ITO, Tirunelveli V. M/s. Natesan Company (Pollachi), Kallakurichi

ITA 211/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61338 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-06-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 03-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VI KRAMADITYA
• Assessee Lawyers: V S JAYAKUMAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 311/MDS/2012 (ASSESSMENT YEAR : 2005-06) M/S NATESAN COMPANY (POLLACHI), NATESAN BUILDING, RAILWAY FEEDER ROAD, KALLIDAIKURICHI. PAN : AABFN9059M (APPELLANT) V. THE INCOME TAX OFFICER, WARD I(3), TIRUNELVELI. (RESPONDENT) I.T.A. NO. 211/MDS/2012 (ASSESSMENT YEAR : 2005-06) THE INCOME TAX OFFICER, WARD I(3), TIRUNELVELI. (APPELLANT) V. M/S NATESAN COMPANY (POLLACHI), NATESAN BUILDING, RAILWAY FEEDER ROAD, KALLIDAIKURICHI. (RESPONDENT) ASSESSEE BY : SHRI V.S. JAYAKUMAR, ADVOCATE REVENUE BY : SHRI VIKRAMADITYA, JCIT DATE OF HEARING : 27.06.2012 DATE OF PRONOUNCEMENT : 11.07.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE RESPECTIVELY, FOR THE IMPUGNED ASSESSMENT YEAR. BO TH AGAINST THE ORDER DATED 15.11.2011 OF COMMISSIONER OF INCOME TAX (APP EALS)-II, MADURAI. GRIEVANCE RAISED BY THE REVENUE IN ITS APPEAL IS TH AT CIT(APPEALS) 2 I.T.A. NO. 311/MDS/12 I.T.A. NO. 211/MDS/12 DELETED A DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') FOR A REASON THAT THE SAI D SECTION APPLIED ONLY TO AMOUNTS STANDING PAYABLE AS AT THE END OF THE RELEV ANT PREVIOUS YEAR AND NOT TO THE AMOUNTS WHICH WERE MADE DURING THE R ELEVANT PREVIOUS YEAR. AS AGAINST THIS, ASSESSEE IN ITS APPEAL AGGR IEVED THAT THE CIT(APPEALS) HELD THE RE-ASSESSMENT PROCEEDING INIT IATED TO BE VALID AND ALSO ASSAILS NON-CONSIDERATION OF CERTAIN ALTER NATIVE ARGUMENT ON THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. 2. SHORT FACTS APROPOS ARE THAT ASSESSEE, DOING TRA NSPORT, AGENCY AND CANVASSING BUSINESS, HAD RETURNED A LOSS OF ` 77,130/- FOR IMPUGNED ASSESSMENT YEAR. ASSESSMENT WAS COMPLETED BY MAKING A DISALLOWANCE OF ` 50,96,156/- UNDER SECTION 40(A)(IA) OF THE ACT. DISALLOWANCE WAS FOR CLAIM OF LORRY HIRE CHARGES WH ICH, AS PER THE A.O., REQUIRED DEDUCTION OF TAX AT SOURCE UNDER SECTION 1 94C OF THE ACT. AS PER THE A.O., ASSESSEE HAVING NOT DONE THAT, INVITE D THE RIGOURS OF SECTION 40(A)(IA) OF THE ACT. ADDITION WAS MADE A CCORDINGLY. 3. IN ITS APPEAL BEFORE CIT(APPEALS), ASSESSEE ASSA ILED THE DISALLOWANCE AS WELL AS INITIATION OF THE RE-ASSESS MENT PROCEEDINGS. AS PER THE ASSESSEE, SECTION 40(A)(IA) APPLIED ONLY TO PAYABLE AMOUNTS AND NOT TO PAID AMOUNTS. FURTHER, ACCORDING TO ASSESSE E, COMMENT OF AUDIT PARTY WAS NOT ACCEPTABLE REASON FOR INITIATING RE-A SSESSMENT 3 I.T.A. NO. 311/MDS/12 I.T.A. NO. 211/MDS/12 PROCEEDINGS. ASSESSEE ALSO SUBMITTED THAT LORRY HI RE CHARGES WOULD NOT FALL UNDER SECTIONS 30 TO 38 OF THE ACT. AS PER TH E ASSESSEE, THERE WAS NO REVENUE LOSS TO THE DEPARTMENT, SINCE SUCH AMOUN TS PAID TO LORRY OWNERS WAS A PART OF THEIR INCOME AND TAXED IN THEI R HANDS. ASSESSEES FURTHER SUBMISSION BEFORE THE CIT(APPEALS) WAS THAT THERE WERE NO CONTRACTS WITH THE LORRY OWNERS AND IN THE ABSENCE OF SUCH CONTRACTS, DEDUCTION OF TAX AT SOURCE WAS NOT WARRANTED. 4. CIT(APPEALS), WHILE DECIDING THE ISSUE, HELD THA T REOPENING WAS VALID IN VIEW OF THE DECISION OF HONBLE APEX COURT IN THE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS (P) LTD. (291 ITR 500) . HOWEVER, AS PER THE CIT(APPEALS), DISALLOWANCE UNDER SECTION 40(A)( IA) COULD BE MADE ONLY FOR SUMS WHICH STOOD PAYABLE AS AT END OF THE RELEVANT PREVIOUS YEAR. AFTER MAKING AN ANALYSIS OF LEDGER PAGES REL ATING TO THREE CONCERNS TO WHICH ASSESSEE HAD EFFECTED LORRY HIRE CHARGES, CIT(APPEALS) CAME TO A CONCLUSION THAT NOTHING REMA INED OUTSTANDING AS AT THE END OF RELEVANT PREVIOUS YEAR. HE, THERE FORE, HELD THAT NO DISALLOWANCE UNDER SECTION 40(A)(IA) COULD BE MADE. NEVERTHELESS, HE DID NOT GIVE ANY FINDING ON THE GROUNDS TAKEN BY TH E ASSESSEE THAT THE PAYMENTS WERE NOT CONTRACTUAL, LORRY OWNERS CONCERN ED HAD PAID TAX ON THE RECEIPTS, AND THAT THE EXPENSES WERE CHARGEABLE TO THE TRADING ACCOUNT. 4 I.T.A. NO. 311/MDS/12 I.T.A. NO. 211/MDS/12 4. NOW BEFORE US, LEARNED D.R. SUBMITTED THAT SECTI ON 40(A)(IA) APPLIED NOT ONLY TO PAID AMOUNTS BUT ALSO PAYABLE A MOUNTS. 5. PER CONTRA, LEARNED A.R. SUBMITTED THAT IN VIEW OF THE DECISION OF SPECIAL BENCH IN THE CASE OF M/S MERILYN SHIPPING & TRANSPORTS V. ACIT [2012] 16 ITR (TRIB.) 1 (SB), THE ISSUE REGARDING A PPLICATION OF SECTION 40(A)(IA) STOOD DECIDED IN FAVOUR OF THE ASSESSEE. HOWEVER, IN SUPPORT OF ASSESSEES APPEAL, LEARNED A.R. SUBMITTED THAT C IT(APPEALS) OUGHT HAVE DECIDED ALTERNATIVE GROUNDS TAKEN BY THE ASSES SEE. 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. INSOFAR AS THE ISSUE OF REOPENING IS CONCERNED, WE ARE OF THE OPINION THAT THE RETURN FILED BY THE ASSESSEE WAS ONLY PROC ESSED UNDER SECTION 143(1) OF THE ACT AND THERE WAS NO SCRUTINY PROCEED ING. ASSESSING OFFICER HAD NOT FORMED ANY OPINION AT THE TIME OF P ROCESSING THE RETURN AND THEREFORE, IN VIEW OF THE DECISION OF HONBLE A PEX COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPRA), T HE REOPENING WHICH WAS DONE WITHIN THE FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, WAS VERY MUCH VALID. 7. INSOFAR AS THE ISSUE OF DISALLOWANCE UNDER SECTI ON 40(A)(IA) OF THE ACT IS CONCERNED, IN VIEW OF THE DECISION OF SPECIA L BENCH OF THIS TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPOR TS (SUPRA), THE SAID SECTION CAN BE APPLIED ONLY TO THE AMOUNTS STANDING AS PAYABLE. THE 5 I.T.A. NO. 311/MDS/12 I.T.A. NO. 211/MDS/12 FINDING OF THE CIT(APPEALS), THAT NO AMOUNT WAS STA NDING PAYABLE AS AT THE END OF THE RELEVANT PREVIOUS YEAR, AFTER VERIFY ING THE LEDGER BOOKS, HAS NOT BEEN REBUTTED BY THE REVENUE. THEREFORE, T HE FINDING OF THE CIT(APPEALS) IN THIS REGARD APPEARS TO BE REASONABL E. NEVERTHELESS, WE DO FIND THAT CIT(APPEALS) HAD NOT DEALT WITH THE AL TERNATIVE GROUNDS TAKEN BY THE ASSESSEE THAT THERE WAS NO CONTRACTS F OR LORRY HIRE, THE PAYEES HAD PAID THE TAX ON THE RECEIPTS, AND THAT T HE AMOUNTS WERE CHARGEABLE TO TRADING ACCOUNT. CIT(APPEALS) HAD DE LETED THE ADDITION IN TOTO TAKING A STAND THAT SECTION 40(A)(IA) APPLIED ONLY TO PAYABLE AMOUNTS. THEREFORE, ADJUDICATION OF SUCH ALTERNATI VE GROUNDS WOULD HAVE BEEN ONLY AN ACADEMIC EXERCISE. WE ARE, THERE FORE, OF THE OPINION THAT THERE WAS NOTHING WHATSOEVER IN THE ORDER OF T HE CIT(APPEALS) FOR THE ASSESSEE TO BE AGGRIEVED. 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE AS WELL AS REVENUE STAND DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON WEDNESDAY, THE 11 TH OF JULY, 2012, AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 11 TH JULY, 2012. KRI. 6 I.T.A. NO. 311/MDS/12 I.T.A. NO. 211/MDS/12 COPY TO: (1) ASSESSEE (2) ASSESSING OFFICER (3) CIT(A)-II, MADURAI (4) CIT-II, MADURAI (5) D.R. (6) GUARD FILE