M/s. B. M. Chapalkar & Sons, Nashik V. Assistant Commissioner of Income tax,

ITA 2906/PUN/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1542 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-11-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 20-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJAY DHOKE
• Keywords: Principle of natural justice; Difference of opinion; TDS; Set aside
• Section: 40(a)(ia); 201; 194A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE BEFORE SHRI R.S.SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY , JM . / I TA NO.2906 /PUN/20 16 / ASSESSMENT YEAR : 2010 - 11 M/S. B.M. CHAPALKAR & SONS, 26, DEHBANOO COMPLEX, NASHIK PUNE ROAD, NASHIK ROAD, NASHIK - 422 101, PAN : AADFB5084C ....... / APPELLANT / V/S. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 1, NASHIK. / RESPONDENT A SSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : SHRI AJAY DHOKE / DATE OF HEARING : 11 .12 .2019 / DATE OF PRONOUNCEMENT : 12 .12 .2019 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(APPEAL) - 1, NASHIK DATED 15.11.2016 FOR THE ASSESSMENT YEAR 201 0 - 1 1 AS PER THE FOLLOWING GROUNDS OF APPEAL ON RECORD. 2 ITA NO. 2906 /PUN/20 16 A.Y. 2010 - 11 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX APPEAL I, NASHIK IN IGNORING THE DECISIONS IN THE CASE OF CINETEK TELEFILMS P LTD. VS. ACIT (2013) TILO 441 (ITAT) (MUM) AND APOLLO TYRES VS. DCIT (2013) 15 5 TTJ (CO CHIN) 470 AND CONFIRMING THE ADDITION OF RS.80,88,260 WHEN THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE TO SHORT DEDUCTION IN VIEW OF THE DECISIONS. THE ADDITION MAY PLEASE BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LEARNED ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING THE ADDITION OF RS.1,54,977 WHEN THE DATE OF PAYMENT IS AFTER 01.10.2009 AND THE PARTY HAS PROVIDED PAN AS REQUIRED. THE CIT(A) - 1, NASHIK IS NOT JUSTIFIED IN SETTING ASIDE THE ISSUE FO R VERIFICATION. THE CIT HAS NO POWER TO SET ASIDE THE ASSESSMENT. THE ORDER MAY PLEASE BE CANCELED AND THE ADDITION MAY PLEASE BE DELETED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.8,60,292 WHEN THE PAYMENTS ARE NOT INTEREST PAYMENT BUT ARE FOR FINANCIAL CHARGES. PROVISIONS OF SECTION 194A ARE NOT APPLICABLE. THE ADDITION MAY PLEASE BE DELETED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE C IT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.11,40,530 IGNORING THE LEDGERS PRODUCED THE LEDGER ACCOUNTS ARE ENCLOSED HEREWITH AGAIN. THE ADDITION MAY PLEASE BE DELETED. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARN ED CIT(A) IS NOT JUSTIFIED IN IGNORING THE FACTUAL POSITION OF TAKING THE INCOME ASSESSED AT RS.3,41,94,670 WHEN THE CIT(A), NASHIK HAS GRANTED REDUCTION OF RS.30,99,827.THE INCOME SHOULD HAVE BEEN REDUCED TO THAT EXTENT AND MAY PLEASE BE TAKEN CORRECTLY. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ANY OF THE GROUND OF APPEAL. 2. G ROUND NO.1 PERTAINS TO THE QUESTION WHETHER U/S.40(A)(IA) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE A CT), DISALLOWANCE CAN BE MADE FOR SHORT DEDUCTION OF TAX. 3. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED THAT WITHIN THE PURVIEW OF THE PROVISION OF SECTION 40(A)(IA) OF THE ACT, THERE IS NOTHING IN THE SAID PROVISION TO TREAT INTER ALIA THE ASSESSEE AS DEFAULTER WHE RE T HERE IS A SHORTFALL IN DEDUCTION. THAT AS REGARDS THIS PROPOSITION, THE LD. AR RELIED ON THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT AND ANOTHER VS. KISHORE RAO AND OTHERS (HUF) IN ITA NO.660/2015 AND THEREIN, 3 ITA NO. 2906 /PUN/20 16 A.Y. 2010 - 11 THE DECISION OF TH E HONBLE CALCUTTA HIGH COURT IS ALSO REFERRED TO I.E. CIT VS. S.K. TEKRIWAL (2014) 361 ITR 432 (CAL.). THE HONBLE KARNATAKA HIGH COURT HAS HELD AND OBSERVED THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT HAS TWO LIMBS ONE IS WHERE ASSESSEE HAS TO D EDUCT TAX AND THE SECOND WHERE AFTER DEDUCTING TAX, THE ASSESSEE HAS TO PAY INTO GOVT. ACCOUNT. THERE IS NOTHING IN THE SAID SECTION TO TREAT, INTER ALIA, THE ASSESSEE AS DEFAULTER WHERE THERE IS SHORTFALL IN DEDUCTION. WITH REGARD TO THE SHORTFALL, IT CAN NOT BE ASSUMED THAT THERE IS A DEFAULT AS THE DEDUCTION IS NOT AS REQUIRED BY OR UNDER THE ACT, BUT THE FACTS IS THAT THIS EXPRESSION, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII - B AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION HAS NOT B EEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB SECTION 3(1) OF SECTION 139. THIS SECTION 40(A)(IA) OF THE ACT REFERS ONLY TO THE DUTY TO DEDUCT TAX AND PAY TO GOVERNMENT ACCOUNT. IF THERE IS ANY SHORTFALL DUE TO ANY DIFFERENCE OF OPINION AS TO THE TAX ABILITY OF ANY ITEM OR THE NATURE OF PAYMENTS FALLING UNDER VARIOUS TDS PROVISIONS, THE ASSESSEE CAN BE DECLARED TO BE AN ASSESSEE IN DEFAULT UNDER SECTION 201 OF THE ACT BUT NO DISALLOWANCE CAN BE MADE BY INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE ACT. 4. THE LD. DR PER CONTRA SUBMITTED THAT IT HAS TO BE ASCERTAINED WHETHER IT IS THE CASE OF SHORT DEDUCTION OR NO DEDUCTION AT ALL SO FAR AS THE ASSESSEE IS CONCERNED. 5. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS. AS DEMONSTRATED BY THE LD. AR OF THE ASSESSEE SO FAR AS THE DECISION OF THE HONBLE KARNATAKA HIGH COURT (SUPRA.) IS CONCERNED, THE REALM OF SECTION 40(A)(IA) OF THE ACT IS IMPOSING TWO FOLD OBLIGATIONS ON THE ASSESSEE VIZ. (I) TO DEDUCT TAX & (II) TO DEPOSIT THE DEDUCTED TAX TO GOVERNMENT ACCOUNT. THERE IS NOTHING IN THE SAID SECTION TO TREAT, INTER ALIA THE ASSESSEE AS DEFAULTER WHERE 4 ITA NO. 2906 /PUN/20 16 A.Y. 2010 - 11 THERE IS SHORTFALL IN DEDUCTION. THIS IS THE VIEW TAKEN BY THE HONBLE KARNATAKA HIGH COURT (SUPRA.) AND THE HONBLE KARNATAK A HIGH COURT (SUPRA.) HAS REFERRED TO THE JUDGMENT DELIVERED BY THE HONBLE CALCUTTA HIGH COURT (SUPRA.). HOWEVER, DETAILED VERIFICATION OF FACTS IS REQUIRED WHETHER IT IS THE CASE OF SHORT DEDUCTION OF TAX . THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT (APPEAL) ON THIS SCORE AND RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR VERIFICATION ON THIS ASPECT AFTER COMPLYING WITH THE PRINCIPLES OF NATURAL JUSTICE. THUS, GROUND NO.1 RAISED IN APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOS ES. 6. WITH REGARD TO GROUND NO.2 , IT IS THE CONTENTION OF THE ASSESSEE THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS.1,54,977/ - WHEN THE DATE OF PAYMENT IS AFTER 01.10.2009 AND THE PARTY HAS PROVIDED PAN AS REQUIRED. THE LD. C IT(APPEAL) WAS NOT JUSTIFIED IN SETTING ASIDE THE ISSUE FOR VERIFICATION. THE LD. CIT(APPEAL) HAS NO POWER TO SET ASIDE THE ASSESSMENT. 7. WE OBSERVE AT PARA 5.3 OF THE CIT(APPEAL)S ORDER THAT HE HAD DIRECTED THE ASSESSING OFFICER TO VERIFY THE CONTENTION OF THE ASSESSEE FROM RECORDS AND RE - COMPUTE DISALLOWANCE U/S.40(A)(IA) OF THE ACT. 8. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THIS ISSUE MAY BE SENT BACK TO THE FILE OF ASSESSING OFFICER FOR PROPER VERIFICATION. 9. TH E LD. DR FAIRLY CONCEDED TO THE ARGUMENTS PUT FORTH BY THE LD. AR OF THE ASSESSEE. 5 ITA NO. 2906 /PUN/20 16 A.Y. 2010 - 11 10. IN VIEW OF THE SUBMISSIONS OF THE PARTIES HEREIN, WE SET ASIDE THE ORDER OF THE LD. CIT(APPEAL) ON THIS ISSUE AND THE MATTER IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR PROPER VERIFICATION AND ADJUDICATION AS PER LAW. THUS, GROUND NO.2 RAISED IN APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 11. WITH REGARD TO GROUND NO.3 , IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD PAID INTERE ST OF RS.8,60,292/ - TO NON BANKING F INAN CIAL C OMPANIES (NBFC) (L & T FINANCE RS.7,61,266/ - ), LABORD RS.12,091/ - , CHOLAMANDALAM FINANCE RS.86,935/ - BUT FAILED TO DEDUCT TAX AT SOURCE ON IT. THE LD. AR HAD MADE SUBMISSIONS AND CLAIMED THAT SUCH EXPENDITURE WAS NOT INTEREST EXPENDITURE BUT WAS FINANCIAL CHARGES FOR PURCHASE OF VEHICLES. HOWEVER, T HE ASSESSING OFFICER NOTICED FROM THE P & L ACCOUNT OF THE ASSESSEE, THE EXPENDITURE HAS BEEN SHOWN AS INTEREST EXPENDITURE. 12. THE LD. CIT(APPEAL) UPHELD THE ORDE R OF THE ASSESSING OFFICER AS PER THE DETAILED REASONS APPEARING IN HIS ORDER WHICH IS ON RECORD. 13. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED THAT SINCE THE MAJOR ISSUES ARE BEING RESTORED BACK TO THE FILE OF ASSESSING OFFICER, THIS I SSUE MAY ALSO BE REMITTED BACK TO HIS FILE IN ORDER TO VERIFY WHETHER IT IS INTEREST EXPENDITURE OR FINANCIAL CHARGES FOR PURCHASE OF VEHICLES. 14. THE LD. DR FAIRLY CONCEDED TO THE ARGUMENTS PUT FORTH BY THE LD. AR OF THE ASSESSEE. 6 ITA NO. 2906 /PUN/20 16 A.Y. 2010 - 11 15. BOTH THE PARTIE S HEARD AND THE FACTS AND CIRCUMSTANCES INVOLVED IN THE ISSUE CONSIDERED . IT IS THE CONTENTION OF THE REVENUE THAT THE AMOUNT IS INTEREST EXPENDITURE AS SHOWN IN THE P & L ACCOUNT OF THE ASSESSEE; WHEREAS THE ASSESSEE CONTENDED THAT THE SAME ARE FINANCIAL CHARGES FOR PURCHASE OF VEHICLES. THESE FACTS NEED TO BE ASCERTAINED AND VERIFIED. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF THE LD. CIT(APPEAL) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR VERIFICA TION AS PER LAW. THUS, GROUND NO.3 RAISED IN APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 16. THE FACTS PERTAIN TO GROUND NO.4 IS THAT THE ASSESSEE HAD PAID CARTING CHARGES OF RS.31,50,441/ - TO VARIOUS PERSONS. AS PER THE PROVISIONS OF SECTION 194C(6) WHICH WAS INSERTED W.E.F. 01.10.2009, IT IMPLIES THAT IF THE ASSESSEE PRODUCES PAN OF CONCERNED TRANSPORTER, HE IS NOT REQUIRED TO DEDUCT THE TAX AT SOURCE. THE LD. AR MADE SUBMISSION DATED 09.07.2 015 AND STATED THAT THE PROVISION OF SECTION 4 0(A)(IA) HAVE BEEN COMPLIED BY HIM. FROM THE DETAILS PROVIDED BY THE ASSESSEE IT WAS SEEN BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD NOT DEDUCTED TAX FULLY ON CERTAIN TRANSACTIONS. THE LD. AR OF THE ASSESSE E CLAIMED THAT SUCH TRANSACTIONS WERE PRIOR TO 01.10.2009 AND ACCORDINGLY NO TAX WAS DEDUCTED AT SOURCE AS THESE PERSONS HAD FURNISHED THEIR PAN. HOWEVER, THE LD. AR DID NOT FURNISH PAN IN RESPECT OF THREE PARTIES. 17. IT IS THE CONTENTION OF THE LD. AR O F THE ASSESSEE AT THE TIME OF HEARING BEFORE US THAT THE ASSESSING OFFICER DISALLOWED THE ENTIRE AMOUNT OF RS.11,40,530/ - HOWEVER , IT IS ONLY WITH REGARD TO THE THREE PERSONS /PARTIES WHOSE PAN HAS NOT BEEN PRODUCE D BY THE LD. AR OF THE ASSESSEE, THE DISALL OWANCE SHOULD BE RESTRICTED TO THESE THREE PERSONS ONLY AS PER SECTION 194C(6) OF THE ACT. 7 ITA NO. 2906 /PUN/20 16 A.Y. 2010 - 11 18. THE LD. DR FAIRLY CONCEDED TO THE ARGUMENTS PUT FORTH BY THE LD. AR OF THE ASSESSEE. 19. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS. WE FIND AS PER THE FINDINGS OF THE ASSESSING OFFICER, ONLY THREE PERSONS/ PARTIES HAVE NOT PROVIDED THEIR PAN. HOWEVER, WHILE MAKING DISALLOWANCE, THE ASSESSING OFFICER ADDED ENTIRE AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. AS PER THE PROVISIONS OF SECTION 194C(6), IT PROVIDES NO DEDUCTION SHALL BE MADE FROM ANY SUM CREDITED OR PAID OR LIKELY TO BE CREDITED TO PAID DURING THE PREVIOUS YEAR TO THE ACCOUNT OF A CONTRACTOR DURING THE COURSE OF BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGES [WHERE SUCH C ONTRACTOR OWNS TEN OR LESS GOODS CARRIAGES AT ANY TIME DURING THE PREVIOUS YEAR AND FURNISHES A DECLARATION TO THAT EFFECT ALONG WITH] HIS PERMANENT ACCOUNT NUMBER, TO THE PERSON PAYING OR CREDITING SUCH SUM. IN THE INSTANT CASE, PAN WAS NOT SUBMITTED BY THREE PARTIES ONLY. THEREFORE, DISALLOWANCE SHOULD BE RE STRICTED ONLY WITH REGARD TO THO SE THREE PARTIES. IN VIEW OF THE MATTER, WE RESTRICT THE DISALLOWANCE WITH RESPECT TO THOSE THREE PARTIES WHO HAVE NOT FURNISHED THEIR PAN AND THE REST AMOUNT OF ADDITION IS DELETED. THUS, GROUND NO.4 RAISED IN APPEAL BY THE ASSESSEE IS PARTLY ALLOWED. 20. WITH REGARD TO GROUND NO.5 , THE LD. AR OF THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT IT IS CONSEQUENTIAL AND THE MATTER MAY BE SENT BACK TO THE FILE OF ASSESSING OFFICER FOR VERIFICATION ACCORD INGLY. THE LD. DR DOES NOT HAVE ANY OBJECTION. 8 ITA NO. 2906 /PUN/20 16 A.Y. 2010 - 11 21. IN VIEW OF THE SUBMISSIONS OF THE PARTIES HEREIN AND FACTS & CIRCUMSTANCES OF THE CASE, GROUND NO.5 IS ALSO RESTORED BACK TO THE FILE OF ASSESSING OFFI CER FOR VERIFICATION AND TO ADJUDICATE THE SAME AFTER COMPLYING WITH THE PRINCIPLES OF NATURAL JUSTICE. THUS, GROUND NO.5 RAISED IN APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 22. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED ON 12 TH DAY OF DEC EMBER , 201 9 . SD/ - SD/ - R.S.SYAL PARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 12 TH DECE MBER , 2019 . SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS) - 1, NASHIK. 4. THE PR. CIT - 1, NASHIK. 5 . , , , / DR, ITAT, B BENCH, PUNE. 6 . / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE . 9 ITA NO. 2906 /PUN/20 16 A.Y. 2010 - 11 DATE 1 DRAFT DICTATED ON 1 1 . 12 .2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 11 .12 .201 9 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER