Rakesh Kamlashanker Rai, Vapi vs Department Of Income Tax

ITO, Vapi Ward-3 Shri Rakesh Kamlashankar Rai Vapi. Vs At & Post Sarigam, Main Road Ral. Umbergoan, Dist. Valsad.

PAN : ADAPR 6459 D

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

Revenue by : Shri Nimesh Yadav, Sr.DR Assessee by : Shri K.N. Bhatt

सन ु वाई क तार ख/ Dateof Hearing : 03/03/2015 घोषणा क तार ख / Date of Pronouncement: 13/03/2015

आदे श/O R D E R

PER N.S. SAINI, ACCOUNTANT MEMBER: This an appeal filed by

the Revenue against order of the CIT(A), Valsad dated 30.6.2011 for Asstt.Year 2008-09.

2. The ground no.1 of the appeal of the Revenue is directed against the order of the CIT(A) in deleting the disallowance of Rs.61,243/- made by the AO u/s. 36(1)(va) of the IT Act.

3. We have heard rival submissions and perused the orders of the lower authorities and material available on record. The undisputed facts are that the AO observed that the assessee deducted Rs.31,532/- and Rs.29,711/- from employees' salary for the month of April, 2007 and October, 2007 respectively, which were not paid to the P.F. authorities before the due date provided under the PF Act. He, therefore, added ITA No.2304/Ahd/2011 2

the same to the income of the assessee under section 2(24)(x) r.w.s. Section 36(1)(va) of the Act.

4. On appeal, the CIT(A) allowed deduction to the assessee by following the decision of the Hon'ble Supreme Court in the case of CIT Vs. Alom Extrusion, 319 ITR 306 (SC) wherein, it was held that where the assessee has paid the employee's contribution to PF after the grace period but before the due date of filing of the return under section 139(1) of the Act, deduction was allowable.

5. We find that the issue is now covered by the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corporation, (2014) 366 ITR 170 (Guj) wherein it was held that where the assessee has not credited the employees' contribution to the employees' account in the relevant fund or funds on or before the due date mentioned in Explanation to section 36(1)(va), the assessee shall not be entitled to deduction of such amount in computing the income. Respectfully following the same, we set aside the order of the CIT(A) and restore back the order of the AO on this issue, and thus, this ground of the Revenue is allowed.

6. The ground no.2 of the Revenue is directed against the order of the CIT(A) in deleting the addition of Rs.24,27,566/- and Rs.3,09,600/- made under section 68 of the Act.

7. We have heard rival submissions and perused the orders of the lower authorities and material available on record. The undisputed facts are that the assessee is proprietor of M/s.Sai Petroleum Services and M/s.Sai Labour and Security Services. The AO on verification of capital account of the assessee in respect of Sai Petroleum Services, found that the assessee had shown introduction of opening capital of Rs.24,27,556/-. The assessee was required by the AO to explain the source of capital introduced during the year. The assessee could not ITA No.2304/Ahd/2011 3

submit any explanation or any evidence to establish the genuineness of source of introduction of opening capital of Rs.24,27,556/-. Therefore, the AO added the same to the income of the assessee by invoking the provisions of section 68 of the Act.

8. Similarly, the AO also observed on verification of capital account in respect of Sai Labour and Security Services that the assessee has introduced capital of Rs.3,09,600/- in cash/bank. The assessee was required to explain the source of capital introduced during the year. The assessee did not submit any explanation or evidence to establish the genuineness of the source of capital introduced of Rs.3,09,600/-. Therefore, the AO added the same to the income of the assessee by invoking the provision of section 68 of the Act.

9. On appeal, the CIT(A) deleted the addition by observing that the assessee had explained the issue in detail by furnishing various documents, audit report, financial statements and abstract of cash book highlighting the transactions, whereby the funds were moved from one proprietary concern to other. He observed that the assessee has rightly submitted that it was not an addition/contribution to capital account but simply the movement of funds. The CIT(A) observed that he was convinced with the movement of funds highlighted in the various documents and the explanation furnished by the assessee. According to the CIT(A), the nature and source of the movement of funds stands explained and the explanation provided by the assessee for the movement of funds was satisfactory, and therefore, held that the AO was not justified in raising the issue of provisions of section 68 of the Act.

10. Before us, the DR submitted that finding of the CIT(A) is vague and from the finding of the CIT(A) it could not be deciphered what was the source of introduction of capital of Rs.24,27,556/- and ITA No.2304/Ahd/2011 4

Rs.3,09,600/-. He also contended that the assessee had not offered any explanation about the source before the AO.

11. On the other hand, AR of the assessee supported the order of the CIT(A).

12. We find force in the submission of the DR that the order of the CIT(A) is vague and from the order it is not clear as to what was the exact source of introduction of new capital in two proprietary concerns of the assessee, and on the basis of which particular document the CIT(A) was satisfied about the source of capital. Both the parties before us have not filed any paper book.

13. However, we find that the assessee explained that no proper opportunity to explain the source of introduction of capital was allowed to the assessee by the AO. The DR could not controvert the above contention of the assessee. In the above circumstances, in our considered view, as the assessee was not allowed reasonable opportunity to explain the source by the AO, it shall be in the interest of justice to restore the issue to the file of the AO for adjudication afresh after allowing reasonable and proper opportunity of hearing to the assessee. We therefore, set aside the orders of the lower authorities and remit the matter back to the file of the AO for adjudication afresh as per law. Thus, this ground of the appeal of the Revenue is allowed for statistical purpose.

14. In the result, the appeal of the Revenue is partly allowed for statistical purpose.

Order pronounced in the Court on Friday, the 13th March, 2015 at Ahmedabad.

Sd/- Sd/- (SHAILENDRA KUMAR YADAV) ( N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 13/3/2015