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2016 (10) TMI 495 - ITAT KOLKATA

2016 (10) TMI 495 - ITAT KOLKATA - TMI - Unaccounted purchases - addition made by Assessing Officer from M/s Konked International which was not verified u/s. 133(6) - AO has made the addition on the ground that inspector could not trace the address of the party M/s KI and notice issued u/s. 133(6) of the Act was returned un-served - Held that:- the payment was made by assessee through account payee cheque and that party was duly registered with Sales Tax Departments of Govt. of West Bengal. Ther .....

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CIT(A) and we also rely in the judgment of Hon'ble jurisdictional High Court in the case of Diagnostics vs. CIT & ANR (2011 (3) TMI 15 - CALCUTTA HIGH COURT ). - TDS u/s 194C - Non-deduction of TDS on transport charges - Held that:- At the outset we find that the provisions of section 194C of the Act were made applicable to the individual assessee w.e.f. 1.6.2007 and it is admitted position that the matter relates to the assessment year 2006-07. Therefore in our considered view the assesse .....

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he payment was made through account payee cheque. The lower authorities have not confronted the reply received from the party under section 133(6) of the Act to the assessee. There was no defect in the bills of the purchases of the party. The ld. CIT(A) has given clear finding that the payment to the P. Beriwal has been made as authorized by the party M/s SE. The ld. DR has not brought anything on record contrary to the findings of ld. CIT(A). Hence we do not find any reasons to interfere in the .....

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instant case the AO has not brought any defect in the amount of purchases shown by the assessee in relation to the excess balance of the party. Therefore in our considered view the AO should have disallowed the amount of the purchases corresponding to the excess balance shown by the assessee. In the instant case before us the AO has admitted all the purchases as genuine in relation to the excess balance shown by the assessee for ₹ 90752.00. The AO has not taken into account the opening ba .....

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order of learned CIT(A). Hence this ground of appeal of the Revenue is dismissed. - Short deduction of TDS under section 194-I viz a viz 40(a)(ia) - whether the expenses claimed by the assessee are allowable deduction though the TDS on such expenses has been deducted at the lower rate? - Held that:-From the provisions of section 40(a)(ia) of the Act we find that it requires deduction of tax and deposit of tax in Government account. The provisions of section are silent to treat the assessee a .....

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separate orders of Commissioner of Income Tax (Appeals)-XIX, Kolkata dated 12.08.2013. Assessments were framed by DCIT, Circle-33, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his orders dated 24.12.2008 & 22.12.2009 for assessment years 2006-07 & 2007-08 respectively. Shri Satyendra Mohan Das, Ld. Senior Departmental Representative appeared on behalf of Revenue and Shri Rajeeva Kumar, Ld. Advocate appeared on behalf of assessee. 2. Both the .....

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facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) has erred in deleting the addition made on account of outstanding liability in relation to M/s Bharat Somani as the same could not be verified. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) has erred in deleting the addition made on account of non-deduction of TDS on transport charges u/s/s 40(a)(ia) of the Income-tax Act, 1961. 4. First issue raised by Revenue is that Ld. .....

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. 133(6) of the Act was issued for confirmation but returned as un-served with the remarks that there was no such party in the given address . On question by AO the assessee failed to offer any explanation about the genuineness of the party, therefore same was disallowed and added to the total income of assessee. 6. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who deleted the addition made by AO by observing that M/s KI, a registered dealer with Sales Tax Department with Govt. of We .....

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e ground of non-service of notice and inspector report. Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 7. Before us both the parties relied on the order of Authorities Below as favourable to them. We have heard rival contentions and perused the materials available on record. We find that AO has made the addition on the ground that inspector could not trace the address of the party M/s KI and notice issued u/s. 133(6) of the Act was returned un-served. However, Ld. CI .....

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the judgment of Hon'ble jurisdictional High Court in the case of Diagnostics vs. CIT & ANR (2011) 334 ITR 111 (Cal). The relevant portion of the judgment is reproduced below : So far as the purchases from SE and INT were concerned, the alleged payments being made in cash and the amount involved being ₹ 50,675 and ₹ 1,00,737 respectively during the relevant assessment year and at the same time, the appellant having failed to produce any of the parties except the bills alleged .....

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lant had no business transaction with SP and consequently, the said party did not co-operate with the AO. However, the transaction having taken place through account payee cheques, the contention of the advocate appearing for the Revenue that the transaction was a non-existent one cannot be accepted. If an assessee took care to purchase materials for his business by way of account payee cheques from a third party and subsequently, three years after the purchase, the said third party does not app .....

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n law in reversing the finding arrived at by the CIT(A) accepting the said transaction as a genuine transaction. Since the payment was made by account payee cheques and was encashed through the bankers, disallowance was not called for; however, disallowance was sustainable in respect of payment made in cash to other two parties in respect of which the assessee had not been able to produce the parties to prove the genuineness. Respectfully, following the above precedents of the above case, we do .....

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s un-served. On question by the AO about non-service of notice assessee could not reply, accordingly, AO disallowed the same as unexplained claim and added to the total income of assessee. 10. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who deleted the addition by observing as under:- 6.1 The facts on this issue are exactly similar to those of Konked International dealt with above. The appellant made purchases of raw materials (Ballast) for sum of ₹ 8.31,748/-, which was incl .....

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nd State and bank statement were filed before the AO in response to his letter dated 16.12.200, a copy of which is also filed during appellate proceedings. As in the case of Konked International, the AO alleged that the notice u/s. 133(6) of the Act could not be served by postal authorities and even by the Inspector deputed by the department, which promoted him to treat the transaction ingenuine, resulting in addition to the total income as unexplained credit. For the reasons discussed hereinabo .....

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in his supply bills were disallowed u/s. 40(a)(ia) of the Act. If total effect of these two is taken together, the total addition would be more than the total transaction of the appellant entered with Bharat Somani. I have verified this fact and found the same true. Therefore, by the said action of the AO it emerges that the impugned addition of ₹ 4,000,000/- was made by the AO purely on assumption and addition on such hypothesis cannot be entertained on the facts and circumstances of the .....

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on of Sec. 40(a)(ia) of the Act and relied on the order of AO. He lastly, left the issue to the discretionary of the Bench. On the other hand, Ld. AR relied on the order of Ld. CIT(A). 12. We have heard the rival contentions and perused the materials available on record. At the outset, we find that AO has made the addition on account of non-existence of the party however payment was made through account payee cheque, so the identity of the party cannot be doubted. Therefore, we do not find any r .....

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e by AO on account of non-deduction of transport charges. The assessee for the year under consideration has claimed transport charges for ₹ 25,32,484/- on which no TDS was deducted by assessee. On question by AO about the non-deduction of TDS assessee submitted that transport charges are the part and parcel of raw material purchased by assessee. Therefore, the question of TDS deduction does not arise. However, AO disregarded the claim of assessee by observing that the transport charges hav .....

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ned assessment order. It is apparent from the table (supra) that except in the case of Suresh Gupta, in all other cases of three suppliers, the cost of transportation was higher than the cost of materials supplied by those parties. The AR tried to explain that the suppliers were charging the price of raw materials for their convenience under different headings seemingly for the reasons that the price of such raw materials were either of negligible value or of no value and the suppliers may add t .....

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ake the character of cost of raw material. It was also submitted that no addition should be made if any claim is made under a wrong notion and nomenclature, I find substance in this submission. On going through the payment details, it is found that although the suppliers had bifurcated the total payments into different heads of expenditure according to their method of billing and on which the appellant had no control, but the appellant, in fact, made payments towards purchase on the basis of tot .....

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materials purchased should be the actual cost of material and incidental expenses incurred on such purchases. In the instant case, the suppliers of raw materials of their own transported the goods to the appellant and naturally, therefore, the total bill raised by them would fetch the purchase price to the appellant. The expenses incurred on account of transportation were intrinsically linked with the purchase cost to the appellant. With these facts, it was found that as the appellant had not pa .....

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of the above factual matrix and numerous judicial pronouncements on the issue, it is amply clear that as the suppliers were not the transport contractors and the AO could not bring on record evidence establishing existence of any oral or written agreement, provisions of section 194C of the Act do not come into play warranting any disallowance u/s 40(a)(ia) of the Act. That being so, the observation of the AO in respect of default in deducting tax at source on transport charges u/s 194C of the Ac .....

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he suppliers. Therefore, there was a relationship of purchaser and seller between them. The appellant purchased raw materials for the purpose of use of the same in his construction job and it was, therefore, a contract for sale and not a contract for any work. In the case of Kishak Bharati Co-op. Ltd. (2011) 10 ITR (Trib) 527, the Hon'ble I.T.A.T., Delhi has held that "The contract for supply of gas from the producers for the purpose of use of this gas for burning in the assessee's .....

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the transport charges separately included in the sale price of raw materials supplied by the parties, because, to reiterate, the total billed amount raised by the parties was the purchase cost to the appellant. In this view of the matter, the AO went wrong in not appreciating the facts of the instant case in proper perspective and making uncalled for disallowance in that regard. The addition of ₹ 25,32,484/- made u/s 40(a)(ia) r.w.s. 194C of the Act is, therefore, directed to be deleted. B .....

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fect of u/s. 194C with effect from 01.06.2007 and the instant case pertains to AY 2006-07. 16. We have heard rival contentions and perused the materials available on record. At the outset we find that the provisions of section 194C of the Act were made applicable to the individual assessee w.e.f. 1.6.2007 and it is admitted position that the matter relates to the assessment year 2006-07. Therefore in our considered view the assessee in the instant case was not liable to deduct TDS and accordingl .....

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ttedly settled. It is admitted position that the matter relates to the assessment year 2006-07, whereas Section 194C(1) has been made applicable to the individual assessee with effect from 1.6.2007. There is no dispute that the respondent is an individual assessee. Considering the position of the law, the learned Tribunal has consistently held that Section 194C(1) cannot be made applicable for the assessment year 2006-07. On identical fact the learned Tribunal has held so in the case of Ajay Raw .....

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f Revenue s appeal is dismissed. Coming to ITA No.356/Kol/2014 for A.Y. 07-08. 17. The grounds raised by the Revenue per its appeal are as under:- 1. Whether on the facts and in law, the Ld. CIT(Appeals)has erred in deleting the addition made on account of bogus purchases from M/s Sunidhi Enterprises amounting to ₹ 14,89,888/- 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) has erred in deleting the addition made on account of excess liability .....

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enue in this appeal is that the ld CIT(A) erred in deleting the addition made by the AO for ₹ 14,89,888/- on account of bogus purchases from M/s Sunidhi Enterprises (for short SE). 19. The assessee during the year has shown the following transactions of purchases and corresponding payment to M/s SE. Date Particulars Debit Credit 01.12.06 Bridge - material 3,15,274/- 10.12.06 Bridge-material 2,08,562/- 30.12.06 C UBI Hazra 3,58,500/- 30.12.06 Bridge-material 3,61,716.- 19.01.07 CC UBI Hazra .....

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ses for ₹ 1,65,346/- only. Accordingly the AO has held the difference of the purchases of ₹ 14,89,888/- as bogus and added to the total income of the assessee 20. Aggrieved, assessee preferred an appeal to ld. CIT(A) whereas assessee submitted that the payment of ₹ 3,61,716/- was made to the party (M/s SE) only but the bank has entered the short name in its statement as Sun Enterprises . Similarly, the payment of ₹ 3,58,500/- was made P. Beriwala as authorised by the part .....

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ed by that party from the appellant. Therefore, the enquiry was not directed to the proper direction, yielding no fruitful purpose. Further, the AO before relying on such report of the Inspector ought to have given an opportunity to counter that report and/or establish his case with evidence. From the above factual matrix of the case and several documents placed on record. I have no hesitation to hold that the appellant, in fact, made purchases to the total tune of ₹ 16,55,234/-from Susnid .....

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he AO to doubt the purchases and add the sum of ₹ 14,89,888/- as bogus purchases. The addition of the said amount made by the AO in the impugned assessment ororder is, therefore, directed to be deleted. Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 21. Before us both the parties relied on the order of Authorities Below as favourable to them. We have heard rival contentions and perused the materials available on record. We find that AO has made the addition on .....

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fect in the bills of the purchases of the party. The ld. CIT(A) has given clear finding that the payment to the P. Beriwal has been made as authorized by the party M/s SE. The ld. DR has not brought anything on record contrary to the findings of ld. CIT(A). Hence we do not find any reasons to interfere in the order of ld. CIT(A). Hence this ground of revenue s appeal is dismissed. 22. The next issue raised by the Revenue in this appeal is that the learned CIT(A) erred in deleting the addition ma .....

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ated the excess liability shown by the assessee as income and added to the total income of the assessee. 24. Aggrieved, assessee preferred an appeal to learned CIT(A). The assessee before the ld CIT(A) submitted that the party ERS in the response to the notice u/s 133(6) of the Act has furnished the details of the purchase transactions took place during the year but failed to incorporate the opening balance of ₹ 90,752/-. The difference of ₹ 90,752/- is arising only on account of the .....

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ation thereof. The appellant furnished a reconciliation statement in this regard before the AO which shows opening balance against that party of ₹ 90,752/- as on 01/04/2006. ESS Refilling Station only gave the details of sales made to the ape during the assessment year under appeal. Naturally, therefore, both the statements, one by the appellant and the other by the said supplier could not be said to be incorrect. The ape furnished ledger copy and statement of account of the said supplier .....

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coming to such an unwarranted conclusion. In such circumstances, in effect, there was no short or excess sales or purchase in this case. That being so, the addition of ₹ 90,752/0- is deleted. Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 25. Before us both the parties relied on the order of Authorities Below as favourable to them. We have heard rival contentions and perused the materials available on record. We find that AO has made the addition on account of .....

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ld have disallowed the amount of the purchases corresponding to the excess balance shown by the assessee. In the instant case before us the AO has admitted all the purchases as genuine in relation to the excess balance shown by the assessee for ₹ 90752.00. The AO has not taken into account the opening balance as shown by the assessee. All the transactions took place during the year are matching with the confirmation of the party as received in response to the notice issued under section 13 .....

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by the AO for ₹ 17,30,671/- on account of short deduction of TDS under section 194-I viz a viz 40(a)(ia) of the Act. 27. The assessee for the year under consideration has incurred expenses for ₹ 21,63,339/- towards machine hire charges and deducted TDS @ 2% on such expenses whereas the liability to deduct TDS was at the rate of 10% u/s194-I of the Act. Accordingly the AO has disallowed proportionate expenses of ₹ 17,30,671/- and added to the total income of the assessee u/s 40( .....

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with the Government account. Where tax is deducted by the assessee, even under bona fide wrong impression, under wrong provisions of TDS, the provisions of section 40(a)(ia) of the Act cannot be invoked and further, nor the appellant can be declared to be an assessee in default us/s 201 of the Act [DCIT vs. S.K. Tekriwal,(2011) 48 SOT 515 (Kol)]. In view of the facts of the case and decision of Hon'ble Tribunal (supra), the addition made by the AO u/s 40(a)(ia) of the Act for application of .....

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r the ld. CIT(A) deleted the same by observing that the assessee deducted TDS at a lower rate under bona fide belief. Now the question before us arises so as to whether the expenses claimed by the assessee are allowable deduction though the TDS on such expenses has been deducted at the lower rate. From the provisions of section 40(a)(ia) of the Act we find that it requires deduction of tax and deposit of tax in Government account. The provisions of section are silent to treat the assessee as def .....

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