M/s OSR Cinemas & Entertainment Pvt Ltd , Bangalore V. The Income TAx Officer Ward-5(1)(2), Bangalore

ITA 688/BANG/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4632 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 20-06-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 05-03-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: KEMPARAJ
• Keywords: Retrospective amendment; Non compliance

Judgement Text

ITA.688, 694/BANG/2018 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'C', BENGALURU BEFORE SHRI. INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER 1. I.T.A NO.688/BANG/2018 (ASSESSMENT YEAR : 2013-14) 2. I.T.A NO.694/BANG/2018 (ASSESSMENT YEAR : 2013-14) 1. M/S. OSR CINEMAS & ENTERTAINMENT P. LTD, 86, 3 RD FLOOR, COLES ROAD, FRAZER TOWN, BENGALURU 560 005 PAN : AABCO4875F 2. M/S. OSR CINEMAS KOCHI P. LTD, 65/6, MILLERS ROAD, BENSON TOWN, BENGALURU 560 005 .. APPELLANTS PAN : AABCO2647K V. INCOME-TAX OFFICER, WARD -5(1)(2), BENGALURU .. RESPONDENT ASSESSEE BY : SHRI. KEMPARAJ, CA REVENUE BY : DR. P. V. PRADEEP KUMAR, ADDL. CIT HEARD ON : 20.06.2018 PRONOUNCED ON : 29.06.2018 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER : THESE ARE APPEALS FILED BY TWO ASSESSEES OF A GROU P, AGAINST THE RESPECTIVE ORDERS OF THE CIT (A) -5, BENGALURU , DT.20.11.2017, FOR AY. 2013-14, ON THE FOLLOWING COMMON GROUNDS, B UT FOR CHANGE IN FIGURE OF DISALLOWANCE REFERRED IN GROUND NO.4 : ITA.688, 694/BANG/2018 PAGE - 2 02. THE FACTS ARE THAT THE ASSESSEES CASE WAS SELE CTED FOR SCRUTINY. THE AO NOTICED THAT AS PER THE TAX AUDIT REPORT VIDE CLAUSE 21B(II)(A), TDS OF TOTAL AMOUNT OF RS.3,97,30,674/- HAS NOT BEEN MADE AND THEREFORE THE AO HAS DISALLOWED THE SAME U /S.40(A)(IA) OF THE ACT. BEING AGGRIEVED THE ASSESSE PREFERRED AN APPEAL BEFORE THE CIT (A. 03. THE CIT (A) WAS NOT CONVINCED WITH THE SUBMISSI ONS OF THE ASSESSE AND THEREFORE DISMISSED THE APPEAL OF THE A SSESSE. FOR THE SAKE OF CLARIFY, WE ARE REPRODUCING PARA 5.3 AND 5. 4 OF THE CIT (AS ORDER WHICH IS TO THE FOLLOWING EFFECT : 5.3 NOW I WOULD LIKE TO ANALYZE THE PROVISOS GIVEN UNDER BOTH THE SECTIONS CORRELATING WITH THE FACTS OF THE CASE. FIRST OF ALL THE PURPOSE OF THE INTRODUCTION OF ITA.688, 694/BANG/2018 PAGE - 3 SEC.40(A)(IA) WAS TO ENSURE THE TAX COLLECTION FROM THE DEDUCTOR HIMSELF AT THE POINT OF TIME OF MAKING PAY MENT OF CERTAIN PAYMENTS, FACILITATING THE DEDUCTEE TO CLAI M THE SAME WHILE PAYING HIS TAXES AT THE TIME OF FILING HIS RE TURN OF THE INCOME. THUS, THE INTENTION OF LEGISLATURE BEING EN SURING THE TAX COLLECTIONS AT THE TIME OF PAYMENT ITSELF THE P ROVISO INSERTED U/S.201 THAT IF THE DEDUCTEE FULFILLS CERT AIN CONDITIONS, THE DEDUCTOR CANNOT BE TREATED AS ASSES SEE IN DEFAULT DEFEAT THE WHOLE PURPOSE OF THE MAIN PROVIS ION OF SEC.40(A)(IA). THIS BEING THE CASE, SINCE THE PROVI SO INSERTED IS SUBSERVIENT TO THE MAIN PROVISION IT CAN BE INFE RRED THAT THEY ARE INSERTED ONLY FOR THE LIMITED PURPOSE OF T REATING THE ASSESSEE AS THE ASSESSEE IN DEFAULT IN ORDER TO LEV Y THE PENALTY ULS.221 OF THE INCOME TAX ACT 1961. THEREFO RE I HEREBY HOLD THAT THE PROVISO SUBSERVIENT TO THE MAI N PROVISION HAS TO BE APPLIED WITHOUT AFFECTING THE P URPOSE OF THE MAIN PROVISION AND IT WAS INSERTED ONLY FOR THE LIMITED PURPOSE OF TREATING THE ASSESSEE IS DEEMED TO BE AN ASSESSEE IN DEFAULT. THEREFORE, THE OTHER SUBMISSIO NS THAT THE AMENDMENT OF SEC.40(A)(IA) VIDE FINANCE AC T, 2014 THAT IN CASE OF NON-DEDUCTION OR NON-PAYMENT O F TDS ON PAYMENT TO MADE TO RESIDENTS OF THE COUNTRY THE DISALLOWANCE SHOULD BE LIMITED TO 30% / OF THE TOTAL AMOUNT OF EXPENSES CLAIMED SHOULD BE APPLICABLE RETROSPECTIVELY, NEED NOT BE ADJUDICATED WHICH IS TREATED AS DISMISSED. 5.4. FURTHER, KEEPING IN MIND THE PROVISO PROVIDED U/S.201(1), I PROCEED IN EXAMINING THE CONDITIONS L AID DOWN ULS.201(1) WHETHER FULFILLED OR NOT BY THE APPELLAN T. IT IS SEEN FROM THE SUBMISSIONS MADE AND EVIDENCES FILED BEFORE ME THAT THOUGH THE CONFIRMATION LETTERS FROM THE DE DUCTEES HAVE BEEN FURNISHED IT IS INFERRED THAT MERE FURNIS HING THE CONFIRMATION LETTERS WOULD NOT ABSOLVE THE ONUS CAS TED UPON THE APPELLANT THAT IT HAS BEEN DISCHARGED. FUR THER, THE APPELLANT DURING THE APPELLATE PROCEEDINGS HAS FURN ISHED ONLY THE CONFIRMATION LETTERS AND NOT ESTABLISHED T HAT THE DEDUCTEES HAVE FILED THE RETURN OF INCOME SHOWING T HE PAYMENTS RECEIVED FROM THE APPELLANT AND TAXES PAID THEREON AND MOST IMPORTANTLY COULD NOT FURNISH THE CERTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT. DURI NG THE APPELLATE PROCEEDINGS ON CONFRONTATION THE AR OF TH E APPELLANT EXPRESSED HIS INABILITY TO FURNISH THOSE CERTIFICATES ITA.688, 694/BANG/2018 PAGE - 4 FROM THE ACCOUNTANT. THEREFORE, EVEN ON ACCOUNT OF FACTUAL MATRIX OF THE CASE I HOLD THAT THE ASSESSING OFFICE R HAS RIGHTLY INVOKED THE PROVISIONS OF SEC.40(A)(1A) OF THE ACT AND DISALLOWED THE SAME BASED ON THE TAX AUDIT REPO RT. IN VIEW OF THE SAME THE APPEAL ON THIS GROUND IS HEREBY DISMISSED BOTH ON LEGAL GROUND AS WELL AS FACTUAL G ROUND. WITH THE ABOVE OBSERVATION THE CIT (A) DISMISSED TH E ASSESSEES APPEAL. 05. BEFORE US THE LD. AR SUBMITTED THAT THE JAIPUR BENCH OF THE TRIBUNAL IN THE MATTER OF RAJENDRA YADAV V. ITO [IT A.895/JP/2012, DT.29.01.2016 (WHEREIN THE JM HERE WAS THE AUTHOR), HAS ALLOWED THE APPEAL OF THE ASSESSE. FOR THAT PURPOSE, OUR A TTENTION WAS DRAWN TO PARA 6.1 TO THE FOLLOWING EFFECT : 6.1. RECENTLY IN THE MATTER OF P.M.S. DIESELS [2015 ] 59 TAXMANN.COM 100 (PUNJAB & HARYANA), HONBLE PUNJAB & HARYANA HIGH COURT HAD ELABORATELY DISCUSSED THE JU DGMENT PASSED BY THE HONBLE CALCUTTA HIGH COURT AND HONB LE GUJARAT HIGH COURT, HONBLE ALLAHABAD HIGH COURT AN D OTHER JUDGMENTS AS AVAILABLE AND THEREAFTER HAS COME TO T HE CONCLUSION THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE MANDATORY IN NATURE AND NON COMPLIANCE/NON DEDUCTIO N OF TAX ATTRACTS DISALLOWANCE OF THE ENTIRE AMOUNT. HAVING SAID SO, WE WILL BE FAILING IN OUR DUTY IF WE DO NOT DISCUSS TH E AMENDMENT BROUGHT IN BY THE FINANCE (NO. 2) ACT 2014 WITH EFF ECT FROM 1.4.2015 BY VIRTUE OF WHICH PROVISO TO SECTION 40(A )(IA) HAS BEEN INSERTED, WHICH PROVIDES THAT IF ANY SUCH SUM TAXED HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR HAS BEEN DE DUCTED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DAT E SPECIFIED IN SUB-SECTION (1) OF SECTION 139, SUCH SUM SHALL B E ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF PREVIOUS YEA R, AND FURTHER, SECTION 40(A)(IA) HAS BEEN SUBSTITUTED WHE REIN THE 30% OF ANY SUM PAYABLE TO A RESIDENT HAS BEEN SUBST ITUTED. IN THE PRESENT CASE, THE AUTHORITIES BELOW HAS ADDED T HE ENTIRE SUM OF RS. 7,51,322/- BY DISALLOWING THE WHOLE OF T HE AMOUNT. THOUGH THE SUBSTITUTION IN SECTION 40 HAS BEEN MADE EFFECTIVE WITH EFFECTIVE FROM 1.4.2015, IN OUR VIEW THE BENEF IT OF THE ITA.688, 694/BANG/2018 PAGE - 5 AMENDMENT SHOULD BE GIVEN TO THE ASSESSEE EITHER BY DIRECTING THE AO TO CONFIRM FROM THE CONTRACTORS, NAMELY, M/S . GARVIT STONEX, M/S. CHANDA MARBLES AND M/S. NIDHI GRANITES AS TO WHETHER THE SAID PARTIES HAVE DEPOSITED THE TAX OR NOT AND FURTHER OR RESTRICT THE ADDITION TO 30% OF RS. 7,51 ,322/-. IN OUR VIEW, IT WILL BE TIED OF JUSTICE IF THE DISALLOWANC E IS ONLY RESTRICTED TO 30% OF RS. 7,51,322/-. ACCORDINGLY, T HE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE ABOVE SAID MA NNER. IT WAS THE SUBMISSION OF THE LD. AR BEFORE US THAT INSTEAD OF DISALLOWING THE WHOLE OF THE AMOUNT AS DONE BY THE AO, ONLY 30% OF THE AMOUNT SHOULD BE DISALLOWED IN TERMS OF PROV ISO TO SECTION 40(A)(IA) WHICH CAME INTO EFFECT VIDE FINANCE ACT, 2012. 06. ON THE OTHER HAND THE LD. DR RELIES UPON THE JU DGMENT OF HONBLE SUPREME COURT IN THE MATTER OF PALAM GAS SE RVICE V. CIT [(2017) 81 TAXMANN.COM 43], WHERE THE HONBLE SUPRE ME COURT HAS DECIDED THE ISSUE OF PAY AND PAYABLE IN FAVOUR OF T HE REVENUE. 07. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THE ASSESSEE BEFORE US HAS FAILED TO FILE ANY EVIDE NCE TO PROVE THAT THE TAX WAS NOT LIABLE TO BE DEDUCTED AT THE TIME O F MAKING THE PAYMENT TO THE PAYER AND HAD FURTHER ASSESSEE HAD NOT FILLED ANY EVIDENCE DEDUCTION OF TAX IN SUBSEQUENT YEARS . TH IS TRIBUNAL, IN A RECENT DECISION IN THE MATTER OF DCIT V. ALLEGIS SE RVICES INDIA LTD [ITA.325/BANG/2018, DT.13.06.2018], WHICH WAS AUTHO RED BY THE JM, HAD DECIDED THE ISSUE OF APPLICABILITY OF THE S ECTION 40(A)(IA) OF THE ACT AND HELD THAT IN CASE THE AMOUNT PAID PERTA INS TO ANY OF THE CATEGORY FALLING UNDER THIS SECTION THEN, IT IS OBL IGATORY ON THE PART OF THE ASSESSEE TO DEDUCT THE TAX , FURTHER IT WAS HELD AO OR THE CIT ITA.688, 694/BANG/2018 PAGE - 6 (A) ARE DUTY BOUND TO DISALLOW THE SUM ON WHICH THE TDS HAS NOT BEEN DEDUCTED, IN ACCORDANCE WITH THIS PROVISION . FURTHER THE ISSUE OF PAY AND PAYABLE RAISED BY THE ASSESSEE BEFORE US IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE SUPREME COUR T IN THE MATTER OF PALAM GAS SERVICE V. CIT [(2017) 81 TAXMA NN.COM 43] IN FAVOUR OF THE REVENUE . THEREFORE, RESPECTFULLY FO LLOWING THE SAID JUDGMENT, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE. THE ASSESSEE HAS ALSO RELIED UPON THE JUDGMENT OF THE JAIPUR BENCH OF THE TRIBUNAL IN THE MATTER OF RAJENDRA YAD AV (SUPRA), WHEREIN THE TRIBUNAL HAS HELD THAT THE BENEFIT OF T HE AMENDMENT INTRODUCED W.E.F.01.04.2015 IS REQUIRED TO BE GIVEN TO THE ASSESSEE. IN OUR VIEW, THE FINDING GIVEN BY THE COORDINATE BE NCH WAS IN DIFFERENT SET OF FACTS AND IS NOT APPLICABLE TO PRE SENT CASE , FURYHER SECTION 40(A)(IA) OF THE ACT, WHICH IS A SUBSTANTIV E PROVISION INTRODUCED W.E.F.01.04.2015 IN THE ACT THEREFORE IT CANNOT HAVE RETROSPECTIVE APPLICATION. IN OUR VIEW THE CORRECT POSITION OF LAW IS THAT THE PROVISION WHICH IS SUBSTANTIVE IN NATURE C ANNOT BE GIVEN A RETROSPECTIVE EFFECT AS IT IS NOT INTENDED TO BE CU RATIVE OR CLARIFICATORY IN NATURE. IN VIEW THEREOF THE DECIS ION OF RAJENDRA YADAV (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE CASE, THEREFORE WE DO NOT FIND ANY MERIT IN THE RELIANCE OF THE ASS ESSEE ON THIS DECISION OF THE TRIBUNAL. ACCORDINGLY THE APPEAL O F THE ASSESSEE IS DISMISSED. ITA NO.694/BANG/2018 : 09. SINCE THE FACTS IN THIS APPEAL ARE IDENTICAL TO THE FACTS OF THE ASSESSE IN ITA NO.688/BANG/2018, WHICH HAS BEEN ADJ UDICATED BY ITA.688, 694/BANG/2018 PAGE - 7 US IN THE PRECEDING PARAGRAPHS, FOLLOWING THE SAME , THE APPEAL OF THE ASSESSEE IS DISMISSED. 10. THE ASSESSEES IN THEIR APPEALS HAVE DENIED ITS OBLIGATION TO CHARGE OF INTEREST U/S.234B AND 234C OF THE ACT. S INCE THE CHARGE OF INTEREST U/S.234B AND 234C IS ONLY CONSEQUENTIAL , THIS GROUND IS DISMISSED. 11. IN THE RESULT, APPEAL OF BOTH THE ASSESSEES ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF JUNE, 2018. SD/- SD/- (INTURI RAMA RAO) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER BENGALURU DATED : 29.06.2018 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 SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.