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Income Tax Appellate Tribunal, KOLKATA BENCH “A” KOLKATA
Before: Shri N.V.Vasusdevan & Shri Waseem Ahmed
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
Both appeals by the assessee are against the different orders of Commissioner of Income Tax (Appeals)-XIX, Kolkata but even date of 11.01.2013. Assessments were framed by ITO Ward-40(1), Kolkata u/s 143(3)(ii)/143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide their orders dated 15.12.2008 & 29.12.2010 for assessment years 2006-07 and 2007-08 respectively.
Both the appeals are heard together and are being disposed of by way of common order for the sake of convenience.
ITA No.967-968/Kol/2013 A.Ys. 06-07 & 08-09 Dipak Chowdhury v. ITO, Wd-40(1) Kol. Page 2 First we take up ITA No.967/Kol/2013 for AY 06-07. 3. Grounds raised by assessee are reproduced below:- “1.That the Learned Commissioner of income Tax (Appeals) erred in confirming the disallowance of Rs.26,99,386 on account of Hire Charges paid by the Assessee on the alleged ground that the assessee failed to discharge his onus of establishing the genuineness of such expenses. 2. That the Learned Commissioner of Income Tax (Appeals) erred in saying that the assessee failed to deduct tax at source u/s. 194C of the Act on the sum of Rs.26,99,386 paid by the Assessee as Hire Charges of Dupers for is business of transportation of Coal. 3. That the Learned Commissioner of Income Tax (Appeals) further erred in saying that the Assessing Officer was justified in not issuing summons under section 131of the Income Tax Act, 1961 to discharge the primary onus cast on assessee to establish the genuineness of the expenses. 4. That the Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.20,000 on account of Balance Sheet difference by wrongly treating it as an unexplained investment. 5. That the Learned Commissioner of Income Tax (Appeals) failed to decide on the ground raised by the assessee for charging of interest under section 234A and section 234B of the Act.“
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.
The facts of case are that assessee is an individual and engaged in transport business under the name and style of M/s Choudhury & Co. During the year assessee has made payments of dumper hire charges and repair & maintenance of dumper to the following parties: 1. Nima Chandra Nath 4. Md. Manir 2. Md. Mayin 5. Ajoy Kumar Singh 3. Om Prakash Yadav 6. Prabhat Ghosal These dumpers were hired by assessee and same were given on hiring basis to M/s Bengal Emta Coal Mines Ltd. During the course of assessment proceedings, AO requested the assessee to produce the bills in support of
ITA No.967-968/Kol/2013 A.Ys. 06-07 & 08-09 Dipak Chowdhury v. ITO, Wd-40(1) Kol. Page 3 dumper hire charges, repair and maintenance charges along with the residence proof, ID proof, income tax return and balance-sheet of the person to whom the payments were made. However, assessee failed to produce any such documents as required. The AO also further noted that assessee has incurred dumber hire charges, repair and maintenance charges without deducting Tax Deducted at Source (TDS). Accordingly, Assessing Officer disallowed the claim of assessee and added it to the total income of assessee.
Aggrieved, assessee preferred an appeal before Ld. CIT(A) who has confirmed the action of AO.
Being aggrieved by this order of Ld. CIT(A) assessee preferred second appeal before us.
Shri A.K.Tibrewal and Shri Amit Agarwal, Ld. Authorized Representatives appearing on behalf of assessee and Shri Anil Kr. Pande, Ld. Departmental Representative appearing on behalf of Revenue.
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.
ITA No.967-968/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
ITA No.967-968/Kol/2013 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.
The Agra Tribunal in the case of Rajiv Kumar Agarwal-vs-ACIT [2014] 45 taxmann.com 555 (Agra – Trib) had held that the second proviso to Section 40(a)(ia) is declaratory and curative in nature and has retrospective effect from 1st April, 2005, being the date from which sub- clause (ia) of section 40(8) was inserted by the Finance No.2) Act, 2004, even though the Finance Act, 2012 had not specifically stated that proviso is retrospective in nature. The High Court affirmed the ratio laid down by the Agra Tribunal and held that said provisos is declaratory and curative in nature and ha retrospective effect from 1st April, 2005.”
Respectfully following the aforesaid decision of the Hon'ble Delhi High Court in the case of Ansal Land Mark Township (P) Ltd., (supra) we deem it fit and appropriate in the interest of justice and fair play to set aside this issue to the file of AO to decide the issue afresh in the light of the aforesaid judgment. Accordingly, we direct the AO to verify whether the payees have included the subject-mentioned receipts in their respective returns and paid taxes thereon or not. If that is so, then disallowance u/s. 40(a)(ia) of the Act shall not be made in the hands of assessee. Accordingly, we allow assessee’s common grounds 1 to 3 for statistical purposes.
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/-.
ITA No.967-968/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.
Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us. 10. 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
ITA No.967-968/Kol/2013 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.
Ground No. 5 raised by assessee for charging of interest u/s 234A/234B of the Act. This is consequential in nature and does not require any adjudication at this stage because the matter is already restored back to the file of Assessing Officer.
In the result, assessee’s appeal is partly allowed for statistical purpose. Coming to ITA No.968/Kol/2013 for AY 08-09. 13. 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.
The assessee supplied dumpers to BECML on hire for lifting and loading coal to truck or railway wagon. The assessee used to raise the bill for the said dumpers given on hire to BECML. As per the terms & conditions BECML shall pay the fuel cost for the dumper when it is in its custody for the use of the business. However the fuel cost paid by the BECML shall be adjusted/ deducted from the bill raised by the assessee. Accordingly BEMCL deducted a sum of Rs. 33,76,944.00 from the bill of the assessee but the AO observed during assessment proceedings that the fuel expenses claimed by the assessee in profit and loss account by ₹36,76,403/. Accordingly the AO
ITA No.967-968/Kol/2013 A.Ys. 06-07 & 08-09 Dipak Chowdhury v. ITO, Wd-40(1) Kol. Page 8 treated the difference of Rs.2,99,459/- as unexplained expenditure u/s. 69C of the Act.
Aggrieved, assessee preferred an appeal before Ld. CIT(A) who confirmed the action of AO.
Being aggrieved by this order of Ld. CIT(A) assessee preferred second appeal before us.
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.
On the other hand, Ld. DR relied on the orders of authorities below.
17 From the aforesaid discussion, we find that AO has treated the sum of ₹2,99,459/- as unexplained expenditure u/s. 69C of the Act as this fuel cost was not reflecting in the accounts of BECML. However the ld. AR submitted that this cost of fuel was paid by the assessee from the premises of the dumper owner to the place of the BECML. Therefore the same shall not be
ITA No.967-968/Kol/2013 A.Ys. 06-07 & 08-09 Dipak Chowdhury v. ITO, Wd-40(1) Kol. Page 9 reflected in the statement of BECML. We find that the authorities below have disallowed the difference amount of ₹2,99,459/- on the ground that it was not reflecting in the statement of BECML. However we find from the ground raised by the assessee that the amount of ₹2,99,459/- was paid by the assessee directly for the running of the dumper from the place of dumper owner to the work place of BECML and when the dumper was not in the custody of BECML. The lower authorities have not considered this aspect in their order as raised in the ground of appeal by the assessee. Therefore in our considered view this aspect of the fuel cost needs to be verified by the AO. So we in the interest of justice & fair play restore this matter to the file of AO for fresh adjudication as per law after taking the proper opportunity to the assessee.
In combined result, ITA No.967/Kol/2013 partly allowed for statistical purpose and that of ITA No. 968/Kol/2013 is also allowed for statistical purpose. Order pronounced in the open court 09/03/2016
Sd/- Sd/- (N.V.Vasudevan) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp �दनांकः- 09/03/2016 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. आवेदक/Assessee-Dipak Chowdhury, Block-L, Flat No-4, Maniktala Govt. Housing Estate, VIP Road, Kolkata-700 054 2. राज�व/Revenue-ITO Ward-40(1), 4th Fl, Poddar Court, 18, Rabindra Sarani, Kol-01 3. संबं�धत आयकर आयु�त / Concerned CIT Kolkata 4. आयकर आयु�त- अपील / CIT (A) Kolkata 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file. By order/आदेश से, /True Copy/ उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, कोलकाता ।