M/s International Fresh Farm Products (India) Limited, Chandigarh V. DCIT, C-1(1), Chandigarh

ITA 1507/CHANDI/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4121 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-09-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 27-11-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA DHAR
• Keywords: Deemed to accrue or arise in india; Proportionate interest; Deemed dividend; TDS
• Section: 43B; 143(3); 2(22)(e); 40(a)(ia); 40a(ia); 13

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B CHANDIGARH BEFORE: SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI R.L.NEGI, JUDICIAL MEMBE R ./ ITA NO. 1507/CHD/2019 / ASSESSMENT YEAR : 2013-14 M/S INTERNATIONAL FRESH FARM PRODUCTS (INDIA) LTD., H.NO. 3, SECSTOR-5, CHANDIGARH. VERSUS THE DCIT, CIRCLE-1(1), CHANDIGARH. ./ PAN NO: AAACI5038D / APPELLANT / RESPONDENT (VIRTUAL COURT) / ASSESSEE BY : SHRI PARIKSHIT AGARWAL, CA ! / REVENUE BY : SMT.PRIYANKA DHAR, JCIT ' #$/ DATE OF HEARING : 28.09.2021 %&'($/ DATE OF PRONOUNCEMENT : 30.09.2021 / ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: THE ABOVE APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS)-I, CHANDIGARH [( IN SHORT THE (LD.CIT(A)] DATED 25.09.2019 RELATING TO ASSESSMENT YEAR 2013-14 PASS ED U/S 250(6) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS ACT. ITA -1507/CHD/2019 A.Y. 2013-14 PAGE 2 OF 16 2. GROUND NO. 1 & 6 RAISED BY THE ASSESSEE ARE GEN ERAL IN NATURE AND NEED NO ADJUDICATION. GROUND NO. 2 RAISED BY THE ASSESSEE READS AS UNDER : 2. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO WHEREIN HE MADE ADDITION OF RS. 3,15,616/- U/S 36(L)(III) OF THE ACT ON ESTIMATED, ARBITRARY, PRESUMPTIVE AND PREJUDICED BASIS WITHOUT ASSIGNING ANY LOGICAL REASONS AND HAD ERRONEOUSLY DISALLOWED THE PROPORTIONATE INTEREST ON ADVANCE GIVEN FOR BUSINESS PURPOSE TO M/S TEMPTATION FOODS AS INTEREST FREE ADVANCE. 3. THE ISSUE RELATES TO DISALLOWANCE OF INTEREST AM OUNTING TO RS. 3,15,616/-, AS PER PROVISIONS OF SECTION 36(1)( III) OF THE ACT, PERTAINING TO INTEREST FREE ADVANCES MADE TO M /S TEMPTATION FOODS AMOUNTING TO RS. 50 LACS TREATING THE SAME TO BE NOT FOR THE PURPOSE OF BUSINESS OF THE ASSESS EE. 4. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENT ION TO THE FACT THAT THE IMPUGNED ADVANCE TO M/S TEMPTATION FO ODS HAD BEEN MADE IN THE PRECEDING YEAR I.E. ASSESSMENT YEA R 2012-13 AND IDENTICAL DISALLOWANCE HAD BEEN MADE IN THE SAI D YEAR ALSO WHICH ISSUE HAD TRAVELLED UPTO THE ITAT WHO HAD RES TORED THE MATTER TO THE AO WITH THE DIRECTION TO DETERMINE TH E FUNDS USED FOR THE PURPOSE OF MAKING THE ADVANCE AND THER EAFTER ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW. THAT THE AO ON RE-CONSIDERATION OF THE ISSUE HAD DELETED THE DISAL LOWANCE ITA -1507/CHD/2019 A.Y. 2013-14 PAGE 3 OF 16 NOTING THAT THE ADVANCE HAD BEEN MADE OUT OF CURREN T ACCOUNT AND THAT ALL THE INTEREST BEARING FUNDS HAD BEEN US ED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IN THIS REGAR D HE DREW OUR ATTENTION TO THE FOLLOWING : I) COPY OF LEDGER ACCOUNT OF M/S TEMPTATION FOODS IN THE BOOKS OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR REFLECTING RS. 50 LACS RECEIVED FRO M M/S TEMPTATION FOODS AS AN OPENING BALANCE OUT OF WHICH RS. 25 LACS WAS RETURNED ON 19.4.2012. THE SAID DOCUMENT WAS PLACED BEFORE US AT PAPER BOOK PAGE 22. II) THE ORDER OF THE LD.CIT(A) FOR THE PRECEDING ASSESSMENT YEAR,I.E A.Y 2012-13, AGAINST ORDER PASSED U/S 143(3) FOR THE SAID YEAR MAKING ADDITION/DISALLOWANCE OF INTEREST ON THE IMPUGNED ADVANCE. SAME WAS PLACED BEFORE US AT PAPER BOOK PAGE 73-78. OUR ATTENTION WAS DRAWN TO PAPER BOOK PAGE 75-77 WHERE IMPUGNED ORDER WAS DISCUSSED BY THE LD. CIT(A) AT PARA 3 TO 3.3.1 AND DISALLOWANCE MADE WAS UPHELD. III) THE ORDER OF THE ITAT IN APPEAL FILED BY THE ASSESS EE AGAINST THE AFORESTATED ORDER OF THE LD.CIT(A) FOR A.Y 2012-13 PLACED BEFORE US AT PAPER BOOK PAGE 79- 108. OUR ATTENTION WAS DRAWN TO PAGES 102 TO 105 WHERE THE ISSUE OF DISALLOWANCE U/S 36(1)(III) OF T HE ACT FOR ASSESSMENT YEAR 2010-11 WAS ADJUDICATED BY THE ITAT REMANDING THE MATTER TO THE AO TO VERIFY THAT NO INTEREST BEARING FUNDS HAD BEEN USED FOR TH E PURPOSE OF MAKING THE ADVANCE AND THEREAFTER TO ITA -1507/CHD/2019 A.Y. 2013-14 PAGE 4 OF 16 PAPER BOOK PAGE NO. 107 WHEREIN IDENTICAL ISSUE RELATING TO ASSESSMENT YEAR 2012-13,PERTAINING TO ADVANCES MADE TO M/S TEMPTATION FOODS, WAS ALSO RESTORED BACK TO THE AO FOR VERIFYING THE FUNDS USE D FOR THE PURPOSE OF MAKING ADVANCE. IV) THE ORDER OF THE AO IN RESTORED PROCEEDINGS PLACED BEFORE US AT PAPER BOOK PAGE 121-129, POINTING OUT THEREFROM AT PAGE 129 THE FINDINGS OF THE AO TO THE EFFECT THAT, AFTER CONSIDERING THE ASSESSEE'S SUBMISSIONS ,IN VIEW OF THE DIRECTIONS OF THE ITAT IN THE ORDER PASSED FOR ASSESSMENT YEAR 2012-13, THE ADVANCES HAD BEEN GIVEN FROM THE CURRENT ACCOUNT OF THE ASSESSEE AND NO CASH CREDIT FACILITY HAD BEEN AVAILED, THAT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS AND THAT THE ASSESSEE HAD ONLY TERM LOANS WHICH WERE USED FOR ACQUISITION OF FIXED ASSETS. THAT AFTER FINDING SO, THE AO MADE NO ADDITIONS/ DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT TO THE INCOME OF THE ASSESSEE. 5. THE LD. COUNSEL FOR THE ASSESSEE CONTENDED T HAT SINCE THE YEAR IN WHICH THE ADVANCE WAS GIVEN, IT WAS FOUND T HAT THE ADVANCES HAD BEEN MADE FROM INTEREST FREE FUNDS, TH ERE WAS NO REASON TO MAKE ANY DISALLOWANCE OF INTEREST U/S 36( 1)(III) OF THE ACT IN THE IMPUGNED YEAR AND THAT THE ISSUE WAS CLE ARLY COVERED BY THE AFORESTATED ORDERS FOR THE PRECEDING YEAR. 6. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF THE CIT(A) THAT THE ASSESSEE HAD NEITHER DEMONSTRATED B USINESS ITA -1507/CHD/2019 A.Y. 2013-14 PAGE 5 OF 16 PURPOSE FOR MAKING THE IMPUGNED ADVANCE NOR THAT IT HAD USED INTEREST FREE FUNDS FOR MAKING THE ADVANCE. SHE FUR THER POINTED OUT THAT IDENTICAL DISALLOWANCE MADE IN AY 2014-15 WAS NOT DELETED IN APPEAL BY THE ITAT. 7. THE LD.COUNSEL FOR THE ASSESSEE COUNTERED BY STA TING THAT IN A.Y 2014-15 THE ASSESSEE HAD NOT PRESSED THE GRO UND RAISED CONSIDERING THE INSIGNIFICANT AMOUNT INVOLVED OF RS .26,926/-. HE DREW OUR ATTENTION TO THE ORDER OF THE ITAT IN A .Y 2014-15 PLACED AT PAPER BOOK PAGE NO.130-135 BRINGING OUT T HE SAID FACTS. 8. WE HAVE HEARD BOTH THE PARTIES. IT IS NOT DENIE D THAT IDENTICAL DISALLOWANCE OF INTEREST ON THE SAID ADVA NCE OF RS. 50 LACS TO M/S TEMPTATION FOODS HAD BEEN MADE IN THE P RECEDING ASSESSMENT YEAR ALSO AND AFTER VARIOUS ROUNDS OF LI TIGATION, WHEN THE ISSUE HAD BEEN RESTORED TO THE AO BY THE I TAT DIRECTING HIM TO DETERMINE THE NATURE OF FUNDS USE D FOR THE PURPOSE OF MAKING THE ADVANCE, IT WAS FOUND BY THE AO THAT NO INTEREST BEARING FUNDS HAD BEEN USED AND INFACT INT EREST FREE FUNDS IN THE CURRENT ACCOUNT OF THE ASSESSEE HAD BE EN USED FOR THE PURPOSE OF MAKING THE ADVANCE. THIS CONCLUSIVE FINDING OF FACT, THEREFORE, PUTS AN END TO ALL DISPUTE VIS--V IS THE ISSUE OF DISALLOWANCE OF INTEREST ON THE ADVANCE GIVEN TO M/ S TEMPTATION FOODS, SINCE IT HAS BEEN FACTUALLY FOUND BY THE ITA -1507/CHD/2019 A.Y. 2013-14 PAGE 6 OF 16 DEPARTMENT THAT INTEREST FREE FUNDS HAD BEEN USED F OR THE PURPOSE OF MAKING THE ADVANCE. NO OCCASION ARISES, THEREFORE, FOR MAKING ANY DISALLOWANCE OF INTEREST U/S 36(1)(I II) OF THE ACT WITH REGARD TO THE SAME. THE RELIANCE PLACED BY THE REVENUE ON THE DECISION OF THE ITAT IN A.Y 2014-15, IS OF NO R ELEVANCE SINCE THE GROUND WAS NOT ADJUDICATED BEING NOT PRES SED BY THE ASSESSEE. GROUND OF APPEAL NO.2 IS THEREFORE, ALLOWED. 9. GROUND NO. 3 RAISED BY THE ASSESSEE READS AS UND ER : 3. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD. AO WHEREIN HE MADE ADDITION OF RS. 27,20,000/- U/S 2(22)(E) EVEN WHEN THE APPELLANT COMPANY IS NOT A SHAREHOLDER OF PUNJAB METALLICS P. LTD. AND THERE I S ONLY COMMON SHAREHOLDERS BETWEEN THE 2 COMPANIES. 10. THE ISSUE RELATES TO TREATMENT OF AN AMOUNT OF RS. 27,20,000/-, RECEIVED BY THE ASSESSEE FROM M/S PUNJ AB METALLICS DURING THE YEAR, AS DEEMED DIVIDEND AS PE R THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. 11. THE ADDITION WAS MADE BY THE AO AND UPHELD BY T HE LD.CIT(A), ON FINDING THAT THE MANAGING DIRECTOR(MD ) OF THE ASSESSEE COMPANY, SH.SUKHINDER SINGH, WAS HOLDING 7 2.26% SHARES IN THE ASSESSEE COMPANY AND 45.39% SHARES IN M/S PUNJAB METALLICS P.LTD, THUS HAVING SUBSTANTIAL INT EREST IN M/S PUNJAB METALLICS P.LTD. AND OWNING MORE THAN 10% SH ARES IN ITA -1507/CHD/2019 A.Y. 2013-14 PAGE 7 OF 16 THE ASSESSEE COMPANY AND FURTHER ON FINDING THAT TH ERE WAS SUFFICIENT RESERVES AND SURPLUS OF RS. 1,28,62,690/ - IN M/S PUNJAB METALLICS P.LTD. FOR TREATING THE AMOUNT ADV ANCED BY IT TO THE ASSESSEE COMPANY AS DEEMED DIVIDEND. 12. THE CONTENTION OF LD. COUNSEL FOR THE ASSESSEE WAS THAT THE LD. CIT(A) HAD MADE DISALLOWANCE BASIS THE ORDE R PASSED BY THE CIT(A) IN ASSESSMENT YEAR 2014-15 WHICH ORDER H AD BEEN AGITATED BEFORE THE ITAT WHO IN TURN HAD DECIDED TH E ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE ORDER OF TH E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SH ARMAN WOOLEN MILLS LTD.(2012) 204 TAXMAN 82 (P&H) NOTING THAT DIVIDEND COULD BE TAXED ONLY IN THE HANDS OF THE SH AREHOLDERS AND IT WAS THE MD WHO WAS SHAREHOLDER IN M/S PUNJAB METALLICS P.LTD. AND NOT THE ASSESSEE COMPANY AND T HEREFORE, THE DEEMED DIVIDEND COULD BE TAXED IN THE HANDS OF THE MD ONLY. COPY OF THE ORDER WAS PLACED BEFORE US AT P.B 130-135. 13. LD.DR ON THE OTHER HAND RELIED ON THE ORDER OF THE LD.CIT(A) CONTENDING THAT THE CONDITIONS SPECIFIED IN SECTION 2(22)(E) OF THE ACT ADMITTEDLY STOOD FULFILLED IN T HE PRESENT CASE AND THEREFORE THE AMOUNT RECEIVED BY THE ASSESSEE F ROM PUNJAB METALLICS HAD BEEN RIGHTLY TREATED AS DEEMED DIVIDE ND IN ITS HANDS. ITA -1507/CHD/2019 A.Y. 2013-14 PAGE 8 OF 16 14. THE LD.COUNSEL FOR THE ASSESSEE WAS ASKED AT BA R TO EXPLAIN THE POSITION OF LAW VIS A VIS THE ISSUE CO NSIDERING THE DECISION OF THE APEX COURT IN THE CASE OF NATIONAL TRAVEL SERVICES VS CIT CA NO.2068-2071 OF 2012 DATED JANUA RY 18 2018. 15. TO THIS, THE LD.COUNSEL FOR THE ASSESSEE PLACED A COMPILATION OF JUDGMENTS BEFORE US CONSISTING OF 11 JUDGMENTS. REFERRING TO THE SAME HE CONTENDED THAT THE ISSUE I N THE CASE OF NATIONAL TRAVEL SERVICES VS. CIT ,WHICH TRAVELL ED UPTO THE SUPREME COURT AND WAS REFERRED TO A LARGER BENCH WA S A DIFFERENT ASPECT RELATING TO INTERPRETATION OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. HE POINTED OUT THAT IN THE CASE OF CIT VS. ANKITECH PRIVATE LIMITED & OTHERS, 340 ITR 14 (DEL), THE HONBLE HIGH COURT HAD IDENTIFIED THREE LIMBS O F SECTION 2(22)(E) AS BEING: ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, BY W AY OF ADVANCE OR LOAN 1) TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENE FICIAL OWNER OF SHARES; 2) TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND HAS SUBSTANTIAL INTEREST; ITA -1507/CHD/2019 A.Y. 2013-14 PAGE 9 OF 16 3) OR ANY PAYMENT BY SUCH COMPANY ON BEHALF OR FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOLDER. 16. HE POINTED OUT THAT WHILE IN ANKITECH (SUPRA) A ND CIT VS. MADHUR HOUSING & DEVELOPMENT COMPANY (DEL HC) ITA NO.721/2011, THE HONBLE DELHI HIGH COURT DEALT WIT H THE SECOND LIMB AND INTERPRETED IT TO BE ONLY ENLARGING THE DEFINITION OF DIVIDEND, HOLDING THAT THE DEEMED DIV IDEND CAN BE TAXED ONLY IN THE HANDS OF SHAREHOLDER AND NOT THE CONCERN RECEIVING IT, WHICH PROPOSITION HE POINTED OUT WAS UPHELD BY THE APEX COURT IN CIT VS. MADHUR HOUSING & DEVELOPM ENT COMPANY 401 ITR 152(SC). IN THE CASE OF NATIONAL T RAVEL SERVICES VS. CIT 347 ITR 305(DEL),HE POINTED OUT TH AT THE ISSUE RELATED TO THE FIRST LIMB WHERE LOAN OR ADVANCE GIV EN TO A SHAREHOLDER BEING A PERSON WHO IS THE BENEFICIAL HO LDER OF SHARE , WAS TO BE INTERPRETED AS TO REFERRING TO BOTH A REGISTERED SHAREHOLDER AND A BENEFICIAL SHAREHOLDER OR ONLY A BENEFICIAL SHAREHOLDER. IT WAS THIS ISSUE WHICH TRA VELLED TO THE HONBLE SUPREME COURT WHO NOTED THE VIEW TAKEN BY THE HONBLE DELHI HIGH COURT IN ONE OF THE CASES OF THE GROUP IN WHICH THE LEAD CASE WAS ANKITECH PRIVATE LIMITED AS REFERRING BOTH TO REGISTERED AND BENEFICIAL SHAREHOLDER ,AND EXPRESSED THEIR DISAGREEMENT WITH THE SAME. THE MATTER WAS AC CORDINGLY REFERRED TO A LARGER BENCH, HE POINTED OUT. THE LD .COUNSEL FOR THE ASSESSEE THEREAFTER POINTED OUT THAT SUBSEQUENT LY THIS ITA -1507/CHD/2019 A.Y. 2013-14 PAGE 10 OF 16 MATTER WAS DISMISSED AS WITHDRAWN WHEN IT CAME UP B EFORE THE LARGER BENCH SINCE THE ASSESSEE HAD SETTLED THE DIS PUTE IN THE VIVAD SE VISVASH SCHEME, 2020. THE LD.COUNSEL FOR THE ASSESSEE FURTHER POINTED OUT THE DECISION OF THE H ON'BLE BOMBAY HIGH COURT IN THE CASE OF PCIT VS. SUNJEWELS INTERNATIONAL LIMITED, 411 ITR 613 AND CIT VS. M/S T. ABDUL WAHID & COMPANY, 428 ITR 426 POINTING OUT THEREFROM THAT IN BOTH THE DECISIONS THE HON'BLE HIGH COURT HAD DISTI NGUISHED THE CASE BEFORE THE HON'BLE SUPREME COURT IN THE CA SE OF NATIONAL TRAVEL SERVICES (SUPRA) BEING IN RELATION TO A DIFFERENT ISSUE AS OPPOSED TO THAT AS DECIDED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF ANKITECH PRIVATE LIMITED & OTH ERS (SUPRA) PERTAINING TO THE TAXABILITY TO DEEMED DIVIDEND BEI NG POSSIBLE ONLY IN THE HANDS OF SHAREHOLDER. HE, THEREFORE, CO NTENDED THAT THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF ANKITECH PRIVATE LIMITED & OTHERS (SUPRA) WAS GOOD LAW AND HAD BEEN REITERATED BY THE HON'BLE JURISDICTIONAL H IGH COURT IN THE CASE OF SHERMAN WOOLLEN MILLS (SUPRA), FOLLOWIN G WHICH THE ITAT HAD DELETED THE ADDITION IN THE CASE OF THE AS SESSEE FOR ASSESSMENT YEAR 2014-15. 17. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO GO NE THROUGH THE DECISIONS CITED BY THE LD.COUNSEL FOR T HE ASSESSEE BEFORE US. WE ARE CONVINCED THAT THE ISSUE REFERRED BY THE APEX COURT TO A LARGER BENCH IS NOT RELEVANT ON ACCOUNT OF WITHDRAWAL ITA -1507/CHD/2019 A.Y. 2013-14 PAGE 11 OF 16 OF THE APPEAL BY THE ASSESSEE HAVING OPTED FOR SETT LEMENT UNDER THE DIRECT TAX VIVAD SE VISHWAS ACT,2020 AND ALSO O N ACCOUNT OF THE FACT THAT THE ISSUE INVOLVED RELATED TO A DI FFERENT ASPECT OF SECTION 2(22)(E) OF THE ACT AS OPPOSED TO THAT B EFORE US. AS RIGHTLY POINTED OUT BY THE LD.COUNSEL FOR THE ASSES SEE WHILE THE ISSUE BEFORE US IS WHETHER LOANS AND ADVANCES GIVEN TO A CONCERN WHICH QUALIFIES AS DEEMED DIVIDEND AS PER S ECTION 2(22)(E) OF THE ACT, WOULD BE TAXABLE IN THE HANDS OF THE CONCERN WHICH ITSELF IS NOT A SHAREHOLDER OF THE CO MPANY ADVANCING THE SAME. IN THE CASE OF NATIONAL TRAVEL SERVICES (SUPRA) HOWEVER THE ISSUE WAS DIFFERENT WHETHER SHA REHOLDER, RECEIVING LOAN OR ADVANCE FROM A COMPANY QUALIFYING AS DEEMED DIVIDEND, IS TO BE A REGISTERED AND/OR BENEFICIAL S HAREHOLDER. 18. AS FOR THE ISSUE BEFORE US, THE HONBLE APEX CO URT IN THE CASE OF MADHUR HOUSING (SUPRA) HAS AFFIRMED THE PRO POSITION OF LAW LAID DOWN BY THE HONBLE DELHI HIGH COURT IN T HE SAID CASE THAT DEEMED DIVIDEND CAN BE TAXED ONLY IN THE HANDS OF A PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF THE BORROWING CONCERN IN WHICH SUCH SH AREHOLDER IS MEMBER OR PARTNER HAVING SUBSTANTIAL INTEREST. 19. HAVING SAID SO, SINCE IN THE PRESENT CASE THE A SSESSEE IS NOT A SHAREHOLDER OF M/S PUNJAB METALICS LIMITED FR OM WHICH IT HAS RECEIVED THE IMPUGNED ADVANCE OF RS.27,20,000/- AND THE SAME THOUGH QUALIFIES AS DEEMED INCOME U/S 2(22)(E ) OF THE ITA -1507/CHD/2019 A.Y. 2013-14 PAGE 12 OF 16 ACT, BUT IS NOT TAXABLE IN THE HANDS OF THE ASSESSE E. THE ADDITION SO MADE IS, THEREFORE, DIRECTED TO BE DELE TED. GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE STAND S ALLOWED. 20. GROUND NO. 4 RELATES TO DISALLOWANCE MADE OF RS . 39,24,228/- U/S 40A(IA) ON ACCOUNT OF TAX DEDUCTED AT SOURCE. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT T HIS FIGURE OF RS. 39,24,228/- WAS PICKED UP FROM THE DISCLOSURE M ADE BY THE TAX AUDITOR IN HIS TAX AUDIT REPORT. OUR ATTENTION WAS DRAWN TO PAPER BOOK PAGE 44 WHEREIN THE SAID AMOUNT WAS REPO RTED AS DISALLOWABLE U/S 40A(IA) BY THE TAX AUDITOR, IN HI S TAX AUDIT REPORT. LD. COUNSEL FOR THE ASSESSEE POINTED OUT TH AT THE TAX AUDITOR HAD MISTAKENLY COMPUTED THE DISALLOWANCE AT RS. 39,24,228/-. AS PER THE LD. COUNSEL FOR THE ASSESS EE THE DISALLOWANCE RELATED TO TWO BILLS ISSUED BY ONE M/S MOHAN LAL CONTRACTOR AGGREGATING TO RS. 788680/- ON WHICH TDS WAS DEDUCTED BY THE ASSESSEE @ 10% BUT WAS REQUIRED TO BE DEDUCTED @ 2%. OUR ATTENTION WAS DRAWN TO THE SAID TWO BILLS PLACED BEFORE US AT PAGE 53-54. THE LD. COUNSEL FO R THE ASSESSEE POINTED OUT THAT THE TAX AUDITOR HAD ON TH E BASIS OF TDS DEDUCTED BY THE ASSESSEE WRONGLY @ 10% AMOUNTIN G TO RS. 78868/- HAD CALCULATED THE AMOUNT OF DISALLOWANCE B Y ASSUMING THE TDS TO HAVE BEEN DEDUCTED @ 2% AND WOR KED THE AMOUNT DISALLOWABLE AT RS. 39,24,228/-. HE STATED THAT THE ITA -1507/CHD/2019 A.Y. 2013-14 PAGE 13 OF 16 DISALLOWANCE ACTUALLY AMOUNTED TO ONLY RS.7,88,680/ - AND PLEADED THAT IT BE RESTRICTED TO THE SAID EXTENT. 21. THE LD. DR, HOWEVER, POINTED OUT THAT LD.CIT(A ) HAD NOTED THAT NO AFFIDAVIT OF TAX AUDITOR TO THE EFFEC T OF HAVING MADE SUCH A WRONG CALCULATION HAD BEEN FILED BY THE ASSESSEE AND THEREFORE, IT WAS NOT POSSIBLE TO BELIEVE THE E XPLANATION. 22. THE LD. COUNSEL FOR THE ASSESSEE AT THIS JUNCTU RE STATED THAT THOUGH HE HAD TRIED PROCURING SUCH AN AFFIDAVI T BUT HAD FAILED TO DO SO. HE PLEADED FOR AN OPPORTUNITY TO PROVE HIS EXPLANATION AND REQUESTED THE MATTER BE REMANDED T O THE AO FOR THE SAID PURPOSE. 23. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT TH E CONTENTION OF THE ASSESSEE THAT THE AMOUNT DISALLOW ABLE U/S 40(A)(IA) HAS BEEN MISTAKENLY REPORTED BY THE TAX AUDITOR AT A HIGHER FIGURE CANNOT BE SIMPLY DISCARDED. THE LD.CO UNSEL HAS MADE CERTAIN FACTUAL CONTENTIONS WHILE EXPLAINING T HE MISTAKEN REPORTING, TO THE EFFECT THAT WHILE THE ASSESSEE HA D DEDUCTED TAXES @ 10% ON THE CONTRACTUAL PAYMENTS TO BE DISAL LOWED OF RS. 7,88,680/-, AMOUNTING TO RS.78868/-, THE AUDITO R HAD ASSUMED TAX DEDUCTED @ 2% AND CALCULATED THE AMOUNT DISALLOWABLE BASIS THIS RATE OF TDS, WHICH AMOUNTED CONSEQUENTLY TO RS.39,24,228/-. THE EXPLANATION OF THE LD.COUNSEL FOR THE ASSESSEE IS NOT OUTRIGHTLY PERVE RSE OR ITA -1507/CHD/2019 A.Y. 2013-14 PAGE 14 OF 16 UNBELIEVABLE, BUT THE FACTS WE FIND, AS POINTED OUT BY HIM NEED TO BE VERIFIED. THEREFORE AGREEING WITH THE PLEA OF THE LD.COUNSEL FOR THE ASSESSEE, WE RESTORE THIS ISSUE TO THE AO TO EXAMINE IT AFRESH IN THE LIGHT OF THE CONTENTIONS M ADE BY THE LD.COUNSEL FOR THE ASSESSEE BEFORE US AS AFORESTATE D, DULY VERIFYING ALL RELEVANT FACTS AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW. NEEDLESS TO ADD THE ASSESSEE BE GRANTED DUE OPPORTUNITY OF HEARING. GROUND OF APPEAL NO.4 IS ALLOWED FOR STATISTICAL PU RPOSES. 24. GROUND NO. 5 READS AS UNDER : 5. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTIO N OF THE LD. AO WHEREIN HE MADE ADDITION OF RS. 1,64,846/- U /S 43B IN RESPECT OF SERVICE TAX AND PF PAYABLE ON EST IMATED, ARBITRARY, PRESUMPTIVE AND PREJUDICED BASIS WITHOUT ASSIGNING ANY LOGICAL REASONS AND HAS ERRONEOUSLY DISALLOWED SOME OF THE EXPENSES OUTSTANDING AS PAYA BLE AT THE END OF THE YEAR EVEN WHEN THE APPELLANT COMP ANY HAD PAID/SETOFF THESE LIABILITIES AND DOCUMENTS IN RESPECT OF THESE WERE ALREADY SUBMITTED. 25. THE ISSUE RELATES TO DISALLOWANCE MADE OF SERVI CE TAX AND PF NOT HAVING BEEN DEPOSITED BY THE DUE DATE AS PRE SCRIBED U/S 43B OF THE ACT AMOUNTING TO RS. 1,64,846/-. THE LD . COUNSEL FOR THE ASSESSEE POINTED OUT THAT BREAK-UP OF FIGUR E WAS AS UNDER : SERVICE TAX RS. 4000/- PF PAYABLE RS. 160846/- ITA -1507/CHD/2019 A.Y. 2013-14 PAGE 15 OF 16 26. HE STATED THAT HE WAS NOT PRESSING THE ISSUE OF ALLOWABILITY OF SERVICE TAX PAYABLE. VIS--VIS ISS UE OF PF PAYABLE HE POINTED OUT THAT HE HAD FILED COPY OF LE DGER ACCOUNT OF SUCCEEDING YEAR BEFORE THE LD.CIT(A) DEMONSTRA TING THE PAYMENT OF PF IN THE SUCCEEDING YEAR. 27. THE LD. DR, HOWEVER, STATED THAT THE LEDGER ACC OUNT WAS NOT SUFFICIENT AND THE ASSESSEE NEEDED TO SUBSTANTI ATE ITS EXPLANATION WITH NECESSARY DOCUMENTARY EVIDENCE. 28. TO THIS LD. COUNSEL FOR THE ASSESSEE SOUGHT FUR THER OPPORTUNITY AND REQUESTED THE MATTER BE RESTORED TO THE AO FOR THE SAID PURPOSE. 29. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT TH E ASSESSEE HAD ATTEMPTED DEMONSTRATING THE COMPLIANCE WITH THE REQUIREMENTS OF SECTION 43B OF THE ACT VIS A VIS T HE ISSUE OF PF PAYABLE, BUT HAD FAILED TO FILE CLINCHING THIRD PAR TY EVIDENCE FOR WHICH HE HAS SOUGHT FURTHER OPPORTUNITY. IN THE IN TEREST OF JUSTICE THEREFORE WE CONSIDER IT FIT TO GIVE THE AS SESSEE ADEQUATE OPPORTUNITY TO SUBSTANTIATE ITS CLAIM AND ACCORDINGLY RESTORE THE ISSUE OF ALLOWANCE OF PF AS PER THE PRO VISIONS OF SECTION 43B OF THE ACT AMOUNTING TO RS.1,60,846/-, TO THE AO TO EXAMINE IT AFRESH AND THEREAFTER DECIDE IT IN AC CORDANCE WITH LAW. NEEDLESS TO ADD THE ASSESSEE BE GIVEN DUE OPPO RTUNITY TO ITA -1507/CHD/2019 A.Y. 2013-14 PAGE 16 OF 16 PRODUCE ALL EVIDENCES IT SEEKS TO RELY UPON IN SUPP ORT OF ITS CLAIM. GROUND OF APPEAL NO.5 IS PARTLY ALLOWED FOR STATIST ICAL PURPOSES. 30. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 30 TH SEPTEMBER, 2021. SD/- SD/- ( R. L. NEGI) (ANNAPURNA GUPTA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER &+,-.-/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT - 2. / THE RESPONDENT - 3. ' // CIT 4. ' /()/ THE CIT(A) 5. -234,$4,67839/ DR, ITAT, CHANDIGARH 6. 38:#/ GUARD FILE &+ ' / BY ORDER, / ASSISTANT REGISTRAR