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TMI Blog2025 (3) TMI 1083X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Years were completed under Section 143(3) of the Income-tax Act, 1961 [hereinafter referred to as "the Act"]. Details of the assessment are tabulated below: Particulars A.Y. 2014-15 A.Y. 2015-16 Date of Filing Original Return 09.10.2015 13.02.2017 Returned Income (Rs.) 5,76,170/- 86,870/- Total Additions (Rs.) 21,19,209/- 22,31,136/- Final Assessed Income (Rs.) 27,95,380/- 23,18,010/- Date & Section of AO's Order 21.12.2016 Passed u/s 143(3) of the Act 28.12.2017 Passed u/s 143(3) of the Act 2.1. For A.Y. 2014-15, the Assessing Officer (AO) disallowed interest payments of Rs. 11,500/- made to M/s H J Associates under Section 40(a)(ia) of the Act for failure to deduct TDS. The AO further disallowed Rs. 8,55,000/- of interest expenses paid to related parties due to non-deduction of TDS. The AO also made an addition of Rs. 69,709/- under Section 43B of the Act for unpaid VAT liability and Rs. 12,83,000/- under Section 68 as unexplained unsecured loans, citing the assessee's failure to prove the creditworthiness of the lenders. The CIT(A) upheld these disallowances, stating that the assessee had not substantiated compliance with TDS provisions, failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully submits that sec.43B does not apply to the Facts of the case since the said amount of Rs. 17,30,384/- VAT payable out of which Rs. 69,709/-which has not been paid is for good & valid reasons. Your Appellant was suffering from Cash Crunch and the balance of Rs. 69,709/- is duly paid in next Finance Year. Further your Appellant had not claimed this amount of VAT as expenses and the amount was not debited to P & L A/c. and there is no loss to the Revenue. It is therefore submitted by your Appellant that the amount Disallowance u/s. 43B of Rs. 69,709/- be delete. IV. Unexplained Unsecured Loans u/s. 68 of Rs. 12,83,000/- 1. (a) Your Appellant submits that the CIT(A) has erred both in Law and in Fact in upholding the addition of Rs. 12,83,000/- made by the Assessing Officer u/s. 68, of the Act. which does not apply as per provisions of Law and since the said amount was credited in Bank Passbook and not in Books of Accounts therefore Sec. 68 does not apply as held by various Authorities. (b) Without prejudice the correct amount if liable u/s. 68 is Rs. 10,73,000/-. Since in the account of Depositor Shri Y.M. Chudasma there was an Opening Balance of Rs. 2,10,000/- to which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Order also on 28/12/2017, which was not getting time barred doing great injustice to your Appellant and acting against principles of Natural Justice. On Merits 1. Your Appellant submits that on CIT(A) has erred in applying provisions of Sec. 69 which does not apply to the case since your Appellant had the amount as per Books of Accounts supporting the Opening cash Balance of Rs. 22,19,000/-. 2. Your Appellant also submits that the amount earned or received and brought to Books in earlier year does not relate to the year of Appeal and as per provisions of Law the Addition is not liable to be added in the year under consideration it being Opening Balance. It is therefore submitted that the relief claimed be allowed and order of the Assessing Officer be notified accordingly your Appellant reasons right to add, amend to or any Grounds of Appeal. 4. Now, first we deal with the ITA No. 353/Ahd/2022 for the A.Y. 2014- 15. Ground No.1 relating to disallowance u/s 40(a)(ia) amounting to Rs. 11,500/-. 4.1. During the course of proceedings before us, the Authorized Representative (AR) of the assessee submitted that the assessee had paid interest of Rs. 11,500/- on an unse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borrowed for the purpose of business and the amounts were invested in the partnership firms where the assessee is a partner. The AR also stated that the assessee has received interest and remuneration from the firms and the same is disclosed in the return of income of the assessee. The AR placed reliance on the decision of Co-ordinate Bench in case of Esaote India (NS) Ltd. (ITA No.55/Ahd/2016) where it was decided that where recipient/deductee has already paid tax on impugned amount of interest under section 194A received from assessee by filing return of income, such interest could not be disallowed in the hands of assessee u/s 40(a)(ia) of the Act. 6. The DR contended that the interest is not paid and only credited to the account of parties from whom the amounts have been borrowed. The DR further stated that if the amounts are not paid the party is not required to disclose in respective returns of income and therefore form 26A need to be verified. 7. We noted that in the computation of income, a deduction of Rs. 8,55,000/- was initially claimed under Section 57 of the Act, with the assessee stating that the interest was paid in a personal capacity. However, during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above, and in the interest of justice, we deem it appropriate to restore the matter to the file of the AO for the limited purpose of verifying the validity and correctness of Form 26A and to examine whether the recipients have duly filed their returns of income, disclosing the interest income and paying tax thereon as per the provisions of Section 201(1) of the Act. The AO is directed to carry out the necessary verification and decide the issue in accordance with law. If it is found that the conditions laid down in Section 201(1) of the Act are satisfied, the disallowance under Section 40(a)(ia) of the Act shall be deleted. Accordingly, this ground is allowed for statistical purposes. Ground No.3 relating to addition of Rs. 69,709/- u/s 43B of the Act. 8. During the assessment proceedings, the AO observed that the assessee had an outstanding VAT liability of Rs. 17,30,384/- at the end of the financial year. Upon verification, it was found that an amount of Rs. 69,709/- remained unpaid beyond the due date of filing the return under Section 139(1) of the Act. Since Section 43B of the Act mandates the disallowance of unpaid statutory liabilities unless they are paid before the due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is claimed in the profit and loss account, and the liability is disclosed as a current liability. While deciding so the Bench relied on the decision of Noble & Hewitt (I) (P) Ltd. (305 ITR 324) (Del.), wherein it was held that if the liability is not debited to the profit and loss account and no deduction is claimed, the provisions of Section 43B of the Act are not applicable. 9.2. Considering the submissions made and the decision of Co-ordinate Bench in case of SDCE Projects Pvt. Ltd.(supra), particularly the observations in paragraph numbers 6.11, 6.12, and 6.13, we deem it appropriate to restore this issue to the file of the AO for verification. The AO is directed to examine whether the VAT liability was indeed reversed in the subsequent year and whether it was ever claimed as a deduction in the profit and loss account. Further, the AO shall verify to which account the VAT liability has been reversed and whether it has impacted the taxable income of the assessee. The AO shall decide the issue after considering the ratio laid down by the Coordinate Bench in the case of SDCE Projects Pvt. Ltd. (supra) and the decision in the case of Noble & Hewitt (I) (P) Ltd. (supra). If it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AR relied on the judgement of Hon'ble High Court of Gujarat in the case of CIT Vs. Apex Therm Packging (P.) Ltd. reported at [2014] 42 taxmann.com 473, where the revenue's appeal was dismissed. The Hon'ble High Court confirmed the decision of Tribunal that when full particulars, inclusive of confirmations with name, address and PAN, copy of Income Tax Returns, etc. were furnished and when the loans were received through cheques, AO was not justified in making additions u/s 68 of the Act. 11.1. In light of the above, it is observed that the assessee has furnished PAN, Income Tax Returns (in the case of Y. M. Chudasama), confirmations, and bank statements in support of the creditworthiness of the lenders. The assessee has also contended that both loans were received through banking channels and that partial repayments were made during the year. Further, it has been submitted that in the case of Y. M. Chudasama, even the opening balance was added under Section 68 of the Act, which is not justified. The AR has placed reliance on the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Apex Therm Packaging (P.) Ltd. [2014] 42 taxmann.com 473, wherein it was held that w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 22,19,000/- was duly reflected in the personal balance sheet as on 31-03-2014, which was certified by a Chartered Accountant. The AR submitted that the certified copy of the balance sheet, forming part of the paper-book (page No. 34), clearly demonstrated the availability of cash at the beginning of the financial year. It was argued that since the cash balance was carried forward from the earlier year, it could not be treated as unexplained under Section 69 of the Act in the current assessment year. The AR further submitted that the balance-sheet had been prepared based on the assessee's books of accounts, and if required, the complete cash book could be produced before the AO for verification. 14. We noted that the AO computed the unexplained opening balance of Rs. 22,19,000/- based on the cash flow analysis for the relevant assessment year. The following tabulated cash flow statement to reconcile the cash transactions was submitted by the assessee before AO: Details of Source of Cash Received: Amount (Rs.) Particulars Cash Withdrawals from Banks 33,64,000/- Withdrawals from Rudra Petroleum 54,50,000/- Withdrawals from Rudra Construction 65,000/- Withdrawal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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