RAVI K. PODDAR, MUMBAI V. ITO 31(3)(3), MUMBAI

ITA 3213/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9614 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 03-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3213 /MUM/2017 (ASSESSMENT YEAR: 2012-13) SHRI RAVI K. PODDAR VS. INCOME TAX OFFICER - 31(3)(3) 201/202, KESHAV PRIYA H.F. SOCIETY ROAD NO. 3 NATVER NAGAR, JOGESHWARI (E) MUMBAI 400051 ROOM NO. 408A, C - 13 PRATYAKSHA KAR BHAVAN BANDRA (E), MUMBAI 400051 PAN AALPP0952D APPELLANT RESPONDENT APPELLANT BY: SHRI M. SUBRAMANIAN RESPONDENT BY: SHRI PURUSHOTTAM KUMAR DATE OF HEARING: 05.09.2017 DATE OF PRONOUNCEMENT: 05.09.2017 O R D E R PER P.K. BANSAL, VICE PRESIDENT THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-42, MUMBAI DATED 15.03.2017 FOR A.Y. 2012-13 ON THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: - 1. (A) THE LEARNED CIT (APPEALS) ERRED IN CONFIRMI NG THE ADDITION OF RS. 1,50,000/- IN RESPECT OF LOAN RECEIVED FROM MR. EKNATH GAIKWAD AND ENHANCING THE ADDITION BY RS.2,75,000/- TO RS.4,25,000/- BY TREATING THE LOAN AS NOT GENUINE. (B) THE LEARNED CIT (APPEALS) ERRED IN STATING THA T THE ASSESSEE HAS NOT FILED ANY REPLY TO THE SHOW CAUSE VIDE ORDE R SHEET DATED 19/12/2016 IGNORING THE WRITTEN SUBMISSIONS-2 FILED VIDE LETTER DATED 26/12/2016 EXPLAINING THE SOURCE OF LOAN GIVE N BY MR. EKNATH GAIKWAD. 2. THE LEARNED CIT (APPEALS) ERRED IN DISALLOWING INTEREST OF RS.13,163/- PAID FOR LATE PAYMENT OF T.D.S. ON THE GROUND THAT INTEREST ON TDS IS INTEREST ON INCOME TAX ONLY , HA VING FAILED TO APPRECIATE THE INTEREST ON LATE PAYMENT OF TDS DEDU CTED IN THE COURSE OF A BUSINESS IS COMPENSATORY IN NATURE AND IS PROPERLY ALLOWABLE AS BUSINESS EXPENSE. ITA NO. 3213/MUM/2017 SHRI RAVI K. PODDAR 2 3. THE LEARNED CIT (APPEALS) ERRED IN DISALLOWING I NTEREST OF RS.5255/- PAID FOR LATE PAYMENT OF SALES TAX (MVAT) ON THE GROUND THAT ORDERS LEVYING INTEREST ARE NOT PRODUCE D, HAVING FAILED TO APPRECIATE THE INTEREST IS COMPENSATORY IN NATUR E AND IS PROPERLY ALLOWABLE AS BUSINESS EXPENSE. 4. THE LEARNED CIT (APPEALS) ERRED IN DISALLOWING PROPERTY TAX OF RS. 54,134/- PAID FOR PREMISES OCCUPIED AND USED AS RETAIL STORE ON THE GROUND THAT THE OWNER HAS NOT ACCOUNTED THIS AMOUNT AS ITS INCOME, HAVING FAILED TO APPRECIATE THAT THE OW NER HAS NOT CLAIMED DEDUCTION FOR THIS PROPERTY TAX WHICH IS AL LOWABLE IN ITS HAND IF PAID BY IT. 2. IN RESPECT OF GROUND NO. 1(A) & (B) WE NOTED THAT T HE ASSESSEE HAS TAKEN A LOAN OF RS.4,25,000/- FROM SHRI EKNATH GAIK WAD, AN EMPLOYEE OF THE ASSESSEE. THE AO MADE AN ADDITION OF RS.1,50,00 0/- AS HE NOTED THAT THE EMPLOYEE BEFORE GIVING THE LOAN TO THE ASSESSEE ON 24.10.2011 HAD DEPOSITED A SUM OF RS.1,50,000/- IN CASH ON 09.10.2 011 IN THREE INSTALLMENTS OF RS.50,000/- EACH. WHEN THE MATTER W ENT BEFORE THE CIT(A), THE CIT(A) ENHANCED THE SAID ADDITION TO RS.4,25,00 0/-. ALTHOUGH THE CIT(A) HAD ISSUED A SHOW CAUSE NOTICE TO THE ASSESS EE AS PER THE ORDER SHEET DATED 19.12.2016 BUT THE ASSESSEE HAD MADE TH E SUBMISSION TO THE CIT(A) VIEW HIS LETTER DATED 26.12.2016. WE NOTED T HAT THE CIT(A) WHILE ENHANCING THE ADDITION FROM RS.1,50,000/- TO RS.4,2 5,000/- DID NOT CONSIDER THE SUBMISSION MADE BY THE ASSESSEE ON 26. 12.2016. IN OUR VIEW THE SUBMISSION MADE BY THE ASSESSEE ON 26.12.2016 W ILL HAVE A BEARING ON THE ADDITION SUSTAINED BY THE CIT(A). WE, THEREFORE , SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND RESTORE THIS ISSUE TO THE FILE OF THE CIT(A) WITH THE DIRECTION THAT THE CIT(A) SHALL RE-DECIDE THIS ISSUE ABOUT SUSTAINING OF THE ADDITION OF RS.1,50,000/- AS WELL AS ENHANCING OF THIS ADDITION TO RS.4,25,000/- AFTER GIVING PROPER AND SUFFICIENT OP PORTUNITY TO THE ASSESSEE AND ALSO AFTER APPRECIATING THE EVIDENCES AS MAY BE PRODUCED BY THE ASSESSEE IN THIS REGARD. THE ASSESSEE IS ALSO D IRECTED TO PRODUCE NECESSARY EVIDENCES BEFORE THE CIT(A) ON WHICH HE M AY RELY IN THIS REGARD. THUS, GROUND NO. 1(A) & (B) ARE ALLOWED FOR STATIST ICAL PURPOSES. 3. GROUND NO. 2 RELATES TO THE DISALLOWANCE OF INTERES T ON LATE PAYMENT OF TDS PAID BY THE ASSESSEE AMOUNTING TO RS.13,163/ -. THIS ISSUE IN OUR ITA NO. 3213/MUM/2017 SHRI RAVI K. PODDAR 3 VIEW IS NO MORE RES INTEGRA IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF BHARAT COMMERCE & INDUSTRIES L TD. VS. CIT 230 ITR 733 IN WHICH THE HONBLE HIGH COURT HAS HELD THAT W HEN INTEREST IS PAID FOR COMMITTING A DEFAULT IN RESPECT OF STATUTORY LI ABILITY TO PAY ADVANCE TAX, THE AMOUNT PAID AND EXPENDITURE INCURRED IN THAT CO NNECTION IS IN NO WAY CONNECTED WITH THE PRESERVING OR PROMOTING THE BUSI NESS OF THE ASSESSEE. THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS . CHENNAI PROPERTIES & INVESTMENT LTD. 239 ITR 435 HELD THAT THE PAYMENT O F INTEREST TAKES COLOUR FROM THE NATURE OF THE LEVY WITH REFERENCE TO WHICH SUCH INTEREST IS PAID AND THE TAX REQUIRED TO BE PAID BUT NOT PAID IN TIM E. THIS RENDERS THE ASSESSEE LIABLE FOR PAYMENT OF INTEREST AND THE INT EREST PAID UNDER SECTION 201(1A) WOULD NOT ASSUME THE CHARACTER OF BUSINESS EXPENDITURE AND CANNOT BE REGARDED AS A COMPENSATORY PAYMENT. THUS, WE DISMISS THE GROUND TAKEN BY THE ASSESSEE. 4. GROUND NO. 3 RELATES TO THE DISALLOWANCE OF INTERES T OF RS.5,255/- FOR LATE PAYMENT OF SALES TAX. AFTER HEARING THE SUBMIS SION OF REVENUE AND GOING THROUGH THE ORDERS OF THE TAX AUTHORITIES BEL OW WE NOTED THAT THIS PAYMENT HAS BEEN MADE BY THE ASSESSEE TOWARDS INTER EST PAID FOR LATE PAYMENT OF SALES TAX. THIS IN OUR OPINION CANNOT BE REGARDED TO BE A PENALTY DISALLOWABLE UNDER SECTION 37(1). THIS IS A PAYMENT COMPENSATORY IN NATURE AND HAS TO BE ALLOWED. IN OUR OPINION THE ISSUE IS COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F LACHMANDAS MATHURADAS VS. CIT 122 TAXMAN 828 (SC). AS PR THE S CHEME OF SALES TAX INTEREST PAID ON LATE PAYMENT OF SALES TAX CANNOT B E REGARDED TO BE A PENALTY BUT COMPENSATORY IN NATURE. THUS, THIS GROU ND STANDS ALLOWED. 5. GROUND NO. 4 RELATES TO DISALLOWANCE OF PROPERTY TA X AMOUNTING TO RS.54,134/- PAD BY THE ASSESSEE FOR OCCUPYING THE P REMISES. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE NOTED THAT THIS PA YMENT HAS BEEN MADE BY THE ASSESSEE TOWARDS PROPERTY TAX AS THE ASSESSE E WAS RUNNING HIS PROPRIETARY BUSINESS IN THE PREMISES OWNED BY M/S. SHAH CONSTRUCTION CO. LTD. THE ASSESSEE HAS NOT PAID ANY RENT TO M/S. SHAH CONSTRUCTION CO. ITA NO. 3213/MUM/2017 SHRI RAVI K. PODDAR 4 LTD. THE ASSESSEE WAS USING THE PREMISES BY ONLY PA YING THE PROPERTY TAX. THE AMOUNT, IN OUR VIEW, HAS BEEN PAID WHOLLY AND E XCLUSIVELY FOR THE PURPOSE OF BUSINESS AND DURING THE COURSE OF CARRYI NG ON THE BUSINESS. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DELETE THE SAID DISALLOWANCE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH SEPTEMBER, 2017. SD/ - SD/ - (PAWAN SINGH) (P.K. BANSAL) JUDICIAL MEMBER VICE PRESIDENT MUMBAI, DATED: 5 TH SEPTEMBER, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -42, MUMBAI 4. THE PR. CIT - 31, MUMBAI 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.