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TMI Blog2012 (8) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... osing stock is revenue in nature since the closing stock of this year becomes the opening stock of the next year - this issue is restored back to the file of Ld. CIT(A) for fresh adjudication - in favour of assessee for statistical purpose. Disallowance u/s. 40(a)(ia) - Held that:- The payments made to transporters will attract the provisions of section 40(a)(ia), wherein, the appellant was bound to deduct the TDS and remit the same in Govt. account before the due date - as it is evident that the tax was deposited in the government account on -7-04-2006 well before filing of income tax return and that the AO has wrongly computed figure of TDS which is paid in time - this issue is restored back to the file of AO who is directed to verify the claim of the assessee, if the tax is deposited before filing of income tax return such amount shall be deleted from the addition and rest other amount be decided afresh as per law after giving opportunity of being heard - in favour of assessee for statistical purpose. Disallowance of interest notionally charged - Held that:- Considering assessee's submission that AO has ignored to appreciate that the assessee has not given loan from intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances, the assessee has filed present appeal before this Tribunal. 3. The first ground is against the confirmation of addition of Rs.10 lakh made u/s 68 of the Act. Ld. A.R. for the assessee has drawn our attention to the fact that in the confirmation letter, PAN of the said party, is also mentioned. He submitted that confirmation letter, as enclosed in the paper book at page-13, mentioned PAN as AASPT1578J. The contention of the Ld. A.R. is that the amount was taken by account payee cheque and was subsequently repaid vide cheque Nos.3341, 42 362518 to the concerned party and same had been duly reflected into the ledger account at paper book at page 11 12, respectively. Ld. A.R. contended that it is not the case where the loan has been taken from any non-existent entity. It is submitted that M/s Sai Krupa Construction is engaged in the business of construction in Nani Daman and assessed to tax. Ld. A.R. placed reliance on the judgment of the Hon ble Rajasthan High Court in the case of Arawali Trading Company v. ITO (2008) 220 CTR 622 (Raj) in support of his contention that once the existence of the creditors is proved and such person owns the credit which is recorded in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant. However, the appellant failed to do so. During the course of appellate proceedings also, the learned AR did not bring any evidence to show that the unsecured loan received was genuine. It is established fact that the burden lies with the assessee to prove genuineness of the credit, identity and creditworthiness of the parties which he failed to do so In the circumstances, I am of the view that the AO was left with no other alternative but to invoke the provisions of section 68 and taxed the same as bogus loans and made an addition of Rs.10,00,000/- in the hands of the appellant. The action of the AO thus, stands confirmed and the ground of appeal on this issue is Dismissed. 6. In this case the contention of the assessee is that the loan amount was taken by cheque, duly reflected in the books of accounts and was repaid by way of account payee cheques. The assessee had filed confirmation letter from the creditor, PAN of the creditor was duly reflected on the confirmation letter. Therefore, the Revenue was in the knowledge of the whereabouts of the creditor. It was also in the knowledge of the department that the creditor M/s Sai Krupa Construction was assessed to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the genuineness of the transaction. Further, the Hon ble jurisdictional High Court in the case of Bomin Pvt. Ltd. (supra) held that nevertheless the Tribunal was under an obligation to consider as to whether the evidence of owners as well as creditors giving the confirmatory letter confirming the advances in support of evidence on the credit earned and if the evidence was found to be not acceptable, what was the reason for it. 8. In the case in hand, the assessee had placed on record a confirmation from the creditor and the contention of the assessee is that the amount was received by account payee cheque and subsequently repaid by account payee cheques. We find that the facts of the present case are distinguishable from the judgments relied by the Assessing Officer in the case of Sumati Dayal (supra) Hon ble Supreme Court had held that the assessee is required to rebut the evidence of receipt of money being in the nature of income. In this case the assessee had filed a confirmatory letter from the creditor who had confirmed it as a loan and the amount was received by cheque. Thus the assessee primarily explained the source and nature of such money. 9. Admittedly, in this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on could be arrived at, no question of law as such arises. 10. In this case also the assessee has furnished the confirmatory letter from the creditor in which name and address of the creditors was given and PAN was also given. It was the submission of the assessee that the creditor M/s Sai Krupa Construction is duly assessed to tax. The Assessing Officer, instead of making enquiry at his end for verification of confirmation letter asked the assessee to furnish financial statement, bank statement etc. belonging to the creditor. In the present case, even the creditor was not summoned by the Assessing Officer to verify the genuineness of confirmation. In such circumstances, the action of the A.O. treating the receipt credited into the bank account of the assessee and shown as the loan from M/s Sai Krupa Construction as income of the assessee is not justified. 11. In this view of the matter and respectfully following the ratio laid down by the Hon ble Supreme Court in the case of Orissa Corporation Ltd. (supra) and the Hon ble jurisdictional High Court in the case of Rohini Builders (supra) this ground of assessee s appeal is allowed. The Assessing Officer is directed to delete th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. It appears that this ground has been wrongly made as the similar ground was made before the Ld. CIT(A) as ground No.3 and same has been allowed by LD. CIT(A). In view of this matter, this ground of assessee s appeal is rejected as infructuous. 16. Ground No.4 is against the disallowance of Rs.6,48,436/- u/s. 40(a)(ia) of the Act. Ld. Authorized Representative for the assessee submitted that this issue is squarely covered in favour of assessee by the decision of Hon ble Calcutta High Court in the case of CIT v. Virgin Creations in GA No.3200/2011 dated 23-11-2011 and followed by the Hon ble co-ordinate Bench of ITAT Ahmedabad in the case of M/s Alpha Projects Society Pvt. Ltd. v. DCIT in ITA No.2869/Ahd/2011 dated 23-03-2012 and in the case of Shri Sureshbhai G Patel v. ITO in ITA No.673/Ahd/2010 dated 30-03-2012. 17. On the contrary Ld. Departmental Representative supported the orders passed by authorities below. 18. We have heard the rival submissions, perused the materials available on record and paper book filed by the assessee. We find that that Assessing Officer has decided this issue in his assessment order which is reproduced hereinbelow:- Disallowance U/s.40( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply to the provisions of section 40(a)(ia), the expenses so made can not be allowed as deduction. However, the appellant is allowed to claim the same as and when the TDS is deposited in the Govt. account. Thus, this ground of appeal on this issue is Dismissed. It is transpired from the records that before Ld. CIT(A) assessee had made following submissions:- (4) Ground No.-4 Disallowance of Expenses u/s. 40(a)(ia) of Rs.6,48,436/- On page (6) of Assessment Order, Lr. A.O in Tabular Form gives the details of TDS under various sections and in case of contractors and professional. I am explaining each of the payment Sr.No. Section Name Amount credited Date of credit Due date of making payment Paid on Date Remark Due date as shown by A.O is not Dt. 31.3.2006 1 194C Nathubhai Subcontactor 1,19,389 Feb.. 2006 30.4.2006 7.4.2006 No default 2 194C J.R. Associates 2,17,363 Before Feb. 2006 30.4.2006 7.4.2006 3 194C Ariq Abraham 72,000 30.4.2006 7.4.2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged to be paid in time. There being no default u/s 40(a)(ia), addition may be deleted. 19. We have given our thoughtful consideration as the submission made by Ld. AR for the assessee and the facts involved in the present case. Ld. AR has relied upon the judgment of Hon ble Calcutta High Court in the case of Virgin Creations (supra) and issue before Hon ble High Court that amendment u/s 40(a)(ia) whether the amendment made in Section 40(a)(ia) vide Finance Act 2010 will have retrospective operation or not. The Hon ble court has ruled that the amendment made in the provisions will have retrospective operation and this judgment has been followed by the co-ordinate Bench of ITAT Ahmedabad in the case of M/s Alpha Projects Society Pvt. Ltd. (supra) and in the case of Shri Sureshbhai G Patel (supra). We find that there are two issues involved in the present ground of appeal (i) being the tax deducted at source but it was not deposited before due date of filing of income-tax return and (ii) is non-deduction of tax at all. After due date of payment and before filing of the income-tax return as envisaged u/s. 139(1) of the Act is concerned same has been decided by the Hon ble Calcutta H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tical purposes as indicated above. 20. Ground No.4 is against the disallowance of interest of Rs.50,268/- notionally charged. Ld. AR submitted that authorities below failed to appreciate the fact that assessee has not given loan from interest bearing fund. He further submitted that loan was given out of accumulate profits. On the contrary, Ld. DR supported the orders passed by authorities below and submitted that assessee failed to prove that the loan was given out of interest free funds. 21. We have heard the rival submissions, perused the material available on record and after considering all aspects of the matter in the interest of justice this issue is restored back to the file of Assessing Officer who is directed to verify the claim of assessee whether the loan given to Shri K.N.K.Pillai was not out of interest bearing fund. The assessee shall establish that there is no nexus between interest free loan given to Shri K.N.K. Pillai, father of the partner of the firm, if it is established that for such loan no interest bearing fund was used for giving the interest free loan to Shri K.N.K. Pillai the AO shall delete the same. This ground of assessee s appeal is allowed for sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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