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TaxTMI 
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TaxTMI 
2011 (8) TMI 1078
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....come of Rs.6,11,930/-. The assessee had executed work mainly for the following three companies from whom he had received contract receipts: 1. R.R.Industries Rs.20,04,142/- 2. Rishab Info Park Rs.1,59,24,264/- 3. Rishab Engineering Rs.5,70,814/- 3. During the accounting year relevant to assessment year 2006- 07, the assessee also debited various expenses like, payment of accounting charges, etc. According to the Assessing Officer, the assessee had to deduction tax at source u/s 194J of the Act before making the payment to the payee. Since the assessee has not deducted tax at source, the accounting charges paid were disallowed u/s 40(a)(ia) of the Act. It was also observed that the assessee had made payments to various parties, for the purchase of materials. The assessee has made these payments in cash which has attracted provisions of section 40A(3), hence, the Assessing Officer has disallowed 20% of the same as under: Shri Mulaivendan 4.3.2006 Rs.20,787 Sultan Hardware Corpn 6.3.2006 Rs.28,000 6.3.2006 Rs.25,860 Total Rs.74,647/- 4. Likewise, certain borrowals in cash were noticed which were repaid in cash amount exceeding Rs.20,000/- attracting the provisions of....
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....ecord. We have also gone through the written submission filed before us. After circumspecting the entire record and the oral submissions of the parties, we have noticed that the assessee is a contractor and labour provider turned Civil Contractor. The Assessing Officer, in scrutiny assessment for assessment year 2006-07 has disallowed and added the following amounts to determine the income of Rs.22,36,816/- as against the returned income of Rs.7,18,036/-: (a) Disallowance u/s 40(a)(ia) for non-deduction of tax at source u/s 194J on payment of accounting charges - Rs.2 lakhs. (b) Disallowance u/s 40A(3) for cash payments @ 20% of Rs.74,647/- - Rs.14,647/- (c) Addition u/s 68 being cash loans from six persons which is not proved - Rs.14,10,000/- Total - Rs.16,14,647/- 7. In addition to raising additional demand of Rs.7,18,036/-, penalties of Rs.19,15,000/- u/s 271D and of Rs.18,95,000/- u/s 271E have also been levied raising the total tax liability of Rs.45,28,036/- (including penalties) as against returned income of Rs.6,11,930/-. 8. With regard to addition of Rs.14,647/- u/s 40A(3), it was argued that the assessee had paid the amount towards material purchased tota....
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....ferent persons on 68 occasions whose details are verily found at pages 8 to 13 of the ld. CIT(A)'s order. The assessee also filed confirmation letters from these hand-loaners which were also produced before the Assessing Officer which he did not place on record due to paucity of time. This fact was not denied from Revenue's side. In our opinion, the reasoning for disallowance as given by both the authorities below are not justifiable and against the basic principles of double entry system of accounting. When the assessee took loans and squared them up during the same year, where the question of their appearing in the Balance Sheet. Before the ld. CIT(A), the assessee filed affidavits taken from all these creditors which were sent to the Assessing Officer and the Assessing Officer has sent his remand report thereon. With regard to these affidavits, the Assessing Officer has found some potholes in them; when the assessee had produced confirmatory letters from them which were not and could not be taken on record due to paucity of time and the assessee filed affidavits which are in the form of sworn statements of the creditors detailing everything therein, the Assessing Officer is not ....
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....the assessee to call for the creditors nor he has summoned them directly for which he has got the power particularly when the credits were squared up years back and no further amounts were borrowed from these parties, this people may not even come forward to give the affidavits and to land themselves into any trouble with the Revenue authorities. The assessee has claimed that these loans were taken free of interest and in such circumstances, it becomes even more difficult for the assessee to seek further proof. Therefore, in our considered opinion, there is no point in rejecting these affidavits and these are good piece of evidence unless the version given in them is proved to be false. In this case, the creditors had given hand-loans free of interest and there is no contrary evidence on record. The Assessing Officer has not given any chance to the assessee to prove against his inference when the Assessing Officer did not object to the affidavits and did not have anything beyond that how the assessee can be expected to further file any proof whatsoever. The grounds taken by the Assessing Officer to reject this evidence cannot be sustained and are rejected. The ld. CIT(A) has not gi....
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....next assessment year. The payee who is the assessee had admitted this amount as his income and paid tax thereon so, there is no loss to Revenue. Section 40(a)(ia) was inserted by Taxation Laws(Amendment) Act, 2006, with effect from 1.4.2006, which says that any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work) on which tax is deductible at source and such tax has not been deducted or, after deduction, has not been paid, shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. In this case, the assessment year is 2006-07. The explanation of the assessee that he was under bonafide belief that this provision was introduced from 1.4.2006 has to be held as a valid one and therefore, we order to delete this addition. 13. In the result, the appeal of the assessee stands allowed. I.T.A.No. 1285/Mds/2010 14. This appeal of the assessee arises out of the order of the ld. CIT(A), dated 12.5.2010 confirmi....
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....oyed and the number of workers would vary according to the requirements of the project. Hence the labour payments could not be planned in advance ..... As explained above, additional work force was arranged at a very short notice for which the payments had to be made immediately. Hence some of the loans were obtained on week days also. Myself and the lenders have bank accounts but the facility could not be used because of urgent business requirements. As I was busily engaged at the project sites, the repayments could not be preplanned and the repayments were mad...§. in instalments as and when the lender demanded repayments. Hence, the payments could not be made through banking channels. , From the above, it may be seen that the transactions were genuine and was unable to get loans by account payee' cheques for bonafide reasons. There was business exigency forcing me to take cash loans for the purpose of honoring business commitments. The lenders were genuine and they have confirmed the payments and the receipts ... 17. On appeal, the ld. CIT(A) has confirmed the penalty against which the assessee is in appeal. 18. After considering the rival submissions, we are ....
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.... Payments to labourers could not be postponed. Hence, I used to borrow money from my friends and relatives. Thus, the amounts borrowed were for urgent business requirements and at the time when there was no bank facility. I was unable to get any bank loan for my business since the nature of business was only labour oriented and I have no proper security to offer. Thus, for urgent business requirements, I had to opt for private borrowings only. As stated above, the amounts borrowed were from friends and relatives, who helped me at the time of necessity and urgency. Thus when they request for the repayment, I had to repay immediately without any delay and the way they required it. Since I was at the working site, sometimes repayments could not be made through bank and could be made only by way of cash. Hence, some of the repayments were made by cash. Thus, cash repayments were made because of urgency and lack of bank facility. During assessment proceedings, it was explained to the assessing authority of my inability to meet urgent business requirements through banking transactions. Parts of the loans have already been added to the income by making huge additions to the income ret....