Thakur Vaidyanath Aiyar & Co., New Delhi V. ACIT, Circle- 63(1), New Delhi

ITA 6986/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7361 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 22-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Rectification of order; TDS
• Section: 43B; 40(a)(ia); 139(1); 113

Judgement Text

1 ITA NO. 6986/DEL/2017 IN THE INCOME TAX APPE LLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE MS SUCHITRA KAMBLE, JUDICIAL ME MBER AND SHRI PRASHANT MAHARISHI, ACCO UNTANT MEMBER I.T.A. NO. 6986/DEL/20 17 (A.Y 2013-14) (THROUGH VIDEO CON FERENCING) THAKUR VAIDYANTH AIYAR & CO. 221-223, DEEN DAYAL MARG, NEW DELHI AAAFT3096M (APPELLANT) VS ACIT ROOM NO. 2205, PRATAYAKSH KAR BHAWAN, J. L. NEHRU MARG, NEW DELHI ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST ORDER DATED 04/09/2017 PASSED BY CIT(A)-20, NEW DELHI FOR ASSESSMENT YEAR 2013-14. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT THE ID. AO AS WELL AS CIT (APPEAL) HAVE ERR ED IN MAKING ADDITION OF RS 29,81,399.00 BEING THE SERVICE TAX PAYABLE AS ON 31.03.2013. 2. THAT THE ID. AO AND THE CIT (APPEAL) HAVE ERRED IN NOT APPRECIATING THAT ENTRIES RELATING TO SERVICE TAX PAYABLE HAVE NOT BE EN ROUTED THROUGH PROFIT & LOSS ACCOUNT AND AS THE ASSESSEE IS MAINTAINING ACC OUNTS UNDER CASH SYSTEM OF ACCOUNTING , NO DISALLOWANCE / ADDITION CAN BE M ADE TO THE RETURNED INCOME. 3. THAT, SINCE THE SERVICE TAX PAYABLE IS NOT ROUTE D THROUGH PROFIT AND LOSS APPELLANT BY SH. SOURABH JAIN, CA RESPONDENT BY SH. PRAKASH DUBEY, SR. DR DATE OF HEARING 30.06.2021 DATE OF PRONOUNCEMENT 19.08.2021 2 ITA NO. 6986/DEL/2017 ACCOUNT ,THE PROVISION OF SECTION 43B ARE NOT APPLI CABLE AND NO ADDITION/DISALLOWANCE CAN BE MADE FOR SUCH NON PAYM ENT BEFORE THE END OF FINANCIAL YEAR. 4. THAT THE ID. AO AND THE CIT( APPEAL) HAVE ERRED IN DISALLOWING AND ADDING A SUM OF RS. 21,516.00 AND RS 14,375.00 AS TDS PAYA BLE ON OTHERS & SALARY RESPECTIVELY TO THE RETURNED INCOME. 5. THAT THE ID. AO AND THE CIT (APPEAL) HAVE ERRED IN DISALLOWING AND ADDING A SUM OF RS 6300.00 TOWARDS PROFESSIONAL TAX PAYABL E TO THE RETURNED INCOME . 6. THAT THE PROVISION OF SECTION 43B OF THE INCOME TAX ACT 1961 OVERRIDES AND IS APPLICABLE IRRESPECTIVE WHETHER THE ACCOUNTS ARE MAINTAINED UNDER CASH SYSTEM OR MERCANTILE SYSTEM OF ACCOUNTING. 7. THAT IN THE ALTERNATIVE, THE ID. AO BE DIRECTED TO ALLOW THE FOLLOWING PAYABLES AS DEDUCTIONS IN THE FOLLOWING ASSESSMENT YEAR UNDER CASH SYSTEM OF ACCOUNTING BEING CONSEQUENTIAL RELIEF. DISALLOWANCE RS. (A) SERVICE TAX 29,81,399,00 (B) PROFESSIONAL TAX 6,300.00 (C) TDS PAYABLE 21,516.00 (D) TDS SALARY 14,375.00 8. THAT THE ID. ASSESSING OFFICER HAS ERRED IN DISA LLOWING 1 /10 TH OF THE FOLLOWING EXPENSES ON SURMISE AND CONJECTURE AND WI THOUT POINTING OUT ANY SPECIFIC DEFECT / DEFICIENCY IN THE ACCOUNTS OF THE ASSESSEE. SI. NO. EXPENSE HEAD DISALLOWANCE RS. 1. STAFF WELFARE 67,808.00 2. CONVEYANCE 1,37,166.00 3. GENERAL EXPENSES 1,46,591.00 4. TELEPHONE 69,137.00 4,20,702.00 9. THAT THE EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THEREFORE DISALLOWANCE OF S UCH EXPENSES IS BAD IN THE ABSENCE OF ANY EVIDENCE TO THE CONTRARY. 3 ITA NO. 6986/DEL/2017 10. THAT THE DISALLOWANCE IS EXCESSIVE AND UNREASO NABLE COMMENSURATE WITH THE NATURE OF THE BUSINESS AND TH E VOLUME OF THE TURNOVER AND ITS INCOME. 11. THAT THE ASSESSMENT ORDER IS BAD IN LAW AND FA CTS OF THE CASE. 12. THAT THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PR EJUDICE TO ONE ANOTHER. 3. THE ASSESSEE IS A PARTNERSHIP FIRM AND DERIVES I NCOME FROM PROFESSION OF CHARTERED ACCOUNTANCY. RETURN OF INCOME WAS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2013-14 ON 30/09/2013 DECLARING A TOTAL INCOME OF RS.53,70,280/-. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS THE ASSESSEE PRODUCED ORIGINAL BOOKS OF ACCOUNTS, BILLS, VOUCHER S, SALARY RECORD, LOG BOOK DISPOSAL. THE ASSESSING OFFICER DISALLOWED THE EXP ENSES WHICH ACCORDING TO THE ASSESSING OFFICER HAVE NOT BEEN PAID IN THE REL EVANT FINANCIAL YEAR. THE ASSESSING OFFICER FURTHER DISALLOWED INTEREST ON SE RVICE BOOKS AS WELL AS EARLIER YEAR SERVICE TAX. THE ASSESSING OFFICER ALSO DISAL LOWED THE WEALTH EXPENSES, STAFF WELFARE EXPENSES, CAR MAINTENANCE EXPENSES, G ENERAL EXPENSES, TELEPHONE EXPENSES. THE ASSESSING OFFICER FURTHER DISALLOWED DEDUCTION CLAIM U/S 80G. THUS, THE INCOME OF THE ASSESSEE IS ASSESSED AT RS. 1,05,44,890/-. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL O F THE ASSESSEE. 5. DURING THE HEARING THE ASSESSEE SUBMITTED THAT A S REGARDS GROUND NOS 1, 2, 3, 5, 6 AND 7 (A) & (B) I.E. SERVICE TAX COMP ONENT AMOUNTING TO RS. 29,81,399/- AND PROFESSIONAL TAX AMOUNTING TO RS. 6 ,300/- ARE NOT PRESSED AND ARE WITHDRAWN AS THE SAME WAS CONSIDERED BY THE ASSESSING OFFICER VIDE RECTIFICATION ORDER DATED 05.07.2018. AS REGARDS G ROUND NOS. 4 AND 7 (C) & (D) RELATING TO DISALLOWANCE IN RESPECT OF TDS PAYABLE ON OTHERS AND SALARY RESPECTIVELY TO THE RETURN INCOME, THE LD. AR SUBM ITTED THAT THE STATUTORY LIABILITIES ARE COVERED UNDER SECTION 43B OF THE IN COME TAX ACT, 1961 AND HAVE 4 ITA NO. 6986/DEL/2017 BEEN PAID IN THE ENSUING YEAR BEFORE THE FILING OF TAX RETURN IN TERMS OF SECTION 139(1) OF THE ACT. THE LD. AR FURTHER SUBMI TTED THAT AS SUCH PROVISIONS OF SECTION 40(A)(IA) CANNOT BE INVOKED IN THE PRESE NT CASE. THE LD. AR RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT I N CASE OF CIT VS. RAJINDER KUMAR (2013) 260 CTR (DEL.) 113 AS WELL AS THE DECI SION OF TRIBUNAL IN CASE OF GAGRAT & CO. VS. ACIT (ITA NO. 3194/DEL/2017 ORDER DATED 07.02.2020). 6. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). THE LD. DR FURTHER SUBMITTED THAT THE ASSES SEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING WHEREBY ONLY PAYMENTS WHICH HA VE BEEN MADE DURING THE YEAR CAN BE CLAIMED AS EXPENSES AND AS THESE EX PENSES ARE NOT PAID, THE SAME CANNOT BE ALLOWED AS EXPENSES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT T HE ASSESSING OFFICER IS NOT DISPUTING THE ACCOUNTING METHOD OF THE ASSESSEE WHI CH IS CASH SYSTEM. IN FACT, THE ASSESSING OFFICER AS WELL AS THE CIT(A) IS ADMI TTING THAT TDS HAS BEEN DEDUCTED BY THE CONCERNED PARTY WHILE CREDITING THE ACCOUNT OF THE ASSESSEE AND DEPOSITED INTO GOVERNMENT ACCOUNT AS PER 26AS O F THE ASSESSEE. THE ASSESSEE HAS MADE TDS PAYMENT BEFORE THE DUE DATE O F FILING OF THE RETURN UNDER SECTION 139(1) WHICH EMERGES FROM PAGE NO. 6 TO 11 OF THE PAPER BOOK ANNEXING CHALLANS AS WELL. THE DECISION OF THE HON BLE DELHI HIGH COURT IN CASE OF RAJNDER KUMAR (SUPRA) AND THE DECISION OF THE TR IBUNAL RELIED BY THE LD. AR ARE APPLICABLE IN THE PRESENT CASE AS THE ASSESSEE HAS PAID THE TDS AMOUNT BEFORE THE DUE DATE I.E. BEFORE THE DATE ON WHICH R ETURN OF INCOME U/S 139(1) OF THE ACT HAS TO BE FILED. THUS, SECTION 40(A)(IA) WI LL NOT BE APPLICABLE IN THE PRESENT CASE. THEREFORE, GROUND NOS. 4, 7(C) AND (D ) ARE ALLOWED. 8. AS REGARDS TO GROUND NO. 8 RELATING TO DISALLOWA NCE OF EXPENSES TO THE EXTENT OF 1/10 TH , THE LD. AR SUBMITTED THAT ALL THE STAFF WELFARE, CONVENIENCE EXPENSES, GENERAL EXPENSES AS WELL AS TELEPHONE EXP ENSES ARE EITHER BELOW RS. 5 ITA NO. 6986/DEL/2017 20,000 OR RS.40,000/- AND, THEREFORE, SOME PAYMENTS WERE MADE IN CASH OR THROUGH VOUCHERS. THE ASSESSING OFFICER COULD NOT POINT OUT OR DETECT ANY EXPENDITURE WHICH WAS WITHOUT ANY VOUCHER DURING TH E ASSESSMENT PROCEEDINGS AND HENCE ADDITION IS UNWANTED AND UNWA RRANTED. 9. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 10. WE HAVE HEARD THE LD. DR AND PERUSED ALL THE RE LEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT THE ASSESSI NG OFFICER HAS SIMPLY REJECTED ALL THESE EXPENSES STATING IN THE ASSESSMENT ORDER THAT THE ASSESSEE COULD NOT PRODUCE PROPER VOUCHERS. BUT FROM THE PERUSAL OF TH E RECORDS WHICH WAS BEFORE THE ASSESSING OFFICER, IT CAN BE SEEN THAT THE ASSE SSEE HAS GIVEN ALL THE VOUCHERS AND THE RELEVANT DETAILS OF THESE EXPENSES WHICH WAS NOT AT ALL TAKEN INTO CONSIDERATION BY THE ASSESSING OFFICER. THUS, MERELY ON ASSUMPTION BASIS THE ASSESSING OFFICER DISALLOWED 1/10 TH OF THESE EXPENSES WHICH ARE NOT JUST AND PROPER. THEREFORE, GROUND NO. 8 IS ALLOWED. 11. AS RELATES TO GROUND NO. 9 TO 12, THE SAME ARE NOT PRESSED/WITHDRAWN BY THE LD. AR AT THE TIME OF HEARING BEFORE US. HEN CE, GROUND NOS. 9 TO 12 ARE DISMISSED. 12. IN RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF AUGUST, 2021. SD/- SD/- (PRASHANT MAHARISHI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL M EMBER DATED: 19/08/2021 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 6 ITA NO. 6986/DEL/2017 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI