ACIT, Bhubaneswar V. M/s. Nilachal Carbo Metalicks Pvt. Ltd., Bhubaneswar

ITA 154/CTK/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3706 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 10-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUNAL SINGH
• Assessee Lawyers: S K AGRAWAL
• Keywords: Retrospective amendment
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO . 154 /CTK/201 5 ASSESSMENT YEAR : 2005 - 06 ACIT, CIRCLE 1(2), BHUBANESWAR. VS. NILACHAL CARBO METALICKS PRIVATE LIMITED., PLOT NO.73 & 74/353, JAYDEV VIHAR, BHUBANESWAR. PAN/GIR NO . AAJPU 6205 A (APPELLANT ) .. ( RESPONDENT ) C.O. NO.20/2015 ( IN ITA NO. 154/CTK/2015 ASSESSMENT YEAR:2005 - 06 NILACHAL CARBO METALICKS PRIVATE LIMITED., PLOT NO.73 & 74/353, JAYDEV VIHAR, BHUBANESWAR.. VS. ACIT, CIRCLE 1(2), BHUBANESWAR PAN/GIR NO. AAJPU 6205 A (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI S.K.AGRAWAL, AR RE VENUE BY : SHRI KUNAL SINGH, CIT DR DATE OF HEARING : 10 /07 / 2017 DATE OF PRONOUNCEMENT : 11 /07 / 2017 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE AGA INST THE ORDER OF CIT(A) - 2, BHUBANESWAR DATED 30.1.2015 , FO R THE ASSESSMENT YEAR 2005 - 06. 2 ITA NO. 154/CTK/2015 C.O. NO.20/CTK/2015 ASSESSMENT YEAR:2005 - 06 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS NOT JUSTIFIED IN LAW AS WELL AS ON FACTS BY DELETING ADDITION OF RS.3,56,38,901/ - UNDER SECTION 40(A)(IA). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW IN NOT ACCEPTING THE EXAMINATION OF FINDINGS MADE BY THE AO ON THE ISSUES. 3. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF COKE AND TRADING OF COOKING COAL AND D UST. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.3,56,38,901/ - IN THE P&L ACCOUNT TOWARDS TRANSPORTATION AND STEVEDORING CHARGES AND TDS DEDUCTED FROM THE SAID AMOUNT DURING THE PERIOD 1.4.2004 TO 25.2.2005 WAS NOT DEPOSITED BY 31.3.2008. BEFORE THE ASSESSING OFFICER, IT WAS SUBMITTED BY THE ASSESSEE AS PER THE PROVISIONS OF SECTION 40(A)(IA) AS AMENDED BY THE FINANCE ACT, 2010, IT WAS EXPRESSED BY THE DIFFERENT JUDICIAL FORUMS THAT THE AMENDMENT IS CURATIVE IN NATUR E AND THE AMENDMENT WAS MADE TO MAKE THE PROVISIONS WORKABLE AND THEREFORE, THE AMENDMENT IS APPLICABLE WITH RETROSPECTIVE EFFECT FROM 1.4.2005. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND, ACCORDINGLY, DISALLOWED RS.3,56,38,90 1/ - U/S.40(A)(IA) OF THE ACT. 4. ON APPEAL, THE CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER . THE ASSESSING OFFICER SUBMITTED ITS REMAND REPORT, WHICH WAS FURNISHED TO THE ASSESSEE TO FILE THE REJOINDER. THE ASSESSEE SUBMITTED 3 ITA NO. 154/CTK/2015 C.O. NO.20/CTK/2015 ASSESSMENT YEAR:2005 - 06 THAT SINCE IN THE REMAND REPORT, THE ASSESSING OFFICER ADMITTED THAT THE ASSESSEE HAS DISCHARGED ITS TDS LIABILITY ON 21.4.2005 AND THE TDS HAD BEEN DEPOSITED BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME, NO DISALLOWANCE IS CALLED FOR U/S.40(A)(IA) OF THE ACT. 5. AFTER CONSIDERING THE REMAND REPORT AND THE SUBMISSION OF THE ASSESSEE, THE CIT(A) DELETED THE DISALLOWANCE OF RS.3,56,38,901/ - MADE U/S.40(A)(IA) OF THE ACT BY OBSERVING AS UNDER: G) ON THE MERITS OF THE ISSUE OF DISALLOWING A CLAIM OF EXPENSE BY EMPLOYING SECTION 40(A)(IA) OF THE ACT ON THE GROUND THAT TDS DEDUCTED HAS NOT BEEN PAID 'IN TIME'' (WHICH ACCORDING TO THE AO MEANS THE LAST DAY OF THE RELEVANT FINANCIAL YEAR, IT IS HELD THAT THE SAME IS AN EXERCISE IN UNFAIR AND AGGRESSIVE OVERREACH. TH E FACTS OF THE CASE SHOW THAT THE TDS PAYMENTS IN QUESTIONS HAV E BEEN MADE IN THEIR ENTIRETY BY 21 S1 OF APRIL OF THE FOLLOWING FINANCIAL YEAR BEING F.Y. 2005 - 06. H) IN ITS DECISION IN ITA NO. 3923/MUM/20L2 FOR THE A.Y. 2008 - 09 IN THE CASE OF M/S.PRATIBHA JV VS. THE. DCIT PRONOUNCED ON 25.09.2013, THE ITAT, SI HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) AS THEY STOOD PRIOR TO THE AMENDMENTS MADE B \ THE FINANCE ACT 2010 WERE RESULTING IN UNINTENDED CONSEQUENCES AND CAUSING GRA VE AND GENUINE HARDS HIPS TO THE ASSESSEES WHO HAD SUBSTANTIALLY COMPLIED WITH THE RELEVANT TDS PROVISIONS BY DEDUCTING THE TAX AT SOURCE AND BY PAYING THE SAME TO THE CREDIT OF THE GOVERNMENT BEFORE THE DUE DATE OF FILING OF THEIR RETURNS U/S 139(1). IN ORDER TO REMEDY THIS P OSITION AND LO REMOVE THE HARDSHIPS BEING CAUSED TO THE ASSESSEES BELONGING TO SUCH CATEGORY, AMENDMENTS WERE MADE IN THE PROVISIONS OF SECTION 40(A)(IA) BY THE FINANCE ACT 2010. THE SAID AMENDMENTS, THE OPINION OF THE ITAT WERE CLEARLY REMEDIAL/CURATIVE I N NATURE. THIS MEANS THAT THE RETROSPECTIVE ARGUMENT OF THE APPLICABILITY OF THE AMENDMENT TO SECTION 40(A)(IA) STANDS VALIDATED. THE ABOVE WOULD ALSO MEAN THAT THE ITAT. MUMBAI HAS OVERTURNED ITS OWN VERDICT IN THE CASE OF BHARATI SHIPYARD LTD. VS. DCIT, 13 TAXMANN.COM 101 [MUM(SB)] VIDE ITS ORDER DATED 09.09.2011 (CITED SUPRA BY THE AO). BESIDES AS ALSO ALREADY STATED EARLIER, THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. VIRGIN CREATIONS VIDE ITS ORDER DATED 2 3.11.2011 HAS DECIDED THE ISSUE AGAINST REVENUE. I) THE DECISION OF THE JURISDICTIONAL ITAT, CUTTACK IN THE CASE OF BAB A LOGISTICS VS. ITO, WARD 2(2), BBSR IN 1TA NO. 370/CTK/2011 (SUPRA), DECIDED AGAINST REVENUE, COVERS THE ESSENTIAL FEATURES OF THE ISSU E UNDER REFERENCE AND IS TO BE FOLLOWED IN THE INTERESTS OF JUDICIAL CONSISTENCY AND 4 ITA NO. 154/CTK/2015 C.O. NO.20/CTK/2015 ASSESSMENT YEAR:2005 - 06 DISCIPLINE. THE OTHER JUDICIAL CITATIONS PREFERRED BY THE APPELLANT IN SUPPORT OF ITS CONTENTIONS ON THE SAID ISSUE IS ACCEPTED. J) IT NEEDS TO BE SLATED IN THIS CONTEXT THAT ALTHOUGH SECTION 40(A)(IA) HAS BEEN INDUBITABLY INTRODUCED INTO THE ACT N THE INTERESTS OF GREATER TDS DISCIPLINE, THE SUBSTANCE OF SUCH DISCIPLINE WOULD APPEAR TO APPLY TO THE ACTIONS IN GOOD FAITH OF THE DEDUCTOR OF TDS, WHICH PRINCIPALLY WOULD INC LUDE DEDUCTION AND PAYMENT TO GOVERNMENT ACCOUNT OF THE APPLICABLE TDS AMOUNTS. THE DELAY OF A FEW DAYS WOULD NOT INDICATE MALA FIDE INTENT ON THE PART OF SUCH DEDUCTOR - PAYER - ASSESSCE, AND DESERVES TO BE GIVEN THE BENEFIT OF DOUBT, ESPECIALLY WHEN THE IMPU GNED PAYMENTS HAVE BEEN MADE WELL BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME. THIS HAS BEEN THE CONSISTENT POSITION OF THE HON'BLE COURTS IN RESPECT OF 'DUE DATES' P AYMENT INTO GOVERNMENT ACCOUNT OF VARIOUS KINDS OF AMOUNTS INCLUDING EMPLOYERS '/ EMPLOYEES' CONTRIBUTIONS TO GRATUITY FUNDS/PF/ESI DISALLOWABLE U/S 43B R.W.S 36(1 )(V) AND 36(L)(VA) OF THE ACT. IT IS THEREFORE IMPORTANT IN THE INTERESTS OF FAIRNESS AND JUSTICE, REASONABLE CONSTRUCTIONS OF LEGAL INTENT AND CONSISTENCY IN THE READING AND INTERPRETATIONS OF STATUTORY PROVISIONS THAT THE SAME BE APPLIED WITH REFERENCE TO SECTION 40(A)(IA) TOO. THIS POSITION HAS BEEN REPEATEDLY UPHELD BY THE JUDICIAL AUTHORITIES. K) IF THERE IS INDEED A DELAY IN THE PAYMENT OF TDS AMOUNTS TO THE CREDIT OF T HE GOVERNMENT, THE RIGHT APPROACH, WOULD BE TO INVOKE THE INTEREST AND PENAL PROVISIONS THAT SEEK TO ACT AGAINST TDS VIOLATIONS. THE AO MAY ACCOR DINGLY TAKE SUITABLE ACTION FOR THE NON - APPLICATION OF TDS PROVISIONS OF THE ACT U/S 200, 201, 221 AND SECTIONS 271C AND 276B OF THE INCOME - TAX ACT. THE AO MAY ALSO REPORT ANY MATTER OF NON - DEDUCTION OF TAXES AS MANDATED UNDER THE STATUTE TO THE OFFICE OF THE C1T (TDS), BHUBANESWAR AND TAKE OTHER NECESSARY ACTION AGAINST THE APPELLANT, INCLUDING THE LEVYING OF INTE REST AND/OR PENALTY, IF AND AS APPLICABLE. 11. THE APPEAL IS ALLOWED ON GROUNDS 2,3 AND 4. THE ENHANCEMENT OF RS.3,56,38,901/ - MADE BY THE AO IS DIRECTED TO BE DELETED. 6. LD D.R. COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ORDER OF THE CIT(A). FURTHER, LD D.R. ALSO COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ORDER OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF BABA LOGISTIC (SUPRA) HAS BEEN VARIED IN APPEAL BY ANY HIGHER FORUM, WHICH WAS FOLLOWED BY THE CIT(A) IN DELETING THE ADDITION OF RS.3,56,38,901/ - U/S.40(A)(IA) OF THE ACT. HENCE, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS HEREBY CONFIRMED AND DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. 5 ITA NO. 154/CTK/2015 C.O. NO.20/CTK/2015 ASSESSMENT YEAR:2005 - 06 7. THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE IN SUPPORT OF THE ORDER OF THE CIT(A) DELETING THE ADDITION OF RS.3,56,38,901/ - . SINCE, WE HAVE UPHELD THE ORDER OF THE CIT(A), THE CROSS OBJECTIONS FILED BY THE ASSESSEE HAVE BECOME INFRUCTUOUS AND HENCE, DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY T HE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCE D IN THE OPEN COURT ON 11 /07 /2017 IN THE PRESENCE OF PARTIES. SD/ - SD/ - ( PAVAN KUMAR GADALE) ( N.S SAINI) JUDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 11 /07 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. TH E APPELLANT :/REVENUE: ACIT, CIRCLE 1(2), BHUBANESWAR 2. THE RESPONDENT /ASSESSEE: NILACHAL CARBO METALICKS PRIVATE LIMITED., PLOT NO.73 & 74/353, JAYDEV VIHAR, BHUBANESWAR.. 3. THE CIT(A) 2, BHUBANESWAR 4. PR.CIT - 2, BHUBANESWAR. 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//