TMI Blog2016 (1) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... in the facts and circumstances of the case and rightly deleted by the CIT(A). - Decided against revenue Disallowance under section 36(1)(va) - Employees Contribution to PF & ESIC paid beyond due date - CIT(A) deleted the addition - Held that:- As submitted on behalf of the assessee that only delay is for the month of January, 2005 of ₹ 28,444/- which has been deposited on 17.02.2005, the payment though delayed has been made within grace period available under Employees Provident Fund Regulations. Similarly, for ESIC contribution, the payment is stated to have been made before due date of filing of return. The CIT(A) reversed the action of the Assessing Officer and allowed the expenses incurred by the assessee for impugned payment of PF and ESIC following the decision of CIT vs. P.M. Electronics, (2008 (11) TMI 3 - DELHI HIGH COURT). We find no error committed by the CIT(A) in coming to the aforesaid conclusion. - Decided against revenue Disallowance of TDS payment under section 40(a)(ia) - TDS payment made by the assessee beyond due dates - Held that:- the relevant provisions of section 40(a)(ia) of the Act would be applicable are as per amendment carried out by the Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following grounds of appeal :- 1. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) was justified in allowing excessive and unreasonable payments made by the assessee to the persons specified u/s. 40A(2)(b), when assessee had not discharged onus to prove reasonableness of the said expenditure. 2. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) was justified in relying on the decision of the Hon'ble Bombay High Court in case of Indo Saudi Services (Travel) (P) Ltd. (2009) 310 ITR 309 and deleting the disallowance made u/s. 40A(2)(b), when judicial decision in case of Nund Samount Co. P. Ltd 78 ITR 268 (SC) and CIT vs. Shatrunja Diamonds (261 ITR 258 (Bom) are squarely applicable to this case. 3. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) was justified in deleting disallowance made u/s.36(i)(va) for Employees Contribution to PF ESIC, which were paid beyond the due date. 4. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) was justified in deleting disallowance made u/s.40 (a)(ia) in respect of TDS paid in to the government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed by the Assessing Officer invoking provisions of section 40A(2)(b) of the Act. 6. The Assessing Officer further observed that in respect of interest expenses, the assessee has paid interest to person other than specified persons i.e. local parties at 6% whereas to the specified persons at the rate of 8%. Accordingly, he disallowed excess claim of 2% considering the same as unreasonable having regard to the fair market rate allowed by the assessee itself to the outsider by the local parties and consequent to the disallowance of ₹ 49,65,802/-. As a result, an aggregate amount to ₹ 1,23,87,860/- were disallowed. 7. Before the CIT(A), the assessee submitted that the detailed explanation filed by the assessee in justification of the reasonableness of the expenditure has not been considered by the Assessing Officer at all. Having regard to the detailed submissions made by the assessee reproduced in para 3.1 of the CIT(A) s order, the CIT(A) obtained remand report from the concerned Assessing Officer, Pune for which the rejoinder from the assessee was sought and reproduced in para 3.3 of the appellate order. The assessee, inter-alia, submitted that for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oup which specialized in purchase and blending of selected qualities of tea was entrusted with the task of tea purchase. Margin of 2% only on price at which Doshi Group parties covered u/s 40A(2) purchased tea at Calcuttta tea auction and from various tea gardens was retained by them while selling tea to appellant. Doshi group was in tea industry for over 40 years and the 2% margin was towards expertise of Doshi Group in purchasing the tea from various concerns. Margin of 2% is a reasonable margin for the functions performed by the sec 40(A(2) parties, i.e. Doshi group from which purchase was made. Considering these aspects and the fact that purchases at same margin from the same sec. 40A(2) parties were accepted by the AO from AY 2001-02 onwards without any disallowance u/s 40A(2), it is held that there was no justification to invoke provisions of section 40A(2) in respect of purchase of raw materials. Regarding purchase of packing material, advertisement and sales promotion, appellant had been charged on cost plus basis by the sister concerns supplying laminated packing material and providing advertisement and sales promotion services. Packing material in question was as per appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 5,49,59,480/-, i.e. far in excess of disallowance u/s 40A(2). Decision by Hon ble Bombay High Court in the case of Saudi Services (Travel) Pvt. Ltd. [2009] 310 ITR 306 (Bom) is relevant in this regard. To sum up, disallowance u/s 40(A)(2) of ₹ 1,23,87,860/- is cancelled and this ground of appeal is allowed. 9. Aggrieved by the order of the CIT(A), the Revenue is in appeal before us. 10. The Ld. Departmental Representative for the Revenue relied upon the order of the Assessing Officer and submitted that the onus rests on the assessee to prove the reasonableness of the payments made to the specified persons under section 40A(2)(b) of the Act, which has not been discharged. 11. The Ld. Authorized Representative for the assessee raised preliminarily objection that the jurisdiction for hearing this appeal lies with the Ahmedabad Bench of the Tribunal and not with this Bench situated at Pune. This is owing to the fact that the assessment order has been passed by the assessee situated at Baroda, Gujarat and therefore the appellate jurisdiction lies with the Ahmedabad Bench of the Tribunal in terms of Rule 4 of the standing orders under the Income Tax (Appellate Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... @ 8% is much lower than interest on bank borrowings @ 14.5% stated to have been paid by the assessee to the bankers, interest @ 6% were paid only to specific suppliers towards small amount of security credit of ₹ 66 lakhs only as against impugned credit of ₹ 30 crores @ 8%. Therefore, the token amount credit available @ 6% does not give proper foundation for comparison. In the light of aforesaid facts and circumstances, we are in complete agreement with the findings of the CIT(A) and therefore decline to interfere. Accordingly, we hold that disallowance under section 40A(2)(b) of the Act is not called for in the facts and circumstances of the case and rightly deleted by the CIT(A). Thus, the ground of appeal Nos.1 and 2 pertaining to disallowance under section 40A(2)(b) of the Act raised by the Revenue are dismissed. 14. The ground No.3 of the Revenue s appeal arises from the action of the CIT(A) in deleting the disallowance made by the Assessing Officer under section 36(1)(va) of the Act for Employees Contribution to PF ESIC which are paid beyond due date. 15. The Assessing Officer observed that Employees Contribution to PF ESIC were paid beyond due date und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2005-06 is dismissed. ITA No.159/PN/2012 (A.Y. : 2006-07) : 17. Now, we take-up the appeal of the Revenue for assessment year 2006-07 in ITA No.159/PN/2012. In this appeal, the Revenue has raised the following grounds of appeal :- 1. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) was justified in allowing excessive and unreasonable payments made by the assessee to the persons specified u/s. 40A(2)(b), when assessee had not discharged onus to prove reasonableness of the said expenditure. 2. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) was justified in relying on the decision of the Hon'ble Bombay High Court in case of Indo Saudi Services (Travel) (P) Ltd. (2009) 310 ITR 309 and deleting the disallowance made u/s. 40A(2)(b), when judicial decision in case of Nund Samount Co. P. Ltd 78 ITR 268 (SC) and CIT vs. Shatrunja Diamonds (261 ITR 258 (Bom) are squarely applicable to this case. 3. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) was justified in deleting disallowance made u/s.36(i)(va) for Employees Contribution to PF ESIC, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prove that identify, genuineness and creditworthiness in respect of the above cash credit is not proved. 20.2 Before the CIT(A), the assessee submitted that the lender, Shri Jayant Sanghavi is a reputed businessman in Vadodara. The Assessing Officer has come to the adverse conclusion on the ground that (a) the signature on PAN Card does not match with the signature on the confirmation letter; (b) Confirmation letter filed does not pertain to the relevant assessment year; and (c) Copy of the depositor s bank account is not furnished. Thus, the assessee has not discharged his burden of proving the genuineness of the cash credit. In defence, the assessee submitted before the CIT(A) that the confirmation letter showing the depositor s account for the year ended on 31.03.2007. The opening balance which includes the principal amount of ₹ 2 crores plus the accrued interest of ₹ 4,81,601/- (net of TDS). The account shows that the interest having been paid on 22.06.2006. The account shows entry for credit of interest of ₹ 12,00,000/- out of which TDS of ₹ 1,34,640/- is deducted. This confirmation is signed by Shobhit H. Shah, the Accounts Manager of the deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed confirmation from the party for the period ending 31.3.2007, copy of letter dt. 17.10.2005 from Jayant Sanghavi forwarding the account payee ABN Amro Bank cheque dated 18.10.2005 of ₹ 2 crore issued by Shri Jayant Sanghavi, copy of cheque, copy of the bank slip depositing said cheque in appellant's bank account, copy of the bank statement of the appellant showing credit of the cheque in appellant's bank account on 18.10.2005, copy of PAN card of Shri Jayant Sanghavi and copy of acknowledgement of return filed along with computation of total income by Shri Jayant Sanghavi for AY 2006-07. Confirmation letter filed by the appellant showed depositor's account for the year ended 31-3-2007 with opening balance as on 1.4.2006 of ₹ 2,04,81,601/-, which included principal amount of ₹ 2 crore plus the accrued interest of ₹ 4,81,601/- (net of TDS). The account showed the interest as above having been paid on 22-06-2006. Appellant had also filed copy of cheque dated 18.10.2005 of ₹ 2,00,00,000/- signed by Jayant Sanghvi, which was credited in appellant's bank account on the same day. After filing of confirmation as above, AO does not seem to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged. It is held that addition of ₹ 2,00,00,000/- u/s 68 was not justified and the same is deleted. 21. Before us, the Ld. Departmental Representative for the Revenue submitted that the Assessing Officer was justified in making the addition under section 68 of the Act when the basic ingredients to satisfy the bona-fides of the loan are not present, even the confirmation letter was not filed. He relied upon the order of the Assessing Officer. 22. The Ld. Authorized Representative on behalf of the assessee, on the other hand, submitted that the CIT(A) have come to the correct conclusion after examination of the facts and circumstances of the case. He, therefore, pleaded that no interference with the order of the CIT(A) is called for. 23. We have carefully considered the rival submissions and orders of the authorities below. We find that the documents filed by the assessee have not been purportedly examined. It is not clear whether all the documents filed before the CIT(A) were present before the Assessing Officer or not. We find that the confirmation letter has been filed for subsequent year which indicates the opening balance of the earlier year. We consider it nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s order may be restored. 5. The appellant craves leave to add, alter, amend, modify any of the above grounds raised, any other grounds at the time of proceedings before the Hon'ble Tribunal which may please be granted. 27. Ground Nos.1 and 2 of the Revenue s appeal for the assessment year 2007-08 are pari-materia with ground Nos.1 and 2 of the assessment year 2005-06 discussed earlier. Since the issues involved are identical and arising from the similar facts for the same assessee, We observe that the findings in respect of ground Nos.1 and 2 pertaining to assessment year 2005-06 shall apply mutatis-mutandis to the ground Nos.1 and 2 herein for assessment year 2007-08. Thus, the ground Nos.1 and 2 raised by the Revenue are dismissed. 28. The Ground No.3 of the Revenue s appeal consequential to Ground No.4 of the Revenue s appeal in ITA No.159/PN/2012 (supra). Accordingly, the issue is also set-aside to the file of the Assessing Officer. The Assessing Officer shall consider the issue afresh in the light of findings arrived at as per Ground No.4 (supra). Thus, the Ground No.3 of the appeal of the Revenue is allowed for statistical purposes. 29. In the result ..... X X X X Extracts X X X X X X X X Extracts X X X X
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