Sri Rajendrakumar, Hubli V. DCIT, Hubli

ITA 1180/BANG/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8564 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-02-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 14-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: MANOJ D PUKHALE
• Keywords: Competent authority
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI K.P.T. THANGAL, VICE PRESIDENT AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 1180/BANG/2009 ASSESSMENT YEAR : 2006-07 SHRI RAJENDRAKUMAR, S/O. CHAMPALALJI JAIN, HUBLI 580 032. : APPELLANT VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE 3(1), HUBLI. : RESPONDENT APPELLANT BY : SHRI MANOJ D. PUKHALE RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), HUBLI IN ITA NO: 120/CIT(A) HBL/08-09 DATED : 6.11.2009 FOR THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAD ORIGINALLY RAISED TWELVE GROUND S. SUBSEQUENTLY, THE LD. A R IN HIS COMMUNICATION DATED: 1/2/2010 HA D FURNISHED ELEVEN GROUNDS IN A CONCISE MANNER. ON A PERUSAL, GROUND NOS: 1 AND 11 BEING GENERAL AND NO SPECIFIC ISSUES INVOLVED, THEY HAVE BECOME NON- ITA NO.1180/BANG/09 PAGE 2 OF 9 CONSEQUENTIAL. IN THE REMAINING GROUNDS, THE CRUXE S OF THE ISSUES RAISED ARE TWO-FOLDS WHICH ARE REFORMULATED AS UNDER: (I) THE LD. CIT(A) ERRED IN DISALLOWING THE CLAIM OF IN TEREST EXPENDITURE U/S 40(A)(IA) OF THE ACT; & (II) THE CIT(A) ERRED IN SUSTAINING THE CHARGE OF INTERE ST U/S 234B OF THE ACT . 3. DURING THE COURSE OF HEARING BEFORE US, THE LD. A R SOUGHT THE PERMISSION OF THIS BENCH TO PLACE AN APPLICATIO N UNDER RULE 18(4) OF APPELLATE TRIBUNAL RULES 1963 WHEREIN HE HAD REASON ED THAT (I) THE GROUND(S) OF THE ASSESSEE IN APPEAL WAS THAT TH E CIT ERRED IN GIVING DECISION WITHOUT STATING POINT(S) FOR DETERM INATION NECESSARY FOR DECIDING THE APPEAL WHICH AROSE PARTI CULARLY FROM PROPOSITION AFFIRMED AND DENIED BY PARTIES; (II) IT WAS ALSO A GROUND THAT THE CIT(A) FAILED TO PRE CISELY CONSIDER THE MATERIAL PROPOSITIONS BECAUSE THE CONTROVERSY W AS DISALLOWANCE OF INTEREST U/S 40(A)(IA) WHICH WAS PA ID TO THE MEMBERS OF THE ASSESSEES FAMILY AND HIS CLOSE RELA TIVES FOR WHICH THE ASSESSEE SOUGHT FOR OPINION IN SUPPOSITION TO K NOW THE LAW; (III) IN SUPPORT OF THIS GROUND, IT WAS NECESSARY TO ADDU CE EVIDENCE TO SHOW THAT THE ASSESSEE MADE EFFORT IN SEEKING REMED Y AVAILABLE UNDER THE ACT; (IV) SEEKING PERMISSION TO FURNISH A COPY OF THE OPINION OF THE CA TO ESTABLISH THE BONA-FIDE OF THE ASSESSEE, AS THE SAI D DOCUMENT WAS NEITHER PRODUCED BEFORE THE AO NOR BEFORE THE FIRST APPELLATE AUTHORITY. 4. THE ISSUE, IN BRIEF, IS THAT THE ASSESSEE, AN IN DIVIDUAL, TRADES IN IRON AND STEEL BUSINESS. DURING THE COURSE OF PROCEEDIN GS FOR THE ASSESSMENT YEAR IN DISPUTE, THE AO, WHILE PERUSING THE BOOKS O F ACCOUNTS, CAME ACROSS THAT THE ASSESSEE HAD PAID RS.14.55 LAKHS TO VARIOU S DEPOSITORS FOR WHICH NO TDS WAS EFFECTED UNDER THE PROVISIONS OF S.194A OF THE ACT. IN COMPLIANCE WITH THE AOS QUERY AS TO WHY SUCH AN EX PENDITURE CLAIMED SHOULD NOT BE DENIED BY INVOKING THE PROVISIONS OF S.40(A)(IA) OF THE ACT, THE ITA NO.1180/BANG/09 PAGE 3 OF 9 ASSESSEE CAME UP WITH A REASONING THAT IN CASE OF CERTAIN PAYEES, APPLICATIONS FOR NO TDS/LOWER TDS MADE BY SOME OF T HE PAYEES IN F NO.13 TO THEIR RESPECTIVE JURISDICTIONAL AOS AND THAT CON SIDERING THE COMPUTATION OF INCOME SHOWN IN EACH CASE WHERE F.NO:13 WAS MADE , TDS OBLIGATION WAS NOT REQUIRED. 5. BRUSHING ASIDE THE CONTENTIONS OF THE ASSESSEE, THE AO, FOR THE REASONS SET-OUT IN THE IMPUGNED ORDER, WENT AHEAD W ITH THE DISALLOWANCE OF RS.14.55 LAKHS U/S 40(A)(IA) OF THE ACT. WHILE DOING SO, HE HAD TAKEN THE CUE FROM THE FINDING OF THE JURISDICTIONAL HIGH COU RT IN THE CASE OF DIVISIONAL MANAGER, NEW INDIA ASSURANCE CO. LTD. V. ITO & ANOT HER REPORTED IN 275 ITR 227. 6. AGITATED, THE ASSESSEE TOOK UP THE ISSUE BEFORE THE LD. CIT (A) FOR RELIEF. AFTER DUE CONSIDERATION OF THE SPIRITED AR GUMENTS PUT-FORTH BY THE ASSESSEE AND ALSO THE RELEVANT PROVISIONS OF THE LA W [S.194A AND RULE 29C ETC.], THE LD. CIT (A) HAD OBSERVED THUS 5.1. ..IT IS OBLIGATORY ON THE PART OF THE AP PELLANT TO DEDUCT INCOME-TAX AT SOURCE AT THE TIME OF THE CRED IT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYME NT THEREOF. THE APPELLANT HAS PAID THE INTEREST BUT FAILED TO DEDUC T THE TAX AT SOURCE ON SUCH INTEREST AMOUNT PAID WHICH IS IN CONTRAVENT ION TO THE PROVISIONS OF SECTION 194A OF THE ACT. IT IS ALSO UNAMBIGUOUS FROM THE RELEVANT RULES CITED ABOVE THAT IT IS MANDATORY TO OBTAIN SUCH CERTIFICATE IN FORM NO.15G FOR AN INDIVIDUAL TO BE ELIGIBLE FOR NON- DEDUCTION OF TAX ON INTEREST PAYMENTS. IN THE CASE OF THE APPELLANT, FORM NO.15G HAS NOT BEEN FURNISHED BY THE PARTIES C ONCERNED AS CLAIMED BY THE APPELLANT IN HIS SUBMISSIONS FOR THE YEAR UNDER APPEAL. ITA NO.1180/BANG/09 PAGE 4 OF 9 6.1. DRAWING STRENGTH AND ALSO EXTENSIVELY QUOTING FROM THE FINDING OF THE HONBLE TRIBUNAL IN THE CASE OF J.G. KHATAWAR & CO. [ITA NO:881/B/08 DT: 24.7.2009], THE CIT(A) WENT ON FUR THER TO OBSERVE THAT 6. IN THE CASE ON HAND FORM NO.15G HAVE NOT BEEN FURNISHED BY THE PARTIES. RATHER THE APPLICATIONS MADE BY THE P AYEES AS CLAIMED BY THE APPELLANT WERE NEVER DISPOSED OFF WHICH MAKE S IT ABUNDANTLY CLEAR THAT THE APPELLANT WAS NOT IN RECEIPT OF FORM NO.15G AT THE TIME OF PAYMENT OF INTEREST, THE OBLIGATION THEREFO RE WAS CAST ON THE APPELLANT TO DEDUCT THE TAX AT SOURCE ON THE PAYMEN T OF INTEREST TO THE PARTIES..WHEREAS IN THE CASE OF PRESENT APPELLANT THE F NO.15G CLAIMED TO H AVE BEEN FILED BY THE PAYEES I.E.., THE RECIPIENTS OF INTEREST BEF ORE THE CONCERNED AUTHORITIES WERE NEVER DISPOSED OFF BUT THE APPELLA NT FAILED TO DEDUCT THE TAX AT SOURCE AT THE TIME OF PAYMENT OF INTEREST WITHOUT ANY AUTHORITY. IN OTHER WORDS THE CERTIFICATES U/S 197A FOR NON- DEDUCTION OF TAX AT SOURCES WERE NEVER FURNISHED BE FORE THE COMPETENT AUTHORITY BY THE PAYEES OF SUCH INTERESTS AS THE APPLICATIONS FILED IN THE PRESCRIBED FORM WERE ALLE GEDLY NOT DISPOSE OFF. IN THE FACTS AND CIRCUMSTANCES, THE RATIO OF THE DECISION OF HONBLE ITAT, BANGALORE IN THE CASE OF KHATAWAR & C O., IS SQUARELY APPLICABLE TO THE PRESENT APPELLANT. THUS , CONSIDERING THE DECISION OF THE HONBLE ITAT AND THE FACT THAT THE APPELLANT FAILED TO DEDUCT THE TAX AT SOURCE IN VIEW OF THE PROVISIONS OF SECTION 194A, THE ACTION OF THE AO TO DISALLOW THE CLAIM U/S 40(A )(IA) IN RESPECT OF INTEREST IS UPHELD. 7. DISILLUSIONED WITH THE FINDING OF THE LD.CIT(A), THE ASSESSEE CAME UP WITH THE PRESENT APPEAL. THE LD. A R REITERATED MORE OR LESS WHAT HAS BEEN URGED BEFORE THE FIRST APPELLATE AUTHORITY. I N FURTHERANCE, THE LD. A.R HAD FURNISHED A PAPER BOOK CONTAINING 1 48 PAGES WHICH CONSISTS OF, INTER ALIA, COPIES OF (I) APPLICATIONS IN FORM NO.13, (II ) TDS RETURN IN FORM 26Q ETC. 7.1. ON THE OTHER HAND, THE LD. D R WAS VERY EMPHAT IC IN HER URGE THAT THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE WIT HOUT ANY PROPER AUTHORIZATION FROM THE PAYEES AND THAT THE AO HAD T AKEN A JUDICIOUS VIEW ITA NO.1180/BANG/09 PAGE 5 OF 9 IN DISALLOWING THE EXPENSES CLAIMED BY WAY OF INTER EST BY RESORTING TO THE PROVISIONS OF S.40(A)(IA) WHICH HAS BEEN RIGHTLY UP HELD BY THE FIRST APPELLATE AUTHORITY. IN VIEW OF THE ABOVE, IT WAS PLEADED TH AT NO INTERFERENCE IS CALLED FOR AT THIS STAGE. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS, PERUSED THE RELEVANT RECORDS AND ALSO THE PAPER BOOK FURNISHED BY THE LD. A.R. 8.1. AFTER DUE CONSIDERATION OF THE ASSESSEES APPL ICATION UNDER RULE 18(4) OF APPELLATE TRIBUNAL RULES, 1963, THE ADDITI ONAL EVIDENCE SOUGHT TO BE PRODUCED BEFORE THIS BENCH IS ADMITTED AND THE R EGISTRY WAS DIRECTED TO TAKE ON RECORD. 8.2. PRECISELY, THE ISSUE FOR CONSIDERATION IS - WHETHER THE ASSESSEE WAS NOT OBLIGED TO DEDUCT TAX SOURCE WHILE MAKING THE INTEREST PAYMENTS? 8.2.1 THE ASSESSEES PRIME CONTENTION IS THAT IN T HE CASES OF CERTAIN PAYEES, APPLICATIONS FOR NO TDS/LOWER TDS W ERE MADE BY SOME OF THE PAYEES IN FORM NO.13 TO THEIR RESPECTIVE JURISD ICTIONAL AOS WITH COPIES TO THE ASSESSEE. CONSIDERING THE SAME, THE ASSESSE E TOOK A VIEW THAT HE WAS NO OBLIGATION TO DEDUCT TDS. 8.2.2. AT THE OUT-SET, WE WOULD LIKE TO POINT OUT THAT THE ASSESSEE WAS, PERHAPS, UNDER THE WRONG NOTION THAT ON THE BA SIS OF THE COPIES OF THE LETTERS OF THE PAYEES - TO THE JURISDICTIONAL AOS F OR ISSUANCE OF AUTHORIZATION ETC. - HE WAS UNDER NO OBLIGATION TO DEDUCT TDS. C OPIES OF SUCH LETTERS OF THE PAYEES ENDORSED TO THE ASSESSEE WERE NOTHING BU T A MERE INFORMATION THAT THE PAYEES HAVE MADE APPLICATIONS IN NO.13 TO THE AOS WHICH, IN ANY ITA NO.1180/BANG/09 PAGE 6 OF 9 STRETCH OF IMAGINATION, CANNOT BE CONSTRUED AS AN A UTHORIZATION TO THE ASSESSEE NOT TO DEDUCT TDS FOR THE INTEREST DUE TO THEM. 8.2.3 AS RIGHTLY HIGHLIGHTED BY THE FIRST APPELLAT E AUTHORITY IN HIS IMPUGNED ORDER WHICH IS UNDER DISPUTE THAT THE PROV ISIONS OF S.194A OF THE ACT AND RULE 29C OF I.T. RULES ARE VERY CLEAR THAT IT IS OBLIGATORY ON THE PART OF THE ASSESSEE TO DEDUCT INCOME-TAX AT SOURCE AT T HE TIME OF THE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE T IME OF PAYMENT THEREOF. 8.2.4. THE HONBLE TRIBUNAL IN THE CASE OF J.G.KHA TAWAR & CO., CITED SUPRA HAD DEALT WITH AN IDENTICAL ISSUE (WHICH HAS BEEN EXTENSIVELY QUOTED IN THE IMPUGNED ORDER OF THE CIT(A) UNDER DISPUTE) AND CONCLUDED THAT THE PROVISIONS OF S.40(A)(IA) OF ACT ARE EXPLICITLY APP LICABLE TO THE SAID CASE. 8.2.5 DURING THE COURSE OF HEARING, THE LD. AR SOU GHT TO DISTINGUISH THE ABOVE FINDING WITH THE CASE ON HAND ON THE GRO UND THAT THE HONBLE TRIBUNAL DEALT WITH AN ISSUE WHICH RELATES TO DECLA RATION BY A PERSON IN FORM NO.15G. 8.2.6. THE RATIO OF FINDING RECORDED IN THE CASE O F J.G.KHATAWAR & CO. IS SQUARELY APPLICABLE TO THE ISSUE ON HAND. 8.2.7. WE HAVE ALSO DULY PERUSED THE FRESH EVIDENC E PRODUCED BY WAY OF AN APPLICATION U/R 18(4) OF I.T.RULES, 1963. AS POINTED OUT BY S.D.OSTAWAL, CHARTERED ACCOUNTANT, (ON PAGE 2) 7. IN A CASE WHERE DEPOSITORS INCOME IS NOT EXCEEDING CHARGEABLE LIMI TS THEN, AS PER 197A, NO TDS SHALL BE MADE UNDER SEC.194A, IF THE DEPOSITOR FURNISHES A DECLARATION ITA NO.1180/BANG/09 PAGE 7 OF 9 TO YOU STATING THAT THE TAX ON HIS/HER ESTIMATED TO TAL INCOME OF THE PERIOD APR 2005 MAR 2006 IN WHICH THE INTEREST INCOME IS TO BE INCLUDED IN COMPUTING HIS/HER TOTAL INCOME WILL BE NIL AND THE SAID DECLARATION SHALL BE IN FORM NO.15G.. [SOURCE: APPLN. U/R 18(4) OF I.T.RULES 1963]. TO OUR DISMAY, NO COPIES OF F.NO.15G WERE FORTH-COMING TO JUSTIFY THE ASSESSEES STAND. MERE INTIMATION TO THE EFFECT THAT THE PAYE E HAD APPROACHED FOR ISSUE OF AN AUTHORIZATION (F.NO.13) CANNOT BE CONS TRUED AS A DECLARATION TO THAT EFFECT. 8.2.8. WITH REGARD TO RTI ACT, WE WOULD LIKE TO PO INT OUT THAT FORM NO.13 STATED TO HAVE BEEN FURNISHED BY THE PAYEES B EFORE THEIR RESPECTIVE AOS FOR AUTHORIZATION NOT TO DEDUCT TDS ETC., WHICH HAVE NOT APPEAR TO HAVE BEEN ACTED UPON BY THE AOS CONCERNED. 8.2.9. RTI ACT : FOR NON-ISSUANCE OF FORM NO.13 THE ASSESSEE SE EMS TO HAVE APPROACHED THE AUTHORITIES CONCERNED UNDER RTI ACT. THIS PARTICULAR ISSUE CANNOT BE A SUBJECT MATTER FOR ADJUDICATION B EFORE THIS BENCH AS THIS ISSUE WILL HAVE TO BE DELIBERATED IN AN APPROPRIATE FORUM. 8.2.10. THE ISSUE BEFORE THIS BENCH IS CONFINED TO , WHETHER THE AO WAS WITHIN HIS DOMAIN TO INVOKE THE PROVISIONS O F S.40(A)(IA) OF THE ACT JUDICIOUSLY? IN OUR CONSIDERED VIEW, THE AO WAS WITHIN HIS REALM TO INVOKE THE PROVISIONS OF S.40(A)(IA) OF THE ACT ON THE PREMISE THAT THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE WHILE MAKING THE INT EREST PAYMENTS. THE ASSESSEES STAND THAT THE PAYEES HAVE APPROACHED TH E AOS CONCERNED FOR ITA NO.1180/BANG/09 PAGE 8 OF 9 ISSUANCE OF NO TDS/LOWER TDS ETC., AUTHORIZATION WH ICH THEY HAVE FAILED TO OBTAIN ETC., DOESNT HOLD WATER. FURTHER CONTENTIO N OF THE ASSESSEE THAT TDS OBLIGATION WAS NOT WAS REQUIRED , CONSIDERING THE COMPUTATION OF INCOME SHOWN IN EACH CASE WHERE F NO.13 APPLICATION WAS MADE TO THE AO CONCERNED FOR AUTHORIZATION, IN OUR CONSIDERED V IEW, TO PUT IT GENTLY , THE ASSESSEE HAD OVER-STEPPED IN HIS PERCEPTION WHICH H E WAS NOT OBLIGED TO DO SO UNDER ANY PROVISIONS OF I.T.ACT. 8.2.11. IN AN OVERALL CONSIDERATION OF THE FACTS AN D CIRCUMSTANCES OF THE ISSUE AND IN CONFORMITY WITH THE FINDING OF TH E HONBLE TRIBUNAL REFERRED SUPRA, THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE STAND OF THE AO ON THIS COUNT. IT IS ORDERED ACCORDINGLY. 9. THE OTHER GRIEVANCE OF THE ASSESSEE IS WITH REG ARD TO THE CHARGING OF INTEREST U/S 234B OF THE ACT. CHARGING OF INTEREST U/S 234B OF THE ACT IS MANDATORY AND CONSEQUENTIAL IN NATURE A ND, THUS, THIS GROUND IS DISMISSED AS NOT MAINTAINABLE. 10. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF FEBRUARY, 2010. SD/- SD/- ( K.P.T. THANGAL ) (A. MOHAN ALANKAMONY ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE 16 TH FEBRUARY, 2010. DS/- ITA NO.1180/BANG/09 PAGE 9 OF 9 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.