Jakhotia Plastics Limited, Hyderabad V. DCIT, Hyderabad

CO 46/HYD/2009

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2811 (ITAT-HYDERABAD)
• Duration Of Justice: 7 year(s) 6 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 14-02-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 05-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: C P RAMASWAMY
• Keywords: Reopening of assessment; Non-deduction of tax; Difference of opinion; Procedural lapse; Reason to believe; Change of opinion
• Section: 43B; 143(3); 194C; 147; 148

Judgement Text

1 ITA.NO.840/HYD/2009 & CO.NO.46/HYD/2009 JAKHOTIA PLASTICS P. LTD., HYDERABAD. IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ITA.NO.840/HYD/2009 ASSESSMENT YEAR 2005-2006 THE DCIT, CIRCLE-2(1) HYDERABAD. VS. JAKHOTIA PLASTICS P. LTD., 3-5-885/A, HIMAYAT NAGAR, HYDERABAD. PAN AAACJ5070A (APPELLANT) (RESPONDENT) CROSS OBJECTION NO.46/HYD/2009 ARISING OUT OF ITA.NO.840/HYD/2009 - ASSESSMENT YEAR 2005-2006 JAKHOTIA PLASTICS P. LTD., 3-5-885/A, HIMAYAT NAGAR, HYDERABAD. PAN AAACJ5070A VS. THE DCIT, CIRCLE-2(1) HYDERABAD. (APPELLANT) (RESPONDENT) FOR REVENUE : SMT. SUMAN MALIK FOR ASSESSEE : SHRI C.P. RAMASWAMY DATE OF HEARING : 14.02.2017 DATE OF PRONOUNCEMENT : 22.02.2017 ORDER PER G. PAVAN KUMAR, J.M. THE REVENUE HAS FILED THE APPEAL AND THE ASSESSEE H AS FILED THE CROSS OBJECTIONS AGAINST THE ORDER OF CIT(A)-3, HYD ERABAD IN ITA.NO.0283 & 284/CIT(A)-III/08-09 DATED 14.05.2009 PASSED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE I.T. ACT, 19 61. 2 ITA.NO.840/HYD/2009 & CO.NO.46/HYD/2009 JAKHOTIA PLASTICS P. LTD., HYDERABAD. 2. FOR THE SAKE OF CONVENIENCE, WE TAKE-UP THE CROSS- OBJECTIONS FILED BY THE ASSESSEE. THE ASSESSEE HAS RAISED THREE CROSS-OBJECTIONS (I) CHALLENGING THE VALIDITY OF RE-ASSESSMENT (II) THE AS SESSEE HAS OBJECTED TO THE ADDITION CONFIRMED RS.31,14,625 BY THE CIT(A) ON PAYMENT MADE THROUGH THE SUPERVISOR TO THE WORKERS UNDER THE PROVISIO NS OF SECTION 194C AND APPLICABILITY OF SECTION 40(A)(IA) AND (III ) THE CIT(A) HAS SUSTAINED THE ADDITION OF RS.1,02,859 UNDER P.F. AND R S.4391 UNDER THE HEAD ESI TOWARDS THE CONTRIBUTION OF EMPLOYEES SHAR E WHICH WAS PAID BEFORE DUE DATE OF FILING OF RETURN OF INCOME. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-C OMPANY IS ENGAGED IN MANUFACTURE OF PP WOVEN SACKS FOR CEMENT I NDUSTRY AND FILED THE RETURN OF INCOME ON 03.10.2005 WITH TOTAL INC OME NIL AFTER SETTING OFF OF THE BROUGHT FORWARD LOSSES OF RS.51,72,2 47 AND ALSO ADMITTED INCOME AS PER THE PROVISIONS OF SECTION 115JB. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1). THE LD. A .O. ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 26.02.2008. IN RESPONS E THE LD. A.R. OF THE ASSESSEE FILED LETTER DATED 09.04.2008 TO CONSIDER THE RETURN OF INCOME FILED ON 03.10.2005 AS THE RETURN FILED IN RE SPONSE TO THE NOTICE UNDER SECTION 148 OF THE ACT SUBSEQUENTLY, THE LD. A.O. ISSUED NOTICE UNDER SECTION 143(2) OF THE ACT. THE LD. AUTHORISED R EPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND SUBMITTED THE INFORMATION. THE A.O. FOUND THAT THE ASSESSEE HAS NOT DEDUCTED TAX ON PAYMENTS TO CONTRACTORS AND SUB-CONTRACTORS AND MADE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT RS.1,52,59,528. SIMILARLY, THE A. O. ON PERUSAL OF THE TAX AUDIT REPORT IN FORM 3CD FOUND THAT EMPLOYEES CONTRI BUTION OF PF AND ESI FOR THE FINANCIAL YEAR 2005-06 WAS NOT PAID W ITHIN THE DUE DATE SPECIFIED BY THE SAID ACT AND THE LD. A.R. FILED WRITTE N SUBMISSION ON 01.12.2008 RELYING ON THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF ALLIED MOTORS P. LTD., VS. CIT (1997) 224 IT R 677 AND OTHER 3 ITA.NO.840/HYD/2009 & CO.NO.46/HYD/2009 JAKHOTIA PLASTICS P. LTD., HYDERABAD. DECISIONS. BUT THE A.O. HAS NOT ACCEPTED THE FACTS AND JUDICIAL DECISIONS AND CAME TO A UNILATERAL CONCLUSION THAT THE DUE DATE SPECIFIED IN THE ACT MEANS DUE DATE IN RESPECT OF THE ESI AND P.F. ACT AND IF ANY, CONTRIBUTION IS MADE BEYOND THE DUE DATE BUT WITHIN THE G RACE PERIOD, IT SHALL BE TREATED AS DEEMED PAYMENTS WITHIN THE DUE DATE. BUT IN THE PRESENT CASE, THE ASSESSEE HAS PAID THE AMOUNTS BEYOND THE DUE DATE AND THEREFORE, THE LD. A.O. MADE ADDITION OF RS.1,02,8 59 TOWARDS P.F. AND RS.4391 TOWARDS ESI TO THE RETURNED INCOME AS PER THE PROVISIONS OF SECTION 36(1)(VA) READ WITH SECTION 2(24)(X) OF THE ACT AND ALSO A.O. MADE ADDITION OF RS.39,330 TOWARDS INCOME TAX DEBITED TO THE P & L A/C AND ASSESSED TOTAL INCOME OF RS.2,05,78,855 AND P ASSED ORDER UNDER SECTION 143(3) R.W.S. 147 OF THE I.T. ACT DATED 26.12.2008. AGGRIEVED BY THE ABOVE ASSESSMENT ORDER OF THE A.O. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). 4. IN THE APPELLATE PROCEEDINGS BEFORE THE CIT(A), THE LD. A.R. ARGUED THE GROUNDS AND REITERATED THE SUBMISSIONS OF RE-ASSESSMENT PROCEEDINGS. THE LD. CIT(A) ON THE GROUND OF RE-OPEN ING OF ASSESSMENT UNDER SECTION 147 OF THE ACT FOUND THE RETURN OF INCOME WAS FILED AND WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THE LD. A.O. HAVING REASON TO BELIEVE ESCAPEMENT OF INCOME HAS ISSUED NOTI CE UNDER SECTION 148 OF THE ACT. THE LD. A.R. SUBMITTED THAT THE ACTION OF TH E A.O. IS ONLY A CHANGE OF OPINION ON THE SAME SET OF FACTS AND THERE FORE, REOPENING IS BAD IN LAW. BUT THE LD. CIT(A) RELIED ON THE DECISION OF HONBLE SUPREME COURT AND VARIOUS HIGH COURTS REJECTED THE GROUND OF TH E ASSESSEE. THE OBJECTION OF THE ASSESSEE WAS ONLY ON THE TECHNICAL GR OUND THAT THE REASONS SHOULD HAVE BEEN PROVIDED TO HIM. SINCE THE R EASONS HAVE BEEN PROVIDED TO THE ASSESSEE DURING THE APPELLATE PROCEEDI NGS BEFORE THE CIT(A) AND THE PROCEDURAL IRREGULARITY OF THE A.O. IS CURED. THE RELEVANT 4 ITA.NO.840/HYD/2009 & CO.NO.46/HYD/2009 JAKHOTIA PLASTICS P. LTD., HYDERABAD. OBSERVATIONS OF THE LD. CIT(A) IN PARAS 2.4 AND 2.5 OF HIS ORDER ARE AS UNDER : 2.4. IN THE PRESENT CASE, THE PROCEDURAL IRREGULA RITY COMMITTED BY THE ASSESSING OFFICER IN NOT FURNISHIN G THE COPY OF THE REASONS RECORDED, WAS CURED DURING THE APPEAL PROCE EDINGS BY SUPPLYING A COPY OF THE REASONS TO THE LD. AR. THE LD. AR WAS ALSO ASKED TO FILE HIS OBJECTIONS TO THE REASONS RECORDE D FOR REOPENING THE ASSESSMENT WHO RELIED ON THE DECISION OF HON'BL E RAJASTHAN HIGH COURT IN THE CASE OF GEHNA VS. UNION OF INDIA (SUPRA). THIS DECISION IN FACT SUPPORTS THE CASE OF REVENUE WHERE THE MATTER WAS ONLY REMANDED TO ASSESSING OFFICER TO SUPPLY THE RE ASONS FOR REOPENING. THE REASSESSMENT ORDER WAS NOT HELD NULL AND VOID. SINCE THE CIT(A)S POWER ARE COTERMINOUS WITH THAT OF A.O. AS HELD IN THE CASE OF JUTE CORPORATION OF INDIA [ 187 ITR 688,693 (SC) ], THE DEFECT WAS CURED DURING THE APPEAL PROCEEDINGS ITSE LF AND, THEREFORE, THERE IS NO NEED TO RESTORE THE CASE TO THE A.O. FOR CURING THE DEFECT. 2.5. IN FACT, THE APPELLANT HAD NOT MADE ANY SUBMI SSIONS ON THE REASONS RECORDED. HIS OBJECTION IS ONLY ON THE TECHNICAL GROUND THAT THE REASONS SHOULD HAVE BEEN PROVIDED TO THE A PPELLANT. SINCE THE REASONS HAVE NOW BEEN PROVIDED TO THE APPELLANT AND THE PROCEDURAL IRREGULARITY OF THE A.O. HAS BEEN RECTIF IED DURING THE APPEAL PROCEEDINGS, THE APPELLANT SHOULD NOT HAVE A NY GRIEVANCE ON THIS ACCOUNT. THE GROUND RAISED BY THE APPELLANT IS ACCORDINGLY DISMISSED. 5. THE LD. CIT(A) DEALT ON THE DISALLOWANCE OF EMPLO YEES CONTRIBUTION TOWARDS PF & ESI UNDER SECTION 36(1)(VA) O F THE ACT AND RELIED ON THE SPECIAL BENCH DECISION OF ITAT IN THE C ASE OF ITC LTD., 299 ITR (AT) 341 AND GAVE A FINDING THAT ONLY THE EMPLOYER S CONTRIBUTION IS ALLOWABLE UNDER SECTION 43B OF THE ACT AND UPHELD THE A DDITION MADE BY THE A.O. ACCORDINGLY, DISMISS THE GROUND OF THE AS SESSEE. 6. THE LD. CIT(A) FOUND THAT THE A.O. HAS DISALLOWED A SUM OF RS.1,52,59,528 DUE TO NON-DEDUCTION OF TAX AT SOURCE UN DER SECTION 40(A)(IA) AND 194C OF THE ACT AND DEALT ON THE SUBMISSI ONS FILED BY THE ASSESSEE IN RESPECT OF NON-DEDUCTION OF TDS. AS THE AS SESSEE COULD NOT 5 ITA.NO.840/HYD/2009 & CO.NO.46/HYD/2009 JAKHOTIA PLASTICS P. LTD., HYDERABAD. PRODUCE THE EVIDENCE TO SUBSTANTIATE THE CLAIM IN RESPE CT OF PAYMENT TO WORKERS AND LABOURERS, THE LD. CIT(A) UPHELD THE DISA LLOWANCE OF RS.31,14,624 BUT IN THE CASE OF OTHER PAYMENTS, THE LD . CIT(A) HAS DISCUSSED AT PARA 4.5 OF HIS ORDER AND DELETED RS.1, 17,65,406 AND PARTLY ALLOWED THE APPEAL. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL WHEREAS THE ASSESSEE HAS FILED CROSS- OBJECTIONS. 7. BEFORE US, THE LD. A.R. OF THE ASSESSEE CONTENDED THAT RE- ASSESSMENT PROCEEDINGS IS NOT IN ORDER AND RELIED ON THE JUDICIAL DECISIONS. WE HAVE PERUSED THE ASSESSMENT ORDER AND S UBMISSIONS OF THE ASSESSEE. THE REOPENING OF ASSESSMENT ISSUE HAS B EEN DEALT BY THE LD. CIT(A) EXHAUSTIVELY RELYING ON THE CASE LAWS AND CURABILITY OF DEFECT. WE FOUND THE LD. CIT(A) WHO HAS CONSIDERED THE FACTS A ND REASONS FOR REOPENING. HENCE, WE ARE INCLINED TO UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE CROSS-OBJECTION/GROUND OF THE ASSESSEE ON RE-OPENING OF ASSESSMENT. 8. THE LD. CIT(A) HAS SUSTAINED THE ADDITION OF RS.31 ,14,624 ON PAYMENTS TO LABOUR CONTRACTOR. THE LD. A.R. OF THE ASSESSEE SUBMITTED THAT THE SAID EXPENDITURE CANNOT BE DISALLOWED U NDER SECTION 40(A)(IA) OF THE ACT AND SQUARELY COVERED BY SPECIAL BENCH DECISION OF VISAKHAPATNAM TRIBUNAL IN THE CASE OF M/S. MERLYIN S HIPPING & TRANSPORTS VS. ADDL. CIT, RANGE-1, VISAKHAPATNAM 136 ITD 23 (VISAKHAPATNAM) (SB) WHEREIN THE SPECIAL BENCH OBSERV ED THAT NO TDS HAS TO BE MADE IN RESPECT OF AMOUNT WHICH HAS ALREADY PAID. SIMILAR ISSUE WAS DEALT WITH BY THE COORDINATE BENCH OF HYDE RABAD TRIBUNAL IN THE CASE OF ACIT VS. M/S. JANAPRIYA PROPERTIES P. LTD. , IN ITA.NOS.1614 & 1622 TO 1624/HYD/2012 DATED 19.01.2015, HELD AS UN DER : 6 ITA.NO.840/HYD/2009 & CO.NO.46/HYD/2009 JAKHOTIA PLASTICS P. LTD., HYDERABAD. '7. UPON HEARING THE RIVAL SUBMISSIONS, WE ARE OF T HE VIEW THAT THE DECISION OF THE ITAT SPECIAL BENCH IS BINDING ON TH E TRIBUNAL, PARTICULARLY IN VIEW OF THE CLARIFICATORY ORDER PAS SED BY THE HON'BLE HIGH COURT OF JUDICATURE AT HYDERABAD IN THE INSTAN T CASE, AND THUS, WE RESPECTFULLY FOLLOW THE DECISION OF SPECIA L BENCH IN THE CASE OF MERILYIN SHIPPING & TRANSPORT (SUPRA), AND HOLD THAT THE PROVISIONS OF S. 40(A)(IA) CANNOT BE INVOKED WHERE THE PAYMENTS WERE ALREADY MADE BY THE ASSESSEE. WE DIRECT THE AS SESSING OFFICER ACCORDINGLY. IN THE RESULT, APPEALS OF THE REVENUE INSOFAR AS THE ABOVE ISSUE IS CONCERNED, ARE HEREBY DISMISSED' . RESPECTFULLY FOLLOWING THE DECISIONS OF COORDINATE BEN CHES WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION AND ALLOW THE GROUND. 9. THE LD. CIT(A) HAS SUSTAINED THE ADDITION OF EMPLO YEES CONTRIBUTION OF PF AND ESI PAID BEFORE DUE DATE OF FI LING THE RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT. THE LD. A.R. OF THE ASSESSEE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ALOOM EXTRUSIONS 319 ITR 306 (SC) AND THE APEX COURT DECISI ON WAS CONSIDERED BY THE HONBLE HIGH COURT OF MADRAS IN TH E CASE OF CIT VS. INDUSTRIAL SECURITY AND INTELLIGENCE INDIA PVT. LTD., ( TAX APPEAL NO.585 AND 586 OF 2015 DATED 24.07.2015) AND HELD AS UNDER : 5. WE FIND THAT THE TRIBUNAL HAS RIGHTLY RELIED ON T HE DECISION OF THE SUPREME COURT IN THE CASE OF CIT V. ALOM EXTRUSION S LTD. REPORTED IN 319 ITR 306, WHEREBY, THE SUPREME COURT HELD THAT O MISSION OF SECOND PROVISO TO SECTION 43B AND AMENDMENT TO FIRS T PROVISO BY FINANCE ACT, 2003 ARE CURATIVE IN NATURE AND ARE EF FECTIVE RETROSPECTIVELY, I.E., WITH EFFECT FROM 1.4.1988 I. E., THE DATE OF INSERTION OF FIRST PROVISO. THE DELHI HIGH COURT IN THE CASE OF CIT V. AMIL LTD. REPORTED IN 321 ITR 508 HELD THAT IF THE ASSESSEE H AD DEPOSITED EMPLOYEE'S CONTRIBUTION TOWARDS PROVIDENT FUND AND ESI AFTER DUE DATE AS PRESCRIBED UNDER THE RELEVANT ACT, BUT BEFO RE THE DUE DATE OF FILING OF RETURN UNDER THE INCOME TAX ACT, NO DISAL LOWANCE COULD BE MADE IN VIEW OF THE PROVISIONS OF SECTION 43B AS AM ENDED BY FINANCE ACT, 2003. WE RESPECTFULLY FOLLOWING THE JUDICIAL HIGH COURT DECI SION, DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION AND ALLOW TH E GROUND OF THE ASSESSEE. 7 ITA.NO.840/HYD/2009 & CO.NO.46/HYD/2009 JAKHOTIA PLASTICS P. LTD., HYDERABAD. 10. IN THE RESULT, CROSS-OBJECTIONS FILED BY THE ASSES SEE ARE PARTLY ALLOWED. 11. WE TAKE-UP REVENUES APPEAL (ITA.NO.840/HYD/200 9) WHERE THE REVENUE HAS RAISED THE GROUND ON RELIEF GRA NTED BY THE LD. CIT(A) UNDER SECTION 40(A)(IA) ON JOB WORK CHARGES. SINCE WE HAVE DECIDED THE ISSUE IN ASSESSEES CROSS OBJECTIONS FOLL OWING THE SPECIAL BENCH DECISION OF VISAKHAPATNAM TRIBUNAL IN THE CASE OF MERYLIN SHIPPING AND TRANSPORT (SUPRA), WE DO NOT FIND ANY ME RITS IN THE GROUND OF THE REVENUE AND DISMISS THE REVENUE GROUND. 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED AND CROSS OBJECTIONS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.02.2017. SD/- SD/- S (B. RAMAKOTAIAH) (G.PAVAN KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 22 ND FEBRUARY, 2017 VBP/- COPY TO 1. THE DCIT, CIRCLE-2(1), B BLOCK, 8 TH FLOOR, I.T. TOWERS, HYDERABAD. 2. JAKHOTIA PLASTICS P. LTD., 3-5-885/A, HIMAYAT NAGA R, HYDERABAD. 3. CIT(A)-III, HYDERABAD. 4. CIT-II, HYDERABAD. 5. D.R. ITAT A BENCH, HYDERABAD. 6. GUARD FILE