N.K. Jewellers, Baroda V. The Income tax Officer,Ward-5(3), Baroda

ITA 638/AHD/2009

• Counselvise Citation: 63820514 RSA 2009
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 23-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 26-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B L YADAV SRDR
• Assessee Lawyers: M K PATEL
• Keywords: Depreciation
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI D.K. TYAGI, HONBLE JUDICIAL MEMBER AND SHRI A.K.GARODIA, HONBLE ACCOUNTANT MEMBER ITA NO.638/AHD/2009 ASSESSMENT YEAR:2005-06 N.K.JEWELLERS 405, ANAND COMPLEX, OPP. MASONIC HALL, JETALPUR ROAD, VADODARA -390005 PAN NO.AABFN3865P V/S. INCOME TAX OFFICER, WARD-5(3), BARODA (APPELLANT) .. (RESPONDENT) /BY APPELLANT SHRI M.K. PATEL, AR /BY RESPONDENT SHRI B.L. YADAV, SR-DR /DATE OF HEARING 23-04-2012 /DATE OF PRONOUNCEMENT 27-04-2012 O R D E R PER D.K. TYAGI, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-V, BARODA IN APPEAL NO.CAB/( A)-V/2-8/07-08 DATED 14-10-2008. THE ASSESSMENT WAS FRAMED BY THE ITO, U /S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDER DATED 28-12-2007 FOR THE ASSESSMENT YEAR 2005-06. 2. THE GROUND NO.1 IS GENERAL IN NATURE AND DOES NO T REQUIRE ANY ADJUDICATION. 3. GROUND NO.2 AND 3 ARE REPRODUCED AS UNDER:- ITA NO.638/AHD/2009 A.Y.2005-06 N.K.JEWELLERS V. ITO WD-5(3) BRD PAGE 2 2. THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE AD DITION OF RS.1,80,136/- ON ACCOUNT OF LABOUR CHARGES PAID TO THREE DIFFERENT PERSONS. HE ERRED IN INVOKING THE PROVISIONS OF SEC TION 40(A)(IA) OF THE INCOME TAX ACT. 3. THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING DIS ALLOWANCE OF RS.2,50,545/- U/S. 40(A)(IA) IN RESPECT OF INTEREST PAID ON DEPOSITS TO VARIOUS PARTIES WHO HAVE SUBMITTED FORM 15G AND 15H FOR NON DEDUCTION OF TAX AT SOURCE. 4. BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSE SSMENT PROCEEDINGS ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS NOT DE DUCTED TAX AT SOURCE ON THE PAYMENT OF LABOUR CHARGES PAID TO VARIOUS PERSO NS IN EXCESS OF LIMIT SPECIFIED U/S 194C OF THE ACT. THEREFORE INVOKING T HE PROVISIONS OF SECTION 40(A)(IA) DISALLOWANCE OF TOTAL LABOUR PAYMENT AMOU NTING TO RS.1,80,136/- WAS MADE AND THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. SIMILARLY, AN ADDITION OF RS.2,50,545/- ON ACCOUNT OF DISALLOW ANCE OF PAYMENT OF INTEREST U/S 40(A)(IA) OF THE ACT WAS MADE. THE ASSESSEES C ONTENTION BEFORE THE LD. CIT(A) WAS THAT THE AMOUNTS WERE NOT PAYABLE BUT AC TUALLY PAID AND IN VIEW OF THIS, THE PROVISIONS OF SECTION 40(A)(IA) OF THE AC T WERE NOT APPLICABLE AS THESE WERE APPLICABLE IN RESPECT OF TDS DEFAULTER, IF AMO UNTS WERE PAYABLE. HOWEVER, LD. CIT(A) DID NOT ACCEPT THE CONTENTION O F THE ASSESSEE AND ACTION OF THE ASSESSING OFFICER WAS CONFIRMED BY DISMISSIN G THE APPEAL OF ASSESSEE. 5. FURTHER, AGGRIEVED NOW THE ASSESSEE IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING LD. AUTHORIZED REPRESENTA TIVE SUBMITTED THAT THERE IS NO DISPUTE THAT ASSESSEE MADE LABOUR PAYME NT OF RS.1,80,136/- AND PAYMENT OF INTEREST OF RS.2,50,545/- AND NO TAX WAS DEDUCTED AT SOURCE FROM THESE PAYMENTS. HE FURTHER SUBMITTED THAT IN SUCH S ITUATION, RATIO AS LAID DOWN BY SPECIAL BENCH IN THE CASE OF M/S MERILYN SHIPPING & TRANSPORTS V. ACIT, IN ITA NO.477/VIZ/2008 WILL APPLY WHEREIN, IT HAS BEEN HELD THAT THE PROVI SIONS OF SECTION 40(A)(IA) OF THE ACT ARE APPLICABLE ONLY TO THE AMOUNTS OF EXPENDITURE WHICH WERE PAYABLE AS ON 31 ST MARCH OF EVERY YEAR AND THIS PROVISIONS CANNOT ITA NO.638/AHD/2009 A.Y.2005-06 N.K.JEWELLERS V. ITO WD-5(3) BRD PAGE 3 BE INVOKED TO DISALLOW WHICH HAVE ACTUALLY BEEN PAI D DURING THE PREVIOUS YEAR WITHOUT DEDUCTION OF TDS. THUS, THE ISSUE IS NOW CO VERED BY THE ABOVE DECISION OF SPECIAL BENCH IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS (SUPRA) IN FAVOUR OF THE ASSESSEE AND THEREFORE FOL LOWING THE SAME, THE ADDITION OF RS.1,80,136/- AND RS.2,50,545/- MADE BY ASSESSING OFFICER AND SUSTAINED BY LD. CIT(A) INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT MAY KINDLY BE DELETED. 7. ON THE OTHER HAND, LD. SR-DR HOWEVER, SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT THE SUM OF RS.1,8 0,136/- WAS PAID BY THE ASSESSEE DURING THE YEAR UNDER APPEAL AS LABOUR PAY MENT TO FOLLOWING THREE PARTIES. RS. 88,236/- PAID TO SALONI JEWELLERS RS. 54,300/- PAID TO SEJAL JEWELLERS RS. 37,600/- PAID TO S. KANJI JEWELLERS RS.1,80,136/- TOTAL LABOUR PAYMENT SIMILARLY, A SUM OF RS.2,50,545/- WAS PAID BY THE A SSESSEE TO THE FOLLOWING DEPOSITORS AS INTEREST:- RS. 16,816/- PAID TO DHAVAL SONI, RS. 47,666/- PAID TO NIRAJ SONI, RS. 98,856/- PAID TO BHAVINIBEN SONI RS. 67,837/- PAID TO BHANUMATIBEN SONI RS. 40,200/- PAID TO NARENDRA SONI RS. 47,007/- PAID DTO SHRI BHOGILAL SONI RS.2,50,545/- TOTAL INTEREST PAYMENT WE FURTHER FIND THAT IN RECENT JUDGMENT OF THE SPEC IAL BENCH IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS (SUPRA) IT HAS BEEN HELD AS UNDER:- ITA NO.638/AHD/2009 A.Y.2005-06 N.K.JEWELLERS V. ITO WD-5(3) BRD PAGE 4 THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE APPLICABLE ONLY TO THE AMOUNTS OF EXPENDITURE WHICH ARE PAYABLE AS ON THE DATE31ST MARCH OF EVERY YEAR AND IT CANNOT BE INVOKED TO DISALLOW WHI CH HAD BEEN ACTUALLY PAID DURING THE PREVIOUS YEAR, WITHOUT DEDUCTION OF TDS. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF SPECIA L BENCH IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS (SUPRA) THE ADDITION MADE BY ASSESSING OFFICER AND SUSTAINED BY LD. CIT(A) BY INVOKING THE PROVISI ONS OF SECTION 40(A)(IA) OF THE ACT ARE HEREBY DELETED. THE GROUNDS NO.2 AND 3 OF THE ASSESSEE ARE ALLOWED. 9. GROUND NO.4 READS AS UNDER:- 4. THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING DI SALLOWANCE OF RS.67,348/- IN RESPECT OF TELEPHONE EXPENSES, PETRO L EXPENSES AND DEPRECIATION OF CAR. 10. DURING THE ASSESSMENT PROCEEDINGS ASSESSING OFF ICER OBSERVED THAT ASSESSEE HAS DEBITED TELEPHONE EXPENSES OF RS.32,66 3/-, PETROL EXPENSES OF RS.98,241/- DEPRECIATION ON CAR OF RS.2,06,477/- AG GREGATING TO RS.3,37,381/-. SINCE THE VOUCHERS PERTAINING TO THESE EXPENSES WER E NOT PROPERLY MAINTAINED AND ALSO THE ASSESSEE COULD NOT SUBSTANT IATE THAT THE USE OF VEHICLE WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE AO ADDED 20% OF THESE EXPENSES I.E. RS.67,348/- TO THE INCOM E OF THE ASSESSEE. THIS ACTION OF THE AO WAS CONFIRMED IN APPEAL BY THE LD. CIT(A). 11. AT THE TIME OF HEARING BEFORE US, IT WAS SUBMIT TED ON BEHALF OF THE ASSESSEE THAT EXPENSES WERE INCURRED WHOLLY AND EXC LUSIVELY FOR THE PURPOSE OF BUSINESS AND THE SAME HAVE BEEN INCURRED OUT OF COMMERCIAL EXIGENCY AND THEREFORE THE DISALLOWANCE IF AT ALL BE RESTRICTED TO 5% OF TOTAL EXPENSES. 12. LD. DR OF THE REVENUE HOWEVER, RELIED UPON THE ORDERS OF AUTHORITIES BELOW. ITA NO.638/AHD/2009 A.Y.2005-06 N.K.JEWELLERS V. ITO WD-5(3) BRD PAGE 5 13. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT ASSESSEE HAS INCURRED SMALL AMOUNT UNDER THE HEAD O F TELEPHONE, PETROL EXPENSES ETC., AND THEREFORE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING AD HOC DISALLOWANCE AT THE RATE OF 20% OF TOTAL EXPENS ES INCURRED BY THE ASSESSEE. THE DISALLOWANCE APPEARS TO BE ON HIGHER SIDE, THEREFORE WE RESTRICT THIS ADDITION TO 10% OF THE TOTAL EXPENSES AND AO IS DIRECTED TO RE- CALCULATE THE DISALLOWANCE ACCORDINGLY. THIS GROUND OF ASSESSEE IS PARTLY ALLOWED. 14. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (D.K. TYAGI) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP - '#$ % &' &' &' &' (() (() (() (() *) *) *) *) / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. $(/ & &0 / CONCERNED CIT 4. & &0- / CIT (A) 5. )34 (((/, & (/ , '#$ / DR, ITAT, AHMEDABAD 6. 478 9: / GUARD FILE. BY ORDER/ &' , /TRUE COPY/ ;/ ' = & (/ , '#$ %