Sh. Raj Kumar Bhalla, Ropar V. ITO, Ropar

ITA 431/CHANDI/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63944 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 28-08-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 25-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 431/CHD/2011 ASSESSMENT YEAR: 2006-07 SHRI RAJ KUMAR BHALLA, V ITO, WARD 2(2), PROP. M/S BHALLA TRANSPORT CO., ROPAR. 384-385, ZAIL SINGH NAGAR, ROPAR. PAN: ABJPB-2660H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT : SHRI AKHILESH GUPTA DATE OF HEARING : 28.08.2012 DATE OF PRONOUNCEMENT : 12.09.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER DATED 22.11.2010 PASSED BY THE LD . CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT'). 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE A DDITION OF RS.5,84,515/- MADE ON ACCOUNT OF NON-DEDUCTION OF T DS ON INTEREST PAYMENTS MADE TO M/S CHOLAMANDALAM FINANCE COMPANY LIMITED, M/S CITI CORP, FINANCE & M/S TATA FINANCE COMPANY LIMITED WHICH WAS IN FACT NOT DEDUC TIBLE AT ALL APPLYING THE PROVISIONS OF SECTION 40(I)(IA) OF THE ACT AND AS SUCH THE ORDER IS ARBITRARY & UNJUSTIFIED. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 2 HAS FURTHER ERRED IN NOT APPRECIATING THE CONTENTIO N OF THE ASSESSEE THAT EVEN IF TDS WAS TO BE DEDUCTED, IT WA S ONLY ON THE AMOUNT PAYABLE IN THE ACCOUNTS AND NOT ON TH E AMOUNTS HAVING ALREADY BEEN PAID DURING THE YEAR AN D AS SUCH THE ORDER IS ILLEGAL, ARBITRARY & UNJUSTIFIED. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS FURTHER ERRED IN UPHOLDING THE ADDITION OF RS. 20,1 86/- MADE APPLYING THE PROVISIONS OF SECTION 40A(3) OF T HE ACT WHICH IS ARBITRARY AND UNJUSTIFIED. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS FURTHER ERRED IN UPHOLDING THE ADDITION OF RS. 1,21 ,908/- ON ALLEGED SALE OF SCRAP WHEN IN FACT THERE HAD BEEN N O SALE WHATSOEVER AND AS SUCH THE ORDER IS ARBITRARY AND UNJUSTIFIED. 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS FURTHER ERRED IN SUSTAINING AN ADHOC DISALLOWANCE AMOUNTING TO RS.46,910/- ON ACCOUNT OF EXPENSES CLA IMED UNDER THE HEADS 'TELEPHONE EXPENSES, 'BUSINESS EXP ENSES', 'MISC. EXPENSES', CONVEYANCE EXPENSES' AN 'INTERES T ON CAR LOAN', WHICH IS ARBITRARY AND UNJUSTIFIED. 6. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TA X (APPEALS) IS ERRONEOUS, ARBITRARY, OPPOSED TO LAW AND FACTS OF THE CASE AND IS, THUS, UNTENABLE. 3. GROUND NOS. 1 & 2, RAISED BY THE APPELLANT, PERT AIN TO UPHOLDING THE ADDITION OF RS.5,84,515/- MADE ON ACC OUNT OF NON-DEDUCTION OF TDS ON INTEREST PAYMENTS, MADE TO M/S CHOLAMANDALAM FINANCE COMPANY LIMITED, M/S CITI COR P, FINANCE & M/S TATA FINANCE COMPANY LIMITED WHICH WA S IN FACT NOT DEDUCTIBLE AT ALL APPLYING THE PROVISIONS OF SECTION 40(I)(IA) OF THE ACT. 4. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, IT TRANSPIRED THAT THE ISSUE IS COVERED BY THE DECISIO N OF THE 3 SPECIAL BENCH OF ITAT, VISHAKHAPATNAM BENCH IN THE CASE OF ACIT VS. MERILYN SHIPPING & TRANSPORTS, ITA NO.477 /VIG /2008 (SB). 5. WE HAVE PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND FOUND THAT THE ISSUE IS COVERED BY THE DECISION DATED 14.03.2012 OF THE SPECIAL BENCH OF ITAT, VISHAKHAPA TNAM BENCH IN THE CASE OF ACIT V MERILYN SHIPPING & TRAN SPORTS (SUPRA). THE RELEVANT PART OF THE DECISION IS REPR ODUCED HEREUNDER : 12. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS OF HON'BLE SUPREME COURT AND HON'BLE HIGH COURTS, MATERIALS PLACED BEFORE US, ARGUMENTS MADE BY BOTH THE SIDES AND IN VIEW OF THE PROVISION S OF SECTION 40(A)(IA) OF THE ACT, ON COMPARISON BETWEEN THE PROPOSED AND ENACTED PROVISION, THE ONLY CONCLUSION WHICH I CAN REACH IS THAT THE LEGISLATURE CONSCIOUS LY REPLACED THE WORDS 'AMOUNTS CREDITED OR PAID' WITH THE WORD 'PAYABLE' IN THE FINAL ENACTMENT. BY CHANGING THE WORDS FROM 'CREDITED' OR 'PAID' TO 'PAYABLE', THE LEGISLATIVE INTENT HAS BEEN MADE CLEAR THAT ONLY OUTSTANDING AMOUNTS OR THE PROVISIONS FOR EXPENSES LIABLE FOR TDS UNDER CHAPTER XVII-B OF THE ACT IS S OUGHT TO BE DISALLOWED IN THE EVENT THERE IS A DEFAULT IN FOLLOWING THE OBLIGATIONS CASTED UPON THE ASSESSEE UNDER CHAPTER XVII-B OF THE ACT. I AGREE WITH THE ARGUMEN TS MADE BY ID. COUNSEL FOR THE ASSESSEE AND OTHER COUN SELS FOR THE INTERVENES THAT WHILE INTERPRETING THE WORD 'PAYABLE' IN THIS PROVISION, THE WORD OF A STATUTE MUST BE UNDERSTOOD IN ITS NATURAL, ORDINARY OR POPULAR S ENSE AND CONSTRUED ACCORDING TO ITS GRAMMATICAL MEANING. ACCORDING TO ME, SUCH CONSTRUCTION WOULD NOT LEAD T O ABSURDITY BECAUSE THERE IS NOTHING IN THIS CONTEXT OR IN THE OBJECT OF THIS STATUTE TO SUGGEST TO THE CONTRA RY. IT IS A CARDINAL PRINCIPLE OF INTERPRETATION THAT THE WOR DS OF A 4 STATUTE MUST BE PRIMA FACIE GIVEN THEIR ORDINARY MEANING, WHEN THE WORDS OF THE STATUTE ARE CLEAR, P LAIN AND UNAMBIGUOUS THEN THE COURTS ARE BOUND TO GIVE EFFECT TO THAT MEANING. THE LITERAL RULE OF INTERPR ETATION REALLY MEANS THAT THERE SHOULD BE NO INTERPRETATION OF THE STATUTE, RATHER IN OTHER WORDS, WE SHOULD READ THE STATUTE AS IT IS WITHOUT DOING ANY VIOLENCE TO THE LANGUAGE. IN THE PRESENT DISPUTE BEFORE US, THE WOR D 'PAYABLE' USED IN SECTION 40(A)(IA) OF THE ACT IS T O BE ASSIGNED STRICT INTERPRETATION, IN VIEW OF THE OBJE CT OF LEGISLATION, WHICH IS INTENDED FROM THE REPLACEMENT OF THE WORDS IN THE PROPOSED AND ENACTED PROVISION FRO M THE WORDS 'AMOUNT CREDITED OR PAID' TO 'PAYABLE'. HENCE, IN MY VIEW, MY ANSWER TO THE QUESTION REFERR ED BY HON'BLE PRESIDENT TO THE SPECIAL BENCH IS AS UND ER: THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE APPLICABLE ONLY TO THE AMOUNTS OF EXPENDITURE WHICH ARE PAYABLE AS ON THE DATE 31 ST MARCH OF EVERY YEAR AND IT CANNOT BE INVOKED TO DISALLOW WHICH HAD BEEN ACTUAL LY PAID DURING THE PREVIOUS YEAR, WITHOUT DEDUCTION OF TDS. 6. RESPECTFULLY FOLLOWING THE DECISION OF THE SPECI AL BENCH OF VISHAKHAPATNAM BENCH, AS REPRODUCED ABOVE, THE ISSU E IS RESTORED TO THE FILE OF THE AO, WITH DIRECTION TO C ONSIDER THE ISSUE IN THE LIGHT OF THE RATIO LAID DOWN IN THE SP ECIAL BENCH DECISION, AFTER MAKING NECESSARY VERIFICATION. ACC ORDINGLY, GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWE D FOR STATISTICAL PURPOSES. 7. IN GROUND NO. 3, APPELLANT CONTENDED THAT CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS.20,186/- MADE APPLYING THE PROVISIONS OF SECTION 40A(3) OF THE ACT, WHICH IS A RBITRARY AND UNJUSTIFIED. 5 8. THE AO, DISALLOWED 20% OF THE EXPENSES, AS PER T HE DETAILS GIVEN IN THE ASSESSMENT ORDER, BY INVOKING THE PROV ISIONS OF SECTION 40A(3). THE ASSESSEE WAS GIVEN OPPORTUNITY BY THE AO VIDE ORDER-SHEET ENTRY DATED 14.11.2008, TO JUSTIFY CASH PAYMENTS, IN CONTRAVENTION OF THE PROVISIONS OF SEC TION 40A(3) OF THE ACT, CHOSE NOT TO FILE ANY REPLY. CONSEQUEN TLY, AO MADE ADDITION OF RS.20,186/- I.E. 20% OF THE EXPENSES IN CURRED, IN CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3) O F THE ACT. LD. CIT(A), UPHELD THE FINDINGS OF THE AO. FINDINGS OF THE CIT(A) ARE CONTAINED IN PARA 16 & 17 OF THE ORDER, WHICH A RE REPRODUCED HEREUNDER : 16. AFTER CAREFULLY CONSIDERING THE RIVAL CONTENTI ONS AND PROVISIONS OF THE INCOME TAX ACT, 1961, I FIND THAT SECTION 40 A(3) CONTEMPLATES THAT WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN R ESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON I N A SINGLE DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR BANK D RAFT EXCEED RS.20,000/- 20% OF THE AMOUNT SHALL BE DISALLOWED. THERE ARE CERTAIN EXCEPTIONS UNDER WHICH THE PAYMENTS CAN BE MADE IN CASH. 17 FROM THE PERUSAL OF THE REPLY IT IS FOUND THAT T HE APPELLANT'S CASE DOES NOT FALL WITHIN THE AMBIT OF EXCEPTIONS TO SECTION 40(A)(3) ASSESSEE'S EXPLANATION BASICALLY POINTS TOWARDS PET TY PAYMENTS TO DRIVERS, PAYMENTS MADE AT ODD HOURS, BUT ACTUALLY T HE PAYMENTS I.E. RS.22132/- ON 22.4.05 AND RS.78800/- ON 21.8.05 DO NOT GEL WITH BY THE EXPLANATION GIVEN. AS SUCH, THE ADDITION MADE B Y THE ASSESSING OFFICER IS SUSTAINED AS JUSTIFIED, DISMISSING THE A PPEAL ON THIS GROUND. 9. THE FINDINGS OF THE LD.CIT(A), ARE CLEAR AND SPE CIFIC, HAVING REGARD TO THE PROVISIONS OF SECTION 40A(3) OF THE A CT AND EXCEPTIONS PROVIDED UNDER THE RELEVANT RULE. LEGIS LATIVE INTENT EMBEDDED IN THE PROVISIONS OF SECTION 40A(3) OF THE ACT, CLEARLY INDICATES THE MODE OF PAYMENT OF ANY EXPENDITURE, B Y WAY OF 6 ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE DRAFT, DRAWN ON A BANK. AT THE RELEVANT POINT OF TIME, THE PROVISIONS OF SE CTION 40A(3) OF THE ACT, AS RECORDED BY THE CIT(A), CONTEMPLATED TO DISALLOW 20% OF SUCH EXPENDITURE. THE CIT(A), HAS CATEGORIC ALLY RECORDED THE FINDING THAT THE CASE OF THE ASSESSEE DOES NOT FALL UNDER ANY OF THE EXCEPTIONS MENTIONED IN THE RELEVA NT RULES. 10. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS , FACTS OF THE CASE AND THE RELEVANT RECORDS AND THE FINDINGS OF THE AO AND CIT(A). IN THIS CASE, THE ASSESSEE HAS FAILED T O PROVE THAT THE INSTANCES QUOTED BY THE AO, FALL UNDER ANY OF T HE EXCEPTIONS, PROVIDED UNDER THE RELEVANT RULES. TH E PROVISIONS OF SECTION 40A(3) OF THE ACT, CONTEMPLATE THAT ANY PAYMENT MADE OTHERWISE THAN BY THE PRESCRIBED MODE OF PAYME NT I.E. THROUGH THE ACCOUNT PAYEE CHEQUE OR DRAFTS, DRAWN O N A BANK, IRRESPECTIVE OF THE GENUINENESS OF THE EXPENDITURE, 20% OF SUCH EXPENDITURE WOULD BE DISALLOWED. THE AO, AS WELL AS CIT(A), ADJUDICATED THE ISSUE STRICTLY IN TERMS OF THE RELE VANT PROVISIONS OF THE ACT, HENCE, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A). ACCORDINGLY, FINDINGS OF THE CIT(A) AR E UPHELD AND GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSE D. 11. IN GROUND NO.4, ASSESSEE CONTENDED THAT CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS.1,21,908/- ON ALLEGED SALE OF SCRAP, WHEN, INFACT THERE HAD BEEN NO SALE, WHAT-SO -EVER AND AS SUCH, THE ORDER IS ARBITRARY AND UNJUSTIFIED. 12. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT ASSESSEE DEBITED AN AMOUNT OF RS.60,95,482/- T OWARDS TRUCK REPAIRS AND TYRES BESIDES OTHER EXPENSES DEBI TED TO PROFIT 7 & LOSS ACCOUNT. AS IS EVIDENT, FROM THE PERUSAL OF THE ASSESSMENT ORDER AS WELL AS THE APPELLATE ORDER, AS SESSEE DID NOT FURNISH THE COMPLETE VOUCHERS REGARDING REPAIRS AND TYRES AND, HENCE, IT WAS NOT POSSIBLE THAT SOME SCRAP I.E . WORN-OUT TYRES AND OTHER REPLACEMENTS, HAVE NOT BEEN SOLD BY THE ASSESSEE FROM THESE HUGE EXPENSES OF RS.60,95,428/- . THE AO, IN THE ABSENCE OF COMPLETE VOUCHERS, DISALLOWED 2% OF SUCH EXPENSES, WHICH WORKED OUT TO RS. 1,81,908/-. LD CI T(A), UPHELD THE FINDINGS OF THE AO AND HELD THAT IN THE ABSENCE OF PLAUSIBLE EXPLANATION AND COMPLETE VOUCHERS, 2% OF THESE EXPENSES CLAIMED, WERE DISALLOWED BY THE AO. THE L D. CIT(A), UPHELD FINDING OF THE AO. 13. THE CONTENTION RAISED BY THE APPELLANT IN THE G ROUND OF APPEAL, IS NOT IN CONSONANCE WITH THE FACTUAL MATRI X OF THE CASE AND THE FINDINGS GIVEN BY THE AO AND THE CIT(A). T HE AO, DISALLOWED 2% OF THE EXPENSES, ON THE GROUND OF NON -AVAILABILITY OF COMPLETE VOUCHERS. SUCH FINDING OF THE AO WAS UPHELD BY THE CIT(A). IT IS NOT A CASE, AS CONTENDED BY THE APPELLANT IN THE GROUND OF APPEAL, THAT ADDITION HAS BEEN MADE O N THE ALLEGED SALE OF SCRAP. HOWEVER, TO MEET THE END OF JUSTICE, DISALLOWANCE MADE BY THE AO IS RESTRICTED TO 1% OF SUCH EXPENSE. HENCE, THIS GROUND OF APPEAL IS PARTLY AL LOWED. 14. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, APPELLANT STATED THAT GROUND NO.5 IS NOT PRESSED, HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 8 15. GROUND NO.6 IS GENERAL IN NATURE AND NEEDS NO S EPARATE ADJUDICATION. THE SAME IS, ACCORDINGLY, DISMISSED. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH SEPT.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 12 TH SEPT.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH