reflecting in the statement given by BECML.