INCOME TAX APPELLATE TRIBUNAL- HYDERABAD BENCH

ITA No.762/Hyd/2012 (ASSESSMENT YEARS 2005-06)

Shri B. Ramakotaiah And Shri Saktijit Dey,JJ.

Sri C. P. Ramaswamy For the Appellant :
Smt. Amisha S. Gupt For the Respondent :

The order of the Bench was delivered by

Saktijit Dey, Judicial Member.-This appeal filed by the assessee is directed against the order passed by the CIT (A) VI, Hyderabad dated 19-3-2012 passed in ITA No.0069/2009-10/CIT (A) -VI and it pertains to the assessment year 2005-06.

2. The only issue involved in the present appeal is the disallowance made u/s 40(a)(ia) of the Act of an amount of Rs. 1,37,56,960/-.

3. Briefly the facts relating to the issue in dispute are, the assessee is a transport contractor. For the impugned assessment year, the assessee filed his return of income on 30- 10-2005 declaring a total income of Rs. 1,26,959/-. During the scrutiny assessment proceedings, the Assessing Officer noted that the assessee had obtained transport contract of the Andhra Pradesh State Civil Supplies Corporation Ltd.,(APSCSC) Nalgonda to transport rice from the District head quarters to the godowns located at Mandal level. Subsequently, the assessee had entered into a sub-contract with M/s Sayana Warehousing Pvt. Ltd., Chennai for executing the transport contract for a profit at the rate of 1% on the gross receipts. The Assessing Officer further noted that during the year under dispute the assessee had received gross receipts of Rs. 1,38,95,919 from APSCSC Ltd., Nalgonda and had remitted Rs. 1,37,56,960/- to M/s Sayana Warehousing Pvt. Ltd., Chennai. The Assessing Officer further noted that though the assessee had deducted the tax at source on the remittance made to M/s Sayana Warehousing Pvt. Ltd., Chennai, but the TDS amount was paid to government a/c only on 29-9-2005. The Assessing Officer asked the assessee to show cause as to why the entire expenditure of Rs. 1,37,56,960/- shall not be disallowed u/s 40(a)(ia) as the assessee had not deposited the TDS before the expiry of time prescribed under sub-section (1) of section 200 of the Act. Though the assessee submitted its reply, the Assessing Officer rejected the same and completed the assessment by disallowing the expenditure claimed of Rs. 1,37,56,960/- by adding it to the returned income of the assessee. The assessee being aggrieved of the assessment order preferred an appeal before the CIT (A).

4. Before the CIT (A), it was contended by the assessee by raising an additional ground that in view of the amendment made to section 40(a)(ia) by the Finance Act, 2010, TDS amount if deposited on or before the due date for filing the return as provided u/s 139(1) of the Act, the same cannot be disallowed u/s 40(a)(ia) of the Act. It was contended by the assessee that the amendment made to section 40(a)(ia) by Finance Act, 2010 being remedial and curative in nature and therefore the same is applicable with retrospective effect from the assessment year 2005-06. The CIT (A) however rejected the contentions made by the assessee and sustained the addition made by the Assessing Officer by observing in the following manner:-

"5. I have considered carefully the facts and evidence. Firstly, the additional ground being a legal ground is hereby ordered to be admitted. Since there is only one issue, all t he grounds are being adjudicated together. There is no dispute about the fact that for the current asset. Year i.e. 2005-06, sec. 40(a)(ia) postulated that TDS had to be deducted and paid as per the time prescribed u/s 200(1). Since the appellant had clearly deducted the tax and made the payment beyond the prescribed time, I do not see any reason whereby the delay can be condoned or a different decision can be taken. Secondly, it is clearly a contract from the State Civil Supplies Department to the appellant for the transportation of rice. There is no fact which supports the claim of the appellant that this is contract of sale. Thirdly, the retrospective amendment to sec. 40(a) (ia) is effective from 1-4-2010. The argument of the appellant that the retrospective amendment would apply from asst. Year 2005-06 is absolutely against the very simple reading of the law. If such an interpretation were to be taken, then it would obviously defeat the very letter and reading of the amendment and would also defeat the mention of the date 1-4-2010 in the amendment. Accordingly, the addition made in this regard is ordered to be confirmed."

5. The learned authorised representative for the assessee reiterating the stand taken before the CIT (A) submitted before us that the TDS amount having been paid before the due date of filing the return, no disallowance u/s 40(a)(ia) of the Act can be made in view of the amendment made to section 40(a)(ia) by Finance Act, 2010. In support of such contention, the learned authorised representative for the assessee relied upon the following decisions:-

i) Golden Stables Lifestyle Centre (P) Ltd. Vs. CIT 9ITA No.5145/Hyd/2009)
ii) ITO vs. Taru Leading Edge (P) Ltd. (ITA No.3592/Hyd/2011)

6. The learned Departmental Representative submitted before us that the assessee though deducted the tax on 31-3- 2005 but has retained the money with him without depositing it into the government account within the prescribed period. It was submitted that the assessee had paid the amount to the government account much after only on 29-9-2005 which shows that the assessee is clearly an assessee in default as per section 201(1) of the IT Act. She contended that in such view of the matter, disallowance made was justified.

7. We have heard rival submissions and perused the material on record. There is no dispute to the fact that the assessee has deposited the TDS amount on 29-9-2005 as the Assessing Officer himself has mentioned this fact in the assessment order. An amendment was made to section 40(a)(ia) by Finance Act, 2010 which reads as under After the aforesaid amendment sec. 40(a)(ia) reads as under:-

" any interest, commission or brokerage, (rent, royalty) fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under chapter XVII-B and such tax has not been deducted or, after deduction, has not been deducted or after deducting tax has not been paid on or before due date specified in sec. 139(1)."

The Hon'ble Calcutta High Court in case of CIT vs. Virgin Creations in judgment dated 23-11-2011 in ITA No.302 of 2011 GA 3200/2011 held that amendment to the provisions of sec. 40(a)(ia) of the Act, by the Finance Act, 2010 would be applicable retrospectively from 1-4-2005. Following the aforesaid decision of Hon'ble Calcutta High Court, different benches of the Tribunal have also held that the amendment brought to section 40(a)(ia) by Finance Act, 2010 would apply retrospectively from 1-4-2005 and if an assessee has deposited the TDS amount before due date of filing of return u/s 139(1), no disallowance can be made u/s 40(a)(ia) of the Act. The orders of the Tribunal relied upon by the learned authorised representative for the assessee also are in the similar line. In the facts of the present case, there is no dispute that the assessee has deposited TDS amount before the due date of filing the return u/s 139(1) of the Act. Hence, in view of the ratio laid down by the Calcutta High Court in case of CIT vs. Virgin Creations (supra) and decisions of different benches of Income-tax Appellate Tribunal, we hold that the assessee having deposited TDS amount before the due date of filing the return u/s 139(1) no disallowance can be made by invoking the provisions contained u/s 40(a)(ia) of the Act. Accordingly, we direct the Assessing Officer to delete the addition of Rs. 1,37,56,960/-.

8. In the result, appeal filed by the assessee stands allowed.
Order was pronounced in the open Court on 31 -05-2013.
ITA No.1749/Hyd/2012
x. This appeal by the department is directed against the order dated 26-9-2012 of CIT (A)-VI, Hyderabad passed in appeal No.0642/2011-12 pertaining to the assessment year 2009-10.
2. The department has raised the following effective ground before us:-

"The ld CIT (A) ought not to have allowed relief to the assessee though the assessee has not substantiated the sources for the credits/deposits made into the bank account with corroborative documentary evidence."

3. Briefly the facts are, the assessee is an individual filed its return of income on 25-11-2009 for the assessment year under dispute declaring a total income of Rs. 2,61,250/- and agricultural income of Rs. 72,630/-. Assessee's case was selected for scrutiny assessment. In course of scrutiny assessment proceedings, the Assessing Officer on examining the assessee's bank account with ICICI Bank Ltd., Secunderabad Branch noticed cash deposits as well as other deposits made into the bank account. When the Assessing Officer asked the assessee to furnish the transaction-wise details of the deposits, the assessee submitted that out of the total cash deposit of Rs. 21,34,500/- in his bank account, he had taken loan of Rs. 10 lakhs from Sri P. Nageswara Rao for his personal purpose to help his aunt for her surgery. Due to unavoidable circumstances, the surgery was postponed and the same was deposited in the bank in the form of cash. The assessee again in the month of May, 2008 withdrew an amount of Rs. 4,91,500/- for his personal purpose and again re-deposited in the bank in the form of cash in August, 2008. The assessee further explained that he was owning some land at Gandamguda and willing to start some construction activity and took a loan of Rs. 5 lakhs, from Mr. Rajeev Aurangabadkar in December, 2008. He withdrew Rs. 4 laths from his account for this purpose and the construction activity could not commence and he re-deposited the same in March, 2008. The Assessing Officer has accepted the assessee's explanation to the extent of deposit of Rs.9.9 lakhs. However, so far as balance of Rs. 11,44,500/- is concerned, the Assessing Officer rejected the contention of the assessee and treating it as unexplained income, added the same u/s 69 of the Act. Being aggrieved of the addition made by the Assessing Officer, the assessee preferred an appeal before the CIT (A).

4. The CIT (A) after considering the submissions of the assessee and examining the materials on record deleted the addition by observing as under:-

"4.1. These deposits can be categorised and examined in three groups on the basis of the explanation of the assessee. The first group of deposits are as follows:-

The assessee has submitted that these amounts had been deposited out of the cash withdrawal of Rs. 4,90,000 on 27-5-2008 which had been withdrawn for hte medical treatment of the assesses aunt)./ The Assessing Officer has not accepted this explanation stating that the sum of Rs. 4,90,000 had been used for repayment of loan to Sri P. Nageswara Rao. It is seen from the entries in the bank account and the assessee 's explanation that the repayment has taken place subsequently, i.e., on 27-8-2008 and on 11-9-2008. Before this, the assessee had made a self withdrawal; of Rs. 4,91,500 on 31-5- 2008. However, as per the assessee, this amount was eventually not utilised and was re-deposited on the dates mentioned above. The Assessing Officer has ignored this withdrawal of Rs. 4,91,500 in his order without giving any justification. I find that the assessee's explanation is reasonable and deserves acceptance.

4.2. The second group of deposits consists of the following:-

The assessee submitted that he had borrowed a sum of Rs. 6 lakhs from Sri Rajeev Aurangabadkar for the purpose of development of land at Gandhamguda village. The borrowals are not disputed by the Assessing Officer. The assessee further submitted that he had paid advances to Sri M.V. Bhadra Rao (contractor for electrical works) and Sri G. Shanker (contracator for civil works). Since the project did not materialise, the assessee recovered the advances from the two persons and the deposits were made out of these amounts. The fact that payments were made to these two persons is borne out fo the bank details extracted in the assessment order. The subsequent deposits also tally exactly with the subsequent disputed deposits. The assessee 's explanation, therefore, is logical and reasonable. The Assessing Officer has not considered this explanation of the assessee and presumed that these deposits had been made out of his income.
4.3. The third set of deposits are as follows:-

The assessee submitted that the deposits had been made out of his income for the current year and the savings from the earlier years. The Assessing Officer did not accept this explanation since the assessee had not furnished any invoices/vouchers for the consultation fees, rental income and agricultural income so as to establish the nexus between the deposits and the income. The fact remains that the assessee had returned an income of Rs. 2,61,250/- and agricultural income of Rs. 72,630/- which has been accepted by the Assessing Officer in his order. These amounts, which reflect the net income of the assessee, would themselves be sufficient to explain the deposits of Rs. 1,44,500/-. It would also be safe and logical to presume that the deposits were made out of the gross receipts of the assessee which naturally would be more than the returned (and net) income. The explanation of the assessee is, therefore, accepted as reasonable.

