The ACIT, Circle-3,, Surat v. Dhawal Engineering Co.,, Surat

ITA 4491/AHD/2007 | 2004-2005
Pronouncement Date: 30-07-2010 | Result: Dismissed

Appeal Details

RSA Number 449120514 RSA 2007
Assessee PAN AACFD6468K
Bench Ahmedabad
Appeal Number ITA 4491/AHD/2007
Duration Of Justice 2 year(s) 7 month(s) 6 day(s)
Appellant The ACIT, Circle-3,, Surat
Respondent Dhawal Engineering Co.,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 30-07-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 30-07-2010
Date Of Final Hearing 29-07-2010
Next Hearing Date 29-07-2010
Assessment Year 2004-2005
Appeal Filed On 24-12-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH D DD D BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI N NN N. .. .S. SAINI S. SAINI S. SAINI S. SAINI ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER AND AND AND AND SHRI SHRI SHRI SHRI MAHAVIR SINGH JUDICIAL MEMBER MAHAVIR SINGH JUDICIAL MEMBER MAHAVIR SINGH JUDICIAL MEMBER MAHAVIR SINGH JUDICIAL MEMBER DATE OF HEARING :29-7-10 DRAFTED ON:29-7-10 ITA NO. 4411 /AHD/ 2007 ASSESSMENT YEAR :2004-05 DHAWAL ENGINEERIN CO 77 SARDAR COMPLEX NEAR ADAJANCIRCLE SURAT. VS. ADDL.COMMISSIONER OF INCOME TAX RANGE-3 AAYAKAR BHAVAN MAJURA GATE SURAT. PAN/GIR NO. : AACFD 6468 K (A PPELLANT ) .. ( RESPONDENT ) AND ITA NO. 4411 /AHD/ 2007 ASSESSMENT YEAR :2004-05 ADDL.COMMISSIONER OF INCOME TAX RANGE-3 AAYAKAR BHAVAN MAJURA GATE SURAT. VS. DHAWAL ENGINEERIN CO 77 SARDAR COMPLEX NEAR ADAJANCIRCLE SURAT. PAN/GIR NO. : AACFD 6468 K (A PPELLANT ) .. ( RESPONDENT ) B Y ASSESSEE : SHRI SAKAR SHARMA. B Y DEPARTMENT : SHRI SUDHANSHU S. JHA D.R. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI ACCOUNTANT MEMBER :- THESE ARE THE CROSS APPEALS ONE FILED BY THE ASSES SEE AND THE OTHER FILED BY THE DEPARTMENT AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II SURAT DATE D 18-10-2007. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- GROUND NO.1 READS AS UNDER :- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITIO N OF `.2 25 352/-. - 2 - 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. DURING THE ASSESSMEN T PROCEEDINGS THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASS ESSEE HAS NOT OFFERED FOR TAXATION A SUM OF `.2 25 352/- WHICH WA S CREDITED IN THE ACCOUNT OF THE ASSESSEE BY M/S. RELIANCE INDUSTRIES LTD. BUT THE ASSESSEE HAS NOT DEBITED THE ACCOUNT OF M/S RELIANC E INDUSTRIES LTD. WITH THE SAID AMOUNT. IT WAS CONFRONTED TO TH E ASSESSEE THE ASSESSEE EXPLAINED BEFORE THE LEARNED ASSESSING OFF ICER THAT THE AFORESAID DIFFERENCE WAS BECAUSE THE SAID PARTY HAS ACCOUNTED FOR FULL VALUE OF BILL WHEREAS THE ASSESSEE ACCOUNTS FO R SERVICE TAX ON CASH BASIS. THUS SERVICE TAX WAS NOT SHOWN AS RECE IVABLE FROM THE SAID PARTY AND THE SAME WAS ALSO NOT SHOWN AS SERVI CE TAX LIABILITY. THE LEARNED ASSESSING OFFICER OBSERVED THAT NO MATE RIAL IN SUPPORT OF THE ABOVE EXPLANATION COULD BE PRODUCED BY THE A SSESSEE AND THEREFORE REJECTED THE EXPLANATION OF THE ASSESSEE AND ADDED `.2 25 352/- TO THE INCOME OF THE ASSESSEE. 4. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT NO MATERIAL WAS PRODUCED BE FORE HIM IN SUPPORT OF THE EXPLANATION GIVEN BY THE ASSESSEE AN D THEREFORE CONFIRMED THE ACTION OF THE LEARNED ASSESSING OFFIC ER. 5. BEFORE US THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE REITERATED THE SAME EXPLANATION WHICH WAS ADDUCED BEFORE THE LOWER AUTHORITIES. 6. WE FIND THAT NO MATERIAL WAS ALSO PRODUCED BEFO RE US BY THE ASSESSEE IN SUPPORT OF THE SAID EXPLANATION. IN ABS ENCE OF ANY MATERIAL FILED EITHER BEFORE ANY OF THE LOWER AUTHO RITIES OR BEFORE US THE EXPLANATION OF THE ASSESSEE CANNOT BE ACCEPTED. WE THEREFORE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE O RDERS OF THE LOWER AUTHORITIES. THEREFORE THIS GROUND OF APPEA L OF THE ASSESSEE IS DISMISSED. 7. GROUND NO.2 READS AS UNDER :- - 3 - THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) E RRED ON FACTS AND IN LAW IN CONFIRMING DISALLOWANCE OF ` .93 374/- OUT OF VEHICLE EXPENSES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE LEARNED ASSESSIN G OFFICER DISALLOWED `.93 374/- OUT OF THE TOTAL VEHICLE EXPE NSES OF `.9 33 742/- CLAIMED BY THE ASSESSEE ON THE GROUND THAT NO LOG- BOOK WAS MAINTAINED BY THE ASSESSEE AND THE PERSONA L USE CANNOT BE RULED OUT. 9. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) CONFIRMED THE ACTION OF THE LEARNED ASSES SING OFFICER. 10. BEFORE US THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE WAS MADE O NLY ON THE BASIS OF SURMISES AND CONJECTURES AND THEREFORE TH E SAME IS NOT SUSTAINABLE. 11. WE FIND THAT THE ASSESSEES TOTAL TURNOVER DURI NG THE YEAR UNDER CONSIDERATION WAS `.4 59 31 662/- AND THE VEH ICLE EXPENDITURE IN THE BACKGROUND OF THE SAME COMES TO ABOUT 2%. NO MATERIAL WAS BROUGHT ON RECORD BY THE LEARNED ASSES SING OFFICER TO SHOW THAT ANY PERSONAL EXPENSES WERE DEBITED UNDER THE HEAD OR THE EXPENDITURE CLAIMED FOR BUSINESS PURPOSES UNDER THE HEAD WAS EXCESSIVE KEEPING IN VIEW THE TURNOVER OF THE ASSES SEE OR PAST HISTORY OF THE CASE. THUS WE FIND THAT THE DISALLO WANCE WAS NOT BASED ON ANY COGENT MATERIAL OR BASIS. THE DISALLO WANCE BEING MADE ON SURMISES AND CONJECTURES THE SAME IS NOT SU STAINABLE. WE THEREFORE DELETE THE DISALLOWANCE OF VEHICLE EXPEN SES OF `.93 374/- AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 12. THE SOLE GROUND OF APPEAL RAISED BY THE REVENUE IS THAT:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE - 4 - ADDITION OF` 2 48 205/-UNDER THE PROVISIONS OF 2(24 )(X) R. W. S. 36(1)(VA) OF THE I.T. ACT AS THE ASSESSEE HAD DEPOS ITED THE CONTRIBUTIONS MADE BY THE EMPLOYEES TO THE PROVIDEN T FUND AFTER THE DUE DATE I.E. 15 TH OF THE NEXT MONTH IN RELATION TO THE MONTHS IN WHICH SUCH CONTRIBUTIONS WERE RECEIVE D BY THE ASSESSEE. 13. THE BRIEF FACTS OF THE CASE ARE THAT THE LEARNE D ASSESSING OFFICER OBSERVED THAT SECTION 2(24)(X) PROVIDES THA T INCOME INCLUDES ANY SUM RECEIVED BY THE ASSESSEE FROM HIS EMPLOYEE AS CONTRIBUTION TO ANY PROVIDENT FUND AND SECTION 36(1 )(VA) PROVIDES THAT DEDUCTION IN RESPECT OF ANY SUM RECEIVED BY TH E ASSESSEE FROM ANY OF HIS EMPLOYEES TO WHICH THE PROVISIONS O F SUB-SECTION (X) OF CLAUSE (24) OF SEC. 2 APPLIES SHALL BE ALLO WED ONLY IF SUCH SUM IS CREDITED BY THE ASSESSEE TO EMPLOYEES ACCOU NT IN THE RELEVANT FUND ON OR BEFORE THE DUE DATE. THE DUE- DATE IN RESPECT OF EMPLOYEES CONTRIBUTION TO THE PROVIDENT FUND IS 15 TH OF THE NEXT MONTH. FROM THE TAX AUDIT REPORT FILED ALONG WITH T HE RETURN OF INCOME FROM PARA-16 (B) IT WAS NOTICED THAT FOLLO WING PAYMENTS HAVE BEEN MADE BY THE ASSESSEE AFTER 15 TH OF NEXT MONTH TO WHICH THE CONTRIBUTION PERTAINS. MONTH AMOUNT(`.) DATE OF PAYMENT APRIL 2003 38 011 24 - 05 - 2003 MAY 2003 37 962 19 - 06 - 2003 JU LY 2003 38 848 16 - 08 - 2003 OCTOBER 2003 40 915 20 - 11 - 2003 DECEMBER 2003 48 244 20 - 01 - 2004 MARCH 2004 36 894 16 - 4 - 2004 TOTAL 2 40 874 THE ASSESSEE HAS CLAIMED THAT THE SUM IS ALLOWABLE AS DEDUCTION IN VIEW OF THE PROVISO TO SEC. 43B (B).THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE BECAUSE THE PROVISIONS OF SEC. 43 B ARE APPLICABLE TO ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER B Y WAY OF CONTRIBUTION TO THE PROVIDENT FUND AND NOT TO ANY S UM RECEIVED BY - 5 - THE ASSESSEE FROM HIS EMPLOYEES AS CONTRIBUTION TO ANY PROVIDENT FUND. THEREFORE IN VIEW OF THE PROVISIONS OF SEC. 2(24)(X) R.W.S. 36(1) (VA) SUM OF `.2 40 874/- IS ADDED TO THE TOT AL INCOME OF THE ASSESSEE. 14. IN APPEAL THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS) CONFIRMED THE ACTION OF THE LEARNED ASSESSING OFFIC ER. 15. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ED THE ORDERS OF THE LOWER AUTHORITIES WHEREAS THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE REITERATED THE SUBMI SSIONS MADE BEFORE THE LOWER AUTHORITIES. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE HO N'BLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 (SC) HAS HELD THAT THERE IS NO MERIT IN THESE A PPEALS FILED BY THE DEPARTMENT FOR THE FOLLOWING REASONS : FIRSTLY S. 43B (MAIN SECTION) WHICH STOOD INSERTED BY FINANCE ACT 1983 W.E.F. 1ST APRIL 1984 EXPRESSLY COMMENCES WITH A NON OBSTANTE CLAUS E THE UNDERLYING OBJECT BEING TO DISALLOW DEDUCTIONS CLAI MED MERELY BY MAKING A BOOK ENTRY BASED ON MERCANTILE SYSTEM OF A CCOUNTING. AT THE SAME TIME S. 43B (MAIN SECTION) MADE IT MANDAT ORY FOR THE DEPARTMENT TO GRANT DEDUCTION IN COMPUTING THE INCO ME UNDER S. 28 IN THE YEAR IN WHICH TAX DUTY CESS ETC. IS A CTUALLY PAID. HOWEVER PARLIAMENT TOOK COGNIZANCE OF THE FACT THA T ACCOUNTING YEAR OF A COMPANY DID NOT ALWAYS TALLY WITH THE DUE DATES UNDER THE PROVIDENT FUND ACT MUNICIPAL CORPORATION ACT ( OCTROI) AND OTHER TAX LAWS. THEREFORE BY WAY OF FIRST PROVISO TO S. 43B AN INCENTIVE/RELAXATION WAS SOUGHT TO BE GIVEN IN RESP ECT OF TAX DUTY CESS OR FEE BY EXPLICITLY STATING THAT IF SUCH TAX DUTY CESS OR FEE IS PAID BEFORE THE DATE OF FILING OF THE RETURN UNDER THE IT ACT (DUE DATE) THE ASSESSEE(S) THEN WOULD BE ENTITLED TO DE DUCTION. HOWEVER THIS RELAXATION/INCENTIVE WAS RESTRICTED O NLY TO TAX DUTY CESS AND FEE. IT DID NOT APPLY TO CONTRIBUTIONS TO LABOUR WELFARE - 6 - FUNDS. THE REASON APPEARS TO BE THAT THE EMPLOYER(S ) SHOULD NOT SIT ON THE COLLECTED CONTRIBUTIONS AND DEPRIVE THE WORK MEN OF THE RIGHTFUL BENEFITS UNDER SOCIAL WELFARE LEGISLATIONS BY DELAYING PAYMENT OF CONTRIBUTIONS TO THE WELFARE FUNDS. HOWE VER THE SECOND PROVISO RESULTED IN IMPLEMENTATION PROBLEMS WHICH RESULTED IN THE ENACTMENT OF FINANCE ACT 2003 DEL ETING THE SECOND PROVISO AND BRINGING ABOUT UNIFORMITY IN THE FIRST PROVISO BY EQUATING TAX DUTY CESS AND FEE WITH CONTRIBUTIONS TO WELFARE FUNDS. ONCE THIS UNIFORMITY IS BROUGHT ABOUT IN THE FIRST PROVISO THEN THE FINANCE ACT 2003 WHICH IS MADE APPLICAB LE BY THE PARLIAMENT ONLY W.E.F. 1ST APRIL 2004 WOULD BECOM E CURATIVE IN NATURE; HENCE IT WOULD APPLY RETROSPECTIVELY W.E.F . 1ST APRIL 1988. IT IS IMPORTANT TO NOTE ONCE AGAIN THAT BY FINANCE ACT 2003 NOT ONLY THE SECOND PROVISO IS DELETED BUT EVEN THE FIR ST PROVISO IS SOUGHT TO BE AMENDED BY BRINGING ABOUT AN UNIFORMIT Y IN TAX DUTY CESS AND FEE ON THE ONE HAND VIS-A-VIS CONTRIBUTION S TO WELFARE FUNDS OF EMPLOYEE(S) ON THE OTHER. THIS IS ONE MORE REASON WHY IT IS HELD THAT THE FINANCE ACT 2003 IS RETROSPECTIV E IN OPERATION. ACCORDINGLY FINANCE ACT 2003 WILL OPERATE RETROS PECTIVELY W.E.F. 1ST APRIL 1988 (WHEN THE FIRST PROVISO STOOD INSER TED). HARDSHIP AND THE INVIDIOUS DISCRIMINATION WOULD BE CAUSED TO THE ASSESSEE(S) IF THE CONTENTION OF THE DEPARTMENT IS TO BE ACCEPTED THAT FINANCE ACT 2003 TO THE ABOVE EXTENT OPERAT ED PROSPECTIVELY. TAKE AN EXAMPLE IN THE PRESENT CASE THE RESPONDENTS HAVE DEPOSITED THE CONTRIBUTIONS WITH T HE R.P.F.C. AFTER 31ST MARCH (END OF ACCOUNTING YEAR) BUT BEFOR E FILING OF THE RETURNS UNDER THE IT ACT AND THE DATE OF PAYMENT FA LLS AFTER THE DUE DATE UNDER THE EMPLOYEES' PROVIDENT FUND ACT THEY WILL BE DENIED DEDUCTION FOR ALL TIMES. IN VIEW OF THE SECOND PROV ISO WHICH STOOD ON THE STATUTE BOOK AT THE RELEVANT TIME EACH OF S UCH ASSESSEE(S) WOULD NOT BE ENTITLED TO DEDUCTION UNDER S. 43B FOR ALL TIMES. THEY WOULD LOSE THE BENEFIT OF DEDUCTION EVEN IN THE YEA R OF ACCOUNT IN WHICH THEY PAY THE CONTRIBUTIONS TO THE WELFARE FUN DS WHEREAS A DEFAULTER WHO FAILS TO PAY THE CONTRIBUTION TO THE WELFARE FUND RIGHT UPTO 1ST APRIL 2004 AND WHO PAYS THE CONTRIBUTION AFTER 1ST APRIL - 7 - 2004 WOULD GET THE BENEFIT OF DEDUCTION UNDER S. 4 3B. THEREFORE FINANCE ACT 2003 TO THE EXTENT INDICATED ABOVE S HOULD BE READ AS RETROSPECTIVE. IT WOULD THEREFORE OPERATE FROM 1S T APRIL 1988 WHEN THE FIRST PROVISO WAS INTRODUCED. IT IS TRUE T HAT THE PARLIAMENT HAS EXPLICITLY STATED THAT FINANCE ACT 2003 WILL OPERATE W.E.F. 1ST APRIL 2004. HOWEVER THE MATTER INVOLVES THE PRINC IPLE OF CONSTRUCTION TO BE PLACED ON THE PROVISIONS OF FINA NCE ACT 2003. FOR THE AFORESTATED REASONS FINANCE ACT 2003 TO THE EXTENT INDICATED ABOVE IS CURATIVE IN NATURE HENCE IT I S RETROSPECTIVE AND IT WOULD OPERATE W.E.F. 1ST APRIL 1988 (WHEN THE F IRST PROVISO CAME TO BE INSERTED). IN THE INSTANT CASE IT IS NOT IN D ISPUTE THAT CONTRIBUTION TO PF AND ESI IF PAID BEFORE THE DUE D ATE OF FILING OF RETURN OF INCOME BY THE ASSESSEE UNDER SECTION 139( 1) OF THE ACT. ACCORDINGLY THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 17. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 30TH JULY 2010 SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTAN T MEMBER AHMEDABAD ON THIS 30TH DAY OF JULY 2010 PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)- 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD - 8 - DATE INITIALS 1. DRAFT DICTATED ON 29-7-2010 -------------- ----- 2. DRAFT PLACED BEFORE AUTHORITY 29-7-2010 ---- --------------- 3. DRAFT PROPOSED & PLACED 29-7-2010 ----------- -------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 29-7-2010 ------------------- JM 5. APPROVED DRAFT COMES TO P.S 30-7-2010 -------------------- 6. KEPT FOR PRONOUNCEMENT ON ---------------- --------------------- 7. FILE SENT TO THE BENCH CLERK ---------------- -------------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- ---------------------