SNEH GUPTA, Jaipur V. ITO, Jaipur

ITA 698/JPR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1947 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 06-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P P MEENA JCIT DHK
• Keywords: Gross profit estimation; Retrospective amendment; Cost of acquisition
• Section: 133A; 133(6); 2

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH HKKXPUN] YS[KK LNL; ,OA JH DQY HKKJR] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 698/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10. SMT. SNEH GUPTA, E-46, ROAD NO. 1B, VKI AREA, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 4(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ACIPG 4373 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (C.A) JKTLO DH VKSJ LS@ REVENUE BY : SHRI P.P. MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 23.10.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 25/10/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT (A)-2, JAIPUR DATED 25.04.2016 PERTAINING TO ASSESSMENT YE AR 2009-10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 2,06,3 19/- BY APPLYING G.P. RATE OF 7.25% ON THE ALLEGED SHORT STOCK OF RS . 25,43,815/-. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED ON FACTS AND IN LAW IN CONFIRMING THE TRADING ADDITION OF RS . 11,74,743/- BY APPLYING G.P. RATE OF 7.25% ON THE DECLARED TURNOVE R AS AGAINST G.P. RATE OF 3.63% DECLARED BY THE ASSESSEE. 3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS. 3, 48,609/- OUT OF INTEREST EXPENSES U/S 40(A)(IA). 2 ITA NO. 698/JP/2016 SMT. SNEH GUPTA, JAIPUR. 3.1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED ON FACTS AND IN LAW IN CONFIRMING THE ABOVE DISALLOWAN CE EVEN WHEN THE ASSESSEE HAS PAID THE ENTIRE AMOUNT AND NO AMOUNT REMAINS PAYABLE AT THE END OF THE YEAR. 3.2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED ON FACTS AND IN LAW IN CONFIRMING THE ABOVE DISALLOWAN CE EVEN WHEN THE RECIPIENT HAS INCLUDED THE INCOME IN ITS R ETURN AND HAS PAID THE TAX THEREON. 3.3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED ON FACTS AND IN LAW IN CONFIRMING THE ENTIRE DISALLOWA NCE OF INTEREST U/S 40(A)(IA) IGNORING THAT IN VIEW OF AMENDMENT MA DE IN THIS SECTION W.E.F. 01.04.2015 WHICH IS TO REMOVE UNINTE NDED HARDSHIP, ONLY 30% OF SUCH AMOUNT CAN BE DISALLOWED BY GIVING THE EFFECT OF THIS AMENDMENT RETROSPECTIVELY. 4. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY ANY OF THE GROUNDS OF APPEAL. 5. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE CARRIES ON THE BUSINESS IN THE NAME OF M/S. CARPENTER CRAFTS AND M /S. CONTINENTAL INTERIORS. A SURVEY UNDER SECTION 133A OF THE INCOME TAX ACT, 19 61 (HEREINAFTER REFERRED TO AS THE ACT) WAS CONDUCTED ON 12.09.2008 ON THE ASSESSE E. DURING THE COURSE OF SURVEY, STOCK DIFFERENCE HAS BEEN FOUND OF RS. 28,45,786/- IN RESPECT OF M/S. CONTINENTAL INTERIORS. THE AO FOUND THAT THE G.P RATE OF BOTH THESE CONCERNS HAVE FALLEN, THEREFORE, THE AO ASKED THE ASSESSEE TO EXPLAIN THE REASON FOR LOWER G.P. RATE. THE ASSESSEE EXPLAINED THAT THE STOCK TAKEN BY THE SURV EY PARTY WAS ON TAG PRICE AND THE ASSESSEE SOLD THE GOODS AFTER GIVING DISCOUNT O N TAG PRICE THEREFORE THE STOCK WAS VALUED ON HIGHER PRICES. MOREOVER, THE GP IN TH IS YEAR IS 3.63% BUT THE GP TAKEN BY THE SURVEY PARTY IS AT 7.25%. THE EXPL ANATION OF THE ASSESSEE WAS NOT 3 ITA NO. 698/JP/2016 SMT. SNEH GUPTA, JAIPUR. FOUND ACCEPTABLE BY THE AO, THUS HE MADE THE ADDITI ON OF RS. 2,06,319/- ON ACCOUNT OF SHORTAGE OF STOCK. THE AO ALSO MADE ADDI TION OF RS. 11,74,319/- ON ACCOUNT OF LOW GROSS PROFIT, ADDITION OF RS. 3,27,8 31/- ON ACCOUNT OF INTEREST EXPENSES WITHOUT DEDUCTING TDS AND RS. 13,073/- AS INCOME FROM OTHER SOURCES. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT (A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DISMIS SED THE APPEAL OF THE ASSESSEE. NOW THE ASSESSEE IS FURTHER IN APPEAL BEFORE THIS T RIBUNAL. 3. GROUND NO. 1 RELATES TO CONFIRMING THE ADDITION OF RS. 2,06,319/-. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN BRIEF. HE SUBMITTED THAT VALUE OF STOCK OF M/S. CONTINENTAL I NTERIORS WAS VALUED AT RS. 92,68,600/- BY TAKING THE TAG PRICE. THE COST OF SU CH STOCK AT THE TIME OF SURVEY WAS DETERMINED AS UNDER :- STOCK AT TAG PRICE RS. 92,68,600/- LESS: DISCOUNT @ 10% RS. 9,26,860/- RS. 83,41,740/- LESS: G.P.@ 7.25% RS. 6,04,776/- STOCK AT COST PRICE RS. 77,36,964/- AGAINST THE ABOVE, THE BOOK STOCK WAS ARRIVED AT RS . 1,05,82,750/- AND ACCORDINGLY THE SHORT STOCK WAS DETERMINED AT RS. 28,45,786/-. THE LD. COUNSEL FOR THE SUBMITTED THAT IN THE ASSESSMENT PROCEEDINGS, THE A SSESSEE EXPLAINED THAT THE GP RATE FOR THE YEAR IS 3.63% BUT IN CALCULATION OF TH E SHORT STOCK, GP RATE CONSIDERING THAT OF A.Y. 07-08 IS APPLIED WHEREAS IN A.Y. 08-09 IT IS 6.63% AND THE SAME IS 3.63% FOR THE YEAR UNDER CONSIDERATION. ACCORDINGLY , IT WAS REQUESTED THAT THE SHORT STOCK SHOULD BE WORKED OUT BY APPLYING GP RATE OF 3 .63% AND PROFIT ON SUCH SHORT STOCK BE WORKED OUT BY APPLYING THIS RATE ONLY. HOW EVER, THIS WAS NOT ACCEPTED AND 4 ITA NO. 698/JP/2016 SMT. SNEH GUPTA, JAIPUR. ADDITION OF RS. 2,06,319/- WAS MADE. THE LD. COUNS EL SUBMITTED THAT FOR WORKING OUT THE SHORT STOCK, THE GP RATE OF CURRENT YEAR SH OULD BE CONSIDERED. THE GP RATE FOR THE CURRENT YEAR IS 3.63%. ON THIS BASIS, THE W ORKING OF SHORT STOCK AND PROFIT THEREON WOULD WORK OUT AS UNDER :- STOCK AT TAG PRICE RS. 92,68,600/- LESS: DISCOUNT @ 10% RS. 9,26,860/- RS. 83,41,740/- LESS: G.P.@ 3.63% RS. 3,02,805/- STOCK AT COST PRICE RS. 80,38,935/- LESS: BOOK STOCK RS.105,74,686/- SHORT STOCK RS. 25,35,751/- PROFIT ON SHORT STOCK @ 3.63% RS. 92,048/- THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMIT TED THAT THE ADDITION ON ACCOUNT OF PROFIT ON SALE OF SHORT STOCK BE RESTRICTED TO R S. 92,048/-. 3.1. ON THE CONTRARY, THE LD. D/R SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 3.2. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE F IND THAT THE LD. CIT (A) CONFIRMED THE ACTION OF THE AO BY OBSERVING AS UNDER :- 2.3. I HAVE PERUSED THE FACTS OF THE CASE, THE AS SESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE ASSESSEE IS E NGAGED IN MANUFACTURING AND TRADING OF FURNITURE IN THE NAME AND STYLE OF M/S. CARPENTER CRAFTS AND M/S. CONTINENTAL INTERIORS. DU RING THE SURVEY PROCEEDINGS UNDER SECTION 133A OF THE I.T. ACT, 196 1 AT THE PREMISES OF THE ASSESSEE, STOCK OF RS. 92,68,600/- HAD BEEN FOUND WHICH WAS INVENTORISED AT THE TAG PRICE. IN THE ASSESSMENT O RDER, TO ARRIVE AT THE 5 ITA NO. 698/JP/2016 SMT. SNEH GUPTA, JAIPUR. STOCK AT COST PRICE, FIRST A DISCOUNT OF 10% WAS TA KEN AND THEN GROSS PROFIT OF 7.25% HAD BEEN APPLIED BY THE ASSESSING O FFICER. THE ISSUE IN THIS GROUND RELATES TO THIS APPLICATION OF GROSS PR OFIT RATE OF 7.25%. AS PER THE ASSESSMENT ORDER, THE ASSESSEES HUSBAND SH RI SUDHIR GUPTA HAD DURING THE COURSE OF PROCEEDINGS UNDER SECTION 133A OF THE I.T. ACT, 1961, IN REPLY TO Q. NO. 39 & 40, OFFERED A PR OFIT OF RS. 2,06,319/- BY APPLYING A GROSS PROFIT RATE OF 7.25% ON RS. 28, 45,786/-, TREATING THE SAME AS SALES OUTSIDE THE BOOKS OF ACCOUNTS. TH E SUBMISSION OF THE AUTHORIZED REPRESENTATIVE IN THE PRESENT PROCEE DINGS ARE, THAT SINCE DURING THE YEAR, THE GROSS PROFIT RATE IS 3.6 3%, AS PER THE RETURN FILED, THE SAME SHOULD BE APPLIED. THE ASSESSING OF FICERS REASONING FOR APPLYING THE GROSS PROFIT RATE OF 7.25% WAS THAT IT WAS OFFERED BY THE ASSESSEE ITSELF DURING THE PROCEEDINGS UNDER SECTIO N 133A OF THE I.T. ACT, 1961, AFTER GOING THROUGH THE STOCK AND OTHER DETAILS. FURTHER, IT IS SEEN THAT THE GROSS PROFIT % IN THE TWO PRECEDING Y EARS ARE 6.63% & 7.14% RESPECTIVELY. THUS, THE GROSS PROFIT % RETURN ED IN THE CURRENT YEAR IS 3.63%, WHICH IS MUCH LESS THAN RETURNED IN THE PREVIOUS YEAR. NO REASON HAS BEEN FORWARDED FOR THE SAME. IN VIEW OF THE ABOVE DISCUSSION, THE GROSS PROFIT % APPLIED BY THE ASSES SING OFFICER TO ARRIVE AT THE STOCK AT COST PRICE, IS UPHELD. THE GROUND O F APPEAL IS DISMISSED. AFTER GOING THROUGH THE FINDINGS OF THE LD. CIT (A) , WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT (A), THE SAME IS HEREBY AFFIRMED. THE GROUND OF THE ASSESSEE IS REJECTED. 4. GROUND NO. 2 RELATES TO CONFIRMING THE TRADING A DDITION OF RS. 11,74,743/-. THE LD. COUNSEL FOR THE SUBMITTED THAT THE ASSESSEE IS MAINTAINING DAY TO DAY BOOKS OF ACCOUNTS WHICH ARE SUBJECT TO AUDIT. THESE BOOKS ARE DULY SUPPORTED BY BILLS AND VOUCHERS WHEREIN THE LOWER AUTHORITIES HAVE NOT FOU ND ANY DISCREPANCIES. THE ONLY 6 ITA NO. 698/JP/2016 SMT. SNEH GUPTA, JAIPUR. DISCREPANCY NOTED IS THE DECLINE IN GP RATE AS COMP ARED TO THE LAST YEAR AND NON MAINTENANCE OF STOCK REGISTER. IT IS TO