The ITO,TDS-3,TDS Range, Ahmedabad V. Shri Mashesh D.Agrawal, Ahmedabad

ITA 1939/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76776 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 04-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Reasonable cause
• Section: 133A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVE DI, A.M.) I.T. A. NOS.1938 & 1939 AHD/2011 (ASSESSMENT YEAR: 2 007-08) THE ITO, TDS-3, AHMEDABAD RANGE-AHMEDABAD V/S SHRI MAHESH D. AGRAWAL PROP OF M.R. CHEMICALS 301, SARTHAK-II, OPP. RAJPATH CLUB, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: ABJPA 0859M APPELLANT BY : SHRI P.L. KUREEL, SR. D.R. RESPONDENT BY : MS. URVASHI SHODHAN ( )/ ORDER DATE OF HEARING : 27-05-201 4 DATE OF PRONOUNCEMENT : 30 -05-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE APPEALS ARE FILED BY THE REVENUE AGAINST T HE ORDER OF CIT(A)-XXI, AHMEDABAD DATED 16-05-2011 FOR A.Y. 2007-08. WE FIRST TAKE UP ITA NO. 1938/AHD/2011 (FOR A.Y. 20 07-08) 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI AL ON RECORD ARE AS UNDER. 3. ASSESSEE IS AN INDIVIDUAL STATED TO BE ENGAGED I N THE MANUFACTURING OF DYES AND CHEMICALS. SURVEY ACTION UNDER SECTION 133A OF THE ACT WAS CARRIED OUT ON 24.01.2008 TO VERIFY THE TDS COMPLIANCE BY THE A SSESSEE. DURING THE COURSE OF SURVEY, IT WAS NOTICED THAT FOR FINANCIAL YEAR ENDING 31.03.2006 (A.Y. 06-07) ASSESSEE HAD PAID INTEREST OF RS. 16,2 3,458/- ON LOAN BORROWED ITA NOS 1938 & 1939/AHD/2011 . A.Y. 2007- 08 2 FROM KOTAK MAHINDRA LTD. BUT ASSESSEE HAD NOT DEDUC TED TDS U/S. 194A OF THE ACT. ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY N O TDS WAS DEDUCTED. ASSESSEE INTERALIA SUBMITTED THAT THE ASSESSEE HAD OBTAINED MARGIN AMOUNT FROM KOTAK MAHINDRA LTD FOR MAKING APPLICATION IN P UBLIC ISSUE OF SHARES AND THE AMOUNT PAID TO KOTAK MAHINDRA LTD. WAS CONSIDER ED AS COST OF PURCHASE OF SHARES AND NOT AS INTEREST. THE SUBMISSION OF TH E ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O. A.O WAS OF THE VIEW THAT TH E ASSESSEE WAS LIABLE TO DEDUCT TAX ON THE PAYMENT MADE TO KOTAK MAHINDRA LT D UNDER SECTION 194A OF THE ACT AND SINCE ASSESSEE HAD FAILED TO COMPLY THE PROVISIONS, A.O TREATED ASSESSEE AS ASSESSEE IN DEFAULT UNDER SEC TION 201(1) READ WITH SECTION 221 OF THE ACT. HE FURTHER HELD THAT ASSESS EE IS LIABLE FOR INTEREST UNDER SECTION 201(1A) OF THE ACT AND WORKED OUT THE INTEREST AT RS. 80,146/- VIDE ORDER DATED 28.03.2008. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONS IDERING THE SUBMISSIONS OF THE ASSESSEE GRANTED RELIEF TO THE ASSESSEE BY HOLD ING AS UNDER:- 5. I HAVE CAREFULLY CONSIDERED THE ORDER OF THE A.O . AND THE ABOVE CONTENTIONS. ON PERUSAL OF THE CONTENTIONS OF THE APPELLANT IT IS FOUND THAT THE A PPELLANT HAD NOT MADE PAYMENT TO KOTAK MAHINDRA LTD, TOWARDS INTEREST BUT FROM THE ACCOUNT OF THE A PPELLANT THEY HAD DIRECTLY SET OFF THEIR CHARGES WH ICH IS INTEREST ALSO AND THUS THE APPELLANT WAS NOT HAV ING ANY CONTROL SO THAT IT COULD HAVE DEDUCTED THE TAXED AT SOURCE. APART FROM THIS, KOTAK MAHINDRA LT D. HAS SPECIFICALLY GIVEN CONFIRMATION THAT THE DETAILS OF THE FILING OF THEIR RETURN THAT THEY HAV E PAID ADEQUATE TAX ON THE RETURNED INCOME AND THUS IN MY VIEW THERE BEING NO LOSS OF REVENUE. THUS FOLLOW ING THE DECISIONS OF THE GUJARAT HIGH COURT AND THE SUPREME COURT, REFERRED TO ABOVE IN THE APPELLA NT'S SUBMISSION, I HOLD THAT THERE WAS NO JUSTIFICATION FOR LEVY OF DEMAND U/S.201(1) AND ALS O U/S. 201(1 A) OF THE INCOME-TAX ACT. THE ORDER OF THE A.O. IS, THEREFORE, CANCELLED. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING EFFECTIVE GROUND:- 1. THE LD. CIT(A) ERRED IN LAW AS WELL AS ON FACTS OF THE CASE IN DELETING THE ORDER PASSED U/S.201 (1) OF RS.3,64,304/- & INTEREST CHARGED U/S. 201 (1 A) OF THE I T ACT OF RS.80,146/- RESPECTIVELY FOR A.Y. 2007-08 BY THE A.O. EVEN THOUGH THE ASSESSEE H AD MADE PAYMENT TO KOTAK MAHINDRA LTD. OF RS. 16,23,435/- BUT NOT DEDUCT TAX AT SOURCE U/S. 194A OF THE IT ACT. 5. BEFORE US, LD. A.R. TOOK US THROUGH THE ORDER OF A.O AND SUPPORTED HIS ORDER. ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIO NS MADE BEFORE CIT(A) AND SUPPORTED THE ORDER OF CIT(A). ITA NOS 1938 & 1939/AHD/2011 . A.Y. 2007- 08 3 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) WHILE GRANTING RELIEF TO THE ASSES SEE HAS GIVEN A FINDING THAT ASSESSEE HAD NOT MADE PAYMENT TO KOTAK MAHINDRA LTD . TOWARDS INTEREST BUT THE ACCOUNT OF THE ASSESSEE WAS DIRECTLY ADJUSTED B Y THE CHARGES AND ASSESSEE HAD NO CONTROL AND THEREFORE IT COULD NOT DEDUCT TDS. HE HAS FURTHER NOTED THAT KOTAK MAHINDRA LTD. HAS GIVEN A CONFIRMATION THAT IT HAD FILED ITS RETURN AND HAS ALSO PAID THE TAXES. CIT(A ) RELYING ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF RISHIKESH CO-OP. HOUSING SOCIETY AND THE DECISION OF HONBLE APEX COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE PVT. LTD. VS. CIT (2007) 293 ITR 226 (SC) HELD THAT THERE WAS NO JUSTIFICATION FOR LEVY OF DEMAND U/S. 201(1) AND 20 1(1A) OF THE ACT. BEFORE US REVENUE COULD NOT CONTROVERT THE FINDINGS OF CIT(A) BY BRINGING ANY CONTRARY MATERIAL ON RECORD. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS DISMISS THIS GROUND OF APPEAL OF REVENUE. 7. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISS ED. ITA NO. 1939/AHD/2011 (FOR A.Y. 2007-08) 8. IN THIS CASE A.O VIDE ORDER PASSED UNDER SECTION 271C DATED 20.10.2008 IMPOSED PENALTY OF RS. 3,64,304 FOR THE REASON THAT THE ASSESSEE HAD NOT DEDUCTED TDS ON THE PAYMENT OF INTEREST OF RS. 16,2 3,458/- MADE TO KOTAK MAHINDRA LTD. AGGRIEVED BY THE ORDER OF A.O, ASSESS EE CARRIED THE MATTER BEFORE CIT(A). CIT(A) DELETED THE ADDITION BY HOLDI NG AS UNDER:- 4.2 I HAVE CONSIDERED THE A.O'S OBSERVATION AND THE ABOVE SUBMISSION. IT IS A FACT THAT THE APPELLANT HAD GIVEN MARGIN MONEY TO KOTAK MAHINDRA LTD. FOR P UBLIC ISSUE OF SHARES AND THAT WHEN THE REFUND WAS RECEIVED BY THEM OUT OF SUCH PUBLIC ISSUE MONEY , THEY HAD DEDUCTED THEIR CHARGES FROM THE MARGIN MONEY AMOUNT AND PAID THE BALANCE AMOUNT. THE APPEL LANT HAD, THEREFORE, NO CHANCE TO APPLY ITS MIND AND DEDUCT TAX AT SOURCE, PARTICULARLY WHEN IT HAD NOT MADE ANY PAYMENT OR CREDITED THE AMOUNT AT THE RELEVANT TIME. THE AMOUNT WAS DIRECTLY ADJUSTED BY KOTAK MAHINDRA LTD. FROM APPELLANT'S ACCOUNT WITH THEM. IN THE CIRCUMSTANCES, THOUGH TAX WAS NOT DEDU CTED, IT WAS NOT INTENTIONAL DEFAULT OF THE APPELLANT. HOWEVER, THE SAID PAYEE KOTAK MAHINDRA LTD. HAS ALR EADY PAID TAX ON THE RETURNED INCOME. CONSIDERING ALL THESE ASPECTS THE APPELLANT HAS REA SONABLE CAUSE FOR NON DEDUCTION OF TAX AT SOURCE. ACCORDINGLY, THE PENALTY LEVIED IS CANCELLED. ITA NOS 1938 & 1939/AHD/2011 . A.Y. 2007- 08 4 9. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O A ND ON THE OTHER HAND LD. A.R. RELIED ON THE ORDER OF CIT(A). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) WHILE DELETING THE PENALTY LEVIED BY A.O HAS HELD THAT DEFAULT OF NON DEDUCTION OF TAX BY THE ASSESSEE WAS NOT INT ENTIONAL AND FURTHER KOTAK MAHINDRA LTD. HAD ALREADY PAID TAX ON RETURNED INCO ME. HE HAS FURTHER GIVEN A FINDING THAT ASSESSEE HAD REASONABLE CAUSE FOR NO N DEDUCTION OF TDS. BEFORE US, REVENUE COULD NOT CONTROVERT THE FINDING S OF CIT(A). WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A ) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 11. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DISMI SSED. ORDER PRONOUNCED IN OPEN COURT ON 30 - 05 - 2014. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITA T,AHMEDABAD