The ITO, Ward-1, Chirala v. Sri Vavileti Ramachandra Rao, Chirala

ITA 129/VIZ/2010 | 2006-2007
Pronouncement Date: 18-03-2011 | Result: Allowed

Appeal Details

RSA Number 12925314 RSA 2010
Bench Visakhapatnam
Appeal Number ITA 129/VIZ/2010
Duration Of Justice 1 year(s) 23 day(s)
Appellant The ITO, Ward-1, Chirala
Respondent Sri Vavileti Ramachandra Rao, Chirala
Appeal Type Income Tax Appeal
Pronouncement Date 18-03-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 18-03-2011
Date Of Final Hearing 15-03-2011
Next Hearing Date 15-03-2011
Assessment Year 2006-2007
Appeal Filed On 25-02-2010
Judgment Text
ITA NO.129 OF 10 CO 181 OF 10/VIZAG/2010 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.129/VIZAG/2010 ASSESSMENT YEAR: 2006-07 ITO WARD-1 CHIRALA VS. M/S. VALIVETI RAMACHANDRA RAO CHIRALA (APPELLANT) (RESPONDENT) PAN NO.AARPV 0863D CO NO.181/VIZAG/2010 ASSESSMENT YEAR: 2006-07 ITO WARD-1 CHIRALA VS. M/S. VALIVETI RAMACHANDRA RAO CHIRALA (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI D.S . SUNDER SINGH SR. DR RESPONDENT BY: SHRI C. SUBRAHMANYAM CA ORDER PER SHRI B. R. BASKARAN ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 12.11.2009 PAS SED BY LEARNED CIT(A) GUNTUR AND IT RELATES TO THE ASSESSMENT YEAR 2006-0 7. 2. THE REVENUE IS ASSAILING THE DECISION OF LEARNE D CIT(A) IN DELETING THE DISALLOWANCE OF RS.10 23 368/- MADE UNDER SECTION 6 9C OF THE ACT. THE ASSESSEE IN HIS CROSS OBJECTION IS ASSAILING THE DECISION OF LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE MADE UNDER SECTION 4 0(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE ON INTEREST PAYMENTS . 3. THE FACTS RELATING THE ISSUES ARE DISCUSSED IN BRIEF. THE ASSESSEE FILED HIS RETURN OF INCOME DECLARING A TOTAL INCOME OF RS .1 87 850/- AND AGRICULTURAL INCOME OF RS.36 000/- FOR THE YEAR UND ER CONSIDERATION. THE ITA NO.129 OF 10 CO 181 OF 10/VIZAG/2010 PAGE 2 OF 5 ASSESSING OFFICER COMPLETED THE ASSESSMENT BY MAKIN G INTER ALIA FOLLOWING TWO ADDITIONS:- A. DISALLOWANCE OF 5% OF OUTSTANDING OF TRADE CREDI TORS AS UNEXPLAINED EXPENDITURE RS.10 23 368/- B. DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF TH E ACT FOR NON DEDUCTION OF TAX AT SOURCE ON INTEREST PAYMENTS. RS.3 40 640/-. THE ASSESSEE CHALLENGED THESE TWO ADDITIONS BEFORE LEARNED CIT(A). THE FIRST APPELLATE AUTHORITY DELETED THE FIRST ADDITIO N CITED ABOVE AND CONFIRMED THE OTHER ADDITION. HENCE BOTH THE PARTIES ARE IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THE FIRST ISSUE RELATES TO THE APPEAL FILED BY THE REVENUE. THE FACTS THAT LED TO THE MAKING OF FIST ADDITION ARE THAT THE ASSESSING OFFI CER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE H AS SHOWN OUTSTANDING TRADE CREDITORS BALANCE AT RS.258.87 LAKHS IN HIS B ALANCE SHEET FOR THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER ASKED TH E ASSESSEE TO FURNISH PARTY WISE BREAK UP DETAILS OF TRADE CREDITORS ALON G WITH THEIR RESPECTIVE ADDRESS. HOWEVER THE ASSESSEE EXPRESSED HIS INABI LITY TO FURNISH THE DETAILS SO CALLED FOR WITH THE REASONING THAT THERE ARE MORE THAN 300 PARTIES AND FURTHER THEY ARE SPREAD OVER IN MANY PLACES. T HERE AFTER THE ASSESSING OFFICER CALLED FOR THE ACCOUNT COPIES/CONFIRMATION LETTERS FROM THE PARTIES BELONGING TO THE TOWN WHERE THE ASSESSEE CARRIES ON BUSINESS. HOWEVER THE ASSESSEE AGAIN FAILED TO FURNISH THE SAID DETAI LS ALSO BY STATING THAT HE HAS MADE PURCHASES FROM THE WEAVERS WHO NORMALLY DO NOT MAINTAIN ANY ACCOUNTS. IN VIEW OF THE GENERAL REPLIES THE ASSE SSING OFFICER WAS DOUBTFUL ABOUT THE GENUINENESS OF THE CLAIM OF OUTSTANDING B ALANCES. ACCORDINGLY THE ASSESSING OFFICER INFERRED THAT THE ASSESSEE MI GHT HAVE SETTLED THE ACCOUNT OF THE CREDITORS BY PAYING CASH FROM OUT OF HIS UNACCOUNTED INCOME. THE ASSESSING OFFICER ALSO TOOK THE VIEW T HAT THE ASSESSEE MIGHT HAVE ACCUMULATED THE UNACCOUNTED INCOME OVER THE YE ARS. ACCORDINGLY ON A BALANCED PERSPECTIVE THE ASSESSING OFFICER ESTIM ATED THAT 5% OF THE TOTAL OUTSTANDING BALANCES OF TRADE CREDITORS AS UNEXPLAI NED EXPENDITURE FOR THE ITA NO.129 OF 10 CO 181 OF 10/VIZAG/2010 PAGE 3 OF 5 YEAR UNDER CONSIDERATION AND DISALLOWED THE SAME UN DER SECTION 69C. THE LEARNED CIT(A) DELETED THE SAID ADDITION WITH THE R EASONING THAT THE ASSESSING OFFICER HAS ARRIVED AT THE SAID CONCLUSIO N WITHOUT MAKING ANY ENQUIRY. 4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND P ERUSED THE RECORD. THE MAIN OBJECTION OF LEARNED A.R WAS THAT THE ASSESSIN G OFFICER COULD NOT HAVE INVOKED THE PROVISIONS OF SEC. 69C FOR MAKING THE IMPUGNED ADDITION AS THE ASSESSING OFFICER WAS OTHERWISE SATISFIED WI TH THE CLAIM OF PURCHASES MADE BY THE ASSESSEE. HOWEVER IN OUR VIEW THE IS SUE IS WITH REGARD TO THE GENUINENESS OF THE CLAIM THAT THE TRADE CREDITO RS SHOWN BY HIM ARE ACTUALLY OUTSTANDING. WE NOTICE THAT THE ASSESSEE HAS FAILED TO FURNISH THE BREAK UP DETAILS I.E. THE NAMES AND ADDRESSES OF T HE TRADE CREDITORS. WHEN THE ASSESSING OFFICER ASKED FOR THE ACCOUNT COPIES/ CONFIRMATION LETTERS OF THE PLACE THE ASSESSEE CARRIES ON BUSINESS AGAIN T HE ASSESSEE DID NOT FURNISH THE SAME WITH THE REASON THAT THE SUPPLIES ARE WEAVERS WHO DO NOT MAINTAIN ANY ACCOUNTS. THE ASSESSEE WENT TO THE EX TENT OF SAYING THAT THE WEAVERS ARE LIKE DAILY LABOUR. WHEN THE ASSESSEE HAS FAILED TO FURNISH ANY DETAILS WITH REGARD TO THE TRADE CREDITORS THE ASS ESSING OFFICER DID NOT HAVE ANY OTHER OPTION BUT TO DRAW ADVERSE INFERENCES AGA INST THE ASSESSEE ON THE BASIS OF AVAILABLE MATERIAL. WHEN THE WEAVERS ARE LIKE DAILY LABOURERS IT IS BEYOND THE COMPREHENSION OF HUMAN PROBABILITIES THAT THEY WILL EXTEND CREDIT TO THE ASSESSEE. BESIDES THE ASSESSING OFFI CER HAS ALSO POINTED OUT ABOUT SELF CONTRADICTORY STATEMENTS MADE BY THE ASS ESSEE I.E. ON ONE HAND THE ASSESSEE CLAIMED THAT HE HAS TO PLEASE THE WEAV ERS TO GET THE GOODS AND ON THE OTHER HAND HE CLAIMS THAT THEY ARE EXTEN DING CREDITS TO THE ASSESSEE. THERE CANNOT BE ANY DOUBT THAT IT IS TH E RESPONSIBILITY OF THE ASSESSEE TO FURNISH THE DETAILS THAT MAY BE CALLED FOR BY THE ASSESSING OFFICER IN ORDER TO ENABLE HIM TO COMPLETE THE ASSE SSMENT. WE FIND THAT THE ASSESSEE HAS FAILED ON THIS SCORE. HENCE WE AR E UNABLE TO AGREE WITH THE OBSERVATION OF LEARNED CIT(A) THAT THE ASSESSIN G OFFICER HAS MADE THE IMPUGNED ADDITION WITH OUT MAKING FURTHER ENQUIRY AS THE ASSESSEE HAS ITA NO.129 OF 10 CO 181 OF 10/VIZAG/2010 PAGE 4 OF 5 FAILED TO FURNISH THE DETAILS THAT WOULD ENABLE HIM TO CARRY OUT FURTHER ENQUIRIES. ACCORDINGLY WE REVERSE THE ORDER OF LE ARNED CIT(A) AND RESTORE THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ISSUE. 5. THE NEXT ISSUE RELATES TO THE CROSS OBJECTIO N FILED BY THE ASSESSEE. IT IS PERTAINING TO THE ADDITION MADE UNDER SECTION 40 (A)(IA) OF THE ACT. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSE SSEE IS LIABLE TO DEDUCT TDS ON INTEREST PAYMENTS MADE BY HIM UNDER SECTION 194A OF THE ACT. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE H AS PAID INTEREST TO THE FOLLOWING PERSONS WITHOUT DEDUCTION OF TDS. (A) VALIVETI MADANA VAMSHI RS.1 79 016/- (B) VALIVETI RAMACHANDRA RAO (HUF) RS.1 61 61 4/- THE ASSESSEE CLAIMED THAT THESE TWO CREDITORS HAVE FURNISHED FORM 15G DECLARING THAT THEY DO NOT HAVE TAXABLE INCOME AND ACCORDINGLY THE TAX WAS NOT DEDUCTED. HOWEVER THE ASSESSING OFFICER OBSER VED THAT THESE TWO PARTIES SHOULD HAVE PRODUCED TO THE ASSESSEE THE CE RTIFICATES OBTAINED UNDER SECTION 197 OR 197A OF THE ACT FOR NO DEDUCTI ON OR LOWER DEDUCTION OF TAX SINCE FORM NO.15G IS APPLICABLE TO THE CASES W HERE THE INTEREST PAYMENT WAS LESS THAN THE NON-TAXABLE LIMIT. ACCOR DINGLY THE ASSESSING OFFICER ADDED THE ABOVE SAID INTEREST PAYMENTS BY I NVOKING PROVISIONS UNDER SECTION 40(A)(IA) OF THE ACT. THE LEARNED CI T(A) ALSO CONFIRMED THE SAID ADDITION WITH THE FOLLOWING OBSERVATIONS: 6. I HAVE CONSIDERED THE SUBMISSIONS MADE. ALTHOUG H FORM 15G WERE FILED BY THE PAYEE THE FACT IS THAT THE A GGREGATE INTEREST PAYABLE TO EACH OF THESE PARTIES IS ABOVE THE TAXABLE LIMIT. THE ASSESSING OFFICER IS CORRECT IN HOLDING THAT IN SUCH CASES FORM 15G CANNOT BE FILED. IN ANY CASE POINT NO.4 OF FORM ITSELF CASTS A DUTY UPON THE PAYER TO VERIFY T HE FORM FILED BY THE PAYEE. THE FACT THAT NO INCOME WAS FINALLY CHARGEABLE TO THE PAYEE ON ACCOUNT OF THE DEDUCTIONS CLAIMED I S NOT RELEVANT. NO DISCRETION IS MADE AVAILABLE BY THE A CT ON THIS ACCOUNT. TAX WAS THEREFORE DEDUCTIBLE BY THE APPEL LANT ON THE INTEREST PAYMENTS MADE TO THE TWO PARTIES. SINCE T HIS WAS NOT DONE A DEFAULT AROSE AND THE PROVISIONS OF SEC. 40 (A)(IA) BECOME APPLICABLE. THE DISALLOWANCE MADE BY THE AS SESSING OFFICER IS IN ORDER AND IS UPHELD. ITA NO.129 OF 10 CO 181 OF 10/VIZAG/2010 PAGE 5 OF 5 WE HAVE GONE THROUGH THE OBSERVATIONS MADE BY THE T AX AUTHORITIES IN THIS REGARD. THE AMOUNT OF INTEREST PAYMENTS IN BOTH T HE CASES EXCEEDS THE NON-TAXABLE LIMIT AND HENCE THESE TWO PERSONS ARE N OT ENTITLED TO FURNISH FORM NO.15G. THESE TWO PERSONS HAVE ALSO FAILED TO GET CERTIFICATE FROM THEIR ASSESSING OFFICER FOR NON-DEDUCTION OF TAX AT SOURCE. HENCE THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE ON TH ESE TWO INTEREST PAYMENTS FAILURE OF WHICH WOULD ATTRACT DISALLOWAN CE OF INTEREST PAYMENTS AS PER SEC. 40(A)(IA) OF THE ACT. IN VIEW OF THE AB OVE WE FIND NO INFIRMITY IN THE DECISION OF LEARNED CIT(A) IN CONFIRMING THI S ADDITION. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS ALL OWED AND THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE:18-03-2011 COPY TO 1 ITO WARD-1 CHIRALA 2 VALIVETI RAMACHANDRA RAO SWARNA ROAD CHIRALA 3 4. THE CIT GUNTUR THE CIT(A) GUNTUR 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM