DCIT, New Delhi V. M/s. PC Jeweller Ltd., New Delhi

ITA 4942/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5343 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 31-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 115JB; 40(a)(ia)

Judgement Text

ITA NO. 4942/DEL/2015 ASSESSMENT YEAR 2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI N.K. SAINI, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 4942/DEL/2015 ASSESSMENT YEAR: 2011-12 DCIT, VS P.C. JEWELLER LTD., CIRCLE-19(2), NO.24/2708, BANK STREET, ROOM NO. 221, KAROL BAGH, 2 ND FLOOR, NEW DELHI-110005 C.R. BUILDING, (PAN: AADCP5443Q) I.P. ESTATE, NEW DELHI. (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI SRIDHAR DORA, SR. DR ASSESSEE BY : SHRI SANJEEV JAIN, CA DATE OF HEARING: 15.11.2018 DATE OF PRONOUNCEMENT: 28.01.2019 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL IS PREFERRED BY THE DEPARTMENT AGAINS T THE ORDER PASSED BY THE LD. CIT (APPEALS)-7, NEW DELHI FOR ASSESSMENT YEAR 2011-12 DATED 15.5.2015. 2.0 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND TRADING OF JEWELLERY. THE RETURN OF INCOME WAS FILED DECLARING INCOME OF RS. 54,88,9 1,67/- AND ITA NO. 4942/DEL/2015 ASSESSMENT YEAR 2011-12 2 ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED AT A N INCOME OF RS. 55,58,36,830/- AFTER MAKING A DISALLOWANCE OF R S. 69,45,219/- U/S 40(A)(IA) OF THE INCOME TAX ACT, 19 61 (HEREINAFTER REFERRED TO AS 'THE ACT') FOR NON-DEDU CTION OF TDS ON BANK CHARGES DEDUCTED BY THE VARIOUS BANKS. THE BO OK PROFIT U/S 115JB OF THE ACT AS PER THE ASSESSEES COMPUTAT ION WAS RS. 1,04,50,10,050/- BUT THE SAME WAS DETERMINED AT RS. 1,04,54,13,356/- AFTER MAKING A DISALLOWANCE OF RS. 4,03,306/- PERTAINING TO THE GRATUITY LIABILITY OF THE ASSESSE E ON THE GROUND THAT THE SAME WAS UNASCERTAINED LIABILITY. 2.1 THE ASSESSEES APPEAL BEFORE THE LD. CIT (APPE ALS) WAS ALLOWED ON BOTH THE GROUNDS WHEREIN BOTH THE DISALL OWANCES WERE DELETED AND NOW THE DEPARTMENT IS BEFORE THE I TAT CHALLENGING THE ORDER OF THE LD. CIT (APPEALS) BY R AISING THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) HAS ERRED IN LAW IN DELETING THE AD DITION OF RS. 69,45,219/- U/S 40(A)(IA) OF THE INCOME ACT, 1961, TREATING THE NOTIFICATION NO 56/2012 DATED 31-12-20 12 EFFECTIVE FROM 01-01-2013 FOR THE DEDUCTION OF TAX PAYMENT TO INDIAN BANK UNDER THE INCOME TAX ACT, 19 61 AS MERELY OF A CLARIFICATION IN NATURE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT (A) HAS ERRED IN DELETING THE ADDITION O F RS.4,03,306/- MADE BY AO IGNORING THE FACTS THAT TH E ITA NO. 4942/DEL/2015 ASSESSMENT YEAR 2011-12 3 PROVISION WAS CREATED TO MEET THE UNASCERTAINED LIA BILITY AND HENCE REQUIRE TO BE ADDED BACK WHILE CALCULATIN G THE BOOK PROFIT. 3. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FR ESH GROUND(S) OF APPEAL AND/OR DELETE OR AMEND ANY OF T HE GROUND(S) OF APPEAL. 3.0 AT THE OUTSET, LD. AR APPEARING ON BEHALF OF T HE ASSESSEE SUBMITTED THAT BOTH THE ISSUES RAISED BY R EVENUE STOOD FULLY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDE R OF THE ITAT DELHI BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT Y EAR 2012-13. A COPY OF THE SAID ORDER WAS PLACED ON RECORD. 4.0 THE LD. SR. DR SUPPORTED THE ORDER OF THE ASSE SSING OFFICER BUT HE COULD NOT DISPUTE THE FACT THAT BOTH THE ISSUES STOOD COVERED IN ASSESSEES FAVOUR BY THE ORDER OF THE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2012-13. 5.0 HAVING HEARD BOTH THE PARTIES AND AFTER HAVING PERUSED THE MATERIAL ON RECORD AS WELL AS THE ORDER OF THE ITAT FOR ASSESSMENT YEAR 2012-13 IN ASSESSEES OWN CASE, WE AGREE WITH THE AVERMENTS OF THE LD. AR THAT BOTH THE ISSUES AR E SQUARELY COVERED IN ASSESSEES FAVOUR. A PERUSAL OF THE ORD ER OF THE ITAT IN ITA NO. 4943/DEL/2015 FOR ASSESSMENT YEAR 2012-13 V IDE ORDER DATED 23.10.2017 SHOWS THAT THE FINDING OF THE ITAT WITH RESPECT TO THE FIRST ISSUE BEING RAISED BY THE DEPARTMENT I S CONTAINED IN ITA NO. 4942/DEL/2015 ASSESSMENT YEAR 2011-12 4 PARA 4 AND 5 OF THE SAID ORDER WHEREIN THE COORDINA TE BENCH HAS RELIED ON THE JUDGMENT OF THE HONBLE DELHI HIGH CO URT IN THE CASE OF CIT VS. JDS APPARELS (P) LTD. REPORTED IN ( 2015) 370 ITR 454 (DELHI) AND HAS HELD THAT SINCE THE BANK WAS MA KING THE PAYMENT TO THE ASSESSEE AFTER MAKING DEDUCTION OF B ANK CHARGES, THERE WAS NO OCCASION FOR THE ASSESSEE TO DEDUCT TA X AT SOURCE AND, FURTHER, THE BANK WAS NOT ACTING ON BEHALF OF THE ASSESSEE BUT ON THE OTHER HAND WAS ACTING ON BEHALF OF THE C USTOMERS WHILE PROCESSING PAYMENTS THROUGH DEBIT CARDS AND C REDIT CARDS. THE OBSERVATIONS OF THE JURISDICTIONAL HIGH COURT I N CIT VS. JDS APPARELS (SUPRA) ARE IN PARA 17 AND 18 AND THE SAME ARE BEING REPRODUCED HERE IN UNDER FOR A READY REFERENCE:- 17. ANOTHER REASON WHY WE FEEL SECTION 40(A)(IA) O F THE ACT SHOULD NOT HAVE BEEN INVOKED IN THE PRESENT CAS E IS THE PRINCIPLE OF DOUBTFUL PENALIZATION WHICH REQUIR ES STRICT CONSTRUCTION OF PENAL PROVISIONS. THE SAID PRINCIPL E APPLIES NOT ONLY TO CRIMINAL STATUTES BUT ALSO TO P ROVISIONS WHICH CREATE A DETERRENCE AND RESULTS IN PUNITIVE P ENALTY. SECTION 40(A)(IA) IS A DETERRENT AND A PENAL PROVIS ION. IT HAS THE EFFECT OF PENALIZING THE ASSESSEE, WHO HAS FAILED TO DEDUCT TAX AT SOURCE AND ACTS TO THE DETRIMENT O F THE ASSESSES PROPERTY AND OTHER ECONOMIC INTERESTS. IT OPERATES AND INFLICTS HARDSHIP AND DEPRIVATION, BY DISALLOWING EXPENDITURE ACTUALLY INCURRED AND TREAT ING IT AS DISALLOWED. THE EXPLANATION, THEREFORE, REQUIRES A STRICT CONSTRUCTION AND THE PRINCIPLE AGAINST DOUBT FUL PENALIZATION WOULD COME INTO PLAY. THE DETRIMENT IN THE PRESENT CASE, AS IS NOTICEABLE, WOULD INCLUDE INTIM ATION OF PROCEEDINGS FOR IMPOSITION OF PENALTY FOR CONCEALME NT, AS ITA NO. 4942/DEL/2015 ASSESSMENT YEAR 2011-12 5 WAS DIRECTED BY THE ASSESSING OFFICER IN THE PRESEN T CASE. THE AFORESAID PRINCIPLE REQUIRES THAT A PERSON SHOU LD NOT BE SUBJECTED TO ANY SORT OF DETRIMENT UNLESS THE OB LIGATION IS CLEARLY IMPOSED. WHEN THE WORDS ARE EQUALLY CAPA BLE OF MORE THAN ONE CONSTRUCTION, THE ONE NOT INFLICTI NG THE PENALTY OR DETERRENT MAY BE PREFERRED. IN MAXWELLS THE INTERPRETATION OF STATUTES, 12 TH EDITION (1969) IT HAS BEEN OBSERVED: THE STRICT CONSTRUCTION OF PENAL STATUTES TO MANIF EST ITSELF IN FOUR WAYS: IN THE REQUIREMENT OF EXPRESS LANGUAG E FOR THE CREATION OF AN OFFENCE; IN INTERPRETING STRICTL Y WORDS SETTING OUT THE ELEMENTS OF AN OFFENCE; IN REQUIRIN G THE FULFILLMENT TO THE LETTER OF STATUTORY CONDITIONS P RECEDENT TO THE INFLICTION OF PUNISHMENT; AND IN INSISTING ON T HE STRICT OBSERVANCE OF TECHNICAL PROVISIONS CONCERNING CRIM INAL PROCEDURE AND JURISDICTION. 18. THE AFORESAID PRINCIPLES AND INTERPRETATIONS C AN APPLY TO TAXING STATUTES. IN THE PRESENT CASE WE FU RTHER FEEL THE SAID PRINCIPLE SHOULD BE APPLIED AS HDFC W OULD NECESSARILY HAVE ACTED AS PER LAW AND IT IS NOT THE CASE OF THE REVENUE THAT THE BANK HAD NOT PAID TAXES ON THE IR INCOME. IT IS NOT A CASE OF LOSS OF REVENUE AS SUCH OR A CASE WHERE THE RECIPIENT DID NOT PAY THEIR TAXES. 5.1 ACCORDINGLY, ON IDENTICAL FACTS AND RESPECTFUL LY FOLLOWING THE ORDER OF THE COORDINATE BENCH IN ASSE SSEES OWN CASE FOR AY 2012-13, WHICH HAS FOLLOWED THE PRINCIP LE AND RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. JDS APPARELS (P) LTD. (SUPRA), WE FIND NO R EASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (APPEALS ) ON THIS ISSUE AND WE DISMISS GROUND NO. 1 OF THE DEPARTMENTS APP EAL. 5.2 SIMILARLY, GROUND NO. 2 IS ALSO COVERED IN FAV OUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT BY THE ORDER OF THE TRIBUNAL ITA NO. 4942/DEL/2015 ASSESSMENT YEAR 2011-12 6 IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2012-13 WHEREIN IT HAS BEEN HELD THAT PROVISION FOR GRATUITY WAS AN AS CERTAINED LIABILITY AS IT BASED ON ACTUARIAL VALUATION. WE F IND FROM THE ORDER OF THE LD. CIT (APPEALS) THAT HE HAS GIVEN A CATEGO RICAL FINDING THAT THE PROVISION FOR GRATUITY WAS AN ASCERTAINED LIABILITY AND WAS BASED ON ACTUARIAL VALUATION AND, THEREFORE, TH E ADDITION MADE TO THE BOOK PROFITS U/S 115JB ON THIS ACCOUNT WAS LIABLE TO BE DELETED. THE LD. DR ALSO COULD NOT POINT OUT T HAT THE OBSERVATIONS OF THE LD. CIT (APPEALS) IN THIS REGAR D WERE FACTUALLY INCORRECT. WE ALSO NOTE THAT THIS ISSUE IS ALSO CO VERED BY ANOTHER ORDER OF THE DELHI BENCH OF THE TRIBUNAL IN THE CAS E OF ACIT VS. NHPC LTD. VIDE ORDER DATED 30.09.2014. THE LD. CIT (APPEALS), WHILE ALLOWING THE ASSESSEES APPEAL, HAS ALSO REFE RRED TO THE OBSERVATIONS OF THE ITAT IN THIS CASE. ACCORDINGLY , WE FIND OURSELVES UNABLE TO TAKE A VIEW WHICH IS DIFFERENT FROM THAT OF THE LD. CIT (APPEALS) ON THIS ISSUE AND WE DISMISS GROU ND NO. 2 OF THE DEPARTMENTS APPEAL. 5.3 GROUND NO. 3 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SEPARATE ADJUDICATION. 6.0 IN THE RESULT, THE APPEAL OF THE DEPARTMENT ST ANDS DISMISSED. ITA NO. 4942/DEL/2015 ASSESSMENT YEAR 2011-12 7 ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH JANUARY, 2019. SD/- SD/- (N.K. SAINI) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL MEM BER DATED: 28 TH JANUARY, 2019 GS COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR