M/s Rajiv Kumar Sanjiv Kumar, Yamunanagar V. ITO, W-3, Yamunanagar

ITA 755/CHANDI/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4336 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 14-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS; Set aside
• Section: 131; 263; 40(a)(ia); 250; 194A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH CHANDIGARH Before Shri Sanjay Garg, Judicial Member I.T.A. No.755/CHANDI/2019 Assessment Year: 2011-12 M/s Rajiv Kumar Sanjiv Kumar.... ..................................................... Appellant 34, Gur Mandi, Industrial Area, Yamuna Nagar, Haryana-135001. [PAN: AADFR3971L] vs. ITO, Ward-3, Yamuna Nagar, Haryana................................................ Respondent Appearances by: Shri S.K. Mukhi, Advocate, appeared on behalf of the appellant. Shri Akashdeep, JCIT, Sr. DR, appeared on behalf of the Respondent. Date of concluding the hearing : August 02, 2022 Date of pronouncing the order : September 22, 2022 ORDER Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 26.02.2019 of the Commissioner of Income Tax (Appeals), Panchkula [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). The assessee in this appeal has taken the following grounds of appeal: “1. That the orders of Ld. CIT(A) is illegal, erroneous and perverse and thus needs to be quashed. 2. That the Ld. CIT(A) is not justified in passing the impugned order confirming the disallowance of interest on account of non-deduction of TDS by erroneously applying the provisions of section 40(a)(ia) of Income Tax Act, 1961 while making payment on account EMI of loan to CITI Financial and thus the order deserves to be set aside. 3. That the appellant craves leave to add, amend or delete any of the grounds of appeal on or before the disposal of the present appeal.” 2. The brief facts of the case are that during the year under consideration, the assessee had paid interest on two loans under the heads ‘Home Equity Loan’ and ‘Personal Loan’ taken from M/s Citi Financials which is a non-banking company. The assessee has claimed that though the loans were taken under the above heads, the loans were actually used for business purposes of the firm. The claim of interest expenditure on M/s Rajiv Kumar Sanjiv Kumar I.T.A. No.755/CHANDI/2019 Assessment Year: 2011-12 2 the aforesaid loans was accepted by the Assessing Officer. However, in the revision proceedings carried out u/s 263 of the Act, the PCIT , Panchkula vide order dated 31.12.2015, from the perusal of the repayment details of the EMI, observed that in respect of equity loan, the assessee during the year had repaid principal amount of Rs.50,278/- whereas, the interest on the same was Rs.4,74,157/-. Similarly, in respect of personal loan, it was observed that the principal amount repaid was Rs.1,38,054/- whereas, the interest on the same was Rs.1,09,121/-. The ld. PCIT further observed that the assessee was required to deduct TDS u/s 194 on the aforesaid interest payments comprised in the EMIs. He, therefore, held that the disallowance of interest payment was attracted in this case under the provisions of section 40(a)(ia) of the Act. The appellant/assessee furnished a certificate from the payee M/s Citi Financials that the payment received from the assessee had been included in the principal and interest account and even the PAN number of the payee was also mentioned. The assessee claimed that since the payee was a regular income tax assessee and had included the interest income in its accounts and had paid due taxes, therefore, the assessee cannot be treated as assessee in default. However, the ld. PCIT rejected the aforesaid contention of the assessee observing that assessee could not furnish documentary evidence such as return of income filed by the Citi Financials for assessment year 2011-12 and computation of income reflecting that the interest received from the assessee was taken into account. The assessee preferred appeal before this Tribunal against the order of the 263 but could not succeed, the Tribunal upheld the finding of the PCIT that the certificate issued by the financial institution were general in nature. 3. In the assessment proceedings carried out in pursuance to section 263 order, the Assessing Officer disallowed the amount of interest as no documentary evidence regarding the deduction of TDS u/s 194A was furnished by the assessee. The ld. CIT(A) vide impugned order had also dismissed the appeal of the assessee. The assessee thus has come in appeal before this Tribunal. 4. I have heard the rival contentions and gone through the records. The ld. counsel for the assessee has submitted that the assessee firm had taken loans from M/s Citi M/s Rajiv Kumar Sanjiv Kumar I.T.A. No.755/CHANDI/2019 Assessment Year: 2011-12 3 Financials. The assessee as per the loan agreement was not entitled to deduct the TDS on the EMI payment. That if, the assessee would have defaulted in any manner in respect of mode of manner of payment EMI payments, the said M/s Citi Financials would have burdened the assessee with penal interest and penalty. That there was no option available to the assessee by the M/s Citi Financials to deduct TDS on the interest component in the EMI. Further, that the assessee made its best efforts to get the required certificate from the payee that the interest income paid by the assessee has been duly taken into account for income tax purposes by the said company and that a certificate to this effect was also issued. However, since the said certificate did not fully satisfy the required conditions as per the provisions of the Act, the same has been rejected by the Income Tax Authorities. That however, a plea was made before the Assessing Officer to call for the required information from the concerned M/s Citi Financials, however, no effort was made by the Assessing Officer in this respect. Under these circumstances, the ld. counsel, therefore, has submitted that the assessee should not be punished for its helplessness and for the acts and omissions which were beyond the control of the assessee. 5. The ld. DR, on the other hand, has relied upon the finding of the lower authorities. 6. Having considered the rival submissions, I am of the view that the assessee not only has demonstrated his compulsion for non-deduction of TDS out of the EMI and further has made sincere effort to procure the required documents from M/s Citi Financials. Under these circumstances, to get to the proper conclusion of the case, the Assessing Officer should have exercised his powers of summoning and calling for record from the concerned M/s Citi Financials. In view of this, the impugned order of the CIT(A) is set aside and the matter is restored to the file of the Assessing Officer with a direction that the Assessing Officer, exercising his power u/s 131 and 133 of the Income Tax Act will call for the required records from the concerned M/s Citi Financials and if it is found that the said M/s Citi Financials has taken into account the amount of interest received by the assessee for the purpose of computation of income and has paid due taxes then the assessee will not be treated as assessee in default and no disallowance will be M/s Rajiv Kumar Sanjiv Kumar I.T.A. No.755/CHANDI/2019 Assessment Year: 2011-12 4 attracted. With the above observations, the issue is restored to the file of the Assessing Officer for decision afresh. 7. In the result, the appeal of the assessee is treated as allowed for statistical purposes. Kolkata, the 22 nd September, 2022. Sd/- [Sanjay Garg] Judicial Member Dated: 22.09.2022. RS Copy of the order forwarded to: 1. M/s Rajiv Kumar Sanjiv Kumar 2. ITO, Ward-3, Yamuna Nagar, Haryana 3. CIT(A)- 4. CIT- , 5. CIT(DR), ITAT, Chandigarh //True copy// By order Assistant Registrar