Shri. Patel Ambalal Rajesh, Hubli V. ITO, Ward-1, Hubli

ITA 1498/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7539 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 17-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H L SOWMYA
• Assessee Lawyers: MANOJ D PUKALE
• Keywords: Opportunity of being heard
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 1498/BANG/2016 ASSESSMENT YEAR : 20 08 - 09 SHRI PATEL AMBALAL RAJESH, PROP: RAJ AUTO CENTRE, SHOP NO. 10, 11 & 12, SWIMMING POOL COMPLEX, HUBLI 580 020. PAN: AEPPP 0163E VS. THE INCOME TAX OFFICER, WARD 1, HUBLI. APPELLANT RESPONDENT ASSESSEE BY : SHRI MANOJ D. PUKALE, ADVOCATE REVENUE BY : SMT. H.L. SOWMYA, ADDL. CIT (DR) DATE OF HEARING : 19 .0 9 .201 7 DATE OF PRONOUNCEMENT : 28 .09 .2017 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIREC TED AGAINST THE ORDER OF LD. CIT(A), HUBLI DATED 31.03.2016 FOR ASSESSMENT YEAR 2008-09. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE ORDER OF THE LNDHUBLI APPELLATE COMMISSIONER OF INCOME TAX, [CI T(A)] IS OPPOSED TO FACTS AND LAW AND ACCORDINGLY, LIABLE TO BE SET ASIDE TO ALLOW THE CLAIMS OF THE APPELLANT. 2. THE LND CIT(A) ERRED TO DECIDE AND CONFIRM ADDI TION OF RS. 9,56,267/- U/S 40A(3) BECAUSE HE FAILED TO APPR ECIATE THE CONTENTS OF RAJ AUTO AGENCY LEDGER AND STATE THE POINTS FOR DETERMINATION UPON THE CORRECT FACTS. 3. THE LND CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT APPELLANT AND RAJ AUTO AGENCY ARE VAT REGISTERED DEALERS AND THE LEDGER OF SAID RAJ AUTO AGENCIES CONTAINED ONLY A SMALL VOLUM E OF PURCHASE TO WHICH DISALLOWING SECTION 40A(3) WOULD APPLY AND NO T TO ALL ENTRIES WHICH LARGELY INCLUDED SARAFI AND BANK TRANSACTION. 4. THE LND CIT(A) ALSO FAILED TO APPRECIATE THAT E VEN THE SMALL ITA NO.1498/BANG/2016 PAGE 2 OF 5 VOLUME OF PURCHASE IN THE LEDGER OF SAID RAJ AUTO A GENCIES WAS OWING TO CIRCUMSTANCES AND CONSIDERATIONS OF BUSINESS EXP EDIENCY WITH OTHER RELEVANT FACTORS. HENCE CLAIM OF APPELLANT BE ALLOW ED. 5. THE LND CIT(A) ALSO ERRED TO DECIDE AND CONFIRM DISALLOWANCE OF RS. 2,83,250/- U/S 40A(IA) BECAUSE HE AGAIN FAILED TO APPRECIATE THAT THE LIABILITY SIDE BALANCE SHEET ITEM SHOWN AS TDS( INTEREST) RS. 28,325/- ALLEGED (IN PARA 2 AT PG 3 OF ASMT ORDER) TO BE DEPOSITED ON 30/03/09 VIDE CHEQUE NO.763404 PERTAINED TO CURRENT YEAR INTEREST CLAIM IS INCORRECT. 6. THE LND CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT THE CHEQUE NO.763404 ALLEGEDLY DEPOSITED IN CENTRAL GOVT. A/C ON 30/03/09 AS SEEN IN THE BANK PASS BOOK WAS OF RS. 34,266/- AND NOT RS.28,325/-. 7. THE LND CIT(A) ALSO FAILED TO APPRECIATE THAT E VEN THE TDS RS. 30,678/- IN RESPECT OF INTEREST RS. 2,97,836/- IS ALSO DULY PAID AND SHOWN IN THE QUARTERLY TDS RETURN IN FORM 26Q. HENC E THE CLAIM THE APPELLANT BE ALLOWED. 8. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF APPEAL HEARING, THE APPELLANT PRAYS THAT THE APPEAL BE ALLOWED. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT GROU ND NO. 1 IS GENERAL AND THE ISSUE INVOLVED IN GROUND NOS. 2 TO 4 IS COMMON. 4. REGARDING DISALLOWANCE U/S. 40A(3) OF THE I.T. A CT, 1961 RAISED IN GROUND NOS. 2 TO 4, HE SUBMITTED THAT DETAILS ARE NOTED BY THE A O ON PAGE NO. 3 OF THE ASSESSMENT ORDER AND AS PER THE SAME, THE AMOUNT IS RS. 32.20 LAKHS AS ON 16.10.2007. HE SUBMITTED THAT THIS AMOUNT IS NOT C ORRECT. HE ALSO SUBMITTED THAT THESE PAYMENTS ARE PAID TO M/S. RAJ AUTO AGENC IES AND THE COMPLETE LEDGER ACCOUNT OF THAT PARTY IS AVAILABLE ON PAGES 6 TO 8 OF PAPER BOOK. HE SUBMITTED THAT AS PER THIS LEDGER ACCOUNT, IT CAN B E SEEN THAT THE AMOUNT OF PURCHASE FROM THIS PARTY IS ONLY OF RS. 1,63,704/-. HE SUBMITTED THAT ALTHOUGH THERE IS CASH PAYMENT OF RS. 41,63,038.02/- BUT THI S IS NOT ON ACCOUNT OF PURCHASE DEBITED TO P & L ACCOUNT AND THEREFORE, DI SALLOWANCE U/S. 40A(3) IN RESPECT OF SUCH CASH PAYMENTS IS NOT JUSTIFIED.THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS.WE FIND THAT THIS IS NOT IN DISPUTE THAT CASH PAYMENT HAS BEEN MADE BY ASSESSEE TO M/S. RAJ AUTO AGENCIES, HUBLI TO THE EXTENT OF RS. 41,63,038.02/- AT LEAST BECAUSE THIS MUCH CASH ITA NO.1498/BANG/2016 PAGE 3 OF 5 PAYMENTS IS SEEN AS PER COPY OF LEDGER ACCOUNT SUBM ITTED BY ASSESSEE ON PAGES 6 TO 8 OF PAPER BOOK. AS PER PAGE NO.7 OF PA PER BOOK, THESE PAYMENTS ARE ON 10 DATES DURING 11.06.2007 TO 09.01.2008 AND PAYMENT ON EACH OF THESE 10 DATES IS RS. 2 LAKHS AND MORE EXCEPT ON 11 .06.2007 WHERE THE PAYMENT IS 1.60 LAKHS. BUT THE QUESTION IS AS TO W HETHER THE PAYMENTS TO THIS PARTY ARE IN RESPECT OF ANY EXPENSES CLAIMED BY THE ASSESSEE IN P & L ACCOUNT BECAUSE SECTION 40A(3) IS A DISALLOWANCE SECTION AS PER WHICH IF AN EXPENDITURE IS CLAIMED FOR WHICH PAYMENT IS MADE IN CASH IN EXCESS OF A SPECIFIED LIMIT THEN SUCH EXPENDITURE IS NOT ALLOWA BLE TO THE EXTENT OF 20% AND THEREFORE, IF THE AMOUNT OF CASH PAYMENT IS NOT IN RESPECT OF EXPENDITURE DEBITED IN P & L ACCOUNT THEN DISALLOWANCE U/S. 40A (3) IS NOT JUSTIFIED IN RESPECT OF SUCH CASH PAYMENTS. AS PER THE ASSESSME NT ORDER, THIS FACT IS NOT COMING OUT AS TO HOW MUCH OF SUCH CASH PAYMENT IS I N RESPECT OF THE EXPENSES DEBITED TO P & L ACCOUNT. HENCE WE FEEL IT PROPER TO RESTORE BACK THIS MATTER TO THE FILE OF AO FOR FRESH DECISION WITH THE DIRECTIO N THAT HE SHOULD EXAMINE THIS ASPECT OF THE MATTER AS TO HOW MUCH OF THIS CASH PA YMENT TO THIS PARTY IS IN RESPECT OF EXPENSES DEBITED BY ASSESSEE TO P & L AC COUNT. TO THE EXTENT IT IS FOUND THAT THE CASH PAYMENT IS NOT IN RESPECT OF AN Y EXPENSES DEBITED TO P & L ACCOUNT THEN THE AO MAY EXAMINE THE APPLICABILITY T O THE PROVISIONS OF SECTION 269SS TO ASSESSEE AS TO WHETHER THERE IS ANY DEFAUL T OF THE ASSESSEE AS PER THE PROVISIONS OF THIS SECTION. THE AO SHOULD PASS NECESSARY ORDER AS PER LAW IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING AD EQUATE OPPORTUNITY OF BEING HEARD TO ASSESSEE. 6. REGARDING GROUND NOS. 5, 6 AND 7, IT WAS SUBMITT ED BY LD. AR OF ASSESSEE THAT AS PER THE ASSESSMENT ORDER, THE DISALLOWANCE HAS B EEN MADE BY THE AO IN RESPECT OF OUTSTANDING TDS PAYABLE SHOWN BY THE ASS ESSEE IN THE BALANCE SHEET COPY OF WHICH AVAILABLE ON PAGE NO. 2 OF THE PAPER BOOK. THE AO HAS CALCULATED THE AMOUNT OF INTEREST PAID WITHOUT TDS BY WAY OF BACK CALCULATION AND ARRIVED AT THE AMOUNT OF INTEREST AT RS. 2,83,2 50/- AND DISALLOWED THE SAME U/S. 40(A)(IA) OF THE I.T. ACT, 1961. HE SUBMITTED THAT ON PAGE NO. 3 OF PAPER BOOK IS THE COMPLETE DETAIL OF INTEREST EXPENDITURE DEBITED BY ASSESSEE TO P & L ACCOUNT FROM WHICH TDS DEDUCTED OF RS. 30,678/- WHI CH HAS BEEN DULY PAID ON ITA NO.1498/BANG/2016 PAGE 4 OF 5 28.03.2008 AND COPY OF CHALLAN IS AVAILABLE ON THE SAME PAGE I.E. PAGE NO. 3 OF PAPER BOOK. AT THIS JUNCTURE, A QUERY WAS RAISED B Y THE BENCH AS TO IF THIS AMOUNT OF TDS HAS BEEN PAID ON 28.03.2008 THEN THE SAME WILL NOT APPEAR IN THE BALANCE SHEET AS ON 31.03.2008 AS A LIABILITY A ND THEREFORE, THE AMOUNT SHOWN IN THE BALANCE SHEET AS LIABILITY ON ACCOUNT OF TDS ( INTEREST) RS. 28,325/- IS NOT THIS AMOUNT BUT A DIFFERENT AMOUNT. IN REPLY, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THE COMPLETE DETAILS OF INT EREST AND TDS ON INTEREST IS AVAILABLE ON PAGE NO. 1 OF THE PAPER BOOK AS PER WH ICH OUT OF TOTAL INTEREST OF RS. 6,69,896/-, TDS WAS DEDUCTIBLE ONLY IN RESPECT OF INTEREST EXPENDITURE OF RS. 2,97,836/- AND FROM THE REMAINING AMOUNT OF INT EREST PAYMENT, TDS WAS NOT DEDUCTIBLE AND NOT DEDUCTED BECAUSE THE SAME WA S ON ACCOUNT OF INTEREST PAYMENT TO BANK OR BELOW RS. 5000/- PER PERSON OR F OR WHICH DECLARATION WAS GIVEN BY THE DEDUCTEE IN FORM 15G. THE LD. DR OF RE VENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THE AO HAS PROCEEDED ON THIS BASIS THAT OUTSTANDING TDS PAYABLE OF RS. 2 8,325/- SHOWN IN BALANCE SHEET IS IN RESPECT OF TDS ON INTEREST EXPENDITURE BUT AS PER THE DETAILS OF INTEREST EXPENDITURE AVAILABLE ON PAGE NOS. 1 TO 3 OF PAPER BOOK, ONLY ON AMOUNT OF INTEREST EXPENDITURE OF RS. 2,97,836/-, T DS WAS DEDUCTIBLE AND THE SAME WAS DEDUCTED RS. 30,678/- AND THE PAYMENT WAS ALSO MADE ON 28.03.2008. BUT THIS VERY FACT THAT THE SAID TDS R S. 30,678/- ON ACCOUNT OF INTEREST PAYMENT WAS PAID BEFORE 31.03.2008 ITSELF SHOWS THAT AMOUNT OF TDS PAYABLE SHOWN IN THE BALANCE SHEET AS ON 31.03.2008 OF RS. 28,325/- IS NOT ON ACCOUNT OF INTEREST EXPENDITURE IN THE PRESENT YEAR . IT MAY BE ON ACCOUNT OF INTEREST EXPENDITURE OF AN EARLIER YEAR OR IT MAY B E ON ACCOUNT OF OTHER EXPENSES FOR WHICH TDS WAS DEDUCTED AND NOT PAID BE FORE 31.03.2008. IN THIS VIEW OF THE MATTER, WE FEEL IT PROPER TO RESTORE TH IS MATTER ALSO BACK TO THE FILE OF AO FOR FRESH DECISION WITH THE DIRECTION THAT AO SH OULD FIRST FIND OUT THE YEAR AND HEAD OF EXPENDITURE FROM WHICH TDS WAS DEDUCTED AND WAS OUTSTANDING AS ON 31.03.2008 TO THE EXTENT OF RS. 28,325/- AND THEN IF THE ASSESSEE CANNOT ESTABLISH THAT SUCH TDS WAS PAID BEFORE THE DUE DAT E OF FILING OF RETURN OF INCOME, THEN THE DISALLOWANCE MAY BE MADE OUT OF SU CH EXPENSES FROM WHICH ITA NO.1498/BANG/2016 PAGE 5 OF 5 TDS WAS DEDUCTED BUT NOT PAID. THE AO SHOULD PASS NECESSARY ORDER AS PER LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING H EARD TO ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (SUNIL KUMAR YADAV) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 28 TH SEPTEMBER, 2017. /MS/ COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.