G.Manimegalai, CHENNAI V. DCIT, CHENNAI

ITA 2145/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8971 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 13-11-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH J
• Assessee Lawyers: S DEEPAC A
• Keywords: Non-deduction of tax

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 2145 & 2146/MDS/2015 / ASSESSMENT YEARS : 2012-13 & 2007-08 SMT.G.MANIMEGALAI , PROP.M/S.HITECH DIAGNOSTIC CENTRE, NO.1,MILLERS ROAD, KILPAUK, CHENNAI 600 010. VS. DEPUTY COMMISSIONER OF INCOME TAX, NON-COROPORATE CIRCLE-10(1), CHENNAI-34. [PAN AAEPM 4356 K ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : MS.S.DEEPA,C.A /RESPONDENT BY : MR.A.V.SREEKANTH, JCIT,DR / DATE OF HEARING : 12.05.2016 / DATE OF PRONOUNCEMENT : 29.06.2016 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE TWO APPEALS OF THE ASSESSEE ARE DIRECTED A GAINST THE COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX (AP PEALS)-12, CHENNAI DATED 21.09.2015 PERTAINING TO ASSESSM ENT YEARS 2012-13 & 2007-08 RESPECTIVELY. ITA NOS.1245 & 1246/MDS./15 :- 2 -: 2. THE COMMON GROUND IN BOTH THESE APPEALS IS WITH REGARD TO CONFIRM THE ADDITION OF ` 1,63,98,938/- (A.Y 2007-08) AND ` 7,53,15,170/-(A.Y.2012-13) BY INVOKING THE PROVISIO NS OF THE SECTION 40(A)(IA) OF THE ACT IN RESPECT OF PAYMENT OF PROFE SSIONAL FEES WITHOUT DEDUCTING TDS U/S.194J OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND THE SOLE PROPRIETRIX OF M/S.HITECH DIAGNOSTIC C ENTRE, ENGAGED IN PROVIDING CLINICAL LABORATORY SERVICES AND FILED HI S RETURNS OF INCOME ON 02.11.2007 & 01.10.2012 FOR ASSESSMENT YEARS 2007- 08 & 2012-13 RESPECTIVELY. BOTH THE RETURNS WERE PROCESSED U/S.1 43(1) AND THE CASES WERE SELECTED FOR SCRUTINY. DURING THE SCRUT INY PROCEEDINGS U/S.143(3), IT WAS NOTICED THAT THE ASSESSEE HAD CH ARGED ` 6,36,87,841/- IN RESPECT OF PAYMENT OF PROFESSIONAL FEES WITHOUT DEDUCTING TDS U/S.194J OF THE ACT. THE AO NOTICED THAT THE SAME ISSUE FOR THE ASSESSMENT YEAR 2007-08 AND ALSO THE ISSUE OF APPLICABILITY OF SEC.40A(2) ON THE SUMS PAID BY THE ASSESSEE TO HER HUSBAND DR.SP GANESAN BEYOND % OF PROFIT ON GROSS R ECEIPTS AS PROFESSIONAL FEE. HENCE, THE AO REOPENED THE ASSESS MENTS U/S.147 BY ISSUE OF NOTICE U/S.148 DATED 26.03.2014 AND COMPLE TED THE ASSESSMENT FOR ASSESSMENT YEAR 2007-08 ON 25.03.20 15 BY ARRIVING AT AN ASSESSED INCOME OF ` 1,63,98,938/- AFTER MAKING ADDITION OF ITA NOS.1245 & 1246/MDS./15 :- 3 -: ` 1,25,03,443/- UNDER VARIOUS HEADS INCLUDING DISALLO WANCE U/S.40(A)(IA) OF ` 1,63,98,938/-. FOR ASSESSMENT YEAR 2012-13, THE AO COMPLETED THE ASSESSMENT ON 25.03.2015 BY ARRIVING AT AN ASSESSED INCOME OF ` 7,53,15,170/- BY DISALLOWING ` 5,26,00,000/- UNDER SECTION 40(A)(IA) OF THE ACT. AGGRIEVED, THE AO CARRIED TH E APPEAL BEFORE THE LD.CIT(A). 4. ON APPEAL, THE CIT(A) OBSERVED THAT ASSESSEE MA DE PAYMENT OF PROFESSIONAL FEES IN THESE TWO ASSESSMENT YEARS WIT HOUT DEDUCTING TDS U/S.194J OF THE ACT AND ACCORDINGLY, CIT(A) CON FIRMED THE ADDITIONS MADE BY THE LD. ASSESSING OFFICER U/S 40( A)(IA) OF THE ACT. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE MADE PAYMENTS IN THESE TWO AS SESSMENT YEARS AT ` 1,16,87,803/-(A.Y:2007-08) & ` 5,26,00,000/- TOWARDS PROFESSIONAL FEES WITHOUT DEDUCTING TDS U/S.194J OF THE ACT. IT IS ALSO AN ADMITTED FACT THAT THESE PAYMENTS WERE ALREADY MADE BY THE A SSESSEE FOR ASSESSMENT YEARS UNDER CONSIDERATION AND IT WAS NOT OUTSTANDING AT THE END OF THE CLOSE OF THE ASSESSMENT YEARS UNDER CONSIDERATION. THE SIMILAR ISSUE CAME BEFORE THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL. CIT [20 12] 16 ITR (TRIB) 1 ITA NOS.1245 & 1246/MDS./15 :- 4 -: (VISAKHAPATNAM) [SB] WHEREIN HELD THAT SECTION 40(A )(IA) IS ONLY APPLICABLE TO THOSE PAYMENTS WHICH ARE OUTSTANDING AT THE END OF THE CLOSE OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSM ENT YEAR IN RESPECT OF THESE PAYMENTS. IN OTHER WORDS, IF THE PAYMENT IS NOT OUTSTANDING AS PAYABLE AT THE END OF THE CLOSE OF FINANCIAL YEAR, PROVISIONS OF SECTION 40(A)(IA) CANNOT BE APPLIED. IN THIS BACKGROUND, W HEN WE EXAMINE THE FACTS OF THE PRESENT CASE, WHEN THE PAYMENT IS NOT OUTSTANDING AT THE END OF THE CLOSE OF THE FINANCIAL YEAR, SUCH PA YMENTS CANNOT BE LIABLE FOR DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE AO AS WELL AS THE CIT(A) HAS NO DI SPUTE TO THE FACT THAT THE PAYMENT OF PROFESSIONAL FEES IS NOT OUTST ANDING AT THE END OF THE CLOSE OF THE FINANCIAL YEAR. IN VIEW OF THIS FA CT, WE ARE OF THE OPINION THAT THE PAYMENTS WHICH ARE NOT OUTSTANDING AT THE END OF THE CLOSE OF THE FINANCIAL YEAR, CANNOT BE DISALLOWED B Y APPLYING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. FURTHE R, THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI N.PALANI VELU VS. ITO REPORTED IN [2015] 40 ITR (TRIB) 325 [CHENNAI] VIDE ORDER DA TED 29.04.2015 WHEREIN HELD THAT:- 4. WE HAVE HEARD BOTH SIDES AND PERUSED THE MATERI AL ON RECORD. WE FIND THAT THE SPECIAL BENCH OF THE TRIBU NAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL. CI T [2012] 16 ITR (TRIB) 1 (VISAKHAPATNAM) [SB] AND JUDGMENT O F THE GUJARAT HIGH COURT IN THE CASE OF CIT V. VECTOR SHI PPING ITA NOS.1245 & 1246/MDS./15 :- 5 -: SERVICES (P.) LTD. IN I. T. A. NOS. 122 OF 2013 DAT ED JULY 9, 2013 [2013] 357 ITR 642 (ALL) HELD THAT SECTION 40( A)(IA) IS NOT APPLICABLE WHEN THERE IS NO OUTSTANDING BALANCE AT THE END OF THE CLOSE OF THE YEAR RELEVANT TO THE ASSESS MENT YEAR IN RESPECT OF THESE PAYMENTS. HOWEVER, THE ASSESSEE HAS NOT BROUGHT ON RECORD, THE DETAILS OF OUTSTANDING EXPEN SES OR SCHEDULE OF SUNDRY CREDITORS SHOWING WHETHER THE IM PUGNED AMOUNT IS OUTSTANDING AT THE END OF THE CLOSE OF TH E PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR EITHER IN THE NAME OF THE PARTY OR OUTSTANDING EXPENSES. HENCE, IN THE IN TEREST OF JUSTICE, WE ARE REMITTING THE ISSUE BACK TO THE FIL E OF THE ASSESSING OFFICER WITH DIRECTION TO VERIFY THE CLAI M OF THE ASSESSEE AND THE ASSESSEE SHALL PLACE NECESSARY EVI DENCE IN SUPPORT OF HIS CLAIM. 5. FURTHER, WE MAKE IT CLEAR THAT IF THE IMPUGNED A MOUNT IS NOT OUTSTANDING AT THE END OF THE CLOSE OF THE ASSE SSMENT YEAR IN RESPECT OF THE EXPENSES EITHER AS OUTSTANDI NG EXPENSES OR AS SUNDRY CREDITORS, THIS AMOUNT CANNOT BE DISALLOWED. THIS GROUND IS REMITTED BACK TO THE ASS ESSING OFFICER FOR FRESH CONSIDERATION. 5.1 WE HAVE EXAMINED THE FACTS OF THE PRESENT CASE IN THE LIGHT OF ABOVE ORDER OF THE TRIBUNAL. IN THIS CASE, THE AO CATEGORICALLY OBSERVED THAT THE AMOUNT DISALLOWED BY THE AO AS PR OFESSIONAL FEE IS ALREADY PAID BY THE ASSESSEE. THIS CAN BE SEEN FRO M THE FOLLOWING OBSERVATIONS OF THE AO:- ITA NOS.1245 & 1246/MDS./15 :- 6 -: FOR A.Y 2007-08 4.1. THE ASSESSEE HAS PAID PROFESSIONAL FEE OF ` 1,16,87,803/- DURING F.Y 2006-07 TO DR.SP.GANESAN (HUSBAND OF THE ASSESSEE ) WITHOUT DEDUCTING TAX ON THE SAME. THE AUTHORIZED REPRESENTATIVE OF ASSESSEE WAS ASKED TO EXPLAIN WHY THE AMOUNT OF PROFESSIONAL FEE AID SHOULD NOT BE DISALLOWED AS PER SECTION 40(A)(IA) FOR NON-DEDUCTION OF TAX. FOR A.Y 2012-13 3.1. THE ASSESSEE HAS PAID PROFESSIONAL FEE OF ` 2,60,000/- DURING F.Y 2011-12(TILL 31.12.2011) TO DR.SP.GANESA N (HUSBAND OF THE ASSESSEE ) WITHOUT DEDUCTING TAX ON THE SAME. THE AUTHORIZED REPRESENTATIVE OF ASSESSEE WAS ASKED TO EXPLAIN WHY THE AMOUNT OF PROFESSIONAL FEE AID SHOULD NOT BE DISALLOWED AS PER SECTION 40(A)(IA) FOR NON-DEDUCTION OF TAX. HENCE, IN OUR OPINION IN THE PRESENT CASE THERE IS NO DISPUTE THAT THE AMOUNT HAS ALREADY PAID. THERE IS NO QUESTION OF R EMITTING THE ISSUE TO THE FILE OF AO TO CONSIDER THE DISALLOWANCE OUTS TANDING AT THE CLOSE OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YE AR. FURTHER, THE DEPARTMENTAL REPRESENTATIVE IS NOT ABLE TO SHOW ANY PAYMENT IS OUTSTANDING AT THE END OF THE CLOSE OF FINANCIAL YE AR. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT PROVISION S OF SECTION 40(A)(IA) CANNOT BE APPLIED TO THE ASSESSEES CASE FOR BOTH THE ASSESSMENT YEARS AND WE ALLOW THE GROUNDS TAKEN BY THE ASSESSEE FOR BOTH THESE ASSESSMENT YEARS UNDER CONSIDERATION. ITA NOS.1245 & 1246/MDS./15 :- 7 -: 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE FOR ASSESSMENT YEARS 2012-13 & 2007-08 ARE ALLOWED. ORDER PRONOUNCED ON WEDNESDAY THE 29 TH OF JUNE, 2016, AT CHENNAI SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 29 TH JUNE, 2016 K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 4. - 1 / CIT 2. / RESPONDENT 5. /23- 4 / DR 3. - 1-!' / CIT(A) 6. 3&-5 / GF