M/s. Vora Sales Corporation, Ahmedabad V. The Income tax Officer,Ward-3(4), Ahmedabad

ITA 1793/AHD/2010

• Counselvise Citation: 179320514 RSA 2010
• Duration Of Justice: 3 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 04-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 26-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Keywords: Business income
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 1793/AHD/2010 ASSESSMENT YEAR :2006-07 M/S/ VORA SALES CORPORATION C/O. VORA FINANCE, 12, SHANTI SADAN ESTATE, 2 ND FLOOR, OPP. DINBAI TOWER, MIRZAPUR V/S . THE INCOME TAX OFFICER WARD 3 (4) AHMEDABAD PAN NO. AA C FV7019A (APPELLANT) .. (RESPONDENT) BY APPELLANT MS. URVASHI SHODHAN, A.R. /BY RESPONDENT SHRI J. P. JHANGID, SR. D.R. /DATE OF HEARING 04.07.2013 /DATE OF PRONOUNCEMENT 02.09.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHI CH HAS EMANATED FROM THE ORDER OF CIT(A), GANDHINAGAR, DATED 08.04. 2010 FOR ASSESSMENT YEAR 2006-07. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UN DER: (1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) GANDHINAGAR, AHMADABAD HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN PASSING AN APPELLATE ORDER U/S. 250 OF THE I.T. ACT FOR ASST. YEAR 2006-07 ON 08.04.2010. (2) THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.81,757/- U/S.40(A)(IA) OF THE ACT. (3) THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF BROKERAGE EXPENDITURE PROVIDED AT RS. 2,75,000/- . ITA NO. 1793/AHD/2010 A.Y. 06-07 PAGE 2 2. THE FIRST GROUND IS GENERAL AND HAS NOT BEEN PRE SSED BY THE APPELLANT. THE SAME IS DISMISSED. 3. THE SECOND GROUND OF APPEAL IS AGAINST THE DISAL LOWANCE OF RS. 81,757/- U/S. 40(A)(IA) OF THE ACT. THE A.O. OBSER VED THAT THE ASSESSEE HAS DEBITED INTEREST AT RS. 18,79,305.78/- IN P&L ACCOU NT. ON VERIFICATION OF DETAILS FILED WITH THE SUBMISSION THE ASSESSEE HAD NOT FILE D FORM NO.15-H, AS REQUIRED IN CASE OF I) BHANUMATI P. SHAH RS. 34,20 0/- II) HARSHAD S. SHAH RS. 26,140/- III) NAYNA DELIWALA RS.8,582/- IV) AZAD DE LIWALA RS.8,282/- & V) MEENA P. CHAMPANERI RS. 4,553/-. THE APPELLANT HAD CLAIMED INTEREST EXPENSES OF RS. 81,757/- WITHOUT DEDUCTING AND PAYI NG TDS. THE A.O. MADE ADDITION OF RS.81,757/- U/S. 40(A)(IA). 4. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD HELD THAT THE APPE LLANT HAD TO FILE FORM NO. 15H/15G IN THE OFFICE OF THE CIT. OTHERWISE SUCH F ORM IS IN ASSESSEES CUSTODY REMAINS AN INCOMPLETE DECLARATION. SECTION 197A(2) CLEARLY CAST THE RESPONSIBILITY OF FURNISHING SUCH DOCUMENTS WITHIN A CERTAIN SPECIFIED PERIOD WHICH GETS CORRELATED WITH THE DATE OF DEDUCTION OF TAX. THE DEDUCTOR WAS NOT ENTITLED TO TAKE HIS OWN DECISION OF NON-DEDUCTION AND WAS REQUIRED TO DEDUCT THE TAX. THUS, HE CONFIRMED THE ADDITION U/S. 40(A )(IA). 5. NOW THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR THE ASSESSEE FILED A PAPER BOOK AND CONTENDED THAT FORM NO. 15 HAD NOT F URNISHED BEFORE THE CIT WITHIN TIME BUT SUBMITTED BEFORE THE A.O. AT THE TI ME OF ASSESSMENT ORDER. HE HAS DRAWN OUR ATTENTION ON PAPER BOOK AT PAGE NOS.4 4 TO 57. HE FURTHER RELIED ITA NO. 1793/AHD/2010 A.Y. 06-07 PAGE 3 IN CASE OF CIT VS. VALIBHAI KHANBHAI MANKAD IN TAX APPEAL NO. 1182 OF 2011 (GUJ.), WHEREIN TDS WAS DEDUCTABLE U/S. 194(1) OF THE IT AC T. THE FACTS WERE THAT THE ASSESSEE DID NOT PRODUCE THE REQUISITE FOR M NO. 15J IN THE OFFICE OF INCOME TAX COMMISSIONER IN PRESCRIBED FORM WITHIN P RESCRIBED TIME. BUT HONBLE GUJARAT HIGH COURT HELD THAT THIS INFRACTIO N IN SUCH REQUIREMENT WOULD NOT MAKE THE REQUIREMENT OF DEDUCTION AT SOURCE APP LICABLE UNDER SUB SECTION 2 OF SECTION 194C OF THE IT ACT. THUS, HE REQUESTE D TO DELETE THE ADDITION. AT THE OUTSET, LD. SR. D.R. RELIED UPON THE ORDER OF T HE CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAD SUBMITTED THE PHOTO COPY OF FORM NO. 15H BEFORE THE A.O. ON 28.11.2008 NOT IN THE CIT OFFICE IN THE PRESCRIBED TIME LIMITED. THE HONBLE GUJARAT HIGH COURT IN CASE OF CIT VS. VALIBHAI KHANBHAI MANKAD (SUPRA), ON TDS DEDUCTABLE U/S. 194C AND FORM NO. 15I WAS TO BE SUBMITTED WITHIN PRESCRIBED TIME BEFORE THE CIT OFFICE AS UND ER: 9) IN OUR VIEW, THEREFORE, ONCE THE CONDITIONS OF FURTHER PROVISO OF SECTION 194C(3) ARE SATISFIED, THE LIABILITY OF THE PAYEE TO DEDUCT TAX AT SOURCE WOULD CEASE. THE REQUIREMENT OF SUCH PA YEE OF FURNISH DETAILS TO THE INCOME TAX AUTHORITY IN THE PRESCRIB ED FORM WITHIN PRESCRIBED TIME WOULD ARISE LATER AND ANY INFRACTIO N IN SUCH A REQUIREMENT WOULD NOT MAKE THE REQUIREMENT OF DEDUC TION AT SOURCE APPLICABLE UNDER SUB-SECTION (2) OF SECTION 194C OF THE ACT. IN OUR VIEW, THEREFORE, THE TRIBUNAL WAS PERFECTLY JUSTIFI ED IN TAKING THE VIEW IN THE IMPUGNED JUDGMENT. IT MAY BE THAT FAILURE TO COMPLY SUCH REQUIREMENT BY THE PAYEE MAY RESULT INTO SOME OTHER ADVERSE CONSEQUENCES IF SO PROVIDED UNDER THE ACT. HOWEVER, FULFILLMENT OF SUCH REQUIREMENT CANNOT BE LINKED TO THE DECLARATIO N OF TAX AT ITA NO. 1793/AHD/2010 A.Y. 06-07 PAGE 4 SOURCE. ANY SUCH FAILURE THEREFORE CANNOT BE VISUAL IZED BY ADVERSE CONSEQUENCES PROVIDED UNDER SECTION 40(A)(IA) OF TH E ACT. 10) WHEN ON THE BASIS OF THE RECORD IT IS NOT DISP UTED THAT THE REQUIREMENTS OF FURTHER PROVISO WERE FULFILLED, THE ASSESSES WAS NOT REQUIRED TO MAKE ANY DEDUCTION AT SOURCE ON THE PAY MENTS MADE TO THE SUB-CONTRACTORS. IF THAT BE OUR CONCLUSION, APP LICATION OF SECTION 40(A)(IA) WOULD NOT ARISE SINCE, AS ALREADY NOTICED , SECTION 40(A)(IA) WOULD APPLY WHEN THERE IS A REQUIREMENT OF DEDUCTIO N OF TAX AT SOURCE AND SUCH REQUIREMENT IS EITHER NOT FULFILLED OR HAVING DEDUCTED TAX AT SOURCE IS NOT DEPOSITED WITHIN PRES CRIBED TIME. BY RESPECTFULLY FOLLOWING THE DECISION OF HONBLE G UJARAT HIGH COURT IN CASE OF CIT VS. VALIBHAI KHANBHAI MANKAD (SUPRA), THE PROPOSITION PROPOUNDED BY THE HONBLE GUJARAT HIGH COURT IN CASE OF TDS U/S. 194C (3) AND FORM NO. 15I NOT SUBMITTED BEFORE THE COMMISSIONER IN PRESCRIBED TIM E IN PRESCRIBED FORM IS APPLICABLE ON LAPSE MADE BY THE DEDUCTOR U/S.194A R EAD WITH 197A OF THE IT ACT. THUS, WE ALLOW THE ASSESSEES APPEAL. 7. THE THIRD GROUND OF APPEAL IS AGAINST CONFIRMING THE DISALLOWANCE OF EXPENDITURE OF RS. 2,75,000/-. THE A.O. FOUND THAT ASSESSEE HAD SHOWN PROVISION FOR BROKERAGE AT RS. 2,75,000/-. NO SATI SFACTORY EXPLANATION WAS GIVEN BY THE ASSESSEE BEFORE THE A.O. THUS, HE MADE ADDITION OF RS.2,75,000/-. LD. CIT(A) CONFIRMED THE ADDITION B Y OBSERVING THAT WHOLE OF BROKERAGE UNDISCHARGED THROUGH OUT THE YEAR, AS VER Y APTLY POINTED OUT BY THE ASSESSING OFFICER. EVEN PROVISION OF PRECEDING YEA R AMOUNTING TO RS.2,01,997/- REMAINED ONLY PARTLY DISCHARGED TO TH E EXTENT OF RS.1,30,917/-. THE BROKERAGE PERTAINED TO AS EARLY AS APRIL 2005 A ND REMAINED UNPAID DURING THE F.Y. 2005-06. THE APPELLANT HAD NOT PROVED THA T THE PROVISION OF LIABILITY ITA NO. 1793/AHD/2010 A.Y. 06-07 PAGE 5 EXISTED AND CRYSTALLIZED DURING THE YEAR. THIS IS PURE PROVISION AND CONTINGENT LIABILITY. IT IS FURTHER OBSERVED THAT MAJOR LIABI LITY HAD BEEN CREATED IN THE NAME OF FOUR PERSONS LISTED AT SR. NOS. 4,32,38 AND 39 O F ANNEXURE A TO THE LETTER DATED 19 TH NOVEMBER 2008, AGAINST WHOSE NAME THE BROKERAGE WA S BEING CREDITED FOR THE FIRST TIME AND WHO DID NOT HAVE TH E RELEVANT PAN DETAILS. FURTHER, DURING THE YEAR, THERE IS A DECLINE IN THE GP RATE AND THERE IS NO CO- RELATION WITH THE PAYMENT AND THE SALE. 8. NOW THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR THE APPELLANT HAD DRAWN OUR ATTENTION OF PAGE NOS. 2 & 3 AND ARGUED T HAT TOTAL BROKERAGE WAS PAYABLE AT RS.2,75,000/- WHICH WAS CALCULATED THE N AMES OF VARIOUS PARTIES ON THE BASIS OF EVERY SALE BILL THROUGHOUT THE YEAR . THE TDS OF RS. 13,892/- HAD BEEN DEDUCTED ON IT. THERE WAS NO DISALLOWANCE IN PRECEDING YEAR AS WELL AS SUBSEQUENT YEAR UNDER THIS HEAD. THE ASSES SEE HAD PAID THE BROKERAGE EVEN IN SUBSEQUENT YEAR THE VARIOUS PARTI ES. THE APPELLANT ARGUED THAT THE ASSESSEE IS IN TRADING BUSINESS OF STEEL T UBES, M.S. GALVANISED PIPES, M.S. PIPES FITTINGS ETC. ON SEMI WHOLESALE B ASIS. THIS IS A VERY COMPETITIVE BUSINESS IN METRO CITIES. ON CONSISTEN T BASIS BUSINESS IS CARRIED OUT THROUGH TRADE BROKERS ONLY TO WHOM BROKERAGE IS PAID. THUS, EXPENDITURE TOWARDS BROKERAGE INEVITABLE IN NATURE OF ACTIVITY CARRIED OUT BY THE APPELLANT. THE TOTAL SALES DURING THE YEAR WAS RS. 6.58 CRORE ON WHICH BROKERAGE OF RS.8,17,071/- WAS CLAIMED @ 1.24%, WHICH WAS LESSER COMPARED TO PREVIOUS YEAR. THE TDS HAS BEEN DEDUCTED ON PAYMENT OF BROK ERAGE. ALL TRADES OF RECIPIENTS WITH FULL ADDRESS AND PAN HAD BEEN GIVEN TO THE A.O. DURING THE ITA NO. 1793/AHD/2010 A.Y. 06-07 PAGE 6 ASSESSMENT PROCEEDING VIDE LETTER DATED 2 ND SEPTEMBER, 19/24/28.11.2008 AND HE PRAYED TO DELETE THE ADDITION. AT THE OUTSE T, LD. SR. D.R. VEHEMENTLY RELIED UPON THE ORDER OF THE CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE APPELLANT HAD SUBMITTED THE ALL DETAIL S OF RECIPIENTS WITH ADDRESS AND PAN TO THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDING. HE HAD DEDUCTED THE TDS ON BROKERAGE. THE WORKING OF BROK ERAGE HAS BEEN PROVIDED. THUS, THE LIABILITY OF BROKERAGE HAS CRY STALLIZED ON THE BASIS OF SALE MADE BY THE ASSESSEE. THUS, IT IS NOT A SIMPLE PRO VISION BUT CALCULATED ON THE BASIS OF SALE MADE BY THE ASSESSEE. THUS, WE REVER SE THE ORDER OF THE CIT(A) AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 02.09.2013 SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ':