M/s. Armor's Developers Pvt.Limited, Nagpur V. Assistant Commissioner of Income-Tax-Circle-8, Nagpur

ITA 168/NAG/2009

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7649 (ITAT-NAGPUR)
• Duration Of Justice: 7 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-06-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 04-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Opportunity of being heard

Judgement Text

1 ITA NO. 168/NAG/2009 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER.. I.T.A. NO. 1 6 8/NAG/20 09 . ASSESSMENT YEAR : 2005 - 06. M/S ARMORS DEVELOPERS (P) LTD., ASSTT. COMMISSIONER OF INCOME - TAX, NAGPUR. VS. CIRCLE - 8, NAGPUR. APPELLANT. RESPONDENT. APPELLANT BY : SHRI MANOJ MORYANI. RESPONDENT BY : SHRI A.R. NINAWE. DATE OF HEARING : 2 2 - 03 - 2017. DATE OF PRONOUNCEMENT : 23 RD MARCH, 2017. O R D E R. PER SHAMIM YAHYA, A.M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - III, NAGPUR AND PERTAINS TO ASSESSMENT YEAR 2005 - 06. THE GROUNDS OF APPEAL READ AS UNDER : 1. THE LEARNED CIT UPHELD THE ASSESSMENT ORDER TO A GREAT EXTENT WHEREIN HUGE ADDITIONS WERE MADE. ALTHOUGH THERE WAS NO REVENUE BY WAY OF SALES / TURNOVER DURING THE YEAR BUT THE A.O. HAS ASSESSED SUBSTANTIVE POSITIVE INCOME. 2. THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THE ORDER OF THE HONBLE I.T.A.T. WHICH WAS MADE IN THE IMMEDIATE PREVIOUS ASSESSMENT YEAR I.E. 2004 - 05. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITIONS MADE U/S 40(A)(IA) WITHOUT CONSIDERING THE CONTENTS OF THE SUBMISSION MADE BEFORE HIM. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITIONS MADE FO R UNEXPLAINED SUNDRY CREDITORS. 2 ITA NO. 168/NAG/2009 5. THE LEARNED CIT(A) ERRED IN NOT ALLOWING THE DEDUCTION U/S 8 0IB(10)(B) OF THE I.T. ACT, 1961. 2. AT THE OUTSET IN THIS CASE LEARNED COUNSEL SUBMITTED THAT HE SHALL BE PRESSING ONLY GROUND NO. 3. HENCE ALL GROUNDS EXCEPT GROU ND NO. 3 ARE DISMISSED AS NOT PRESSED. 3. THE SAID GROUND NO. 3 RELATES TO DISALLOWANCE U/S 40(A)(IA). THE PAYMENTS AMOUNTING TO RS.1,10,75,797/ - WERE DISALLOWED BY THE AO INVOKING THE PROVISIONS OF SECTION 40(A)(IA). THE ADDITION WAS ALSO CONFIRMED BY THE LEARNED CIT(APPEALS). 4. BEFORE US LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT ALL THE IMPUGNED PAYMENTS WERE MADE UPTO THE CLOSE OF THE FINANCIAL YEAR AND VERY SMALL AMOUNT REMAIN ED OUTSTANDING. HENCE LEARNED COUNSEL SUBMITTED THAT SECTION 40(A)(IA) CAN BE INVOKED ONLY WITH REFERENCE TO THE AMOUNT THAT HAS REMAINED OUTSTANDING. THE SAID SECTION CANNOT BE INVOKED WITH REFERENCE TO THE AMOUNT WHICH HAS ALREADY BEEN PAID. THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE IN THIS REGARD IS AS UNDER : THE ASSESSEE IS DOING THE BUSINESS OF DEVELOPERS. THE ASSESSEE HAS INCURRED SUM OF RS.1,10,75,796/ - AND SAME WERE DULY REFLECTED IN THE AUDITED PROFIT & LOSS ACCOUNT. THE ASSESSEE HAS MADE PAYMENT OF RS.89,00,000/ - TO AGNI CONSTRUCTION TOWARDS LABOUR PAYMENTS FOR STRUCTURAL, PLINTH, LABOUR, BRICKS WORKS, SITE DEVELOPMENT, SUPPLY, PROVIDING AND FIXING OF MATERIAL SUCH AS SAND, MURRUM, ELECTRICAL FITTING, GRANITE, FARSHI, GRILL GATE AND ROLLING SHUTTERS, ETC. AS WELL AS PAYME NT OF RS. 21,75,797 / - MADE TO VARIOUS PERSONS OR FIRMS TOWARDS, SALARY, PLUMBING LABOUR WORK ALONGWITH MATERIAL, CIVIL CONSTRUCTION, TECHNICAL SERVICES, CONSULTANCY WORK, WATER PROOFING, COMMISSION, ADVERTISEMENTS, DURING THE PREVIOUS YEAR RELEVANT TO AS STT. YEAR. 2005 - 06. 3 ITA NO. 168/NAG/2009 THE A SSESSING O FFICER DISALLOWED THE EXPENDITURE AS THE ASSESSEE FAILED TO DEDUCT TDS AS REQUIRED U/S. 40(A)(IA). THE ASSESSEE RESPECTFULLY SUBMITTED THAT PROVISION OF SECTION 40(A)(IA) IS APPLICABLE ONLY TO EXPENDI TURE WHICH IS PAYABLE AS ON 31 ST MARCH OF EVERY YEAR AND NOT ON THE EXPENDITURE ALREADY BEEN PAID DURING THE PREVIOUS YEAR WITHOUT DEDUCTING TAX AT SOURCE. THE ASSESSEE HAS ALREADY PAID SUM OF RS. 1,01,62,647/ - DURING THE PREVIOUS YEAR RELEVANT TO ASSTT. YEAR 2005 - 06 AND SUM OF RS. 5 ,91,377/ - PAYABLE AS ON 31/03/2005. THE ASSESSEE RESPECTFULLY SUBMITTED THAT AMOUNT PAYABLE IN RESPECT OF AFORESAID EXPENSES WERE RS. \ 5,91,377 / - ONLY AND THE SAME MAY KINDLY BE CONSIDERED. ON THE ABOVE MENTIONED PREPOSITI ON ASSESSEE PLACED RELIANCE ON 1. ITA NO. 477/VIZAG/2008 MERILYN SHIPPING & TRANSPORT - VS - ADDITIONAL COMMISSIONER OF INCOME TAX 2. (2013) 357 ITR 0642 (ALL)/ITA NO. 122 OF 2013 COMMISSIONER OF INCOME TAX - VS . - VECTOR SHIPPING SERVICES (P) 3. JUDGMENT OF HON'BLE SUPREME COURT OF INDIA DATED 04/03/2015 IN CC NO(S) 8068/2014 OF ITA NO. 122/2013 4. JUDGMENT OF HON 'BLE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH, DATED 04/03/2015 IN ITA NO. 2293 - 2294/MUM/201 3. 5. UPON HEARING BOTH THE COUNSEL AND PERUSING THE RECORDS WE FIND THAT IT IS THE PLEA OF THE COUNSEL OF THE ASSESSEE THAT SECTION 4 ITA NO. 168/NAG/2009 40(A)(IA) CAN BE INVOKED ONLY WITH REFERENCE TO AMOUNTS THAT HAVE REMAINED UNPAID. IN THIS REGARD LEARNED COUNSEL OF THE ASSE SSEE HAS PLACED RELIANCE UPON CIT VS. VECTOR SHIPPING SERVICES (P) LTD. 357 ITR 642 (ALL.). IN THE SAID CASE HONBLE ALLAHABAD HIGH COURT HAS UPHELD THE FINDING THAT WHEN THE EXPENSES INCURRED BY THE ASSESSEE IS TOTALLY PAID AND NOT REMAINED PAYABLE AS AT THE END OF THE RELEVANT ACCOUNTING PERIOD, PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE. THE HIONBLE HIGH COURT IN PARA 10 OF THE ORDER HAS CONCLUDED AS UNDER : IT IS TO BE NOTED THAT FOR DISALLOWING EXPENSES FROM BUSINESS AND PROVISION ON THE GRO UND THAT TDS HAS NOT BEEN DEDUCTED, THE AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY THE END OF THE YEAR. 13. REVENUES APPEAL AGAINST THE ABOVE SAID DECISION OF THE HONBLE ALLAHABAD HIGH COURT WAS DISMISSED BY THE HONBLE APEX COURT IN CC NO. 8068/2014 VIDE ORDER DATED 02 - 07 - 2014. THE HONBLE APEX COURT HAS HELD AS UNDER : HEARD MR. MUKUL ROHATGI, LEARNED ATTORNEY GENERAL, FOR THE PETITIONER. DELAY IN FILING AND REFILLING SPECIAL LEAVE PETITION IS CONDONED. SPECIAL LEAVE PETITION IS DIS MISSED. WE ARE ALSO AWARE THAT THERE ARE CERTAIN OTHER HONBLE HIGH COURT DECISIONS WHEREIN THIS PROPOSITION HAS NOT BEEN UPHELD THAT PROVISIONS OF SECTION 40(A)(IA) ARE ATTRACTED ONLY WHEN THE AMOUNT IS PAYABLE. HOWEVER, WE NOTE THAT THERE IS NO JURISDI CTIONAL HIGH COURT DECISION ON THIS ISSUE. IN SUCH A SITUATION WE NOW HAVE A HONBLE ALLAHABAD HIGH COURT DECISION WHICH IS IN FAVOUR OF THE ASSESSEE. REVENUE DEPARTMENTS PETITION FOR SPECIAL LEAVE TO APPEAL HAS BEEN DISMISSED BY THE HONBLE APEX COURT B Y CONDONING THE DELAY IN FILING THE LEAVE PETITION. IN SUCH A SITUATION, IN OUR CONSIDERED OPINION, THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD. 188 ITR 192 HAS TO BE FOLLOWED. IN THE SAID DECISION THE HONBLE APEX C OURT HAS EXPOUNDED THAT IN 5 ITA NO. 168/NAG/2009 CASE THERE ARE TWO VIEWS POSSIBLE, THE VIEW IN FAVOUR OF THE ASSESSEE SHOULD BE FOLLOWED. ACCORDINGLY IN ABSENCE OF ANY JURISDICTIONAL HIGH COURT DECISION, WE RESPECTFULLY FOLLOW THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN TH E CASE OF VECTOR SHIPPING SERVICES (P) LTD. AS ABOVE. ACCORDINGLY SINCE VERY SMALL AMOUNT OF THE PAYMENT WAS UNPAID OR WAS PAYABLE AS ON THE CLOSE OF THE FINANCIAL YEAR WE HOLD THAT THE PROVISION OF SECTION 40(A)(IA) IS ATTRACTED ONLY TO THAT EXTENT. 5. THUS FROM THE ABOVE WE FIND THAT DISALLOWANCE U/S 40(A)(IA) CAN BE MADE ONLY WITH RESPECT TO THE SUMS WHICH HAVE REMAINED UNPAID. SINCE THIS ASPECT NEEDS FACTUAL EXAMINATION WITH REFERENCE TO THE RECORDS, WE REMIT THIS ISSUE TO THE FILE O F THE AO. THE AO IS DIRECTED TO EXAMINE THE AMOUNTS WHICH HAVE BEEN PAID AND WHICH HAVE REMAINED UNPAID. THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCE ONLY WITH REFERENCE TO THOSE AMOUNTS WHICH HAVE REMAINED OUTSTANDING. NEEDLESS TO ADD THE ASSESSEE SHOU LD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 6. IN THE RESULT, THIS APPEAL BY THE ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF MARCH, 2017. SD/ - SD/ - (RAM LAL NEGI) ( SHAMIM YAHYA) JUDICIAL MEMBER. ACOUNTANT MEMBER. NAGPUR, DATED: 23 RD MARCH, 2017. 6 ITA NO. 168/NAG/2009 COPY FORWARDED TO : 1. ARMORS DEVELOPERS , NAVA NAKASHA, NAGPUR - 17. 2. A .C.I.T., CIRCLE - 8, NAGPUR. 3. CIT(APPEALS) - II, NAGPUR. 4. C.I.T. - IV, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.