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

ITA 4943/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3723 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 31-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: H NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDEN T & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NO.-4943/DEL/2015 ( ASSESSMENT YEAR: 2012-13) DCIT CIRCLE 19(2) ROOM NO. 221 2 ND FLOOR C.R. BLDG., I.P. ESTATE NEW DELHI. VS PC JEWELLER LTD. NO. 24/2708, BANK STREET, KAROL BAGH, NEW DELHI. AADCP5443Q ASSESSEE BY SH. SANJEEV JAIN, CA REVENUE BY SH. ARUN KUMAR YADAV, SR. DR ORDER PER SHRI K.N. CHARY, JUDICIAL MEMBER THIS IS AN APPEAL BY THE REVENUE CHALLENGING THE OR DER DATED 28.05.2015 IN APPEAL NO. 829/14-15 PASSED BY THE LD . COMMISSIONER OF INCOME TAX (APPEALS)-7, DELHI (HERE INAFTER FOR SHORT CALLED AS THE LD. CIT (A)) ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN LAW IN DELETING THE ADDITI ON OF RS. 1,58,19,150/- U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961, TREATING THE NOTIFICATION NO. 56/2012 DATED 31.12.2 012 EFFECTIVE FROM 01.01.2013 FOR THE DEDUCTION OF TAX DATE OF HEARING 18.09.2017 DATE OF PRONOUNCEMENT 23.10.2017 2 ITA NO. 4943/DEL/2015 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 CASE, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 32,19,512/- MADE BY AO IGNORING THE FACTS THAT THE 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 FRESH GROUNDS OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND TRADING OF JEWELLERY, AND FOR THE AY 2012-13 THEY HAVE FILED THEIR RETURN OF INCOME ON 28.09.201 2 DECLARING A TOTAL INCOME OF RS. 1,04,99,00,570/-. ASSESSMENT W AS COMPLETED BY MAKING AN ADDITION OF RS. 1,58,19,150/- BY DISAL LOWING AN EXPENDITURE U/S 40(A)(IA) OF THE INCOME TAX ACT, 19 61 (FOR SHORT CALLED THE ACT) AND RS. 32,19,512/- IN RESPECT OF THE PROVISIONS FOR RETIREMENT BENEFITS FOR THE PURPOSE OF SECTION 115J B OF THE ACT. ON APPEAL OF THE ASSESSEE LD. CIT (A) BY WAY OF IMP UGNED ORDER DELETED BOTH THE ADDITIONS AND ALLOWED THE APPEAL, HENCE, THIS APPEAL BY THE REVENUE. 3. IT IS THE ARGUMENT OF THE LD. DR THAT THE LD. CI T (A) ERRED IN TREATING THE NOTIFICATION NO. 56/2012 DATED 31.12.2 012 EFFECTIVE FROM 01.01.2013 FOR THE DEDUCTION OF TAX PAYMENT TO INDIAN BANK 3 ITA NO. 4943/DEL/2015 UNDER THE ACT AND HAS MERELY OF A CLARIFICATORY IN NATURE. HE FURTHER CONTENDED THAT LD CIT (A) IGNORED THAT SUCH A PROVISION IN THIS CASE WAS CREATED TO MEET THE UNASCERTAINED LIA BILITY AND REQUIRED TO BE ADDED BACK. ON THE OTHER HAND, IT I S THE ARGUMENT OF THE LD. AR THAT BASING ON THE DECISION REPORTED IN CIT VS. JDS APPARELS (P) LTD. (2015) 370 ITR 454 (DELHI), LD. C IT (A) CONCLUDED THAT THERE IS NO REQUIREMENT OF TDS ON BANK CHARGES , AND FURTHER PLACING RELIANCE ON THE DECISION OF A COORDINATE BE NCH OF THIS TRIBUNAL IN ACIT VS. M/S NHPC LTD. LD. CIT (A) DEC IDED ON 30.09.2014, HE CONCLUDED THAT ANY ASCERTAIN LIABILI TY CANNOT RESULT IN ADDITION TO THE BOOK PROFITS, AND IN THIS CASE T HE LD. CIT (A) SATISFIED THAT THE PROVISION FOR GRATUITY IS AN ASC ERTAINED LIABILITY. 4. IN RESPECT OF GROUND NO. 1 THE AO MADE DISALLOWA NCE ON ACCOUNT OF NON DEDUCTION OF TDS ON BANK CHARGES DED UCTED BY THE BANK WHILE MAKING PAYMENT TO THE ASSESSEE FOR THE G OODS PURCHASED BY THE CUSTOMERS OF THE BANK AGAINST THE DEBIT AND CREDIT CARDS ISSUED BY THE BANK TO ITS CUSTOMERS. LD. COUNSEL SUBMITTED THAT THE BANK WAS MAKING THE PAYMENTS TO THE ASSESSEE AFTER MAKING THE DEDUCTION OF THE CHARGES TO IT, AS SUCH, THERE IS 4 ITA NO. 4943/DEL/2015 NO OCCASION FOR THE ASSESSEE TO DEDUCT THE TDS AND FURTHER BANK WAS NOT WORKING FOR THE ASSESSEE BUT ON THE OTHER H AND, IT WAS WORKING FOR ITS CUSTOMERS, AS SUCH, THERE IS NO REQ UIREMENT OF TDS ON BANK CHARGES. LD. CIT (A) PLACED RELIANCE ON TH E BINDING DECISION OF THE JURISDICTIONAL HIGH COURT IN CIT VS . JDS APPARELS (P) LTD. (SUPRA), WHEREIN IT WAS HELD AS FOLLOWS: 17. ANOTHER REASON WHY WE FEEL SECTION 40(A)(IA) OF THE ACT SHOULD NOT HAVE BEEN INVOKED IN THE PRESENT CASE IS THE PR INCIPLE OF DOUBTFUL PENALIZATION WHICH REQUIRES STRICT CONSTRU CTION OF PENAL PROVISIONS. THE SAID PRINCIPLE APPLIES NOT ONLY TO CRIMINAL STATUTES BUT ALSO TO PROVISIONS WHICH CREATE A DETERRENCE AN D RESULTS IN PUNITIVE PENALTY. SECTION 40(A)(IA) IS A DETERRENT AND A PENAL PROVISION. IT HAS THE EFFECT OF PENALIZING THE ASS ESSEE, WHO HAS FAILED TO DEDUCT TAX AT SOURCE AND ACTS TO THE DETR IMENT OF THE ASSESSES PROPERTY AND OTHER ECONOMIC INTERESTS. I T OPERATES AND INFLICTS HARDSHIP AND DEPRIVATION, BY DISALLOWING E XPENDITURE ACTUALLY INCURRED AND TREATING IT AS DISALLOWED. T HE EXPLANATION, THEREFORE, REQUIRES A STRICT CONSTRUCTION AND THE P RINCIPLE AGAINST DOUBTFUL PENALIZATION WOULD COME INTO PLAY. THE DE TRIMENT IN THE PRESENT CASE, AS IS NOTICEABLE, WOULD INCLUDE INTIM ATION OF PROCEEDINGS FOR IMPOSITION OF PENALTY FOR CONCEALME NT, AS WAS DIRECTED BY THE ASSESSING OFFICER IN THE PRESENT CA SE. THE AFORESAID PRINCIPLE REQUIRES THAT A PERSON SHOULD NOT BE SUBJ ECTED TO ANY SORT OF DETRIMENT UNLESS THE OBLIGATION IS CLEARLY IMPOS ED. WHEN THE WORDS ARE EQUALLY CAPABLE OF MORE THAN ONE CONSTRUC TION, THE ONE NOT INFLICTING THE PENALTY OR DETERRENT MAY BE PREF ERRED. 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 LANGUAGE FOR THE CREATION OF AN OFFENCE; IN INTERPR ETING STRICTLY WORDS SETTING OUT THE ELEMENTS OF AN OFFEN CE; IN REQUIRING THE FULFILLMENT TO THE LETTER OF STATUTOR Y CONDITIONS PRECEDENT TO THE INFLICTION OF PUNISHMEN T; AND IN INSISTING ON THE STRICT OBSERVANCE OF TECHNICAL 5 ITA NO. 4943/DEL/2015 PROVISIONS CONCERNING CRIMINAL PROCEDURE AND JURISDICTION. 18. THE AFORESAID PRINCIPLES AND INTERPRETATIONS C AN APPLY TO TAXING STATUTES. IN THE PRESENT CASE WE FURTHER FEEL THE SAID PRINCIPLE SHOULD BE APPLIED AS HDFC WOULD NECESSARILY HAVE AC TED AS PER LAW AND IT IS NOT THE CASE OF THE REVENUE THAT THE BANK HAD NOT PAID TAXES ON THEIR INCOME. IT IS NOT A CASE OF LOSS OF REVENUE AS SUCH OR A CASE WHERE THE RECIPIENT DID NOT PAY THEIR TAXES. 19. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY MER IT IN THE PRESENT APPEAL AND THE SAME IS DISMISSED. 5. FACTS ARE SIMILAR, AND THE PRINCIPLE OF THE ABOV E DECISION IS APPLICABLE TO THE FACTS OF THE CASE ON HAND. WE, T HEREFORE, HOLD THAT THE DISALLOWANCE U/S 40(A)(IA) CANNOT BE SUSTA INED AND UPHOLD THE FINDING OF THE LD.CIT (A). GROUND NO. 1 IS DISMISSED. 6. NOW COMING TO GROUND NO. 2, A SUM OF RS. 32,19,5 12/- WAS DISALLOWED BY THE AO HOLDING THAT THE PROVISION FOR GRATUITY WAS NOT AN ASCERTAIN LIABILITY, WHEREAS ASSESSEE HAS BE EN CONTENDING THAT IT IS AN ASCERTAIN LIABILITY. LD.CIT (A) ON F ACTS HELD THAT IN THIS CASE, THE PROVISION FOR GRATUITY IS AN ASCERTAINED LIABILITY AND WHILE PLACING RELIANCE ON THE DECISION REPORTED IN ACIT V S. NHPC LIMITED DECIDED BY A COORDINATE BENCH OF THIS TRIBUNAL HE G RANTED THE RELIEF. NOTHING CONTRARY IS ESTABLISHED BEFORE US TO SHOW THAT THE PROVISION FOR GRATUITY IN THIS CASE IS NOT AN ASCER TAINED LIABILITY. NO ASCERTAIN LIABILITY, WHETHER OR NOT THE PAYMENT WAS MADE IN 6 ITA NO. 4943/DEL/2015 FUTURE COULD BE ADDED BACK, AS SUCH, WE UPHOLD THE FINDING OF THE LD. CIT (A) AND DISMISSED THIS GROUND OF APPEAL. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.10.2017 SD/- SD/- (G.D. AGRAWAL) (K.N. CHARY) PRESIDENT JUDICIAL MEMBER DATED: 23.10.2017 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI