Sri. Anil Kumar Joseph, Bangalore V. DCIT, Bangalore

ITA 845/BANG/2014

• Counselvise Citation: 84521114 RSA 2014
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 26-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 26-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N BALAKRISHNAN
• Assessee Lawyers: V SRINIVASAN
• Keywords: Question of law; Non-deduction of tax; Bad and doubtful debts; Assessment record
• Section: 143(3); 234B; 194C; 6; 12; 10; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE SHRI N.V. VASUDEVAN , JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO. 845 /BANG/201 4 (ASSESSMENT YEAR : 20 0 8 - 09 ) SHRI ANIL KUMAR JOSEPH, NO.3/3, 59 TH CROSS, V BLOCK, RAJAJINAGAR, BANGALORE - 560 010 PAN ACQPJ 6856K VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 9(1), BANGALORE. APPELLANT RESPONDENT. I.T.A. NO. 1036 /BANG/2014 (ASSESSMENT YEAR : 20 0 8 - 09 ) ASST. COMMISSIONER OF INCOME TAX, CIRCLE 9(1), BANGALORE. VS. SHRI AN IL KUMAR JOSEPH, NO.3/3, 59 TH CROSS, V BLOCK, RAJAJINAGAR, BANGALORE - 560 010 APPELLANT RESPONDENT. APPELLANT BY : SHRI V. SRINIVASAN, C.A. RESPONDENT BY : SHRI N. BALAKRISHNAN, JCIT (D.R) DATE OF H EARING : 26.5.2015. DATE OF P RONOUNCEMEN T : 3.7. 201 5 . O R D E R PER SHRI JASON P. BOAZ, A.M. : TH ESE ARE CROSS APPEAL S BY THE ASSESSEE AND REVENUE , DIRECTED AGAINST THE ORDER OF THE COMMISSI ONER OF INCOME TAX (APPEALS), LTU , BANGALORE DT. 16.4.2014 FOR ASSESSMENT YEAR 200 8 - 09 . 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER : - 2 ITA NO S . 845 & 1036 /BANG/ 2014 2.1 THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF ACTING AS COLLECTION AGENT S FOR BANKS FOR THE RECOVERY OF THEIR DEBTS, CONSIDERED AS BAD AND DOUBTFUL DEBTS, WHICH HAVE BECOME NON - PERFORMING ASSETS. THE ASSESSEE FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2008 - 09 ON 3.11.2008 DECLARING INCOME OF RS.14,36,988. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS 'THE ACT') AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT WHILE IN THE PROFIT AND LOSS ACCOUNT THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS.55,30,572 AS COLLECTION COMMISSION , BUT ON VERIFICATION OF THE BOOKS OF ACCOUNT, IT WAS SEEN THAT THE ASSESSEE HAD DEBITED A SUM OF ONLY RS.42,83,604. SINCE THE EXPENSES AS PER BOOKS OF ACCOUNT WAS RS.42,83,604 AS AGAINST THE ASSESSEE'S CLAIM OF RS.55,30,572, THE DIFFERENCE OF RS.12,46,968 WAS DISALLOWED ON ACCOUNT OF EXCESS CLAIM OF EXPENDITURE. SIMILARLY THE ASSESSING OFFICER ON EXAMINATION OF THE ASSESSEE'S CLAIM OF EXPENDITURE ON ACCOUNT OF SALES COMMISSION FOUND THAT AS AGAINST EXPENDITURE OF RS.40,42,000 CLAIMED IN THE ASSESSEE'S PROFIT AND LOSS ACCOUNT, THE AMOUNT DEBITED IN THE BOOKS OF ACCOUNT WAS RS.36,76,400 AND THEREFORE THE EXCESS EXPENDITURE CLAIMED I.E. OF RS.3,66,000 WAS DISALL OWED. APART FROM THIS, THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND PROCEEDED TO DISALLOW RS.30,62,689 IN RESPECT OF COLLECTION COMMISSION AND DISALLOWANCE OF RS.35,75,500 IN RESPECT OF SALES COMMISSION FOR FAILURE TO DEDUCT TAX AT SOURCE THEREON. THUS, THE ASSESSING OFFICER COMPLETED THE ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2008 - 09 UNDER SECTION 143(3) OF THE ACT VIDE ORDER DT.20.12.2010 DETERMINING THE INCOME 3 ITA NO S . 845 & 1036 /BANG/ 2014 OF THE ASSESSEE AT RS.96,88,145 AS AGAINST THE RETUR NED INCOME OFRS.14,36,988 IN VIEW OF THE FOLLOWING ADDITIONS/DISALLOWANCES : - I) EXCESS CLAIM OF COLLECTION COMMISSION : RS.12,46,968. II) EXCESS CLAIM OF SALES COMMISSION : RS.3,66,000. III) DISALLOWANCE U/S. 40(A)(IA) : RS.66,38,189. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DT.20.12.2010 FOR ASSESSMENT YEAR 2008 - 09, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (APPEALS), LTU, BANGALORE. THE LEARNED CIT(A) DISPOSED OFF THE ASSESSEE'S APPEAL VIDE ORDER DT.16.4.2014 ALLOWING THE ASSESSEE PARTIAL R ELIEF. THE LEARNED CIT(A) DELETED THE ENTIRE DISALLOWANCE MADE BY THE ASSESSING OFFICER TOWARDS THE EXCESS CLAIM OF COLLECTION COMMISSION EXPENDITURE OF RS.12,46,968 AND IN RESPECT OF THE DISALLOWANCE OF RS.3,66,200 MADE TOWARDS EXCESS CLAIM OF EXPENDITU RE TOWARDS SALES COMMISSION, THE LEARNED CIT(A) SUSTAINED THE ADDITION TO THE EXTENT OF RS.500 ONLY. THE LEARNED CIT(A), HOWEVER, CONFI RM ED THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. 3. BOTH REVENUE AND THE ASSESSEE ARE AGGRIEVED BY THE O RDER OF THE CIT (APPEALS), LTU, BANGALORE DT.16.4.2014 FOR ASSESSMENT YEAR 2008 - 09 AND HAVE FILED SEPARATE CROSS APPEALS BEFORE THIS TRIBUNAL. WE SHALL NOW PROCEED TO DISPOSE OFF THESE CROSS APPEALS HEREUNDER. REVENUE S APPEAL FOR ASSESSMENT YEAR 2008 - 09 IN ITA NO.1036/BANG/2014. 4. THE GROUNDS RAISED IN REVENUE S APPEAL ARE AS UNDER : - 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS OPPOSED TO THE FACTS OF THE CASE BROUGHT ON RECORD. 4 ITA NO S . 845 & 1036 /BANG/ 2014 2. ON THE FACTS AND IN LAW, THE LEARNED CIT (APPEALS) ERRED IN DELET ING THE ADDITION OF RS.;12,46,968 BEING THE EXCESS CLAIM OF COMMISSION ON COLLECTION CLAIMED BY THE ASSESSEE DISALLOWED BY THE ASSESSING OFFICER FOR WANT OF ADEQUATE PROOF TO VERIFY THE ACCURACY OF THE AMOUNT OF EXPENDITURE CLAIMED. 3. ON THE FACTS AND IN LAW, THE LEARNED CIT (APPEALS) ERRED IN DELETING THE ADDITION OF RS.3,65,500 BEING THE EXCESS CLAIM OF COMMISSION ON SALES FOR WANT OF ADEQUATE PROOF AND SUBSTANTIATION AT THE TIME OF ASSESSMENT PROCEEDINGS. 4. ON THE FACTS OF THE CASE, THE LEARNED CIT (APPEALS) ERRED IN ORDERING FOR DELETION OF ADDITION MADE IN SPITE OF ASSESSEE ;NOT FURNISHING THE COMPLETE BOOKS OF ACCOUNTS TO VERIFY THE CLAIM OF EXPENDITURE BOTH AT THE TIME OF ASSESSMENT AND REMAND PROCEEDINGS AND THE FACT INTIMATED TO THE LEARNED CIT (APPEALS) VIDE REMAND REPORT SUBMITTED. 5. THE APPELLANT CRAVES FOR PERMISSION TO ADD, MODIFY OR DELETE THE GROUNDS OF APPEAL AT THE TIME OF HEARING THE CASE WITH A PRAYER TO RESTORE THE ORDER OF A.O. 5. THE GROUNDS AT S.NOS.1 AND 5 OF REVENU E S APPEAL ARE GENERAL IN NATURE AND THEREFORE NO ADJUDICATION IS CALLED FOR THEREON. 6.1 GROUNDS 2 TO 4 OF REVENUE S APPEAL RELATE TO THE DISALLOWANCES OF RS.12,46,968 AND RS.3,65,500 ON ACCOUNT OF COMMISSION ON COLLECTION AND COMMISSION ON SALES RESPECTIVELY THAT HAVE BEEN DELETED BY THE LEARNED CIT(A) IN THE IMPUGNED ORDER. IN RESPECT OF THESE GROUNDS, THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTENDED THAT THE DISALLOWANCES WERE MADE BY THE ASSESSING OFFICER AS THERE WERE DISCREPANCIES DETECTED BETWEEN THE AMOUNT CLAIMED IN THE PROFIT AND LOSS ACCOUNT AND THE BOOKS OF ACCOUNT PRODUCED BEFORE THE ASSESSING OFFICER. IT WAS SUBMITTED THAT, ON APPEAL BEFORE THE LEARNED CIT(A), THE ASSESSEE CONTENDED THAT THE ASSESSING OFFICER HAD ONLY PARTIALLY CONS IDERED/EXAMINED THE BOOKS OF ACCOUNT AS HE HAD NOT VERIFIED THE ENTIRE CLAIM WITH REGARD TO TWO PROPRIETARY CONCERNS OF THE ASSESSEE VIZ. M/S. SA NFORCE AND M/S.TRACERS. O N THE BASIS OF THIS SUBMISSION MADE BY THE ASSESSEE, THE LEARNED CIT(A) CALLED FOR A REMAND REPORT 5 ITA NO S . 845 & 1036 /BANG/ 2014 FROM THE ASSESSING OFFICER AFTER VERIFICATION OF THE ASSESSEE'S CLAIM. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT IN REMAND PROCEEDINGS, THE ASSESSEE DID NOT PRODUCE THE ENTIRE BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER FOR V ERIFICATION OF THE ABOVE CLAIM AND CONTENDED THAT IN THESE CIRCUMSTANCES, THE DELETION OF THESE DISALLOWANCES BY THE CIT (APPEALS) WAS ERRONEOUS. IN THIS REGARD, THE LEARNED DEPARTMENTAL REPRESENTATIVE REFERRED TO THE REMAND REPORT OF THE ASSESSING OFFICE R DT.18.2.2014 WHERE THIS FACT OF NON - PRODUCTION OF BOOKS OF ACCOUNT IS RECORDED AT PARA 2 ON PAGE 1 THEREOF. 6.2 PER CONTRA, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUPPORTED AND RELIED ON THE FINDING IN THE ORDER OF THE LEARNED CIT(A) O N THIS ISSUE. THE LEARNED AUTHORISED REPRESENTATIVE DREW OUR ATTENTION TO THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AND COPIES OF THE LEDGER ACCOUNTS IN RESPECT OF COLLECTION COMMISSION AND SALES COMMISSION OF BOTH THE CONCERNS OF THE ASSESSEE, V IZ. M/S. TRACERS AND M/S.SA N FORCE THAT WERE PLACED BEFORE THE LEARNED CIT(A) AND WHICH WAS ALSO AVAILABLE BEFORE THE ASSESSING OFFICER BOTH IN ASSESSMENT AND REMAND PROCEEDINGS. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT ORIGINALLY THE DISALLOWA NCE WAS MADE IN THE ORDER OF ASSESSMENT ON ACCOUNT OF PARTIAL EXAMINATION OF THE DETAILS FILED BY THE ASSESSEE SINCE THE ASSESSING OFFICER HAD EXAMINED THE LEDGER ACCOUNTS ONLY TILL FEBRUARY, 2008 AND THAT TOO ONLY IN RESPECT OF ONE CONCERN. THE LEARNED A UTHORISED REPRESENTATIVE SUBMITTED THAT THE LEARNED CIT(A) HAS EXAMINED THE ASSESSEE'S CLAIMS AND FOUND THAT THERE WAS NO EXCESS 6 ITA NO S . 845 & 1036 /BANG/ 2014 CLAIM MADE BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT AND THEREFORE DELETED THE ADDITION. IT WAS PLEADED THAT THE ORDER OF THE LEARNED CIT(A) BE UPHELD. 6.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE LEARNED CIT(A) HAS DISPOSED OFF THIS ISSUE IN PARAS 3.1 TO 3.4 OF THE IMPUGNED ORDER HOLDING AS UNDER : - 3.1 BEFORE ME IN APPEAL IT WAS POINTED OUT THAT THE ASSESSING OFFICER HAD MISSED OUT THE CLAIM OF EXPENDITURE IN ONE OF THE TWO PROPRIETORSHIP CONCERNS OPERATED BY THE APPELLANT. THE DETAILS, WHICH ARE EVIDENT FROM THE SEPARATE AUDITED PROFIT & LOSS ACCOU NT SUBMITTED FOR EACH PROPRIETORSHIP CONCERN, ARE SUMMARIZED BELOW : M/S. SANFORCE M/S. TRACERS TOTAL CLAIM DEBITED AS PER A.O. COLLECTION COMMISSION RS.47,85,800 RS.7,44,772 RS.55,30,572 RS.42,83,604 BEING ENTRIES UPTO FEB.2008 ONLY. SALES COMMISSION RS.36,76,400 RS.3,65,500 RS.40,42,400 RS.36,76,400. 3.2 THE A.O. WAS ASKED TO COMMENT ON THE ABOVE DURING REMAND PROCEEDINGS BUT REPLIED THAT IN THE ABSENCE OF BOOKS OF ACCOUNT HE WAS UNABLE TO DO SO. I FIND FROM ASSESSMENT RECORD THAT THE BOOKS OF ACCOUNT HAD BEEN PRODUCED BEFORE HIM ON 9.11.2010 AND DURING REMAND PROCEEDINGS THE EXTRACT OF LEDGER ACCOUNTS WERE ONCE AGAIN FILED. A LEDGER IS CLEARLY INCLUDED IN THE DEFINITION OF BOOKS OF ACCOUNT. THE A.O. S REMARKS, THEREFORE, DO NOT CONVEY AN INT ENTION TO ARRIVE AT FACTUAL ACCURACY AND APPEAR TO BE DILATORY IN NATURE. 3.3 THE EVIDENCES IN THE FORM OF AUDITED FINANCIAL STATEMENTS OF THE TWO PROPRIETORSHIP CONCERNS AND THE LEDGER EXTRACTS CLEARLY INDICATE THAT AS FAR AS COLLECTION COMMISSION IS CON CERNED THE FIGURE ADOPTED BY THE ASSESSING OFFICER IS INCOMPLETE AND HAS MISSED OUT THE ENTRIES OF MARCH, 2008 FOR M/S. SANFORCE AND FOR THE ENTIRE YEAR FOR M/S. TRACERS. IF THESE AMOUNTS ARE TAKEN INTO ACCOUNT, THERE IS NO DIFFERENCE AS POINTED OUT BY TH E ASSESSING OFFICER. THE ADDITION TOWARDS COLLECTION COMMISSION IS, THEREFORE, DIRECTED TO BE DELETED. 3.4 WITH REGARD TO SALES COMMISSION, THE AMOUNT DEBITED IN THE PROFIT & LOSS ACCOUNT OF M/S. TRACES UNDER THIS HEAD IS RS.3,65,500 WHICH HAS NOT BEEN CONSIDERED BY THE A.O. THE TOTAL OF THE TWO PROPRIETORSHIP CONCERNS UNDER THIS 7 ITA NO S . 845 & 1036 /BANG/ 2014 HEAD COMES TO RS.40,41,900 AGAINST WHICH THE ASSESSEE HAS DEBITED RS.40,42,400. THE DIFFERENCE, THEREFORE, IS ONLY OF RS.500 AND ONLY THIS IS TO BE BROUGHT TO TAX. 6.3.2 ON A PERUSAL AND APPRAISAL OF THE DETAILS/FACTS ON RECORD, WE FIND THAT THE OBSERVATIONS OF THE LEARNED CIT(A), WHILE DELETING THE DISALLOWANCES MADE BY THE ASSESSING OFFICER TO BE IN ORDER SINCE ORIGINALLY THESE DISALLOWANCES WERE MADE ON THE GROUND THA T THERE WERE DIFFERENCES BETWEEN THE AMOUNTS CLAIMED IN THE PROFIT AND LOSS ACCOUNT AND THE RELEVANT LEDGER ACCOUNTS PRODUCED IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE EXPLANATION PUT FORTH BY THE ASSESSEE BEFORE THE LEARNED CIT(A) WAS THAT THERE WERE TWO CONCERNS OPERATED BY THE ASSESSEE AND IF THE EXPENDITURE CLAIMED IN BOTH THESE CONCERNS WERE TAKEN TOGETHER AND FOR THE ENTIRE PERIOD UNDER CONSIDERATION, THERE WILL BE NO DIFFERENCE AT ALL . T HAT THIS CLAIM HAS BEEN EXAMINED BY THE LEARNED CIT(A) AND FOUND TO BE CORRECT IS NOT IN DOUBT AS IS EVIDENT FROM THE IMPUGNED ORDER. WE FIND NO MERIT IN THE PLEA RAISED BY REVENUE THAT THE DISALLOWANCE HAS TO BE SUSTAINED SINCE THE ENTIRE BOOKS OF ACCOUNT WERE NOT PRODUCED IN REMAND PROCEEDINGS. THE PRODUCTIO N OF THE ENTIRE BOOKS OF ACCOUNTS, IN OUR VIEW, WAS NOT REQUIRED IN SO FAR AS EXAMINING THE VERACITY OF THE ASSESSEE'S CLAIM. WHAT IS MATERIAL FOR EXAMINATION WAS THE COPIES OF THE LEDGER ACCOUNTS OF THE CONCERNED PROPRIETARY CONCERNS VIZ. M/S. TRACES AND M/S. SANFORCE VIS - A - VIS THE FINANCIAL STATEMENTS OF BOTH THESE CONCERNS FROM WHICH IT WILL BECOME CLEAR AS TO WHETHER THERE IS A DIFFERENCE IN THE EXTENT OF EXPENDITURE CLAIMED AS PER THE PROFIT AND LOSS ACCOUNT AND THE LEDGERS OF THE PARTIES IN THE BOOKS OF ACCOUNT. THESE HAVE BEEN PRODUCED BEFORE THE AUTHORITIES BELOW IN APPELLATE AND REMAND 8 ITA NO S . 845 & 1036 /BANG/ 2014 PROCEEDINGS AND IT IS CLEAR FR O M THE CATEGORICAL FINDING OF THE LEARNED CIT(A) THAT THERE IS NO DIFFERENCE AT ALL. IN THIS FACTUAL MATRIX, WE ARE OF THE CONSIDERED VIEW THAT THE DELETION OF THE DISALLOWANCES OF RS.12,46,968 AND RS.3,65,500 MADE ON ACCOUNT OF EXCESS CLAIM OF EXPENDITURE OF COMMISSION ON COLLECTION AND COMMISSION ON SALES , BY THE LEARNED CIT(A) CANNOT BE FAULTED, CALLS FOR NO INTERFERENCE THEREIN BY US AND IS CONSEQUENTLY UPHELD. ACCORDINGLY, GROUNDS RAISED BY REVENUE AT S.NOS.2 TO 4 ARE DISMISSED. 7. IN THE RESULT, REVENUE S APPEAL FOR ASSESSMENT YEAR 2008 - 09 IS DISMISSED. ASSESSEE'S APPEAL FOR A.Y. 2008 - 09 IN ITA NO.845/BANG/2014. 8. THE GROUNDS RAISED IN THE ASSESSEE'S APPEAL ARE AS UNDER : - 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR S THEY ARE AGAINST THE APPELLANT, ARE OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF A SUM OF RS.30,62,689 UNDER SECTION 40(A)(IA) OF THE ACT, ON COLLECTION COMMISSION UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT S CASE. 3. THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF A SUM OF RS.35,75,500 UNDER SECTION 40(A)(IA) OF THE ACT, ON SALES COMMISSION UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT S CASE. 4. THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN SUSTAININ G THE AFORESAID DISALLOWANCES WITHOUT NOTICING THAT THE SAME WAS NOT PAYABLE AND HENCE, THE DISALLOWANCES MADE WERE MISCONCEIVED AND HENCE, THE SAME IS LIABLE TO BE DELETED. 5. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WITH THE HON'BLE CCIT / DG, THE APPELLANT DENIES HIMSELF LIABLE TO BE CHARGED TO INTEREST UNDER SECTION 234A, 234B AND 234C OF THE ACT, WHICH UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT S CASE DESERVES TO BE CANCELLED. 6. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE COS TS. 9 ITA NO S . 845 & 1036 /BANG/ 2014 9. THE GROUNDS AT S.NOS.1 AND 6 OF THE AS APPEAL ARE GENERAL IN NATURE AND NOT BEING URGED BEFORE US, ARE DISMISSED AS INFRUCTUOUS. 10. IN GROUND NO.5 , THE ASSESSEE HAS DENIED HIMSELF LIABLE TO BE CHARGED INTEREST UNDER SECTION 234A, 234B AN D 234C OF THE ACT. THE CHARGING OF INTEREST IS CONSEQUENTIAL AND MANDATORY AND THE ASSESSING OFFICER HAS NO DISCRETION IN THE MATTER. THIS PROPOSITION HAS BEEN UPHELD BY THE HON'BLE APEX COURT IN THE CASE OF ANJUM H GHASWALA (252 ITR 1) AND W E, THEREFORE , UPHOLD THE ACTION OF THE ASSESSING OFFICER IN CHARGING THE SAID INTEREST. THE ASSESSING OFFICER IS, HOWEVER, DIRECTED TO RECOMPUTE TH E INTEREST CHARGEABLE U/S. 234A, 234B AND 234C OF THE ACT, IF ANY, WHILE GIVING EFFECT TO THIS ORDER. ...... 11.1 T HUS, THE GROUNDS AT S.NOS. 2 TO 4 OF THE ASSESSEE'S APPEAL REMAIN THE ONLY EFFECTIVE GROUNDS FOR ADJUDICATION OF THE ASSESSEE'S APPEAL; WHICH ARE IN RESPECT OF THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT AMOUNTING TO RS.30,62,689 AND RS.35,75,500 S USTAINED BY THE LEARNED CIT(A) IN THE IMPUGNED ORDER. IN THE COURSE OF HEARING BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE PLACED RELIANCE ON THE DECISIONS OF THE CO - ORDINATE BENCHES OF THIS TRIBUNAL IN THE CASE OF ANANDA MARKALA IN ITA NO.1584/BANG/ 2012 DT.13.9.2013 AND THE CASE OF BHARGAVI GOPINATH IN ITA NO.280/BANG/2014 DT.21.11.2014 FOR THE PROPOSITION THAT NO DISALLOWANCE IS WARRANTED AS THE AFORESAID EXPENSES WERE NOT PAYABLE AT THE END OF THE YE AR VIZ. A S ON 31 ST MARCH. IT WAS ALSO SUBMITTED THAT ON MERITS, THERE WAS NO REQUIREMENT TO DEDUCT TAX AT SOURCE UNDER SECTION 194C OR 194H OF THE ACT AND THEREFORE, THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT WAS NOT CALLED FOR. THE LEARNED AUTHORISED REPRESENTATIVE 10 ITA NO S . 845 & 1036 /BANG/ 2014 PLEADED THAT, IN VIEW OF THE JUDICIAL DECISIONS CITED, THESE DISALLOWANCES REQUIRE TO BE DELETED. 11.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE IMPUGNED ORDER OF THE LEARNED CIT(A) WHO HAS CHOSEN NOT TO FOLLOW THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRI BUNAL IN THE CASE OF ANANDA MARKALA (SUPRA). 11.3.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN ITS DECISION IN THE CASE OF ANANDA MARKALA (SUPRA) HAS CON SIDERED THE APPLICABILITY OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND FOLLOWED THE ORDER OF THE HON'BLE ALLAHABAD HIGH COURT IN THE VASE OF VECTOR SHIPPING SERVICES PVT. LTD. IN ITA NO.122/2013 DT.9.7.2013, WHICH UPHELD THE FINDING OF THE SPECIAL BENCH OF THE ITAT, VISAKHAPATNAM IN THE CASE OF MERILYN SHIPPING (2012) 16 ITR (TRIB) 1, VISAKHAPATNAM (SB). THE RELEVANT PORTION OF THE DECISION AND OBSERVATION OF THE CO - ORDINATE BENCH IN THE CASE OF ANANDA MARKALA (SUPRA) AT PARAS 26 TO 31 THEREOF ARE EXTRACTED HEREUNDER : - 26. WE ARE OF THE VIEW THAT THE REASONING OF THE HON BLE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS LTD(SUPRA) WILL EQUALLY TO THE AMENDMENT TO SEC.40(A)(IA) OF THE ACT WHEREBY A SECOND PROVISO WAS INSERTED IN SUB - CLAUSE (IA) OF CLAUSE (A) OF SECTION 40 BY THE FINANCE ACT, 2012, W.E.F. 1 - 4 - 2013. THE PROVISIONS ARE INTENDED TO REMOVE HARDSHIP. IT WAS ARGUED ON BEHALF OF THE REVENUE THAT THE EXISTING PROVISIONS ALLOW DEDUCTION IN THE YEAR OF PAYMENT AND TO THAT EXTENT THERE IS NO HARDSHIP. WE ARE OF THE VIEW THAT THE HARDSHIP IN SUCH AN EVENT WOULD BE TAXING AN ASSESSEE ON A HIGHER INCOME IN ONE YEAR AND TAXING HIM ON LOWER INCOME IN A SUBSEQUENT YEAR. TO THE EXTENT THE ASSESSEE IS MADE TO PAY TAX ON A HIGHER INCOME IN ONE YE AR, THERE WOULD STILL BE HARDSHIP. 27. AS FAR AS THE APPEAL OF THE REVENUE IS CONCERNED, WE FIND THAT THE USE OF WORD PAYABLE , IN SECTION 40(A)(IA) OF THE ACT HAS CREATED CONTROVERSY AS TO WHETHER PAYABLE INCLUDES AMOUNTS PAID DURING THE YEAR. THERE WERE CONFLICTING DECISIONS RENDERED BY THE TRIBUNAL. 11 ITA NO S . 845 & 1036 /BANG/ 2014 SS IN THE CASE OF DCIT VS. ASHIKA STOCK BROKING LTD. REPORTED IN 44 SOT 556 THE HON BLE KOLKATA ITAT HAS DECIDED THE MATTER IN FAVOUR OF REVENUE AND AFTER FOLLOWING ITS DECISION DATED 15.01.2010 IN THE C ASE OF PODDAR SON S EXL. P LTD VS. ITO IN ITA NO. 1418(KOL.)/09 HAS HELD THAT PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE APPLICABLE TO EVEN SUMS PAID DURING THE YEAR. SS IN THE CASE OF TEJA CONSTRUCTION VS. ACIT REPORTED IN 39 SOT 13 THE HON BLE HYDERABAD ITAT HAS DECIDED THE ISSUE AGAINST THE REVENUE AND HAS HELD THAT PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT APPLICABLE IN RESPECT OF SUMS/AMOUNT PAID DURING THE YEAR AND WHICH ARE NOT PAYABLE AT END OF THE YEAR ON DATE OF BALANCE SHEET, AS IT IS A PPLICABLE ONLY IN RESPECT OF PAYABLE AMOUNT SHOWN IN BALANCE SHEET AS OUTSTANDING EXPENSES ON WHICH TDS HAS NOT BEEN MADE. SIMILAR LAWS WERE LAID IN VARIOUS OTHER CASES. SS TO RESOLVE THE ABOVE ISSUE SPECIAL BENCH WAS CONSTITUTED AND THE HON BLE VISAKHAPATN AM SPECIAL BENCH OF ITAT IN THE CASE OF MERILYN SHIPPING & TRANSPORT VS. ADDL CIT REPORTED IN 20 TAXMANN.COM 244 HAS DECIDED THE ISSUE AGAINST THE REVENUE AND AFTER COMPARING THE PROPOSED AND ENACTED PROVISION WHICH IS INTENDED FROM THE REPLACEMENT OF THE WORDS IN THE PROPOSED AND ENACTED PROVISION FROM THE WORDS AMOUNT CREDITED OR PAID TO PAYABLE HAS HELD THAT IT HAS TO BE CONCLUDED THAT PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY TO THE AMOUNTS OF EXPENDITURE WHICH ARE PAYABLE AS ON THE DATE 3 1ST MARCH OF EVERY YEAR AND IT CANNOT BE INVOKED TO DISALLOW EXPENDITURE WHICH HAS BEEN ACTUALLY PAID DURING THE PREVIOUS YEAR, WITHOUT DEDUCTION OF TDS. 28. IN CIT VS. SIKANDARKHAN N.TUNVAR & OTHERS, TAX APPEAL NO. 905 OF 2012 & OTHERS DATED02/05/201 3, THE HON BLE GUJARAT HIGH COURT HELD THAT I N MERILYN SHIPPING 146 TTJ 1 (VIZ) (SB,) THE MAJORITY HELD THAT AS THE FINANCE BILL PROPOSED THE WORDS AMOUNT CREDITED OR PAID AND AS THE FINANCE ACT USED THE WORDS AMOUNTS PAYABLE , S. 40(A)(IA) COULD ONLY A PPLY TO AMOUNTS THAT ARE OUTSTANDING AS OF 31ST MARCH AND NOT TO AMOUNTS ALREADY PAID DURING THE YEAR. THIS VIEW IS NOT CORRECT FOR TWO REASONS. FIRSTLY, A STRICT READING OF S. 40(A)(IA) SHOWS THAT ALL THAT IT REQUIRES IS THAT THERE SHOULD BE AN AMOUNT PAY ABLE OF THE NATURE DESCRIBED, WHICH IS SUCH ON WHICH TAX IS DEDUCTIBLE AT SOURCE BUT SUCH TAX HAS NOT BEEN DEDUCTED OR IF DEDUCTED NOT PAID BEFORE THE DUE DATE. THE PROVISION NOWHERE REQUIRES THAT THE AMOUNT WHICH IS PAYABLE MUST REMAIN SO PAYABLE THROUGHO UT DURING THE YEAR. IF THE ASSESSEE S INTERPRETATION IS ACCEPTED, IT WOULD LEAD TO A SITUATION WHERE THE ASSESSEE WHO THOUGH WAS REQUIRED TO DEDUCT THE TAX AT SOURCE BUT NO 12 ITA NO S . 845 & 1036 /BANG/ 2014 SUCH DEDUCTION WAS MADE OR MORE FLAGRANTLY DEDUCTION THOUGH MADE IS NOT PAID TO THE GOVERNMENT, WOULD ESCAPE THE CONSEQUENCE ONLY BECAUSE THE AMOUNT WAS ALREADY PAID OVER BEFORE THE END OF THE YEAR IN CONTRAST TO ANOTHER ASSESSEE WHO WOULD OTHERWISE BE IN SIMILAR SITUATION BUT IN WHOSE CASE THE AMOUNT REMAINED PAYABLE TILL THE END OF THE YEAR. THERE IS NO LOGIC WHY THE LEGISLATURE WOULD HAVE DESIRED TO BRING ABOUT SUCH IRRECONCILABLE AND DIVERSE CONSEQUENCES. SECONDLY, THE PRINCIPLE OF DELIBERATE OR CONSCIOUS OMISSION IS APPLIED MAINLY WHEN AN EXISTING PROVISION IS AMENDED AND A CHANGE IS BROUGHT ABOUT. THE SPECIAL BENCH WAS WRONG IN COMPARING THE LANGUAGE USED IN THE DRAFT BILL TO THAT USED IN THE FINAL ENACTMENT TO ASSIGN A PARTICULAR MEANING TO S. 40(A)(IA). ACCORDINGLY, MERILYN SHIPPING DOES NOT LAY DOWN CORRECT LAW. THE CORRECT LAW IS THAT S. 40(A)(IA) COVERS NOT ONLY TO THE AMOUNTS WHICH ARE PAYABLE AS ON 31ST MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. THE HON BLE KOLKATA HIGH COURT IN CIT VS. MD.JAKIR HOSSAI MONDAL (SUPRA) DID NOT AGREE WITH T HE VIEW OF THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING FOLLOWING ITS JUDGMENT ON 3RD APRIL, 2013 IN ITAT NO. 20 OF 2013, G.A. NO. 190 OF 2013 (CIT, KOLKATA - XI VS. CRESCENT EXPORT SYNDICATES) HOLDING THAT THE VIEWS EXPRESSED IN THE CASE OF MERILYN SHI PPING & TRANSPORTS (ITA.477/VIZ./2008 DATED 20.3.2012) WERE NOT ACCEPTABLE. 29. HOWEVER, WE FIND THAT THE HON BLE ALLAHABAD HIGH COURT HAS HOWEVER UPHELD THE VIEW TAKEN BY THE SPECIAL BENCH ITAT IN THE CASE OF MERILYN SHIPPING (SUPRA) IN THE CASE OF M /S. VECTOR SHIPPING SERVICES PVT. LTD. (SUPRA). THE RELEVANT OBSERVATIONS OF THE HON BLE COURT WERE AS FOLLOWS: - WE DO NOT FIND THAT THE REVENUE CAN TAKE ANY BENEFIT FROM THE OBSERVATIONS MADE BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN S HIPPING AND TRANSPORT LTD. (136 LTD 23) (SB) QUOTED AS ABOVE TO THE EFFECT SECTION 40(A)(IA) WAS INTRODUCED IN THE ACT BY THE FINANCE ACT, 2004 WITH EFFECT FROM 1.4.2005 WITH A VIEW TO AUGMENT THE REVENUE THROUGH THE MECHANISM OF TAX DEDUCTION AT SOURCE. T HIS PROVISION WAS BROUGHT ON STATUTE TO DISALLOW THE CLAIM OF EVEN GENUINE AND ADMISSIBLE EXPENSES OF THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION IN CASE THE ASSESSEE DOES NOT DEDUCT TDS ON SUCH EXPENSES. THE DEFAULT IN DEDUCTION OF T DS WOULD RESULT IN DISALLOWANCE OF EXPENDITURE ON WHICH SUCH TDS WAS DEDUCTIBLE. IN THE PRESENT CASE TAX WAS DEDUCTED AS TDS FROM THE SALARIES OF THE EMPLOYEES PAID BY M/S MERCATOR LINES LTD., AND THE CIRCUMSTANCES IN WHICH SUCH SALARIES WERE PAID BY M/S M ERCATOR LINES LTD., FOR M/S VECTOR SHIPPING SERVICES, THE ASSESSEE WERE SUFFICIENTLY EXPLAINED. IT IS TO BE NOTED THAT FOR DISALLOWING EXPENSES FROM BUSINESS AND PROFESSION ON THE GROUND THAT TDS HAS NOT BEEN DEDUCTED, THE AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY THE END OF THE YEAR. WE DO NOT FIND THAT THE TRIBUNAL HAS COMMITTED ANY ERROR IN RECORDING THE FINDING ON THE FACTS, WHICH WERE NOT CONTROVERTED BY THE DEPARTMENT AND THUS THE QUESTION OF LAW AS FRAMED DOES NOT ARISE FOR CONSIDERATIO N IN THE APPEAL. THE INCOME TAX APPEAL IS DISMISSED. 13 ITA NO S . 845 & 1036 /BANG/ 2014 30. THUS THERE ARE TWO VIEWS ON THE ISSUE, ONE IN FAVOUR OF THE ASSESSEE EXPRESSED BY THE HON BLE ALLAHABAD HIGH COURT AND THE OTHER AGAINST THE ASSESSEE EXPRESSED BY THE HON BLE GUJARAT & CALCUTT A HIGH COURTS. ADMITTEDLY, THERE IS NO DECISION RENDERED BY THE JURISDICTIONAL HIGH COURT ON THIS ISSUE. IN THE GIVEN CIRCUMSTANCES, FOLLOWING THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF VEGETABLE PRODUCTS LTD. (SUPRA), WE HOLD THAT WHERE TW O VIEWS ARE POSSIBLE ON AN ISSUE, THE VIEW IN FAVOUR OF THE ASSESSEE HAS TO BE PREFERRED. FOLLOWING THE DECISION OF THE HON BLE ALLAHABAD HIGH COURT, WE UPHOLD THE ORDER OF THE CIT(A). 31. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISMISSED, WHILE T HE CROSS OBJECTION BY THE ASSESSEE IS ALLOWED. 11.3.2 A PERUSAL AND APPRAISAL OF THE IMPUGNED ORDER WOULD SUGGEST THAT THE ISSUE IN DISPUTE IS COVERED IN FAVOUR OF THE ASSESSEE. THE LEARNED AUTHORISED REPRESENTATIVE CONTENDS THAT THE ASSESSEE HAS P AID THE AMOUNTS AND THAT NOTHING IS OUTSTANDING / PAYABLE AS ON THE LAST DAY OF THE YEAR UNDER CONSIDERATION. HOWEVER, SINCE THIS AVERMENT OF THE ASSESSEE IS NOT DISCERNIBLE FROM THE IMPUGNED ORDER, WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER. THE ASSESSING OFFICER SHALL ASCERTAIN WHETHER THE ASSESSEE HAS PAID THE AMOUNTS OR NOT. IN CASE IT IS FOUND THAT THE PAYMENTS HAVE ALREADY BEEN MADE AS CONTENDED BY THE ASSESSEE I.E. ON OR BEFORE 31 ST MARCH, 2008, THEN THE ASSESSING OFFICER SHALL EXAMINE THE ISSUE IN THE LIGHT OF THE ORDER OF THE CO - ORDINATE BENCH IN THE CASE OF ANAN DA MARKALA (SUPRA) AS EXTRACTED. 12. IN THE RESULT, THE ASSESSEE'S APPEAL FOR ASSESSMENT YEAR 2008 - 09 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED IN THE OPEN COURT ON 3 RD JULY, 201 5 . SD/ - (N.V.VASUDEVAN) JUDICIAL MEMBER SD/ - (JASON P BOAZ) ACCOUNTANT MEMBER *REDDY GP