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2020 (9) TMI 577 - AT - Income TaxUnaccounted cash found at the time of search - HELD THAT - As relying on M/s. Jai Amarnath Associates vs DCIT 2019 (9) TMI 1396 - ITAT JAIPUR we are of the view that since the whole cash amounting was not found from the possession of the assessee and the premises at G-8, Ratna Sagar, MSB Ka Rasta, Johri Bazar, Jaipur is not the premises belonging to the assessee and the assessee had duly reconciled the cash found from the assessee's books of accounts. Therefore, the addition made by the AO on this ground is not sustainable in the eye of law. Thus Ground No. 1 of the assessee is allowed. Disallowance of interest paid on late deposit of TDS - HELD THAT - Referring to discussions as well as the decision of ITAT Kolkata Bench in the case of DNV GL As vs ADIT (International Taxation) 2017 (5) TMI 1675 - ITAT MUMBAI we are of the view that the interest paid by the assessee for delayed payment of TDS in respect of statutory liabilities and thus this interest amount cannot be treated as business expenditure u/s 37(1) - no infirmity in the order of the ld. CIT(A) which is confirmed. Thus Ground No. 2 of the assessee is dismissed.
Issues Involved:
1. Addition of ?3,51,470/- on account of alleged unaccounted cash found during the search. 2. Addition of ?18,315/- on account of disallowance of interest paid on late deposit of TDS. Issue-Wise Detailed Analysis: 1. Addition of ?3,51,470/- on account of alleged unaccounted cash found during the search: The assessee contested the addition of ?3,51,470/- made by the Assessing Officer (AO) for unaccounted cash found during the search. The assessee argued that the total cash found, amounting to ?6,29,400/-, was duly accounted for in the books of accounts, which showed a cash balance of ?12,05,828/-. The assessee provided a detailed reconciliation, subtracting amounts paid to individuals and claimed stolen cash, resulting in a revised cash balance of ?6,29,861/-, which matched the cash found. The AO merged the cash found at the premises of another entity, M/s The Cargo, with the assessee's cash, leading to the disputed addition. The assessee clarified that only ?1,50,000/- of the cash found at M/s The Cargo's premises belonged to them, and the rest was explained as belonging to other entities or individuals, including a temple. The CIT(A) upheld the AO's addition, rejecting the assessee's explanations. However, the Tribunal found that the assessee had adequately reconciled the cash found with the books of accounts and that the premises where the excess cash was found did not belong to the assessee. The Tribunal also referenced a similar case, M/s. Jai Amarnath Associates vs DCIT, where the addition was deleted under similar circumstances. Consequently, the Tribunal allowed the assessee's appeal on this ground, deleting the addition of ?3,51,470/-. 2. Addition of ?18,315/- on account of disallowance of interest paid on late deposit of TDS: The assessee challenged the addition of ?18,315/- for disallowance of interest on late deposit of TDS, arguing that such interest is compensatory and not penal, and hence allowable under Section 37(1) of the Income Tax Act. The assessee cited the Supreme Court's decision in Lachmandas Mathura Vs. CIT, which held that interest on arrears of tax is compensatory. The Tribunal examined the judgments cited by both parties and noted that the facts in the present case differed from those in the cited judgments. The Tribunal relied on the ITAT Mumbai Bench's decision in DNV GL AS vs ADIT, which held that interest on delayed payment of TDS is not allowable as a business expenditure under Section 37(1) since it pertains to a statutory liability. Consequently, the Tribunal upheld the CIT(A)'s order disallowing the interest expense and dismissed the assessee's appeal on this ground. Conclusion: The appeal was partly allowed. The addition of ?3,51,470/- on account of unaccounted cash was deleted, while the addition of ?18,315/- for disallowance of interest on late deposit of TDS was upheld. The order was pronounced in the open court on 01/09/2020.
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