M/s Ganesh Rice Mills, Kurukshetra V. ITO, Kurukshetra

ITA 903/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64019 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 31-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHILESH GUPTA
• Assessee Lawyers: SURESH GUPTA
• Keywords: Bonafide belief
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 903/CHD/2012 (ASSESSMENT YEAR : 2009-10) M/S GANESH RICE MILLS, VS. THE INCOME TAX OFFICE R, PIPLI ROAD, LADWA, WARD 2, KURUKSHETRA. KURUKSHETRA. LUDHIANA. PAN: AAAFG5746R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SURESH GUPTA RESPONDENT BY : SHRI AKHILESH GUPTA, DR DATE OF HEARING : 06.11.2012 DATE OF PRONOUNCEMENT : 26.11.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), KARNAL DATED 27.06.2012 RELATING TO ASSESSMENT YEAR 2009-10 AGAINST THE ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE ADD ITION OF RS.622500/- ON RENT PAID TO HARYANA WAREHOUSING COR PORATION WITHOUT DEDUCTION OF TDS AS REQUIRED UNDER SECTION 194 (1) OF THE IT ACT, WHEREAS THE SAME WAS NOT DEDUCTED UNDER THE BONAFIDE BELIEF THAT CORPORATION IS A GOVT. UNDERTAKING BE SIDES THE CORPORATION REFLECTED THE SAME IN THEIR RETURN OF INCOME AND CERTIFICATE IN THIS REGARDS WAS SUBMITTED BEFORE TH E AO. THE LD. CIT (A) HAS NOT APPRECIATED THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLABEVERAGES V S CIT, 298 ITR 226 (SC) IN WHICH IT WAS HELD 'THAT TAX ONCE AG AIN COULDN'T BE RECOVERED FROM THE DEDUCTOR ASSESSEE SINCE THE TAX ALREADY BEEN PAID BY THE RECIPIENT OF INCOME' MORE OVER THERE IS NO REVENUE LOSS AS STATED ABOVE. MOREOVER THE PROVISION OF SECTION 40(A)(IA) OF THE 2 ACT IS APPLICABLE ONLY TO THE AMOUNT OF EXPENDITURE WHICH ARE PAYABLE AS ON THE DATE 31 MARCH EVERY YEAR AND CAN' T BE INVOKED TO DISALLOW WHICH HAD BEEN ACTUALLY PAID DURING THE YEAR WITHOUT DEDUCTION OF TDS. HENCE RELIEF MAY BE ALLO WED. 2. THAT THE LD. CIT(A) HAS ERRED IN CONFORMING ADDI TION OF RS. 74552/-ASFREIGHT (35852/- + 38500/-) ON CASH PAYMEN T TO TRUCK OWNERS OF MP BEING UNKNOWN TO THE APPELLANT WHO RE FUSED THE PAYMENT THROUGH CHEQUES. 3. THAT THE LD. CIT (A) HAS ERRED IN CONFORMING THE ADDITION OF RS. 1,22,629/- ON COMMISSION PAID TO BUSH FOOD OVER SEAS, DELHI THROUGH THE BROKER OF KURUKSHETRA WHO HAS REFLECTED THE SAME IN HIS RETURN OF INCOME. HE IS PAN NO. WAS ALSO SUBMITTED BEFORE THE LD. ASSESSING OFFICER, KURUKSH ETRA WHO IS ALSO ASSESSED TO INCOME TAX IN WARD-01, KURUKSHETRA . 4. THAT THE LD. CIT (A) HAS ERRED IN MAKING ADDITIO N OF RS. 6500/- IN TV ADVERTISEMENT ACCOUNT WHEREAS THE ENTR IES OF THE SAME WERE DEBITED IN DISCOUNT ACCOUNT BEING THE COM POSITE BILLS OF DISCOUNT AND ADVERTISEMENT. 5. THAT THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.18,500/-UNDER THE BRIEF THAT THE SAME IS THE AMO UNT OF INTEREST WHEREAS IT IS PAYMENT MADE THROUGH CHEQUE TO CREDITOR ON 21/01/2009 WHEREAS THE ACCOUNT WERE SET TLED ON 31/03/2009 AND ACCORDINGLY THE FORM 15G WAS FILLED ON 08/04/2009 IN THE OFFICE OF CIT, KARNAL. 6. THAT THE APPELLANT CRAVES, LEAVE TO, ADD TO, ALT ER OR AMEND THE GROUND OF APPEAL AT THE TIME OF HEARING. 7. THAT APPEAL FEE OF RS. 10000/- HAS BEEN DEPOSITE D IN STATE BANK OF INDIA, LADWA VIDE TR NO. 00012 DATED 08/08/2012. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS RUNNING RICE SHELLER. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSING OFFICER NOTED THE ASSESSEE TO HAVE DEBITED GODOWN R ENT OF RS.12,31,380/- TO THE PADDY EXPENSES CLAIMED AT RS.1.19 CRORES. T HE ASSESSING OFFICER VIDE PARA 4 NOTED THE ASSESSEE TO HAVE PAID RENT OF RS.6,22,500/- TO M/S HARYANA WAREHOUSING CORPORATION, LADWA. THE ASSESS EE HAD FAILED TO DEDUCT TAX AT SOURCE UNDER THE PROVISIONS OF SECTIO N 194I OF THE ACT AND CONSEQUENTLY THE SAID EXPENDITURE WAS DISALLOWED BY THE ASSESSING OFFICER IN VIEW OF THE PROVISIONS OF SECTION 40A(IA ) OF THE ACT. THE SAID DISALLOWANCE WAS UPHELD BY THE CIT (APPEALS), AGAIN ST WHICH THE ASSESSEE IS IN APPEAL. 3 4. WE FIND THAT THE PRESENT ISSUE RAISED BY THE ASS ESSEE VIDE GROUND NO.1 STANDS COVERED BY THE RATIO LAID DOWN BY THE S PECIAL BENCH OF VISHAKHAPATNAM TRIBUNAL IN ACIT VS. MERILYN SHIPPIN G & TRANSPORTS [140 TTJ 1(SB)(VISHAKHAPATNAM)], WHEREIN IT HAS BEE N HELD AS UNDER: 12. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS OF HON'BLE SUPREME COURT AND HON'BLE HIGH COURTS, MATERIALS PL ACED BEFORE US, ARGUMENTS MADE BY BOTH THE SIDES AND IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, ON COMP ARISON BETWEEN THE PROPOSED AND ENACTED PROVISION, THE ONL Y CONCLUSION WHICH I CAN REACH IS THAT THE LEGISLATUR E CONSCIOUSLY REPLACED THE WORDS 'AMOUNTS CREDITED OR PAID' WITH THE WORD 'PAYABLE' IN THE FINAL ENACTMENT. BY CHANGING THE WORDS FROM 'CREDITED' OR 'PAID' TO 'PAYABLE', T HE LEGISLATIVE INTENT HAS BEEN MADE CLEAR THAT ONLY OUTSTANDING AM OUNTS OR THE PROVISIONS FOR EXPENSES LIABLE FOR TDS UNDER CHAPTE R XVII-B OF THE ACT IS SOUGHT TO BE DISALLOWED IN THE EVENT THE RE IS A DEFAULT IN FOLLOWING THE OBLIGATIONS CASTED UPON THE ASSESS EE UNDER CHAPTER XVII-B OF THE ACT. I AGREE WITH THE ARGUMEN TS MADE BY ID. COUNSEL FOR THE ASSESSEE AND OTHER COUNSELS FOR TH E INTERVENES THAT WHILE INTERPRETING THE WORD 'PAYABL E' IN THIS PROVISION, THE WORD OF A STATUTE MUST BE UNDERSTOOD IN ITS NATURAL, ORDINARY OR POPULAR SENSE AND CONSTRUED ACCORDING T O ITS GRAMMATICAL MEANING. ACCORDING TO ME, SUCH CONSTRUC TION WOULD NOT LEAD TO ABSURDITY BECAUSE THERE IS NOTHIN G IN THIS CONTEXT OR IN THE OBJECT OF THIS STATUTE TO SUGGEST TO THE CONTRARY. IT IS A CARDINAL PRINCIPLE OF INTERPRETATION THAT T HE WORDS OF A STATUTE MUST BE PRIMA FACIE GIVEN THEIR ORDINARY ME ANING, WHEN THE WORDS OF THE STATUTE ARE CLEAR, PLAIN AND UNAMB IGUOUS THEN THE COURTS ARE BOUND TO GIVE EFFECT TO THAT MEANING . THE LITERAL RULE OF INTERPRETATION REALLY MEANS THAT THERE SHOU LD BE NO INTERPRETATION OF THE STATUTE, RATHER IN OTHER WORD S, WE SHOULD READ THE STATUTE AS IT IS WITHOUT DOING ANY VIOLENC E TO THE LANGUAGE. IN THE PRESENT DISPUTE BEFORE US, THE WOR D 'PAYABLE' USED IN SECTION 40(A)(IA) OF THE ACT IS TO BE ASSIG NED STRICT INTERPRETATION, IN VIEW OF THE OBJECT OF LEGISLATIO N, WHICH IS INTENDED FROM THE REPLACEMENT OF THE WORDS IN THE P ROPOSED AND ENACTED PROVISION FROM THE WORDS 'AMOUNT CREDITED O R PAID' TO 'PAYABLE'. HENCE, IN MY VIEW, MY ANSWER TO THE QUES TION REFERRED BY HON'BLE PRESIDENT TO THE SPECIAL BENCH IS AS UND ER: THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE APPLICABLE ONLY TO THE AMOUNTS OF EXPENDITURE WHICH ARE PAYABLE AS ON THE DATE 31 ST MARCH OF EVERY YEAR AND IT CANNOT BE INVOKED TO DI SALLOW WHICH HAD BEEN ACTUALLY PAID DURING THE PREVIOUS YE AR, WITHOUT DEDUCTION OF TDS. 4 5. IN VIEW THEREOF, WHERE THE ASSESSEE HAD MADE THE PAYMENT DURING THE YEAR ITSELF AND NOTHING WAS PAYABLE AT THE CLOS E OF THE YEAR, THERE IS NO REQUIREMENT OF DEDUCTION OF TAX AT SOURCE AND PR OVISIONS OF SECTION 40A(IA) OF THE ACT ARE NOT ATTRACTED. IN THE FACTS OF THE PRESENT CASE BEFORE US, ADMITTEDLY, THE RENT HAD BEEN PAID TO M/ S HARYANA WAREHOUSING CORPORATION ON 15.10.2008. FOLLOWING THE RATIO LAID DOWN BY THE SPECIAL BENCH OF VISHAKHAPATNAM TRIBUNAL IN ACIT VS. MERILYN SHIPPING & TRANSPORTS (SUPRA) WE DIRECT THE ASSESSI NG OFFICER TO ALLOW EXPENDITURE OF RS.6,22,500/- UNDER THE HEAD RENT A CCOUNT. 6. THE GROUND NO.2 RAISED BY THE ASSESSEE IS AGAINS T DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT. THE ASSESSEE HAD CLAIMED PADDY FREIGHT EXPENSES OF RS.20,35,909/- THE ASSESSING OFFICER F ROM THE PERUSAL OF THE DETAILS OF THE SAID EXPENSES NOTED THE ASSESSEE TO HAVE MADE CASH PAYMENT OF RS.35,852/- ON 21.1.2009 AND RS.38,700/- ON 16.2.2009. THE EXPLANATION OF THE ASSESSEE IN THIS REGARD WAS THAT THE SAID PAYMENTS WERE MADE IN CASH TO THE TRUCK DRIVERS SINCE THEY R EFUSED TO TAKE PAYMENTS THROUGH CHEQUES. THE ASSESSEE ALSO CLAIME D TO HAVE MADE THE PAYMENT AFTER 6.00 P.M. I.E. THE TIME WHEN THE BANK WAS NOT OPERATIONAL. THE CLAIM OF THE ASSESSEE WAS UNDER RULE 6DD (I) OF INCOME TAX RULES. THE ASSESSING OFFICER NOTED THAT THE PAYMENTS MADE ON 21.1.2009 WAS PAID ON WEDNESDAY AND 16.2.2009 WAS MONDAY AND THE ASSESSEE HAD FAILED TO PRODUCE ANY EVIDENCE TO SHOW THAT THE ABO VE SAID TWO DAYS WERE BANK HOLIDAYS. APPLYING THE PROVISIONS OF SEC TION 40A(3) OF THE ACT THE ASSESSING OFFICER DISALLOWED A SUM OF RS.74 ,552/-. THE CIT (APPEALS) CONFIRMED THE SAME. 5 7. IN VIEW OF THE AMENDED PROVISIONS OF SECTION 40A (3) OF THE ACT WE ARE IN AGREEMENT WITH THE ORDERS OF THE AUTHORITIES BELOW THAT THE SAID EXPENDITURE IS NOT ALLOWABLE AS A DEDUCTION AND FUR THER THE PROVISIONS OF RULE 6DD OF INCOME TAX RULES ARE NOT APPLICABLE. T HUS GROUND NO.2 RAISED BY THE ASSESSEE IS DISMISSED. 8. GROUND NO. 3 RAISED BY THE ASSESSEE IS AGAINST T HE DISALLOWANCE OF COMMISSION EXPENSES OF RS.1,22,629/- FOR NON DEDUCT ION OF TAX AT SOURCE IN VIEW OF THE PROVISIONS OF SECTION 40A(IA) OF THE ACT. IN LINE WITH OUR OBSERVATIONS IN RELATION TO GROUND NO.1 RAISED BY T HE ASSESSEE WE HOLD THAT WHERE THE ASSESSEE HAD MADE PAYMENTS OF THE AF ORESAID EXPENDITURE THEN THE RATIO LAID DOWN BY THE SPECIAL BENCH OF VI SHAKHAPATNAM TRIBUNAL IN ACIT VS. MERILYN SHIPPING & TRANSPORTS (SUPRA) IS APPLICABLE. HOWEVER, FROM THE RECORD IT IS NOT APP ARENT WHETHER THE ASSESSEE HAD PAID THE COMMISSION OF RS.1,22,629/- B EFORE THE CLOSE OF THE FINANCIAL YEAR. IN ORDER TO VERIFY THE ABOVE SAID, WE REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WI TH THE LIMITED PURPOSE OF VERIFICATION OF FACTUM OF PAYMENT OF COMMISSION BY THE ASSESSEE. THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE DEDUCTIO N IN THE HANDS OF THE ASSESSEE AFTER VERIFYING THE FACTUM OF PAYMENT OF C OMMISSION BEFORE THE CLOSE OF THE FINANCIAL YEAR, BY THE ASSESSEE. GROU ND NO.3 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9. THE NEXT ISSUE RAISED VIDE GROUND NO.4 IS AGAINS T DISALLOWANCE OF RS.6500/-. THE ASSESSEE HAD CLAIMED ADVERTISEMENT E XPENSES OF RS.85,451/-. THE ASSESSING OFFICER NOTED THE ASSES SEE TO HAVE FURNISHED VOUCHERS FOR RS.78,951/- AND NO VOUCHERS WERE FURNI SHED FOR RS.6500/-. 6 THE ASSESSING OFFICER DISALLOWED THE SAME WHICH WAS CONFIRMED BY THE CIT (APPEALS). 10. THE LEARNED A.R. FOR THE ASSESSEE WAS CONFRONTE D WITH THE ABOVE SAID FINDINGS OF THE ASSESSING OFFICER AND HE FAILE D TO FURNISH ANY EVIDENCE IN SUPPORT OF THE SAID EXPENDITURE OF RS.6 500/-. IN VIEW THEREOF, WE FIND NO MERIT IN THE CLAIM OF THE ASSES SEE AND DISALLOWANCE OF RS.6500/- IS UPHELD. 11. GROUND NO.5 RAISED BY THE ASSESSEE IS IN RELATI ON TO THE DISALLOWANCE OF INTEREST OF RS.18,500/-. 12. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT COPY OF ACCOUNT OF SMT.SUDHA BANSAL REFLECTED PAYMENT OF RS.18,500/- O N 21.1.2009 THROUGH CHEQUE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAID PAYMENT WAS ON ACCOUNT OF INTEREST AND AS NO TDS WAS DEDUCT ED AND FORM NO.15G WAS FILED ON 8.4.2009, THE SAID AMOUNT WAS T O BE ADDED AS INCOME OF THE ASSESSEE IN VIEW OF THE DEFAULT UNDER SECTION 197A(2) OF THE ACT. THE EXPLANATION OF THE ASSESSEE BEFORE TH E CIT (APPEALS) WAS THAT THE SAID SUM OF RS.18,500/- WAS PAID THROUGH C HEQUE ON 21.1.2009 TO SMT.SUDHA BANSAL WHOSE ACCOUNT WAS SETTLED ON 31 .3.2009 AND FORM NO.15G WAS FILED ON 8.4.2009. THE CIT (APPEALS), H OWEVER, UPHELD THE ADDITION OF RS.18,500/-, AGAINST WHICH THE ASSESSEE IS IN APPEAL. 13. FROM THE PERUSAL OF THE RECORD WE FIND THAT THE FINDINGS OF THE ASSESSING OFFICER AND EXPLANATION OF THE ASSESSEE A RE AT VARIANCE. IN CASE THE AMOUNT OF RS.18,500/- HAS BEEN PAID TO SQU ARE UP THE AMOUNT DUE, THEN THE SAME CANNOT PARTAKE THE NATURE OF INT EREST. IN ORDER TO ADJUDICATE THE SAID ISSUE WE DEEM IT FIT TO RESTORE THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR NECESSARY VERIFIC ATION AT HIS END. IF THE CLAIM OF THE ASSESSEE IS FOUND TO BE CORRECT THEN N O DISALLOWANCE IS 7 WARRANTED. THE ASSESSING OFFICER SHALL AFFORD REAS ONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE AND ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW. THE GROUND NO.5 RAISED BY THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DAY OF NOVEMBER, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26 TH NOVEMBER, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH