T. Mahantesh, V. ITO,

ITA 222/BANG/2013

• Counselvise Citation: 22221114 RSA 2013
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 19-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T S N MURTHY CITIII
• Assessee Lawyers: S RAMASUBRAMANIAN
• Keywords: Gross profit estimation; Revision of order; Opportunity of being heard
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE C BENCH, BANGALORE BEFORE SMT P.MADHAVI DEVI, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER (ITA NO.222(BNG.)/2013) (S.P.NO.151(B)/2014 (ASSESSMENT YEAR : 2009-10) SHRI T. MAHANTESH (HUF) PROP: SRI MATHA INDUSTRIES, KIADB INDUSTRIAL AREA, CHITRADURGA PETITIONER PAN NO.AAGHM1353Q VS THE INCOME-TAX OFFICER, WARD-1, CHITRADURGA RESPONDENT PETITIONER BY : SHRI S. RAMASUBRAMANIAN, CA RESPONDENT BY : SHRI T.S.N.MURTHY, CIT-III DATE OF HEARING : 01-08-2014 DATE OF PRONOUNCEMENT : 22- 08-2014 O R D E R PER SHRI ABRAHAM P GEORGE, AM: IN THIS APPEAL FILED BY THE ASSESSEE IT ASSAILS AN ORDER DATED 18/1/2013 PASSED BY THE CIT, DAVANGERE, U/S 263 OF THE IT ACT. 2. LEARNED COUNSEL FOR THE ASSESEE SUBMITTED THAT T HE CIT HAD PROPOSED REVISION FOR NON DEDUCTION OF TAX AT S OURCE ON 2 ITA NO.222(B)/2013 & SP NO.151(B)/2014 TRANSPORTATION CHARGES OF RS.7,58,410/- AND FOR PAY MENTS OF RS.13,500/- AND RS.15,040/- TO RMC AND SALES TAX AU THORITIES BEING ALLOWED BY THE AO DESPITE BEING IN THE NATURE OF PENALTIES. ACCORDING TO THE LEARNED AR IN SO FAR AS THE NON-DE DUCTION OF TAX WAS CONCERNED, ALL THE CONCERNED PAYMENTS WERE MADE DURING THE RELEVANT PREVIOUS YEAR AND THEREFORE, SEC.40A(IA) O F THE ACT DID NOT APPLY. RELIANCE WAS PLACED ON THE DECISION OF THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS ACIT 1 36 ITD 23(SB). IN SO FAR AS THE OTHER TWO PAYMENTS WERE CONCERNED, LEARNED AR SUBMITTED THAT THESE WERE NOT PENALTIES WHICH CALLE D FOR APPLICATION OF THE EXPLANATION TO SEC.37(1) OF THE ACT. ACCORD ING TO HIM, TWIN CONDITIONS REQUIRED FOR INVOKING SEC.263 WAS NOT SA TISFIED. 3. PER CONTRA, LEARNED DR SUBMITTED THAT 40A(IA) DI SALLOWANCE WAS CALLED FOR EVEN FOR PAYMENTS MADE DURING THE RE LEVANT PREVIOUS YEAR. IN VIEW OF THE DECISION OF THE HONBLE KOLK ATTA HIGH COURT IN THE CASE OF CIT VS CRESCENT EXPORT SYNDICATE 262 CT R 525 AND THAT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIKANDARKHAN N TUNVAR 357 ITR 312 4. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. FOR INVOKING THE POWERS VESTED U/S 263 OF THE ACT, TWO 3 ITA NO.222(B)/2013 & SP NO.151(B)/2014 CONDITIONS HAVE TO BE SATISFIED. FIRST IS THAT TH E ORDER SHOULD BE ERRONEOUS AND THE SECOND IS THAT THE ERROR SHOULD H AVE CAUSED PREJUDICE TO THE REVENUE. IN THIS CASE, THE ORIGIN AL ASSESSMENT WHEN COMPLETED U/S 143(3) OF THE ACT, THE AO HAD MA DE THE FOLLOWING COMMENTS. . DURING THE COURSE OF SCRUTINY ASSESSMENT, IT WAS NOTICED THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BILLS AND VOUCHERS TOWARDS PAYMENTS MADE TO EXPENSES DUE TO SELF MADE VOUCHERS AND IT WAS ALSO NOTICED THAT THE ASSESSEE HAS SHOWN LOW GP BY DEBITING HUGE EXPENSES IN P&L ACCOUNT, I.E. ELECTRI CAL CHARGES RS.15,38,635/-, LORRY FREIGHT RS.27,27,565/ -. MACHINERY SPARES RS.2,78,461/- SHORTAGE OF SF OIL & CAKE RS.2,73,293/- & RS.1,88,387/- AND WAGES RS.91,560/- ETC., THE UNDERSIGNED ALSO ASKED TO FI LE CONFIRMATION OF CREDITORS WITH FULL NAME AND ADDRES S AND THE SAME WAS VERIFIED AFTER NOTING CERTAIN DISCREPANCIES WITH RESPECT TO EXPENSES AND CREDITOR S CONFIRMATIONS. THE UNDERSIGNED WAS ASKED HIM TO EXPLAIN ABOUT DISCREPANCIES, THE ASSESSEE WAS NOT A LE TO EXPLAIN HENCE IN THE ABSENCE OF PROPER EXPLANATI ON AND AFTER GIVING THE OPPORTUNITY OF BEING HEARD THE UNDERSIGNED HAS DISALLOWED TO THE EXTENT OF THE AMOUNT OF RS.2,50,000/- LUMPSUM TO COVER ALL HIS DISCREPANCIES AND ADDED BACK TO HIS REGULAR INCOME. THE ASSESSES AR ALSO AGREED FOR THE SAME AND 4 ITA NO.222(B)/2013 & SP NO.151(B)/2014 ACCORDINGLY THE SCRUTINY PROCEEDINGS IS COMPLETED A S UNDER. 5. IT IS CLEAR FROM THE ABOVE THAT THE AO HAD VERIF IED VARIOUS EXPENDITURE IN THE P&L ACCOUNT BEFORE MAKING AN AD- HOC DISALLOWANCE OF RS.2,50,000/-. THE SO CALLED PENALT Y AMOUNT OF RS.13,500/- AND RS.15,040/- BEING A PART OF SUCH P& L ACCOUNT COULD NOT HAVE ESCAPED THE EYES OF THE AO. COMING TO THE ASPECT OF APPLICATION OF SEC.40A(IA) THERE ARE DIVERGENT O PINIONS FROM THE VARIOUS HIGH COURTS, VIS--VIS THE ISSUE OF APPLIC ABILITY OF THE SAID SECTION TO PAID AMOUNTS. WHEREAS HONBLE ALLAHABA D HIGH COURT IN THE CASE OF CIT VS VECTOR SHIPPING SERVICES PVT. LTD.M, 357 ITR 642 WENT BY THE VIEW TAKEN BY THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING AND TRANSPORT(SUPRA), THE CALCUTTA HIGH COURT IN THE CASE OF CRESCENT EXPORT SYNDICATE (SUPRA), AND GUJARAT HIGH COURT IN THE CASE OF SIKANDAR KHAN N TUNVAR (SUPRA) WERE IN FAVOUR OF THE REVENUE. SINCE THERE IS NO DECISION OF THE JURISDICTIONAL HONBLE HIGH COURT ON THIS ISSUE, WE CANNOT SAY THA T AO WAS NOT ACTING LAWFULLY WHEN HE ALLOWED THE CLAIM OF THE AS SESSEE, VIS--VIS THE PAYMENTS MADE TO TRANSPORTERS. THUS, IN OUR OP INION, TWIN CONDITIONS REQUIRED TO APPLY SEC.263 OF THE ACT HAV E NOT BEEN 5 ITA NO.222(B)/2013 & SP NO.151(B)/2014 SPECIFIED HERE. CONSEQUENTLY, WE HAVE NO HESITATION IN QUASHING THE ORDER OF THE CIT(A). IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. STAY PETITION HAVING BECOME INFRUCTUOUS IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON THE CONCLUSION OF T HE HEARING. SD/- SD/- (P.MADHAVI DEVI) (ABRAHAM P GEORGE) JUDCIAL MEMER ACCOUNTANT MEMBER BANGALORE: D A T E D : 22-08-2014 AM* COPY TO : APPELLANT RESPONDENT CIT(A)-IV, BANGALORE. CIT DR, ITAT, BANGALORE. GUARD FILE (1+1) ASST. REGISTRAR ITAT, BANGALORE