Satwant Harbhajan Singh, Pune V. ACIT,Range-2, Pune

ITA 1473/PUN/2010

• Counselvise Citation: 147324514 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 27-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALOK MISHRA
• Assessee Lawyers: C V CHITALE
• Section: 28

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1473/PN/2010 (ASSTT.YEAR : 2007-08) SHRI SATWANT HARBHAJAN SINGH, OFFICE NO. 109, GULMOHAR CENTRE POINT, OFF : RAMWADI NAKA, VADGAON SHERI, PUNE 411 004 .. APPELLANT PAN NO. AJVPS 0535J VS. ACIT, RANGE-2, PUNE .. RESPONDENT APPELLANT BY : SRI C.V. CHITALE RESPONDENT BY : SRI ALOK MISHRA DATE OF HEARING : 05-06-2012 DATE OF PRONOUNCEMENT : 07-06-2012 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 27-10- 2010 OF THE CIT(A)-II, PUNE RELATING TO THE ASSESSM ENT YEAR 2007-08. 2. IN GROUND OF APPEAL NO. 2 THE ASSESSEE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 94,34, 867/- U/S.40(A)(IA) OF THE ACT MADE BY THE AO. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS AN INDIVIDUAL AND DERIVES INCOME FROM BUSINESS AS PROMOTERS AND BUILDERS UNDE R THE NAME AND STYLE OF VASANT CONSTRUCTION. HE FILED RETURN OF INCOME ON 22-10-2007 DECLARING TOTAL INCOME OF RS. 1,86,09,874/-. DURING THE IMPUGNED A SSESSMENT YEAR THE CONSTRUCTION OF THE PROJECT PEACOCK PALACE HAS BE EN COMPLETED AT KALYAN NAGAR WHICH STARTED DURING THE FINANCIAL YEAR 2003-04. D URING THE COURSE OF ASSESSMENT 2 PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS REC EIVED ADVANCES AGAINST SALE OF FLATS, THE DETAILS OF WHICH ARE AS UNDER : FINANCIAL YEAR AMOUNT 2003-04 3,97,700 2004-05 45,16,190 2005-06 4,65,46,325 4. HE FURTHER NOTED THAT THE ASSESSEE HAS INCURRED EXPENSES IN DIFFERENT FINANCIAL YEARS BEFORE THE COMMENCEMENT OF CURRENT FINANCIAL YEAR, I.E. 2006-07, THE DETAILS OF WHICH ARE AS UNDER : FINANCIAL YEAR AMOUNT 2003-04 51,46,303 2004-05 88,43,979 2005-06 2,19,37,680 THE AO THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS T O WHY THE PROVISIONS OF SECTION 40(A)(IA) SHOULD NOT BE APPLICABLE TO HIS CASE SINC E THE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD OF ACCOUNTING FOR RECOGNISING PRO FIT. IT WAS EXPLAINED THAT THIS ASSESSMENT YEAR WAS THE FIRST YEAR OF THE PROPRIETO RY CONCERN AND THEREFORE TDS PROVISIONS WERE NOT APPLICABLE. IT WAS ALSO EXPLAI NED THAT THE ADVANCES WERE NOT IN THE NATURE OF TURNOVER OR GROSS RECEIPTS FOR THE PU RPOSE OF SECTION 44AB OF THE ACT SINCE THESE ARE NOT REVENUE RECEIPTS. IT WAS SUBMI TTED THAT THE DISALLOWANCE U/S. 40(A)(IA) WAS NOT APPLICABLE SINCE THE ASSESSEE HAD CLAIMED DEDUCTION FOR CONSTRUCTION EXPENSES, WAGES ETC., U/S. 28 OF THE I .T. ACT WHEREAS SECTION 40(A)(IA) IS ATTRACTED TO DEDUCTIONS CLAIMED U/S. 30 TO 38 OF THE I.T. ACT. THE ASSESSEE ALSO TOOK AN ALTERNATE ARGUMENT BEFORE THE AO THAT TDS P ROVISION IS NOT APPLICABLE ON 3 PAYMENTS MADE FOR EXPENSES BUT IS APPLICABLE ONLY W HEN THE AMOUNTS WERE PAYABLE, I.E., WERE OUTSTANDING AND NOT ACTUALLY PA ID. 5. HOWEVER, THE AO WAS NOT SATISFIED WITH THE VARIO US EXPLANATIONS GIVEN BY THE ASSESSEE. DISTINGUISHING THE VARIOUS DECISIONS CITED BEFORE HIM HE HELD THAT THE ASSESSEE WAS LIABLE TO DEDUCT THE TAX FOR THE PERIO D PERTAINING TO ASSESSMENT YEARS 2006-07 AND 2007-08. HE CALCULATED THE DETAILS OF SUCH PAYMENT MADE WITHOUT TAX DEDUCTION WHICH ARE AS UNDER : PARTICULARS A.Y. 2006 - 07 A.Y. 2007 - 08 LABOUR CHARGES RS. 43,96,857 RS. 28,43,000 BROKERAGE RS. 11,17,470 RS. 10,77,540 TOTAL RS. 94,34,867 SINCE THE ASSESSEE HAS DEBITED THE EXPENDITURE INCU RRED IN THE EARLIER YEARS IN THE PROFIT AND LOSS ACCOUNT FOR THE CURRENT YEAR AGAINS T THE SALES BOOKED BY THE ASSESSEE AND SINCE NO TAX HAS BEEN DEDUCTED AT SOUR CE, THEREFORE, THE AO INVOKING THE PROVISIONS OF SECTION 40(A)(IA) DISALLOWED THE ABOVE AMOUNT OF RS. 94,34,867/-. 6. IN APPEAL, THE LEARNED CIT(A) REJECTED THE VARIO US ARGUMENTS MADE BY THE ASSESSEE AND UPHELD THE DISALLOWANCE MADE BY THE AO . AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTS ET SUBMITTED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DEC ISION OF THE VISAKHAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILY N SHIPPING AND TRANSPORTS VS. ACIT REPORTED IN 136 ITD 23(SB). SINCE IN THE INST ANT CASE THERE IS NO AMOUNT PAYABLE IN THE BALANCE SHEET, THEREFORE, NO DISALLO WANCE CAN BE MADE U/S.40(A)(IA) OF THE I.T. ACT. THE LEARNED D.R. ON THE OTHER HAN D HEAVILY RELIED ON THE ORDERS OF THE AO AND THE CIT(A). 4 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE VISAKHAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS (SUPRA) HAS HELD TH AT PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY TO AMOUNTS OF EXPENDI TURE WHICH ARE PAYABLE AS ON 31 ST MARCH OF EVERY YEAR AND IT CANNOT BE INVOKED TO DI SALLOW EXPENDITURE WHICH HAS BEEN ACTUALLY PAID DURING THE PREVIOUS YEAR WIT HOUT DEDUCTION OF TDS. THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ENTIRE AMOUNT OF DISALLOWANCE HAS BEEN PAID BY THE ASSESSEE BEFORE T HE CLOSE OF THE FINANCIAL YEAR AND NO AMOUNT IS PAYABLE AT THE END OF THE YEAR COU LD NOT BE CONTROVERTED BY THE LEARNED D.R. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE DECISION OF THE VISAKHAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS (SUPRA) WE HOLD THAT THE PROVISIONS OF S ECTION 40(A)(IA) ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE SINCE N O AMOUNT IS PAYABLE AS ON 31 ST MARCH 2007. WE ACCORDINGLY SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE DISALLOWANCE. 9. GROUNDS OF APPEAL NO. 3 AND 4 BY THE ASSESSEE WE RE NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEA RING FOR WHICH THE LEARNED D.R. HAS NO OBJECTION. ACCORDINGLY THE ABOVE TWO GROUND S ARE DISMISSED AS NOT PRESSED. 10. IN GROUND OF APPEAL NO. 1 THE ASSESSEE HAS CHAL LENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE DETERMINATION OF INCOME AT RS. 2,81,11,716/- AS AGAINST RS. 86,09,874/- DECLARED BY THE ASSESSEE BY DISALLO WING AN AMOUNT OF RS. 94,34,867/- U/S.40(A)(IA) AND VARIOUS OTHER EXPENSE S. SINCE WE HAVE ALLOWED GROUND OF APPEAL NO. 2 OF THE ASSESSEE RELATING TO DISALLOWANCE U/S.40(A)(IA) AND 5 THE OTHER GROUNDS WERE NOT PRESSED BY THE LEARNED C OUNSEL FOR THE ASSESSEE, THEREFORE THE GROUND NO. 1 BY THE ASSESSEE IS PARTL Y-ALLOWED. 11. GROUND OF APPEAL NOS. 5 AND 6 BEING GENERAL IN NATURE ARE DISMISSED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 7 TH JUNE 2012. SD/- SD/- (R.S. PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE, DATED THE 7 TH JUNE 2012 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-II, PUNE 4. THE CIT CONCERNED 5. D.R. B BENCH, PUNE 6. GUARD FILE BY ORDER PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE