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2016 (7) TMI 1607 - ITAT INDOREAddition u/s 40(a)(ia) - addition made on account of interest paid on EMI for purchase of vehicles - Assessee contended that since no amount was outstanding payable to the above parties as at the end of the year on 31st March, 2011, the assessee was not liable to deduct TDS from the payments made to the five parties during the year under consideration - HELD THAT:- We find that recently in RKP COMPANY VERSUS INCOME TAX OFFICER WARD 1, KORBA [2016 (7) TMI 447 - ITAT RAIPUR] similar issue decided in favour of assessee. Further, the second proviso appended to Section 40(a)(ia) by the Finance Act, 2012, w.e.f. 01.04.2013, provides that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVIIB, on any such sum, but is not deemed to be an assessee in default under the first proviso to sub Section (1) of Section 201, then for the purpose of this sub Section (1) shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso. We find that the assessee filed certificates from the Chartered Accountants of the five payee companies before the ld. CIT(A) to contend that as the payee companies have shown the amount of interest in the return of income filed and paid due taxes thereon, therefore, in view of the second proviso to Section 40(a)(ia) of the Act, no disallowance was exigible in the case of the assessee u/s 40(a)(ia) of the Act. The ld. CIT(A) has not adjudicated on this plea of the assessee while confirming the disallowance made by the AO. Hon'ble Delhi High Court in the case of CIT vs. Ansal Land Market Township Private Limited [2015 (9) TMI 79 - DELHI HIGH COURT] has held that second proviso to Section 40(a)(ia) of the Act is declaratory and curative and has retrospective effect. Therefore, we hold that the disallowance cannot be made u/s 40(a)(ia) of the Act on this count also. Thus, this ground of appeal of the assessee is allowed. Addition under the head “unsecured loan” and interest paid thereon - HELD THAT:- In the instant case, there was some enquiry made by the DDIT in the case of Shri Shailendra Biyani, where it was found that the company did not have the creditworthiness to advance loan and that the Directors of the Company did not appear before the DDIT. This information and material was not confronted to the assessee by the AO during the course of the assessment proceedings or even during the course of first appellate proceedings. Therefore, the said material cannot be used or read against the assessee, as the same has not been controverted to the assessee. We rely on a very recent decision of H. R. Mehta vs. ACIT, [2016 (7) TMI 273 - BOMBAY HIGH COURT] wherein held that on a very fundamental aspect, the Revenue was not justified in making addition at the time of reassessment without having first given the assessee an opportunity to cross examine the deponent on the statement relied upon by the ACIT. Quite apart denial of an amount of cross examination, the Revenue did not even provide the material on the basis of which the Department sought to conclude that the loan was bogus transaction. This is not having been done, the denial of such opportunity goes to the root of the matter and strikes at the very foundation of the reassessment and, therefore, renders the orders passed by the CIT(A) and the Tribunal vulnerable. We hold that the addition of unsecured loan and interest paid thereon was not justified in the present case as the material collected in the case of Shri Shailendra Biyani in the case of the M/s. East West Finvest India Limited was neither confronted to the assessee nor the assessee was allowed any opportunity of cross-examination of the giver of the statement. - Decided in favour of assessee.
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