MOHD. ARIF MOHD. AYUB AZMI, Nagpur V. J.C.I. T WARDHA RANGE, Wardha

ITA 461/NAG/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2183 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 31-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 05-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P G MUDLIAR
• Keywords: Opportunity of being heard; Reasonable cause

Judgement Text

1 ITA NO. 461/NAG/2014 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO.4 61 /NAG/201 4 . ASSESSMENT YEAR : 200 9 - 10. MOHD. ARIF MOHD. AYUB AZMI, JOINT COMMISSIONER OF INCOME - TAX, PUSAD. VS. WARDHA RANGE, WARDHA. APPELLANT. RESPONDENT. APPELLANT BY : SHRI MAHAVIR ATAL. RESPOND ENT BY : SHRI S.P.G. MUDLIAR. DATE OF HEARING : 31 - 05 - 2016 DATE OF PRONOUNCEMENT : 2 ND JUNE , 2016 O R D E R PER SHRI SHAMIM YAHYA, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 30 - 01 - 2014 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10. THE GROUNDS OF APPEAL READ AS UNDER : 1. THE LEARNED CIT(A) ERRED IN CONSTRUCTING THE HIRE AGREEMENT OF TOOLS & EQUIPMENTS AS A WORK CONTRACT AND THEREBY CULLING OUT THAT THE SAID EXPENDITURES A RE HIT BY THE TDS PROVISIONS STIPULATED UNDER SECTION 194C. 2. THE LEARNED CIT(A) ERRED IN NOT FOLLOWING BOARDS CIRCULAR NO. 681 DATED 8.03.1994. 3. THE LEARNED CIT(A) & ASSESSING OFFICER ERRED IN DISALLOWING PAYMENTS MADE UNDER SECTION 40(A)(IA) BY TREATING AS SESSEE IN DEFAULT. AS THE AMOUNT OF TDS OUGHT TO BE DEDUCTED WAS PAID BY PAYEE SUBSEQUENTLY AND HENCE ASSESSEE CANNOT BE TERMED AS ASSESSEE IN DEFAULT AND HENCE NO DISALLOWANCE IS CALLED FOR. 4. THE LEARNED CIT(A) & ASSESSING OFFICER FAILED TO APPRECIATE AND ACKNOWLEDGE THE FACT THAT DISALLOWANCE UNDER SECTION 40(A)(IA) IS 2 ITA NO. 461/NAG/2014 RESTRICTED ONLY TO THE AMOUNT PAYABLE AS ON 31 ST MARCH (I.E.) FINANCIAL YEAR END. THEREFORE PAYMENTS WHICH ARE NOT OUTSTANDING ON 31 ST MARCH SHOULD NOT BE DISALLOWED. 2. AT THE OUTSET WE NOTE THAT IN THIS CASE THERE IS A DELAY OF 20 1 DAYS IN FILING THE APPEAL. THE REASONABLE CAUSE FOR THE DELAY HAS BEEN ATTRIBUTED BY THE ASSESSEE TO THE ILL HEALTH OF HIS ONLY SON WHO MET WITH AN ACCIDENT AND HAS BECOME BED RIDDEN. IN THESE CIRCUMSTANCES TH E ASSESSEE HAD SUBMITTED THAT HE WAS NOT ABLE TO CONCENTRATE ON HIS DAY TO DAY BUSINESS ACTIVITY. HENCE THIS HAS RESULTED IN THE DELAY IN FILING OF APPEAL. 3. UPON HEARING BOTH THE COUNSEL AND PERUSING THE RECORDS, WE ARE OF THE CONSIDERED OPINION THAT IN VIEW OF THE REASONABLE CAUSE AS MENTIONED ABOVE, THE DELAY IN FILING OF THIS APPEAL DESERVES TO BE CONDONED AND THE SAME IS CONDONED AS SUCH. 4. AT THE OUTSET LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT HE WANTS TO GET AN ADJUDICAT ION INITIALLY ON THE B ASIS OF GROUND NO. 4 MENTIONED ABOVE. LEARNED COUNSEL SUBMITTED THAT THE DISALLOWANCE HAS BEEN MADE BY THE AO IN THIS CASE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) BY HOLDING THAT THE IMPUGNED EXPENDITURES WERE HIT BY THE TDS PROVISIONS STIPULATED U /S 194C. LEARNED COUNSEL SUBMITTED THAT NONE OF THE IMPUGNED PAYMENTS WERE OUTSTANDING AT THE END OF THE FINANCIAL YEAR. HENCE LEARNED COUNSEL PLEADED THAT IN SUCH SITUATION WHEN ALL THE PAYMENTS HAVE BEEN MADE DURING THE FINANCIAL YEAR , RIGOURS OF PROVIS IONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE. FOR THIS PROPOSITION LEARNED COUNSEL PLACED RELIANCE UPON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICES (P) LTD. 357 ITR 642 (ALL.). LEARNED COUNSEL FURTHER SUBMIT TED THAT REVENUES APPEAL AGAINST THE ABOVE SAID DECISION OF THE HONBLE ALLAHABAD HIGH COURT WAS ALSO DISMISSED BY THE HONBLE APEX COURT IN CC NO. 8068/2014 VIDE ORDER DATED 02 - 07 - 2014. LEARNED COUNSEL FURTHER SUBMITTED THAT THIS ASPECT OF THE ISSUE WAS 3 ITA NO. 461/NAG/2014 CONSIDERED BY THIS TRIBUNAL IN ITA NO. 333/NAG/2014 IN THE CASE OF ACIT VS. CHADDA TRANSPORT. VIDE ORDER DATED 25 - 02 - 2016 THE TRIBUNAL HAD ADJUDICATED SIMILAR ASPECT IN PARA 12 AND 13 OF THE SAID ORDER AS UNDER : 12. WE HAVE CAREFULLY CONSIDERED THE SUB MISSIONS AND PERUSED THE RECORDS. FIRST WE DEAL WITH THE ISSUE ON THE GROUND THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT ATTRACTED INASMUCH AS THE ENTIRE FREIGHT EXPENDITURE IS PAID AND NOTHING IS PAYABLE AS ON 31 - 03 - 2007. THE FACTS IN THIS REGARD AR E UNDISPUTED. THE ASSESSEES PLEA IS THAT THE ENTIRE FREIGHT AMOUNT WAS PAID AND NOTHING IS PAYABLE AS ON 31 - 03 - 2007, AND THAT THIS IS DULY REFLECTED BY A PERUSAL OF THE BALANCE SHEET/PROFIT & LOSS ACCOUNT WHERE NO AMOUNT IS PAYABLE AS ON 31 - 03 - 2007. IN TH IS REGARD LEARNED COUNSEL OF THE ASSESSEE HAS PLACED RELIANCE UPON CIT VS. VECTOR SHIPPING SERVICES (P) LTD. 357 ITR 642 (ALL.). IN THE SAID CASE HONBLE ALLAHABAD HIGH COURT HAS UPHELD THE FINDING THAT WHEN THE EXPENSES INCURRED BY THE ASSESSEE IS TOTALLY PAID AND NOT REMAINED PAYABLE AS AT THE END OF THE RELEVANT ACCOUNTING PERIOD, PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE. THE HIONBLE HIGH COURT IN PARA 10 OF THE ORDER HAS CONCLUDED AS UNDER : IT IS TO BE NOTED THAT FOR DISALLOWING EXPENSES F ROM BUSINESS AND PROVISION ON THE GROUND THAT TDS HAS NOT BEEN DEDUCTED, THE AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY THE END OF THE YEAR. 13. REVENUES APPEAL AGAINST THE ABOVE SAID DECISION OF THE HONBLE ALLAHABAD HIGH COURT WAS DISMISSE D BY THE HONBLE APEX COURT IN CC NO. 8068/2014 VIDE ORDER DATED 02 - 07 - 2014. THE HONBLE APEX COURT HAS HELD AS UNDER : HEARD MR. MUKUL ROHATGI, LEARNED ATTORNEY GENERAL, FOR THE PETITIONER. DELAY IN FILING AND REFILLING SPECIAL LEAVE PETITION IS CONDONE D. SPECIAL LEAVE PETITION IS DISMISSED. WE ARE ALSO AWARE THAT THERE ARE CERTAIN OTHER HONBLE HIGH COURT DECISIONS WHEREIN THIS PROPOSITION HAS NOT BEEN UPHELD THAT PROVISIONS OF SECTION 40(A)(IA) ARE ATTRACTED ONLY WHEN THE AMOUNT IS PAYABLE. HOWEVER , WE NOTE THAT THERE IS NO JURISDICTIONAL HIGH COURT DECISION ON THIS ISSUE. IN SUCH A SITUATION WE NOW HAVE A HONBLE ALLAHABAD HIGH COURT DECISION WHICH IS IN FAVOUR OF THE ASSESSEE. REVENUE DEPARTMENTS PETITION FOR SPECIAL LEAVE TO APPEAL HAS BEEN DIS MISSED BY THE HONBLE APEX COURT BY CONDONING THE DELAY IN FILING THE LEAVE PETITION. IN SUCH A SITUATION, IN OUR CONSIDERED OPINION, THE DECISION OF HONBLE APEX COURT 4 ITA NO. 461/NAG/2014 IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD. 188 ITR 192 HAS TO BE FOLLOWED. IN TH E SAID DECISION THE HONBLE APEX COURT HAS EXPOUNDED THAT IN CASE THERE ARE TWO VIEWS POSSIBLE, THE VIEW IN FAVOUR OF THE ASSESSEE SHOULD BE FOLLOWED. ACCORDINGLY IN ABSENCE OF ANY JURISDICTIONAL HIGH COURT DECISION, WE RESPECTFULLY FOLLOW THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING SERVICES (P) LTD. AS ABOVE. ACCORDINGLY SINCE NO AMOUNT OF THE FREIGHT WAS UNPAID OR WAS PAYABLE AS ON 31 - 03 - 2007 WE HOLD THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT ATTRACTED AND IN THIS VIE W OF THE MATTER WE ARE OF THE OPINION THAT REVENUES APPEAL IS LIABLE TO BE DISMISSED. 5. IN THE LIGHT OF THE ABOVE, LEARNED COUNSEL SUBMITTED THAT SINCE IN THE PRESENT CASE ALL THE PAYMENTS WERE PAID UPTO THE CLOSE OF THE YEAR AND NO AMOUNT WAS OUTSTANDING, THE DISALLOWANCE U/S 40(A)(IA) IS NOT PERMISSIBLE. 6. WE HAVE CAREFULLY HEARD BOTH THE COUNSEL ON THIS ISSUE. WE FIND THAT THIS ASPECT OF ASSESSEES PLEA WAS NOT BEFORE THE AUTHORITIES BELOW. HOWEVER, WE AGREE THAT THE ISSUE RAISED GOES TO THE ROOT OF THE MATTER AND AN ADJUDICATION ON THIS ALSO REQUIRES THE EXAMINATION OF THE FACTUAL ASPECT AS TO WHETHER ANY OF THE CONCERNED AMOUNT WAS OUTSTANDING OR NOT. SINCE ALL THE FACTS ARE NOT AVAILABLE ON RECORD, IN OUR CONSIDERED OPINION, INTEREST OF J USTICE WILL BE SERVED IF THIS ISSUE AND THE ASSESSEES PLEA IN THIS REGARD IS REMITTED TO THE FILE OF THE AO TO CONSIDER THE SAME AFRESH AS PER LAW AND DISCUSSION AS ABOVE. ACCORDINGLY THIS ISSUE IS REMITTED TO THE FILE OF THE AO. THE AO SHALL CONSIDER T HE ISSUE AFTER GIVING THE ASSESSEE PROPER OPPORTUNITY OF BEING HEARD. 7. IN THE RESULT, THIS APPEAL BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 ND D AY OF JUNE , 2016. SD/ - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 2 ND JUNE , 2016. 5 ITA NO. 461/NAG/2014 COPY FORWARDED TO : 1. MOHD. ARIF MOHD. AYUB AZMI, SONY ENTERPRISES, FLAT NO. 202, BIRENDRA APTS. NEW COLONY ROAD, NAGPUR - 4400013. 2. J .C.I.T., WARDHA RANGE, WARDHA . 3. C.I.T. I , NAGPUR. 4. CIT(APPEALS), - I, NAGPUR. 5. D.R., ITAT, RAIPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.