EDROOS SYED MOHAMMED ZAKIR, MUMBAI V. ACIT 13(3), MUMBAI

ITA 3705/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4365 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 23-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AARSI PRASADDR
• Assessee Lawyers: PRAKASH PANDITAR
• Keywords: Diversion of income; Question of law
• Section: 143(3); 2

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI E BENCH BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & SANDEEP GOSAIN,JUDICIAL MEMBER /.ITA NO.3705-06/MUM/2014, /ASSESSMENT YEAR-2005-06&06-07 SHRI EDROOS SYED MOHAMMED ZAKIR 13, M.A. SARANG MARG, DONGRI MUMBAI-400 020. PAN: AADPE 2591 D VS ACIT- CIRCLE-13(3) MUMBAI. ( / APPELLANT) ( / RESPONDENT) /ASSESSEE BY : SHRI PRAKASH PANDIT-AR / REVENUE BY : SHRI AARSI PRASAD-DR / DATE OF HEARING : 19-11 -2015 / DATE OF PRONOUNCEMENT : 01.01.2016 , 1961 1961 1961 1961 254 254 254 254( (( (1 11 1) )) ) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDERS,DATED 03.02.14 OF CIT(A)-24, MUMBAI THE ASSESSEE HAS FILED THE APPEALS FOR THE ABOVE MENTIONED TWO ASSESSMENT YEARS(AY.S.) RAISING THE IDENTICAL GROUNDS OF APPEAL WHEREIN HE HAS CHALLENGED THE PENALTY LEVIED U/S. 2 71(1)(C) OF THE ACT. ITA NO.3705/MUM/14-AY.2005-06: 2. ASSESSEE,AN INDIVIDUAL FILED HIS RETURN OF INCOME O N 29.9.2005 DECLARING INCOME OF RS.3.50 LACS.THE ASSESSING OFFICER(AO) COMPLETED THE ASSESS MENT U/S. 143(3) OF THE ACT,ON 27.12.2007, DETERMINING THE INCOME OF THE ASSESSEE AT RS.88.17 LACS. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THA T THE ASSESSEE HAD MADE COMMISSION PAYMENT OF RS.56.30 LACS TO CERTAIN PARTIES,THAT H E HAD NOT DEDUCTED TAX AT SOURCE WHILE MAKING THE COMMISSION PAYMENTS.HE HELD THAT THE ASSESSEE H AD CONTRAVENED THE PROVISIONS OF SECTION 194H OF THE ACT, THAT THE SUM OF RS.47,41,615/- PAI D AS COMMISSION WAS TO BE DISALLOWED U/S.40 (A)(IA) OF THE ACT.HE FURTHER DISALLOWED RS.8.88 LA CS FOR CONTRAVENTION OF SEC.194H OF THE ACT. THE AO OBSERVED THAT ASSESSEE HAD MADE PAYMENT OF R S.5.23 LACS THAT WERE OF PERSONAL NATURE. HE HELD THAT SAME WAS NOT ALLOWABLE AS EXPENDITURE AS IT WAS NOT INCURRED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS.THE AO INITIATED PE NALTY U/S. 271(1)(C) R.W. EXPALANATION-1 OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME .VIDE HIS ORDER DT.29.3.2012,THE AO IMPOSED A PENALTY OF RS.18.65 LACS FOR THE YEAR UNDER CONSI DERATION. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,ASSESSMENT ORDER AND THE PENALTY ORDER,HE UPHELD THE ORDER OF THE AO. IN THE MEANWHILE THE ASSESSEE PREFERRED AN APPEAL B EFORE THE FAA AGAINST THE QUANTUM ADDITIONS, WHO DELETED THE ADDITIONS MADE BY THE AO.AN APPEAL BEFORE THE TRIBUNAL WAS FILED BY THE AO (ITA NO.3659/MUM/2009).VIDE ITS ORDER,DT.8.7.2000,T HE TRIBUNAL REVERSED THE ORDER OF THE FAA. THE ASSESSEE CHALLENGED THE ORDER OF THE TRIBUNAL B EFORE THE HONBLE HIGH COURT AND THE HONBLE COURT (INCOME TAX APPEAL NO.2657 OF 2011 DA TED 19.03.2012) ADMITTED FOLLOWING SUBSTANTIAL QUESTIONS OF LAW WITH REGARD TO THE QUA NTUM ADDITIONS: A) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE TRIBUNAL WAS RIGHT IN UPHOLDING THAT RS.56,30,173/- AMOUNTS TO COMMISSION PAID TO THE OTHER LIAISON OFFICERS AND, ITA /3705 & 3706/M/14,AY.05-06 & 06-07 EDROOS SYE D 2 THEREFORE, THE SAME IS ALLOWABLE UNDER SECTION 194H READ WITH SECTION 40(A)(IA) OF THE INCOME TAX ACT,1961. B) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE PAYMENT OF RS.56,30,173/- TO THE O THER LIAISON OFFICERS WAS NOT A DIVERSION OF INCOME AT SOURCE, BUT IT IS AN APPLICATION OF INCOM E AND THEREBY UPHOLDING DISALLOWANCE OF RS.56,30,173/-. 3. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE (AR) CONTENDED THAT WHILE DECIDING THE APPEAL FOR 2008-09 THE TRIBUNAL HAD DECIDED THE ISSUE OF NON DEDUCTION OF TDS AND DISALLOWANCE MADE U/S. 40(A) (IA) OF THE AC T IN FAVOUR OF THE ASSESSEE, THAT THE HON'BLE JURISDICTIONAL HIGH COURT HAD ADMITTED SUBSTANTIAL QUESTION OF LAW WITH REGARD TO THE SAME ISSUE, THAT ON ADMISSION OF SUBSTANTIAL QUESTION OF LAW BY THE HONBLE HIGH COURT THE ISSUE HAD BECOME DEBATABLE,THAT THE PENALTY WAS NOT LEVIABLE FOR NON DEDUCTION OF TDS AND CONTRAVENTION OF PROVISIONS OF SECTION 194H OF THE ACT.HE RELIED UPO N THE CASE OF NAYAN BUILDERS AND DEVELOPERS(368 ITR 722)OF THE HON'BLE JURISDICTIONA L HIGH COURT. DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE AO HAD MADE ADDITIONS ON ACCOUNT OF CONTRAVENTIONS OF SECTION 194H AND NOT INCURRING EXPENDITURE WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES,THAT H E LEVIED PENALTY FOR FURNISHING INACCURATE PARTICULARS FOR INCOME IN CONTRAVENTION OF SECTION 194H ONLY,THAT THE QUANTUM ADDITIONS MADE BY AO WERE DELETED BY FAA BUT WERE CONFIRMED BY THE TR IBUNAL, THAT THE HONBLE HIGH COURT HAD ADMITTED SUBSTANTIAL QUESTION OF LAW WITH REGARD TO NON DEDUCTION OF TAX, THAT IN THE SUBSEQUENT YEAR THE TRIBUNAL HAD (ITA/81/MUM/2012-AY08-09 DT.4 .2.15)DECIDED THE ISSUE OF NON DEDUCTION OF TAX AND APPLICATION OF PROVISIONS OF SECTION 40( A)(IA) IN FAVOUR OF THE ASSESSEE.WE FIND THAT IN THE CASE OF NAYAN BUILDERS AND DEVELOPERS THE HON'B LE BOMBAY HIGH COURT HAS HELD THAT ONCE A SUBSTANTIAL QUESTION OF LAW WAS ADMITTED AGAINST TH E ORDER OF THE TRIBUNAL BY THE HIGH COURT THE ISSUE BECOMES DEBATABLE.IT WAS FURTHER HELD THAT IN SUCH CASES CONCEALMENT PENALTY, PENALTY FOR FILING INACCURATE PARTICULARS SHOULD NOT BE IMPOSED INVOKING THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT.IN THE CASE UNDER CONSIDERATION,AS STATE D EARLIER THE HON'BLE BOMBAY HIGH COURT HAS ADMITTED SUBSTANTIAL QUESTION OF LAW FOR THE QUANTU M ADDITIONS.THEREFORE,WE HOLD THAT NO PENALTY CAN BE IMPOSED U/S.271(1)(C) OF THE ACT FOR THE YEA R UNDER APPEAL IN LIGHT OF DECISION OF NAYAN BUILDERS AND DEVELOPERS.EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. ITA NO.3706/MUM/14(06-07) 5. THE FACTS AND CIRCUMSTANCES OF THE CASE FOR THE YEA R ARE IDENTICAL TO THE FACTS OF THE EARLIER AY., EXCEPT THAT THE AMOUNT OF PENALTY IS RS.23.64 LACS FOR THE YEAR WHEREAS IN THE EARLIER YEAR THE AO HAD IMPOSED PENALTY OF RS.81.65 LACS. FOLLOWING OUR ORDER FOR EARLIER AY, THE EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEALS FILED B Y THE ASSESSEE FOR BOTH THE AY.S. STAND ALLOWED . . . ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST JANUARY, 2016. 01 , 2016 SD/- SD/- ( / SANDEEP GOSAIN ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 01.01.2016 ITA /3705 & 3706/M/14,AY.05-06 & 06-07 EDROOS SYE D 3 . . . .. . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.