Income-tax Officer, V. M/s. Messung Systems, Pune

ITA 1438/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1694 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 10-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Keywords: Opportunity of being heard
• Section: 143(3); 139

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !, # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.1438/PN/2014 ASSESSMENT YEAR : 2009-10 THE INCOME TAX OFFICER, WARD 2(3), PUNE. . APPELLANT VS. M/S MESSUNG SYSTEMS, PLOT NO.EL-2, J BLOCK, MIDC, BHOSARI, PUNE 26. PAN : AAEFM6577C . RESPONDENT ITA NO.1470/PN/2014 ASSESSMENT YEAR : 2009-10 M/S MESSUNG SYSTEMS, 501, LUNKAD SKYMAX, DATTA MANDIR SQUARE, VIMAN NAGAR, PUNE 411 014. PAN : AAEFM6577C . APPELLANT VS. THE INCOME TAX OFFICER, WARD 8(3), PUNE. . RESPONDENT ASSESSEE BY : SHRI P. D. KUDVA DEPARTMENT BY : SHRI ANIL CHAWARE / DATE OF HEARING : 25.05.2016 / DATE OF PRONOUNCEMENT: 08.06.2016 % / ORDER PER PRADIP KUMAR KEDIA, AM : THE AFORESAID CAPTIONED CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE ARE AGAINST THE ORDER OF CIT(A)-V, PUNE, D ATED 12.03.2014 RELATING TO ASSESSMENT YEAR 2009-10 PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2 ITA NO.1438/PN/2014 ITA NO.1470/PN/2014 2. THE CROSS APPEALS FILED BY THE REVENUE AND THE A SSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER. ITA NO.1438/PN/2014 (BY REVENUE) : 3. FIRST, WE SHALL TAKE-UP THE APPEAL OF THE REVENU E FOR ADJUDICATION. BY WAY OF GROUND NO.1 OF THE REVENUE APPEAL, THE ASSES SING OFFICER HAS IMPUGNED THE ORDER OF THE CIT(A) IN DELETING THE AD DITION OF RS.52,14,078/- UNDER SECTION 40(A)(IA) OF THE ACT HOLDING THAT AME NDMENT TO SECTION 40(A)(IA) BY THE FINANCE ACT, 2010 IS RETROSPECTIVE IN OPERAT ION WITHOUT APPRECIATING THAT THE LAW TO BE APPLIED SHOULD BE THE ONE WHICH IS AP PLICABLE TO THE RELEVANT YEAR. 3.1 BRIEFLY STATED, THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING ACTIVITY OF PROGRAMMABLE LOGIC CONTRO LLERS AT PUNE. FROM THE DETAILS PROVIDED BY THE ASSESSEE, THE ASSESSING OFF ICER NOTED THAT IN RESPECT OF EXPENDITURE AMOUNTING TO RS.52,14,078/- INCURRED UN DER VARIOUS HEADS, THE ASSESSEE HAS FAILED TO DEDUCT TDS ON OR BEFORE THE PRESCRIBED DATES. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE HAS DEDUCTED TAX AND PAID TO THE GOVERNMENT TREASURY AFTER THE PRESCRIBED DATES AS R EFERRED TO IN RULE 30 OF THE INCOME TAX RULES, 1962 AND THEREFORE OWING TO THE F AILURE OF TDS COMPLIANCE, THE DEDUCTION OF THE AFORESAID AMOUNT C ANNOT BE ALLOWED AS EXPENDITURE. HE, ACCORDINGLY, PROCEEDED TO MAKE AD DITION OF RS.52,14,078/- TO THE TOTAL INCOME OF THE ASSESSEE. 3.2 IN FIRST APPEAL, THE CIT(A) HOWEVER NOTED THAT THE ENTIRE AMOUNT OF TDS HAS BEEN PAID IN THE FINANCIAL YEAR 2008-09 ONLY. HE, ACCORDINGLY, PLACED RELIANCE UPON THE ORDER OF THE HONBLE CALCUTTA HIG H COURT IN THE CASE OF CIT VS. VIRGIN CREATIONS IN ITA NO.302 OF 2011 ORDER DA TED 23.11.2011 AND GRANTED RELIEF TO THE ASSESSEE. THE RELEVANT OPERA TIVE PARA OF THE ORDER OF THE CIT(A) IS REPRODUCED AS UNDER :- 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AS WELL AS REPLY OF THE APPELLANT. IN THIS CASE IT IS SEEN THAT ENTIRE AMO UNT OF TDS HAS BEEN PAID IN THE F.Y. 2008-09 EXCEPT IN THE CASE OF FOLLOWING PAYMENTS : 3 ITA NO.1438/PN/2014 ITA NO.1470/PN/2014 SR. NO. DESCRIPTION GROSS AMOUNT RS. TDS AMOUNT RS. DATE OF PAYMENT A DUE DATE BEING 7 TH OF THE FOLLOWING MONTH AFTER 31/03/2009 8,284 13,867 211 314 09/04/2009 09/04/2009 7. IN THE ABOVE CASES TOO, THERE IS DELAY OF ONLY T WO DAYS AS DUE DATE WAS 07.04.2009 AGAINST WHICH PAYMENT HAS BEEN MADE ON 0 9.04.2009. IN THIS REGARD, IT IS SEEN THAT THE RIGOURS OF SEC. 40(A)(IA) OF THE I NCOME-TAX ACT WERE RELAXED BY FINANCE ACT 2010 W.E.F. 01.04.2010 TO ENABLE AN ASS ESSEE TO PAY THE TAX DEDUCTED BY HIM AT SOURCE UNDER CHAPTER XVII-B OF THE INCOME-TA X ACT ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SEC. 139 OF INCOME- TAX ACT. IN ITS JUDGMENT IN CIT VS. VIRGIN CREATIONS [ITA NO.302 OF 2011 DATED 23.11.20 11] THE CALCUTTA HIGH COURT HAS TAKEN A VIEW THAT THE AFORESAID RELAXATION INTR ODUCED BY THE FINANCE ACT 2010 W.E.F. 01.04.2010 WOULD BE AVAILABLE IN EARLIER YEA RS TOO. ACCORDINGLY, FOLLOWING THE ABOVE JUDGMENT OF HONBLE CALCUTTA HIGH COURT, IT IS HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION OF RS. 52,14,078/- U/S. 40(A)(IA) OF THE INCOME-TAX ACT. IT WOULD NOT BE OUT OF PLACE TO ME NTION THAT IN CASE THE AMOUNT IS CLAIMED IN A.Y. 2010-11 ON PAYMENTS BASIS OR ALLOWE D BY THE ASSESSING OFFICER, THE SAME IS REQUIRED TO BE WITHDRAWN. SUBJECT TO THE A BOVE REMARKS, THE GROUND IS ALLOWED. 3.3 THE LD. AUTHORIZED REPRESENTATIVE (AR) FOR THE ASSESSEE VEHEMENTLY EXHORTED THAT THERE IS NO DISPUTE THAT THE TDS HAS BEEN DEPOSITED IN THE GOVERNMENT TREASURY DURING THE FINANCIAL YEAR ITSEL F AND IN ANY CASE BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME. THE RE QUISITE DETAILS IN RESPECT OF PAYMENT WITH REFERENCE TO THE DEPOSIT CHALLANS HAS ALREADY BEEN NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE, ON THE OTHER H AND, RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 4. WE FIND THAT THE ASSESSING OFFICER HIMSELF HAS R ETURNED A FINDING OF FACT THAT THE TDS HAS BEEN DEPOSITED WITH THE GOVERNMENT TREASURY ALBEIT AFTER THE PRESCRIBED DUE DATE. WE ALSO NOTICE FROM THE ORDER OF THE CIT(A) THAT EXCEPT FOR ONE OR TWO INSTANCES INVOLVING PALTRY AMOUNT, T HE ENTIRE AMOUNT HAS BEEN PAID DURING THE RELEVANT FINANCIAL YEAR ITSELF. TH E OTHER TWO SMALL PAYMENTS WERE ALSO FOUND BY THE CIT(A) TO BE MADE IN THE MON TH OF APRIL 2008 ONLY. IN THE BACKGROUND OF THE AFORESAID FACTS, WE FIND NO I NFIRMITY IN THE ORDER OF THE CIT(A). THUS, THE GROUND NO.1 OF THE REVENUE APPEA L IS DISMISSED. 4 ITA NO.1438/PN/2014 ITA NO.1470/PN/2014 5. BY WAY OF GROUND NO.2 OF THE REVENUE APPEAL, THE REVENUE HAS ALSO IMPUGNED THE ACTION OF THE CIT(A) IN DELETING THE A DDITION OF RS.4,34,387/- UNDER SECTION 40(A)(IA) EVEN WHEN THE ASSESSEE HAD NOT PROVED THAT TDS WAS DEDUCTED AND PAID BEFORE THE END OF THE FINANCIAL Y EAR AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 5.1 THE RELEVANT FACTS CONCERNING THE ISSUE ARE THA T THE ASSESSEE INTER-ALIA PAID A SUM OF RS.4,34,387/- TO M/S RELIABLE MANPOWE R SERVICES IN RESPECT OF LABOUR CHARGES. THE ASSESSING OFFICER DISALLOWED T HE AFORESAID AMOUNT ON THE GROUND THAT THE TDS WAS NOT DEDUCTED AND PARTICULAR S OF PAN/TAN OF THE PARTIES WERE NOT FURNISHED. 5.2 BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT THE PAN IN RESPECT OF M/S RELIABLE MANPOWER SERVICES REMAINED TO BE TYPED DUE TO CLERICAL OVERSIGHT AT THE AUDITORS OFFICE. A COPY OF THE P AN CARD OF THE RECIPIENT WAS SUBMITTED BEFORE THE ASSESSING OFFICER DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, WHICH HAS NOT BEEN CONSIDERED. THE AS SESSEE CLAIMED THAT IT HAS DEDUCTED TDS ON THE AFORESAID AMOUNT AND DEPOSITED THE SAME WELL BEFORE THE YEAR-END. THEREFORE, NO ADVERSE INFERENCE CAN BE D RAWN AGAINST THE ASSESSEE. 5.3 THE CIT(A) ON APPRECIATION OF FACTS PLACED BEFO RE HIM GRANTED THE RELIEF TO THE ASSESSEE. THE OPERATIVE PARA OF THE ORDER O F THE CIT(A) IS AS UNDER :- 10. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AS WELL AS REPLY OF THE APPELLANT. IN THIS CASE, THE APPELLANT SUBMITS THAT PAN IN RESPECT OF M/S. RELIABLE MANPOWER SERVICES REMAINED TO BE TYPED DUE TO CLERI CAL OVERSIGHT AT AUDITOR'S OFFICE. THE LEARNED COUNSEL OF THE APPELLANT SUBMIT TED THAT THE COPY OF PAN CARD OF MR. ZAIN FAROOK MERCHANT WAS SUBMITTED BEFORE THE A SSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER. ACCORDINGLY, THE SAME HAS BEEN FURNISHED A S PER PAPER BOOK, PAGE NO. 46. FURTHER, THE APPELLANT HAS SHOWN THAT THERE IS NO A DVERSE COMMENTS IN RESPECT ON ACCOUNT OF COMPLIANCE OF TDS PROVISIONS AS WELL AS DISALLOWANCE U/S. 40(A)(IA) OF INCOME-TAX ACT IN THE AUDITOR'S REPORT. THIS BEING SO, I DO NOT FIND ANY MERIT IN THE ASSESSING OFFICER'S STAND IN DISALLOWING THE AMOUNT OF RS.4,34,387/-. ACCORDINGLY, HE IS DIRECTED TO DELETE THE SAME. THUS, GROUND NO. 2 IS ALLOWED. 5 ITA NO.1438/PN/2014 ITA NO.1470/PN/2014 5.4 WHILE ADDRESSING THE ISSUE, THE LD. AR FOR THE ASSESSEE ADVERTED OUR ATTENTION TO THE COPY OF THE PAN CARD OF THE RECIPI ENT AND SUBMITTED THAT THE TDS HAS BEEN DEDUCTED ON THE LABOUR CHARGES PAID. 6. HAVING REGARD TO THE FACTS OF THE CASE, WE SET-A SIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR DE NOVO EXAMINATION. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION ON BEING SATISFIED THAT THE TDS ON THE AFORESAID PAYMENT HAS BEEN DEDUCTED AND PAID ON OR BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME. THE ASSESSEE SHALL BE GIVEN REAS ONABLE OPPORTUNITY OF BEING HEARD WHILE DECIDING THE ISSUE. WE DIRECT ACCORDIN GLY. 7. THUS, GROUND NO.2 OF THE REVENUE APPEAL IS ALLOW ED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISP OSED OF IN THE AFORESAID TERMS. ITA NO.1470/PN/2014 (BY ASSESSEE) : 9. NOW, WE SHALL TAKE-UP THE ASSESSEES APPEAL. TH E ASSESSEE HAS TAKEN SEVERAL GROUNDS IN ITS APPEAL. HOWEVER, THE ONLY I SSUE INVOLVED IS AD-HOC DISALLOWANCE OF RS.3,12,706/- OUT OF BUSINESS/SALES PROMOTIONS EXPENSES. 10. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSE E FIRM INCURRED EXPENDITURE ON ACCOUNT OF BUSINESS/SALES PROMOTION TO THE TUNE OF RS.31,27,065/-. THE ASSESSING OFFICER NEXT OBSERVE D THAT MAJOR EXPENSES ARE TOWARDS HOTEL EXPENSES, LUNCH EXPENSES, ENTERTAINME NT OF GUESTS ETC. WHICH CANNOT BE CATEGORICALLY CLASSIFIED AS INCURRED EXCL USIVELY FOR BUSINESS PROMOTION. AS THESE EXPENSES ARE NOT FULLY VERIFIA BLE AND NOT BEYOND DOUBT, HE ESTIMATED REASONABLE DISALLOWANCE OF 10% OUT OF THE TOTAL EXPENDITURE ON DISCUSSION WITH THE AR PRESENT FOR THE ASSESSEE. 6 ITA NO.1438/PN/2014 ITA NO.1470/PN/2014 10.1 BEFORE THE CIT(A), THE ASSESSEE FURNISHED THE BREAKUP OF THE EXPENDITURE WHICH READ AS UNDER :- GOODS USED FOR DEMO AND PROMOTIONS PROFESSIONAL FEES PAID FOR EXHIBITIONS, 10,83,729 ADVERTISEMENTS ETC. 16,71,978 REWARD TO EMPLOYEES AT AREA OFFICE 1,45,000 HOTEL EXPENSES, LUNCH EXPENSES, GUESTS ETC. 2,26,35 8 TOTAL RS. 31, 27,065 10.2 THE LD. AR SUBMITTED THAT THE EXPENSES ARE SUP PORTED AND INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. THER EFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS ARBITRARY AND NOT JUSTIFIED. THE CIT(A), HOWEVER, DECLINED TO ENTERTAIN THE PLEA OF THE ASSE SSEE ON THE GROUND THAT THE DISALLOWANCE HAS BEEN CARRIED OUT AFTER DISCUSSION WITH THE COUNSEL OF THE ASSESSEE WHICH IMPLIEDLY MEANS THAT THESE EXPENSES ARE NOT FULLY VERIFIABLE. HE, ACCORDINGLY, SUSTAINED THE DISALLOWANCE. 10.3 THE LD. AR FOR THE ASSESSEE BEFORE US ADVERTED OUR ATTENTION TO THE BREAKUP OF THE EXPENDITURE NOTED ABOVE AND SUBMITTE D THAT EXPENSES OF RS.31,27,065/- INCLUDES A MEAGER AMOUNT OF RS.2,26, 358/- TOWARDS HOTEL AND LUNCH EXPENSES ARE DULY SUPPORTED BY EVIDENCES. TH E LD. AR FURTHER SUBMITTED THAT WITH REFERENCE TO PARA 4.1 OF THE AS SESSMENT ORDER THAT THE DISALLOWANCE BEFORE THE ASSESSING OFFICER WAS AGREE D WITH RESPECT TO HOTEL EXPENSES, LUNCH EXPENSES AND ENTERTAINMENT OF GUEST S ETC. WHICH AMOUNT TO RS.2,26,358/- ONLY. THE ASSESSING OFFICER HAS, THE REFORE, WRONGLY WORKED OUT THE DISALLOWANCE WITH REFERENCE TO THE TOTAL EXPENS ES OF RS.31,27,065/-. 11. WE FIND THAT THE MAJOR EXPENSES HAVE BEEN INCUR RED TOWARDS ADVERTISEMENTS AND EXPENDITURE INCURRED TOWARDS GOO DS USED FOR DEMO AND PROMOTIONS, PROFESSIONAL FEES PAID FOR EXHIBITIONS, ETC. THE ASSESSEE HAS INCURRED RS.2,26,358/- ONLY TOWARDS HOTEL EXPENSES, LUNCH EXPENSES AND GUESTS ETC.. THEREFORE, THE ESTIMATION OF AD-HOC D ISALLOWANCE SHOULD BE FAIRLY RESTRICTED TO THESE EXPENSES ONLY WHICH WORKS OUT T O RS.22,635/- ONLY. THUS, 7 ITA NO.1438/PN/2014 ITA NO.1470/PN/2014 THE ORDER OF THE CIT(A) IS MODIFIED TO THIS EXTENT. HENCE, ASSESSEE PARTLY SUCCEEDS ON THIS ISSUE. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. 13. RESULTANTLY, THE APPEAL OF THE REVENUE AS WELL AS THE APPEAL OF THE ASSESSEE IS DISPOSED-OFF, AS PER TERMS NOTED ABOVE. ORDER PRONOUNCED ON THIS 08 TH DAY OF JUNE, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE ; DATED : 08 TH JUNE, 2016. % & '() *)' / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V, PUNE; 4) THE CIT- V, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. %+ / BY ORDER , //TRUE COPY// ! '# / SR. PRIVATE SECRETARY $ %& %'' , / ITAT, PUNE