N.Mohan Kumar, Madurai V. DCIT, Madurai

ITA 799/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96319 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 27-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 13-04-2015
• Court: TRIBUNAL
• Department Lawyers: EPASS ROAD MADURAI PAN AFBPM M
• Assessee Lawyers: P A ASWIN KUM A AR C A SHRI A
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , !' # , $ % [BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMB ER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER] ./ ITA NO.799/MDS/2015 ( /ASSESSMENT YEAR 2010-2011) SHRI. N. MOHANKUMAR , NO.10, SBI OFFICER, 2 ND COLONY, BYE-PASS ROAD, MADURAI 625 010. [PAN: AFBPM 7293M] ( &' /APPELLANT) VS THE DEPUTY COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE -2, MADURAI. ( #(&' /RESPONDENT) / APPELLANT BY : SHRI. P.A. ASWIN KUM A AR, C.A. / RESPONDENT BY : SHRI. A.V. SREEKANTH, IRS, JCIT. /DATE OF HEARING : 27.08.2015 ! /DATE OF PRONOUNCEMENT : 11.11.2015 ) / O R D E R PER A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-2, MAD URAI DATED 25.03.2015 IN ITA NO.0014/13-14 PASSED U/S 143(3) READ WITH SECTION 250 OF THE ACT. I.T.A.NO.799/MDS/2015. :- 2 -: 2. THE ASSESSEE HAS RAISED TWO GROUND GROUNDS IN HI S APPEAL AND THE SAME ARE CONCISED BELOW FOR ADJUDICATION:- (I) THE LD. CIT (A) HAS ERRED BY DISALLOWING IN TEREST PAID TO VARIOUS PARTIES AMOUNTING TO ` 6,49,919/- BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT THROUGH THE ASSESSEE HAD BELATEDLY FILED FORM 15G BEFORE THE LD.A.O AND ALSO BEFORE THE LD. CIT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF SHARE TRADIN G AND SERVICE PROVIDER, FILED HIS RETURN OF INCOME FOR THE ASSES SMENT YEAR 2010- 11 ADMITTING INCOME AS ` 18,27,970/-. INITIALLY THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT AND SUBSEQUENTLY T HE CASE WAS TAKEN FOR SCRUTINY THROUGH CASS AND THE ASSESSMENT U/S. 143(3) WAS COMPLETED ON 26.03.2013 WHEREIN THE LD. ASSESSI NG OFFICER MADE ONE OF THE DISALLOWANCES BY INVOKING THE PROVI SIONS OF SECTION 40(A)(IA) OF THE ACT FOR NOT FILING THE FOR M NO.15G BEFORE THE DUE DATE AS STIPULATED UNDER RULE 29C OF IT RUL ES, 1962. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD. ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CL AIMED AN I.T.A.NO.799/MDS/2015. :- 3 -: AMOUNT OF ` 6,46,919/- AS INTEREST EXPENSES TO VARIOUS PARTIES IN HIS P&L ACCOUNT HOWEVER, FAILED TO DEDUCT TDS ON T HE AFORESAID AMOUNT. IN RESPONSE TO AOS PROPOSAL DATED 11.03.20 13, THE ASSESSEE PLEADED THAT HE HAD OBTAINED FORM 15-G FRO M ALL THE PAYEES EXCEPT SMT, GOWARI AND SRI GOTHANDARAMAN AND ENCLOSED THE XEROX COPIES OF THE FORM-15G. ON PERUS ING THE FORM 15G, THE LD. ASSESSING OFFICER OBSERVED THAT T HE FORM NO.15G WAS UNDATED. THEREFORE THE LD. ASSESSING OFF ICER INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND DISALLOWED THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE AS DEDUCTION. 4.1 ON APPEAL, THE LD. CIT (A) CONFIRMED THE ORDE R OF THE LD. ASSESSING OFFICER AND HELD AS FOLLOWS:- 5.2. DURING APPEAL, APPELLANT MADE FOLLOWING WRITT EN SUBMISSIONS:- 6. DISALLOWANCE OF RS.6, 46,919/- MADE BY THE ASSES SING OFFICER U/S 40(A) (IA). AS CAN BE SEEN FROM THE PROVISIONS OF SEC.40(A)(IA) THAT THE AMOUNT CANNOT BE ALLOWED AS DEDUCTION ONLY IN THE EVENT WHEN TAX IS DEDUCTABLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED O R, AFTER DEDUCTION HAS NOT BEEN PAID. SEC.194A IS FURTHER QU ALIFIED BY THE PROVISIONS OF SEC.197A(IA) WHEREIN IF A PERSON FURNISHED A DECLARATION IN WRITING IN PRESCRIBED FORM AND VERIF IED IN THE PRESCRIBED MANNER TO THE EFFECT THAT TAX ON HIS EST IMATED TOTAL INCOME IS TO BE INCLUDED IN COMPUTING HIS TOTAL INC OME WILL BE NIL, THERE IS NO NEED TO DEDUCT TAX. THE ASSESSEE H AS RECEIVED SUCH FORMS AS PRESCRIBED FROM THOSE PERSONS TO WHOM INTEREST WAS PAID/BEING PAID AND ACCORDINGLY NO DEDUCTION OF TAX WAS TO BE MADE IN SUCH CASES. I.E. ONCE FORM 15G/15H WAS R ECEIVED BY THE PERSON RESPONSIBLE FOR DEDUCTING TAX, THERE IS NO LIABILITY TO DEDUCT TAX. ONCE THERE IS NO LIABILITY TO DEDUCT TAX, IT CANNOT I.T.A.NO.799/MDS/2015. :- 4 -: BE CONSIDERED THAT TAX IS DEDUCTIBLE AT SOURCE UNDE R CHAPTER XVII-B AS PRESCRIBED U/S 40(A)(IA) CAN ONLY BE INVO KED IN A CASE WHERE TX IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS N OT BEEN DEDUCTED OR AFTR DEDUCTION HAS NOT BEEN PAID. NO S UCH DEFAULT OCCURRED IN THIS CASE. COPY OF ORDER OF ITAT, MUMBA I BENCH A, MUMBAI IN THE CASE OF KARVAT STEEL TRADERS VS. ITO, 13(3)(4), MUMBAI IN ITA NO..6822/MUM/20II DATE D 10.07.2013 IS FILED FOR THE ESTEEMED CONSIDERATION AND REFERENCE OF COMMISSIONER OF LNCOME TAX (APPEALS). DURING THE COURSE OF ASSESSMENT PROCEEDINGS YOUR APPELLANT HAS FILED COPIES OF TWELVE I 5G FORMS, WHICH WERE ALREADY FIL ED BEFORE CIT ON 12.01.2013 THROUGH HIS CHARTERED ACCOUNTANT BY H IS LETTER 157/12-13 DATED 14.03.2013. AS SUCH THE ADDITION MA DE UNDER THIS COUNT IS NOT WARRANTED IT IS REQUESTED TO BE D ELETED. 5.3. THE REMAND REPORT OF THE ASSESSING OFFICER DAT ED 13.3.2015 IS AS UNDER:- A PERUSAL OF XEROX COPY OF THE LOCAL DELIVERY BOOK PRODUCED BY THE ASSESSEES AUTHORIZED REPRESENTATIVE REVEALS TH AT COPIES OF TWELVE NUMBERS OF 15-G FORMS HAD BEEN FILED BEFORE THE COMMISSIONER OF INCOME TAX-1 MADURAI WITHOUT THE SI GNATURE OF THE RECEIVING OFFICIAL AND IT IS SIMPLY WRITTEN IN THE SIGNATURE COLUMN OF THE LOCAL DELIVERY BOOK HANDED OVER TO H EADQUARTER- 1. THEREFORE, THIS CANNOT BE CONSIDERED AS A VALID EVIDENCE AS CLAIMED BY THE ASSESSEE. HENCE, IT IS CONSTRUED THA T THE ASSESSEE DID NOT FULFILL THE CONDITIONS LAID DOWN I N SUB RULE (3) OF RULE 29C OF THE INCOME TAX RULES 1962 WHERE IT W AS STATED THAT THE PERSON RESPONSIBLE FOR PAYING THE INTEREST ETC. SHALL DELIVER OR CAUSE TO BE DELIVERED TO THE CHIEF COMMI SSIONER OR COMMISSIONER, ONE COPY OF / THE DECLARATION ON OR B EFORE THE SEVENTH DAY OF THE NEXT MONTH IN WHICH THE DECLARAT ION IS FURNISHED TO HIM. SINCE THE ASSESSEE HAD FAILED TO FURNISH PROOF FOR SUBMISSION OF FORM 15-G DECLARATION BEFORE THE COMMISSIONER WITHI N THE DUE DATE MENTIONED ABOVE, THE ASSESSING OFFICER CONCLUD ED THAT THE DECLARATIONS ARE NOT VALID. IN VIEW OF THIS, THE DI SALLOWANCE OF INTEREST PAYMENT OF RS.6, 46,919/- UNDER SECTION 40 (A)(IA) MAY BE SUSTAINED. 5.4. APPELLANT EITHER HAS TO DEDUCT TDS OR OBTAIN FORM 15G IN THE PRESCRIBED METHOD WHICH ENVISAGES THAT THE SAID FOR MS SHOULD FILED BEFORE THE COMMISSIONER OF INCOME TAX BEFORE THE DU E DATE. WHEN APPELLANT CLAIMS THAT TDS IS NOT DEDUCTIBLE AS HE O BTAINED FORM 15G, THE ONUS IS ON HIM TO ESTABLISH FACTUALLY THAT THE SAID FORMS WERE FILED BEFORE COMMISSIONER OF INCOME TAX BEFORE THE DUE DA TE. THE AO EXAMINED THE ISSUE AND GAVE A FINDING IN THE REMAND REPORT THAT APPELLANT HAS NOT PROVED THROUGH EVIDENCE THAT DECL ARATIONS UNDER I.T.A.NO.799/MDS/2015. :- 5 -: FORM NO.15-G WERE FILED BEFORE THE COMMISSIONER OF INCOME TAX BEFORE THE DUE DATE. ONCE THE FORMS ARE NOT VALID A PPELLANT DEEMED TO HAVE BECOME DEFAULT UNDER TDS AND THEREFORE, THE DI SALLOWANCE U/S.49(A)(IS) WILL BE INVOKED. IN VIEW OF THE ABOVE HE ADDITION IS UPHELD. 4. BEFORE US, THE LD. A.R. REITERATED THE SUBMIS SIONS MADE BEFORE THE REVENUE. HE ARGUED FURTHER STATING THAT THE ASSESSEE HAD RECEIVED THE FORMS 15G FROM ALL THOSE PERSONS T O WHOM INTEREST WAS PAID EXCEPT TWO INDIVIDUALS AND THE SAME WERE FILED BEFORE THE LD.A.O AT THE TIME OF ASSESSMENT PROCEED INGS AND ALSO BEFORE LD. CIT ON 12.01.2013 VIDE LETTER DATED 14.03.2013. IT WAS THEREFORE ARGUED THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CANNOT BE INVOKED IN THE CASE OF THE ASSESSEE B ECAUSE THE ASSESSEE WAS NOT LIABLE TO DEDUCT TDS AS HE HAS COM PLIED WITH THE PROVISIONS OF THE ACT BY FILING FORM 15G. THE LD. A.R. ALSO RELIED IN THE DECISIONS OF JURISDICTIONAL HIGH COUR T IN THE CASE OF VIJAY HEMANT FINANCE & ESTATES LTD, REPORTED IN [19 99] 105 TAXMANN 519(MAD.) AND MUMBAI TRIBUNAL IN THE CASE O F M/S.KARWAT STEEL TRADERS VS. ITO IN ITA NO.6822/MUM /2011 VIDE ORDER DATED 10.07.2013. ON THE OTHER HAND THE LD. D .R RELIED ON THE ORDERS OF THE REVENUE AND ARGUED IN SUPPORT OF THE SAME. I.T.A.NO.799/MDS/2015. :- 6 -: 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PER USED THE MATERIALS AVAILABLE ON RECORD. FROM THE FACTS OF T HE CASE, IT APPEARS THAT THE ASSESSEE HAD FILED THE FORM 15G BE LATEDLY BEFORE THE LD. A.O EXCEPT FROM TWO INDIVIDUALS. SI NCE THERE WERE DEFECT IN THE FORM 15G BECAUSE THE SAME WAS UNDATED , THE LD. ASSESSING OFFICER AS WELL AS THE LD. CIT DISALLOWED THE INTEREST EXPENSES CLAIMED BY THE ASSESSEE BY INVOKING THE PR OVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE ASSESSEE HAS R ELIED IN THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF VIJAY HEMANT FINANCE & ESTATES LTD., CITED SUPRA WHICH IS IDENTICAL TO THE CASE OF THE ASSESSEE WHEREIN THE HONBLE HIGH C OURT REMITTED THE MATTER BACK TO THE FILE OF LD. ASSESSING OFFICE R FOR PROVIDING AN OPPORTUNITY TO THE ASSESSEE TO RECTIFY THE DEFECTS IN THE FORM 15H. THE RELEVANT PARA OF THE ORDER IS REPRODUCED HEREIN BELOW FOR REFERENCE:- 11. THE BOMBAY HIGH COURT IN THE CASE OF DATTATRAY A GOPAL SHETTE V. SHETTE VS. CIT [1984] 150 ITR 460/18 TAXMAN 434 HA S ALSO TAKEN THE SAME VIEW. THE BOMBAY HIGH COURT WAS DEALING WITH A CASE WHERE AN APPLICATION FOR RENEWAL OF REGISTRATION WAS NOT SIG NED BY ONE OF THE PARTNERS AND IT WAS REJECTED ON THE GROUND THAT THE APPLICATION WAS DEFECTIVE. THE QUESTION AROSE WHETHER THE ACTION OF THE ITO WAS JUSTIFIED AND WHETHER THE ITO WAS REQUIRED TO GIVE AN OPPORTU NITY TO THE ASSESSEE I.T.A.NO.799/MDS/2015. :- 7 -: TO RECTIFY THE DEFECTS IN THE APPLICATION FILED FOR RENEWAL OF REGISTRATION OF THE FIRM. SUJATHA MANOHAR, J. (AS HER LORDSHIP THEN WAS) SPEAKING FOR THE BENCH OF THE BOMBAY HIGH COURT REFERRED TO A CIRCUL AR ISSUED BY THE CENTRAL BOARD OF REVENUE DATED 114-1955 [CIRCULAR N O. 14 (XL-35) OF 1955] AND HELD AS UNDER: IT IS NOW WELL-SETTLED THAT EVEN IF THE CONTENTS O F A CIRCULAR MAY AMOUNT TO A DEVIATION ON A POINT OF LAW, A CIRCULAR OF THE CENTRAL BOARD OF REVENUE WHICH CONFERS SOME BENEFIT ON THE ASSESSEE IS BINDING ON ALL OFFICERS CONCERNED WITH THE EXECUTION OF THE INCOME -TAX ACT; AND THEY MUST CARRY OUT THEIR DUTIES IN THE LIGHT OF THE CIR CULAR. IN THE PRESENT CASE, THEREFORE, IT WAS, IN THE FIRST PLACE, THE DU TY OF THE ITO TO HAVE DRAWN THE ATTENTION OF THE ASSESSEE-FIRM TO THE DEF ECT IN THE APPLICATION FOR RENEWAL OF REGISTRATION. THE ITO, HOWEVER, GRAN TED REGISTRATION TO THE FIRM. IN SUCH A SITUATION IT WAS EQUALLY THE DU TY OF THE CIT TO HAVE GIVEN AN OPPORTUNITY TO THE ASSESSEE-FIRM TO REMEDY THE DEFECT IN THEIR APPLICATION. THE CIT. IN VIEW OF THIS CIRCULAR, CLE ARLY SHOULD NOT HAVE CANCELLED THE RENEWAL OF REGISTRATION OF THE ASSESS EE-FIRM WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSEE-FIRM TO REMED Y THE DEFECT IN THE APPLICATION. (P. 463) FOLLOWING THE DECISION OF THE BOMBAY HIGH COURT, I HOLD THAT IT IS THE DUTY OF THE ITO TO GIVE AN OPPORTUNITY TO RECTIFY THE DE FECTS IN THE DECLARATIONS IN FORM NO. 15H AND IMPOSITION OF TAX LIABILITY WIT HOUT GIVING AN OPPORTUNITY TO THE PETITIONER TO RECTIFY THE DEFECT S IN THE DECLARATIONS IN SPITE OF THE PETITIONER ASKING FOR AN OPPORTUNITY T O RECTIFY THE DEFECTS IS NOT JUSTIFIED IN THE EYES OF LAW. THEREFORE, THE IMPUGN ED ORDER PASSED BY THE FIRST RESPONDENT IS QUASHED AND THE RESULT IS THE M ATTER IS REMITTED TO THE ITO TO GRANT AN OPPORTUNITY TO THE PETITIONER FOR T HE RECTIFICATION OF THE DEFECTS NOTICED IN THE DECLARATIONS IN FORM NO. 15H AND THEN PROCEED IN ACCORDANCE WITH LAW. I.T.A.NO.799/MDS/2015. :- 8 -: FOLLOWING THE AFORESAID DECISION OF THE HONBLE JUR ISDICTIONAL HIGH COURT, WE ALSO HEREBY REMIT THE MATTER BACK TO THE FILE OF LD. ASSESSING OFFICER WITH SIMILAR DIRECTION. 6. IN THE RESULT APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 11 TH NOVEMBER, 2015, AT CHENNAI. SD/- SD/- ( !' # ) (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER ( . ) (A.MOHAN ALANKAMONY) ACCOUNTANT MEMBER CHENNAI. DATED: 11.11.2015. K S SUNDARAM COPY TO: 1. /APPELLANT 2. / RESPONDENT 3. ' ( )/CIT(A) 4. ' /CIT 5. #$% & /DR 6. %' ( /GF.