2018 (12) TMI 752 - AT - Income Tax

Addition on account of Training Fees & Royalty Payments - Held that - We confirm the stand of first appellate authority in deleting the addition on account of Training Fees & Royalty Payments. The payment on account of survey fees has been confirmed by the first appellate authority in the impugned AY. However, the aforesaid payment made by assessee in AY 2008-09 as well as in AY 2012-13 is also covered in the grounds raised by the revenue for those years wherein the Tribunal has confirmed the deletion of quantum addition by first appellate authority. This being the case, the aforesaid addition on account of survey fees also stands deleted. The grounds raised by assessee, in this regard, stands allowed whereas grounds raised by revenue stands dismissed. Addition of cash credit u/s 68 - Held that - As already noted that the complete onus to prove the fulfillment of primary ingredients of Section 68 viz. identity, creditworthiness and genuineness was upon assessee and the same, on factual matrix has remained un-discharged to a great extent. Since the revenue has agitated the relief provided by Ld. CIT(A) in violation of Rule-46A, we deem it proper to set aside the findings of appellate authority and restore the matter back to the file of Ld. AO for readjudication as per law. The assessee is directed to substantiate its stand with requisite documentary evidences and demonstrate the fulfillment of primary ingredients of Section 68. The allowance of interest payment is consequential in nature which would be adjudicated as per the stand taken by revenue against loan creditors. Resultantly, the grounds urged by revenue as well as by assessee, in this regard, stands allowed for statistical purposes. Quantum addition u/s 40A(3) - CIT-A deleted the addition - Held that - Not a valid ground to delete the addition without verification of factual matrix. The complete onus to substantiate the arguments advanced by the assessee rested upon him and Ld. CIT(A) erred in shifting the onus of the same on Ld. AO. Therefore, the matter stands remitted back to the file of Ld. AO for verification of submissions made by the assessee before first appellate authority and re-adjudicate the same as per law with a direction to the assessee to substantiate the same. Ground of revenue s appeal stands allowed for statistical purposes

Summary

Issues Involved:
1. Addition under Section 40(a)(ia) for non-deduction of tax.
2. Unexplained cash credit under Section 68.
3. Interest expenses related to unexplained cash credit.
4. Addition under Section 40A(3) for cash payments.

Detailed Analysis:

1. Addition under Section 40(a)(ia) for Non-Deduction of Tax:
The assessee contested the addition of ?6,23,673/- under Section 40(a)(ia) for non-deduction of tax on payments made to Government Agencies/Local Authorities. The CIT(A) confirmed this addition, noting inconsistencies in the assessee's claims regarding the nature of payments during assessment and appeal stages.

The revenue's appeal included the deletion of ?51,66,919/- out of ?58,20,505/- for non-deduction of TDS on training fees, royalty, and survey fees. The CIT(A) deleted these additions based on prior Tribunal decisions favoring the assessee for other assessment years (AYs). The Tribunal confirmed the CIT(A)'s deletion of additions for training fees and royalty payments, following precedent from AYs 2008-09, 2010-11, and 2012-13. The Tribunal also deleted the addition for survey fees, consistent with its decisions in prior AYs.

2. Unexplained Cash Credit under Section 68:
The assessee failed to substantiate unsecured loans of ?2,56,75,000/- from 106 parties with adequate documentary evidence. The CIT(A) admitted additional evidence and directed the AO to verify the lenders' details, but the AO did not comply. The CIT(A) eventually confirmed an addition of ?22,00,000/- for 20 creditors and related interest of ?73,725/-, while deleting the rest.

The Tribunal found that the assessee did not provide sufficient evidence for many lenders and noted discrepancies in loan confirmations. The Tribunal set aside the CIT(A)'s findings and remanded the matter to the AO for re-adjudication, directing the assessee to substantiate the loans with proper documentation.

3. Interest Expenses Related to Unexplained Cash Credit:
The interest of ?10,60,900/- paid on the unexplained loans was disallowed. The CIT(A) confirmed the disallowance of interest related to the ?22,00,000/- addition but deleted the rest. The Tribunal noted that the interest allowance is consequential to the resolution of the cash credit issue and remanded it for re-adjudication along with the principal amount.

4. Addition under Section 40A(3) for Cash Payments:
The assessee made cash payments aggregating to ?19,52,521/- in violation of Section 40A(3). The CIT(A) deleted the addition, citing the AO's failure to call for further details. The Tribunal found this reasoning insufficient and remanded the issue back to the AO for verification of the assessee's claims and re-adjudication based on the factual matrix.

Conclusion:
The Tribunal partly allowed the cross-appeals, confirming the CIT(A)'s deletion of additions for training fees, royalty payments, and survey fees, while remanding the issues of unexplained cash credits and related interest, as well as cash payments under Section 40A(3), for further verification and re-adjudication by the AO.