Rajeev Garg & Sons (HUF), Faridabad V. ITO, Faridabad

ITA 4971/DEL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3258 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 25-04-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 19-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BEDOBANI CHAUDHURI
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.4971/DEL/2016 ASSESSMENT YEAR 2010-11 RAJEEV GARG & SONS (HUF) THROUGH KARTA RAJEEV GARG 785, SECTOR-15, FARIDABAD. PAN: AABHR 3428L VS. ITO, WARD-II(2), FARIDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : MS. BEDOBANI CHAUDHURI, SR.D.R. ASSESSEE(S) BY : SHRI ALOK KUMAR GUPTA, CA / DATE OF HEARING : 25/04/2017 / DATE OF PRONOUNCEMENT: 28/04/2017 ORDER THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER O F LEARNED CIT(A), FARIDABAD, VIDE ORDER DATED 22.07.2016 FOR THE ASSESSMENT YEAR 2010-11. THE ASSESSEE HAS RAISED THE GROUNDS OF APP EAL AS UNDER: 1. THAT THE ORDER PASSED BY LD. CIT(A), FARIDABAD IS B AD IN LAW AND ADDITIONS CONFIRMED DESERVES TO BE DELETED. 2.THAT THE LD. CIT(A), FARIDABAD WAS NOT JUSTIFIED IN CONFIRMING ADDITIONS OF RS. 604832/- U/S. 40(A)(IA) IN TOTAL INCOME FOR NOT DED UCTING TDS FROM VARIOUS PAYMENTS. 3. THAT THE LD. CIT(A), FARIDABAD WAS NOT JUSTIFIED IN CONFIRMING ADDITIONS OF RS.950000/- IN TOTAL INCOME U/S.68 ON ACCOUNT OF UN SECURED LOANS TAKEN FROM SMT. MADHU GARG AND SHRI ANKUSH GARG. 4. THAT THE LD. CIT(A), FARIDABAD WAS NOT JUSTIFIED IN CONFIRMING DISALLOWANCE OF RS. 12140/- IN TOTAL INCOME OUT OF TELEPHONE EXPENSES O N ACCOUNT OF PERSONAL USE. 5THAT THE LD. CIT(A) , FARIDABAD WAS NOT JUSTIFIED IN CONFIRMING DISALLOWANCE OF RS. 23780/- IN TOTAL INCOME OUT OF CAR EXPENSES FOR PER SONAL USE. 6.THAT THE APPELLANT SEEKS THE LEAVE OF HONORABLE I TAT TO ADD, MODIFY, AMEND OR DELETE ANY GROUNDS OF APPEAL AT THE TIME OF HEARING OR BEF ORE IT. 2. THE ASSESSEE DOES NOT PRESS GROUNDS NO.4 AND 5, THEREFORE, SAME ARE DISMISSED AS NOT PRESSED. ITA NO.4971/DEL/2016 2 3. GROUNDS NO.1 AND 6 ARE GENERAL IN NATURE, THE REFORE, DO NOT REQUIRE ANY ADJUDICATION. 4. AS REGARDS GROUND NO.2, THE BRIEF FACTS OF TH E CASE AS ARE EMANATING FROM THE ORDER OF THE ASSESSING OFFICER A RE REPRODUCED HEREINBELOW: D URING THE ASSESSMENT PROCEEDINGS THE COUNSEL OF ASS ESSEE WAS ASKED TO FURNISH THE PROFIT AND LOSS ACCOUNTS, AUDIT REPORT AND ALL THE DETAILS OF EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT AND THE SAME WERE FURNI SHED BY THE COUNSEL OF THE ASSESSEE . ON PERUSAL OF THE BALANCE SHEET IT WAS NOTICED THAT ASSESSEE HAD RAISED SECURED LOAN FROM GE CAPITAL, LAXMI NAG R I P ATH SANSTHAN, MAGMA LEASING . THE ASSESSEE HAD DEBITED INTEREST ON TH I S LOAN A M OUNTI NG TO RS.1 , 40,556/-, RS . 3,89,938/ - AND RS . 74,338/- TOTALING TO RS.6,04,832/ -. BUT THE AS S ESS EE HAS NOT DEDUCTED TAX AT SOURCE ON THE PAYMENT OF INTEREST ON LOAN MADE TO ABOVE SAI D F I NANCE COMPANIES AMOUNTING TO RS.6 , 04 , 832/- , THEREFORE, PROV I S I ONS OF SECTION 40 ( A) ( IA) ARE APPLICABLE. AS PER PROVISION OF SECTION 40(A ) (IA) ANY I NTEREST ON WH I CH TAX I S DEDUCTABLE AT SOURCE UNDER C H APTER XVI I -B AND SUCH TAX HAS NOT BEEN DEDUCTED , SUCH I NTEREST SHALL NOT BE DEDUCTED IN C OMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROF I T AND GAIN OF THE BUSINESS . VIDE O R DER SHEET ENTRY DATED 11 . 02 . 2013 THE COUNSEL OF THE ASSESSEE WAS ASKED TO EXPLA I N THE P U RPOSE OF THE LOAN AND WEATHER ANY TAX HAS BEEN DEDU CTED ON THE PAYMEN T OF THE INTEREST M A DE TO THE ABOVE SAID COMPAN I ES . THE COUNSEL OF THE ASSESSEE VIDE R EPLY DATED 18 . 02.2013 S T A TED THAT NO LIABIL I TY OF TAX ARISE IN RESPECT OF PAYMENT OF I NTEREST IN CASE OF ABOVE SAID FI N ANCE COMPANIES. IN CASE OF MAGMA LEASING THE COUNSE L OF ASSESSEE SUBMITTED THAT THE P A YMENT MADE TO MAGMA LEASING IS LESS THAN RS.1,20,000/- SO THAT NO L I ABILITY OF TDS IS AR I SE AS PER SECTION 194 I . THE COUNSEL OF THE ASSESSEE FORGET THAT TDS ON INTEREST HAS TO BE DE DUCT U/S. 194 A AND NOT U/S194 I AND THE ASSESSEE WAS LIABLE TO DEDUCT TAX ON THE PAYMENT O F INTEREST MADE TO ABOVE SAID COMPANY . THE ASSESSEE SUBMITTED LAXM I NAGRI PATH SA NSTHAN IS A CORPORATION ESTAB L ISHED UNDER MAHARASHTRA GOVERNMENT , THEREFORE NO LIAB I LITY OF TDS ARISE IN TH I S CASE . L AXMINAGRI PATH SANSTHAN IS A CO-OPERATIVE SOCIETY R EGISTERED U NDER THE DIRE C TOR CO-OPERATIVE SOCIETY AND NOT A BANK , THEREFORE , THE ASSESSEE WAS L IABLE T O DEDUCT TDS ON THE PAYMENT OF I NTEREST MADE TO THI S SOC I ETY . IT I S , T HEREFORE , CLEAR THA T A SSESSEE HAS NOT DEDUCTED THE TAX AT SOURCE ON TH E PAYMEN T OF I NTEREST. THE ASSESSEE HAS VIOLATED THE PROVISION OF SECTION 40(A)( I A) OF THE IT ACT , 1 96 1 BY NOT DEDUCT I NG TAX AT SOURCE ON THE PAYMENT OF I N T E R EST MADE TO ABOVE COMPAN I ES AMOUNT I NG T O RS . 6 , 04,832 /-. T HEREFORE , I NTEREST DEBITED AMOU NTI NG T O RS . 6 , 04 , 832 /- I N THE PROF I T AND L OSS ACCOUNT I S DISALLOWED AND ADDED I N THE INCOME OF THE ASSES S EE . (ADDITION OF RS.6,04,832/- ~ 5. LEARNED CIT(A) CONFIRMED THE ACTION OF THE ASSES SING OFFICER. 6. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE FACTS OF THE CASE. IT IS A MATTER OF FACT, IN THE PRESENT CASE INTEREST H AS ALREADY BEEN PAID AND NO PART IS PAYABLE. ACCORDINGLY NO DISALLOWANCE CAN BE MADE AS PER PROVISION OF SECTION 40(A)(IA) OF THE ACT. THE RELIANCE IS PL ACED UPON THE DECISION OF ITA NO.4971/DEL/2016 3 ITAT VISAKHAPATNAM IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ACIT WHICH IS PLACED AT PAGES 66 TO 97 OF THE PAPER BOOK. THE RELEVANT PORTION ARE REPRODUCED HEREINBELOW: THE ONLY WORD PUT IN THE PROVISION OF SECTION 40(A )(IA) IS PAYABLE AND NOT PAID OR CREDITED, RATHER LEGISLATURE CONSCIOUSLY REPLACE D THE WORD AMOUNTS CREDITED OR PAID WITH THE WORD PAYABLE IN THE FINAL ENACT MENT AND SUCH CHANGE WAS DONE WITH A PURPOSE IN THE FINANCE BILL BOTH THE WORDS PAID AND PAYABLE WERE USED. HOWEVER, THE WORD PAID WAS SUBSEQUENTLY, DROPPED WHICH SHOWS T HAT SECTION 40(A)(IA) WAS MEANT TO BE APPLICABLE ONLY IF THE AMOUNTS COVERED THEREIN WAS PAYABLE AT THE END OF THE YEAR IN THE PRESENT CASE , SECTION 40(A )(IA) CREATES A LEGAL FICTION FOR THE AMOUNT OUTSTANDING OR REMAINS PA Y ABLE , I.E. , AT THE END OF EVERY YEAR AS ON 31ST MARCH AND IT CANNOT BE EXTENDED FOR TAXING THE AMOUNTS AL R E AD Y PAID . IN FACT , SECTION 201 ITSELF TAKES CARE OF TAX TO BE COLLECTED IN THE HANDS OF THE PAYEE AND OTHER TDS PROVISIONS UNDER CHAPTER XVII-B OF THE ACT. NO FURTHER LEGAL FICTION FROM ELSEWHERE IN THE STATUTE CAN B E BORRO W ED TO EXTEND THE FIELD OF SECTION 40(A)(IA) . THIS FICTION CANNOT BE EXTENDED ANY FURTHER AND , TH E REFORE , CANNOT BE INVOKED BY ASSESSING OFFICER TO DISALLOW THE GENUINE AND REASO NABLE EXPENDITURE ON TH E AMOUNTS OF EXPENDITURE ALREADY PAID . [PARA 101 IN VIEW OF THE ABOVE DISCUSSION AND IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) , ON COMPARISON BETWEEN THE PROPOSED AND ENACTED PROVISION, THE ONLY CON C LUSION WHICH ONE CAN REACH IS THAT THE LEGISLATURE CON S CIOUSLY REPLACED THE WORDS 'AMOUNTS CREDITED OR PAI D' WITH THE WORD 'PAYABLE' IN THE FINAL ENACTMENT. B Y CHANGING THE WORDS FROM 'CREDITED' OR 'PAID' TO 'PAYABLE', THE LEGISLATIVE INTENT HAS BEE N MADE CLEAR T H A T ONL Y OUTSTANDING AMOUNTS OR THE PROVISIONS FOR EXPENSES LIABLE FOR TDS UNDER CHAPTER XVII-B OF THE AC T A R E SOU G HT TO BE DISALLOWED IN THE EVENT THERE IS A DEFAULT IN FOLLOWING THE OBLIGATIONS CASTED UPON THE ASSESSEE UNDER CHAPTER XVII-B OF THE ACT. ALSO RELIANCE IS PLACED UPON THE DECISION OF HONBL E HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VS. VECTOR SHIPPING SE RVICES P. LTD., COPY OF WHICH IS PLACED AT PAGES 98 TO 100 OF THE PAPER BOO K AND THE RELEVANT PORTION OF THE DECISION IS REPRODUCED HEREINBELOW: 10. IT IS TO BE NOTED THAT FOR DISALLOWING EXPENSE S FROM BUSINESS AND PROFESSION ON THE GROUND THAT TDS HAS NOT BEEN DEDU CTED, THE AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY THE END O F THE YEAR. FURTHER RELIANCE IS PLACED UPON THE DECISION OF ITA T DELHI BENCH B ITA NO.4971/DEL/2016 4 NEW DELHI IN THE CASE OF CADTRIUM ENGINEERING SOLUT IONS (P) LTD. VS. ITO, REPORTED IN (2013) 33 TAXMANN.COM 269 (DEL. TRI) AN D THE RELEVANT PORTION IS REPRODUCED HEREINBELOW: 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. IT IS NOT DISPUTED THAT THE PAYMENTS WER E MADE DURING THE YEAR AND NO AMOUNT WAS PAYABLE AT THE END OF THE FINANCIAL YEAR . THIS FACT IS NOT CONTROVERTED BY THE REVENUE. THE HONBLE SPECIAL BENCH IN THE CA SE OF MERILYN SHIPPING & TRANSPORTS (SUPRA) HAS HELD AS UNDER: 6 THE PROVISIONS OF S. 40(A)(IA) OF THE ACT WAS INTRODUCED IN ORDER TO ENSURE COMPLIANCE OF TDS BUT ASSIGNED THE TERM PAYABLE IN THE PROVISION OF S. 40(A)(IA) OF THE ACT. ON A COMPARISON BETWEEN THE PROPOSED AN D ENACTED PROVISION, THE ONLY CONCLUSION, WHICH CAN BE REACHED, IS THAT LEGI SLATURE CONSISTENTLY REPLACED THE WORD AMOUNT CREDITED OR PAID WITH THE WORD PAYABLE IN THE FINAL ENACTMENT AND SUCH CHANGE WAS NOT DONE WITHOUT ANY PURPOSE. IT IS A BASIC PRESUMPTION THAT AN ENACTMENT BROUGHT IN BY THE LEG ISLATURE IS WELL THOUGHT OF AND PROPERTY WORDED IN ORDER TO GIVEN MEANING TO ITS IN TENT BY CHANGING THE WORDS FROM CREDITED OR PAID TO PAYABLE. THE LEGISLATI VE INTENT HAS BEEN MADE CLEAR THAT ONLY THE OUTSTANDING AMOUNT OR THE PROVISION F OR EXPENSE LIABLE FOR TDS IS SOUGHT TO BE DISALLOWED IN THE EVENT THERE IS A DEF AULT OF TDS. RESPECTFULLY FOLLOWING THE RATIO LAID IN MERILYN SH IPPING & TRANSPORTS (SUPRA), THIS GROUND OF THE ASSESSEES APPEAL IS ALLOWED. TH E ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION MADE ON THIS BASIS. ALSO RELIANCE IS PLACED UPON THE DECISION OF HONBL E HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF CIT VS. RAJINDER PA RSHAD JAIN, REPORTED IN (2015) 61 TAXMANN. COM 310 (P&H) AND RELEVANT PORTI ON IS REPRODUCED AT PAGE 110 OF THE PAPER BOOK. FOLLOWING THE ABOVESAID PARITY OF REASONING, WE DI RECT THE ASSESSING OFFICER TO VERIFY THE STAND OF THE ASSESSEE AND IN CASE THE SA ID AMOUNTS HAVE BEEN PAID BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION, N O DISALLOWANCE IS WARRANTED OUT OF THE SAID PAYMENTS IN LINE WITH THE PROVISION S OF SECTION 40(A)(IA) OF THE ACT. 7. IN THE CIRCUMSTANCES AND FACTS OF THE CASE, THE ASSESSING OFFICER CANNOT MAKE ANY DISALLOWANCE AND DISALLOWANCE SO MA DE IS DIRECTED TO BE DELETED. ACCORDINGLY, THE GROUNDS NO.2 AND 3 IS ALL OWED. 8. AS REGARDS GROUND NO.3, THE BRIEF FACTS OF THE C ASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED THA T ASSESSEE HAS RAISED UNSECURED LOAN FROM SMT. MADHU GARG & SHRI ANKUSH G ARG AMOUNTING TO ITA NO.4971/DEL/2016 5 RS.5,00,000/- AND RS.4,50,000/- RESPECTIVELY. THE A SSESSING OFFICER HAS VERIFIED BANK ACCOUNT OF SMT. MADHU GARG & SHRI ANK USH GARG AMOUNTING TO RS.5,00,000/- AND RS.4,50,000/- RESPECTIVELY. TH E ASSESSING OFFICER HAS VERIFIED BANK ACCOUNT OF SMT. MADHU GARG MAINTAINED WITH AXIS BANK WHERE SHE HAS DEPOSITED CASH RS.2,50,000/- ON 15.03.2010 AND ISSUED CHEQUE OF RS.2,50,000/- TO THE ASSESSEE. SIMILARLY ON 17.03.2 010, SHE DEPOSITED CASH OF RS.2,50,000/- AND ISSUED CHEQUE OF THE SAME AMOUNT ON 18 . 03 . 2013 TO THE ASSESSEE , WH I CH HAVE BEEN CREDITED I N THE A S SESSEE ' S BA N K ACCOUNT MAINTA I NED WITH HDFC BANK . AS PER STATEMENT OF SMT . MADHU GARG SHE WAS A SKED TO EXPLAIN THE SOURCE OF CASH DEPOSIT OF RS . 2 , 50 , 000 / - EACH ON 15 . 03 . 2010 AND 17.03 . 20 1 0 , SH E STATED THAT THIS IS OUT OF HER TRUCK INCOME AND CAPITAL. WHEN SHE WAS ASKED HOW MUCH I NCOME SHE EARNED FROM PLYING TRUCKS , SHE STATED THAT FROM EACH TRUCK SHE EARNED RS . 3 TO 4 THOUSAND P ER MONTH AFTER MEETING ALL EXPENSES ON TRUCKS . 9. AS PER BANK ACCOUNT STATEMENT MAINTAINED W I TH AXIS BANK , SH . ANKUSH GARG DEPOSITED CASH RS . 4,50 , 000/- ON 30 . 03 . 2010 AND ISSUED T HE CHEQUE OF RS . 4 , 50 , 000/ - TO THE ASSESSEE ON THE SAME DAY WHICH HAVE BEEN CRED I TED I N THE ASSESSEE ' S BANK A CC OUN T MAINTAINED WITH CORPORATION BANK . THE COUNSEL OF THE ASSESSEE PRODUCED SH RI ANKUSH GARG ON 27 . 02.2013 AND HIS STATEMENT WAS RECORDED. IN H I S STATEMENT HE DEPOSED THAT HE IS AN INCOME TAX ASSESSEE HAVING PAN: ALGPG5795H AND HE IS FILL I NG HIS I NCOME TAX RETURN IN WARD-1(3) , FARIDABAD . HE EARNED INCOME FROM PLYING TRUCKS AND HE HAS FOUR TRUCKS IN HIS NAME. HE ALSO STATED THAT HE HAS GIVEN A LOON OF RS . 4,50,000/ - TO SH . RAIEEV GARG , WHO IS HIS UNCLE . WHEN HE WAS ASKED TO EXPLA I N THE SOURCE OF CASH DEPOSIT OF RS. 4,50 , 000/- ON 30 . 03 . 2010 , HE STATED THAT THIS IS OUT OF HIS TRUCK INCOME AND CAP ITAL . WHEN HE WAS ASKED HOW MUCH INCOME HE EARNED FROM PLYING TRUCK, HE STA TED FROM EACH TRUCK HE ITA NO.4971/DEL/2016 6 EARNED RS.3 TO 4 THOUSAND PER MONTH AFTER MEET I NG ALL EXPENSES ON TRUCKS. 10. SINCE THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF SUCH DEPOSIT OF CASH TO THE SATISFACTION OF THE ASSESSING OFFICER. ACCOR DINGLY HE ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 11. BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMITT ED CERTAIN ADDITIONAL DOCUMENTS WHICH WERE SENT TO THE ASSESSING OFFICER FOR REMAND REPORT AND AFTER RECEIVING REMAND REPORT AND REJOINDER THE LEA RNED CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 12. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ASSESSEE HAS RECEIVED UNSECURED OF RS.5 LAC FRO M SMT. MADHU GARG CASH AND RS.4,50,000/- WHO HAS DEPOSITED CASH IN TH EIR BANK ACCOUNT AND IMMEDIATELY ISSUED THE CHEQUES TO THE ASSESSEE. THE IMMEDIATE SOURCE OF INCOME BY SMT. MADHU GARG AND SHRI ANKUSH GARG WAS STATED TO BE INCOME WHICH WAS NOT SUFFICIENT ENOUGH TO BELIEVE A CAPITA L OF RS.5 LAC AND RS.4,50,000/- WAS AVAILABLE WITH THEM AND NO DOCUME NTARY EVIDENCE WAS PLACED ON RECORD TO SUBSTANTIATE THE CLAIM THAT SO MUCH OF AMOUNT WAS AVAILABLE WITH THE SAID PERSONS. IN SUCH CIRCUMSTAN CES AND FACTS OF THE CASE THE AMOUNT REMAINS UNVERIFIED AND UNSUBSTANTIATED A ND ACCORDINGLY, I FIND NO INFIRMITY IN THE ORDER OF LEARNED CIT(A) WHO HAS RIGHTLY CONFIRMED THE ACTION OF THE ASSESSING OFFICER. THUS, GROUND NO.3 IS DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY 2 8 TH APRIL, 2017 SD/- (B.P. JAIN) ACCOUNTANT MEMBER DATED: 28/04/2017