M/s Capital Pharma, Mangalore V. ITO, Mangalore

ITA 34/BANG/2013

• Counselvise Citation: 3421114 RSA 2013
• Duration Of Justice: 1 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-08-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 09-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BIJOY KUMAR
• Keywords: Non-deduction of tax
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH A, BANGALORE BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER ITA NO.34(BANG) 2013 (ASSESSMENT YEAR : 2005-06) M/S CAPITAL PHARMA, D.NO.24-6-586, NG ROAD, ATTAVARA, MANGALORE APPELLANT PAN NO.AABFC0510E VS THE INCOME-TAX OFFICER, WARD-2(3), BANGALORE RESPONDENT ASSESSEE BY : SHRI SRINIVASKAMATH, CA REVENUE BY : SHRI BIJOY KUMAR PANDA, ADDL.CIT DATE OF HEARING : 06-08-2014 DATE OF PRONOUNCEMENT : 1 4-08-2014 O R D E R PER SHRI ABRAHAM P GEORGE, AM: IN THIS APPEAL FILED BY THE ASSESSEE DIRECTED AGA INST AN ORDER DATED 02-09-2002 OF CIT(A),MYSORE, IT HAS RAISED 10 GROUN DS IN TOTO OF WHICH GROUNDS 1& 10 ARE GENERAL, NEEDING NO SPECIFIC ADJU DICATION. 2. THROUGH ITS GROUNDS 2 TO 4, ASSESSEE CHALLENGES THE RE-OPENING DONE FOR THE IMPUGNED ASSESSMENT YEAR. ITA NO.34(BANG)2013 2 3.LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT N O INCOME COMING WITHIN MEANING OF SEC.147 R.W.S.2((24)OF THE IT ACT , 1961(IN SHORT THE ACT). ACCORDING TO HIM, DEFINITION OF INCOME AS GIVEN IN SEC.2(24)(I) MENTIONED PROFIT AND GAINS. FURTHER, AS PER LEARNED AR SEC.2 8 DEFINED WHAT COULD BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ADDITION ARISING OUT OF DISALLOWANCE MADE UNDER SEC.40(A)(IA) FOR NON-DEDUC TION OF TAX AT SOURCE WOULD NOT FALL UNDER IT. IN ANY CASE, ACCORDING TO HIM, NO SPEAKING ORDER WAS PASSED ON THE OBJECTION RAISED BY THE ASSESSEE TO THE NOTICE U/S 148. COUNSEL FOR THE REVENUE ON THE OTHER HAND, STATED T HAT RE-OPENING WAS RIGHTLY DONE. 4. WE HAVE SEEN THE ORDERS, RECORDED REASONS AND CA REFULLY GIVEN OUR MIND TO THE CONTENTIONS RAISED BY THE LEARNED AR. IN THE FIRST PLACE WHAT WE FIND IS THAT RETURN FOR IMPUGNED ASSESSMENT YEAR FILED BY THE ASSESSEE ON 19-10-2005 WAS SUBJECTED ONLY TO A PROCESSING U/ S 143(1). WE HAVE LOOKED AT THE REASONS FOR RE-OPENING, CONSIDERING T HIS ASPECT. WHAT CAN BE SEEN IS THE RELEVANCY OF THE REASON AND NOT SUFFICI ENCY. ASSESSING OFFICER HAD RECORDED THE REASONS FOR RE-OPENING WHICH WAS D ONE WITHIN 4 YEARS OF THE END OF THE IMPUGNED ASSESSMENT AND THIS READS A S UNDER; ITA NO.34(BANG)2013 3 FROM THE RETURN, IT IS SEEN THAT ASSESSEE HAS PAID INTEREST TO THE FOLLOWING PERSONS, BUT DEFAULTED IN DEDUCTION OF TA X. 1. R.D.SEQUIRA RS.27,000 2.ROWEENA DSOUZA RS.66,825 3. RYNA DSOUZA RS.49,500 4.RUBAN DSOUZA RS.66,825 5. ALICE SEQUIRA RS.48,000 6. ROSANNE DSOUZA RS. 9,000 TOTAL RS.2,67,150 IN VIEW OF THE NEWLY INTRODUCED PROVISIONS OF SEC.4 0A(IA) W.E.F. ASSESSMENT YEAR 2005-06, THE ENTIRE EXPENDITURE OF RS.2,67,150/- STANDS TO GET DISALLOWED. THEREFORE, I HAVE REASON TO BELIEV E THAT ASSESSEES FAILURE TO DEDUCT TAX ON THE INTEREST PAYMENT OF RS.2,67,150/- THEREBY CLAIMING EXCESS EXPENDITURE RESULTED IN ESCAPED ASSESSMENT WITHIN T HE MEANING OF SEC.147 OF THE IT ACT. IN OUR OPINION, DISALLOWANCE MADE UNDER SEC.40(A)(I A) ALSO BECOMES PART OF INCOME IN THE FINAL COMPUTATION. DEFINITI ON OF INCOME IN SEC.2(24) BEING INCLUSIVE AND NOT EXHAUSTIVE, ADDITIONS MADE ON ACCOUNT OF DISALLOWANCES ALSO WOULD FALL UNDER IT, NOT WITHSTA NDING SUB-CLAUSE(VA) TO (VE) THEREOF WHICH SPECIFICALLY MENTIONS ITEMS FALL ING UNDER 28(IIIA)(IIIB),(IIIC),(IV) AND (V). WE CANNOT ALSO SAY THAT THE REASON MENTIONED BY AO WAS IRRELEVANT, ESPECIALLY SINCE ORIGINALLY T HE RETURN WAS SUBJECTED ONLY TO PROCESSING UNDER SECTION 143(1) O F THE ACT. AS FOR THE GROUND RAISED BY THE ASSESSEE THE OBJECTION RAISED BY IT ON THE NOTICE UNDER ITA NO.34(BANG)2013 4 SECTION 148, WAS NOT DEALT WITH BY THE AO, IT IS NE CESSARY TO HAVE A LOOK AT SUCH OBJECTION. THIS IS REPRODUCED HEREUNDER; 2.2. ON RECEIPT OF THE REASON RECORDED, THE ASSESS EE HAS FILED A LETTER DATED 15-11-2008 STATING THAT THOUGH THE ABOVE CITED LETTER YOU HAVE GIVEN US REASON FOR ISSUANCE OF NOTICE U/S148 OF THE IT ACT 1961 FOR THE ASSESSMENT YEAR 2 006-07. IN THIS CONNECTION, WE HAVE TO STATE AS FOLLOWS: OU R ASSESSMENT WERE COMPLETED BY THE HONBLE ITO (TDS) MANGALORE FOR THE ASSESSMENT YEARS 2003-04 TO 23005 -06. THE HONBLE IOTAT, BANGALORE VIDE ITS ORDER IN MP 3 0 TO 32/BANG/2008 HAS REMANDED OUR CASE FOR THE ASSESSME NT YEAR 2003-04 AND ORDERS HAVE ALREADY BEEN PASSED BY THE HONBLE IT OFFICE (TDS) MANGALORE IN OUR FAVOUR FOR THIS YEAR. SINCE ORDERS FOR ASSESSMENT YEARS 2004-05 AND 2005- 06 WERE ALREADY PASSED BY HONBLE ITO(TDS) MANGALORE. WE ARE EXPECTING FAVOUABLE DECISION BASED ON ASSESSMEN T YEAR 2003-04. HENCE, ASSESSMENT U/S 148 FOR THE ASSESS MENT YEAR 2005-06 WILL NOT BE SUSTAINABLE . A READING OF THE ABOVE DOES NOT SHOW ANY SPECIFIC OBJECTION RAISED BY THE ASSESSEE FOR THE AO TO DEAL WITH, EXC EPT NARRATING THE COURSE OF EVENTS IN ITS APPEALS ON ORDERS OF TAX DE DUCTION OFFICER. HENCE RELEVANCE PLACED ON THE DECISION OF THE HONB LE APEX COURT IN THE CASE OF GKN DRIVE SHAFTS(IND.)LTD VS ITO258 ITR 19 WOULD ITA NO.34(BANG)2013 5 NOT FURTHER ITS CASE. WE THEREFORE, DISMISS GROUND S 2 TO 4 RAISED BY THE ASSESSEE. 5. VIDE ITS GROUND 5 TO 9 ASSESSEE STATES THAT PROV ISION OF SECTION 40A(IA) WAS NOT APPLICABLE TO IT. AS PER T HE ASSESSEE THE RECIPIENTS FURNISHED FORM 15G/H AND IT HAD NO OBLIG ATION TO DEDUCT TAX. 6. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED ADMI TTED THAT THE DISALLOWANCES WERE MADE BY THE AO FOR A REASON THAT ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON FOLLOWING INTERES T PAYMENTS. 1. R.D.SEQUIRA RS.27,000 2.ROWEENA DSOUZA RS.66,825 3. RYNA DSOUZA RS.49,500 4.RUBAN DSOUZA RS.66,825 5. ALICE SEQUIRA RS.48,000 6. ROSANNE DSOUZA RS. 9,000 TOTAL RS.2,67,150 AS PER THE LEARNED AR THESE INTERESTS WERE PAID DUR ING THE CURRENCY OF THE RELEVANT PREVIOUS YEAR AND HENCE SECTION 40A (IA) HAD NO APPLICATION. ITA NO.34(BANG)2013 6 RELIANCE WAS PLACED ON SPECIAL BENCH DECISION IN TH E CASE OF MERILYN & SHIPPING TRANSPORTS VS ADDL.CIT 136 ITD 23, AND TH AT OF HON.ALLAHABAD HIGH COURT IN THE CASE OF CIT VS VECTOR SHIPPING S ERVICES (P)LTD.,357 ITR 642. AS PER LEARNED AR, SLP FILED BY THE DEPARTMEN T AGAINST THE LATTER DECISION STOOD DISMISSED BY HON SUPREME COURT IN CC NO.8065/2014 DATED 02-07-2014. IN ANY CASE, AS PER THE LEARNED AR, EV ERY RECIPIENT OF INTEREST HAD FURNISHED 15G/H AND HENCE ASSESSEE HAD NO OBLIG ATION TO DEDUCT TAX. 7. PER CONTRA, LEARNED DR SUBMITTED THAT JUDGMENTS OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS CRESCENT EXPORT SYNDICATE(262 CTR 525) AND GUJARAT HIGH COURT IN THE CASE OF CIT VS SIKANDARKHAN N TANVAR (357 ITR 312) WERE IN REVENUES FAVOUR. FU RTHER, ACCORDING TO HIM FORM 15G/H WERE FILED BY THE ASSESSEE MUCH LATER TO THE PAYMENT OF INTEREST AND HENCE COULD NOT BE TAKEN COGNIZANCE OF . 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTION. IN SO FAR AS PAID AND PAYABLE ISSUE IS CONCERNED, NO DOUB T THERE ARE DIVERGENT OPINIONS FROM VARIOUS HIGH COURTS. THERE IS NO DEC ISION OF THE HONBLE JURISDICTIONAL HIGH COURT ON THIS ISSUE, BROUGHT TO OUR NOTICE. HENCE FOLLOWING THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS VEGETABLE PRODUCTS 88 ITR 192, DECISION IN FAVOUR O F ASSESSEE HAS TO BE ITA NO.34(BANG)2013 7 FOLLOWED BY US. MORE SO, SINCE THE DEPARTMENT SLP IN VECTOR SHIPPING SERVICES CASES(SUPRA) HAVING BEEN DISMISSED BY APEX COURT. IN ANY CASE, FACTS HERE SHOW THAT ASSESEE HAD OBTAINED 15G/H FOR M FROM THE RECIPIENTS, THOUGH FILED BELATEDLY. IRRESPECTIVE OF THE DATE OF FILING THESE FORMS, ASSERTION MADE THEREIN BY THE PAYEES THAT THEY WERE NOT HAVING TAXABLE INCOME OR WERE HAVING INCOME BELOW TAXABLE LIMITS H AS NOT BEEN FOUND TO BE INCORRECT. WHEN ASSESSEE WAS WELL AWARE THAT R ECIPIENTS HAD NO TAXABLE INCOME, JUST BECAUSE THE DECLARATIONS IN FORM 15G/H WERE OBTAINED LATE, IT CANNOT BE FASTENED WITH THE CONSEQUENCE THAT ARISE FOR NON-DEDUCTION OF TAX AT SOURCE. WE CANNOT SAY THAT THERE WAS A FAIL URE ON THE PART OF THE ASSESSEE THAT WOULD ATTRACT THE RIGOURS OF SEC.40A( IA). IN THE CIRCUMSTANCES, WE ALLOW GROUNDS 5 TO 9 RAISED BY TH E ASSESSEE, AND DELETE THE DISALLOWANCE OF RS.2.67,150/- MADE U/S 40A(IA) OF THE IT ACT, 19161. APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 14-08-2014 SD/- (SHRI RAJPAL YADAV) SD/- (ABRAHAM P GEORGE) JUDICAL MEMBER AC C OUNTANT MEMBER BANGALORE: D A T E D : AM* ITA NO.34(BANG)2013 8 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE