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Income Tax Appellate Tribunal, PUNE“B” BENCH, PUNE
Before: HON’BLE SHRI S. S. GODARA & SHRI G. D. PADMAHSHALI
॥ आयकर अपीलीय न्यायाधिकरण, पुणे न्यायपीठ,“ बी” बेंच, पुणे में ॥ IN THE INCOME TAX APPELLATE TRIBUNAL, PUNE“B” BENCH, PUNE BEFORE HON’BLE SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER आयकर अपऩल सं. / ITA No.1609/PUN/2019 निर्धारण वर्ा / Assessment Year : 2014-15 Rajesh Mohanlal Bora, 401, Rushiraj House, Thatte Nagar, College Road, Nashik – 422 005 PAN : ABCPB5526F . . . . . . . अपऩलधथी / Appellant बनाम / V/s. ITO Ward- 1(1) Nashik . . . . . . . प्रत्यथी / Respondent द्वारा/ Appearances Assessee by : Shri Pramod Shingte Revenue by : Shri M. G. Jasnani सपिवधई की तधरऩख / Date of conclusive Hearing : 03/10/2022 घोर्णध की तधरऩख / Date of Pronouncement : 20/12/2022 आदेश / ORDER PER G. D. PADMAHSHALI, AM; The present appeal of the assessee is assailed against the order of Commissioner of Income Tax (Appeals)-1, Nashik [for short “CIT(A)”] dt. 23/08/2019 passed u/s 250 of the Income-tax Act, 1961 [for short “the Act”] which dove out of order of assessment dt. 29/12/2016 passed u/s 143(3) of the Act by Income Tax Officer 1(1), Nashik [for short “AO”] for the assessment year [for short “AY”] 2014-15. ITAT-Pune Page 1 of 8
Rajesh Mohanlal Bora, ITA No. 1609/PUN/2019 AY: 2014-15 2. Briefly stated the facts of the case are; 2.1 The assessee is an individual filed his return of income [for short “ITR”] declaring total loss of ₹44,94,489/- for the AY 2014-15, which subsequently was revised declaring total loss of ₹10,55,231/- and the same was subjected to limited scrutiny under CASS regime to verify following viz; i) large investment in property as compared to total income, ii) Low capital gain with respect to sale consideration, iii) Unsecured loans from persons who have not filed their return of income iv) Huge interest paid not commensurate with loans raised v) Less turnover, large business loss set off against other head vi) Cash deposit in bank accounts 2.2 During the course of assessment proceedings, upon a perusal of profit & loss account [for short “P&L”] the Ld. AO observing the payment of finance charges of ₹18,82,544/- to Shriram City Union Finance Limited a NBFC, has put the assessee to notice to clarify on the compliance TDS provision with respect
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Rajesh Mohanlal Bora, ITA No. 1609/PUN/2019 AY: 2014-15 thereto. In the event of failure to deduct TDS u/s 194A vis-à-vis produce the certificate in terms of proviso to section 201(1A), the Ld. AO disallowed the aforesaid amount of finance charges and culminated the assessment with a solitary addition.
2.3 Aggrieved with the aforesaid impugned disallowance, the appellant preferred an appeal before the Ld. FAA, who finding no force in the submission of the appellant, reverberated the views of Ld. AO and confirmed the impugned disallowance.
2.4 The appellant alleging that both the Ld. TAB have erred in law and facts in disallowing finance charges for not deducting the TDS or not supporting the claim with the certificate u/s 201(1A) of the Act, is in appeal before the Tribunal with the following grounds; “1.The learned CIT(A) erred in not adjudicating on Ground No. 3 of appellant, relating to disallowance of interest expense of Rs. 18,82,544/- u/s 40(a)(ia) in a limited scrutiny assessment order, when such issue was not the reason for selection of ROI for limited scrutiny. Thus, the disallowance was in ITAT-Pune Page 3 of 8
Rajesh Mohanlal Bora, ITA No. 1609/PUN/2019 AY: 2014-15 contravention to the directions issued by the CBDT vide its Instruction no. 20/2015 [F.NO.225/269/2015-ITA-II], dated 29-12-2015. Therefore, it is prayed to hold the disallowance as void and accordingly delete the same.
The learned CIT(A) erred in upholding disallowance of interest expense of Rs. 18,82,544/- u/s 40(a)(ia), paid / payable to Shriram City Union Finance Ltd. Therefore, it is prayed to delete the said disallowance.
The learned CIT(A) erred in not considering appellant's plea that the disallowance of interest expense be restricted to Rs. 13,16,107/-, as the balance interest of Rs.5,66,437/- was already disallowed by appellant in the ROI u/s 40A(3). Therefore, without prejudice to above grounds of appeal, if at all it is held to continue the interest disallowance, it is prayed to restrict the same to Rs. 13,16,107/-.
The learned CIT(A) erred in holding that the 2nd proviso to Sec. 40(a)(ia), regarding restricting disallowance to 30%, does not apply to appellant's case. Therefore, without prejudice to above grounds
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Rajesh Mohanlal Bora, ITA No. 1609/PUN/2019 AY: 2014-15 of appeal and in alternate, it is prayed to restrict the disallowance of the impugned interest payment to Rs. 3,94,832/- (13,16,107 * 30%).”
After hearing to rival contentions of both the parties; and subject to the provisions of rule 18 ITAT, Rules,1963 perused case records, case laws relied upon by the appellant as well the respondent and duly considered the facts of the case in the light of settled legal position forewarned to either party.
In aforesaid context, it shall suffice to state that, the position of statute and the law laid down by the Hon’ble Delhi High Court in “CIT Vs Ansel Landmark Township” reported at 377 ITR 635 and Hon’ble Apex Court in judgment in “M/s Hindustan Coca Cola Beverages Pvt Ltd Vs CIT” reported at 293 ITR 22 and in the context of circular number e Circular No. 275/201/95-IT(B) dt 29/1/1997 issued by the Central Board of Direct Taxes [for shot “CBDT”], the Hon’ble Lordships have observed that, once it is proved on record that, the payee has accounted the amount in
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Rajesh Mohanlal Bora, ITA No. 1609/PUN/2019 AY: 2014-15 question as income and discharged the due taxes thereon then, no recovery of tax demand be enforced against the assessee for failure to deduct the TDS from the payment of expense.
In the case at hand, firstly, so far as payment of interest / finance charges to M/s. Shriram City Union Finance Limited, is concerned, neither a copy of ITR nor certificate therefrom in terms of provision to section 201(1A) is placed to substantiate the compliance of aforesaid provision. In the absence of certificate from an accountant proving the twofold facts, as to whether the amount of finance charge / interest in question is accounted as income and taxes due thereon has been paid to the credit of ex-chequer remained unestablished, therefore the appellant disentitled himself from immunity of being held as “the assessee-in-default” within the meaning of Section 201(1) of the Act and resultantly, un-distanced from application of provisions of section 40(a)(ia) of the Act. Thus, in the light of aforesaid observations, the ground number 1 & 2 are dismissed. ITAT-Pune Page 6 of 8
Rajesh Mohanlal Bora, ITA No. 1609/PUN/2019 AY: 2014-15 6. Insofar as the ground number 4 is concerned, we concur with the findings and adjudication of the Ld. FAA in upholding the disallowance as elaborated with detailed reasoning at para 6.3 of his order as; “On perusal of the above stated facts, submission of the appellant and legal decision cited by the appellant, I am of considered opinion that, the AO is justified in making addition of ₹18,82,544/- since the appellant has failed to deduct tax at source u/s 19A of the Act. On perusal of the reply of M/s. Shriram City Union Finance Limited in response to notice u/s 133(6) of the Act, it is not been able to ascertain, whether interest pad is considered by the M/s. Shriram City Union Finance Limited, but only an amount of broken period interest of ₹x,xx,xxx/- is mentioned in Annexure 1 as on 31.03.2014. The appellant has also failed to explain how the interest paid is reflected in the books of accounts of M/s. Shriram City Union Finance Limited.
The alternate pea taken by the appellant is also not applicable, since the appellant has not deducted the tax at source at all, therefore, applicability of amendment introduced in sec. 40(a)(ia) through Finance (No.2) Act, 2014 is not applicable in instant case of the appellant.
Coming the ground number 3, the appellant’s plea that, disallowance on account finance charges to be restricted to ₹13,16,107/- finds merit in the light of
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Rajesh Mohanlal Bora, ITA No. 1609/PUN/2019 AY: 2014-15 revised computation of income placed at page 40-42 of the paper book, whereby we find that, while arriving the revised income for the purpose of revised return filed on 31/10/2015, the appellant has suo-motu disallowed an amount of ₹5,66,437/- paid towards finance charges to M/s. Shriram City Union Finance Limited, consequently the disallowance u/s 40(a)(ia) is restricted to ₹13,16,107/-, ergo this ground stand allowed.
Resultantly, the appeal of the appellant assessee is PARTLY ALLOWED in aforestated terms. In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Friday 20th day of December, 2022.
-S/d- -S/d- S. S. GODARA G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / PUNE ; दिन ांक / Dated : 20th day of December, 2022. आदेश की प्रधिधलधप अग्रेधिि / Copy of the Order forwarded to : 1.अपील र्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The Pr. CIT(A)-1, Nashik (Mh-India) 4. The CIT (A) -1, Pune (Mh-India) 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय न्य य दिकरण, पुणे “बी” बेंच, पुणे / DR, ITAT, Pune “B” Bench, Pune. 6. ग र्डफ़ इल / Guard File. आिेश नुस र / By Order, िररष्ठ दनजी सदचि / Sr. Private Secretary आयकर अपीलीय न्य य दिकरण, पुणे / ITAT, Pune.
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