DCIT, CHENNAI V. R.R.Constructions and Infrastructure Pvt. ltd., CHENNAI

ITA 2667/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90320 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 21-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S DAS GUPTA IRS
• Keywords: Unexplained cash credit; Deemed to accrue or arise in india
• Section: 40A(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . !' , # $% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER ./ I.T.A. NO.2667/MDS/2014 ( / ASSESSMENT YEAR : 2010-2011) THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE V (4), CHENNAI 600 034 ( &' /APPELLANT) VS M/S. R.R. CONSTRUCTIONS AND INFRASTRUCTURE PVT. LTD, NO.1, DORAI ARASAN STREET, SALIGRAMAM, CHENNAI 600 093. [PAN:AADCR 6735R] ( ()&' /RESPONDENT) / APPELLANT BY : SHRI. S. DASGUPTA, IRS, JCIT. / RESPONDENT BY : NONE /DATE OF HEARING : 27.04.2015. /DATE OF PRONOUNCEMENT : 30.04.2015 * / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, CHENNAI , D ATED 21.07.2004, FOR THE ASSESSMENT YEAR 2010-11. I.T.A.NO.2667/MDS/2014. :- 2 -: 2. NONE APPEARED FOR ASSESSEE INSPITE OF ISSUE OF NOTI CE FOR HEARING. WE TAKE UP THE APPEAL TO ADJUDICATE AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE. 3. THE FIRST GROUND FOR OUR CONSIDERATION IS WITH REG ARD TO DELETION/ ADDITION MADE U/S.40(A)(IA) OF THE ACT. 3.1 THE ASSESSING OFFICER DISALLOWED A SUM OF D1,1 1,507/-, 34,77,878/-, D1,65,450/- AND D25,55,982/- RESPECTIV ELY U/S.40(A)(IA) OF THE ACT BEING PAYMENTS MADE BY THE ASSESSEE TO THE SUB-CONTRACTORS NAMELY M/S.SHAKTHI ENTERPRISES, M/S.PIYUS ENTERPRIS ES, M/S.RAMAN ASSOCIATES AND M/S.PHITA SITE ON THE GROUND THAT NO TDS WAS MADE BY THE ASSESSEE AS REQUIRED U/S.194C OF THE ACT . ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE SA ME FOR THE REASON THAT PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE APPLICABLE ONLY TO THE AMOUNT WHICH WAS OUTSTANDING AT THE CLO SE OF THE ACCOUNTING YEAR. IN THE ASSESSEES CASE, IT WAS NO T OUTSTANDING AS ON THE LAST DAY OF PREVIOUS YEAR. BEING SO, PROVISION S U/S.40(A)(IA) OF THE ACT ARE NOT APPLICABLE AND PLACING RELIANCE ON THE ORDER OF THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDL. CIT (2012) 136 ITD 23(VISAKHAPATNAM), THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. I.T.A.NO.2667/MDS/2014. :- 3 -: 4. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE A ND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION MADE U/S. 40(A)(IA) OF THE ACT BY PLACING RELIANCE ON THE SPECIAL BENCH ORDER OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ACIT (2012) 136 ITD 23 (VISAKHAPATNAM) AND JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF CIT VS. M/S. VECTOR SHIPPING SERVICES (P) LTD IN ITA NO.122 OF 2013 DATED 09.7.2013. HOWEVER, THERE IS NO FINDINGS GIVEN BY THE COMMISSIONER OF INCOME TAX (APPEALS) WHETHER THE IM PUGNED AMOUNT IS OUTSTANDING AT THE END OF THE CLOSE OF THE PRE VIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR IN THE NAME OF THESE PARTIES OR NOT. HENCE, WE ARE INCLINED TO REMIT THE ISSUE BACK TO THE FILE O F THE ASSESSING OFFICER TO FIND OUT FROM THE BALANCE SHEET/SCHEDULE OF SUND RY CREDITORS WHETHER THE IMPUGNED AMOUNT IS OUTSTANDING AT THE E ND OF THE CLOSE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YE AR IN THESE PARTIES NAME. WITH THESE OBSERVATIONS, WE ARE REMITTING TH E ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATI ON. 5. THE NEXT GROUND FOR OUR CONSIDERATION IS WITH REGA RD TO INVOKING OF PROVISIONS U/S.40A(3) OF THE ACT. 5.1 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSING OFFICER DISALLOWED SUM OF D2,53,894/-, D8,22,960/- AND D8, 87,681/- I.T.A.NO.2667/MDS/2014. :- 4 -: RESPECTIVELY MADE BY THE ASSESSEE TO M/S. SRI KRIPA HIGHWAYS, M/S. UDHAN KRUSHI SERVICES AND M/S. AMBIKA ENGINEERING W ORKS U/S. 40A(3) OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT THE PAYMENTS WERE MADE BY THE ASSESSEE IN A REMOTE PLACE WHERE T HERE IS NO BANKING FACILITY AND THE ASSESSEE HAD TO MAKE THE P AYMENTS IN CASH TO M/S. SRI KRIPA HIGHWAYS, M/S. UDHAN KRUSHI SERVICES AND M/S. AMBIKA ENGINEERING WORKS TOWARDS TRANSPORT CHARGES OF BRIN GING THE MATERIAL TO THE SITE AND TOWARDS CRUSHING CHARGES OF STONE F OR CONSTRUCTION PURPOSE AND THESE PAYMENTS WERE MADE ON THE REQUES T OF THE TRANSPORT OPERATORS TO BE PAID BY CASH SINCE THERE IS NO BANKING FACILITY IN THAT REMOTE PLACE. ACCORDING TO THE ASSESSING OF FICER, THIS INSTANCE OF PAYMENTS WOULD NOT FALL UNDER THE EXEMPTED PROVI SIONS OF RULE. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOM E TAX (APPEALS) WAS OF THE VIEW THAT THIS INSTANCE OF PAYMENT WOULD FALL UNDER THE EXEMPTED PROVISIONS OF RULE 6DD AND DELETED THE AD DITIONS MADE BY THE ASSESSING OFFICER. AGAINST THIS, THE REVENUE I S IN APPEAL BEFORE US. 6. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTA TIVE. THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED TH E ADDITIONS IN THIS CASE ON THE REASON THAT THERE IS NO BANKING FA CILITY AND PAYMENTS I.T.A.NO.2667/MDS/2014. :- 5 -: WERE PAID IN REMOTE PLACES. THERE IS NO MENTION AB OUT THE PLACE AND DATE WHERE THE PAYMENTS WERE MADE. HENCE, IT IS NO T POSSIBLE FOR US TO EXPRESS ANY OPINION ON THE APPLICABILITY OF RULE 6DD. HENCE, WE REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING O FFICER TO RECONSIDER THE ISSUE AFTER BRINGING ALL RELEVANT FACTS TO DEC IDE THE ISSUE. THIS ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. 7. THE NEXT GROUND IS WITH REGARD TO DELETION/ADDITION OF D6,88,800/- MADE U/S.68 OF THE ACT. 7.1 THE FACTS OF THE CASE ARE THAT THE ASSESSIN G OFFICER DISALLOWED AN AMOUNT OF D6,88,800/- ON ACCOUNT OF A NEGATIVE C ASH BALANCE OF D6,88,800/- FOR THE WHOLE YEAR THEREBY CONSIDERED T HE SAME AS DEEMED INCOME U/S.68 OF THE INCOME TAX ACT, AND ADD ED TO THE INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). IT WAS THE CONTENTION OF THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) THAT THE ADDITIONS OF THE NEGATIVE CASH B ALANCE OF D6,88,800/- U/S.68 OF THE ACT BY STATING THAT SEC.6 8 WOULD BE APPLICABLE ONLY IF CREDITS ARE FOUND IN THE BOOKS O F AN ASSESSEE AND THE NEGATIVE CASH BALANCE DOES NOT REPRESENT CREDITS. T HE COMMISSIONER I.T.A.NO.2667/MDS/2014. :- 6 -: OF INCOME TAX (APPEALS) OBSERVED THAT ONCE IT IS NE GATIVE CASH BALANCE THE SAME CANNOT BE TREATED AS UNEXPLAINED C ASH CREDIT U/S.68 OF THE ACT AND HENCE NO DISALLOWANCE CAN BE MADE AS THERE IS NO UNEXPLAINED CREDIT AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) THUS DELETED T HE ADDITION. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 8. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THA T THERE IS NEGATIVE CASH BALANCE OF D6,68,800/-. THE EXPLANAT ION GIVEN BY THE ASSESSEE IS NOT SATISFACTORY. BEING SO, THE INCOME OF THE ASSESSEE SHOULD BE TREATED UNDER RULE 69(C) OF THE ACT RATHE R THAN SEC.68 OF THE ACT AND MENTIONING OF WRONG SECTION CANNOT BE CONSIDERED AS FATAL IN VIEW OF THE PROVISIONS OF SEC.292B OF THE ACT. 9. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE. IN THIS CASE THERE IS ACTUALLY NEGATIVE CASH BALANCE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR. IT IS NOT IN THE NORMAL COURSE OF BUSINESS A ND IT IS VERY STRANGE EVENT. NEITHER LAW NOR HUMAN EXPERIENCE GUARANTEE T HAT ASSESSEE CAN MAKE PAYMENTS WITH NEGATIVE CASH BALANCE. THE ASSE SSEE IS BOUND TO EXPLAIN WITH MATERIAL EVIDENCE SUGGESTING AVAILABIL ITY OF CASH AND THERE IS NO UNACCOUNTED OR CONCEALMENT INCOME. IN THE PR ESENT CASE THE I.T.A.NO.2667/MDS/2014. :- 7 -: ASSESSEE NOT ABLE TO EXPLAIN WITH REFERENCE TO THE NEGATIVE CASH BALANCE IN THE BOOKS OF ACCOUNTS. THE ASSESSEES ON LY ARGUMENT BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) WAS THAT T HERE IS WRONG APPLICATION OF SECTION 68. IN OUR OPINION, ADDITI ON TO BE MADE U/S.69C OF THE ACT. THE MENTIONING OF SEC.68 BY ASSESSING OFFICER IS NOT FATAL AND IT CANNOT MAKE NEGATIVE CASH BALANCE AS POSITIV E. IN THESE CIRCUMSTANCES, NEGATIVE CASH BALANCE IS TO BE CONSI DERED AS UNEXPLAINED INCOME AND ADDITION TO BE MADE TOWARDS THIS ACCOUNT AS PAYMENTS WERE MADE BY UNEXPLAINED SOURCES. ACCORDIN GLY, WE SUSTAIN THE ADDITION. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IN I TA NO.2667/MDS/2014 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THURSDAY, THE 30 TH DAY OF APRIL, 2015, AT CHENNAI. SD/- SD/- ( . !' ) V. DURGA RAO # / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER !' /CHENNAI. #$ /DATED:30.04.2015. KV $% &' (' /COPY TO: 1. ) APPELLANT 2. / RESPONDENT 3. * ( )/CIT(A) 4. * /CIT 5. '+, - /DR 6. ,. / /GF. I.T.A.NO.2667/MDS/2014. :- 8 -: