REGINA JAYPRAKASH, MUMBAI V. ITO 22(2)(4), MUMBAI

ITA 1006/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2887 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 27-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 05-02-2013
• Court: TRIBUNAL
• Assessee Lawyers: AJAY R SINGH
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 143(3); 194C; 201(1); 11; 139

Judgement Text

, , D, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.2561 /MUM/2012 ASSESSMENT YEAR: 2008-09 & ITA NO.1006/MUM/2013 ASSESSMENT YEAR: 2009-10 REGINA JAYPRAKASH, 78/2312, KINARA CHS, PANT, NAGAR, GHATKOPAR (E) MUMBAI -400075 / VS. ITO 22(2) - 4 MUMBAI- (ASSESSEE ) (REVENUE) P.A. NO. ADLPR4425Q ITA NO.1312/MUM/2013 ASSESSMENT YEAR: 2009-10 ITO 22(2) - 4 MUMBAI- / VS. REGINA JAYPRAKASH, 78/2312, KINARA CHS, PANT, NAGAR, GHATKOPAR (E) MUMBAI -400075 (REVENUE) (ASSESSEE ) P.A. NO. ADLPR4425Q !' / ASSESSEE BY SHRI AJAY R. SINGH (AR) / REVENUE BY SHRI B.S. BIST ( SR. DR) REGINA JAYPRAKASH 2 # $ % & / DATE OF HEARING : 14/06/2016 % & / DATE OF ORDER: 24/06/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THESE APPEALS ARE FILED BY THE ASSESSEE AND REVENUE PERTAINING TO SAME ASSESSEE AND FILED AGAINST SEPAR ATE ORDERS OF LD. ORDER OF LD. COMMISSIONER OF INCOME TAX (APP EALS), {(IN SHORT CIT(A)}, PASSED AGAINST ASSESSMENT ORDER U/ S 143(3) OF THE ACT. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI AJAY R. SINGH, AUTHORISED REPRESENTATIVE (AR) ON BEHALF OF THE ASSESSEE AND BY SHRI B.S. BIST, DEPARTMENTAL REPRESENTATIVE (DR) ON BEHALF OF THE REVENUE. 3. THE COMMON ISSUE INVOLVED IN ALL THESE APPEALS IS WITH REGARD TO DISALLOWANCE MADE U/S 40(A)(IA) MADE BY T HE AO ON THE GROUND THAT ASSESSEE FAILED TO DEDUCT TDS U/S 1 94C ON THE AMOUNT OF FREIGHT PAID. DURING THE COURSE OF HE ARING, IT WAS STATED AT THE VERY OUTSET BY THE LD. COUNSEL OF THE ASSESSEE THAT SIMILAR ISSUE HAD COME UP IN IMMEDIAT ELY PRECEDING YEAR I.E. 2007-08, BEFORE INCOME TAX APPE LLATE TRIBUNAL IN ASSESSEES OWN CASE WHEREIN THE TRIBUNA L ACCEPTED ONE OF THE CONTENTIONS OF THE ASSESSEE AND DELETED THE DISALLOWANCE. IT WAS PRAYED THAT THESE MATTER MAY B E SENT BACK TO THE FILE OF THE AO TO DECIDE THIS ISSUE IN THE LIGHT OF REGINA JAYPRAKASH 3 DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE. IT WAS FURTHER STATED BY THE ASSESSEE THAT THIS ISSUE HAS ALSO BEE N DECIDED BY THE HONBLE DELHI HIGH COURT IN FAVOUR OF THE ASSES SEE IN THE CASE OF ANSAL LAND MARK TOWNSHIP (P) LTD. 373 ITR 6 35 3.1. PER CONTRA, LD. DR RELIED UPON THE JUDGMENTS OF HO NBLE KERLA HIGH COURT IN THE CASE OF PRUDENTIAL LOGISTICS AND TRANSPORTS V. ITO [2014] 364ITR 689 (KERLA). BUT LD . DR HAD NO OBJECTION IF THESE MATTERS ARE SENT BACK TO THE FILE OF THE AO TO BE DECIDED AFRESH IN THE LIGHT OF CORRECT LEGAL POSITION. 3.2. WE HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITI ES AS WELL AS ORDER OF THE TRIBUNAL OF A.Y. 2007-08. IT I S NOTED BY US THAT IDENTICAL ISSUE CAME UP BEFORE THE TRIBUNAL. T HE TRIBUNAL VIDE ITS ORDER DATED 09.04.2014 IN ITA NO.3121/MUM/ 2011 IN ASSESSEES OWN CASE ADJUDICATED THIS ISSUE IN FAVOU R OF THE ASSESSEE WITH FOLLOWING OBSERVATIONS: 10. THE NEXT CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE HAS BEEN THAT A NEW PROVISO HAS BEEN INSER TED IN SECTION 40(A)(IA) VIDE FINANCE ACT, 2012 W.E.F. 01. 04.13 WHEREIN IT HAS BEEN PROVIDED THAT IF THE ASSESSEE F AILS TO DEDUCT TDS IN RESPECT OF ANY PAYMENT TO WHICH THE T DS PROVISIONS APPLY BUT HE IS NOT DEEMED TO BE AN ASSE SSEE IN DEFAULT UNDER SECTION 201 OF THE ACT, WHICH PROVIDE S THAT IF THE PAYEE OF THE SUCH AMOUNT COMPUTED THE SAME INTO HIS INCOME TAX RETURN AND HAS PAID THE DUE TAXES, THEN SUCH AN ASSESSEE WILL NOT BE DEEMED TO BE AN ASSESSEE IN DE FAULT. THE RELEVANT PROVISIONS OF SECTION 40 (A)(IA) INCLU DING THE NEWLY INSERTED PROVISO, FOR THE SAKE OF CONVENIENCE ARE REPRODUCED AS UNDER: AMOUNTS NOT DEDUCTIBLE: 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SEC TIONS 30 REGINA JAYPRAKASH 4 TO 64, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PRO FITS AND GAINS OF BUSINESS OR PROFESSION', (A)................ (IA) ANY INTEREST, COMMISSION OR BROKERAGE, 67[REN T, ROYALTY,] FEES FOR PROFESSIONAL SERVICES OR FEES FO R TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR C ARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING O UT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER C HAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, 68[HAS NOT BEEN PAID ON OR BEFORE THE DU E DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 :] 69[PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFTER TH E DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139, S UCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE IN COME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID:] 70[PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB-SECTION (1) OF SECTION 201, THEN, FOR THE PU RPOSE OF THIS SUB-CLAUSE, IT SHALL BE DEEMED THAT THE ASSESS EE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE O F FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYE E REFERRED TO IN THE SAID PROVISO.].................. ... --------------------------------------------------- --------------------------------------- 70. INSERTED BY THE FINANCE ACT, 2012, W.E.F. 1-4- 2013. SECTION 201 OF THE ACT BEING ALSO RELEVANT IS REPRO DUCED AS UNDER: CONSEQUENCES OF FAILURE TO DEDUCT OR PAY: 201. (1) WHERE ANY PERSON, INCLUDING THE PRINCIPAL OFFI CER OF A COMPANY, (A) WHO IS REQUIRED TO DEDUCT ANY SUM IN ACCORDANC E WITH THE PROVISIONS OF THIS ACT; OR (B) REFERRED TO IN SUB-SECTION (1A) OF SECTION 192 , BEING AN EMPLOYER, DOES NOT DEDUCT, OR DOES NOT PAY, OR AFTER SO DEDUC TING FAILS REGINA JAYPRAKASH 5 TO PAY, THE WHOLE OR ANY PART OF THE TAX, AS REQUIR ED BY OR UNDER THIS ACT, THEN, SUCH PERSON, SHALL, WITHOUT P REJUDICE TO ANY OTHER CONSEQUENCES WHICH HE MAY INCUR, BE DE EMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX : 21.[PROVIDED THAT ANY PERSON, INCLUDING THE PRINCIP AL OFFICER OF A COMPANY, WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF THIS C HAPTER ON THE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED T O THE ACCOUNT OF A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT (I) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTI ON 139; (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND (III) HAS PAID THE TAX DUE ON THE INCOME DECLARED B Y HIM IN SUCH RETURN OF INCOME, AND THE PERSON FURNISHES A CERTIFICATE TO THIS EFFE CT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED]........................... --------------------------------------------------- --------------------------------------- --- 21. INSERTED BY THE FINANCE ACT, 2012, W.E.F. 1-7- 2012 --------------------------------------------------- --------------------------------------- ---- 11. THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED UPO N VARIOUS CASE LAWS OF THE HONBLE SUPREME COURT AND OF THE HONBLE HIGH COURTS TO PRESS THE POINT THAT THE NEW LY INSERTED PROVISO TO SECTION 40(A)(IA) IS IN FACT CL ARIFICATORY IN NATURE AND SHOULD BE APPLIED/RETROSPECTIVELY. ON THE OTHER HAND, THE LD. D.R. HAS ALSO RELIED UPO N VARIOUS JUDGMENTS OF THE HONBLE SUPREME COURT AS WELL THAT OF THE HONBLE HIGH COURTS OF THE COUNTRY TO PRESS THE POI NT THAT IT HAS BEEN SPECIFICALLY PROVIDED IN THE ACT THAT THE SAID PROVISO COMES INTO OPERATION W.E.F. 01.04.13 AND TH AT WHERE THE LANGUAGE OF THE SECTION AS WELL AS THE DA TE OF OPERATION OF SUCH PROVISIONS HAS BEEN MENTIONED SPECIFICALLY THE COURTS CANNOT SUPPLY WORDS TO THE PROVISIONS OR AMEND THE PROVISIONS TO GIVE IT A DIF FERENT MEANING AND FURTHER THAT THE NEWLY INSERTED PROVIS O UNDER SUCH CIRCUMSTANCES IS PROSPECTIVE IN NATURE I.E. W. E.F. 01.04.13 AND CANNOT BE APPLIED RETROSPECTIVELY. REGINA JAYPRAKASH 6 12. AT THIS STAGE, LD. COUNSEL FOR THE ASSESSEE BRO UGHT TO OUR NOTICE THAT THE ISSUE RELATING TO THE OPERATION OF THE NEWLY INSERTED PROVISO, WHETHER PROSPECTIVE OR RETR OSPECTIVE IN NATURE, HAS ALREADY BEEN RAISED BEFORE THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. M/S. GAURIM AL MAHAJAN & SONS ITA NO.1852/PN/2012 DECIDED ON 06.01.14, AS WELL AS BEFORE THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF ANTONY D. MUNDACKAL VS. AC IT ITA NO.38/COCH/2013 DECIDED ON 29.11.13, WHICH DECISION ALSO FINDS REFERENCE OF THE ORDER OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. GAURIMAL MAHAJAN & SO NS (SUPRA) ON THIS ISSUE. HE HAS FURTHER SUBMITTED TH AT AFTER CONSIDERATION OF THE MATTER, BOTH THE ABOVE CO-ORDI NATE BENCHES OF THE TRIBUNAL HAVE RESTORED THIS ISSUE TO THE FILE OF THE AO TO EXAMINE THE CONTENTION OF THE ASSESSEE IN THIS RESPECT AND DECIDE THE ISSUE AFRESH IN ACCORDANCE W ITH LAW. 13. WE HAVE PERUSED THE ORDER OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. GAURIMAL MAHAJAN & SO NS (SUPRA). THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THE SAID CASE ARE REPRODUCED AS UNDER: 8.1 HOWEVER, THE ASSESSEE HAS MADE A NEW LEGAL ARGUMENT THAT THE FINANCE ACT, 2010 HAS AMENDED THE FIRST PROVISO TO SECTION 40(A)(IA) W.E.F. 01-04-2010 AND IT HAS BEEN HELD BY VARIOUS JUDICIAL AUTHORITIES THAT SUCH AMENDMENT IS RETROSPECTIVE IN NATURE. IT IS THE SUB MISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SECOND PROVISO TO SECTION 40(A)(IA) WAS INSERTED BY THE FINANCE AC T, 2012 W.E.F. 01-04-2013 WHEREIN IT IS STATED THAT DISALLO WANCE U/S.40(A)(IA) OF THE ACT NEED NOT BE MADE IF THE AS SESSEE IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE F IRST PROVISO TO SECTION 201(1) OF THE I.T. ACT., THEREFO RE, THIS SHOULD ALSO BE HELD AS RETROSPECTIVE SINCE IT HAS B EEN INTRODUCED TO ELIMINATE UNINTENDED CONSEQUENCES WHI CH MAY CAUSE UNDUE HARDSHIP TO THE TAX PAYERS. 8.2 WE FIND SOME FORCE IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. WE FIND THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF ANTONY D. MUNDACKAL (SUPRA) RELIED ON BY LD. COUNSEL FOR THE ASSESSEE, HAD AN OCCASION TO DECIDE AN ISSUE IN THE LIGHT OF THE ABOVE ARGUMENT AND HAS RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFF ICER WITH REGINA JAYPRAKASH 7 CERTAIN DIRECTIONS. THE RELEVANT OBSERVATION OF THE TRIBUNAL AT PARA 7 OF THE ORDER READ AS UNDER: 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFUL LY PERUSED THE RECORD. ACCORDING TO THE ASSESSEE, THER E IS NO WRITTEN CONTRACT BETWEEN HIM AND THE PERSONS DOING POLISHING WORKS. ACCORDINGLY, THE ASSESSEE HAS CONT ENDED BEFORE US THAT THE PROVISIONS OF SEC. 194C SHALL NO T APPLY TO THE POLISHING CHARGES. HOWEVER, WE NOTICE THAT THE ASSESSING OFFICER HAS GIVEN A CLEAR FINDING THAT ES SENTIAL INGREDIENTS OF A CONTRACT ARE VERY MUCH AVAILABLE I N THE POLISHING WORKS ENTRUSTED BY THE ASSESSEE. FURTHER WE NOTICE THAT THE CBDT, VIDE CIRCULAR NO.433 DATED 25 -09- 1985 (1986)(157 ITR ST. 27) HAS CLARIFIED THAT THE PROVISIONS OF SEC. 194C ARE WIDE ENOUGH TO COVER ORAL CONTRACT S ALSO. A CONTRACT IS NORMALLY REDUCED IN WRITING IN ORDER TO MAKE CLEAR THE TERMS AND CONDITIONS, OBLIGATIONS OF THE PARTIES TO THE CONTRACT ETC. IF THE CONDITIONS OF CONTRACT ARE OTHERWISE UNDERSTOOD BY THE PARTIES, IN VIEW OF THE REPEATED TRANSACTIONS, IN OUR VIEW, THE ABSENCE OF A WRITTEN CONTRACT WOULD NOT MAKE ANY DIFFERENCE. IN THE INSTANT CASE, THE ASSESSEE IS REPEATEDLY GIVEN WORKS TO THE POLISHING PEOPLE AND HENCE THE TERMS AND CONDITIONS OF THE WORK WOUL D BE CLEARLY UNDERSTOOD BY BOTH THE PARTIES. ACCORDINGLY , WE REJECT THIS CONTENTION OF THE ASSESSEE AND HOLD THA T THE PROVISIONS OF SEC. 194C SHALL APPLY TO THE POLISHIN G WORKS GIVEN BY THE ASSESSEE. 7.1 ACCORDING TO LD A.R, THE ASSESSEE HAS ACTED AS A CONDUIT PIPE IN CONNECTION WITH THE POLISHING WORKS BETWEEN THE CUSTOMERS AND THE PERSON DOING POLISHIN G JOB. ACCORDINGLY, IT WAS SUBMITTED THAT THERE IS NO PROF IT ELEMENT IN THE SAID TRANSACTIONS. THE LD A.R FURTHER SUBMIT TED THAT THE ASSESSEE HAS INCLUDED THE COST OF POLISHING WOR KS IN THE SALE VALUE OF ALUMINIUM EXTRUSIONS, WITHOUT KNOWING TAX IMPLICATIONS. HOWEVER, WE NOTICE THAT THE ASSESSEE DID NOT FURNISH ANY PROOF TO SUBSTANTIATE THE ABOVE SAID CL AIMS. THE ASSESSEE, BEING A DEALER IN ALUMINIUM EXTRUSIONS, H AS ONLY SUPPLIED THE PRODUCTS AFTER CARRYING OUT THE POLISH ING WORKS ACCORDING TO THE TASTE AND REQUIREMENT OF CUSTOMERS . IT IS ONLY ONE OF THE MANY BUSINESS TECHNIQUES NORMALLY A DOPTED BY A BUSINESS MAN TO IMPROVE HIS SALES, SINCE IT WI LL BE VERY REGINA JAYPRAKASH 8 DIFFICULT FOR CUSTOMERS TO IDENTIFY THE POLISHING P EOPLE AND GET THE WORK DONE BY THEMSELVES. HENCE, WE ARE OF T HE VIEW THAT IT MAY NOT BE CORRECT TO ARGUE THAT THE CONTRA CT EXISTED BETWEEN THE CUSTOMERS AND THE POLISHING PEOPLE. IN FACT, THE CUSTOMER MAY NOT HAVE ANY CONTACT WITH THE POLISHIN G PEOPLE IN THIS TYPE OF TRANSACTIONS. HENCE, IT IS H ARD TO BELIEVE THE CLAIM OF THE ASSESSEE THAT HE HAS ACTED AS MERE CONDUIT PIPE BETWEEN THE CUSTOMERS AND POLISHING PE OPLE, ACCORDINGLY, THE CLAIM THAT THE ASSESSEE STANDS IN A FIDUCIARY CAPACITY IS ALSO LIABLE TO BE REJECTED. I N THIS KIND OF FACTUAL SITUATION, IN OUR VIEW, THE EXISTENCE OR AB SENCE OF PROFIT ELEMENT IN THE POLISHING WORKS DOES NOT MAKE ANY DIFFERENCE. 7.2 THE LD COUNSEL, BY PLACING RELIANCE ON THE DECI SION OF SPECIAL BENCH IN THE CASE OF MERYLINE SHIPPING AND TRANSPORTS (SUPRA) CONTENDED THAT THE PROVISIONS OF SEC. 40(A)(IA) SHALL APPLY ONLY TO AMOUNT PAYABLE AND NO T TO THE AMOUNT PAID. HOWEVER, THE HON'BLE GUJARAT HIGH COUR T IN THE CASE OF CIT VS. SIKANDAR KHAN N TUNVAR (357 ITR 312) AND THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (ITAT 20 OF 2013) HAVE HE LD THAT THE DECISION RENDERED BY THE SPECIAL BENCH IN THE C ASE OF MERYLINE SHIPPING & TRANSPORTS IS NOT A GOOD LAW. T HE LD A.R, HOWEVER, PLACED RELIANCE ON THE DECISION OF HO N'BLE ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING SERVICES (357 ITR 642). ON A CAREFUL PERUSAL OF THE DECISION GIVEN BY HON'BLE ALLAHABAD HIGH COURT, WE NOTICE TH AT THE HIGH COURT HAS DECIDED THE ISSUE REFERRED TO IT ON A DIFFERENT FOOTING AND HAS MADE A PASSING COMMENT AB OUT THE DECISION RENDERED BY THE SPECIAL BENCH. THUS, T HE RATIO OF THE SAID DECISION IS DIFFERENT FROM THAT RENDERE D IN THE CASE OF MERYLINE SHIPPING AND TRANSPORTS BY THE SPE CIAL BENCH. HENCE, WE ARE INCLINED TO REJECT THE CONTENT IONS OF THE ASSESSEE ON THIS POINT ALSO. 7.3 THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCO-COLA BEVERAGES LTD(SUPRA) IN ORDER TO CONTEND THAT THE R EVENUE IS NOT ENTITLED TO RECOVER TAXES, IF THE RECIPIENT HAS DECLARED THE PAYMENTS IN HIS RETURN OF INCOME. WE NOTICE THA T THE ABOVE SAID DECISION WAS RENDERED IN THE CONTEXT OF THE REGINA JAYPRAKASH 9 PROVISIONS OF SEC. 201(1) AND HENCE, WE ARE OF THE VIEW THAT THE RATIO OF THE SAID DECISION CANNOT BE APPLIED TO THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT, 7.4 THE LAST CONTENTION OF THE ASSESSEE IS THAT THE SECOND PROVISO TO SEC, 40(A)(IA) OF THE ACT, INSERTED BY T HE FINANCE ACT, 2012 WITH EFFECT FROM 1.4.2013 IS CLARIFICATOR Y IN NATURE AND HENCE THE BENEFIT OF THE SAME SHOULD BE APPLIED RETROSPECTIVELY. HOWEVER, THE CORRECTNESS OF THIS C ONTENTION HAS NOT BEEN EXAMINED BY THE TAX AUTHORITIES. HENCE , IN THE INTEREST OF NATURAL JUSTICE, WE ARE OF THE VIEW THA T THIS CONTENTION OF THE ASSESSEE REQUIRES EXAMINATION AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE MODIFY TH E ORDER OF THE LD.CIT(A) AND SET ASIDE THIS GROUND TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE ABOVE SAID CONTENTION OF THE ASSESSEE AND DECIDE THE SAME IN ACCORDANCE WITH LAW, AFTER AFFORDING NECESSARY OPPO RTUNITY OF BEING HEARD. WE MAKE IT CLEAR THAT WE HAVE, IN E FFECT, REJECTED ALL THE CONTENTIONS OF THE ASSESSEE EXCEPT THE GROUND RELATING TO APPLICABILITY OF THE SECOND PROV ISO TO SEC.40(A)(IA) OF THE ACT TO THE YEAR UNDER CONSIDER ATION. 8.3 SINCE THE ABOVE ARGUMENTS ARE BEING ADVANCED BE FORE THE TRIBUNAL FOR THE FIRST TIME AND THE CORRECTNESS OF THE CONTENTION HAS NOT BEEN EXAMINED BY THE TAX AUTHORI TIES, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF T HE COCHIN BENCH OF THE TRIBUNAL CITED (SUPRA) AND IN THE INTE REST OF JUSTICE, WE RESTORE THIS ISSUE TO THE FILE OF THE A SSESSING OFFICER WITH A DIRECTION TO EXAMINE THE ABOVE CONTE NTION OF THE ASSESSEE AND DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW. NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL GIVE DUE OPPORTUNITY OF BEING HEARD TO THE AS SESSEE. WE HOLD AND DIRECT ACCORDINGLY. 14. SINCE IN THIS CASE ALSO THE ABOVE ARGUMENTS WER E RAISED BY THE ASSESSEE FOR THE FIRST TIME BEFORE TH E TRIBUNAL AND THE CONTENTION OF THE ASSESSEE HAS NOT BEEN EXA MINED BY THE LOWER AUTHORITIES, HENCE, RESPECTFULLY FOLLO WING THE DECISIONS OF THE CO-ORDINATE BENCHES OF THE TRIBUNA L I.E. OF COCHIN BENCH AS WELL AS OF PUNE BENCH, WE RESTORE T HIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO EXA MINE THE ABOVE RAISED CONTENTION OF THE ASSESSEE AND DECIDE THE REGINA JAYPRAKASH 10 ISSUE AFRESH, ON THIS CONTENTION ONLY, IN ACCORDANC E WITH LAW. IT IS MADE CLEAR THAT WE HAVE REJECTED ALL OTH ER CONTENTIONS OF THE ASSESSEE ON THIS ISSUE EXCEPT TH E PLEA RELATING TO APPLICABILITY OF THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. 3.3. IT IS FURTHER NOTED BY US THAT LAW IN THIS REGARD HAS BEEN FURTHER CLARIFIED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF ANSAL LAND MARK TOWNSHIP (P) LTD (SUPRA), THE OBSERVATIONS OF HONBLE DELHI HIGH COURT ARE VERY U SEFUL ON THIS ISSUE. IT HAS BEEN HELD BY HONBLE HIGH COURT THAT SECTION 40A)(IA) OF THE INCOME-TAX ACT, 1961, IS AIMED AT E NSURING THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION I N THE HANDS OF AN ASSESSEE IN A SITUATION IN WHICH INCOME EMBED DED IN SUCH EXPENDITURE HAS REMAINED UNTAXED DUE TO TAX WITHHOLDING LAPSES BY THE ASSESSEE. IT IS NOT A PEN ALTY FOR TAX WITHHOLDING LAPSE BUT IT IS A SORT OF COMPENSATORY DEDUCTION RESTRICTION FOR AN INCOME GOING UNTAXED DUE TO TAX WITHHOLDING LAPSE. THE INSERTION OF THE SECOND PROVISO TO SECTI ON 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETRO SPECTIVE EFFECT FROM APRIL 1, 2005, BEING THE DATE FROM WHICH SUB-CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY THE FINANCE ( NO. 2) ACT, 2004. THE FIRST PROVISO TO SECTION 201 (1) OF THE A CT HAS BEEN INSERTED TO BENEFIT THE ASSESSEE. IT ALSO STATES TH AT WHERE A PERSON FAILS TO DEDUCT TAX AT SOURCE ON THE SUM PAI D TO A RESIDENT OR ON THE SUM CREDITED TO THE ACCOUNT OF A RESIDENT, SUCH PERSON SHALL NOT BE DEEMED TO BE AN ASSESSEE I N DEFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139. WHAT IS COMMON TO BOTH PR OVISOS TO REGINA JAYPRAKASH 11 SECTIONS 40(A)(IA) AND 201(1) OF THE ACT IS THAT AS LONG AS THE PAYEE OR RESIDENT HAS FILED ITS RETURN OF INCOME DI SCLOSING THE PAYMENT RECEIVED BY AND IN WHICH THE INCOME EARNED BY IT IS EMBEDDED AND HAS ALSO PAID TAX ON SUCH INCOME, THE ASSESSEE WOULD NOT BE TREATED AS A PERSON IN DEFAULT. WITH T HESE OBSERVATIONS IT WAS HELD BY HONBLE HIGH COURT THAT WHERE THE PAYEES HAD FILED RETURNS AND OFFERED THE SUMS RECEI VED TO TAX, THEN NO DISALLOWANCE COULD BE MADE UNDER SECTION 40 (A)(IA). 3.4. IT WAS FURTHER SUBMITTED BY THE LD. COUNSEL THAT I N THE YEAR BEFORE US ALSO MOST OF THE PAYEES ARE SAME AS WERE IN AY 2007-08 AND THEIR INCOME HAS BEEN DULY ASSESSED BY THE INCOME TAX DEPARTMENT IN THEIR RESPECTIVE HANDS. TH EREFORE, IN VIEW OF AMENDMENT MADE TO SECOND PROVISO TO SECT ION 40(A)(IA) BY FINANCE ACT, 2012, THE DISALLOWANCE SH OULD NOT BE MADE BY THE AO IF THE PAYMENTS MADE TO PAYEES HAVE BEEN ASSESSED IN THEIR RESPECTIVE HANDS. UNDER THESE CIRCUMSTANCES, RESPECTIVELY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2007-08 AS WELL AS AFORESAID ORDER OF HONBLE DELHI HIGH COURT, WE SEND THIS ISS UE INVOLVED IN A.Y. 2008-09 AND 2009-10 ALSO BACK TO THE FILE O F THE AO. THE AO SHALL DECIDE THIS ISSUE IN THE LIGHT OF THE LEGAL POSITION AS DISCUSSED ABOVE. THE AO IS DIRECTED TO VERIFY TH IS FACT AFTER TAKING REQUISITE GUIDANCE FROM THE AFORESAID JUDGME NTS AND DECIDE THIS ISSUE AFTER GIVING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. IN CASE THE NEED ARISES, THE AO SH OULD USE APPROPRIATE POWERS UNDER THE LAW TO VERIFY THESE FA CTS DIRECTLY FROM THE PAYEES AND/OR RESPECTIVE ASSESSING OFFICER S OF THE REGINA JAYPRAKASH 12 PAYEES. IN CASE INCOME OF THE PAYEES ARE ASSESSED A ND IMPUGNED SUM HAS BEEN INCLUDED IN THE ACCOUNTS OF T HE PAYEES, THEN NO DISALLOWANCE SHOULD BE MADE U/S 40( A)(IA) IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF NON-DEDUCTI ON OF TAX AT SOURCE. WITH THESE DIRECTIONS ALL APPEALS ARE TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. 4. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE A ND REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES IN TERM S OF OUR ORDER AS DISCUSSED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JUNE, 2016. SD/- (JOGINDER SINGH) SD/- (ASHWANI TANEJA) '# / JUDICIAL MEMBER $# / ACCOUNTANT MEMBER # $ MUMBAI; ( DATED: 24/06/2016 CTX? P.S/. . . %'&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. / / # 0 ( * ) / THE CIT, MUMBAI. 4. / / # 0 / CIT(A)- , MUMBAI 5. 34 - , / *& 5 , # $ / DR, ITAT, MUMBAI 6. 6! 7$ / GUARD FILE. / BY ORDER, .3* - //TRUE COPY// / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI