ACIT, New Delhi V. M/s Gran Overseas Ltd., New Delhi

ITA 1251/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86987 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 18-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 10-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Assessee Lawyers: C S AGARWAL
• Keywords: Opportunity of being heard; Additional evidence; Non-deduction of tax
• Section: 133(6); 194C; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : C : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI C.M. GARG, JM ITA NO.1251/DEL/2011 ASSESSMENT YEAR : 2007-08 ACIT, CIRCLE 12(1), NEW DELHI. VS. GRAN OVERSEAS LTD., 107-109, RATTAN JATI BLDG., RAJENDRA PLACE, NEW DELHI. PAN: AABCG6796R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C.S. AGARWAL, SR. ADVOCATE & SHRI RAVI PRATAP MALL, ADVOCATE DEPARTMENT BY : SHRI T. VASANTHAN, SR. DR DATE OF HEARING : 18.03.2015 DATE OF PRONOUNCEMENT : 20 .03.2015 ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 18.11.2010 IN RELATION TO THE ASSESSM ENT YEAR 2007-08. ITA NO.1251/DEL/2011. 2 2. THE FIRST GROUND IS GENERAL WHICH DOES NOT REQUI RE ANY SEPARATE ADJUDICATION. 3. GROUND NO. 2 IS AGAINST THE DELETION OF ADDITION OF RS.5,66,44,000/- MADE BY THE ASSESSING OFFICER (AO) ON ACCOUNT OF UN SECURED LOANS. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT OF IRON ORE FINES, STEEL PIPES AND SKIMMED MILK POWDERS, ETC. THE AO NOTICED FROM THE DETAILS FURN ISHED BY THE ASSESSEE THAT THE FOLLOWING AMOUNTS WERE RECEIVED DURING THE YEAR UNDER CONSIDERATION :- M/S S.V. LIQUOR INDIA LTD. RS.1,96,10,000/- M/S MUDRA EXPORTS RS.3,35,34,000/- M/S MUDRA CERAMICS PVT. LTD. RS. 15,00,000/- M/S ANSHU HOSPITAL RS. 20,00,000 /- TOTAL RS.5,66,44,000/- 5. THE ASSESSEE WAS CALLED UPON TO FURNISH CONFIRMA TIONS FROM THE ABOVE PARTIES ALONG WITH THEIR INCOME-TAX RETURNS A ND BALANCE SHEETS ETC. TO PROVE THE GENUINENESS OF CREDITS. THE ASSESSEE F URNISHED A CERTIFICATE ITA NO.1251/DEL/2011. 3 FROM MUDRA EXPORTS CONFIRMING DEBIT BALANCE IN ITS NAME AT RS.3,15,14,000. THE AO FOUND THE BALANCE AS NOT TA LLYING INASMUCH AS THE LOAN WAS RECEIVED FOR A SUM OF RS.3.35 CRORE. ON BEING CALLED UPON TO FURNISH PARTICULARS IN RESPECT OF ALL THE FOUR C REDITORS, THE ASSESSEE SHOWED ITS INABILITY TO FURNISH ANY DOCUMENTS IN RE SPECT OF M/S MUDRA EXPORTS ON THE GROUND THAT THEY REFUSED TO GIVE ANY SUCH DOCUMENT. THE AO ISSUED NOTICE U/S 133(6) TO M/S MUDRA EXPORTS, BUT NO COMPLIANCE WAS MADE. IN VIEW OF THE FOREGOING FACTS, THE AO M ADE ADDITION OF RS.5,66,44,000/-. DURING THE COURSE OF FIRST APPEL LATE PROCEEDINGS, THE ASSESSEE FURNISHED DETAILS REGARDING ALL THE FOUR C REDITORS AS ADDITIONAL EVIDENCE. COMPLYING WITH RULE 46A, THE LD. CIT(A) SENT SUCH ADDITIONAL EVIDENCE TO THE AO FOR COMMENTS. THE AO SUBMITTED REMAND REPORT DATED 13.5.2010 OBJECTING TO THE ADMISSION O F ADDITIONAL EVIDENCE AND ALSO GIVING COMMENTS ON THE MERITS OF THE ADDIT IONAL EVIDENCE. AFTER CONSIDERING THE ENTIRE GAMUT OF MATERIAL AVAI LABLE ON RECORD, THE LD. CIT(A) DELETED THE ADDITION OF RS.5,66,44,000/- . HERE, IT IS PERTINENT TO MENTION THAT THE REVENUE IS NOT AGGRIEVED AGAINS T THE ADMISSION OF ADDITIONAL EVIDENCE IN TERMS OF RULE 46A INASMUCH A S THERE IS NO GROUND ITA NO.1251/DEL/2011. 4 CHALLENGING THE ADMISSION OF ADDITIONAL EVIDENCE BY THE LD. CIT(A). THE REASON APPEARS TO BE THE LD. CIT(A) CALLING AND THE AO SENDING REMAND REPORT ON THE MERITS OF THE ADDITIONAL EVIDENCE FIL ED BY THE ASSESSEE. THE REVENUE, ON THIS ISSUE, IS AGGRIEVED AGAINST THE DE LETION OF ADDITION OF RS.5,66,44,000 MADE BY THE AO. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE ADDITIO N OF RS.5.66 CRORE MADE BY THE AO U/S 68 COMPRISES OF AMOUNTS RECEIVED BY T HE ASSESSEE FROM FOUR DIFFERENT ENTITIES. WE WILL DEAL WITH THESE F OUR ENTITIES ONE BY ONE FOR DETERMINING THEIR GENUINENESS OR OTHERWISE. I) MUDRA EXPORTS . 7.1. THE AO PICKED UP THE FIGURE OF RS.3,35,34,000/ -, BEING THE AMOUNT OF LOAN OR DEPOSIT TAKEN BY THE ASSESSEE FRO M MUDRA EXPORTS, BY CONSIDERING AN ANNEXURE TO THE TAX AUDIT REPORT, A COPY OF WHICH IS AVAILABLE ON PAGE 201 OF THE PAPER BOOK. THE ANNEXU RE TO THE TAX AUDIT REPORT SHOWING RECEIPT , INTER ALIA , OF RS.3,35,34,000/- ALSO SHOWS REPAYMENT OF LOAN TO MUDRA EXPORTS TO THE TUNE OF RS.20.20 LAC. THUS, ITA NO.1251/DEL/2011. 5 THE BALANCE AFTER DEDUCTION OF THE AMOUNT OF REPAYM ENT FROM THE AMOUNT OF LOAN RECEIVED COMES TO RS.3,15,14,000/-, BEING THE SAME AMOUNT AS WAS GIVEN BY MUDRA EXPORTS IN THEIR CONFIRMATION. A COPY OF SUCH CONFIRMATION GIVEN BY MUDRA EXPORTS IS AVAILABLE ON PAGE 215 OF THE PAPER BOOK, WHICH CERTIFIES THE DEBIT BALANCE OF T HE ASSESSEE IN THEIR BOOKS OF ACCOUNT AT THE SAME LEVEL OF RS.3,15,14,00 0/-. A DETAILED COPY OF THE ASSESSEES ACCOUNT IN THE BOOKS OF MUDRA EXP ORTS IS AVAILABLE AT PAGE 51 OF THE PAPER BOOK FROM WHICH IT IS APPARENT THAT THE CLOSING BALANCE IN THIS ACCOUNT AT RS.3,15,14,000/- FULLY T ALLIES WITH THE AMOUNT GIVEN BY THIS PARTY IN THE CERTIFICATE. 7.2. THE POSITION WHICH, THEREFORE, EMERGES IS TH AT MUDRA EXPORTS ADVANCED LOAN TO THE ASSESSEE FROM ITS BOOKS OF ACC OUNT WHICH IS EVIDENCED FROM THE COPY OF ACCOUNT OF THE ASSESSEE IN THEIR BOOKS OF ACCOUNT. ONCE A PERSON PAYS A LOAN FROM HIS REGULA R BOOKS OF ACCOUNT TO ANOTHER AND THE BALANCE IS SHOWN IN THE BALANCE SHE ET, THERE CANNOT BE ANY QUESTION OF DOUBTING THE GENUINENESS OF THE CRE DIT, MORE SO, WHEN THE SAID AMOUNT HAS BEEN ACCEPTED AS GENUINE IN THE ASSESSMENT OF THAT OTHER PERSON. A COPY OF ASSESSMENT ORDER PASSED IN THE CASE OF MUDRA ITA NO.1251/DEL/2011. 6 EXPORTS IS AVAILABLE AT PAGES 56 AND 57 OF THE PAPE R BOOK. IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER PASSED U/S 14 3(3) OF THE ACT IN THE CASE OF MUDRA EXPORTS THAT THE GENUINENESS OF THE T RANSACTION OF ADVANCING LOAN BY MUDRA EXPORTS TO THE ASSESSEE HAS NOT BEEN DISPUTED. BE THAT AS IT MAY, WE FIND FROM THE IMPUGNED ORDER THAT OUT OF TOTAL AMOUNT RECEIVED BY THE ASSESSEE FROM MUDRA EXPORTS AT RS.3.35 CRORE, A SUM OF RS.2,38,34,000/- WAS DIRECTLY ADVANCED BY TH IS PARTY BY MEANS OF VARIOUS CHEQUES ISSUED ON DIFFERENT DATES, THE DETA ILS OF WHICH ARE AVAILABLE ON RECORD. THE REMAINING AMOUNT OF RS.97 LAC WAS OBTAINED BY THE ASSESSEE INDIRECTLY FROM MUDRA EXPORTS BY RE COVERING THE AMOUNTS FROM THEIR DEBTORS WHICH AMOUNTS WERE DIREC TLY PAID TO THE CREDITORS OF THE ASSESSEE. THE DETAILS OF PARTIES FROM WHOM THE ASSESSEE RECEIVED LOANS ON BEHALF OF MUDRA EXPORTS AND PAID THE SAME TO ITS CREDITORS IS AVAILABLE IN THE PAPER BOOK. IT IS AP PARENT FROM SUCH DETAILS THAT ALL THE AMOUNTS WERE RECEIVED BY MEANS OF DEMA ND DRAFTS WHICH WERE DIRECTLY ISSUED IN FAVOUR OF THE ASSESSEES CR EDITORS. SUCH AMOUNTS RECEIVED BY THE ASSESSEE FROM THE DEBTORS OF MUDRA EXPORTS ARE DULY RECORDED BY MUDRA EXPORTS IN ITS BOOKS OF ACCOUNT. ITA NO.1251/DEL/2011. 7 7.3. IN VIEW OF THE ABOVE OVERWHELMING EVIDENCE FILED BY THE ASSESSEE ESTABLISHING THE GENUINENESS OF THE AMOUNTS RECEIVE D BY THE ASSESSEE FROM OR ON BEHALF OF MUDRA EXPORTS, WE HAVE NO HESI TATION IN UPHOLDING THE IMPUGNED ORDER DELETING THIS ADDITION. (II) S.V. LIQUOR INDIA LTD . 8. THE ASSESSEE SHOWED A RECEIPT OF RS.1,96,10,000/ - FROM S.V. LIQUOR INDIA LTD., IN THE SAME ANNEXURE TO ITS TAX AUDIT REPORT, AS THE AMOUNT OF LOAN OR DEPOSIT TAKEN OR ACCEPTED. THE A O PICKED UP THIS AMOUNT FROM THE SAID ANNEXURE OF THE AUDIT REPORT. THE NEXT COLUMN IN THE ANNEXURE SHOWS THE AMOUNT OF REPAYMENT TO M/S S.V. LIQUOR INDIA LTD., AT RS.2.47 CRORE. PAGE NO. 88 OF THE PAPER B OOK IS A COPY OF THE ASSESSEES ACCOUNT IN THE BOOKS OF S.V. LIQUOR INDI A LTD., WHICH SHOWS, INTER ALIA , DEBIT ENTRIES OF RS.50 LAC EACH ON DIFFERENT DATE S. PAGE 86 OF THE PAPER BOOK IS THE ACCOUNT OF S.V. LIQUOR INDIA LTD. IN THE BOOKS OF THE ASSESSEE WHICH, APART FROM SHOWING THREE RECEIP TS OF RS.50 LAC EACH, ALSO SHOWS A SUM OF RS.46,10,000/- RECEIVED ON 30.3 .2007 WITH THE REMARKS BEING AMOUNT RECEIVED AND PAID TO RAILWAY. BELOW THE ITA NO.1251/DEL/2011. 8 ACCOUNT OF S.V. LIQUOR INDIA LTD., ON PAGE 86 OF TH E PAPER BOOK, THE ASSESSEE HAS DRAWN A RECONCILIATION OF THE BALANCE BY SHOWING A SUM OF RS.46,10,000/- AS THE AMOUNT DEBITED BY S.V. LIQUOR INDIA LTD., IN NEXT YEAR. IN SO FAR AS THE FIRST THREE ENTRIES OF RS.5 0 LAC EACH ARE CONCERNED, WE FIND THAT THESE HAVE EMANATED FROM THE BOOKS OF ACCOUNT OF S.V. LIQUOR INDIA LTD., AND HAVE GONE INTO THE ASSESSEE S BOOKS OF ACCOUNT REPRESENTING A SUM OF RS.1.50 CRORE RECEIVED BY THE ASSESSEE FROM THIS COMPANY BY MEANS OF PAY ORDERS ON THREE DIFFERENT D ATES. S.V. LIQUOR FILED ITS RETURN OF INCOME, A COPY OF WHICH IS AVAI LABLE ON PAGE 91 OF THE PAPER BOOK. THE ABOVE FACTUAL POSITION INDICATES T HAT THERE CAN BE NO DISPUTE IN SO FAR AS THE RECEIPT OF LOAN OF RS.1.50 CRORE IS CONCERNED. HOWEVER, AS REGARDS THE REMAINING AMOUNT OF RS.46.1 0 LAC, WE FIND THAT SH. VIJAY JINDAL, A DIRECTOR OF S.V. LIQUOR FURNISH ED AN AFFIDAVIT ON 21.4.2010, A COPY OF WHICH IS AVAILABLE ON PAGE 89 AND 90 OF THE PAPER BOOK. APART FROM THE ABOVE THREE AMOUNTS OF RS.50 LAC EACH, IT HAS BEEN MENTIONED THAT A SUM OF RS.46,10,000/- WAS PAID VID E CHEQUE NO.779195 DATED 4.4.2007. THE POSITION WHICH, THER EFORE, RESULTS IS THAT THE ASSESSEE IS CLAIMING TO HAVE RECEIVED A SUM OF RS.46.10 LAC FROM ITA NO.1251/DEL/2011. 9 S.V. LIQUOR ON 30.3.2007, WHERE THIS PARTY IS SHOWI NG TO HAVE PAID THIS SUM TO THE ASSESSEE IN THE NEXT FINANCIAL YEAR ON 4 .4.2007. WE ARE UNABLE TO UNDERSTAND AS TO HOW THE PAYMENT OF RS.46 .10 LAC MADE BY S.V. LIQUOR INDIA LTD. VIDE CHEQUE DATED 4.4.2007 C AN BE RECEIVED BY THE ASSESSEE BEFORE THAT DATE ON 30.3.2007 AND RECO RDED WITH THE NARRATION OF THE AMOUNT RECEIVED AND PAID TO RAILWAY. ONE CAN UNDERSTAND IF THE AMOUNT IS PAID BY A TO B AND THE A RECORDS TRANSACTION IN HIS BOOKS OF ACCOUNT ON THE DATE OF MAKING OF DR AFT OR ISSUANCE OF CHEQUE AND B RECORDS THE SAME IN HIS BOOKS OF ACCOU NT LATER ON AT THE TIME OF ITS ACTUAL RECEIPT. HOWEVER, THE POSITION IN THE INSTANT CASE IS CONVERSE INASMUCH AS THE PAYER IS CLAIMING TO HAVE MADE PAYMENT ON 4.4.2007 AND PAYEE, THAT IS THE ASSESSEE, IS SHOWI NG TO HAVE RECEIVED THIS AMOUNT ON 30.3.2007. UNDER SUCH CIRCUMSTANCES , WE CANNOT ACCEPT THE GENUINENESS OF LOAN TRANSACTION TO THE TUNE OF RS.46.10 LAC UNLESS THE FACTS ARE PROPERLY CONSIDERED AND APPRECIATED. OVE RTURNING THE IMPUGNED ORDER ON THIS SCORE, WE SEND THE MATTER BA CK TO THE FILE OF AO FOR VERIFYING THE GENUINENESS OF CREDIT TO THE EXTE NT OF RS.46.10 LAC CLAIMED TO HAVE BEEN RECEIVED FROM S.V. LIQUOR INDI A LTD. ITA NO.1251/DEL/2011. 10 III) MUDRA CERAMICS PVT. LTD . 9. THE AO MADE ADDITION FOR A SUM OF RS.15 LAC ON T HE BASIS OF THE ENTRY MADE IN THE SAME ANNEXURE TO THE TAX AUDIT RE PORT SHOWING RECEIPT OF LOAN OF THE SAID AMOUNT FROM MUDRA CERAMICS PVT. LTD. THE LD. CIT(A) DELETED THIS ADDITION BY OBSERVING THAT THE ASSESSEE HAD, IN FACT, ADVANCED LOAN TO MUDRA CERAMICS PVT. LTD., FOR THIS SUM INSTEAD OF RECEIVING THE SAME AND, HENCE, THE SAME OUGHT NOT T O HAVE BEEN ADDED. DURING THE COURSE OF PROCEEDINGS BEFORE US, WE REQU IRED THE AR TO SHOW THE ADVANCING OF LOAN OF RS.15 LAC TO MUDRA CERAMIC S PVT. LTD., FROM THE BALANCE SHEET OF THE ASSESSEE. THOUGH APPARENT LY THERE IS NO SEPARATE ENTRY FOR ANY LOAN AND ADVANCE OF RS.15 LAC APPEARI NG ON THE ASSET SIDE OF THE BALANCE SHEET OF THE ASSESSEE, BUT THE LD. A R CONTENDED THAT THIS AMOUNT MAY HAVE BEEN INCLUDED IN THE LIST OF LOANS AND ADVANCES. IT WAS ATTEMPTED TO SHOW THAT THIS PAYMENT IS A PART O F THE SEVERAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE WITH THIS P ARTY. UNLESS THE POSITION BECOMES CLEAR ABOUT THE RECEIPT OR PAYMENT OF THE SUM OF RS.15 LAC, WE CANNOT ACCEPT THE VIEW POINT OF THE LD. CI T(A) ON ITS FACE VALUE. THE OBVIOUS REASON IS THAT THE AUDITOR OF THE ASSES SEE REPORTED IN THE TAX ITA NO.1251/DEL/2011. 11 AUDIT REPORT THAT A SUM OF RS.15 LAC WAS RECEIVED A S AMOUNT OF LOAN OR DEPOSIT TAKEN BY THE ASSESSEE FROM MUDRA CERAMICS P VT. LTD. WE, THEREFORE, OVERTURN THE IMPUGNED ORDER ON THIS ISSU E AND SEND THE MATTER BACK TO THE FILE OF AO FOR EXAMINING THIS ISSUE AFR ESH AND, THEREAFTER, TAKING AN APPROPRIATE DECISION AS PER LAW AND AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IV) ANSHU HOSPITAL . 10. THE AO MADE ADDITION OF RS.20 LAC BY ADOPTING T HE FIGURE FROM THE SAME ANNEXURE OF THE TAX AUDIT REPORT WHICH MEN TIONS IT AS THE AMOUNT OF LOAN OR DEPOSIT TAKEN OR ACCEPTED BY THE ASSESSEE FROM ANSHU HOSPITAL. HERE AGAIN, THE LD. CIT(A) DELETED THIS A DDITION BY ACCEPTING THE ASSESSEES CONTENTION THAT THE SAME WAS IN THE NATURE OF LOAN ADVANCED AND NOT LOAN TAKEN. THIS AMOUNT OF RS.20 LAC CLAIMED TO HAVE BEEN ADVANCED TO ANSHU HOSPITAL IS NOT DIRECTLY TRA CEABLE FROM THE FACE OF THE BALANCE SHEET. THE LD. AR GAVE THE SAME EXP LANATION AS GIVEN FOR MUDRA CERAMICS ABOVE. FOLLOWING THE VIEW TAKEN HER EINABOVE IN THE CONTEXT OF MUDRA CERAMICS PVT. LTD., WE SET ASIDE T HE IMPUGNED ORDER ITA NO.1251/DEL/2011. 12 ON THIS ISSUE AND SEND THE MATTER TO THE AO FOR DEC IDING IT IN CONFORMITY WITH OUR ABOVE DIRECTIONS. 11.1. GROUND NO.3 IS AGAINST THE DELETION OF ADDIT ION OF RS.15,80,000/- MADE BY THE AO ON ACCOUNT OF PENDING SHARE APPLICATION MONEY. FROM THE BALANCE SHEET FURNISHED BY THE ASS ESSEE, THE AO OBSERVED THAT SHARE APPLICATION MONEY TO THE TUNE O F RS.15.80 LAC WAS PENDING ALLOTMENT AS ON 31.3.2006. IT WAS, THEREFO RE, OPINED THAT THIS WAS A CASE OF CESSATION OF LIABILITY FOR WHICH ADDI TION OF RS.15.80 LAC WAS MADE. THE LD. CIT(A) ORDERED FOR THE DELETION OF ADDITION. 11.2. HAVING HEARD THE RIVAL SUBMISSIONS AND PERU SED THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE VIEWPOINT OF T HE AO TREATING THE AMOUNT AS CESSATION OF LIABILITY, IMPLIEDLY U/S 41 (1) OF THE ACT, IS NOT TENABLE. SECTION 41(1) IS ATTRACTED WHERE ANY ALLO WANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE, OR TRADING LIABILITY INCURRED BY THE ASSESSEE AND S UBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE IS BENEFITTED BY WAY OF REMISSION OR CESSATION OF THE AMOUNT FOR WHICH IT INCURRED LOSS OR EXPENDI TURE ETC., EARLIER. TO ITA NO.1251/DEL/2011. 13 PUT IT SIMPLY, SECTION 41(1) CAN BE ATTRACTED ONLY WHEN A TRADING LIABILITY FOR WHICH DEDUCTION WAS CLAIMED EARLIER, CEASES TO BE PAYABLE. OBVIOUSLY, RECEIPT OF SHARE APPLICATION MONEY CAN, BY NO STANDARD, BE CONSTRUED AS A TRADING LIABILITY FOR WHICH THE ASSE SSEE COULD HAVE BEEN ALLOWED DEDUCTION IN THE PAST AND ITS LATER CESSATI ON HAS RESULTED INTO INCOME. AS SUCH, THE APPLICATION OF SECTION 41(1) IS RULED OUT. 11.3. IT IS NOTICEABLE FROM THE ASSESSEES BALANC E SHEET THAT A SUM OF RS.15.80 LAC IS APPEARING AS SHARE APPLICATION MONE Y FOR THE YEAR ENDING 31.3.2007 AND EQUAL AMOUNT IS APPEARING IN THE BALA NCE SHEET FOR THE IMMEDIATELY PRECEDING YEAR ENDING 31.3.2006. THIS SHOWS THAT THE AMOUNT OF RS.15.80 LAC WAS RECEIVED BY THE ASSESSEE IN AN EARLIER YEAR AND NOT IN THE PREVIOUS YEAR RELEVANT TO THE ASSESS MENT YEAR UNDER CONSIDERATION. AS SUCH, THIS AMOUNT CANNOT BE CONS IDERED AS INCOME IN TERMS OF SECTION 68 OF THE ACT BECAUSE THERE IS NO FRESH CREDIT APPEARING ON THE BOOKS OF THE ASSESSEE DURING THE YEAR ON THI S ACCOUNT, WHICH IS A CONDITION PRECEDENT FOR ATTRACTING THE MISCHIEF OF THIS SECTION. IT IS FURTHER A MATTER OF RECORD THAT IN THE SUBSEQUENT Y EAR THE SHARES WERE ITA NO.1251/DEL/2011. 14 ISSUED AGAINST THE SAID SHARE APPLICATION MONEY OF RS.15.80 LAC. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER ON THIS ISSUE. THIS GROUND FAILS. 12.1. GROUND NO. 4 IS AGAINST THE DELETION OF DIS ALLOWANCE OF FREIGHT AND TRANSPORTATION CHARGES AMOUNTING TO RS.3,22,90,536/ -. ON PERUSAL OF THE DETAILS OF FREIGHT AND TRANSPORTATION CHARGES, THE AO OBSERVED THAT THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE ON THE FREIGH T CHARGES PAID TO LAKSHMI AND JYOTHI TRANSPORT, TOTALING TO RS.3,22, 90,536/-. BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA), HE D ISALLOWED THE SAID SUM. THE LD. CIT(A) ORDERED FOR THE DELETION OF ADDITION . 12.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PER USED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE INCURRED TOTAL FREIGHT AND TRANSPORTATION CHARGES TO THE TUNE OF RS.3,77,09,42 4/-, THE DETAILS OF WHICH IS AVAILABLE ON PAGE 126 OF THE PAPER BOOK. IT CAN BE SEEN THAT THE PAYMENT TO LAKSHMI AND JYOTHI TRANSPORT IS ONLY TO THE EXTENT OF RS.7 LAC AND ODD, WHILE A SUM OF RS.3,16,50,188/- WAS PA ID TO INDIAN RAILWAYS AND A FURTHER SUM OF RS.3,14,414/- WAS PAI D TO KOLKATA PORT TRUST TOWARDS FREIGHT FOR CARRIAGE OF GOODS BY RAIL WAYS. SECTION 194C ITA NO.1251/DEL/2011. 15 PROVIDES FOR MAKING DEDUCTION OF TAX AT SOURCE BY A NY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT. THE TERM WORK HAS BE EN DEFINED IN CLAUSE (IV) IN EXPLANATION BELOW SECTION 194C(7) TO INCLUD E , INTER ALIA, (C) CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRAN SPORT OTHER THAN BY RAILWAYS . THUS, IT IS EVIDENT THAT FREIGHT OR TRANSPORTAT ION CHARGES PAID FOR CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT ARE COVERED WITHIN THE MEANING OF SECTION 194C SAVE AND EXCEPT THE CARRIAGE OF GOODS OR PASSENGERS BY RAILWAYS. IN OTHER WORDS, A NY PAYMENT MADE FOR CARRIAGE OF GOODS OR PASSENGERS THROUGH RAILWAY S CANNOT BE COVERED U/S 194C OF THE ACT. IN SO FAR AS PAYMENT OF RS.3, 16,50,188/- IS CONCERNED, IT WAS DIRECTLY MADE BY THE ASSESSEE TO RAILWAYS FOR WHICH THERE CAN BE NO DEFAULT FOR NON-DEDUCTION OF TAX AT SOURCE. AS REGARDS THE PAYMENT FOR A SUM OF RS.3,14,414/- PAID TO KOLK ATA PORT TRUST, THE SAME WAS TOWARDS FREIGHT FOR CARRIAGE OF GOODS BY RAILWAYS. THE ASSESSEE FILED A COPY OF BILL SHOWING THAT THE PAYM ENT WAS MADE TO THE RAILWAY DIVISION OF THE PORT TRUST FOR FREIGHT CHAR GES RELATING TO HIRED WAGONS. SINCE THIS PAYMENT IS ALSO TOWARDS CARRIAG E OF GOODS BY ITA NO.1251/DEL/2011. 16 RAILWAYS, IT WOULD NOT ATTRACT SECTION 194C. AS RE GARDS THE REMAINING AMOUNT DISALLOWED BY THE AO, THE ASSESSEE FILED EVI DENCE BEFORE THE LD. CIT(A) SHOWING DEDUCTION OF TAX AT SOURCE @ 2.24% A MOUNTING TO RS.8,258/- IN RESPECT OF FREIGHT PAYMENT AMOUNTING TO RS.3,68,015/- MADE TO M/S LAKSHMI TRANSPORT. SINCE THE ASSESSEE DEDUCTED TAX AT SOURCE FROM THE PAYMENTS MADE TO LAKSHMI TRANSPORT, THERE CAN BE NO QUESTION OF APPLYING SECTION 40(A)(IA) OF THE ACT. THE AO DID NOT MAKE ANY DISALLOWANCE IN RESPECT OF TRANSPORTATION CHARG ES PAID BY THE ASSESSEE TO M/S JYOTHI TRANSPORT. IT, THEREFORE, B ECOMES ABUNDANTLY APPARENT THAT THE ASSESSEE DEDUCTED TAX AT SOURCE F ROM THE FREIGHT PAYMENTS WHEREVER IT WAS REQUIRED UNDER LAW. IN VI EW OF THIS POSITION, WE UPHOLD THE IMPUGNED ORDER DELETING THE DISALLOWA NCE MADE U/S 40(A)(IA) OF THE ACT. 13. THE LAST GROUND IS AGAINST THE DELETION OF DIS ALLOWANCE OF SERVICE TAX AMOUNTING TO RS.82,224/-. THE AO MADE THIS DIS ALLOWANCE ON THE GROUND THAT THE ASSESSEE DID NOT FILE PROOF OF PAYM ENT OF SERVICE TAX BEFORE FILING THE RETURN. THE LD. CIT(A) DELETED T HIS ADDITION BY ITA NO.1251/DEL/2011. 17 VERIFYING COPIES OF CHALLANS EVIDENCING PAYMENT OF SERVICE TAX BEFORE 31.3.2007, COPIES OF WHICH WERE ALSO SENT TO THE AO FOR COMMENTS. IN THE ABSENCE OF ANY ADVERSE COMMENTS MADE BY THE AO AND THE FACT THAT THE ASSESSEE DID PAY SERVICE TAX BEFORE THE CLOSE O F THE YEAR ITSELF, WE HOLD THAT THE LD. CIT(A) WAS RIGHT IN DELETING THIS ADDITION. 14. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 20.03.201 5. SD/- SD/- [C.M. GARG] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 20 TH MARCH, 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.