M/s. Dharmana Moters, Srikakulam V. The ITO, Srikakulam

ITA 311/VIZ/2016

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9791 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 06-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T SATYANANDAM
• Assessee Lawyers: C V S MURTHY
• Section: 143(3)

Judgement Text

ITA NO.311/VIZAG/2016 M/S. DHARMANA MOTORS, SRIKAKULAM ` 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER ./I.T.A.NO.311/VIZAG/2016 ( / ASSESSMENT YEAR: 2009-10) M/S. DHARMANA MOTORS, SRIKAKULAM VS. ITO, WARD - 2, SRIKAKULAM [PAN: AADFD4215B ] ( / APPELLANT) ( ! / RESPONDENT) / APPELLANT BY : SHRI C.V.S. MURTHY, AR / RESPONDENT BY : SHRI T. SATYANANDAM , DR / DATE OF HEARING : 01.09.2016 / DATE OF PRONOUNCEMENT : 26.10.2016 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL IS FILED BY ASSESSEE AGAINST THE ORDER OF THE CIT(A)-2, GUNTUR DATED 21.4.2016 FOR THE ASSESSMENT YEAR 2009 -10. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI RM IS IN THE BUSINESS OF DEALERS OF TVS MOTOR CYCLES, MOPEDS AND SPARES, ETC. THE ASSESSEE ITA NO.311/VIZAG/2016 M/S. DHARMANA MOTORS, SRIKAKULAM ` 2 HAS FILED RETURN OF INCOME, WHICH WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME T AX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT'). THE FIRST GROUN D OF APPEAL RAISED BY THE ASSESSEE RELATING TO DISALLOWANCE U/S 40(A)(IA) OF THE ACT. IN THE ASSESSMENT ORDER, THE A.O. HAS OBSERVED THAT THE AS SESSEE FIRM HAS MADE INTEREST PAYMENTS TO M/S. INDIA BULLS ON WHICH IT HAS TO DEDUCT TDS U/S 194A OF THE ACT. BUT THE ASSESSEE FIRM FAI LED TO DEDUCT THE SAME. ACCORDINGLY, HE HAS DISALLOWED ` 4,15,082/- AND ADDITION WAS MADE. ON APPEAL, CIT(A) CONFIRMED THE SAME. WHEN THIS APPEAL IS TAKEN UP FOR HEARING, THE LD. COUNSEL FOR THE ASSES SEE HAS STATED THAT THE ISSUE INVOLVED IN THIS APPEAL IS COVERED BY THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. MERILYN S HIPPING & TRANSPORTS VS. ACIT 136 ITD 23. 3. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORT ED THE ORDER PASSED BY THE AUTHORITIES BELOW. 4. I HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE COORDINATE BENCH OF THE TRIBUNAL HAS CONSIDERED THE SPECIAL BENCH DECISION IN THE CASE OF M/S. MERILYN SHIPPING & TRA NSPORTS VS. ACIT (SUPRA). FURTHER, THE COORDINATE BENCH OF THE TRIB UNAL CONSIDERED THE ITA NO.311/VIZAG/2016 M/S. DHARMANA MOTORS, SRIKAKULAM ` 3 SAME IN THE CASE OF MUKUNDARA ENGINEERS & CONTRACTO RS, VISAKHAPATNAM VS. ACIT IN ITA NO.657/VIZAG/2014 DATED 22.7.2015 A ND HELD AS UNDER: 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORD. CONSISTENT WITH THE VIEW TAKEN BY THE ITAT SPECIAL BENCH VISAKHAPATNAM AND ALSO IN THE LIGHT OF THE VIEW EXP RESSED BY THE HONBLE A.P. HIGH COURT IN THE CASE OF JANAPRIYA ENGINEERING SYN DICATE, WE ARE OF THE OPINION THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CANNOT BE MADE APPLICABLE IN RESPECT OF THE AMOUNTS ALREADY PAID BEFORE 31 ST MARCH. IN OTHER WORDS, THE A.O. IS DIRECTED TO RESTRICT THE DISALLOWANCE TO THE AMO UNTS PAYABLE AFTER 31 ST MARCH. WITH THESE OBSERVATIONS, GROUND NO.3 OF THE ASSESSE E IS TREATED AS PARTLY ALLOWED. 5. IN VIEW OF THE ABOVE DECISION OF THE TRIBUNAL, I RESPECTFULLY FOLLOWING THE SAME, DIRECT THE A.O. TO DELETE THE A DDITION SUBJECT TO VERIFYING THAT IF THE ASSESSEE HAS PAID THE AMOUNTS ON OR BEFORE THE END OF THE FINANCIAL YEAR. THIS GROUND OF APPEAL RAISE D BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6. THE NEXT GROUND OF APPEAL RELATING TO ADDITION I N RESPECT OF ` 2,10,000/-. THE CASE OF THE A.O. IS THAT THE ASSES SEE HAS ADVANCED ` 10 LAKHS TO SHRI PILLA LAKSHMANA RAO AND NO INTEREST W AS COLLECTED. ACCORDING TO THE A.O., THE ASSESSEE IS FOLLOWING ME RCANTILE SYSTEM OF ACCOUNTING, HE OUGHT TO HAVE BEEN COLLECTED 21% OF ` 10 LAKHS AMOUNTING TO ` 2,10,000/-. ACCORDINGLY, THE A.O. MADE ADDITION O F ` 2,10,000/-. ON APPEAL, LD. CIT(A) CONFIRMED THE S AME. ON APPEAL BEFORE ME, IT IS SUBMITTED THAT THE ASSESSEE HAS NO T RECOVERED EVEN PRINCIPAL AMOUNT AND HE HAS FILED A COMPLAINT BEFOR E THE FIRST CLASS ITA NO.311/VIZAG/2016 M/S. DHARMANA MOTORS, SRIKAKULAM ` 4 JUDICIAL MAGISTRATE, SRIKAKULAM AND THE COURT HAS I MPOSED IMPRISONMENT FOR SHRI PILLA LAKSHMANA RAO FOR 1 YEARS AND A FI NE OF ` 5,000/- U/S 138 OF THE ACT. THE ORDER OF THE COURT IS FILED AL ONG WITH PAPER BOOK. I FIND THAT WHEN THE ASSESSEE IS NOT ABLE TO RECOVE R THE PRINCIPAL AMOUNT, QUESTION OF COLLECTING INTEREST DOES NOT AR ISE. I FURTHER FIND THAT BOTH THE AUTHORITIES BELOW I.E. A.O. AS WELL AS CIT (A) WITHOUT CONSIDERING THE ORDER OF THE COURT AND ALSO WITHOUT CONSIDERING FACTUAL MATRIX OF THE CASE SIMPLY MADE ADDITION. THUS, ADD ITION MADE BY THE ASSESSING OFFICER IS DELETED. THIS GROUND OF APPEA L RAISED BY THE ASSESSEE IS ALLOWED. 7. THE NEXT GROUND OF APPEAL RELATING TO ADDITION I N RESPECT OF ` 2,40,000/-. IN THE ASSESSMENT ORDER THE A.O. HAS O BSERVED THAT FROM THE LIST OF SUNDRY CREDITORS AND DEBTORS, IT IS SEE N THAT THE PARTNERS SRI D. DHARMA RAO AND SHRI D. SESHADRI RAO HAVING A DEBIT BALANCE OF ` 10 LAKHS EACH AND THE ASSESSEE FIRM IS NOT CHARGING AN Y INTEREST EVEN THOUGH IT HAS GIVEN INTEREST ON PARTNERS CAPITAL. HENCE, INTEREST @ 12% PER ANNUM ON ` 20 LAKHS AMOUNTING TO ` 2,40,000/- ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL, IT WAS SUBMITTE D BEFORE THE LD. CIT(A) THAT INTEREST FREE FUNDS IN THE ASSESSEES F IRM HAS RECEIVED BY WAY OF ADVANCE FROM CUSTOMERS AND THEREFORE, THE IN TEREST NOT CHARGED ON THE AMOUNTS DRAWN BY THE PARTNERS. THIS FACT IS NEITHER EXAMINED BY ITA NO.311/VIZAG/2016 M/S. DHARMANA MOTORS, SRIKAKULAM ` 5 THE A.O. NOR BY CIT(A). THUS, WE SET ASIDE THE ORD ER PASSED BY THE LD. CIT(A) AND DIRECT THE A.O. TO EXAMINE THE DETAILS O F THE CUSTOMERS AND DECIDE IN ACCORDANCE WITH LAW. THIS GROUND OF APPE AL RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH OCT16. SD/- ( . ) (V. DURGA RAO) /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 26.10.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT M/S. DHARMANA MOTORS, D.NO.1-7-1 -1, DAY & NIGHT JUNCTION, SRIKAKULAM 2. / THE RESPONDENT THE ITO, WARD-2, SRIKAKULAM 3. ) / THE PRINCIPAL CIT-2, VISAKHAPATNAM 4. ) ( ) / THE CIT(A)-2, GUNTUR 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM