Bharat N. Patel, RAJKOT-GUJARAT V. The Asstt. Commr. of Income Tax, Cir.-2, RAJKOT-GUJARAT

ITA 123/RJT/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0231 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 18-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Retrospective amendment; Additional evidence; TDS; Set aside
• Section: 143(3); 244A; 40(a)(ia); 68; 12; 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT , , BEFORE SHRI RAJPAL YADAV , JUDICIAL MEMBER & SHRI WASEEM AHMED , ACCOUNTANT MEMBER ./ I.T.A. NO S . 1 2 3 /RJT/2017 ( / ASSESSMENT YEAR : 2011 - 12) BHARAT N. PATEL, INDIA PRINTS , RANCHHODNAGAR, B/H. RAJMOTI OIL MILL, RAJKOT. / VS. A.C.I.T , CENTRAL CIRCLE - 2 , RAJKOT. ./ ./ PAN/GIR NO. : A DPPP6615C ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : WRITTEN SUBMISSION / RESPONDENT BY : SHRI ANIL KUMAR , D R. / DATE OF HEARING 19 /09 /201 9 / DATE OF PRONOUNCEMENT 20 / 0 9 /201 9 / O R D E R PER WASEEM AHMED ACCOUNTANT M EMBER : THE CAPTIONED APPEAL S HAVE BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) - 2 , AHMEDABAD [ LD. CIT(A) IN SHORT] OF E DATED 10/02 /2017, ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER R EFERRED TO AS 'THE ACT') DAT ED 30/12/2013 RELEVANT TO ASSESSMENT YEAR S (A . Y . ) 2011 - 12 . ITA NO. 123 /RJT / 2017 A.Y. S 2011 - 12 - 2 - THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE GROUNDS RAISED IN THIS APPEAL ARE WITHOUT PREJUDICE TO ONE ANOTHER. 2. THE LD.CLT( A) ERRED IN LAW AND ON FACTS IN RETIRING DISALLOWANCE OF RS.185338/ - OUT OF INTEREST EXPENSE THOUGH THE SAME WAS NOT WARRANTED ON THE FACTS OF THE CASE AND WAS NOT IN ACCORDANCE WITH LAW. 3. THAT ON THE FACTS OF THE CASE AND MATERIAL ON RECORD THE DISALL OWANCE MADE DESERVES TO BE DELETED. 4. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN IGNORING THE COGENT EVIDENCES THE MATERIAL FILED WITH HIM AND FURTHER ERRED IN NOT ACCEPTING THE ADDITIONAL MATERIAL AS ADDITIONAL EVIDENCE FOR WHICH THE PRAYER U/S.46A W AS MADE IN APPEAL PROCEEDINGS. 5. THE LD.CIT(A) IN THIS REGARD PROCEEDED ON ERRONEOUS PRESUMPTION & PREMISES AND ERRED IN IGNORING THE COGENT MATERIAL PUT FORTH BEFORE HIM. ON THE FACTS OF THE CASE IT IS CONTENDED THAT THE DISALLOWANCE MADE DESERVES TO BE DELETED. 6. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ANY OF THE GROUNDS STATED HERE ABOVE. T HE 1 ST ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO FOR RS. 2, 74 , 704 ON ACCOUN T OF NO N DEDUCTION OF TDS UNDER SECTION 48 I A OF THE ACT. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL AND CARRYING ON THE BUSINESS OF SA REE PRINTING. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CLAIMED INTERES T EXPENSES PAID TO M/S INDIA BULLS RS. 1,52,935.00 AND KOTAK MAHINDRA PRIME LTD. RS. 1,21,769.00 WITHOUT DEDUCTING THE TDS UNDER SECTION 194A OF THE ACT. ACCORDINGLY , THE AO DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A). ITA NO. 123 /RJT / 2017 A.Y. S 2011 - 12 - 3 - 3. THE ASSESSEE BEFORE THE LEARNED CIT (A) SUBMITTED THAT THERE CANNOT BE ANY DISALLOWANCE OF THE EXPENSES ON ACCOUNT OF NON - DEDUCTION OF TDS AS PER THE AMENDMENT UNDER THE PROVISIONS OF SECTION 40 (A)(I A) OF THE ACT IF THE RECIPIENT HAS PAID THE TAXES ON SUCH INCOME RECEIVED FROM THE ASSESSEE. 4. HOWEVER THE LEARNER CIT (A) DISREGARDED THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ORDER OF THE AO. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED AR BEFORE US FILED THE WRITTEN SUBMISSIONS WHICH ARE AVAILABLE ON RECORD. THE ASSESSEE IN THE WRITTEN SUBMISSION REITERATED THE POINT A S PLACED BEFORE THE LEARNE D CIT (A). 6. ON THE OTHER HAND THE LEARNE D DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE LEARNED DR AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ASSESSEE IN THE CASE ON HAND HAS CLAIMED AN EXPENSE OF RS. 2,74,704/ - UNDER THE HEAD INTEREST EXPENSES ON FINANCE. THE ASSESSEE INCURRED SUCH EXPENSE WITHOUT DEDUCTING TDS U/S 194A R.W.S. 40(A)( IA ) OF THE ACT. THEREFORE, THE DISALLOWANCE WAS MADE BY THE AO ON ACCOUNT OF NON - DEDUCTION OF TDS. ITA NO. 123 /RJT / 2017 A.Y. S 2011 - 12 - 4 - 7.1 HOWEVER, FROM THE PRECEDING DISCUSSION, WE FIND FORCE IN THE ARGUMENT SUBMITTED BY THE LEARNED AR THAT IF THE RECIPIENT OF INTEREST HAS PAID THE TAXES ON THE AMOUNT RECEIVED FROM THE ASSESSEE, THEN THERE WILL BE NO DISALLOWANCE. INDEED T HE SAID PROVISION THOUGH INSERTED BY THE FINANCE ACT 2012 W.E.F. 1 - 4 - 2013 HAS B EEN HELD TO BE RETROSPECTIVE IN OPERATION BY RECENT DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. ANSAL LAND MARK TOWNSHIP (P) LTD. (2015) 61 TAXMANN.COM 45 (DEL) WHEREIN THE QUESTION RAISED BEFORE THE COURT AND THE DECISION RENDERED THERE ON IS REPRODUCED HEREIN BELOW FOR THE SAKE OF CLARITY: - QUESTION : WHETHER THE SECOND PROVISO TO SECTION 40(A)( IA ) (INSERTED BY THE FINANCE ACT, 2012), WHICH STATES THAT TDS SHALL BE DEEMED TO BE DEDUCTED AND PAID BY A DEDUCTOR IF RESIDENT RECIPIENT HAS DI SCLOSED THE AMOUNT IN HIS RETURN OF INCOME AND PAID TAX THEREON, IS RETROSPECTIVE IN NATURE OR NOT? HELD : SECTION 40(A)(IA) WAS INTRODUCED BY THE FINANCE (NO.2) ACT , 2004 TO ENSURE THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATION WHERE INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED DUE TO TAX WITHHOLDING LAPSES BY THE ASSESSEE. HENCE , SECTION 40(A)( IA ) IS NOT A PENALTY PROVISION FOR TAX WITHHOLDING LAPSE BUT IT IS A PROVISION INTRODUCED TO COMPENS ATE ANY LOSS TO THE REVENUE IN CASES WHERE DEDUCTOR HASN T DEDUCTED TDS AN AMOUNT PAID TO DEDUCTEE AND, IN TURN, DEDUCTEE ALSO HASN T OFFERED TO TAX INCOME EMBEDDED IN SUCH AMOUNT THE PENALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEPARATELY PROVIDED UNDER SECTION 271C AND, THEREFORE, SECTION 40(A)(I) ISN T ATTRACTED TO THE SAME. HENCE, AN ASSESSEE COULD NOT BE PENALIZED UNDER SECTION 40(A)( IA ) WHEN THERE WAS NO LOSS TO REVENUE. THE AGRA TRIBUNAL IN THE CASE OF RAJIV KUMAR AGARWAL - VS - ACIT [2014] 45 TA XMANN.COM 555 (AGRA TRIB) HAD HELD THAT THE SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND HAS RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005, BEING THE DATE FROM WHICH SUB - CLAUSE (IA) OF SECTION 40(8) WAS INSERTED BY THE FINANC E NO.(2) ACT, 2004, EVEN THOUGH THE FINANCE ACT, 2012 HAD NOT SPECIFICALLY STATED THAT PROVISO IS RETROSPECTIVE IN NATURE. THE HIGH COURT AFFIRMED THE RATIO LAID DOWN BY THE AGRA TRIBUNAL AND HELD THAT SAID PROVISOS IS DECLARATORY AND CURATIVE IN NATURE AN D HA RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005. IN VIEW OF ABOVE, WE ARE INCLINED TO SET ASIDE THE ORDER OF THE LD. CIT - A TO THE AO FOR FRESH ADJUDICATION IN THE LIGHT OF THE ABOVE ITA NO. 123 /RJT / 2017 A.Y. S 2011 - 12 - 5 - DISCUSSION. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR THE STATISTICAL PURPOSES. THE 2 ND ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO FOR 9 1 , 586 ON ACCOUNT OF DIFFERENCE IN THE RECEIPTS SHOWN IN THE BOOKS VIZ A VIZ SHOWN IN FORM 26AS. 8. THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERVED THAT THERE IS A RECEIPT OF 3 , 17 , 194 AS PER THE FORM 26AS FROM M/S IMPERIAL EXPORTS WHEREAS THE ASSESSEE HAS SHOWN SUCH RECEIPT IN ITS BOOKS OF ACCOUNTS AT RS. 2 ,2 5 , 608 LEA V ING A DIFFERENCE OF 9 1568. 00 ONLY. ACCO RDINGLY THE AO TREATED THE SAME AS UNDISCLOSED INCOME UNDER SECTION 68 OF THE ACT. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A). 9. THE ASSESSEE BEFORE THE LEARNED CIT (A) SUBMITTED THAT THE ENTIRE AMOUNT REPRESENTING THE DIFFERENCE AS OBSERVED BY THE AO CANNOT BE TREATED AS INCOME OF THE ASSESSEE. AS SUCH, THE PROFIT ELEMENT ON SUCH DIFFERENCE CAN BE BROUGHT TO TAX. 10. HOWEVER, THE LEARNED CIT (A) DISREGARDED THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ORDER OF THE AO BY OBSERV ING THAT THERE WAS NO EVIDENCE FURNISHED BY THE ASSESSEE SUGGESTING TH AT THERE WAS SOME EXTRA EXPENSE INCURRED BY HIM AGAINST SUCH DIFFERENCE AS DISCUSSED ABOVE. ITA NO. 123 /RJT / 2017 A.Y. S 2011 - 12 - 6 - BEING AGGRIEVED BY THE ORDER OF THE LEARNE D C IT - A, THE ASSESSEE IS IN APPEAL BEFORE US. 11 . THE LEARNED AR BEFORE US IN THE WRITTEN SUBMISSION CONTENDED THAT THE ENTIRE AMOUNT CANNOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AS SUCH THE AMOUNT OF PROFIT ELEMENT CAN BE BROUGHT TO TAX. 12. ON THE OTHER HAND THE LEARNE D DR VEHEMENTLY SUPPORT ED THE ORDER OF THE AUTHORITIES BELOW. 13. WE HAVE HEARD THE LEARNED DR AND PERUSED THE MATERIALS AVAILABLE ON RECORD . IT IS UNDISPUTED FACT THAT THE IMPUGNED AMOUNT WAS REPRESENTING THE BUSINESS RECEIPTS. THEREFORE, IN OUR CONSIDERED VIEW THE ENTIRE AMO UNT CANNOT BE BROUGHT TO TAX. IN THIS REGARD, WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HON BLE GUJARAT HIGH COURT IN THE CASE OF PRESIDENT INDUSTRIES REPORTED IN 258 ITR 654 WHEREIN IT WAS HELD AS UNDER: THE AMOUNT OF SALES BY ITSELF CANNOT REPRESENT THE INCOME OF THE ASSESSEE WHO HAS NOT DISCLOSED THE SALES. THE SALES ONLY REPRESENT THE PRICE RECEIVED BY THE SELLER OF THE GOODS FOR THE ACQUISITION OF WHICH IT HAS ALREADY INCURRED THE COST. IT IS THE REALISATION OF EXCESS OVER THE COST INCURRED THAT ONLY FORMS PART OF THE PROFIT INCLUDED IN THE CONSIDERATION OF SALES. THEREFORE, UNLESS THERE IS A FINDING TO THE EFFECT THAT THE INVESTMENT BY WAY OF INCURRING COST IN ACQUIRING GOODS WHICH HAVE BEEN SOLD HAS BEEN MADE B Y THE ASSESSEE AND THAT HAS ALSO NOT BEEN DISCLOSED, THE QUESTION WHETHER ENTIRE SUM OF UNDISCLOSED SALES PROCEEDS CAN BE TREATED AS INCOME, ANSWERS BY ITSELF IN THE NEGATIVE. I N VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LEARNED CIT (A) AND DIRECT THE AO TO TAX THE PROFIT ELEMENT EMBEDDED IN SUCH RECEIPT. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 123 /RJT / 2017 A.Y. S 2011 - 12 - 7 - THE 3 RD ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION OF 35 , 529 .00 ON ACCOUNT OF INTERE ST RECEIVED UNDER SECTION 244A OF THE ACT. 14. THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF 35 , 529 ON ACCOUNT OF INTEREST ON THE INCOME TAX REFUND WHICH WAS NOT SHOWN IN THE BOOKS OF ACCOUNT. ACCORDI NGLY THE AO ADDED THE SUM OF 3 5 , 529 TO THE TOTAL INCOME OF THE ASSESSEE. 15 . AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A) WHO HAS CONFIRMED THE ORDER OF THE AO. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 16 . THE LEARNED AR BEFORE US HAS NOT PLACED ANY POINT OF CONTENTION IN THE WRITTEN SUBMISSION. 17 . ON THE OTHER HAND THE LEARNE D DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 18 . WE HAVE HEARD THE LEARNED DR AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET WE NOTE THAT THERE WAS NO ARGUMENT ADVANCED BY THE LEARNED AR FOR THE ASSESSEE QUA THE AMOUNT OF INTEREST RECEIVED ON THE INCOME TAX REFUND. ACCORDINGLY WE DO NOT FIN D ANY REASON TO INTERFERE ITA NO. 123 /RJT / 2017 A.Y. S 2011 - 12 - 8 - IN THE FINDING OF THE LEARNED CIT (A). HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 19 . IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR THE STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COU RT ON 20 / 0 9 /201 9 - SD - - SD - ( ) ( ) (RAJPAL YADAV) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (TRUE COPY) DATED 20 /09 /201 9 MANISH