Saroj Kumar Mishra, Bhubaneswar V. ACit, Bhubaneswar

ITA 195/CTK/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4386 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 16-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 10-05-2010
• Court: TRIBUNAL
• Department Lawyers: K N JANA
• Assessee Lawyers: P C SETHI
• Keywords: Non-deduction of tax; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 195/CTK/2010 (ASSESSMENT YEAR 2006 - 07) SRI SAROJ KUMAR MISHRA, 162 (1 ST FLOOR ), BAPUJI NAGAR, BHUBANESWAR 751 009 PAN: ABKPM 8495 J VERSUS ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), BHUBANESWAR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI P.C.SETHI, AR FOR THE RESPONDENT SHRI K.N.JANA, DR ORDER SHRI K.K.GUPTA, ACCO UNTANT MEMBER : THIS APPEAL BY THE ASSESSEE AGITATES THE ACTION OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IN CONFIRMING THE DISALLOWANCE COMPUTED UNDER THE PROVISIONS OF SECTION 143(3) BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SE CTION 40(A)(IA) OF THE INCOME - TAX ACT,1961. THE ASSESSEE ALSO AGITATES THE ISSUE ON CONFIRMING AND ARBITRARY DISALLOWANCE OF 10% OF THE SALARY CLAIMED AS EXPENSES WITHOUT ANY BASIS. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL FIL ED ITS RETURN OF INCOME DECLARING INCOME OF RS.8,71,886. THE ASSESSEE IS A PROPRIETOR OF ASIATIC AGENCIES AND CONDUCTED THE BUSINESS OF DIRECT SOURCING/SELLING AGENCY OF MEGMA LEASING LTD., ICICI HOME FINANCE LTD., AND SOME OTHER CONCERNS FOR MARKETING A ND SOURCING LOAN PRODUCTS AND POSTPAID ITA NO.195/CTK/2010 2 CELLULAR CONNECTIONS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIMED A SUM OF RS.12,15,166 TOWARDS PAYMENT OF COMMISSION WHICH HE SOUGHT TO VERIFY UNDER THE PROV ISIONS OF SECTION 194H. AFTER FINDING THAT THE ASSESSEE HAS NEITH ER DEDUCTED TAX AT SOURCE NOR HAS CLAIMED FOR THESE EXPENSES SUBSEQUENT TO THE DUE DATE OF FILING OF THE RETURN DISALLOWED THE SAME U/S.40(A)(IA). SIMILARLY, THE ASSESSEE CLAIMED EXPENSES AMO UNTING TO RS.41,99,175 TOWARDS PAYMENT OF BROKERAGE AND THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE INCOMPLIANCE TO THE PROVISO TO SECTION 194H SOUGHT TO DISALLOW RS.41,76,075. SIMILARLY HE WAS ASKED TO FURNISH THE DETAILS OF TAX DEDUCTED AT SOURCE ON PAYMENT OF INTEREST ON HAND LOANS CLAIMED AS EXPENSES AMOUNTING TO RS.3,75,727. ON VERIFYING THAT THE ASSESSEE HAD ONLY PAID INTEREST TO THE BANK AMOUNTING TO RS.4,420 AND NOT DEDUCTED TAX AT SOURCE ON OTHER INTEREST PAID INCO MPLIANCE TO THE PROVISIONS OF SECTION 194A DISALLOWED A SUM OF RS.3,71,307. IN VIEW OF HIS INCURRING EXPENSES IN LEGAL AND CONSULTANCY FEES CLAIMED AS EXPENSES AMOUNTING TO RS.1,70,993 AS NO TAX WAS DEDUCTED AT SOURCE U/S.194J, THE ASSESSING OFFICER DISALL OWED THE SUM OF RS.1,70,993. HAVING EARNED INCOME, THE ASSESSING OFFICER PERUSED THE GROSS RECEIPTS ON THE BASIS OF TDS ITA NO.195/CTK/2010 3 CERTIFICATES AGAINST WHICH THE ASSESSEE HAD CLAIMED EXPENSES. THE ASSESSING OFFICER HAD ALSO HELD THAT THE COMMISSION AMOUNTING TO RS.1, 12,294 WAS NOT INDICATED IN THE TOTAL RECEIPTS WHICH HE ADDED TO THE TOTAL INCOME. ON VERIFYING THE SALARY EXPENSES CLAIMED AMOUNTING TO RS.32,02,319 THE ASSESSEE WAS REQUIRED TO FURNISH THE DETAILS OF THE AMOUNTS PAID TO THE EMPLOYEES INDICATING THEIR AD DRESS ETC., WHICH WAS ALSO SOUGHT FOR BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 133(6). AS A GOOD NUMBER OF NOTICES CAME BACK TO THE ASSESSING OFFICER UNSERVED , THE ASSESSING OFFICER DEEMED IT PROPER TO DISALLOW A SUM OF RS.3,20,232 (10%) A S UNTENABLE . AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY ON ALL THESE ADDITIONS AND DISALLOWANCES WHEN THE LEARNED CIT(A) ON THE BASIS OF THE SUBMISSIONS OF THE ASSESSEE APPELLANT BEFORE HIM AND ON THE BASIS OF DECISIONS CITED BY T HE ASSESSEE FOUND THAT THE ASSESSING OFFICER WAS WITHIN HIS JURISDICTION TO INVOKE THE PROVISIONS OF SECTION 40(A)(IA) IN TERMS OF THE PAID AND PAYABLE ENVISAGED THEREIN WHICH HAS BEEN CREATED TO RATHER REMOVE THE HARDSHIP FACED BY THE ASSESSEE DOES NO T GIVE AN ESCAPE ROOT TO THE ASSESSEE INSOFAR AS THE FAILURE TO DEDUCT TAX AT SOURCE AS PER CHAPTER XVIIB WOULD MAKE THE RESULTANT PAYMENTS CLAIMED AS EXPENSES DISALLOWABLE. THE STATUTE HAS NOT PROVIDED ITA NO.195/CTK/2010 4 ANY EXCEPTION. THE DECISIONS OF HONBLE APEX COURT CI TED BY THE ASSESSEE APPELLANT WERE ON THE CONTEXT OF SECTIONS 200(1) AND 200(1A) HAVE NO REMOTE NEXUS TO THE PROVISIONS OF SECTION 40(A)(IA). HE UPHELD THE DISALLOWANCE AS MADE BY THE ASSESSING OFFICER U/S.4 0 (A)(IA). ON THE ISSUE OF DIFFERENCE IN THE GROSS RECEIPTS ON THE BASIS OF TDS CERTIFICATES, THE ASSESSEE WAS NOT ABLE TO EXPLAIN ANY REASON FOR SHOWING LESS RECEIPTS BY A SUM OF RS.1,12,294 WAS CONFIRMED AS ADDED BY THE ASSESSING OFFICER. WITH RESPECT TO 10% SALARY DISALLOWANCE, HE CONFIRMED THE SAME BY HOLDING THAT THE ASSESSING OFFICER WAS ENTITLED TO TAKE AN ADVERSE VIEW WHEN 90% OF THE SALARY HAS BEEN PAID TO THE VERY PERSONS AND STANDS ALLOWED COULD ONLY BE A MATTER OF PRODUCING THE RIGHT PERSON WHO HAS RECEIVED THE SALARY ON THE BASIS OF ASSESSING OFFICER SUMMONING THEM UNDER THE PROVISIONS OF SECTION 133(6). 3. THE LEARNED COUNSEL FOR THE ASSESSEE INITIAT ED HIS ARGUMENTS BY SUBMITTING THAT IN SUPPORT OF HIS CONTENTION, HE HAS RELIED ON THE DECISION OF ITAT, CUTTACK (SMC) BENCH, IN ITA NO.119/CTK/20 10 DT.9.3.2011 IN THE CASE OF M/S.ALISHAN REALCON PVT. LTD. V. ITO, WHO HAVE IDENTIFIED THE TERM PAID AND PAYABLE FOR CONSIDERATION AS PROVIDED IN THE SAID SECTION FOR CONSIDERING DISALLOWANCE IRRESPECTIVE OF THE PROVISIONS OF ITA NO.195/CTK/2010 5 CHAPTER XVIIB. IN THAT DE CISION, THE TRIBUNAL HAS HELD THAT THE STAND TAKEN BY THE ASSESSEE THAT THE TDS AS MENTIONED IN SECTION 40(A)(IA) IS ONLY AN AMOUNT REMAINING PAYABLE BUT NOT AMOUNT PAID ALREADY IS CORRECT. THE DISALLOWANCE THEREFORE COULD NOT BE MADE FOR WANT OF DEDUC TION OF TAX AT SOURCE UNDER THE DEEMING PROVISIONS OF SECTION 40(A)(IA). HE PRAYED THAT THE DISALLOWANCE U/S.40(A)(IA) THEREFORE IS LIABLE TO BE ALLOWED INSOFAR AS THE TAX WAS STILL TO BE PAYABLE AND WAS TO BE ALLOWED AS AND WHEN PAID. ON THE ISSUE OF DI SALLOWANCE OF RS.1,12,294 BEING THE DIFFERENCE BETWEEN THE GROSS RECEIPTS AS PER TDS CERTIFICATES AND COMMISSION INCOME HE LEFT IT TO THE DISCRETION OF THE BENCH FOR CONSIDERATION. SIMILARLY ON THE ISSUE OF 10% DISALLOWANCE OF SALARY, HE PRAYED THAT 90% HA VING BEEN ALLOWED BY THE ASSESSING OFFICER COULD THEREFORE NOT BE CONSIDERED SEPARATELY FOR DISALLOWANCE AS A PART OF THAT SALARY FOR WANT OF NAMES AND ADDRESSES OF THE EMPLOYEES. 4. ON A QUERY BY THE BENCH WHETHER ANY TAX AT SOURCE HAS BEEN DEDUCTED ON T HE BASIS OF CHAPTER XVIIB ON EXPENSES CLAIMED IN THE P & L ACCOUNT WHETHER PAID OR PAYABLE, THE ASSESSEE HAS DEDUCTED TAX AT SOURCE, THE LEARNED COUNSEL FOR THE ASSESSEE ANSWERED IN THE NEGATIVE. SIMILARLY ON THE ISSUE OF 10% DISALLOWANCE OF THE SALARY, TH E LEARNED COUNSEL FOR THE ASSESSEE ITA NO.195/CTK/2010 6 WAS ASKED TO FURNISH THE DETAILS OF THE REMAINING 90% EMPLOYEES, WHETHER HAD RESPONDED TO THE SUMMONS U/S.133(6) IN THE MANNER SO AS TO HOLD THAT THESE EMPLOYEES WERE ON THE ROLES WHEN THE EXPENSES WERE INCURRED, THE LEAR NED COUNSEL FOR THE ASSESSEE LE FT IT TO THE DISCRETION OF THE BENCH WHETHER TO REMAND TO THE ASSESSING OFFICER FOR VERIFICATION THEREOF OR TO CONFIRM THE SAME. 5. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE POINTED OUT THAT THE CONTENT ION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS MISPLACED TO THE EXTENT THAT THE EXPENSES HAVE BEEN CLAIMED WHICH MAY REMAIN PAYABLE AND CAN BE PAID TILL THE DUE DATE OF FILING OF THE RETURN AS PROVIDED UNDER THE SAID SECTION. THE LEARNED CIT(A) WAS THEREFO RE WITHIN HIS JURISDIDTION TO CONSIDER THE CASE OF THE ASSESSEE APPELLANT BY HOLDING THAT THE ASSESSEE WAS AT LIBERTY TO DEDUCT TAX AT SOURCE FROM THESE EXPENSES CLAIMED WHETHER PAID OR PAYABLE TO INDICATE THE TAX HAS BEEN DEDUCTED AND PAID TO THE GOVERNME NT EXCHEQUER TILL THE DATE OF FIL ING OF THE RETURN U/S.139(1). I T IS IMMATERIAL AS LONG AS THE EXPENSES HAVE BEEN CLAIMED IN THE P & L ACCOUNT WHETHER PAID OR REMAIN PAYABLE INSOFAR AS THE PROVISIONS OF CHAPTER XVIIB ARE A PROCEDURE IN ITSELF WHICH MAY BE INITIATED ON THE HAPPENING OF NON DEDUCTION OF TAX AT SOURCE, DEDUCTION OF TAX AT ITA NO.195/CTK/2010 7 SOURCE BUT NOT PAID TO THE GOVERNMENT, AND NON - DEDUCTION OF TAX BUT CLAIMING EXPENSES AS ENVISAGED IN SECTIONS 194H, 194J, 104C ETC. THE CASE LAWS CITED BY THE LEARNED COUNSE L FOR THE ASSESSEE THEREFORE CLEARLY INDICATE THAT THE PAID AND PAYABLE IN RESPECT OF A CAPITAL EXPENDITURE WAS IMMATERIAL TO THE ISSUE OF DISALLOWANCE U/S.40(A)(IA) WHICH DECISION RELIED LEANS IN FAVOUR OF THE REVENUE INSOFAR AS NO EXPENSES HAD BEEN C LAIMED FOR DISALLOWANCE UNDER THE DEEMING PROVISIONS OF SECTION 40(A)(IA). AS PER THE ASSESSING OFFICER THE ASSESSEE HAD SHOWN GROSS RECEIPTS UNDER SEP ARATE HEADS AMOUNTING TO R S.1,46,29,326 ON WHICH TAX AT SOURCE HAS BEEN DEDUCTED THEREFORE WAS CONSIDERED FOR THE PURPOSE OF INCOME GENERATED ON WHICH A SUM OF RS.1,12,294 WAS NOT RETURNED BY THE ASSESSEE AS INCOME WHICH HE FAILED TO RECONCILE BEFORE THE LEARNED CIT(A) ALSO. THE ASSESSEE IS ENTITLED TO CLAIM INCOME AND EXPENSES AS AND WHEN THE TDS CERTIFICAT ES ARE AVAILABLE FOR ENTITLING IT TO CLAIM AS INCOME OR EXPENSES AS WAS THE INTENTION OF THE DEEMING PROVISIONS OF SECTION 40(A)(IA). HE FULLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW FOR HIS PART OF SUBMISSIONS. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE INCLINED TO AGREE WITH THE SUBMISSIONS OF THE ITA NO.195/CTK/2010 8 LEARNED DR ON THE ANSWER IN THE NEGATIVE BY THE LEARNED AR OF THE ASSESSEE FOR HAVING DEDUCTED TAX AT SOURCE ON A LL THE EXPENSES CLAIMED UNDER THE HEADS COMMISSION, BROKERAGE, INTEREST AND LEGAL & CONSULTANCY. ALL THESE EXPENSES ARE ALLOWABLE TO IT PROVIDED HE HAD DEDUCTED TAX AT SOURCE FOR THESE PAYMENTS TO HAVE CRYSTALLIZED AS PROVIDED IN CHAPTER XVIIB. WE ARE INCL INED TO UPHOLD THE ORDER OF THE LEARNED CIT(A) INSOFAR AS THE EXPENSES ARE ONLY TO BE CLAIMED EITHER PAID OR PAYABLE AND LEAVE NO DISTINCTION FOR TDS TO BE DEDUCTED WHICH COULD BE DEDUCTED TILL THE DATE OF FILING OF THE RETURN AFTER THE CLOSE OF THE YEAR WHICH EXPENSES WILL BE ALLOWED IN THE IMPUGNED ASSESSMENT YEAR ONLY. OBVIOUSLY THE INTENTION OF THE LEGISLATURE WAS TO ALLOW THE EXPENDITURE AS AND WHEN THE TAX AT SOURCE ON THE SAID SUM HAS BEEN DEDUCTED AND DEPOSITED WITH THE GOVERNMENT TREASURY FOR ALL OWANCE OF THE SAID EXPENDITURE HAS BEEN FURTHER CLARIFIED IN THE PROVISO TO THE SAID SECTION 40(A)(IA). THE CASE LAWS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE THEREFORE RATHER LEANS IN FAVOUR OF THE REVENUE TO THE EXTENT THAT A DISALLOWANCE OF AN EXPE NDITURE U/S.40(A)(IA) CANNOT BE MADE WHEN SUCH EXPENSES HA VE NOT BEEN CLAIMED AT ALL. IF THE NATURE OF EXPENSES IS SUCH THAT PROVISIONS OF CHAPTER XVIIB ARE ATTRACTED BUT ARE NOT CLAIMED AS AN EXPENSES, THE TRIBUNAL WAS ITA NO.195/CTK/2010 9 RIGHT IN HOLDING THAT THE QUESTION O F PAID OR PAYABLE DOES NOT ARISE. IN THE CITED CASE, THE COMMISSION WAS PAID TO THE LAND OWNER WHEN THE REAL ESTATE DEVELOPER PURCHASED THE LAND AND IDENTIFIED THE PAYMENTS BEING THE COST OF LAND AS PART COMMISSION AS WELL TO BE HOLD AS WORK - IN - PROGRE SS . IN VIEW OF THE ABOVE, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE OF EXPENDITURE UNDER THE HEADS COMMISSION, BROKERAGE AND LEGAL CONSULTANCY. GROUNDS NO.1 TO 4 ARE THEREFORE DISMISSED. 7. IN RESPECT TO FIFTH GROUND REGARDIN G LACK OF RECON CILIATION O F THE GROSS RECEIPTS AS RETURNED BY THE ASSESSEE AND AS QUOTED IN THE TDS CERTIFICATES, NO FURTHER CLARIFICATION HAS BEEN SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE AS OF NOW IS ALSO DISMISSED. 8. ON THE LAST GROUND BEING 10% ARBITRARY DISALLOWANCE OF SALARY, THE LEARNED COUNSEL HAS NOT BEEN ABLE TO FURNISH WHETHER THE 10% SALARY DISALLOWED COULD BE IDENTIFIED WITH THOSE EMPLOYEES WHO REFUSED TO RESPOND TO THE SUMMONS ISSUED U/S.133(6) AS PRAYED FOR CONFIRMING THE SAME O T HE R THAN RESTORING TO THE ASSESSING OFFICER FOR AFFORDING ANOTHER OPPORTUNITY TO EXPLAIN THE SAME, WE HAVE NO ALTERNATIVE BUT TO CONFIRM THE SAME. THE DISALLOWANCE OF 10% SALARY IS THEREFORE, ITA NO.195/CTK/2010 10 CONFIRMED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS D ISMISSED. PRONOUNCED IN OPEN COURT ON DT. 17 TH JUNE, 2011 S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 17 TH JUNE, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWAR DED TO : 1. THE APPELLANT: SRI SAROJ KUIMAR MISHRA, 162 (1 ST FLOOR), BAPUJI NAGAR, BHUBANESWAR 751 009 2. THE RESPONDENT: ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), BHUBANESWAR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPL ICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.