Shri Vipin Somabhai Pujara, Ahmedabad V. ACIT, Circle-5(2), Ahmedabad

ITA 2175/AHD/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7415 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 24-10-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S S SHUKLA
• Assessee Lawyers: S N DIVATIA
• Keywords: Principle of natural justice; Corroborative evidences; TDS
• Section: 143(3); 40(a)(ia); 194A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH (CONDUCTED THROUGH VIRTUAL COURT) BEFORE: SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEM BER SHRI VIPIN SOMABHAI PUJARA A/11, AMIJYOT APARTMENT, NR. RAJNAGAR CLUB, PARIMAL SOCIETY, AMBAWADI, AHEMEDABD PAN: AFUPP6021P (APPELLANT) VS THE ACIT, CIRCLE-5(2), NARAYAN CHAMBERS NEHRU BRIDGE CORNER ASHRAM ROAD, AHMEDABAD (RESPONDENT) REVENUE BY: SHRI S. S. SHUKLA, SR. D.R. ASSESSEE BY: SHRI S.N. DIVATIA, A.R . DATE OF HEARING : 03-08-2021 DATE OF PRONOUNCEMENT : 23-08-202 1 /ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- THIS ASSESSEES APPEAL FOR A.Y. 2012-13, ARISES FRO M ORDER OF THE CIT(A)-5, AHMEDABAD DATED 17-08-2018, IN PROCEEDIN GS UNDER SECTION 143(3) R.W.S. 263 OF THE INCOME TAX ACT, 1961; IN S HORT THE ACT. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- ITA NO. 2175/AHD/2018 ASSESSMENT YEAR 2012-13 I.T.A NO. 2175/AHD/2018 A.Y. 2012-13 PAGE NO SMT. VIPIN SOMABHAI PUJARA VS. ACIT 2 1.1 THE ORDER PASSED U/S.25 ON 17-8-2018 FOR A.Y.2012-13 BY CIT(A)-5. ABAD, CONFIRMING DISALLOWANCE U/S 40(A)(IA) TO THE EXTENT OF 30% IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE EXPLANATIONS FURNISHED AND THE EVIDENC E PRODUCED BY THE APPELLANT. 2.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND/OR ON FACTS IN UPHOLDING THAT THE APPELLANT WAS REQUIRED TO MAKE TDS U/S 194A FROM PAYMENTS AGG REGATING TO RS. 74.54,822/- AND THERE BY CONFIRMING THAT THE PROVISIONS OF SECTION 40(A)(IA) WERE ATTRACTED. 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW. THE ID. CIT(A) ERRED IN UPHOLDING THAT THE APPELLANT WAS REQUIRED TO MAKE T DS U/S 194A FROM PAYMENTS AGGREGATING TO RS. 1,63.64,831/- AND THERE BY CONFIRMING THAT THE PROVISIONS OF SECTION 40(A)(IA) WERE ATTRACTED. 2.3 WITHOUT PREJUDICE TO THE ABOVE AND IN ALTER NATIVE, THE JII. CIT(A) OUGHT TO HAVE APPRECIATED THAT SINCE THE RECIPIENTS WERE ASSESSED TO TAX THE DISALLOWANCE U/S 40(A)(IA) WAS UNJUSTIFIED IN LAW. ' IT IS THEREFORE PRAYED THAT THE DISALLOWANCE U/S 40(A)(IA) UPHELD BY 30 % BY CIT(A) SHOULD BE DELETED 3. ALL THE GROUNDS OF APPEAL ARE INTER-CONNECTED, T HEREFORE, FOR THE SAKE OF CONVENIENCE THE SAME ARE CONSIDERED TOGETHER AS FOLLOWS:- 4. THE FACT IN BRIEF IS THAT ASSESSEE HAS FILE D RETURN OF INCOME SHOWING LOSS OF RS. 79,96,219/- ON 28 TH SEP, 2012. ASSESSMENT ORDER U/S. 143(3) OF THE ACT WAS PASSED ON 2 ND MARCH, 2015 ACCEPTING THE LOSSES SHOWN IN THE RETURN OF INCOME. SUBSEQUENTLY, THE PR. CIT ISSUED NOTICE U/S. 263 OF THE ACT AND PASSED ORDER U/S. 263 OF THE ACT ON 28 TH MARCH, 2017 DIRECTING THE ASSESSING OFFICER TO DISALLOW THE PAYMENT OF INTERE ST OF RS. 74,54,822/- WHICH INCLUDED PAYMENT OF RS. 25,29,132/- TO M/S. INDIA INFOLINE, RS. 35,07,114/- TO DSP MERRILL LYNCH AND RS. 14,18,562/ - TO MORGEN STANELY U/S. 40(A)(IA) OF THE ACT. IN THE COURSE OF ASSES SMENT PROCEEDINGS U/S. 143(3) R.W.S. 263 OF THE ACT, THE ASSESSING OFFICER NOTIC ED THAT ASSESSEE HAS DEBITED AFORESAID INTEREST EXPENSES TO THE PROFIT AND LOSS ACCOUNT AND ASSESSEE WAS LIABLE TO DEDUCT TAX U/S. 194A OF THE ACT ON INTERE ST PAYMENT AMOUNTING TO RS. 74,54,822/-. ON VERIFICATION OF THE DETAIL FIL ED, THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS FAILED TO DEDUCT TAX ON THE AFORESAID INTEREST I.T.A NO. 2175/AHD/2018 A.Y. 2012-13 PAGE NO SMT. VIPIN SOMABHAI PUJARA VS. ACIT 3 PAYMENT. ON QUERY, THE ASSESSEE EXPLAINED THAT HE WAS UNDER BONAFIDE IMPRESSION THAT INTEREST PAID TO THE AFORESAID THRE E PARTIES WAS NOT SUBJECT TO TDS PROVISION AND HE WAS UNDER THE IMPRESSION THAT ALL THESE COMPANIES HAVE OBTAINED LICENSE FOR OPERATING AS BANKING COMP ANIES. THE ASSESSEE FURTHER SUBMITTED THAT ALL THE ACCOUNTS OF THE AFOR ESAID COMPANIES WERE AUDITED ACCOUNTS AND THEY HAVE FILED THE INCOME TAX RETURN AND PAID THE TAX ON THE INTEREST INCOME. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE. THE ASSESSING OFFICE R HAS STATED THAT ASSESSEE HAS MADE REQUEST TO DISALLOW 30% OF INTEREST PAYMEN T OF RS. 74,54,822/- U/S. 40(A)(IA) OF THE ACT. BUT THE ASSESSING OFFICER H AS NOT AGREED WITH THE ASSESSEE STATING THAT AMENDMENT FOR 30% DISALLOWME NT AS PER PROVISION OF SECTION 40(A)(IA) HAS BEEN INSERTED BY THE FINANCE ACT, 2014 W.E.F. 01-04- 2015 APPLICABLE TO THE ASSESSMENT YEAR 2015-16 AND SAME IS NOT APPLICABLE TO THE YEAR UNDER CONSIDERATION THAT IS ASSESSMENT YEAR 2012-13. CONSEQUENTLY, THE ASSESSING OFFICER HAS DISALLOWED THE WHOLE OF INTEREST EXPENSES AS MENTIONED ABOVE OF RS. 74,54,822/- U/S. 40(A)(IA) OF THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE TH E LD. CIT(A). THE ASSESSEE HAS SUBMITTED BEFORE THE LD. CIT(A) THAT DISALLOWAN CE AT 30% OF SUCH SUM HAS TO BE MADE IN CASE OF NON-DEDUCTION OF TDS AS THE AMENDMENT IN THE PROVISION U/S. 40(A)(IA) IS RETROSPECTIVE AND CLARI FICATORY IN NATURE AND APPLICABLE TO THE YEAR UNDER CONSIDERATIONS IN VIEW OF THE VARIOUS JUDICIAL PRONOUNCEMENTS HOLDING THAT THE AMENDMENT IS RETROS PECTIVE AND CLARIFICATORY. THEREFORE, THE LD. CIT(A) HAS REST RICTED THE DISALLOWANCE TO I.T.A NO. 2175/AHD/2018 A.Y. 2012-13 PAGE NO SMT. VIPIN SOMABHAI PUJARA VS. ACIT 4 30% OF THE TOTAL INTEREST PAYMENT. THE RELEVANT PA RT OF THE DECISION OF LD. CIT(A) IS AS UNDER:- 4.3. IN THIS CASE, ASSESSMENT U/S. 143(3) OF THE A CT WAS PASSED ON 2.3.3015 DETERMINING TOTAL LOSS AT RS.79,96,219/-. SUBSEQUENTLY THE PR.CIT, AHMEDAB AD-5 PASSED AN ORDER U/S.263 OF THE ACT ON 20.3.2017 AND DIRECTING THE AO TO DISALLOW THE PAYM ENT OF INTEREST OF RS.74,54,822/- WHICH INCLUDED PAYMENT OF RS.25,29,132/- TO M/S.INDIA INF O LINE, RS.35,07,114/- TO DSP MERRILL LYNCH AND RS.14,18,576/- TO MORGAN STANELY U/S.40(A)(IA)O F THE ACT AS THE ASSESSEE HAD FAILED TO COMPLY THE TDS PROVISION OF THE ACT. THE AO HAS OBSERVED T HAT ALL THESE COMPANIES ARE NON-BANKING FINANCE COMPANY HENCE THE ASSESSEE WAS LIABLE TO DE DUCT TAX U/S.194A OF THE ACT ON INTEREST PAYMENT AMOUNTING TO RS.74,54,822/-. THE ASSESSEE H AS FAILED TO COMPLY THE TDS PROVISIONS, THEREFORE, THE AO HAS DISALLOWED THE INTEREST AND M ADE AN ADDITION OF RS.74,54,822/-. THE AO HAS ALSO REJECTED THE REQUEST OF ASSESSEE TO DISALLOW 3 0% OF TOTAL INTEREST PAYMENT ON THE GROUND THAT THE AMENDED PROVISION IS APPLICABLE FROM A.Y. 2015- 16. 4.4. DURING THE APPELLATE PROCEEDINGS THE APPELL ANT HAS CONTENDED THAT THE AO HAS FAILED TO APPRECIATE THAT THE IMPUGNED PAYMENT TO NBFCS TOTAL ING TO RS.74,54,822/- WERE NOT IN NATURE OF INTEREST BUT THE SAME WERE FINANCIAL CHARGES SO THA T THE PROVISIONS OF SECTION 194A WERE NOT APPLICABLE. FURTHER CONTENDED THAT WHEN THE RECIPIE NTS NBFCS WERE ASSESSED TO TAX AND HAD INCLUDED THE PAYMENTS MADE BY THE APPELLANT IN THEI R ACCOUNTS, PAID TAXES THEREON, NO DISALLOWANCE IS WARRANTED U/S.40(A)(IA) OF THE ACT. IT IS FURTHER CONTENDED THAT THE AO HAS FAILED TO APPRECIATE THAT THE SAID PROVISIONS WAS AMENDED BY FINANCE ACT, 2014 WHEREBY A FLAT RATE OF DISALLOWANCE AT 30% OF SUCH SUM HAS TO BE MADE IN C ASE OF NON-DEDUCTION OF TDS. IT IS CONTENDED THAT THE SAID AMENDMENT IS RETROSPECTIVE AND CLARIF ICATORY IN NATURE IN AS MUCH AS THE SAME WAS INTRODUCED TO REMOVE THE HARDSHIP CAUSED BY THE DIS ALLOWANCE OF ENTIRE EXPENSES. THOUGH THE SAME MAY BE GENUINE. IT IS CONTENDED THAT AN IDENTI CAL AMENDMENT WAS MADE BY FINANCE ACT, 2010 IN RESPECT OF THIS PROVISION WHICH HAS HELD TO BE RETROSPECTIVE BY THE APEX COURT IN THE CASE OF CIT VS. CALCUTTA EXPORT CO. 4.5. FACTS OF THE CASE AND THE SUBMISSIONS ARE CONS IDERED. THE CONTENTION OF THE APPELLANT THAT THESE PAYMENTS ARE NOT IN NATURE OF INTEREST BUT TH E SAME WERE FINANCIAL CHARGES AND THE PROVISIONS OF SECTION 194A WERE NOT APPLICABLE IS N OT ON SOUND FOOTING, HE APPELLANT HAS FAILED TO ESTABLISH THAT THE NATURE OF PAYMENT WAS FINANCIAL CHARGES. FURTHER THE APPELLANT TRIED TO TAKE SUPPORT OF THE PROVISO OF THE SECTION AND CONTENDED THAT THE RECIPIENT NBFCS HAD INCLUDED THE PAYMENTS MADE BY THE APPELLANT IN THEIR ACCOUNTS AN D PAID TAXES THEREON. HOWEVER, THE APPELLANT HAS FAILED IN DOING SO AS NO REQUIRED CERTIFICATE I N THIS REGARD WAS FURNISHED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS. THE PROVISIONS OF SECTION WAS AMENDED BY FINANCE ACT, 2014 WHEREBY A FLAT RATE OF DISALLOWANCE AT 30% OF SUCH SUM HAS TO BE MADE IN CASE OF NON-DEDUCTION OF TDS. THE AO HAS REJECTED THE REQUEST OF THE ASSESSEE ON THE GROUND THAT THIS AMENDMENT IS EFFEC TIVE FROM 1 ST APRIL, 2014 AND NOT APPLICABLE TO THE YEAR UNDER CONSIDERATION. THE APPELLANT HAS CON TENDED THAT THIS AMENDMENT IS RETROSPECTIVE AND CLARIFICATORY IN NATURE AND APPLICABLE IN THE Y EAR UNDER CONSIDERATION. THE ARGUMENT OF THE APPELLANT IS FOUND TO BE CORRECT AS IN VARIOUS JUDICIAL PRONOUNCEMENTS IT IS HELD THAT THE AMENDMENT IS RETROSPECTIVE AND CLARIFLCATORY. FOLLO WING THE JUDICIAL PRONOUNCEMENTS THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCE TO 30% OF THE TOTAL INTEREST PAYMENT. THUS THE GROUND OF APPEAL IS PARTLY ALLOWED. 6. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL CONTENDED THAT AMOUNT OF INTEREST PAYMENT HAS BEEN INCLUDED IN THE INCOME OF THE PARITIES TO WHOM THE AMOUNT OF INTEREST WAS PAID AND THEY HAVE FILED THEIR RETURN OF INCOME, THEREFORE, NO DISALLOWANCE SHOULD BE MADE. IN THIS I.T.A NO. 2175/AHD/2018 A.Y. 2012-13 PAGE NO SMT. VIPIN SOMABHAI PUJARA VS. ACIT 5 REGARD, THE LD. COUNSEL HAS PLACED RELIANCE ON THE DECISION OF CO-ORDINATE BENCH OF THE ITAT VIDE ITA NO. 309/ALLD/2017 IN THE CASE OF M.K. AGRAWAL & CO. VS. ACIT DATED 03-12-2020. ON THE OT HER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS CONTENDED THAT ASSE SSEE HAS NOT PRODUCED ANY EVIDENCES OF PAYMENT OF TAXES BY THE OTHER PART IES, THEREFORE, THE CONTENTION OF THE ASSESSEE IS NOT CORRECT. THE LD. DEPARTMENTAL REPRESENTATIVE HAS ALSO PLACED RELIANCE ON THE DECI SION OF SUPREME COURT OF INDIA IN THE CASE OF SHREE CHAUDHARY TRANSPORT COMP ANY VS. ITO (2020) 118 TAXMANN.COM 47 (SC). 7. HEARD BOTH THE SIDES AND PERUSED THE MATERI AL ON RECORD. THE ASSESSING OFFICER HAS DISALLOWED THE INTEREST PAYME NT OF RS. 74,54,822/- ON THE GROUND THAT ASSESSEE HAS FAILED TO COMPLY WITH THE TDS PROVISION. THE ASSESSING OFFICER HAS REJECTED THE REQUEST OF THE A SSESSEE TO DISALLOW 30% OF TOTAL INTEREST PAYMENT ON THE GROUND THAT THE AMEND ED PROVISION IS APPLICABLE FROM A.Y. 2015-16. THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 30% OF TOTAL INTEREST PAYMENT AFTER HOLDI NG THAT AMENDED PROVISION OF SECTION 40(A)(IA) OF THE ACT, THE FINANCE ACT, 2 014 IS RETROSPECTIVE AND CLARIFICATORY. DURING THE COURSE OF APPELLATE PROC EEDINGS BEFORE US, THE LD. COUNSEL HAS REFERRED THE DECISION OF ITAT ALLAHABAD AS REFERRED ABOVE STATING THAT ONCE THE RECIPIENT OF THE INTEREST AMO UNT HAS INCLUDED THE SAME AS PART OF THEIR INCOME AND FILED THE RETURN OF INC OME IN THAT CASE THE PROVISION OF SECTION 40(A)(IA) IS NOT REQUIRED TO I NVOKED. IN THIS REGARD, WE HAVE PERUSED THE MATERIAL ON RECORD AND NOTICED TH AT ASSESSEE HAS NOT FILED ANY SUPPORTING EVIDENCES TO SUBSTANTIATE THAT AFORE SAID PAYEES OF INTEREST HAVE INCLUDED THE SAME IN THEIR RETURN OF INCOME AN D PAID THE TAXES THERE ON. I.T.A NO. 2175/AHD/2018 A.Y. 2012-13 PAGE NO SMT. VIPIN SOMABHAI PUJARA VS. ACIT 6 THE ASSESSEE HAS NOT FILED SUCH DETAIL AT THE TIME OF ASSESSMENT AND APPELLATE PROCEEDINGS. IT IS FURTHER NOTICED THAT DURING TH E COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A) IN HIS SUBMISSION THE ASSESSEE HAS CATEGORICALLY PLEADED TO RESTRICT THE DISALLOWANCE AT 30% OF SUCH SUM OF INTEREST PAYMENT. IN THIS REGARD, THE RELEVANT PAR T OF THE SUBMISSION OF THE ASSESSEE REPORTED AT THE PAGE NO. 4 OF LD. CIT(A)S ORDER IS REPRODUCED AS UNDER:- (C) LASTLY, THE AO HAS FAILED TO APPRECIATE THAT T HE SAID PROVISION WAS AMENDED BY FINANCE ACT, 2014 WHEREBY A FLAT RATE OF DISALLO WANCE AT 30% OF SUCH SUM HAS TO BE MADE IN CANE OF NON-DEDUCTION OF IDS. THE APP ELLANT HAD CONTENDED THAT THE SAID AMENDMENT WAS RETROSPECTIVE AND CLARIFICATARY IN NATURE IN AS MUCH AS THE SAME WAS INTRODUCED TO REMOVE THE HARDSHIP CAUSED B Y THE DISALLOWANCE OF ENTIRE EXPENSES, THOUGH THE SAME MAY BE GENUINE. IT IS SUB MITTED THAT AN IDENTICAL AMENDMENT WAS MADE BY FINANCE ACT, 2010 IN RESPECT OF THIS PROVISION WHICH HAS HELD TO BE RETROSPECTIVE BY THE APEX COURT IN CASE OF CIT VS. KALKATTA EXPORT CO. (302 CTR 201) WHEREIN IT WAS HELD THAT 'THE PROVISO WHICH IS INSERTED TO REMEDY UNINTENDED CONSEQUENCES AND TO MAKE THE PROVISION WORKABLE, A PROVISO WITH SUPPLIES AN OBVIOUS IN THE SECTION, IS REQUIRED TO BE READ INTO THE SECTION TO GIVE THE SE CTION A REASONABLE INTERPRETATION AND REQUIRES TO BE TREATED AX RETROSPECTIVE IN OPER ATION SO THAT A REASONABLE INTERPRETATION CAN BE GIVEN TO THE SECTION AS A WHO LE. THE AMENDED PROVISION OF SECTION 40(A)(IA) SHOULD BE INTERPRETED LIBERALLY A ND EQUITABLY AND APPLIES RETROSPECTIVELY FROM THE DATE OF INSERTION. ' IN VIEW OF ABOVE, THE IMPUGNED DISALLOWANCE OF RS. 74,54,822/- MAY PLEASE BE DELETED. ON PERUSAL OF THE AFORESAID SUBMISSION, IT IS CATEG ORICALLY DEMONSTRATED THAT ASSESSEE HIMSELF HAS REQUESTED THE LD. CIT(A) TO RE STRICT THE DISALLOWANCE TO 30% SINCE THE AMENDED PROVISION ARE APPLICABLE RETR OSPECTIVELY IN VIEW OF THE DECISION OF HONBLE SUPREME COURT AS REFERRED I N THE SUBMISSION OF THE ASSESSEE. THE ASSESSEE HAS FAILED TO FILE THE SUPP ORTING EVIDENCES OF INCLUDING THE PAYMENT BY NBFC IN THIS ACCOUNT AND P AYMENT OF TAXES THEREON. IN THE LIGHT OF THE ABOVE FACTS AND CIRC UMSTANCES, WE DO NOT FIND I.T.A NO. 2175/AHD/2018 A.Y. 2012-13 PAGE NO SMT. VIPIN SOMABHAI PUJARA VS. ACIT 7 ANY INFIRMITY IN THE DECISION OF LD. CIT(A), THEREF ORE, THE GROUNDS OF APPEAL 1.1 TO 1.3 ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23-08-2021 SD/- SD/- (MAHAVIR PRASAD) (AMARJIT SINGH) JUDICIAL MEMBER A CCOUNTANT MEMBER AHMEDABAD : DATED 23/08/2021 / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,