IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH, ‘SMC-1’: NEW DELHI

(Through Video Conferencing)

BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND
MS. SUCHITRA KAMBLE, JUDICIAL MEMBE

ITA No.6547/DEL/2018
[Assessment Year: 2012-13]

Neetu Juneja, Income Tax Officer,
Prop. Tirupati Indane, 28n Ward-3,
Netaji Colony, Sanoli Raod, Panipat,
Panipat, Haryana-132103 Haryana
PAN-AFYPJ5593G
Respondent
Appellant

Appellant by Sh. K.C. Aneja, AR
Respondent by Ms. Shivani Bansal, Sr. DR

Date of Hearing 08.03.2021
Date of Pronouncement 28.05.2021

ORDER

PER R.K. PANDA, AM,

This appeal filed by the assessee is directed against the

order dated 20.06.2018 of the learned CIT(A), Karnal, relating to

AY-2012-13.

2. The grounds raised by the assessee are as under:-

i. That without being prejudice to the interest of the
revenue shop & godown security guards salaries of
Rs.324000/- paid to four individual persons and the
A.O. without considering the facts disallowed on the
2 ITA No.6547/Del/2018

pretext of not deducted tax at source and The
Learned CIT(A) erred in confirming the same.

ii. That no services of any contractor were availed and
the A.O. merely conjecture having made payments to
contractor for Rs.324000/- without TDS and wrongly
disallowed the salaries.

iii. That inspite of confirmations submitted the AO
without application of his mind arbitrarily disallowed
the shop rent paid Rs.120000/- & godown rent of
Rs.236379/- to four co-owners individuals and the
Learned CIT(A) erred in confirming the same.

iv. That interest of Rs.86,410/- has wrongly been
charged on advances made for commercial
expediency.

v. That there was no justification for adding Rs.250000
for alleged low house hold expenses.

vi. That the assessee was disturbed due to family feuds
as such delay caused if any please be condoned.

vii. That the appellant craves for leave to add & amend
any grounds of appeal before the hearings.

3. Facts of the case, in brief, are that the assessee is an

individual and is proprietor of the concern styled Tirupati Indane,

engaged in the business of Indane Gas Service at Samalkha. She

filed her return of income 17.09.2012 declaring taxable income at

Rs.5,05,730/-. During the course of assessment proceedings,

the AO noted that the assessee claimed security expenses at

Rs.3,24,000/-. However, she has not deducted TDS as per the

provisions of section 194-C of the Income Tax Act, 1961. In

absence of any reply to the query raised by the AO, invoking the
3 ITA No.6547/Del/2018

provisions of section 40a(ia), the AO made disallowance of
Rs.3,24,000/-. Similarly on account of non-deduction of TDS
from the godown rent of Rs.2,36,379/- and shop rent of
Rs.1,20,000/-, the AO made an addition of Rs.3,56,379/- in
absence of any reply to the query raised by him. The AO also
disallowed proportionate interest @15% on interest free advance
of Rs.5,59,159/- in absence of any plausible explanation. Since,
the assessee had shown withdrawal of household expenses of
Rs.1,06,000/- only for meeting the expenses and considering the
fact that the assessee has two children in the age group of 14
year and 11 years who are both school going and husband of the
assessee is earning only Rs.2.50 lakhs per annum, the AO made
estimated addition of Rs.25,000/- on account of withdrawals for
house hold expenses. Similarly, the AO disallowed an amount of
Rs.62,176/- being 1/6th of the total expenses to Rs.3,73,060/-
incurred by the assessee on account of car running expenses, car
depreciation, maintenance expenses, car insurance,
telephone/mobile bill and interest on car loan for probable
personal use. Thus, the AO determined the total income of the
assessee at Rs.13,59,700/- as against the returned income of
Rs.5,05,750/-
4 ITA No.6547/Del/2018

4. In appeal, the learned CIT(A) called for a remand report

from the AO. After considering the remand report of the AO and

rejoinder of the assessee to such remand report, he restricted the

disallowance of various expenses from 1/6th to 1/10 of the

expenses and sustained the remaining additions.

5. Aggrieved with such order of the learned CIT(A), the

assessee is in appeal before the Tribunal.

6. We have heard the rival arguments made by the both

the sides, perused the orders of the Assessing Officer and the

learned CIT(A) and the paper book filed on behalf of the assessee.

We have also considered the various decisions cited before us.

The first issue raised in the grounds of appeal relates to the

disallowance of Rs.3,24,000/- paid to four individual security

guards appointed by the assessee. We find the AO disallowed an

amount of Rs.3,24,000/- being the salary paid to the security

guards on the ground that such payments have been made to the

contractor without deducting tax u/s 194-C of the Act. We find

the learned CIT(A) sustained the addition by observing as under:-

“I have considered the submissions made by the
appellant as well as the remand report of the A.O.
dated 01.01.2018. The findings of the AO has clearly
shown that no copy of salary register or attendance
register was filed nor was the mode of payment
indicated. Payments to security guards have been
5 ITA No.6547/Del/2018

indicated separately in the P & L A/c. The assessee
has not been able to controvert this finding of the A.O. I,
therefore, confirm the said addition. This ground of
appeal is dismissed.”

7. It is the submission of the learned counsel for the

assessee that no service of the contractor was availed by her and

the payment was made to individual persons and confirmation

were also filed before the learned CIT(A). We find the learned

CIT(A) rejected the same on the ground that this evidence is not a

clinching evidence with regard to proof of payment of salary to

the persons engaged by her as security guards. According to her,

the assessee has not produced copy of any salary register and

attendance register. We find the assessee in the instant case is a

small assessee and has produced confirmation of the persons on

the letter head of its firm as proof of payment of salary to these

persons. Merely because the assessee has not disclosed mode of

payment of salary i.e. either by cheque or cash, the same in our

opinion should not doubted by the learned CIT(A) especially when

such salary to security guards comes to Rs.27,000/- per month

for four persons. Even, if the payment is made in cash, there will

be no violation of section 40A(3) of the Act. We, therefore, hold

that the learned CIT(A) is not justified in sustaining the addition
6 ITA No.6547/Del/2018

of Rs.3,24,000/- paid to four individual persons towards salary

to security guards. The first issue raised by the assessee is

accordingly allowed.

8. The next issue raised in the grounds of appeal relates

to the disallowance of Rs.1,20,000/- on account of shop rent and

Rs.2,36,379/- on account of godown rent.

9. After hearing both the sides, we find the AO disallowed

the amount of Rs.3,56,379/- i.e. (Rs.2,36,379 + Rs.1,20,000)

incurred by the assessee as shop rent and godown rent on the

ground that the assessee did not file any reply to the query raised

by him. We find before the learned CIT(A) has submitted that

godown rent of Rs.2,36,379/- was paid to four person who are

joint owners of the godown and whose details are as under:-

i. Jagdish Parshad Jain S/o Sh. Umrav Singh Jain of

Samalkha,

ii. Jai Pal Jain S/o Sh. Murav Singh Jain of Samalkha

iii. Manoj Jain S/o Sh. Ramesh Jain of Samalkha

iv. Mahavir Prasad Jain S/o Sh. Umrav Singh Jain of

Samalkha
7 ITA No.6547/Del/2018

10. It was argued that each co-owner was paid rent of

Rs.59334/- in a year and each persons TDS liability was below

taxable limit of Rs.180000/- u/s 194(I) of the Act.

11. Similarly, office rent of Rs.1,20,000/- was paid to

Mr. Ashok Juneja who is proprietor of M/s Devsons Sanitation

and is an exiting income tax assessee at Panipat, who has filed

income tax return for AY 2012-13. Further, the rent paid was

below statutory limit u/s 194(1) of the Act and therefore there

was no necessity for deducting tax source. However, we find the

learned CIT(A) after obtaining the remand report from the AO

dismissed the ground raised by the assessee on this issue by

observing as under:-

“5.3. The A.O. has clearly pointed out the

absence of documentary evidence in respect of rent paid

at the assessment as well as the remand stage. The

documents submitted are basically certificates issued by

the appellants and purportedly singed by the co-owners

which lack verifiablility. The so-called rent agreement is

also undated. In the absence of the same, the addition

has been correctly made and I confirm the same. This

ground of appeal is dismissed.”

12. We find the assessee neither at the assessment stage

nor at the remand stage has produced sufficient documents or

evidence for the allowability of the rent. Considering the totality

of facts of the case and in the interest of justice, we deem it
8 ITA No.6547/Del/2018

proper to restore this issue to the file of the AO with a direction to

grant one more opportunity to the assessee to substantiate her

case and decide the issue as per fact and law. Accordingly, the

second issue raised by the assessee in the grounds of appeal is

allowed for statistical purpose.

13. The next issue raised in the grounds of appeal relates

to the disallowance of 86,410/- being proportionate interest on

advance of Rs.5,59,159/- to different persons

14. After hearing both the sides, we find the AO disallowed

the above amount of Rs.86,410/- being proportionate interest on

interest free advance of Rs.5,59,159/-. We find before the

learned CIT(A), it was argued that such amount was advanced for

business purposes, and therefore, it was for commercial

expediency. Therefore, in view of the decision of the Hon’ble

Supreme Court in the case of S.A. Builders ltd. vs CIT reported in

(2007) 288 ITR 1 (SC), no disallowance is called for. However, the

learned CIT(A) dismissed the ground holding that no plausible

explanation was offered for the query raised on this issue except

stating that it was needed for business dealings. From the

various details furnished by the assessee, we do not find what

was the reason for giving such advance. The commercial
9 ITA No.6547/Del/2018

expediency of the same has not been established. Further, it has

not been established as to whether the assessee’s own capital

and free reserves are more than the interest free advance

extended by the assessee during the impugned assessment year.

Considering the totality of facts of the case and in the interest of

justice, we restore this issue to the file of the AO with a direction

to give one more opportunity to substantiate the commercial

expediency or to substantiate that her own capital and free

reserves is more than the interest free advances given. The AO

shall decide the issue as per fact and law after giving due

opportunity of being heard to the assessee. Accordingly, ground

no.4 is allowed for statistical purpose.

15. The next issue relates to the disallowance of

Rs.25,000/- for alleged low house hold expenses.

16. After hearing both the sides, we find the AO

disallowed of Rs.25,000/- on estimate basis being probable

house hold expenditure on the ground that the assessee’s

withdrawal is only Rs.1,06,000/- and her husband is earning

approximate Rs.2.50 laksh per annum and the family of the

assessee consists of the assessee, her husband and two school

going children in the age group of 14 and 11 years. It is the
10 ITA No.6547/Del/2018

submission of the learned counsel for the assessee that

contribution of her husband is about Rs.2 lakhs and the

assessee has shown withdrawal at Rs.1,06,000/- and such

combined withdrawal is reasonable for meeting house hold

expenses. We find some force in the above arguments of the

learned counsel for the assessee. The addition made by the AO is

purely on surmises and conjectures and nothing has been

brought on record to show any extravagant expenditure incurred

by the assessee during the year. Since, the addition made by the

AO is based on surmises and conjectures, which has been upheld

by the learned CIT(A), therefore, we set-aside the order of the

learned CIT(A) and direct the AO to delete the disallowance.

Grounds No.4 and 5 are accordingly allowed.

17. Ground no.6 and 7 being general in nature are

dismissed.

18. In the result, the appeal of the assessee is partly

allowed for statistical purpose.

Order was pronounced in the open Court on 28.05.2021.

Sd/- Sd/-

[SUCHITRA KAMBLE] [R.K.PANDA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Delhi; Dated: 28/05/2021.
11 ITA No.6547/Del/2018

f{x~{tÜ? fÜA P.S Asst. Registrar,
ITAT, New Delhi
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR