TMI Blog2022 (12) TMI 1163X X X X Extracts X X X X X X X X Extracts X X X X ..... see represents the business loss but we note that no one has verified the agreement filed by the assessee in support of its claim which is available on record. Thus we are of the view that the claim of the assessee needs to be re-verified at the level of the AO de-novo as per the provisions of law. Therefore, we hereby set aside the issue to the file of the AO for fresh adjudication. Hence, the ground of appeal of the assessee is allowed for the statistical purposes. TDS u/s 194J - Disallowances of production expenses - Addition u/s 40(a))(ia) - HELD THAT:- As coordinate bench of Hyderabad Tribunal in case of BBR Project (P.) Ltd [ 2020 (8) TMI 69 - ITAT HYDERABAD ] where the bench set aside the issue to file of the AO for fresh adjudication with a direction to verify whether the assessee is an assessee in default under the provision of section 201(1) of the Act or not - In view of the above and in the interest of justice and fair play, we are inclined to restore the issue to the file of the AO for de novo assessment as per the provisions of law and in the light of the documents available on record. Hence, the ground of appeal of the assessee is allowed for the statistical pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted:- 21-12-2022 - Shri Waseem Ahmed, Accountant Member, And Shri T.R. Senthil Kumar, Judicial Member For the Assessee : Shri Bhupendra Shah, A.R For the Revenue : Shri B.D. Gupta, Sr. D.R ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-7, Ahmedabad, dated 06/04/2017 arising in the matter of assessment order passed under s. 154 of the Income Tax Act, 1961 (here-in-after referred to as the Act ) relevant to the Assessment Year 2013-14. 2. The assessee has raised following revised grounds of appeal: 1. In the Facts Circumstances of the case and in the law, the Learned A.O. erred in disallowing bad debts amounting of Rs. 79,00,000/- , alternatively failed in treating the same as business loss of the Appellant. 2. In the Facts Circumstances of the case and in the law, the Learned A.O. erred in disallowing production expenses of Rs. 95,170/- due to Short deduction of TDS 3. In the Facts Circumstances of the case and in the law, the Learned A.O. erred in disallowing expenses of Rs.11,50,000/- due to non de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the authenticity of the contract and confirmation cannot be verified in such short of time to complete the assessment. Hence, the same cannot be accepted as evidence. Further, it can be seen from the ledger copy that the assessee has been claiming partial amount as bad debts. As per the ledger copy, the assessee has given money to the impugned parties in FY 2007-08 for Rs. 1 crore each. Subsequently, in the FY 2011-12, the assessee claimed bad debts of Rs. 10 lakh against both the parties. In the year under consideration, the assessee has shown receipt of Rs. 20 lacs against one of party namely M/s Durga Udyog and also claimed bad debt of Rs. 7 lakh and shown closing balance receivable at Rs. 63 lacs. Likewise, the assessee against the party namely B.B. Corporation claimed bad debt of Rs. 72 lacs and shown closing balance receivable of Rs. 18 lacs. Thus, the modus of operandi of claiming partial amount as bad debt in different A.Ys. is not allowable. Thus, the AO in view of the above disallowed the claim of bad debt for Rs. 79 lakh and added to the total income of the assessee. 5. Aggrieved assessee preferred an appeal to the learned CIT(A). 6. The assessee before learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on account of reimbursement and purchase of fixed assets. In view of these facts, I have no reason to disagree with the stand taken by the AO and the addition of Rs.1,13,226/- is confirmed. Ground of appeal No.4 is dismissed. 9. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. 10. The learned AR before us filed a paper book running from pages 1 to 117 and contended that the impugned amount, claimed as bad debt, represents the business loss to the assessee as the amount was given in the course of the business. However, the assessee, inadvertently, has classified such business loss as bad debt while preparing the financial statement. However, the nomenclatural shown by the assessee cannot be some criteria to make the disallowance. The learned AR further submitted that the money was advanced by the assessee in the course of the business as evident from the copies of the agreements which are placed on pages 89 to 96 and 97 of the paper book. 11. On the other hand, the learned DR submitted that the agreements were filed by the assessee at the fag end of the assessment and therefore there was no time available with the authorities belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) of the Act. However, the assessee failed to make any reply or furnish any explanation in this regard. Hence, the AO in absence of explanation and submission from assessee disallowed the same and added to the total income of the assessee. 16. Aggrieved, the assessee preferred an appeal to the learned CIT(A). 17. The assessee before the learned CIT(A) submitted that due to lack of understanding of accountant with regard to the provision of TDS and nature of payment i.e. whether falling under professional services or contractual liability TDS was not deducted at flat rate of 10% on all the expenses. Therefore, the shortfall in the amount of tax deduction was not intentionally but due to lack of clarity. The assessee further submitted the party namely Reliance Media Work is a regular tax assessee, if AO had doubt, he should have inquired from party with respect to the fact that whether such amount has been included in the income by Reliance Media Work. The assessee also submitted that the provision of section 40(a))(ia) of the Act can be invoked in the cases where tax has not been deducted or deducted but not deposited in the Government account. In its case, the tax has been d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the matter is set aside to the file of the AO for fresh adjudication as per the provisions of law. 21. We have heard rival contentions of both the parties and perused the materials available on record. Admittedly the assessee made payment of Rs. 4,68,239/- to the party namely Reliance Media Works on account of production expenses. The assessee was required to deduct tax under section 194J of the Act @ 10% on the entire payment of Rs. Rs. 4,68,239/-, however, the assessee deducted TDS only on the amount of Rs. 3,70,370/- only leaving the balance of Rs. 95,170/- only. Thus, the AO invoked the provisions of section 40(a)(ia) of the Act for the balance amount which was also confirmed by the learned CIT-A. The learned AR for the assessee contended that the party namely Reliance Media Works Ltd is reputed firm and thus it must have furnished return of income under section 139 of the Act after including the impugned receipt in its computation of income. Therefore, the appellant assessee should be provided with benefit of second proviso to section 40(a)(ia) of the Act or the matter should be remanded to the file of the AO for fresh verification on this count. In this regard we find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowances of Rs. 11,50,000/- for non-deduction of tax at source. 23. The AO during the assessment proceedings found that the assessee has claimed Legal Expense of Rs. 5 lakh paid to M/s Subh Marketing and likewise also claimed Studio Renewal Charges of Rs. 6.5 lakh paid to RG Films (Rs. 3 lakh) and to Shri Plash Chaudhry (Rs. 3.5 lakh). The AO was of the view that the impugned payment were liable to deduction of tax under section 194J and 194C of the Act respectively but no such tax was deducted by the assessee. 23.1 On question by the AO the assessee submitted that the Studio Renewal charges includes addition of new facilities such mike, sound system and lighting in recording studio in which no labour was included. Hence, the provisions of section 194C was not applicable. The assessee in support of its contention also furnished copy of invoice issued by the said parties. 23.2 The AO found that the invoice furnished by the assessee contain descriptions as Studio Renewal Charges as such there no mention of purchase of items as claimed by the assessee. The description Renewal Charges suggest that the amount was pad against services and not against purchase of items as cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order, facts of the case and the submissions made by the appellant. It was noted by the AO during the assessment proceedings that the appellant had debited legal expenses of Rs.8,30,349/- and studio renewal charges of Rs.6,50,000/- which were liable for TDS ti/s. 194J and 194C of the LT. Act. However, no tax was deducted at source and no satisfactory explanation was submitted by the appellant during the assessment proceedings. During thi1 assessment proceedings, the appellant has stated that the amount of Rs.5,00,000/- paid to Shubh Marketing which was disallowed by the AO for non deduction of tax, had been erroneously debited under the head legal expenses whereas the same actually pertained to loan processing charges and bank charges. However, no documentary evidences in support of his claim have been filed by the appellant. Similarly, in respect of payments made to RHG Films and Palash Chaudhry amounting to Rs.3,00,000/- and Rs.3,50,000/- respectively, the appellant has claimed that it had signed contract with these two parties for supply of labour for studio renewal. It has also claimed that these amounts paid as studio renewal charges- were reimbursement made to the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee is an assessee in default under the provision of section 201(1) of the Act or not. The relevant finding of the tribunal reads as under: 8. With respect to the other ground raised by the assessee towards invoking provisions of section40(a)(ia) of the Act, the Ld. AR had submitted that the assessee has not been treated as an assessee in default U/s. 201(1) of the Act, further no proceedings have been initiated on this regard for the relevant AY, therefore, disallowance U/s. 40(a)(ia) of the Act is not warranted. On perusing the facts of the case, it is evident that the assessee has not deducted tax at source for the payment made towards interest for Rs. 4,94,956/-. Therefore, it is apparent that the provisions of section 40(a)(ia) of the Act will come into play. However, the second proviso to section40(a)(ia) of the Act has come into effect from 1/4/2012 by virtue of Finance Act, 2012 wherein it is stated that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee-in-default under the first proviso to sub-section (1) of section 201, then, for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted the disallowances made by the AO for cash paid against revenue expenditure includes an amount of Rs. 34,490/- paid to accountant for office expense. As such the accountant incurred petty office expenses from own pocket and at the end of accounting period the account of the accountant was settled by making cash payment. Thus disallowances to this extent should be deleted. 33. The learned CIT(A) after considering the facts in totality confirmed the addition made by the AO by observing as under: 7,2 1 have considered the assessment order, facts of the case and the submissions made by the appellant. After considering the same, I find that no documentary evidences have been furnished by the appellant in support of its claim that the payments were made on account of reimbursement and purchase of fixed asset. In view of these facts, I have no reason to disagree with the stand taken by the AO and the addition of Rs.1,13,226/- is confirmed. Ground of appeal No.4 is dismissed. 34. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 35. The learned AR for us contended that the payment made for the purchase of the capital assets exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumentary evidence besides raising its contentions before the authorities below to justify that provisions of section 40A(3) of the Act are not applicable. However, the documents filed by the assessee have not been verified by the AO during the assessment proceedings. Therefore, in the interest of justice and fair play, we are inclined to restore the issue to the file of the AO for de novo assessment as per the provisions of law and in the light of the documents available on record. Hence, the ground of appeal of the assessee is allowed for the statistical purposes. 40. The next issue raised by the assessee is that the learned CIT-A erred in confirming disallowances of traveling and repair maintenance expenses of Rs. 21,473/- only. 41. The AO during the assessment proceeding found that the assessee has incurred traveling and repair maintenance expenses for Rs. 1,04,785/- and 1,09,952/- respectively in cash. Further, the complete supporting document were not available on record with respect to impugned cash expenses. Thus the AO after discussion with AR of the assessee disallowed 10% of such expenses i.e. amounting to Rs. 21,473/- to cover up any leakage of revenue. 42. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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