M/s I. K. Matagar, Belgaum V. The Principal Commissioner of Income Tax, Belgaum., Belgaum

ITA 177/PAN/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1492 (ITAT-PANAJI)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 05-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SMRITI BHARDWAJ
• Keywords: Business income; Assessment record
• Section: 40A(3); 143(3); 37(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 177 /PNJ/201 5 (ASST. YEAR : 20 1 0 - 1 1 ) M/S. I.K. MATAGAR, CIVIL CONTRACTOR, AT POST : HIDKAL DAM, TAL : HUKKERI, DIST. BELAGAVI. VS. P CIT, BEL A GA VI PAN NO. AABFI 9229 E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHOK MUDNUR C A DEPARTMENT BY : SMT. SMRITI BHARDWAJ - D R DATE OF HEARING : 05 / 0 8 /2015 . DATE OF PRONOUNCEMENT : 0 5 / 0 8 /201 5 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF PRINCIPAL COMMISSIONER OF INCOME TAX , BEL A GA VI , DATED 2 6 /0 3 /201 5 . 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE PRINCIPAL COMMISSIONER OF INCOME TAX ERRED IN INVOKING SEC. 263 OF THE ACT AGAINST THE ORDER PASSED BY ASSESSING OFFICER UNDER SEC. 143(3) FOR THE ASSESSMENT YEAR 2010 - 11. 3 . THE PRINCIPAL COMMISSIONER OF INCOME TAX OBSERVED THAT THE ASSESSEE HAS PAID INTEREST TO SUNDARAM FINANCE LTD. RS.47,282/ - , SHRI VELUMURUGAM RS. 1,35,340/ - TOWARDS LABOUR AND RS. 23,000/ - PAID TO SHIVA ENGINEERING TOWARDS MISC. E XPENSES . HE OBSERVED THAT A CCORDING TO THE ASSESSEE, THE PROVISIONS OF SEC. 40(A)(IA) ARE APPLICABLE TO THE AMOUNT PAYABLE AND NOT TO AMOUNT PAID DURING THE YEAR. THE PRINCIPAL 2 ITA NO. 177 /PNJ/201 5 COMMISSIONER OF INCOME TAX OBSERVED THAT THE HONBLE KOLKATA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE HAS REVERSED THE VIEW OF THE VISAKHAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERLYN SHIPPING & TRANSPORT, VISAKHAPATNAM VS. ACIT - 1 TO THE SAME EF F E CT A S THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT - IV VS. SIKANDARKHAN N TUNVAR . HOWEVER, HE OBSERVED THAT THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF ACIT VS. VECTOR SHIPPING SERVICES , CONFIRMED THE FINDINGS GIVEN BY THE VISAKHAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN MERLYNE SHIPPING & TRANSPORT (SUPRA) . THE PRINCIPAL COMMISSIONER OF INCOME TAX HAS ALSO OBSERVED THAT THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT C - 4(2), MUMBAI VS. RISHTI STOCK AND SHARES PVT. LTD . IN I.T.A.NO. 112/MUM/2012 ORDER DATED 02/08/2013 AFTER TAKING INTO CONSIDERATION THE DECISION OF ALLAHABAD HIGH COURT AND GUJARAT HIGH COURT AND KOLKATA HIGH COURT HAS APPLIED THE VIEW TAKEN BY THE HONBLE GUJARAT AND KOLKATA HIGH COURT S . HE FURTHER OBSERVED THAT CBDT CIRCULAR NO. 10/ DV/2013 DATED 13/12/2013 HAS CLARIFIED THAT FOR THE PURPOSES OF DISALLOWANCE UNDER SEC. 40(A)(IA) OF THE ACT FOR NON - DEDUCTION OF TAX AT SOURCE NOT ONLY AMOUNTS REMAINING PAYABLE AT THE END OF THE FINANCIAL YEAR , BUT ALSO THE AMOUNTS PAID DURING THE FINANCIAL YEAR HAS TO BE TAKEN INTO CONSIDERATION. THEREFORE, THE DECISION S RENDERED BY THE HONBLE GUJARAT AND KOLKATA HIGH COURT S AND THE CBDT CIRCULAR ARE BINDING ON THE ASSESSING OFFICER. ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO DISALLOW INTEREST PAID TO SUNDARAM FINANCE LTD. RS. 47,282/ - , SHRI VELUMURUGAM RS. 1,35,340/ - TOWARDS LABOUR CHARGES AND RS. 23,000/ - PAID TO SHIVA ENGINEERING TOWARDS MISC. EXPENSES UNDER SEC. 40(A)(IA) OF THE ACT AND ENHANCED THE INCOME BY RS. 2,05,622/ - . 4 . THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX. IT IS ALSO NOT THE SUBMISSION OF THE ASSESSEE THAT THE PAYEES TO WHOM INTEREST PAYMENT WAS MADE BY THE ASSESSEE HAS SHOWN THE AMOUNT OF INTEREST IN THE RETURN OF INCOME FILED AND PAID THE TAX DUE 3 ITA NO. 177 /PNJ/201 5 THEREON. IN THE ABSENCE OF THE SAME, WE FIND NO INFIRMITY IN THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX ON THIS ISSUE WHICH IS CONFIRMED. 5. FURTHER, THE PRINC IPAL COMMISSIONER OF INCOME TAX OBSERVED THAT THE ASSESSEE HAS INCURRED SALES PROMOTION EXPENSES OF RS. 53,976/ - . I T IS THE SUBMISSION OF THE ASSESSEE THAT THE EXPENSES ARE TOWARDS ITEMS GIVEN ON THE FESTIVALS, BIRTHDAYS ETC. TO THE PERSONS INVOLVED IN THE BUSINESS OF CIVIL CONTRACT. SINCE THE EXPENSES ARE INCURRED TOWARDS BUSINESS PURPOSES, THE SAME ARE TO BE ALLOWED. THE PRINCIPAL COMMISSIONER OF INCOME TAX OBSERVED FROM THE ASSESSMENT RECORDS THAT IT IS SEEN THAT NO LEDGER EXTRACTS IS OBTAINED AND VERIFIED BY THE ASSESSING OFFICER IN REGARD TO NATURE OF EXPENSES AS CLAIMED BY THE ASSESSEE . ACCORDINGLY, HE SET ASIDE THE ISSUE TO THE ASSESSING OFFICER FOR VERIFICATION AS TO WHETHER EXPENSES DEBITED UNDER THIS HEAD ARE LEGITIMATE EXPENSES INCURRED DU RING THE NORMAL COURSE OF BUSINESS OR OTHERWISE BY CALLING CONCERNED LEDGER ACCOUNT AND VOUCHERS MAINTAINED BY THE ASSESSEE. 6 . THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS NOT CONTROVERTED THE ABOVE OBSERV ATION OF THE PRINCIPAL COMMISSIONER OF INCOME TAX THAT NO LEDGER ACCOUNTS OR OTHER EVIDENCES OR DETAILS WERE FILED BY THE ASSESSEE TO SUBSTANTIATE THAT THE SALES PROMOTION EXPENSES OF RS. 53,976/ - WERE INCURRED BY THE ASSESSEE FOR THE PURPOSES OF ITS BUSINESS. ACCORDING TO SEC. 37(1) OF THE ACT, ONLY THOSE EXPENSES INCURRED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE ARE ALLOWABLE FOR DEDUCTION WHILE COMPUTING THE BUSINESS INCOME OF THE ASSESSEE. SINCE, NO VERIFICATION AS OBSERVED BY THE PRINCIPAL COMMISSIONER OF INCOME TAX WAS CARRIED OUT BY THE ASSESSING OFFICER, WE FIND NO INFIRMITY IN THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX IN REMANDING THE MATTER BACK TO THE ASSESSING OFFICER FOR VERIFICATION AND ADJUD ICATING THE ISSUE AFRESH. THEREFORE, THIS PART OF THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX IS ALSO CONFIRMED. 4 ITA NO. 177 /PNJ/201 5 7 . WITH REGARD TO URD PURCHASES OF METAL, SAND AS WELL AS TRANSPORTATION OF THESE URD ITEMS, THE PRINCIPAL COMMISSIONER OF INCOME TA X OBSERVED THAT THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS STATED THAT THE NAMES AND DETAILS OF PARTIES ARE NOT AVAILABLE . THE PRINCIPAL COMMISSIONER OF INCOME TAX OBSERVED TH A T PARTIES TO WHOM PAYMENTS ARE MADE ARE SINGLE TRANSACTION PARTIES AND THEY DO NOT SIGN THE VOUCHERS . THESE RELATE TO RUBBLE, SAND AND STONE PURCHASED IN THE INTERIOR/REMOTE SITE WORKS WHERE CANAL WORK IS UNDERTAKEN. THE PRINCIPAL COMMISSIONER OF INCOME TAX ALSO OBSERVED THAT THE ASSESSEE HAS PAID VAT ON THESE URD PURCHASES . THE ASSESSEE ALSO SUBMITTED THAT THE DETAILS WERE FURNISHED FOR VERIFICATION TO THE ASSESSING OFFICER, WHO AFTER VERIFICATION OF VOUCHERS ETC. DISALLOWED 5% OF THE URD PURCHASES OF RS. 22,02,900/ - WHICH WORKS OUT TO RS.1,10,145/ - FOR WANT OF PROPER CHECK . THE PRINCIPAL COMMISSIONER OF INCOME TAX OBSERVED THAT THE ASSESSING OFFICER DISALLOWED 5% OF URD PURCHASES IN THE ABSENCE OF FULL PARTICULARS OF SELLER IN PURCHASE BILLS/ VOUCHERS AND IN SOME CASE S EXPENSES CANNOT BE VERIFIABLE. ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO VERIFY THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE WITH REFERENCE TO VAT AS THE ASSESSEE HAS ALSO CLAIMED TO HAVE PAID VAT ON THESE URD PURCHASES AND ACCORDINGLY RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. 8 . AUTHORIZED REPRESENTATIVE OF THE ASSESSEE COULD NOT POINT OUT ANY MISTAKE IN THE ABOVE DIRECTION OF THE PRINCIPAL COMMISSIONER OF INCOME TAX. THEREFORE, WE FIND NO GOOD REASON TO INTERFERE WITH THIS PART OF THE ORDER OF PRINCIPAL COMMISSIONER OF INCOME TAX. 9. REGARDING CASH PAYMENT IN A DAY TO VITHAL PRASAD & CO RS.29,888/ - AND RS. 22,290/ - ON 10/11/2009 AND 17/11/2009 , A CCORDING TO PRINCIPAL COMMISSIONER OF INCOME TAX, THE ASSESSEE STATED THAT THE PAYMENTS WERE MADE IN CASH FOR PURCHASE OF DIESEL IN A DAY AT DIFFERENT TIMINGS AND IN VIEW OF THE DECISION OF CIT VS. TRIVENIPRASAD 5 ITA NO. 177 /PNJ/201 5 PANNLAL AND KOTHARI SANITATION & TILES PVT. LTD. , NO DISALLOWANCE IS TO BE MADE IF PAYMENT OF SINGLE SUM DOES NOT EXCEED RS. 20,000/ - . ACCORDING TO PRINCIPAL COMMISSIONER OF INCOME TAX , THESE DECISIONS WERE GIVEN ON THE PROVISIONS OF SEC. 40A(3) AS IT STOOD PRIOR TO ITS AMENDMENT W.E.F. 01/04/2008 AND, THEREFORE, DO NOT APPLY TO THE FACTS OF THE ASSESSEES CASE. AS PER THE PROVISIONS OF SEC. 40A(3) W.E.F. 01 /0 4 /20 08 , ANY EXPENDITURE IN RESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY , OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT EXCEEDS RS.20,000/ - IT IS TO BE DISALLOWED . THE PRINCIPAL COMMISSIONER OF INCOME TAX OBSERVED THAT IN VIEW OF THESE PROVISIONS, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE AGREED FOR DISALLOWANCE UNDER SEC.40(A)(IA) VIDE ORDER - SHEET NOTINGS DATED 18/03/2015 . ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO DISALLOW A SUM OF RS. 52,178/ - UNDER SEC. 40A(3) OF THE ACT. 10 . AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS NOT CONTROVERTED THE FINDING OF THE PRINCIPAL COMMISSIONER OF INCOME TAX THAT HE AGREED TO THE ADDITION OF RS. 52,178/ - UNDER SEC. 40A(3) OF THE ACT, THEREFORE, THERE IS NO GRIEVANCE OF THE ASSESSEE AGAINST THE ORDER OF PRINCIPAL COMMISSIONER OF INCOME TAX. HENCE, THIS PART OF THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX IS ALSO CONFIRMED. 11 . IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON WEDNESDAY , THE 0 5 TH DAY OF AUGUST , 201 5 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 0 5 RD AUGUST , 201 5 . VR/ - 6 ITA NO. 177 /PNJ/201 5 COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI 7 ITA NO. 177 /PNJ/201 5 DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 0 5 .0 8 .2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 06 .08 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 06 /08 /2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 06 /0 8 /2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 06 /08 /2015 SR.PS 6. DATE OF PRONOUNCEMENT 0 5 /0 8 /2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 06 /08 /2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER