Shri Tushar A.Sanghvi,HUF, Surat V. The Income tax Officer,Ward-3(4), Surat

ITA 1901/AHD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57140 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-12-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 01-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH
• Keywords: Business income; Depreciation; Opportunity of being heard; Period of limitation; Time period of passing order; Unabsorbed depreciation
• Section: 40A(3); 54F; 142(1); 147; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, AHMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT , JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.1901 / AHD/2011 (ASSESSMENT YEAR 2008-09) SHRI TUSHAR A SANGHVI HUF, PROP. M/S. PARTH ENTERPRISE, 603, JAY COMPLEX, ANAND MAHAL ROAD, ADAJAN, SURAT VS. ITO ,WAD 3(4), SURAT PAN/GIR NO. : AAFHS7515B (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI RASESH SHAH, AR RESPONDENT BY: SHRI SAMIR TEKRIWAL, SR. DR DATE OF HEARING: 13.01.2012 DATE OF PRONOUNCEMENT: 09.02.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A) SURAT DATED 27.06.2011 FOR THE ASSESSMENT YE AR 2008-09. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECTS, THE LD. CIT(A) HAS ERRED IN CO NFIRMING THE ACTION OF THE A.O. IN MAKING DISALLOWANCE OF RS.62, 10,000/- U/S 40A(3) OF THE INCOME TAX ACT, 1961. 2) IT IS, THEREFORE PRAYED THAT ABOVE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE CIT(A) MAY PL3ASE BE DELE TED. 2. BRIEF FACTS OF THE CASE TILL THE ASSESSMENT STAG E ARE NOTED BY LD. CIT(A) IN PARA 3 OF HIS ORDER WHICH IS REPRODUCED B ELOW: I.T.A.NO.1901 /AHD/2011 2 3. THE FACTS RELATING TO THE ABOVE ADDITION ARE DI SCUSSED IN PARA 3 OF THE ASSESSMENT ORDER THAT DURING THE COURSE OF A SSESSMENT PROCEEDINGS IN THE A.Y.2007-08, IT WAS FOUND THAT T HE APPELLANT HAD SHOWN TRADE CREDITORS OUTSTANDING AT RS. 1,95,1 7,664/-, AS ON 31.3.2007. THE APPELLANT WAS, THEREFORE, ASKED BY T HE ASSESSING OFFICER TO GIVE DETAILS OF PAYMENT MADE TO THE SAID OUTSTANDING CREDITORS IN THE SUBSEQUENT YEARS, AND, ON THE BASI S OF DETAILS OF PAYMENTS, ALONGWITH COPIES OF A/CS SUBMITTED BY THE APPELLANT, IN RESPECT OF THE ABOVE CREDITORS, THE ASSESSING OFFIC ER CONDUCTED ENQUIRIES FROM THE CONCERNED BANKS, WHERE THE CHEQU ES ISSUED BY THE APPELLANT WERE PRESENTED FOR CLEARANCE AND, AS PER THE REPLY RECEIVED FROM THE BANK, IT WAS FOUND THAT THOUGH TH E CHEQUES WERE ISSUED IN THE NAME OF THE CREDITORS, VIZ., M/S BHAV I ENTERPRISES, M/S PATEL TRADERS AND M/S JAYRAJ TRADERS, THE SAME HAVE BEEN DEPOSITED IN SOME OTHER PERSONS' ACCOUNTS, PARTICUL ARS OF WHICH ARE GIVEN IN PAGES 2 TO 4 OF THE ASSESSMENT ORDER, VIZ. CHEQUES ISSUED IN FAVOUR OF PATEL TRADERS WERE DEPOSITED IN THE A/ C. OF KIRTI CORPORATION, MANTHAN TRADERS, SHAH CORPORATION (HUF ), MAYANK CORPORATION, NILESH CORPORATION, YASH TRADERS, AND B.K. CORPORATION. SIMILARLY, CHEQUES ISSUED IN FAVOUR OF M/S BHAVI ENTERPRISES WERE DEPOSITED IN THE A/C. OF YASH TRAD ERS, B.K.CORPORATION, NILESH CORPORATION, AND MAYANK COR PORATION. THE TOTAL OF THE CHEQUES AMOUNTS ISSUED IN FAVOUR O F PATEL TRADERS AND M/S BHAVI ENTERPRISE WHICH HAVE BEEN CREDITED I N THE ABOVE PERSONS' A/CS ARE TO THE EXTENT OF F 62,10,0007-. I N RESPECT OF CHEQUES ISSUED IN FAVOUR OF JAYRAJ TRADERS, IT WAS FOUND THAT THE SAME HAVE BEEN CREDITED IN THE A/CS. OF KIRTI CORPO RATION AND B.K. CORPORATION. THE TOTAL OF THE CHEQUES ISSUED IN FAV OUR OF PATEL TRADERS, BUT DEPOSITED IN OTHER A/CS IS RS. 12,10, OOO/-. THE ASSESSING OFFICER, ACCORDINGLY, ISSUED NOTICE U/S 1 42(1) OF THE ACT, DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ASK ED THE APPELLANT TO GIVE DETAILS AS TO IN WHICH ASSTT.YEAR , EXPENSES HAVE BEEN CLAIMED ON ACCOUNT OF THE ABOVE CREDITORS, VIZ . M/S PATEL ENTERPRISE, M/S BHAVI ENTERPRISE AND M/S JAIRAJ TRA DERS, AND ALSO TO SUBMIT COPIES OF A/CS. FOR THE YEARS IN WHICH EX PENSES WERE CLAIMED IN THE NAMES OF THE ABOVE THREE PARTIES AND THEIR COPIES OF A/CS IN THE SUBSEQUENT YEARS. THE ASSESSING OFFICER HAS RECORDED THAT AS PER THE ENTRY NOTINGS DATED 22.12.2009 OF T HE ORDER SHEET, THE APPELLANT SHOWED HIS INABILITY TO SUBMIT ANY RE PLY ON THE ABOVE ISSUE. HE, THEREFORE, CONCLUDED THAT SINCE THE SUMS AGGREGATING TO RS. 62,10,000/- HAVE BEEN PAID OTHER THAN BY A/C. P AYEE CHEQUES TO I.T.A.NO.1901 /AHD/2011 3 THE OUTSTANDING CREDITORS, VIZ. M/S PATEL TRADER AN D M/S BHAVI ENTERPRISE, AND AMOUNTS AGGREGATING TO RS.12,10,000 /- HAVE BEEN PAID, OTHERWISE THAN BY A/C. PAYEE CHEQUES TO THE O UTSTANDING CREDITOR, VIZ. M/S JAYRAJ TRADERS, AS PER THE AMEND ED PROVISIONS OF SECTION 40(A)(3) W.E.F.01.4.208, THE AMOUNT OF RS. 62,10,000/- IS REQUIRED TO BE TREATED AS HIS INCOME IN THE A.Y.200 8-09, AND THE AMOUNT OF RS. 12,10,000/- IS REQUIRED TO BE TREATED AS HIS INCOME IN THE A.Y.2010-11. ACCORDINGLY, THE ASSESSMENT IN THE CASE OF THE APPELLANT FOR THE YEAR UNDER CONSIDERATION WAS RE-O PENED U/S 147 OF THE ACT. IN PARA 4 OF THE ASSESSMENT ORDER, THE ASS ESSING OFFICER HAS DISCUSSED THAT VIDE SHOW CAUSE NOTICE ISSUED U/ S 142(1) OF THE ACT, THE APPELLANT WAS CAUSED TO STATE AS TO WHY TH E AMOUNT OF RS. 62,10,000/- MAY NOT BE ADDED U/S 40A(3) OF THE ACT. THE APPELLANT, VIDE REPLY DTD. 23.12.2010, FILED IN THE OFFICE TAP AL OF THE ASSESSING OFFICER, STATED THAT THE GOODS WERE PURCHASED FROM M/S PATEL TRADERS AND M/S BHAVI ENTERPRISE, WHO WERE COMMISSI ON AGENTS, AND THE GOODS WERE DIRECTLY TRANSPORTED FROM THE PR INCIPAL TO THE APPELLANT, AND ALL THE ABOVE PARTIES WERE ONLY MEDI ATORS, WHICH IS ESTABLISHED FROM THE SAMPLE COPY OF BILLS ENCLOSED, WHEREIN COMMISSION HAS BEEN SEPARATELY SHOWN UNDER BACK TO BACK AMOUNT OF THE GOODS SOLD TO THE APPELLANT, AND THE TERMS O F PAYMENT WERE THAT IT HAD TO BE MADE DIRECTLY TO THE PRINCIPAL, H OWEVER, FOR THE SAKE OF CONVENIENCE, THE APPELLANT ISSUED CROSS CHE QUES THROUGH THE AGENTS AND, SINCE THE PAYMENTS WERE OUTSTANDING FOR A VERY LONG TIME, ANY FURTHER DELAY IN BANKING CHANNEL WAS NOT DESIRED BY THE PRINCIPAL, THEREFORE, THE AGENTS HAVE TRANSFERR ED THE CHEQUES TO THE PRINCIPAL FROM WHOM THEY HAVE PURCHASED THE GOO DS. WITHOUT PREJUDICE TO THE ABOVE SUBMISSION, THE APPELLANT ST ATED THAT THE PURCHASES WERE MADE IN YEAR 2004, AND AS THE TRANSA CTIONS RELATED TO THAT YEAR, ONLY 20% OF DISALLOWANCE SHOULD BE MA DE OF THE AMOUNTS PAID OTHERWISE THAN BY A/C. PAYEE CHEQUES O R DRAFTS, AS PER PROVISIONS OF SECTION 40A(3) OF THE ACT, APPLICABLE IN THAT YEAR. THE ASSESSING OFFICER, AFTER DULY CONSIDERING THE A BOVE SUBMISSION OF THE APPELLANT, HAS RECORDED THAT CONS EQUENT TO THE NOTICES ISSUED U/S 142(1) OF THE ACT, ON 02.02.2010 , 09.7.2010, 03.9.2010, 15.10.2010 AND 26.LL.2UIO, THE APPELLANT FURNISHED REPLY IN HIS OFFICE TAPAL ON 23.12.2010. HE, FURTHER OBSE RVED THAT IN THE BOOKS OF A/C., THE APPELLANT HAS SHOWN PURCHASES FR OM M/S PATEL TRADERS, M/S BHAVI ENTERPRISE AND M/S JAYRAJ TRADER S, AND THE OUTSTANDING AMOUNT PAYABLE TO THEM HAS BEEN SHOWN A S LIABILITY UNDER THE HEAD 'SUNDRY CREDITORS', AS ON 31.3.200 7, AND THE NATURE I.T.A.NO.1901 /AHD/2011 4 OF TRANSACTIONS IS OF 'PURCHASES' AND NOT 'COMMISSI ON' IN THE CONCERNED YEAR, AS CLAIMED BY THE APPELLANT. THE AS SESSING OFFICER, THEREFORE, HELD THAT THE AMENDED PROVISION S OF SECTION 40A(3) W.E.F. 13.7.2006 ARE APPLICABLE FROM 01.4.20 08, THAT IS WHERE AN ALLOWANCE HAS BEEN MADE IN THE ASSESSMENT YEAR FOR ANY YEAR IN RESPECT OF ANY LIABILITY INCURRED BY AN ASS ESSEE FOR ANY EXPENDITURE AND, SUBSEQUENTLY, DURING ANY PREVIOUS YEAR, THE ASSESSEE MAKES PAYMENT IN RESPECT THEREOF, OTHERWIS E THAN BY AN A/C. PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, THE PAYMENT SO MADE SHALL BE DEEMED TO BE THE PROFI TS AND GAINS OF BUSINESS OR PROFESSION AND CHARGEABLE TO TAX AS INC OME OF THE SUBSEQUENT YEAR, IF SUCH AMOUNT PAID EXCEEDS 20,0 00/-. THE ASSESSING OFFICER, THEREFORE, CONCLUDED THAT SINCE THE CHEQUES ISSUED BY THE APPELLANT IN THE NAME OF THE CREDITOR S, VIZ. M /S BHAVI ENTERPRISE, M/S PATEL TRADERS AND M/S JAYRAJ TRADERS HAVE BEEN DEPOSITED IN SOME OTHER PERSONS' ACCOUNTS, THR OUGH NON- ACCOUNT PAYEE CHEQUES DRAWN ON A BANK OR NON-ACCOUN T PAYEE BANK DRAFT, UNDER THE PROVISIONS OF SECTION 40A(3) OF THE ACT, THE PAYMENT OF F 62,10,000/- IS DEEMED TO BE THE PROFIT S AND GAINS OF BUSINESS OR PROFESSION, AND ADDED THE SAME TO THE I NCOME OF THE APPELLANT. 3. BEFORE LD. CIT(A), VARIOUS CONTENTIONS WERE MADE BY THE ASSESSEE BUT HE WAS NOT SATISFIED AND HE CONFIRMED THE ASSES SMENT ORDER ON THIS ISSUE AND DISMISSED THE APPEAL OF THE ASSESSEE AND NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. IT IS SUBMITTED BY THE LD. A.R. OF THE ASSESSEE BEFORE US THAT SECTION 40A(3) WAS INTRODUCED FOR DISALLOWING 100% EXPENDITURE IN RESPECT OF THE PAYMENTS MADE IN A SUM EXCEEDING RS. 2,500/- OTHERWISE THAN BY CROSSED CHEQUE/CROSSED BANK DRAFT AND THIS SECTION WAS INTRODUCED FOR THE FIRST TIME W.E.F. 01.04.1959. T HE LIMIT OF THE AMOUNT WAS INCREASED FROM RS.2,500/- TO RS.10,000/- W.E.F. 01.04.1989 AND IT WAS FURTHER INCREASED TO RS.20,000/- W.E.F. 01.04.1 997. IT IS ALSO SUBMITTED THAT W.E.F. 01.04.1996, THERE WAS ONE MAJ OR AMENDMENT AS PER WHICH, INSTEAD OF 100% DISALLOWANCE, DISALLOWANCE W AS RESTRICTED TO THE I.T.A.NO.1901 /AHD/2011 5 EXTENT OF 20% OF SUCH PAYMENT MADE OTHERWISE THAN B Y PRESCRIBED MODE. IT IS FURTHER SUBMITTED THAT THERE WAS AGAIN AN AME NDMENT BY TAXATION LAW (AMENDMENT) ACT 2006 W.E.F. 13.07.2006 AS PER W HICH, INSTEAD OF CROSSED CHEQUE/CROSSED BANK DRAFT, THE PAYMENT WAS REQUIRED TO BE MADE BY A/C PAYEE CHEQUE/ A/C PAYEE BANK DRAFT. IT IS FURTHER SUBMITTED THAT AGAIN THERE IS AN AMENDMENT W.E.F. 01.04.2008 AS PE R WHICH, AGAIN IT IS PRESCRIBED THAT INSTEAD OF 20% DISALLOWANCE, 100% D ISALLOWANCE BE MADE IN CASE OF THE PAYMENT OTHERWISE THAN BY PRESCRIBED MODE. IT IS FURTHER SUBMITTED THAT THERE IS ONE MORE AMENDMENT AS PER W HICH IF THE PAYMENT IS MADE IN A SUBSEQUENT YEAR AND NOT IN THE YEAR OF INCURRING THE EXPENDITURE, THEN AS PER THE SAID PROVISION, DISALL OWANCE WAS TO BE MADE IN THE YEAR IN WHICH THE EXPENDITURE WAS INCURRED B Y INVOKING THE PROVISIONS OF SECTION 154 AND THE TIME LIMIT OF FOU R YEARS WAS TO BE COUNTED FROM THE END OF THE ASSESSMENT YEAR IN WHIC H SUCH PAYMENT FOR EXPENDITURE WAS MADE. BUT HOWEVER, W.E.F. 01.04.20 08, IT WAS PRESCRIBED THAT INSTEAD OF MAKING RECTIFICATION IN THE YEAR IN WHICH THE EXPENSE ARE INCURRED, ADDITION WILL BE MADE IN THE YEAR IN WHIC H THE PAYMENT IS MADE BY THE ASSESSEE OTHERWISE THAN BY PRESCRIBED MODE. IT WAS HIS SUBMISSION THAT IN THE PRESENT CASE, THERE IS NO DISPUTE THAT THE EXPENSES WERE INCURRED IN ASSESSMENT YEAR 2004-05 AND THE PAYMENT WAS MADE IN THE ASSESSMENT YEAR 2008-09. IT IS SUBMITTED THAT AS P ER THE PROVISIONS APPLICABLE IN ASSESSMENT YEAR 2004-05, THE ASSESSEE WAS REQUIRE T O MAKE PAYMENT BY CROSSED CHEQUE/CROSSED BANK DRAFT AND EV EN IF THE ASSESSEE MAKE PAYMENT IN CONTRAVENTION TO THE PRESCRIBED MOD E, AS PER THE PROVISION TO SECTION 40A(3), ADDITION WAS REQUIRED TO BE MADE IN THE YEAR IN WHICH EXPENSES WERE INCURRED. IT IS HIS SUBMISS ION THAT THIS FACTUAL POSITION IN THE PRESENT CASE, THE AMENDED PROVISION S OF SECTION 40A(3) I.T.A.NO.1901 /AHD/2011 6 CANNOT BE MADE APPLICABLE BECAUSE THE EXPENSES WERE INCURRED IN ASSESSMENT YEAR 2004-05 AND HENCE, THE PROVISIONS A PPLICABLE DURING THAT YEAR HAS TO BE APPLIED AND AS PER THE SAME, DISALLO WANCE CAN BE MADE IN THE YEAR OF INCURRING THE EXPENDITURE IF THE PAYMEN T IS MADE BY THE ASSESSEE IN ANY SUBSEQUENT YEAR OTHERWISE THAN BY W AY OF CROSSED CHEQUE/CROSSED BANK DRAFT AND THAT TOO TO THE EXTEN T OF 20% OF THE EXPENSES AND NOT TO THE EXTENT OF 100%. IT WAS HI S SUBMISSION THAT THE AMENDED PROVISIONS ARE TO BE APPLIED IF THE EXPENSE S WERE INCURRED IN THE ASSESSMENT YEAR 2008-09 AND IN SUBSEQUENT YEAR AND IT CANNOT BE MADE APPLICABLE TO THE EXPENSE INCURRED PRIOR TO 01.04.2 008. IN SUPPORT OF THIS CONTENTION, RELIANCE WAS PLACED ON THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF DCIT VS TIMES GUA RANTY LIMITED AS REPORTED IN 131 TTJ 257 (MUM.) (S.B.). IT WAS SUBM ITTED THAT IN THAT CASE THIS ISSUE INVOLVED WAS REGARDING SET OFF OF BROUGH T FORWARD UNABSORBED DEPRECIATION AND IN THAT CASE, IT WAS HELD THAT UNA BSORBED DEPRECIATION RELATING TO ASSESSMENT YEAR 1997-98 TO 1999-2000 AG AINST INCOME UNDER ANY HEAD OTHER THAN PROFITS & GAINS OF BUSINESS OR PROFESSION IN ASSESSMENT YEAR 2003-04 AND 2004-05. IT WAS SUBMIT TED THAT BY THE SAME ANALOGY, IN THE PRESENT CASE, DISALLOWANCE U/S 40A( 3) FOR THE EXPENSES INCURRED PRIOR TO 01.04.2008 HAS TO BE MADE AS PER THE APPLICABLE PROVISIONS OF THAT YEAR IN WHICH THE EXPENSES ARE I NCURRED. RELIANCE WAS PLACED ON THE TRIBUNAL DECISION RENDERED IN THE CAS E OF SHRI ANAND KUMAR RAWAT RAM JOSHI VS ITO IN I.T.A.NO.1833/AHD/2011 DA TED 18.11.2011, A COPY OF WHICH WAS SUBMITTED. IT WAS SUITED THAT IN THAT CASE, IDENTICAL ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AND IT WAS HELD THAT IF THE LIABILITY IS INCURRED UP TO ASSESSMENT YEAR 2007-08, THE PAYMENT MADE IN THE SUBSEQUENT YEAR I.E. ASSESSMENT YEAR 20 08-09 OR ANY I.T.A.NO.1901 /AHD/2011 7 SUBSEQUENT YEAR, THE PROVISIONS OF SECTION 40A(3) A S APPLICABLE IN THE YEAR IN WHICH LIABILITY WAS INCURRED, SHOULD BE APP LIED. 5. AS AGAINST THIS, IT WAS SUBMITTED BY THE LD. D.R . OF THE REVENUE THAT UNDISPUTEDLY, THE PAYMENT BY WAY OF CROSSED CH EQUES WERE MADE IN THE PRESENT YEAR I.E. IN ASSESSMENT YEAR 2008-09 AN D, THEREFORE, THE PROVISIONS OF SECTION 40A(3) AS APPLICABLE IN THE A SSESSMENT YEAR 2008- 09, SHOULD BE APPLIED AND HENCE, THE ADDITION WAS RIGHTLY MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) AND NO INTERFE RENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A). HE SUBMITTED THAT IT IS A DMITTED POSITION OF LAW BY NOW THAT THE PROVISIONS APPLICABLE IN THE RELEVA NT ASSESSMENT YEAR ARE TO BE APPLIED. HE ALSO SUBMITTED THAT THE COURTS M UST ADOPT SUCH CONSTRUCTION WHICH WILL SUPPRESS THE MISCHIEF AND A DVANCE THE REMEDY. HE ALSO SUBMITTED THAT IN VIEW OF THE DEVELOPMENT O F BANKING FACILITIES AND E-PAYMENT FROM ASSESSMENT YEAR 2008-09, CREDIT CARDS AND DEBIT CARDS PAYMENTS HAVE BEEN INCLUDED IN THE PERMISSIBL E MODES. HE SUBMITTED THAT IN SUCH A SCENARIO, PAYMENTS MADE IN ASSESSMENT YEAR 2008-09 BY CREDIT CARD AND DEBIT CARD CANNOT BE BRO UGHT WITHIN THE AMBIT OF SECTION 40A(3) EVEN WHEN LIABILITY FOR THE PAYME NT HAVE BEEN MADE RELATED TO PAST YEAR AND, THEREFORE THE INTERPRETAT ION SUGGESTED BY THE ASSESSEE WILL LEAD TO ABSURD RESULTS. HE PLACED RE LIANCE ON THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT V S WOODWARD GOVERNOR (INDIA) PVT. LTD. AS REPORTED IN 312 ITR 2 544. HE ALSO PLACED RELIANCE ON ANOTHER JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS ISTHMIAN STEAMSHIP LINES AS REPORTED IN 2 0 ITR 572 (S.C.) AND ALSO ON THE JUDGMENT RENDERED IN THE CASE OF RELIAN CE JUTE AND INDUSTRIES LTD. VS CIT AS REPORTED IN 120 ITR 921 (S.C.). REL IANCE WAS PLACED BY I.T.A.NO.1901 /AHD/2011 8 HIM ON THE TRIBUNAL DECISION RENDERED IN THE CASE O F MANAN CORPORATION IN I.T.A.NO. 2424/AHD/2009 AND C.O. 204/AHD/2009 AND I T WAS POINTED OUT THAT IN THAT DECISION, IT IS HELD BY THE TRIBUNAL T HAT CLAUSE (D) OF SECTION 80-IB(10) INSERTED W.E.F. 01.04.2005 HAS TO BE MADE APPLICABLE FOR THE ASSESSMENT YEAR 2005-06. IT IS SUBMITTED BY HIM TH AT AS PER THIS TRIBUNAL DECISION ALSO, THE LAW APPLICABLE IN THIS YEAR OF P AYMENT WHICH IS BEFORE THE TRIBUNAL, SHOULD BE CONSIDERED. RELIANCE WAS PLACED BY HIM ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS:- (A) CIT VS HYNOUP FOOD & OIL IND. (P) LTD. 150 TAXM AN 194 (GUJ.) (B) R.S. NAYYAR VS JCIT 108 ITD 424 (PUNE) (C) MAHINDRA & MAHINDRA LTD. VS DCIT 61 ITD 129 (3 RD MEMBER) (D) RANJIT NARANG VS CIT 317 ITR 332 (ALL.) (E) JAI USHIN LTD. VS DCIT 117 ITD 01 (DEL.) 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGMENTS CITED BY BOTH THE SIDES. WE FIND THAT TH ERE IS NO DISPUTE ABOUT THE FACTS. IT IS ADMITTED POSITION THAT THE EXPENS E WERE INCURRED IN ASSESSMENT YEAR 2004-05 AND THE PAYMENT WAS MADE IN ASSESSMENT YEAR 2008-09 BY CROSSED CHEQUES. THE APPLICABLE PROVISI ONS OF SECTION 40A(3) AS APPLICABLE IN ASSESSMENT YEAR 2004-05 ARE AS UNDER: SECTION 40A(3) OF THE INCOME TAX ACT,1961 AS IN FOR CE IN A.Y. 2004 05 WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPE CT OF WHICH PAYMENT IS MADE, AFTER SUCH DATE (NOT BEING LATER T HAN 31ST DAY OF MARCH, 1969), AS MAY BE SPECIFIED IN THIS BEHALF BY THE CENTRAL GOVERNMENT BY NOTIFICATION IN THE OFFICIAL GAZETTE; IN A SUM EXCEEDING TWENTY THOUSAND RUPEES OTHERWISE THAN BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT, * [TWENTY PER CENT OF SUCH EXPENDITURE SHALL NOT BE ALLOWED AS A DEDUCTION]: ; I.T.A.NO.1901 /AHD/2011 9 PROVIDED THAT WHERE AN ALLOWANCE HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR NOT BEING AN ASSESSMENT YEA R COMMENCING PRIOR TO THE 1ST DAY OF APRIL, 1969, IN RESPECT OF ANY LIABILITY INCURRED BY THE ASSESSEE FOR ANY EXPENDITURE AND SU BSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE MAKES ANY PAY MENT IN RESPECT THEREOF IN A SUM EXCEEDING TWENTY THOUSAND RUPEES OTHERWISE THAN BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT, THE ALLOWANCE ORIGINALLY MADE S HALL BE DEEMED TO HAVE BEEN WRONGLY MADE AND THE ASSESSING OFFICER MAY RECOMPUTE THE TOTAL INCOME OF THE ASSESSEE FOR THE PREVIOUS YEAR IN WHICH SUCH LIABILITY WAS INCURRED AND MAKE THE NECE SSARY AMENDMENT, AND THE PROVISIONS OF SECTION 154 SHALL, SO FAR AS MAY BE, APPLY THERETO, THE PERIOD OF FOUR YEARS SPECIFI ED IN SUBSECTION (7) OF THAT SECTION BEING RECKONED FROM THE END OF THE ASSESSMENT YEAR NEXT FOLLOWING THE PREVIOUS YEAR IN WHICH THE PAYMENT WAS SO MADE : PROVIDED FURTHER THAT NO DISALLOWANCE UNDER THIS SUB-SECTIO N SHALL BE MADE WHERE ANY PAYMENT IN A SUM EXCEEDING TWENTY THOUSAND RUPEES IS MADE OTHERWISE THAN BY A CROSSED CHEQUE D RAWN ON A BANK OR BY A CROSSED BANK DRAFT, IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED, HAVING REGARD T O THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDE RATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. 7. THE AMENDED PROVISIONS W.E.F. 01.04.2008 ARE AS UNDER: (3)(A) WHERE THE ASSESSEE INCURS ANY EXPENDITURE I N RESPECT OF WHICH PAYMENT IS MADE IN A SUM EXCEEDING TWENTY THO USAND RUPEES OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DR AWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, NO DEDUCTION SHAL L BE ALLOWED IN RESPECT OF SUCH EXPENDITURE; (B) WHERE AN ALLOWANCE HAS BEEN MADE IN THE ASSESSM ENT FOR ANY YEAR IN RESPECT OF ANY LIABILITY INCURRED BY THE AS SESSEE FOR ANY EXPENDITURE AND SUBSEQUENTLY DURING ANY PREVIOUS YE AR (HEREINAFTER REFERRED TO AS SUBSEQUENT YEAR) THE AS SESSEE MAKES PAYMENT IN RESPECT THEREOF, OTHERWISE THAN BY AN AC COUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, THE PAYMENT SO MADE SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS INCOME OF I.T.A.NO.1901 /AHD/2011 10 THE SUBSEQUENT YEAR IF THE AMOUNT OF PAYMENT EXCEED S TWENTY THOUSAND RUPEES: PROVIDED THAT NO DISALLOWANCE SHAL L BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GA INS OF BUSINESS OR PROFESSION UNDER THIS SUB-SECTION WHERE ANY PAYM ENT IN A SUM EXCEEDING TWENTY THOUSAND RUPEES IS MADE OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAY EE BANK DRAFT, IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES A S MAY BE PRESCRIBED, HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDERATIONS OF BUSINESS EX PEDIENCY AND OTHER RELEVANT FACTORS.' 8. WHEN WE GO THROUGH THE PROVISIONS APPLICABLE IN ASSESSMENT YEAR 2004-05 AND ASSESSMENT YEAR 2008-09, WE FIND THAT T HERE ARE THREE MAJOR DIFFERENCES:- (I) THE FIRST DIFFERENCE IS THAT AS PER THE PROVISIONS OF ASSESSMENT YEAR 2004-05, THE ASSESSEE IS REQUIRED T O MAKE PAYMENT BY WAY OF CROSSED CHEQUE/CROSSED BANK DRAFT WHEREAS AS PER THE PROVISIONS OF ASSESSMENT YEAR 2008-09, THE ASSESSEE IS REQUIRE D TO MAKE PAYMENT BY WAY OF A/C PAYEE CHEQUE / A/C PAYEE BANK DRAFT. (I I) THE SECOND DIFFERENCE IS THIS THAT AS PER THE PROVISIONS APPLI CABLE IN ASSESSMENT YEAR 2004-05, THE DISALLOWANCE WAS TO BE MADE TO THE EXT ENT OF 20% OF PAYMENTS MADE IN CONTRAVENTION TO THE PRESCRIBED MO DE WHEREAS, AS PER THE PROVISIONS APPLICABLE IN ASSESSMENT YEAR 2008-0 9, SUCH DISALLOWANCE IS TO THE EXTENT OF 100% OF SUCH PAYMENT IN CONTRAV ENTION TO THE PRESCRIBED MODE. (III) THE THIRD DIFFERENCE IS WITH REGARD TO PAYMEN T IN A SUBSEQUENT YEAR IN CONTRAVENTION TO THE PRESCRIBED MODE. AS PER TH E PROVISIONS APPLICABLE IN ASSESSMENT YEAR 2004-05, THE DISALLOWANCE WAS TO BE MADE IN THE RELEVANT YEAR IN WHICH THE EXPENDITURE WAS INCURRED WHEREAS AS PER THE PROVISIONS OF ASSESSMENT YEAR 2008-09, ADDITION IS TO BE MADE IN THE YEAR IN WHICH PAYMENT IN CONTRAVENTION TO PRESCRIBED MOD E WAS MADE BY THE ASSESSEE IRRESPECTIVE OF THE FACT AS TO WHETHER THE EXPENDITURE WAS I.T.A.NO.1901 /AHD/2011 11 INCURRED IN AN EARLIER YEAR. NOW, THE QUESTION TO BE DECIDED BY US IS AS TO WHETHER IF AN EXPENDITURE INCURRED IN ASSESSMENT YE AR 2004-05 FOR WHICH PAYMENT IS MADE IN ASSESSMENT YEAR 2008-09, PROVISI ON OF SECTION 40A(3) APPLICABLE IN ASSESSMENT YEAR 2004-05 IS REQUIRED T O BE APPLIED OR THE PROVISIONS IN ASSESSMENT YEAR 2008-09 BEING THE YEA R OF PAYMENT, ARE TO BE APPLIED. THE A.O. HAS APPLIED THE PROVISIONS OF SECTION 40A(3) AS AMENDED W.E.F. 1.4.2008 BECAUSE THE PAYMENTS WERE M ADE BY THE ASSESSEE IN THE ASSESSMENT YEAR 2008-09 AND THE CLA IM OF THE ASSESSEE BEFORE US IS THIS THAT SINCE THE EXPENSES WERE INCU RRED IN ASSESSMENT YEAR 2004-05, SUCH EXPENSES ARE TO BE SUBJECTED TO THE P REVISIONS APPLICABLE IN ASSESSMENT YEAR 2004-05. WE FIND THAT THE TRIBUNAL DECISION IN THE CASE OF ANAND KUMAR RAWATRAM JOSHI (SUPRA) IS UNDER SIMI LAR FACTS WITH SMALL DIFFERENCE THAT IN THAT CASE, THE EXPENSES WERE INC URRED IN ASSESSMENT YEAR 2007-08 AND THE PAYMENTS WERE MADE IN ASSESSMENT YE AR 2008-09. THIS ASPECT HAS BEEN DECIDED BY THE TRIBUNAL AS PER PARA 8 OF THIS TRIBUNAL ORDER WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REF ERENCE: 8. FROM THE CURRENT YEAR, SUB-SECTION (3A) HAS BEE N INSERTED IN SECTION 40A, AS PER WHICH, IF AN ALLOWANCE HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR AND THE ASSESSEE MAKES PAYM ENT IN RESPECT THEREOF OTHERWISE BY A/C PAYEE CHEQUE DRAWN ON A BA NK OR A/C PAYEE BANK DRAFT, THE PAYMENT SO MADE SHALL BE CHAR GEABLE TO INCOME TAX AS INCOME OF THE SUBSEQUENT YEAR IN WHIC H SUCH PAYMENT WAS MADE. NOW, THE QUESTION IS AS TO WHETHE R THESE AMENDED PROVISIONS ARE APPLICABLE IN RESPECT OF THE LIABILITY INCURRED IN AND AFTER THE ASSESSMENT YEAR 2008-09 O R EVEN FOR LIABILITY INCURRED UP TO ASSESSMENT YEAR 2007-08. IN OUR CONSIDERED OPINION, THE AMENDED PROVISIONS ARE APPLICABLE IN R ESPECT OF THOSE EXPENDITURE FOR WHICH, LIABILITY HAS BEEN INCURRED IN ASSESSMENT YEAR 2008-09 OR IN ANY SUBSEQUENT YEAR BUT IT CANNO T BE MADE APPLICABLE TO THE LIABILITY INCURRED UP TO THE ASSE SSMENT YEAR 2007- 08. IF THE LIABILITY IS INCURRED UP TO 2007-08 BUT THE PAYMENT MADE IS IN A SUBSEQUENT YEAR I.E. IN ASSESSMENT YEAR 200 8-09 OR ANY SUBSEQUENT YEAR, THE PROVISIONS OF SECTION 40A(3) A S APPLICABLE IN I.T.A.NO.1901 /AHD/2011 12 THAT YEAR IN WHICH LIABILITY WAS INCURRED SHOULD BE APPLIED, AS PER WHICH, IF THE ASSESSEE DOES NOT MAKE PAYMENT FOR SU CH A LIABILITY IN A SUM EXCEEDING RS.20,000/- BY AN A/C PAYEE CHEQUE DRAWN ON A BANK OR BY AN A/C PAYEE BANK DRAFT, THE ALLOWANCES ORIGINALLY MADE SHALL BE DEEMED HAVING WRONGLY BEEN MADE AND THE AS SESSMENT ORDER OF THAT YEAR IN WHICH LIABILITY WAS INCURRED SHOULD BE RECTIFIED AS PER THE PROVISIONS OF SECTION 154 AND FOR THE PURPOSE OF RECKONING THE LIMITATION PERIOD OF FOUR YEARS, IT S HALL BE RECKONED FROM THE END OF THE ASSESSMENT YEAR FOLLOWING THE P REVIOUS YEAR IN WHICH THE PAYMENT WAS SO MADE. HENCE, REGARDING TH E DISALLOWANCE MADE BY THE A.O. OF RS.2,68,66,115/- B EING PAYMENT OUT OF OPENING BALANCE, EVEN IF IT IS FOUND THAT RU LE 6DD(K) IS NOT APPLICABLE THEN ALSO, NO DISALLOWANCE OR ADDITION I S CALLED FOR IN THE PRESENT YEAR IN RESPECT OF THESE PAYMENTS AND THE S AME HAS TO BE DEALT WITH IN THE ASSESSMENT YEAR IN WHICH THE LIAB ILITY WAS INCURRED AS PER THE PROVISIONS OF SECTION 40A(3) AP PLICABLE UP TO THE ASSESSMENT YEAR 2007-08. THE A.O. SHALL FIRST DECIDE THE APPLICABILITY OF RULE 6DD(K) WITH REGARD TO THESE PAYMENTS ALSO AND IF IT IS FOUND THAT RULE 6DD(K) IS APPLICABLE, THEN OBVIOUSLY, NO ADDITION IS CALLED FOR IN ANY OF THE YEAR BUT IF IT IS FOUND THAT RULE 6DD(K) IS NOT APPLICABLE THEN ALSO NO DISALLOW ANCE IS CALLED FOR IN THE PRESENT YEAR IN RESPECT OF THIS PAYMENT OF RS.2,68,66,115/- IN THE PRESENT YEAR OUT OF OPENING BALANCE AND THE ADDITION IN THIS REGARD SHALL BE MADE IN THAT YEAR IN WHICH THE LIABILITY WAS INCURRED BY APPLYING THE PROVISIONS O F SECTION 40A(3) WHICH WAS APPLICABLE TILL THE ASSESSMENT YEAR 2007- 08. THE A.O. SHOULD PASS NECESSARY ORDER AS PER LAW AS PER ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. WE FIND THAT THE PRESENT ISSUE IS SQUARELY COVER ED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL DECISION RENDERED IN THE CASE OF ANAND KUMAR RAWATRAM JOSHI (SUPRA) BECAUSE IT WAS HELD BY THE T RIBUNAL IN THAT CASE THAT IF THE LIABILITY IS INCURRED UP TO ASSESSMENT YEAR 2007-08 AND THE PAYMENT IS MADE IN A SUBSEQUENT YEAR I.E. 2008-09 O R ANY SUBSEQUENT YEAR, THE PROVISIONS OF SECTION 40A(3) AS APPLICABL E IN THE YEAR IN WHICH LIABILITY WAS INCURRED SHOULD BE APPLIED AND IF WE APPLY THE PROVISIONS OF I.T.A.NO.1901 /AHD/2011 13 SECTION 40A(3) AS APPLICABLE IN ASSESSMENT YEAR 200 4-05, WE FIND THAT NO ADDITION IN THE PRESENT YEAR IS JUSTIFIED AND NO DI SALLOWANCE CAN BE MADE IN ASSESSMENT YEAR 2004-05 ALSO BECAUSE AS PER THE PROVISION OF SECTION 40A(3) AS APPLICABLE IN ASSESSMENT YEAR 2004-05, TH E PAYMENTS ARE REQUIRED TO BE MADE BY A CROSSED CHEQUE/CROSSED BAN K DRAFT AND THE ASSESSEE HAS MADE THE PAYMENT BY WAY OF CROSSED CHE QUE AND, THEREFORE, NO DISALLOWANCE IS CALLED FOR IN THE PRESENT CASE A S PER THE PROVISIONS OF SECTION 40A(3) AS APPLICABLE IN THE ASSESSMENT YEAR 2004-05. 10. NOW, WE DISCUSS VARIOUS JUDGEMENTS CITED BY THE LD. D.R. OF THE REVENUE. THE FIRST JUDGEMENT CITED BY HIM IS THE J UDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF WOODWARD GOVERNO R INDIA (P) LTD. (SUPRA). RELIANCE ON THIS JUDGMENT IS PLACED IN S UPPORT OF THIS CONTENTION THAT THE PROVISIONS APPLICABLE IN THE YEAR OF PAYME NT ARE TO BE APPLIED. BUT WHEN WE GO THROUGH THIS JUDGMENT, WE FIND THAT RELIANCE PLACED BY THE LD. D.R. IS MISPLACED. IN THAT CASE, IT IS HEL D BY THE HONBLE APEX COURT THAT WHEN AMENDMENT IS IN COMPLETE SUBSTITUTI ON OF THE SECTION AS IT EXISTED PRIOR THERETO, THE AMENDMENT IS MANDATORY A ND NOT CLARIFICATORY IN NATURE. IN THAT CASE, AMENDMENT IN SECTION 43A WAS W.E.F. 01.04.2003 AND AS PER THIS AMENDED, PROVISIONS OF SECTION 43A, IT WAS REQUIRED THAT PAYMENT OF LIABILITY IS A CONDITION PRECEDENT FOR M AKING ADJUSTMENT IN THE CARRYING COST OF THE FIXED ASSET. IN THAT CASE, TH E ASSESSMENT YEAR INVOLVED WAS 1998-99 AND IT WAS HELD THAT SUCH AMEN DED PROVISION W.E.F. 01.04.2003 ARE NOT APPLICABLE BECAUSE THE SAME ARE MANDATORY AND NOT CLARIFICATORY. HENCE, THIS JUDGEMENT OF HONBLE AP EX COURT HAS NO RELEVANCE IN THE PRESENT CASE BECAUSE IN THAT CASE, THE AMENDMENT WAS EFFECTIVE FORM 01.04.2003 AND WERE SOUGHT TO BE APP LIED BY THE REVENUE W.E.F. 1998-99 ON THIS PLEA THAT THE SAME ARE CLARI FICATORY WHEREAS IN THE I.T.A.NO.1901 /AHD/2011 14 PRESENT CASE, THE AMENDMENTS ARE APPLICABLE FROM AS SESSMENT YEAR 2008- 09 AND THE REVENUE HAS SOUGHT THE APPROVAL FOR APPL YING THE AMENDED PROVISIONS IN ASSESSMENT YEAR 2008-09 AND THE OBJEC TION OF THE ASSESSEE IS THIS THAT SINCE LIABILITY IN QUESTION WAS INCURRED IN ASSESSMENT YEAR 2004- 05, THE AMENDED PROVISION ARE NOT APPLICABLE AND HE NCE, THIS JUDGMENT OF THE HONBLE APEX COURT IS NOT APPLICABLE IN THE PRE SENT CASE BECAUSE THE FACTS ARE DIFFERENT. AS PER THE PROVISIONS OF SE CTION 40A(3) AS APPLICABLE IN ASSESSMENT YEAR 2004-05, THE ASSESSEE WAS REQUIRED TO MAKE THE PAYMENT BY WAY OF CROSSED CHEQUE/CROSSED BANK D RAFT AND IF THE ASSESSEE MAKES PAYMENT IN CONTRAVENTION TO THIS MOD E, THE ASSESSMENT OF THE YEAR IN WHICH THE LIABILITY WAS INCURRED WAS RE QUIRED TO BE RECTIFIED AS PER THE PROVISO TO SECTION 40A(3) AS APPLICABLE IN THAT YEAR AND SUCH RECTIFICATION CAN BE CARRIED OUT BY THE A.O. WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR IN WHICH THE PA YMENT WAS MADE BY THE ASSESSEE IN CONTRAVENTION TO THE PRESCRIBED MOD E. THESE PROVISIONS SUGGEST BY IMPLICATION THAT THE INCURRING OF LIABIL ITY ON ACCOUNT OF EXPENDITURE AND MAKING OF PAYMENT AGAINST SUCH LIAB ILITY IN ANY SUBSEQUENT YEAR IN CONTRAVENTION TO THE PRESCRIBED MODE OF PAYMENT AS PRESCRIBED IN THE YEAR OF ASSESSMENT IN WHICH LIABI LITY WAS INCURRED IS REQUIRED TO BE RECTIFIED BY THE A.O. U/S 154 AND BE CAUSE OF THIS, IN OUR HUMBLE OPINION, THE AMENDED PROVISIONS OF SECTION 4 0A(3) CANNOT BE MADE APPLICABLE TO THOSE EXPENSES WHICH WERE INCURR ED PRIOR TO 01.04.2008 BUT PAYMENTS OF WHICH WERE MADE ON OR AF TER 01.04.2008 IN CONTRAVENTION TO THE PROVISIONS OF SECTION 40A(3). THIS CAN BE UNDERSTOOD FROM ONE MORE ANGLE. IF IN THE PRESENT YEAR, THE LIMIT OF SUCH PAYMENT OTHERWISE THAN BY A/C PAYEE CHEQUE / A/C PA YEE BANK DRAFT IS INCREASED TO RS.1 LAC THEN WHETHER THE ASSESSEE WIL L BE PERMITTED TO MAKE I.T.A.NO.1901 /AHD/2011 15 PAYMENT AGAINST THE LIABILITY INCURRED IN ASSESSMEN T YEAR 2004-05 IN CASH IN THE PRESENT YEAR UP TO RS.1 LAC BEING THE AMENDE D PRESCRIBED AMOUNT. IN OUR HUMBLE OPINION, ON THIS ASPECT ALSO, THE LAW APPLICABLE IN ASSESSMENT YEAR 2004-05 ARE TO BE APPLIED AND UNLES S THERE IS SPECIFIC AMENDMENT WHICH INCREASES THE AMOUNT IS MADE APPLIC ABLE IN RESPECT OF PAYMENT FOR EARLIER YEAR ALSO. 11. ABOUT THE TRIBUNAL DECISION IN THE CASE OF MARA N CORPORATION (SUPRA), WE FIND THAT HIS DECISION IS NOT APPLICABL E AS THE FACTS & LEGAL PROVISION ARE DIFFERENT. IN THAT CASE, THE CLAIM O F THE ASSESSEE WAS ON THE BASIS OF THIS CONTENTION THAT THE ASSESSEE HAS VEST ED RIGHT WHEREAS IN THE PRESENT CASE, THE CLAIM OF THE ASSESSEE IS SUPPORTE D BY THE PROVISIONS OF SECTION 40A(3) AS PER WHICH IN CASE, THE PAYMENT IN A SUBSEQUENT YEAR IS IN CONTRAVENTION OF SECTION 40A(3), THE ASSESSMENT OF THE YEAR IN WHICH THE LIABILITY WAS INCURRED IS REQUIRED TO BE RECTIF IED. THE 3 RD DECISION CITED BY THE LD. D.R. IS THE JUDGEMENT OF HONBLE APEX CO URT RENDERED IN THE CASE OF ISTHMIAN STEAMSHIP LINES (SUPRA). THIS JUD GEMENT IS ALSO NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE FACTS AR E DIFFERENT. IN THAT CASE, THE ISSUE INVOLVED WAS REGARDING ALLOWABILITY OF SE T OFF OF UNABSORBED DEPRECIATION AND THERE BEING NO SUCH ISSUE AS TO WH ETHER ANY LIABILITY INCURRED IN A PRIOR YEAR CAN BE SUBJECTED TO THE PR OVISIONS OF A SUBSEQUENT YEAR IN WHICH PAYMENT FOR SUCH LIABILITY WAS MADE. IN THAT CASE, IT WAS HELD BY THE HONBLE APEX COURT THAT BEFORE APRIL 19 40 AMENDMENT TO SECTION 10(2)(VI) TOOK PLACE AND THE DATE 01.04.193 9 MENTIONED IN THE AMENDED PROVISO, MUST BE HELD TO APPLY TO THE ASSES SMENT YEAR AND NOT TO THE ACCOUNTING YEAR BECAUSE IN THE INCOME TAX MATTE RS, THE LAW TO BE APPLIED IS THE LAW IN FORCE IN THE ASSESSMENT YEAR UNLESS OTHERWISE STATED OR IMPLIED AND CONSEQUENTLY THE OLD LAW APPLIED TO EVERY ASSESSMENT YEAR I.T.A.NO.1901 /AHD/2011 16 UP TO AND INCLUDING THE ASSESSMENT YEAR 1939-40. HERE ALSO, IT IS A DECISION OF HONBLE APEX COURT THAT THE LAW IN FORC E IN THE RELEVANT ASSESSMENT YEAR IS TO BE APPLIED UNLESS OTHERWISE S TATED OR IMPLIED. WE HAVE ALREADY SEEN IN THE ABOVE PARA THAT IN THE PRE SENT CASE, IT IS IMPLIED IN VIEW OF THE PROVISO TO SECTION 40A(3) AS APPLICA BLE IN ASSESSMENT YEAR 2004-05 THAT WHENEVER ANY PAYMENT IS MADE IN A SUBS EQUENT YEAR IN CONTRAVENTION TO THE PRESCRIBED MODE, DISALLOWANCE HAS TO BE MADE IN THE YEAR IN WHICH THE LIABILITY IS INCURRED AND, THEREF ORE, THE AMENDED PROVISIONS IN ASSESSMENT YEAR 2008-09 CANNOT BE MAD E APPLICABLE TO THE EXPENSES FOR WHICH LIABILITY WAS INCURRED PRIOR TO 01.04.2008 AND THE SAME HAS TO BE DEALT WITH AS PER THE PROVISIONS OF SECTION 40A(3) AS APPLICABLE IN THE RELEVANT YEAR IN WHICH THE LIABIL ITY WAS INCURRED. 12. REGARDING THE JUDGEMENT CITED BY THE LD. D.R. O F THE REVENUE, WHICH IS THE JUDGMENT RENDERED IN THE CASE OF RELIA NCE JUTE AND INDUSTRIES LD. VS CIT (WB) AS REPORTED IN 120 ITR 921, WE FIND THAT IN THAT CASE, HONBLE APEX COURT HAS SIMPLY FOLLOWED THE EARLIER JUDGMENT RENDERED IN THE CASE OF CIT VS ISTHMIAN STEAMSHIP LINES (SUPRA) AND WE HAVE ALREADY SEEN THAT THIS JUDGMENT IS NOT APPLICABLE IN THE PR ESENT CASE AND FOR THE SAME REASONS, THIS JUDGMENT OF HONBLE APEX COURT R ENDERED IN THE CASE OF RELIANCE JUTE AND INDUSTRIES (SUPRA) IS ALSO NOT APPLICABLE IN THE PRESENT CASE. - THE NEXT JUDGMENT CITED BY THE LD. D.R. IS THE JU DGEMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS HYNOUP FOOD & OIL IND. (P) LTD.(SUPRA). THIS JUDGMENT IS NOT A PPLICABLE IN THE PRESENT CASE BECAUSE THE QUESTION BEFORE THE HONBLE GUJARA T HIGH COURT WAS ENTIRELY DIFFERENT. THE QUESTION BEFORE THE HONBL E GUJARAT HIGH COURT WAS, AS TO WHETHER THE TRIBUNAL WAS RIGHT IN DELETI NG THE DISALLOWANCE I.T.A.NO.1901 /AHD/2011 17 MADE BY THE A.O. U/S 40A(3) BY HOLDING THAT THE EXC EPTION TO THIS SECTION IN RULE 6DD(J) CAN BE APPLIED FOR PAYMENT WHICH WER E MADE IN THE COURSE OF A BUSINESS OUTSIDE THE BOOKS. HENCE, THI S JUDGMENT OF HONBLE GUJARAT HIGH COURT IS NOT AT ALL APPLICABLE IN THE PRESENT CASE. - THE NEXT DECISION CITED BY THE LD. D.R. IS THE TR IBUNAL DECISION RENDERED IN THE CASE OF R.S. NAYAR (SUPRA). IN THA T CASE, THE ISSUE BEFORE THE TRIBUNAL WAS, AS TO WHETHER IN VIEW OF THE OMIS SION OF RULE 6DD(J) W.E.F. 25.07.1995, THE ASSESSEE CAN BE CONSIDERED T O BE ELIGIBLE FOR THE BENEFIT OF THIS RULE IN RESPECT OF THE PAYMENTS MAD E BETWEEN 01.04.1995 TO 24.07.1995 BECAUSE THE SAID RULE WAS NOT APPLICA BLE FOR MAKING ASSESSMENT IN ASSESSMENT YEAR 1996-97. UNDER THIS FACTUAL POSITION, IT WAS HELD BY THE PUNE BENCH OF THE TRIBUNAL THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM THE BENEFIT OF RULE 6DD(J) IN RESPECT OF T HE PAYMENT MADE BETWEEN 01.04.1995 TO 24.07.1995. HERE, THE AMENDM ENT IN QUESTION IS AMENDMENT IN THE INCOME TAX RULES AND AMENDED RULES ARE APPLICABLE IN ASSESSMENT YEAR 1996-97 AND UNDER THESE FACTS, IT W AS HELD BY THE TRIBUNAL THAT IN VIEW OF THE AMENDED RULES WHICH AR E APPLICABLE IN ASSESSMENT YEAR 1996-97, THE ASSESSEE IS NOT ELIGIB LE FOR THE BENEFIT OF RULE 6DD(J) IN THAT ASSESSMENT YEAR. HERE ALSO, TH ERE IS NO SUCH PROVISION IN THE RULES WHICH CAN BE APPLIED BY WAY OF PRECEDENCE OVER THE AMENDED ACT AND AMENDED RULES. WHEREAS, IN THE PRESENT CASE, THE PROVISO TO SECTION 40A(3) IN THE YEAR OF INCURRING LIABILITY FOR EXPENDITURE HAS TO BE APPLIED IN RESPECT OF THE SUBSEQUENT PAYM ENT FOR THE EXPENSES INCURRED IN THAT YEAR AND UNDER THESE FACTS, THE TR IBUNAL DECISION IS ALSO OF NO HELP TO THE REVENUE IN THE PRESENT CASE. - THE NEXT DECISION CITED BY THE LD. D.R. IS THE DE CISION OF 3 RD MEMBER TRIBUNAL DECISION RENDERED IN THE CASE OF MA HINDRA & MAHINDRA I.T.A.NO.1901 /AHD/2011 18 LTD. (SUPRA). ON THIS TRIBUNAL DECISION, RELIANCE WAS PLACED BY THE LD. D.R. BUT WE FEEL THAT SEVERAL ISSUES ARE INVOLVED I N THIS TRIBUNAL DECISION AND IT WAS NOT POINTED OUT BY THE LD. D.R. AS TO WH ICH PART OF THIS TRIBUNAL DECISION IS APPLICABLE IN THE PRESENT CASE. STILL, WE FIND THAT THERE WAS ONE OF THE ISSUES IN THAT CASE THAT WHEN THERE IS SALE OF ASSETS AND CONCURRENTLY INVESTMENT ALLOWED HAS TO BE WITH DRAWN, THE SAME H AS TO BE EFFECTED IN THE YEAR IN WHICH INVESTMENT ALLOWANCE WAS GRANTED. IN VIEW OF THIS, IN OUR CONSIDERED OPINION, THIS TRIBUNAL DECISION RATH ER SUPPORTS THE CASE OF THE ASSESSEE AND IT DOES NOT SUPPORT THE CASE OF TH E REVENUE. - THE NEXT DECISION CITED BY THE LD. D.R. IS THE JU DGMENT OF HONBLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF RANJIT NARANG (SUPRA). IN THAT CASE, THE ISSUE IN DISPUTE BEFORE HONBLE ALLA HABAD HIGH COURT WAS THAT THE CAPITAL GAIN CAN BE TAXED ON WITHDRAWAL OF DEDUCTION U/S 54F IN THE YEAR OF ACTUAL CAPITAL GAIN OR IN THE YEAR IN W HICH THE PRESCRIBED PERIOD OF 3 YEARS EXPIRES. IT IS NOTED BY THE HON BLE ALLAHABAD HIGH COURT THAT AS PER PLAIN READING OF SECTION 54F, THE AMOUNT OF CAPITAL GAIN WHICH HAS NOT BEEN UTILIZED U/S 54F, HAS TO BE CHAR GED U/S 45 AS THE INCOME OF THE PREVIOUS YEAR AFTER THE EXPIRY OF THR EE YEARS FROM THE DATE OF SALE OF THE ASSET. IN THAT CASE, THE ASSET WAS SOLD IN ASSESSMENT YEAR 1990-91 AND SINCE THE PERIOD OF THREE YEARS EXPIRED IN ASSESSMENT YEAR 1993-94, IT WAS HELD THAT THE CAPITAL GAIN HAS TO B E TAXED IN ASSESSMENT YEAR 1993-94. HENCE, IT IS SEEN THAT THIS JUDGMENT OF ALLAHABAD HIGH COURT ONLY EXPLAINS THE SPECIFIC PROVISION OF SECTI ON 54F AND IT DOES NOT THROW ANY LIGHT AS TO WHETHER IN A DISPUTE LIKE THE DISPUTE BEFORE US, WHETHER THE PROVISION APPLICABLE IN THE YEAR IN WHI CH THE LIABILITY FOR EXPENDITURE WAS INCURRED WILL BE APPLICABLE OR THE PROVISION IN THE YEAR OF PAYMENT WILL BE APPLICABLE PARTICULARLY WHEN THERE IS PROVISO TO SECTION I.T.A.NO.1901 /AHD/2011 19 40A(3) WHICH SPECIFICALLY SAYS THAT WHENEVER THERE IS ANY PAYMENT IN A FUTURE YEAR IN VIOLATION TO THE PRESCRIBED MODE, TH E DISALLOWANCE HAS TO BE MADE IN THE YEAR IN WHICH THE LIABILITY FOR EXPENDI TURE WAS INCURRED BY WAY OF RECTIFICATION U/S154 AND REGARDING THE PER IOD OF RECTIFICATION, IT HAS BEEN SPECIFIED THAT THE PERIOD OF FOUR YEARS WI LL START FROM THE END OF THE YEAR IN WHICH THE PAYMENT IN VIOLATION OF THE P RESCRIBED MODE IS MADE. HENCE, THIS JUDGMENT OF HONBLE ALLAHABAD HI GH COURT IS ALSO NOT RELEVANT IN THE PRESENT CASE. - THE NEXT DECISION CITED BY THE LD. D.R. IS THE TR IBUNAL DECISION RENDERED IN THE CASE OF JAI USHIN LTD. (SUPRA). IN THAT CASE, THE ISSUE INVOLVED WAS REGARDING UNABSORBED DEPRECIATION RELA TING TO ASSESSMENT YEAR 1999-2000 AND IT WAS THE CASE OF THE ASSESSEE BEFORE THE TRIBUNAL THAT SINCE UNABSORBED DEPRECATION WAS RELATING TO 1 999-2000, THE SAME CAN BE SET OFF ONLY AGAINST BUSINESS INCOME AS PER THE PROVISIONS OF SECTION 32(2) AS APPLICABLE IN ASSESSMENT YEAR 1999 -2000 AND THE A.O. WAS NOT JUSTIFIED IN SETTING OFF THE SAME AGAINST T HE INCOME FROM HOUSE PROPERTY AS PER THE PROVISIONS OF SECTION 32(2) AS APPLICABLE W.E.F. 01.04.2002. UNDER THESE FACTS, IT WAS HELD BY THE TRIBUNAL THAT AS PER THE PROVISIONS OF SECTION 32(2), UNABSORBED DEPRECIATIO N OF THE PREVIOUS YEAR IS TO BE TREATED AS CURRENT YEAR DEPRECIATION AND H ENCE, THE LAW APPLICABLE IN THE CURRENT YEARS HAS TO BE APPLIED FOR SET OFF OF UNABSORBED DEPRECIATION BROUGHT FORWARD WHICH ARE CONSIDERED A S PART OF THE CURRENT YEAR DEPRECIATION. IN THE PRESENT CASE, THE PROVIS O TO SECTION 40A(3) UP TO ASSESSMENT YEAR 2007-08 IS TO THE EFFECT THAT IF AN EXPENDITURE IS INCURRED AND PAYMENT FOR THE SAME IS MADE IN A SUBS EQUENT YEAR IN CONTRAVENTION TO THE PRESCRIBED MODE OF PAYMENT THE N, THE DISALLOWANCE IS TO BE MADE IN THE YEAR IN WHICH THE LIABILITY FO R EXPENDITURE WAS I.T.A.NO.1901 /AHD/2011 20 INCURRED AND, THEREFORE, WHENEVER THE PAYMENT IS MA DE IN CONTRAVENTION TO THE PRESCRIBED MODE OF PAYMENT, THE PROVISO TO S ECANTS 40A(3) GET TRIGGERED AND, THEREFORE, THE PROVISIONS OF THE YEA R OF PAYMENT CANNOT BE MADE APPLICABLE SIMULTANEOUSLY BECAUSE IT WILL RESU LT INTO DOUBLE DISALLOWANCE ONCE IN THE YEAR OF INCURRING THE EXPE NDITURE AND AGAIN IN THE YEAR OF PAYMENT. UNDER THIS LEGAL POSITION, TH IS TRIBUNAL DECISION IS ALSO NOT APPLICABLE IN THE PRESENT CASE. 13. WE HAVE SEEN AS PER ABOVE DISCUSSION THAT NONE OF THE JUDGMENTS CITED BY THE LD. D.R. OF THE REVENUE IS OF ANY HELP TO THE REVENUE IN THE PRESENT CASE. ONE MORE CONTENTION WAS RAISED BY THE LD. D.R. THAT IF THIS VIEW IS TAKEN THAT THE AMENDED PROVISIONS TO S ECTION 40A(3) AS AMENDED FROM 2008-09 CANNOT BE MADE APPLICABLE TO T HE LIABILITY INCURRED PRIOR TO 01.04.2008 THEN, THESE PROVISIONS WILL BECOME REDUNDANT AND THAT CANNOT BE THE INTENTION OF THE LEGISLATURE . WE DO NOT FIND ANY MERIT IN THIS CONTENTION OF THE LD. D.R. BECAUSE TH ESE AMENDED PROVISIONS ARE VERY MUCH APPLICABLE IN RESPECT OF THOSE EXPENS ES FOR WHICH THE LIABILITY IS INCURRED BY THE ASSESSEE IN ASSESSMENT YEAR 2008-09 OR IN ANY SUBSEQUENT YEAR AND IT IS NOT APPLICABLE ONLY IN RE SPECT OF THOSE EXPENSES FOR WHICH LIABILITY WAS INCURRED PRIOR TO 01.04.200 8 BECAUSE AS PER THE PROVISIONS OF SECTION 40A(3) AS APPLICABLE UP TO AS SESSMENT YEAR 2007- 08, DISALLOWANCE IS REQUIRED TO BE MADE IN THE RELE VANT YEAR IN WHICH LIABILITY WAS INCURRED IF THE ASSESSEE MAKES PAYMEN T IN A SUBSEQUENT YEAR IN CONTRAVENTION TO THE PRESCRIBED MODE AND HENCE, IT IS IMPLIED THAT ANY AMENDED PROVISION CANNOT BE MADE APPLICABLE TO SUCH EXPENSE FOR WHICH LIABILITY WAS INCURRED UP TO 31.03.2008 UNLESS ANY SUBSEQUENT AMENDMENT IS SPECIFICALLY MADE APPLICABLE TO THOSE EXPENSES F OR WHICH LIABILITY WAS INCURRED PRIOR TO 01.04.2008 AND AS PER THE AMENDED PROVISIONS OF I.T.A.NO.1901 /AHD/2011 21 SECTION 40A(3) AS AMENDED FROM 01.04.2008, THESE PR OVISIONS ARE NOT SPECIFICALLY MADE APPLICABLE TO THE LIABILITY INCUR RED BY THE ASSESSEE PRIOR TO 01.04.2008. 14. HENCE, IN OUR CONSIDERED OPINION, DISALLOWANCE MADE BY THE A.O. CANNOT BE SUSTAINED BY FOLLOWING THE TRIBUNAL DECIS ION RENDERED IN THE CASE OF SHRI ANANDKUMAR RAWATRAM JOSHI (SUPRA). WE DELETE THE SAME. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. 16. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (MUKUL KUMAR SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 13/12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 15/12.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 09/02/2012 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.9/2 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 09/02/2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..