DR ADI R NAZIR, MUMBAI V. ACIT 11(2), MUMBAI

ITA 1056/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84363 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 26-11-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 04-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACCHIDANAND DUBEY
• Assessee Lawyers: RAJESH ATHAVALE

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,M UMBAI - I BENCH. , , BEFORE S/SH. RAJENDRA, ACCOUNTANT MEMB ER & VIVEK VARMA, JUDICIAL MEMBER /. ITA NO.1056/MUM/2011, ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-2006-07 DR. ADI R. NAZIR, 162, RAMBHA NEPEAN SEA ROAD, MUMBAI-400006. # # # # . . . /PAN:AAAPN3551F V/S. ACIT 11(2), R.NO. 440, AAYAKAR BHAVAN, NEW MARINE LINES, MUMBAI -400020 ( #$ / APPELLANT) ( %&#$ / RESPONDENT) !'( !'( !'( !'( ) ) ) ) / ASSESSEE BY : SHRI RAJESH ATHAVALE * ) / REVENUE BY : SHRI SACCHIDANAND DUBEY ! ! ! ! * ** * (+ (+ (+ (+ / DATE OF HEARING : 26-11-2014 ,-' * (+ / DATE OF PRONOUNCEMENT : 26-11-2014 ! ! ! ! , 1961 * ** * 254 )1 ( (.( (.( (.( (.( / / / / ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! : CHALLENGING THE ORDER DATED 18.11.2010 OF THE CIT(A )-3,MUMBAI THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: BEING AGGRIEVED BY THE APPEAL ORDER PASSED BY THE L EARNED CIT(A) 3, MUMBAI, I SUBMIT THE FOLLOWING GROUNDS FOR YOUR CONSIDERATION. 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE OF PAYMENT OF PROFESSIONAL FEES OF RS. 2,40,0001- U/S 40(A)(IA) TO HIS SON DR MEHLI ADI NA ZIR. 2. THE LEARNED CIT(A) ERRED IN NOT ACCEPTING THE GR OUND THAT DR ADI R NAZIR AND DR MEHLI A NAZIR HAVE BEEN REGULAR IN FILING THEIR RETURNS OF INCOME AND BOTH HAVE PAID INCOME-TAX DUE ON THEIR INCOME FOR THE RELEVANT ASSESSMENT YEAR. THER EFORE THERE IS NO LOSS TO THE REVENUE IN DEFAULT MADE U/S 40(A)(IA). 3. THE LEARNED CIT(A) ERRED IN NOT ACCEPTING THE GR OUND THAT THE CLAIM OF PAYMENT TO HIS SON WAS A VERY RARE CASE OF TECHNICAL DEFAULT. 4. THE LEARNED CIT(A) ERRED IN NOT ACCEPTING THE FA CT THAT THE WORDS PAID AND PAYABLE IN SEC. 40(A) (IA) CLEARLY DISTINGUISH THE PAYMENTS MADE AND PAYM ENTS NOT MADE AT THE END OF THE YEAR. THE OPTION OF SYSTEM OF CASH AND MERCANTILE HAS TO BE R ECKONED WITH IN RELATION TO SEC 40(A)(IA). SINCE THE APPELLANT MAINTAINS CASH SYSTEM, SEC 40(A)(IA) WAS NOT APPLICABLE TO HIM. 5. THE DISALLOWANCE CONFIRMED BY THE LEARNED CIT(A) MAY BE RECONSIDERED AND PAYMENT MADE MAY BE ALLOWED IN FULL AS DEDUCTION. ASSESSEE HAS FILED FOLLOWING ADDITIONAL GROUND: THE APPELLANT CRAVES LEAVE TO RAISE THE FOLLOWING A DDITIONAL GROUNDS OF APPEAL AS UNDER: 1) THE PAYMENT OF PROFESSIONAL FEES OF INR 2,40,000 OU GHT TO HAVE BEEN ALLOWED AS DEDUCTION AS PER SECOND PROVISO TO SECTION 40(A)(IA) OF THE INCO ME TAX ACT. 2) THE APPELLANT SUBMITS THAT THE SECOND PROVISO TO SE CTION 40(A)(IA) OF THE INCOME TAX ACT SHOULD BE READ RETROSPECTIVELY. THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER OR A MEND THE GROUNDS OF APPEAL. 2 ITA NO. 1056/M/2011 DR. ADI R. NAZIR 2 . ASSESSEE, AN INDIVIDUAL IS A GENERAL SURGEON BY P ROFESSION. HE FILED ITS RETURN OF INCOME ON 30.10.2006 DISCLOSING INCOME OF RS. 20.36 LAKHS. TH E ASSESSING OFFICER (AO) FINALISED THE ASSESSMENT ON 28.11.2008 DETERMINING HIS INCOME AT RS. 22,70,090/-. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT ASSESSEE HAD CLAIMED A DEDUCTION OF RS. 2.40 LAKHS UNDER THE HEAD 'FEES' PAID TO THE ASSISTANT SURGEON. ON QUERY IT WAS EXPLAINED BY THE ASSESSEE THAT THE ASSESSEE HAD AVAILED SERVICES OF HIS SON, WHO IS AL SO A QUALIFIED SURGEON, DURING THE YEAR UNDER CONSIDERATION AND HAD PAID RS. 20,000/- PER MONTH F OR HIS PROFESSIONAL SERVICES. IT WAS FOUND THAT THE ASSESSEE HAD NOT DEDUCTED TDS, THEREFORE, THE A O MADE A DISALLOWANCE OF RS. 2.40 LAKHS U/S 40(A)(IA) OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA). BEFORE HIM IT WAS ARGUED THAT DR. M .A. NAZIR, THE SON OF THE ASSESSEE, HAD FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATI ON ON 26.12.2006, RETURNING INCOME OF RS. 23.77 LAKHS, THAT THE PROFESSIONAL INCOME RECEIVED FROM THE ASSESSEE AMOUNTING TO RS. 2.40 LAKHS WAS INCLUDED IN THE RETURN OF DR. M.A.NAZIR, THAT THE SON OF THE ASSESSEE HAD PAID TAX ON THE AMOUNT RECEIVED BY HIM FROM HIS FATHER, THAT IT WAS A TECHNICAL MISTAKE ON PART OF THE ASSESSEE. BEFORE HIM, IT WAS ALSO ARGUED THAT IN THE CASE OF TEJA CONSTRUCTION ITAT, HYDERABAD (129 TTJ 57 HAD HELD THAT PROVISIONS OF SECTION 40(A)(IA) WE RE APPLICABLE TO THE AMOUNTS REMAINED PAYABLE AND NOT TO THE AMOUNTS PAID, THAT THE ASSESSEE HAD ALREADY PAID THE AMOUNT IN QUESTION TO THIS SON. THE ASSESSEE ALSO RELIED UPON THE CASE OF HINDUSTAN COCO-COLA BEVERAGES PVT. LTD. (2007-(IT-2)- GJX-0353.AFTER CONSIDERING THE SUBMISSION OF THE AS SESSEE AND THE ASSESSMENT ORDER, THE FAA HELD THAT FACTS OF THE CASE OF HINDUSTAN COCO-COLA BEVERAGES PVT. LTD.(SUPRA) WERE NOT APPLICABLE TO THE CASE UNDER CONSIDERATION. AFTER ANALYSING TH E CASE OF TEJA CONSTRUCTION (SUPRA), THE FAA HELD THAT LIABILITY TO DEDUCT TAX WAS FOR BOTH I.E. FOR PAYABLE OR PAID AMOUNTS, THAT FAILURE TO DO SO WOULD RESULT IN DISALLOWANCE U/S 40(A)(IA) OF THE A CT. FINALLY, THE FAA UPHELD THE ORDER OF THE AO. 4 . BEFORE US, AUTHORISED REPRESENTATIVE (AR) ARGUED THAT THE SON OF THE ASSESSEE HAD PAID THE TAX ON THE PAYMENT RECEIVED FROM THE ASSESSEE, THAT FOR A TECHNICAL DEFAULT ADDITIONS SHOULD NOT HAVE BEEN MADE/UPHELD. HE FAIRLY ADMITTED THAT THE ISSUE OF SECTION 40(A)(IA) HAD NOT GAIN FINALITY AND DIFFERENT HIGH COURTS HAVE TAKEN OPPOSITE STAND. HE FURTHER ARGUED THAT IF THERE WAS A CONFLICT OF VIEWS/INTERPRETATION AMONG THE HIGH COURTS, THEN FA VOURING/BENEFICIAL TO THE ASSESSEE SHOULD BE RELIED UPON. REFERRING TO THE ADDITIONAL GROUND, HE STATED THAT THE SECOND PROVISO ADDED TO THE SECTION 40(A)(IA) WAS APPLICABLE FROM AY 2009-10,TH AT THE SAID AMENDMENT WAS CURATIVE IN NATURE AND HENCE APPLICABLE RETROSPECTIVELY. HE RELIED UPO N THE CASE OF SANTOSH KUMAR SHETTY (INCOME TAX APPEAL NO. 590/2013) DELIVERED BY THE HON'BLE K ARNATAKA HIGH COURT ON 15TH JULY 2014. HE ALSO REFERRED TO THE DECISION OF S.M.ANAND OF BANGA LORE TRIBUNAL (ITA/1831/BANG/2013). DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDE R OF THE AO AND THE FAA. 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL BEFORE US. UNDISPUTED FACTS OF THE CASE THAT THE ASSESSEE HAD MADE PAYMENT OF RS. 2.40 LAKHS TO HIS SON WITHOUT DEDUCTING TAX AT SOURCE, THAT THE AO HAD DISALLOWED THE SAID AMOUNT INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. WE FIND THAT THE HON'BLE KARNATAKE HIGH CO URT IN THE CASE OF SANTOSH KUMAR SHETTY (SUPRA) HAS HELD THAT SECOND PROVISO TO SECTION 40( A)(IA) IS RETROSPECTIVE.THEREFOR, WE HOLD THAT IF THE DEDUCTEE PAYS THE TAX NO DISALLOWANCE SHOULD BE MADE U/S 40(A)(IA) OF THE ACT. WE FIND THAT HON'BLE KARNATAKA HIGH COURT HAD REFERRED TO THE JU DGMENT DELIVERED BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF OM PRAKASH R. CHAUDHARY I N THE TAX APPEAL NO. 412/2013. CONSIDERING THE FACT THAT SON OF THE ASSESSEE HAD P AID THE TAX ON THE PROFESSIONAL FEES AND RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HIGH COU RT OF KARNATAKA (SUPRA), WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSE E. AS A RESULT,THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. 1(2 !'( 3 4 5 * ( 67 . 3 ITA NO. 1056/M/2011 DR. ADI R. NAZIR ORDER PRONOUNCED IN THE OPEN COURT ON 26TH ,NOVEMBER 2014 . / * ,-' 8 9! 26 ! , 201 4 - * . : SD/- SD/- ( / VIVEK VARMA) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 9! /DATE: 26.11 . 2014. / / / / * ** * %( %( %( %( ; '( ; '( ; '( ; '( / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / #$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT(A)/ < = , 4. THE CONCERNED CIT / < = 5. DR I BENCH, ITAT, MUMBAI / >. %(! , . . . 6. GUARD FILE/ . 1 & ( & ( & ( & ( %( %(%( %( //TRUE COPY// /! / BY ORDER, ? / 6 DY./ASST. REGISTRAR , /ITAT, MUMBAI