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TMI Blog2012 (5) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... tors - summons u/s 131 issued - 11 summons returned back by the postal authority as un-served and 23 loan creditors have not filed any submission in response to summons issued to them - assessee during hearing submits that these loans are 'Hundi' loans taken through the brokers by cheques with TDS on interest – Held that:- In the absence of any material to show that apart from issuing notice u/s 133(1) as to how the AO pursued the matter further with the said parties and keeping in view that the assessee is ready to file confirmation letter along with the PAN, we are of the view that in the interests of justice, the matter should go back to the file of the AO. - ITA No. 5849/Mum/2010, - - - Dated:- 9-12-2011 - R.S. Syal, D.K. Agarwal, JJ. M.N. Vaishnav for the Appellant O.A. Mao for the Respondent ORDER D.K. Agarwal, Judicial Member 1. This appeal preferred by the assessee is directed against the order dated 31.3.2010 passed by the ld.CIT(A) for the assessment year 2006-07. 2. Briefly stated facts of the case are that the assessee firm is engaged in the business of Trading activity of Thermoware, Vaccumware, Glassware and imported Articles. It f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assware and imported Material's and it is very clear that the interest bearing funds have not been utilized for its business and accordingly he disallowed the interest debited to the profit and loss account. He further noted that the assessee made the interest payment over Rs.5,000/- to the 14 parties aggregating to Rs.91,725/- but has not deducted TDS. On being asked it was explained by the assessee that he has obtained Form No.15H in respect of interest paid to Kundandas Panjwani and Smt. Nirmala Bajaj but it has not submitted the same in the TDS Circle. In respect of others, the assessee has not furnished any explanation. According to the AO the assessee firm was liable to deduct TDS, however, it has failed to do so. In view of the above, the AO disallowed the amount of Rs.91,725/- not allowable as per the provision of section 40 (a) (ia) of the Act, as on the said payment/expenses, the assessee failed to deduct tax at source (TDS) as per the provision of section 194C of the Act. Accordingly, the AO disallowed the interest of Rs.17,51,997/- (including disallowance u/s 40(a)(ia) Rs.91,725/-) and added back to the total income of the assessee. 6. On appeal, the ld. CIT(A) whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 0.2 Royalty Charges The Licensee also hereby agrees that it would pay to the Licensor Royalty Charges on yearly basis at the following schedule of rates: Yearly Turnover % Royalty Upto Rs.50 Crores 0.50% More than Rs.50 Crores up to Rs.100 Crores Rs.25,00,000/- plus 0.25% of the excess turnover above Rs.50 crores Above Rs.100 Crores Rs.37,50,000/- plus 0.1% of the excess turnover above Rs.100 crores The above turnover would be considered for the period April to March every year. In view of what is stated in Para 1 above, the period for calculating turnover in the first year would be considered from 01st July 2005 to 31st March 2006. 2.3... 2.4.. 2.5.. 3... 3.1.. 3.2... 3.3 Further, it is agreed that the firm directly or through partners has to invest in shares worth Rs.2 Crore (promoter quota) in the Share Capital of the Company during FY 05-06 as the company is in the process of IPO." From the above clauses of the agreement with the company, we find that there was an obligation to the assessee, directly or through partners, to invest in shares worth Rs.2 crores in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue to certain reasons the same could not be submitted by the assessee in the TDS Circles. Since it is a fact that the assessee has obtained Form No.15H from the said parties, therefore, there is no default on the part of the assessee in respect of payment of interest without deducting TDS to Kundandas Punjwani and Smt. Nirmala Bajaj. The AO is directed not to consider the payment of interest to these two parties without TDS for the purpose of disallowance u/s 40(a)(ia) of the Act. 13. As regards payment of interest to other 12 parties as appearing at paragraph 4.4 of the assessment order, we find that the assessee has not furnished any explanation in this regard even at this stage, therefore, the disallowance made by the AO to this extent u/s 40(a)(ia) is upheld. The ground taken by the assessee is, therefore, partly al lowed. 14. Ground No.2 is against the sustenance of disallowance of unexplained cash credit of Rs.4 lakhs. 15. Brief facts of the above issue are that the AO noted that the assessee firm has shown loan of Rs.2,32,42,889/-. The assessee was asked to furnish the loan confirmation along with copy of bank statements and copy of return of the loan creditors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d issued summons u/s 131 to all the parties. However, in the absence of any response, he has added Rs.23,50,000/- as undisclosed income. We further find that in the remand report dated 25.2.2010, the AO has observed as under: S. No. Name of the loan creditors Amount of loan shown by the assessee Compliance of loan creditors 1. Kundandas Punjwani Rs.2,00,000 Non compliance from the loan party. However, the assessee filed copy of its own bank statement, copy of bills of exchange. The details filed by the assessee has been considered. However, the same is not acceptable in absence of any loan confirmation, identify, creditworthiness of the said loan party. Accordingly, the loan standing in the name of the said party remains unexplained. 2. Nimesh Biharilal Rs.1,00,000 Non compliance from the loan party. However, the assessee filed copy of its own bank statement, copy of bills of exchange. The details filed by the assessee has been considered. However, the same is not acceptable in absence of any loan confirmation, identify, creditworthiness of the said loan party. Accordingly, the loan standing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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