ACIT 22(3), NAVI MUMBAI V. GOKUL CONSTRUCTION, NAVI MUMBAI

ITA 6172/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78999 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 22-05-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 09-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Assessee Lawyers: DR P DANIEL
• Keywords: Opportunity of being heard; Non-deduction of tax

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G, BENC H MUMBAI . . , ..'#. , BEFORE SHRI B.R.BASKARAN, AM & DR.S.T.M PAVALAN, JM ./ ITA NO.6172/MUM/2012 ( % % % % / ASSESSMENT YEAR :2009-10) ACIT 22(3), 3 RD FLOOR, TOWER NO.6, VASHI RLY STATION COMPLEX, VASHI, NAVI MUMBAI VS. GOKUL CONSTRUCTION, 408, PERSIPOLI BUILDING, PLOT NO.74, SECTOR-17, VASHI, NAVI MUMBAI-400 705 & ./ ' ./ PAN/GIR NO. : AAGFG 9463 R ( &( / APPELLANT ) .. ( )*&( / RESPONDENT ) + ++ + , , , , /REVENUE BY : MR. R.K.SAHU -. + ++ + , , , , /ASSESSEE BY : DR. P.DANIEL + .# / DATE OF HEARING : 22 ND MAY, 2014 /0% + .# / DATE OF PRONOUNCEMENT : 28 TH MAY, 2014 1 1 1 1 / O R D E R PER B.R.BASKARAN (A.M.) : THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 23.07.2012 PASSED BY LD CIT(A)-33, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2009-10. 2. THE REVENUE IS ASSAILING THE DECISION OF LD C IT(A) IN GRANTING RELIEF IN RESPECT OF THE FOLLOWING TWO ADDITIONS:- (A) DISALLOWANCE OF INTEREST EXPENDITURE (B) DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT. 3 . THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BU ILDING CONSTRUCTION. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF INTE REST EXPENDITURE. THE ASSESSEE HAS CLAIMED INTEREST EXPENDITURE OF RS.21, 79,500/- ON UNSECURED LOANS BORROWED BY IT. THE AO NOTICED THA T THE PARTNERS ITA NO.6172 /12 2 ACCOUNT SHOWED HEAVY DEBIT BALANCES AND ACCORDINGLY TOOK THE VIEW THAT THE ASSESSEE HAS DIVERTED INTEREST BEARING FUNDS TO THE PARTNERS BY ALLOWING THEM TO WITHDRAW THE SAME THROUGH THEIR CU RRENT ACCOUNTS. ACCORDINGLY HE DISALLOWED THE ENTIRE INTEREST EXPEN DITURE CLAIM. 4 . IN THE APPELLATE PROCEEDINGS, THE ASSESSEE SUB MITTED CERTAIN ADDITIONAL DETAILS BEFORE LD CIT(A) IN ORDER TO SHO W THAT THERE WAS NO DIVERSION AS PRESUMED BY THE AO. THE LD CIT(A) DID NOT CONFRONT THOSE ADDITIONAL DETAILS WITH THE ASSESSING OFFICER, I.E. , THE FIRST APPELLATE AUTHORITY CONSIDERED HIMSELF THOSE ADDITIONAL DETAI LS AND GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE SAME, TH E REVENUE IS CONTENDING BEFORE US THAT THERE IS VIOLATION OF RULE 46A OF TH E INCOME TAX RULES. 5 . WE HEARD BOTH THE PARTIES ON THIS ISSUE. LD A.R FAIRLY CONCEDED THAT THERE IS VIOLATION OF RULE 46A ON THE PART OF LD CI T(A) IN NOT CONFRONTING THE ADDITIONAL DETAILS FURNISHED BY THE ASSESSEE TO HIM. THE LD D.R PLEADED THAT THIS ISSUE MAY BE SET ASIDE TO THE FIL E OF THE ASSESSING OFFICER FOR CONSIDERING THE SAME AFRESH BY DULY CONSIDERING THE ADDITIONAL DETAILS THAT WERE FURNISHED BY THE ASSESSEE BEFORE LD CIT(A ). THE LD A.R DID NOT OBJECT TO THE PLEA SO MADE BY LD D.R. ACCORDIN GLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE MA TTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THI S ISSUE AFRESH, BY CONSIDERING THE ADDITIONAL DETAILS THAT WERE FILED BEFORE LD CIT(A) AND ALSO ANY OTHER DETAILS / INFORMATION THAT MAY BE FURNISH ED BY THE ASSESSEE. AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LA W. ITA NO.6172 /12 3 6 . THE NEXT ISSUE RELATES TO THE DISALLOWANCE MA DE U/S 40(A)(IA) FOR NON-DEDUCTION OF TAX AT SOURCE IN RESPECT OF CERTAI N PAYMENTS. THE AO NOTICED THAT THE ASSESSEE DID NOT DEDUCT TAX AT SOU RCE ON PAYMENTS MADE TOWARDS LABOUR CHARGES, TRANSPORT CHARGES AND SECUR ITY SERVICE CHARGES AGGREGATING TO RS.6,71,887/-. HENCE THE AO DISALLO WED THE SAME BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE AC T. 7 . IN THE APPELLATE PROCEEDINGS, THE ASSESSEE SU BMITTED THAT A SUM OF RS.1,24,669/- ALONE REMAINED AS PAYABLE AS AT THE E ND OF THE YEAR AND THE BALANCE AMOUNTS HAVE BEEN PAID DURING THE COURS E OF THE YEAR. THE LD CIT(A), BY FOLLOWING THE DECISION RENDERED BY SP ECIAL BENCH OF VISAKHAPATNAM ITAT IN THE CASE OF MERYLINE SHIPPING AND TRANSPORTS VS. ADDL. CIT (136 ITD 23)(SB) , UPHELD THE ADDITION RELATING TO THE OUTSTANDING AMOUNT OF RS.1,24,669/- AND DELETED THE BALANCE AMOUNT OF THE ADDITION, WHICH WERE CLAIMED TO HAVE BEEN PAID DURING THE COURSE OF THE YEAR. 8 . THE LD D.R SUBMITTED THAT THE DECISION RENDER ED BY THE SPECIAL BENCH IN THE CASE OF MERILYNE SHIPPING AND TRANSPOR TS LTD (SUPRA) WAS CONSIDERED IN THE FOLLOWING CASES AND IT WAS HELD T O BE NOT A GOOD LAW:- (A) CIT VS. CRESCENT EXPORT SYNDICATE (CAL) (ORDER DT. 03-4-2013 IN ITA NO.20 OF 2013) (B) CIT VS. MD. JAKIR HOSSAIN MANDAL (CAL) (ORDER DATED 04-04- 2013 IN ITA NO.31 OF 2013) (C) CIT VS. SIKANDARKHAN N TUNVAR (GUJ) (33 TAXMA NN.COM 133) 9 . ON THE CONTRARY, THE LD A.R SUBMITTED THAT THE HONBLE ALLAHABAD HIGH COURT HAS APPROVED THE DECISION RENDERED BY TH E SPECIAL BENCH, REFERRED ABOVE, IN ITS DECISION RENDERED IN THE CAS E OF CIT VS. VECTOR ITA NO.6172 /12 4 SHIPPING SERVICES (P) LTD (ORDER DATED 09-7-2013 IN ITA NO.122 0F 2013) . HE FURTHER SUBMITTED THAT THE CHENNAI BENCH OF T RIBUNAL IN THE CASE OF ITO VS. THEEKATHIR PRESS (ITA NO.2076/MDS/2012 DATE D 18-09-2013) HAS TAKEN THE VIEW THAT THE DECISION IN FAVOUR OF T HE ASSESSEE IS REQUIRED TO BE TAKEN IN CASE OF CONFLICTING DECISIONS OF DIF FERENT HIGH COURTS. HE SUBMITTED THAT THE CHENNAI TRIBUNAL HAS FOLLOWED TH E RATIO GIVEN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD (88 ITR 192 ). 10 . IN THE REJOINDER, THE LD D.R SUBMITTED THAT T HE MUMBAI BENCH OF TRIBUNAL HAS CONSIDERED ALL THE DECISIONS RENDERED BY THE HONBLE HIGH COURTS OF CALCUTTA, GUJARAT AND ALLAHABAD IN A RECE NT CASE, VIZ., IN THE CASE OF RISHTI STOCK AND SHARES PVT LTD IN ITA NO.1 12/MUM/2012 ORDER DATED 02-08-2013 AND THE TRIBUNAL HAS TAKEN THE VIE W THAT THE OBSERVATIONS MADE BY HONBLE ALLAHABAD HIGH COURT I N THE CASE OF VECTOR SHIPPING SERVICES (P) LTD (SUPRA) IN RESPECT OF THE SPECIAL BENCH DECISION REFERRED SUPRA WAS ONLY A PASSING REMARK AND HENCE IT IS ONLY OBITER DICTA, HAVING NO BINDING EFFECT. 11 . WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS IS SUE. WE NOTICE THAT THE ISSUE BEFORE THE HONBLE ALLAHABAD HIGH COURT I N THE CASE OF VECTOR SHIPPING SERVICES (P) LTD WAS WITH REGARD THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SO URCE ON SALARIES PAID. THE HIGH COURT NOTICED THAT ANOTHER COMPANY M/S MERCATOR LINES LTD HAD PAID THE SALARIES ON BEHALF OF THE ABOVE SAID A SSESSEE AND HAD ALSO ITA NO.6172 /12 5 DEDUCTED TAX AT SOURCE THERE FROM. IN THIS FACTUAL SCENARIO, THE HONBLE ALLAHABAD HIGH COURT HELD AS UNDER:- IN THE PRESENT CASE TAX WAS DEDUCTED AS TDS FROM THE SALARIES OF THE EMPLOYEES PAID BY M/S MERCATOR LINES LTD AND TH E CIRCUMSTANCES IN WHICH SUCH SALARIES WERE PAID BY M /S MERCATOR LINES LTD FOR M/S VECTOR SHIPPING SERVICES, THE ASS ESSEE WERE SUFFICIENTLY EXPLAINED. HAVING DECIDED THE ISSUE URGED BEFORE THEM IN THE A BOVE TERMS, THE HONBLE HIGH COURT INCIDENTALLY MENTIONED THAT FOR DISALLOWING EXPENSES ON THE GROUND THAT TAX HAS NOT BEEN DEDUCTED, THE A MOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY THE END OF T HE YEAR. 12 . THE CO-ORDINATE BENCH OF TRIBUNAL, IN THE CASE OF RISHTI STOCK AND SHARES PVT LTD (SUPRA), HAS NOTICED THE ABOVE FACTS PREVAILING IN THE CASE OF M/S VECTOR SHIPPING SERVICES AND ACCORDINGLY HEL D THAT THE OBSERVATIONS MADE BY THE HONBLE ALLAHABAD HIGH COU RT, AFTER DECIDING THE ISSUE URGED BEFORE THEM ON MERITS, WERE ONLY PA SSING REMARKS, WHICH WERE OBITER DICTA. IT IS WELL SETTLED PROPOSITION THAT ONLY THE RATIO OF A PARTICULAR DECISION SHALL HAVE BINDING EFFECT. WE NOTICE THAT THE CHENNAI BENCH OF TRIBUNAL IN THE CASE OF M/S THEEKATHIR PRESS DID NOT ANALYSE THE DECISION RENDERED BY HONBLE ALLAHABAD HIGH COU RT IN DETAIL, WHERE AS THE MUMBAI BENCH OF TRIBUNAL HAS CONSIDERED THE SAM E IN DETAIL. HENCE, WE ARE INCLINED TO FOLLOW THE VIEW EXPRESSED BY MUM BAI BENCH OF TRIBUNAL IN THE CASE OF RISHTI STOCK AND SHARES PVT LTD (SUP RA). ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE. ITA NO.6172 /12 6 13 . IN RESPECT OF MERITS OF ADDITION, BOTH THE PARTI ES SUBMITTED THAT THE SAME REQUIRES FRESH EXAMINATION AT THE END OF THE A SSESSING OFFICER, SINCE THE AO HAS MADE THE ADDITION WITHOUT PROPERLY EXAMI NING THE APPLICABILITY OF THE TDS PROVISIONS TO THE QUANTUM OF PAYMENT MAD E TO EACH OF THE PARTIES. ACCORDINGLY, WE ARE OF THE VIEW THAT THIS ISSUE ALSO REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFICER. A CCORDINGLY, WE SET ASIDE THIS MATTER ALSO TO THE FILE OF THE ASSESSING OFFIC ER FOR FRESH EXAMINATION. 14 . NEEDLESS TO MENTION THAT THE ASSESSEE SHOULD BE GIVEN PROPER OPPORTUNITY OF BEING HEARD. THE ASSESSEE IS ALSO D IRECTED TO FURNISH ALL THE INFORMATION / EXPLANATIONS THAT MAY BE CALLED F OR BY THE AO. 15 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS T REATED AS ALLOWED FOR STATISTICAL PURPOSES . - .2 + 3+ 456 7. + . 89 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH MAY, 2014. 1 + /0% : ;2 28 TH MAY,2014 0 + < SD/- SD/- ( . . '# . ) (DR.STM PAVALAN) ( . . ) (B.R.BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; ; DATED 28/05/2014 ). . /PKM , . / PS 1 1 1 1 + ++ + ).= ).= ).= ).= >=%. >=%. >=%. >=%. / COPY OF THE ORDER FORWARDED TO : 1 1 1 1 / BY ORDER, 4 44 4 / 8 8 8 8 ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT. 3. ? ( ) / THE CIT(A), MUMBAI. 4. ? / CIT 5. =@< ). , , / DR, ITAT, MUMBAI 6. < A / GUARD FILE. *=. ). //TRUE COPY//