ITO, Ward-4(1)(1), Ahmedabad V. M.s. Kachchh Steel Pvt Ltd.(Now Know as M/s. Savanna Resorts Pvt. Ltd.), Ahmedabad

ITA 312/AHD/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3074 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 08-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Assessee Lawyers: V R CHOKSHI
• Keywords: Retrospective amendment; TDS
• Section: 143(3); 40(a)(ia); 201(1)

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR ./ I.T.A. NO. 312/AHD/2018 WITH CROSS OBJECTION NO. 47/AHD/2018 ( ASSESSMENT YEAR : 2012-13) ITO WARD -4(1)(1), AHMEDABAD / VS. M/S. KACHCHH STEELS PVT. LTD. (NOW KNOWN AS M/S. SAVANNA RESORTS PVT. LTD.) 10, KATARIA ARCADE, MAKARBA, OFF. SARKHEJ HIGHWAY, AHMEDABAD 380027 ./ ./ PAN/GIR NO. : AACCK2845C ( APPELLANT / RESPONDENT ) .. ( RESPONDENT / CROSS OBJECTOR ) / REVENUE BY : SHRI L. P. JAIN, SR. D.R. / ASSESSEE BY : SHRI V. R. CHOKSHI, A.R. DATE OF HEARING 25/02/2019 ! / DATE OF PRONOUNCEMENT 28/02/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS)-2, AHMEDABAD (CIT(A) IN SHORT), DATED 1 6.11.2017 ARISING IN THE ASSESSMENT ORDER DATED 31.03.2015 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING ASSESSMENT YEAR 2012-13. ITA NO. 312/AHD/18 WITH CO NO. 47/AHD/2018 [ITO VS. M/S.KACHCHH STTELS PVT. LTD.] A.Y. 2012-13 - 2 - 2. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION IN T HE REVENUES APPEAL AS CAPTIONED ABOVE. ITA NO. 312/AHD/2018 (REVENUES APPEAL) 3. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA DS AS UNDER:- 1. THAT THE LD. CIT(APPEAL) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.66,41,836/- MADE ON ACCOUNT OF DISALLOWANCE U/S. 40(A)(IA) OF THE INCOME TAX ACT, 1961. 2. THAT THE LD. CIT(APPEAL) ERRED IN LAW AND ON F ACTS IN NOT APPRECIATING THE FACTS THAT THE ASSESSEE COMPANY FAILED TO DEDUCT TDS U/S. 94C WHILE MAKING PAYMENT OF CONTRACTUAL WORK TO M/S. SANGHI INDUSTRIES LTD. DUR ING THE RELEVANT PERIOD. 3. THAT THE LD. CIT(APPEAL) ERRED IN LAW AND ON FACTS IN NOT HOLDING THAT THE PROVISION TO SECTION 40(A)(IA) WAS EFFECTIVE FROM 0 1/04/2013, WHEREIN NO RETROSPECTIVE EFFECT HAS BEEN MENTIONED. 4. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED AR FOR THE REVENUES APPEAL SUBMITTED AT THE OUTSET THAT THE A O HAS DISALLOWED AN AMOUNT OF RS.66,41,836/- UNDER S.40(A)(IA) OF TH E ACT ON THE GROUND THAT THE ASSESSEE HAS FAILED TO DEDUCT TDS ON JOB W ORK CHARGED TO M/S. SANGHI INDUSTRIES LTD. IN THIS CONTEXT, THE LEARNE D AR SUBMITTED THAT THE RECIPIENT/PAYEE NAMELY SANGHI INDUSTRIES LTD. H AVE ALREADY INCLUDED THE JOB WORK CHARGES IN ITS INCOME FOR WHI CH RELEVANT CERTIFICATES WERE PRODUCED BEFORE THE CIT(A). THE LEARNED AR FURTHER SUBMITTED THAT THE 2 ND PROVISO TO SECTION 40(A)(IA) AMENDED BY FINANCE ACT, 2012 HAS RETROSPECTIVE OPERATION AND T HEREFORE, WHERE THE ASSESSEE IS NOT DEEMED TO BE IN DEFAULT UNDER 1 ST PROVISO TO SUB-SECTION 201 OWING TO PAYMENT OF TAX BY PAYEE, PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IS NOT APPLICABLE AT ALL IN VIEW OF THE JUDGMENT RENDERED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P) LTD. (2015) 61 TAXMANN.COM 45 (DEL). THE LEARNED AR SUBMITTED THAT THE REVENUE CANNOT RECOVER DEFAULTED TAX FROM THE PAYER (ASSESSEE) IF THE PAYEE HAS PAID TAX ON THE S UM RECEIVED. THE LEARNED AR FURTHER SUBMITTED AN ALTERNATIVE CONTENT ION THAT THE AO ITA NO. 312/AHD/18 WITH CO NO. 47/AHD/2018 [ITO VS. M/S.KACHCHH STTELS PVT. LTD.] A.Y. 2012-13 - 3 - FRAMED THE ASSESSMENT BASED ON ESTIMATION OF THE GR OSS PROFIT AND THEREFORE, SEPARATE ADDITION ON ACCOUNT OF DISALLOW ANCE UNDER S.40(A)(IA) OF THE ACT IS NOT PERMISSIBLE IN SUCH A SITUATION. THE LEARNED AR ACCORDINGLY SUBMITTED THAT THE CIT(A) HA S RIGHTLY APPRECIATED THE FACTS IN PERSPECTIVE AND APPLIED TH E LAW CORRECTLY WITH WHICH NO INTERFERENCE IS CALLED FOR. 5. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE AO. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE FOR THE AY 2012-13 IN QUESTION ON THE JOB WORK EXPENSES PAID TO THE RECIP IENT M/S. SANGHI INDUSTRIES LTD. THE AO MADE DISALLOWANCE UNDER S.4 0(A)(IA) OF THE ACT AND TREATED THE ASSESSEE AS ASSESSEE IN DEFAULT . THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A). THE CIT(A) HELD THAT PROVISION OF SECTION 40(A)(IA) IS NOT APPLICAB LE WHERE THE PAYEE HAS COMPLIED WITH THE TAX PROVISIONS AND PAID THE T AX ON THE AFORESAID JOB CHARGES. THE RELEVANT OPERATIVE PARA OF THE OR DER OF THE CIT(A) IS REPRODUCED HEREUNDER: 5.3 DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE STATEMENT OF FACTS FILED BY THE APPEL LANT. THE AO HAS MADE THE DISALLOWANCES OF RS.66,41,836/- ON THE GROUND T HAT APPELLANT HAS NOT DEDUCTED TDS ON THE JOB WORK CHARGED TO M/S. SANGHI INDUSTRIES LIMITED. THE APPELLANT HAS SUBMITTED THAT AO HAS ESTIMATED T HE GROSS PROFIT AND MADE THE ADDITION ON THE BASIS OF GROSS PROFIT, AND THEREFORE, NO FURTHER ADDITION U/S. 40(A)(IA) IS CALLED FOR. THE APPELLA NT FURTHER SUBMITTED THAT M/S. SANGHI INDUSTRIES LIMITED HAS OFFERED ITS ENTI RE INCOME TO THE INCOME TAX AND SUBMITTED A CERTIFICATE IN FORM NO. 26A, RU LE 31 ACB IN SUPPORT OF ITS CONTENTION. THE APPELLANT ALSO RELIED UPON THE PROVISO TO SECTION 40(A)(IA) AMENDED BY FINANCE ACT, 2012 WHEREBY, IF AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDAN CE WITH THE PROVISIONS OF CHAPTER XVII B, BUT IS NOT DEEMED TO BE AN ASSES SEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB SECTION OF SECTION 201 THE N IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX. I DO N OT AGREE WITH THE APPELLANTS SUBMISSION THAT DEDUCTION U/S.40(A)(IA) CANNOT BE MADE WHERE INCOME HAS BEEN ESTIMATED ON THE BASIS OF GROSS PRO FIT. AS REGARD TO APPELLANTS SUBMISSION THAT M/S. SANGHI INDUSTRIES HAS INCLUDED THE JOB ITA NO. 312/AHD/18 WITH CO NO. 47/AHD/2018 [ITO VS. M/S.KACHCHH STTELS PVT. LTD.] A.Y. 2012-13 - 4 - WORK OF RS.66,41,836/- IN ITS RETURN OF INCOME WHIC H HAS BEEN CERTIFIED IN FORM 26A UNDER RULE 31ACB, I AGREE WITH THE APPELLA NT THAT THE DISALLOWANCE U/S.40(A)(IA) OF THE ACT IS UNCALLED F OR IN VIEW OF NEWLY INSERTED PROVISO TO SECTION 40(A)(IA). RELIANCE IS PLACED ON THE DECISION OF EDEWEISS FINANCIAL ADVISORS LTD. VS. ACIT [ITA N O. 1718/AHD/2011]. THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 7. THE APPLICABILITY OF SECTION 40(A)(IA) R.W.S. 20 1(1) OF THE ACT IS IN CONTROVERSY IN THE FACTS OF THE CASE CONCERNING AY 2012-13. WE STRAIGHTWAY OBSERVE THAT WHEN THE SECTION 201(1) OF THE ACT AND SECTION 40(A)(IA) OF THE ACT ARE READ IN CONJUNCTIO N TOGETHER WITH LAW ENUNCIATED BY THE HONBLE DELHI HIGH COURT IN ANSAL LAND MARK TOWNSHIP (SUPRA), WE FIND THAT THE 1ST PROVISO TO S ECTION 201(1) OF THE ACT AND 2ND PROVISO TO SECTION 40(A)(IA) OF THE ACT ARE CURATIVE IN NATURE AS THESE WERE INSERTED WITH THE INTENTION OF ALLEVIATING HARDSHIP IN CASES WHERE THE RESIDENT/RECEIVER OF AMOUNT HAS PAID TAXES ON SUCH RECEIPTS EVEN WHEN THE PAYER HAS FAILED TO DEDUCT T AX AT SOURCE. AS PER THE 1ST PROVISO TO SECTION 201(1) OF THE ACT, W HEN A RESIDENT WHO RECEIVES ANY SUM FROM AN ASSESSEE HAS FURNISHED HIS RETURN OF INCOME UNDER S.139(1) OF THE ACT AND TAKEN INTO ACCOUNT SU CH SUM FOR COMPUTING INCOME, AS ALSO PAID THE TAX DUE ON THE I NCOME DECLARED BY HIM IN SUCH RETURN; THEN THE ASSESSEE WOULD STAND A BSOLVED FROM BEING TREATED AS AN ASSESSEE IN DEFAULT, DESPITE THE FACT THAT THE ASSESSEE HAS FAILED TO DEDUCT AT SOURCE, THE WHOLE OR ANY PART O F THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-B. THUS, WHEN THE ASSESSEE FAILED TO DEDUCT TAX ON ANY SUM PAID TO TH E RECEIVER, HE WOULD STILL NOT BE CONSIDERED AS AN ASSESSEE IN DEFAULT, IF THE RECEIVER HAS PAID TAX ON THAT INCOME/SUM. IN THE LIGHT OF DECIS ION OF THE HONBLE DELHI HIGH COURT IN ANSAL LAND MARK TOWNSHIP (SUPRA ) THE 2ND PROVISO TO SECTION 40(A)(IA) IS ALSO HELD TO BE DEC LARATORY AND CURATIVE IN NATURE AND IT HAS RETROSPECTIVE OPERATION EFFECT FROM 01.04.2015 BEING THE DATE FROM WHICH SUB CLAUSE (IA) OF SECTIO N 40(A)(IA) OF THE ACT WAS INSERTED BY THE FINANCE (NO.2) ACT, 2004. THEREFORE, THE BENEFIT OF 2ND PROVISO TO SECTION 40(A)(IA) OF THE ACT HAS BEEN RIGHTLY ITA NO. 312/AHD/18 WITH CO NO. 47/AHD/2018 [ITO VS. M/S.KACHCHH STTELS PVT. LTD.] A.Y. 2012-13 - 5 - HELD TO BE AVAILABLE TO THE ASSESSEE BY CIT(A). WE THUS SEE NO REASON TO INTERFERE. 8. THE CIT(A), IN OUR CONSIDERED VIEW, HAS ALSO RIG HTLY OBSERVED THAT WHERE THE INCOME HAS BEEN ASSESSED ON ESTIMATI ON OF GROSS PROFITS, THERE WAS NO WARRANT FOR SEPARATE DISALLOW ANCE BY INVOKING SECTION 40(A)(IA) OF THE ACT. THEREFORE, WE FIND O URSELVES IN COMPLETE AGREEMENT WITH THE CONCLUSION REACHED BY THE CIT(A) IN FAVOUR OF THE ASSESSEE. THE CONTROVERSY IS THUS ANSWERED IN NEGA TIVE AND AGAINST THE REVENUE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 10. THE CROSS OBJECTION RAISED BY THE ASSESSEE IN T HE REVENUES APPEAL IS ALSO DISMISSED AS NOT PRESSED. 11. IN THE COMBINED RESULT, BOTH THE APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 28/02/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- $. / REVENUE 2. / ASSESSEE &. '() * / CONCERNED CIT 4. *- / CIT (A) -. ./0 122()3 ()!3 45' / DR, ITAT, AHMEDABAD 6. 078 9 / GUARD FILE. BY ORDER / 3 /4 ()!3 45' THIS ORDER PRONOUNCED IN OPEN COURT ON 28/02/201 9