M/S MANGLM HOUSING AND DEVELOPERS, JAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX, JAIPUR

ITA 324/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3645 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 07-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Non compliance; TDS
• Section: 40(a)(ia); 194C

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 324/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2014-15 M/S MANGLAM HOUSING & DEVELOPERS 6 TH FLOOR APEX MALL, TONK ROAD, LALKOTHI, JAIPUR. CUKE VS. THE ACIT, CIRCLE-6 JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAQFM 4554 K VIHYKFKHZ@ APPEL LANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI ANOOP SINGH (ADDL.CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 31/05/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 04/06/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF DATED 22.12.2017 OF CIT (A), JAIPUR FOR A.Y. 2014-15. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS AS UNDER:- 1. THAT THE AUTHORITIES BELOW HAS ERRED IN LAW AND FACTS IN DISALLOWING/CONFIRMING THE ADDITIONS OF THE AMOUNT OF RS. 8,46,733/- U/S 40(A)(IA) OF THE INCOME TAX ACT, 196 1 ON TECHNICAL BREACH OF NON SUBMISSION OF FROM 15G/15H BY THE ASS ESSEE TO THE AUTHORITIES WHICH RESULTED NO LOSS TO THE REVEN UE AS THE TAX ITA NO. 324/JP/2018 M/S MANGLAM HOUSING & DEVELOPERS VS. ACIT 2 HAS BEEN PAID BY THE PAYEE OR NO TAX IS PAYABLE BY THE PAYEE AS THEIR INCOME WAS BELOW TAXABLE LIMIT. 2. THAT THE APPELLANT CRAVES RIGHT TO ADD, AMEND, A LTER, WITHDRAW ANY ONE OR MORE GROUNDS OF APPEAL. 2. THE AO NOTED THAT THE ASSESSEE HAS NOT DEDUCTED TDS IN RESPECT OF INTEREST PAID ON UNSECURED LOANS. THE ASSESSE HA S SUBMITTED THAT FORM 15G/15H WITH REFERENCE TO THESE PARTIES HOWEVE R, THE AO DID NOT ACCEPT THESE FORMS ON THE GROUND THAT AS PER THE PR OVISIONS OF SECTION 197A(IA) AND RULE 29C OF THE INCOME TAX RULES THE A SSESSEE WAS REQUIRED TO DELIVER THESE FORMS TO THE CHIEF COMMIS SIONER/ COMMISSIONER WITHIN THE TIME PERIOD AS PRESCRIBED. THEREFORE, IN THE ABSENCE OF FORM 15G/15H DELIVER TO THE PRESCRIBED A UTHORITY THE BENEFIT OF THESE FORMS WERE NOT ALLOWED BY THE AO. ACCORDIN GLY, THE AO DISALLOWED A SUM OF RS. 8,46,733/- BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE ASSESSEE CHALLENGED THE A CTION OF THE AO BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. 3. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSEE EXPLAINED BEFORE THE AUTHORITIES BELOW THA T THE PAYMENT OF INTEREST TO THESE PERSONS DID NOT REQUIRE DEDUCTION OF TAX AS THE INCOME OF THE RECIPIENT WAS BELOW TAXABLE LIMIT. IN SUPPOR T OF THIS EXPLANATION THE ASSESSEE FILED COPIES OF FORM 15G/15H OF ALL AS WELL AS COPY OF ITA NO. 324/JP/2018 M/S MANGLAM HOUSING & DEVELOPERS VS. ACIT 3 ITR/CERTIFICATE OF TWO PARTIES. THE LD AR HAS FURTH ER CONTENDED THAT WHEN THE ASSESSEE HAS ALREADY TAKEN THE DECLARATION FROM THE RECIPIENT THAT THEIR INCOME IS BELOW TAXABLE LIMIT AND TAKEN FORM 15G/15H THEN NON SUBMISSIONS OF THESE FORMS TO THE CHIEF COMMISS IONER/ COMMISSIONER CANNOT BE A GROUND FOR DISALLOWANCE U/ S 40(A)(IA) OF THE ACT. THERE IS SEPARATE ACTION PROVIDED U/S 272A(2)( F) OF THE ACT FOR NON SUBMISSION OF FORM 15G/15H TO CHIEF COMMISSIONER/CO MMISSIONER. THE LD. AR HAS RELIED UPON THE DECISION OF KARNATAKA HIGH COURT IN CASE OF CIT VS. SRI MARIKAMBA TRANSPORT CO. 379 ITR 129 AND SUBMITTED THAT THE HONBLE HIGH COURT HELD THAT FIL ING OF FORM 15I/15J IS DIRECTORY. ACCORDINGLY THE PROVISIONS OF SECTION 40 (A)(IA) WERE NOT ATTRACTED. THE LD. AR HAS ALSO RELIED UPON THE DECI SION OF THE MUMBAI BENCHES OF THE TRIBUNAL IN CASE OF KARWAT STEEL TRADERS VS. ITO 145 ITD 370 AS WELL AS DECISION OF THE HYDERABAD BENCHES OF T HE TRIBUNAL IN CASE OF ACIT VS. CHITTOR DISTT. CO-OPERATIVE CENTRAL BANK L TD. 161 ITD 282 . THUS, THE LD. AR HAS SUBMITTED THAT THE DISALLOWA NCE MADE BY THE AO IS NOT JUSTIFIED. 4. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE SCHEME AND PURPOSE OF OBTAINING THE FORM 15G/15H AND TO BE SUBMITTED TO T HE OFFICE OF CHIEF ITA NO. 324/JP/2018 M/S MANGLAM HOUSING & DEVELOPERS VS. ACIT 4 COMMISSIONER/COMMISSIONER IS TO BRING THE MATTER IN THE NOTICE OF THE TAXING AUTHORITY AND TO PREVENT THE AVOID OF TAX BY THE RECIPIENT OF THE AMOUNT WITHOUT SUBJECTED TO TDS. HE HAS RELIED UPON THE ORDER OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIALS ON RECORD. IN THE CASE IN HAND, THE ASSES SEE PAID INTEREST TO 6 PARTIES WITHOUT DEDUCTING TAX AT SOURCE TOTAL AMOUN TING TO RS. 8,46,733/-. THE ASSESSEE OBTAINED DECLARATION OF TH E RECIPIENT IN FORM 15G/15H TO THE EFFECT THEIR INCOME IS BELOW TAXABLE LIMIT. HOWEVER, THE ASSESSEE DID NOT SUBMIT THESE FORMS/DECLARATIONS IN THE OFFICE OF CHIEF COMMISSIONER/COMMISSIONER AS PRESCRIBED U/S 191A(2) OF THE ACT. THE AO DISALLOWED THE SAID CLAIM OF INTEREST OF RS. 8,4 6,733/- BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND REJECTING THE EXPLANATION OF THE ASSESSEE THAT THE ASSESSEE HAS A LREADY OBTAINED THE DECLARATION IN FORM 15G/15H FROM THESE PARTIES. THE RE IS NO QUARREL ON THE POINT THAT AS PER THE PROVISIONS OF SECTION 197 A(2) OF THE ACT THE ASSESSEE IS ALSO REQUIRED TO SUBMIT FORM 15G/15H TO THE OFFICE OF CHIEF COMMISSIONER/COMMISSIONER WITHIN THE PRESCRIBED PER IOD AND AS PER RULE 29C OF THE INCOME TAX RULES. HOWEVER, THE FAIL URE OF THE ASSESSEE TO COMPLY WITH THE CONDITIONS AS REQUIRED U/S 197A( 2) WOULD ATTRACT THE ITA NO. 324/JP/2018 M/S MANGLAM HOUSING & DEVELOPERS VS. ACIT 5 PROVISIONS OF SECTION 272A(2)(F) AND THEREFORE, THE PENALTY CAN BE IMPOSED ON ACCOUNT OF SUCH DEFAULT COMMITTED BY TH E ASSESSEE. SO FAR AS THE BENEFIT OF TAKING THE DECLARATION IN FORM 15 G/15H IS CONCERNED SECTION 197A(1A) CLEARLY STIPULATES THAT NO DEDUCTI ON OF TAX SHALL BE MADE IN THE CASE OF A PERSON (NOT BEING A COMPANY O R FIRM) IF SUCH PERSONS FURNISHED TO THE PAYER A DECLARATION IN WRI TING IN DUPLICATE IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER TO THE EFFECT THAT THE TAX ON HIS ESTIMATED TOTAL INCOME OF THE P REVIOUS YEAR INCLUSIVE OF THE INCOME SO RECEIVED WILL BE NIL. THEREFORE, A S PER THE PROVISIONS OF SECTION 197A(1A) THE ONLY REQUIREMENT IS TAKING THE DECLARATION IN WRITING FROM RECIPIENT AND VERIFICATION IN THE PRES CRIBED FORM AND ONCE THE REQUIREMENTS OF THIS SECTION IS COMPLIED WITH T HE ASSESSEE IS UNDER NO OBLIGATION TO DEDUCT TAX AT SOURCE ON SUCH PAYME NTS. SUB-SECTION (2) OF SECTION 197A IS A SEPARATE PROVISION REQUIRING T HE PAYER TO DELIVER THE DECLARATION SO OBTAIN TO THE PRINCIPLES CHIEF C OMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPLES COMMISSIONER OR COMMISSI ONER AS CASE MAY BE BEFORE THE DATE OF EXPIRY OF THE TIME PERIOD AS PRESCRIBED. THUS, THE NON COMPLIANCE OF SUB-SECTION (2) SECTION 197A WOUL D NOT IMPINGE THE BENEFIT SUB-SECTION (1A) OF SECTION 197A OF THE ACT . IF THE ASSESSEE HAS COMMITTED A DEFAULT IN COMPLIANCE OF SUB-SECTION (2 ) OF SECTION 197A ITA NO. 324/JP/2018 M/S MANGLAM HOUSING & DEVELOPERS VS. ACIT 6 THEN THE PENAL PROVISIONS OF SECTION 272A(2)(F) SHO ULD ATTRACT. THE HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. SRI MARIKAMBA TRANSPORT CO. (SUPRA) HAS HELD IN PARAS 4 AND 5 AS UNDER:- 4. THE COMBINED READING OF THESE TWO PROVISIONS MAKE IT CLEAR THAT IF THERE IS ANY BREACH OF REQUIREMENTS OF SECT ION 194C(3), THE QUESTION OF APPLICABILITY OF SECTION 40(A)(IA) ARISES. THE EXCLUSION PROVIDED IN SUB-SECTION OF SECTION 194C F ROM THE LIABILITY TO DEDUCT TAX AT SOURCE UNDER SUB-SECTION (2) WOULD BE COMPLETE, THE MOMENT THE REQUIREMENTS CONTAINED THE REIN ARE SATISFIED. ONCE, THE DECLARATION FORMS ARE FILED BY THE SUBCONTRACTOR, THE LIABILITY OF THE ASSESSEE TO DED UCT TAX ON THE PAYMENTS MADE TO THE SUB-CONTRACTOR WOULD NOT ARISE . AS WE HAVE EXAMINED, THE SUB-CONTRACTORS HAVE FILED FORM NO. 15-I BEFORE THE ASSESSEE. SUCH BEING THE CASE, THE ASSES SEE IS NOT REQUIRED TO DEDUCT TAX UNDER SECTION 194C(3) OF THE ACT AND TO FILE FORM NO.15J. IT IS ONLY A TECHNICAL DEFECT AS POINTED OUT BY THE TRIBUNAL IN NOT FILING FORM NO.15J BY THE ASSES SEE. THIS MATTER WAS EXTENSIVELY CONSIDERED BY THE ITAT, AHME DABAD BENCH IN VALIBHAI KHANDBAI MANKAD'S CASE (SUPRA) AN D THE SAID JUDGMENT HAS BEEN UPHELD BY IN HIGH COURT OF GUJARA T IN CIT V. VALIBHAI KHANBHAI MANKAD [2013] 216 TAXMAN 18/28 TAXMANN.COM 119 WHEREIN IT IS HELD THAT ONCE THE CONDITIONS OF SECTION 194C(3) WERE SATISFIED, THE LIABILITY OF TH E PAYEE TO DEDUCT TAX AT SOURCE WOULD CEASE AND ACCORDINGLY, APPLICAT ION OF SECTION 40(A)(IA) WOULD ALSO NOT ARISE. THE TRIBUNAL, PLACI NG RELIANCE ON THE JUDGMENT OF THE ITAT, AHMEDABAD BENCH, HAS DISM ISSED THE APPEAL FILED BY THE REVENUE. WE AGREE WITH THE SAID PROPOSITIONS AND HOLD THAT FILING OF FORM NO.15I/J IS ONLY DIREC TORY AND NOT MANDATORY. 5. IN THE CIRCUMSTANCES, NO INTERFERENCE IS WARRANTED WITH THE WELL CONSIDERED ORDER PASSED BY THE TRIBUNAL. ACCOR DINGLY, NO SUBSTANTIAL QUESTIONS OF LAW ARISES FOR OUR CONSIDE RATION AND FOR ITA NO. 324/JP/2018 M/S MANGLAM HOUSING & DEVELOPERS VS. ACIT 7 THE FORGOING REASONS, WE DISMISS THE APPEAL FILED B Y THE REVENUE. THE MUMBAI BENCHES OF THE TRIBUNAL IN CASE OF KAR WAT STEEL TRADERS VS. ITO (SUPRA) AS WELL AS HYDERABAD BENCHES OF THE TRIBUNAL IN CASE OF ACIT VS. CHITTOR DISTT. CO-OPERATIVE CENTRAL BANK L TD. (SUPRA) HAVE TAKEN A CONSISTENT VIEW THAT NON PRODUCTION OF FORM 15G/15H WOULD NOT LEAD TO DISALLOWANCE U/S 40(A)(IA) OF THE ACT. ACCORDINGLY, FOLLOWING THE DECISIONS OF HONBLE KARNATAKA HIGH COURT AS WE LL AS COORDINATE BENCHES OF THE TRIBUNAL WE DELETE THE DISALLOWANCE MADE BY THE AO U/S 40(A)(IA) OF THE IT ACT. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/06/2018. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 04/06/2018. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S MANGLAM HOUSING & DEVELOPERS, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ACIT, CIRCLE-6, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) ITA NO. 324/JP/2018 M/S MANGLAM HOUSING & DEVELOPERS VS. ACIT 8 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 324/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR