M/s. Stitchwell Garments , Ahmedabad V. The Income Tax Officer, Ward-6(4), Ahmedabad

ITA 2559/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9305 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-01-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 30-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Retrospective amendment
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NOS: 2559 & 2560/AHD/2013 (ASSESSMENT YEAR: 2006-07 & 2007-08) M/S. STITCHWELL GARMENTS 2011/B, GIDC, PHASE-IV, VATVA, AHMEDABAD V/S INCOME TAX OFFICER, WARD- 6 (4), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAJFS0523P APPELLANT BY : SHRI M. K. PATEL, AR RESPONDENT BY : SHRI K. MADHUSUDAN, SR. D.R. ( )/ ORDER DATE OF HEARING : 25 -01-201 7 DATE OF PRONOUNCEMENT : 31 -01-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. ITA NOS. 2559 & 2560/AHD/2013 ARE TWO APPEALS BY TH E ASSESSEE PREFERRED AGAINST TWO SEPARATE ORDERS OF THE LD. CIT(A)-XI, A HMEDABAD DATED 13.09.2013 PERTAINING TO A.YS. 2006-07 & 2007-08. A S COMMON ISSUES ARE ITA NOS. 255 9 & 2560/AHD/2013 . A.YS. 2006- 07 & 2007-08 2 INVOLVED IN BOTH THESE APPEALS, THEY WERE HEARD TOG ETHER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE . 2. THE COMMON GRIEVANCE IN BOTH THESE APPEALS RELATE T O THE DISALLOWANCE OF FREIGHT CHARGES OF RS. 64,06,319/- AND 60,53,860/- RESPECTIVELY MADE U/S. 40(A)(IA) OF THE ACT. 3. THE COMMON PLEA OF THE ASSESSEE IN BOTH THESE APPEA LS IS THAT THE AMENDMENT TO SECTION 40(A)(IA) BY FINANCE ACT OF 20 12 WITH EFFECT FROM 01.04.2013 BY INSERTING SECOND PROVISO IS CURATIVE IN NATURE AND HAVE RETROSPECTIVE APPLICATION. 4. THE OTHER COMMON GRIEVANCE RELATE TO THE DISALLOWAN CE OF COMMISSION PAYMENT OF RS. 1,82,527/- AND 1,77,527/-. AT THE VE RY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT HE IS NOT PRES SING THE COMMON GRIEVANCE RELATING TO THE DISALLOWANCE OF COMMISSIO N. THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED FOR THE BOTH THE YEARS UNDER CONSIDERATION. 5. THE ONLY GRIEVANCE THAT SURVIVES NOW RELATES TO THE DISALLOWANCE OF FREIGHT CHARGES. 6. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS PAID FREIGHT CHARGES TO VARIO US PARTIES. THE DETAILS OF TDS RETURNS IN FORM NO. 26Q WERE CROSS VERIFIED BY THE A.O. AND FOUND THAT ITA NOS. 255 9 & 2560/AHD/2013 . A.YS. 2006- 07 & 2007-08 3 THE ASSESSEE HAS TAKEN SHELTER BEHIND CBDT CIRCULAR NO. 723 CLAIMING THAT NO TDS WAS TO BE MADE IN RESPECT OF THE IMPUGNED PA YMENTS. 7. THE A.O. FURTHER VERIFIED FROM THE DETAILS OF THE P AYEES AND FOUND THAT PAYMENTS MADE TO ACE SHIPPING PVT. LTD CAN ONLY BE CONSIDERED AS THE RIGHT CLAIM OF THE ASSESSEE FOR NON-APPLICATION OF THE TD S PROVISIONS. IN RESPECT OF THE OTHER PAYEES, THE A.O. WAS OF THE FIRM BELIE F THAT THE PROVISIONS OF TDS SQUARELY APPLY ON THE FACTS OF THE CASE AND ACC ORDINGLY MADE DISALLOWANCE OF RS. 64,06,319/- IN A.Y. 2006-07 AND RS. 60,53,860/- IN A.Y. 2007-08. BEFORE US, THE LD. COUNSEL FOR THE ASSESSE E REITERATED ITS CLAIM THAT THE AMENDMENT TO SECTION 40(A)(IA) BY THE FINANCE A CT OF 2012 HAS A RETROSPECTIVE APPLICATION. FOR THIS PROPOSITION, ST RONG RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ANSAL LAND MARK TOWNSHIP P. LTD. IN 377 ITR 635. 8. PER CONTRA, THE LD. D.R. STRONGLY PLACED RELIANCE O N THE ORDERS OF THE REVENUE AUTHORITIES. 9. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE FIND FORCE IN THE CONTENTION OF THE LD. C OUNSEL. WE FIND THAT WITH THE INSERTION OF THE SECOND PROVISO TO SECTION 40(A )(IA), IF THE PAYEES HAVE FILED INCOME TAX RETURN AND HAS OFFERED THE SUM REC EIPT FOR TAXATION, NO DISALLOWANCE OF THE SUM IS JUSTIFIED. THE HONBLE HIGH COURT OF DELHI IN THE CASE OF ANSAL LAND MARK TOWNSHIP P. LTD (SUPRA) HAD THE OCCASION TO CONSIDER THIS ISSUE AND THE SAME READS AS UNDER:- ITA NOS. 255 9 & 2560/AHD/2013 . A.YS. 2006- 07 & 2007-08 4 SECTION 40(A)(IA) OF THE INCOME-TAX ACT, 1961, IS AIMED AT ENSURING THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION IN T HE HANDS OF AN ASSESSEE IN A SITUATION IN WHICH INCOME EMBEDDED IN SUCH EXPENDIT URE HAS REMAINED UNTAXED DUE TO TAX WITHHOLDING LAPSES BY THE ASSESSEE. IT I S NOT A PENALTY FOR TAX WITHHOLDING LAPSE BUT IT IS A SORT OF COMPENSATORY DEDUCTION RESTRICTION FOR AN INCOME GOING UNTAXED DUE TO TAX WITHHOLDING LAPSE. THE INSERTION OF THE SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CUR ATIVE IN NATURE AND IT HAS RETROSPECTIVE EFFECT FROM APRIL 1, 2005, BEING THE DATE FROM WHICH SUB-CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY THE FINANCE (NO. 2 ) ACT, 2004. THE FIRST PROVISO TO SECTION 201(1) OF THE ACT HAS BEEN INSERTED TO B ENEFIT THE ASSESSEE. IT ALSO STATES THAT WHERE A PERSON FAILS TO DEDUCT TAX AT SOURCE O N THE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO THE ACCOUNT OF A RESIDENT, S UCH PERSON SHALL NOT BE DEEMED TO LIE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TA X IF SUCH RESIDENT HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139. WHAT IS COM MON TO BOTH PROVISOS TO SECTIONS 40(A)(IA) AND 201(1) OF THE ACT IS THAT AS LONG AS THE PAYEE OR RESIDENT HAS FILED ITS RETURN OF INCOME DISCLOSING THE PAYME NT RECEIVED BY AND IN WHICH THE INCOME EARNED BY IT IS EMBEDDED AND HAS ALSO PAID T AX ON SUCH INCOME, THE ASSESSEE WOULD NOT BE TREATED AS A PERSON IN DEFAUL T. HELD, DISMISSING THE APPEAL, THAT THE PAYEES HAD FI LED RETURNS AND OFFERED THE SUMS RECEIVED TO TAX. NO DISALLOWANCE COULD BE MADE UNDER SECTION 40(A)(IA). 10. AS NO DISTINGUISHING DECISION HAS BEEN BROUGHT ON R ECORD, RESPECTFULLY FOLLOWING THE FINDINGS OF THE HONBLE HIGH COURT (S UPRA), WE DIRECT THE A.O. TO VERIFY WHETHER THE PAYEES HAVE OFFERED THE IMPUG NED SUM IN THEIR RESPECTIVE RETURNS OF INCOME AND IF FOUND SO, NO DI SALLOWANCE NEED TO BE MADE U/S. 40(A)(IA) OF THE ACT. 11. THE MATTER IS RESTORED TO THE FILES OF THE A.O. FO R THIS LIMITED PURPOSE OF VERIFICATION. ITA NOS. 255 9 & 2560/AHD/2013 . A.YS. 2006- 07 & 2007-08 5 12. IN THE RESULT, THE APPEALS ARE TREATED AS ALLOWED S UBJECT TO ABOVE DIRECTIONS. ORDER PRONOUNCED IN OPEN COURT ON 31 - 01- 20 17 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 31/01/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD