ITO, Ward - 36(2), Kolkata, Kolkata V. M/s. S.K. Garg & Sons (HUF), Kolkata

ITA 1304/KOL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9426 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2011
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 23-06-2010
• Court: TRIBUNAL
• Department Lawyers: PIYUSH KOLHE
• Keywords: Business income; Reasonable cause; Condonation of delay

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : BENCH-B : KOLKATA [BEFORE HONBLE B.R. MITTAL, J.M. & HONBLE SHRI C. D. RAO, A.M] ITA NO. 1304 (KOL) OF 2010 : ASSESSMENT YEAR : 2007-08 INCOME TAX OFFICER/WARD-36(2) -VS. M/S. S.K. GARG & SONS (HUF) KOLKATA. KOLKATA [PAN : AAEHS 7226 J] [APPPELLANT] [RESPONDEN T] APPELLANT BY : SHRI PIYUSH KOLHE, SR. D.R. RESPONDENT BY : SHRI SUBASH AGARWAL O R D E R PER B. R. MITTAL, J. M. THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMEN T YEAR 2007-08 ALONGWITH AN APPLICATION FOR CONDONATION OF DELAY OF 3 DAYS AGAINST ORDER OF LD. CIT(A)-XX, KOLKATA DATED 05.03.2010 ON THE FOLLOWING GROUNDS :- (1) THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT INTEREST INCOME EARNED BY THE ASSESSEE FROM LENDING FUNDS WAS NOT BUSINESS INCOME, BUT INCOME F ROM OTHER SOURCES, WITHOUT CONSIDERING THE FACT THAT THE ASSE SSEE WAS ENGAGED IN BORROWING AND LENDING OF FUNDS. (2) THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN HOLDING THAT INTEREST INCOME EA RNED BY THE ASSESSEE WAS INCOME FROM OTHER SOURCES, INSTEAD OF BUSINESS INCOME, WHEN SUCH A VIEW IS CONTRARY TO THE FACTS OF THE CASE. (3) THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE WAS NOT LIAB LE TO DEDUCT TAX AT SOURCE FROM ITS PAYMENT OF INTEREST OF RS.19,08,966 /- IN TERMS OF SECTION 194A(1), WHEREAS THE PROVISION OF SECTION 1 94A(1) CLEARLY STATES THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FAMI LY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIF IED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANC IAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH S UCH INTEREST IS CREDITED OR PAID, SHALL BE LIABLE TO DEDUCT INCOME- TAX UNDER THIS SECTION. (4) THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)S DECISION IS ERRONEOUS AS HE HAS FAILED TO CONSIDER THE GROSS ITA NO. 1304/KOL/2010 2 RECEIPTS OR TURNOVER DURING THE FINANCIAL YEAR IMME DIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH INTEREST IS CREDIT ED OR PAID IN TERMS OF THE PROVISIONS OF SECTION 194A(1). AS SUCH, LD. CIT (A)S ORDER ON THIS ISSUE IS PERVERSE AND LIABLE TO BE QUASHED AND ASSESSING OFFICERS ORDER BE RESTORED. 2. IN RESPECT OF DELAY OF 3 DAYS, AFTER CONSIDERING THE APPLICATION DATED 22.06.2010 FILED BY THE DEPARTMENT AND THE SUBMISSIONS OF THE LD. REPRE SENTATIVES OF THE PARTIES, WE ARE SATISFIED THAT THE DELAY WAS DUE TO REASONABLE CAUSE. HENCE, WE CO NDONE THE DELAY OF 3 DAYS AND ENTERTAIN THE APPEAL ON MERITS. 3. ALL THE GROUNDS IN THE APPEAL ARE INTER-LINKED. THE MAIN ISSUE INVOLVED IN THIS APPEAL IS AS TO WHETHER THE RECEIPT OF INTEREST BY THE ASSESSEE IS TO BE CONSIDERED UNDER THE HEAD INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES. 4. THE RELEVANT FACTS ARE THAT THE ASSESSEE FILED R ETURN SHOWING TOTAL INCOME OF RS.1,50,200/- BY SHOWING INCOME FROM TRADING IN CLOTH AND INTERES T RECEIPTS. THERE IS NO DISPUTE TO THE FACT THAT IN TRADING ACCOUNT FOR CLOTH BUSINESS, TURNOVER IS OF RS.26,21,400/- AND IN THE PROFIT AND LOSS ACCOUNT INTEREST INCOME IS SHOWN AT RS.22,67,296/-. THE ASSESSEE HAS ALSO PAID INTEREST OF RS.19,04,438/- TO 57 LOAN CREDITORS, DETAILS OF WHI CH ARE GIVEN BY THE ASSESSING OFFICER AT PAGES 3 & 4 OF THE ASSESSMENT ORDER. THE ASSESSEE HAS ADMIT TEDLY NOT GOT ITS ACCOUNTS AUDITED U/S. 44AB OF THE ACT. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON THE INTEREST PAYMENT EVEN IN THOSE CASES WHERE THE AMOUNT OF INT EREST PAID WAS OF RS.5,000/- OR MORE TO A LOAN CREDITOR. 5. THE ASSESSING OFFICER HAS STATED THAT THE TOTAL TURNOVER OF THE ASSESSEE FROM BUSINESS ACTIVITY COMES TO RS.48,,88,696/- (RS.26,21,400/- + RS.22,67,296/-) AND THEREFORE, THE ASSESSEE WAS NOT ONLY REQUIRED TO GET ITS ACCOUNTS AUDITED U /S. 44AB OF THE ACT BUT ALSO REQUIRED TO DEDUCT TDS WHERE THE PAYMENT OF INTEREST TO A PERSON EXCEE DED RS.5,000/- AS PER SECTION 194A OF THE ACT. THE ASSESSING OFFICER STATED THAT THE PAYMENT OF INTEREST IS TO BE DISALLOWED AS PER SECTION 40(A)(IA). HOWEVER, THE ASSESSEE CONTENDED THAT INT EREST RECEIVED BY THE ASSESSEE IS TO BE CONSIDERED UNDER THE HEAD INCOME FROM OTHER SOURCE S. MONEY LENDING IS NOT BUSINESS OF THE ASSESSEE. THEREFORE, THE BUSINESS RECEIPTS WAS ONLY ON ACCOUNT OF SALE OF RS.26,21,400/- AND THE PROVISIONS OF TAX AUDIT WERE NOT ATTRACTED. IT WAS ALSO CONTENDED THAT CONSEQUENTLY PROVISION OF TDS U/S. 194A WAS NOT APPLICABLE. THE ASSESSING OFF ICER DID NOT ACCEPT THE SAID CONTENTION OF THE ASSESSEE. THE ASSESSING OFFICER HAS STATED THAT ASS ESSEE HAS ALSO SHOWN HIS INTEREST EARNING AS HIS ITA NO. 1304/KOL/2010 3 BUSINESS INCOME IN THE COMPUTATION FILED AND NOT I NCOME FROM OTHER SOURCES EVEN IN THE ASSESSMENT YEAR UNDER CONSIDERATION. IT IS OBSERVED THAT THE ASSESSEE FILED REVISED COMPUTATION BY SHOWING INTEREST PAYMENT UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER DID NOT ACCEPT THE SAME AND AFTER CONSIDERING ALL THE C ASES WHERE INTEREST PAYMENT IS OF RS.5,000/- OR MORE TO AN INDIVIDUAL, MADE DISALLOWANCE U/S. 40(A) (IA) OF THE ACT WHICH IS AGGREGATING TO RS.19,08,966/-, DETAILS GIVEN AT PAGE 7 OF THE ASSE SSMENT ORDER. BEING AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). 6. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HAS STATED THAT INTEREST INCOME IS ASSESSABLE AS INCOME FROM OTHER SOURCES. THE LD. CIT(A) HAS ALSO STATED THAT EVEN IF THE INTEREST INCOME IS CONSIDERED UNDER THE HEAD BUSINE SS INCOME AND THE TOTAL TURNOVER FROM BUSINESS ACTIVITIES EXCEED MONETARY LIMIT DURING THE FINANCI AL YEAR, ASSESSEES LIABILITY TO DEDUCT TAX AT SOURCE WILL ARISE ONLY IN THE SUBSEQUENT FINANCIAL YEAR AS PER PROVISO TO SECTION 194A OF THE INCOME TAX ACT AND NOT IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, THE LD. CIT(A) HAS DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. HENCE, THE DEPARTMENT IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 7. DURING THE COURSE OF HEARING, LD. DEPARTMENTAL R EPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER. IT WAS CONTENDED BY THE LD. DEPA RTMENTAL REPRESENTATIVE THAT INTEREST INCOME IS BUSINESS INCOME AND THE ASSESSEE ITSELF HAS SHOW N INTEREST INCOME AS BUSINESS INCOME IN THE COMPUTATION FILED. THEREFORE, THE TOTAL TURNOVER EX CEEDED RS.40.00 LAKHS AND THE ASSESSEE WAS REQUIRED TO DEDUCT TDS ON THE INTEREST PAID EXCEEDI NG RS.5,000/- TO AN INDIVIDUAL AS PER SECTION 194A OF THE ACT. THE LD. DEPARTMENTAL REPRESENTATIV E FURTHER SUBMITTED THAT MONEY LENDING IS SUBSTANTIAL PART OF THE BUSINESS OF THE ASSESSEE AN D IN THE PRECEDING ASSESSMENT YEAR, ASSESSEE HAS SHOWN MONEY LENDING AS ITS BUSINESS AND THE INTERES T RECEIVED OF RS.19.87 LAKHS OF ASSESSMENT YEAR 2006-07 WAS SHOWN AS BUSINESS RECEIPT. 8. IN HIS SUBMISSION, LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE COULD NOT CONTROVERT THE SUBMISSIONS OF THE LD. DEPARTMENTAL REPRESENTATIVE. ON THE OTHER HAND, THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE CONCEDED THAT IN TH E PRECEDING ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2006-07, ASSESSEE HAS SHOWN INTEREST INCOME AS INCOME FROM BUSINESS AND THE TOTAL TURNOVER ALSO EXCEEDED TO RS.40.00 LAKHS. THEREFORE, THE ATT ENTION OF THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE WAS DRAWN TO PROVISO TO SECTION 194A O F THE ACT AND HE COULD NOT CONTROVERT THAT THE FINDING GIVEN BY THE LD. CIT(A) IS CONTRARY TO PROV ISO TO SECTION 194A OF THE ACT AND AS SUCH, ITA NO. 1304/KOL/2010 4 ASSESSEE WAS REQUIRED TO DEDUCT TDS U/S. 194A OF TH E ACT BECAUSE IN THE PRECEDING ASSESSMENT YEAR ITSELF TURNOVER OF THE ASSESSEE EXCEEDED RS.40 .00 LAKHS. 9. CONSIDERING THE ABOVE FACTS AND THE CONTENTION O F THE LD. REPRESENTATIVES OF THE PARTIES THAT ASSESSEE ITSELF HAS BEEN SHOWING INTEREST RECE IPT UNDER THE HEAD INCOME FROM BUSINESS IN THE PRECEDING ASSESSMENT YEARS AND THE SAME WAS ASSESSE D IN ASSESSMENT YEAR 2006-07 ALSO AS INCOME FROM BUSINESS AND ALSO THE FACT THAT THE TOTAL TURN OVER OF THE ASSESSEE IN THE PRECEDING YEARS TO THE ASSESSMENT YEAR UNDER CONSIDERATION ALSO EXCEEDED R S.40 LAKHS AND ALSO THE FACT THAT THE ASSESSEE ITSELF HAS SHOWN MONEY LENDING AS ONE OF ITS BUSINE SS ACTIVITY IN THE COMPUTATION FILED ALONGWITH RETURN, WE REVERSE THE ORDER OF THE LD. CIT(A) BY C ONFIRMING THE ACTION OF THE ASSESSING OFFICER. THEREFORE, WE HOLD THAT THE ASSESSING OFFICER HAS R IGHTLY APPLIED THE PROVISIONS OF SECTION 40(A)(IA) TO DISALLOW INTEREST OF RS.19,08,966/- AS THE ASSESSEE WAS LIABLE TO DEDUCT TDS U/S. 194A OF THE ACT, WHICH ASSESSEE FAILED TO DO SO. 10. ACCORDINGLY, THE GROUNDS OF APPEAL TAKEN BY THE DEPARTMENT ARE ALLOWED BY CONFIRMING THE ACTION OF THE ASSESSING OFFICER AND VACATING THE OR DER OF LD. CIT(A). 11. IN THE RESULT, APPEAL OF THE DEPARTMENT IS ALLO WED. ORDER IS PRONOUNCED IN OPEN COURT ON 07. 01. 2011. SD/- SD/- [ C. D. RAO ] [ B.R. MITTAL ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 07. 01. 2011. COPY OF THE ORDER FORWARDED TO: 1. INCOME TAX OFFICER, WARD-36(2), 18, RABINDRA SARANI (3 RD FLOOR), KOLKATA-700 001. 2 M/S. S.K. GARG, & SONS (HUF), 33/1, N.S. ROAD (7 TH FLOOR), KOLKATA-700001. 3. CIT- (4) CIT(A) - 5. DR, KOLKATA BENCHES, KOLKATA [TRUE COPY] BY ORDER DEPUTY/ASSISTANT REGISTRAR I.T.A.T., KOLKA TA.