MESAGE. NORTHERN TRASFORMERS. INDUSTRIAL ESTATE,SRINAGAR vs. INCOME TAX OFFICER WARD-2, SRINAGAR

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER

I.T.A. No.329/Asr/2019 Assessment Year: 2007-08

M/s Northern Transformers, Vs. ITO, Ward-2, Industrial Estate, Sanat Nagar, Srinagar, Kashmir (J & K) Srinagar, J & K. [PAN:- AADFN6327J] (Respondent) (Appellant)

Appellant by None. (Written Submission) Respondent by Sh. S.M. Surendranath, Sr. DR.

Date of Hearing 24.08.2022 Date of Pronouncement 26.08.2022

ORDER Per:Anikesh Banerjee, JM:

The instant appeal was filed by the assessee against the order of the ld. Commissioner of Income Tax(Appeals)-1, Amritsar, [in brevity the CIT(A)]

bearing appeal no. 87/2009-10,date of order 27.02.2019, the order passed u/s 250(6) of the Income Tax Act 1961, [in brevity the Act] for A.Y. 2007-08.The impugned order was originated against the order of the Income Tax Officer, Ward-

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2, Srinagar (in brevity the AO), order passed u/s 143(3) of the Act, date of order

21.12.2009.

transformers, conductors and steel tubular poles. During the year under

consideration, sale amount of Rs.53,13,804/- on which the gross profit was

declared amount to Rs.1,32,859/- which is worked out @ 2.5%. In assessment

proceeding the addition was made by disallowing the different expenses total

amount as of Rs.7,99,997/- which was added with the total income of the assessee.

Also, the disallowance of expenses u/s 40(a)(ia) for non-deduction of TDS u/s

194C for payment to transporter amount of Rs.22,850/- and Rs.26,723/- which is

worked out total amount of Rs.49,573/- was added back with total income of the

assessee.Aggrieved assessee filed an appeal before the ld. CIT(A). The ld. CIT(A)

upheld the addition made by AO.

Counsel filed a paper book and prayed to adjudicate the issues on basis of written

submission. With the consent of the ld. DR the matter is taken for adjudication.

4.1 Addition was made in different expenses like manufacturing charges, wages,

labour charges, salary, travelling, conveyance, staff welfare and maintaining the

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total amount of Rs.7,99,997/- &was added back with the total income of the

assessee on the ground that the expenses was booked on 31.03.2007. In this respect

the assessee made the submission in the paper book which is extracted as below: “Explanation from Assessee as to why expenses were debited on 31.03.2007 “During the year, the assessee received orders for erection of tubular poles in far flung areas under the Govt’s rural electrification scheme. Since it was not possible to erect such poles from the factory at Srinagar, it was decided to move erection infrastructure to the rural village (Wusun, Anantnag) & open a sub erection centre there. To meet the expenses of such centre, the assessee has paid amounts first as imprests to one of its partners through cheques duly drawn from banks and debited under the accounting head ‘advance against supplies’. The total imprest during the year amounted to Rs.7,83,130/- for which the partner has rendered accounts at the year end and accordingly expenses incurred out of such imprest booked on 31-03-2007’. Details of such expenses are enclosed”. Your honour, the above explanation is self-explanatory. Actually, during the year, the assessee received orders for erection & installation of tubular poles in far flung areas under the Gods rural electrification scheme. Since the men & material required for erection & installation of such poles was moved near the site, the expenses for the purpose were incurred

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through imprest given to partner who rendered the account at the year end. Your honor, in support of the above contention, the appellant assessee also furnished his bank account from which cheques have been drawn towards imprest account. The appellant assessee also submitted details of wages &labor charges and also salaries paid to staff at erection site.(These details were also submitted before worthy CIT(A), which is acknowledged by him in last para of page 4 of Appellate order).Since labor had to be engaged at remote sites, the appellant assessee had to arrange for their boarding expenses for which an amount of Rs. 50,000/- was incurred. The details of this expense head were also furnished. Vouchers for materials procured for erection like steel plates, welding rods, black glasses, gloves, electrodes etc are also furnished. .Your honor-All these expenses are very reasonable expense incurred wholly & solely for business purposes and its disallowance is a grave injustice to an assessee.lt needs to be appreciated that the mere fact that expenses have been booked on 31st March of the financial year out of the imprest paid to one of the partners cannot be held to be fake & fictitious merely on the ground of having been booked on last day of the year and infact it is a common practice in such types of businesses or eventualities that advances for expenses are first paid to managers or partners & then adjusted in books of accounts upon rendering of accounts by such persons. It is an absurd view to hold such expenses as

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fake and in view of the above details & information & explanation submitted to Ld. ITO & CIT (A), the addition needs to be deleted.” 5. The ld. Sr. DR argued and relied on the order of revenue authorities and not

made any strong objection against the submission of the assessee.

authorities. The assessee hadpaid the expenses through banking channel. The

amount was incurred out of such imprest booked on 31.03.2007, the details

explanation was filed by the assessee, supra. The expenses are paid in job-site and

all the expenses are accumulated from different site to head office which was

entered in books of accounts on dated 31.03.2007. The AO did not find any

specific lacuna or did not point out any discrepancies related to the expenses

disallowed amount of Rs.7,99,997/-. Without any specific finding the addition of

expenses is liable to be deleted.

6.1. The disallowance was made u/s 40(a)(ia) amount to Rs.49,573/-. In support the

assessee took the plea that the amount was paid not payable. So the section

40(a)(ia) will not be applicable. The assessee paid the transporter amount of

Rs.22,850/- and on date 26.06.2006 and dated 27.02.2007 amount of Rs.22,850/-,

accordingly the total amount is worked out amount to Rs.49,573/- which is

contravention of section 194C of the Act for non-deduction of TDS. The assessee

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was not able to clarify properly for reason for non-deduction of TDS on payment

to transporter. The assessee was unable to mention any supporting case law in

support of its reason for non-deduction of tax by contravening section 194C.

Accordingly, this ground of the assessee is deleted. The addition amount of Rs.

49,573/- is upheld.

allowed.

Order pronounced in the open court on 26.08.2022

Sd/- Sd/-

(Dr. M. L. Meena) (ANIKESH BANERJEE) Accountant Member Judicial Member

AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T.