Prarthana Jalan
IT-I: Where assessee engaged in trade of tractors and spares, allowed discount on sale of tractors which was duly evidenced from delivery challans, vouchers and cheque details etc., assessee's claim for deduction in respect of discount so granted was to be allowed
IT-II: Where assessee received loan through account payee cheques and, in support of loan transaction he also brought on record copy of books of account, bank statement and income-tax return of lender, transaction in question was to be regarded as genuine and, thus, loan amount could not be added to assessee's taxable income under section 68
IT-III: In view of amendment made to section 40(a)(ia) by Finance Act, 2010 with retrospective effect from 1-4-2005, where in respect of commission, assessee deducted tax during last month of previous year and same was deposited to credit of Government before due date specified in sub-section (1) of section 139, payment so made could not be disallowed under section 40(a)(ia)
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[2014] 41 taxmann.com 493 (Gujarat)
HIGH COURT OF GUJARAT
Commissioner of Income-tax-I
v.
Patel Ramniklal Hirji*
V.M. SAHAI AND N.V. ANJARIA, JJ.
TAX APPEAL NOS. 605 & 606 OF 2011†
AUGUST 23, 2012
I. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of [Discount] - Assessment year 2005-06 - Assessee was engaged in trade of tractors and spares - It claimed deduction of discount in respect of sale of tractors - Assessing Officer held expenditure was on very high scale and not genuine - He thus rejected assessee's claim - Commissioner (Appeals) noted that there were various evidences in terms of delivery challans, vouchers and cheque details, which proved factum of discount - Further recipients of discounts signed vouchers evidencing receipt of discount by them - He thus allowed assessee's claim - Tribunal upheld order of Commissioner (Appeals) - Whether on facts, impugned order passed by Tribunal did not require any interference - Held, yes [Para 3.2] [In favour of assessee]
II. Section 68 of the Income-tax Act, 1961 - Cash credits [Loan] - Assessment year 2005-06 - Assessee had shown unsecured loans in name of four different persons in books of account - Assessing Officer added said amount as unexplained credit on ground that genuineness of transactions and creditworthiness of depositors were not properly established - Commissioner found that assessee had furnished copies of accounts, copies of bank statements and copies of income-tax returns of all depositors, and therefore, identity of parties were established - Moreover, loan was received through account payee cheques - Commissioner (Appeals) thus deleted addition made by Assessing Officer - Tribunal confirmed said order - Whether on facts, impugned order passed by Tribunal did not require any interference - Held, yes [Para 4] [In favour of assessee]
III. Section 40(a)(ia) of the Income-tax Act, 1961 - Business disallowance - Interest, etc., paid to a resident without deduction of tax at source [Time of deposit] - Whether in view of amendment made to section 40(a)(ia) by Finance Act, 2010 with retrospective effect from 1-4-2005, where in respect of commission, assessee deducted tax during last month of previous year and same was deposited to credit of Government before due date specified in sub-section (1) of section 139, payment so made could not be disallowed under section 40(a)(ia) - Held, yes [Para 5] [In favour of assessee]
Pranav G. Desai for the Appellant.
JUDGMENT
N.V. Anjaria, J. - The present appeals arise from common order dated 23-09-2010 of Income-tax Appellate Tribunal, Rajkot Bench, Rajkot, passed in Income-tax Appeal No.1004 of 2009 and Cross Objections No.205 of 2009. Appeal No.605 relates to the common order insofaras it related to Income-tax Appeal No.1004 of 2009. Appeal No.606 of 2011 is referable to the order in Cross Objections.
1.1 The following four questions are raised by the appellant proposing them as substantial questions of law:
"1. Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.22,47,086/- made on account of disallowance of discount expenditure?
2. Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.5,50,000/- made on account of unexplained cash credit?
3. Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.1,46,016/- made on account of interest on unexplained cash credit of Rs.5,50,000/-?
4. Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.3,16,100/- made u/s.40(a)(ia)?"
1.2 Question No.4 above is common and it is the only question raised as substantial question of law in Tax Appeal No.606 of 2011.
2. We have heard learned advocate Mr. Pranav G. Desai appearing for the appellant-Department in both these appeals.
3. The assessee has been engaged in the trade of tractors and spares. He filed his return of income of the assessment year 2005-06 declaring his income. During the course of the assessment proceedings, the Assessing Officer noticed firstly that the assessee had debited Rs.2,45,586/- towards discount expenses in the profit and loss account. The discount was shown in respect of sales of tractors. According to the Assessing Officer that expenditure was on very high scale and not genuine. He, therefore, disallowed discount expenses of Rs.22,47,086/-. Secondly, the assessee had shown unsecured loans in the name of four different persons totalling Rs.5,50,000/- in the books of account. That amount came to be added by the Assessing Officer as unexplained credit on the ground that the genuineness of transactions and creditworthiness of the depositors were not properly established. In the third place, it was observed by Assessing Officer that the interest amount of Rs.1,46,016/- was paid on cash credit by the assessee. That was disallowed by the Assessing Officer as a consequence of treating the cash credits as unexplained. Lastly, according to him, the assessee had shown the amount of Rs.3,16,100/- as commission paid, which came to be disallowed by the Assessing Officer under section 40(a)(ia) of the Income-tax Act, 1961, on the ground that instead of deducting tax at source at the time of payment, the assessee deducted tax at source in the month of March only.
3.1 The assessee preferred appeal before the Commissioner of Income-tax (Appeals) and succeeded on all aforesaid counts. In respect of discount expenses, the CIT(A) held that there were various evidences in terms of delivery challans, vouchers and cheque details, which prove the factum of expenses in question. He noticed that the Assessing Officer had recorded statements of the eight parties in hushed up manner without properly eliciting necessary details. There were 12 purchasers of tractors in respect of whom the discount amount was shown by the assessee.
3.2 The Commissioner remanded the case to the Assessing Officer directing him to cross-examine the parties again and upon their cross-examination being done, all the six parties in their statements duly confirmed the amounts of discount received by them. The CIT(A) concluded that the Assessing Officer was not right in disallowing the discount expenditure.
3.3 With regard to the addition of unexplained cash credit, the CIT(A) held that the appellant had furnished copies of accounts, copies of bank statements and copies of income-tax returns of all the depositors, and therefore, the identity of the parties were established. The CIT(A) accordingly deleted the addition of the amount in respect of cash credit. As far as the addition made under section 40(a)(ia) of the Act is concerned, the Commissioner held that section 139(1) provided for the deduction of tax in the last month of the previous year. Assessee had deposited the tax at source within time and therefore the addition could not have been made.
3.4 In the appeal of the Department, the Income-tax Appellate Tribunal confirmed the findings of the Commissioner (Appeals) in respect of all the three issues and dismissed the appeal of the Revenue.
4. It was observed by the Tribunal that upon the case being remanded, the Assessing Officer had issued summons to those persons, who then clarified and admitted that they had received the discount. The vouchers were signed evidencing the receipt of the discount by them. Similarly, with regard to cash credit amount, the six depositors furnished requisite details to prove their identity, and showed the place of their residence. The loan was received through account payee cheques. Copies of bank statement was given and the details of Permanent Account Numbers were available. All these materials duly proved the genuineness of the transaction of loan as well as the creditworthiness of the depositors. Therefore, the Tribunal did not commit any error in confirming the findings of CIT(A).
5. In respect of addition under section 40(a)(ia) the Tribunal noted that under the Finance Act, 2010, the section was retrospectively amended with effect from 01-04-2005. It was provided that the tax to be deducted at source in respect of any interest, commission, etc. was required to be paid before the date specified in sub-section (1) of section 139. As the assessee had deducted the tax during the last month of previous years and the same was deposited to the credit of the Government in the month of May, 2005, i.e. before the due date specified in sub-section (1) of section 139 of the Act, the expenses relating to the commission paid were allowable.
6. From the above, it is clear that the Tribunal recorded its confirming findings on the basis of relevant material, which were proper and reasonable. In the circumstances, none of the four questions raised any substantial question of law to be considered by this Court.
7. Both the Tax Appeals are devoid of merits and they are dismissed.
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