2016 (4) TMI 1230 - AT - Income Tax

Addition u/s 40(a)(ia) - not deducted tax at source on interest payment - Belated filing of non-deduction forms 15G/15H under Rule 29C Held 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 2014 (1) TMI 927 - ITAT MUMBAI wherein held that the default for non-furnishing of the declarations to the CIT as prescribed may result in invoking penalty provisions u/s. 272A(2)(f), for which separate provision/ procedure was prescribed under the Act - once Form 15G/Form 15H was received by the person responsible for deducting tax, there is no liability to deduct tax - Once there is no liability to deduct tax, it cannot be considered that tax is deductible at source under Chapter XVII-B as prescribed u/s. 40(a)(ia) - The provisions of section 40(a)(ia) can only be invoked in a case where tax is deductible at source and such tax has not been deducted or after deduction has not been paid - No such default occurred in the present case - the provisions of section 40(a)(ia) are not invokable - Decided in favour of assessee. Addition u/s 68 - Held that - The authorities below were fully justified in holding that the peak for the assessment year under consideration is required to be considered separately, independent to other documents. There is no dispute that the seized document i.e. Annexure A-3 pertains for a short period of seven day i.e. from 12.2.2006 to 19.2.2006. It is also an admitted fact that the other seized documents relate to the next financial year onwards. We find no material on record to controvert the findings of the lower authorities. Accordingly, we uphold the order of CIT(A) and reject ground No.4 of the appeal. Addition u/s 69C on account of unexplained expenditure - Held that - The document in question does not contain the specific date particularly the year. There is no evidence on record to prove that the document in question pertains to assessment year 2008-09 or the search period. It is also relevant to point out here that Assessing officer has not examined any authorized person of Sakshi Jewellers in order to bring the truth. In our opinion, the addition made by the Assessing officer and confirmed by the CIT(A) is unwarranted and, accordingly, we delete the addition made u/s 69C of the Act. Addition u/s 69B on account of discrepancy in stock - Held that - Admittedly, the survey was conducted at branch office at Manimajra, Chandigarh where GP rate of 27.29%, which should have been applied. Considering the entire facts and circumstances of the present case, in our opinion, there was no discrepancy in the stocks. In fact the discrepancy in the stock has been worked out by the Assessing officer on estimation. i.e. estimated weight and estimated rate has been taken by the Revenue during the course of survey and the said estimation value of the stock compared with the estimated stock valued as per the books of account by applying estimated GP rate. It is well settled law that no addition can be made where the discrepancies in stock has been worked out at estimation basis without bringing any material on record. In view of the above discussion, we do not see any justification in sustaining the addition of ₹ 25,03,545/- on account of discrepancy in stock. Addition on surrendered income - Double addition - Held that - 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 ₹ 10.84 lakhs and we delete the same. This ground of appeal is allowed. Addition on account of unexplained expenditure u/s 69C - Held that - In this case, the Revenue authorities recorded the statement of Shri Sandeep Bansal, partner of the assessee firm u/s 133A of the Act during the course of survey action. In the above decision, the Tribunal has held that the statement recorded u/s 133A of the Act is not on oath and section does not provide that it can be used for the purpose of Act. Therefore, evidential value of statement u/s 133A is much lower than the evidential value of statement recorded u/s 132(4) of the Act. In this case also, the Revenue has no evidence except the shortage of cash, which does not lead to the inference to earning equivalent income. Applying the ratio of the above decision to the facts of the present case, we are of the view that CIT(A) was fully justified in deleting the addition.

Summary

Issues Involved:
1. Proper opportunity of hearing and natural justice.
2. Confirmation of additions under various sections of the Income Tax Act, 1961.
3. Non-deduction of tax at source on interest payments.
4. Addition of peak credits under Section 68.
5. Discrepancy in stock and unexplained expenditure under Section 69B and Section 69C.
6. Double addition of surrendered income.

Issue-wise Detailed Analysis:

1. Proper Opportunity of Hearing and Natural Justice:
The appellant contended that the CIT(A) did not provide a proper opportunity of hearing, which was against the principles of natural justice. However, during the hearing, these grounds were not pressed by the appellant's counsel and were subsequently dismissed by the Tribunal as not pressed.

2. Confirmation of Additions under Various Sections:
- Section 153A(1)(b) r.w.s. 143(3): The appellant argued that the assessment was not as per the provisions of the assessment in search cases. This ground was not pressed during the hearing and was dismissed.
- Section 68 (Peak Credits): The Tribunal upheld the CIT(A)'s decision to confirm the peak credit additions, stating that the seized documents pertained to different assessment years, and the peak credits were to be considered separately for each year.

3. Non-Deduction of Tax at Source on Interest Payments:
The Tribunal addressed the issue of non-deduction of tax at source on interest payments under Section 40(a)(ia). The appellant's counsel argued that Form 15G/15H was furnished by the payees, and thus no tax was required to be deducted at source. The Tribunal referred to the ITAT Mumbai Bench decision in Karwat Steel Traders v ITO, which held that once Form 15G/15H is received, there is no liability to deduct tax. The Tribunal allowed the appellant's ground and deleted the disallowance made under Section 40(a)(ia).

4. Addition of Peak Credits under Section 68:
- Assessment Year 2006-07: The Tribunal confirmed the addition of ?5,37,900 as unexplained cash credit, stating that the peak credit for the assessment year under consideration should be considered separately.
- Assessment Year 2007-08: The Tribunal remanded the issue back to the Assessing Officer to decide afresh, considering the entire period mentioned in the documents as one period for calculating the peak credit.
- Assessment Year 2008-09: The Tribunal upheld the CIT(A)'s decision to confirm the addition of ?7,38,700, noting that the appellant failed to reconcile the entries with the books of account.

5. Discrepancy in Stock and Unexplained Expenditure:
- Discrepancy in Stock (Section 69B): The Tribunal allowed the appellant's ground, stating that the discrepancy in stock was worked out on an estimation basis without any material evidence. The Tribunal deleted the addition of ?25,03,545.
- Unexplained Expenditure (Section 69C): The Tribunal deleted the addition of ?1,20,000, stating that the document in question did not contain a specific date and there was no evidence to prove that it pertained to the assessment year 2008-09.

6. Double Addition of Surrendered Income:
The Tribunal observed that the surrendered income of ?10,84,000 was already included in the trading account and making the addition again would amount to double taxation. The Tribunal deleted the addition, allowing the appellant's ground.

Separate Judgments:
The Tribunal delivered a common order for all the appeals, addressing each issue comprehensively and providing detailed reasons for its decisions. The judgments were based on the facts and circumstances of each case, as well as relevant legal precedents.