ACIT, Circle-2(2), Bhubaneswar, Bhubaneswar V. Subhasish Jena, Bhubaneswar

ITA 505/CTK/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8811 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 30-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 13-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VENKATRAMANI
• Assessee Lawyers: D K SALIAN
• Keywords: Question of law
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 468/CTK/2013 : (ASST. YEAR : 2009 - 10) SRI SUBHASISH JENA C/O. SANTOSH KUMAR DASH PLOT NO. 4715, SAINIK SCHOOL, LAXMI VIHAR, BHUBANESWAR PAN : AANPJ7891H (APPELLANT) VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 2(2), BHUBANESWAR. (RESPONDENT) ITA NO. 505/CTK/2013 : (ASST. YEAR : 2009 - 10) ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 2(2), BHUBANESWAR. (APPELLANT) VS. SRI SUBHASISH JENA C/O. SANTOSH KUMAR DASH PLOT NO. 4715, SAINIK SCHOOL, LAXMI VIHAR, BHUBANESWAR PAN : AANPJ7891H (RESPONDENT) ASSESSEE BY : D.K. SALIAN, AR REVENUE BY : S. VENKATRAMANI, DR DATE OF HEARING : 30/01/2015 DATE OF PRONOUNCEMENT : 12 /0 3 /2015 O R D E R PER P.K. BANSAL : 1. BOTH THESE CROSS APPEALS HAVE BEEN FILED AGAINST THE ORDER OF CIT(A) - II, BHUBANESWAR DT. 27.8.2013. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL IN THE APPEAL FILED BY HIM : 1. THAT THE AO / CIT (A) IGNORING THE LEGAL PROVISIONS OF SEC. 40(A)(IA) OF THE I T ACT, 1961 AND DECIDED CASE LAWS AND SUBMISSIONS MADE DURING THE ASSESSMENT PROCEEDINGS, ADDED CONTRACTUAL PAYMENTS OF RS.39,92,007.00 MADE THROUGH ACCOUNT PAYEE CHEQUES WITHOUT DEDUCTION OF INCOME TAX AT SOURCE AS PER THE PROVISIONS OF SEC. 194 C WHICH IS BAD IN LAW AND SHOULD BE QUASHED. 2 ITA NOS. 468 & 505/CTK/2013 (A.Y : 2009 - 10) WHILE THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEA L IN ITS APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. C1T(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS. 12,10,000 / - TOWARDS CASH CREDIT U/S.68 MADE BY THE AO ON ACCOUNT OF CAPITAL INTRODUCTION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWING RELIEF OF RS.24,43,100/ - OUT OF RS.64, 35,107 / - ADDED BY THE AO U/S.40(A)(IA) IN REGARD TO CONTRACT PAYMENTS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.4,62,8147 - MADE BY THE AO U/S.40(A)(IA) IN REGARD TO TRANSPORTATION CHARGES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN ACCEPTING THE CONTENTION OF THE ASSESSEE AN D NOT ACCEPTING THE FINDINGS OF THE AO IN VIOLATION OF RULE 46A. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. RETURN FOR THE IMPUGNED ASSESSMENT YEAR WAS FILED AT A TOTAL INCOME OF RS. 52,35,790/ - . ASSESSMENT WAS COMPLETED ON A TOTAL INCOME OF RS. 1,33,43,710/ - MAKING THE FOLLOWING DISALLOWANCES/ADDITIONS : I) ADDITION U/S 68 - RS. 12,10,000/ - II) DISALLOWANCE U/S 40(A)(IA) DUE TO NON - DEDUCTION OF TDS U/S 194C - RS. 64,35,107/ - III) DISALLOWANCE U/S 40(A)(IA) DUE TO NON - DEDUCTION OF TDS ON TRANSPORTATION CHARGES - RS. 4,62,814/ - THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). CIT(A) DELETED THE DISALLOWANCE MADE U/S 68, DELETED THE DISALLOWANCE OF RS. 24,43,100/ - U/S 40(A)(IA) IN RESPECT OF MATERIA L SUPPLIED AND ALSO DELETED THE DISALLOWANCE OF RS.4,62,814/ - IN RESPECT OF TRANSPORTATION CHARGES. 3. THE ONLY GROUND IN ASSESSEES APPEAL AND GROUND NO. 2 IN REVENUES APPEAL RELATE TO APPLICABILITY OF SEC. 40(A)(IA). AFTER HEARING THE LD. DR AND 3 ITA NOS. 468 & 505/CTK/2013 (A.Y : 2009 - 10) PER USING THE MATERIAL ON RECORD BEFORE THE AUTHORITIES BELOW WE NOTED THAT BEFORE THE CIT(A) THE ASSESSEE HAS SUBMITTED BILLS AND CIT(A) AFTER PERUSING THE BILLS NOTED THAT THE BILLS OF RS. 24,43,100/ - RELATE TO MATERIALS SUPPLIED AND THEREFORE HE TOOK THE VI EW THAT THE PROVISIONS OF SEC. 194C WILL NOT APPLY. FOR THE SUM OF RS. 39,92,007/ - IT WAS FOUND BY CIT(A) THAT THESE BILLS RELATE TO THE LABOUR SUPPLY SUBMITTED BY MR. MAHESH CHOUDHURY AND MR. GOBINDA PATRA AND IT IS A FACT THAT THE ASSESSEE HAS NOT DEDUC TED TAX. SINCE THE ASSESSEE HAS NOT DEDUCTED TDS, THEREFORE, HE SUSTAINED THE DISALLOWANCE AGAINST WHICH THE ASSESSEE HAS COME IN APPEAL BEFORE US. THE FACTS AS FOUND BY THE CIT(A) HA VE NOT BEEN DISPUTED BEFORE US. FROM THE ORDER OF THE CIT(A) WE NOTED THAT THE ASSESSEE HAS RELIED ON THE DECISION OF THE SPECIAL BENCH OF ITAT IN THE CASE OF MERLYN SHIPPING AND TRANSPORT LTD., 136 ITD 23 THAT THE DISALLOWANCE CAN BE MADE ONLY IN RESPECT OF AMOUNT PAYABLE AND NOT THE AMOUNT WHICH WAS PAID DURING THE YEAR. THE SPECIAL BENCH OF THIS TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS VS. ADDL. CIT, 16 ITR (TRIB) 1 ( SUPRA ) TOOK THE VIEW THAT THE PROVISIONS OF SEC. 40(A)(IA) IS APPLICABLE ONLY IN RESPECT OF THE AMOUNT REMAINS PAYABLE ON THE LAST DAY OF THE FINANCIAL YEAR . WHEN THE MATTER WENT BEFORE THE HON'BLE ANDHRA PRADESH HIGH COURT, THEIR LORDSHIPS VIDE INTERIM JUDGEMENT STAYED THE OPERATION OF THE ORDER. IN THE MEANTIME, SIMILAR ISSUE WAS RAISED BEFORE THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIKANDAR KHAN N. TUNVAR , 357 ITR 312 AND BEFORE THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORTS SYNDICATE (ITA NO. 23 OF 2013). THE QUESTION BEFORE THE HON'BLE GUJARAT HIGH COURT WAS FRAMED AS UNDER : '1. WHETHER THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE INCOME - TAX ACT, 1961, COULD BE MADE ONLY IN RESPECT OF SUCH AMOUNTS WHICH ARE PAYABLE AS ON MARCH 31 OF THE YEAR UNDER CONSIDERATION ? 2. WHETHER THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AN D TRANSPORTS V. ADDL. CIT LAYS DOWN CORRECT LAW ?' 4 ITA NOS. 468 & 505/CTK/2013 (A.Y : 2009 - 10) WHEN SIMILAR ISSUE WAS BEFORE THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORTS SYNDICATE ( SUPRA ), THE HON'BLE CALCUTTA HIGH COURT TOOK THE VIEW AS UNDER : BEFORE DEALING WITH THE SUBMISSIONS OF THE LEARNED COUNSEL APPEARING FOR THE ASSESSEES IN BOTH THE APPEALS WE HAVE TO EXAMINE THE CORRECTNESS OF THE MAJORITY VIEWS IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS . WE ALREADY HAVE QUOTED EXTENSIVELY BOTH T HE MAJORITY AND THE MINORITY VIEWS EXPRESSED IN THE AFORESAID CASE. THE MAIN THRUST OF THE MAJORITY VIEW IS BASED ON THE FACT THAT THE LEGISLATURE HAS REPLACED THE EXPRESSION AMOUNTS CREDITED OR PAID WITH THE EXPRESSION PAYABLE IN THE FINAL ENACTMENT. COMPARISON BETWEEN THE PRE - AMENDMENT AND POST AMENDMENT LAW IS PERMISSIBLE FOR THE PURPOSE OF ASCERTAINING THE MISCHIEF SOUGHT TO BE REMEDIED OR THE OBJECT SOUGHT TO BE ACHIEVED BY AN AMENDMENT. THIS IS PRECISELY WHAT WAS DONE BY THE APEX COURT IN THE C ASE OF CIT VS. KELVINATOR REPORTED IN 2010(2) SCC 723. BUT THE SAME COMPARISON BETWEEN THE DRAFT AND THE ENACTED LAW IS NOT PERMISSIBLE. NOR CAN THE DRAFT OR THE BILL BE USED FOR THE PURPOSE OF REGULATING THE MEANING AND PURPORT OF THE ENACTED LAW. IT IS T HE FINALLY ENACTED LAW WHICH IS THE WILL OF THE LEGISLATURE. THE LEARNED TRIBUNAL FELL INTO AN ERROR IN NOT REALIZING THIS ASPECT OF THE MATTER. THE LEARNED TRIBUNAL HELD THAT WHERE LANGUAGE IS CLEAR THE INTENTION OF THE LEGISLATURE IS TO BE GATHERED FROM THE LANGUAGE USED. HAVING HELD SO, IT WAS NOT OPEN TO SEEK TO INTERPRET THE SECTION ON THE BASIS OF ANY COMPARISON BETWEEN THE DRAFT AND THE SECTION ACTUALLY ENACTED NOR WAS IT OPEN TO SPECULATE AS TO THE EFFECT OF THE SO - CALLED REPRESENTATIONS MADE BY THE PROFESSIONAL BODIES. THE LEARNED TRIBUNAL HELD THAT SECTION 40(A)(IA) OF THE ACT CREATES A LEGAL FICTION BY VIRTUE OF WHICH EVEN THE GENUINE AND ADMISSIBLE EXPENSES CLAIMED BY AN ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION: IF T HE ASSESSEE DOES NOT DEDUCT TDS ON SUCH EXPENSES ARE DISALLOWED. HAVING HELD SO WAS IT OPEN TO THE TRIBUNAL TO SEEK TO JUSTIFY THAT THIS FICTION CANNOT BE EXTENDED ANY FURTHER AND, THEREFORE, CANNOT BE INVOKED BY ASSESSING OFFICER TO DISALLOW THE GENUI NE AND REASONABLE EXPENDITURE ON THE AMOUNTS OF EXPENDITURE ALREADY PAID? DOES THIS NOT AMOUNT TO DELIBERATELY READING SOMETHING IN THE LAW WHICH IS NOT THERE? 5 ITA NOS. 468 & 505/CTK/2013 (A.Y : 2009 - 10) WE, AS SUCH, HAVE NO DOUBT IN OUR MIND THAT THE LEARNED TRIBUNAL REALIZED THE MEANING AND PUR PORT OF SECTION 40(A)(IA) CORRECTLY WHEN IT HELD THAT IN CASE OF OMISSION TO DEDUCT TAX EVEN THE GENUINE AND ADMISSIBLE EXPENSES ARE TO BE DISALLOWED. BUT THEY SOUGHT TO REMOVE THE RIGOUR OF THE LAW BY HOLDING THAT THE DISALLOWANCE SHALL BE RESTRICTED TO T HE MONEY WHICH IS YET TO BE PAID. WHAT THE TRIBUNAL BY MAJORITY DID WAS TO SUPPLY THE CASUS OMISSUS WHICH WAS NOT PERMISSIBLE AND COULD ONLY HAVE BEEN DONE BY THE SUPREME COURT IN AN APPROPRIATE CASE. REFERENCE IN THIS REGARD MAY BE MADE TO THE JUDGMENT IN THE CASE OF BHUWALKA STEEL INDUSTRIES VS. BOMBAY IRON & STEEL LABOUR BOARD REPORTED IN 2010(2) SCC 273. UNPROTECTED WORKER WAS FINALLY DEFINED IN SECTION 2(11) OF THE MATHADI ACT AS FOLLOWS: - UNPROTECTED WORKER MEANS A MANUAL WORKER WHO IS ENGAGE D OR TO BE ENGAGED IN ANY SCHEDULED EMPLOYMENT. THE CONTENTION RAISED WITH REFERENCE TO WHAT WAS THERE IN THE BILL WAS REJECTED BY THE SUPREME COURT BY HOLDING AS FOLLOWS: IT MUST, AT THIS JUNCTURE, BE NOTED THAT IN SPITE OF SECTION 2(11), WHICH INCL UDED THE WORDS BUT FOR THE PROVISIONS OF THIS ACT IS NOT ADEQUATELY PROTECTED BY LEGISLATION FOR WELFARE AND BENEFITS OF THE LABOUR FORCE IN THE STATE, THESE PRECISE WORDS WERE REMOVED BY THE LEGISLATURE AND THE DEFINITION WAS MADE LIMITED AS IT HAS BEEN FINALLY LEGISLATED UPON. IT IS TO BE NOTED THAT WHEN THE BILL CAME TO BE PASSED AND RECEIVED THE ASSENT OF THE VICE - PRESIDENT ON 05 - 06 - 1969 AND WAS FIRST PUBLISHED IN THE MAHARASHTRA GOVERNMENT GAZETTE EXTRAORDINARY, PART IV ON 13 - 06 - 1969, THE AFOREMENTIO NED WORDS WERE OMITTED. THEREFORE, THIS WOULD BE A CLEAR POINTER TO THE LEGISLATIVE INTENT THAT THE LEGISLATURE BEING CONSCIOUS OF THE FACT AND BEING ARMED WITH ALL THE COMMITTEE REPORTS AND ALSO BEING ARMED WITH THE FACTUAL DATA, DELIBERATELY AVOIDED THOS E WORDS. WHAT THE APPELLANTS ARE ASKING WAS TO READ IN THAT DEFINITION, THESE PRECISE WORDS, WHICH WERE CONSCIOUSLY AND DELIBERATELY OMITTED FROM THE DEFINITION. THAT WOULD AMOUNT TO SUPPLYING THE CASUS OMISSUS AND WE DO NOT THINK THAT IT IS POSSIBLE, PART ICULARLY, IN THIS CASE. THE LAW OF SUPPLYING THE CASUS OMISSUS BY THE COURTS IS EXTREMELY CLEAR AND SETTLED THAT THOUGH THIS COURT MAY SUPPLY THE CASUS OMISSUS, IT WOULD BE IN THE RAREST OF THE RATE CASE AND THUS SUPPLYING OF THIS CASUS OMISSUS WOULD BE EX TREMELY NECESSARY DUE TO THE INADVERTENT OMISSION ON THE PART OF THE LEGISLATURE. BUT, THAT IS CERTAINLY NOT THE CASE HERE. WE SHALL NOW ENDEAVOUR TO SHOW THAT NO OTHER INTERPRETATION IS POSSIBLE. THE KEY WORDS USED IN SECTION 40(A)(IA ), ACCORDING TO US, ARE ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII - B. IF THE QUESTION IS WHICH EXPENSES ARE SOUGHT TO BE DISALLOWED? THE ANSWER IS BOUND TO BE THOSE EXPENSES ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII - B. ONCE THIS IS REALIZED NOTHING TURNS ON 6 ITA NOS. 468 & 505/CTK/2013 (A.Y : 2009 - 10) THE BASIS OF THE FACT THAT THE LEGISLATURE USED THE WORD PAYABLE AND NOT PAID OR CREDITED. UNLESS ANY AMOUNT IS PAYABLE, IT CAN NEITHER BE PAID NOR CREDITED. IF A N AMOUNT HAS NEITHER BEEN PAID NOR CREDITED, THERE CAN B E NO OCCASION FOR CLAIMING ANY DEDUCTION. THE LANGUAGE USED IN THE DRAFT WAS UNCLEAR AND SUSCEPTIBLE TO GIVING MORE THAN ONE MEANING. BY LOOKING AT THE DRAFT IT COULD BE SAID THAT THE LEGISLATURE WANTED TO TREAT THE PAYMENTS MADE OR CREDITED IN FAVOUR OF A CONTRACTOR O R SUB - CONTRACTOR DIFFERENTLY THAN THE PAYMENTS ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES BECAUSE THE WORDS AMOUNTS CREDITED OR PAID WERE USED ONLY IN RELATION TO A CONTRA CTOR O R SUB - CONTRACTOR. THIS DIFFERENTIAL TREATMENT WAS NOT INTENDED. THEREFORE, THE LEGISLATURE PROVIDED THAT THE AMOUNTS, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER XVII - B PAYABLE ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR P ROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES OR TO A CONTRACTOR O R SUB - CONTRACTOR SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME OF AN ASSESSEE IN CASE HE HAS NOT DEDUCTED, OR AFTER DEDUCTION HAS NOT PAID WITHIN THE SPECIFIED TIME. THE LANGUAGE USED BY THE LEGISLATURE IN THE FINALLY ENACTED LAW IS CLEAR AND UNAMBIGUOUS WHEREAS THE LANGUAGE USED IN THE BILL WAS AMBIGUOUS. A FEW WORDS ARE NOW NECESSARY TO DEAL WITH THE SUBMISSION OF MR. BAGCHI AND MS. ROYCHOWDHURI. THERE CAN BE NO DENIAL THAT THE PROV ISION IN QUESTION IS HARSH. BUT THAT IS NO GROUND TO READ THE SAME IN A MANNER WHICH WAS NOT INTENDED BY THE LEGISLATURE. THIS IS OUR ANSWER TO THE SUBMISSION OF MR. BAGCHI. THE SUBMISSION OF MR. ROYCHOWDHURI THAT THE SECOND PROVISO SOUGHT TO BECOME EFFECT IVE FROM 1 ST APRIL, 2013 SHOULD BE HELD TO HAVE ALREADY BECOME OPERATIVE PRIOR TO THE APPOINTED DATE CANNOT ALSO BE ACCEDED TO FOR THE SAME REASON INDICATED ABOVE. THE LAW WAS DELIBERATELY MADE HARSH TO SECURE COMPLIANCE OF THE PROVISIONS REQUIRING DEDUCTI ONS OF TAX AT SOURCE. IT IS NOT THE CASE OF AN INADVERTENT ERROR. FOR THE REASONS DISCUSSED ABOVE, WE ARE OF THE OPINION THAT THE MAJORITY VIEWS EXPRESSED IN THE CASE OF MERILYN SHIPPING & TRANSPORTS ARE NOT ACCEPTABLE. THE SUBMISSIONS ADVANCED BY LEARNE D ADVOCATES HAVE ALREADY BEEN DEALT WITH AND REJECTED. WE HAVE ALSO GONE THROUGH THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN VECTOR SHIPPING SERVICES (P) LTD., 357 ITR 642 ( SUPRA ). WE NOTED THAT IN THIS CASE THE FOLLOWING SUBSTANTIAL QUESTION WAS A DMITTED : '(A) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE INCOME - TAX APPELLATE TRIBUNAL HAS RIGHTLY CONFIRMED THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) AND THEREBY DELETING THE DISALLOWANCE OF RS. 1,17,68,621 7 ITA NOS. 468 & 505/CTK/2013 (A.Y : 2009 - 10) MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF THE INCOME - TAX ACT, 1961, BY IGNORING THE FACT THAT THE COMPANY M/S. MERCATOR LINES LTD. HAD PERFORMED SHIP MANAGEMENT WORK ON BEHALF OF THE ASSESSEE M/S. VECTOR SHIPPING SERVICES (P.) LTD. AND THERE WAS A MEMORANDUM OF UNDERSTANDING SIGNED BETWEEN BOTH THE COMPANIES AND AS PER THE DEFINITION OF MEMORANDUM OF UNDERSTANDING, IT INCLUDED CONTRACT ALSO?' UPON HEARING PARTIES AND UPON PERUSING MATERIAL ON RECORD, THE HON'BLE JURISDICTIONAL HIGH COURT WAS OF T HE CONSIDERED VIEW THAT (PAGE 645 OF 357 ITR) WE DO NOT FIND THAT THE TRIBUNAL HAS COMMITTED ANY ERROR IN RECORDING THE FINDING ON THE FACTS, WHICH WERE NOT CONTROVERTED BY THE DEPARTMENT AND THUS THE QUESTION OF LAW AS FRAMED DOES NOT ARISE FOR CONSIDERA TION IN THE APPEAL. IN PLAIN WORDS, WHAT THEIR LORDSHIPS DID WAS SIMPLY REJECTION OF THE QUESTION OF LAW PROPOSED BY THE INCOME TAX DEPARTMENT BY OBSERVING THAT THIS QUESTION OF LAW DOES NOT ARISE FOR CONSIDERATION IN THE APPEAL. ON THIS, THE AGRA BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. GUPTA OVERSEAS IN ITA NO. 1961 FOR A.Y 2008 - 09 OBSERVED AS UNDER : 35. HAVING NOTED THE ABOVE, WE MUST ALSO TAKE NOTE OF THE FACT THAT THERE IS INDEED AN OBSERVATION OF THEIR LORDSHIPS TO THE EFFECT THAT 'THIS IS TO BE NOTED, FOR DISALLOWING EXPENSES FROM BUSINESS OR PROFESSION ON THE GROUND THAT TDS HAS NOT BEEN DEDUCTED, TH E AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY THE END OF THE YEAR' BUT SUCH AN OBSERVATION MAY PROBABLY STEM FROM THE FACT THAT APPARENTLY THE INCOME - TAX DEPARTMENT DID NOT QUESTION THE LAW LAID DOWN BY THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL. CIT [2012] 16 ITR (TRIB) 1 (VISHAKAPATNAM) [SB] AND THAT IS PRECISELY WHAT THE SPECIAL BENCH HAD HELD. IN THESE CIRCUMSTANCES, THE QUESTION THAT WE SHOULD NORMALLY ASK OURSELVES IS WHETHER WE SHOULD PROCEED ON THE BASIS THA T THE SPECIAL BENCH DECISION IN THE CASE OF MERILYN SHIPPING AND TRANSPORT INDEED STANDS APPROVED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE ABOVEMENTIONED DECISION IN CIT V. VECTOR SHIPPING SERVICES P. LTD. [2013] 357 ITR 642 (ALL). 36. OF COURSE, THERE IS A SCHOOL OF THOUGHT THE VIEWS EXPRESSED BY THE HON'BLE COURTS ABOVE, WHETHER AS A PART OF THE DECISION OR AS ON OBITER DICTA OR IN ANY OTHER MAN NER, SHOULD BE GIVEN FULLEST POSSIBLE RESPECT, AND, WITHOUT GOING INTO MUCH ANALYSIS, FOLLOWED IN LETTER AND SPIRIT. AFTER ALL, EVERYTHING WE DO IS, AND SHALL ALWAYS REMAIN, SUBJECT TO THE JUDICIAL SCRUTINY BY THEIR LORDSHIPS, AND, IF THERE ARE ANY ERROR 8 ITA NOS. 468 & 505/CTK/2013 (A.Y : 2009 - 10) A ND OMISSION IN OUR BONA FIDE FOLLOWING THE ESTEEMED VIEWS OF THEIR LORDSHIPS, THESE ERRORS AND OMISSIONS CAN BE RECTIFIED AT THAT STAGE OF JUDICIAL SCRUTINY. ONE MAY POSSIBLY UNDERSTAND DISCOMFORT IN TREATING THE WORDS OF THE HON'BLE COURTS ABOVE AS A BLIN D MAN'S WALKING STICK RATHER THAN AS LUMINOSITY OF JUDICIAL LAMP ENABLING IMPARTING OF JUSTICE, AND THUS ERRING ON THE SIDE OF EXCESSIVE CAUTION, BUT, APART FROM ALL OTHER VIRTUES OF SUCH AN APPROACH, IT IS CERTAINLY A SAFE APPROACH. GOING BY THIS SCHOOL O F THOUGHT, NOW THAT THEIR LORDSHIPS OF THE HON'BLE JURISDICTIONAL HIGH COURT HAVE OBSERVED, IN WHATEVER SETTING AND CONTEXT, THAT 'THIS IS TO BE NOTED, FOR DISALLOWING EXPENSES FROM BUSINESS OR PROFESSION ON THE GROUND THAT TDS HAS NOT BEEN DEDUCTED, THE A MOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY THE END OF THE YEAR', WE COULD PROCEED ON THE BASIS THAT THIS PROPOSITION HAS THE APPROVAL OF THEIR LORDSHIPS. 37. THERE COULD ALSO BE A SCHOOL OF THOUGHT THAT SINCE THE CORRECTNESS OR OTHERWISE OF TH E CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL. CIT [2012] 16 ITR (TRIB) 1 (VISHAKAPATNAM) [SB] DID NOT EVEN FALL FOR CONSIDERATION BY THE HON'BLE JURISDICTIONAL HIGH COURT, IT CANNOT BE SAID THAT THE HON'BLE JURISDICTIONAL HIGH COURT HAS APPROVED THE V IEW TAKEN BY THE SPECIAL BENCH IN MERILYN SHIPPING AND TRANSPORTS. THE CONCEPTUAL SUPPORT FOR THIS PROPOSITION COULD BE THIS. AS A READING OF THE SUBSTANTIAL QUESTION OF LAW BEFORE THEIR LORDSHIP'S CASE WOULD CLEARLY SHOW THAT THE QUESTION WHICH FELL FOR A DJUDICATION BY THEIR LORDSHIPS WAS ALTOGETHER DIFFERENT, I.E., WHETHER CARRYING OUT OF WORK BY MERCATOR LINES LTD. UNDER THE MEMORANDUM OF UNDERSTANDING, WHICH INCLUDED CONTRACT, THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WERE ATTRACTED. AS THEIR LORDS HIPS OBSERVED IN UNAMBIGUOUS WORDS, THIS QUESTION DID NOT ARISE FROM THE TRIBUNAL'S ORDER AND THAT WAS THE REASON WHY THEIR LORDSHIPS DECLINE TO CONSIDER THE SAME. AS OBSERVED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. SUN ENGINEERING WORKS P. LTD. [1992] 198 ITR 297 (SC) (PAGE 320) : 'THE JUDGMENT MUST BE READ AS A WHOLE AND THE OBSERVATIONS FROM THE JUDGMENT HAVE TO BE CONSIDERED IN THE LIGHT OF THE QUESTION WHICH WERE BEFORE THIS COURT' AND THAT 'A DE CISION OF THIS COURT TAKES ITS COLOUR FROM THE QUESTIONS INVOLVED IN THE CASE IN WHICH IT IS RENDERED AND, WHILE APPLYING THE DECISION TO A LATER CASE, THE COURTS MUST CAREFULLY TRY TO ASCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DECISION OF THIS COURT AN D NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUDGMENT, DIVORCED FROM THE CONTEXT OF THE QUESTIONS UNDER CONSIDERATION BY THIS COURT, TO SUPPORT THEIR REASONING'. WHAT WAS THUS EXPRESSED FOR ANALYSING DECISION OF THE HON'BLE SUPREME COURT MUST EQUALLY APPL Y IN ANALYSING OF THE HON'BLE HIGH COURT'S JUDGMENT. IT COULD THUS BE, BY THIS SCHOOL OF THOUGHT, WHOLLY INAPPROPRIATE TO PROCEED ON THE BASIS OF THE RATIO OF MERILYN SHIPPING AND TRANSPORTS STANDS APPROVED BY THE HON'BLE JURISDICTIONAL HIGH COURT PARTICUL ARLY WHEN THAT ASPECT OF THE MATTER WAS NOT EVEN IN CHALLENGE BEFORE THEIR LORDSHIPS. HOWEVER, ONE OF THE DEMERITS IF WE CAN TERM IT AS A DEMERIT OF THIS SCHOOL OF THOUGHT IS THAT THERE IS AN INHERENT RISK OF BEING LESS THAN RIGHT IN SUCH A SUBJECTIVE DECI SION, AS IN ANY CEREBRAL PURSUIT. 9 ITA NOS. 468 & 505/CTK/2013 (A.Y : 2009 - 10) IN VIEW OF THE AFORESAID DISCUSSION AND THE FACT THAT THE HON'BLE GUJARAT HIGH COURT AND HON'BLE CALCUTTA HIGH COURT HAD DECIDED THE ISSUE ON MERIT, WE DO NOT AGREE WITH THE SUBMISSION OF THE ASSESSEE AND ARE OF THE VIEW THAT THE DECISION OF MERILYN SHIPPING AND TRANSPORTS VS. ADDL. CIT, 16 ITR (TRIB) 1 ( SUPRA ) WILL NOT ASSIST THE ASSESSEE. WE HAVE ALREADY DISCUSSED THAT IN THE CASE OF VECTOR SHIPPING SERVICES (P) LTD. ( SUPRA ) THE QUESTION BEFORE THE HON'BLE HIGH COURT DID NOT RELATE TO PAYABLE OR PAID AND THE HON'BLE HIGH COURT HAS NOT DECIDED THE QUESTION ON MERIT BUT HAS SIMPLY MADE OBSERVATION AS THE COUNSEL FOR THE DEPARTMENT DID NOT QUESTION THE LAW LAID DOWN BY THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDL. CIT, 16 ITR (TRIB) 1 ( SUPRA ). EVEN THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT AS WELL AS THE HON'BLE GUJARAT HIGH COURT WHICH WERE PRIOR TO THE DECISION RENDERED BY THE HON'BLE ALLAHABAD HIGH COURT WERE NOT CITED BEFORE THE HON'BLE ALLAHABAD HIGH COURT AS THE QUESTION INVOLVED DID NOT RELATE TO THIS ISSUE. 4. IN VIEW OF OUR AFORESAID DISCUSSION, WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER OF CIT(A) AND CONFIRM THE ORDER . WE ACCORDINGLY DISMISS THE ONLY GROUND IN ASSESSEES APPEAL AS WELL AS GROUND NO. 2 IN REVENUES APPEAL. 5 . GROUND NO. 3 IN REVENUES APPEAL RELATES TO THE DELETION OF THE DISALLOWANCE OF RS. 4,62,814/ - . THE SAID AMOUNT HAS BEEN DELETED BY THE CIT(A) BY HOLDING AS UNDER : THE ENTIRE EXPLANA TION AS ABOVE, FOR RS.4,62,814/ - IS BASED ON THE FACT THAT THE AMOUNTS CAN BE BROKEN DOWN TO SMALL AMOUNTS WHICH ARE BEING PAID STRICTLY FOR TRANSPORTING GOODS AND ON EACH OCCASIONS THE PAYMENT WAS MADE DIRECTLY TO THE ENGAGED TRUCK DRIVERS. IN SOME CASES, IT HAS BEEN DONE BY M/S S.M.AGARWAL, AGENT OF M/S TATA STEEL ON BEHALF OF THE APPELLANT FOR STEEL TRANSPORTED TO THE APPELLANT'S SITE. IN OTHER CASES, IT HAS BEEN DONE BY M/S SRIKANT AGENCY WHERE AS IN 7(SEVEN) 10 ITA NOS. 468 & 505/CTK/2013 (A.Y : 2009 - 10) INSTANCES, THE APPELLANT HAD MADE IT DIRECTL Y TO TRUCK DRIVERS, EACH AMOUNT BEING LESS THAN RS.10,000/ - . FOR DIRECT PAYMENTS BY APPELLANT, THE CONCERNED TRUCK NUMBERS , DATES OF PAYMENTS AND AMOUNTS PAID WERE INDICATED IN A CHART FILED IN A PAPER BOOK. CONSIDERING THESE FACTS, THE APPELLANT CLAIMED THAT NO AMOUNT OUT OF RS.4,62,814/ - COULD BE DISALLOWED U/S 40A(IA). THE REMAND REPORT DOES NOT SHOW THAT THE AO HAS APPLIED HIS MIND TO THE FACTUAL CLAIM AS MADE ABOVE. SINCE THERE IS NO CATEGORICAL REBUTTAL BY THE AO, THE APPELLANTS CLAIM IS ACCEPTED AND THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.4,62,814/ - . THE LD. DR EVEN THOUGH VEHEMENTLY RELIED ON THE ORDER OF THE AO BUT COULD NOT ADDUCE ANY COGENT MATERIAL OR EVIDENCE WHICH MAY PROVE THAT THE FINDING GIVEN BY THE CIT(A) THAT THE PAYMENT HAS DIRECTLY BEEN MADE TO THE TRUCK DRIVERS AND EACH PAYMENT IS LESS THAN RS. 10,000/ - IS ERRONEOUS. THE TRUCK NUMBER, DATE OF PAYMENT AND THE AMOUNTS PAID WERE ALSO NOT DISPUTED. UNDER THESE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY ILLEGALITY OR INFIRMI TY IN THE ORDER OF CIT(A). WE, THEREFORE, DISMISS GROUND NO. 3 OF REVENUES APPEAL. 6. GROUND NOS. 1 AND 4 OF REVENUES APPEAL AS CONTENDED BY THE LD. AR RELATE TO THE COMMON ISSUE RELATING TO DELETION OF THE ADDITION OF RS.12,10,000 / - . THE BRIEF FACTS RELATING TO THESE GROUNDS ARE THAT DURING THE COURSE OF ASSESSMENT THE AO NOTED THAT THE ASSESSEE HAS INTRODUCED SUM OF RS. 12,10,000/ - IN HIS CAPITAL ACCOUNT IN THE FORM OF CASH OUT OF WHICH RS. 10,10,000/ - WAS INTRODUCED IN VARIOUS I NSTALMENTS IN THE MONTHS OF APRIL AND JUNE, 2008. IN THE ABSENCE OF ANY EXPLANATION BEING OFFERED, THE AO MADE THE ADDITION U/S 68. WHEN THE MATTER WENT BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT IN MARCH, 2008 THE ASSESSEE HAD WITHDRAWN SUM OF RS. 2 LACS FROM HIS C ASH C REDIT ACCOUNT NO. 10508948002 WITH SBI, RS. 1,01,000/ - FROM CASH CREDIT ACCOUNT NO. 10508848451 WITH SBI AND RS. 10,50,000/ - FROM CURRENT ACCOUNT NO. 0328201002034 WITH CANARA BANK. OUT OF SUCH WITHDRAWAL OF RS. 14.5 LACS, THE ASSESSE E DEPOSITED BACK RS. 12,10,000/ - AND THE INTRODUCTION OF THE CASH IN CAPITAL ACCOUNT IS NOTHING BUT A CIRCULATING CASH. IN THE REMAND REPORT THE AO 11 ITA NOS. 468 & 505/CTK/2013 (A.Y : 2009 - 10) HAD A CHANCE TO EXAMINE THE EXPLANATION AND HE HAD OBSERVED THAT THERE WAS CASH WITHDRAWAL FROM THE CAPITAL ACCOUNT AMOUNTING TO RS. 9,40,000/ - IN MARCH, 2008 AND THIS WILL EXPLAIN THE CASH INTRODUCED AMOUNTING TO RS.3,50,000/ - IN APRIL, 2008. THE AO ALSO ACCEPTED THAT OUT OF RS. 12,10,000/ - , RS. 2 LACS WERE INTRODUCED IN FEBRUARY, 2009. CIT(A), THEREFORE, UL TIMATELY AFTER ANALYSING THE BANK ACCOUNT OF THE ASSESSEE AND ANALYSING THE REMAND REPORT REJECTED THE PLEA OF THE AO THAT THE ASSESSEE WOULD HAVE NOT KEPT CASH IN HAND FOR TWO MONTHS AND DELETED THE ADDITION. 7. WE HEARD THE RIVAL SUBMISSIONS AND CAREF ULLY CONSIDERED THE SAME. WE NOTED THAT THE CIT(A) HAS GIVEN A FINDING OF FACT AFTER GIVING DUE OPPORTUNITY TO THE AO AND CALLING FOR THE REMAND REPORT IN RESPECT OF EVIDENCE SUBMITTED BY THE ASSESSEE. THE AO HIMSELF ACCEPTED THAT THE ASSESSEE HAS WITHDR AWN THE MONEY FROM HIS BANK ACCOUNT. CIT(A) DULY EXAMINED THE PASSBOOK. IN OUR OPINION, IT IS NOT A CASE OF VIOLATION OF RULE 46A. LD. DR EVEN THOUGH VEHEMENTLY RELIED ON THE ORDER OF THE AO BUT NO COGENT MATERIAL OR EVIDENCE WAS BROUGHT TO OUR KNOWLEDG E WHICH MAY COMPEL US TO INTERFERE WITH THE ORDER OF CIT(A). WE, ACCORDINGLY, CONFIRM THE FINDING GIVEN BY CIT(A) DELETING THE ADDITION. THUS, GROUND NOS. 1 & 4 TAKEN BY THE REVENUE STAND DISMISSED. 8. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE STAND DISMISSED. 9. ORDER PRONOUNCED IN PURSUANCE OF RULE 34(4) OF ITAT RULES, 1963 BY PUTTING ON NOTICE BOARD OF THE BENCH AT CUTTACK ON 1 2 /03/2015. S D / - (D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER DATED : 1 2 /03/ 201 5 *SSL* 12 ITA NOS. 468 & 505/CTK/2013 (A.Y : 2009 - 10) COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER ,