TaxTMI 
TaxTMI 
2021 (12) TMI 1165
X X X X Extracts X X X X
X X X X Extracts X X X X
....on facts confirming disallowance made by AO of Rs. 7,93,836/- for non-deduction of TDS u/s 194C from labour charges invoking provisions of section 40(a)(ia) of the Act. 3. Ld. CIT (A) erred in law and on facts confirming disallowance of interest expenses of Rs. 36,000/- made by AO u/s 36(i)(iii) of the Act. 4. Ld. CIT (A) erred in law and on facts partly confirming addition of Rs. 12,01,595/- out of total addition of Rs. 1,59,89,202/- made by AO as unexplained credit u/s 68 of the Act. 5. Levy of interest u/s 234A, 234B, 234C & 234D of the Act is unjustified. 6. Initiation of penalty proceedings u/s 271(1) (c) of the Act is not justified. The assessee craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal." 3. This appeal filed by the assessee for AY 2010-11, is barred by limitation by twenty six days. The assessee has moved a petition for condonation of delay and request, the bench to condone the delay. We have heard both the parties on this preliminary issue and having regard to the reasons given in the petition for condonation of delay....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se of CIT Vs Gujarat State Road Transport Corporation [2014] 41 taxmann.com 100 (Guj.). Learned Counsel for the assessee submits before us that assessee made the payment for the month of August 2009, at Rs. 15,919/- on dated 19.09.2009, which falls within the grace period. The learned Counsel also submits that for the Month of March,2010, the payment of Rs. 15,696/- was made on 17.04.2010, which is within the grace period, therefore the same should be allowed. We find merits in the submissions of the assessee, that the payment within grace should be allowed. Therefore, total amount to be allowed within grace period comes to Rs. 31,615/- ( Rs. 15,919 + Rs. 15,696) which are paid by the assessee within the grace period, therefore, addition to the extent of Rs. 31,615/- is hereby deleted and we direct the assessing officer to make the disallowance of the balance amount of Rs. 35,496/- (Rs. 67,111- Rs. 31,615). Thus, ground no.1 raised by the assessee is partly allowed. 8. Ground no.2 raised by the assessee relates to disallowance of Rs. 7,93,836/- on account of non-deduction of TDS from payment of labour charges under section 194C of the Act. 9. Succinct facts are that during....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions of section 194C, if the single payment does not exceeds Rs. 20,000/- and total payment for the year does not exceeds Rs. 50,000/- to a contractor, the tax is not required to be deducted at source and accordingly the assessee is not liable to deduct and pay the TDS on total amount of Rs. 1,58,728/- out of the total payment of Rs. 9,52,564/-. I find the force in the argument of the Ld. A.R. and addition of Rs. 1,58,728/- is deleted and the balance amount of Rs. 7,93,836/- confirmed." 11. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. 12. Learned Counsel for the assessee submits before the Bench that entire amount of Rs. 7,93,836/- should not be disallowed and only 30% of payment to be disallowed as per the amended provisions of the Finance Act, 2014. Learned Counsel also stated that the amendment under section 40(a)(ia) of the Act is retrospective in nature and therefore 30% disallowance should be made. For that she relied on the judgment of the SMC Bench of Ahmedabad in the case of Amruta Quarry Works, in ITA No.1481/AHD/2013 for AY.2008-09, dated 19.07.2016 wherein it was held as follows: "6.2 Since the amendment has been brought ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....014, the legislature reduced the extent of disallowance under Section 40(a)(ia) of the Act and limited 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 Company (supra), the proviso to Section 40(a)(ia) of the Act was amended so as to provide relief to a bonafide 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 "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) any interest, commission or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, thirty per cent of such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid: Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 assesses were, after the said amendment in 2008, classified in two categories namely: one, those who have deducted that tax during the last month of the previous year and two, those who have deducted the tax in the remaining eleven months of the previous year. It was provided that in the case of assessees falling under the first category, no disallowance under section 40(a)(ia) of the Income-tax Act shall be made if the tax deducted by them during the last month of the previous year has been paid on or before the last day of filing of return in accordance with the provisions of secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sions 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 amendment, even if not given operation retrospectively, may not materially be of consequence to the Revenue when the tax rates are stable and uniform or in cases of big assessees having substantial turnover and equally huge expenses and necessary cushion to absorb the effect. However, marginal and medium taxpayers, who work at low gross product rate and when expenditure which becomes the subject matter of an order under section 40(a)(ia) is substantial, can suffer severe adverse consequences if the amendment made in 2010 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the provisions of Section 194C were indeed applicable and the assessee was under obligation to deduct the tax at source in relation to the payments made by it for hiring the vehicles for the purpose of its business of transportation of goods; that disallowance under Section 40(a)(ia) of the Act is not limited only to the amount outstanding and this provision equally applies in relation to the expenses that had already been incurred and paid by the assessee; that disallowance under Section 40(a)(ia) of the Act of 1961 as introduced by the Finance (No.2) Act, 2004 with effect from 01.04.2005 is applicable to the case at hand relating to the assessment year 2005-2006; and that the benefit of amendment made in the year 2014 to the provision in question is not available to the assessee in the present case. These answers practically conclude the matter but we have formulated Question No. 4 essentially to deal with the last limb of submissions regarding the prejudice likely to be suffered by the assessee. 21. The suggestion on behalf of the assessee about the likely prejudice because of disallowance deserves to be rejected for three major reasons. In the first place, it is cl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Assessing Officer and the submissions of the assessee. Learned Counsel for the assessee submits that interest of Rs. 36,000/- is computed by the assessing officer on opening balance amount, as on 01.04.2009. This addition is based on opening balance of Rs. 3,00,000/- and assessee has not given any loan during the year under consideration. However, Learned DR for the Revenue relied on the order of assessing officer. Learned Counsel also submits that assessee has given advance of Rs. 3,00,000/- to Mr. Ajay Shah which is out of assessee`s interest free funds therefore addition should not be made. Thus, considering all these facts it is crystal clear that assessee has given interest free loan to Mr. Ajay Shah of Rs. 3,00,000/-, out of its interest free funds, therefore addition should not be made. Accordingly, the addition made by A.O. to the tune of Rs. 36,000/- is deleted. 18. Ground no.4 raised by the assessee relates to addition of Rs. 12,01,195/- sustained by ld.CIT(A) under section 68 of the Act. 19. Brief facts qua the issue are that during the assessment stage the assessee was asked to submit unsecured loan confirmation of R R Construction with IT Return and bank ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onsidered Rs. 1,59,89,020/- as unexplained which is credited to R.R. Construction in its books. In appellate proceedings, the assessee has submitted the bank statement of R R Construction of his current account with ICICI Bank Ltd, Bank of India and Prime Co-op Bank Ltd, along with the detailed explanation for each debit and credit entry in accounts. The submission of assessee and all bank/financial statements have verified by the A.O. and he has not taken any adverse view in his remand except credit through journal entries of Rs. 76,09,595/- is to be added u/s 41(1), considering the same as cessation of liabilities. The A.O. has not objected any source / explanation/ details submitted by the assessee during the remand. Further, the assessee has disclosed in its return of income that income of Rs. 53,63,318/- is paid to Mr Vinayak R. Mehta, who is proprietor of R.R. Construction as his share of profit in firm. The nexus between the assessee and R.R. construction is proved and the argument of the assessee that the customers erroneously issued payment cheques in favour of R.R. Construction instead of M/s Shree R.R. Construction, the assessee has Deposited those payments in his bank a....