TaxTMI 
TaxTMI 
TaxTMI 
2015 (6) TMI 809
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....- by ignoring that the said amount was out of withdrawals entry of Rs. 4 Lacs from the books of M/s Mosaic House (India) Kund. 3. That the addition of Rs. 107939/- the alleged difference in sundry creditors accounts confirmed by the learned CIT(A) Rohtak is against the facts, written submissions and documents on record. 4. That the learned CIT (At Rohtak has grossly erred in confirming the disallowance the expenditure claimed at Rs. 1872599/- incurred in exporting in goods out of India by foreign shipping companies through Indian Agents while all the relevant documents and certificates are on record. 5. That the confirming of 50% disallowance of expenses at Rs. 154665/- out of Rs. 309330/- by the learned CIT (Appeal) Rohtak ignoring and without discussing that the expenses are under various heads and quite relevant to the business activities and none of the same are of capital or personal in nature. 6. That the appellant craves the leave to add, modify, amend or delete any of the ground of appeal at the time of hearing. Further all the grounds of appeal as above are without prejudice to each other. 3. The grounds raised in ITA No. 2222/Del/2012 (A.Y. 2009-10) read as unde....
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....nd figures on record. 7. That the confirming of addition of Rs. 95830/- i.e. agricultural income supported with documents on record by the Learned CIT (A) Rohtak is quite arbitrary. He has further erred in ignoring the reply, documents and submissions which are very well on record. 8. That the confirming the additions of Rs. 33900/- i.e. 20% disallowances of expenses under various heads are quite arbitrary and without any findings. 9. That the confirming the addition of Rs. 20000/- under house hold expenses by the Learned CIT (A) Rohtak without any concrete findings and detection on record. 10. That the appellant craves the right to amend, delete or add any now grounds of appeal before and during hearing of appeal." ITA NO. 467/DEL/2011 (AY 2007-08) 4. The brief facts of the case are that the Return declaring total income of Rs. 7,37,090/- was filed on 2.11.2007. The return was processed u/s. 143(1) on returned income. Assessee is running two proprietorship concerns in the name and style of M/s Mosaic House (India) & M/s Diler Stone, VPO Majra, Kund, Rewari. M/s Mosaic House (India) is a new concern and M/s Diler Stone is a existing concern of the assessee. The ass....
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....de on account of alleged unexplained cash deposits in bank account of M/s Diler Stone 3,86,041/- 7 (2.6) 7 (707.1) 3. Additions on account of payment to sundry creditors outside books of account u/s 68 of the Act. 1,07,939 8(3) 7 (8 - 8.1) 4. Disallowance of expenditure incurred on export of goods through agents of freight shipping companies 18,72,599 9 (4.2) 8-9 (9-9.2) 5. Adhoc disallowance of 50% of following expenses 1,54,665 9 (5) 9(10) 1.5 Ground wise submission is as under:- 2. Addition of Rs. 12,67,193/- 2.1 Manner of Computation: Perusal of cash book (pages 65 -75 of Paper Book) of Mosaic House (India) reveals that the following position: Particulars Amount (Rs.) Opening balance Nil Receipts 5,29,948 (upto 30.3.2007) Total 5,29,948/- Less: payment 17,97,141/- (upto 30.3.2007) Difference added as income from undisclosed sources 12,67,193 2.2 Basis of Addition: Relevant pages of the learned Assessing Officer: (pages 5 to 7 para 2.3 to 2.5) i) The explanation of the appellant that he had received advance of Rs. 11,50,000/- in March 2006 is an after thought ii) The affidavit furnished is on self-serving doc....
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....unt of virus in the computer v) That the difference of Rs. 12,67,193/- is explained out of the following: a) Advance against land Rs. 11,50,000/- b) Transfer from Diler stone Rs . 1,95,320/- vi) The fact of advance of Rs. 11,50,0001- having been received is evident from following evidences: a) Agreement to sell dated 26.3.206 (pages 77-78 of Paper Book) b) . Cash flow statement (page 76 of Paper Book) c) Revised cash book (pages 79-90 of Paper Book) vii) The learned Assessing Officer has admitted that even as per cash book the advance was received of Rs. 11,50,000/-. According to him however such advance was received on 31.3.2007 and, on 31.3.2006+ as is stated in cash book. The finding is contradictory. It is submitted that factum of receipt of advance cannot be deemed, as the same id duly reflected in financial statements/cash book. It is submitted that the learned Assessing Officer has accepted the cash balance at the close of year to be as declared in the cash book/financial statement. It is submitted that in such circumstances, logically and legally, it ought to be held that cash payments was out of advance which was received in March' 2006. It may b....
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.... 4 Ground No.3: Addition of Rs. 1,07,939/- The learned Assessing Officer has held at page 8 paras 3 to 3.2 have been paid in cash out of the books and, therefore such payments have been treated as income from undisclosed sources U/S 68 of the Act Sr. No. Name of creditors Amount (Rs.) Pages of Paper Book (showing Closing balance in balance sheet) Explanation of assessee Pages Of paper book Ledger account i) Haryana Engineering Store, Jaipur 22,000 19 47 209 and 210 ii) Pratibha Granites, Bhilwara 2,1696 19 48 210 and 207 iii) Nabera Granites, Bilwara Gra 41,409 19 48 211 and 208 iv) Mahadev Stones 22,834 7 48 205 Total 1,07,939 4.1 According to the learned Assessing Officer, all the parties have denied having any outstanding demand at the close of year. He rejected the explanation that unilateral entries made by parties cannot be a basis to discredit the audited books of appellant (pages 38-39 of Paper Book). He has held that the explanation is evasive and absurd, without appreciating that burden was on the basis to provi....
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....foresaid sum represented payment 'made outside books of accounts. The learned Assessing officer issued notice dated 11.12.2009 and, in response to which reply was furnished on 17.12.2009 (page 38 of Paper Book), whereby cash flow statement (page 76 of paper Book) placed on record. The difference was explained on account of following reasons: a) Advance against land: Rs. 11,50,000/- b) Transfer from Diler Stone Rs. 1,95,320/- The claim was supported by an agreement to sell dated 26.3.2006 (pages 77-78 of Paper Book) and raised cash book (pages 79 to 90 of Paper Book) The learned Assessing Officer (para 2.4 and 2.5) however held that explanation tendered is not acceptable on account of following reasons: i) Affidavit is a self serving document and suffers from many discrepancies: a) Overwriting of the date; b) Not entered in revenue records; c) Person mentioned are not from single family and, includes matter of assessee; d) Amounts contributed are not in equal proprietor; e) Total sale consideration is not mentioned for agreement is for a period of more than five year; f) Agreement is for a period of more than five year; g) Sale consideration (Rs. 20 lacs)....
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.... Book) 5.7 Apart from the above, it is well settled law that provision of section 194C of the Act are not attracted on payments made to agents of non resident shipping companies as has been held in following judgments: i) 163 Taxman 479 (Del) CIT vs. Continental Carriers (P) Ltd. (pages 292-293 of Paper Book) ii) 103 TTJ 103 (Del) ITO vs. Freight Systems (India) Pvt. Ltd. iii) 271 CTR 165 (Cal) Poddar Sons Ex. L. (P) Ltd. vs. CIT (pages 277- 280 of Paper Book) 5.8 In view of the aforesaid, it is prayed that no disallowance be made under section 40a(ia) of the Act as the issue involved is squarely covered by the decisions and judgments cited above and there is no distinguishing feature. 5.9 It is also well settled law that reimbursement of expenses is not eligible for deduction of TDS under section 194C of the Act in view of the following judgments: i) ITA No. 359 and 511/2012 (Del) dated 25.8.2014 CIT vs. Opera Global (P) Ltd. (pages 353-356 of Paper Book) ii) 146 ITD 745 (Mum) ITO (TDS) vs. Vishinda Diamonds (pages 281- 286 of Paper Book) iii) 64 SOT 15 (Bang) DCIT vs. Dhaanya Seeds (P) Ltd. Section 194C, read with section 40(a)(ia), of the Income-tax Act, 1961....
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....Shipping Services (P) Ltd CIT vs. Vector Shipping Services (P) Ltd. wherein SLP has been dismissed by Apex Court in order dated 02.07.2014. Also, Civil Misc. Review Application No. 248688 of 2013 (All) CIT vs. Mls Vector Shipping Services (P) Ltd. has been dismissed. ii) 146 TTJ 1 (SB) (Vishakapatnam) (SB) Merilyn Shipping and Transports vs. Addl. CIT iii) ITA No. 249 of 2013 (AP) CIT vs. New Bombay Goods Transport iv) 123 TTJ 888 (Jaipur) Jaipur Vidyut Vitran Nigam Ltd. vs. DCIT v) ITA No. 228/2014 (O&M) (P&H) dated 20.11.2014 CIT vs. Mls Rajinder Parshad Jain (pages 348-352 of Paper Book) vi) ITA No. 52/2014 (Hyd) CIT vs. Janapriya Engineers Syndicate (pages 366-368 of Paper Book) 5.11 It is also submitted that once assessee had bonafide reason to believe TDS was not deductible, section 40(a)(ia) of the Act is inapplicable as has been held by the following judgments: i) 340 ITR 333 (Bom) CIT vs. Kotak Securities Ltd. ii) 109 DTR 70 (HP) Palam Gas Service vs. CIT . 5.12 This submission is supported by insertion of second proviso to section 40(a)(ia) of the Act, which is explained in Finance Bill' 2012 as under: i) 342 ITR 49 (St.) Finance Bill' 201....
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.... on the judgment of State of Orissa v. Maharaja Shri B.P.Singh Deo (1970) reported in 76 ITR 690 (SC) 6.6 Moreover it is not a case where books of accounts have been produced alongwith vouchers. It is submitted that vouchers are always self *generated and suspicion howsoever strong cannot be basis to disallowance an eligible expenditure. Reliance is placed on the following judicial pronouncements: a) 37 ITR 151(SC) Omar Salay Mohammad Sait v CIT b) 26 ITR 736 (SC) Dhirajlal Girdharilal v CIT, Bombay c) 26 ITR 775 (SC) Dhakeshwari Cotton Mills Itd. v CIT d) 37 ITR 288 (SC) Lal Chand Bhagat Ambica Ram v CIT 6.7 The appellant also seeks to place on the judgment of Hon'ble Bombay High Court in the case of R.B. Jessaram Fatehchand (Sugar Deptt.) vs. CIT 6.8 In view thereof, disallowance made may kindly be deleted." 8. On the contrary, Ld. DR relied upon the order passed by the Ld. First Appellate Authority and stated that the Appeal filed by the Assessee may be dismissed, because assessee has not produced any evidence to support its claim before the Revenue Authority. 9. We have heard both the counsel and perused the relevant records available with us, especi....
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....w of Mosaic House (India) for your kind consideration. 2 That as regard to cash difference of Rs. 3,86,041/- in the books of Diler Stone as mentioned in the above notice, it is submitted that there was opening balance of Rs. 75,959/- and thereafter a sum of Rs. 4,00,000/- was transferred from the cash book of Mosaic House (India) and out of these amounts a sum of Rs. 4,50,000/- was deposited in the bank. Both the accounts were maintained in same computer. But due to virus problem unfortunately these entry was disturbed and due to over sight of these entries both the cash book were printed without noticing these entries. " 10.1 The learned Assessing Officer examined the agreement furnished by the appellant and held that it is a self serving document and does not have any evidentiary value and moreover, since the property is the personal property, any amount received against the personal property has to be introduced in the capital account of the assessee and not in the balance sheet of the firm as advance against property. He thus rejected explanation of the assessee and made the impugned additions. 10.2 On appeal, the CIT(A) directed the Assessing Officer to furnish a remand rep....
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.... and adjudication after granting necessary opportunity to the appellant. 11. With regard to ground no. 3 relating to confirmation of addition of Rs. 1,07,939/- is concerned, we find that Ld. CIT(A) has observed that the assessee was afforded one more opportunity to produce the said creditors before the AO during the remand proceedings. The appellant could not produce these parties inspite of several opportunities. But for furnishing the bills of these parties, no efforts were made to prove his version. In the rejoinder to the remand report, the assessee contended that complete address, telephone/FAX No. and bank a/c no. was furnished to the AO during the remand proceedings but the AO has not taken any steps to enquire at his own level. We further find that Ld. CIT(A) has observed that it could be seen that the AO made addition in respect of the parties who have denied to have any outstanding amount with the appellant. It is not the case of not receiving any response from the creditors or return of the letters as comeback un-served. Under these circumstances, onus is on the appellant to prove that the liability exists by producing them or furnishing reconciliation statement etc. In....
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....es which has been felt out in the bills including commission to the agent. It was therefore, held as under: "The learned tribunal also observed that the relation between the assessee and the agent is principal and an agent. The learned tribunal also observed that so far as the obligation to deduct tax at source from the payment of transport charges and other charges is concerned, the same was complied with by the agent, who had made payment on it's behalf. On the aforesaid facts the learned tribunal also observed that the circular relied upon by the revenue that it is the liability of the assessee as principal agent to deduct the TDS will not be applicable and the said circular would be applicable for payment made to principal to principal. Considering the aforesaid facts and circumstances of the case, when the learned tribunal has confirmed the order passed by the CIT(A) quashing and setting aside the order passed by the Assessing Officer in deleting the disallowance of Rs. 6,93,372/-and Rs. 76,00,509/- claimed by the assessee under Section 40(a)(ia) of the Income Tax Act, we see no reason to interfere with the same. No error has been committed by the learned tribunal in conf....
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....rt in case of Kamataka Urban Infrastructure Development Finance Corporation (supra). 12.3 We have gone through the ratio of this decision and found that the same is distinguishable. In this case on bona fide belief of the assessee company which was wholly-owned by State of Karnataka had not deducted TDS on account of non-resident company by observing that the amount spent towards accommodation and conveyance of the officer/employee of the non-resident company was not required to be treated as a part of their income, whereas it was a part of their income. Therefore, Hon'ble Karnataka High Court held that on this amount TDS was deductible. However, in the present case the facts are entirely distinguishable. There is no component of income on the amount paid by assessee on account of reimbursement. Whatever the amount was paid by the agent, that was reimbursed by the assessee. Therefore, there was no income component in the hands of agent. It is further seen that provisions of s. 172 were very clear that such type of payments which are made by assessee had been held that they are not part of regular income and, therefore, provisions of ss. 194C and 195 are not applicable and Boar....
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....ee charges by govt. Rs.11,000 Fumigation charges on storage to prevent the goods for damages Rs.6,100 License fee charges bill wise Rs.2,42,608.50 Misc. And Petty charges Sea/Air freight not subject to TDS Total : Rs. 18,70,773.01 12.5. A perusal of the above chart demonstrates that most of the payments are reimbursement of expenses. When expenditure is reconciled there is no element of income to the recipient. 12.6. Having regard to the above factual position which is not disputed by authorities below, we hold that since the payments have been made as reimbursement of expenses to the agents of the appellant, therefore, appellant was not obliged to deduct TDS under section 194C of the Act and as such, no disallowance is warranted u/s 40(a)(ia) of the Act. Having regard to the above, we delete the addition and allow the ground raised by the appellant. 13. With regard to ground no. 5 relating to confirmation of addition of Rs. 1,54,665/- is concerned, we find that the AR of the counsel has submitted that all the expenses claimed are supported with vouchers. The action of the AO in disallowing 50% of the expenditure without pointing out any defect is ar....
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....T(A) has force in his finding in holding that in the absence of any evidence led by the assessee, the action of the AO in disallowing the amount u/s. 40A(3) was upheld, which does not need any interference on our part, hence, we uphold the same and dismiss the ground no. 2 raised by the assessee. 17. Ground no.6 is addition on account of notional interest. It is well settled law that the Hon'ble Gauhati High Court in the case of Highways Constructions Co. Pvt. Ltd. Vs. Commissioner of Income Tax 199 ITR 702 held that notional interest cannot be charged. This ground is allowed. 18. The ground no. 7 relating to confirmation of addition of Rs. 95830/- is not pressed before us, hence, the same is dismissed, as not pressed. 19. With regard to ground no. 8 relating to confirmation of addition of Rs. 33900/- i.e. 20% disallowances of expenses under various heads is concerned, we find that the Ld. CIT(A) has observed that a fact finding has been given by the AO that some of the expenses are unvouched or not properly vouched. The Assessee's counsel has not contravened these observations of the AO. Therefore, in view of the above factual finding of the AO and Ld. CIT(A), Ld. CIT(A) upheld....