KUMARI PRITI SURAJ KUMAR, MUMBAI V. ITO 30(2)(5), MUMBAI

ITA 4634/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7853 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-01-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 07-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Assessee Lawyers: SHAILESH S SHAH
• Keywords: Retrospective amendment; Additional evidence; Non-deduction of tax
• Section: 143(3); 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NO.4634/MUM/2016 (ASSESSMENT YEAR 2012-13) KUMARI PRITI SURAJ KUMAR ALIAS PRITI J. KADAKIA, C-103, EVERSHINE MELLENIUM PARADISE, THAKUR VILLAGE, KANDIVALI (E), MUMBAI 400 101 PAN: AHMPK 7142E ...... APPELLANT VS. THE INCOME TAX OFFICER 30(2)(5), MUMBAI 400 020 .... RESPONDENT APPELLANT BY : SHRI SHAILESH S. SHA H RESPONDENT BY : MS. BEENA SANTOSH DATE OF HEARING : 10/02/2017 DATE OF PRONOUNCEMENT : 31/03/2017 ORDER THE CAPTIONED APPEAL FILED BY THE ASSESSEE PE RTAINING TO ASSESSMENT YEAR 2012-13 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-41, MUMBAI DATED 26/04/2016, WHICH IN TURN, ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 30/12/2014. 2. IN THIS APPEAL, THE SOLITARY ISSUE RELATES TO T HE ACTION OF THE INCOME TAX AUTHORITIES IN DISALLOWING INTEREST EXPENDITURE TO THE TUNE OF RS.12,75,064/- PAID TO CERTAIN NON-BANKING FINANCE COMPANIES BY IN VOKING SECTION 40(A)(IA) OF THE ACT ON THE GROUND OF NON-DEDUCTION OF TAX AT SOURCE AS PRESCRIBED UNDER CHAPTER XVIIB OF THE ACT. 2 ITA NO.4634/MUM/2016 (ASSESSMENT YEAR 2012-13) 2.1 IN BRIEF, THE RELEVANT FACTS ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF RUNNING VEHICLES ON HIRE THROUGH HER P ROPRIETARY CONCERN M/S. HRIDAY TRAVELS. AS PER DETAILS NOTED BY THE ASSES SING OFFICER IN PARA 4.1 OF THE ASSESSMENT ORDER, ASSESSEE WAS FOUND TO HAVE PA ID INTEREST OF RS.12,75,064/- TO SEVEN NON-BANKING FINANCIAL COMP ANIES, ON WHICH THE REQUISITE TAX WAS NOT DEDUCTED AT SOURCE IN TERMS O F CHAPTER-XVII-B OF THE ACT. FOR THE SAID REASON, THE ASSESSING OFFICER IN VOKED SECTION 40(A)(IA) OF THE ACT AND DISALLOWED THE EXPENDITURE OF RS.12,75, 064/-, WHICH HAS SINCE BEEN SUSTAINED BY THE CIT(A) ALSO. 3. BEFORE ME, THE LD. REPRESENTATIVE FOR THE ASSESS EE HAS RAISED VARIED SUBMISSIONS, BUT A PERTINENT POINT WHICH HAS BEEN RAISED IS TO THE EFFECT THAT THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT, WHICH HAS BEEN INSERTED BY THE FINANCE ACT OF 2012, IS EQUALLY APP LICABLE IN THE INSTANT YEAR AND THE SAID PROVISO MITIGATES THE HARDSHIP OF SE CTION 40(A)(IA) OF THE ACT. IN THIS CONTEXT, LD. REPRESENTATIVE FOR THE ASSESSE E POINTED OUT THAT THE SAID PROVISO PRESCRIBES THAT WHERE A PERSON FAILS TO DED UCT TAX AT SOURCE ON THE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO TH E ACCOUNT OF A RESIDENT, BUT HAS NOT BEEN DEEMED TO BE AN ASSESSEE IN DEFAU LT UNDER THE FIRST PROVISO TO SECTION 201(1) OF THE ACT, THEN FOR THE PURPOSES OF SECTION 40(A)(IA) OF THE ACT, IT SHALL BE DEEMED THAT ASSES SEE HAD DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF TH E RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED IN THE SAID PROVISO. IN SU PPORT, LD. REPRESENTATIVE FOR THE ASSESSEE ALSO MADE AN APPLICATION SEEKING A DMISSION OF ADDITIONAL EVIDENCE IN TERMS OF RULE 29 OF THE INCOME-TAX (A PPELLATE TRIBUNAL) RULES, 1963. IN TERMS OF THE SAID APPLICATION, THE ASSESS EE HAS SOUGHT ADMISSION OF CERTIFICATES IN FORM NO.26A IN RESPECT OF FOUR CONC ERNS, NAMELY, RELIANCE CAPITAL LIMITED; REIGARE FINVEST LTD.; BMW FINANCI