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TMI Blog2025 (3) TMI 1083X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that all the lenders are agriculturalist having agricultural income and their other income is below taxable limit - DR contended that the interest is not paid and only credited to the account of parties from whom the amounts have been borrowed - HELD THAT:- As in the interest of justice, we deem it appropriate to restore the matter to the file of the AO for the limited purpose of verifying the validity and correctness of Form 26A and to examine whether the recipients have duly filed their returns of income, disclosing the interest income and paying tax thereon as per the provisions of Section 201(1) of the Act. Addition u/s 43B - assessee had an outstanding VAT liability at the end of the financial year - AO held that the unpaid amount was outstanding as of the balance sheet date and was not cleared before the return filing due date, the disallowance u/s 43B of the Act was considered justified - HELD THAT:- Considering the submissions made and the decision of SDCE Projects Pvt. Ltd [2019 (10) TMI 309 - ITAT AHMEDABAD] we deem it appropriate to restore this issue to the file of the AO for verification. The AO is directed to examine whether the VAT liability was indeed reversed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OKAR, AM: Both these appeals have been filed by the assessee against the separate orders passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as "CIT(A)"] dated 30/07/2022 & 20/07/2022 for the Assessment Years (AYs) 2014-15 and 2015-16 respectively. Since the assessee is same, for the sake of convenience, both appeals are disposed of by way of this common order. Facts of the case: 2. The assessee is engaged in the business of trading in petrol, diesel, and oil under the proprietorship concern M/s Rudra Petroleum. Additionally, he is a partner in M/s.Rudra Minerals and M/s Rudra Construction. The assessments for both the Assessment Years were completed under Section 143(3) of the Income-tax Act, 1961 [hereinafter referred to as "the Act"]. Details of the assessment are tabulated below: Particulars A.Y. 2014-15 A.Y. 2015-16 Date of Filing Original Return 09.10.2015 13.02.2017 Returned Income (Rs.) 5,76,170/- 86,870/- Total Additions (Rs.) 21,19,209/- 22,31,136/- Final Assessed Income (Rs.) 27,95,380/- 23,18,010/- Date & Section of AO's Order 21.12.2016 Passed u/s 143(3) of the Act 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in confirming disallowance of Rs. 8,55,000/- being interest paid without deduction of TDS on funds borrowed for Business in earlier years and therefore invoking Sec.40(a)(ia). b) Your Appellant submits that interest paid is on old credit accounts and no amount was borrowed in the year under Appeal and particularly payment of Interest to same parties which was not disallowed in previous Assessment Year and facts being the same, your Appellant submits that the CIT(A) has erred in confirming the disallowance of Rs. 8,55,000/- which is allowable Business as expenses u/s. 57 in computing Income u/s. 28 of the Act. III. Disallowance /Addition u/s. 43B of Rs. 69,709/- Your Appellant respectfully submits that sec.43B does not apply to the Facts of the case since the said amount of Rs. 17,30,384/- VAT payable out of which Rs. 69,709/-which has not been paid is for good & valid reasons. Your Appellant was suffering from Cash Crunch and the balance of Rs. 69,709/- is duly paid in next Finance Year. Further your Appellant had not claimed this amount of VAT as expenses and the amount was not debited to P & L A/c. and there is no loss to the Revenue. It is therefore submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds to the Assessing Officer he gave to gave to understand that he has accepted your Appellants claim of his having Rs. 22,19,000/-as opening cash as per his Books of Accounts. 3. (a) The Assessing Officer has erred in making addition of Rs. 22,19,000/-as alleged unexplained Investment without referring to any relevant provision of Act. (b) The CIT(A) has erred in invoking sec.69 and confirming the said Addition which does not apply to the facts of the case since it was opening Cash Balance duly supported by Books of Accounts. 4. The Assessing Officer also grossly failed to appreciate & consider detailed submissions made by your Appellant on 28/12/2017 and for unjustifiable reason he passed the Assessment Order also on 28/12/2017, which was not getting time barred doing great injustice to your Appellant and acting against principles of Natural Justice. On Merits 1. Your Appellant submits that on CIT(A) has erred in applying provisions of Sec. 69 which does not apply to the case since your Appellant had the amount as per Books of Accounts supporting the Opening cash Balance of Rs. 22,19,000/-. 2. Your Appellant also submits that the amount earned or received and brought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ails of such amounts are: Name of Lender(s) Interest Paid (Rs.) Smt. Anshyaba B. Chudasama 1,08,700/- Smt. Yashomatiba B. Chudasama 1,04,200/- Smt. Manharba B. Chudasama 1,33,500/- Sri Mahendra Sinh B. Chudasama 1,34,600/- Dharmendrakuverba B. Chudasama 1,85,200/- Y M Chudasama (HUF) 1,88,800/- Total Disallowed u/s 40(a)(ia) 8,55,000/- 5.1. The AR contended that all the lenders are agriculturalist having agricultural income and their other income is below taxable limit. During the course of proceedings before the CIT(A), the assessee furnished certificates in form 26A, however, the CIT(A) upheld the disallowance u/s 40(a)(ia) of the Act. The AR also explained that the amounts were borrowed for the purpose of business and the amounts were invested in the partnership firms where the assessee is a partner. The AR also stated that the assessee has received interest and remuneration from the firms and the same is disclosed in the return of income of the assessee. The AR placed reliance on the decision of Co-ordinate Bench in case of Esaote India (NS) Ltd. (ITA No.55/Ahd/2016) where it was decided that where recipient/deductee has already paid tax on impugned amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded the amount in its return and paid tax thereon, disallowance under Section 40(a)(ia) of the Act is not warranted in the hands of the assessee. 7.2. On the other hand, the DR contended that the interest was only credited to the accounts of the lenders and not actually paid. It was further argued that if the interest amount was merely credited and not paid, the recipient was not required to disclose the same in its return, and therefore, the validity of Form 26A needed to be verified. We note that Form 26A considers both "paid" and "credited" amounts as per its Annexure A, and the filing of a return of income by the recipient is crucial to avail the benefit of this provision. 7.3. Considering the above, and in the interest of justice, we deem it appropriate to restore the matter to the file of the AO for the limited purpose of verifying the validity and correctness of Form 26A and to examine whether the recipients have duly filed their returns of income, disclosing the interest income and paying tax thereon as per the provisions of Section 201(1) of the Act. The AO is directed to carry out the necessary verification and decide the issue in accordance with law. If it is found th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter re-examination of books of accounts it came to the notice of the assessee that there was excess provision of VAT liability. 9.1. In light of the above, it is observed that the assessee contended that the VAT liability was not routed through the profit and loss account and was instead reflected as a current liability. The assessee also argued that the VAT payable was reversed in the subsequent year due to the discovery of an excess provision upon re-examination of the books of accounts. The Co-ordinate Bench of the Tribunal in the case of SDCE Projects Pvt. Ltd. (ITA No. 2556/Ahd/2017) has held that no disallowance (relating to service tax) under Section 43B of the Act can be made when no deduction is claimed in the profit and loss account, and the liability is disclosed as a current liability. While deciding so the Bench relied on the decision of Noble & Hewitt (I) (P) Ltd. (305 ITR 324) (Del.), wherein it was held that if the liability is not debited to the profit and loss account and no deduction is claimed, the provisions of Section 43B of the Act are not applicable. 9.2. Considering the submissions made and the decision of Co-ordinate Bench in case of SDCE Projects Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,83,000/- under Section 68, observing that the assessee failed to establish the creditworthiness of the lenders. 11. During the course of hearing before us, the AR submitted that both the loans have been accepted through banking channel and the assessee has submitted PAN, ITR (only in case of Y.M. Chudasama), confirmations and Bank statement in support of credit worthiness and therefore the assessee has discharged his initial burden of proof and therefore the addition should not have been made by AO and confirmed by the CIT(A). The AR also submitted that the loans have been repaid in part in the current year and in case of Shri Y. M. Chudasama even opening balance was also added u/s 68 of the Act. The AR relied on the judgement of Hon'ble High Court of Gujarat in the case of CIT Vs. Apex Therm Packging (P.) Ltd. reported at [2014] 42 taxmann.com 473, where the revenue's appeal was dismissed. The Hon'ble High Court confirmed the decision of Tribunal that when full particulars, inclusive of confirmations with name, address and PAN, copy of Income Tax Returns, etc. were furnished and when the loans were received through cheques, AO was not justified in making additions u/s 68 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the cash balance was available from previously declared income and cash flows, and therefore, Section 69 of the Act should not be invoked. Before the CIT(A), the assessee reiterated that an opening balance does not constitute an income of the current year and that such an addition under Section 69 of the Act was unjustified. However, the CIT(A) upheld the AO's decision, observing that the assessee had failed to provide credible evidence to establish the source of the opening balance. Consequently, the addition of Rs. 22,19,000/- was confirmed, and the assessee's appeal on this ground was dismissed. 13. During the course of hearing before us, the AR contended that the opening cash balance of Rs. 22,19,000/- was duly reflected in the personal balance sheet as on 31-03-2014, which was certified by a Chartered Accountant. The AR submitted that the certified copy of the balance sheet, forming part of the paper-book (page No. 34), clearly demonstrated the availability of cash at the beginning of the financial year. It was argued that since the cash balance was carried forward from the earlier year, it could not be treated as unexplained under Section 69 of the Act in the current ..... X X X X Extracts X X X X X X X X Extracts X X X X
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