2018 (1) TMI 1291 - AT - Income Tax

Disallowance made u/s 40a(ia) - short deduction of tax at source - CIT-A restricted the addition - Held that - It is not in dispute that the sum of 11, 86, 890/- represents amounts of expenditures for which short deduction of tax at source has been made by the assessee. It is well settled by the Hon ble Jurisdictional High Court in the case of CIT vs. S.K. Tekriwal 2012 (12) TMI 873 - CALCUTTA HIGH COURT wherein it has been held that disallowance u/s 40a(ia) of the Act cannot be invoked in respect of short deduction of tax at source. Hence respectfully following the said decision we hold that no disallowance u/s 40a(ia) could not be made Disallowance of bad debts - Held that - We find lot of force in the argument of the Ld. AR that these balances were reflected under the head sundry debtors in the balance sheet of the assessee and from the very fact that the same are shown under sundry debtors itself goes to prove that they had emanated out of sales of the assessee and hence the income relatable thereon in the form of sales and services had been duly offered to tax in the earlier years in accordance with Section 36(2) of the Act. Respectfully following the decision of the Hon ble Supreme Court in the case of TRF Limited (2010 (2) TMI 211 - SUPREME COURT) and in view of the fact that the assessee had duly written off this trade debts by crediting the concerned sundry debtors accounts in its books of accounts we direct the Ld. AO to delete the disallowance made towards bad debts. Addition made on account of sundry creditors - Held that - This is a case wherein the other party M/s Anvil Cables Pvt. Ltd. having made sales to the assessee and having sent all the requisite documents through bank pursuant to L/C limits had not recorded the sales in its books of accounts. Instead of passing on of this information to the Ld. AO of the supplier M/s Anvil Cables Pvt. Ltd for necessary action to be taken in accordance to law in the hands of the said supplier the Ld.AO of the assessee had accepted the statement of account of that supplier as sacrosanct and proceeded to make addition in the hands of the assessee by disbelieving the reconciliation statement and explanation given by the assessee. Hence in these circumstances we have no hesitation in directing the Ld. AO to delete the addition made on account of sundry creditors. Non-granting of rebate of tax paid u/s 90/91 - Held that - CIT(A) had not adjudicated this ground at all in his order even though this ground is also reproduced in his order. Hence we deem it fit and appropriate to remand this issue to the file of the Ld. Ld. CIT(A) for adjudication of the same on merits and based on the evidences filed by the assessee and dispose off this ground in accordance with law. Accordingly ground raised by the assessee is allowed for statistical purposes.

Summary

Issues:
1. Disallowance of short deduction of TDS under section 40a(ia) of the Income Tax Act.
2. Disallowance of bad debt.
3. Disallowance of sundry creditors.
4. Non-granting of rebate of tax paid under section 90/91 of the Act.

Issue 1: Disallowance of short deduction of TDS under section 40a(ia) of the Income Tax Act:
The appellant contested the disallowance of ?11,86,890 for short deduction of tax at source. The appellant argued that certain payments had tax duly deducted and remitted, while for the remaining amount, tax was deducted but not in accordance with relevant provisions. The appellant cited a jurisdictional High Court decision to support their claim. The Tribunal held that disallowance under section 40a(ia) cannot be invoked for short deduction of tax at source based on the cited decision. Consequently, the disallowance was not justified, and the appellant's ground was allowed.

Issue 2: Disallowance of bad debt:
The appellant challenged the disallowance of ?8,86,029 claimed as bad debt. The AO disallowed the claim as details of income offered in earlier years for specific parties were not provided. The Tribunal noted that the debts were written off and reflected as sundry debtors, indicating income had been offered in earlier years. Citing relevant case law, the Tribunal directed the AO to delete the disallowance, as the bad debts were duly written off in the books.

Issue 3: Disallowance of sundry creditors:
The appellant disputed the disallowance of ?17,71,820 concerning sundry creditors. Discrepancies were noted between party ledger balances and the assessee's books. The appellant explained the treatment in its books, including reversal of purchases in the subsequent year. The Tribunal found the AO disregarded the explanation and relied on the other party's statement obtained under section 133(6) of the Act. Considering the circumstances, the Tribunal directed the AO to delete the addition made on account of sundry creditors.

Issue 4: Non-granting of rebate of tax paid under section 90/91 of the Act:
The appellant sought a rebate for taxes paid under section 90/91, which was partially granted by the AO. However, the remaining amount was not credited. The Tribunal observed that the CIT(A) did not adjudicate on this issue. Therefore, the Tribunal remanded the issue to the CIT(A) for proper adjudication based on the evidence filed by the appellant. Grounds 1, 2, and 3 were allowed, while ground 4 was allowed for statistical purposes.

In conclusion, the Tribunal allowed the appeal for statistical purposes, addressing the issues of disallowance of TDS, bad debt, sundry creditors, and rebate of tax paid under sections 90/91 of the Act. The Tribunal provided detailed reasoning for each issue, ensuring justice and compliance with relevant legal provisions.