OBEROI GLASS HOUSE, NEW DELHI V. ACIT, CIRCLE- 35(1), NEW DELHI

ITA 2331/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0244 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 04-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure; Opportunity of being heard; Notional interest; TDS; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SH. R.K PANDA, ACCOUNTANT MEMBER ITA NO.2331/DEL/2018 ASSESSMENT YEAR: 2013-14 M/S. OBEROI GLASS HOUSE 1589, MADARSA ROAD, KASHMERE GATE, DELHI-110006 PAN NO.AAAFO6397A VS ACIT CIRCLE 35 (1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. SATISH AGGARWAL, CA RESPONDENT BY SH. AMIT JAIN, SR. DR DATE OF HEARING: 11/03/2019 DATE OF PRONOUNCEMENT: 29/03/2019 ORDER PER R.K. PANDA, AM: 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER DATED 28.11.2017 OF THE CIT(A)-12, NEW DELHI RELATING TO A. Y. 2013-14. 2. THE REVISED GROUNDS RAISED BY THE ASSESSEE ARE A S UNDER :- 1. THAT THE ORDER OF THE LEARNED CITI (APPEALS)-12 , NEW DELHI IS ARBITRARY, BIASED AND BAD IN LAW AND IN FA CTS AND CIRCUMSTANCES OF THE CASE IN SO FAR AS IT CONFIRMS THE ORDER OF THE ASSESSING OFFICER. 2 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS GROSSLY ERRED IN CONFIRMING THE 40A (A) (IA) OF THE ACT, WERE NOT APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS.16,93,861/- BEING THE NOTIONAL INTEREST ON INTER EST FREE LOAN GIVEN TO M/S. OBEROI ENTERPRISES. 3. THE GROUND NO. 1 BEING GENERAL IN NATURE IS DISM ISSED. 4. SO FAR AS GROUND NO.2 IS CONCERNED THE SAME RELA TES TO ADDITION CONFIRMED BY THE CIT(A) ON ACCOUNT OF NON DEDUCTION OF TAX UNDER PROVISIONS OF SECTION 40 (A) (IA) FROM CE RTAIN PAYMENTS. 5. THE FIRST ISSUE RAISED BY THE ASSESSEE IN THE GR OUNDS OF APPEAL RELATES TO THE ORDER OF THE CIT(A) IN CONFIR MING THE DISALLOWANCE OF BUSINESS EXPENDITURE OF RS.4,05,832 /- MADE BY THE ASSESSING OFFICER. 6. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEE FIRM IS ENGAGED IN THE BUSINESS OF TRADING IN AUTO MOBILE G LASS AND ACCESSORIES. IT FILED ITS RETURN OF INCOME ON 19.12 .2013 DECLARING TOTAL INCOME OF RS.21,76,930/-. THE ASSESSING OFFI CER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS MADE PAYMENT OF RS.6,61,732/- TO DIFFERENT PARTIES ON WHICH TDS HAS NOT BEEN DEDUCTED. FROM THE DETAILS FURNISH ED BY THE ASSESSEE HE OBSERVED THAT AN AMOUNT OF RS.4,05,832/ - HAS BEEN PAID TO HOTEL RADISSON ON WHICH NO TAX HAS BEEN DED UCTED. IT WAS ARGUED BEFORE THE ASSESSING OFFICER THAT NO TAX IS REQUIRED TO BE DEDUCTED FROM THE AMOUNT PAID TO HOTEL RADISSON FOR DINNER HOSTED BY THE ASSESSEE FOR EXISTING AND PROSPECTIVE CUSTOMERS OF 3 THE ASSESSEE WHO WERE IN THE SAME OR RELATED TRADE. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE ARGUME NTS ADVANCED BY THE ASSESSEE AND MADE ADDITION OF THE SAME FOR N ON DEDUCTION OF TAX. 7. IN APPEAL THE LD. CIT(A) UPHELD THE ACTION OF T HE ASSESSING OFFICER. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET R EFERRED TO CBDT CIRCULAR NO.715 DATED 08.08.1995 AND DREW THE ATTENTION OF THE BENCH TO THE QUERY NO.11 AND ANSWER THERE TO WHICH READ AS UNDER :- QUESTION : WHETHER A CONTRACT FOR CATERING WOULD I NCLUDE SERVING FOOD IN A RESTAURANT/ SALE OF EATABLES ? ANS. TDS IS NOT REQUIRED TO BE MADE WHEN PAYMENT IS MADE FOR SERVING FOOD IN A RESTAURANT IN THE NORMAL COURSE OF RUNNING OF THE RESTAURANT / CAF. 9. HE ACCORDINGLY SUBMITTED THAT IN VIEW OF THE CBD T CIRCULAR NO.715 WHICH IS BINDING ON THE DEPARTMENT NO TAX IS DEDUCTABLE FROM THE PAYMENTS MADE TO HOTEL RADISSON FOR CATERI NG EXPENSES. 10. THE LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 11. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BEL OW. IT IS AN ADMITTED FACT THAT THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.4,05,832/- PAID TO HOTEL RADISSON BEING THE DINN ER HOSTED BY THE ASSESSEE FOR CUSTOMERS ON ACCOUNT OF NON DEDUCT ION OF TAX. I FIND THE LD. CIT(A) UPHELD THE ACTION OF THE ASSESS ING OFFICER ON THE GROUND THAT THE SUPPLY OF FOOD ALONGWITH CATERI NG SERVICES RENDERED BY THE HOTEL IS COVERED IN THE WORK CONTR ACT AND THE 4 ASSESSEE WAS UNDER LEGAL OBLIGATION TO DEDUCT TAX F ROM THE SAME. I FIND THE ISSUE IS COVERED IN FAVOUR OF THE ASSESS EE BY CBDT CIRCULAR NO.715 DATED 08.08.1995 WHERE IT HAS BEEN CATEGORICALLY HELD THAT TDS IS NOT REQUIRED TO BE MADE WHEN PAYME NT IS MADE FOR SERVING FOOD IN THE RESTAURANT IN THE NORMAL CO URSE OF RUNNING OF THE RESTAURANT / CAFE. SINCE THE CIRCULAR IS BI NDING ON THE DEPARTMENT, THEREFORE, I FIND NO JUSTIFICATION ON T HE PART OF THE CIT (A) IN UPHOLDING THE ACTION OF THE ASSESSING OFFICE R. I, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION. 13. THE SECOND ISSUE RELATES TO ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS.28,000/- OUT OF RS.6,29,628/- MA DE BY THE ASSESSING OFFICER OUT OF MISCELLANEOUS EXPENSES. 14. THE FACTS OF THE CASE, IN BRIEF, ARE THAT AN AM OUNT OF RS.28,000/- WAS PAID TO TWO PERSONS @ 14000 EACH FO R FACILITATING TO GET THE RENTED PREMISES AT TWO LOCATIONS AND FOR COMPLYING RELATED FORMALITIES. IT WAS SUBMITTED BEFORE THE AS SESSING OFFICER THAT THESE PAYMENTS WERE NOT IN THE NATURE OF COMMI SSION / BROKERAGE AND WERE ALSO NOT IN THE NATURE OF CONTRA CT PAYMENT. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WI TH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND MADE THE ADD ITION WHICH HAS BEEN CONFIRMED BY THE CIT(A). 15. THE LD. COUNSEL FOR THE ASSESSEE COULD NOT CONT ROVERT THE FACTUAL FINDING GIVEN BY THE CIT(A) THAT WHEN THE S ERVICES OF THE BROKERS ARE TAKEN FOR SOME RENTED PREMISES, THE PAY MENTS TO THEM WILL BE CALLED BROKERAGE ONLY AND THEREFORE, T DS SHOULD HAVE BEEN DEDUCTED SINCE THE PAYMENT EXCEEDS TO RS. 2500/- TO EACH PERSON. I, THEREFORE, UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND ADDITION SO SUSTAINED IS CONFIRMED. 5 16. THE NEXT ISSUE RELATES TO THE ORDER OF THE CIT( A) IN CONFIRMING THE ADDITION OF RS.2,27,900/- ON ACCOUNT OF NON DEDUCTION OF TAX FROM RENT BY OBSERVING AS UNDER :- 8.9 RS.2,27,900/- WERE PAID AS RENT TO M/S. NAJUMUD DIN TAIYEBALLY & OTHERS. THE APPELLANT STATES THAT THE PAYMENT WAS MADE TO MORE THAN ONE PERSON. BUT IN THIS REGA RD NO EVIDENCE HAS BEEN FILED. MOREOVER, I FIND THAT IN THE RENTAL AGREEMENT THERE IS THE SIGNATURE OF ONLY ONE PERSON AGAINST LESSOR. IN THE LEASE AGREEMENT ALSO, THE TERM USED IS LESSOR WHICH INDICATES SINGULAR INSTEAD OF PLURAL. TH E APPELLANT HAS NOT GIVEN THE DETAILS OF BANK STATEMENT TO PROV E THAT THE PAYMENTS WERE MADE TO DIFFERENT PERSONS. THE AMOUNT DURING THE YEAR EXCEEDED RS.1,80,000/-. THEREFORE, THE ASS ESSEE WAS UNDER OBLIGATION TO MAKE THE TDS. HENCE, THE ASSESS ING OFFICER WAS JUSTIFIED IN MAKING THE DISALLOWANCE. 17. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT GIVEN AN OPPORTUNITY THE ASSESSEE IS IN A POSITION TO PRODUC E THE BANK ACCOUNT AND SUBSTANTIATE THAT THE PAYMENTS HAVE BEE N MADE TO DIFFERENT PERSONS AND THE AMOUNT DOES NOT EXCEED RS .1,80,000/- PER YEAR PER PERSON FOR WHICH NO TAX IS DEDUCTABLE. IN VIEW OF THE ABOVE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSE E THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GRANT ONE FINAL OPPORTUNITY TO THE ASSEESSEE TO SUB STANTIATE ITS CASE. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AS PER FACT AND LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. I HOLD AND DIRECT ACCORDINGLY. 18. SIMILARLY THE ISSUE WITH RESPECT TO PAYMENT OF RS.250/- CLAIMED TO BE RENT FOR THE BUSINESS PREMISES IS ALS O RESTORED TO 6 THE FILE OF THE ASSESSING OFFICER WITH SIMILAR DIRE CTIONS AS IN THE PRECEDING PARAGRAPH. 19. THE NEXT ISSUE RELATES TO THE ORDER OF THE CIT( A) IN CONFIRMING THE ADDITION OF RS.2,42,110/- WHEREIN TH E LD. CIT(A) HELD AS UNDER :- 8.11 THE APPELLANT HAS STATED THAT NO TAX WAS DEDUC TED ON RS.2,42,110/- PAID TO M/S. VK GARG & ASSOCIATES, CHARTERED ACCOUNTANTS. THE APPELLANT HAS FAILED TO JUSTIFY THE REASON FOR MAKING NO DEDUCTION. I AM NOT CONVI NCED WITH THE ARGUMENT OF THE APPELLANT THAT DISALLOWANC E CANNOT BE MADE IN THE CASES OF SHORT DEDUCTION. SH ORT DEDUCTION CANNOT BE DEFINED BECAUSE A PERSON CAN MA KE THE DEDUCTION OF RS.1./- LEAVING THE BALANCE AMOUNT , PAYABLE TO THE DEDUCTEE. SUCH CASES WILL ALSO FALL IN THE CATEGORY OF SHORT DEDUCTION. IN THIS WAY THE PURPO SE OF THE PROVISIONS OF THE TDS WILL GET DEFEATED. THEREFORE , I HOLD THAT ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE A MOUNT. 20. THE LD. COUNSEL FOR THE ASSESSEE FILED THE FOLL OWING CHART :- 2. DETAILS OF SHORT DEDUCTION OF TDS TOTAL PAYMENT TO M/S. VK GARG & ASSOCIATES 549 950.00 DURING THE YEAR 2012-13 TDS REQUIRED TO BE DEDUCTED ON THE ABOVE10.00% 5499 5.00 TDS ACTUALLY DEDUCTED BY M/S. OBEROI GLASS HOUSE 30784.00 TDS SHORT DEDUCTION 24211.00 AMOUNT ON WHICH TDS SHORT DEDUCTED 242110.00 7 (DISALLOWANCE) 21. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT HE HAS NO OBJECTION IF THE ISSUE IS RESTORED T O THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE ONE FINA L OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EVIDENCE TO HIS S ATISFACTION REGARDING INCOME OFFERED BY THE PAYEES ON SUCH INCO ME WHO ARE REPUTED CONSULTANCY FIRMS. I, THEREFORE, DEEM IT P ROPER TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WIT H A DIRECTION TO GIVE ONE FINAL OPPORTUNITY TO THE ASSESSEE TO SUBST ANTIATE WITH EVIDENCE TO HIS SATISFACTION THAT THE PAYEES HAVE D ECLARED SUCH INCOME IN THEIR RESPECTIVE RETURN OF INCOME AND PAI D TAX THEREON. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AS PER FACT AND LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 22. SO FAR AS THE GROUND NO.3 IS CONCERNED THE SAME RELATES TO THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS.15,93,861/- BEING NOTIONAL INTEREST ON INTEREST FREE LOAN GIVEN TO M/S. OBEROI ENTERPRISES. 23. AFTER HEARING BOTH THE SIDES. I FIND THE ASSES SING OFFICER HAD MADE ADDITION OF RS.15,93,861/- BEING INTEREST @ 12 % ON 1,32,82,8641/- BEING INTEREST ON INTEREST FREE LOAN GIVEN TO M/S. OBEROI ENTERPRISES. IN APPEAL THE LD. CIT (A) CONF IRMED THE ADDITION ON THE GROUND THAT THE ASSESSEE COULD NOT SUBSTANTIATE WITH EVIDENCE THAT THE PAYMENT WAS MADE FOR PURCHAS E OF GOODS. SINCE THE ASSESSEE HAS CLAIMED INTEREST ON ACCOUNT OF BORROWED FUNDS FROM THE BANKS AND UNSECURED LOANS AND HAS GI VEN INTEREST FREE ADVANCES TO SISTER CONCERNS, THEREFORE, HE HEL D THAT THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING NOTIONAL IN COME IS JUSTIFIED. 8 23. THE LD. COUNSEL FOR THE ASSESSEE RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CH ANDA BHOY AND JASSA BOY (2012) 49 SOT 448 (MUM) SUBMITTED THA T UNDER IDENTICAL CIRCUMSTANCES THE HONBLE HIGH COURT HAS UPHELD THE ORDER OF THE TRIBUNAL DELETING THE ADDITION ON ACCO UNT OF NOTIONAL INTEREST. 24. IT IS THE SUBMISSION OF THE LD. DR THAT ASSESSE E HAS NOT FULFILLED THE CONDITION LAID DOWN BY THE HONBLE SU PREME COURT IN THE CASE OF S. A. BUILDTECH VS. CIT. 25. I FIND THAT THE FACTS ARE NOT BORNE OUT CLEARLY FROM THE SUBMISSIONS MADE BY THE ASSESSEE. IT IS NOT A CASE OF THE ASSESSEE THAT IT HAS SUFFICIENT CAPITAL AND FREE RE SERVES AT THE BEGINNING OF THE YEAR SO AS TO ADVANCE SUCH HUGE LO AN. THE ASSESSEE HAS ALSO NOT SUBSTANTIATED WITH EVIDENCE T HAT ADVANCES GIVEN TO M/S. OBEROI ENTERPRISES ARE AGAINST PURCHA SES. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE A ND CONSIDERING THE FACT THAT THE LD. CIT(A) WHILE REJECTING THE CL AIM OF THE ASSESSEE ON THIS ISSUE HAS OBSERVED THAT THE ASSESS EE HAS FAILED TO PROVE ITS AVERNMENT MADE BEFORE THE ASSESSING OF FICER OR BEFORE HIM, THEREFORE, I DEEM IT PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO GIV E ONE MORE OPPORTUNITY TO THE ASSESEE TO SUBSTANTIATE WITH EVI DENCE TO HIS SATISFACTION THAT THESE ARE BUSINESS ADVANCES AND / OR THAT THE CAPITAL OF THE PARTNERS IS MORE THAN THE INTEREST F REE ADVANCES GIVEN TO THE SISTER CONCERNS. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AS PER FACT AND LAW AFTER GIVING DUE OPPO RTUNITY OF BEING HEARD TO THE ASSESSEE. I HOLD AND DIRECT ACCORDINGL Y. 9 26. THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29.03.2019. SD/- (R.K PANDA) ACCOUNTANT MEMBER *NEHA* DATE:- .03.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 25.03.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 29.03.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER