M/s Marutinandan Construction, RAJKOT-GUJARAT V. The Income Tax Officer, Wd-1(3), RAJKOT-GUJARAT

ITA 737/RJT/2014

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9732 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 15-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment; TDS; Set aside
• Section: 143(3); 40(a)(ia); 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [ CONDUCTED THROUGH E-COURT AT AHMEDABAD ] BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER I.T.A. NO.737/RJT/2014 (ASSESSMENT YEAR : 2010-11) M/S.MARUTINANDAN CONSTRUCTION 208-LAND MARK BUILDING 2 ND FLOOR, ASTRON CHOWK RAJKOT VS. THE ITO WARD-1(3) RAJKOT [PAN NO. AAHFMN 8678 B] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : WRITTEN SUBMISSION (SHRI D.R.ADHIA AR) RESPONDENT BY : SHRI SANJEEV JAIN, SR.DR DATE OF HEARING 22/11/2019 DATE OF PRONOUNCEMENT 06/ 01/2020 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEA LS)I, RAJKOT [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)-I/RJT/0034/13-14 DATED 08/10/2014 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S. 143(3) OF THE INCO ME TAX ACT, 1961(HEREINAFTER REFERRED TO AS 'THE ACT') DATED 19/03/2013 RELEVAN T TO ASSESSMENT YEAR (AY) 2010-11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- ITA NO. 737/RJT/2014 MARUTINANDAN CONSTRUCTION VS. ITO ASST.YEAR 2010-11 - 2 - 1.1 THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING ADDITION OF RS.39,42,552/- U/S.40(A)(IA). THE ADDITION NEEDS DELETION. 1.2. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN C ONFIRMING ADDITION OF RS.32,24,967/- U/S.40(A)(IA). THE ADDITION NEEDS DELETION. 1.3. THE LD.CIT(A) HAS ERRED IN LAW AND FACTS IN C ONFIRMING ADDITION OF RS.6,18,115/- U/S.40(A)(IA). THE ADDITION NEEDS DELETION. 1.4. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS I N CONFIRMING ADDITION OF RS.24,800/- U/S.40(A)(IA). THE ADDITION NEEDS DELETION. 1.5. THE LD.CIT(A) HAS ERRED IN LAW AND FACTS IN C ONFIRMING ADDITION OF RS.74,640/- U/S.40(A)(IA). THE ADDITION NEEDS DELETION. 2. TAKING INTO CONSIDERATION THE LEGAL, STATUTORY, FACTUAL AND ADMINISTRATIVE ASPECTS, NO ADDITION OF AN AMOUNT OF RS.39,42,552/- (RS.32,24,967/-, RS.6,18,115/-, RS.24,800/- AND RS.74,640/-) OUGHT TO HAVE BEEN MADE. THE ADDITIONS NEED DELETI ON. 2. THE EFFECTIVE ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOU NT OF NON-DEDUCTION OF TDS UNDER SECTION 194C READ WITH SECTION 40(A)(IA) OF T HE ACT. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND ENGAGED IN THE ACTIVITY OF CIVIL CONSTRUCTION. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS INCURRED CERTAIN EXPENSES UNDER THE HEAD SUBCONTRAC TOR, LABOUR EXPENSES AND TRANSPORT EXPENSES. THE ASSESSEE IN RESPECT OF CERT AIN EXPENSES HAS NOT DEDUCTED THE TDS AND IN RESPECT OF CERTAIN EXPENSES, IT HAS DEDUCTED THE TDS LOWER THAN THE RATE PRESCRIBED UNDER THE ACT. AS SUCH THERE WAS TH E SHORT DEDUCTION OF TDS ON THE PAYMENT MADE TO CERTAIN PARTIES. THE DETAILS OF THE PARTIES, AMOUNT/NATURE OF EXPENSES, AND THE AMOUNT OF TDS DEDUCTED ARE AVAILA BLE IN THE ORDER OF THE AO. THUS THE AO DISALLOWED SUCH EXPENSES AMOUNTING TO 39,42,522/- ON ACCOUNT OF NON-DEDUCTION OF TDS UNDER SECTION 194C READ WITH S ECTION 40(A)(IA) OF THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO. 737/RJT/2014 MARUTINANDAN CONSTRUCTION VS. ITO ASST.YEAR 2010-11 - 3 - AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARN ED CIT (A) WHO CONFIRMED THE ORDER OF THE AO. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT-A, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED AR BEFORE US FILED THE WRITTEN SU BMISSIONS WHICH ARE AVAILABLE ON RECORD. THE ASSESSEE IN THE WRITTEN SUBMISSION SUBM ITTED THAT THERE CANNOT BE ANY DISALLOWANCE OF THE IMPUGNED EXPENSES ON ACCOUNT OF NON-DEDUCTION OF TDS IN VIEW OF THE AMENDED PROVISO TO SECTION 40(A)(IA) OF THE ACT IN A SITUATION WHERE THE RECIPIENT HAS DISCLOSED THE AMOUNT RECEIVED FROM TH E ASSESSEE IN HIS BOOKS AND OFFERED THE SAME TO TAX. 5. ON THE OTHER HAND THE LEARNED DR VEHEMENTLY SU PPORTED THE ORDER OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE LEARNED DR AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ASSESSEE IN THE