RPG Marble Pvt. Ltd., Bangalore V. ACIT, Bangalore

ITA 1015/BANG/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5529 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 19-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: H N KHINCHA
• Keywords: Commercial expediency
• Section: 143(3); 153A; 234B; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N BARADHVAJA SANKAR, VICE PRESIDENT AND SMT. P MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 1015/BANG/2010 (ASST. YEARS 2007-08) M/S RPG MARBLE PVT. LTD., NO.11/3, BANNERGHATTA ROAD, BANGALORE. . APPELLANT VS. THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(2), BANGALORE. . RESPONDENT APPELLANT BY : SHRI H.N KHINCHA RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI O R D E R PER SMT. P MADHAVI DEVI, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEV ANT ASSESSMENT YEAR IS 2007-08. THE APPEAL IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) VI AT BANGAL ORE DATED 24.06.2010. THE APPEAL ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961. ITA NO.1015/B/10 2 2. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.2 LAKHS OUT OF CARRIAGE EXPENSES AND IN NOT CONSIDERING THE CASH SEIZED AT THE TIME OF SEARCH FOR THE PURPOSE OF CALCULATION OF INTEREST U/S 234B AND 234C OF THE INCOME-TAX ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PVT. LTD. COMPANY AND IS ENGAGED IN THE BUSINESS OF GRANITES AND MARBLES. A SEARCH ACTION U/S 132 TOOK PLACE IN THE BUSINESS PR EMISES OF THE ASSESSEE AND ALSO THE RESIDENTIAL PREMISES OF THE D IRECTORS AND THE ACCOUNTANT OF THE ASSESSEE COMPANY. DURING THE COU RSE OF SEARCH CERTAIN INCRIMINATING DOCUMENTS AND UNACCOUNTED CAS H TO THE EXTENT 1.40 CRORES WERE FOUND AND SEIZED. THE ASSESSEE FI LED THE RETURN OF INCOME ON 31.10.07 DECLARING INCOME OF RS.3,58,15,7 85/-. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE INCOME-TAX ACT, THE ASSESSING OFFICER OBSERVED FROM THE DETAILS OF SALE AND DISTRIBUTION EXPENSES, THAT THE ASSESSEE HAS DEBITED AN AMOUNT O F RS.9,34,943/- TOWARDS CARRIAGE OUTWARDS AS AGAINST RS.10,17,887/- IN THE PREVIOUS YEAR. THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF EXPENDITURE. THE ASSESSEE STATED THAT IT IS BEARING THE TRANSPOR TATION CHARGES OF THE CUSTOMERS FOR DELIVERING THE GOODS AT THEIR HOME OR AT THE PLACE OF ITA NO.1015/B/10 3 THEIR REQUEST AND THE SAME IS INCLUDED IN THE INVOI CES WITHOUT MENTIONING THE TRANSPORTATION COST BUT BY INCREASIN G THE VALUE OF GOODS SOLD TO THE EXTENT OF TRANSPORTATION CHARGES INCLUDED. IT WAS ALSO STATED THAT THE CUSTOMERS USUALLY ASKS FOR DIS COUNT AND TO AVOID ALLOWING THE DISCOUNT, THIS PROCEDURE IS FOLLOWED F ROM LAST YEAR TO KEEP A GOOD RELATION WITH THE CUSTOMERS. WHEN IT W AS POINTED OUT THAT USUALLY SOME CUSTOMERS MAKE THEIR OWN ARRANGEMENT F OR TRANSPORTATION OF THE GOODS PURCHASED, IT WAS STATE D THAT IN SUCH CASES SMALL DISCOUNT IS ALLOWED. THE AO OBSERVED THAT TH E ASSESSEE HAS DEBITED DISCOUNT AND REBATES OF RS.21,323/-. SINCE THE TRANSPORTATION COST INCURRED WAS NOT SHOWN SEPARATELY IN THE INVOI CES, THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES PLEA AND DISA LLOWED LUMP SUM OF RS.2 LAKHS AND MADE THE ADDITIONS ACCORDINGLY. WHI LE COMPUTING THE TAX PAYABLE BY THE ASSESSEE, THE ASSESSING OFFICER AFTER REDUCING THE TDS AND THE ADVANCE TAX PAID, ARRIVED AT AN AMOUNT OF RS.1,21,18,202/- ON WHICH HE COMPUTED INTEREST U/S 234B AND 234C. FROM THE FIGURE ARRIVED THEREAFTER HE REDUCED THE PD ADJUSTMENT AND 140A PAYMENT AND COMPUTED THE BALANCE TAX PAYABLE. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ORDER OF THE AO. ITA NO.1015/B/10 4 5. AS REGARDS COMPUTATION OF INTEREST U/S 234B OF T HE INCOME-TAX ACT, THE CIT(A) HELD THAT THE AMOUNT SEIZED IS TO B E TREATED AS PAID ON THE DATE OF FILING OF THE RETURN AND, THEREFORE INT EREST U/S 234B SHOULD BE COMPUTED UP TO THE DATE OF FILING OF THE RETURN. HE, THEREFORE, DIRECTED THE AO TO RE-COMPUTE THE INTEREST U/S 234B OF THE INCOME-TAX ACT TREATING THE AMOUNT OF RS.50 LAKHS PAID ON THE DATE OF FILING OF THE RETURN. 6. AGGRIEVED BY THE SAID DECISION, THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI H .N KHINCHA WHILE REITERATING THE SUBMISSIONS MADE BEFORE THE AUTHORI TIES BELOW, SUBMITTED THAT THE ASSESSEE BEING IN THE BUSINESS O F MARBLES AND GRANITES HAS TO DELIVER THE GOODS AT THE PREMISES O F THE PURCHASERS AND, THEREFORE, THE EXPENDITURE INCURRED ON SUCH TR ANSPORTATION IS CLAIMED AS EXPENDITURE, WHICH IS ALLOWABLE AS BUSIN ESS EXPENDITURE. HE SUBMITTED THAT THE COMMERCIAL EXPEDIENCY AND GOO D RELATIONS WITH THE CUSTOMERS REQUIRES THE ASSESSEE TO INCUR S UCH EXPENDITURE. ITA NO.1015/B/10 5 8. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE TRANSPORTA TION CHARGES ARE NOT SEPARATELY SHOWN IN THE INVOICES AND, THEREFORE , THEY CANNOT BE ACCEPTED. 9. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THE RIVAL CONTENTIONS, WE FIND THAT IT IS THE USUAL PRACTICE FOR THE BUSINESSMAN TO DELIVER THE GOODS AT THE PREMISES ACCORDING TO T HE CUSTOMERS CHOICE AND THE ASSESSEE USUALLY PAYS TRANSPORTATION CHARGES IN CASH. HOWEVER, THERE SHOULD BE SOME EVIDENCE WITH REGARD TO INCURRING OF SUCH EXPENDITURE. THE ASSESSEE HAS NOT BEEN ABLE T O PRODUCE EVIDENCES WITH REGARD TO INCURRING OF SUCH EXPENDIT URE AND, THEREFORE, THE AO HAS MADE DISALLOWANCE OF RS.2 LAK HS ONLY OUT OF TOTAL CLAIM OF RS.9,34,943/-. WHEN THE ASSESSEE IS CLAIMING THE EXPENDITURE, ONUS IS ON THE ASSESSEE TO PROVE THE N ECESSITY AND GENUINENESS OF THE SAID CLAIM. IN THE CASE BEFORE US, THE ASSESSEE HAS PROVED THE NECESSITY OF MAKING SUCH PAYMENTS, BUT HAS NOT BEEN ABLE TO PROVE THE GENUINENESS OF THE ENTIRE CLAIM, THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.2 LAKHS WHICH IS REASONABLE. ITA NO.1015/B/10 6 10. AS REGARDS THE COMPUTATION OF THE INTEREST U/ S 234B OF THE INCOME-TAX ACT IS CONCERNED, THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITTED THAT THE SEARCH ACTION HAD TAKEN PLACE ON THE ASSESSEES PREMISES ON 8.3.2007, DURING WHICH UNACCEPTED CASH FOUND AND SEIZED BY THE DEPARTMENT AND DEPOSITED IN THE PERSO NAL DEPOSIT ACCOUNT OF THE DEPARTMENT. THE ASSESSEE ON 15.3.20 07 HAD FILED A LETTER BEFORE THE AUTHORITIES TO TREAT THE SUM OF R S.50 LAKHS SEIZED DURING THE COURSE OF SEARACH AS ADVANCE TAX PAYABLE BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08 CONSEQUENT TO THE S EARCH PROCEEDINGS. THUS, ACCORDING TO THE LEARNED COUNSE L FOR THE ASSESSEE, THIS AMOUNT HAS TO BE TREATED AS ADVANCE TAX PAID BY THE ASSESSEE AND THE SAME HAS TO BE REDUCED FROM THE TA XABLE INCOME BEFORE COMPUTING INTEREST U/S 234B OF THE INCOME-TA X ACT. IN SUPPORT OF HIS CONTENTION THE LEARNED COUNSEL FOR T HE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION OF A BENCH OF T HE TRIBUNAL IN THE CASE OF SMT. SUSHILA DEVI TAINWALA IN ITA NO.418 T O 424/BANG/2010 DATED 22.12.2010, WHEREIN IT HAS BEEN HELD THAT NO INTEREST U/S 234B CAN BE CHARGED AFTER THE ASSESSEE HAS FILED RETURN OF INCOME AND HAS ASKED FOR THE ADJUSTMENT OF TAX LIAB ILITY. ITA NO.1015/B/10 7 11. THE LEARNED DR HOWEVER, DREW OUR ATTENTION TO SEC. 132 OF THE INCOME-TAX ACT TO SUBMIT THAT ONLY AGAINST E XISTING LIABILITY CAN THE PROPERTY OR CASH SEIZED DURING THE COURSE O F SEARCH BE APPROPRIATED. AS REGARDS ASSESSEES LETTER DATED 1 5.3.2007, SHE SUBMITTED THAT NO ESTIMATION OF INCOME IS MADE THER EIN AND, THEREFORE, THE SAME CANNOT BE ACCEPTED. IN THE RE JOINDER, THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE OFFERIN G THE ADJUSTMENT OF THE CASH SEIZED ITSELF AMOUNTS TO DECLARATION OF LI ABILITY AND PAYMENT OF THE ADVANCE TAX U/S 209 OF THE INCOME-TAX ACT A ND IS PRESUMED TO ACCEPT THE EXISTING LIABILITY TO PAY THE TAX AND CA SH SEIZED HAS TO BE APPROPRIATED AGAINST THE DEMAND FOR THE PURPOSE OF THE SEC. 234B OF THE INCOME-TAX ACT. 12. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS, WE FIND THAT THE ASSESSEE HAS OFFERED THE CASH SEIZED OF RS.50 LAKHS AS ADVANCE TAX VIDE LETTER DATED 15.3.2 007. THE COMPUTATION OF ADVANCE TAX AND PAYMENT THEREOF IS GOVERNED BY SEC. 209 AND 210 OF THE INCOME-TAX ACT. SUB SEC. 1 OF SEC 209 PROVIDES THAT THE AMOUNT OF ADVANCE TAX PAYABLE BY AN ASSESSEE IN THE FINANCIAL YEAR SHALL, SUBJECT TO THE PROVISION S OF SUB-SECTIONS (2) AND (3), BE COMPUTED AS BELOW NAMELY : ITA NO.1015/B/10 8 1(A) WHERE THE CALCULATION IS MADE BY THE ASSESSEE FOR THE PURPOSED OF PAYMENT OF ADVANCE TAX UNDER SUB SEC. (1), (2) OR SUB SEC. (5) OR SUB SEC 6 OF SEC 210, HE SHALL FIRST ESTIMATE HIS CURRENT INCOME AND THE INCOME-TAX THEREON SHALL BE CALCULATED AT THE RATES IN FORCE FOR THE FINANCIAL YEAR;. SUB SEC. 1 OF SEC. 210 PROVIDES THAT EVERY PERSON WHO IS LIABLE TO PAY ADVANCE TAX U/S 208 SHALL, OUT OF HIS OWN ACCORD PAY, ON OR BEFORE EACH OF THE DUE DATES SPECIFIED IN SEC. 211, THE APPROPRIATE PERCENTAGE, SPECIFIED IN THAT SEC. OF THE ADVANCE TAX ON THE CU RRENT INCOME, CALCULATED IN THE MANNER THE LAID DOWN IN S EC. 209 OF THE INCOME-TAX ACT. 13. FROM THE READING OF THE ABOVE PROVISIONS, IT IS CLEAR THAT BEFORE MAKING PAYMENT OF ADVANCE TAX U/S 210 OF THE INCOME-TAX ACT, THE ASSESSEE HAS TO COMPUTE HIS CURRENT INCOME IN THE MANNER LAID DOWN U/S 209 OF THE INCOME-TAX ACT. IN THE CA SE BEFORE US, THE ASSESSEE HAS NOT COMPUTED THE CURRENT INCOME NOR HA S HE OFFERED THIS INCOME I.E THE AMOUNT OF CASH SEIZED, AS HIS INCOME FOR THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE HAS ONLY OFFERED THE CASH SEIZED AS THE ADVANCE TAX PAID AGAINST THE LIABILITY IN THE B LOCK ASSESSMENT CONSEQUENT TO THE SEARCH. FURTHER, SEC. 132B PROVID ES FOR APPLICATION ITA NO.1015/B/10 9 OF ASSETS SEIZED U/S 132A OF THE INCOME-TAX ACT. CL AUSE (I) OF SUB SEC. 1 OF SEC. 132B PROVIDES THAT THE AMOUNT OF ANY EXISTING LIABILITY UNDER THE INCOME-TAX ACT, THE WEALTH TAX, EXPENDITU RE-TAX ACT AND INTEREST-TAX ACT AND THE AMOUNT OF THE LIABILITY DE TERMINED ON COMPLETION OF THE ASSESSMENT [U/S 153A AND THE ASSE SSMENT OF THE YEAR RELEVANT TO THE PREVIOUS YEAR, IN WHICH SEARCH IS INITIATED OR REQUISITION IS MADE, OR THE AMOUNT OF LIABILITY DET ERMINED ON THE COMPLETION OF THE ASSESSMENT UNDER CHAPTER XIVB FOR THE BLOCK PERIOD AS THE CASE MAY BE] AND IN RESPECT OF WHICH, SUCH PERSON IS IN DEFAULT OR IS DEEMED TO BE DEFAULT, MAY BE RECOVERE D OUT OF SUCH ASSETS. THUS, IT IS CLEAR THAT THE AMOUNTS SEIZED CAN BE APPLIED OR APPORTIONED ONLY AGAINST THE EXISTING LIABILITY OR LIABILITY DETERMINED ON COMPLETION OF ASSESSMENT. 14. THIS ISSUE HAS BEEN CONSIDERED BY A BENCH O F THE TRIBUNAL IN THE CASE OF SMT. SUSHILA DEVI TAINWALA AND IT HA S BEEN HELD THAT MONEY SEIZED DURING THE COURSE OF SEARCH PROCEEDING S CAN BE APPLIED ONLY AGAINST THE LIABILITY DETERMINED BUT A NOTHER FACT THAT HAS TO BE CONSIDERED IS THAT THE LIABILITY TO PAY TAX COULD BE FASTENED ON THE ASSESSEE WHEN THE ASSESSEE HAS FILED THE RETURN OF UNDISCLOSED INCOME FOR THE BLOCK PERIOD OR FOR RELEVANT PREVIOU S YEAR AND THE ITA NO.1015/B/10 10 ASSESSEE IS BOUND TO PAY THE TAX AS SOON AS HE ACKN OWLEDGES HIS LIABILITY BY FILING HIS RETURN OF INCOME. IN THE C ASE BEFORE US, THE ASSESSEE HAS FILED THE RETURN OF INCOME ON 31.10.20 07 DECLARING INCOME OF RS.3,60,15,785/- AND THE TAXABLE INCOME D ETERMINED OR ASSESSED BY THE ASSESSING OFFICER AT RS.3,60,15,790 /-, THEREFORE, FOLLOWING THE DECISION OF THE A BENCH, WE ARE OF THE OPINION THAT THE AMOUNT OF RS.50 LAKHS SEIZED BY THE DEPARTMENT DURING THE COURSE OF SEARCH HAS TO BE TREATED AS THE TAX PAID AS ON THE DATE OF THE FILING OF THE RETURN AND THE INTEREST U/S 234B AND 234C HAS TO BE CALCULATED AFTER REDUCING THE SAME FROM THE TAXABLE INCOME. THEREFORE, WE UPHOLD THE FINDING OF THE CIT(A). 15. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH JUN, 2011. SD/- SD/- (N BARADHVAJA SANKAR) (P MADHAVI DEVI) VICE PRESIDENT JUDICIAL MEMBER VMS. BANGALORE DATED : 30/06/2011 COPY TO : 1. THE ASSESSEE` 2. THE REVENUE ITA NO.1015/B/10 11 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, I TAT, BANGALORE.