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TMI Blog2016 (4) TMI 1230X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 which is not as per the provisions of the assessment in search cases. 3. That the Ld. CIT(A) is not justified in confirming the addition of Rs. 1,20,523/- u/s 40(a)(ia) on account of non deduction of tax at source on interest payments to different persons. 3. At the time of hearing of the appeal, Shri Neeraj Jaiin, Ld. Counsel for the assessee did not press for ground Nos. 1 & 2 of the appeal and, hence, the same are dismissed as not pressed. 4. Ground No.3 of the appeal relates to addition of Rs. 1,20,523/- u/s 40(a)(ia) of the Income-tax Act, 1961 (in short 'the Act'). As per para 5 of the assessment order, the Assessing officer observed that assessee had not deducted tax at source on interest payment in the following cases:- S.No. Name of the persons Interest paid (in Rs.) 1 Anita Aggarwal 89361 2 Bhupindaer Sain, HUF 21375 3 Raj Kumar Jindal 1000 4 Ram Chand Aggarwal 6108 5 Ritu Aggarwal 15975 6 Rupak Aggarwal 20568 7 Sain Brothers 11348 8 Shakuntala Aggarwal 6108 9 Tara Devi Aggarwal 19680 Total 120523 When the Assessing officer required the assessee to submit the reasons for nondeduction of tax, the assessee submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure should not be disallowed u/s 40 (a)(ia) of the Act on account of failure to deduct tax at source. In response to the said query, the assessee submitted that those parties were paying interest on regular basis and TDS was also deducted on interest paid to them except for 16 parties from whom Form 15G/H was received. The Assessing officer made addition on the ground that the assessee has not filed form 15G/H to the CIT as prescribed under Rule 29C of the I.T. Rules, 1962. Consequently Assessing officer disallowed the entire amount of Rs. 5,30,429/- us/40(a)(ia) of the Act. 7. On appeal, the CIT(A) upheld the order of the Assessing officer. The assessee challenged the order of the CIT(A) in appeal before the Tribunal and the Tribunal allowed the appeal of the assessee observing as under:- "4 We have considered the issue. The provisions of section 40(a)(ia) are as under:- "40. Amount not deductible notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "profits and Gains of business or profession: (a) in the case of any assessee. (b) (i) ....... (ia) any inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Act, 1961 Deduction of tax at source Interest other than Interest on securities Assessment year 2006-07 Assessee was carrying on business of manufacture and printing of packaging materials He made payment of interest to 34 parties in excess of Rs. 5000 without deducting tax at source In response to show cause notice, assessee submitted that all payees to whom interest was paid, had furnished declarations in Form No. 15H/15G, as the case may be, before date on which tax ought to have been deducted and, therefore, assessee was not liable to deduct tax Assessee also submitted that by oversight he did not submit copies of declarations in Form No. 15G/15H to office of Commissioner (TDS) Assessing Officer took a view that it was only when he proposed disallowance of interest by invoking section 40(a)(ia) then assessee filed declarations claimed to have been submitted to him by payees of interest, in office of Commissioner (TDS) as required by sub-section (2) of section 197A Accordingly, Assessing Officer invoked section 40(a)(ia) and disallowed interest payments Commissioner (Appeals) confirmed disallowance made by Assessing Officer On instant appeal, it was seen that apart from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements from the payees of the interest to the effect that they did not file any declarations with the assessee at the appropriate time or to the effect that they filed the declarations only at the request of the assessee in September/October, 2008. In the absence of any such direct evidence, the assessee's claim could not be rejected. The Assessing Officer had stated in the assessment order that he found that some of the loan creditors were having taxable income but still the assessee had submitted declarations from them in form No. 15G. Unless it was proved that these forms were not in fact submitted by the loan creditors, the assessee could not be blamed because at the time of paying the interest to the loan creditors, he had to perforce rely upon the declarations filed by the loan creditors and he was not expected to embark upon an enquiry as to whether the loan creditors really and in truth had no taxable income on which tax was payable. That would be putting an impossible burden on the assessee. That apart section (1A) of section 197A merely requires a declaration to be filed by the payee of the interest and once it is filed the payee of the interest has no choice except t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uffice to say that on the facts of the case, there is no need to deduct tax at source in the above 17 cases and thus, there is no default committed by the assessee. Accordingly, disallowance under section 40(a)(ia) does not arise. Non filing or delayed filing of such forms can not result in disallowance u/s 40(a)(ia). The grounds raised by assessee are allowed. AO is directed to modify the order accordingly." 8. After considering the rival submissions, we are of the view that the issue is squarely covered in favour of the assessee against the Revenue by the decision of the ITAT Mumbai Bench in the case of Karwat Steel Traders v ITO, Mumbai (supra). The facts of the present case are almost similar to that of the case of Karwat Steel Traders v ITO, Mumbai (supra). Respectfully following the order of the ITAT Mumbai Bench, we delete the disallowance of Rs. 1,20,523/- made u/s 40(a)(ia) of the Act. 9. In the result, the appeal is allowed partly. ITA No. 42/Chd/2013 10. This appeal filed by the assessee is directed against the order of CIT(A) (Central), Gurgaon dated 12.12.2012 relating to assessment year 2006-07. 11. In this appeal, the assessee has raised the following grounds:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent was seized from the residence of Shri Sandeep Bansal partner of M/s Munshi Ram Walati Ram of H. No. 175, Sector 9, Panchkula and the said document belonged to the firm M/s Munshi Ram Walati Ram. It was also explained that in the said document, the amount received on various accounts and payments, made against the same has been recorded. However, the Assessing officer did not accept the above explanation of the assessee stating that Shri Sandeep Bansal was given the opportunity to reconcile the entries in the loose papers with regular books but he failed to reconcile these entries with regular books of the assessee. Therefore, the Assessing officer asked Shri Sandeep Bansal as to why the peak credit of these entries should not be treated as undisclosed income of the assessee. No explanation was given on behalf of the assessee. Accordingly, these transactions were treated outside the books of account. The Assessing officer worked out the peak credit of these documents at Rs. 5,37,900/- and the same was added to the total income of the assessee as unexplained cash credit u/s 68 of the Income-tax Act, 1961 (in short 'the Act'). 14. On appeal, the CIT(A) confirmed the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 2005-06. The facts of the present year are similar to those of assessment year 2005-06. The decision given by us on similar issue for the assessment year 2005-06 shall also apply to this ground of appeal with equal force. For the detailed reasons given therein, we allow this ground of appeal and delete disallowance of Rs. 65,094/- made u/s 40(a)(ia) of the Act. 20. In the result, the appeal is allowed partly. ITA No. 43/Chd/2013 (Assessee's appeal) (AY 2007-08) & 222/Chd/2013 - Revenue's appeal (AY 2007-08):- 21. The appeal filed by the assessee (ITA No. 43/Chd/2013) and that of Revenue (ITA No. 222/Chd/2013) are directed against the order of CIT(A), (Gurgaon) dated 12.12.2012 relating to assessment year 2007-08. The assessee in ITA No. 43/Chd/2013 has raised the following grounds:- 1. That the Ld. CIT (A) is not justified in not giving the proper opportunity of hearing which is against the natural justice. 2. That the Ld. CIT (A) is not justified in confirming the assessment made u/s 153A (1) (b) r.w.s. 143(3) of I.T. Act 1961 which is not as per the provisions of the assessment in search cases. 3. That the Ld. CIT(A) is not justified in not deciding the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details of purchases/sales and other expenses and receipts of the assessee for different periods. During the course of search operation, Shri Sandeep Bansal, one of the partner of the assessee firm admitted in his statement that all these entries relate to M/s Munshi Ram Walati Ram. The assessee vide its letter dated 16.12.2010 submitted the detailed reply in this regard. The Assessing officer observed that the total of the peak credits of all the seized documents came as under:- Document Amount (in Rs.) A-3/P-II 5,26,000 A-3/P-III 6,22,000 A-3/P-IV 3,41,000 A-4 2,73,250 A-5 5,97,300 A-6 15,66,110 A-7 4,14,332 A-8 3,85,200 A-9 7,38,700 Total 54,63,982 According to Assessing officer, the assessee failed to reconcile the above entries with books of account after giving various opportunities. The Assessing officer, therefore, treated the peak credit of Rs. 54,63,982/- as unexplained cash credit u/s 68 of the Act and added back to the total income of the assessee. 25. On appeal, the CIT(A) reduced the addition to Rs. 25,29,110/- as against Rs. 54,63,982/- made by the Assessing officer. The CIT(A) allowed a relief of Rs. 29,34,872/-. Vide ground No.4 of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove period is in continuity and, therefore, period in the consideration should not be broken into months/quarters etc. Considering the entire facts and circumstances of the present case, we find considerable force in the above submissions of Shri Neeraj Jain, Ld. Counsel for the assessee. Accordingly, we set aside the findings of the CIT(A) on this issue and remand the issue to the file of the Assessing officer with a direction to decide the same afresh in accordance with law after affording due and reasonable opportunity of being heard to the assessee. Shri Neeraj Jain, Ld. Counsel for the assessee submitted that addition of Rs. 5,37,900/- has been made u/s 68 on account of peak credit of Annexure-3 for the assessment year 2006-07 and the benefit of the said addition may be given in this year. We remand this issue also to the file of the Assessing officer for reconsideration in accordance with law. Accordingly, ground No.4 of the ITA No. 43/Chd/2013 and Ground No.1 of the Revenue's appeal in ITA No. 222/Chd/2013 are allowed for statistical purposes. 28. Ground No. 5 of the assessee's appeal relates to addition of Rs. 76,448/- made us/40(a)(ia) of the Act on account of non deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 against the peak credit addition confirmed in assessment year 2008-09. 32. At the time of hearing of the appeal Shri Neeraj Jain, Ld. Counsel for the assessee did not press for ground Nos. 1, 2 and 6 of the appeal and, hence, we dismiss these grounds as not pressed. 33. Ground No.3 of the appeal relates to the addition of Rs. 7,38,700/- u/s 68 of the Act on account of peak of Annexure A-9. The Assessing officer noted that during the course of search operation at the residence of Shri Sandeep Bansal, partner of the assessee firm a document Annexure A-9 was seized. This is a note pad which contained details of purchases, sales and other expenses/receipts of the assessee relating to the jewellery w.e.f. 1.4.2007 to 14.7.2007. The Assessing officer reproduced the contents of these documents in para 5 of the assessment order. Despite providing sufficient opportunities to the assessee, the assessee failed to reconcile these entries with regular books. Therefore, the Assessing officer asked the assessee as to why peak credit of these entries should not be treated as undisclosed income of the assessee. The assessee failed to furnish any explanation in this regard. Accordingly, these tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of being heard to the assessee. In the above terms, this ground of appeal is disposed of. 36. Ground No.4 of the appeal relates to addition of Rs. 1,20,000/- u/s 69C on account of unexplained expenditure. During the course of search operation at the business premises of Shri Sandeep Bansal, partner of the firm, a document Annexure A-2 was impounded. Page 33 of the Annexure A-2 contained the account of Sakshi Jewellers of dated 15/2. However, the year is not mentioned. 37. We have heard the rival submissions. Shri Neeraj Jain Ld. Counsel for the assessee, pointed out that the CIT(A) was not justified in confirming the addition, particularly when year is not mentioned in the document marked Annexure A-2. He vehemently argued that this document does not pertain to search period. It is stated that the document is very old and was recorded in the books of account relating the period prior to period 2003 and no cognizance of the said document should be taken in the assessment year 2008-09. In our view, there is a force in the above contention of Shri Neeraj Jain, Ld. Counsel for the assessee. The document in question does not contain the specific date particularly the year. There is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) is not justified in not giving the telescoping/set off additions made on account of peak credit in assessment year 2006-07, assessment year 2007-08 & assessment year 2008-09 & Assessment year 2009-10 against the additions made for unexplained expenditure/unexplained investment. d) that the Ld. CIT(A) is not justified in not giving the telescoping/set off additions made on account of peak credit in assessment year 2006-07 and assessment year 2007-08 and assessment year 2008-09 against the peak credit addition confirmed in assessment year 2009-10.. 42. At the time of hearing of the appeal Shri Neeraj Jain, Ld. Counsel for the assessee did not press for ground Nos. 1, 2 & 7 of the appeal and, hence, we dismiss these grounds as not pressed. 43. Ground No. 3 of the appeal relates to addition of Rs. 45,03,505/- sustained by the CIT(A) u/s 69B of the Act on account of discrepancy in stock. The Assessing officer discussed this issue in para 4.1 of the assessment order, which reads as under:- "4.1 Discrepancy in stock:- At the time of survey, stock of jewellery items was inventoried and valued by the approved valuer. The stock found at the time of survey was valued at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually be 1,62,94,820/-. According to CIT(A), the copies of the two inventory of gold and diamond respectively taken at the time of survey (Rs. 41,66,820 + Rs. 1,21,28,000) i.e. Rs. 1,62,94,820/- has been shown. He therefore, held that the difference of stock to the extent of Rs. 50,050/- taken in excess by the Assessing officer should be deleted. The CIT(A) further held that the GP rate applied by the Assessing officer was correct and he, therefore, confirmed the order of the Assessing officer to this extent. As regards the valuation of the stock, the CIT(A) observed that at the time of survey, the stock had been valued at Rs. 1310 per gram which was rate applicable for 24 ct. The CIT(A) directed the Assessing officer the rate for 22 ct of Rs. 1200/- per gm should be applied. Accordingly, the CIT(A) directed the Assessing officer to calculate the value at 22 ct at the rate of Rs. 1200/- per gm. 45. Now the assessee is in appeal challenging the addition sustained by the CIT(A). However, the Revenue vide ground Nos.(i) and (ii) of the appeal (ITA No. 223/Chd/2013) has challenged the action of the CIT(A) in allowing relief of Rs. 12,33,870/- (37,37,415/- - Rs. 25,03,545/-) to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing officer deserves to be deleted. It is also observed that the Ld. CIT(A) has correctly held that the Assessing officer has wrongly taken the difference of stock to the extent of Rs. 11,83,820/- while comparing the stock valuation made by the registered valuer with the estimated trading account. The Assessing officer has taken the quantities on estimate basis for net weight and not the actual weights. We also find that the stock has been valued at Rs. 1310 per gms for 24 ct jewellery at the time of survey whereas the same should have been calculated at 22 ct gold jewellery which will be Rs. 1200 per gm of jewellery, as the jewellery is made of 22 ct gold and not of 24 ct gold. Accordingly, we hold that the CIT(A) was fully justified in directing the Assessing officer to give the relief of Rs. 11,83,820/- to the assessee. As regards the GP rate, we are of the opinion that there is a merit in the submissions made by the Ld. Counsel for the assessee that GP rate of branch office should have been applied which is 27.29%. there was no justification in applying the GP rate of 2.61% of head office which is situated at Nabha particularly when the books of account for branch office an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ork out the peak credit. It is the assessee's contention that the transaction dates are continuous from 12.0.2006 and that all the documents seized pertain to different assessment year should be considered for working out one single peak credit. This contention was found inaccurate and consequently wherever there was a break in the transaction dates and where the opening and closing balance of the annexures did not tally, peak credits have been worked out separately as evident from the appellate orders for assessment years 2008-09, 2007-08 and 2006-07. For the document pertaining to this year, as the opening and closing balance in respect of A-16 & A-17 are found to be tallying, these annexures - two documents are taken to pertain to one transaction. The Assessing officer had however taken two peak credits for A-16 and A-17. Accordingly, the peak credit to be taken for addition here u/s 68 is Rs. 9,91,000/- which occurs in A-17. Consequently the addition is to be directed to be restricted to Rs. 9,91,000/-. The assessee succeeds on this ground." 50. As regards the addition of Rs. 32,500/-, the CIT(A) observed that the assessee could not reconcile the entries with the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit of addition made on account of peak credit in the immediate preceding assessment year may be given to the assessee. We direct the Assessing officer to consider and decide this aspect of the matter in accordance with law after affording due and reasonable opportunity of being heard to the assessee. 53. Ground No.6 of the assessee's appeal relating to addition of Rs. 10,84,000/-. We may observe here that the Assessing officer noted that at the time of survey operation, statement of Shri Sandeep Bansal one of the partners of the assessee firm was recorded u/s 132(4)( of the Act, whereby he had surrendered a sum of Rs. 1 crore. During the course of assessment proceedings the assessee was required by the Assessing officer to specify the manner of the disclosure. In this regard, the assessee submitted reply on 16.12.2010. The Assessing officer observed that the assessee failed to specify the manner of disclosure. However, the Assessing officer noted that on perusal of the account of the assessee it was found that the surrendered income of Rs. 10,84,000/- has been included in the trading account. According to Assessing officer the surrendered income of the assessee whould be over a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of Rs. 28,43,782/- was found. In this regard, Shri Sandeep Bansal, parnter of the firm stated that during the course of survey he had withdrawn a sum of Rs. 15 lakhs. However, he failed to explain the difference of Rs. 12,42,737/-. Accordingly, , Shri Sandeep Bansal surrendered an additional income of Rs. 12,42,737/- in the hands of the firm. The Assessing officer observed that during the course of assessment proceedings, Shri Sandeep Bansal submitted a letter dated 16.12.2010 whereby he had retracted form his surrender. The explanation given by the partner of the firm vide his letter dated 16.1.2010, was not acceptable to the Assessing officer because the assessee could not explain how the difference in cash found at the time of survey was utilized. The Assessing officer further mentioned that as per the cash book produced during the course of assessment proceedings, the cash balance as on 16.1.2009 was Rs. 32,39,572/- but at the time of survey cash of Rs. 1,01,045/- was found physically. Thus, there was a difference of Rs. 31,38,527/-. The assessee failed to specify the purposes for which cash of Rs. 31,38,527/- was utilized or spent. In that view of the matter the difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of assessment as the cash was lying elsewhere. Therefore, the addition is made merely on the statement, which does not have any evidentiary value. 7.1 In the case of Pullangode Rubber Produce Co. Ltd. (supra), the distinguishing feature is that entries were made in the books of account maintained in the regular course of business. The Hon'ble Court held that this admission is an important piece of evidence but it was open to the assessee to show that it is not correct. In the case of S. Khader Khan Son ( supra), the Tribunal had recorded a finding that there is no evidence of duress. We find that there is no evidence of duress in this case also. To the contrary, the assessee has taken up shifting stands in various times and, therefore, there is reason to come to the conclusion that the assessee tried to foreclose enquiry by making confession at the time of survey. Its conduct has been dubious. However, the question still remains as to whether an addition has to be sustained on the basis of evidence on record or merely because the assessee has been taking shifting stands. Further, there is unanimity of opinion that statements u/s 132(4) and 133A stand on different footings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence is otherwise not deductible under the law. The Department has no evidence except shortage of cash, which does not lead to the inference of earning equivalent income. In these circumstances, the order of the ld. CIT (Appeals) cannot be said to be perverse or illegal. Accordingly, we are of the view that the ld. CIT (Appeals) was right in deleting this addition." 59. In this case, the Revenue authorities recorded the statement of Shri Sandeep Bansal, partner of the assessee firm u/s 133A of the Act during the course of survey action. In the above decision, the Tribunal has held that the statement recorded u/s 133A of the Act is not on oath and section does not provide that it can be used for the purpose of Act. Therefore, evidential value of statement u/s 133A is much lower than the evidential value of statement recorded u/s 132(4) of the Act. In this case also, the Revenue has no evidence except the shortage of cash, which does not lead to the inference to earning equivalent income. Applying the ratio of the above decision to the facts of the present case, we are of the view that CIT(A) was fully justified in deleting the addition. Accordingly, we do not find any merits in gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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