M/S D.C CONSTRUCTION, BILASPUR(CG) V. DY.. C.I.T. CIRCLE-1(1), BILASPUR(CG)

ITA 134/BIL/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7762 (ITAT-RAIPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 28-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: G S AGRAWAL
• Keywords: Depreciation; Opportunity of being heard; Retrospective amendment; Additional evidence
• Section: 201(1); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH , RAIPUR BEFORE S HRI N.K. BILLAIYA (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 134 /RPR /20 1 5 ASSESSMENT YEAR: 2010 - 11 M/S D.C. CONSTRUCTION, B - 1, PARIJAT EXTENSION, NEHRU NAGAR, BILASPUR (C.G.) PAN: AAFFD8842E VS. THE DY. COMMISSIONER OF INCOME TAX - CIRCLE 1(1), MAHIMA COMPLEX, VYAPAR VIHAR, BILASPUR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.S. AGRAWAL ( CA ) REVENUE BY : SHRI SANJAY KUMAR (DR ) DATE OF HEARING: 09 /03 /201 8 DATE OF PRONOUNCEMENT: 04 / 06 /201 8 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 09.09.2015 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), BILASPUR , FOR THE A S S ESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED BY THE AO U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM ENGAGED IN CIVIL CONSTRUCTION WORK FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 26,69,260/ - . S INCE, THE CASE WAS SELECTED FOR SCRUTINY NOTICE U/S 143 (2) AND 142 (1) WERE ISSUED AND IN RESPONSE TO THE SAID NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED BEFORE THE AO AND FILED WRITTEN SUBMISSIONS 2 ITA NO. 134 / RPR/201 5 ASSESSMENT YEAR: 2010 - 11 AND OTHER DETAILS. IT WAS SEEN THAT THE ASSESSEE HAD CLAIMED VARIOUS EXPENSES IN P&L ACCOUNT AMOUNTING TO S. 18,58,378/ - UNDER THE HEAD FINANCE CHARGES. FROM THE DETAILS SUBMITTED BY THE ASSESSEE, IT WAS NOTICED THAT EXCEPT THE AMOUNT OF RS. 27,687/ - , THE ENTIRE AMOUNT HAS BEEN PAID TO NON - B ANKING FINANCIAL COMPANIES. THE AO HOLDING THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE BEFORE MAKING THE PAYMENT DISALLOWED ADDITION OF RS. 18,30,691/ - AND ADDED BACK THE SAME TO THE INCOME OF THE ASSESSEE U/S 40(A)(IA) READ WITH SECTION 194A OF T HE ACT. THE AO AFTER MAKING OTHER DISALLOWANCES DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 46,85,390/ - . 3. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE PARTLY ALLOWED THE APPEAL OF THE ASSESSEE, HOWEVER SUSTAINED THE DISALLOWANCE OF RS. 18,30,691/ - MADE BY THE AO U/S 40(A)(IA) OF THE ACT. AGAINST THE SAID FINDINGS, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. T HE ASSESSEE HAS CHALLENGED THE IMPUGNE D ORDER PASSED BY THE LD. CIT (A ) ON THE FOLLOWING GROUNDS: - 1. THAT UNDER THE FACTS AND THE LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 18,30,691/ - MADE BY THE LEARNED ASSESSING OFFICER U/S 40(A)(IA) FO R NON - DEDUCTION OF TAX AT SOURCE ON FINANCIAL CHARGES PAID, AS BELOW, REJECTING ALL THE EXPLANATIONS MADE AND EVIDENCES FILED: - 1. MAGMA FIN CORP - RS. 16,33,041/ - 2. MAHINDRA FINANCE - RS. 90,406/ - 3. TATA MOTORS FINANCE LTD. - RS. 1,07,244/ - TOTAL - RS. 18,30,691/ - PRAYED TO DELETE THE DISALLOWANCE OF RS . 18,30,691/ - . 3 ITA NO. 134 / RPR/201 5 ASSESSMENT YEAR: 2010 - 11 1.1 THAT THE LD. CIT (APPEALS) FURTHER ERRED IN REJECTING THE ADDITIONAL EVIDENCES FILED UNDER RULE 46A BEING CERTIFICATE FROM TWO CHARTERED ACCOUNTANTS SIMILAR TO CERTIFICATE REFERRED TO IN SECOND PROVISO TO SEC. 40(A)(IA) AND FIRST PROVISO TO SEC. 201(1). PRAYED THE SAME BE ADMITTED AND BE CONSIDERED. 1.2 THAT THE LD. CIT (APPEALS) FURTHER ERRED IN REJECTING VARIOUS ORDERS OF THE HONBLE TRIBUNAL AND JUDGMENTS OF HIGH COURT SUPPORTING THAT, AS THE AMOUNT WAS NOT OUTSTANDING AS PAYABLE AT THE YEAR END, NO DISALLOWANCE WAS CALLED - FOR. PRAYED THAT NO AMOUNT OF FINANCE CHARGES IS OUTSTANDING AND THEREFORE, DISALLOWANCE IS UNCALLED - FOR AND BE DELETED. 1.3 THAT THE LD. CIT (APPEALS) FURTHER ERRED IN REJE CTING THE EXPLANATION AND THE CASE LAWS THAT SECOND PROVISO TO SEC. 40(A)(IA) AND FIRST PROVISO TO SEC. 201 (1) BE CONSIDERED AS HAVING RETROSPECTIVE EFFECT. PRAYED THAT DISALLOWANCE OF RS. 18,30,691/ - IS UNJUSTIFIED AS FALLS UNDER THE ABOVE PROVISO, AND BE DELETED. 2. THAT THE LD. CIT (A) FURTHER ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 1,17,408/ - MADE BY THE LEARNED AO ON ADHOC BASIS UNDER FOLLOWING HEADS, REJECTING THE EXPLANATION: HEAD OF EXPENSE EXPENSES DISALLOWED (RS.) TELEPHONE EXPENSES - 17,537/ - DEPRECIATION - 54,845/ - CONVEYANCE EXPENSES - 43,033/ - OFFICE EXPENSES - 16,632/ - ------------- TOTAL - 1,32,047/ - --------------- PRAYED TO DELETE ADHOC DISALLOWANCE. 4 ITA NO. 134 / RPR/201 5 ASSESSMENT YEAR: 2010 - 11 5. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO U/S 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TAX AT SOURCE ON FINANCIAL CHARGES PAID TO MAGMA FIN . CORP ., MAHINDRA FINANCE AND TATA MOTORS FINANCE LTD. , R EJECTING THE ADDITIONAL EVIDENCE FILED UNDER RULE 46 BEING CERTIFICATES FROM TWO CHARTERED ACCOUNTANTS AS REQUIRED UNDER THE SECOND PROVISO TO SECTION 40(A) (IA) AND FIRST PROVISO TO SECTION 201 OF THE ACT . THE LD. C OUNSEL FOR THE ASSESSEE RELYING ON THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX - 1 V S. ANSEL LANDMARK TOWNSHIP (PP) LTD. 377 ITR 635 (DEL) SUBMITTED THAT SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATI VE AND IT HAS RETROSPECTIVE EFFECT FROM 01.04.2005. SINCE THE PAYEES HAVE FURNISHED THEIR RETURN OF INCOME AND HAS TAKEN INTO ACCOUNT THE SUM FOR COMPUTING INCOME IN THE RETURN OF INCOME AND HAS PAID THE TAX DUE TO THE INCOME DECLARED BY THEM IN SUCH RETUR N OF INCOME, THE DISALLOWANCES IS LIABLE TO BE DELETED. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELIED ON THE FINDINGS OF THE LD. CIT (A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD IN THE LIGHT OF THE CONTENTIONS OF THE PARTIES. THE HONBLE DELHI HIGH COURT IN COMMISSIONER OF INCOME TAX VS. ANSEL LANDMARK TOWNSHIP (SUPRA) HAS DECIDED THE IDENTICAL ISSUE INVOL VED IN THIS CASE IN FAVOUR OF THE ASSESSEE HOLDING AS UNDER: - 11. THE FIRST PROVISIO TO SECTION 201(1) OF THE ACT HAS BEEN INSERTED TO BENEFIT THE ASSESSEE. IT ALSO STATES THAT WHERE A PERSON FAILS TO DEDUCT TAX AT SOURCE ON THE SUM PAID TO A RESIDENT OR ON THIS CREDITED TO THE ACCOUNT OF A RESIDENT SUCH PERSON SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN 5 ITA NO. 134 / RPR/201 5 ASSESSMENT YEAR: 2010 - 11 RESPECT OF SUCH TAX IF SUCH A RESIDENT HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139 OF THE ACT. NO DOUBT, THERE IS A MANDATORY REQUIREMENT UNDER SECTION 201 TO DEDUCT TAX AT SOURCE UNDER CERTAIN CONTINGENCIES, BUT THE INTENTION OF LEGISLATURE IS NOT TO TRADE THE ASSESSEE AS A PERSON IN DEFAULT SUBJECT TO THE FULFILMENT OF THE CONDITIONS AS STIPULATED IN THE FIRST PROVISO TO SECTION 201(1). T HE INSERTION OF THE SECOND PROVISO TO SECTION 40(A)(IA) ALSO REQUIRES TO BE VIEWED IN THE SAME MANNER. THIS AGAIN IS A PROVISIO INTENDED TO BENEFIT THE ASSESSEE. THE FACT OF THE LEGAL FICTION CREATED THEREBY IS TO TREAT THE ASSESSEE IS A PERSON NOT IN DEFA ULT OF DEDUCTING TAX AT SOURCE UNDER CERTAIN CONTINGENCIES. 12. RELEVANT TO THE CASE IN HAND, WHAT IS COMMON TO BOTH THE PROVISO TO SECTION 40(A)(IA) AND SECTION 201(1)OF THE ACT IS THAT AS LONG AS THE PAYEE/RESIDENT (WHICH IN THIS CASE IS ALIP) HAS FILED ITS RETURN OF INCOME DISCLOSING 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. AS FAR AS THE PRESENT CASE IS CONCERNED, IT IS NOT DIS PUTED BY THE REVENUE THAT THE PAYEE HAS FILED RETURN AND OFFERED THE SUM RECEIVED TO TAX. 8. IN THE LIGHT OF THE AFORESAID JUDGMENT, THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE IS RELEVANT TO ADJUDICATE THE ISSUE INVOLVED IN THIS CASE. HENCE, THE LD. CIT (A) HAS WRONGLY REJECTED THE APPLICATION FILED BY THE ASSESSEE UNDER RULE 46A OF THE INCOME TAX RULES, 1962. 9. UNDER RULE 46A THE ADDITIONAL EVIDENCE CAN BE PRODUCED DURING THE COURSE OF APPELLATE PROCEEDINGS, UNDER THE FOLLOWING CIRCUMSTANCES: - (A) WHERE THE [ ASSESSING OFFICER] HAS REFUSED TO ADMIT EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTING, OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE [ ASSESSING OFFICER] OR 6 ITA NO. 134 / RPR/201 5 ASSESSMENT YEAR: 2010 - 11 (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE [ASSESSING OFFICER] ANY EVIDENCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL OR (D) WHERE THE [ASSESSING OFFICER] H AS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. 10. AS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE, THE ASSESSEE COULD NOT COLLECT THE DOCUMENTS IN QUESTION D URING THE COURSE OF ASSESSMENT PROCEEDINGS THE SAME COULD NOT BE PRODUCED BEFORE THE AO . IN OUR CONSIDERED VIEW, THESE DOCUMENTS ARE ESSENTIAL FOR DECIDING THE ONLY ISSUE INVOLVED IN THIS CASE . HENCE, WE ADMIT THE SAME AS ADDITIONAL EVIDENCE. SINCE, THE ISSUE IS REQUIRED TO BE DECIDED AFRESH IN THE LIGHT OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT AFORESAID, WE SET ASIDE THE FINDINGS OF THE LD. CIT (A) AND SEND THE APPEAL BACK TO THE AO TO DECIDE T HE ISSUE AFRESH IN THE LIGHT OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT AFTER EXAMINING/VERIFYING THE ADDITIONAL DOCUMENTS PRODUCED BY THE ASSESSEE AND GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT, APPEAL FILED BY THE ASSESSEE F OR A SSESSMENT YEAR 2010 - 2011 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JUNE , 2018 . SD/ - SD/ - ( N.K. BILLAIYA) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER RAIPUR, DATED: 04 / 06 / 2018 ALINDRA, PS 7 ITA NO. 134 / RPR/201 5 ASSESSMENT YEAR: 2010 - 11 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , RAIPUR / DR, ITAT, RAIPUR 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) / PS , RAIPUR / ITAT, RAIPUR