5. We have heard submissions of the parties and perused the material on record. Out of the total cash deposit of Rs. 21,34,500/- in the bank account, the Assessing Officer had accepted assessee's explanation for the cash deposit of Rs.9.9 lakhs. So far as the balance amount of Rs. 11,44,500/- treated by the Assessing Officer as unexplained deposit as would be evident from the order of the CIT (A) quoted hereinbefore. The assessee has sufficiently discharged the onus of proving the said deposits in to the bank account. The pattern of deposits and withdrawals made in the bank account which are reproduced by the Assessing Officer in page-2 of assessment order does not establish the fact that the deposits made of a total amount of Rs. 5 lakh on 25-8- 2008, 26-8-2008 and on 8-9-2008 are out of the withdrawals of Rs. 4,91,000/- made on 27-5-2008. Similarly, the assessee's explanation with regard to the deposits of Rs. 1 lakh and Rs. 4 lakh respectively on 29-1- 2009 and on 18-3-2009 are acceptable in view of the fact the Assessing Officer has not disputed the fact of borrowals of Rs. 5 lakhs made from Mr. Rajeev Aurangabadkar on 12-12-2008. Similarly, assessee's explanation with regard to total deposits of Rs. 1,44,500/- on different dates as mentioned in para 4.3 of the CIT (A)'s order also cannot be rejected considering the nexus between the deposits and the income and also the fact that the assessee had shown income of Rs. 2,61,250/- and agricultural income of Rs. 72,630/- which has not been disputed by the Assessing Officer. Considering the totality of facts and the circumstances of the case, we do not find any infirmity in the order of the CIT (A) in deleting the additions made by the Assessing Officer as the assessee has satisfactorily explained the source of such deposits. In aforesaid view of the matter, we confirm the order of the CIT (A) and dismiss the grounds raised by the department.

6. In the result, the appeal filed by the department stands dismissed.
ITA No. 241 of 2013
This appeal by the department is directed against the order dated 1-11-2012 of CIT (A)-VI, Hyderabad passed in appeal No.0484/11-12/CIT(A)-VI pertaining to the assessment year 2009-10.

x. The sole grievance of the revenue in the present appeal is with regard to the direction of the CIT (A) to the Assessing Officer to determine the net profit at the rate of 5% of the purchases and stock put for sale during the year.

x. At the time of hearing, despite service of notice, none appeared on behalf of the assessee-respondent and not even a petition for adjournment was received from the assessee. Hence, we have heard the learned Departmental Representative and proceeded to dispose of the appeal ex parte on merits.

x. We have heard the learned Departmental Representative and perused the material on record in the light of the impugned order of the CIT (A). We find that the issue involved in the present appeal is squarely covered by the consistent view taken by the co-ordinate bench of this Tribunal in similar matters wherein the Tribunal has held that income of the assessee in this particular line of business of liquor has to be estimated at 5% on purchase of stock put for sale. In fact, relying upon one of such order passed by the Tribunal in the case of M/s Amaravati Wine Shop (ITA No.1196/Hyd/2011 dated 8-6-2012), the CIT (A) has directed the Assessing Officer to determine the net profit at the rate of 5% of stock put for sale during the year. Since the impugned order of the CIT (A) is in consonance with the consistent view taken by the co-ordinate bench of this Tribunal in similar matter, we do not find any infirmity in the order of the CIT (A). Accordingly, we uphold the same by rejecting the grounds of appeal raised by the department.

The order pronounced in the open court on May 31, 2013