SHRI SURAJ SINGH, Dewas V. THE DCIT-1(1), Ujjain

ITA 647/IND/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5896 (ITAT-INDORE)
• Duration Of Justice: 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 16-09-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: S S DESHPANDE
• Keywords: Reasonable cause
• Section: 40A(3); 143(3); 145; 37

Judgement Text

ITA NO.647/IND/2015 : AY:2010-11 SURAJ SINGH GOUD PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER SURAJ SINGH GOUD DEWAS PAN ACNPG 3266H VS. DCIT 1(1) UJJAIN APPELLANT RESPONDENT APPELLANT BY SHRI S.S. DESHPANDE RESPONDENT BY SHRI MOHD. JAVED DATE OF HEARING 2.8.2016 DATE OF PRONOUNCEMENT 2.8.2016 O R D E R PER O.P. MEENA ACCOUTANT MEMEBR. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF LD. COMMISSIONER OF INCOME-TAX, UJJAIN, [HEREINAFTE R REFERRED TO AS THE CIT(A)] DATED 30.6.2015 AND PERTAINS TO ASSESSMENT YEAR 2010-11 AS AGAINST APPEAL DECIDED I N ASSESSMENT ORDER U/S. 143(3) OF INCOME TAX ACT,1961 ( HEREIN AFTER REFERRED TO AS 'THE ACT) DATED 15.3.20 15 OF DCIT 1(1), UJJAIN [HEREINAFTER REFERRED TO AS THE AO]. 2. AT THE OUTSET OF HEARING, THE LEARNED COUNSEL FO R THE ASSESSEE BROUGHT TO OUR NOTICE THAT THERE IS DELAY OF ONE DAY I.T.A. NO. 647/IND/2015 ASSESSMENT YEAR: 2010-11 ITA NO.647/IND/2015 : AY:2010-11 SURAJ SINGH GOUD PAGE 2 OF 8 IN FILING OF THE APPEAL. THE APPEAL HAS BEEN FILED ON 16.9.2015 BUT THE ORDERS WERE RECEIVED ON 16.7.2015 . THE DELAY WAS DUE TO THE DEATH IN THE FAMILY OF THE LEA RNED COUNSEL AND AS SUCH THE APPEAL COULD NOT BE FILED I N TIME. IT WAS, THEREFORE, PRAYED THAT THE DELAY IN FILING OF THE APPEAL MAY KINDLY BE CONDONED AND THE APPEAL MAY BE DECIDE D ON MERIT. 3. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND CONSIDERING THE REASONING OF THE LEARNED C OUNSEL FOR THE ASSESSEE, WE ARE OF THE VIEW THAT THERE IS A REASONABLE CAUSE FOR NOT FILING THE APPEAL WITHIN T IME. ACCORDINGLY, THE DELAY OF ONE DAY IS CONDONED AND T HE APPEAL IS ALLOWED TO BE PROCEEDED WITH. 4. GROUND NO. 1 RELATES TO MAINTAINING THE ADDITION OF RS.74,232/- U/S 40(A)(IA) OF THE ACT BEING DISALLOW ANCE OF INTEREST EXPENSES ON ACCOUNT OF NON-TDS. 5. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE HAS MADE PAYMENT OF RS.74,232/- AS INTERES T TO M/S SUNDARAM FINANCE LIMITED WITHOUT DEDUCTING TDS THEREON. SINCE THE ASSESSEE HAS FAILED TO DEDUCT TH E REQUIRED TAX, THE SAME WAS DISALLOWED U/S 40(A)(IA) OF THE ITA NO.647/IND/2015 : AY:2010-11 SURAJ SINGH GOUD PAGE 3 OF 8 ACT. ON APPEAL, THE LEARNED CIT(A) NOTED THAT THE Q UESTION OF MAKING ANY DISALLOWANCE U/S 40(A)(IA) OF THE ACT AR ISES IN A SITUATION WHERE IN THE FIRST INSTANCE THE EXPENDITU RE IN QUESTION IS DEDUCTIBLE U/S 37 OF THE ACT. THUS, AF TER THE EXPENDITURE QUALIFIES, AS AFORESAID, THE ASSESSEE C LAIMING DEDUCTION OF SUCH EXPENDITURE, HAS TO ESTABLISH THA T THE SAID EXPENDITURE WAS LAID OUT OR EXPANDED WHOLLY AN D EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN THE PR ESENT CASE, THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE ASSESSEE WAS REQUIRED TO DEDUCT TD S IN THE GIVEN CIRCUMSTANCES. THE ABOVE POSITION HAS BEEN UP HELD BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V S. HYNOUP FOOD AND OIL INDUSTRIES (P) LTD.; 290 ITR 70 1THAT SEPARATE ADDITION CAN BE MADE EVEN AFTER ESTIMATING THE NET PROFIT AFTER REJECTING THE BOOK RESULTS. ACCORDINGL Y, SUCH DISALLOWANCES WERE CONFIRMED BY THE LEARNED CIT(A). 6. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED T HAT NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT CAN BE MAD E WHERE THE PROFIT WAS ESTIMATED BY APPLYING NET PROFIT AND REJECTING THE BOOKS OF ACCOUNTS. IN SUPPORT OF THIS, THIS LE ARNED COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE ON TH E CASE OF ITA NO.647/IND/2015 : AY:2010-11 SURAJ SINGH GOUD PAGE 4 OF 8 CIT VS. HINDUSTAN EQUIPMENT (P) LTD.; (2013) 30 TAXMANN.COM 295 (MP). 7. ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE FACTS OF THE CASE AND THE MATERIAL AVAILABLE ON RECORD. THE FACT THAT THE PAY MENT OF INTEREST WAS MADE WITHOUT DEDUCTING TDS HAS NOT BEE N NEGATED BY THE LEARNED COUNSEL FOR THE ASSESSEE. TH E CASE LAW RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSE SSEE PERTAINS TO DISALLOWANCE U/S 40A(3) OF THE ACT WHER E THE BOOKS OF ACCOUNTS WERE REJECTED AND NP RATE APPLIED . HOWEVER, IN THE INSTANT CASE, THE DISALLOWANCE IS S TATUTORILY MADE ON ACCOUNT OF NON-TDS, WHICH ARE PENAL PROVISI ONS COMPLYING WITH TDS PROVISIONS. HENCE, THE FACTS OF THE PRESENT CASE ARE DISTINGUISHABLE FROM THE CASE LAW RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE. HENCE , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) AND CONFIRM THE SAME. 9. GROUND NO. 2 RELATES TO MAINTAINING THE ADDITION OF RS.90,000/- BEING THE DISALLOWANCE OF CASH PAYMENT TO CREDITORS. ITA NO.647/IND/2015 : AY:2010-11 SURAJ SINGH GOUD PAGE 5 OF 8 10. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS MADE PAYMENT OF RS.90,000/- IN CASH TOWARDS PURCHASES MA DE FROM M/S BHAGWATI TRADING COMPANY. THE NOTICE ISSU ED BY THE ASSESSEE TO M/S BHAGWATI TRADING COMPANY AT THE ADDRESS FURNISHED BY THE ASSESSEE WAS RETURNED UNSE RVED. THEREFORE, THE ASSESSEE WAS ASKED TO PRODUCE THE MA IN PERSONS OF M/S BHAGWATI TRADING COMPANY BUT THE ASSESSEE FAILED TO PRODUCE NEITHER THE PARTY NOR TH E CONFIRMATION LETTER, NOR ANY EVIDENCE OF CASH PAYME NT OF RS.90,000/-. THE ASSESSEE HAS ALSO FAILED TO ESTABL ISH AND SATISFY THE ASSESSING OFFICER THAT THE PAYMENT IN C ASH WAS MADE DUE TO EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCE S AND THE PAYMENT BY CROSSED-CHEQUE OR BANK DRAFT WAS NOT PRACTICABLE. FURTHER, THE ASSESSEE HAS FAILED TO FU RNISH GENUINENESS OF THE PAYMENT AND IDENTITY OF THE PART Y. THE ASSESSING OFFICER WAS ALSO OF THE VIEW THAT SEPARAT E ADDITIONS CAN BE MADE EVEN AFTER ESTIMATING THE NET PROFIT AFTER REJECTING BOOKS OF ACCOUNTS BY PLACING RELIAN CE ON THE CASE DECIDED BY THE HON'BLE GUJARAT HIGH COURT IN T HE CASE OF CIT VS. HYNOUP FOOD AND OIL INDUSTRIES (P) LTD.; 290 ITR ITA NO.647/IND/2015 : AY:2010-11 SURAJ SINGH GOUD PAGE 6 OF 8 702 (GUJ.). ACCORDINGLY, THE ADDITION OF RS.90,000/ - WAS CONFIRMED. 11. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS PER THE LEDGER OF M/S BHAGWATI TRADING COMPANY, THE OPENING BALANCE WAS RS.2,20,832/- AND DURING THE YE AR PURCHASES WERE SHOWN AT RS.2,60,421/-. OUT OF THE PURCHASES OF RS.2,60,421/- THE ASSESSEE HAS MADE PA YMENT OF RS.90,000/- IN CASH AND THE REST OF THE PAYMENTS WERE MADE BY CHEQUE. SINCE THE ASSESSING OFFICER HAS APP LIED 6.25% GP RATE ON ESTIMATED SALES OF RS.7,79,38,584/ -, THEREFORE, NO SEPARATE ADDITION SHOULD HAVE BEEN MA DE. 12. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THA T THE ADDITION OF RS.90,000/- WAS MADE AS NEITHER THE ASS ESSEE COULD PRODUCE THE PARTY NOR THE CONFIRMATION LETTER . THEREFORE, THE ASSESSING OFFICER HAD NO OPTION BUT TO TREAT THE PAYMENT OF RS.90,000/- AS BOGUS PAYMENT IN THE HANDS OF THE ASSESSEE. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE F ACTS, AS ARE AVAILABLE ON RECORD, REVEAL THAT THE ASSESSE E HAS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION AND IDENTITY OF THE PAYEE WITH ANY DOCUMENTARY EVIDENCE . ITA NO.647/IND/2015 : AY:2010-11 SURAJ SINGH GOUD PAGE 7 OF 8 THEREFORE, THE DISALLOWANCE IS REQUIRED TO BE MADE ON ACCOUNT OF NON-GENUINENESS OF PAYMENT BUT AT THE SA ME TIME SINCE THE BOOKS OF ACCOUNTS OF THE ASSESSEE WE RE REJECTED U/S 145 OF THE ACT, THEREFORE, IT WOULD BE REASONABLE TO APPLY GP RATE OF 6.25% ON BOGUS PAYME NT OF RS.90,000/- WHICH COMES TO RS.5,625/- HENCE THE SAM E SUSTAINED AND THE BALANCE OF RS.84,375/- IS DELETED . THIS GROUND IS, THEREFORE, PARTLY ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 2 ND AUGUST, 2016. SD/- (D.T.GARASIA) JUDICIAL MEMBER SD/- (O.P.MEENA) ACCOUNTANT MEMBER DATED : 2 ND AUGUST, 2016. DN/- COPY FORWARDED TO:- 1. THE ASSESSEE/2. THE AO CONCERNED/3. THE LD. PCIT CONCERNED 4. THE LD. CIT(A)/5. THE LD. DR, INDORE/6. THE GUAR D FILE BY ORDER ITA NO.647/IND/2015 : AY:2010-11 SURAJ SINGH GOUD PAGE 8 OF 8 A.R. ITAT, INDORE