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TMI Blog2011 (12) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. (3) That Hon ble CIT(A) has erred in sustaining charging of interest u/s 234B in respect of above addition/disallowance. ITA No.2899/Ahd/2009 Asst. Year 2006-07 (Revenue s appeal): 3. The Revenue has raised following ground in its appeal :- (1) On the facts and circumstance of the case and in law, the ld. CIT(A) has erred in deleting the addition made by AO of ₹ 1,07,27,834/- on account of in genuine and unexplained credits in the names of so called 11 sub-contractors. 4. The effective ground of assessee s appeal relates to disallowance of ₹ 1,74,44,764/- under the provisions of section 40(a)(ia) of the IT Act, 1961. The facts of the case are that the assessee is engaged in the business of construction of Roads as per Contract received from various Government authorities. During the year under consideration the assessee filed return of income of ₹ 6,64,733/-. The AO noted that the assessee had deducted tax from expenses totaling ₹ 1,77,32,164/- but the tax deducted at source from such payments was paid into the Govt. account only on 30.5.2006 which was beyond the due date since all such payments were made prior to February, 2006. The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly deductible u/s 28 of the Act. Therefore, the payments covered by sec.28 could not be disallowed u/s 40(a)(ia) of the Act. The TDS which was deposited into the Govt. account on 30.5.2006 had been deducted on 31.3.2006. It was submitted that in the assessee s line of business, the bills from the subcontractors were received very late and the final amount was paid when all the bills were received and finalized, which was mainly in the month of March. As a result, tax became deductible at source only in the month of March. The AO was not justified in stating that such tax was deductible in earlier months. Even the shortfall in the deduction was made up in the month of March. It was thus submitted that it was the tax deducted at source on 31.3.2006 which had been deposited on 30.5.2006 and all other deductions were paid into the Government account in time, during the year itself. It was also submitted that as per amended provisions if the TDS is paid before the due date of filing of the return no disallowance could be made. Out of total disallowance of ₹ 1,74,44,764/- and sum of ₹ 15,46,203/- was paid to Shri Dhansukhbhai Bhagat against the purchase of goods and not for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, however, is that in view of the amended provisions of section 40(a)(ia), if the tax has been deducted in the month of March and the same is deposited before due date of filing of return which has been done in this case, no disallowance can be made u/s 40(a)(ia). We further find that on similar facts, the Tribunal, Delhi Bench in the case of in the case of H.S.Mohindra Traders vs. ITO (2010) 132 TTJ (Del) 701 relief was given to the assessee. In that case assessee was required to deduct tax on the expenditure in the month of February, 2007 but the assessee deducted tax only in the month of March, 2007 and tax so deducted was paid on 9th April, 2007 and 12th June, 2007. The AO relying on the provisions of section 40(a)(ia) was of the opinion that since the tax was not deducted and deposited within the stipulated time, the expenditure could not be allowed during the year under appeal. He, therefore, disallowed the expenditure. This action of the AO was also confirmed by the ld. CIT(A). However, the Tribunal decided the issue by observing as under :- 6. We have carefully considered the rival submissions in the light of the material placed before us. The undisputed facts are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007. The assessee in the present case has deducted tax in the month of March, 2007 and it has paid the said TDS before the due date of filing the return. Therefore, the disallowance cannot be made u/s 40(a)(ia) as there is no default on the part of the assessee of non-deduction or non-payment of TDS in accordance with the said provision. The disallowance has wrongly been upheld by the CIT(A) and the same deserves to be deleted. Accordingly the disallowance is deleted. In view of the above, we are of the considered opinion that the ld. CIT(A) was not justified in sustaining the addition and the same is hereby deleted. This ground of assessee is allowed. 10. The other ground is regarding charging of interest u/s 234B which is consequential and no adjudication is required. 11. The ground raised by the Revenue relates to deletion of addition of ₹ 1,07,27,834/- made by AO on account of in-genuine and unexplained credits. During the course of assessment proceedings the AO noted that the assessee had shown outstanding creditors of ₹ 4,42,38,809/-. The AO issued notices u/s 133(6) at random to some of the creditors. Notices issued to 11 creditors at the given addres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rever applicable, tax was deducted at source and certificates furnished along with PAN of the creditors which were available with the AO. In support of his contention the ld. AR placed reliance on the decisions of Hon ble Gujarat High Court in the case of DCIT vs. Rohini Builders (2002) 256 360 (Guj) and in the case of CIT vs. MK Brothers (1987) 163 ITR 249 (Guj). It was further submitted that the NP ratio disclosed during the year was 2.47% as against 1.70% in the immediately preceding year. The addition made by the AO of the sum of ₹ 1,07,27,834/- had enhanced NP ratio to 12.09%, which was very unreasonable. No mention was made by the AO in the final show cause notice of the unverifiability of such creditors. He made the addition without giving an opportunity to the assessee to further explain its case. 13. After taking into consideration the submissions of the assessee, the ld. CIT(A) discussed the issue in detail at pages 11 to 15 of his order and deleted the addition made by the AO. Against this order of the ld. CIT(A), Revenue is in appeal. 14. The ld. DR supported the order of Assessing Officer whereas the ld. counsel of the assessee relied on the order of ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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