AADI Associates, Bhubaneswar V. ITO, Bhubaneswar

ITA 262/CTK/2011

• Counselvise Citation: 26222114 RSA 2011
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 13-05-2011
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: B R PATTNAIK
• Section: 194C

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 262/CTK/2011 (ASSESSMENT YEAR 2007 - 08) AADI ASSOCIATES, PLOT NO.S - 3/18,SECTO R A, ZONE B, MANCHESWAR INDUSTRIAL ESTATE, RASULGARH, BHUBANESWAR 751 010 PAN: AANFA 7283 J VERSUS INCOME - TAX OFFICER, WARD 2(2), BHUBANESWAR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI B.R.PATTNAIK, AR FOR THE RESPONDENT SMT. PARAMITA TRIPATHY, DR ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE AGITATES THE ACTION OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IN CONFIRMING THE DISALLOWANCE OF EXPENSES CLAIMED UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE I.T.ACT ,1961 RELATING TO NON - DEDUCTION OF TAX ON PAYMENTS AS A TRANSPORT CONTRACTOR. 2. THE BRIEF FACTS RELATING TO THE DISPUTE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND CONDUCTS TRANSPORT BUSINESS. IT CARRIES TRANSPORTATION WORKS FOR SHRI J.N.PATTNAIK OF K EONJHAR FOR TRANSPORTING IRON ORE FROM MINES AT KORA CENTRE TO PARADEEP PORT. THE ASSESSEE FILED RETURNED OF INCOME SHOWING 1,61,214 CLAIMING REFUND OF 6,92,707.NOTICE U/S.147/148 WAS ISSUED WHEN THE ASSESSING OFFICER SOUGHT TO HOLD THAT INCOME HAD ESCAP ED ASSESSMENT AS THE ASSESSEE HAD RECEIVED TRANSPORT WORKS ORDERS OF 3.32 CRORES FROM SHRI J.N.PATANAIK OF KEONJHAR TOWARDS EXECUTION OF TRANSPORT CONTRACT H AD NOT DEDUCTED TAX AT SOURCE WHEN THE PAYMENTS WERE MADE. HE OBSERVED THAT THE ASSESSEE HAD DEDUC TED 4,73,620 ON 31.3.2007 AND DEPOSITED THE SAID SUM INTO CENTRAL GOVERNMENT ACCOUNT ON 25.10.2007 WHICH WAS NOT IN COMPLIANCE TO THE PROVISIONS OF SECTION 40(A)(IA) R.W.S. 194C OF THE I.T.ACT. IN HIS ORDER, THE ASSESSING OFFICER HAS NOTED THE PAYMENTS OF CREDITS AVAILED WHEN THE ITA NO.262/CTK/2011 2 ASSESSEE EXECUTED THE CONTRACT WORKS RENDERING INCOME OF 1,61,214. HE DISALLOWED THE PAYMENT OF RS,2,75,00,000 U/S.40(A)(IA) WHICH WAS APPEALED AGAINST BEFORE THE FIRST APPELLATE AUTHORITY. THE FIRST APPELLATE AUTHORITY IN HIS EL ABORATE ORDER TRIED TO CONSIDER THE CASE OF THE ASSESSING OFFICER TO SUMMARIZE THAT NO DEFECT COULD BE ESTABLISHED BY THE ASSESSEE APPELLANT BEFORE HIM TO WARRANT INTERFERENCE WITH THE ORDER OF THE ASSESSING OFFICER. THE DETAIL GROUNDS RAISED BEFORE HIM HA D NO MERIT INSOFAR AS THE LEARNED CIT(A) ELABORATELY CONSIDERED THE VARIOUS GROUNDS ON THE BASIS OF SYSTEM OF ACCOUNTING TO FACT FINDING THAT THE INTERPRETATION OF LAW REGARDING TAX DEDUCTIBLE ON THE EXPENSES CLAIMED WAS A VIEW TAKEN BY HIM DID NOT COMPLY TO THE DEFAULT COMMITTED BY THE ASSESSEE. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND VIOLATED THE BASIC PRINCIPLES OF JUDICIAL DECORUM BY COMPLETELY DISREGARDING T HE DECISIONS OF JURISDICTIONAL T RIBUNAL O N SIMILAR ISSUES BROUGHT TO HIS NOTICE BY THE ASSESSEE WHILE CONFIRMING THE DISALLOWANCE OF 2,75,00,000 U/S 40(A)(IA). HE HAS GROSSLY ERRED IN LAW IN NOT DEALING WITH THE CASE LAWS CITED BY THE ASSESSEE EVEN THOUGH THE FACTS OF THE ASSESSEES CASE AND THE CASE LAWS CITED BY THE ASSESSEE ARE IDENTICAL IN ALL RESPECTS AND WHEN THE RATIO OF THE SA ID CASES SHOULD HAVE BEEN FOLLOWED WHILE DECIDING THE ASSESSEES CASE. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT WHEN DEDUCTION OF TAX IS MADE DURING THE LAST MONTH OF THE PREVIOUS YEAR, NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT IS ENVISAG ED IF THE TAX IS DEPOSITED ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. HE SUBMITTED THAT THE LEARNED CIT(A) ERRED IN LAW IN NOT DEALING WITH THE SUBMISSION OF THE ASSESSEE THAT IN VIEW OF THE AFFIRMATION BY THE LEGISLATURE THROUGH TH E MEMORAND UM TO THE FINANCE BILL, 2010 AS TO WHAT IS THE CURRENT LAW PERTAINING TO SECTION 40(A)(IA) WHICH CLEARLY STIPULATES THAT NO ITA NO.262/CTK/2011 3 DISALLOWANCE CAN BE MADE WHEN DEDUCTION OF TAX IS MADE DURING THE LAST MONTH OF THE PREVIOUS YEAR AND THE DEDUCTED TAX IS DEPOSITED ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. THE LEARNED CIT(A) THEREFORE WAS NOT JUSTIFIED IN CONFIRMING THE D ISALLOWANCE OF RS.2,75,00,000 U/S 40(A)(IA) OF THE ACT WITHOUT CONSIDERING THE SUBMISSION OF THE ASSESSEE THAT NO DISALLOWANCE SHOU LD BE MADE IN THE IN VIEW OF DECISIONS OF JURISDICTIONAL AS WELL AS OTHER BENCHES OF ITAT [(I.E. ITAT, CUTTACK IN THE CASE OF VIJAYLAXMI PM. LTD. V. DY. CIT AND PRAMILA MINING & ALLOYS PM. LTD. V. ACIT, DELHI BENCH - C OF ITAT IN THE CASE OF H.S. MOHINDRA TRAD ERS V. INCOME - TAX OFFICER, CHENNAL BENCH OF ITAT IN THE CASE OF R.S.SURIYA V. DY. CIT, BANSAL PARIVAHAN (INDIA) (P.) LTD V. INCOME - TAX OFFICER ITAT MUMBAI BENCH - B, MUMBAI B BENCH OF ITAT IN THE CASE OF BAPUSHAEB NANASAHEB DHUMAL V. ACIT IN IT APPEAL NO.6 628/MUM12009. THE LEARNED CIT(A) IS NOT JUSTIFIED TO REJECT THE STAND OF THE ASSESSEE THAT AMENDMENT TO SECTIO N 40(A)(IA) MADE VIDE FINANCE AC T,2010 IS CURATIVE IN NATURE AND ACCORDINGLY OPERATES RETROSPECTIVELY W.E.F 01.04.2005. THE LEARNED COUNSEL FOR TH E ASSESSEE SUBMITTED THAT NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT IS PERMISSIBLE BECAUSE THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND ACTUAL TRANSPORTERS. IF AT ALL THERE EXISTED ANY CONTRACT BETWEEN ASSESSEE AND ACTUAL TRANSPORTERS, IT CAN NEVER BE DEE MED TO HAVE EXISTED DURING DEC06 TO FEB07. THE LEARNED CIT(A) IS NOT JUSTIFIED IN REJECTING CONTENTION OF THE ASSESSEE THAT ASSESSING OFFICER HAD REJECTED APPELLANTS REPLY DATED 19.11.2009 BY PASSING A NON - SPEAKING ORDER WITHOUT ASSIGNING ANY VALID REAS ONS. HE IS ALSO NOT JUSTIFIED TO REJECT THE CONTENTION OF THE ASSESSEE THAT PAYMENT OF A SUM CANNOT BE EQUATED WITH EXPENDITURE OF THE SAME AMOUNT AND THAT NO DISALLOWANCE CAN BE MADE WHEN THERE HAS BEEN NO LOSS OF REVENUE TO THE STATE AND THE OBJECTIVES O F SECTION 40(A)(IA) HAVE BEEN COMPLIED WITH. THE LEARNED AR OF THE ASSESSEE ITA NO.262/CTK/2011 4 CONTENDED THAT THE STATE CANNOT UNJUSTLY ENRICH ITSELF PURELY ON TECHNICAL GROUND. HE FURTHER ARGUED THAT THE PROVISIONS OF SECTION 40(A)(IA) IS NOT APPLICABLE WHEN AMOUNT HAS ALR EADY BEEN PAID AND IT IS ONLY APPLICABLE WHEN THE AMOUNT IS PAYABLE. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE IN VIEW OF THE PROVISIONS OF SUB - SECTION (6) OF SECTION 194C WHICH OPERATES RETROSPEC TIVELY BEING CURATIVE IN NATURE. 4. THE LEARNED DR SUPPORTED THE ORDER OF THE LEARNED CIT(A) BY INDICATING THAT THE AMOUNT WHICH THE ASSESSEE CLAIMED AS EXPENSES WAS TO SUFFER DEDUCTION OF TAX AT SOURCE AT THE THRESHOLD AND THEREFORE COULD NOT BE POSTPONED TO THE FACT THAT THE LAW PROVIDED FOR DEDUCTION OF TAX AT SOURCE IN THE MONTH OF MARCH BEING THE LAST MONTH OF THE FINANCIAL YEAR WAS TO BE CONSID ERED FOR PAYMENT TO THE GOVERNMENT ACCOUNT BEFORE THE DUE DATE OF FILING OF THE RETURN. THE DEEMING PROVISION S OF SECTION 40(A)(IA) WERE THEREFORE RIGHTLY INVOKED BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 147/148 WHEN THE LEARNED CIT(A) NOTED THAT THE GROUNDS RAISED BEFORE IT WERE TO BE DEALT WITH ON THE INTERPRETATION OF THE LAW WHICH FACTS WERE A LREADY SETTLED BY THE ASSESSING OFFICER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE UNABLE TO SATISFY OURSELVES TO THE FACT FINDING AS ENUMERATED BY THE LEARNED CI T(A) IN HIS DETAILED ORDER. THE LEARNED CIT(A) IN A WAY HAS TRIED TO SPELL OUT THE ACCOUNTING TREATMENT GIVEN BY THE ASSESSEE TO CLAIM THE EXPENSES WHICH WAS NEVER THE ISSUE BEFORE THE ASSESSING OFFICER. IN FACT THIS WAS AN ISSUE CLARIFIED BY THE CBDT DIRE CTING THE ASSESSING OFFICER TO CONSIDER THE HARDSHIP FACED BY THE ASSESSEES FOR DEDUCTION OF TAX AT SOURCE BY TAKING INTO CONSIDERATION WHERE THE AMOUNT WAS SUBJECT ED TO TAX AT SOURCE IN THE COMING ELEVEN ITA NO.262/CTK/2011 5 MONTHS. THE CASE LAWS CITED BY THE LEARNED COUNSEL BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE LEARNED CIT(A) ARE THEREFORE, DIRECTLY APPLICABLE TO THE ASSESSEES CASE INSOFAR AS THE VARIOUS AMENDMENTS IN THE SAID SECTION 40(A)(IA) RELATED TO THE CONSIDERATION OF THE FACT THAT THE TAX CREDIT AVAILA BLE TO THE CONTRACTEES WAS TO BE AVAILABLE IN THE LAST MONTH OF THE FINANCIAL YEAR WHEN THE TAX DEDUCTION CERTIFICATE WAS ISSUED. THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US HAS SUBMITTED THAT THE REMEDY OF NON - DEDUCTION OF TAX AT SOURCE ON THE QUARTERL Y PAYMENT HAD ALREADY SUFFERED IN TEREST AND TOKEN PENALTY U/S.201 AGAINST WHICH THE ASSESSING OF FICER AND THE LEARNED CIT(A) HAVE NOT MADE ANY OBSERVATION. THE VERY CASE LAWS THEREFORE LEAN IN FAVOUR OF THE FACTS AS CONSIDERED BY THE ASSESSING OFFICER AND THE LEARNED CIT(A) THAT THE ASSESSEE HAD COMPLIED TO DEDUCTION OF TAX AT SOURCE ON THE PAYMENTS MADE UP TO THE END OF ELEVEN MONTHS IN THE TWELFTH MONTH OF THE FINANCIAL YEAR WHICH HE WAS ENTITLED TO DEPOSIT BEFORE THE DUE DATE OF FILING OF THE RETURN UND ER THE PROVISIONS OF SECTION 139(1). IN THE PAPER BOOK FILED BY THE ASSESSEE, THE DOCUMENTS RELATING TO SUCH PAYMENTS AND THE VARIOUS COMPILATIONS OF CASE LAWS HAVE BEEN GIVEN WHICH HAVE NOT BEEN CONTROVERTED BY THE LEARNED DR. THE LEGISLATION NEVER INTEND S THAT DISALLOWANCE WILL BE MADE IN RESPECT OF EXPENDITURE BY INTERPRETING THE WORD THE TAX WAS DEDUCTIBLE AND AS SO DEDUCTED DURING THE LAST DAY OF THE PREVIOUS YEAR AS PER SUB - CLAUSE ( A ) OF SECTION 40(A)(IA) IN THE AFORESAID MANNER, OTHERWISE A SUITA BLE PROVISION UNDER THE PROVISIONS OF SUB - CLAUSE (A) OF SECTION 40(A)(IA) OF THE ACT COULD HAVE BEEN MADE FOR ALLOWING IT IN THE SUBSEQUENT YEAR ON DEPOSIT OF DEFAULTED TDS. IN OTHER WORDS, THE PROVISIONS OF SECTION 194C HAD TO BE INVOKED FIRST FOR CONSIDE RING THE DEEMING PROVISIONS OF SECTION 40(A)(IA) THEREFORE SETTLES THE ISSUE IN CHAPTER XVI I ITSELF , WHICH HAS BEEN ACCEPTED BY THE ASSESSEE NOT TO BE FURTHER CONSIDERED FOR DISALLOWANCE ON THE ITA NO.262/CTK/2011 6 INTERPRETATION OF THE PROVISIONS OF SECTION 40(A)(IA) AN D THAT TOO U/S.147/148. THEREFORE, THE LEARNED CIT(A) MISDIRECTED HIMSELF TO CONSIDER THE NATURE OF ACCOUNTING ENTRIES REQUIRING SUCH DEDUCTION OF TAX AT SOURCE WHICH HAD ALREADY BEEN ADJUDICATED UPON BY THE ASSESSING OFFICER OF TDS CIRCLE. THE AMOUNT OF D ISALLOWANCE OF 2,75,00,000 IS THEREFORE UNJUSTIFIED AND WITHOUT ANY BASIS. FOR THE REASONS AFORESAID, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND DIRECT THE ADDITION OF 2,75,00,000 MADE ON THIS ACCOUNT TO BE DELETED. 6. IN THE RESULT, THE A PPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN OPEN COURT ON DT. 5 TH AUGUST, 2011 S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 5 TH AUGUST, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE OR DER FORWARDED TO : 1. THE APPELLANT: AADI ASSOCIATES, PLOT NO.S - 3/18,SECTOR A, ZONE B, MANCHESWAR INDUSTRIAL ESTATE, RASULGARH, BHUBANESWAR 751 010 2. THE RESPONDENT: INCOME - TAX OFFICER, WARD 2(2), BHUBANESWAR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.