Pawankumar Jyotiprasad Agarwal, Pune V. Income-tax Officer, Pune

ITA 1016/PUN/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3038 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 24-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Opportunity of being heard; Retrospective amendment; Non-deduction of tax
• Section: 201(1)

Judgement Text

SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE . , BEFORE SHRI D. KARUNAKARA RAO, AM . / ITA NO.1016/PUN/2017 / ASSESSMENT YEAR : 2012-13 PAWANKUMAR JYOTIPRASAD AGARWAL, NEAR CENTURY ENKA COLONY NO.1 A/P. BHOSARI, NEAR NASHIK ROAD, PUNE 411039 PAN : AANPAO4865G . /APPELLANT VS. ITO, WARD-8(1), PUNE . / RESPONDENT / APPELLANT BY : SHRI C.H. NANIWADEKAR / RESPONDENT BY : SHRI PANKAJ GARG / DATE OF HEARING : 17.05.2018 / DATE OF PRONOUNCEMENT: 25.05.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A)-9, PUNE, DATED 13-01-2017 FOR THE ASSESSMENT YEAR 2012-13. 2. GROUNDS RAISED BY THE ASSESSEE READ AS UNDER : 1. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED ON FACTS AND IN LAW IN UPHOLDING DISALLOWANCE OF RS. 35,07 , 252 BEING INTEREST EXPENSES U/S 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX A T SOURCE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN NOT ADMITTING AND APPRECIATING THE CO NTENTIONS/ARGUMENTS /FRESH EVIDENCE FURNISHED BY THE ASSESSEE DURING AP PELLATE PROCEEDINGS ON TECHNICAL GROUNDS WITHOUT APPRECIATING THAT THESE R ELATED TO A LEGAL GROUND/PLEA SET UP BY THE ASSESSEE AND HE OUGHT TO HAVE CONSIDERED/ADMITTED THESE . IN ANY CASE , HE ERRED ON PLACING RELIANCE ON KERALA HIGH COURT ' S DECISION IN 364 ITR 689 WHEREIN THE FACTS WERE EN TIRELY DIFFERENT. 3. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE AMENDMENT MADE VIDE SECOND PROVISO TO SEC. 40(A)(IA) HAS A RETROSPECTIVE EFFECT AS HAS BE EN JUDICIALLY HELD AND CONSEQUENTLY NO DISALLOWANCE U/S. 40(A)(IA) WAS WARRANTED. ITA NO.1016/PUN/2017 PAWANKUMAR JYOTIPRASAD AGARWAL 2 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE OR SUBSTITUTE ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. 3. BRIEFLY STATED RELEVANT FACTS ARE THAT ASSESSEE IS AN INDIVIDUAL AND IN THE ENGAGED IN THE BUSINESS OF SALE OF FOOTWEAR ON WHOL ESALE BASIS. ASSESSEE FILED THE RETURN OF INCOME ON 24-09-2012 DECLARING TOTAL INCOME OF RS.9,03,032/-. IN THE SCRUTINY PROCEEDINGS, AO NOTICED THAT ASSESSEE DEBITED CERTAIN INTEREST EXPENSES AMOUNTING TO RS.42,17,138/- WITHOUT DEDUCT ING TDS. THE DETAILS OF THE SAME ARE GIVEN AS UNDER : SR.NO. NAME OF THE PARTY TO WHOM INTEREST PAID TOTA L AMOUNT PAID 1 INTEREST ON LOAN PAID TO SHRIRAM FINANCE RS.66,18 0 2 INTEREST ON LOAN PAID TO EDELWEISS FINANCE RS.11, 98,065 3 INTEREST ON LOAN PAID TO CITY FINANCE RS.5,12,217 4 INTEREST ON LOAN PAID TO FUTURE MONEY RS.23,97,56 6 5 INTEREST ON LOAN PAID TO BARCLAY FINANCE RS.42,48 0 TOTAL RS.42,17,138 IN RESPONSE TO THE AOS PROPOSAL TO INVOKE THE PROV ISIONS OF SECTION 40(A)(IA) OF THE ACT, THE ASSESSEE EXPLAINED THAT AN AMOUNT OF R S.7,09,886/- RELATES TO PRE- CLOSURE AND PROCESSING CHARGES PAID TO FUTURE MONEY LISTED AT SL.NO.4. ASSESSEE COULD NOT EXPLAIN THE BALANCE AMOUNT. AO REJECTED THE ASSESSEES SUBMISSION THAT THE AMENDED PROVISIONS OF SECTION 40(A)(IA) OF THE ACT HELPS THE ASSESSEE. THUS, THE AO MADE THE ADDITION OF RS.35,07,252/- INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. WHILE MAKING DISALLOWANCE, T HE AO RELIED ON THE JUDGMENTS OF HONBLE CALCUTTA AND GUJARAT HIGH COURT IN THE C ASE OF CIT VS. CRESCENT EXPORTS SYNDICATE 33 TAXMAN.COM 259 (CALCUTTA) AND CIT VS. SIKANDAR KHAN N. TUNWAR 33 TAXMAN.COM 133 (GUJARAT) 4. BEFORE THE FIRST APPELLATE PROCEEDINGS, THE ASSE SSEE FURNISHED CERTIFICATES IN FORM 26A IN RESPECT OF ECL FINANCE LTD. (EDELWEI SS FINANCE) AND CAPITAL FIRST LTD. (FORMERLY KNOWN AS FUTURE CAPITAL HOLDINGS LTD . HOWEVER, THE CIT(A) HELD THAT NO SUCH SUBMISSIONS WERE MADE BEFORE THE AO RE GARDING THESE ADDITIONAL ITA NO.1016/PUN/2017 PAWANKUMAR JYOTIPRASAD AGARWAL 3 EVIDENCES AND THE ASSESSEE HAS NOT MADE ANY REQUEST UNDER RULE 46A OF THE ACT. CIT(A) CONFIRMED THE DISALLOWANCE IGNORING THE ASSE SSEE SUBMISSIONS RELYING ON THE ORDER OF AGRA BENCH OF THE TRIBUNAL IN THE CASE OF RAJEEV KUMAR AGARWAL VS. CIT IN ITA NO.337/AGRA/2013, DATED 29-05-2013. 5. AGGRIEVED WITH THE ORDER OF CIT(A) THE ASSESSEE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL WITH THE GROUNDS EXTRACTED ABOV E. 6. BEFORE ME, AT THE OUTSET, LD. COUNSEL FOR THE AS SESSEE SUBMITTED THAT THE ISSUE RAISED IN THE GROUNDS NEEDS TO BE REMANDED TO THE FILE OF AO CONSIDERING THE RATIO LAID DOWN BY THE PUNE BENCH OF THE TRIBUNAL I N THE CASE OF VIVEK DATTATRAYA GUPTE-HUF IN ITA NOS. 406 AND 407/PN/2014, DATED 16 -12-2015. HE SUBMITTED THAT THIS IS A CASE WHERE THE ASSESSEE MADE INTERES T PAYMENTS ON THE LOANS TAKEN FROM THE 5 PARTIES MENTIONED ABOVE. 7. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED ON THE ORDERS OF THE AO/CIT(A). 8. I HEARD BOTH THE PARTIES ON THIS ISSUE AND PERUS ED THE DECISION RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. I FIND THAT THE TRIBUNAL IN THE CASE OF VIVEK DATTATRAYA GUPTE-HUF VS. ITO (SUPRA) WHILE REMANDIN G THE ISSUE TO THE FILE OF AO RELIED ON THE DECISION OF PUNE BENCH OF THE TRIBUNA L IN THE CASE OF ACIT VS. BHAVOOK CHANDRAPRAKASH TRIPATHI (2015) 43 CCH 292 ( PUNE TRIBUNAL). FOR THE SAKE OF COMPLETENESS, I PROCEED TO EXTRACT THE OPER ATIONAL PARAS OF THE ORDER OF TRIBUNAL (SUPRA) 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE POINTED OUT THAT PUNE BENCH OF TRIBUNAL HAVE TAKEN A CONSISTENCY VIE W THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WERE ATTRACTED TO AN E XPENDITURE TO WHICH PROVISIONS OF TAX DEDUCTION AT SOURCE ARE APPLICABL E, IRRESPECTIVE OF THE FACT WHETHER THE SAME IS PAID AT ANY TIME DURING THE PRE VIOUS YEAR AND WAS NOT PAYABLE AT THE CLOSE OF YEAR. THE LEARNED AUTHORIZE D REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT PUNE BENCH OF TRI BUNAL HOWEVER, HAS FURTHER TAKEN NOTE OF SECOND PROVISO TO SECTION 40( A)(IA) OF THE ACT, WHICH WAS INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01.04. 2013, WHEREIN IT IS PROVIDED THAT THE SAID PROVISIONS WOULD NOT BE APPL ICABLE IF THE ASSESSEE ITA NO.1016/PUN/2017 PAWANKUMAR JYOTIPRASAD AGARWAL 4 WAS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER F IRST PROVISO TO SECTION 201(1) OF THE ACT. THE MATTER WAS RESTORED BACK TO THE FILE OF ASSESSING OFFICER TO CONSIDER THE PLEA OF THE ASSESSEE BASED ON THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT. RELIANCE IN THIS REGA RD WAS PLACED ON THE RATIO LAID DOWN IN ACIT VS. BHAVOOK CHANDRAPRAKASH TRIPAT HI (2015) 43 CCH 292 (PUNE-TRIB). 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAS PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST ISSUE ARISING IN THE PRESENT APPEAL IS WHETHER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE ATTRACTED TO AN EXPENDITUR E, WHICH WAS NOT PAYABLE AT THE CLOSE OF THE YEAR. THE PUNE BENCHES OF TRIBU NAL HAVE CONSISTENTLY TAKEN VIEW THAT THE SAID PROVISIONS ARE ATTRACTED I RRESPECTIVE OF THE EXPENDITURE BEING PAID DURING THE YEAR AND NOTHING BEING PAYABLE AT THE CLOSE OF THE YEAR. HENCE, WHERE THE ASSESSEE HAD MA DE PAYMENT ON ACCOUNT OF INTEREST EXPENDITURE TO WHICH THE PROVISIONS OF SECTION 194A OF THE ACT ARE APPLICABLE, THE ONUS WAS UPON THE ASSESSEE TO DEDUC T TDS AND IN ABSENCE OF THE SAME, THE SAID EXPENDITURE IS LIABLE TO THE DISALLOWED IN THE HANDS OF ASSESSEE, IN VIEW OF THE PROVISIONS OF SECTION 40(A )(IA) OF THE ACT. WE UPHOLD THE ORDER OF CIT(A) IN THIS REGARD. 10. NOW, COMING TO THE SECOND ASPECT OF THE ISSUE I .E. NEW LEGAL PLEA RAISED BY THE ASSESSEE IN VIEW OF SECOND PROVISO TO SECTIO N 40(A)(IA) OF THE ACT, WHICH WAS INSERTED BY THE FINANCE ACT, 2012. THE TR IBUNAL IN ACIT VS. BHAVOOK CHANDRAPRAKASH TRIPATHI (SUPRA) WHILE ADJUD ICATING SIMILAR ISSUE HAD OBSERVED AS UNDER:- 4. FOLLOWING THE AFORESAID PRECEDENT, WE HEREBY RE VERSE THE DECISION OF THE CIT(A). HOWEVER, AT THE TIME OF HEARING, THE LD. REPRESENTATIVE FOR THE RESPONDENT-ASSESSEE MADE A NEW LEGAL ARGUME NT THAT SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT WAS INSERTE D BY FINANCE ACT, 2012 W.E.F. 01.04.2013, WHEREBY IT IS PROVIDED THAT THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT WOULD NOT BE MADE IF THE A SSESSEE IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SECTION 201(1) OF THE ACT. THE STAND OF THE ASSESSEE IS THA T THE SAID PROVISO SHOULD BE UNDERSTOOD AS RETROSPECTIVE IN NATURE AS IT HAS BEEN INTRODUCED TO ELIMINATE UNINTENDED CONSEQUENCES WHIC H MAY CAUSE UNDUE HARDSHIPS TO THE TAX PAYERS. IT WAS POINTED O UT THAT IN SIMILAR CIRCUMSTANCES, THE PUNE BENCH OF THE TRIBUNAL IN TH E CASE OF ITO VS. M/S GAURIMAL MAHAJAN & SONS VIDE ITA NO.1852/PN/201 2 DATED 06.01.2014 FOLLOWING THE DECISION OF THE COCHIN BEN CH OF THE TRIBUNAL IN THE CASE OF ANTONY D. MUNDACKAL VS. ACIT VIDE IT A NO.38/COCH/2013 DATED 29.11.2013 HAS RESTORED THE M ATTER BACK TO THE FILE OF THE ASSESSING OFFICER. IN THE PRECEDENT DATED 06.01.2014 (SUPRA), THE TRIBUNAL NOTED THAT SUCH A PLEA WAS RA ISED FOR THE FIRST TIME BEFORE THE TRIBUNAL AND THE CORRECTNESS OR OTH ERWISE OF THE CONTENTIONS RAISED WAS NOT EXAMINED BY THE LOWER AUT HORITIES. THEREFORE, THE TRIBUNAL RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINATION AFRESH, FOLLOWING THE DECISION OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF ANTONY D. MUNDACKAL (SUPRA) IN A SIMILAR CIRCUM STANCE. THE LD. REPRESE NTATIVE SUBMITTED THAT THE MATTER BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER IN THE LIGHT OF THE ORDER OF THE TRIBUNAL DATED 06,01. 2014 (SUPRA). THE AFORESAID PLEA OF THE RESPONDENT-ASSESSEE HAS NOT B EEN SERIOUSLY OPPOSED BY THE LD. DEPARTMENTAL REPRESENTATIVE APPE ARING FOR THE REVENUE. 5. FOLLOWING THE AFORESAID PRECEDENT, WE THEREFORE DEEM IT FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF TH E ASSESSING OFFICER WHO SHALL CONSIDER THE PLEA OF THE ASSESSEE BASED O N THE SECOND ITA NO.1016/PUN/2017 PAWANKUMAR JYOTIPRASAD AGARWAL 5 PROVISO TO SECTION 40(A)(IA) OF THE ACT INSERTED BY THE FINANCE ACT W.E.F. 01.04.2013 IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL CONTAINED IN ITS ORDER DATED 06.01.2014 (SUPRA). NE EDLESS TO SAY, THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASON ABLE OPPORTUNITY OF BEING HEARD BEFORE PASSING AN ORDER AFRESH ON TH IS ASPECT AS PER LAW. 11. THE ISSUE RAISED IN THE PRESENT APPEALS IS SQUA RELY COVERED BY THE ORDER OF TRIBUNAL (SUPRA) AND FOLLOWING THE SAME PARITY O F REASONING, WE DEEM IT FIT TO RESTORE THE MATTER BACK TO THE FILE OF ASSES SING OFFICER, WHO SHALL CONSIDER THE PLEA OF THE ASSESSEE BASED ON THE PROV ISIONS OF THE ACT INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01.04.2013 AND IN L INE WITH EARLIER ORDER OF THE TRIBUNAL DATED 06.01.2014 (SUPRA), THE ASSESSIN G OFFICER IS DIRECTED TO ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW AFTER A FFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 12. THE FACTS AND ISSUES IN ITA NO.407/PN/2014 ARE IDENTICAL TO THE FACTS AND ISSUES IN ITA NO.406/PN/2014 AND OUR DECISION I N ITA NO.406/PN/2014 SHALL APPLY MUTATIS MUTANDIS TO ITA NO.407/PN/2014. CONSIDERING THE FACTS OF THE CASE BEFORE THE TRIBUN AL (SUPRA) ARE IDENTICAL TO THE FACTS OF THE PRESENT CASE, I REMIT THE ISSUE BACK TO THE FILE OF AO FOR FRESH ADJUDICATION WITH SIMILAR DIRECTIONS. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 25 TH DAY OF MAY, 2018. SD/- (D.KARUNAKARA RAO) / ACCOUNTANT MEMBER / PUNE; DATED : 25 TH MAY, 2018. SATISH / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 9, PUNE 4. / THE CIT - 9, PUNE 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE