R.R.Constructions And Infrastructure ... vs Department Of Income Tax

The Deputy Commissioner of M/s. R.R. Constructions and Income Tax, Vs Infrastructure Pvt. Ltd, Company Circle V (4), No.1, Dorai Arasan Street, Chennai 600 034 Saligramam, Chennai 600 093.

[PAN:AADCR 6735R] (अपीलाथ'/Appellant) (()यथ'/Respondent)

अपीलाथ क ओर से / Appellant by : Shri. S. Dasgupta, IRS, JCIT. यथ क ओर से / Respondent by : None

सन ु वाई क तार ख/Date of hearing : 27.04.2015. घोषणा क तार ख /Date of Pronouncement : 30.04.2015

आदे श / O R D E R

PER CHANDRA POOJARI, ACCOUNTANT MEMBER

This appeal by Revenue is directed against the order of the

Commissioner of Income Tax (Appeals)-V, Chennai , dated 21.07.2004,

for the assessment year 2010-11.

:- 2 -: I.T.A.No.2667/Mds/2014.

2. None appeared for assessee inspite of issue of notice for

hearing. We take up the appeal to adjudicate after hearing the ld.

Departmental Representative.

3. The first ground for our consideration is with regard to deletion/

addition made u/s.40(a)(ia) of the Act.

3.1 The Assessing Officer disallowed a sum of D1,11,507/-,

34,77,878/-, D1,65,450/- and D25,55,982/- respectively u/s.40(a)(ia) of

the Act being payments made by the assessee to the sub-contractors

namely M/s.Shakthi Enterprises, M/s.Piyus Enterprises, M/s.Raman

Associates and M/s.Phita Site on the ground that no TDS was made by

the assessee as required u/s.194C of the Act. On appeal, the

Commissioner of Income Tax (Appeals) deleted the same for the

reason that provisions of section 40(a)(ia) of the Act are applicable

only to the amount which was outstanding at the close of the

accounting year. In the assessee's case, it was not outstanding as on

the last day of previous year. Being so, provisions u/s.40(a)(ia) of the

Act are not applicable and placing reliance on the order of the Special

Bench in the case of Merilyn Shipping & Transports Vs. Addl. CIT

(2012) 136 ITD 23(Visakhapatnam), the Commissioner of Income Tax

(Appeals) deleted the addition. Against this, the Revenue is in appeal

before us.

:- 3 -: I.T.A.No.2667/Mds/2014.

4. We have heard the ld. Departmental Representative and

perused the material on record. In this case, the Commissioner of

Income Tax (Appeals) deleted the addition made u/s.40(a)(ia) of the

Act by placing reliance on the Special Bench order of the Tribunal

in the case of Merilyn Shipping and Transports vs. ACIT (2012) 136

ITD 23 (Visakhapatnam) and judgment of Gujarat High Court in the

case of CIT vs. M/s. Vector Shipping Services (P) Ltd in ITA No.122 of

2013 dated 09.7.2013. However, there is no findings given by the

Commissioner of Income Tax (Appeals) whether the impugned amount

is outstanding at the end of the close of the previous year relevant to

the assessment year in the name of these parties or not. Hence, we

are inclined to remit the issue back to the file of the Assessing Officer

to find out from the balance sheet/schedule of sundry creditors

whether the impugned amount is outstanding at the end of the close

of the previous year relevant to the assessment year in these parties

name. With these observations, we are remitting the issue back to the

file of the Assessing Officer for fresh consideration.

5. The next ground for our consideration is with regard to invoking

of provisions u/s.40A(3) of the Act.

5.1 The brief facts of the case are that the Assessing Officer

disallowed sum of D2,53,894/-, D8,22,960/- and D8,87,681/-

:- 4 -: I.T.A.No.2667/Mds/2014.

respectively made by the assessee to M/s. Sri Kripa Highways, M/s.

Udhan Krushi Services and M/s. Ambika Engineering Works u/s.

40A(3) of the Act. The Assessing Officer observed that the payments

were made by the assessee in a remote place where there is no

banking facility and the assessee had to make the payments in cash to

M/s. Sri Kripa Highways, M/s. Udhan Krushi Services and M/s. Ambika

Engineering works towards transport charges of bringing the material

to the site and towards crushing charges of stone for construction

purpose and these payments were made on the request of the

transport operators to be paid by cash since there is no banking facility

in that remote place. According to the Assessing Officer, this instance

of payments would not fall under the exempted provisions of Rule.

Aggrieved, the assessee preferred an appeal before the Commissioner

of Income Tax (Appeals). The Commissioner of Income Tax (Appeals)

was of the view that this instance of payment would fall under the

exempted provisions of Rule 6DD and deleted the additions made by

the Assessing Officer. Against this, the Revenue is in appeal before

us.

6. We have heard the ld. Departmental Representative.

The Commissioner of Income Tax (Appeals) deleted the additions in

this case on the reason that there is no banking facility and payments :- 5 -: I.T.A.No.2667/Mds/2014.

were paid in remote places. There is no mention about the place and

date where the payments were made. Hence, it is not possible for us

to express any opinion on the applicability of Rule 6DD. Hence, we

remit the issue back to the file of the Assessing Officer to reconsider

the issue after bringing all relevant facts to decide the issue. This

issue is remitted back to the file of the Assessing Officer for fresh

consideration.

7. The next ground is with regard to deletion/addition of

D6,88,800/- made u/s.68 of the Act.

7.1 The facts of the case are that the Assessing Officer disallowed

an amount of D6,88,800/- on account of a negative cash balance of

D6,88,800/- for the whole year thereby considered the same as

deemed income u/s.68 of the Income Tax Act, and added to the

income of the assessee. Aggrieved, the assessee preferred an appeal

before the Commissioner of Income Tax (Appeals). It was the

contention of the assessee before the Commissioner of Income Tax

(Appeals) that the additions of the negative cash balance of

D6,88,800/- u/s.68 of the Act by stating that Sec.68 would be

applicable only if credits are found in the books of an assessee and the

negative cash balance does not represent credits. The Commissioner :- 6 -: I.T.A.No.2667/Mds/2014.

of Income Tax (Appeals) observed that once it is negative cash

balance the same cannot be treated as unexplained cash credit u/s.68

of the Act and hence no disallowance can be made as there is no

unexplained credit as per the books of accounts of the assessee. The

Commissioner of Income Tax (Appeals) thus deleted the addition.

Against this, the Revenue is in appeal before us.

8. The ld. Departmental Representative submitted that there is

negative cash balance of D6,68,800/-. The explanation given by the

assessee is not satisfactory. Being so, the income of the assessee

should be treated under Rule 69(C) of the Act rather than Sec.68 of

the Act and mentioning of wrong section cannot be considered as

fatal in view of the provisions of sec.292B of the Act.

9. We have heard the ld. Departmental Representative. In this

case there is actually negative cash balance in the books of accounts

of the assessee during the accounting year relevant to the assessment

year. It is not in the normal course of business and it is very strange

event. Neither law nor human experience guarantee that assessee can

make payments with negative cash balance. The assessee is bound to

explain with material evidence suggesting availability of cash and there

is no unaccounted or concealment income. In the present case the :- 7 -: I.T.A.No.2667/Mds/2014.

assessee not able to explain with reference to the negative cash

balance in the books of accounts. The assessee's only argument before

the Commissioner of Income Tax (Appeals) was that there is wrong

application of section 68. In our opinion, addition to be made u/s.69C

of the Act. The mentioning of Sec.68 by Assessing Officer is not fatal

and it cannot make negative cash balance as positive. In these

circumstances, negative cash balance is to be considered as

unexplained income and addition to be made towards this account as

payments were made by unexplained sources. Accordingly, we sustain

the addition.

10. In the result, the appeal of the Revenue in ITA

No.2667/Mds/2014 is partly allowed for statistical purposes.

Order pronounced on Thursday, the 30th day of April, 2015, at Chennai.

Sd/- Sd/- (वी. दग ु ा" राव) (चं पज ू ार ) V. DURGA RAO (CHANDRA POOJARI) या#यक सद य / JUDICIAL MEMBER लेखा सद य/ ACCOUNTANT MEMBER चे"नई/Chennai. #दनांक/Dated:30.04.2015. KV

आदे श क त&ल'प अ(े'षत/Copy to: 1. अपीलाथ /Appellant 2. यथ / Respondent 3. आयकर आयु*त (अपील)/CIT(A) 4. आयकर आयु*त/CIT 5. 'वभागीय त न-ध/DR

6. गाड फाईल/GF.

:- 8 -: I.T.A.No.2667/Mds/2014.