2016 (2) TMI 40 - AT - Income Tax

Non deduction of tds u/s 194C - payments made to the labourers. - Held that - We find no merit in the submissions of the assessee that the provisions of section 40(a)(ia) of the Act are applicable only to the amounts which are outstanding or remaining payable at the end of every year i.e. 31st March. The Pune Bench of Tribunal has consistently taken a view that the provisions of section 40(a)(ia) of the Act are applicable to the amounts irrespective of whether the same were paid during the year or were outstanding at the close of the year. In the absence of any justification for non-deduction of TDS out of sub-contract payments and in view of admission of the assessee before the Assessing Officer, we uphold the addition - Decided against the assessee Deemed dividend u/s 2(22)(e) - Held that - Since the assessee is not the registered shareholder of the said company, we find no merit in the aforesaid addition made in the hands of the assessee - Decided in favour of assessee Addition u/s 68 - cash credit - Held that - The perusal of the balance sheet filed by the assessee reflects that the closing balance as on 31.03.2007 was ₹ 2,42,500/- i.e. the amount due to Durvesh Construction Co. The case of the assessee before us is limited that it had received sum of ₹ 5 lakhs from M/s. Durvesh Construction Co., out of which sum of ₹ 2,57,500/- was the loan due from the said person and the balance of ₹ 2,42,500/- was the loan outstanding at the close of the year. The assessee had admittedly, received ₹ 5 lakhs from the said person and had only shown the balance of ₹ 2,42,500/- in the balance sheet. In the above said facts and circumstances, where the assessee had advanced sum of ₹ 2,57,500/- in the preceding year to Mr. S.R. Sharma, proprietor of M/s. Durvesh Construction Co., then to the extent of said amount, loan is explained as the creditworthiness can be accepted to the extent of amount which was advanced by the assessee. However, in respect of balance of ₹ 2,42,500/-, the assessee has failed to discharge his onus i.e. to establish the creditworthiness of the person advanced the loan. Accordingly, we direct the Assessing Officer to restrict the disallowance to ₹ 2,42,500/- - Decided partly in favour of assessee. Addition being difference in receipts - Held that - The assessee claims to have booked the balance sale consideration in subsequent assessment year. Though the assessee is making the same plea before the authorities below and even before us, but the plea of the assessee cannot be accepted in the absence of any documentary evidence being filed by the assessee. Even before us, the assessee has failed to reconcile difference in sale consideration and / or to furnish the evidence that the said amount has been offered to taxation in the succeeding year and on what basis. In the absence of the same, we find no merit in the grounds of appeal, thus confirming the addition - Decided against assessee

Summary

Issues Involved:

1. Disallowance of Rs. 1,58,050 under section 40(a)(ia) for commission paid.
2. Disallowance of Rs. 8,17,741 under section 40(a)(ia) for payment to laborers.
3. Addition of Rs. 2,01,884 as deemed dividend under section 2(22)(e).
4. Addition of Rs. 5,00,000 as unexplained cash credit under section 68.
5. Addition of Rs. 67,500 on account of gross receipts.

Issue-wise Detailed Analysis:

1. Disallowance of Rs. 1,58,050 under section 40(a)(ia) for commission paid:

The assessee raised grounds of appeal No.1 and 2 against the disallowance of Rs. 1,58,050 for non-deduction of tax on commission paid. The provisions of section 40(a)(ia) were applied for non-deduction of TDS. However, the assessee did not press these grounds during the earlier hearing. Consequently, these grounds were dismissed as not pressed.

2. Disallowance of Rs. 8,17,741 under section 40(a)(ia) for payment to laborers:

The assessee contested the disallowance of Rs. 8,17,741 for non-deduction of tax on payments made to laborers. The Assessing Officer noted payments to Aier and Satyam Enterprises, which attracted TDS provisions. The CIT(A) upheld the addition, dismissing the plea that tax deduction was only applicable to amounts payable at year-end. The Tribunal found no merit in the assessee's submissions, stating that section 40(a)(ia) applies to amounts paid during the year as well. The addition of Rs. 8,17,741 was upheld, and the grounds of appeal No.3 and 4 were dismissed.

3. Addition of Rs. 2,01,884 as deemed dividend under section 2(22)(e):

The assessee challenged the addition of Rs. 2,01,884 as deemed dividend. The Assessing Officer applied section 2(22)(e) since the assessee took a loan from a company with substantial interest held by its partners. The CIT(A) upheld the addition. However, the Tribunal noted that the assessee, a partnership firm, was not a registered shareholder of the lending company. Citing the decision in ACIT Vs. Bhumik Colour Pvt. Ltd., it was held that section 2(22)(e) applies only to shareholders. Thus, the addition was reversed, and grounds of appeal No.5 and 6 were allowed.

4. Addition of Rs. 5,00,000 as unexplained cash credit under section 68:

The assessee contested the addition of Rs. 5,00,000 received from Durvesh Construction Co. The Assessing Officer added the amount under section 68 due to the non-verification of the creditor's identity. The CIT(A) upheld the addition. The Tribunal, upon examining the evidence, found that the assessee had received Rs. 5,00,000 but had an opening balance of Rs. 2,57,500 from the creditor. The disallowance was restricted to Rs. 2,42,500, and grounds of appeal No.7 and 8 were partly allowed.

5. Addition of Rs. 67,500 on account of gross receipts:

The assessee disputed the addition of Rs. 67,500 due to discrepancies in sales receipts. The Assessing Officer added the amount as the assessee failed to provide evidence of booking the amount in the subsequent year. The CIT(A) confirmed the addition. The Tribunal found no merit in the assessee's plea due to the lack of documentary evidence. The addition of Rs. 67,500 was upheld, and grounds of appeal No.9 and 10 were dismissed.

Conclusion:

The appeal was partly allowed, with some additions upheld and others reversed or modified based on the evidence and legal provisions. The order was pronounced on January 27, 2016.