HANUMAN TUBE WELL CO., Jaipur V. JCIT, Jaipur

ITA 429/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2052 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 27-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Keywords: Question of law; Non-deduction of tax
• Section: 244A; 194C

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPAN] YS[KK LNL; ] DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 429/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 M/S HANUMAN TUBE WELL CO., STATION ROAD, JAIPUR. CUKE VS. JT. CIT, RANGE-3, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABFH 5769 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. JAIN (ADV) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 22/06/2017 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 23/06/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATES F ROM THE ORDER OF THE LD. CIT(A)-1, JAIPUR DATED 01/02/2016 FOR THE A .Y. 2011-12, WHEREIN THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE LD. CIT(A) I HAS GROSSLY ERRED IN LAW AND FACTS IN NOT ACCEPTING THE INCOME SHOWN BY THE ASSESSEE AS PER REGULAR BOOKS OF ACCOU NT PROPERLY MAINTAINED DURING THE COURSE OF BUSINESS AND SUCH B OOKS ARE PROPERLY AUDITED BY C.A. AS PER PROVISION OF SECTIO N 44AB. THUS & THEREFORE INVOKING OF PROVISIONS OF SECTION 145(3) IS WITHOUT ANY EVIDENCE /MATERIAL ON RECORD. ITA 429/JP/2016_ M/S HANUMAN TUBE WELL CO. VS JT.CIT 2 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE LD. CIT(A) I HAS GROSSLY ERRED IN LAW AND FACTS CONFIRMING LUMP SUM TRADING ADDITION OF RS. 6,00000/- IN THE DECLARED NET PROFI T. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE LD. CIT(A)- 1 HAS GROSSLY ERRED IN LAW AND FACTS IN CONFIRMING ADDITIONS OF RS. 1,02,633/- ON A/C OF NON DEDUCTION OF TAX ON PAYMEN T OF INTEREST TO FOLLOWING CREDITORS :- S. NO. NAME OF THE CONCERN TO WHOM INTEREST PAID AMOUNT OF INTEREST 1 SMT. PRITI SONI 22,545/ - 2. SHRI RAJENDRA KUMAR BHUKMARYA 27,500/ - 3. SARITA KOOLWAL 32,588/ - 4. SMT. MEERA DEVI KUMAWAT 20,000/ - TOTAL 1,02,633/ - 4. THAT MAKING SPECIAL DISALLOWANCE WAS NOT JUSTIFI ED AND LAWFUL WHERE BOOKS OF ACCOUNTS ARE REJECTED AND INCOME IS ESTEEMED BY WAY OF LUMPSUM ADDITIONS. 5. NO SHOW CAUSE NOTICE THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) I HAS GROSSLY ERRED IN LAW AND FACTS IN NOT ISSUING P ROPER & VALID SHOW CAUSE NOTICE BEFORE MAKING ADDITIONS/ DISALLOW ANCES. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE LD. CIT(A) I HAS GROSSLY ERRED IN LAW AND FACTS IN WITHDRAWING I NTEREST U/ S 244A AND CHARGING INTEREST U/S 234D. 2. IN THIS CASE, THE ASSESSEE E-FILED ITS RETURN ON 30/09/2011 DECLARING TOTAL INCOME OF RS. 29,03,830/-. ASSESSMENT U/S 143 (3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WAS FINALIZED ON 19/02/ 2014. THE ASSESSEE IS GOVERNMENT CONTRACTOR OF PHED AND ENGAGED IN THE BU SINESS OF DRILLING OF TUBE WELL AND SALE OF PUMPS. DURING THE YEAR UNDER C ONSIDERATION, THE ASSESSEE DECLARED BORING RECEIPTS OF RS. 29,30,40,1 06/-. THE ASSESSING ITA 429/JP/2016_ M/S HANUMAN TUBE WELL CO. VS JT.CIT 3 OFFICER MADE ADDITION OF RS. 6,00,000/- ON LUMP SUM BASIS. THE LD. CIT(A) HAS CONFIRMED THE LUMP SUM ADDITION OF RS. 6,00,000 /- MADE BY THE ASSESSING OFFICER. 3. I HAVE HEARD BOTH THE SIDES ON THE ISSUE OF CONF IRMING THE TRADING ADDITION OF RS. 6,00,000/- RAISED IN THE GROUNDS NO . 1 AND 2 OF THE APPEAL. IT IS PERTINENT TO NOTE THAT THE NET PROFIT RATE DE CLARED FOR THE YEAR UNDER CONSIDERATION WAS BETTER THAN THE EARLIER YEAR I.E. FOR THE A.Y. 2010-11, IT WAS 17.43% AND FOR THE YEAR UNDER CONSIDERATION, IT WAS 18.93%. THE ASSESSING OFFICER HAS NOT SPECIFIED THE DEFECTS IN THE BOOKS OF ACCOUNT AND HE HAS SIMPLY STATED THAT THE LABOUR CHARGES VOUCHE RS WERE SELF MADE AND QUANTITATIVE AND QUALITATIVE CONSUMPTION OF RAW MAT ERIAL COULD NOT BE WORKED OUT OR VERIFIED IN ABSENCE OF DAY TO DAY STOC K REGISTER, THEREFORE, HE MADE A LUMP SUM ADDITION. IN MY CONSIDERED VIEW, WHEN THE ASSESSEE HAS DECLARED BETTER NP RATE THAN THE EARLIER YEAR THEN THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING LUMP SUM TRADING ADDITION WI THOUT GIVING SPECIFIC DEFECTS IN THE EXPENSES DEBITED IN THE P&L ACCOUNT OR SPECIFIC FINDING WITH REGARD TO THE SUPPRESSION OF THE RECEIPTS. THE ASSES SEE CLAIMS THAT HIS BOOKS OF ACCOUNT WERE AUDITED AND NOTHING SPECIFIC IS QUALIFIED BY THE AUDITOR IN THE AUDIT REPORT, THEREFORE, MERE SUSPIC ION SHOULD NOT BE MADE A BASIS FOR ADDITION. I ALSO AGREE WITH THIS VIEW THAT AN ALLEGATION REMAINS ITA 429/JP/2016_ M/S HANUMAN TUBE WELL CO. VS JT.CIT 4 ALLEGATION UNLESS IT IS PROVED. SUSPICION MAY BE ST RONG BUT IT CANNOT TAKE PLACE OF REALITY, THEREFORE, I DIRECT TO DELETE THI S ADDITION. 4. IN THE GROUND NO. 3, THE ISSUE INVOLVED IS SUSTA INING THE ADDITION OF RS. 1,02,633/- ON ACCOUNT OF NON-DEDUCTION OF TAX O N PAYMENT OF INTEREST. THE LD. CIT(A) HAS CONFIRMED THIS ADDITION BY HOLDING AS UNDER:- 3.2.2 DETERMINATION (I) I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A PPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. THE AO DISALLOWE D INTEREST PAYMENT OF RS. 1,02,633/- AS THE APPELLANT HAS NOT DEDUCTED TA X AT SOURCE ON ACCOUNT OF INTEREST PAYMENTS AS DETAILED BY THE APPELLANT I N ITS WRITTEN SUBMISSIONS. IT WAS THE CONTENTION OF THE APPELLANT THAT THE ENTIRE INTEREST WAS PAID DURING THE YEAR AND NO INTEREST WAS PAYABL E AT THE YEAR END AND THUS PROVISIONS OF SECTION 40A (IA) ARE NOT APPLICA BLE AND IT PLACED RELIANCE ON THE CASE OF VECTOR SHIPPING SERVICES P LTD (2013 ) 357 ITR 642 (ALL) AND OTHER JUDICIAL PRONOUNCEMENTS. (II) IT MAY BE MENTIONED THAT THE HONBLE P & H HIG H COURT IN THE CASE OF P.M.S. DIESELS VS CIT (2015) 93 CCH 110 PHHC / (201 5) 277 CTR 0491 (P&H) AFTER CONSIDERING THE CASES OF CIT VS. M/S VE CTOR SHIPPING SERVICES (P) LTD., (2013) 262 CTR (ALL) 545, V.M. SALGAOCAR & BROS. (P) LTD., ETC. VS. CIT, ETC. (2000) 243 ITR 383 (SC), ACIT VS. MERILYN SHIPPING & TRANSPORTERS 136 ITD 23 (SB) (VISHAKHAPATNAM), TUBE INVESTMENTS OF INDIA LTD. AND ANOTHER VS. ACIT, (TDS) AND OTHERS, (2010) 325 ITR 610 (MAD)HELD THAT: THE PROVISIONS OF SECTION 40(A) (IA) OF THE INCOME TAX ACT, 1961, ARE APPLICABLE NOT ONLY TO THE AMOUNT WHICH IS SHOWN AS PAYABLE ON THE DATE OF BALANCE SHEET, BUT IT IS APPLICABLE TO SUCH EXPENDITURE, WHICH BECOME PAYABLE AT ANY TIME DURING THE RELEVANT PREVIOUS YE AR AND WAS ACTUALLY PAID WITHIN THE PREVIOUS YEAR. IN THE RESULT THE QU ESTION IS DECIDED IN FAVOUR OF REVENUE AND AGAINST THE ASSESSEE. ITA 429/JP/2016_ M/S HANUMAN TUBE WELL CO. VS JT.CIT 5 (IIA) THE SAME VIEW WAS TAKEN BY THE HONBLE CALCU TTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE, (2013) 216 TAXMA N 258 (CALCUTTA) WHEREIN IT WAS HELD THAT: IT IS NOTICEABLE THAT SECTION 40(A) IS APPLICABLE IRRESPECTIVE OF THE METHOD OF ACCOUNTING FOLLOWED BY AN ASSESSEE. THEREFORE, B Y USING FHE TERM 'PAYABLE' LEGISLATURE INCLUDED THE ENTIRE ACCRUED L IABILITY. IF ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THEN THE MOMENT AMOUNT WAS CREDITED TO THE ACCOUNT OF PAYEE ON ACCRUAL OF LIABILITY, TDS WAS REQUIRED TO BE MADE BUT IF ASSESSEE WAS FOLLOWING C ASH SYSTEM OF ACCOUNTING, THEN ON MAKING PAYMENT TDS WAS TO BE MA DE AS THE LIABILITY WAS DISCHARGED BY MAKING PAYMENT. THE TDS PROVISION S ARE APPLICABLE BOTH IN THE SITUATION OF ACTUAL PAYMENT AS WELL OF THE CREDIT OF THE AMOUNT. IT BECOMES VERY CLEAR FROM THE FACT THAT TH E PHRASE, 'ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVIIB, W AS NOT THERE IN THE BILL BUT INCORPORATED IN THE ACT. THIS WAS NOT WITHOUT A NY PURPOSE.' (IIB) THE HONBLE HIGH COURT OF HIMACHAL PRADESH I N THE CASE OF PALAM GAS SERVICE VS CIT, (2014) 89 CCH 0123 HPHC / (2015) 37 0 ITR 0740 (HP) HELD THAT: LASTLY, INSOFAR AS THE PLEA TAKEN BY THE APPELLANT THAT NO DISALLOWANCE CAN BE MADE UNDER SECTION 40 (A) (IA) AS THE FREIGH T CHARGES HAD BEEN PAID AND WERE NOT PAYABLE. SUFFICE IT TO STATE THAT THE PROVISIONS OF SECTION 40 (A) (IA) OF THE ACT WERE APPLICABLE NOT ONLY TO THE AMOUNT WHICH WERE SHOWN AS OUTSTANDING ON THE CLOSING OF T HE RELEVANT PREVIOUS YEAR, BUT TO THE ENTIRE EXPENDITURE WHICH BECAME LIABLE FOR PAYMENT AT ANY POINT OF TIME DURING THE YEAR UNDER CONSIDERATI ON AND WHICH WAS ALSO PAID BEFORE THE CLOSING OF THE YEAR AS RIGHTLY HELD BY THE AUTHORITIES BELOW. (IIC) THE HONBLE ITAT, LUCKNOW BENCH IN THE CASE O F DCIT VS AMA MEDICAL & DIAGNOSTIC CENTRE (2014) 40 CCH 0581 LUCKNOW TRIB / (2014) 63 SOT 0136 (LUCKNOW) ((URO)) HELD THAT: ITAT ARE OF THE VIEW THAT THE HON'BLE JURISDICTION AL HIGH COURT HAS NOT EXAMINED THE IMPUGNED ISSUE I.E. WHETHER DISALLOWAN CE U/S 40(A) (IA) OF THE ACT COULD BE MADE ONLY IN RESPECT OF SUCH AMOUN T WHICH ARE PAYABLE AS ON 31 ST MARCH OF EVERY YEAR UNDER CONSIDERATION WHEREAS TH E HON'BLE GUJARAT HIGH COURT AND HON'BLE CALCUTTA HIGH COURT HAVE DEALT WITH THE ISSUE IN DETAIL IN THE LIGHT OF VARIOUS JUDICIAL PR ONOUNCEMENT AND HAVE CATEGORICALLY HELD THAT SECTION 40(A) (IA) WOULD CO VER NOT ONLY TO THE ITA 429/JP/2016_ M/S HANUMAN TUBE WELL CO. VS JT.CIT 6 AMOUNT WHICH ARE PAYABLE AS ON 31ST MARCH OF A PART ICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. (PAR A7.5) ITAT CONSIDERED OPINION THAT THE VIEW EXPRESSED OR THE RATIO LAID DOWN BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ME RILYN SHIPPING & TRANSPORTS HAS BEEN OVERRULED. THEREFORE, IT CANNOT BE SAID THAT SINCE THE HON'BLE JURISDICTIONAL HIGH COURT HAS APPROVED THE VIEW TAKEN BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILY N SHIPPING & TRANSPORTS, THE SAME HAS TO BE FOLLOWED BY THE TRIB UNAL SITUATED WITHIN THE JURISDICTION OF HON'BLE ALLAHABAD HIGH COURT. T HE HON'BLE JURISDICTIONAL HIGH COURT HAS NOT EXAMINED THE IMPU GNED ISSUE AT ALL AND SIMPLE PASSING REFERENCE WAS MADE WITH REGARD TO TH E ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILY N SHIPPING & TRANSPORTS AND THE RELIEF WAS GRANTED TO THE ASSESSEE ON MERIT . THEREFORE, THE RATIO LAID DOWN IN THE CASE OF MERI LYN SHIPPING TRANSPORTS, WHICH HAS BEEN SUSPENDED BY HON'BTE ANDHRA PRADESH HIGH COURT, HAS NOT BEEN APPROVED BY THE HON'BLE ALLAHABAD HIGH COU RT. THEREFORE, SUBORDINATE JUDICIAL FORUM ARE NOT REQUIRED TO FOLL OW THE RATIO ORDER LAID DOWN IN THE CASE OF MERILYN SHIPPING & TRANSPORTS ( SUPRA), AS IT WAS OVERRULED BY THE OTHER HIGH COURT. (PARA8)' (III) IT MAY BE MENTIONED THAT VIDE CIRCULAR NO. 10 OF 2013 DATED 16.12.2013 IT HAS BEEN STATED BY THE CBDT THAT: 4. AFTER CAREFUL EXAMINATION OF THE ISSUE, THE BOA RD IS OF THE CONSIDERED VIEW THAT THE PROVISION OF SECTION 40(A)(IA) OF THE ACT WOULD COVER NOT ONLY THE AMOUNTS WHICH ARE PAYABLE AS ON 31ST MARCH OF A PREVIOUS YEAR BUT ALSO AMOUNTS WHICH ARE PAYABLE AT ANY TIME DURI NG THE YEAR. THE STATUTORY PROVISIONS ARE AMPLY CLEAR AND IN THE CON TEXT OF SECTION 40(A)(IA) OF THE ACT THE TERM 'PAYABLE' WOULD INCLU DE 'AMOUNTS WHICH ARE PAID DURING THE PREVIOUS YEAR'. (IV) HERE IT MAY BE MENTIONED THAT AS PER THE PROVI SO TO SECTION 201 INSERTED W.E.F 01.07.2012, THE APPELLANT WOULD NOT BE TREATE D AS ASSESSEE IN DEFAULT, IF THE PAYEE (I) HAS FURNISHED ITS RETURN OF INCOME U/S 139; (II) HAS TAKEN INTO ACCOUNT SUCH SUMS FOR COMPUTIN G INCOME IN SUCH RETURN OF INCOME; AND (III) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY IT IN SUCH RETURN OF INCOME AND THE PERSON FURNISHES A CERTIFICATE TO TH IS EFFECT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED (FORM N. 26A) ITA 429/JP/2016_ M/S HANUMAN TUBE WELL CO. VS JT.CIT 7 (V) THE APPELLANT HAS NOT FILED ANY CERTIFICATE IN FORM NO. 26A, THUS NO BENEFIT COULD BE ALLOWED TO THE APPELLANT ON THE BASIS OF T HE ABOVE SECTION. (VI) IN VIEW OF THE ABOVE DISCUSSION AND THE JUDICI AL PRONOUNCEMENTS, IT IS HELD THAT SECTION 40(A) (IA) IS APPLICABLE WHETHER THE P AYMENTS WERE PAID DURING THE YEAR OR PAYABLE AT THE YEAR END. THEREFO RE, IN VIEW OF THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE AO WAS JUSTIFIED IN MAKING ADDITION OF RS. 1,02,633/- U/S 40(A) (IA) OF THE ACT AND THUS THE SAME IS SUSTAINED. 5. I HAVE HEARD BOTH THE SIDES ON THIS ISSUE. THE CO NTROVERSY REGARDING TDS ON PAID AND PAYABLE HAS BEEN SETTLED DOWN BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S PALAM GAS SERVICES VS. CIT IN CIVIL APPEAL NO. 5512 OF 2015 ORDER DATED 02/05/201 7, WHEREIN IT HAS BEEN HELD AS UNDER:- 15) WE APPROVE THE AFORESAID VIEW AS WELL. AS A FO RTIORARI, IT FOLLOWS THAT SECTION 40(A)(IA) COVERS NOT ONLY THOSE CASES WHERE THE AMOUNT IS PAYABLE BUT ALSO WHEN IT IS PAID. IN THIS BEHALF, ONE HAS T O KEEP IN MIND THE PURPOSE WITH WHICH SECTION 40 WAS ENACTED AND THAT HAS ALRE ADY BEEN NOTED ABOVE. WE HAVE ALSO TO KEEP IN MIND THE PROVISIONS OF SECT IONS 194C AND 200. ONCE IT IS FOUND THAT THE AFORESAID SECTIONS MANDATE A P ERSON TO DEDUCT TAX AT SOURCE NOT ONLY ON THE AMOUNTS PAYABLE BUT ALSO WHE N THE SUMS ARE ACTUALLY PAID TO THE CONTRACTOR, ANY PERSON WHO DOE S NOT ADHERE TO THIS STATUTORY OBLIGATION HAS TO SUFFER THE CONSEQUENCES WHICH ARE STIPULATED IN THE ACT ITSELF. CERTAIN CONSEQUENCES OF FAILURE TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS MADE, WHERE TAX WAS TO BE DEDUCTED AT SOURCE OR FAILURE TO PAY THE SAME TO THE CREDIT OF THE CENTRAL GOVERNMEN T, ARE STIPULATED IN SECTION 201 OF THE ACT. THIS SECTION PROVIDES THAT IN THAT CONTINGENCY, SUCH A PERSON WOULD BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX. ITA 429/JP/2016_ M/S HANUMAN TUBE WELL CO. VS JT.CIT 8 WHILE STIPULATING THIS CONSEQUENCE, SECTION 201 CAT EGORICALLY STATES THAT THE AFORESAID SECTIONS WOULD BE WITHOUT PREJUDICE TO AN Y OTHER CONSEQUENCES WHICH THAT DEFAULTER MAY INCUR. OTHER CONSEQUENCES ARE PROVIDED UNDER SECTION 40(A)(IA) OF THE ACT, NAMELY, PAYMENTS MADE BY SUCH A PERSON TO A CONTRACTOR SHALL NOT BE TREATED AS DEDUCTIBLE EXPEN DITURE. WHEN READ IN THIS CONTEXT, IT IS CLEAR THAT SECTION 40(A)(IA) DEALS W ITH THE NATURE OF DEFAULT AND THE CONSEQUENCES THEREOF. DEFAULT IS RELATABLE TO C HAPTER XVIIB (IN THE INSTANT CASE SECTIONS 194C AND 200, WHICH PROVISION S ARE IN THE AFORESAID CHAPTER). WHEN THE ENTIRE SCHEME OF OBLIGATION TO D EDUCT THE TAX AT SOURCE AND PAYING IT OVER TO THE CENTRAL GOVERNMENT IS REA D HOLISTICALLY, IT CANNOT BE HELD THAT THE WORD 'PAYABLE' OCCURRING IN SECTIO N 40(A)(IA) REFERS TO ONLY THOSE CASES WHERE THE AMOUNT IS YET TO BE PAID AND DOES NOT COVER THE CASES WHERE THE AMOUNT IS ACTUALLY PAID. IF THE PRO VISION IS INTERPRETED IN THE MANNER SUGGESTED BY THE APPELLANT HEREIN, THEN EVEN WHEN IT IS FOUND THAT A PERSON, LIKE THE APPELLANT, HAS VIOLATED THE PROVISIONS OF CHAPTER XVIIB (OR SPECIFICALLY SECTIONS 194C AND 200 IN THE INSTANT CASE), HE WOULD STILL GO SCOT FREE, WITHOUT SUFFERING THE CONSEQUEN CES OF SUCH MONETARY DEFAULT IN SPITE OF SPECIFIC PROVISIONS LAYING DOWN THESE CONSEQUENCES. THE PUNJAB & HARYANA HIGH COURT HAS EXHAUSTIVELY INTERP RETED SECTION 40(A(IA) KEEPING IN MIND DIFFERENT ASPECTS. WE WOULD AGAIN Q UOTE THE FOLLOWING PARAGRAPHS FROM THE SAID JUDGMENT, WITH OUR COMPLET E APPROVAL THERETO: 26. FURTHER, THE MERE INCURRING OF A LIABILITY DOE S NOT REQUIRE AN ASSESSEE TO DEDUCT THE TAX AT SOURCE EVEN IF SUCH PAYMENTS, IF MADE, WOULD REQUIRE AN ASSESSEE TO DEDUCT THE TAX AT SOURCE. THE LIABILITY TO DEDUCT TAX AT SOURCE UNDER CHAPTER XVII-B ARISES ONLY UPON PAYMENTS BEIN G MADE OR WHERE SO SPECIFIED UNDER THE SECTIONS IN CHAPTER XVII, THE A MOUNT IS CREDITED TO THE ACCOUNT OF THE PAYEE. IN OTHER WORDS, THE LIABILITY TO DEDUCT TAX AT SOURCE ARISES NOT ON ACCOUNT OF THE ASSESSEE BEING LIABLE TO THE PAYEE BUT ONLY UPON THE LIABILITY BEING DISCHARGED IN THE CASE OF AN AS SESSEE FOLLOWING THE CASH SYSTEM AND UPON CREDIT BEING GIVEN BY AN ASSESSEE F OLLOWING THE MERCANTILE SYSTEM. THIS IS CLEAR FROM EVERY SECTION IN CHAPTER XVII. 27. TAKE FOR INSTANCE, THE CASE OF AN ASSESSEE, WHO FOLLOWS THE CASH SYSTE M OF ACCOUNTING AND WHERE THE ASSESSEE WHO THOUGH LIABLE TO PAY THE CON TRACTOR, FAILS TO DO SO FOR ITA 429/JP/2016_ M/S HANUMAN TUBE WELL CO. VS JT.CIT 9 ANY REASON. THE ASSESSEE IS NOT THEN LIABLE TO DEDU CT TAX AT SOURCE. TAKE ALSO THE CASE OF AN ASSESSEE, WHO FOLLOWS THE MERCANTILE SYSTEM. SUCH AN ASSESSEE MAY HAVE INCURRED THE LIABILITY TO PAY AMOUNTS TO A PARTY. SUCH AN ASSESSEE IS ALSO NOT BOUND TO DEDUCT TAX AT SOURCE UNLESS HE CR EDITS SUCH SUMS TO THE ACCOUNT OF THE PARTY/PAYEE, SUCH AS, A CONTRACTOR. THIS IS CLEAR FROM SECTION 194C SET OUT EARLIER. THE LIABILITY TO DEDUCT TAX A T SOURCE, IN THE CASE OF AN ASSESSEE FOLLOWING THE CASH SYSTEM, ARISES ONLY WHE N THE PAYMENT IS MADE AND IN THE CASE OF AN ASSESSEE FOLLOWING THE MERCAN TILE SYSTEM, WHEN HE CREDITS SUCH SUM TO THE ACCOUNT OF THE PARTY ENTITL ED TO RECEIVE THE PAYMENT. 28. THE GOVERNMENT HAS NOTHING TO DO WITH THE DISPU TE BETWEEN THE ASSESSEE AND THE PAYEE SUCH AS A CONTRACTOR. THE PROVISIONS OF THE ACT INCLUDING SECTION 40 AND THE PROVISIONS OF CHAPTER XVII DO NO T ENTITLE THE TAX AUTHORITIES TO ADJUDICATE THE LIABILITY OF AN ASSESSEE TO MAKE PAYMENT TO THE PAYEE/OTHER CONTRACTING PARTY. THE APPELLANT'S SUBMISSION, IF A CCEPTED, WOULD REQUIRE AN ADJUDICATION BY THE TAX AUTHORITIES AS TO THE LIABI LITY OF THE ASSESSEE TO MAKE PAYMENT. THEY WOULD THEN BE REQUIRED TO INVESTIGATE ALL THE RECORDS OF AN ASSESSEE TO ASCERTAIN ITS LIABILITY TO THIRD PARTIE S. THIS COULD IN MANY CASES BE AN EXTREMELY COMPLICATED TASK ESPECIALLY IN THE ABS ENCE OF THE THIRD PARTY. THE THIRD PARTY MAY NOT PRESS THE CLAIM. THE PARTIE S MAY SETTLE THE DISPUTE, IF ANY. THIS IS AN EXERCISE NOT EVEN REMOTELY REQUIRED OR EVEN CONTEMPLATED BY THE SECTION. 16) AS MENTIONED ABOVE, THE PUNJAB & HARYANA HIGH COURT FOUND SUPPORT FROM THE JUDGMENTS OF THE MADRAS AND CALCUTTA HIGH COURT S TAKING IDENTICAL VIEW AND BY EXTENSIVELY QUOTING FROM THE SAID JUDGMENTS. 17) INSOFAR AS JUDGMENT OF THE ALLAHABAD HIGH COUR T IS CONCERNED, READING THEREOF WOULD REFLECT THAT THE HIGH COURT, AFTER NO TICING THE FACT THAT SINCE THE AMOUNTS HAD ALREADY BEEN PAID, IT STRAIGHTAWAY CONCLUDED, WITHOUT ANY DISCUSSION, THAT SECTION 40(A)(IA) WOULD APPLY ONLY WHEN THE AMOUNT IS 'PAYABLE' AND DISMISSED THE APPEAL OF THE DEPARTMEN T STATING THAT THE QUESTION OF LAW FRAMED DID NOT ARISE FOR CONSIDERAT ION. NO DOUBT, THE SPECIAL LEAVE PETITION THERE AGAINST WAS DISMISSED BY THIS COURT IN LIMINE. HOWEVER, THAT WOULD NOT AMOUNT TO CONFIRMING THE VI EW OF THE ALLAHABAD HIGH COURT (SEE V.M. SALGAOCAR & BROS. (P) LTD. V. COMMISSIONER OF INCOME TAX, (2000) 243 ITR 383 AND SUPREME COURT EMPLOYEES WELFARE ASSOCIATION V. UNION OF INDIA, (1989) 4 SCC 187. ITA 429/JP/2016_ M/S HANUMAN TUBE WELL CO. VS JT.CIT 10 18) IN VIEW OF THE AFORESAID DISCUSSION, WE HOLD T HAT THE VIEW TAKEN BY THE HIGH COURTS OF PUNJAB & HARYANA, MADRAS AND CALCUTTA IS THE CORRECT VIEW AND THE JUDGMENT OF THE ALLAHABAD HIGH COURT IN CIT V. VECTOR SHIPPING SERVICES (P) LTD., (2013) 357 ITR 642 DID NOT DECIDE THE QUE STION OF LAW CORRECTLY. THUS, INSOFAR AS THE JUDGMENT OF THE ALLAHABAD HIGH COURT IS CONCERNED, WE OVERRULE THE SAME. CONSEQUENCES OF THE AFORESAID DI SCUSSION WILL BE TO ANSWER THE QUESTION AGAINST THE APPELLANT/ASSESSEE THEREBY APPROVING THE VIEW TAKEN BY THE HIGH COURT. 6. IN VIEW OF THE DECISION OF THE HON'BLE SUPREME CO URT (SUPRA), I FIND NO MERIT IN THE GROUND UNDER CONSIDERATION OF THE A SSESSEES APPEAL, THEREFORE, THE SAME IS HEREBY DISMISSED. 7. GROUNDS NO. 4 AND 5 ARE GENERAL IN NATURE AND NO T PRESSED AT THE TIME OF HEARING, THEREFORE, I DISMISS THESE GROUNDS AS NOT PRESSED. 8. GROUND NO. 6 OF THE APPEAL IS AGAINST WITHDRAWING THE INTEREST U/S 244A AND CHARGING INTEREST I/S 234D OF THE ACT. BOT H THE ISSUES ARE CONSEQUENTIAL AND MANDATORY, HENCE, THIS GROUND IS ALSO DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/06/2017. SD/- HKKXPAN (BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23 RD JUNE, 2017 *RANJAN ITA 429/JP/2016_ M/S HANUMAN TUBE WELL CO. VS JT.CIT 11 VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S HANUMAN TUBE WELL CO., JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE JT. CIT, RANGE-3, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 429/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR