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TMI Blog2018 (12) TMI 1509X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the Act if the said matter was not taken up for scrutiny and enquiry then it is a subject matter falling in the ambit of revisionary power U/s 263 of the Act due to the reason that there was a complete lack of enquiry on the part of the Assessing Officer to examine the correctness of books of account. Since this was not at all subject matter of the assessment, therefore, it cannot be a subject matter of enhancement of income U/s 251 - As relying on SH. JAGDISH NARAYAN SHARMA VERSUS ITO WARD-7 (2) [2018 (7) TMI 1398 - ITAT JAIPUR] we set aside the order of the ld. CIT(A) qua this issue being beyond the jurisdiction of the ld. CIT(A). Rejection of books of account by the ld. CIT(A) is not valid as not based on any material defect pointed out by the CIT(A), hence, the same is set aside. TDS u/s 194C - payments of transportation to various contractors without deduction of TDS - Disallowance made U/s 40(a)(ia) - Held that:- CIT(A) has considered the fact of production of relevant information as printed on challan/builties issued by the recipients in respect of the payment on account of transportation of goods under contract and to that extent the ld. CIT(A) has deleted the disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) ought to have allowed the claim of the assessee in terms of the provisions of Section 43B or at the best for the A.Y. 2012-13. Hence, we direct the Assessing Officer to allow the claim of the assessee for the A.Y. 2012-13. Disallowance of service tax - Held that:- Assessing Officer and the ld. CIT(A) has disallowed this claim on the ground that this demand was crystallized in the F.Y. 2013-14, which is relevant to the assessment year 2014-15 and not for the A.Y. 2013-14. An identical issue has been considered by us while deciding ground No. 7 of this appeal. Accordingly, the Assessing Officer is directed to allow the claim for the A.Y. 2014-15 which is also decided by the ld. CIT(A) by composite order and is being decided by us in this order. Deductions made by the awarders of the contract/clients which includes a sum towards the loss and damages - AO held that the alleged deduction are not supported by documentary evidence - Held that:- , there is no dispute that the assessee has produced documentary evidence in support of the claim of deduction made by the clients only to the extent of 22,12,096/-. As regards the remaining deductions, the assessee has not produced any doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken as lead case. 3. The assessee is a partnership firm and a contractor engaged in erection and fabrication work. The assessee filed its return of income for the A.Y. 2012-13 on 25/09/2012 declaring total income of ₹ 16,42,27,060/-. The assessment was completed U/s 143(3) of the Income Tax Act, 1961 (in short the Act) by the Assessing Officer on 30/3/2015 at a total income of ₹ 19,15,23,899/-. The Assessing Officer made various disallowances while passing the assessment order. Identical disallowances were also made by the Assessing Officer for the A.Y. 2013-14 and 2014- 15. 4. The assessee challenged the orders of the Assessing Officer making disallowances before the ld. CIT(A). The ld. CIT(A) while passing the impugned order has enhanced the assessment for all the three assessment years by rejecting the books of account and estimated the income of the assessee by applying the N.P. rate of 8.5%, 9.5% and 10% for the A.Y. 2012-13 to 2014-15 respectively. For the A.Y. 2012-13, part relief was granted by the ld. CIT(A) on the issue of disallowance made U/s 40(a)(ia) of the Act against which the revenue has filed the cross appeal. For the A.Y. 2012-13 the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. 6. That on the facts and in the circumstances of the case and in law, Id CIT-A grossly erred in enhancing the income of appellant assessee without appreciating that entire enhancement is based on purely hypothetical and artificial income which is never earned by assessee and is never corroborated even symbolically by any iota of trading outside the books . Other grounds relating to additions made by Ld AO which are not deleted by Ld CIT-A 7. That on the facts and in the circumstances of the case and in law, Id CIT-A erred in not deleting the sustained disallowance of ₹ 34,64,780 (Rs 594,412 and ₹ 28,70,368) u/s 40(a)(ia) which does not cover direct costs allowable u/s 28 and for those amounts assessee's explanation has not been objectively appreciated and even for those amounts in worst case scenario only 30% of the expense can be considered for disallowance in view of retrospective amendment in section 40(a(ia). We request for total deletion of said disallowance first and alternatively we pray for 30% disallowance without prejudice to our main contention. 8. That on the facts and in the circumstances of the case and in law, Id CIT-A erred in not deleting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt then the ld. CIT(A) cannot invoke the extraordinary power of enhancement to reject the books of account U/s 145(3) of the Act in most perfunctory and preposterous manner and further applying certain self suiting presumptive and assumptive profit rate without any incriminating material. Thus, the action of the ld. CIT(A) enhancing the assessee has resulted invalid and unlawful demand of tax as well as penalty proceedings U/s 271 of the Act. The ld AR has contended that the addition made by the ld. CIT(A) are ex-facie unsustainable in law. The ld AR has then contended that Section 251 of the Act limits power of enhancement of ld. CIT(A) to the aspects considered by the Assessing Officer and not to pickup any new source of income or issue which was not even picked up by the Assessing Officer in the scrutiny assessment. The sole basis of enhancement by the ld. CIT(A) is the past history of books rejection and profit estimation without any factual finding of defects in the books of account, therefore, the rejection of books of account U/s 145(3) of the Act and consequential enhancement is without considering and satisfying the stipulated conditions of law provided U/s 145(3) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as the relevant material on record. There is no quarrel on the point that the ld. CIT(A) can exercise its power to enhance the income U/s 251 of the Act on the issue which is subject matter of the assessment. However, the said power of enhancement of ld. CIT(A) cannot be exercised in respect of the issue which is not the subject matter of the assessment and therefore, there is a restriction on exercise of power of enhancement not to take up an altogether new source of income. The question arises what is subject matter of assessment and in our considered opinion it depends on the scope of the enquiry by the Assessing Officer during the scrutiny assessment proceedings. Therefore, if the Assessing Officer has taken up an issue or matter for scrutiny during the assessment proceedings and after considering the explanation/reply of the assessee has accepted the claim then though the Assessing Officer has not made any addition on that particular item or source of income but the said would be very much subject matter of the assessment. Consequently the ld. CIT(A) can exercise its power on such point or subject matter by scrutinizing the same again and in case it is found that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A), therefore, though, vested with very wide powers U/s 251(1) of the Act so far as the subject matter and aspects of the assessment about which the assessee makes a grievance as well as regarding any other matter considered by the Assessing Officer and determined in the assessment. Therefore, it is not open to the ld. CIT(A) to introduce in the assessment a new source of income and the assessment must be confined to those items of income which were subject matter of original assessment which means the items of income and the aspects on which the Assessing Officer has taken up for scrutiny. This Tribunal in the case of Sh. Jagdish Narayan Sharma Vs ITO (supra) while considering an identical issue has discussed this question of jurisdiction of the ld. CIT(A) to enhance the assessment in para 44 to 51 as under: "44. We have heard the rival contentions and perused the material available on record. The issue which arise for consideration is whether the ld CIT(A) was justified in bringing to tax long term capital gains, on sale of land by the assessee to his two daughter-in-laws, by way of enhancement of income in terms of provisions of section 251(1)(a) of the Act which reads as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on relating to appeals is enacted for the benefit of the subject and also, to the limited extent therein stated, for the benefit of the Crown. But the subject-matter of the appeal is the assessment and the scope of the appeal must in my opinion be limited by the subject-matter. The appellate authority has no power to travel beyond the subject-matter of the assessment and, for all the reasons advanced by the appellant, is in my opinion not entitled to assess new sources of income." The view of the Patna High Court receives support from a decision of the Madras High Court in Gajalakshmi Ginning Factory v. Commissioner of Income-tax [1952] 22 ITR 502 where, at page 510, the Divisional Bench observed as follows: "Of course, it would not be open to the Appellate Assistant Commissioner to introduce into the assessment new sources, as his power of enhancement should be restricted only to the income which was the subject-matter of consideration for purposes of assessment by the Income-tax Officer." In Bishwanath Prasad Bhagwat Prasad v. Commissioner of Income-tax [1956] 29 ITR 748, the Appellate Assistant Commissioner had actually remanded the case, but while consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n constituted a revising authority against the decisions of the Income-tax Officer; a revising authority not in the narrow sense of revising what is the subject-matter of the appeal, not in the sense of revising those matters about which the assessee makes a grievance, but a revising authority in the sense that once the appeal is before him he can revise not only the ultimate computation arrived at by the Income-tax Officer but he can revise every process which led to the ultimate computation or assessment. In other words, what he can revise is not merely the ultimate amount which is liable to tax, but he is entitled to revise the various decisions given by the Income-tax Officer in the course of the assessment and also the various incomes or deductions which came in for consideration of the Income-tax Officer." The learned Chief Justice in the judgment under appeal considers that this court has thus given approval to his view and also the view of the Patna High Court in the earlier case. In our opinion, this court must be held not to have expressed its final opinion on the point arising here, in view of what was stated at pages 709 and 710 of the report. This court, how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The Income-tax Act was amended several times in the last 37 years, but no amendment of section 31(3) was undertaken to nullify the rulings, to which we have referred. In view of this, we do not think that we should interpret section 31 differently from what has been accepted in India as its true import, particularly as that view is also reasonably possible." 47. The Hon'ble Rajasthan High Court in case of Commissioner of Income-tax vs. Associated Garments Makers reported in 64 Taxman 215, following the above decision of the Hon'ble Supreme has held as under: "7. Appeals are provided under section 246 of the Act before the AAC and the Commissioner (Appeals). These appeals are by the assessee aggrieved by the orders mentioned therein. Any order made under section 143(3) is appealable and the powers of the appellate court are provided in section 251 of the Act wherein appellate authority has power to confirm, reduce, enhance or annul the assessment or he may set aside the assessment and refer the case back to the ITO for making fresh assessment in accordance with directions given in appeal and after making such further enquiry as may be necessary. These powers are, inter alia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... open to the Appellate Assistant Commissioner to travel outside the record, i.e., the return made by the assessee or the assessment order of the Income-tax Officer, with a view to finding out new sources of income and the power of enhancement under section 31(3) is restricted to the sources of income which have been the subject-matter of consideration by the Income-tax Officer from the point of view of taxability". Their Lordships considered the meaning of the word 'consideration' and held that, " 'consideration' does not mean 'incidental' or 'collateral' examination of any matter by the Income-tax Officer in the process of assessment. There must be something in the assessment order to show that the Income-tax Officer applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its nontaxability and not to any incidental connection". In the instant case, the AAC had himself, after issuing notice, considered the new material and had gone into new sources of income for the consideration of which he had no jurisdiction. 8. In fact, we fail to understand as to why when the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , besides various other decisions, it held that the powers under section 251 are, indeed, very wide; but, wide as they are, they do not go to the extent of displacing powers under, say, sections 147, 148 and 263. We deem it appropriate to reproduce the discussions and the relevant findings of the Hon'ble High Court as under: "The Ambit of Appellate Power: 37. To begin with, let us examine section 251 of the Act. As the assessment year was 1995-96, we will examine the provision as stood then. Before the amendment by Act 18 of 2008, section 251 read as: 251. Powers of the [* * *] Commissioner (Appeals).- (1) In disposing of an appeal, the [* * *] Commissioner (Appeals) shall have the following powers- (a) in an appeal against an order of assessment he may confirm, reduce, enhance or annul the assessment; [* * *] (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit. (2) The [* * *] Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688/[1990] 53 Taxman 85 has stated that the declaration of law is clear that the power of the Appellate Authority is co-terminus with that of the Income Tax Officer, and if that is so, there appears to be no reason why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income Tax Officer. No exception could be taken, held the Supreme Court in CIT v. Nirbheram Deluram [1997] 224 ITR 610/91 Taxman 181 to this view as the Act places no restriction or limitation on exercising appellate power. Even otherwise, an appellate authority while hearing the appeal against the order of a subordinate authority, has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitation, if any, prescribed by the statutory provisions. Absent any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have. 42. In CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC) the assessment year was 1947-1948, and the case was finally decided in 14.02.1962. So the Act cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erated that the appellate powers conferred on the Appellate Commissioner under Section 251 could not be confined to the matter considered by the ITO, as the Appellate Commissioner is vested with all the plenary powers which the Income Tax Officer may have while making the assessment. 47. Indeed, examining Daluram's holding, a Division Bench of the Delhi High Court in CIT v. Union Tyres [1999] 240 ITR 556/107 Taxman 447, has observed that Daluram did not comment whether these wide powers also include the power to discover a new source of income. So, Union Tyres concludes that the principle of law laid down in Shapoorji and Chamaria still holds the field. 48. The principle emerging from various pronouncements of the Supreme Court, Union Tyres observes, is that the first Appellate Authority is invested with very wide powers under Section 251(1)(a) of the Act and once an assessment order is brought before the authority, his competence is not restricted to examining only those aspects of the assessment about which the assessee makes a grievance and ranges over the whole assessment to correct the Assessing Officer not only regarding a matter raised by the assessee in appeal but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... executed through the registered sale deeds of even date i.e, 11.01.2007 whereby the assessee has sold certain plots of land at Village Goner, Tehsil Sanganer, Jaipur to his two daughters-in-law namely Narangi Devi w/o Chhaju lal and Jamna Devi w/o Kaluram for a total consideration of ₹ 1,62,72,000. Now, if we look at the return of income filed by the assessee, it is noted that pursuant to issuance of notice u/s 148, the assessee had filed his return of income disclosing agricultural income of ₹ 1,10,000/- and prior to that, no return of income was filed by the assessee. The notice issued under section 148 dated 15.03.2013 talks about an amount of ₹ 16,50,000 deposited in assessee's bank account maintained with PNB, the source of which has not been explained and the same has thus escaped assessment. On perusal of the assessment order passed under section 143(3) read with section 147 of the Act, it is noted that the said deposits in assessee's bank has been examined however, there is no linkage with the impugned sale transactions which are the subject matter of enhancement by the ld CIT(A). Further, there is a sale transaction which is the subject matter of assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ld CIT(A) are circumscribed by the assessment order in the matters arising thereof or a matter arising out of the proceedings. As held by the Courts, even though, the ld CIT(A) has suo motu power to consider the questions arising thereof but there is no provision to go beyond the matter arising out of the proceedings before the Assessing officer, more particularly as separate provisions for such eventuality are provided in the Act. In light of the same, the enhancement so done by the ld CIT(A) whereby the impugned sale transactions are brought to tax in the year under consideration are beyond the scope of her powers envisaged under section 251(1)(a) and the same thus cannot be accepted. However, the AO shall be free to take action as per law. 51. In light of the above discussions, having decided against the exercise of powers of the ld CIT(A) in bringing to tax the subject transaction, we do not deem it appropriate to examine and the address the arguments and contentions so raised by both the parties on merits of the taxability of the subject transaction." In the case in hand, the Assessing Officer made certain disallowances of expenses while completing the assessment U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t various projects cannot be recorded at one place on daily basis, the books of account cannot be rejected. In support of his contention, he has relied upon the decision of Hon'ble Jurisdictional High Court dated 30/07/2015 in the case of Pr.CIT Vs M/s Hues India Pvt. Ltd. in D.B. Income Tax appeal No. 56/2015 and submitted that in absence of any finding that the assessee has made any excess claim and all the details and entries are recorded in the books of account, not found to be incorrect then merely because day to day consumption details are not recorded in the stock register, cannot be a reason for rejection of books of account. He has also relied upon the decision of Special Bench of Mumbai Tribunal in the case of M/s GTC Industries Vs. ACIT 164 ITD 1. 9. On the other hand, the ld DR has relied upon the order of the ld. CIT(A) and submitted that the assessee has expressed the inability to maintain the stock register showing day to day consumption clearly established that the assessee has not maintaining proper books of account and therefore, the book results are not giving correct picture and liable to be rejected. 10. We have considered the rival submissions as well as rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g standards and duly audited then the audit tax report pointing out of not maintaining the day to day moment of stock cannot be a reason for rejection of books of account in absence of any other defect either in the quantity of opening stock, purchase, consumption, work in progress and closing stock is found by the authorities below. Further the assessee has produced the stock register before the authorities below which contains all details of opening stock, purchases, closing stock and work in progress then in absence of any defect whatsoever in the quantity and valuation of the stock, mere day to day moment of the material and stock which is not possible due to very nature of the business activity of the assessee, cannot be a ground for rejection of books of account. Further the doctrine of resjudicata is not applicable in the tax matter and particularly when the books of account for each years are maintained independently having no overlapping except the closing and opening stock. Therefore, the rejection of books of account in the preceding year cannot be a reason for rejection of books of account for the year under consideration when no defect is found in the books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot backed up with the quantitative and qualitative stock details and that there was a considerable fall in the gross profit rate and invoked the provisions of Section 145 (1) of the Act. The Assessing Officer was not convinced by the reason given by the assessee that the assessee had employed a method of accounting regularly which was accepted by the Department and made an addition of ₹ 3,34,960 by increasing the gross profit rate. The Commissioner (Appeals) while substantially accepting the explanation of the assessee for reduction in gross profit rate was of the view that the addition was on the higher side and sustained an addition of ₹ 34,000 only to cover up the possible leakage in the books of account. The Tribunal upheld the invocation of the provisions of section 145(1) but did not sustain the additions retained by the Commissioner (Appeals). On a reference : Held, that the Tribunal had reached the finding on the ground that, in the absence of any finding recorded by the Commissioner (Appeals) that the expenses incurred on any account appeared to be unreasonable or excessive, the additions sustained merely on suspicion of pilferage or leakage were not justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not reflected in the stock register. The Special Bench of Mumbai Tribunal in the case of M/s GTC Industries Ltd. Vs ACIT (supra) has also considered this issue in para 50 and 51 as under: "50. Now coming to the issue of rejection of books of account as well as the estimation of income by multiplying the volume of sales of lower price brand with the differential price of higher price brand on account of theory of 'twin branding mechanism' and thereby giving an adhoc reduction of 10% on the ground that some of the share in premium money belonged to the wholesale buyers. First of all, it is noticed that, the basis of rejection of books of account by the Assessing Officer u/s 145(2) is that, firstly, assessee has maintained bank accounts in fictitious names outside the books and has otherwise incurred expenses which are not reflected in books of account; and secondly, assessee has been maintaining cash in bank accounts outside the books. Learned CIT (A) has further added one more ground that, bank accounts appearing to be channel for circulating such premium or assessee is bound to have a large share in such secret money and its circulation. First of all the first allegat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough millions of retailers, there has been collection of extra money equivalent to the price of high brand value cigarettes and then such collection of money has cent per cent flown back to the assessee directly; and out of that premium money some minor share pertains to the wholesale buyers. Such a wild speculation or basis for estimation on the facts of the present case is very far-fetched and implausible. The best judgment does not entail wild guesswork or huge additions should be resorted to, albeit it lays down the determination of income based on fair and reasonable analysis based on some tangible material. The framing of the best judgment though entails some kind of fair and honest estimation but at the same time it should be based on material and information on record. The best judgment is not a provision to penalize the assessee and resort to wild estimate but it is a machinery provision which is to be based on assessing the correct income and that too based on material and evidence having live link nexus with the income which is to be assessed. Thus, on this count also, we are unable to uphold the kind of estimation or addition which has been made by the AO and sustained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR has submitted that in view of the amendment in Section 40(a)(ia) of the Act whereby the disallowance sustained by the ld. CIT(A) may be restricted to 30%. In support of his contention, he has relied upon the decision of Delhi Benches of the Tribunal dated 01/8/2018 in the case of Chopra Industries Vs. Addl.CIT in ITA No. 3099/Del/2015. 15. On the other hand, the ld CIT-DR has submitted that mere production of invoice of vouchers having PAN of the transporter is not a compliance of Section 194C(6)&(7) of the Act when the assessee has not produced the details in the prescribed proforma before the competent authority. He has relied upon the order of the Assessing Officer. 16. We have considered the rival submissions as well as relevant material on record. This issue is common in both the appeals of the assessee as well as the revenue. The revenue has raised ground for the A.Y. 2012-13 on this issue as under: "1. Whether in the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of ₹ 1,27,68,281/- when the assessee failed to furnish the information to prescribed authority in prescribed form as envisaged in section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the appellant that the payment of ₹ 45,000 was genuine and cannot be disallowed under section 40A(3) of the Act is also devoid of merit as the appellant has not brought on record, the circumstances in which the said payment was made in cash in violation of the express provisions of section 40A(3) of the Act. The appellant could not indicate under which clause of Rule 6D of the IT Rules, it could take shelter to avoid the rigours of provisions of section 40A(3) of the Act. In view of the above discussion, it is held that the AO was justified in making disallowance of ₹ 5,94,412/- u/s 40(a) (ia) of the Act including ₹ 45,000/- u/s 40(a)(ia)/40A(3))and thus, the same is hereby sustained. Disallowance of ₹ 1,56,38,649/- (vii) The AO has disallowed the sum of ₹ 1,56,38,649/- by observing that the appellant has not complied with the provisions of section 1940(7) of the Act and 1940(6) and 1940(7) are interlinked. It was also observed by the AO that it cannot be ascertained as to when the PANs were obtained by the appellant, whether these were obtained prior to making payment to transporters or at the time of furnishing the reply to query raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the application of section 194C( 1) subject to the condition of obtaining PAN from the transporters. It was further stated that the provisions of section 194C(6) of the Act are independent and subject to compliance of section 194C(7) of the Act, therefore, the liability to deduct tax at source ceases at the moment, when it obtained the PAN of the transporter and that liability cannot be considered to have been again restored due to non compliance of section 194C(7). In support of its submissions, the appellant has relied upon the order dated 13.02.2015 of Hon'ble Hyderabad Bench of ITAT in the case of ACIT v. Mohammad Suhail in ITA No.l536/Hyd./2014. (x) I have duly considered the submissions of the appellant, assessment order and the material placed on record. It is noted from the material placed on record that the PAN of the respective parties were printed on the GR/Challan/Bilty/Bill issued by the parties to whom major payments were made and only in few cases, it was hand written. Therefore, at least in respect of those parties, where PAN was printed on various documents, I find merit in the contention of the appellant that the AO has no justification in holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (xiii) In the case of ACIT Vs M/s Mohammed Suhail in ITA No. 1536/Hyd/2014 for the AY 2010-11, it was held by the Hon'ble ITAT, Hyderabad Bench that: "4. After considering the rival submissions and perusing the submissions and notifications issued in this regard, we are of the opinion that there is no need to deviate from the order of Ld. CIT(A). Even though new provisions were introduced and assessees were made liable to deduct tax on the payments made to transporters, provisions of section 194C(6) gives exemption to the persons not to deduct the amount, in case they obtain/furnish the PAN. Assessee has complied with these provisions. Therefore, there is no need to deduct any tax and disallowance under section 40(a) (ia) does not arise. Even though it was stated in sub section (7) that person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed Income Tax Authority or the person authorised by it, such particulars in such form within such time as may be prescribed, this provision was not made applicable for the impugned assessment year as the relevant notification was not issued immediately. In fact, the Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endment introduced by Finance Act (No.2) 2009, the distinction between a contractor and a subcontractor has been done away with and Cl. (Hi) of Explanation under 194C(7) now clarifies that "contract" shall include subcontract; (iii) subject to compliance with the provisions of Section 194C(6), immunity from TDS under sec. 194C(1) in relation to payments to transporters, applies transporter and non-transporter contractees alike; (iv) under Sec. 194C(6), as it stood prior to the amendment in 2015, in order to get immunity from the obligation of TDS, filing of PAN of the Payee-Transporter alone is sufficient and no confirmation letter as required by the learned CIT is required; (v) Sections I94C(6) and Section I94C(7) are independent of each other, and cannot be read together to attract disallowance u/s 40(a) (ia) read with Section I94C of the Act; and (vi) If the assessee complies with the provisions of Section 194C(6), no disallowance u/s 40(a) (ia) of the Act is permissible, even there is violation of the provisions of Section 194C(7) of the Act. 35. Consequent to our findings in the preceding paragraphs, we reach a conclusion that the authorities below are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is violation of section 194C(7) and disallowance under section 40(a) (ia) does not arise as held by the Coordinate Bench supra, accordingly, the impugned addition made thereon shall go and thus, ground no's 2 and 3 raised by the Assessee are allowed." (xvi) In view of the above discussion and the judicial pronouncements, it is held that the AO was not justified in making disallowance u/s 40(a) (ia) of the Act, in respect of persons whose PAN have been obtained as in view of the provision of section 194C(6) of the Act, it was not required to deduct tax at source. Further, non furnishing of information u/s 1940(7) of the Act, did not result in violation of provisions of section 40(a) (ia) of the Act as the provisions of section 1940(7) does not override the provisions of section 194C(6) of the Act. However, it is noted that in some of the cases, PAN were not printed but hand written on challans/builties/GR/lnvoice etc. and as the appellant has failed to demonstrate that these were obtained prior to making payments to these parties, the same are to disallowed u/s 1940(6) of the Act. The name of such parties are Prakash Transport, Sahu Goods, Jai Prakash Tak etc (total am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdhari Lai Bargoti, ITAN0.757/JP/2012 dt. 10.04.2015. (iv) Smt. Sonu Khandelwal vs. ITO, ITAN0.597/JP/2013 dt. 13.05.2016. (v) Shri Aridaman Singh vs. ITO, ITAN0.391/JP/2014 dt. 09.10.2015. 6. The ld. DR on the other hand strongly relied on the order of the ld. CIT(A) and submitted that since the assessee has violated the provisions of section 4o(a)(ia), therefore, 100% disallowance should be made. 7. After hearing both the sides, we find the only issue to be decided in the grounds of appeal is regarding the restriction of the disallowance to 30% of the addition. We find an identical issue had come up before the Coordinate Bench of the Tribunal in the case of Smt. Kanta Yadav vs. ITO. We find the Tribunal in ITA No.6312/Del/2016 order dated 12.05.2017 for assessment year 2012-13 has decided the identical issue and has observed as under :- "6. We have considered rival submissions and find that issue is covered in favour of the assessee by order of ITAT Jaipur Bench in the case of Shri Rajendra Yadav vs. ITO and Smt. Sonu Khandelwal vs. ITO. In these orders it was held that the disallowance u/s 4o(a)(ia) to be restricted to 30% of the addition. In these orders the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 of the IT Act and being a concurrent finding of fact by the respective authorities and in the light of the judgments rendered by this Court in the case of CIT v. State Bank of Bikaner & Jaipur/ Jaipur Vidyut Vitran Nigam Ltd. [2014] 363 ITR 70/43 taxmann.com 411 of even date wherein it has been held that if the amount has been deposited on or before the due date of filing the return under s. 139 and admittedly it was deposited on or before the due date then the amount cannot be disallowed under s. 43B of the IT Act or under s. 36(1)(va) of the Act. In fact in the above matters one of the parties is same as in the present appeals, therefore, the issue is no more res Integra in the light of judgments of this Court referred to supra and, in our view, no substantial question of law arises out of the impugned orders of the Tribunal, which may require attention of this Court." Similarly in the case of CIT Vs. SBBJ 363 ITR 70 (Raj), the Hon'ble Jurisdictional High Court has held as under: "21. A conjoint reading of the proviso to Section 43-B which was inserted by the Finance Act, 1987 made effective from 01/04/1988, the words numbered as clause (a), (c), (d), (e) and (f), are omitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is regarding the validity of notice issued U/s 143(2) of the Act. At the time of hearing, neither any argument was advanced by the ld. AR of the assessee nor any specific defect is pointed out in the notice issued U/s 143(2) of the Act, therefore this ground of assessee's appeal is dismissed being not pressed. 20. In the appeal for the A.Y. 2013-14, the assessee has raised following grounds: "1. That on the facts and in the circumstances of the case and in law, Id CIT-A grossly erred in enhancing the income of appellant assessee by sum of ₹ 2,91,29,333/- acting ultra vires to statutory limitation of enhancement powers u/s 251 which is ab initio void and fundamentally flawed action. 2. That on the facts and in the circumstances of the case and in law, Id CIT-A grossly erred in enhancing the income of appellant assessee by sum of ₹ 2,91,29,333/- in perfunctory manner on preposterous basis of earlier history of books rejection and some orders of higher authorities without applying basic understanding that it is nowhere stated in the income tax law that once assessee's books are rejected and profit is estimated then for all years in perpetuity according to Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to disturb assessee's claim and accordingly disallowance sustained is plainly incorrect. Alternatively sice A.Y. 2012-13 was also very much before CIT-A he could have very well held it should be given in that year but it seems Ld. CIT-A was not willing to advance justice to assessee. 8. That on the facts and in the circumstances of the case and in law, Id CIT-A erred in not deleting the sustained disallowance of ₹ 41,48,656/- pertaining to service tax amount which is correctly claimed in this period and otherwise also when only conflict is for the year of allowability and otherwise the claim is allowable under the law, it is revenue neutral to disturb assessee's claim and accordingly disallowance sustained is plainly incorrect. Alternatively since A.Y. 2014-15 was also very much before CIT-A he could have very well held it should be given in that year but it seems ld. CIT-A was not willing to advance justice to assessee. 9. That on the facts and in the circumstances of the case and in law, Id CIT-A erred in not deleting the disallowance of ₹ 13,63,011/- pertaining to genuine and actual deductions made by the clients which is plainly against real income theory. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that the said liability pertains to the assessment year 2012-13 and not for the A.Y. 2013-14. 24. Before us, the ld AR of the assessee has submitted that when both the appeals were before the ld. CIT(A) and decided by a composite order then if the said demand of service tax was found for the A.Y. 2012-13 and not for the A.Y. 2013-14 the claim of the assessee was required to be allowed. He has thus pleaded that the claim on account of service tax may be allowed for the A.Y. 2013-14. Even otherwise as per the provisions of Section 43B of the Act, the said sum is allowed on actual payment and not on accrual basis. In support of his contention, he has relied upon the decision of Delhi Benches of the Tribunal dated 09/11/2017 in the case of Dharampal Satyapal Sons (P) Ltd. Vs DCIT in ITA No. 5919/Del/2014 and submitted that once the payment was made before the due date of filing of the return of income then the amount is allowable in the relevant assessment year. 25. On the other hand, the ld CIT-DR has relied upon the orders of the authorities below and submitted that the ld. CIT(A) has given the finding that this liability to pay the service tax pertains to the A.Y. 2012-13 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisputed that the expenditure incurred by the assessee on the project is admissible deduction. The only dispute that the Revenue seeks to raise is regarding the year of allowability of expenditure. Considering that the assessee is a company assessed, at uniform rate of tax, the entire exercise, of seeking to disturb the year of allowability of expenditure is in any case, revenue neutral." 5. In the case on hand also as against the provision, the assessee made payment of ₹ 95,90,000/- and the tax rates are uniform for the relevant and subsequent assessment years, as such in a tax neutral scenario, it is fair to allow the expenditure for this assessment year. We, therefore, allow this ground of appeal and direct the AO to delete the addition on this count." Thus, the Tribunal has allowed the claim when it was found that the payment was made before due date of filing of return of income U/s 139 of the Act. It is matter of fact that the liability is not in dispute and the disallowance is made only on account of year of allowability of claim. It is pertinent to note that when both the years were before the ld. CIT(A) and decided by the composite order then if the claim of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are lying in the possession of the awarders/clients and the same has not been supplied to the assessee. Such types of deductions are of routine and general in nature in case of contractors and therefore, part and parcel of the business. The assessee by producing the books of account and copy of the relevant ledgers has established the genuineness of the claim that the assessee received the payment after the deductions made by the awarders of the contracts/clients. 31. On the other hand, the ld DR has submitted that when the assessee has not produced any documentary evidence in support of such deduction then the disallowance sustained by the ld. CIT(A) is justified. 32. We have considered the relevant material on record. The ld. CIT(A) has considered this issue at page 51 and 52 of the impugned order as under: "(iii) I have duly considered the submissions of the appellant, assessment order and the material placed on record. It is noted that the appellant could not file any documentary evidence in support of its claim of deductions made by its clients on account of loss and damages except in the case of M/s DB Power Ltd. The AO did not allow any deduction even in the case of D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmation on behalf of the parties. Accordingly, in the facts and circumstances of the case and in the interest of justice, we set aside this issue to the record of the Assessing Officer to verify the correctness of the claim either by calling the information from the concerned parties or the assessee shall furnish the confirmation from these parties. Needless to say that the assessee be given appropriate opportunity of hearing. 33. Ground No. 10 of the appeal is regarding disallowance made account of employees' contribution to ESI and PF. 34. We have heard the ld AR as well as the ld. CIT-DR and considered the relevant material of record. This issue is identical to the issue raised in ground No. 9 of the appeal for the A.Y. 2012-13. In view of our finding on this issue for the A.Y. 2012-13, this ground of appeal is allowed and the disallowance confirmed by the ld. CIT(A) is deleted. 35. Now we take up the appeal of the assessee for the A.Y. 2014-15. In the appeal, the assessee has raised following grounds of appeal: "1. That on the facts and in the circumstances of the case and in law, Id CIT-A grossly erred in enhancing the income of appellant assessee by sum of ₹ 1,08, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee without appreciating that entire enhancement is based on purely hypothetical and artificial income which is never earned by assessee and is never corroborated even symbolically by any iota of trading outside the books . Other grounds relating to additions made by Ld AO which are not deleted by Ld CIT-A 7. That on the facts and in the circumstances of the case and in law, Id CIT-A erred in not deleting the sustained disallowance of ₹ 2,53,993/- pertaining to genuine and actual deductions made by the clients which is plainly against real income theory. 8. That on the facts and in the circumstances of the case and in law, Id CIT-A erred in not deleting the sustained disallowance of ₹ 58330/- U/s 36(1)(va)/Section 2(24)(x) of the Act without appreciating that said issue is covered in assessee's favour by the jurisdictional High court decisions. 9. That on the facts and in the circumstances of the case and in law, Id CIT-A erred in not completely deleting the disallowance of ₹ 26,19,088/- and wrongly upholding ld. A.O.'s version that the assessee has diverted interest bearing loans towards interest from advances which is factually and legally incorrect w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration, the assessee has shown interest income of ₹ 1,15,02,306/- and interest payment of ₹ 2,50,40,608/-. The Assessing Officer has observed that the interest paid to various parties and banks is ranging from 9% to 12% whereas the assessee has made interest free loans and advances to its group concerns which are covered U/s 40A(2)(b) of the Act. The assessee contended that the interest free loans were given by the assessee out of its interest free loans taken from the group concerns and therefore no disallowance of interest is called for on account of interest free advances given to the group concerned. The Assessing Officer did not accept the contention of the assessee and made a proportionate disallowance of interest of ₹ 26,19,088/-. 42. The ld. CIT(A) has confirmed the disallowance made by the Assessing Officer. Though the amount of interest based on the duration for which the loan was given to the group concern during the year under consideration was considered by the ld. CIT(A) and the Assessing Officer was accordingly directed to modify the amount. 43. Before us, the ld AR of the assessee has submitted that out of total amount of ₹ 16.00 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,400/- 3. Zuberi Engineering Co. Ltd. 2,06,64,063/- 12.00% 12 months 24,79,668/- Total 26,19,088/- Thus, it is clear that the first two amounts of advances of ₹ 13.00 crores and ₹ 94.00 lacs respectively were given only for the three days during the year under consideration and the Assessing Officer has also made the disallowance of interest only for the three days. The balance amount of ₹ 2,06,64,063/- was undisputedly not given during the year under consideration but it was given in the earlier year and the Assessing Officer has not made any disallowance on account of interest. Therefore, once the said amount of ₹ 2,06,64,063/- was not given during the year under consideration and no disallowance was made by the Assessing Officer in the earlier year then having regard to the rule of consistency, no disallowance can be made in respect of the said advance given by the assessee in the earlier year. It is pertinent to note that when this amount was given in the earlier year then the availability of interest free funds has to be seen in the earlier year and not during the year under consideration. Further it is also not disputed by the revenue that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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