CASE ON HAND HAS CLAIMED AN EXP ENSE OF RS. 39,42,522/- UNDER VARIOUS HEADS BUT WITHOUT DEDUCTING TDS U/S 194C R. W.S. 40(A)(IA) OF THE ACT. THEREFORE, THE DISALLOWANCE WAS MADE BY THE AO ON A CCOUNT OF NON-DEDUCTION OF TDS WHICH WAS CONFIRMED BY THE LD. CIT-A. 6.1. HOWEVER, FROM THE PRECEDING DISCUSSION, WE F IND FORCE IN THE ARGUMENT ADVANCED IN WRITTEN SUBMISSION BY THE LEARNED AR TH AT IF THE RECIPIENT OF THE ITA NO. 737/RJT/2014 MARUTINANDAN CONSTRUCTION VS. ITO ASST.YEAR 2010-11 - 4 - AMOUNT HAS PAID THE TAXES ON THE AMOUNT RECEIVED FR OM THE ASSESSEE, THEN THERE WILL BE NO DISALLOWANCE. INDEED THE SAID PROVISION THOUGH INSERTED BY THE FINANCE ACT 2012 W.E.F. 1-4-2013 BUT THE SAME HAS BEEN HELD TO BE RETROSPECTIVE IN OPERATION BY RECENT JUDGMENT OF THE HON'BLE DELHI H IGH COURT IN THE CASE OF CIT V. ANSAL LAND MARK TOWNSHIP (P) LTD. (2015) 61 TAXMANN.COM 45 (DEL) WHEREIN THE QUESTION RAISED BEFORE THE COURT AND THE DECISION R ENDERED THEREON IS REPRODUCED HEREIN BELOW FOR THE SAKE OF CLARITY:- QUESTION : WHETHER THE SECOND PROVISO TO SECTION 40(A)(IA) ( INSERTED BY THE FINANCE ACT, 2012), WHICH STATES THAT TDS SHALL BE DEEMED TO BE DEDUCTE D AND PAID BY A DEDUCTOR IF RESIDENT RECIPIENT HAS DISCLOSED THE AMOUNT IN HIS RETURN OF INCOME AN D PAID TAX THEREON, IS RETROSPECTIVE IN NATURE OR NOT? HELD : SECTION 40(A)(IA) WAS INTRODUCED BY THE FINANCE ( NO.2) ACT, 2004 TO ENSURE THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION IN T HE HANDS OF AN ASSESSEE IN A SITUATION WHERE INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UN TAXED DUE TO TAX WITHHOLDING LAPSES BY THE ASSESSEE. HENCE , SECTION 40(A)(IA) IS NOT A PENALTY PROVISION FOR TAX WITHHOLDING LAPSE BUT IT IS A PROVISION INTRODUCED TO COMPENSATE ANY LOSS TO THE REVENUE IN CASES WHERE DEDUCTOR HASNT DEDUCTED TDS AN AMOUNT PAID TO DEDUCTEE AND, IN TURN, DEDUCTEE A LSO HASNT OFFERED TO TAX INCOME EMBEDDED IN SUCH AMOUNT THE PENALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEP ARATELY PROVIDED UNDER SECTION 271C AND, THEREFORE, SECTION 40(A)(I) ISNT ATTRACTED TO THE SAME. HENCE, AN ASSESSEE COULD NOT BE PENALIZED UNDER SECTION 40(A)(IA) WHEN THERE WAS NO LOSS TO R EVENUE. THE AGRA TRIBUNAL IN THE CASE OF RAJIV KUMAR AGARWA L-VS-ACIT [2014] 45 TAXMANN.COM 555 (AGRA TRIB) HAD HELD THAT THE SECOND PROVISO TO S ECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND HAS RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005, BEING THE DATE FROM WHICH SUB-CLAUSE (IA) OF SECTION 40(8) WAS INSERTED BY THE FINANCE NO.(2) ACT, 2004, EVEN THOUGH THE FINANCE ACT, 2012 HAD NOT SPECIFICALLY STATED THAT PROVISO IS RETROSP ECTIVE IN NATURE. THE HIGH COURT AFFIRMED THE RATIO LAID DOWN BY THE AGRA TRIBUNAL AND HELD THAT SAID PROVISOS IS DECLARATORY AND CURATIVE IN NATURE AND HA RETROSPEC TIVE EFFECT FROM 1 ST APRIL, 2005. 6.2. IN VIEW OF ABOVE, WE ARE INCLINED TO SET ASIDE THE ORDER OF THE LD. CIT-A TO THE AO FOR FRESH ADJUDICATION IN THE LIGHT OF THE A BOVE DISCUSSION. THE AO WILL VERIFY THE FACTS WHETHER THE RECIPIENT OF THE AMOUN T FROM THE ASSESSEE HAVE OFFERED ITA NO. 737/RJT/2014 MARUTINANDAN CONSTRUCTION VS. ITO ASST.YEAR 2010-11 - 5 - THE AMOUNT TO TAX IN THEIR RESPECTIVE RETURNS/DISCL OSED IN THE BOOKS ACCOUNTS. IT IS NEEDLESS TO MENTION THAT THE ASSESSEE SHALL EXTEND FULL CO-OPERATION DURING THE PROCEEDINGS. HENCE, THE GROUND OF APPEAL OF THE ASS ESSEE IS ALLOWED FOR THE STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 06 / 01 /2020 SD/- SD/- ( RAJPAL YADAV ) ( WASEEM AHMED ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 06 / 01 /2020 .., .../ T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ' #! / CONCERNED CIT 4. ' #! ( ) / THE CIT(A)-I, RAJKOT 5. '() ! , , /DR,ITAT, RAJKOT 6. )45 67 / GUARD FILE. / BY ORDER, '! ! //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !', / ITAT, RAJKOT 1. DATE OF DICTATION 23.12.2019 (WORD PROCESSED BY HONBLE AM IN HIS COMPUTER BY DR AGON) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 24.12.2019/06.01.2020 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.6.1.2020 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 6.1.2020 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER