HTC PIPES & INFRA PROJECT PVT. LTD, Jaipur V. ITO, Jaipur

ITA 1102/JPR/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6368 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 13-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SEEMA MEENA JCIT DR DHK
• Assessee Lawyers: A K GUPTA
• Keywords: Rejection of books of accounts; Depreciation; Additional evidence; Corroborative evidences; Assessment record; Onus to prove; Documents seized
• Section: 244A; 234B; 131; 69; 154; 68

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,O JH HKKXPUN] YS[KK LNL; LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM VK;DJ VIHY LA-@ ITA NO. 1102/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR: 2012-13 M/S. HTC PIPES & INFRA PROJECT PVT. LTD (I) 10, STATION ROAD, JAIPUR (II) JAIN & CO. 228, CITY CENTRE, S.C. ROAD, JAIPUR CUKE VS. THE ITO, WARD- 3(2) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AACCH 5036 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI A.K. GUPTA, ADVOCATE & SHRI S.L. JAIN, ADVOCATE JKTLO DH VKSJ LS@ REVENUE BY:SMT. SEEMA MEENA, JCIT - DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 05/07/2018 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 26/07/2018 VKNS'K@ ORDER PER BHAGCHAND, AM THE APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A)-I, JAIPUR DATED 29-09-2016 FOR THE ASS ESSMENT YEAR 2012-13 RAISING THEREIN FOLLOWING GROUNDS OF APPEAL. 1. THAT THE LD. AUTHORITIES BELOW HAVE GROSSLY ER RED BOTH IN LAW AND FACTS IN INVOKING THE PROVISION OF SECTI ON 145(3) WITHOUT ANY JUSTIFICATION. THE ASSESSEE HAS MAINTAI NED REGULAR AND PROPER BOOKS OF ACCOUNT DULY AUDITED BY ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 2 CHARTERED ACCOUNTANT AND EXPENSES ARE VOUCHED AND VERIFIABLE. 2. THAT THE LD. AUTHORITIES BELOW HAVE GROSSLY ERRE D BOTH IN LAW AND FACTS IN NOT ACCEPTING CBDT CIRCULAR OFF ICIAL MEMORANDUM (F.NO.279/MISC.52/2014-(ITJ] DATED 7-11- 2014 ISSUED U/S 119 (2) OF THE I.T. ACT WHICH IS BI NDING ON ALL OFFICERS EMPLOYED DIN THE EXECUTION OF ACT (HIG H PITCHED ASSESSMENT WITHOUT PROPER BASIS) [NAVNEET L AL JHAVERI VS K.K. SEN. AAC (1965) 56 ITR 198 (SC) AND THEREFORE, THE ORDER SO MADE IS WITHOUT JURISDICTIO NS, ILLEGAL AND VOID AB INITIO. 3. CASH CREDIT RS. 19,50,000:- THAT THE LD. AUTHORI TIES BELOW HAVE GROSSLY ERRED BOTH IN LAW AND FACTS IN M AKING / CONFIRMING ADDITIONS OF RS. 19,50,000/- U/S 68 OF I .T. ACT, 1961 WITHOUT MAKING ANY ENQUIRY BY ISSUING NOTICE U /S 131. THE AO IS DUTY BOUND TO MAKE ENQUIRY FROM COORDINAT E OFFICER (ITA NO.1341/MUM/2011 ASSESSMENT YEAR 1996- 97 ARUN KUMAR MUCHHALA).THE ASSESSEE HAS PRODUCED EVID ENCE ABOUT IDENTITY OF CREDITOR BY PROVIDING PAN AND GEN UINENESS BY RECEIVING PAYMENT THROUGH BANK ACCOUNT AND CREDITWORTHINESS BY ATTENDING CIRCUMSTANCES AND THE REFORE, ONUS OF PROOF SHIFTS TO THE REVENUE. 4. DISALLOWANCE OF INTEREST U/S 40(A)(IA) RS. 52,65 0/- KAMLA CHOUDHARY :- THAT THE AUTHORITIES BELOW HAVE GROSSLY ERRED BOTH IN LAW AND FACTS IN SUSTAINING DISALLOWA NCE OF INTEREST PAYMENT OF RS. 52,650/- TO SMT. KAMLA CHOU DHARY ON ACCOUNT OF NON-TDS AS REQUIRED U/S 194A. THE SEC TION 40(A)(IA) CAN BE INVOKED WHERE THE AMOUNT OF INTERE ST REMAINS PAYABLE AND NOT ON PAYMENT PAID DURING THE PREVIOUS YEAR. 5. DISALLOWANCE OF DEPRISATION EXPENSES OF RS. 13,79,254/-: THAT THE AUTHORITIES BELOW HAVE GROSSL Y ERRED BOTH IN LAW AND FACTS IN SUSTAINING DISALLOWANCE OF DEPRISATION EXPENSES OF RS. 13,79,254/- (FULL AMOUN T) WITHOUT ANY BASIS AND JUSTIFICATION. THE ASSESSEE H AS ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 3 PROVIDED COPY OF LEDGER ACCOUNT AND SUPPORTING EVID ENCE. EXPENSES IS THROUGH BANKING CHANNEL AND GENUINE AND NOT EXCESSIVE. 6. DISALLOWANCE OF EXPENSES OF RS. 22,83,153/-:- TH AT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE AO HAS GROSSLY ERRED IN LAW AND FACTS IN SUSTAINING DISALL OWANCE OF EXPENSES RS. 22,83,153/- ( 7% OF RS. 3,26,16,480/-) WITHOUT ANY BASIS AND JUSTIFICATION. THE ASSESSEE HAS PROVI DED COPY OF LEDGER ACCOUNT AND SUPPORTING EVIDENCE. EXPENSES IS THROUGH BANKING CHANNEL AND GENUINE AND NOT EXCESSI VE. 7. DISALLOWANCE OF DEPRECIATION:- THAT THE AUTHORIT IES BELOW HAVE GROSSLY ERRED BOTH IN LAW AND FACTS IN R ESTRICTING DEPRECIATION ALLOWANCE OF RS. 1,46,72,895/- IN PLAC E OF RS. 1,98,22,466/- WITHOUT ANY BASIS AND JUSTIFICATION. 8. THAT THE AUTHORITIES BELOW HAVE GROSSLY ERRED BO TH IN LAW AND FACTS IN APPLYING N.P. RATE OF 34.48% SUBJE CT TO DEPRECIATION AS AGAINST N.P. RATE OF 26.87% SHOWN B Y THE ASSESSEE. COMPARATIVE CHART A.Y. TURNOVER NET PROFIT DEPRECIATION TOTAL PROFIT % OF N.P. % AO APPLIED 2012-13 74361300 156870 19822470 19979340 26.87 34. 48* *THE AO HAS MADE ITEMWISE ADDITION BY DISALLOWING VARIOUS EXPENSES AND ASSETS POSITIVE INCOME RS. 58, 21,930/- AND DEPRECIATION RS. 1,98,22,466/- TOTALING TO RS. 2,56,44,396/- AND BY ADDING SUCH DISALLOWANCE IN N. P. COMES TO 34.48%. 9. NO SHOW CAUSE NOTICE:- THAT THE LD. CIT(A) HAS GROSSLY ERRED BOTH IN LAW AND FACTS IN SUSTAINING A DDITIONS/ DISALLOWANCE WITHOUT SHOW CAUSE NOTICE BY THE AO. ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 4 (A) CASH CREDITS RS. 19,50,000/- (B) DISALLOWANCE OF INTEREST U/S 40(A)(IA) RS. 52,650/- DISALLOWANCE OF DEPRECIATION EXPENSES RS. 13,79,254/- (D) DISALLOWANCE OF EXPENSE RS. 22,83,153/- (E) DISALLOWANCE OF DEPRECIATION. 10. THAT THE AUTHORITIES BELOW HAVE GROSSLY ERRED B OTH IN LAW AND FACTS IN CHARGING INTEREST U/S 234(B) OF RS . S1,79,856/-, 234D OF RS. 1,60,620/- AND INTEREST RE COVERED U/S 244A OF RS. 87,563/- 2.1 AT THE OUTSET OF THE HEARING, THE BENCH OBSE RVED THAT THERE IS DELAY OF 7 DAYS IN FILING THE APPEAL BY THE ASSESSEE. TH E LD.AR OF THE ASSESSEE VIDE APPLICATION DATED 19-04-2017 FILED THE CONDONA TION APPLICATION WITH FOLLOWING SUBMISSIONS. THE PRESENT APPEAL HAS BEEN FILED 7 DAYS LATE. TH IS DELAY HAS OCCURRED ON ACCOUNT OF SERIOUS ILLNESS OF DIRECTORS WIFE WHO IS SUFFERING FROM CANCER SINCE LAST MANY M ONTHS. MOREOVER, THERE WAS THREE DAYS PUBLIC HOLIDAYS 10,1 1 AND 12DECEMBER, 2016 BEING SATURDAY, SUNDAY AND BARAWAF AT. THE MEDICAL CERTIFICATE OF SMT. SAROJ SHARMA ISSUED BY DR. LALIT MOHAN SHARMA, MD AND AFFIDAVIT OF SHRI ASHOK SHARMA, MANAGING DIRECTOR ARE ATTACHED. 2.2 ON THE OTHER HAND, THE LD. DR OPPOSED THE CONDO NATION APPLICATION OF THE LD.AR OF THE ASSESSEE. ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 5 2.3 AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIALS AVAILABLE ON RECORD, IT IS NOTED THAT THERE IS DELAY OF 7 DAY S IN FILING THE APPEAL BY THE ASSESSEE FOR WHICH THE ASSESSEE HAS FILED THE A PPROPRIATE REASONS (SUPRA). IN THIS VIEW OF THE MATTER, THE BENCH COND ONES THE DELAY OF 7 DAYS IN FILING THE APPEAL BY THE ASSESSEE. 3.1 APROPOS GROUND NO. 1 AND GROUND NO. 8 AS PER WR ITTEN SUBMISSIONS OF THE ASSESSEE, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) ARE AS UNDER:- 3.4.2 DETERMINATION: (I) THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT HAS CLAIMED THE FOLLOWING EXPENSES IN ITS TRADING AND P ROFIT AND LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION. DEPRECIATION EXPENSES RS. 13,79,254/- DIRECT EXPENSES RS. 1,82,36,857/- OTHER EXPENSES RS. 10,85,982/- DEPRECIATION RS. 1,46,72,895/- (II) DURING THE ASSESSMENT PROCEEDINGS, THE AO REQUIRED THE APPELLANT TO EXPLAIN THE NATURE OF DEPRECIATION EXPENSES AND ALSO TO PRODUCE THE BOOKS OF ACCOUNTS. THE APPELLANT NEITHER SUBMITTED THE NATUR E OF DEPRECIATION EXPENSES NOR PRODUCED BOOKS OF ACCOUN TS BEFORE THE AO FOR VERIFICATION OF ABOVE EXPENSES BY ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 6 STATING THAT THE BOOKS OF ACCOUNTS WERE SEIZED BY T HE SALES TAX DEPARTMENT. HOWEVER, IT WAS NOTED BY THE AO THAT MOST OF THE DOCUMENTS SEIZED BY THE SALES TAX DEPARTMENT WERE RELATED TO M/S HANUMAN TUBEWELL AND ONLY FEW VOUCHERS RELATING TO THE APPELLANT COMPANY WERE SEIZED AND IT WAS ALSO NOTICED THAT CASH BOOK AND LEDGER WERE NOT SEIZED BY THE SALES TAX DEPARTMENT. (III) SINCE, NO VERIFICATION OF THE ABOVE EXPENSES COULD BE MADE, THE AO DISALLOWED THE TOTAL EXPENSES OF RS. 13,79,254/- CLAIMED ON ACCOUNT OF DEPRECIATION EXPENSES AND DISALLOWED 7% OF THE REMAINING EXPENSE S AND MADE AN ADDITION OF RS. 22,83,153/- TO THE INCO ME OF THE APPELLANT. DURING THE APPELLATE PROCEEDINGS, IT WAS SUBMITTED BY THE APPELLANT THAT THE AO HAS MADE THE ABOVE ADDITIONS WITHOUT REJECTING ITS BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT IGNORING THE FACT TH AT ITS BOOKS OF ACCOUNTS WERE AUDITED BY A CHARTERED ACCOUNTANT AND PART OF THE BOOKS OF ACCOUNTS WERE PRODUCED BEFORE THE AO. IT WAS FURTHER SUBMITTED TH AT THE ABOVE DISALLOWANCE RESULTING IN NP RATE OF 34.4 8% WHICH IS NOT POSSIBLE IN THIS LINE OF BUSINESS. (IV) I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. THE AO HAS IMPLIEDLY REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT AS THE TRADING RESULTS AND OTHER EXPENSES CLAIMED BY THE APPELLANT WERE NOT VERIFIABLE AS THE BOOKS OF ACCOUNTS WERE N OT PRODUCED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. IN FACT, THE APPELLANT HAS NOT OFFERED TO PRODUCE BOOKS OF ACCOUNTS DURING THE APPELLATE PROCEEDINGS ALSO TO SUBSTANTIATE ITS CLAIM. IT WAS THE CONTENTION OF THE APPELLANT THAT THE AO HAS APPLIED NP RATE OF 34.48% AGAINST DECLARED NP RATE OF 26.87% ON TURNOVER OF RS. 7,43,61,300/- WHICH IS NO T POSSIBLE IN THIS LINE OF BUSINESS ACTIVITY. AS THE APPELLANT HAS NOT BEEN ABLE TO SUBSTANTIATE ITS CLA IM OF EXPENSES, IT IS HELD THAT THE BOOKS OF ACCOUNTS OF ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 7 THE APPELLANT ARE LIABLE TO BE REJECTED U/S 145(3) OF THE ACT AND THE ADDITIONS RS. 13,79,254/- AND RS. 22,83,153/-MADE BY THE AO IS HEREBY SUSTAINED. 3.2 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE PRAYED THAT THE LOWER AUTHORITIES HAVE WRONGLY INVOKED THE PROV ISIONS OF SECTION 145(3) OF THE ACT BY APPLYING THE N.P. RATE OF 34.4 8% AS AGAINST 26.87% SHOWN BY THE ASSESSEE FOR WHICH THE LD.AR OF THE AS SESSEE FILED THE FOLLOWING WRITTEN SUBMISSION. 1. GROUND NO.1&8 ( REJECTION OF BOOKS OF ACCOUNT BY INVOKING SECTION 145(3) OF IT ACT, APPLYING NP RATE 34.48% AGAINST 26.87% AS DECLARED SUO MOTO); (I) THE FACTS OF THE ISSUES ARE THAT DURING THE YEAR UN DER QUESTIONED ASSESSEE MAINLY INDULGED IN THE ACTIVITI ES OF SUB CONTRACTOR OF DRILLING OF LAND TO GET COAL ETC., M AINTAINING REGULAR BOOKS OF ACCOUNT DURING DAY TO DAY BUSINESS AFFAIRS, GET AUDITED BY THE QUALIFIED CHARTERED ACCOUNTANTS, FILLING INCOME TAX RETURN REGULARLY, FILLING ROC AND VAT RE TURN REGULARLY AND TIMELY & GET CHECKED/ASSESSED THEIR B OOKS OF ACCOUNT BEFORE EVERY GOVERNMENT AGENCY AS & WHEN IT IS REQUIRED, BUT COULD NOT PRODUCE SOME PART OF BOOKS OF ACCOUNTS BEFORE THE LD AO DURING THE COURSE OF ASSE SSMENT PROCEEDINGS DUE TO HAVING SEIZES ION IT BY SALES TA X DEPARTMENT IN THE MATTER OF OTHER SISTER CONCERN'S (HANUMAN TUBE WELL COMPANY'S ) SURVEY, (II) THIS FACTS HAVE BEEN BROUGHT ON THE RECORD OF THE ASSESSMENT MANY TIMES DURING THE COURSE OF ASSESSME NT PROCEEDINGS (KINDLY REFER PAGE NO. 81 & 32 OF ASSESSEE APPELLANT'S SUBMISSION TO LD. AO & PAGE NO. 7 OF LD . AO'S ASSESSMENT ORDER), ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 8 (III) BUT WITHOUT APPRECIATING THE FACTS OF THE CAS E THE LD. AO REJECTED BOOKS OF ACCOUNTS AND IMPLIEDLY INVOKED THE PROVISION OF SECTION 145(3) OF IT ACT, 1961 (KINDLY REFER PAGE NO. 36 OF LD. CIT(A)'S ORDER), (IV) MERELY NON PRODUCING ANY PART OF BOOKS OF ACCO UNTS DUE TO SOME REASONABLE REASON COULD NOT BE A VALID GROU ND OF REJECTING THE BOOKS OF ACCOUNT AND INVOKING SECTION 145(3) OF IT ACT, 1961, WHILE AUDIT REPORT PROVED THE EXIS TENCE OF CORRECT AND FAIR BOOKS OF ACCOUNTS, (V) AT THE VERY OUTSET IT IS SUBMITTED THAT THE ASS ESSEE APPELLANT IS A BONAFIED IT ASSESSEE. HE BELIEVES IN CONTRIBUTING TO THE NATIONAL INCOME AS THE LAW OF L AND. WITH THIS VIEW HE IS MAINTAINED THE COMPLETE BOOKS OF AC COUNTS. THE SAME ARE AUDITED BY THE QUALIFIED CA U/S 44AB O F THE IT ACT. THE ASSESSEE HAVING CONSISTENTLY FOLLOWING THE SAME METHOD OF ACCOUNTING. IT COULD NOT BE SAID THAT THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE WAS SUCH THAT T HE INCOME COULD NOT BE PROPERLY DEDUCED, AS THE RESULT S OF BOOKS OF ACCOUNTS PRECEDING THE PREVIOUS YEAR (I.E. A.Y. 2011-12) AND SUBSEQUENT THE PREVIOUS YEAR (I.E. A.Y . 2013- 14 & 2014-15) WERE ACCEPTED THE REVENUE WITHOUT TEM PTING ANYTHING EVEN IN THEIR REGULAR ASSESSMENT PROCEEDIN GS, (VI) IF THE LD. AO DOES NOT SATISFY WITH THE BOOKS OF ACCOUNTS OF THE ASSESSEE APPELLANT AS PRODUCED BEFO RE HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS THEN H E IS BOUND TO MAKE AN HONEST ESTIMATION OF INCOME KEEPIN G IN VIEW OF THE MATERIAL AVAILABLE ON RECORD, PAST HIST ORY OF THE CASE, LOCAL KNOWLEDGE, COMPARABLE CASE AFTER CONFRO NTING WITH TRADING RESULTS AND REPUTE OF THE ASSESSEE. HE IS ALSO SUPPOSED TO COLLECT NECESSARY MATERIAL FOR THE PURP OSE, IF SO REQUIRED. AN ARBITRARY, CAPRICIOUS AND WILD ESTIMAT ION, AS DONE IN THE PRESENT CASE, ARE NOT AT ALL PERMITTED IN THE EYES OF THE LAW. THE LD. AO HOWEVER DID NOT CONFIRM TO I TS SETTLED LEGAL POSITION. ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 9 THE SAME CONTENTION CONTENDED BY HONORABLE APEX COU RT IN A LAND MARK JUDGMENT (BRIJ BHUSHAN LAL PRADUMAN KUMAR V/S CIT 115 ITR 524(SC), FURTHERMORE MANY MORE CASES HAVE BEEN DECIDED ON TH E BASIS OF THIS SAID CONTENTION I.E. ITAT RAJKOT BENCH V/S ITO WARD 2(5), RAJKOT2007(105 ITD)585 (RAJKOT) ITAT HYDRABAD BENCH V/S ACIT CIRCLE 3(4) HYDRABAD (2007) 104ITD 537 (HYD.) ( VII) THEREFORE, IT IS HUMBLE SUBMISSION IN THIS REGARD T HAT NET PROFIT SHOULD BE CALCULATED ON THE BASIS OF FAI R AND REASONABLENESS AND ADDITIONS MADE ON THE BASIS OF S PECIFIC DEFECTS AND ESTIMATION AS TAKEN FOR DISALLOWING THE EXPENSES SHOULD BE DELETED, (VIII) THE ASSESSEE APPELLANT DECLARED A QUITE GOOD EFFECTIVE NET PROFIT (SUBJECT TO DEPRECIATION) WHICH IS 2 6.87% OF TOTAL TURNOVER OF RS.7,43,61,300/-(NET PROFIT=156870+DEPRECIATION=19822466=EFFECTIVE NET PROFIT=19979336/-), WHICH IS QUITE REASONABLE AS CO MPARE TO OTHER FIRMS HAVING SAME NATURE OF BUSINESS, (IX ) AS THE ASSESSEE APPELLANT INVOLVED IN DRILLING WO RK OF LAND FOR MINING OR TUBE WELL PURPOSES, HERE IN THIS YEAR HE INDULGED IN THE ACTIVITIES OF DRILLING OF LAND FOR GETTING COAL AS SUB CONTRACTOR SHIP OF M/S ASSOCIATED SOAPSTONE DIST. CO PVT. LTD., (KINDLY REFER PAGE NO. 2 & 51 & 52 OF PAPER BOOK) IT IS ESTABLISHED THAT THE NATURE OF WORK OF THE ASSESSEE APPELLANT IS SUB CONTRACTO R SHIP HENCE IN CASE WHERE BOOKS OF ACCOUNT HAVE BEEN REJE CTED BY THE LD. AO A FAIR AND REASONABLE ESTIMATION CAN BE MADE ON THE BASIS OF ANY OTHER COMPARABLE CASE, HERE IT IS KIND ATTENTION BEFORE YOUR HONOR THAT THE ASSESSEE'S SIS TER CONCERN (M/S HANUMAN TUBE WELL COMPANY) IS ALSO INVOLVED IN SAME NATURE OF WORK SINCE LAST 40 YEARS , HENCE IN SUPPORT OF ASSESSEE'S DECLARATION OF NET PROFIT WE PLACED ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 10 BEFORE YOUR HONOR NEAREST COMPARABLE CASE OF THE SA ID FIRM WHERE LD. AO APPLIED 8% NET PROFIT RATE ON TURNOVER SUBJECT TO DEPRECIATION, REMUNERATION AND INTEREST, FOR THE SAME ASSESSMENT YEAR (I.E.2012-13). THEREFORE IT IS HUMBLE SUBMISSION KINDLY ACCEPT THE DECLARED NET PROFIT @ 26.87% (SUBJECT TO DEPRECIATION) OF TO TAL TURNOVER AGAINST ARBITRARILY MADE HUGE ADDITIONS RE SULTANT THE NET PROFIT RATE REACHED @34.48%. 3.3 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ERS OF THE LOWER AUTHORITIES. 3.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. BRIEF FACTS OF THE CASE ARE TH AT THE ASSESSEE COMPANY IS TRADING AND MINING FIRM WHICH DEALS IN ALL TYPE OF TUBEWELL RELATED ITEMS, PIPES, PUMPS AND ALSO DRILLING OF TUBEWELL. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDING NOTED THAT THE ASSE SSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNT WHICH WERE NOT VERIFIA BLE. HENCE, THE AO INVOKED THE PROVISIONS OF SECTION 145(3) AND MADE S PECIFIC ADDITION WHICH RESULTED INTO NET PROFIT RATE OF 34.48% AS AG AINST 26.87% DECLARED BY THE ASSESSEE WHICH HAS BEEN CONFIRMED BY THE LD. CIT(A). IT IS NOTED FROM THE RECORDS THAT THE NATURE WORK OF THE ASSESS EE IS A SUB-CONTRACTOR. THE SISTER CONCERN OF THE ASSESSEE M/S. HANUMAN TUB EWELL ALSO DEALS IN THE SAME LINE OF BUSINESS WHEREIN THE SAME ASSES SMENT YEAR I.E. 2012- 13, THE AO HAS APPLIED THE NET PROFIT RATE OF 8% O N THE GROSS RECEIPT. THE ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 11 OBSERVATION OF THE AO VIDE HIS ASSESSMENT ORDER DAT ED 31-12-2014 IN THE CASE OF M/S. HANUMAN TUBEWELL COMPANY IS AS UNDER:- IN VIEW OF THE FACTS MENTIONED ABOVE, THE PROVISI ONS OF SECTION 145(3) ARE INVOKED AND NET PROFIT RATE A T 8% IS APPLIED ON THE GROSS RECEIPTS OF RS. 24,78,46,633/- SUBJECT TO ALLOWABILITY OF DEPRECIATION AND REMUNERATION & INT EREST PAID TO PARTNERS. THEREAFTER THE INTEREST RECEIVED DURIN G THE YEAR WILL BE ADDED TO THE INCOME OF THE ASSESSEE FIRM. IT IS FURTHER NOTED FROM THE AVAILABLE RECORD THAT THE ASSESSEE HAS DECLARED THE NET PROFIT RATE OF 26.87% (SUBJECT TO DEPRECIAT ION) WHILE THE SISTER CONCERN OF THE ASSESSEE I.E. M/S HANUMAN TUBEWELL C OMPANY HAS DECLARED THE NET PROFIT RATE OF 8% SUBJECT TO ALLOW ABILITY OF DEPRECIATION AND REMUNERATION & INTEREST PAID TO PARTNERS. TAKIN G INTO CONSIDERATION THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS OBSE RVED THAT THE ASSESSEE HAVING SIMILAR TYPE OF BUSINESS HAS SHOWN BETTER NE T PROFIT RATE OF 26.87% AS COMPARED TO NET PROFIT RATE OF 8% APPLIED BY THE AO IN THE CASE OF HANUMAN TUBEWELL COMPANY. IN THIS VIEW OF THE MATTE R, THE GROUND NO. 1 OF THE ASSESSEE IS DISMISSED AND GROUND NO. 8 OF THE ASSESSEE IS ALLOWED BY DELETING THE ADDITIONS OF RS. 13,79,254/- AND RS . 22,83,153/- CONFIRMED BY THE LD. CIT(A). ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 12 4.1 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE HAS NOT PRESSED THE GROUND NO. 2. HENCE, THE SAME IS DISMIS SED BEING NOT PRESSED. 5.1 APROPOS GROUND NO. 3 OF THE ASSESSEE, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) ARE AS UNDER:- 3.2.2 DETERMINATION: (I) THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT WAS A TRADING AND MINING COMPANY DEALING IN ALL TYPE OF T UBEWELL RELATED ITEMS, PIPES, PUMPS AND DRILLING OF TUBEWEL L ALSO. IN THE MINING WORK, THE COMPANY WAS ENGAGED IN DEPRISA TION ACTIVITY. DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS TAKEN UNSECURED LOANS FROM 28 PARTIES. DURING T HE ASSESSMENT PROCEEDINGS, THE AO REQUIRED THE APPELLA NT TO FILE CONFIRMATIONS FROM THE SAID PARTIES, ON A NUMB ER OF OCCASIONS AND FINALLY AFTER GIVING AMPLE OPPORTUNIT IES TO THE APPELLANT, THE AO MADE AN ADDITION OF RS. 19.50 LAC U/S 69 OF THE ACT IN RESPECT OF 11 PARTIES FROM WHOM THE APPELLANT COULD NOT FILE THE CONFIRMATIONS. IT MAY BE MENTIONED THAT THE TOTAL OF 11 PARTIES WORKED OUT T O RS. 24.50 LAC AND NOT 19.50 LAC AS STATED BY THE AO IN THE ASSESSMENT ORDER. VIDE ORDER DATED 15.04.2015 PASSE D U/S 154 OF THE ACT, THE AO EXCLUDED THE ADDITION OF RS. 5 LAC MADE IN THE NAME OF SH. GAURAV HARKAWAT AS THE SAME WAS INCLUDED WRONGLY WHILE MAKING ADDITION U/S 68 OF THE ACT. THEREFORE, THE DISPUTE REMAINS IS AD DITION OF RS. 19.50 LAC U/S 68 OF THE ACT IN RESPECT OF 10 PARTIES AS STATED IN THE ASSESSMENT ORDER. (II) DURING THE APPELLATE PROCEEDINGS, THE APPELLAN T FILED CONFIRMATIONS IN RESPECT OF CASH CREDITORS NA MELY MS. KAMLA CHOUDHARY, MADHWANAND DIXIT, SWATI KHANDELWAL, PRIYANKA GUPTA AND SUNITA GUPTA WITHOUT STATING THAT THESE ARE ADDITIONAL EVIDENCES AND WIT HOUT ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 13 STATING ANY REASON WHY THESE WERE NOT PRODUCED BEFO RE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. EVEN, NO APPLICATION UNDER RULE 46A OF THE I.T. RUL ES WAS FILED FOR ADMISSION OF THESE CONFIRMATIONS AS ADDITIONAL EVIDENCES. IT IS PERTINENT TO MENTION TH AT THE APPELLANT HAS NOT MENTIONED ANYTHING WHY THESE DOCUMENTS WERE NOT PRODUCED BEFORE THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS. THESE FACTS CLEARLY REVEAL THAT THE APPELLANT HAS NOT COME FORWARD WITH CLEAN HANDS EVEN DURING THE APPELLATE PROCEEDINGS. THEREFORE, THE SAME ARE NOT BEING ADMITTED AS ADDITIONAL EVIDENCE AND THE ISSUE IS DECIDED WITHOU T CONSIDERING THEM. IT WOULD BE RELEVANT TO REPRODUCE RULE 46A OF THE IT RULES AS UNDER: PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE DEPUTY COMMISSIONER (APPEALS) AND COMMISSIONER (APPEALS). 46A . (1) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE 94 [DEPUTY COMMISSIONER (APPEALS)] 95 [OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS)], ANY EVIDE NCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENC E PRODUCED BY HIM DURING THE COURSE OF PROCEEDINGS BE FORE THE 96 [ASSESSING OFFICER], EXCEPT IN THE FOLLOWING CIRCUMSTANCES, NAMELY : (A) WHERE THE 97 [ASSESSING OFFICER] HAS REFUSED TO ADMIT EVIDENCE W HICH OUGHT TO HAVE BEEN ADMITTED ; OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAU SE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE 97 [ASSESSING OFFICER] ; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAU SE FROM PRODUCING BEFORE THE 97 [ASSESSING OFFICER] ANY EVIDENCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL ; OR (D) WHERE THE 97 [ASSESSING OFFICER] HAS MADE THE ORDER APPEALED AGA INST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELL ANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. (2) NO EVIDENCE SHALL BE ADMITTED UNDER SUB-RULE (1 ) UNLESS THE 98 [DEPUTY COMMISSIONER (APPEALS)] 99 [OR, AS THE CASE MAY BE, THE ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 14 COMMISSIONER (APPEALS)] RECORDS IN WRITING THE REAS ONS FOR ITS ADMISSION. 1 (3) THE 2 [DEPUTY COMMISSIONER (APPEALS)] 3 [OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS)] SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UNLESS THE 4 [ASSESSING OFFICER] HAS BEEN ALLOWED A REASONABLE OPPORTUNITY (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS- EXAMINE THE WITNESS PRODUCED BY THE APPELLANT, OR (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITNESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT. (4) NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE POWER OF THE 5 [DEPUTY COMMIS-SIONER (APPEALS)] 6 [OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS)] TO DIRECT THE PRODUCTION OF ANY DOCUMENT , OR THE EXAMINATION OF ANY WITNESS, TO ENABLE HIM TO DISPOSE OF THE APP EAL, OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETHER ON HIS OWN MOTION OR ON THE REQUES T OF THE 7 [ASSESSING OFFICER]) UNDER CLAUSE (A) OF SUB-SECTION (1) OF SE CTION 251 OR THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C). (III) IN VIEW OF THE PROVISIONS OF RULE 46A OF TH E I.T. RULES, THE ADDITIONAL EVIDENCES COULD BE ADMITTED O NLY IF THE CASE OF THE ASSESSEE FALLS IN ANY OF THE FOUR CLAUS ES AS MENTIONED IN CLAUSE 1 OF RULE 46A. IT IS TO BE NOTE D THAT DURING THE ASSESSMENT PROCEEDINGS, A NUMBER OF OPPORTUNITI ES WERE PROVIDED BY THE AO TO THE APPELLANT TO EXPLAIN CASH CREDITS. (IV) IT MAY BE MENTIONED THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF MANISH BUILD WELL 204 TAXMAN 1 06 OBSERVED AS UNDER: 'RULE 46A IS A PROVISION WHICH IS INVOKED, ON THE OTHER HAND, BY THE ASSESSEE WHO IS IN AN APPEAL BEF ORE THE COMMISSIONER (APPEALS). ONCE THE ASSESSEE INVOK ES RULE 46A AND PRAYS FOR ADMISSION OF ADDITIONAL EVIDENCE BEFORE THE COMMISSIONER (APPEALS), THEN TH E PROCEDURE PRESCRIBED IN THE SAID RULE HAS TO BE SCRUPULOUSLY FOLLOWED. THE FACT THAT SUBSECTION (4) OF SEC. 250 CONFERS POWERS ON THE COMMISSIONER (APPEAL S) TO CONDUCT AN ENQUIRY AS HE THINKS FIT, WHILE DISPO SING ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 15 OF THE APPEAL, CANNOT BE RELIED UPON TO CONTEND THA T THE PROCEDURAL REQUIREMENTS OF RULE 46A NEED NOT BE COMPLIED WITH. IF SUCH A PLEA OF THE ASSESSEE IS ACCEPTED, IT WOULD REDUCE RULE 46A TO A DEAD LETTER BECAUSE IT WOULD THEN BE OPEN TO EVERY ASSESSEE TO FURNISH ADDITIONAL EVIDENCE BEFORE THE COMMISSIONER (APPEALS) AND, THEREFORE, CONTEND THAT THE EVIDENCE SHOULD BE ACCEPTED AND TAKEN ON RECORD BY THE COMMISSIONER (APPEALS) BY VIRTUE OF HIS POWERS OF ENQUIRY UNDER SUBSECTION (4) OF SECTION 250. THIS W OULD MEAN IN TURN THAT THE REQUIREMENT OF RECORDING REAS ONS FOR ADMITTING THE ADDITIONAL EVIDENCE, THE REQUIREM ENT OF EXAMINING WHETHER THE CONDITIONS FOR ADMITTING THE ADDITIONAL EVIDENCE ARE SATISFIED, THE REQUIREMENT THAT THE AO SHOULD BE ALLOWED A REASONABLE OPPORTUNITY O F EXAMINING THE EVIDENCE, ETC., CAN BE THROWN TO THE WINDS, A POSITION WHICH IS WHOLLY UNACCEPTABLE AND MAY RESULT IN UNACCEPTABLE AND UNJUST CONSEQUENCES. THE FUNDAMENTAL RULE WHICH IS VALID IN ALL BRANCHES OF LAW, INCLUDING INCOME TAX LAW, IS THAT THE ASSESSEE SHOU LD ADDUCE THE ENTIRE EVIDENCE IN HIS POSSESSION AT THE EARLIEST POINT OF TIME. THIS ENSURES FULL, FAIR AND DETAILED ENQUIRY AND VERIFICATION. IT IS FOR THE AFORESAID R EASON THAT RULE 46A STARTS IN A NEGATIVE MANNER BY SAYING THAT AN APPELLANT BEFORE THE COMMISSIONER (APPEALS) SHAL L NOT BE ENTITLED TO PRODUCE BEFORE HIM ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENC E ADDUCED BY HIM BEFORE THE AO. AFTER MAKING SUCH A GENERAL STATEMENT, EXCEPTIONS HAVE BEEN CARVED OUT THAT IN CERTAIN CIRCUMSTANCES IT WOULD BE OPEN TO THE COMMISSIONER (APPEALS) TO ADMIT ADDITIONAL EVIDENCE . THEREFORE, ADDITIONAL EVIDENCE CAN BE PRODUCED AT T HE FIRST APPELLATE STAGE ONLY WHEN CONDITIONS STIPULAT ED IN RULE 46A ARE SATISFIED AND A FINDING IS RECORDED. T HE CONDITIONS PRESCRIBED IN RULE 46A MUST BE SHOWN TO EXIST BEFORE ADDITIONAL EVIDENCE IS ADMITTED AND EV ERY PROCEDURAL REQUIREMENT MENTIONED IN RULE HAS TO BE STRICTLY COMPLIED WITH SO THAT RULE IS MEANINGFULLY EXERCISED AND NOT EXERCISED IN A ROUTINE OR CURSORY ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 16 MANNER. A DISTINCTION SHOULD BE RECOGNIZED AND MAINTAINED BETWEEN A CASE WHERE THE ASSESSEE INVOKE S RULE 46A TO ADDUCE ADDITIONAL EVIDENCE BEFORE THE COMMISSIONER (APPEALS) AND A CASE WHERE THE COMMISSIONER (APPEALS), WITHOUT BEING PROMPTED BY THE ASSESSEE, WHILE DEALING WITH THE APPEAL, CONSID ERS IT FIT TO CAUSE OR MAKE A FURTHER ENQUIRY BY VIRTUE OF THE POWERS VESTED IN HIM UNDER SUBSECTION (4) OF SECTIO N 250. IT IS ONLY WHEN THE EXERCISES HIS STATUTORY SU OMOTU POWER UNDER THE ABOVE SUBSECTION, THAT THE REQUIREM ENTS OF RULE 46A NEED NOT BE FOLLOWED. ON THE OTHER HAND , WHENEVER THE ASSESSEE, WHO IS IN APPEAL BEFORE HIM, INVOKES RULE 46A, IT IS INCUMBENT UPON THE COMMISSIONER (APPEALS) TO COMPLY WITH THE REQUIREMENTS OF RULE STRICTLY. (V) IN VIEW OF THE ABOVE DISCUSSION AND RESPECTFULL Y FOLLOWING THE DECISION OF HON' BLE DELHI HIGH COURT , THE ADDITIONAL EVIDENCES FILED BY THE APPELLANT WITHOUT SUBMITTING ANY APPLICATION FOR THEIR ADMITTANCE AS ADDITIONAL EVIDENCE CANNOT BE ADMITTED UNDER RULE 46A OF THE IT RULES A ND THUS THE MATTER IS DECIDED WITHOUT TAKING INTO ACCOUNT T HESE EVIDENCES. (VI) IT IS NOTED FROM THE ASSESSMENT ORDER THAT A NUMBER OF OPPORTUNITIES WERE PROVIDED BY THE AO TO THE APPELLANT TO PROVE THE CASH CREDITS, HOWEVER, NO CO MPLIANCE WAS MADE IN RESPECT OF 10 PARTIES AS STATED IN THE ASSESSMENT ORDER. DURING THE APPELLATE PROCEEDINGS, IT WAS SUB MITTED BY THE APPELLANT THAT IT HAS DISCHARGED ITS INITIAL ON US BY FILING THE CONFIRMATIONS FROM THE CASH CREDITORS. I HAVE E XAMINED THE RELEVANT ASSESSMENT RECORD OF THE APPELLANT AND OBSERVED THAT NO CONFIRMATION IN RESPECT OF THESE 10 PARTIES WAS FILED DURING THE ASSESSMENT PROCEEDINGS BEFORE THE AO. TH EREFORE, IN RESPECT OF THESE 10 PARTIES, THE APPELLANT DID N OT DISCHARGE EVEN THE INITIAL ONUS TO PROVE THE CASH CREDITS. IT WAS THE CONTENTION OF THE APPELLANT THAT IT PROVED THE IDEN TITY OF CASH CREDITORS, GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE CASH CREDITORS. IT MAY BE M ENTIONED ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 17 THAT IN A NUMBER OF JUDICIAL PRONOUNCEMENTS IT HAS BEEN HELD BY THE JUDICIAL AUTHORITIES THAT TRANSACTIONS THROU GH BANKING CHANNELS ARE NOT SACROSANCT. FURTHER, THE APPELLANT HAS NOT FILED ANY DOCUMENTARY EVIDENCE TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THESE CREDITORS. EVEN DURING TH E APPELLATE PROCEEDINGS, THE APPELLANT FILED ONLY CONFIRMATIONS FROM SOME OF THE CASH CREDITORS AS STATED EARLIER IN THIS ORDER AND NO EVIDENCE INCLUDING THE COPY OF THEIR INCOME TAX RETURN WAS F ILED TO ESTABLISH THEIR CREDITWORTHINESS. (VII) THEREFORE, LOOKING TO THE TOTALITY OF FACTS A ND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE AO W AS JUSTIFIED IN MAKING ADDITION OF RS. 19.50 LAC U/S 68 OF THE ACT, HENCE, THE ADDITION IS HEREBY SUSTAINED. THUS, THIS GROUND OF APPEAL IS HEREBY REJECTED. 5.1 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE PRAYED THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 19.50 LACS U/S 68 OF THE ACT FOR WHICH THE LD.AR OF THE ASSESSEE F ILED THE FOLLOWING WRITTEN SUBMISSION. 3. GROUND NO.3 (THE LD. CIT (A)-I, HAS CONFIRMED TH E ACTION OF LD. AO OF ADDITION OF RS. 19.50 LAC U/S 68 OF THE A CT, ON ACCOUNT OF CASH CREDIT) ; (I) THE AFOREMENTIONED GROUND IS RELATED TO 10 CASH CRE DITORS AMOUNTING TO RS. 19,50,000/-, WHO ARE IN DISPUTE AS CONTENDED BY LD. AO AS WELL AS LD. CIT (A)-I, JAIPUR, (II) WHEREAS THE LD. AO ALLEGED THAT ASSESSEE DID N OT PRODUCE CONFIRMATION OF AFOREMENTIONED CASH CREDITORS BEFOR E THEM DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHILE THE LD. CIT (A)-I, JAIPUR HELD IN THEIR ORDER THAT ASSESSEE PRODUCED SOME CONFIRMA TION BEFORE THEM WITHOUT COMPLYING THE PROCEDURE AS STIPULATED BY RU LE 46A OF IT RULE IN THIS REAGRD, (III) TO MAKE THE POSITION CLEAR BEFORE YOUR HONOR WE ARE PRODUCING HERE WITH A STATEMENT OF DISPUTED CASH CREDITORS & THEIR CONFIRMATION AS SUBMITTED BEFORE LD. AO AND LD. CIT (A)-I, JAIPUR;- ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 18 S.NO. NAME OF CASH CREDITORS AMOUNT CONFIRMATION SUBMITTED BEFORE LD. AO CONFIRMATION SUBMITTED BEFORE LD. CIT (A) PAGE NUMBER OF PAPER BOOK 1 M/S CLASSIC COLOR CHEM 100000/- AGZPA4654A YES 37 2 ROSHIKA CONSTRUCTION 200000/- ABFPK9035K YES 36 3 ROORMAL 100000/- YES 35 4 KAMLA CHOUDHARY 500000/- AASPC8896Q YES 135 5 MADHWANAND DIXIT 400000/- ABRPD3992Q YES 136 6 R S & SONS 100000/- ACSPB6794N YES 34 7 SHWETA SONKHIYA 100000/- ASXPS9240F 8 SWETA KHANDELWAL 150000/- AXDPK5880E YES 137 9 PRIYANKA GUPTA 150000/- ALSPG8681Q YES 138 10 SUNITA GUPTA 150000/- AHHPG1101A YES 139 TOTAL 19,50,000/- (IV) ALL AFOREMENTIONED CONFIRMATION EXCEPTED NUMBER 7 (SHWETA SONKHIYA ) ARE ANNEXED AS PART OF PAPER BOOK ON THEIR REFERR ED PAGE NUMBERS, (V) ALL ANNEXED CONFIRMATION HAVING FOLLOWING DETAILS ; (A) NAME OF CASH CREDITOR, (B) PAN OF CASH CREDITOR, (C) COMPLETE ADDRESS OF OF CASH CREDITORS EXCEPTED CREDITOR NO. 3 (ROORMAL), (D) DETAILS OF TRANSACTION, (E) SIGNATURE OF CASH CREDITORS. (VI) BY EXAMINING THE CONFIRMATIONS, IT IS ESTABLIS HED THAT THE AMOUNT AS TAKEN FROM SAID CASH CREDITORS WERE THROUGH AN A CCOUNT PAYEE CHEQUES, HAVING THEIR PAN/ADDRESSES AND DETAILS OF DATE WISE TRANSACTION VIZ. REPAYMENT, PAYMENT OF INTEREST AND DEDUCTION OF TAX THEREON ETC., THESE INFORMATION PROVED THAT THE TRA NSACTION AS DONE BETWEEN ASSESSEE APPELLANT AND CASH CREDITORS ARE G ENUINE, THE IDENTITY OF CASH CREDITORS ARE NOT FAKE AND COULD BE VERIFIE D BY THE LD. AO AS WELL AS LD. CIT (A) AT THEIR LEVEL BY ISSUING SUMMO N UNDER SECTION 131 OF IT ACT, (VII) APART OF THIS IT IS ALSO SUBMITTED BEFORE YOU R HONOR THAT THE ASSESSEE APPELLANT GOT AUDITED THEIR BOOKS OF ACCOU NT BY QUALIFIED ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 19 CHARTERED ACCOUNTANT FOR THE YEAR UNDER CONSIDERATI ON AND SUBMITTED THEIR REPORT IN FORM NUMBER 3CD BEFORE LD. AO, WHIC H DESCRIBED THE POSITION OF CASH CREDITORS BY THEIR POINT NO. 24(A) , (B) & (C) BY WHICH THE CONTENTION OF ASSESSEE APPELLANT GET STRONG, (VIII) IN CONTRARY TO CONTENDED BY LD. AO IT IS SUB MITTED BEFORE YOUR HONOR THAT OUT OF ABOVE MENTIONED 10 CASH CREDITORS , THE CONFIRMATION OF NUMBER 1,2,3, &6 WERE SUBMITTED BEFORE LD AO DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS AND COULD HAVE BEEN VERIF IED BY THE THEN BY ISSUING THE SUMMON TO THE CONCERNED PARTIES UNDER S ECTION 131 OF IT ACT, BEFORE MAKING ANY ADVERSE OPINION REGARDING TH EIR IDENTITY, GENUINENESS AND CREDITWORTHINESS, (IX) ON SAME LINE REGARDING CASH CREDITOR NO. 4,5,8 ,9, & 10 WHICH'S CONFIRMATION WERE SUBMITTED BEFORE LD. CIT (A)-I ON LY, AND COULD NOT SUBMIT BEFORE LD. AO DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, IN THIS MATTER IT IS SUBMITTED THAT THESE CONFIRMATION COULD NOT GET SIGNED BY THE CONCERNING CASH CREDITORS THAT TIME AND THIS FACT HAS ALSO COMMUNICATED TO THE LD. AO BY THE THEN REPLY AS SUB MITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, (KINDLY REFER POI NT NO. 1 ON PAGE NO. 32 OF PAPER BOOK). (X) WE REFER FOLLOWING CASE LAWS IN SUPPORT OF ASSE SSEE APPELLANT WHERE INITIAL ONUS DISCHARGED BY HIM BY PROVIDING N AME, PAN, ADDRESS OF THE LENDERS; CIT V/S SHREE BARKHA SYNTHETICS 182CTR 175 (RAJ) CIT V/S FIRST POINT FIANANCE LTD. 286 ITR 477 (RAJ) (XI) MOSTLY PERSONS ARE IT ASSESSED AS THEY PROVIDE D THEIR PAN NO. HENCE CAPACITY IS PROVED ; CIT V/S ORISSA CREDIT CORP. LTD. 159 ITR 78 (SC) CIT V/S P MOHAN KALA 291 ITR 279 (SC) (XII) SUSPICION CAN NOT TAKE PLACE THE PLACE OF REA LITY ARE SETTLED PRINCIPLES KINDLY REFER; DHAKESHWARI COTTON MILLS 26 ITR 775 (SC) , RBNJ NAIDU V/S CIT 29 ITR 194 (NAG) KANPUR STEEL CO LTD. V/S CIT 32 ITR 56 (ALL) ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 20 5.3 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 5.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THIS CASE THE AO MADE THE A DDITION OF RS. 19.50 LACS U/S 68 OF THE ACT BY OBSERVING AS UNDER:- 3.7 SINCE THE ASSESSEE HAS BEEN REPEATEDLY REQUESTED TO FILE THE CONFIRMATIONS OF UNSECURED LO ANS FROM THE DAY ONE I.E. 06-01-2014, THE DATE ON WHICH 1 ST QUERY LETTER WAS ISSUED, BUT DESPITE OF AMPLE OPPORTUNITI ES PROVIDED, ASSESSEE FAILED TO PROVE THE GENUINENESS OF UNSECURED LOANS BY NOT FILING MINIMUM REQUIREMENT O F PAN AND COMPLETE ADDRESS OF THE PARTIES. CLASSIC COLOR CHEM 1,00,000/- ROSHIKA CONSTRUCTION 2,00,000/- ROORMAL 1,00,000/- GAURAV HARKAWAT 5,00,000/- KAMLA CHOUDHARY 5,00,000/- MADHWANAND DIXIT 4,00,000/- R.S. & SONS 1,00,000/- SHWETA SONKHIYA 1,00,000/- SWETA KHANDELWAL 1,50,000/- PRIYANKA GUPTA 1,50,000/- SUNITA GUPTA 1,50,000/- RS. 19,50,000/- THEREFORE, THE CREDITS OF RS. 19,50,000/- IN THE NA ME OF ABOVE PARTIES ARE REMAINED UNEXPLAINED U/S 68 OF THE I.T. ACT, 1961 AS THE ASSESSEE FAILS TO PROVE IDENTITY, SOURCE AND CREDITWORTHINESS OF THESE CREDITS SHOWN IN THE BOOK S OF ACCOUNTS. HENCE, THE ACCOUNT OF RS. 19,50,000/- ADD ED TO THE INCOME OF THE ASSESSEE. ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 21 IN FIRST APPEAL, THE LD. CIT(A) HAS CONFIRMED THE A CTION OF THE AO. FROM THE AVAILABLE RECORDS AND THE WRITTEN SUBMISSIONS F ILED BY THE ASSESSEE (SUPRA), IT IS NOTED THAT THE ASSESSEE HAS FILED TH E CONFIRMATIONS OF THE ABOVE CREDITORS AT PAPER BOOK PAGES I.E. IN THE NAM E OF CLASSIC COLOUR CHEM (PAGE 37), ROSHIKA CONSTRUCTION (PAGE 36), ROO RMAL (PAGE 35), KAMLA CHOUDHARY (PAGE 135), MADHWANAND DIXIT (PAGE 136), R.S. SONS (PAGE 34), SWETA KHANDELWAL (PAGE 137), PRIYANKA GU PTA (PAGE 138), SUNITA GUPTA (PAGE 139) EXCEPT SHWETA SONKHIYA. TAK ING INTO CONSIDERATION ALL THE FACTS, CIRCUMSTANCES OF THE C ASE AND THE CONFIRMATIONS BY THE ABOVE MENTIONED LENDERS/ CASH CREDITORS, THE BENCH DOES NOT CONCUR WITH THE FINDINGS OF THE LD. CIT(A) ON THE ISSUE AND DIRECT TO DELETE THE ADDITION OF RS. 18.50 LACS AND SUSTAI NED RS. 1.00 LAC IN THE CASE OF SMT. SHWETA SONKHIYA FOR WANT OF NO CONFIRM ATION. THUS GROUND NO. 3 OF THE ASSESSEE IS PARTLY ALLOWED. 6.1 APROPOS GROUND NO. 4 OF THE ASSESSEE, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) ARE AS UNDER:- 3.3.2 DETERMINATION: (I) THE BRIEF FACTS ARE THAT DURING THE YEAR UNDER CONSIDERATION THE APPELLANT HAD PAID A SUM OF RS. 5 2,650/- TO SMT. KAMLA CHOUDHARY AS INTEREST WITHOUT DEDUCTION OF TAX AT SOURCE. THE AO INVOKED THE PROVISIONS OF SECTION 40A(IA) ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 22 OF THE ACT AND MADE ADDITION OF RS. 52,650/- TO THE INCOME OF THE APPELLANT. (II) DURING THE APPELLATE PROCEEDING, IT WAS SUBMIT TED BY THE APPELLANT THAT AT THE END OF THE YEAR, THE A MOUNT WAS NOT PAYABLE AND DISALLOWANCE U/S 40(A) (IA) OF THE ACT CAN ONLY BE MADE WHEN THE AMOUNT IS PAYABLE AT YEAR END. IN SUPPORT OF ITS CONTENTION, THE APPELLA NT RELIED UPON A NUMBER OF JUDICIAL PRONOUNCEMENTS. IT WAS FURTHER SUBMITTED THAT THE INTEREST WAS PAID DURING THE FINANCIAL YEAR ITSELF AND NOTHING WAS PAYABLE AT TH E END OF THE YEAR WHILE SECTION 40(A)(IA) OF THE ACT APPL IES ON THE AMOUNT REMAINING PAYABLE AT THE END OF THE YEAR . (III) I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. IT IS AN UNDISPUTED FACT THAT THE APPELLANT CLAIMED TO PAY A SUM OF RS. 52,650/- AS INTEREST PAYMENT WITHOUT MAKING TDS THEREOF. THUS, THE PROVISIONS OF SECTION 40(A)(IA)OF THE ACT ARE CLEAR LY APPLICABLE TO THE INSTANT CASE UNDER CONSIDERATION. IT WAS THE CONTENTION OF THE APPELLANT THAT THE INTERE ST PAYMENT HAS BEEN PAID DURING THE YEAR UNDER CONSIDERATION AND NOTHING WAS PAYABLE AT THE END OF THE YEAR AND THUS THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT ARE NOT APPLICABLE. (IV) THE AR ALSO RELIED ON THE DECISION OF HON'BLE ITAT, JAIPUR IN THE CASE OF GIRDHARI LAL BARGOTI DA TED 10.04.2015. I HAVE GONE THROUGH THE ABOVE DECISION OF HON'BLE ITAT AND OBSERVED THAT THE HON'BLE ITAT HAS NOT DECIDED THE ISSUE ON MERITS AND OBSERVED THAT DIFFE RENT COURTS HAVE DIFFERENT VIEWS ON THE ISSUE, THEREFORE , IN VIEW OF DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD., THE CASE WAS DECIDED I N FAVOUR OF THE APPELLANT. IT IS TO BE NOTED THAT IN A RECENT DECISION DATED 29.04.2015 WHICH IS SUBSEQUENT TO TH E ORDER OF HON'BLE ITAT, JAIPUR IN THE CASE OF GIRDHA RI LAL BARGOTI, THE HON'BLE P & H HIGH COURT IN THE CA SE OF ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 23 P.M.S. DIESELS VS CIT (2015) 93 CCH 110 PHHC / (2015) 277 CTR 0491 (P&H), THE HON'BLE HIGH COURT O F PUNJAB & HARYANA AFTER CONSIDERING THE CASES OF CIT VS. M/S VECTOR SHIPPING SERVICES (P) LTD., (2013) 262 C TR (ALL) 545, V.M. SALGAOCAR & BROS. (P) LTD., ETC. VS . CIT, ETC. (2000) 243 ITR 383 (SC), ACIT VS. MERILYN SHIPPING & TRANSPORTERS 136 ITD 23 (SB) (VISHAKHAPATNAM), TUBE INVESTMENTS OF INDIA LTD. AN D ANOTHER VS. ACIT, (TDS) AND OTHERS, (2010) 325 ITR 610 (MAD)HELD THAT: 'THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961, ARE APPLICABLE NOT ONLY TO THE AMOUNT WHICH IS SHOWN AS PAYABLE ON THE DATE OF BALANCE SHEET, BUT IT IS APPLICABLE TO SUCH EXPENDITURE, WHICH BECOME PAYABLE AT ANY TIME DURING THE RELEVANT PREVIOUS YEAR AND WAS ACTUALLY PAID WITHIN THE PREVIOUS YEAR. IN THE RESULT THE QUESTION IS DECIDED IN FAVOUR OF REVENUE AND AGAINST THE ASSESSEE.' (V) THE SAME VIEW WAS TAKEN BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENTS EXORTS SYSDICATE, (2013) 216 TAXMAN 258 (CALCUTTA) WHEREIN IT WAS HELD THAT: 'IT IS NOTICEABLE THAT SECTION 40(A) IS APPLICABLE IRRESPECTIVE OF THE METHOD OF ACCOUNTING FOLLOWED BY AN ASSESSEE. THEREFORE, BY USING THE TERM 'PAYABLE' LEGISLATURE INCLUDED THE ENTIRE ACCRUED LIABILITY. IF ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THEN THE MOMENT AMOUNT WAS CREDITED TO THE ACCOUNT OF PAYEE ON ACCRUAL OF LIABILITY, TDS WAS REQUIRED TO BE MADE BUT IF ASSESSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING, THEN ON MAKING PAYMENT TDS WAS TO BE MADE AS THE LIABILITY WAS DISCHARGED BY MAKING PAYMENT. THE TDS PROVISIONS ARE APPLICABLE BOTH IN THE ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 24 SITUATION OF ACTUAL PAYMENT AS WELL OF THE CREDIT O F THE AMOUNT. IT BECOMES VERY CLEAR FROM THE FACT THAT THE PHRASE, 'ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVIIB', WAS NOT THERE IN THE BILL BUT INCORPORATED IN THE ACT. THIS WAS NOT WITHOUT ANY PURPOSE.' (VA) THE HONBLE HIGH COURT OF HIMACHAL PRADESH IN THE CASE OF PALAM GAS SERVICE VS CIT, (2014)89CCH 0123HPHC/ (2015) 370 ITR 0740 (HP) HELD THAT: LASTLY, INSOFAR AS THE PLEA TAKEN BY THE APPELLANT THAT NO DISALLOWANCE CAN BE MADE UNDER SECTION 40 (A) (I A) AS THE FREIGHT CHARGES HAD BEEN PAID AND WERE NOT PAYABLE. SUFFICE IT TO STATE THAT THE PROVISIONS OF SECTION 40 (A) ( IA) OF THE ACT WERE APPLICABLE NOT ONLY TO THE AMOUNT WHICH WERE S HOWN AS OUTSTANDING ON THE CLOSING OF THE RELEVANT PREVI OUS YEAR, BUT TO THE ENTIRE EXPENDITURE WHICH BECAME LIABLE F OR PAYMENT AT ANY POINT OF TIME DURING THE YEAR UNDER CONSIDERATION AND WHICH WAS ALSO PAID BEFORE THE CL OSING OF THE YEAR AS RIGHTLY HELD BY THE AUTHORITIES BELOW. (VB) THE HON'BLE ITAT, LUCKNOW BENCH IN THE CASE OF DCIT VS AMA MEDICAL & DIAGNOSTIC CENTRE (2014) 40 CCH 0581 LUCKNOW TRIB / (2014) 63 SOT 0136 (LUCKNOW) ((URO)) HELD THAT: ITAT ARE OF THE VIEW THAT THE HONBLE JURISDICTIONAL HIGH COURT HAS NOT EXAMINED THE IMPUGNED ISSUE I.E. WHETHER DISALLOWANCE U/S 40(A)(IA) OF THE ACT COULD BE MADE ONLY IN RESPECT OF SUCH AMOUNT WHICH ARE PAYABLE AS ON 31 ST MARCH OF EVERY YEAR UNDER CONSIDERATION WHEREAS THE HON'BLE GUJARAT HIGH COURT AND HON'BLE CALCUTTA HIGH COURT HAVE DEALT WITH THE ISSUE IN DETAIL IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENT AND HAVE CATEGORICALLY HELD THAT SECTION 40(A)(IA) WOULD COV ER NOT ONLY TO THE AMOUNT WHICH ARE PAYABLE AS ON 31 ST ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 25 MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR (PARA7.5). ITAT CONSIDERED OPINION THAT THE VIEW VIEW EXPRESSED OR THE RATIO LAID DOWN BY THE SPECIAL BEN CH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS HAS BEEN OVERRULED. THEREFORE, IT CANNOT BE SAID THAT SINCE THE HON'BLE JURISDICTIONAL HIGH COURT HAS APPROVED THE VIEW TAKEN BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPI NG & TRANSPORTS, THE SAME HAS TO BE FOLLOWED BY THE TRIBUNAL SITUATED WITHIN THE JURISDICTION OF HON'BL E ALLAHABAD HIGH COURT. HAD THE IMPUGNED ISSUE BEEN EXAMINED AND ADJUDICATED BY THE JURISDICTIONAL HIGH COURT, IT WOULD HAVE BEEN RESPECTFULLY FOLLOWED BY THE TRIBUNAL IRRESPECTIVE OF THE FACT THAT CONTRARY VIE WS HAVE BEEN EXPRESSED BY THE DIFFERENT HIGH COURTS. T HE HON'BLE JURISDICTIONAL HIGH COURT HAS NOT EXAMINED THE IMPUGNED ISSUE AT ALL AND SIMPLE PASSING REFERENCE WAS MADE WITH REGARD TO THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILY N SHIPPING & TRANSPORTS AND THE RELIEF WAS GRANTED TO THE ASSESSEE ON MERIT. THEREFORE, THE RATIO LAID DO WN IN THE CASE OF MERILYN SHIPPING & TRANSPORTS, WHICH HAS BEEN SUSPENDED BY HON'BLE ANDHRA PRADESH HIGH COURT, HAS NOT BEEN APPROVED BY THE HON'BLE ALLAHABAD HIGH COURT. THEREFORE, SUBORDINATE JUDICIAL FORUM ARE NOT REQUIRED TO FOLLOW THE RATIO ORDER LAID DOWN IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA), AS IT WAS OVERRULED BY THE OTHE R HIGH COURT (PRA 8). (VI) IT MAY BE MENTIONED THAT VIDE CIRCULAR NO. 10 OF 20 13 DATED 16.12.2013, IT HAS BEEN STATED BY THE CBDT TH AT: '4. AFTER CAREFUL EXAMINATION OF THE ISSUE, THE BOA RD IS OF THE CONSIDERED VIEW THAT THE PROVISION OF SEC TION 40(A)(IA) OF THE ACT WOULD COVER NOT ONLY THE AMOUN TS WHICH ARE PAYABLE AS ON 31ST MARCH OF A PREVIOUS YEAR BUT ALSO ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 26 AMOUNTS WHICH ARE PAYABLE AT ANY TIME DURING THE YE AR. THE STATUTORY PROVISIONS ARE AMPLY CLEAR AND IN THE CON TEXT OF SECTION 40(A)(IA) OF THE ACT THE TERM 'PAYABLE' WOU LD INCLUDE AMOUNTS WHICH ARE PAID DURING THE PREVIOUS YEAR (VII) IT MAY BE MENTIONED THAT AS PER THE PROVISO TO SECT ION 201 INSERTED W.E.F. 01.07.2012, THE APPELLANT WOULD NOT BE TREATED AS ASSESSEE IN DEFAULT IF THE CONCERNED PERSONS (I) HAS FURNISHED ITS RETURN OF INCOME U/S 139; (II) HAS TAKEN INTO ACCOUNT SUCH SUMS FOR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND (III) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY IT I N SUCH RETURN OF INCOME AND THE PERSON FURNISHES A CERTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT IN SU CH FORM AS MAY BE PRESCRIBED (FORM N. 26A) (VIII) IN THE INSTANCE CASE UNDER CONSIDERATION, THE APPEL LANT HAS NOT SUBMITTED ANY CERTIFICATE FROM A CHARTERED ACCOUNTANT IN FORM NO. 26A. IT IS ALSO NOTED THAT THE APPELLAN T COULD NOT PROVE THE UNSECURED LOANS ALLEGED TO BE TAKEN FROM MS. KAMLA CHOUDHARY, THEREFORE, THE INTEREST PAYMENT, IS OTHE RWISE ALSO NOT ALLOWABLE. THEREFORE, IN VIEW OF THE ABOVE DISC USSION IT IS HELD THAT THE AO WAS JUSTIFIED IN MAKING DISALLOWAN CE OF RS. 52,650/- U/S 40(A) (IA) OF THE ACT, HENCE, THE SAME IS HEREBY SUSTAINED. 6.2 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE PRAYED FOR DELETION OF DISALLOWANCE OF RS. 52,680/- U/S 40 (A)(IA) OF THE ACT FOR WHICH THE LD.AR OF THE ASSESSEE FILED THE FOLLO WING WRITTEN SUBMISSION. 4. GROUND NUMBER 4 (DISALLOWING THE INTEREST U/S 40(A)(IA) WITHOUT DEDUCTING TAX AT SOURCE); ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 27 (A)(IA), (I) THE FACTS OF THE CASE IS AN INTEREST HAS BEEN PAID TO THE LENDER (NAMED M/S KAMLA CHOUDHARY) FOR RS. 52,650/- WITHOUT DEDUCTING TAX AT SOURCE AS REQUIRE D BY U/S 194A DURING THE YEAR UNDER QUESTIONED HENCE THE LD. AO MADE DISALLOWANCE OF RS. 52,650,/- U/S 40 (II) AT THE VERY OUTSET, IT IS SUBMITTED THAT AT TH E END OF THE YEAR AMOUNT IS NOT PAYABLE I.E. DISALLOWANCE ONLY W HEN AMOUNT REMAINS PAYABLE ACCORDING TO S. 40(A)(IA) ' NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO 41 [38], THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED I N COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PRO FITS AND GAINS OF BUSINESS OR PROFESSION', ( A ) IN THE CASE OF ANY ASSESSEE 42 [( I ) 43 44 ANY INTEREST (NOT BEING INTEREST ON A LOAN ISSUED FOR PUBLIC SUBSCRIPTION BEFORE THE 1ST DAY OF APRIL, 19 38), ROYALTY, FEES FOR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE UNDER THIS ACT, WHICH IS PAYABLE, ( A ) OUTSIDE INDIA; OR ( B ) IN INDIA TO A NON- RESIDENT, NOT BEING A COMPANY OR TO A FOREIGN COMPANY, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII- B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDU CTION, HAS NOT BEEN PAID 45 [ON OR BEFORE THE DUE DA TE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 ] : IT MEANS THE SECTION PROVIDES FOR DEDUCTION OF TAX ON AMOUNT WHICH REMAINS PAYABLE TO A RESIDENT IN RESPECT OF I NTEREST ETC. IT IS NOT APPLICABLE WHERE AMOUNT IS PAID. IT IS APPLICAB LE ONLY IN CASE WHERE THE PAYMENTS ARE DUE AND OUTSTANDING. ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 28 THE WORD PAYABLE IS NOT DEFINED UNDER THE ACT THOUG H THE WORD PAID IS DEFINED U/S 43(2) TO MEAN ACTUALLY PAI D OR INCURRED. S. 40(A)(IA) OTHERWISE BEING A LEGAL FICTION NEED T O BE CONSTRUED STRICTLY IN VIEW OF THE DECISION OF SUPRE ME COURT IN CIT V/S MOTHER INDIA REFRIGERATION INDUSTRIES PVT LTD. 155 ITR 711 (SC). THEREFORE THE DISALLOWANCE SO MADE MAY KINDLY BE DELETED IN FULL. 6.3 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ER OF THE LD. CIT(A) 6.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THIS CASE THE AO MADE THE A DDITION OF RS. 52,650/- U/S 40(A)(IA) OF THE ACT BY OBSERVING AS U NDER:- 4.1 DURING THE YEAR ASSESSEE HAS PAID INTEREST OF RS. 52,650/- TO SMT. KAMLA CHAUDHARY BUT NO TDS WAS MADE AS REQUIRED U/S 194A. THEREFORE, VIDE LETTER D ATED 13-02-2015 ASSESSEE WAS REQUESTED TO EXPLAIN WHY DISALLOWANCE U/S 40(A)(IA) SHOULD NOT BE MADE BUT N O REPLY WAS FILED. 4.2 ONE MORE OPPOTUNITU WAS PROVIDED TO ASSESSEE VIDE NOTE SHEET ENTRY DATED 23-02-2015 AND LETTER DATED 15-03-2015 BUT NOTHING WAS STATED BY T HE ASSESSEE. 4.3 THEREFORE, LOOKING TO THE ABOVE FACTS OF THE CASE, SINCE THE ASSESSEE WAS LIABLE TO MAKE TDS U/S 194A OF THE I.T. ACT, 1961 AND FAILED TO DO SO, DISALLOWANCE OF RS. 52,650/- IS HEREBY MADE U/S 40(A)(IA) OF THE I.T. ACT, 1961. ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 29 IN FIRST APPEAL, THE LD. CIT(A) HAS CONFIRMED THE A CTION OF THE AO. DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSE SSEE COULD NOT CONTROVERT THE FINDINGS OF THE LOWER AUTHORITIES. H ENCE, WE CONFIRM THE ORDER OF THE LD. CIT(A) ON THE ISSUE. THUS GROU ND NO. 4 OF THE ASSESSEE IS DISMISSED. 7.1 THE GROUND NO. 5 AND 6 OF THE ASSESSEE ARE RELA TING TO DE- PRESSURIZATION EXPENSES (WRONGLY MENTIONED AS DEPR ESATION) AMOUNTING TO RS. 13,79,254/- AND DISALLOWANCE OF LU MPSUM 7% OF DIRECT EXPENSES AMOUNTING TO RS. 22,83,153/-. 7.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THIS ISSUE HAS BEEN TAKEN INTO CONSIDERATION WITH THE GROUND NO. 8 OF THE ASSESSEE WHEREIN THE D ISALLOWANCE CONFIRMED BY THE LD. CIT(A) HAS BEEN DELETED. THUS GROUND NO. 5 AND 6 OF THE ASSESSEE ARE ALLOWED. 8.1 DURING THE CORUSE OF HEARING, THE LD.AR OF THE ASSESSEE HAS NOT PRESSED THE GROUND NO. 7 & 9. HENCE, THE SAME A RE DISMISSED BEING NOT PRESSED. ITA NO.1102/JP/2016 M/S. HTC PIPES & INFRA PROJECT PVT. LTD. JAIPUR VS ITO, WARD- 3(2), JAIPUR 30 9.1 THE GROUND NO. 10 OF THE ASSESSEE IS REGARDING CHARGING OF INTEREST U/S 234B & 234D AND 244A FOR RECOVERY OF I NTEREST WHICH ARE MANDATORY AND CONSEQUENTIAL IN NATURE 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 26 -07-2018 . SD/- SD/- FOT; IKY JKO HKKXPUN (VIJAY PAL RAO) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 26 /07/ 2018 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. HTC PIPES & INFRA PROJECT PVT L TD. JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 3(2), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.1102 /JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR