M/S VINEET SINGH CONSTRUCTION CO. PVT LTD, BILASPUR V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), , BILASPUR

ITA 206/RPR/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3194 (ITAT-RAIPUR)
• Duration Of Justice: 4 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 29-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence; Non-deduction of tax; TDS
• Section: 68; 143(3); 142(1); 40(a)(ia); 194C; 201(1); 201; 194J; 194A; 22

Judgement Text

ITAT-Raipur Page 1 of 12 आयकर अपीलीय Æयायािधकरण, रायप ु र Æयायपीठ, रायप ु र म¤। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR (Through Virtual Court at Raipur) BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI JAMLAPPA D BATTULL, ACCOUNTANT MEMBER आयकर अपील स ं . / ITA Nos. 206 & 207/RPR/2017 कर िनधाªरण वषª / Assessment Year : 2013-14 & 2014-15 M/s Vineet Singh Construction Co. Pvt. Ltd. Shop No 3, Kashyap Complex, Bilaspur (C.G.) PAN : ACQPA 4988 B . . . . . . . अपीलाथê / Appellant बनाम / V/s. Dy. Commissioner of Income Tax, Circle-1(1), Bilaspur (C.G.) . . . . . . ÿÂयथê / Respondent Appearances Assessee by : Shri Sunil Kumar Agrawal Revenue by : Shri G. N. Singh स ु नवाई कì तारीख / Date of conclusive Hearing : 19/04/2022 घोषणा कì तारीख / Date of Pronouncement : 29/04/2022 आदेश / ORDER PER JAMLAPPA D BATTULL, AM; The present appeals filed by the assessee against the first appellate orders of Commissioner of Income Tax(Appeals), Bilaspur [for short “CIT(A)”] passed u/s 250 vide order dt. 24/03/2017, which in turn sprung from the assessment orders dt. 22/02/2016 & 16/12/2016, passed by the Dy. Commissioner of Income Tax, Circle-1(1), Bilaspur [for short “AO”] u/s 143(3) of the Income-tax Act, 1961 [for short “the Act”] for the assessment year [for short “AY”] 2013- 2014 & 2014-2015 respectively. M/s Vineet Singh Construction Co. Pvt. Ltd. ITA Nos. 206 & 207/RPR/2017, PAN : AABCV7141D AY 2013-14 & 2014-2015 ITAT-Raipur Page 2 of 12 2. The dispute under these tax litigations claims rescue from the application of 40(a)(ia) on the strength of certificate from an accountant. 3. Since the issue urged in both these appeals are identical in nature, they are heard together for being disposed of by a common order and the adjudication in lead case ITA/206/RPR/2017 laid in succeeding paragraphs, shall mutatis mutandis apply to ITA/207/RPR/2017. 4. The grounds raised in both these appeals are analogous and are reproduced as under; 4.1 ITA No 206/RPR/2017 (AY 2013-2014); “1. That Under the facts and the law, the Ld. Commissioner of Income Tax (Appeals) erred in confirming the disallowance of Rs.38,09,366/- (Comprising of Rs.37,30,998/- towards finance charges paid to NBFC & Rs.78,368/- towards consultancy charges) made, by the Ld. Assessing Officer u/s 40(a)(ia) for non-deduction of tax u/s 194A for interest & 194J on consultancy charges, by rejecting the rejecting the explanations filed. Prayed that the disallowance of Rs.38,09,366/- is unjustified and be deleted. 2. That under the facts and the law, the Ld. Commissioner of Income Tax (Appeals) further erred in not accepting the additional evidence filed in the form of Certificate from the Chartered Accountant as per the proviso to Sec 201 in case of finance charges paid to Seri Equipment Finance Limited, Shriram Equipment Finance Company Limited and L & T Finance Limited. Prayed that same be admitted and disallowance be deleted. M/s Vineet Singh Construction Co. Pvt. Ltd. ITA Nos. 206 & 207/RPR/2017, PAN : AABCV7141D AY 2013-14 & 2014-2015 ITAT-Raipur Page 3 of 12 3. The Ld. Commissioner of Income Tax (Appeals) further erred in mentioning that certificate of Chartered Accountant for Finance Charges in the matter of M/s L & T Finance Limited was not Filed. Prayed that the same was also filed before the Ld. AO. Prayed to delete the disallowance.” (Empasis supplied) 4.2 ITA No 207/RPR/2017 (AY 2014-2015); “1. That Under the facts and the law, the learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of Rs.37,81,810/- (Included in Rs.39,20,126/-) being finance charges paid to NBFC u/s 40(a)(ia) for non-deduction of tax u/s 194A through the certificate of Chartered Accountant was filed. Prayed that the disallowance of Rs.37,81,810/- be deleted. 2. That under the facts and the law, the learned Commissioner of Income Tax (Appeals) further erred in not accepting the additional evidence filed in the form of Certificate from the Chartered Accountant as per the proviso to Sec 201 towards finance charges paid. Prayed that same be admitted and disallowance be deleted.” 3. That learned Commissioner of Income Tax (Appeals) further erred in confirming the disallowance of Rs. 70,600/- (included in Rs. 39,20,126) being amount of security services charges, made by the learned Assessing Officer u/s 40(a)(ia) for non-deduction of tax at source, rejecting the explanation, which is unjustified and be deleted. 4. That learned Commissioner of Income Tax (Appeals) further erred in confirming the disallowance of Rs. 67,716/- (included in Rs. 39,20,126) being Audit Fee, made by the learned Assessing Officer M/s Vineet Singh Construction Co. Pvt. Ltd. ITA Nos. 206 & 207/RPR/2017, PAN : AABCV7141D AY 2013-14 & 2014-2015 ITAT-Raipur Page 4 of 12 u/s 40(a)(ia) for non-deduction of tax at source, which is unjustified and be deleted. 5. That under the facts and the law, the learned Commissioner of Income Tax (Appeals) further erred in confirming the addition of Rs. 1,00,000/- made by the learned Assessing Officer u/s 68 on account of credit of Rs. 1,00,000/- in the account of M/s. D.A. Enterprises, which is unjustified and be deleted. (Empasis supplied) 5. Let us now cite the facts of the case succinctly as; 5.1 The appellant assessee is private limited company incorporated under the erstwhile Companies Act, 1956 and engaged in the business of Civil Contracting & Transport, made up its Income Tax Returns [for short “ITR/ROI”] electronically for AY 2013-2014 & AY 2014-2015 on 05/10/2013 with a returned income of ₹26,82,660/- & ₹24,08,900/- respectively. The returns of income were subjected to scrutiny by issue of statutory notices u/s 143(2) of the Act. The information sought by issue of notices accompanying questionnaire u/s 142(1) were submitted substantiating the claims made in the returns. Considering the written submissions, the assessment u/s 143(3) of the Act was framed assessing the total income of the appellant company for AY 2013-2014 at ₹67,47,762/- and for AY 2014-2015 ₹1,07,90,151/- predominantly on account of disallowance u/s 40(a)(ia) for non-deduction of tax at sources [for short “TDS”] from the payment of interest / finance charges u/s 194A, from the payment of consultancy charges, security service charges, audit fees u/s 194J of the Act and the addition u/s 68 of the Act in respect of cash credit remained unexplained by the assessee company. M/s Vineet Singh Construction Co. Pvt. Ltd. ITA Nos. 206 & 207/RPR/2017, PAN : AABCV7141D AY 2013-14 & 2014-2015 ITAT-Raipur Page 5 of 12 5.2 Aggrieved assessee carried the matter in an appeal before the first appellate forum [for short “FAA”], wherein Ld. CIT(A) not finding infirmity in the view taken by the Ld. AO, upheld the disallowance made u/s 40(a)(ia) of the Act to the extent payments without TDS u/s 194A & 194J of the Act and also confirmed the addition made u/s 68 of the Act. 5.3 The appellant being aggrieved with the orders of the CIT(A), has carried the matter in appeal before us with the grounds of appeal set herein before at Para 3. 5. For the purpose of adjudication, it is apt to tabulate the prayers seeking relief in both these appeals as; 6. We have heard the rival contentions of both the parties; perused material placed on records and duly considered the facts of the case in the light of settled legal position and the case laws relied upon by the appellant assessee as well the respondent revenue. 7. Before adjudicating the matter on merits of the case, we shall first deal with grounds relating to admission of additional evidence u/r 29 as; Non Deduction of TDS u/s 194A Non Deduction of TDS u/s 194C Non Deduction of TDS u/s 194J 37,30,998078,3680 NBFC Finance Charge Consultancy Fees 37,81,81070,60067,7161,00,000 NBFC Finance Charge Security ServicesAudit FeesCash Credit 1 ITA206/RPR/2017 2013-2014 2 ITA207/RPR/2017 2014-2015 Sr Appeal No Asstt Year Particulars of Disallowances / additions ( ₹ ) Disallowance u/s 40(a)(ia) Addition u/s 68 M/s Vineet Singh Construction Co. Pvt. Ltd. ITA Nos. 206 & 207/RPR/2017, PAN : AABCV7141D AY 2013-14 & 2014-2015 ITAT-Raipur Page 6 of 12 7.1 During the course of hearing of these appeals, the Ld. AR taken us through an application filed for admission of additional evidence u/r 29 of the Income-Tax Appellate Tribunal Rules, 1963 [for short “Rules”] and adverting the contents thereof submitted that, these additional evidences comprising of certificates obtained from a Chartered Accountant / NBFC in terms of first proviso to section 201(1) and which were partly filed during the course of first appellate proceedings before the Ld. CIT(A) u/r 46A of the Income Tax Rules, 1962 [for short “IT Rules”] however same were not dealt with, hence prayed for admission of the same pleading necessity for substantial justice. Au contraire, the learned departmental representative [for short “DR”] did not raise any objection to the admission of the aforesaid additional evidence. 7.2 Insofar as the admission of additional evidence is concerned, the Hon’ble Delhi High Court while dealing with the similar matter on admissibility of additional evidence before the Tribunal laid by the assessee suo-moto u/r 29 Rules, have categorically held in “CIT Vs Text Hundred India Pvt Ltd” that; “The law clearly lays down a neat principle of law that, the discretion lies with the Tribunal to admit additional evidence in the interest of justice, once the Tribunal affirms the opinion that doing so would be necessary for proper adjudication of the matter. This can be done even when application is filed by one of the parties to the appeal and it need not to be a suo motto action of the Tribunal. The aforesaid rule is made enabling the Tribunal to admit the additional evidence in its discretion if the Tribunal holds the view that such additional evidence would be necessary to do substantial justice in the matter. It M/s Vineet Singh Construction Co. Pvt. Ltd. ITA Nos. 206 & 207/RPR/2017, PAN : AABCV7141D AY 2013-14 & 2014-2015 ITAT-Raipur Page 7 of 12 is well settled that the procedure is handmade of justice and justice should not be allowed to be choked only because of some inadvertent error or omission on the part of one of the parties to lead evidence at the appropriate stage. Once it is found that the party intending to lead evidence before the Tribunal for the first time was prevented by sufficient cause to lead such an evidence and that this evidence would have material bearing on the issue which needs to be decided by the Tribunal and ends of justice demand admission of such an evidence, the Tribunal can pass an order to that effect.” (Empasis supplied) 7.3 For the admissibility of additional evidence, the Ld. AR submitted that, some of the certificates could not be obtained during the course of assessment vis-à-vis first appellate proceedings for the reason beyond control of the assessee and thus, evidence being necessary to substantiate the due discharge of tax liability by the payee, so has to enable the payer to claim the deduction, is made forming part of an evidence for proper adjudication of the matter. After a thoughtful consideration, we are of the considered view, that the additional evidence would have a substantial bearing on the adjudication of the issue before us, therefore, the same merits to be admitted, thus, in terms of our aforesaid observations we admit the additional evidence placed on our record u/r 29 of the Rules, in the effect the ground number 2 (of both the appeals) stands as allowed. 8. Admittedly, it is a matter of fact borne from the records that, following amount of expenses were debited without TDS u/s 194A, 194C & 194J of the Act and was subjected to 40(a)(ia) disallowances by the Ld. AO, against which M/s Vineet Singh Construction Co. Pvt. Ltd. ITA Nos. 206 & 207/RPR/2017, PAN : AABCV7141D AY 2013-14 & 2014-2015 ITAT-Raipur Page 8 of 12 certificate in “Annexure-A to form 26A”, from a Chartered Accountant is placed on record in terms of first proviso to section 201(1) of the Act r.w.s. 31ACB; Sr AY Resident NBFC Payee GOA No Expense Claimed in ROI & Disallowed (₹) Certificate Produced (₹) Short fall (₹) 1 2013-2014 Shriram Equipment Finance Ltd 1 9,45,546 8,98,847 46,699 SREI Equipment Finance Ltd 1 10,48,335 10,48,366 0 L & T Finance Ltd 1 17,37,097 21,23,887 0 Consultancy Charges 1 78,368 No Certificate 78,368 Total (₹) 38,09,346 1,25,067 2 2014-2015 Shriram Equipment Finance Ltd 1 4,85,572 6,65,890 0 SREI Equipment Finance Ltd 1 5,10,987 4,87,000 23,987 L & T Finance Ltd 1 27,85,251 9,31,613 18,53,638 Security Service Charges 3 70,600 No Certificate 70,600 Audit Fees 4 67,716 No Certificate 67,716 Total (₹) 39,20,126 20,15,941 8.1 Now in this regards, it is imperative to make note of insertion of first proviso to Section 201 (1) by the Finance Act 2012, which is operative with effect from 1st July 2012 and idem reads as under: “Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident- (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and M/s Vineet Singh Construction Co. Pvt. Ltd. ITA Nos. 206 & 207/RPR/2017, PAN : AABCV7141D AY 2013-14 & 2014-2015 ITAT-Raipur Page 9 of 12 (iii) has paid the tax due on the income declared by him in such return of income; And the person furnishes a certificate to this effect from an accountant in such form as may be prescribed.” (Empasis supplied) 8.2 The corroborative & corresponding amendments in section 40(a)(ia) was also carried out by the same Finance Act, 2012 by insertion of second proviso and made effective from 1 st March, 2013, which read as under; The following second proviso shall be inserted in sub-clause (ia) of clause (a) of section 40 by the Finance Act, 2012, w.e.f. 1-4-2013 : “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. Explanation.—For the purposes of this sub-clause,— (i) "commission or brokerage" shall have the same meaning as in clause (i) of the Explanation to section 194H; (ii) "fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; (iii) "professional services" shall have the same meaning as in clause (a) of the Explanation to section 194J; (iv) "work" shall have the same meaning as in Explanation III to section 194C; M/s Vineet Singh Construction Co. Pvt. Ltd. ITA Nos. 206 & 207/RPR/2017, PAN : AABCV7141D AY 2013-14 & 2014-2015 ITAT-Raipur Page 10 of 12 37[(v) "rent" shall have the same meaning as in clause (i) to the Explanation to section 194-I; (vi) "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;” (Empasis supplied) 8.3 The conjunctive & constructive interpretation first proviso to Section 201(1) and second proviso to section 40(a)(ia) of the Act reveals that, these have been inserted to benefit the Assessee, to provide that where a person fails to deduct tax at source (TDS) on the sum paid or credited to a resident payee under certain contingencies, such person; a. Shall first be excluded from holding as the assessee in default, subject to placing on records the certificate from a chartered accountant and b. Shall then be deemed that, such person has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee. 8.4 In the aforesaid position of lex scripta and the law laid down by the Hon’ble Delhi High Court in “CIT Vs Ansel Landmark Township”, reported at 377 ITR 635 and Hon’ble Apex Court in judgment in “M/s Hindustan Coca Cola Beverages Pvt Ltd Vs CIT”, reported at 293 ITR 22 and in the context of Circular No. 275/201/95-IT(B) dt. 29/1/1997 issued by the Central Board of Direct Taxes [for shot “CBDT”], the Hon’ble Lordships have observed that, once it is proved on record that, the payee has accounted the amount in question as income and discharged the due taxes thereon then, no recovery of tax demand be enforced against the assessee, and the assessee shall entitle to claim the deduction without subjecting to 40(a)(ia) of the Act. M/s Vineet Singh Construction Co. Pvt. Ltd. ITA Nos. 206 & 207/RPR/2017, PAN : AABCV7141D AY 2013-14 & 2014-2015 ITAT-Raipur Page 11 of 12 8.5 Applying the same analogy to ad litem, the assessee placed on record, the certificates from a chartered accountant showcasing that the, amount of expenditure (interest / finance charges) in question is accounted as income and due discharge of taxes thereon by resident payees as detailed at para 8 herein before. Consequently, for the said amount of certificates, the assessee shall be exonerated from holding as “the assessee-in-default” within the meaning of Section 201(1) of the Act and resultantly, shall be distant from application of provisions of section 40(a)(ia) of the Act to the extent of lower of the expenditure claimed and the certificates produced. Consequently, in the light of aforesaid observations, the disallowance u/s 40(a)(ia) on account of non-deduction of taxes from the payment of expenses shall be restricted to the amount of shortfall laid herein foregoing paragraphs. Accordingly the ground number 1 (of both the appeals) is partly allowed and the ground number 3 of ITA No 206/RPR/2017 and the ground number 3, 4, & 5 of ITA No 207/RPR/2017 are dismissed as not pressed. 12. Resultantly, the appeals of the assessee are partly allowed in terms of our aforestated observation. Order pronounced on this Friday 29 th day of April, 2022. -S/d- -S/d- RAVISH SOOD JAMLAPPA D BATTULL JUDICIAL MEMBER ACCOUNTANT MEMBER रायप ु र / RAIPUR ; िदना ं क / Dated : 29 th April, 2022 M/s Vineet Singh Construction Co. Pvt. Ltd. ITA Nos. 206 & 207/RPR/2017, PAN : AABCV7141D AY 2013-14 & 2014-2015 ITAT-Raipur Page 12 of 12 आदेश कì ÿितिलिप अúेिषत / Copy of the Order forwarded to : 1. अपीलाथê / The Appellant. 2. ÿÂयथê / The Respondent. 3. The Pr. CIT-1, Raipur(C.G) 4. The Pr. CIT, Raipur (C.G) 5. िवभागीय ÿितिनिध,आयकर अपीलीय Æयायािधकरण, रायप ु र ब¤च, रायप ु र / DR, ITAT, Raipur Bench, Raipur. 6. गाडªफ़ाइल / Guard File. आदेशान ु सार / BY ORDER, िनजीसिचव / Private Secretary आयकर अपीलीय Æयायािधकरण, रायप ु र / ITAT, Raipur.