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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM :
This appeal has been filed by the assessee against the order of Commissioner of Income Tax (Appeals)-1&2, Kolhapur dated 10-03-2015 for the assessment year 2011-12.
The brief facts of the case as emanating from records are: The assessee is engaged in the business of wholesale trading of Onion, Potato,
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Garlic, Ginger etc. During the course of scrutiny assessment proceedings for assessment year 2011-12, the Assessing Officer observed that in the return of income the assessee has disclosed income from sales as Rs.14,79,93,927/-, as against the total sales of Rs.15,10,44,521/- as per the details furnished. Thus, there was a difference of Rs.30,50,594/- in the sales disclosed in the return of income and the figure of sales emerging from the documents furnished by the assessee. The assessee explained that every day vegetables are purchased in auction carried out by the Kolhapur Market Yard. On behalf of the assessee, M/s. Sureshkumar Motumal & Co. makes the bid in auction purchase. They charged 5% as rate difference between the auction price and the sale amount. The difference of Rs.30,50,594/- is on account of rate difference. While preparing profit and loss account, the rate difference charged by M/s. Sureshkumar Motumal & Co. i.e. Rs.30,50,592/- was debited to sales account and the net sales were shown in the return of income and Profit and Loss Account. The Assessing Officer held that the alleged rate difference is nothing but commission paid by assessee to M/s. Sureshkumar Motumal & Co. The Assessing Officer disallowed the aforesaid payment u/s. 40(a)(ia) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) as the assessee failed to deduct tax at source on the aforesaid payments.
Aggrieved by the assessment order dated 14-11-2013, the assessee filed appeal before the Commissioner of Income Tax (Appeals). Before the Commissioner of Income Tax (Appeals) the Assessing Officer assailed the addition u/s. 40(a)(ia) on merits. The assessee made alternate submission seeking relief under second proviso to section 40(a)(ia) inserted by Finance Act, 2012 w.e.f. 01-04-2013. The Commissioner of Income Tax (Appeals) confirmed the findings of Assessing Officer on this issue and rejected the
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alternate contention as well. Now, the assessee is second appeal before the Tribunal against the findings of Commissioner of Income Tax (Appeals) confirming the addition u/s. 40(a)(ia) of the Act.
Shri M.K. Kulkarni appearing on behalf of the assessee submitted that Rs.30,50,594/- is not in the nature of payment of commission to M/s. Sureshkumar Motumal & Co. It is merely difference in rate calculated at the end of year on the total sales effected by M/s. Sureshkumar Motumal & Co. to the assessee and accounted through debit note. Since, it was not payment of commission the assessee was not liable to deduct any tax at source under the provisions of the Act.
3.1 The ld. Counsel making alternate submission contended that not admitted but presuming the rate difference is commission paid to M/s. Sureshkumar Motumal & Co., the provisions of section 40(a)(ia) are not attracted in view of the recent amendment brought to section 40(a)(ia) by way of second proviso inserted by Finance Act, 2012. The ld. Counsel contended that where the assessee is not held to be assessee is in default, no disallowance u/s. 40(a)(ia) can be made. The ld. Counsel for the assessee asserted that the payee has offered the amount to tax in its return of income. The ld. Counsel in support of his submissions placed reliance on the decision of Pune Bench of the Tribunal in the case of Shri Radhesham Bherulal Bhandari Vs. ACIT in ITA No.954/PN/2011 for assessment year 2007-08 decided on 29-02-2016.
On the other hand, Dr. Vivek Aggarwal representing the Department vehemently defended the order of Commissioner of Income Tax (Appeals) in confirming the disallowance made u/s. 40(a)(ia) of the Act. The ld. DR submitted that difference in rate between the auction price and the sale
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amount charged by M/s. Sureshkumar Motumal & Co. by whatever name called by the assessee is in fact commission charged by M/s. Sureshkumar Motumal & Co. from the assessee. Therefore, the assessee was duty bound to deduct tax at source on the aforesaid payment. The ld. DR prayed for upholding the findings of Commissioner of Income Tax (Appeals) in respect of disallowance u/s. 40(a)(ia) of the Act.
We have heard the submissions made by the representatives of rival sides and have perused the orders of authorities below. The primary issue raised by the assessee in appeal is with respect to disallowance of Rs.30,50,594/- u/s. 40(a)(ia) of the Act. It has been contended that the difference between sale price shown by the assessee in relation of income and the actual sale price as per documents on record is the rate difference between the auction price and the sale amount charged by M/s. Sureshkumar Motumal & Co. It is assessee’s own admission that M/s. Sureshkumar Motumal & Co. charges 5% as rate difference. The assessee has not explained as to on what account M/s. Sureshkumar Motumal & Co. is charging such rate difference, if it is not commission. It is apparent from the facts that the alleged rate difference is nothing but the commission charged by M/s. Sureshkumar Motumal & Co. from the assessee. It is an undisputed fact that on the aforesaid payments/rate difference the assessee has not deducted any tax at source. The assessee was under obligation to deduct tax at source on the payment of commission to M/s. Sureshkumar Motumal & Co. Hence, we do not find any merit in ground No. 1 raised by the assessee. Accordingly, the same is dismissed.
In ground No. 2 of the appeal, the assessee has raised an alternate submission that in view of second proviso to section 40(a)(ia) inserted by
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the Finance Act, 2012 no disallowance u/s. 40(a)(ia) is warranted as the payee of the amount has reflected the same in its return of income. A perusal of the impugned order shows that similar prayer was made by the assessee before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) rejected the same on the ground that the assessee had failed to furnish any details of tax at source made. We are of considered view that the First Appellate Authority has erred in not appreciating the alternate submission of the assessee in right perspective. Therefore, we deem it appropriate to remit the alternate contention of the assessee with respect to disallowance u/s. 40(a)(ia) to the file of Commissioner of Income Tax (Appeals). The assessee is directed to furnish relevant documents indicating that Rs.30,50,594/- charged as commission by M/s. Sureshkumar Motumal & Co. has been disclosed by payee in its books of account and has been offered to tax. The Commissioner of Income Tax (Appeals) after examining the documents shall decide this issue afresh in line with second proviso to section 40(a)(ia) inserted by the Finance Act, 2012.
We would like to make it clear that though the second proviso has been inserted by the Finance Act, 2012 w.e.f. 01-04-2013, various Benches of the Tribunal have held that the second proviso to section 40(a)(ia) is clarificatory and therefore, retrospective in operation [ The Beed district Central Co-op. Bank Ltd. Vs. Asst. Commissioner of Income Tax in ITA Nos. 1108 & 1109/PN/2011 for assessment years 2007-08 & 2008-09 decided on 31-12-2015]. Needless to say that the Commissioner of Income Tax (Appeals) while adjudicating this issue shall afford sufficient opportunity of hearing to the assessee, in accordance with law. Accordingly, ground No. 2 raised in the appeal by the assessee is allowed for statistical purpose.
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In ground No. 3 of the appeal, the assessee has assailed charging of interest u/s. 234A, 234B and 234C of the Act. It is a well settled law that charging of interest under the aforesaid sections is consequential and mandatory. Accordingly, ground No. 3 raised in the appeal is dismissed.
Ground No. 4 raised in the appeal by assessee is general in nature, hence requires no adjudication.
In the result, the appeal of assessee is partly allowed for statistical purpose in the terms aforesaid.
Order pronounced on Wednesday, the 03rd day of January, 2018.
Sd/- Sd/- (डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 03rd January, 2018 RK आदेश की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-1&2, Kolhapur 3. आयकर आयुक्त / The CIT-I/II, Kolhapur/CIT (Central), Pune 4. ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, “बी” बेंच, 5. ऩुणे / DR, ITAT, “B” Bench, Pune. गाडड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रयत // True Copy// आदेशानुसार / BY ORDER,
यनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune