M/s. Suresh Bapusaheb Chougule, Kolhapur V. Income-tax Officer, Ward - 1(1), Kolhapur

ITA 865/PUN/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3651 (ITAT-PUNE)
• Duration Of Justice: 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 14-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Assessee Lawyers: P S SHINGTE
• Keywords: Bonafide belief
• Section: 40A(3); 143(3); 40(a)(ia)

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 865 /P U N/201 8 / ASSESSME NT YEAR : 20 1 0 - 1 1 M/S. SURESH BAPUSAHEB CHOUGULE, 2017, C WARD, MANDAI, KOLHAPUR 416002 . / APPELLANT PAN: AAFFS2087N VS. THE INCOME TAX OFFICER, WARD 1 ( 1 ), KOLHAPUR . / RESPONDENT / APPELLANT BY : SHRI P.S. SHINGTE / RESPONDENT BY : SHRI M.K. VERMA / DATE OF HEARING : 1 7 . 0 1 .201 9 / DATE OF PRONOUNCEMENT: 20 . 0 2 .201 9 / ORDER PER SUSHMA CHOWLA, J M : THE APPEAL FILED BY ASSE SSEE IS AGAINST ORDER OF CIT (A) - 1 , KOLHAPUR , DATED 0 9 . 0 4 .201 8 RELATING TO ASSESSMENT YEAR 20 1 0 - 1 1 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1) O N FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON MERIT IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER, CONFIRMING THE DISALLOWANCE OF THE PAYMENTS EXECUTED TO SAINATH SAH. DUDH SANSHTHA, MANGUR U/S. 40A(3) OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS.1,20,891/ - . ITA NO. 865 /P U N/201 8 M/S. SURESH B. CHOUGULE 2 2) ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON MERIT IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER, CONFIRMING THE DISALLOWANCE OF INTEREST U/S. 40(A)(IA) OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS.1,52,139/ - . 3. THE FIRST ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST DISALLOWANCE OF 1,20,891/ - UNDER SECTION 40A(3) OF THE ACT. THE SECOND ISSUE RAISED IS AGAINST DISALLOWANCE OF INTEREST UNDER SECTION 40(A)(IA) OF THE ACT AT 1,52,139/ - . 4. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE WAS GENERAL MERCHANT AND COMMISSION AGENT. THE ASSESSEE WAS PARTNERSHIP FIRM. THE CASE OF ASSESSEE WAS TAKEN UP FOR SCRUTINY. ON VERIFICATION OF DETAILS AND BOOKS OF ACCOUNT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD MADE CERTAIN PAYMENTS IN CASH IN VIOLATION OF PROVISIONS OF SECT ION 40A(3) OF THE ACT. THE SAID PAYMENTS ARE TABULATED AT PAGE 2 OF THE ASSESSMENT ORDER. THE ASSESSEE EXPLAINED THAT IT WAS ACTING AS AN AGENT OF M/S. BUNGE INDIA PVT. LTD. AND THERE WERE SOME CLAIMS IN RESPECT OF RATE DIFFERENCE WHICH WAS SUBMITTED TO THE COMPANY FROM TIME TO TIME BY THE CUSTOMER. HOWEVER, THE AMOUNTS WERE RECEIVED BY THE ASSESSEE FOR SETTLEMENT AND SOME OF THE CLAIMANTS INSISTED FOR CASH PAYMENTS AND HENCE, THE PAYMENTS IN CASH ON BEHALF OF THE COMPANY. THE ASSESSEE EXPLAINED THAT TH E AMOUNTS WERE NOT IN THE NATURE OF EXPENDITURE, HENCE PROVISIONS OF SECTION 40A(3) OF THE ACT WERE NOT APPLICABLE. THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT WAS ROUTED THROUGH ASSESSEES BOOKS OF ACCOUNT WHERE THE CHEQUE WAS ISSUED BY CONSIGNOR TO T HE ASSESSEE AND AGAINST THE SAME, THE ASSESSEE HAD MADE THE PAYMENTS IN CASH TO SOME OF THE PARTIES AND TO OTHERS BY CHEQUE. HENCE, HE DISALLOWED SUM OF 1,20,891/ - UNDER SECTION 40A(3) OF THE ACT. FURTHER, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD PAID INTEREST ON UNSECURED LOANS TO DIFFERENT ITA NO. 865 /P U N/201 8 M/S. SURESH B. CHOUGULE 3 PARTIES TOTALING 1,56,939/ - . THE ASSESSEE EXPLAINED THAT IT HAD FILED FORM NO.15G IN RESPECT OF THREE PERSONS IN THE OFFICE OF COMMISSIONER OF INCOME TAX, KOLHAPUR AND ALSO FILED COPIES OF THE SAME BEFO RE THE ASSESSING OFFICER. THE ASSESSING OFFICER ON VERIFICATION OBSERVED THAT THE ASSESSEE HAD FAILED TO FURNISH FORM NO.15G IN RESPECT OF SUCHETA SUMIT CHOUGULE (INTEREST OF 79,474/ - ) IN THE OFFICE OF COMMISSIONER OF INCOME TAX, KOLHAPUR WITHIN STIPUL ATED TIME. IN RESPECT OF OTHER TWO PERSONS, THE ASSESSEE FAILED TO FURNISH ANY PROOF OF FILING THE SAID FORMS. THE ASSESSEE POINTED OUT THAT IT HAD FURNISHED THE SAID FORMS ON 09.04.2010 WAS NOT ACCEPTED AS ACCORDING TO THE ASSESSING OFFICER, LAST DATE F OR FILING THE SAME WAS 7 TH OF NEXT MONTH . HENCE, DISALLOWANCE OF 1,56,939/ - WAS MADE IN THE HANDS OF ASSESSEE. 5. THE CIT(A) UPHELD THE SAME, AGAINST WHICH THE ASSESSEE IS IN APPEAL. 6. IN RESPECT OF FIRST ISSUE, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT COMMISSION OR RATE DIFFERENCE WH ICH WAS RECEIVED FROM THE CONSIGNOR WAS DISTRIBUTED TO VARIOUS PARTIES, SOMETIMES IN CASH. HOWEVER, IT WAS NOT CLAIMED AS EXPENDITURE BY THE ASSESSEE, SO NO REASON TO INVOKE THE PROVISIONS OF SECTION 40A(3) OF THE ACT. IN RESPECT OF SECOND ISSUE, THE LEA RNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT FORM NO.15G FROM ALL THE PARTIES WERE SUBMITTED TO THE COMMISSIONER OF INCOME TAX ON 09.04.2009 THOUGH THE ASSESSEE HAD TO SUBMIT THE SAME BY 7 TH APRIL, HOWEVER, NO DISCREPANCY WAS POINTED OU T BY THE COMMISSIONER AND UNDER THE BONAFIDE BELIEF THE ASSESSEE DID NOT DEDUCT THE TA X AT SOURCE OUT OF SAID PAYMENTS OF INTEREST. ITA NO. 865 /P U N/201 8 M/S. SURESH B. CHOUGULE 4 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 8. ON PERU SAL OF RECORD AND AFTER HEARING BOTH THE LEARNED AUTHORIZED REPRESENTATIVES, THE FIRST ISSUE WHICH ARISES IS AGAINST DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT. THE SAID PROVISIONS OF THE ACT CAN BE INVOKED IN RESPECT OF EXPENDITURE BY THE ASSESSEE IN CASH. HOWEVER, WHERE THE EXPENDITURE IS NOT EXPENDITURE OF ASSESSEE AND IT WAS ONLY CONDUIT FOR DISTRIBUTION OF RATE DIFFERENCE / COMMISSION TO DIFFERENT PARTIES ON BEHALF OF CONSIGNOR, THEN SUCH PAYMENTS THOUGH IN CASH CANNOT BE SAID TO BE IN VIOLATI ON OF PROVISIONS OF SECTION 40A(3) OF THE ACT. THERE IS NO MERIT IN THE STAND OF AUTHORITIES BELOW AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DISALLOWANCE OF 1,20,891/ - . THE GROUND OF APPEAL NO.1 RAISED BY ASSESSEE IS THUS, ALLOWED. 9. NOW, COMING TO THE NEXT DISALLOWANCE WHERE THE ASSESSEE WAS TO PAY INTEREST TO THREE DIFFERENT PARTIES, WHO IN TURN, HAD SUBMITTED FORM NO.15G, REQUESTING THE ASSESSEE NOT TO DEDUCT TAX AT SOURCE OUT OF INTEREST PAYMENTS. UNDER THE PROVISIONS OF THE ACT, A SYSTEM IS PLACED WHEREIN THE PERSONS IN RECEIPT OF CERTAIN PAYMENTS AND REQUESTED FOR NON DEDUCTION OF TAX AT SOURCE, WHERE THEIR INCOME IS BELOW THE TAX LIMITS ; IN SUCH CI RCUMSTANCES THE PERSONS HAVE TO FURNISH FORM NO.15G, WHICH IN TURN, HAVE TO BE FILED BY THE DEDUCTOR BEFORE THE COMMISSIONER . THE SAME HAVE TO BE DEPOSITED BY 7 TH OF NEXT MONTH IN WHICH HE HAD RECEIVED THE SAID FORMS. IN THE CASE OF ASSESSEE, THE SAID FO RMS WERE FILED ON 09.04.2009 I.E. AFTER THE DELAY OF ABOUT TWO DAYS, WHICH IS VERY MINOR AND IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, THE SAME IS CONDONED. IN ANY CASE, THE COMMISSIONER ACCEPTING THE SAID FORM ITA NO. 865 /P U N/201 8 M/S. SURESH B. CHOUGULE 5 NO.15G HAS NOT REJECTED THE SAID FORMS ON THE GROUND OF NOT BEING FILED IN TIME. IN SUCH CIRCUMSTANCES, THERE WAS NO REQUIREMENT TO DEDUCT TAX AT SOURCE OUT OF INTEREST PAYMENTS MADE TO THE PERSONS, WHO HAD FILED FORM NO.15G. ACCORDINGLY, DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT IS THUS, DELETED. THE GROUND OF APPEAL NO.2 RAISED BY ASSESSEE IS THUS, ALLOWED. 1 0 . IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 20 TH DAY OF FEBRUARY , 201 9 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 20 TH FEBRUARY , 201 9 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPOND ENT; 3. ( ) / THE CIT(A) - 1 , KOLHAPUR ; 4. THE PR. CIT - 1 , KOLHAPUR ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE