ACIT, Hyderabad V. M/s. Seaways Shipping Limited, Hyderabad

ITA 80/HYD/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3232 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 18-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T DIWAKAR PRASAD
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.80/H/2011 ASSESSMENT YEAR :2005-06 THE ACIT, CIRCLE 3(1) HYDERABAD VS M/S SEAWAYS SHIPPING LIMITED, SECUNDERABAD. (PAN AADCS 0845 B) APPELLANT RESPONDENT APPELLANT BY : SHRI T. DIWAKAR PRASAD RESPONDENT BY : NONE ORDER PER CHANDRA POOJARI, A.M: THIS APPEAL PREFERRED BY THE REVENUE IS DIRE CTED AGAINST THE ORDER PASSED BY THE CIT(A) IV, HYDERAB AD DATED 29.10.2010 AND PERTAINS TO THE ASSESSMENT YE AR 2005-06. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS IN IT S APPEAL: 1. THE CIT(A) ERRED IN LAW AND ALLOW THE ASSESSEES APPEAL. 2. THE CIT(A) OUGHT TO HAVE UPHELD THE PENALTY LEVIED BY THE ASSESSING OFFICER AS THE ASSESSEE HAD UNDERSTATED THE INCOME BY NOT DEDUCTING TAX AT SOURCE ON CERTAIN PAYMENTS MADE WHICH ATTRACTS TDS AND BY NOT ADDITION CERTAIN EXPENDITURE TO TOTA L INCOME ON WHICH TDS WAS MADE BEYOND DUE DATES. ITA NO.80/H/2011 M/S SEAWAYS SHIPPING LTD., HYD. 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHIPPING INTERMEDIARY SE RVICES. AS ASSESSMENT U/S 143(3) HAD BEEN MADE IN THE ASSES SEES CASE FOR THE ASSESSMENT YEAR 2005-06 BY WAY OF AN O RDER DATED 24.12.2007 WHEREIN THE TOTAL INCOME WAS ASSES SED AT RS.2,15,78,933, AS AGAINST THE RETURN OF INCOME OF RS.1,86,95,703/-. DURING THE ASSESSMENT PROCEEDING S, IT WAS OBSERVED THAT THE ASSESSEE HAD MADE THE FOLLOWI NG PAYMENTS BY DEDUCTING TAX AT SOURCE BEYOND THE DUE DATES STIPULATED U/S 200(1) OF THE ACT. AMOUNT PERTAINING TO SECTION 194 C : RS.1,89,380 AMOUNT PERTAINING TO SECTION 194 J : RS.3,03,050 AMOUNT PERTAINING TO SECTION 194 I : RS.68,22, 868 3.1. FURTHER, IT WAS NOTICED THAT THE ASSESSEE HAD ADDED BACK THE AMOUNTS PERTAINING TO SECTION 194C AND 194 J TOTALLING RS.4,92,430/- IN THE COMPUTATION OF INCOM E. HOWEVER, THE ASSESSING OFFICER NOTED THAT THE AMOUN T PERTAINING TO SECTION 194I INCLUDED PAYMENTS OF RS.11,14,253/- PERTAINING TO PAYMENTS MADE TOWARDS EQUIPMENT HIRE CHARGES. THE ASSESSING OFFICER NO TED THAT THE MEANING OF THE TERM RENT WAS ENLARGED BY WAY OF EXPLANATION WITH EFFECT FROM 3.7.2006 ONLY. HE CON CLUDED THAT IN RESPECT OF EQUIPMENT HIRE CHARGES PAID EARL IER TDS WAS TO BE MADE U/S 194C AND NOT U/S 194I. HE FURTH ER CONCLUDED THAT SINCE THESE CHARGES WERE REMITTED TO THE CENTRAL GOVT. ACCOUNT BEYOND THE DUE DATES PRESCRIB ED U/S 200(1) READ WITH RULE 30 OF THE IT RULES, 1962 THE PROVISIONS OF SECTION 40(A)(IA) WERE ATTRACTED AND ITA NO.80/H/2011 M/S SEAWAYS SHIPPING LTD., HYD. 3 ACCORDINGLY A DISALLOWANCE OF RS.11,14,253/- WAS MA DE U/S 40(A)(IA). 3.2. THE ASSESSING OFFICER ALSO NOTICED THAT THE A SSESSEE HAD NOT DEDUCTED TDS ON PAYMENTS MADE TO M/S SHIV SHAKTI LORRY SUPPLIERS, WHILE MAKING THE PAYMENT OF RS.12,88,649/-, STATING THAT THE COMPANY RECEIVED SUCH CARGO ON TO PAY BASIS AND HAD PAID THE AMOUNT ON BEHALF OF THE EXPORTERS THE AMOUNT PAYABLE AS ON 31.3.2005 TO M/S SHIV SHAKTI LORRY TRANSPORT WAS DEBITED TO VARI OUS CLIENTS ACCOUNTS. IT WAS PLEADED THAT THE ASSESSE E WAS UNDER AN IMPRESSION THAT TDS WAS NOT APPLICABLE ON TO PAY BASIS. HOWEVER, IN VIEW OF THE CBDTS CIRCULAR NO .715 DATED 8.8.1995 IN F.NO.133/101/95-TPL, THE ASSESSIN G OFFICER CONCLUDED THAT THERE WAS AN OBLIGATION TO D EDUCT TAX AT SOURCE OUT OF PAYMENT OF FREIGHT EVEN WHEN THE G OODS ARE RECEIVED ON FREIGHT TO PAY BASIS, IRRESPECTIVE OF THE ACTUAL PAYMENT. CONSIDERING THAT THE ASSESSEE HAD VIOLATE D THE PROVISIONS OF SECTION 200(1) BY NOT DEDUCTING TAX O N SUCH PAYMENTS, THE ASSESSING OFFICER MADE DISALLOWANCE O F RS.12,88,649/- U/S 40(A)(IA) OF THE ACT. IN VIEW O F THE ABOVE DISALLOWANCE, PENALTY PROCEEDINGS U/S 271(1) (C ) W ERE INITIATED BY THE ASSESSING OFFICER. 4. ON APPEAL THE CIT(A) DELETED THE PENALTY. AGA INST THIS THE REVENUE IS IN APPEAL BEFORE US. 5. AT THE TIME OF HEARING ON 16.6.2011, NONE APPE ARED ON BEHALF OF THE ASSESSEE. WE HEARD THE DEPARTMENT AL REPRESENTATIVE. IN THIS CASE, PENALTY IS LEVIED FO R DISALLOWANCE OF EXPENDITURE U/S 40(A) (IA) OF THE I NCOME TAX ITA NO.80/H/2011 M/S SEAWAYS SHIPPING LTD., HYD. 4 ACT. NON DEDUCTION OF TDS BY THE ASSESSEE WAS RESU LTED IN DISALLOWANCE OF EXPENDITURE U/S 40(A) (IA), THAT IT SELF CANNOT BE CONSTRUED AS FURNISHING INACCURATE PARTICULARS O F INCOME OR CONCEALMENT OF INCOME. THE ASSESSEE HAS FAILED TO DEDUCT TDS WHICH RESULTED IN DISALLOWANCE OF EXPEN DITURE. IN OUR OPINION, THE MISTAKE COMMITTED BY THE ASSESS EE WAS COMPENSATED BY DISALLOWING THE EXPENDITURE. FURTHE R, THE REVENUE CANNOT PENALISE THE ASSESSEE BY LEVYING PEN ALTY U/S 271(1) (C ) OF THE ACT. IN ORDER TO LEVY PENAL TY U/S 271 (1) (C ) OF THE ACT, THERE HAS TO BE CONCEALMENT OF PARTICULARS OF INCOME OF THE ASSESSEE OR THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF ITS INCOME. PR ESENT IS NOT THE CASE OF CONCEALMENT OF INCOME OR IT IS NOT THE CASE OF REVENUE THAT THE ASSESSEE HAS FURNISHED INACCURA TE PARTICULARS OF INCOME. THE DEPARTMENT HAS NOT FOUN D OUT THAT THE ASSESSEE HAS FURNISHED ANY FACTUAL INCORRE CT INFORMATION AND THE ASSESSEE IS NOT GUILTY OF FURNI SHING OF INACCURATE PARTICULARS OF INCOME. IN OUR OPINION, THE CONDITIONS LAID DOWN IN SECTION 271(1) (C ) OF THE ACT IS NOT COMPLIED WITH. BEING SO, LEVY OF PENALTY IS NOT JU STIFIED MERELY BECAUSE THE ASSESSEE HAS CLAIMED CERTAIN EXPENDITURE THAT EXPENDITURE IS NOT ELIGIBLE IN VIE W OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND FOR THAT REASON, EXPENDITURE IS DISALLOWED. PENALTY CANNOT BE LEVIED FOR MERE MAKING OF A CLAIM OF THE EXPENDITURE WHICH IS NOT SUSTAINABLE AND DELETION OF PENALTY BY THE CIT(A) I S JUSTIFIED. WE PLACE RELIANCE ON THE JUDGEMENT OF THE HONBLE S UPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCT S (P) LTD. (322 ITR 158) (SC). ACCORDINGLY THE GROUND RAISED B Y THE REVENUE HOLDS NO MERIT. ITA NO.80/H/2011 M/S SEAWAYS SHIPPING LTD., HYD. 5 8. IN THE RESULT, THE APPEAL OF THE REVENUE STAN DS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.6.201 1 SD/- G.C. GUPTA SD/- CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 17 TH JUNE, 2011 COPY FORWARDED TO: 1. THE ACIT, CIRCLE 3 (1), HYDERABAD 2. M/S. SEAWAYS SHIPPING LIMITED, 405 & 406, 4 TH FLOOR, ASHOKA BHOOPAL CHAMBERS, SP ROAD, HYDERABAD. 3. THE CIT(A) IV, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP