Shri. Tirumalarao P. Mokashi, Bijapur V. CIT, Bangalore

ITA 503/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0587 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-09-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 19-05-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JASON P BOAZ
• Assessee Lawyers: P C CHADAGA
• Keywords: Search and seizure; Non-deduction of tax; TDS
• Section: 143(3); 40(a)(ia); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.503/BANG/2009 ASSESSMENT YEAR : 2005-06 SHRI TIRUMALARAO P. MOKASHI, PWD CONTRACTOR, BEHIND PATIL NURSING HOME, S.R. COLONY, BIJAPUR. : APPELLANT VS. THE COMMISSIONER OF INCOME TAX, KARNATAKA (CENTRAL), BANGALORE. : RESPONDENT APPELLANT BY : SHRI P.C. CHADAGA RESPONDENT BY : SHRI JASON P. BOAZ O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER IN THIS APPEAL, THE ASSESSEE, AN INDIVIDUAL, HAS AGITATED THE ACTION OF THE LD. CIT(CENTRAL) IN PASSING AN ORDER U/S 263 OF THE ACT OF THE FOR THE AY 2005-06 SETTING ASIDE THE ORIGINAL ORDER PASSED U/S 143(3) OF THE ACT BY THE AO. 2. THE ASSESSEE HAS RAISED FIVE GROUNDS OF APPEAL, OUT OF WHICH, GROUND NO.1 AND 5 ARE GENERAL AND NOT SPECIFIC AND, ACCORDINGLY, THEY DO ITA NO.503/B/09 PAGE 2 OF 12 NOT SURVIVE FOR ADJUDICATION. IN THE REMAINING GRO UNDS, THE ESSENCE AND SUBSTANCE OF THE ISSUE IS CONFINED TO EVEN THOUGH THE CLAUSE (IA) WAS INSERTED TO S. 40(A ) AND WILL BE OPERATIVE FROM 1.4.2005 AND THUS MAKES IT APPLICABL E FROM THE ASSESSMENT YEAR 2005-06 (WHICH RECEIVED THE ASSENT OF THE PRESIDENT ONLY ON 11/9/2004), THE LD. CIT (C) ERRED IN PASSIN G AN ORDER U/S 263 OF THE ACT, DIRECTING THE AO TO DISALLOW A SUM OF R S.2.73 CRORES U/S 40(A)(IA) OF THE ACT. 3. THE ASSESSEE, A PWD CONTRACTOR, FURNISHED HIS RO I FOR THE AY UNDER DISPUTE, ADMITTING AN INCOME OF RS.32.77 LAKH S WHICH WAS PROCESSED AND CONCLUDED BY THE AO, DETERMINING THE TOTAL INCO ME AT RS.39.85 LAKHS. THE LD. CIT(C), AFTER VERIFICATION OF P & L ACCOUNT OF THE ASSESSEE FOUND THAT HE HAD CLAIMED A SUM OF RS.2.73 CRORES REPRESE NTING SUB-CONTRACT PAYMENT FOR WHICH THERE WAS NO PROOF OF TAX DEDUCTE D AT SOURCE, IN A SUO MOTU ACTION INITIATED PROCEEDINGS U/S 263 OF THE AC T TO DISALLOW THE SAID SUM IN VIEW OF THE NEWLY AMENDED S. 40(A)(IA) OF TH E ACT, AS THIS ISSUE HAD NOT BEEN EXAMINED BY THE AO WHILE CONCLUDING THE AS SESSMENT IN QUESTION. 4. THE STAND OF THE CIT(C) WAS OBJECTED TO BY THE A SSESSEE ON THE FOLLOWING LINES: (I) CLAUSE (IA) OF S.40(A) OF THE ACT WAS INTRODUCED BY THE FINANCE (NO:2) ACT OF 2004 AND THE SAID ACT RECEIVED THE AS SENT OF THE PRESIDENT ONLY ON 10/9/2004. PRIOR TO THE AMENDMEN T, THE ISSUE OF DISALLOWANCE WAS ONLY IN RESPECT OF CERTAIN PAYMENT S WHICH WAS EXTENDED BY THE AMENDMENT TO THE PAYMENTS MADE TO R ESIDENT CONTRACTOR/SUB-CONTRACTOR. SINCE THE AMENDMENT WAS NOT IN EXISTENCE ON THE STATUTE BOOK AS ON 1 ST APRIL OF THAT YEAR, THE ASSESSEE WAS GIVEN TO UNDERSTAND THAT THE PROVISION S WERE APPLICABLE FOR THE AY 06-07 ONLY AND NOT FOR AY 05-06; ITA NO.503/B/09 PAGE 3 OF 12 (II) THE RECIPIENT OF THE SAID SUB-CONTRACT HAD DECLARED THE SAID AMOUNT IN HIS ROI, PAID TAXES AND THAT THE ASSESSME NT HAD BEEN COMPLETED IN HIS CASE. EVEN IF THE ASSESSEE HAD TO DEDUCT THE TAX, THE RECIPIENT CAN NOT CLAIM THE SAME SINCE THE EXIS TING PROVISIONS OF LAW DO NOT PERMIT ANY SUPPLEMENTARY CLAIM OF REF UND AND, IN EFFECT, THE DEDUCTION AMOUNTS TO DOUBLE TAXATION; (III) EVEN IF THE ASSESSMENT WAS FOUND TO BE ERRONEOUS IN LAW, IT WAS NOT PREJUDICIAL TO THE INTEREST OF REVENUE AS THE T AXES DUE ON THE SAID SUM HAD BEEN COLLECTED BY WAY OF ASSESSMENT IN THE CASE OF RECIPIENT AND SINCE TWO VIEWS WERE POSSIBLE, THE PH RASE 'PREJUDICIAL TO THE INTEREST OF REVENUE SHOULD NOT BE UNDERSTOOD TO MEAN THAT IT WAS A LOSS OF REVENUE AND PLACED RELIA NCE ON THE FINDINGS REPORTED IN 243 ITR 83 (SC) AND IN 268 ITR 128 (P&H). 4.1. REBUTTING THE ASSESSEES OBJECTION, THE CIT( C) OBSERVED IN THE IMPUGNED ORDER THE FOLLOWING REASONS TO JUSTIFY HIS STAND: (I) THE FINANCE (NO:2) ACT BY WHICH CLAUSE (IA) WAS INS ERTED INTO S.40(A) RECEIVED THE ASSENT OF THE PRESIDENT ONLY O N 10/9/04 AND THE SAID PROVISION WAS NOT ON THE STATUTE AS ON 1.4 .04 WAS NOT TENABLE; (II) THE FINANCE(NO:2) ACT 2004 CLEARLY PROVIDES THAT TH E PROVISION IN CLAUSE (IA) TO S. 40(A) WILL BE OPERATIVE FROM 1.4. 05 AND THUS MAKES IT APPLICABLE FROM THE ASST. YEAR 05-06; (III) THE SUB-CONTRACT ASSIGNED BY THE ASSESSEE WAS A CON TINUOUS ONE SPREAD OVER THE ENTIRE FY AND NOT AN ACT ON A PARTI CULAR DAY AND THAT IN THE INSTANT CASE AND THE ON THE DATE OF PAY MENT TO THE SUB- CONTRACTOR THE SAID PROVISION WAS VERY MUCH ON THE STATUTE AND, AS SUCH, THE ASSESSEE WAS BOUND TO DEDUCT TAX AS PE R THE PROVISIONS OF THE I.T. ACT WHILE MAKING SUCH SUB-CO NTRACT PAYMENTS WHICH THE ASSESSEE HAD FAILED TO DO SO; (IV) THE INTRODUCTION OF CLAUSE (IA) IN THE STATUTE WAS TO KEEP A CHECK ON SUCH NON-COMPLIANCE TO THE PROVISIONS RELATING T O TDS AS PER THE PROVISIONS OF THE ACT; (V) THE ASSESSEES PLEA OF IGNORANCE OF CLAUSE (IA) WHI CH PROMPTED HIM FOR MAKING THE PAYMENT OF ENTIRE SUB-CONTRACT A MOUNT WITHOUT TDS DOESNT HOLD WATER; ITA NO.503/B/09 PAGE 4 OF 12 (VI) IN THE CASE ON HAND, THE APPLICATION OF THE NEW PRO VISION S.40(A)(IA) COMES INTO EFFECT ONLY IN CASE OF VIO LATION OF ANOTHER PROVISIONS OF S.194C WHICH WAS ALREADY IN EXISTENCE ; (VII) THE MAKE BELIEF ASCERTAIN OF THE ASSESSEE THAT HIS PREVIOUS CAS VERSION THAT THE PROVISIONS APPLICABLE FROM THE AY 06-07 WAS THE REASON FOR NON-DEDUCTION OF TAX AT SOURCE HAD EXPOS ED HIM WIDELY AS THE SAME AUDITOR HAD HIGHLIGHTED THE SAID OMISSI ON IN HIS AUDIT REPORT FURNISHED ALONG WITH THE ROI; (VIII) THE ASSESSEE HAVING PAID THE SUB-CONTRACT AMOUNT WI THOUT RESORTING TO DEDUCT TAX AT SOURCE AMOUNTS TO NON-CO MPLIANCE WHICH ATTRACTS THE PROVISIONS OF NEW S.40(A)(IA). THE PROVISIONS CLAUSE (IA) OF S.40(A) ARE ENFORCING IN NATURE AND ARE INTENDED TO ENSURE THAT THE PROVISIONS RELATING TO DEDUCTION OF TAX AT SOURCE ARE COMPLIED WITH; (IX) THE APPLICATION OF THE SAID PROVISIONS WOULD BE ON ACTUAL FACTS AND NOT ON HYPOTHETICAL SITUATIONS AS SOUGHT TO BE BROUGHT OUT BY THE AR OF THE ASSESSEE; (X) RELIANCE PLACED IN THE CASE LAWS REPORTED IN 295 I TR 282 (SC) AND 243 ITR 83 (SC) WHEREIN THE DECISIONS OF THE AP EX COURT THAT THE PROVISIONS OF S.263 CANNOT BE INVOKED TO CORREC T AN ORDER OF THE AO ON AN ISSUE ON WHICH THERE WAS A POSSIBILITY OF TWO VIEWS; - IN THE CASE ON HAND, THERE WAS NO SUCH POSSIBILIT Y OF TWO VIEWS ON THE ISSUE OF DISALLOWANCE OF SUB-CONTRACT AMOUNT ON WHICH NO TAX WAS DEDUCTED. THIS WAS FOR THE REASON THAT DUR ING THE PERIOD OF PAYMENT, THE LAW WAS VERY CLEAR IN VIEW OF THE P ROVISIONS OF CLAUSE (IA) OF S.40(A) OF THE ACT. THE PAYMENTS ON WHICH TAX WAS NOT DEDUCTED NEED TO BE DISALLOWED FROM EXPENDITURE ; (XI) IN VIEW OF THE CLEAR PROVISIONS OF THE ACT, THERE W AS NO POSSIBILITY OF HAVING TWO VIEWS AND, THUS, THE CASE LAWS CITED ARE CLEARLY DISTINGUISHABLE; (XII) SINCE THE AO, WHILE PASSING THE ORDER, HAD NOT APPL IED THE PROVISIONS OF S.40(A)(IA) IN RESPECT OF SUB-CONTRAC T PAYMENTS ON WHICH NO TDS WAS MADE AS PER THE PROVISIONS OF THE ACT, THE IMPUGNED ORDER OF THE AO WAS ERRONEOUS AND WAS PREJ UDICIAL TO THE INTEREST OF REVENUE. 5. AGITATED, THE ASSESSEE HAS COME UP WITH THE PRES ENT APPEAL. DURING THE COURSE OF HEARING, THE LD. A R, IN HIS SPIRITED ARGUMENTS, REITERATED ITA NO.503/B/09 PAGE 5 OF 12 MORE OR LESS WHAT HAS BEEN PUT FORTH DURING THE PRO CEEDINGS U/S 263 OF THE ACT. TO FURTHER STRENGTHEN HIS ARGUMENT, THE LD. A R SUBMITTED THAT THE LD. CIT (C) HAD GROSSLY ERRED IN INTERPRETING THE AMEND ED PROVISIONS WHICH WAS DETRIMENTAL TO THE ASSESSEE AND PLEADED THAT THE IM PUGNED ORDER OF THE CIT (C) DESERVES TO BE QUASHED AND THAT OF THE AO B E RESTORED. 5.1. ON THE OTHER HAND, THE LD. D.R ARGUED THAT TH E CIT (C) HAD IN A JUDICIOUS MANNER DEALT WITH THE ISSUE AS PER THE AM ENDED PROVISIONS OF S.40(A)(IA) OF THE ACT WHICH HAD BEEN LOST SIGHT OF WHILE CONCLUDING THE ORIGINAL ASSESSMENT BY THE AO. THUS, THERE WAS NO IMPEDIMENT WHATSOEVER WHICH REQUIRES TO BE MODIFIED. IT WAS, THEREFORE, URGED THAT THE ORDER OF THE CIT (C) REQUIRES NO INTERFERENCE AT TH IS STAGE. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE EITHER PARTY AND ALSO DULY PERUSED THE RELEVANT RECORDS. THE ES SENCE AND SUBSTANCE OF THE ISSUE AND THE GRIEVANCE OF THE ASSESSEE IS THAT THOUGH THE AMENDMENT WAS INTRODUCED BY THE FINANCE (NO.2) ACT, 2004 AND PUT INTO OPERATION W.E.F. 1.4.2005 [APPLICABLE FROM THE ASSESSMENT YEA R 2005-06], IT CANNOT BE APPLIED IN THE CASE OF THE ASSESSEE AS THE PAYMENTS WERE MADE BETWEEN APRIL AND SEPTEMBER 2004 AND THAT THE SAID FINANCE ACT RECEIVED THE ASSENT OF THE PRESIDENT ONLY ON 10/9/2004. THE REA SONING OF THE ASSESSEE DOESNT COMMAND ANY CONVICTION. BEING A PWD CONTRA CTOR MAINLY WITH THE IRRIGATION DEPARTMENT OF GOVERNMENT OF KARNATAKA, C ANNOT PLEAD IGNORANCE THAT THE TAX WILL HAVE TO BE DEDUCTED AT SOURCE FOR THE PAYMENTS MADE TO THE SUB-CONTRACTOR. THE ASSESSEES ARGUMENT THAT T HE FINANCE ACT (NO:2) ACT 2004 WAS BROUGHT ON THE STATUTE, ON RECEIVING O F ASSENT FROM THE ITA NO.503/B/09 PAGE 6 OF 12 PRESIDENT; ONLY ON 10.9.2004 AND THAT THE ASSESSE E HAD MADE THE PAYMENTS BETWEEN APRIL AND SEPTEMBER, 2004 IS HARD LY CONVINCING. BEING A CONTRACTOR EXECUTING WORK RUNNING INTO CRORES OF RUPEES AND HIS BOOKS OF ACCOUNT WERE SUBJECTED TO AUDIT U/S 44 AB AND THAT HE WAS BEING ABLY ASSISTED BY CONSULTANTS IN TAX MATTERS, THERE WON T BE ANY BUYERS OF HIS THEORY THAT THE AMENDMENT WAS NOT IN EXISTENCE ON T HE STATUTE BOOK AS ON 1 ST APRIL OF 2004 AND THAT HE WAS GIVEN TO UNDER-STAND BY HIS CA THAT THE PROVISIONS WERE APPLICABLE FOR THE AY.2006-07 AND NOT FOR THE AY UNDER DISPUTE . 6.1 BY VIRTUE OF VARIOUS PROVISIONS OF THE ACT UND ER CHAPTER XVII, THE PAYER-ASSESSEE IS BOUND TO DEDUCT TAX AT THE TI ME OF SUCH CREDIT TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THER EOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVE R IS EARLIER. THE TAX SO DEDUCTED HAS TO BE REMITTED WITHIN THE STIPULATED P ERIOD AS SPECIFIED UNDER THE VARIOUS PROVISIONS. THERE ARE NO PROVISIONS I N THE ACT TO HELP THE ASSESSEE ON HIS LIABILITY TO DEDUCT TAX IN THE PRET EXT THAT THE PAYEE- ASSESSEE HAS PAID TAX, FILED HIS RETURN OF INCOME A ND ASSESSMENT COMPLETED. IT IS PERTINENT TO NOTE THAT SUCH EVEN TS TAKES PLACE MUCH BEYOND THE TIME STIPULATED BY THE ACT TO DEDUCT TAX . THE LIABILITY TO DEDUCT TAX AND SUBSEQUENT REMITTANCE BEING MANDATORY WERE ALREADY EXISTENT IN THE ACT BY VIRTUE OF VARIOUS OTHER PROVISIONS OF TH E ACT PRIOR TO INTRODUCTION OF SECTION 40(A)(IA) BY THE FINANCE (NO.2) ACT OF 2 004 IN THE LOK SABHA ON 8.7.2004, WHICH RECEIVED THE ASSENT OF THE PRESIDEN T ON 10.9.2004. THIS AMENDMENT CAME INTO FORCE WITH EFFECT FROM 1.4.2004 . IN SUCH A SITUATION, IT IS QUITE OBVIOUS THAT THE TAX DEDUCTOR COULD NOT HAVE VISUALIZED THE DIRE ITA NO.503/B/09 PAGE 7 OF 12 CONSEQUENCE U/S. 40(A)(IA) IN NON-COMPLIANCE OF THE VARIOUS PROVISIONS RELATING TO TDS PRIOR TO 8.7.2004. IN ORDER TO TI DE OVER THIS SITUATION, THE ASSESSEE COULD HAVE DEDUCTED TAX WITHIN THE RELEVAN T PREVIOUS YEAR I.E., DURING THE PERIOD 8.7.2004 TO 31.3.2005 AND REMITTE D THE SAME TO THE GOVERNMENT EXCHEQUER TO AVOID THE WRATH OF THE PRO VISIONS OF SECTION 40(A)(IA). FURTHER THE ACT PROVIDED THAT WHERE IN RESPECT OF SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR HAS BEE N DEDUCTED IN THE PREVIOUS YEAR, BUT PAID IN ANY SUBSEQUENT YEAR AFTE R THE EXPIRY OF TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 200, SU CH SUM SHALL BE ALLOWED AS DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOU S YEAR IN WHICH SUCH TAX HAS BEEN PAID, THEREBY BRINGING IN RELIEF TO TH E TAX DEDUCTOR. 6.2. THE INTENT OF THE LEGISLATURE WAS TO PLUG THE REVENUE LOSS AND TO BRING THE LEGITIMATE TAXES DUE TO THE GOVERNMENT EXCHEQUER. FOR AN ARGUMENT SAKE WITHOUT CONCEDING, IF THE ASSESSEES ARGUMENT THAT THE TAXES DUE ON THE SAID SUMS HAVE ALREADY BEEN COLLEC TED FROM THE SO CALLED RECIPIENT AND THAT THERE WAS NO LOSS TO THE GOVERNM ENT WERE TO BE ACCEPTED RATHER IN PRINCIPLE, WE ARE AFRAID, THE VE RY PURPOSE AND INTENT OF THE LEGISLATURE WOULD BE DEFEATED IN BRINGING IN SU CH AN AMENDMENT. SECTION 40(A)(IA) OF THE ACT AS INTRODUCED BY THE F INANCE (NO.2) ACT, 2004 WITH EFFECT FROM 1.4.2004 IS EXTRACTED HERE-BELOW F OR A CLOSER EXAMINATION : (IA) ANY INTEREST, COMMISSION OR BROKERAGE, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR O R SUB- CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WO RK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVI I-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCT ION, HAS ITA NO.503/B/09 PAGE 8 OF 12 NOT BEEN PAID DURING THE PREVIOUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESC RIBED UNDER SUB-SECTION (1) OF SECTION 200: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR, HAS BEEN DEDUCT ED IN THE PREVIOUS YEAR BUT PAID IN ANY SUBSEQUENT YEAR AFTER THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTIO N 200, SUCH SUM SHALL BE ALLOWED AS DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. A PLAIN READING OF THE PROVISION CLEARLY PROVIDES T HAT ANY PAYMENT MADE TO A RESIDENT OR TO A CONTRACTOR OR SUB-CONTRACTOR IN LIEU OF ANY INTEREST, COMMISSION, BROKERAGE, ETC. AS SPECIFIED IN THE ACT , ON WHICH TAX IS TO BE DEDUCTED AND IF SUCH TAX IS NOT DEDUCTED OR AFTER D EDUCTION HAS NOT BEEN REMITTED, SUCH SUM SHALL NOT BE ALLOWED AS DEDUCTIO N IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS B EEN PAID. IN OTHER WORDS, THE PROVISION PROVIDES THAT UNDER CERTAIN CI RCUMSTANCES OF NON- COMPLIANCE WITH TDS PROVISIONS, THE PAYMENT MADE ON WHICH TAX HAS TO BE DEDUCTED AT SOURCE SHALL NOT BE ALLOWED AS A DEDUCT ION IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD, PROFITS AND GAIN S OF BUSINESS OR PROFESSION. HOWEVER, SUCH SUM SHALL BE ALLOWED AS DEDUCTION IN THE YEAR IN WHICH THE TAX IS DEDUCTED ON SUCH PAYMENT AND RE MITTED. THIS PROVISION IS NO DOUBT INTRODUCED TO PLUG IN ANY PROBABLE LOSS TO THE REVENUE. IT IS A HARSH PROVISION COMPELLING ANY TAX DEDUCTOR TO DEDU CT TAX AT SOURCE AND REMIT IT TO THE GOVERNMENT TREASURY IN ORDER TO ENS URE THAT NO INCOME ESCAPES TAX. HOWEVER, THE RIGOUR OF THIS PROVISION IS MADE EQUITABLE BY PROVIDING THAT THE TAX DEDUCTOR SHALL BE ALLOWED DE DUCTION FOR THE DISALLOWED EXPENDITURE IN THE PREVIOUS YEAR WHEN TH E TAX IS DEDUCTED. TO SUM UP, EVEN THOUGH THE ACT HAS BEEN EMBEDDED WITH A PENAL PROVISION OF ITA NO.503/B/09 PAGE 9 OF 12 THE DISALLOWANCE ON NON-COMPLIANCE, RELIEF IS INHER ENTLY GRANTED ON COMPLIANCE WITH SOME INCONVENIENCE, DISTURBANCE OF MATCHING PRINCIPLE AND CUMBERSOME PROCESS WHEN IT COMES TO THE CLAIMIN G OF REFUND BY THE DEDUCTEE WHERE, TAX IS DEDUCTED AT SOURCE BY THE DE DUCTOR AND THE DEDUCTEE HAS ALSO PAID THE TAX. IN ORDER TO AVOID SUCH A SITUATION, IT WOULD BE PRUDENT ON THE PART OF THE ASSESSEE TO PROMPTLY DEDUCT TAX AND REMIT IT TO THE GOVERNMENT TREASURY. IN INTERPRETING TAX S TATUTE, GENERALLY ACCEPTED PRINCIPLE FOLLOWED IS STRICT INTERPRETATION WITH RE SPECT TO CHARGING PROVISION AND PENAL PROVISION. THE LEGENDARY DECISION HELD IN CAPE BRANDY SYNDICATE V. INLAND REVENUE IS BEING FOLLOWED IN MA NY OF THE RECENT DECISIONS OF THE HONBLE APEX COURT. IT WAS HELD T HAT IN A TAXING STATUTE ONE HAS TO LOOK MERELY AT WHAT IS CLEARLY SAID. TH ERE IS NO REASON FOR ANY INTENDMENT. THERE IS NO EQUITY ABOUT A TAX. THERE IS NO PRESUMPTION AS TO TAX. NOTHING IS TO BE READ IN, NOTHING IS TO BE IM PLIED. ONE CAN ONLY LOOK FAIRLY AT THE LANGUAGE USED. IN THE NEW SUB-CLAUSE (IA) IN CLAUSE (A) OF SECTION 40 WHICH HAS COME INTO EFFECT FROM THE ASSE SSMENT YEAR 2005-06, THE LANGUAGE IS VERY CLEAR AND THERE IS NO AMBIGUIT Y IN IT. IN THE CASE OF CIT V. PUNJAB FINANCIAL CORPORATION (2002) 254 ITR 6 (P &H) , THE HIGH COURT REITERATED THE LAW THAT THE TAXING STATUTE SHOULD B E CONSTRUED STRICTLY IN RESPECT OF CHARGING PROVISION OR A PROVISION IMPOSI NG PENALTY. 6.3 FURTHER IN DENTAL COUNCIL OF INDIA V. HARI PRAKASH (2001) 8 SC C 61 , IT WAS HELD THAT THE INTENTION OF LEGISLATURE IS PR IMARILY TO BE GATHERED FROM THE LANGUAGE USED IN THE STATUTE, THUS PAYING ATTE NTION TO WHAT HAS BEEN SAID AS ALSO TO WHAT HAS NOT BEEN SAID. WHEN THE W ORDS ARE NOT ITA NO.503/B/09 PAGE 10 OF 12 AMBIGUOUS, LITERAL MEANING HAS TO BE APPLIED WHICH IS THE GENERAL RULE OF INTERPRETATION. 6.4 ANOTHER ARGUMENT OF THE ASSESSEE THAT SINCE THE RECIPIENT OF THE SUB-CONTRACT AMOUNT WAS DECLARED AND PAID THE TAXES IN HIS HANDS AND THAT THERE WAS NO LOSS TO THE GOVERNMENT (IN ANY WAY) WE RE TO BE TAKEN ON ITS FACE VALUE AND CONCEDING TO THE ASSESSEES ARGUMENT , WE ARE AFRAID, WE WOULD BE SETTING A PRECEDENT WHICH WOULD ENABLE THE ERRANT ASSESSEE (S) TO TAKE A LEAF OUT OF THIS PRECEDENT AND WALK AWAY SCO T-FREE. THE VERY INTENT OF THE LEGISLATION, IN OUR UNANIMOUS VIEW, WOULD TH EN BE A CASUALTY. MORE OVER FISCAL STATUTES SHOULD BE CONSTRUED STRICTLY I N RESPECT OF CHARGING PROVISION OR PROVISION IMPOSING PENALTY, BUT NOT OT HER PARTS OF THE STATUTE, WHICH CONTAINS THE MACHINERY PROVISIONS OR WHAT IS ORDINARILY UNDERSTOOD AS PROCEDURAL LAW AS HELD BY THE DECISION OF THE HONB LE SUPREME COURT IN CIT V. NATIONAL TAJ TRADERS (1980) 121 ITR 535. 6.5. WITH RESPECTS, WE HAVE PERUSED THE RULING OF THE HONBLE APEX COURT WITH REGARD TO APPLICABILITY OF THE PROV ISIONS OF S.263 OF THE ACT. (I) CIT V. MAX INDIA LIMITED 295 ITR 282 (SC) : THE PHRASE PREJUDICIAL TO THE INTEREST OF REVENUE IN S.263 OF THE ACT HAS TO BE READ IN CONJUNCTION WITH EXPRESSION ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONS EQUENCE OF THE ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN THE ASSESSING OFFICER A DOPTS ONE OF TWO COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF R EVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ON E VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED A S ERRONEOUS ORDER ITA NO.503/B/09 PAGE 11 OF 12 PREJUDICIAL TO THE REVENUE, UNLESS THE VIEW TAKEN B Y THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. 6.6. IF THE ASSESSING OFFICER ADOPTS ONE OF TWO COURSES PERMISSIBLE IN LAW WHICH HAD RESULTED IN LOSS OF REVENUE OR WHERE TWO VIEWS WERE POSSIBLE AND THE ASSESSING OFFICER HAD TAKEN ONE VIEW WITH W HICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS ERRONEOUS A ND PREJUDICIAL TO THE REVENUE AS RULED BY THE HONBLE APEX COURT REFERRED SUPRA. HOWEVER, WITH DUE RESPECTS, WE WOULD LIKE TO POINT OUT THAT IN THE PRESENT CASE; ONE OF TWO COURSES PERMISSIBLE IN LAW HAD NOT BEEN ADOP TED BY THE ASSESSING OFFICER AT ALL. ON A CAREFUL PERUSAL OF THE IMPUGN ED ORDER OF THE AO, WE FIND THAT THE APPLICABILITY OF THE AMENDED PROVISIONS OF S.40(A)(IA) OF THE ACT WAS NOT LOOKED INTO BY THE AO RATHER HE HAS OMITTED TO EXAMINE IT AND GIVE EFFECT TO THAT ASPECT. THERE WAS NEITHER DIFFERENT OPINION NOR TWO VIEWS ON THE ISSUE OF DISALLOWANCE OF SUB-CONTRACT AMOUNT ON WHICH NO TAX WAS DEDUCTED. AS SUCH, IN OUR CONSIDERED VIEW, THE RULI NG OF THE HONBLE SUPREME COURT REFERRED SUPRA CANNOT COME TO THE RES CUE OF THE ASSESSEE. 6.7. THE ASSESSEE HAS BEEN TRYING TO SEEK SANC TUARY UNDER ANOTHER RULING OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT REPORTED IN 243 ITR 83 . ON A CAREFUL PERUSAL OF THE SAID VERDICT WITH RESPECTS, WE ARE OF THE UNANIMOUS VIEW THAT TH E SAID RULING WAS ON AN IDENTICAL ISSUE WHICH WAS RELIED ON BY THE HONBLE SUPREME COURT WHILE DECIDING THE ISSUE IN THE CASE OF CIT V. MAX INDIA LTD. CITED SUPRA. THUS, THE RULINGS OF THE HONBLE COURT REFERRED SUPRA ARE DISTINGUISHABLE WHICH ARE NOT APPLICABLE TO THE FACTS OF THE CASE ON HAND . ITA NO.503/B/09 PAGE 12 OF 12 6.8. IN AN OVERALL CONSIDERATION OF THE FACTS AN D THE CIRCUMSTANCES OF THE ISSUE ON HAND, WE ARE OF THE UNANIMOUS VIEW THA T THE LD.CIT (C) WAS FULLY JUSTIFIED IN INVOKING THE PROVISIONS OF S.263 OF THE ACT IN SETTING ASIDE THE IMPUGNED ORDER PASSED U/S 143(3) OF THE A CT BY THE AO. IT IS ORDERED ACCORDINGLY. 7. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF OCTOBER, 2009. SD/- SD/- (SHALENDRA KUMAR YADAV) (A. MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 30 TH OCTOBER, 2009. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.