M/s. Jigna Construction, Baroda V. The Income Tax Officer, Ward-3(1), Baroda

ITA 3019/AHD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89589 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 14-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: TUSHAR HEMANI
• Keywords: Business income; Rectification of order; Retrospective amendment; Question of law; Wrong claim
• Section: 154; 139; 143(3)

Judgement Text

I.T.A. NO.: 3019 (AHD) OF 2014 ASSESSMENT YEAR: 2007 - 08 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S.S. GODARA JM ] I.T.A. NO.: 3019 (AHD) OF 201 4 ASSESSMENT YEAR: 2007 - 08 JIGNA CONSTRUCTION . ......... ...... .... APPELLANT D 43, PRABHUKRIPA SOCIETY NEW SAMA ROAD, VADODARA 390 008 [PAN: AACFJ6589R ] VS. INCOME TAX OFFICER WARD 3(1) , VADODARA . .RESPONDENT APPEARANCES BY: TUSHAR HEMANI , FOR THE APPELLANT SONIA KUMAR , FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : JULY 2 , 201 5 D ATE OF PRONOUNCING THE ORDER : JULY 7 , 201 5 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL , THE APPELLANT HAS CALLED INTO QUESTION THE CORRECTNESS OF ORDER DATED 6 TH AUGUST 2014 PASSED BY THE LEARNED CIT(A), IN THE MATTER OF RECTIFICATION UNDER SECT ION 154 R.W.S. 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT Y EAR 2007 - 08. 2. THE SHORT QUESTION THAT WE ARE REQUIRED TO ADJUDICATE IN THIS APPEAL IS WHETHER OR NOT THE CIT(A) WAS JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DEC LINING TO DELETE, IN THE COURSE OF RECTIFICATION PROCEEDINGS UNDER SECTION 154 OF THE ACT, THE DISALLOWANCE OF RS 97,38,134 UNDER SECTION 40(A)(IA) EVEN THOUGH THE TAX DEDUCTED AT SOURCE FROM THESE PAYMENTS WAS ADMITTED PAID WELL BEFORE THE TIME OF FILING INCOME TAX RETURN UNDER SECTION 139(1). I.T.A. NO.: 3019 (AHD) OF 2014 ASSESSMENT YEAR: 2007 - 08 PAGE 2 OF 7 3. TO ADJUDICATE ON THIS ISSUE, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE BEFORE US IS A CONTRACTOR. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED TH AT THE ASSESSEE HAS MADE PAYMENTS FOR CONSTRUCTION AND TRANSPORTATION CHARGES AGGREGATING TO RS 97,38,134 BUT THE TAXES DEDUCTED AT SOURCE FROM THESE PAYMENTS HAVE BEEN DEPOSITED ONLY ON 5 TH MAY 2007 WHICH WAS, IN ACCORDANCE WITH THE PROVISIONS OF SECTION 200(1) R.W.R. 30 OF THE INCOME TAX RULES, BEYOND THE TIME PERMITTED FOR DEPOSITING THE TAXES SO DEDUCTED AT SOURCE. THE ASSESSING OFFICER FURTHER NOTED THAT THE DISALLOWANCE UNDER SECTION 40(A)(IA), IN ACCORDANCE WITH THE LAW AS IT STOOD AT THE MATERIAL PO INT OF TIME, COMES INTO PLAY WHEN THE TAX SO DEDUCTED HAS NOT BEEN PAID (A) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR, ON OR BEFORE THE DUE DATE SPECIFIED IN SUB - SECTION (1) OF SECTION 139; OR (B ) IN ANY OTHER CASE, ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR . ACCORDINGLY, A DISALLOWANCE OF RS 97,38,134 WAS MADE UNDER SECTION 40(A)(IA). SUBSEQUENTLY, HOWEVER, THE ASSESSING OFFICER MOVED A RECTIFICATION PETITION POINTING OUT THAT THE AMENDMENT IN SECTION 40(A)(IA), WHICH PROVIDED THAT THE DISALLOWANCE UNDER SECTION 40(A)(IA) COMES INTO PLAY ONLY WHEN THE TAX DEDUCTED HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB - SECTION (1) OF SECTION 139 , HAS BEEN HELD TO BE RETROSPECTIVE IN EFFE CT, COVERING THE RELEVANT ASSESSMENT YEAR AS WELL. THE ASSESSING OFFICER REJECTED THIS PETITION. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN APPEAL BEFORE US. 4. WE H AVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 5. AS THE THINGS STAND NOW, IT IS NOT IN DISPUTE, IN THE LIGHT OF A SERIES OF JUDGMENTS OF HONBLE JU RISDICTIONAL HIGH COURT, THAT THE AMENDMENT BROUGHT I.T.A. NO.: 3019 (AHD) OF 2014 ASSESSMENT YEAR: 2007 - 08 PAGE 3 OF 7 TO SECTION 40(A)(IA), WHICH HAS BEEN RELIED UPON BY THE ASSESSEE, IS ONLY CLARIFICATORY IN NATURE AND IT WILL ALSO APPLY TO THE ASSESSMENT YEARS PRIOR TO THE ASSESSMENT YEARS 2010 - 11 AS WELL. IN THE CASE OF CIT VS OMPRAKASH R CHAUDHURY & OTHERS (TA NO. 412 OF 2013; JUDGMENT DATED 22 ND NOVEMBER 2013), HONBLE JURISDICTIONAL HIGH COURT HAS, INTER ALIA , OBSERVED AS FOLLOWS: .CONSIDERING RELEVANT LEGISLATIVE CHANGES MADE BY THE PARLIAMENT FROM TIME TO TIM E AND SOME OF THE DECISIONS RELEVANT TO CONSIDER THE QUESTION OF RETROSPECTIVITY RAISED IN THESE PRESENT APPEALS, THE FOCAL QUESTION, THEREFORE, WOULD BE WHETHER THE AMENDMENT BROUGHT ABOUT BY WAY OF FINANCE ACT 2010 IN SECTION 40(A)(IA) WITH EFFECT FROM 1 ST APRIL 2010 COULD BE SAID TO BE CLARIFICATORY IN NATURE FOR ATTENDING TO UNINTENDED CONSEQUENCES, AND, THEREFORE, IS HAVING RETROSPECTIVE EFFECT FROM 1 ST APRIL 2005 . .. FROM THE DISCUSSIONS HELD HEREINABOVE, WE ANSWER THE SUBSTANTIAL QUESTION OF LAW RAISED IN THESE APPEALS IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY HOLDING THAT THE AMENDMENT MADE IN SECTION 40(A)(IA) OF THE ICOE TAX ACT, 1961, AS RETROSPECTIVE IN OPERATION HAVING EFFECT FROM 1 ST APRIL 2005, I.E. FROM THE DATE OF INSER TION OF SECTION 40(A)(IA) OF THE ACT. 6. CLEARLY, THEREFORE, THE IMPUGNED ORDER DATED 10 TH DECEMBER 2013 PASSED BY THE ASSESSING OFFICER, DECLINING RECTIFICATION UNDER SECTION 154, WAS CONTRARY TO THE LAW SETTLED BY HONBLE JURISDICTIONAL HIGH COURT . ONCE HONBLE JURISDICTIONAL HIGH COURT HOLDS THAT AN AMENDMENT WILL HAVE RETROSPECTIVE EFFECT FROM 1 ST APRIL 2005, THERE CANNOT BE ANY TWO OPINIONS ON THE ISSUE AT LEAST SO FAR AS IN THE JURISDIC TION OF THIS HONBLE HIGH COURT. IT IS ALSO ELEMENTARY THAT WHEN HONBLE HIGH COURT INTERPRETS A LEGAL PROVISION IN A I.T.A. NO.: 3019 (AHD) OF 2014 ASSESSMENT YEAR: 2007 - 08 PAGE 4 OF 7 PARTICULAR MANNER IT IS NOT FROM THE DATE OF THAT DECISION THAT LEGAL POSITION IS SO SETTLED; IT IS TO DEEMED TO BE THE CORRECT LEGAL POSITION RIGHT FROM THE TIME THE LAW CAME INTO FORCE. AS OBSERV ED BY A HONBLE PUNJAB & HARYANA HIGH COURT, IN THE CASE OF CIT VS ARUNA LUTHARA [(2001) 252 ITR 76 (P&H FULL BENCH)], WHEN A COURT INTERPRETS A PROVISION, IT DECIDES AS TO WHAT IS THE MEANING AND EFFECT OF THE WORDS USED BY THE LEGISLATURE. IT IS A DECL ARATION REGARDING THE STATUTE. IN OTHER WORDS, THE JUDGMENT DECLARES AS TO WHAT THE LEGISLATURE HAD SAID AT THE TIME OF THE PROMULGATION OF THE LAW. THE DECLARATION IS THIS WAS THE LAW. THIS IS HOW THE PROVISION SHALL BE CONSTRUED . IN THE CASE OF ACIT VS SUARASHTRHA KUTCH STOCK EXCHANGE LIMITED [(2008) 305 ITR 277 (SC)] , HONBLE SUPREME COURT HAS STATED THIS PRINCIPLE AS FOLLOWS: 42. IN OUR JUDGMENT, IT IS ALSO WELL - SETTLED THAT A JUDICIAL DECISION ACTS RETROSPECTIVELY. ACCORDING TO BLACKSTONIAN THEORY, IT IS NOT THE FUNCTION OF THE COURT TO PRONOUNCE A `NEW RULE BUT TO MAINTAIN AND EXPOUND THE 'OLD ONE. IN OTHER WORDS, JUDGES DO NOT MAKE LAW, THEY ONLY DISCOVER OR FIND THE CORRECT LAW. THE LAW HAS ALWAYS BEEN THE SAME. IF A SUBSEQUENT DECISION ALTERS THE EARLIER ONE, IT (THE LATER DECISION) DOES NOT MAKE NEW LAW. IT ONLY DISCOVERS THE CORRECT PRINCIPLE OF LAW WHICH HAS TO BE APPLIED RETROSPECTIVELY. TO PUT IT DIFFERENTLY, EVEN WHERE AN EARLIER DECISION OF THE COURT OPERATED FOR QUITE SOME TIME, THE DEC ISION RENDERED LATER ON WOULD HAVE RETROSPECTIVE EFFECT CLARIFYING THE LEGAL POSITION WHICH WAS EARLIER NOT CORRECTLY UNDERSTOOD. 7. THE LAW LAID DOWN BY THE HONBLE COURTS ABOVE BINDS THE LOWER JUDICIAL AUTHORITIES AND, AS SUCH, THE ORDERS OF THE LOWER J UDICIAL AUTHORITIES CAN BE RECTIFIED ON THE BASIS OF SUBSEQUENT BINDING JUDICIAL PRECEDENTS. THIS IS SO HELD IN THE CASE OF SAURASHTRA STOCK EXCHANGE LTD (SUPRA). THE QUESTION AS TO WHETHER A SUBSEQUENT JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT CAN AL SO BE THE BASIS OF RECTIFYING A MISTAKE APPARENT FROM RECORD STANDS BY THE ASSESSING OFFICER ANSWERED BY HONBLE MADRAS HIGH COURT IN THE CASE OF I.T.A. NO.: 3019 (AHD) OF 2014 ASSESSMENT YEAR: 2007 - 08 PAGE 5 OF 7 METTUR CHEMICAL AND INDUSTRIAL CORPORATION LTD VS CIT [(1977) 110 ITR 822 (MAD)]. IN THIS CASE, HONBLE MADRAS HIGH COURT HAS, INTER ALIA , OBSERVED AS FOLLOWS: SEC. 154 OF THE ACT ENABLES THE ITO TO RECTIFY ANY MISTAKE APPARENT FROM THE RECORD. IN THIS CASE, AS WE ALREADY POINTED OUT, THE ITO HAD DEDUCTED THE WEALTH - TAX PAID BY THE ASSESSEE FROM THE BUSINESS INCOME FOR COMPUTING THE ASSESSABLE INCOME FROM THE BUSINESS. THE DECISION OF THIS COURT REFERRED TO ABOVE VIZ., KUMBAKONAM ELECTRIC SUPPLY CORPORATION LTD. VS. CIT (SUPRA) HELD THAT WEALTH - TAX PAID BY A COMPANY UNDER THE PROVISIONS OF THE WT ACT, ON THE N ET WEALTH OF THE COMMPANY IS NOT AN ALLOWABLE EXPENDITURE IN COMPUTING THE TAXABLE INCOME OF THE COMPANY, EITHER UNDER S. 10(2)(XV) OR UNDER S. 10(1) OF THE INDIAN IT ACT, 1922. THIS DECISION OF THIS COURT IS AN AUTHORITATIVE PRONOUNCEMENT AS TO THE SCOPE OF S. 10(2)(XV) AND S. 10(1) AS FAR AS THE ITO WAS CONCERNED. CONSEQUENTLY, THIS DECISION MADE IT CLEAR THAT THE ITO HAS COMMITTED AN ERROR IN DEDUCTING THE WEALTH - TAX PAID BY THE ASSESSEE FROM THE INCOME FROM THE BUSINESS AND THAT ERROR WAS APPARENT FROM THE RECORD . CONSEQUENTLY, THE ITO ACTED WELL WITHIN HIS JURISDICTION IN PROCEEDING UNDER S. 154 OF THE IT ACT, 1961, IN ORDER TO RECTIFY A MISTAKE APPARENT FROM THE RECORD BY ADDING BACK THE WEALTH - TAX WHICH HE HAD ORIGINALLY DEDUCTED (EMPHASIS, BY UNDERL INING, SUPPLIED BY US) 8. IN VIEW OF THE ABOVE DISCUSSIONS, IN OUR CONSIDERED VIEW, THE CIT(A) WAS INDEED IN ERROR IN SUSTAINING ASSESSING OFFICERS ACTION OF DECLINING TO DELETE THE DISALLOWANCE OF RS 97,38,134, UNDER SECTION 40(A)(I A), ON THE FACTS OF THIS CASE PARTICULARLY AS THE FACTUAL ELEMENTS EMBEDDED IN THE CONTENTIONS OF THE ASSESSEE WERE NOT EVEN DISPUTED BY THE ASSESSING OFFICER. WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO GRANT THE RESULTANT RELIEF. I.T.A. NO.: 3019 (AHD) OF 2014 ASSESSMENT YEAR: 2007 - 08 PAGE 6 OF 7 9. LEARNE D COUNSEL FOR THE ASSESSEE HAS BEEN FAIR ENOUGH TO INVITE OUR ATTENTION TO THE FACT THAT, VIDE ORDER DATED 11 TH AUGUST 2010 PASSED BY THE LEARNED COMMISSIONER UNDER SECTION 264 OF THE ACT, THE ASSESSEE HAS BEEN GRANTED THE SAME DEDUCTION IN THE NEXT ASSESS MENT YEAR IN THE FOLLOWING TERMS: ..IF THE EXPENSE IS DISALLOWED IN THE YEAR MERELY BECAUSE OF OPERATION OF LAW SUCH AS UNDER SECTION 40(A)(IA) AND THE SAID TDS IS PAID IN THE SUBSEQUENT YEAR, THE EXPENSES SO DISALLOWED IN THE EARLIER YEAR IS TO BE AL LOWED IN THE SUBSEQUENT YEAR OTHERWISE GRAVE INJUSTICE WILL BE DONE TO THE ASSESSEE BECAUSE THE ASSESSE HAS NOT ACTUALLY SUPPRESSED ANYTHING OR HAS MADE ANY BOGUS CLAIM. THE ASSESSING OFFICER IS DIRECTED TO PASS NECESSARY RECTIFICATION ORDER UNDER SECTION 154 FOR THE RELEVANT YEARS AND GIVE EFFECT TO THE EXPENSES DISALLOWED IN THE EARLIER YEARS TO BE ALLOWED IN THE YEAR OF PAYMENT OF TDS. 10. THE RELIEF SO GIVEN DOES NOT COME IN THE WAY OF DELETING THE IMPUGNED DISALLOWANCE AND IT WOULD NOT RESULT IN DOUB LE DEDUCTION FOR THE SAME EXPENDITURE . EVEN AT THIS STAGE, THE ASSESSING OFFICER HAS THE POWERS, AS INDEED THE CORRESPONDING DUTY, TO WITHDRAW THE DEDUCTION FOR THE SUBSEQUENT ASSESSMENT YEAR, IF ALREADY GRANTED, IN THE EVENT OF THE DEDUCTION BEING ALLOWED IN THIS ASSESSMENT YEAR. IT IS A FINDING IN THIS APPELLATE ORDER THAT THE DEDUCTION IS TO BE ALLOWED IN THIS ASSESSMENT YEAR. AS A COROLLARY THERETO, THE SAID DEDUCTION CANNOT BE ALLOWED IN ANY OTHER ASSESSMENT YEAR. SEC. 153(3) OF THE IT ACT, 1961 PROVI DES THAT THE PROVISIONS OF SS. 153(1) AND (2), (I.E., THE PROVISION LAYING DOWN THE TIME - LIMIT WITHIN WHICH ASSESSMENTS, REASSESSMENTS OR RECOMPUTATIONS CAN BE DONE) SHALL NOT APPLY TO, INTER ALIA , THE CLASSES OF ASSESSMENTS, REASSESSMENTS AND RECOMPUTATIO NS WHICH MAY BE COMPLETED AT ANY TIME WHERE THE ASSESSMENT, REASSESSMENT OR RECOMPUTATION IS MADE ON THE ASSESSEE OR ANY PERSON IN CONSEQUENCE OF OR TO GIVE EFFECT TO ANY FINDING OR D IRECTION CONTAINED IN, INTER ALIA, AN ORDER I.T.A. NO.: 3019 (AHD) OF 2014 ASSESSMENT YEAR: 2007 - 08 PAGE 7 OF 7 UNDER SECTION 254 . THEREFORE, TO THE EXTENT, AN ASSESSMENT, REASSESSMENT OR RECOMPUTATION IS DONE TO GIVE EFFECT TO THE 'FINDING OR DIRECTION CONTAINED IN, INTER ALIA, THE TRIBUNAL ORDER, THE SAME CAN BE PASSED AT ANY TIME. THE ASSESSING OFFICER, THEREFORE, SHALL BE WELL WITHIN HIS P OWERS TO PASS THE APPROPRIATE ORDERS TO WITHDRAW THE DEDUCTION, IF GRANTED, IN THE SUBSEQUENT ASSESSMENT YEAR. 11. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 7 TH DAY OF JULY, 2015. SD/XX SD/XX S. S. GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 7 TH DAY OF JULY, 2015 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT ( 3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD