IGL GEMSTONES P.LTD, MUMBAI V. DCIT 5(2), MUMBAI

ITA 2955/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92582 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 25-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 17-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHHIDANAND DUBEY
• Assessee Lawyers: DEEPAK TRALSHAWALLA
• Keywords: Bonafide belief; Non-deduction of tax
• Section: 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I MUMBAI . . , / BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND , SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO.2955/MUM/2013 / ASSESSMENT YEAR 2009-10 IGL GEMSTONES PVT. LTD. 520/521 PAREKH MARKET, 39, KENNEDY BRIDGE, OPE4RA HOUSE, MUMBAI 400 004. / VS. THE DCIT 5 (2), 5 TH FLOOR, AAYKAR BHAVAN, MK RAOD, MUMBAI 400 020 ./ ./ PAN/GIR NO. : AABCI 1908B ( / APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY SHRI DEEPAK TRALSHAWALLA RESPONDENT BY SHRI SACHHIDANAND DUBEY ! ' / DATE OF HEARING : 25/05/2015 ! ' / DATE OF PRONOUNCEMENT : 25/05/2015 / O R D E R PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-9, MUMBAI DATED 06.03.2013 FOR ASSESSMENT YEAR 2009- 10. 2. IN THE PRESENT CASE, ASSESSEE IS CONTESTING THE LEVY OF CONCEALMENT PENALTY ON THE DISALLOWANCE OF A SUM OF RS.6,06,87 9/- MADE UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 (THE ACT). O N SUCH DISALLOWANCE PENALTY OF RS.1,87,525/- IS IMPOSED WHICH HAS BEEN CONFIRME D BY LD. CIT(A). THE ASSESSEE IS AGGRIEVED, HENCE, HAS FILED THIS APPEAL . . / ITA NO.2955/MUM/2013 / ASSESSMENT YEAR 2009-10 2 3. IT IS THE CASE OF THE REVENUE THAT ASSESSEE WAS UNDER AN OBLIGATION TO DEDUCT TAX UNDER SECTION 194C ON THE PAYMENTS MADE BY IT TO TWO FIRMS NAMELY M/S. FEZISONS AND M/S. DWARKESH ENTERPIRSES, WHICH CONCERNS HAVE DONE PRINTING WORK FOR THE ASSESSEE. THE DETAILS O F THESE WORKS HAVE BEEN GIVEN IN THE TABLE REPRODUCED IN PARA 5.4 OF THE O RDER OF LD. CIT(A) AND FOR THE SAKE OF BREVITY THE SAME ARE NOT BEING REPRODUCED. THE ASSESSEE HAS MADE PAYMENTS TO M/S. FEZISONS AGGREGATING TO A SUM OF R S.3,35,808/- WHICH INCLUDES PAYMENT MADE FOR ART WORK FOR MAGAZINE & Q UALITY ANALYSIS REPORT; VISITING CARDS, QUALITY ANALYSIS REPORT OF DIAMOND/ DIAMOND JEWELLERY; DIGITAL PRINTOUTS; DIGITAL PRINTOUTS WITH STICKER SHEETS; I GL BOOKLETS; DIAMONDS GUIDES; TENTS MADE FOR EXHIBITION; LIGHT PERFORMANCE REPORT OF THE DIAMOND; QUALITY ANALYSIS REPORT OF DIAMOND; COPIES OF QUALITY ANALY SIS REPORT OF DIAMONDS; FILES WITH NEW PUNCH PRINTED/REPRINTED FILES ETC. 3.1 SIMILARLY, PAYMENTS HAVE BEEN MADE TO M/S. DWAR KESH ENTERPRISES AGGREGATING TO RS.2,71,071/- , WHICH INCLUDES PAYME NT MADE FOR JEWELLERY DESIGN BOOK;A4 SIZE CERTIFICATE; A4 SIZE TERMS AND CONDITIONS; A4 SIZE COLOUR LETTERHEAD; I-CARD FOR DELHI; DIAMOND & DIAMOND GRA DING BOOK; JEWELLERY DESIGN BOOK; TERMS AND CONDITIONS; CASH CREDIT VOUCHER; VOUCHER BOOK ETC. 3.2 THUS, IT HAS BEEN HELD BY AO THAT AN AGGREGATE SUM OF RS.6,06,879/- WAS TO BE ADDED TO THE INCOME OF THE ASSESSEE UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AS ASSESSEE DID NOT DEDUCT TAX UPON THE AFOREMENTIONED PAYMENTS. THE ASSESSEE DID NOT CONTEST THIS ADDITI ON TO THE INCOME. 4. IT IS THE CASE OF THE ASSESSEE THAT ALL MATERIAL GOT PRINTED FROM AFOREMENTIONED TWO CONCERNS WAS WITH REGARD TO MATE RIAL GOT BY THE ASSESSEE ACCORDING TO THE REQUIREMENT OR SPECIFICATION AND THE MATERIAL USED BY THOSE CONCERNS WAS ALSO NOT PURCHASED BY THOSE CONCERNS F ROM THE ASSESSEE, . / ITA NO.2955/MUM/2013 / ASSESSMENT YEAR 2009-10 3 THEREFORE, THE ACTION OF NON-DEDUCTION OF TAX WAS S UPPORTED BY THE STATUTORY PROVISIONS AS PER DEFINITION GIVEN IN EXPLANATION TO SECTION 194C UNDER THE HEAD WORK EXCLUDE THE PROCUREMENT OF GOODS WHICH ARE AS PER REQUIREMENT OR SPECIFICATION OF THE CUSTOMER BY USING MATERIAL PUR CHASED FROM A PERSON OTHER THAN SUCH CUSTOMER. THUS, IT IS THE CASE OF LD. AR THAT THOUGH ASSESSEE HAS ACCEPTED THE ADDITION, THAT FACT ALONE CANNOT BE UTILIZED FOR CONFIRMING THE CONCEALMENT PENALTY AS PRIMARILY THE OBLIGATION OF THE ASSESSEE FOR DEDUCTION OF TAX DOES NOT EXIST. IT IS ALSO THE CASE OF THE ASS ESSEE THAT, IN ANY CASE, NON- DEDUCTION OF TAX FROM THE PAYMENTS MADE TO THE AFOR EMENTIONED TWO CONCERNS ARISES OUT OF BONAFIDE BELIEF OF THE ASSESSEE THAT ASSESSEE IS NOT UNDER AN OBLIGATION TO DEDUCT TAX ON SUCH PAYMENTS. IT IS ALSO THE CASE OF THE ASSESSEE THAT NO MATERIAL PARTICULARS HAVE BEEN CONCEALED O R NO INACCURATE PARTICULARS HAVE BEEN SUBMITTED SO THAT CONCEALMENT PENALTY COU LD BE LEVIED UPON THE ASSESSEE. TO SUPPORT THESE PROPOSITION, LD. AR HAS RELIED UPON THE DECISION OF DELHI BENCHES OF ITAT IN THE CASE OF ITO VS. KUBER KHAINI PVT. LTD., ORDER DATED 29/7/2011 PASSED IN ITA NO.155/DEL/2011, COPY OF TH E SAID ORDER WAS PLACED ON OUR RECORD AND WAS ALSO GIVEN TO LD. DR. IN THE SAID DECISION, CONSIDERING THE DEFINITION OF WORK GIVEN IN EXPLANATION TO SE CTION 194C IT WAS HELD BY TRIBUNAL THAT IF THE PAYMENTS ARE MADE FOR THE MAN UFACTURE OR SUPPLY OF PRODUCTS WHICH ARE MANUFACTURED ACCORDING TO THE RE QUIREMENTS OR SPECIFICATIONS OF THE CUSTOMER BY USING MATERIAL PU RCHASED FROM A PERSON OTHER THAN SUCH CUSTOMER, THEN THE ASSESSEE WAS NOT UNDE R AN OBLIGATION TO DEDUCT THE TAX AS PAYMENTS MADE BY THE ASSESSEE WOULD NOT FALL WITHIN THE AMBIT OF WORK CONTRACT DEFINED IN SECTION 194C OF THE ACT. 4.1 IT WAS ALSO SUBMITTED BY LD. AR THAT FOR THE ADDITIONS MADE UNDER SECTION 40(A) (IA), PENALTY COULD NOT BE LEVIED AS PER DECISION OF MUMBAI TRIBUNAL IN THE CASE OF RUSHI BUILDERS & DEVELOPER S VS. ACIT DECISION DATED 4/3/2015 PASSED IN ITA NO.6684/MUM/12, WHEREIN SIMI LAR PROPOSITION WAS ACCEPTED. . / ITA NO.2955/MUM/2013 / ASSESSMENT YEAR 2009-10 4 4.2 THUS, IT WAS SUBMITTED BY LD. AR THAT LD. CIT (A) HAS COMMITTED AN ERROR IN CONFIRMING THE CONCEALMENT PENALTY WHICH S HOULD BE DELETED. 5. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY AO AND LID. CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. PRIMA-FACIE, ACCORDING TO THE PROVISIO NS OF SECTION 194C R.W. DEFINITION GIVEN OF WORK UNDER THE EXPLANATION TO SECTION 194C, THE CASE OF THE ASSESSEE HAS TO BE ACCEPTED THAT ASSESSEE COULD BE UNDER BONAFIDE BELIEF FOR NON-DEDUCTION OF TAX FROM THE TYPE OF PAYMENTS UPON WHICH IT HAS BEEN HELD THAT ASSESSEE IS LIABLE TO DEDUCT TAX AT SOUR CE. MERE ACCEPTANCE BY THE ASSESSEE OF THE ADDITION DOES NOT MAKE ENTITLE THE DEPARTMENT TO LEVY CONCEALMENT PENALTY. IN THIS CASE, IS NO ALLEGATI ON CAN BE IMPOSED UPON THE ASSESSEE TO SAY THAT DID NOT FURNISH ALL THE PART ICULARS OR IT HAS DISCLOSED INACCURATE PARTICULARS SO AS TO SAY THAT ASSESSEE IS LIABLE FOR CONCEALMENT PENALTY. KEEPING IN VIEW THE ENTIRETY OF FACTS AND ALSO REASONABLE BELIEF OF THE ASSESSEE THAT IT IS NOT ENTITLED FOR DEDUCTION OF T AX ON THE PAYMENTS MADE TO HIM BY IT AS THE SAME WERE EXCLUDED FROM THE DEFINI TION OF WORK BY THE EXPLANATION TO SECTION 194C, WE ARE OF THE OPINION THAT LEVY OF CONCEALMENT PENALTY IN THE PRESENT CASE IS NOT JUSTIFIED AND D ESERVES TO BE DELETED. ACCORDINGLY, THE PENALTY IS DELETED AND APPEAL FILE D BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/05/201 5 () * + 25/05/2015 SD/- SD/- ( , / RAJENDRA) ( . . / I.P. BANSAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER ( MUMBAI; * DATED 25/05/2015 . / ITA NO.2955/MUM/2013 / ASSESSMENT YEAR 2009-10 5 ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. .! ( ) / THE CIT(A)- 4. .! / CIT 5. /0 !12 , ' 12 , ( / DR, ITAT, MUMBAI 6. 3 / GUARD FILE. / BY ORDER, /! ! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ( / ITAT, MUMBAI . . ./ VM , SR. PS