LAXMI NARAIN AGARWAL, Jaipur V. DCIT, Jaipur

ITA 395/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5430 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 26-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P BHATEJA CIT DHK
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA -@ ITA NO. 395/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 LAXMI NARAYAN AGARWAL, 104, RIDHI SIDHI APARTMENT, AHINSA CIRCLE, JAIPUR. CUKE VS. D.C.I.T. CIRCLE-6, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. ABSPA 1338 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI O.P. BHATEJA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19/01/2016 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 24/02/2016 VKNS'K@ ORDER PER T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 04/04/2014 OF THE LEARNED CIT(A)-II, JAIPUR FOR A.Y. 2009-10.THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD CIT(A) HAS GROSSLY ERRED IN SUSTAINING DISALLOWANC E OF RS. 1,74,575/- (BEING 10%) OUT OF FOLLOWING EXPENSES, ARBITRARILY: 2 ITA NO. 395/JP/2014 LAXMI NARAIN AGARWAL VS DCIT NATURE OF EXPENSES EXPENSES CLAIMED EXPENSES DISALLOWED VEHICLE RUNNING & MAINTENANCE EXP. 2,97,714.00 29,771.00 OFFICE & STAFF WELFARE EXPENSES 2,97,635.00 29,764.00 SITE EXPENSES 11,50,396.00 1,15,050.00 TOTAL 17,45,745.00 1,74,575.00 1.1 THAT THE LD CIT(A) HAS FAILED TO APPRECIATE THE F ACT THAT THE LD A.O. HAS MADE THE DISALLOWANCES BY MAKING GENERAL OBSERVATIONS AND NO SPECIFIC INSTANC E OF NON-VERIFICATION IS POINTED, THUS THE DISALLOWANC ES SO SUSTAINED DESERVES TO BE DELETED MORE PARTICULAR LY WHEN BOOKS OF ACCOUNTS WERE ACCEPTED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST AMOUNTING RS. 15,79,723/- U/S 40(A)(IA) WITHOUT APPRECIATING THE SUBMISSION/FACTS PRODUCED BEFORE HIM, THUS THE SAME DESERVES TO BE DELETED. 2. THE LD ASSESSING OFFICER OBSERVED THAT THE ASSESS EE IS A GOVERNMENT CONTRACTOR. HE FILED RETURN ON 27/09/200 9 DECLARING TOTAL INCOME OF RS. 3,36,94,940/-. THE CASE WAS SCRUTINIZE D U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE FIRST GR OUND OF APPEAL IS AGAINST SUSTAINING THE DISALLOWANCE OF 1,74,575 (BEI NG 10%) OF THE TOTAL EXPENSES UNDER DIFFERENT HEADS. THE ASSESSING OFFICE R ANALYSED THE TRADING RESULT AND AFTER ANALYZING THE EVIDENCE PRO DUCED BY THE ASSESSEE, 3 ITA NO. 395/JP/2014 LAXMI NARAIN AGARWAL VS DCIT HE DISALLOWED 20% OUT OF VEHICLE RUNNING AND MAINTEN ANCE EXPENSES, OFFICE AND STAFF WELFARE EXPENSES AND SITE EXPENSES ON THE GROUND THAT THE CLAIM OF SELF MADE VOUCHERS AND PERSONAL EXPENS ES NOT VERIFIABLE. THE TOTAL ADDITION WAS MADE UNDER THE HEAD VEHICLE RUNNI NG AND MAINTENANCE EXPENSES AT RS. 59,543/-, OFFICE AND STAFF WELFARE E XPENSES AT RS. 59,527/- AND IN THE SITE EXPENSES AT RS. 2,30,079, WHICH WAS CHALLENGED BY THE ASSESSEE BEFORE THE LD CIT(A), WHO HAD PARTLY ALLOWED BY THE APPEAL BY RESTRICTING THE ADDITION @ 10%. 3. NOW THE ASSESSEE IS IN APPEAL BEFORE US. IT IS SU BMITTED BY THE LD AR OF THE ASSESSEE THAT DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE ASSESSEE HAD PRODUCED BOOKS OF ACCOUNT AND VOUCHERS FOR VERIFICATION. THE LD ASSESSING OFFICER HAD NOT POINTED OUT ANY SPE CIFIC DEFECT AND PARTICULAR EXPENSES, WHICH WAS NOT INCURRED FOR THE P URPOSE OF BUSINESS OR NON-VERIFIABLE. HE CASUALLY MENTIONED THAT EXPEN SES WERE SUPPORTED BY SELF MADE VOUCHERS AND WERE NOT FULLY VERIFIABLE. THE RUNNING OF VEHICLE EXPENDITURE IS WHOLLY AND EXCLUSIVELY INCURRED FOR T HE BUSINESS PURPOSES. ALL THE EXPENSES WERE INCURRED FOR THE BUSINESS PURP OSES. THE LD CIT(A) ALSO HAS NOT ASSIGNED ANY REASON TO RESTRICTING THE EXPENSES @ 10%. HE FURTHER RELIED ON THE DECISIONS OF HON'BLE SUPREME COURT IN THE CASE OF 4 ITA NO. 395/JP/2014 LAXMI NARAIN AGARWAL VS DCIT S.A. BUILDERS LTD. VS CIT(A) 288 ITR 1 (SC) AND EMPI RE JUTE CO. LTD. VS. CIT 124 ITR 1 (SC) AND FURTHER ARGUED THAT THE ASSESS ING OFFICER CANNOT PUT STEP IN THE SHOES OF THE BUSINESS MAN AND DIREC T TO THE ASSESSEE TO HOW CONDUCT THE BUSINESS. THEREFORE, HE PRAYED TO DEL ETE ALL THE ADDITIONS. 4. AT THE OUTSET, THE LD DR HAS VEHEMENTLY SUPPORTE D THE ORDER OF THE LD CIT(A) AND ARGUED THAT THE NATURE OF EXPENSES ARE SUCH THAT 100% BILL VOUCHERS CANNOT BE OBTAINED, THEREFORE, VERIFICATIO N CANNOT BE MADE. THE PERSONAL USE ALSO CANNOT BE RULED OUT. THE LD CIT(A ) WAS ALSO REASONABLE TO RESTRICT THE ADDITION. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE LO WER AUTHORITIES HAD NOT POINTED OUT SPECIFIC DEFECTS IN CLAIMING OF EXP ENSES UNDER ALL THE HEADS. THEY MADE GENERAL OBSERVATIONS. IT IS ALSO A FACT THAT UNDER THESE HEADS, FULL BILLS CANNOT BE OBTAINED FROM THE SERVI CE PROVIDER, WHICH IS NOT VERIFIABLE. THEREFORE, IN THE INTEREST OF THE JUSTIC E, WE RESTRICT THIS ADDITION @ 5%. THE ASSESSING OFFICER IS DIRECTED TO CALCULATE THE DISALLOWANCES ACCORDINGLY. 5 ITA NO. 395/JP/2014 LAXMI NARAIN AGARWAL VS DCIT 6. THE 2 ND GROUND OF THE APPEAL IS AGAINST CONFIRMING THE DIS ALLOWANCE OF RS. 15,79,723/- U/S 40(A)(IA) OF THE ACT. THE LD ASSESSING OFFICER OBSERVED THAT THE ASSESSEE MADE PAYMENTS ON ACCOUNT OF INTEREST TO THE FOLLOWING NBFCS ON WHICH TDS WAS NOT DEDUCTED, WHICH IS REPRODUCED AS UNDER:- SL.NO. NAME OF THE PARTY TO WHOM INTEREST PAID AMOUN T (IN RS.) 1. CHOLAMANDAL DBS FINANCE LTD.- BUSINESS LOAN 2,13 ,809/- 2. CITY CORP FINANCE LTD- LOAN AGAINST DUMPER 72,30 1/- 3. CITY CORP FINANCE LTD- LOAN AGAINST JCB 71,717/- 4. CITY CORP FINANCE LTD.- LOAN AGAINST JCB 1,95,36 6/- 5. CITY CORP FINANCE LTD.- LOAN AGAINST VIBRATORY ROLLER 74,977/- 6. CITY CORP FINANCE LTD.- LOAN AGAINST SENSOR PAVER 1,29,791/- 7. CITY CORP FINANCE LTD.- LOAN AGAINST DUMPER 1,00 ,314/- 8. TATA CAPITAL LTD.- LOAN AGAINST DUMPER 1,25,152/- 9. TATA CAPITAL LTD.- LOAN AGAINST DUMPER 2,88,867/- 10. TATA CAPITAL LTD.- LOAN AGAINST EARTH COMPACTOR 85,001/- 11. TML FINANCIAL SERVICES LTD.- LOAN AGAINST HITACHI 2,22,427/- TOTAL RS. 15,79, 723/- THE LD ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD. THE ASSESSEE HAD NOT DEDUCTED TDS ON IT. THERE WAS A VIOLA TION OF SECTION 40(A)(IA) OF THE ACT ON PAYMENT OF RS. 15,79,723/-. THE ASSESSING OFFICER PROVIDED OPPORTUNITY ON IT, THE ASSESSEE SUBMITTED THAT SECTION 40(A)(IA) APPLIED ONLY WHEN THE AMOUNT IS PAYABLE AND NO WHERE EXPENDITURE IS PAID FOR WHICH HE RELIED HONBLE ITAT, JAIPUR BENCH D ECISION IN THE CASE OF 6 ITA NO. 395/JP/2014 LAXMI NARAIN AGARWAL VS DCIT JAIPUR VIDHYUT VITRAN NIGAM LTD. VS. DCIT 123 TTJ 888 . AFTER CONSIDERING THE ASSESSEES FACTUAL AND LEGAL ARGUMENT, IT HAS B EEN HELD BY THE ASSESSING OFFICER THAT SECTION 40(A)(IA) IS APPLICA BLE ON PAID AS WELL AS PAYABLE. ANY PAYMENT MADE BY THE ASSESSEE IS PAID O NLY AFTER IT BECOMES PAYABLE AND FROM THE DATE HE TAKES THE LOAN AND THU S INVOKING TWO SEPARATE OF THE PROVISIONS OF SECTION 40(A)(IA). TH US, HE MADE ADDITION OF RS. 15,79,723/- 7. BEING AGGRIEVED BY THE ORDER OF THE LD ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WH O HAD CONFIRMED THE ADDITION BY OBSERVING AS UNDER:- 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSES SMENT ORDER AND APPELLANTS WRITTEN SUBMISSION. ASSESSING OFFICER DISALLOWED INTEREST PAID BY THE APPELLANT UN DER SECTION 40(A)(IA) WITHOUT DEDUCTING TDS. APPELLANT SUBMITTED THAT TDS WAS NOT DEDUCTED AND PAID UNDER THE BELIEF THAT PAYMENT WAS MADE TO INSTITUTIONS FOR WHICH TDS MIGHT NOT BE REQUIRED. THEREFORE IT IS NOT IN DISPUTE THAT APPELLANT MADE THE PAYMENT OF INTEREST WITHOUT DEDUCTING TDS AS REQUIRED UNDER SECTION 194A . APPELLANT SUBMITTED THAT SINCE AMOUNT WAS NOT PAYAB LE BUT ALREADY PAID, DISALLOWANCE SHOULD NOT BE MADE IN VIEW OF THE DECISION OF JURISDICTIONAL ITAT. THE ONLY ARGUMENT OF THE APPELLANT AGAINST THE DISALLOWANCE I S 7 ITA NO. 395/JP/2014 LAXMI NARAIN AGARWAL VS DCIT THAT INTEREST WAS PAID AND NOT PAYABLE AND THEREFORE PROVISIONS OF SECTION 40 (A) (IA) ARE NOT APPLICABL E. HOWEVER AFTER THE DECISION OF JURISDICTIONAL ITAT IN THE CASE OF JAIPUR VIDHYUT VITRAN NIGAM LTD, SEVERAL DECISIONS HAVE COME. ITAT SPECIAL BENCH DECISION IN THE CASE OF MERLYN SHIPPING HELD THAT DISALLOWANCE UNDER SECTION 40 (A)(IA) IS APPLICABLE ONLY IF AMOUNT IS PAYABLE AT THE YEAR END. HOWEVER OPERATION OF THIS DECISION IS STAYED BY AP HIGH COURT. SUBSEQUENTLY DECISIONS OF CALCUTTA AND GUJARAT HIGH COURT IN THE CASES OF CRESCENT EXPORT SYNDICATE AND SIKANDARKHAN N TUNVAR (BOTH DECIDED IN MAY 2013) RESPECTIVELY DECIDED THE ISSUE CATEGORICALLY AGAINST THE APPELLANT BY HOLDIN G THAT DISALLOWANCE OF THE SECTION 40(A)(IA) IS APPLICABLE IN RESPECT OF NON-DEDUCTION OR DELAYED PAYMENT OF TDS FOR BOTH AMOUNTS PAID AS WELL AS PAYABLE. THEREFORE POSITION IS QUITE CLEAR NOW AND ACCORDINGLY THE DISALLOWANCE OF INTEREST MADE BY THE AO ON ACCOUNT O F NON-DEDUCTION OF TDS IS JUSTIFIED. ACCORDINGLY, THE DISALLOWANCE MADE BY THE AO IS CONFIRMED. 8. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAD PAID RS. 15,79, 723/- TO VARIOUS NBFCS AS ON 31/3/2009, NO AMOUNT OF INTEREST WAS PAY ABLE. THE SPECIAL BENCH OF ITAT IN THE CASE OF MERILYN SHIPPING & TRANS PORT VS. ACIT 16 8 ITA NO. 395/JP/2014 LAXMI NARAIN AGARWAL VS DCIT ITR (TRIB) 1 WHEREIN IT HAS BEEN HELD THAT SECTION 40( A)(IA) IS APPLICABLE ONLY ON PAYABLE AMOUNT NOT PAID DURING THE YEAR. THI S VIEW HAS BEEN UPHELD BY THE HON'BLE ALLAHABAD HIGH COURT IN THE C ASE OF CIT VS. M/S VECTOR SHIPPING SERVICES PVT. LTD. 357 ITR 642, WHICH HAS BEEN CHALLENGED BEFORE THE HON'BLE SUPREME COURT AND THE SLP HAS BEEN DISMISSED. HE FURTHER RELIED ON THE FOLLOWING CASE L AWS:- (I) M/S HERBICIDES (INDIA) LTD. VS ACIT ITA NO. 391/ JP/2013 (ITAT, JAIPUR). (II) CIT VS. SIKANDAR KHAN N. TUNVAR 357 ITR 312. (III) CIT VS CRESCENT EXPORT SYNDICATE 94 DTR 81. (IV) ACIT VS M/S C.K. MOTORS ITA NO. 122/JU/2014. VARIOUS COURTS HAS BEEN DECIDED THIS ISSUE IN FAVOU R OF THE REVENUE AS 40(A)(IA) IS APPLICABLE ON PAID AND PAYABLE BUT THE ARS ARGUMENT IS THAT WHERE TWO VIEWS HAS BEEN EXPRESSED BY THE HONBLE COUR TS, FAVOURABLE VIEW IN CASE OF ASSESSEE IS TO APPLY BY FOLLOWING THE HON'BLE SUPREME COURT DECISION IN THE CASE OF CIT VS VEGETABLE PRODU CTS LTD. 88 ITR 192. 9. AT THE OUTSET, THE LD DR HAS VEHEMENTLY SUPPORTE D THE ORDER OF THE LD CIT(A). 10. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THIS BENCH HAS CONSIDERED THIS ISSUE IN VARIOUS CASES. IT IS UNDISPUTED FACT THAT THE ASSESSEE PAID ALL 9 ITA NO. 395/JP/2014 LAXMI NARAIN AGARWAL VS DCIT THE INTEREST DURING THE YEAR, WHICH WAS NOT PAYABLE O N 31 ST MARCH, 2007, THEREFORE, BY FOLLOWING THE HON'BLE ALLAHABAD HIGH C OURT DECISION IN THE CASE CIT VS. M/S VECTOR SHIPPING SERVICES PVT. LTD.( SUPRA) AND THIS BENCH DECISION IN VARIOUS CASES. THE COORDINATE BENCH IN T HE CASE OF RAJENDRA YADAV VS ITO IN ITA NO. 895/JP/2012 FOR A.Y. 2007-0 8 ORDER DATED 29/01/2016 HAS TAKEN DIFFERENT VIEW ON PECULIAR FAC TS, WHICH ARE DISTINGUISHABLE FROM THE FACTS OF THE CASE BEFORE U S. THEREFORE, WE DELETE THE DISALLOWANCE OF RS. 15,79,723/- MADE U/S 40(A)(I A) OF THE ACT. 11. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/02/2016. SD/- SD/- YFYR DQEKJ VH-VKJ-EHUK (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 24 TH FEBRUARY, 2016 RANJAN* VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI LAXMI NARAYAN AGARWAL, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE DCIT, CIRCLE-6, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 395/JP/2014) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR