DCIT, Circle-4(2), Ahmedabad V. Shyam Shayona Buildcon, Ahmedabad

ITA 2330/AHD/2018

AI Insights

The case revolves around an appeal by the Revenue against the order of the CIT(A) which had deleted a disallowance made by the Assessing Officer (AO) under section 40(a)(ia) of the Income Tax Act, 1961. The disallowance pertained to a transaction involving the purchase of property by the assessee, Shyam Shayona Buildcon, without deduction of tax at source. The property was part of an auction conducted by ARCIL, following the financial troubles of M/s. Mardia Steel Ltd. The Tribunal examined whether the assessee was in default for not deducting TDS on the property purchase and whether the conditions of the proviso to section 201(1) were met, which would exempt the assessee from being considered in default.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133576 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-07-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 29-11-2018
• Other Referred Cases: CI vs. Valibhai Khanbhai Mankad Tax Appeal No.1182 of 2011
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R.B. TANK
• Keywords: TDS
• Section: 40(a)(ia); 201(1); 201

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘C’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No.2330/Ahd/2018 Assessment Year :2015-16 DCIT, Cir.4(2) Ahmedabad. Vs. Shyam Shayona Buildcon 1, Shayona Darshan Bungalow R.C. Technical Road Ghatlodiya Ahmedabad 380 061. PAN : ACOFS 8489 H Assessee by : Shri R.B. Tank, AR Revenue by : Shri A.P. Singh, CIT स ु नवाई क तार ख/D a t e o f H e a r i n g : 1 1 / 0 7 / 2 0 2 3 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t : 0 6 / 1 0 / 2 0 2 3 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER The present appeal has been filed by the Revenue against the order passed by the Commissioner of Income Tax (Appeals)-4, Ahmedabad (in short referred to as CIT(A)), dated 12.9.2018 passed under section 250(6) of the Income Tax Act, 1961 ("the Act" for short) pertaining to Assessment Year 2015-16. 2. At the outset itself, it was pointed out that solitary issue in the present appeal is with respect to disallowance made by the AO by invoking section 40(a)(ia) of the Act on account of non-deduction of tax at source on alleged transaction of purchase of property by the assessee amounting to Rs.38,62,82,055/-; 30% of which was accordingly disallowed by invoking the said section amounting to ITA No.2330/Ahd/2018 2 Rs.11,58,84,616/-. The ld.CIT(A) had deleted the aforesaid disallowance, aggrieved by which, the Revenue has come in appeal before us. 3. Drawing our attention to the facts of the case, it was pointed out that the AO had noted from the financial statement of the assessee that it had purchased land amounting to Rs.38,62,82,055/- without deduction of TDS. The assessee was confronted as to why it be not treated as ‘assessee-in-default’ of the same and disallowance be made on account of purchase of the said land. The assessee explained the facts and circumstances leading to the acquisition of this land worth Rs.38,62,82,055/- pointing out that this land was part of land admeasuring308171 sq.meters situated at village Vasana, Chachiawadi, Ahmedabad originally owned by M/s.Mardia Steel Ltd. (MSL); that MSL went into financial trouble and defaulted various loans taken by it from different banks, and therefore, the land in question was therefore taken over by Asset Reconstruction Company (India) Ltd.(ARCIL), in an arrangement under supervision of Hon’ble Gujarat High Court ,allowing the property in question to be disposed of to repay the debts of MSL; that accordingly, ARCIL conducted an auction of the saidproperty in the financial year 2013-14 under the SARFESI Act and in the auction M/s.Shayona Organisers P. Ltd. (SOPL) won the bid for a consideration of Rs.134.10 crores. Out of the same, SOPL was able to pay only Rs.27 crores upto June, 2014 and since it was unable to pay the balance, it approached M/s.Shri Rang Infrastructure P.Ltd. (SRIP) for help, who in turn paid Rs.28.53 crores on behalf of the SOPL to ARCIL during the assessment year 2013-14; that subsequently even SRIP was unable to arrange balance of the fund, and therefore to bail out SOPL, the assessee was formed which ITA No.2330/Ahd/2018 3 obtained financial investment, and it was agreed that the property initially awarded to SOPL be taken over by the assessee as a nominee of SOPL after discharging the liability of the later. To safeguard interest of SOPL and itself to the extent of the payment already made, the assessee entered into a MOU with ARCIL, SOPL and SRIP dated 25.6.2014 as per which the assessee was given right over the part of land measuring 89049 sq.meters for which purpose sale certificate was registered in accordance with SARFESI Rules. The value assigned of the part of the property was Rs.38,62,82,055/-on which stamp duty was paid by the assessee at Rs.1,89,28,500/-. The assessee therefore contended that the sum of Rs.38,62,82,055/- had not been paid by it, but in fact, had been paid by SOPL and SRIP which the assessee agreed to reimburse to them subsequently, and make complete payment of Rs.134 crores to ARCIL for the land which the SOPL had won the bid in auction. The assessee also contended that this Rs.38,62,82,055/- had been paid to a trust by the name of ARCIL Mardia Steel Ltd. which had accounted for all the receipts in its Profit & Loss account and paid taxes thereon, and therefore, assessee could not be treated as assessee-in-default. The assessee filed certificate of Accountant as provided in section 201(1) of the Act in support of its above contention. The assessee had also taken other arguments to the effect that it had not claimed the amount of Rs.38 crores asits expenses in P&L Account and therefore also there was no question of making any disallowance. The AO rejected all contentions of the assessee and made the impugned disallowance. Theld.CIT(A) however found merit in all the contentions of the assessee and allowed the appeal of the assessee. ITA No.2330/Ahd/2018 4 4. The Revenue has challenged the deletion of disallowance by the Ld.CIT(A) on two grounds • On finding the purchase to be not debited to the Profit & Loss account by the assessee • On finding the assessee to be not an assessee in default as per proviso to section 201 of the Act. 5. Ground No.1 & 2 raising the above grievance by the Revenue respectively reads as under: 1) that the Ld. CIT (A) has erred in law and on the facts in deleting the addition made on account of Disallowance u/s.40(a)(ia) of the IT Act 1961 amounting to Rs.11,58,84,616/- disregarding the assessee's claim expenditure in P&L A/c. 2) that the Ld. CIT (A) has erred in law and on the facts in holding that the assessee fulfills the conditions as laid down in section 201(1) of the Act and hence cannot be held as assessee-in-default disregarding the facts narrated in Assessment Order.” 6. We shall first be dealing with ground No.2. 7. In ground No.2 the Revenue has challenged the order of the Ld.CIT(A) deleting the disallowance of purchase of Rs.11.58 Crs u/s.40(a)(ia) of the Act holding that the disallowance was not tenable since the assessee was not an assessee in default as per the first proviso to section 201 of the Act. 8. We have gone through order of the ld.CIT(A) on the issue and we find that he held the assessee as not being an assessee-in-default as per proviso to section 201 of the Act finding that all conditions of the proviso stood fulfilled i.e the payee, ARCIL, had filed its return of income, included therein all receipts from the impugned transaction ITA No.2330/Ahd/2018 5 and had paid taxes due on the said income. And the assessee has filed a certificate of the accountant to this effect. 9. The Ld.CIT(A) also noted that all these facts were verified by the AO also. The relevant finding of the ld.CIT(A) at para 7.6& 7.7 is as under: “7.6 All the payments made by appellant to ARCIL has been shown as a part of receipt by the latter in terms of the proviso to section 201(1) which fact has also been acknowledged by the AO in assessment order page 9 & 10 hence, even on this count appellant cannot be held as assessee-in-default. The relevant part of the same is reproduced as below: "In this regard, the assesses has submitted details as under "The assessee would like to submit that the assessee has purchased the land from ARCIL, copy of deed has already been placed on records It is further to submit that consideration was accepted by the ARCIL on behalf of the trust created by him the assessee herewith attaches detailed sheet to clarify the payment made to them for your ready reference. 7.7 The appellant furnished certificate of the accountant as provided in section 201(1) of the Act as regards the fact that the amounts credited by the appellant to ARCIL in lieu of the sale agreement in question were taken into account by aRCIL in the relevant year. Copy of the said certificate was submitted by the appellant to the AO. ITA No.2330/Ahd/2018 6 10. The Revenue has not dispute the above facts. Their case for inapplicability of proviso to section 201 is that the recipient or the payee has not paid any taxes on such amount, and the certificate was provided only at the end of the final stage of the assessment, and hence was an after-thought. Both these contentions have been duly dealt by the ld.CIT(A) at para 7.7 of his order as under: 7.7 The appellant furnished certificate of the accountant as provided in section 201(1) of the Act as regards the fact that the amounts credited by the appellant to ARCIL in lieu of the sale agreement in question were taken into account by aRCIL in the relevant year. Copy of the said certificate was submitted by the appellant to the AO. AO has rejected the same for the reason that (a) trust has not paid any tax on such amount, and (b) the certificate produced was only at the final stage of assessment and hence, an afterthought. As per the first reason the requirement of proviso to section 201 is that the recipient should have furnished the return of income u/s.139 of the Act taken into account such sum for computing income in such return of income and should have paid tax on the income declared in such return of income. It is not the requirement that tax should have been paid on the receipts but such receipts should have been taken into account. It may happen that even after accounting such receipts the recipient incur losses or is not required to pay any tx, hence, if after taking into accunt such receipt appellant is not liable to pay any tx it cannot be said that the conditions of the proviso of section 201(1) are not fulfilled. For the sake of clarity the provisions of section 201(1) proviso 1 is reproduced as below: 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 payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax if such payee— (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 (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 prescribed57: Provided further that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax. Therefore, the certificate of the appellant cannot be disregarded for the reasons that no tax ultimately payable by the recipient. As regards the manner of furnishing the said certificates appellant contended that there is no time limit prescribed for furnishing such certificate and they had furnished the same to the AO when asked for. Appellant relied on the judgment of Hon’ble Gujarat High Court in the case of CI vs. ValibhaiKhanbhai Mankad Tax Appeal No.1182 of 2011 dated 01.10.2012. In this case the Hon’ble High Court was dealing with such certificate in relation to the deduction tax at source u/s.194C of the Act and held that in our view, therefore, once the condition of further proviso of section 194C(3) are satisfied, the liability of ITA No.2330/Ahd/2018 7 the payee to deduct tax at source would ease. The requirement of such payee to furnish details to the income tax authority in the prescribed form within prescribed time, would arise later and any infraction in such a requirement would not make the requirement of deduction at source applicable under sub-section (2) of section 194C of the Act. In our view, therefore the Tribunal was perfectly justified in taking the view in the impugned judgment. It may be that failure to comply such requirement by the payee may result into some other adverse consequences if so provided under the Act. However, fulfillment of such requirement cannot be linked to the declaration of tax at source. Any such failure therefore cannot be visualized by adverse consequences provided under section 40(a)(ia) of the Act.. I find that the ratio of above judgment is squarely applicable to the facts of the case at hand.” 11. A perusal of the above would reveal that the ld.CIT(A) held that the requirement of the proviso to section 201 is that the payee should have included the receipts in its income and paid due taxes on the same. He held that the proviso only requires the taxes due on the income to be paid which includes situations as that in the case of the assessee where after inclusion of income no taxes were required to be paid by the payee. The ld.DR was unable to point out any infirmity inthis finding of the ld.CIT(A). 12. Also on going through the provisions of law in this regard pertaining to section 201, 1 st proviso, we do not find any infirmity in the order of the Ld.CIT(A). We completely agree with him that the proviso only requires the payees to include receipts in its income and pay taxes due on the income. The argument of the Ld.DR that the payee should have paid taxes on the receipts compulsorily is, we hold, not in accordance with law. Therefore, we see no reason to disagree with the ld.CIT(A) with regard to the rejection of the AO’s finding in this regard. 13. With respect to the contention of the AO that the certificate was after-thought having been filed belatedly, the ld.CIT(A), we find, ITA No.2330/Ahd/2018 8 has relied upon the decision of jurisdictional High Court in the case of Valibhai Khanbhai Mankad (supra) wherein furnishing requisite certificate was held to be a procedural requirement and such failure could not be read adversely against the assessee for the purpose of section 40(a)(ia) of the Act. The ld.DR was unable to controvert the above finding of the ld.CIT(A) also. 14. Further during the course of hearing before us, the ld.counsel for the assessee filed an order dt . 30-03-2022 passed in the case of the assessee itself under section 201(1)/201(A) of the Act with respect to the impugned transaction, wherein he pointed out that the AO categorically held that the assessee was not an assessee-in- default for not having deducted TDS on the purchase of land worth Rs.38 crores from the ARCIL Mardia Trust. 15. In view of the uncontroverted finding of the ld.CIT(A) that the assessee had fulfilled all conditions prescribed under the proviso to section 201(1) to be treated as not an assessee in default, re- enforced by the order passed under section 201(1)/201(1A) of the Act holding the assessee not to be in default for not having deducted TDS on the said transaction,we find that the Revenue has no case before us challenging this finding of the Ld. CIT(A). We, therefore, see no reasons to interfere to the order of the ld.CIT(A) in deleting the disallowance of Rs.11,58,84,616/- u/s 40(a)(ia) of the Act finding the assessee to be not an assessee in default as per proviso to section 201 of the Act. Ground of appeal No.2 is dismissed. ITA No.2330/Ahd/2018 9 16. Since we have held the Ld.CIT(A) to have rightly deleted the disallowance made u/s 40(a)(ia) of the Act for the above reason, we do not consider it necessary to deal with the alternate basis for the CIT(A) for deleting the disallowance, finding the purchase to be not debited to the Profit and Loss account of the assessee, which has been challenged by the Revenue before us in Ground No.1. Ground No.1 is therefore not being adjudicated by us. 17. In the result, appeal of the Revenue is dismissed as above. Order pronounced in the Court on 6 th October, 2023 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad,dated 06/10/2023