MUKESH RUSTOGI,JAIPUR vs. ACIT, JAIPUR

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ITA 662/JPR/2016Status: DisposedITAT Jaipur24 October 2017AY 2011-127 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal restored the issue of TDS on interest payment to the AO for verification. For other expenses, the Tribunal upheld the CIT(A)'s order, which had partly sustained disallowances.

What were the facts?

The assessee's case was selected for scrutiny assessment, leading to additions by the AO for disallowance of interest payment and various expenses. The CIT(A) partly allowed the assessee's appeal.

What were the issues?

Whether disallowance under Section 40(a)(ia) is applicable when tax has been paid by the recipient and whether certain expenses were rightly disallowed.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 143(3),Section 197(1),Section 234B,Section 234C,Section 234D

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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR

Before: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM vk;dj vihy la-@ITA No. 662/JP/2017

For Appellant: Shri Shrawan Gupta (Advocate) jktLo dh vksj ls@

PER SHRI KUL BHARAT, JM.

This appeal by the assessee is directed against the order of ld. CIT (A)-1,

Jaipur dated 13.04.2016 pertaining to assessment year 2011-12. The assessee has

raised the following grounds of appeal :

1.

The impugned order u/s 143(3) dated 11.12.2013 is bad in law and on facts of the case, for want of jurisdiction, barred by limitation and various other reasons and hence the same may kindly be quashed.

2.

Rs. 5,71,280/- : The ld. CIT (A) has grossly erred in law as well as on the facts of the case in confirming the disallowance of Rs. 5,71,280/- u/s 40(a)(ia) made by the AO on account of non deduction of TDS, on the amount which has been paid before the end of year and tax has been paid by the recipient. Hence the disallowance addition so made and confirmed by the CIT (A) is being totally contrary to the provisions of law and facts. Hence the same may kindly be deleted in full.

2 ITA No. 662/JP/2017 Shri Mukesh Rustogi

3.

Rs. 2,25,281/- : the ld. CIT (A) has grossly erred in law as well as on the facts of the case in partly confirming the disallowance of Rs. 2,25,281/- made by the AO of Rs. 2,78,626/- on account of various expenses. Hence the disallowance so made and partly confirmed by the CIT (A) is being totally contrary to the provisions of law and facts. Hence the same may kindly be deleted in full.

4.

The ld. AO erred in law as well as on the facts of the case in charging of interest u/s 234B, 234C & 234D as consequential in nature. The appellant totally denies it liability of charging of any such interest. Hence the interest so charged, being contrary to the provisions of law and facts, may kindly be deleted in full.

5.

The appellant prays your honors indulgence to add, amend or alter all or any of the grounds of the appeal on or before the date of hearing.

2.

Briefly stated the facts of the case are that the case of the assessee was

picked up for scrutiny assessment and the assessment under section 143(3) of the

Income Tax Act, 1961 (hereinafter referred to as the Act) was framed vide order

dated 11.12.2013. While framing the assessment, the AO made additions on

account of disallowance out of interest payment of Rs. 5,71,280/- by invoking

provisions of section 40(a)(ia) of the Act, disallowance out of vehicle running

expenses of Rs. 24,977/-, disallowance out of lbusiness promotion of Rs. 28,368/-,

disallowance out of Telephone expenses of Rs. 87,657/- and disallowance out of

Traveling expenses of Rs. 1,37,624/-. Aggrieved, the assessee preferred an appeal

before ld. CIT (A), who after considering the submissions of the assessee partly

allowed the appeal of the assessee. Now the assessee is further in appeal before

this Tribunal.

3 ITA No. 662/JP/2017 Shri Mukesh Rustogi

3.

At the time of hearing, the ld. Counsel for the assessee submitted that he

does not wish to press Ground No. 1. Therefore, the same is dismissed as not

pressed.

4.

Ground No. 2 relates to confirming the disallowance of Rs. 5,71,280/- u/s

40(a)(ia) of the Act on account of interest expenses to private parties i.e. NBFC on

which no TDS was deducted. The ld. Counsel for the assessee reiterated the

submissions as made in the written brief. He submitted that the Income Tax

Department has issued a certificate u/s 197(1) to Cholamandalam DBS Finance for

non deduction of TDS, a certificate issued by the M/s. Indiabulls Financial Services

Ltd. wherein they have confirmed about inclusion of interest charged by them from

V.R. marketing during the year 2010-11 in their taxable income and have

accordingly paid the tax, all NBFCs are well known NBFD and some of them are also

listed companies and the accounts of all are subject to statutory audit under the

Companies Act Therefore, there remains no doubt of non-inclusion of interest

charged by them in their income and consequently payment of income tax thereon. Section 40(a)(ia) is applicable only to the expenditure which is payable as on 31st

March of every year and cannot be applied on expenditure which have already been

paid during the year, without deducting tax at source.

4.1. On the contrary, the ld. D/R relied on the order of the Assessing Officer.

4.2. We have heard rival contentions, perused the material on record and gone

through the orders of the authorities below. After considering the totality of facts

and the decision of Hon’ble Delhi High Court rendered in the case of CIT vs. Ansal

Landmark Township (P) Ltd. 377 ITR 635 (Delhi), we restore the issue to the file of

4 ITA No. 662/JP/2017 Shri Mukesh Rustogi

the Assessing Officer for verification with regard to the Certificate as furnished by

the assessee. The AO after verifying the same from the respective parties i.e.

NBFCs would delete the disallowance in case the Certificate is found in order. The

appeal of the assessee is allowed for statistical purposes.

5.

Ground No. 3 relates to confirming the disallowance of Rs. 2,25,281/- on

account of various expenses. The ld. Counsel for the assessee submitted that the

AO has not specifically pointed out any defect except that the expenses are not

properly vouched. The AO disallowed the expenses on the ground that the some of

the payments were made in cash and personal use etc. could not be ruled out. The

ld. Counsel submitted that only on these basis no disallowance can be made without

bringing any cogent material.

5.1. On the other hand, the ld. D/R supported the orders of the authorities below.

5.2. We have heard rival contentions, perused the material on record and gone

through the orders of the authorities below. The ld. CIT (A) while confirming the

disallowance has observed in para 3.2.2 of his order as under :-

“ 3.2.2. I have duly considered the submissions of the appellant, assessment order and the material placed on record. It is noted that the AR of the appellant agreed for the additions made by the AO on account of vehicle running expenses (10%), business promotion expenses (10%), telephone expenses (5%) and travelling expenses (10%). It is trite law that no estoppels lie against statute and the AO has to determine the correct income of the appellant in view of the provisions of the Act. It is noted from the assessment order that specific defects were pointed out by the AO in respect of telephone

5 ITA No. 662/JP/2017 Shri Mukesh Rustogi

expenses and travelling expenses. The AR of the appellant agreed for the additions (now disputed by the appellant) and thus the AR prevented the AO for making further enquiries in respect of the expenses claimed by the appellant. During appellate proceedings, the appellant was not able to confront the findings recorded by the AO in the assessment order in respect of telephone and traveling expenses. It is also noted that the AO has made disallowances in respect of business promotion and vehicle running expenses without any cogent reasons and bringing on record any material which may justify the said disallowances. (ii) Therefore, looking to the totality of facts and circumstance of the case, it is held that the disallowance made by the AO on account of telephone and travelling expenses was justified, hence sustained. Further, the disallowance on account of vehicle running and business promotion cannot be sustained. Thus, out of the total disallowance of Rs. 2,78,626/- made by the AO, a sum of Rs. 2,25,281/- (87,657 + 1,37,624) is hereby sustained and thus the appellant gets a relief of Rs. 53,345/- (24,977 + 28,368).”

In view of the above finding of the ld. CIT (A), we do not find reason to interfere in

the order of ld. CIT (A), the same is hereby affirmed. The ground of the assessee is

rejected.

6.

Ground No. 4 relates to charging of interest under section 234B, 234C and

234D. The assessee has not submitted any details in respect of this ground. The

ground is consequential in nature. Therefore, the A.O. is directed to give appeal

effect while deciding the issue accordingly.

6 ITA No. 662/JP/2017 Shri Mukesh Rustogi

7.

In the result, the appeal of the assessee is partly allowed for statistical

purposes.

Order is pronounced in the open court on 24.10.2017.

Sd/- Sd/- ( HkkxpUn ½ ( dqy Hkkjr) ( BHAGCHAND) ( KUL BHARAT ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Jaipur Dated:- 24/10/2017. Das/

आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

1.

The Appellant- Shri Mukesh Rustogi, Jaipur. 2. The Respondent – The ACIT, Circle-3, Jaipur. 3. The CIT(A). 4. The CIT, 5. The DR, ITAT, Jaipur 6. Guard File (ITA No. 662/JP/2017) vkns'kkuqlkj@ By order,

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

7 ITA No. 662/JP/2017 Shri Mukesh Rustogi

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