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TMI Blog2014 (9) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... .1 Facts of the case, in brief, are that the assessee is a company engaged in the business of manufacture of engineering goods. It filed its return of income on 30-09-2009 declaring total income of Rs. 32,96,809/. In this case a survey action u/s.133A of the I.T. Act was conducted on 09-08-2010. During the course of assessment proceedings the AO asked the assessee to furnish the sales and purchase bills, vouchers etc. in respect of the sister concerns. The assessee furnished extracts of account of the following 4 sister concerns appearing in the books of accounts of the assessee company. It was stated by the assessee that the following purchase bills of the above sister concerns are not available: Sr. No. Name of the sister concern Total amt. debited in the books of account (Rs.) Amt. of bills not available (Rs.) Remarks 1 2 3 4 5 1 M/s. Engineering Marketing Company Pvt. Ltd. (EMCPL) 4,80,58,490 1,70,52,378 Assessee has furnished confirmation from the creditor M/s. Engineering Marketing Company Pvt. Ltd. (EMCPL) regarding purchases of Rs. 3,10,06,112/-. 2 M/s. EPS Trading Corporation Prop. Shri Rajesh Nashikkar 21,08,217 7,58,217 The balance amount of Rs. 13.70 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ineering Marketing Pvt. Ltd. This fact is undisputed, therefore, it is established that the appellant has shown fictitious purchases in order to pretend higher profits in its accounts. As a corollary to this attempt, it is also seen that the assessee has also projected fictitious sales which are more than the fictitious purchases. Therefore, the contention of the appellant that it has inflated turnover to show higher profit for obtaining and continuing loan from financial institution has been found to be correct. It is also pertinent to note here that the Hon'ble ITAT Pune in para 5 of the order dated 26/10/2007 in the case of Barkha Farms Vs. ITO in ITA No.182/PN/07 in which assessee company has made certain manipulations has observed as under: "There are other laws to take care of such manipulations but as far as IT legislation is concerned, it cannot tax a non existent income merely because the assessee has been unscrupulous or wanting in his conduct." In view of these facts it is thus established that there is no cause for making any disallowance on this account. At the best the assessee can be charged with false statement in veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties and the assessee has merely debited such expenditure in the name of sister concerns for reducing the profit. In other words, according to the Assessing Officer the assessee has inflated the expenditure under the head "purchases from its sister concerns" to reduce the profit. 7.1 We find the Ld. CIT(A) deleted the addition on the ground that although the assessee has debited fictitious purchases however the Assessing Officer has ignored the fictitious sales. He accordingly accepted the submission of the assessee that it has inflated turnover to show higher profit for obtaining and continuing loan from financial institution as correct. We find while allowing the relief to the assessee the Ld. CIT(A) merely accepted the submissions of the assessee without considering the impounded documents found during the course of survey. Further, when bills were raised by the sister concerns and the payments were made through banking channel, it is very difficult to accept such a proposition especially when the purchase and sales are not inflated equally but there is huge disparity between the purchases and sales. Although the issue of fictitious purchases and fictitious sales was never ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount was paid without deduction of TDS as per provision of Chapter XVIIB of the Income Tax Act." 8.1 Facts of the case, in brief, are that the AO during the course of assessment proceedings observed that the assessee has not deducted TDS and deposited the same to the credit of the Government account in respect of the following payments: Sl. No. Amount (Rs.) Payee under section on account of 1 14,076 Ariwali Security organisation 194C Security charges 2 25,000 Deepika Engineers 194C Repairs and maintenance 3 80,000 Shri Vighnaharta Electrical Works 194C Labour charges 4 82,248 Bhagwati Shipping Pvt. Ltd. 194C Service charges 5 2,08,488 DHL Lemuir Logistics P. Ltd. Ocean Freight TOTAL 4,09,812 Following the provisions of section 40(a)(ia) the AO made addition of Rs. 4,09,812/- to the total income of the assessee. 9. Before the CIT(A) it was submitted that provision of section 40(a)(ia) is applicable to the amounts payable i.e. outstanding at the year end and in the cases where the amount of expenditure is not outstanding and is paid in the same year then the provisions of section 40(a)(ia) cannot be ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly directed to delete the addition of Rs. 4,09,812/-. Ground No.3 is thus allowed." 10.1 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 11. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. So far as the disallowance of Rs. 14,076/- is concerned we find the same was disallowed by the Assessing Officer on account of short deduction of tax where the payment was made to Aravali Securities. We find the Ld. CIT(A) following the decision of the Kolkata Bench of the Tribunal in the case of DCIT Vs. S.K. Tekriwal (Supra) deleted the addition on the ground that no disallowance can be made for short deduction of tax u/s.40(a)(ia). Nothing contrary was brought to our notice by the Ld. Departmental Representative against the order of the Tribunal which has been followed by Ld.CIT(A). Therefore, the disallowance of Rs. 14,076/- on account of short deduction of tax on payment made to Aravali Securities is deleted and the order of the CIT(A) on this issue is upheld. 11.1 So far as the disallowance of Rs. 3,95,736/- u/s.40(a)(ia) is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntracts also. A contract is normally reduced in writing in order to make clear the terms and conditions, obligations of the parties to the contract etc. If the conditions of contract are otherwise understood by the parties, in view of the repeated transactions, in our view, the absence of a written contract would not make any difference. In the instant case, the assessee is repeatedly given works to the polishing people and hence the terms and conditions of the work would be clearly understood by both the parties. Accordingly, we reject this contention of the assessee and hold that the provisions of sec. 194C shall apply to the polishing works given by the assessee. 7.1 According to Ld A.R. the assessee has acted as a conduit pipe in connection with the polishing works between the customers and the person doing polishing job. Accordingly, it was submitted that there is no profit element in the said transactions. The Ld A.R further submitted that the assessee has included the cost of polishing works in the sale value of aluminium extrusions, without knowing tax implications. However, we notice that the assessee did not furnish any proof to substantiate the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hon'ble Supreme Court in the case of Hindustan Coco-Cola beverages Ltd (supra) in order to contend that the revenue is not entitled to recover taxes, if the recipient has declared the payments in his return of income. We notice that the above said decision was rendered in the context of the provisions of sec. 201(1) and hence, we are of the view that the ratio of the said decision cannot be applied to the disallowance made u/s 40(a)(ia) of the Act, 7.4 The last contention of the assessee is that the second proviso to sec, 40(a)(ia) of the Act, inserted by the Finance Act, 2012 with effect from 1.4.2013 is clarificatory in nature and hence the benefit of the same should be applied retrospectively. However, the correctness of this contention has not been examined by the tax authorities. Hence, in the interest of natural justice, we are of the view that this contention of the assessee requires examination at the end of the assessing officer. Accordingly, we modify the order of the Ld. CIT(A) and set aside this ground to the file of the Assessing Officer with the direction to examine the above said contention of the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that although the PF & ESIC dues were not deposited within the statutory due date prescribed under the relevant Act, however, the same has been deposited within the same financial year, i.e. much prior to the due date of filing of the return. The Coordinate Benches of the Tribunal are taking the consistent view that if the Employees Contribution to PF & ESIC, are deposited prior to the due date of filing of the return u/s.139(1), then the same cannot be disallowed. Since the assessee in the instant case has admittedly deposited the PF & ESIC dues before the due date of filing of the return u/s.139(1), therefore, we find no infirmity in the order of the CIT(A) deleting the addition by following the decision in the case of AMI Ltd. (Supra). Accordingly, the same is upheld and the ground raised by the Revenue is dismissed.
16. In the result, the appeal filed by the Revenue is partly allowed for statistical purposes.
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