Sri Grandhi Manoj Kumar, Eluru V. The DCIT, Central Circle-1, Visakhapatnam

ITA 244/VIZ/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7128 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-12-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 07-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: TH L PETER
• Keywords: Non-deduction of tax
• Section: 263; 63

Judgement Text

ITA NO.244/VIZAG/200 -GRANDHI MANOJ KUMAR, ELURU PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.244/VIZAG/2010 ASSESSMENT YEAR: 2005-06 GRANDHI MANOJ KUMAR ELURU CIT(CENTRAL) HYDERABAD (APPELLANT) PAN NO: AABHG 9892B VS. (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI TH.L.PETER, CIT(DR) ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 04-2- 2010 PASSED BY LD CIT (CENTRAL), HYDERABAD U/S 263 OF THE ACT FOR THE ASSESSMENT YEAR 2005-06. THE ASSESSEE IS CHALLENGI NG THE DIRECTIONS ISSUED BY LD CIT. 2. DURING THE COURSE OF HEARING, THE LD A.R DID NOT PRESS GROUND NO.6. ACCORDINGLY, THE SAID GROUND IS DISMISSED AS WITHDR AWN. THE REMAINING GROUNDS GIVE RISE TO A SINGLE ISSUE VIZ., THE DISAL LOWANCE REQUIRED TO BE MADE U/S 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE AS PER SEC. 194A OF THE ACT ON INTEREST PAYMENTS MADE BY THE AS SESSEE. 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS ASSESSED IN THE HUF STATUS AND IS ENGAGED IN THE JE WELLERY BUSINESS. THE ASSESSEE CARRIED ON THE JEWELLERY BUSINESS IN THE N AME AND STYLE M/S VAIBHAV JEWELLERS AT ELURU TILL 23.4.2004. THEREAF TER THE BUSINESS WAS TAKEN OVER BY A COMPANY NAMED M/S VAIBHAV EMPIRE PR IVATE LIMITED. THE ITA NO.244/VIZAG/200 -GRANDHI MANOJ KUMAR, ELURU PAGE 2 OF 5 ASSESSEE MAINTAINED TWO SETS OF BOOKS OF ACCOUNT, I .E. ONE FOR JEWELLERY BUSINESS AND ANOTHER ONE CALLED CAPITAL SET FOR O THER ACTIVITIES. IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2004 -05, I.E. IN YEAR IMMEDIATELY PRECEDING TO THE YEAR UNDER CONSIDERATI ON, THE TURNOVER OF THE JEWELLERY BUSINESS EXCEEDED THE LIMITS PRESCRIBED U /S 44AB OF THE ACT. HENCE THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOUR CE ON INTEREST PAYMENTS MADE DURING THE YEAR RELEVANT TO THE ASSESSMENT YEA R 2005-06 U/S 194A OF THE ACT. THE ASSESSEE HAD MADE PAYMENTS OF INTERES T FROM OUT CAPITAL SET BOOKS, BUT DID NOT DEDUCT TDS FROM THEM. THE AO COM PLETED THE ASSESSMENT BY ACCEPTING THE RETURN FILED BY THE ASS ESSEE. HOWEVER, THE LD CIT(A) NOTICED THAT THE ASSESSEE DID NOT DEDUCT TDS FROM THE FOLLOWING INTEREST PAYMENTS. U/S 194A OF THE ACT. A. SMT. G.MANGALA GOWRI - RS.3,00,000/- B. M/S ACP INDUSTRIES LTD. - RS.34,27,931/-. ACCORDINGLY HE INITIATED REVISION PROCEEDINGS U/S 2 63 OF THE ACT. THE ASSESSEE SUBMITTED BEFORE HIM THAT HIS CAPITAL SET BOOKS HAVE NOTBEEN COVERED BY AUDIT UNDER SECTION 44AB OF THE ACT AND HENCE THERE ISNO LIABILITY TO DEDUCT TDS ON THE INTEREST PAID FROM T HE CAPITAL SET. HOWEVER THE LD CIT WAS NOT CONVINCED WITH THE SAID EXPLANAT IONS AND ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO MAKE A FRESH ASSE SSMENT DE NOVO. AGGRIEVED BY THE DIRECTIONS OF LEARNED CIT, THE ASS ESSEE IS IN APPEAL BEFORE US. 4. THE LD A.R SUBMITTED THAT THE IMPUGNED INTERES T PAYMENTS HAVE BEEN MADE IN THE MONEY LENDING BUSINESS OF THE ASSESSEE FOR WHICH SEPARATE BOOKS OF ACCOUNT (NAMED AS CAPITAL SET) ARE MAINTA INED. THE PROVISIONS OF SEC. 194A BECAME TO BE APPLICABLE TO THE ASSESSE E SINCE THE TURNOVER OF THE JEWELLERY BUSINESS IN THE IMMEDIATELY PRECEDING FINANCIAL YEAR EXCEEDED THE MONETARY LIMITS PRESCRIBED U/S 44AB OF THE ACT. THE PROVISO TO SEC. 194A(1) STATES THAT THE PROVISIONS OF SEC. 194 IS A PPLICABLE TO THE INDIVIDUAL/ HUF, IF THE TURNOVER FROM BUSINESS CARR IED ON BY THE ASSESSEE ITA NO.244/VIZAG/200 -GRANDHI MANOJ KUMAR, ELURU PAGE 3 OF 5 EXCEEDS THE MONETARY LIMITS PRESCRIBED U/S 44AB OF THE ACT IN THE IMMEDIATELY PRECEDING FINANCIAL YEAR. SINCE THE AP PLICABILITY OF SEC. 194A IS LINKED TO THE BUSINESS, THERE IS A POSSIBLE VIEW TH AT THE SAID PROVISO SHALL APPLY ONLY IF THE SAID BUSINESS IS CONTINUED TO BE CARRIED ON IN THE YEAR SUCCEEDING TO THE YEAR IN WHICH THE TURNOVER EXCEED ED THE LIMITS PRESCRIBED IN SEC. 44AB OF THE ACT. THE ASSESSEE HAD TRANSFER RED THE JEWELLERY BUSINESS TO A PRIVATE LIMITED COMPANY DURING THE YE AR UNDER CONSIDERATION, I.E. ON 23.4.2004 AND HENCE HE DID NOT CARRY ON THE BUSINESS DURING THE YEAR UNDER CONSIDERATION. BESIDES THE ABOVE, THE T URNOVER IN THE MONEY LENDING BUSINESS DID NOT EXCEED THE LIMITS PRESCRIB ED U/S 44AB OF THE ACT IN THE IMMEDIATELY PRECEDING FINANCIAL YEAR. HENCE THE RE ARE TWO POSSIBLE VIEWS ABOUT THE APPLICABILITY OF THE PROVISO TO SEC . 194(1) TO THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, IN WHICH CASE, TH E INSTANT ISSUE FALLS OUTSIDE THE SCOPE OF SEC. 263 OF THE ACT. 5. ON THE OTHER HAND, THE LD D.R SUBMITTED THAT THOUGH THE IMPUGNED INTEREST PAYMENTS HAVE BEEN MADE IN THE MONEY LENDI NG BUSINESS CARRIED ON BY HIM, SINCE THE TURNOVER IN THE JEWELLERY BUSI NESS HAD EXCEEDED THE MONETARY LIMITS PRESCRIBED IN SEC. 44AB OF THE ACT IN THE IMMEDIATELY PRECEDING YEAR, THE PROVISO TO SEC. 194A(1) SHALL A PPLY TO THE ASSESSEE. THE SAID PROVISO DOES NOT DIFFERENTIATE DIFFERENT T YPES OF BUSINESSES AND HENCE IT IS ASSESSEE SPECIFIC. ACCORDINGLY, THE L D D.R SUBMITTED THAT THERE IS NO AMBIGUITY ABOUT THE APPLICABILITY OF THE SAID SECTION TO THE ASSESSEE, AS CONTENDED BY LEARNED A.R. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. UNDER SECTION 194A OF THE ACT, THE TDS IS LIABLE TO DEDUCTED ON PAYMENT OF INTEREST OTHER THAN INTEREST ON SECURITIES. THE SA ID SECTION IS NOT APPLICABLE TO THE ASSESSEES WHO ARE ASSESSED IN THE STATUS OF INDIVIDUAL OR HUF. HOWEVER, BY VIRTUE OF THE PROVISO TO 194A(1), IT I S MADE APPLICABLE TO THE ITA NO.244/VIZAG/200 -GRANDHI MANOJ KUMAR, ELURU PAGE 4 OF 5 INDIVIDUALS AND HUF ON FULFILLMENT OF THE CRITERIA PRESCRIBED IN THE SAID PROVISO, WHICH READS AS UNDER: PROVIDED THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO SE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BU SINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LI MITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURI NG THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WH ICH SUCH INTEREST IS CREDITED OR PAID, SHALL BE LIABLE TO DEDUCT INCO ME-TAX UNDER THIS SECTION. ACCORDING TO THE PROVISO CITED ABOVE, IF THE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY AN INDIVIDUAL OR A HUF EXCEEDS THE MONETARY LIMITS SPECIFIED IN SEC.44 AB DURING THE IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH S UCH INTEREST IS CREDITED OR PAID, THEN THE PROVISIONS OF SEC. 194A(1) SHALL APPLY TO THE INDIVIDUAL OR HUF. 7. IN THE INSTANT CASE, THE YEAR UNDER CONSIDER ATION IS THE FINANCIAL YEAR 2004-05 RELEVANT TO THE ASSESSMENT YEAR 2005-06. I N THE IMMEDIATELY PRECEDING FINANCIAL YEAR, THE GROSS SALES OF THE AS SESSEE FROM THE JEWELLERY BUSINESS CARRIED ON BY THE ASSESSEE HAVE EXCEEDED T HE LIMITS PRESCRIBED IN SEC. 44AB OF THE ACT. HENCE ON A PLAIN READING OF THE PROVISO, THE PROVISIONS OF SEC. 194A SHALL APPLY TO THE ASSESSEE . BEFORE US, THE LD A.R CONTENDED THAT THERE IS AMBIGUITY ABOUT THE APPLICA TION OF SEC. 194A IN THE HANDS OF THE ASSESSEE SINCE THE ASSESSEE HAS STOPPE D THE JEWELLERY BUSINESS DURING THE YEAR UNDER CONSIDERATION. HOWE VER, IN OUR VIEW, THE SAID CONTENTIONS CANNOT BE RAISED AT THIS STAGE. BE CAUSE, THE POINT THAT IS REQUIRED TO BE SEEN FOR THE PURPOSE OF SEC. 263 IS WHETHER THE ASSESSING OFFICER HAS EXAMINED THE IMPUGNED ISSUE AND IF SO W HETHER THE VIEW TAKEN BY HIM CAN BE TAKEN AS A POSSIBLE VIEW. FROM THE A SSESSMENT ORDER, WE FIND THAT THE ASSESSING OFFICER DID NOT DISCUSS ANY THING ABOUT THE IMPUGNED ISSUE. THE ASSESSEE ALSO COULD NOT SHOW T HAT THE ASSESSING OFFICER DID ACTUALLY EXAMINE THE IMPUGNED ISSUE. S INCE THE ASSESSING ITA NO.244/VIZAG/200 -GRANDHI MANOJ KUMAR, ELURU PAGE 5 OF 5 OFFICER HAS FAILED TO EXAMINE THE APPLICABILITY OF SEC. 40(A)(IA) OF THE ACT, WE ARE OF THE VIEW THAT THE REVISION PROCEEDINGS IN ITIATED BY LEARNED CIT(A) UNDER SECTION 263 OF THE ACT IS PROPER. ACC ORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF THE LD CIT(A) IN SETTING THE ASSESSMENT ORDER WITH A DIRECTION TO MAKE FRESH ASSESSMENT. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON 17.3.2011 SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 17 TH MARCH, 2011 COPY TO 1 GRANDHI MANOJ KUMAR, PROP: VAIBHAV JEWELLERS, MAI N BAZAR, ELURU- 534 001 2 THE CIT(CENTRAL), HYDERABAD 3 4. THE CIT HYDERABAD THE CIT(A), HYDERABAD 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM