The Assistant Commissioner of Income-tax, Non Corporate Circle -22, Tambaram v. Enrec Engineers
[Citation -2016-LL-0921-125]

Citation 2016-LL-0921-125
Appellant Name The Assistant Commissioner of Income-tax, Non Corporate Circle -22, Tambaram
Respondent Name Enrec Engineers
Court ITAT-Chennai
Relevant Act Income-tax
Date of Order 21/09/2016
Assessment Year 2009-10
Judgment View Judgment
Keyword Tags unexplained cash credit • agricultural produce • outstanding balance • agricultural income • family partition • current account • partition deed
Bot Summary: The Assessing Officer did :- 3 -: ITA Nos.1910 1911 2016 not accept the reply of the assessee and disallowed the amount of 53,70,401 - u s 40(a)(ia) as these contract payments fell under Section 194C and the assessee should have deducted TDS on them. The assessee has not brought on record, the details of outstanding expenses or schedule of sundry creditors showing whether the impugned amount is outstanding at the end of the close of the previous year relevant to the assessment year either in the name of the party or :- 5 -: ITA Nos.1910 1911 2016 outstanding expenses. In the interest of justice, we are remitting the issue back to the file of the Assessing Officer with direction to verify the claim of the assessee and the assessee shall place necessary evidence in support of his claim. The assessee replied that the amount was agricultural income derived from the agricultural lands of 18 acres in his HUF at Theni and a net debit of 12,82,007 - for the year ended 31.03.2008 was utilized for investment in the current account for the year ended 31.03.2009 with M s. Enrec Engineers. The AO further observed that if the assessee had balance out of the last year withdrawal, it should have credited the same in the current account as on 31.03.2008 itself and the :- 7 -: ITA Nos.1910 1911 2016 cash on hand as on 31.03.2008 should have been shown in the balance sheet also. The assessee 's AR has submitted a copy of the partition deed and the evidences for having grown coconut trees in 19.13 acres by the HUF. The assessee's AR has submitted that although these details were submitted before the AO, the same was not considered. In our opinion, the assessee has to explain not only identity of the partners, but also capacity of the partners to invest this impugned amount in assessee firm.


IN INCOME TAX APPELLATE TRIBUNAL BENCH, CHENNAI, BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . I.T.A. Nos.1910 & 1911 Mds 2016 Assessment years : 2009-2010 & 2010-2011 Assistant Commissioner M s. Enrec Engineers, of Income Tax, Vs. No.49, 13th Cross Street, Non Corporate Circle -22, New Colony, Tambaram Chrompet, Chennai 600 044. [PAN AABFE 3594Q] ( Appellant) ( Respondent) Appellant by : Shri. Shiva Srinivas, IRS, JCIT. Respondent by : None Date of Hearing : 07-09-2016 Date of Pronouncement : 21-09-2016 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: These two appeals by Department are directed against common order of Commissioner of Income Tax (Appeals)-10, Chennai, dated 28.03.2016 for above assessment years. Since issue in these three appeals are common in nature, these appeals :- 2 -: ITA Nos.1910 & 1911 2016 are combined, heard together, and disposed of by this common order for sake of convenience. For sake of convenience, we take up ITA No.1910 Mds 2016 of assessment year 2006-2010. 2. first common ground raised by Department in these two appeal is that ld. Commissioner of Income Tax (Appeals) erred in deleting disallowance made u s.40(a)(ia) of Act for non deduction of tax at source. For sake of convenience, we take up ITA No.1910 Mds 2016 of assessment year 2009-2010 for adjudication. 3. Brief facts of case are ld. Assessing Officer noticed that assessee had paid labour charges of 53,70,401 - for Assessment year 2009-10 respectively and did not deduct TDS on payments. AO called for explanation and assessee replied that section 40(a)(ia) would be applicable only to expenditure payable at end of year and not expenditure paid on which no tax deduction was made and by relying on Finance Bill 2004 stated that words 'paid' and 'payable' were separate and distinct and separate consequences had been provided in Act for non- deduction and non-payment of tax. Assessing Officer did :- 3 -: ITA Nos.1910 & 1911 2016 not accept reply of assessee and disallowed amount of 53,70,401 - u s 40(a)(ia) as these contract payments fell under Section 194C and assessee should have deducted TDS on them. Aggrieved by order, assessee filed appeal before Commissioner of Income Tax (Appeals). 4. In appellate proceedings, ld. Commissioner of Income Tax (Appeals) deleted disallowance by following order of Special Bench in case of Merilyn Shipping and Transports vs. Addl. CIT (136 ITD 23) (Vizag) (SB) whereas it was held that provisions of Sec. 40(a)(ia) of Act are only applicable to amount shown as payable on date of Balance sheet and it cannot be applied to expenditure already paid by assessee and also ld. Commissioner of Income Tax (Appeals) considered that provisions of Sec. 40(a)(ia) of Act cannot be applied in view of second proviso to Sec. 40(a)(ia) of Act w.e.f. 01.04.2013 relevant to assessment year 2013-2014 and subsequent years in view of judgment of Delhi High Court in case of CIT vs. Ansal Land Mark Township (P) Ltd (2015) 377 IIR 635 wherein it is held that aforesaid amendment which is curative in nature should be applicable retrospectively. Respectfully relying on decision of Hon ble :- 4 -: ITA Nos.1910 & 1911 2016 Delhi High Court, Commissioner of Income Tax (Appeals) directed ld. Assessing Officer to delete disallowance u s.40(a) (ia) of Act in respect of those payments in which assessee has submitted details of PAN by way of affidavits. Aggrieved by order, Revenue filed appeal before Tribunal. 5. None appeared on behalf of assessee. However, we proceed to dispose appeals after hearing ld. Departmental Representative. We perused material on record and judicial decisions cited supra. In our opinion similar issue came for consideration before this Tribunal in case of T. Palanivelu vs. Income Tax Officer, in ITA No. 618 Mds 2015, dated 29.04.2015 wherein it was held as under:- 3. We have heard both sides and perused material on record. We find that Special Bench of Tribunal in case of Merilyn Shipping and Transports vs. ACIT (2012) 136 ITD 23 (Visakhapatnam) and judgment of Gujarat High Court in case of CIT vs. M s. Vector Shipping Services (P) Ltd in ITA No.122 of 2013 dated 09.7.2013 held that sec 40(a)(ia) is not applicable when there is no outstanding balance at end of close of year relevant to assessment yea in respect of these payment. However, assessee has not brought on record, details of outstanding expenses or schedule of sundry creditors showing whether impugned amount is outstanding at end of close of previous year relevant to assessment year either in name of party or :- 5 -: ITA Nos.1910 & 1911 2016 outstanding expenses. Hence, in interest of justice, we are remitting issue back to file of Assessing Officer with direction to verify claim of assessee and assessee shall place necessary evidence in support of his claim. 4. Further, we make it clear that if impugned amount is not outstanding at end of close of assessment year in respect of expenses either as outstanding expenses or as sundry creditors, this amount cannot be disallowed. This ground is remitted back to Assessing Officer for fresh consideration . So, we do not find any infirmity in this issue. payment which is not outstanding at end of close of financial year cannot be disallowed. In present case, ld. Departmental Representative is not able to show that impugned amount outstanding at end of close of financial year. Accordingly, we are in agreement with findings of Commissioner of Income Tax (Appeals) on this issue. This ground raised by Revenue is dismissed in both appeals. 5. next ground in ITA No.1910 2016 raised by Revenue is that ld. Commissioner of Income Tax (Appeals) erred in deleting addition of 30,10,838 - made towards unexplained cash credit in account of partner Mrs. Jayakodi. 6. Brief facts of case are that in AY 2009-10, AO observed that amount of 30,10,838 - had been :- 6 -: ITA Nos.1910 & 1911 2016 credited in current account of one of partner Mr. P. Jayakodi on various dates from April 2008 to October 2008, apart from 3,OO,000 -- of salary and 18,02,105 - being 90% of share profit for that it was out of withdrawal during year. AO observed that current account showed withdrawal of above 1 lakh only from November 2008, and before November 2008 withdrawals were of small amounts. assessee replied that amount was agricultural income derived from agricultural lands of 18 acres in his HUF at Theni and net debit of 12,82,007 - for year ended 31.03.2008 was utilized for investment in current account for year ended 31.03.2009 with M s. Enrec Engineers. Further assessee submitted copies of family partition deed and chitta and adangal in support of its claim. AO did not accept reply of assessee and observed that mere partition deed and chitta and adangal would not suffice to prove source for amounts credited in current account. AO further observed that if assessee had balance out of last year withdrawal, it should have credited same in current account as on 31.03.2008 itself and :- 7 -: ITA Nos.1910 & 1911 2016 cash on hand as on 31.03.2008 should have been shown in balance sheet also. As assessee has not produced any detail as to cultivation and evidence that amount was earned out of agricultural produce and also as no return of income was filed for AY 2009-10, AO disallowed cash credits of .30,10,838 - in partner's account u s 68 and added to total Income. Aggrieved by order, assessee filed appeal before Commissioner of Income Tax (Appeals). 6. In appellate proceedings, ld. Commissioner of Income Tax (Appeals) observed that cash credit in partner's account of 30,10,838 -, ld. Assessing Officer has made addition on ground that assessee did not submit details for agricultural income. assessee 's AR has submitted copy of partition deed and evidences for having grown coconut trees in 19.13 acres by HUF. assessee's AR has submitted that although these details were submitted before AO, same was not considered. When assessee was asked to work out peak credit in respect of aforesaid cash credits in view of earlier cash :- 8 -: ITA Nos.1910 & 1911 2016 withdrawals, assessee 's AR has worked out peak credit at 4,20,746 -. As AO has not considered assessee 's claim of earlier cash withdrawals as source for future cash credits. ld. Commissioner of Income Tax (Appeals) convinced that adopting peak credit is fair proposition under such facts and circumstances. Therefore, ld. Commissioner of Income Tax (Appeals) directed ld. Assessing Officer to restrict addition on account of cash credit in partner's account of 30,10,838 - to 4,20,746 . Agrieved by order, Revenue assailed appeal before Tribunal. 7. Before us, plea of ld. Departmental Representative that assessee has not furnished partners financial statements so as to verify availability of funds with partners to make investment in assessee company. Being so, in our opinion, assessee has to explain not only identity of partners, but also capacity of partners to invest this impugned amount in assessee firm. Accordingly, we remit this issue in dispute to file of ld. Assessing Officer for fresh consideration with direction to assessee to prove capacity and genuineness of transactions alongwith :- 9 -: ITA Nos.1910 & 1911 2016 identity of partners. This ground of Revenue is partly allowed for statistical purpose. 8. In result, appeals of Revenue in ITA No.1910 Mds 2016 is partly allowed for statistical purpose and ITA No.1911 Mds 2016 is dismissed. Order pronounced on Wednesday, 21st day of September, 2016, at Chennai. Sd - Sd - (G. PAVAN KUMAR) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER Chennai Dated:21.09.2016 KV Copy to: 1. Appellant 3. ( ) CIT(A) 5. DR 2. Respondent 4. CIT 6. GF Assistant Commissioner of Income-tax, Non Corporate Circle -22, Tambaram v. Enrec Engineer
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