M/s. Panchvati Ship Breakers, Bhavnagar V. The Jt.CIT, Range-1, Bhavnagar

ITA 2658/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8873 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 13-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Recovery proceedings
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 40(a)(ia); 194C; 201

Judgement Text

ITA NO. 2658 / AHD/201 3 ASSESSMENT Y EAR: 20 0 9 - 10 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S S GODARA JM] ITA NO. 2658 /AHD/201 3 ASSESSMENT Y EAR : 20 0 9 - 10 PANCHVATI SHIP BREAKERS, ..... .......... .APPELLANT LATI BAZAR, BHAVNAGAR. [PAN: AA EPF 3358 P ] VS. JOINT COMMISSIONER OF INCOME TAX, RANGE - 1, BHAVNAGAR. .. ......... RESPONDENT APPEARANCES BY TUSHAR P. HEMANI FOR THE A PPELLANT JAMES KURIAN FOR THE R E SPONDENT HEARING CONCLUDED ON: 03 .01.2017 ORDER PRONOUNC ED ON : 29 .03.2017 O R D E R PER PRAMOD KUMAR , AM: 1. THIS APPEAL , FILED BY THE ASSESSEE, IS DIRECTED AGAINST THE ORDER DATED 30 TH AUGUST , 201 3 , PASSED BY THE LEARNED CIT(A), IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961, FOR THE ASSESSMENT YEAR 20 0 9 - 10 . 2. IN GROUND NOS.1 TO 3, WHICH WE WILL TAKE UP TOGETHER, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCES : - 1. THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF ID. A O IN MAKING ADDITION OF RS.3,49,178/ - ON ACCOUNT OF UNDISCLOSED SALE OF FUEL AND LUBRICATING OIL MERELY ON PRESUMPTION AND ASSUMPTION BASIS. 2. THE ID. CIT (A) OUGHT TO HAVE APPRECIATED THAT IN ANY CASE THE APPELLANT HAS DECLARED ALLEGED UNDISCLOSED SALE OF FUEL AND LUBRICATING OIL IN THE SUCCEEDING A.Y.2010 - 11, AND THEREFORE ALSO, NO ADDITION MADE BY THE ID. AO COULD HAVE BEEN SUSTAINED IN THE YEAR UNDER CONSIDERATION. ITA NO. 2658 / AHD/201 3 ASSESSMENT Y EAR: 20 0 9 - 10 PAGE 2 OF 6 3. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE, IF THE ADDITION MADE ON ACCOUNT OF ALLEGED UNDISCLOSED SALE OF FUEL AND LUBRICATING OIL IS SUSTAINED, DIRECTION MAY BE GIVEN TO REDUCE THE SAME IN THE SUCCEEDING A.Y.2010 - 11, WHICH IS ALREADY INCLUDED IN PROFIT & LOSS ACCOUNT FOR A.Y.2010 - 11. 3. BRIEFLY, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHIP BREAKING AND TRADING IN SCRAP. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT, ON 16.01.2009, THE ASSESSEE HAD PURCHASED A SHIP BY THE NAME OF MV TWAR WHICH HAD 3,77,400 LITRES OF FUEL OIL AND 30,900 LITRES OF LUBRICANT O I L. IT WAS ALSO NOTED THAT THE ASSESSEE S BOOKS OF ACCOUNT SHOWED SALES OF ONLY 3,54,420 LITRES OF FUEL OIL AND 29,920 LITRES OF LUBRICANT OIL. ON THESE FACTS, THE ASSESSING OFFICER AS SUMED THAT REMAINING QUANTITIES OF FUEL OIL AND LUBRICANT OIL WERE SOLD OUTSIDE BOOKS OF ACCOUNT. THIS UNACCOUNTED SALE WAS COMPUTED AT RS.3,26,928/ - FOR FUEL O IL, BY ADOPTING RATE OF RS.104.45 PER LITRE, AND RS.22,250/ - FOR LUBRICANT OIL, BY ADOPTING THE RATE OF RS.4.45 PER LITRE. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) BUT WITHOUT ANY SUCCESS. LEARNED CIT(A) NOTED THE ASSESSEE S CONTENTION REGARDING SALE OF FUEL OIL IN THE SUBSEQUENT YE A R BUT REJECTED THE SAME B Y OBSE RVING THAT IT CANNOT BE ASCERTAINED WHETHER THE FUEL SOLD IN THE SUBSEQUENT YE A R WAS THE SAME FUEL WHICH W AS OBTAINED F ROM MV TWAR AGGRIEVED BY THE STAND SO TAKEN BY THE LEARNED CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE HEARD THE R IVAL CONTENTIONS, PERUSED T HE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEG A L POSITION. 5. WE HAVE NOTED THAT IT IS NOT IN DISPUTE THAT PART OF FUEL OIL WAS SOLD IN THE SUBSEQUENT ASSESSMENT YEAR AND THAT THE A SSESSEE DID NOT HAVE ANY OTHER SOURCE OF SUCH O I L, EXCEPT FROM MV TWAR. LEARNED COUNSEL FAIRLY SUBMITS THAT A SET OFF MAY BE ITA NO. 2658 / AHD/201 3 ASSESSMENT Y EAR: 20 0 9 - 10 PAGE 3 OF 6 GRANTED FOR SUCH SALE . TO THE EXTENT OIL IS SOLD IN SUBSEQUENT YEAR, IT S SOURCE CAN ONLY BE MV TWAR AND SUPPRESSED SALE OF THE S AME CANNOT, IN ANY CASE, HOLD GOOD IN THIS YEAR. IN THIS VIEW OF THE MATTER, WE DEEM IT FIT AND PROPER TO REMIT THE MATTE R TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DELETE THE IMPUGNED ADDITION TO THE EXTENT THE SALE OF FUEL OIL IS ACCOUNTE D FOR IN THE SUBSEQUENT ASSESSMENT YEAR. AS THE MATTER IS BEING REMITTED TO THE FILE OF THE ASSESSING O FFICER FOR FRESH ADJUDICATION ON THIS ISSUE, INTER ALIA, THE ABOVE OBSERVATION, WE SEE NO NEED TO DEAL WITH OTHER CONTENTIONS OF THE ASSESSEE. SUFFICE TO SAY THAT THE ASSESSEE WILL ALSO BE AT LIBERTY TO RAISE ALL SUCH LEGAL AND FACTUAL ARGUMENTS AS HE DEEM FIT AND THE ASSESSING O FFICER WILL DEAL WITH THE SAME IN ACCORDANCE WITH THE LAW, BY WAY OF A SPEAKING ORDER AND AFTER GIVING YET ANOTHER OPPORTUNIT Y OF HEARING TO THE ASSESSEE. WE DIRECT SO. 6 . GROUND NOS.1, 2 AND 3 ARE ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. 7 . IN GROUND NOS.4 TO 12, WHICH WE WILL TAKE UP TOGETHER, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCES : - 4. THE ID. CIT (A) HAS ERRED IN LAW AND ON THE FACTS IN INVOKING PROVISIONS OF S. 194 - I AS AGAINST S.194C INVOKED BY THE ID. AO. THIS ACTION OF ID. CIT (A) IS WITHOUT JURISDICTION AND AGAINST THE SETTLED PRINCIPLES OF LAW. 5. THE ID. CIT (A) HAS ERRE D IN LAW AND ON THE FACTS OF THE CASE IN HOLDING THAT THE PLOT DEVELOPMENT CHARGES OF RS.9,05,130/ - PAID TO THE GUJARAT MARITIME BOARD IS EQUIVALENT TO RENT / LEASE CHARGES AND THE APPELLANT HAS MADE DEFAULT IN NOT DEDUCTING TAX AT SOURCE U/S 194 - I OF THE AC T ON SUCH CHARGES. 6. THE ID. CIT (A) ACCORDINGLY ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMI NG THE ACTION OF ID. ASSESSING OFFICER IN MAKING DISALLOWANCE OF RS.9,05,130/ - U/S 40(A)(IA) OF THE ACT FOR NON - DEDUCTION OF TAX AT SOURCE. 7. THE ID. CIT (A) OUGHT TO HAVE APPRECIATED THAT THE PLOT DEVELOPMENT CHARGES PAID TO GUJARAT MARITIME BOARD IS IN THE NATURE OF LICENSE, CESS, ITA NO. 2658 / AHD/201 3 ASSESSMENT Y EAR: 20 0 9 - 10 PAGE 4 OF 6 LEVY ETC. PAYABLE TO THE GOVERNMENT AND ON SUCH LEVIES, NO TAX IS REQUIRED TO BE DEDUCTED AT SOURCE U/S 19 4 - I OF THE ACT. 8. THE ID. CIT(A) HAS FURTHER ERRED IN LAW AND ON THE FACTS OF THE CASE IN NOT ADJUDICATING THE GROUND RELATED TO DISALLOWANCE OF RS.55,000/ - MADE U/S 40(A)(IA) OF THE ACT FOR NON - D EDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT ON PAYM ENT MADE TO THE GUJARAT POLLUTION CONTROL BOARD. 9. IN ANY CASE, BOTH THE LOWER AUTHORITIES OUGHT TO HAVE APPRECIATED THAT PAYMENT TO GUJARAT POLLUTION CONTROL BOARD WAS MADE TO OBTAIN AUTHORIZATION FOR DISPOSAL OF HAZARDOUS WASTE UNDER THE PROVISIONS OF HAZARDOUS WASTE (MANAGEMENT & HANDLING) RULES 1989, TO WHICH PROVISIONS OF S.194C OF THE ACT ARE NOT APPLICABLE AND THE APPELLANT WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE THEREON. 10. BOTH THE AUTHORITIES OUGHT TO HAVE APPRECIATED THE FACTS THAT IF ULTIMATE RECOVERY OF TAX HAS BEEN RESOLVED IN A MANNER THAT PAYEE HAS ALREADY INCLUDED SUCH INCOME IN HIS RETURN OF INCOME AND PAID TAX THEREON, THE PAYER I.E. THE APPELLANT SHOULD NOT BE PENALIZED BY DISALLOWING ENTIRE AMOUNT OF EXPENDITURE. 11. ALTE RNATIVELY AND WITHOUT PREJUDICE TO ABOVE, THE WHOLE OF THE EXPENDITURE IS PAID AND NOTHING IS PAYABLE AT THE END OF THE PREVIOUS YEAR, THEREFORE THE PROVISIONS OF S.40 (A) (IA) OF THE ACT WOULD HAVE NO APPLICATION. 12. ALTERNATIVELY AND WITHOUT PREJUDICE T O ABOVE, ONLY THE AMOUNT OF TAX DEDUCTED AT SOURCE COULD HAVE BEEN DISALLOWED RATHER THAN DISALLOWING THE ENTIRE EXPENDITURE. 8 . SO FAR AS THESE GRIEVANCES OF THE ASSESSEE ARE CONCERNED, IT IS SUFFICIENT TO TAKE NOTE OF ONLY A FEW MATERIAL AND UNDISPUTE D FACTS. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS MADE A PAYMENT OF RS.9,05,130/ - TO GUJARAT MARITIME BOARD ON ACCOUNT OF PLOT DEVELOPMENT CHARGES AND RS.55,000/ - TO GUJARAT POLLUTION CONTROL BOARD F OR OBTAINING AUTHORIZATION FOR DISPOSAL OF HAZARDOUS WASTE, WITHOUT ANY DEDUCTION OF T AX AT SOURCE UNDER SECTION 194, WHICH, ACCORDING T O THE ASSESSING O FFICER, WAS APPLICABLE ON THE FACTS OF THIS CASE. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER D ISALLOWED THESE EXPENSES UNDER SECTION 40(A)(IA). AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT (A) BUT WITHOUT ANY SUCCESS. NOT SATISFIED, ASSESSEE IS IN FURTHER APPEAL BEFORE US. ITA NO. 2658 / AHD/201 3 ASSESSMENT Y EAR: 20 0 9 - 10 PAGE 5 OF 6 9 . HAVING HEA R D THE RIVAL CONTENTIONS AND HAVING PERUSED THE MATERIAL ON RECORD, WE CONSIDER IT APPROPRIATE TO REMIT THE M ATTER TO THE FILE OF ASSESSING O FFICER FOR VERIFICATION AS TO WHETHER OR NOT THE RECIPIENTS OF THESE AMOUNTS HAVE DISCHARGED THEIR INCOME TAX OBLIGATION IN RESPECT OF THESE AMOUNTS. IN CASE IT IS FOUND THAT RECIPIENTS HAVE INCLUDED THESE AMOUNTS IN RECEIPTS DISCLOSED TO THE INCOME TAX DEPARTMENT AND THAT THEY HAVE DULY DISCHARGED THEIR TAX LIABILITIES, IF ANY, DISALLOWANCE WILL HAVE TO BE DELETED. IT IS SO FAR THE REASON THAT HON BL E DELHI HIGH COURT, IN THE CASE OF CIT VS . ANSAL LANDMARK TOWNSHIP PVT . LTD . [(2015) 377 ITR 635 (DEL)], HAS HELD SECOND PROVISO TO SECTION 40(A)(IA) TO BE RETROSPECTIVE IN EFFECT, AND, THEREFORE, AS LONG AS RECIPIENTS OF INCOME HAVE DISCHARGED THEIR TAX L IABILITIES, DISALLOWANCE UNDER SECTION 40(A)(IA) CANNOT BE MADE. AS WE NOTE THIS LEGAL POSITION, WE ARE ALIVE TO THE FACT THAT THE AUTHORITIES BELOW HAVE NOT ADDRESSED THEMSELVES TO THIS ASPECT OF THE MATTER. IN VIEW OF THE LEGAL AND FACTUAL POSITION AS ABOVE, WE DEEM IT FIT AND PROPER TO REMIT THE MATTER TO THE FILE OF THE ASSESSING O FFICER FOR FACTUAL VERIFICATION REGARDING TAX LIABILITIES IN THE HAND S OF THE ASSESSEE. IN CASE, THE TAXES PAYABLE , IF ANY, IN THE HANDS OF RECIPIENTS ARE DISCHARGED, THE D ISALLOWANCE WILL BE DELETED. AS THE ISSUE IS BEING DECIDED ON THIS SHORT LEGAL GROUND, WE SEE NO NEED TO DEAL WITH OTHER GROUNDS OF APPEAL WHICH ARE RENDERED INFRUCTUOUS. 10 . IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF MARCH , 2017 . SD/ - SD/ - S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 29 TH DAY OF MARCH , 201 7 . PBN/* ITA NO. 2658 / AHD/201 3 ASSESSMENT Y EAR: 20 0 9 - 10 PAGE 6 OF 6 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD