Vallabh Textiles, Manimajra V. ITO, Chandigarh

ITA 445/CHANDI/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5367 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 31-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 30-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NARESH SINGLA
• Keywords: Additional evidence; Non-deduction of tax; TDS
• Section: 143(3); 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH SMC, CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.445 /CHD/2010 (ASSESSMENT YEAR : 2006-07) VALLABH TEXTILES VS. THE INCOME-TAX OFFICER, SHOP NO.58, 1 ST FLOOR, MHC WARD 3(4), MANIMAJRA. CHANDIGARH. PAN: AAFFV2428 J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NARESH SINGLA RESPONDENT BY: SMT.SARITA KUMARI, DR O R D E R THE APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (A), DATED 3.12.2009 RELATING TO ASSE SSMENT YEAR 2006-07 AGAINST THE ORDER PASSED U/S 143(3) OF THE INCOME-T AX ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1. THAT THE LEARNED CIT (APPEALS) WAS NOT JUSTIFIE D IN CONFIRMING THE ADDITION OF RS.52,754/- ON ACCOUNT OF INTEREST ON UNSECURED LOANS. 2. THAT THE LEARNED CIT (APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.10,601/- ON ACCOUNT OF DISCOUNT RECEIVED. 3. THE PRESENT APPEAL HAS BEEN FILED AFTER A DELAY OF 20 DAYS. THE APPEAL WAS DUE TO BE FILED ON 9.4.2010. HOWEVER, A S THE GRANDFATHER OF THE PARTNER OF ASSESSEE FIRM WAS SERIOUSLY ILL, THE PRESENT APPEAL WAS FILED ON 30.4.2010 I.E. AFTER A DELAY OF 20 DAYS. 2 4. THE LEARNED A.R. FOR THE ASSESSEE HAS FURNISHED ON RECORD AN AFFIDAVIT OF ONE OF THE PARTNERS. THE DELAY IN FIL ING THE APPEAL IS HEREBY CONDONED IN THE FACTS AND CIRCUMSTANCES OF THE CASE . 5. THE ISSUE VIDE GROUND NO.1 IS AGAINST THE ADDITI ON ON ACCOUNT OF INTEREST PAID ON LOAN RAISED FROM BROTHER OF THE AS SESSEE. THE ASSESSEE HAD PAID INTEREST OF RS.53,786/- ON THE UNSECURED L OAN TAKEN BY IT. HOWEVER, NO TAX WAS DEDUCTED AT SOURCE AS PROVIDED UNDER SECTION 194A OF THE INCOME TAX ACT. THE ASSESSING OFFICER INVOK ING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, HELD THAT THE SAID AMOUNTS WERE NOT ALLOWABLE AS A DEDUCTION AND THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE. 6. BEFORE THE CIT(A) THE LEARNED A.R. FOR THE ASSES SEE POINTED OUT THAT SUMS OF RS.1032/- AND RS.52,754/- WERE PAID TO TWO DIFFERENT PERSONS BUT ON THE AMOUNT OF RS.1032/-, NO TAX WAS TO BE DEDUCTED. WHEREAS THE SUM OF RS.52,754/- WAS CLAIMED TO HAVE BEEN PAID TO EMPLOYEE OF THE FIRM, WHOSE INCOME WAS NOT TAXABLE. THE LEARNED A.R. FURTHER SUBMITTED THAT FORM NO.15H WAS DEPOSITED WI TH THE DEPARTMENT. THE CIT(A) NOTED THE ASSESSEE TO HAVE FILED FORM NO .15G IN THE OFFICE OF ADDL. CIT, RANGE-I, CHANDIGARH. FURTHER IT WAS CONTENDED THAT THERE WAS NO RECEIPT NUMBER ON THE STAMP DATED 31.3.2006. THE ASSESSING OFFICER HAD DURING THE ASSESSMENT PROCEEDINGS SPECI FICALLY ASKED THE COUNSEL TO FURNISH A COPY OF FORM NO.15G/15H, WHICH WAS NOT FILED BEFORE THE ASSESSING OFFICER. THE CIT(A) FURTHER N OTED THAT THE ASSESSEE WHILE FURNISHING THE SAID FORM BEFORE HIM HAD CLAIM ED IT NOT BE AN ADDITIONAL EVIDENCE. THE CIT(A) WAS OF THE VIEW T HAT THE ASSESSEE HAD TRIED TO CREATE THE EVIDENCE AT A LATER STAGE AND H ENCE THE DISALLOWANCE 3 OF RS.52,754/- WAS UPHELD. THE DISALLOWANCE OF RS. 1032/- WAS DELETED. THE ASSESSEE IS IN APPEAL AGAINST THE SAID DISALLOW ANCE OF RS.54,754/-. 7. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT TH AT THE INTEREST WAS PAID TO THE BROTHER OF THE ASSESSEE AND NO TAX WAS DEDUCTED. THE FORM NO.15H WAS FILED ON 31.3.2006. MY ATTENTION WAS IN VITED TO THE AUDIT REPORT FURNISHED ALONGWITH RETURN OF INCOME WHEREIN AT SR.NO.27 IT HAS BEEN REPORTED THAT NO TDS ON INTEREST PAID TO PERSO NS SPECIFIED UNDER SECTION 40(A)(2)(B) OF THE ACT, ON UNSECURED LOANS, HAD BEEN DEDUCTED DURING THE YEAR AGAINST FORM NO.15H. THE PLEA OF T HE LEARNED A.R. WAS THAT THE FACTUM OF NON-DEDUCTION OF TAX BECAUSE OF SUBMISSION OF FORM 15H IS REPORTED IN AUDIT REPORT AND CANNOT BE CALLE D AN EVIDENCE CREATED AT A LATER STAGE. 8. THE LEARNED D.R. FOR THE REVENUE POINTED OUT THA T THE ASSESSEE HAD MADE TWO OPPOSITE CLAIMS I.E. DURING THE ASSESSMENT PROCEEDINGS THERE WAS NO REQUIREMENT OF DEDUCTION OF TAX AT SOURCE, B UT DURING THE APPELLATE PROCEEDINGS, HAD CLAIMED TO HAVE FILED FO RM NO.15H. THE LEARNED D.R. FOR THE REVENUE PLACED BEFORE ME THE R ECEIPT REGISTER MAINTAINED IN THE OFFICE OF THE ADDL.CIT, WHEREIN T HE SAID DOCUMENT WAS CLAIMED NOT TO HAVE BEEN ENTERED. FURTHER IT WAS P OINTED OUT THAT THE SAID FORM NO.15H WAS NOT FILED BEFORE THE PRESCRIBE D AUTHORITY. THE LEARNED D.R. FOR THE REVENUE FURTHER DREW MY ATTENT ION TO THE ORDER- SHEET ENTRIES. HOWEVER, THE LEARNED D.R. FAIRLY AD MITTED THAT DURING THE YEAR UNDER CONSIDERATION THE DOCUMENTS WERE BEING R ECEIVED UNDER SEAL OF THE RELEVANT OFFICER WITH DATE AND NO RECEIPT NU MBERS WERE BEING PUT. 9. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE RECORD. THE ASSESSEE HAD CLAIMED DEDUCTION ON ACCOUNT OF INTERE ST PAYMENT OF 4 RS.521,754/-, WHICH WAS PAID TO THE BROTHER OF THE ASSESSEE, WHO IN TURN IS A SPECIFIED PERSON UNDER THE PROVISIONS OF SECTI ON 40(A)(2)(B) OF THE ACT. THE ASSESSEE HAD NOT DEDUCTED ANY TAX AT SOUR CE OUT OF THE AFORESAID INTEREST PAYMENT. THE CLAIM OF THE ASSE SSEE IS THAT IT HAD FURNISHED FORM NO.15H/15G BEFORE THE TAX AUTHORITIE S ON 31.3.2006 AND AS THE INCOME OF THE RECIPIENT SHRI VISHAL JAIN WAS BELOW THE TAXABLE LIMIT, THERE WAS NO LIABILITY TO DEDUCT TAX AT SOUR CE. THE COPY OF FORM NO.15G IS PLACED AT PAGES 17 TO 30 OF THE PAPER BOO K, WHICH ADMITTEDLY WAS FOR PAYMENT OF INTEREST OF RS.52,754/- BY THE A SSESSEE TO SHRI VISHAL JAIN. THE SAID FORM WAS FILED IN THE OFFICE OF THE ADDL.CIT, RANGE-I, CHANDIGARH ON 31.3.2006 AS PER THE STAMP AVAILABLE ON THE SAID DOCUMENTS. THE ASSESSEE HAS ALSO FILED COPY OF AUD IT REPORT ALONGWITH AUDITED BALANCE SHEET AND TRADING PROFIT & LOSS ACC OUNT ON RECORD. A PERUSAL OF THE SAME REVEALS THAT AS PER COLUMN NO.2 7(A) WHERE THE AUDITOR IS TO REPORT WHETHER THE ASSESSEE HAS DEDUC TED THE TAX AT SOURCE AND PAID THE SAID AMOUNT TO THE CREDIT OF CENTRAL G OVT. IN ACCORDANCE WITH PROVISIONS OF CHAPTER XVII-B, IT HAS BEEN REPO RTED BY THE AUDITORS THAT NO TDS ON INTEREST PAID TO PERSONS SPECIFIED UNDER SECTION 40(A)(2)(B), ON UNSECURED LOANS, HAS BEEN DEDUCTED DURING THE YEAR AGAINST FORM NO.15H. THE AUDIT REPORT IS DATED 27. 7.2006. ADMITTEDLY, THE COPY OF THE SAID FORM NO.15H/15G WAS NOT FURNIS HED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS . THE CONTENTION RAISED BY THE ASSESSEE DURING THE ASSESSMENT PROCEE DINGS WAS THAT THE AMOUNT BEING NON-TAXABLE IN THE HANDS OF THE RECIPI ENT, NO TAX WAS DEDUCTED AT SOURCE. HOWEVER, COPY OF FORM NO.15H/1 5G IN THE CASE WAS FURNISHED BEFORE THE CIT(A). THOUGH THE SAID FORM NO.15H HAS NOT BEEN FILED BEFORE THE PRESCRIBED AUTHORITY I.E. THE CIT( A), WE FIND NO MERIT IN THE STAND OF THE CIT(A) THAT THE ASSESSEE HAS CREAT ED THE SAID EVIDENCE IN ORDER TO SUBSTANTIATE ITS CLAIM. THE FACTUM OF HAV ING FILED THE FORM 5 NO.15H/15G BEFORE THE ADDL.CIT IS FIRST ESTABLISHED BY THE ACKNOWLEDGEMENT BY THE OFFICE OF ADDL.CIT, RANGE-I, CHANDIGARH ON 31.3.2006 AND FURTHER ITS MENTION IN THE AUDIT REPO RT IN FORM NO.3CD DATED 27.7.2006. THOUGH THE ASSESSEE HAD NOT FURNI SHED THE SAID FORM BEFORE THE PRESCRIBED AUTHORITY BUT WITHOUT CONFRON TING THE SAME TO THE ASSESSEE, THE CLAIM OF THE ASSESSEE CANNOT BE BRUSH ED ASIDE. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AN D THE SMALLNESS OF THE MATTER AND THE TRANSACTION BEING BETWEEN TWO BROTHE RS THERE IS NO MERIT IN DISALLOWING THE CLAIM OF THE ASSESSEE APPLYING T HE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. BECAUSE OF THE SMALL NESS OF THE AMOUNT INVOLVED, THE EXERCISE OF SENDING THE ISSUE BACK TO THE ASSESSING OFFICER IN ALLOWING THE ASSESSEE TO FURNISH THE SAID DOCUME NT BEFORE THE CIT(A) AND THEREAFTER ALLOWING THE CLAIM OF THE ASSESSEE I S DISPENSED WITH IN THE INTEREST OF JUSTICE. HOWEVER, THE PRESENT DECISION WOULD NOT ACT AS A PRECEDENT IN ANY OTHER APPEAL. THE ASSESSING OFFIC ER IS THUS DIRECTED TO DELETE THE ADDITION OF RS.52,754/-. THE GROUND NO. 1 RAISED BY THE ASSESSEE IS THUS ALLOWED. 10. THE ISSUE IN GROUND NO.2 RAISED BY THE ASSESSEE IS AGAINST THE ADDITION OF RS.10,601/- ON ACCOUNT OF DISCOUNT RECE IVED. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD SHOWN CREDIT BA LANCE OF RS.1,25,390/- IN THE NAME OF M/S ASHOK WEAVING TEXT ILE MILLS P. LTD. HOWEVER, FROM THE COPY OF ACCOUNT FILED BY THE PART Y, IT TRANSPIRES THAT THE DEBIT BALANCE OF RS.1,14,789/- WAS SHOWN BY THE SAID PARTY. THE ASSESSEE CLAIMED THAT DISCOUNT OF RS.7132/- HAD BEE N CONSIDERED IN THE NEXT YEAR. THE ASSESSING OFFICER TREATED THE SAME AS INCOME OF THE ASSESSEE FOR THE PRESENT YEAR. 6 11. THE CIT(A) ON PERUSAL OF THE COPIES OF ACCOUNTS OF THE SAID CREDITORS FOR THE YEARS 2005-06 AND 2006-07 NOTED T HAT THE SAID DISCOUNT OF RS.7132/- WAS CREDITED ON 25.4.2006. THE CIT(A) NOTED THE ASSESSEE TO HAVE FURNISHED ITS RETURN OF INCOME ON 31.10.200 6 AND WAS OF THE VIEW THAT AT THE TIME OF FILING OF RETURN OF INCOME, THE ASSESSEE WAS AWARE OF THE DISCOUNT FOR THE PERIOD ENDING 31.3.2006. AS T HE BOOKS OF ACCOUNT WERE BEING MAINTAINED ON MERCANTILE BASIS, THE CIT( A) WAS OF THE VIEW THAT THE INCOME HAD ACCRUED BEFORE 31.3.2006, IRRES PECTIVE OF THE RECEIPT IN NEXT YEAR. THE ADDITION WAS CONFIRMED BY THE CI T(A). 12. ON PERUSAL OF THE RECORD I FIND THAT THERE WAS A DIFFERENCE OF RS.10,601/- IN THE ACCOUNT OF M/S ASHOK WEAVING TEX TILE MILLS P. LTD. AS COMPARED TO THE BALANCE SHOWN BY THE CREDITORS I N ITS BOOKS OF ACCOUNT. THE EXPLANATION OF THE ASSESSEE WAS THAT THE SUPPLIER HAD BOOKED DISCOUNT ON 31.3.2006, WITHOUT INFORMING THE ASSESSEE. HOWEVER, THE SAID DISCOUNT WAS ACCOUNTED FOR AT THE TIME OF PAYMENT I.E. ON 25.4.2006. THE ASSESSEE IS MAINTAINING ITS BOOK S OF ACCOUNT ON MERCANTILE BASIS UNDER WHICH ITS PRESCRIBED THAT AL L THE ENTRIES RELATING TO THE FINANCIAL YEAR ARE TO BE ACCOUNTED FOR IN TH E YEAR ITSELF, WHEN THE INCOME HAD ACCRUED TO THE ASSESSEE OR THE EXPENDITU RE OR THE LIABILITY TO INCUR THE EXPENDITURE HAD ARISEN, IRRESPECTIVE OF T HE DATE OF RECEIPT OF THE AMOUNT OR THE PAYMENT OF THE EXPENDITURE. THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND THE DISCOUN T RELATABLE TO THE YEAR UNDER CONSIDERATION IS TO BE ACCOUNTED FOR IN THE YEAR TO WHICH IT RELATES. MERELY BECAUSE THE ASSESSEE HAD MADE THE BALANCE PAYMENT IN THE SUCCEEDING YEAR DOES NOT ABSOLVE THE ASSESSEE O F ITS LIABILITY TO ACCOUNT FOR THE DISCOUNT PERTAINING TO THE PERIOD E NDING 31.3.2006. FURTHER THE ASSESSEE IS RECEIVING DISCOUNT ON ITS P URCHASE FROM THE SAID PARTY AND AS SUCH THE SAID DISCOUNT RELATING TO THE PERIOD ENDING 7 31.3.2006 IS TO BE REFLECTED IN THE BOOKS OF ACCOUN T ENDING 31.3.2006. THE ASSESSEE HAS CLAIMED THE SAID DISCOUNT OF RS.71 32/- AND NO EXPLANATION WITH REGARD TO THE BALANCE DISCREPANCY HAS BEEN GIVEN BY THE ASSESSEE. IN THE TOTALITY OF THE FACTS AND CIRCUMS TANCES OF THE CASE I CONFIRM THE ADDITION OF RS.10,601/-. THE GROUND NO .2 RAISED BY THE ASSESSEE IS DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF JUNE, 2011. SD/- (SUSHMA CHOWLA) JUDICIAL MEMBER DATED : 29 TH JUNE, 2011 RATI COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH