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Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH, AHMEDABAD
Before: Ms. SUCHITRA KAMBLE & SHRI WASEEM AHMED
PER SUCHITRA KAMBLE, JUDICIAL MEMBER :
These are appeals filed by the assessee & Revenue against two different orders, both dated 23.01.2019 passed by the CIT(A)-5, Ahmedabad for the Assessment Year 2009-10.
ITA Nos.337 & 602/Ahd/2019 A.Y. 2009-10 Page 2 of 5 2. The assessee in its appeal ITA No.337/Ahd/2019 has raised the following grounds of appeal:-
“1.1 The order passed u/s 250 on 23.01.2019 for A.Y. 2009-10 by CIT(A)-5, Abad. confirming disallowance u/s 40(a)(ia) of Rs.1,63,64,831/- is wholly illegal, unlawful and against the principles of natural justice.
1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the explanations furnished and the evidence produced by the appellant.
2.1 The Ld. CIT(A) has grievously erred in law and/or on facts in upholding that the appellant was required to make TDS u/s 194A from payments by way of financial charges aggregating to Rs 1,63.64,831/- to NBFCs and thereby confirming that the provisions of section 40(a)(ia) were attracted.
2.2 That in the facts and circumstances of the case as well as in law, the Id. CIT{A) erred in upholding that the appellant was required to make TDS u/s 194A from payments aggregating to Rs.1,63,64,831/- and thereby confirming that the provisions of section 40(a){ia) were attracted.
2.3 That in facts and circumstances of the case, the CIT(A) erred in not restricting the disallowance at 30% though it was settled position by way of amendment of Finance Act, 2014.
2.4 Without prejudice to the above and in alternative, the Ld. CIT(A) ought to have appreciated that since the recipients were assessed to tax the disallowance u/s 40(a)(ia) was unjustified in law. The Ld. CIT(A) has failed to appreciate that since the appellant was not furnished the said details in spite of repeated requests , the AO should have been directed to obtain the same.
2.5 That in facts and circumstances of the case, the CIT(A) erred in observing that the none attended on 18-1-2019, though the AR had mailed adjournment application on the website of CIT(A)-5.
It is therefore prayed that the disallowance u/s 40(a)(ia) upheld by CIT(A) of Rs.1,63,64,801/- deserves to be deleted.”
The assessee has also raised the following additional grounds of appeal:
“1.1 The Ld. CIT(A) has grievously erred in law and/or on facts erred initiating proceedings u/s 147, though the same were illegal and unlawful.
1.2 That in the facts and circumstances of the case, as well as in law, the Ld. CIT(A) ought to have appreciated that the reassessment
ITA Nos.337 & 602/Ahd/2019 A.Y. 2009-10 Page 3 of 5 proceedings u/s 147 were illegal and unlawful. In view of the condition laid down under proviso to section 147 was not fulfilled.”
The Revenue in its appeal ITA No.602/Ahd/2019 has raised the following grounds of appeal :
“1. In view of fact that non-compliance with provision of Section 40(a)(ia) of the Act being reported in Tax Audit Report and failure of assessee to make disallowance of Rs.1,63,64,831/- in his return of income and considering the order of Hon’ble Supreme Court’s decision in the case of Jivanlal & Sons, reported in SLP [2019] 103 taxman.com 208 (SC), the Ld. CIT(A) has erred in law and on facts in cancelling the penalty of Rs.54,54,771/- levied u/s.271(1)(c)
On the facts and circumstances the Ld. CIT(A) ought to have upheld the order of the AO
It is therefore prayed that the order of the Ld. CIT(A) may be set aside and that of the order of the Assessing Officer be restored to the above extent.
The appeal is filed as tax effect in the case is Rs.54,54,771/- which is above the monetary limit specified in the Board’s Circular No.3/2018 dated 11.07.2018.”
Firstly we are taking the quantum appeal. The assessee is an individual derives income from dealing of shares. The assessee filed return of income for the A.Y. 2009-10 on 29.09.2009 declaring total loss of Rs.12,31,38,435/-. The case was selected for scrutiny and the original assessment was completed under Section 143(3) of the Income Tax Act, 1961 on 01.12.2011 determining total loss of Rs.12,31,38,435/- Reassessment proceedings were initiated vide notice under Section 148 dated 28.03.2016 on the ground of failure to make TDS from interest paid to two NBFCs namely City Corp India Finance Limited and DSP Merrill Lynch Limited. The Assessing Officer observed that provisions of Section 194A are applicable in assessee’s case and, therefore, expenses incurred on interest should be disallowed. Order under Section 143(3) read with Section 147 of the Act was passed on 07.11.2016 thereby assessing total income at (-) Rs.10,73,82,285/- thereby making disallowance of Rs.1,63,64,831/- in respect of two interest expenses.
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
ITA Nos.337 & 602/Ahd/2019 A.Y. 2009-10 Page 4 of 5 7. The Ld. AR submitted that additional grounds are not pressed. Ld. A.R. further submitted that it was genuinely proved that payee companies were assessed to tax and hence there was no revenue loss. The disallowance was in the nature of financial charges so that Section 194A of the Act is not applicable and modus operandi of such transaction as described by the CIT(A) was not possible to bifurcate principal and interest. Ld. AR further submitted that the recipients were assessed to tax, therefore, there was no revenue loss. Ld. AR relied upon the decision of M/s. G.M. Agro Industries vs. DCIT wherein it was observed that the Assessing Officer be directed to call for information under Section 133C from the recipient since the assessee was not in a position to furnish the certificate from the recipient companies. Alternately, the Ld. AR submitted that disallowance at 30% of such sum to be made, non-deduction of TDS as per amended provisions of Finance Act, 2014. Ld .AR submitted that the CIT(A) was not correct in upholding the addition in respect of interest expenses. Section 40(a)(ia) were attracted in assessee’s case.
The Ld. AR further submitted that the decision of CIT vs. Ansal Landmark Township P. Ltd., 377 ITR 635 as well as JDS Apparels Pvt. Ltd., 370 ITR 454 should be taken into consideration and matter may be restored to the file of the Assessing Officer for proper adjudication.
Ld DR submitted that the projection of the assessee that there is no revenue loss is not proper and justifiable as no evidence or certificate in respect of TDS was submitted before the Assessing Officer at the time of assessment proceedings. Therefore, the Ld. DR submitted that the CIT(A) has rightly upheld the addition. As regards the alternate plea of the Ld. AR that 30% of such sum should be only be disallowed cannot come to picture as the assessee has not given sufficient evidence before the authorities.
We have heard both the parties and perused the relevant material available on record. Since the additional grounds are not pressed, the same are dismissed. In respect of disallowance of interest expenses, it is pertinent to note that the Assessing Officer has not given the finding related to verification of the parties and there was no evidence brought on record by the assessee before the Assessing Officer as well. Not giving proper opportunity to produce the evidences at assessment proceedings is not
ITA Nos.337 & 602/Ahd/2019 A.Y. 2009-10 Page 5 of 5 a proper method of disallowance of expenses on the part of the Assessing Officer. Therefore, it will be appropriate to remit back this issue to the file of the Assessing Officer for proper adjudication. Alternate argument of 30% disallowance should be taken into consideration made by the ld. AR does not have the proper footing as on what basis disallowance should be restricted to 30% and the same has not been clarified by the Ld. AR. Therefore, appeal of the assessee ITA No.337/Ahd/2019 is partly allowed for statistical purposes.
In respect of penalty appeal filed by the Revenue, the CIT(A) has rightly relied upon the decision of CIT vs. Reliance Petroproducts Pvt. Ltd., 189 Taxman 322, as the genuineness of the claim of the assessee was not disputed by the Assessing Officer and there was no case of the revenue that the assessee furnished inaccurate particulars of income or concealed the particular of income. Therefore, ITA No.602/Ahd/2019 filed by the Revenue is dismissed.
In the result, appeal filed by the assessee is partly allowed for statistical purposes and the appeal filed by the Revenue is dismissed.
Order pronounced in the open Court on this 27th day of May, 2022.
Sd/- Sd/- (WASEEM AHMED) (SUCHITRA KAMBLE) Accountant Member Judicial Member Ahmedabad, the 27th day of May, 2022 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY
Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad