M/s. Jagson Colorchem Ltd., Ahmedabad V. The ACIT(OSD)-1, Circle-4, Ahmedabad

ITA 3115/AHD/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6095 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 30-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAMES KURIAN HEARIN G CONCLUDE
• Keywords: Business income; Retrospective amendment
• Section: 143(3); 201(1)

Judgement Text

ITA NO.3115/AHD/2013 ASSESSMENT YEAR: 2009 - 10 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM] ITA NO. 3115/AHD/2013 ASSESSMENT Y EAR: 2009 - 10 JAGSON COLOURCHEM LIMITED ... .......... . APPELLANT 5601/4, PHASE 2, GIDC VATVA AHMEDABAD 382 445 [PAN: AAACJ7664C] VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 4, AHMEDABAD ... .. ......... RESPONDENT APPEARANCES BY PRATIK JAIN FOR THE A PPELLANT JAMES KURIAN FOR THE R E SPONDENT HEARING CONCLU DED ON: 28 .0 4 .2017 ORDER PRONOUNCED ON : 28 . 0 4 .2017 O R D E R PER PRAMOD KUMAR , AM: 1. THIS APPEAL IS FILED BY THE ASSESSEE AND IS DIRECTED AGAINST THE ORDER DATED 1 ST OCTOBER 2011 PASSED BY THE LEARNED CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2009 - 10. 2. GRIEVANCES RAISED BY THE ASSESSEE ARE AS FOLLOWS: 1. THAT ON THE FACTS AND IN LAW OR IN THE CIRCUMSTANCE OF THE CASE, THE LEARNED C I T HAS ERRED IN SUSTAINING THE INC OME OF THE APPELLANT OF RS.1,51,91,090/ - INSTEAD OF 1,47,84,770/ - . AS SUCH AGGREGATE ADDITION OF RS.4,06,323/ - MAY PLEASE BE DELETED. 2. THAT THE LEARNED CI T HAS WRONGLY SUSTAINED THE DISALLOWANCE OF FREIGHT & HANDLING CHARGES PAID TO M/S VELJI DOSABHAI & SONS PVT . LTD . ON ACCOUNT OF NON - DEDUCTION OF TDS. 3. THAT THE LEARNED CI T HAS NOT CONSIDERED THE EVIDENCE (CA CERTIFICATE) REGARDING THE INCLUSION OF THE AMOUNT IN DEDUCTEE ITR. THERE IS NO REVENUE LOSS TO EX - CHEQUER AS TAX HAS BEEN PAID BY THE DEDUCT EE. ITA NO.3115/AHD/2013 ASSESSMENT YEAR: 2009 - 10 PAGE 2 OF 3 4. THAT THE LEARNED CIT HAS WRONGLY PRESUMED THE PROVISIONS OF SECTION 201(1) AND 40(IA) OF I NCOME T AX A CT AND NOT CONSIDERED THE SUBMISSION MADE BY ABOVE ASSESSEE. 5. THAT T HE IMPOUND ORDER PASSED BY THE LEARNED AO AND CIT (A) LEAD TO DOUBLE TAXATIO N OF T HE SAME INCOME. AS SUCH THE ASSESSMENT MAY PLEASE BE HELD AS BAD IN LAW AND ADDITION MADE THEREON MAY KINDLY BE DELETED. 3. THE SHORT ISSUE WE ARE THUS REQUIRED TO ADJUDICATE IS WHETHER A DISALLOWANCE UNDER SECTION 40(A)(IA) WILL BE JUSTIFIED EVE N IN A SITUATION IN WHICH REC IPIENT OF INCOME HAS DISCHARGED HIS TAX OBLIGATIONS. 4. TO ADJUDICATE ON THIS ISSUE, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. IT IS A CASE IN WHICH THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE FROM CERTAIN PAYMENTS, A GGREGATING TO RS 4,06,323, MADE TO VELJI DOSHABHAI & SONS PVT LTD, AND, IT WAS FOR THIS REASON THAT THE ASSESSING OFFICER DISALLOWED THESE PAYMENTS UNDER SECTION 40(A)(IA) OF THE ACT. IN APPEAL, IT WAS POINTED OUT TO THE CIT(A) THAT RECIPIENT HAS IN ANY EV ET DISCHARGED HIS TAX LIABILITY IN RESPECT OF INCOME EMBEDDED IN THESE PAYMENTS, AND, FOR THIS REASON, THE IMPUGNED DISALLOWANCE SHOULD BE DELETED. LEARNED CIT(A), HOWEVER, DECLINED THIS PLEA AS DEVOID OF LEGAL BASIS AND CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE ASSESSEE IS AGGRIEVED AND IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITON. 6. AS LEARNED COUNSEL RIGHTLY POINTS OUT, THE LEGAL POSITION, AS IT PREVAILS NOW, IS THAT ONCE IT IS FOUND THAT THE RECIPIENT OF AN INCOME EMBEDDED IN THE RELATED PAYMENTS IS DULY TAXED, THE DISALLOWANCE UNDER SECTION 40(A)(IA) WILL NOT COME INTO PLAY. THAT S WHAT HON BLE HIGH COURT HAS HELD IN THE CASE OF CIT VS ANSAL LANDMARK TOWNSHIP PVT LTD [(2015) 377 ITR 635 (DEL)] , AND THERE IS NO DECISION CONTRARY THERETO BY HON BLE JURISDICTIONAL HIGH COURT. HON BLE DELHI HIGH COURT HAS SPECIFICALLY APPROVED THE STAND TAKEN BY A COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF RAJEEV KUMAR AGARWAL VS ACIT [(2014) 149 ITD 363 (AGRA)], AND UPHELD THE ACTION OF THE TRIBUNAL IN FOLLOWING THE SAME. 9. . NOW THAT THE LEGISLATURE HAS BEEN COMPASSIONATE ENOUGH TO CURE THESE SH ORTCOMINGS OF PROVISION, AND THUS OBVIATE THE UNINTENDED HARDSHIPS, SUCH AN AMENDMENT IN LAW, IN VIEW OF THE WELL SETTLED LEGAL POSITION TO THE EFFECT THAT A CURATIVE AMENDMENT TO AVOID UNINTENDED CONSEQUENCES IS TO BE TREATED AS RETROSPECTIVE IN NATURE EV EN THOUGH IT MAY NOT STATE SO SPECIFICALLY, THE INSERTION OF SECOND PROVISO MUST BE GIVEN RETROSPECTIVE EFFECT FROM THE POINT OF TIME WHEN THE RELATED LEGAL PROVISION WAS INTRODUCED. IN VIEW OF THESE DISCUSSIONS, AS ALSO FOR THE DETAILED REASONS SET OUT EA RLIER, WE CANNOT SUBSCRIBE TO THE VIEW THAT IT COULD HAVE BEEN AN INTENDED CONSEQUENCE TO PUNISH THE ASSESSEES FOR NON DEDUCTION OF TAX AT SOURCE BY DECLINING THE DEDUCTION IN RESPECT OF RELATED PAYMENTS, EVEN WHEN THE CORRESPONDING INCOME IS DULY BROUGH T TO TAX. THAT WILL BE GOING MUCH BEYOND THE OBVIOUS INTENTION OF THE SECTION. ACCORDINGLY, WE HOLD THAT THE INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETROSPECTIVE EFFECT FROM 1ST APRIL, 2005, BEING THE DATE FROM WHICH SUB CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY THE FINANCE (NO. 2) ACT, 2004. ITA NO.3115/AHD/2013 ASSESSMENT YEAR: 2009 - 10 PAGE 3 OF 3 10. IN VIEW OF THE ABOVE DISCUSSIONS, WE DEEM IT FIT AND PROPER TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIG HT OF OUR ABOVE OBSERVATIONS AND AFTER CARRYING OUT NECESSARY VERIFICATIONS REGARDING RELATED PAYMENTS HAVING BEEN TAKEN INTO ACCOUNT BY THE RECIPIENTS IN COMPUTATION OF THEIR INCOME, REGARDING PAYMENT OF TAXES IN RESPECT OF SUCH INCOME AND REGARDING FILIN G OF THE RELATED INCOME TAX RETURNS BY THE RECIPIENTS. WHILE GIVING EFFECT TO THESE DIRECTIONS, THE ASSESSING OFFICER SHALL GIVE DUE AND FAIR OPPORTUNITY OF HEARING TO THE ASSESSEE, DECIDE THE MATTER IN ACCORDANCE WITH THE LAW AND BY WAY OF A SPEAKING ORDE R. WE ORDER SO 7 . IN EFFECT THUS, THEIR LORDSHIPS HAVE APPROVED THE ACTION OF THE TRIBUNAL IN REMITTING THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO ASCERTAIN WHETHER THE RECIPIENT HAS TAKEN INTO ACCOUNT RELATED PAYMENTS INTO COMPU TATION OF HIS INCOME AND OFFERING THE SAME TO TAX, AND, IF SO, DELETE THE DISALLOWANCE UNDER SECTION 40(A)(IA) IN RESPECT OF THE SAME. THAT IS PRECISELY WHAT WE DEEM FIT TO DO IN THIS CASE AS WELL. 8. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE DEEM IT FIT AND PROPER TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR LIMITED VERIFICATION ON THE ASPECT AS TO WHETHER RECIPIENT OF PAYMENT HAS INCLUDED THE SAME IN HIS COMPUTATION OF BUSINESS INCOME OFFERED TO T AX, AND, IF FOUND TO BE SO, DELETE THE DISALLOWANCE IN QUESTION. WITH THESE DIRECTIONS, THE MATTER STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER. 9. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. PRONOU NCED IN THE OPEN COURT TODAY ON THE 28 TH DAY OF APRIL, 2017. SD/ - SD/ - MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED, AHMEDABAD, THE 28 TH DAY OF APRIL , 201 7 . PBN/* COPIE S TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD