SMT. SONU KHANDELWAL, Jaipur V. ITO, Jaipur

ITA 597/JPR/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5321 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 04-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA JCIT DHK
• Assessee Lawyers: RAJEEV SOGANI C AS
• Keywords: Rejection of books of accounts; Business income; Retrospective amendment; Non compliance
• Section: 143(3); 194C; 68; 139

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO. 597/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 . SMT. SONU KHANDELWAL, PROP. M/S. SEJAL ENTERPRISES, C-19, JAGAN PATH,CHOMU HOUSE, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD 2(3), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AHEPK 3168 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI ROHAN SOGANI & SHRI RAJEEV SOGANI (C.AS.) JKTLO DH VKSJ LS@ REVENUE BY : MS ROSHANTA MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 10.05.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 13/05/2016. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT (APPEALS)- I, JAIPUR DATED 08.03.2013 FOR THE A.Y. 2008-09. T HE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER :- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD. A O IN DISALLOWING A SUM OF RS. 3,34,612/- OF INTEREST EXPENSES UNDER SE CTION 40(A)(IA) OF THE INCOME TAX ACT, 1961. THE ACTION OF THE LD. CIT (A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE SAID DISALLOWANCE S OF RS. 3,34,612/-. 2 ITA NO. 597/JP/2013 SMT. SONU KHANDELWAL VS. ITO 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD. A O IN MAKING ADDITION OF RS. 57,000/- OF UNSECURED LOANS FROM PA RTIES UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 :- S.NO. NAME OF THE PARTY AMOUNT 1. BHAWANA KARARIA RS. 19,000/ - 2. SHRI AJAY MAHAWAR RS. 19,000/ - 3. SHRI YOGESH SHARMA RS. 19,000/ - TOTAL RS. 57,000/ - THE ACTION OF THE LD. CIT (A) IS ILLEGAL, UNJUSTIFI ED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY DELETING THE SAID ADDITION OF RS. 57,000/-. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF IRON STEEL FURNITURE F OR OFFICE, HOSPITAL FURNITURE AND AGRICULTURE ITEMS, MAINLY SUPPLIED TO THE GOVERNMEN T DEPARTMENTS. THE ASSESSEE HAS FILED THE RETURN ON 29.09.2008 DECLARING TOTAL INCOME OF RS. 3,50,670/-. THE CASE OF THE ASSEESSEE WAS SCRUTINIZED UNDER SECTION 143(3) AND ASSESSMENT COMPLETED ON 24.12.2010 AT RS. 10,33,830/-. 2.1. DURING THE YEAR UNDER CONSIDERATION, THE ASSES SEE HAS SHOWN GROSS PROFIT OF RS. 35,05,356/- ON A TOTAL SALES OF RS. 2,53,12,664 /- GIVING A GROSS PROFIT RATE OF 13.85% IN COMPARISON TO IMMEDIATELY PRECEDING YEAR AT 9.88% AND FOR THE A.Y. 2006-07 AT 13.40%. IN THE IMMEDIATELY PRECEDING AS SESSMENT IN SCRUTINY ASSESSMENT, THE AO ADOPTED THE GP RATE AT 15%. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO PRODUCE T HE BOOKS OF ACCOUNT. HOWEVER, BOOKS OF ACCOUNTS WERE NOT PRODUCED BY THE ASSESSEE . HOWEVER, THE ASSESSEE VIDE REPLY DATED 19.10.2010 SUBMITTED THAT BOOKS OF ACCO UNTS WERE LOST WHILE BRINGING 3 ITA NO. 597/JP/2013 SMT. SONU KHANDELWAL VS. ITO THE SAME FROM THE SALES TAX DEPARTMENT. SHE, HOWEVE R, FURNISHED THE COPY OF AUDIT REPORT. ON PERUSAL OF THE AUDIT REPORT, THE AO NOTE D THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER AND HELD THAT IN ABSENCE OF STOCK REGISTER, STOCK IS NOT VERIFIABLE FROM THE RECORDS OF THE ASSESSEE. THE A O, THEREFORE, REJECTED THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE BY INVOKING PROVISIONS OF SECTION 145(3) OF THE IT ACT, AND ESTIMATED THE GP @ 15% OF THE TOTAL SALES IN THE FOLLOWING MANNER :- IN VIEW OF THE ABOVE, GROSS PROFIT RATE @ 15% IS APPLIED ON TOTAL SALES OF RS.2,53,12,664/- WHICH COMES TO RS. 37,96, 900/- AND THE ASSESSEE HAS SHOWN GROSS PROFIT OF RS. 35,05,356/-, THUS, DIFFERENCE OF PROFIT OF RS. 2,91,544/- IS ADDED TO THE TOTAL INCO ME OF THE ASSESSEE APPLYING THE GROSS PROFIT RATE OF 15% ON A TOTAL SA LES AND THE SAME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THOUGH THE ASSESSEE HAS WORKED AS AN INDIVIDUAL CAP ACITY AND THE MAIN SOURCE OF INCOME OF THE ASSESSEE IS ONLY FROM THIS BUSINESS, YET THE PERSONAL USE IN TELEPHONE, CONVEYANCE, LOW HOUS EHOLD WITHDRAWALS ETC. ARE NOT ADDED SEPARATELY. THE ABOVE TRADING AD DITION INCLUDES ALL THE EXPENDITURE WHICH IS OF PERSONAL NATURE ND THE SAME ARE NOT DISALLOWED SEPARATELY. THEREAFTER THE AO HAS DISALLOWED THE INTEREST EXPEN DITURE ON THE SECURED LOANS TAKEN IN THE ASSESSMENT YEAR AND IN THE PREVIOUS YE AR TO THE EXTENT OF RS. 3,34,612/-. 3. BEING AGGRIEVED, THE ASSESSEE HAS FILED THE APPE AL AGAINST THE ORDER OF AO BEFORE LD. CIT (A). THE LD. CIT (A) CONFIRMED THE DISALLOWANCE BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE RE LEVANT PARA IN THE ORDER OF LD. CIT (A) IS AS UNDER :- THE SECOND GROUND OF APPEAL IS AGAINST THE ADDITI ON OF RS. 3,34,612/- PAID TO CREDITORS U/S 40(A)(IA). IN THE ASSESSMENT ORDER THE AO STATED THAT THE ASSESSEE HAS TAKEN SOME UNSECURED LOANS IN THIS YEAR ONLY 4 ITA NO. 597/JP/2013 SMT. SONU KHANDELWAL VS. ITO AND SOME UNSECURED LOAN IN THE PREVIOUS YEAR ON WHI CH THE ASSESSEE HAS BEEN PAYING INTEREST OF RS. 3,34,612/- REGULARL Y. WHILE MAKING THE INTEREST PAYMENT WHICH EXCEEDS RS. 5,000/-, THE TDS SHOULD BE DEDUCTED ON THE AMOUNT AND NET AMOUNT WILL BE PAID. HOWEVER, THE ASSESSEE HAS NOT DONE SO FAR I.E. THE TDS HAS NOT B EEN DEDUCTED BY THE ASSESSEE. HENCE, THE AO DISALLOWED RS. 3,34,612 /- ON WHICH TDS WAS NOT DEDUCTED BY THE ASSESSEE AND ADDED THE INTE REST INCOME TO THE TOTAL INCOME OF THE ASSESSEE. DURING THE COURSE OF APPEAL HEARING THE A/R FOR THE APPELLANT SUBMITTED THAT IN THIS REGARD IT IS SUBMITTED THAT SECTION 40(A)(IA) HAS BEEN AMENDED VIDE FINANCE ACT, 2012 AS UNDER PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIO N OF CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB SECTION (1) OF SECTION 201 , THEN FOR THE PURPOSE OF THIS SUB CLAUSE, IT SHALL BE DEEMED THAT THE ASS ESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISH ING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAI D PROVISO. AS PER SECTION 201 OF THE IT ACT, 1961 THE ASSESSEE SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF S UCH TAX, IF THE RECIPIENT HAS FURNISHED HIS RETURN U/S 139 AND HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME AND HAS PAID TAX DUE ON THE SAID INCOME. THE AMENDMENT IN CURATIVE IN NATURE AND IS TO BE TREATED RETROSPECTIVE. THEREFORE SEEING IN THIS CONTENCT, THE DISALLOWANCE U/S 40(A)(IA) MAY PLEASE BE QUASHED. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUB MISSION MADE. THE A/R FOR THE ASSESSEE FAILED TO FILE ANY DOCUMENTARY EVIDENCE REGARDING THE RETURN FILED AND DUE TAXES PAID. IN THE ABSENCE OF ANY SATISFACTORY EXPLANATION THE ADDITION MADE BY THE AO IS CONFIRME D. THE APPELLANT FAILS ON THIS GROUND. 4. NOW THE ASSESSEE IS BEFORE US. 4.1. THE LD. A/R FOR THE ASSESSEE HAS ARGUED VEHEM ENTLY AND HAS SUBMITTED THAT THE ENTIRE INTEREST EXPENDITURE HAS WRONGLY BEEN DI SALLOWED BY THE AO AND CONFIRMED BY LD. CIT (A). FOR THAT PURPOSE THE ASSE SSEE RELIED UPON THE ORDER PASSED BY THIS TRIBUNAL IN THE MATTER OF GIRDHARI LAL BARG OTI IN ITA NO. 757/JP/2012 TO THE FOLLOWING EFFECT :- 5 ITA NO. 597/JP/2013 SMT. SONU KHANDELWAL VS. ITO 10. AT THE OUTSET, THE LD AR FOR THE ASSESSEE HAS S UBMITTED AS UNDER:- 1. THE LEGISLATIVE INTENT FOR INTRODUCING SECTION 40(A )(IA) IS EXPLAINED IN CBDT CIRCULAR NO.5/2005 DT. 15.07.2005 REPORTED AT 269 ITR 101 (STATUTE). IN THE PRESENT CASE THERE IS NO DISPUTE AS TO THE FACT THAT INTEREST HAS ACTUALLY BEEN PAID TO ABOVE FINANCE CO MPANIES AND AS ON 31.03.2009 NO AMOUNT OF INTEREST WAS PAYABLE. TH E SPECIAL BENCH OF ITAT IN CASE OF MERILYN SHIPPING & TRANSPO RT VS. ACIT 16 ITR (TRIB) 1 (PB 62-63) HAS HELD THAT SECTION 40(A) (IA) CANNOT BE INVOKED IN RESPECT OF AMOUNTS ACTUALLY PAID WITHIN THE PREVIOUS YEARS WITHOUT DEDUCTION OF TAX AT SOURCE. AFTER THI S DECISION THE GUJARAT HIGH COURT IN CASE OF CIT VS. SIKANDAR KHAN N. TUNVAR 357 ITR 312 AND CALCUTTA HIGH COURT IN CASE OF CIT VS. CRESCENT EXPORT SYNDICATE 94 DTR 81 HELD THAT SECTION 40(A)(IA) WOU LD COVER NOT ONLY TO THE AMOUNTS WHICH ARE PAYABLE AS ON 31 ST MARCH OF THE PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY T IME DURING THE YEAR. HOWEVER, THE ALLAHABAD HIGH COURT IN CASE OF CIT VS. VECTOR SHIPPING SERVICES (P) LTD. 94 DTR 101/357 ITR 642 H ELD THAT IT IS ONLY THE AMOUNT WHICH IS PAYABLE AND NOT THAT WHICH HAS BEEN ALREADY PAID BY THE END OF THE YEAR THAT CAN BE DIS ALLOWED U/S 40(A)(IA). AGAINST THE SAID DECISION OF ALLAHABAD H IGH COURT, THE DEPARTMENT FILED A SPECIAL LEAVE PETITION (SLP) IN THE SUPREME COURT WHICH WAS DISMISSED BY THE SUPREME COURT VIDE ITS ORDER DT.02.07.2014. THUS, THERE ARE TWO VIEWS ON THIS IS SUE, ONE IN FAVOUR OF THE ASSESSEE AND OTHER AGAINST THE ASSESS EE. CONSIDERING THESE VIEWS, THE VARIOUS BENCHES OF HONBLE ITAT, A FTER CONSIDERING THE VARIOUS AMENDMENT MADE TO SECTION 40(A)(IA) FRO M TIME TO TIME TO REMOVE THE UNDUE HARDSHIP AND CONSIDERING THE DE CISION OF SUPREME COURT IN CASE OF CIT VS. VEGETABLE PRODUCTS LTD. 88 ITR 192 WHERE IT IS HELD THAT WHEN TWO VIEWS ARE POSSIB LE ON AN ISSUE, THE VIEW IN FAVOUR OF THE ASSESSEE HAS TO BE PREFER RED DELETED THE DISALLOWANCE. HE ALSO RELIED ON THE FOLLOWING CASE LAWS: (I) DCIT VS. ANANDA MARAKALA (2014) 150 ITD 323 (B ANG.) (TRIB.) (II) ITO VS. M/S THEEKATHIR PRESS (CHENNAI)(TRIB. ) ITA NO. 2076(MDS)2012 DT. 18.09.2013 THE ISSUE OF APPLICABILITY OF TDS ON AMOUNT PAYABLE AS ON 31ST MARCH ONLY IS ALSO COVERED BY THE DECISION OF THE H ONBLE ITAT 6 ITA NO. 597/JP/2013 SMT. SONU KHANDELWAL VS. ITO JAIPUR BENCH IN CASE OF JVVNL V. DCIT 123 TTJ 888 W HEREIN IT WAS HELD THAT SECTION 40(A)(IA) APPLIES ONLY WHEN T HE AMOUNT IS PAYABLE AND NOT WHERE THE EXPENDITURE IS PAID. THER EFORE WHERE THE ASSESSEE HAS MADE ACTUAL PAYMENT, THE PROVISION S OF SECTION 40(A)(IA) IS NOT APPLICABLE. 2. IT MAY ALSO BE POINTED OUT THAT SECOND PROVISO TO S ECTION 40(A)(IA) INSERTED BY FA, 2012 W.E.F. 01.04.2013 HAS PROVIDED THAT WHERE AN ASSESSEE FAILS TO DEDUCT TAX ON THE SUM PAID TO THE RESIDENT BUT SUCH RESIDENT PAYEE HAS FURNISHED THE RETURN, TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME AND HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM THEN IT WILL BE DEEMED THAT ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE O F FURNISHING OF RETURN BY THE RESIDENT PAYEE. ALL THE FINANCE COMPA NIES TO WHICH ASSESSEE HAVE PAID INTEREST ARE LARGE COMPANIES AND ASSESSED TO TAX. THEREFORE, THE PRESUMPTION IS THAT THESE COMPA NIES HAVE INCLUDED THE INTEREST PAID BY THE ASSESSEE TO THEM IN THEIR INCOME AND PAID TAX THEREON. THE DELHI HIGH COURT IN CASE OF CIT VS. TRANS BHARAT AVIATION PVT. LTD. 320 ITR 671 HAS HELD THAT SINCE DEDUCTEE IS A GOVERNMENT UNDERTAKING, THE TAXES MAY BE PRESU MED TO HAVE BEEN PAID LASTLY BY THE DUE DATE OF FILING OF THE R ETURN OF INCOME AND, THEREFORE, THE LIABILITY OF THE ASSESSEE TO PA Y INTEREST ON THE AMOUNT WHICH WAS TO BE DEDUCTED AS TDS ENDS WITH TH E DUE DATE OF FILING OF THE RETURN BY THE DEDUCTEE. THEREFORE, CONSIDERING THE ABOVE AMENDMENT WHICH IS INTRODUCED TO REMOVE UNINT ENDED HARDSHIP, THE DEPARTMENT MAY BE DIRECTED TO VERIFY THIS FACT AND WHERE FINANCE COMPANIES HAS PAID TAX ON SUCH INTERE ST, NO DISALLOWANCE U/S 40(A)(IA) BE MADE IN THE HANDS OF THE ASSESSEE. IT IS A SETTLED LAW THAT SECOND PROVISO TO SECTION 40( A)(IA) INSERTED W.E.F. 01.04.2013 HAS RETROSPECTIVE EFFECT AS HELD IN BANGALORE BENCH IN CASE OF SH. G. SHANKAR VS. ACIT IN ITA NO.1832/BANG/2013 DT. 10.10.2014, AGRA BENCH IN CAS E OF RAJEEV KUMAR AGARWAL VS. ACIT (2014) 34 ITR(TRIB.)479, DEL HI BENCH IN CASE OF ITO VS. DR. JAIDEEP KUMAR SHARMA (2014) 34 ITR(TRIB.)565, BANGALORE BENCH IN CASE OF DCIT VS. ANANDA MARAKALA (2014) 150 ITD 323 AS THE AMENDMENT WAS MADE TO REMOVE THE UND UE HARDSHIP. 3. IT MAY ALSO BE POINTED OUT THAT AN AMENDMENT HAS BE EN MADE BY FA, 2014 W.E.F. 01.04.2015 IN SECTION 40(A)(IA) WHE REBY IT IS PROVIDED THAT 30% OF ANY SUM PAYABLE TO A RESIDENT SHALL BE DISALLOWED IF TAX IS NOT DEDUCTED AT SOURCE UNDER C H. XVIIB AS 7 ITA NO. 597/JP/2013 SMT. SONU KHANDELWAL VS. ITO AGAINST THE 100% PRESENTLY MADE. THE PURPOSE OF THI S AMENDMENT WAS EXPLAINED IN THE MEMORANDUM AS UNDER:- T HE DISALLOWANCE OF WHOLE OF THE AMOUNT OF EXPENDITU RE RESULTS INTO UNDUE HARDSHIP AND THEREFORE IN ORDER TO REDUCE THE HARDS HIP, IT IS PROPOSED THAT IN CASE OF NON-DEDUCTION OR NON-PAYMENT OF TDS ON PAYM ENTS MADE TO RESIDENTS AS SPECIFIED IN SECTION 40(A)(IA) OF THE ACT, THE DISALLOWANCE SHALL BE RESTRICTED TO 30% OF THE AMOUNT OF EXPENDITURE CLAI MED. THE FINANCE MINISTER WHILE INTRODUCING THE AMENDMEN T IN PARA 207 OF THE BUDGET SPEECH HAS STATED AS UNDER:- 207. CURRENTLY, WHERE AN ASSESSEE FAILS TO DEDUCT AND PAY TAX ON SPECIFIED PAYMENTS TO RESIDENTS, 100 PERCENT OF SUCH PAYMENTS ARE NOT ALLOWED AS DEDUCTION WHILE COMPUTING HIS INCOME. THIS HAS CAUS ED UNDUE HARDSHIP TO TAXPAYERS, PARTICULARLY WHERE THE RATE OF TAX IS ON LY 1 TO 10%. HENCE , I PROPOSE TO PROVIDE THAT INSTEAD OF 100 PERCENT, ONL Y 30% OF SUCH PAYMENTS WILL BE DISALLOWED. FROM THE ABOVE IT CAN BE NOTED THAT THE AMENDMENT MADE BY FA (NO.2) ACT, 2014 W.E.F. 01.04.2015 IS TO REMOVE UNI NTENDED AND UNDUE HARDSHIP AND THEREFORE THIS AMENDMENT SHOULD BE GIVE RETROSPECTIVE EFFECT AS PER THE VARIOUS DECISIONS S TATED ABOVE. IT IS ALSO SUBMITTED THAT THE SUPREME COURT IN CASE OF CIT VS. VATIKA TOWNSHIP PVT. LTD. 109 DTR 33 HAS HELD THAT LEGISLATIONS WHICH MODIFY ACCRUED RIGHTS OR WHICH IMPOSE OBLIGAT IONS OR IMPOSE NEW DUTIES OR ATTACH A NEW DISABILITY HAVE T O BE TREATED AS PROSPECTIVE UNLESS THE LEGISLATIVE INTENT IS CLE ARLY TO GIVE THE ENACTMENT A RETROSPECTIVE EFFECT. HOWEVER, IF LEGIS LATION CONFERS A BENEFIT ON SOME PERSONS BUT WITHOUT INFLICTING A CO RRESPONDING DETRIMENT ON SOME OTHER PERSON OR ON THE PUBLIC GEN ERALLY AND WHERE TO CONFER SUCH BENEFIT APPEARS TO HAVE BEEN T HE LEGISLATORS OBJECT, THEN THE PRESUMPTION WOULD BE THAT SUCH LEG ISLATION, GIVING IT A PURPOSIVE CONSTRUCTION, WOULD WARRANT I T TO BE GIVEN A RETROSPECTIVE EFFECT . THEREFORE EVEN IN A CASE IT IS HELD THAT THE DISALLOWANCE U/S 40(A)(IA) IS WARRANTED, SAME SHOUL D BE RESTRICTED TO ONLY 30% OF THE AMOUNT OF INTEREST PA ID. IN VIEW OF ABOVE, THE ORDER OF THE CIT(A) BE UPHEL D BY DISMISSING THE GROUND OF THE DEPARTMENT. 8 ITA NO. 597/JP/2013 SMT. SONU KHANDELWAL VS. ITO 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. O N ISSUE OF AMOUNT ALREADY PAID DURING THE YEAR OR AMOUNT SHOWN PAYABLE AS ON 31 ST MARCH OF EVERY YEAR, THE VARIOUS COURTS HAVE DIFF ERENT VIEWS I.E. IN FAVOUR OF THE ASSESSEE AND AGAINST TH E ASSESSEE. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. VEGETA BLE PRODUCTS LTD. (SUPRA) HAS HELD THAT WHEN THERE ARE TO VIEWS ON AN ISSUE, THE VIEW IN FAVOUR OF THE ASSESSEE HAS TO BE PREFER RED. THEREFORE, WE CONFIRM THE ORDER OF THE LD. CIT(A). FURTHER THE RECIPIENT ARE NBFC, THEREFORE, NOT POSSIBLE TO NOT BE ASSESSED TO TAX, THESE PAYMENTS WERE RELATED FOR A.Y. 2009-10 AND RETURN F OR A.Y. 2009- 10 ALREADY MIGHT HAVE BEEN FILED BY THESE NBFC BY I NCLUDING THESE INTERESTS RECEIPTS AS THEIR INCOME. THEREFORE , WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD . CIT(A). IN THE ALTERNATIVE, IT WAS SUBMITTED BY THE LD. A/R FOR THE ASSESSEE THAT SINCE THE BOOKS OF ACCOUNTS ARE REJECTED, NO FURTHER ADDITION CAN BE MADE RELYING ON THE SAID BOOKS OF ACCOUNT IN VIEW OF LAW LAID DOWN BY THE HO NBLE PUNJAB & HARYANA HIGH COURT IN THE MATTER OF DULLA RAM, LABOUR CONTRACTOR , KOTKAPURA (2014) 42 TAXMANN.COM 349 ( PUNJAB & HARYANA ). THE LD. A/R HAS ALSO REFERRED THE JUDGMENT OF THE JAIPUR TRIBUNAL PASSED IN THE MATTER OF COSM OPOLITAN TRADING CORPORATION IN ITA NO. 298/JP/2013 AND ALSO THE JUDGMENT IN THE MA TTER OF M/S. K.Y. CONTINENTAL INTERIORS PVT. LTD. VS. ITO IN ITA NO. 595/JP/2013. 4.2. ON THE OTHER HAND, THE LD. D/R HAS RELIED UPON THE ORDER PASSED BY THE AUTHORITIES BELOW AND SUPPORTED THE DISALLOWANCE MA DE BY THE AO. 4.3. WE HAVE HEARD THE RIVAL PARTIES AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. FACTUALLY IT IS NOT DISCERNABLE FROM THE RECORD THA T THE INTEREST PAYMENT HAS ACTUALLY BEEN MADE DURING THE YEAR TO THE EXTENT OF RS. 3,34 ,612/-. THE BENCH HAS ENQUIRED FROM THE LD. A/R WHETHER THE SAID AMOUNT HAS ALREAD Y BEEN PAID IN THE YEAR, TO 9 ITA NO. 597/JP/2013 SMT. SONU KHANDELWAL VS. ITO WHICH THE LD. A/R HAS SHOWN HIS INABILITY TO ASSIST THE COURT. IN THE ABSENCE OF ANY CONCRETE ANSWER, THE BENCH HAS LEFT WITH NO OTHER O PTION BUT TO HOLD THAT THE SAID AMOUNT HAS NOT BEEN PAID DURING THE YEAR. MOREOVER, THIS TRIBUNAL IN THE CASE OF SHRI RAJENDRA YADAV HAS HELD AS UNDER :- 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN ADMITTED FACT THAT T HE APPELLANT CARRIED ON THE BUSINESS OF TRADING OF MARBLE TILES AND SLAB. I T IS ALSO AN ADMITTED FACT THAT THE MARBLE BLOCKS ARE PURCHASED BY THE AS SESSEE AND THE SAME MARBLE BLOCKS ARE SENT TO M/S. GARVIT STONEX, M/S. CHANDA MARBLES & M/S. NIDHI GRANITES FOR THE PURPOSE OF SA WING AND EDGE CUTTING WITH A VIEW TO CONVERT THE MARBLE BLOCKS IN TO MARBLE TILES. IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESS EE HAS PAID A SUM OF RS 1,54,711/- TO M/S. M/S. GARVIT STONEX, RS. 3, 92,711/- TO M/S. CHANDA MARBLES & RS. 2,28,700/- TO M/S. NIDHI GRAN ITES TOTALING RS. 7,76,122/- FOR EDGE CUTTING AND SAWING CHARGES ON V ARIOUS DATES. FROM THE DETAILS GIVEN, THE AO AND THE LD. CIT (A) HAS W ORKED OUT THE AVERAGE CUTTING AND SAWING CHARGES OF MORE THAN RS. 2155/- PER DAY PAID TO THE SAID M/S. GARVIT STONEX, M/S. CHANDA MA RBLES & M/S. NIDHI GRANITES. IN OUR VIEW, THE SAID FIRMS/COMPANIES AR E DOING THE EDGE CUTTING AND SAWING ON REGULAR BASIS AND ARE ALSO HA VING BUSINESS RELATIONSHIP WITH THE ASSESSEE. THE REGULAR BILLS WERE BEING RAISED BY THE SAID CONCERNED PERSONS ON THE ASSESSEE AND THE ASSESSEE HAD BEEN MAKING THE PAYMENT TO THE SAID PERSONS. WE DO NOT AGREE WITH THE CONTENTION OF THE ASSESSEE THAT THERE IS NO WRI TTEN CONTRACT OR ORAL CONTRACT WITH THE SAID PERSONS/FIRMS WHICH MAKE THE PAYMENT AMENABLE FOR DEDUCTION OF TDS UNDER SECTION 194C OF THE IT ACT. WE DO NOT FIND FORCE IN THE SUBMISSIONS, AS PER OUR UN DERSTANDING, UNDER THE CONTRACT AT EVERY PROMISE AND EVERY SET OF PROM ISES ARE FORMED. THE CONSIDERATION FOR EACH OTHER IS AN AGREEMENT AN D AN AGREEMENT ENFORCEABLE BY LAW IS A CONTRACT. IN THE PRESENT CA SE, THE CONTRACT STANDS CONCLUDED WHEN THE ASSESSEE ASKED M/S. GARVI T STONEX AND OTHERS TO DO THE EDGE CUTTING AND SAWING OF GRANITE BLOCKS AND CONVERT THEM INTO MARBLE TILES FOR IT FOR A CONSIDERATION. THE MOMENT THE SAID CONTRACTORS/PERSONS DOING THE SAWING AND EDGE CUTTI NG OF THE MARBLE BLOCKS, THE SAID PERSONS ARE ENTITLED FOR THE AMOUN T REQUIRED TO BE PAID AS PER THE BILLS RAISE BY THEM. IN FACT, IN THE PRE SENT CASE AFTER DOING THE EDGE CUTTING AND SAWING, THE CHARGES WERE EVEN PAID BY THE ASSESSEE, IN OUR UNDERSTANDING, A CONTRACT HAS COM E INTO EXISTENCE BETWEEN THE ASSESSEE AND M/S. GARVIT STONEX AND OTH ERS. IN OUR VIEW, THE ASSESSEE IS RESPONSIBLE FOR PAYING THE AMOUNT T O SUCH PERSONS I.E. CONTRACTOR FOR CARRYING OUT THE SPECIFIC WORK. THE REFORE, THE ASSESSEE 10 ITA NO. 597/JP/2013 SMT. SONU KHANDELWAL VS. ITO IS LIABLE TO DEDUCT THE TAX ON SUCH PAYMENTS. SINC E THE ASSESSEE HAS FAILED TO DEDUCT THE TAX ON THE AMOUNT PAID BY IT T O SUCH PERSONS/CONTRACTOR, THE ASSESSEE IS DUTY BOUND TO D EDUCT THE TAX, AND NON DEDUCTION OF TAX BY THE ASSESSEE, ATTRACTS THE PROVISIONS OF SECTION 40(A)(IA). 6.1. RECENTLY IN THE MATTER OF P.M.S. DIESELS 2015 ] 59 TAXMANN.COM 100 (PUNJAB & HARYANA), HONBLE PUNJAB & HARYANA HIGH COURT HAD ELABORATELY DISCUSSED THE JUDGMENT P ASSED BY THE HONBLE CALCUTTA HIGH COURT AND HONBLE GUJARAT HIG H COURT, HONBLE ALLAHABAD HIGH COURT AND OTHER JUDGMENTS AS AVAILAB LE AND THEREAFTER HAS COME TO THE CONCLUSION THAT THE PROVISIONS OF S ECTION 40(A)(IA) ARE MANDATORY IN NATURE AND NON COMPLIANCE/NON DEDUCTIO N OF TAX ATTRACTS DISALLOWANCE OF THE ENTIRE AMOUNT. HAVING SAID SO, WE WILL BE FAILING IN OUR DUTY IF WE DO NOT DISCUSS THE AMENDMENT BROUGHT IN BY THE FINANCE (NO. 2) ACT 2014 WITH EFFECT FROM 1.4.2015 BY VIRTUE OF WHICH PROVISO TO SECTION 40(A)(IA) HAS BEEN INSERTED, WHI CH PROVIDES THAT IF ANY SUCH SUM TAXED HAS BEEN DEDUCTED IN ANY SUBSEQU ENT YEAR OR HAS BEEN DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFT ER THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139, SUCH S UM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF PREVIOUS YEAR, AND FURTHER, SECTION 40(A)(IA) HAS BEEN SUBSTITUTED WHEREIN THE 30% OF ANY SUM PAYABLE TO A RESIDENT HAS BEEN SUBSTITUTED. IN THE PRESENT CASE, THE AUTHORITIES BELOW HAS ADDED THE ENTIRE SUM OF RS. 7 ,51,322/- BY DISALLOWING THE WHOLE OF THE AMOUNT. THOUGH THE SUB STITUTION IN SECTION 40 HAS BEEN MADE EFFECTIVE WITH EFFECTIVE F ROM 1.4.2015, IN OUR VIEW THE BENEFIT OF THE AMENDMENT SHOULD BE GIVEN T O THE ASSESSEE EITHER BY DIRECTING THE AO TO CONFIRM FROM THE CONT RACTORS, NAMELY, M/S. GARVIT STONEX, M/S. CHANDA MARBLES AND M/S. NI DHI GRANITES AS TO WHETHER THE SAID PARTIES HAVE DEPOSITED THE TAX OR NOT AND FURTHER OR RESTRICT THE ADDITION TO 30% OF RS. 7,51,322/-. IN OUR VIEW, IT WILL BE TIED OF JUSTICE IF THE DISALLOWANCE IS ONLY RESTRIC TED TO 30% OF RS. 7,51,322/-. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE ABOVE SAID MANNER. FURTHER MORE, THE ARGUMENT OF THE ASSESSEE THAT IN VIEW OF THE REJECTION OF BOOKS OF ACCOUNT, NO FURTHER DEDUCTION CAN BE DISALLOWED BY THE AO. THOUGH THE PROPOSITION OF LAW IS CORRECT BUT WHEN WE LOOK INTO THE ASSESSM ENT ORDER, WE FIND THAT THE INCOME HAS BEEN ESTIMATED ON THE BASIS OF GROSS SAL E OF THE ASSESSEE AND 11 ITA NO. 597/JP/2013 SMT. SONU KHANDELWAL VS. ITO DISALLOWANCE HAS BEEN SEPARATELY DONE BY THE AO UND ER SECTION 40(A)(IA). THEREFORE, THE JUDGMENTS REFERRED BY THE LD. A/R AR E NOT APPLICABLE. 4.4. IN VIEW OF THE ABOVE DISCUSSION AND AFTER APPL YING THE RATIO LAID DOWN IN THE CASE OF RAJENDRA YADAV IN ITA NO. 895/JP/2012 DECID ED ON 29.01.2016, IT WILL BE IN THE INTEREST OF JUSTICE IF THE DISALLOWANCE IS ONLY RESTRICTED TO 30% OF RS. 3,34,612/- WHICH COMES TO RS. 1,00,384/-. ACCORDINGLY THE ISS UE IS PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. 5. SECOND GROUND OF THE ASSESSEE IS WITH RESPECT TO CASH CREDIT TO THE EXTENT OF RS. 57,000/-. 5.1. WE HAVE ALREADY HELD THAT ADDITION UNDER SECTI ON 68 WAS MADE AS THE ASSESSEE HAS FAILED TO FURNISH THE IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTION OF THE PERSON. HOWEVER, ON PERUSAL OF T HE RECORD, WE FIND THAT THE ASSESSEE WAS NOT ABLE TO PRODUCE ANY COGENT EVIDENC E TO PROVE THE CREDITWORTHINESS, GENUINENESS AND IDENTITY OF THE P ERSON. THEREFORE, IN VIEW OF SECTION 68 THE ASSESSEE IS NOT ENTITLED TO ANY BENE FIT. THE AO HAS MADE THE SEPARATE ADDITION OF RS. 57,000/- UNDER SECTION 68 AS MENTIO NED IN PARA 5.4 AND 5.5 OF THE ASSESSMENT ORDER. THE ARGUMENT OF THE LD. A/R THAT IN VIEW OF ESTIMATION OF INCOME, NO SEPARATE ADDITION CAN BE MADE, IN OUR VIEW, IS N OT APPLICABLE AND DO NOT COME TO THE RESCUE OF THE ASSESSEE AS THE INCOME OF THE ASS ESSEE WAS ESTIMATED ONLY ON THE BASIS OF TOTAL SALES OF THE ASSESSEE. HAD IT BEEN O THERWISE, THEN NO SEPARATE HEAD- WISE ADDITION OR DISALLOWANCE CAN BE MADE. SINCE T HE INCOME HAS BEEN ESTIMATED 12 ITA NO. 597/JP/2013 SMT. SONU KHANDELWAL VS. ITO ON THE BASIS OF SALES OF THE ASSESSEE, THEREFORE, T HIS GROUND OF THE ASSESSEE IS BOUND TO FAIL. ACCORDINGLY, WE DECIDE THIS GROUND AGAINS T ASSESSEE. 5.2. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/05/201 6. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 13/05/2016 DAS/ VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SMT. SONU KHANDELWAL, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO WARD 2(3), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 597/JP/2013) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR