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TMI Blog2016 (7) TMI 1607X X X X Extracts X X X X X X X X Extracts X X X X ..... t payee referred to in the said proviso. We find that the assessee filed certificates from the Chartered Accountants of the five payee companies before the ld. CIT(A) to contend that as the payee companies have shown the amount of interest in the return of income filed and paid due taxes thereon, therefore, in view of the second proviso to Section 40(a)(ia) of the Act, no disallowance was exigible in the case of the assessee u/s 40(a)(ia) of the Act. The ld. CIT(A) has not adjudicated on this plea of the assessee while confirming the disallowance made by the AO. Hon'ble Delhi High Court in the case of CIT vs. Ansal Land Market Township Private Limited [ 2015 (9) TMI 79 - DELHI HIGH COURT] has held that second proviso to Section 40(a)(ia) of the Act is declaratory and curative and has retrospective effect. Therefore, we hold that the disallowance cannot be made u/s 40(a)(ia) of the Act on this count also. Thus, this ground of appeal of the assessee is allowed. Addition under the head unsecured loan and interest paid thereon - HELD THAT:- In the instant case, there was some enquiry made by the DDIT in the case of Shri Shailendra Biyani, where it was found that the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of Section 40(a)(ia) of the Incometax Act, 1961, for non-deduction of TDS. 4. The brief facts of the case are that the AO observed that the assessee has made payment of EMI for purchase of vehicles to the following parties :- S. No. Name of the Finance Company Amount (Rs.) 1. Citicorp Finance P. Limited 6,05,675 2. SERI Finance 13,95,596 3. L T Finance 7,60,284 4. Magna Finance 5,08,035 5. Religare Finvest Limited 6,78,264 TOTAL Rs. 39,47,854 5. Since the assessee failed to deduct TDS from the payments made to the above parties on account of interest payment, the AO made disallowance of ₹ 39,47,854/- by invoking provisions of Section 40(a)(ia) of the Act for non-deduction of TDS from the payment of interest made by the assessee. 6. Being not satisfied with the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies and perused the material available on record. In the instant case, the AO observed from the return of income filed by the assessee that the assessee has made payment of interest of ₹ 39,47,854/- to five finance companies without deducting TDS thereon and, so, he, by invoking provisions of Section 40(a)(ia) of the Act disallowed the deduction of ₹ 39,47,854/- and made addition of the same to the income of the assessee. On appeal, the ld. CIT(A) following the decision of Hon'ble Kolkata High Court in the case of CIT vs. Crescent Exports Syndicate, (2013) 33 taxmann.com 250 (Kol) and the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Sikandarkhan N.Tunvar, (2013) 33 taxmann.com 133 (Guj) and the CBDT Circular No. 10/DV/2013 dated 16.12.2013 confirmed the addition made by the AO holding that the term payable would include amounts which are paid during the previous year. The ld. Authorized Representative of the assessee has contended that the decision of Hon'ble Allahabad high Court in the case of CIT vs. Vector Shipping Service (P) Limited, (2013) 38 taxmann.com 77 (All) is in favour of the assessee where the Hon'ble High Court has h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.8068/2014 order dated 02.07.2014. Therefore, the ld. CIT(A) was not justified in dismissing the ground of appeal on this count. 14. Further, the second proviso appended to Section 40(a)(ia) by the Finance Act, 2012, w.e.f. 01.04.2013, provides that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVIIB, on any such sum, but is not deemed to be an assessee in default under the first proviso to sub Section (1) of Section 201, then for the purpose of this sub Section (1) shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso. We find that the assessee filed certificates from the Chartered Accountants of the five payee companies before the ld. CIT(A) to contend that as the payee companies have shown the amount of interest in the return of income filed and paid due taxes thereon, therefore, in view of the second proviso to Section 40(a)(ia) of the Act, no disallowance was exigible in the case of the assessee u/s 40(a)(ia) of the Act. The ld. CIT(A) has not adjudicated on this plea of the assessee whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfactory, the AO can disbelieve the alleged transaction of loan. Once the assessee produces sufficient material in support of the loan transaction, onus shifts upon the AO and after verification, he can call for further explanation from the assessee and in the process onus may again shift from the AO to the assessee. Therefore, he held that the assessee failed to discharge the burden of proof by not establishing the genuineness of the transaction and creditworthiness of the parties. He, therefore, confirmed the action of the AO. 18. Before us, the ld. Authorized Representative of the assessee vehemently argued and contended that before the AO, the assessee filed confirmation of the unsecured loan creditors with PAN numbers. He submitted that this is not the case where the loan creditor had refused to having advanced the amount to the assessee. The AO failed to bring on record that the amount as shown received from the loan creditor was not actually received from that creditor. It was submitted that the AO merely on the basis of findings recorded in the case of Shri Shailendra Biyani added the entire amount of loan taken to the income of the assessee. It was argued that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 58 of 2001 order dated 30th June,2016, wherein the Hon'ble High Court has held that on a very fundamental aspect, the Revenue was not justified in making addition at the time of reassessment without having first given the assessee an opportunity to cross examine the deponent on the statement relied upon by the ACIT. Quite apart denial of an amount of cross examination, the Revenue did not even provide the material on the basis of which the Department sought to conclude that the loan was bogus transaction. This is not having been done, the denial of such opportunity goes to the root of the matter and strikes at the very foundation of the reassessment and, therefore, renders the orders passed by the CIT(A) and the Tribunal vulnerable. Respectfully following the above cited decision of Hon'ble Bombay high Court, we hold that the addition of unsecured loan of ₹ 35 lakhs and interest paid thereon of ₹ 3,80,921/- was not justified in the present case as the material collected in the case of Shri Shailendra Biyani in the case of the M/s. East West Finvest India Limited was neither confronted to the assessee nor the assessee was allowed any opportunity of cross-exami ..... X X X X Extracts X X X X X X X X Extracts X X X X
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