2012 (8) TMI 1078 - HC - Income Tax

Disallowance of discount expenditure - Held that - The vouchers were signed evidencing the receipt of the discount by them. Similarly with regard to cash credit amount the six depositors furnished requisite details to prove their identity and showed the place of their residence. The loan was received through account payee cheques. Copies of bank statement was given and the details of Permanent Account Numbers were available. All these materials duly proved the genuineness of the transaction of loan as well as the creditworthiness of the depositors. Therefore the Tribunal did not commit any error in confirming the findings of CIT(A). Addition under section 40(a)(ia) the Tribunal noted that under the Finance Act 2010 the section was retrospectively amended with effect from 01-04-2005. As provided that the tax to be deducted at source in respect of any interest commission etc. was required to be paid before the date specified in sub-section (1) of section 139. As the assessee had deducted the tax during the last month of previous years and the same was deposited to the credit of the Government in the month of May 2005 i.e. before the due date specified in sub-section (1) of section 139 of the Act the expenses relating to the commission paid were allowable. Tribunal recorded its confirming findings on the basis of relevant material which were proper and reasonable. No substantial question of law to be considered by this Court.

Summary

Issues:
1. Disallowance of discount expenditure
2. Unexplained cash credit
3. Interest on unexplained cash credit
4. Disallowance under section 40(a)(ia)

Issue 1: Disallowance of discount expenditure
The appellant challenged the disallowance of discount expenditure by the Assessing Officer. The Assessing Officer contended that the discount expenses of &8377; 22,47,086 were not genuine. However, the Commissioner of Income-tax (Appeals) found evidence such as delivery challans, vouchers, and cheque details supporting the expenses. The CIT(A) directed the Assessing Officer to cross-examine parties, leading to confirmation of discount amounts by parties. The Tribunal upheld the CIT(A)'s findings, stating that the vouchers were signed, proving receipt of discounts. The Tribunal concluded that the Assessing Officer erred in disallowing the discount expenditure.

Issue 2: Unexplained cash credit
The Assessing Officer added &8377; 5,50,000 as unexplained credit due to lack of proper establishment of transaction genuineness and depositors' creditworthiness. The CIT(A) found that the appellant provided necessary documents like accounts, bank statements, and income tax returns of depositors, establishing their identities. Consequently, the CIT(A) deleted the addition of the cash credit amount. The Tribunal confirmed these findings, noting that depositors provided details proving their identity and creditworthiness through account payee cheques and bank statements.

Issue 3: Interest on unexplained cash credit
The Assessing Officer disallowed &8377; 1,46,016 as interest on cash credit due to treating the cash credits as unexplained. However, the CIT(A) held that the tax was deposited within the specified time, as per section 139(1), and thus, the addition was unwarranted. The Tribunal concurred with the CIT(A)'s decision, emphasizing that the expenses related to the commission paid were allowable as the tax was deducted and deposited before the due date specified in section 139(1).

Issue 4: Disallowance under section 40(a)(ia)
The Assessing Officer disallowed &8377; 3,16,100 as commission paid under section 40(a)(ia) due to delayed tax deduction at source. The CIT(A) held that the tax was deducted within the last month of the previous year and deposited before the due date specified in section 139(1). The Tribunal noted the retrospective amendment under the Finance Act, 2010, and allowed the expenses related to the commission paid. The Tribunal affirmed the CIT(A)'s findings, stating that the expenses were allowable as the tax was deducted and deposited before the specified due date.

In conclusion, the Tribunal found no substantial questions of law in the appeals, as it confirmed the findings based on relevant material. Consequently, both Tax Appeals were dismissed for lacking merit.