Mukesh B.Shah, Ahmedabad vs Assessee

अिधकरण, अहमदाबाद यायपीठ 'ए' अहमदाबाद।

आयकर अपीलीय अिधकरण, IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI KUL BHARAT, JUDICIAL MEMBER आयकर अपील सं./ ./ ITA No. 1177/Ahd/2013 िनधा रण वष /Assessment Year: 2007-08 Mukeshbhai B. Shah ITO, 160, New Cloth Market, Ward 9 (4), Outside Raipur Gate, Raipur, Ahmedabad Ahmedabad PAN : ADFPS 9410 A

अपीलाथ / (Appellant) ू"यथ यथ / (Respondent)

Assessee(s) by : Shri Tej Shah, AR Revenue by : Shri Dinesh Singh, Sr. DR.

सुनवाई क% तार'ख/ / Dateof Hearing : 26/02/2015 घोषणा क% तार'ख / Date of Pronouncement: 17/03/2015

आदे श/O R D E R

PER G.D. AGRAWAL, VICE PRESIDENT:

This is an appeal filed by the assessee and is directed against the order of the Ld. Commissioner of Income-tax(Appeals)-XV, Ahmedabad dated 04.02.2013 pertaining to the Assessment Year 2007-08.

2. Ground No.1 of the assessee's appeal reads as under:-

That the Ld. CIT(A) erred in law and on the facts of the case in confirming the addition of Rs.16,47,395/- made by the Ld. AO u/s 40(a)(ia) of the Act.

3. At the time of hearing before us, it is stated by the ld. Counsel that the assessee is an individual and the assessment year under consideration is Assessment Year 2007-08. The Revenue has made disallowance u/s 40(a)(ia) on the ground that the assessee failed to deduct the tax u/s 194C in ITA No. 1177/Ahd/2013 Mukeshbhai B Shah Vs. ITO For AY 2007-08 2

respect of certain payments. He stated that Section 194C had been made applicable for the individual with effect from 01.06.2007 and therefore, it is not applicable to Assessment Year 2007-08. In support of this contention, he relied upon the decision of the ITAT, Ahmedabad Bench dated 08.07.2011, in the case of Shri Prashant H Shah vs. ACIT vide ITA No.17/Ahd/2011. He also stated that the above decision of ITAT, Ahmedabad Bench is upheld by the Hon'ble Jurisdictional High Court in the case of CIT vs. Prashant H Shah, reported in [2013] 29 taxmann.com 296 (Guj.). He, therefore, submitted that when the assessee was not required to deduct the tax u/s 194C in the year under consideration, the question of any failure to deduct the tax by the assessee and the consequential disallowance u/s 40(a)(ia) is not called for.

4. The ld. Departmental Representative, on the other hand, relied upon the orders of the authorities below.

5. We have carefully considered the arguments of both the parties and perused the material placed before us. We find that the issue under consideration is squarely covered in favour of the assessee by the decision of the ITAT, Ahmedabad Bench which is upheld by the Hon'ble Jurisdictional High Court in the case of Prashat H Shah (supra). The ITAT, Ahmedabad Bench has held as under:-

"...it is further important to mention that vide an amendment with effect from 01.06.2007 and individual or HUF have also been inducted vide sub-clause(k) in section 194C(1) of the IT Act. As this juncture, it is worth to hold that as far as the AY in hand is concerned, i.e. AY 2007-08, this latest amendment of section 194C(1)(k) of the Act being introduced with effect from 01.06.2007 has no applicability. We therefore hold that if the Revenue Department had made an endeavour to invoke the provisions of section 40(a)(ia) for the ITA No. 1177/Ahd/2013 Mukeshbhai B Shah Vs. ITO For AY 2007-08 3

infringement of the provisions of section 194C of the Act by holding that the assessee being an individual got covered by sub-section(1), then according to us, it was an incorrect application of law;"

The above decision of the ITAT, Ahmedabad Bench was upheld by the Hon'ble Jurisdictional High Court in the case of CIT vs. Prashant H Shah (supra), wherein their Lordships of the Hon'ble High Court has held as under:-

"Till clause (k) was introduced in sub-section (1), the category of individual, HUF or AOP was not included. Such amendment was made with effect from 01.06.2007 and obviously, therefore, would not apply to the case on hand.

The Tribunal, therefore, correctly came to the conclusion that the case of the assessee was not covered under Section 194C(1) since in the instant case the payment was made by the assessee to individuals {para 7]."

6. The facts of the assessee's case are identical. Therefore, above decisions of the ITAT, Ahmedabad Bench and Hon'ble Jurisdictional High Court would be squarely applicable to the case of the assessee. No contrary decision of Hon'ble Jurisdictional High Court or Hon'ble Apex Court is brought to our knowledge. We, therefore, respectfully following the above decisions of ITAT, Ahmedabad Bench as well as Hon'ble Jurisdictional High Court in the case of Prashant H Shah (supra), hold that, for Assessment Year 2007-08, the assessee being individual, was not liable to deduct tax u/s 194C of the Act. Since he was not liable to deduct the tax u/s 194C, the disallowance u/s 40(a)(ia) cannot be made for the alleged failure of deduction of tax u/s 194C of the Act. We, therefore, delete the disallowance made u/s 40(a)(ia) of the Act and allow Ground No.1 of the assessee's appeal.

7. Ground Nos. 2 and 4 of the assessee's appeal read as under:-

ITA No. 1177/Ahd/2013 Mukeshbhai B Shah Vs. ITO For AY 2007-08 4

2. That the ld. CIT(A) erred in law and on the facts of the case in confirming the disallowance of Rs.68,390/- made by the AO being amount paid towards insurance premium.

4. That the ld. CIT(A) erred in law and on the facts of the case in confirming the addition of Rs.2,25,000/- u/s 69 of the Act.

8. The aforesaid grounds were not pressed at the time of hearing; accordingly, the same are rejected being not pressed.

9. The assessee had also filed an application seeking admission of additional ground which reads as under:-

In view of the amendment made by the Finance Act 2012, no disallowance u/s 40(a)(ia) can be made if the assessee is not held to be an assessee in default u/s 201(1) of the Act since the payees have already paid their taxes.

10. At the time of hearing before us the additional ground was also not pressed; accordingly, the same is not considered either for admission or for adjudication.

11. Ground No.3 of the assessee's appeal reads as under:-

3. That the Ld. CIT(A) erred in law and on the facts of the case in confirming the addition of Rs.2,35,000/- as payment out of books from undisclosed income.

12. The facts of the case, as discussed in paragraph 5 of the assessment order, read as under:-

"5. On verification of books of account and details furnished by the assessee during the course of assessment proceedings it is noticed assessee has purchased two vehicles i.e. Tavera Model No.GJ-7-TT-9693 for Rs.8,00,000/- and Getz Model No.GJ-18-AC-3132 for Rs.4,25,000/-. Both vehicles were purchased from Mr. Mr. M.I. Sheikh Mohammad Hanif Sheikh respectively. During the course of assessment proceedings the assessee was asked to furnish contra confirmation and sale/purchase deed. On verification of ITA No. 1177/Ahd/2013 Mukeshbhai B Shah Vs. ITO For AY 2007-08 5

purchase/sale deed and cash book of the assessee, it is noticed that an amount of Rs.50,000/- each has been given in cash on 01.05.2006 and 08.03.2007. But the same is not reflected in the cash book. Further, on verification of purchase/sale agreement it is noticed that on the date of agreement there was not outstanding amount against the purchase of above vehicles for which receipts for the payment received have been given by the seller in sale agreement. Therefore, assessee was asked to explain the same. Assessee has furnished confirmation of Shri M.I. Sheikh and Shri Mohammad Hanif Sheikh without PAN or ID proof. Assessee has not proved the genuineness of the above transaction by not producing PAN or ID proof which is main ingredients required to prove the same nor explained discrepancy noticed.

Thus, in fact the assessee has not satisfactorily discharged the onus cast upon him to prove the genuineness of above mentioned transaction by not proving identity, and genuineness. He has not satisfactorily established the genuineness and identity of the above person; hence the same cannot be treated as genuine one and this is simply a device to create bogus liabilities and thereby reduce tax liability or payment made to the seller out of books of accounts in cash. The assessee has totally failed to prove the important ingredients that are identity and genuineness of the transaction. Therefore, amount of Rs.2,35,000/- claimed to have been outstanding as on 31.03.2007 is nothing but colorful device to invest undisclosed income in payments out of books. Therefore, the said amount of Rs.2,35,000/- is added to the total income of the assessee treating the same payment out of books from undisclosed income. Penalty proceedings u/s 271(1)(c) are separately initiated for concealment of particulars of income. (Addition Rs.2,35,000/-)"

13. The above findings of the Assessing Officer is supported by the ld. CIT(A) with the following findings:-

"5.3 Ground No.10 is against the addition of Rs.2,35,000/- in reference to unexplained and undisclosed income. Considering the facts as discussed by A.O. in the Asstt. Order and in the absence of any evidence filed contrary to facts discussed by A.O., I am inclined to accept the contentions of A.O. The addition so made is therefore justified and confirmed. The ground is dismissed."

14. At the time of hearing before us, the ld. Counsel for the assessee has referred to the ledger account of Shri M.I. Sheikh and Shri Mohammad Hanif Sheikh in the assessee's books of accounts and pointed out that the ITA No. 1177/Ahd/2013 Mukeshbhai B Shah Vs. ITO For AY 2007-08 6

ledger accounts of the assessee have been duly affirmed by Shri M.I. Sheikh as well as Shri Mohammad Hanif Sheikh. However, the ld. Counsel was fair enough to admit that except the above confirmation of the ledger account, the assessee does not have any other evidence in his possession as the matter is very old. He also expressed his inability to produce the purchase/sale deed of these vehicles which are referred to by the Assessing Officer in his order. From the perusal of the assessment order, it is clear that the on the purchase/sale date there is mentioning of some payments which are not tallying with the assessee's books of accounts. Therefore, the details of exact payments made by the assessee would be clear only from the purchase/sale deed of vehicles. In the so called confirmation of the ledger account, we find that the assessee has put a seal mentioning "I Confirm the above a/c is true & Correct" and below that seal it is written in Hindi "Mohammad Hanif". It shows that the signatory to this ledger account does not even know English. Similar is the position in the ledger confirmation to the ledger account of Shri M.I. Sheikh. In view of the above, in our opinion, the alleged signature on the ledger account cannot be relied upon, especially when the assessee is avoiding to produce the original documents on the basis of which the vehicles have been purchased by the assessee. Ordinarily, no person would transfer the vehicle unless and until full payment is made. The sale deed gives the details of payments. The assessee is avoiding the production of sale deed. In view of above, we do not find any justification to take a view different than the view taken by the lower authorities. Accordingly, Ground No. 3 of the assessee's appeal is rejected.

15. Ground No.5 of the assessee's appeal reads as under:-

"5. That the Ld. CIT(A) erred in law and on the facts of the case in confirming the order of the AO in charging interest u/s 234A, 234B and 234C of the Act."

ITA No. 1177/Ahd/2013 Mukeshbhai B Shah Vs. ITO For AY 2007-08 7

16. At the time of hearing of the appeal before us, the learned counsel fairly stated that this ground is consequential. We, therefore, direct the Assessing Officer to re-work the interest in accordance with law after determination of final income as per our order.

17. In the result, the assessee's appeal is partly allowed.

Order pronounced in the Court on 17th March, 2015 at Ahmedabad.

Sd/- Sd/-

(KUL BHARAT) G.D. AGRAWAL JUDICIAL MEMBER VICE-PRESIDENT (AZ, LZ & BZ) Ahmedabad; Dated 17/03/2015 Biju T., PS

षत Copy आदे श क% ूितिल-प अमे-षत/ of the Order forwarded to : 1. अपीलाथ / The Appellant 2. ू"यथ / The Respondent. 3. संबंिधत आयकर आयु/ / Concerned CIT 4. आयकर आयु/(अपील) / The CIT(A)- XV, Ahmedabad

5. -वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद/ DR, ITAT, Ahmedabad

6. गाड फाईल / Guard file.

/ BY ORDER, आदे शानु सार

TRUE COPY

Dy./Asstt.Registrar) उप/सहायक पंजीकार ( उप/ अिधकरण, अहमदाबाद / आयकर अपीलीय अिधकरण, ITAT, Ahmedabad