TaxTMI 
TaxTMI 
2021 (1) TMI 783
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Group of cases including the assessee on 10.2.2009. Notice u/s 153A dated 07.10.2009 was served on assessee requiring the assessee to file the return of income with 16 days of the service of the aforesaid notice and in response to which assessee filed return of income on 11.12.2009 declaring the loss at Rs. 10,86,965/-. The case was taken up for scrutiny and thereafter, vide order dated 19.8.2011 passed u/s 153A the total taxable income was determined at Rs. 58,30,841/- 4. As far as A.Y. 2008-09 is concerned, Assessee had filed the original return of income on 30.09.2008 declaring loss of Rs. 2,82,80,689/- which was initially processed u/s 143(1) of the Act. Thereafter in view of the search u/s 132 conducted in the case of assessee, notice u/s 153A dated 07.10.2009 was served on the assessee on 19.10.2009 requiring the assessee to file the return of income within 16 days of the service of the notice. In response of notice u/s 153A of the Act, assessee filed return of income on 11.12.2009 declaring loss of Rs. 2,82,80,689/-. Subsequently, assessment was framed u/s 153A vide order dated 19.08.2011 and the total loss was determined at Rs. 1,87,63,172/-. 5. Aggrieved by the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the facts and circumstances of the case and in law the A.O. has erred in law and on facts in holding that the amount of Rs. 9,588/- spent towards printing of memorandum of article is capital expenditure in nature and not a revenue expenditure and CIT(A) has erred in law and on facts in upholding the same. 10. That the explanations given, evidence produced and material placed and made available on record have not been properly considered and judicially interpreted and the same do not justify the addition made. 11. That the addition/disallowance made is based on mere surmises conjunctures and the same cannot be justified by any material on record is highly excessive. 12. That the interest u/s 234A, 234B, 234C and 234D has been wrongly and" illegally charged as there is no delay in filling of return and there is no default of payment of Advance tax as the receipt / income is liable to TDS and it could not have anticipated such additions. In any case the interest charged has been wrongly worked out and is excessive. 13. That all the above grounds are independent to each other and mutually exclusive. 14. The Appellant craves leave to add, am....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at A.O., in view of the facts and circumstances of the case, has erred in law and on facts in disallow sum of Rs. 1,70,501/- U/s 40A(3) paid as freight and CIT(A) has erred in law and on facts in upholding the same. The CIT(A) has failed to appreciate that payment is made out of commercial expediency and is allowable expenditure Addition on account of personal expenses 11. That in view of the facts and circumstances of the case and in law the A.O^ has erred in holding that an amount of Rs. 20,680/- is in nature of personal expense and thereby disallowing the same and CIT(A) has also erred in upholding the same. Addition on account of disallowance of additional depreciation 12. That in view of the facts and circumstances of the case and in law the A.O./CIT(A) has erred in law and on facts in confirming an addition on account of disallowance of additional depreciation on plant and machinery. Disallowance of expenses on account of Non-Deduction and Short-Deduction of TDS 13. That CIT(A), in view of the facts and circumstances of the case, has erred in law and on facts in only allowing the part relief in respect of disallowance made U/s 40(a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 07.10.2009 asking the assessee to file the return of income and in response to which assessee filed the return of income on 11.12.2009 declaring loss of Rs. 10,86,965/-. He submitted that in pursuance of the notice u/s 153A, the regular assessment proceedings u/s 143(3) stood abated. He submitted that the AO proceeded to make various additions/disallowances in respect of which no incriminating material was found during the course of search by merely relying on the finding of the special auditor. He submitted that assessment u/s 153A of the Act can be made only on the basis of seized material found during the course of search and any addition made de-hors any material/document found during the course of search is clearly outside the scope of proceedings u/s 153A of the Act. He therefore submitted that the action of the AO in passing the impugned order is without jurisdiction, illegal and bad in law. Ld DR on the other hand supported the order of lower authorities. 11. We have heard the rival submissions and perused the material on record. In the present ground, assessee is challenging the assessment proceedings and the additions made thereat. 12. It is an undisputed fact that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....terated and the abated assessment or reassessment can be made. The word "assess" in section 153A is relatable to abated pro ceedings (i.e., those pending on the date of search) and the word "reassess" to the completed assessment proceedings. (vi) In so far as the pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer. (vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 13. In the light of the aforesaid decision of Hon'ble jurisdictional high Court we find that since it is on undisputed fact that assessment for the year had abated and in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee and when the matter travelled before the Co-ordinate Bench of Tribunal, the issue was decided in Assessee's favour (ITA No. 4164/Del/2013 order dated 30.09.2020). He pointed to the relevant findings of the Tribunal. He therefore, submitted that the expenses were allowable u/s 37 of the Act and the disallowance deserves to be deleted. Ld DR on the other hand supported the orders of the lower authorities. 17. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to disallowance of expenses of Rs. 2,49,650/-. These expenses have been disallowed for the reason that the assessee did not substantiate the nature of expenses and did not file the required details. Before us, Ld. AR has pointed to the details that have been filed by the assessee before the AO. The submissions of these details have not been controverted by the Revenue. Further Ld. AR has pointed to the fact that the expenses have been incurred for the travelling (including related foreign travel) expenses of the Directors and have been incurred for the purpose of the business of the assessee. These submissions have not been controverted by Re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e on 19.10.2009. The 16 days period to file the return of income expired on 04.11.2009 but the return of income was filed on 11.12.2009. The contention before us is that the assessee vide letter dated 04.11.2009 requested the AO to provide additional time to file the return and the said application of the assessee has not been rejected by the AO but at the same time it is also a fact that there is nothing on record to demonstrate that the AO, in response to the aforesaid request of the assessee had extended the time for filing the return of income. In such a situation we are of the view that there has been delay on the part of the assessee in filing the return of income and that the assessee was liable for payment of interest u/s 234A from immediately following the due date i.e. 20.10.2009. We finding no infirmity in the order of AO and thus the ground of appeal of the assessee is dismissed. 23. Thus the appeal of the assessee is partly allowed. 24. Now we take up Appeal in ITA No.4158/Del/2013 for A.Y. 2008-09. 25. Before us, at the outset, the Ld AR submitted that assessee does not wish to press Ground Nos.1 to 4 and 11. In view of the aforesaid submission of Ld AR....
X X X X Extracts X X X X
X X X X Extracts X X X X
....payments of expenditure by crossed cheque or bank draft was to prevent tax evasion and not to disallow deduction of genuine expenditure. In the present case he submitted that the payments which have been disallowed by the AO have been incurred during the course of business and there is no finding of the AO that the expenses are not genuine or are not for the purpose of business. He thereafter, referring to the disallowance of Rs. 7,71,925/- being payment of freight charges to transport/ truck operators (627609 + 144316) he submitted that it is towards the freight charges paid to transporters/truck drivers. He submitted that in a contract of transport of goods there are at least three parties involved namely the transport company, truck owner/ driver and the assessee. In such a transaction normally the arrangement is between the assessee and the transport company and the truck owner/ driver is the intermediary between the two. When the truck owner/ driver carries the goods belonging to the assessee, he acts as an agent of the transport company to deliver the goods and collects the freight from the assessee on behalf of the truck company. In such a situation, the assessee is under....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed that it was an advance payment made to Shri Satoo Kamat for distribution of the daily wages to the labourers. He pointed to the details at page 140 of the paper book. He further submitted that since no payment to an individual was in excess of Rs. 20,000/- the provisions for Section 40A(3) are not applicable and that without prejudice the transactions also falls within the exception provided in Rule 6DD(k). He therefore, submitted that the disallowance upheld by CIT(A) be deleted. 36. Ld DR on the other hand supported the order of lower authorities. 37. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to disallowance u/s 40A(3). 38. As far as the disallowance expenses paid as freight charges to transporters and truck operators is concerned before us, Learned AR has vehemently argued that the payments are covered under sub rule (k) of rule 6DD of I.T. Rules. Therefore, no disallowance u/s 40A(3) is called for and for which assessee has also relied on the decision of Pune Bench of Tribunal and Amritsar Bench of Tribunal. However, it is also a fact that on identical issue in the case of the gr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to state that insofar as the disallowance under section 40A(3) of the Act is concerned, identify of the payees or the genuineness of payment are irrelevant considerations, because it is only after crossing the threshold of such genuineness of the expenditure, the question of payment in terms of section 40A(3) of the Act will arise. Assessee is harping on the escape clause under Rule 6DD(k) which says that where a payment or aggregate of payments made by a person to his agent who is required to make payment in cash for goods or services on behalf of such person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as prescribed under rule 6ABBA, no disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under subsection (3A) of section 40A of the Act. 83. According to the assessee, the truck driver acts as an agent of the assessee. By no stretch of imagination can we say that the truck driver who operates the track pursuant to the agreement bet....
X X X X Extracts X X X X
X X X X Extracts X X X X
....port nor has placed any material on record to demonstrate that the aforesaid decision of Delhi Tribunal has been set aside, stayed or overruled by higher judicial forum. In view of these facts, we hold that AO was not justified in disallowing the depreciation of Rs. 93,406/- u/s 40A(3) of the Act. 41. With respect to the payment of Rs. 28,745/- made to Rakesh Gaur, it is assessee's contention that the concerned employee was not having a bank account at that relevant point of time and therefore assessee made the payment in cash. It is also the contention of the Learned AR that salary payment in subsequent months have been made through cheque. The aforesaid contention of the Learned AR has not been controverted by the Revenue. Further no material has been placed by Revenue to demonstrate that the genuineness of the payment and the identity of the payee was in doubt. Considering the totality of the aforesaid facts, we are of the view that the AO was not justified in disallowing the aforesaid expenses. 42. As far as the disallowance of Diwali expenses of Rs. 43,155/- is concerned. It is the contention of the assessee that the payments have been made to various parties and no indi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in respect of new machinery on the actual cost acquired and installed by an assessee. He submitted that pre-operative expenses were capitalized as part of the block of plant and machinery and normal depreciation under section 32 of the Act which was claimed by the assessee has been allowed by the AO. He submitted that the 'cost of asset' for the purpose of allowability of normal depreciation has not been disputed but the claim of additional depreciation has been disallowed by the AO as according to him the pre-operative expenses did not found part of actual cost. 47. Before us, Learned AR submitted that Accounting Standard (AS) - 10 issued by the Institute of Chartered Accountants of India (ICAI) specifies the components of cost of a fixed asset and it further states that the administrative and other expenses which are specifically attributable to construction of a project or to acquisition of fixed asset(s) or bringing assets to its working condition, it may be included as part of cost of the construction project or as part of the cost of the fixed asset. He further submitted that the Guidance Note on 'Treatment of Expenditure during the Construction Period issued by Instit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....his report has pointed about the instances of the nondeduction of tax at source by the assessee on the payment made on account of freight charges, repairing charges etc. AO asked the assessee to explain about the non-deduction of TDS which have been pointed out by the special auditor. AO after considering the submissions of the assessee noted that assessee has not deducted TDS on the payment made to Truck owners where aggregate amount exceeded Rs. 50,000/-. He accordingly made a disallowance of Rs. 29,89,035/-. He also disallowed certain payments made for inland handling charges, taxi charges on account of TDS. When the matter was carried by the assessee before the CIT(A), CIT(A) after considering the submissions of the assessee granted partial relief to the assessee by observing that no disallowance u/s 40(a)(ia) of the Act is to be made where the payment are in the nature of reimbursement of expenses, no disallowance in case of Railway freight, no disallowance to be made in cases where provisions of section 172 of the Act was applicable and in case of short deduction of tax at source, disallowance to be made only in respect of portion of payment on which TDS has not been deducted....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... he placed reliance on the decision in the case of CIT vs. S. K. Tekriwal 361 ITR 432. He further submitted that identical issue also arose in L T Foods, a group company in A.Y. 2007-08 wherein the Co-ordinate Bench of Tribunal by relying on the decision of Hon'ble Calcutta High Court in the case of S.K. Tekriwal (supra) decided the issue in favour of the assessee. He, therefore, submitted that disallowance made by AO u/s 40(a)(ia) of the Act be deleted. 52. The Learned DR on the other hand with respect to the case of non-deduction of TDS supported the order of lower authorities and further submitted that the Hon'ble Apex Court also in the case of Shree Choudhary Transport Company (supra) has held that amendment made to provisions of section 40(a)(ia) of the Act vide Finance Act 2014 was substantive. With respect to disallowance on account of short deduction of TDS, he has supported the order of lower authorities. 53. We have heard both the parties and perused all the materials available on record. The issue in the present ground is with respect to disallowance u/s 40(a)(ia) of the Act. The disallowance u/s 40(a)(ia) can be divided into two parts. One is with respect to non-d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... made by the Finance (No.2) Act, 2014 could be stretched anterior the date of its substitution so as to reach the assessment year 2005-06 nor the said decision in Calcutta Export Company has any correlation with the case at hand or with the amendment made by the Finance (No.2) Act of 2014. 19.1 By the amendment brought about in the year 2014, the legislature reduced the extent of disallowance under section 40(a)(ia) of the Act and Ltd. it to 30% of the sum payable. On the other hand, by the Finance Act of 2010, which was considered in the case of Calcutta Export Co. (supra), the proviso to section 40(a) (ia) of the Act was amended so as to provide relief to a bona fide assessee who could not make deposit of deducted tax within prescribed time. In fact, even before the year 2010, the said proviso was amended by the Finance Act 2008 and that amendment of the year 2008 was provided retrospective operation by the legislature itself. For ready reference, we may reproduce in juxtaposition the main part of section 40(a) (ia) of the Act as it would read after the amendments of 2008, 2010 and 2014 respectively, as under: (i) 'After the amendment by Finance Act, 2008 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r deduction, has not been paid on or before the due date specified in sub-section (1) of section 139: Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid: ** ** ** (iii) After the amendment by Finance (No.2) Act, 2014 "40. Amounts not deductible.-Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession", (a) in the case of any assessee ** ** ** (ia) thirty per cent. of any sum payable to a resident, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139: Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been dedu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, from the date of insertion of section 40(a)(ia). 19.4 Learned counsel for the appellant has only referred to the concluding part of the decision in Calcutta Export Company but, a look at the entire synthesis by this Court, of the reasons for the amendments of 2008 and 2010, makes it clear as to why this Court held that the amendment of the year 2010 would be retrospective in operation. We may usefully reproduce the relevant discussion and exposition of this Court in Calcutta Export Company as under:- (at pp. 663-666 of ITR):- "19. The above amendments made by the Finance Act, 2008 thus provided that no disallowance under section 40(a)(ia) of the Income-tax Act shall be made in respect of the expenditure incurred in the month of March if the tax deducted at source on such expenditure has been paid before the due date of filing of the return. It is important to mention here that the amendment was given retrospective operation from the date of April 1,2005, i.e., from the very date of substitution of the provision. 20. Therefore, the assessees were, after the said amendment in 2008, classified in two categories namely: one, those who have deducted that ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ver, the Memorandum Explaining the Provisions of the Finance Bill, 2010 expressly mentioned as follows: "This amendment is proposed to take effect retrospectively from April 1, 2010 and will, accordingly, apply in relation to the assessment year 2010-11 and subsequent years." 25. The controversy surrounding the above amendment was whether the amendment being curative in nature should be applied retrospectively, i.e., from the date of insertion of the provisions of section 40(a) (ia) or to be applicable from the date of enforcement. ** ** ** 27. A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section, is required to be read into the section to give the section a reasonable interpretation and requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole. 28. The purpose of the amendment made by the Finance Act, 2010 is to solve the anomalies that the insertion of section 40(a)(ia) was causing to the bona fide tax payer. The amendm....