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2019 (8) TMI 1317 - AT - Income TaxTDS u/s 194J or 192 - Addition on account of accounting charges - HELD THAT - We note that the assessee made a payment of accounting charges to the part time Accountant, who was not a Chartered Accountant. Therefore, section 194J does not apply to the issue under consideration. This accounting charges has been paid by the assessee to the part time Accountant for a particular period and it does not relate to a lump sum payment. And, it is below the threshold limit, which does not require to deduct TDS. Therefore, we note that the CIT(A) has rightly deleted the impugned addition made by the AO. That being so, we decline to interfere in the impugned order of the CIT(A) on this issue and uphold the same, hence, ground no. 1 raised by the revenue is dismissed. Disallowance of alleged commission payment - HELD THAT - We note that the said payment of ₹ 80,000/- was not in the nature of commission but it was made on account of petty works. The Ld.CIT(A) also stated that the said expenditure is an allowable expenditure as per provision of Section 37. Therefore, the provisions to deduct tax u/s 194H is not applicable in this case. That being so, we decline to interfere in the order passed by CIT(A), his order on this issue is hereby upheld and grounds of appeal raised by the Revenue is dismissed. Addition on account of default in deducting TDS - the payment made through labour sardars, who is suppliers of labours and he himself is also a labourer - HELD THAT - Respectfully following the judgment of the Co-ordinate Bench in the case of Kwality Construction 2016 (11) TMI 667 - ITAT KOLKATA we are of the opinion that the CIT-A was justified in accepting the plea of assessee being the labour sardars are not suppliers of labours and as such he rightly deleted the impugned addition made u/s. 40(a)(ia). We uphold the impugned order of the CIT-A. Therefore, the grounds raised by the revenue are dismissed. Addition on account of capital introduction - unexplained Cash Credit u/s. 68 - HELD THAT - We note that Assessee has introduced the following assets as capital contribution to the business firm such as, Building, Car , Computer Furniture , Security deposit etc., we adjudicate the asset-wise issue as follows Building - The asssessee produced an executed will, on the basis of which the building under question was received by the assessee from one Shri Ashok Kumar Singh and the same was brought into the business in F.Y. 2012-13. It was clearly mentioned in the will that it will become effective only after the death of Shri Singh. In the meantime, a copy of Property Tax Bill was submitted which clearly depicts that the owner of the same building at that time was Shri Ashok Kumar Singh. So, the assessee was not in a position to be the absolute and beneficial owner of the said property. While deleting the addition CIT (A) has directed to AO to add back the depreciation claimed in respect of the above building. Therefore, the addition made by AO to the tune of ₹ 70,00,000/- has been deleted by ld. CIT(A). We do not find any infirmity in the order of ld. CIT(A), hence, we uphold the order of ld. CIT(A). Car - Car A was purchased in the year 2009-10 for ₹ 5,14,500/- for personal use. Later on, it was brought into the business invoking provision of Section 43C(1) and was recorded at its F.M.V. at ₹ 3,68,000/-. While going through the Explanation 5 to Section 43(1), CIT (A) held that it is clearly mentioned how to record a property in the books of accounts clearly mentioned that it should at cost less depreciation. However, for other asset Explanation 5 to Section 43(1) is silent. Since, in the remand report the AO. has mentioned that the assessee has submitted the evidence in respect of car purchased by the necessary journal entry hence, it is clear that no financial transaction is involved. Therefore, the addition made by AO to the tune of₹ 3,68,000/- was deleted by ld.CIT(A). We do not find any infirmity in the order of ld. CIT(A), hence, we uphold the order of ld. CIT(A). Car B was purchased in the F.Y. 2012-13. However, assessee admitted that due to an accounting error committed by the earlier accountant, the assessee has wrongly entered the car in the books of account. Wrong accounting treatment done by the assessee clearly shows that addition in capital is purely on account of an asset which was not owned by the assessee in F.Y. 2012-13. Hence, the AO.'s action to treat the same as unexplained cash credit is not valid and hence deleted by ld.CIT(A). Therefore, the addition made by AO to the tune of Rs.l6,31,986/- was rightly deleted by ld. CIT(A). We do not find any infirmity in the order of ld. CIT(A), therefore, we uphold the same. Computer - We note that on examining the balance sheet and relevant evidences produced by the assessee, CIT (A) observed that the assessee has wrongly credited capital account instead of respective party account. Moreover, the Counsel of the assessee submitted a declaration from the creditors which clearly shows that the said amount is still outstanding. Therefore, the addition made by AO to the tune of ₹ 2,00,000/- has been deleted by ld. CIT(A). We do not find any infirmity in the order of CIT(A), therefore, we uphold the same. Furniture - Due to passing of wrong journal entries viz. instead of crediting the respective party ledgers, the assessee wrongly credited the Capital A/c. Moreover, the Counsel of the assessee submitted invoices in respect of the purchases. The assessee also admitted that since all the documents were under the custody of DGCEI, the same could not be submitted by the assessee earlier. Therefore, the addition made by AO to the tune of ₹ 9,73,000/- has been deleted by CIT(A). The assessee produced before the Bench, Bill for purchase of Furniture on credit basis - DR for the Revenue prayed the Bench that purchase bill of furniture should be verified by AO, hence this issue should be remitted back to the file of the AO. Assessee has fairly agreed that issue may be remitted back to the file of AO for necessary verification of purchase bill of furniture. Therefore, we remit this issue back to the file of the AO with the direction to examine the purchase bill of furniture and adjudicate the issue in accordance to law. Statistical purposes, this issue is treated to be allowed. Investment/Security Deposits - We note that assessee deposited with VGR Cooperative Housing Society Ltd. and Roudrachaya Co-operative Housing Society Ltd. as Security Money/EMD money in order to obtain construction work contract. However, due to some reason the said work could not get started. In the next year the assessee got order from the above parties. Subsequently, both the societies acknowledged that the amount deposited will be adjusted as Security Deposit against the work order issued in the year 2011-12. Therefore, the addition made by AO to the tune of ₹ 20,00,000/- has been deleted by ld. CIT(A). DR for the Revenue prayed the Bench that letter for adjustment of security deposit against the work order issued in the year 2011- 12 should be examined by AO, therefore, he requested the Bench to remit this issue back to the file of A.O. Assessee has fairly agreed with Ld. DR, therefore, we remit this issue back to the file of the AO for verification of letter for adjustment of security deposit and adjudicate the issue in accordance to law. Assessee is directed to file before the AO Letter for adjustment of security deposit and explanation, if any, to prove his bona fide. Statistical purposes, this issue is treated to be allowed.
Issues Involved:
1. Deletion of addition on account of accounting charges. 2. Deletion of disallowance on account of commission payment. 3. Deletion of addition on account of default in deducting TDS for labour charges. 4. Deletion of addition on account of capital introduction. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Accounting Charges: The Revenue contended that the CIT(A) erred in accepting the assessee's contention that accounting charges were in the nature of salary based on an appointment letter without evidence of acceptance by the incumbent. The AO had disallowed ?37,146 paid as accounting charges due to non-deduction of TDS under Section 194J. However, the Tribunal noted that there was an employer-employee relationship between the assessee and the accountant, which attracts Section 192, not Section 194J. Consequently, the provision of Section 40(a)(ia) was not applicable, and the CIT(A) rightly deleted the addition. Hence, the ground raised by the Revenue was dismissed. 2. Deletion of Disallowance on Account of Commission Payment: The AO disallowed ?80,000 paid as commission to M/s. Bhai Bhai Enterprise due to non-deduction of TDS under Section 194H. The CIT(A) deleted the addition, stating the payment was for petty works, not commission, and allowable under Section 37. The Tribunal upheld this decision, noting that Section 194H was not applicable. Therefore, the ground raised by the Revenue was dismissed. 3. Deletion of Addition on Account of Default in Deducting TDS for Labour Charges: The AO disallowed ?1,51,83,363 for non-deduction of TDS on labour charges under Section 194C. The CIT(A) deleted the addition, noting that payments were made to labour sardars, who were facilitators for payment of wages, not contractors. The Tribunal referenced multiple precedents, including the case of Dilip Saha, where it was held that payments made through labour sardars do not attract Section 194C. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's ground. 4. Deletion of Addition on Account of Capital Introduction: The AO added ?1,21,73,000 as unexplained cash credit under Section 68 due to the assessee's failure to provide supporting documents for capital introduction. The CIT(A) deleted the addition, accepting the assessee's explanations and supporting documents for various assets introduced as capital. The Tribunal reviewed each asset's introduction: - Building: The CIT(A) deleted the addition but directed the AO to add back the depreciation claimed, as the building was not yet owned by the assessee. - Car A: The CIT(A) deleted the addition, noting the car was brought into business at fair market value, complying with Section 43C(1). - Car B: The CIT(A) deleted the addition due to an accounting error, as the car was not owned by the assessee in the relevant year. - Computer: The CIT(A) deleted the addition, noting the amount was wrongly credited to the capital account instead of the creditor's account. - Furniture: The Tribunal remitted this issue back to the AO for verification of purchase bills, as requested by the Revenue. - Investment/Security Deposits: The Tribunal remitted this issue back to the AO for verification of the letter for adjustment of security deposits against work orders. The Tribunal partly allowed the Revenue's appeal for statistical purposes, remitting specific issues back to the AO for verification. Conclusion: The Tribunal upheld the CIT(A)'s deletions on most grounds, except for the issues related to furniture and security deposits, which were remitted back to the AO for further verification. The appeal was partly allowed for statistical purposes.
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