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2016 (1) TMI 401 - ITAT AHMEDABAD

2016 (1) TMI 401 - ITAT AHMEDABAD - TMI - Disallowance of employees contribution for PF & ESI - Held that:- This issue has been decided by the Hon’ble Jurisdictional High Court in favour of the Revenue in the case of CIT vs. Gujarat Road State Transport Corporation reported at (2014 (1) TMI 502 - GUJARAT HIGH COURT ) - Decided against assessee

Disallowance of expenses u/s.40(a)(ia) - deduction of tax paid after the specific date - contention of the ld.counsel for the assessee is that .....

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ided against revenue

Short deduction or non-deduction of TDS - disallowance of expenses by invoking the provisions of section 40(a)(ia) - Held that:- restore this issue back to the file of AO to verify whether any order u/s.201 has been passed against the assessee. In case, no order has been passed, the AO would decide this issue in the light of the judgement of the Hon’ble High Court of Delhi in the case of CIT vs. Ansal Land Mark Township (P) Ltd.(2015 (9) TMI 79 - DELHI HIGH COURT .....

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and debit entry of ₹ 72,000/-. The AO has added the entire entry entries of ₹ 3,94,000/- All these transactions have been routed through banking channel. The closing balance is of ₹ 1,52,000/-. We find that the AO has not given set off of these debit entries, when the transaction is routed through banking channel, identity of depositor is established, therefore in our considered view, the AO was not justified in making the disallowance of the entire credit entries amounting to .....

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his appeal by the Assessee is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-VI, Baroda [ CIT(A) in short] dated 01/07/2015 pertaining to Assessment Year (AY) 2010-11. The Assessee has raised the following grounds of appeal:- 1. The learned CIT(A) erred on facts and in law in confirming disallowance of additional depreciation of ₹ 1,51,059/-. 2. The learned CIT(A) erred on facts and in law in confirming disallowance of employees contribution for PF & ESI amoun .....

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in confirming addition u/s.68 for ₹ 3,94,000/-. Your appellant craves leave to add, alter and/or amend all or any of grounds before the final hearing of appeal. 2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as the Act ) was framed vide order dated 01/03/201, thereby the Assessing Officer (AO in short) made various additions on account of disallowances of expe .....

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of unexplained cash credit u/s.68 of the Act of ₹ 3,94,000/-. The assessee being aggrieved by the assessment order, preferred an appeal before the ld.CIT(A), who after considering the submissions of the assessee dismissed the appeal. Aggrieved by the order of the ld.CIT(A), now the assessee is further in appeal before us. 3. At the time of hearing, ld.counsel for the assessee submitted that he does not wish to press ground No.1. The ld.Sr.DR has no objection. In view of the statement made .....

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nd respectfully following the judgement of Hon ble Jurisdictional High Court in the case of CIT vs. Gujarat Road State Transport Corporation(supra), we dismissed the ground raised by the assessee. 5. Ground No.3 is against confirming disallowance of expenses u/s.40(a)(ia) of ₹ 18,53,850/- on account of deduction of tax paid after the specific date. The ld.counsel for the assessee submitted that the TDS was deposited before the due date for filing of return of income u/s.139(1). He drew our .....

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cord and gone through the orders of the authorities below as well as the judgement relied upon by the ld.counsel for the assessee. The contention of the ld.counsel for the assessee is that the TDS was deposited before the due date for filing of return. The law is well settled, in case the assessee has paid tax before the due date of filing of the return, then disallowance u/s.40(a)(ia) is not called for on the ground that TDS was not paid before the due date specified in the section. The Revenue .....

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st the assessee and, therefore, assessee cannot made subject to disallowance u/s.40(a)(ia) in view of second proviso inserted by Finance Act, 2012 w.e.f. 1.4.2013 but this amendment has been held to be curative and has retrospective effect from the date when section 40(a)(ia) was inserted by Finance (No.2) Act, 2004 by the judgement of Hon ble High Court of Delhi in the case of CIT vs. Ansal Land Mark Township (P) Ltd. in ITA 160/2015 & ITA 161/2015 dated 26/08/2015. 7.1. On the contrary, ld .....

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ane totalling to ₹ 18,29,036/-. The ld.CIT(A) confirmed this disallowance by observing as under:- 8.3. I have carefully considered the facts and the circumstances of the case, observations of the Assessing Officer, submissions of the assessee and the material available on record. The assessee has himself accepted that he is a defaulter on the payments made to M/s Om Sai Engineering. The assessee claims that it is a manufacturer or producer of articles or things, and in that sense, if it aw .....

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ir Crane, were his sub-contractors and not contractors. In the absence of any evidence, it cannot be accepted that the all the payees, except M/s Mahavir Crane, are assessee's sub-contractors. In the case of M/s Mahavir Cranes, which is a proprietary concern, the assessee submits that it is rent payment and since the total quantum of payment is below the threshold limit for deduction of tax, the assessee was not liable to deduct tax at source. However, the assessee has failed to produce a co .....

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M/s Mahavir Cranes was "rent". Therefore, his contention that he was not required to deduct tax on the total payments to M/s Mahavir Cranes cannot be accepted. In the result, the assessee has failed to establish that he has deducted the tax correctly and fairly on the payments made to various payees as per para 11 of the assessment order and therefore, these payments are liable to be disallowed u/s 40(a)(ia) of the Act. However, in the case of M/S Om Sai Engineering, the amount on whic .....

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d of ₹ 10,64,145/- as far as disallowance of payments to M/s Om Sai Engineering is concerned. The assessee fails on this ground of appeal. 8.1. The ld.counsel for the assessee has placed reliance on the judgement of Hon ble High Court of Delhi in the case of CIT vs. Ansal Land Mark Township(P) Ltd.(supra). The Hon ble High Court of Delhi has held as under:- 12. Relevant to the case in hand, what is common to both the provisions to Section 40(a)(ia) and Section 210(1) of the Act is that the .....

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(supra), the Court finds that it has undertaken a thorough analysis of the second proviso to Section 40(a)(ia) of the Act and also sought to explain the rationale behind it insertion. In particular, the Court would like to refer to para 9 of the said order which reads as under: "On a conceptual note, primary justification for such a disallowance is that such a denial of deduction is to compensate for the loss of revenue by corresponding income not being taken into account in computation of .....

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ions to that effect. Deincentivizing a lapse and punishing a lapse are two different things and have distinctly different, and sometimes mutually exclusive, connotations. When we appreciate the object of scheme of section 40(a)(ia), as on the statute, and to examine whether or not, on a "fair, just and equitable" interpretation of law- as is the guidance from Hon'ble Delhi High Court on interpretation of this legal provision, in our humble understanding, it could not be an "in .....

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view, a penalty for tax withholding lapse but it is a sort of compensatory deduction restriction for an income going untaxed due to tax withholding lapse. The penalty for tax withholding lapse per se is separately provided for in Section 271 C, and, section 40(a)(ia) does not add to the same. The provisions of Section 40(a)(ia), as they existed prior to insertion of second proviso thereto, went much beyond the obvious intentions of the lawmakers and created undue hardships even in cases in(whic .....

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given retrospective effect from the point of time when the related legal provision was introduced. In view of these discussions, as also for the detailed reasons set out earlier, we -cannot subscribe to the view that it could have been an '"intended consequence" to punish the assessees for non deduction of tax at source by declining the deduction in respect of related payments, even when the corresponding income is duly brought to tax. That will be going much beyond the obvious int .....

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usion that the said proviso is declaratory and curative and has retrospective effect from 1st April 2005, merits acceptance. 15. In that view of the matter, the Court is unable to find any legal infirmity in the impugned order of the ITAT in adopting the ratio of the decision of the Agra Bench, ITAT in (Rajiv Kumar Agarwal v. ACIT). 8.2. Looking to the totality of the facts of the case, we deem it proper to restore this issue back to the file of AO to verify whether any order u/s.201 has been pa .....

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in making the addition. The ld.counsel for the assessee submitted that confirmation, bank statement of depositor was produced. The assessee cannot be made scapegoat for non-appearance of depositor in compliance of summons issued to him. Even if the assessee was required to explain deposit so receipt only an amount of ₹ 1,52,000/- received on 17/11/2009 was to be explained. Balance amount was representing receipt of amount against advances made earlier or amounts squared up on the same dat .....

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r:- 9.3 I have carefully considered the facts and circumstances of the case, the observations of the AO, the submissions of the assessee material available on record and the judicial pronouncements on the subject. It is clear from the records that the assessee has failed to establish the identity and creditworthiness of the claimed creditor viz Shri Mustafa Abbasbhai. He refused to comply with the summons u/s 131 issued by the Assessing Officer. There are cash deposits in the account of Shri Mus .....

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redits by way of loan in his books of accounts and the onus is on him to prove the identity and creditworthiness of the creditor and also establish the genuineness of the transaction. In Rosahn Di Hutti vs CIT [1977] 107 ITR 938 (SC) and Kale Khan Mohammad Hanif vs CIT [1963] 50 ITR 1 (SC), it was held that the onus of proving the source of a sum of money found to have been received by an assessee is on him. Where the nature and source of a receipt, whether it be of money or other property, cann .....

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1980] 126 ITR 63 (Cal), it was held that in case of cash credit entry, it is necessary for the assessee to prove not only the identity of the creditor but also to prove capacity of the creditor to advance the money and genuineness of the transaction. Hon'ble Calcutta High Court has also held in the case of CIT vs Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal) that mere mention of Income-tax File No. of the creditor cannot be said to have proved the genuineness of the credit. Hon'ble Ca .....

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genuine since the transactions through cheque may be treated as genuine. However, in the absence of the proof of creditworthiness of the creditor, it cannot be accepted that the assessee has discharged the onus. In Nemi Chand Kothari vs CIT [2003] 264 ITR 254 (Gau), it was held that it cannot be said that a transaction which takes place through a cheque is always sacrosanct. 9.6 In view of the above discussion, it is clear that the assessee has failed to discharge" the burden of primary onu .....

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