Assistant Commissioner of Income Tax Central Circle-2(3), Bangalore V. M/s RNS Infrastructure Ltd , Bangalore

ITA 290/BANG/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0013 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 01-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHREESHKUMAR
• Keywords: Rejection of books of accounts; Principle of natural justice; Earning of tax free income; Additional evidence; Corroborative evidences; TDS; Rule 8D; Set aside
• Section: 14A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER SL. NO. APPEALS NO. ASST. YEAR APPELLANT RESPONDENT 1 ITA 290/BANG/2018 2013 14 ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(3), ROOM NO. 316, 3 RD FLOOR, C. R. BUILDING, QUENS ROAD, BENGALURU 560 001. M/S. RNS INFRASTRUCTURE LTD., 7 TH FLOOR, NAVEEN COMPLEX, 14, M. G. ROAD, BENGALURU 560 001. PAN NO : AADCR7165G 2 ITA 318/BANG/2018 2013 14 M/S. RNS INFRASTRUCTURE LTD., 7 TH FLOOR, NAVEEN COMPLEX, 14, M. G. ROAD, BENGALURU 560 001. PAN NO : AADCR7165G DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL REVENUE BUILDING, QUEENS ROAD, BANGALORE 560 001. A PPELLANT BY : SHRI. SUNIL KUMAR AGARWAL, ADDL. CIT DR RE SPONDENT BY : SHRI. SHREESHKUMAR, C.A DATE OF H EARING : 20 . 1 1 .2019 DATE OF PRONOUNCEMENT : 20 . 1 2 .2019 O R D E R PER BEENA PILLAI, JUDICIAL MEMBER : PRESENT CROSS APPEALS HAVE BEEN FILED BY ASSESSEE AS WELL AS REVENUE AGAINST ORDER DATED 16/11/17 PASSED BY LD. CIT (A)-11, BANGALORE FOR ASSESSMENT YEAR 2013-14 ON FOLLOWING GROUNDS OF APPEAL: ITA NO. 290/B/2018(REVENUES APPEAL) 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS CORRECT IN DELETING THE ADDITION OF RS. 1,57,95,052/- ON ACCOUNT OF WAGES EXPENDITURE WHICH WERE NOT ADEQUATELY BACKED UP BY PRIMARY DOCUMENTS. 2. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS CORRECT IN DELETING ADDITION OF RS. 1,32,21,414/- ON ACCOUNT OF 14A R.W.R 8D(III). ITA 290/BANG/2018 & ITA 318/BANG/2018 PAGE 2 OF 9 ITA NO. 318/B/2018 (ASSESSEES APPEAL) 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN SO FAR AS IT IS AGAINST THE APPELLANT, IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, NATURAL JUSTICE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ALLOWED THE CLAIM OF INTEREST OF RS. 69,14,866/- PAID TO NON BANKING FINANCE COMPANIES BY THE APPELLANT DISALLOWED BY THE LEARNED ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE INTEREST PAID BY THE APPELLANT HAS BEEN OFFERED TO INCOME TAX BY SUCH NBFCS AND DOUBLY AXING THE SAME TRANSACTIONS IN THE HANDS OF THE APPELLANT AS WELL SUCH PAYEES ARE NOT WARRANTED UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. WITHOUT PREJUDICE THE LEARNED LOWER AUTHORITIES HAVE ERRED IN LAW IN LEVYING INTEREST UNDER THE PROVISIONS OF THE ACT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. FURTHER WITHOUT PREJUDICE THE CALCULATION OF INTEREST, RATE AND PERIOD ARE NOT DISCERNIBLE FROM THE ORDER OF ASSESSMENT ON THE FACTS AND CIRCUMSTANCE OF THE CASE. 5. THE APPELLANT CRAVES TO ADD, ALTER, DELETE OR SUBSTITUTE ANY OF THE GROUNDS URGED ABOVE. 