IT : ITAT slams casual attitude of DRs & casually moving hastily scribbled "DR is not available " adjournment applications
• DR fined Rs. 500 deductible from his salary for being casual and being absent and not applying for adjournment in advance.
• Casual explanation of DR of "held up in marriage ceremony of nephew" deserves to be rejected as marriage ceremonies are planned in advance.
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[2013] 40 taxmann.com 140 (Delhi - Trib.)
IN THE ITAT DELHI BENCH 'D'
Assistant Commissioner of Income-tax, Circle-II, Faridabad
v.
Laksons Footwear (P.) Ltd.
R.P. TOLANI, JUDICIAL MEMBER
AND T.S. KAPOOR, ACCOUNTANT MEMBER
AND T.S. KAPOOR, ACCOUNTANT MEMBER
IT Appeal Nos. 2204, 2547 & 2548 (Delhi) of 2012
[ASSESSMENT YEARS 2005-06 & 2008-09]
[ASSESSMENT YEARS 2005-06 & 2008-09]
NOVEMBER 28, 2013
M.K. Madan for the Appellant.
ORDER
R.P. Tolani, Judicial Member - This is a set of three appeals in the case of same assessee containing two revenue's appeal for A.Y. 2005-06 and 2008-09 and assessee's appeal for A.Y. 2008-09. All the three appeals are disposed of by this common order for the sake of convenience.
2. When the Bench set for hearing at 10.30AM on 20-11-2013, to our surprise, none of the DR was present in the courtroom. It may be worthwhile to mention that about 33 appeals were fixed for hearing with the current pendency it takes about 4 to 5 months' period for fixation of any appeal for hearing in normal course.
2.1 It may be pointed out that there was neither any DR present in the courtroom nor any application for adjournment from the revenue's side. In public interest and interest of justice, Bench continued with the adjournment applications filed by the assessees and thereafter with the hearing of the remaining appeals.
2.2 This set of appeals, which comprises of two revenue appeals and one assessee's appeal, was called out. Ld. Counsel for the assessee contended that the issues involved were covered by ITAT judgments in assessee's own case and it has been adjourned several times, therefore, it may be heard. As no DR was present, matter was passed over.
2.3 At about 10.50 AM Shri D.K. Mishra CIT(DR) entered the courtroom in a huff and gave a vague reason for his absence that he was held up some where. Since Shri D.K. Mishra made the appearance, this passed over matter was called out. It may be mentioned that Shri D.K. Mishra CIT(DR) is the Commissioner In-charge of the "D" Bench and it is his duty to ensure that the court is properly assisted to discharge its function of hearing and decide appeals. On the calling out of this matter for hearing, Shri D.K. Mishra replied that he will not argue these appeals as they are not assigned to him and other DR who is absent, also was held up in traffic jam.
2.4 It was clearly pointed out to him that there are two revenue's appeals and it is its duty of the revenue to ensure that their own appeals are represented. In these circumstances, the Bench will be left with no choice but to proceed with the matter ex parte qua revenue. Shri D.K. Mishra contended that the Bench may take a view it likes.
2.5 These developments and circumstances leave an impression on the Bench that Revenue is not taking the court proceedings with responsibility, which is deserved by judicial proceedings and cause consternation in our mind. As the issues are pleaded by assessee to be covered by ITAT order in it's own case and on several earlier occasions the appeals have been adjourned. The 'D' Bench DR's attitude is of recalcitrance and non-cooperation, in the public interest and interest of justice we are of the view that further adjournment of a seemingly covered matter will cause hardship to assessee and amount to obstruction to dispensation of justice. Under these circumstances, we are left with no choice but to proceed with the hearing of these appeals ex parte qua the department.
2.6 After this hearing was over, at about 11.30AM a bunch of hastily written adjournment applications by the department was moved with scribbling "DR is not available". We have adjourned all the other matters on these revenue's applications. Though the cause of the adjournments sought by revenue is non specific and does not invoke any judicial conscience. Nevertheless to emphasize that the ITAT Benches consider "Revenue" with due regards and esteem, these belatedly and hastily moved adjournment applications were allowed except the heard appeals.
2.7 From the above proceedings it becomes crystal clear that the actions of "D" Bench DRs has caused obstruction of justice and lack of due respect to the judicial discipline and set norms of ITAT proceedings. We may also mention that on earlier date i.e. 18-11-2013 about 40 cases were fixed and on 19-11-2013 29 cases were fixed and a huge number of cases were compelled to be adjourned as the revenue moved applications with scribbling "DR is not available". The Bench has been more than fair to the department in allowing such adjournments. The 'D' bench DRs failed even to extend minimum courtesy of applying adjournment in advance and inform the opposite parties who come prepared from various out stations.
2.8 On 2.30 PM Mr. Bhatia, Sr. DR 'D' Bench, explained his absence as being busy with the marriage ceremony of his nephew at Lucknow and he got delayed which resulted in non-appearance. He was reminded that marriage ceremonies are fixed well in advance and due intimation should be given if the DR proceeds on a planned leave. The above facts are being narrated in detail to make the department aware of the situation of some of the DRS whose recalcitrant way of working is leading to un-anticipated adjournments and obstruction of justice, which deserves to be improved.
3. To promote public interest and dispensation of justice, as a symbolic gesture, the Bench deems it fit and in the interest of justice to impose a token cost of Rs. 500/- on the absentee DR Mr. Bhatia which should be deducted from his salary. This order should be duly forwarded by Registry to CIT(DR)-I, Chief Commissioner In-charge of Delhi Bench, the learned Chairman CBDT for record purposes.
4. Now we proceed to decide these appeals. We have heard ld. AR of the assessee and perused the material available on record and we proceed to decide the appeals as under: :
Assessment year 2005-06 ( Revenue's appeal)
5. Sole effective ground raised is as under:
"On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition of Rs. 23,18,590/- made by the Assessing officer u/s 36(1)(iii) of the Income Tax Act, 1961 on account of interest on investment in shares in the light of following judgments:
| (i) | Jurisdictional Punjab & Haryana High Court in the case of CIT v. Abhishek Industries (186 ITR 1); | |
| (ii) | Hon'ble Madras High Court in the case of K. Somasundaram & Bros. v. CIT 238 ITR 939; and | |
| (iii) | CIT v. Smt. Leena Ramchandran 339 ITR 296 (Ker)." |
6. Ld. Counsel for the assessee contends that the issue in question is covered by ITAT's consolidated order dated 30-3-2012 in assessee's own case in ITA nos. 3361 & 3362/Del/2010 for A.Y. 2003-04 & 2004-05, inter alia, observing as under:
"8. …….. The assessee has business relationship with all persons with whom trading is made. Business relationship can be said to exist even with the persons from whom funds are borrowed. Hence the principle of commercial exigency cannot be blindly applied in the case of persons with whom the assessee has some business relationship. The assessee ahs to demonstrate the purpose for which he was making the investment in the shares of associate concern; whether it is for getting distributorship or earning dividend income or for controlling interests. The assessee had borrowed money for its own purpose but has been investing it in shares. Prima facie it appears to be diversion of funds for acquisition of share. It is not a case of deposit of money with Lakhani India for the purpose of securing business of distributorship. What was the position in the very first year when business of distributorship was assigned to assessee is not known. If there was no condition in the very first year or in subsequent years, the amounts invested in various years in shares of Lakhani India Ltd. cannot be treated as assessee's compulsion to make investment in shares within the meaning of Commercial expediency. The learned CIT(A) /A.O. has not examined this aspect of the case also. Since the issue has not been examined either by the Assessing officer or the learned CIT(A), we feel it proper to set aside the matter to the file of the Assessing officer with the directions to examine the issue in the light of our aforesaid observations and decide it afresh after affording the assessee a reasonable opportunity of being heard."
6.1 Since the issue in question has been set aside, restored back to the file of assessing officer, the matter may be accordingly set aside back to the file of assessing officer with similar directions.
7. We have heard ld. AR of the assessee and gone through the relevant material available on record. The issue has been set aside by the ITAT in earlier years (supra) to decide the issue in the light of observations made by in the ITAT order. Respectfully following the same, we set aside the issues back to the file of assessing officer with similar directions. The appeal of the revenue is allowed for statistical purposes only.
A.Y. 2008-09 - Cross appeals:
8. Sole effective ground raised by the Revenue is as under:
"On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition of Rs. 15,81,991/- out of total addition of Rs. 18,84,991/-made by the Assessing officer on account of various expenses even though these expenses were incurred on exempted incomes, therefore not allowable in view of section 14A of the Income Tax Act, 1961 and in the light of following judgments:
| (i) | Jurisdictional Punjab & Haryana High Court in the case of CIT v. Abhishek Industries (186 ITR 1); | |
| (ii) | Hon'ble Madras High Court in the case of K. Somasundaram & Bros. v. CIT 238 ITR 939; | |
| (iii) | Hon'ble Calcutta High Court in the case of Dhanuka and Sons v. CIT (Cal) 339 ITR 319; and | |
| (iv) | CIT v. Smt. Leena Ramachandran 339 ITR 296 (Ker.)" |
Assessee's appeal:
9. Following grounds are raised:
1. (a) That the order passed by Ld. CIT(A) is bad in law and on facts.
(b) That the Ld. CIT(A) has erred in confirming disallowance of interest of Rs. 49,87,440/- u/s 40(a)(ia) of the Income Tax Act, 1961.
2. That the Ld. CIT(A) has wrongly confirmed the disallowance of administrative expenses of Rs. 3,03,000/- u/s 14A of the Income Tax Act read with clause (iii) of Rule 8D (2) of the Income Tax Rules."
10. The sole effective ground of revenue's appeal and ground no. 2 of assessee's appeal are common. Here also ld. Counsel for the assessee contends that similar issue arose in A.Y. 2006-07 and 2007-08 and ITAT vide consolidated order dated 22-3-2012 in ITA nos. 2117 and 2118/Del/2011, referred to the following judgments:
| - | Godrej & Boyce Mfg. Co. Ltd. v. DCIT & another 328 ITR 81 (Bom.); | |
| - | Maxopp v. CIT ( Hon'ble Delhi High Court ITA no. 667/2009 dated 18-11-2009); | |
| - | CIT v. Winsome Textile Industries Ltd. 319 ITR 204 (P&H) - Jurisdictional High court in assessee's case. |
11. The ITAT referring to the Jurisdictional High Court judgment (supra) and various other judgments and considering the arguments and on perusal of the record set aside the issue, restored back to the file of assessing officer by following observations:
"8.3. In the light of the aforementioned peculiar facts and circumstances, we are of the view that it is appropriate to restore the issue back to the file of the A.O. as it is seen that on facts no material has been brought on record by the CIT(A) to conclude that facts qua the group concern namely Lakhani Marketing Incorporation in 2000-2001 A.Y are exactly identical to the facts of the assessee in A.Y. 2006-07. It is seen that no such exercise has been done by the A.O. Accordingly, the applicability of the facts pertaining to commercial expediency as considered in the facts of group concern needs to be seen and brought on record. The A.O. shall in the light of the judgments of the Apex Court and jurisdictional High Court shall examine and discuss each and every time funds were advanced by the assessee to Lakhani India Ltd. in context of 'nexus' and 'commercial expediency' as has been laid down by the Apex Court in the case of S.A. Builders 288 ITR 1 (SC) and Munjal Sales Corporation 298 ITR 298 (SC). Thus not only the facts qua the Lakhani Marketing Incorporation stated to be identical to assessee's case in the context of 'commercial expediency' need to be taken into consideration but also the finding in assessee's own case in 2003-04 and 2004-05 A.Ys is also relevant as the issue in the earlier years in the case of assessee has been restored to the A.O. vide order dt. 16-4-2009 in ITA 2233 and 4545/Del/2007. Accordingly after marshalling the facts, the case law can be applied.
8.4. Accordingly for the detailed reasons given hereinabove the issue is restored to the file of the A.O. for both the years with the direction to decide the same in accordance with law by way of speaking order. Needless to say that t he assessee shall be afforded a reasonable opportunity of being heard."
12. It is pleaded that both the grounds in case of assessee and revenue's appeal should be set aside on the issue of disallowance u/s 14A.
13. Apropos ground no. 1 of assessee's appeal, brief facts are that disallowance u/s 40(a)(ia) was made on the ground that assessee had not deducted TDS on interest amounting to Rs. 49,87,440/- paid to the bank through the account of Nitin Miglani. Since TDS was not deducted by the assessee while making the payment to Nitin Miglani the assessing officer purposed to disallow the interest for want of compliance to sec. 40(a)(ia). The assessee pleaded as under:
"De-facto the loan was taken from the bank and interest was also paid to the bank and in such a situation there is no need of deduction of tax u/s 194A of the Income Tax Act, 1961. It is not a case of the revenue that money was borrowed from the saving bank of Mr. Nitin Miglani Nor is the case that money/interest was paid to Nitin Miglani. There are no two independent transactions that is company with Mr. Nitin Miglani and Mr. Nitin Miglani with the bank. This is rather one transaction in which Mr. Nitin Miglani was a conduit to circumvent the problem faced due to cessation of Board and to prevent the closure of business. From the conduit loan directly come to appellant, interest was paid to the bank by the group company/ it's MD. It is respectfully submitted that the provision of section 40(a)(ia) are introduced to protect the evasion of taxes. There is no such case. The bank is a nationalized bank and ahs paid the taxes on the interest earned in its assessment. It is held by the Hon'ble Supreme Court that in case the tax is paid by the payee no disallowance can be made u/s 40(a)(ia). Assessee relies upon the judgment of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd. v. CIT (293 ITR 226).
14. CIT(A) however, upheld the disallowance by relying on ITAT Mumbai Bench in the case of Mahesh Enterprises v. ITO 42 SOT 125; ITAT Bangalore Bench in the case of Gaonkar Mines v. Addl. CIT (9 Taxmann.com33) and upheld the action of assessing officer by further following observations:
"The ITAT, Delhi Bench 'H' Delhi in the case of DCIT v. Umang Dairies Ltd. [36 SOT 383], after examining the objects stated for bringing such provisions on statute and memorandum explaining the provisions relating to direct taxes, has held that the expenditure claimed by the assessee could be allowed only if the assessee had paid TDS thereon. The decision of Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd. v. CIT 9293 ITR 226), relied upon by the appellant, is in the context of provisions of section 201(1) and not in the context of section 40(a)(ia) of the Act, which are separate and distinct provisions meant for ensuring compliance to the provisions of Chapter XVII of the Act. Keeping in view the provisions of law and the decision of Jurisdictional ITAT in Umang Dairies Ltd. (supra), the A.O was fully justified in disallowing the interest of Rs. 49,87,440/- under section 40(a)(ia) of the Act since no TDS at all was made. Hence, the addition made by the A.O is upheld and this ground of appeal is dismissed."
Aggrieved, assessee is before us.
15. Ld. Counsel for the assessee relied on ITAT Visakhapatnam Special Bench judgment in the case of Merilyn Shipping & Transports v. Addl. CIT (2012) 136 ITD 23 (Visakhapatnam) (SB), holding that what can be disallowed u/s 40(a)(ia) is only the outstanding balance as on 31st March of the year and cannot be invoked against payment made prior to 31st March of every year.
16. Ld. Counsel though pleaded that the Special Bench judgment has been reversed by the Hon'ble Calcutta and Madras High Courts. Hon'ble Allahabad High Court has taken a view in favour of Merilyn Shipping & Transports.
17. Since the issue in question has become debatable in view of Special Bench judgment and contrary judgments of High Courts, in the interest of substantial justice we set aside this issue back to the file of assessing officer to verify whether the TDS has been deducted in the subsequent year and to decide the same in accordance with law keeping in view the latest legal position.
18. In the result, all the three appeals stand allowed for statistical purposes only.
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Regards
Prarthana Jalan
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