Shri Bhupendra V.Rathod, Baroda V. The Income tax Officer,Ward-2(4), Baroda

ITA 621/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9748 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 26-11-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 12-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: S H RI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER SHRI BHUPENDRA V. RATHOD, PROP. M/S. CAREWELL CONSTRUCTION, 16/B, SARASWATI SOCIETY, B/H ESIC HOSPITAL, GOTRI ROAD, BARODA - 390001 PAN: ABMPR7865D (APPELLANT) VS INCOME TAX OFFICER, WARD 2(4), BARODA (RESPONDENT) REVENUE BY : S H RI DINESH SINGH , SR. D . R. ASSESSEE BY: S H RI MUKUND BAKSHI , A.R. DATE OF HEARING : 26 - 11 - 2 015 DATE OF PRONOUNCEMENT : 20 - 01 - 2 016 / OR DER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2007 - 08, AR ISES FROM ORDER OF THE CIT(A) - II, BARODA DATED 02 - 12 - 2011 IN APPEAL NO. CAB /II - 289 /09 - 10, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT T HE ACT . I T A NO . 621 / A HD/20 12 A SSESSMENT YEAR 200 7 - 08 I.T.A NO. 621 /AHD/20 12 A.Y. 2007 - 08 PAGE NO SHRI B HUPENDRA V. RATHOD VS. ITO 2 2. FOLLOWING GROUNDS HAVE BEEN PLEADED IN THE INSTANT APPEAL. 1. THE LD. CIT (APPEALS) - II, BARODA HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF THE LD. A.O. IN REJECTING THE BOOKS OF ACCOUNT MERELY ON THE BASIS OF DIFFERENCE FOU ND IN CONTRACT RECEIPTS AS PER BOOKS AND AS PER TDS CERTIFICATES IN IGNORANCE OF THE FACT THAT THE IMPUGNED DIFFERENCE IN CONTRACT RECEIPTS AROSE IN THE FIRST PLACE DUE TO IT BEING SHOWN UNDER ADVANCES FROM THE PARTIES. BARRING THE ABOVE, NO OTHER DEFECT W AS FOUND. THE CONFIRMATION OF REJECTION OF BOOKS THUS MADE IS PRAYED TO BE QUASHED. 2. WITHOUT PREJUDICE TO THE ABOVE GROUND, THE LD. CIT (APPEALS) - II, BARODA HAS ERRED IN LAW AND IN FACTS IN NOT ALLOWING THE CLAIM OF DEPRECIATION IN THE COMPUTATION O F PROFIT ON ESTIMATION BASIS BY APPLYING A RATE OF PROFIT OF 8%. EVEN WHILE APPLYING THE RATE OF PROFIT, THE DEPRECIATION IS TO BE ADDITIONALLY ALLOWED AS CLAIMED. YOUR APPELLANT SEEKS APPROPRIATE DIRECTIONS TO THIS EFFECT. 3. THE LD. CIT (APPEALS) - II , BARODA HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF THE LD. A.O. IN THE DISALLOWANCE OF EXPENDITURE OF RS. 2,44,710/ - BY INV OKING THE PROVISIONS OF SEC. 40(A)(IA) EVEN WHERE THE BOOK RESULTS ITSELF ARE REJECTED AND PROFIT IS ESTIMATED. NO D ISALLOWANCE OF EXPENSE WAS JUSTIFIED WHERE BOOK RESULTS ARE REJECTED AND ACCORDINGLY, THE DISALLOWANCE OF RS. 2,44,710/ - MAY PLEASE BE DIRECTED TO BE CANCELLED. 4. THE LD. CIT (APPEALS) - II, BARODA HAS FURTHER ERRED IN LAW AND IN FACTS IN CONFIRMING TH E ACTION OF THE LD. A.O IN THE ADDITION OF ESTIMATED HOU SEHOLD EXPENSES OF RS. 1,00,000/ - . THE LD. CIT(A) OUGHT HAVE HELD THE SOURCE OF SUCH EXPENDITURE AS BEING INCURRED OUT OF THE DIFFERENCE IN THE PROFIT ESTIMATED AND AS SHOWN IN THE BOOKS ON THE WELL R ECOGNIZED PRINCIPLES OF TELESCOPIN G. THE ADDITION OF RS. 1,00,000/ - MAY THUS BE DELETED. 3. THE ASSESSEE DOES NOT PRESS FORMER TWO GROUNDS IN THE COURSE OF HEARING. WE COME TO ITS THIRD SUBSTANTIVE SECTION 40(A)(IA) DISALLOWANCE OF RS. 2,44,710/ - . THE CIT(A) DEALS WITH THE ISSUE AS UNDER: - 4.1 FINDINGS IN THE ASSESSMENT ORDER: I.T.A NO. 621 /AHD/20 12 A.Y. 2007 - 08 PAGE NO SHRI B HUPENDRA V. RATHOD VS. ITO 3 DURING ASSESSMENT PROCEEDINGS ON VERIFICATION OF TDS PAYABLE ACCOUNT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DEDUCTED TAX OF RS.34,396/ - ON FREIGHT AND SUB - CONTRACT E XPENSES OUT OF WHICH RS.20,951/ - WAS DEDUCTED FROM APRIL, 2006 TO FEBRUARY, 2007 AND OUT OF WHICH THE ASSESSEE HAS DEPOSITED RS.1 8,198/ - IN THE GOVERNMENT ACCOUNT BEFORE 31.03.2007 AND THE BALANCE AMOUNT OF RS.2,753/ - AFTER DUE DATE. THE ASSESSEE WAS ASKE D TO SHOW CAUSE AS TO WHY PROPORTIONATE DISALLOWANCE AMOUNTING TO RS.2,44,710/ - SHOULD NOT BE MADE U/S.40(A)(IA) OF THE ACT. IN THIS REGARD THE AUTHORIZED REPRESENTATIVE STATED THAT BILLS AMOUNTING TO RS.2,44,710/ - THOUGH ACCOUNTED FOR BEFORE FEBRUARY, 200 7 WERE NOT CLEARED FOR FINAL PAYMENTS. THEREFORE, THE CREDIT OF SUCH BILLS IS CONSIDERED BY THE ASSESSEE ONL Y IN THE MONTH OF MARCH, 2007. HE FURTHER SUBMITTED THAT THE EXPENSES AMOUNTING TO RS.2,44,710/ - WAS DISALLOWED THE CREDIT OF THE SAME MAY BE GIV EN IN SUBSEQUENT ASSESSMENT YEAR. THE ASSESSING OFFICER CONTENDED THAT THE ASSESSEE WAS LIABLE TO REMIT THE TDS AMOUNT OF RS.2,753/ - BEFORE 31.03.2007. HOWEVER, THE ASSESSEE HAS FAILED TO REMIT THE TAX AS PRESCRIBED TIME LIMIT. THE ASSESSING OFFICER ACCO RDINGLY DISALLOWED ASSESSEE'S CLAIM FOR EXPENSES AMOUNTING TO RS.2,44,710/ - U/S. 40(A)(IA) AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4.2 SUBMISSION DURING APPELLATE PROCEEDINGS: IN APPEAL THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT - 'ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. A O ERRED IN DISALLOWING RS. 2,44, 710 OUT OF FREIGHT AND SUB CONTRACT EXPENSES ON THE PLEA THAT THE TDS THEREON OF RS. 2,753/ - HAS BEEN REMITTED IN THE MONTH OF MAY 2007, ACCORDING TO LD. AO, THE S AME HAVING BEEN REMITTED AFTER 31.03,2007 HAS BEEN REMITTED AFTER THE DUE DATE AND HENCE MADE THE IMPUGNED DISALLOWANCE. THE APPELLANT HAD DEDUCTED T DS OF RS. 34,396 ON FREIGHT AND SUB - CONTRACT EXPENSES DURING THE YEAR. OUT OF THIS RS. 20,951 WAS DED UCTED FROM APRIL 2006 TO FEBRUARY 20 07 AND OUT OF THIS, THE T DS AMOUNTING TO RS. 18,198 WAS PAID BEFORE 31.03.2007. THE BALANCE TDS OF RS. 2.753 (RS. 20.951 - 18,198) WAS DULY REMITTED ON 28.05.2007 AND HENCE NO DISALLOWANCE IS CALLED FOR ON THIS ACCOUNT. I.T.A NO. 621 /AHD/20 12 A.Y. 2007 - 08 PAGE NO SHRI B HUPENDRA V. RATHOD VS. ITO 4 Y OUR APPELLANT HEREBY ATTACHED COPY OF TDS PAYABLE ACCOUNT FOR THE PERIOD APRIL 2006 TO MAR 2007 AND APRIL 2007 TO MARCH 20 08 ALONG WITH COPY OF TDS CHALLA NS VIDE PAGE NO. 1 - 3 OF THE PAPER BOOK. KINDLY NOTE THAT AS PER THE AMENDED PROVISIONS OF SECTION 40( A)(IA) OF THE IT ACT, 1961, IF THE PAYMENT OF TDS IS MADE BEFORE THE DUE DATE OF FILING OF THE IT RETURN, THE SAME IS ALLOWED AND THERE CAN BE NO DISALLOWANCE IN SUCH CASES. HEREIN YOUR APPELLANT RELIES ON THE DECISION OF JURISDICTIONAL HON'BLE AHMEDABAD I TAT IN THE CASE OF SHRI KANUBHAI RAMJIBHAI MAKWANA VS ITO (DATED: DECEMBER 3, 2010) HOLDING THAT THE AMENDMENT BROUGHT OUT IN SECTION 40(A)( IA) , ARE , CLARIFICATORY IN NATURE AND RETROSPECTIVE W. E.F . 1ST APRIL 2005. - ASSESSEE'S APPEAL ALLO WED. COPY OF THE DECISION IS ATTACHED VIDE PAGE NO. 4 TO 14 OF THE PAPER BOOK. FURTHER RELIANCE IS PLACED ON HON'BLE MUMBAI ITAT IN THE CASE OF GOLDEN STABL ES LIFE STYLE CENTRE PVT. LTD. I TA NOS. 5145/MUM/2009 BENCH 'G' DT. 30 - 9 - 2010. (2010) BCAJ NOV., 26 [155 (2010) 42 - B.BCAJJ ITA. NO. 5145/MUM/2009 WHEREIN IT WAS HELD THAT - AMENDMENT TO SECTION 40(A)(IA) BY THE FINANCE ACT, 2010 WHICH EXTENDS THE TIME LIMIT FOR ALL TDS PAYABLE THROUGHOUT THE YEAR HAS BEEN INTRODUCED AS CURATIVE MEASURE AND THEREFORE, WOUL D APPLY TO EARLIER YEARS ALSO. WITHOUT PREJUDICE TO THE ABOVE, IT IS HUMBLY SUBMITTED, WHERE THE INCOME HAS BEEN ESTIMATED REJECTING THE BOOKS OF ACCOUNT, NO FURTHER DISALLOWANCE CAN BE MADE OUT OF EXPENSES CLAIMED BY THE APPELLANT. ' 4.3 DECISION: I HA VE CONSIDERED THE SUBMISSIONS OF THE LEARNED AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFICER. THE AUTHORIZED REPRESENTATIVE'S RELIANCE ON THE AHMEDABAD ITAT DECISION IN THE CASE OF SHRI KANUBHAI R. MAKWANA VS. ITO IS MISPLACED AS THE SAID DECISION HAS BEEN OVERRULED BY THE SPECIAL BENCH OF MUMBAI ITAT IN THE CASE OF BHARATI SHIPYARD. HENCE THE AMENDMENT TO SEC. 40(A)(IA) W.E.F. 01.04.2010 CANNOT BE TAKEN TO BE EFFECTIVE FROM 01.04.2005. THE ASSESSEE HAS CLEARLY DEFAULTED IN DEPOSIT OF TDS W ITHIN DUE DATE INVITING PROVISION OF SEC 40(A)(IA). I.T.A NO. 621 /AHD/20 12 A.Y. 2007 - 08 PAGE NO SHRI B HUPENDRA V. RATHOD VS. ITO 5 THE ASSESSING OFFICER'S ACTION IS CORRECT AND IS UPHELD. THE AUTHORIZED REPRESENTATIVE CLAIMING THAT SINCE THE PROFITS ARE ESTIMATED, SUCH ADDITION CANNOT BE MADE IS ALSO NOT ACCEPTABLE AS THESE EXPENSES WILL BE ALLOWED IN THE YEAR OF DEPOSIT OF TDS. SUCH ALLOWANCE IN FUTURE WILL DILUTE THE PROFITS BROUGHT TO TAX THIS YEAR AND IF SUCH DISALLOWANCE IS NOT MADE, IT WILL RESULT IN TAXING THE INCOME OF THE ASSESSEE AT RATES LESSER THAN ESTIMATED (I.E. 8% HERE) . HENCE THE CONTENTION OF THE AUTHORIZED REPRESENTATIVE IS NOT ACCEPTED AND THE GROUND OF APPEAL IS FAILS. 4. BOTH PARTIES REITERATE THEIR RESPECTIVE STAND S . IT IS TO BE SEEN THAT THE TRIBUNAL SPECIAL BENCH DECISION REPORTED AS BHAR A TI SHIPYARD LTD VS. DCIT 141 TTJ 129 (MUM) DECIDING THE ISSUE AGAINST THE ASSESSEE THEREBY HOLDING THAT THE AMENDMENT BROUGHT OUT IN SECTION 40(A)(IA) W.E.F . 01 - 04 - 2010 DOES NOT APPLY W.E.F. 01 - 04 - 2005 HAS BEEN REVERSED BY HON BLE DELHI HIGH COURT IN CIT VS. RAJENDRA KUMAR 36 2 ITR 241. THE REVENUE IS UNABLE TO CONTROVERT THIS LEGAL POSITION. WE ACCORDINGLY DELETE THE IMPUGNED SECTION 40(A)(IA) DISALLOWANCE OF RS. 2,44,710/ - IN QUESTION. THIS SECOND SUBSTANTIVE GROUND SUCCEEDS. 5. THIS LEAVES US WITH ASSESSEE S LAST GROU ND CHALLENGING ADDITION OF ESTIMATED HOUSE HOLD EXPENSES OF RS. 1 LACS. IT HAS COME ON RECORD THAT THE ASSESSEE HAD NOT SHOWN ANY WITHDRAWAL UNDER THIS HEAD IN THE RELEVANT PREVIOUS YEAR. THE AUTHORITIES HAVE ALREADY TAKEN INTO ACCOUNT HIS SOCIO - ECONOMIC CIRCUMSTANCES FOR ESTIMATING THE IMPUGNED HOUSE HOLD WITHDRAWAL. HE FAILS TO CONTROVERT THIS FACTUAL FINDING. THE LAST SUBSTANTIVE GROUND FAILS. I.T.A NO. 621 /AHD/20 12 A.Y. 2007 - 08 PAGE NO SHRI B HUPENDRA V. RATHOD VS. ITO 6 6. THIS ASSESSEE S APPEAL IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 20 - 01 - 201 6 SD/ - SD/ - ( PRAMOD KUMAR ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 20 /01/2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,