Harish Jain, Chandigarh V. ITO, Chandigarh

ITA 1277/CHANDI/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5369 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-01-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 10-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VRIND KUMAR
• Keywords: Business expenditure
• Section: 143(3); 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1277/CHD/2010 ASSESSMENT YEAR : 2005-06 HARISH JAIN VS. I.T.O. WARD 4(3) SCO 26-27, FIRST FLOOR CHANDIGARH SECTOR 34-A CHANDIGARH AGAAPPJ 0441 H (APPELLANT) (RESPONDENT) DEPARTMENT BY SHRI VRIND KUMAR ASSESSEE BY: SHRI AKHILESH GUPTA DATE OF HEARING 8.1.2014 DATE OF PRONOUNCEMENT 17. 1.2014 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 11. 8.2010 OF THE LD CIT(A), CHANDIGARH. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: 1. THAT CIT( A) HAS ERRED BOTH IN FACTS AND LAW. 2. THAT CIT (A) HAS ERRED IN TREATING RECTIFICATION U/S 154 FOR MAKING DISALLOWANCE U/S 40(A)(IA) WITHOUT APPRECIATING THE FACT THAT ONLY ARITHMETICALLY MISTAKES CAN BE RECTIFIED U/S 154. T HE ADDITION U/S 40(A)(IA) CAN BE MADE ONLY AFTER LONG DRAWN PROCESS OF LEGAL INTERPRETATIONS. SO THE DISALLOWANCE MAY BE ALLOWED AS EXPENDITURE. 3. THAT CIT (A) HAS ERRED WHILE INTERPRETING LAW, S INCE ONLY EXPENSES PAYABLE COMES WITHIN THE AMBIT OF THE SECTION 40(A) (IA) NOT THE EXPENSES WHICH HAS ALREADY BEEN PAID DURING THE RELEVANT FIN ANCIAL YEAR, SO THE ADDITIONS MADE BY WAY OF DISALLOWANCE U/S 40 (A)(IA ), SHOULD BE ALLOWED AS BUSINESS EXPENDITURE. 4. THE CIT(A) HAS ERRED IN TREATING THE SCANNING & PROCESSING CHARGES PAID RS. 252100/- U/S 194 J WHERE AS THESE ARE ONLY JOB WORK CANNOT BE TAKEN U/S 194 J. SINCE EXPENDITURE DOESN T FALL IN THE SAID SECTION AS TAKEN UP BY THE LD. AO. AND RATIFIED BY CIT APPEALS, SO THE ADDITIONS MADE BY WAY OF DISALLOWANCE U/S 40(A)(IA) , SHOULD BE ALLOWED AS BUSINESS EXPENDITURE. 5. THAT CIT (A) HAS ERRED ON THE FACT THAT THE ASSE SSEES TURNOVER DURING THE RELEVANT PERIOD IS BELOW RS. 40,00,000/- AND BEING INDIVIDUAL 2 THERE IS NO REQUIREMENT TO DEDUCT TAX FOR SUB-CONTR ACTING. SO ADDITION MADE RS. 252100/- FOR SCANNING & PROCESSING CHARGES AND RS. 40,000/- AS CONTENT DEVELOPMENT CHARGES BEING THE SALARY OF A PART TIME EMPLOYEE SHOULD BE ALLOWED AS BUSINESS EXPENDITURE. 3 AFTER HEARING BOTH THE PARTIES WE FIND THAT IN TH IS CASE ORIGINALLY ASSESSMENT WAS COMPLETED U/S 143(3) ASSE SSING TOTAL INCOME AT RS. 3,93,526/-. LATER ON A NOTICE U/S 15 4 WAS ISSUED TO RECTIFY THE MISTAKE IN RESPECT OF NON DEDUCTION OF TAX AGAINST SCANNING AND PROCESSING CHARGES AMOUNTING T O RS. 2,52,100/- AND EXPENDITURE ON ACCOUNT OF CONTENT DE VELOPMENT AMOUNTING TO RS. 70,820/-. THE ASSESSING OFFICER A FTER CONSIDERING THE OBJECTIONS OBSERVED THAT TURNOVER O F THE ASSESSEE WAS MORE THAN RS. 40 LAKHS AND ADMITTEDLY THE ASSESSEE HAS NOT DEDUCTED THE TAX, THEREFORE THESE TWO ITEMS WERE ADDED TO THE INCOME FOR NON DEDUCTION OF TAX U /S 40(A)(IA) OF THE INCOME -TAX ACT, 1961. 4 ON APPEAL FOLLOWING SUBMISSIONS WERE MADE BEFORE THE LD. CIT(A): THE A.O HAS ERRED WHILE INITIATING PROCEEDINGS OF RECTIFICATIONS U/S 154. THE POWER OF RECTIFICATION U/S 154 CAN BE EXERCISED ONLY IF THERE IS MISTAKE APPARENT FRO THE RECORD OF THE ASSESSEE. A MISTAKE APPARENT ON THE RECORD MUST BE AN OBVIOUS AND PATENT MISTAKE NO T SOMETHING WHICH CAN BE ESTABLISHED BY ONLY DRAWN PROCESS OF REASONI NG ON POINTS ON WHICH THERE MAY BE DIFFERENT OPINIONS. A DECISION O N DEBATABLE POINT CANT BE CONSIDER A MISTAKE ON THE RECORD AS FROM T HE CASE OF THE ASSESSEE. IT CAN BE SEEN THAT A.O. HAS DISALLOWED E XPENDITURE U/S 40(A)(IA) BY WAY OF DISALLOWANCE OF CERTAIN EXPENDI TURE WHICH WAS INCURRED FOR GETTING CERTAIN SCANNING AND PROCESSIN G, NOW THE POINT IS TO MAKE ANY DISALLOWANCE UNDER THE SAID SECTION A.O DO ESNT HAVE ANYTHING APPARENT ON RECORD. THE LD. AO HAS TO GET INTO THE FURTHER DETAILS, TO SEE WHETHER THE PARTICULAR EXPENDITURE IS SUBJECT TO TD S PROVISIONS, THEN HE HAS TO FURTHER CHECK WHETHER THE ASSESSE WHO IS MAK ING SUCH PAYMENTS IS LIABLE TO DEDUCT TDS AND IN THIS PARTICULARS CAS E THE ASSESSEE IS AN INDIVIDUAL AND WHETHER HE IS SUBJECT TO AUDIT U/S 4 4AB. SO FROM ALL THESE PROVISIONS AND RELEVANT SECTIONS ASSESSING OFFICE H AS TO MAKE INTERPRETATION WHETHER THE ASSESSEE NEED TO DEDUCT TAX OR NOT AN PARTICULAR EXPENDITURE BILLS UNDER WHAT PARTICULAR PROVISION OF TDS AND THEN AS A MATTER OF FACT WHETHER TDS HAS BEEN DEDUC TED OR NOT AND DEPOSITED OR NOT. SO IT IS VERY MUCH EVIDENT IN THIS CASE THAT THERE IS NO MISTAKE WHICH CAN BE SAID TO APPARENT FROM THE RECORD RATHER IT HAS T O BE DRAWN AFTER LONG ARGUMENT AND DEBATE. SO THIS CANT BE RECTIFIED BY APPLYING SECTION 154.THE POINT THAT DISALLOWANCE U/S 40(A)(IA) FOR N ON DEDUCTION OF TDS U/S 194J IS HIGHLY DEBATABLE CAN BE WELL JUDGED FRO M MY ARGUMENTS GIVEN FOR THE GROUND NO. 3 ON THE NEXT PAGES. THERE ARE V ARIOUS JUDGMENTS OF 3 HONORABLE SUPREME COURT AS WELL AS HIGH COURT WHICH CLEARLY STATE THAT THE MISTAKE WHICH IS NOT APPARENT FROM THE RECORD C ANT BE RECTIFIED BY A.O BY INVOKING SECTION 154. FURTHER RELIANCE WAS PLACED ON THE DECISION OF HON' BLE SUPREME COURT IN CASE OF T.S. BALRAM, I.T.O VS. VOL KART BROTHERS AND OTHERS, 82 ITR 50 (S.C) AND SOME OTHER CASES. 5 THE LD. CIT(A) AFTER EXAMINING THE SUBMISSIONS DI D NOT FIND FORCE IN THE SAME AND OBSERVED THAT NON DEDUCT ION OF TAX IS STATUTORY PROVISION AND THE ASSESSEE WAS DUTY BO UND TO FOLLOW THE SAME. AFTER DETAILED ANALYSIS AND DISCU SSION SHE CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 6 BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT DEDUCTION OF TAX WAS A DEBATABLE ISSUE AND CAN NOT BE SAID TO BE APPARENT FROM RECORD. HE FURTHER SUBMITTED T HAT CHANDIGARH BENCH OF THE TRIBUNAL HAD TAKEN SIMILAR VIEW IN CASE OF ITO VS. SHRI SATISH KUMAR, ITA NO. 1146/CHD /2012. 7 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND TH E LD. CIT(A). 8 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND T HAT IT IS A SETTLED POSITION OF LAW THAT MISTAKE APPARENT FROM THE RECORD CAN BE RECTIFIED U/S 154 BUT THE MISTAKE HAS TO BE APPARENT IF IT HAS TO BE FOUND OUT BY A LONG PROCESS OF REASONING THEN SUCH MISTAKE CANNOT BE SAID TO BE APPARENT FROM RECORD. HON'BLE SUPREME COURT IN CASE OF T.S. BALRAM, I.T.O VS. VOL KART BROTHERS AND OTHERS (SUPRA) HAS OBSERVED AS UNDER: A MISTAKE APPELLANT ON THE RECORD MUST BE AN OBVIO US AND PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY BE CONCEIVABLY TWO OPINIONS. A DECISION ON A DEBATABL E POINT OF LAW IS NOT A MISTAKE APPELLANT FROM THE RECORD. 4 9 IN OUR OPINION, THE ISSUE REGARDING DEDUCTION OF TAX CANNOT BE SAID TO BE APPARENT FROM RECORD. VARIOUS FACTORS ARE INVOLVED IN DETERMINING WHETHER A PARTICULAR PAYMEN T IS LIABLE FOR DEDUCTION OF TAX. MOREOVER, AT THE RELEVANT PO INT OF TIME LONG DEBATE WAS GOING ON WHETHER THE PROVISIONS OF TDS WOULD BE APPLICABLE IN CASE OF PAYMENT WHICH HAVE ALREADY BEEN MADE AND THE MATTER WENT TO SPECIAL BENCH OF THE T RIBUNAL IN CASE OF MERILYN SHIPPING AND TRASNPORTS VS. ADDL CI T, 136 ITD 23 (VISHAKHAPATNAM)(SB) BECAUSE OF DIVERSE VIEWS OF VARIOUS BENCHES. THUS IT IS CLEAR THAT THE ISSUE REGARDING DEDUCTION OF TAX IS DEBATABLE AND SAME IS NOT OPEN FOR RECTIFICA TION. SAME VIEW HAS BEEN TAKEN BY THE CHANDIGARH BENCH OF THE TRIBUNAL IN CASE OF ITO VS. SHRI SATISH KUMAR (SUPRA). THER EFORE IN OUR OPINION, RECTIFICATION WAS NOT POSSIBLE IN THIS CAS E AND ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT(A ) AND ANNUL THE ORDER PASSED U/S 154 OF INCOME -TAX ACT, 1961. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 17.1.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17.1.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 5