Income-tax Officer, Ward 4, Ahmednagar V. Dr Mrs Savita D Shirsath,

ITA 1525/PUN/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7647 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2005-2006
• Appeal Filed On: 25-11-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HEMANTKUMAR C LEUVA
• Keywords: Opportunity of being heard
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO. 1525/PN/08 (ASSTT YEAR: 2005-06) INCOME-TAX OFFICER, WARD 4, AHMEDNAGAR APPELLANT VS. DR (MRS) SAVITA D SHIRSATH, RESPONDENT SHIRSATH ACCIDENT HOSPITAL, NORTHERN BRANCH, AT & PO: SHRIRAMPUR PAN ADVPS1334P AND CROSS OBJ. NO11/PN/10 (IN ITA NO 1525/PN/08 A.Y:2005-06) DR (MRS) SAVITA D SHIRSATH, CROSS OBJECTOR AT & PO: SHRIRAMPUR PAN ADVPS1334P VS. INCOME-TAX OFFICER, WARD 4, AHMEDNAGAR RESPONDENT ASSESSEE BY : NONE DEPARTMENT BY : SHRI HEMANT KUMAR C LEUVA ORDER PER G.S. PANNU, A.M: THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, PUNE DATED 11.9.2008 WHICH, IN TURN, H AS ARISEN FROM AN ORDER DATED 18.3.2005 PASSED BY THE ASSESSING OFFIC ER UNDER SEC. ITA 1525/PN/08 & CO 11/PN/10 DR (MRS) SAVITA D SHIR SATH, SHRIRAMPUR 2 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE A CT) PERTAINING TO THE ASSESSMENT YEAR 2005-06. 2. AT THE TIME OF HEARING, THE LEARNED DEPARTMENTAL REPRESENTATIVE APPEARED ON BEHALF OF THE REVENUE, WHILE NONE APPEA RED ON BEHALF OF THE ASSESSEE, IN SPITE OF NOTICE OF HEARING HAVING BEEN ISSUED BY REGISTERED POST A.D SUFFICIENTLY IN ADVANCE. THEREF ORE, BOTH THE APPEAL AND THE CROSS OBJECTION ARE DISPOSED OF EX PARTE QU A ASSESSEE AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE ON MERITS. 3. THE REVENUE HAS RAISED TWO GROUNDS OF APPEAL, BO TH RELATING TO DISALLOWANCES MADE BY THE ASSESSING OFFICER UNDER S ECTION 40(A) (IA) OF THE ACT. THE TWO GROUNDS ARE WITH REGARD TO A SU M OF RS 6,52,900/- BEING PROFESSIONAL CHARGES PAID TO DR D. B SHIRSAT H AND RS 25,873/- REPRESENTING INTEREST ON DEPOSIT OF SHRI MADHAV SHE JUL WHICH HAVE BEEN DISALLOWED FOR VIOLATION OF THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. AS PER THE ASSESSING OFFICER, THE PAYMENTS MAD E TO DR D B SHIRSATH WERE FOR PROFESSIONAL CHARGES AND TAX WAS DEDUCTIBLE IN TERMS OF SECTION 194J OF THE ACT. AS PER THE ASSESSING OF FICER, ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE IN TERMS OF SECTION 194J OF THE ACT AND BY APPLYING THE PROVISIONS OF SECTION 40()(IA), THE SA ME HAS BEEN DISALLOWED. SIMILARLY WITH REGARD TO THE INTEREST O F RS 25,873/- PAID ON DEPOSIT OF SHRI MADHAV SHEJUL, ASSESSING OFFICER NO TED THAT THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE AS REQUIRED IN TERMS OF SECTION 194A OF THE ACT AND, THEREFORE, THE SAID EX PENDITURE HAS BEEN DISALLOWED AS PER PROVISIONS OF SECTION 40(A)(IA) O F THE ACT. ON BOTH THESE ASPECTS, COMMISSIONER OF INCOME-TAX (APPEALS) HAS DELETED THE ADDITIONS BY NOTICING THAT PROVISIONS OF SECTION 19 4J AND 194A DO NOT APPLY IN THE PRESENT CASE, BECAUSE THE ASSESSEE IS AN INDIVIDUAL. ITA 1525/PN/08 & CO 11/PN/10 DR (MRS) SAVITA D SHIR SATH, SHRIRAMPUR 3 ACCORDINGLY, AS PER THE COMMISSIONER OF INCOME-TAX (APPEALS) THERE WAS NO LIABILITY ON THE PART OF THE ASSESSEE TO DED UCT TAX AT SOURCE UNDER SECTION 194J OR 194A OF THE ACT, BEING AN IND IVIDUAL. THEREFORE, THE DISALLOWANCES HAVE BEEN DELETED. 4. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE REFERRED TO THE SECOND PROVISO BELOW SECTION 194J AND FIRST PRO VISO BELOW 194A OF THE ACT TO POINT OUT THAT THE SAID PROVISIONS ARE A TTRACTED EVEN IN CASE OF INDIVIDUAL, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM BUSINESS OR PROFESSION EXCEED THE MONETARY LIMITS P RESCRIBED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB OF THE ACT . IN THE PRESENT CASE, IT IS POINTED OUT THAT THE COMMISSIONER OF INCOME-T AX (APPEALS) IN PARAGRAPH 5 OF THE IMPUGNED ORDER HAS HELD THAT THE INCOME OF THE ASSESSEE IS ASSESSABLE UNDER THE HEAD INCOME FROM PROFESSION AND THE SAME EXCEEDED THE LIMITS PRESCRIBED UNDER SECTI ON 44AB OF THE ACT AND, THEREFORE, THE ASSESSEE WAS LIABLE TO DEDUCT T AX AT SOURCE IN TERMS OF SECTION 194A AND 194J OF THE ACT ON THE IM PUGNED PAYMENTS. 5. WE HAVE PERUSED THE BARE PROVISIONS OF THE ACT P OINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE AND FIND TH AT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONCL UDING THAT ASSESSEE WAS OUTSIDE THE PURVIEW OF SECTION 194J AN D 194A OF THE ACT. WE, THEREFORE, FIND THE ORDER OF THE COMMISSIONER O F INCOME-TAX (APPEALS) UNSUSTAINABLE ON THIS POINT. WE ALSO FIND THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS NOT CONSID ERED ANY OTHER ARGUMENT OF THE ASSESSEE ON THIS ASPECT AND, THEREF ORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND RESTORE THE ISSUES BACK TO HIS FILE TO BE ADJUDICATED AFRESH, AFTER ALLOWING THE ASSESSEE A R EASONABLE ITA 1525/PN/08 & CO 11/PN/10 DR (MRS) SAVITA D SHIR SATH, SHRIRAMPUR 4 OPPORTUNITY OF BEING HEARD AND THEREAFTER PASSING A N ORDER IN ACCORDANCE WITH LAW. THUS, IN SO FAR AS THE APPEAL OF THE REVENUE IS CONCERNED, IT IS TREATED AS PARTLY ALLOWED. 6. NOW WE MAY TAKE UP THE CROSS-OBJECTION PREFERRED BY THE ASSESSEE. AS FAR AS GROUNDS NO 1 & 2 RAISED BY ASSE SSEE IN CROSS OBJECTION ARE CONCERNED, ASSESSEE VIDE APPLICATION DATED 26.6.2010 HAS SOUGHT TO WITHDRAW THE SAME. ACCORDINGLY, GROUN D NOS 1 & 2 ARE HEREBY DISMISSED AS WITHDRAWN. 7. GROUND NO 3 IN CROSS OBJECTION RELATES TO THE AD DITION OF RS 50,000/- MADE UNDER SECTION 40A (3) OF THE ACT. THE BRIEF FACTS ARE THAT THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD MADE PAYMENT OF RS 1,00,000/- ON 16.2.2005 AND ANOTHER RS 1,50,000/- O N 22.2.2005 IN CASH TO ONE SHRI SANDEEP A. CHAVAN, CONTRACTOR, ON ACCOUNT OF EXPENDITURE INCURRED TOWARDS REPAIRS OF BUILDING. T HE ASSESSING OFFICER NOTED THAT THE PAYMENTS MADE IN CASH ON THE PARTICU LAR DAY EXCEEDED RS 20,000/- AND THEREFORE, ASSESSEE HAS VIOLATED TH E PROVISIONS OF SECTION 40A(3) OF THE ACT. THE ASSESSING OFFICER AC CORDINGLY DISALLOWED 20% OF THE TOTAL PAYMENT UNDER SECTION 4 0A (3) OF THE ACT, WHICH RESULTED IN AN ADDITION OF RS 50,000/-. IN AP PEAL, THE COMMISSIONER OF INCOME-TAX (APPEALS) NOTICED THAT T HE PAYMENTS IN QUESTION WERE MADE IN CASH TO THE CONTRACTOR ON ACC OUNT OF REPAIRS OF BUILDING IN A SINGLE DAY AND AS THE ASSESSEE HAS DE DUCTED DUE TDS FROM SUCH PAYMENTS, IT WAS CLEAR THAT THE PAYMENTS IN QUESTION WERE MADE FOR A SINGLE WORK TO THE SAME PERSON ON A GIVE N DAY. ON THESE FACTS, THE COMMISSIONER OF INCOME-TAX (APPEALS) HEL D THAT THE PAYMENTS MADE BY ASSESSEE FELL WITHIN THE PURVIEW O F SECTION 40A (3) AND ASSESSEE HAS ALSO FAILED TO PROVE ANY EXTENUATI NG CIRCUMSTANCES ITA 1525/PN/08 & CO 11/PN/10 DR (MRS) SAVITA D SHIR SATH, SHRIRAMPUR 5 FOR MAKING SUCH PAYMENT IN CASH. ACCORDINGLY, THE C OMMISSIONER OF INCOME-TAX (APPEALS) CONFIRMED THE DISALLOWANCE OF RS 50,000/- MADE BY THE ASSESSING OFFICER UNDER SECTION 40A (3) OF T HE ACT. 8. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENT ATIVE AS WELL AS GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES . WE FIND THAT THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THE URGENCY OF MAKING CASH PAYMENTS EXCEEDING RS 20,000/- TO THE CONTRACTOR ON A SINGLE DAY AND, THEREFORE, WE AFFIRM THE DECISION OF THE COMMISSION ER OF INCOME-TAX (APPEALS) IN UPHOLDING THE ADDITION OF RS 50,000/- MADE UNDER SECTION 40A (3) OF THE ACT. ACCORDINGLY, ASSESSEE FAILS ON THIS GROUND. 9. THE NEXT GROUND ALSO RELATES TO AN ADDITION OF R S 32,262/- MADE UNDER SECTION 40A (3) OF THE ACT BEING THE PAYMENT MADE TO DR D B SHIRSAT. THE ASSESSING OFFICER NOTICED THAT ASSESSE E HAD MADE CASH PAYMENT TOWARDS PROFESSIONAL EXPENSES IN EXCESS OF RS 20,000/- TO DR D B SHIRSAT TOTALLING TO RS 1,61,310/-. THE ASSESS ING OFFICER, THEREFORE, OBSERVED THAT 20% OF RS 1,61,310/- SHALL BE DISALLOWED IN FUTURE AS THESE PAYMENTS ARE MADE TO DR D B SHIRSAT H FOR PROFESSIONAL EXPENSES. IN APPEAL, THE COMMISSIONER OF INCOME-TA X (APPEALS) HELD THAT ASSESSEE HAS CONTRAVENED THE PROVISIONS OF SEC TION 40A(3) OF THE ACT IN MAKING CASH PAYMENTS IN EXCESS OF RS 20,000/ - TO DR D B SHIRSAT WITHOUT ANY JUSTIFICATION AND, THEREFORE, T HE DISALLOWANCE OF 20% THEREOF WAS WARRANTED. THE COMMISSIONER OF INCO ME-TAX (APPEALS) ACCORDINGLY DIRECTED THE ASSESSING OFFICE R TO DISALLOW AN AMOUNT OF RS 32,262/- BEING 20% OF THE PAYMENT MADE TO DR D. B. SHIRSAT IN CONTRAVENTION OF THE PROVISIONS OF SECTI ON 40A (3) OF THE ACT, WHILE GIVING EFFECT TO THE APPELLATE ORDER. ITA 1525/PN/08 & CO 11/PN/10 DR (MRS) SAVITA D SHIR SATH, SHRIRAMPUR 6 10. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AU THORITIES ON THIS ASPECT AND FIND THAT THERE IS NO INFIRMITY IN THE D IRECTION GIVEN BY THE COMMISSIONER OF INCOME-TAX (APPEALS). WE ACCORDINGL Y AFFIRM THE DECISION OF THE COMMISSIONER OF INCOME-TAX (APPEALS ) ON THIS ASPECT. ASSESSEE FAILS ON THIS GROUND. 11. IN THE RESULT, CROSS OBJECTION OF THE ASSESSEE FAILS AND IS DISMISSED. 12. RESULTANTLY, APPEAL OF THE REVENUE IS PARTLY AL LOWED, WHILE CROSS OBJECTION OF ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 21ST DAY OF J ANUARY, 2011. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 21ST JANUARY, 2011 COPY TO:- 1) DR (MRS) SAVITA D SHIRSAT, SHRIRAMPUR 2) THE ITO WD-4, AHMEDNAGAR, 3) THE CIT (A)-I, PUNE 4) THE CIT-1, PUNE 5) THE D R, B BENCH, ITAT, PUNE. BY ORDER TRUE COPY ASSTT.REGISTRAR,I.T.A.T., PUNE B