TaxTMI 
TaxTMI 
2012 (8) TMI 44
X X X X Extracts X X X X
X X X X Extracts X X X X
.... law and on facts to disallow u/s 40(a)(ia) of the Act an amount of Rs.6,48,436/-. 5. Lr. A.O. has erred in law and on facts to disallow interest of Rs.50,268/- notionally charged." 2. The facts, in brief are that the case was selected for scrutiny and the assessments were framed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). The Assessing Officer made following additions/disallowances:- Disallowance/Additions as discussed Unexplained Loan U/s 68. Rs.10,00,000/- Under Valuation of Stock Rs.02,83,645/- Interest on FDRs Rs.01,05,190/- Disallowance U/s 40(a)(ia) Rs.06,48,436/- Out of interest exps. Rs.00,50,268/- Interest on TDS Rs.00,01,194/- Against this order, the assessee filed appeal before the Ld. CIT(A) who partly allowed the appeal of the assessee whereby the addition made on account of bogus loan, under valuation of stock, addition of Rs.6,48,436/- made u/s 40(a)(ia) of the Act, addition of interest of Rs.50,268/- and addition of interest on TDS was confirmed. However, addition of Rs.1,05,190/- on account of interest was deleted by Ld. CIT(A). Under these facts and circumstances, the assessee has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ss of transaction and creditworthiness of such creditors. He submitted that the Assessing Officer has rightly applied the judgment of Hon'ble Supreme Court in the case of Sumati Dayal v. CIT (1995) 214 ITR 801(SC), the judgment of Hon'ble jurisdictional High Court in the case of Bomin Pvt. Ltd. Vs. CIT (1986) 160 ITR 477 (Guj) and the judgment of Hon'ble Calcutta High Court in the case of CIT Vs. Precision Finance Pvt. Ltd.(1994) 208 ITR 465 (Cal). 5. We have heard the rival submissions, perused the material available on record and the judgments cited by the parties. We find that this issue has been dealt by Ld. CIT(A) in para 6.3 of his order, the same is reproduced hereinbelow for the sake of clarity:- "I have carefully considered the order of the AO and submission made by the AR of the appellant and also, the case laws relied upon by the AO in his assessment order. I find that in the instant case, inspite of providing number of opportunities by the AO, the appellant could not furnish the details such as, copy of bank statement, assessment details in respect of the depositors. The burden of proving the genuineness of unsecured loans entirely lies on the appellant. However, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....when receipt is sought to be taxed as income, the burden lies upon the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within the exemption provided by the Act lies upon the assessee. But in view of Section 68 of the Act, where any sum is found credited in the books of accounts of the assessee for any previous years, the same may be charged to income tax as the income of the assessee of that previous year, if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such a case there is a prima facie evidence against the assessee viz. the receipt of the money, and if he fails to rebut such evidence being unrebutted, can be used against him by holding that it was receipt of income nature. While considering the explanation of the assessee, the Department cannot, however, act unreasonable. Hon'ble Calcutta High Court in the case of Precision Finance Pvt. Ltd. (supra) held that it is for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to verify the claim of the assessee. It is pertinent to mention here that the Hon'ble Supreme Court in the case of CIT v. Orissa Corporation P. Ltd.(SC) (1986) 159 ITR 78 (SC) wherein the Hon'ble Supreme Court has held as under:- "In this case, the assessee had given the name and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were Income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sed the materials available on record. We find that Assessing Officer has made addition on the basis that materials were purchased in the last date of the year, the assessee could not explain where such materials were consumed. It is the contention of the assessee that materials were purchased as and when it was required in the construction line of business and in support of the contention Ld. AR pointed out certain materials were supplied in the month of January and February of 2006 and bills were raised on 28-03-2006. Ld. AR further submitted that even otherwise also an addition of closing stock is revenue in nature since the closing stock of this year becomes the opening stock of the next year. We find force into the contention of Ld. AR that closing stock becomes the opening stock of the next year. This aspect has not been examined by the authorities below. In view of this matter, this issue is restored back to the file of Ld. CIT(A) for fresh adjudication after giving reasonable opportunity of being heard to the assessee. This ground of assessee's appeal is allowed for statistical purposes. 15. Ground No. 3 is against the addition interest on FDRs of the deposit. It appears....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xpenditure of Rs.6,38,436/- cannot be allowed as a deduction to the assessee in the year under consideration and is hereby added to the income of the assessee as per the provisions of section 40(a)(ia) of the Act." However, Ld. CIT(A) has held as under:- "9.1 The AO in the assessment order has made disallowance of Rs.6,48,436/- us. 40(a)(ia) of the Income Tax Act, 1961 for the reasons that the appellant committed default in making payments of TDS in the Govt. accounts. 9.2 The appellant in his submission dated 01.06.09 has stated that thee is no default on his part in compliance to the provisions of section 40(a)(ia) of the Act. He has further stated that the payments made to transporters did not exceed Rs.50,00/- hence is not liable for making TDS. 9.3 I have carefully considered the order of the AO. I find that the payments made to transporters will attract the provisions of section 40(a)(ia), wherein, the appellant was bound to deduct the TDS and remit the same in Govt. account before the due date. Since, appellant failed to comply to the provisions of section 40(a)(ia), the expenses so made can not be allowed as deduction. However, the appellant is allowed to claim ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....section (2) from the account of or to the contractor or subcontractor, if such sum does not exceed twenty thousand rupees. Provided that where the aggregate amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds Rs.50,000/-. The persons responsible for paying such sums referred to in Sub.-sec(1) or as the case may be Sub-section(2) shall be liable to deduct Income ax under the section.' Therefore appellant firm was not liable to TDS as aggregate amount did not exceed Rs.50,000/- in his case. However payment credited before Feb., 2006 on which party's a/c is credited and payment made by the party on Dt. 7.4.2006 as stated by A.O, before statutory date of 30.4.2006 there is not default of TDS. Lr. AO has wrongly computed figure of Rs.6,48,436/- as against correct figure of Rs.4,49,436/- TDS can on which is alleged to be paid in time. There being no default u/s 40(a)(ia), addition may be deleted." 19. We have given our thoughtful consideration as the submission made by Ld. AR for the assessee and the facts involved in the present case. Ld. AR has relied upon the judgment of Hon'ble Calcutta High Court in the case of Virgin ....