ITO 9(1)(1), MUMBAI V. ARC ONSTRUCTION P.LTD, MUMBAI

ITA 4706/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92583 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-05-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 17-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN
• Assessee Lawyers: A K LAL
• Keywords: Retrospective amendment; Non-deduction of tax
• Section: 143(3); 194C; 139

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A - BENCH , , BEFORE S/SH. I P BANSAL,JUDICIAL ME MBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 4706 /MUM/20 13 , / ASSESSMENT YEAR - 20 06 - 07 ITO - 9(1)(1) ROOM NO.226, AAYAKAR BHAVAN MUMBAI - 400 020. VS M/S. ARC CONSTRUCTION PVT. LTD. 19 - A, TURAKHIYA PARK M.G. ROAD, KANDIVALI(W) MUMBAI - 400 067. PAN: AAACC 3369 H ( / A P PELLANT ) ( / RESPONDENT ) /ASSESSEE BY :SHRI A.K. LAL / REVENUE BY :SHRI ASGHAR ZAIN / DATE OF HEARING : 25 - 0 5 - 2015 / DATE OF PRONOUNCEMENT : 25 - 0 5 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT. 3.4.2013 OF CIT(A) - 19 THE ASSESSING OFFICER(AO) , HAS RAISED FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, WHETHER THE LD. CIT(A) IS RIGHT IN DELETING ADDITION OF RS.69,14,662/ - U/S. 40(A)(IA) OF THE INCOME TAX ACT, 1961 STATING THAT THE AMENDMENT MADE TO SECTION 40(A)(IA) BY THE FINANCE ACT, 2010 IS CLARIFICATORY AND HAS RETROSPE CTIVE APPLICATION. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ASSES S EE - COMPANY, ENGAGED IN THE BUSINESS OF CIVIL CONTRACTOR , FILED ITS RETURN OF INCOME ON 28. 11.2006, DECLARING TOTAL INCOME OF RS.14.10 LACS. THE AO COMPLETE D ASSESSMENT ON 13/12/2008 U/S. 143(3) R.W.S. 254 OF THE ACT DETERMINING THE INCOME OF THE ASSESSEE AT R S.83,24,660/ - . 2. EFFECTIVE GROUND OF APPEAL IS ABOUT ADDITION OF RS.69.14 LACS MADE THE AO U/S. 40(A)( IA ) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS , THE AO FOUND THAT THE ASSESSEE HAD MADE PAYMENT TO THE FOLLOWING PARTIES WHEREIN THE TDS DEDUCTED HAD N OT BEEN DEPOSITED TO THE GOV ERNMENT ACCOUNT, DURING THE YEAR UNDER CONSIDERATION ,W ITHIN THE TIME PRESCRIBED BY SECTION 200 OF THE ACT. CONSIDERING THE ABOVE , THE A O HELD THAT THE TDS DEDUCTED IN RESPECT OF THE PAYMENTS WAS DEPOSITED TO THE GOV ERNMENT ACCOUNT BEYOND DUE DATE SPECIFIED. INVOKING THE PROVISIONS OF S ECTION 40 (A)(IA) OF THE ACT R.W.S. 194C AND190J, HE MADE AN ADDITION OF RS.69,14,662/ - TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFERRED AN APPEAL BEFORE FIRST A PPELLATE AUTHORITY ( FAA ) .BEFORE HER, THE ASSESSEE SUBMITTED THAT IN THE FIRST ROUND OF LITIGATION THE MATTER 4706/M/13 2 WAS RESTORED BACK BY THE T RIBUNAL , VIDE ITS ORDER DATED 4.1.2012, TO THE FILE OF THE AO FOR PASSING FRESH ORDER, THAT THE ASSESSEE HAD, BY ITS LETTER D A T ED 20.7.2012 FURNISHED THE DETAILS OF PAYMENTS, THAT ALL PAYMENT OF TDS HAD BEEN MADE BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME, THAT AS PER THE AMENDMENT OF 2010 THE AMENDMENT WAS RETROSPECTIVE, THAT THE CALCUTTA HIGH COURT HAD IN THE CASE OF VIRGIN CREATIO NS DECID ED THE ISSUE IN FAVOUR OF THE ASSESSEE, THAT TDS PAYMENT WAS MADE MUCH BEF O RE THE DUE DATE OF FILING OF RETURN OF INCOME, THAT THE AO HAD NOT DEALT WITH THE MATTER OF VIRGIN CREATIONS (SUPRA).AFTER CONSIDERING THE SUBMISSION OF THE A SSESSEE AND THE ASSESSMENT ORDER THE FAA TABULATED THE DETAILS OF NATURE OF PAYMENT, DUE D ATE OF PAYMENT , TDS DEDUCTED AND D ATE O F PAYMENT IN GOVT . A/C. - NAME OF THE PARTY NATURE OF PAYMENT DUE DATE OF PAYMENT AMOUNT PAID (IN RS.) TDS DEDUCTED (IN RS.) DA TE OF PAYMENT IN GOVT. A/C. SUNIL CONSTRUCTION U/S. 194C JUNE 2005 188390 3770 30.05.2006 S.S. ENTERPRISES U/S. 194C SEPT. 2005 195470 3990 22.04.2006 SHREEJI CORPORATION U/S. 194C OCT.2005 84750 1800 23.05.2006 CON - TECH ENGINEERS U/S. 194C DEC. 2005 20700 425 23.05.2006 ECONOMIC CREATIONS U/S. 194C DEC. 2005 175011 3570 30.05.2006 IVA ENTERPRISES U/S. 194C SEPT. & DEC. 2005 464750 9480 22.05.2006 & 30.05.2006 K.D. CORPORATION U/S. 194C DEC. 191520 3910 30.05.2006 PRS & COMPANY U/S. 194C NOV. & DEC . 2005 326555 6660 22.04.2006 R.P. CORPORATION U/S. 194C OCT. & DEC.2005 475640 9705 22.04.2006 & 30.05.2006 S.S. ENTERPRISES U/S. 194C OCT. & DEC.2005 229110 4667 22.04.2006 & 30.05.2006 V.B. MISTRY & CO. U/S. 194C DEC. 2005 145960 2980 22.04.2006 & 30 .05.2006 B.R. CORPORATION U/S. 194C FEB. 2006 203610 4160 30.05.2006 D. SHAH & WORKS U/S. 194C FEB. 2006 284650 5810 22.04.2006 HARSH CORPORATION U/S. 194C JAN. 2006 189125 3860 30.05.2006 K.D. CORPORATION U/S. 194C JAN. 2006 169455 3460 30.05.2006 PR S & CO. U/S.194C JAN. 2006 158445 3240 22.04.2006 PRS & CO. U/S. 194C FEB.2006 171715 3500 30.05.2006 REDDY CONSTRUCTION U/S. 194C JAN. 2006 99800 2045 30.05.2006 SUNVIK DEVELOPERS U/S. 194C FEB.2006 129860 2650 22.04.2006 TE CREATIONS U/S. 194C FEB.2 006 263310 5370 22.04.2006 V.B. MISTRY & CO. U/S. 194C JAN. & FEB.2006 276391 5893 30.05.2006 N.A. U/S. 194C JAN. & FEB.2006 304450 630 23.05.2006 4706/M/13 3 TRANSPORT VIRAJ D. KAKKA U/S. 194C JAN. & FEB.2006 30000 615 03.06.2006 & 23.05.2006 GAURAV CONSTRUCTI ON U/S. 194C FEB.2006 2375745 32213 30.05.2006 RASIK MOTA & CO. U/S. 194J OCT. 2005 34050 1740 23.05.2006 REFERRING TO THE JUDGMENT OF THE VIRGIN CREATIONS, OF T HE HONBLE HIGH COURT OF CALCUTTA , SHE DELETED THE ADDITION MADE BY THE AO. 4. DURING THE CO URSE OF HEARING BEFORE US, DEPARTMENTAL REPRESENTATIVE ( DR ) RELIED UPON THE ORDER OF BHARTI SHIPYAR D ( 13 TAXMANN.COM 101 ) . THE AUTHORISED REPRESENTATIVE ( AR ) OF THE ASSESSEE SUPPORTED THE ORDER OF THE FAA AND REFERRED TO THE CASE OF RAJINDER KUMAR. (362 ITR 241) DELIVERED BY THE HONBLE DELHI HIGH COURT . 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE ISSUE BEFORE US IS DISALLOWANCE MADE BY THE AO U/S. 40(A)(IA) OF THE AC T, THAT THE ASSESSEE HAD DEPOSITED THE DEDUC TED TAX BEFORE THE DUE D ATE O F FILING OF THE RETURN. WE FURTHER FIND THAT IN THE CASE OF RAJINDER KUMAR (SUPRA) THE HONBLE DELHI HIGH COURT HELD AS UNDER : - SECTION 40(A)(IA) OF THE INCOME - TAX ACT, 1961, AND THE PROVISO THERETO, AS AMENDED BY THE FINANCE A CT, 2008, WITH RETROSPECTIVE EFFECT FROM APRIL 1, 2005, ACKNOWLEDGED THAT WHERE TAX WAS DEDUCTIBLE AND WAS DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT WAS PAID BEFORE THE DUE DATE SPECIFIED UNDER SUB - SECTION (1) OF SECTION 139 , DEDUCTION SHALL BE ALLOWED IN THE YEAR. CLAUSE (A) OF THE PROVISO TO SECTION 40(A)(IA) OF THE ACT , AS AMENDED BY THE FINANCE ACT, 2008, WITH RETROSPECTIVE EFFECT FROM APRIL 1, 2005, HAS TO BE READ WITH CLAUSE (A) OF THE MAIN SECTION AND NOT IN ISOLATION. CLAUSE (A) OF THE MAIN SECTION AND CLAUSE (A) OF THE PROVISO WILL APPLY IN DIFFERENT FACTUAL MATRICES OR SITUATIONS. CLAUSE (A) OF THE MAIN SECTION APPLIES WHEN THE TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE ASSESSMENT YEAR AND WAS PAID ON OR BE FORE THE DUE DATE FOR FILING OF THE RETURN UNDER SECTION 139(1) . THE PROVISO APPLIES WHEN TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR HAS BEEN DEDUCTED IN TERMS OF CLAUSE (A) DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT HAS BEEN PAID AFTER THE DUE D ATE. THE EXPRESSION SAID DUE DATE CANNOT MEAN THE DATE ON WHICH TAX DEDUCTED AT SOURCE IN ACCORDANCE WITH CHAPTER XVIII - B SHOULD HAVE BEEN PAID. IT REFERS TO THE DUE DATE FOR FILING OF THE RETURN UNDER SECTION 139(1) OF THE ACT. ANY OTHER INTERPRETATION WOULD LEAD TO DIFFICULTIES, INCONGRUITIES AND CONFLICT BETWEEN CLAUSE (A) OF THE MAIN SECTION AND CLAUSE (A) OF THE PROVISO. BOTH WOULD BE APPLICABLE TO THE SAME FACTUAL MATRIX/SITUATION WITH CONTRADICTORY STIPULATIONS OR CONSEQUENCES. THE PROVISIONS, AS AMENDED BY THE FINANCE ACT, 2010, ARE CLEAR AND FREE FROM ANY AMBIGUITY AND DOUBT. THEY CLEARLY SUPPORT THE VIEW THAT THE EXPRESSION SAID DUE DATE USED IN CLAUSE (A) OF THE PROVISO TO THE UNAMENDED SECTION REFERS TO THE TIME SPECIFIED IN SECTION 139(1) O F THE ACT. THE AMENDED SECTION 40(A)(IA) EXPANDS AND FURTHER LIBERALISES THE STATUTE WHEN IT STIPULATES THAT DEDUCTIONS MADE IN THE FIRST ELEVEN MONTHS OF THE PREVIOUS YEAR BUT PAID BEFORE THE DUE DATE OF FILING OF THE RETURN, WILL CONSTITUTE SUFFICIENT CO MPLIANCE. THE INTENTION BEHIND SECTION 40(A)(IA) IS TO ENSURE THAT TAX IS DEDUCTED AT SOURCE AND PAID. THE OBJECT OF INTRODUCTION OF SECTION 40(A)(IA) IS TO ENSURE THAT THE PROVISIONS FOR TAX DEDUCTION AT SOURCE ARE SCRUPULOUSLY IMPLEMENTED WITHOUT DEFAUL T IN ORDER TO AUGMENT RECOVERIES. IT IS NOT TO PENALISE AN ASSESSEE WHEN PAYMENT HAS BEEN MADE WITHIN THE TIME STATED. FAILURE TO DEDUCT TAX AT SOURCE OR DEPOSIT IT RESULTS IN LOSS OF REVENUE AND MAY DEPRIVE THE GOVERNMENT OF THE TAX DUE AND PAYABLE. THE P ROVISION SHOULD BE INTERPRETED IN A FAIR, JUST AND EQUITABLE MANNER. IT SHOULD NOT BE INTERPRETED IN A MANNER WHICH RESULTS IN INJUSTICE AND CREATES TAX LIABILITIES WHEN TAX DEDUCTED 4706/M/13 4 HAS BEEN DEPOSITED AND THE ASSESSEE WHO WAS FOLLOWING THE CASH SYSTEM OF ACCOUNTANCY HAS MADE ACTUAL PAYMENT TO THE THIRD PARTY FOR SERVICES RENDERED. CLAUSE (C) OF THE EXPLANATION TO SECTION 194J WHICH STATES THAT CREDIT TO A SUSPENSE ACCOUNT OR ANY OTHER ACCOUNT IN THE BOOKS WOULD BE DEEMED TO BE CREDIT TO THE ACCOUNT OF THE PAYEE IS MEANT TO CURTAIL THE POSSIBILITY OR CHANCE OF NON - DEDUCTION IF AN ASSESSEE CREDITS A THIRD ACCOUNT INSTEAD OF CREDITING THE ACCOUNT OF THE PAYEE TO AWAIT DEDUCTION OF TAX AT SOURCE. IN OUR OPINION, THE AMENDMENT TO THE PROVISIONS OF SEC.40(A)(I A) ARE RETROSPECTIVE AND WOULD BE APPLICABLE TO THE A SSESSMENT Y EAR UNDER CONSIDERATION. THE FAA HAD RIGHTLY DELETED THE ADDITION CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. AS WE DO NOT FIND AN Y LEGAL INFIRMITY IN THE ORDER OF THE FAA, SO CONFIRMIN G HER ORDER WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED . . ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH , MAY ,2015. 25 TH , 2015 SD/ - SD/ - ( /I P BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 25 .0 5 .2015 . . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. G UARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.