M/s. Ramnarayan M. Gaggad, Ahmednagar V. Income-tax Officer,

ITA 503/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0763 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 13-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Assessee Lawyers: S N DOSHI; DHIRAJ S DANDGAVAL
• Keywords: Principle of natural justice; Non-deduction of tax
• Section: 143(3)

Judgement Text

] ]] ] ... IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE , !', $ % BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.503/PN/2014 ASSESSMENT YEAR : 2007-08 M/S RAMNARAYAN M. GAGGAD, BAZAR PETH SANGAMNER, DIST. AHMEDNAGAR. PAN : AAFER5494L . APPELLANT VS. THE INCOME TAX OFFICER, WARD 4, AHMEDNAGAR. . RESPONDENT / APPELLANT BY : SHRI S. N. DOSHI & SHRI DHIRAJ S. DANDGAVAL / RESPONDENT BY : SHRI PANKAJ GARG / DATE OF HEARING : 07.12.2015 / DATE OF PRONOUNCEMENT: 17.12.2015 & / ORDER PER PRADIP KUMAR KEDIA, AM : THE PRESENT APPEAL PREFERRED BY THE ASSESSEE IS AGA INST THE ORDER OF CIT(A)-IT/TP, PUNE DATED 03.02.2014 RELATING TO ASS ESSMENT YEAR 2007-08 PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE INCOM E-TAX ACT, 1961 (IN SHORT THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE REPRODUCED AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS.1,81,394/- MADE U /S 40(A)(IA) OVERLOOKING THE ADMITTED FACT THAT APPELLANT WAS NOT LIABLE TO BE D EDUCT THE TAX BY VIRTUE OF 15G FORMS OBTAINED FROM THE PAYEES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT(A) HAS ERRED IN HOLDING THAT NON FILLING OF THE COPIES OF 15G TO TH E COMMISSIONER OF INCOME TAX ATTRACTS THE PROVISIONS OF SEC 40(A)(IA) JUSTIFYING THE DISALLOWANCE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS.9250/- ON ACCOUNT OF THE DIFFERENCE IN BANK BALANCE. 2 ITA NO.503/PN/2014 THE ABOVE GROUNDS OF APPEAL MAY KINDLY BE ALLOWED T O BE AMENDED, ALTERED, MODIFIED ETC., IN THE INTEREST OF NATURAL JUSTICE. 3. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEE IS A PARTNERSHIP FIRM CARRYING ON THE BUSINESS OF DEALING IN CLOTH AT SAN GAMNER, AHMEDNAGAR. THE ASSESSING OFFICER NOTICED THAT ASSESSEE CLAIMED AN AMOUNT OF RS.1,81,394/- AS DEDUCTION ON ACCOUNT OF INTEREST EXPENDITURE. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN WHY THE SAID EXPENDITURE SHOULD NOT BE DISALLOWED UNDER SECTION 40(A)(IA) OF THE ACT ON FAILURE TO DEDUCT T AX AT SOURCE. WHILE FURNISHING THE DETAILS, THE ASSESSEE SUBMITTED THAT ASSESSEE H AD TAKEN LOANS FROM MRS. SHANKUNTALA SURESH GAGGAD, PROPRIETOR OF SHRADHA DR ESSES AND MRS. SHAILA RAMESH GAGGAD, PROPRIETOR OF SHRADHA COLLECTION AND PAID INTEREST THEREON OF RS.49,078/- AND RS.1,32,316/- RESPECTIVELY WITHOUT DEDUCTION OF TAX AT SOURCE. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT IT DID NOT DEDUCT TAX IN VIEW OF RECEIPT OF FORM NO.15G FROM THESE PAYEES . 4. HOWEVER, IT WAS OBSERVED BY THE ASSESSING OFFICE R THAT THE ASSESSEE DID NOT SUBMIT THEIR FORMS NO.15G TO THE COMMISSIONER O F INCOME TAX WITHIN STIPULATED TIME. THE ASSESSEE STATED THAT HE HAD S ENT THESE FORM NO.15G BY POST TO THE OFFICE OF THE COMMISSIONER OF INCOME TA X-I, PUNE ON 06.04.2007. HOWEVER, NO DOCUMENTARY EVIDENCE IN THE FORM OF THE ACKNOWLEDGEMENT OR RECEIPT FOR SUBMISSION OF SUCH FORMS BEFORE THE COM MISSIONER IS AVAILABLE WITH THE ASSESSEE. THEREFORE, THE ASSESSING OFFICE R DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND INVOKED SECTION 40(A )(IA) OF THE ACT FOR NON- DEDUCTION OF TAX AT SOURCE AND THUS DISALLOWED RS.1 ,81,394/- PAID TOWARDS INTEREST. AGAINST THE SAID ACTION OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). 5. THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. HE OBSERVED THAT RULE 29C(3) OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES) PROVIDES CONDITION OF DELIVERY OF FORM NO.15G TO THE COMMISSIONER BEFORE 07 TH DAY OF THE MONTH FOLLOWING THE MONTH OF IN WHICH T HE DECLARATION IS FURNISHED TO HIM. WHILE THE ASSESSEE HAS PRODUCED COPY OF FORM NO.15G 3 ITA NO.503/PN/2014 BEFORE HIM, IT HAS NOT SUBMITTED ANY EVIDENCE REGAR DING DELIVERY OF THESE COPIES TO THE COMMISSIONER OF INCOME TAX. THEREFOR E, CONDITION OF RULE 29C(3) OF THE RULES IS NOT SATISFIED, WHICH WILL PE RMIT BENEFIT OF NON-DEDUCTION OF TAX AT SOURCE. HE, THEREFORE, HELD THAT DISALLO WANCE OF INTEREST UNDER SECTION 40(A)(IA) OF THE ACT IS FULLY JUSTIFIED IN THE FACT S OF THE CASE. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US. 7. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE VEHEMENTLY SUBMITTED THAT IT IS NOT IN DISPUTE THAT IMPUGNED F ORM NO.15G HAD BEEN OBTAINED FROM THE RESPECTIVE PAYEES AND COPIES THER EOF WERE PRESENTED BEFORE THE AUTHORITIES BELOW. IT IS ALSO NOT IN DISPUTE T HAT NO DEFECT HAS BEEN POINTED OUT IN FORM NO.15G PER SE . THE ONLY POINT IN DISPUTE BEING AGITATED IS WHETHER NON-FILING OF FORM NO.15G TO THE COMMISSION ER OF INCOME TAX IN TERMS OF RULE 29C(3) OF THE RULES WILL RESULT IN IN VOCATION OF SECTION 40(A)(IA) OF THE ACT OR NOT. THE LD. AUTHORIZED REPRESENTATI VE FOR THE ASSESSEE CONTENDED THAT THE PHRASEOLOGY OF SECTION 40(A)(IA) OF THE ACT IS ENTIRELY DIFFERENT AND THE SECTION CANNOT BE INVOKED FOR MER E NON-FILING THE FORM NO.15G BEFORE THE COMMISSIONER AS PRESCRIBED. THE DEFAULT IN NON- SUBMISSION OF FORM NO.15G IS MERELY TECHNICAL IN NA TURE WHEN THE ASSESSEE HAS ACTUALLY RECEIVED THE RELEVANT FORMS FROM THE P AYEES. HE SUBMITTED THAT IN THE PRESENCE OF FORM NO.15G, ASSESSEE WAS NOT LIABL E TO DEDUCT AT SOURCE AND THEREFORE SECTION 40(A)(IA) OF THE ACT IS NOT TRIGG ERED. FOR THIS PROPOSITION, HE RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CAS E OF (I) KARWAT STEEL TRADERS VS. ITO IN ITA NO.6822/MUM/2011, ORDER DATED 10.07. 2013; (II) VIPIN P. MEHTA VS. ITO, (2011) 11 TAXMANN.COM 342 (MUM.); AN D, (III) VIJAYA BANK VS. ITO IN ITA NO.2672/DEL/2013 & OTHERS, ORDER DATED 1 4.03.2014. 8. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE CIT(A) AND SUBMI TTED THAT MERE COLLECTION OF FORM NO.15G, IPSO FACTO , WILL NOT DISCHARGE THE ONUS WHICH LAYS UPON THE ASSESSEE. IT IS THE STATUTORY OBLIGATION OF THE AS SESSEE TO FURNISH THE FORM SO 4 ITA NO.503/PN/2014 COLLECTED WITH THE COMMISSIONER OF INCOME TAX TO FU LFILL THE REQUIREMENT OF RULE 29C(3) OF THE RULES. HE, THUS, SUBMITTED THAT THE ARGUMENTS ON BEHALF ASSESSEE DOES NOT HAVE MERIT TO CALL FOR ANY INTERF ERENCE. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS, ORDERS OF THE AUTHORITIES BELOW AND THE CASE LAW CITED. THE PROV ISIONS OF SECTION 40(A)(IA) OF THE ACT ARE READ AS UNDER :- 40. AMOUNTS NOT DEDUCTIBLE NOTWITHSTANDING ANYTHIN G TO THE CONTRARY IN SECTIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCT ED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION,- (A) IN THE CASE OF ANY ASSESSEE (I) .. (IA) ANY INTEREST, COMMISSION OR BROKERAGE, [RENT, ROYALTY,] FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR C ARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHI CH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDU CTED OR, AFTER DEDUCTION, [HAS NOT BEEN PAID,--. (ONLY RELEVANT PORTION EXTRACTE D). 10. THE PROVISION NOTED ABOVE SPELLS OUT THAT THE A MOUNT CANNOT BE ALLOWED AS DEDUCTION ONLY IN THE EVENT WHEN TAX IS DEDUCTIB LE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION HAS NOT BEEN PAID. IN THE PRESENT CASE, THE ASSESSEE WAS REQUIR ED TO DEDUCT TAX IN TERMS OF THE PROVISIONS OF SECTION 194A. SECTION 194A IS FU RTHER QUALIFIED BY SECTION 197A(1A) WHICH IS A NON-OBSTANTE CLAUSE. SECTION 1 97A(1A) PROVIDES THAT LIABILITY TO DEDUCT TAX UNDER SECTION 194A CEASES W HEN A DECLARATION IN WRITING IN DUPLICATE IN PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER RECEIVED BY A PERSON RESPONSIBLE FOR PAYING INCOME TO THE PA YEE. THE REMEDY TOWARDS DEFAULT FOR NON-FURNISHING OF THE DECLARATION TO TH E COMMISSIONER OF INCOME TAX AS PRESCRIBED HAS BEEN ADDRESSED UNDER SECTION 272A(2)(F) OF THE ACT BY IMPOSING SUITABLE PENALTY THEREON. HOWEVER, ONCE F ORM NO,15G WAS RECEIVED BY THE PERSONS RESPONSIBLE FOR DEDUCTING TAX, THERE IS NO LIABILITY TO DEDUCT TAX AT SOURCE IN VIEW OF SECTION 194A R.W.S. 197A. ONC E, IT IS HELD THAT TAX IS NOT DEDUCTIBLE AT SOURCE UNDER SECTION 194A ON RECEIPT OF VALID FORM NO.15G, THE MISCHIEF PROVIDED UNDER SECTION 40(A)(IA) IS NOT AT TRACTED. 5 ITA NO.503/PN/2014 11. WE FIND THAT NO DEFAULT CAN BE SAID TO HAVE OCC URRED IN TERMS OF THE PHRASEOLOGY PROVIDED UNDER SECTION 40(A)(IA) OF THE ACT IN THE FACTS OF THE CASE. ACCORDINGLY, WE HOLD THAT BOTH THE ASSESSING OFFICE R AND CIT(A) COMMITTED ERROR IN MAKING DISALLOWANCE UNDER SECTION 40(A)(IA ) OF THE ACT DUE TO MERE NON-FILING OF IMPUGNED FORM NO.15G. WE HAVE ALSO P ERUSED THE CASE LAW CITED BY THE ASSESSEE. WE FIND THE FACTS IN THE PR ESENT CASE ARE IDENTICAL TO THE FACTS IN THE CASE OF KARWAT STEEL TRADERS (SUPRA), WHEREIN THE TRIBUNAL HAS TAKEN A FAVOURABLE VIEW ON THE SIMILAR FACTS. RESP ECTFULLY, FOLLOWING THE ORDER OF THE CO-ORDINATE BENCH OF THE TRIBUNAL, WE HOLD T HAT TDS IS NOT DEDUCTIBLE ON RECEIPT OF FORM NO.15G AND ACCORDINGLY, SECTION 40(A)(IA) OF THE ACT IS NOT APPLICABLE IN THE FACTS OF THE CASE. THUS, ON THIS ISSUE, ASSESSEE SUCCEEDS. 12. NOW, WE COME TO THE SECOND ISSUE RAISED BY THE ASSESSEE BY WAY OF GROUND OF APPEAL NO.3 TOWARDS ADDITION OF RS.9,250/ - ON ACCOUNT OF DIFFERENCE IN BANK BALANCE. 13. IN RESPECT OF THIS ISSUE, THE ASSESSEE HAS NOT ADVANCED ANY ORAL ARGUMENTS BEFORE US. IN THE WRITTEN NOTE FILED, TH E ASSESSEE HAS MERELY AVERRED THAT THE RECONCILIATION STATEMENT FOR IMPUGNED DIFF ERENCE IS NOT AVAILABLE. WE OBSERVE THAT THE CIT(A) HAD ALSO DISMISSED THE AFOR ESAID GROUND OF THE ASSESSEE IN THE ABSENCE OF ANY RECONCILIATION STATE MENT. SINCE THE GROUND REMAINS UNSUBSTANTIATED, WE ARE NOT INCLINED TO INT ERFERE WITH THE SAME AND REJECT THE SAID GROUND. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON THIS 17 TH DAY OF DECEMBER, 2015. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE ; DATED : 17 TH DECEMBER, 2015. 6 ITA NO.503/PN/2014 & ' ()* +*( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-IT/TP, PUNE; 4) THE CIT-I, PUNE; 5) THE DR SMC BENCH, I.T.A.T., PUNE; 6) GUARD FILE. &, / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE