Sh. Rana, Ludhiana V. ITO, Ludhiana

ITA 171/CHANDI/2020

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6118 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 13-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK KHANNA
• Keywords: Retrospective amendment; TDS
• Section: 40(a)(ia); 201(1); 207; 139(1)

Judgement Text

आयकर य कर , य य “ब ”, IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘B, CHANDIGARH BEFORE: SHRI SUDHANSHU SRIIVASTAVA, JUDICIAL MEMBER AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER ITA No. 171/Chd/2020 (Assessment Year: 2013-14 Sh.Rana, Chawla Colonisers & Builders, 2260 Phase II, Dugri, Ludhiana. बनाम Income Tax Officer, Ward-6(2), Ludhiana. थायी लेखा सं./PAN NO: AEPPR0453K नधा रती क ओर से/Assessee by: Shri Parikshit Aggarwal, CA राज व क ओर से/ Revenue by : Shri Ashok Khanna, Addl. CIT स ु नवाई क तार ख/Date of Hearing: 07.12.2021 उदघोषणा क तार ख/Date of Pronouncement: 20.12.2021 (Hearing through Webex) आदेश/ORDER Per Vikram Singh Yadav, Accountant Member: This is an appeal filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals)-3 [in short the ‘Ld.CIT(A)’], Ludhiana dated 15.11.2018 wherein the assessee has taken many grounds of appeal which effectively relate to challenging the order of the Ld.CIT(A) in confirming the addition of Rs.48,19,477/- u/s 40(a)(ia) of the Income Tax Act, 1961 (in short ‘the Act’). ITA No.171/Chd/2020 A.Y.2013-14 2 2. At the outset, it is noted that there is a delay in filing the present appeal by 358 days. In this regard, the Ld. AR submitted that the assessee had initially engaged an Advocate Shri Vijay Sharma for filing and arguing the present appeal and all necessary documents including the impugned order were provided to him. However, the advocate fell seriously ill and was diagnosed with brain tumor and his health condition continued to remain bad even as on date. It was submitted that all-along, the assessee was under the impression that the present appeal had been filed by the Advocate, however, subsequently on receipt of communication from the AO regarding initiation of penalty proceedings, he came to know that the impugned order has not been appealed against. Subsequently, the assessee contacted the Counsel’s office and he was told about the ill health of the Counsel and the fact that the appeal has not been filed. Thereafter the assessee engaged another Counsel to prepare and file the present appeal which was thereafter filed within a period of 10 days of appointment of the new Counsel. It was accordingly submitted that the delay so happened was totally unintentional and due to bonafide reasons the appeal could not be filed and in this regard, an affidavit of the assessee has also been filed along with condonation application. It ITA No.171/Chd/2020 A.Y.2013-14 3 was accordingly submitted that the delay so happened in filing the present appeal be condoned and the appeal of the assessee be heard on merits. 3. The Ld. DR submitted that there is a substantial delay in filing the present appeal and the assessee has not been able to explain the reasonable cause for the delay in filing the present appeal. He accordingly opposed the condonation petition filed by the assessee. 4. Heard both the parties and purused the material available on record. There is no dispute that there has been a delay in filing the present appeal and the period of delay as computed by the Registry comes to 358 days. There is also no dispute that under section 253(5) of the Act, the Tribunal may admit an appeal filed beyond the period of limitation where it is satisfied that there was sufficient cause on the part of the assessee for not presenting the appeal within the prescribed time. The explanation of the assessee therefore becomes relevant to determine whether the same reflects sufficient cause on his part in not presenting the present appeal within the prescribed time. In the instant case, it has been contended by the ld AR and as also stated in the affidavit so submitted by the assessee that the assessee was under a belief that the appeal was ITA No.171/Chd/2020 A.Y.2013-14 4 filed by his Counsel, however, later on, on receipt of communication from the AO regarding initiation of penalty proceedings, he enquired and came to know that the Counsel has been diagnosed with brain tumor and his health continues to be bad and due to ill-health of the Counsel, the appeal was not filed. It has been further stated that the assessee engaged another Counsel to prepare and file the present appeal which was thereafter filed within a period of 10 days of appointment of the new Counsel. The contents of the affidavit have not been disputed by the Revenue. We therefore find that there is no culpable negligence or malafide on the part of the assessee in delayed filing of the present appeal and he was under the bonafide belief that the appeal has been filed by his Counsel who has been engaged for the purposes of filing and arguing the present appeal. Where so instructed, it was the responsibility of the Counsel to file the appeal and where there was inability on his part in filing the appeal though due to his ill-health, it was expected that he should have atleast communicated the same to the assessee so that the latter could have taken appropriate alternate measures and steps to file the appeal which unfortunately has not happened in this instant case. The assessee therefore cannot be penalized for lack of communication or inaction ITA No.171/Chd/2020 A.Y.2013-14 5 on part of the Counsel. At the same time, it was also expected on part of the assessee to follow up on the matter with his Counsel from time to time, however, there again is an unspoken and generally understood belief which the assessee carries that once the Counsel is engaged and has been given proper instrucions, the Counsel will take care of the matter and need for communication arises only where there is need for any fresh instructions. On balance, we find that there exists sufficient and reasonable cause for condoning the delay in filing the present appeal and as held by the Hon’ble Supreme Court, where substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserved to be preferred and the assessee deserve to be heard on merits of the case. Therefore, in exercise of powers under section 253(5) of the Act, we hereby condone the delay in filing the present appeal as we are satisfied that there was sufficient cause for not presenting the appeal within the prescribed time and the appeal is hereby admitted for adjudication on merits. 5. Now, coming to the merits of the case. Briefly, the facts of the case are that the assessee is carrying on the property business in the name and style of M/s Chawla Builders and Colonisers and while filing his return of income, he has claimed an amount of Rs. 48,19,477/- ITA No.171/Chd/2020 A.Y.2013-14 6 towards interest paid to M/s India Infoline Finance Limited and M/s Religare Finvest Limited. During the course of assessment proceedings, the information was called for by the AO and he observed that the assessee has claimed the aforesaid expenses without deduction of tax at source u/s 194A of the Act and a show cause notice was issued to the assessee. In response, the assessee submitted that he has paid the total interest on the loan raised during the year under consideration and no interest is outstanding as payable as on the year end and, therefore, the provisions of section 40(a)(ia) of the Act are not applicable. 6. The reply so filed by the assessee was not found acceptable to the AO. As per the AO, the matter is squarely covered by the decision of the Hon'ble Punjab & Haryana High Court in the case of P.M.S. Diesel Vs. CIT 374 ITR 562 wherein it has been held that the term ‘payable’ is descriptive of the payment which attract the liability to deduct tax at source and it does not categorize default on the basis when the payments are actually made to the payee which attract liability to deduct tax at source. Accordingly, the AO made an addition of Rs.48,19,477/- by invoking the provisions of section 40(a)(ia) of the Act. ITA No.171/Chd/2020 A.Y.2013-14 7 7. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A). It was contended before the Ld.CIT(A) that there has been an amendment by the Finance Act, 2012 to the provisions of section 201(1) of the Act as well section 40(a)(ia) of the Act by virtue of which where the assessee furnishes certificate in the requisite format that the payee has taken into account such sum for computing the income in its return of income and has paid the taxes due on the income declared by him in such return of income, the assessee will not be held as an assessee in default. It was submitted that the assessee has already filed a letter with both the parties for providing the said certificate and he is regularly following up for the same and it was accordingly requested that some time may be granted so that the assessee is able to obtain the certificate and furnish the same before the Ld.CIT(A). 8. The submissions so filed by the assessee were considered but not found acceptable by the Ld.CIT(A). As per the Ld.CIT(A), the assessee had sufficient time at the time of assessment proceedings to submit the necessary certificate and even after a gap of more than two years of filing the appeal, the assessee has not been able to get the necessary certificates from the parties in support of his contention that the payees have furnished their return of ITA No.171/Chd/2020 A.Y.2013-14 8 income and have taken into consideration the same and has paid taxes thereon. It was accordingly held by the Ld.CIT(A) that the assessee has failed to produce necessary evidence with regard to the fact that the taxes have been duly deposited by the payees and corresponding income have been taken into consideration while filing their respective returns and mere filing of undated letters of the concerned parties does not support the case of the assessee. It was further held by the Ld.CIT(A) that the amendment brought in by the Finance Act, 2012 is prospective and not retrospective in nature and, therefore, the assessee cannot be allowed to take shelter under the said amendment. The Ld. CIT(A) accordingly confirmed the order passed by the AO. Against the said finding and order of the Ld.CIT(A), the assessee is in appeal before us. 9. During the course of hearing, the Ld. AR submitted that the amendment which has been brought in by the Finance Act, 2012 in section 40(a)(ia) by virtue of which 2 nd proviso has been introduced, has been held to be declaratory and curatory in nature and to be given retrospective effect from 1 st April, 2005, as held by the Hon'ble Punjab & Haryana High Court in the case of Pr.CIT Vs. Shivpal Singh Chaudhry (2018) 409 ITR 87. It was further submitted that in any case, the question of ITA No.171/Chd/2020 A.Y.2013-14 9 retrospective or prospective nature of amendment does not arise in the facts of the present case as the assessment year under consideration is assessment year 2013-14 and amendment is clearly applicable in the impugned assessment year. It was submitted that the payee entities are known NBFCs and it is unlikely that they have not filed their respective returns of income and have not included the impugned payments and paid taxes thereon. It was accordingly submitted that the assessee may be allowed one more opportunity to submit the requisite certificates and in the alternate, the AO is well empowered to call for the information from the payees and the matter may thus be set-aside to the file of the AO to verify the same. 9A. Alternatively, it was contended that by virtue of the amendment in section 40(a)(ia) brought in by the Finance Act, 2014, only 30% of any sum payable to a resident on which tax is deductible at source and such tax has not been deducted or after deduction has not been paid on or before due date specified in section 139(1) of the Act can be disallowed. It was submitted that by virtue of the said amendment, only 30% of the sum payable can be disallowed instead of 100% as done by the AO. It was submitted that though the said amendment has been brought in w.e.f. 01.04.2015, however, it has been consistently held by ITA No.171/Chd/2020 A.Y.2013-14 10 various Benches of the Tribunal that the said amendment needs to be read retrospective in nature and our attention was invited to the decision of the Coordinate Jaipur Benches of Tribunal in the case of M/s Natani Rolling Mills Pvt. Ltd. Vs. ITO in CO Nos.29 & 30/JP/2018 arising out of ITA Nos.537&538/JP/2018, dated 02.09.2019 relating to assessment years 2010-11 & 2011-12 wherein the relevant findings read as under: “11. During the course of hearing, the AR submitted that an amendment has been made by the Finance Act, 2014 w.e.f. 01.04.2015 in Section 40(a)(ia) whereby it is provided that 30% of any sum payable to a resident shall be disallowed if tax is not deducted at source under Ch. XVIIB as against the 100% disallowance presently made. The purpose of this amendment was explained in the memorandum as under:- "the disallowance of whole of the amount of expenditure results into undue hardship and therefore In order to reduce the hardship, it is proposed that in case of non- deduction or nonpayment of TDS on payments made to residents as specified in sect/on 40(a)(ia) of the Act, the disallowance shall be restricted to 30% of the amount of expenditure claimed. " 12. The Finance Minister while introducing the amendment in Para 207 of the Budget Speech has stated as under:- "207, Currently, where an assessee falls to deduct and pay tax on specified payments to residents, 100 percent of such payments are not allowed as deduction while computing his income. This has caused undue hardship to taxpayers, particularly where the rate of tax is only 1 to 10%. Hence, I propose to provide that instead of 100 percent, only 30% of such payments will be disallowed." 13. It was submitted that from the above, it can be noted that the amendment made by FA (No.2) Act, 2014 w.e.f. 01.04.2015 is to ITA No.171/Chd/2020 A.Y.2013-14 11 remove unintended and undue hardship and therefore this amendment should be give retrospective effect as per the various decisions stated above, The Ld. CIT(A) has incorrectly stated that amendment is not retrospective. Reliance is placed on the five member Bench decision of the Hon'ble Supreme Court in case of CIT Vs. Vatika Township Pvt. Ltd. 109 DTR 33 where it has been held that legislations which modify accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect. However, if legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally and where to confer such benefit appears to have been the legislators object, then the presumption would be that such legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. Therefore even in a case it is held that the disallowance u/s 40(a)(ia) is warranted, same should be restricted to only 30% of the amount of interest paid. 14. It was further submitted that the Hon'ble Supreme Court in case of CIT Vs. Calcutta Export Company (2018) 165 DTR 321/ 255 Taxman 293 has also held that "the purpose of the amendment made to sec. 40(a)(ia) by the Finance Act, 2010 is to remove the anomalies that the section was causing to the bona fide taxpayers and therefore, the amendment being curative in nature is required to be given retrospective operation i.e., from the date of insertion of the said provision w.e.f. AY 2005-06". This ratio laid down equally applies to the amendment made by Finance Act, 2015. 15. It was further submitted that Jaipur Tribunal in case of Shri Rajendra Yadav vs. ITO Ajmer order dated 29.01.2016 in ITA no. 895/JP/2012 after considering the amendment made by Finance Act 2014 in section 40(a)(ia) has held as under :- " --In the present case, the authorities below has added the entire sum of R.s.7,51,322/- by disallowing the whole of the amount. Though the substitution in section 40 has been made effective from 1.04.2015, in our view the benefit of the amendment should be given to the assessee either by directing the AO to confirm from the contractors, namely M/s. Garvit Stonex, M/s. Chanda Marbles and M/s. Nidhi Granites as to whether the said parties have deposited the tax or not and further or restrict the addition to 30% of Rs.7,51,322/-. In our view it will be tied of justice if the disallowance is only restricted to 30% of Rs.7,51,322/-," 16. We have heard the rival contentions and pursued the material available on record. In the instant case, there is no ITA No.171/Chd/2020 A.Y.2013-14 12 dispute that the assessee is liable to deduct IDS on interest payment to Shri Ramesh Chand and non-deduction of the TDS will entail disallowance u/s 40(a)(ia) of the Act, However, in view of the consistent position taken by the Coordinate Benches of the Tribunal wherein the amendment in section 40(a)(ia) has been held retrospective in nature, the disallowance is restricted to 30% of the total amount. In the result, the cross- objection is partly allowed. 10. Per contra, the Ld. DR relied on the orders of the lower authorities. 11. We have heard the rival contentions and purused the material available on record. We find that an amendment has been brought in by the Finance Act, 2012 w.e.f 1.4.2013 by virtue of which 2 nd proviso has been provided to section 40(a)(ia) which reads as under: “Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub- section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso.” 12. The impugned assessment year is assessment year 2013-14 and there cannot be any dispute that the aforesaid amendment is applicable in the instant case. It has been contended that the payees are publicly known NBFCs and it is unlikely that they have not considered the payments so made by the assessee while computing their income and ITA No.171/Chd/2020 A.Y.2013-14 13 filing their respective tax returns and the assessee may be allowed an opportunity to furnish the requisite certificates in support of the same. We find that the legislative mandate so provided by the aforesaid amendment should be allowed to reach its logical conclusion and considering the same and in the interest of substantial justice, we hereby allow the assessee one more opportunity to furnish the requisite certificates from the respective parties and where the certificates are so furnished by the assessee containing the requisite information, allow the necessary relief to the assessee. The alternate contention is therefore not considered and left open. The matter is accordingly set- aside to the file of the Assessing officer for the limited purposes of examining and considering the certificates which shall be furnished by the assessee within reasonable period of time as so specified by the Assessing officer. 13. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 20.12.2021. Sd/- Sd/- (SUDHANSHU SRIVASTAVA) (VIKRAM SINGH YADAV) /Judicial Member /Accountant Member Dated: 20.12.2021 *रती* ITA No.171/Chd/2020 A.Y.2013-14 14 आदेश क % त&ल'प अ*े'षत/ Copy of the order forwarded to : 1. अपीलाथ+/ The Appellant 2. %,यथ+/ The Respondent 3. आयकर आय ु -त/ CIT 4. आयकर आय ु -त (अपील)/ The CIT(A) 5. 'वभागीय % त न0ध, आयकर अपील य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड फाईल/ Guard File # $ स / By order, सह (ंज / Assistant Registrar