6. IN VIEW OF THE ABOVE AND OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED IN THE INTEREST OF JUSTICE AND EQUITY. BRIEF FACTS OF THE CASE ARE AS UNDER: 2 ASSESSEE IS A COMPANY AND FILED ITS RETURN OF INCOME ON 23/03/13 DECLARING TOTAL INCOME OF RS.7,36,88,029/-. STATUTORY NOTICES WERE ISSUED IN RESPONSE TO WHICH REPRESENTATIVE OF ASSESSEE APPEARED BEFORE LD.AO AND FILED REQUISITE DETAILS AS CALLED FOR. LD.AO AFTER VERIFYING VARIOUS DETAILS FILED BY ASSESSEE PASSED ASSESSMENT ORDER BY MAKING FOLLOWING ADDITIONS: INTEREST PAID TO NBFC RS.69,14,866/- ITA 290/BANG/2018 & ITA 318/BANG/2018 PAGE 3 OF 9 PARTIAL DISALLOWANCE OF WAGES RS.1,57,95,052/- DISALLOWANCE UNDER SECTION 14 A OF RS.1,32,21,414/- 3 AGGRIEVED BY ADDITIONS MADE BY LD.AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A) WHO PARTLY ALLOWED APPEAL FILED BY ASSESSEE. AGGRIEVED BY ORDER PASSED BY LD. CIT (A) ASSESSEE AS WELL AS REVENUE BOTH PREFERRED APPEAL BEFORE THIS TRIBUNAL . ITA NO.318/B/2018 4 ASSESSEE IN ITS APPEAL HAS RAISED ONLY ONE ISSUE RELATING TO DISALLOWANCE OF INTEREST CONFIRMED BY LD. CIT (A) PAID TO NONBANKING FINANCE COMPANIES AMOUNTING TO RS. 69,14,866/- UNDER PROVISIONS OF SECTION 40 (A) (IA) OF THE ACT. LD. AR SUBMITTED THAT NBFC COMPANIES TO WHOM INTEREST PAYMENTS WERE MADE FOR ALL ASSESSABLE UNDER INCOME TAX ACT. IT IS ALSO BEEN SUBMITTED THAT ASSESSEE HAS MADE ALL PAYMENTS THROUGH ACCOUNT PAYEE CHEQUE. LD. AR SUBMITTED THAT THE COMPANIES HAVE ALREADY PAID TAXES ON THE INTEREST PAYMENTS BY ASSESSEE AND DISALLOWING THE CLAIM OF INTEREST IN ASSESSEES HAND WOULD RESULT IN DOUBLE TAXATION OF SAME TRANSACTION IN THE HANDS OF PAYER AS WELL AS PAYEE. LD.AR FILED BEFORE US CERTIFICATE ISSUED BY CHARTERED ACCOUNTANT IN CERTIFIED THAT PAYMENT MADE TO TATA CAPITAL FINANCIAL SERVICES LIMITED BY ASSESSEE AMOUNTING TO RS. 17, 78, 128/- WAS WITHOUT DEDUCTING TDS AND THAT THE PAYEE BEING M/S. TATA CAPITAL FINANCIAL SERVICES LTD., INCLUDES THE AMOUNT PAID BY ASSESSEE. IN THE AFFIDAVIT DATED 11/07/19 DIRECTOR OF ASSESSEE COMPANY ON ITS BEHALF STATED THAT THE CERTIFICATE COULD NOT BE PRODUCED BEFORE AUTHORITIES BELOW ALTHOUGH THE ARGUMENTS WERE ITA 290/BANG/2018 & ITA 318/BANG/2018 PAGE 4 OF 9 MADE BY ASSESSEE. IT HAS BEEN SUBMITTED BY LD. AR THAT THE PRODUCT FAILURE TO PRODUCE THE DOCUMENT BEFORE AUTHORITIES BELOW WERE NEITHER WILLFUL NOR DELIBERATE AND THE SAME IS VERIFIABLE. HE REQUESTED FOR ADMISSION OF ADDITIONAL EVIDENCE. 5 ON THE CONTRARY LD. SR. DR SUBMITTED FACTS ASSESSEE DEBITED INTEREST EXPENSES PAID TO NONBANKING FINANCIAL INSTITUTIONS AGAINST WHICH TDS UNDER SECTION 194 A OF THE ACT HAS NOT BEEN DEDUCTED. HE SUBMITTED THAT DISALLOWANCE CONFIRMED BY AUTHORITIES BELOW UNDER SECTION 40 (A) (IA) OF THE ACT IS TOTALLY JUSTIFIED. LD. SR. DR, HOWEVER SUBMITTED THAT BASED UPON CERTIFICATE ISSUED BY CHARTERED ACCOUNTANT NOW FILED BY ASSESSEE AS ADDITIONAL EVIDENCE BEEN SET ASIDE TO LD. AO FOR VERIFICATION. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 6 ADMITTEDLY, ASSESSEE HAS NOT DEDUCTED TDS UNDER SECTION 194 A OF THE ACT AGAINST INTEREST PAID TO NONBANKING FINANCIAL COMPANIES. IT IS ALSO AN ADMITTED FACT THAT THE COMPANIES TO WHOM ASSESSEE HAS MADE PAYMENTS ARE REPEATED COMPANIES LIKE M/S. L & T FINANCE LTD., M/S. BAJAJ FINANCE LTD., M/S. RELIANCE CAPITAL LTD., M/S. INDIA BULLS LTD., M/S. DIAMLER FINANCE LTD., M/S. KOTAK MAHINDRA BANK LTD., AND M/S. TATA CAPITAL LTD., WHO ARE REGULAR ASSESSEES UNDER INCOME TAX ACT. AS LD. AR FILED BEFORE US CERTIFICATE ISSUED BY CHARTERED ACCOUNTANT WHICH WAS NOT FILED BEFORE AUTHORITIES BELOW, IT IS NECESSARY THAT THE SAME IS TO BE VERIFIED. WE SET ASIDE THIS ISSUE ITA 290/BANG/2018 & ITA 318/BANG/2018 PAGE 5 OF 9 TO LD. AO FOR DUE VERIFICATION OF THE FACTS AND TO CONSIDER THE CLAIM IN ACCORDANCE WITH LAW. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 290/B/2018 7 GROUND NO. 1 HAS BEEN RAISED BY REVENUE AGAINST DELETING THE ADDITION OF RS.1,57,95,052/- ON ACCOUNT OF WAGES EXPENDITURE WHICH WERE NOT ADEQUATELY BACKED BY PRIMARY DOCUMENTS. EXCELLENT LD. SR. DR SUBMITTED THAT ASSESSEE IS HAD DEBITED SUM OF RS.15,03,77,278/- AND RS.75,73,239/- WAS TOWARDS WAGES FOR CONSTRUCTION DIVISION AND REAL ESTATE DIVISION. HE SUBMITTED THAT LD. AO UPON VERIFICATION OF THE VOUCHERS FOUND MOST OF THE VOUCHERS TO BE SELF-MADE AND CONTAINED DISCREPANCIES. IT WAS ALSO NOTED BY LD. AO THAT THE BILLS AND VOUCHERS WERE NOT PROPERLY MAINTAINED AND THEY WERE NOT LEGIBLE IN MANY CASES. LD. AO HAS ALSO NOTED THAT MOST OF THE PAYMENTS WERE THROUGH CASH. LD. SR. DR SUBMITTED THAT LD. AO RIGHTLY DISALLOWED 10% OF THE WAGE EXPENDITURE AS ASSESSEE COULD NOT SATISFACTORILY SUBSTANTIATE THE CLAIM. 8 ON THE CONTRARY LD. AR SUBMITTED THAT ASSESSEE IS IN THE CONTRACT BUSINESS AND UNDERTAKES CONTRACT WORK AT VARIOUS PARTS OF THE STATE PARTICULARLY IN REMOTE AREAS. HE SUBMITTED THAT IT WAS NOT POSSIBLE FOR ASSESSEE TO KEEP SUPPORTING EVIDENCES FOR DAILY WHICH PAYMENTS AND OTHER SITE RELATED EXPENSES WHERE THE ITA 290/BANG/2018 & ITA 318/BANG/2018 PAGE 6 OF 9 LABOUR TURNOVER IS VERY HIGH. FURTHER LD. AR SUBMITTED THAT IN THIS LINE OF BUSINESS THE LABOUR PAYMENTS, BILLS/VOUCHERS ARE GENERALLY OF SELF-MADE NATURE AND IS INEVITABLE. IN SUPPORT OF HIS ARGUMENT HE PLACED RELIANCE UPON DECISION OF HONBLE DELHI HIGH COURT IN CASE OF PR. CIT VS. M/S. R.G BUILDWELL ENGINEERS LTD., REPORTED IN (2018) 99 TAXMANN.COM 283 WHICH HAS BEEN APPROVED BY HONBLE SUPREME COURT IN CASE OF PR. CIT VS. M/S. R.G BUILDWELL ENGINEERS LTD., REPORTED IN (2018) 99 TAXMANN.COM 284, WHEREIN IDENTICAL SITUATION AROSE. 9 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. ASSESSEE ALSO PLACED RELIANCE UPON ORDER DATED 11/09/09 PASSED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05 IN ITA NO. 929 AND 930/B/2008 , WHEREIN IDENTICAL DISALLOWANCE MADE BY LD. AO STOOD DELETED. HONBLE SUPREME COURT CONFIRMED ADDITION BEING DELETED IN CASE OF M/S. R.G BUILDWELL ENGINEERS LTD., (SUPRA) . IT HAS BEEN SUBMITTED BY LD. AR THAT TRIBUNAL IN CASE OF M/S. R.G BUILDWELL ENGINEERS LTD., DELETED ADDITION FOR 2 REASONS ; FIRSTLY THAT THE BOOKS OF ACCOUNTS WERE NOT REJECTED AND SECONDLY THAT IN THE PAST CONSISTENTLY SUCH EXPENSES WERE ALLOWED IN SCRUTINY ASSESSMENT. 10 IN THE PRESENT FACTS OF THE CASE BEFORE US LD. AO HAS NOT REJECTED THE BOOKS OF ACCOUNTS. FURTHER IT HAS BEEN OBSERVED BY LD. CIT (A) THAT THERE IS NO FINDING BY LD. AO THAT EXPENDITURE INCURRED AND CLAIMED BY ASSESSEE IS EITHER CAPITAL IN NATURE OR PERSONAL OR WHOLLY AND EXCLUSIVELY NOT INCURRED FOR THE PURPOSES ITA 290/BANG/2018 & ITA 318/BANG/2018 PAGE 7 OF 9 OF BUSINESS. LD. CIT (A) ALSO OBSERVED THAT NO DEFECT HAS BEEN POINTED OUT BY LD. AO IN ANY OF SPECIFIC VOUCHERS. IT IS OBSERVED THAT THE DISALLOWANCE MADE BY LD. AO IS ON PURELY AD HOC BASIS OF 10%. IT IS ALSO NOTED THAT THE LD. AO HAS NOT DOUBTED BONA FIDES OF SUCH EXPENDITURE. UNDER SUCH CIRCUMSTANCES WE DO NOT FIND ANY REASON TO INTERFERE WITH THE VIEW ADOPTED BY LD. CIT (A) AND THE SAME IS UPHELD. ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS DISMISSED. 11 GROUND NO. 2 IS IN RESPECT OF DELETING DISALLOWANCE OF RS.1,32,21,414/- ON ACCOUNT OF SECTION 14 A READ WITH RULE 8D (III). 12 LD. SR. DR SUBMITTED THAT ASSESSEE EARNED EXEMPT INCOME AND WHENEVER THERE IS AN EXEMPT INCOME EARNED CERTAIN INDIRECT/COMMON EXPENDITURE COULD ALWAYS BE ATTRIBUTABLE TO SUCH RECEIPTS. THUS SUPPORTED THE ORDER PASSED BY AUTHORITIES BELOW. ON THE CONTRARY LD. AR PLACED RELIANCE UPON THE OBSERVATIONS OF LD. CIT (A). 13 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. ADMITTEDLY ASSESSEE HAS EARNED EXEMPT INCOME AMOUNTING TO RS. 11, 600/-AND NO NEW INVESTMENT HAS BEEN MADE BY ASSESSEE DURING THE YEAR UNDER CONSIDERATION. FURTHER LD. CIT (A) HAS OBSERVED THAT ALL OLD INVESTMENTS BY ASSESSEE HAVE BEEN CARRIED OUT OF INTERNAL GENERATED FUNDS AND THAT NO BORROWED FUNDS HAVE BEEN UTILISED FOR INVESTMENTS THAT HAVE BEEN MADE IN THE PAST. UNDER SUCH CIRCUMSTANCES WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT ITA 290/BANG/2018 & ITA 318/BANG/2018 PAGE 8 OF 9 (A) IN RESTRICTING DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME EARNED DURING THE YEAR. ACCORDINGLY GROUND RAISED BY REVENUE STANDS DISMISSED. IN THE RESULT APPEAL FILED BY REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER, 2019. SD/- (B. R. BASKARAN) ACCOUNTANT MEMBER SD/- (BEENA PILLAI) JUDICIAL MEMBER BANGALORE, DATED, 20 TH DECEMBER, 2019. /MK/ COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. ITA 290/BANG/2018 & ITA 318/BANG/2018 PAGE 9 OF 9 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR. P. S. .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SECTION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. .. 14. DICTATION NOTE ENCLOSED