Rajeshbhai Chimanbhai Javia, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-1(4), RAJKOT-GUJARAT

ITA 312/RJT/2014

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0966 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 07-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S N KABRA
• Keywords: Depreciation; Retrospective amendment; TDS; Set aside
• Section: 143(3); 40(a)(ia); 201; 13

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT (CONDUCTED THROUGH E - COURT AT AHMEDABAD) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND MS . MADHUMITA ROY, JUDICIAL MEMBER ./ ITA NO . 312 /RJT /2014 / ASSTT. YEAR : 2008 - 20 09 RAJESHBHAI CHIMANBHAI JAVIA , SARVODAY SOCIETY , FULWADI PLOT, , BHAYAVADAR , UPLETA PAN: AFPPJ8545M VS . I.T.O , WARD - 1 (4) , RAJKOT . (APPLICANT) (RESPON D ENT) ASSESSEE BY : NONE (WITTEN SUBMISSION) REVENUE BY : SHRI S.N. KABRA , SR .D R / DATE OF HEARING : 1 6 / 10 / 201 9 / DATE OF PRONOUNCEMENT: 12 / 12 /201 9 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER : THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - I , RAJKOT DATED 06/03/2014 ( IN SHORT LD.CIT(A) ) ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 ( HERE - IN - AFTER REFERRED TO AS 'THE ACT') DT. 12 /12 /2011 RELEVANT TO THE ASSESSMENT YEAR 2008 - 2009 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NO.312 /RJT/2014 ASSTT. YEAR 2008 - 09 2 1.1. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING ADDITION OF RS. 7,19,448/ - ALTHOUGH THE PROVI SIONS OF SECTION 40(A)(IA) IS NOT APPLICABLE. THE ADDITION NEEDS DELETION. 1.3. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING ADDITION OF RS. 7,19,448/ - BY PLACING RELIANCE ON AN IRRELEVANT MATERIALS. THE ADDITION NEEDS DELETION. 2. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING ADDITION OF RS. 7,19,448/ - WITHOUT VERIFYING PROPER FACTS OF THE CASE. THE ADDITION NEEDS DELETION. 3. TAKING INTO CONSIDERATION THE LEGAL, STATUTORY, FACTUAL, ACCOUNTING AND ADMINISTRATIVE ASPECTS, NO ADDIT ION AMOUNTING TO RS. 7,19,448/ - . OUGHT TO HAVE BEEN CONFIRMED. THE ADDITIONS NEED DELETION. 4.1. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING ADDITION OF RS. 10,930/ - (21,760 - 2) AT 10% IN RESPECT OF CAR DEPRECIATION OF RS. 76,500/ - AND PETROL EXPENSES OF RS. 32,800/ - . THE ADDITION NEEDS DELETION. 4.2. WITHOUT PREJUDICE THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING ADDITION OF RS. 10,930/ - (21,760 DIVIDE BY 2) AT 10% IN RESPECT OF CAR DEPRECIATION OF RS. 76,500/ - AND PETROL EXPENSES OF RS. 32,800/ - . THE ADDITION NEEDS SUITABLE REDUCTION. 5. WITHOUT PREJUDICE, THE ASSESSMENT MADE IS BAD IN LAW AND DESERVES ANNULMENT. 6. WITHOUT PREJUDICE, NO ADEQUATE, SUFFICIENT AND REASONABLE OPPORTUNITY HAS BEEN PROVIDED WHILE PASSING ASSESSMENT O RDER. THE ASSESSMENT NEEDS ANNULMENT. 7. WITHOUT PREJUDICE, NO ADEQUATE, SUFFICIENT AND REASONABLE OPPORTUNITY HAS BEEN PROVIDED WHILE PASSING APPEAL ORDER. THE ASSESSMENT NEEDS ANNULMENT. 8. THE APPELLANT CRAVES LEAVE TO ADD/ALTER/AMEND AND/OR SUBSTITUT E ANY OR ALL GROUND OF APPEAL BEFORE THE ACTUAL HEARING TAKES PLACE. 2. THE 1 ST ISSUE RAISED BY THE ASSESSEE IN GROUND NOS. 1 TO 3 IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO FOR RS. 7,19,448.00 ON ACCOUNT OF NON DEDUCTION OF TDS UNDER SECTION 194H OF THE ACT R.W.S. 40(A)(IA) OF THE ACT. 3 . BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL AND CARRYING ON THE BUSINESS OF TRADING IN SHARES & SECURITIES AND ALSO ACTING AS COMMISSION AGENT. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CLAIMED COMMISSION EXPENSES OF RS. 7,19,448.00 IN HIS PROFIT AND LOSS ACCOUNT WITHOUT DEDUCTING THE TDS UNDER SECTION 194H OF THE ACT. ACCORDINGLY, THE AO DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO.312 /RJT/2014 ASSTT. YEAR 2008 - 09 3 4 . AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A) WHO ALSO CONFIRMED THE ORDER OF THE AO. 5 . THE ASSESSEE BEFORE THE LEARNED CIT (A) SUBMITTED THAT THERE CANNOT BE ANY DISALLOWANCE OF THE EXPENSES ON ACCOUNT OF NON - DEDUCTION OF TDS AS PER THE AMENDMENT UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IF THE RECIPIENT HAS PAID THE TAXES ON SUCH INCOME RECEIVED FROM THE ASSESSEE. 6 . HOWEVER THE LEARNER CIT (A) DISREGARDED THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ORD ER OF THE AO. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. 7 . THE LEARNED AR BEFORE US FILED THE WRITTEN SUBMISSIONS WHICH ARE AVAILABLE ON RECORD. THE ASSESSEE IN THE WRITTEN SUBMISSION REITERATED THE CONTEN TIONS AS MADE BEFORE THE LEARNED CIT (A). 8 . ON THE OTHER HAND THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 9 . WE HAVE HEARD THE LEARNED DR AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ASSESSEE IN THE CASE ON HAND HAS CLAIMED AN EXPENSE OF RS. 7,19,448/ - UNDER THE HEAD COMMISSION. THE ASSESSEE INCURRED SUCH EXPENSE WITHOUT DEDUCTING TDS U/S 194H R.W.S. 40(A)( IA ) OF THE ACT. THEREFORE, THE DISALLOWANCE WAS MADE BY THE AO ON ACCOUNT OF NON - DEDUCTION OF TDS. 9 .1 HOWEVER, FROM THE PRECEDING DISCUSSION, WE FIND FORCE IN THE ARGUMENT SUBMITTED BY THE LEARNED AR THAT IF THE RECIPIENT OF COMMISSION INCOME HAS PAID THE TAXES ON THE AMOUNT RECEIVED FROM THE ASSESSEE, THEN THERE WILL BE NO DISALLOWANCE. INDEED T HE SAID PROVISION, THOUGH INSERTED BY THE FINANCE ACT 2012 ITA NO.312 /RJT/2014 ASSTT. YEAR 2008 - 09 4 W.E.F. 1 - 4 - 2013, HAS BEEN HELD TO BE RETROSPECTIVE IN OPERATION BY RECENT DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. ANSAL LAND MARK TOWNSHIP (P) LTD. (2015) 61 TAXMANN.COM 45 (DEL) WHEREIN THE Q UESTION RAISED BEFORE THE COURT AND THE DECISION RENDERED THEREON IS REPRODUCED HEREIN BELOW FOR THE SAKE OF CLARITY: - QUESTION : WHETHER THE SECOND PROVISO TO SECTION 40(A)( IA ) (INSERTED BY THE FINANCE ACT, 2012), WHICH STATES THAT TDS SHALL BE DEEMED TO BE DEDUCTED AND PAID BY A DEDUCTOR IF RESIDENT RECIPIENT HAS DISCLOSED THE AMOUNT IN HIS RETURN OF INCOME AND PAID TAX THEREON, IS RETROSPECTIVE IN NATURE OR NOT? HELD : SECT ION 40(A)(IA) WAS INTRODUCED BY THE FINANCE (NO.2) ACT , 2004 TO ENSURE THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATION WHERE INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED DUE TO TAX WITHHOLDING L APSES BY THE ASSESSEE. HENCE , SECTION 40(A)( IA ) IS NOT A PENALTY PROVISION FOR TAX WITHHOLDING LAPSE BUT IT IS A PROVISION INTRODUCED TO COMPENSATE ANY LOSS TO THE REVENUE IN CASES WHERE DEDUCTOR HASN T DEDUCTED TDS AN AMOUNT PAID TO DEDUCTEE AND , IN TURN , DEDUCTEE ALSO HASN T OFFERED TO TAX INCOME EMBEDDED IN SUCH AMOUNT THE PENALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEP ARATELY PROVIDED UNDER SECTION 271C AND, THEREFORE, SECTION 40(A)(I) ISN T ATTRACTED TO THE SAME. HENCE, AN ASSESSEE COULD NOT BE PENAL IZED UNDER SECTION 40(A)( IA ) WHEN THERE WAS NO LOSS TO REVENUE. THE AGRA TRIBUNAL IN THE CASE OF RAJIV KUMAR AGARWAL - VS - ACIT [2014] 45 TAXMANN.COM 555 (AGRA TRIB) HAD HELD THAT THE SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND HAS RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005, BEING THE DATE FROM WHICH SUB - CLAUSE (IA) OF SECTION 40(8) WAS INSERTED BY THE FINANCE NO.(2) ACT, 2004, EVEN THOUGH THE FINANCE ACT, 2012 HAD NOT SPECIFICALLY STATED THAT PROVISO IS RETROSPECTIVE IN NATURE. THE HIGH COURT AFFIRMED THE RATIO LAID DOWN BY THE AGRA TRIBUNAL AND HELD THAT SAID PROVISOS IS DECLARATORY AND CURATIV E IN NATURE AND HA RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005. IN VIEW OF ABOVE, WE ARE INCLINED TO SET ASIDE THE ORDER OF THE LD. CIT - A TO THE AO FOR FRESH ADJUDICATION IN THE LIGHT OF THE ABOVE DISCUSSION. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS A LLOWED FOR THE STATISTICAL PURPOSES. 10 . THE 2 ND ISSUE RAISED BY THE ASSESSEE IN GROUND 4 IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO FOR 10,930 ON ACCOUNT OF DEPRECIATION AND PATROL EXPENSES. ITA NO.312 /RJT/2014 ASSTT. YEAR 2008 - 09 5 11 . THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CLAIMED DEPRECIATION ON CAR AND PATROL EXPENSES AMOUNTING TO 76,530 AND 32 , 800 / - RESPECTIVELY AGGREGATING TO 1, 09 , 300 ONLY. AO DURING THE ASSESSMENT PROCEEDINGS OBSERVED THAT THE PERSONAL USE OUT OF THE I MPUGN ED EXPENSES CANNOT BE RULED OUT . ACCORDINGLY THE AO MADE THE DISALLOWANCE OF 21,860 BEING 1/5 OF THE IMPUGNED EXPENDITURE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 12 . AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A) WHO RESTRICT ED THE ADDITION TO THE EXTENT OF 10% OF THE IMPUGNED EXPENSES. HENCE THE LEARNED CIT (A) ALLOWED THE GROUND OF APPEAL OF THE ASSESSEE IN PART. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT - A, THE ASSESSEE IS IN APPEAL BEFORE US. 13 . THE LEARNED DR VE HEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 14 . WE HAVE HEARD THE LEARNED DR AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE PRESENT CASE RELATES TO THE AD HOC DISALLOWANCE OF DEPRECIATION ON CAR AND PATROL EXPENSES FOR 10 , 930 ON THE GROUND THAT THE PERSONAL USE OF THE CAR CANNOT BE DENIED. ACCORDINGLY THE AO DISALLOWED THE 20% OF SUCH EXPENSES WHICH WAS RESTRICTED BY THE LEARNE D C IT - A TO THE EXTENT OF 10% OF SUCH EXPENSES. 14 .1 THE LEARNED AR AT THE TIME OF HEARING HAS NOT M ADE ANY SUBMISSION IN THE WRITTEN SUBMISSION FILED BEFORE US. AS THERE WAS NO REPRESENTATION FROM THE SIDE OF THE LEARNED AR FOR THE ASSESSEE QUA THE DISALLOWANCES MADE BY THE AUTHORITIES BELOW AGAINST THE DEPRECIATION ON CAR AND THE PATROL EXPENSES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE AUTHORITIES BELOW. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO.312 /RJT/2014 ASSTT. YEAR 2008 - 09 6 15 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR THE STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE COURT ON 12 /12 / 2019 AT AHMEDABAD. - SD - - SD - (MS MADHUMITA ROY ) (WASEEM AHMED ) JUDICIAL MEMBER ACCOUNTANT MEMBER (TRUE COPY) A HMEDABAD; DATED 12 / 12 /2019 MANISH