EVER GREEN TRAILOR SERVICES, NAMAKKAL V. ITO, WARD-1, NAMAKKAL

CO 21/CHNY/2019

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 5523 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 05-09-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 02-04-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S BHARATHCITD R
• Assessee Lawyers: G BASKAR
• Keywords: Opportunity of being heard; TDS
• Section: 40A(3); 40(a)(ia); 201

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER & S HRI S.JAYARAMAN , ACCOUNTANT MEMBER ./ I.T.A.NOS.1325 & 1326/CHNY/2017 / ASSESSMENT YEARS : 2012-13 & 2013-14 M/S.EVER GREEN TRAILOR SERVICE , 6/336-A5,OPP.NTLOA PETROL PUMP, PARAMATHY ROAD, NAMAKKAL 637 001. VS. INCOME TAX OFFICER, WARD-1, NAMAKKAL. [PAN AACFE 5113 G ] ( / APPELLANT) ( /RESPONDENT) ./ I.T.A.NOS.3348 & 3349/CHNY/2018 AND C.O. NOS.20 & 21/CHNY/2018 / ASSESSMENT YEARS : 2012-13 & 2013-14 INCOME TAX OFFICER, WARD-1, NAMAKKAL. VS. M/S.EVER GREEN TRAILOR SERVICE , 6/336-A5,OPP.NTLOA PETROL PUMP, PARAMATHY ROAD, NAMAKKAL 637 001. [PAN AACFE 5113 G ] ( / APPELLANT) ( /RESPONDENT/ CROSS OBJECTOR) ITA NOS.1325 & 1326/CHNY/17 ITA NOS.3348 & 3349/CHNY/18 C.O. NOS.20 &21/CHNY/19 :- 2 -: / ASSESSEE BY : MR.G.BASKAR,ADVOCATE !' /REVENUE BY : MR.S.BHARATH,C.I.T D.R & / DATE OF HEARING : 05 - 09 - 201 9 & / DATE OF PRONOUNCEMENT : 05 - 09 - 201 9 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER I.T.A.NOS.1325 & 1326/CHNY/2017 ARE APPEALS FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDER OF THE PRINCIP AL COMMISSIONER OF INCOME-TAX, SALEM, PASSED U/S.263 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) IN NO.9544(09)/2016-17/PCIT/SLM DA TED 13.02.2017 AND IN NO.9544(10)/2016-17/PCIT/SLM DATED 13.02.201 7 FOR THE ASSESSMENT YEARS 2012-13 & 2013-14 RESPECTIVELY. I.T.A.NOS.3348 & 3349/CHNY/2018 ARE APPEALS FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS), SALEM, IN APPEAL NO.145/2017-18 AND IN APPEAL NO.146/2017-18 DATED 2 0.09.2018 FOR THE ASSESSMENT YEARS 2012-13 & 2013-14 RESPECTIVELY , BEING THE ORDERS IN APPEAL AGAINST THE CONSEQUENTIAL ORDER P ASSED BY THE ASSESSING OFFICER TO THE ORDER PASSED U/S.263 OF TH E ACT, WHICH IS SUBJECT MATTER OF THE APPEAL I.T.A.NOS.1325 & 1326/CHNY/2017. CROSS OBJECTION NOS.20 & 21/CHNY/2019 ARISING APPEAL NOS. 3348 & 3349/CHNY/2018 ARE FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD.CIT(A), SALEM FOR THE ASSESSMENT YEARS 2012-13 & 2013-14. ITA NOS.1325 & 1326/CHNY/17 ITA NOS.3348 & 3349/CHNY/18 C.O. NOS.20 &21/CHNY/19 :- 3 -: 2. MR.G.BASKAR REPRESENTED ON BEHALF OF THE ASSESSEE AND MR.S.BHARATH REPRESENTED ON BEHALF OF THE REVENUE. 3. SINCE THE ASSESSEE PERTAINING TO ASSESSMENT YEA R IS COMMON IN ALL THESE APPEALS AS WELL AS CROSS OBJECTIONS, W E HEARD THESE APPEALS AND CROSS OBJECTIONS TOGETHER AND DISPOSE O F THE SAME BY THIS COMMON ORDER. 4. IT WAS SUBMITTED BY LD.AR THE ORIGINAL ASSESSME NTS U/S.143(3) OF THE ACT FOR ASSESSMENT YEAR 2012-13 C AME TO BE COMPLETED ON 16.12.2014, AND FOR THE ASSESSMENT YEA R 2013-14 ON 27.03.2015. IT WAS SUBMITTED THAT ASSESSEE IS IN TH E BUSINESS OF DOING LORRY TRANSPORT. IT WAS A SUBMISSION THAT LD.PCIT HAD INVOKED HIS POWER U/S.263 OF THE ACT AND ISSUED A SHOW CAUSE NO TICE ON 13.02.2017 FOR BOTH THE ASSESSMENT YEARS WHEREIN TH E ISSUE RAISED WAS AS FOLLOWS:-- O/O.PCIT,3,GANDHI ROAD, SALEM 636 007 C.NO.9544(10)/2016-17/PCIT/SLM DATED.13/08.02.2017 THE ASSESSMENT IN THIS CASE WAS COMPLETED BY THE IT O, WARD-1,NAMAKKAL U/S.143(3) OF THE INCOME TAX ACT,19 61 FOR THE ASSESSMENT YEAR 2013-14 ON 27.03.2015 BY MAKING AN ADDITION OF RS.4 8,000/- TO THE TOTAL INCOME OF ASSESSEE. ITA NOS.1325 & 1326/CHNY/17 ITA NOS.3348 & 3349/CHNY/18 C.O. NOS.20 &21/CHNY/19 :- 4 -: (2) ON GOING THROUGH THE RECORDS, I FOUND THAT TH E ASSESSMENT COMPLETED BY THE ITO, WARD-1, NAMAKKAL IS ERRONEOUS AND IT IS PREJUDICIAL TO THE INTEREST OF REVENUE FOR THE FOLLOWING REASONS:- (2.1.) THE ASSESSEE FIRM HAS MADE THE HIRE CHARG ES PAYMENTS AMOUNTING TO RS.7,35,92,131/- AS DEBITED IN P&L A/C, BY WAY OF B EARER CHEQUES AND NOT BY WAY OF ACCOUNT PAYEE CHEQUE AS MENTIONED IN THE PROVISI ONS OF SECTION 40A(3). THEREFORE, THE ABOVE SAID AMOUNT IS REQUIRED TO BE DISALLOWED U/S.40A(3). 3. THEREFORE, I AM OF THE VIEW THAT THE ASSESSMENT ORDER IS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. I THERE FORE, PROPOSE TO PASS APPROPRIATE ORDER THEREON U/S.263 AS THE CIRCUMSTANCES OF THE C ASE JUSTIFY. YOU ARE HEREBY GIVEN AN OPPORTUNITY TO REPRESENT YOUR CASE AND STA TE YOUR OBJECTIONS, IF ANY TO THE PROPOSED ACTION. 4. THE CASE IS POSTED FOR HEARING ON 20.02.2017 AT 4.00 PM. YOU ARE REQUESTED TO APPEAR BEFORE ME EITHER IN PERSON OR T HROUGH AUTHORIZED REPRESENTATIVE ON THE SAID DATE. SD/-/PCIT, SALEM . IT WAS SUBMITTED BY LD.AR THAT THE ISSUE RAISED IN THE SHOW CAUSE NOTICE IN RESPECT OF HIRE CHARGES PAYMENTS DEBITED IN THE PROFIT AND LOSS A/C, PAID BY WAY OF BEARER CHEQUES AND NOT BY WAY OF ACCOUNT PAYEE CHEQUES. IN REPLY TO THE SAID SHOW CAUSE NOTI CE, THE ASSESSEE HAD GIVEN A DETAILED REPLY DATED 06.03.2017 WHEREIN THE ASSESSEE HAD EXPLAINED THE REASONS FOR ISSUING THE BEARER CHEQUE S AND THE PRACTICALITY OF THE PAYMENT AS ALSO VARIOUS CASE LA WS CITED ON THE ISSUE. IT WAS A SUBMISSION THAT AFTER CONSIDERING THE REPL Y OF THE ASSESSEE, THE LD.PCIT PASSED AN ORDER U/S.263 OF THE ACT ON 3 0.03.2017 FOR THE ASSESSMENT YEAR 2012-13 AND ON 27.03.2017 FOR THE A SSESSMENT YEAR ITA NOS.1325 & 1326/CHNY/17 ITA NOS.3348 & 3349/CHNY/18 C.O. NOS.20 &21/CHNY/19 :- 5 -: 2013-14 WHEREIN FOR THE ASSESSMENT YEAR 2012-13 IN PARA 2.3 OF HIS ORDER, THE PCIT AFTER CONSIDERING THE REPLY, DROPPE D HIS SHOW CAUSE NOTICE ON THE ISSUES RAISED FOR THE ASSESSMENT YEAR 2013-14 AND SIMILARLY THE PCIT IN PARA NO.2.3 WITHDREW THE REVI SION PROPOSED. IT WAS A FURTHER SUBMISSION THAT HOWEVER IN THE SECOND PARAGRAPH OF 2.3, THE LD. PCIT GAVE A DIRECTION AS FOLLOWS:- HOWEVER, IT IS NOTICED THAT THE TOTAL HIRE CHARGES PAID AMOUNTED TO RS.7,57,47,771/- AND INVOLVED SINGLE PAYMENTS EXCEE DING RS.1 LAKH IN SO MANY OCCASION WHICH REQUIRES THROUGH VERIFICA TION. MOREOVER, IF SEC.40A(3) IS NOT APPLICABLE, THEN DISALLOWANCE OF EXPENDITURE WHEREVER PAN IS NOT AVAILABLE HAS TO BE MADE U/S.40 A(IA) OF THE I.T.ACT AS THE PROVISIONS OF SECTION 194C(6) WOULD NOT BE SATISFIED IF PAN WAS NOT OBTAINED WHILE MAKING THE PAYMENT. THE ASSESSING OFFICER MAY HAVE TO VERIFY THE GENUINENESS OF THE P AYMENTS AS CLAIMED BY THE ASSESSEE AND ALLOW THE SAME IF FOUND GENUINE AND IF ALLOWED THERE THE APPLICABILITY OF SEC.40A(IA) OF T HE I.T ACT IS ALSO TO BE VERIFIED. IT WAS SUBMITTED THAT THE DIRECTION GIVEN WAS TO VE RIFY THE PAYMENTS EXCEEDING RS.1/- LAKHS AND WHERE THE PROVISIONS OF SECTION 40A(3) IS NOT APPLICABLE AND WHERE THE PAN IS ALSO NOT AVAILA BLE, THEN PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WAS TO BE INVOKED I N VIEW OF THE PROVISIONS OF SECTION 194C(6) OF THE ACT. CONSEQUE NTLY, THE ASSESSING OFFICER HAD BEEN DIRECTED TO VERIFY THE GENUINENESS OF THE PAYMENTS AS CLAIMED BY THE ASSESSEE AND ALLOW THE SAME, IF FOUN D GENUINE, AND IF IT WAS ALLOWED, THEN THE APPLICABILITY OF SECTION 40(A )(IA) OF THE ACT WAS TO BE VERIFIED. IT WAS SUBMITTED BY LD.AR THAT THIS ISSUE WAS NOT AN ISSUE AS MENTIONED IN THE SHOW CAUSE NOTICE. IT WA S ALSO A SUBMISSION ITA NOS.1325 & 1326/CHNY/17 ITA NOS.3348 & 3349/CHNY/18 C.O. NOS.20 &21/CHNY/19 :- 6 -: THAT A PERUSAL OF THE PROVISIONS OF SECTION 263(1) OF THE ACT, SPECIFICALLY PROVIDES FOR AN OPPORTUNITY OF BEING HEARD TO THE A SSESSEE. IT WAS A SUBMISSION THAT THE ASSESSEE HAS NOT BEEN SERVED WI TH SHOW CAUSE NOTICE AND THE ASSESSEE HAVING NOT BEEN HEARD BY TH E LD.PCIT U/S.263 OF THE ACT IN RESPECT OF THE ISSUE, AS REGARDS DIRE CTION FOR VERIFICATION THE ORDER PASSED U/S.263 OF THE ACT DIRECTING THE A SSESSING OFFICER TO DO VERIFICATION WAS UNSUSTAINABLE. 5. IN REPLY, THE LD.DR VEHEMENTLY SUPPORTED THE OR DER OF PCIT. IT WAS SUBMITTED THAT THE ISSUE OF VERIFICATION OF GENUINENESS OF APPLICABILITY OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, WAS INBUILT TO THE SHOW CAUSE NOTICE IN PARA 2.1 , WHICH HAS BEEN EXTRACTED EARLIER. IT WAS A SUBMISSION THAT THE ASSESSEE IN HIS REPLY HAD SPECIFICALLY MENTIONED APPLICABILITY OF THE PROVISIONS OF SECTIO N 6DD OF THE ACT AS BEING ILLUSTRATIVE AND NOT EXHAUSTIVE. IT WAS A FUR THER SUBMISSION THAT ASSESSEE IN HIS REPLY TO SHOW CAUSE NOTICE HAD TALK ED ABOUT APPLICABILITY OF RULE 6DD(K). IT WAS SUBMITTED THAT THE ASSESSEE HAD BEEN HEARD IN RESPECT OF THE ISSUE, WHICH HAS BEEN DIRECTED FOR VERIFICATION BY THE PCIT. IT WAS A PRAYER THE ORDE R OF PCIT WAS LIABLE TO BE UPHELD. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. A PERUSAL OF THE SHO W CAUSE NOTICE AS ITA NOS.1325 & 1326/CHNY/17 ITA NOS.3348 & 3349/CHNY/18 C.O. NOS.20 &21/CHNY/19 :- 7 -: EXTRACTED CLEARLY SHOWS THAT THE ISSUE OF VERIFICAT ION AS TO WHETHER THE PAYMENT IS MADE AFTER DEDUCTION OF TDS OR NOT AND A S TO WHETHER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WOULD AP PLY IN RESPECT OF THE PAYMENTS MADE, IS NOT A PART OF THE SHOW CAUSE NOTI CE. IT IS TRUE THAT THE ASSESSEE HAS DISCUSSED THE PROVISIONS OF RULE 6 DD AND THE APPLICABILITY OF RULE 6DD(K) OF THE ACT, IN HIS RE PLY TO THE SHOW CAUSE NOTICE, THE PROVISIONS OF RULE 6DD(K) IS IN RESPEC T OF REASONS FOR MAKING THE PAYMENT IN A MANNER OTHER THAN AS PRESCR IBED UNDER THE ACT, AND IS NOT IN ANY WAY CONNECTED TO THE APPLICA BILITY OF SEC.40(A)(IA) OF THE ACT OR THE DEDUCTION OF TDS U /S.194C(6) OF THE ACT. A PERUSAL OF SECTION 263(1) OF THE ACT CLEARLY SHOWS THAT THE WORDS USED ARE AFTER GIVING THE ASSESSEE AN OPPORT UNITY OF BEING HEARD. IN THE PRESENT CASE, THE DIRECTIONS GIVEN BY THE LD.PCIT TO THE ASSESSING OFFICER IS NOT AN ISSUE, THAT HAS BEEN PU T TO THE ASSESSEE OR ONE WHICH HAS BEEN DONE AFTER GIVING THE ASSESSEE A N OPPORTUNITY OF BEING HEARD. THIS BEING SO, HIS DIRECTION IS UNSUST AINABLE AND CONSEQUENTLY, THE ORDER PASSED U/S.263 OF THE ACT B ECOMES UNSUSTAINABLE AND CONSEQUENTLY QUASHED. 7. IN THE RESULT, THE APPEALS OF THE ASSESSEE IN ITA NOS.1325 & 1326/CHNY/2017 STAND ALLOWED. ITA NOS.1325 & 1326/CHNY/17 ITA NOS.3348 & 3349/CHNY/18 C.O. NOS.20 &21/CHNY/19 :- 8 -: 8. AS WE HAVE QUASHED THE ORDER PASSED U/S.263 OF THE ACT BY THE LD.PCIT IN ITA NOS.1325 & 1326/CHNY/2017 FOR AS SESSMENT YEARS 2012-13 & 2013-14, THE REVENUES APPEAL IN ITA NOS. 3348 & 3349/CHNY/2017 FOR ASSESSMENT YEARS 2012-13 & 2013- 14 BECOME INFRUCTUOUS, SO ALSO THE CROSS OBJECTIONS FILED BY THE ASSESSEE IN C.O. NOS.20 & 21/CHNY/2019 FOR ASSESSMENT YEARS 2012-13 & 2013-14 ARE DISMISSED AS INFRUCTUOUS. 9. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E IN ITA NOS.1325 & 1326/CHNY/2017 ARE ALLOWED, AND THE APPE ALS OF THE REVENUE IN ITA NOS.3348 & 3349/CHNY/2018 AND CROSS OBJECTIONS OF THE ASSESSEE IN C.O NOS.20 & 21/CHNY/2018 FOR ASSES SMENT YEARS 2012-13 & 2013-14 RESPECTIVELY STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 05 TH SEPTEMBER, 2019, AT CHENNAI. SD/- SD/- ( ) (S. JAYARAMAN) # /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) $ # / JUDICIAL MEMBER / CHENNAI * / DATED: 05 TH SEPTEMBER, 2019. K S SUNDARAM !,- .- / COPY TO: 1 . / APPELLANT 3. / () / CIT(A) 5. - !4 / DR 2. !' / RESPONDENT 4. / / CIT 6. / GF