ACIT, BHARUCH CIRCLE V. CHETAN COACH BUILDERS PVT. LTD.

TAXAP/220/2007

AI Insights

The case involves an appeal by the ACIT, Bharuch Circle against Chetan Coach Builders Pvt. Ltd., challenging the ITAT's decision which had dismissed the Revenue's appeal concerning the disallowance of certain expenses claimed by the assessee. The primary legal issue was whether the ITAT was correct in reducing the disallowance on account of late payment made to PF & ESI beyond the due date, without considering the provisions of section 43B and section 36(1)(v) of the IT Act, 1961. The High Court examined the retrospective application of the amendments to section 43B and the implications of section 36(1)(va) regarding the timing of contributions to provident funds.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 720480 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 04-12-2014
• Assessment Year: misc
• Other Referred Cases: CIT vs. Alom Extrusions Ltd., CIT vs. JMC Projects (India) Ltd., CIT vs. Gujarat State Road Transport Corporation
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: R K PATEL
• Assessee Lawyers: K M PARIKH
• Keywords: Bogus expenses; Concealment of income; MAT credit; Retrospective amendment; Unpaid PF/ESI
• Section: 271(1)(c); 274; 234B; 36(1)(v); 43B(b)

Judgement Text

"O/TAXAP/220/2007 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 220 of 2007 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ ACIT, BHARUCH CIRCLE....Appellant(s) Versus CHETAN COACH BUILDERS PVT. LTD.....Opponent(s) ================================================================ Appearance: MR KM PARIKH, ADVOCATE for the Appellant(s) No. 1 MR RK PATEL, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 04/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. This is an appeal by the appellant- revenue, seeking to challenge the order of the learned ITAT, Ahmedabad Bench ‘C’, Ahmedabad (for Page 1 of 7 O/TAXAP/220/2007 JUDGMENT short, ‘the Tribunal’), Dated : 29.03.2006, rendered in ITA No. 3116/Ahd/2003 for A.Y. 1999- 2000, whereby, it dismissed the appeal filed by the Revenue. 2. The brief facts of the case are that respondent-assessee filed its return of income for the year under consideration on 31.12.1999. subsequently, a survey was carried out at the business premises of the assessee, during which the concerned AO found that the assessee had claimed certain bogus expenses against the income. Further, the assessee declared the following amounts, during the course of survey, towards income for the A.Y.s 1998-99 & 1999-2000; A.Y. 1998-99 A.Y.s 1999-2000 Excess Labour Charges Rs. 10,192,020/- Rs. 2,80,151/- Excess Labour Charges Rs. 40,000/- - Resale Rs. 2,86,000/- - Stock Rs. 9,93,627/- Rs. 23,71,955/- Excess Cash Rs. - Rs.29,708 Total Rs.23,38,647/- Rs.26,81,814/- 3. Later on, the concerned AO made certain additions / disallowances and issued notice u/s. 274 r.w.s. 271(1)(c) of the Income Tax Act, 1961 (‘the Act’, for short) for concealment of income. Hence, the assessee approached the learned CIT(A, Page 2 of 7 O/TAXAP/220/2007 JUDGMENT who partly allowed the appeal of the assessee. Being aggrieved with the same, the Revenue carried the matter in appeal before the Tribunal, which passed the impugned order. Hence, the present appeal. 4. At the time of admitting this appeal, this Court framed the following questions of law; “[A] Whether the Appellate Tribunal is right in law and on facts in deleting the disallowance made u/s.43B(b) read with second proviso, in respect of unpaid PF/ESI amount which remained unpaid even during the grace period available? [B] Whether the Appellate Tribunal is right in law and on facts in directing the Assessing Officer to recompute interest u/s.234B after allowing credit of MAT?\" 5. Mr. Parikh, learned Counsel for the appellant-Revenue, however, invited our attention to Page-3 of the Memo of this appeal and submitted that as such the appellant has raised only one question in the present appeal, which reads as under; “Whether the ITAT was right in law and on facts in reducing the disallowance of Rs.1,21,371/- to Rs.15,100/- on account of late payment made to PF & ESI beyound due date, without Page 3 of 7 O/TAXAP/220/2007 JUDGMENT considering the provisions of section 43B and section 36(1)(v) of the IT Act, 1961?” 6. In above view of the matter, it is submitted that question [B] is not required to be answered. The second question, i.e. question [B], as stated above, is wrongly raised and does not require to be considered. 7. Mr. Parikh submitted that so far as the question involved in this appeal is concerned, i.e. the question [A], it has two parts / components. 8. Mr. Parikh submitted that so far as first part or component of question [A] is concerned, same is squarely covered by the decision of the Apex Court in “CIT VS. ALOM EXTRUSIONS LTD.”, [2009] 319 ITR 306 (SC), wherein, the Apex Court observed that when a proviso in a section is inserted to remedy unintended consequences and to make the section workable, the proviso which supplies an obvious omission therein is required to be read retrospectively in operation, particularly to give effect to the section as a whole. He also invited our attention to a decision of this Court in the case of “CIT VS. JMC PROJECTS (INDIA) LTD.” in Tax Appeal No. 451 of 2007, Dated : Page 4 of 7 O/TAXAP/220/2007 JUDGMENT 16.06.2011, wherein, this Court, while relying on the aforesaid decision of the Apex Court, observed and held as under in Para-5; “(5) The Supreme Court in the case of Commissioner of Income Tax Vs. Alom Extrusions Ltd. (supra) has observed that the omission of the second proviso to section 43B of the Income-tax Act, 1961, by the Finance Act, 2003, operated, retrospectively, with effect from April 1, 1988 and not prospectively from April 1, 2004. Earlier under the second proviso to section 43B as amended by the Finance Act, 1989, assessees were entitled to deduction only if the contribution stood credited on or before the due date given in the Provident Funds Act. This created further difficulties and on a representation made to the Finance Ministry one more amendment was made by the Finance Act, 2003. Though this amendment was made applicable with effect from April 1, 2004, the amendment was curative in nature and applied retrospectively with effect from April 1, 1988. When a proviso in a section is inserted to remedy unintended consequences and to make the section workable, the proviso which supplies an obvious omission therein is required to be read retrospectively in operation, particularly to give effect to the section as a whole. It was further held that if strict construction leads to a result not intended to be subserved by the object of the legislation, and if another construction is possible apart from the literal construction, then that construction should be preferred.” Page 5 of 7 O/TAXAP/220/2007 JUDGMENT 9. So far as the second component of question [A] is concerned, i.e. the provisions of Section 36(1)(va) is concerned, Mr. Parikh submitted that same is covered by a decision of this Court in “CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION”, [2014] taxmann.com 100 (Gujarat), wherein, this Court held that where the assessee did not deposit employee’s contribution to employee’s account in relevant fund before due date prescribed in Explanation to Section 36(1)(va), no deduction would be admissible even though he deposits same before due date under section 43B. 10. In above view of the matter, Mr. Parikh submitted that the question raised in this appeal be answered in favour of the Revenue. 11. Mr. Patel, learned Advocate for the respondent-assessee, does not dispute the aforesaid position of law. 12. In above view of the matter, having heard the learned Counsels for the parties and having gone through the material on record as well as the decisions of the Apex Court and of this Court relied on by Mr. Parikh, as stated above, since, the question raised in this appeal is squarely governed by the same and answered in Page 6 of 7 O/TAXAP/220/2007 JUDGMENT favour of the Revenue and against the assessee, we do not propose to give further reasons and the present appeal deserves to be allowed. 13. In the result, present appeal is allowed. The order of the Tribunal, Dated : 29.03.2006, is quashed and set aside. We answer the question in favour of the Revenue and against the assessee, accordingly. No order as to costs. (K.S.JHAVERI, J.) (K.J.THAKER, J) UMESH Page 7 of 7 "