M/S Eros Fashion Pvt Ltd., Kolkata V. A.C.I.T Cir - 10,kolkata., Kolkata

ITA 241/KOL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100060 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 30-09-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 05-02-2013
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA PRASAD
• Assessee Lawyers: A K TULSIYAN
• Keywords: Retrospective amendment
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M. BALAGANES H, AM] I.T.A NO. 241/KOL/2013 ASSESSMENT YEAR: 2006-07 M/S. EROS FASHION PVT. LTD. VS. ASSISTANT COMMIS SIONER OF INCOME-TAX, (PAN: AABCE1789N) CIRCLE-10, KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 17.11.2015 DATE OF PRONOUNCEMENT: 20.11.2015 FOR THE APPELLANT: SHRI A. K. TULSIYAN, FCA FOR THE RESPONDENT: SHRI RAJENDRA PRASAD, JCIT ( SR. DR) ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XII, KOLKATA IN APPEAL NO. 227/XII/CIR-10/08-09 DATED 30.11.2012. ASSESSM ENT WAS FRAMED BY DCIT, CIRCLE- 10, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2006-07 VIDE ITS ORDER DATED 22.12.2008. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF PAYMENT OF LIQUIDATED DAMAGES O N ACCOUNT OF NON-SUPPLY OF MATERIAL FOR NON-DEDUCTION OF TDS U/S. 194C OF THE ACT BY IN VOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. FOR THIS, ASSESSEE HAS RAISE D FOLLOWING GROUND NO.1: 1. THAT THE LD. CIT(A) ERRED IN CONFIRMING DISALL OWANCE AMOUNTING TO RS.16,72,684/- U/S. 40(A)(IA) OF THE INCOME TAX ACT, 1961 ON THE P AYMENT MADE AS LIQUIDATED DAMAGES ON ACCOUNT OF NON-SUPPLY OF MATERIALS AGAINST ADVANCE RECEIVED. THE SAID PAYMENT DOES NOT ATTRACT TDS. FURTHER, THE ENTIRE PAYMENT OF RS.16, 72,684/-, WAS MADE DURING THE YEAR AND NOTHING REMAINED PAYABLE AT THE END OF THE FINA NCIAL YEAR. THE PAYMENT MADE DURING THE YEAR DOESNT ATTRACT THE PROVISIONS OF SEC. 40( A)(IA) UNDER ANY CIRCUMSTANCES. THE ADDITION NEEDS TO BE DELETED. 3. BRIEF FACTS WHICH ARE ADMITTED BY ASSESSEES COU NSEL DURING THE COURSE OF HEARING BEFORE US THAT THE ASSESSEE HAS PAID A SUM OF RS.16 ,72,684/- TOWARDS LIQUIDATED DAMAGES TO ARINTEX GLOBAL LTD. (AGL) WITHOUT DEDUCTION OF T DS U/S. 194C OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE ALSO ADMITTED THAT ASSESSE ES PAYMENT IS LIABLE TO BE DISALLOWED U/S. 40(A)(IA) OF THE ACT. BUT, IN SUCH CIRCUMSTAN CES, HE ONLY REQUESTED THAT THE ISSUE BE REMITTED BACK TO THE FILE OF AO TO EXAMINE WHETHER THE RECIPIENTS OF LIQUIDATED DAMAGES HAVE INCLUDED THE RECEIPTS IN THEIR RESPECTIVE RETU RN OF INCOME OR NOT, AND IF THE RECIPIENTS HAVE INCLUDED THE RECEIPTS IN THEIR INCOME AND FILE D THE RETURN OF INCOME AND PAID TAXES, THEN, IN THAT EVENT, THE ISSUE IS COVERED BY THE DE CISION OF HONBLE DELHI HIGH COURT IN 2 ITA NO. 241/KOL/2013 M/S. EROS FASHION PVT. LTD. AY 2006-07 THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P) LT D., ITA NOS. 160 & 161/2015 DATED 26.08.2015, WHEREIN IT HAS BEEN HELD AS UNDER : NO S. 40(A)(IA) DISALLOWANCE FOR FAILURE TO DEDUCT TDS ON PAYMENT IF PAYEE HAS OFFERED AMOUNT TO TAX. SECOND PROVISO TO S. 40(A)(I A) INSERTED BY FINANCE ACT 2013 W.E.F. 1.4.2013 SHOULD BE TREATED AS CURATIVE AND T O HAVE RETROSPECTIVE EFFECT FROM 1.4.2005. ITAT PRAISED FOR 'THOROUGH ANALYSIS' OF T HE PROVISION 4. IN VIEW OF THE ABOVE, LD. COUNSEL FOR THE ASSESS EE ONLY REQUESTED FOR SETTING ASIDE THE ISSUE TO THE FILE OF AO. ON QUERY FROM THE BEN CH, LD. SR. DR HAS NOT OBJECTED TO THE PROPOSAL. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTA NCES, WE ARE OF THE CONSIDERED VIEW THAT LET THE AO EXAMINE THE DETAILS OF RECIPIENTS O F LIQUIDATED DAMAGES, WHICH ARE TO BE FILED BY ASSESSEE AND IN CASE THESE RECEIPTS ARE IN CLUDED IN THEIR RESPECTIVE RETURN OF INCOME AND PAID TAXES THEREON, THE AO WILL DELETE T HE DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT IN VIEW OF THE DECISION IN THE CASE OF ANSA L LAND MARK TOWNSHIP (P) LTD., SUPRA. THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED FOR STAT ISTICAL PURPOSES. 5. THE NEXT ISSUE I.E. GROUND NO.2 IS AS REGARDS T O DISALLOWANCE U/S. 40(A)(IA) OF THE ACT AMOUNTING TO RS.23,77,041/- ON ACCOUNT OF PAYME NT MADE TO VARIOUS PARTIES. LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS ISSUE B EFORE US AND ON QUERY FROM THE BENCH, LD. SR. DR HAS RAISED NO OBJECTION QUA THAT. ACCOR DINGLY, THE SAME IS DISMISSED AS NOT PRESSED. 6. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF INTEREST AMOUNTING TO RS.3,37,3 80/-. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.3: 3. THAT THE LD. CIT(A) ERRED IN CONFIRMING DISALL OWANCE OF INTEREST AMOUNTING TO RS.3,37,380/- UNDER WRONG NOTION THAT NO INTEREST W AS EARNED BY THE ASSESSEE FROM THE LOAN & ADVANCE MADE TO DIRECTOR AND GROUP CONCE RN. THE ASSESSEE HAS EARNED INTEREST AMOUNTING TO RS.1,59,667/- FROM THE LOAN/A DVANCE GIVEN TO DIRECTORS AND GROUP CONCERN AND THE SAME WAS CREDITED IN THE PROF IT & LOSS A/C. THIS FACT HAS BEEN IGNORED BY THE AO AS WELL AS LD. CIT(A). THE ADDITION NEEDS TO BE DELETED. 7. BRIEFLY STATED FACTS ARE THAT THE AO ON EXAMINAT ION OF P&L ACCOUNT OF THE ASSESSEE, WHICH REVEALED THAT THE ASSESSEE HAS DEBI TED INTEREST TO THE TUNE OF RS.3,89,185/-. ACCORDING TO AO, THE ASSESSEE HAS A DVANCED INTEREST FREE LOANS TO THE FOLLOWING PERSONS: SHRI ASISH TODI, DIRECTOR RS. 6,40,011/- SHRI LAXMI KANT TODI, DIRECTOR RS.5,63,184/- LAXMI KANT TODI, HUF RS.1,97,134/- M. M. EXPORTS RS.4,74,000/- RS.18,74,329/- 3 ITA NO. 241/KOL/2013 M/S. EROS FASHION PVT. LTD. AY 2006-07 ACCORDINGLY, AO APPLYING INTEREST RATE OF 18% AND D ISALLOWED THE INTEREST AT RS.3,37,380/-. AGGRIEVED, ASSESSEE PREFERRED APPEA L BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO. AGGRIEVED, NOW ASSESSEE IS IN SE COND APPEAL BEFORE US. 8. BEFORE US, LD. COUNSEL FOR THE ASSESSEE STATED T HAT THERE ARE INTEREST RECEIVED AND ALSO INTEREST PAID ON THESE AMOUNTS AND THERE ARE N O INTEREST FREE LOANS. LD. COUNSEL FOR THE ASSESSEE TRIED TO FILE DETAILS BUT THESE ARE NE W EVIDENCE BUT HE REQUESTED THAT LET THIS ISSUE BE SET ASIDE TO THE FILE OF AO FOR FRESH EXAM INATION. ON QUERY FROM THE BENCH, LD. SR. DR HAS NOT OBJECTED TO THE PROPOSAL. IN VIEW O F THE ABOVE FACTS AND CIRCUMSTANCES, WE SET ASIDE THIS ISSUE TO THE FILE OF AO TO RE-DECIDE THE ISSUE AFTER TAKING INTO CONSIDERATION THE DETAILS FILED BY THE ASSESSEE WHETHER THE ASSES SEE HAS RECEIVED INTEREST AND PAID INTEREST ALSO. IN VIEW OF THE ABOVE, THE AO WILL RE-DECIDE ACCORDINGLY. 9. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF AO IN MAKING ADDITION OF DIFFERENCE I N STOCK FOUND DURING THE COURSE OF SURVEY AT RS.2,21,460/-. FOR THIS, ASSESSEE HAS RA ISED FOLLOWING GROUND NO.4: 4. THAT THE LD. CIT(A) ERRED IN CONFIRMING ADDITI ON OF RS.2,21,460/- ON ACCOUNT OF THE ALLEGED DIFFERENCE FOUND IN STOCK IN THE COURSE OF SURVEY. THE LD. CIT(A) IGNORED THE FACT THAT CLOSING STOCK INCLUDES THIS ALLEGED SHORTAGE O F STOCK. AT THE BEST, IN RESPECT OF THE ALLEGED SHORTAGE OF STOCK FOUND IN THE COURSE OF TH E SURVEY, THE GP RATE COULD HAVE BEEN APPLIED. THE ADDITION MADE AND CONFIRMED BY THE LD . CIT(A) IS THE CONSEQUENCE OF THE NON-APPRECIATION OF FACTS AND HENCE NEEDS TO BE DEL ETED. 10. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO HAS NOT GONE INTO THE RE CONCILIATION STATEMENT FILED BY ASSESSEE VIDE LETTER DATED 17.12.2008, WHEREBY THE COMPLETE STOCK STATEMENT AS ON THE DATE OF SURVEY I.E. 27.12.2005 WAS FILED. EVEN THE CIT(A) WITHOUT GOING INTO THE ISSUE OF RECONCILIATION CONFIRMED THE ADDITION. IN VIEW OF THE ABOVE FACT, WE ARE OF THE VIEW THAT RECONCILIATION SHOULD HAVE BEEN CONSIDERED BY THE L OWER AUTHORITIES AND ACCORDINGLY, WE SET ASIDE THIS ISSUE TO THE FILE OF AO FOR FRESH AD JUDICATION AFTER CONSIDERING THE RECONCILIATION. THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 12. ORDER IS PRONOUNCED IN THE OPEN COURT ON 20.11. 2015 SD/- SD/- (M. BALAGANESH) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20TH NOVEMBER, 2015 JD. SR. P.S 4 ITA NO. 241/KOL/2013 M/S. EROS FASHION PVT. LTD. AY 2006-07 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT M/S. EROS FASHION PVT. LTD., 22, MADAN MOHAN TALLA STREET, KOLKATA-700005. 2 RESPONDENT ACIT, CIRCLE-10, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .