B BUDH SINGH GULAB SINGH, NEW DELHI V. ITO, WARD- 32(3), NEW DELHI

ITA 2618/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2974 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 16-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Retrospective amendment; Bad and doubtful debts; TDS
• Section: 143(3); 40(b); 40(a)(ia); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO.2618/DEL/2018 ASSESSMENT YEAR: 2013-14 B. BUDH SINGH GULAB SINGH, NEW DELHI. V. ITO, WARD-32(3), NEW DELHI. TAN/PAN: AAAFB 1423E (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RAJIV SAXENA, ADV. RESPONDENT BY: SHRI S.L. ANURAGI, SR.D.R. DATE OF HEARING: 19 12 2018 DATE OF PRONOUNCEMENT: 26 02 2019 O R D E R THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 09.01.2018 PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-XI, NEW DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S. 143(3) FOR THE ASSESSMENT YEAR 2013-14. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS), 11, NEW DELHI HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONF IRMING THE ADDITIONS/DISALLOWANCES MADE BY THE AO COMPUTING TH E TOTAL INCOME OF THE ASSESSEE TO THE TUNE OF RS. 37,61,728 /- AS AGAINST INCOME RETURNED BY THE ASSESSEE AT RS. 6,42,970/-. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITIO NS MADE BY THE AO TO THE TUNE OF RS.4,93,038/- U/S 40(A)(IA) OF TH E INCOME TAX ACT, 1961. I.T.A. NO.2618/DEL/2018 2 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLO WANCE MADE BY THE AO OF RS.3,91,506/-ON ACCOUNT OF CASH HANDLING EXPENSES. THE AO FURTHER FAILED TO APPRECIATE THAT THE AMOUNT IN QUESTION WAS FOR BUSINESS PURPOSES ONLY. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLO WANCE OF RS. 18 LAKHS ON ACCOUNT OF REMUNERATION PAID TO THE PARTNE R. 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLO WANCE OF CLAIM MADE BY ASSESSEE OF BAD DEBTS AMOUNTING TO RS.4,34, 217/-. 6. THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HA S FAILED TO PROVIDE REASONABLE AND SUFFICIENT OPPORTUNITY TO TH E ASSESSEE. 2. IN SO FAR AS GROUNDS NO. 2 AND 3 ARE CONCERNED, LD. COUNSEL SUBMITTED THAT THE SAME NOW STANDS COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE IN THE ASSESSMENT YEARS 2011-12 AND 2012-13. 3. THE FACTS IN BRIEF QUA THE DISALLOWANCE U/S. 40( IA) OF RS.4,93,038/- ARE THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF DISTRIBUTION AND SALE OF PETROL AND PETROLEUM PR ODUCTS, AND IS AUTHORIZED DEALER OF BPCL. THE ASSESSEE HAS DEBI TED SUM OF RS.4,93,038/- UNDER THE HEAD LFR RENT. THE LD. AS SESSING OFFICER NOTED THAT ASSESSEE HAS NOT FILED ANY EVIDE NCE OF TDS DEDUCTED ON SUCH RENT. HE HAS ALSO INCORPORATED THE RELEVANT CLAUSES OF THE RENT AGREEMENT AND HELD THAT ASSESSE E WAS LIABLE TO DEDUCT TAX @10% ON THE PAYMENT OF RENT AN D ACCORDINGLY MADE A DISALLOWANCE U/S.40(IA). I.T.A. NO.2618/DEL/2018 3 4. LD. CIT (A) IN HIS EX PARTE ORDER HAS CONFIRMED THE SAID DISALLOWANCE. 5. I FIND THAT THIS ISSUE HAD COME UP FOR CONSIDERA TION IN THE EARLIER YEARS ALSO, WHEREIN THE TRIBUNAL HAD DE LETED THE SAID DISALLOWANCE AFTER HOLDING AND OBSERVING AS UN DER:- 3. I HAVE HEARD BOTH THE SIDES AND PERUSED THE REL EVANT MATERIAL ON RECORD. THE CASE OF THE REVENUE IS THAT THE ASSESSEE MADE A PAYMENT OF RENT TO BPCL AND DID NOT DEDUCT T AX AT SOURCE WHICH ATTRACTED DISALLOWANCE UNDER SECTION 40(A)(IA ). SECOND PROVISO TO SECTION 40(A)(IA) PROVIDES THAT WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDAN CE 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 T O SECTION 201(1), THEN FOR THE PURPOSES OF SECTION 40(A)(IA) IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID TAX ON SAID SUM ON T HE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYE E. THE ESSENCE OF THIS PROVISION IS THAT IF THE PAYER HAS NOT MADE DE DUCTION OF TAX AT SOURCE, BUT THE PAYEE HAS FURNISHED HIS RETURN OF I NCOME U/S 139 OF THE ACT BY INCLUDING THE AMOUNT RECEIVED FROM THE A SSESSEE-PAYER, THEN THE ASSESSEE SHALL BE DEEMED TO HAVE DEDUCTED AND PAID TAX ON THE DATE OF FURNISHING OF RETURN OF INCOME BY TH E PAYEE AND AS SUCH NO DISALLOWANCE UNDER SECTION 40(A)(IA) WILL B E MADE. THOUGH THIS PROVISO HAS BEEN INSERTED BY THE FINANCE ACT 2 012 W.E.F. 1.4.2013 BUT SEVERAL COURTS HAVE HELD IT TO BE RETR OSPECTIVE. THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS. ANSAL LANDMARK TOWNSHIP PRIVATE LIMITED (2015) 279 CTR 384 (DEL) H AS HELD THAT SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND HAS RETROSPECTIVE EFFECT FROM 1.4.2005. ON A CONJOINT READING OF SECOND PROVISO TO SECTION 40(A)(IA) AND FIRST PROVISO TO SECTION 201(1), IT BECOMES GRAPHICALLY CLEAR THAT I F THE PAYEE HAS I.T.A. NO.2618/DEL/2018 4 FURNISHED HIS RETURN OF INCOME UNDER SECTION 139 AN D HAS TAKEN INTO ACCOUNT SUCH SUM PAID BY THE PAYER FOR COMPUTI NG INCOME IN SUCH RETURN OF INCOME AND HAS PAID INCOME TAX THERE ON, THEN THE PAYER CANNOT BE TREATED AS ASSESSEE IN DEFAULT. A F ORTIORI, NO DISALLOWANCE UNDER SECTION 40(A)(IA) CAN BE MADE IN SUCH CIRCUMSTANCES. 4. ADVERTING TO THE FACTS OF THE INSTANT CASE, IT I S SEEN THAT THE ASSESSEE PAID A SUM OF RS.6,36,920/- TO BHARAT PETR OLEUM CORPORATION LIMITED. THERE CAN BE QUESTION OF SUSPE CTING THAT THE BPCL DID NOT INCLUDE SUCH RENTAL INCOME FROM THE AS SESSEE IN ITS RETURN OF INCOME. IT IS, THEREFORE, HELD THAT THE C ASE OF THE ASSESSEE IS COVERED BY SECOND PROVISO TO SECTION 40(A)(IA) A ND HENCE THE DISALLOWANCE MADE CANNOT BE SUSTAINED. I, THEREFORE , ORDER TO DELETE THE DISALLOWANCE. THIS GROUND IS ALLOWED. 6. THUS, RESPECTFULLY FOLLOWING THE SIMILAR FACTS P ERMEATING IN THIS YEAR ALSO, I DELETE THE SAID DISALLOWANCE U /S.40(A)(IA). 7. THE NEXT ISSUE PERTAINS TO DISALLOWANCE OF RS.3, 91,506/- ON ACCOUNT OF CASH HANDLING EXPENSES. 8. THE LD. ASSESSING OFFICER NOTED THAT ASSESSEE HA S CLAIMED CASH HANDLING CHARGES OF RS.3,91,506/-. IN RESPONSE TO THE SHOW CAUSE NOTICE, ASSESSEE SUBMITTED THAT T HE SAID AMOUNT WAS PAID TO THREE PERSONS ON ACCOUNT OF CASH HANDLING EXPENDITURE AND IN FACT IT WAS A KIND OF S ALARY PAID TO THEM AND NO OTHER PAYMENT HAS BEEN MADE OVER AND ABOVE THE SALARY DURING THE YEAR. LD. ASSESSING OFFICER H AS DISALLOWED THE SAME AFTER HOLDING AND OBSERVING AS UNDER: I.T.A. NO.2618/DEL/2018 5 PERUSAL OF NATURE OF EXPENDITURE SHOWS THAT ASSESS EE IS A FIRM WHICH DEALS IN SELLING PETROL AND PETROLEUM PRODUCT S FROM ITS PETROL PUMP, RESULTING GENERATION OF CASH THROUGHOUT THE W ORKING HOURS, HANDLING OF CASH IS A RESPONSIBLE AND RISKY WORK AN D KEEPING IN VIEW THE SAFETY OF THE AMOUNT, EITHER ASSESSEE WOUL D ENGAGE PROFESSIONALS (PRIVATE PERSONS) OR RELY ON ITS FAIT HFUL EMPLOYEES. HAD ASSESS TAKEN THE SERVICES OF PROFESSIONALS, HE WOULD HAVE DEDUCTED TDS, BEING PAYMENT T PROFESSIONALS ON SUCH AMOUNT, WHICH IS NOT THE CASE HERE AND IN THE ABSENCE OF DO CUMENTARY EVIDENCE, THE GENUINENESS OF THE EXPENDITURE CLAIME D COULD NOT BE PROVED. THEREFORE, THE AMOUNT OF RS.3,91,506/- REMA INED IN GENUINE EXPENDITURE AND NOT RELATING TO BUSINESS OF THE ASSESSEE, HENCE DISALLOWED AND ADDED TO THE INCOME. FURTHER, ON SIMILAR GROUND IN A.Y. 2011-12 ADDITION MADE BY THE AO HAS BEEN UPHELD BY THE ID. CIT(A) IN HIS ORDER. 9. LD. CIT(A) HAS CONFIRMED THE SAID DISALLOWANCE. 10. WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY THE TRIBUNAL AFTER HOLDING AND OBSERVING AS UNDER: 6. AFTER CONSIDERING THE RIVAL SUBMISSION AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT CAN BE SEEN THAT TH E ASSESSEE PAID CASH HANDLING CHARGES TO CERTAIN PERSONS ON MONTHLY BASIS. VOUCHERS FOR SUCH PAYMENTS HAVE BEEN PLACED ON RECO RD. SINCE SUCH EXPENSES WERE INCURRED DURING THE COURSE OF BU SINESS AND WERE NECESSARY FOR CARRYING ON THE BUSINESS, IN MY CONSIDERED OPINION, THE SAME SHOULD NOT HAVE BEEN DISALLOWED. I, THEREFORE, ORDER TO DELETE THE ADDITION. 11. MOREOVER, I FIND THAT THE REASONING GIVEN BY THE ASSESSING OFFICER THAT HANDLING OF CASH IS RESPONSI BLE AND RISKY WORK FOR WHICH HE SHOULD HAVE ENGAGED PROFESS IONALS, I.T.A. NO.2618/DEL/2018 6 THEN HE WAS REQUIRED TO DEDUCT TDS. SUCH A REASONIN G FOR MAKING THE DISALLOWANCE CANNOT BE HELD TO BE VALID GROUND, BECAUSE IN THE NATURE OF BUSINESS CARRIED OUT BY TH E ASSESSEE WHICH IS SELLING OF PETROL AND PETROLEUM PRODUCT FR OM ITS PETROL PUMP, HUGE CASH IS GENERATED THROUGHOUT THE WORKING HOURS AND IF ASSESSEE IS PAYING CASH HANDLING CHARG ES TO TWO PERSONS WHICH IS IN THE FORM OF SALARY, THEN DISALL OWANCE CANNOT BE MADE ESPECIALLY WHEN VOUCHERS FOR SUCH PA YMENT HAVE BEEN PRODUCED. ACCORDINGLY, RESPECTFULLY FOLLO WING THE ORDER OF THE TRIBUNAL FOR THE EARLIER YEARS, I DELE TE THE SAME. 12. COMING TO THE ISSUE OF DISALLOWANCE OF RS.18 LACS ON ACCOUNT OF REMUNERATION PAID TO THE PARTNERS, THE A SSESSING OFFICER ON THE PERUSAL OF THE P&L ACCOUNT NOTED THA T ASSESSEE HAS CLAIMED RS.24 LACS AS PARTNERS REMUNERATION OUT OF WHICH SHRI KAMALJEET SINGH SETHI GOT SALARY OF RS.12 LACS AND TWO OTHER LADY PARTNERS HAVE RECEIVED RS.6 LASC EACH. O N GOING THROUGH THE PARTNERSHIP DEED, HE ASKED THE ASSESSEE , WHY THE OTHER TWO LADIES WERE GETTING SALARY, IN RESPONSE, ASSESSEE SUBMITTED THAT THEY ARE GETTING REMUNERATION SINCE THE DATE OF INTRODUCTION OF THESE PARTNERS IN THE PARTNERSHI P FIRM AND THE SAME REMUNERATION HAS BEEN PAID IN THE EARLIER YEARS ALSO. AO ALSO NOTED CLAUSE 18 OF THE PARTNERSHIP DE ED WHICH READ AS UNDER: THAT SHRI KAMALJEET SINGH SETHI THE PARTY OF THE F IRST PARTY WILL BE WORKING PARTNER AND HEREBY AUTHORIZED TO RECEIVE RE MUNERATION AT THE RATE OF RS.15,000/- PER MONTH W.E.F.1 ST JUNE, 2004. SMT. I.T.A. NO.2618/DEL/2018 7 PUSWHPJEET KAUR AND SMT. SATWANT KAUR WILL BE NON W ORKING PARTNERS AND THEY WILL NOT RECEIVE ANY REMUNERATION . AO HELD THAT, SINCE PROPER EXPLANATION WAS NOT GIVE N BY THE ASSESSEE, HE WORKED OUT THE DISALLOWANCE OF RS.18 L AC, I.E., HE DISALLOWED THE REMUNERATION PAID TO TWO LADIES PART NERS AND HAS ALSO DISALLOWED RS.6 LAC ON ACCOUNT OF SALARY P AID TO SHRI KAMALJEET SINGH SETHI. SUCH A DISALLOWANCE HAS BEEN CONFIRMED BY THE LD. CIT(A) ALSO. 13. BEFORE US, LD. COUNSEL FOR THE ASSESSEE HAS SUB MITTED THAT NOT ONLY IN THE EARLIER YEARS BUT ALSO IN THE SUBSEQUENT YEAR THE REMUNERATION PAID TO THE PARTNERS HAVE ALW AYS BEEN ALLOWED AND LOOKING TO THE FACT THAT OVER THE PERIO D OF TIME ASSESSEES BUSINESS HAS INCREASED AND PARTNERSHIP D EED WAS ENTERED WAY BACK IN THE YEAR 2004, THEREFORE, INCRE ASE IN SALARY AND IN REMUNERATION IS WHOLLY JUSTIFIED. FURT HER, THE PARTNERS REMUNERATION HAS TO BE ALLOWED IN TERMS O F SECTION 40(B). ACCORDINGLY, HE REQUESTED THAT MATTER CAN BE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMIN E THE PAST HISTORY AND ALSO ALLOW REMUNERATION AS PER THE SPEC IFIC PROVISION GIVEN IN SECTION 40(B). 14. LD. D.R. HAS NO OBJECTION IF THE MATTER HAS BEE N EXAMINED AFRESH BY THE ASSESSING OFFICER. 15. ACCORDINGLY, I REMIT THE ISSUE BACK TO THE F ILE OF THE ASSESSING OFFICER TO SEE WHETHER SIMILAR REMUNERATI ON PAID TO THE PARTNERS HAVE BEEN ALLOWED IN THE EARLIER YEARS OR IN I.T.A. NO.2618/DEL/2018 8 SUBSEQUENT YEAR OR NOT; AND SECONDLY, HE SHOULD EXA MINE THE PARTNERS SALARY AND REMUNERATION ARE PAID IN ACCOR DANCE WITH PROVISION CONTAINED IN SECTION 40(B) OR NOT. A O WILL GIVE OPPORTUNITY OF HEARING TO THE ASSESSEE TO SUBSTANTI ATE IS CASE. THUS, THIS ISSUE IS TREATED AS ALLOWED FOR STATISTI CAL PURPOSES. 16. LASTLY, WITH REGARD TO THE DISALLOWANCE OF CLAI M OF BAD DEBT OF RS. 4,34,217/-, IT IS SEEN THAT ASSESSING O FFICER HAS DISALLOWED THE SAME ON THE GROUND THAT NO DOCUMENTA RY EVIDENCES HAVE BEEN FILED FOR CLAIM OF SUCH AND BAD DEBT REMAINED NOT GENUINE. 17. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT NOW THE ONLY REQUIREMENT UNDER THE LAW IS THAT, WHE THER BAD DEBT HAS BEEN WRITTEN OFF AS IRRECOVERABLE IN THE B OOKS OF ACCOUNT OF THE ASSESSEE OR NOT AND THERE IS NO LONG ER ANY REQUIREMENT TO PROVE OR ESTABLISH THAT THE DEBT HAS BECOME BAD OR HAS BECOME IRRECOVERABLE. THIS IS IN CONSONA NCE WITH THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CA SE OF TRF LTD. (2010) 190 TAXMAN. 391 (SC). 18. ON THE OTHER HAND, LD. D.R. RELIED UPON THE ORD ER OF THE ASSESSING OFFICER AND LD. CIT(A) AND SUBMITTED THE NO DOCUMENTARY EVIDENCES HAVE BEEN FILED. 19. I FIND THAT, NOWHERE ASSESSING OFFICER HAS DISP UTED THE FACT THAT ASSESSEE HAS NOT WRITTEN OFF THE BAD DEBT S AS IRRECOVERABLE IN THE BOOKS OF ACCOUNT, ALBEIT THE CASE OF THE ASSESSING OFFICER IS THAT ASSESSEE HAS NOT PRODUCED ANY I.T.A. NO.2618/DEL/2018 9 DOCUMENTARY EVIDENCES THAT DEBT HAS BECOME BAD. AS STATED BY THE LD. COUNSEL NOW THERE IS NO REQUIREMENT UNDE R THE LAW FOR THE ASSESSEE TO ESTABLISH THAT DEBT HAS BECOME IRRECOVERABLE AND IT IS ENOUGH THAT THE SAME IS WRI TTEN OFF AS IRRECOVERABLE IN THE BOOKS OF ACCOUNT OF THE ASSESS EE. THIS HAS BEEN ALSO CLARIFIED BY THE CBDT CIRCULAR DATED 30.0 5.2016 BEING CIRCULAR NO.12/2016 [F.NO.279/MISC/140/2015-I TJ], WHEREIN THE CBDT HAS CLARIFIED THAT NOW IN THE WAKE OF JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. (SUPRA) NO APPEAL SHOULD BE FILED BY THE REVENUE BE FORE ANY COURT OR TRIBUNAL. THUS, THIS CLARIFICATION BY CBDT ALSO SUPPORTS THE CASE OF THE ASSESSEE. HENCE, THIS GROU ND IS ALLOWED. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH FEBRUARY, 2019. SD/- [AMIT SHUKLA] JUDICIAL MEMBER DATED: 26 TH FEBRUARY, 2019 PKK