2020 (2) TMI 420 - ITAT JAIPUR

Rectification u/s 154 - additional depreciation @20% claimed as per provision of Sec. 32(1)(iia) - HELD THAT:- The matter raised before us is debatable as to whether the mining of marble block is manufacturing or not and assessee had also intimated the AO. Therefore, the modus operandi in support of the claim is to be covered under the mining and manufacturing activity. Therefore, the matter being debatable cannot be rectified u/s 154 of the Act. We further noticed that since the issue is debatable as to whether the assessee is manufacturing or not and for purpose firstly it should be decided that whether mining of marble block is manufacturing or not and when the interpretation of manufacturing has not been decided in the case of the assessee, then as to how it can be said that the assessee is not a manufacturer. From the various facts, it is on record of the AO that the issue is debatable and the issue which has been rectified by the AO u/s 154 is highly debatable and it is the settled legal preposition of law that a debatable issue cannot be rectified u/s 154 and cannot be said mistake apparent on record.

The issue in hand is debatable, thus the same cannot be rectified by invoking the provisions of Section154 of the Act by the AO and the AO without examining the facts, nature of the business of the assessee and without bringing any material in his support to establish that the assessee was not manufacturer, had disallowed the claim of the assessee which is against the principles of law. We therefore, allow these grounds raised by the assessee and quash the decisions of the lower authorities on this issue.

Rejection of books - invoking the provisions of section 145(3) and confirming the trading addition - HELD THAT:- In this case the books of account of the assessee are rejected in spite of declaring better n.p. rate of last 05 years as compared to average of last years. We are of the view that no trading addition is sustainable.

Findings by the decision of SHRI KISHAN KUMAR SARAIWALA [2017 (8) TMI 1584 - RAJASTHAN HIGH COURT] we restore the matter back to the file of the AO to verify the results declared and attained finality by the assessee by comparing the average results of last 05 years and in case it is found by the AO that the assessee has declared better n.p. rate as compared to earlier years then in that eventuality no trading additionis called for. It is needless to mention that before passing the afresh order on this issue by the AO, the assessee will be provided adequate opportunity of hearing by the AO and the assessee will submit the necessary details before him. Thus this Ground No. 2 of the assessee is allowed for Statistical purposes.

Disallowance towards interest on TDS - HELD THAT:- We are of the view that the interest payment for delayed deposit of TDS is in fact in the nature of penalty and the same is not found allowable. The Legislature expects from the assessee to adhere the various laws of land and in case of any violation of same and financial consequences thereof cannot be allowed in the ambit of Section 37 of the Act. The case laws cited by the ld.AR of the assessee are not applicable in the present facts and circumstances of the case of the assessee. It is an admitted fact that disallowance/ addition made by the AO on account of payment of interest on delayed deposit of TDS is penal in nature. The ld.AR of the assessee relied on the decision of Hon'ble Supreme Court in the case of Bharat Commerce Industries Ltd. vs CIT [1998 (3) TMI 2 - SUPREME COURT] which does not find force in this ground of the assessee. Hence, the Ground No. 3 of the assessee is dismissed.

Disallowance u/s 40(a)(ia) - assessee paid interest on which no TDS was deducted - HELD THAT:- Keeping in view the facts that the assessee had submitted the certificate from the payees and the AO has not disputed the same. Even otherwise the underlying idea and basic concept of TDS was to ensure an early and fast recovery of the taxes. It is designed so that the payer itself should make a deduction of tax at source on the income of the payee. Thus, it was an advance collection and recovery of the tax for on and behalf of the payee, in whose hand, after including the subjected amount of income, there is going to be a liability of tax thereupon. If either there is no liability to pay tax or because of the tax already stood paid by the payee, there is no further liability of the payer. The very purpose of making deduction of tax at source and depositing with the Govt., stands fulfilled.

Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd. v/s CIT [2007 (8) TMI 12 - SUPREME COURT] has held that no penalty u/s 271C or interest u/s 201 can be charged in such cases. The principle so propounded equally and squarely applies on the facts of the present case also. Hence the entire disallowance be deleted in full. - Decided in favour of assessee.