Adwaita Charan Hota, Bhubaneswar v. ITO, Bhubaneswar

ITA 274/CTK/2010 | 2005-2006
Pronouncement Date: 22-12-2011

Appeal Details

RSA Number 27422114 RSA 2010
Assessee PAN ABBPH5061L
Bench Cuttack
Appeal Number ITA 274/CTK/2010
Duration Of Justice 1 year(s) 5 month(s) 8 day(s)
Appellant Adwaita Charan Hota, Bhubaneswar
Respondent ITO, Bhubaneswar
Appeal Type Income Tax Appeal
Pronouncement Date 22-12-2011
Appeal Filed By Assessee
Bench Allotted DB
Tribunal Order Date 22-12-2011
Date Of Final Hearing 30-11-2011
Next Hearing Date 30-11-2011
Assessment Year 2005-2006
Appeal Filed On 14-07-2010
Judgment Text
IN THE INC O ME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE : SHRI K.K.GUPTA AM AND SHRI K.S.S.PRASAD RAO JM ITA NO. 274/CTK/2010 (ASSESSMENT YEAR 2005 - 06) ADWAITA CHARAN HOTA IVR - 32/2 UNIT II ASHOK NAGAR BHUBANESWAR ORISSA - 751009 PAN: ABBPH 5061 L VERSUS INCOME - TAX OFFICER WARD 1(2) BHUBANESWAR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI B.S.TRIPATHY/AMRESH MISHRA ARS FOR THE RESPONDENT SHRI S.C.MOHANTY DR DATE OF HEARING : 30.11.2011 DATE OF PRONOUNCEME NT : 22.12.2011 ORDER SHRI K.S.S.PRASAD RAO JM : THIS APPEAL IS FILED BY THE ASSESSEE HAVING BEEN AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) DT. 15.4.2010 FOR THE ASSESSMENT YEAR 2005 - 06 IN THE CASE OF THE ASSESSEE. 2. THE ASSESSEE HAS RAISED THE FOLLOWING ISSUES IN THE GROUNDS OF APPEAL. 1. FOR THAT THE IMPUGNED ASSESSMENT AND AS WELL AS APPEAL NOT CONSIDER THE FACTS ABOUT THE APPELLANTS PAST RECORDS AND HIS AND HIS FAMILY SAVINGS WHICH IS NOT TENABLE AS PER NATURAL JU STICE. 2. FOR THAT THE APPELLANT HAD FURNISHED ALL THE RELEVANT REQUIRED PARTICULARS JUSTIFYING THE CAPITAL INTRODUCTION WHICH WAS ALSO DULY REFLECTED IN THE BOOKS OF ACCOUNTS AND THE SAME IGNORED BY BOTH THE FORUM BELOW. 3. FOR THAT IN ORDER TO REPAY THE RETIRING PARTNERS THEIR CAPITAL AMOUNT THE APPELLANT INTRODUCE CAPITAL AND ALSO SHOW DETAILS IN FIRMS CAPITAL A/C. 4. FOR THAT THE APPELLANT HAVE INCOME OTHER THAN THE BUSINESS AND THE CAPITAL INTRODUCTION WAS OUT OF LOAN AGRICULTURAL INCOME FROM 3 0 ACRE LAND AND CONTRACT RECEIPTS FOR ITA NO.274/CTK/2010 2 WHICH RETURN ALSO FILED FOR YEARS AND DETAILS SUBMITTED BEFORE THE FORUM BELOW AND NOT CONSIDERED. 5. FOR THAT THE APPELLANT LIVES WITH HIS FAMILY IN A STATE GOVT. QUARTER OF HIS WIFE WHO IS A CLASS 1 EMPLOYEE OF STAT E GOVERNMENT SO SHE MAINTAINS HER FAMILY WITHOUT MORE BURDEN ON APPELLANT. 6. FOR THAT THE INTEREST PAID TO L& T FINANCE A SISTER CONCERN OF THE COMPANY FOR WHICH PRODUCT (L&T JOHN DEERE TRACTOES) THE APPELLANT IS A DEALER IS A PURCHASE FINANCE AND THE C HARGES SHOULD BE ALLOWED AS EXPENSES AND SECTION 194A HAD NO APPLICATION. 7. FOR THAT THE OTHER DISALLOWANCES OF EXPENDITURE IS ALSO INCORRECT AND WITHOUT ANY PROPER FINDINGS AND LIABLE TO BE QUASHED. 3. BOTH THE PARTIES WERE HEARD REGARDING THE ISSUES RAISED IN THE RESPECTIVE APPEALS AND THEIR LEGAL IMPLICATIONS. 4. ON CAREFUL CONSIDERATION OF THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL AND ANALYZING THE SAME IN THE LIGHT OF THE SUBMISSIONS OF BOTH THE PARTIES THE UNDISPUTED FACTS RELATING TO THE ISSUE S ARE THAT THE ASSESSEE IS CARRYING ON BUSINESS IN TRADING IN TRACTORS. HE FILED THE RETURN FOR THE PERIOD UNDER CONSIDERATION ON 13.10.2005 DISCLOSING TOTAL INCOME AT 1 22 300. INITIALLY THE RETURN WAS PROCESSED U/S.143(1) OF THE INCOME - TAX ACT 1961 AND SUBSEQUENTLY IT WAS TAKEN UP FOR SCRUTINY BY ISSUING STATUTORY NOTICES. THE ASSESSING OFFICER AFTER HEARING THE ASSESSEE AND CONSIDERING THE MATERIAL PLACED BEFORE HIM HAS PASSED THE ASSESSMENT ORDER ON 19.12.2007 MAKING ADDITIONS ON ACCOUNT OF TRAVELLING EXPENSES OUT - DOOR EXPENSES INTEREST U/S.40(A)(IA) OF THE INCOME - TAX ACT 1961 DEPRECIATION AND DISALLOWANCE U/S.43B OF THE ACT AND CAPITAL INTRODUCED BY THE ASSESSEE DURING THIS YEAR IN THE BUSINESS. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A) AND THE LEARNED CIT(A) AFTER HEARING THE ASSESSEE AND CONSIDERING THE ASSESSMENT RECORD AND MATERIAL THEREIN HAS ITA NO.274/CTK/2010 3 PASSED THE IMPUGNED ORDER BY UPHOLDING THE ADDITIONS MADE U/S.40(A)(IA) OF THE ACT AND INTRODUCTION OF CAPITAL INTRODUCED UP TO 3 10 000 TRAVELLING EXPENSES AND OUTDOOR EXPENSES BY PARTIALLY ALLOWING THE APPEAL OF THE ASSESSEE. NOW THE ASSESSEE HAS FILED THE PRESENT APPEAL PLEADING THE GROUNDS OF APPEAL REGARDING THE INTRODUCTION OF CAPITAL AND DISALLOWANCE U/S.40(A)(IA) OF THE A CT. 5. DURING THE COURSE OF HEARING THE LEARNED AR OF THE ASSESSEE HAS VEMENTLY ARGUED CONTENDING INTER ALIA THAT BEFORE STATING THE BUSINESS THE ASSESSEE WAS A GOVERNMENT EMPLOYEE AND BEFORE STARTING THE BUSINESS THE ASSESSEE HAD AGRICULTURE INCOME AND INCOME FROM TRACTOR PLYING FOR MORE THAN 15 YEARS AND THE ASSESSEES WIFE IS A GOVERNMENT EMPLOYEE AND THEY WERE BLESSED WITH TWO SONS AND ALL THE FAMILY IS STAYING IN THE GOVERNMENT QUARTERS ALLOTTED TO HIS WIFE BY THE STATE GOVERNMENT. TWO PARTNERS OUT OF THE PARTNERSHIP FIRM SAMPARK MOTORS RETIRED FROM 1.10.2004 AND THE ASSESSEE BECAME THE SOLE PROPRIETOR OF THE SAID FIRM AND THE ASSESSEE INTRODUCED A SUM OF 6 10 000 BEING PAYMENTS MADE TO THE OUTGOING PARTNERS. HE CLAIMED THAT HE PAID 3 LAKHS OUT OF HIS PAST SAVINGS AND HE BORROWED LOAN OF 3 LAKHS FROM THE STATE BANK OF MYSORE AND IT WAS TRANSFERRED TO SAVINGS BANK ACCOUNT. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS FILED RETURNS FOR THE ASSESSMENT YEAR 2002 - 03 2003 - 04 AND 2004 - 05 OFFERING INCOM E FROM PLYING TRACTORS AND AGRICULTURAL INCOME AND PAID TAX AS PER THE RETURNS. IN THE COMPUTATION STATEMENT FILED FOR THESE YEARS THE ASSESSEE HAS SHOWN INCOME FROM TRACTOR PLYING AT 58 620 AND AGRICULTURAL INCOME AT 86 500 IN THE ASSESSMENT YEAR 20I 02 - 03. HE HAS SHOWN 63 480 AS INCOME FROM TRACTOR PLYING AND 98 500 AS AGR ICULTURAL INCOME IN THE ASSESSMENT YEAR 2003 - 04 AND 1 35 370 AS INCOME FROM TRACTOR PLYING AND 86 000 AS AGRICULTURAL INCOME IN THE ASSESSMENT YEAR 2004 - 05. AS CAN BE ITA NO.274/CTK/2010 4 SEEN F ROM THESE RETURNS THE ASSESSEE IS HAVING MORE THAN 3 LAKHS OF INCOME OF THE IMMEDIATELY PRECEDING THREE AYS AND OUT OF IT HE HAS PAID 3 LAKHS TO THE OUTGOING PARTNERS AND HE BORROWED ANOTHER 3 LAKHS FROM THE BANK. SO THE ASSESSEE HAS CATEGORICALLY ON UNEQUIVOCAL TERMS HAS DISCLOSED THE SOURCES OF 6 10 000 PAID BY HIM TO THE RETIRED PARTNERS. BUT THE DEPARTMENTAL AUTHORITIES HAVE NOT APPRECIATED THIS ASPECT IN THE ORDERS PASSED BY THEM BUT THEY ARE STICKING ON BY SAYING THE ASSESSEE HAS NOT EXPLAIN ED THE SOURCE OF THE PAYMENT OF 6 10 000 TO THE RETIRED PARTNERS. 6. ADVERTING TO THE ISSUE OF DISALLOWANCE U/S.40(A)(IA) THE LEARNED AR OF THE ASSESSEE CONTENDED THAT THE ASSESSEE HAS PAID THE INTEREST OF 39 565 ON CASH CREDIT LOANS AND THE INTEREST OF 4 500 WAS CHARGED THEREON. THE ASSESSEE BORROWED LOAN FOR PURCHASE OF TRACTORS FROM L & T FINANCE AND THIS AMOUNT IS DISCLOSED IN THE BALANCE SHEET AS LOAN BORROWED. THE DEPARTMENTAL AUTHORITIES HAVE DISALLOWED A SUM OF 34 891 OUT OF THE TOTAL IN TEREST PAID BY THE ASSESSEE CONTENDING THAT AS NO TDS WAS DEDUCTED ON THIS PAYMENT THE ASSESSEE HAS CONTRAVENED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE PROVISIONS CONTAINED IN SECTION 40(A)(IA) IS NOT APPLICABLE TO THE ASSESSEE AS HE IS AN INDI VIDUAL CARRYING ON BUSINESS IN TRADING OF TRACTORS AFTER DISSOLUTION OF THE PARTNERSHIP FIRM AFTER PAYING TO THE RETIRED PARTNERS. THE PROVISIONS CLEARLY STARTS FROM ANY PERSON NOT BEING AN INDIVIDUAL OR HUF ... THEREFORE ACCORDING TO THIS PROVISION T HE PAYMENT MADE BY THE ASSESSEE TO THE L & T FINANCE DOES NOT ATTRACT THE PROVISIONS OF SECTION 194A. THEREFORE THE DISALLOWANCE MADE BY THE DEPARTMENTAL AUTHORITIES IS NOT PROPER. 7. THE LEARNED AR OF THE ASSESSEE HAS CONTENDED THAT THE ORDERS PASSED BY THE DEPARTMENTAL AUTHORITIES ON THESE TWO ISSUES REQUIRES SET ASIDE BY ALLOWING THE APPEAL OF THE ASSESSEE. ITA NO.274/CTK/2010 5 8. CONTRARY TO THIS THE LEARNED DR VEHEMENTLY ARGUED SUPPORTING THE ORDERS OF THE DEPARTMENTAL AUTHORITIES CONTENDING INTER ALIA THAT THE ASSESSEE HAS NOT PROPERLY EXPLAINED THE INTRODUCTION OF CAPITAL OF 6 10 000 FULLY AND THE SUM OF 3 LAKHS WAS ACCEPTED BY THE LEARNED CIT(A) AS HE HAS PROVED THE SAID AMOUNT BY WAY OF BORROWAL FROM THE SBI MYSORE. THE ASSESSEE IS NOT ABLE TO PLACE ANY MATERIAL TO SHOW THAT THE PAYMENTS OF OTHER PART OF 3 LAKHS FROM HIS PAST SAVINGS. THEREFORE THE ADDITION UNDER THAT HEAD IS JUSTIFIED AND THEREFORE THE LEARNED DR SOUGHT FOR UPHOLDING THE SAME. WHILE ADVERTING TO THE DISALLOWANCE MADE U/S.40(A)(IA) HE SUBMIT TED THAT THE ASSESSEE HAS BORROWED LOAN FROM L & T FINANCE AND THE PAYMENTS MADE BY THE ASSESSEE TO THE TOWARDS THE DISCHARGE OF LOAN BORROWED FROM IT. THE ASSESSEE HAS TO DEDUCT TDS ON THE INTEREST PORTION PAID TO THE L & T FINANCE BUT AS THE ASSESSEE HAS NOT DEDUCTED ANY TDS OUT OF THE INTEREST PAID TO L & T FINANCE THE DEPARTMENTAL AUTHORITIES ARE WELL WITHIN THEIR POWERS TO DISALLOW THE PAYMENT OF SUCH INTEREST FOR WANT OF DEDUCTION OF TDS ON THE INTEREST PAID BY IT TO THE L & T FINANCE. THEREFORE HE SOUGHT FOR UPHOLDING THE SAME BY DISMISSING THE APPEAL OF THE ASSESSEE. 9. ON CAREFUL ANALYSIS OF THE ORDER PASSED BY THE LEARNED CIT(A) IT IS FOUND THAT THE LEARNED CIT(A) HAS UPHELD THE DISALLOWANCE U/S.40(A)(IA) AS THE ASSESSEE HAS NOT DEDUCTED TDS U/ S.194A ON THE INTEREST PAYMENT OF 34 891 MADE TO L & T FINANCE. BUT THE PROVISIONS OF SECTION 194A CLEARLY STATES THAT ANY PERSON NOT BEING INDIVIDUAL OR HUF.. SO THIS PROVISION CLEARLY EXCLUDES INDIVIDUALS AND HUFS. THE ASSESSEE HAVING BEEN ASSESSED AS INDIVIDUAL IS NOT COMING UN DER THE PURVIEW OF THE SAID SECTION. HENCE THERE IS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT TDS ON THE INTEREST AMOUNT PAID TO L & T FINANCE. THEREFORE THE DISALLOWANCE MADE BY ITA NO.274/CTK/2010 6 THE ASSESSING OFFICER AND UPHELD BY THE LEARNED CIT(A) OF 34 181 U/S.40(A)(IA) IS SET ASIDE BY ALLOWING THE ISSUE AS RAISED BY THE ASSESSEE. 10. NOW COMING TO THE ISSUE OF CAPITAL INTRODUCTION OF 6 120 000 THE LEARNED CIT(A) HAS ACCEPTED CAPITAL INTRODUCTION OF 3 LAKHS BECAUSE THE ASSESSEE HAS SHOWN THAT HE HAS OBT AINED LOAN FROM SBI MYSORE OF 3 LAKHS. REGARDING OTHER PORTION OF 3 LAKHS THE LEARNED CIT(A) HAS NOT AGREED TO THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE IS NOT ABLE TO ESTABLISH THE SAVINGS OF THE AMOUNT OF 3 10 000. BUT AS CAN BE SEE N FROM THE RETURNS FILED BY THE ASSESSEE FOR THE IMMEDIATE PAST THREE AYS 2002 - 03 2003 - 04 AND 2004 - 05 THE ASSESSEE HAS SHOWN INCOME FROM TRACTOR PLYING AT 58 620 AND AGRICULTURAL INCOME AT 86 500 IN THE ASSESSMENT YEAR 20I02 - 03. HE HAS SHOWN 63 480 AS INCOME FROM TRACTOR PLYING AND 98 500 AS AGRICULTURAL INCOME IN THE ASSESSMENT YEAR 2003 - 04 AND 1 35 370 AS INCOME FROM TRACTOR PLYING AND 86 000 AS AGRICULTURAL INCOME IN THE ASSESSMENT YEAR 2004 - 05. FURTHER THE ASSESSEE CLAIMS THAT HE IS A MARR IED PERSON AND HIS WIFE IS A GOVERNMENT EMPLOYEE AND THE ASSESSEE IS STAYING WITH HIS FAMILY IN THE GOVT. QUARTER ALLOTTED TO HIS WIFE AND SHE BEING AN EMPLOYEE HE IS NOT PAYING ANY AMOUNT TOWARDS MAINTENANCE OF THE FAMILY. NEITHER THE ASSESSING OFFICER NO R THE LEARNED CIT(A) HAS BROUGHT OUT ANY MATERIAL CONTROVERTING THIS CLAIM OF THE ASSESSEE. THE ASSESSEE HAS FILED COPIES OF THE RETURNS OF THE PREVIOUS YEARS PLACED ON PAGES 49 TO 52 OF THE PAPER BOOK WHICH CLEARLY SHOW THAT THE CLAIM OF THE ASSESSEE THA T HE IS OFFERING INCOME FROM PLYING TRACTOR AND AGRICULTURAL INCOME FOR THE IMMEDIATE PAST THREE YEARS IS CORRECT AND HENCE THE CONTENTION OF THE ASSESSEE THAT FROM THE PAST SAVINGS HE HAS MADE THE PAYMENT OF 3 10 000 TO THE RETIRED PARTNERS APPEARS PLAU SIBLE MORE SO WHEN HIS WIFE IS A GOVERNMENT EMPLOYEE WHO IS MEETING OUT FAMILY MAINTENANCE AND THE ASSESSEE IS STAYING WITH HER IN THE GOVT. QUARTER ITA NO.274/CTK/2010 7 ALLOTTED TO HER BY THE GOVERNMENT. IN ABSENCE OF ANY MATERIAL BROUGHT OUT BY THE DEPARTMENTAL AUTHORITIES CONTRARY TO THIS THE CONTENTION OF THE ASSESSEE NEEDS TO BE ACCEPTED. HENCE ACCORDINGLY THE CONTENTION OF THE ASSESSEE IS ACCEPTED BY SETTING ASIDE THE ADDITION OF 3 10 000 MADE BY THE DEPARTMENTAL AUTHORITIES ON ACCOUNT OF INTRODUCTION OF CAPITAL. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. SD/ - SD/ - (K.K.GUPTA) ACCOUNTANT MEMBER ( K.S.S.PRASAD RAO) JUDICIAL MEMBER DATE: 22.12.2011 H.K.PADHEE SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: ADWAITA CHARAN HOTA IVR - 32/2 UNIT II ASHOK NAGAR BHUBANESWAR ORISSA - 751009 2. THE RESPONDENT: INCOME - TAX OFFICER WARD 1(2) BHUBANESWAR. 3. THE CIT 4. THE CIT(A) 5. THE DR CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY.