ACIT, Meerut V. M/s. V. Kumar Dyeing & Printing Works (P) Ltd., Meerut

ITA 159/DEL/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9962 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 23-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 10-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAKAR
• Assessee Lawyers: O P SAPRA ADV SANDEEP SAPRA
• Keywords: Opportunity of being heard; Principle of natural justice; Corroborative evidences; Assessment record
• Section: 143(3); 142(1); 194C; 147; 148; 28

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H : NEW DELHI BEFORE SHRI B.C.MEENA, ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 159/DEL/2012 (ASSESSMENT YEAR: 2006 - 07) & ITA NO. 5576/DEL/2011(ASSESSMENT YEAR: 2006 - 07) ACIT CIRCLE - 2, MEERUT VS. M/S V. KUMAR DYEING & PRINTING WORKS (P) LTD. MEERUT (APPELLANT) (RESPONDENT) APPELLANT BY : SH. J.P CHANDRAKAR, SR. DR RESPONDENT BY : SH. O.P. SAPRA, ADV SANDEEP SAPRA, ADV DATE OF HEARING 23.03.2015 DATE OF PRONOUNCEMENT 13 .05 .2015 O R D E R PER A. T. VARKEY , JUDICIAL MEMBER TH ESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE EM ANATE OUT OF THE ORDER DATED 18.10.2011 PASSED BY THE LD. CIT(A), MEERUT PERTAINING TO ASSESSMENT YEAR 2006 - 07 . SINCE SOME OF THE ISSUES INVOLVED IN BOTH THE APPEALS ARE COMMON AND IDENTICAL, HENCE, WE ARE DISPOSING OF THESE APPEALS BY PASSING A CONSOLIDATED ORDER FOR THE SAKE OF BREVITY. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL: - 1. T HAT THE ID CIT.(A) HAS ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE BY UPHOLDING THE ACTION OF THE ID. A.O. OF COMPLETING THE ASSESSMENT UNDER REFERENCE WITHOUT AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE APPELLANT AND THE ID. CIT(A), EVEN T HOUGH NOT FINDING PROOF OF SERVICE OF NOTICE DATED 15.10.2010 ON RECORD, WHICH WAS THE ONLY NOTICE U/S 143(2) ISSUED DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS, HAS CONFIRMED THE ACTION OF THE ID. A.O. ONLY ON THE BASIS OF SERVICE OF NOTICE U/S 142(1) DATED 5.08.2010 THEREBY WRONGLY UPHOLDING THE COMPLETION OF RE - ASSESSMENT UNDER REFERENCE EVEN WITHOUT SERVICE OF ANY NOTICE U/S 143(2). ITA NO S . 5576/DEL/2011 & 159/ DEL/201 2 2 2. THAT THE ID. CIT(A) HAS ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE BY DESISTING FROM ANNULLING THE ASSESSMENT, EVEN AFTER OBSERVING THAT THERE WAS NO EVIDENCE OF SERVICE OF THE COPY OF REASONS RECORDED BEFORE ISSUANCE OF NOTICE U/S 148 DATED 12.0 3.2010 UPON THE APPELLANT AND THE ACTION OF THE ID. CIT (A) TO UPHOLD THE PROCEEDINGS U/S 148 AND ORDER U/S 147 UNDER APPEAL ONLY ON THE BASIS OF SERVICE OF NOTICE U/S 148 DATED 12.03.2010 IS UNJUST AND UNLAWFUL. 3. THAT THE ID. CIT (A) HAS ERRED IN LAW A S WELL AS ON THE FACTS OF THE CASE BY CONFIRMING THE DISALLOWANCE OF RS.2,40,350 / - OUT OF THE FINISHING CHARGES OF RS.8,33,795/ - U/S 40(A)(IA) FOR ALLEGED CONTRAVENTION OF SEC. 194C REGARDI NG DEDUCTION OF TDS THERE FROM. 3. THE REVENUE HAS RAISED THE FOL LOWING GROUNDS IN ITS APPEAL. 1.WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS. 99,15,170/ - MADE BY A.O. U/S 40A(IA) OF IT ACT 1961 IGNORING THE FACT THAT TDS WAS CERTAINLY DEDUCTABLE UPON THE EXPENSES STYLED AS PRINTING & DYEING CHARGES. THE CLAIM OF THE ASSESSEE THAT THESE EXPENSES CONTAINED THE PURCHASE OF PRINTED AND DYED CLO THS THEREIN WAS MERELY AN AFTER THOUGHT. IN THE P&L A/CS SEPARATE EXPEN SES UNDER THE HEAD OF PURCHASES WERE ALREADY EXISTING FOR RS. 3,44,02,620/ - . 2. WHETHER, IN THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN LAW IN CIRCUMSTANCES OF THE CASE BY RESTRICTING THE DISALLOWA NCES TO RS 2,40,350/ - AS AGAINST RS. 8,33,795/ - ON A/C OF JOBWORK IGNORING THE FACTS THAT ASSESSEE HAS ITSELF MENTIONED THE SAME IN THE P&L A/C THAT THE PAYMENT WAS IN NATURE OF JOBWORK AND NO TDS WAS DEDUCTED BY THE ASSESSEE ON THE SAME VIOLATING THE PROV ISIONS CONTAINED IN THE SECTION 194C OF THE IT ACT 1961. 3. WHETHER THE LD. CIT (APPEALS) WAS JUSTIFIED IN ACCEPTING THE CHANGED STAND TAKEN BY THE ASSESSEE IN TURNING THE JOBWORK PAYMENTS TO THE PURCHASES TO AVOID THE PENAL PROVISIONS CONTAINED IN THE IN COME TAX ACT , 1961. 4. IN THE FACT AND CIRCUMSTANCES OF THE CASE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) MAY BE SET ASI DE AND THAT OF THE AO RESTORED. 4 . THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IN THIS CASE DERIVED INCOME FROM TRADING OF BED SHEETS AND FABRICS RETURN DECLARING LOSS OF RS. 4,94,552/ - WA S FILED ON 30.11.2006, WHICH WAS PROCESSED AS SUCH U/S. 143(1) OF ITA NO S . 5576/DEL/2011 & 159/ DEL/201 2 3 THE INCOME TAX ACT, 1961 (HEREIN AFTER THE ACT) . LATER ON, THE CASE WAS SELECTED FOR SCRUTINY ACCORDINGLY, ST ATUTORY NOTICES U/S. 143(2) AND 142(1) DATED 1.10.2007 ALONGWITH QUEST IONNAIRE DATED 13.5.2008 WERE ISSUED AND SERVED UPON THE ASSESSEE. IN COMPLIANCE THERETO, LD. COUNSEL OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED DETAILS OF THE CASE AND PROCEEDINGS. BOOKS OF ACCOUNTS, BILLS/ VOUCHERS PRODUCED WHICH WERE EXAMIN ED ON TEST CHECK BASIS. THE ASSESSING OFFICER AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE SUBMITTED BY THE ASSESSEE AND EXAMINATION OF BOOKS OF ACCOUNT / OTHER DOCUMENTS, AFTER DISCUSSION AN ADDITION OF RS. 55,000/ - WERE MADE OUT OF EXPEN SES WERE NOT FOUND VOUCHED. THEREAFTER, THE AO HAS COMPLETED THE ASSESSMENT BY MAKING VARIOUS ADDITIONS U/S. 143(3) /147/148 OF THE I.T. ACT, 1961. 5 . AGAINST THE AFORESAID ORDER OF THE ASSESSING OFFICER, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 18 . 11. 201 1 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 6 . NOW BOTH ASSESSEE AND REVENUE ARE IN CROSS APPEAL BEFORE THE TRIBUNAL. 7 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. 8. WITH REGARD TO GROUND NO. 1 RAISED IN ASSESSEES APPEAL IS CONCERNED, W E FIND THAT LD. COUNSEL OF THE ASSESSEE HAS STATED THAT THE LD. CIT(A) WHILE UPHOLDING THE ACTION OF THE ID. A.O. OF COMPLETING THE ASSESSMENT UNDER REFERENCE WITHOUT AFFORDING REA SONABLE OPPORTUNITY OF BEING HEARD TO THE APPELLANT AND THE ID. CIT(A), EVEN THOUGH NOT FINDING PROOF OF SERVICE OF NOTICE DATED 15.10.2010 ON RECORD, WHICH WAS THE ONLY NOTICE U/S 143(2) ISSUED DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS, HAS CONFIRMED THE ACTION OF THE ID. A.O. ONLY ON THE BASIS OF SERVICE OF NOTICE U/S 142(1) DATED 5.08.2010 THEREBY WRONGLY UPHOLDING THE COMPLETION OF RE - ASSESSMENT UNDER REFERENCE EVEN WITHOUT SERVICE OF ANY NOTICE U/S 143(2). IN OUR CONSIDERED VIEW, IN THIS CASE NO TICE U/S. 143(2) WAS NOT SERVED HOWEVER, ON LY NOTICE U/S. 142(1) WAS SERVED . I T HAS COME ON RECORD IN THE NOTING SHEET OF THE AO THAT NOTICE U/S. 143(2) WAS ISSUED. IN OUR VIEW SECTION 292BB CURES THE DEFECT IF ANY, I.E. THE NON - SERVICE OF NOTICE AFTER P ARTICIPATING IN THE ASSESSMENT PROCEEDINGS CANNOT STAND IN THE WAY TO INVALIDATE THE ASSESSMENT PRO CEEDINGS. THEREFORE, THE GROUND NO. 1 IS REJECTED. ITA NO S . 5576/DEL/2011 & 159/ DEL/201 2 4 9 . WITH REGARD TO GROUND NO. 2 OF ASSESSEES APPEAL IS CONCERNED, WE FIND THAT LD. COUNSEL OF THE ASSESSEE HAS SUBMITTED THAT LD. CIT(A) H AS ERRED IN LAW BY DESISTING FROM ANNULLING THE ASSESSMENT, EVEN AFTER OBSERVING THAT THERE WAS NO EVIDENCE OF SERVICE OF THE COPY OF REASONS RECORDED BEFORE ISSUANCE OF NOTICE U/S 148 DATED 12.03.2010 UPON THE A SSESSEE AND THE ACTION OF THE ID. CIT (A) TO UPHOLD THE PROCEEDINGS U/S 148 AND ORDER U/S 147 UNDER APPEAL ONLY ON THE BASIS OF SERVICE OF NOTICE U/S 148 DATED 12.03.2010 IS UNJUST AND UNLAWFUL. THE ASSESSEE HAS REQUESTED THE AO TO PROVIDE IT THE COPY OF T HE REASONS VIDE COMMUNICATION DATED 17.3.2010 FILED ON 22.3.2010 IN THE OFFICE OF THE AO. THE ASSESSE E HAS CLAIMED THAT THE PRINCIPLE OF NATURAL JUSTICE HAS NOT BEEN COMPLIED WITH AND, THEREFORE, THE ORDER UNDER REFE RENCE DESERVE S TO BE ANNULLED. THE ASSE SSEE HAS SUBMITTED THAT ALONGWITH THE COPY OF THE NOTICE DATED 12.3.2010 U/S. 148 THERE WAS NO COPY OF THE REASONS RECORDED BEFORE ISSUANCE OF THE SAID NOTICE WAS THERE. T HE AO IN HIS REMAND REPORT HAS STATED THAT AS PER THE NORMAL PRACTICE THE REASONS REC ORDED U/S. 147 ARE SENT TO THE ASSESSEE AT THE TIME OF ISSUING NOTICE U/S. 148. HE HAS FURTHER STATED THAT ON GOING THROUGH THE RECORDS, IT IS FOUND THAT WHILE ISSUING NOTICE U/S. 148 ON 12.3.2010, HIS PREDECESSOR HAS ISSUED NOTICE U/S. 148 ALONGWITH THE C OPY OF THE REASONS RECORDED. ACCORDING TO THE AO THE DOCUMENTS ARE AVAILABLE ON RECORD SO THAT THE ASSESSEES PLEA THAT REASONS WERE NOT PROVIDED IS NOT CORRECT. WE FIND THAT THE LD. CIT(A) HAS GONE THROUGH THE ASSESSMENT RECORDS AND THE ASSESSEE HAS AD MITTED HAVING RECEIVED THE NOTICE U/S. 148 DATED 12.3.2010 AND IN THE RE MAND REPORT THE AO HAS REITERATED THAT THE REASON FOR REOPENING HAS BEEN SEND ALONG WITH THE SAID NOTICE NEED NOT BE DISBELIEVED AND SO WE DO NOT DISTURB THE IMPUGNED ORDER ON THIS ACCO UNT ; HENCE, WE UPHOLD THE SAME AND REJECT THE GROUND NO . 2 ACCORDINGLY. 10 . WITH REGARD TO GROUND NO . 1 IN REVENUES APPEAL IS CONCERNED, WE FIND THAT THE AO HAS MADE DISALLOWANCE OF RS.1,09,61,165/ - U/S. 40(A)(IA) HOLDING THAT TDS WAS REQUIRED TO BE DEDUCTED AND SINCE THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE, THE SAME WAS DISALLOWABLE U/S. 40(A)(IA). THE AO HELD THAT THE ASSESSEE HAS FAILED TO AVAIL THE OPPORTUNITY TO BE PRESENT AND BEING HEARD ; AND NO REPLY WHATSOEVER HAS BEEN FILED BEFORE HIM , SO HE MADE THE DISALLOWANCE. THE ITA NO S . 5576/DEL/2011 & 159/ DEL/201 2 5 SUBMISSIONS ALONGWITH SUPPORTING EVIDENCES W AS FILED BY THE ASSESSEE DURING THE APPELLATE PROCEE DINGS WERE CONFRONTED TO THE AO FOR CONSIDERATION THEREOF. THE AO IN HIS REMAND REPORT HAS STATED THAT THE DETAILED COPY OF ACCOUNT OF EXPENSES, PHOTOCOPY OF SPECIMEN BILLS AS FILED BY THE ASSESSEE WERE INCOR RECT BECAUSE ACCORDING TO THE AO IT WAS TOTALLY AN AFTERTHOUGHT. THE AO DID NOT CHOOSE TO COMMENT ON THE DETAILS SUBMITTED BY THE ASSESSEE. WE FIND THAT THE LD. CIT(A) HAS OBSERVED THAT THE DETAILS OF PRINTING AND DYING CHARGES OF RS. 99,15,170/ - AS FILED CONTAIN PARTICULARS OF PURCHASES OF PRINTED AND DYED CLOTH FROM VARIOUS PARTIES THROUGH THEIR BILLS. PHOTOCOPIES OF SOME BILLS AS FILED AS SPECIMEN COPI ES HAVE ALSO BEEN CONSIDERED. WE ALSO NOTE THAT LD. CIT(A) FOUND THAT ACCOUNTING HEAD THOUGH TERMED AS PRINT ING & DYEING CHARGES CONTAINS THE PURCHASES OF PRINTED AND DYED CLOTH THEREIN. IT HAS BEEN RIGHTLY NOTED BY THE LD CIT (A) THAT T HE NOMENCLATURE OF AN ACCOUN T CANNOT BE TAKEN SO AS TO REJECT THE CONTENTION OF THE ASSESSEE THAT THE SAID ACCOUNT CONTAINS THE PURCHASE OF PRINTED AND DYED CLOTH. WE FIND THAT THE LD . CIT(A) HAS RIGHTLY HELD THAT THE ACCOUNT BEING THE ACCOUNT OF PURCHASES DID NOT REQUIR E ANY TDS DE DUCTION AND THE AO H AS RIGHTLY DIRECTED TO DELETE THE DISALLOWANCE OF RS.99,15,170/ - AS MADE ON THIS ACCOUNT, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS AND REJECT THE GROUND NO. 1 RAISED BY T HE REVENUE. 11. WITH REGARD TO GROUND NO . 2 RAISED IN REVENUES APPEAL AND GROUND NO .3 RAISED IN ASSESSEES APPEAL WE WILL DEAL WITH THE SAME TOGETHER , SINCE B OTH THE SAID GROUNDS ARE COMMON THEREFORE, TAKEN UP TOGETHER . WE FIND THAT LD. DR HAS STATED T HAT LD. CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE DISALLOWANCES TO RS . 2,40,350/ - A S AGAINST RS. 8,33,795/ - ON ACCOUNT OF JOBWORK IGNORING THE FACTS THAT ASSESSEE HAS ITSELF MENTIONED THE SAME IN THE P& L A/C THAT THE PAYMENT WAS IN NATURE OF JOBWORK AND NO TDS WAS DEDUCTED BY THE ASSESSEE ON THE SAME VIOLATING THE PROVISIONS CONTAINED IN THE SECTION 194C OF THE ACT . WE FIND FROM THE DETAILS IT IS APPARENT THAT THE FINISH ING CHARGES EXCEPT A SUM OF RS. 2, 40,350/ - PAID TO MS . SONIA AGARWAL WERE PAID TO DIFFERENT PERSONS IN THE DENOMINATIONS OF LESS THAN RUPEES TWENTY THOUSAND EACH. PAYMENT TO SMT. SONIA AGARWAL, THOUGH ITA NO S . 5576/DEL/2011 & 159/ DEL/201 2 6 THE AMOUNT OF FINISHING CHARGES AT TIMES CREDITED ON VARIOUS OCCASIONS WAS LESS THAN RS. 20,000/ - BUT THE TOTAL PAYMENT / CREDITS EXCEEDED RS. 75,000/ - DURING THE YEAR AND, THEREFORE, TDS FROM HER SHOULD HAVE BE EN DEDUCTED. IN THIS VIEW, THE ASSESSEE HAS COMMITTED CONTRAVENTION OF SECTION 194C AND AS SUCH THE SAID AMOUNT HAS RIGHTLY BEEN D ISALLOWED I N TERMS OF SECTION 40(A)(IA). WE ALSO FIND THAT THE ALTERNATIVE CONTENTION OF THE ASSESSEE THAT THE PAYMENT OF FINISHING CHARGES IS ALLOWABLE U/S. 28 AND IS NOT AN EXPENSE ALLOWABLE U/S. 30 TO 38, THEREFORE, THE PROVISIONS OF SECTION 40(A)(I A) CANNOT BE INVOKED TO MAKE DISALLOWANCE OF THAT AMOUNT CANNOT BE ACCEPTED. IF SUCH CONTENTION IS ACCEPTED, THE PROVISIONS OF SECTION 40(A)(IA) SHALL BECOME MEANINGLESS. IN VIEW OF THE ABOVE, THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE OF RS . 2,40,350/ - OUT OF THE FINISHING CHARGES OF RS. 8,33,795/ - BY GRANTING RELIEF OF RS. 5,93,445/ - ON THIS ACCOUNT, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE, AND THUS REJECT THE GROUND NO. 2 RAISED BY THE REVENUE & GROUND NO. 3 RAISED BY THE ASSESSEE IN THEIR RESPECTIVE APPEALS. 1 2 . IN THE RESULT, BOTH THE ASSESSEES AND REVENUE APPEALS ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 1 3 . 05 .2015 . - S D / - - S D / - ( B.C.MEENA ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 3 / 05 / 2015 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI