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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: SHRI MAHAVIR PRASAD & SHRI AMARJIT SINGH
PER MAHAVIR PRASAD, J.M.
This appeal filed by the Assessee is directed against the order of the Commissioner of Income Tax (‘hereinafter called CIT(A)’) order no. CIT(A)-1/DCIT Circle-
ITA No. 2236/Ahd/2018 2 . A.Y. 2015-16 1(1)(1)/10469/2017-18 order dated 26/09/2018 arising out of assessment order dated 29/12/2017. Assessee has taken following grounds of appeal:
1 In law and in the facts and circumstances of the appellant's N.A. case, the learned CIT(A) has grossly erred in treating Ground No. 1 of the appellant's appeal, challenging the validity of the assessment order, as being general in nature dismissing it 2 On the facts and in the circumstances of the case, the earned Rs. 4,72,060/- CIT(A) erred in confirming disallowance of Rs. 15,73,533/- being Employees' contribution to ESI made by the Assessing Officer on the ground that the aforesaid payment was made after the due date prescribed under the relevant ESI Act, even though the payment was made within the time prescribed u/s.139(l) of the I.T. Act for filing the return of income 3 On the facts and in the circumstances of the case, the earned Rs. 4,07,41,047/- CIT(A) erred in confirming disallowance of provision for expenses to the extent of Is. 13,58,03,489/- from out of the total disallowance of Rs.l3,89,04,088/-made by the Assessing Officer by invoking the provisions of section 40(a)(ia) of the I.T. Act for non-deduction of tax at source 4 In law, on the facts and circumstances of the case, the learned N.A. CIT (A) has grossly erred in confirming the action of A.O in levying interest u/s.234A, 234B, 234C and 234D when no such interest is chargeable. It may be deleted. 5 In law, on the facts and circumstances of the case, the learned N.A. CIT(A) has grossly erred in confirming the action of A.O for initiating the penalty proceedings u/s. 271(l)(c) of the act when no such penalty is leviable. Since the proceedings are wrongly initiated. He may be directed to withdraw such proceedings
Brief facts of the case are that asessee is in the business of retailing of apparels.
ITA No. 2236/Ahd/2018 3 . A.Y. 2015-16 3. On verification of the P&L A/c., it is noticed that the assessee has debited various expenses viz. repairs to others, processing charges, legal and professional fees, payment to auditors, commission, brokerage and discounts, miscellaneous expense, housekeeping charges, miscellaneous expenses etc. and accordingly the assessee was requested to furnish details of TDS made on expenses liable for TDS alongwith payment made to the government account. On verification of the submissions made by the assessee, it is found that on many payments liable for TDS the assessee has failed to deduct TDS on such payment after recording reason for non-TDS as "provisions". The details of such provisions are as under:
Sr. Nature of Provision Provision as on No. 31.03.2015 in Rs. 1. Repairs to others 6091626 2. Processing charges 4546924 3. Legal and professional fees 5900335 4. Payment to auditors 5698501 5. Commission, brokerage and 4226727 discounts 6. Commission, brokerage and 3100599 discounts 7. Commission, brokerage and 58262474 discounts 8. Books and periodicals 468374 9. House-keeping Expenses 24874070 10, Hire charges 2684769 11. General expense 23049689 Total Rs. 13,89,04,088/-
ITA No. 2236/Ahd/2018 4 . A.Y. 2015-16 Therefore, vide letter dated 19.12.2017 the assessee was requested to explain as to why such provisions should not be disallowed as any provision made is not an allowable expenditure u/s. 32 to 37 of the Act.
In this connection, the assesse submitted that it follows mercantile system of accounting from year to year. Further, the provisions of section 145 of the Act also prescribes the method of accounting to be followed by the assesse for computing the income chargeable under the head Income from Business and Profession. Section 145(1) contemplates that the computation of income would be in accordance with the method of accounting regularly employed by the assesse i.e. cash or mercantile system of accounting.
Therefore further stated that in respect of expenses which have accrued, but for which the parties have not raised bills/debit notes till the end of relevant year, necessary provision is created in respect of such expenses. Therefore, in the subsequent assessment year, entire provisions for expenses is reversed by passing reversal entry.
But Ld. A.O. was of the opinion-TDS ought to have been deducted by the assesse on such provision and accordingly disallowed the claim of the assesse and added the impugned expenses to the total income of the assesse.
Thereafter in appeal before the Ld. CIT(A) he confirmed the action of the A.O.
Now assesse has come before us by way of second statutory appeal.
We have gone through the relevant record and impugned order. So far ground no. 1 is concerned, assesse does not wish to press the same. Therefore, same is dismissed as not pressed.
ITA No. 2236/Ahd/2018 5 . A.Y. 2015-16 10. Now we come to ground no. 2 wherein Ld.CIT(A) erred in confirming disallowance of Rs. 15,73,533/- being Employees’ contribution to ESI of Rs. 4,72,060/-.
Ld. A.R. fairly conceded that in view of the Jurisdictional High Court order in the matter of CIT vs. Gujarat State Road Transport Corporation (2014) 366 ITR 170 (Guj.) (supra). This ground is against the Assessee.
Now we come to next effective ground with regard to disallowance of provision for expenses to the extent of Rs. 13,58,03,489/-.
At the outset, Ld. A.R. filed a copy of Co-ordinate Bench in assessee’s own case wherein on similar facts and circumstances matter has been decided in favour of the assesse in preceding year and operative para of the said ITA No. 2377/Ahd/2017 for A.Y. 2013-14 is as under:
The next interconnected issue raised by the assessee is that the learned OT (A) erred in upholding the order of the AO by sustaining the disallowance of Rs. 4,21,44,256/- in part under section 40(a)(ia) of the Act on account of non- deduction of TDS with respect to the expenses claimed on provisional basis.
At the outset we note issue raised by the assessee is identical to the issue raised in ITA No. 1817/Ahd/2016 for A.Y. 2012-13 vide ground no-4 which has been decided in favour of the assessee by us in paragraph no 20 of this order. Accordingly following the same we allow the ground of appeal of the assessee.
Thus in parity with the aforesaid order, we allow appeal of the assesse.
So far ground nos. 4 & 5 are concerned same are consequential and need not be adjudicated at this stage.
ITA No. 2236/Ahd/2018 6 . A.Y. 2015-16 16. In the result, appeal filed by the Assessee is partly allowed.
Order pronounced in Open Court on 11- 05- 2021
Sd/- Sd/- (AMARJIT SINGH) (MAHAVIR PRASAD) ACCOUNTANT MEMBER True Copy s JUDICIAL MEMBER Ahmedabad: Dated 11/05/2021 Rajesh Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) – 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File.
By ORDER
Deputy/Asstt.Registrar ITAT,Ahmedabad