The ACIT, Circle-5, RAJKOT-GUJARAT V. Sogo Ceramics, Morbi

ITA 470/RJT/2012

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0136 (ITAT-RAJKOT)
• Duration Of Justice: 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-10-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 09-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANKUR GARG
• Assessee Lawyers: DHRUVE A SOLANKI

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. . .. . . .. . , , , , . .. . . .. . , , , , $ $ $ $ BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAV A, AM ITA NO.469 AND 470/RJT/2012. / ASSESSMENT YEAR 2005-06 ACIT, CIR-5 AAYAKAR BHAVAN 1 ST FLOOR, ROOM NO.114, RACE COURSE, RING ROAD RAJKOT ( * / APPELLANT) VS. SOGO CERAMIC PVT.LTD., OLD GHUNTU ROAD, MORBI PAN:AAHCS4649B +,* / RESPONDENT - / REVENUE BY SHRI. ANKUR GARG /- / ASSESSEE BY SHRI DHRUVE A SOLANKI - /DATE OF HEARING 16.10.2012 - / DATE OF PRONOUNCEMENT 19.10.2012 / / / / ORDER . .. . . . . . , , , , / T. K. SHARMA, J. M. THESE TWO APPEALS BY THE REVENUE ARE AGAINST THE TWO SEPARATE ORDERS DATED 20.6.2012 OF CIT(A)-IV, RAJKOT FOR THE ASSESSMENT YEAR 2005-06. SINC E BOTH THE APPEALS OF THE REVENUE WERE HEARD TOGETHER, WE PRO CEEDS TO DECIDE THE SAME BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENC E ITA NO.469 AND 470/RJT/2012. 2 ITA NO.469/RJT/2012. 2. ONLY GROUND TAKEN BY THE REVENUE IN THIS APPE AL IS REPRODUCED BELOW:: 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACT I N DELETING THE TOTAL ADDITION OF RS.70,57,090/- MADE BY THE A O ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE U/S 40(A)(IA) OF TH E INCOME TAX ACT, 1961 WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORDS BY THE AO. 3. BRIEF FACTS RELATING TO CONTROVERSY INVOLVED IN TH IS CASE ARE THAT THE AO DISALLOWED THE EXPENDITURE OF RS.70,57,090/- ON THE GROUND THAT NO TDS HAS BEEN MADE, THEREFORE, HE DISALLOWED THE SAM E U/S 40(A)(IA). ON APPEAL, IN THE IMPUGNED ORDER THE LD. CIT(A) DEL ETED THE DISALLOWANCE FOR THE DETAILED REASONS GIVEN IN PAR AGRAPHS 6.1 TO 6.3 WHICH READS AS UNDER : 6.2 THE PARTY WISE AND MONTH WISE ANALYSIS OF THE EXPE NDITURE OF RS.62,14,627/- SHOWS THAT AMOUNT OF ONLY RS 13,46,322/- WAS PAYABLE AS ON 31.03.2005 AND OUT OF THIS AMOUNT RS.1,1 4,062/- WAS THE EXPENDITURE INCURRED IN THE MONTH OF MARCH 200 5. THERE IS NO DISPUTE THAT THE TDS ON THE AMOUNT OF RS.1,14,062/ - ON WHICH TAX WAS DEDUCTIBLE IN LAST MONTH OF MARCH 2005 OF FINA NCIAL YEAR 2004-05 MAY BE PAID BEFORE THE DUE DATE OF FILING O F RETURN OF INCOME AND SUCH AMOUNT WOULD NOT BE LIABLE FOR DISALLO WANCE U/S 40(A)(IA). THEREFORE RS.1,14,062/ OUT OF RS 62,14,62 7/- CANNOT BE DISALLOWED U/S 40(A)(IA). 6.3 IN RESPECT OF REMAINING AMOUNT OF RS.62,14,627 (-) RS.1,14,062= RS.61,00,565/- THERE IS NO DISPUTE THAT COR RESPONDING AMOUNT OF TDS WAS PAID ON 31.5.2005. OUT OF THIS AMOU NT OF RS .61,00,565/- THE AMOUNT OF ONLY RS.12,94,785/- WAS PAYABLE ON 31.3.2005 AND THE BALANCE AMOUNT WAS ACTUALLY PAID BY APPELLANT TO RESPECTIVE PARTIES TILL 31.3.2005. THEREFORE AS PER THE DECISION OF H'BLE SPECIAL BENCH OF ITAT- VISHAKHAPATNAM IN CASE OF MERILYN SHIPPING & TRANSPORTERS (70 DTR 81) THE PROVISIONS OF SECTION 40(A)(IA) WOULD APPLY ONLY TO THE AMOUNT OF RS.12,94,785/ OUTSTANDING AT THE YEAR END AND NOT T O THE AMOUNT PAID DURING THE YEAR. APPELLANT HAS FURTHER R ELIED ON THE DECISION OF H'BLE KOLKATA HIGH COURT IN CASE OF CIT VS V IRGIN CREATIONS IN GA NO.3200/2011 DATED 23-11-2011 WHERE IT WAS HELD THAT THE AMENDMENT IN SECTION 40(A)(IA) WILL APPLY WI TH RETROSPECTIVE ITA NO.469 AND 470/RJT/2012. 3 EFFECT FROM ASSESSMENT YEAR 2005-06. THE PROVISION OF SE CTION 40(A)(IA) WAS AMENDED BY FINANCE ACT 2010 W.E.F FROM 1 -4-2010 AND ALL SUCH EXPENDITURES ON WHICH TDS HAS BEEN PAID ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME WO ULD QUALIFY FOR DEDUCTION. IN EARLIER PROVISION OF SECTION 40(A)(IA) SUCH QUALIFYING AMOUNT WAS ONLY THE EXPENDITURE INCURRED I N THE LAST MONTH OF MARCH OF THE RELEVANT FINANCIAL YEAR IF TH E CORRESPONDING TDS IS PAID ON OR BEFORE THE DUE DATE OF FILING OF R ETURN OF INCOME; AND IN RESPECT OF REMAINING EXPENDITURES INCURRED FROM APRIL TO FEBRUARY OF SUCH FINANCIAL YEAR THE TDS SHOULD HAVE BE EN PAID IN GOVERNMENT ACCOUNT ON OR BEFORE 31ST MARCH OF THAT FIN ANCIAL YEAR TO QUALIFY FOR DEDUCTION. THE SPECIAL BENCH OF ITAT- M URNBAI HELD IN CASE OF BHARTI SHIPYARD LTD VS DCIT IN ITA NO.2404/MUM L2009 DATED 25.08.2011 FOR ASSESSMENT YEAR 2005-2006 HELD THA T A PARTIAL RELAXATION IN THE RIGOR OF PROVISION OF SECTIO N 40(A)(IA), INSERTED WITH PROSPECTIVE EFFECT, CANNOT BE TREATED AS 'RETROSPECTIVE'. APPELLANT HAS SUBMITTED THAT KOLKATTA HIGH COURT JUDGMENT HAS TO BE FOLLOWED IN PREFERENCE TO THE MUMB AI ITAT SPECIAL BENCH DECISION AND RELIED ON THE DECISIONS IN CASE OF RAJAMAHENDRI SHIPPING & OIL FIELD SERVICES LTD VS ADDL CIT (ITAT-VISHAKAPATTANAM) IN ITA NO 352/VIZAG/2008, PIYUSH MEHTA VS ACIT IN ITA 1321/MUM/2009 (ITAT-MUMBAI), A LPHA PROJECTS SOCIETY PVT. LTD. VS DCIT IN ITA 2869/AHD/2011 (ITAT- A'BAD), SURESHBHAI G. PATEL VS ITO IN ITA NO 673/AHD L2010 (ITAT- A'BAD). AS SUPERIOR APPELLATE AUTHORITIES ARE FOLLOWI NG THE DECISION OF H'BLE KOLKATA HIGH COURT, I ALSO HOLD FOLLOWING TH E JUDGMENT OF KOLKATA HIGH COURT THAT APPELLANT IS ENTITLED TO CLAIM DEDUCTION OF EXPENSES OF RS.62,14,627/- AS THE CORRESPONDING TDS HAS BEEN PAID ON 31.5.2005, IE, BEFORE THE DUE DATE OF FILIN G OF RETURN OF INCOME. THE ASSESSING OFFICER HAS INCORRECTLY CONSIDERED T HE TDS DEDUCTIBLE AMOUNT AT RS.70,57,090/- INSTEAD OF RS.62,14,627/-. AS THE ENTIRE TDS DEDUCTIBLE AMOUNT I S ALLOWABLE FOR DEDUCTION BECAUSE APPELLANT HAD PAID THE CORRESPONDI NG TDS AMOUNT ON 31.5.2005). I DIRECT THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE OF RS 70,57,090/- AND REDUCE THE TOTAL INCOME OF APPELLANT ACCORDINGLY. 4. AT THE TIME OF HEARING THE LD. DR POINTED OUT TH AT VARIOUS DECISIONS RELIED UPON BY THE LD. CIT(A) WHILE DELETING THE AD DITION MADE BY THE AO U/S 40(A)(IA) ARE NOT ACCEPTED BY THE DEPARTMENT, THER EFORE, KEEPING IN VIEW THE ISSUE ALIVE THIS APPEAL HAS BEEN FILED. AS AGA INST THIS, SHRI DHRUVE A SOLANKI VEHIMENTALY SUPPORTED THE ORDER OF T HE LD. CIT(A). 5. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY CON SIDERED THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO N OTE THAT WHILE DELETING ITA NO.469 AND 470/RJT/2012. 4 THE DISALLOWANCE THE LD. CIT(A) HAS RELIED UPON THE DE CISION OF THE HONBLE KOLKATA HIGH COURT IN THE CASE OF CIT /S VI RGIN CREATIONS IN GA NO.3200/2011 DATED 23.11.2011. THE LD. DR COULD NOT POINT OUT ANY THING AS TO WHY THE FINDINGS OF THE LD. CIT(A) ARE NOT ACCEPT ABLE. THEREFORE, WE UPHOLD THE ORDER OF THE LD. CIT(A). 6. THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ITA NO. 470/RJT/2012. 7. ONLY GROUND TAKEN BY THE REVENUE IN THIS APPEAL I S REPRODUCED BELOW : 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACT I N DELETING THE PENALTY LEVIED BY THE AO U/S 271(1)( C ) OF T HE ACT, AMOUNTING TO RS.25,82,366/- WITHOUT APPRECIATING TH E FACTS BROUGHT ON RECORDS BY THE AO 8. BRIEF FACTS LEADING TO THE CONTROVERSY ARE THAT THE ASSESSING OFFICER IMPOSED PENALTY OF RS.25,82,366/-U/S 271(1 )( C) OF THE ACT ON THE GROUND THAT THE ASSESSEE INCURRED AN EXPENDIT URE ON (I) JOB WORK EXPENSES RS.52,71,100/-, (II) ADVERTISEMENT EXPENSE S RS.11,32,500/- (III) FEES FOR PROFESSIONAL EXPENSES RS.1,72,820/- AND (IV) INTEREST EXPENSES RS.4,80,670/- TOTALING TO RS.70,57,090/- AND PAID TDS ON 31.5.2005 WHICH IS IN VIOLATION OF THE PROVISIONS O F SECTION 200(1) OF THE INCOME TAX ACT, 1961. THEREFORE, HE ISSUED NOTI CE TO THE ASSESSEE CALLING UPON IT TO EXPLAIN AS TO WHY THE P ENALTY SHOULD NOT BE IMPOSED U/S 271(1)( C ) OF THE ACT. IN REPLY THE A SSESSEE COULD NOT FURNISH ANY DETAILS AS CALLED FOR BY THE AO. HE AC CORDINGLY IMPOSED THE PENALTY OF RS.25,82,366/- U/S 271(1)( C ) OF TH E ACT. ON APPEAL, BEFORE THE LD. CIT(A), THE ASSESSEE RELIED ON THE S UBMISSIONS FILED BEFORE THE LD. CIT(A) IN QUANTUM APPEAL BEARING CI T(A)-IV/0031/11- ITA NO.469 AND 470/RJT/2012. 5 12. THE LD. CIT(A) DELETED THE PENALTY LEVIED BY TH E AO ON THE GROUND THAT THE BUSINESS OF THE APPELLANT WAS CLOSED AND IN THE QUANTUM APPEAL BEARING APPEAL NO. CIT(A)-IV/0031/11-12, ORD ER DATED 20.6.2012 HE DELETED THE ADDITION OF RS.70,57,090/- VIDE PARAGRAPHS 6.2 AND 6.3 OF HIS ORDER. THEREFORE, THE AMOUNT O F TAX SOUGHT TO BE EVADED U/S 271(1)( C ) ALSO REDUCES TO NIL AND ACCO RDINGLY, THE LD. CIT(A) DELETED THE PENALTY LEVIED BY THE AO. 9. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 10. THE LD. DR COULD NOT BRING ANY MATERIAL CONTRAR Y TO THE FINDING OF THE LD. CIT(A). AS AGAINST THIS THE LD. COUNSEL OF THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A). 11. HAVING HEARD BOTH THE SIDES AND CAREFULLY CONSI DERING THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THE L D.CIT(A) HAS DELETED THE PENALTY OF RS.25,82,366/- BY HOLDING THAT IN TH E QUANTUM APPEAL THE AMOUNT OF RS.70,57,090/- BEING UNEXPLAINED EXPE NDITURE AND TDS THEREON HAS NO LEGS TO STAND. THE FINDING OF THE LD .CIT(A) IN QUANTUM APPEAL HAS ALREADY BEEN REPRODUCED IN THIS ORDER AT PARAGRAPH 3. BEFORE US ALSO THE LD. DR COULD NOT SUBSTANTIATE HI S CLAIM AS TO HOW THE FINDINGS OF THE LD.CIT(A) ARE NOT ACCEPTABLE TO THE REVENUE. THEREFORE, WE ARE INCLINED TO UPHOLD THE DECISION O F THE LD. CIT(A). ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. ITA NO.469 AND 470/RJT/2012. 6 12. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DAT E MENTIONED HEREINABOVE. SD SD ( D. K. SRIVASTAVA) (T. K. SHARMA) / ACCOUNTANT MEMBER /JUDICIAL MEMBER 3/ ORDER DATE 19. 10.2012 /RAJKOT SRL - -- - +7 +7 +7 [phone] / COPY OF ORDER FORWARDED TO:- 1. * / APPELLANT-, 2. +,* / RESPONDENT- 3. ; / CONCERNED CIT. 4. ;- / CIT (A). 5. 7 +, , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.