BE NOTED TH AT THE DECLINE IN GP RATE IS DUE TO THE INCREASE IN P URCHASE COST WITHOUT CORRESPONDIN G INCREASE IN THE SELLING PRICE. THIS IS ALSO EVIDENT FROM THE FACT THAT TILL THE DA TE OF SURVEY I.E. UPTO 13.09.2008, THE SALES OF THE ASSESSEE WAS RS. 2,29,111/- WHEREAS TH E OPENING STOCK AS ON 01.04.2008 WAS RS. 91,92,380/-. IT IS FOR THIS REAS ON THAT ASSESSEE HAS TO REDUCE THE PROFIT MARGIN TO BOOST SALE. THEREAFTER, THE SALES FOR THE PERIOD 14.09.2008 TO 31.03.2009 COULD BE ACHIEVED AT RS. 3,22,62,390/-. THIS WOULD NOT HAVE BEEN POSSIBLE WITHOUT REDUCING THE PROFIT MARGIN. HENCE, THE GP RATE DECLARED SHOULD BE ACCEPTED AND THE ADDITION MADE BY THE AO BE DELETED PARTICULARLY CONSIDERING THE FACT THAT ON THE SHORT STOCK ALREADY AN ADDITION HA S BEEN MADE BY THE AO. OTHERWISE ALSO, ONLY BECAUSE THERE IS A DECLINE IN THE GP RATE OR STOCK REGISTER IS NOT MAINTAINED, THE SAME SHOULD NOT NECESSARILY LEAD TO THE TRADING ADDITION. THE LD. COUNSEL PLACED RELIANCE ON THE FOLLOWING DECISIONS :- PR. CIT VS. HUES INDIA LTD., 2015 TIOL 2275 (RAJ. ) MALANI RAJJIVAN JAGANNATH VS. ACIT, 316 ITR 120 ( RAJ.) ASHOKE REFRACTGORIES P. LTD. VS. CIT 279 ITR 457 (CAL.) CIT VS. SMT. POONAM RANI, 41 DTR 194 (DEL.) CIT VS. OM OVERSEAS 315 ITR 185 ( P&H) CIT VS. GOTAN LISME KHANIZ UDYOG, 256 ITR 243 (RA J.) 4.1. ON THE CONTRARY, THE LD. D/R SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 4.2. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WHILE CONFIRMING THE TRADING ADDITION, THE LD. CIT (A) IN PARA 3.3 OF HIS ORDER OBSERVED A S UNDER :- 7 ITA NO. 698/JP/2016 SMT. SNEH GUPTA, JAIPUR. 3.3. I HAVE PERUSED THE FACTS OF THE CASE, THE AS SESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE ASSESSING OFF ICER DURING THE ASSESSMENT PROCEEDINGS, FOUND THAT, THE ASSESSEE DO ES NOT MAINTAIN STOCK REGISTER OR OTHER QUANTITATIVE DETAILS OF GOO DS AND IN THE ABSENCE OF SAME THE BOOKS OF ACCOUNTS WERE REJECTED UNDER S ECTION 145(3) OF THE I.T. ACT, 1961 AND AN ADDITION OF RS. 11,74,743 /- WAS MADE BY APPLYING A GROSS PROFIT RATE OF 7.25%. IN THE PRESE NT PROCEEDINGS THE APPELLANT SUBMITTED THAT PROPER BOOKS OF ACCOUNTS H AVE BEEN MAINTAINED AND NO DISCREPANCIES WERE FOUND IN THESE . HOWEVER, IT WAS ADMITTED THAT THERE IS DECLINE IN GROSS PROFIT RATE AND THERE IS NON MAINTENANCE OF STOCK REGISTER. THE ONLY REASON GIVE N FOR THE DECLINE IN GROSS PROFIT IS INCREASE IN PURCHASE COST WITHOUT C ORRESPONDING INCREASE IN SELLING PRICE. THIS PLEA OF THE APPELLANT CANNOT BE ACCEPTED. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS UPHEL D. THE GROUND OF APPEAL IS DISMISSED. IN VIEW OF THE ABOVE FINDING OF LD. CIT (A), WE FIN D NO INFIRMITY IN THE ORDER OF LD. CIT (A). MOREOVER, THE LD. COUNSEL FOR THE ASSESS EE HAS NOT BROUGHT ANY CONTRARY MATERIAL IN SUPPORTS OF HIS CASE. THE GROUND OF TH E ASSESSEE IS REJECTED. 5. GROUND NO. 3 TO 3.3 RELATES TO CONFIRMING THE AD DITION ON ACCOUNT OF DISALLOWANCE OUT OF INTEREST EXPENSES U/S 40(A)(IA) OF THE ACT. 5.1. THE LD. COUNSEL FOR THE ASSESSEE REITERATED TH E SUBMISSIONS AS MADE IN THE WRITTEN BRIEF. THE WRITTEN SUBMISSIONS OF THE ASSE SSEE ARE AS UNDER :- 1. IT MAY BE POINTED OUT THAT SECOND PROVISO TO SECTIO N 40(A)(IA) INSERTED BY FA, 2012 W.E.F. 01.04.2013 HAS PROVIDED THAT WHE RE AN ASSESSEE FAILS TO DEDUCT TAX ON THE SUM PAID TO THE RESIDENT BUT SUCH RESIDENT PAYEE HAS FURNISHED THE RETURN, TAKEN INTO ACCOUNT SUCH SUM F OR COMPUTING INCOME AND 8 ITA NO. 698/JP/2016 SMT. SNEH GUPTA, JAIPUR. HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM THEN IT WILL BE DEEMED THAT ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN BY THE RESIDENT PAYEE. ALL THE FINANCE CO MPANIES TO WHICH ASSESSEE HAVE PAID INTERESTS ARE ASSESSED TO TAX. THEREFORE, THE PRESUMPTION IS THAT THESE COMPANIES HAVE INCLUDED THE INTEREST PAID BY THE AS SESSEE TO THEM IN THEIR INCOME AND PAID TAX THEREON. THE DELHI HIGH COURT IN CASE OF CIT VS. TRANS BHARAT AVIATION PVT. LTD. 320 ITR 671 HAS HELD THAT SINCE DEDUCTEE IS A GOVERNMENT UNDERTAKING, THE TAXES MAY BE PRESUMED TO HAVE BEEN PAID LASTLY BY THE DUE DATE OF FILING OF THE RETURN OF I NCOME AND, THEREFORE, THE LIABILITY OF THE ASSESSEE TO PAY INTEREST ON THE AM OUNT WHICH WAS TO BE DEDUCTED AS TDS ENDS WITH THE DUE DATE OF FILING OF THE RETURN BY THE DEDUCTEE. FURTHER, HONBLE ITAT, JAIPUR BENCH IN CASE OF ACIT VS. GIRD HARI LAL BARGOTI IN ITA NO. 757/JP/12 ORDER DT. 10.04.2015 HAS HELD THAT THE RECIPIENTS ARE NBFC, THEREFORE, NOT POSSIBLE TO NOT BE ASSESSED TO TAX. THESE PAYMENTS WERE RELATED FOR AY 2009-10 AND RETURN FOR AY 2009-10 ALREADY MIGHT HAVE BEEN FILED BY THESE NBFC BY INCLUDING TH ESE INTEREST RECEIPTS AS THEIR INCOME. THEREFORE, CONSIDERING THE ABOVE AMEN DMENT WHICH IS INTRODUCED TO REMOVE UNINTENDED HARDSHIP, THE DEPAR TMENT MAY BE DIRECTED TO VERIFY THIS FACT AND WHERE FINANCE COMPANIES HAS PA ID TAX ON SUCH INTEREST, NO DISALLOWANCE U/S 40(A)(IA) BE MADE IN THE HANDS OF THE ASSESSEE. RELIANCE IN THIS CONNECTION IS PLACED IN CASE OF SANJAY KUMAR AGARWAL VS. ITO 48CCH 0034 (KOL.) (TRIB.) DECISION DATED 02.09.2016 (PB 4 1-42) WHEREIN IT WAS HELD THAT ONCE IT WAS HELD THAT ASSESSEE WAS ENTITL ED TO BENEFIT OF 2ND PROVISO TO SEC. 40(A)(IA), CIT(A) OUGHT TO HAVE DIRECTED AO TO VERIFY WHETHER RECIPIENTS INCLUDED RECEIPTS PAID BY ASSESSEE IN TH EIR RESPECTIVE RETURNS OF INCOME AND ALSO PAID TAXES ON SAME. TO EXTENT RECIP IENTS FROM ASSESSEE HAD SO INCLUDED SUM IN THEIR RETURNS OF INCOME AND FILED S AME, NO DISALLOWANCE U/S 40(A)(IA) OUGHT TO HAVE BEEN SUSTAINED BY CIT(A). C IT(A) OUGHT TO HAVE ALSO DIRECTED AO THAT IN CASE RECIPIENT PARTIES WERE NOT COOPERATING IN PROVIDING DETAILS, AO SHOULD CALL FOR INFORMATION U/S 133(6) OR 131, FOR VERIFICATION OF SAME. IN THIS REGARD ASSESSEE FURNISHED ALL DETAILS OF ASSESSMENT PARTICULARS OF RECIPIENTS OF PAYMENT FROM ASSESSEE. AO THEREFORE SHOULD NOT HAVE ANY DIFFICULTY IN MAKING REQUIRED VERIFICATION. TO EXTE NT RECIPIENTS FROM ASSESSEE 9 ITA NO. 698/JP/2016 SMT. SNEH GUPTA, JAIPUR. HAD SO INCLUDED SUM IN THEIR RETURNS OF INCOME AND FILED SAME, NO DISALLOWANCE U/S 40(A)(IA) SHOULD BE MADE BY AO. IN CASE RECIPIENT PARTIES WERE NOT COOPERATING IN PROVIDING DETAILS, AO SHOUL D BE DIRECTED TO CALL FOR INFORMATION U/S 133(6) OR 131, FOR VERIFICATION OF SAME. FURTHER, M/S TAMBI MOTORS HAS INCLUDED THE INTEREST PAID BY THE ASSESS EE IN ITS INCOME AND PAID TAX THEREON (PB 54-56) . IT IS A SETTLED LAW THAT SECOND PROVISO TO SECTIO N 40(A)(IA) INSERTED W.E.F. 01.04.2013 HAS RETROSPECT IVE EFFECT AS HELD BY THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP PVT. LTD. (2015) 377 ITR 635 AS THE AMENDMENT WAS MADE TO REMOVE THE UNDUE HARDSHIP. THE LD. CIT(A) HAS RELIED ON THE HO NBLE KERELA HIGH COURT DECISION IN CASE OF THOMAS GEORGE MUTHOOT VS. CIT 6 3 TAXMAN.COM 99 IN HOLDING THAT THE SECOND PROVISO TO SECTION 40(A)(IA ) OF THE IT ACT, 1961 INTRODUCED W.E.F. 01.04.2013 IS PROSPECTIVE. IN THI S CONNECTION, IT IS TO BE NOTED THAT RECENTLY THE BOMBAY TRIBUNAL IN CASE OF R.K.P. COMPANY VS. ITO 180 TTJ 0237 DECISION DT. 24.06.2016 (PB 38-40) AFTER CONSIDERING THE ABOVE DECISION OF KERELA HIGH COURT VIDE PARA 7 OF ITS ORDER HELD AS UNDER:- AS FOR HONBLE KERALA HIGH COURTS DECISION IN THE CASE OF THOMAS GEORGE MUTHOOT (SUPRA), UNDOUBTEDLY, OUTSIDE THE JU RISDICTION OF HONBLE KERALA HIGH COURT AND OUTSIDE THE JURISDICTION OF H ONBLE DELHI HIGH COURT- WHICH HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESS EE, THERE ARE CONFLICTING DECISIONS ON THE ISSUE OF RESTROSPECTIVITY OF SECON D PROVISO TO SECTION 40(A)(IA). IT IS THUS EVIDENT THAT VIEWS OF THESE T WO HIGH COURTS ARE IN DIRECT CONFLICT WITH EACH OTHER. CLEARLY, THEREFORE, THERE IS NO MEETING GROUND BETWEEN THESE TWO JUDGMENTS. THE DIFFICULTY ARISES AS TO WHICH OF THE HONBLE NON JURISDICTIONAL HIGH COURT IS TO BE FOLLOWED BY US IN THE PRESENT SITUATION. IT WILL BE WHOLLY INAPPROPRIATE FOR US TO CHOOSE VI EWS OF ONE OF THE HIGH COURTS BASED ON OUR PERCEPTIONS ABOUT REASONABLENES S OF THE RESPECTIVE VIEWPOINTS, AS SUCH AN EXERCISE WILL DE FACTO AMOUN T TO SITTING IN JUDGMENT OVER THE VIEWS OF THE HIGH COURTS SOMETHING DIAMETR ICALLY OPPOSED TO THE VERY BASIC PRINCIPLES OF HIERARCHICAL JUDICIAL SYSTEM. W E HAVE TO, WITH OUR HIGHEST RESPECT OF BOTH THE HONBLE HIGH COURTS, ADOPT AN O BJECTIVE CRITERION FOR DECIDING AS TO WHICH OF THE HONBLE HIGH COURT SHOU LD BE FOLLOWED BY US. WE FIND GUIDANCE FROM THE JUDGMENT OF HONBLE SUPREME COURT IN THE MATTER OF CIT VS. VEGETABLE PRODUCTS LTD. [(1972) 88 ITR 192 (SC)]. HONBLE SUPREME COURT HAS LAID DOWN A PRINCIPLE THAT 'IF TWO REASON ABLE CONSTRUCTIONS OF A TAXING PROVISIONS ARE POSSIBLE, THAT CONSTRUCTION W HICH FAVOURS THE ASSESSEE MUST BE ADOPTED'. THIS PRINCIPLE HAS BEEN CONSISTEN TLY FOLLOWED BY THE VARIOUS AUTHORITIES AS ALSO BY THE HONBLE SUPREME COURT IT SELF. IN ANOTHER SUPREME COURT JUDGMENT, PETRON ENGG. CONSTRUCTION (P) LTD. & ANR. VS. CBDT & ORS. (1988) 75 CTR (SC) 20 : (1989) 175 ITR 523 (SC), IT HAS BEEN REITERATED THAT 10 ITA NO. 698/JP/2016 SMT. SNEH GUPTA, JAIPUR. THE ABOVE PRINCIPLE OF LAW IS WELL ESTABLISHED AND THERE IS NO DOUBT ABOUT THAT. HONBLE SUPREME COURT HAD, HOWEVER, SOME OCCASIONS TO DEVIATE FROM THIS GENERAL PRINCIPLE OF INTERPRETATION OF TAXING STATU TE WHICH CAN BE CONSTRUED AS EXCEPTIONS TO THIS GENERAL RULE. IT HAS BEEN HELD T HAT THE RULE OF RESOLVING AMBIGUITIES IN FAVOUR OF TAXPAYER DOES NOT APPLY TO DEDUCTIONS, EXEMPTIONS AND EXCEPTIONS WHICH ARE ALLOWABLE ONLY WHEN PLAINL Y AUTHORISED. THIS EXCEPTION, LAID DOWN IN LITTMAN VS. BARRON 1952(2) AIR 393 AND FOLLOWED BY APEX COURT IN MANGALORE CHEMICALS & FERTILIZERS LTD . VS. DY. COMMR. OF CT (1992) SUPPL. (1) SCC 21 AND NOVOPAN INDIA LTD. VS. CCE & C 1994 (73) ELT 769 (SC), HAS BEEN SUMMED UP IN THE WORDS OF LO RD LOHEN, 'IN CASE OF AMBIGUITY, A TAXING STATUTE SHOULD BE CONSTRUED IN FAVOUR OF A TAX-PAYER DOES NOT APPLY TO A PROVISION GIVING TAX-PAYER RELIEF IN CERTAIN CASES FROM A SECTION CLEARLY IMPOSING LIABILITY'. THIS EXCEPTION, IN THE PRESENT CASE, HAS NO APPLICATION. THE RULE OF RESOLVING AMBIGUITY IN FAV OUR OF THE ASSESSEE DOES NOT ALSO APPLY WHERE THE INTERPRETATION IN FAVOUR OF AS SESSEE WILL HAVE TO TREAT THE PROVISIONS UNCONSTITUTIONAL, AS HELD IN THE MATTER OF STATE OF M.P. VS. DADABHOYS NEW CHIRMIRY PONRI HILL COLLIERY CO. LTD . AIR 1972 (SC) 614. THEREFORE, WHAT FOLLOWS IS THAT IN THE PECULIAR CIR CUMSTANCES OF THE CASE AND LOOKING TO THE NATURE OF THE PROVISIONS WITH WHICH WE ARE PRESENTLY CONCERNED, THE VIEW EXPRESSED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF ANSAL LANDMARK (SUPRA),WHICH IS IN FAVOUR OF ASSESSEE, IS REQUIRED TO BE FOLLOWED BY US. REVENUE DOES NOT, THEREFORE, DERIVE ANY ADVANTA GE FROM HONBLE KERALA HIGH COURTS DECISION IN THE CASE OF THOMAS GEORGE MUTHOOT (SUPRA). 2. IT IS FURTHER POINTED OUT THAT AN AMENDMENT HAS BEE N MADE BY FA, 2014 W.E.F. 01.04.2015 IN SECTION 40(A)(IA) WHEREBY IT IS PROVI DED THAT 30% OF ANY SUM PAYABLE TO A RESIDENT SHALL BE DISALLOWED IF TAX IS NOT DEDUCTED AT SOURCE UNDER CH. XVIIB AS AGAINST THE 100% PRESENTLY MADE. THE PURPO SE OF THIS AMENDMENT WAS EXPLAINED IN THE MEMORANDUM AS UNDER:- THE DISALLOWANCE OF WHOLE OF THE AMOUNT OF EXPENDI TURE RESULTS INTO UNDUE HARDSHIP AND THEREFORE IN ORDER TO REDUCE THE HARDS HIP, IT IS PROPOSED THAT IN CASE OF NON-DEDUCTION OR NON-PAYMENT OF TDS ON PAYMENTS MADE TO RESIDENTS AS SPECIFIED IN SECTION 40(A)(IA) OF THE ACT, THE DISA LLOWANCE SHALL BE RESTRICTED TO 30% OF THE AMOUNT OF EXPENDITURE CLAIMED. THE FINANCE MINISTER WHILE INTRODUCING THE AMENDMEN T IN PARA 207 OF THE BUDGET SPEECH HAS STATED AS UNDER:- 207. CURRENTLY, WHERE AN ASSESSEE FAILS TO DEDUCT AND PA Y TAX ON SPECIFIED PAYMENTS TO RESIDENTS, 100 PERCENT OF SUCH PAYMENTS ARE NOT ALLOWED AS DEDUCTION WHILE COMPUTING HIS INCOME. THIS HAS CAUS ED UNDUE HARDSHIP TO TAXPAYERS, PARTICULARLY WHERE THE RATE OF TAX IS ON LY 1 TO 10%. HENCE , I PROPOSE TO PROVIDE THAT INSTEAD OF 100 PERCENT, ONLY 30% OF SUCH PAYMENTS WILL BE DISALLOWED. 11 ITA NO. 698/JP/2016 SMT. SNEH GUPTA, JAIPUR. FROM THE ABOVE, IT CAN BE NOTED THAT THE AMENDMENT MADE BY FA (NO.2) ACT, 2014 W.E.F. 01.04.2015 IS TO REMOVE UNINTENDED AND UNDUE HARDSHIP AND THEREFORE THIS AMENDMENT SHOULD BE GIVE RETROSPECTIVE EFFECT AS PE R THE VARIOUS DECISIONS STATED ABOVE. IT IS ALSO SUBMITTED THAT THE SUPREME COURT IN CASE OF CIT VS. VATIKA TOWNSHIP PVT. LTD. 109 DTR 33 HAS HELD THAT LEGISLATIONS WHICH MODIFY ACCRUED RIGHTS OR WHICH IMPOSE OBLIGATIONS OR IMPOSE NEW DU TIES OR ATTACH A NEW DISABILITY HAVE TO BE TREATED AS PROSPECTIVE UNLESS THE LEGISL ATIVE INTENT IS CLEARLY TO GIVE THE ENACTMENT A RETROSPECTIVE EFFECT. HOWEVER, IF LEGIS LATION CONFERS A BENEFIT ON SOME PERSONS BUT WITHOUT INFLICTING A CORRESPONDING DETR IMENT ON SOME OTHER PERSON OR ON THE PUBLIC GENERALLY AND WHERE TO CONFER SUCH BENEF IT APPEARS TO HAVE BEEN THE LEGISLATORS OBJECT, THEN THE PRESUMPTION WOULD BE T HAT SUCH LEGISLATION, GIVING IT A PURPOSIVE CONSTRUCTION, WOULDS WARRANT IT TO BE GIV EN A RETROSPECTIVE EFFECT . THEREFORE EVEN IN A CASE IT IS HELD THAT THE DISALLOWANCE U/S 40(A)(IA) IS WARRANTED, SAME SHOULD BE RESTRICTED TO ONLY 30% OF THE AMOUNT OF INTEREST PAID. 5.2. ON THE CONTRARY, THE LD. D/R RELIED ON THE ORD ER OF THE ASSESSING OFFICER. 5.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. AFTER CONSIDERING THE TOTALITY OF FACTS AND THE DECISION OF HONBLE DELHI HIGH COURT RENDER ED IN THE CASE OF CIT VS. ANSAL LANDMARK TOWNSHIP (P) LTD. 377 ITR 635 (DELHI), WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION WITH REGARD TO THE CERTIFICATE AS FURNISHED BY THE ASSESSEE. THE AO AFTER VERIFYING THE SAME FROM THE RESPECTIVE PARTIES I.E. NBFCS WOULD DELETE THE DISALLOWANCE IN CASE THE CER TIFICATE IS FOUND IN ORDER. THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES. 6. GROUND NO. 4 IS GENERAL IN NATURE, NEEDS NO ADJU DICATION. 7. IN RESPECT OF GROUND NO. 5, THE ASSESSEE HAS NOT ADVANCED ANY ARGUMENT, THEREFORE, THE SAME IS DISMISSED. 12 ITA NO. 698/JP/2016 SMT. SNEH GUPTA, JAIPUR. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 25.10.2 017. SD/- SD/- ( HKKXPUN ( DQY HKKJR ) ( BHAGCHAND) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 25/10/2017. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SMT. SNEH GUPTA, JAIPUR. 2. THE RESPONDENT THE ITO WARD 4(2), JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 698/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 13 ITA NO. 698/JP/2016 SMT. SNEH GUPTA, JAIPUR.