Shah Harendra Chhabiladas (HUF-1), Surendranagar V. The Income Tax Officer, Ward-1, Surendranagar

ITA 893/RJT/2009

• Counselvise Citation: 89324914 RSA 2009
• Duration Of Justice: 3 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-06-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 15-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: DR ADHIA
• Keywords: Depreciation; Additional evidence
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBULAL: RAJKOT BENCH: RAJKOT BEFORE SHRI T K SHARMA, JM AND SHRI D K SRIVASTAVA, AM ITA NO. 893 /RJ T/ 2009 ASSESSMENT YEAR : 200 5 - 0 6 SHAH HARENDRA CHHABILDAS (HUF - 1) PROP. OF HARENDRA CHHABILDAS & CO., KHARWA NIL POLE, WADHWANC ITY, SURENDRANAGAR PAN: AAIHS 6674 Q V. ITO, WARD - 1 , SURENDRANAGAR DATE OF HEARING : 06 .0 6 .2013 DATE OF PRONOUNCEMENT : 10 .0 7 .2013 ASSESSEE BY : SHRI D R ADHIA, AR REVENUE BY : SHRI K C MATHEWS, DR ORDER D. K. SRIVASTAVA : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER PASSED BY THE CIT(A) - XVI , AHMEDABAD ON 11 . 0 5 .20 09 . THE ASSESSEE IS AN INDIVIDUAL. HE IS ENGAGED IN THE BUSINESS OF COTTON TRADING. HE FILED HIS RETURN OF INCOME ON 13.09.2005 RETUR NIN G TOTAL INCOME AT RS.76,440/ - . ASSESSMENT U/S 143(3) OF THE INCOME - TAX ACT WAS COMPLETED ON 23.03.2007 ASSESSING HIS TOTAL INCOME AT RS.7,41,457 / - AFTER DISALLOWING (A) RS.6,53,740/ - U/S 40(A)(IA); (B) RS.8,777/ - BEING DEPRECIATION ON SCOOTER; AND (C) R S.2,500/ - BEING DONATION TO DAJIRAJ SCHOOL. ON APPEAL, THE LD CIT(A) HAS CONFIRMED ALL THE AFORESAID ADDITIONS/DISALLOWANCES MADE BY THE ASSESSING OFFICER. 2. AGGRIEVED BY THE ORDER PASSED BY THE LD CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBU NAL. 3. GROUND NO.1 TAKEN BY THE ASSESSEE READS AS UNDER: - 1.1 THE LEARNED COMMISSIONER OF INCOME TAX (A), HAS ERRED IN LAW AND FACTS IN CONFIRMING THE ADDITION ON INTEREST EXPENSES OF RS.6,53,740/ - . THE SAME NEEDS DELETION. 1.2 THE LD. CI.T.T. (A ) HAS ERRED IN LAW AND FACTS IN NOT ACCEPTING THE LEGAL POSITION THAT PROVISION OF SECTION 40(A)(IA) INTRODUCED THROUGH FINANCE ACT (NO.2) OF 2004 WAS ASSENTED BY THE HON. PRESIDENT OF INDIA ON OR AFTER 30.09.2004 AND THEREFORE ITS EFFECT IS TO BE GIVEN FR OM F.Y. 2005 - 06 RELATING TO A.Y. 2006 - 07. 2 893 - RJT - 2009 SHAH HARENDRA CHHABILDAS (HUF - 1) 1.3 THE LD. CIT(A) IS ERRED IN LAW AND FACTS IN NOT ACCEPTING THE PLEA THAT AMOUNT OF RS.6,53,740/ - WAS NOT LIABLE FOR INCLUSION TO THE INCOME OF THE APPELLANT. THE SAME NEEDS DELETION. 4. PERUSAL OF THE ASSES SMENT ORDER PASSED BY THE ASSESSING OFFICER AND THE APPELLATE ORDER PASSED BY THE LD CIT(A) SHOW S THAT THE ASSESSEE HAD PAID THE IMPUGNED SUM S BY WAY OF INTEREST WITHOUT DEDUCTING THE TAX AT SOURCE AS REQUIRED BY SECTION 194 A A S A RESULT OF WHICH THE IMPUG NED SUMS WERE DISALLOWED U/S 40(A)(IA) OF THE INCOME - TAX ACT. THE LD . CIT(A) HAS CONFIRMED THE IMPUGNED DISALLOWANCE WITH THE FOLLOWING OBSERVATIONS: - 3.1 I HAVE CONSIDERED THE SUBMISSIONS. IT IS CORRECT THAT THE PROVISIONS OF SECTION 40(A)(IA) WERE BR OUGHT IN THE STATUTE BY FINANCE ACT 2004 W.E.F. 1.4.205 I.E. W.E.F. 2005 - 06 AND NOT EFFECTIVE FROM AY 2006 - 07 AS CONTENDED BY THE AUTHORIZED REPRESENTATIVE. IN FACT, MANY APPEALS HAVE BEEN DECIDED BY ME ON 40(A)(IA) DISALLOWANCE FOR AY 2005 - 06. FURTHER AS PER SECTION 194A, IF INDIVIDUAL OR HUF MAKES ANY PAYMENT OF INTEREST TO ANY OTHER PARTY EXCEEDING RS.2500/ - , THEN HE IS LIABLE FOR DEDUCTION OF TAX AT SOURCE, IF HIS ACCOUNTS WERE SUBJECT TO AUDIT U/S 44AB IN THE IMMEDIATELY PRECEDING YEAR. IN THIS CASE THE ACCOUNT OF THE APPELLANT WERE AUDITED IN AY 2004 - 05 I.E. IN THE IMMEDIATELY PROCEEDING YEAR OF A.Y. 2005 - 06 WHICH IS SUBJECT MATTER OF APPEAL BEFORE ME. THEREFORE IN VIEW OF SEC 40(A)(IA) R.W.S. 194A, THE APPELLANT IS LIABLE TO DEDUCT TAX AT SOURCE ON THE INTEREST PAYMENT. SINCE THE SAME HAS NOT BEEN DEDUCTED AND DEPOSITED IN THE GOVT TREASURY BY THE APPELLANT BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME, THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING INTEREST OF RS.6,53,740/ - . 5. IN SUPP ORT OF APPEAL, THE LD AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS TWICE. WRITTEN SUBMISSIONS FILED BY HIM ON 22.01.2013 READ AS UNDER: - PRAYER FOR ADMISSION OF ADDITIONAL EVIDENCES 1 . THE FINANCE ACT, 2012 HAS AMENDED THE PRO VISIONS OF SECTION 40(A)(IA) AND FOLLOWING SECOND PROVISO IS INSERTED IN THE SAID CLAUSE AS UNDER: 3 893 - RJT - 2009 SHAH HARENDRA CHHABILDAS (HUF - 1) PROVIDE D FURTHER THAT WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII B ON ANY SUCH S UM BUT IS NOT DEEMED TO BE AN ASSESSEE ON DEFAULT UNDER THE FIRST PROVISO TO SUB - SECTION (1) OF SECTION 201, THEN, FOR THE PURPOSE OF THIS SUB - CLAUSE, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO. 2 . THE ABOVE PROVISO IS INSERTED ONLY THROUGH FINANCE ACT, 2012. THE ASSESSEE COULD NOT SUBMIT ITS RELEVANT PAPERS TO ESTABLISH THAT THE PERSONS IN RESPECT OF WHOM HE WAS REQUIRED T O DEDUCT TAX ARE EITHER NOT LIABLE TO INCOME - TAX OR THEY HAVE PAID THE TAX DUE ON THEIR RETURN INCOME AT THE TIME OF ASSESSMENT PROCEEDINGS OR DURING THE COURSE OF APPEAL PROCEEDINGS BEFORE THE LD. CIT (A) BECAUSE THERE WAS NO SUCH PROVISIONS. 3 . SINCE NOW T HE LAW PRESCRIBES THE AMENDMENTS THROUGH FINANCE ACT, 2012, THE ASSESSEE HAS FURNISHED TOGETHER WITH IT WRITTEN SUBMISSIONS AT THE TIME OF HEARING OF APPEAL BEFORE THIS HON. BENCH ON 4 - 1 - 2013, THE COPIES OF ACKNOWLEDGMENT OF RETURN OF INCOME FILED TOGETHER WITH COMPUTATION OF INCOME BY THE PERSONS SHOWING THAT THEY ARE NOT LIABLE EITHER TO PAY OF INCOME - TAX ON THE RETURN INCOME OR THEY HAVE ALREADY PAID THE TAX DUE ON THE RETURN OF INCOME IN RESPECT OF AMOUNT OF INTEREST EARNED FROM THE APPELLANT, SHRI HARE NDRA CHHABILDAS SHAH HUF. 4 . SINCE AS MENTIONED IN THE WRITTEN SUBMISSIONS BEFORE THIS HON. BENCH ON 4 - 1 - 2013 AT PARA 1.2 & 1.3 THEREOF WHICH READS AS UNDER 1.2 THUS THE MATTER CAN BE CONSIDERED AS COVERED BY THE DECISIONS OF HON. CALCUTTA HIGH COURT IN T HE CASE OF CIT V/S. VIRGIN CREATORS IN G.A. NO. 3200/2011 DATED 23 - 11 - 2011 WHICH PROVIDES THAT SUCH AMENDMENTS CAN BE CONSIDERED AS RETROSPECTIVE. THIS VIEW HAS BEEN FOLLOWED BY THE HON. ITAT AHMEDABAD IN THE CASE OF M/S. ALPHA PROJECTS. THE HON. ITAT RA JKOT (PRESENT BENCH) HAS ALSO BEEN 4 893 - RJT - 2009 SHAH HARENDRA CHHABILDAS (HUF - 1) PLEASED TO FOLLOW THE ABOVE VIEW IN THE CASE OF M/S. VIJYA PRINTERS JETPUR (ITA NO.11/RJT/2012). 1.3 THE HON. CALCUTTA HIGH COURT IN THE ABOVE DECISIONS HAS FOLLOWED THE DECISIONS OF THE HON. SUPREME COURT IN THE CASE OF ALLIED MOTORS 224 ITR 677 (SC) & ALOM EXTRUSIONS 319 ITR 306 (SC) AND IN THE CASE OF R.B.JODHA MAL KUTHIALA 82 ITR 570 (SC) WHEREIN IT IS HELD THAT A PROVISION WHICH WAS INSERTED THE REMEDY TO MAKE A PROVISION WORKABLE REQUIRES TO BE TREATED WITH RETROSPE CTIVE OPERATION SO THAT REASONABLE DEDUCTION CAN BE GIVEN TO THE SECTION AS WELL. 5. THEREFORE IN VIEW OF THE AMENDMENTS AS PER FINANCE ACT, 2012 WHICH IS TO BE TREATED AS RETROSPECTIVE IN VIEW OF DECISIONS OF THE HON. CALCUTTA HIGH COURT IN THE CASE OF C IT V/S. VIRGIN CREATORS CITED SUPRA TOGETHER WITH DECISIONS OF THE HON. SUPREME COURT THE ADDITION MADE IN THE CASE OF ASSESSEE OF RS.6,53,740/ - NEEDS DELETION. 6. IN VIEW OF THE ABOVE POSITION THAT AT THE TIME OF ASSESSMENT AND FIRST APPEAL PROCEEDINGS T HERE WAS NO AMENDMENTS, THE ABOVE PLEAS WAS NOT TAKEN AND NO PAPERS AS INDICATED ABOVE WERE FURNISHED. NOW DUE TO AMENDMENTS AS DISCUSSED ABOVE, THIS PLEA IS TAKEN AND RELEVANT PAPERS ARE FURNISHED. THE APPEAL MAY KINDLY BE DECIDED IN FAVOUR OF APPELLANT AS PRAYED FOR. THE HON. SUPREME COURT HAS BEEN PLEASED TO HOLD THAT ADDITIONAL EVIDENCES CAN BE ADMITTED CONSEQUENCE OF SUBSEQUENT EVENTS. ANGLO AMERICAN DIRECT TEA TRADING COMPANY (1968) 69 ITR 667 (SC). 7. IT IS THEREFORE HUMBLY PRAYED THAT THE PAPER F URNISHED BEFORE THE HON. ITAT RAJKOT (BEFORE THIS HON. BENCH) MAY KINDLY BE ADMITTED AS EVIDENCES AND ADDITION MADE MAY KINDLY BE DELETED AS PRAYED FOR. 6. FURTHER WRITTEN SUBMISSIONS WERE FILED AT THE TIME OF HEARING ON 04.01.2013 WHICH READ AS UNDER: - 1.1. AN AMOUNT OF RS.6,53,740/ - HAS BEEN DISALLOWED U/S. 40(A)(IA) FOR NON DEDUCTION OF TDS FROM INTEREST. THE AMOUNT PERTAINS TO 13 DEFERENCE 5 893 - RJT - 2009 SHAH HARENDRA CHHABILDAS (HUF - 1) PERSONS. NOW THERE IS AN AMENDMENTS IN FINANCE ACT WHERE BY THE PROVISIONS OF SECTION 40(A)(IA) NOW PROVIDES THAT IF PAYEES HAVE FURNISHED THE RETURN AND PAID THE TAX DUE THEREON THEN ONLY INTEREST UP TO THE DATE OF PAYMENT OF TAX BY PAYEE IS TO BE CHARGED. 1.2 THUS THE MATTER CAN BE CONSIDERED AS COVERED BY THE DECISIONS OF HON. CALCUTTA HIGH COURT IN THE CASE OF CIT V/S. VIRGIN CREATORS IN G.A. NO. 3200/2011 DATED 23 - 11 - 2011 WHICH PROVIDES THAT SUCH AMENDMENTS CAN BE CONSIDERED AS RETROSPECTIVE. THIS VIEW HAS BEEN FOLLOWED BY THE HON. ITAT AHMEDABAD IN THE CASE OF M/S. ALPHA PROJECTS. THE HON. ITAT RAJKOT (P RESENT BENCH) HAS ALSO BEEN PLEASED TO FOLLOW THE ABOVE VIEW IN THE CASE OF M/S. VIJYA PRINTERS JETPUR (ITA NO.11/RJT/2012). 1.3 THE HON. CALCUTTA HIGH COURT IN THE ABOVE DECISIONS HAS FOLLOWED THE DECISIONS OF THE HON. SUPREME COURT IN THE CASE OF ALLIED MOTORS 224 ITR 677 (SC) & ALOM EXTRUSIONS 319 ITR 306 (SC) AND IN THE CASE OF R.B.JODHA MAL KUTHIALA 82 ITR 570 (SC) WHEREIN IT IS HELD THAT A PROVISION WHICH WAS INSERTED THE REMEDY TO MAKE A PROVISION WORKABLE REQUIRES TO BE TREATED WITH RETROSPECTIVE O PERATION SO THAT REASONABLE DEDUCTION CAN BE GIVEN TO THE SECTION AS WELL. 1.4 IT IS THEREFORE PRAYED THAT ADDITION OF RS.6,53,740/ - MAY KINDLY BE DIRECTED TO BE DELETED SINCE ALL THE PERSONS HAVE PAID THE TAX ON INTEREST AMOUNT RECEIVED BY THEM WHERE DUE . 2. DETAILED WRITTEN SUBMISSIONS ARE ALSO ATTACH HERE WITH TOGETHER WITH THE COPY OF ACKNOWLEDGMENTS OF RETURNS AND COMPUTATION OF INCOME FILED BY THEM. 7. IN REPLY, THE LD DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E ORDER PASSED BY THE LD CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES. THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE US WERE NOT MADE BEFORE THE LD CIT(A) . SECOND P ROVISO TO SECTION 40(A)(IA) HAS BEEN INSERTED BY THE FINANCE ACT, 2012 A CCORDING TO WHICH DISALLOWANCE U/S 40(A)(IA) CANNOT BE MADE UN LESS THE ASSESSEE IS THE ASSESSEE IN DEFAULT. IN THIS 6 893 - RJT - 2009 SHAH HARENDRA CHHABILDAS (HUF - 1) VIEW OF THE MATTER, THE ISSUE RAISED IN FIRST GROUND OF APPEAL IS RESTORED TO THE FILE OF THE LD CIT(A) FOR A FRESH DECISION. GROUND NO.1 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 9. GROUND NO S. 2 AND 3 READ AS UNDER: - 2. THE LD. C.I.T.(A) IS ERRED IN LAW AND FACTS IN CONFIRMING THE DISALLOWANCE IN RESPECT OF DEPRECIATION ON SCOOTER OF RS.8,777/ - . THE SAME NEEDS DELETION. 3. THE LD. C.I.T.(A) IS ERRED IN LAW AND FACTS IN CONFIRMING THE ADDI TION OF DONATI ON (ADVERTISEMENT) TO DAJIRAJ SCHOOL OF RS.2,500/ - . THE SAME NEEDS DELETION. 10. IN SUPPORT OF APPEAL, THE LD AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS NOT MADE ANY SUBMISSIONS EITHER IN WRITING OR ORALLY AT THE TIME OF HEARING. 11. WE HAVE CAREFULLY PERUSED GROUND NOS. 2 AND 3 TAKEN BY THE ASSESSEE IN THE LIGHT OF MATERIALS AVAILABLE ON RECORD. THE LD CIT(A) HAS CONFIRMED THE IMPUGNED DISALLOWANCE S WITH THE FOLLOWING OBSERVATIONS: - 4. NEXT GROUND IS REGARDING DISALLOWANCE OF ADVER TISEMENT EXPENSES OF RS.2500/ - . THE ASSESSING OFFICER IN PARA 7 OF THE ASSESSMENT ORDER STATED THAT RS.2500/ - WAS PAID BY THE APPELLANT TO DAJIRAJ HIGH SCHOOL SHATABDI MAHOTSAV SAMITI, WADHWAN AND THE MONEY RECEIPT WAS ISSUED IN THE NAME OF KARTA WITHOUT MENTIONING THE STATUS OF HUF. HOWEVER THIS AMOUNT IS PAID THROUGH CHEQUE FROM THE ACCOUNT OF THE HUF. THE ASSESSING OFFICER HELD THAT THE AMOUNT DOES NOT REPRESENT ANY ADVERTISEMENT VALUE BUT DONATION WHICH IS DISALLOWABLE. I AGREE WITH THE ASSESSING OFFIC ER THAT IN THE ABSENCE OF THE NAME OF THE APPELLANT HUF IN THE SOUVENIR ISSUED BY THE SCHOOL IT CANNOT BE SAID TO BE ADVERTISEMENT EXPENSES. THEREFORE THE DISALLOWANCE OF RS.2500/ - IS CONFIRMED. 5 . LAST GROUND IS REGARDING DISALLOWANCE OF DEPRECIATION OF RS. 8,777/ - ON SCOOTER. THIS ISSUE HAS BEEN DISCUSSED BY THE ASSESSING OFFICER AT PARA 5 AND 5.1 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER FOUND THAT INVESTMENT IN SCOOTER IS NOT APPEARING IN THE BALANCE SHEET OF THE APPELLANT 7 893 - RJT - 2009 SHAH HARENDRA CHHABILDAS (HUF - 1) AND ALSO RUNNING EXPENSES SU CH AS PETROL EXPENSES ETC ARE NOT CLAIMED BY THE APPELLANT DURING THE YEAR. THIS INDICATES THAT THE SCOOTER WAS NOT USED BY THE ASSESSEE HUF FOR HIS BUSINESS PURPOSE. IT WAS ALSO HELD THAT THE APPELLANT IS NOT THE OWNER OF THE SCOOTER. THE AUTHORIZED REPR ESENTATIVE ARGUED THAT THE SCOOTER IS USED BY THE SERVANT FOR OFFICE WORK AND THAT IN THE ABSENCE OF ANY DISALLOWANCE OF SCOOTER EXPENSES SUCH AS PETROL EXPENSES ETC, DISALLOWANCE OF DEPRECIATION CANNOT BE MADE I DO NOT AGREE WITH THE APPELLANT. IN THIS CA SE IT WAS HELD BY THE ASSESSING OFFICER THAT THE SCOOTER RUNNING EXPENSES ARE NOT CLAIMED NOR THE INVESTMENT IN SCOOTER IS MADE FROM THE BANK ACCOUNT OF THE APPELLANT BUT THE INVESTMENT OF RS.35,106/ - IS MADE FROM THE B A NK ACCOUNT OF HARENDRA CHHABILDAS & CO. IN THE ABSENCE OF THE EVIDENCE THAT THE SCOOTER WAS AT ALL USED BY THE APPELLANT FOR ITS BUSINESS PURPOSES AND THE OWNERSHIP THEREOF LIES WITH HIM, I SUSTAIN THE DISALLOWANCE OF DEPRECIATION MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT. 12. THE AFO RESAID FINDINGS RECORDED BY THE LD CIT(A) HA VE NOT BEEN REBUTTED BEFORE US BY THE ASSESSEE. IN THIS VIEW OF THE MATTER, THE ORDER PASSED BY THE LD CIT(A) IN THIS BEHALF IS CONFIRMED. GROUND NOS.2 AND 3 ARE DISMISSED. 13. IN VIEW OF THE FOREGOING, THE AP PEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 10 . 0 7 . 201 3 (T. K. SHARMA) ( D. K. SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT: 10 .07 .2013 B T COPY OF ORDER FORWARDED TO: - 1 . APPELLANT SH AH HARENDRA CHHABILDAS (HUF - 1), PROP. OF HARENDRA CHHABILDAS & CO., KHARWA NIL POLE, WADHWANCITY, SURENDRANAGAR 2 . RESPONDENT - ITO, WARD - 1, SURENDRANAGAR 3 . CONCERNED CIT , AHMEDABAD - V, AHMEDABAD 4 . CIT (A) - XVI, AHMEDABAD 5 . DR, ITAT, RAJKOT 6 . GUARD FILE. BY ORDER TRUE COPY PRIVATE SECRETARY, ITAT, RAJKOT