M. Thiyagarajan, Bangalore V. CIT, Bangalore

ITA 651/BANG/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95190 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 28-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V SREEDHAR

Judgement Text

ITA.651/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE BEFORE SHRI. N. V. VASUDEVAN, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.651/BANG/2015 (ASSESSMENT YEAR : 2010-11) SHRI. M. THIYAGARAJAN, NO.66, 2 ND RIGHT CROSS, SRIRAM TEMPLE STREET, NEW THIPPASANDRA, BANGALORE 560 075 ..APPELLANT PAN : AAUPT3071A V. COMMISSIONER OF INCOME-TAX OFFICER, BANGALORE 4, BANGALORE ..RESPONDENT ASSESSEE BY : SHRI. V. SREEDHAR, CA REVENUE BY : SHRI. SUNIL KUMAR AGARWALA, JCIT HEARD ON : 06.08.2015 PRONOUNCED ON : .08.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY ASSESSEE, IT ASSAILS AN OR DER DT.09.03.2015 OF CIT BENGALURU-4, BENGALURU, PASSED U/S.263 OF THE INCOM E-TAX ACT, 1961 (THE ACT IN SHORT). 02. FACTS APROPOS ARE THAT ASSESSEE HAD FILED HIS R ETURN FOR THE IMPUGNED ASSESSMENT YEAR DECLARING INCOME OF RS.16,17,200/-. ASSESSMENT WAS COMPLETED ON 08.03.2013, AFTER SCRUTINY U/S.143(3) OF THE ACT. ON 23.02.2015, ITA.651/BANG/2015 PAGE - 2 CIT ISSUED A NOTICE U/S.263 OF THE ACT, INTER ALIA STATING THAT ASSESSEE HAD PAID HIRE CHARGES OF RS.60,18,269/- TO ONE M/S. BLLPL, W ITHOUT DEDUCTING TAX AT SOURCE. AS PER THE CIT, SECTION 40(A)(IA) STOOD AT TRACTED. IN REPLY TO THE ABOVE, ASSESSEE SUBMITTED THAT THE RECEPIENT M/S. BLLPL HA D ACCOUNTED THE HIRE RECEIPTS AND PAID TAX THEREON. AS PER THE ASSESSEE , IN THE FIRST PLACE THERE WAS NO AMOUNT OUTSTANDING PAYABLE TO M/S. BLLPL AT THE END OF THE RELEVANT PREVIOUS YEAR, AND SECONDLY, M/S. BLLPL HAVING ALREADY ACCOU NTED THE HIRE CHARGES IN ITS BOOKS, SECOND PROVISO TO SECTION 40(A)(IA) ADDE D BY FINANCE ACT, 2012 CAME TO ITS AID. PAYEE HAVING ACCOUNTED THE RECEIPT AND PAID TAX THEREON, AS PER THE ASSESSEE, SECTION 40(A)(IA) OF THE ACT, COULD NOT B E APPLIED ON THE ASSESSEE. 03. HOWEVER, CIT WAS NOT IMPRESSED. ACCORDING TO H IM, AMENDMENT TO SECTION 40(A)(IA) OF THE ACT, INTRODUCED BY FINANCE ACT, 2012 CAME INTO EFFECT FROM 01.04.2013 AND WOULD NOT HELP THE ASSESSEE SIN CE THE IMPUGNED ASSESSMENT YEAR WAS PRIOR TO IT. HE HELD THAT HIRE CHARGES OF RS.60,18,269/- WARRANTED DISALLOWANCE U/S.40(A)(IA) OF THE ACT FOR WANT OF DEDUCTION OF TAX AT SOURCE. HE CANCELLED THE ASSESSMENT AND DIRECTED T HE AO TO REDO THE SAME AFTER CONSIDERING THE DISALLOWANCE MENTIONED ABOVE. 04. NOW BEFORE US, LD. AR SUBMITTED THAT IN THE FIR ST PLACE THERE WAS NO AMOUNT OUTSTANDING PAYABLE TO M/S. BLLPL. FURTHER ACCORDING TO THE LD. AR AO HAD ON 05.02.2014 ENQUIRED FROM THE ASSESSEE WHY VEHICLE CHARGES SHOULD NOT BE DISALLOWED. AS PER THE LD. AR, ASSESSEE HAD IN ITS REPLY DT.17.05.2014 STATED THAT AMENDMENT TO SECTION 40(A)(IA) MADE THR OUGH FINANCE ACT, 2012 ITA.651/BANG/2015 PAGE - 3 APPLIED RETROSPECTIVELY. AS PER THE LD. AR, THE S AID M/S. BLLPL HAD ACCOUNTED THE RECEIPT OF VEHICLE HIRE CHARGES, FILE D THEIR RETURN AND PAID TAXES THEREON. LD. AR SUBMITTED THAT COPIES OF FINANCIAL STATEMENTS AND RETURN OF INCOME OF M/S. BLLPL WERE PRODUCED BEFORE THE CIT. HE RELIED ON THE DECISION OF COORDINATE BENCH IN THE CASE OF G. SHAN KAR V. ACIT [ITA NO.1832/BANG/2013, DT.10.10.2014]. 05. PER CONTRA, LD. DR STRONGLY SUPPORTING THE ORDE R OF CIT SUBMITTED THAT AMENDMENT MADE TO SECTION 40(A)(IA) OF THE ACT, THR OUGH FINANCE ACT, 2012, W.E.F.01.04.2013 COULD NOT BE CONSIDERED AS RETROSP ECTIVE. LEGISLATURE HAD NOT NO SUCH INTENTION. FURTHER ACCORDING TO HIM, AO DI D NOT MAKE ANY ENQUIRIES IN THIS REGARD AND CORRESPONDENCE NOW RELIED ON BY THE ASSESSEE WERE SUBSEQUENT TO THE COMPLETION OF THE ASSESSMENT U/S.143(3) ON 0 8.03.2013, 06. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. ASSESSMENT ORDER U/S.143(3) DONE ON 08.03.2013 WAS CRYPTIC. I T IS REPRODUCED HEREUNDER : THE ASSESSEE FILED E-RETURN OF INCOM ON 12.-10-2010 VIDE ACK. NO.0121010 DECLARING A TOTAL INCOME OF RS.16,07,200 /-. THIS CASE WAS SELECTED FOR SCRUTINY UNDER CASS DURING THE FINANCI AL YEAR 2011-12. CONSEQUENTLY NOTICES U/S.143(2) WAS ISSUED ON 26/8/ 2011 WHICH WAS SERVED ON 28/11/2011. IN RESPONSE TO THE NOTICES THE ASSESSEES AUTHORIS ED REPRESENTATIVE SHRI. R. NEDUMARAN CA APPEARED FROM TIME TO TIME AN D PRODUCED THE DETAILS CALLED FOR WHICH WERE VERIFIED AND CASE WAS HEARD. THE ASSESSMENT IS COMPLETED BY ACCEPTING THE RETURNED I NCOME. ASSESSEE HAS NOT BEEN ABLE TO PLACE ANY CORRESPONDE NCE PRIOR TO THE DATE OF THE ASSESSMENT ORDER WITH REGARD TO THE PAYMENTS EFFECT ED BY IT TO M/S. BLLPL. ITA.651/BANG/2015 PAGE - 4 LETTER FROM THE AO WHICH SOUGHT CLARIFICATION ON TH E ISSUE OF VEHICLE HIRE CHARGES PLACED AT PAPER BOOK PAGE 16 WAS DATED.05.0 2.2014 AND REPLY GIVEN TO IT BY THE ASSESSEE WAS DT.17.09.2014. ASSESSMENT O RDER WAS PASSED ON 08.03.2013. IT IS THEREFORE OBVIOUS THAT AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD NOT APPLIED HIS MIND TO THE QUESTIO N WHETHER HIRE CHARGES PAID BY THE ASSESSEE TO M/S. BLLPL REQUIRED DEDUCTION OF TAX AT SOURCE AND WHETHER SECTION 40(A)(IA) OF THE ACT WAS TO BE APPLIED. NO DOUBT, ASSESSEE HAD TAKEN A STAND BEFORE THE CIT THAT THE AMOUNT STOOD PAID AND THERE WAS NOTHING OUTSTANDING TO M/S. BLLPL AS ON 31.03.2010. HOWEVE R WE FIND FROM THE FINAL ACCOUNT STATEMENTS FILED BY THE ASSESSEE, VEHICLE H IRE CHARGES WAS ACCOUNTED AS DIRECT EXPENSES AND UNDER THE HEAD , CURRENT LIABIL ITIES THERE WAS A SUNDRY CREDITORS BALANCE OF RS.329,74,942/-. THEREFORE, W HETHER VEHICLE HIRE CHARGES WERE ACTUALLY PAID OR WERE A PART OF SUNDRY CREDITO RS IS NOT CLEAR FROM THE FINAL ACCOUNT STATEMENTS FILED BY THE ASSESSEE. FURTHER, THE QUESTION WHETHER THE AMOUNTS STOOD PAID OR WAS PAYABLE AS AT THE END OF THE RELEVANT PREVIOUS YEAR WAS NEVER VERIFIED BY THE AO AT ANY POINT OF TIME. 07. COMING TO THE RETROSPECTIVITY OF THE SECOND PRO VISO TO SECTION 40(A)(IA) OF THE ACT, ADDED THROUGH FINANCE ACT, 2012, NODOUB T, COORDINATE BENCH IN THE CASE OF G. SHANKAR (SUPRA) HAD HELD AS UNDER : 5.4.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JU DICIAL DECISIONS CITED. ADMITTEDLY, THE UNDISPUTED FACT IS THAT THE ASSESSEE IN THE CASE ON HAND, HAS NOT DEDUCTED TAX AT SOURCE ON THE PAYM ENTS MADE TO SHRI UDAY KUMAR SHETTY AMOUNTING TO RS.1,53,78,795/-. AS SUBMITTED BY THE LD.AR, AS FAR AS THE PAYMENTS MADE BY THE ASSES SEE TO SHRI UDAY ITA.651/BANG/2015 PAGE - 5 KUMAR SHETTY, THE FACT THAT THE PAYEE HAS ACCOUNTED FOR THESE PAYMENTS IN HIS BOOKS OF ACCOUNT, FINANCIAL STATEME NTS AND THE SAME HAVE BEEN OFFERED FOR TAX IN HIS RETURN OF INCOME F OR THE PERIOD RELEVANT TO ASSESSMENT YEAR 2005-06, HAS NOT BEEN C ONTROVERTED BY THE AUTHORITIES BELOW. IN OUR CONSIDERED OPINION, SINCE THE PAYEE/ RECIPIENT I.E. SHRI UDAY KUMAR SHETTY HAS ACCOUNTED FOR THESE PAYMENTS IN HIS BOOKS OF ACCOUNT, AUDITED U/S 44AB OF THE ACT AND HAS OFFERED THE SAME FOR TAX IN HIS RETURN OF INCOME FO R THE RELEVANT PERIOD, THUS, BY VIRTUE OF THE AMENDMENT, BY WAY OF INSERTION OF THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT W.E. F. 1/4/2013, THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WOULD NO T BE ATTRACTED TO THE PAYMENTS MADE BY THE ASSESSEE TO SHRI UDAY KUMAR SH ETTY AMOUNTING TO RS.1,53,78,795/-. IN COMING TO THIS VIEW, WE DRA W SUPPORT FROM THE TWO ABOVE CITED DECISIONS OF THE CO-ORDINATE BENCHE S OF THIS TRIBUNAL IN THE CASE OF DCIT VS. ANAND MARAKALA (ITA NO.1584 /BANG/2012 AND CO NO.58/BANG/2013 DATED 13/9/2013) AND S.M.ANA ND VS. ACIT (ITA NO.1831/BANG/2013 DATED 21/2/2014) WHEREIN IT WAS HELD THAT INSERTION OF THE SECOND PROVISO TO SECTION 40(A)(IA ) OF THE ACT SHOULD BE READ RETROSPECTIVELY FROM 1/4/2005 AND NOT PROSP ECTIVELY FROM 1/4/2013. IN THIS VIEW OF THE MATTER, THE PROVISION S OF SECTION 40(A)(IA) OF THE ACT IS NOT ATTRACTED TO THE PAYMENTS MADE BY THE ASSESSEE TO SHRI UDAY KUMAR SHETTY AMOUNTING TO RS.1,53,78,795/- SIN CE THE OBJECT OF INTRODUCTION OF SECTION 40(A)(IA) IS ACHIEVED FOR T HE REASON THAT THE PAYEE/RECIPIENT HAS ACCOUNTED FOR, DECLARED AND OFF ERED FOR TAXATION THE PAYMENTS RECEIVED FROM THE ASSESSEE IN HIS HAND S. 5.4.2 EARLIER, WE HAVE HELD THAT THE SECOND PROVIS O TO SECTION 40(A)(IA) OF THE ACT IS RETROSPECTIVE IN OPERATION W.E.F. 1/4/2005. AS PER THIS NEWLY INSERTED PROVISO, THE ASSESSEE IS RE QUIRED TO FILE FORM NO.26A AS PER RULE 31ACB OF THE IT RULES,1962 SO AS NOT TO BE HELD AS AN ASSESSEE IN DEFAULT AS PER THE PROVISO TO SECTIO N 201 OF THE ACT. AS HELD IN THE DECISION OF THE CO-ORDINATE BENCH IN TH E CASE OF S.M.ANAND VS. ACIT (SUPRA), SINCE THE ASSESSEE IN THE PERIOD UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2005-06, COULD NOT HAVE CONTEM PLATED THAT SUCH A COMPLIANCE WAS TO BE MADE, WE ALSO IN THE CASE ON HAND, REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER. THE AS SESSING OFFICER IS DIRECTED TO CONSIDER THE ALLOWANCE OR OTHERWISE OF THE EXPENDITURE CLAIMED AMOUNTING TO RS.1,53,78,795/- ON ACCOUNT OF PAYMENTS TO SHRI UDAY KUMAR SHETTY AFTER AFFORDING THE ASSESSEE ADEQ UATE OPPORTUNITY TO FILE FORM NO.26A AND VERIFICATION OF WHETHER THE SAID PAYEE HAS REFLECTED THE PAYMENT/RECEIPT IN HIS BOOKS OF ACCOU NT AND OFFERED THE SAME TO TAX IN THE PERIOD UNDER CONSIDERATION. IN T HESE CIRCUMSTANCES, WE SET ASIDE THE ORDER OF THE LD.CIT(A) TO THE FILE OF THE ASSESSING OFFICER ONLY FOR THE LIMITED PURPOSE AS DIRECTED AB OVE. ITA.651/BANG/2015 PAGE - 6 08. COORDINATE BENCH HAD RELIED ON THE EARLIER DECI SION OF AGRA BENCH OF THIS TRIBUNAL IN THE CASE OF RAJEEV KUMAR AGARWAL V . ADDL. CIT [ITA NO.337/AGRA/2013, DT.29.05.2013] FOR COMING TO THE CONCLUSION THAT SECOND PROVISO TO SECTION 40(A)(IA) ADDED THROUGH F INANCE ACT, 2012 HAD TO BE CONSTRUED RETROSPECTIVELY. HOWEVER, EVEN IF WE CONSTRUE THE SECOND PROVISO TO SECTION 40(A)(IA) ADDED THROUGH F INANCE ACT, 2012 AS RETROSPECTIVE, THE QUESTION WHETHER M/S. BLLPL HAD ACCOUNTED THE VEHICLE HIRE CHARGES AND PAID TAXES THEREOF WAS NEV ER VERIFIED BY THE AO. HE HAD NO INFORMATION IN THIS REGARD. ASSESSEE PRO DUCED THE DETAILS OF SUCH A CLAIM FOR THE FIRST TIME ONLY BEFORE THE CIT . EVEN FROM SUCH ACCOUNTS PRODUCED IT COULD NOT BE CATEGORICALLY STA TED THAT INCOME-TAX DUE ON VEHICLE HIRE CHARGES RECEIVED WERE INDEED PA ID BY M/S. BLLPL. JUST BECAUSE THE TAX RETURN WAS FILED BY THE PAYEE, WOULD NOT MEAN THAT TAXES ON EVERY RECEIPTS WERE DULY ACCOUNTED AND PAI D BY IT. IN ANY CASE IT IS CLEAR THAT THE AO HAD NOT MADE ANY ENQUIRY IN THIS REGARD. THERE WAS TOTAL LACK OF ENQUIRY. LACK OF ENQUIRY ON POIN TS WHICH REQUIRE CONSIDERATION, AND WHICH ANY PRUDENT MAN WOULD HAVE DONE, WOULD RENDER THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICI AL TO THE INTERESTS OF REVENUE. WE ARE OF THE OPINION THAT CIT WAS JUSTIF IED IN TAKING THIS VIEW THOUGH HIS OBSERVATION THAT SECOND PROVISO TO SECTION 40(A)(IA) ADDED THROUGH FINANCE ACT, 2012 HAD NO RESTROSPECTI VITY DOES NOT APPEAR IN CONSONANCE WITH THE TRIBUNAL DECISIONS CITED ABO VE. WE THEREFORE UPHOLD THE ORDER OF THE CIT, BUT DIRECT THE AO TO R EDO THE ASSESSMENT, ITA.651/BANG/2015 PAGE - 7 BUT WITH A MODIFICATION THAT THE AO SHALL PROCEED T O CONSIDER THE ISSUES MENTIONED BY CIT, UNTRAMELLED BY HIS OBSERVATIONS O N THE RETROSPECTIVITY OF SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT. AO SHALL PROCEED IN ACCORDANCE WITH LAW. 09. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON ____ DAY OF A UGUST, 2015. (N. V. VASUDEVAN) (ABRAHAM P GEO RGE) JUDICIAL MEMBER ACCOUNTANT MEMBER MCN COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR