SHRI SHRI AJAY KUMAR AGRAWAL, AMBIKAPUR (CG) V. THE INCOOME TAX OFFICER, AMBIKAPUR (CG)

ITA 261/BIL/2016

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 6954 (ITAT-RAIPUR)
• Duration Of Justice: 5 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 10-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Recovery proceedings; Depreciation; Business expenditure; Additional evidence; TDS
• Section: 143(3); 40(a)(ia); 37(1); 201(1); 250; 201; 194A; 22

Judgement Text

ITAT-Raipur Page 1 of 11 आयकर अपीलीय Ɋायािधकरण, रायपुर Ɋायपीठ रायपुर मŐ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR (Through Virtual Court at Raipur) BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI JAMLAPPA D. BATTULL, ACCOUNTANT MEMBER आयकर अपील सं. / ITA Nos. 260 & 261/RPR/2016 िनधाŊरण वषŊ / Assessment Year : 2010-11 & 2011-12 Shri Ajay Kumar Agrawal, Juna Gaddi Road, PO: Ambikapur (C.G.) PAN : ACQPA 4988 B .......अपीलाथŎ / Appellant बनाम / V/s. The Income Tax Officer, Income Tax Office, Kharsia Road, PO: Ambikapur (C.G) .......ŮȑथŎ / Respondent Appearances Assessee by : Shri G. S. Agrawal Revenue by : Shri G. N. Singh सुनवाई की तारीख / Date of conclusive Hearing : 04/02/2022 घोषणा की तारीख / Date of Pronouncement : 14/03/2022 आदेश/ ORDER PER JAMLAPPA D. BATTULL, AM; The present appeals are filed by the assessee against the first appellate order of Commissioner of Income Tax - Appeals, Bilaspur [for short “CIT(A)”] passed u/s 250 vide order dt 21/03/2016, which in turn sprung from the assessment order [for short “AO”] dt 04/03/2013 & 23/01/2014 passed for assessment year [for short “AY”] 2010- 2011 & 2011-2012 by the Ld Assessing Officer [for short “Ld AO”] u/s 143(3) of the Income-tax Act, 1961 [for short “the Act”]. ITA Nos. 260 & 261/RPR/2016 AY 2010-11 & 2011-2012 ITAT-Raipur Page 2 of 11 2. The dispute under these tax litigations, firstly challenges the legality of ad-hoc disallowance of business expenses and secondly claims rescue from the application of 40(a)(ia) on the strength of certificate from an accountant. 3. The grounds raised in both these appeals are similar, however before advancing the matter on facts for adjudication, we reproduce grounds challenged by the appellant in ITA No 260/RPR/2016 (AY 2010-2011) as under; “1 That Under the facts and the law, the learned Commissioner of Income Tax (Appeals) erred in maintaining the disallowance of ₹4,43,330/- out of ₹4,84,974/- made by the learned Assessing Officer u/s 40(a)(ia) for non- deduction of tax u/s 194A being finance charges paid to NBFCs namely M/s Shriram Transport Finance Co. Ltd ₹2,32,274/- and M/s Tata Finance Limited ₹2,11,046/-, rejecting the explanations filed”. “Prayed that the deductees are national repute NBFCs and paying taxes and that no amount is outstanding as payable as at the end of the year. Prayed that the disallowance of ₹4,43,330/- be deleted.” “2.That under the facts and the law, the learned Commissioner of Income Tax (Appeals) further erred in not considering the Certificate of Chartered Accountant filed certifying that the finance charges paid by the appellant had been considered by deductees in Return of Income, have paid the taxes and filed the Return of Income. Prayed, the disallowance u/s 40(a)(ia) be deleted.” “3.That under the facts and the law, the learned Commissioner of Income Tax (Appeals) further erred in maintaining the adhoc disallowance out of Spare parts & repairs ₹8,373/-, Tyre Tube expenses ₹5,000/-, Office expenses ₹9,980/-, Telephone expenses ₹12,344/-, Depreciation ₹11,186/-, Travelling & vehicle Maintenance ₹10,000/-, Pump maintenance expenses ₹8,374/- made by the learned Assessing Officer” (Empasis supplied) 4. Let us now state the facts of the case succinctly as; 4.1. The appellant assessee is an individual and proprietor of Shri Ambika Transport engaged in transport & logistic business, made up his Income tax return ITA Nos. 260 & 261/RPR/2016 AY 2010-11 & 2011-2012 ITAT-Raipur Page 3 of 11 [for short “ITR”] for AY 2010-2011 on 21/09/2010 with a returned income of ₹5,83310/-, the same was subjected to scrutiny under CASS. The assessment u/s 143(3) of the Act was framed assessing the total income at ₹11,38,075/- on account of disallowance of interest / finance charges ₹4,84,974/- u/s 40(a)(ia) paid to certain banks & Non-Banking-Financial-Corporation [for short “NBFC”] without deduction of tax at sources [for short “TDS”] u/s 194A of the Act and further reciting the reasoning of self-made vouchers and element of personal usages etc. an ad-hoc disallowance of business expenses amounting to ₹69,791/- from various heads were also made as under; 4.2. Aggrieved assessee carried the matter in an appeal before the first appellate forum, wherein Ld CIT(A) not finding any infirmity in the view taken by the Ld AO, upheld the disallowance made u/s 40(a)(ia) of the Act to the extent payments relating to NBFC without TDS u/s 194A and also concurred in disallowing various business expenses on ad-hoc basis on account of reasonability such disallowances. 4.3. The appellant being aggrieved with the order of the CIT(A), has carried the matter in appeal before us with the grounds of appeal set herein before at Para 3. 5. We have heard the rival contention of both the parties; perused material placed on record and duly considered the facts of the case in the light of settled legal position and the case laws relied upon by the appellant assessee as well the respondent revenue. 6. We shall now first deal with ground number 1 & 2, ITA Nos. 260 & 261/RPR/2016 AY 2010-11 & 2011-2012 ITAT-Raipur Page 4 of 11 6.1. During the course of hearing of these appeals the Ld AR taken us through an application filed for admission of additional evidence u/r 29 of the Income-Tax Appellate Tribunal [for short “ITAT”] Rules, 1962 and adverting the contents thereof submitted that these additional evidences comprising of certificates obtained from a Chartered Accountant and NBFC in terms of first proviso to section 201(1) and which were filed during the course of first appellate proceedings before the Ld CIT(A) u/r 46A of the Income Tax Rules, 1962 however same were not dealt with. 6.2. Per contra, the learned departmental representative [for short “DR”] did not raise any objection to the admission of the aforesaid additional evidence. 6.3. After a thoughtful consideration, we are of the considered view, that the additional evidence would have a substantial bearing on the adjudication of the issue before us, therefore, the same merits to be admitted, thus, in terms of our aforesaid observations we admit the additional evidence placed on our record u/r 29 of the ITAT Rules, 1963 6.4. Admittedly, it is a matter of fact borne from the records that, following amount of interest / finance charges were debited without TDS u/s 194A and was subjected to 40(a)(ia) disallowances by the Ld AO, against which certificate in “Annexure-A to form 26A”, from a Chartered Accountant is placed on record in terms of first proviso to section 201(1) of the Act r.w.s. 31ACB; Date Certified Amount 1 Shree Ram Transport Finance Co Ltd2,32,27431/03/20151,21,280 2 Tata Finance Ltd2,11,046 CA Certificate Details No Certificate Placed on Record SrNBFC Payee Amt of Interest/finance charge Debited / Claimed as Exps & disallowed ITA Nos. 260 & 261/RPR/2016 AY 2010-11 & 2011-2012 ITAT-Raipur Page 5 of 11 6.5. In this regards, it is imperative to make note of insertion of first proviso to Section 201 (1) by the Finance Act 2012, operative with effect from 1st July 2012 which reads as under: "Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident- (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income; And the person furnishes a certificate to this effect from an accountant in such form as may be prescribed. (Empasis supplied) 6.6. The corroborative & corresponding amendments in section 40(a)(ia) was also carried out by the same Finance Act, 2012 by insertion of second proviso and made effective from 1 st March, 2013, which read as under; The following second proviso shall be inserted in sub-clause (ia) of clause (a) of section 40 by the Finance Act, 2012, w.e.f. 1-4-2013 : Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso. Explanation.—For the purposes of this sub-clause,— (i) "commission or brokerage" shall have the same meaning as in clause (i) of the Explanation to section 194H; ITA Nos. 260 & 261/RPR/2016 AY 2010-11 & 2011-2012 ITAT-Raipur Page 6 of 11 (ii) "fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; (iii) "professional services" shall have the same meaning as in clause (a) of the Explanation to section 194J; (iv) "work" shall have the same meaning as in Explanation III to section 194C; 37[(v) "rent" shall have the same meaning as in clause (i) to the Explanation to section 194-I; (vi) "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;] (Empasis supplied) 6.7. The conjunctive & constructive interpretation first proviso to Section 201(1) and second provision to section 40(a)(ia) of the Act reveals that, these have been inserted to benefit the Assessee, to provide that where a person fails to deduct tax at source (TDS) on the sum paid or credited to a resident payee under certain contingencies, such person; a. Shall first be excluded from holding as the assessee in default, subject to placing on records the certificate from a chartered accountant and b. Shall then be deemed that, such person has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee. 6.8. In the aforesaid position of statute and the law laid down by the Hon’ble Delhi High Court in CIT Vs Ansel Landmark Township reported at 377 ITR 635 and Hon’ble Apex Court in judgment in M/s Hindustan Coca Cola Beverages Pvt Ltd Vs CIT reported at 293 ITR 22 and in the context of circular number e Circular No. 275/201/95-IT(B) dt 29/1/1997 issued by the Central Board of Direct Taxes [for shot “CBDT”], the Hon’ble Lordships have observed that, once it is proved on record that, the payee has accounted the amount in question as income and discharged the due taxes thereon then, no recovery of tax demand be enforced against the assessee. ITA Nos. 260 & 261/RPR/2016 AY 2010-11 & 2011-2012 ITAT-Raipur Page 7 of 11 6.9. Applying the same analogy to the case at hand, the assessee placed on records a certificate from a chartered accountant showcasing the income accounted and due discharge of taxes paid thereon by one of the resident payee namely Shree Ram Transport Finance Co Ltd for amount of ₹1,21,280/- as detailed at para 0 herein before. Consequently, for the said amount of certificate the assessee cannot be held as “the assessee-in-default” within the meaning of Section 201(1) of the Act and resultantly, such amount of ₹1,21,280/- shall distant from application of provisions of section 40(a)(ia) of the Act. Thus, in the light of aforesaid observations, the ground number 1 & 2 are partly allowed in terms of above. 7. We shall now deal with ground number 3 relating to ad-hoc disallowances; 7.1. At the outset, the Ld AR submitted that, Ld AO had in a most arbitrary manner disallowed portion of expense applying ad-hoc percentile and which has been sustained by the Ld CIT(A) except restricting the disallowance to ₹10,000/- in case of travelling & vehicle maintenance, despite of the fact that, all these business expenditure debited to profit & loss account [for short “P&L”] and claimed in the return of income has all the valid characteristic laid in section 37(1) of the Act; ITA Nos. 260 & 261/RPR/2016 AY 2010-11 & 2011-2012 ITAT-Raipur Page 8 of 11 7.2. During the course of hearing, Ld AR claimed that, the solitary basis for making and sustaining the aforesaid disallowance of expenditure by the lower tax authorities was that, the some of the aforementioned expenditure were supported only by self-made vouchers in the absence of third-party evidence. 7.3. Our careful consideration of assessment records and the records of appellate proceedings transpired that, neither of the lower tax authorities had pointed any such voucher, the genuineness of the expenditure therein claimed to have been incurred by the assessee wholly and exclusively for the purpose of its business did not inspire any confidence, nor it was the case of the revenue that any part of the expenditure in question was either found to be bogus or fictitious, nor was found to have not been incurred by the assessee wholly and exclusively for the purpose of his business. Indeed, it showcased an exercise of running around the circle by both the lower tax authorities while dealing with the present case. % of Expenses Amt of Disallowance 1 Spare Parts & Repairs8,37,3021%8,373 2 Tyre, Tube Expenses10,76,2831%5,000 3 Office Expenses99,80110%9,980 4 Telephone Expenses1,23,43710%12,344 5 Depreciation55,92920%11,186 6 Travelling & Vehicle Maintenance72,67020%14,534 7 Pump Maintenance1,67,4755%8,374 24,32,89769,791 Business Expenses Total Sr Head of Expenses Amt Claimed in ITR / P&L Disallowed by AO ITA Nos. 260 & 261/RPR/2016 AY 2010-11 & 2011-2012 ITAT-Raipur Page 9 of 11 7.4. We neither could come across any provision in the present Income Tax Statute nor it has been brought to our notice by either parties to dispute, which subscribes vis-à-vis authorises the tax authorities to arrive at this logic of subscribing ad-hoc disallowances. Evidently, there has been no clear findings as to number of vouchers requiring denial of allowances with the amount of expenditure and nature of defects therein or therewith, moreover department could not bring out any deprecative material on record to substantiate its logical conclusion. We couldn’t also see remotely there is any mention of rationale in arriving at the percentile of disallowance in the present case, consequently we find substantial force in the claim of the assessee that devoid of any specific infirmity qua the assessee’s claim for deduction of the aforementioned expenditure by the lower tax authorities, and hence the ad-hoc disallowance carried out in a most arbitrary manner could by no means be held to be justified. 7.5. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Madras in V.C. Arunai Vadivelan Vs ACIT (TCA No 612 of 2019 dt 05/02/2021), wherein the lordships has held para 7 as; “Given the nature of the industry in which the assessee operates, we can take judicial notice of the fact that, computer generated vouchers may not always be issued by the transporters unless they are an organization owning a large fleet and If the Assessing Officer had any doubt with regard to the genuinity of any one of the vouchers produced he could have drawn sample vouchers and called upon the assessee to establish its genuineness. Without doing so, making an adhoc disallowance by not specifically assigning any reason to a voucher or bunch of vouchers is not legally tenable.” (Empasis supplied) 7.6. Considering the entire conspectus of case, we, do not find favour with the view taken by the lower tax authorities, consequently we set-aside the impugned ITA Nos. 260 & 261/RPR/2016 AY 2010-11 & 2011-2012 ITAT-Raipur Page 10 of 11 order of CIT(A) on this score and vacate the ad-hoc disallowance in its entirety and thereby allow the ground number 3 of the appeal. 8. As regards to appeal of ITA No 261/RPR/2016 (AY 2011-2012) 8.1. We find that as the facts and the issue involved in the present appeal remains the same as were there before us in the appeal of the assessee in his own case for AY 2010-2011 in ITA No 260/RPR/2017, except with variations spelt out herein after. 8.2. As regards to ground number 1 & 2 relating to disallowance of interest u/s 40(a)(ia) Following the same analogy and ration laid in disposing off the ITA No 260/RPR/2017, shall mutatis mutandis apply vacating the disallowance of interest for sum of ₹3,51,036/- in the light of certificate of chartered accountant placed on records, thus the ground number 1 & 2 stands partly allowed. 8.3. As regards to ground number 3 relating to ad-hoc disallowance Date Certified Amount 1 Shree Ram Transport Finance Co Ltd3,51,03631/03/20153,67,790 2 Tata Finance Ltd2,11,046 2 Magma Finlease Ltd16,772No Certificate Placed on Record CA Certificate Details No Certificate Placed on Record SrNBFC Payee Amt of Interest/finance charge Debited / Claimed as Exps & disallowed ITA Nos. 260 & 261/RPR/2016 AY 2010-11 & 2011-2012 ITAT-Raipur Page 11 of 11 The ration laid in disposing off the ITA No 260/RPR/2017, shall mutatis mutandis apply in vacating the ad-hoc disallowance in its entirety and thereby allow the ground number 3 of the appeal. 12. Resultantly, these appeals of the assessee are allowed in terms of our aforesaid terms, with no order as to cost. Order pronounced on this Monday 14 th day of March, 2022. Sd/- Sd/- RAVISH SOOD JAMLAPPA D. BATTULL JUDICIAL MEMBER ACCOUNTANT MEMBER रायपुर/ RAIPUR ; िदनांक / Dated : 14 th March, 2022 आदेश की Ůितिलिप अŤेिषत / Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant. 2. ŮȑथŎ / The Respondent. 3. The Pr. CIT-1, Raipur(C.G) 4. The Pr. CIT, Raipur (C.G) 5. िवभागीय Ůितिनिध,आयकर अपीलीय Ɋायािधकरण,रायपुर बŐच, रायपुर / DR, ITAT, Raipur Bench, Raipur. 6. गाडŊफ़ाइल / Guard File. आदेशानुसार / BY ORDER, िनजीसिचव / Private Secretary आयकरअपीलीयअिधकरण, रायपुर / ITAT, Raipur.