MEDILINE PHARMACEUTICALS (INDIA) P. LTD, MUMBAI v. ITO 8(2)(4), MUMBAI

ITA 612/MUM/2013 | 2005-2006
Pronouncement Date: 14-10-2016 | Result: Partly Allowed

Appeal Details

RSA Number 61219914 RSA 2013
Assessee PAN AAECM1773B
Bench Mumbai
Appeal Number ITA 612/MUM/2013
Duration Of Justice 3 year(s) 8 month(s) 22 day(s)
Appellant MEDILINE PHARMACEUTICALS (INDIA) P. LTD, MUMBAI
Respondent ITO 8(2)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-10-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 14-10-2016
Date Of Final Hearing 28-04-2015
Next Hearing Date 28-04-2015
Assessment Year 2005-2006
Appeal Filed On 23-01-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH JM AND SHRI RAJESH KUMAR AM ./ I .T.A. NO. 612 /MUM/201 3 ( / ASSESSMENT YEAR : 20 0 5 - 06 ) M EDILINE PHARMACEUTICALS (INDIA) PRIVATE LIMITED 39 NAND GHANSHYAM INDUSTRIAL ESTAE MAHAKALI CAVES ROAD ANDHERI (E) MUMBAI - 400093 / VS. INCOME TAX OFFICER WARD 8(2)(4) ROOM NO. 213 2 ND FLOOR A A YAKAR BHAVAN M.K.ROAD MUMBAI - 400020 ./ PAN : AAECM1773B / ASSESSEE BY NONE / REVENUE BY SHRI SANJEEV JAIN / DATE OF HEARING : 31.5.2016 / DATE O F PRONOUNCEMENT : 14 . 10.2016 / O R D E R PER RAJESH KUMAR A M THIS IS AN APPEAL FILED BY THE ASSESSEE CHALLENGING THE ORDER OF LD.CIT(A) - 17 MUMBAI DATED 21.12.2012 FOR THE ASSESSMENT YEAR 20 0 5 - 06 . 2. DESPITE OF SERVICE OF NOTICE NONE APPE ARED ON BEHALF OF THE ASSESSEE THEREFORE WE PROCEED TO DECIDE THE APPEAL EX - PARTE WITHOUT PRESENCE OF ASSESSEE ON THE BASIS OF MATERIAL AVAILABLE BEFORE US AND AFTER HEARING THE LD.DR. 2 ITA NO. 612 / MUM/ 201 3 3 . THE ISSUE RAISED IN GROUNDS OF APPEAL NO.1 IS AGAINST THE UPHOLD ING THE DISALLOWANCE OF RS.64000 / - AS MADE BY THE AO ON ACCOUNT OF NOT ALLOWING SALARY. 4 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 29.3.2006 DECLARING A TOTAL INCOME AT RS.3 00 840/ - . THE ASSESSEE COMPANY WAS ENGAGED IN T HE BUSINESS OF COMMISSION AGENT OF PHARMACEUTICAL PRODUCTS . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT A SUM OF RS.1 08 000/ - WAS OUTSTANDING TO FIVE PERSONS AS SALARY FOR THREE MONTHS. THE AO OBSERVED THAT NO EMPLOYEE C OULD REMA IN WITHOUT SALARY FOR A PERIOD OF THREE MONTHS AND HENCE ISSUED NOTICE DATED 26.12.2007 TO THE ASSESSEE CALLING UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE AMOUNT OF RS.1 08 000/ - SHOULD NOT BE DISALLOWED AS NON GENUINE EXPENSES . THE ASSESSEE IN REPLY T O THE SAID SHOW CAUSE NOTICE SUBMITT ED T HAT THE SALARY PAYABLE TO THE EMPLOYEES WAS LEGITIMATE BUSINESS EXPENSES AND WAS RIGHTLY CLAIMED . HOWEVER THE AO NOT FINDING THE REPLY OF THE ASSESSEE AS TENABLE REJECTED THE CLAIM OF THE ASSESSEE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE BY FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT VIDE ORDER DATED 31.12.2007 AND THE INCOME WAS ASSESSED AT RS.5 78 840/ - . AGGRIEVED BY THE ORDER OF THE AO ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A) WHO HAS GIVEN PART RELIEF TO THE ASSESSEE BY HOLDING THAT THE ASSESSEE COULD PRODUCE PROOF S ONLY IN RESPECT OF RS.44 000/ - THEREFORE 3 ITA NO. 612 / MUM/ 201 3 REMAINING AMOUNT OF RS.64 000/ - COULD NOT BE VERIFIED AND ACCORDINGLY UPHELD THE SAME. 5. AFTER HEARING THE LD.DR AND ON PER USAL OF THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW WE FIND THAT THE ASSESSEE HAS FAILED TO PRODUCE RECORD S AS REGARD SALARY PAYMENT S OF RS.64 000/ - . W E ARE THEREFORE IN AGREEMENT WITH THE FINDINGS OF THE LD.CIT(A) THAT UNV OUCHED SALARY WHICH COULD NOT BE PROVED BY THE ASSESSEE DURING THE APPELLANT PROCEEDINGS COULD NOT BE ALLOWED. ACCORDINGLY AFTER CONSIDERING THE MERITS OF T HE CA S E AND ORDERS OF THE AUTHORITIES BELOW WE ARE INCLINED TO UPHOLD THE ORDER OF LD.CIT(A). THI S GROUND OF APPEAL IS DISMISSED. 6. THE ISSUE RAISED IN SECOND GROUND OF APPEAL IS WITH RESPECT TO CONFIRMATION OF ADDITION OF RS.1 70 000/ - BY THE LD. CIT(A) WHICH WAS DISALLOWED BY T HE AO FOR NON DEDUCTION OF TAX AT SOURCE U/S 40(A)(IA) OF THE INCO ME TAX A CT 1961 . 7. ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS DEBITED A SUM OF RS.1 70 000/ - UNDER THE HE A D CONSULTANCY CHARGES ON WHICH NO TDS HAS BEEN DEDUCTED BY THE ASSESSEE . ACCORDINGLY ASSESSEE WAS GIVEN SHOW CAUSE NOTICE WHICH WAS REPLIED BY THE ASSESSEE FROM TIME TO TIME DURING ASSESSMENT PROCEEDINGS. DURING THE ASSESSMENT PROCEEDINGS IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE AO THAT THE SAID CONSULTATION CHARGES REPRESENT ED SALARY 4 ITA NO. 612 / MUM/ 201 3 PAID TO MR. K L NARAYAN WHO IS A FUL TIME EM PLOYEE OF THE COMPANY . T HE SAID PAYMENT WAS SHOWN UNDER THE SUB - HEAD CONSULTANCY CHARGES UNDER THE MAIN HEAD SELLING AND DISTRIBUTION EXPENSES. THE LD.AR FURTHER SUBMITTED BEFORE THE AO VIDE LETTER DATED 3.10.2007 RS.1 70 000/ - WERE PAID AS DE LIVERY CHARGES. THE ASSESSEE ALSO SUBMITTED BEFORE THE AO THAT SALARY PAID TO SHRI K L NARAYAN WHO WAS FULL TIME EMPLOYEE ON WHICH PROFESSIONAL TAX WAS DEDUCTED AND DEPOSITED TO THE GOVERNMENT TREASURY. THE AO REJECTED THE SUBMISSIONS OF THE ASSESSEE AS BEING SELF CONTRADICTORY AND DISALLOWED THE AMOUNT OF RS.1 70 000/ - BEING CONSULTANCY CHARGES AND ADDED TO THE TOTAL INCOME OF ASSESSEE U/S 40(A)(IA) OF THE ACT R.W.S.200(1) OF THE ACT FOR NON DEDUCTION OF TAX U/S 194J OF THE ACT. 8 . IN THE APPELLAT E PROCEEDINGS THE LD. CIT(A) UPHELD THE ACTION OF THE AO ON THIS ISSUE BY OBSERVING AND HOLDING AS UNDER : 6.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE ORDER OF THE AO. THE APPELLANT HAS BEEN CONTINUOUSLY CHANGING ITS STANCE AND CLAIME D THE AMOUNT TO BE INITIALLY AS CONSULTANCY CHARGES AND THEN MENTIONED THE SAME AS DELIVERY CHARGES AND ALSO GAVE BIFURCATION OF THE SAME AND LATER CLAIMED THE SAME AS SALARY PAID TO SHRI K.L. NARAYAN. THE APPELLANT HAS NOT BEEN ABLE TO SATISFACTORILY EXPL AIN THE CHANGES IN THE STANCE TAKEN BY IT. THE APPELLANT HAS ALSO NOT DEDUCTED ANY TDS IF THE SAME WAS PAID AS CONSULTANCY CHARGES. IF IT WAS PAID AS DELIVERY CHARGES EVEN THEN U/S. 194C TDS SHOULD HAVE BEEN DEDUCTED WHICH HAS NOT BEEN DONE. THEREFORE T HE STAND OF THE AO IS UPHELD AND THE GROUND OF APPEAL OF THE APPELLANT IS DISMISSED . ' 9 . AFTER HEARING THE LD.DR AND ON PERUSAL OF THE ORDERS OF AUTHORITIES BELOW WE FIND THAT THE PAYMENT MADE TO SHRI K L N ARAYAN ON ACCOUNT OF SALARY WAS 5 ITA NO. 612 / MUM/ 201 3 DISALLOWED BY THE AO BY HOLDING THAT THE ASSESSEE HAD MADE SELF CONTRADICTORY STATEMENT S . THE AO OBSERVED THAT I F THE PAYMENT WAS BY WAY OF SALARY HOW IT C OULD BE SHOWN UNDER THE HEAD CONSULTANCY CHARGES WHEREAS THE ASSESSEE TIME AND AGAIN REITERATED BEFORE THE AO THAT THE PAYMENT WAS ON ACCOUNT OF SALARY ON WHICH PROCESSIONAL TAX HAS BEEN DEDUCTED. THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE ON THE GROUND THAT NO TDS WAS DEDUCTED A ND DEPOSITE D IN THE GOVERNMENT TREASURY. IN OUR OPINION ENDS OF JUSTICE WOULD MEET IF THE MATTER IS RESTORED BACK TO THE FILE OF THE AO FOR VERIFYING WHETHER THE RECIPIENT OF THE SALARY HAS PAID TAX ON THE SAID INCOME BY FILING HIS RETURN OF INCOME AND IF SO THE AO TO ALLOW THE CLAIM OF THE ASSESSEE AS PER SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT. THE SECOND GROUND OF APPEAL IS ALLOWED FOR STAT ISTICAL PURPOSES. 10 . IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 1 4. 10.2016 . SD SD ( MAHAVIR SINGH ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 14. 10 .2016 SR.PS:SRL: 6 ITA NO. 612 / MUM/ 201 3 / COPY OF THE ORDER F ORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. / DR ITAT MUMBAI 6. / GUARD F ILE / BY ORDER TRUE COPY / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI