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Before: Shri Abraham P. George & Shri Duvvuru RL Reddy
आयकर अपील�य अ�धकरण, ‘‘सी’’ �यायपीठ, चे�नई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI �ी अ�ाहम पी. जॉज�, लेखा सद�य एवं �ी धु�वु� आर.एल रे�डी, �या�यक सद�य के सम� Before Shri Abraham P. George, Accountant Member & Shri Duvvuru RL Reddy, Judicial Member I.T.A. Nos. 2274 and 2275/Chny/2017 Assessment Years: 2008-09 & 2009-10 Shri Mahaveer Babulal Jain, The Deputy Commissioner of No. 44/9, E.K. Agraharam, Vs. Income Tax, Chennai 600 003. Non Corporate Circle 5, Chennai 600 006. [PAN: AHTPM1979Q] (अपीलाथ� /Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से / Appellant by : Shri S. Sridhar, Advocate ��यथ� क� ओर से/Respondent by : Shri B. Sagadevan, JCIT सुनवाई क� तार�ख/ Date of hearing : 10.04.2018 घोषणा क� तार�ख /Date of Pronouncement : 25.05.2018 आदेश /O R D E R PER BENCH: Both the appeals filed by the assessee are directed against separate orders of the ld. Commissioner of Income Tax (Appeals) 5, Chennai, both dated 22.08.2017 relevant to the assessment years 2008- 09 and 2009-10. Besides challenging reopening of assessment under section 147 of the Income Tax Act, 1961 [“Act” in short] for the assessment year 2008-09 and confirmation of disallowance representing interest for want of TDS on the application of section 40(a)(ia) of the Act,
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the assessee also challenged confirmation of disallowance towards loss on account of mutilated notes claimed as expenditure under section 37(1) of the Act for both the assessment years.
It was the submissions of the ld. Counsel that the assessee is engaged in the business of trading in gold and filed its return declaring income of ₹.8,80,020/- for the assessment year 2008-09. The assessment under section 143(3) of the Act was completed on 30.12.2010 at an income of ₹.29,91,150/- and creating a demand of ₹.9,75,410/-. It was the submission of the ld. Counsel that against the assessment under section 143(3) of the Act, the assessee preferred appeal before the ld. CIT(A) and the ld. CIT(A) passed the appellate order dated 19.11.2012. Thereafter, the Assessing Officer reopened the assessment under section 147 of the Act by issuing notice under section 148 of the Act. It was the submission of the ld. Counsel that after scrutiny assessment under section 143(3) of the Act, in the absence of any cogent material evidence, reopening of assessment is illegal and it is mere change of opinion, which cannot be the basis for reassessment in view of the decision in the case of CIT v. Kelvinator of India Ltd. 256 ITR 1 (Del)(FB) and more so in the case of ACIT v. ICICI Securities Primary Dealership Ltd. [2013] Civil Appeal No. 5960 of 2012 (SC). It was further
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submission of the ld. Counsel that after passing appellate order against assessment under section 143(3) of Act, reopening of assessment under section 147 of the Act is bad in law and prayed for quashment of assessment under section 143(3) r.w.s. 147 of the Act.
Per contra, by supporting the orders of authorities below, it was the submissions of the ld. DR that the Assessing Officer believed that income chargeable to tax escaped assessment and accordingly, after recording reasons, the assessment was reopened under section 147 of the Act by service of notice under section 148 of the Act.
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In this case, the original assessment under section 143(3) of the Act was completed on 30.12.2010. Against the assessment under section 143(3) of the Act, the assessee preferred further appeal before the ld. CIT(A) and the ld. CIT(A) passed the appellate order dated 19.11.2012. Thereafter, by recording reasons, the Assessing Officer issued notice under section 148 of the Act to assessee to assess the sum of ₹.8,47,986.73, which was debited in the profit and loss account as mutilated notes loss. Since the mutilated notes can be exchanged and are replaceable from RBI/other banks, the Assessing Officer believed that income chargeable to tax escaped
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assessment. In this case, the income chargeable to tax was underassessed during the course of scrutiny assessment under section 143(3) of the Act and therefore, the Assessing Officer reopened the assessment. Explanation 2 to section 147 of the Act envisages that if the income chargeable to tax was underassessed, the Assessing Officer can reopen the assessment and brought the underassessed income to tax. Moreover, in this case, we also find that the appellate order dated 19.11.2012 has not influenced the Assessing Officer to reopen the assessment, which was completed under section 143(3) of the Act, but for underassessment. Under the above facts and circumstances, we are of the considered opinion that the assessment was validly reopened under section 147 of the Act and thus, the ground raised by the assessee is dismissed.
The common ground raised in both the appeals relate to confirmation of loss from mutilated currency notes claimed as business loss/business expenditure in computation of taxable total income.
5.1 It was the submission of the ld. Counsel that the assessee has debited a sum of ₹.8,47,980/- and ₹.13,24,030/- in the profit and loss account for the assessment years 2008-09 and 2009-10 being mutilated notes loss and the said expenditure was claimed as deduction while
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computing the income of the assessee. It was the submission that the above loss was incurred during the course of assessee’s business and if at all the assessee recognises as income after getting the mutilated notes exchanged or replaced by the RBI or so on. It was the submission that, on appeal, the ld. CIT(A) confirmed the disallowance for both the assessment years under appeal since the facts and issue are identical. It was the submission of the ld. Counsel that the genuineness of the claim was not doubted by the Assessing Officer since the assessee has filed complete bank statement, where debit entries in the bank account were made. The ld. Counsel prayed for deleting the disallowance made by allowing the expenditure under section 37(1) of the Act.
5.2 On the other hand, the ld. DR strongly supported the orders of authorities below.
5.3 We have heard both sides, perused the materials available on record and gone through the orders of authorities below. In this case, the assessee claimed deduction of under section 37(1) of the Act incurred towards mutilated notes loss. The Assessing Officer disallowed 80% of the claim at ₹.6,78,389/- against the claim of ₹.8,47,980/- for the assessment year 2008-09 and in the case of assessment year 2009-10, the Assessing Officer disallowed the entire claim of the assessee of
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₹.13,24,030/-. On appeal, the ld. CIT(A) upheld the entire claim of the assessee for both the assessment years. In the assessment year 2008- 09, the Assessing Officer stated that the mutilated notes can be replaced by the RBI at any point of time. Accordingly, the Assessing Officer gave relief to the extent of 20% of the claim and disallowed 80%. In the assessment order at page 2, para 5, the Assessing Officer mentioned that “The assessee and his representative has agreed on this issue”. This being so, against agreed addition, the assessee cannot prefer further appeal before the higher forum. On this count itself, the appeal filed by the assessee on this issue stands dismissed for the assessment year 2008-09.
5.4 So far as assessment year 2009-10 is concerned, the Assessing Officer has taken a different stand and disallowed entire claim of mutilated note loss of ₹.13,24,030/- in the absence of proper explanation by holding that mutilated notes might have been replaced by the bank. On appeal, the ld. CIT(A) confirmed the disallowance.
5.5 Vide circular No.RBI/2012-13/562 [DCM(FNVD) No. 5840/16.01.05/ 2012-13] dated 27.06.2013 addressed to the CMD/CEO of all Scheduled Commercial Banks, while deciding to compensate the banks 25% of the loss incurred in respect of counterfeit notes of ₹.100 and above detected
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by them and reported to RBI and Police Authorities, it was also emphasised in the Extract of Monetary Policy Statement 2012-13 to streamline their system in a manner which will make them bear the risk of counterfeit bank notes rather than the common man who unknowingly comes in possession of such notes. Admittedly, the assessee is engaged in trading in gold bullion and there is every possibility of getting mixed the mutilated notes during the course of his business. In the assessment year 2008-09, the Assessing Officer allowed the loss to the extent of 20% of total claim of the assessee. Similarly, we direct the Assessing Officer to allow the loss to the extent of 20% in the assessment year 2009-10.
The next ground raised in the appeal for the assessment year 2008-09 is with regard to confirmation of disallowance of ₹.3,01,000/- representing interest for want of TDS on the application of section 40(a)(ia) of the Act in the computation of taxable total income. The assessee has debited a sum of ₹.3,01,000/- as interest paid in the profit and loss account. The assessee failed to furnish the details of interest paid and TDS thereon. Further proof for TDS remittance was also not furnished. Further, the Assessing Officer observed that the interest was credited to the loan party’s account without deducting the TDS and thus, violated the provisions of section 40a(ia) of the Act. Accordingly, the Assessing Officer disallowed the above sum of ₹.3,01,000/- and brought
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to tax. On appeal, by following the decision in the case of Palam Gas Services v. CIY [2017] 81 taxmann.com 43 (SC), wherein it was held that “Word ‘payable’ occurring in section 40(a)(ia) of the Act not only covers cases where amount is yet to be paid, but also those cases, where amount has actually been paid”, the ld. CIT(A) confirmed the disallowance. In view of the decision of the Hon’ble Supreme Court referred above, we find no infirmity in the order passed by the ld. CIT(A) and thus, the ground raised by the assessee stands dismissed for the assessment year 2008-09.
In the result, I.T.A. No. 2274/Chny/2017 for AY 2008-09 is dismissed and I.T.A. No. 2275/Chny/2017 for AY 2009-10 is partly allowed for statistical purposes.
Order pronounced on the 25th May, 2018 at Chennai.
Sd/- Sd/- (ABRAHAM P. GEORGE) (DUVVURU RL REDDY) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, the 25.05.2018 Vm/- आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant, 2.��यथ�/ Respondent, 3. आयकर आयु�त (अपील)/CIT(A), 4. आयकर आयु�त/CIT, 5. �वभागीय ��त�न�ध/DR & 6. गाड� फाईल/GF.