The ACIT, Circle-2, JAMNAGAR V. M/s Hiravati Marine Products (P) Ltd., PORBANDAR

ITA 945/RJT/2010

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7293 (ITAT-RAJKOT)
• Duration Of Justice: 9 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 28-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS USHA SHROTE
• Assessee Lawyers: PM MAHARISHI
• Keywords: TDS
• Section: 43B; 40A(3); 143(3); 40(a)(ia); 194C; 195; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: SHRI MAHAVIR PRASAD , JUDICIAL MEMBER AND S H RI AMARJIT SINGH , ACCOUNTANT MEMBER [CONDUCTED THROUGH E - COURT AT AHMEDABAD] ACIT, CIRCLE - 2 , JAMNAGAR (APPELLANT) VS M/S. HIRAVATI M ARINE PRODUCTS (P) LTD. JAWARNKA, PORBANDAR, PAN: A ABCH211OC (RESPONDENT) REVENUE BY : MRS. USHA SHROTE , SR. D . R. ASSESSEE BY: S H RI P.M. MAHARISHI , A.R. DATE OF HEARING : 0 6 - 06 - 2 019 DATE OF PRONOUNCEMENT : 23 - 07 - 2 01 9 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THI S REVENUE S APPEAL FOR A.Y. 2005 - 06 , AR ISES FROM ORDER OF THE CIT(A), JAMNAGAR DATED 16 - 03 - 2010 , I N PROCEEDINGS UNDER SECTION 143(3)/147 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE REV ENUE HAS RAISED FOLLOWING SUBSTANTIVE GROUNDS OF APPEAL: - 1. THE L D. CIT(A) HAS ERRED IN LAW AND IN FACTS I N DELETING THE ADDITION OF RS. 22,800 / - BEING THE DISALLOWANCE F OR PAYMENTS MADE IN CASH U/S.40A(3) OF THE ACT. 2. THE LD. CIT(A) HAS ER RED IN L AW AND IN FAC TS IN DELETING THE ADDITION OF RS..4,42,334/ - BEING THE DISALLOWANCE FO R NON - DEDUCTION OF TDS U/S.40(A)(IA) OF THE ACT. I T A NO . 945 / RJT /20 10 A SSESSMENT YEAR 200 5 - 06 I.T.A NO. 945 /RJT /20 10 A.Y. 2005 - 06 PAGE NO ACI T VS. M/S. HIRAVATI MARINE PRODUCTS (P) LTD. 2 3. THE LD. CIT (A) HAS ERRED IN LAW AND IN FACTS IN DELETING THE ADDITION OF I RS. 10, 21,060 / - BE ING THE DISALLOWANCE ON ACCOUNT OF RATE DIFFERENCE . 4. THE L D. CIT(A) HAS ERRED IN LAW AND IN FACTS IN DELETING THE ADDITION OF RS. 29,478/ - BEING THE DISALLOWANCE ON ACCOUNT OF PAYMENT TO PROVIDENT FUND U/S. 43B(E) OF THE ACT. 5. THE ID. CIT (A) HAS ERRED IN LAW AND IN FACTS IN DELETING THE ADDITION OF RS.26,39,676/ - BEING THE DISALLOWANCE ON ACCOUNT OF VARIOUS EXPENSES. 6. THE LD. CIT(A) IN LAW AND IN FACTS IN DELETING THE ADDITION OF RS. 4, 42,200 / - BEING THE DISALLOWANCE ON ACCOUNT OF N ON - DEDUCTION OF TDS U/S.40(A)(IA) OF THE ACT. 7. THE LD. CIT(A) ERRED IN LAW AND IN FAC TS IN DELETING THE ADDITION OF RS. 18, 95, 600 / - BEING THE DISALLOWANCE ON ACCOUNT OF NON DEDUCTION OF TDS ON EXPORT COMMISSION U/S.40(A)(IA) OF THE ACT. 3. THE FAC T IN BRIEF IS THAT RETURN OF INCOME DECLARING LOSS OF RS. 9 , 37 , 33 ,0 47/ - WAS FILED ON 31 ST AUGUST, 2005. THE RETURN OF INCOME WAS PROCESSED U/S. 143(1)(A) OF THE ACT ON 24 TH FEB, 2016. SUBSEQUENTLY, A NOTICE U/S. 148 OF THE ACT WAS ISSUED ON 13 TH MARCH, 2 009. THE ASSESSMENT U/S. 143(3) OF THE ACT WAS MADE ON 30 TH DECEMBER, 2009. THE ASSESSING OFFICER HAS MADE VARIOUS DISALLOWANCES AS UNDER: - (I) ADDITION OF RS. 1,70,66,716/ - U/S. 40(A)(IA) OF THE ACT (II) A DDITION OF RS. 22, 558 / - ON ACCOUNT OF PAYMENT MA DE IN CASH (III) A DDITION OF RS. 4 , 42 , 334/ - U/S. 40(A)(IA) OF THE ACT (IV) A DDITION OF RS. 6 ,96, 774/ - ON ACCOUNT OF DISALLOWANCE OF RATE DIFFERENCE. (V) ADDITION OF RS. 3 , 24 , 286/ - ON ACCOUNT OF DISALLOWANCE OF RATE DIFFERENCE (VI) A DDITION OF RS. 8 , 51 , 217 / - ON ACCOUNT OF DISALLOWANCE U/S. 38B(E) (VII) A DDITION OF RS. 29 , 478/ - U/S. 43B OF THE ACT (VIII) A DDITION OF R S. 26 , 39 , 6 76/ - ON ACCOUNT OF DISALLOWANCE OF EXPENSES (IX) A DDITION OF RS. 4 , 42 , 200/ - ON ACCOUNT OF DISALLOWANCE U/S. 40(A)(IA) (X) A DDITION O F RS. 18 , 95 , 600/ - U/S. 40(A)(IA) 4. AGAINST THE AFORESAID DISALLOWANCES MADE BY THE ASSESSING OFFICER , THE ASSESSEE HAS PREFERRED THE APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. FURTHER , FACT OF THE CASE A RE I.T.A NO. 945 /RJT /20 10 A.Y. 2005 - 06 PAGE NO ACI T VS. M/S. HIRAVATI MARINE PRODUCTS (P) LTD. 3 DISCUSSED WHILE ADJUDICATING THE DIFFERENT GROUNDS OF APPEAL FIELD BY THE REVENUE AS UNDER: - ADDITION OF RS. 22800/ - U/S. 40A(3) 5. DURING THE COUR S E OF ASSESSMENT U/S. 147 OF THE ACT, THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS. 28 , 558/ - BEING 1 /5 OF THE AMOUNT OF R S. 114,000/ - MADE IN CASH FOR EXPENDITURE OF LABOUR CHARGES AND ADVANCES PAID TO STAFF AS SALARY. THE LD. CIT(A) HAS DELETED THE ADDITION. 6. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. IN THIS REGARD, WE HAVE NOTICED THAT LD. CIT(A) HAS DELETED THE AFORESAID ADDITION ON THE BASIS THAT ASSESSEE HAS MADE PAYMENT TO STAFF MEMBER AS ADVANCE WHICH WAS NOT CALLED AS EXPENDITURE. FURTHER , THE DISALLOWANCE OF LABOUR CHARGES IS APPLICABLE ONLY IN CASE WHERE THE PAYMENT IS EXCEEDED RS. 20 , 000/ - TO PER PERSON . I N VIEW OF ABOVE FACTS, WE CONSIDER THAT LD. CIT(A) HAS RIGHTLY DELETED THE AFORESAID ADDITION. THEREFORE, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL AND THE SAME IS DISMISSED. ADDITION OF RS. 4 , 42 , 334/ - U/S. 40(A)(IA) OF THE ACT 7. THE ASSESSING OFFICER HAS MADE AFORESAID ADDITION ON ACCOUNT OF NON - DEDUCTION OF TAX AT SOURCE U/S. 40(A)(IA) OF THE ACT. THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY DELETING THE AMOUNT OF RS. 1,89,400/ - AND SUSTAINING BALANCE DISALLOWANCE OF RS. 2 , 52 , 934/ - 8. WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISSUE. WE CONSIDER THAT THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE CONSIDERING THE FACT I.T.A NO. 945 /RJT /20 10 A.Y. 2005 - 06 PAGE NO ACI T VS. M/S. HIRAVATI MARINE PRODUCTS (P) LTD. 4 THAT ASSESSEE HAS MADE PAYMENT FOR PURCHASE OF STAMP PAPER ON WHI CH NO TDS WAS RE QUIRED TO BE DEDUCTED U/S. 194J OF THE ACT. AFTER CONSIDERING THE FINDING OF LD. CIT(A) , WE DO NOT FIND ANY SUBSTANCE ON THI S ISSUE THEREFORE THE SAME ALSO STANDS DISMISSED. ADDITION OF RS. 10 , 21 , 060/ - ON ACCOUNT OF RATE DIFFERENCE 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS. 6 , 96 , 774/ - AND RS. 3 , 24 , 286/ - BEING RATE DIFFERENCE CREDIT GIVEN TO GROUP COMPANY OF THE ASSESSEE M/S. AMAR POLIFILS PVT. LTD. BY TREATING THE SAME AS ACCOMMO DATION ENTRY . T HE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY DELETING THE DISALLOWANCE OF RS. 3 , 24 , 286/ - MADE ON ACCOUNT OF RATE DIFFERENCE. 10. ON THIS ISSUE AFTER HEARING BOTH PARTIES AND PER US AL OF THE MATERIAL ON RECORD , IT IS NOTICED TH AT ASSESSEE HAS PURCHASED FISH F ROM ITS GROUP CONCERN M/S AMAR PO L F ILS PV T. L TD. AND THE PAYMENT RECEIVED WAS ALSO SHOWN AS OF INCOME OF THE GROUP CONCERN . THE RATE OF DIFFERENCE IS ALLOWED AS PER THE BUSINESS POLICY TO THE OTHER CONCERNS INCLUDING ITS AS SOCIATE CONCERN. T HEREFORE THE ACTION OF LD. CIT(A) IN DELETING THIS ADDITION IS JUSTIFIED. REGARDING SECOND PART OF ADDITION OF R S.3 , 24 , 286/ - MADE ON ACCOUNT OF RATE DIFFERENCE WHICH WAS PERTAINED TO THE 24 PARTIES AND NONE OF THEM RE LAT ED TO THE ASSE SSEE. THE RATE DIFFERENT WAS ACCOUNTED IN THE BOOKS OF ACCOUNT TO COVER EFFECT OF PRICE MOVEMENT FOR THE PERIOD AND QUALITY DIFFERENCE. THE RE FORE, WE DO NOT FIND ANY ERROR IN THE DECISION OF LD. CIT(A) DELETING THIS ADDITION . I.T.A NO. 945 /RJT /20 10 A.Y. 2005 - 06 PAGE NO ACI T VS. M/S. HIRAVATI MARINE PRODUCTS (P) LTD. 5 ADDITION OF RS. 26 , 3 9 , 676/ - ON ACCOUNT OF VARIOUS EXPENSES 11 . DURING THE COUR S E OF ASSESSMENT, THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS. 26,39,676/ - BEING 10% OF TRAVELLING TRANSPORTATION, TELEPHONE, MOBILE, ENTERTAINMENT EXPENSE, MISCELLANEOUS EXPENSES, CARRIAGE OUTWARD AND REPAIR AND MAINTENANCE EXCESSES . THE ASSESSING OFFICER HAS DISALLOWED THESE EXPENSES ON THE GROUND THAT THESE EXPENSES WERE NOT FULLY SUPPORTED WITH BILLS AND VOUCHERS THEREFORE FOR WANT OF PROPER VERIFICATION THE ASSESSING OFFICER HAS MA DE THE DISAL LOWANCE . T H E LD. CIT(A) HAS DELETED THE AFORESAID ADDITIONS . 12 . WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISSUE. WE CONSIDER THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED THAT THE AFORESAID EXPENSES WERE NOT FULLY SUPPORTED WITH THE PROPER BILLS AND VOUCHER S THEREFORE FOR WANT OF PROPER VERIFICATION , THE ASSESSING OFFICER HAS DISALLOWED 10% OF THE AFORESAID EXPENSES. THE LD. CIT(A) HAS DELETED THE AFORESAID ADDITION WITHOUT DISPROVING THE FACT REPORTED BY THE ASSES SING OFFICER THAT THE AFORE SAID EXPENSES WE RE DIFFICULT TO BE VERIFIED FOR WANT OF PROPER BILLS AND VOUCHERS. THEREFORE , W E CONSIDER THAT IT WILL BE APPROPRIATE TO DISALLOW THE 5% OF AFORESAID EXPENSES. ACCORDINGLY, AN AMOUNT OF RS. 13,19 , 838/ - IS DISAL LOWED FOR WANT OF PROPER BILL AND VOUCHERS IN SUPPORT OF THE CLAIM OF AFORESAID E XPENSES. ACCORDINGLY, THIS GROUND OF APPEAL OF THE REVENUE IS PARTLY ALLOWED. DELETING ADDITION OF RS. 4 , 42 , 200/ - U/S. 40(A)(IA) 13 . DURING THE COURSE OF ASSES SMENT, THE A SSESSING OFFICER DISALLOWED THE TRANSPORTATION EXPENSES TO THE AMOUNT OF RS. 4 , 42 , 200/ - FOR NON - DEDUCTION OF I.T.A NO. 945 /RJT /20 10 A.Y. 2005 - 06 PAGE NO ACI T VS. M/S. HIRAVATI MARINE PRODUCTS (P) LTD. 6 TAX AT SOURCE. THE LD. CIT(A) HAS DELETED THE ADDITION ON THE GROUND THAT THE ASSESSEE HAS NOT DEBITED THE AFORESAID EXPENSES TO ITS PROFIT AND LOS S ACCOUNT. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, REVENUE COULD NOT CONTRADICT THE DECISION OF LD. CIT(A) THAT AFORESAID EXPENSES WAS NOT DEBITED TO ITS P & L ACCOUNT OF THE ASSESSEE THEREFORE PROVISION OF SECTION 40(A)(IA) WAS NOT APPLICAB LE. THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED . ADDITION OF RS. 18 , 95 ,6 00/ - U/S. 40(A) (IA) OF THE ACT 14 . DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS. 18 , 95 , 600/ - AS EXPORT COMMISSION ON THE GROU ND THAT ASSESSEE HAS NOT DEDUCTED TAX ON THE AFORESAID PAYMENT . THE LD. CIT(A) HAS DELETED THE AFORESAID ADDITION ON THE GROUND THAT IN THE CASE OF THE ASSESSEE PROVISION OF SECTION 172 WAS APPLICABLE THEREFORE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX U/S. 194C OF THE ACT. 15 . WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISSUE. ON PERUSAL OF THE MATERIAL ON RECORD, IT IS OBSERVED THAT THE AFORESAID PAYMENT WAS MADE T O THE NON - RESIDENT SHIP OWNER OR FROM AGENT AND SUCH PAYMENT ARE DEALT WITH BY SECTION172 OF T HE ACT. THE ASSESSEE HAS ALSO REFERRED CIRCULAR NO. 723 DATED 19 TH SEP, 1995 WHEREIN IT IS S TATED THAT WHERE PAYMENT ARE MADE TO SHIP PING AGENT OF NON - RESIDENTS SHIP OWNERS OR CHARTERS FOR CARRIAGE ON PROCESS ETC . SHIPPED AT A P O R T IN INDIA PROVISION OF SECITON172 SHALL APPLY AND THOSE OF SECTION 194C AND 195 WILL NOT APPLY. WE HAVE NOTICED THAT LD. CIT(A) IN HIS FINDING HAS CONSIDERED AFORESAID CIRCULAR N O. 723 DATED 19 TH SEP, 1995. I.T.A NO. 945 /RJT /20 10 A.Y. 2005 - 06 PAGE NO ACI T VS. M/S. HIRAVATI MARINE PRODUCTS (P) LTD. 7 THEREFORE , WE UPHOLD THE DECISION OF LD. CIT(A) AND NO MERIT WAS FOUND IN THIS GROUND OF APPEAL OF THE REVENUE, THEREFORE THE SAME IS DISMISSED . DISALLOWANCE OF RS. 29 , 478/ - 16 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS. 29 , 478/ - IN RESPECT OF AMOUNT OF EMPLOYEES C ONTR IBUTION AND ESIC FOR NOT DEPOSITING THE SAME TO THE GOVT. ACCOUNT ON OR BEFORE THE DUE DATE PRESCRIBED IN THE SPECIFIED ACT. THE LD. CIT(A) HAS DELETED THE ADDITION. 17 . WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. WE FIND THAT LD. CIT(A) IS NOT JUSTIFIED IN DELETING THIS ADDITION IN VIEW OF THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT STATE ROAD TRANSPORT CORPORATION WHEREIN IT IS HELD THAT IN CASE THE EMPLOYEES CONTRIBUTION TOWARDS PF AND ESIC ARE NOT DEPOSITED ON OR BEFORE THE DUE DATE PRESCRIBED IN THE SPECIFIED ACT , THE DEDUCTION OF THE SAME IS NOT AVAILABLE TO THE ASSESSE. THEREFORE, WE ARE NOT INCLINED WITH THE DECISION OF LD. CIT(A) AND APPEAL OF THE REVENUE ON THIS ISSUE IS ALLOWED. 18 . IN THE RESULT THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OUR T ON 23 - 07 - 201 9 SD/ - SD/ - (MAHAVIR PRASAD ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 23 /07 /201 9 I.T.A NO. 945 /RJT /20 10 A.Y. 2005 - 06 PAGE NO ACI T VS. M/S. HIRAVATI MARINE PRODUCTS (P) LTD. 8 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJKOT