1987 (11) TMI 117 - AT - Income Tax

Issues Involved:
1. Credit for tax deducted at source (TDS) amounting to Rs. 9,33,630.
2. Disallowance of travelling expenses.
3. Disallowance of motor car expenses.
4. Addition of sales tax penalty.
5. Charging of interest under sections 139(8) and 215/217.

Detailed Analysis:

1. Credit for Tax Deducted at Source (TDS):

The primary issue is the CIT(A)'s order upholding the ITO's action in not allowing the assessee's claim for credit of TDS aggregating to Rs. 9,33,630. The TDS certificates were furnished by the assessee during the original assessment proceedings. The ITO withdrew the credit on the grounds that the dates for deposit of the sums deducted were not furnished in the TDS certificates. The CIT(A) observed that the parties who issued the TDS certificates were "the sister concerns of the assessee" and had not deposited the deducted tax with the Government even after 5/6 years. The CIT(A) termed the TDS certificates as "mere scraps of paper" and upheld the ITO's action.

The assessee challenged these observations, arguing that credit for TDS under section 194A cannot be denied merely because the tax was not paid to the Government by the deductor. The assessee's counsel referred to sections 191, 194A, 198, 199, 203, 205, and 206, emphasizing that the person who suffers tax deduction cannot be taxed again due to the default of the deductor. The counsel cited Supreme Court decisions to support this argument. However, the Tribunal noted that no direct demand was raised on the assessee and upheld the CIT(A)'s order, finding that the TDS certificates were not in accordance with sections 199, 203, and Form 19A.

2. Disallowance of Travelling Expenses:

The ITO disallowed Rs. 15,665 out of the travelling expenses claimed by the assessee, referring to Rule 6D. The CIT(A) restricted this disallowance. The Tribunal found that the details of actual travelling and period of stay were not furnished. A comparative chart showed that disallowances in earlier years were significantly lower. Therefore, the Tribunal restricted the addition to Rs. 5,000, considering the past disallowances.

3. Disallowance of Motor Car Expenses:

The ITO disallowed Rs. 4,000 out of the motor car expenses claimed by the assessee. The CIT(A) upheld this disallowance. The Tribunal found the disallowance reasonable, considering the total expenditure claimed and the fact that cars were also used for personal purposes of the directors. Therefore, the disallowance was confirmed.

4. Addition of Sales Tax Penalty:

The ITO added back a sales tax penalty of Rs. 10,000. The CIT(A) upheld this addition. The Tribunal found that the facts mentioned by the lower authorities were not in dispute and upheld the addition.

5. Charging of Interest under Sections 139(8) and 215/217:

The ITO charged interest under sections 139(8) and 215/217. The CIT(A) upheld this charging of interest. The Tribunal noted that the assessee's counsel did not seriously contest this ground and upheld the CIT(A)'s order, referring to the Supreme Court decision in Central Provinces Manganese Ore Co. Ltd vs. CIT, which allows disputing the levy of interest in appeal only if the assessee denies its liability to the levy.

Conclusion:

The appeal was allowed in part. The Tribunal upheld the CIT(A)'s order regarding the TDS credit, disallowance of motor car expenses, and addition of sales tax penalty. The disallowance of travelling expenses was restricted to Rs. 5,000. The charging of interest under sections 139(8) and 215/217 was also upheld.

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