AI Drafter 
TaxTMI 
TaxTMI 
2016 (4) TMI 1230
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.... the addition made u/s 153A(1)(b) r.w.s. 143(3) of I.T. Act, 1961 which is not as per the provisions of the assessment in search cases. 3. That the Ld. CIT(A) is not justified in confirming the addition of Rs. 1,20,523/- u/s 40(a)(ia) on account of non deduction of tax at source on interest payments to different persons. 3. At the time of hearing of the appeal, Shri Neeraj Jaiin, Ld. Counsel for the assessee did not press for ground Nos. 1 & 2 of the appeal and, hence, the same are dismissed as not pressed. 4. Ground No.3 of the appeal relates to addition of Rs. 1,20,523/- u/s 40(a)(ia) of the Income-tax Act, 1961 (in short 'the Act'). As per para 5 of the assessment order, the Assessing officer observed that assessee had not deducted tax at source on interest payment in the following cases:- S.No. Name of the persons Interest paid (in Rs.) 1 Anita Aggarwal 89361 2 Bhupindaer Sain, HUF 21375 3 Raj Kumar Jindal 1000 4 Ram Chand Aggarwal 6108 5 Ritu Aggarwal 15975 6 Rupak Aggarwal 20568 7 Sain Brothers 11348 8 Shakuntala Aggarwal 6108 9 Tara Devi Aggarwal 19680 ....
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....f Rs. 5,30,425/- as deduction on account of interest expenditure. The Assessing officer asked the assessee to explain as to why the aforesaid expenditure should not be disallowed u/s 40 (a)(ia) of the Act on account of failure to deduct tax at source. In response to the said query, the assessee submitted that those parties were paying interest on regular basis and TDS was also deducted on interest paid to them except for 16 parties from whom Form 15G/H was received. The Assessing officer made addition on the ground that the assessee has not filed form 15G/H to the CIT as prescribed under Rule 29C of the I.T. Rules, 1962. Consequently Assessing officer disallowed the entire amount of Rs. 5,30,429/- us/40(a)(ia) of the Act. 7. On appeal, the CIT(A) upheld the order of the Assessing officer. The assessee challenged the order of the CIT(A) in appeal before the Tribunal and the Tribunal allowed the appeal of the assessee observing as under:- "4 We have considered the issue. The provisions of section 40(a)(ia) are as under:- "40. Amount not deductible notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted i....
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....). 4.2 Similar issue was considered by the co-ordinate Bench in the case of Vipin P. Mehta (supra) where in it was held:. "Section 194A, read with sections 197A and 40(a)(ia), of the Income-tax Act, 1961 Deduction of tax at source Interest other than Interest on securities Assessment year 2006-07 Assessee was carrying on business of manufacture and printing of packaging materials He made payment of interest to 34 parties in excess of Rs. 5000 without deducting tax at source In response to show cause notice, assessee submitted that all payees to whom interest was paid, had furnished declarations in Form No. 15H/15G, as the case may be, before date on which tax ought to have been deducted and, therefore, assessee was not liable to deduct tax Assessee also submitted that by oversight he did not submit copies of declarations in Form No. 15G/15H to office of Commissioner (TDS) Assessing Officer took a view that it was only when he proposed disallowance of interest by invoking section 40(a)(ia) then assessee filed declarations claimed to have been submitted to him by payees of interest, in office of Commissioner (TDS) as required by sub-section (2) of section 197A Accor....
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....made. Without disproving the assessee's claim on the basis of other evidence, except by way of inference, it would not be fair or proper to discard the claim. The Assessing Officer had not recorded any statements from the payees of the interest to the effect that they did not file any declarations with the assessee at the appropriate time or to the effect that they filed the declarations only at the request of the assessee in September/October, 2008. In the absence of any such direct evidence, the assessee's claim could not be rejected. The Assessing Officer had stated in the assessment order that he found that some of the loan creditors were having taxable income but still the assessee had submitted declarations from them in form No. 15G. Unless it was proved that these forms were not in fact submitted by the loan creditors, the assessee could not be blamed because at the time of paying the interest to the loan creditors, he had to perforce rely upon the declarations filed by the loan creditors and he was not expected to embark upon an enquiry as to whether the loan creditors really and in truth had no taxable income on which tax was payable. That would be putting an impos....
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....ee's appeal was to be allowed and the disallowance of interest was to be deleted. [Para 8]" 4.3 Similar finding was also held in other cases relied upon by the assessee, which we do not intend to extract here. Suffice to say that on the facts of the case, there is no need to deduct tax at source in the above 17 cases and thus, there is no default committed by the assessee. Accordingly, disallowance under section 40(a)(ia) does not arise. Non filing or delayed filing of such forms can not result in disallowance u/s 40(a)(ia). The grounds raised by assessee are allowed. AO is directed to modify the order accordingly." 8. After considering the rival submissions, we are of the view that the issue is squarely covered in favour of the assessee against the Revenue by the decision of the ITAT Mumbai Bench in the case of Karwat Steel Traders v ITO, Mumbai (supra). The facts of the present case are almost similar to that of the case of Karwat Steel Traders v ITO, Mumbai (supra). Respectfully following the order of the ITAT Mumbai Bench, we delete the disallowance of Rs. 1,20,523/- made u/s 40(a)(ia) of the Act. 9. In the result, the appeal is allowed partly. ITA No. 42/....
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....9090 207100 15-Feb-2006 207100 104200 93600 217700 16-Feb-2006 217700 8500 88100 138100 17-Feb-2006 138100 225526 160542 203084 18-Feb-2006 203084 63731 36515 230300 19-Feb-2006 230300 285012 179212 336100 When the above document was confronted to the assessee, the assessee submitted that the above document was seized from the residence of Shri Sandeep Bansal partner of M/s Munshi Ram Walati Ram of H. No. 175, Sector 9, Panchkula and the said document belonged to the firm M/s Munshi Ram Walati Ram. It was also explained that in the said document, the amount received on various accounts and payments, made against the same has been recorded. However, the Assessing officer did not accept the above explanation of the assessee stating that Shri Sandeep Bansal was given the opportunity to reconcile the entries in the loose papers with regular books but he failed to reconcile these entries with regular books of the assessee. Therefore, the Assessing officer asked Shri Sandeep Bansal as to why the peak credit of these entries should not be treated as undisclosed income of the assessee. No explanation was given....
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....se forms with CIT concerned within the time limit as prescribed in the Act. The assessee failed to file any explanation in this regard. Consequently, the Assessing officer made disallowance of Rs. 65,094/u/s 40(a)(ia) of the Act. 18. On appeal, the CIT(A) confirmed the addition and, hence, the assessee is in appeal before the Tribunal. 19. We have decided a similar issue in assessee's case in ITA No. 41/Chd/2013 relating to assessment year 2005-06. The facts of the present year are similar to those of assessment year 2005-06. The decision given by us on similar issue for the assessment year 2005-06 shall also apply to this ground of appeal with equal force. For the detailed reasons given therein, we allow this ground of appeal and delete disallowance of Rs. 65,094/- made u/s 40(a)(ia) of the Act. 20. In the result, the appeal is allowed partly. ITA No. 43/Chd/2013 (Assessee's appeal) (AY 2007-08) & 222/Chd/2013 - Revenue's appeal (AY 2007-08):- 21. The appeal filed by the assessee (ITA No. 43/Chd/2013) and that of Revenue (ITA No. 222/Chd/2013) are directed against the order of CIT(A), (Gurgaon) dated 12.12.2012 relating to assessment year 2007-08. The assessee in....
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....110/- u/s 68 of the Act made on account of peak credit. The Assessing officer noted that during the course of search operation at the residence of Shri Sandep Bansal, partner of the assessee firm, a document Annexure A-3 was seized. This document is a loose bunch of papers. This document contained the details of purchases, sales and other expenses/receipts of the assessee for different periods. Similarly, the documents A-4, A-5, A-6, A-7, A-8 & A-9 were also seized from the residence of Shri Sandeep Bansal which contained the details of purchases/sales and other expenses and receipts of the assessee for different periods. During the course of search operation, Shri Sandeep Bansal, one of the partner of the assessee firm admitted in his statement that all these entries relate to M/s Munshi Ram Walati Ram. The assessee vide its letter dated 16.12.2010 submitted the detailed reply in this regard. The Assessing officer observed that the total of the peak credits of all the seized documents came as under:- Document Amount (in Rs.) A-3/P-II 5,26,000 A-3/P-III 6,22,000 A-3/P-IV 3,41,000 A-4 2,73,250 A-5 5,97,300 A-6 15,66,110 A-7 4,14,332 ....
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.... Period Addition made (in Rs. ) A: 7 25.05.2006 to 03.06.2006 4,14,332/- A: 6 04.06.2006 to 14.07.2006 15,66,110/- A: 3/P-II 14.07.2006 to 31.08.2006 5,26,000/- A: 5 01.09.2006 to 21.10.2006 5,97,300/- A:3/P:III 21.10.2006 30.11. to 2006 6,22,000/- A: 8 01.12.2006 to 20.01.2007 3,85,200/- A:3/P:IV 20.01.2007 to 31.01.2007 3,41,000/- A;$ 01.02.2007 to 31.03.2007 2,73,250/- According to Ld. Counsel for the assessee, the above period may be taken as one period and should not be broken into months/quarters/years or any other period. According to him, the above period is in continuity and, therefore, period in the consideration should not be broken into months/quarters etc. Considering the entire facts and circumstances of the present case, we find considerable force in the above submissions of Shri Neeraj Jain, Ld. Counsel for the assessee. Accordingly, we set aside the findings of the CIT(A) on this issue and remand the issue to the file of the Assessing officer with a direction to decide the same afresh in accordance with law after affording due and reasonable opportunity of being heard to the assessee. ....
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....the above Grounds of Appeals:- a) The appellant disputes the quantum of additions/disallowances. b) That the Ld. CIT(A) is not justified in not giving the telescoping/set off of addition against the surrender made in the A.Y. 2009-10. c) that the Ld. CIT(A) is not justified in not giving the telescoping/set off additions made on account of peak credit in assessment year 2006-07, assessment year 2007-08 & assessment year 2008-09 against the additions made for unexplained expenditure/unexplained investment. d) that the Ld. CIT(A) is not justified in not giving the telescoping/set off additions made on account of peak credit in assessment year 2006-07 and assessment year 2007-08 against the peak credit addition confirmed in assessment year 2008-09. 32. At the time of hearing of the appeal Shri Neeraj Jain, Ld. Counsel for the assessee did not press for ground Nos. 1, 2 and 6 of the appeal and, hence, we dismiss these grounds as not pressed. 33. Ground No.3 of the appeal relates to the addition of Rs. 7,38,700/- u/s 68 of the Act on account of peak of Annexure A-9. The Assessing officer noted that during the course of search operation at the re....
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....stion have not been reconciled with books of account at this stage also. In our opinion, the CIT(A) was justified in upholding the action of the Assessing officer and, hence, we do not see any merit in this ground of appeal and reject the same. Before parting with this case, it may be relevant to observe here that Shri Neaeraj Jain, Ld. Counsel for the assessee stated that the benefit of addition made on account of peak credit u/s 68 in the immediate preceding year may be given. We have restored a similar issue to the Assessing officer for a fresh consideration in accordance with law in assessment year 2007-08. We direct the Assessing officer to decide this issue in accordance with law after affording reasonable opportunity of being heard to the assessee. In the above terms, this ground of appeal is disposed of. 36. Ground No.4 of the appeal relates to addition of Rs. 1,20,000/- u/s 69C on account of unexplained expenditure. During the course of search operation at the business premises of Shri Sandeep Bansal, partner of the firm, a document Annexure A-2 was impounded. Page 33 of the Annexure A-2 contained the account of Sakshi Jewellers of dated 15/2. However, the year is not m....
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....ing the addition u/s 69-B on account of discrepancy in stock. 4. That the Ld. CIT(A) is not justified in confirming the addition of Rs. 9,91,000/- u/s. 68 on account of peak credit . 5. That the Ld. CIT(A) is not justified in confirming the addition of Rs. 32,500/- on acocunt of peak credit of document A:2 6.. That the Ld. CIT(A) is not justified in confirming the addition of Rs. 10,84,000/- which the assessee has itself surrendered and declared as its income. This amounts to double addition. 7. That without prejudice to the above Grounds of Appeals:- a) The appellant disputes the quantum of additions/disallowances. b) That the Ld. CIT(A) is not justified in not giving the telescoping/set off of addition against the surrender made. c) that the Ld. CIT(A) is not justified in not giving the telescoping/set off additions made on account of peak credit in assessment year 2006-07, assessment year 2007-08 & assessment year 2008-09 & Assessment year 2009-10 against the additions made for unexplained expenditure/unexplained investment. d) that the Ld. CIT(A) is not justified in not giving the telescoping/set off additi....
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....arket prices on the date of survey. But the assessee did not maintain any stock register. Neither at the time of survey nor in course of assessment proceedings, the assessee furnished any explanation how it had arrived at the value of stock found as on the date of survey at Rs. 1,26,07,455/- At no stage the assessee had filed any evidence in support of his submission and therefore, the plea that there was no discrepancy in stock cannot be accepted. Hence, a sum of Rs. 37, 37,415/- is being added back to the total income of the assessee u/s 69B on account of discrepancy in stock. In view of the above, the Assessing officer made the addition of Rs. 37,37,415/- u/s 69B of the Act. 44. On appeal, the CIT(A) held that there was a counting mistake as the Assessing officer in assessment order has taken stock value at Rs. 1,63,44,870/- which should actually be 1,62,94,820/-. According to CIT(A), the copies of the two inventory of gold and diamond respectively taken at the time of survey (Rs. 41,66,820 + Rs. 1,21,28,000) i.e. Rs. 1,62,94,820/- has been shown. He therefore, held that the difference of stock to the extent of Rs. 50,050/- taken in excess by the Assessing officer....
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....at Assessing officer has wrongly taken the difference of stock to the extent of Rs. 26,01,018/- while comparing the stock valuation made by the registered valuer with the estimated trading account. 47. Considering the submissions made on behalf of both the parties, we observe that the Ld. CIT(A) has correctly held that the Assessing officer has wrongly taken the difference of stock to the extent of Rs. 50,050/- while comparing the stock value made by the registered valuer with the estimated trading account. The Assessing officer has mentioned the closing stock at the time of survey at Rs. 1,63,44,870/- whereas as per valuation made by the registered valuer of the Department, the closing stock was valued at Rs. 1,62,94,820/-. In our opinion, the Ld. CIT(A) has correctly opined that the difference of stock to the extent of Rs. 50,050/- taken in excess by the Assessing officer deserves to be deleted. It is also observed that the Ld. CIT(A) has correctly held that the Assessing officer has wrongly taken the difference of stock to the extent of Rs. 11,83,820/- while comparing the stock valuation made by the registered valuer with the estimated trading account. The Assessing officer h....
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....re A-16 and A-17 are available in para 5 of the assessment order. The Assessing officer noted that the peak credit of those two documents (A-16 and A-17) came to Rs. 19,29,920/- (Rs.9,38,920/- + Rs. 9,91,000/-) . The assessee failed to reconcile these entries with the regular books of account, therefore, total peak credit of Rs. 19,29,920/- was added back to the total income of the assessee u/s 68 of the Act. During the course of survey operation, yet another document i.e. Annexure A-2 was also impounded. The peak credit of the said document came to Rs. 32,500/-. The Assessing officer made the addition of Rs. 32,000/- u/s 68 of the Act. 49. On appeal, the CIT(A) confirmed the addition of Rs. 9,91,000/- and allowed a relief of Rs. 9,38,920/-, observing as under:- "6.1 I find that the content of the seized documents have been reproduced in the impugned order to work out the peak credit. It is the assessee's contention that the transaction dates are continuous from 12.0.2006 and that all the documents seized pertain to different assessment year should be considered for working out one single peak credit. This contention was found inaccurate and consequently wherever there ....
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....tly observed that the opening of closing balance in respect of A-16 & A-17 are tallying with each other and he, therefore, has correctly held that these two documents should be taken to pertain to one transaction. The Assessing officer had taken over the two peak credits for A-16 & A-17, therefore, Assessing officer was not correct while taking two peak credit of A16 & A17. In our opinion, the Ld. CIT(A) has correctly taken the peak credit of Rs. 9,91,000/- which is reflected in Annexure A-17. As regards the addition of Rs. 32,500/- also, we do not see any infirmity in the order of the CIT(A). The assessee has failed to reconcile the entries with the books of account. Thus, considering the entire facts and circumstances of the present case, we reject ground Nos. 4 & 5 of the appeal. Before parting this, we may add that the alternative contention, Ld. counsel for the assessee submitted that benefit of addition made on account of peak credit in the immediate preceding assessment year may be given to the assessee. We direct the Assessing officer to consider and decide this aspect of the matter in accordance with law after affording due and reasonable opportunity of being heard to the ....
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.... was Rs. 12,02,460/-. In our opinion, the amount in question has already been included in the returned income by including the same in trading account by specifically mentioning as surrendered income and making the addition on the same while making the assessment, it will amount to double addition. Accordingly, we hold that there was no justification in making the addition of Rs. 10.84 lakhs and we delete the same. This ground of appeal is allowed. 56. Vide ground Nos. (iii) & (iv) of the appeal, (ITA No. 223/Chd/2013), the Revenue has challenged the action of the CIT(A) in deleting the addition of Rs. 31,38,527/- made on account of unexplained expenditure u/s 69C of the Act. The Assessing officer discussed this issue in para 4.2 of the assessment order. The Assessing officer noted that during the course of survey cash of Rs. 1,01,045/- was found but as per balances prepared as on 16.1.2009, balance of Rs. 28,43,782/- was found. In this regard, Shri Sandeep Bansal, parnter of the firm stated that during the course of survey he had withdrawn a sum of Rs. 15 lakhs. However, he failed to explain the difference of Rs. 12,42,737/-. Accordingly, , Shri Sandeep Bansal surrendered an ad....
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....iscrepancy in stock was offered for taxation but discrepancy in cash was not offered for taxation. The case of the ld. counsel is that the assessee has been taking shifting stands on various points of time. The AO has made addition not merely on the basis of statement but also on account of cash discrepancy noted by the survey officer. The assessee has displayed dismal tax morality. There is nothing on record to show the application of force or coercion. Therefore, the addition made by the AO is required to be restored. On the other hand, the burden of the argument of the ld. counsel is that the addition has been made solely on the statement, which does not have evidentiary value. The excess stock which results in income has been offered for taxation notwithstanding the stand taken in the notes on accounts. However, shortage of cash does not lead to inference of income. The shortage was explained during the course of assessment as the cash was lying elsewhere. Therefore, the addition is made merely on the statement, which does not have any evidentiary value. 7.1 In the case of Pullangode Rubber Produce Co. Ltd. (supra), the distinguishing feature is that entries were made ....
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....ection of evidence of income which leads to information on what has not been disclosed or what is not likely to be disclosed before the revenue. They have been further advised that no attempt should be made to obtain confession as to the undisclosed income. Having gone through the statement, we find that it was tendered voluntarily and there was no attempt to obtain the confession. However, the survey officers lost focus and concentration on collection of evidence of income which leads to information on what has been disclosed or what is not likely to be disclosed in the return. They were happy because the Director-cum- DGM (Finance) made a statement surrendering the cash for taxation and did not go further to gather facts as to what has happened to the missing cash. While we may agree with the ld. CIT, DR that the assessee has displayed low tax morality, that cannot be a ground for sustaining an addition, which inference is otherwise not deductible under the law. The Department has no evidence except shortage of cash, which does not lead to the inference of earning equivalent income. In these circumstances, the order of the ld. CIT (Appeals) cannot be said to be perverse or illega....