The ACIT, Central Circle-2(2), Ahmedabad V. Chartered Logistics Ltd.(Formerly known as Chartered Carriers Ltd.), Ahmedabad

ITSSA 35/AHD/2013

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9558 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 29-10-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 22-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T P KRISHNA KUMAR
• Section: 142(1)

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . . . . , , , , ! ! ! ! ' #$ ' #$ ' #$ ' #$ , , , , % % % % BEFORE S/SHRI N.S. SAINI, ACCOUNTANT MEMBER AND KUL BHARAT, JUDICIAL MEMBER) IT(SS)A NO.35 AND 36/AHD/2013 [ASSTT.YEAR : 2005-2006 AND 2006-2007] ACIT, CENT.CIR.2(2) AHMEDABAD. /VS. CHARTERED LOGISTICS LTD. (FORMERLY KNOWN AS CHARTERED CARRIERS LTD.) CHARTERED HOUSE, SARKHEJ-SANAND CIRCLE AHMEDABAD. PAN : AAACC 7939 H ( (( ('( '( '( '( / APPELLANT) ( (( ()*'( )*'( )*'( )*'( / RESPONDENT) + , - / REVENUE BY : SHRI T.P.KRISHNAKUMAR CIT-DR /$ , - / ASSESSEE BY : SHRI TUSHAR HEMANI '0 , $1/ DATE OF HEARING : 29 TH OCTOBER, 2013 234 , $1/ DATE OF PRONOUNCEMENT : 08.11.2013 5 / O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER : THESE TWO APPEALS ARE FILED BY THE REVENUE ARE AGAINST THE OR DER OF THE CIT(A)-III, AHMEDABAD DATED 22.11.2012. 2. THE SOLE ISSUE INVOLVED IN BOTH THE APPEALS OF T HE REVENUE IS THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF ` 11,83,268 (BEING 0.50% OF THE TOTAL FREIGHT PAYMEN T IT(SS)A NO.35 AND 36/AHD/2013 -2- OF ` 23,66,53,659/- IN A.Y.2005-2206 AND ` 16,93,385/- (BEING 0.50% OF THE TOTAL FREIGHT PAYMENT OF ` 33,86,77,052/-) BEING THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE IT ACT DURING THE YEAR UNDER CONSIDERATION. 3. BRIEF FACTS OF THE CASE ARE THAT PURSUANT TO SEA RCH IN THE CASE OF ASSESSEE, THE ASSESSMENTS WERE COMPLETED BY THE AO. THE AO OBSERVED THAT FOR THE PERIOD RELEVANT TO THE ASSESS MENT YEAR 2007- 2008 TO 2010-2011 WHERE THE SERVER DATA OF THE ASSE SSEE WAS SEIZED AND COULD BE ANALYSED, SIGNIFICANT DEFAULT R EGARDING DEDUCTION OF TAX AT SOURCE HAS BEEN FOUND IN THE CA SE OF THE ASSESSEE-COMPANY. IT WAS OBSERVED THAT CERTAIN PAY MENTS WITHOUT MAKING TDS WERE MADE BY THE ASSESSEE DURING THE ASSESSMENT YEARS 2007-2008 TO 2010-2011, AND DISALL OWANCE UNDER SECTION 40(A)(IA) WERE MADE IN THOSE YEARS. THE AO FURTHER OBSERVED THAT THE ASSESSEE FAILED TO SUPPLY INFORMATION WITH REGARDS TO THE TDS ON FREIGHT PAYMENT MADE AS REQUESTED VIDE NOTICES ISSUED UNDER SECTION 142(1) OF THE ACT ON 15.7.2011 AND 24.10.2011. THEREFORE, THE AO HAS PROCEEDED TO ESTIMATE THE DISALLOWANCE AND MADE DISALLOWANCE OF 0.50% OF THE TOTAL FREIGHT PAYMENTS MADE BY THE ASSESSEE-COMPANY INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE ACT IN BOTH THE YEARS U NDER APPEALS. 4. IN APPEAL BEFORE THE LEARNED CIT(A), THE ASSESSE E ARGUED THAT THE AO HAS ESTIMATED THE AMOUNT OF DISALLOWANC E UNDER SECTION 40(A)(IA) OF THE ACT BY APPLYING THE FINDIN GS OF TDS DEFAULTS IN SUBSEQUENT YEARS AS NO MATERIAL WAS FOU ND DURING IT(SS)A NO.35 AND 36/AHD/2013 -3- SEARCH INDICATING ANY TDS DEFAULT. IT WAS SUBMITTE D THAT THE AO CANNOT PRESUME THAT THE MATERIAL SIMILAR TO MATERIA L IN THE FORM OF RECORDS EXISTED/MAINTAINED FOR OTHER PERIODS ALS O. THE AO WAS NOT WITHIN HIS RIGHTS TO MAKE AN ESTIMATION OF INCOME FOR A LARGER PERIOD BEYOND THE PERIOD INDICATED IN SEIZED MATERIAL. FOR THIS, THE ASSESSEE RELIED ON THE DECISION IN THE CA SE OF SAMRAT BEAR BAR VS. ACIT, 75 ITD 19 (PUNE), WHICH HAD FOLLOWED THE DECISION IN THE CASE OF N.R.PAPER & BOARD LTD., 234 ITR 333 (GUJ) AND D.N. KAMANI VS. DCIT, 70 ITD 77 (PAT). THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS MADE BY TH E ASSESSEE BEFORE HIM VACATED THE DISALLOWANCE BY OBSERVING TH AT DISALLOWANCE UNDER SECTION 40(A)(IA) IS ON A TECHNI CAL NATURE. THERE IS NO SCOPE FOR EXTRAPOLATION IN RESPECT OF A TECHNICAL DISALLOWANCE. DISALLOWANCE U/S.40(A)(IA) CAN BE MA DE IF IT WAS FOUND THAT THE TAX WAS DEDUCTIBLE IN RESPECT OF A C ERTAIN PAYMENT AND THE SAME HAS NOT BEEN DEDUCTED BY THE ASSESSEE. IN THIS CASE, DURING THE COURSE OF SEARCH NO MATERIAL WAS FOUND T O INDICATE THAT THE ASSESSEE HAS MADE ANY PAYMENT DURING THE YEAR W ITHOUT MAKING TDS. IN SUCH A SITUATION NO DISALLOWANCE CO ULD BE MADE ON ESTIMATE BASIS MERELY ON THE BASIS OF FINDING FO R SUBSEQUENT PERIOD. THE DISALLOWANCE OF ` 11,83,268/- FOR A.Y.2005-06 AND ` 16,93,385/- FOR A.Y.2006-207 WERE DIRECTED TO BE D ELETED. 5. THE LEARNED DR RELIED ON THE ORDER OF THE AO, AN D THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE THE LEARNED CIT(A) AND FULLY JUSTIFIED ACTIO N OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE AO. IT(SS)A NO.35 AND 36/AHD/2013 -4- 6. AFTER CONSIDERING RIVAL SUBMISSIONS AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT DURING T HE COURSE OF SEARCH ON THE ANALYSIS OF SERVER DATA OF THE ASSESS EE, IT WAS OBSERVED THAT THE ASSESSEE HAS MADE PAYMENT FOR FRE IGHT CHARGES WITHOUT DEDUCTING THE TDS, AND THEREFORE, DISALLOWA NCE WAS MADE UNDER SECTION 40(A)(IA) IN THE ASSESSMENT YEAR S 2007-08 TO 2010-11. THE AO EXTRAPOLATED THE DATA FOR THESE AS SESSMENT YEARS ESTIMATING THE DISALLOWANCE IN THE PRESENT CU RRENT YEARS 2005-06 AND 2006-2007 AT THE RATE OF 0.50% OF THE T OTAL FREIGHT PAYMENTS MADE BY THE ASSESSEE DURING THESE YEARS, A ND THEREBY MADE DISALLOWANCE OF ` 11,83,268/- IN A.Y.2005-2006 AND ` 16,93,385/- FOR A.Y.2006-07. 7. ON APPEAL, THE LEARNED CIT(A) DELETED THE DISALL OWANCE ON THE GROUND THAT NO MATERIALS WERE FOUND DURING THE COURSE OF SEARCH THAT THE ASSESSEE HAD MADE ANY PAYMENT DURIN G THE YEARS WITHOUT MAKING TDS. HE ALSO OBSERVED THAT DISALLOW ANCE UNDER SECTION 40(A)(IA) OF THE ACT CAN BE MADE ONLY IF IT IS FOUND THAT THE TAX WAS DEDUCTIBLE IN RESPECT OF CERTAIN PAYMEN TS AND THE SAME HAS NOT BEEN DEDUCTED BY THE ASSESSEE, AND THA T THE DISALLOWANCE UNDER SECTION 40(A)(IA) IS OF A TECHNI CAL NATURE. NO SPECIFIC DEFECT IN THE ABOVE FINDINGS OF THE LEARNE D CIT(A) COULD BE POINTED OUT BY THE LEARNED DR. NO MATERIAL COUL D BE BROUGHT ON RECORD BY THE LEARNED DR TO SHOW THAT THERE WAS ANY ACTUAL EXPENDITURE OF FREIGHT CLAIMED BY THE ASSESSEE, ON WHICH, THOUGH THE ASSESSEE WAS LIABLE TO DEDUCT TAX, THE ASSESSEE MADE DEFAULT IN IT(SS)A NO.35 AND 36/AHD/2013 -5- DEDUCTING THE REQUIRED TDS DURING THE YEARS UNDER C ONSIDERATION. WE FIND THAT THE DISALLOWANCE WAS MADE NOT ON THE B ASIS OF THE ANY ACTUAL MATERIAL FOUND FOR THE YEARS UNDER CONSI DERATION, BUT WAS MADE BY EXTRAPOLATING THE FINDINGS OF THE SUBSE QUENT YEARS, WHICH IS NOTHING BUT A MERE GUESS WORK ON THE BASIS OF SUSPICION AND THEREBY THE AO ACTED WITHOUT SATISFYING THE PRE -REQUISITE CONDITIONS. IN OUR CONSIDERED OPINION, BEFORE MAKI NG DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT, TH E PRE-REQUISITE CONDITIONS ARE THAT THE AO SHOULD BRING MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX IN RESPECT OF THE EXPENDITURE SPECIFIED IN THAT SECTION, THE ASSESSEE ACTUALLY DEFAULTED IN DEDUCTING TDS OR DEFAULTED IN MAKING P AYMENT OF TDS AFTER DEDUCTION, AND THE ASSESSEE CLAIMED DEDUC TION IN RESPECT OF SUCH EXPENDITURE. IN THE INSTANT CASE, THE AO FAILED TO DISCHARGE THE BURDEN WHICH WAS ON HIM UNDER THE LAW . WE, THEREFORE, DO NOT FIND ANY ERROR IN THE ORDER OF TH E LEARNED CIT(A), AND DISMISS THIS GROUND OF THE APPEAL OF TH E REVENUE. 8. IN THE RESULT APPEALS OF THE REVENUE ARE DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( ' #$ ' #$ ' #$ ' #$ /KUL BHARAT /JUDICIAL MEMBER . .. . . . . . /N.S. SAINI /ACCOUNTANT MEMBER C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT.