Select Products Pvt. Ltd., Kolkata V. ITO, Ward - 3(2), Kolkata, Kolkata

ITA 294/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75112 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2014
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 22-02-2012
• Court: TRIBUNAL
• Department Lawyers: SADHAN BHATTACHARYA ACIT
• Keywords: Unexplained investment; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, B , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B , KOLKATA [ () , , , , , ! ! ! ! ] ]] ] [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHY A, AM ] # # # # /ITA NO.294/KOL/2012 $% &'/ ASSESSMENT YEAR : 2006-07 ()* / APPELLANT ) - $ - ( ,-)* /RESPONDENT) SELECT PRODUCTS PVT. LTD. -VERSUS- I.T.O., WARD-3 (2), KOLKATA KOLKATA (PAN:AAECS 8501 R) )* . / / FOR THE APPELLANT: SHRI SUBASH AGARWAL, ADVOCATE ,-)* . / / FOR THE RESPONDENT: SHRI SADHAN BHATTACHARYA ACIT, SR.DR 0$1 . 2! /DATE OF HEARING : 31.03.2014 3& . 2! /DATE OF PRONOUNCEMENT : 31.03.2014. / ORDER ( (( ( ) )) ), , , , PER SHRI MAHAVIR SINGH, JM THIS APPEAL OF ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-I, KOLKATA IN APPEAL NO.381/CIT(A)-I/WD-3(2)/08-09 DATED 17.11.2011. ASS ESSMENT WAS FRAMED BY I.T.O., WARD-3(2), KOLKATA U/S. 143(3) OF THE INCOME TAX AC T, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR A.YR. 2006-07 VIDE ITS ORDER DATED 31.12.2008. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS A GAINST THE ORDER OF CIT(A) IN MAKING DISALLOWANCES OF INTEREST PAYMENT OF RS.91,8 61/- FOR NON DEDUCTION OF TDS BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT . FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.1 :- 1. FOR THAT THE LEARNED CIT(A) WAS NOT JUSTIFI ED IN CONFIRMING ADDITION MADE BY THE INCOME TAX OFFICER FOR INTEREST OF RS.91,861 /- ON THE GROUND THAT PAYMENT OF SAME IS FOR WITHOUT DEDUCTION OF T.D.S. THOUGH THE APPELLANT HAD OBTAINED FORM NO.15G FROM THE PAYEE ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE. ITA NO.294/KOL/2012 SELECT PRODUCTS PVT. LTD. A.YR.2006-07 2 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO HAD DISALLOWED TH E INTEREST PAID TO THE FOLLOWING PERSONS : SL.NO. NAME AMOUNT 1. SHRI ANKIT K.KOTHARI RS. 6,731/- 2. SRI BHAVIK KR.KOTHARI RS.25,377/- 3. SHRI KAUSHIK KR.KOTHARI (HUF) RS.59,753/- RS.91,861/- THE AO MADE THESE DISALLOWANCES. THE ASSESSEE HAS N OT DEDUCTED TDS ON THE ABOVE PAYMENTS OF INTEREST AND THEREBY INVOKING THE PROVI SIONS OF SECTION 40(A)(IA) OF THE ACT HE MADE THE DISALLOWANCES. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO CONFIRMED THE ACTION OF AO. NOW ASSESSEE IS IN APPEAL BEFORE US. WE FIND THAT THE ASSESSEE BEFORE CIT(A) CONTENDED THAT IT HAD PA ID/DEBITED INTEREST AMOUNTING TO RS.13,46,512/- AND TDS WAS DEDUCTED OF ALL INTEREST PAID/DEBITED EXCEPT FROM THESE THREE PARTIES. THE ASSESSEE CONTENDED BEFORE CIT(A) THAT IN RESPECT OF THESE THREE PARTIES TDS WAS NOT DEDUCTED FOR THE REASON THAT TH EY HAVE FURNISHED FORM NO.15G FOR NON DEDUCTION OF TAX IN THE INTEREST INCOME. CO PIES OF FORM NO.15G AS SUBMITTED BY THE LOAN CREDITORS WITH THE ASSESSEE COMPANY WAS FURNISHED BEFORE AO DURING THE COURSE OF SCRUTINY ASSESSMENT. THESE WERE FILED BEF ORE CIT(A) ALSO BUT CIT(A) CONFIRMED THE DISALLOWANCE FOR THE REASON THAT FORM NO.15G WAS NOT SUBMITTED IN THE OFFICE OF THE COMMISSIONER OF INCOME TAX CONCERNED. WE FIND THAT ONCE FORM NO.15G IS SUBMITTED BY THE PAYEE THE ASSESSEE IS NO T OBLIGED TO DEDUCT TDS AND ONCE THIS IS THE POSITION, THE AO CANNOT MAKE DISALLOWAN CE BY INVOKING PROVISION OF SECTION 40(A)(IA) OF THE ACT. THIS POSITION HAS BEE N EXPLAINED BY THE COORDINATE BENCH OF ITAT MUMBAI IN THE CASE OF VIPIN P.MEHTA VS ITO IN ITA NO.3317/MUMBAI VIDE ORDER DATED 20.5.2011, WHEREIN IT HAS BEEN HELD AS UNDER :- ALL THESE PROVISIONS INDICATE THAT THE FAILURE ON THE PART OF THE ASSESSEE WHO IS THE PAYER OF THE INTEREST, TO FILED THE DECLARATIONS GI VEN TO HIM BY THEPAYEES OF THE INTEREST, WITHIN THE TIME LIMIT SPECIFIED IN SUB-SE CTION (2) TO SECTION 197A IS DISTINCT AND SEPARATE AND MERELY BECAUSE THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO SUBMIT THE DECLARATIONS TO THE INCOME-TAX DEPARTMEN T WITHIN THE TIME LIMIT, IT CANNOT BE SAID THAT THE ASSESSEE DID NOT HAVE DECLA RATIONS WITH HIM AT THE TIME WHEN HE PAID THE INTEREST TO THE PAYEES. THAT WOULD BE A SEPARATE MATTER AND SEPARATE PROOF AND EVIDENCE IS REQUIRED TO SHOW THA T EVEN WHEN THE ASSESSEE PAID THE INTEREST, HE DID NOT HAVE THE DECLARATIONS FROM PAYEES WITH HIM AND THEREFORE ITA NO.294/KOL/2012 SELECT PRODUCTS PVT. LTD. A.YR.2006-07 3 HE OUGHT TO HAVE DEDUCTED THE TAX FROM THE PAYMENT. NO SUCH EVIDENCE OR PROOF HAS BEEN BROUGHT BY THE DEPARTMENT. FOR THE ABOVESAID REASONS, WE ACCEPT THE ASSESSEE S CLAIM THAT SINCE HE HAD THE DECLARATIONS OF THE PAYEES IN THE PRESCRIBED FORM B EFORE HIM AT THE TIME WHEN THE INTEREST WAS PAID, HE WAS NOT LIABLE TO DEDUCT TAX THEREFROM UNDER SECTION 194A, IF HE WAS NOT LIABLE TO DEDUCT TAX, SECTION 40(A)(IA) IS NOT ATTRACTED. THERE IS NO OTHER GROUND TAKEN BY THE INCOME TAX AUTHORITIES TO DISAL LOW THE INTEREST. WE THEREFORE ACCEPT THE ASSESSEES APPEAL AND DELETE THE DISALLO WANCE OF INTEREST OF RS.7,87,291/-. THEREFORE, IN VIEW OF THE ABOVE DECISION IN THE CAS E OF SHRI VIPIN P.MEHTA SUPRA, WE HOLD THAT THE DISALLOWANCES CONFIRMED BY CIT(A) IS UNWARRANTED AND WE DELETE THE SAME. THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED . 4. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) IN CONFIRMING DISALLOWANCE OF EXPENSES BY INVOKING PRO VISION OF SECTION 14A READ WITH RULE 8D OF IT RULES 1962 QUA THE EXEMPTED INCOME. F OR THIS ASSESSEE HAS RAISED THE FOLLOWING GROUNDS NOS. 2 & 3 :- 2. FOR THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED I N CONFIRMING DISALLOWANCE OF RS.1,21,608/- U/S 14A OF THE INCOME TAX ACT, 1961 B Y APPLYING PROVISION OF RULE 8D OF INCOME TAX RULE 1962 WHICH COME INTO FORCE FROM 2008-09 ASSESSMENT YEAR. 3. FOR THAT THE LEARNED CIT(A) SHOULD HAVE APPRECIA TED THAT WHEN THE EXEMPT (DIVIDEND) INCOME IS RS.62807/- DISALLOWANCE U/S 14 A OF RS.1,21,608/- IS HIGH AND EXCESSIVE. 5. WE FIND THAT FIRST OF ALL BOTH THE AUTHORITIES B ELOW HAVE ERRED IN APPLYING RULE 8D OF THE RULES READ WITH SECTION 14A OF THE ACT IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG . CO. LTD. VS. DCIT [2010] 328 ITR 81 (BOM.), WHEREIN IT IS HELD THAT RULE 8D OF THE RULES AS INSERTED BY THE I. T (FIFTH AMENDMENT) RULES, 2008 W.E.F. 24.3.2008 IS P ROSPECTIVE AND NOT RETROSPECTIVE. HENCE, IT WILL NOT APPLY TO ASSESSMENT YEAR 2006-07 AS IN THE PRESENT CASE. FURTHER, WE FIND THAT THE AO MADE THE ADDITION OF RS.1,21,60 8/- U/S. 14A OF THE ACT AGAINST EXEMPT INCOME AND CIT(A) HAS CONFIRMED THE SAME AND TRIBUNAL IS TAKING A CONSISTENT VIEW ALL ALONG RESTRICTING THE DISALLOWA NCE AT 1% OF THE EXEMPT INCOME. IN SUCH CIRCUMSTANCES WE FIND THAT THE EXEMPTED INCOME I.E. THE DIVIDEND IS ONLY TO THE EXTENT OF RS.62,087/- AND 1% OF THE EXEMPTED INCOME WILL SUFFICE THE ISSUE. ITA NO.294/KOL/2012 SELECT PRODUCTS PVT. LTD. A.YR.2006-07 4 ACCORDINGLY WE DIRECT THE AO TO RESTRICT THE DISALL OWANCE TO 1% OF THE EXEMPTED INCOME. THIS ISSUE IS PARTLY ALLOWED. 6. COMING TO THE THIRD ISSUE IN THE APPEAL OF ASSES SEE IS AS REGARDS THE ADDITION OF UNEXPLAINED INVESTMENT AT RS.3 LAKHS IN THE MUTUAL FUND. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUNDS NO.4 AND 5 :- 4. FOR THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED I N CONFIRMING THE ADDITION MADE BY INCOME TAX OFFICER OF RS.3,00,000/- IN PRINCIPAL MUTUAL FUND ON THE BASIS OF DATA IN ANNUAL INFORMATION RETURN (AIR)ALTHOUGH A C ERTIFICATE FROM RESPECTIVE MUTUAL FUND IS PRODUCED AND FILED STATING THAT THE ACTUAL INVESTMENT IS RS.2,00,000/- AND IT WAS ERRONEOUSLY FORWARDED TO I NCOME TAX DEPARTMENT AS RS.3,00,000/-. 3. FOR THAT THE LEARNED CIT(A) ERRED IN NOT UNDERST ATING THAT THE ACTUAL INVESTMENT IN PRINCIPAL MUTUAL FUND WAS FOR RS.2,00,000/- WHIC H WAS ERRONEOUSLY ENTEREST IN AIR DATA AT RS.3,00,000/- AND THAT THE INVESTMENT O F RS.2,00,000/- IS DULY RECORDED IN APPELLANTS BOOKS OF ACCOUNT & BANK ACC OUNT. 7. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT AO HAS MADE ADDITION OF UNEX PLAINED INVESTMENT BY OBSERVING AS UNDER :- AS PER AIR INFORMATION, THE ASSESSEE HAD INVESTED A SUM OF RS.3,00,000/- ON 30.06.2005 IN PRINCIPAL MUTUAL FUND. BUT THIS INVES TMENT HAD NOT BEEN SHOWN IN THE BOOKS OF THE ASSESSEE. SRI BAVISHI HAD SUBMITTE D THAT THE ASSESSEE HAD ACTUALLY INVESTED ONLY RS.2,00,000/- AND EVEN THE DATE OF IN VESTMENT WAS MATCHING. THIS IS NOT A SUFFICIENT EVIDENCE TO REFUTE THE A.R. INFORM ATION. THEREFORE, THE ASSESSEE HAD SUPPRESSED ITS INVESTMENT IN PRINCIPAL MUTUAL F UND BY RS.3,00,000/-, WHICH IS ADDED BACK TO THE TOTAL INCOME AN UNEXPLAINED INVES TMENT. PENALTY PROCEEDINGS U/S 271(1)(C) IS INITIATED SEPARATELY. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO. AGGRIEVED ASSESSEE NOW IS IN APPEAL BEFORE US. 8. WE FIND THAT THE ASSESSEE COMPANY HAS PURCHASED UNITS OF MUTUAL FUND WORTH RS.5,00,000/- DURING THE RELEVANT YEAR. ASSESSEE HA S FILED LEDGER COPY OF MUTUAL FUND PURCHASED BEFORE AO AS WELL AS BEFORE CIT(A) AND EV EN NOW BEFORE US. OUT OF THE TOTAL INVESTMENT IN MUTUAL FUND OF RS.5,00,000/- A SUM OF RS.2,00,000/- WAS INVESTED WITH THE PRIMARY MUTUAL FUND. HOWEVER, THE AIR INFO RMATION RECEIVED FROM INCOME TAX DATA BASE SHOWS THAT ASSESSEE HAS MADE INVESTME NT IN PRIMARY MUTUAL FUND AT RS.3,00,000/-. ASSESSEE BEFORE US NOW FILED THE CLA RIFICATION FROM PRINCIPAL MUTUAL ITA NO.294/KOL/2012 SELECT PRODUCTS PVT. LTD. A.YR.2006-07 5 FUND WHEREBY IT HAS BEEN CLARIFIED THAT ASSESSEE HA S MADE AN AMOUNT OF RS.2,00,000/- AND NOT RS.3,00,000/-. THE RELEVANT PORTION READS A S UNDER :- THIS IS WITH REFERENCE TO YOUR REQUEST DATED 27TH JUL 2010 RECEIVED BY US ON 29TH JUL 2010 REGARDING THE ABOVE SUBJECT MATTER. IN THIS REGARD, WE WOULD LIKE TO INFORM YOU THAT TH ERE WAS AN ERROR IN THE INFORMATION RELATED TO YOUR TRANSACTIONS IN THE AIR REPORT THAT WAS SENT TO THE INCOME TAX DEPARTMENT. WE WOULD LIKE TO CONFIRM TO YOU THAT THE INVESTMENT S WERE MADE BY YOU IN PRINCIPAL JUNIOR CAP FUND DIVIDEND PAYOUT OF PRINCI PAL MUTUAL FUND UNDER ACCOUNT NO.16547857. THE CORRECT INVESTMENT DETAILS AND THE AMOUNT THAT WAS ERRONEOUSLY FORWARDED TO THE INCOME TAX DEPARTMENT VIDE OUR AIR REPORT FOR T HE PERIOD 2005-06 IS MENTIONED BELOW : DATE OF TRANSACTION MODE OF PAYMENT CHEQUE NO. CORRECT AMOUNT WRONG AMOUNT WHICH WAS ERRONEOUSLY SENT TO THE INCOME TAX DEPARTMENT 30/06/2005 CHEQUE 109511 2,00,000.00 3,00,000.00 WE HAD ALREADY TAKEN ADEQUATE STEPS TO RECTIFY THIS ERROR BY SUBMITTING A SUPPLEMENTARY AIR REPORT TO THE INCOME TAX DEPARTMENT. THE SUPPLE MENTARY AIR APPROPRIATELY REFLECTS YOUR TRANSACTIONS WITH CORRECT VALUES. WE REQUEST YOU TO ASK THE INCOME TAX DEPARTMENT TO REFER TO THE SAME. A COPY OF THE PROVISIONAL RECEIPT OF THE SUPPLEMENT ARY RETURN AND ACCOUNT STATEMENT FOR PERIOD 2005-06 IS ENCLOSED FOR YOUR REFERENCE. AS ASSESSEE HAS GOT CLARIFICATION FROM PRIMARY MUTU AL FUND THEREBY IT HAS BEEN CLARIFIED THAT ASSESSEE HAS MADE INVESTMENT OF RS.2 ,00,000 ONLY AND NOT RS.3,00,000/- AS ADDED BY THE LOWER AUTHORITIES. WE FEEL THAT ADD ITION IS UNWARRANTED AND WE DELETE THE SAME. THIS GROUND OF ASSESSEES APPEAL IS ALLOW ED. 9. IN THE RESULT THE APPEAL OF ASSESSEE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- [ , , , , ! ] [ , ] [ SHAMIM YAHYA ] [ MAHAVIR SINGH ] ACCOUNTANT MEMBER JUDICIAL MEMBER ( (( (2! 2! 2! 2!) )) ) DATE: 31.03.2014. R.G.(.P.S.) ITA NO.294/KOL/2012 SELECT PRODUCTS PVT. LTD. A.YR.2006-07 6 . ,4 5 4&6- COPY OF THE ORDER FORWARDED TO: 1 . SELECT PRODUCTS PVT.LTD., 6C, ELGIN ROAD, UNIT 3C, KOLKATA-700020. 2 THE I.T.O.-WARD-3(2), KOLKATA. 3 . THE CIT, 4. THE CIT(A)-I, KOLKATA 5 . DR, KOLKATA BENCHES, KOLKATA -4 ,/ TRUE COPY, $0/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES