TMI Blog2017 (1) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... ding/contract works account for the period 01-04-2011 to 07-02-2012 found at the time of survey alone in absence of any books of account or other documents found is not at all sustainable. Since no evidence whatsoever with regard to finding regarding suppressed sale has been brought on record and the AO has rejected the books of account, we are of the opinion that the addition by the AO by applying 8% gross profit as in earlier years is required to be restored and the addition of R.3,43,24,120/- based upon the tentative trading account found on survey is liable to be deleted.- Decided in favour of assessee Disallowance u/s 40(a)(ia) - it is the assessee’s plea that the sums involved have been paid by the end of the year and no amounts are outstanding - Held that:- As decided in case of M/s Chadda Transport [2016 (3) TMI 1019 - ITAT NAGPUR ] Since we have already held that the provisions of section 40(a)(ia) were not attracted inasmuch as no amount was payable as on the close of the year as well as in absence of any contracts, there was no obligation on the part of the assessee to deduct the tax at source - Decided in favour of assessee - I.T.A. No. 306/Nag/2015 - - - Dated:- 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d addition of ₹ 15,79,813/- should be made to the total income; b) Why interest payments made to Sunderam Finance and Manga Finance at ₹ 23,92,290/- should not be disallowed u/s 40(a)(ia); c) Why Sale of material shown at the time of survey at ₹ 36,28,240/-, not disclosed in the final accounts should not be added back; and d) Why the additional income at ₹ 3,43,24,120/- declared during the course of survey, retracted later on, should not be added to the total income. 4. As regards rejection of books of account the AO was not satisfied with the assessee s submission. He held as under : The present and earlier contentions of the assessee were considered carefully and the same are rejected on the ground that the assessee is following mercantile system of accounting for recording expenses, where as the income is reported on the cash basis. Thus it is not possible to work out correct profits earned by the assessee during the year. The expenses accounted for by the assessee till the end of the financial year should also be reflected in the financial statements in the form of closing work in progress, which the assessee is not showing at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educt tax on this amount the same is disallowed u/s. 40(a)(ia) of the Income Tax Act, 1961 and added to the total income of the assessee. Penalty - proceedings u/s 271(i)(c) of the Income Tax Act, 1961 are initiated separately for furnishing Inaccurate particulars of income. 6. The AO further added the additional income declared during the course of survey and made further addition of ₹ 3,43,24,120/-. 7. The AO further disallowed TDS late payment interest of ₹ 9,351/- debited to bank interest. 8. Against the above order, the assessee appealed before the learned CIT(Appeals). The learned CIT(Appeals) elaborately considered the issue. 9. As regards the addition on account of admission on survey, learned CIT(Appeals) concluded as under : It is thus quite manifest from the above that the gross profit as per tentative trading account is ₹ 5,70,34,614/- whereas the book results shows the profits at ₹ 2,27,10,494/-. It is perused from the two separate trading accounts for the same period that the gross profit is at a huge variance of ₹ 3.43 Crs. This varia tion of gross profit is mainly attributed to the difference in the figures of pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.120/- is confirmed. Thus, ground no. 3 is dismissed. 10. The addition u/s 40(a)(ia) was affirmed by the learned CIT(Appeals) by concluding as under : In view of the above ratio laid down by the Hon. Punjab Hryana High Court, after taking into consideration the dismissal of departmental SLP by the Hon. Supreme Court in the case of Vector Shipping, I am of the considered opinion that the appellant has committed the default by not making TDS on professional charges and not depositing the TDS made on account of commission expenses, hence has rendered himself liable for disallowance u/s 40(a)(ia) of the I.T. Act. Therefore, this ground is dismissed. 11. Against the above order the assessee is in appeal before us. 12. We have heard both the counsel and perused the records. Learned counsel of the assessee submitted that no cogent material was found during the search. He submitted that the materials and discrepancies found during the survey were as under : 1. No unaccounted vouchers or documents were found. 2. Difference of ₹ 96/- was found in cash. 3. No excess stock was found. 4. Assessee was asked to prepare trading account on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hat in this case the AO s addition to the assessee s profit by rejecting the books of account and estimating 8% profit on the total turnover has been deleted by the learned CIT(Appeals) on the ground that the addition of ₹ 3.43 crores on account of admission during survey is sufficient. We find that the said addition of ₹ 3.43 crores in this case is based upon a tentative profit and loss account prepared at the time of survey. There is no other corroborative material found in this regard. Learned CIT(Appeals) has sustained the addition on the ground that the assessee has not been able to reconcile and explain the difference found between the said tentative profit and loss account and the actual profit and loss account. In our considered opinion the tentative profit and loss account found during the course of survey alone cannot be a basis for making an addition of huge amount of ₹ 3.43 crores. Dehorse any other corroborative evidence of suppressed sale or booking of any bogus expenditure, this addition is not sustainable on the anvil of Hon ble Apex Court decision in the case of S. Khader Khan (supra). If the assessee s books of account are found to be not relia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be payable and not which has been paid by the end of the year. 13. Revenue s appeal against the above said decision of the Hon ble Allahabad High Court was dismissed by the Hon ble Apex Court in CC No. 8068/2014 vide order dated 02-07-2014. The Hon ble Apex Court has held as under : Heard Mr. Mukul Rohatgi, learned Attorney General, for the petitioner. Delay in filing and refilling special leave petition is condoned. Special leave petition is dismissed. We are also aware that there are certain other Hon ble High Court decisions wherein this proposition has not been upheld that provisions of section 40(a)(ia) are attracted only when the amount is payable. However, we note that there is no jurisdictional High Court decision on this issue. In such a situation we now have a Hon ble Allahabad High Court decision which is in favour of the assessee. Revenue Department s petition for special leave to appeal has been dismissed by the Hon ble Apex Court by condoning the delay in filing the leave petition. In such a situation, in our considered opinion, the decision of Hon ble Apex Court in the case of CIT vs. Vegetable Products Ltd. 188 ITR 192 has to be followed. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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