Ashish Sumatibhai Shah, Ahmedabad V. DCIT, Circle-5(2), , Ahmedabad

ITA 2944/AHD/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0158 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-04-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 28-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Bonafide belief; Additional evidence; TDS; Set aside
• Section: 40(a)(ia); 194A; 68; 69

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD ( THROUGH VIRTUAL COURT ) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ITA NO. 2944/AHD/2017 ( / ASSESSMENT YEAR : 2013-14) ASHISH SUMATIBHAI SHAH T-3, AAKAR COMPLEX NATHALAL COLONY STADIUM ROAD, NAVRANGPURA, AHMEDABAD / VS. THE DCIT CIRCLE-5(2) AHMEDABAD ./ ./ PAN/GIR NO. : AHZPS 0503 N ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI DIVYANG SHAH. AR / RESPONDENT BY : SHRI LALIT P. JAIN, SR.DR / DATE OF HEARING 12/11/2020 !'# / DATE OF PRONOUNCEMENT 29/12/2020 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS)5, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)-5 /DCIT CIR.5(2)/725/2016-17 DATED 24/10/2017 ARISING IN T HE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961( HEREINAFTER REFERRED TO AS 'THE ACT') DATED 19/02/2016 RELEVANT TO ASSES SMENT YEAR (AY) 2013-14. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- ITA NO.2944/AHD/2017 ASHISH SUMATILAL SHAH VS. DCIT ASST .YEAR - 2013-14 - 2 - 1. WHETHER, ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, LD.AO HAS ERRED IN DISALLOWING INTEREST OF RS.171,8 01/- UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT 1961? 2. WHETHER, ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, LD.AO HAS ERRED IN DISALLOWING BAD DEBT OF RS.450,0 00/- UNDER SECTION 36(1)(VIII) OF INCOME TAX ACT 1961? 3. WITHOUT PREJUDICE TO GROUND OF APPEAL NO.2, WHETHER , ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, LD.AO HAS ERR ED OTHERWISE ALSO IN NOT ALLOWING BAD DEBT OF RS.450,000/- AS BU SINESS LOSS? 4. WHETHER, ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, LD.AO HAS ERRED IN MAKING ADDITION OF RS.22,91,000/ - UNDER SECTION 68 OF THE INCOME TAX ACT 1961? 3. GROUND NO.1 CONCERNS DISALLOWANCE OF INTEREST EX PENDITURE INCURRED AMOUNTING TO RS.1,71,801/- BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) FOR NON-DEDUCTION OF TDS. THE AS SESSEE IS STATED TO HAVE AVAILED A LOAN FROM BAJAJ FINANCE LTD. (BFL) A ND HAS PAID INTEREST AMOUNT TO RS.1,71,801/- DURING THE AY 2013-14. IT IS THE CASE OF THE ASSESSEE THAT HE WAS UNDER BONAFIDE BELIEF THAT BAJ AJ FINANCE LTD. IS A BANKING CORPORATION AND THEREFORE TDS IS NOT REQUIR ED TO BE DEDUCTED UNDER S.194A OF THE ACT. HOWEVER, THE ASSESSING OF FICER OBSERVED THAT BAJAJ FINANCE LTD. IS A NBFC AND THEREFORE PROVISIO NS OF SECTION 194A ARE SQUARELY APPLICABLE. CONSEQUENTLY, THE ASSESSI NG OFFICER INVOKED PROVISIONS OF SECTION 40(A)(IA) AND DISALLOWED INTE REST OF RS.1,71,801/- INCURRED BY THE ASSESSEE ON LOANS AVAILED FROM NBFC COMPANY OWING TO FAILURE OF THE ASSESSEE TO DEDUCT TAX THEREON. ITA NO.2944/AHD/2017 ASHISH SUMATILAL SHAH VS. DCIT ASST .YEAR - 2013-14 - 3 - 4. WE HAVE PERUSED THE ASSESSMENT ORDER AND THE FIR ST APPELLATE ORDER AND ALSO HEARD THE RIVAL SUBMISSIONS ON THE ISSUE. 5. IN THE BACKDROP OF LONG LINE OF JUDICIAL PRECEDE NTS INCLUDING JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF H INDUSTAN COCO COLA BEVERAGE LTD. REPORTED AT 293 ITR 226 (SC), WE CONSIDER IT EXPEDIENT TO SET ASIDE THE DISALLOWANCE AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSEE SHALL BE ENTIT LED TO PRODUCE SUCH EVIDENCES AS MAY BE CONSIDERED NECESSARY TO DEFEND ITS CASE FOR NON- DEDUCTION OF TDS. THE ASSESSING OFFICER SHALL BE E NTITLED TO MAKE SUCH ENQUIRY FROM THE PAYEE (BAJAJ FINANCE LTD.) AS MAY BE CONSIDERED EXPEDIENT TO ASCERTAIN WHETHER THERE IS ANY LOSS OF REVENUE BY SUCH NON- DEDUCTION. NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL DELETE THE DISALLOWANCE OF AMOUNT CARRIED OUT UNDER S.40(A)(IA ) WHERE IT IS FOUND THAT THE PAYEE CONCERNED HAS INCLUDED THE RECEIPT O BTAINED FROM THE ASSESSEE FOR THE PURPOSES OF COMPUTATION OF TOTAL I NCOME IN ITS RETURN. IN OTHER WORDS, DISALLOWANCE UNDER S.40(A)(IA) OF THE ACT WILL NOT SURVIVE IN THE HANDS OF ASSESSEE WHERE DEDUCTEE HAS ALSO INCLU DED THE CORRESPONDING INCOME IN ITS RETURN OF INCOME. THE ISSUE RAISED IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DETERMINATION IN ACCORDANCE WITH LAW. 6. IN THE RESULT, GROUND NO.1 OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ITA NO.2944/AHD/2017 ASHISH SUMATILAL SHAH VS. DCIT ASST .YEAR - 2013-14 - 4 - 7. GROUND NOS.2 & 3 ARE DISMISSED AS NOT PRESSED. 8. GROUND NO.4 CONCERNS ADDITIONS OF RS.22,91,000/- UNDER S.68 OF THE ACT. 8.1. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE A SSESSING OFFICER INTER ALIA OBSERVED THAT NATURE AND SOURCE IN RESPECT OF CERT AIN LOANS TAKEN BY ASSESSEE IS NOT SATISFACTORY. THE DETAIL S OF LOANS AVAILED AS TABULATED BY ASSESSING OFFICER IS REPRODUCED HEREUN DER: SR.NO. NAME DATE AMOUNT (RS.) 1. S KUMAR COMPUTERS PVT.LTD. 03.12.2012 03.12.2012 5,00,000 5,00,000 2. SAROJBEN SHAH 28.08.2012 25.09.2012 4,00,000 4,00,000 (REPAYMENT) 3. WONDERWORLF (INC) 13.07.2012 18.07.2012 6,00,000 (REPAYMENT) 4. SATNAM ELECTRIC & SERVICE CENTRE 24.04.2012 24.05.2012 2,91,000 2,91,000 (REPAYMENT) 8.2. THE ASSESSING OFFICER ACCORDINGLY INVOKED PROV ISIONS OF SECTION 68 OF THE ACT AND ADDED AN AMOUNT OF RS.22,91,000/- IN AGGREGATE IN RESPECT OF THE AFORESAID FOUR PARTIES. IN THE FI RST APPEAL, BEFORE THE CIT(A) AS WELL, THE ASSESSEE COULD NOT DERIVE ANY RELIEF. 8.3. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED THE APPEAL BEFORE THE TRIBUNAL. ITA NO.2944/AHD/2017 ASHISH SUMATILAL SHAH VS. DCIT ASST .YEAR - 2013-14 - 5 - 8.4. THE LD.AR FOR THE ASSESSEE IN THE COURSE OF HEARING, STRENUOUSLY HARPED ON THE FACT THAT THE LOSS HAVE BEEN TAKEN FO R A VERY BRIEF PERIOD AND ALSO REPAID THROUGH BANKING CHANNEL IN THE SAM E FINANCIAL YEAR IN RESPECT OF LOANS TAKEN FROM SAROJBEN SHAH (RS.4 LAK HS), WONDERWORLD (INC) (RS.6 LAKHS) AND SATNAM ELECTRIC & SERVICE CE NTRE (RS.2,91,000). IT WAS FURTHER POINTED OUT THAT LOANS OF RS.10 LAKH S OBTAINED FROM S. KUMAR COMPUTERS PVT.LTD. HAS ALSO BEEN REPAID IN TH E NEXT FINANCIAL YEAR. ADDITIONAL EVIDENCES IN THE FORM OF BANK STA TEMENT WAS FILED TO PROVE THE FACTUM OF REPAYMENT. IT WAS CONTENDED TH AT THIS IMPORTANT FACT HAS BEEN TOTALLY OVERLOOKED BY THE REVENUE. THE LD .AR FOR THE ASSESSEE STRONGLY ASSERTED THAT WHERE THE LOANS OBTAINED HAS BEEN DULY REPAID, THE ASSESSEE DOES NOT STAND TO BENEFIT AT ALL AND CONSE QUENTLY PLEADED THAT THE BONAFIDES OF THE TRANSACTION REQUIRES TO BE SEEN HA VING REGARD TO ENTIRETY OF THE FACTS. IT WAS SUBMITTED THAT THERE IS NO JU STIFICATION FOR THE REVENUE TO INCREASE THE ASSESSED INCOME ON ACCOUNT OF LOANS ALREADY REPAID. THE LD.AR THUS CONTENDED THAT ONUS WHICH LAY UPON THE ASSESSEE HAS BEEN BROADLY DISCHARGED IN THESE PECUL IAR CIRCUMSTANCES. 9. WE STRAIGHT AWAY NOTICE THAT THE FACT OF REPAYME NT OF THE LOAN IN RESPECT OF RS.12,91,000/- HAS BEEN DULY RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE ASSESSEE HAS ALSO FURNISHED ADDITIONAL EVIDENCE IN THE FORM OF BANK STATEMENT T O SHOW THAT THE REPAYMENT OF REMAINING AMOUNT OF RS.10 LAKHS PAID T O SHRI S. KUMAR COMPUTERS PVT.LTD. THE ASSESSING OFFICER HAS NOT E XAMINED THE FACT OF REPAYMENT. UNDER THE CIRCUMSTANCES, WE CONSIDER IT APPROPRIATE TO SET ITA NO.2944/AHD/2017 ASHISH SUMATILAL SHAH VS. DCIT ASST .YEAR - 2013-14 - 6 - ASIDE AND RESTORE THE ISSUE BACK ON ACCOUNT OF ADDI TION RESPECT OF SUCH LOANS OF RS.22,91,000/- TO THE FILE OF ASSESSING O FFICER. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE FACTUAL ASPECTS O N CLAIM OF RE-PAYMENT TO THE PARTY AND IF FOUND PROPER, IS DIRECTED TO GRANT APPROPRIATE RELIEF. IT SHALL BE OPEN TO THE ASSESSING OFFICER TO MAKE APPR OPRIATE INQUIRY FROM THE BANK TO ASCERTAIN THE FACT OF RE-PAYMENT TO TH E LENDERS, IF SO CONSIDERED EXPEDIENT. THUS, THE ACTION OF CIT(A) IS CANCELLED AND THE ADDITIONS MADE ON ACCOUNT OF RECEIPT FROM AFORESAID FOUR PARTIES IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR NECESSARY VERIFICATION AS NOTED ABOVE TO ENABLE HIM TO PASS A FRESH ORDER IN ACCORDANCE WITH LAW. 10. AT THIS JUNCTURE, IT WILL BE RELEVANT TO NOTE T HE PERTINENT OBSERVATIONS OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS. SMT. P.K. NOORJAHAN (1999) 237 ITR 570 (SC) IN THE CONTE XT OF THE EXPRESSION MAY WITH REFERENCE TO SECTION 69 OF THE ACT. THE HONBLE SUPREME COURT IN THAT CASE OBSERVED THAT THE WORD MAY SHO ULD NOT BE READ AS SHALL. THE HONBLE SUPREME COURT HELD THAT THE E XPRESSION MAY INDICATES THAT THE INTENTION OF PARLIAMENT IN ENACT ING SECTION 69 (SIMILAR TO SECTION 68) WAS TO CONFER A DISCRETION ON THE AS SESSING OFFICER IN THE MATTER OF TREATING THE SOURCE OF INVESTMENT, WHICH HAS NOT BEEN SATISFACTORILY EXPLAINED BY THE ASSESSEE. IN TERMS OF THE DECISION OF THE HONBLE SUPRME COURT, THE ASSESSING OFFICER IS NOT OBLIGED TO INVOKE SECTION 68/S.69 OF THE ACT IN EVERY CASE WHERE THE EXPLANATION OFFERED IS FOUND TO BE UNSATISFACTORY IN THE OPINION OF THE ASSESSING OFFICER. IN ITA NO.2944/AHD/2017 ASHISH SUMATILAL SHAH VS. DCIT ASST .YEAR - 2013-14 - 7 - VIEW OF THE OVERRIDING FACT THAT LOANS SO OBTAINED STOOD RE-PAID THROUGH BANKING CHANNEL WITHOUT ANY REAL ADVANTAGE TO THE A SSESSEE, THE ONUS CAST UPON THE ASSESSEE IS SUBSTANTIALLY DISCHARGED IN VI EW OF THE OBSERVATIONS OF THE HONBLE SUPREME COURT. THE ACTION OF ASSESS ING OFFICER IS THUS SET ASIDE AND THE ISSUE IS RESTORED BACK TO THE FIL E OF ASSESSING OFFICER IN TERMS OF DIRECTIONS NOTED ABOVE. 11. AS A RESULT, GROUND NO.4 OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 29/12/2020 SD/- SD/- ( RAJPAL YADAV ) ( P RADIP KUMAR KEDIA ) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD; DATED 29/12/2020 &.., .(.. / T.C. NAIR, SR. PS !'#' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-5, AHMEDABAD 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD