P.Sivalingam, Trichy V. ITO, Trichy

ITA 579/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90714 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 25-05-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 23-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR NISCHAL
• Assessee Lawyers: C MARUTHAPPAN
• Keywords: Opportunity of being heard

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . . , ! # $ , % ' BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO . 579/MDS/2015 ( / ASSESSMENT YEAR: 2006-07) MR. S.SIVALINGAM B-31, FIRST MAIN ROAD, RAMALINGA NAGAR, WORAIYUR TRICHY-620 003. VS INCOME TAX OFFICER, WARD-II(1)(CON) TRICHY. PAN:AROPS 1779H ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. C.MARUTHAPPAN, C.A. /RESPONDENT BY : DR.NISCHAL, JCIT /DATE OF HEARING : 25 TH MAY, 2015 /DATE OF PRONOUNCEMENT : 29 TH JULY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, TIRUCHI RAPALLI DATED 28.01.2015 FOR THE ASSESSMENT YEAR 2006-07. 2. THE FIRST ISSUE IN THE APPEAL OF THE ASSESSEE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTA INING THE DISALLOWANCE OF ` 1,00,000/- OUT OF FREIGHT CHARGES INCURRED BY THE ASSESSEE. THE ASSESSEE, AN INDIVIDU AL, ENGAGED IN THE BUSINESS OF WHOLESALE DISTRIBUTION O F 2 ITA NO.579/MDS/2015 MACHINES FILED RETURN OF INCOME ON 31.10.2006 ADMIT TING INCOME FROM BUSINESS OF ` 3,55,308/- AND AGRICULTURAL INCOME OF ` 1,80,000/-. THE ASSESSMENT WAS COMPLETED ON 26.12.2008 DETERMINING THE INCOME FROM BUSINESS AT ` 7,60,490/-. WHILE COMPLETING THE ASSESSMENT, THE AS SESSING OFFICER DISALLOWED ` 2,27,076/- OUT OF FREIGHT OUTWARD EXPENSES ON THE GROUND THAT DURING THIS ASSESSMENT YEAR THERE HAS BEEN INCREASE OF 209% OF THESE FREIGHT OU TWARD WHEN COMPARED TO PRECEDING ASSESSMENT YEAR THOUGH T HE TURNOVER HAS COME DOWN. THE ASSESSING OFFICER COMPA RING THE FREIGHT CHARGES INCURRED WITH RESPECT TO THE TU RNOVER FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 2005 -06 AND IMMEDIATELY SUCCEEDING ASSESSMENT YEAR I.E. 2007-08 DISALLOWED ` 2,27,076/- OUT OF FREIGHT OUTWARD EXPENSES INCURRED BY THE ASSESSEE AS EXCESSIVE. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE DISALLOWANCE TO ` 1,00,000/- AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 3. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMI TS THAT THERE IS NO JUSTIFICATION IN DISALLOWING THE F REIGHT 3 ITA NO.579/MDS/2015 EXPENSES AS EXCESSIVE. AUTHORIZED REPRESENTATIVE S UBMITS THAT ESTIMATION IS ON HIGHER SIDE. 4. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDERS OF LOWER AUTHORITIES. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS APPARE NTLY CLAIMED MORE THAN 200% OF FREIGHT OUTWARD EXPENSES DURING THIS ASSESSMENT YEAR WHEN COMPARED TO EARLIER ASSES SMENT YEAR. IT WAS OBSERVED THAT THOUGH THERE IS SUBSTAN TIAL INCREASE IN EXPENSES OF MORE THAN 200%, THE ASSESSE E COULD NOT SHOW ANY CORRESPONDING INCREASE IN THE PROFITS . IT WAS ALSO OBSERVED THAT THERE WILL BE SOME INCREASE IN F REIGHT OUTWARD EXPENSES IN VIEW OF THE FACT THAT LORRY FRE IGHT HAD INCREASED SUBSTANTIALLY AND ALSO IN EARLIER YEARS F REIGHT USED TO BE CHARGED ON THE NUMBER OF CARTONS IRRESPECTIVE OF THE WEIGHT OF THE CONTENTS. HOWEVER, DURING THIS ASSESS MENT YEAR FREIGHT WERE CHARGED EQUIVALENT TO THE WEIGHT TRAN SPORTED OF GOODS OF I.V. FLUIDS CONTAINED IN BOTTLES. THUS, T HE 4 ITA NO.579/MDS/2015 COMMISSIONER OF INCOME TAX (APPEALS) TAKING INTO AC COUNT THE SUBMISSIONS OF THE ASSESSEE RESTRICTED THE DISA LLOWANCE OF EXPENSES TO ` 1,00,000/- AS REASONABLE ON ACCOUNT OF FREIGHT OUTWARD EXPENSES. TAKING THE TOTALITY OF T HE FACTS AND CIRCUMSTANCES OF THE CASE INTO CONSIDERATION, W E RESTRICT THE DISALLOWANCE TO ` 50,000/- AS JUST AND REASONABLE IN THIS CASE. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE I S PARTLY ALLOWED. 6. THE NEXT GROUND IN THE GROUNDS OF APPEAL OF THE ASSESSEE IS THAT COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN SUSTAINING THE DISALLOWANCE OF INTEREST OF ` 2,51,575/- INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT . THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT N OTICED THAT ASSESSEE HAS CLAIMED INTEREST TO THE TUNE OF ` 3,85,825/- AND THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH DETAILS OF CREDITORS AND AMOUNTS OF INTEREST PAID TO EACH CREDITORS. THE ASSESSEE BY LETTER DATED 3.12.2008 FURNISHED THE PARTICULARS. ON GOING THROUGH THE PARTICULARS, THE ASSESSING OFFICER NOTICED THAT INTEREST WAS PAID TO 18 INDIVIDUALS AND NO TDS WAS DEDUCTED BY THE ASSESSE E AND 5 ITA NO.579/MDS/2015 THEREFORE, HE DISALLOWED SUCH INTEREST INVOKING PRO VISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF T AX AT SOURCE. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) SUSTAINED THE DISALLOWANCE TO THE EXTENT OF ` 2,51,575/- AND DELETED ` 1,34,250/- AFTER EXAMINING THE DETAILS FURNISHED B Y THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPE ALS) NOTICED THAT ASSESSEE HAS DEDUCTED TDS ON PAYMENTS MADE TO 5 INDIVIDUALS TOTALING TO ` 1,34,250/- AND THEREFORE, HE DIRECTED THE ASSESSING OFFICER TO DELETE SUCH AMOUN T. COMING TO THE BALANCE INTEREST OF ` 2,51,575/-, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THIS AMOUNT WAS PAID TO 13 INDIVIDUALS AND THE ASSESSEE THOUGH STATED THAT FORM NO. 15G WAS OBTAINED FROM THESE PA RTIES, SINCE THE ASSESSEE HAS NOT PRODUCED THESE FORMS EIT HER BEFORE THE ASSESSING OFFICER OR BEFORE THE COMMISSI ONER OF INCOME TAX (APPEALS), HE SUSTAINED THE DISALLOWANCE . 7. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMI TS THAT THE ASSESSEE HAS OBTAINED FORM NO.15G FROM AL L THE 13 PERSONS AND THEREFORE NEED NOT DEDUCT TDS. AUTHORI ZED REPRESENTATIVE FOR THE ASSESSEE SUBMITS THAT NEITHE R THE 6 ITA NO.579/MDS/2015 ASSESSING OFFICER NOR THE COMMISSIONER OF INCOME TA X (APPEALS) CALLED FOR THE FORMS OF 15G AND THEREFOR E IT IS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE. 8. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT IT IS T HE DUTY OF THE ASSESSEE TO PRODUCE FORM NO.15G BEFORE THE AUTHORITIES TO CLAIM EXEMPTION. SINCE IN THE ABSENC E OF FORM NO.15G FURNISHED BY THE ASSESSEE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS CORRECT. 9. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. ON HEARING BOTH THE PARTIES, WE ARE OF THE VIEW THA T THE ASSESSEE SHOULD BE GIVEN ONE MORE OPPORTUNITY TO FI LE FORM NO.15G SAID TO HAVE BEEN OBTAINED FROM ALL THESE 1 3 PERSONS BEFORE THE ASSESSING OFFICER. THUS, WE REM IT THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER, WH O SHALL EXAMINE FORM NO. 15G OBTAINED BY THE ASSESSEE, AFTE R PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD. TH E ASSESSEE SHALL CO-OPERATE WITH THE ASSESSING OFFICE R. IN CASE FORM NO.15G SAID TO HAVE BEEN OBTAINED BY THE ASSES SEE FROM ALL THESE 13 PERSONS ARE NOT PLACED BEFORE THE 7 ITA NO.579/MDS/2015 ASSESSING OFFICER, THE DISALLOWANCE SHALL BE SUSTAI NED AND THE ASSESSING OFFICER IS DIRECTED TO DISALLOW THE I NTEREST. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY, 2015. SD/- SD/- ( . $ ) ( & () ) (D.KARUNAKARA RAO) (CHALLA NAGENDR A PRASAD ) + / ACCOUNTANT MEMBER ( + / JUDICIAL MEMBER ( /CHENNAI, - /DATED 29 TH JULY, 2015 SOMU /0 10 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 2 () /CIT(A) 4. 2 /CIT 5. 0 6 /DR 6. /GF .