M/s. Worth Engineering, Pune V. Income tax Officer, Pune

ITA 637/PUN/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7602 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 16-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 201(1)

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 637 /P U N/201 7 / ASSESSM ENT YEAR : 20 07 - 08 M/S WORTH ENGINEERING, 64/5, BHIDE BAUG, SINHAGAD ROAD, VADGAON BK., PUNE 411041 . / APPELLANT PAN: A A AFW1242N VS. THE INCOME TAX OFFICER , WARD 1(3), PUNE . / RESPONDENT / AP PELLANT BY : SHRI C.H. NANIWADEKAR / RESPONDENT BY : S HRI AJAY MODI / DATE OF HEARING : 09 . 0 5 .201 8 / DATE OF PRONOUNCEMENT: 18 . 0 5 .201 8 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILE D BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - 4 , PUNE , DATED 30 . 11 .20 1 6 RELATING TO ASSESSMENT YEAR 20 07 - 08 AGAINST ORDER PASSED UNDER SECTION 14 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL: - 1 . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN UPHOLDING DISALLOWANCE IN RESPECT OF LABOUR CHARGES OF RS.19,53,489/ - U/S 40(A)(IA) OF THE ACT. ITA NO. 637 /P U N/20 1 7 M/S. WORTH ENGINEERING 2 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AN D IN LAW IN UPHOLDING THE AFORESAID DISALLOWANCE WITHOUT APPRECIATING THAT ONE OF THE RELEVANT CONTRACTS EXCEEDED RS.20,000/ - INDIVIDUALLY AND AS SUCH SEC.194C DID NOT HAVE AN APPLICATION. 3. IN ANY CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) F AILED TO APPRECIATE THAT ALL THE PAYEES HAVE SHOWN RELEVANT INCOME IN THEIR RETURN AND HAVE ALSO PAID TAXES THEREON AND AS SUCH THE ASSESSEE CANNOT BE VISITED WITH THE DISALLOWANCE UNDER SECOND PROVISO TO SEC. 40(A)(IA) READ WITH FIRST PROVISO TO SEC.201(1 ). 3. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ISSUE RAISED IN GROUNDS OF APPEAL NO.1 AND 3 IS AGAINST DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT. HE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN VIVEK DATTATRAYA GUPTE HUF VS. ITO IN ITA NOS.406 & 407/PUN/2014, RELATING TO ASSESSMENT YEARS 2008 - 09 AND 2009 - 10, ORDER DATED 16.12.2015 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE MATTER BE SET ASIDE TO THE FILE OF ASSESSING OFFICER FOR VERIFICATION OF TAX ES PAID BY THE PAYEE IN ORDER TO DECIDE THE ISSUE OF DISALLOWANCE, IF ANY, UNDER SECTION 40(A)(IA) OF THE ACT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE DID NOT PRESS THE GROUND OF APPEAL NO.2. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME DECLARING TOTAL INCOME OF 5,58,527/ - . THE CASE OF ASSESSEE WAS PICKED UP FOR SCRUTINY. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD PAID LABOUR CHARGES. HOWEVER, IT WAS NOTED THAT IN RESPECT OF LABOUR CONTRACT PAYMENTS MADE TO D IFFERENT PARTIES, TDS WAS NOT DEDUCTED. THE LIST OF PARTIES AND THE AMOUNT OF EXPENSES TOTALING 19,53,489/ - IS ENLISTED AT PAGE 2 OF THE ASSESSMENT ORDER. THE ASSESSEE WAS SHOW CAUSED WITH REGARD TO PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. SINCE TH E ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE, THE ASSESSEE WAS HELD TO BE IN ITA NO. 637 /P U N/20 1 7 M/S. WORTH ENGINEERING 3 DEFAULT AND THE EXPENSES WERE NOT ALLOWED AS DEDUCTION UNDER SECTION 40(A)(IA) OF THE ACT RESULTING IN ADDITION OF 19,53,489/ - . 5. THE CIT(A) HAS UPHELD THE SAID ADDITION MADE BY THE ASSESSING OFFICER, AGAINST WHICH THE ASSESSEE IS IN APPEAL. 6. THE LIMITED ISSUE WHICH IS RAISED BEFORE THE TRIBUNAL IS WHETHER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE ATTRACTED. THE SAID PROVISIONS ARE APPLICABLE TO THE CASES OF EXPEN DITURE WHICH ARE DEBITED BY THE ASSESSEE, WHETHER PAID OR PAYABLE AT THE END OF THE YEAR, AGAINST WHICH THE ASSESSEE HAD LIABILITY TO DEDUCT TAX AT SOURCE, BUT THE SAME HAS NOT BEEN DEDUCTED. SUCH AN EXPENDITURE IS LIABLE TO BE DISALLOWED IN THE HANDS OF ASSESSEE, IN VIEW OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. HOWEVER, THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT HAS BEEN INSERTED BY THE FINANCE ACT, 2012. UNDER THE PROVISO, IT IS PROVIDED THAT IN CASE THE PAYEE HAS PAID TAXES ON THE AMOUNT S PAID TO IT, THEN THE PAYER CANNOT BE HELD TO HAVE DEFAULTED IN NON DEDUCTION OF TAX AT SOURCE. SUCH WAS THE PROPOSITION LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN VIVEK DATTATRAYA GUPTE HUF VS. ITO (SUPRA), WHEREIN IT WAS HELD AS UNDER: - 10. NOW, COM ING TO THE SECOND ASPECT OF THE ISSUE I.E. NEW LEGAL PLEA RAISED BY THE ASSESSEE IN VIEW OF SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT, WHICH WAS INSERTED BY THE FINANCE ACT, 2012. THE TRIBUNAL IN ACIT VS. BHAVOOK CHANDRAPRAKASH TRIPATHI (SUPRA) WHIL E ADJUDICATING SIMILAR ISSUE HAD OBSERVED AS UNDER: - 4. FOLLOWING THE AFORESAID PRECEDENT, WE HEREBY REVERSE THE DECISION OF THE CIT(A). HOWEVER, AT THE TIME OF HEARING, THE LD. REPRESENTATIVE FOR THE RESPONDENT - ASSESSEE MADE A NEW LEGAL ARGUMENT THAT SE COND PROVISO TO SECTION 40(A)(IA) OF THE ACT WAS INSERTED BY FINANCE ACT, 2012 W.E.F. 01.04.2013, WHEREBY IT IS PROVIDED THAT THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT WOULD NOT BE MADE IF THE ASSESSEE IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE F IRST PROVISO TO SECTION 201(1) OF THE ACT. THE STAND OF THE ASSESSEE IS THAT THE SAID PROVISO SHOULD BE UNDERSTOOD AS RETROSPECTIVE IN NATURE AS IT HAS BEEN INTRODUCED TO ITA NO. 637 /P U N/20 1 7 M/S. WORTH ENGINEERING 4 ELIMINATE UNINTENDED CONSEQUENCES WHICH MAY CAUSE UNDUE HARDSHIPS TO THE TAX PAYERS. IT WAS POINTED OUT THAT IN SIMILAR CIRCUMSTANCES, THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. M/S GAURIMAL MAHAJAN & SONS VIDE ITA NO.1852/PN/2012 DATED 06.01.2014 FOLLOWING THE DECISION OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF ANTONY D . MUNDACKAL VS. ACIT VIDE ITA NO.38/COCH/2013 DATED 29.11 .2013 HAS RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. IN THE PRECEDENT DATED 06.01.2014 (SUPRA), THE TRIBUNAL NOTED THAT SUCH A PLEA WAS RAISED FOR THE FIRST TIME BEFORE THE TRIBU NAL AND THE CORRECTNESS OR OTHERWISE OF THE CONTENTIONS RAISED WAS NOT EXAMINED BY THE LOWER AUTHORITIES. THEREFORE, THE TRIBUNAL RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINATION AFRESH, FOLLOWING THE DECISION OF THE COCHIN BE NCH OF THE TRIBUNAL IN THE CASE OF ANTONY D. MUNDACKAL (SUPRA) IN A SIMILAR CIRCUM STANCE. THE LD. REPRESENTATIVE SUBMITTED THAT THE MATTER BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER IN THE LIGHT OF THE ORDER OF THE TRIBUNAL DATED 06,01.2014 (SU PRA). THE AFORESAID PLEA OF THE RESPONDENT - ASSESSEE HAS NOT BEEN SERIOUSLY OPPOSED BY THE LD. DEPARTMENTAL REPRESENTATIVE APPEARING FOR THE REVENUE. 5. FOLLOWING THE AFORESAID PRECEDENT, WE THEREFORE DEEM IT FIT AND PROPER TO RESTORE THE MATTER BACK TO TH E FILE OF THE ASSESSING OFFICER WHO SHALL CONSIDER THE PLEA OF THE ASSESSEE BASED ON THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT INSERTED BY THE FINANCE ACT W.E.F. 01.04.2013 IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL CONTAINED IN ITS ORDER DATE D 06.01.2014 (SUPRA). NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD BEFORE PASSING AN ORDER AFRESH ON THIS ASPECT AS PER LAW. 11. THE ISSUE RAISED IN THE PRESENT APPEALS IS SQUARELY COVERED BY TH E ORDER OF TRIBUNAL (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE DEEM IT FIT TO RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER, WHO SHALL CONSIDER THE PLEA OF THE ASSESSEE BASED ON THE PROVISIONS OF THE ACT INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01.04.2013 AND IN LINE WITH EARLIER ORDER OF THE TRIBUNAL DATED 06.01.2014 (SUPRA), THE ASSESSING OFFICER IS DIRECTED TO ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. THE ISS UE WHICH ARISES IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL AND FOLLOWING THE SAME PARITY OF REASONING, THE MATTER IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER TO CARRY OUT NECESSARY VERIFICAT ION AND ADJUDICATE THE ISSUE IN LINE WITH THE DIRECTIONS OF THE TRIBUNAL AND IN ACCORDANCE WITH LAW AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FILE THE REQUISITE DETAILS OF TAXES PAID BY THE PAYEE IN THI S REGARD AND THE ASSESSING OFFICER SHALL DECIDE THE ISSUE. I N VIEW OF AMENDED PROVISIONS, NO DISALLOWANCE IS TO BE MADE IN THE HANDS OF ITA NO. 637 /P U N/20 1 7 M/S. WORTH ENGINEERING 5 ASSESSEE , WHERE PAYEES HAD PAID TAXES ON THE RECEIPTS , AGAINST WHICH ASSESSEE WAS HELD TO BE DEFAULTER . THE GROUNDS OF APPEAL NO.1 AND 3 RAISED BY THE ASSESSEE ARE THUS, ALLOWED FOR STATISTICAL PURPOSE. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS NOT PRESSED AND HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 8 . IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED ON THIS 18 TH DAY OF MAY , 201 8 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 18 TH MAY , 201 8 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPON DENT; 3. ( ) / THE CIT(A) - 4 , PUNE ; 4. THE PR. CIT - 3 , PUNE ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE