Late Sanjeev Kumar Sahoo, V. ITO, Paradeep

ITA 425/CTK/2011

• Counselvise Citation: 42522114 RSA 2011
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 10-10-2011
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEEDR
• Assessee Lawyers: SASWAT ACHARYA

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM , AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 425/CTK/2011 (ASSESSMENT YEAR 2007 - 08) SARITA SAHOO, LEGALHEIR OF LATE SANJEEV KUMAR SAHOO, PROP. SRI BALDEVJEW AUTOMOBILES , BADAHAT,KENDRAPARA PAN: ADQPS 4142 J VERSUS DY.COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), CUTTACK. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI SASWAT ACHARYA, AR FOR THE RESPONDENT SHRI A.BHATTACHARJEE,DR DATE OF HEARING : 15.02.2 012 DATE OF PRONOUNCEMENT : 14.03.2012 ORDER SHRI K.S.S.PRASAD RAO, JM : THIS APPEAL IS FILED BY THE LEGAL HEIR OF THE ASSESSEE HAVING BEEN AGGRIEVED BY THE ORDER OF THE LEARNED CITA) DT. 21.7.2011 FOR THE ASSESSMENT YEAR 2007 - 08 IN THE CASE OF THE ASSESSEE. 2. THE SOLE ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT(A) AS WELL AS THE ASSESSING OFFICER HAVE NOT PROPERLY APPRECIATED THE CONTENTION OF THE ASSESSEE REGARDING THE ALLEGED PAYMENT OF COMMISSION PAID BY THE ASSESSEE TO THE PURCHASERS OF VEHICLES F ROM HIM AND CONSEQUENTLY MAKING DISALLOWANCE OF THE ENTIRE PAYMENTS OF 10,62,1 30 WITHOUT VERIFYING THE NATURE OF SUCH EXPENSES. 3. BOTH THE PARTIES WERE HEARD REGARDING THE ISSUE AND ITS LEGAL IMPLICATIONS. 4. ON CAREFULLY CONSIDERATION OF THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL IN THE LIGHT OF RIVAL SUBMISSIONS OF BOTH THE PARTIES THE UNDISPUTED FACTS RELATING TO THE ISSUE ARE THAT THE DECEASED ASSESSEE CARRIED ON BUSINESS OF SELLING MOTOR VEHICLES IN THE NAME AND STYLE OF M/S.SHREE BALADEVJEW AUTOM OBILES AND EARNED INCOME OF MARGIN ALLOWED BY THE PRODUCERS OF THE VEHICLES ON SALE OF THOSE VEHICLES AS A FRANCHISE OF THE MANUFACTURER. DURING ITA NO.425/CTK/2011 2 THAT PROCESS THE PLACE KENDRAPADA WHERE THE ASSESSEE IS CARRYING ON BUSINESS BEING A REMOTE AREA AND THE ASSESS EE IS T HE ONLY PERSON HAVING FRANCHISE OF MANUFACTURER OF VEHICLES AND SELLING THE VEHICLES IN THE AREA HAVING RESTRICTED CHOICE OF VEHICLES. THAT PLACE BEING SITUATED AT A PLACE OF WITHIN 100 KMS FROM BHUBANESWAR/CUTTACK WHERE THERE ARE NUMBER OF DEALER S WHO ARE OFFERING MANY CHOICES TO THE PURCHASERS, SUCH AS COLOUR OF THE VEHICLE, CAPACITY OF ENGINE ETC. SO, IN ORDER TO ENCOURAGE THE LOCALS THE ASSESSEE USED TO PAY 1,000 TO 2000 TO THE PURCHASERS OF THE VEHICLES AS INCENTIVE OUT OF THE MARGIN HE IS GETTING ON THE SAID VEHICLES. BUT THE SAID PAYMENTS WERE WRONGLY DESCRIBED IN THE BOOKS OF ACCOUNT AS COMMISSION. THE DEPARTMENTAL AUTHORITIES TAKING ADVANTAGE OF T HIS WRONG MENTION OF NOMENCLATURE HAS INVOKED SECTION 40(A)(IA) OF THE I.T.ACT, WHEREIN IT IS CONTEMPLATED THAT WHEN A COMMISSION IS PAID WITHOUT MAKING ANY TDS THEREON U/S.194H OF THE I.T.ACT, THE SAID PAYMENT IS ENTIRELY DISALLOWABLE. THUS, THE DEPARTMEN T DISALLOWED THE ENTIRE PAYMENT OF COMMISSION AMOUNTING TO 10,62,130 CLAIMED BY THE ASSESSEE. HENCE, THE PRESENT APPEAL IS FILED BY THE ASSESSEE BEFORE THE TRIBUNAL. 5. DURING THE COURSE OF HEARING THE LEARNED AR OF THE ASSESSEE VEHEMENTLY ARGUED CONTENDING INTER ALIA TH AT THE PLACE OF BUSINESS OF THE ASSESSEE I S IN A REMOTE AREA AND THE ASSESSEE IS THE ONLY FRANCHISE OF THE MANUFACTURER FOR SELLING OF THEIR VEHICLES. AS THE ASSESSEE FOUND IT DIFFICULT TO ATTRACT PURCHASERS AS THE SAID PLACE OF BUSINESS SITUATES AT A DISTANCE OF 100 KMS FROM CUTTACK/BHUBANESWAR W HERE SO MANY SELLERS ARE OFFERING VARIETIES OF VEHICLES TO THE CHOICE OF THE PURCHASERS, THE ASSESSEE USED TO PAY 1,000 TO 2,000 TO THE PURCHASERS AS INCENTIVE FOR MAKING PURCHASES FROM THE ASSESSEE. BUT THE AMOUNT S SO PAID TO THE PURCHASERS WERE DESCRIBED IN THE BOOKS OF ACCOUNT AS COMMISSION. THUS TAKING ADVANTAGE OF THIS ITA NO.425/CTK/2011 3 NOMENCLATURE, THE DEPARTMENTAL AUTHORI TIES INSISTED ON DEDUCTION OF TDS ON SUCH COMMISSION PAYMENTS, WHICH THE ASSESSEE HAS NOT DONE. THEREFORE, THE DEPARTMENTAL AUTHORITIES HAVE DISALLOWED THE ENTIRE PAYMENT AMOUNTING TO 10,62,132 U/S.40(A)(IA) OF THE I.T.ACT. IN THE TOTALITY OF THE CIRCUMS TANCES, THE VIEW TAKEN BY THE DEPARTMENTAL AUTHORITIES IS NOT SUSTAINABLE FOR LEGAL SCRUTINY INASMUCH AS THE ASSESSEES ACT OF SPENDING THE AMOUNT TOWARDS INCENTIVE TO THE PURCHASERS ON PURCHASE OF VEHICLES FROM HIM IN VIEW OF THE PREVAILING OF MUCH CHOICE WITHIN A DISTANCE OF 100 KMS FROM THE PLACE OF ASSESSEES BUSINESS, SUCH AS, CUTTACK/BHUBANESWAR. THEREFORE, THE ACTION OF THE DEPARTMENTAL AUTHORITIES IN INVOKING SECTION 40( A)(IA) OF THE I.T.ACT ON SUCH PAYMENTS IS NOT AT ALL SUSTAINABLE FOR LEGAL SCRU TINY AND REQUIRES TO BE SET ASIDE BY ALLOWING THE APPEAL OF THE ASSESSEE. 6. CONTRARY TO THIS, THE LEARNED DR HAS VEHEMENTLY ARGUED CONTENDING INTERALIA THAT THE PROVISIONS CONTAINED IN SECTION 194H HAS CLEARLY AND CATEGORICALLY MANDATES THAT WHEN ANY COMM ISSION IS PAID TO ANY PERSON THE PAYER HAS TO DEDUCT NECESSARILY THE TDS ON SUCH AMOUNT AND NON - PAYMENT OF SUCH TDS WILL RESULT IN DISALLOWANCE U/S.40(A)IA) OF THE I.T.ACT. SO, THE ACTION TAKEN BY THE DEPARTMENTAL AUTHORITIES IN ENTIRELY DISALLOWING THE CL AIM OF DEDUCTION IS VERY MUCH IN ACCORDANCE WITH LAW APPLICABLE TO IT AND NOT INFIRMED IN ANY WAY REQUIRING INTERFERENCE. 7. ON CAREFUL ANALYSIS OF THE ORDERS PASSED BY T HE DEPARTMENTAL AUTHORITIES IT IS FOUND THAT UNDISPUTEDLY THE AMOUNT OF INCENTIVE PAID BY THE ASSESSEE ARE ONLY TO THE PURCHASERS AND NOT TO ANY THIRD PERSONS. SO IN THE ABSENCE OF ANY MATERIAL MADE AVAILABLE TO THE TRIBUNAL THAT THE PAYMENTS ARE COMMISSION STRICTLY IN IT SENSE TO ANY THIRD PERSON ON SALES OF THE VEHICLES, THE DISALLOWANCE IN QUESTION IS NOT SUSTAINABLE FOR LEGAL SCRUTINY. ON THE OTHER HAND, IT IS THE SPECIFIC PLEA OF THE ASSESSEE THAT THE ASSESSEE HAS ITA NO.425/CTK/2011 4 PAID INCENTIVE ONLY TO THE PURCHASERS ONLY OUT OF THE COMMISSION WHICH HE EARNS ON THE SALE OF VEHICLES. THEREFORE, MERELY A WRONG DESCRIPTION OF AMOUNT OF EXPENDITURE IN THE BOOKS OF ACCOUNT DUE TO UNAWARENESS OF THE MUNSHI/ACCOUNTANT OF THE ASSESSEE SHALL NOT MAKE THE ASSESSEE TO SUFFER FROM DISALLOWANCE. THEREFORE, IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT SIMPLY BECAUSE A WRONG DESCRIPTION HAS BEEN GIVEN TO AN EXPENDITURE IT CANNOT BE DISALLOWED MERELY BECAUSE OF TECHNICAL NON - COMPLIANCE OF THE PROVISIONS OF THE ACT BY THE ASSESSEE MORE SO WHEN THERE IS NO MATERIAL MADE AV AILABLE BY THE DEPARTMENT THAT THE ASSESSEE HAS PAID COMMISSION TO THIRD PARTIES. WE ARE THEREFORE, OF THE CONSIDERED VIEW THAT THE ACTION OF THE DEPARTMENTAL AUTHORITIES IS NOT AT ALL SUSTAINABLE FOR LEGAL SCRUTINY. HENCE, THE DISALLOWANCE 10,62,130 MADE U/S.40(A)(IA) OF THE I.T.ACT IS DELETED BY ALLOWING THE APPEAL OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. (K.K.GUPTA) ACCOUNTANT MEMBER ( K.S.S.PRASAD RAO) JUDICIAL MEMBER DATE: 14.03.2012 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: SARITA SAHOO, LEGALHEIR OF LATE SANJEEV KUMAR SAHOO, PROP. SRI BALDEVJEW AUTOMOBILES, BADAHAT,KENDRAPARA 2. THE RESPONDENT: DY.COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), CUTTACK. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.