ACIT 11(1), MUMBAI V. PICTURE THIS, MUMBAI

ITA 5599/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71516 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 05-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Difference of opinion
• Section: 194C; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH, MUMBAI , BEFORE SHRI H.L.KARWA , PRESIDENT & SHRI N.K.BILLAIYA , AM ITA N O. 5599 / MUM/ 20 1 2 ( ASSESSMENT YEAR : 20 0 7 - 20 08 ) ACIT 11(1), MUMBAI` VS. M/S PICTURE THIS, 1 BELVEDERE, 35, REVELLO STREET, BANDRA (W) , MUMBAI - 400 050 PAN/GIR NO. : A AC FP 2869 A ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : SHRI SANJEEV JAIN /ASSESSEE BY : SHRI BHADRESH DOSHI DATE OF HEARING : TH DATE OF PRONOUNCEMENT : 30 TH OCTOBER, 2013 O R D E R PER N.K.BILLAIYA , AM : THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE CIT(A) - 3 , MUMBAI , DATED 29 - 6 - 2012 , PERTAINING TO ASSESSMENT YEAR 20 0 7 - 20 08 . 2 . THE REVENUE HAS RAISED FOLLOWING THREE SUBSTANTIVE GROUNDS OF APPEAL : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) , MUMBAI HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 34,83,116/ - MADE UNDER SECTION 40(A)(IA) WHEN THE ASSESSEE HAD NOT DEPOSITED TAX DEDUCTED IN GOVT. ACCOUNT IN PRESCRIB ED TIME, AND EVEN THOUGH THE AMENDMENT IN SECTION 40(A)(IA) IS NOT RETROSPECTIVE AS DECIDED BY ITAT SPECIAL BENCH ITA NO. 5599 / 1 2 2 (MUMBAI) IN THE CASE OF BHARATI SHIPYARD LTD. VS. DCIT IN ITA NO.2404/MUM/2009. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) MUMBAI HAS ERRED IN DELETING DISALLOWANCE U/S.40(A)(IA) ON ACCOUNT OF SHORT DEDUCTION OF TDS ON VARIOUS EXPENSES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) MUMBAI HAS ERRED IN DELETING THE ADDITION MADE U/S.68 OF IT ACT AMOUNTING TO RS.11,47,081/ - WHEN THE ASSESSEE FAILED TO RECONCILE THE DISCREPANCY IN CASH BALANCE DURING SURVEY PROCEEDINGS AND EVEN DURING ASSESSMENT PROCEEDING U/S.143(3) OF THE IT ACT, 1961. 3 . AT THE VERY OUTSET, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DECISION OF THE SPECIAL BENCH OF THE ITAT MUMBAI HAS BEEN REVERSED BY THE HON BLE KOLKATA HIGH COURT IN THE CASE OF CIT VS. VIRGIN CREATIONS, DECIDED IN ITA NO. 302 OF 2011, VIDE DATED 23 - 11 - 2011. LEARNED COUNSEL FURTHER POINTED OUT THAT THE DECISION OF THE HON BLE KOLKATA HIGH COURT HAS BEEN FOLLOWED BY THE TRIBUNAL MUMBAI BENCH IN ITA NO.1321/MUM/2009. 3.1 LEARNED DR FAIRLY CONCEDED TO THIS. 3.2 WE HAVE CAREFULLY PERUSED THE GRIEVANCE OF THE REVENUE VIS - - VIS THE O RDER OF THE LOWER AUTHORITIES. WE FIND FORCE IN THE CONTENTION OF THE LEARNED COUNSEL. THE ISSUE WHETHER THE AMENDMENT BROUGHT TO IN SECTION 40(A)(IA) IS PROSPECTIVE OR RETROSPECTIVE, IS NOW SETTLED BY THE DECISION OF THE HON BLE KOLKATA HIGH COURT (SUPRA) . SINCE IT HAS BEEN HELD THAT THE AMENDMENT IS RETROSPECTIVE, THEREFORE, WE DIRECT THE AO TO DELETE THE ADDITION MADE ON ACCOUNT OF THE LATE PAYMENT OF TDS, ITA NO. 5599 / 1 2 3 THOUGH PAID BEFORE THE DUE DATE OF FILING OF THE RETURN. GROUND NO.1 IS ACCORDINGLY DISMISSED. 4. GRO UND NO. 2 RELATES TO THE SHORT DEDUCTION OF TAX ON VARIOUS EXPENSES. 4. 1 THE AO CONSIDERED THIS ISSUE IN PARA 5.2(B) AT PAGE 5 OF HIS ORDER. THE AO NOTICED THAT IN RESPECT OF CERTAIN EXPENSES, THE ASSESSEE HAS DEDUCTED TAX AT A LOW RATE, THEN THAT PROVI DED UNDER THE ACT. THE AO DISALLOWED THE EXPENSES OF WHICH THERE WAS SHORT DEDUCTION OF TAX. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) . THE ASSESSEE STRONGLY CONTENDED THAT THE CORRECT PROVISION FOR MAKING TDS WAS AS PER SECTION 194C OF THE ACT, WH EREAS THE AO WAS OF THE VIEW THAT THE TAX SHOULD HAVE BEEN DEDUCTED UNDER SECTION 194I OF THE ACT. AFTER CONSIDERING THE FACTS AND SUBMISSIONS OF THE ASSESSEE, THE CIT(A) WAS OF THE OPINION THAT SECTION 40(A)(IA) OF THE ACT REFERS ONLY TO DEDUCTION OF TAX AND THE PAYMENT OF THE SAME TO THE GOVERNMENT ACCOUNT. THE CIT(A) FURTHER OBSERVED THAT IF THERE IS ANY SHORTFALL DUE TO DIFFERENCE OF OPINION AS TO THE TAXABILITY OF ANY ITEM OR THE NATURE OF PAYMENTS FALLING UNDER VARIOUS TDS PROVISIONS, THE ASSESSEE CAN BE DECLARED TO BE AN ASSESSEE IN DEFAULT UNDER SECTION 201 OF THE ACT BUT NO DISALLOWANCE CAN BE MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA). THE CIT(A) RELIED UPON THE DECISION OF THE KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. S.K.TEK RIWAL, DECIDED IN ITA ITA NO. 5599 / 1 2 4 NO.1135/KOL/2010, DATED 21 - 10 - 2011 . THE CIT(A) ALSO FOLLOWED THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN ITA NO.20/MUM/2010, DATED 8 - 7 - 2011 AND DELETED THE DISALLOWANCE MADE BY THE AO. 4.2 BEFORE US, LEARNED DR COULD NOT BRING ANY DISTINGUISHING CASE LAW IN FAVOUR OF THE REVENUE. 4.3 PER CONTRA , THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DECISION OF THE KOLKATA BENCH OF THE TRIBUNAL HAS BEEN CONFIRMED BY THE HON BLE HIGH COURT OF KOLKATA. 4.4 WE HAVE CAREFULLY PERUSED TH E ORDERS OF THE LOWER AUTHORITIES. WE FIND FORCE IN THE CONTENTION OF THE COUNSEL. THE DECISION RELIED UPON BY THE CIT(A) IN THE CASE OF S.K.TEKRIWAL (SUPRA) HAS BEEN CONFIRMED BY THE HON BLE KOLKATA HIGH COURT IN ITA NO. 183/2012, DATED 3 - 12 - 2012 . THEREFOR E, RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISION, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE CIT(A) . GROUND NO. 2 IS ACCORDINGLY DISMISSED. 5 . GROUND NO.3 RELATES TO DELETION OF THE ADDITION MADE UNDER SECTION 68 OF THE ACT AMOUN TING TO RS. 11,47,081/ - . 5.1 DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE CASH SHORTAGE TO THE TUNE OF RS. 11,47, 081/ - WAS FOUND DURING THE COURSE OF SURVEY ACTION ON THE PREMISES OF THE ASSESSEE ON 6 - 2 - 2007. THE ASSESS EE WAS ASKED TO EXPLAIN THE SHORTFALL OF THE CASH FOUND AT THE TIME OF SURVEY. THE ASSESSEE ITA NO. 5599 / 1 2 5 EXPLAINED THAT PARTNER HAD WITHDRAWN THE CASH FOR PERSONAL EXPENSES WHICH REMAINED TO BE DEBITED TO THEIR ACCOUNT AT THE TIME OF SURVEY WHICH HAS RESULTED INTO CASH SHORTAGE FOUND AT THE TIME OF SURVEY VIS - - VIS CASH IN HAND AS PER BOOKS. THE AO DID NOT ACCEPT THIS SUBMISSION OF THE ASSESSEE. THE AO WAS OF THE FIRM BELIEF THAT THE ASSESSEE SHOULD HAVE MAINTAINED CASH BOOK UP - TO - DATE. ON THAT NOTE, THE AO ADDED BACK R S. 11,47,081/ - AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 5. 2 BEFORE THE CIT(A) , THE ASSESSEE REITERATED ITS CONTENTION. AFTER CONSIDERING THE FACTS AND SUBMISSIONS AND ALSO PERUSING THE UP - TO - DATE CASH BOOK FILED BY THE ASSESSEE, THE CIT(A) D ELETED THE ADDITION OF RS. 11,47,081/ - . 5. 3 BEFORE US, LEARNED DR RELIED UPON THE FINDINGS OF THE AO. 5.4 ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. 5.5 WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IT IS NOT DISPUTE THAT AT THE TIME OF SURVEY CASH WAS FOUND AT RS. 2,05,121/ - , WHEREAS THE CASH IN HAND AS PER TRIAL BALANCE SUBMITTED AT THE TIME OF SURVEY WAS AT RS. 13,52,202/ - . THUS, THERE WAS A SHORTAGE OF CASH OF RS . 11,47,081/ - . THIS HAS BEEN ADDED BY THE AO UNDER SECTION 68 OF THE ACT. WE FAIL TO UNDERSTAND HOW A DEBIT BALANCE CAN BE ADDED AS UNEXPLAINED CASH CREDIT. IF THERE WAS A SHORTAGE OF ITA NO. 5599 / 1 2 6 CASH AT THE MOST A PRESUMPTION CAN BE MADE THAT THE CASH MUST HAVE BEEN S PENT ON SOME ACCOUNT/EXPENDITURE. BUT BY NO STRET CH OF IMAGINATION, THE DIFFERENCE CAN BE ADDED UNDER SECTION 68 OF THE ACT. MOREOVER, THE CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE UP - TO - DATE CASH BOOK CLEARLY SHOWS THE WITHDRAWALS MADE BY THE PARTNE RS WHICH ENTRIES COULD NOT BE MADE AT THE TIME OF SURVEY, THAT BEING FACT OF THE MATTER, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE CIT(A). GROUND NO. 3 IS ACCORDINGLY DISMISSED. 6 . RESULTANTLY , THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 30/10 / 2013 . SD/ - ( ) ( H.L.KARWA ) SD/ - ( ) ( N.K.BILLAIYA ) / PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; DATED : 30/10/ 2013 /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI