RAASFAA, Delhi V. ITO, Gurgaon

ITA 3182/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6826 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 17-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 21-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Retrospective amendment
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRES IDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 3182/DEL/2013 AY: 20 08-09 RAASFAA, VS INCOME TAX OFFICER, C/O KAPIL GOEL, ADV. WARD-II(3), A-1/25, SECTOR-15, GURGAON. ROHINI, DELHI. (PAN: AAJFR1054Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KAPIL GOEL, ADV. RESPONDENT BY : MS RAKHI VIMAL, SR. DR ORDER PER SUDHANSHU SRIVASTAVA, JM THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST THE ORDER DATED 18.2.2013 PASSED BY THE LD. CIT(A)-II, FARIDABAD. 2. THE ASSESSEE RAASFA-JV (A) IS A JOINT VENTURE TH ROUGH A PARTNERSHIP AGREEMENT DATED 17.01.2006 BETWEEN R. A GARWAL & ASSOCIATE AND SFA & ASSOCIATES. THE JOINT VENTURE WAS TO EXECUTE THE WORK OF CIVIL CONSTRUCTION, ERECTING, C OMMISSIONING OF SEWAGE TREATMENT PLANT. TOTAL WORK DONE DURING THE YEAR THE YEAR WAS DECLARED AT RS.91,42,310/- AGAINST WHICH A LOSS OF RS.2,87,110/- WAS DECLARED. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS. THE ASSESSING OFFICER IN HIS ORDER U /S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE A CT) MADE TWO I.T.A. NO. 3182/DEL/2013 ASSESSMENT YEAR 2008-09 2 ADDITIONS. RS.10,39,891/- WAS ADDED ON ACCOUNT OF CASH CREDITS AND RS.7,27,815 WAS DISALLOWED U/S 40(A)(IA) OF THE ACT AND THE ASSESSMENT WAS FINALISED AT A TOTAL INCOME OF RS. 1 4,80,600/-. THE ADDITION OF RS.10,38,991/- WAS MADE BY THE ASSE SSING OFFICER AS, IN HIS OPINION, THE ASSESSEE HAD FAILED TO FURNISH THE COPIES OF ACCOUNT OF ANY OF THE CREDITORS. THE ASS ESSING OFFICER WAS OF THE VIEW THAT NEITHER THE IDENTITY NOR THE C REDITWORTHINESS OF THE CREDITORS COULD BE ESTABLISHED. DURING THE PROCEEDINGS, THE ASSESSING OFFICER HAD ALSO SOUGHT DETAILS OF JO B WORK DONE, PAYMENTS MADE TO THE CONCERNED PARTIES, TDS DEDUCTE D ON SUCH PAYMENTS AND THE DATE OF DEPOSITING THE TDS AND ON A CONSIDERATION OF THE DETAILS FILED, HE WAS OF THE V IEW THAT THERE WERE PAYMENTS AMOUNTING TO RS. 7,27,815/- ON WHICH THE REQUIREMENTS PERTAINING TO TDS WERE NOT FULFILLED A ND ACCORDINGLY RS. 7,27,815/- WAS DISALLOWED AS PER SECTION 40(A)( IA) OF THE ACT. 3. AGGRIEVED, THE ASSESSEE WENT INTO APPEAL WHEREIN ON THE ISSUE OF ADDITION OF RS.10,39,891, THE LD. CIT(A) G AVE A FINDING THAT THE ASSESSEE WAS NOT ABLE TO PROVIDE CONFIRMED COPIES OF ACCOUNT OF THE CREDITORS. THE LD. CIT(A) ALSO GAVE A FINDING THAT THERE WERE A LARGE NUMBER OF PETTY CREDITORS WHICH WERE OUTSTANDING FOR AS LONG A PERIOD AS ONE YEAR AND FO R WHICH THE I.T.A. NO. 3182/DEL/2013 ASSESSMENT YEAR 2008-09 3 ASSESSEE COULD NOT OFFER ANY EXPLANATION. THE LD. CIT(A) WENT ON TO CONFIRM THE ADDITION. ON THE ISSUE OF TDS DISAL LOWANCE, THE ASSESSEE WAS OF THE VIEW THAT THE PROVISIONS OF SEC TION 40(A)(IA) WERE APPLICABLE ONLY IN RESPECT OF TDS DEFAULTS IF THE AMOUNT WAS PAYABLE. IF THE AMOUNT WAS ACTUALLY PAID AND THE T AX WAS NOT DEDUCTED, PROVISIONS OF SECTION 40(A)(IA) WILL NOT BE APPLICABLE. HOWEVER, THE LD. CIT(A) DID NOT CONCUR WITH THE ASS ESSEE ON THIS ISSUE ALSO AND THIS GROUND WAS ALSO DISMISSED. 4. IN THE APPEAL BEFORE US, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- ERROR OF JURISDICTION 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, LEARNED CIT-A ERRED IN NOT QUASHIN G IMPUGNED ASSESSMENT INITIATED ON BASIS OF NOTICE U/ S 143(2) BEING ISSUED BY NON JURISDICTIONAL OFFICER A S ADMITTED IN INITIAL PART OF THE IMPUGNED ORDER AND LATER ON CASE WAS TAKEN UP BY JURISDICTIONAL OFFICER, WHICH HITS AT THE ROOT OF THE MATTER, AS IT IS MUST THAT RIGHT AO NOT ONLY COMPLETES THE PROCEEDINGS BUT ALSO RIGH T AO INITIATES THE PROCEEDINGS IN VALID MANNER. ADDITION FOR TRADE OUTSTANDING U/S 68 O F THE ACT ( RS. 10,29,891) 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, LEARNED CIT-A ERRED IN UPHOLDING THE ADDITION MADE BY LD AO U/S 68 OF THE ACT BEING ALLE GED UNEXPLAINED CASH CREDIT IN RESPECT OF GENUINE TRADE OUTSTANDING, DULY ACCEPTED TO BE GENUINE IN SUBSEQUENT I.T.A. NO. 3182/DEL/2013 ASSESSMENT YEAR 2008-09 4 YEAR SCRUTINY ASSESSMENT. DISALLOWANCE U/S 40(A)(IA) OF THE ACT FOR RS. 727,2 15 DULY COVERED BY RETROSPECTIVE AMENDMENT IN 40(A)(IA ) 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, LEARNED CIT-A ERRED IN UPHOLDING THE DISALLOWANCE MADE BY LD AO U/S 40(A)(IA) OF THE ACT IN RELATION TO DIRECT BUSINESS COSTS AND OTHERWISE ALS O TDS STANDS DEPOSITED WITHIN EXTENDED PERIOD AS PROVIDED BY RETROSPECTIVE AMENDMENT IN SECTION 40(A)(IA) OF THE ACT. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED CIT-A ERRED IN UPHOLDING THE DISALLOWANCE MADE BY LD AO U/S 40(A)(IA) OF THE ACT WITHOUT LOOKING AT WHETHER THE PAYEE HAVE PAID THE TAXES IN THEIR HANDS WHICH WILL EXTINGUISH NEED FOR ANY FURTHER ADDITION IN HANDS OF PAYER. 5. AT THE OUTSET, THE LD. AR SUBMITTED THAT GRO UND NO. 1 IS NOT BEING PRESSED. HENCE, THIS GROUND IS DISMISSED AS NOT PRESSED. 6. ON GROUND NO. 2, THE LD. AR SUBMITTED THAT DU RING THE YEAR UNDER CONSIDERATION, THE WORK WAS BEING EXECUTED NE AR ROHTAK AND THE SITE WAS BEING MANAGED BY THE SITE IN CHARG E. ALL THE TRANSACTIONS WERE BEING ROUTED THROUGH THE SITE IN CHARGE BY MAINTAINING HIS IMPREST ACCOUNT. THE TRANSACTIONS IN THE IMPREST ACCOUNT WERE RELATED TO PETTY PURCHASES, PA YMENT OF DAY TO DAY SITE EXPENSES, PAYMENT TO LABOR CONTRACTORS, JOB WORK PAYMENTS, PAYMENT TO BUILDING MATERIAL SUPPLIERS, W AGES TO SITE LABOR ETC. HE SUBMITTED THAT ALL THE SUNDRY CREDIT ORS FOR PETTY I.T.A. NO. 3182/DEL/2013 ASSESSMENT YEAR 2008-09 5 PURCHASES, PAYMENTS TO LABOUR CONTRACTORS ETC. WERE UNDER THE DIRECT CONTROL OF SITE IN CHARGE AND AS FAR AS THE HEAD OFFICE WAS CONCERNED, THE NODAL PERSON WAS THE SITE IN CHARGE. THE LD. AR FURTHER SUBMITTED THAT WHILE ACCOUNTING THE TRANSAC TIONS OF SUNDRY CREDITORS FOR PETTY MATERIAL SUPPLY AS WELL AS SUNDRY CREDITORS FOR LABOUR PAYMENTS WERE GROUPED UNDER TH E IMPREST ACCOUNT OF SITE IN CHARGE SHRI ASHISH GUPTA AND THE GROUP CREDIT BALANCE WAS RS.9,84,554.25. LD. AR SUBMITTED A COP Y OF GROUP SUMMARY IN SUPPORT OF HIS CONTENTION. 7. ON THE ISSUE OF DISALLOWANCE U/S 40(A)(IA), TH E LD. AR SUBMITTED THAT THE ASSESSEE HAD PAID ALL ITS TAXES AND FILED ITS RETURN OF INCOME. HE RELIED ON THE ORDERS OF THE A GRA BENCH OF THE TRIBUNAL IN I.T.A. NO. 337/AGRA/2013 FOR THE PR OPOSITION THAT THE SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARAT ORY AND CURATIVE IN NATURE AND THAT IT HAS RETROSPECTIVE EFFECT UPON 01.04.2005. 8. LD. DR, IN RESPONSE, RELIED ON AND SUPPORTED T HE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFU LLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. AS FAR AS T HE ISSUE OF VERIFICATION OF THE SUNDRY CREDITORS IS CONCERNED, THE ASSESSING OFFICER IS OF THE VIEW THAT THE ASSESSEE HAS TRIED TO COVER UP I.T.A. NO. 3182/DEL/2013 ASSESSMENT YEAR 2008-09 6 UNEXPLAINABLE CREDITS BY SPLITTING THEM UNDER 38 NA MES UNDER THE IMPREST ACCOUNT. HOWEVER, THE LD. AR HAS SUBMI TTED THAT ALL THE ENTRIES APPEARING THEREIN CAN BE EXPLAINED AND CORRELATED BY THE ASSESSEE, IF GIVEN A CHANCE TO DO SO. THEREFOR E, IN THE INTEREST OF JUSTICE, WE RESTORE THE MATTER TO THE FILE OF TH E ASSESSING OFFICER FOR FRESH ADJUDICATION. AS FAR AS THE ISSUE OF DIS ALLOWANCE U/S 40(A)(IA) OF THE ACT IS CONCERNED, WE FIND THAT THE AGRA BENCH OF THE ITAT IN THE CASE OF RAJIV KUMAR AGRAWAL (SUPRA) HAS HELD AS FOLLOWS:- 6. HOWEVER, THE STAND SO TAKEN BY THE SPECIAL BENC H WAS DISAPPROVED BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS RAJINDER KUMAR (362 ITR 241). WHILE DOING SO, TH EIR LORDSHIPS OBSERVED THAT, THE OBJECT OF INTRODUCTIO N OF SECTION 40(A)(IA) IS TO ENSURE THAT TDS PROVISIONS ARE SCRUPULOUSLY IMPLEMENTED WITHOUT DEFAULT IN ORDER T O AUGMENT RECOVERIES..FAILURE TO DEDUCT TDS OR DEPO SIT TDS RESULTS IN LOSS OF REVENUE AND MAY DEPRIVE THE GOVERNMENT OF THE TAX DUE AND PAYABLE (EMPHASIS BY UNDERLINING SUPPLIED BY US). HAVING NOTED THE UNDE RLYING OBJECTIVES, THEIR LORDSHIPS ALSO PUT IN A WORD OF C AUTION BY OBSERVING THAT, THE PROVISION SHOULD BE INTERPRETE D IN A FAIR, JUST AND EQUITABLE MANNER. THEIR LORDSHIPS THUS RECOGNIZED THE BIGGER PICTURE OF REALIZATION OF LEGITIMATE TAX DUES, AS OBJECT OF SE CTION 40(A)(IA), AND THE NEED OF ITS FAIR, JUST AND EQUIT ABLE INTERPRETATION. THIS APPROACH IS QUALITATIVELY DIFF ERENT FROM PERCEIVING THE OBJECT OF SECTION 40(A)(IA) AS AWARD ING OF COSTS ON THE ASSESSEES WHO FAIL TO COMPLY WITH THE RELEVANT PROVISIONS BY CONSIDERING OVERALL OBJECTIVE OF BOOS TING TDS COMPLIANCE. NOT ONLY THE CONCLUSIONS ARRIVED AT BY THE SPECIAL BENCH WERE DISAPPROVED BUT THE VERY FUNDAME NTAL I.T.A. NO. 3182/DEL/2013 ASSESSMENT YEAR 2008-09 7 ASSUMPTION UNDERLYING ITS APPROACH, I.E. ON THE ISS UE OF THE OBJECT OF SECTION 40(A)(IA), WAS REJECTED TOO. IN A NY EVENT, EVEN GOING BY BHARTI SHIPYARD DECISION (SUPRA), WHA T WE HAVE TO REALLY EXAMINE IS WHETHER 2012 AMENDMENT, INSERTING SECOND PROVISO TO SECTION 40(A)(IA), DEAL S WITH AN INTENDED CONSEQUENCE OR WITH AN UNINTENDED CONSEQUENCE. 7. WHEN WE LOOK AT THE OVERALL SCHEME OF THE SECTI ON AS IT EXISTS NOW AND THE BIGGER PICTURE AS IT EMERGES AFT ER INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA), I T IS BEYOND DOUBT THAT THE UNDERLYING OBJECTIVE OF SECTION 40(A )(IA) WAS TO DISALLOW DEDUCTION IN RESPECT OF EXPENDITURE IN A SITUATION IN WHICH THE INCOME EMBEDDED IN RELATED PAYMENTS RE MAINS UNTAXED DUE TO NON DEDUCTION OF TAX AT SOURCE BY TH E ASSESSEE. IN OTHER WORDS, DEDUCTIBILITY OF EXPENDIT URE IS MADE CONTINGENT UPON THE INCOME, IF ANY, EMBEDDED I N SUCH EXPENDITURE BEING BROUGHT TO TAX, IF APPLICABLE. IN EFFECT, THUS, A DEDUCTION FOR EXPENDITURE IS NOT ALLOWED TO THE ASSESSEES, IN CASES WHERE ASSESSEES HAD TAX WITHHOL DING OBLIGATIONS FROM THE RELATED PAYMENTS, WITHOUT CORRESPONDING INCOME INCLUSION BY THE RECIPIENT. TH AT IS THE CLEARLY DISCERNABLE BIGGER PICTURE, AND, UNMISTAKAB LY, A VERY PRAGMATIC AND FAIR POLICY APPROACH TO THE ISSUE H OWSOEVER BELATED THE REALIZATION OF UNINTENDED AND UNDUE HAR DSHIPS TO THE TAXPAYERS MAY HAVE BEEN. IT SEEMS TO PROCEED ON THE BASIS, AND RIGHTLY SO, THAT SEEKING TAX DEDUCTION A T SOURCE COMPLIANCE IS NOT AN END IN ITSELF, SO FAR AS THE S CHEME OF THIS LEGAL PROVISION IS CONCERNED, BUT IS ONLY A ME AN OF RECOVERING DUE TAXES ON INCOME EMBEDDED IN THE PAYM ENTS MADE BY THE ASSESSEE. THATS HOW, AS WE HAVE SEEN A SHORT WHILE AGO, HONBLE DELHI HIGH COURT HAS VISUALIZED THE SCHEME OF THINGS AS EVIDENT FROM THEIR LORDSHIPS REFERENCE TO AUGMENTATION OF RECOVERIES IN THE CONT EXT OF LOSS OF REVENUE AND DEPRIVING THE GOVERNMENT OF THE TAX DUE AND PAYABLE. 8. WITH THE BENEFIT OF THIS GUIDANCE FROM HONBLE DELHI HIGH COURT, IN VIEW OF LEGISLATIVE AMENDMENTS MADE FROM TIME TO TIME, WHICH THROW LIGHT ON WHAT WAS ACTUALLY SOUGHT TO BE ACHIEVED BY THIS LEGAL PROVISION, AND IN THE LIGHT OF THE ABOVE I.T.A. NO. 3182/DEL/2013 ASSESSMENT YEAR 2008-09 8 ANALYSIS OF THE SCHEME OF THE LAW, WE ARE OF THE CO NSIDERED VIEW THAT SECTION 40(A)(IA) CANNOT BE SEEN AS INTEN DED TO BE A PENAL PROVISION TO PUNISH THE LAPSES OF NON DEDUCTI ON OF TAX AT SOURCE FROM PAYMENTS FOR EXPENDITURE- PARTICULAR LY WHEN THE RECIPIENTS HAVE TAKEN INTO ACCOUNT INCOME EMBED DED IN THESE PAYMENTS, PAID DUE TAXES THEREON AND FILED IN COME TAX RETURNS IN ACCORDANCE WITH THE LAW. AS A COROLLARY TO THIS PROPOSITION, IN OUR CONSIDERED VIEW, DECLINING DEDU CTION IN RESPECT OF EXPENDITURE RELATING TO THE PAYMENTS OF THIS NATURE CANNOT BE TREATED AS AN INTENDED CONSEQUENCE OF S ECTION 40(A)(IA). IF IT IS NOT AN INTENDED CONSEQUENCE I.E . IF IT IS AN UNINTENDED CONSEQUENCE, EVEN GOING BY BHARTI SHIPYA RD DECISION (SUPRA), REMOVING UNINTENDED CONSEQUENCES TO MAKE THE PROVISIONS WORKABLE HAS TO BE TREATED AS RETROSPECTIVE NOTWITHSTANDING THE FACT THAT THE AME NDMENT HAS BEEN GIVEN EFFECT PROSPECTIVELY. REVENUE, THUS , DOES NOT DERIVE ANY ADVANTAGE FROM SPECIAL BENCH DECISION IN THE CASE BHARTI SHIPYARD (SUPRA). 9. ON A CONCEPTUAL NOTE, PRIMARY JUSTIFICATION FOR SUCH A DISALLOWANCE IS THAT SUCH A DENIAL OF DEDUCTION IS TO COMPENSATE FOR THE LOSS OF REVENUE BY CORRESPONDING INCOME NOT BEING TAKEN INTO ACCOUNT IN COMPUTATION OF TAXA BLE INCOME IN THE HANDS OF THE RECIPIENTS OF THE PAYMENTS. SUC H A POLICY MOTIVATED DEDUCTION RESTRICTIONS SHOULD, THEREFORE, NOT COME INTO PLAY WHEN AN ASSESSEE IS ABLE TO ESTABLISH THA T THERE IS NO ACTUAL LOSS OF REVENUE. THIS DISALLOWANCE DOES DEIN CENTIVIZE NOT DEDUCTING TAX AT SOURCE, WHEN SUCH TAX DEDUCTIO NS ARE DUE, BUT, SO FAR AS THE LEGAL FRAMEWORK IS CONCERNE D, THIS PROVISION IS NOT FOR THE PURPOSE OF PENALIZING FOR THE TAX DEDUCTION AT SOURCE LAPSES. THERE ARE SEPARATE PENA L PROVISIONS TO THAT EFFECT. DEINCENTIVIZING A LAPSE AND PUNISHING A LAPSE ARE TWO DIFFERENT THINGS AND HAVE DISTINCTL Y DIFFERENT, AND SOMETIMES MUTUALLY EXCLUSIVE, CONNOTATIONS. WHE N WE APPRECIATE THE OBJECT OF SCHEME OF SECTION 40(A)(IA ), AS ON THE STATUTE, AND TO EXAMINE WHETHER OR NOT, ON A FAIR, JUST AND EQUITABLE INTERPRETATION OF LAW- AS IS THE GUIDANC E FROM HONBLE DELHI HIGH COURT ON INTERPRETATION OF THIS LEGAL PROVISION, IN OUR HUMBLE UNDERSTANDING, IT COULD NO T BE AN INTENDED CONSEQUENCE TO DISALLOW THE EXPENDITURE, DUE TO NON DEDUCTION OF TAX AT SOURCE, EVEN IN A SITUATION IN WHICH I.T.A. NO. 3182/DEL/2013 ASSESSMENT YEAR 2008-09 9 CORRESPONDING INCOME IS BROUGHT TO TAX IN THE HANDS OF THE RECIPIENT. THE SCHEME OF SECTION 40(A)(IA), AS WE S EE IT, IS AIMED AT ENSURING THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUA TION IN WHICH INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UN TAXED DUE TO TAX WITHHOLDING LAPSES BY THE ASSESSEE. IT I S NOT, IN OUR CONSIDERED VIEW, A PENALTY FOR TAX WITHHOLDING LAPS E BUT IT IS A SORT OF COMPENSATORY DEDUCTION RESTRICTION FOR AN I NCOME GOING UNTAXED DUE TO TAX WITHHOLDING LAPSE. THE PEN ALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEPARATELY PROVIDED FOR IN SECTION 271 C, AND, SECTION 40(A)(IA) DOES NOT ADD TO THE SAME. THE PROVISIONS OF SECTION 40(A)(IA), AS THEY EXISTE D PRIOR TO INSERTION OF SECOND PROVISO THERETO, WENT MUCH BEYO ND THE OBVIOUS INTENTIONS OF THE LAWMAKERS AND CREATED UND UE HARDSHIPS EVEN IN CASES IN WHICH THE ASSESSEES TAX WITHHOLDING LAPSES DID NOT RESULT IN ANY LOSS TO THE EXCHEQUER. NOW THAT THE LEGISLATURE HAS BEEN COMPASSIONATE ENOUGH TO CURE T HESE SHORTCOMINGS OF PROVISION, AND THUS OBVIATE THE UNI NTENDED HARDSHIPS, SUCH AN AMENDMENT IN LAW, IN VIEW OF THE WELL SETTLED LEGAL POSITION TO THE EFFECT THAT A CURATIV E AMENDMENT TO AVOID UNINTENDED CONSEQUENCES IS TO BE TREATED A S RETROSPECTIVE IN NATURE EVEN THOUGH IT MAY NOT STAT E SO SPECIFICALLY, THE INSERTION OF SECOND PROVISO MUST BE GIVEN RETROSPECTIVE EFFECT FROM THE POINT OF TIME WHEN TH E RELATED LEGAL PROVISION WAS INTRODUCED. IN VIEW OF THESE DI SCUSSIONS, AS ALSO FOR THE DETAILED REASONS SET OUT EARLIER, WE C ANNOT SUBSCRIBE TO THE VIEW THAT IT COULD HAVE BEEN AN I NTENDED CONSEQUENCE TO PUNISH THE ASSESSEES FOR NON DEDUCT ION OF TAX AT SOURCE BY DECLINING THE DEDUCTION IN RESPECT OF RELATED PAYMENTS, EVEN WHEN THE CORRESPONDING INCOME IS DUL Y BROUGHT 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 DECLARATO RY AND CURATIVE IN NATURE AND IT HAS RETROSPECTIVE EFFECT FROM 1STAPRIL, 2005, BEING THE DATE FROM WHICH SUB CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY THE FINANCE (NO. 2) ACT, 2004 . 10. IN VIEW OF THE ABOVE DISCUSSIONS, WE DEEM IT F IT AND PROPER TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OF FICER FOR FRESH ADJUDICATION IN THE LIGHT OF OUR ABOVE OBSERVATIONS AND AFTER CARRYING OUT NECESSARY VERIFICATIONS REGARDING RELA TED I.T.A. NO. 3182/DEL/2013 ASSESSMENT YEAR 2008-09 10 PAYMENTS HAVING BEEN TAKEN INTO ACCOUNT BY THE RECI PIENTS IN COMPUTATION OF THEIR INCOME, REGARDING PAYMENT OF T AXES IN RESPECT OF SUCH INCOME AND REGARDING FILING 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 OR DER. WE ORDER SO. 10. RESPECTFULLY FOLLOWING THE SAME, WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR THE LIMITED PURPO SE OF VERIFICATION. THE ASSESSING OFFICER SHALL VERIFY WHETHER THE PAYE E HAS FILED HIS RETURN OF INCOME AND PAID THE TAXES WITHIN STIPULAT ED TIME. IF IT HAS DONE SO, NO DISALLOWANCE SHALL BE MADE. 11. HENCE, THIS GROUND IS ALSO ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16TH OF FEBRU ARY, 2016. SD/- SD/- ( G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL MEMBER DT. 16TH FEBRUARY, 2016 GS I.T.A. NO. 3182/DEL/2013 ASSESSMENT YEAR 2008-09 11 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT(A) 4. DR ASSTT. REGISTRAR