M/s Sreenivasa Sri Kaleswari Transport (P) Ltd., Visakhapatnam V. THE ITO, WARD-4 (2), VISAKHAPATNAM., Visakhapatnam

ITA 313/VIZ/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0187 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A NARAYANA RAO
• Keywords: Non-deduction of tax

Judgement Text

ITA NOS.313 & 354/VIZAG/2012 M/S. SRINIVASA SRI KALESWARI TRANSPORT (P) LTD., VI SAKHAPATNAM 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.313/VIZAG/2012 ( / ASSESSMENT YEAR : 2008-09 ) M/S. SRINIVAS A SRI KALESWARI TRANSPORT (P) LTD. VISAKHAPATNAM VS. ITO WARD - 4(2) VISAKHAPATNAM [ PAN: AAHCS 0574M] (, , , , / APPELLANT) (-., -., -., -., / RESPONDENT ) . .. ./ // / I.T.A.NO.354/VIZAG/2012 ( / ASSESSMENT YEAR : 2008-09 ) ACIT CIRCLE - 4(1) VISAKHAPATNAM VS. M/S. SRINIVAS A SRI KALESWARI TRANSPORT (P) LTD. VISAKHAPATNAM ( , , , , / APPELLANT) ( -., -., -., -., / RESPONDENT ) , / / APPELLANT BY : SHRI I. KAMASASTRY, AR -., / / RESPONDENT BY : SHRI A. NARAYANA RAO, DR / 3 / DATE OF HEARING : 17.11.2015 / 3 / DATE OF PRONOUNCEMENT : 30.11.2015 ITA NOS.313 & 354/VIZAG/2012 M/S. SRINIVASA SRI KALESWARI TRANSPORT (P) LTD., VI SAKHAPATNAM 2 / O R D E R PER BENCH: THESE CROSS APPEALS FILED BY THE ASSESSEE AS WELL A S REVENUE ARE DIRECTED AGAINST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 30.7.2012 FOR THE ASSESSMENT YEAR 2008-09. SINCE, THE ISSUES INV OLVED IN THESE APPEALS ARE COMMON, THEY ARE CLUBBED, HEARD TOGETHE R AND DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENI ENCE. ITA NO.354/2012: 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY, WHICH IS ENGAGED IN THE BUSINESS O F TRANSPORT CONTRACTS. THE ASSESSEE HAS FILED ITS RETURN OF IN COME FOR THE ASSESSMENT YEAR 2008-09 ON 29.9.2008, DECLARING A T OTAL INCOME OF ` 1,58,470/-. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE ASSESSEE WAS ASKED TO PRODUCE THE DETAILS OF FREIGH T CHARGES PAID ALONG WITH BILLS AND VOUCHERS. THE A.O., ON VERIFICATION OF THE DETAILS OF PAYMENT OF LORRY HIRE CHARGES, NOTICED THAT THE HIR E CHARGES ARE PAID TO MANY VEHICLE OWNERS WITHOUT DEDUCTING TAX AT SOURCE . AFTER VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE, THE A.O. COMP UTED AN AMOUNT OF ` 17,33,712/- ON WHICH TDS HAS NOT BEEN DEDUCTED. TH EREFORE, DISALLOWED THE AMOUNT OF RS. 17,33,712/- U/S 40(A)( IA) OF THE INCOME- ITA NOS.313 & 354/VIZAG/2012 M/S. SRINIVASA SRI KALESWARI TRANSPORT (P) LTD., VI SAKHAPATNAM 3 TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT). S IMILARLY, THE A.O. DISALLOWED AN AMOUNT OF ` 5,88,944/- BEING 50% ADMINISTRATIVE EXPENSES DEBITED TO P&L ACCOUNT IN THE ABSENCE OF B ILLS & VOUCHERS. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE CHALLENGED THE VALIDITY OF THE ASSESSMENT ORDER AND ALSO AGITA TED THE ISSUES ON MERITS. THE ASSESSEE SUBMITTED THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS BARRED BY LIMITATION, AS T HE ASSESSMENT ORDER IS SERVED ON THE ASSESSEE ON 12.1.2011 WHICH IS BEYOND THE TIME LIMIT, I.E. 31-12-2010 PROVIDED UNDER THE ACT. THE ASSESSEE FU RTHER CONTENDED THAT THE A.O. DID NOT ISSUED MANDATORY NOTICE REQUI RED TO BE ISSUED U/S 143(2) OF THE ACT BEFORE COMPLETION OF ASSESSMENT T HEREFORE, THE ASSESSMENT ORDER PASSED WITHOUT THE VALID NOTICE U/ S 143(2) OF THE ACT IS NULL AND VOID. AS FAR AS THE ISSUES ON MERIT IS CONCERNED, THE ASSESSEE SUBMITTED THAT THE AMOUNTS IN QUESTION PAID TO ALLE GED VEHICLE OWNERS HAS BEEN ALREADY PAID DURING THE YEAR UNDER CONSIDE RATION I.E. BEFORE 31 ST MARCH, THEREFORE, DISALLOWANCE U/S 40(A)(IA) OF TH E ACT FOR THE AMOUNTS ALREADY PAID IS NOT CORRECT. THE ASSESSEE FURTHER SUBMITTED THAT THE ISSUE IS ALREADY COVERED IN FAVOUR OF THE ASSESSEE BY THE SPECIAL BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF MERI LYN SHIPPING TRANSPORT VS. ACIT (2012) 136 ITD 23. THE A.R. FURTHER RELIE D UPON THE DECISION ITA NOS.313 & 354/VIZAG/2012 M/S. SRINIVASA SRI KALESWARI TRANSPORT (P) LTD., VI SAKHAPATNAM 4 OF THIS TRIBUNAL IN THE CASE OF DCIT VS. VEERA ASSO CIATES (2015) 55 TAXMAN.COM 466. 4. ON THE OTHER HAND, THE D.R. SUBMITTED THAT THE A .O. RIGHTLY DISALLOWED THE AMOUNT FOR NON-DEDUCTION OF TAX AT S OURCE ON VEHICLE HIRE CHARGES, BECAUSE THE DEPARTMENT DID NOT ACCEPT THE SPECIAL BENCH DECISION IN THE CASE OF MERILYN SHIPPING AND TRANSP ORTS, AS THE DEPARTMENT HAS FILED AN APPEAL BEFORE THE HONBLE A .P. HIGH COURT. THE D.R. FURTHER SUBMITTED THAT THE HONBLE A.P. HIGH C OURT STAYED THE OPERATION OF THE SPECIAL BENCH DECISION, THEREFORE, IN VIEW OF THE FACT THAT THE ISSUE IS NOT ATTAINED FINALITY, THE ORDER OF THE ASSESSING OFFICER SHOULD BE UPHELD. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE CASE LAWS RELIED UPON BY THE PARTIES. DURING THE COURSE OF HEARING, THE A.R. OF THE ASSESSEE ARGUED THAT THE ISSUE INVOLVED IN THIS APP EAL IS SQUARELY COVERED BY THE DECISION OF SPECIAL BENCH OF THIS TR IBUNAL, IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ACIT (SUPRA). WE HAVE GONE THROUGH THE SPECIAL BENCH DECISION OF THIS TRIBUNAL MENTIONED ABOVE IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND COME TO THE CONCLUSION THAT THE SPECIAL BENCH OF VISAKHAPATNAM IN THE ABOV E CASE, HELD THE ITA NOS.313 & 354/VIZAG/2012 M/S. SRINIVASA SRI KALESWARI TRANSPORT (P) LTD., VI SAKHAPATNAM 5 ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORT ION IS REPRODUCED AS UNDER: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE CIT(A) PERTAINING TO THE ASSESSMENT YEAR 2005-06. A REFERENCE U/S 255(3) OF THE INCOME-TAX ACT HAS BEEN MADE TO THE HONBLE PRESIDENT TO CONSTITUTE A SPECIAL BENCH TO ADJUDICATE AN ISSUE W HETHER SECTION 40A(IA) OF THE INCOME TAX ACT CAN BE INVOKED ONLY TO DISALL OW EXPENDITURE OF THE NATURE REFERRED TO THEREIN WHICH IS SHOWN AS PAYABL E AS ON THE DATE OF BALANCE SHEET OR IT CAN BE INVOKED ALSO TO DISALLOW SUCH EXPENDITURE WHICH BECOMES PAYABLE AT ANY TIME DURING THE RELEVANT PRE VIOUS YEAR AND WAS ACTUALLY PAID WITHIN THE PREVIOUS YEAR? CONSEQUENTL Y, SPECIAL BENCH WAS CONSTITUTED AND THE AFORESAID QUESTION WAS ANSWERED IN FAVOUR OF THE ASSESSEE. ACCORDING TO THE MAJORITY VIEW, IT WAS HE LD THAT SECTION 40A(IA) OF THE ACT IS APPLICABLE ONLY TO EXPENDITURE WHICH IS PAYABLE AS ON 31 ST MARCH OF EVERY YEAR AND CANNOT BE INVOKED TO DISALL OW THE AMOUNTS WHICH HAVE ALREADY BEEN PAID DURING THE YEAR WITHOUT DEDU CTING TAX AT SOURCE. 2. ISSUE INVOLVED IN THIS APPEAL IS WITH REGARD TO THE DISALLOWANCE OF PAYMENTS OF ` 38,75,000/- TOWARDS BROKERAGE AND ` 2,43,253/- TOWARDS COMMISSION ON NON-DEDUCTION OF TDS BY INVOKING THE PROVISIONS OF SECTION 40A(IA) OF THE ACT. THE ASSESSEES CASE WAS THAT TH E ENTIRE BROKERAGE IN COMMISSION PAYMENTS WERE ACTUALLY PAID DURING THE F INANCIAL YEAR EXCEPTING AN AMOUNT OF ` 1,78,025/- WHICH REMAINED PAYABLE AS ON 31.3.2005. THE CLAIM OF THE ASSESSEE WAS REJECTED B Y THE REVENUE RESULTING IN AN APPEAL BEFORE US BY THE ASSESSEE. F OLLOWING THE MAJORITY VIEW OF THE SPECIAL BENCH, THE PROVISIONS OF SECTIO N 40A(IA) CANNOT BE INVOKED WITH RESPECT TO THE AFORESAID PAYMENTS WHIC H WERE ACTUALLY PAID DURING THE FINANCIAL YEAR BUT IT CAN BE INVOKED WIT H RESPECT TO ` 1,78,025/- WHICH REMAINED PAYABLE AS ON 31.3.2005. THEREFORE, THE DISALLOWANCE IS REDUCED TO ` 1,78,025/- ONLY. ACCORDINGLY, THE ORDER OF THE CIT(A) IS MODIFIED. 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. THE ITAT, VISAKHAPATNAM BENCH IN THE CASE OF DCI T VS. VEERA ASSOCIATES (2015) 55 TAXMAN.COM, WHILE DEALING WITH THE SIMILAR ISSUE HELD AS UNDER: IN VIEW OF THE AFORESAID, CONTENTION OF THE DEPARTM ENT THAT THE RATIO LAID DOWN BY THE ITAT VISAKHAPATNAM SPECIAL B ENCH IN CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA) IS NOT APPLIC ABLE, CANNOT BE ITA NOS.313 & 354/VIZAG/2012 M/S. SRINIVASA SRI KALESWARI TRANSPORT (P) LTD., VI SAKHAPATNAM 6 ACCEPTED. SINCE THE DEPARTMENT HAS NOT CONTROVERTE D THE FACT THAT THE ENTIRE AMOUNT OF ` 5,98,13,357 WAS PAID BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR AND NOTHING REMAINED PAYABLE ON THE LAST DAY OF THE PREVIOUS YEAR, IN OUR VIEW, AS PER THE RATIO LA ID DOWN IN CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA), NO DISALLOWA NCE UNDER SECTION 40(A)(IA) CAN BE MADE. ACCORDINGLY, THE CIT(A)S O RDER ON THIS ISSUE DESERVES TO BE UPHELD. 7. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE C ASE AND ALSO APPLYING THE RATIO LAID DOWN BY THE COORDINATE BENC H OF THIS TRIBUNAL IN MERILYN SHIPPING AND TRANSPORTS (SUPRA), WE ARE OF THE OPINION THAT NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT, FOR THE AMOUNTS ALREADY PAID DURING THE FINANCIAL YEAR. ACCORDINGL Y, WE UPHELD THE CIT(A) ORDER AND DISMISS THE APPEAL FILED BY THE RE VENUE. ITA NO.313/2012: 8. THE ONLY ISSUE ARISES FOR OUR CONSIDERATION FROM THE ASSESSEES APPEAL, IS WHETHER THE ASSESSING OFFICER IS RIGHT I N DISALLOWING 50% ADMINISTRATIVE EXPENDITURE. THE ASSESSEE CONTENDED THAT THE A.O. DISALLOWED A SUM OF ` 5,88,944/- OUT OF THE TOTAL ADMINISTRATIVE AND OTHE R EXPENSES WITHOUT EXAMINING THE DETAILS FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE A.R. FUR THER SUBMITTED THAT OUT OF THE TOTAL ` 11,77,889/- EXPENDITURE DEBITED TO P&L ACCOUNT, ` 3,09,815/- IS PAID TOWARDS SALARIES OF THE STAFF AN D A FURTHER SUM OF RS. 4,31,313/- PAID TO BANK TOWARDS INTEREST ON CASH CR EDITS LOAN AVAILED ITA NOS.313 & 354/VIZAG/2012 M/S. SRINIVASA SRI KALESWARI TRANSPORT (P) LTD., VI SAKHAPATNAM 7 FROM THE ORIENTAL BANK OF COMMERCE. THE A.R. FURTH ER SUBMITTED THAT THE ASSESSEE HAS PRODUCED DETAILS FOR SALARY PAID T O STAFF AND ALSO FURNISHED BANK STATEMENTS BEFORE THE ASSESSING OFFI CER, WHEREIN INTEREST DEBITED BY THE BANK IS REFLECTED IN THE BANK STATEM ENTS. THEREFORE, THE A.O. IS NOT CORRECT IN DISALLOWING THESE TWO EXPEND ITURES. TO THIS EFFECT, THE ASSESSEE HAS FURNISHED COPIES OF BANK STATEMENT WHICH IS AVAILABLE IN PAGES 23 TO 42 OF THE PAPER BOOK. 9. ON THE OTHER HAND, THE D.R. SUPPORTED THE ORDER OF THE CIT(A). THE D.R. FURTHER ARGUED THAT THE ASSESSEE DID NOT P RODUCE ANY DETAILS FOR THE EXPENDITURE DEBITED TO P&L ACCOUNT IN SPITE OF REPEATED REQUEST MADE BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE D.R. FURTHER ARGUED THAT THE ASSE SSEE HAS FAILED TO FURNISH ANY DETAILS EVEN BEFORE THE CIT(A) AT THE A PPELLATE PROCEEDINGS. THEREFORE, THE A.O. IS RIGHT IN DISALLOWING THE EXP ENDITURE IN THE ABSENCE OF BILLS & VOUCHERS AND REQUESTED TO UPHOLD THE ORD ER OF THE CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE A.O. DISALLOWE D THE 50% OF ADMINISTRATIVE AND OTHER EXPENSES DEBITED TO P&L ACCOUNT FOR THE REASON THAT THE ASSESSEE HAS FAILED TO FURNISH BILL S & VOUCHERS. THE ASSESSEES CONTENTION IS THAT IT HAS FURNISHED THE ITA NOS.313 & 354/VIZAG/2012 M/S. SRINIVASA SRI KALESWARI TRANSPORT (P) LTD., VI SAKHAPATNAM 8 DETAILS OF EXPENDITURE LIKE SALARIES AND WAGES PAID TO STAFF AND BANK INTEREST AND FURNISHED NECESSARY DETAILS OF RETURNS FILED BEFORE THE PF ORGANIZATION FOR HAVING PAID THE SALARIES TO STAFF AND BANK STATEMENTS FOR HAVING PAID THE INTEREST ON CASH CREDIT LOAN AVAILE D FROM THE BANK. WE HAVE EXAMINED THE ASSESSMENT ORDER AS WELL AS DETAI LS FURNISHED BY THE ASSESSEE. THE ASSESSEE HAS FURNISHED DETAILS OF BA NK STATEMENTS, WHEREIN THE INTEREST DEBITED BY THE BANK IS REFLECT ED. THE A.O. AS WELL AS THE CIT(A) FAILED TO EXAMINE THE DETAILS FURNISH ED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS. THEREFORE, TO MEET THE ENDS OF JUSTIC E, WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A D IRECTION TO AFFORD AN OPPORTUNITY OF HEARING TO THE ASSESSEE AND PASS NEC ESSARY ORDERS IN ACCORDANCE WITH LAW. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 30 TH NOV15. SD/- SD/- ( (( ( . .. . ) ) ) ) ( (( ( . . . . ) ) ) ) ( (( ( V. DURGA RAO ) )) ) ( (( ( G. MANJUNATHA) / // / JUDICIAL MEMBER / // / ACCOUNTANT MEMBER /VISAKHAPATNAM: 6 / DATED : 30.11.2015 VG/SPS ITA NOS.313 & 354/VIZAG/2012 M/S. SRINIVASA SRI KALESWARI TRANSPORT (P) LTD., VI SAKHAPATNAM 9 / - 7 / COPY OF THE ORDER FORWARDED TO :8 1. , / THE APPELLANT M/S. SREENIVASA SRI KALESWARI TRANSPORT (P) LTD., 2 33, VUDA COLONY, MADHAVADHARA, VISAKHAPATNAM 2. -., / THE RESPONDENT THE ITO, WARD-4(2), VISAKHAPATNAM 3. THE ACIT, CIRCLE-4(1), VISAKHAPATNAM 3. : / THE CIT-2, VISAKHAPATNAM 4. : () / THE CIT (A), VISAKHAPATNAM 5. -, , / // / DR, ITAT, VISAKHAPATNAM 6 . . . . / GUARD FILE / BY ORDER // TRUE COPY // @A ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM