ACIT, Chandigarh V. M/s Rana Polycot Ltd., Chandigarh

ITA 36/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80904 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 09-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Non-deduction of tax

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NOS. 35 & 36/CHD/2013 ASSESSMENT YEARS: 2006-07 & 2007-08 THE DCIT, VS. M/S RANA POLYCOT LTD., CIRCLE -1 (1), CHANDIGARH CHANDIGARH PAN NO. AAACR7623M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH RESPONDENT BY : SHRI T.N.SINGLA DATE OF HEARING : 10.09.2014 DATE OF PRONOUNCEMENT : 17.09.2014 ORDER PER T.R.SOOD, A.M. BOTH THE APPEALS FILED BY THE REVENUE AGAINST THE SEPARATE ORDER DATED 1.10.2012 OF CIT (APPEALS), CHANDIGARH. 2. IDENTICAL ISSUE HAS BEEN RAISED IN BOTH THE APPE ALS, THEREFORE, THE SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY T HIS COMMON ORDER FOR THE SAKE OF BREVITY. 3. FIRST WE SHALL DEAL WITH ITA NO. 35/CHD/2014. IN THIS APPEAL REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUND:- THE LD. CIT(A) HAS ERRED IN FACTS AS WELL AS IN LAW IN DELETING PENALTY U/S 271(1)(C) BECAUSE THE ASSESSE E CAN BE HELD TO HAVE FURNISH INACCURATE PARTICULARS OF INCO ME WHERE THE ASSESSEE MAKES A CLAIM OF DEDUCTION, WHICH IS INCORRECT AS PER LAW AND IS NOT AS PER PROVISIONS OF THE ACT. 4. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS VARIOUS ADDITIONS WERE MADE AND ONE OF THE ADDITION WAS MADE FOR NON- 2 DEDUCTION OF TAX IN FREIGHT AND OTHER CHARGES PAID BY THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. IT WAS PLEADED THAT THESE PAYMENTS WERE MAINLY REIMBURSEMENT CHARGES. FURTHE R PAYMENTS WERE MADE TO THE NON-RESIDENT SHIPPING COMPANIES, THEREFORE, AS PER CIRCULAR NO. 723 DATED 19.9.1995, TDS WAS NOT REQUIRED TO BE DEDUCTED. T HE ASSESSING OFFICER DID NOT ACCEPT THESE SUBMISSIONS AND DISALLOWED THESE PAYME NTS. ON THE SAID ADDITION PENALTY PROCEEDINGS U/S 271(1)(C) WAS ALSO INITIATE D. FURTHER, TDS WAS ALSO NOT DEDUCTED ON ACCOUNT OF INTEREST PAYMENTS MADE TO M/ S KOTAK MAHINDRA PRIMUS LD. AND CITY FINANCIAL SERVICES LTD. IT WAS MAINLY PLEADED THAT THESE PAYMENTS WERE IN THE FORM OF HIRE-PURCHASE PAYMENTS AND, TH EREFORE, TDS WAS NOT REQUIRED TO BE DEDUCTED. THE ASSESSING OFFICER DID NOT ACCEPT THIS AND ADDED THESE ITEMS BY INVOKING THE PROVISIONS OF SECTION 4 0A(IA) OF THE ACT AND ALSO INITIATED PENALTY PROCEEDINGS US/ 271(1)(C) OF THE ACT. 5. IN RESPECT TO THE SHOW CAUSE NOTICE AGAINST LEVY OF PENALTY VARIOUS EXPLANATIONS WERE GIVEN AND RELIANCE WAS ALSO PLACE D ON CERTAIN CASE LAWS. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE S AME AND LEVIED MINIMUM PENALTY @ 100% AMOUNTING TO RS. 20,20,198/-. 6. ON APPEAL, IT WAS MAINLY PLEADED THAT DISALLOWAN CE U/S 40A(IA) HAS BEEN WRONGLY MADE BECAUSE THERE WAS A CONTROVERSY WHETHE R TDS PROVISIONS WERE APPLICABLE AGAINST THE PAYMENTS ALREADY MADE OR ONL Y TO THE PAYMENTS REMAINING PAYABLE AND ULTIMATELY THE SPECIAL BENCH OF THE TRI BUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORT V ADDL CIT (2012) 136 ITD 23 VISKHAKAPATNAM (SPECIAL BENCH) HELD THAT TDS PROVISIONS WERE APPLICABLE ONL Y IF A SUM WAS PAYABLE.. THEREFORE, THE ISSUE WAS DEBATABLE AND PENALTY WAS NOT LEVIABLE. THE LD. CIT(A) ACCEPTED THE CONTENTION AND DELETED THE PENA LTY. 7. BEFORE US, THE LD. DR STRONGLY SUPPORTED THE ORD ER OF ASSESSING OFFICER. HE ALSO REFERRED TO THE ORDER OF THE TRIBUNAL IN QU ANTUM APPEAL IN ITA NOS. 3 1382 & 1383/CHD/2010. HE PARTICULARLY REFERRED TO PARA 15 AND POINTED OUT THAT TRIBUNAL HAS RECORDED A FINDING THAT ASSESSEE COULD NOT FURNISH EVIDENCE TO PROVE THAT PAYMENTS HAVE BEEN MADE TO FOREIGN SHIPP ING COMPANIES, THEREFORE, CLEARLY THESE COMPANIES WERE NOT EXITING AND IT WAS WRONGLY CLAIMED AND PENALTY IS LEVIABLE. 8 ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESS EE SUBMITTED THAT THIS IS A WRONG CONCLUSION DRAWN BY THE LD. DR AND TRIBUNAL HAS SIMPLY STATED THAT ASSESSEE COULD NOT PROVE THAT SHIPPING COMPANIES WE RE FOREIGN SHIPPING LINES. HE ALSO REFERRED TO THE ASSESSMENT ORDER AND POINTE D OUT THAT NO FINDING WAS EVER MADE THAT PAYMENTS ARE BOGUS. THE ONLY ISSUE WAS WHETHER PAYMENTS WERE MADE TO THE FOREIGN SHIPPING LINES OR NOT. HE FURT HER SUBMITTED THAT MERELY NON- DEDUCTION ON TAX ON A PARTICULAR PAYMENT AND THAT T OO PARTICULARLY WHEN THE ISSUE IS DEBATABLE THEN PENALTY PROVISION SHOULD NOT HAVE BEEN APPLIED. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND FORCE IN THE SUBMISSIONS OF LD. COUNSEL FOR THE ASSESSEE. WE HA VE PERUSED THE ORDER OF THE TRIBUNAL IN QUANTUM APPEAL AND FIND THAT PARA 15 W HICH HAS BEEN RELIED ON BY LD. DR READS AS UNDER:- 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ASSESSEE HAS FAILED TO FURNISH ON RECO RD ANY EVIDENCE TO PROVE ITS CASE THAT THE PAYMENT HAS BEE N MADE TO THE SO CALLED AGENTS OF FOREIGN SHIPPING COMPANY AND IN THE ABSENCE OF THE SAME, WE FIND NO MERIT IN THE PL EA OF THE ASSESSEE AND THE SAME IS REJECTED. NOW, COMING TO THE ALTERNATE PLEA OF THE ASSESSEE THAT NO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT IS MERITED IN VIEW OF THE RATIO LAID DOWN BY THE SPECIAL BENCH IN ACIT VS. MERILYN SHIPPING & TRANSPORTS, ITA NO.477 /VIG /2008 (SB). WE FIND THAT THE ISSUE, NOW STANDS COVERED BY THE RAT IO LAID DOWN BY THE GUJRAT HIGH COURT IN CIT VS SIKANDER KH AN N.TUNVAR & OTHERS ITA NO. 905 OF 2012 JUDGEMENT DAT ED 02.05.2013 AND THE HON'BLE CALCUTTA HIGH COURT IN C IT VS CRESENT EXPORT SYNDICATE ITA NO. 20 OF 2013, G.A . 4 NO. 190 OF 2013 UNDER WHICH THE RATIO LAID DOWN BY THE SPECIAL BENCH HAS BEEN REVERSED. FOLLOWING THE ABOVESAID RATIO LAID DOWN BY THE HON'BLE GUJRAT HIG H COURT, WE DISMISS PLEA RAISED BY THE ASSESSEE AND BECAUSE OF FAILURE OF THE ASSESSEE TO DEDUCT TAX AT SOURCE OUT OF THE AFORESAID PAYMENTS MADE TO SHIPPING AGEN TS, AND FOR NON-DEDUCTION OF TAX AT SOURCE, THE SAID EXPENDITURE IS LIABLE TO BE DISALLOWED UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE GR OUND OF APPEAL NO. 3 RAISED BY ASSESSEE IS THUS, DISMISSED. 10. THE ABOVE CLEARLY SHOWS THAT TRIBUNAL OBSERVED THAT ASSESSEE WAS NOT ABLE TO PROVE THAT PAYMENTS HAVE BEEN MADE TO FOREI GN AIRLINES. THE ALTERNATIVE PLEA THAT TDS PROVISIONS WERE NOT APPLICABLE ON PAY MENTS WHICH HAS ALREADY BEEN MADE WAS ALSO REJECTED IN THE LIGHT OF THE DE CISION OF HON'BLE GUJRAT HIGH COURT IN THE CASE OF CIT V SIKANDER KHAN N. TUNVAR & OTHERS (SUPRA). THIS CLEARLY SHOWS THAT ASSESSEE HAS RAISED TWOFOLD CONT ENTIONS. MOREOVER, THE ISSUE WHETHER TDS IS DEDUCTIBLE ON PAYMENTS ALREADY MADE AND PAYMENTS REMAINING PAYABLE IS DEBATABLE AND THE SAME WAS DE CIDED IN FAVOUR OF THE ASSESSEE BY THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF MERILYN SHIPPING AND TRANSPORT V ADDL CIT (SUPRA) BUT THIS DECISION HAS BEEN REVERSED BY CERTAIN HIGH COURTS. THE LD. CIT(A) HAS DELETED THIS PENAL TY VIDE PARA 5.1 WHICH IS AS UNDER:- 5.1 THUS, WHEN THE ASSESSEE HAS CONCEALED PARTICU LARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS, APP LICABILITY OF CONDITIONS LAID DOWN IN EXPLANATION 1 (SUPRA) HA VE TO BE EXAMINED. IN THIS CASE, THE APPELLANT HAD NOT DEDUC TED TAX ON THE FREIGHT PAYMENTS AND ON INTEREST PAYMENTS TO NB FCS AND SO THE ENTIRE AMOUNT OF WAS ADDED BACK TO THE TOTAL AMOUNT U/S 40(A)(IA) OF THE ACT. ON THE FACTS OF THE CASE, THE APPELLANT CANNOT BE SAID TO HAVE DELIBERATELY FURNI SHED INACCURATE PARTICULARS OF INCOME. HONBLE ITAT DELH I IN THE CASE OF AT&T COMMUNICATIONS SERVICES INDIA PVT. LT D. (42 DTR 22) HAS HELD THAT THE DISALLOWANCE MADE BY INVO KING PROVISIONS OF SECTION 40(A)(I) CANNOT BE A GROUND T O LEVY 5 PENALTY U/S 271(1)(C) SINCE IN SUCH SITUATIONS, IT CANNOT BE SAID THAT THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVANT TO THE DEDUCTION CLAIMED BY THE ASSESSEE. SECTION 40(A)(I) PERTAINS TO PAYMENTS MAD E TO NON- RESIDENTS AND THE CORRESPONDING PROVISION FOR RESID ENTS IS SECTION 40 (A)(IA) AND SO THE RATIO OF THIS DECISIO N IS APPLICABLE IN RESPECT OF DISALLOWANCE U/S 40(A)(IA) ALSO. FURTHER, THE ENTIRE AMOUNT HAS BEEN ADDED U/S 40(A) (IA) FOR NON-DEDUCTION OF TAX AND THE APPELLANT HAS ALREADY BEEN PENALIZED BY TAXING WHOLE OF THE AMOUNT, ON WHICH T AX WAS TO BE DEDUCTED. IN VIEW OF THIS DISCUSSION AND BY RESP ECTFULLY FOLLOWING THE DECISION. IN VIEW OF THIS DISCUSSION AND BY RESPECTFULLY FOLLOWING THE DECISION OF HONBLE ITAT DELHI (SUPRA), THE CONCEALMENT PENALTY LEVIED U/S 271(1)( C) IS CANCELLED AND THE GROUNDS OF APPEAL TAKEN BY THE AP PELLANT ARE ALLOWED. 11. IN OUR OPINION, IN VIEW OF THE OBSERVATIONS MAD E BY US THE LD. CIT(A) HAS CORRECTLY DECIDED THE ISSUE BECAUSE ADDITION WAS ON DEBATABLE POINT WHICH DOES NOT ATTRACT PENAL PROVISIONS, THEREFORE, WE FIND NO THING WRONG WITH THE ORDER OF LD. CIT(A) AND CONFIRM THE SAME. 12. ITA NO. 26/CHD/2013 :- THE ISSUE IN THIS APPEAL IS IDENTICAL TO THE ISS UE RAISED BY THE REVENUE IN ITA NO. 35/CHD/2013, THERE FORE, FOLLOWING OUR DECISION IN ITA NO. 35/CHD/2013 ALSO, IN THIS CASE WE CONFIRM THE ORDER OF LD. CIT(A). 13. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.09.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED:17 TH SEPTEMBER, 2014 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 6