Tirumalarao P Mokashi, Bijapur V. Assistant Commissioner of income tax, Belgaum

ITA 724/BANG/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1105 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 05-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJASEKHAR REDDY L
• Keywords: Retrospective amendment; Set aside
• Section: 143(3); 40(a)(ia); 194C; 195; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: BENGALURU BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER I.T.A NO.724/BANG/2016 (ASSESSMENT YEAR: 2005-06) SHRI TIRUMALARAO P. MOKASHI, PWD CONTRACTOR, BEHIND PATIL NURSING HOME, S.R. COLONY, BIJAPUR 586 103. [PAN: AJIPM 4949B] VS. THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1 BELGAUM. ( /APPELLANT ) ( /RESPONDENT ) / ASSESSEE BY : SHRI NARENDRA SHARMA, ADVOCATE / RESPONDENT BY : SHRI RAJASEKHAR REDDY. L, CIT / DATE OF HEARING : 27.11.2019 /DATE OF PRONOUNCEMENT : 29.11.2019 O R D E R PER D.S. SUNDER SINGH, A.M. : THIS APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VI, BENGALURU (HEREAFTER REFERRED AS CIT(A)) IN ITA NO.76/ACIT/CC 1,BGM/CIT(A)-VI/2 009-10 DATED 21/12/2010 FOR THE ASSESSMENT YEAR 2005-06. 2. THERE WAS A DELAY OF 1872 DAYS IN FILING THE APP EAL. THE LD. AR SUBMITTED THAT IN THE INSTANT CASE, THE ASSESSMENT WAS ORIGINALLY COMPLETED U/S. 143(3) OF THE INCOME TAX ACT, 1961 ( 'THE ACT') ON ITA NO.724/BANG/2016 :- 2 -: 07.12.2006 AND SUBSEQUENTLY THE LD. COMMISSIONER OF INCOME TAX,KARNATAKA (CENTRAL),BANGALORE (CIT IN SHORT) HAS TAKEN UP THE CASE FOR REVISION U/S. 263 AND SET ASIDE THE ASSESSMENT ORDER WITH A DIRECTION TO RECOMPUTE THE INCOME AFTER DISALLOWING THE EXPENDIT URE COVERED U/S. 40(A)(IA) OF THE ACT, FOR NON DEDUCTION OF TAX AT SOURCE. AGAINST THE ORDER OF LD. CIT, THE ASSESSEE WENT ON APPEAL BEFORE ITAT BUT WAS UN- SUCCESSFUL AND HENCE, CARRIED THE MATTER TO THE HON BLE HIGH COURT OF KARNATAKA. IN THE MEANTIME, THE ASSESSING OFFICER (AO) PASSED THE CONSEQUENTIAL ORDER GIVING EFFECT TO THE ORDER OF T HE LD. CIT U/S. 263 OF THE ACT AND ACCORDINGLY PASSED THE ORDER U/S 143(3) R.W .S 263 BY AN ORDER DATED 23/10/2009 AND MADE THE ADDITION OF RS. 2,73 ,06,000/- RELATING TO THE SUB-CONTRACT PAYMENTS U/S. 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TAX AT SOURCE. THE ASSESSEE WENT ON APPEAL BEFORE LD. C IT(A) AND THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE WITH A N OBSERVATION THAT THE ACIT, CENTRAL CIRCLE, BELGAUM PASSED THE ORDER U/S. 143(3) OF THE ACT AS PER THE DIRECTIONS OF THE LD.CIT TO DISALLOW THE AM OUNT OF RS. 2,73,06,000/- U/S. 40(A)(IA) OF THE ACT THEREFORE, HELD THAT THE LD. CIT(A) BEING A PARALLEL AUTHORITY HAS NO JURISDICTION VESTED IN HIM U/S. 24 6A OF THE ACT TO ADJUDICATE THE CONSEQUENTIAL ORDER GIVING EFFECT TO THE ORDER OF LD. CIT AND ACCORDINGLY DISMISSED THE APPEAL OF THE ASSESSEE. AGAINST WHICH THE ASSESSEE FILED APPEAL BEFORE THIS TRIBUNAL WITH DEL AY OF 1872 DAYS. 3. THE LD. AUTHORISED REPRESENTATIVE(AR) SUBMITTED THAT THE LD. COUNSEL FOR THE ASSESSEE ADVISED THAT THE ORDER OF THE LD. CIT CANNOT ITA NO.724/BANG/2016 :- 3 -: AGITATED BEFORE THE ITAT IN THE LIGHT TO THE FACT THAT THERE WAS NO ERROR COMMITTED BY THE AO IN FOLLOWING THE DIRECTIONS OF LD. CIT IN MAKING THE DISALLOWANCE. THEREFORE, WITH A BONAFIDE IMPRESSIO N THAT THE ORDER OF THE LD. CIT WAS FINAL THE ASSESSEE DID NOT PREFER THE A PPEAL BEFORE THE ITAT. LD.AR SUBMITTED THAT THE ASSESSEE GOT RELIEF FROM T HE HONBLE HIGH COURT OF KARNATAKA FOR THE EARLIER APPEALS. THE LD. AR FU RTHER SUBMITTED THAT BEFORE THE HONBLE HIGH COURT OF KARNATAKA THE ASSE SSEE HAD MENTIONED THE ISSUE WITH REGARD TO THE PENDENCY OF THIS APPEA L BEFORE AND THE HONBLE HIGH COURT HAS DIRECTED THE ITAT TO DISPOSE THE PENDING APPEAL IN ACCORDANCE WITH LAW. THE AR PLACED THE COPY OF THE HONBLE HIGH COURT ORDER BEFORE US. THE LD.AR SUBMITTED THAT THE DELAY WAS PURELY DUE TO THE MISGUIDANCE OF THE COUNSEL AND NOT INTENTIONAL. HE NCE, REQUESTED TO CONDONE THE DELAY AND ADMIT THE APPEAL. THE LD. AR ALSO RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RA M NATH SAO ALISA RAM NATH SAHU AND OTHERS VS. GOBARDHAN SAO AND OTHE RS IN (2002) 3 SUPREME COURT CASES 195 IN CIVIL APPEAL NO.1704 OF 2992 DATED 27 TH FEBRUARY 2002 AND SUBMITTED THAT THE HONBLE APEX C OURT WHILE DECIDING THE ISSUE WITH REGARD TO THE SUFFICIENT CAUSE FOR D ELAY HELD AS UNDER: 12. THUS IT BECOMES PLAIN THAT THE EXPRESSION 'SUFFICIE NT CAUSE' WITHIN THE MEANING OF SECTION 5 OF THE ACT OR ORDER 22 RULE 9 OF THE CODE OR ANY OTHER SIMILAR PROVISION SHOULD RECEIVE A LIBERA L CONSTRUCTION SO AS TO ADVANCE SUBSTANTIAL JUSTICE WHEN NO NEGLIGENCE OR I NACTION OR WANT OF BONA FIDE IS IMPUTABLE TO A PARTY. IN A PARTICULAR CASE WHETHER EXPLANATION FURNISHED WOULD CONSTITUTE 'SUFFICIENT CAUSE' OR NO T WILL BE DEPENDANT UPON FACTS OF EACH CASE. THERE CANNOT BE A STRAITJA CKET FORMULA FOR ACCEPTING OR REJECTING EXPLANATION FURNISHED FOR TH E DELAY CAUSED IN TAKING STEPS. BUT ONE THING IS CLEAR THAT THE COURT S SHOULD NOT PROCEED WITH THE TENDENCY OF FINDING FAULT WITH THE CAUSE S HOWN AND REJECT THE PETITION BY A SLIPSHOD ORDER IN OVER JUBILATION OF DISPOSAL DRIVE. ACCEPTANCE OF EXPLANATION FURNISHED SHOULD BE THE R ULE AND REFUSAL AN ITA NO.724/BANG/2016 :- 4 -: EXCEPTION MORE SO WHEN NO NEGLIGENCE OR INACTION OR WANT OF BONA FIDE CAN BE IMPUTED TO THE DEFAULTING PARTY. ON THE OTHE R HAND, WHILE CONSIDERING THE MATTER THE COURTS SHOULD NOT LOSE S IGHT OF THE FACT THAT BY NOT TAKING STEPS WITHIN THE TIME PRESCRIBED A VALUA BLE RIGHT HAS ACCRUED TO THE OTHER PARTY WHICH SHOULD NOT BE LIGHTLY DEFEATE D BY CONDONING DELAY IN A ROUTINE LIKE MANNER. HOWEVER, BY TAKING A PEDANTI C AND HYPER TECHNICAL VIEW OF THE MATTER THE EXPLANATION FURNISHED SHOULD NOT BE REJECTED WHEN STAKES ARE HIGH AND/OR ARGUABLE POINTS OF FACTS AND LAW ARE INVOLVED IN THE CASE, CAUSING ENORMOUS LOSS AND IRREPARABLE INJ URY TO THE PARTY AGAINST WHOM THE LIS TERMINATES EITHER BY DEFAULT O R INACTION AND DEFEATING VALUABLE RIGHT OF SUCH A PARTY TO HAVE TH E DECISION ON MERIT. WHILE CONSIDERING THE MATTER, COURTS HAVE TO STRIKE A BALANCE BETWEEN RESULTANT EFFECT OF THE ORDER IT IS GOING TO PASS U PON THE PARTIES EITHER WAY. 4. THE LD. AR ARGUED THAT THE ISSUE IS HIGH DEMAND CASE AND THE STAKES INVOLVED ARE HIGH AND IF THE DELAY IS NOT CO NDONED, THE SAME WOULD CAUSE FINANCIAL INJURY TO THE ASSESSEE THEREFORE, R EQUESTED TO CONDONE THE DELAY AND ADMIT THE APPEAL. ON THE OTHER HAND, THE LD. DR VEHEMENTLY OPPOSED FOR CONDONING THE DELAY. 5. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE M ATERIAL PLACED ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE IT IS A FIT CASE FOR CONDONING THE DELA Y, SINCE, THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT THE DISALLOWANC E U/S. 40(A)(IA) OF THE ACT NOT WAS EXAMINED BY THE AO WITH REGARD TO IT;S RETROSPECTIVE NATURE. THEREFORE, IN THE INTEREST OF JUSTICE,WE CONDONE TH E DELAY AND ADMIT THE APPEAL. 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL PLACED ON RECORD. IN THE INSTANCE CASE, THE LD. AR SUBMITTED THAT THE ISSUE INVOLVED IN THIS CASE IS THE DISALLOWANCE U/S. 40(A)(IA) OF THE ACT. THE ASSESSEE MADE THE PAYMENT OF RS. 2,73,06,000/- TOWARDS SUB-C ONTRACT PAYMENTS ITA NO.724/BANG/2016 :- 5 -: WITHOUT DEDUCTION OF TAX AT SOURCE AS REQUIRED U/S. 194C OF THE ACT, WHICH ATTRACTS THE DISALLOWANCE U/S. 40(A)(IA) OF THE ACT . THE ASSESSEE SUBMITTED BEFORE THE AO THAT RECIPIENTS HAVE ADMITT ED THE INCOME IN THEIR HANDS AND PAID THE TAXES THEREON, THUS CONTENDED T HAT AS PER SECOND PROVISO TO S. 40(A)(IA) OF THE ACT INSERTED BY FINA NCE ACT, 2012, NO ADDITION IS WARRANTED. ACCORDING TO THE LD. AR, THE AMENDM ENT MADE TO SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT IS HELD TO BE DECLARATORY, CURATIVE AND HAS RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005 BY VARIOUS HONBLE HIGH COURTS INCLUDING THE HONBLE JURISDICTIONAL HIGH CO URT IN THE ASSESSEES OWN CASE. THE ISSUE IN THE IMPUGNED APPEAL IS ALSO IDENTICAL. THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES APP EAL NO.200001/2016 DATED 23/09/2019 DIRECTED THE ITAT TO PASS THE APPR OPRIATE ORDERS IN PENDING APPEAL. IN THE INSTANT CASE, THE AO DID NO T ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE AMENDMENT WAS RETROSPECTIV E. THE HONBLE HIGH COURT IN ITS ORDER STATED TO BE HELD THAT AMENDMENT HAS RETROSPECTIVE EFFECT. FOR THE SAKE OF CLARITY AND CONVENIENCE, W E EXTRACT PARAL NO.3 & 4 OF THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE ORDER CITED, SUPRA, DATED 23.08.2019, WHICH READS AS UNDER: 3. APPEAL NO.724/BNG/2016 FILED BY THE ASSESSEE IS PENDING BEFORE THE ITAT AGAINST THE ORDER GIVING EFFECT TO, THE OR DER PASSED UNDER SECTION 263 OF THE ACT BY THE COMMISSIONER OF INCOME TAX. 4. IN VIEW OF THE SECOND PROVISO TO S. 40(A)(IA) OF THE ACT IS HELD TO BE DECLARATORY AND CURATIVE AND HAS RETROSPECTIVE E FFECT FROM 1 ST APRIL, 2005 BY VARIOUS HONBLE HIGH COURT INCLUDING THE J URISDICTIONAL HIGH COURT IN ITA NO.100056/2014 DISPOSED OF TODAY, THE ORDER GIVING EFFECT TO, THE ORDER OF CIT UNDER SECTION 263 OF THE ACT REQUIRES TO BE CONSIDERED IN THE PENDING APPEAL BEFORE THE ITAT BEING UNINFLUENCED B Y ANY OF THE OBSERVATIONS MADE IN THE SAID ORDER I.E., ORDER PAS SED UNDER SECTION 263(1) AS WELL AS THE ORDER IN ITA NO.503(BH)/2009 DATED 30.09.2009 BY ITA NO.724/BANG/2016 :- 6 -: ITAT. HENCE, THE HONBLE IAT SHALL DISPOSE OF THE PENDING APPEAL NO.724/BNG/2016 IN ACCORDANCE WITH LAW RELATING TO THE ASSESSMENT YEAR 2005-06 AS AFORESAID. 7. SINCE, THE ISSUE INVOLVED IN THIS APPEAL IS THE ADDITION MADE U/S. 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TAX AT SO URCE, IN THE LIGHT OF THE JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT WE C ONSIDER IT APPROPRIATE TO REMIT HE MATTER BACK TO THE FILE OF AO TO EXAMINE W HETHER THE ASSESSEE HAS DEDUCTED THE TAX AT SOURCE AND REMITTED TO THE GOVERNMENT ACCOUNT OR WHETHER THE RECIPIENT HAVE ADMITTED THE INCOME AND PAID THE TAXES AS PROVIDED IN THE AMENDMENT MADE TO FINANCE ACT AND D ECIDE THE ISSUE AFRESH ON MERITS. THE LD. AR IS DIRECTED TO PLACE T HE COPY OF RELEVANT ORDERS OF HONBLE HIGH COURT BEFORE THE AO FOR CONS IDERATION. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE FOR STATISTICAL PURPOSE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER, 2019. SD/- SD/- (N.V. VASUDEVAN) (D.S. SUNDER SINGH) VICE PRESIDENT ACCOUN TANT MEMBER BENGALURU, DATED: 29-11-2019 EDN ITA NO.724/BANG/2016 :- 7 -: COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT (A) 4. PR. CIT 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL BANGALORE