M/s Torsteel Ltd, Bhubaneswar V. ACIT, Bhubaneswar

ITA 59/CTK/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4377 (ITAT-CUTTACK)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 16-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 28-01-2011
• Court: TRIBUNAL
• Department Lawyers: P TRIPATHY
• Assessee Lawyers: M UDAYAPURIYAB AGARWALLA ARS
• Keywords: Revised return; TDS
• Section: 43B; 40(a)(ia)

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 059/CTK/2011 (ASSESSMENT YEAR 2005 - 06) TORSTEEL LIMITED, OSIL HOUSE, GANGADHA R MEHER MARG,BHUBANESWAR 751 024 PAN:AACCT 0917 A VERS US ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), BHUBANESWAR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI M.UDAYAPURIYA/B.AGARWALLA, ARS FOR THE RESPONDENT SHRI P.TRIPATHY, DR ORDER SHRI K .K.GUPTA, ACCOUNTANT MEMBER : THE ASSESSEE IS IN APPEAL AGITATING THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) RAISING THE FOLLOWING GROUNDS. 1. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) IS WHOLLY UNJUSTIFIED TO HOLD THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE TO PROVE THAT THE ASST. ORDER WAS SERVED ON DT. 24.02.2010 WHICH IS NOT CORRECT AND HIS HOLDING THAT THE ASST. ORDER WAS NOT BARRED BY LIMITATION ON SUCH FLIMSY AND IRRELEVANT LOGIC IS UNREASONABLE, VITIATED AND ILLEGAL & UNSUSTAINABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS WHOLLY UNJUSTIFIED IN CONFIRMING THE ADDITION OF RS.1,15,972 AS UNACCOUNTED SALE BRUSHING ASIDE ALL THE SUBMISSIONS & MATERIAL PRODUCED BEFORE HIM AND THEREFORE THE ORDER BEING ILLEGAL, BAD IN LAW AND ARBITRARY SHOULD BE INTERFERED WITH IN THE FACTS AND CIRCUMSTANCE OF THE CASE. ITA NO.059/CTK/2011 2 3. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE DELETED THE DISALLO WANCE OF RS.60,92,836 U/S. 40(A) (IA) OF THE INCOME TAX ACT, 1961 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IS NOT JUSTIFIED TO DIRECT THE ASSESSING OFFICER TO ONCE AGAIN EXAMINE THE TDS DETAILS FOR ALLOWING NECESSARY RELIEF WHEN THE BASIS, DUE DATES, DATE OF PAYMENT OF TDS, ETC. WERE AVAILABLE IN FORM OF A T ABLE IN THE ASSESSMENT ORDER ITSELF. THEREFORE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL) SETTING ASIDE THE MATTER TO THE ASSESSING OFFICER IS INCORRECT, ILLOGICAL, BAD IN LAW & UNSUSTAIN ABLE IN THE FACTS & CIRCUMSTANCES OF THE CASE. 4. FOR THAT ANY OTHER GROUNDS IF ANY SHALL BE URGED AT THE TIME OF HEARING. 2. THE BRIEF FACTS ON THE ISSUES IN DISPUTE ARE THAT THE ASSESSEE COMPANY HAS FI LED ITS REVISED RETURN OF INCOME SHOWING A LOSS O F RS.7,27,781 FOR THE ASSESSMENT YEAR 2005 - 06. THE CASE WAS SELECTED FOR SCRUTINY AND IN COMPLIANCE TO NOTICES RECEIVED THE ASSESSEE COMPANY HAS PRODUCED NE CESSARY DETAILS AS ASKED FOR FROM TIME TO TIME ALONG WITH THE BOOKS OF ACCOUNT FOR VERIFICATION IN T HE MONTH OF OCTOBER AND NOVEMBER 2007. HOWEVER, THE COMPANY DID NOT RECEIVE THE ASSESSMENT ORDER TILL 3L MARCH 2008. THEN THE ASSESSEE COMPANY, TO ITS UTMOST SURPRISE RECEIVED THE ASSESSMENT ORDER ON 22 FEBRUARY 2010 DISALLOWING TH E EXPENDITURE OF RS. 60,9 2,836 UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT,1961 AND ADDITION OF RS 1,15,972 ITA NO.059/CTK/2011 3 TREATING THE SAME AS U NACCOUNTED SALES UNDER SECTION 145A OF THE INCOME TAX , 1961 AND DETERMINED THE TOTAL INCOME AT RS. 54,81,027 . THE ASSESSING OFFICER DURING THE COURS E OF PROCEEDINGS U/S.143(3) HELD THAT THE ASSESSEE HAD NOT DEPOSITED THE TAX DEDUCTED AT SOURCE BY THE STIPULATED DATE SPECIFIED IN SECTION 200(1) OF THE I.T.ACT. HE DISALLOWED THE SUM OF RS.60,92,836 ON THE BASIS OF EXPENSES CLAIMED SUBJECT TO DEDUCTION O F TAX AT SOURCE U/S.194C, 194J AND 194H. INVOKING THE PROVISIONS U/S.145A HE ALSO RECONCILED THE SALES AS GIVEN IN THE P & L ACCOUNT TO THE GROSS SALES INCLUDING SALES TAX PAID, ENTRY TAX PAID CONSIDERED UNDER THE PROVISIONS OF SECTION 43B. HE CONSIDERED S UPPRESSION OF SALES AMOUNTING TO RS.1,15,972. HE ALSO CONSIDERED TDS DEFAULT FOR LEVY OF INTEREST U/S.200(1A) AMOUNTING TO RS.15,175 WHICH WAS TAKEN UP BY THE ASSESSING OFFICER IN SEPARATE PROCEEDINGS. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APP ELLATE AUTHORITY WHO CONFIRMED THE ADDITIONS U/S.40(A)(IA) AND THE SUPPRESSION OF SALES AMOUNTING TO R S.1,15,972 WHICH IN TURN HAVE BEEN RAISED BY THE ASSESSEE BEFORE US IN GROUNDS NO.2 AND 3. IN THE FIRST GROUND, THE ASSESSEE HAS ALSO AGITATED THE NON - REC EIPT OF THE ASSESSMENT ORDER EVEN AFTER A GAP OF MORE THAN TWO YEARS WHICH WAS NOTED BY THE LEARNED CIT(A) AS ASSESSEE NOT PRODUCING ANY EVIDENCE WHATSOEVER IN SUPPORT OF THE CLAIM THAT THE ORDER WAS RECEIVED BY THE ASSESSEE - COMPANY BELATEDLY ON 24.2.2010 THOUGH THE ASSESSMENT ORDER IS DATED 26.11.20L07 WHICH ENTITLED IT TO PURSUE AN APPEAL BEFORE IT IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT. ITA NO.059/CTK/2011 4 3. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENT SUBMITTED ON THE FIRST ISSUE REGARDING THE B ELATED SERVING OF ORDER AFTER A GAP OF TWO YEARS THAT IT IS THE DEPARTMENT WHO OUGHT TO PRODUCE EVIDENCE THAT THE DEMAND HAD BEEN RAISED WITHIN THE LIMITATION AS PROVIDED IN PURSUANCE TO NOTICE U/S.143 ( 2) AND NOT THE OTHER WAY WHICH THE LEARNED CIT(A) S OUG HT TO CLARIFY FROM THE ASSESSEE APPELLANT BEFORE HIM. HE PRAYED THAT A PROPER DIRECTION MAY BE GIVEN IN VIEW OF THE FACT THAT THE ASSESSEE RELIED ON THE DECISION OF HONBLE MP HIGH COURT DECISION IN THE CASE OF CIT V. TARACHAND KHUSHIRAM [2008] 303 ITR 29 8 (MP). ON THE MERIT ADDITIONS, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE DUE DATE OF PAYMENT OF TDS AMOUNT WAS THE FIRST WEEK OF THE MONTH IMMEDIATELY AFTER THE CLOSE OF THE ASSESSMENT YEAR WAS TO BE PAID OR DEDUCTED BEFORE THE DUE DATE OF FILING OF RETURN INDICATES THAT THE ASSESSEE BEING A LIMITED COMPANY WAS TO FILE THE RETURN ON 3 1.10 .2005. HE NOTED THAT ALL THE PAYMENTS FOR TAX DEDUCTION AT SOURCE UNDER THE VARIOUS SECTIONS IN CHAP TER XVIIB HAVE BEEN PAID IN ACCORDANCE WITH THE PROVISIONS OF SECTION 40(A)(IA) , THEREFORE COULD NOT BE SUBJECTED TO INTERPOLATE THE DATE WHEN THE AMOUNT OF CREDIT WAS GIVEN FOR THE INCOME WHICH REMAINED EITHER PAID OR PAYABLE TO THE PAYEE. THEREFORE, IT I S APPARENT ON THE ORDER ITSELF THAT THE ASSESSEE WAS ENTITLED TO MAKE THE PAYMENT OF TDS TILL THE DUE DATE OF FILING OF THE RETURN WHEN THE DUE DATE OF PAYMENT OF TDS WAS THE FIRST WEEK OF THE IMMEDIATELY PRO CE ED ING ITA NO.059/CTK/2011 5 MONTH FOR THE ASSESSMENT YEAR 2005 - 06. T HE LEARNED CIT(A) THEREFORE MISCONSTRUED THE CONCEPT OF PREVIOUS YEAR AND THE ASSESSMENT YEAR SUBSEQUENT TO THE IMPUGNED ASSESSMENT YEAR WHICH OBVIOUSLY HAS TO BE FOR THE SUBSEQUENT ASSESSMENT YEAR ONLY. THE BOOKS OF ACCOUNT ARE AUDITED AND THE FINANC IAL STATEMENT AND TAX DEDUCTED AT SOURCE PAYABLE WERE CERTIFIED BY THE AUDITORS HAVING BEEN PAID PRIOR TO THE DUE DATE OF FILING OF THE RETURN WAS NOTED BY THE LEARNED CIT(A) IN HIS ORDER THEREFORE COULD NOT BE SUBJECTED TO DISALLOWANCE IN VIOLATION TO THE DEEMING PROVISIONS OF SECTION 40(A)(IA). SIMILARLY THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER IN HIS ORDER HAS CATEGORICALLY RECONCILED THE GROSS SALES WITH THE NET SALES BY IMPORTING THE TAXES PAID U/S.4 3B WHICH CLEARLY IND ICATE THAT THE LIABILITY FOR DIFFERENT PERIOD HAS BEEN CONSID ERED FOR SUPPRESSION OF SALES FOR THE IMPUGNED ASSESSMENT YEAR. IN THE MERCANTILE SYSTEM OF ACCOUNTING WHEN THE LAW PROVIDES THAT THE EXPENSES RELATING TO SALES TAX, ENT RY TAX ARE ALLOWABLE AS AN EXPENDITURE PROVIDED THE SAME ARE PAID IN ACCORDANCE WITH THE PROVISIONS OF SECTION 43B , THE SAME CANNOT BE RECONCILED WITH THE ACTUAL SALES IN THE IMPUG NED ASSESSMENT YEAR TO DERIVE A FIGURE OF SALES WHAT OUGHT TO HAVE BEEN DECLARED BUT NOT DECLARED. HE PRAYED THAT BOTH THE DISALLOWANCE AND ADDITIONS MAY KINDLY BE DIRECTED TO BE DELETED. 4. THE LEARNED DR SUBMITTED THAT THE LEARNED CIT(A) FINE TUNED THE FINDING OF THE ASSESSING OFFICER ON THE DEEMING PROVISIONS OF SECTION 40(A)(IA) INSOFAR AS THE TAX AT S OURCE WHICH HAS BEEN DEDUCTED WAS TO ITA NO.059/CTK/2011 6 BE PAID IN ACCORDANCE WITH THE PROVISIONS OF SECTION 200(1). THE ASSESSING OFFICER HAS CATEGORICALLY GIVEN A FINDING REGARDING WITHHOLDING OF TAX BY THE ASSESSEE BUT NOT PAYING IN ACCORDANCE WITH THE PROVISIONS OF SECTI ON 200(1) LEADING TO CHARGING TO INTEREST U/S.200(1A ) AMOUNTING TO RS.15,175. THE DISALLOWANCE, THEREFORE, WAS IN ACCORDANCE WITH THE PROVISIONS OF THE ACT WHEN , IRRESPECTIVE OF THE EXPENSES WHETHER PAID OR PAYABLE , THE ASSESSEE OUGHT TO HAVE SHOWN THE DE DUCTION OF TAX AT SOURCE WITHIN THE FINANCIAL YEAR ITSELF WAS CONFIRMED BY THE LEARNED CIT(A) WHEN HE NOTED THAT THE ACTUAL DATE OF PAYMENT WAS IN THE END OF THE PREVIOUS YEAR BUT BEFORE THE DUE DATE OF FILING OF THE RETURN. SIMILARLY, THE DEDUCTION CLAIME D U/S.43B WAS TO BE RECONCILED WITH THE SALES IN THE IMPUGNED ASSESSMENT YEAR WHEN THE RESIDUAL BALANCE IN GROSS SALES AND NET SALES WAS LEFT UN - RECONCILED TO THE EXTENT OF RS.1,15,972. THE LEARNED CIT(A) THEREFORE RIGHTLY CONFIRMED THAT THE ASSESSEE DID N OT QUESTION THE FINDING OF UNACCOUNTED SALES OF RS.1,15,592. HE SUPPORTED THE ORDER OF THE LEARNED CIT(A) ON THIS SCORE AS WELL AS THE FIRST GROUND AGITATED BY THE ASSESSEE REGARDING SERVICE OF THE ORDER U/S.143( 2 ) BEING TIME BARRED. 5. WE HAVE HEARD THE R IVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE INCLINED TO HOLD THAT THE ASSESSEE DID NOT SEEK TO FIND THE DELAY IN SERVING THE ORDER WHEN THE DEMAND HAD ALREADY BEEN INFORMED TO IT. NO PURP OSE WOULD BE SERVED FOR THE ASSESSING OFFICER TO CREATE A ITA NO.059/CTK/2011 7 DEMAND AND NOT INFORM THE ASSESSEE WHEN THE LEARNED CIT(A) ON THE BASIS OF THE DEMAND NOTICE AGREED TO HEAR THE APPEAL U/S.246 OF THE I.T.ACT. IN ANY CASE, THE SERVICE OF ORDER BECOMES A PROCEDURE F OR PROCEEDING WITH AN APPEAL ONLY O N THE DEMAND RAISED BY THE ASSESSING OFFICER. THE ASSESSEE HAD ALREADY FILED RETURNS FOR THE ASSESSMENT YEAR 2006 - 07 AND 2007 - 08 DURING THE INTERVENING PERIOD AS WERE INTIMATED TO HIM THEREFORE CANNOT HELD A GRIEVANCE AGA INST THE ASSESSING OFFICER FOR BELATEDLY SERVING THE SAME. IN ANY CASE, THE ASSESSING OFFICER HAD COMPLIED TO THE PROVISIONS OF SECTION 143(2) THEREFORE CANNOT BE SUBJECTED TO SCRUTINY UNDER THE PROVISIONS OF THE I.T.ACT AS SOUGHT TO BE CHALLENGED BY THE A SSESSEE AS OF NOW. WE ARE OF THE CONSIDERED OPINION THAT THE MERIT ADDITIONS AND DISALLOWANCE RATHER LEAN IN FAVOUR OF THE ASSESSEE FOR DELETION WOULD CLEARLY INDICATE THE LETHARGY OF THE ASSESSING OFFICER IN LIQUIDATING THE DEMAND SO CREATED WITHIN THE L IMITATION AS PROVIDED IN THAT SECTION. THE ASSESSING OFFICER HAD CLEARLY NOTED AS CONFIRMED BY THE LEARNED CIT(A) THAT THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION OF THE EXPENSES UNDER THE PROVISIONS OF LAW WHICH WAS SUBJECTED TO DEDUCTION OF TAX U/S.194C , 194H AND 194J. ON PAGE 5 OF THE ORDER OF THE LEARNED CIT(A) A CLARITY HAS BEEN IDENTIFIED BY THE LEARNED CIT(A) ITSELF THAT FOR ALL THE PAYMENTS THE DUE DATE OF PAYMENT OF TAX WAS THE FIRST WEEK OF ENSUING MONTH AFTER THE CLOSE OF THE FINANCIAL YEAR WAS ALLOWABLE TO THE ASSESSEE TO BE PAID BEFORE THE DUE DATE OF FILING OF RETURN U/S.139(1). THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON ITA NO.059/CTK/2011 8 THE ITAT DECISION IN THE CASE OF BANSAL PARIVAHAN (INDA) LTD V. ITO (2011) 137 TTJ (MUM) 319 , KANUBHAI RAMJI BHAI V . ITO (2011) 135 TTJ (AHD.) 364 WHICH CLEARLY INDICATE THAT THE INTENTION OF THE LEGISLATURE WAS TO PURSUE THE ASSESSEES TO DEDUCT TAX EVEN IF THE AMOUNT OF EXPENSES WAS CLAIMED WERE EITHER PAID OR PAYABLE AS ON 31 ST MARCH COULD BE SUBJECTED TO DEDUCTION O F TAX AT SOURCE TO BE DEPOSITED IN THE GOVERNMENT ACCOUNT BEFORE THE DUE DATE OF FILING OF THE RETURN TO ENTITLE IT TO CLAIM DEDUCTION IN THE IMPUGNED ASSESSMENT YEAR. THE LEARNED CIT(A) THEREFORE, MISDIRECTED HIMSELF TO CONFUSE BETWEEN PREVIOUS YEAR AND THE ASSESSMENT YEAR UNDER THE MERCANTILE SYSTEM OF ACCOUNTING WHICH WE ARE INCLINED TO VACATE. THE ASSESSEE HAD COMPLIED WITH THE PROVISIONS OF SECTION 40(A)(IA) WAS THEREFORE ENTITLED TO CLAIM DEDUCTION OF THESE EXPENSES WHICH ARE DIRECTED TO BE ALLOWE D. 6. ON THE ISSUE OF SUPPRESSION OF SALES, AGAIN WE ARE INCLINED ON THE FINDING BY THE ASSESSING OFFICER HIMSELF , AS NOTED IN HIS COMPUTATION OF UNACCOUNTED SALES WAS BY IMPORTING THE PAYMENTS U/S.43B WHICH CLEARLY INDICATE THAT THE AMOUNTS WERE HELD AS A LIABILITY. SALES ARE THE SOURCE OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR AND THE SALES TAX AND ENTRY TAX LIABILITY PERTAIN TO OTHER YEARS. CESS, DUTIES AND TAXES CANNOT BE REDUCED FROM THE TURNOVER PERTAINING TO OTHER YEARS. THE LAW PROVIDES FOR CLAIMIN G OF DEDUCTION U/S.43B AS AND WHEN PAID THEREFORE CANNOT BE SUBJECTED TO RECONCILIATION TO DETERMINE THE NET SALES AS DECLARED IN THE P & L ITA NO.059/CTK/2011 9 ACCOUNT AND THE GROSS SALES AS PER THE BOOKS OF AC COUNT. THE SUPPRESSION OF SALES, THEREFORE AS CONFIRMED BY THE LEA RNED CIT(A) , SUFFERS FROM CLARITY INSOFAR AS THE EXPLANATION WAS TO SEEK TO RECONCILE OF THE PURCHASES AND SALES BY IDENTIFYING THE STOCK MISSING AGAINST WHICH NO INFIRMITY HAS BEEN FOUND. WE HAVE FOUND THAT THE RECONCILIATION BY THE ASSESSING OFFICER WAS BAD IN AS HAS BEEN SUPPORTED BY THE CIT(A) THEREFORE IS BOUND TO BE TURNED DOWN. THEREFORE, THE ADDITION MADE ON THIS COUNT HAS NO LEGS TO STAND ON AND THEREFORE, THE SAME IS HEREBY DIRECTED TO BE DELETED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. PRONOUNCED IN OPEN COURT ON DT. 17 TH JUNE, 2011 S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 17 TH JUNE, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: TORSTEEL LIMITED, OSIL HOUSE, GANGADHAR MEHER MARG,BHUBANESWAR 751 024 2. THE RESPONDENT: ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), BHUBANESWAR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DU PLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.