M/S PHIL MINERALS BENEFICATION 7 ENERGY P.LTD., BILASPUR(CG) V. DY.. C.I.T. CIRCLE-1(1), BILASPUR(CG)

ITA 135/BIL/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1374 (ITAT-RAIPUR)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 28-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Assessee Lawyers: G S AGRAWAL
• Keywords: Business income; Retrospective amendment; Additional evidence
• Section: 201(1)

Judgement Text

ITA NO 135 /RPR/201 5 ASSESSMEN T Y EAR: 20 10 - 11 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR [CORAM : PRAMOD KUMAR AM & C.M. GARG, JM ] ITA NO . 135 / RPR /20 1 5 AS SESSMENT Y EAR : 20 10 - 11 PHIL MINERALS BENEFICATION & ENERGY P. LTD. .APPELLANT B - II, SAI PLAZA, LINK ROAD, BILASPUR (C.G. ) [PAN : A ADCP 9563 F ] VS. DY. COMMISSIONER OF INCOME TAX, BILASPUR (C.G.) ....................RESPONDENT APPEARANCES BY: G.S. AGRAWAL , FOR THE A PPELLANT S.K. MEENA , F OR THE RE SPONDENT DATE OF CONCLUDING THE HEARING : JU NE 2 3 RD , 201 6 DATE OF PRONOUNCING THE ORDER : JUNE 24 TH , 201 6 O R D E R PER PRAMOD KUMAR, AM: BY WAY OF TH IS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 09.09.2015 , PASSED BY THE LEARNED CIT(A) FOR THE ASSESS MENT YEAR 20 10 - 11 , ON TH E FOLLOWING GROUNDS : - 1. THAT UNDER THE FACTS AND THE LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 2 , 68,055 / - OUT OF RS. 3,91,650/ - MADE BY THE LD. ASSESSING OFFICER UNDER SECTION 4 0(A)(IA) FOR NON - DEDUCTION OF TAX AT SOURCE ON FINANCIAL CHARGES PAID TO M/S. MAGMA FIN C ORP LTD. RS.90,062/ - , M/S. T ATA CAPITAL LIMITED RS.1,76,678 & M/S. ASHOK LEYLAND RS.1,315/ - & REJECTING THE EXPLANATIONS MADE AND EVIDENCES FILED. PRAYED TO DELETE TH E DISALLOWANCE OF RS. 2,68,055/ - 1.1 THAT THE LD CIT(A) 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). ITA NO 135 /RPR/201 5 ASSESSMEN T Y EAR: 20 10 - 11 PAGE 2 OF 6 PRAYED THE SAME BE ADMITTED AND BE CONSIDERED. 1.2 THAT THE LD CIT(A) FURTHER ERRED IN REJECTING VARIOUS ORDERS OF THE HON'BLE TRIBUNAL AND JUDGEMENTS OF HIGH COURT SUPPORTING THAT, AS THE AMOUNT WAS NOT OUTSTANDING AS PAYABLE AT T HE 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(A) FURTHER ERRED IN REJECTING THE EXPLANATION AND THE CASE LAWS THAT SECON D PROVISO TO SEC 40(A)(IA) AND FIRST PROVISO TO SEC 201(1) BE CONSIDERED AS HAVING RETROSPECTIVE EFFECT. PRAYED THAT DISALLOWANCE OF RS. 2,68,055/ - IS UNJUSTIFIED AS FALLS UNDER THE ABOVE PROVISO, AND BE DELETED. 2. THAT THE LD. CIT(A) FURTHER ERRED IN CONF IRMING THE DISALLOWANCE OF RS.50,000/ - OUT OF RS.3,00,000/ - UNDER VARIOUS HEAD OF EXPENSES MADE BY THE LD ASSESSING OFFICER ON ADHOC BASIS AND REJECTING THE EXPLANATION. PRAYED TO DELETE ADHOC DISALLOWANCE. 2. THE ISSUE RAISED IN THE APPEAL IS SQUA RELY COVERED VIDE OUR ORDER OF EVEN DATE IN THE CASE OF RKP COMPANY, KORBA VS. ITO, KORBA - ITA NO.106/RPR/2016 - WHEREIN IT HAS BEEN INTER ALIA OBSERVED AS FOLLOWS: - 3. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVES, PERUSED THE MATERIAL ON RECOR D AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. NONE HAS APPEARED FOR THE ASSESSEE BUT AS THE ISSUE IN APPEAL IS A SHORT LEGAL ISSUE, SET OUT IN A NARROW COMPASS OF FACTS, WHICH CAN BE DISPOSED OF EVEN WITHOU T THE BENEFIT OF ASSISTANCE FROM THE ASSESSEE, WE CONSIDER IT APPROPRIATE TO PROCCED WITH THE MATTER EX PARTE QUA THE ASSESSEE. 4. WE FIND THAT HON BLE DELHI HIGH COURT HAS SPECIFICALLY APPROVED THE STAND TAKEN BY A COORDINATE BENCH OF THIS TRIBUNAL, IN T HE CASE OF RAJEEV KUMAR AGARWAL VS ACIT [(2014) 149 ITD 363 (AGRA)] , AND UPHELD THE ACTION OF THE TRIBUNAL IN FOLLOWING THE SAME. 9. . NOW THAT THE LEGISLATURE HAS BEEN COMPASSIONATE ENOUGH TO CURE THESE SHORTCOMINGS OF PROVISION, AND THUS OBVIA TE THE UNINTENDED HARDSHIPS, SUCH AN AMENDMENT IN LAW, IN VIEW OF THE WELL SETTLED LEGAL POSITION TO THE EFFECT THAT A CURATIVE AMENDMENT TO AVOID UNINTENDED CONSEQUENCES IS TO BE ITA NO 135 /RPR/201 5 ASSESSMEN T Y EAR: 20 10 - 11 PAGE 3 OF 6 TREATED AS RETROSPECTIVE IN NATURE EVEN THOUGH IT MAY NOT STATE SO SPECIFICA LLY, THE INSERTION OF SECOND PROVISO MUST BE GIVEN RETROSPECTIVE EFFECT FROM THE POINT OF TIME WHEN THE RELATED LEGAL PROVISION WAS INTRODUCED. IN VIEW OF THESE DISCUSSIONS, AS ALSO FOR THE DETAILED REASONS SET OUT EARLIER, WE CANNOT SUBSCRIBE TO THE VIEW THAT IT COULD HAVE BEEN AN INTENDED CONSEQUENCE TO PUNISH THE ASSESSEES FOR NON DEDUCTION OF TAX AT SOURCE BY DECLINING THE DEDUCTION IN RESPECT OF RELATED PAYMENTS, EVEN WHEN THE CORRESPONDING INCOME IS DULY BROUGHT TO TAX. THAT WILL BE GOING MUCH BEYON D THE OBVIOUS INTENTION OF THE SECTION. ACCORDINGLY, WE HOLD THAT THE INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETROSPECTIVE EFFECT FROM 1ST APRIL, 2005, BEING THE DATE FROM WHICH SUB CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY THE FINANCE (NO. 2) ACT, 2004. 10. IN VIEW OF THE ABOVE DISCUSSIONS, WE DEEM IT FIT AND PROPER TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF OUR ABOVE OBSERVATIONS AND AFTER C ARRYING OUT NECESSARY VERIFICATIONS REGARDING RELATED PAYMENTS HAVING BEEN TAKEN INTO ACCOUNT BY THE RECIPIENTS IN COMPUTATION OF THEIR INCOME, REGARDING PAYMENT OF TAXES IN RESPECT OF SUCH INCOME AND REGARDING FILING OF THE RELATED INCOME TAX RETURNS BY T HE RECIPIENTS. WHILE GIVING EFFECT TO THESE DIRECTIONS, THE ASSESSING OFFICER SHALL GIVE DUE AND FAIR OPPORTUNITY OF HEARING TO THE ASSESSEE, DECIDE THE MATTER IN ACCORDANCE WITH THE LAW AND BY WAY OF A SPEAKING ORDER. WE ORDER SO 5. IN EFFECT THUS, THEIR LORDSHIPS HAVE APPROVED THE ACTION OF THE TRIBUNAL IN REMITTING THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO ASCERTAIN WHETHER THE RECIPIENT HAS TAKEN INTO ACCOUNT RELATED PAYMENTS INTO COMPUTATION OF HIS INCOME AND OFFERING THE SAM E TO TAX, AND, IF SO, DELETE THE DISALLOWANCE UNDER SECTION 40(A)(IA) IN RESPECT OF THE SAME. 6. WHEN, HOWEVER, WE ASKED THE LEARNED DEPARTMENTAL REPRESENTATIVE AS TO WHY WE SHOULD ALSO NOT REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER, WITH THE SAME DIRECTIONS, HE, ALONGWITH HIS SENIOR COLLEAGUE SHRI DARHAN SINGH, WHO HAPPENS TO BE THE CIT(A) AUTHORING THE IMPUGNED ORDER AND WHO WAS ON DUTY AS CIT(DR) BEFORE US, HAD THREE POINTS TO MAKE - FIRST, THAT THERE ARE DECISIONS IN SUPPORT OF THE STAND OF THE ASSESSING OFFICER S STAND, BY WAY OF HON BLE KERALA HIGH COURT S DECISION IN THE CASE OF THOMAS GEORGE MUTHOOT VS CIT [(2015) 63 TAXMANN.COM 99 (KERALA)] ; SECOND, THAT EVEN IF INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) CAN BE CONSTRUED AS ITA NO 135 /RPR/201 5 ASSESSMEN T Y EAR: 20 10 - 11 PAGE 4 OF 6 RETROS PECTIVE IN EFFECT, THE CORRESPONDING RULE IN THE INCOME TAX RULES 1962 IS NOT, AND HAS NOT BEEN HELD TO BE, RETROSPECTIVE, AND THE SECOND PROVISO TO SECTION 40(A)(IA) CANNOT, THEREFORE, BE GIVE RETROSPECTIVE EFFECT; AND, THIRD, THAT THERE IS NO DECISION ON THIS ISSUE BY HON BLE JURISDICTIONAL HIGH COURT AND, AS SUCH, THE STAND OF THE ASSESSING OFFICER CANNOT BE FAULTED. 7. AS FOR HON BLE KERALA HIGH COURT S DECISION IN THE CASE OF THOMAS GEORGE MUTHOOT (SUPRA), UNDOUBTEDLY, OUTSIDE THE JURISDICTION OF HON BLE KERALA HIGH COURT AND OUTSIDE THE JURISDICTION OF HON BLE DELHI HIGH COURT - WHICH HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, THERE ARE CONFLICTING DECISIONS ON THE ISSUE OF RESTROSPECTIVITY OF SECOND PROVISO TO SECTION 40(A)(IA). IT IS THUS EVID ENT THAT VIEWS OF THESE TWO HIGH COURTS ARE IN DIRECT CONFLICT WITH EACH OTHER. CLEARLY, THEREFORE, THERE IS NO MEETING GROUND BETWEEN THESE TWO JUDGMENTS. THE DIFFICULTY ARISES AS TO WHICH OF THE HON BLE NON JURISDICTIONAL HIGH COURT IS TO BE FOLLOWED BY US IN THE PRESENT SITUATION. IT WILL BE WHOLLY INAPPROPRIATE FOR US TO CHOOSE VIEWS OF ONE OF THE HIGH COURTS BASED ON OUR PERCEPTIONS ABOUT REASONABLENESS OF THE RESPECTIVE VIEWPOINTS, AS SUCH AN EXERCISE WILL DE FACTO AMOUNT TO SITTING IN JUDGMENT OVER THE VIEWS OF THE HIGH COURTS SOMETHING DIAMETRICALLY OPPOSED TO THE VERY BASIC PRINCIPLES OF HIERARCHICAL JUDICIAL SYSTEM. WE HAVE TO, WITH OUR HIGHEST RESPECT OF BOTH THE HON BLE HIGH COURTS, ADOPT AN OBJECTIVE CRITERION FOR DECIDING AS TO WHICH OF THE HO N BLE HIGH COURT SHOULD BE FOLLOWED BY US. WE FIND GUIDANCE FROM THE JUDGMENT OF HON BLE SUPREME COURT IN THE MATTER OF CIT VS. VEGETABLE PRODUCTS LTD. [(1972) 88 ITR 192 (SC)] . HON BLE SUPREME COURT HAS LAID DOWN A PRINCIPLE THAT 'IF TWO REASONABLE CONSTR UCTIONS OF A TAXING PROVISIONS ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADOPTED'. THIS PRINCIPLE HAS BEEN CONSISTENTLY FOLLOWED BY THE VARIOUS AUTHORITIES AS ALSO BY THE HON BLE SUPREME COURT ITSELF. IN ANOTHER SUPREME COURT JUDGM ENT, PETRON ENGG. CONSTRUCTION (P) LTD. & ANR. VS. CBDT & ORS. (1988) 75 CTR (SC) 20 : (1989) 175 ITR 523 (SC), IT HAS BEEN REITERATED THAT THE ABOVE PRINCIPLE OF LAW IS WELL ESTABLISHED AND THERE IS NO DOUBT ABOUT THAT. HON BLE SUPREME COURT HAD, HOWEVER, SOME OCCASIONS TO DEVIATE FROM THIS GENERAL PRINCIPLE OF INTERPRETATION OF TAXING STATUTE WHICH CAN BE CONSTRUED AS EXCEPTIONS TO THIS GENERAL RULE. IT HAS BEEN HELD THAT THE RULE OF RESOLVING AMBIGUITIES IN FAVOUR OF TAX - PAYER DOES NOT APPLY TO DEDUCTION S, EXEMPTIONS AND EXCEPTIONS WHICH ARE ALLOWABLE ONLY WHEN PLAINLY AUTHORISED. THIS EXCEPTION, LAID DOWN IN LITTMAN VS. BARRON 1952(2) AIR 393 AND FOLLOWED BY APEX COURT IN MANGALORE CHEMICALS & FERTILIZERS LTD. VS. DY. COMMR. OF CT (1992) SUPPL. (1) SCC 2 1 AND NOVOPAN INDIA LTD. VS. CCE & C 1994 (73) ELT 769 (SC ), HAS BEEN SUMMED UP IN THE WORDS OF LORD LOHEN, 'IN CASE OF AMBIGUITY, A TAXING STATUTE SHOULD BE CONSTRUED IN FAVOUR OF A TAX - PAYER DOES NOT APPLY TO A PROVISION GIVING TAX - PAYER RELIEF IN CERTAI N CASES FROM A SECTION CLEARLY IMPOSING LIABILITY'. THIS EXCEPTION, IN THE PRESENT CASE, HAS NO ITA NO 135 /RPR/201 5 ASSESSMEN T Y EAR: 20 10 - 11 PAGE 5 OF 6 APPLICATION. THE RULE OF RESOLVING AMBIGUITY IN FAVOUR OF THE ASSESSEE DOES NOT ALSO APPLY WHERE THE INTERPRETATION IN FAVOUR OF ASSESSEE WILL HAVE TO TREAT THE PROVISIONS UNCONSTITUTIONAL, AS HELD IN THE MATTER OF STATE OF M.P. VS. DADABHOY S NEW CHIRMIRY PONRI HILL COLLIERY CO. LTD. AIR 1972 (SC) 614 . THEREFORE, WHAT FOLLOWS IS THAT IN THE PECULIAR CIRCUMSTANCES OF THE CASE AND LOOKING TO THE NATURE OF THE PROV ISIONS WITH WHICH WE ARE PRESENTLY CONCERNED, THE VIEW EXPRESSED BY THE HON BLE DELHI HIGH COURT IN THE CASE OF ANSAL LANDMARK (SUPRA), WHICH IS IN FAVOUR OF ASSESSEE, IS REQUIRED TO BE FOLLOWED BY US. REVENUE DOES NOT, THEREFORE, DERIVE ANY ADVANTAGE FROM HON BLE KERALA HIGH COURT S DECISION IN THE CASE OF THOMAS GEORGE MUTHOOT (SUPRA). 8. THE SECOND ISSUE IS WITH RESPECT TO THE SECOND PROVISO TO SECTION 40(A)(IA) BEING HELD TO BE RETROSPECTIVE, WITHOUT CORRESPONDING ENABLING PROVISION IN THE RULES BEING HELD TO BE RETROSPECTIVE. THAT IS A HYPER TECHNICAL ARGUMENT AND TOO PEDANTIC AN APPROACH. THE SECOND PROVISO TO SECTION 40(A)(IA) WAS HELD TO BE RETROSPECTIVE IN IN THE CONTEXT OF FINDING SOLUTION TO THE PROBLEM TO THE TAXPAYER, AND THE MATTER WAS SET AS IDE TO THE FILE OF THE ASSESSING OFFICER WITH CERTAIN DIRECTIONS ABOUT FACTUAL VERIFICATIONS ON THE RECIPIENT HAVING INCLUDED THE SAME IN THE RECEIPTS BASED ON WHICH TAXABLE INCOME IS COMPUTED, AND THE INCOME HAVING BEEN OFFERED TO TAX. IT IS THIS ACTION O F THE COORDINATE BENCH THAT WAS UPHELD BY THE TRIBUNAL AND THE COURSE OF ACTION SO ADOPTED BY THE COORDINATE BENCH APPROVED BY THEIR LORDSHIPS. IT IS IMPERMISSIBLE TO PICK UP ONE OF THE ASPECTS OF THE DECISION OF THE JUDICIAL AUTHORITY AND READ THE SAME IN ISOLATION WITH OTHER ASPECTS. THE DECISION IS NOT ON THE RETROSPECTIVITY OF THE PROVISO ALONE, ITS ALSO ON DELETION OF DISALLOWANCE IN THE EVENT OF THE RECIPIENT HAVING TAKEN INTO ACCOUNT THESE RECEIPTS IN THE COMPUTATION OF INCOME. THE JUDGE MADE LAW IS AS BINDING ON THE AUTHORITIES BELOW AS IS THE LEGISLATED STATUE. THE HYPER TECHNICAL STAND OF THE DEPARTMENTAL REPRESENTATIVES, THEREFORE, DOES NOT MERIT OUR APPROVAL. 9. AS REGARDS LACK OF GUIDANCE FROM HON BLE JURISDICTIONAL HIGH COURT, THAT CAN NOT BE REASON ENOUGH TO DISREGARD THE DECISIONS FROM NON - JURISDICTIONAL HIGH COURTS. HON BLE COURTS ABOVE, BEING A HIGHER TIER OF THE JUDICIAL HIERARCHY, BIND THE LOWER FORUMS NOT ONLY IN THE JURISDICTION OF RESPECTIVE HIGH COURTS, BUT UNLESS, THERE IS ANYTHING CONTRARY THERETO BY THE JURISDICTIONAL HIGH COURTS, OTHER JURISDICTIONS AS WELL. THERE CANNOT BE ANY DISPUTE ON THE FUNDAMENTAL PROPOSITION THAT IN THE HIERARCHICAL JUDICIAL SYSTEM THAT WE HAVE, BETTER WISDOM OF THE COURT BELOW HAS TO YIELD TO HIGHER WISDO M OF THE COURT ABOVE, AND THEREFORE WE HAVE TO HUMBLY BOW BEFORE THE VIEWS EXPRESSED BY HON BLE COURTS ABOVE. SUCH A HIGH COURT BEING A NON - JURISDICTIONAL HIGH COURT DOES NOT ALTER THE POSITION AS LAID DOWN BY HON BLE BOMBAY HIGH COURT ITA NO 135 /RPR/201 5 ASSESSMEN T Y EAR: 20 10 - 11 PAGE 6 OF 6 IN THE MATTER OF CIT VS. GODAVARI DEVI SARAF ([1978) 113 ITR 589 (BOM)] AND AS ANALYSED BY A COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS AURANGABAD HOLIDAY RESORTS PVT LTD [(2009) 118 ITD 1 (PUNE)] . 10. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE DEEM IT FIT AND PROPER TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR LIMITED VERIFICATION ON THE ASPECT AS TO WHETHER RECIPIENT OF PAYMENT HAS INCLUDED THE SAME IN HIS COMPUTATION OF BUSINESS INCOME OFFERED TO TAX, A ND, IF FOUND TO BE SO, DELETE THE DISALLOWANCE IN QUESTION. WITH THESE DIRECTIONS, THE MATTER STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER. 3. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN IN THE ABOVE CASE. RESPE CTFULLY FOLLOWING THE SAME, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER IN THE TERMS INDICATED ABOVE. 4. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT O N THIS 24 TH DAY OF JUNE, 2016. SD/ - SD/ - C.M. GARG PRAMOD KU MAR ( JUDICIAL MEMBER ) (ACCOUNTANT MEMBER) DATED: THE 24 TH DAY OF JUNE, 2016 . PBN/* COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CI T(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR