R.V.Refractories, CHENNAI V. ACIT, CHENNAI

ITA 2208/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86275 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 02-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: M KARUNAKARAN
• Keywords: Reopening of assessment; Non-deduction of tax; Difference of opinion; Change of opinion
• Section: 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 2208/MDS/2014 ( / ASSESSMENT YEAR: 2007-08) M/S. R.V.REFRACTORIES 388, SIDCO INDUSTRIAL ESTATE, AMBATTUR, CHENNAI-600 058. VS ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE-XIV CHENNAI. PAN: AAAFR5118G ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. M.KARUNAKARAN, ADVOCATE /RESPONDENT BY : MR. S. DAS GUPTA, JCIT /DATE OF HEARING : 13 TH JANUARY, 2015 /DATE OF PRONOUNCEMENT : 30 TH JANUARY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) VII, C HENNAI DATED 23.06.2014 FOR THE ASSESSMENT YEAR 2007-08. THOUGH THE ASSESSEE RAISED SEVERAL GROUNDS OF APPEAL, THE GROUNDS ARE MAINLY ON THREE ISSUES:- I) CHALLENGING REOPENING OF ASSESSMENT AS BAD IN LAW AND ONLY A MERE CHANGE OF OPINION; II) COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN 2 ITA NO.2208/MDS/2014 DISALLOWING LORRY FREIGHT CHARGES UNDER SECTION 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TDS; III) COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING THE DISALLOWANCE OF ` TWO LAKHS BEING ADVANCES MADE IN THE COURSE OF ASSESSEES BUSINESS WRITTEN OFF. 2. COUNSEL FOR THE ASSESSEE SUBMITS THAT GROUND NO .3 I.E. DISALLOWANCE OF ` 2,00,000/- BEING ADVANCES MADE IN THE COURSE OF ASSESSEES BUSINESS WRITTEN OFF IS NOT PR ESSED AND MAY BE TREATED AS WITHDRAWN. THUS, THIS GROUND IS D ISMISSED AS WITHDRAWN. 3. COMING TO THE ISSUE OF REOPENING OF ASSESSMENT, COUNSEL FOR THE ASSESSEE RELIES ON THE GROUNDS OF A PPEAL. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTS THE O RDERS OF LOWER AUTHORITIES. 4. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. INSOFAR AS REOPENING OF ASSESSMENT IS CONCERNED, TH E COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER: - 3 ITA NO.2208/MDS/2014 4.1 THE ASSESSEE QUESTIONED THE VALIDITY OF REOPEN ING OF ASSESSMENT U/S.147 OF THE I..T. ACT. IN THE SCRU TINY ASSESSMENT PASSED U/S.143(3) OF THE ACT DATED 18.12.2009 DISALLOWANCE U/S.40(A)(IA) OF THE ACT WA S MADE IN RESPECT OF COMMISSION PAYMENT OF ` 5,74,405/- WITHOUT DEDUCTING TAX AT SOURCE. THE ASSESSEE CLAIM ED ` 84,43,862/- TOWARDS FREIGHT DURING THE A.Y.2007-08. IN THE AUDIT REPORT FILED IN FORM 3CD U/S.44AB OF THE ACT COLUMN NO.27 WAS KEPT BLANK REGARDING TDS AND ITS PAYMENT. NON-DEDUCTION OF TAX AT SOURCE ON FREIGHT CHARGES WAS NOT IN THE KNOWLEDGE OF THE ASSESSING OFFICER WHILE COMPLETING THE SCRUTINY ASSESSMENT ORIGINALLY. SUBSEQUENTLY THE ASSESSING OFFICER CAME TO KNOW THAT INCOME CHARGEABLE TO TAX HAS BEEN UNDER- ASSESSED AS PER EXPLANATION 2 CLAUSE (C) TO SECTIO N 147 OF THE ACT. THE ASSESSING OFFICER THEREFORE ISSUED NOTICE U/S.147 OF THE ACT AFTER RECORDING THE REASONS FOR THE SAME. HENCE, THE OBJECTION OF THE ASSESSEE IS NOT TENABLE AND REJECTED. RELIANCE IS PLACED ON THE FO LLOWING CASE LAWS FOR THE DECISIONS: 1. PROFUL CHUNILAL PATEL VASANT CHUNILAL PATEL VS. M.J MAKWANA ACIT (236 ITR 832) (GUJ ) 2. ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT.LTD. ( 291 ITR 500 (SC). 5. ON GOING THROUGH THE ABOVE ORDER, WE DO NOT FIND ANY GOOD REASON TO REVERSE THE FINDINGS OF THE COMMISSI ONER OF INCOME TAX (APPEALS) AND THEREFORE UPHOLD THE SAME ON THIS ISSUE. 6. COMING TO THE MERITS OF THE CASE, THE ASSESSEE D URING THE ASSESSMENT YEAR PAID LORRY FREIGHT CHARGES. TH E ASSESSING OFFICER WHILE COMPLETING THE REASSESSMENT 4 ITA NO.2208/MDS/2014 DISALLOWED THE SAID CHARGES FOR THE REASON THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON THE SAID AMOUNT. 7. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESS EE HAD PAID ENTIRE FREIGHT CHARGES BEFORE THE END OF T HE RELEVANT YEAR AND THEREFORE PROVISIONS OF SECTION 40(A)(IA) HAVE NO APPLICATION AND THIS ISSUE HAS BEEN DECIDED BY THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN FAVOUR OF THE AS SESSEE IN THE CASE OF ITO VS. THEEKATHIR PRESS IN ITA NO.2076/MDS/2012, A COPY OF THE ORDER IS PLACED ON RECORD. 8. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDERS OF THE LOWER AUTHORITIES. 9. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISION RELIED ON. THE CO-ORDINATE BENCH O F THIS TRIBUNAL IS CONSISTENTLY HOLDING THAT PROVISIONS OF SECTION 40(A)(IA) HAVE NO APPLICATION FOR THE AMOUNTS ALRE ADY PAID WITHIN THE ACCOUNTING YEAR FOLLOWING THE DECISION O F THE SPECIAL BENCH OF (VISAKHAPATNAM BENCH) THIS TRIBUNA L IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ADDL. CIT (136 ITD 23) (SB). THIS VIEW IS ALSO UPHELD BY VARIOUS H IGH 5 ITA NO.2208/MDS/2014 COURTS. SOME OF THE HIGH COURTS HAVE TAKEN A CONTRA RY VIEW ALSO. THEREFORE, IN VIEW OF THE CONFLICTING DECISI ONS, THE TRIBUNAL FOLLOWS THE DECISION OF THE HONBLE SUPREM E COURT IN THE CASE OF VEGETABLE PRODUCTS ( 88 ITR 192 (SC) WHILE ALLOWING THE CLAIM OF THE ASSESSEE. 10. IN THE CASE OF ITO VS. THEEKATHIR PRESS (SUPRA) THE CO- ORDINATE BENCH OF THIS TRIBUNAL HELD AS UNDER:- 2. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF CERTAIN EXPENDITURE MADE BY THE ASSESSEE UNDER SECTION 40(A)(IA) ON THE GROUND THAT TAX HAS NOT BEEN DEDUCTED AT SOURCE AND PAID TO THE CREDIT OF GOVERNMENT OF INDIA. BUT, THE COMMISSIONER OF INCOME- TAX(APPEALS) DELETED THE DISALLOWANCE STATING THAT THE AMOUNT PAYABLE ALONE WOULD ATTRACT THE DISALLOWANCE UNDER SECTION 40(A)(IA) AND THE AMOUNT ALREADY PAID WOULD NOT ATTRACT THE ABOVE PROVISION. THE REVENUE IS AGGRIEVED AND, THEREFORE, THIS SECOND APPEAL BEFORE US. 3. THE INCOME-TAX APPELLATE TRIBUNAL, VISAKHAPATNAM-SPECIAL BENCH, HAD HELD IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ADDL. CIT, 16 ITR (TRIB) 1, THAT THE PROVISIONS OF SECTIO N 40(A)(IA) DO APPLY ONLY TO THOSE AMOUNTS REMAINED PAYABLE BY THE END OF THE PREVIOUS YEAR AND THE SAID PROVISIONS DO NOT APPLY TO THE AMOUNTS ALREADY PAID BY THE ASSESSEE BEFORE THE CLOSE OF THE RELEVANT PREVIOUS YEAR. IN THAT WAY, THE ORDER OF THE COMMISSIONER OF INCOME- TAX(APPEALS) IN THE PRESENT CASE IS CONDUCIVE TO THE DECISION OF THE SPECIAL BENCH. THE VERY SAME VIEW HAS BEEN UPHELD BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. M/S. VECTOR SHIPPING SERVICES(P) LTD. THE HONBLE ALLAHABAD 6 ITA NO.2208/MDS/2014 HIGH COURT, THROUGH THEIR JUDGMENT DATED 9-7- 2013 IN ITA NO.122 OF 2013, HAS HELD THAT THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ADDL. CIT IS GOOD LAW. IN THAT WAY, THE PRESENT APPEAL FILED BY THE REVENUE IS LIABLE TO BE DISMISSED. 4. BUT, AT THE SAME TIME, THE LEARNED JOINT COMMISSIONER OF INCOME-TAX APPEARING FOR THE REVENUE HAS RELIED ON THREE OTHER JUDGMENTS RENDERED BY THE HONBLE CALCUTTA HIGH COURT AND GUJARAT HIGH COURT, IN WHICH THEIR LORDSHIPS HAVE HELD THAT THE LAW STATED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDL.CIT WAS NOT ACCEPTABLE. THE HONBLE CALCUTTA HIGH COURT, THROUGH THEIR JUDGMENT DELIVERED ON 3 RD APRIL, 2013 IN ITA NO.20 OF 2013 IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATES, HAS HELD THAT THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDL.CIT IS NOT ACCEPTABLE. THE SAME VIEW HAS AGAIN BEEN REPEATED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. MD. JAKIR HOSSAIN MONDAL, THROUGH THEIR JUDGMENT DELIVERED ON 4 TH APRIL, 2013 IN ITA NO.31 OF 2013. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIKANDARKHAN N.TUNVAR, 33 TAXMAN.COM.133, HAS ALSO HELD THAT THE DISALLOWANCE UNDER SECTION 40(A)(IA) DOES NOT DISTINGUISH BETWEEN AMOUNTS PAID AND PAYABLE. IN VIEW OF THE ABOVE JUDGMENTS OF TWO HIGH COURTS, THE LEARNED OFFICER CONTENDED THAT THE APPEAL OF THE REVENUE NEEDS TO BE ALLOWED. 5. WE FIND THAT THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT IS IN FAVOUR OF THE ASSESSEE. AT THE SAME TIME, WE FIND THAT THE ORDERS OF THE CALCUTTA HIGH COURT AND THE GUJARAT HIGH COURT ARE AGAINST THE ASSESSEE. IN SUCH CIRCUMSTANCES, THE RULE OF JUDICIAL PRECEDENCE DEMANDS THAT THE VIEW FAVOURABLE TO THE ASSESSEE MUST BE ADOPTED, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD., 88 ITR 192. FOLLOWING THE ABOVE FUNDAMENTAL RULE DECLARED BY 7 ITA NO.2208/MDS/2014 THE HONBLE SUPREME COURT, WE HAVE TO FOLLOW THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT, WHICH IS IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, WE HOLD THAT THE DISALLOWANCE UNDER SECTION 40(A)(IA) APPLIES ONLY TO THOSE AMOUNTS PAYABLE AND NOT TO THOSE AMOUNTS PAID. ACCORDINGLY, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) IN THE PRESENT CASE. THE APPEAL FILED BY THE REVENUE IS LIABLE TO BE DISMISSED. 10. RESPECTFULLY FOLLOWING THE SAID DECISION, WE AL LOW THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 30 TH DAY OF JANUARY, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 30 TH JANUARY, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .