Sree Rama Krishna Engineering Company, Visakhapatnam V. PCIT-1, Visakhapatnam

ITA 365/VIZ/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8706 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 19-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEBAKUMAR SONOWAL
• Section: 143(3); 80G; 201(1); 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , ! . . # , & BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER& SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ I.T.A.NO.365/VIZ/2017 ( / ASSESSMENT YEAR:2012-13 ) M/S SREE RAMA KRISHNA ENGINEERING COMPANY DOOR NO.28-13-4/3, SURYABAGH NEAR POLICE BARRACKS JN. VISAKHAPATNAM [PAN : AAIFS3466J] VS. PR.COMMISSIONER OF INCOME TAX AAYKAR BHAWAN VISAKHAPATNAM ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI C.SUBRAHMANYAM, AR / RESPONDENT BY : SHRI DEBA KUMAR SONOWAL, DR / DATE OF HEARING : 27.02.2018 / DATE OF PRONOUNCEMENT : 07.03.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE PR.COMMISSIONER OF INCOME-TAX (PR.CIT]-1, VISAKHAPA TNAM VIDE 2 ITA NO.365/VIZ/2017 SREE RAMA KRISHNA ENGINEERING COMPANY, VISAKHAPATNA M F.NO.PR.CIT-1/VSP/263/6/2016-17 DATED 27.03.2017 FO R THE ASSESSMENT YEAR 2012-13. 2. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE ORD ER PASSED BY THE PR.COMMISSIONER OF INCOME TAX (PR.CIT) U/S 263. IN THIS CASE, ASSESSMENT WAS COMPLETED U/S 143(3) ON TOTAL INCOME OF RS.42,2 4,770/- BY AN ORDER DATED 10.03.2015. LD.PR.CIT HAS TAKEN UP THE CASE F OR REVISION U/S 263 FOR THE FOLLOWING TWO REASONS : (I) THE ASSESSEE HAS MADE THE PAYMENT OF RENTS BUT NOT DEDUCTED THE TDS AS PER SECTION194I OF I.T.ACT (II) INTEREST CREDITS MADE TO CHOLAMANDALAM DBS FINANCE LTD., BUT NOT DEDUCTED THE TAX AT SOURCE AS REQUIRED U/S 80G OF I.T.ACT. 2.1. THE PR.CIT OBSERVED THAT THE ASSESSEE HAS PAI D RENTS TO THE FOLLOWING PERSONS BUT NOT DEDUCTED THE TAX AT SOURCE AND THE EXPENDITURE REQUIRED TO BE CONSIDERED FOR THE DISALLOWANCE U/S 40(A)(IA) OF I.T.ACT. S.NO. NAME OF THE PROPERTY OWNER ADDRESS OF THE PROPERTY RENT PAID (RS.) 1. B.SAMBASIVA RAO, 28-13-4/3, 2 ND FLOOR, SURYABAGH, VISAKHAPATNAM 28-13-4/3, SURYABAGH, VISAKHAPATNAM 1,04,000 2. B. PYDI RAJU, 28 - I3 - 4/2, 2 ND FLOOR, SURYABAGH, VISAKHAPATNAM 28-13-4/3, SURYABAGH, VISAKHAPATNAM 1,04,000 SHOP RENT A/C TOTAL 2,08,000 3 ITA NO.365/VIZ/2017 SREE RAMA KRISHNA ENGINEERING COMPANY, VISAKHAPATNA M (HEAD OFFICE) 3. P.ARUDRAMMA, 9-1-178, PETAYYANAGAR, NEW GAJUWAKA, VIZAG-26 7-14-30/1, B/H GODOWN, OLD GAJUWAKA, VISAKHAPATNAM 60,000 4. P.VENUGOPAL AND M.MOHAN KIRAN 12-1-6/1, 12-1-16/2, MARKET ROAD, GAJUWAKA, VIZAG-16 7-14-30/2, B/H GODOWN, OLD GAJUWAKA, VISAKHAPATNAM 51,000 5. CH.JAGANMOHINI, 8-7-10/3, NEELKAMAL ROAD, GAJUWAKA, VIZAG-26 7-14-28, OLD GAJUWAKA, VISAKHAPATNAM 85,800 6. M.KANAKA DURGA, 12-1-6, MARKET ROAD, GAJUWAKA, VIZAG-26 7-14-30, OLD GAJUWAKA, VISAKHAPATNAM 80,000 SHOP RENT A/C (BRANCH-1) TOTAL 2,76,800 7. G.V.S.S.KUMAR, NO.25, KIRLAMPUDI, VISAKHAPATNAM 9-13-7A, NEW RESAPUVANIPALEM, VIZAG 1,17,000 8. G.N.VIJAY, NO.25, KIRLAMPUDI, VISAKHAPATNAM 9-13-7B, NEW RESAPUVANIPALEM, VIZAG 1,17,000 9. SHOP RENT (BRANCH-2) TOTAL 2,34,000 10. ANDHRA CRICKET ASSOCIATION, 60- 8-8, 5 TH LANE, SIDDARTHANAGAR, VIJAYAWADA SHOP NOS.4,5,6, DR.YSR ACA- VDCA CRICKET STADIUM, P.M.PALEM, VIZAG - 41 2,35,950 SHOP RENT (BRANCH-4) TOTAL 2,35,950 GRAND TOTAL 9,54,750 THE PAYMENT OF INTEREST WITHOUT DEDUCTION OF TAX AT SOURCE ALSO ATTRACTS THE DISALLOWANCE U/S 40(A)(IA) OF I.T.ACT. HENCE THE PR.CIT TAKEN UP THE CASE FOR REVISION. 3. THE LD.AR ARGUED BEFORE THE LD.PR.CIT THAT THE ACT HAS BEEN AMENDED IN RESPECT OF DISALLOWANCE U/S 40(A)(IA) AN D SECOND PROVISO HAS BEEN INTRODUCED, WHEREIN, IF THE RECIPIENT ADMITS T HE INCOME IN ITS HANDS, THE DISALLOWANCE IS NOT ATTRACTED. HENCE, REQUESTE D THE PR.CIT NOT TO RESORT FOR THE REVISION U/S 263 AND REQUESTED TO DROP THE PROCEEDINGS. SIMILARLY IN 4 ITA NO.365/VIZ/2017 SREE RAMA KRISHNA ENGINEERING COMPANY, VISAKHAPATNA M RESPECT OF THE RENTS THE LD.A.R SUBMITTED THAT THE ANDHRA CRICKET ASSOCIATION IS SOCIETY AND THE INCOME OF THE ASSESS EE IS EXEMPT AND IN THE REMAINING CASES EITHER THE RENTS PAID WERE BELOW TH E LIMIT OR THE RECIPIENTS HAVE ADMITTED THE INCOME IN THEIR HANDS. NOT BEIN G CONVINCED WITH THE EXPLANATION OF THE ASSESSEE, THE PR.CIT HELD THAT T HE AMENDMENT TO SECOND PROVISO TO 40(A)(IA) IS PROSPECTIVE W.E.F. 1.4.2013 HENCE THE ASSESSEE REQUIRED TO DEDUCT THE TAX AND FAILURE TO DEDUCT TH E TAX THE EXPENDITURE REQUIRED TO BE DISALLOWED AS PER SECTION 40(A)(IA) OF I.T.ACT. THE LD PCIT FURTHER OBSERVED THAT UNLESS AND OTHERWISE EXPRESS LY STATED TO BE RETROSPECTIVE OR BY INTENDMENT SHOWN, A STATUTORY P ROVISION IS ALWAYS PROSPECTIVE. THE LD.PR.CIT HAS ALSO TAKEN THE SUPPO RT OF THE DECISION OF HONBLE HIGH COURT OF KERALA IN THE CASE OF PRUDENT IAL LOGISTICS & TRANSPORTS (364 ITR 689) AND HELD THAT SECOND PROVI SO TO SECTION 40(A)(IA) OF THE I.T.ACT IS NOT RETROSPECTIVE IN NATURE. SIN CE THE ASSESSEE FAILED TO COMPLY WITH THE PROVISIONS OF THE TAX DEDUCTED AT S OURCE AS REQUIRED U/S 194A OF THE ACT, THE PR.CIT HELD THAT THE ASSESSMEN T MADE U/S 143(3) DATED 10.03.2015 IS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF THE REVENUE AND ACCORDINGLY SET ASIDE THE ORDER AND DIRECTED THE AO TO REDO THE ASSESSMENT AS PER LAW AFTER CONDUCTING NECESSARY INQUIRIES. 5 ITA NO.365/VIZ/2017 SREE RAMA KRISHNA ENGINEERING COMPANY, VISAKHAPATNA M 4. AGGRIEVED BY THE ORDER OF THE PR.CIT, THE ASSESS EE IS IN APPEAL BEFORE THIS TRIBUNAL. DURING THE APPEAL HEARING, THE LD.A R ARGUED THAT THERE WAS AN AMENDMENT TO THE ACT BY INTRODUCTION OF SECOND P ROVISO TO SECTION 40(A)(IA) OF I.T.ACT AND AS PER SECOND PROVISO TO SECTION 40(A)(IA), IF THE DEDUCTEE OFFERS THE INCOME IN ITS HANDS AND FILE TH E RETURN OF INCOME, THE ASSESSEE SHOULD NOT BE TREATED AS ASSESSEE IN DEFAU LT FOR THE PURPOSE OF 201(1) OF THE ACT AND DISALLOWANCE U/S 40(A)(IA) DO ES NOT ATTRACT AND ARGUED THAT THE PAYEE HAD SHOWN THE RECEIPT IN THEI R BOOKS OF ACCOUNT AND TAX DUE WAS PAID BY THE SAID COMPANY, HENCE THERE I S NO CASE FOR REVISION U/S 263. THE ASSESSEE ALSO RELIED ON THE DECISION O F FOLLOWING CASE LAWS (I) COMMISSIONER OF INCOME TAX VS. ANSAL LAND MARK TOWNSHIP (P) LTD. (DELHI HC) (II) RAJEEV KUMAR AGARWAL VS. ACIT (AGRA BENCH) (ITA NO.337/AGRA/2013) (III) VEDPRAKASH SAMARIA VS. ACIT (JAIPUR BENCH) (IV) SANJAY KUMAR (2016) 48 CCH 34 (KOLKATA TRIBUNAL) AND ARGUED THAT THE ORDER OF PR.CIT COMMITTED A MIS TAKE IN NOT CONSIDERING THE AMENDMENT TO PROVISO AS RETROSPECTIVE AND REQUE STED TO SET ASIDE THE ORDER OF THE LD.PR.CIT. 6 ITA NO.365/VIZ/2017 SREE RAMA KRISHNA ENGINEERING COMPANY, VISAKHAPATNA M 5. ON THE OTHER HAND, LD.DR SUPPORTED THE ORDERS OF THE PR.CIT AND RELIED ON THE DECISION OF HONBLE HIGH COURT OF KER ALA IN THE CASE OF THOMAS GEORGE MUTHOOT VS. CIT AND PRUDENTIAL LOGISTICS & T RANSPORTS VS. ITO (SUPRA) . 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED ON RECORD. IN THIS CASE THE ASSESSEE HAS MADE THE PAY MENTS OF RS.13,04,412/- TO M/S CHOLAMANDALAM DBS FINANCE LIMITED FOR THE FI NANCIAL YEAR 2011-12 RELEVANT TO THE ASSESSMENT YEAR 2012-13 AND ALSO PA ID THE RENTS AMOUNTING TO RS.9,54,750/- TO VARIOUS PERSONS AS PE R DETAILS GIVEN ABOVE. . THE LIMITED QUESTION IN THIS CASE IS WHETHER THE AS SESSMENT ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTER EST OF REVENUE OR NOT ? THE ASSESSEE HAS NOT DEDUCTED THE TDS IN RESPECT OF THE PAYMENT MADE TO M/S CHOLAMANDALAM DBS FINANCE LIMITED, AND IN RESPE CT OF RENT PAYMENTS. NON DEDUCTION OF TAX AT SOURCE ATTRACTS THE PROVISI ON OF SECTION 40(A)(IA) OF I.T.ACT. THE AMENDMENT TO SECTION 40(A)(IA) CAME IN TO EFFECT FROM 01/04/2013 AND THE ASSESSING OFFICER HAS NOT EXAMIN ED THE TAXABILITY OF RENTS AND INTEREST. THE AO DURING THE ASSESSMENT PR OCEEDINGS HAS CALLED FOR THE DETAILS OF TDS MADE, INTEREST PAID ON TDS B UT NOT REMITTED TO GOVERNMENT ACCOUNT ALONG WITH OTHER DETAILS, BUT T HE ASSESSEE HAS NOT 7 ITA NO.365/VIZ/2017 SREE RAMA KRISHNA ENGINEERING COMPANY, VISAKHAPATNA M FURNISHED THE DETAILS TO THE AO. THE ASSESSEE DID N OT FURNISH THE DETAILS RELATING TO NON DEDUCTION OF TAX AT SOURCE THOUGH T HE AO HAS CALLED FOR THE DETAILS AND BECAUSE OF ASSESSEES FAILURE TO FURNIS H THE DETAILS THE AO COULD NOT EXAMINE THE ISSUE AND DID NOT MAKE THE DISALLO WANCE WHICH REQUIRED TO BE MADE U/S 40(A)(IA) OF I.T.ACT. THE CASE LAWS REGARDING APPLICATION OF PROVISIONS OF SECOND PROVISO TO SECTION 40(A)(IA) W HETHER RETROSPECTIVE OR PROSPECTIVE IS A LEGAL ISSUE WHICH IS NOT FINALLY S ETTLED AND NOT RELATED TO THE JURISDICTION U/S 263 OF I.T.ACT. THE SECOND PROVIS O TO SECTION 40(A)(IA) IS PROSPECTIVE W.E.F. 1.4.2013. THIS VIEW IS ALSO SUP PORTED BY THE DECISION OF HONBLE HIGH COURT OF KERALA RELIED UP ON BY THE LD .PR.CIT AND LD.DR IN THE CASE OF THOMAS GEORGE MUTHOOT VS. CIT. THOUGH THE A SSESSEE RELIED ON ANSAL LAND MARK TOWNSHIP (P) LTD. (DELHI HC) SUPRA THE ASSESSEE DID NOT FURNISH THE DETAILS BEFORE THE AO DURING THE ASSESS MENT PROCEEDINGS, HENCE THE CASE LAW IS NO WAY HELPFUL TO THE ASSESSEE. SI NCE THE ASSESSEE FAILED TO DEDUCT THE TAX AT SOURCE WHICH REQUIRED TO BE DEDUC TED U/S 194A AND 194I OF I.T.ACT AND THE AO FAILED TO CONSIDER THE ISSUE AND MAKE THE ADDITION U/S 40(A)(IA), THE ASSESSMENT MADE BY THE AO IS ERRONEO US AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE PR.CIT DIRECTED TH E AO TO DISALLOW THE INTEREST EXPENDITURE AND TO REDO THE ASSESSMENT AFT ER MAKING INQUIRIES. SINCE THE DIRECTION GIVEN BY THE PR.CIT IS AMBIGUOU S AND CONFUSING, WE 8 ITA NO.365/VIZ/2017 SREE RAMA KRISHNA ENGINEERING COMPANY, VISAKHAPATNA M MODIFY THE DIRECTION AND SET ASIDE BOTH THE ISSUES TO THE FILE OF THE AO TO REDO THE ASSESSMENT AS PER LAW. THE AO IS FREE TO CONDUCT THE INQUIRIES AND DECIDE THE ISSUE AS PER LAW ON MERITS. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 7 TH MARCH, 2018. SD/- SD/- ( . ) ( ! . . # ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM $ /DATED : 07.03.2018 L.RAMA, SPS 9 ITA NO.365/VIZ/2017 SREE RAMA KRISHNA ENGINEERING COMPANY, VISAKHAPATNA M & ' / COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT- M/S SREE RAMA KRISHNA ENGINEERING CO MPANY DOOR NO.28-13-4/3, SURYABAGH, NEAR POLICE BARRACKS JN., VISAKHAPATNAM 2. / THE RESPONDENT PR.COMMISSIONER OF INCOME TAX, AAYKAR BHAWAN VISAKHAPATNAM 3. THE PR. COMMISSIONER OF INCOME TAX-1, VISAKHAPATN AM 4. * , * , / DR, ITAT, VISAKHAPATNAM 5. / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM