ITO, Pune V. Shri Balaji Tukaram Gaikwad, Pune

ITA 2444/PUN/2012

• Counselvise Citation: 244424514 RSA 2012
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-04-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 11-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: C V CHITALE
• Keywords: Principle of natural justice
• Section: 143(3); 194C; 201(1); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.2444/PN/2012 (ASSESSMENT YEAR : 2006-07) INCOME TAX OFFICER, WARD 8 (2), PUNE. . APPELLANT VS. SHRI BALAJI TUKARAM GAIKWAD, AT POST TAKAWE BK, TAL. MAVAK, DIST. PUNE 412 106. PAN : AGAPG5637P . RESPONDENT C.O. NO.01/PN/2014 (ARISING OUT OF ITA NO.2444/PN/2012) (ASSESSMENT YEAR : 2006-07) SHRI BALAJI TUKARAM GAIKWAD, AT POST TAKAWE BK, TAL. MAVAK, DIST. PUNE 412 106. PAN : AGAPG5637P . CROSS OBJECTOR VS. INCOME TAX OFFICER, WARD 8 (2), PUNE. . APPELLANT IN APPEAL DEPARTMENT BY : SHRI S. P. WALIMBE ASSESSEE BY : SHRI C.V. CHITALE DATE OF HEARING : 26-06-2014 DATE OF PRONOUNCEMENT : 30-06-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE REVENUE AND THE CROSS- OBJECTION BY THE ASSESSEE IS DIRECTED AGAINST AN ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS)-V, PUNE DATED 06.09.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 20.12.2011 PASSED BY THE ASSESSING OFFICER U/ S 143(3) R.W.S. 148 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSM ENT YEAR 2006-07. ITA NO.2444/PN/2012 C.O. NO.01/PN/2014 2. IN THE APPEAL OF THE REVENUE, FOLLOWING GROUND O F APPEAL HAS BEEN RAISED :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE U /S 40(A)(IA) BY HOLDING THAT TDS DISALLOWANCE APPLIES ONLY TO AMOUNTS PAYABLE AS ON 31 ST MARCH AND NOT TO AMOUNTS ALREADY PAID DURING THE YEAR? 3. IN SO FAR AS THE CROSS OBJECTION OF THE CROSS-OB JECTOR/ASSESSEE, THE FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED :- A) WITHOUT CONSIDERING THE FACT THAT PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE FOR PAYMENT OF EXPENSES, THE ASS ESSING OFFICER HAS ERRED IN DISALLOWING PAYMENTS UNDER PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT. B) WITHOUT CONSIDERING THE PROVISIONS UNDER SECTION 28 OF THE INCOME TAX ACT, 1961 (THE ACT) ASSESSING OFFICER HA S ERRED IN DISALLOWING EXPENDITURE UNDER SECTION 40(A)(IA) OF THE ACT. C) WITHOUT CONSIDERING EXEMPTION FROM TDS PROVIDED UNDER SECTION 194C(6) FROM 01.06.2005 FOR TRANSPORTERS, A SSESSING OFFICER HAS ERRED IN NOT EXCLUDING PAYMENTS MADE TO CONTRACTORS WHO H AVE FURNISHED PAN AND HOLDING UPTO TWO GOODS CARRIAGES. D) WITHOUT CONSIDERING THE FACT THAT PAYMENT IS TOW ARDS REIMBURSEMENT OF EXPENSES, ASSESSING OFFICER HAS ER RED IN DISALLOWING SUCH PAYMENT. 4. SUBSTANTIVELY SPEAKING, IN BOTH THE APPEALS THE ISSUE REVOLVES AROUND A DISALLOWANCE OF RS.1,47,14,023/- MADE BY THE ASSESS ING OFFICER OUT OF TRANSPORTATION CHARGES BY INVOKING SECTION 40(A)(IA ) OF THE ACT. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRANSPO RT CONTRACTING. THE ASSESSING OFFICER NOTICED THAT OUT OF THE TOTAL TRA NSPORT CHARGES OF RS.1,59,70,200/- THE PROVISIONS OF SECTION 194C OF THE ACT WERE APPLICABLE WITH RESPECT TO A SUM OF RS.1,47,14,023/-. WITH RE SPECT TO THE AFORESAID AMOUNT THE ASSESSING OFFICER NOTED THAT ASSESSEE HA D FAILED TO DEDUCT THE REQUISITE TAX AS REQUIRED IN TERMS OF SECTION 194C OF THE ACT AND THEREFORE HAVING REGARD TO THE PROVISIONS OF SECTION 410(A)(I A) OF THE ACT, AN AMOUNT OF RS.1,47,14,023/- WAS DISALLOWED. ITA NO.2444/PN/2012 C.O. NO.01/PN/2014 5. THE AFORESAID DISALLOWANCE WAS CARRIED IN APPEAL BEFORE THE CIT(A). IN APPEAL ASSESSEE RAISED VARIOUS SUBMISSIONS WHICH, I NTER-ALIA, INCLUDED A PLEA THAT THE PROVISIONS OF SECTION 194C OF THE ACT WERE NOT APPLICABLE TO THE IMPUGNED TRANSACTIONS. THE ASSESSEE ALSO RELIED UP ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILY N SHIPPING AND TRANSPORT VS. ADDL. CIT, 70 DTR 81 FOR THE PROPOSITION THAT T HE DISALLOWANCE U/S 40(A)(IA) OF THE ACT WAS TO BE RESTRICTED TO ONLY THOSE AMOUN TS WHICH WERE OUTSTANDING FOR PAYMENT AS AT THE END OF THE RELEVANT PREVIOUS YEAR. ON THE BASIS OF THE SAID PROPOSITION, THE CIT(A) HAS RESTRICTED THE DIS ALLOWANCE TO RS.14,17,460/- ONLY, AS ACCORDING TO HIM, THE BALANCE OF THE EXPEN DITURE WAS ACTUALLY PAID DURING THE YEAR ITSELF. THE OTHER ISSUES RAISED BY THE ASSESSEE WERE HOWEVER DISMISSED. ACCORDINGLY, THE REVENUE IS IN APPEAL B EFORE US CHALLENGING THE ACTION OF THE CIT(A) IN RESTRICTING THE DISALLOWANC E U/S 40(A)(IA) OF RS.14,17,460/- WHEREAS THE ASSESSEE IS BY WAY OF TH E CROSS OBJECTION IS IN APPEAL BEFORE US ON THE AFORESTATED GROUNDS. 6. IN THE ABOVE BACKGROUND, WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNED DEPARTMENTAL REPRESENTATIVE AT THE TIME OF HEARING HAS REFERRED TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF VINAY ASHWINIKUMAR JONEJA VS. ITO VIDE ITA NO.1514/PN/2012 DATED 22.10 .2013 WHEREIN IT HAS BEEN HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE APPLICABLE EVEN ON SUMS WHICH ARE OUTSTANDING AT THE CLOSE OF THE YEAR AND ON WHICH ASSESSEE HAS NOT DEDUCTED AND DEPOSITED THE REQUISI TE TAX AT SOURCE. THE TRIBUNAL RELIED UPON THE JUDGEMENTS OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (ITAT 20 OF 2013) DATED 03.04.2013 AND THAT OF THE HONBLE GUJARAT HIGH COU RT IN THE CASE OF CIT VS. SIKANDAR KHAN N TUNVAR (TAX APPEAL NO.905 OF 2012 & OTHERS) DATED 02.05.2013, WHICH WERE CONTRARY TO THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSP ORT (SUPRA), AND HELD THE ISSUE AGAINST THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT ITA NO.2444/PN/2012 C.O. NO.01/PN/2014 DISPUTED THE AFORESAID POSITION. CONSEQUENTLY, IN ORDER TO MAINTAIN CONSISTENCY, FOLLOWING THE DECISION OF THE PUNE BEN CH OF THE TRIBUNAL IN THE CASE OF VINAY ASHWINIKUMAR JONEJA (SUPRA) THE ACTIO N OF THE CIT(A) IN ALLOWING RELIEF TO THE ASSESSEE BY FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSP ORT (SUPRA) HAS TO BE REVERSED. WE HOLD SO. 7. ONE OF THE PLEAS OF THE LEARNED COUNSEL BEFORE U S WAS THAT THE APPLICABILITY OF SECTION 194C OF THE ACT TO THE IMP UGNED SUM OF RS.1,47,14,023/- DESERVES TO BE APPRECIATED AND IN CASE THE ASSESSEE IS ABLE TO DEMONSTRATE THAT IT WAS NOT LIABLE TO DEDUCT THE TAX U/S 194C OF THE ACT AT ALL, THEN NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT WOULD BE MERITED. FOR THE SAID PURPOSE, A REFERENCE HAS BEEN MADE TO THE GROU NDS RAISED IN THE CROSS OBJECTION. APART THEREFROM, THE LEARNED COUNSEL HA S REFERRED TO A NEW PLEA, WHICH IS BASED ON THE SECOND PROVISO TO SECTION 40( A)(IA) OF THE ACT INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01.04.2013. IN TER MS OF THE SECOND PROVISO, IT IS PRESCRIBED THAT THE DISALLOWANCE U/S 40(A)(IA) O F THE ACT NEED NOT TO BE MADE IF THE ASSESSEE IS NOT DEEMED TO BE AN ASSESSE E IN DEFAULT IN TERMS OF THE FIRST PROVISO U/S 201(1) OF THE ACT. THE PLEA OF THE COUNSEL IS THAT IF THE AFORESAID PROVISO IS TO BE APPLIED RETROSPECTIVELY IT WOULD MITIGATE THE RIGORS OF SECTION 40(A)(IA) OF THE ACT IN THE PRESENT CASE. JUSTIFYING THE RETROSPECTIVE APPLICATION OF THE SAID PROVISO, IT IS SUBMITTED TH AT IT HAS BEEN INSERTED TO ELIMINATE UNINTENDED CONSEQUENCES WHICH MAY CAUSE U NDUE HARDSHIPS TO THE TAX PAYERS, AND THUS IT HAS TO BE CONSIDERED AS RET ROSPECTIVE IN OPERATION. IN SUPPORT, ANALOGY HAS BEEN DRAWN FROM THE FIRST PROV ISO TO SECTION 40(A)(IA) OF THE ACT INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01 .04.2013, WHICH HAS BEEN HELD TO BE RETROSPECTIVE BY THE HONBLE CALCUTTA HI GH COURT IN THE CASE OF CIT VS. VIRGIN CREATIONS VIDE ITA NO.302/2011 DATED 23. 11.2011 ON THE REASONING THAT IT WAS CLARIFICATORY IN NATURE AND WAS INTRODU CED BY THE LEGISLATURE TO ELIMINATE UNINTENDED CONSEQUENCES. IT HAS ALSO BEE N POINTED OUT THAT THE ITA NO.2444/PN/2012 C.O. NO.01/PN/2014 PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. M /S GAURIMAL MAHAJAN & SONS VIDE ITA NO.1852/PN/2012 DATED 06.01.2014 HAS CONSIDERED A SIMILAR PLEA AND FOLLOWING THE DECISION OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF ANTONY D. MUNDACKAL VS. ACIT VIDE ITA NO.38/COCH /2013 DATED 29.11.2013 HAS RESTORED THE ISSUE BACK TO THE FILE OF THE ASSE SSING OFFICER TO EXAMINE THE AFORESAID CONTENTION IN ACCORDANCE WITH LAW. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE APPEARIN G FOR THE REVENUE HAS NOT SERIOUSLY DISPUTED THE PLEA OF THE ASSESSEE FOR RESTORING THE MATTER BACK FOR ADJUDICATION ON MERITS WITH REGARD TO THE NEW PLEA. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN OUR CONSIDERED OPINION, THE ISSUES RELATING TO THE APPLICABILITY O F SECTION 194C OF THE ACT, AS CONTAINED IN THE GROUNDS RAISED IN THE CROSS OBJECT ION, AS ALSO THE FRESH PLEA RAISED BY THE ASSESSEE BEFORE US BASED ON THE SECON D PROVISO TO SECTION 40(A)(IA) OF THE ACT INSERTED BY THE FINANCE ACT, 2 012 W.E.F. 01.04.2013, DESERVE TO BE EXAMINED AFRESH ON THEIR MERITS. THE AFORESAID NEW PLEA HAS NOT BEEN EXAMINED BY THE LOWER AUTHORITIES, BECAUSE THEY DID NOT HAVE THE BENEFIT OF THE INSERTION OF SECOND PROVISO TO SECTI ON 40(A)(IA) OF THE ACT BY THE FINANCE ACT, 2012 W.E.F. 01.04.2013 BEFORE THEM. H ENCE, IN THE INTEREST OF NATURAL JUSTICE, WE ARE OF THE VIEW THAT THE AFORES AID CONTENTION ALONG WITH OTHER ISSUES RAISED BY THE ASSESSEE REGARDING THE A PPLICABILITY OF SECTION 194C ITSELF DESERVE TO BE EXAMINED AT THE LEVEL OF THE A SSESSING OFFICER. ACCORDINGLY, WHILE WE SET-ASIDE THE ORDER OF THE CI T(A) ALLOWING PART RELIEF TO THE ASSESSEE; HOWEVER, ON THE OTHER ASPECTS AS AFOR ESAID, THE MATTER IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTIONS TO EXAMINE CONTENTIONS OF THE ASSESSEE AND DECIDE THE SAME IN ACCORDANCE WITH LAW, OFCOURSE AFTER AFFORDING THE ASSESSEE NECESSARY OPP ORTUNITY OF BEING HEARD. IN CASE, THE ASSESSING OFFICER IS SATISFIED WITH TH E CONTENTIONS OF THE ASSESSEE HE SHALL ALLOW APPROPRIATE RELIEF; AND, IN CASE HE IS NOT SATISFIED THEN HE SHALL ITA NO.2444/PN/2012 C.O. NO.01/PN/2014 BE AT LIBERTY TO PROCEED IN ACCORDANCE WITH LAW TO MAKE THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT. 10. IN THE RESULT, THE CROSS OBJECTION OF THE ASSES SEE IS ALLOWED FOR STATISTICAL PURPOSES. 11. RESULTANTLY, WHEREAS THE APPEAL OF THE REVENUE IS ALLOWED THAT OF THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 30 TH JUNE, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE