Date Of Judgment 28-06-2018, Ita v. The Commissioner Of Income Tax & Another 2/8

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 28 DAY OF JUNE 2018 PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A. No.35/2017 BETWEEN : JAYARAM PATHAK RBEPRBSEBENTBD BY GPA HOLDE SRIHARI PATAKNO.2997, II FLOOR, RUKMA COMPLEX.KALIDASA ROAD, VV MOHALLAMYSORE —- 570 OO?_. APPELLANT (BY SRI.R.CHANDRASHEKAR, ADV.) AND 1.THR COMMISSIONBR OF INCOME TAXAYAKAR BHAVAN, RESIDENCY ROAD,NAZARABAD,MYSORE - 5/70 OLO.AYAKAR BHAVAN, RESIDENCY ROAD,NAZARABAD,MYSORE - 5/70 OLO. 2.THE ASSISTANT COMMISSIONER OF|INCOME TAX, CIRCLE 1(1),.INCOME TAX, CIRCLE 1(1),. AYAKAR BHAVAN, RESIDENCY ROAD,NAZARABALD,MYSORE - 570 OLO. |.. RESPONDENTSNAZARABALD,MYSORE - 570 OLO. |.. RESPONDENTS (BY SRI.JEEVAN J NEERALGI, ADV.) Date of Judgment 28-06-2018, ITA No.35/2017 Jayaram Pathak Vs. The Commissioner of Income Tax & another 2/8 THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A|OF THE INCOME TAX ACT 19601, ARISING OUT OF ORDERDATED: 23.09.2015 PASSED IN ITA NO. 484/BANG/2014, FOR:THEASSESSMENTYRAR2008-2009,PRAYINGTO:|I)FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW ASSTATED ABOVE OR FRAME SUCH QUESTION OR QUESTIONS.AS THIS HON BLE COURT DEEM IT FIT. I) ALLOW THE APPEALAND SKBT-ASIDE THR ORDER OF THR INCOMB TAX APPELLATETRIBUNAL|BBRARINGITA|NOS.484/BANG/2014DATEHD23.09.2015 AND ALL OTHER ORDERS WHICH HAVE GIVENRAISE TO APPEAL BEFORE THR INCOME TAX APPELLATE|TRIBUNAL IN ITA NO.484/BANG/2014 AND ETC..,. THIS APPEAL COMING ON FOR ADMISSION, THIS DAY,|Dr. VINEET KOTHARI, J©, DELIVERED THE FOLLOWING: JU DGMENT Mr. R. Chandrashekar,|Adv. for Appellant — AssesseeMr. Jeevan J. Neeralgi1Adv., for Respondents -|Revenue This Appeal is filed by the Assessee purportedlyraising substantial questions of law arising from theOrder of the Income Tax Appellate Tribunal, ‘C’ Bench,Bangalore,1n ITANo.484/Bang/2014dated| 23.09.2015, relating to the Assessment Year2008-09. Date of Judgment 28-06-2018, ITA No.35/2017 Jayaram Pathak Vs. The Commissioner of Income Tax & another 3/8 a2The proposed substantial questions of law| framed by the Revenue in the Memorandum of Appeal isas under: 1.“Whether, the Appellate Tribunal is rightin law in holding that proviso to section40(a) (ta) of the Income Tax Act, 1961cannot be invoked to grant allowance ofearlieryear’s:disallowancemadeu/s.40(a) (ia) of the Act, unless there is adisallowance u/s. 40(a)(ia) of the Act inthe year in question? |Whether, the order of the AppellateTribunal is sustainable in law?”| 3.The learned Tribunal has given the following findings about the claim of the Appellants-Assessee ofthe deduction of Rs.23,02,920/- u/s. 4Olallia] of theIncome Tax Act, 1961 |'Act' for short]. The Tribunalrejected thesaid|claimmaking.thefollowingobservations: Date of Judgment 28-06-2018, ITA No.35/2017 Jayaram Pathak Vs. The Commissioner of Income Tax & another 4/8 framed by the Revenue in the Memorandum of Appeal isas under: 1.“Whether, the Appellate Tribunal is rightin law in holding that proviso to section40(a) (ta) of the Income Tax Act, 1961cannot be invoked to grant allowance ofearlieryear’s:disallowancemadeu/s.40(a) (ia) of the Act, unless there is adisallowance u/s. 40(a)(ia) of the Act inthe year in question? |Whether, the order of the AppellateTribunal is sustainable in law?”| 3.The learned Tribunal has given the following findings about the claim of the Appellants-Assessee ofthe deduction of Rs.23,02,920/- u/s. 4Olallia] of theIncome Tax Act, 1961 |'Act' for short]. The Tribunalrejected thesaid|claimmaking.thefollowingobservations: Date of Judgment 28-06-2018, ITA No.35/2017 Jayaram Pathak Vs. The Commissioner of Income Tax & another 4/8 “AThe assessee carried the matter to this|Tribunal. The Tribunal vide its order dated|21.12.2012 confirmed the action of the AO incomputing and assessed to tax of the total|income of the assessee based on estimate at|9% of total gross sales. However, the|Tribunal has held that since the income was|assessed on estimate basis, therefore, the|disallowance made u/s. 40/aj/ial was not|justified. Thus, while deciding the appeal ofthe assessee, the Tribunal has given the|limited relief on account of disallowance u/s.40 [aj/ta/. In giving effect to the order, the AO|has withdrawn the disallowance made wu/s.40/a//ia/ of Rs.8,13,154/-. The assessee was|not satisfied with the order passed by the AO|giving effect to the order of the Tribunal andfled an appeal before the CIT/A] raising theissue that the assessee i1s_ entitled fodeduction of Rs.23,02,920/- which was|added in the earlier years by applying the|provisions of sec. 40/aJ//ta] of the Act but thepayment was made during the year underconsideration therefore, as per proviso to SEc.40/aJj[ta/, the said amount has to be allowed Date of Judgment 28-06-2018, ITA No.35/2017 Jayaram Pathak Vs. The Commissioner of Income Tax & another 5/8 as|deductionforthe|YET|underconsideration. The CIT/A] did not accept the|contention of the assessee and held that the|Tribunal has held that separate disallowance|need not be made u/s. 40/aj/ta/ the allowance|does not arise. 5.The grievance of the assessee in thissecond round of appeal is that the assessee.1S|alsoentitledfordeductionof|Rs.23,02,920/- which was disallowed in theearlier year u/s. 40/aj/ia/ but it is allowable|for the year under consideration on the.payment made by the assessee in terms ofproviso to sec. 40/a//ia/. We find that when|the income of the assessee was estimated at|9% of the gross sales, the expenditure to be|disallowedOrallowablehasbecome.irrelevant and only on that analogy the|Tribunal has observed that no separate|disallowance u/s. 40/a//ia/ is required, once|the income of the assessee is estimated on|gross sales. Even otherwise, when the.Tribunalhasdirectedtoexclude.anydisallowance u/s. 40/aj[ia] then the claim of| Date of Judgment 28-06-2018, ITA No.35/2017 Jayaram Pathak Vs. The Commissioner of Income Tax & another 6/8 allowance under same provision cannot be|entertained in giving effect proceedings on the|part of the AO. If the assessee was aggrievedor any ambiguity was perceived by the|assessee in the order of the Tribunal, the|proper remedy would have to approach the.Hon’ble High Court. Since the observations ofthe Tribunal are plain and clear, therefore, the|jurisdiction of the AO while giving effect to theorder of the Tnbunal is limited and to give|relief to the assessee by deleting the addition|made u/s. 40/aj/ia/. We are of the view thatonce the applicability of sec. 40/a//ta/ is ruled|out by the Tribunal, then the assessee cannot|claim the benefit u/s. 40/a//ia/ when the|addition under the same section has not been|permitted. Accordingly, we do not find anyreason to interfere with the order of the|authorities below.”” 4The learned Counsel for the Assessee has!urged before us that disallowance u/s. 4Ola|lia] of theAct made in the previous assessment years was madeon the ground of not deducting the tax at source under Date of Judgment 28-06-2018, ITA No.35/2017 Jayaram Pathak Vs. The Commissioner of Income Tax & another 7/8 the said provision. But, the said amount is to be paidby the Assessee during the current year and thereforeeven from the estimation of income made @ 9% perannum, separate deduction should be allowed to theAssessee as per the proviso to Section 4O{ajjia]| of theAct. 5.Learned Counsel for the Revenue supportedthe Order passed by the learned Tribunal. 6.Having heard the learned Counsel for theparties, we are satisfied that there is no merit in thecontention of the learned Counsel for the Appellantsince the net taxable income of the Assessee has been|estimated during the current year @ 9% per annum ofthe gross sales. The said income determined on thebasis of percentage of the gross sales shall be deemed tohave taken into account all eligible deductions allowablein the hands of the Assessee and no separate deductioncan be claimed by the Assessee under the provisio to Jayaram Pathak Vs. The Commissioner of Income Tax & another 8/8 section 4Ofajjia] of the Act. The findings arrived at bythe Tribunal about estimation of income do not give riseto any substantial question of law. | The Appeal of the Assessee is without merit and is liable to be dismissed and the same is accordinglydismissed. No costs. | AN /- Sd/-.JUDGE. Sd/-.JUDGE.