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Income Tax Appellate Tribunal, “C”, BENCH
Before: SHRI M.BALAGANESH, AM & SHRI AMARJIT SINGH, JM Shri Suresh G Hundia
आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in A.Y.2006-07 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-37, Mumbai in appeal No.CIT(A)-37/I.T.406/ACCC-14/09-10 dated 12/08/2010 (ld. CIT(A) in short) against the order of assessment passed u/s.154 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 26/12/2008 by the ld. Asst. Commissioner of Income Tax, Central Circle 13, Mumbai (hereinafter referred to as ld. AO).
At the outset we find that there is a delay of 2107 days in filing of appeal by the assessee before us. The assessee has filed an affidavit
Shri Suresh G. Hundia wherein it has been contended that he had undergone Kidney Transplantation and his health was weak for a prolonged period from 2008 onwards. Subsequently, he also suffered stroke in the year 2012 which made him completely bed ridden. Because of his prolonged illness, he could not follow-up with his Chartered Accountant as to whether the appeal against the order of the ld. CIT(A) had indeed been filed by the concerned Chartered Accountant before the Tribunal for the year under consideration i.e., A.Y.2006-07. The assessee had also furnished the concerned medical reports in support of his contentions in order to prove his bona fide. Subsequently, when the appeals for the A.Yrs. 2007-08 & 2008-09 had come up for hearing in July 2016, the assessee enquired about the status of pendency of appeal for A.Y.2006-07 from his Chartered Accountant and was informed that no appeal was preferred by the said CA for A.Y.2006-07 due to oversight on the part of his staff. The assessee immediately on noticing the same had preferred the appeal before us with delay of 2107 days. The assessee in support of his contention has also filed an affidavit from his concerned Chartered Accountant wherein the concerned Chartered Accountant had duly admitted that the appeal was omitted to be filed due to his oversight. The ld. AR before us also placed reliance on the decision of Co-ordinate Bench of Cochin Tribunal in the case of Midas Polymer Compounds Pvt. Ltd., vs. ACIT in for A.Y.2006-07 dated 25/06/2018 wherein under similar circumstances, i.e. due to mistake committed by the Chartered Accountant, delay of 2819 days was condoned by the Tribunal. We have gone through the said decision of Cochin Tribunal wherein by placing reliance on the decision of Hon’ble Apex Court in the case of Collector, Land Acquisition vs. Mst Katiji and Ors reported in 167 ITR 471 (SC) wherein the Hon’ble Apex Court had laid down certain principles to be understood in the interest of substantial justice for condonation of delay had been considered and also by placing reliance on Shri Suresh G. Hundia the decision of Hon’ble Madras High Court in the case of CIT vs. KSP Shanmugavel Nadar and Others reported in 153 ITR 596 (Mad) and Sreenivas Charitable Trust vs. DCIT reported in 280 ITR 357 (Mad), among other decisions of the Tribunal, had condoned the delay of 2819 days in the interest of substantial justice.
2.1. Respectfully following the said decision which had discussed elaborately on the aspect of condonation of delay, by referring to various judicial precedents including the decisions of Hon’ble High Court and Hon’ble Supreme Court, we are inclined to condone the delay in filing of appeal before us of 2107 days and admit the appeal of the assessee for adjudication.
The only issue to be decided on merits is as to whether the ld. CIT(A) was justified in upholding the disallowance made u/s.40(a)(ia) of the Act in the sum of Rs.20 lakhs in respect of one time premium paid by the assessee to the bank in the facts and circumstances of the case.
3.1. We have heard rival submissions. We find that the assessee is engaged in the business of import and export of bullions and other activities connected therewith. The assessee is a proprietor of M/s. Hundia Exports. The assessee has trading activity from Mumbai as well as from Ahmedabad. The return of income for the A.Y.2006-07 was filed by the assessee on 31/10/2006 declaring total income of Rs.94,67,033/-. The assessment was completed u/s.143(3) of the Act on 26/12/2008 determining the total income of the assessee at Rs.94,92,030/-. Later, this assessment was sought to be rectified by issuance of notice u/s.154 of the Act for the purpose of considering the disallowance of amount paid in the sum of Rs.20 lakhs to Nova Scotia Bank u/s.40(a)(ia) of the Act for non-deduction of tax at source. The assessee before the ld. AO replied
Shri Suresh G. Hundia that it had not made any payment of commission as alleged by the ld. AO to the Bank of Nova Scotia and accordingly, there was no violation of provisions of section 194H of the Act and hence it would not fall within the ambit of disallowance u/s.40(a)(ia) of the Act. The assessee further submitted before the ld. AO during rectification proceedings u/s.154 of the Act that it had paid one time premium to Bank of Nova Scotia for purchase of gold which will effectively add to his gold cost. He also enclosed a letter written by him to the bank vide letter dated 25/04/2005 on the subject of gold purchases from the bank wherein it had been specifically stated by the assessee that it had paid the non-refundable additional premium of Rs.20 lakhs to Bank of Nova Scotia towards purchase of gold during the relevant purchase period. It was specifically mentioned in the said letter that the said additional premium paid by the assessee is non-refundable irrespective of the quantity of gold purchased by the assessee from the bank during the relevant period. In effect, this premium was paid by the assessee to the bank to enable continuous and uninterrupted supply of gold by the bank to the assessee for the purpose of his business , pursuant to mutual understanding with the bank. The assessee also submitted the certificate from the bank of Nova Scotia dated 22/05/2007 issued to the assessee wherein the bank categorically confirmed the receipt of one time premium (non-refundable) in the sum of Rs.20 lakhs. The ld. AO did not agree to these contentions of the assessee and categorised the payment of one time premium for purchase of gold as the amount paid towards commission warranting deduction of tax at source. Since, no deduction of tax at source was made by the assessee on the said payment, the ld. AO proceeded to make disallowance u/s. 40(a)(ia) of the Act in the order passed u/s.154 of the Act on 02/09/2009.
Shri Suresh G. Hundia 3.2. The ld. CIT(A) upheld the action of the ld. AO on a completely different footing. He held that what has been paid by the assessee is a one time premium paid to the bank in connection with purchase of gold. Since, it is one time payment, it would take the character of capital expenditure and not revenue expenditure. Accordingly, he upheld the action of the ld. AO.
Aggrieved, the assessee is in appeal before us.
We have heard rival submissions. We find that assessee had raised an additional ground by stating that the issue involved in the present appeal could not have been disallowed by the revenue authorities in the proceedings u/s.154 of the Act as there is no mistake apparent from the records warranting any rectification. We find that this is purely a legal issue and goes to the root of the matter and does not require any investigation of fresh facts. Accordingly, we deem it fit to admit this additional ground and consider the same for re-adjudication. We find from the submissions made by the assessee before the lower authorities, which had been completely ignored by the ld. AO and by the ld. CIT(A) that assessee has made payment of one time non-refundable premium of Rs.20 lakhs to bank of Nova Scotia for purchase of gold for the purpose of his business in order to ensure continuous and uninterrupted supply of gold by the bank to the assessee. We find from page 5 of the paper book that the bank had also confirmed the receipt of said sum of Rs.20 lakhs towards one time non-refundable premium from the assessee. Hence, this transaction of payment of one time premium would effectively go to add to the purchase cost of the gold and cannot be categorised as commission. Accordingly, there is no requirement of deduction of tax at source on the part of the assessee in terms of Section 194H of the Act
Shri Suresh G. Hundia and consequently, no disallowance u/s.40(a)(ia) of the Act would come into operation thereon. 5.1. We find that the ld. CIT(A) had completely shifted the stand taken by the ld. AO by considering that the said payment of one time premium is capital expenditure as against the claim of revenue expenditure made by the assessee. It is well settled that the issue of capital vs revenue expenditure is always a debatable issue. Hence, we hold that the debatable issue cannot be the subject matter of rectification proceedings u/s.154 of the Act as it would not fall within the ambit of patent, glaring, apparent issue from the records. Reliance in this regard is placed on the decision of Hon’ble Supreme Court in the case of TS Balaram, ITO vs. Valkart Bros reported in 82 ITR 50 (SC). Hence, we hold that the impugned disallowance of Rs.20 lakhs could not be done in the proceedings u/s.154 of the Act. In view of the aforesaid submissions, the additional grounds and regular grounds raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on this 21/08/2019