Balasaheb Vishnu Yadav, Pune V. Deputy Commissioner Income-tax,

ITA 1740/PUN/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7735 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 16-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Keywords: Principle of natural justice

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1740/PUN/2016 / ASSESSMENT YEAR : 2011-12 SHRI BALASAHEB VISHNU YADAV, PROP. M/S. MAHALAXMI STEEL CORPORATION, A-68, H-BLOCK, MIDC, PIMPRI, PUNE 411 018 PAN : AADPY0698R . /APPELLANT VS. DCIT, CIRCLE-8, PUNE . / RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : DR. VIVEK AGGARWAL / DATE OF HEARING : 19.06.2018 / DATE OF PRONOUNCEMENT: 27.06.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDE R OF CIT(A)-6, PUNE, DATED 31-05-2016 FOR THE ASSESSMENT YEAR 2011-12. 2. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT GROUNDS NO. 3 TO 5 ARE EITHER GENERAL OR ARGUMENTATIVE IN NATURE. A S SUCH, THEY CAN BE DISMISSED AS GENERAL OR ARGUMENTATIVE. ACCORDINGLY, WE DIS MISS THE GROUND NOS. 3 TO 5 RAISED BY THE ASSESSEE. THAT LEAVES GROUND NOS. 1 AND 2 FOR ADJUDICATION. THEREFORE, THE SAID GROUNDS ARE EXTRACTED HERE AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE A O IN DISALLOWING THE CLAIM OF DIRECT EXPENSES OF RS.5,92,315/- AS AMOUNT INVOLVES IN UNCLEARED CHEQUES OF RS.1,88,410/- WHEN THE AO HAD NOT REJECTED THE BOOK S OF ACCOUNT INVOKING THE PROVISIONS OF S.145(3). THE DISALLOWANCE BE DELETE D. 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD.CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO WHO HAD SC ALED DOWN THE CLAIM OF INTEREST PAID @18% TO 12%. THE INTEREST WAS CHARGE D AS PER BUSINESS EXPEDIENCY OF THE ASSESSEE. THE AO WAS NOT SUPPOSE D TO DICTATE HIS TERMS TO THE ASSESSEE TO DO THE BUSINESS IN A PARTICULAR WAS AS HE FELT. THE LD.CIT(A) WAS NOT OBLIGED TO CONFIRM THE ACTION OF THE AO. T HE CLAIM BE ALLOWED TO THE ASSESSEE. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE INCLUDE THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURE AND DEALER IN SCRAP. ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.36,09,290/-. IN THE SCRU TINY ASSESSMENT, AO MADE VARIOUS ADDITIONS AND THE ASSESSED INCOME IS DETERMINED AT RS.46,04,760/-. AO MADE ADDITION OF RS.5,92,315 /- ON ACCOUNT OF PAYMENTS MADE TO MRS. MINAL YADAV, THE DAUGHT ER-IN-LAW OF THE ASSESSEE. FURTHER, AO ALSO MADE ADDITION OF RS.1,88,410/- O N ACCOUNT OF UNCLEARED CHEQUES PAID BY THE ASSESSEE TO THE LABOUR. FINALLY, THERE IS ANOTHER ADDITION MADE BY THE AO ON ACCOUNT OF DIFFERENCE IN INTEREST RATES QUA THE UNSECURED LOANS TAKEN BY THE ASSESSEE. GROU ND-WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS. 4. GROUND NO.1 RELATES TO DISALLOWANCE OF LABOUR CHARGES PAID TO MRS. MINAL YADAV (DAUGHTER-IN-LAW OF ASSESSEE) AMOUNTING TO RS.5,9 2,315/-. BRIEF FACTS ON THIS ISSUE INCLUDE THAT HER JOB IS TO SUPERV ISE MAKING OF BAILS OF THE SCRAP. SHE IS A QUALIFIED SOFTWARE PERSONNEL AND SH E IS ASSESSED TO TAX IN HER INDIVIDUAL CAPACITY. IN THE ASSESSMENT PROCEED INGS, AO NOTICED THAT MRS. MINAL YADAV IS A RELATED PARTY WITHIN THE MEANING OF SECTION 40A(2)(B) OF THE ACT AND HELD THAT THE ASSESSEE FAILED TO DISCHARGE THE O NUS OF PROVING THE GENUINENESS OF THE TRANSACTION. AO IS OF THE OPINION THAT MRS. MINAL YADAV IS A DIPLOMA HOLDER IN WEB COMPONENT DEVELOPME NT DESIGN (CTD) AND HER QUALIFICATION IS NOTHING TO DO WITH THE ALLEGED S ERVICES RENDERED BY HER TO THE ASSESSEE. CONSIDERING THE FACT THAT MRS. MINAL YADAV FILED THE RETURNS SUBSEQUENT TO THE NOTICES ISSUED FOR SC RUTINISING THE ACCOUNT OF THE ASSESSEE, AO IS CRITICAL OF THE ASSESSEES CLAIM THAT SHE IS REGULARLY ASSESSED TO TAX. AS PER THE AO, IT IS A CASE OF REDUCING TAXABLE 3 PROFITS SHOWING INGENUINE PAYMENT TO MRS. MINAL YADAV. CIT(A ) APPROVED THE VIEWS OF THE AO AS PER THE CONTENTS OF PARA NO.6 OF HIS ORDER. 5. ON THIS ISSUE, BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED TH AT IT IS A CASE OF GENUINE PAYMENTS AND THE SAME WERE REFLECTE D IN THE RETURNS OF MR.S MINAL YADAV AND THE PAYMENTS WERE MADE AFTER MAKING THE TDS AS PER THE RULES. IN SUPPORT OF THE SAME, ASSESSEE FILED THE COP Y OF RETURN FILED BY MRS. MINAL YADAV. 6. LD. DR FOR THE REVENUE RELIED ON THE ORDERS OF AO/CIT(A). 7. ON HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THA T THE PAYMENTS INDEED ARE PAID BY ASSESSEE TO MRS. MINAL YADAV AND THE SAME ARE EVEN TUALLY ASSESSED TO TAX ALTHOUGH MRS. MINAL YADAV FILED THE RETURN OF INCOME SUBSEQUENTLY TO THE NOTICE OF SCRUTINY OF THE ASSESSEE. IT IS A CASE WHERE ASSESSEE EFFECTED TDS WHILE MAKING THE PAYMENT TO MRS. MIN AL YADAV. IT IS NOT THE CASE OF THE AO THAT SECTION 40A(2)(B) OF THE ACT A PPLY TO THE FACTS OF THE CASE. HOWEVER, THE AO IS OF THE OPINION THAT THE PAY MENT IS NOT GENUINE. ON HEARING BOTH THE SIDES, WE ARE OF THE OPINION THAT TH E AO HAS NOT DISCHARGED HIS ONUS IN ESTABLISHING THAT THE PAYMENTS ARE NOT GENUINE. SINCE THE AO DID NOT INVOKE FORMALLY THE PROVISIONS OF SECT ION 40A(2)(B) OF THE ACT, WE RESIST FROM GIVING A FINDING ON THIS ASPECT. IN OUR VIEW, IT IS THE CASE OF MERE SUSPICION AND SURMISES THAT THE AO HELD THE PAYMENT AS NON- GENUINE. THEREFORE, WE ARE OF THE OPINION THAT THE ORDE R OF CIT(A) ON THIS ISSUE REQUIRES TO BE REVERSED. ACCORDINGLY, THIS PART OF GROUND NO.1 RAISED BY THE ASSESSEE IS ALLOWED. 8. REGARDING THE ADDITION OF RS.1,88,410/-, RELEVANT FACTS INC LUDE THAT THE AO EXAMINED THE BANK ACCOUNT OF THE ASSESSEE AND NOTICED THE FACTS ABOUT UNCLEARED CHEQUES ISSUED BY THE ASSESSEE. ASSES SEE WAS ASKED TO EXPLAIN THE REASONS FOR THIS UNCLAIMED CHEQUES AND THE RE ASONS FOR NOT ENCASHING THE CHEQUES BY THE RECIPIENTS, I.E. SHRI TAPKIR LA XMAN, SHRI 4 SANDEEP AGARWAL, AND SHRI B.V. YADAV. AMOUNTS AND CHEQUE NOS. ARE GIVEN IN PARA NO.6 OF THE ASSESSMENT ORDER. IN RESPONSE, ASS ESSEE SUBMITTED THAT THE CHEQUES WERE ISSUED. IT IS FOR THE RECIPIENTS TO SUB MIT THE CHEQUES AND ENCASH THEM. ASSESSEE CANNOT BE HELD RESPONSIBLE FOR TH E SAME. HE ALSO SUBMITTED THAT HE SHALL ISSUE FRESH CHEQUES TO THE PARTIE S DUE TO EXPIRY OF THE SAME. FURTHER, MENTIONING THAT THE CHEQUES WERE E VENTUALLY CLEARED AS UNDATE SUBJECT TO THE FINDING OF FACT ON THIS ISSUE, THE CLA IM OF THE ASSESSEE SHOULD BE ALLOWED AND THE ADDITION OF RS.1,88,410/- NEEDS TO BE DELETED. 9. LD. DR FOR THE REVENUE RELIED ON THE ORDERS OF AO/CIT(A). 10. ON HEARING BOTH THE PARTIES ON THIS ISSUE, WE ARE OF THE OPINION THAT THIS ISSUE SHOULD BE REMANDED TO THE FILE OF AO FOR EXAMINA TION IF THE AMOUNTS IN QUESTION ISSUED THROUGH CHEQUES ARE EVENTUA LLY PAID BY THE ASSESSEE TO THE SAID PARTIES. AFTER DUE EXAMINATION, IN CA SE THE AO FINDS THE ENCASHMENT OF THE CHEQUES AMOUNTING TO RS.1,88,410/- ARE MADE BY NOW, ASSESSEE IS ENTITLED TO RELIEF. WITH THESE DIRECTIONS, WE REM AND THIS ISSUE TO THE FILE OF AO. AO SHALL GRANT REASONABLE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE IN ACCORDANCE WITH THE SET PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, THIS PORTION OF GROUND NO.1 RAISED BY THE A SSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 11. REGARDING THE ADDITION OF INTEREST AMOUNT OF RS.99,000/ -, THE FACTS INCLUDE THAT THE ASSESSEE REPORTED UNSECURED LOANS OF R S.5,50,000/- FROM SHRI RAMESHWAR LALCHAND VARMA. THE RATE OF INTEREST PAID BY THE ASSESSEE ON THIS LOAN IS 18%. THE INTEREST WORKS OUT TO RS.99,000./ -. IN THE SCRUTINY ASSESSMENT, AO FOUND THE SAID RATE OF INTEREST IS ON HIGH ER SIDE. AFTER RECORDING THE REASONS AND GIVING AN OPPORTUNITY TO THE ASSESSEE, THE AO HELD THAT INTEREST AMOUNT @12% ON RS.5,50,000/- ONLY BE ALLOWE D. THIS RESULTED IN ADDITION OF RS.33,000/-. CIT(A) CONFIRMED THE SAME. 5 12. AGGRIEVED WITH THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 13. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT SUCH ADDITIONS ARE UNSUSTAINABLE IN LAW WHEN THE LOAN IS A GENUIN E ONE AND THE LOAN CREDITOR IS NOT A RELATED PARTY. AS SUCH, RATE OF 12 % IS NOT THE MARKET RATE AND THE RATE OF INTEREST VARIES FROM PERSON TO PE RSON, LOAN TO LOAN AND AREA TO AREA. 14. ON HEARING BOTH THE SIDES, WE AGREE WITH THE CONTEN TIONS RAISED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE LOAN CREDITOR IS NO T A RELATED PARTY TO THE ASSESSEE. AS SUCH, THE INTEREST RATES VARY FROM PE RSON TO PERSON, LOAN TO LOAN ETC. THUS, IT IS NOT PROPER TO INFER THAT THE RATE OF INTEREST @18% IS NOT GENUINE ONE. THEREFORE, WE ALLOW THE GROUND NO.2 RAISED B Y THE ASSESSEE IN HIS FAVOUR. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF JUNE, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 27 TH JUNE, 2018 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-6, PUNE 4. THE PR.CIT-5, PUNE 5. , , B BENCH PUNE; 6. / GUARD FILE.