Utkal Galvanizers Ltd, Bhubaneswar V. ACIT, Cuttack

ITA 300/CTK/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81460 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 10-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S C DAS
• Assessee Lawyers: SASWAT ACHARYA
• Keywords: Question of law

Judgement Text

I.T.A. NO. 30 0 / CTK ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI S .V. MEHROTRA (ACCOUNTANT MEMBER) , AND SHRI GEORGE MATHAN (JUDICIAL MEMBER) I.T.A. NO. 300 / CTK / 20 1 3 ASSESSMENT YEAR : 200 9 - 20 10 UTKAL GALVANIZERS LTD.,............... ......... ........... .. .APP ELL ANT PLOT NO. 232, SAHEED NAGAR, BHUBANESWAR - 751 007 [PAN : A A ACU 3693 E ] - VS. - ASSISTANT COMMISSIONER OF INCOME TAX, ... .... . RESPONDENT CIRCLE - 1(1), CUTTACK APPEARANCES BY: SHRI S ASWAT ACHARYA , A .R. , FOR THE ASSESSE E SHRI S.C. DAS , D.R, FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : OCTOBER 20 , 2 01 4 DATE OF PRONOUNCING THE ORDER : OCTOBER 22 , 201 4 O R D E R PER GEORGE MATHAN : TH IS IS AN APPEAL FILED BY THE ASSESSE E AGAINST THE ORDER OF LD. COMMISSI ONER OF INCOME TAX (APPEALS) , CUTTACK , ODISHA IN I.T. APPEAL NO. 0 64 5 / 20 1 1 - 1 2 DATED 1 9 . 02 .20 1 3 FOR THE ASSESSMENT YEAR 200 9 - 10 . 2 . SHRI S ASWAT ACHARYA , A DVOCATE , REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI S.C. DAS , D.R, REPRESENTED ON BEHALF OF THE RE VENUE . 3. AT THE TIME OF HEARING, I N RESPECT OF GROUNDS NO. 1 & 2, IT WAS SUBMITTED BY THE LD. AR THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD. CIT(APPEALS) IN CONFIRMING THE ADDITION REPRESENTING THE DIFFERENCE IN STOCK AS PROVIDED TO THE BANK AND AS RECORDED IN THE ASSESSEES STOCK BOOK. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD SHOWN THE I.T.A. NO. 30 0 / CTK ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 2 OF 5 VALUE OF CLOSING STOCK AT RS.7,65,73,151/ - IN ITS BALANCE - SHEET AS ON 31.03.2009. IT WAS THE SUBMISSION THAT IN THE STATEMENT GIVEN TO THE BANK, THE ASSESSEE HAD SHOWN THE CLOSING STOCK AT RS.9,89,34,510/ - . IT WAS THE SUBMISSION THAT THE DIFFERENCE OF RS.2,23,61,359/ - WAS TREATED BY THE ASSESSING OFFICER AS SUPPRESSED STOCK AND HAD MADE THE ADDITION THEREON. IT WAS THE SUBMISSION THAT IN THE ASSESSMENT ORDER, THE A SSESSING OFFICER HAD EXTRACTED THE STATEMENT GIVEN TO THE BANK BY THE ASSESSEE IN THE ASSESSMENT ORDER AT PAGE 3, PARA 2.2. IT WAS THE SUBMISSION THAT THE MAIN DIFFERENCE WAS ON ACCOUNT OF THE MATERIAL RECEIVED ON LETTER OF CREDIT, WHICH HAD BEEN SHOWN TO THE BANK. IT WAS THE SUBMISSION THAT THE MATERIAL RECEIVED ON LETTER OF CREDIT WOULD NOT FIND PLACE IN THE CLOSING STOCK OF THE ASSESSEE BUT WAS TO BE CONSIDERED ONLY IN THE WORK - IN - PROGRESS. IT WAS THE SUBMISSION BEFORE THE ASSESSING OFFICER THAT THERE WA S NO VARIATION ITEM - WISE AND THAT THE STATEMENT GIVEN TO THE BANK WAS PURELY AN ESTIMATED FIGURE. A T THIS POINT, LD. AR WAS DIRECTED TO PRODUCE THE COPY OF THE STATEMENT GIVEN TO THE BANK AS ALSO THE BREAK - UP OF THE STOCK STATEMENT AND LD. AR PRODUCED THE SAME. ON A SPECIFIC VERIFICATION, WHICH WAS ALSO SHOWN TO THE LD. DR, IT WAS FOUND THAT THE FINISHED GOODS AS SHOWN IN THE CLOSING STOCK IN THE BALANCE - SHEET AND THE CLOSING STOCK AS SHOWN TO THE BANK WERE ALSO FOUND TO TALLY ITEM - WISE. THE STATEMENT GIVEN TO THE BANK DID NOT CARRY THE MATERIAL RECEIVED ON LETTER OF CREDIT. IT WAS THUS THE SUBMISSION BY THE LD. AR THAT THE ADDITION AS MADE BY THE ASSESSING OFFICER AND AS CONFIRMED BY THE LD. CIT (APPEALS) WAS LIABLE TO BE DELETED. 4. . IN REPLY, LD. D . R . VEH EMENTLY SUPPORTED THE ORDER OF ASSESSING OFFICER AND LD. CIT(APPEALS). 5 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE HAVE ALSO PERUSED THE ASSESSMENT ORDER AS ALSO THE ORDER OF THE LD. CIT(APPEALS). WE HAVE SPECIFICALLY VERIFIED THE CLOSING STOCK PROVIDE D TO THE BANK ALONGWITH THE BREAK - UP OF THE SAME AS SHOWN IN ITS BALANCE - SHEET. IT IS NOTICED THAT THERE IS NO VARIATION IN THE QUANTITY OF THE CLOSING STOCK THE VARIATION IS ONLY IN THE VALUATION. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT NO ADDITIO N CAN BE MADE IN SO FAR AS THE ADDITION ON ACCOUNT OF STOCK CANNOT BE MADE BY ONLY REFERRING TO THE STOCK STATEMENT GIVEN TO THE BANK. A PERUSAL OF THE ASSESSMENT ORDER ALSO SHOWS THAT THE PURCHASE AND SALES HAVE NOT BEEN DISPUTED. THUS THE ASSESSEE HAS BE EN ABLE TO DEMONSTRATE THAT THERE IS NO VARIATION IN THE QUANTITATIVE TALLY AND THAT I.T.A. NO. 30 0 / CTK ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 3 OF 5 THE VARIATION IS ONLY ON ACCOUNT OF THE VALUATION AND THE MATERIAL SUPPLIED ON LETTER OF CREDIT. THE ASSESSEE HAVING EXPLAINED THE VARIATION AND DEMONSTRATED THE SAME AND HAVING RECONCILED THE DIFFERENCE, WE ARE OF THE VIEW THAT NO ADDITION ON THIS COUNT IS CALLED FOR IN THE HANDS OF THE ASSESSEE. CONSEQUENTLY THE SAID ADDITION STANDS DELETED. 6 . IN RESPECT OF GROUND NO. 3, IT WAS THE SUBMISSION THAT THE ISSUE WAS AGAINST T HE ACTION OF THE LD. CIT(APPEALS) IN CONFIRMING THE ADDITION REPRESENTING DISALLOWANCE MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ON THE GROUND THAT TDS HAD ALSO BEEN DEDUCTED IN RESPECT OF THE PAYMENTS MADE TO THE PROFESSIONALS. IT WA S THE SUBMISSION THAT ALL PAYMENTS HAD BEEN MADE, NO AMOUNTS PAYABLE AS ON THE YEAR - END. IT WAS THE SUBMISSION THAT IN VIEW OF THE DECISION OF THE HONBLE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORT, VISHAKHAPATNAM VS. - ACIT REPORTED IN (2012) 16 ITR (TRIB.) 1 (SB) , NO ADDITION WAS CALLED FOR. 7 . IN REPLY, LD. D . R . VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND LD. CIT(APPEALS). 8 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE PAYMENTS HAVE BEEN MADE TO THE ARBITRATORS AND PAYMENTS ARE PROFESSIONAL FEES AND THERE IS NO OUTSTANDING AS ON THE YEAR - END, IN VIEW OF THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL DATED 16.10.2014 IN ITA NO. 54/CTK/2013 IN THE CASE OF TYBAS PROJECTS PVT. LTD . HAS HELD AS FOLLOWS: - 19. HAVING HEARD BOTH THE SIDES, WE FIND THAT ITAT DELHI BENCH IN THE CASE OF MRS KANAK SINGH IN ITA NO.5530/DEL/2012 ORDER DATED 19.9.2012 HELD AS UNDER: 5. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE RECORD OF THE CASE. T HE FACTS ARE NOT DISPUTED. ADMITTEDLY ASSESSEE DID NOT DEDUCT THE TAX AS REQUIRED UNDER THE PROVISIONS OF SECTION 194C. HOWEVER, IT IS ALSO NOT DISPUTED THAT NO AMOUNT WAS PAYABLE AT THE END OF THE YEAR TO SUB - CONTRACTORS. UNDER SUCH CIRCUMSTANCES, THE MAJ ORITY VIEW DECISION OF SPECIAL BENCH IN THE CASE MERILYN SHIPPING & TRANSPORTS (SUPRA), IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE. HOWEVER, THE SPECIAL BENCH DECISION WAS EXAMINED BY VARIOUS HIGH COURT AND IT WAS HELD BY HONBLE ALLAHABAD HIGH COURT IN THE CASE OF M/S VECTOR SHIPPING SERVICES (P) LTD. (SUPRA), AS UNDER: WE DO NOT FIND THAT THE REVENUE CAN TAKE ANY BENEFIT FROM THE OBSERVATIONS MADE BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORT LTD. (136 ITD 23) (S B) QUOTED AS ABOVE TO THE EFFECT SECTION 40 (A) (IA) WAS INTRODUCED IN THE ACT BY THE FINANCE ACT, 2004 WITH EFFECT FROM1.4.2005 WITH A VIEW TO AUGMENT THE REVENUE THROUGH THE MECHANISM OF TAX DEDUCTION AT SOURCE. THIS PROVISION WAS BROUGHT ON STATUTE TO D ISALLOW THE CLAIM OF EVEN GENUINE AND ADMISSIBLE EXPENSES OF THE ASSESSEE UNDER THE HEAD 'INCOME FROM I.T.A. NO. 30 0 / CTK ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 4 OF 5 BUSINESS AND PROFESSION' IN CASE THE ASSESSEE DOES NOT DEDUCT TDS ON SUCH EXPENSES. THE DEFAULT IN DEDUCTION OF TDS WOULD RESULT IN DISALLOWANCE OF EXPEND ITURE ON WHICH SUCH TDS WAS DEDUCTIBLE. IN THE PRESENT CASE TAX WAS DEDUCTED AS TDS FROM THE SALARIES OF THE EMPLOYEES PAID BY M/S MERCATOR LINES LTD., AND THE CIRCUMSTANCES IN WHICH SUCH SALARIES WERE PAID BY M/S MERCATOR LINES LTD., FOR M/S VECTOR SHIPPI NG SERVICES, THE ASSESSEE WERE SUFFICIENTLY EXPLAINED. IT IS TO BE NOTED THAT FOR DISALLOWING EXPENSES FROM BUSINESS AND PROFESSION ON THE GROUND THAT TDS HAS NOT BEEN DEDUCTED, THE AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY THE END OF THE YE AR. WE DO NOT FIND THAT THE TRIBUNAL HAS COMMITTED ANY ERROR IN RECORDING THE FINDING ON THE FACTS, WHICH WERE NOT CONTROVERTED BY THE DEPARTMENT AND THUS THE QUESTION OF LAW AS FRAMED DOES NOT ARISE FOR CONSIDERATION IN THE APPEAL. THE INCOME TAX APPEALIS DISMISSED. 5.1. THESE OBSERVATIONS HAVE BEEN MADE WITH REFERENCE TO THE FINDINGS OF THE TRIBUNAL IN ITA NO. 5219/DEL/2012 IN THE CASE OF M/S VECTOR SHIPPING SERVICES, WHICH IS REPRODUCED HEREUNDER: - 7 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTI ES AND HAVE PERUSED THE RECORD OF THE CASE. THE SUBMISSIONS MADE BEFORE LD. CIT(A), AS NOTED EARLIER, HAVE NOT BEEN CONTROVERTED BY THE DEPARTMENT. IT IS NOT DISPUTED THAT M/S MERCATOR LINES LIMITED HAD DEDUCTED TDS ON SALARIES PAID BY IT ON BEHALF OF ASSE SSEE. UNDER SUCH CIRCUMSTANCES ASSESSEE WAS NOT REQUIRED TO DEDUCT TDS ON REIMBURSEMENT BEING MADE BY IT TO M/S MERCATOR LINES LIMITED. FURTHER IN ANY VIEW OF THE MATTER, SINCE IT IS NOT DISPUTED THAT NO AMOUNT REMAINED PAYABLE AT THE YEAR END, THEREFORE, IN VIEW OF THE SPECIAL BENCH DECISION IN THE CASE OF MERILYN SHIPPING AND TRANSPORT LTD., (136 ITD 23) (SB), ADDITION COULD NOT BE MADE. IN THIS CASE, IT WAS HELD AS UNDER: - SECTION 40(A)(IA) WAS INTRODUCED IN T HE ACT, BY THE FINANCE ACT, 2004 WITH EFFEC T FROM 1.4.2005 WITH A VIEW TO AUGMENT THE REVENUE THROUGH THE MECHANISM OF TAX DEDUCTION AT SOURCE. THIS PROVISION WAS BROUGHT ON STATUTE TO DISALLOW THE CLAIM OF EVEN GENUINE AND ADMISSIBLE EXPENSES OF THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS A ND PROFESSION IN CASE THE ASSESSEE DOES NOT DEDUCT TDS ON SUCH EXPENSES. THE DEFAULT IN DEDUCTION OF TDS WOULD RESULT IN DISALLOWANCE OF EXPENDITURE ON WHICH SUCH TDS WAS DEDUCTIBLE. 5.1.1. THE SLP FILED AGAINST THE ORDER OF THE HONBLE HIGH COURT STANDS DISMISSED BY THE HONBLE SUPREME COURT: 5.2. 5.3. SINCE NO DECISION OF HONBLE JURISDICTIONAL HIGH COURT DIRECTLY ON THE ISSUE HAS BEEN BROUGHT TO OUR NOTICE, THEREFORE, CONSIDERING THE CONFLICT OF OPINION BETWEEN VARIOUS HIGH COURT AND THE DECISION O F SPECIAL BENCH OF THE ITAT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) ON THE ISSUE IN QUESTION. 20. RESPECTFULLY, FOLLOWING THE SAME, GROUND NOS.2 & 3 ARE ALLOWED. RESPECTFULLY FOLLOWING THE SAME, THE ADDITION MADE BY THE ASSESSING OFFICER AND AS CONFIRMED BY THE LD. CIT(APPEALS) BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA), STANDS DELETED. I.T.A. NO. 30 0 / CTK ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 5 OF 5 9 . LD. AR DID NOT PRESS GROUND NO. 4 OF THE ASSESSEES APPEAL CONSEQUENTLY THE SAME IS DISMISSED AS NOT PRESSED. 10 . IN THE RESULT, THE APPEAL FILED BY T HE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND OCTOBER , 2014. SD/ - SD/ - S .V. MEHROTRA GEORGE MATHAN ( ACCOUNTANT MEMBER) ( JUDICIAL MEMBER) KOLKATA, THE 22 ND D AY OF OCTO BER , 20 1 4 COPIES TO : (1) THE ASSESSEE (2) THE DEPARTMENT (3) COMMISSIONER OF INCOME - TAX (APPEALS) (4) COMMISSIONER OF INCOME TAX ( 5 ) THE DEPARTMENTAL REPRESENTATIVE ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL CUTTACK B ENCH, CUTTACK LAHA/SR. P.S.