Smt. Prema Pradipkumar Potdar, Latur V. Income-tax Officer,

ITA 1850/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1915 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 13-04-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 10-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Assessee Lawyers: V L JAIN
• Keywords: Principle of natural justice; Retrospective amendment
• Section: 194C; 201(1); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , !'!! # , $ % BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1850/PN/2014 $& ' !(' / ASSESSMENT YEAR : 2008-09 SMT. PREMA PRADIPKUMAR POTDAR, INDUSTRIAL ESTATE, SIGNAL CAMP, LATUR PAN : ABJPP6317K ....... / APPELLANT )& / V/S. INCOME TAX OFFICER, WARD 3(3), LATUR / RESPONDENT ASSESSEE BY : SHRI V.L. JAIN REVENUE BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 13-04-2016 / DATE OF PRONOUNCEMENT : 29-04-2016 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS), AURANGABAD DATED 24 -02-2014 FOR THE ASSESSMENT YEAR 2008-09. 2. THE APPEAL HAS BEEN FILED WITH THE DELAY OF 168 DAYS. THE ASSESSEE HAS FILED AN APPLICATION SEEKING CONDONATION OF DELA Y IN FILING OF APPEAL SUPPORTED BY AN AFFIDAVIT. AFTER PERUSING THE SA ME WE ARE 2 ITA NO. 1850/PN/2014, A.Y. 2008-09 SATISFIED WITH THE DELAY IN FILING OF APPEAL WAS NOT DELIBERATE OR INTENTIONAL. THE ASSESSEE HAS BEEN ABLE TO EXPLAIN THE RE ASON FOR DELAY IN FILING OF THE APPEAL. ACCORDINGLY, THE DELAY OF 168 DAYS I N FILING OF APPEAL IS CONDONED AND THE APPEAL IS ADMITTED TO BE HEAR D AND DISPOSED OF ON MERITS. 3. THE ONLY ISSUE RAISED BY THE ASSESSEE IN APPEAL IS C ONFIRMING OF DISALLOWANCE OF ` 13,33,225/- U/S. 40(A)(IA) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR WANT OF DEDUCT ION OF TAX AT SOURCE ON SORTEX EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT. 4. THE ASSESSEE IS ENGAGED IN THE MANUFACTURING OF ALL TYP ES OF DAL FROM PULSES. THE ASSESSEE FIELD ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 30-09-2008 DECLARING TOTAL INCOME OF ` 1,32,274/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY, NOTICE U/S. 143(2) WAS ISSUED TO THE ASSESSEE ON 19-08-2 009. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS MADE PAYMENTS AMOUNTING TO ` 13,33,225/- ON ACCOUNT OF SORTEX EXPENSES TO M/S. SHRAWAN AGRO INDUS TRIES, M/S. SUBHLAXMI FOODS AND M/S. MAMTA INDUSTRIES. THE ASSESSING OFFICER OBSERVED THAT THE AGGREGATE PAYMENT TO EACH PARTY W AS ABOVE ` 50,000/-, HENCE, THE PROVISIONS OF SECTION 194C ARE ATTRAC TED. SINCE, THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON THE PAYMENTS SO MADE THE ASSESSING OFFICER DISALLOWED THE ENTIRE AMOUNT U/S. 40(A )(IA) OF THE ACT. AGGRIEVED BY THE ASSESSMENT ORDER DATED 23-12-2010, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPUG NED 3 ITA NO. 1850/PN/2014, A.Y. 2008-09 ORDER UPHELD THE FINDINGS OF ASSESSING OFFICER AND DISMISSED T HE APPEAL OF THE ASSESSEE. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL AGAINST CONFIRMING OF DISALLOWANCE U/S. 40(A)(IA) OF THE ACT. 5. SHRI V.L. JAIN APPEARING ON BEHALF OF THE ASSESSEE ADMITT ED THAT THE ASSESSEE HAS NOT DEDUCTED TAX ON THE PAYMENTS M ADE TO VARIOUS PARTIES ON ACCOUNT OF SORTEX EXPENSES. THE LD. AR CON TENDED THAT ACCORDING TO SECOND PROVISO TO SECTION 40(A)(IA) AS LONG AS THE ASSESSEE IS NOT TREATED AS ASSESSEE IN DEFAULT, DISALLOWANCE U/S. 40(A )(IA) CANNOT BE MADE. THE LD. AR CONTENDED THAT THE SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND HAS RETR OSPECTIVE EFFECT FROM 1 ST APRIL, 2005. IN SUPPORT OF HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ANSAL LAND MARK TOWNSHIP (P) LTD. REPORTED AS 279 CTR 384 (DEL), THE ORDER OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. M/S. GAURIMAL MAHAJAN & SONS IN IT A NO. 1852/PN/2012 FOR THE ASSESSMENT YEAR 2008-09 DECIDED ON 06-01-2014 AND THE DECISION OF AGRA BENCH OF THE TRIBUNA L IN THE CASE OF RAJIV KUMAR AGARWAL VS. ACIT REPORTED AS 34 ITR (TRIB) 479 (AGRA). 6. ON THE OTHER HAND SHRI HITENDRA NINAWE REPRESENTING T HE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISS IONER OF INCOME TAX (APPEALS). THE LD. DR SUBMITTED THAT AS PER A SSESSEES OWN ADMISSION NO TAX HAS BEEN DEDUCTED ON THE PAYMENTS MA DE ON ACCOUNT OF SORTEX EXPENSES, THEREFORE, DISALLOWANCE U/S. 40(A)(IA) HAS B EEN RIGHTLY MADE. 4 ITA NO. 1850/PN/2014, A.Y. 2008-09 7. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE IN RESPECT OF PAYMENTS MADE ON ACCOUNT OF SORTEX EXPENSE S ` 13,33,225/-. THE CONTENTION OF THE LD. AR IS THAT IN VIEW OF SECOND PRO VISO TO SECTION 40(A)(IA) NO DISALLOWANCE U/S. 40(A)(IA) CAN BE MADE TILL THE TIM E THE ASSESSEE IS HELD TO BE ASSESSEE IN DEFAULT. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR HAS PLACED RELIANCE ON THE DECISION O F AGRA BENCH OF THE TRIBUNAL IN THE CASE OF RAJIV KUMAR AGARWAL V S. ACIT (SUPRA). THE TRIBUNAL IN SAID CASE HAS ELABORATELY DISCUSS ED THE APPLICABILITY OF SECOND PROVISO TO SECTION 40(A)(IA) AND HELD AS UNDER: 9. ON A CONCEPTUAL NOTE, PRIMARY JUSTIFICATION FOR SUCH A DISALLOWANCE IS THAT SUCH A DENIAL OF DEDUCTION IS TO COMPENSATE FO R THE LOSS OF REVENUE BY CORRESPONDING INCOME NOT BEING TAKEN INTO ACCOUN T IN COMPUTATION OF TAXABLE INCOME IN THE HANDS OF THE RECIPIENTS OF TH E PAYMENTS. SUCH A POLICY MOTIVATED DEDUCTION RESTRICTIONS SHOULD, THE REFORE, NOT COME INTO PLAY WHEN AN ASSESSEE IS ABLE TO ESTABLISH THAT THE RE IS NO ACTUAL LOSS OF REVENUE. THIS DISALLOWANCE DOES DEINCENTIVIZE NOT D EDUCTING TAX AT SOURCE, WHEN SUCH TAX DEDUCTIONS ARE DUE, BUT, SO F AR AS THE LEGAL FRAMEWORK IS CONCERNED, THIS PROVISION IS NOT FOR T HE PURPOSE OF PENALIZING FOR THE TAX DEDUCTION AT SOURCE LAPSES. THERE ARE SEPARATE PENAL PROVISIONS TO THAT EFFECT. DEINCENTIVIZING A LAPSE AND PUNISHING A LAPSE ARE TWO DIFFERENT THINGS AND HAVE DISTINCTLY DIFFERENT, AND SOMETIMES MUTUALLY EXCLUSIVE, CONNOTATIONS. WHEN WE APPRECIATE THE OBJECT OF SCHEME OF SECTION 40(A)(IA), AS ON THE ST ATUTE, AND TO EXAMINE WHETHER OR NOT, ON A FAIR, JUST AND EQUITABLE INT ERPRETATION OF LAW- AS IS THE GUIDANCE FROM HONBLE DELHI HIGH COURT ON INTER PRETATION OF THIS LEGAL PROVISION, IN OUR HUMBLE UNDERSTANDING, IT COULD NO T BE AN INTENDED CONSEQUENCE TO DISALLOW THE EXPENDITURE, DUE TO NO N DEDUCTION OF TAX AT SOURCE, EVEN IN A SITUATION IN WHICH CORRESPONDING INCOME IS BROUGHT TO TAX IN THE HANDS OF THE RECIPIENT. THE SCHEME OF SE CTION 40(A)(IA), AS WE SEE IT, IS AIMED AT ENSURING THAT AN EXPENDITURE SH OULD NOT BE ALLOWED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATIO N IN WHICH INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED D UE TO TAX WITHHOLDING LAPSES BY THE ASSESSEE. IT IS NOT, IN O UR CONSIDERED VIEW, A PENALTY FOR TAX WITHHOLDING LAPSE BUT IT IS A SORT OF COMPENSATORY 5 ITA NO. 1850/PN/2014, A.Y. 2008-09 DEDUCTION RESTRICTION FOR AN INCOME GOING UNTAXED D UE TO TAX WITHHOLDING LAPSE. THE PENALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEPARATELY PROVIDED FOR IN SECTION 271 C, AND, SECTION 40(A)(I A) DOES NOT ADD TO THE SAME. THE PROVISIONS OF SECTION 40(A)(IA), AS THEY EXISTED PRIOR TO INSERTION OF SECOND PROVISO THERETO, WENT MUCH BEYO ND THE OBVIOUS INTENTIONS OF THE LAWMAKERS AND CREATED UNDUE HARDSH IPS EVEN IN CASES IN WHICH THE ASSESSEES TAX WITHHOLDING LAPSES DID NOT RESULT IN ANY LOSS TO THE EXCHEQUER. NOW THAT THE LEGISLATURE HAS BEEN COMPASSIONATE ENOUGH TO CURE THESE SHORTCOMINGS OF PROVISION, AND THUS OBVIATE THE UNINTENDED HARDSHIPS, SUCH AN AMENDMENT IN LAW, IN VIEW OF THE WELL SETTLED LEGAL POSITION TO THE EFFECT THAT A CURATIV E AMENDMENT TO AVOID UNINTENDED CONSEQUENCES IS TO BE TREATED AS RETROSP ECTIVE IN NATURE EVEN THOUGH IT MAY NOT STATE SO SPECIFICALLY, THE INSERT ION OF SECOND PROVISO MUST BE GIVEN RETROSPECTIVE EFFECT FROM THE POINT O F TIME WHEN THE RELATED LEGAL PROVISION WAS INTRODUCED. IN VIEW OF THESE DI SCUSSIONS, AS ALSO FOR THE DETAILED REASONS SET OUT EARLIER, WE CANNOT SUB SCRIBE TO THE VIEW THAT IT COULD HAVE BEEN AN INTENDED CONSEQUENCE TO PUN ISH THE ASSESSEES FOR NON DEDUCTION OF TAX AT SOURCE BY DECLINING THE DEDUCTION IN RESPECT OF RELATED PAYMENTS, EVEN WHEN THE CORRESPONDING INCOM E IS DULY BROUGHT TO TAX. THAT WILL BE GOING MUCH BEYOND THE OBVIOUS INTENTION OF THE SECTION. ACCORDINGLY, WE HOLD THAT THE INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NA TURE AND IT HAS RETROSPECTIVE EFFECT FROM 1ST APRIL, 2005, BEING TH E DATE FROM WHICH SUB CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY THE FI NANCE (NO. 2) ACT, 2004. THE HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ANSAL LAND MARK TOWNSHIP (P) LTD. (SUPRA) HAS AFFIRMED THE ORDER OF AGRA BENCH OF THE TRIBUNAL IN THE CASE OF R AJIV KUMAR AGARWAL VS. ACIT (SUPRA). 8. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF IT O VS. M/S. GAURIMAL MAHAJAN & SONS (SUPRA) HAS ALSO CONSIDERED THIS ISSUE AND HAS OBSERVED AS UNDER: 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER 6 ITA NO. 1850/PN/2014, A.Y. 2008-09 BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS BROUGHT TO OUR NOTICE BY BOTH THE SIDES. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS NOT DEDUC TED TDS ON AN AMOUNT OF RS.58,81,847/- FOR WHICH THE ASSESSING OFFICER A PPLYING THE PROVISIONS OF SECTION 40(A)(IA) MADE ADDITION OF THE ABOVE AMO UNT. WE FIND THE LD.CIT(A) DELETED THE ADDITION MADE BY THE ASSESSIN G OFFICER ON THE GROUND THAT PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE SINCE NO AMOUNT IS PAYABLE AT THE END OF THE YEAR. WHILE DOI NG SO, HE RELIED UPON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL I N THE CASE OF MERILYN SHIPPING AND TRANSPORT (SUPRA). THE COORDINATE BENC H IN THE CASE OF VINAY ASHWINIKUMAR JONEJA (SUPRA) HAS ALREADY TAKEN A VIEW THAT PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE EVEN IF NO AMOUNT IS PAYABLE AT THE END OF THE YEAR. THEREFORE, THE ORDER OF THE CIT(A) HAS TO BE REVERSED. 8.1 HOWEVER, THE ASSESSEE HAS MADE A NEW LEGAL ARGU MENT THAT THE FINANCE ACT, 2010 HAS AMENDED THE FIRST PROVISO TO SECTION 40(A)(IA) W.E.F. 01-04-2010 AND IT HAS BEEN HELD BY VARIOUS J UDICIAL AUTHORITIES THAT SUCH AMENDMENT IS RETROSPECTIVE IN NATURE. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SECOND PR OVISO TO SECTION 40(A)(IA) WAS INSERTED BY THE FINANCE ACT, 2012 W.E .F. 01-04-2013 WHEREIN IT IS STATED THAT DISALLOWANCE U/S.40(A)(IA ) OF THE ACT NEED NOT BE MADE IF THE ASSESSEE IS NOT DEEMED TO BE AN ASSESSE E IN DEFAULT UNDER THE FIRST PROVISO TO SECTION 201(1) OF THE I.T. ACT ., THEREFORE, THIS SHOULD ALSO BE HELD AS RETROSPECTIVE SINCE IT HAS BEEN INT RODUCED TO ELIMINATE UNINTENDED CONSEQUENCES WHICH MAY CAUSE UNDUE HARDS HIP TO THE TAX PAYERS. 8.2 WE FIND SOME FORCE IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. WE FIND THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF ANTONY D. MUNDACKAL (SUPRA) RELIED ON BY LD. COUNSEL FOR T HE ASSESSEE, HAD AN OCCASION TO DECIDE AN ISSUE IN THE LIGHT OF THE ABO VE ARGUMENT AND HAS RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFF ICER WITH CERTAIN DIRECTIONS. THE RELEVANT OBSERVATION OF THE TRIBUNA L AT PARA 7 OF THE ORDER READ AS UNDER: 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFUL LY PERUSED THE RECORD. ACCORDING TO THE ASSESSEE, THERE IS NO WRITTEN CONT RACT BETWEEN HIM AND THE PERSONS DOING POLISHING WORKS. ACCORDINGLY, THE ASSESSEE HAS CONTENDED BEFORE US THAT THE PROVISIONS OF SEC. 194 C SHALL NOT APPLY TO THE POLISHING CHARGES. HOWEVER, WE NOTICE THAT THE ASSESSING OFFICER HAS GIVEN A CLEAR FINDING THAT ESSENTIAL INGREDIENTS OF A CONTRACT ARE VERY 7 ITA NO. 1850/PN/2014, A.Y. 2008-09 MUCH AVAILABLE IN THE POLISHING WORKS ENTRUSTED BY THE ASSESSEE. FURTHER WE NOTICE THAT THE CBDT, VIDE CIRCULAR NO.4 33 DATED 25-09-1985 (1986)(157 ITR ST. 27) HAS CLARIFIED THAT THE PROVI SIONS OF SEC. 194C ARE WIDE ENOUGH TO COVER ORAL CONTRACTS ALSO. A CONTRAC T IS NORMALLY REDUCED IN WRITING IN ORDER TO MAKE CLEAR THE TERMS AND CON DITIONS, OBLIGATIONS OF THE PARTIES TO THE CONTRACT ETC. IF THE CONDITIONS OF CONTRACT ARE OTHERWISE UNDERSTOOD BY THE PARTIES, IN VIEW OF THE REPEATED TRANSACTIONS, IN OUR VIEW, THE ABSENCE OF A WRITTEN CONTRACT WOULD NOT M AKE ANY DIFFERENCE. IN THE INSTANT CASE, THE ASSESSEE IS REPEATEDLY GIV EN WORKS TO THE POLISHING PEOPLE AND HENCE THE TERMS AND CONDITIONS OF THE WORK WOULD BE CLEARLY UNDERSTOOD BY BOTH THE PARTIES. ACCORDIN GLY, WE REJECT THIS CONTENTION OF THE ASSESSEE AND HOLD THAT THE PROVIS IONS OF SEC. 194C SHALL APPLY TO THE POLISHING WORKS GIVEN BY THE ASS ESSEE. 7.1 ACCORDING TO LD A.R, THE ASSESSEE HAS ACTED AS A CONDUIT PIPE IN CONNECTION WITH THE POLISHING WORKS BETWEEN THE CUS TOMERS AND THE PERSON DOING POLISHING JOB. ACCORDINGLY, IT WAS SUB MITTED THAT THERE IS NO PROFIT ELEMENT IN THE SAID TRANSACTIONS. THE LD A.R FURTHER SUBMITTED THAT THE ASSESSEE HAS INCLUDED THE COST OF POLISHING WOR KS IN THE SALE VALUE OF ALUMINIUM EXTRUSIONS, WITHOUT KNOWING TAX IMPLICATI ONS. HOWEVER, WE NOTICE THAT THE ASSESSEE DID NOT FURNISH ANY PROOF TO SUBSTANTIATE THE ABOVE SAID CLAIMS. THE ASSESSEE, BEING A DEALER IN ALUMINIUM EXTRUSIONS, HAS ONLY SUPPLIED THE PRODUCTS AFTER CA RRYING OUT THE POLISHING WORKS ACCORDING TO THE TASTE AND REQUIREM ENT OF CUSTOMERS. IT IS ONLY ONE OF THE MANY BUSINESS TECHNIQUES NORMALLY A DOPTED BY A BUSINESS MAN TO IMPROVE HIS SALES, SINCE IT WILL BE VERY DIFFICULT FOR CUSTOMERS TO IDENTIFY THE POLISHING PEOPLE AND GET THE WORK DONE BY THEMSELVES. HENCE, WE ARE OF THE VIEW THAT IT MAY N OT BE CORRECT TO ARGUE THAT THE CONTRACT EXISTED BETWEEN THE CUSTOMERS AND THE POLISHING PEOPLE. IN FACT, THE CUSTOMER MAY NOT HAVE ANY CONT ACT WITH THE POLISHING PEOPLE IN THIS TYPE OF TRANSACTIONS. HENCE, IT IS H ARD TO BELIEVE THE CLAIM OF THE ASSESSEE THAT HE HAS ACTED AS MERE CONDUIT P IPE BETWEEN THE CUSTOMERS AND POLISHING PEOPLE, ACCORDINGLY, THE CL AIM THAT THE ASSESSEE STANDS IN A FIDUCIARY CAPACITY IS ALSO LIABLE TO BE REJECTED. IN THIS KIND OF FACTUAL SITUATION, IN OUR VIEW, THE EXISTENCE OR AB SENCE OF PROFIT ELEMENT IN THE POLISHING WORKS DOES NOT MAKE ANY DIFFERENCE . 7.2 THE LD COUNSEL, BY PLACING RELIANCE ON THE DECI SION OF SPECIAL BENCH IN THE CASE OF MERYLINE SHIPPING AND TRANSPORTS (SU PRA) CONTENDED THAT THE PROVISIONS OF SEC. 40(A)(IA) SHALL APPLY ONLY T O AMOUNT PAYABLE AND NOT TO THE AMOUNT PAID. HOWEVER, THE HON'BLE GUJARA T HIGH COURT IN THE CASE OF CIT VS. SIKANDAR KHAN N TUNVAR (357 ITR 312 ) AND THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (ITAT 20 OF 2013) HAVE HELD THAT THE DECISION RENDE RED BY THE SPECIAL BENCH IN THE CASE OF MERYLINE SHIPPING & TRANSPORTS IS NOT A GOOD LAW. 8 ITA NO. 1850/PN/2014, A.Y. 2008-09 THE LD A.R, HOWEVER, PLACED RELIANCE ON THE DECISIO N OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING SERVICES (357 ITR 642). ON A CAREFUL PERUSAL OF THE DECISION GIVEN BY HON'BLE ALLAHABAD HIGH COURT, WE NOTICE THAT THE HIGH COURT HAS DECID ED THE ISSUE REFERRED TO IT ON A DIFFERENT FOOTING AND HAS MADE A PASSING COMMENT ABOUT THE DECISION RENDERED BY THE SPECIAL BENCH. THUS, THE R ATIO OF THE SAID DECISION IS DIFFERENT FROM THAT RENDERED IN THE CAS E OF MERYLINE SHIPPING AND TRANSPORTS BY THE SPECIAL BENCH. HENCE, WE ARE INCLINED TO REJECT THE CONTENTIONS OF THE ASSESSEE ON THIS POINT ALSO. 7.3 THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCO-COLA BEVERAGES LTD (SUPRA) IN ORDER TO CONTEND THAT THE REVENUE IS NOT ENTITLED TO RECO VER TAXES, IF THE RECIPIENT HAS DECLARED THE PAYMENTS IN HIS RETURN OF INCOME. WE NOTICE THAT THE ABOVE SAID DECISION WAS RENDERED IN THE CONTEXT OF THE PROVISIONS OF SEC. 201(1) AND HENCE, WE ARE OF THE VIEW THAT THE RATIO OF THE SAID DECISION CANNOT BE APPLIED TO THE DISALLOWANCE MADE U/S 40(A )(IA) OF THE ACT, 7.4 THE LAST CONTENTION OF THE ASSESSEE IS THAT THE SECOND PROVISO TO SEC, 40(A)(IA) OF THE ACT, INSERTED BY THE FINANCE ACT, 2012 WITH EFFECT FROM 1.4.2013 IS CLARIFICATORY IN NATURE AND HENCE THE B ENEFIT OF THE SAME SHOULD BE APPLIED RETROSPECTIVELY. HOWEVER, THE COR RECTNESS OF THIS CONTENTION HAS NOT BEEN EXAMINED BY THE TAX AUTHORI TIES. HENCE, IN THE INTEREST OF NATURAL JUSTICE, WE ARE OF THE VIEW THA T THIS CONTENTION OF THE ASSESSEE REQUIRES EXAMINATION AT THE END OF THE ASS ESSING OFFICER. ACCORDINGLY, WE MODIFY THE ORDER OF THE LD.CIT(A) A ND SET ASIDE THIS GROUND TO THE FILE OF THE ASSESSING OFFICER WITH TH E DIRECTION TO EXAMINE THE ABOVE SAID CONTENTION OF THE ASSESSEE AND DECID E THE SAME IN ACCORDANCE WITH LAW, AFTER AFFORDING NECESSARY OPPO RTUNITY OF BEING HEARD. WE MAKE IT CLEAR THAT WE HAVE, IN EFFECT, RE JECTED ALL THE CONTENTIONS OF THE ASSESSEE EXCEPT THE GROUND RELAT ING TO APPLICABILITY OF THE SECOND PROVISO TO SEC.40(A)(IA) OF THE ACT TO T HE YEAR UNDER CONSIDERATION. 8.3 SINCE THE ABOVE ARGUMENTS ARE BEING ADVANCED BE FORE THE TRIBUNAL FOR THE FIRST TIME AND THE CORRECTNESS OF THE CONTE NTION HAS NOT BEEN EXAMINED BY THE TAX AUTHORITIES, THEREFORE, RESPECT FULLY FOLLOWING THE DECISION OF THE COCHIN BENCH OF THE TRIBUNAL CITED (SUPRA) AND IN THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE TO THE F ILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THE ABOVE CONTENTION OF THE ASSESSEE AND DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW. NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL GIVE DUE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. 9 ITA NO. 1850/PN/2014, A.Y. 2008-09 9. THUS, IN VIEW OF THE DECISIONS DISCUSSED ABOVE WE DEEM IT APPROPRIATE TO REMIT THE FILE BACK TO THE ASSESSING OFFICER TO CONSIDER THIS ISSUE AFRESH IN THE LIGHT OF CASE LAWS DISCUSSED ABOVE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON FRIDAY, THE 29 TH DAY OF APRIL, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 29 TH APRIL, 2016 RK *+,$-.'/'(- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A), AURANGABAD 4. ' / THE CIT, AURANGABAD 5. !*+ %%,- , ,- , . /01 , / DR, ITAT, A BENCH, PUNE. 6. + 2 34 / GUARD FILE. // ! % // TRUE COPY// #5 / BY ORDER, %6 ,1 / PRIVATE SECRETARY, ,- , / ITAT, PUNE