Sandor Medicaids Pvt.Ltd, Hyderabad V. DCIT, Hyderabad

ITA 1403/HYD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3362 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 08-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Assessee Lawyers: K L RATHI
• Section: 43B; 154

Judgement Text

ITA NO.1403/H/2010 M/S SANDOR MEDICALS (P) LTD., HYDERABAD 1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.1403/H/2010 ASSESSMENT YEAR :2005-06 M/S SANDOOR MEDICALS (P) LTD. HYDERABAD (PAN AADCS 4168 H) VS THE DCIT, CIRCLE 3(1), HYDERABAD APPELLANT RESPONDENT APPELLANT BY : SHRI K.L. RATHI RESPONDENT BY : SMT. NIVEDITA BISWAS, DR ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE ASSESSEE IS DI RECTED AGAINST THE ORDER OF THE CIT(A) HYDERABAD DATED 11.12.2009 AN D PERTAINS TO THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS: 1. THE CIT(A) ERRED IN NOT DISPOSING OF GROUND OF APPE AL NO.5 THROUGH WHICH ASSESSEE CLAIMED THAT PROCEEDINGS U/S 154 ARE ILLEGAL IN AS MUCH AS IN THE NOTICE ISSUED U/S 154 OF THE ASSESSING OFFICER GAVE ONE REASON FOR INITIATING PR OCEEDINGS BUT DISALLOWANCE OF SALES TAX WAS MADE FOR ANOTHER REAS ON IN ORDER U/S 154. 2. THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF SALES TAX OF RS.2,73,735/- ON THE GROUND THAT IT WAS BY WAY OF J OURNAL ENTRY WITHOUT CONSIDERING THE FACT THAT THE PAYMENTS WAS MADE BY M/S SANDOR HEALTH CARE P LTD. WHO IS A CONSIGNMENT AGEN T OF ASSESSEE AND THE PAYMENT WAS MADE ON BEHALF OF THE ASSESSEE ITA NO.1403/H/2010 M/S SANDOR MEDICALS (P) LTD., HYDERABAD 2 AS IT PERTAINS TO TURNOVER OF THE ASSESSEE MADE THR OUGH CONSIGNMENT AGENT. ACCORDINGLY THE CONSIGNMENT AGE NT DEBITED ASSESSEES ACCOUNT WITH SALES TAX LIABILITY AND PAI D BY IT ON BEHALF OF THE ASSESSEE. 3. THE CIT(A) ERRED IN NOT DISPOSING OF ASSESSEES GRO UNDS OF APPEAL NO.2.3.4 WHICH HE IS BOUND TO DISPOSE AS PER PROVISIONS OF SECTION 250(6) THAT SAYS THAT ORDER SHALL STATE THE POINTS FOR DETERMINATION, THE DECISION THEREON AND THE REASON FOR THE DECISION. 4. THE PROVISIONS OF SECTION 154 ARE ONLY FOR RECTIFYI NG THE MISTAKE WHICH IS VERY MUCH APPARENT FROM THE RECORD AND THI S BEING NOT SO IN THE CASE OF ASSESSEE, INVOKING THE PROVISIONS OF SECTION 154 IS VERY MUCH ILLEGAL AS A DEBATABLE POINT CANNOT BE MADE SUBJECT MATTER OF RECTIFICATION U/S 154. 5. WITHOUT PREJUDICE TO ABOVE, SINCE ASSESSEE HAS PAID SALES TAX AS IS EVIDENT FROM SALES TAX ACCOUNT OF CONSIGNMENT AG ENT WHEREIN ASSESSEE ACCOUNT WAS CREDITED AND SALES A/C WAS DEB ITED WHICH IS NORMAL ACCOUNTANCY PRACTICE, QUESTION OF ANY OTH ER EVIDENCE DOES NOT ARISE AND FURTHER THE AUDITOR HAS ALSO CER TIFIED THE PAYMENT IN AUDIT REPORT IN FORM 3CB AND 3CD. 3. THE ASSESSEE HAD FILED ITS RETURN OF INCOME F OR THE ASSESSMENT YEAR 2005-06 DECLARING A LOSS OF RS.(-)22,96,167 ON 28.10.2005. THE SAME WAS PROCESSED U/S 143(1) ON 25.9.2006. LATER, IT WAS FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD DEBITED SAL ES TAX OF RS.3,23,189/- PERTAINING TO FY 2002-03 AND 2003-04 IN THE P&L ACC OUNT FOR THE YEAR. HE OPINED THAT AS PER THE PROVISIONS OF SEC.43B, EV IDENCE IN SUPPORT OF PAYMENT OF TAXES OUGHT TO HAVE BEEN FURNISHED BY TH E ASSESSEE ALONG WITH THE RETURN OF INCOME. SINCE NO SUCH EVIDENCE WAS SO ENCLOSED, THE ASSESSING OFFICER ISSUED NOTICE U/S 154 PROPOSING T O RECTIFY THE SAID MISTAKE. ITA NO.1403/H/2010 M/S SANDOR MEDICALS (P) LTD., HYDERABAD 3 4. THE ASSESSEE IN HIS REPLY DATED 3.7.2008 SUBMIT TED BEFORE THE ASSESSING OFFICER THAT THE PAYMENTS HAD BEEN EFFECT ED PARTLY BY CHEQUE, BEING THOSE OF RS.22,429/- ON 28.2.2005 AND RS.27,0 25/- ON 14.12.2004 WHILE THE REMAINING AMOUNT OF RS.2,73,735/- WAS PAI D BY BOOK ADJUSTMENT THROUGH A JOURNAL ENTRY ON 31.3.2005. A COPY OF THE LEDGER ACCOUNT WAS ALSO FURNISHED SHOWING THAT THE LIABILI TY HAD BEEN TRANSFERRED TO M/S SANDOR HEALTH CARE P LTD. 5. ON EXAMINATION OF THE SUBMISSIONS AND DETAILS, THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE HAD NOT FURNISH ED ANY PROOF OF PAYMENT OF TAXES. HE OPINED THAT THE JOURNAL ENTRY PASSED ON 31.3.2005, TRANSFERRING THE LIABILITY OF RS.2,73,735/- TO M/S SANDOR HEALTH CARE P LTD. CANNOT BE CONSTRUED AS DISCHARGING/PAYING THE SALES TAX LIABILITY IN THE ABSENCE OF ANY SPECIFIC PROOF. ACCORDINGLY, HE FOU ND THAT THE CONTENTION OF THE ASSESSEE IS UNACCEPTABLE AND DISALLOWED A TO TAL OF RS.3,23189/-. 6. ON APPEAL THE CIT(A) OBSERVED THAT AS SEEN FRO M THE RECORDS THE PAYMENTS OF RS.27,025/ AND RS.22,429/- INDEED WAS M ADE BY CHEQUE. ACCORDINGLY, THE SAID PAYMENTS ARE TO BE ALLOWED IF THE CHEQUES WERE REALISED AND HE HAS GIVEN A DIRECTION TO THE ASSESS ING OFFICER TO VERIFY FROM RECORDS WHETHER THESE CHEQUES WERE REALISED. AS REGARDS THE BALANCE AMOUNT, IT IS OBSERVED BY CIT(A) THAT MERE TRANSFER OF SALES TAX LIABILITY OF RS.2,73,735/- TO M/S SANDOR HEALTH CAR E (P) LTD., BY WAY OF JOURNAL ENTRY CANNOT BE CONSTRUED AS ACTUAL PAYMENT S TO THE GOVT. ACCOUNT, HE DISALLOWED THE AMOUNT OF RS.2,73,735/- . AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTE D THAT THE ENTIRE LIABILITY DEBITED TO THE PROFIT AND LOSS ACC OUNT IS ON ACCOUNT OF EARLIER YEAR LIABILITY I.E. ASSESSMENT YEARS 2002-0 3 AND 2003-04 AND PAID ITA NO.1403/H/2010 M/S SANDOR MEDICALS (P) LTD., HYDERABAD 4 ON ACCOUNT OF DIFFERENCE IN SALES TAX RATES AND LIA BILITY. THE IMPUGNED LIABILITY OF RS.3,23,189 WAS ACTUALLY PAID. THE A SSESSEE HAS PAID BY WAY OF CHEQUE AN AMOUNT OF RS.27,025/- ON 28.2.2005 I.E ., BEFORE THE DUE DATE OF FILING OF RETURN AND SIMILARLY ANOTHER LIAB ILITY OF RS.22,429/- WAS PAID ON 14.12.2004. THE BALANCE OF RS.2,73,735/- H AS BEEN PAID BY WAY OF ADJUSTMENT ENTRIES AS LIABILITY IS PAYABLE BY TH E ASSESSEE TO THE PRINCIPAL M/S SANDOR HEALTH CARE (P) LTD. ACCORDIN GLY, THIS LIABILITY HAS BEEN DEBITED BY THE ASSESSEE TO THE P&L ACCOUNT TO THE CORRESPONDING CREDIT TO SANDOR HEALTH CARE P LTD(SHCPL). IN TURN SANDOR HEALTH CARE P LTD. HAS PAID THIS LIABILITY TO THE SALES TAX DEPAR TMENT. HE DREW OUR ATTENTION TO THE LEDGER ACCOUNT OF M/S SANDOR HEALT H CARE P LTD WHICH IS PLACED ON RECORD AT PB NO.15 & 16. ACCORDING TO TH E LEARNED COUNSEL, THE TOTAL TAX LIABILITY OF M/S SHCPL TO THE TUNE OF RS. 4,75,735/- WHICH INCLUDES THE ASSESSEES PORTION OF LIABILITY AT RS.2,73,735/ -. HE SUBMITTED THAT THIS AMOUNT WAS DUE TO M/S SHCPL AND ACCORDINGLY JOURNAL ENTRY WAS PASSED BY THE ASSESSEE CREDITING TO M/S SHCPL AND DEBITING TO THE P&L ACCOUNT AND THIS IS THE ACCEPTED ACCOUNTING POLICY. HE SUB MITTED THAT THIS WAS THE ASSESSEES LIABILITY PAYABLE TO SHCPL AND WHO I N TURN PAID SALES TAX TO THE DEPARTMENT. HE SUBMITTED THAT THE CIT(A) HAS N OT GIVEN ANY FINDINGS ON THIS ISSUE AND THERE WAS NO REASON TO D ISALLOW THIS PAYMENT. FURTHER, HE SUBMITTED THAT THE REASON GIVEN FOR ISS UE OF NOTICE U/S 154 IS DIFFERENT FROM ISSUE RAISED IN THE ORDER PASSED U/S 154. ACCORDING TO THE AR, THE CIT(A) HAS NOT DEALT THIS ISSUE. HE SUBMIT TED THAT THE ASSESSING OFFICER CAN INVOKE THE PROVISIONS OF SECTION 154 ON LY IF THERE IS A MISTAKE APPARENT FROM RECORD BUT HE CANNOT TAKE UP ANY DEBA TABLE ISSUE. ACCORDING TO AR, THE REASONS GIVEN BY THE ASSESSING OFFICER IS VERY MUCH WRONG IN AS MUCH AS THE ASSESSEES ACCOUNT BEING SU BJECT TO AUDIT BOTH UNDER COMPANIES ACT AND UNDER INCOME TAX ACT AND A UDITOR HAS VERY MUCH CERTIFIED IN FORM 3CD IN PARA 21(I)(B) WHICH R EADS AS UNDER: ITA NO.1403/H/2010 M/S SANDOR MEDICALS (P) LTD., HYDERABAD 5 STATE WHETHER SALES TAX, CUSTOMS DUTY, EXCISE DUTY OR ANY OTHER INDIRECT TAX, LEVY, CELL, IMPOST, ETC. IS PASSED THROUGH THE PROFIT AND LOSS ACCOUNT. HE SUBMITTED THAT AGAINST THE ABOVE QUERY, THE AUDI TOR GAVE THE REPORT AS UNDER: YES SALES TAX AND CUSTOMS DUTY PASSED THROUGH PROF IT AND LOSS ACCOUNT. AS SUCH THERE IS NO QUESTION OF FAILURE TO FURNISH THE PROOF DOES NOT ARISE. ACCORDING TO HIM THE ASSESSING OFFICER IN HIS NOTIC E U/S 154 PROPOSED THE DISALLOWANCE OF SALES TAX CLAIM ON THE GROUND THAT AS PER COLUMN 21(II) OF 3CD OF THE CHARTERED ACCOUNTANT STATES NIL, BUT TH AT COLUMN PERTAINS TO CLAUSE (B) OF SECTION 43B WHICH READS AS FOLLOWS: CLAUSE (B): ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERANNUATIO N FUND OR GRATUITY FUND OR ANY OTHER FUND FOR THE WELFARE OF THE EMPLO YEES. THEREFORE AGAINST THIS COLUMN, THE CHARTERED ACCOUN TANT MENTIONED NIL WHICH IS VERY MUCH CORRECT. 8. HE RELIED ON THE FOLLOWING JUDGEMENTS: 1. ITO VS. VOLKART BROTHERS & OTHERS (82 ITR 50) (SC) 2. PIECO ELECTRONICS & ELECTRICALS LTD. VS. CIT (205 I TR 469) (KAL.HC) 3. ASSOCIATED STONE INDUSTRIES VS. CIT (217 ITR 246)(R AJ. HC) 4. ITC LTD. VS. INSPECTING AC & OTHERS (249 ITR 104)( CAL. HC) 9. THE DR RELIED ON THE ORDER OF THE CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AT LENGTH AND PERUSED THE MATERIALS AVAILABLE ON RECORD AND ALSO CAREFULLY GO NE THROUGH ALL THE CASE LAW CITED BY THE LEARNED AR. WE ARE CONSIDERING TH E ALL THE GROUNDS ITA NO.1403/H/2010 M/S SANDOR MEDICALS (P) LTD., HYDERABAD 6 CUMULATIVELY HEREIN. IN THIS CASE, NOTICE U/S 154 WAS ISSUED TO THE ASSESSEE ON OBSERVING IN THIS NOTICE DATED 24.6.200 8 AS FOLLOWS: AS PER P&L ACCOUNT SALES TAX OF RS.3,23,189/- DEB ITED FOR ASSESSMENT YEAR 2002-03 AND 2003-04. WHEREAS AS PER COL.21(I I) OF 3CD REPORT THE C.A. SHOWS NIL. 11. THE ISSUE DEALT BY ASSESSING OFFICER IS WITH REGARD TO NON PAYMENT OF SALES TAX I.E. NON PAYMENT WITHIN THE DU E DATE OF FILING THE RETURN OF INCOME U/S 139(1) OF THE IT ACT AS MENTI ONED IN THE 43B OF THE IT ACT. THE ASSESSEES ARGUMENT IS THAT THE DETAI LS MENTION IN COL.21(2) OF 3C D REPORTED BY C A IS NOT W.,R.T. SALES TAX LI ABILITY. THIS ARGUMENT OF THE ASSESSEES COUNSEL IS DEVOID OF MERITS WHICH IS AGAINST THE FACTS OF THE CASE. IN THE PRESENT CASE, THE ASSESSEE CLAIMED DE DUCTION OF RS.3,23,189/- IN THE P&L ACCOUNT TOWARDS SALES TAX PAYMENT. OUT OF THIS, THERE WAS A JOURNAL ENTRY CREDITING SHCPL ON 31.3.2 005 TO THE TUNE OF RS.2,73,735/- AND DEBITING THE SALES TAX PAID ACCOU NT AT RS.2,73,735/- IN THE BOOKS OF THE ASSESSEE. BUT THERE IS NO ACTUAL PAYMENT. ACTUALLY, THE ASSESSEE HAS NOT PAID THE SALES TAX LIABILITY. T HE ASSESSEE CLAIMING DEDUCTION BY PASSING THE ABOVE JOURNAL ENTRY. AS P ER EXPLANATION 2 TO SECTION 43B, THE ASSESSEE CAN CLAIM DEDUCTION ONLY WHEN IT WAS ACTUALLY PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE OF F ILING THE RETURN AS APPLICABLE U/S 139(1) OF THE IT ACT AND THE ASSESSE E IS REQUIRED TO FURNISH PROOF OF ACTUAL PAYMENT ALONG WITH THE RETURN OF IN COME. THERE IS A MANDATORY REQUIREMENT ON THE PART OF THE ASSESSEE T O ENCLOSE THE PROOF FOR THE ACTUAL PAYMENT ALONG WITH THE RETURN OF INC OME AND THE RETURN TO BE FILED BEFORE THE DUE DATE AS PRESCRIBED U/S 139( 1) OF THE ACT. WHEN THE PROOF OF ACTUAL PAYMENT OF THE IMPUGNED LIABILI TY WAS NOT ACCOMPANIED BY THE RETURN OF INCOME, THE ASSESSING OFFICER SHALL DISALLOW THE SAME. IN THE PRESENT CASE, ADMITTEDLY THERE WA S NO PROOF FOR ITA NO.1403/H/2010 M/S SANDOR MEDICALS (P) LTD., HYDERABAD 7 PAYMENT OF THIS IMPUGNED LIABILITY ALONG WITH THE R ETURN OF INCOME. EVEN THE BENCH ASKED THE ASSESSEES COUNSEL WHETHER THE ASSESSEE IS HAVING ANY PROOF FOR PAYMENT EITHER FROM ASSESSEES SIDE O R FROM M/S SHCPL. FOR THIS QUERY RAISED BY THE BENCH, THE ASSESSEE HA S GIVEN EVASIVE ANSWER AND NOT ABLE TO FURNISH ANY EVIDENCE FOR THE ACTUAL PAYMENT OF THE IMPUGNED LIABILITY BEFORE DUE DATE OF FILING THE RE TURN OF INCOME OF THE ASSESSEE. FURTHER, THE ASSESSEES COUNSEL MADE AN ARGUMENT BEFORE US THAT THE ISSUE TAKEN UP BY THE ASSESSING OFFICER IN THE NOTICE DATED 24.6.2008 ISSUED U/S 154 IS DIFFERENT FROM THE ISSU E DEALT BY THE ASSESSING OFFICER IN THE ORDER PASSED DATED U/S 154 ON 15.10.2008. IN OUR OPINION, THE ISSUE DEALT BY THE ASSESSING OFFIC ER WHILE ISSUE OF NOTICE AS WELL AS IN THE ASSESSMENT ORDER IS ONE AND THE S AME I.E. WITH REGARD TO NON PAYMENT OF SALES TAX LIABILITY WITHIN THE DUE D ATE AS MENTIONED IN SECTION 43B OF THE ACT. THE OTHER CONTENTION MADE BY THE AR BEFORE US IS THAT THE ASSESSING OFFICER HAS TAKEN UP DEBATABL E ISSUE U/S 154 WHICH IS NOT PERMITTED BY LAW. THIS ARGUMENT OF THE ASSE SSEES COUNSEL DEVOID OF MERITS AS PER EXPLANATION 2 OF SECTION 43B, THE ASSESSEE IS DUTY BOUND TO FURNISH PROOF OF ACTUAL PAYMENT OF SALES TAX LIA BILITY ALONG WITH RETURN OF INCOME FILED ON OR BEFORE THE DUE DATE AS APPLIC ABLE TO THE ASSESSEE FOR FURNISHING THE RETURN U/S 139(1). THIS IS A MANDAT ORY REQUIREMENT AND THERE IS NO QUESTION OF DEBATE ON THIS ISSUE TO DEC IDE WHETHER THE ASSESSEE IS REQUIRED TO FILE PROOF OF PAYMENT OF SA LES TAX LIABILITY ALONG WITH THE RETURN OF INCOME. THE ASSESSEE HAS FAILED TO FURNISH PROOF FOR ACTUAL PAYMENT OF SALE TAX LIABILITY ALONG WITH THE RETURN OF INCOME AS ENUMERATED U/S 43B OF THE IT ACT AND THERE IS NO EV IDENCE WHICH HAS BEEN FURNISHED BY THE ASSESSEE REGARDING THE PAYMEN T OF SALES TAX LIABILITY, AS SUCH, THE ASSESSING OFFICER IS WITHIN JURISDICTION TO INVOKE PROVISIONS OF SECTION 154 TO DISALLOW THE SAME U/S 43B OF THE ACT. ITA NO.1403/H/2010 M/S SANDOR MEDICALS (P) LTD., HYDERABAD 8 12. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITIES AND THE SAME IS TO BE CONFIRMED. THE V ARIOUS CASE LAW RELIED BY THE ASSESSEES COUNSEL IS NOT AT ALL RELEVANT TO THE FACTS OF THE PRESENT CASE, AS SUCH THEY CANNOT BE ANY ASSISTANCE TO THE ASSESSEE. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE STA NDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.4.2 011 SD/- G.C. GUPTA SD/- CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED 21 ST APRIL, 2011 COPY FORWARDED TO: 1. SHRI K.L. RATHI, 3-5-144/5 EDEN GARDEN, HYDERABAD -1. 2. THE DCIT-3(1), HYDERABAD 3. THE CIT(A) IV, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/