M/s Tirupati Construction, Hooghly V. CIT-XX, KOLKATA, Kolkata

ITA 1186/KOL/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3116 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 26-05-2014
• Court: TRIBUNAL
• Assessee Lawyers: S M SURANA LD
• Keywords: Opportunity of being heard; Principle of natural justice; Retrospective amendment; Assessment record
• Section: 143(3); 194C; 263; 63; 2

Judgement Text

ITA NO.1186/KOL/2014-B-AM M/S. TIRUPATI CONSTRUCTION 1 IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, K OLKATA BEFORE : SHRI N.V. VASUDEVAN, JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER I.T.A NO.1186/KOL/2014 A.Y : 2009-10 M/S. TIRUPATI CONSTRUCTION VS. C.I.T, KOL-X X, KOLKATA PAN: AAFFT 4305G (APPELLANT) (RE SPONDENT) FOR THE APPELLANT: SHRI S.M SURANA, ADVOCAT E, LD.AR FOR THE RESPONDENT: NONE APPEAR ED DATE OF HEARING: 29-01-2016 DATE OF PRONOUNCEMENT: 03-02-201 6 ORDER SHRI M.BALAGANESH, AM THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE ORDER OF THE LEARNED CIT, KOL-XX, KOLKATA IN NO. CIT-XX/KOL/REV. U/S 263/2013-14/510 3-06 DATED 20-12-2014 AGAINST THE ORDER OF ASSESSMENT FRAMED BY THE LD. AO U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. DURING THE COURSE OF HARING BEFORE US THE AS SESSEE HAS RAISED THE FOLLOWING ADDITIONAL/REVISED GROUNDS OF APPEAL :- 1. FOR THAT THE ORDER OF THE LD. CIT IS ARBITRARY, ILLEGAL, EXCESSIVE, PERVERSE AND BAD IN LAW. 2. FOR THAT THE LD CIT ERRED IN INVOKING THE PROVIS IONS OF SECTION 263 WHEN IN THE COURSE OF ASSESSMENT THE AO DULY APPLIE D HIS MIND AND COMPLETED THE ASSESSMENT AFTER EXAMINING ALL THE IS SUES. 3. FOR THAT THE LD. CIT ERRED IN DIRECTING THE AO T O ADD BACK RS. 33,88,282/- CLAIMED UNDER THE HEAD MACHINERY HIRE C HARGES BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) READ WITH SEC. 194 I(A)/194C AS ALSO THE ITA NO.1186/KOL/2014-B-AM M/S. TIRUPATI CONSTRUCTION 2 PROVISIONS OF SECTION 40(A)(IA) WERE NOT APPLICABLE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. FOR THAT THE LD. CIT ERRED IN DIRECTING THE AO T O ADD BACK RS. 1,83,956/-CLAIMED UNDER THE HEAD DEWATERING CHARGES BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) READ WITH SEC. 194C AS ALSO THE PROVISIONS OF SECTION 40(A)(IA) WERE NOT APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. FOR THAT THE LD. CIT ERRED IN DIRECTING THE AO T O ADD BACK RS. 5,13,966/- BY INVOKING THE PROVISIONS OF SEC. 40(A) (IA) READ WITH SEC. 194C(3) WHEN NO TAX WAS DEDUCTIBLE ON THE SAID AMOU NT WAS SINCE THE PAYMENT DURING THE WHOLE YEAR TO EACH OF THE PERSON LESS THAN RS. 50000/- AND SINGLE PAYMENT WAS LESS THAN RS. 20000/ -AND FU RTHER EVEN OTHERWISE THE PROVISIONS OF SECTION 40(A)(IA) WERE NOT APPLIC ABLE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. FOR THAT THE LD. CIT ERRED IN DIRECTION THE AO T O ADD BACK RS. 43,94,971/- CLAIMED UNDER THE HEAD WAGES AND LABOUR BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) READ WITH SEC. 194C(3) AS ALSO THE THE PROVISIONS OF SECTION 40(A)(IA) WERE NOT APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. FOR THAT THE LD. CIT ERRED IN DIRECTION THE AO T O ADD BACK RS.1,91,600/ - CLAIMED UNDER THE HEAD TRANSPORT CHARGES BY INVOK ING THE PROVISIONS OF SEC. 40(A)(IA) READ WITH SEC. 194C(3) WHEN THE PAYM ENTS WERE REIMBURSEMENT OF EXPENSES AND FURTHER NO TAX WAS DE DUCTIBLE, THE PROVISIONS OF SECTION 40(A)(IA) WERE NOT APPLICABLE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. FOR THAT LD. CIT ERRED IN DIRECTING THE AO TO AD D BACK RS. 1,20,49,196/- AS UNDERSTATEMENT OF RECEIPT WHEN THE SAID ISSUE WAS NOT THE SUBJECT MATTER OF SHOW CAUSE NOTICE UNDER SEC.263 A ND THEREFORE IT WAS BEYOND JURISDICTION OF THE LD. C.LT TO CONSIDER THE SAID ISSUE IN THE ORDER U/S.263. EVEN OTHERWISE THERE WAS NO UNDERSTATEMENT OF THE RECEIPTS FOR AS PER RECONCILIATION STATEMENT. 9. FOR THAT THE LD. CIT ERRED IN DIRECTING THE AO T O MAKE VARIOUS ADDITIONS TO THE EXTENT OF RS.2,07,21,971/ - WITH P ROPERLY EXAMINING THE ISSUES HIMSELF OR DIRECTING THE AO TO EXAMINE WHETH ER THERE WAS ANY VIOLATION OF THE PROVISIONS OF SEC. 40(A)(IA) OR TH AT THERE WAS IN FACT SOME UNDERSTATEMENT OF THE RECEIPTS ITA NO.1186/KOL/2014-B-AM M/S. TIRUPATI CONSTRUCTION 3 10. FOR THAT ALTERNATIVELY THE LD. C.I.T ERRED IN DIRECTING THE AO TO MAKE ADDITION OF THE ALLEGED UNDISCLOSED RECEIPTS IN ITS ENTIRITY AS THE INCOME OF THE APPELLANT. 11. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER OF THE LD. CIT BE MODIFIED AND OR CANCELLED AND THE ASSESSEE B E GIVEN THE RELIEF PRAYED FOR. 12. FOR THAT THE ASSESSEE CRAVES TO ADD FURTHER GR OUNDS BEFORE OR AT THE TIME OF HEARING. 3. OUT OF THE AFORESAID GROUNDS FIRST 2 GROUNDS ARE ON CHALLENGING ON THE VALIDITY OF PROCEEDINGS INITIATED U/S. 263 OF THE ACT. GROU ND NOS.3 TO 7 ARE WITH REGARD TO DISALLOWANCES PROPOSED TO BE MADE U/S. 40(A)(IA) OF THE ACT IN RESPECT OF VARIOUS EXPENSES INCURRED BY THE ASSESSEE. GROUND NOS. 8 TO 10 ARE WITH REGARD TO DISALLOWANCES/ADDITIONS PROPOSED TO BE MADE TOWARD S UNDERSTATEMENT OF RECEIPTS IN A SUM OF RS. 1,20,49,196/-, WHICH WAS NOT THE SUBJEC T MATTER OF SHOW-CAUSE NOTICE ISSUED U/S. 263 OF THE ACT BY THE LD.CIT. GROUND N OS. 11 & 12 ARE GENERAL IN NATURE. 4. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASS ESSMENT FOR THE ASSESSMENT YEAR 2009-10 WAS COMPLETED IN THIS CASE U/S 143(3) OF T HE ACT ON 01-06-2011 DETERMINING THE ASSESSED INCOME AT RS.6,04,831/- AS AGAINST R ETURNED INCOME OF RS. 4,97,664/-. DURING THE COURSE OF PROCEEDINGS U/S. 263 OF THE A CT BEFORE THE LD.CIT, THE LD.AR OF THE ASSESSEE PLEADED THAT ALLOWABILITY OF VARIOUS EXPENSES IN THE CONTEXT OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WAS INDEED EXAMINED BY THE LD.AO IN DETAIL AS PER THE THEN PREVAILING CASE LAWS ON THE IMPUGNED ISSUE. H E FURTHER CLARIFIED THAT THE ASSESSMENT ORDER U/S. 143(3) OF THE ACT WAS PASSED ON 01-06-2011 BY RELYING ON THE DECISION OF THE HONBLE SPECIAL BENCH, ITAT VIZAG I N THE CASE OF MERILYN SHIPPING TRANSPORT, WHICH WAS IN FAVOUR OF THE ASSESSEE. THE ITAT VIZAG, SPECIAL BENCH IN THE CASE (SUPRA) HAD HELD THAT THE PROVISIONS OF SECTI ON 40(A)(IA) CANNOT BE INVOKED IN ITA NO.1186/KOL/2014-B-AM M/S. TIRUPATI CONSTRUCTION 4 RESPECT OF AMOUNTS PAID BEFORE THE END OF THE PREVI OUS YEAR. THE LD.AO HAD DULY CONSIDERED THE SAID JUDGMENT AND TAKEN A CONSCIOUS , JUDICIOUS AND POSSIBLE VIEW WHILE FRAMING THE IMPUGNED ASSESSMENT U/S. 143(3) OF THE ACT. ACCORDINGLY, THE LD.AR ARGUED THAT THE SAME CANNOT BE THE SUBJECT MATTER OF REVISION PROCEEDINGS U/S. 263 OF THE ACT BY THE LD.CIT BASED ON SUBSEQUENT DE VELOPMENTS OF JUDGMENTS BY THE VARIOUS HONBLE HIGH COURTS, MORE PARTICULARLY THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT REVERSING THE SAID DECISION OF ITAT, SP ECIAL BENCH VIZAG IN THE CASE (SUPRA) IN THE CASE OF CIT VS. CRESENT EXPORT SYNDI CATE REPORTED IN ( 33 TAXMANN.COM 250(CAL) DATED 3-4-2013. HOWEVER, THE LD.CIT U/S. 2 63 OF THE ACT HAD PROPOSED TO MAKE THE FOLLOWING ADDITIONS U/S. 40(A)(IA) OF THE ACT:- A. MACHINERY HIRE CHARGES U/S. 40(A)(IA) R.W.S 194 I(A) RS.33,88,282/- B. DE-WATERING CHARGES U/S. 40(A)(IA) R.W.S 194C RS. 1,83,956/- C. WAGES & LABOUR CHARGES U/S. 40(A)(IA) R.W.S 194C (3) RS. 5,13,966/- D. WAGES & LABOUR CHARGES U/S. 40(A)(IA) R.W.S 194C (3) RS.43,94,971/- E. TRANSPORTATION CHARGES U/S. 40(A)(IA)R.W.S 1 94C(3) RS. 1,91,600/- RS.86,72,775 5. THE LD.AR ALTERNATIVELY ARGUED THAT THIS ISSUE M AY BE SET ASIDE TO THE FILE OF THE LD.AO TO EXAMINE WHETHER THE PAYEES HAVE DULY CONS IDERED/SHOWN THE SAID RECEIPTS IN THEIR RESPECTIVE RETURNS. IF SO, THE SECOND PROVIS O TO SECTION 40(A)(IA) OF THE ACT SHALL HAVE TO BE INVOKED. HE FURTHER ARGUED THAT SECOND P ROVISO TO SECTION 40(A)(IA) HAS BEEN HELD TO BE RETROSPECTIVE IN OPERATION BY THE DECIS ION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS ANSAL LAND MARK TOWNSHIP (P) LTD REPORTED I N (2015) 61 TAXMANN.COM 45/ 377 ITR 635(DEL). 6. WITH REGARD TO THE ADDITION AS PROPOSED BY THE LD.C IT U/S. 263 PROCEEDINGS TOWARDS UNDERSTATEMENT OF RECEIPTS TO THE TUNE OF R S.1,20,49,196/-, THE LD.AR ARGUED THAT THE SAME WAS NOT THE SUBJECT MATTER OF SHOW CA USE NOTICE ISSUED U/S. 263 OF THE ITA NO.1186/KOL/2014-B-AM M/S. TIRUPATI CONSTRUCTION 5 ACT BY THE LD.CIT. HE ALSO BROUGHT TO OUR ATTENTION THAT THIS ISSUE WAS RAISED BEFORE THE LD.AR BY THE LD. CIT FOR THE FIRST TIME DURING THE COURSE OF HEARING ON 14-02-2014 U/S. 263 PROCEEDINGS. THIS IS CLEARLY MENTIONED IN PAGE 9 AT 2 ND PARA OF THE LD.CIT U/S. 263. HE FURTHER ARGUED THAT THE SAME WAS NEVER INTENDED BY THE LD.CIT WHILE ISSUING SHOW CAUSE NOTICE U/S. 263 ON 5.7.2012. ACCORDINGLY, HE PRAYED THAT THE SAME CANNOT BE THE SUBJECT MATTER OF REVISION PROCEEDINGS U/S. 263 OF THE ACT. HE PLACED RELIANCE ON CERTAIN DECISIONS IN SUPPORT OF HIS CONTENTIONS:- IN THE CASE OF APOLLO TYRES LTD VS. ACIT REPORTED IN (1998) 65 ITD 263 (DELHI ITAT), WHEREIN IT HAS BEEN HELD: 6. ONE OF THE ARGUMENTS ADVANCED BY THE LEARNED C OUNSEL FOR THE ASSESSEE WAS WHOLESALE CANCELLATION OF THE ASS ESSMENT ORDER BY THE CIT WAS NOT VALID AND HE SHOULD HAVE DIRECTED T HE ITO TO MAKE A FRESH ASSESSMENT ONLY WITH REGARD TO THE SPECIFI C ITEMS OF INCOME FOR WHICH THE SHOW-CAUSE NOTICE WAS GIVEN UNDER SEC TION 263. WE AGREE WITH THE SUBMISSIONS MADE BY THE LEARNED COUN SEL FOR THE ASSESSEE AND MODIFY THE ORDER OF THE CIT TO THE EX TENT THAT THE ITO WILL MAKE A FRESH ASSESSMENT AFTER MAKING NECESSAR Y AND PROPER INVESTIGATION ONLY IN RESPECT OF THE TWO ITEMS OF INCOME (I) RELATING TO THE LOSS OF RS.4,06,93,010 CLAIMED BY THE ASSESS EE IN PURCHASE AND SALE OF UNITS OF UTI, 1964, ETC., AS PER DETAIL S DISCUSSED HEREINBEFORE ; AND (II) WITH REGARD TO THE DIVIDEND INCOME ON SUCH UNITS OF UTI AS DISCUSSED AND DECIDED IN EARLIER PA RAGRAPHS OF THIS ORDER. IN THE CASE OF MAXPAK INVESTMENT LTD VS. ACIT REPORTED IN (2007) 13 SOT 67(DELHI) , WHEREIN IT HAS BEEN HELD: ..CIT V. G.K. KABRA [1995] 211 ITR 336 THE ANDH RA PRADESH HIGH COURT WAS DEALING WITH AN _ - N SEEKIN G REFERENCE 'UNDER SECTION 256(2), INTER ALIA, OF THE FOLLOWING QUESTION: WHETHER , ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME-TAX APPELLATE TRIBUNAL WAS CORRECT IN HOLDIN G THAT THE COMMISSIONER OF INCOME-TAX LACKS INITIAL JURISDICTI ON, PARTICULARLY WHEN THE CONCLUSION MADE BY THE COMMISSIONER OF INC OME-TAX IN THE ORDER UNDER SECTION 263 WAS ON THE BASIS OF THE INFORMATION ITA NO.1186/KOL/2014-B-AM M/S. TIRUPATI CONSTRUCTION 6 FURNISHED IN RESPONSE TO THE INITIAL NOTICE ?' WHILE DECLINING TO REFER THE ABOVE QUESTION, THE HI GH COURT HELD AS UNDER (PAGES 339-340) : 'THE NECESSARY IMPLICATION IN THE EXPRESSION 'AFTER GIVING OPPORTUNITY OF BEING HEARD' RELATES TO THE POINT ON WHICH THE COMMISSIONER CONSIDERS THE ORDER TO BE ERRONEOUS AN D PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN OTHER WORDS, IT IS NECESSARY FOR THE COMMISSIONER TO POINT OUT THE EXACT ERROR IN TH E ORDER WHICH HE PROPOSES TO REVISE ) THAT THE ASSESSEE WOULD HAVE A N ADEQUATE OPPORTUNITY OF MEETING THE ERROR BEFORE THE FINAL O RDER IS MADE.' IN THE CASE BEFORE THE HIGH COURT, THE SHOW-CAUSE N OTICE REFERRED TO TWO ISSUES TO WHICH THE ASSESSEE HAD GIVEN SATIS FACTORY REPLIES. NO ACTION WAS TAKEN UNDER SECTION 263 IN RESPECT OF THESE TWO ISSUES. HOWEVER, IN THE SAID ORDER THE CIT MENTIONE D THE HIRE CHARGES AS THE GROUND FOR REVISING THE ASSESSMENT. THIS POINT HAD NOT BEEN MENTIONED AS A GROUND IN THE SHOW-CAUSE NO TICE. THE HIGH COURT HELD THAT 'IN AS MUCH AS THE COMMISSIONER HAD NOT CHOSEN TO SHOW THESE TWO POINTS AS THE ERRORS IN MAKING THE F INAL ORDER AND THE FINAL ORDER UNDER SECTION 263 REFERS ONLY TO TH E INFERENCE OF HIRE CHARGES BEING EXIGIBLE TO TAX WHICH WAS NOT MENTION ED AT ALL IN THE SHOW CAUSE, OBVIOUSLY THE ASSESSEE HAD NO OPPORTUNI TY TO MEET THAT POINT.' [EMPHASIS SUPPLIED] 10. THE RATIO OF THE DECISION, CLEAR FROM THE ABO VE OBSERVATIONS, IS THAT IF A GROUND OF REVISION IS NOT MENTIONED IN TH E SHOW-CAUSE NOTICE ISSUED UNDER SECTION 263, THAT GROUND CANNOT BE MADE THE BASIS OF THE ORDER PASSED UNDER THE SECTION, FOR TH E SIMPLE REASON THAT THE ASSESSEE WOULD HAVE HAD NO OPPORTUNITY TO MEET THE POINT. ..... ) 6. NONE APPEARED ON BEHALF OF THE REVENUE. IT IS SEEN FROM THE ORDER SHEET RECORDS THAT THE DEPARTMENT HAS BEEN DIRECTED ON PREVIOUS O CCASIONS TO PRODUCE THE ASSESSMENT RECORDS AND RECORDS OF THE LD.CIT. THUS, THE CASE H AS BEEN ADJOURNED FOR WANT OF THIS RECORD ON VARIOUS OCCASIONS. MOREOVER, THE LD.AR B ROUGHT TO OUR NOTICE THAT THE DEPARTMENT HAD ALREADY ATTACHED THE PROPERTY BELON GING TO THE ASSESSEE ON ONE HAND ITA NO.1186/KOL/2014-B-AM M/S. TIRUPATI CONSTRUCTION 7 AND ON THE OTHER HAND THE DEPARTMENT IS CONTINUOUSL Y SEEKING ADJOURNMENT BEFORE THE TRIBUNAL. WE ALSO FIND THAT THE REVENUE HAD ALSO S OUGHT ADJOURNMENT TODAY FOR ITS 11 CASES OUT OF 18 CASES LISTED IN THE BENCH. IN VIEW OF THE AFORESAID FACTS, REVENUES REQUEST FOR ADJOURNMENT IS REJECTED AND WE DISPOSE OFF THE APPEAL AFTER HEARING THE LD.AR AND THE MATERIAL AVAILABLE ON RECORD. 7. WE HAVE HEARD THE LEARNED AR AND PERUSED THE MAT ERIALS AVAILABLE ON RECORD. WITH REGARD TO THE ADDITION PROPOSED TO BE MADE BY THE LD.CIT TOWARDS UNDERSTATEMENT OF RECEIPTS IN THE SUM OF RS. 1,20,49,196/-, WE FIND THAT THE SAME WAS NOT INTENDED TO BE INCLUDED IN THE SHOW CAUSE NOTICE BY THE LD.CIT AND THE SAME WAS FOR THE FIRST TIME BROUGHT TO THE NOTICE OF THE LD.AR ONLY ON LAST DA TE OF HEARING I.E. ON 14-02-2014 AND THE ORDER OF THE LD.CIT U/S. 263 HAS BEEN PASSED ON 20- 02-2014. IN THIS REGARD, WE HOLD THAT THE ISSUE WHICH WAS NOT THE SUBJECT MATTER OF SHOW CAUSE NOTICE ISSUED U/S. 263 CANNOT BE CONSIDERED IN THE ORDER PASSED U/S. 263 OF THE ACT, AS OBVIOUSLY THE ASSESSEE WOULD NOT HAVE AN OCCASION TO FILE HIS SUBMISSIONS ON THE SAM E IN CONSONANCE WITH PRINCIPLES OF NATURAL JUSTICE. THE PROVISIONS OF SECTION 263 IS V ERY CLEAR THAT THE LD.CIT IN RESPECT OF ITEMS CONTEMPLATED IN THE SHOW CAUSE NOTICE I.E. IN ITIAL NOTICE BASED ON WHICH 263 PROCEEDINGS HAVE BEEN INITIATED BY THE LD. CIT, SH ALL PASS AN ORDER U/S. 263 OF THE ACT AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING T O THE ASSESSEE. HENCE, IT CAN BE SAFELY CONCLUDED WHAT IS NOT CONTEMPLATED IN THE SHOW CAU SE NOTICE CAN NOT FIND PLACE IN THE ORDER OF THE LD.CIT PASSED U/S. 263. WE FIND LOT O F FORCE IN THE CASE LAWS RELIED UPON BY THE LEARNED AR ON THE IMPUGNED ISSUE. IN VIEW OF TH E DECISIONS MENTIONED HEREINABOVE, WE HOLD THAT WHEN THE GROUND OF REVISION U/S. 263 IS NOT MENTIONED IN T HE SHOW CAUSE NOTICE ISSUED U/S. 263, THAT ISSUE CANNOT BE THE SU BJECT MATTER OF REVISION PROCEEDINGS IN THE ORDER PASSED U/S. 263. HENCE THE ADDITION PR OPOSED TOWARDS UNDERSTATEMENT OF RECEIPT OF RS. 1,20,49,196/- IS NOT IN ACCORDANCE W ITH LAW. ACCORDINGLY, THE ORDER PASSED BY THE LD.CIT U/S. 263 IS MODIFIED TO THIS E XTENT. HENCE GROUND NOS. 8-10 RAISED BY THE ASSESSEE ARE ALLOWED. ITA NO.1186/KOL/2014-B-AM M/S. TIRUPATI CONSTRUCTION 8 8. APROPOS THE DISALLOWANCE PROPOSED TO BE MADE U/S 40(A)(IA) OF THE ACT TOWARDS VARIOUS EXPENSES FOR NON-COMPLIANCE OF TDS PROVISIO NS, THE FACTS AS STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE THE SAME AR E NOT REITERATED HEREIN FOR THE SAKE OF BREVITY. WE FIND THAT IF THE PAYEES HAVE I NCLUDED THE SUBJECT MENTIONED RECEIPTS IN THEIR BOOKS/RETURNS OF INCOME, THEN SEC OND PROVISO TO SECTION 40(A)(IA) OF THE ACT SHOULD HAVE TO BE INVOKED AND NO DISALLOWA NCE U/S. 40(A)(IA) OF THE ACT COULD BE MADE. SECTION 40(A)(IA) OF THE ACT TOGETHER WITH SECOND PROVISO, IS REPRODUCED HEREIN BELOW FOR THE SAKE OF CLARITY:- SECTION 40: AMOUNTS NOT DEDUCTIBLE 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO [38], THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HAD PROFITS AND GAINS OF BUSINESS OR PRO FESSION- (A) IN THE CASE OF ANY ASSESSEE- (I) *** *** *** *** *** PROVIDED THAT *** *** *** *** (IA) [ THIRTY PER CENT OF ANY SUM PAYABLE TO A RESI DENT], ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, [HAS NOT BEEN PAID ON OR BEFOR E THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139;] PROVIDED THAT *** *** *** *** PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO D EDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAP TER XVIIB ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDE R THE FIRST PROVISO TO SUB- SECTION (1) SECTION 201, THEN, FOR THE PURPOSE OF T HIS SUB-CLAUSE, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO.] 9. WE ALSO FIND THAT THE PROVISIONS OF SECTION 40( A)(IA) OF THE ACT HAS BEEN HELD TO BE RETROSPECTIVE IN OPERATION BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ITA NO.1186/KOL/2014-B-AM M/S. TIRUPATI CONSTRUCTION 9 CIT VS ANSAL LAND MARK TOWNSHIP (P) LTD REPORTED IN (2015) 61 TAXMANN.COM 45/ 377 ITR 635(DEL)., WHEREIN THE QUESTION RAISED BEFORE T HEIR LORDSHIPS AND THEIR DECISION RENDERED THEREON IS AS UNDER:- QUESTION: THE ISSUE THAT AROSE BEFORE THE HIGH COU RT WAS- WHETHER THE SECOND PROVISO TO SECTION 40(A)(IA)( INSERTED BY THE FINANCE ACT, 2012), WHICH STATES THAT TDS SHALL BE DEEMED TO BE DEDUCTED AND PAID BY A DEDUCTOR IF RESIDENT RECIPIE NT HAS DISCLOSED THE AMOUNT IN HIS RETURN OF INCOME AND PAID TAX THE REON, IS RETROSPECTIVE IN NATURE OR NOT ? HELD : SECTION 40(A)(IA) WAS INTRODUCED BY THE FINANCE (NO.2) ACT, 2004 TO ENSURE THAT AN EXPENDITURE SHOULD NO T BE ALLOWED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATIO N WHERE INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED D UE TO TAX WITHHOLDING LAPSES BY THE ASSESSEE. HENCE, SECTION 40(A)(IA) IS NOT A PENALTY PROVISI ON FOR TAX WITHHOLDING LAPSE BUT IT IS A PROVISION INTRODUC ED TO COMPENSATE ANY LOSS TO THE REVENUE IN CASES WHERE DEDUCTOR HA SNT DEDUCTED TDS ON AMOUNT PAID TO DEDUCTEE AND, IN TURN, DEDUCT EE ALSO HASNT OFFERED TO TAX INCOME EMBEDDED IN SUCH AMOUNT. THE PENALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEP ARATELY PROVIDED UNDER SECTION 271C, AND, THEREFORE, SECTI ON 40(A)(IA) ISNT ATTRACTED TO THE SAME. HENCE, AN ASSESSEE COULD NOT BE PENALIZED UNDER SECTION 40(A)(IA) WHEN THERE WAS NO LOSS TO R EVENUE. THE AGRA TRIBUNAL IN THE CASE OF RAJIV KUMAR AGARWA L V. ACIT [2014] 45 TAXMANN. COM 555 (AGRA-TRIB) HAD HEL D THAT THE SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND HAS RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005, BEING THE DATE FROM WHICH SUB-CLAUSE (IA) OF SECTION 40(A) WA S INSERTED BY THE FINANCE (NO.2) ACT, 2004, EVEN THOUGH THE FINANCE A CT, 2012 HAD NOT SPECIFICALLY STATED THAT PROVISO IS RETROSPECTI VE IN NATURE. THE HIGH COURT AFFIRMED THE RATIO LAID DOWN BY THE AGRA TRIBUNAL AND HELD THAT SAID PROVISO IS DECLARA TORY AND CURATIVE IN NATURE AND HAS RETROSPECTIVE EFFECT FROM 1 ST APRIL 2005. 10. IN VIEW OF THE AFORESAID DECISION OF HONBLE DE LHI HIGH COURT IN THE CASE OF CIT VS ANSAL LAND MARK TOWNSHIP (P) LTD (SUPRA), WE DEEM IT FIT AND APPROPRIATE, TO SET ASIDE THE ISSUE TO THE FILE OF THE LD.AO TO DECIDE THE IMPUGNED ISSUE U/S. 40(A)(IA) IN THE ITA NO.1186/KOL/2014-B-AM M/S. TIRUPATI CONSTRUCTION 10 LIGHT OF APPLICABILITY OF SECOND PROVISO TO SECTIO N 40(A)(IA) AS MENTIONED HEREIN ABOVE AND IN THE LIGHT OF SAID DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ANSAL LAND MARK TOWNSHIP (P) LTD (SUPRA). THE ASSESSEE IS AT L IBERTY TO ADDUCE FRESH EVIDENCES, IF ANY, TO SUBSTANTIATE ITS CONTENTIONS. NEEDLESS TO MENTION THAT THE ASSESSEE BE GIVEN REASONABLE OPPORTUNITY OF BEING HEARD. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE IN THIS REGARD ARE ALLOWED FOR STATISTICAL PURPOSES. 11. THE GROUND NOS. 11 & 12 RAISED BY THE ASSESSEE ARE GENE RAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSE AS STATED ABOVE. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 03-02- 2016 1.. THE APPELLANT: M/S. TIRUPATI CONSTRUCTION, BE GAMPUR, KALITALA, SERAMPORE, DIST HOOGHLY WB 712306. 2 THE RESPONDENT- THE COMMISSIONER OF INCOME-TAX K OL-XX 54/1 RAFI AHMED KIDWAI ROAD, KOL-16. 3 /THE CIT, 4.THE CIT(A ) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP SPS SD/- ( N.V. VASUDEVAN, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE: DATE 03-02-2016 COPY OF THE ORDER FORWARDED TO:-