ITO 4(2)(4), MUMBAI v. KAMBARE CHEMICALS (I) P. LTD, MUMBAI

ITA 1701/MUM/2011 | 2007-2008
Pronouncement Date: 24-11-2014 | Result: Dismissed

Appeal Details

RSA Number 170119914 RSA 2011
Assessee PAN AABCK0905A
Bench Mumbai
Appeal Number ITA 1701/MUM/2011
Duration Of Justice 3 year(s) 8 month(s) 25 day(s)
Appellant ITO 4(2)(4), MUMBAI
Respondent KAMBARE CHEMICALS (I) P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 24-11-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted I
Tribunal Order Date 24-11-2014
Date Of Final Hearing 24-11-2014
Next Hearing Date 24-11-2014
Assessment Year 2007-2008
Appeal Filed On 01-03-2011
Judgment Text
INCOME TAX APPELLATE TRIBUNAL MUM BAI - I BENCH. . . BEFORE S/SH.I.P.BANSAL JUDICIAL MEMBER & RAJENDRA ACCOUNTANT MEMBER /. ITA NO.1701/MUM/2011 ! ! ! ! / ASSESSMENT YEAR-2007-08 ITO 4(2)(4) AAYAKAR BHAVAN R.NO. 647 6TH FLOOR M.K.ROAD MUMBAI -400020 V/S. KAMBARE CHEMICALS (I) P. LTD. SHOP NO. C JAWAHAR MANSION FANSWADI THAKURDWAR MUMBAI-400002. # # # # . . . /PAN:AABCK0905A ( #$ / APPELLANT) ( %&#$ / RESPONDENT) ' ( / REVENUE BY : SHRI SACCHIDANAND DUBEY )* )* )* )* ( ( ( ( / ASSESSEE BY : SHRI NISHIT GANDHI/ABHISHEK TIL AK ' '' ' *+ *+ *+ *+ / DATE OF HEARING : 24 -11-2014 -! ' *+ / DATE OF PRONOUNCEMENT : 24-11-2014 1961 ' '' ' 254 )1 ( *.* *.* *.* *.* / / / / ORDER U/S.254(1)OF THE INCOME-TAX ACT 1961(ACT) PER RAJENDRA AM : CHALLENGING THE ORDER DATED 23.12.2010 OF THE CIT(A )-11 MUMBAI THE ASSESSING OFFICER(AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.10 82 133/- PERTAINING TO REPAIR S AND MAINTENANCE EXPENDITURE ON THE GROUND THAT NO TDS HAS BEEN DEDUCTED. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN ADMITTING ABSOLUTELY NEW FACTS AND ADDITIONAL EVIDENCE WITHOU T GIVING OPPORTUNITY OF HEARING TO A.O. THEREBY VIOLATING PROVISIONS OF RULE 46A. 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.LO 45 42O/- TOWARDS SALARY PAYMENT B Y THE A.O. 4.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN ADMITTING ADDITIONAL EVIDENCE WITHOUT GIVING OPPORTUNITY OF H EARING TO ASSESSEE THEREBY VIOLATING PROVISIONS OF RULE 46A. 5.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE IMPUGNED ORDER OF THE ID. CIT(A) IS CONTRARY TO LAW TO BE SET ASIDE AND THAT OF THE ASSESSING OF FICER BE RESTORED. 6.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ASSESSEE-COMPANY ENGAGED IN THE BUSINESS MANUFACTUR ING LEAD INGOT AND LEAD LITHARGE FILED ITS RETURN OF INCOME ON 15.11.2007 DECLARING TOTAL INCO ME OF RS.4 55 478/-.AO FINALISED THE ASSESSMENT U/S.143(3) OF THE ACT ON 30.12.2009 DETE RMINING THE TOTAL INCOME AT RS.34 54 253/-. 2. FIRST GROUND OF APPEAL PERTAINS TO DISALLOWANCE OF RS.10 82 133/-.DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD MAINTAIN ED TWO ACCOUNTS UNDER THE HEAD REPAIRS & MAINTENANCE. THE EXPENSES SHOWN IN THIS ACCOUNT WER E: REPAIRS AND MAINTENANCE RS. 1 84 317/- REPAIRS AND MAINTENANCE (BUILDING) : RS. 10 82 133/ . DETAILS FURNISHED WITH REGARD TO THE SECOND ACCOUNT SHOWED THAT THE ASSESSEE HAD MADE PAYMENTS 2 ITA NO. 1701/M/2011 KAMBARE CHEMICALS (I) P. LTD. TOM/S.GURUKRUPA TRANSPORT AND BUILDING MATERIAL AND M/S.SHIVSHAKTI BUILDING MATERIAL SUPPLIER -S THAT THE ASSESSEE MADE PAYMENTS TO THOSE PARTIES WITHOUT DEDUCTING TAX AT SOURCE. CONSIDERING THE SAID FACTS THE AO HELD THAT THE ASSESSEE HAD FA ILED TO DEDUCT TDS THAT AS PER THE PROVISIONS OF SECTION 40(IA) (A)OF THE ACT THE PAYMENT MADE BY IT WAS TO BE DISALLOWED. 2.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).IT WAS ARGUED BEFORE HIM THAT THE ASSESSEE HA D PURCHASED ONLY MATERIALS OR GOODS FOR REPAIR WORKS OF ITS FLOORING OF THE FACTORY THAT THERE W AS NO LIABILITY TO DEDUCT TDS ON THE MATERIALS PURCHASED THAT RAW MATERIAL FOR REPAIRING WAS PURCH ASED FROM VARIOUS PARTIES THAT IT HAD MADE PAYMENTS TO FOUR PARTIES THAT PAYMENT WAS NOT CARRY ING OUT ANY WORK THAT THE PROVISIONS SEC. 194C OF THE ACT WERE NOT APPLICABLE THAT THE ADDITI ON MADE BY THE AO WAS WITHOUT PROPER APPRECI -ATION OF THE FACT OF THE CASE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER HE HELD THAT THE REPAIRS AND MAINTENANCE OF THE FLOORING OF THE FACTORY BUIL DING AND SLIDE HAD BEEN CARRIED OUT A NORMAL COURSE OF BUSINESS ACTIVITY OF THE COMPANY THAT THE RE WAS NO CONTRACT BETWEEN THE APPELLANT COMPANY AND M/S.GURUKRUPA TRANSPORT AND BUILDING MA TERIAL SUPPLIER AND M/S. SHIVSHAKTI BUILD -ING MATERIAL SUPPLIER FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT THAT THE ASSESSEE HAD PURCHASED MATERIAL ONLY FROM THOSE PARTIES WHICH WA S APPARENT FROM THE COPIES OF THE BILLS FILED THAT THE PROVISIONS OF SECTION194C OF THE ACT WERE NOT ATTRACTED.HE DIRECTED THE AO TO DELETE THE ADDITION MADE IN THIS REGARD.THE FAA FOUND THAT IN FIRST NINE MONTHS THE CASH EXPENDITURE ON REPAIR WORK/LABOUR WAS VARYING BETWEEN RS. 3 000/- TO RS. 7 000/-PER MONTH THAT THE ASSESSEE HAD CLAIMED CASH EXPENDITURE TOWARDS REPAIRS FOR THE MO NTH OF JANUARY AT RS. 23 560/- FOR THE MONTH OF FEBRUARY AT RS. 43 890/- AND FOR THE MONTH OF MA RCH RS. 47 240/-.HE HELD THAT THE EXPENDITURE INCURRED IN THE LAST THREE MONTHS OF THE FINANCIAL YEAR WAS EXCESSIVE AND UNREASONABLE.HE RESTRICTED THE EXPENDITURE TO RS.7 000/-PER MONTH F OR THESE MONTHS. 2.2. BEFORE US DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTE D THE ORDER OF THE AO AND STATED THAT THE ASSESSEE HAD FAILED TO DEDUCT TAXES.AUTHORISED REPR ESENTATIVE(AR) STATED THAT THE ASSESSEE HAD PURCHASED GOODS AND IT HAD NOT TO PAY TAX FOR THAT. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE FAA HAS GIVEN A CATEGORICAL FINDING OF FACT AFTER PERUSING THE BILLS THAT THE PAYMENT-IN-QUESTION MADE BY THE ASSESSEE WAS FOR PURCHASING RAW MATERIAL FOR RE PARING THAT THE ASSESSEE HAD NOT GIVEN CONTRACT TO ANY OF THE PARTIES.WE FURTHER FIND THAT THE AO H AS PASSED A CRYPTIC ORDER AND HAS MADE AN ADDITION OF RS.10.82 LAKHS WITHOUT ASSIGNING ANY RE ASON.HE HAS NOT POINTEDG OUT AS HOW AND WHICH APPLICABLE SECTION OF THE ACT WAS VIOLATED BY THE ASSESSEE.THE ASSESSEE HAD CARRIED OUT REPAIRING AT ITS BUSINESS PREMISES AND FOR THAT IT HAD PURCHASED GOODS FROM THE ABOVE REFERRED TO PARTIES.THEREFORE THERE WAS NO JUSTIFICATION IN INV OKING PROVISIONS OF SECTION 40(IA)(A)OF THE ACT. WE FIND THAT THE ORDER OF THE FAA DOES NOT SUFFER F ROM ANY LEGAL OR FACTUAL INFIRMITY.SO CONFIRMING HIS ORDER WE DECIDE GROUND NO.1 AGAINST THE AO. 3. NEXT GROUND IS ABOUT DELETING DISALLOWANCE OF RS.10 45 420/-.DURING THE ASSESSMENT PROCEEDING S THE AO FOUND THAT THE ASSESSEE HAD DURING THE MO NTH APRIL TO JANUARY PAID SALARY IN THE RANGE OF RS 19 000 TO RS 21 000/- WHEREAS THE SALARY PAYA BLE SHOWN IN THE MONTH OF FEBRUARY WAS RS. 1 21 6401- THAT IN THE MONTH OF MARCH THE ASSESSEE HAD MADE PAYMENT OF RS.9 83 840/-AS SALARY. CONSIDERING THE ABOVE FACTS THE AO HELD THAT ALL TH E SALARY PAYABLE HAD BEEN SHOWN AS CURRENT LIABILITY THAT THE GENUINENESS AND CORRECTNESS OF C LAIM WAS SUSPECTED THAT THE ASSESSEE HAD NOT DEDUCTED ANY TDS AGAINST THE CLAIM THAT SALARY EXPE NSED COULD NOT BE ALLOWED ON THE ESTIMATION BASIS.HE ESTIMATED ALLOWABLE SALARY AT RS 20 000/- PER MONTH.FINALLY HE HELD THAT THE BALANCE AMOUNT OF RS 10 45 420/-(RS 12 85 420/- MINUS 2 40 000/-) WAS TO DISALLOWED. 3.1. BEFORE THE FAA THE ASSESSEE ARGUED THAT THE COMPANY PAID MONTHLY SALARY TO WORKERS WHICH WAS IN THE RANGE OF ABOUT RS. 20 000/- PER MONTH TH AT IT HAD TO PAY SALARY TO STAFF WHICH CONSISTED OF MOSTLY FAMILY MEMBERS THAT IN THE CASE OF THE FA MILY MEMBERS PROVISION WAS MADE IN THE END OF THE YEAR AND THE SALARY WAS PAID IN THE NEXT YEA R THAT SALARY PAID TO THOSE MEMBERS DID NOT FALL WITHIN THE PERVIEW OF TDS THAT AMOUNT PAID AS SALAR Y WERE NOT LARGE THAT THE ASSESSEE HAD ALSO 3 ITA NO. 1701/M/2011 KAMBARE CHEMICALS (I) P. LTD. ISSUED FORM NO. 16 TO THOSE PERSONS AND THE SALARY PAID BY THE ASSESSEE WAS SHOWN BY THE FAMILY MEMBERS IN THEIR INDIVIDUAL RETURNS OF INCOME THAT TOTAL SALARY PAID BY THE COMPANY DURING THE YEAR WAS RS. 12.85 LAKHS WHICH WAS NEITHER EXCESSIV E NOR UNREASONABLE THAT PAYMENT WAS MADE BY CHEUQUES THAT IT WAS A GENUINE EXPENDITURE. AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBM ISSIONS OF THE ASSESSEE THE FAA HELD THAT THE ADDITION HAD BEEN MADE BY THE AO BASED ON CONJECTUR ES AND SURMISES THAT THE AO HAD NOT EXAMINED THIS ISSUE PROPERLY AND ADDITION HAS BEEN MADE MERELY BASED ON SUSPICION THAT UNLESS IT WAS PROVED BEYOND DOUBT THAT THE FAMILY MEMBERS HAD NOT RENDERED ANY SERVICES TO THEASSESSEE OR THEY WERE NOT EMPLOYEES OF THE COMPANY THE DISALLOW ANCE OF SALARY COULDNOT BE MADE THAT EXPENSES COULD NOT BE DISA1LOWED ON THE GROUND THAT THE ASSESSEE HAD MADE PROVISION AT THE END OF THE FINANCIAL YEAR WHEREAS THE PAYMENT WAS MADE BY THE COMPANY BY MEANS OF CHEQUES IN THE SUBSEQUENT YEAR TO THESE STAFF MEMBERS THAT THE ADD ITION MADE BY THE AO WAS WITHOUT ANY MERITS. BEFORE US THE DR SUPPORTED THE ORDER OF THE AO.THE AR ARGUED THAT PROVISIONS OF SECTION 40(IA) (A)WERE NOT APPLICABLE TO THE SALARY PAYMENTS THAT THE AO WAS NOT JUSTIFIED AT ALL IN MAKING DISALL -OWANCE. 3.2. WE HAVE HEARD THE RIVAL SUBMISSIONS.WE FIND THAT TH E AO HAD MADE DISALLOWANCE INVOKING THE PROVISIONS OF SECTION 40(IA)(A)OF THE ACT FOR T HE SALARY PAYMENTS AND HOLDING THAT THE PAYMENT WAS EXCESS.IN OUR OPINION THE ORDER OF THE AO IS NO T AS PER THE PROVISIONS OF LAW.HE IS NOT AUTHORISED TO MAKE ADDITIONS/DISALLOWANCE MERELY ON SUSPICION.FASTENING TAX LIABILITY TO AN ASSESSEE IS A SERIOUS THING AND SHOULD BE BASED ON EVIDENCES.THE ASSESSEE HAD ISSUED FORM NO. 16A TO THE PERSONS TO WHOM IT HAD PAID SALARIES AND IT WAS CLAIMED THAT THEY HAVE SHOWN THE SALARY INCOME IN THEIR RESPECTIVE RETURNS.IF THE AO HAD ANY DOUBT ABOUT THE PAYMENTS HE SHOULD HAVE MADE INQUIRIES ABOUT THE CLAIM MADE BY THE ASS ESSEE.ONLY ON SUSPICION NO DISALLOWANCE/ ADDITION CAN BE MADE.SIMILARLY MAKING PROVISION FOR AN EXPENDITURE IS NOT A BASIS FOR DISALLOWING IT.THE AO HAD AS RIGHTLY POINTED OUT BY THE FAA NOT PROVED THAT THE PERSONS RECEIVING SALARY DID NOT RENDER ANY SERVICE TO THE ASSESSEE DURING THE Y EAR UNDER CONSIDERATION.IN SHORT THERE WAS NO JUSTIFICATION OF THE SAID DISALLOWANCE.THEREFORE WE AGREE WITH THE FAA THAT THE ADDITIONS WERE MADE ON CONJECTURES AND SURMISES AND NOT ON EVIDENC E.CONFIRMING THE ORDER OF THE FAA WE DECIDE GROUND NO.2 AGAINST THE AO. AS A RESULT THE APPE AL FILED BY THE AO STANDS DISMISSED. 0*1 )* + 2 3 4 ' * 56 . ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH NOVEMBER 2014 . / ' -! 7 8 24 201 4 - ' . ; SD/- SD/- ( . . / I.P. BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI 8 /DATE: 24.11 . 2014. / / / / ' '' ' %*< %*< %*< %*< = ? 4. THE CONCERNED CIT / > ? 5. DR I BENCH ITAT MUMBAI / <@. %* . . . 6. GUARD FILE/ . 0 &<* &<* &<* &<* %* %*%* %* //TRUE COPY// / / BY ORDER A / 5 DY./ASST. REGISTRAR /ITAT MUMBAI