M. Sailaja, Secunderabad V. ITO, Ward 10(4), Hyderabad

ITA 354/HYD/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9034 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 21-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Keywords: Unexplained investment; Business income; Business expenditure; Loose papers; Retrospective amendment; Additional evidence; Non-deduction of tax; Corroborative evidences; Onus to prove
• Section: 43B; 201(1); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.354/HYD/2013 ASSESSMENT YEAR 2009-2010 SMT. M. SAILAJA, PROP. FAIR DEAL ENTERPRISES SECUNDERABAD PAN AFJPM4981Q INCOME TAX OFFICER, WARD 10(4) HYDERABAD. APPELLANT) (RESPONDENT) ITA.NO.428/HYD/2013 ASSESSMENT YEAR 2009-2010 INCOME TAX OFFICER, WARD 10(4) HYDERABAD. VS. SMT. M. SAILAJA, PROP. FAIR DEAL ENTERPRISES SECUNDERABAD PAN AFJPM4981Q (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. K. GOPAL FOR REVENUE : MR. RAJAT MITRA DATE OF HEARING : 08.10.2014 DATE OF PRONOUNCEMENT : 02.01.2015 ORDER PER B. RAMAKOTAIAH, A.M. THESE ARE CROSS APPEALS BY ASSESSEE AND REVENUE AGAINST THE ORDER OF LD. CIT(A)-VI, DATED 28.12.201 2 FOR THE A.Y. 2009-2010. WE HAVE HEARD THE LD. COUNSEL AND L D. D.R. AND PERUSED THE DOCUMENTS PLACED IN PAPER BOOK. CER TAIN CLARIFICATIONS WERE ALSO SOUGHT DURING THE COURSE O F HEARING WHICH WERE CONSIDERED WHILE DECIDING THE ISSUES. 2 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. 2. BRIEFLY STATED FACTS ARE THAT ASSESSEE, AN INDIVIDUAL, IS INTO THE BUSINESS OF TRADING IN SURG ICAL ITEMS IN THE NAME AND STYLE OF M/S. FAIR DEAL ENTERPRISES, A PROPRIETARY CONCERN. SURVEY WAS CONDUCTED ON 03.11.2008, IN THE BUSINESS PREMISES OF ASSESSEE ALONG WITH THE BUSINE SS PREMISES OF M/S. SRI KRISHNA SURGICALS, A PROPRIETA RY CONCERN OF MR. M. MURALIDHAR RAO, HUSBAND OF ASSESSEE. DURI NG THE COURSE OF SURVEY PROCEEDINGS, CERTAIN LOOSE SHEETS/ DOCUMENTS WERE FOUND AND IMPOUNDED, NOTICING CERTAIN INVESTME NTS INCLUDING THE INVESTMENTS IN IMMOVABLE PROPERTIES. BASED ON THE SAID FINDINGS, THE FOLLOWING ADDITIONS WERE MAD E. A. UNEXPLAINED INVESTMENT IN PURCHASE OF LAND RS.68,89,250 B. UNEXPLAINED INVESTMENT IN PURCHASE OF LAND RS.2,21,50,000 C. UNEXPLAINED INVESTMENT IN CONSTRUCTION OF HOUSE RS.24,12,341 D. UNACCOUNTED CASH FOUND RS.5,13,000 E. UNEXPLAINED INVESTMENT/LOANS ADVANCED RS.70,00,000 F. UNDISCLOSED INCOME RS.75,00,000 G. DISALLOWANCE OF INTEREST PAID U/S.40A(IA) RS.21,11,274 3. ASSESSEE PREFERRED AN APPEAL RAISING RELEVANT GROUNDS. LD. CIT(A) IN THE APPEAL HAS DELETED THE A DDITIONS MADE AT SL.NO. (A), (D) TO (F) AND DIRECTED A.O. TO EXAMINE (C) VIZ., UNEXPLAINED INVESTMENT IN CONSTRUCTION OF HOU SE AS THE INVESTMENTS WERE EXPLAINED BY ASSESSEE THROUGH BANK STATEMENTS. LD. CIT(A) CONFIRMED THE ADDITIONS AT I TEM (B) AND (G). ASSESSEE IS AGGRIEVED AND RAISED 13 GROUNDS ON THESE TWO ISSUES. REVENUE IS AGGRIEVED ON DELETION OF ADDITIO N AT ITEM (A) AND DIRECTION WITH REFERENCE TO ITEM (C). 3 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. ITA.NO.354/HYD/2013 : 4. IN THIS APPEAL, ASSESSEE IS CONTESTING THE CONFIRMATION OF ADDITION OF UNEXPLAINED INVESTMENT IN PURCHASE OF PLOT VIDE GROUND NOS. 2 TO 9 AND ADDITI ON UNDER SECTION 40(A)(IA) OF ITEM (G) VIDE GROUNDS 10 TO 12 WHILE GROUNDS 1 AND 13 ARE GENERAL IN NATURE. ISSUE OF ADDITION OF RS.2,21,50,000 AS UNEXPLAINED INVESTMENTS : 5. THE FACTS LEADING TO THE ADDITION ARE THAT DURING THE COURSE OF SURVEY PROCEEDINGS DOCUMENTS/ MATERIAL IMPOUNDED VIDE PAGES 146 TO 151 OF ANNEXUR E A/FDE/01 CONTAINED UNSIGNED AGREEMENT OF SALE ENTER ED BETWEEN SMT. YELETI ANNAPURNA REDDY AND ASSESSEE FO R PURCHASE OF LAND ADMEASURING 500 SQ. YARDS SITUATED AT KAVURI HILLS, FOR A CONSIDERATION OF RS. 2,95,50,00 0/- WHEREIN THE DETAILS OF PART OF CONSIDERATION PAID ( RS.74 LAKHS ) WERE INDICATED ALONG WITH THE BALANCE OF TH E AMOUNTS PAYABLE (RS.2,21,50,000). INFORMATION ON LO SE SHEETS FOUND INDICATED PAYMENT OF AMOUNTS TO THE TU NE OF RS.2,21,50,000/-, NOTED AGAINST DIFFERENT DATES AND PARTIES UNDER THE HEADING 'FOE'. ON BEING QUESTIONE D ABOUT THE AGREEMENT, ASSESSEE'S HUSBAND REPLIED THA T THESE AGREEMENTS WERE NOT SIGNED BY THE SELLER AS T HE CONDITIONS WERE NOT AGREED UPON AND TRANSACTION TOO K PLACE WITH DIFFERENT CONDITIONS AND THE PROPERTY WA S REGISTERED, IN THE NAME OF MRS. SAILAJA, SUBSEQUENT LY. IT WAS FURTHER STATED THAT THE PROPERTY IS SITUATED IN A WATER BODY ZONE OR FULL TANK LEVEL ZONE, WHERE PERMISSIONS ARE NOT GRANTED FOR ANY CONSTRUCTION AN D 4 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. THERE WAS ERROR IN THE MENTIONING OF AMOUNT BY THE DOCUMENT WRITER. IT WAS FURTHER STATED BEFORE THE A O THAT DUE TO RECESSION AROUND HITECH CITY, THE PLOT WAS RENEGOTIATED FOR RS. 60,56,000 AND COPY OF SALE DEE D WAS SUBMITTED. DISBELIEVING THE VERSION OF ASSESSEE, AO OBSERVED THAT THE PAGE NO.151 OF ANNEXURE A/FDE/02 HAS INDICATED THE AMOUNTS TO THE TUNE OF RS.2,21,50 ,000, AS PAYMENTS, NOTED AGAINST DIFFERENT DATES AND PART IES UNDER THE HEAD FDE, AND THE SAME REVEALS THAT THE DETAILS IN LOOSE SHEET ARE NOTHING BUT THE PAYMENTS MADE IN EXCESS OF CONSIDERATION INDICATED IN THE SALE DE ED. THUS, IT WAS CONCLUDED THAT THE TOTAL CONSIDERATION AGREED WAS RS.2,95,50,000, OUT OF WHICH AN AMOUNT O F RS. 74 LAKHS WAS PAID AT THE TIME OF ENTERING INTO THE AGREEMENT OF SALE AND THE BALANCE AMOUNT OF RS. 2,21,50,000 WAS PAID AS MENTIONED IN THE LOOSE SHEETS IMPOUNDED AS PAGE NO.151. A.O. ALSO OBSERVED THAT ASSESSEE PAID PART OF SALE CONSIDERATION IN ADVANCE BY WAY OF DD AND BY WAY OF CASH, AND IF THE VERSION OF FULL TANK LEVEL ZONE IS TO BE ACCEPTED AND THE REGISTRATI ON EFFECTED AS PER SRO FOR A VALUE OF RS. 60,56,000/- AS CORRECT, ASSESSEE SHOULD HAVE SHOWN THE PROOF FOR T HE DIFFERENCE AMOUNT RETURNED BY THE VENDOR. IN VIEW O F THE ABOVE, THE AO CONCLUDED THAT THE AMOUNT OF RS. 2,21,50,000/- MENTIONED IN THE PAGE NO. 151, REPRESENTED THE PAYMENTS MADE TO THE LAND OWNER FOR PURCHASE OF LAND ADMEASURING 500 SQ. YARDS AT KAVUR I HILLS AT THE TIME OF REGISTRATION AND ACCORDINGLY T HE SAID AMOUNT HAS BEEN TREATED AS THE UNEXPLAINED INVESTME NT MADE FOR PURCHASE OF PROPERTY BY ASSESSEE AND WAS ACCORDINGLY BROUGHT TO TAX. 5 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. 6. BEFORE THE LD. CIT(A) ASSESSEE MADE DETAILED SUBMISSIONS DURING THE COURSE OF APPELLATE PROCEEDI NGS, REITERATING THE FACTS PUT FORTH BEFORE THE ASSESSIN G OFFICER. ASSESSEE SUBMITTED THE COPY OF THE STATEME NT RECORDED FROM THE VENDOR OF PLOT, AS AN ADDITIONAL EVIDENCE WHEREIN THE VENDOR HAD ACCEPTED THE CONSIDERATION OF RS. 60,56,000/- ONLY. AN AFFIDAVIT FROM THE VENDOR SMT. A. ANNAPURNA REDDY WAS ALSO FILED A S ADDITIONAL EVIDENCE UNDER RULE 46A OF THE IT RULES. IT WAS FURTHER ARGUED THAT THE NOTINGS ON THE LOOSE SH EET IS NOT IN THE HAND WRITING OF ASSESSEE OR ANY OF HER S TAFF AND THE PAPER DOES NOT CONTAIN ANY REFERENCE TO THE SALE TRANSACTION. IT WAS FURTHER STATED THAT THERE IS NO PAYMENT OF RS.1.50 CRORES BY WAY OF DD AT DUBAI AS SHOWN IN THE PAPER. IT WAS ALSO STATED THAT THE PAP ER REFERS TO THE PAYMENT OF RS. 50 LAKHS TO THE AUDITO R, WHICH IS NOT CORRECT AND HENCE, THE LOSE SHEET I.E. PAGE NO. 151 OF ANNEXURE A/FDE/02 CANNOT FORM THE BASIS FOR MAKING ADDITION OF RS. 2,21,50,000/-. 6.1. AS THE INFORMATION FILED ALONG WITH THE SUBMISSIONS CONSTITUTED ADDITIONAL EVIDENCE, THE SA ME WERE FORWARDED TO THE ASSESSING OFFICER CALLING FOR A REPORT ON THE SAME. HOWEVER, AS INDICATED BY CIT(A), THE REMAND REPORTS SUBMITTED ON 09.08.2012 AND 01.11.2012, WERE SILENT ON THIS ASPECT. 6.2. IN THE OBJECTIONS TO THE REMAND REPORT, ASSESSEE HAD STATED THAT AO IN THE REMAND PROCEEDIN GS HAD DECLINED TO VERIFY THE ADDITIONAL EVIDENCE PROD UCED AND REITERATED THE FACTS AS MENTIONED IN DETAIL AND THAT THE ADDITION IS TO BE DELETED. 6 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. 7. LD. CIT(A) HAS DECIDED THE ISSUE CONFIRMING THE ADDITIONS AS UNDER : 7.5. PERUSED THE OBSERVATIONS OF THE AO AND THE SUBMISSIONS OF APPELLANT. AS COULD BE SEEN FROM THE FACTS OF THE CASE, APPELLANT MRS. SAILAJA ENTER ED INTO AN AGREEMENT FOR SALE WITH MRS. Y. ANNAPURNA REDDY, RESIDENT OF HYDERABAD FOR PURCHASE OF PLOT ADMEASURING 500 SQ. YARDS LOCATED AT PLOT NO. 170, KAVURI HILLS, FOR AN AGREED SALE CONSIDERATION OF R S. 2,95,00,000/- THAT IS @ RS.59,100 PER SQ. YARD, VIDE THE AGREEMENT FOR SALE DT. 12.04.2008, WHOSE COPY WAS FOUND AND IMPOUNDED DURING THE COURSE OF THE SURVEY PROCEEDINGS CONDUCTED IN THE GROUP ON 3.11.2008. AS PER THE IMPOUNDED MATERIAL (PAGE NO. 146 TO 151 OF A/FDE/OL), IN THE FORM OF COPY OF AGREEMENT DT. 12.04.2008, THE AMOUNTS OF RS. 74,00,000 (MENTIONED BY AO AS RS. 73 LAKHS) WERE PAID TO THE VENDOR IN PURSUANCE OF THE SAID AGREEMENT WITH AN AMOUNT OF RS. 14 LAKHS (RS.13 LAKHS + ONE LAKH) PAID IN CASH AND RS. 60 LAKHS PAID BY THE DEMAND DRAFT DT. 12.04.2008. THE SAID AGREEMENT FOR SALE ALSO INDICATE THE BALANCE OF THE AMOUNTS PAYABLE AT RS. 2,21,50,000/-, PAYABLE AT THE TIME OF REGISTRATION AND THE LOSE SHEET NUMBERE D AS 151 OF ANNEXURE A/FDE/01 OF THE IMPOUNDED MATERIAL INDICATE FURTHER THAT THE PAYMENT OF THE SAID BALANCE AMOUNTS, TO THE TUNE OF RS. 2,21,50,000/- ON VARIOUS DATES THROUGH VARIOUS MODES / PERSONS. HOWEVER, THE SAID TRANSACTION WAS EXECUTED BY A SALE DEED DT. 28.6.2008, VIDE DOCUMENT NO.4708/2008, WITH A SALE CONSIDERATION SHOWN AT RS. 60,56,000/-. BASED ON THE CONTENTS OF THE AGREEMENTS OF THE SALE (PAGE NO. 146 TO 150 OF ANNEXURE A/FDE/L ) AND THE CORROBORATE EVIDENCE AS FOUND IN THE LOSE SHEET OF THE IMPOUNDED MATERIAL (PAGE 151 OF A/FDE/01), WITH REFERENCE TO THE CONSIDERATION REFLECTED IN SALE DEED DT. 28.6.2008, THE AO HAS ARRIVED AT THE CONCLUSION THAT THE AMOUN T OF RS. 2,21,50,000 REPRESENT THE UNEXPLAINED INVESTMENT OF APPELLANT BEING THE EXTRA/ UNACCOUNTED SALE CONSIDERATION PAID FOR ACQUIRING THE PROPERTY UNDER REFERENCE. IN THE PROCESS, THE A O DISBELIEVED THE EXPLANATION OF THE APPELLANT THAT THOUGH THE AGREEMENT WAS REACHED FOR SALE OF PROPERTY FOR A CONSIDERATION AS REFERRED IN THE 7 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. AGREEMENT FOR SALE, IT WAS RENEGOTIATED SUBSEQUENTL Y ON THE ACCOUNT OF LOCATION OF THE PLOT IN FTL ZONE WHERE PERMISSIONS WOULD NOT BE GIVEN FOR ANY CONSTRUCTION. IN THIS REGARD, THE AO FURTHER OBSERV ED THAT NO SUCH INFIRMITY IN THE LAND WAS NOTICED AND NOTED THAT APPELLANT HAS CONSTRUCTED THE COMMERCIA L COMPLEX ON THE SAME PROPERTY SUBSEQUENTLY. THE AO ALSO RELIED ON THE RATIO OF DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE (SUPRA). 7.6. ON THE OTHER HAND APPELLANT CONTENDED THAT NO EXTRA AMOUNTS WERE PAID FOR THE SAID ACQUISITION OF THE PROPERTY ON ACCOUNT OF RENEGOTIATION WITH THE VENDOR, WITH REGARD TO THE PROBLEM ASSOCIATED WITH LOCATION OF PLOT IN FTL ZON E. IT WAS ALSO CONTENDED BY APPELLANT THAT THE VENDOR REFUSED TO REFUND THE AMOUNT PAID IN PURSUANCE OF THE AGREEMENT. IT HAS BEEN FURTHER CONTENDED BY APPELLANT THAT THE VENDOR HAS CONFIRMED THE SALE CONSIDERATION AT RS.60,56,000 AS MENTIONED IN THE SALE DEED VIDE HER STATEMENT DT. 2.1.2009 RECORDED BY ADIT (INV.) AND ALSO CONFIRMED BY AN AFFIDAVIT SUBMITTED SUBSEQUENTLY. APPELLANT FURTHER TRIED TO SUBSTANTIATE THE CLAIM THAT THE SAID LAND / PLOT IS SUFFERING FROM CERTAIN LOCATIONAL PROBLEMS BY CITIN G THE SALE OF THE SAID PROPERTY BY ASSESSEE ON 12.12.2011 FOR A CONSIDERATION OF RS.65,60 ,000/-. 7.7. IN THE CONTEXT OF THE CLAIMS AND COUNTER CLAI MS AS REGARDS TO THE RELEVANCE OF THE CONSIDERATION AS REFLECTED IN AGREEMENT FOR SALE VIS.A.VIS SALE DEED , TO ASCERTAIN THE QUANTUM OF THE UNACCOUNTED INVESTMENTS MADE BY THE APPELLANT, IT IS RELEVANT T O REFER TO THE PROVISIONS OF SEC. 69B WHICH I NDICATE THAT THE PROVISIONS OF SEC. 69B CAN BE EVOKED ON THE BAS IS OF THE FOLLOWING CIRCUMSTANCES, ON CUMULATIVE BASIS : I) WHERE IT IS FOUND THAT THE ASSESSEE MADE INVESTMENTS OR IS FOUND TO BE THE OWNER OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE AND; II) WHERE IT IS FOUND THAT THE AMOUNT EXPENDED ON MAKING SUCH INVESTMENTS OR ACQUIRING SUCH BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE EXCEEDS THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND; 8 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. III) EITHER THE ASSESSEE OFFERS NO EXPLANATION ABOU T SUCH EXCESS AMOUNT OR THE EXPLANATION OFFERED BY HIM IS NOT SATISFACTORY. A READING OF THE CONDITIONS FOR INVOKING THE PROVISIONS OF SEC. 69B, IT MAKES CLEAR THAT THE LEG AL FRICTION ENACTED BY THE SAID SECTION COMES INTO EFF ECT WHERE ALL THE ABOVE CIRCUMSTANCES DO FACTUALLY EXIS T AND THE ONUS TO PROVE THE EXISTENCE OF ALL SUCH CIRCUMSTANCES, LIES ON THE DEPARTMENT. IN THIS CASE , THE INFORMATION AS EVIDENCED THROUGH THE IMPOUNDED MATERIAL IN THE FORM OF THE AGREEMENTS FOR SALE ALO NG WITH OTHER EVIDENCES SUCH AS THE PAYMENTS BY DEMAND DRAFTS AND LOSE SHEETS FOUND DURING THE COURSE OF THE SURVEY PROCEEDINGS, INDICATE THE EXISTENCE OF ALL SUCH CIRCUMSTANCES AS PROVIDED IN SEC. 69B. THE AGREEMENT FOR SALE DT. 12.4.2008, CONSTITUTE A PRIMARY EVIDENCE WHICH INDICATE THE ACTUAL SALE CONSIDERATION AT RS. 2,95,00,000/-, IS FURTHER SUPPORTED BY THE CORROBORATIVE EVIDENCE OF PAYMENT OF A GOOD PORTION OF THE CONSIDERATION TO T HE EXTENT OF RS. 60,00,000/- BY WAY OF DEMAND DRAFT DT . 12.4.2008. THE AGREEMENT FOR SALE, THOUGH NOT SIGNE D BY THE VENDORS AND THE VENDEE INDICATE THE OTHER IMPORTANT INGREDIENTS OF AN EVIDENCE SUCH AS THE DETAILS OF THE LAND/PLOT UNDER TRANSACTION, SUCH AS THE AREA OF THE PLOT THE LOCATION OF THE PLOT AND I TS GENESIS WHICH WERE ALSO INCORPORATED IN THE SALE DEED EXECUTED SUBSEQUENTLY ON 28.6.2008, FOR SALE O F THE SAME PROPERTY SIGNED BY THE SAME SET OF' VENDORS AND VENDEES. THE AGREEMENT FOR SALE WAS IN THIS CASE ALSO CLEARLY INDICATING THE BALANCE OF TH E PAYMENTS TO BE MADE TO THE EXTENT OF RS. 2,21,50,000/- AT THE TIME OF REGISTRATION OF THE SA ID LAND AFTER REDUCING THE AMOUNT OF RS. 74 LAKHS PAID IN PURSUANCE OF THE AGREEMENT FOR SALE DT. 12.4.2008. FURTHER CORROBORATION OF THE EVIDENCE WA S INDICATED IN THE LOSE SHEET IMPOUNDED AS PAGE NO.151 OF A/FDE/01, INDICATING THE PAYMENTS OF THE BALANCE OF THE AMOUNTS. THE PAYMENT OF THE REASONABLE AMOUNTS AT THE TIME OF AGREEMENTS FOR SALE THAT TOO BY A DEMAND DRAFT INDICATE THE REAL INTENTION OF THE PARTIES TO THE TRANSACTION AND THE LATER DEVELOPMENTS AND EXPLANATION EITHER IN THE FORM OF STATEMENTS RECORDED OR AFFIDAVITS FILED FOR EXPLAINING THE REDUCED SALE CONSIDERATION IN THE SA LE DEED REGISTERED SUBSEQUENTLY, ONLY REFLECTS THE AFT ER 9 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. THOUGHTS AND THE HALF TRUTHS ON THE PARTS OF THE VENDORS AND VENDEE. 7.8. IN THE TRANSACTION OF SALE OF PROPERTY AT PLO T NO. 170, KAVURU HILLS, THE PAYMENT OF RS. 60 LAKHS BY DEMAND DRAFT DT. 12.4.2008, IN PURSUANCE OF AGREEMENT OF SALE DT. 12.4.2008, CONSTITUTE THE MAI N STAY OF THE CORROBORATIVE EVIDENCE AND SUPPORT THE PRIMARY EVIDENCE AS REGARD TO THE PAYMENT OF TOTAL CONSIDERATION OF RS. 2,95,00,000/- AS REFLECTED IN AGREEMENTS FOR SALE. THIS EVIDENCE/INFORMATION DEMOLISHES THE AFTERTHOUGHTS AND INFORMATION INCLUDING THE SALE DEED DT. 28.06.2008, ALONG WITH THE STATEMENT RECORDED FROM THE VENDOR OR THE AFFIDAVIT FILED BY THE VENDOR. THE AFFIDAVIT AND STATEMENT FROM THE VENDOR THAT IS MRS. ANNAPURNA REDDY ARE NOTHING BUT SELF SERVING INFORMATION AND EVIDENCE AND THE SAME NEED NOT BE CONSIDERED AS A CORROBORATIVE EVIDENCE, FOR THE REASON THAT THE AMOUNT OF CONSIDERATION AS CONFIRMED BY THE VENDOR WAS PUT AT RS. 60,56,000/- WHICH IS THE SAME AS THAT OF THE AMOUNT MENTIONED IN SALE DEED DT. 28.06.2008 WHEREAS THE AMOUNTS PAID AS PER AGREEMENT FOR SALE DT. 12.4.2008 ITSELF WAS RS. 74,00,000 INCLUDING THE AMOUNTS PAID BY DD. THIS WAS NEVER RETURNED BY THE VENDOR AFTER ADJUSTMENT OF THE CONSIDERATION OF RS. 60,56,000 AS PER SALE DEED. THIS MEANS, EVEN AS PER THE AGREEMENT FOR SALE THE MINIMUM AMOUNT EXCHANGED FOR TRANSACTION WAS RS.74 LAKHS WHICH WAS NOT DENIED EITHER OF THE PARTIES, AS AGAINST THE CONFIRMATION OF THE CONSIDERATION AT RS.60,56,000 BY THE VENDOR. THESE FACTS EXPLAIN THE CLEAR AFTERTHOUGHTS BOTH ON THE P ART OF THE VENDOR AND THE VENDEE. 7.9. FURTHER, THE INFIRMITY ATTRIBUTABLE TO THE LA ND THAT THE LAND WAS LOCATED IN FTL ZONE WAS NOT FULLY EXPLAINED BY ASSESSEE SINCE THE COMMERCIAL PROPERTY AT KAVURI HILLS, WAS IDENTIFIED AS THE PROPERTY IN WHICH MRS. SAILAJA AND MR. MURALIDHAR RAO, SHOWN TO HAVE MADE THE INVESTMENTS, AS PER THE SUBMISSIONS OF MR. MURALIDHAR RAO MADE DURING THE COURSE OF THE POST SURVEY PROCEEDINGS. IN THIS REGA RD IT IS RELEVANT TO REFER TO THE EXPLANATION OFFERED BY ASSESSEE FOR ADDITIONAL QUESTIONS. WHILE FURNISHING THE REPLY FOR SUCH QUESTIONS THE REPLY OF ASSESSEE FOR QUESTION NO.5 AND 6 INDICATE AS UNDER: 10 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. ANSWER TO QUESTION NO. 5 : ' NO PROPERTY WAS PURCHASED IN MY NAME FOR THE ASST. YEAR 2009-10. I POSSESS THE FOLLOWING PROPERTIES ON MY NAME: I HOUSE PROPERTY BEARING H .NO.6-1-190-25/2, PADMARAO NAGAR, SECUNDERABAD - 500 025 II. PLOT NO. 170, KAVURI HILLS, HYDERABAD, ON WHICH A COMMERCIAL COMPLEX IS BEING BUILT.' ANSWER TO QUESTION NO. 6: 'THE INVESTMENTS MADE ONLY FOR COMMERCIAL COMPLEX AT KAVURI HILLS ON PLOT NO. 170, TO A TUNE OF RS.48,24,683/- DURING THE FINANCIAL YEAR 2008-09 AND 2009-10.' THUS ASSESSEE INDICATES THAT COMMERCIAL PROPERTY WAS CONSTRUCTED ON PLOT NO. 170 AT KAVURI HILLS, WHICH IS NOTHING BUT THE PROPERTY UNDER REFERENCE AND THE SAME FACT INDICATE THAT THERE IS NO SUCH INFIRMITY AS ATTRIBUTABLE TO THE SAID LAND. 7 .10 IN THIS CASE, THE APPELLANT FAILED TO ADDUCE ANY COGENT EVIDENCE TO SUBSTANTIATE THE REDUCTION IN PURCHASE PRICE FROM RS.2,95,50,000 AS AGREED IN THE AGREEMENT FOR SALE DT. 12.4.2008, TO RS.60,56,000 AS RECORDED IN THE SALE DEED DT. 28.06.2008. THE ONLY REASON GIVEN BY THE APPELLANT IS THE LOCATION OF THE PLOT IN FTL ZONE WHICH ALSO STAND UNSUBSTANTIATED FOR THE REASONS INDICATED ABOVE. FURTHER, A PAYMENT OF MORE THAN 25% OF THE CONSIDERATION AT THE STAGE OF AGREEMENT FOR SALE, SUBSTANTIATE THE REAL QUANTUM OF CONSIDERATION AS REFLECTED IN AGREEMENT FOR SALE. IT IS ALSO RELEVAN T TO MENTION THAT THE APPELLANT SHOWN TO HAVE PAID RS. 74 LAKHS AT THE STAGE OF AGREEMENT FOR SALE WHICH WAS NOT DISPUTED. SUCH AMOUNTS ALSO EXCEEDS THE ACTUAL CONSIDERATION FOR WHICH THE LAND IS REGISTER ED FOR AND THE DETAILS OF PARTICULARS OF EXCESS PAYMENTS AND THE RESULTANT REFUNDS IF ANY ARE NOT REFERRED TO IN THE SALE DEED. ACCORDINGLY IT PROVES THAT THE SUBMISSIONS MADE IN THIS REGARD THAT THE NEGOTIATIONS WITH THE VENDOR AND HER REFUSAL TO REFUND THE AMOUNTS ETC. AMOUNTED TO THE AFTERTHOUGHTS ON THE PART OF THE APPELLANT . IN THIS CONTEXT, IT MAY BE RELEVANT TO REFER TO THE DECISIO N OF HON'BLE DELHI HIGH COURT IN THE CASE OF BELA JUNENA VS. CIT (339 ITR 144)(2011), WHEREIN THE DIFFERENCE 11 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. BETWEEN THE CONSIDERATION AS PER THE AGREEMENT FOR SALE AND THE SALE DEED WAS HELD TO BE THE UNEXPLAINED INVESTMENT. 7.11. THUS, RELYING ON THE RATIO OF THE JUDICIAL DECISION AND THE FACTS OF THE CASE, I AM OF THE CONSIDERED OPINION THAT THE INFORMATION REGARDING THE PURCHASE CONSIDERATION OF THE PROPERTY AS REFLECTED IN THE AGREEMENT FOR SALE WITH FURTHER SUPPORT OF DETAILS OF PAYMENTS BY THE DOS CONFIRM THE CORRECTNESS OF THE QUANTUM OF CONSIDERATION AT RS.2,95,50,000/-, AS AGAINST THE CONSIDERATION OF RS. 60,56,000/- SHOWN IN THE SALE DEED. FURTHER, THE EVIDENCE / INFORMATION FOUND IN THE FORM OF DETAILS OF PAYMENTS MADE SUBSEQUENTLY AS PER THE NOTINGS IN PAGE 151 OF A/FDE/01 WHICH ARE MATCHING EXACTLY WITH THE BALANCE OF THE AMOUNTS OF RS.2,21,50,000/- AS REFLECTED IN THE AGREEMENT FOR SALE INDICATE THE R ELEVANCE OF SUCH CORROBORATIVE EVIDENCE IN STRENGTHENING THE PRIMARY EVIDENCE OF THE CASE. FURTHER, SUCH DETAILS AT PAGE NO.151 OF T HE IMPOUNDED MATERIAL INDICATES THE NAME OF THE CONCERN AS FDE (FAIR DEAL ENTERPRISES) WHICH IS NOTHING BUT A PROPRIETARY CONCERN OF MRS. M.SAILAJA AND THIS FACT ALSO STRENGTHEN THE NATURE. OF CORROBORATIVE EVIDENCE EMBEDDED THEREIN. ACCORDINGLY, IT CAN BE HELD THAT THE AMOUNT OF RS.2,21,50,000 REPRESENT THE UNEXPLAINED INVESTMENT OF ASSESSEE FOR THE INVESTMENTS MADE IN THE PROPERTY UNDER REFERENCE DURING THE YEAR UNDER REFERENCE AND ACCORDINGLY THE ADDITION MADE ON SUCH BASIS IS SUSTAINED. THIS GROUND OF APPEAL IS TREATED AS DISMISSED. 8. LD. COUNSEL REFERRING TO THE ORDER OF LD. CIT(A ) SUBMITTED THAT THE CIT(A) ERRED IN CONSIDERING THE FACTS. HIS FIRST ARGUMENT WAS THAT LD. CIT(A) WAS CONFUSED WIT H THE TWO PROPERTIES ASSESSEE HAS DEALT WITH. HIS SUBMISSIONS ARE THAT THE PLOT NO.170 WHICH WAS SUBJECT MATTER OF DEAL WI TH MRS. Y. ANNAPURNA REDDY WAS DIFFERENT AND THIS PROPERTY WAS SOLD SUBSEQUENTLY AS EXPLAINED BEFORE AUTHORITIES. HOWEV ER, ASSESSEE AND HER HUSBAND HAS ANOTHER PROPERTY ON WH ICH A HOUSE WAS CONSTRUCTED ON WHICH A.O. MADE ADDITION O F 12 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. RS.24,12,341 EACH AS UNEXPLAINED. THEREFORE, LD. CI T(A) OBSERVATIONS IN PARA 7.9 WERE NOT CORRECT FACTUALLY . MOREOVER, THE STATEMENT EXTRACTED BY LD. CIT(A) WITH REFERENC E TO Q.5 IS NOT FROM EITHER ASSESSEE OR FROM MR. MURALIDHAR RAO , HER HUSBAND. THE SOURCE OF SUCH STATEMENT WAS NOT KNOW N AND ASSESSEE WAS NOT IN A POSITION TO EXPLAIN FROM WHER E LD. CIT(A) EXTRACTED THE STATEMENT. LD. COUNSEL THEN REFERRED TO THE DOCUMENTS ON RECORD AND EXPLANATIONS GIVEN TO SUBMI T THAT LD. CIT(A) ACCEPTED THE EXPLANATION WITH REFERENCE TO PURCHASE OF AGRICULTURAL LANDS WHEREAS, HE HAS NOT ACCEPTED THE EXPLANATION WITH REFERENCE TO THE PLOT 170. HE REFE RRED TO AFFIDAVIT FILED, STATEMENT RECORDED FROM SELLER, RE MAND REPORT OF A.O. AND REPLIES BY ASSESSEE AND FURTHER TO THE FAC T THAT THE SAID PROPERTY WAS SUBSEQUENTLY SOLD FOR MORE OR LES S SAME CONSIDERATION. IT WAS THE SUBMISSION THAT ADDITION CANNOT BE MADE ON DUMB DOCUMENTS. 9. LD. D.R. RELIED ON THE ORDER OF AUTHORITIES. AT OUR INSTANCE, HE ALSO PLACED COPIES OF TWO STATEMENTS R ECORDED FROM MR. MURALIDHAR RAO DATED 03.11.2008 AND 15.12. 2008 AND EXPRESSED INABILITY TO CONFIRM THE EXTRACT MADE BY LD. CIT(A) IN PARA 7.9 OF THE ORDER. 10. WE HAVE CONSIDERED RIVAL CONTENTIONS AND EXAMINED THE DOCUMENTS PLACED ON RECORD. AS FAR AS THE OBSERVATIONS OF LD. CIT(A) IN PARA 7.9 OF HIS ORDER ARE CONCERNED, THE SAME CANNOT BE SUPPORTED AS THERE IS NO SUCH STATEMENT MADE BY MR. MURALIDHAR RAO AND THE PROPER TIES ARE DIFFERENT. AS FAR AS PLOT NO.170 IS CONCERNED, THE SAME WAS SOLD AS SUCH WITHOUT ANY CONSTRUCTION ACTIVITY ON T HAT SUBSEQUENTLY. WE ARE OF THE OPINION THAT LD. CIT(A) WAS CONFUSED WITH TWO PROPERTIES IN KAVURI HILLS, ONE H ELD BY 13 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. ASSESSEE INDIVIDUALLY WITH THAT OF ANOTHER PROPERTY JOINTLY WITH HER HUSBAND ON WHICH INVESTMENTS WERE MADE (SUBJECT TO ADDITION BY A.O. SEPERATELY). TO THAT EXTENT, PARA 7.9 OF LD. CIT(A) CAN NOT BE CONSIDERED WHILE DECIDING THE IS SUE. 10.1. NOW COMING TO THE MERITS OF ADDITION, BOTH P ARTIES RELY ON THE DOCUMENTS TO DRAW DIFFERENT CONCLUSIONS . AS FAR AS AGREEMENT OF SALE IS CONCERNED, ASSESSEE IS NOT DEN YING THE SAME BUT ONLY THE PRICE AT WHICH IT IS NEGOTIATED. ASSESSEE ADMITS PAYMENT OF RS. 74 LAKHS AT THE TIME OF AGREE MENT (WRONGLY TAKEN AS RS. 73 LAKHS BY A.O.) IE. RS. 1 L AKH ON 09.02.2008, RS.60,00,000 BY WAY OF DD ON 21.02.2008 AND RS. 13 LAKHS ON DAY OF AGREEMENT IN CASH. THIS AMOU NT SEEMS TO HAVE BEEN ACCOUNTED FOR EVEN THOUGH THE SAID PRO PERTY WAS REGISTERED FOR RS.60,56,000 ONLY. A.O. DID NOT MADE ANY ADDITION OF THE AMOUNT FROM OUT OF RS. 74 LAKHS. TH US, THE CONTENTS OF THE AGREEMENT CANNOT BE DENIED, EVEN TH OUGH THE SAME IS NOT SIGNED BY THE PARTIES, THE PAYMENT BY D D WAS ALSO SUBSEQUENTLY ACKNOWLEDGED IN THE REGISTERED PU RCHASE DOCUMENT. 10.2. ASSESSEES CONTENTION THAT THE SAID PROPERTY IS IN FTL AND SO THE SAME COULD NOT BE BROUGHT AT HIGH PR ICE HAS NOT BEEN EXAMINED BY A.O. AT ALL. ASSESSEE CONTENTI ON THAT THE SAME WAS SUBSEQUENTLY SOLD WAS ALSO NOT EXAMINED BY AUTHORITIES. IN FACT, SUBSEQUENT SALE WAS NOT BEFOR E A.O. AND LD. CIT(A) GOT CONFUSED WITH ANOTHER PROPERTY WHILE CONFIRMING THE SAME. THESE CONTENTIONS OF ASSESSEE WERE UNVERI FIED. 10.3. AS FAR AS THE IMPOUNDED SHEET IS CONCERNED, THE SAME REPRESENTS FDE TRANSACTIONS. FDE IS THE ABBREV IATION OF ASSESSEE PROPRIETARY CONCERN, FAIR DEAL ENTERPRISE. IN THE 14 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. STATEMENT ON DATE OF SURVEY, ASSESSEE HUSBAND DID N OT DENY BUT STATED THAT HE WOULD EXPLAIN THE TRANSACTIONS T OMORROW (Q.NO.24 ON 03.11.2008), LIKE THE ANSWER TO MANY QU ESTIONS ON TRANSACTIONS PERTAINING TO FDE. A.O. DID NOT EXAMIN E WHETHER THE AMOUNT STATED THEREIN COULD BE CORROBORATED. TH E ENTRIES IN DOCUMENT ARE AS UNDER : FDE 13.06.2008 5,00,000 16.06.2008 5,00,000 18.06.2008 5,00,000 20.06.2008 5,00,000 TOTAL 20,00,000 CASH 1,50,000 AUDITOR 50,00,000 71,50,000 D/D TO DUBAI + INTEREST 3,00,000 1,50,00,000 2,21,50,000 THERE ARE PAYMENTS TO AN EXTENT OF RS.20,00,000 IN JUNE, 2008. WHETHER THESE PAYMENTS PERTAIN TO BUSINESS TRANSACTIONS OR TO THE LAND COULD NOT BE ASCERTAINE D IN THE ABSENCE OF ANY CORRELATION. EVEN THOUGH THE AMOUNT OF RS.2,21,50,000 + RS. 74 LAKHS PAID AT THE TIME OF AGREEMENT OF SALE, DO TOTAL TO AN AMOUNT OF RS. 2.95 CRORES AGREED AS PE R THE AGREEMENT OF SALE, THE PAYMENT OF SUCH AMOUNT C OULD NOT BE CONFIRMED AS SUCH. ONE REASON IS THAT THERE CANN OT BE ANY DD PAYMENT TO DUBAI. NO MONEY CAN BE REMITTED BY WA Y OF DD TO DUBAI. UNLESS THERE IS REMITTANCE TO THE SAID MR S. Y. ANNAPURNA BY ANY OTHER MEANS, THIS CAN NOT BE ACCEP TED. THIS ASPECT OF TRANSACTION WAS NOT EXAMINED BY A.O. NOR THE SAME WAS QUESTIONED FROM THE SAID VENDOR BY THE OFFICER WHO TOOK STATEMENT. UNLESS THERE ARE REMITTANCES THROUGH BAN KING CHANNEL TO THE VENDOR, THE SAID PAYMENT BY DD HAS N O 15 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. SIGNIFICANCE. FURTHER, PAYMENT OF RS.50,00,000 THR OUGH AUDITOR AND INTEREST OF RS.3,00,000 IS ALSO NOT VER IFIED. JUST BECAUSE AN AMOUNT OF RS.2,21,50,000 WAS NOTED DOWN ON A SLIP WITH A HEADING FDE, THE SAME COULD NOT BE TAKE N AS CONCLUSIVE PROOF OF PAYMENT BY ASSESSEE, SO AS TO T AX THE SAME AS UNEXPLAINED INVESTMENT. 10.4. IN OUR OPINION, SINCE ENQUIRES WERE NOT PROP ERLY DONE BY REVENUE EITHER OF ASSESSEE CONTENTIONS THAT THE PROPERTY IS IN FTL, SO AS TO MAKE IT UNFIT FOR CONS TRUCTION NOR THE ENTRIES IN THE SLIP ARE CORROBORATED/CORRELATED WITH ANY OTHER EVIDENCE OR ENQUIRY, THE MATTER SHOULD BE REF ERRED TO A.O. FOR MAKING FRESH ENQUIRIES SO AS TO DECIDE THE ISSUE. IF ASSESSEE CONTENTION THAT THE PROPERTY IS IN FTL IS VERIFIED, THERE MAY BE GENUINE REASON FOR REDUCTION OF PRICE. THIS ASPECT REQUIRES EXAMINATION. IN ORDER TO DO THE NEEDFUL, W E SET ASIDE THE ISSUE TO THE FILE OF A.O. TO MAKE NECESSARY ENQ UIRIES AS OBSERVED ABOVE. ASSESSEE SHOULD BE GIVEN DUE OPPORT UNITY TO SUBSTANTIATE THE CONTENTIONS. WITH THESE OBSERVATIO NS, THE GROUNDS ARE CONSIDERED ALLOWED FOR STATISTICAL PURP OSES. ISSUE OF DISALLOWANCE U/S. 40(A)(IA). 11. BRIEFLY, FACTS LEADING TO THE ADDITION ARE THA T ASSESSEE WAS SHOWN TO HAVE PAID INTEREST OF RS.21,11,274 TO M/S. INDIA BULLS, HYDERABAD BY WAY OF EMI, ON THE LOANS OBTAINED IN THE YEAR UNDER REFERE NCE. IT WAS OBSERVED BY THE AO THAT NO TDS WAS MADE ON SUCH PAYMENTS AND THERE WAS VIOLATION OF PROVISIONS OF S EC. 194A. ON ENQUIRY BY THE AO IT WAS SUBMITTED THAT ASSESSEE DID NOT MAKE ANY TDS PRESUMING THAT THE PROVISIONS OF SEC. 194A ARE NOT APPLICABLE ON THE I NTEREST 16 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. COMPONENT IN THE AMOUNTS PAID BY WAY OF EMIS. AS PE R THE AO THE PROVISIONS ARE VERY MUCH APPLICABLE FOR SUCH PAYMENTS AND DISALLOWED THE CLAIM OF RS. 21,11,274/ - BEING THE INTEREST PAID TO M/S. INDIA BULLS BY APPL YING THE PROVISIONS OF SEC. 40(A)(IA). 11.1. ASSESSEE ARGUED BEFORE LD. CIT(A) ON THE GROUND THAT THE INTEREST WAS NOT PAID SEPARATELY SINCE THE PAYMENTS WERE PART OF EMIS PAID TO M/S. INDIA BULLS . AS AN ALTERNATIVE PLEA, ASSESSEE SUBMITTED THAT M/S. I NDIA BULLS IS AN INCOME-TAX ASSESSEE AND INTERESTS OF REVENUE WERE NOT JEOPARDIZED BECAUSE OF THE NON DEDUCTION OF THE TAX BY ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE AMOUNTS OF RS. 21,11,274/- REPRESENT THE PAYMENTS ACTUALLY MADE IN THE FINANCI AL YEAR 2008-09 HENCE, THE PROVISIONS OF SEC. 40(A)(IA ) ARE NOT APPLICABLE SINCE SUCH PROVISIONS ARE ONLY APPLI CABLE TO BE SITUATION WHERE THE AMOUNTS ARE STILL PAYABLE AS ON 31 ST OF MARCH OF THE FINANCIAL YEAR CONCERNED. IN THIS REGARD, ASSESSEE RELIED ON THE DECISION OF SPECIAL BENCH OF !TAT, VISAKHAPATNAM IN ITA.NO.477/VIZ/2008,DT. 29.3.2012, TO SUBSTANTIATE HER CLAIM. 11.2. LD. CIT(A) DISMISSED THE GROUND STATING AS U NDER : 12.3. PERUSED THE OBSERVATIONS OF THE AO AND THE SUBMISSIONS OF THE APPELLANT. AS COULD BE SEEN FROM THE ASSESSMENT ORDER, THE AO HAS BRIEFLY MENTIONED THAT ASSESSEE PAID INTEREST OF RS.21,11,274/- DURING THE FINANCIAL YEAR 2008-09 TO M/S. INDIA BULLS FOR THE LOANS OBTAINED FROM THEM, WITHOUT MAKING TDS AS PER THE PROVISIONS OF SEC, 194A, AND THEREBY INVOKED THE PROVISIONS OF SEC. 40(A)(IA) FOR MAKING THE DISALLOWANCE OF EXPENSES CLAIMED UNDER THE HEAD INTEREST, BEING THE AMOUNT PAID AS INTEREST TO M/S. INDIA BULLS. AS REGARD TO THE 17 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. SUBMISSION OF ASSESSEE THAT INTEREST WAS NOT PAID SEPARATELY TO ATTRACT THE PROVISIONS OF SEC. 194A A ND EXEMPTION OF APPLICABILITY OF SEC. 40(A)(IA) FOR TH E PAYMENTS MADE BY THE EMI, ARE NOT TENABLE, SINCE THE EMI IS THE EMBODIMENT THE AMOUNT OF PRINCIPLE AND INTEREST. REGARDING THE SUBMISSIONS OF ASSESSEE THAT M/S. INDIA BULLS IS AN ASSESSEE AND NON DEDUCTION OF TAX ON PAYMENTS MADE BY ASSESSEE DO NOT PREJUDICE THE INTERESTS OF THE REVENUE, IT CAN BE HELD THAT SUCH CONTENTION IS TENABLE NEITHER FACTUALLY NOR LEGALLY AND SUCH SITUATION MAY ONLY HELP THE APPELLANT IN SAVING HERSELF BEING TERMED AS ASSESSEE IN DEFAULT ON THE FRONT OF APPLICABILITY OF TDS PROVISIONS BUT WILL N OT HELP FROM THE APPLICATION OF PROVISIONS OF SEC. 40(A)(IA) AS HELD BY JUDICIAL DECISIONS. AS REGARD TO THE RELIANCE OF ASSESSEE ON THE DECISION OF SPL. BENCH OF ITAT, IN THE CASE OF M /S. MERILYN SHIPPING AND TRANSPORTS, VISAKHAPATNAM VS. ADDI.CIT, VISAKHAPATNAM, DT. 29.3.2012, IN ITA NO. 477/VIZ/ 2008, REGARDING THE APPLICABILITY OF PROVISIONS FOR THE AMOUNTS 'PAID' OR 'PAYABLE' , IT HAS BEEN OBSERVED THAT VIDE THE SAID ORDER HON'BLE SPL. BENCH, HAS ARRIVED AT THE CONCLUSION THAT RUNS AS UNDER; 'THE WORD 'PAYAB LE' USED IN SECTION 40(A)(IA) OF THE IT ACT, HAS TO BE GIVEN ITS NATURAL MEANING AND GOING BY STRICT INTERPRETAT ION, SEC. 40(A)(IA) OF THE ACT IS APPLICABLE ONLY TO EXPENDITURE WHICH IS PAYABLE AS ON 31 ST MARCH OF EVERY YEAR CANNOT BE INVOKED TO DISALLOW THE AMOUNT S WHICH WERE ALREADY BEEN PAID DURING THE PREVIOUS YEAR, WITHOUT DEDUCTING TAX AT SOURCE'. 12.4. GOING BY THE FACTS OF THE CASE, THE RATIO O F THE DECISION OF HON'BLE SPL. BENCH OF ITAT; VISAKHAPATNAM IS APPLICABLE, AS RELIED UPON BY THE APPELLANT. HOWEVER, IT HAS BEEN OBSERVED THAT THE OPERATION OF THE ABOVE DECISION HAS BEEN STAYED BY THE HON'BLE HIGH COURT OF ANDHRA PRADESH, TILL ITS FINA L DECISION ON THE MATTER. KEEPING THE ABOVE DECISION IN MIND AND WITH DUE RESPECT TO THE HON'BLE SPL. BENC H OF ITAT, IT CAN BE HELD THAT THE DECISION RELIED UPON BY ASSESSEE IS NOT AVAILABLE TO HER CASE PRESENTLY. ACCORDINGLY, IT IS HELD THAT THE CLAIM FOR DEDUCTIO N OF RS. 21,11,274/-, BEING THE INTEREST PAID TO INDIA B ULLS THROUGH EMI IS DISALLOWABLE AS PER THE PROVISIONS O F SEC. 40(A)(IA) AND AS SUCH THE ORDER OF THE AO IN DISALLOWING THE SAID AMOUNT IS SUSTAINABLE. 18 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. ACCORDINGLY, THIS GROUND OF APPEAL IS TREATED AS DISMISSED. 12. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE AR E OF THE OPINION THAT THERE IS MERIT IN ASSESSEES CONTE NTIONS. FIRST OF ALL, A.O. HAS NOT ESTABLISHED THAT THE AMOUNT PA ID AS EMI GET COVERED BY TDS PROVISIONS. MOREOVER, NO PROCEED INGS U/S. 201(1) WERE INITIATED AGAINST ASSESSEE. FURTHER, SA ID INDIA BULLS ACCOUNTED THE SAME AS INCOME, SO FOLLOWING PR INCIPLE LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF HINDUS TAN COCO COLA VS. CIT 293 ITR 226 NO FURTHER RECOVERY COULD BE MADE. NOT ONLY THAT ON LEGAL PRINCIPLES ALSO, THE ADDITIO N COULD NOT BE SUSTAINED. EVEN THOUGH THE DECISION OF ITAT SPECIAL BENCH WAS STAYED BY HONBLE A.P. HIGH COURT, THE MATTER W AS CONSIDERED BY OTHER HIGH COURTS. THE COORDINATE BEN CH IN THE CASE OF DCIT VS. ANANDA MARAKALA 150 ITD 323, HAS CONSIDERED THE ISSUE AND HELD AS UNDER : 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS FAR AS THE CROSS OBJECTION IS CONCERNED, THE QUESTION FOR OUR CONSIDERATION IS AS TO WHETHER SECTION 40(A)(IA) AM ENDED BY THE FINANCE ACT, 2012 WITH EFFECT FROM 01.04.201 3 IS RETROSPECTIVE FROM 01.04.2005 OR PROSPECTIVE FROM T HE DATE SPECIFIED. 14. IN ORDER TO FIND ANSWER TO THIS QUESTION, IT WOULD BE RELEVANT TO NOTE DOWN THE LEGISLATIVE HISTORY OF TH E PROVISION. SECTION 40 HAS CERTAIN CLAUSES PROVIDING FOR THE AMOUNTS WHICH ARE NOT DEDUCTIBLE. SUB-CLAUSE (IA) O F CLAUSE (A) OF SECTION 40 WAS INSERTED BY THE FINANC E (NO.2) ACT, 2004 WITH EFFECT FROM 1ST APRIL, 2005 READING AS UNDER : 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTED THE INCOME CHARGEABLE UNDER TH E HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' ** ** ** 19 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. (IA) ANY INTEREST, COMMISSION OR BROKERAGE, FEES FO R PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR O R SUB- CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WO RK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK), ON OR, AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE P REVIOUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY O F THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 20 0: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR, HAS BEEN DEDUCTED IN THE PREVIOUS YEAR BUT PAID IN ANY SUBSE QUENT YEAR AFTER THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB- SECTION (1) OF SECTION 200, SUCH SUM SHALL BE ALLOW ED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS Y EAR IN WHICH SUCH TAX HAS BEEN PAID. EXPLANATION FOR THE PURPOSES OF THIS SUB-CLAUSE.- (I) COMMISSION OR BROKERAGE SHALL HAVE THE SAME MEANING AS IN CLAUSE (I) OF THE EXPLNATION TO SECTI ON 194H; (II) FEES FOR TECHNICAL SERVICES SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB- SECTION (1) OF SECTION 9; (III) PROFESSIONAL SERVICES SHALL HAVE THE SAME MEANING AS IN CLAUSE (A) OF THE EXPLANATION TO SECTION 194J; (IV) WORK SHALL HAVE THE SAME MEANING AS IN EXPLANATION III TO SECTION 194C; THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FIN ANCE BILL EXPLAINED THE RATIONALE OF THE INSERTION OF TH E NEW PROVISION IN FOLLOWING WORDS : 'WITH A VIEW TO AUGMENT COMPLIANCE OF TDS PROVISION S, IT IS PROPOSED TO EXTEND THE PROVISIONS OF SECTION 40( A)(I) TO PAYMENTS OF INTEREST, COMMISSION OR BROKERAGE, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S TO RESIDENTS, AND PAYMENTS TO A RESIDENT CONTRACTOR OR SUB- CONTRACTOR FOR CARRYING OUT ANY WORK (INCLUDING SUP PLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION, HAS NOT BEEN PAID 20 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB- SECTION (1) OF SECTION 200 AND IN ACCORDANCE WITH THE OTHER PROVISIONS OF CHAPTER XVII-B. IT IS ALSO PROPOSED T O PROVIDE THAT WHERE IN RESPECT OF PAYMENT OF ANY SUM, TAX HA S BEEN DEDUCTED UNDER CHAPTER XVII-B OR PAID IN ANY SUBSEQUENT YEAR, THE SUM OF PAYMENT SHALL BE ALLOWE D IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. THE PROPOSED AMENDMENT WILL TAKE EFFECT FROM 1ST DA Y OF APRIL, 2005 AND WILL, ACCORDINGLY, APPLY IN RELATIO N TO THE ASSESSMENT YEAR 2005- 2006 AND SUBSEQUENT YEARS. [CLAUSE 11]' THEREAFTER THE FINANCE ACT, 2008 MADE AMENDMENT TO CLAUSE (A) IN SUB-CLAUSE (IA) IN SECTION 40 WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 2005. THE SECT ION AS AMENDED BY THE FINANCE ACT, 2008 READ AS UNDER: '(IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICA L SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONT RACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT A NY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER C HAPTER XVII-B AND SUCH TAX 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. PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED (A) DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE SAID DUE DATE ; OR (B) DURING ANY OTHER MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR, SUCH SUM S HALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF T HE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID.' 21 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. 15. THE FINANCE ACT, 2008 BROUGHT OUT AMENDMENT TO SECTION 40(A)(IA) W.R.E.F. 1.4.2005 BY RELAXING EAR LIER POSITION TO SOME EXTENT. IT MADE TWO CATEGORIES OF DEFAULTS CAUSING DISALLOWANCE ON THE BASIS OF THE PERIOD OF THE PREVIOUS YEAR IN WHICH TAX WAS DEDUCTIBLE. THE FIRS T CATEGORY OF DISALLOWANCES INCLUDED THE CASES IN WHI CH TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT THERE WAS FAILURE TO PAY SUCH TAX ON OR BEFORE THE DUE DATE SPECIFIED IN SUB -SECTION (1) OF SECTION 139 OF THE ACT. IN OTHER WORDS, IF A NY AMOUNT ON WHICH TAX WAS DEDUCTIBLE DURING LAST MONTH OF TH E PREVIOUS YEAR, THAT IS MARCH 2005, BUT WAS PAID BEF ORE 31ST OCTOBER, 2005, BEING THE DUE DATE U/S 139(1), THE DEDUCTIBILITY OF THE AMOUNT WAS KEPT INTACT. THE SE COND CATEGORY INCLUDED CASES OTHER THAN THOSE GIVEN IN CATEGORY FIRST. TO PUT IT SIMPLY, IF TAX WAS DEDUCT IBLE AND WAS SO DEDUCTED DURING THE FIRST ELEVEN MONTHS OF T HE PREVIOUS YEAR, THAT IS, UP TO FEBRUARY, 2005, THE DISALLOWANCE WAS TO BE MADE IF THE ASSESSEE FAILED TO PAY IT BEFORE 31ST MARCH, 2005. 16. THEN CAME THE AMENDMENT TO SECTION 40(A)(IA) BY THE FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1S T APRIL, 2010. THE PROVISION SO AMENDED, NOW READS AS UNDER : '(IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICA L SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONT RACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT A NY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER C HAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR; AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE D ATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFTER TH E DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139, S UCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE IN COME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAI D.' 17. FROM THE ABOVE PROVISION AS AMENDED BY THE FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 2010 IT CAN BE SEEN THAT THE ONLY DIFFERENCE WHICH THIS AMENDMENT HAS MADE IS DISPENSING WITH THE EARLIER T WO 22 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. CATEGORIES OF DEFAULTS AS PER THE FINANCE ACT, 2008 , AS DISCUSSED IN THE EARLIER PARA, CAUSING DISALLOWANCE ON THE BASIS OF THE PERIOD OF THE PREVIOUS YEAR DURING WHI CH TAX WAS DEDUCTIBLE. THE FIRST CATEGORY OF DISALLOWANCES INCLUDED THE CASES IN WHICH TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS Y EAR BUT THERE WAS FAILURE TO PAY SUCH TAX ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139. T HE FINANCE ACT, 2010 HAS NOT TINKERED WITH THIS POSITI ON. THE SECOND CATEGORY OF THE FINANCE ACT, 2008 WHICH REQU IRED THE DEPOSIT OF TAX BEFORE THE CLOSE OF THE PREVIOUS YEAR IN CASE OF DEDUCTION DURING THE FIRST ELEVEN MONTHS, A S A PRE- CONDITION FOR THE GRANT OF DEDUCTION IN THE YEAR OF INCURRING EXPENDITURE, HAS BEEN ALTERED. THE HITHERTO REQUIRE MENT OF THE ASSESSEE DEDUCTING TAX AT SOURCE DURING THE FIR ST ELEVEN MONTHS OF THE PREVIOUS YEAR AND PAYING IT BE FORE THE CLOSE OF THE PREVIOUS YEAR UP TO 3 1ST MARCH OF THE PREVIOUS YEAR AS A REQUIREMENT FOR GRANT OF DEDUCTI ON IN THE YEAR OF INCURRING SUCH EXPENDITURE, HAS BEEN EA SED TO EXTEND SUCH TIME FOR PAYMENT OF TAX UP TO DUE DATE U/S 139(1) OF THE ACT. AS PER THE NEW AMENDMENT, THE DISALLOWANCE WILL BE MADE IF AFTER DEDUCTING TAX AT SOURCE, THE ASSESSEE FAILS TO PAY THE AMOUNT OF TAX ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 OF THE ACT. THE EFFECT OF THIS AMENDMENT IS THA T NOW THE ASSESSEE DEDUCTING TAX EITHER IN THE LAST MONTH OF THE PREVIOUS YEAR OR FIRST ELEVEN MONTHS OF THE PREVIOU S YEAR SHALL BE ENTITLED TO DEDUCTION OF THE EXPENDITURE I N THE YEAR OF INCURRING IT, IF THE TAX SO DEDUCTED AT SOU RCE IS PAID ON OR BEFORE THE DUE DATE U/S 139(1). THIS IS THE O NLY DIFFERENCE WHICH HAS BEEN MADE BY THE FINANCE ACT, 2010. 18. THE QUESTION AS TO WHETHER THE AMENDMENT BY THE FINANCE ACT, 2010 AS AFORESAID IS PROSPECTIVE OR RETROSPECTIVE FROM 1.4.2005 CAME UP FOR CONSIDERATI ON BEFORE THE MUMBAI SPECIAL BENCH ITAT IN THE CASE OF BHARATI SHIPYARD LTD. V. DY. CIT [2011] 132 ITD 53/ 13 TAXMANN.COM 101. BEFORE THE SPECIAL BENCH, IT WAS ARGUED THAT THE AMENDMENT WAS MADE WITH A VIEW TO REMOVE THE UNNECESSARY HARDSHIP CAUSED TO THE ASSES SEE BY THE EARLIER PROVISION. THE SPECIAL BENCH BY ITS ORDER DATED 9.9.2011, HOWEVER, HELD THAT THE AMENDMENT CARRIED OUT BY THE FINANCE ACT, 2010 WITH RETROSPEC TIVE EFFECT FROM ASSESSMENT YEAR 2010-2011 CANNOT BE HEL D TO BE RETROSPECTIVE FROM ASSESSMENT YEAR 2005-2006. TH E 23 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. SPECIAL BENCH HELD THAT THE AMENDMENT BROUGHT OUT B Y THE FINANCE ACT, 2010 TO SECTION 40(A)(IA) W.E.F. 01.04.2010, IS NOT REMEDIAL AND CURATIVE IN NATURE. 19. PRIOR TO THE DECISION OF THE SPECIAL BENCH, IDENTIC AL ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE ITAT KOLKATA BENCH IN THE CASE OF VIRGIN CREATIONS V. IT O, IT APPEAL NO. 267/KOL/2009 FOR AY 05-06. THE ISSUE THA T AROSE FOR CONSIDERATION WAS DISALLOWANCE OF EXPENSE S U/S.40(A)(IA) CLAIMED AS DEDUCTION WHILE COMPUTING INCOME FROM BUSINESS BEING EMBROIDERY CHARGES, DYEI NG CHARGES, INTEREST ON LOAN AND FREIGHT CHARGES WITHO UT DEDUCTING TAX AT SOURCE. THE EMBROIDERY CHARGES WER E PAID BETWEEN 22ND MAY, 2004 TO 30.11.2004. TAX HAD BEEN DEDUCTED AT SOURCE BUT WERE PAID TO THE GOVERN MENT ONLY ON 28.10.2005 AND NOT WITHIN THE TIME CONTEMPL ATED BY SECTION 200(1) OF THE ACT. THE DYEING CHARGES WE RE PAID BETWEEN 5.4.2004 TO 20.8.2004. TAX WAS DEDUCTE D AT SOURCE BUT WAS PAID TO THE GOVERNMENT ONLY ON 28.10.2005. FRIEGHT OUTWARD CHARGES WERE PAID WITHO UT DEDUCTION OF TAX AT SOURCE. INTEREST ON LOANS WERE CREDITED TO THE CREDITORS ACCOUNT ON 31.3.2005 TO THE EXTENT THEY WERE PAID AFTER THE DUE DATE FOR FILING RETURN OF I NCOME U/S. 139(1) OF THE ACT, THE DISALLOWANCE WAS MADE U/S.40(A)(IA) OF THE ACT. BEFORE THE TRIBUNAL, THE ASSESSEE CONTENTED THAT THE AMENDMENT BY THE FINANCE ACT, 20 10 WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 2010 WHER EBY AMOUNT OF TAX DEDUCTED AT THE TIME OF MAKING PAYMEN T IN RESPECT OF EXPENDITURE REFERRED TO IN SEC.40(A)(IA) OF THE ACT, IF PAID TO THE GOVERNMENT ON OR BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME DUE DATE U/S 139(1) OF THE ACT SHOULD BE ALLOWED AS A DEDUCTION. IN OTHER WORD S IT WAS ARGUED THAT THE AMENDMENT BY THE FINANCE ACT, 2 010 TO THE PROVISIONS OF SEC.40(A)(IA) HAS TO BE HELD T O BE RETROSPECTIVE W.E.F. 1-4-2005. THE ITAT KOLKATA BEN CH BY ITS ORDER DATED 15.12.2010, HELD AS FOLLOWS: '8. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, KEEPI NG IN VIEW OF THE FACT THAT THOUGH THE LD.D.R. SUBMITTED THAT THE DECISIONS OF THE COORDINATE BENCHES ARE NOT BINDING AND THE KOLKATA BENCHES MAY TAKE A DIFFERENT VIEW, SINC E MUMBAI BENCH AFTER ANALYZING THE PROVISIONS OF SEC.40(A)(IA) SINCE ITS INCEPTION AND VARIOUS AMEND MENTS MADE TO THE SAME INCLUDING THE SUGGESTION MADE BY T HE INDUSTRY IN THE FORM OF REPRESENTATION IN THEIR PRE -BUDGET 24 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. MEMORANDUM TO THE HON'BLE FINANCE MINISTER AND BY APPLYING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF ALOM EXTRUSIONS LTD., HAS OBSERVED THAT 'TH E PROVISIONS OF SECTION 40(A)(IA) AS STOOD PRIOR TO T HE AMENDMENTS MADE BY THE FINANCE ACT, 2010 THUS WERE RESULTING INTO UNINTENDED CONSEQUENCES AND CAUSING GRAVE AND GENUINE HARDSHIPS TO THE ASSESSEES WHO HA D SUBSTANTIALLY COMPLIED WITH THE RELEVANT TDS PROVIS IONS BY DEDUCTING THE TAX AT SOURCE AND BY PAYING THE SA ME TO THE CREDIT OF THE GOVERNMENT BEFORE THE DUE DATE OF FILING OF THEIR RETURNS U/S. 139(1). IN ORDER TO REMEDY TH IS POSITION AND TO REMOVE THE HARDSHIPS WHICH WAS BEIN G CAUSED TO THE ASSESSEE BELONGING TO SUCH CATEGORY, AMENDMENTS HAVE BEEN MADE IN THE PROVISIONS OF SECT ION 40(A)(IA) BY THE FINANCE ACT, 2010. THE SAID AMENDM ENTS, IN OUR OPINION, THUS ARE CLEARLY REMEDIAL/CURATIVE IN NATURE AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF ALLIED MOTORS PVT. LTD. (SUPRA) AND MOM EXTRUSIO NS LTD. (SUPRA) AND THE SAME THEREFORE WOULD APPLY RETROSPECTIVELY W.E.F. 1ST APRIL, 2005. IN THE CASE OF R.B. JODHA MAL KUTHIALA 82 ITR 570, IT WAS HELD BY THE HON'BLE SUPREME COURT THAT A PROVISO WHICH IS INSER TED TO REMEDY UNINTENDED CONSEQUENCES AND TO MAKE THE PROVISION WORKABLE, REQUIRES TO BE TREATED AS RETRO SPECTIVE IN OPERATION SO THAT A REASONABLE INTERPRETATION CA N BE GIVEN TO THE SECTION AS A WHOLE. IN THE PRESENT CAS E, THE AMOUNT OF TAX DEDUCTED AT SOURCE FROM THE FREIGHT C HARGES DURING THE PERIOD 01/04/2005 TO 28/02/2006 WAS PAID BY THE ASSESSEE IN THE MONTH OF JULY AND AUGUST 200 6 I.E., WELL BEFORE THE DUE DATE OF FILING OF ITS RET URN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THIS BEING THE UNDISPUTED POSITION, WE HOLD THAT THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LEARNED CIT(A) ON ACCOUNT OF FREIGHT CHARGES BY INVOKING THE PROVISIO NS OF SECTION 40(A)(IA) IS NOT SUSTAINABLE AS PER THE AMENDMENTS MADE IN THE SAID PROVISIONS BY THE FINAN CE ACT, 2010 WHICH, BEING REMEDIAL/CURATIVE IN NATURE, HAVE RETROSPECTIVE APPLICATION', WE FIND NO REASON TO DE VIATE FROM THE DECISIONS OF THE ITAT'S MUMBAI BENCH AND AHMEDABAD BENCH, IN THE ABSENCE OF A CONTRARY VIEW, EXCEPT THE OTHER BENCHES DECISIONS OR ANY OTHER HIG H COURT. THEREFORE, RESPECTFULLY FOLLOWING THE DECISI ON OF THE COORDINATE BENCHES (SUPRA), WE ALLOW THE GROUND NOS . 1 TO 3 OF THE ASSESSEE'S APPEAL.' 25 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. 20. AS AGAINST THE AFORESAID DECISION, THE REVENUE PREFERRED APPEAL BEFORE THE HON'BLE CALCUTTA HIGH C OURT. THE HON'BLE CALCUTTA HIGH COURT IN ITA NO. 302 OF 2 011, GA 3200/2011 DECIDED ON 23.11.2011, HELD AS FOLLOWS : 'WE HAVE HEARD MR. NIZAMUDDIN AND GONE THROUGH THE IMPUGNED JUDGMENT AND ORDER. WE HAVE ALSO EXAMINED THE POINT FORMULATED FOR WHICH THE PRESENT APPEAL I S SOUGHT TO BE ADMITTED. IT IS ARGUED BY MR. NIZAMUDD IN THAT THIS COURT NEEDS TO TAKE DECISION AS TO WHETHE R SECTION 40(A)(IA) IS HAVING RETROSPECTIVE OPERATION OR NOT. THE LEARNED TRIBUNAL ON FACT FOUND THAT THE ASSESSE E HAD DEDUCTED TAX AT SOURCE FROM THE PAID CHARGES BETWEE N THE PERIOD APRIL 1, 2005 AND APRIL 28, 2006 AND THE SAM E WERE PAID BY THE ASSESSEE IN JULY AND AUGUST 2006, I.E. WELL BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THIS FACTUAL POSI TION WAS UNDISPUTED. MOREOVER, THE SUPREME COURT, AS HAS BEEN RECORDED BY THE LEARNED TRIBUNAL, IN THE CASE OF ALLIED MOTORS PVT. LTD. AND ALSO IN THE CASE OF ALO M EXTRUSIONS LTD., HAS ALREADY DECIDED THAT THE AFORE SAID PROVISION HAS RETROSPECTIVE APPLICATION. AGAIN, IN THE CASE REPORTED IN 82 ITR 570, THE SUPREME COURT HELD THAT THE PROVISION, WHICH HAS INSERTED THE REMEDY TO MAKE TH E PROVISION WORKABLE, REQUIRES TO BE TREATED WITH RETROSPECTIVE OPERATION SO THAT REASONABLE DEDUCTIO N CAN BE GIVEN TO THE SECTION AS WELL. IN VIEW OF THE AUT HORITATIVE PRONOUNCEMENT OF THE SUPREME COURT, THIS COURT CANN OT DECIDE OTHERWISE. HENCE WE DISMISS THE APPEAL WITHO UT ANY ORDER AS TO COSTS.' 21. FURTHER LIBERALIZATION OF PROVISIONS OF SECTION 40( A)(IA) WAS MADE THROUGH AMENDMENT BROUGHT BY THE FINANCE ACT, 2012. WITH A VIEW TO LIBERALIZE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FINANCE ACT, 2012 BROUGHT AMEN DMENT W.E.F 01.04.2013 AS UNDER. THE FOLLOWING SECOND PRO VISO SHALL BE INSERTED IN SUB-CLAUSE (IA) OF CLAUSE (A) OF SECTION 40 BY THE FINANCE ACT, 2012, W.E.F. 1-4-2013 : 'PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO D EDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB-SECTION (1) OF SECTION 201, THEN, FO R THE PURPOSE OF THIS SUB-CLAUSE, IT SHALL BE DEEMED THAT THE 26 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE R ESIDENT PAYEE REFERRED TO IN THE SAID PROVISO.' 22. SINCE PROVISIONS OF SECTION 40(A)(IA) AS AMENDED BY FINANCE ACT, 2012 IS LINKED TO SECTION 201 OF THE A CT, IN WHICH PROVISO WAS INSERTED, IT IS NECESSARY TO LOOK INTO THOSE PROVISIONS WHICH READ THUS: 'SEC.201: (1) WHERE ANY PERSON, INCLUDING THE PRINC IPAL OFFICER OF A COMPANY (A) WHO IS REQUIRED TO DEDUCT ANY SUM IN ACCORDANCE WIT H THE PROVISIONS OF THIS ACT; OR (B) REFERRED TO IN SUB-SECTION (1A) OF SECTION 192, BEI NG AN EMPLOYER, DOES NOT DEDUCT, OR DOES NOT PAY, OR AFTE R SO DEDUCTING FAILS TO PAY, THE WHOLE OR ANY PART OF TH E TAX, AS REQUIRED BY OR UNDER THIS ACT, THEN, SUCH PERSON , SHALL, WITHOUT PREJUDICE TO ANY OTHER CONSEQUENCES WHICH HE MAY INCUR, BE DEEMED TO BE AN ASSESSEE IN DEFAUL T IN RESPECT OF SUCH TAX: PROVIDED THAT ANY PERSON, INCLUDING THE PRINCIPAL O FFICER OF A COMPANY, WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER O N THE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO THE AC COUNT OF A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN D EFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT (I) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 13 9; (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOM E IN SUCH RETURN OF INCOME; AND (III) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME, AND THE PERSON FURNISHES A CERTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT IN SU CH FORM AS MAY BE PRESCRIBED.' 23. MEMORANDUM EXPLAINING THE PROVISIONS WHILE INTRODUC ING FINANCE BILL, 2012 PROVIDES THE JUSTIFICATION OF TH E AMENDMENT TO SECTION 40(A)(IA) IN THE FOLLOWING WOR DS: 'IN ORDER TO RATIONALISE THE PROVISIONS OF DISALLOW ANCE ON ACCOUNT OF NON-DEDUCTION OF TAX FROM THE PAYMENTS M ADE TO A RESIDENT PAYEE, IT IS PROPOSED TO AMEND SECTION 40( A)(IA) TO PROVIDE THAT WHERE AN ASSESSEE MAKES PAYMENT OF THE 27 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. NATURE SPECIFIED IN THE SAID SECTION TO A RESIDENT PAYEE WITHOUT DEDUCTION OF TAX AND IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER SECTION 201(1) ON ACCOUNT OF PAYMENT OF TAXES BY THE PAYEE, THEN, FOR THE PURPOS E OF ALLOWING DEDUCTION OF SUCH SUM, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESID ENT PAYEE.' 24. THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT ARE MEANT TO ENSURE THAT THE ASSESSEE'S PERFORM THEIR OBLIGAT ION TO DEDUCT TAX AT SOURCE IN ACCORDANCE WITH THE PROVISI ONS OF THE ACT. SUCH COMPLIANCE WILL ENSURE REVENUE COLLECTION WITHOUT MUCH HASSLE. WHEN THE OBJECT SOUGHT TO BE ACHIEVED BY THOSE PROVISIONS ARE FOUND TO BE ACHIEVED, IT WOULD BE UN JUST TO DISALLOWANCE LEGITIMATE BUSINESS EXPENSES OF AN ASS ESSEE. DESPITE DUE COLLECTION OF TAXES DUE, IF DISALLOWANC E OF GENUINE BUSINESS EXPENSES ARE MADE THAN THAT WOULD BE UNJUST ENRICHMENT ON THE PART OF THE GOVERNMENT AS THE PAYEE WOULD HAVE ALSO PAID THE TAXES ON SUCH INCOME . IN ORDER TO REMOVE THIS ANOMALY, THIS AMENDMENT HAS BE EN INTRODUCED. IN CASE OF PAYMENT TO NON RESIDENT, THE GOVERNMENT DOES NOT HAVE ANY OTHER MECHANISM TO REC OVER THE DUE TAXES. HENCE, NO AMENDMENT WAS MADE IN SECT ION 40(A)(I). THE LEGISLATURE HAS NOT GIVEN BLANKET DED UCTION UNDER SECTION 40(A)(IA). THE DEDUCTION AS PER AMEND ED SECTION WILL BE ALLOWED ONLY IF THE (I) PAYEE HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139; (II) PAYEE HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND (III) PAYEE HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME, AND THE PAYER FURNISHES A CERTIFICATE TO THIS EFFEC T FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED. 25. THE QUESTION IS AS TO WHETHER THE AMENDMENT MADE AS ABOVE IS PROSPECTIVE OR RETROSPECTIVE W.E.F. 1.4 .2005 WHEN THE PROVISIONS OF SEC.40(A)(IA) WERE INTRODUCE D. KEEPING IN VIEW THE PURPOSE BEHIND THE PROVISO INSE RTED BY THE FINANCE ACT, 2012 IN SECTION 40(A)(IA) OF TH E ACT, IT CAN BE SAID TO BE DECLARATORY AND CURATIVE IN NATUR E AND THEREFORE, SHOULD BE GIVEN RETROSPECTIVE EFFECT FRO M 1ST APRIL, 2005, BEING THE DATE FROM WHICH SUB-CLAUSE ( IA) OF 28 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. SECTION 40(A) WAS INSERTED BY THE FINANCE (NO. 2) A CT, 2004. IN CIT V. ALOM EXTRUSIONS LTD. [2009] 319 ITR 306/185 TAXMAN 416 (SC), THE HON'BLE SUPREME COURT HAD TO DEAL WITH THE QUESTION, WHETHER OMISSION (DE LETION) OF THE SECOND PROVISO TO S. 43B OF THE IT ACT, 1961 , BY THE FINANCE ACT, 2003, OPERATED W.E.F. 1ST APRIL, 2004, OR WHETHER IT OPERATED RETROSPECTIVELY W.E.F. 1ST APRI L, 1988? PRIOR TO FINANCE ACT, 2003, THE SECOND PROVISO TO S . 43B OF THE IT ACT, 1961 (FOR SHORT, 'THE ACT') RESTRICTED THE DEDUCTION IN RESPECT OF ANY SUM PAYABLE BY AN EMPLO YER BY WAY OF CONTRIBUTION TO PROVIDENT FUND/SUPERANNUA TION FUND OR ANY OTHER FUND FOR THE WELFARE OF EMPLOYEES , UNLESS IT STOOD PAID WITHIN THE SPECIFIED DUE DATE. ACCORDING TO THE SECOND PROVISO, THE PAYMENT MADE B Y THE EMPLOYER TOWARDS CONTRIBUTION TO PROVIDENT FUND OR ANY OTHER WELFARE FUND WAS ALLOWABLE AS DEDUCTION, IF P AID BEFORE THE DATE FOR FILING THE RETURN OF INCOME AND NECESSARY EVIDENCE OF SUCH PAYMENT WAS ENCLOSED WIT H THE RETURN OF INCOME. IN OTHER WORDS, IF CONTRIBUTI ON STOOD PAID AFTER THE DATE FOR FILING OF THE RETURN, IT ST OOD DISALLOWED. THIS RESULTED IN GREAT HARDSHIP TO THE EMPLOYERS. THEY REPRESENTED TO THE GOVERNMENT ABOUT THEIR HARDSHIP AND, CONSEQUENTLY, PURSUANT TO THE R EPORT OF THE KELKAR COMMITTEE, THE GOVERNMENT INTRODUCED FINANCE ACT, 2003, BY WHICH THE SECOND PROVISO STOO D DELETED W.E.F. 1ST APRIL, 2004, AND CERTAIN CHANGES WERE ALSO MADE IN THE FIRST PROVISO BY WHICH UNIFORMITY WAS BROUGHT ABOUT BETWEEN PAYMENT OF FEES, TAXES, CESS, ETC., ON ONE HAND AND CONTRIBUTION MADE TO EMPLOYEES' PROVIDENT FUND, ETC., ON THE OTHER. ACCORDING TO TH E DEPARTMENT, THE OMISSION OF THE SECOND PROVISO GIVI NG RELIEF TO THE ASSESSEE(S) [EMPLOYER(S)] OPERATED ON LY W.E.F. 1ST APRIL, 2004, WHEREAS, ACCORDING TO THE ASSESSEE (S)- EMPLOYER(S), THE SAID FINANCE ACT, 2003, TO THE EXT ENT INDICATED ABOVE, OPERATED W.E.F. 1ST APRIL, 1988 (RETROSPECTIVELY). THE HON'BLE SUPREME COURT HELD T HAT THE DELETION OF THE SECOND PROVISO WAS RETROSPECTIVE W. E.F. 1.4.2004. THE COURT CONSIDERED THE SCHEME OF THE AC T AND THE HISTORICAL BACKGROUND AND THE OBJECT OF INTRODU CTION OF THE PROVISIONS OF S. 43B. THE COURT ALSO REFERRED T O THE EARLIER AMENDMENTS MADE IN 1988 WITH INTRODUCTION O F THE FIRST AND SECOND PROVISOS. THE COURT ALSO NOTED FUR THER AMENDMENT MADE IN 1989 IN THE SECOND PROVISO DEALIN G WITH THE ITEMS COVERED IN S. 43B(B) (I.E., CONTRIBU TION TO EMPLOYEES WELFARE FUNDS). AFTER CONSIDERING THE SAM E, THE COURT WAS OF THE VIEW THAT IT WAS CLEAR THAT PRIOR TO THE 29 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. AMENDMENT OF 2003, THE EMPLOYER WAS ENTITLED TO DEDUCTION ONLY IF THE CONTRIBUTION STANDS CREDITED ON OR BEFORE THE DUE DATE GIVEN IN THE PROVIDENT FUND ACT ON ACCOUNT OF SECOND PROVISO TO S. 43B. THE SITUATION CREATED FURTHER DIFFICULTIES AND AS A RESULT OF REPRESENTAT IONS MADE BY THE INDUSTRY, THE AMENDMENT OF 2003 WAS CARRIED OUT WHICH DELETED THE SECOND PROVISO AND AL SO MADE FIRST PROVISO APPLICABLE TO CONTRIBUTION TO EM PLOYEES WELFARE FUNDS REFERRED TO IN S. 43B(B). 15. WE FIND NO MERIT IN THESE CIVIL APPEALS FILED BY THE DEPARTMENT FOR THE FOLLOWING REASONS : FIRSTLY AS S TATED ABOVE, S. 43B (MAIN SECTION), WHICH STOOD INSERTED BY FINANCE ACT, 1983, W.E.F. 1ST APRIL, 1984, EXPRESSL Y COMMENCES WITH A NON OBSTANTE CLAUSE, THE UNDERLYIN G OBJECT BEING TO DISALLOW DEDUCTIONS CLAIMED MERELY BY MAKING A BOOK ENTRY BASED ON MERCANTILE SYSTEM OF ACCOUNTING. AT THE SAME TIME, S. 43B (MAIN SECTION) MADE IT MANDATORY FOR THE DEPARTMENT TO GRANT DEDUCTION IN COMPUTING THE INCOME UNDER S. 28 IN THE YEAR IN WHI CH TAX, DUTY, CESS, ETC., IS ACTUALLY PAID. HOWEVER, P ARLIAMENT TOOK COGNIZANCE OF THE FACT THAT ACCOUNTING YEAR OF A COMPANY DID NOT ALWAYS TALLY WITH THE DUE DATES UND ER THE PROVIDENT FUND ACT, MUNICIPAL CORPORATION ACT ( OCTROI) AND OTHER TAX LAWS. THEREFORE, BY WAY OF FIRST PROV ISO, AN INCENTIVE/RELAXATION WAS SOUGHT TO BE GIVEN IN RESP ECT OF TAX, DUTY, CESS OR FEE BY EXPLICITLY STATING THAT I F SUCH TAX, DUTY, CESS OR FEE IS PAID BEFORE THE DATE OF FILING OF THE RETURN UNDER THE IT ACT (DUE DATE), THE ASSESSEE(S) THEN WOULD BE ENTITLED TO DEDUCTION. HOWEVER, THIS RELAXATION/INCENTIVE WAS RESTRICTED ONLY TO TAX, DU TY, CESS AND FEE. IT DID NOT APPLY TO CONTRIBUTIONS TO LABOU R WELFARE FUNDS. THE REASON APPEARS TO BE THAT THE EMPLOYER(S ) SHOULD NOT SIT ON THE COLLECTED CONTRIBUTIONS AND D EPRIVE THE WORKMEN OF THE RIGHTFUL BENEFITS UNDER SOCIAL W ELFARE LEGISLATIONS BY DELAYING PAYMENT OF CONTRIBUTIONS T O THE WELFARE FUNDS. HOWEVER, AS STATED ABOVE, THE SECOND PROVISO RESULTED IN IMPLEMENTATION PROBLEMS, WHICH HAVE BEEN MENTIONED HEREINABOVE, AND WHICH RESULTED IN T HE ENACTMENT OF FINANCE ACT, 2003, DELETING THE SECOND PROVISO AND BRINGING ABOUT UNIFORMITY IN THE FIRST PROVISO BY EQUATING TAX, DUTY, CESS AND FEE WITH CONTRIBUTI ONS TO WELFARE FUNDS. ONCE THIS UNIFORMITY IS BROUGHT ABOU T IN THE FIRST PROVISO, THEN, IN OUR VIEW, THE FINANCE A CT, 2003, WHICH IS MADE APPLICABLE BY THE PARLIAMENT ONLY W.E .F. 1ST APRIL, 2004, WOULD BECOME CURATIVE IN NATURE, H ENCE, IT 30 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. WOULD APPLY RETROSPECTIVELY W.E.F. 1ST APRIL, 1988. SECONDLY, IT MAY BE NOTED THAT, IN THE CASE OF ALLI ED MOTORS (P) LTD. ETC: V. CIT [1997] 139 CTR (SC) 364 : (1997) 224 ITR 677 (SC), THE SCHEME OF S. 43B OF THE ACT C AME TO BE EXAMINED. IN THAT CASE, THE QUESTION WHICH AROSE FOR DETERMINATION WAS, WHETHER SALES-TAX COLLECTED BY T HE ASSESSEE AND PAID AFTER THE END OF THE RELEVANT PRE VIOUS YEAR BUT WITHIN THE TIME ALLOWED UNDER THE RELEVANT SALES- TAX LAW SHOULD BE DISALLOWED UNDER S. 43B OF THE AC T WHILE COMPUTING THE BUSINESS INCOME OF THE PREVIOUS YEAR ? THAT WAS A CASE WHICH RELATED TO ASST. YR. 1984-8 5. THE RELEVANT ACCOUNTING PERIOD ENDED ON 30TH JUNE, 1983 . THE ITO DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSE E WHICH WAS ON ACCOUNT OF SALES-TAX COLLECTED BY THE ASSESSEE FOR THE LAST QUARTER OF THE RELEVANT ACCOU NTING YEAR. THE DEDUCTION WAS DISALLOWED UNDER S. 43B WHI CH, AS STATED ABOVE, WAS INSERTED W.E.F. 1ST APRIL, 198 4. IT IS ALSO RELEVANT TO NOTE THAT THE FIRST PROVISO WHICH CAME INTO FORCE W.E.F. 1ST APRIL, 1988 WAS NOT ON THE STATUTE BOOK WHEN THE ASSESSMENTS WERE MADE IN THE CASE OF ALLIE D MOTORS (P) LTD. ETC. (SUPRA). HOWEVER, THE ASSESSEE CONTENDED THAT EVEN THOUGH THE FIRST PROVISO CAME T O BE INSERTED W.E.F. 1ST APRIL, 1988, IT WAS ENTITLED TO THE BENEFIT OF THAT PROVISO BECAUSE IT OPERATED RETROSP ECTIVELY FROM 1ST APRIL, 1984, WHEN S. 43B STOOD INSERTED. T HIS IS HOW THE QUESTION OF RETROSPECTIVITY AROSE IN ALLIED MOTORS (P) LTD. ETC. (SUPRA). THIS COURT, IN ALLIED MOTORS (P) LTD. ETC. (SUPRA) HELD THAT WHEN A PROVISO IS INSERTED T O REMEDY UNINTENDED CONSEQUENCES AND TO MAKE THE SECTION WORKABLE, A PROVISO WHICH SUPPLIES AN OBVIOUS OMISS ION IN THE SECTION AND WHICH PROVISO IS REQUIRED TO BE READ INTO THE SECTION TO GIVE THE SECTION A REASONABLE INTERPRETATION, IT COULD BE READ RETROSPECTIVE IN O PERATION, PARTICULARLY TO GIVE EFFECT TO THE SECTION AS A WHO LE. ACCORDINGLY, THIS COURT, IN ALLIED MOTORS (P.) LTD. ETC. (SUPRA), HELD THAT THE FIRST PROVISO WAS CURATIVE I N NATURE, HENCE, RETROSPECTIVE IN OPERATION W.E.F. 1ST APRIL, 1988. IT IS IMPORTANT TO NOTE ONCE AGAIN THAT, BY FINANCE AC T, 2003, NOT ONLY THE SECOND PROVISO IS DELETED BUT EV EN THE FIRST PROVISO IS SOUGHT TO BE AMENDED BY BRINGING A BOUT AN UNIFORMITY IN TAX, DUTY, CESS AND FEE ON THE ONE HA ND VIS- A-VIS CONTRIBUTIONS TO WELFARE FUNDS OF EMPLOYEE(S) ON THE OTHER. THIS IS ONE MORE REASON WHY WE HOLD THAT THE FINANCE ACT, 2003, IS RETROSPECTIVE IN OPERATION. M OREOVER, THE JUDGMENT IN ALLIED MOTORS (P) LTD. ETC. (SUPRA) IS DELIVERED BY A BENCH OF THREE LEARNED JUDGES, WHICH IS 31 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. BINDING ON US. ACCORDINGLY, WE HOLD THAT FINANCE AC T, 2003, WILL OPERATE RETROSPECTIVELY W.E.F. 1ST APRIL , 1988 (WHEN THE FIRST PROVISO STOOD INSERTED). LASTLY, WE MAY POINT OUT THE HARDSHIP AND THE INVIDIOUS DISCRIMINA TION WHICH WOULD BE CAUSED TO THE ASSESSEE(S) IF THE CONTENTION OF THE DEPARTMENT IS TO BE ACCEPTED THAT FINANCE ACT, 2003, TO THE ABOVE EXTENT, OPERATED PROSPECTIVELY. TAKE AN EXAMPLE - IN THE PRESENT CAS E, THE RESPONDENTS HAVE DEPOSITED THE CONTRIBUTIONS WITH T HE R.P.F.C. AFTER 31ST MARCH (END OF ACCOUNTING YEAR) BUT BEFORE FILING OF THE RETURNS UNDER THE IT ACT AND T HE DATE OF PAYMENT FALLS AFTER THE DUE DATE UNDER THE EMPLO YEES' PROVIDENT FUND ACT, THEY WILL BE DENIED DEDUCTION F OR ALL TIMES. IN VIEW OF THE SECOND PROVISO, WHICH STOOD O N THE STATUTE BOOK AT THE RELEVANT TIME, EACH OF SUCH ASS ESSEE(S) WOULD NOT BE ENTITLED TO DEDUCTION UNDER S. 43B OF THE ACT FOR ALL TIMES. THEY WOULD LOSE THE BENEFIT OF DEDUC TION EVEN IN THE YEAR OF ACCOUNT IN WHICH THEY PAY THE CONTRIBUTIONS TO THE WELFARE FUNDS, WHEREAS A DEFAU LTER, WHO FAILS TO PAY THE CONTRIBUTION TO THE WELFARE FU ND RIGHT UPTO 1ST APRIL, 2004, AND WHO PAYS THE CONTRIBUTION AFTER 1ST APRIL, 2004, WOULD GET THE BENEFIT OF DEDUCTION UNDER S. 43B OF THE ACT. IN OUR VIEW, THEREFORE, FINANCE ACT, 2003, TO THE EXTENT INDICATED ABOVE, SHOULD BE READ AS RETROSPECTIVE. IT WOULD, THEREFORE, OPERATE FROM 1S T APRIL, 1988, WHEN THE FIRST PROVISO WAS INTRODUCED. IT IS TRUE THAT THE PARLIAMENT HAS EXPLICITLY STATED THAT FINA NCE ACT, 2003, WILL OPERATE W.E.F. 1ST APRIL, 2004. HOWEVER, THE MATTER BEFORE US INVOLVES THE PRINCIPLE OF CONSTRUC TION TO BE PLACED ON THE PROVISIONS OF FINANCE ACT, 2003. 16. BEFORE CONCLUDING, WE EXTRACT HEREINBELOW THE RELEVANT OBSERVATIONS OF THIS COURT IN THE CASE OF CIT V. J.H. GOTLA [1985] 48 CTR (SC) 363 : (1985) 156 ITR 323 (SC), WHICH READS AS UNDER : 'WE SHOULD FIND OUT THE INTENTION FROM THE LANGUAGE USED BY THE LEGISLATURE AND IF STRICT LITERAL CONSTRUCTI ON LEADS TO AN ABSURD RESULT, I.E., A RESULT NOT INTENDED TO BE SUBSERVED BY THE OBJECT OF THE LEGISLATION FOUND IN THE MANNER INDICATED BEFORE, THEN IF ANOTHER CONSTRUCTI ON IS POSSIBLE APART FROM STRICT LITERAL CONSTRUCTION, TH EN THAT CONSTRUCTION SHOULD BE PREFERRED TO THE STRICT LITE RAL CONSTRUCTION. THOUGH EQUITY AND TAXATION ARE OFTEN STRANGERS, ATTEMPTS SHOULD BE MADE THAT THESE DO NO T REMAIN ALWAYS SO AND IF A CONSTRUCTION RESULTS IN E QUITY 32 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. RATHER THAN IN INJUSTICE, THEN SUCH CONSTRUCTION SH OULD BE PREFERRED TO THE LITERAL CONSTRUCTION.' 17. FOR THE AFORESTATED REASONS, WE HOLD THAT FINAN CE ACT, 2003, TO THE EXTENT INDICATED ABOVE, IS CURATIVE IN NATURE, HENCE, IT IS RETROSPECTIVE AND IT WOULD OPERATE W.E .F. 1ST APRIL, 1988 (WHEN THE FIRST PROVISO CAME TO BE INSE RTED). FOR THE ABOVE REASONS, WE FIND NO MERIT IN THIS BAT CH OF CIVIL APPEALS FILED BY THE DEPARTMENT WHICH ARE HER EBY DISMISSED WITH NO ORDER AS TO COSTS.' 26. WE ARE OF THE VIEW THAT THE REASONING OF THE HON'BL E SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS LTD. ( SUPRA) WILL EQUALLY TO THE AMENDMENT TO SEC.40(A)(IA) OF T HE ACT WHEREBY A SECOND PROVISO WAS INSERTED IN SUB-CLAUSE (IA) OF CLAUSE (A) OF SECTION 40 BY THE FINANCE ACT, 201 2, W.E.F. 1-4-2013. THE PROVISIONS ARE INTENDED TO REMOVE HARDSHIP. IT WAS ARGUED ON BEHALF OF THE REVENUE TH AT THE EXISTING PROVISIONS ALLOW DEDUCTION IN THE YEAR OF PAYMENT AND TO THAT EXTENT THERE IS NO HARDSHIP. WE ARE OF THE VIEW THAT THE HARDSHIP IN SUCH AN EVENT WOULD BE TAXING AN ASSESSEE ON A HIGHER INCOME IN ONE YEAR AND TAXING HIM ON LOWER INCOME IN A SUBSEQUENT YEAR. TO THE EXTENT THE ASSESSEE IS MADE TO PAY TAX ON A HIGHER INCOME IN O NE YEAR, THERE WOULD STILL BE HARDSHIP. 27. AS FAR AS THE APPEAL OF THE REVENUE IS CONCERNE D, WE FIND THAT THE USE OF WORD 'PAYABLE', IN SECTION 40( A)(IA) OF THE ACT HAS CREATED CONTROVERSY AS TO WHETHER PAYAB LE INCLUDES AMOUNTS PAID DURING THE YEAR. THERE WERE CONFLICTING DECISIONS RENDERED BY THE TRIBUNAL. IN THE CASE OF DCIT V. ASHIKA STOCK BROKING LTD. REPORTED IN 44 SOT 556 THE HON'BLE KOLKATA ITAT HAS DECIDED THE MATTER IN FAVOUR OF REVENUE AND AFTER FOLLOWING ITS DECISION DATED 15.01.2010 IN THE CASE OF PODDAR SON'S EXL. P LTD V. ITO IN ITA NO. 1418(KOL. )/09 HAS HELD THAT PROVISIONS OF SECTION 40(A)(IA) OF TH E ACT ARE APPLICABLE TO EVEN SUMS PAID DURING THE YEAR. IN THE CASE OF TEJA CONSTRUCTION V. ACIT REPORTED I N 39 SOT 13 THE HON'BLE HYDERABAD ITAT HAS DECIDED TH E ISSUE AGAINST THE REVENUE AND HAS HELD THAT PROVISI ONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT APPLICABLE IN RESPECT OF SUMS/AMOUNT PAID DURING THE YEAR AND WHICH ARE NOT PAYABLE AT END OF THE YEAR ON DATE OF BALANCE SHEET , AS IT IS APPLICABLE ONLY IN RESPECT OF 'PAYABLE AMOUNT' S HOWN IN 33 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. BALANCE SHEET AS OUTSTANDING EXPENSES ON WHICH TDS HAS NOT BEEN MADE. SIMILAR LAWS WERE LAID IN VARIOUS OT HER CASES. TO RESOLVE THE ABOVE ISSUE SPECIAL BENCH WAS CONSTITUTED AND THE HON'BLE VISAKHAPATNAM SPECIAL BENCH OF ITAT IN THE CASE OF MERILYN SHIPPING & TRA NSPORT V. ADDL CIT REPORTED IN 20 TAXMANN.COM 244 HAS DECI DED THE ISSUE AGAINST THE REVENUE AND AFTER COMPARING T HE PROPOSED AND ENACTED PROVISION WHICH IS INTENDED FR OM THE REPLACEMENT OF THE WORDS IN THE PROPOSED AND EN ACTED PROVISION FROM THE WORDS 'AMOUNT CREDITED OR PAID' TO 'PAYABLE' HAS HELD THAT IT HAS TO BE CONCLUDED THAT PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY TO THE AMOUNTS OF EXPENDITURE WHICH ARE PAYABLE AS ON THE DATE 31ST MARCH OF EVERY YEAR AND IT CANNOT BE INVOKED T O DISALLOW EXPENDITURE WHICH HAS BEEN ACTUALLY PAID D URING THE PREVIOUS YEAR, WITHOUT DEDUCTION OF TDS. 28. IN SIKANDARKHAN N. TUNVAR (SUPRA), THE HON'BLE GUJARAT HIGH COURT HELD THAT IN MERILYN SHIPPING & TRANSPORT (SUPRA) THE MAJORITY HELD THAT AS THE FIN ANCE BILL PROPOSED THE WORDS 'AMOUNT CREDITED OR PAID' A ND AS THE FINANCE ACT USED THE WORDS 'AMOUNTS PAYABLE', S . 40(A)(IA) COULD ONLY APPLY TO AMOUNTS THAT ARE OUTS TANDING AS OF 31ST MARCH AND NOT TO AMOUNTS ALREADY PAID DU RING THE YEAR. THIS VIEW IS NOT CORRECT FOR TWO REASONS. FIRSTLY, A STRICT READING OF S. 40(A)(IA) SHOWS THAT ALL THA T IT REQUIRES IS THAT THERE SHOULD BE AN AMOUNT PAYABLE OF THE NATURE DESCRIBED, WHICH IS SUCH ON WHICH TAX IS DEDUCTIBLE AT SOURCE BUT SUCH TAX HAS NOT BEEN DEDU CTED OR IF DEDUCTED NOT PAID BEFORE THE DUE DATE. THE PR OVISION NOWHERE REQUIRES THAT THE AMOUNT WHICH IS PAYABLE M UST REMAIN SO PAYABLE THROUGHOUT DURING THE YEAR. IF TH E ASSESSEE'S INTERPRETATION IS ACCEPTED, IT WOULD LEA D TO A SITUATION WHERE THE ASSESSEE WHO THOUGH WAS REQUIRE D TO DEDUCT THE TAX AT SOURCE BUT NO SUCH DEDUCTION WAS MADE OR MORE FLAGRANTLY DEDUCTION THOUGH MADE IS NOT PAI D TO THE GOVERNMENT, WOULD ESCAPE THE CONSEQUENCE ONLY BECAUSE THE AMOUNT WAS ALREADY PAID OVER BEFORE THE END OF THE YEAR IN CONTRAST TO ANOTHER ASSESSEE WHO WOU LD OTHERWISE BE IN SIMILAR SITUATION BUT IN WHOSE CASE THE AMOUNT REMAINED PAYABLE TILL THE END OF THE YEAR. T HERE IS NO LOGIC WHY THE LEGISLATURE WOULD HAVE DESIRED TO BRING ABOUT SUCH IRRECONCILABLE AND DIVERSE CONSEQUENCES. SECONDLY, THE PRINCIPLE OF DELIBERATE OR CONSCIOUS OMISSION 34 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. IS APPLIED MAINLY WHEN AN EXISTING PROVISION IS AME NDED AND A CHANGE IS BROUGHT ABOUT. THE SPECIAL BENCH WA S WRONG IN COMPARING THE LANGUAGE USED IN THE DRAFT B ILL TO THAT USED IN THE FINAL ENACTMENT TO ASSIGN A PARTIC ULAR MEANING TO S. 40(A)(IA). ACCORDINGLY, MERILYN SHIPP ING DOES NOT LAY DOWN CORRECT LAW. THE CORRECT LAW IS T HAT S. 40(A)(IA) COVERS NOT ONLY TO THE AMOUNTS WHICH ARE PAYABLE AS ON 31ST MARCH OF A PARTICULAR YEAR BUT ALSO WHIC H ARE PAYABLE AT ANY TIME DURING THE YEAR. THE HON'BLE KO LKATA HIGH COURT IN MD.JAKIR HOSSAI MONDAL (SUPRA) DID NO T AGREE WITH THE VIEW OF THE SPECIAL BENCH IN THE CA SE OF MERILYN SHIPPING & TRANSPORT (SUPRA) FOLLOWING ITS JUDGMENT ON CIT V. CRESCENT EXPORT SYNDICATES [2013 ] 216 TAXMAN 258/33 TAXMANN.COM 250 (CAL.) HOLDING THAT T HE VIEWS EXPRESSED IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA) WERE NOT ACCEPTABLE. 29. HOWEVER, WE FIND THAT THE HON'BLE ALLAHABAD HIGH COURT HAS HOWEVER UPHELD THE VIEW TAKEN BY THE SPEC IAL BENCH ITAT IN THE CASE OF MERILYN SHIPPING & TRANSP ORTS (SUPRA) IN THE CASE OF VECTOR SHIPPING SERVICES (P. ) LTD. (SUPRA). THE RELEVANT OBSERVATIONS OF THE HON'BLE C OURT WERE AS FOLLOWS: 'WE DO NOT FIND THAT THE REVENUE CAN TAKE ANY BENEF IT FROM THE OBSERVATIONS MADE BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSP ORT LTD. (136 1TD 23) (SB) QUOTED AS ABOVE TO THE EFFEC T SECTION 40(A)(IA) WAS INTRODUCED IN THE ACT BY THE FINANCE ACT, 2004 WITH EFFECT FROM 1.4.2005 WITH A VIEW TO AUGMENT THE REVENUE THROUGH THE MECHANISM OF TAX DEDUCTION AT SOURCE. THIS PROVISION WAS BROUGHT ON STATUTE TO DISALLOW THE CLAIM OF EVEN GENUINE AND ADMISSIBLE EXPENSES OF THE ASSESSEE UNDER THE HEAD 'INCOME FROM BUSINESS AND PROFESSION' IN CASE THE ASSESSEE DOES NOT DEDUCT TDS ON SUCH EXPENSES. THE DEFAULT IN DEDUCTION OF TDS WOULD RESULT IN DISALLO WANCE OF EXPENDITURE ON WHICH SUCH TDS WAS DEDUCTIBLE. IN THE PRESENT CASE TAX WAS DEDUCTED AS TDS FROM THE SALAR IES OF THE EMPLOYEES PAID BY M/S MERCATOR LINES LTD., A ND THE CIRCUMSTANCES IN WHICH SUCH SALARIES WERE PAID BY M/S MERCATOR LINES LTD., FOR M/S VECTOR SHIPPING SERVICES, THE ASSESSEE WERE SUFFICIENTLY EXPLAINED. IT IS TO BE NOTED THAT FOR DISALLOWING EXPENSES FRO M BUSINESS AND PROFESSION ON THE GROUND THAT TDS HAS NOT 35 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. BEEN DEDUCTED, THE AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY THE END OF THE YEAR. WE DO NOT FIND THAT THE TRIBUNAL HAS COMMITTED ANY ERROR IN RECORDING THE FINDING ON THE FACTS, WHICH WERE N OT CONTROVERTED BY THE DEPARTMENT AND THUS THE QUESTIO N OF LAW AS FRAMED DOES NOT ARISE FOR CONSIDERATION IN T HE APPEAL. THE INCOME TAX APPEAL IS DISMISSED.' 30. THUS THERE ARE TWO VIEWS ON THE ISSUE, ONE IN FAVOU R OF THE ASSESSEE EXPRESSED BY THE HON'BLE ALLAHABAD HIGH COURT AND THE OTHER AGAINST THE ASSESSEE EXPRESSED BY THE HON'BLE GUJARAT & CALCUTTA HIGH COURTS. ADMITTE DLY, THERE IS NO DECISION RENDERED BY THE JURISDICTIONAL HIGH COURT ON THIS ISSUE. IN THE GIVEN CIRCUMSTANCES, FO LLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF VEGETABLE PRODUCTS LTD. (SUPRA), WE HOLD THAT WHERE TWO VIEWS ARE POSSIBLE ON AN ISSUE, THE VIEW IN FAVOUR OF THE ASSESSEE HAS TO BE PREFERRED. FOLLOWING THE DECISIO N OF THE HON'BLE ALLAHABAD HIGH COURT, WE UPHOLD THE ORDER O F THE CIT(A). 12.1. RESPECTFULLY FOLLOWING THE SAME, WE HOLD TH E ISSUE IN FAVOUR OF ASSESSEE. A.O. IS DIRECTED TO DELETE T HE ADDITION. GROUNDS ARE ALLOWED. 13. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FO R STATISTICAL PURPOSES. ITA.NO.428/HYD/2013 : 14. REVENUE HAS RAISED THE FOLLOWING GROUNDS ON TW O ISSUES AS UNDER : 2. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT IT IS THE ASSESSEE WHO HAS TO DISCHARGE THE INITIAL ONUS OF PROVING WITH CORROBORATIVE EVIDENCE S THAT THE LANDS WERE SITUATED AT FTL ZONE AND HENCE, THE AGREED PRICE HAS NOT BEEN MATERIALIZED, WHICH THE ASSESSEE FAILED TO DO SO. 36 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. 3. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FAC T THAT IN CERTAIN SITUATIONS EXCHANGE OF ON-MONEY CANNOT BE PROVED WITH DEMONSTRABLE DEGREE OF EVIDENCES AND IN SUCH CASES PRIMA FACIE EVIDENCE LIKE AGREEMENTS OF SALE FOUND DURING SURVEY HAS TO BE RELIED UPON TAKING INTO CONSIDERATION CIRCUMSTANTIAL EVIDENCE AND PREPONDERANCE OF PROBABILITY. 4. THE LD. CIT(A) OUGHT TO HAVE ALLOWED OR DISMISSE D THE GROUNDS OF THE ASSESSEE AND WOULD NOT HAVE DIRECTED THE A.O. FOR VERIFICATION OF THE ISSUES AL ONG WITH THE BOOKS OF ACCOUNT AND OTHER INFORMATION, PARTICULARLY, AFTER THE AMENDMENT IN SECTION 251(1) OF THE I.T. ACT, W.E.F. 01.06.2001. ISSUE OF UNEXPLAINED INVESTMENT IN PURCHASE OF LAND RS.65,69 250. 15. BRIEFLY STATED, DURING THE COURSE OF SURVEY PROCEEDINGS CONDUCTED ON 3.11.2008, CERTAIN DOCUMEN TS WERE FOUND AND IMPOUNDED. AMONG THEM, PAGE 35 TO 39 OF ANNEXURE A/FDE/01 AND 43 TO 54 OF ANNEXURE A/FED/01, CONTAIN AGREEMENTS OF SALE ENTERED BY ASSESSEE AND SMT. CH. SANDHYA ON 12.4.2008 FOR PURCHASE OF LAND FOR A TOTAL CONSIDERATION OF RS. 39,37,500/-, RS. 46,72,500 AND RS.45,41,250. HOWEVE R, DURING THE EXAMINATION ON OATH AS WELL AS DURING TH E COURSE OF THE SURVEY AND POST-SURVEY PROCEEDINGS, ASSESSEE SUBMITTED THAT SHE ALONG WITH SMT. CH. SANDHYA HAVE PURCHASED JOINTLY AGRICULTURAL LAND OF ACRE 2.15 GUNTAS FOR A CONSIDERATION OF RS. 62,62,0 00/- AND THIS FACT WAS REITERATED BY ASSESSEE'S HUSBAND IN THE STATEMENT RECORDED ON 15.12.2008. ASSESSEE FURT HER SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE LAN DS WERE LOCATED IN FTL ZONE AND NO PERMISSIONS ARE GIV EN FOR CONSTRUCTION AND HENCE THOUGH INITIALLY NEGOTIA TED 37 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. FOR A HIGHER PRICE ASSUMING THAT THERE ARE NO LEGAL HURDLES BUT LATER AGREED TO PURCHASE FOR A MUCH LES SER PRICE. DISBELIEVING THE CONTENTIONS OF ASSESSEE, TH E ASSESSING OFFICER OPINED THAT ASSESSEE HAD ENTERED INTO AGREEMENTS OF SALE TO PURCHASE THE SAID LANDS FOR A TOTAL CONSIDERATION OF RS.1,31,51,250/-, WHILE REGISTERIN G THE SAME FOR RS.62,62,000/-, ONLY TO CONCEAL THE INVEST MENT AND CORROBORATIVE EVIDENCE TO SUPPORT THE CLAIM OF ASSESSEE THAT THE LANDS WERE LOCATED IN FTL ZONE AN D REFUSAL FOR PERMISSION FOR CONSTRUCTION WAS NOT FURNISHED. EVEN IN RESPECT OF THE CLAIM THAT THE LA NDS WERE JOINTLY PURCHASED WITH SMT.CH. SANDHYA, IT WAS OBSERVED THAT ASSESSEE DID NOT FILE COPY OF SALE DE ED TO SUBSTANTIATE THE CLAIM. HENCE, THE ASSESSING OFFICE R RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE (82 ITR 540) PROCEEDED TO ASSESS THE AMOUNT OF RS. 68,89,250/- BEING THE DIFFERENTIAL AMOUNTS AS PER AGREEMENT FOR SALE DT. 12.04.2008 (RS.1,31,51,250) AND SALE DEEDS DT.15.09.2008 (RS.62,62,000/-), AS UNEXPLAINED INVESTMENT IN THE HANDS OF ASSESSEE. 16. LD. CIT(A) AFTER ADMITTING ADDITIONAL EVIDENCE AND GETTING REMAND REPORTS FROM A.O. HAS ALLOWED THE AS SESSEE CONTENTIONS BY STATING AS UNDER : 6.4. PERUSED THE OBSERVATIONS OF THE ASSESSING OFFICER ALONG WITH THE SUBMISSIONS OF THE APPELLANT . AS COULD BE SEEN FROM THE FACTS OF THE CASE, THE APPELLANT MRS. M. SAILAJA, ALONG WITH ONE MRS. CH. SANDHYA PURCHASED THE AGRICULTURAL LANDS LOCATED AT YEDULANAGULAPALLY AND KOLLUR VILLAGES, FOR A CONSIDERATION OF RS. 62,62,500/- VIDE THE TWO SALE DEEDS DT. 15.09.2008. HOWEVER, THE AO QUANTIFIED THE ACTUAL SALE CONSIDERATION TO BE RS. 38 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. 1,31,51,250/- AS PER THE AMOUNTS MENTIONED IN THE THREE SEPARATE AGREEMENTS FOR SALE, SHOWN TO HAVE BEEN ENTERED ON 12.4.2008 WITH THE THREE PARTIES I. E. MR. B. RAMULU GOUD , MR. B. LAKSHMINARAYA GOUD AND MR. VENKATESHAM GOUD. THE COPIES OF THE AGREEMENTS FOR SALE WERE FOUND AND IMPOUNDED DURING THE COURSE OF THE SURVEY PROCEEDINGS CONDUCTED ON 3.11.2008. HOWEVER, THESE AGREEMENTS FOR SALE WERE NOT SIGNED EITHER BY THE VENDOR OR THE VENDEE, BUT THE AMOUNTS OF THE PART CONSIDERATION SHOWN TO HAVE PAID IN CASH, INDICATED IN THE SAID AGREEMENT. THE SAID LAND TRANSACTIONS WERE CONCLUDED THROUGH TWO SALE DEEDS DT. 15.09.2008 INDICATING THE TOTAL CONSIDERATION AT RS . 62,62,500/- WHICH WERE SHOWN TO HAVE BEEN FINALISED AFTER RENEGOTIATING THE PRICE FROM RS.1,31,51,250/-, BASED ON THE FACT THAT THE SAID LANDS ARE LOCATED IN THE FTL ZONE OF THE LOCAL LAKES/PONDS AND PERMISSIONS ARE NOT POSSIBLE TO BE OBTAINED. THE AO DISBELIEVED THE SUBMISSIONS OF THE APPELLANT ON THE COUNT OF FTL THEORY AND RENEGOTIATION OF PRICE ON SUCH BASIS AND ACCORDINGL Y TREATED THE AMOUNT OF RS. 68,89,250/- BEING THE DIFFERENCE OF THE AMOUNTS AS REFLECTED IN THE THREE AGREEMENTS FOR SALE DT. 12.4.2008 AS COMPARED TO THE AMOUNTS REFLECTED IN TWO SALE DEEDS DT. 15.9.2008 AND ACCORDINGLY TREATED THE AMOUNTS AS UNEXPLAINED INVESTMENTS IN THE HANDS OF THE APPELLANT. 6.5. WHILE TREATING THE AMOUNTS OF THE CONSIDERATION WHICH WAS NOT REFLECTED IN THE SALE DEED, AS UNEXPLAINED INVESTMENT OF THE APPELLANT, THE A.O. RELIED ON THE RATIO OF DECISION OF SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE (82 ITR 540). THE A.O. FURTHER RELIED ON THE ISSUE THAT THE APPELLANT FAILED TO FURNISH ANY CORROBORATIVE EVIDENCE AS REGARDS TO THE INFIRMITIES OF THE LANDS ON ACCOUNT OF LOCATION IN FTL AND HELD THAT THE APPELLANT HAD BOUGHT THE PROPERTIES WITHOUT ANY SUCH ANGLE INDICATED IN SALE DEED WHICH MEANS THE REDUCTION IN CONSIDERATION AS PER THE SALE DEED WAS A DELIBERATE ATTEMPT TO CONCEAL THE INVESTMENTS. REGARDING THE REGISTRATION OF THE LAND IN THE JOINT NAMES OF THE APPELLANT AND MRS. CH. SANDHYA, IT WAS OBSERVED BY THE AO THAT THE APPELLANT FAILED TO FURNISH THE COPIES OF THE SALE DEED SO AS TO VERIFY THE INVESTMENTS IN 39 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. THE NAME OF MRS. SANDHYA. 6.6 IN THIS REGARD IT IS RELEVANT TO MENTION THAT THE APPELLANT COULD PRODUCE THE AFFIDAVITS ALONG WITH T HE STATEMENTS RECORDED FROM THE VENDORS AND IT APPEARS THE SAME WERE IGNORED BY THE AO. IT IS A FACT THAT THE AGREEMENTS FOR SALE DT. 12.04.2008 WERE NOT SIGNED BY EITHER OF THE PARTIES I.E. THE VENDOR AND THE VENDEES AND NO AMOUNTS WERE SHOWN TO HAVE BEEN PAID THROUGH CHEQUES OR DDS TO INDICATE THE ABSENCE OF CORROBORATIVE EVIDENCE IF ANY. THE RATIO OF THE DECISION RELIED UPON BY THE AO INDEED INDICATES THAT THE TAXING AUTHORITIES ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY O F THE RECITALS MADE IN THOSE DOCUMENTS. HOWEVER, NO SUCH SURROUNDING CIRCUMSTANCES WERE NEITHER FOUND NOR BROUGHT ON THE RECORD BY THE AO. IN THIS CASE THE DOCUMENTS RELIED UPON BY THE AO ARE NEITHER EXECUTED NOR SIGNED AND THE SALE DEED RELIED UPON BY THE APPELLANT WAS REJECTED WITHOUT BRINGING IN ANY CORROBORATIVE EVIDENCE, EITHER FOUND DURING THE SURVEY PROCEEDINGS OR COLLECTED IN THE SUBSEQUENT PROCEEDINGS, ON THE RECORD. FURTHER, THE VENDORS, WHO WERE EXAMINED BY THE AUTHORITIES CONCERNED DID NOT CONFIRM THE RECEIPT OF THE HIGHER AMOUNTS AS ENVISAGED BY THE AO, BASED ON THE RECITALS IN AGREEMENTS FOR SALE. THUS, IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE, THE UNSIGNED AGREEMENT FOR SALE ALONE MAY NOT CONVEY THE INFORMATION, OTHER THAN WHAT HAS BEEN INCORPORATED IN A REGISTERED DOCUMENT. 6.7. FURTHER, THE AMOUNT OF CONSIDERATION WHICH WAS TREATED AS UNEXPLAINED INVESTMENTS IN THE HANDS OF THE APPELLANT, AS AGAINST ASSESSABILITY OF THE SAME IN THE HANDS OF THE TWO PERSONS NAMED IN THE SALE DEED I.E. MRS. M. SAILAJA AND MRS. CH. SANDHYA, IS DEVOID OF ANY BASIS. THE AO HELD THAT THE APPELLANT FAILED TO SUBMIT THE COPY OF THE SALE DEED SO AS TO VERIFY THE CLAIM OF INVESTMENTS IN TH E HANDS OF MRS. CH. SANDHYA, THE OTHER CO-OWNER. THIS STATEMENT APPEARS INCORRECT, SINCE THE AO HIMSELF MENTIONED ABOUT THE SUBMISSIONS OF THE PURCHASE DEEDS BY THE APPELLANT, RELATED TO THE PURCHASE OF LANDS AT KOLLUR AND YEDULANAGULAPALLY, IN RESPONSE TO THE QUESTIONNAIRS DT. 3.11.2011 AND 23.12.2011. FURTHER, IT IS ALSO RELEVANT TO MENTION 40 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. THAT THE QUANTUM OF UNACCOUNTED INVESTMENTS IN LANDS WAS ASCERTAINED WITH THE HELP OF THE SALE DEED VIS.A.VIS THE AGREEMENTS FOR SALE, AND AS SUCH THE AVAILABILITY OF SUCH DOCUMENTS BEFORE THE AO CANNOT BE DENIED. ON THIS COUNT, IT CAN BE HELD THAT THE AO IS FACTUALLY INCORRECT TO ASSESS T HE ENTIRE CONSIDERATION IN THE HANDS OF THE APPELLANT WHERE SHE IS NOT THE SOLE BUYER OF THE PROPERTY UNDER REFERENCE, BY SIMPLY HOLDING THAT THE SALE DEED FOR REFLECTING SUCH TRANSACTION WAS NOT AVAILABLE WITH HIM. FURTHER THE COPIES OF THE AFFIDAVITS WHICH WERE FURNISHED BY THE VENDORS OF THE LAND, FOR NOT HAVING RECEIVED ANY EXTRA CONSIDERATION AND ON THE ISSUE OF FTL PROBLEMS, THA T HAVE BEEN MARKED TO THE AO FOR TREATING THE SAME AS ADDITIONAL EVIDENCE, WERE NOT COMMENTED UPON BY THE ASSESSING OFFICER. UNDER THE CIRCUMSTANCES I T CAN BE HELD THAT THE INFORMATION RELIED UPON BY THE AO, FOR QUANTIFYING THE SALE CONSIDERATION AT RS.1,31,51,250/- I.E. THAT THE AGREEMENTS FOR SALE WHICH WERE NOT SIGNED BY THE EITHER PARTIES, CANNOT BE TREATED AS THE SOLE BASIS FOR TREATING THE AMOUN TS AS UNEXPLAINED INVESTMENTS, IN THE ABSENCE OF ANY OTHER CORROBORATIVE EVIDENCES TO SUPPORT THE VIEW TAKEN BY THE ASSESSING OFFICER. 6.8 PROVISIONS OF SEC. 69B DEMANDS THE PRESENCE OF FOLLOWING CIRCUMSTANCES ON THE CUMULATIVE BASIS: I) WHERE IT IS FOUND THAT THE ASSESSEE MADE INVESTMENTS OR IS FOUND TO BE THE OWNER OF ANY BULLION, JEWELLERY AND OTHER VALUABLE ARTICLE AND II) WHERE IT IS FOUND THAT THE AMOUNT EXPENDED ON MAKING SUCH INVESTMENTS OR ACQUIRING SUCH BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE EXCEEDS THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND III) EITHER THE ASSESSEE OFFERS NO EXPLANATION ABOUT SUCH EXCESS AMOUNT OR THE EXPLANATION OFFERED BY HIM IS NOT SATISFACTORY. FURTHER, THE ONUS OF PROVING PRESENCE OF ALL THE CIRCUMSTANCES LIES WITH THE DEPARTMENT. IN THE PRESENT CASE, THERE IS NO CORROBORATIVE EVIDENCE TO PROVE THAT THE REAL CONSIDERATION PAID IS 41 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. RS.1,31,51,250/- EXCEPT THE UNSIGNED AGREEMENTS OF SALE DT.12.4.2008. FURTHER, NEITHER THE PAYMENTS WERE MADE BY DEMAND DRAFTS/CHEQUES, NOR THE RECEIPTS FOR PAYMENTS FOR CASH WERE AVAILABLE WITH THE A.O. TO PROVE THAT THE CONSIDERATION PAID IS MO RE THAN RS.68,89,250/- AS INDICATED IN THE SALE DEED DATED 15.08.2008. FURTHER, THE MAIN REASON ATTRIBUTED BY THE APPELLANT FOR RENEGOTIATION OF TH E PRICE I.E., THE LOCATION OF THE LANDS IN FTL ZONE O F THE LOCAL PONDS WAS FAILED TO BE REBUTTED. THUS, IT CAN BE HELD THAT THE CUMULATIVE CONDITIONS/CIRCUMSTANCES WERE ABSENT TO BRING THE AMOUNTS BASED ON THE PRIMARY EVIDENCES SUCH AS UNSIGNED AGREEMENTS FOR SALE, INTO THE AMBIT OF UNEXPLAINED INVESTMENTS. FURTHER, AS DISCUSSED, THE ENTIRE CONSIDERATION IS NOT RELATABLE TO THE APPELL ANT ALONE WHERE THE NAME OF MRS SANDHYA WAS MENTIONED AS THE COOWNER IN THE SALE DEED. UNDER THE CIRCUMSTANCES, I AM OF THE CONSIDERED OPINION THAT THE ADDITION OF RS.68,89,250/- MADE ON ACCOUNT OF TREATING THE DIFFERENCE IN SALE CONSIDERATION AS PER THE AGREEMENTS FOR SALE AND THE SALE DEEDS DO NOT SURVIVE, FOR LACK OF REQUIRED EVIDENCE AND FOR THE REASONS THAT THE SAID ADDITION IS BASED ON INCORRECT PRESUMPTIONS. ACCORDINGLY, THIS GROUND OF APPEAL IS TREATED AS ALLOWED. 17. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE DO NOT SEE ANY MERIT IN REVENUE GROUNDS. IN FACT, WHEN THE MATTER WAS REMANDED TO A.O. HE SHOULD HAVE EXAMINED THE AF FIDAVITS AND CONTENTIONS. WITHOUT MAKING ANY ENQUIRY, REVENU E CANNOT COME IN APPEAL, HAVING LOST THE OPPORTUNITY TO SUBSTANTIATE BEFORE LD. CIT(A). REVENUE CANNOT CON TEND THAT LD. CIT(A) ERRED IN DECIDING THE ISSUE. NOTHING WAS BROUGHT ON RECORD TO COUNTER THE FINDINGS OF LD. CIT(A). HONBLE SUPREME COURT IN MEHTA PARIKH & CO. VS. CIT (1956) 30 ITR 1 80 (SC). AT PAGE 187 OF THE REPORT, OBSERVED THAT IF THE DE PARTMENTAL AUTHORITIES DO NOT CONSIDER IT NECESSARY TO CALL FO R THE DEPONENTS IN ORDER TO CROSS EXAMINE THEM WITH REFER ENCE TO THE STATEMENTS MADE BY THEM IN THEIR RESPECTIVE AFFIDAV ITS, IT WAS 42 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. NOT OPEN TO THE REVENUE TO CHALLENGE THE CORRECTNES S OF THE CASH BOOK ENTRIES OR THE STATEMENTS MADE BY THOSE D EPONENTS IN THEIR AFFIDAVITS. THE OBSERVATION OF THE HONBLE SUPREME COURT AT PAGE-187 ARE EXTRACTED BELOW: ' NO FURTHER DOCUMENTS OR VOUCHERS IN RELATION TO THO SE ENTRIES WERE CALLED FOR, NOR WAS THE PRESENCE OF TH E DEPONENTS OF THE THREE AFFIDAVITS CONSIDERED NECESS ARY BY EITHER PARTY. THE APPELLANT TOO IT THAT THE AFFIDAV ITS OF THESE PARTIES WERE ENOUGH AND NEITHER THE APPELLATE ASSISTANT COMMISSIONER, NOR THE INCOME TAX OFFICER, WHO WAS PRESENT AT THE HEARING OF THE APPEAL BEFORE THE APPELLATE ASSISTANT COMMISSIONER, CONSIDERED IT NECESSARY TO CALL FOR THEM IN ORDER TO CROSS EXAMIN E THEM WITH REFERENCE TO THE STATEMENTS MADE BY THEM IN TH EIR AFFIDAVITS. UNDER THESE CIRCUMSTANCES IT WAS NOT OP EN TO THE REVENUE TO CHALLENGE THE CORRECTNESS OF THE CAS H BOOK ENTRIES OR THE STATEMENT MADE BY THOSE DEPONENTS IN THEIR AFFIDAVITS.' IN VIEW OF THE ABOVE PRINCIPLES LAID DOWN BY THE AP EX COURT, WE DO NOT FIND ANY MERIT IN REVENUE GROUNDS, HENCE, DI SMISSED. INVESTMENT IN HOUSE : 18. THE FACTS LEADING TO THE ADDITIONS ARE THAT AO MADE AN ADDITION OF RS. 24,12,341 BEING THE AMOUNT REPRESENTING 50% OF THE INVESTMENTS MADE JOINTLY BY ASSESSEE AND HE R HUSBAND IN THE PROPERTY AT KAVURI HILLS, HYDERABAD, HOLDING THAT SUCH INVESTMENT WAS NOT EXPLAINED WITH REFERENCE TO THE SOURCES AND WITH THE HELP OF THE BOO KS OF ACCOUNT. AS PER THE ASSESSING OFFICER, CERTAIN NOTINGS WERE FOUND IN THE IMPOUNDED MATERIAL (PAGE NO.1 TO 10 OF 43 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. ANNEXURE A/FDE/05), INDICATING CERTAIN AMOUNTS WRITTE N AGAINST VARIOUS NAMES, POINTING OUT TO THE PAYMENTS MADE TOWARDS THE INVESTMENT IN PROPERTY AT KAVURI HIL LS AND DURING THE ASSESSMENT PROCEEDINGS ASSESSEES FAI LED TO EXPLAIN THE SOURCES OF THE SAME EXCEPT SAYING THAT T HE SAID INVESTMENTS ARE DULY ACCOUNTED IN THE FINANCIAL YEAR 2008- 09 AND WERE MET OUT OF THE WITHDRAWALS MADE FROM M/S. FAIR DEAL ENTERPRISES (PROPRIETRIX - M. SAILAJA) AN D M/S. SRI KRISHNA SURGICALS (PROPRIETOR MR. M. MURALIDHAR RAO) . IN THE ABSENCE OF CLEAR EXPLANATIONS AS REGARDS TO THE SOURCES OF THE INVESTMENT, SPECIALLY WITH REFERENCE TO THE BOO KS OF ACCOUNT, THE AO TREATED THE AMOUNTS OF RS. 48,24,683 INVESTED DURING THE FINANCIAL YEAR 2008-09, AS UNEX PLAINED INVESTMENT AND 50% OF SUCH INVESTMENTS WERE TREATED A S UNEXPLAINED INVESTMENTS IN THE HANDS OF ASSESSEE. 19. BEFORE THE LD. CIT(A), ASSESSEE FURNISHED ADDITIONAL EVIDENCE AND THE SAME WAS SENT TO A.O. O N REMAND. A.O. MADE VARIOUS SUBMISSIONS AFTER PARTIAL ENQUIRY . LD. CIT(A) EXAMINED THE CONTENTIONS FROM PARA 7.3 TO 7. 8 OF HIS ORDER IN DETAIL AND IN PARA 8 EXTRACTED THE STATEME NT AND BANK DETAILS OF ASSESSEES REGARDING INVESTMENTS. FINALLY HE CONCLUDED AS UNDER : UNDER THE CIRCUMSTANCES, IT MAY BE CONCLUDED THAT THE INFORMATION FURNISHED AS REGARD TO THE SOURCES OF T HE INVESTMENT IN THE HANDS OF MR. MURALIDHAR RAO & MRS . M. SAILAJA, ARE EXPLAINABLE THROUGH THE BANK ACCOUNTS MAINTAINED BY THEM AND FOR THE SAME REASON, THE A.O . IS DIRECTED TO EXAMINE THE SAME WITH REFERENCE TO THE SOURCES FOR THE AMOUNTS IN THEIR BANK ACCOUNTS AS WELL AS T HE BOOKS OF ACCOUNT REFERRED BY THEM AND ACCEPT THE CL AIM OF THE APPELLANTS ON BEING EXPLAINED THROUGH THE BOOKS OF ACCOUNT AND BANK ACCOUNTS THAT ARE ORDERED TO BE PRODUCED BEFORE THE A.O. NOW. ON THIS ACCOUNT, THE APPEAL 44 ITA.NO.354/HYD/2013 & 428/HYD/2013 SMT. M. SAILAJA, SECUNDERABAD. OF THE APPELLANT IS TREATED AS ALLOWED SUBJECT TO T HE VERIFICATION OF THE BANK ACCOUNTS AND BOOKS OF ACCO UNT. 20. AFTER PERUSING THE DETAILED ORDER OF LD. CIT(A ) AND SUBMISSION BY LEARNED D.R. AND A.R., WE ARE OF THE OPINION THAT LD. CIT(A) SHOULD HAVE DELETED THE ADDITIONS H IMSELF WITHOUT DIRECTING THE A.O. TO EXAMINE AND ALLOW. IF A.O. REFUSES TO EXAMINE/CONSIDER THE EVIDENCE FURNISHED BY ASSES SEE WHEN MATTER WAS REMANDED BY CIT(A), THERE IS NO POINT IN DIRECTING THE A.O. AGAIN TO EXAMINE. BE THAT AS IT MAY, WE DO NOT FIND ANY MERIT IN REVENUE CONTENTIONS. ASSESSEE HAS PLAC ED ON RECORD THE CONSEQUENTIAL ORDER PASSED BY A.O. WHERE IN A.O. ACCEPTED THE INVESTMENTS AS EXPLAINED. THEREFORE, O N FACTS THERE IS NO MERIT IN REVENUE CONTENTIONS. GROUNDS A RE DISMISSED. 21. IN THE RESULT, ASSESSEE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES AND REVENUE APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND JANUARY, 2015 SD/- SD/- (SAKTIJIT DEY) JUDICIAL MEMBER (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 02 ND JANUARY, 2015 VBP/- COPY TO: 1. SMT. M. SAILAJA, FAIR DEAL ENTERPRISES, H.NO.6-1 -190- 25/2, PADMARAO NAGAR, SECUNDERABAD. 2. INCOME TAX OFFICER, WARD 10(4), HYDERABAD. 3. CIT(A)-VI, HYDERABAD. 4. THE CIT-V, HYDERABAD. 5. THE DR 'B' BENCH, ITAT, HYDERABAD