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2017 (8) TMI 1246 - AT - Income TaxSuppression of the receipts - N.P. determination - Held that - Net profit rate declared for the year under consideration was better than the earlier year i.e. for the A.Y. 2010-11 it was 17.43% and for the year under consideration it was 18.93%. The Assessing Officer has not specified the defects in the books of account and he has simply stated that the labour charges vouchers were self made and quantitative and qualitative consumption of raw material could not be worked out or verified in absence of day to day stock register therefore he made a lump sum addition. When the assessee has declared better NP rate than the earlier year then the Assessing Officer was not justified in making lump sum trading addition without giving specific defects in the expenses debited in the P&L account or specific finding with regard to the suppression of the receipts. The assessee claims that his books of account were audited and nothing specific is qualified by the auditor in the audit report therefore mere suspicion should not be made a basis for addition. Also agree with this view that an allegation remains allegation unless it is proved. Suspicion may be strong but it cannot take place of reality therefore direct to delete this addition. - Decided in favour of assessee. Non-deduction of tax on payment of interest paid to creditors - TDS on paid or payable - amount payable at the end of FY or any time during the year - Held that - Controversy regarding TDS on paid and payable has been settled down by the decision of the Hon ble Supreme Court in the case of M/s Palam Gas Services Vs. CIT 2017 (5) TMI 242 - SUPREME COURT wherein held it cannot be held that the word payable occurring in Section 40(a)(ia) refers to only those cases where the amount is yet to be paid and does not cover the cases where the amount is actually paid. If the provision is interpreted in the manner suggested by the appellant herein then even when it is found that a person like the appellant has violated the provisions of Chapter XVIIB (or specifically Sections 194C and 200 in the instant case) he would still go scot free without suffering the consequences of such monetary default in spite of specific provisions laying down these consequences. - Decided in favor of revenue.
Issues Involved:
1. Rejection of books of account and invocation of section 145(3). 2. Confirmation of lump sum trading addition. 3. Addition on account of non-deduction of tax on payment of interest. 4. Special disallowance despite rejection of books of account. 5. Lack of proper show cause notice before making additions/disallowances. 6. Withdrawal of interest under section 244A and charging of interest under section 234D. Issue-wise Detailed Analysis: 1. Rejection of Books of Account and Invocation of Section 145(3): The assessee contended that the CIT(A) erred in not accepting the income shown as per the regular books of account, which were properly maintained and audited as per section 44AB. The Tribunal noted that the Assessing Officer (AO) did not specify defects in the books of account and made a lump sum addition based on self-made labor charge vouchers and the absence of a day-to-day stock register. The Tribunal held that mere suspicion without specific defects could not justify the invocation of section 145(3) and directed the deletion of the lump sum addition. 2. Confirmation of Lump Sum Trading Addition: The AO made a lump sum trading addition of ?6,00,000, which was confirmed by the CIT(A). The Tribunal observed that the net profit rate declared for the year under consideration was better than the previous year. The AO failed to provide specific defects in the expenses debited or any suppression of receipts. The Tribunal concluded that the addition was based on mere suspicion and directed its deletion. 3. Addition on Account of Non-Deduction of Tax on Payment of Interest: The CIT(A) confirmed the addition of ?1,02,633 due to non-deduction of tax on interest payments. The CIT(A) relied on various judicial pronouncements, including the Punjab & Haryana High Court and the Supreme Court, which held that section 40(a)(ia) applies to amounts payable and paid during the year. The Tribunal upheld this view, noting the Supreme Court's decision in M/s Palam Gas Services Vs. CIT, which clarified that section 40(a)(ia) covers both payable and paid amounts. Consequently, the Tribunal dismissed the assessee's ground on this issue. 4. Special Disallowance Despite Rejection of Books of Account: The assessee argued that making special disallowance was unjustified when the books of accounts were rejected, and income was estimated by lump sum additions. However, this ground was not separately addressed in the Tribunal's order, indicating it was not pressed or considered in detail. 5. Lack of Proper Show Cause Notice Before Making Additions/Disallowances: The assessee claimed that the CIT(A) did not issue a proper and valid show cause notice before making additions/disallowances. This ground was also not separately addressed in the Tribunal's order, suggesting it was not pressed or considered in detail during the hearing. 6. Withdrawal of Interest Under Section 244A and Charging of Interest Under Section 234D: The assessee contested the withdrawal of interest under section 244A and the charging of interest under section 234D. The Tribunal noted that these issues are consequential and mandatory, thereby dismissing this ground. Conclusion: The appeal was partly allowed. The Tribunal directed the deletion of the lump sum trading addition of ?6,00,000 due to lack of specific defects in the books of account. However, the addition of ?1,02,633 for non-deduction of tax on interest payments was upheld based on the Supreme Court's ruling. Other grounds were dismissed as either general in nature or not pressed during the hearing.
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