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TMI Blog2015 (7) TMI 1404X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering the applicability or otherwise in the facts of the case of all the relevant provisions of law, to which section 40(a)(ia) is or cannot be any exception. The same in fact is a statutory disallowance, artificially inflating the assessee-payer's income for the time being, which is liable to be allowed as deduction upon complying with the condition prescribed for its non applicability, i.e., of the deposit of TDS to the credit of the payee, in the year in which it stands complied with, introducing thus a timing effect. Not so considering; rather, leads to an anomalous, unacceptable situation. Our reasons in support of our decision stand listed in the foregoing paragraphs of this order. The premise, or the underlying concern, it needs to be appreciated, is to arrive at the best estimate of the total income after considering all the relevant provisions of law, be it qua an allowance or disallowance in-as-much as the assessment is to be only in accordance with the law. The assessee's argument thus is not valid and, accordingly, we find no infirmity in the direction of the ld. CIT in restoring the assessment for the consideration of the relevant issues to the file of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's assessment for the assessment year (A.Y.) 2008-09. 2. The appeal raises the issue of maintainability or otherwise in law of the revision u/s. 263 of the Act of the assessment under reference on the following grounds: a) non-consideration of disallowance u/s. 40(a)(ia) of hire charges for JCB machines, being subject to TDS @ 10%, debited in accounts and claimed in the sum of Rs. 9,97,637/-, i.e., in view of the admitted non-deduction of tax at source; b) non-consideration, similarly, of labour charges paid to labour contractors, in the aggregate of Rs. 35,30,828/-, u/s. 40(a)(ia) in-as-much as the same is liable to TDS @ 1%, and which has admittedly not been deducted or deposited to the credit of the Central Government; and c) non-consideration for assessment as income u/s. 68 of cash credits by way of unsecured loans from two parties, for a total of Rs. 25,35,500/-. The ld. CIT held the assessee to have violated the provisions of section 194C or, as the case may be, section 194I, so that the disallowance u/s. 40(a)(ia) was exigible, while no enquiry was made by the Assessing Officer (A.O.) in respect of the compliance of the TDS provision/s and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arat Tanners v. CIT, 264 ITR 673 (Mad.); Ashok Leyland Ltd. v. CIT, 260 ITR 599 (Mad.); Swarup Vegetable Products v. CIT, 187 ITR 412 (All.); Thalibai F. Jain v. ITO, 101 ITR 1 (Kar.); Gee Vee Enterprises v. CIT (Addl.), 99 ITR 375 (Del.). His order, requiring the A.O. to frame the assessment afresh after making necessary enquiry in accordance with law, is thus consistent with his objection for assuming revision, and it would be wrong to say that he has pre-decided the issue. In fact, if and to the extent he so does, he, we may clarify, exceeds his jurisdiction in-as-much as the very basis for the invocation of section 263 in the present case is the absence of proper enquiry and due application of mind by the A.O., making his order legally infirm, so that the matter shall normally require being considered by him, allowing proper opportunity for stating its case to the assessee. We shall be equally at fault, if we were to discuss the merits of the case. 4.2 This leaves us with the aspect of whether there has indeed been, i.e., on facts, lack of proper enquiry or due of application of mind by the A.O. while framing the assessment, for his order to be considered as being per se err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted, is of total income under the Act and not of commercial profit alone. Reference, in this context, drawing support there-from, is made to the various decisions by the hon'ble jurisdictional High Court, as in the case of Shyam Bihari v. CIT [2012] 345 ITR 283 (Patna), advocating a separate allowance of depreciation u/s. 32(1) in-as-much as the said allowance, a statutory allowance, is subject to variation from year to year. This is also the rationale or the understanding of the Tribunal of the said decision, as expressed in the case of Shashi Builders (India) (P.) Ltd. v. ITO (in ITA Nos. 155 163/Pat/2012 dated 06.05.2015). There being nothing on record to suggest of it being separately considered or taken into account while estimating the income, the same cannot be presumed to have been allowed and, thus, would require being allowed separately. The decision in the case of Shri Ram Jhanwar Lal v. ITO [2010] 321 ITR 400 (Raj) is also on the same lines; the Hon'ble Court in fact also holding for the allowance of interest and remuneration to partners separately, i.e., after the estimation of the income of an assessee firm, even as both the deductions fall u/ss. 30 to 38, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply. The estimation of income, to the best of his judgment, is to be made by the assessing authority of total income under the Act and not of the commercial profit alone. The same would though have to be exhibited in-as-much as transparency, so that what stands considered or not, and the manner of its consideration, is an essential pre-requisite of a judicial order. This would also meet the assessee's argument of the 'profit' rate, reckoned with reference to turnover, comes to an abnormally high rate. The argument presumes that what is being assessed is the business profit, underlining its fallacy. Why, a similar ratio of 'income' could arise even under the condition of a normative assessment. Further, reliance is also placed on the decisions by the apex court in CIT v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC) and CIT v. Manick Sons [1969] 74 ITR 1 (SC), to rebut the proposition that when books of account are rejected, the same cannot be again relied upon for the purpose of making any other addition/disallowance, also discussed by the tribunal in Muni Rai (supra). 4.4 There is, however, a caveat to what stands stated by us. The estimation of income havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uctions (supra), would be assumed to have been allowed or, as the case may be, disallowed. It is precisely on account of this position in law, agreed to in principle, that where it is shown that the A.O. had not applied his mind to an aspect of the matter, and proceeded to estimate the income without giving effect to a statutory disallowance/s, either out of ignorance, assuming the provision as not applicable, or through oversight, that the ld. CIT, as the competent authority, would stand to assume jurisdiction u/s. 263. Lack of application of mind extends not only to matters which the A.O. has done, but also to what he ought to have, though has failed or omitted to. The disallowance u/s. 40(a)(ia) is not occasioned by the fact of it being not admissible per se, but for having not deducted tax at source on the impugned sum, forming part of the payee's-to whom it is allowed, income, i.e., toward his tax. Not therefore adjusting the assessee's income for the same would translate into a double whammy for the assessee in-as-much as - the presumption in law being of all allowances and disallowances having been effected, the same could in law validly be claimed and allowed on pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he estimation regime is of the total income under the Act and not of the business profit alone, and which could only be upon considering the applicability or otherwise in the facts of the case of all the relevant provisions of law, to which section 40(a)(ia) is or cannot be any exception. The same in fact is a statutory disallowance, artificially inflating the assessee-payer's income for the time being, which is liable to be allowed as deduction upon complying with the condition prescribed for its non applicability, i.e., of the deposit of TDS to the credit of the payee, in the year in which it stands complied with, introducing thus a timing effect. Not so considering; rather, leads to an anomalous, unacceptable situation. Our reasons in support of our decision stand listed in the foregoing paragraphs of this order. Our decision, based on first legal principles, is supported by the decisions in the case of Shyam Bihari (supra) by the hon'ble jurisdiction high court and Shri Ram Jhanwar Lal (supra). In both these decisions, the hon'ble high courts have held in favour of deduction of statutory allowances even where the income is estimated on global basis, which has been u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on case law, as in the case of CIT v. Jaiswal Motors Finance [1983] 141 ITR 706 (All); India Rice Mills v. CIT [1996] 218 ITR 508 (All), holding that a credit to the account of the partners in a firm could only be added u/s. 68 in their hands. There is nothing to show that the credit is from the partners. The matter, in our view, is factual, with the decisions being rendered with reference to the facts of the case, as by a partner on his introduction as such in a firm, or by the partners on the commencement of the business by the firm, etc. On the legal aspect, how one wonders would s. 68 not apply in-as-much as the 'firm' and 'partner' are different persons under the Act, with the credit/s appearing in the books of the firm? Reference in this context be made to the decision in the case of CIT v. Kishorilal Santoshilal [1995] 216 ITR 9 (Raj.), explaining the law in the matter, based on first legal principles. We, accordingly, uphold the impugned order on this ground/s (2). 6. In the result, the assessee's appeal is dismissed. Order pronounced by listing the result on the Notice Board of the Bench under Rule 34(4) of the Appellate Tribunal Rules, 1963 on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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