Sri. Jacob Thomas, Pathanamthitta V. TheDCIT, Thiruvalla

ITA 200/COCH/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4064 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 25-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: SAMUAL THOMAS

Judgement Text

ITA NO 200/C/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH (SMC) KOCHI BEFORE SHRI GEORGE GEORGE K , JUDICIAL MEMBER ITA NO 200/COCH/2016 (A SST YEAR 2008 - 09 ) SH JACOB THOMAS MULAMOOTTIL HOUSE KOZHECHERRY PATHANAMTHITTA KERALA VS THE DY COMMR OF INCOME TAX CIRCL E 1 THIRUVALLA ( APPELLANT) (RESPONDENT) PAN NO. ACKPT3269L ASSESSEE BY SH SAMUAL THOMAS REVENUE BY SH A DHANARAJ, SR DR DATE OF HEARING 24 TH OCT 2016 DATE OF PRONOUNCEMENT 1 ST NOV 20 16 ORDER PER GEORGE GEORGE K,J M : THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE, IS DIRECTED AGAINST THE CIT(A)S ORDER DATED 19.2.2016. THE RELEVANT ASSESSMENT YEAR IS 2008 - 09. 2 THE GROUND RAISED, READ AS FOLLOWS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME (APPEALS) KOTTAYAM, UPHOLDING THE ADDITION OF RS. 16,49,053 UNDER SECTION 40(A)(IA) MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS CONTRARY TO LAW AND THE FACTS OF THE CASE; 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN HIS CONCLUSION, IN PARA - 12 OF HIS ORDER IN UPHOLDING THE VIEW OF TH E ASSESSING OFFICER THAT TECHNICAL DEFECTS IN FORM NO.15G WILL ENTAIL DISALLOWANCE OF INTEREST PAID IN TERMS OF SECTION 197 A( 1). ITA NO 200/C/2016 2 3. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT CONSIDERING THE POSITION THAT THE DEFECTS IN THE FORM NO.15G115H WERE CUR ABLE. 4. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT UPHOLDING THE LEGAL POSITION THAT PROVISIONS OF SECTION 40(A)(IA) CAN ONLY BE INVOKED IN A CASE WHERE TAX IS DEDUCTABLE AT SOURCE. 5. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE TAKEN INTO ACC OUNT THE POSITION THAT ONCE FORM NO.15G/15H IS FILED BEFORE HIM BY THE PAYEES OF THE INTEREST, THE APPELLANT HAS NO CHOICE EXCEPT TO DESIST FROM DEDUCTING TAX FROM THE INTEREST. THE SUB SECTION (IA) OF SECTION 197 A USES THE WORD 'SHALL' WHICH LEAVES NO CH OICE TO THE APPELLANT IN THE MATTER. THE SUB SECTION DOES NOT IMPOSE ANY OBLIGATION ON THE APPELLANT TO FIND OUT THE TRUTH OF THE DECLARATIONS FILED BY THE PAYEES. 6. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE HELD THAT ONCE THE FORMS NO. 15G/15H AR E FILED BEFORE THE APPELLANT, HE HAS TO ACT UPON THE SAME AND THE TECHNICAL DEFECTS COULD ALWAYS BE CURED AND THAT THE APPELLANT WAS NOT EXPECTED TO EMBARK UPON AND ENQUIRE AS TO WHETHER THE LOAN CREDITORS REALLY AND IN TRUTH HAD NO TAXABLE INCOME ON WHICH TAX WAS PAYABLE. THAT WOULD BE PUTTING AN IMPOSSIBLE BURDEN ON THE APPELLANT. 3 BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS AN INDIVIDUAL. HE IS CARRYING ON VARIOUS BUSINESS, INTER - ALIA INCLUDING THE MONEY LENDING BUSINESS WHI CH INVOLVED ACCEPTING LOAN S FROM VARIOUS PARTIES TO WHOM INTEREST WAS PAID. FOR THE ASSESSMENT YEAR 2008 - 09, RETURN OF INCOME WAS FILED ON 1.5.2009 DECLARING THE TOTAL INCOME OF RS. 7,65,730/ - . THE ASSESSMENT WAS TAKEN UP FOR SCRUTINY U/S 143(2) OF THE I T ACT AND THE SCRUTINY ASSESSMENT U/S 143(3 ) OF THE ACT WAS COMPLETED VIDE ORDER DATED 30.12.2010. WHILE COMPLETING SCRUTINY ASSESSMENT, THE ASSESSING OFFICER, INVOKING SECTION 40(A)(IA) OF THE ACT , DISALLOWED INTEREST PAYMENT AMOUNTING TO RS. 16,49,053/ - . THE OBSERVATIONS OF THE ASSESSING OFFICER IN MAKING THE ABOVE SAID DISALLOWANCE, READ AS FOLLOWS: ITA NO 200/C/2016 3 5. THE ASSESSEE HAS ACCEPTED DEPOSITS/LOANS FROM OUTSIDE PARTIES AND IS PAYING INTEREST ON THE SAME. IN THE MONEY LENDING BUSINESS, THE INTEREST PAID ON S UCH LOANS/DEPOSITS IS RS. 15,11,189. IN THE MULAMOOTTIL TRADING CO., THE INTEREST ON UNSECURED LOAN PAID IS RS4,37,608. THE ASSESSEE IS NOT DEDUCTING TAX ON THESE INTEREST PAYMENTS, ALTHOUGH THERE ARE PAYMENTS EXCEEDING RS.5000 DURING THE YEAR. THE EXPLANA TION OF THE ASSESSEE IS THAT FORM 15G OR FORM 15H HAS BEEN FILED BY THE PAYEES AND THEREFORE THE ASSESSEE IS NOT UNDER ANY OBLIGATION TO DEDUCT TAX. 5.1 15G FORMS WERE CALLED FOR AND EXAMINED. IT IS SEEN THAT THE FORMS WERE NOT PROPERLY VERIFIED. THE YEAR TO WHICH THE DECLARATION APPLIES IS NOT FILLED IN. FURTHER THE DATE AND PLACE OF THE DECLARATION IS ALSO NOT FILLED IN. (IN FACT NONE OF THE DETAILS ARE FILLED IN EXCEPT NAME AND ADDRESS. A COPY OF ONE SUCH FORM IS ANNEXED TO THIS ORDER.) AGAIN AS PER IT RULE 29C(5), THE PERSON PAYING THE INCOME (I.E. ASSESSEE) TO WHOM THE DECLARATION IS FURNISHED BY THE PAYEE, HAS TO FURNISH A COPY OF THE DECLARATION ON OR BEFORE THE 7TH DAY FOLLOWING THE MONTH IN WHICH DECLARATION IS FURNISHED, TO THE CONCERNED CIT. THE ASSESSEE HAS NOT COMPLIED WITH STIPULATION. THESE DEFECTS WERE BROUGHT TO THE NOTICE OF THE AR VIDE ORDER SHEET ENTRY DATED 24.12.2010. THE AR DID NOT OFFER ANY EXPLANATION. 5.2 AS PER SECTION 197 A (1), TAX NEED NOT BE DEDUCTED ON THE INCOME PAID, IF THE PAYEE SUBMITS A DECLARATION IN DUPLICATE IN THE PRESCRIBED FORM, VERIFIED IN THE PRESCRIBED MANNER TO THE EFFECT THAT TAX ON THE ESTIMATED TOTAL INCOME OF THE PREVIOUS YEAR IN WHICH SUCH INCOME IS TO BE INCLUDED IN COMPUTING HIS TOTAL INCOME WILL BE NIL. SINCE NONE OF THE PAYEES HAVE VERIFIED THE REQUIRED FORM IN THE PRESCRIBED MANNER, THE ASSESSEE WAS WRONG IN NOT DEDUCTING TAX AS APPLICABLE. INTEREST PAID IN EXCESS OF 5000 WITHOUT TDS IS DISALLOWED. THIS INVOLVES AN ADDITION OF RS.16,49,053 / - 4 AGGRIEV ED BY THE DISALLOWANCE OF RS. 16,49,053/ - THE ASSESSEE PREFERRED APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) CONFIRMED THE ACTION TAKEN BY THE ASSESSING OFFICER. THE RELEVANT FINDINGS OF THE CIT(A) READ AS FOLLOWS: 12 DURING THE COURSE OF APPELL ATE PROCEEDINGS THE AUTHORIZED REPRESENTATIVE MERELY ARGUED THAT IT IS ONLY A TECHNICAL DEFECT, WHICH COULD HAVE BEEN CURED IF THE ASSESSING OFFICER HAD GIVEN AN OPPORTUNITY TO THE APPELLANT. THIS IS NOT A VALID ARGUMENT. THERE ARE MAJOR LAPSES ON THE PART ASSESSEE. HE HAS NOT CARRIED OUT IMPORTANT PROCEDURES IN ACCEPTING THE FORM NO.15C. THE ADDITION MADE BY THE ASSESSING OFFICER IS HEREBY UPHELD. ITA NO 200/C/2016 4 5 THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFORE THE TRIBUNAL. THE LD COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE INCOME TAX AUTHORITIES. ON THE OTHER HAND, THE LD DR RELIED ON THE FINDINGS OF THE ASSESSING OFFICER AND THE CIT(A). 6 I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS TO BE MENTIONED THAT THE GE NUINENESS OF THE DEPOSIT RECEIVED AND THE PAYMENT OF INTEREST ON THE SAME FOR THE RELEVANT ASSESSMENT YEARS HAS NEVER BEEN DOUBTED BY THE INCOME TAX AUTHORITIES. THE DECLARATION HAS BEEN FURNISHED BY THE PERSONS WHO ARE IN RECEIPT OF THE INTEREST STATING THAT THEIR INCOME IS BELOW THE THRESHOLD LIMIT FOR TAXATION AND NO TAX NEED TO BE DEDUCTED. THE DISALLOWANCE MADE FOR THE RELEVANT ASSESSMENT YEAR IS FOR THE REASONS THAT THERE IS A TECHNICAL ERROR IN FURNISHING THE DECLARATION IN FORM 15G/15H WHEREIN CER TAIN COLUMNS OF THE F ORMS W ERE NOT FILLED - UP BY THE PAYEE. THE MISTAKE S FOUND IN THE DECLARATION ARE OF TECHNICAL NATURE AND THE ASSESSEE COULD HAVE GOT IT CORRECTED, HAD HE BEEN GIVEN AN OPPORTUNITY , INSTEAD OF TAKING TO THE EXTREME STEP OF ADDING BACK T HE ENTIRE INTEREST PAYMENT OF RS. 16,49,053/ - . THE ASSESSING OFFICER AND THE CIT(A) INSTEAD OF GIVING AN OPPORTUNITY TO THE ASSESSEE TO CORRECT THE FORM 15G/15H HAD STRAIGHT AWAY INVOK ED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND DISALLOWED THE IN TEREST EXPENDITURE. NON FURNISHING OF STATEMENT TO CIT AS MENTIONED IN RULE 29C(5) ITA NO 200/C/2016 5 ONLY ENTAILS THE ASSESSEE FOR PENALTY U/S 272A(2) OF THE ACT AND NOT FOR A AUTOMATIC DISALLOWANCE OF INTEREST EXPENDITURE BY INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE ACT. 6.1 THE HONBLE SUPREME COURT IN THE CASE OF FORMICA INDIA VS COLLECTOR OF CENTRAL EXCISE REPORTED IN 195 (77) ELT 522 (SC) WAS CONSIDERING A CASE WHERE THE ASSESSEE WAS DENIED THE BENEFIT OF EXCISE DUTY ON THE GROUND THAT THE ASSESSEE FAILED T O COMPLY WITH THE REQUIREMENTS OF A RULE NAMELY, RULE 56A OF THE CENTRAL EXCISE RULES. THE HONBLE SUPREME COURT HELD THAT THE APPELL ANT BE PERMITTED TO AVAIL THE BENEFIT OF THE NOTIFICATION BY COMPLYING AT T H IS STAGE WITH RULE 56A TO THE SATISFACTION OF THE DEPARTMENT AND ACCORDINGLY ORDERED REMISSION OF THE MATTER TO THE COLLECTOR OF CENTRAL EXCISE WITH A DIRECTION TO PERMIT THE APPELLANT TO COMPLY AT THIS STAGE WITH THE REQUIREMENT OF RULE 56A OF THE CENTRAL EXCISE RULES AD CLAIM SET OFF OF THE DUTY PA YABLE. 6. 2 AS MENTIONED EARLIER, NON F ILLING U P OF THE COLUMN IN FORM 15G/ 15H BY THE PAYEE S ARE ONLY TECHNICAL DE FAULT , WHICH COULD H A VE BEEN CORRECTED HAD THE ASSESSEE BEEN GIVEN AN OPPORTUNITY. IN THE INTEREST OF JUSTICE AND EQUITY, I AM OF THE VIE W THAT THE ASSESSEE SHOULD BE GIVEN AN OPPORTUNITY TO CORRECT THE TECHNICAL ERROR WITH REGARD TO THE DEFAULT S THAT IS CONTAINING IN FORMS 15 G /15H. THEREFORE, THE MATTER IS REMITTED TO THE ASSESSING ITA NO 200/C/2016 6 OFFI CER. THE ASSESS EE SHALL PRODUCE THE CORRECTED FORM 1 5G/15H FOR THE RELEVANT PERIOD FROM THE PAYEE AND SHALL SUBMIT THE SAME TO THE ASSESSING OFFICER. IF THE CORRECTED FORMS IN 15G/15H ARE SUBMITTED, THERE SHALL BE NO DISALLOWANCE OF INTEREST EXPENDITURE . IT IS ORDERED ACCORDINGLY. 7 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF NOV 2016 . SD/ - ( GEORGE GEORGE K) JUDICIAL MEMBER COCHIN: DATED 1 ST NOV 2016 RAJ* COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT, 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN