TMI Blog2019 (9) TMI 1336X X X X Extracts X X X X X X X X Extracts X X X X ..... duct TDS on interest payment to Shri Ramesh Chand and non-deduction of the TDS will entail disallowance u/s 40(a)(ia) of the Act. However, in view of the consistent position taken by the Coordinate Benches of the Tribunal wherein the amendment in section 40(a)(ia) has been held retrospective in nature, the disallowance is restricted to 30% of the total amount. In the result, the crossobjection is partly allowed. Addition towards telephone expenses and the personal/other than business use of telephone could not be ruled out and therefore, made disallowance being 10% of the expenses - HELD THAT:- CIT(A) held that the personal use of telephone by Director cannot be ruled out and no evidence is brought to consider the same as perquisite. Thus, the disallowance made by AO is reasonable and accordingly, confirmed the addition. It was submitted by the ld AR that the telephone expenses are incurred in respect of telephone installed at factory and mobile of directors and employee. The telephones are used for the purpose of the business. Hence, the adhoc disallowance of 10% of the expenses cannot be made. Even otherwise, in case of a company, no disallowance can be made on account of pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt made in this section w.e.f 01.04.2015 which is to remove unintended hardship, only 30% of such amount can be disallowed as this amendment has retrospective effect. 4. The ld. CIT(A) has erred on facts and in law in confirming the disallowance of ₹ 16,745/- out of telephone expenses, being 10% of ₹ 1,67,455/-. 4. Briefly stated, the facts of case are that the assessee is engaged in the business of manufacturing of MS Bar, MS Angle, Section and Channel etc. Notice u/s 148 dated 17.04.2015 was issued on the basis of order dated 13.05.2014 passed by Commercial Taxes Department, Anti Evasion Wing where they determined undisclosed sales of ₹ 1,42,40,278/- for AY 2010-11 which in turn was based on order of Additional Commissioner, Central Excise wherein they made out a case of duty evasion of ₹ 25,43,832/- in connection with the searches conducted by Central Excise Department at the factory premises of the assessee and also at the residential premises of the director Shri Rajesh Natani on 03.08.2010. The AO on the basis of these orders issued show cause notice dated 14.10.2016 to the assessee as to why the books of accounts be not rejected and why such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 lakhs is deleted. Against the said findings, the assessee is now in appeal by way of cross-objection. 6. During the course of hearing, the ld. AR, at the outset, submitted that against the allegation of the Central Excise Departments that assessee has been indulged in clandestine activities of removal of finished goods without payment of duty and thus, evaded the duty to the tune of ₹ 25,43,832/-, assessee filed an appeal to the Hon ble CESTAT, New Delhi. The Hon ble Tribunal, vide its order dated 07.02.2019 set aside the order passed by the Excise Authorities and allowed the appeal of the assessee by giving following finding at Paras 5 to 8 of the order: 5. On going through the impugned order passed by the Commissioner (Appeals), I find that the appellant had taken a categorical stand that the entries in the ledger, on which Revenue has relied upon not only belong to them but the same relates to one M/s Sanjog Steels, Bagru. It was disclosed by them that the Director was also doing the trading in the same very goods and as such various documents recovered from his premises were in connection with his trading activity and has nothing to do with the manufacturing ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcept the recovery of certain incriminating documents from the residential premises of the assessee s director read with his retracted statement, stand made. The findings of the clandestine activities cannot be upheld on the said documents, which were not even recovered from the premises of the manufacturing unit and as such has to be treated in the nature of third party documents. The same required corroboration, which the Revenue has failed to. 8. In view of the foregoing, I find no justification in upholding the impugned order. Accordingly, the same is set aside and appeal is allowed with consequential relief to the appellant . 7. It was submitted that where the very basis on which the charge of unaccounted sale is made against the assessee does not survive, addition made by the AO but partly confirmed by the Ld. CIT(A) also does not survive. It was further submitted that the Ld. CIT(A) has worked out alleged investment of ₹ 24,71,863/- for alleged unaccounted purchases by considering 1/6th of the alleged average unaccounted sales for AY 2010-11 AY 2011-12. There is no basis for such assumption. In any case, since the entire case made out by the Excise Authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputing his income. This has caused undue hardship to taxpayers, particularly where the rate of tax is only 1 to 10%. Hence, I propose to provide that instead of 100 percent, only 30% of such payments will be disallowed. 13. It was submitted that from the above, it can be noted that the amendment made by FA (No.2) Act, 2014 w.e.f. 01.04.2015 is to remove unintended and undue hardship and therefore this amendment should be give retrospective effect as per the various decisions stated above. The Ld. CIT(A) has incorrectly stated that amendment is not retrospective. Reliance is placed on the five member Bench decision of the Hon ble Supreme Court in case of CIT Vs. Vatika Township Pvt. Ltd. 109 DTR 33 where it has been held that legislations which modify accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect. However, if legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally and where to confer such benefit appears to have been the legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no. 4 in assessee s cross-objection. Briefly, the facts of the case are that the AO observed that the assessee has debited ₹ 1,67,455/- towards telephone expenses and the personal/other than business use of telephone could not be ruled out and therefore, made disallowance of ₹ 16,745/- being 10% of the expenses. The Ld. CIT(A) held that the personal use of telephone by Director cannot be ruled out and no evidence is brought to consider the same as perquisite. Thus, the disallowance made by AO is reasonable and accordingly, confirmed the addition. It was submitted by the ld AR that the telephone expenses are incurred in respect of telephone installed at factory and mobile of directors and employee. The telephones are used for the purpose of the business. Hence, the adhoc disallowance of 10% of the expenses cannot be made. Even otherwise, in case of a company, no disallowance can be made on account of personal use. We donot see any infirmity in the order of the ld CIT(A) and the same is hereby confirmed. In the result, the cross-objection is dismissed. 18. In the result, the cross-objection so filed by the assessee is partly allowed. 19. In Cross Objection No. 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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