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2016 (1) TMI 629 - AT - Income TaxExcessive and unreasonable payments made by the assessee to the persons specified under section 40A(2)(b) - CIT(A) deleted the addition - Held that - The recipient i.e. Doshi Group has earned only 2% margin towards expertise and vast existence for purchasing the tea from various customers on cost plus basis method which appears to be quite reasonable and is in accordance with the past practices. Similarly, interest @ 8% is much lower than interest on bank borrowings @ 14.5% stated to have been paid by the assessee to the bankers, interest @ 6% were paid only to specific suppliers towards small amount of security credit of ₹ 66 lakhs only as against impugned credit of ₹ 30 crores @ 8%. Therefore, the token amount credit available @ 6% does not give proper foundation for comparison. In the light of aforesaid facts and circumstances, we are in complete agreement with the findings of the CIT(A) and therefore decline to interfere. Accordingly, we hold that disallowance under section 40A(2)(b) of the Act is not called for in the facts and circumstances of the case and rightly deleted by the CIT(A). - Decided against revenue Disallowance under section 36(1)(va) - Employees Contribution to PF & ESIC paid beyond due date - CIT(A) deleted the addition - Held that - As submitted on behalf of the assessee that only delay is for the month of January, 2005 of ₹ 28,444/- which has been deposited on 17.02.2005, the payment though delayed has been made within grace period available under Employees Provident Fund Regulations. Similarly, for ESIC contribution, the payment is stated to have been made before due date of filing of return. The CIT(A) reversed the action of the Assessing Officer and allowed the expenses incurred by the assessee for impugned payment of PF and ESIC following the decision of CIT vs. P.M. Electronics, (2008 (11) TMI 3 - DELHI HIGH COURT). We find no error committed by the CIT(A) in coming to the aforesaid conclusion. - Decided against revenue Disallowance of TDS payment under section 40(a)(ia) - TDS payment made by the assessee beyond due dates - Held that - the relevant provisions of section 40(a)(ia) of the Act would be applicable are as per amendment carried out by the Finance Act, 2008 w.r.e.f. 01.04.2005. As per these provisions, where the tax was deducted in the month of March, 2005 but paid before due date of filing of return, deduction of corresponding expenses would be allowed. In cases, where the tax was deducted in other month of the previous year but paid before the last date of the previous year i.e. 31.03.2005, corresponding expenses is to be allowed. He accordingly, directed the Assessing Officer to allow expenses in question as per aforesaid criteria. We find no error in the conclusion of the CIT(A) and hence, we decline to interfere with his findings.- Decided against revenue Addition under section 68 - CIT(A) deleted the addition - Held that - We find that the documents filed by the assessee have not been purportedly examined. It is not clear whether all the documents filed before the CIT(A) were present before the Assessing Officer or not. We find that the confirmation letter has been filed for subsequent year which indicates the opening balance of the earlier year. We consider it necessary that proper enquiry is conducted by the Assessing Officer to find out the bona-fides of the impugned cash credit. We observe that the Assessing Officer has failed to discharge his obligation to conduct a proper enquiry qua the lender to take the matter to logical conclusion. The CIT(A) has also accepted the version of the assessee without any enquiry from vendee. In our considered view, the proper enquiry is necessary in the circumstances existing in the case. Accordingly, We set-aside the issue to the file of the Assessing Officer with a direction to re-examine the issue - Decided in favour of revenue for statistical purposes.
Issues Involved:
1. Disallowance under section 40A(2)(b) of the Income-tax Act, 1961. 2. Disallowance under section 36(1)(va) for Employees Contribution to PF & ESIC. 3. Disallowance under section 40(a)(ia) regarding TDS payments. 4. Addition under section 68 concerning unexplained cash credits. Issue-wise Detailed Analysis: 1. Disallowance under section 40A(2)(b) of the Income-tax Act, 1961: The Revenue challenged the CIT(A)'s decision to reverse the disallowance of excessive and unreasonable payments made by the assessee to specified persons under section 40A(2)(b). The Assessing Officer (AO) had observed a steep fall in gross profit and estimated 10% of certain expenses as excessive, disallowing Rs. 1,23,87,860/-. However, the CIT(A) found that the assessee had consistently justified these payments in previous years without any disallowance. The CIT(A) concluded that the payments were reasonable and in line with past practices, and there was no benefit to the assessee from excessive payments due to substantial brought forward losses. The Tribunal upheld the CIT(A)'s findings, dismissing the Revenue's grounds. 2. Disallowance under section 36(1)(va) for Employees Contribution to PF & ESIC: The AO disallowed Employees Contribution to PF and ESIC paid beyond the due date. The CIT(A) reversed this, citing the Tribunal's decision in Gujarat Containers Ltd. and the Delhi High Court's ruling in CIT vs. P.M. Electronics, which allowed such payments if made before the due date of filing the return. The Tribunal found no error in the CIT(A)'s conclusion and dismissed the Revenue's ground. 3. Disallowance under section 40(a)(ia) regarding TDS payments: The AO disallowed Rs. 4,34,901/- under section 40(a)(ia) due to TDS payments made beyond due dates. The CIT(A) allowed these expenses, referencing the amendment by the Finance Act, 2008, which permitted deductions if TDS was paid before the due date of filing the return. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's ground. 4. Addition under section 68 concerning unexplained cash credits: For the assessment year 2006-07, the AO added Rs. 2,00,00,000/- under section 68, questioning the genuineness and creditworthiness of a loan from Shri Jayant Sanghvi. The CIT(A) deleted the addition, noting that the assessee had provided sufficient documentation, including a confirmation letter, cheque details, and the lender's tax return. The Tribunal, however, found that proper enquiry was necessary and set aside the issue to the AO for re-examination. Consequently, the related ground for the assessment year 2007-08 concerning interest on this addition was also set aside for re-examination. Conclusion: The Tribunal upheld the CIT(A)'s decisions on disallowances under sections 40A(2)(b), 36(1)(va), and 40(a)(ia), dismissing the Revenue's appeals on these grounds. However, it set aside the addition under section 68 for re-examination by the AO, allowing the related grounds for statistical purposes. The appeals were disposed of accordingly.
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