AL SERVICES LTD. & MAGMA 3 ITA NO.4634/MUM/2016 (ASSESSMENT YEAR 2012-13) FINCORP LTD. TO DEMONSTRATE THAT THE PAYEES HAVE FI LED THEIR RETURN OF INCOME DISCLOSING THE PAYMENT RECEIVED FROM ASSESSE E AND ALSO PAID TAX ON SUCH INCOME AND ACCORDINGLY ASSESSEE COULD NOT BE T REATED A PERSON IN DEFAULT IN TERMS OF THE FIRST PROVISO TO SECTION 20 1(1) OF THE ACT. ON THE STRENGTH OF THE AFORESAID, LD. REPRESENTATIVE FOR T HE ASSESSEE POINTED OUT THAT THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT COMES TO THE RESCUE OF THE ASSESSEE. THE LD. REPRESENTATIVE FOR THE ASSES SEE POINTED OUT THAT THE AFORESAID ADDITIONAL EVIDENCE IS A VITAL EVIDENCE, WHICH GOES TO DETERMINE THE CORRECT TAX LIABILITY IN THE HANDS OF THE ASSES SEE AND IT HAS ALSO BEEN POINTED OUT THAT SUCH EVIDENCE, THOUGH NOT PRODUCED EARLIER, IS PURELY IN SUPPORT OF THE ASSERTIONS WHICH WERE ALREADY MADE B Y THE ASSESSEE BEFORE THE LOWER AUTHORITIES. IT WAS POINTED OUT THAT SIN CE THE EVIDENCE RELATED TO THE PAYEES, IT TOOK TIME FOR THE ASSESSEE TO OBTAIN THE SAME, BUT THE BONAFIDES OF THE EVIDENCE CANNOT BE CHALLENGED, INA SMUCH AS, THE SAME HAVE BEEN CERTIFIED IN THE PRESCRIBED FORM NO.26A O F THE ACT. THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT BO TH THE LOWER AUTHORITIES HAVE TAKEN THE VIEW THAT THE SECOND PROVISO TO SECT ION 40(A)(IA) OF THE ACT HAS BEEN INSERTED BY THE FINANCE ACT, 2012 W.E.F. 0 1/04/2013 AND, THEREFORE, THE SAME IS NOT APPLICABLE FOR THE INSTA NT ASSESSMENT YEAR. ON THIS ASPECT, THE LD. REPRESENTATIVE FOR THE ASSESSE E HAS REFERRED TO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CA SE OF CIT VS. ANSAL LANDMARK TOWNSHIP(P) LTD., 377 ITR 635(DEL), WHEREI N THE SAID PROVISO HAS BEEN UNDERSTOOD TO BE EVEN APPLICABLE TO ASSESSMENT YEARS PRIOR TO 01.04.2013. IT WAS THEREFORE, CONTENDED THAT THE A DDITIONAL EVIDENCE BE ADMITTED WHICH IS BASED ON THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT, AND CONSIDERED FOR ADJUDICATION. 4 ITA NO.4634/MUM/2016 (ASSESSMENT YEAR 2012-13) 4. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE POINTED OUT THAT THE CIT(A) HAS REFERRED TO THE JUDGMENT OF THE HONBLE KERALA HIGH COURT IN THE CASE OF SHRI THOMAS GEORGE MUTHOOT VS. CIT (2015) 63 TAXMANN.COM 99(KERALA) TO HOLD THAT THE SECOND PROV ISO TO SECTION 40(A)(IA) IS APPLICABLE FROM 01/04/2013 AND NOT TO THE INSTAN T ASSESSMENT YEAR. 5. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S. IT IS QUITE CLEAR THAT IN THE PRESENT CASE, SECTION 40(A)(IA) OF THE ACT H AS BEEN INVOKED BY THE ASSESSING OFFICER ON THE GROUND THAT THE PRESCRIBED TAX HAS NOT BEEN DEDUCTED AT SOURCE ON INTEREST PAYMENTS MADE TO SEV EN CONCERNS AS DETAILED IN PARA 4.1 OF THE ASSESSMENT ORDER. THE FACTUM OF NON-DEDUCTION OF TAX AT SOURCE IS NOT DISPUTED BY THE ASSESSEE. THE PRELIMINARY LINE OF DEFENCE SET UP BY THE ASSESSEE IS ON THE STRENGTH O F THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT. THE SAID PROVISO REA DS AS UNDER:- 'PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO D EDUCT THE WHALE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTE R XVIII-B AN ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE F IRST PROVISO TO SUB-SECTION (1) OF SECTION 201, THEN, FOR THE PURPOSE OF THIS SUB-C LAUSE, 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 RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO.' 5.1 THE AFORESAID PROVISO CAME UP FOR CONSIDERATION BEFORE THE HON'BLE DELHI HIGH COURT IN THE CASE OF ANSAL LANDMARK TOW NSHIP(P) LTD.(SUPRA), WHEREIN IT HAS BEEN EXPLAINED TO BE INTRODUCING A LEGAL FICTION IN A SITUATION WHEN AN ASSESSEE FAILS TO DEDUCT TAX AT SOURCE IN A CCORDANCE WITH THE PROVISIONS OF CHAPTER-XVIIB OF THE ACT . THE PROVI SO LAYS DOWN THAT IN SUCH A SITUATION, WHEN AN ASSESSEE IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT IN TERMS OF THE FIRST PROVISO TO SECTION 201(1) OF THE ACT, THEN IT SHALL BE DEEMED THAT ASSESSEE HAD DEDUCTED AND PAID THE TAX ON SUCH INCOME ON THE DATE OF FURNISHING OF INCOME BY THE RESIDENT PA YEE REFERRED TO IN THE SAID 5 ITA NO.4634/MUM/2016 (ASSESSMENT YEAR 2012-13) PROVISO. AS PER THE HON'BLE HIGH COURT , THE FIRST PROVISO TO SECTION 201(1) OF THE ACT WAS INSERTED TO BENEFIT THE TAX PAYER AND, THEREFORE, INSERTION OF THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT IS A LSO REQUIRED TO BE VIEWED IN THE SAME MANNER. IN THIS BACKGROUND, THE HON'BLE H IGH COURT APPROVED THE REASONING OF THE AGRA BENCH OF THE TRIBUNAL THAT TH E SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT IS DECLARATIVE AND CUR ATIVE AND HAD RETROSPECTIVE EFFECT FROM 01/04/2005 ONWARDS. IN VIEW OF THE AF ORESAID DECISION, I AM INCLINED TO UPHOLD THE PLEA OF THE ASSESSEE THAT TH E SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT IS APPLICABLE EVEN IN THE INSTANT ASSESSMENT YEAR. SO HOWEVER, THE JUDGMENT OF THE KERALA HIGH COURT I N THE CASE OF SHRI THOMAS GEORGE MUTHOOT (SUPRA) HAS BEEN REFERRED BY THE CIT(A) TO CONCLUDE TO THE CONTRARY. IN MY CONSIDERED VIEW, W HERE TWO CONTRARY VIEWS OF DIFFERENT HIGH COURTS ARE AVAILABLE, THEN IN THE ABSENCE OF ANY DECISION OF THE JURISDICTIONAL HIGH COURT, THE VIEW IN FAVOUR O F THE TAX PAYER IS LIABLE TO BE PREFERRED IN VIEW OF THE PRINCIPLE LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. M/S. VEGETABLE PRODUCT S LTD., 88 ITR 192(SC). 5.2 IN THIS BACKGROUND, I MAY NOW NOTICE THAT THE C LAIM OF THE ASSESSEE, BASED ON THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT, CAN BE PUT TO TEST IN AN APPROPRIATE MANNER ONLY ONCE THE AFORESA ID ADDITIONAL EVIDENCE IS ADMITTED. QUITE CLEARLY, IT HAS TO BE OBJECTIVELY ESTABLISHED THAT THE CONDITIONS PRESCRIBED IN THE SECOND PROVISO TO SECT ION 40(A)(IA) OF THE ACT HAS BEEN SATISFIED OR NOT? IN SUPPORT, ASSESSEE H AS PRODUCED THE REQUISITE CERTIFICATES IN RELATION TO FOUR CONCERNS, WHICH IN MY VIEW, ARE REQUIRED TO DEALT WITH ON MERITS. AT THE TIME OF HEARING, LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT EVEN WITH REGARD TO THE OTHER THREE PARTIES, THE NECESSARY EVIDENCE SHALL BE PRODUCED TO SATISFY TH E ASSESSING OFFICER WITH 6 ITA NO.4634/MUM/2016 (ASSESSMENT YEAR 2012-13) REGARD TO THE CONDITIONS PRESCRIBED IN SECOND PROVI SO TO SECTION 40(A)(IA) OF THE ACT. CONSIDERING THE ENTIRETY OF FACTS AND CIR CUMSTANCES OF THE CASE, IN MY CONSIDERED OPINION, IT WOULD BE IN THE FITNESS O F THINGS THAT THE ISSUE RELATING TO THE APPLICABILITY OR OTHERWISE OF THE P ROVISO TO SECTION 40(A)(IA) OF THE ACT RESTORED BACK TO THE FILE OF ASSESSING OFFI CER FOR A DENOVO ADJUDICATION ON MERITS AS PER LAW. NEEDLESS TO MEN TION, THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASONABLE OPPOR TUNITY OF BEING HEARD IN SUPPORT OF HER PLEA AND THEREAFTER, THE ASSESSING O FFICER SHALL PASS AN APPROPRIATE ORDER IN ACCORDANCE WITH LAW. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOW ED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 31/03/201 7 SD/- (G.S. PANNU) ACCOCUNTANT MEMBER MUMBAI, DATED 31/03/2017 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI