M/s S. Dhole & Co., Kolkata V. CIT,- XX, KOLKATA, Kolkata

ITA 769/KOL/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3229 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 28-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S SRIVASTAVA
• Assessee Lawyers: G BANERJEE
• Section: 143(3); 194C; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 769 / KOL / 2014 ASSESSMENT YEAR :2009-10 M/S S.DHOLE & CO 63, BAGUIATI ROAD, KOLKATA-700 028 [ PAN NO.ABAFS 8332 A ] V/S . COMMISSIONER OF INCOME TAX-XX, RAFI AHMED KIDWAI ROAD, KOLKATA-700 016 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI G. BANERJEE, FCA /BY RESPONDENT SHRI S. SRIVASTAVA, CIT-DR /DATE OF HEARING 05-01-2016 /DATE OF PRONOUNCEMENT 11-02-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F COMMISSIONER OF INCOME TAX-XX, KOLKATA NO.CIT-XX/KOL/REVENUE.U/S.26 3/13-14/5115-18 DATED 20.02.2014 PASSED U/S 263 OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). ASSESSMENT WAS FRAMED BY ITO WARD-55(2), KOLKATA U/S 143(3) OF THE ACT VIDE HIS ORDER DATED 15.12.20 11 FOR ASSESSMENT YEAR 2009-10 AND ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DIRECTION OF ADDITION US. 40(A)(IA) OF RS.266,459 REPRESENTING P URCHASE OF MATERIAL/GOODS BEING EXCLUDED FROM TDS U/S. 194C(3) READ WITH SUB CLAUSE (E) OF EXPLANATION IS WRONG, ERRONEOUS, EXCE SSIVE, ARBITRARY AND DESERVES TO BE DELETED/REDUCED. ITA NO.769/KOL/2014 A.Y.2009-10 M/S S. DHOLE & CO. V. CIT-XX KOL. PAGE 2 2. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE DIRECTION OF ADDITION U/S. 40(A)(IA) OF RS.56,04,100 REPRESENTIN G EXPENDITURE/PAYMENTS NOT EXIGIBLE TO TAX DEDUCTION AT SOURCE OR OTHERWISE NOT DISALLOWABLE IS WRONG, ERRONEOUS, EXC ESSIVE, ARBITRARY AND DESERVES TO BE DELETED/REDUCED. 3. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE DIRECTING TO ADDITION OF RS.130,345 AS BANK INTEREST INCOME OF T HE ASSESSEE IS WRONG, ERRONEOUS, EXCESSIVE, ARBITRARY AND DESERVES TO BE DELETED/REDUCED. 4. FOR THAT THE IMPUGNED ORDER U/S.263 DATED 20.02. 14 IS OTHERWISE BAD, INVALID, TIME-BARED, VOID AUTHORITIES BELOW-INITIO AND DESERVES TO BE CANCELLED. 2. FACTS OF THE CASE ARE THAT ASSESSEE IS A PARTNER SHIP FIRM AND ENGAGED IN THE BUSINESS OF MANUFACTURING OF DRUGS AND MEDIC INES. ASSESSMENT OF ASSESSEE WAS COMPLETED U/S 143(3) OF THE ACT BY ASS ESSING OFFICER ON 15.12.2011. WHILE PASSING THE ORDER OF AO LD. CIT F OUND FROM THE RECORDS THAT ASSESSMENT ORDER PASSED BY AO IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF FOLLOWING REA SONS:- (1) ASSESSEE CLAIMED ADVERTISEMENT EXPENSES OF 64,10,506/- IN ITS PROFIT AND LOSS ACCOUNT WITHOUT DEDUCTING THE TDS UNDER TH E ACT (2) ASSESSEE HAS UNDER STATED THE INTEREST INCOME FOR 1,30,145/- ACCORDINGLY, LD. CIT SOUGHT THE CLARIFICATION FROM ASSESSEE BY ISSUING NOTICE U/S 263 OF THE ACT. ISSUE NO.1 3. IN COMPLIANCE TO NOTICE OF LD. CIT(A) ASSESSEE SUBMITTED THAT REGARDING THE ISSUE OF TDS ON ADVERTISEMENT EXPENSE S, THE CORRECT AMOUNT OF SUCH ADVERTISEMENT IS AT 66,65,453/- BUT THE OBJECTION ON THE ISSUE OF NOTIC E U/S 263 OF THE ACT BY ASSESSEE ARE AS FOLLOWS:- ITA NO.769/KOL/2014 A.Y.2009-10 M/S S. DHOLE & CO. V. CIT-XX KOL. PAGE 3 (I) ASSESSING OFFICER VERIFIED IN DETAILS OF ALL T HE EXPENSES IN RELATION TO ADVERTISEMENT INCURRED BY ASSESSEE DURING THE YE AR UNDER CONSIDERATION; (II) EVEN IF IT IS PRESUMED THAT ASSESSEE HAS DEFA ULTED THE PROVISION OF TDS U/S. 40(A)(IA) OF THE ACT THEN ALSO THE ORDE R OF AO IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E, FOR THE REASONS AS UNDER:- 1) AS PER THE DECISION OF MERILYN SHIPPING & TRANSORT VS. ADDL. CIT IN ITA NO. 477/VIZ/2008 HELD THAT THE AMOUNT REMAIN ING OUTSTANDING AT THE END OF YEAR ATTRACT THE SEC. 40( A)(IA) OF THE ACT WITH RESPECT TO SEC. 194C OF THE ACT. THE OUTSTANDI NG AMOUNT AT THE END OF FINANCIAL YEAR IS AT 33,21,418/-. SO THE AMOUNT OF DISALLOWANCE SHALL BE RESTRICTED TO ABOVE STATED AM OUNT 2) AS PER AMENDED FINANCE ACT 2012 IF THE RECIPIENT PAYS THE TAX THEN THE PROVISION OF SEC. 40(A)(IA) WOULD NOT BE A TTRACTED TO THE PAYER. ACCORDINGLY, DISALLOWANCE CANNOT BE MADE. 3) OUT OF THE ABOVE DISALLOWANCE OF 66,65,453/- AND SUM OF 2,66,469/- IS OUT OF PURVIEW OF TDS PROVISION AS IT RELATES TO PURCHASE OF PRINTING MATERIAL FROM M/S JYOTI ENTERP RISE 4) AS PER BOARDS CIRCULAR N. 1 OF 2014, THE SERVIC E TAX COMPONENT EMBODIED IN ADVERTISEMENT EXPENSE IS TO BE EXCLUDED FROM THE PROVISION OF TDS; THE LD. CIT HAS DISREGARDED THE CLAIM OF THE ASSESS EE BY OBSERVING THAT THE DECISION OF MERILYN SIPPING & TRANSPORT (SUPRA) HAS BEEN REVERSED BY THIS JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. CRESCENT EXPORT SYNDICATE IN 216 TAXMANN 258 (CAL). THEREFORE THE PROVISIONS OF TDS SHALL BE APPLIED ON BOTH THE PAID AS WELL AS PAYABLE AMOUNT OF THE EXPE NSES FOR ADVERTISEMENT AFTER EXCLUDING THE AMOUNT QUANTIFIED AS SERVICE TA X FROM THE BILLS OF ADVERTISEMENT. SIMILARLY THE AMENDMENT IN FINANCE A CT 2012 CAME MUCH AFTER THE RELEVANT YEAR IN CONSIDERATION. REGARDING THE EXPENSES OF PRINTING MATERIALS, LD. CIT HELD THAT EXPENSES INCURRED IN R ELATION TO PRINTING BANNERS, ITA NO.769/KOL/2014 A.Y.2009-10 M/S S. DHOLE & CO. V. CIT-XX KOL. PAGE 4 CALENDARS BEARING THE NAME OF LOGO OF ASSESSEE-COMP ANY THEREFORE IT CANNOT BE USED BY ANY OTHER PERSONS. SO LD. CIT DISREGARDE D THE CLAIM OF ASSESSEE AND DIRECTED THE AO TO INCLUDE THE EXPENSES INCURRE D IN RELATION TO PRINTING MATERIALS FOR AN AMOUNT OF 2,66,459/-. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) SHRI G. BANERJEE, LD. AUTHORIZED REPRESENTATIVE APP EARING ON BEHALF OF ASSESSEE AND SHRI S. SRIVASTAVE LD. DEPARTMENTAL RE PRESENTATIVE APPEARING ON BEHALF OF REVENUE. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. LD. AR SUBMITTED PAPER BOOK CONTAINING PAGE S 1 TO 40 AND STATED THAT ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT AFT ER DETAILED SCRUTINY OF ITS BOOKS OF ACCOUNT AND DOCUMENTS. THE ISSUE RAISED BY LD. CIT WAS ALSO VERIFIED BY AO AND THEREFORE THE ORDER PASSED U/S 2 63 OF THE ACT BY LD. CIT HOLDING ERRONEOUS AND PREJUDICIAL TO THE INTEREST O F REVENUE DOES NOT HOLD ANY MERIT. BESIDES, THIS ASSESSEE SUBMITTED IN TERMS OF AMENDED PROVISION OF FINANCE ACT 2012 WHERE IF AN ASSESSEE FAILS TO DEDU CT TDS BUT PROVE THAT THE RECEIVER HAS PAID THE TAX ON THE AMOUNT THEN THE PA YER WILL BE EXEMPTED FROM THE PROVISION OF SEC. 40(A)(IA) OF THE ACT. 6. ON THE OTHER HAND, LD. DR CITED A DECISION OF TH E HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX, CENTERAL-I, KOLKATA V. MAITHAN INTERNATIONAL (2015) 56 TAXMANN.COM 283 (CAL) AND V EHEMENTLY RELIED ON THE ORDER OF LD. CIT. 7. FROM THE AFORESAID DISCUSSION, WE FIND THAT ASSE SSEE CLAIMED THE EXPENSE INCURRED OF 64,10,506/- BY DEBITING FROM PROFIT AND LOSS ACCOU NT TOWARDS ADVERTISEMENT EXPENSES, HOWEVER, THIS EXPEN SE ATTRACTS THE PROVISION OF TDS IN TERMS OF PROVISION OF SEC. 194C OF THE AC T. ACCORDINGLY, ASSESSEE ITA NO.769/KOL/2014 A.Y.2009-10 M/S S. DHOLE & CO. V. CIT-XX KOL. PAGE 5 WAS LIABLE TO DEDUCT TDS FROM THE ABOVE EXPENSES, B UT THE ASSESSEE FAILED TO DO SO. BESIDES THE ABOVE THE ADVERTISEMENT EXPENSES WERE NOT VERIFIED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT. THEREFORE, LD. CIT HELD THE ORDER PASSED BY AO IS E RRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. WE FIND FROM THE AMENDE D PROVISION OF FINANCE ACT, 2012 THAT IN CASE, ASSESSEE FAILS TO DEDUCT TDS FRO M THE PAYMENT OF EXPENSE TO THE PARTY CONCERNED AND RECEIVER OF THE PAYMENT HAS PAID TAX ON THE AMOUNT RECEIVED THEN ASSESSEE SHOULD NOT BE HELD AS GUILTY FOR DEFAULT OF TDS U/S 40(A)(IA) OF THE ACT. LD. AR SUBMITTED THAT A C ERTIFICATE FROM CHARTERED ACCOUNTANT CERTIFYING THAT THE PARTY I.E. M/S I.S. TRADING TO WHOM THE ADVERTISEMENT EXPENSES WERE PAID BY ASSESSEE THAT T HE INCOME TAX ON THE AMOUNT RECEIVED FROM ASSESSEE HAS BEEN DULY PAID WH ICH IS PLACED ON PAGE 26 AND 27 OF THE PAPER BOOK. THEREFORE, WE ARE OF T HE CONSIDERED VIEW THAT THE OBSERVATION OF LD. CIT U/S. 263 OF THE ACT THAT THE ORDER IS ERRONEOUS IS CORRECT OBSERVATION. HOWEVER, AS PER THE PROVISION OF SEC. 263 OF THE ACT THE ORDER OF THE AO SHOULD NOT ONLY BE ERRONEOUS BUT AL SO TO THE INTEREST OF REVENUE. SO IN THIS VIEW OF THE MATTER THE ORDER PA SSED BY ASSESSING OFFICER IS NOT PREJUDICIAL TO THE INTEREST OF REVENUE. REGARD ING THE CLAIM OF ASSESSEE THAT THE PRINTING MATERIAL EXPENSE IS OUT OF THE PU RVIEW OF TDS PROVISION, WE FIND THAT THIS IS A TRANSACTION OF PURCHASE OF PRIN TING MATERIAL AS EVIDENT FROM THE BILL OF THE PARTY CONCERN M/S JYOTI ENTERPRISE WHICH ARE PLACED AT PAGE NO. 6 TO 8 OF THE PAPER BOOK. WE ALSO FIND THAT THERE W AS NO CONTRACT BETWEEN THE ASSESSEE AND THE PARTY M/S JYOTI ENTERPRISE FOR ATT RACTING THE PROVISION OF SEC. 194C OF THE ACT. IN OUR CONSIDERED VIEW, WE REVERSE THE ORDER OF LD. CIT AND ACCORDINGLY THIS GROUND OF ASSESSEES APPEAL IS ALL OWED. COMING TO SECOND ISSUE . 8. LD. CIT FOUND FROM THE BALANCE-SHEET OF THE ASSE SSEE THAT THE INTEREST INCOME HAS BEEN UNDER STATED BY AN AMOUNT OF 1,30,145/-. THE ASSESSEE HAS DECLARED IN THE BALANCE-SHEET THE INTEREST ON F IXED DEPOSIT (FD) FOR AN AMOUNT OF 4,28,266/- BUT IN THE PROFIT AND LOSS ACCOUNT IT W AS SHOWN FOR ITA NO.769/KOL/2014 A.Y.2009-10 M/S S. DHOLE & CO. V. CIT-XX KOL. PAGE 6 2,98,121/-. ACCORDINGLY, LD. CIT ISSUED NOTICE U/S. 263 OF THE ACT. IN RESPONSE THERETO ASSESSEE SUBMITTED THAT INTEREST A CCRUED ON FD FOR THE PERIOD FROM 01.04.2008 TO 31.03.2009 IS OF 2,98,120/- ONLY. HOWEVER, LD. CIT DISREGARDED THE CLAIM OF ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO MAKE THE ADDITION OF 1,30,145/-. 9. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE U S. 10. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORDS. LD. AR SUBMITTED THAT THE DIFFERENCE IN IN TEREST ON FD HAS BEEN STATED IN THE BALANCE-SHEET AND PROFIT AND LOSS ACC OUNT IS DUE TO WRONG NOMENCLATURE. IN THIS REGARD, LD. AR DREW OUR ATTEN TION AT PAGES 12 AND 13 OF THE PAPER BOOK WHERE THE DETAIL OF INTEREST INCOME WAS DULY RECORDED. 11. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER O F LD. CIT. 12. FROM THE AFORESAID DISCUSSION WE FIND THAT THE LD. CIT FOUND THE ORDER OF THE AO ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AS THE INCOME OF THE INTEREST WAS UNDERSTATED BY THE ASSESSEE BY AN AMOUNT OF RS. 1,30,145/-. HOWEVER BEFORE US THE LD. AR HAS SUBMITTED THE RECO NCILIATION STATEMENT FOR THE INTEREST INCOME AND THE EXPLAINED THAT PART OF THE INTEREST INCOME WAS PERTAINING TO THE EARLIER YEAR. THEREFORE WE REVERS E THE ORDER OF THE LD. CIT PASSED UNDER SECTION 263 OF THE ACT. 13. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 11/ 02/2016 SD/- SD/- (S.S.VISHWANETHRA RAVI) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 11 / 02 /201 6 ITA NO.769/KOL/2014 A.Y.2009-10 M/S S. DHOLE & CO. V. CIT-XX KOL. PAGE 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S S.DHOLE & CO. 63, BAGUIATI ROAD, KOL KATA-700 028 2. /RESPONDENT-CIT-XX, RAFI AHMED KIDWAI ROAD, KOLKATA -700 016 3. ) *+ , , - / CONCERNED CIT KOLKATA 4. , , -- / CIT (A) KOLKATA 5. 012 33*+, , *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , , /TRUE COPY/ / , *+ ,