M/s. Shiv Krupa Tin Containers, V. The Income Tax Officer, S.K. Ward-1, Himatnagar

ITA 136/AHD/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1410 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 31-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 19-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P K
• Assessee Lawyers: N C AMIN
• Keywords: Retrospective amendment; Additional evidence; Non-deduction of tax; Reasonable cause
• Section: 40A(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ I.T.A. NO.136/AHD/2016 ( / ASSESSMENT YEAR : 2010-11) M/S. SHIV KRUPA TIN CONTAINERS AT BORIYA BECHARAJI MODASA ROAD TALUKA TALOD 383 215 / VS. THE ITO SK WARD-1 HIMATNAGAR $ ./ ./ PAN/GIR NO. : ABPFS 9958 P ( $& / APPELLANT ) .. ( '($& / RESPONDENT ) $&) / APPELLANT BY : SHRI N.C. AMIN, AR '($&*) / RESPONDENT BY : SHRI B.P.K. PANDA, SR.DR +* / DATE OF HEARING 31/05/2016 ,-./* / DATE OF PRONOUNCEMENT 09/06/2016 / O R D E R PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-2, AHMEDABAD DATED 03/12/2015 FOR THE ASSESSMENT YEAR 2010-11. ITA NO.136/AHD/ 2016 M/S. SHIV KRUPA TIN CONTAINERS VS. ITO ASST.YEAR 2010-11 - 2 - 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- 2.1. ASSESSEE IS A PARTNERSHIP-FIRM STATED TO BE EN GAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF TINS AND ITS JOB-WO RK. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR AY 20 10-11 ON 24/09/2010 DECLARING TOTAL INCOME OF RS.95,980/-. THE CASE WA S SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) ON 07/03 /2013 AND THE TOTAL INCOME WAS DETERMINED AT RS.7,95,620/-. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER (AO), ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A) WHO VIDE ORDER DATED 03/12/2015 (IN APPEAL NO.CIT(A )-VIII/49/SK WD.1 HMT/2013-14 AND NOW CIT(A)-2/20/SK WD.1, HMT/2 013-14) DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED FOLLOWING EFFECTIVE GROUNDS:- 1. THAT THE CIT(A)-2 AHMEDABAD HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING AN ADDITION OF DISA LLOWANCE OF EXPENSES U/S.40(A)(3) OF RS.2,49,497/-. 2. THAT THE LEARNED CIT(A)-2 HAS FURTHER ERRED AND CONFIRMING OF AN ADDITION OF RS.4,45,625/- MADE BY LEARNED A.O. U /S.40(A)(IA) OF THE INCOME TAX ACT, 1961. EVEN THOUGH AMENDMENT WAS MADE BY FINANCE ACT, 2012 UNDER SECOND PROVISO TO SECTIO N 40(A)(IA) IS RETROSPECTIVE AND CONSIDERING THE SAME THIS GROU ND. PLEASE BE DECIDE ON MERITS. ITA NO.136/AHD/ 2016 M/S. SHIV KRUPA TIN CONTAINERS VS. ITO ASST.YEAR 2010-11 - 3 - 2.2. FIRST GROUND IS WITH RESPECT TO DISALLOWANCE O F EXPENSES U/S.40A(3) OF THE ACT. 2.3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, O N THE BASIS OF DETAILS FURNISHED BY THE ASSESSEE, AO NOTICED THAT THE ASSESSEE HAD MADE SEVERAL CASH PAYMENTS TO GUJARAT ELECTRICITY BOARD (GEB) IN RESPECT OF ELECTRICITY EXPENSES. (THE DETAILS OF WHICH ARE LI STED AT PAGE NOS.7 & 8 OF THE ASSESSMENT ORDER), THE AGGREGATE OF SUCH CASH PAYMENTS AGGREGATED TO RS.2,49,497/-. THE ASSESSEE WAS ASKED TO EXPLAI N AS TO WHY EXPENSES NOT BE DISALLOWED U/S.40A(3) TO WHICH ASSESSEE INTER ALIA SUBMITTED THAT THE PAYMENTS WERE MADE TO GEB, A GOVERNMENT ORGANIZ ATION AND THERE WAS NO FACILITY FOR ACCEPTANCE OF CHEQUE IN THE VIL LAGE IN WHICH ITS FACTORY OF THE ASSESSEE IS LOCATED. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE AO, IN VIEW OF THE FACT THAT THE ASSESSEE HAD NOT PLACED ANY MATERIAL ON RECORD TO DEMONSTRATE TH AT THERE WAS NO FACILITY IN THE VILLAGE TO ACCEPT THE CHEQUES, ASSE SSEE HAD NOT MADE OUT CASE OF UNAVOIDABLE CIRCUMSTANCES SO AS TO CLAIM TH E BENEFIT RULE 6DD OF THE ACT. HE ACCORDINGLY DISALLOWED THE PAYMENTS IN EXCESS OF RS.20,000/- WHICH AGGREGATED TO RS.2,49,497/- U/S.4 0A(3) OF THE ACT. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE CARR IED THE MATTER BEFORE LD.CIT(A) WHO UPHELD THE ORDER OF THE AO BY HOLDING AS UNDER:- 5.3. DECISION : I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS MADE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT, AS TH E APPELLANT HAS MADE ITA NO.136/AHD/ 2016 M/S. SHIV KRUPA TIN CONTAINERS VS. ITO ASST.YEAR 2010-11 - 4 - PAYMENT OF PART OF THE ELECTRICITY EXPENSES IN CASH . AS PER AO, THE APPELLANT HAD MADE THE PAYMENT OF RS.2,49,497/- TO UGVCL / GEB FOR ELECTRIC EXPENSES IN CASH WHICH INCLUDES THE PAYMEN T OF RS.33,595/- TO M/S.TANVEER ENTERPRISES FOR PURCHASE OF THE OLD USE CABLES. THE AO CONCLUDED THAT THE APPELLANTS PLEA THAT THERE WAS NO FACILITY IN ACCEPTING CHEQUES IN BORIYA BECHARJI VILLAGE FOR WHICH THE APPELLANT HAS NOT PLACED ANY EVIDENCE IN SUPPORT. THE AO ALS O OBSERVED THAT THE APPELLANT HAS NOT BEEN ABLE TO MAKE OUT A CASE OF U NAVOIDABLE CIRCUMSTANCES SO AS TO CLAIM THE BENEFIT OF RULE 6D D. FURTHER HELD THAT THE PAYMENT MADE TO GEB WAS NOT A PAYMENT TO THE GO VERNMENT AND ALSO DID NOT SUBMIT THAT GEB DID NOT ACCEPT THE PAY MENTS THROUGH CHEQUES AND IT WAS THE COMPULSION TO MAKE THE PAYME NTS IN CASH. 5.4. ON THE OTHER SIDE, THE APPELLANT SUBMITTED THA T THESE PAYMENTS WERE MADE TO THE GEB / UGVCL AND THEIR GENUINENESS HAS NOT BEEN DOUBTED. THUS, THE LIBERAL INTERPRETATION OF THE R ULE 6DD HAS TO BE CONSTRUED. IT ALSO SUBMITTED THAT THERE WAS NO FAC ILITY IN ACCEPTING CHEQUES IN THE VILLAGE AND IN ABSENCE OF THE SAME, THE APPELLANT WAS UNABLE TO RUN THE FACTORY. 5.5. ON A CAREFUL CONSIDERATION OF ENTIRE FACTS REL ATED TO THE ISSUE, IT IS NOTED THAT THOUGH THE UGVCL IS A GOVERNMENT COMP ANY, IT DOES NOT MANDATORILY ASKS ITS CUSTOMERS TO MAKE PAYMENT BY C ASH. THE RULE 6DD PROVIDES AN EXCEPTION IN CASES WHERE THE PAYMENT HA S BEEN MADE TO A GOVERNMENT ORGANIZATION AND THE RULES PRESCRIBED IN THIS BEHALF REQUIRES PAYMENT IN CASH COMPULSORILY. THE APPELLA NT HAS FAILED TO ESTABLISH SUCH CIRCUMSTANCE. IT HAS NOT GIVEN ANY REASONABLE CAUSE AS TO WHY THE PAYMENT WAS MADE IN CASH IN SPITE OF THE FACT THAT APPELLANT HAS A BANK ACCOUNT FROM WHICH ALL OTHER EXPENSES HA VE BEEN INCURRED. THE PROVISIONS OF SECTION 40A(3) ARE VERY CLEAR AND IT PROVIDES SPECIFIC EXCEPTION TO THE PROVISIONS UNDER RULE 6DD. THE CA SE OF THE APPELLANT IS NOT COVERED UNDER ANY OF THE EXCEPTIONS PROVIDED IN RULE 6DD. THE APPELLANT IS RUNNING A BIG BUSINESS ESTABLISHMENT A ND IT ALSO HAS BANK ACCOUNT AT THE PLACE NEARBY. IT COULD HAVE OBTAINE D DEMAND DRAFT FOR PAYMENT OF ELECTRICITY DUES AND ACCORDINGLY MADE TH E PAYMENT IN COMPLIANCE OF THE PROVISIONS OF INCOME TAX ACT. IN THE CASE OF THE ITA NO.136/AHD/ 2016 M/S. SHIV KRUPA TIN CONTAINERS VS. ITO ASST.YEAR 2010-11 - 5 - APPELLANT, IT HAS NOT FURNISHED ANY DOCUMENTARY EVI DENCE IN SUPPORT OF ITS CLAIM THAT IT COULD NOT MAKE THE PAYMENT BY LOC AL CHEQUE. 5.6. THE APPELLANT HAS RELIED UPON THE DECISIO N OF HONBLE ITAT, AHMEDABAD IN THE CASE OF NAVJIVAN SYNTHETICS WHEREI N THE CASH PAYMENTS TO LABOURS WERE MADE ON SUNDAY I.E. BANK H OLIDAY TO AVOID LABOUR PROBLEMS. FURTHER, THE APPELLANT ALSO RELIE D UPON THE JUDGMENT OF HONBLE COCHIN ITAT IN THE CASE OF P.M. ABDUL RA ZAK, WHEREIN THE PAYMENTS TO THE SMALL CULTIVATORS WERE MADE IN CASH WHO REFUSED TO GET PAYMENTS BY CROSS CHEQUES. THE FACTS AND CIRCUMSTA NCES UNDER WHICH PAYMENT MADE IN THE AFORESAID CASES ARE TOTALLY DIF FERENT FROM THE FACTS OF THE CASE, AND HENCE, RELIANCE IS MISPLACED AND A CCORDINGLY THE DECISION OF THE HONOURABLE ITAT WOULD NOT BE APPLIC ABLE. IT IS ALSO MENTIONED THAT THE AFORESAID DISALLOWANCE INCLUDES THE CASH PAYMENT TO M/S.TANVEER ENTERPRISES OF RS.33,595/- WHICH IS ALS O EXCEEDING TO RS.20,000/- AND HENCE THE SAME ALSO ATTRACTS THE DI SALLOWANCE. FURTHER, TWO BILLS OF UGVCL AMOUNTING TO RS.17,975/ - AND RS.2,077/- WERE PAID BY THE APPELLANT ON THE SAME DATE I.E. 20 /06/2009 TO THE UGVCL WHICH IS THE SAME PARTY, HENCE, DISALLOWANCE OF TWO BILLS AT A TIME TO THE SAME PARTY ALSO ATTRACTS THE PROVISIONS OF SECTION 40(A)(3) OF THE I.T. ACT. ACCORDINGLY, THE CASE OF THE APPELLA NT IS NOT COVERED BY ANY OF THE EXCEPTIONS PROVIDED IN RULE 6DD. THE DI SALLOWANCE MADE BY THE AO IS ACCORDINGLY UPHELD. 2.3. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 3. BEFORE US, LD.AR REITERATED THE SUBMISSIONS MADE BEFORE THE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT THE AO HAS NOT DISPUTED THAT THE PAYMENTS MADE BY THE ASSESSEE IS NOT FOR THE PURPOS E OF BUSINESS. HE FURTHER SUBMITTED THAT THE PAYMENT WAS MADE TO ELEC TRICITY COMPANY IN CASH AS THERE WAS NO FACILITY MADE BY THEM TO ACCEP T THE PAYMENT IN ITA NO.136/AHD/ 2016 M/S. SHIV KRUPA TIN CONTAINERS VS. ITO ASST.YEAR 2010-11 - 6 - CHEQUE OR DRAFT. HE FURTHER SUBMITTED THAT THE PRI MARY OBJECT OF ENACTING SECTION 40A(3) OF THE ACT WAS TO PUT A CHECK ON TRA DING TRANSACTIONS TO AVOID THE LIABILITY TO TAX ON INCOME EARNED ON SUCH TRANSACTIONS. THE LD.AR SUBMITTED THAT WHILE UPHOLDING THE DISALLOW ANCE U/S.40A(3), THERE IS NO FINDING OF LD.CIT(A) THAT AS TO WHETHER EACH PAYMENT IN A DAY MADE BY THE ASSESSEE EXCEEDED RS.20,000/-. HE FURT HER SUBMITTED THAT PROVISIONS OF SECTION 40A(3) WAS INTENDED WITH THE OBJECTIVE OF AVOIDING TAX EVASION. HE SUBMITTED THAT WHEN THE PAYMENTS A RE GENUINE AND ARE MADE OUT OF INCOME FROM DISCLOSED SOURCES, NO DISAL LOWANCE U/S.40A(3) CAN BE MADE. HE FURTHER PLACED RELIANCE ON THE JUD GEMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF ANUPAM TELE SERVI CES VS. ITO REPORTED AT (2014) 366 ITR 122 (GUJ.). HE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CAS E OF CIT VS. CHOUDHARY AND CO. REPORTED AT (1996) 216 ITR (ALL). LD.SR.DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AO AND LD.C IT(A). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO DISALLOWANCE U/S.40A(3) OF THE ACT. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAS MADE CASH PAYMENTS FOR EXPENSES AND THESE PAYMENTS HAVE BEEN MADE TO ELECTRICITY COMPANY FOR THE SUPPLY OF ELECTRICITY. THE PAYMENT OF ELECTRICITY WAS THE PURPOSE OF BUSINESS, THE PAYEE TO WHOM THE ASSESSEE ITA NO.136/AHD/ 2016 M/S. SHIV KRUPA TIN CONTAINERS VS. ITO ASST.YEAR 2010-11 - 7 - HAS MADE THE PAYMENT HAS NOT BEEN DOUBTED BY THE AO ; MEANING THEREBY THAT THE GENUINENESS OF PAYMENT AND IDENTITY OF THE PAYEE ARE NOT IN DOUBT. IN SUCH A SITUATION, WE FIND THAT THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ANUPAM TELE SERVICES VS. ITO REPORTED AT (2014) 366 ITR 122 (GUJ.) HAS HELD THAT THE PARAMOUNT CONSIDERATION OF SECTION 40A(3) IS TO CURB AND REDUCE THE POSSIBILITIES OF B LACK MONEY TRANSACTIONS AND SECTION DOES NOT ELIMINATE CONSIDERATIONS OF B USINESS EXPEDIENCIES. BEFORE US, REVENUE HAS NOT PLACED ANY CONTRARY BIND ING DECISION. IN VIEW OF THE AFORESAID FACTS AND AFTER PLACING RELIA NCE ON THE AFORESAID DECISION OF HONBLE GUJARAT HIGH COURT, WE ARE OF T HE VIEW THAT IN THE PRESENT CASE THE EXPENDITURE CANNOT BE DISALLOWED. THUS, THIS GROUND OF ASSESSEE IS ALLOWED. 5. SECOND GROUND IS IN RESPECT OF DISALLOWANCE MADE U/S.40(A)(IA) OF THE ACT. 5.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE AO NOTICED THAT THE ASSESSEE MADE PAYMENT OF INTEREST TO FOUR PARTI ES LISTED AT PAGE NOS.2 AND 3 OF THE ASSESSMENT ORDER, THE AGGREGATE INTER EST PAYMENT BEING OF RS.4,45,625/- ON WHICH THE ASSESSEE HAD NOT DEDUCTE D TDS. AO WAS OF THE VIEW THAT THE EXPENDITURE IS NOT ALLOWABLE U/S. 40(A)(IA) OF THE ACT ON ACCOUNT OF NON-DEDUCTION OF TDS. HE ACCORDINGLY DI SALLOWED THE AGGREGATE PAYMENT OF RS.4,45,625/-. AGGRIEVED BY T HE ORDER OF THE AO, ITA NO.136/AHD/ 2016 M/S. SHIV KRUPA TIN CONTAINERS VS. ITO ASST.YEAR 2010-11 - 8 - ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A), W HO UPHELD THE ORDER OF THE AO BY HOLDING AS UNDER:- 3.6. DECISION : I HAVE CAREFULLY CONSIDERED THE FACTS AND SUBMISSIO N OF THE APPELLANT. THE AO HAS MADE THE DISALLOWANCE OF THE CLAIM OF INTEREST EXPENSES OF RS.4,45,625/- BEING IN THE NATURE OF IN TEREST ON LOANS TAKEN FROM DIFFERENT PARTIES OF WHICH DETAILS ARE AS UNDE R:- (I) BAJAJ FINANCE RS. 88,272/- (II) INDIA BULLS FINANCIAL SERVICES LTD. RS 65,135/- (III) RELIANCE CAPITAL RS.2,34,415/- (IV) RELIANCE FINVEST LTD. RS. 57,803/- THOSE ARE NBFCS FROM WHOM FINANCE HAS BEEN TAKEN BY THE APPELLANT. THERE WAS THE LIABILITY ON THE PART OF THE APPELLANT TO MAKE THE TDS U/S. 194A OF THE I. T. ACT ON THE INTEREST PAYMENTS, AS THE INTEREST PAYMENT WAS EXCEEDING TO THE LIMITS PRESCR IBED U/S. 194A OF THE I. T. ACT, 1961. THE AO OBSERVED THAT THE RELIANCE OF THE APPELLANT ON THE DECISION OF HON'BLE VISHAKHAPATNAM, ITAT IN THE CASE OF MERYLYN SHIPPING AND TRANSPORTS, VISHKHAPATNAM, IS NOT RELE VANT DUE TO SUSPENSION OF THE SAID DECISION BY THE HON'BLE HIGH COURT OF ANDHRA PRADESH AND THEREAFTER, REVERSED THE ORDER OF THE I TAT VIDE APPEAL IN ITTA NO. 384 OF 2012 DATED 09/10/2012. THEREFORE, T HE DECISION OF HON'BLE ITAT WAS NOT APPLICABLE ON THE FACTS OF THE THIS CASE. SINCE, THE APPELLANT HAD FAILED TO MAKE THE TDS IN RESPECT OF THE LIABILITY U/S. 194A OF THE I. T. ACT, 1961 ON THE INTEREST PAYMENT TO N BFC AND HENCE THE DISALLOWANCE WAS MADE. 3.7. ON THE OTHER SIDE, THE APPELLANT SUBMITTED THA T IT HAS PAID THE CHEQUES IN ADVANCE OF THE AMOUNTS INCLUDED OF PRINC IPAL AND INTEREST THEREUPON, HENCE IT WAS DIFFICULT FOR HIM TO MAKE T HE TDS. FURTHER, THE INTEREST TO THE FINANCE COMPANIES WERE ACTUALLY PAI D AND THERE WAS NO OUTSTANDING AMOUNT PAYABLE AT THE END OF THE YEAR. THUS PROVISIONS OF SECTION 40A)(IA) WERE NOT APPLICABLE. IT WAS ALSO S UBMITTED THAT THESE COMPANIES WERE HAVING THE PAN NUMBERS AND ADDRESSES WERE ITA NO.136/AHD/ 2016 M/S. SHIV KRUPA TIN CONTAINERS VS. ITO ASST.YEAR 2010-11 - 9 - AVAILABLE. THE PAYEES HAVE ALREADY SHOWN THE INTERE ST INCOME AS THEIR INCOME IN THEIR INCOME TAX RETURN FILED FOR THE YEA R UNDER CONSIDERATION. IT ALSO RELIED UPON CERTAIN JUDGMENT S INCLUDING THE DECISION OF HON'BLE ITAT, AGRA IN THE CASE OF RAJEE V KUMAR AGRAWAL IN ITA NO. 337/AGRA/2013 & OTHERS. 3.8. HAVING CONSIDERED THE FACTS AND SUBMISSION, TH ERE IS NO DOUBT ABOUT THE STATUTORY LIABILITY CAST UPON THE APPELLA NT TO MAKE THE TDS ON THE INTEREST PAYMENT TO THE NBFCS FOR THE FINANCE T AKEN BY THE APPELLANT. IN VIEW OF THE PROVISIONS OF SECTION 194 A OF THE I. T. ACT, IT WAS IMMATERIAL WHETHER THE CHEQUES WERE GIVEN IN AD VANCE FOR THE CONSOLIDATED FIGURES CONSISTS OF PRINCIPAL AND INTE REST THEREUPON. SINCE THE INTEREST AMOUNT WAS SEGREGATED AND IDENTIFIABLE IN RESPECT OF THE INSTALLMENT AMOUNTS THAT IS WHY THE P & L ACCOUNT H AS BEEN DEBITED FOR THE INTEREST AMOUNT. SO, THE AOS OBSERVATION FOR NO T MAKING THE IDS ON THE INTEREST PAYMENT TO NBFC IS CORRECT AND JUSTIFI ED. 3.9. NOW, WITH REGARD TO THE APPELLANT'S CONTENTION VIDE ITS LETTER ENCLOSING THEREWITH THE COPIES OF CERTAIN LETTERS F ROM THE RESPECTIVE NBFCS, THE SAME IS DEALT HEREUNDER. 3.9.1. ALONG WITH THE WRITTEN SUBMISSION, THE APP ELLANT HAS SUBMITTED COPIES OF THE LETTERS ISSUED BY THE AFORESAID PARTI ES AND THEIR LEDGER ACCOUNT IN APPELLANT'S BOOKS OF ACCOUNTS. THE COPIE S OF THESE LETTERS WERE SUBMITTED FIRST TIME BEFORE THIS OFFICE AS ADD ITIONAL EVIDENCES FOR WHICH THE APPELLANT HAS NOT COMPLETED THE PROCEDURE LAID DOWN BY WAY OF MAKING A WRITTEN REQUEST SPECIFYING THE REASONS OF NON - SUBMISSION OF THEM BEFORE THE AO IN THE ASSESSMENT PROCEEDINGS . SO THERE WAS NOTHING ON RECORD TO SEE ABOUT FURNISHING OF THESE ADDITIONAL EVIDENCES DUE TO GOOD AND SUFFICIENT REASONS FOR ADMISSION AS PER THE RULE 46A. IN ABSENCE OF THE SAME, THESE ADDITIONAL EVIDENCES ARE NOT ADMITTED, AND HENCE, THE SAME ARE NOT CONSIDERED WHILE TAKING THE DECISION OVER THE ISSUE. 3.9.2. WITHOUT PREJUDICE TO NON - ADMISSION OF THE ADDITIONAL EVIDENCES, EVEN ON MERITS ALSO, THESE DOCUMENTS ARE NOT ENTERT AINABLE FOR TWO REASONS; FIRSTLY IN THE LETTERS GIVEN BY THESE PART IES, NOWHERE IT HAS BEEN ITA NO.136/AHD/ 2016 M/S. SHIV KRUPA TIN CONTAINERS VS. ITO ASST.YEAR 2010-11 - 10 - COMMITTED BY EACH OF THE PARTIES THAT THEY HAVE INC LUDED THE INTEREST INCOME IN THEIR BOOKS OF ACCOUNTS AND THE SAME HAS BEEN OFFERED FOR TAXATION IN THE INCOME TAX RETURN FILED BY EACH OF SUCH PARTIES. SECONDLY, AS PER THE FIRST PROVISO TO SECTION 201 (1), THE CE RTIFICATES FROM THE RECIPIENT PARTIES SHOULD HAVE BEEN IN THE PRESCRIBE D FORMAL I.E. FORM NO. 26A AS PER RULE 31ACB I.E. THE CERTIFICATE FROM A CHARTERED' ACCOUNTANT OF THE RECIPIENT PARTIES. THUS, THE APPE LLANT HAS NOT SUBMITTED THE FORM NO. 26A FROM THE RECIPIENT PARTI ES WHEREIN THE CERTIFICATE HAS TO BE ISSUED BY THE CHARTERED ACCOU NTANT OF THE RECIPIENT PARTIES THAT THE RECIPIENT COMPANY HAS INCLUDED THE INTEREST INCOME IN ITS RETURN OF INCOME AND PAID THE TAXES. IN ABSENCE OF SUCH CERTIFICATES IN FORM NO. 26A, THE APPELLANT IS NOT ENTITLED TO G ET THE BENEFIT GRANTED UNDER SECOND PROVISO TO SECTION 40(A)(IA) R.W. FIRS T PROVISO TO SECTION 201 (1) OF THE I. T. ACT. IN VIEW OF THIS, THE CASE LAWS RELIED UPON BY THE APPELLANT ARE NOT APPLICABLE AND HENCE, THEY ARE NO T RELEVANT. 3.10. IN VIEW OF THE AFORESAID DISCUSSION, THE APPE LLANT HAS COMMITTED THE DEFAULT FOR NOT MAKING THE TDS UPON THE INTERES T PAYMENT TO NBFCS, AND THEREFORE, DISALLOWANCE MADE BY THE AO IS FOUND CORRECT AND JUSTIFIED AND HENCE THE SAME IS CONFIRMED. THIS VIE W IS FURTHER SUPPORTED BY THE JUDGMENT IN THE CASE OF CIT VS. SIKANDER KHAN N. TUNWAR [(2013) 357 ITR 312 (GUJ.)]. RELEVANT PORTION OF THE JUDGMENT IS REPRODUCED HEREUNDER:- '37. IN OUR OPINION, THE TRIBUNAL COMMITTED AN ERRO R IN APPLYING THE PRINCIPLE OF CONSCIOUS OMISSION IN THE PRESENT CASE. FIRSTLY, AS ALREADY OBSERVED, WE HAVE SERIOUS DOUBT WHETHER SUCH PRINCIPLE CAN BE APPLIED BY COMPARING THE DRAFT PRE SENTED IN PARLIAMENT AND ULTIMATE LEGISLATION WHICH MAY BE PA SSED. SECONDLY, THE STATUTORY PROVISION IS AMPLY CLEAR. 38. IN THE RESULT, WE ARE OF THE OPINION THAT SECTI ON 40(A)(IA) WOULD COVER NOT ONLY TO THE AMOUNTS WHICH ARE PAYAB LE AS ON 31 ST MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYAB LE AT ANY TIME DURING THE YEAR. OF COURSE, AS LONG AS THE OTH ER REQUIREMENTS OF THE SAID PROVISION EXIST. IN THAT C ONTEXT, IN OUR OPINION THE DECISION OF THE SPECIAL BENCH OF THE TR IBUNAL IN THE ITA NO.136/AHD/ 2016 M/S. SHIV KRUPA TIN CONTAINERS VS. ITO ASST.YEAR 2010-11 - 11 - CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA), DOES NOT LAY DOWN CORRECT LAW. 39. WE ANSWER THE QUESTION AS UNDER:- QUESTION (1) IN THE NEGATIVE I.E. IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEES. QUESTION (2) ALSO IN THE NEGATIVE I.E. IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEES. 3.11. THE GROUND OF APPEAL IS ACCORDINGLY DISMISSE D. 5.2. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), ASSES SEE IS NOW IN APPEAL BEFORE US. 5.3. BEFORE US, LD.AR REITERATED THE SUBMISSIONS MA DE BEFORE THE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT THE PARTIES TO WHOM THE ASSESSEE MADE THE PAYMENT OF INTEREST HAVE ALREADY CONSIDERE D THE PAYMENTS RECEIVED FROM THE ASSESSEE AS THEIR INCOME AND IN S UCH A SITUATION, THE ASSESSEE CANNOT BE CONSIDERED TO BE AN ASSESSEE IN DEFAULT AND, THEREFORE, NO DISALLOWANCE CAN BE MADE. HE FURTHE R RELYING ON THE DECISION OF HONBLE AGRA TRIBUNAL IN THE CASE OF RA JEEV KUMAR AGARWAL VS. ADDL.CIT REPORTED IN (2014) 149 ITD 363 (AGRA) SUBMITTED THAT THE ASSESSEE COULD NOT BE PUNISHED FOR NON-DEDUCTION OF TAX AT SOURCE WHEN THE CORRESPONDING INCOME WAS DULY BROUGHT TO TAX. HE ALSO POINTED OUT TO THE TABLE PLACED AT PAGE NO.2 OF THE PAPER-BOOK, WHEREIN THE DETAILS OF THE PAYMENTS ARE TABULATED. HE THEREFORE SUBMITTED THAT IN THE PRESENT CASE NO DISALLOWANCE U/S.40(A)(IA) OF THE ACT IS CA LLED FOR. LD.SR.DR, ON ITA NO.136/AHD/ 2016 M/S. SHIV KRUPA TIN CONTAINERS VS. ITO ASST.YEAR 2010-11 - 12 - THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORI TIES BELOW AND SUBMITTED THAT THERE IS NO MATERIAL ON RECORD TO DE MONSTRATE THAT THE PARTIES TO WHOM THE ASSESSEE HAD MADE THE PAYMENT T OWARDS INTEREST HAVE OFFERED THE AMOUNT TO TAX. IN THE ALTERNATE, HE SU BMITTED THAT THE MATTER BE REMITTED TO AO FOR VERIFICATION. HE THUS SUPPOR TED THE ORDER OF THE AO & LD.CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISION RELIED UPON BY THE LD.AR. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO DISALLOWANCE OF EXPENSES U/ S.40(A)(IA) OF THE ACT ON ACCOUNT OF NON-DEDUCTION OF TDS. BEFORE US AL SO, APART FROM THE ORAL SUBMISSIONS, ASSESSEE HAS ALSO NOT PLACED ANY MATERIAL ON RECORD TO DEMONSTRATE THAT THE RECIPIENTS OF THE AMOUNTS HAVE CONSIDERED THE AMOUNTS RECEIVED FROM THE ASSESSEE AS THEIR INCOME . WE FIND THAT THERE IS NO FINDING OF THE LOWER AUTHORITIES TO THE EFFEC T THAT THE PAYMENT MADE BY THE ASSESSEE HAVE BEEN CONSIDERED BY THE RESPECT IVE PAYEES AS THEIR INCOME. WE FURTHER FIND THAT THE COORDINATE BENCH OF TRIBUNAL IN THE CASE OF AGRA TRIBUNAL IN THE CASE OF RAJEEV KUMAR A GARWAL VS. ADDL.CIT[SUPRA] HAS HELD AT PARA-4 AS UNDER:- THE UNAMBIGUOUS UNDERLYING PRINCIPLE SEEMS TO BE THAT I N THE SITUATIONS IN WHICH THE ASSESSEE'S TAX WITHHOLDING LAPSE HAVE NOT RESULTED IN ANY LOSS TO THE EXCHEQUER, AND THIS FAC T CAN BE REASONABLY DEMONSTRATED, THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT. ITA NO.136/AHD/ 2016 M/S. SHIV KRUPA TIN CONTAINERS VS. ITO ASST.YEAR 2010-11 - 13 - THE NET EFFECT OF THESE AMENDMENTS IS THAT THE DISA LLOWANCE UNDER SECTION 40(A)(IA) SHALL NOT BE ATTRACTED IN THE SIT UATIONS IN WHICH EVEN IF THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE FROM TH E RELATED PAYMENTS FOR EXPENDITURE BUT THE RECIPIENT OF THE MONIES HAS TAKEN INTO ACCOUNT THESE RECEIPTS IN COMPUTATION OF HIS INCOME, PAID D UE TAXES, IF ANY, ON THE INCOME SO COMPUTED AND HAS FILED HIS INCOME TAX RETURN UNDER SECTION 139(1). AFTER CONSIDERING VARIOUS DECISION CITED THEREIN, THE COORDINATE BENCH OF TRIBUNAL FURTHER HELD AT PARA-9 AS UNDER:- WHEN WE APPRECIATE THE OBJECT OF SCHEME OF SECTIO N 40(A)(IA), AS ON THE STATUTE, AND TO EXAMINE WHETHER OR NOT, ON A 'F AIR, JUST AND EQUITABLE' INTERPRETATION OF LAW- AS IS THE GUIDANC E FROM HON'BLE DELHI HIGH COURT ON INTERPRETATION OF THIS LEGAL PROVISIO N, IN OUR HUMBLE UNDERSTANDING, IT COULD NOT BE AN 'INTENDED CONSEQU ENCE' TO DISALLOW THE EXPENDITURE, DUE TO NON DEDUCTION OF TAX AT SOU RCE, EVEN IN A SITUATION IN WHICH CORRESPONDING INCOME IS BROUGHT TO TAX IN THE HANDS OF THE RECIPIENT. THE SCHEME OF SECTION 40(A)(IA), AS WE SEE IT, IS AIMED AT ENSURING THAT AN EXPENDITURE SHOULD NOT BE ALLOW ED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATION IN WHICH IN COME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED DUE TO TAX WI THHOLDING LAPSES BY THE ASSESSEE. IT IS NOT, IN OUR CONSIDERED VIEW, A PENALTY FOR TAX WITHHOLDING LAPSE BUT IT IS A SORT OF COMPENSATORY DEDUCTION RESTRICTION FOR AN INCOME GOING UNTAXED DUE TO TAX WITHHOLDING LAPSE. THE PENALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEPARATELY PROV IDED FOR IN SECTION 271 C, AND, SECTION 40(A)(IA) DOES NOT ADD TO THE S AME. . . ACCORDINGLY, WE HOLD THAT THE INSERTION OF SECOND P ROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005, BEING THE DATE FROM WHICH SUB CLAUSE( IA) OF SECTION 40(A) WAS INSERTED BY THE FINANCE (NO.2) AC T, 2004. ITA NO.136/AHD/ 2016 M/S. SHIV KRUPA TIN CONTAINERS VS. ITO ASST.YEAR 2010-11 - 14 - 6.1. IN VIEW OF THE AFORESAID FACTS, WHEREIN IT HA S BEEN HELD THAT SECOND PROVISO TO SECTION 40(A)(IA) HAS RETROSPECTIVE EFFE CT FROM 1 ST APRIL-2005 AND IN THE ABSENCE OF ANY MATERIAL ON RECORD WHICH COULD SHOW THAT THE PAYEES HAVE ALREADY OFFERED THE AMOUNTS RECEIVED FR OM ASSESSEE AS THEIR INCOME, WE ARE OF THE VIEW THAT THE ISSUE NEEDS TO BE RESTORED BACK TO THE FILE OF LD.CIT(A) TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF OUR AFORESAID DISCUSSION AND DECIDE THE ISSUE AFRESH IN ACCORDANC E WITH LAW. NEEDLESS TO STATE THAT THE LD.CIT(A) SHALL GRANT ADEQUATE OP PORTUNITY OF HEARING TO BOTH THE PARTIES. THE ASSESSEE IS ALSO DIRECTED TO CO-OPERATE BY PROMPTLY FURNISHING ALL THE REQUIRED DETAILS CALLED FOR BY T HE AUTHORITIES. THUS, SECOND GROUND OF ASSESSEES APPEAL IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 09/06/2016 SD/- SD/- () () (RAJPAL YADAV) ( ANIL CHATURVEDI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 09/ 06 /2016 3..,.../ T.C. NAIR, SR. PS ITA NO.136/AHD/ 2016 M/S. SHIV KRUPA TIN CONTAINERS VS. ITO ASST.YEAR 2010-11 - 15 - !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT. 3. 456 7 / CONCERNED CIT 4. 7 ( ) / THE CIT(A)-2, AHMEDABAD 5. 89:'56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<=+ / GUARD FILE. / BY ORDER, (8' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 31.5.16 (DICTATION-PAD 16+ PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 6.6.16/8.6.16 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.9.6.16 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 9.6.16 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER