Income Tax Appellate Tribunal - Delhi
Dcit, Meerut vs Shri Rajeev Kumar Mann, Meerut on 15 May, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "F", NEW DELHI
BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER
AND
SHRI KULDIP SINGH, JUDICIAL MEMBER
ITA No.6266/Del/2016
Assessment Year : 2009-10
DCIT, Circle- 2, Rajeev Kumar Mann,
Meerut. I-12, Phase- 1, Pallav Puram,
Vs.
Meerut.
PAN : AIBPM3833G
(Appellant) (Respondent)
Department by : Shri Atiq Ahmad, Sr. DR
Assessee by : Shri Sandeep Sapra, Adv.
Date of hearing : 22-03-2018
Date of pronouncement : 15-05-2018
ORDER
PER R. K. PANDA, AM :
This appeal filed by the Revenue is directed against the order dated 15.09.2016 of CIT(A), Meerut relating to assessment year 2009-10.
2. Ground no.1 by the Revenue reads as under :-
"1. Whether in the facts and circumstances of the case, the ld. Commissioner of Income Tax (Appeals) has erred in law and fact in restricting the addition to Rs.20,800/- only and deleting the balance addition of Rs.15,75,243/- made by the A.O. u/s 40A(3) of the I.T. Act, 1961, ignoring the independent and third party evidence that the concerned payees had recorded the payments in their books of account in single entry of more than Rs.20,000/- in contradiction of assessee's claim of having paid these amounts on different occasions, each below Rs.20,000/-."
3. Facts of the case, in brief, are that the assessee is an individual and is engaged in the business of sale and servicing of spare parts of generator. It filed 2 ITA No.6266/Del/2016 his return of income on 19.12.2011 declaring total income of Rs.15,33,200/-. During the course of assessment proceedings, the Assessing Officer observed that the assessee has made payment in cash of Rs.18,66,043/- to M/s Allied Engineers, M/s Meerut Automobile, M/s Supertech Engineers and M/s Tureem Power in violation of section 40A(3) of the I.T. Act, 1961. On being questioned by the Assessing Officer, it was submitted that the payments were made on different dates and none of the payment has exceeded Rs.20,000/- at one time. The ledger account of the above parties were produced before the Assessing Officer to substantiate the same. It was submitted that the proprietor of the concern has given the account of such payments consolidatedly to the Accountant of the concern, who has posted the transaction in single entry.
4. However, the Assessing Officer was not satisfied with the explanation given by the assessee. He noted that the copies of the account of the parties in the books of account of the assessee clearly show that the cash payment in excess of Rs.20,000/- against job work is clear cut violation of provision of section 40A(3) of the I.T. Act. The Assessing Officer accordingly made addition of Rs.15,96,043/- by invoking the provisions of section 40A(3) of the I.T. Act.
5. Before the ld. CIT(A), it was submitted that except a payment of Rs.20,800/- on 10.12.2008 to M/s Supertech Engineers, no other cash payment was in excess of Rs.20,000/- at a time. It was reiterated that the Accountant of 3 ITA No.6266/Del/2016 the assessee has passed cumulative entries of various payment made by the assessee, being the proprietor of his concern, out of his imp-rest account.
6. Based on the arguments advanced by the assessee, ld. CIT(A) deleted the addition on the ground that the assessee has not made cash payment of Rs.20,000/- at a time to any of the parties. According to him, making of consolidated entries of the payments actually made denomination of less than Rs.20,000/- each, which is supported by the assessee's ledger account in the books of the payees cannot be made a basis for making disallowance u/s 40A(3) of the I.T. Act in absence of any contrary material to establish that the submissions of the assessee is incorrect. He accordingly, sustained an amount of Rs.20,800/- u/s 40A(3) and deleted the balance of Rs.15,75,243/-.
7. Aggrieved with such order of the ld. CIT(A), the Revenue is in appeal before the Tribunal.
8. We have considered the rival arguments made by both the sides and perused the material available on record. The submissions of the assessee before the Assessing Officer as well as the ld. CIT(A) that none of the payment exceeding Rs.20,000/- cash at a time recorded in the ledger account of the payees could not be controverted by the ld. DR. Therefore, we find merit in the finding of the ld. CIT(A) that making of consolidated entries of the payments actually made in the denomination of less than Rs.20,000/- each, which fact is supported by the assessee's ledgers in payee's books cannot be made a basis for 4 ITA No.6266/Del/2016 making disallowance u/s 40A(3) of the I.T. Act. The ground no.1 raised by the Revenue is accordingly dismissed.
9. Ground no.2 by the Revenue reads as under :-
"2. Whether in the facts and circumstances of the case, the ld. Commissioner of Income Tax (Appeals) has erred in law and fact in deleting the addition of Rs.2,77,27,802/- made by the A.O. u/s 40(a)(ia) of the I.T. Act, 1961, ignoring that addition was made in accordance with the decision of Hon'ble Allahabad High Court, the jurisdictional court in the case of M/s Vector Shipping Services Pvt. Ltd. reported in 262 CTR 245 (All)."
10. Facts of the case, in brief, are that the Assessing Officer during the course of assessment proceedings observed that the assessee has made payment of Rs.2,93,23,845/- in cash to sister concern but no TDS has been deducted. He, therefore, asked the assessee to explain as to why the disallowance u/s 40(a)(ia) should not be made. It was explained by the assessee that no TDS was deducted by him from the contract payments and in view of second proviso to section 40(a)(ia) as introduced w.e.f. 01.04.2013 by Finance Act, 2012 no disallowance u/s 40(a)(ia) can be made if the person from whom TDS was deductible has already filed his return of income. It was submitted that all the persons to whom payments have been made by the assessee are Indian residents and had filed their returns of income within due date along with audited statement of account. Relying on various decisions, it was submitted that the provisions of second proviso to section 40(a)(ia) being curative in nature is applicable retrospectively. It was accordingly submitted that no disallowance u/s 40(a)(ia) is called for.
5ITA No.6266/Del/2016
11. Without prejudice to the above, it was submitted that only 30% of the total expenditure can be disallowed in terms of amendment made vide Finance Act, 2014 to the first proviso to section 40(a)(ia) of the I.T. Act.
12. Based on the argument advanced by the assessee, ld. CIT(A) decided the issue in favour of the assessee by observing as under :-
"I have considered the facts on record and submissions of the appellant and the judicial pronouncements relied upon by the appellant as cited hereinabove and have taken note that all the contractors have filed their respective returns of income and have paid due taxes thereon in their respective cases on or before the due date applicable in their cases. In my considered view, the appellant is eligible to get the benefit of 2nd proviso to section 40(a)(ia) read with 1st proviso to sub section (1) of section 201 of I.T. Act, 1961. I, respectfully following the judicial pronouncements of Hon'ble Supreme Court, Hon'ble Delhi High Court in Commissioner of Income Tax vs. Ansal Land Mark Township (P) Ltd. (2015) 377 ITR 0635 and Agra Tribunal Bench of ITAT in Rajeev Kumar Agarwal vs. Additional Commissioner of Income Tax (2014) 34 ITR 0479, delete the disallowance of Rs.2,77,27,802/- and direct the A.O. accordingly."
13. After hearing both the sides, we do not find any infirmity in the order of the ld. CIT(A). We find the ld. CIT(A) following the decision of the Hon'ble Delhi High Court in the case of Ansal Land Mark Township (P) Ltd. (supra) and various other decisions has given a finding that all the contractors have filed their respective returns of income and paid taxes due thereon on or before the due date applicable in their case. Therefore, the assessee is eligible to get the benefit of second proviso to section 40(a)(ia) read with first proviso to sub- section (1) of section 201 of the I.T. Act. The various other decisions relied on by the ld. counsel for the assessee also support the case that no addition u/s 40(a)(ia) could be made where the payees have furnished return of income u/s 6 ITA No.6266/Del/2016 139 after taking into account such receipts while computing the income in such return of income and paid the taxes due thereon and such person furnishes a certificate to this effect from Accountant of such firm as may be prescribed. It has also been held in various decisions that second proviso to section 40(a)(ia) is applicable with retrospective effect. In this view of the matter and in view of the detailed reasoning given by the ld. CIT(A) while deleting the disallowance made u/s 40(a)(ia), we do not find any infirmity in the same. Accordingly, the order of the ld. CIT(A) on this issue is upheld and the ground raised by the Revenue is dismissed.
14. Grounds no.3 and 4 being general in nature are dismissed.
15. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open Court on this 15th day of May, 2018.
Sd/- Sd/-
(KULDIP SINGH) (R. K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 15-05-2018.
Sujeet
Copy of order to: -
1) The Appellant
2) The Respondent
3) The CIT
4) The CIT(A)
5) The DR, I.T.A.T., New Delhi
By Order
//True Copy//
Assistant Registrar
ITAT, New Delhi