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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 23/09/2024 Date of Order – 24/09/2024
O R D E R PER K.M. ROY, A.M.
The assessee has filed this appeal challenging the impugned order dated 21/09/2021, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Nagpur, [“learned CIT(A)”], for the assessment year 202014–15.
Following grounds have been raised by the assessee:–
“1) On the facts and circumstances of the case, the entire assessment framed is bad in law and liable to be quashed in the interest of justice. 2) The Ld. CIT(A), National Faceless Appeal Centre ("NFAC") grossly erred in not adjudicating the ground challenging the legality of assessment despite the same having been taken and specifically argued.
2 Friends Timber Pvt. Ltd. ITA no.120/Nag./2021
3) On the facts and circumstances of the case and in law, the AO grossly erred in making and the CIT(A), NFAC grossly erred in confirming the additions made during assessment which were outside the scope of Limited Scrutiny. The additions made during assessment being outside the scope of Limited Scrutiny as prescribed, deserve to be deleted in the interest of justice. 4) On the facts and circumstances of the case and in law, the Ld. AO grossly erred in disallowing and the CIT(A), NFAC grossly erred in confirming the interest paid of Rs.1,53,188/- on delayed deposit of TDS, TCS and Income Tax. The amount of interest so paid being compensatory in nature and pertaining exclusively to the business of the Appellant deserves to be allowed in the interest of natural justice. 5) On the facts and circumstances of the case and in law, the Ld. AO grossly erred in making and the CIT(A), NFAC grossly erred in confirming a total addition of Rs.57,475/- on account of late deposit of amounts pertaining to Employee's contribution to Provident Fund & ESIC despite the said amounts having been paid by the Appellant before the due date of filing the return of income. The amounts having been paid before the due date of filing the return of income, ought to be allowed as per law and the addition so made deserves to be deleted as per law. 6) The CIT(A), NFAC grossly erred in adjudicating the appeal and confirming the additions without giving an opportunity to the Appellant to be heard in person as was specifically requested by the Appellant. The adjudication of the Appeal is thus violative of the principles of natural justice and deserved to be set aside in the interest of justice. 7) The Appellant craves leave to add, amend, alter, vary and / or withdraw any or all the above grounds of appeal with the kind permission of the Hon'ble Tribunal.”
3. The assessee has also raised following additional grounds:–
“8. On the facts and circumstances of the case and in law, the AO grossly erred in making and the CIT(A), NFAC grossly erred in confirming the additions made during assessment which were outside the scope of Limited Scrutiny. The additions made during assessment being outside the scope of Limited Scrutiny as prescribed, deserve to be deleted in the interest of justice. The Appellant craves leave to add, amend, delete, rectify, substitute, and modify the aforesaid ground of appeal or add new grounds of appeal at any time before or at the time of hearing of appeal.”
In the present case, the assessee, for the year under consideration, filed its return of income on 28/09/2014, disclosing total income of ` 1,08,03,710. The case was selected for limited scrutiny through CASS.
3 Friends Timber Pvt. Ltd. ITA no.120/Nag./2021 Various notices were sent, which were served upon the assessee. During the scrutiny proceedings, the Assessing Officer noticed that the assessee claimed interest on TDS, TCS and income tax aggregating to ` 1,53,188, which is not allowable expenditure. The assessee was asked to explain regarding such claim. The assessee, through its Authorised Representative, relied upon the following case laws:–
Mahalaxmi Sugar Mills v/s CIT, [1980] 123 ITR 429 (SC); 2. Triveni Engineering Works Ltd. v/s CITv [1983] 144 ITR 732 (All.) 3. CIT v/s H.P. State Forest Corporation, [2010] 320 ITR 170 (HP); 4. Lachmandas Mathuradas v/s CIT, [2002] 254 ITR 799 (SC); and 5. DCIT v/s Messee Dusseldorf India (P) Ltd., [2010] 129 TTJ (Del.) (UO) 81.
5. The Assessing Officer, however, considering the submissions of the assessee and the above case laws, held that the aforesaid case laws are altogether different from facts of this case. He held that facts of the above case laws are altogether different from facts of this case. Above case laws discuss interest on Sales Tax, Service Tax, Sugar Tax etc., whereas in present case, the assessee is claiming deduction of interest on TDS & TCS & Income Tax which being taxes on income are not allowed as deduction. Hence Rs.1,53,188/- are disallowed and added back to the total income of the assessee. The assessee being aggrieved, preferred appeal before the first appellate authority.
6. The learned CIT(A) dismissed the appeal by confirming the order so passed by the learned CIT(A).
4 Friends Timber Pvt. Ltd. ITA no.120/Nag./2021
Before us, the learned Authorised Representative reiterated the submissions made before the authorities below.
Per–contra, the learned Departmental Representative has made very comprehensive submissions. The gist of submissions made before us, are reproduced below:– “The present case was selected for limited scrutiny with following reasons:
1. 1. 1. Large increase of unsecured loans during the year. 2. Large other expenses claimed in the profit and loss etc.
3. Mismatch in amount paid to related persons u/s 40A(2)(b) reported in Audit Report and ITR The AO during the assessment proceedings noticed that the following claims of the assessee were not allowable and he added them to the total income.
1. Interest paid on delayed deposit of TDS/TCS - Rs.1,53,188/- 2. Delayed payment of employee's PF/ESIC - Rs.57,475/- 3. The Ld CIT(A) had confirmed the addition.
4. The Ld Authorised Representative of the assessee has relied upon circulars/instructions issued by CBDT and various case laws. The same are dealt with as under: v. Instruction No 7/2014 (para 4) In case, during the course of assessment proceedings it is found that there is potential escapement of income exceeding Rs. 10 lakhs (for non metro charges, the monitoring limit shall be Rs. 5 lakhs) on any other issue(s) apart from AIR/CIB/26AS information based on which the case was selected under CASS requiring substantial verification, the case may be taken up for comprehensive scrutiny with the approval of the Pr CIT/DIT concerned. However, such an approval shall be accorded by the Pr CIT/DIT in writing after being satisfied about merits of the issue(s) necessitating wider and detailed scrutiny in the case. Cases so taken up for detailed scrutiny shall be monitored Jt. CIT/Addl. CIT concerned. vi. Instruction No 20/2015 (para 3d) In case, during the course of assessment proceedings it is found that there is potential escapement of income exceeding Rs.10 lakhs (for non–metro charges, the monitoring limit shall be Rs. 5 lakhs) on any other issue(s) requiring substantial verification, the case may be taken up for comprehensive scrutiny with the approval of the Pr CIT/DIT concerned. However, the case may be taken up for comprehensive scrutiny with the approval of Pr CIT/DIT in writing after being satisfied about merits of the issue(s) necessitating wider and detailed scrutiny in the case. Cases so taken up for detailed scrutiny shall be monitored Jt. CIT/Addl. CIT concerned.
5 Friends Timber Pvt. Ltd. ITA no.120/Nag./2021 vii. Instruction No 5/2016 (para 2) In order to ensure that maximum objectivity is maintained in converting a case falling under 'Limited Scrutiny' into a 'Complete Scrutiny' case, the matter has been further examined and in partial modification to para 3(d) of the earlier order dated 29.12.2015, Board hereby lays down that while proposing to take up 'Complete Scrutiny' in a case which was originally earmarked for 'Limited Scrutiny', the Assessing Officer (AO) shall be required to form a reasonable view that there is a possibility of under assessment of income if the case is not examined under 'Complete Scrutiny'. In this regard, the monetary limits and requirement of administrative approval from Pr CIT/CIT/Pr. DIT/DIT, as prescribed in para 3(d) of the earlier instruction dated 29.12.2015, shall continue to remain applicable. viii. Su-raj Diamond Hon'ble ITAT 'G' Bench, Mumbai Valuation of stocks was the issue involved, which was not a reason under limited scrutiny.
Thus, in the present case, the AO was neither required to carry out substantial verification nor the permission was required due to the amounts below the monetary limits.
In view of the above facts, the order of the Ld Assessing Officer and Ld CIT(A) be kindly upheld.”
We have given a thoughtful consideration to the arguments made by the rival parties and perused the material available on record. We find that the addition made by the Assessing Officer on account of interest claimed on TDS, TCS and income tax aggregating to ` 1,53,188, we find that the Assessing Officer was correct in holding that the said claimed by the assessee is not an allowable deduction. In our view also, the addition is prima facie inadmissible. There is no need to embark upon any specific enquiry to sustain the addition. The Assessing Officer has granted full opportunity to the assessee to confront the issue of disallowance and thereafter passed a well– reasoned speaking order by making twin addition. We also find that the impugned order passed by the assessee is a watertight and need not be interfered with. Before us also, the learned Authorised Representative failed to refer to any favourable judgment in his favour. The case laws relied upon by him before us are distinguishable in nature hence not applicable to the 6 Friends Timber Pvt. Ltd. ITA no.120/Nag./2021 facts to the present case. Hence, we find that the averments made by the learned A.R. are devoid of merits. Accordingly, we do not hesitate to uphold the impugned order of the learned CIT(A) by dismissing all the grounds of appeal and additional ground raised by the assessee.
In the result, appeal filed by the assessee is dismissed. Order pronounced in the open Court on 24/09/2024