Mr.Mohd Rafiq, Gulbarga V. Income Tax Officer Ward-2, Gulbarga

ITA 573/BANG/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3333 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-02-2020
• Assessment Year: 2010-2011
• Appeal Filed On: 10-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH CIT BENGALURU
• Keywords: Opportunity of being heard; TDS; Set aside
• Section: 80C; 244A; 40(a)(ia); 194C; 201(1); 48; 40a(ia); 153; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND SHRI A. K. GARODIA , ACCOUNTANT MEMBER ITA NO. 5 7 3 /B ANG/201 7 ASSESSMENT YEAR : 2010-11 MR. MOHD. RAFIQ, PRO: KARNATAKA TRANSPORT CO. & ACC CONTRACTOR, NEAR IRANI BUILDING, ACCC MAIN ROAD, AT/POST WADI, TQ. CHITTAPUR, DIST. GULBARGA 585 225. PAN : A DSPR 0 153 Q VS. INCOME TAX OFFICER, WARD - 2, GULBARGA. APPELLANT RESPONDENT ASSESSEE BY : SHRI. PRANAV KRISHNA , ADVOCATE REVENUE BY : SHRI. MANJEET SINGH , ADDL. CIT (DR)(ITAT), BENGALURU DATE OF HEARING : 1 0 . 0 2 .20 20 DATE OF PRONOUNCEMENT : 20 . 0 2 .20 20 O R D E R PER A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A), GULBARGA DATED 29.12.2016, FOR THE ASSESSMENT YEAR 2010-11. 2. DURING THE COURSE OF HEARING, IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESSEE THAT GROUND NOS.1 TO 3 ARE GENERAL AND AS PER GROUND NOS.4 TO 10, THE ONLY GRIEVANCE OF THE ASSESSEE IS REGARDING DISALLOWANCE MADE BY THE AO ITA NO. 573/BANG/2017 PAGE 2 OF 6 OF RS.5,36,233/-/- UNDER SECTION 40A(IA) OF THE INCOME TAX ACT, 1961. IN THIS REGARD, HE SUBMITTED THAT ON PAGE 48 OF THE PAPER BOOK IS THE DETAIL OF ALL THE PAYEES ALONG WITH THE PAN AND AS PER THE PROVISIONS OF SECTION 194C(6) OF THE INCOME TAX ACT, 1961, IF THE PAYEE FURNISHES A DECLARATION TO THE EFFECT THAT HE OWNS 10 OR LESS GOODS CARRIAGE AT ANY TIME DURING THE RELEVANT PREVIOUS YEAR ALONG WITH PAN, THE PERSON PAYING OR CREDITING THE SUM, NO TDS IS REQUIRED TO BE DEDUCTED UNDER SECTION 194C OF THE INCOME TAX ACT, 1961. HE SUBMITTED THAT AS PER PARA 3.3 OF HIS ORDER, THE ISSUE IN DISPUTE WAS DECIDED BY LEARNED CIT(A) IN WHICH IT IS DECIDED BY HIM THAT IN THE REMAND REPORT, THERE IS A FINDING OF THE AO THAT 18 PAN NUMBERS ARE GENERATED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 31.10.2010. HE ALSO SUBMITTED THAT AS PER 2 ND PROVISO TO SECTION 40A(IA) INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01.04.2013, EVEN IF THE ASSESSEE FAILS TO DEDUCT WHOLE OR PART OF TDS BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER 1 ST PROVISO TO SECTION 201(1) OF THE INCOME TAX ACT, 1961, THEN NO DISALLOWANCE CAN BE MADE UNDER SECTION 40A(IA). REGARDING 1 ST PROVISO TO SECTION 201(1) OF THE IT ACT, 1961 HE SUBMITTED THAT IF THE PAYEE HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139 AND HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING THE INCOME AND HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM AND THE SAID PERSON FURNISHES THE CERTIFICATE TO THIS EFFECT FROM THE ACCOUNTANT IN THE PRESCRIBED FORM, THEN THE ASSESSEE PAYER WILL NOT BE CONSIDERED AS AN ASSESSEE IN DEFAULT AND IN CONSEQUENCE THEREOF, NO DISALLOWANCE CAN BE MADE UNDER SECTION 40A(IA) IN THE HANDS OF THE PAYER REGARDING SUCH PAYMENTS WITHOUT TDS. HE SUBMITTED THAT IN THE INTEREST OF JUSTICE, THE MATTER BE RESTORED BACK TO THE FILE OF AO AND IF IT IS DONE, THE ASSESSEE WILL OBTAIN AND FURNISH THE REQUIRED CERTIFICATES FROM THE PAYEES. HE ALSO SUBMITTED THAT THIS PROVISO IS HELD TO BE RETROSPECTIVE BY SEVERAL JUDICIAL PRONOUNCEMENTS. LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF CIT(A). ITA NO. 573/BANG/2017 PAGE 3 OF 6 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND EXCEPT APPLICABILITY OF SECOND PROVISO TO SECTION 40A(IA), WE FIND NO INFIRMITY IN THE ORDER OF CIT(A). REGARDING APPLICABILITY OF SECOND PROVISO TO SECTION 40A(IA) WHICH IS INSERTED BY FINANCE ACT, 2012 W.E.F. 01.04.0213, WE FIND THAT THIS PROVISO IS NOT APPLICABLE IN THE PRESENT CASE IF IT IS NOT RETROSPECTIVE BECAUSE IN THE PRESENT CASE, ASSESSMENT YEAR INVOLVED IS 2010-11 BUT AS PER THE JUDGMENT OF HONBLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF PCIT VS. MANOJ KUMAR SINGH, 402 ITR 238, IT WAS HELD THAT SECTION 40(A)(IA) PROVISO WAS FOR BENEFIT OF ASSESSEE AND WHEN PROVISION HAD BEEN MADE IN FISCAL STATUTE FOR BENEFIT OF ASSESSEE, IN ABSENCE OF ANY EXPRESS PROVISION OR PROVISIONS WHICH BY NECESSARY IMPLICATION GAVE DIFFERENT IMPRESSION, SUCH PROVISION WHICH WAS BENEFICIAL TO ASSESSEE MUST BE READ AND GIVEN EFFECT TO RETROACTIVELY. HENCE, WE SET ASIDE THE ORDER OF CIT (A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO HIS FILE FOR A FRESH DECISION WITH THE DIRECTION THAT IF THE ASSESSEE IS ABLE TO ESTABLISH THAT SECOND PROVISO TO SECTION 40 A (IA) IS APPLICABLE IN THE PRESENT CASE BY BRINGING NECESSARY MATERIAL ON RECORD, BENEFIT SHOULD BE ALLOWED TO THE ASSESSEE OF THIS PROVISO IN THE PRESENT YEAR ALSO IN VIEW OF THIS JUDGMENT OF HONBLE ALLAHABAD HIGH COURT AS NOTED ABOVE BECAUSE IT WAS HELD THAT IT IS RETROSPECTIVE. WE WANT TO MAKE IT CLEAR THAT THE ASSESSEE SHOULD MAKE EFFORTS TO OBTAIN NECESSARY DOCUMENTS FROM THE PAYEES IMMEDIATELY AFTER GETTING THIS ORDER AND FURNISH THE SAME BEFORE CIT (A) WHEN THE MATTER IS FIXED FOR HEARING BY CIT (A). LEARNED CIT (A) SHOULD PROVIDE REASONABLE OPPORTUNITY OF BEING HEARD TO BOTH SIDES BEFORE DECIDING THIS ISSUE. 4. AS PER GROUND 11, THE DISPUTE IS REGARDING PART UPHOLDING OF THE DISALLOWANCE MADE BY THE AO TO THE EXTENT OF RS.5,36,233/-. 5. IN THE COURSE OF HEARING, IT WAS SUBMITTED BY LEARNED AR OF THE ASSESSEE THAT OUT OF TOTAL EXPENSES INCURRED OF RS.1,60,83,471/- ON ACCOUNT OF VARIOUS ITA NO. 573/BANG/2017 PAGE 4 OF 6 EXPENSES LIKE DIESEL AND OIL, TYRES AND TUBES AND CONVEYANCE CHARGES, ETC., DISALLOWANCE WAS MADE BY THE AO TO THE EXTENT OF 8% COMPUTED AT RS.12,86,680/- AND OUT OF THE SAME, LEARNED CIT(A) HAS CONFIRMED THE DISALLOWANCE OF RS.5,36,233/- TO THE EXTENT OF 8% OF RS.67,02,912/- AFTER REDUCING VARIOUS EXPENSES FOR WHICH PAYMENTS HAVE BEEN MADE BY WAY OF ACCOUNT CHEQUES AND FOR WHICH VOUCHERS HAD BEEN PRODUCED BEFORE AO DURING REMAND PROCEEDINGS. HE SUBMITTED THAT THIS IS AN ADHOC DISALLOWANCE WHICH SHOULD BE DELETED AND EVEN IF NOT DELETED, IT SHOULD BE FURTHER REDUCED BECAUSE 8% DISALLOWANCE IS EXCESSIVE. LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT RELEVANT PORTION OF THE REMAND REPORT IS REPRODUCED BY CIT(A) ON PAGES 10 AND 11 OF HIS ORDER IN WHICH IT IS REPORTED BY AO THAT THE ASSESSEE HAS NOT PRODUCED BILLS AND VOUCHERS OF THESE EXPENSES IN COURSE OF ASSESSMENT PROCEEDINGS AND THEREFORE, DISALLOWANCE WAS MADE BY HIM TO THE EXTENT OF 8% OF SUCH EXPENSES. WE HAVE SEEN THAT LEARNED CIT(A) HAS REDUCED THOSE EXPENSE FOR WHICH PAYMENT WAS MADE BY THE ASSESSEE BY WAY OF CHEQUE AND FOR WHICH THE ASSESSEE COULD PRODUCE BILLS AND VOUCHERS IN REMAND PROCEEDINGS. HENCE THE DISALLOWANCE CONFIRMED BY THE CIT(A) IS OUT OF THOSE EXPENSES ONLY WHICH ARE PAID IN CASH AND FOR WHICH NO BILL OR VOUCHER COULD BE PRODUCED BY THE ASSESSEE EVEN IN THE COURSE OF REMAND PROCEEDINGS. WHEN THE PAYMENT OF SUCH EXPENSE IS MADE BY WAY OF CASH AND NO SUPPORTING IS AVAILABLE, INFLATION OF EXPENSES CANNOT BE RULED OUT. AFTER CONSIDERING THESE FACTS, WE FIND NO REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. ACCORDINGLY, GROUND 11 IS REJECTED. 7. AS PER GROUND NO.12, THE GRIEVANCE OF THE ASSESSEE IS REGARDING ADDITION OF INTEREST UNDER SECTION 244A OF RS.28,970/- FOR ASSESSMENT YEAR ITA NO. 573/BANG/2017 PAGE 5 OF 6 2009-10 WITHOUT ASCERTAINING WHETHER THE ASSESSEE HAS ENCASHED THE REFUND CHEQUE OR NOT. 8. IN THE COURSE OF HEARING, LEARNED AR OF THE ASSESSEE SUBMITTED THAT THIS ISSUE WAS DECIDED BY LEARNED CIT(A) ON PAGE 14 OF HIS ORDER. HE SUBMITTED THAT THERE IS NO FINDING OF CIT(A) THAT THE REFUND CHEQUE WAS ACTUALLY ENCHASED BY THE ASSESSEE AND THEREFORE, THE ADDITION MADE BY THE AO AND CONFIRMED BY THE CIT(A) IS NOT JUSTIFIED. LEARNED DR OF THE REVENUE SUPPORTED THE ORDER CIT(A). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS IS NOTED BY LEARNED CIT(A) ON PAGE 14 OF HIS ORDER THAT THE ASSESSEE HAS RECEIVED A REFUND BY CHEQUE NO.473346 DATED 18.04.2009 AND THIS REFUND INCLUDED INTEREST UNDER SECTION 244A OF RS.28,970/-. THE ONLY OBJECTION OF THE ASSESSEE BEFORE CIT(A) AND BEFORE US IS THIS THAT THE REFUND CHEQUE WAS NOT ENCASHED BY THE ASSESSEE IN THE PRESENT YEAR BUT EVEN IF THIS ASSERTION IS CORRECT, THERE IS NO INFIRMITY IN THE ORDER CIT(A) ON THIS ISSUE BECAUSE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTANT AS NOTED BY THE AO ON PAGE 1 OF THE ASSESSMENT ORDER AND HENCE, EVEN IF THE CHEQUE IS NOT ENCASHED IN THE PRESENT YEAR, INTEREST GRANTED UNDER SECTION 244A IS TAXABLE IN THE PRESENT YEAR. HENCE, THIS GROUND IS ALSO REJECTED. 10. AS PER GROUND 13, THE DISPUTE IS REGARDING DISALLOWANCE OF THE ASSESSEES CLAIM FOR DEDUCTION 80C OF THE IT ACT, 1961 TO THE EXTENT OF RS. 25,000/-. IN THE COURSE OF HEARING, IT WAS SUBMITTED BY LEARNED AR OF THE ASSESSEE THAT THE CLAIM OF ASSESSEE FOR DEDUCTION UNDER SECTION 80C TO THE EXTENT OF RS. 25,000/- WAS REJECTED ON THIS BASIS THAT THE ASSESSEE HAS FAILED TO FURNISH THE PROOF FOR THE SAME. HE SUBMITTED THAT ALTHOUGH THE ASSESSEE IS NOT HAVE A PROOF BUT THE INVESTMENT WAS ACTUALLY MADE BY THE ASSESSEE AND HENCE, ITA NO. 573/BANG/2017 PAGE 6 OF 6 IN THE INTEREST OF JUSTICE, THIS SHOULD BE ALLOWED. LEARNED DR OF THE REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND IN THE ABSENCE OF ANY PROOF REGARDING THE INVESTMENT, ASSESSEES CLAIM CANNOT BE ALLOWED AND HENCE, THIS GROUND IS ALSO REJECTED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (N. V. VASUDEVAN) (A.K. GARODIA) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED: 20 TH FEBRUARY, 2020. /NS/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.