Swaransingh G. Sohal, Pune V. Deputy Commissioner of Income-tax,

ITA 1814/PUN/2013

• Counselvise Citation: 181424514 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-01-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 08-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1814/PN/2013 (ASSESSMENT YEAR : 2005-06) SWARANSINGH G. SOHAL, 606, SAN MAHU COMPLEX, OPP : POONA CLUB, BUND GARDEN ROAD, PUNE 411 001 .. APPELLANT PAN NO.ACHPS9850P VS. DCIT, CIRCLE-2, PUNE .. RESPONDENT ASSESSEE BY : SMT. DEEPA KHARE REVENUE BY : SHRI RAJESH DAMOR DATE OF HEARING : 15-01-2015 DATE OF PRONOUNCEMENT : 21-01-2015 ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 15-05-2013 OF THE CIT(A)-II, PUNE RELATING TO ASSESSMENT YEAR 2005-06. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL. THE ORIGINAL RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR WAS FILED BY THE ASSESSEE ON 30-10- 2005 DECLARING TOTAL INCOME OF RS.11,52,294/-. THE AO COMPLETED T HE ASSESSMENT ON 13-12-2010 U/S.143(3) R.W.S. 263 ON A TOTAL INCO ME OF RS.22,72,430. SUBSEQUENTLY, THE AO NOTICED THAT DI SALLOWANCE U/S.40(A)(IA) REMAINED TO BE MADE IN RESPECT OF (I) SUB-CONTRACTORS PAYMENT (II) INTEREST PAYMENT AND (III) PROFESSIONA L PAYMENT OF 2 RS.58,93,328/- WHILE PASSING THE ORDER U/S.143(3) R .W.S. 263. HE THEREFORE ISSUED A NOTICE U/S.154 OF THE I.T. ACT T O THE ASSESSEE ON 31-03-2011 REQUESTING HIM TO ATTEND HIS OFFICE ON 0 7-04-2011 OR FILE WRITTEN SUBMISSION FOR REASONS GIVEN IN THE NO TICE U/S.154 TO RECTIFY THE MISTAKE. IN ABSENCE OF ANY COMPLIANCE BY THE ASSESSEE, THE AO ON THE BASIS OF MATERIAL AVAILABLE ON RECORD , DETERMINED THE TOTAL INCOME AT RS.81,66,758/-. WHILE DOING SO, HE NOTED THAT THE ASSESSEE HAS MADE PAYMENT TO SUB-CONTRACTORS OF RS. 55,57,255/- OUT OF WHICH AN AMOUNT OF RS.6,45,594/- HAS BEEN PAID I N THE MONTH OF MARCH 2005 AND THE BALANCE AMOUNT OF RS.49,11,661/- WAS PAID BEFORE MARCH 2005. HOWEVER, THE ASSESSEE HAS DEDUC TED TAX AT SOURCE AND PAID THE SAME TO THE CREDIT OF THE GOVER NMENT ACCOUNT ON 31-10-2005. SINCE THE ASSESSEE HAS NOT DEPOSITE D THE TDS TO THE CREDIT OF THE CENTRAL GOVERNMENT ACCOUNT ON OR BEFO RE 31-03-2005, THEREFORE, DISALLOWANCE OF RS.49,11,661/- HAS TO BE MADE U/S.40(A)(IA) OF THE I.T. ACT. SIMILARLY AN AMOUNT OF RS.8,61,667/- BEING AMOUNT PAID TO THE SUB-CONTRACTORS WAS MADE B EFORE MARCH 2005. ACCORDING TO THE AO, THE ASSESSEE SHOULD HAV E DEPOSITED THE TDS INTO THE CREDIT OF THE GOVERNMENT ACCOUNT WITHI N ONE WEEK FROM LAST DAY OF THE MONTH IN WHICH THE DEDUCTION I S MADE OR BEFORE 31-03-2005 BUT THE ASSESSEE HAS DEPOSITED THE TDS T O THE CREDIT OF THE CENTRAL GOVT. ON 31-10-2005 WHICH IS BEYOND TIM E LIMIT. THEREFORE, HE DISALLOWED AN AMOUNT OF RS.8,61,667/- U/S.40(A)(IA) OF THE ACT. 2.1 THE AO FURTHER NOTED THAT AN AMOUNT OF RS.36,00 0/- BEING INTEREST HAS BEEN PAID BEFORE MARCH 2005. SINCE TH E TDS WAS 3 DEPOSITED TO THE CREDIT OF THE CENTRAL GOVT. ON 18 -01-2006 WHICH IS BEYOND TIME LIMIT PRESCRIBED, THEREFORE, THE AO MAD E ADDITION OF RS.36,000/-. SIMILARLY, ON ACCOUNT OF PROFESSIONAL FEES PAID TILL MARCH 2005 AMOUNTING TO RS.84,000/- TDS SO DEDUCTED WAS DEPOSITED ON 18-01-2006 WHICH ACCORDING TO THE AO I S BEYOND TIME LIMIT. THEREFORE, THE AO DISALLOWED AN AMOUNT OF R S.84,000/- U/S.40(A)(IA) OF THE I.T. ACT. THUS, IN EFFECT THE AO MADE ADDITION OF RS.58,93,328/- TO THE TOTAL INCOME OF THE ASSESS EE U/S.154 OF THE I.T. ACT AND DETERMINED THE TOTAL INCOME AT RS.81,6 6,758/-. 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) CHALLENGING THE ABOVE ADDITION MADE BY THE AO IN TH E 154 PROCEEDINGS. IT WAS SUBMITTED THAT THE TAX DEDUCTE D FROM THE ABOVE AMOUNTS HAVE BEEN PAID TO THE CREDIT OF THE CENTRAL GOVT. BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME U/S.139( 1). THEREFORE, THE SAME IS AN ALLOWABLE EXPENDITURE. RELYING ON THE D ECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF VIRGIN C REATIONS VS. ITO VIDE ITA NOS.302/2011 ORDER DATED 23-11-2011 IT WAS ARGUED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HA S HELD THAT PROVISO TO SECTION 40(A)(IA) IS RETROSPECTIVE IN NA TURE AS THE SAME HAS BEEN INSERTED AS A REMEDY TO MAKE THE PROVISION WORKABLE. 4. HOWEVER, CIT(A) WAS NOT SATISFIED WITH THE ARGUM ENTS ADVANCED BY THE ASSESSEE. RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE JUTE INDUSTRI ES LTD. VS. CIT REPORTED IN 20 ITR 921, HE NOTED THAT THE HONBLE S UPREME COURT IN THE SAID DECISION HAS HELD THAT LAW TO BE APPLIED I S THAT IS IN FORCE IN 4 THE ASSESSMENT YEAR UNLESS OTHERWISE PROVIDED EXPRE SSLY OR BY NECESSARY IMPLICATIONS. THE LD.CIT(A) NOTED THAT I N A NUMBER OF CASES THE HONBLE SUPREME COURT HAS HELD THAT THERE IS NO RESTROSPECTIVITY UNLESS EXPRESSLY STATED OR CLEARLY IMPLIED. HE REFERRED TO THE DECISION OF THE SPECIAL BENCH OF TH E TRIBUNAL IN THE CASE OF BHARATI SHIPYARD LTD. VS. DCIT REPORTED IN 141 TTJ (MUMBAI) (SB) 129 WHICH, AFTER TAKING INTO CONSIDER ATION THE CASE OF ALLIED MOTORS PVT. LTD., AND ALOM EXTRUSION AS R ELIED UPON IN THE CASE OF VIRGIN CREATIONS AND ALSO OTHER CASES O N THE ISSUE OF RETROSPECTIVE APPLICATION OF THE AMENDED SECTION 40 (A)(IA) BY THE FINANCE ACT, 2010, HAS HELD THAT THE AMENDMENT TO S ECTION 40(A)(IA) MADE BY THE FINANCE ACT WITH RETROSPECTIVE EFFECT F ROM 01-04-2010 EXPLAINING THE TIME LIMIT FOR DEPOSIT OF TDS IS NEI THER AIMED AT REMOVING ANY INTENDED HARDSHIP TO THE ASSESSEE NOR IS CURATIVE OR DECLARATORY OF THE PROVISIONS OF LAW AND THEREFORE IT CANNOT BE GIVEN RETROSPECTIVE EFFECT. ACCORDING TO HIM THE SPECIAL BENCH HAS PASSED THE ORDER AFTER TAKING INTO ACCOUNT THE DECI SION OF HONBLE CALCUTTA HIGH COURT. ACCORDING TO HIM, THE ORDER O F HONBLE CALCUTTA HIGH COURT, BEING NON JURISDICTIONAL, MAY NOT HAVE THAT BINDING EFFECT WITH THAT OF THE SPECIAL BENCH OF TH E MUMBAI AS IT HAS MORE PERSUASIVE VALUE OF BINDING EFFECT. HE AC CORDINGLY REJECTED THE ARGUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE ORDER OF THE AO. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING REVISED GROUNDS OF APPEAL : 5 1. THE LEARNED C1T(A) ERRED IN CONFIRMING DISALLO WANCE OF RS 58,93,328/- U/S 40(A)(IA) IN RECTIFICATION PROCEEDIN GS U/S 154 ON THE GROUND THAT AMENDMENT MADE WEF 1.4.2010 IS APPLI CABLE FROM AY 2010-11 AND NOT RETROSPECTIVE AND THEREFORE WOULD NOT APPLY TO AY 2005-06. 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE WHICH IS HIGHLY DEBATABLE ISSUE AND CANNOT BE SUBJECT MATTER OF RECTIFICATION PROCEEDINGS U/S 154. EVEN OTH ERWISE, ON MERITS, LEARNED CIT(A) ERRED IN NOT FOLLOWING THE DE CISION OF CALCUTTA HIGH COURT IN VIRGIN CREATION GA NO.3200/2 011 DATED 23- 11-2011 WHICH HELD THAT THE AMENDMENT MADE TO SEC 4 0(A)(IA) WEF FROM 1.4.2010 IS RETROSPECTIVE. 3. THE LEARNED C1T(A) FAILED TO APPRECIATE THAT O UT OF RS 58,93,328/-, AN AMOUNT OF RS9,81,667/- PERTAINS TO PA YMENTS FOR WHICH TDS WAS PAID ON 18.1.2006 WHICH WERE DISALLOWED BY LEARNED AO IN THE ORDER PASSED U/S 143(3) DT. 31.12.20 10. THIS AMOUNT OF RS.9,81,667/- HAS BEEN WRONGLY DISALLOWED TW ICE IN ORDER U/S 154. 4. THE APPELLANT CRAVES TO ADD, ALTER, MODIFY OR S UBSTITUTE ANY GROUND OF APPEAL AT THE TIME OF HEARING. 6. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET M ADE TWO FOLD ARGUMENTS. ACCORDING TO HER, DISALLOWANCE U/S. 40( A)(IA) FOR NON DEPOSIT OF THE TDS WITHIN 7 DAYS FROM THE END OF TH E MONTH IN WHICH SUCH DEDUCTION WAS MADE BUT DEPOSITED BEFORE DUE DATE OF FILING OF THE RETURN U/S.139(1) IS A HIGHLY DEBATA BLE ISSUE AND CANNOT BE A SUBJECT MATTER OF PROCEEDING U/S.154 OF THE I. T. ACT. REFERRING TO THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF VIRGIN CREATIONS (SUPRA), SHE SUBMITTED THAT THE HO NBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT AMENDMENT MADE TO SECTION 40(A)(IA) W.E.F. 01-04-2010 IS RETROSPECTIVE. THER EFORE, THE DECISION OF THE HONBLE CALCUTTA HIGH COURT PREVAILS OVER TH E DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL. REFERRING TO DECISI ON OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. DREAM S CONSTRUCTION VIDE ITA NO.1013/PN/2009 AND CO NO.01/PN/2011 ORDER DATED 23-08-2012 FOR A.Y. 2005-06 SHE SUBMITTED THAT THE TRIBUNAL IN THE 6 SAID DECISION, FOLLOWING THE DECISION OF THE COORDI NATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. H.A. DEVELOPERS V IDE ITA NO.373/PN/2009 ORDER DATED 27-04-2012 FOR A.Y. 2005 -06, HAS HELD THAT AMENDMENT TO THE PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT BY THE FINANCE ACT 2010 IS RETROSPECTIVE FROM 0 1-04-2005. CONSEQUENTLY, ANY PAYMENT OF TAX DEDUCTED AT SOURCE DURING THE PREVIOUS YEAR RELEVANT TO AND FROM A.Y. 2005-06 CAN BE MADE TO THE CENTRAL GOVT. ON OR BEFORE THE DUE DATE OF FILING O F THE RETURN U/S.139(1) OF THE I.T. ACT. SHE SUBMITTED THAT THE TRIBUNAL IN THE CASE OF H.A. DEVELOPERS (SUPRA) HAS FOLLOWED THE DE CISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF VIRGIN C REATIONS (SUPRA). SIMILAR VIEW HAS BEEN TAKEN BY THE PUNE B ENCH OF THE TRIBUNAL IN THE CASE OF (I) ACIT VS. M/S. KALE AND SONS VIDE ITA NO.205/PN/2010 AND CO NO.09/PN/2011 ORDER DATED 24- 08-2012 FOR A.Y. 2005-06 AND (II) SHRI PRASHANT WAMAN KHULE VIDE ITA NO.1685/PN/2012 ORDER DATED 31-12-2013 FOR A.Y. 200 8-09, AND BY THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF B.M.S. PROJECTS PVT. LTD., VS. DCIT REPORTED IN 85 DTR (AH D.) (TRIBUNAL) 393. 6.1 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AN AMOUNT OF RS.9,81,667/- PERTAINS TO PAYMENT FOR WHICH TDS WAS PAID ON 18- 01-2006 AND THE SAME WAS DISALLOWED BY THE AO VIDE ORDER PASSED U/S.143(3)/263 DATED 13-12-2010. AGAIN THIS AMOUNT HAS BEEN DISALLOWED BY THE AO IN THE ORDER PASSED U/S.154, T HEREFORE, IT AMOUNTS TO DOUBLE ADDITION. THEREFORE, RS.9,81,667 /- IN ANY EVENT HAS TO BE REDUCED. 7 7. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE IN THE PAPER BOOK , WE FIND THE ASSESSING OFFICER IN THE ORDER PASSED U/S.143(3) DA TED 13-12-2010 HAS ALREADY DISALLOWED AN AMOUNT OF RS.9,81,667/- U /S.40(A)(IA) WHICH COMPRISES OF THE FOLLOWING AMOUNTS VIZ., RS.8 ,61,667 + 36,000 + 84,000. THE ADDITION TO THE EXTENT OF RS. 9,81,667/- AGAIN IN THE ORDER PASSED U/S.154 OF THE I.T. ACT, THEREF ORE, AMOUNTS TO DOUBLE ADDITION AND, THEREFORE, THE SAME IS DIRECTE D TO BE DELETED. NOW THE BALANCE AMOUNT, I.E. SUBJECT MATTER OF LITI GATION IS RS.49,11,661/-. ADMITTEDLY, THE ASSESSEE HAS PAID THE ABOVE AMOUNT TO THE SUB-CONTRACTORS BEFORE 31-03-2005 AND THE TAX SO DEDUCTED AT SOURCE HAS BEEN PAID TO THE CREDIT OF T HE CENTRAL GOVT. ON 31-10-2005. THEREFORE, THE QUESTION THAT REMAIN S TO BE ANSWERED IS WHETHER THE PAYMENT MADE TO THE SUB-CON TRACTORS WHERE THE ASSESSEE HAS DEPOSITED THE TDS TO THE CRE DIT OF THE CENTRAL GOVT. ACCOUNT ON OR BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME U/S.139(1) IS AN ALLOWABLE EXPENDI TURE OR TO BE DISALLOWED U/S.40(A)(IA) OF THE I.T. ACT. 8.1 THE COORDINATE BENCH OF THE TRIBUNAL IN THE CAS E OF DREAMS CONSTRUCTIONS (SUPRA) HAS HELD THAT AMENDMENT TO TH E PROVISIONS OF 8 SECTION 40(A)(IA) OF THE ACT BY THE FINANCE ACT 201 0 IS RETROSPECTIVE FROM 01-04-2005. CONSEQUENTLY, ANY PAYMENT OF TAX DEDUCTED AT SOURCE DURING THE PREVIOUS YEAR RELEVANT TO AND FRO M ASSESSMENT YEAR 2005-06 CAN BE MADE TO THE CENTRAL GOVERNMENT ON OR BEFORE THE DUE DATE OF FILING OF RETURN U/S.139(1) OF THE I.T. ACT AND THEREFORE NO DISALLOWANCE U/S.40(A)(IA) CAN BE MADE . SIMILAR VIEW HAS BEEN TAKEN BY THE PUNE BENCHES IN THE CASE OF M /S. KALE & SONS (SUPRA) AND SHRI PRASHANT WAMAN KHULE (SUPRA). THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF B.M. S. PROJECTS PVT. LTD. VS. DCIT REPORTED IN 85 DTR 393 FOLLOWING THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF V IRGIN CREATIONS (SUPRA) AND THE DECISION OF HONBLE GUJARAT HIGH CO URT IN THE CASE OF CIT VS. J.K. CONSTRUCTION COMPANY VIDE TAX APPEA L NO.706/2010 ORDER DATED 18-07-2011 HAS HELD THAT DI SALLOWANCE CANNOT BE MADE U/S.40(A)(IA) WHERE ASSESSEE HAVING DEDUCTED TDS FROM THE PAYMENTS MADE TO SUB-CONTRACTORS HAS DEPOS ITED THE SAME BEFORE THE DUE DATE OF FILING OF RETURN. THE BANGA LORE BENCH OF THE TRIBUNAL IN THE CASE OF S.S. WARAD VS. ADDL.CIT REP ORTED IN 26 ITR (AT) 258 FOLLOWING THE DECISION OF THE HONBLE CALC UTTA HIGH COURT IN THE CASE OF VIRGIN CREATIONS (SUPRA) HAS H ELD THAT THE AMENDMENT TO SECTION 40(A)(IA) BY THE FINANCE ACT 2 010 IS RETROSPECTIVE IN NATURE. RESPECTFULLY FOLLOWING TH E DECISIONS CITED (SUPRA), WE HOLD THAT THE AMENDMENT TO PROVISIONS O F SECTION 40(A)(IA) BY THE FINANCE ACT 2010 IS RETROSPECTIVE IN NATURE. SINCE THE ASSESSEE IN THE INSTANT CASE HAS ADMITTEDLY DEP OSITED THE TDS DEDUCTED FROM PAYMENT TO SUB-CONTRACTORS TO THE CRE DIT OF THE 9 CENTRAL GOVT. ON 31-10-2005, THEREFORE, NO DISALLOW ANCE U/S.40(A)(IA) CAN BE MADE IN THE INSTANT CASE. 8.2 IN VIEW OF THE SERIES OF DECISIONS CITED ABOVE, THE QUESTION, I.E. WHEN THE TDS SO DEDUCTED AND PAID TO THE CREDI T OF THE CENTRAL GOVT. ON OR BEFORE THE DUE DATE OF FILING OF THE RE TURN U/S.139(1) AND NOT WITHIN A PERIOD OF 7 DAYS FROM THE END OF THE M ONTH IN WHICH THE SAME IS DEDUCTED IS ALSO A HIGHLY DEBATABLE ISS UE IN VIEW OF THE AMENDMENT TO THE PROVISIONS OF SECTION 40(A)(IA) BY THE FINANCE ACT 2010. IT HAS BEEN HELD IN A SERIES OF DECISIONS IN CLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF IT O VS. VOLKART BROTHERS REPORTED IN 82 ITR 50 (SC) THAT DEBATABLE ISSUE CANNOT BE THE SUBJECT MATTER IN RECTIFICATION PROCEEDINGS U/S .154 OF THE I.T. ACT. WE THEREFORE HOLD THAT APART FROM MERIT EVEN ON THIS LEGAL ISSUE ALSO, THE ASSESSEE HAS TO SUCCEED. IN VIEW O F THE DISCUSSION ABOVE, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOW ED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 21-01-2015. SD/- SD/- (SUSHMA CHOWLA) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED: 21 ST JANUARY, 2015 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-II, PUNE 4. THE CIT-II, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE