M/s. Vishwas Builders, Mangalore V. CIT, Mangalore

ITA 132/BANG/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51321 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PREETHI GARG
• Keywords: Retrospective amendment
• Section: 143(3); 194C; 263

Judgement Text

PAGE 1 OF 6 ITA NO.132/BANG/2011 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES A BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.132/BANG/2011 (ASST. YEAR 2006-07) M/S VISHWAS BUILDERS, VISHWAS CROWN, NEAR COCHIN BAKERY, KANKANADY, MANGALURU-575 002. - APPELLANT PA NO.AAFFV8709E VS THE COMMISSIONER OF INCOME TAX, CENTRAL REVENUES BUILDING, ATTAVAR, MANGALURU-575 001. - RESPONDENT DATE OF HEARING : 19/10/2011 DATE OF PRONOUNCEMENT : 19/10/2011 APPELLANT BY : SMT. SHEETHAL BORKAR, ADVOCATE RESPONDENT BY : SMT. PREETHI GARG, CIT O R D E R PER GEORGE GEORGE K : THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT, MANGALORE PASSED U/S 263 OF THE A CT DATED 16.12.2010. THE RELEVANT ASST. YEAR IS 2006-07. 2. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN TH E BUSINESS AS A BUILDER AND PROMOTER UNDER THE NAME AND STYLE VISHW AS BUILDERS. IT FILED PAGE 2 OF 6 ITA NO.132/BANG/2011 2 ITS RETURN OF INCOME FOR THE CONCERNED ASST. YEAR ON 31.10.2006 DECLARING THEREIN A TOTAL INCOME OF RS.5,88,340/-. SUBSEQUEN TLY, THE CASE WAS SELECTED FOR SCRUTINY BY ISSUANCE OF NOTICE U/S 143(2 ) OF THE ACT. THE SCRUTINY ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 24.10.2008. IN THE SAID ASSESSMENT ORDER, THE AO H AD MADE CERTAIN ADDITIONS TO THE RETURNED INCOME AND ARRIVE AT THE TOTAL INCOME OF RS.9,54,380/-. 2.1 SUBSEQUENTLY, THE CIT PROPOSED TO REVISE THE AS SESSMENT DATED 24.10.2008 U/S 263 OF THE ACT. THE CIT WAS OF THE VIEW THAT THE ASSESSMENT ORDER WAS ERRONEOUS IN LAW AND PREJUDICI AL TO THE INTEREST OF THE REVENUE, AS TDS HAS NOT BEEN REMITTED AS PER THE PR OVISIONS OF CHAPTER XVII-B OF THE ACT. THEREFORE, HE PROPOSED TO DISAL LOW AN AMOUNT OF RS.29,95,170/- BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE ASSESSEE FILED ITS OBJECTIONS VIDE ITS LETTER D ATED 9.12.2010. HOWEVER, THE COMMISSIONER REJECTED THE OBJECTIONS RAISED AND PASSED REVISIONARY ORDER U/S 263 OF THE ACT ON 16.12.2010. THE RELEVA NT DIRECTION OF THE CIT READS AS FOLLOWS:- 17. IN THE LIGHT OF THE FOREGOING ANALYSIS, I HOLD THAT THE ASSESSMENT ORDER PASSED IN THIS CASE UNDER SECT ION 143(3) ON 24.10.2008 IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE. I THEREFO RE DIRECT THE ASSESSING OFFICER TO DISALLOW THE AFORES AID AMOUNT OF RS.29,95,170/- UNDER SECTION 40(A)(IA) FO R FAILURE ON PART OF THE ASSESSEE FIRM TO DEDUCT TAX AT SOURCE ON PAYMENT OF CONTRACT CHARGES AND PROFESSION AL FEES AND FOR DELAY IN PAYING TO GOVERNMENT ACCOUNT TH E TAX DEDUCTED SUBSEQUENTLY ON 31.3.2006. PAGE 3 OF 6 ITA NO.132/BANG/2011 3 3. THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFOR E US RAISING THE FOLLOWING GROUNDS:- I) THE LEARNED CIT, MANGALORE IS NOT JUSTIFIED IN LAW IN COMING TO THE CONCLUSION THAT, THE ORDER PASSED U/S 143(3) DATED 24.10.2008 BY THE ACIT, CENTRAL-1(1), MANGALORE IS ERRONEOUS IN LAW AND WAS PREJUDICIAL T O THE INTEREST OF THE REVENUE. II) THE LEARNED CIT, MANGALORE IS NOT JUSTIFIED IN LAW IN DIRECTING THE AO TO DISALLOW A SUM OF RS.29,95,170/ - U/S 40(A)(IA) OF THE I T ACT, 1961 FOR FAILURE ON PART OF THE ASSESSEE FIRM TO DEDUCT TAX AT SOURCE ON PAYMENT OF CONTRACT CHARGES AND PROFESSIONAL FEES AND FOR DELA Y IN PAYING TO GOVERNMENT ACCOUNT THE TAX DEDUCTED SUBSEQUENTLY ON 31.3.2006. IN FACT, THE TAX DEDUCTE D AT SOURCE HAS BEEN PAID ON 18.8.2006 AMOUNTING TO RS.1,01,100/- I.E. WELL BEFORE THE DUE DATE FOR FIL ING THE RETURN. III) THE LEARNED CIT, MANGALORE HAS OVERLOOKED THE FACT THAT, THE APPELLANTS CASE IS SQUARELY COVERED UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE I T ACT, 196 1. IV) THE LEARNED CIT, MANGALORE HAS OVERLOOKED THE FACT THAT, PROVISIONS OF SECTION 40(A)(IA) AS AMENDED BY THE FINANCE ACT, 2010 WITH EFFECT FROM 1 ST APRIL, 2010 IS REMEDIAL IN NATURE, DESIGNED TO ELIMINATE UNINTENDE D CONSEQUENCES WHICH MAY CAUSE UNDUE HARDSHIP TO TAX PAYERS. THEREFORE, IT HAS TO BE TREATED AS RETROSPECTIVELY WITH EFFECT FROM 1 ST APRIL, 2005, THE DATE ON WHICH SECTION 40(A)(IA) HAS BEEN INSERTED, AS HELD IN THE FOLLOWING DECISIONS:- O KANUBHAI RAMJIBHAI V ITO (135 TTJ 364) (ITAT AHMEDA BAD-B); O CIT V ALOM EXTRUSIONS LIMITED (319 ITR 306)(SC); O ALLIED MOTORS (P) LTD. V CIT (224 ITR 677)(SC); O CIT V APAR INDUSTRIES LIMITED (323 ITR 411) (BOM.). PAGE 4 OF 6 ITA NO.132/BANG/2011 4 V) THE LEARNED CIT, MANGALORE OUGHT TO HAVE CONSIDERED THE FOLLOWING DECISIONS RELIED ON BY THE APPELLANT: BAPUSAHEB NANASAHEB DHUMAL V ACIT (132 TTJ 694) (BO M.); M S MOHINDRA TRADERS V ITO (132 TTJ 701) (DELHI); CIT V ORACLE SOFTWARE INDIA LTD. (211 CTR 60) (DELH I); CIT V NESTLE INDIA LTD. (195 CTR 98) (DELHI) & ADDL. CIT V FARASOL LTD. (163 ITR 364) (RAJ. 4. THE LEARNED AR STRONGLY RELIED ON THE GROUNDS RA ISED HEREIN, WHICH IS MORE OR LESS ARGUMENTATIVE IN NATURE. 5. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED TH AT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE ORDER OF THE SPEC IAL BENCH IN THE CASE OF BHARATI SHIPYARD LTD. V DCIT (2011) 11 (TRIB) ITR 59 9 (S.B.) (MUMBAI). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. BY INVOKING THE PROVISIONS OF SECTION 4 0(A)(IA), THE AO HAS DISALLOWED AN EXPENDITURE AMOUNTING TO RS.29,95,170 /- ON ACCOUNT OF LATE DEDUCTION OF TAX AND LATE PAYMENT TO THE GOVERNMENT ACCOUNT. IN THIS CASE, EXPENDITURE OF CONTRACT CHARGES AND PROFESSIONAL FE ES ARE DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. FOR THE PAYMENT OF CONTRACT CHARGES, TAX IS TO BE DEDUCTED U/S 194C AN D FOR THE PAYMENT OF PROFESSIONAL FEES, TAX IS TO BE DEDUCTED UNDER THE PROVISIONS OF SECTION 194J. SECTION 194C SPECIFIES THAT ANY PERSON RESPON SIBLE FOR PAYING ANY SUM TO ANY RESIDENT CONTRACTOR FOR CARRYING OUT ANY WORK I NCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK, SHALL DEDUCT TAX AT THE RATES PRESCRIBED AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF, WHICHEVER IS EARLIER . (EMPHASIS SUPPLIED). PAGE 5 OF 6 ITA NO.132/BANG/2011 5 SIMILARLY, SECTION 194J, WHICH DEALS WITH THE PAYMENT OF FEES FOR PROFESSIONAL OR TECHNICAL SERVICES, ALSO LAYS DOWN T HAT DEDUCTION OF TAX SHALL BE MADE AT THE TIME OF CREDIT OF SUCH SUM TO THE AC COUNT OF THE PAYEE OR AT THE TIME OF PAYMENT, WHICHEVER IS EARLIER. IN THE I NSTANT CASE, THE DATES OF PAYMENT OR CREDIT TO THE PAYEES ARE SPREAD THROUGHOUT THE PREVIOUS YEAR I.E. FROM MAY, 2005 TO FEBRUARY, 2006, BUT TDS WAS MADE LA TER ON A SINGLE DATE VIZ. 31.3.2006 IN EACH OF THE 170 SUCH PAYMENT INSTA NCES. SINCE PAYMENT/CREDIT TO THE PAYEES WERE MUCH PRIOR TO 31/3/ 2006, THE PROVISIONS OF SECTION 40(A)(IA) IS VERY MUCH ATTRACTED ON THE FACTS OF THIS CASE BOTH FOR NON DEDUCTION OF TAX AT SOURCE AND FOR DELAY IN REMITTANCE TO THE GOVERNMENT ACCOUNT. THEREFORE, THE LATE DEPOSIT WA RRANTS DISALLOWANCE OF THE EXPENDITURE U/S 40(A)(IA) OF THE ACT IN THE CON CERNED ASST. YEAR NAMELY 2006-07. HOWEVER, THE FACT THAT THE ASSESSEE HAS D EPOSITED BEYOND THE PRESCRIBED PERIOD WOULD AMOUNT TO COMPLIANCE WITHIN THE PRESCRIPTION OF THE PROVISO TO ENABLE THE ASSESSEE TO DEDUCT THE EXPEND ITURE IN THE SUBSEQUENT YEAR, NAMELY 2007-08. 6.1 THE CONTENTION OF THE ASSESSEE THAT, THE PROVI SIONS OF SECTION 40(A)(IA) AS AMENDED BY FINANCE ACT, 2010 W.E.F. 1 ST APRIL, 2007 IS REMEDIAL IN NATURE, DESIGNED TO ELIMINATE UNINTENDED CONSEQU ENCES WHICH MAY CAUSE UNDUE HARDSHIP TO THE TAX PAYER, IS TO BE REJECTED I N VIEW OF THE SPECIAL BENCH ORDER OF THE TRIBUNAL IN THE CASE OF BHARATI SHIPYARD LTD. V DCIT (MUM.) 11 ITR (TRIB) 599 WHEREIN IT WAS CATEGORICAL LY HELD THAT SECTION 40(A)(IA) AS AMENDED BY THE FINANCE ACT, 2010 W.E.F. 1 ST APRIL, 2010 DO NOT PAGE 6 OF 6 ITA NO.132/BANG/2011 6 HAVE RETROSPECTIVE EFFECT. THE RELEVANT FINDING O F THE TRIBUNAL READS AS FOLLOWS:- THE AMENDMENT TO SECTION 40(A)(IA) BY THE FINANCE A CT, 2010 HAS BEEN SPECIFICALLY MADE RETROSPECTIVELY APPLICABLE FROM THE ASSESSMENT YEAR 2010-2011. IT H AS NOT BEEN EXPRESSLY SET OUT THAT THE AMENDMENT IS CURATIVE OR MERELY DECLARATORY OF THE PREVIOUS LAW. THE INTENTION OF THE LEGISLATURE AS GATHERED FROM THE N OTES ON CLAUSES AND THE MEMORANDUM EXPLAINING THE PROVIS IONS OF THE FINANCE BILL DOES NOT PARTICULARLY INDICATE A NY RELAXATION IN THE PROVISION RETROSPECTIVELY FROM THE ASST. YEAR 2005-06. IN THE LIGHT OF THE ABOVE REASONING, THE GROUNDS RA ISED BY THE ASSESSEE ARE REJECTED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DAY OF OCTOBER, 2011 SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO:- 1.THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCE RNED 4. THE CIT(A) CONCERNED 5. THE DR 6. GF MSP/- BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.