TaxTMI 
TaxTMI 
2010 (11) TMI 485
X X X X Extracts X X X X
X X X X Extracts X X X X
.... deleted. (4) That in the facts circumstances as well as under the law, the learned CIT(A) was not justified in enhancing the income by Rs.1330239 [Rs.418620 u/s 40 (a) (ia) and Rs.911619 u/s 40A(3)] in the Appellate proceedings. (5) That in the facts circumstances as well as under the law, the learned CIT (A), was not justified in retaining the addition of Rs.45738 u/s 40A(3) made by A.O. (6) That the humble Appellant craves leave of Hon'ble ITAT, to change at amend, modify and/or alter any of the ground(s) in course of proceedings before the Hon'ble ITAT, in the event of development arising in such Appellate proceedings 3. Subsequently, the appellant has taken following ground of appeal:- Ground No. 3A.- "That in the facts and circumstances of the case as well as under the law, the learned A.O. as also learned C.I.T. (A) erred in not mentioning or refraining from making any comment to the effect that - 'The disallowance made should be allowed in any subsequent year in terms of 'provisions' to section 40 (a) (ia) on payment of TDS, in relation to Ground No.(6) taken by the Appellant before learned C.I.T. (A)" 4. The appea....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... TDS on Job Processing and Labour charges for the assessment year 06-07. Because of non getting any PAN no from the filler. Now we are Getting PAN no. Hence, we will deduct TDS for the assessment year 2006-07 now." 5.4 Such explanation of the assessee was not accepted by the AO and the impugned amount [Rs.40,47,655 and Rs.19,82,697/-= Rs.60,30,352/-] was added by him as per provision of section 40a(ia) of the Act. 5.5 It was noted by the AO that following cash payments were made exceeding Rs.20,000/-:- a. Banti Mondal. Rs.6.12,824/- b. Ashoke Thandan Rs.4,12,835.31. c. Mahim Rs.4,l8,921/- d. A.K.Ad.Centre. Rs.1,12,816/- e. Ajoy Sinha. Rs.25,479.69. f. Mehaboob Rahaman Rs.3,12,826/- g. Kajal Barui Rs.5,64,.233/- h. Raj Enterprises Rs.2.00,000/- i. Shymal Chakraborty Rs.1,98,487/- j. Jitan Choudhury Rs.78,801/- k. Goputam Ghosh Rs.4,41,459/- l. Bajrang Steel Rs.2,28,693/- Total Rs.36,07,425/- 5.6 When asked to explain the above, the assessee replied that needful be done as per I.T Act'61. The AO, therefore, disallowed 20% of such am....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation of the party and invoked the provisions of section 40A(3). This is for your kind information that in both the cases the balance stood under the has S.Crs. as on 31.03.2006 were paid during the F.Y. 2006-07, which fact may kindly be verified from the books of A/cs. maintained by the assessee. It is pertinent to mention here that no cross examination was made in either of the cases. The ordinary presumption of law is that the apparent state of affairs is real unless the contrary is proved. Law is settled that the fate of the assessee cannot be decided by the revenue on the basis of surmise, suspicion, or probabilities. Further, the bare reading of the provisions of sections 40A(3) seems the action of the appellant as violation of the said provisions. However, there are certain exceptions provided in Rule 6DD, under which expenditure, even exceeding Rs.20,000/-, shall be allowed as deduction, even though the payment is not made by an account payee cheque/draft. One of those exceptions is -"where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person." The A.O failed to co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nts of M/s. D. Popatlal and Co. and M/s. Techno Electric Corporation of whose accounts were already considered while invoking provisions of section 40A(3) in respect of cash purchase. As such the purchases made from those parties and the payments mode to them were properly verified and there was no dispute as to the same. Above all the transactions related to the said two parties were reflected in the audited accounts submitted by the appellant which was accepted and the assessment was made accordingly. It is not the case that the discrepancies were found in 5the appellant's own accounts but between the appellant's and parties accounts- it was obviously due to lack of proper reconciliation. The A.O. has not taken any pain in this respect but vindictively treated the said discrepancies as deemed income of the appellant. The action of the A.O. is not acceptable." 10. As the parties involved were the same in case on account of whom addition of Rs.77,656/- was made by the AO u/s.40A(3) of the I.T.Act'61 and as during the remand proceeding the assessee did not avail of the opportunity, the ld.CIT(A) confirmed the addition of Rs.2,53,103/. 11. With reference to disall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....helping the assessee to get it verified and allow the same if so proved to be a genuine claim. It could be left to the wisdom of the parties as to how the case should be placed and re-examined and what material be brought on record to prove the genuineness of his claim [ACIT v/s. Amar Mining Co. ITA No.1841/Ahd./2002 (ITAT Ahmedabad Bench 'D') dated 29.01.2009] "It is already in your knowledge that the appellant has raised additional grounds of appeal in respect of ground No.6 with a prayer to kindly grant permission to urge the said additional grounds of appeal. In this respect we are advised to submit as under: It is further submitted that the A.O. was wrong in invoking provisions of section 40(a)(ia) of the Act. The thrust of the section is that it is applicable only when the payments are due and outstanding i.e. when the amount of expenditure is payable. Thus it is not applicable where the amount of expenditure has already been paid. Section 40(a) (ia) reads as under: "40. Amounts not deductible : Notwithstanding anything to the contrary in section 30 to 38, the following amounts shall not be deducted in computing the income "chageable under the head 'Profit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a)(ia), the word 'payable' is used to mean the amount which is required to be paid for carrying out any work done during the previous year under consideration. It includes the amount, which is actually paid during the year as well as the amount which remains unpaid at the end of the year. If the word 'payable' was accompanied by a particular date the interpretation placed by the Hon'ble ITAT Jaipur Bench would be the correct proposition. In this view of the matter, he confirmed the addition of Rs.60,30,352/- u/s.40(a)(ia) of the I.T.Act'61 14. The ld.CIT(A) on examination of the ledger account of the labour charges. noted that total labour charges amounted to Rs.82,67,161/- and not Rs.19,82,697/- as taken by the AO. Such amount of Rs.19,82,697/- was only net balance of labour charges. He, therefore, issued enhancement notice to the assessee on this account. It was submitted by the assessee that out of total amount of Rs.82,67,161/- debited in the labour charges account, Rs.62,84,464/- were paid to 15 parties, who did the jobs for installation of sign board for different clients of the assessee. However, this amount of Rs.62,84,464/- consisted of cost of raw materials amou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation of section 40(a)(ia) of the Act. The same are enumerated hereunder:- a. The view of the Hon'ble ITAT, Jaipur Bench, Jaipur in the case of Jaipur Vidyut Nigam Ltd vs. DCIT [123 TTJ 888] is further supported by the Taxman's commentary on 'direct taxes' law and practice(44th Edition, page 392) wherein Dr. Vinode K Sinhania has expressed the same view as that of the Hon'ble Jaipur Bench. b. The provision of section 40(a)(ia) has to be subjected to strict interpretation. c. As per the CBDT's Circular No.5/05 dated 15-07-2005, the intention of introducing the impugned provision was to curb bogus payment. It also explains that under certain circumstances, if the TDS is deducted in any subsequent year(s) on such expenditure, the same will be allowed. As in the present case the expenditure has not been held to be bogus, section 40(a)(ia) was not applicable. Also when the expenditure is allowable, if TDS is deducted in subsequent years, there cannot be any question of deducting TDS from the payments made in the year under consideration. d. The provisions of section 40(a)(ia) and 43B are analogues. Therefore, there could not be any disallowance u/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d.DR placed his reliance on the following case laws:- i. Attar Singh Gurmukh Singh V. ITO 191 ITR 667(SC) ii. C.V George and Sons V. ACIT 286 ITR 389(Ker) iii. Bagmari Tea Co. Ltd vs. CIT 251 ITR 640(Cal) iv. Neghi Lal vs. CIT 167 ITR 139(Raj) and other case laws as per the written submission filed by him. 24. We have heard the parties and perused the record. We have also gone through the relevant case laws cited by both the parties. 24.1 As regards the additional ground of appeal taken by the appellant, we are of the considered opinion that such ground do not arise out of the order of the AO or the ld.CIT(A). What is required to be allowed in a different assessment year cannot be the subject matter of appeal for the present year under consideration. Such decision is also not required for disposing of the present appeal. In this view of the matter, we reject the additional ground of appeal moved by the appellant on merit. 24.2 As regards ground no.1 relating to addition of Rs.77,656/- u/s.40A(3) of the Act, the appellant has failed to show that the decision of the ld.CIT(A), which we have narrated in th....