TMI Blog2017 (8) TMI 1377X X X X Extracts X X X X X X X X Extracts X X X X ..... O also did not dispute the fact that the liability of ₹ 70,00,000/-, did not exist in the books of the assessee. Just because that the trade creditor has been renamed by the assessee, as unsecured loan does not mean that the assessee has paid any liability or has done any illegal activity to conceal the particulars of income. Payment of ESI and payment of EPF after due date and in violation of provisions of section 36(1) (va) - Held that:- In the instant case the assessee has paid ESI liability of ₹ 2813/- and provident fund liability of ₹ 63299/- within the due date of filing the income tax return. It is a sufficient compliance, therefore, respectfully following the decision of jurisdictional Kolkata High Court in case of CIT Vs. Vijay Shree Ltd. (2011 (9) TMI 30 - CALCUTTA HIGH COURT), we are of the view that there is no any infirmity in the order passed by ld. CIT(A). Hence, we confirm the order passed by ld. CIT(A). - ITA No.1593/Kol/2014, ITA No.1802/Kol/2014 - - - Dated:- 4-8-2017 - SHRI A.T.VARKEY, JM DR. A.L.SAINI, AM Assessee by : Shri Manoj Kataruka Advocate Revenue by : Shri Nicholas Murmu, JCT Sr.DR O R D E R Per Dr. Arj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the assessee has paid to its creditor M/s Charco Electronics Pvt. Ltd. not by account payee cheuqe nor by account payee draft but through book entry. However, the assessee submitted before the AO that the assessee did not pay ₹ 6,03,150/- to M/s Charco Electronics Pvt. Ltd. directly but paid the said amount to M/s Shivam on the instructions from M/s Charco Electronics Pvt. Ltd. Therefore, the mischief of section 40A(3) does not apply in this case. Apart from this, the said adjustment entry does not fall under rule 6DD of the I.T.Rules. However, the AO ignoring the submissions of the assessee held that ₹ 6,03,150/- is liable to be disallowed by invoking the provisions of Section 40A(3) of the Act and, therefore, the AO added back to the total income of the assessee. 4.2 Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the CIT(A) who has confirmed the addition made by the AO. The CIT(A) in respect of addition of ₹ 6,03,150/- observed that the said amount is paid by the assessee to M/s Shivam Enterprises on the instructions of its creditors M/s Charco Electronics Pvt. Ltd, since the AO concluded that explanation to Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew that there is no violation of provisions of section 40A(3) of the Act. As it is abundantly clear from the facts that the assessee has paid ₹ 6,03,150/- to Shivam Enterprises on the instruction of its creditor M/s Charco Electronics Pvt. Ltd, through account payee cheque. There is no cash payment at all. Therefore, we are of the view that addition made by assessing officer and confirmed by ld CIT(A) needs to be deleted. Accordingly, we delete the addition of ₹ 6,03,150/- 4.5 In the result, the appeal filed by the assessee, ( In ITA No. 1593/kol/2014), is allowed. 5. Now, we shall take the appeal filed by the Revenue in ITA No.1802/Kol/2014. The grounds of appeal raised by the Revenue reads as under: Grounds raised by Revenue in ITA No.1802/Kol/2014 (AY:2011-12) : i) That Ld. CIT(A) has erred in deleting the disallowance of ₹ 70,00,000/u/ s 40A(3A) of IT Act just by placing reliance on the tribunal decision in the case of DCIT Vs. Bhartiya Hotels Ltd. (ITA NO.941/KoI/2011) (A.Y.0708), interpreting the meaning of payment other than by A/ c Payee cheque or bank draft. ii) That Ld. CIT(A) has erred by ignoring the AO s interpretation of the malpractic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore, AO held that it clearly attracted the provisions of disallowance u/s.40A(3) of the Act. However, the assessee submitted before the AO that no payment has been made to M/s Rolatainers Niryat Pvt. Ltd. by making general entry of ₹ 70,00,000/- on 1-4-2010 and only transferred the trading liability of the said party to unsecured loan to creditor account credited on 1.4.2010 in the name of M/s Rolatainers Niryat Pvt. Ltd. But when a book entry is made on the debit side in the creditors ledger account then the trading liability by that amount is implied to have been paid to the creditor and as a result the trading liability is also reduced by that amount (i.e reduced to Nil in this case). Therefore, AO held that in assessee`s case, the old trade liability amounting to ₹ 70,00,000/- is said to have been paid to M/s Rollataniers Niryat Pvt. Ltd. by passing the necessary journal entry/book entry. Payment (through deemed) to the trade creditor through this book entry is deemed to be the income of the assessee as per provision laid down in section 40A(3) of I.T.Act. It is not coming in the purview of the exception clause u/s.6DD of I.T.Rules. But the assessee submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d transferred amount of ₹ 70,00,000/ on 1.4.2010 from sundry creditors to the loan amount of the same party namely M/s Rollataniers Niryat Pvt. Ltd. In the books of M/s Rollataniers Niryat Pvt. Ltd., the amount of ₹ 70,00,000/- is reflected as sundry creditors as on 31.3.2011, therefore, in the assessee s balance sheet it should be reflected as a sundry creditor, whereas the assessee has changed it as a loan creditor, therefore, it is not allowed. 5.5 On the other hand, ld. Counsel has submitted that, this is just change in nomenclature. The sundry creditor has been changed and renamed as sundry loan, just because of change in nomenclature does not mean that the assessee has paid the liability. In the books of assessee the liability remained the same. There is no payment made as per the meaning of the word payments . Therefore, just because the assessee has renamed the trade liability of ₹ 70,00,000/-, to unsecured loan from the same party M/s Rollataniers Niryat Pvt. Ltd. during the financial year relevant to the assessment year 2011-12, does not mean that the assessee had paid the said liability. Therefore, the liability remained the same i.e. M/s Rollatanie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w.s.36(i)(va) of the I.T.Act. The assessee submitted before the AO that the EPF is covered by the expression u/s.2(24)(x) r.w.s. 36(1)(va) of the I.T.Act. The assessee submitted that for late payment of PF/ESI the assessee has to bear the penal interest and the subsequently penalty, therefore, the assessee should not penalized further. Ignoring the submissions of the assessee the AO made the addition of ₹ 63,299/- and ₹ 2,813/- on account of payment of employees contribution to PF ESI respectively. 6.2 Dissatisfied with the order of AO, the assessee filed an appeal before the CIT(A), who has allowed the assessee s appeal. Regarding disallowance of employees contribution to provide fund of ₹ 63,299/- and ESI of ₹ 2813/- u/s.36(1)(va), ld. CIT(A) held that the jurisdictional Kolkata High Court in the case of CIT Vs. M/s Vijay Shree Limited, ITAT No.245 of 2011, held that employees contribution to provident fund and ESI, if these are deposited within due date of filing of income tax return then these should not be added bank u/s.36(1)v) of the Act. The Ld. CIT(A) also relied on the judgment of Hon ble Supreme Court in the case of CIT Vs. Alom Extrusion Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X
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