Jaiswal Plastic Tubes Ltd, Balasore V. ACIT, Balasore

ITA 219/CTK/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52413 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 21-09-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 31-08-2009
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: P K JENA
• Keywords: Opportunity of being heard; Application of stay
• Section: 154; 40A(3); 133(6)

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM , AND SHRI K.S.S.PRASAD RAO, JM ITA NO S . 219,220,221 AND 222/CTK/2009 (ASSESSMENT YEAR S 2003 - 04, 2005 - 06 AND 1999 - 2000) JAISWAL PLASTIC TUBES LTD., GANESWARPUR IN DUSTRIAL ESTATE, JANUGANJ, BALASORE PAN: AAACJ 4383 Q VERSUS ASST.COMMISSIONER OF INCOME - TAX,BALASORE CIRCLE, BALASORE. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI P.K.JENA, AR FOR THE RESPONDENT SHRI S.C.MOHANTY, DR DATE OF HEARING : 21.09.2011 DATE OF PRONOUNCEMENT : 23.09.2011 ORDER PER BENCH : THESE FOUR APPEALS BY THE ASSESSEE ARE BEING TAKEN UP TOGETHER AS ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE TOGETHER AND BUT THE ISSUES ARE DIFFERENT OF THE FOUR APPEALS ARE T O BE DEALT WITH SEPARATELY AS PER THE APPEAL MEMO ON RECORD OF INDIVIDUAL FILES AND THE SAME ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NO.219/CTK/2009 (ASSESSMENT YEAR 2003 - 04) : 2. THIS APPEAL BY THE ASSESSEE AGITATE S THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE PENALTY U/S.221(1) OF THE INCOME - TAX ACT,1961 FOR THE ASSESSMENT YEAR 2003 - 04. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE APPELLANT HAVING PROVED TO THE SATISFACTION OF THE ASSESSI NG OFFICER THAT THE DEFAULT IN PAYMENT OF TAX WAS DUE TO PENDENCY OF THE STAY APPLICATION BEFORE THE HIGHER AUTHORITIES WHICH WAS A GOOD AND SUFFICIENT REASON, NO PENALTY SHOULD HAVE BEEN LEVIED BY THE ASSESSING OFFICER AS CONFIRMED BY THE LEARNED CIT(A). 3. THE LEARNED DR, HOWEVER, SUBMITTED THAT THE ASSESSING OFFICER WAS CONSTRAINED TO LEVY PENALTY WHEN THE DEMAND RAISED WAS NOT EVEN ADHERED TO IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME - TAX ACT,1961 AND IS NOT ITA NOS.219,220,221 AND 222/CTK/2009 2 SUPPORTED BY ANY DOCUMENTARY EVIDENCE F OR NON - PAYMENT OF THE DEMAND UNDER THE PROVISIONS OF THE SAID ACT. 4. ON SPECIFIC QUERY BY THE BENCH, THE LEARNED COUNSEL FOR THE ASSESSEE AGREED TO PAY THE DEMAND IN THIS APPEAL AND DID NOT PRESS FOR THE BONAFIDE REASONS OF NOT HAVING PAID THE DEMAND ON T IME AS RAISED BY THE ASSESSING OFFICER PENDING ADJUDICATION BY HIGHER AUTHORITIES AS INSTRUCTED BY HIS CLIENT (ASSESSEE). 5. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO.220/CTK/2009 (ASSESSMENT YEAR 2003 - 04): 6. THIS APPEAL BY TH E ASSESSEE IS ON THE ISSUE ON CONFIRMATION OF PENALTY UNDER THE PROVISIONS OF SECTION 271(1)(C) WHEN THE QUANTUM OF INCOME AS CONSIDERED BY THE ASSESSING OFFICER AND LEARNED CIT(A) HAS BEEN PARTLY REDUCED BY THE TRIBUNAL VIDE THEIR ORDER DT.11.12.2008 AND THE BALANCE HAVING BEEN APPEALED AGAINST BEFORE THE HONBLE HIGH COURT ON THE FACTUAL MISINTERPRETATION WHEN THE LEVY OF PENALTY IS TO BE ONLY ON AN INCOME PURPORTEDLY HELD TO BE CONCEALED BY THE ASSESSEE ON THE FACT FINDING OF THE ASSESSING OFFICER. 7. T HE ASSESSEE COMPANY DERIVES INCOME FROM MANUFACTURING OF PVC PIPES. IT FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DECLARING 3,67,370 INCOME WHEN THE ASSESSING OFFICER COMPUTED THE INCOME OF THE ASSESSEE U/S.143(3). HE CONSIDERED THAT THE ASSESSEE HAD SHOWN CREDIT BALANCE OF 2.16 CRORES OF RELIANCE INDUSTRIES LTD., AND SHOWN 1.65 CRORES DEBIT BALANCE OF M/S.K.M.ENTERPRISES WH O WAS THE DISTRIBUTING AGENT OF M/S.RELIANCE INDUSTRIES LTD. THE ASSESSEE PROCURED RAW MATERIALS FROM M/S.RELIANCE INDUSTRIES LTD., WAS USED IN THE CONVERTING OF PVC GRANULES USED BY THE ASSESSEE AS RAW MATERIAL FOR MANUFACTURING OF PVC PIPES IN ITS FACTOR Y. ITA NOS.219,220,221 AND 222/CTK/2009 3 THE ASSESSING OFFICER HELD THAT THE SUM OF 41,78,651 WAS THE INFLATED CREDIT BALANCE SHOWN IN THE BALANCE SHEET BY THE ASSESSEE WHEN HE CHOSE TO CONFI RM CREDIT BALANCE FROM M/S.RELIANCE INDUSTRIES LTD UNDER THE PROVISIONS OF SECTION 133(6) WHO RESPONDED THAT THEY OWED ONLY 9,38,898. THE ASSESSING OFFICER ALSO PROCEEDED TO BRING TO TAX SUNDRY CREDITORS FOR EXPENSES WHO HAD REGULAR ACCOUNT WITH THE ASSESSEE ON THE ASSESSEES INABILITY TO FURNISH THE NAMES AND ADDRESSES OF THE PARTIES . HE ALSO SOUGHT TO TAX EXCESS CREDIT BALANCE IN THE CASE OF KABRA EXTRUSIONTECHNIK LTD, MUMBAI AMOUNTING TO 5,57,453 WHICH ALL THESE ADDITIONS ALONG WITH NON - EXISTENT SUNDRY CREDITORS WERE TAXED BY THE ASSESSING OFFICER. THE SAME WERE CONFIRMED BY THE LEARNED CIT(A) WHEN THE TRIBUNAL CONFIRMED THE REMAIN ING TO DELETE 5,57,453 BELONGING TO KABRA EXTRUSIONTECHNI K LTD, MUMBAI. AS PER THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US, THE REMAINING CREDITS CONFIRMED BY THE TRIBUNAL HAVE BEEN APPEALED AGAINST AS QUANTUM APPEAL BEFORE HONBLE ORISSA HIGH COURT. THE ASSESSING OFFICER LEVIED PENALTY OF 18,89,470 U/S.27 1(1)(C) PERTAINING TO THE ABOVE ADDITIONS AND THE SAME HAVING BEEN CONFIRMED BY THE LEARNED CIT(A) THE ASSESSEE IS IN APPEAL HERE BEFORE THE TRIBUNAL. 8. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF C IT V. RELIANCE PETROPRODUCTS PVT. LTD.,[(2010) 322 ITR 158 (SC)] IN VIEW OF THE FACT THAT THE REQUISITE SATISFACTION AS REGARDS THE ASSESSEE HAVING CONCEALED PARTICULARS OF INCOME OR HAVING FURNISHED INACCURATE PARTICULARS OF INCOME WAS NOT RECORDED BY T HE ASSESSING OFFICER IN THE ASSESSMENT ORDER PASSED U/S.143(3 INSOFAR AS HE HAD CATEGORICALLY NOTED THAT THE CREDIT BALANCE OF M/S.RELIANCE INDUSTRIES LTD WAS TO BE ADJUSTED AGAINST THE DEBIT BALANCE OF ITS DISTRIBUTOR AGENT, NAMELY M/S/..M.ENTERPRISES. TH ESE FACTS CLEARLY INDICATE THAT THERE WAS NO INCOME TO ITA NOS.219,220,221 AND 222/CTK/2009 4 BE TAXED AS PARKED FUNDS WITH M/S.RELIANCE INDUSTRIES LTD WHEN THE ADJUSTMENT BETWEEN THE TWO WERE TO BE ON THE BASIS OF BUSINESS TRANSACTIONS HAVING TAKEN BALANCE AND THE AMOUNT WAS ADJUSTED AGAINST T HE STOCK LYING WITH THE ASSESSEE AND IT WAS INTERPOLATION OF THE STOCK FOUND VIS - - VIS THE DEBIT BALANCE OF M/S.K.M.ENTERPRISES WHICH WAS TO BE ADJUSTED AGAINST GOODS IN TRANSIT AND THE INVOICES TO BE RAISED WERE TO BE ADJUSTED. HE ARGUED THAT THE CREDIT O UTSTANDING AGAINST THE SAME CREDIT OR WAS TO BE ACCEPTED BY THE ASSESSING OFFICER IN SUBSEQUENT YEAR AND THEREFORE COULD NOT HELD AGAINST THE ASSESSEE FOR THE PURPOSE OF LEVYING PENALTY U/S.271(1)(C). HE HAD NOT DETERMINED THE INCOME BUT HAD ONLY VERIFIED T HE CREDITOR U/S.68. ALTHOUGH THE ADDITION COULD NOT BE MADE INSOFAR AS THE ASSESSEE HAD EXPLA INED THAT THE DISTRIBUTOR AGENT WHO OWED 1 .65 CRORES TO THE ASSESSEE WAS ACTUALLY TO BE PAID TO THE MANUFACTURER OF THE RAW MATERIAL NAMELY M/S.RELIANCE INDUSTRIE S LTD. THE DEBIT THEREFORE ADJUSTED AGAINST THE CREDITOR WAS NOT TO BE IN ITS BOOKS OF ACCOUNT WAS ADEQUATELY EXPLAINED BY THE ASSESSEE WHEN THE STOCK WHICH WAS IN TRANSIT WAS HELD WITH M/S.K.M.ENTERPRISES BEING THE DISTRIBUTOR AGENT OF M/S.RELIANCE INDUS TRIES LTD ., AND WAS CONSIDERED BY THE ASSESSING OFFICER U/S.68 . THE DISTRIBUTOR AGENT WAS TO PAY M/S.RELIANCE INDUSTRIES LTD WHEN THE GOODS THAT ARE PREMIUM ITEM S REGULATED BY M/S.RELIANCE INDUSTRIES LTD ., WOULD NOT DISPATCH THE GOODS WITHOUT HAVING RECEIV ED THE FULL PAYMENT. THE LEARNED COUNSEL ARGUED THAT IT IS A ROUTINE BUSINESS TRANSACTION AND THE GOODS ARE TO BE PROCURED AS CONTINUING FACTORY PROCESS REQUIRED THE ASSESSEE TO MAINTAIN A CREDIT BALANCE WITH M/S.RELIANCE INDUSTRIES LTD SO THAT THE SMOOTH RUNNING OF THE FACTORY IS NOT INTERRUPTED. IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT M/S.K.M.ENTERPRISES HAD FAILED TO PAY M/S.RELIANCE INDUSTRIES LTD WHEN HE HAD ALREADY TAKEN THE PAYMENT FROM THE ASSESSEE. THE CREDIT BALANCE THEREFORE STOOD RECON CILED INSOFAR AS THE GOODS IN TRANSIT ITA NOS.219,220,221 AND 222/CTK/2009 5 AND THE GOODS ALREADY WITH THE ASSESSEE STOOD CONFIRMED TO THE ASSESSING OFFICER AGAINST WHIC H NO CONTROVERTING MATERIAL HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER LEVYING PENALTY. ALL THESE CREDITORS THEREFO RE STOOD EXPLAINED T HAT THE ASSESSING OFFICER HAD ACCEPTED THE TRANSACTION IN THE SUBSEQUENT AYS AND IT WAS NOT THE CASE OF THE ASSESSE TO FURNISH INACCURATE PA RTICULARS OF INCOME OR CONCEAL ANY INCOME AS ALLEGED BY THE ASSESSING OFFICER ON THE CONFIRM ATION OF THE QUANTUM BY THE TRIBUNAL. HE SUBMITTED THAT THIS WAS THE REASON THE DEMAND SO RAISED WAS SOUGHT TO BE STATED BY THE ASSESSEE BEFORE THE APPELLATE AUTHORITIES WHEN THE PENALTY U/S.271(1)(C) WAS LEVIED AND THE ASSESSEE HAS APPEALED BEFORE THE TR IBUNAL AND AS CONSIDERED ABOVE. 9. ADDRESSING ON THE FINER ISSUE OF LEVY OF PENALTY, THE LEARNED COUNSEL FOR THE ASSESSEE HAD RELIED ON VARIOUS DECISIONS LEADING FROM APEX COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD.,[(2010) 322 ITR 158 (S C)] . HE SUBMITTED THAT THE ASSESSEES DUTY STOOD DISCHARGED ONCE THE ASSESSING OFFICER CHOSE TO BRING ON RECORD INFORMATION U/S.133(6) WHEN THE AMOUNT SHOWED AS OWED TO THE ASSESSEE BY M/S.RELIANCE INDUSTRIES LTD STOOD EXPLAINED BY THE ASSESSEE WHICH HE C HOSE TO ADJUST THE DEBIT BALANCE OF M/S.K.M.INDUSTRIES THERE FROM. THE BUSINESS TRANSACTION S INDICATE THAT THE ADVANCE WAS FOR THE PURCHASE OF RAW MATERIALS AGAINST WHICH NO CONTROVERSY HAS BEEN FOUND IN RESPECT TO THE VALUATION OF STOCK HELD WITH THE ASSE SSEE. IT WAS THE ASSESSING OFFICERS FAILURE TO DISCHARGE THE ONUS OF PROVING THAT THE EXPLANATION OF THE ASSESSEE IS FALSE WHEN HE HAD HIMSELF ACKNOWLEDGED THAT THE AMOUNT WAS CREDIT AGAINST PURCHASES OF RAW MATERIALS. 10. THE PROVISIONS OF SECTION 271(1 ) (C) SUGGESTS THAT IN ORDER TO BE COVERED THERE BE CONCEALMENT OF PARTICULARS OF INCOME OF THE ASSESSEE WHICH THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS . THE ADDITIONS IN THE ITA NOS.219,220,221 AND 222/CTK/2009 6 PRESENT CASE SO MADE AND CONFIRMED BY THE TRIBUNAL ARE UNDER THE DEE MING PROVISION OF SECTION 68, THEREFORE EX PRESS THE FACT THAT THE ASSESSEE WAS NOT TO BE VISITED WITH PENALTY UNDER THE PROVISIONS OF SECTION 271(1)(C). IN ORDER TO ATTRACT LEVY OF PENALTY, GREATER IMPORTANCE IS THE NECESSITY FOR A DEFINITE FINDING THAT TH ERE IS CONCEALMENT, AS WITHOUT SUCH A FINDING OF CONCEALMENT, THERE CAN BE NO QUESTION OF IMPOSING ANY PENALTY. IN T HE PRESENT CASE THE ASSESSEE HAD EXPLAINED BUT THE ADDITION MADE BY THE AUTHORITIES BELOW AND SUSTAINED BY THE TRIBUNAL WAS BY NOT ACCEPTING THE SAID EXPLANATION. IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED, I.E., IT IS NOT ACCEPTED BUT CIRCUM STANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEES CASE IS FALSE, THE PROVISIONS OF SECTION 2 71(1)(C) IS NOT ATTRACTED. FURTHER, LAW IS WELL SETTLED THAT IT CANNOT BE SAID THAT THE FINDING GIVEN IN THE ASSESSMENT PROCEEDINGS FOR DETERMINING OR COMPUTING THE TAX IS CONCLUSIVE. IN THE PRESENT CASE, THOUGH THE ADDITIONS WERE MADE IN THE ASSESSMENT BY NOT ACCEPTING THE EXPLANATION OF THE ASSESSEE, UPON CONSIDERING THE FACTS AND CIRCUMSTANCES STATED ABOVE IT CANNOT BE HELD THAT THERE IS ANY CONCEALMENT OF INCOME OR SUBMISSION OF INACCURATE PARTICULARS OF INCOME WHICH IS A SINE QUA NON FOR IMPOSITION OF PENALTY U/S.271(1)(C) OF THE ACT. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IN ITS ENTIRETY, THE LEVY OF PENALTY U/S.271(1)(C) IN THE INSTANT CASE MUST BE HELD TO BE UNJUSTIFIED AND AS SUCH, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARN ED CIT(A) AND CANCEL THE PENALTY SO LEVIED IN CASE OF THE ASSESSEE. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 221 /CTK/2009 (ASSESSMENT YEAR 2005 - 06) : 12 . THIS APPEAL BY THE ASSESSEE IS ON THE SOLITARY ISSUE THAT THE ASSESSING OFFIC ER WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 154 OF THE INCOME - TAX ACT,1961 TO BRING TO TAX THE AMOUNT WHICH IS HELD AS ASSET ITA NOS.219,220,221 AND 222/CTK/2009 7 (ADVANCE) BUT INCOME TO BE TAXED UNDER THE PROVISIONS OF SECTION 41(1) PLACING RELIANCE ON THE DECISION OF HONBLE A PEX COURT IN THE CASE OF CIT VS. THIRUMALAISWAMY NAIDU AND SONS [1998] 230 ITR 534 (SC) . 13. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT, CUTTACK BENCH IN ASSESSEES OWN CAS E FOR THE ASSESSMENT YEARS 1997 - 98 AND 1998 - 99 IN ITA NOS.205 AND 206/CTK/2007 DT.27.4.2009 WHEN THE AMOUNT OF ADVANCE SALES TAX PAID TO THE SALES TAX AUTHORITIES WAS TO BE ADJUSTED AGAINST THE SALES TAX TO BE PAID RECOVERED HAVING BEEN ALREADY RENDERED TO TAX IN THE IMPUGNED ASSESSMENT YEAR S . THE TRIBUNAL HAD RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERATION IN THE LIGHT OF ASSESSING AUTHORITIES HOLDING IT AS REFUND OF ADVANCE OF CENTRAL SALES TAX PAID BY THE ASSESSEE TO THE SALES T AX AUTHORITIES UNDER THE PROVISIONS OF SECTION 41(1). THE IMPUGNED ASSESSMENT YEAR IS 1999 - 2000 AND THE RESIDUAL BALANCE STANDING TO THE DEBIT OF THE SALES TAX AUTHORITIES WAS 1,03,746 WAS SOUGHT TO BE CONSIDERED DISALLOWABLE AND ADDED TO THE ASSESSEES INCOME FOR TAXATION WAS UNDER THE PROVISIONS OF SECTION 154 WHEN THE ASSESSEE EXPLAINED TO THE ASSESSING OFFICER THAT THE OPENING BALANCE IN THE AFORESAID AMOUNT STOOD AT 1,03, 746 AND THE TAX COLLECTED FROM THE PARTIES AGAINST SALES DURING THE YEAR WAS 7,46,556 THEREFORE THE AMOUNT OWNED BY THE ASSESSEE WAS 5,86,691 WHICH COULD NOT BE SUBJECTED TO TAX U/S.41(1) WHEN THE INCOME HAS ALREADY BEEN RENDERED TO TAX ON THE BASIS OF A SSESSEE RAISING INVOICES AND THE SALES TAX AMOUNT IS PART OF THE TURNOVER. THE LEARNED ASSESSING OFFICER THEREFORE FAILED TO OBSERVE THAT THE TRIBUNAL ORDER FOR THE PRECEDING TWO AYS HAD NO BEARINGS TO THE FACTS OF THE CASE FOR THE IMPUGNED YEAR FOR INVOKI NG THE PROVISIONS OF SECTION 154. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT IT WAS PUT FORTH BEFORE THE LEARNED CIT(A) THAT THE TOTAL AMOUNT PAYABLE BY THE ITA NOS.219,220,221 AND 222/CTK/2009 8 ASSESSEE TO THE SALES TAX AUTHORITIES WAS 11,52,410 WHICH CANNOT BE SUBSTITUTED FOR HOLDING THE SAME AS INCOME UNDER THE PROVISIONS OF SECTION 41(1) AND THE AMOUNT HAD ALREADY BEEN RENDERED TO TAX AND IS AN LIABILITY TO BE PAID IN ACCORDANCE WITH THE PROVISIONS OF THE SALES TAX ACT. HOWEVER, THE LEARNED CIT(A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER WITHOUT ADJUDICATING ON THE ISSUE THAT SALES TAX IS AN INDIRECT TAX AND HAS NO ELEMENT OF PROFIT AND AS SUCH THE ADDITION OF CST TO THE INCOME OF THE ASSESSEE IS CONTRARY TO THE PROVISIONS O F SETTLED LAW AS ANNUNCIATED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. LAKSHMI MACHINE WORKS (290 ITR 667). 14. THE LEARNED DR OPPOSED THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ORDER OF THE TRIBUNAL HA D NO BEARING TO THE ISSU E FOR THE PURPOSE OF INVOKING THE PROVISIONS OF SECTION 154 BY THE ASSESSING OFFICER. THE AMOUNT OF 1,03,746 STOOD AS AN ADVANCE TO THE SALES TAX AUTHORITIES ON 1 ST OF APRIL, 1998 WAS THEREFORE RIGHTLY CONSIDERED FOR TAXATION BY THE ASSESSING OFFICER WHI CH THE LEARNED CIT(A) CONFIRMED. HE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW FOR HIS PART OF SUB MISSIONS. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE INCLINED TO FIND THAT THE DIRECTION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE PRECEDING TWO AYS HAS BEEN MISCONSTRUED. THE EXPENSES CANNOT BE INTERPRETED AS INCOME WHEN THE FACTS ARE GLARING AND THE ASSESSING OFFICER CHOSE TO INVOKE THE PROVISIONS OF SECTION 154 BY BRINGING IT TO TAX AN AMOUNT PAID IN EXCESS TO THE SALES TAX AUTHORITIES AS INCOME IN THE HANDS OF THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THE ADVANCE PAID IN THE IMPUGNED ASSESSMENT YEAR STOOD ADJUSTED AGAINST OTHER INCOME BEING THE SALES TAX COL LECTED FROM THE CUSTOMERS WAS PAID TO THE SALES TAX AUTHORITIES THEREFORE WAS LESS BY 1,03,746 CANNOT BE CONSIDERED AS INCOME FOR THE IMPUGNED ITA NOS.219,220,221 AND 222/CTK/2009 9 ASSESSMENT YEAR. IN ANY CASE THIS AMOUNT COULD NOT BE COMPUTED FOR TAXATION UNDER THE PROVISIONS OF SECTION 154 IN THE LIGHT OF THE FACT THAT THE ASSESSING OFFICER CHOSE TO FOLLOW THE DIRECTION OF T HE TRIBUNAL IN THIS ORDER BUT FOR THE PRECEDING TWO AYS WHICH CATEGORICALLY HELD THAT THE SAID AMOUNT CANNOT BE TAXED UNDER THE PROVISIONS OF SECTION 41(1). WE ARE INCLINED TO FIND FAVOUR IN THE CONTENTION OF THE LEARNED COUNSEL THAT THE SAID ADDITION OR D ISALLOWANCE HAS NO MERIT WHATSOEVER. THE LEARNED CIT(A) THEREFORE MISINTERPRETED THE FACTUAL ASPECTS BROUGHT OUT BY THE ASSESSING OFFICER IN ITS RIGHT PROSPECTIVE. THE ORDER OF THE LEARNED CIT(A) IS THEREFORE, SET ASIDE AND THE ORDER U/S.154 IS ANNULLED. 1 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.222/CTK/2009 (ASSESSMENT YEAR 2005 - 06): 17. THIS APPEAL BY THE ASSESSEE AGITATES THE CONFIRMATION OF DISALLOWANCE OF NON - CASH ADJUSTMENTS BETWEEN TWO SISTER CONCERNS BEING THE BUSINESS PARTNER S OF THE ASSESSEE AMOUNTING TO 1,50,000 AND ALSO DISALLOWANCE UNDER THE PROVISIONS OF SECTION 40(A)(IA) BEING THE AMOUNT PAID TO PROFESSIONAL WITHOUT DEDUCTION OF TAX AT SOURCE U/S.194J AMOUNTING TO 6,54,985. BOTH THESE AMOUNTS WERE DISALLOWED BY THE ASS ESSING OFFICER IN HIS ORDER U/S.143(3) WHEN THE ASSESSEE WHO IS A MANUFACTURER OF PVC PIPES AND PROCURES RAW MATERIALS F ROM M/S.RELIANCE INDUSTRIES LTD HAD RETURNED INCOME OF 2,82,463. THE LEARNED CIT(A) CONFIRMED THE SAME ON THE BASIS OF FINDINGS BY THE LEARNED ASSESSING OFFICER WITHOUT ADJUDICATING ON THE CONTENTION OF THE ASSESSEE APPELLANT BEFORE HER . 18. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE ADDITION MADE BY THE LEARNED ASSESSING OFFICER AMOUNTING TO 1 ,50,000.00 U/S. 69 C ON THE GR OUND THAT 9 CASH PAYMENT S WERE MADE BY THE ASSESSEE OUTSIDE THE BOOK S AND CONFIRMED BY THE LEARNED CIT APPEAL IS NOT FACTUALLY CORRECT, AS ON ITA NOS.219,220,221 AND 222/CTK/2009 10 20.01.2005 THE ASSESSEE HAS ADJUSTED DEBIT BALANCE OF RS.1,50,000.00 ON ACCOUNT OF K.M AGENCIES A SISTER CONCERN O F K.M ENTERPRISES IN ITS LEDGER AND AS SUCH THE ADDITION MADE U/S.69 C IS LIABLE TO BE DELETED. THE DISALLOWANCE OF 6,84,985 U /S. 40 (A) (IA) READ WITH SECTION 194J ON THE GROUND THAT THE ASSESSEE HAD NOT DEDUCTED TDS WHILE MAKING PAYMENT TO THE ADVOCATES AS PROFESSIONAL FEES AND CONFIRMED BY THE LEARNED CIT APPEAL IS ARBITRARY, EXCESSIVE AND BAD IN LAW. THE LEARNED A R OF THE ASSESSEE SUBMITTED THAT IN THE MEAN TIME THE ASSESSEE HAS ALREADY DEPOSITED TDS AMOUNTING TO 34,250 AND INTEREST AMOUNTING TO 15,070 TOTALLING TO 49,320 ON 3.12.2008 AND THE AFOREMENTIONED PROVISION HAVING BEEN MADE EFFECTIVE FROM 01.04.05 A ND THE ASSESSEE DUE TO INADVERTENT MISTAKE HAVING NOT DEDUCTED TDS WHILE MAKING PAYMENT OF PROFESSIONAL FEES SHOULD HAVE BEEN DEALT LIBERALLY BY THE LEARNED ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A) . FOR THIS PURPOSE HE FILED THE COPY OF THE LEDGER A CCOUNT OF THE SUNDRY CREDITORS WHICH INDICATE THAT THE ASSESSING OFFICER HAD FAILED TO FIND THE TRANSACTIONS IN THE CASH BOOK AS THEY WERE NOT TO BE BUT WERE INSCRIBED BY THE ASSESSEE BY WAY OF JOURNAL ENTRIES ON THE INSTRUCTION OF THE SISTER CONCERN WHO H AD TO ADJUST THE AMOUNT AMONGST THEMSELVES WERE THEREFORE RIGHTLY CONFIRMED THAT THE BALANCE SHOWN AT THE END OF THE YEAR TALLIED AGAINST WHICH NO DEFECT WAS FOUND BY THE ASSESSING OFFICER. THE BALANCE CONFIRMED BY THE PARTIES THEREFORE CLARIFIED THE ISSUE THAT THE TRANSACTIONS BETWEEN THE SISTER CONCERN IN CASH WILL HAVE NO BEARING TO THE ASSESSEE FOR THE PURPOSE OF DISALLOWANCE/ADDITION EITHER UNDER SECTION 40A(3) OR SECTION 269SS. ON A SPECIFIC QUERY FROM THE BENCH WHETHER THE TRANSACTIONS AS RECORDED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) HAD BEEN EXPLAINED BY THE ASSESSEE IN THE MANNER AS NOW PUT FORTH BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE AGREED TO THE PROPOSITION THAT IT WILL BE EXPLAINED IF THE ISSUE IS RESTORED TO TH E FILE OF THE ITA NOS.219,220,221 AND 222/CTK/2009 11 ASSESSING OFFICER. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO AGREED TO THE PROPOSITION THAT IN VIEW OF THE SECOND ISSUE BEING THE DISALLOWANCE OF PROFESSIONAL CHARGES PAID AND CLAIMED AS EXPENSES WAS SUBJECTED TO DEDUCTION OF TAX IN THE LATER YEAR, THE SAME MAY KINDLY BE ALLOWED AS PER THE COPY OF CHALLANS AND TDS CERTIFICATES ISSUED TO THE PAYEE AS PLACED ON THE PAPER BOOK WHEN THE TWO DIFFERENT PROFESSIONAL WERE SUBJECTED TO DEDUCTION OF TAX AT SOURCE IN THE IMPUGNED ASSESSMENT YEAR. HE AGRE ED TO THE PROPOSITION THAT IT WOULD BE ALLOWED AS PER THE PROVISIONS OF THE I.T.ACT U/S.40(A)(IA) WHICH DIRECTION MAY ALSO BE GIVEN TO THE ASSESSING OFFICER. 19. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW CLARIFYING THE FACTUAL POSITION AS HAVE BEEN BROUGHT OUT BY THE ASSESSING OFFICER AND THE LEARNED CIT(A). 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE AGREE TO THE PROPOSITION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT BOTH THESE ISSUES BE CONSIDERED IN THE LIGHT OF THE FACT THAT THE ACTUAL TRANSACTION HAD TAKEN PLACE CONFIRMING THE CLOSING BALANCES AND IN VIEW OF NO OTHER CORROBORATIVE CONTROVERSIAL MATERIAL HAVE BEEN BROUGHT ON RECORD BY THE ASSESSING AUTHORITIES TO CONTINUE WITH THE DI SALLOWANCE OF THE SAME, WE RES TORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERATION AFRESH IN THE LIGHT OF THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE CLAIM OF ASSESSEE WAS UNDER THE PROVISIONS OF THE I.T.ACT AND DID NO T INTERFERE WITH THE INTERPRETATION OF ACTUAL FACTS FINDING BY THE AUTHORITIES BELOW. BOTH THE ISSUES ARE TO BE CONSIDERED AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE DISALLOWANCE U/S.40(A)IA) IS TO BE ALLOWED ON THE BASIS OF TDS PAID FOR THE IMPUGNED ASSESSMENT YEAR IN THE YEAR IN WHICH IT HAS BEEN PAID AS PER LAW . WITH DIRECTION, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND RESTORE ITA NOS.219,220,221 AND 222/CTK/2009 12 THE ISSUES TO THE FILE OF THE ASSESSING OFFICER. 22. IN THE RESULT, THE APPEAL O F THE ASSESSE IS ALLOWED FOR STATISTICAL PURPOSES. 23. TO SUM UP THE RESULTS 1 ) ITA NO.219/CTK/2009 FOR THE ASSESSMENT YEAR 200 3 - 04 IS DISMISSED. 2 ) ITA NO.220/CTK/200 9 FOR THE ASSESSMENT YEAR 2003 - 04 IS ALLOWED. 3 ) ITA NO.221/CTK/2009 FOR THE ASSESSMENT YEAR 1 999 - 2000 IS ALLOWED. 4 ) ITA NO.222/CTK/2009 FOR THE ASSESSMENT YEAR 2005 - 06 IS ALLOWED FOR STATISTICAL PURPOSES. SD/ - SD/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 23 RD SEPTEMBER, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: JAISWAL PLASTIC TUBES LTD., GANESWARPUR INDUSTRIAL ESTATE, JANUGANJ, BALASORE 2. THE RESPONDENT: ASST.COMMISSIONER OF INCOME - TAX,BALASORE CIRCLE, BALASORE. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.