Kanigalpula Nagendram & Sons Co., Guntur V. THE CIT, Guntur

ITA 298/VIZ/2014

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9629 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 02-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Revision of order; Non-deduction of tax; Assessment record; TDS; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 142(1); 40(a)(ia); 194A

Judgement Text

ITA NO.298/VIZAG/2014 KANIGALPULA NAGENDRAM AND SONS COMPANY, GUNTUR 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.298/VIZAG/2014 ( / ASSESSMENT YEAR: 2009-10) KANIGALPULA NAGENDRAM AND SONS COMPANY GUNTUR VS. CIT GUNTUR [PAN: AACFK4873F ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI S. RAMA RAO, AR / RESPONDENT BY : SHRI G. GURUSWAMY, DR / DATE OF HEARING : 01.12.2016 / DATE OF PRONOUNCEMENT : 23.12.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE COMMISSIONER OF INCOME TAX, GUNTUR DATED 14.3.2014 U/S 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE AC T') FOR THE ASSESSMENT YEAR 2009-10. ITA NO.298/VIZAG/2014 KANIGALPULA NAGENDRAM AND SONS COMPANY, GUNTUR 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING IN GUNNIES AND JUTE, FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 19.9.2010 DECLARING TOTAL INCOME OF ` 1,86,830/-. THE CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTICES U/S 142(1) & 143(2 ) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') WERE IS SUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSES SEE APPEARED FROM TIME TO TIME AND FURNISHED THE INFORMATION CALLED F OR. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT, ON 19.12.2011 DETERMINING TOTAL INCOME OF ` 5,36,830/- INTER-ALIA MAKING ADDITIONS OF ` 3,50,000/- TOWARDS DISALLOWANCE OF CERTAIN EXPENDITURES. 3. THE CIT, GUNTUR ISSUED A SHOW CAUSE NOTICE DATED 20.7.2014 U/S 263 OF THE ACT AND ASKED TO EXPLAIN AS TO WHY THE A SSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT, DATED 19. 12.2011 SHALL NOT BE REVISED UNDER THE PROVISIONS OF SECTION 263 OF THE ACT. THE CIT PROPOSED TO REVISE THE ORDER FOR THE REASON THAT ON VERIFICATION OF ASSESSMENT RECORDS, IT IS NOTICED THAT THE A.O. FAI LED TO MAKE ADDITIONS U/S 40(A)(IA) OF THE ACT, TOWARDS INTEREST EXPENDIT URE EVEN THOUGH THE ASSESSEE FAILED TO DEDUCT TDS U/S 194A OF THE ACT. THE CIT FURTHER OBSERVED THAT THE ASSESSEE HAS PAID INTEREST OF ` 5,91,601/-, HOWEVER, ITA NO.298/VIZAG/2014 KANIGALPULA NAGENDRAM AND SONS COMPANY, GUNTUR 3 FAILED TO DEDUCT TDS U/S 194A OF THE ACT. THEREFOR E, OPINED THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE F ILED A WRITTEN SUBMISSION AND CONTENDED THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE IN TEREST OF THE REVENUE AS THE A.O. HAS EXAMINED THE ISSUE OF APPLICABILITY OF TDS ON INTEREST PAYMENTS AT THE TIME OF ASSESSMENT PROCEEDINGS. TH E ASSESSEE FURTHER SUBMITTED THAT THE RECIPIENT OF INTEREST HAS FURNIS HED DECLARATION IN FORM NO.15G/15H ON 5.4.2009 AND THE SAME WERE FURNISHED TO THE CIT(TDS) HYDERABAD. SINCE THE RECIPIENTS OF INTEREST HAVE F URNISHED DECLARATIONS IN FORM NO.15G/15H, THE ASSESSEE HAS NOT DEDUCTED T DS U/S 194A OF THE ACT. THESE FACTS WERE BROUGHT TO THE NOTICE OF THE A.O. AND THE A.O. AFTER EXAMINING THE DETAILS FURNISHED BY THE A SSESSEE HAS ACCEPTED THE EXPLANATIONS, THEREFORE, THE ASSESSMENT ORDER P ASSED BY THE A.O. CANNOT BE CONSIDERED AS ERRONEOUS IN SO FAR AS IT I S PREJUDICIAL TO THE INTEREST OF THE REVENUE. 5. THE CIT AFTER CONSIDERING THE EXPLANATIONS FURNI SHED BY THE ASSESSEE HELD THAT THE ASSESSMENT ORDER PASSED BY T HE A.O. IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE, AS ITA NO.298/VIZAG/2014 KANIGALPULA NAGENDRAM AND SONS COMPANY, GUNTUR 4 THE A.O. FAILED TO EXAMINE THE ISSUE OF DISALLOWANC E OF INTEREST U/S 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SO URCE U/S 194A OF THE ACT. THOUGH THE ASSESSEE CLAIMS TO HAVE FURNISHED FORM NO.15G/15H TO THE CIT(TDS), HYDERABAD, ON PERUSAL OF THE FORMS FI LED BY THE ASSESSEE, IT IS OBSERVED THAT THE RECIPIENTS HAVE FILED FORMS ON 5.4.2009, WHEREAS INTEREST WAS CREDITED TO RESPECTIVE ACCOUNTS ON 31. 3.2009. THE ASSESSEE COULD NOT HAVE ACTED UPON A DECLARATION WH ICH WAS RECEIVED BY IT SUBSEQUENT TO CREDITING OF INTEREST TO THE RESPE CTIVE PARTYS ACCOUNT. AS THE ASSESSEE HAS NO DECLARATION IN ITS HANDS AS ON THE DATE OF CREDITING INTEREST, IT SHOULD HAVE COMPLIED WITH SE CTION 194A OF THE ACT. SINCE, THERE IS NO COMPLIANCE, THE PROVISIONS OF SE CTION 40(A)(IA) OF THE ACT CAME INTO OPERATION CALLING FOR DISALLOWANCE OF ENTIRE INTEREST CREDITED/PAID BY THE ASSESSEE. SINCE, THE A.O. FAI LED TO EXAMINE THE ISSUE, THE ASSESSMENT ORDER PASSED BY THE A.O. IS E RRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AN D ACCORDINGLY THE ASSESSMENT ORDER PASSED BY THE A.O. IS SET ASIDE AN D DIRECTED THE A.O. TO MODIFY THE ASSESSMENT ORDER AS PER THE DIRECTION S GIVEN ABOVE WITH AN OPPORTUNITY OF HEARING TO THE ASSESSEE. AGGRIEV ED BY THE CIT ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.298/VIZAG/2014 KANIGALPULA NAGENDRAM AND SONS COMPANY, GUNTUR 5 6. THE LD. A.R. FOR THE ASSESSEE, SUBMITTED THAT TH E LD. CIT OUGHT TO HAVE SEEN THE FACT THAT TDS U/S 194A OF THE ACT CAN NOT BE MADE WHEN FORM NO.15G/15H WAS SUBMITTED BY THE RECIPIENT OF I NTEREST. THE LD. A.R. FURTHER SUBMITTED THAT THE LD. CIT FAILED TO A PPRECIATE THE FACT THAT THE ASSESSEE IS HAVING TIME UP TO 5 TH OF MAY OF THE SUCCEEDING YEAR TO DEPOSIT THE TDS AND ACCORDINGLY ANY FORMS SUBMITTED ON OR BEFORE THAT DATE CAN BE CONSIDERED FOR NON-DEDUCTION OF TAX AT SOURCE. SINCE THE RECIPIENTS OF INTEREST HAVE FURNISHED DECLARATIONS IN FORM 15G/15H ON 5.4.2009, THE ASSESSEE HAS NOT DEDUCTED TDS. THESE FACTS WERE BROUGHT TO THE NOTICE OF THE A.O. AT THE TIME OF AS SESSMENT PROCEEDINGS BY FILING NECESSARY DECLARATION FORMS. THE A.O. AF TER EXAMINING THE DETAILS FILED BY THE ASSESSEE HAS COMPLETED THE ASS ESSMENT BY MAKING CERTAIN ADHOC DISALLOWANCE TOWARDS EXPENDITURE, THE REFORE, THE CIT WAS NOT CORRECT IN ASSUMING JURISDICTION U/S 263 OF THE ACT. 7. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORT ED ORDER OF THE CIT. THE LD. D.R. FURTHER SUBMITTED THAT THE ASSES SEE COULD HAVE DEDUCTED TDS U/S 194A OF THE ACT WHEN THE RECIPIENT S HAVE NOT SUBMITTED DECLARATIONS IN FORM NO.15G/15H BEFORE TH E DATE THE ASSESSEE SHOULD CREDIT THE INTEREST TO THE RESPECTIVE PAYEE S ACCOUNTS. SINCE, THE RECIPIENTS HAVE SUBMITTED FORMS AFTER THE DUE DATE OF PAYMENT/CREDIT OF ITA NO.298/VIZAG/2014 KANIGALPULA NAGENDRAM AND SONS COMPANY, GUNTUR 6 INTEREST, THE ASSESSEE OUGHT TO HAVE DEDUCTED TDS. THE A.O. FAILED TO EXAMINE THE ISSUE OF DISALLOWANCE OF INTEREST U/S 4 0(A)(IA) OF THE ACT, FOR NON DEDUCTION OF TAX AT SOURCE AND ACCORDINGLY CIT RIGHTLY ASSUMED JURISDICTION TO REVISE THE ASSESSMENT ORDER AND HIS ORDER SHOULD BE UPHELD. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE CIT ASSUMED JURISDICTION TO REVISE THE ASSESSMENT ORDER FOR THE REASON THAT THE A.O. HAS FAILED TO MAKE ADDITIONS TOWARDS INTER EST PAYMENTS UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, FOR NON-DEDUCTION OF TAX AT SOURCE U/S 194A OF THE ACT. THE CIT FURTHER OBSERV ED THAT THOUGH THE ASSESSEE HAS FURNISHED DECLARATIONS IN FORM NO.15G/ 15H TO THE CIT(TDS), HYDERABAD, THE FORMS SUBMITTED BY THE REC IPIENTS OF INTEREST ARE BEYOND THE DATE OF CREDIT/PAYMENT OF INTEREST T O THE RESPECTIVE PAYEES ACCOUNTS. IT IS THE CONTENTION OF THE ASSE SSEE THAT IT HAD RECEIVED DECLARATIONS BEFORE THE DUE DATE OF PAYMEN T OF TDS TO THE CREDIT OF GOVERNMENT ACCOUNT AND ACCORDINGLY, IT HA S NOT DEDUCTED TDS U/S 194A OF THE ACT. THE ASSESSEE FURTHER CONTENDE D THAT THE A.O. HAS EXAMINED THE ISSUE OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT, TOWARDS INTEREST PAYMENT AFTER SATISFIED WITH THE EXPLANATI ONS FURNISHED BY THE ITA NO.298/VIZAG/2014 KANIGALPULA NAGENDRAM AND SONS COMPANY, GUNTUR 7 ASSESSEE CHOSEN TO ACCEPT THE INTEREST PAYMENT, THE REFORE, THE CIT WAS INCORRECT IN ASSUMING JURISDICTION U/S 263 OF THE A CT. 9. HAVING HEARD BOTH THE SIDES, WE FIND FORCE IN TH E ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE A.O. HAS EXAMINED THE ISSUE OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT, TOWARDS INTE REST PAYMENTS AT THE TIME OF ASSESSMENT. THE ASSESSEE HAS FURNISHED DET AILS OF DECLARATIONS RECEIVED FROM THE RECIPIENT OF INTEREST AND THE A.O . AFTER SATISFIED WITH THE EXPLANATIONS OFFERED BY THE ASSESSEE HAS CHOSEN TO ACCEPT INTEREST PAYMENT, THEREFORE, THE CIT WAS INCORRECT IN HOLDIN G THAT THE A.O. HAS NOT EXAMINED THE ISSUE AT THE TIME OF ASSESSMENT PR OCEEDINGS. IN SO FAR AS DISALLOWANCE OF INTEREST U/S 40(A)(IA) OF TH E ACT, FOR NON-DEDUCTION OF TAX AT SOURCE U/S 194A OF THE ACT, WE FIND THAT THE ASSESSEE HAS RECEIVED DECLARATIONS IN FORM 15G/15H FROM THE RECI PIENT OF INTEREST ON 5.4.2009. WE FURTHER OBSERVED THAT THOUGH THE ASSE SSEE CREDITED INTEREST TO RESPECTIVE PARTYS ACCOUNTS AS ON 31.3. 2009, AS PER THE PROVISIONS OF SECTION 194A OF THE ACT, THE ASSESSEE IS HAVING TIME TO DEPOSIT TDS TO THE CREDIT OF THE GOVERNMENT ACCOUNT UP TO 5 TH MAY OF SUCCEEDING FINANCIAL YEAR. SINCE, THE ASSESSEE HAS RECEIVED DECLARATIONS BEFORE THE DUE DATE OF PAYMENT OF TDS U/S 194A OF T HE AC, EVEN THOUGH TDS IS DEDUCTED AT THE TIME OF MAKING CREDIT TO THE ACCOUNTS OF THE ITA NO.298/VIZAG/2014 KANIGALPULA NAGENDRAM AND SONS COMPANY, GUNTUR 8 PAYEES, THE ASSESSEE ALWAYS CAN REVERSE TDS BEFORE THE DUE DATE OF PAYMENT OF TDS TO THE CREDIT OF GOVERNMENT ACCOUNT, IF THE RECIPIENTS HAVE FURNISHED DECLARATIONS IN FORM 15G/15H OF THE ACT. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, WE FIND THAT THE RECIPIENTS HAVE FURNISHED DECLARATIONS IN FORM 15G/15H BEFORE THE DUE DATE OF PAYMENT OF TDS TO THE CREDIT OF THE GOVERNMENT ACCOUNT. SINCE, THE RECIPIENT HAS FURNISHED STATUT ORY FORMS IN FORM 15G/15H, THE ASSESSEE NEED NOT TO DEDUCT TDS U/S 19 4A OF THE ACT, CONSEQUENTLY, NO DISALLOWANCE CAN BE MADE U/S 40(A) (IA) OF THE ACT, ACCORDINGLY, THERE IS NO PREJUDICE IS CAUSED TO THE INTEREST OF REVENUE. SINCE, THE ASSESSMENT ORDER PASSED BY THE A.O. IS N EITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE, THE CIT WAS INCORRECT IN ASSUMING JURISDICTION U/S 263 OF THE ACT. THEREFOR E, WE SET ASIDE THE ORDER PASSED BY THE CIT U/S 263 OF THE ACT AND REST ORE THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 23 RD DEC16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER ITA NO.298/VIZAG/2014 KANIGALPULA NAGENDRAM AND SONS COMPANY, GUNTUR 9 ! /VISAKHAPATNAM: % /DATED : 23.12.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT KANIGALPULA NAGENDRAM & SONS CO. , C/O N. SUBBA RAYUDU, AUDITOR & TAX CONSULTANT, PATNAM BAZAR, GUN TUR 2. / THE RESPONDENT THE CIT, GUNTUR 3. ) ( ) / THE CIT(A), GUNTUR 4. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 5 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM