Chandi Filling Station, Cuttack V. ITO, Ward-1(1), Cuttack

ITA 107/CTK/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9306 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 12-04-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M K GAUTAM
• Keywords: Assessment record; Set aside
• Section: 201(1); 194A; 13; 263

Judgement Text

P A G E 1 | 5 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO . 107 /CTK/201 9 ASSESSMENT YEAR : 2014 - 15 CHANDI FILLING STATION, MANGULI, CUTTACK VS. ITO, WARD 1(1), CUTTACK PAN/GIR NO. AACFC 8350 K (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI MOHIT SHETH, AR REVENUE BY : SHRI M.K.GAUTAM , CIT DR DATE OF HEARING : 14 / 0 8 / 20 20 DATE OF PRONOUNCEMENT : 14 / 0 8 /20 20 O R D E R PER C.M.GARG,JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE PR. CIT, CUTTACK DATED 29.3.2019 FOR THE ASSESSMENT YEAR 2014 - 15. 2. IN THIS CASE, THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON 30.11.2016 DETERMINING THE TOTAL ASSESSED INCOME AT RS.2,20,440/ - AS AGAINST RETURNED INCOME OF RS.1,22,700/ - . ITA NO. 107/CTK/2019 ASSESSMENT YEAR : 2014 - 15 P A G E 2 | 5 3. THEREAFTER, ON VERIFICATION OF THE ASSESSMENT RECORD, THE LD. PCIT FO UND FROM THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.3.2014 THAT BESIDES INTEREST EXPENSES TO OTHER PARTIES, THE ASSESSEE HAS CLAIMED AN EXPENDITURE OF RS.76,772/ - UNDER THE HEAD INTEREST ON TANKER LOAN. FURTHER, ONGOING THROUGH THE DETAILS ON TH E RECORD, HE NOTICED THAT THE ASSESSEE HAD BORROWED CAPITAL FROM M/S. MAGMA FINANCIAL CORPORATION, A NON - BANKING FINANCIAL COMPANY ( NBFC) ENGAGED IN THE ACTIVITIES OF FINANCING LOANS FOR ACQUIRING ASSETS. AS PER SECTION 194A OF THE I.T.ACT, THE ASSESSEE W AS REQUIRED TO DEDUCT TAX AT SOURCE ON PAYMENT OF INTEREST TO THE ABOVE NBFC AND SUCH DEDUCTED AMOUNT WAS REQUIRED TO BE CREDITED TO THE CENTRAL GOVERNMENT ACCOUNT, HOWEVER, NO TAX WAS DEDUCTED U/S.194A OF THE ACT AND, ACCORDINGLY, THE EXPENDITURE OF RS.76 ,772/ - CLAIMED UNDER THE HEAD INTEREST ON TANKER LOAN WAS REQUIRED TO BE DISALLOWED U/S.40(A)(IA) OF THE ACT. LD PCIT OBSERVED THAT SINCE TAX HAS NOT BEEN DEDUCTED BY THE ASSESSEE AND THE AO HAS NOT DISALLOWED THE SAME, THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, THE PR CIT SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE AO TO MODIFY THE ASSESSMENT ORDER BY DISALLOWING A SUM OF RS.76,722/ - U/S.40(A)(IA) OF THE ACT. HENCE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT DURING SCRUTINY ASSESSMENT PROCEEDINGS U/S.143(3) OF THE ACT, THE ASSESSING OFFICER MADE ENQUIRIES REGARDING INTEREST PAID BY THE ASSESSEE TO M/S. MAGMA FINANCIAL ITA NO. 107/CTK/2019 ASSESSMENT YEAR : 2014 - 15 P A G E 3 | 5 CORPORATION, A NON - BANKING FINA NCIAL COMPANY WITH REFERENCE TO THE AUDITED ACCOUNTS OF THE ASSESSEE. LD COUNSEL FURTHER SUBMITTED THAT PAYMENT OF INTEREST OF RS.76,772/ - HAS BEEN MADE TO M/S. MAGMA FINANCIAL CORPORATION, WHICH IS A FINANCIAL CORPORATION ESTABLISHED BY OR UNDER A CENTRA L, STATE OR PROVINCIAL ACT, THEN THE PROVISIONS OF SECTION 194A(1) OF THE ACT SHALL NOT APPLY TO SUCH PAYMENT MEANING THEREBY DEDUCTION OF TAX AT THE TIME IS REQUIRED TO BE MADE, HENCE, QUESTION OF DISALLOWANCE ON SUCH EXPENDITURE U/S.40(A)(IA) OF THE ACT DOES NOT ARISE. LD COUNSEL ALSO CONTENDED THAT ALL THE BOOKS OF ACCOUNT WERE DULY VERIFIED BY THE AO DURING THE ASSESSMENT PROCEEDINGS AND ISSUE OF INTEREST PAYMENT WAS ALSO EXAMINED AND VERIFIED BY HIM. THEREFORE, THERE IS NO REQUIREMENT OF INVOKING TH E PROVISIONS OF SECTION 263 OF THE ACT. THEREFORE, THE IMPUGNED REVISIONAL ORDER PASSED BY PCIT MAY KINDLY BE QUASHED. 5. REPLYING TO ABOVE, LD CIT DR DREW OUR ATTENTION TOWARDS RELEVANT PARA 13 OF THE IMPUGNED ORDER AND SUBMITTED THAT RECIPIENT/PAYEE OF INTEREST I.E. M/S. MAGMA FINANCIAL CORPORATION IS A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 AND THE SAME WAS NOT ESTABLISHED BY OR UNDER A CENTRAL, STATE OR PROVISIONAL ACT, THEREFORE, THE PROVISIONS OF SECTION 194A(3)(III)(B) DOES NOT APPLY TO THE CASE OF THE ASSESSEE AND THE INTERPRETATION PLACED ON THIS SECTION IS NOT IN CONSONANCE WITH THE PROVISIONS OF THE ACT. HENCE, SAME WAS NOT RIGHTLY ACCEPTED BY THE LD PR. CIT. LD CIT DR CONTENDED THAT FROM A READING OF THE ASSESSMENT ORDER, IT ITA NO. 107/CTK/2019 ASSESSMENT YEAR : 2014 - 15 P A G E 4 | 5 IS AM PLE CLEAR THAT THE AO HAS NOT MADE ANY ENQUIRY REGARDING INTEREST PAYMENT TO M/S. MAGMA FINANCIAL CORPORATION. THEREFORE, IT IS A CLEAR CASE OF NO INQUIRY AND HENCE, THE PR CIT WAS RIGHT IN DIRECTING THE AO TO MODIFY THE ASSESSMENT BY DISALLOWING THE IMPU GNED AMOUNT U/S.40(A)(IA) OF THE ACT. 6. ON CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIONS, WE ARE OF THE CONSIDERED VIEW THAT FROM THE ASSESSMENT ORDER, IT IS VIVID CLEAR THAT AO HAS NOT MADE ANY ENQUIRY ON THE ISSUE OF PAYMENT OF INTEREST TO M/S. MAGMA FINANCIAL CORPORATION BY THE ASSESSEE DURI NG THE RELEVANT FINANCIAL PERIOD. LD COUNSEL COULD NOT CONTROVERT THE FACT THAT RECIPIENT OF IMPUGNED INTEREST I.E. M/S. MAGMA FINANCIAL CORPORATION IS A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 AND THUS, THE PROVISIONS OF SECTION 194A(3)(III)(B ) OF THE ACT IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISIONS OF RULE 31CAB READ WITH FIRST PROVISO TO SECTION 201(1) OF THE ACT AND HAS NOT SUBMITTED FORM 26A A S MANDATED UNDER RULE 31ACB OF THE I.T.RULES. THEREFORE, WE HAVE NO HESITATION TO UPHOLD THE ORDER OF THE PCIT, HOLDING THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND DIRECTING THE AO TO MODIFY THE ASSESSMENT ORDER BY DISALLOWING A SUM OF RS.76,772/ - U/S.40(A)(IA) OF THE ACT AND ADDING THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. HENCE, WE CONFIRM THE ORDER OF THE LD PCIT. ITA NO. 107/CTK/2019 ASSESSMENT YEAR : 2014 - 15 P A G E 5 | 5 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 14 / 0 8 /20 20 . S D/ - SD/ - (LAXMI PRASAD SAHU) ( CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER CUTTACK; DATED 14 / 8 /20 20 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR . PVT. S ECRETARY ITAT, CUTTACK 1. THE APPELLANT : CHANDI FILLING STATION, MANGULI, CUTTACK 2. THE RESPONDENT. ITO, WARD 1(1), CUTTACK 3. THE CIT(A) - , CUTTACK 4. PR.CIT - , CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//