TaxTMI 
TaxTMI 
2020 (12) TMI 720
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....ruction work. The case was selected for scrutiny by issuing of notice u/s. 143(2) of the Act on 18th August, 2010. The relevant facts relating to the issues contested in the grounds of appeals are discussed as under:- Ground No. 1 (Deleting addition of Rs. 2,22,175/- u/s. 40(a)(ia) for nondeduction of tax) 3. At the time of assessment, the Assessing Officer noticed that assessee has made interest payment to GE Capital and Tate Motors Ltd. without deduction of tax as prescribed u/s. 194A of the act, therefore, amount of Rs. 2,22,175/- was disallowed u/s. 40(a)(ia) of the Act and added to the total income of the assessee. 4. Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has deleted the addition following the decision of Merillyn Shipping and Transport ITAT Special Bench 20 taxman.com 244 holding that once the payments are made and no amount is payable as on 31/03 of the relevant previous year, no disallowance u/s. 40(a)(ia) can be made. 5. During the course of appellate proceeding before us, both the ld. counsel and ld. Departmental Representative have agreed that aforesaid issue of non-deduction of TDS is covered by the decision of Hon'ble High Court ....
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....3 I have gone through the facts of the case. The appellant is t all disputing the finding of the AO that the amount has been diverted for non-business purpose. As far as the claim of noninterest bearing funds available with the appellant is concerned, the following facts are very pertinent: i) the advance has been given to a partner's proprietary concern who runs a petrol pump. No commensurate purchases of fuel are there. The appellant is not even disputing it. It is therefore, in nature of withdrawal of funds by partner from his capital and even over and above it. On the one hand the partner ShriRamjibhaiChaudhary is being paid interest on his capital of Rs. 24.45 lac and on the other hand he has withdrawn over Rs. 60 lac and no interest has been charged from him. ii) all these credits which are claimed as interest free funds; are very old and there were huge investments at that time in the business as well as there was substantial sundry debtors outstanding. There were no funds available from these credits when the funds have been diverted to the partner's concern. iii) therefore, it can be safely said that loans taken on Interest mixed with other funds have been di....
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....partmental Representative has pointed out that loan amount was very old which was given in the earlier years and there was no sufficient interest free fund available with the assessee. During the course of course of appellate proceedings before us, the ld. counsel has stated that opening debit balance was Rs. 61,14,336/- and closing debit balance was Rs. 59,31,445/- and the interest free fund available with the assessee was Rs. 64,75,145/-. However, to controvert the submission of the ld. Departmental Representative the ld. counsel has not furnished any information and material to disprove the claim of the Ld. Departmental Representative that the loan amount was pertained to earlier years when the assessee was not having sufficient interest free fund. The cases relied upon by the assessee are distinguishable on facts. We do not find any merit in the ground of appeal of revenue after considering that the ld. CIT(A) has judiciously restricted the disallowance to the extent of Rs. 3,98,436/- on pro-rata basis as elaborated in his finding supra in this order after following the decision of Sanghiv Swiss Refills Pvt. Ltd. 85 (ITD) 59. In the light of the above facts and findings, both ....
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....related to the assessee and had never filed income tax return. Considering the facts and circumstances, the ld. CIT(A) has confirmed the addition to the unsecured loan amount of Rs. 8,39,727/- and deleted the remaining addition of Rs. 3,75,18,118/- (Rs. 3,83,57,845/- - Rs. 8,39,727/-) holding that looking to the details filed such addition is not justified u/s. 41(1) of the Act. Relevant part of the decision of ld. CIT(A) is as under:- "7.5 I have gone through the facts of the case carefully. The AO 'has conducted verification and enquiries with respect to all 25 creditors whose balance at the end of the year was more than Rs. 5 lac. Notices u/s 133(6) were issued by the AO at the new addresses given by the appellant. They were delivered in most cases except 4. According to the AO, even out of these 3 have submitted confirmations by tapal. From the report it is found that most of the creditors have confirmed the balances and the fact that the money is due to them. As decided by the Supreme court in the case of Suguali Sugar Works Pvt. Ltd. (1999) 236 ITR 518 (SC ) in the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt was ....
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....;ble Delhi High Court in case of ShriVardhman Overseas Ltd ,343 ITR 408.None of the credits has been proved not genuine or bogus. When letters are sent to 25 persons ,some non -responses are natural Out of the cases test checked by the AO, in all cases except as per SI.No.2 of the Remand Report, it has been held under the facts and circumstances discussed above that no addition is justified under law u/s 41(1) of the IT Act. The remaining case is that of Bhemjibhai L. Chaudhary. The appellant has in his submissions claimed that the amount of Rs. 8,39,7277- is due to him and is an unsecured loan which was interest free and has been grouped under Sundry Creditors inadvertently. However, his statement was taken under section 131 and Bhemjibhai L. Chaudhary has stated that the payment was due for jobwork. He didn't even remember the period to which it pertained. The person concerned is closely related to the partners of the firm. Even otherwise, Bhemjibhai L. Chaudhary appears to be a person of small means and has admitted that he has never filed his Income-tax Return. Why, in these circumstances he would lend such a big amount interest free for years together without even bother....
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.... company but the same was returned undelivered 9 Jivabhai Laxmanbhai 981774 Notice u/s. 133(6) of the Act was issued on 16.07.2012, in response no reply is received till now from Jivabhai Laxmanbhai 12 Mohanbhai nathabhai pagi 644301 In response to the summon u/s. 131 of the I.T Act, Shri Mohan nathabhai pagi has attended this office and in his statements he confessed that he worked as supervisor in Gayatri construction till 2007 and worked as a salaried employee only 15 New Mehsana Auto Parts 632690 Notice u/s. 133(6) of the Act was issued on 16.07.2012, in response no reply is received till now from New Mehsana Auto Parts 23 Navdurga Quary Works 527724 Notice u/s. 133(6) of the Act was issued on 16.07.2012, in response no reply is received till now from Navdurga Quary Works After perusal of the information in respect of the aforesaid cases it is clear that complete information has not been furnished. On this issue both the representatives agreed to restore these cases to the file of the Assessing Officer for deciding afresh after examination/verification of the information. Therefore, we restore these cases to the file of Assessing Officer for decidi....
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.... based on the decision of Hon'ble Gujarat High Court in the case of CIT vs. Deepak Nitrate wherein it is held that since assessee acquired possession and was running factory on payment of a substantial part of price, assessee was entitled to grant of deprecation. In view of the above facts and findings, this ground of appeal of the Revenue is dismissed. Ground No. 5 (Restricting GP addition @ 1.5 of GP out of 3.27% of GP) of Revenue and ground nos. 3 & 4 of assessee confirming the rejection of books of a/c u/s. 145 & confirming addition of G.P. @ 1.5 thereby confirming addition of Rs. 19,20,000/- 18. During the course assessment, the Assessing Officer noticed that assessee has shown gross profit at 7.27% on turnover of Rs. 12,74,56,609/- as against gross profit at 10.54% on turnover of Rs. 762,19,534/- in the preceding year. The Assessing Officer observed that there was sharp reduction in the gross profit compared to the earlier year, therefore, the assessee was asked to justify the reduction in the gross profit and provide detail of various projects, project wise income and expenses, detail of labour expenses, detail of diesel expenses as both these expenses were incurred in cas....
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.... reproduced as under:- "9.3 I have gone through the facts of the case. It is observed that major expenses like labour, petrol & diesel and sub-contract expenses which are to the extent of Rs. 3.57 crore. 2.22 crore and 2.45 crore respectively cannot be verified at all vis-a-vis the actual contract work done. This is a very major shortcoming in the books of account. The first two expenses are in cash. In the case of labour expenses, even the payees cannot be traced from the record and therefore, there cannot be any independent check. The appellant himself is saying that sub-contract expenses is booked on the date of payment to parties to whom sub contract work was allotted. There is no check even whether the payments made in April are payments in advance or otherwise of work done earlier. When even the details of sub-contract work done is not known and when the expenses are being booked on cash basis when the method of accounting of the assessee is mercantile, I have got no doubt that accounts of the appellant are not correct as to give a reasonable picture of the profits and state of affairs and by admittedly following mixed system of accounting at least in respect of one major....
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....failed to furnish the project wise income/expenditure details and also failed to prove the genuineness of labour and diesel/petrol expenses with relevant supporting evidences. Regarding sub-contract expenses, he has pointed that the assessee was unable to prove the genuineness of such expenses and no required supporting details/information furnished. The ld. Departmental Representative sated that full amount of sub-contract expenses be disallowed. On the other hand, the ld. Authorized Representative has submitted that the main reason for fall in the GP was due to increased subcontract expenses and the detailed reason for fall in GP was given at pages 30 to 34 of the order of the ld. CIT(A). He further stated that the ld. CIT(A) has confirmed the G.P. @ 1.5% only on the estimated basis. Regarding subcontract expenses he has referred page 18 of the paper book and pages 87 to 89 of the paper book. The Ld. Authorized Representative has submitted that G.P. addition may be reduced to 1%. 21. Heard both the sides and perused the material on record. During the course of assessment, the Assessing Officer noticed short fall in the gross profit declared during the year as compared to the las....
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....acts till 31-03-2009. Even the assessee has failed to furnish the addresses of these sub-contractors and other relevant details of their existence from which the Assessing Officer could have verified the genuineness of the claim of the assessee. In the light of the aforesaid facts and circumstances the ld. CIT(A) has made addition of 1.5% in GP rate after placing reliance on the comparable judicial cases for estimating the income in respect of cases of contracts and sub-contracts as elaborated supra in the findings of the ld. CIT(A). Considering the above facts and circumstances, we do not find any merit in the appeal of the Revenue on this issue as the ld. CIT(A) has judicially restricted the addition to the extent of 1.5 % G.P. rate after following the direction laid down in the various judicial findings relevant to the facts and circumstances pertained to the case of the assessee. It is observed that no separate addition for sub-contract expenses is justified since these expenses ultimately also affect the gross profit therefore the ld. CIT(A) has rightly held that addition of 1.5% in G.P. would also covered addition of sub-contract expenses. We also do not find any merit in....