ITO 18(2)(4), MUMBAI V. HARISH ANUPCHAND MEHTA, MUMBAI

ITA 4460/MUM/2011

• Counselvise Citation: 446019914 RSA 2011
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2012
• Appeal Filed By: Department
• Bench Allotted: H
• Next Hearing Date: 09-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 03-06-2011
• Court: TRIBUNAL
• Department Lawyers: T C SUBRAMANIAN
• Assessee Lawyers: A K GHOSH
• Section: 142(1); 194C; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H BEFORE SHRI D. MANMOHAN (VP) & SHRI RAJENDRA SINGH (AM) I.T.A.NO. 4460/MUM/2011 (ASSESSMENT YEAR : 2006-07) ITO WARD 18(2)(4) ROOM NO. 109, 1 ST FLOOR PIRAMAL CHAMBERS PAREL MUMBAI-400 012. VS. SHRI HARISH ANUPCHAND MEHTA 6, SHREE GURUNIWAS BUILDING GOKHALE ROAD NORTH, DADAR WEST MUMBAI-400 028. APPELLANT RESPONDENT PAN/GIR NO. : AAEPM5838L ASSESSEE BY : SHRI A.K. GHOSH DEPARTMENT BY : SHRI T.C. SUBRAMANIAN DATE OF HEARING : 9.5.2012 DATE OF PRONOUNCEMENT : 9.5.2012 ORDER PER D.MANMOHAN (VP) :- THE ONLY GROUND URGED BY THE REVENUE READS AS UNDER :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED CIT(A) ERRED IN DELETING DISALLOWANCE MADE U/S. 40( A)(IA) HOLDING THAT CLAUSE (K) TO SECTION 194C(1) OF THE I.T. ACT, 1961 WAS NOT APPLICABLE TO THE ASSESSEES CASE, WITHOUT APPRECIA TING THE FACT THAT THE SAID DISALLOWANCE MADE NOT ONLY ON ACCOUNT OF N ON-DEDUCTION OF TDS BUT ALSO ON FAILURE OF THE ASSESSEE TO SUBSTANT IATE THE CLAIM OF EXPENDITURE. 2. FACTS OF THE CASE IN SHORT ARE THAT THE ASSESSEE , AN INDIVIDUAL BY STATUS, WAS ENGAGED IN THE BUSINESS OF EXPORTS. FO R THE YEAR UNDER CONSIDERATION, HE DECLARED A TOTAL INCOME OF ` 1,02 ,810/-. THE CASE WAS TAKEN UP FOR SCRUTINY AND EFFECTIVE INQUIRY WAS MAD E BY ISSUING QUESTIONNAIRE TO THE ASSESSEE ALONGWITH NOTICE U/S. 142(1) DATED 22.11.2008. SINCE NONE APPEARED IN RESPONSE TO THE NOTICE ANOTHER OPPORTUNITY WAS GIVEN TO THE ASSESSEE AND CASE WAS POSTED FOR HEARING ON 8.12.2008. NONE APPEARED ON THIS DATE ALSO. SIN CE ASSESSMENT WAS GETTING BARRED BY LIMITATION ON 31.12.2008 THE ASSE SSING OFFICER SHRI HARISH ANUPCHAND MEHTA 2 PROCEEDED TO MAKE A BEST JUDGEMENT ASSESSMENT U/S. 144 OF THE ACT. WHILE EXAMINING THE PROFIT AND LOSS ACCOUNT IT APPE ARS THAT THERE WERE CERTAIN EXPENSES ON WHICH ASSESSEE OUGHT TO HAVE DE DUCTED TAX AT SOURCE. THOUGH BOOKS OF ACCOUNT WERE AUDITED, THERE IS NO EVIDENCE OF DEPOSITS OF TAX DEDUCTED AT SOURCE. THEREFORE FOR W ANT OF EVIDENCE THE ASSESSING OFFICER INVOKED PROVISIONS OF SECTION 40( A)(IA) OF THE INCOME TAX ACT, 1961 TO DISALLOW THE EXPENDITURE. WITHOUT PREJ UDICE TO THE STAND THAT 40(A)(IA) IS APPLICABLE, THE ASSESSING OFFICER OBSERVED THAT THE EXPENDITURE IS OTHERWISE NOT ALLOWABLE SINCE THERE IS NO DOCUMENTARY EVIDENCE TO PROVE THE EXPENDITURE. 3. AGGRIEVED BY THE BEST JUDGEMENT ASSESSMENT, ASSE SSEE PREFERRED AN APPEAL BEFORE LEARNED CIT(A). SINCE BEST JUDGEME NT ASSESSMENT WAS MADE LEARNED CIT(A), IN THE INTEREST OF JUSTICE, AL LOWED THE ASSESSEE TO HAVE ONE MORE OPPORTUNITY AND IN THAT PROCESS HE CA LLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER AND DIRECTED THE ASSESSEE TO APPEAR BEFORE THE ASSESSING OFFICER TO SUBMIT THE NECESSAR Y DETAILS. 4. IT IS NOT IN DISPUTE THAT THE ACCOUNTS OF THE AS SESSEE WERE AUDITED U/S. 44AB OF THE ACT. LEARNED CIT(A) FURTHER OBSERV ED THAT THE ASSESSEE WAS VIRTUALLY ILLITERATE AND HAD TO DEPEND ON THE C HARTERED ACCOUNTANT TO WHOM NOTICES AND DETAILS WERE HANDED OVER AND THUS CERTAIN VITAL DOCUMENTS COULD NOT BE FILED BY THE ASSESSEE. HE H AS ALSO TAKEN NOTE OF THE REMAND REPORT OF THE ASSESSING OFFICER WHEREIN, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE DEPOSITED THE TDS AMOUNT ON 10.4.2006. HE ALSO NOTICED THAT THAT PAYMENT BECOMES DUE ON EVERY 7 TH OF THE NEXT MONTH AND PERUSAL OF THE LEDGER OF TDS SHOWS THAT T HE EXPENSES ARE CREDITED ON THE LAST DAY OF THE YEAR I.E. 31.3.2006 AND THE ASSESSEE DEPOSITED THE SAME IN THE MONTH OF APRIL 2006. THU S THE ASSESSING OFFICER HAS NOT DISPUTED THE GENUINENESS OF THE EXP ENDITURE BUT REMARKED IN THE REMAND REPORT THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS CORRECT ON ACCOUNT OF THE FACT THAT THE PAYMENT WAS MADE BEYOND TIME PRESCRIBED. UPON RECEIPT OF THE RE MAND REPORT CASE WAS LISTED FOR HEARING BEFORE LEARNED CIT(A). LEAR NED COUNSEL SUBMITTED THAT IN THE REMAND REPORT THE ASSESSING OFFICER HAS NOT DOUBTED THE SHRI HARISH ANUPCHAND MEHTA 3 GENUINENESS OF THE EXPENDITURE AS COMPLETE DETAILS WERE FILED BEFORE THE ASSESSING OFFICER DURING REMAND PROCEEDINGS; THE AS SESSING OFFICERS ONLY GRIEVANCE PERHAPS WAS THAT THE TAXES DEDUCTIBL E U/S. 194C DURING APRIL 2005 TO FEBRUARY 2006 WAS REQUIRED TO BE DEPO SITED INTO THE GOVERNMENT TREASURY ON OR BEFORE 31 ST MARCH 2006, WHICH IS NOT CORRECT. AS PER THE AMENDED PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, AN INDIVIDUAL IS LIABLE TO DEDUCT TAX U/S. 194C W.E.F. 1.6.2007 WHEREAS, THE IMPUGNED EXPENDITURE WAS INCURRED PRIOR TO THE SAID DATE WHEN THERE WAS NO PROVISION IN LAW TO DEDUCT TAX AT SOURCE. 5. HAVING REGARD TO THE SUBMISSIONS MADE BY THE ASS ESSEE AND ALSO PERUSAL OF THE REMAND REPORT, LEARNED CIT(A) SET AS IDE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY OBSERVING, IN PARA 4.4 & 4.5, AS UNDER:- 4.4 ON THE OTHER HAND THE APPELLANT HAS STATED THA T THE GENUINENESS OF THE EXPENDITURE HAS NOT BEEN DOUBTED BY THE ASSESSING OFFICER. IT IS PARTICULARLY MENTIONED THAT APPELLANT IS AN INDIVIDUAL AND WAS LIABLE TO DEDUCT TAX UNDER SECTI ON 194C ONLY WITH EFFECT FROM 1 JUNE 2007. IT IS SUBMITTED THAT SUBSECTION 1 OF SECTION 194C WAS SUBSTITUTED BY THE FINANCE ACT 200 7 WITH EFFECT FROM 1 JUNE 2007. CLAUSE (K) OF SUBSECTION 1 OF SEC TION 194C WAS INTRODUCED BY THE FINANCE ACT 2007. THE INDIVIDUAL AND HUF ARE LIABLE TO DEDUCT TAX UNDER SECTION 194C BY VIRTUE O F THE PROVISIONS OF CLAUSE (K) OF SECTION 1. IT IS THEREFORE SUBMITTED THAT SINCE APPELLANT WAS NOT REQUIRED TO DEDUCT TAX UNDER 194C FOR THE Y EAR UNDER CONSIDERATION THE PROVISIONS OF SECTION 40(A)(IA) C ANNOT BE APPLIED. 4.5 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, ARGUMENTS OF THE ASSESSING OFFICER AND THE WRITTEN SUBMISSION S OF THE AUTHORISED REPRESENTATIVE OF THE APPELLANT. IN FACT THE PROVISIONS OF SECTION 40(A)(IA) HAS BEEN AMENDED. HUF AND INDIVIDUALS WERE MADE LIABLE TO PROVISIONS OF SECTION 194C ONLY WITH EFFECT FROM 1 JUNE 2007. THEREFORE THE APPELLANT WAS NOT UNDER OBLIGATION TO DEDUCT TAX AS PER LAW. SINCE APPELLANT WAS NOT REQUIRED TO DEDUCT TAX UNDER 194C FOR THE YEAR UNDE R CONSIDERATION THE PROVISIONS OF SECTION 40(A)(IA) CANNOT BE APPLI ED. THE DISPUTED ADDITION OF ` 38,46,773/- IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 6. AGGRIEVED BY THE ORDER OF LEARNED CIT(A), REVE NUE IS IN APPEAL BEFORE US. SHRI HARISH ANUPCHAND MEHTA 4 7. AS COULD BE NOTICED FROM THE GROUND URGED BEFORE US, PLEA OF THE REVENUE IS THAT THE DISALLOWANCE WAS MADE NOT ON TH E GROUND OF APPLICABILITY U/S. 194C BUT ON ACCOUNT OF FAILURE O F THE ASSESSEE TO SUBSTANTIATE THE CLAIM OF EXPENDITURE. HOWEVER THE FACT REMAINS THAT IN THE REMAND REPORT THE ASSESSING OFFICER, HAVING VER IFIED THE DETAILS OF EXPENDITURE, DATE OF TAX DEDUCTION AND DEPOSIT, OBS ERVED THAT THE TAX WAS DEDUCTED ON THE LAST DAY AND DEPOSITED IN APRIL WHI CH IMPLIES THAT THERE IS NO DISPUTE WITH REGARD TO THE GENUINENESS OF THE EXPENDITURE. AT ANY RATE, NO MATERIAL WHATSOEVER WAS PLACED ON RECORD T O CONTRADICT THE FINDINGS OF LEARNED CIT(A). IT IS ALSO NOT DISPUTED THAT AMENDMENT TO SECTION 194C IS EFFECTIVE FROM 1.6.2007 AND HENCE I S NOT APPLICABLE FOR THE PERIOD UNDER CONSIDERATION. UNDER THE CIRCUMSTA NCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LEARNED CIT(A) . AS PRONOUNCED IN THE OPEN COURT, WE DISMISS THE APPEAL FILED BY THE REVE NUE. SD/- (RAJENDRA SINGH) ACCOUNTANT MEMBER SD/- (D. MANMOHAN) VICE-PRESIDENT DATED : 9 TH MAY, 2012. COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI PS