H.R. Developers & Promotors Pvt. Ltd., Patiala V. ACIT, Circle, Patiala

ITA 1506/CHANDI/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3867 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 27-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND SUDARSHAN JCIT
• Assessee Lawyers: AJAY KUMAR JAIN
• Keywords: Opportunity of being heard; Non-deduction of tax; TDS; Set aside
• Section: 40(a)(ia); 201(1); 143(1); 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH A, CHANDIGARH (VIRTUAL COURT) .., !' '# $, % &' BEFORE: SHRI. N.K.SAINI, VP & SHRI , SANJAY GARG, J M ITA NO. 1506/CHD/2019 ASSESSMENT YEAR : 2012-13 H.R DEVELOPERS & PROMOTERS PRIVATE LIMITED, CHOTTI BARADARI, PATIALA THE ASSTT. CIT INCOME TAX CIRCLE PATIALA PAN NO: AABCH8807L APPELLANT RESPONDENT !' ASSESSEE BY : SHRI AJAY KUMAR JAIN, CA #!' REVENUE BY : SHRI ARVIND SUDARSHAN, JCIT $ %! & DATE OF HEARING : 02/11/2020 '()*! & DATE OF PRONOUNCEMENT : 02/11/2020 &(/ ORDER PER N.K. SAINI, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DT. 04/09/2019 OF THE LD. CIT(A), PATIALA. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS: 1. THAT THE LD. COMMISSIONER OF INCOME TAX APPEALS HAS WRONGLY UPHELD THE ADDITION OF RS. 14,69,990/- UNDER SECTION 40(A)(IA) OF INCOME TAX ON ACCOUNT OF NON DEDUCTION OF TDS WITHOUT APPRECIATING THE FACT THAT THE PAYEES HAS PAID TAXES ON INCOME RECEIVED FROM APPELLANT. 2. THAT THE LD. COMMISSIONER OF INCOME APPEALS HAS ERR ED BY NOT DECIDING THE DISALLOWANCE OF RS. 2 LAKHS WHICH WAS MADE BY ASSES SING OFFICER WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN BILLS AND VOUCHERS. 3. VIDE GROUND NO. 1 GRIEVANCE OF THE ASSESSEE RELATE S TO THE SUSTENANCE OF ADDITION OF RS. 14,69,990/- MADE BY THE A.O. UNDER SE CTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT). 2 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FI LED THE RETURN OF INCOME ON 29/09/2012 DECLARING AN INCOME OF RS. 67,57,580/- WHIC H WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. LATER ON THE CASE WAS REOPENED UNDER SECTION 147 R.W.S 148 OF THE ACT. IN RESPONSE THE ASSESSEE SUBMITTED THAT THE RETU RN OF INCOME ALREADY FILED ON 29/09/2012 MAY BE TREATED IN RESPONSE TO THE NOTICE UNDE R SECTION 148 OF THE ACT. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE ASSESSEE HAD PAID INTEREST AMOUNTING TO RS. 32,26,980/- TO NBFC AGAINST THE TERM LOAN RAISED FOR PURCHASE OF PLANT & MACHINERY TO THE FOLLOWING COMPANIES: 1. RELIGARE FINVEST LTD. RS. 93,87,98/- 2. MAGMA FINCORP. LTD. RS.97,86,92/- 3. MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD. RS. 4 9,13,00/- 4. SRIE EQUIPMENT FINANCE LTD. RS. 81,81,89/- TOTAL 32,26,980/- THE A.O. REQUIRED THE ASSESSEE TO SHOW CAUSE AS UNDER: YOU HAVE NOT COLLECTED T.D.S ON THE PAYMENT AMOUN TING TO RS. 32,26,980/- TO NBFCS I.E. RELIGARE FINVET LTD., MAGMA FINCORP, LTD., AND MAHI NDRA & MAHINDRA AND SRIE EQUIPMENT FINANCE COMPANY. PLEASE SHOW CAUSE WHY THESE PAYMEN T MAY NOT BE DISALLOWED AS PER THE PROVISION OF SECTION 40(A)(IA). 5.1 IN RESPONSE THE ASSESSEE SUBMITTED AS UNDER: THE ASSESSEE COMPANY HAS PAID INTEREST TO THE NON- BANKING FINANCIAL COMPANY DURING THE PERIOD UNDER CONSIDERATION. IT IS NOT OUT OF TH E PLACE TO MENTION HERE THAT ALL THE PAYMENTS WERE MADE BY WAY OF CHEQUES AND THE SAID N ON BANKING COMPANY HAS DULY ACCOUNTED FOR IN THEIR RESPECTIVE BOOKS OF ACCOUNT. THEY HAVE SHOWN THE SAID PAID INTEREST AS THERE INCOME DURING THE PERIOD UNDER CO NSIDERATION. IT WILL BE HARDSHIP ON THE ASSESSEE COMPANY IF THIS INTEREST PAID AMOUNT IS DI SALLOWED BY YOUR GOODSELF. IT IS THEREFORE PRAYED TO YOUR HONOUR NOT TO DISALLOW THE INTEREST PAID AND OBLIGE. 5.2 HOWEVER THE A.O. DID NOT FIND MERIT IN THE SUBMISSI ONS OF THE ASSESSEE AND MADE THE ADDITION OF RS. 32,26,980/- BY OBSERVING AS UNDER: THE REPLY OF THE ASSESSEE HAS DULY BEEN CONSIDERED , BUT FOUND NOT TENABLE, THE ASSESSEE HAD MADE FINANCIAL CHARGE OF RS. 32,26,980/- TO NBF CS I.E. RELIGARE FINVEST LTD., MAGMA FINCORP. LTD., AND MAHINDRA & MAHINDRA AND SRIE EQU IPMENT FINANCE COMPANY. THE ASSESSEE WAS REQUIRED TO DEDUT TDS IN ACCORDANCE WI TH THE PROVISIONS OF SECTION 194A, BUT ASSESSEE HAD FAILED TO DO SO, FURTHER ASSESSEE HAS NEITHER PRODUCED FORM 26A, AS PER THE PROVISIONS OF SECTION 201(1) NOR PRODUCED ANY CERTI FICATE FROM N.B.F.CS/PARTIES. THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 40( A)(IA) READ WITH SECTION 201(1) AND RULE 31ACB. CONSIDERING THE ABOVE FACTS, INTEREST PAID TO NBFCS AMOUNTING TO RS. 32,26,980/- IS DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40 (A)(IA) OF THE INCOME TAX ACT, 1961 AND THE SAME IS ADDED BACK TO THE RETURNED INCOME OF TH E ASSESSEE. 3 6. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: 'THE ASSESSEE COMPANY IS ENGAGED IN THE WORK OF CIV IL CONSTRUCTION. THE LEARNED ASSESSING OFFICER HAS DISALLOWED INTEREST FOR NON-DEDUCTION OF TAX AT SOURCE DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE COMPANY HAS MADE THE PAYMENT OF INTEREST A LONG WITH INSTALLMENT THROUGH CROSS PAYEE CHEQUES. SINCE THE PAYMENT HAS BEEN MADE THROUGH CH EQUES AS SUCH ALL THE COMPANIES HAS ACCOUNTED FOR IN THEIR BOOKS OF ACCOUNTS. ALL THE C OMPANIES I.E. SHRIRAM EQUIPMENT FINANCE CO,. RELIGARE FINVEST LTD, MAGMA FINCORP LTD, MAHINDRA & MAHINDRA FINANCIAL SERVICES, SREI INFRASTRUCTURE FINANCE LTD ARE BIG NBFC'S WHO MAKE ADVANCES MAINLY FOR CIVIL CONSTRUCTIONS EQUIPMENT. ALL THE COMPANIES ARE FILLING THEIR INCOME TAX RETURNS. THE ASSESSEE COMPANY COULD ONLY OBTAINED THEIR PANS AND AUDITED BALANCE SHEETS IN WHICH THEY HAVE DULY ACCOUNTED FOR THE AMOUNT OF INTEREST PAID. I AM ENCLOSING HEREWITH COPIES OF BALANCE SHEET AND L IST OF PANS OF THE ABOVE SAID COMPANIES. IT IS VERY HARD FOR THE ASSESSEE COMPANY TO OBTAIN CERTIF ICATE FROM CHARTERED ACCOUNTANT OF THE SAID COMPANIES AS THEIR HEAD OFFICES ARE SOMEWHERE IN MU MBAI, CHENNAI ETC. AND NONE OF THEIR EMPLOYEES ARE CO-OPERATING WITH THE ASSESSEE COMPAN Y. AS FAR AS SHORT DEDUCTION OF TDS DEDUCTED OF THE FIRM M/S. JGB CONSTRUCTION IS CONCERN COPY O F ACKNOWLEDGEMENT RECEIPT HAS ALREADY BEEN SUBMITTED BEFORE THE ASSESSING OFFICER. THE SAID FI RM HAS FILED ITS INCOME TAX RETURN VIDE ACKNOWLEDGEMENT RECEIPT NO. 650224901300313 ON 30-0 3-2013. IT IS THEREFORE PRAYED TO YOUR HONOR TO PLEASE DELETE THE ADDITION FOR THE SAKE OF JUSTI CE AND OBLIGE. 6.1 LD. CIT(A) HOWEVER SUSTAINED THE ADDITION OF RS. 14,69,990/- BY OBSERVING IN THE IMPUGNED ORDER AS UNDER: DURING THE APPELLATE PROCEEDINGS, I WROTE TO M/S RE LIGARE FINVEST LTD., MAGNA FINCORP LTD., SREI EQUIPMENT FINANCE LTD. AND M/S MAHINDRA & MAHI NDRA FINANCIAL LTD. SEEK AS TO WHETHER THE INTEREST RECEIVED FROM THE APPELLANT HA S BEEN DULY REFLECTED IN THE P & L ACCOUNTS OF THE PARTIES AND WHETHER TAX HAS BEEN PA ID THEREON. THE DETAILS OF THE PARTIES TO WHOM THE APPELLANT HAS PAID INTEREST WITHOUT DED UCTION OF TAX SOURCE AND THE FINAL INFORMATION THEREON AFTER DUE ENQUIRIES DURING APPE LLATE PROCEEDINGS ARE AS UNDER: SR NO. NAME OF PARTY INTEREST PAID STATUS 1. RELIGARE FINVEST PVT LTD. 9,38,798.00 CHARTERED/ACCOUNTANTS CERTIFICATE AND CONFIRMATION AS TO INCLUSION OF THE INTEREST IN THE INCOME HAS BEEN FILED 2. MAGMA FINCORP LTD. 9,78,692.46 THERE IS NO RESPONSE EVEN AFTER WRITING A NUMBER OF TIMES TO THE PARTY 3. SREI EQUIPMET FINANCE LTD. 8,18,189.49 CHARTERED/ACCOUNTANTS CERTIFICATE AND CONFIRMATION AS TO INCLUSION OF THE INTEREST IN THE INCOME HAS BEEN FILED 4. M/S MAHINDRA & MAHINDRA FINANCIAL SERVICES LTD 4,91,300.26 THERE IS NO RESPONSE EVEN AFTER WRITING A NUMBER OF TIMES OT THE PARTY TOTAL 32,26,980.18 IN VIEW OF THE ABOVE FACTUAL MATRIX IT IS MY CONSID ERED VIEW THAT THE APPELLANT HAS FAILED TO SUPPLY ANY EVIDENCE AS PER LAW THAT THE NBFCS MAGMA FINCORP LTD. &M/S MAHINDRA & 4 MAHINDRA FINANCIAL SERVICES LTD HAVE PAID THE TAX/ INCLUDED THE STATED INTEREST IN THEIR RETURNED INCOME AND THEREFORE , THE ADDITION IS DIR ECTED TO BE RESTRICTED TO 14,69,990/- (9,78,692.46+4,91,300.26) IT IS ORDERED ACCORDINGLY. THE APPELLANT PARTLY SUC CEEDS ON THIS GROUND OF APPEAL. 7. NOW THE ASSESSEE IS IN APPEAL. 8. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) WITHOUT CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND WITHOUT ASKING TO P RODUCE THE EVIDENCE RELATING TO THIS FACT THAT THE COMPANIES IN QUESTION HAVE PAID THE T AX ON THE INTEREST IN THEIR RETURN OF INCOME WAS NOT JUSTIFIED IN RESTRICTING THE ADDITION O F RS. 14,69,990/-. IT WAS SUBMITTED THAT THE ASSESSEE PRODUCED RELEVANT EVIDENCE RELATING T O THE INTEREST RECEIVED FROM THE ASSESSEE WHICH HAD BEEN DULY REFLECTED IN THE P&L ACCOUNT OF THE PARTIES NAMELY M/S MAGMA FINCORP LTD. AND M/S MAHINDRA & MAHINDRA FINANCIAL S ERVICES LTD. FOR THE AMOUNT OF RS. 9,78,692.46 AND RS. 4,91,300.26 RESPECT IVELY AND THAT THE ASSESSEE CAN PRODUCE THOSE EVIDENCES. THEREFORE THE ADDITION SUSTAIN ED BY THE LD. CIT(A), WAS NOT JUSTIFIED. 9. IN HIS RIVAL SUBMISSIONS THE LD. DR STRONGLY SUPPORT ED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). 10. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE IT APPEARS THAT THE LD. CIT(A) SUSTAINED THE ADDITION IN THE ABSENCE OF RELEVANT EVIDE NCE RELATING TO THE INCLUSION OF THE INTEREST INCOME BY THE PARTIES IN QUESTION IN THEIR RE SPECTIVE RETURNED INCOME. THE LD. COUNSEL OF THE ASSESSEE STATED AT BAR THAT THE ASSE SSEE IS IN A POSITION TO PRODUCE THOSE EVIDENCES NOW. WE THEREFORE DEEM IT APPROPRIATE TO SET ASIDE THIS ISSUE BACK TO THE FILE OF THE LD. CIT(A) TO BE ADJUDICATED AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 11. AS REGARDS TO THE ISSUE RAISED IN GROUND NO. 2 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE WAS RAISED BEFORE THE LD. C IT(A) BUT THE SAME HAD NOT BEEN ADJUDICATED BY HIM. 12. THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR THE A SSESSEE WAS NOT CONTROVERTED BY THE LD. SR. DR. WE THEREFORE SET ASIDE THIS ISSUE BACK TO THE FILE OF THE 5 LD. CIT(A) TO BE ADJUDICATED AFRESH IN ACCORDANCE WIT H LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 02/11/2020) SD/- SD/- '# $ .., (SANJAY GARG ) ( N.K. SAI NI) % &'/ JUDICIAL MEMBER / VICE PRESIDENT AG DATE: 02/11/2020 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE