Arvind Kaushik, Delhi V. ITO, New Delhi

ITA 1256/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9635 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 02-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAGDISH SINGH
• Keywords: TDS
• Section: 143(3); 40(a)(ia); 194J

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DLEHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO.1256/DEL/2017 ASSESSMENT YEAR: 2012-13 ARVIND KAUSHIK, VS. INCOME-TAX OFFICER, WA-116, SHAKARPUR, DELHI. WARD 60(5), NEW DELHI. PAN : AJKPK8536G (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SAMEER KAPOOR, ADVOCATE RESPONDENT BY: SH. JAGDISH SINGH, SR.DR DATE OF HEARING: 27/07/2021 DATE OF ORDER : 27/07/2021 ORDER PER K. NARASIMHA CHARY, J.M. AGGRIEVED BY THE ORDER DATED 10/01/2017 PASSED BY T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-19, NEW DELHI ('LD. CIT(A)') FOR THE ASSESSMENT YEAR 2012-13, ARVIND KAUSHIK (THE ASSES SEE) FILED THIS APPEAL. 2. BRIEFLY STATED, RELEVANT FACTS ARE THAT THE ASSE SSEE IS THE PROPRIETOR OF M/S. KRISHNA CONSULTANTS AND IS ENGAGED IN THE B USINESS OF RECOVERY AND COLLECTION AGENT ON BEHALF OF CERTAIN BANKS. HE FIL ED RETURN OF INCOME ON 25.02.2013 DECLARING INCOME OF RS.10,88,200/-. ASSE SSMENT U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (THE ACT) WAS, HOWEVER, COMPLETE AT AN INCOME OF RS.2,05,43,440/- BY MAKING SEVERAL ADDITI ONS. 2 3. AGGRIEVED BY SUCH ADDITIONS, ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) AND BY WAY OF THE IMPUGNED ORDER, LD. CI T(A) GRANTED PARTIAL RELIEF TO THE ASSESSEE BY DELETING CERTAIN ADDITION S AND REMITTING THE AMOUNTS IN RESPECT OF CERTAIN ADDITIONS. IN SO FAR AS THIS APPEAL IS CONCERNED, THE RELEVANT ADDITIONS SUSTAINED BY THE CIT(A) ARE (I) RS.3,98,932/- U/S. 40(A)(IA) ON ACCOUNT OF NON-DEDU CTION OF TDS U/S. 194J ON CONSULTATION EXPENSES INCURRED BY THE ASSESSEE; AND (II) RS.39,84,917/- THE AMOUNT SUSTAINED OUT OF DISALLOW ANCE OF SALARY TO THE EMPLOYEES. 4. AGGRIEVED BY SUCH AN ACT OF THE LD. CIT(A) BY WA Y OF IMPUGNED ORDER, THE ASSESSEE PREFERRED THIS APPEAL ON FIVE G ROUNDS, BUT AT THE TIME OF ARGUMENTS, GIVEN UP GROUNDS NOS. 3 TO 5 AND CONF INED THE SCOPE OF LIMIT TO THE SUSTENANCE OF ADDITION TO THE EXTENT OF RS.3 ,98,932/- U/S. 40(A)(IA) OF THE ACT AND RS.39,84,91 7/- ON ACCOUNT OF DISALL OWANCE OF SALARY TO THE EMPLOYEES. 5. COMING TO THE ADDITION IN RESPECT OF SECTION 40( A)(IA) OF THE ACT, THE ASSESSMENT ORDER SPEAKS THAT THE ASSESSEE FAILED TO FURNISH EVIDENCES OF TDS IN RESPECT OF THE PAYMENTS MADE TO THE CONSULTA NCY CHARGES U/S. 194J OF THE ACT AND, THEREFORE, ADDITION WAS MADE TO THE EXTENT OF RS.10,39,141/-. LEARNED CIT(A), AFTER OBTAINING THE REMAND REPORT FROM THE ASSESSING OFFICER, GAVE A CATEGORICAL FINDING T HAT IN RESPECT OF ABOUT 9 PERSONS, AN AMOUNT EXCEEDING RS.20,000/- ON A SINGL E DAY WAS PAID WITHOUT DEDUCTING TAX AT SOURCE U/S. 194J OF THE AC T AND THEREFORE, DISALLOWANCE HAS TO BE MADE IN RESPECT OF SUCH AMOU NTS U/S. 40(A)(IA) OF THE ACT. ASSESSEE CHALLENGED THIS EXTENT OF THE DI SALLOWANCE, I.E., RS.3,98,932/-. 3 6. HOWEVER, AT THE TIME OF ARGUMENTS, LD. AR SUBMIT TED THAT IN SO FAR AS THE FACTUAL FINDING OF THE AUTHORITIES BELOW IS CONCERNED, THERE IS MUCH TO SUBMIT BUT THE ASSESSEE CONCEDES THE SAME. HOWEV ER, ASSESSEE SUBMITS THAT UNDER SECTION 40(A)(IA), AS AMENDED BY FINANCE ACT, 2014 W.E.F. 01.04.2015, THE DISALLOWANCE OF EXPENSES ON ACCOUNT OF NON DEDUCTION OF TDS SHOULD BE RESTRICTED TO 30% OF THE EXPENSES IN VIEW OF THE FACT THAT THE AMENDMENT MADE BY THE FINANCE ACT (2) TO SECTION 40(A)(IA) IS CURATIVE IN NATURE AND IS, THEREFORE, ALSO APPLICABLE TO THE ASSESSMENT YEAR UNDER CONSIDERATION. HE SUBMITS TH AT THOUGH THIS AMENDMENT IS W.E.F. 01.04.2015, BUT THE JUDICIAL AU THORITIES HELD IT TO BE CURATIVE IN NATURE AND RETROSPECTIVE. HE PLACED REL IANCE ON VARIOUS TRIBUNAL ORDERS IN THE CASES OF M/S. R. H. INTERNAT IONAL VS. ITO (ITA NO. 6724/DEL/2018 )DATED 20.03.2019, RAJENDRA YADAV VS. ITO FOR THE A.Y. 2007-08 ORDER DATED 29.01.2016 (JAIPUR BENCH), SMT. KANTA YADAV VS. ITO (ITA NO. 6312/DEL/2016) DATED 12.05.2017 AND UMAXE PROJECTS (P) LTD. VS. DCIT (ITA NO. 206/DEL/2019). BASING ON THIS, LEARNE D AR PRAYED THAT INSTEAD OF DISALLOWING THE ENTIRE AMOUNT IN RESPECT OF WHICH TDS WAS NOT DEDUCTED, ONLY 30% THEREOF MAY BE DISALLOWED. LD. D R RELIED ON THE FINDINGS OF THE AUTHORITIES BELOW. 7. WE HAVE GONE THROUGH THE RECORDS IN THE LIGHT OF SUBMISSIONS MADE ON EITHER SIDE. AMOUNT OF THE SUBJECT MATTER OF DIS ALLOWANCE IS NOT IN DISPUTE, WHICH IS RS.3,98,932/-. HOWEVER, THE QUEST ION IS WHETHER ENTIRE AMOUNT HAS TO BE DISALLOWED OR ONLY 30% THEREOF HAS TO BE DISALLOWED. THOUGH THE FINANCE ACT OF 2014 MADE AN AMENDMENT TO SECTION 40(A)(IA) OF THE ACT W.E.F. 01.04.2015, BUT IN THE DECISIONS RELIED BY THE ASSESSEE, VARIOUS BENCHES OF TRIBUNALS INCLUDING DELHI BENCHE S OF TRIBUNAL CONSISTENTLY HELD THAT SUCH AMENDMENT IS CURATIVE I N NATURE. IN R.H. 4 INTERNATIONAL (SUPRA), IT IS CLEARLY HELD THAT DISA LLOWANCE U/S. 40(A)(IA) OF THE ACT HAS TO BE RESTRICTED ONLY TO 30% OF THE EXP ENSES PAID AS AGAINST 100% BECAUSE THE AMENDED PROVISION MADE TO SECTION 40(A)(IA) BY FINANCE (NO 2) ACT, 2014 IS CURATIVE IN NATURE AND THE SAME SHOULD BE APPLIED RETROSPECTIVELY. INASMUCH AS NO CONTRARY DE CISION IS AVAILABLE WITH US, WE ARE OF THE CONSIDERED OPINION THAT SUCH A VI EW CONSISTENTLY TAKEN BY THE TRIBUNALS HAS TO BE FOLLOWED. WITH THIS VIEW OF THE MATTER, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALL OWANCE TO 30% OF THE AMOUNT PAID IN RESPECT OF WHICH TDS SHOULD HAVE BEE N MADE. WE ACCORDINGLY, ALLOW GROUND NO. 1 PARTIALLY. 8. NOW, COMING TO GROUND NO.2, THE ASSESSMENT ORDER SPEAKS THAT TOWARDS RECOVERY SUB-AGENTS EXPENSE, THE ASSESSEE I NCURRED AN EXPENDITURE OF RS.1,30,71,097/-, BUT THE ASSESSEE F AILED TO FURNISH THE DETAILS THEREOF. ASSESSING OFFICER, THEREFORE, DISA LLOWED A SUM OF RS.1,30,71,097/- FOR NON-COMPLIANCE OF SECTION 194H AND CONSEQUENTLY DISALLOWED IT U/S. 40(A)(IA) OF THE ACT. LEARNED CI T(A) NOTED THAT OUT OF 144 EMPLOYEES IN RESPECT OF WHOM THE SALARY EXPENSE OF RS.1,30,71,097/- WAS SAID TO HAVE BEEN INCURRED, THE ICICI BANK STATED T HAT 60 PERSONS RENDERED SERVICE. LEARNED CIT(A) ALLOWED SUCH AN EXPENSE TO THE TUNE OF RS.90,86,180/-. HOWEVER, LEARNED CIT(A) NOTED THAT ABOUT 42 OTHER PERSONS WERE DRAWING A SALARY AROUND RS.15000/ PER MONTH WHEREAS THE REGULAR EMPLOYEES TO WHOM THESE 42 PERSONS WERE EXP ECTED TO ASSIST, WERE DRAWING SALARY FAR LESS THAN THESE 42 PERSONS. LEARNED CIT(A), THEREFORE, THOUGHT THAT IT IS UNLIKELY THAT EMPLOYE ES DRAWING MORE SALARY WOULD BE ASSISTING THE EMPLOYEES DRAWING LESS SALAR Y AND THEY CANNOT BE TERMED AS JUNIOR EMPLOYEES, AS CLAIMED BY THE ASSES SEE. LEARNED CIT(A), BASING ON THE DENIAL OF ICICI BANK AS TO THE 42 PER SONS RENDERING ANY 5 SERVICE COUPLED WITH THE IMPROBABILITIES OF THESE P ERSONS ASSISTING THE EMPLOYEES WITH LESS SALARY, CONCLUDED THAT THESE 42 PERSONS MIGHT NOT HAVE RENDERED SERVICE. 9. IT COULD BE SEEN FROM THE IMPUGNED ORDER THAT IN RESPECT OF SOME OF THESE EMPLOYEES, PAYMENTS WERE MADE BY WAY OF CH EQUES. WE FIND SOME SUBSTANCE IN THE ARGUMENT OF THE LD. AR THAT I CICI BANK MIGHT HAVE REFUSED TO REIMBURSE THE ENTIRE SO CALLED SALARY EX PENSES SAID TO HAVE BEEN INCURRED BY THE ASSESSEE, BUT SINCE THE BUSINE SS OF THE ASSESSEE IS A DIFFERENT ONE, IF REALLY, THE ASSESSEE INCURRED SUC H EXPENSES, IT CANNOT BE DISALLOWED. FOR THIS PURPOSE, THE VERIFICATION AT T HE END OF THE AUTHORITIES BELOW IS NOT COMPLETE AND THEY BASED THEIR FINDINGS ON SURMISES AND CONJECTURES. AFTER HEARING BOTH THE SIDES, WE ARE O F THE CONSIDERED OPINION THAT IN THE PRESENT SCENARIO, NO PURPOSE WO RTH WOULD BE SERVED BY REMANDING THE MATTER TO THE FILE OF ASSESSING OF FICER TO UNDERTAKE THE FRESH EXERCISE IN THIS REGARD. INSTEAD, WE ARE OF T HE CONSIDERED OPINION THAT ENDS OF JUSTICE WOULD BE MET BY MAKING DISALLO WANCE OF 25% IN RESPECT OF SALARY EXPENSE OF THESE 42 PERSONS. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO DISALLOW 25% OUT OF THE DISALL OWANCE OF RS.39,84,917/-. SUBJECT TO THIS OBSERVATION, GROUND NO. 2 IS ALLOWED IN PART. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 27 TH DAY OF JULY, 2021. SD/- SD/- (N.K. BILLAIYA) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27/07/2021 AKS