I.T.O Wd - 55(1) ,kolkata., Kolkata V. Shri Subir Kumar Roy, Kolkata

ITA 219/KOL/2013

• Counselvise Citation: 21923514 RSA 2013
• Duration Of Justice: 2 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 11-09-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 01-02-2013
• Court: TRIBUNAL
• Department Lawyers: AMITABH ROY JCIT LD
• Keywords: Opportunity of being heard; Retrospective amendment

Judgement Text

ITA NO. 2 19/KOL/2013 -C-AM SHRI SU BIR KUMAR ROY 1 IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, K OLKATA BEFORE : SHRI MAHAVIR SINGH,JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER I.T.A NO. 219/KOL/2013 A.Y. 2006-07 I.T.O WARD 55(1), KOLKATA VS. SHRI SUBIR KUMA R ROY PAN:AFPPR 0232 M (APPELLANT) (RESPO NDENT) FOR THE APPELLANT: SHRI AMITABH ROY, JCIT, LD. S R. DR FOR THE RESPONDENT : NONE APPEARED ON BEHALF OF THE ASSESSEE DATE OF HEARING: 05-11-2015 DATE OF PRONOUNCEMENT: 20-11-20 15 ORDER SHRI M.BALAGANESH, AM THIS APPEAL OF THE REVENUE ARISES OUT OF THE ORDE R OF THE LEARNED CIT(A), XXXVI, KOLKATA IN APPEAL NO.610/CIT(A)-XXXVI/KOL/2 011-12/1638 DATED 16-11- 2012 FOR THE ASST YEAR 2006-07 PASSED AGAINST THE ORDER OF ASSESSMENT FRAMED BY THE LEARNED AO U/S 144/147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. 1 ST AND 2 ND ISSUES TO BE DECIDED IN THIS APPEAL ARE THAT WH ETHER A SUM OF RS.41,71,115/- COULD BE ADDED U/S. 40(A)(IA) OF T HE ACT AND 50% COMMISSION EXPENDITURE COULD BE HELD TO BE BOGUS IN THE FACT S AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE A SSESSEE IS AN INDIVIDUAL AND WHOLESALER OF MEDICINES AND RUNNING HIS BUSINESS UNDER THE NAME AND STYLE M/S. ROY AGENCY. DURING THE ASSESSMENT YEAR 2006-07, THE ASSESSEE DEBITED A SUM OF RS. 9,42,230/- IN HIS P & L ACCOUNT TOWARDS COMMISSION PAYMENT. THE LD.AO FOUND THAT ITA NO. 2 19/KOL/2013 -C-AM SHRI SU BIR KUMAR ROY 2 THE SAID PAYMENTS WERE LIABLE FOR DEDUCTION OF TAX AT SOURCE [TDS]. ACCORDINGLY, HE SOUGHT TO DISALLOW THE SAME U/S. 40(A)(IA) OF THE ACT AS NO DETAILS WERE FILED BEFORE HIM BY THE ASSESSEE REGARDING THE SAME. ON FIRST AP PEAL, THE LD. CIT(A) FOUND THAT THE ASSESSEE HAS PAID SALES INCENTIVE TO HIS VARIOUS ST AFF MEMBERS AND THE SAME HAS BEEN CATEGORIZED AS COMMISSION PAYMENT BY THE ASSESSEE. THE LD.CIT(A) FOUND THAT CERTAIN SUMMONS ISSUED TO THE PARTIES TO WHOM THE COMMISSI ON WAS PAID BY THE ASSESSEE WERE RETURNED UNSERVED. ACCORDINGLY, HE HELD THAT THE P AYMENT OF COMMISSION IS NOT FULLY ESTABLISHED BY THE ASSESSEE AS MEANT FOR BUSINESS P URPOSES. HOWEVER, BY RELYING ON THE DECISION OF THE ITAT SPECIAL BENCH, VISHAKAPATN AM IN ITA NO.477/VIZ/08 DATED 29-03-2012, HE HELD THAT THE ASSESSEE HAS PAID CO MMISSION BEFORE THE END OF THE PREVIOUS YEAR AND ACCORDINGLY, NO ADDITION COULD B E MADE U/S. 40(A)(IA) OF THE ACT. HAVING HELD SO, STRANGELY HE SOUGHT TO CONFIRM THE ADDITION TO THE EXTENT OF 50% AND GRANTED RELIEF FOR THE BALANCE SUM OF RS.4,71,115 /- TO THE ASSESSEE. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GRO UNDS:- 1. LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN AL LOWING COMMISSION EXPENDITURE OF RS.4,71,115/- RELYING ON THE DECISI ON OF THE LD.ITAT, SPECIAL BENCH, VISHAKAPATNAM IN ITA NO.477/VIZ/2008 WHEN THE SAID DECISION HAS ALREADY BEEN SUSPENDED FROM OPERATION AS PER HONBLE ANDHRA PRADESH HIGH COURTS ORDER. 2. LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN NO T HOLDING THE FULL PART OF THE COMMISSION EXPENDITURE AS BOGUS WHEN HE HIMSELF HAS HELD THE 50% TO BE BOGUS. 4. SHRI AMITABH ROY, JCIT, LD. SR. DR ARGUED ON BEHALF OF THE REVENUE. NONE APPEARED ON BEHALF OF THE ASSESSEE. 5. WE HAVE HEARD THE LD. SR.DR AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSUE OF PAID/PAYABLE AS DECIDED BY THE ITAT SPECIAL BENCH, VISHAKAPATNAM IN THE CONTEXT OF APPLICABILITY OF SE CTION 40(A)(IA) HAS BEEN REVERSED BY THE DECISION OF THE HONBLE JURISDICTIONAL CALCU TTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE REPORTED IN (2013) 33 TAXMANN.COM 250(CAL.), ITA NO. 2 19/KOL/2013 -C-AM SHRI SU BIR KUMAR ROY 3 WHEREIN THEIR LORDSHIPS OF CALCUTTA HIGH COURT HEL D THAT THE PROVISIONS OF SECTION 40(A)(IA) COULD BE INVOKED EVEN IN RESPECT OF AMOU NTS PAID BEFORE THE END OF THE FINANCIAL YEAR. WE ALSO FIND THAT THERE IS AN AME NDMENT IN SECTION 40(A)(IA) BY INSERTION OF SECOND PROVISO W.E.F 1-4-2013, WHEREIN IF THE PAYEE HAD CONSIDERED THE SUBJECT MENTIONED RECEIPTS INCLUDING THE SUM IN HI S RETURN, THEN THE PAYER ( THE ASSSESSEE HEREIN) SHOULD NOT BE INVITED WITH THE DI SALLOWANCE OF SECTION 40(A)(IA) OF THE ACT. THIS AMENDMENT HAS BEEN HELD TO BE RETROS PECTIVE IN OPERATION BY RECENT DECISION OF THE HONBLE DELHI HIGH COURT IN THE CA SE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P) LTD. REPORTED IN (2015) 61 TAXMANN.COM 45(DELHI HIGH COURT) WHEREIN IT WAS HELD AS UNDER:- SECTION 40(A)(IA) WAS INTRODUCED BY THE FINANCE (NO .2) ACT, 2004 TO ENSURE THAT AN EXPENDITURE SHOULD NOT BE AL LOWED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATIO N WHERE INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED DUE TO TAX WITHHOLDING LAPSES BY THE ASSESSEE. HENCE, SECTION 40(A)(IA) IS NOT A PENALTY PROVISION FOR TAX WITHHOLDING LAPSE BUT IT IS A PROVISION INTRODUCED TO COMPENSATE ANY LOSS TO THE REVENUE IN CASES WHERE DEDUCTOR HASNT DEDUCTED TDS AN AMOUNT PAID TO DEDUCTEE AND, IN TURN, DEDUCTEE ALSO HASNT OFFERED TO TAX INCOME EMBEDDED IN SUCH AMOUNT. THE PENALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEP ARATELY PROVIDED UNDER SECTION 271C AND, THEREFORE, SECTION 40(A)(IA) ISNT ATTRACTED TO THE SAME. HENCE, AN ASSESSEE COULD NOT BE PENALIZED UNDER SECTION 40(A)(IA) WHEN THERE WAS NO LOSS TO R EVENUE. THE AGRA TRIBUNAL IN THE CASE OF RAJIV KUMAR AGARWA L VS- ACIT [2014] 45 TAXMANN.COM 555(AGRA- TRIB) HAD HELD THAT THE SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND HAS RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005, BEING THE DATE FROM WHICH SUB-CLAUSE(IA) OF SECTION 40(8) WAS INSERTED BY THE FINANCE NO.2) ACT, 2004, EVEN THOUGH THE FINANCE A CT, 2012 HAD NOT SPECIFICALLY STATED THAT PROVISO IS RETROSPECTI VE IN NATURE. THE HIGH COURT AFFIRMED THE RATIO LAID DOWN BY THE AGRA TRIBUNAL AND HELD THAT SAID PROVISO IS DECLARATORY AND CURATIVE IN NATURE AND HAS RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005 . RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF T HE HONBLE DELHI HIGH COURT, WE SET ASIDE THIS ISSUE TO THE FILE OF THE LD.AO TO DECIDE THE SAME IN THE LIGHT ITA NO. 2 19/KOL/2013 -C-AM SHRI SU BIR KUMAR ROY 4 OF THE AFORESAID JUDGMENT( AS STATED SUPRA). ACC ORDINGLY, WE DIRECT THE LD.AO TO VERIFY WHETHER THE PAYEE(S) HAS INCLUDED THE SUBJEC T MENTIONED RECEIPTS IN HIS RESPECTIVE RETURN AND PAID TAXES THEREON OR NOT. IF THAT IS SO, THEN DISALLOWANCE U/S. 40(A)(IA) OF THE ACT SHALL NOT BE MADE IN THE HAND S OF THE ASSESSEE. ACCORDINGLY, THE GROUND NOS. 1 & 2 RAISED BY THE REVENUE ARE ALLO WED FOR STATISTICAL PURPOSES. 6. LAST GROUND TO BE DECIDED IN THIS APPEAL IS THAT WHETHER A SUM OF RS.2,46,065/- COULD BE ADDED TOWARDS CARRIAGE OUTWARD IN THE FACT S AND CIRCUMSTANCES OF THE CASE. 7. BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSE E PAID A SUM OF RS.4,92,130/- IN HIS P & L ACCOUNT UNDER THE HEAD CARRIAGE OUTWARD . THE LD.AO FOUND THAT NO DETAILS WERE FILED BY THE ASSESSEE BEFORE HIM REGAR DING THE SAME. THE LD.AO ALSO FOUND THAT THE ASSESSEE HAS NOT CHARGED ANY EXPENDITURE RELATING TO VEHICLE EXCEPT FUEL CHARGE. THE LD.AO FOUND THAT THE LINE OF BUSINESS I N WHICH THE ASSESSEE IS ENGAGED, THERE IS NO REQUIREMENT FOR THE ASSESSEE TO INCUR T HIS EXPENDITURE OF CARRIAGE OUTWARD TO THE TUNE OF RS.4,92,130/- AND MORE SO IN THE ABSENC E OF ANY DETAILS PROVIDED BY THE ASSESSEE, HE SOUGHT TO DISALLOW THE ENTIRE SUM IN THE ASSESSMENT. ON 1 ST APPEAL, THE LD.CIT(A) RESTRICTED THE DISALLOWANCE TO 50% AND GR ANTED RELIEF OF RS.2,46,065/- TO THE ASSESSEE. AGGRIEVED, THE REVENUE IS IN APPEAL BEFOR E US ON THE FOLLOWING GROUND:- 3. LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN GI VING RELIEF ON CARRIAGE OUTWARDOF RS.2,46,065/- AS HE HIMSELF DE TECTED DISCREPANCY. 8. WE HAVE HEARD THE LD.DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DEEM IT FIT AND APPROPRIATE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, TO SET ASIDE THI S ISSUE TO THE FILE OF THE LD.AO FOR DECIDING THE SAME AFRESH, IN ACCORDANCE WITH LAW, A FTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASS ESSEE IS ALSO DIRECTED TO CO-OPERATE WITH THE LD.AO IN FURNISHING NECESSARY EVIDENCES I N SUPPORT OF HIS CLAIM. ACCORDINGLY, GROUND NO.3 RAISED BY THE REVENUE IS A LLOWED FOR STATISTICAL PURPOSE. ITA NO. 2 19/KOL/2013 -C-AM SHRI SU BIR KUMAR ROY 5 9. IN THE RESULT, THE APPEAL OF THE REVENUE IN I TA NO. 219/KOL2013 FOR THE A.Y 2006-07 IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER IS PRONOUNCED IN OPEN COURT ON /11/ 2015 COPY OF THE ORDER FORWARDED TO: 1.. THE APPELLANT : I T O WARD 55(1) 54/1 RAFI AHM ED KIDWAI ROAD, KOL-16 2 THE RESPONDENT- SHRI SUBIR KUMAR ROY C/O M/S. RO Y AGENCY, 284 DIAMOND HARBOUR ROAD, KOLKATA-34. 3 4. . THE CIT, THE CIT(A) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR ** PRADIP SPS SD/- ( MAHAVIR SINGH, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE 20/11 /2015