M/s. Shah Engineering Co., GANDHIDHAM V. The Assistant Commissioner of Income Tax, Gandhidham Circle, GANDHIDHAM

ITA 494/RJT/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6660 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 20-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: MJ RANPURA
• Keywords: Rectification of order
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI K. NAR A SIMHA CHARY , MEMBER ITA NO. 494 / RJT /201 4 ASS T. YEAR : 2006 - 07 M/S. SHAH ENGINEERING CO. DBZ - N - 147, GANDHIDHAM PAN : AAMFS8680E (APPELLANT) VS ACIT, GANDHIDHAM CIRCLE, GANDHIDHAM (RESPONDENT) APPELLANT BY : SHRI M.J. RANPURA, C.A RESPONDENT BY : SHRI AVINASH KUMAR, DR DATE OF HEARING : 2 1 /0 3 /201 7 DATE OF PRONOUNCEMENT : 22 /0 3 /201 7 O R D E R PER K. NAR A SIMHA CHARY, MEMBER, JM : THIS IS AN APPEAL CHALLENGING ORDER DATED 10.7.2014 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - II, RAJKOT (FOR SHORT HEREINAFTER REFERRED TO AS LD. CIT(A) ) IN APPEAL NO. CIT(A) - II/RJT/0001/13 - 14. 2. BRIEF FAC TS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN THE CONSTRUCTION OF CANALS. FOR THE ASSESSMENT YEAR 2006 - 07, ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT HEREINAFTER REFERRED TO AS THE ACT) WAS COMPLETED ON 14.11.2008 DETERMINI NG THE TOTAL INCOME OF RS.94,65,544/ - . SUBSEQUENTLY, ON 2 ITA NO. 494/RJT/2014 M/S. SHAH ENGINEERING CO. SCRUTINY OF THE RECORDS , ASSESSING OFFICER FOUND THAT THE ASSESSEE CLAIMED INTEREST ON BILL DISCOUNTING OF RS.18,14,916/ - BUT WITHOUT DEDUCTING TDS ON THE INTEREST PAID TO BANK, AS SUCH U/S 154 OF THE ACT THE ASSESSING OFFICER RECTIFIED THE ASSESSMENT ORDER DISALLOWING A SUM OF R S.18,14,916/ - U/S 40(A)(IA) OF THE ACT. ASSESSEE CHALLENGED THE SAID RECTIFICATION ORDER BEFORE THE LD. CIT(A) CONTENDING THAT THE DEDUCTIBILITY OF TDS ON THE INTEREST PAID TO THE BANK IS A DEBATABLE ISSUE, AS SUCH CANNOT BE RECTIFIED U/S 154 OF THE ACT A ND ALSO THAT SEC. 194A OF THE ACT HAS NO APPLICATION TO THE FACTS OF THE CASE INASMUCH AS THE CASE OF ASSESSEE FALLS UNDER THE EXEMPTION U/S 194A(3) OF THE ACT. LD . CIT(A), HOWEVER, BY WAY OF THE IMPUGNED ORDER DISMISSED THE APPEAL HOLDING THAT THE ASSESS ING OFFICER WAS RIGHT IN DISALLOWING THE EXPENDITURE U/S 40(A)(IA) OF THE ACT, BUT THERE WAS NO DISCUSSION ON THE POINT OF JURISDICTION OF THE ASSESSING OFFICER U/S 154 OF THE ACT. 3. CHALLENGING THE IMPUGNED ORDER, THE ASSESSEE IS BEFORE US IN THIS APPEA L CONTENDING THAT INSOFAR AS THE FACTS OF THE CASE ARE CONCERNED, WHETHER THE BANK WAS AN AGENT OR WHETHER THE INTEREST WAS PAID TO THE BANK ON THE LOAN RAISED FOR WORKING CAPITAL IS A DEBATABLE ISSUE AND CANNOT BE RECTIFIED U/S 154 OF THE ACT. HE FURTHER SUBMITS THAT THE CASE OF ASSESSEE SQUARELY FALLS U/S 194A(3) OF THE ACT, AS SUCH NO AMOUNT COULD BE WITHHELD AS TDS, AND THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT CANNOT BE SUSTAINED. 4. PER CONTRA, THE LD. DR VEHEMENTLY RELIED UPON THE ORDERS OF THE A UTHORITIES BELOW. 3 ITA NO. 494/RJT/2014 M/S. SHAH ENGINEERING CO. 5. WE HAVE CAREFULLY GONE THROUGH THE RECORDS. FROM THE BEGINNING, THE CONTENTION OF THE ASSESSEE BEFORE THE AUTHORITIES IS THAT THE ASSESSEE HAS BEEN ENGAGED IN THE BUSINESS OF CIVIL CONTRACTS, BILLS RAISED BY THEM ON THEIR DEBTORS WER E TAKING A LONG TIME TO REALIZE, AS SUCH BY MORTGAGING THE BILLS AS SECURITY WITH SYNDICATE BANK THEY WERE RAISING THE WORKING CAPITAL LOAN, AS AND WHEN THEY WERE RECEIVING THE PAYMENTS OF THE BILLS FROM THE DEBTORS, SUCH AMOUNTS WERE DEPOSITED IN THE LOAN ACCOUNT AND THE LOAN AMOUNT WAS CLOSED AFTER PAYING THE INTEREST. ON THESE FACTS, THE CONTENTION OF THE ASSESSEE IS THAT THEIR CASE FALLS U/S 194A(3) OF THE ACT AND NOT U/S 194 OF THE ACT. THE ASSESSEE PRODUCED THE STATEMENT OF BILL DISCOUNT LOAN TAKEN FROM SYNDICATE BANK FOR THE ASSESSMENT YEAR 2005 - 06 IN SUPPORT OF THEIR CONTENTION. ON THE BASIS OF THESE FACTS, IT WAS ARGUED BEFORE THE LD. CIT(A) THAT THERE IS NO MISTAKE APPARENT ON THE FACE OF THE RECORD, BUT THE ISSUE REQUIRES A LOT OF DEBATE, DISCU SSION AND CONSIDERATION FOR ITS RESOLUTION, AS SUCH IT IS BEYOND THE SCOPE OF SEC. 154 OF THE ACT. IT IS A SETTLED PRINCIPLE OF LAW AS PER THE CASE OF T.S. BALRAM VS WOCKHARDT BROTHERS, 82 ITR 50 (SC) THAT CONTENTIOUS ISSUES ARE NOT AVAILABLE FOR RECTIFIC ATION U/S 154 OF THE ACT. HERE, IN THIS MATTER, IN VIEW OF THE CONTENTION OF THE ASSESSEE THAT THE INTEREST PAID TO THE BANK IS NOT IN ITS CAPACITY AS AN AGENT, BUT IT WAS FOR THE WORKING CAPITAL LOAN RAISED BY MORTGAGING THE BILLS AS SECURITY, SEC. 194A OF THE ACT HAS NO APPLICATION BY VI RTUE OF SEC. 194A(3) OF THE ACT, WE ARE OF THE CONSIDERED OPINION THAT THE MATTER REQUIRES DEBATE, DISCUSSION AND CONSIDERATION AND THEREBY NOT AVAILABLE TO THE ASSESSING OFFICER TO BE RECTIFIED U/S 154 OF THE ACT. WITH THIS VIEW OF THE MATTER, WE HOLD THAT THE ORDER U/S 154 OF THE ACT IS WITHOUT JURISDICTION AND CONSEQUENTLY, THE ORDERS OF THE 4 ITA NO. 494/RJT/2014 M/S. SHAH ENGINEERING CO. AUTHORITIES BELOW ARE LIABLE TO BE QUASHED. WE ACCORDINGLY ALLOW THE GROUNDS. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 2 N D MARCH, 2017. SD/ - SD/ - ( S.V. MEHROTRA ) ACCOUNTANT MEMBER ( K. NAR A SIMHA CHARY ) JUDICIAL MEMBER MUMBAI, DATE : 2 2 N D MARCH , 201 7 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, RAJKOT 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, RAJKOT