VISHNUKANTA LAXMINIWAS MODANI, MUMBAI V. ACIT 32 (3), MUMBAI

ITA 7666/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6841 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 12-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Bonafide belief; Non-deduction of tax; TDS
• Section: 40(a)(ia)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI , BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER . 7666 //20 19 (. . 2011-12 ) ITA NO.7666/MUM/2019 (A.Y.2011-12) VISHNUKANTA LAXMINIWAS MODANI 1701, GREEN RIDGE TOWER 1, CHICKOOWADI, NEW LINK ROAD, BORIVALI WEST, MUMBAI-400092. PAN: AFEPM7784G ...... ' / APPELLANT VS. ACIT 32(3), KAUTILYA BHAVAN, G BLOCK, BANDRA KURLA COMPLEX, BANDRA, MUMBAI-400051. ..... (*/ RESPONDENT ' +/ APPELLANT BY : SH. ANUJ KISHNADWALA (* +/ RESPONDENT BY : SH. SANJAY J. SETHI , / DATE OF HEARING : 26/07/2021 , / DATE OF PRONOUNCEMENT : 27/07/2021 / ORDER PER VIKAS AWASTHY, J.M: THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF COMMISSIONER OF INCOME TAX (APPEALS)-44, MUMBAI [HEREINAFTER REFERR ED TO AS THE CIT(A)] DATED 24.10.2019 FOR THE ASSESSMENT YEAR (AY) 2011- 12. 2. SHRI ANUJ KISHNADWALA APPEARING ON BEHALF OF ASS ESSEE SUBMITTED THAT THE SOLITARY ISSUE RAISED IN APPEAL IS AGAINST CONF IRMING OF DISALLOWANCE OF 2 . 7666 //20 219 (. .2011-12 ) ITA NO.7666/MUM/2019 (A.Y.2011-12) RS. 2,50,000/- UNDER SECTION 40(A)(IA) OF THE INCOM E TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] BY THE CIT(A). THE LD. AU THORIZED REPRESENTATIVE (AR) OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD MAD E PAYMENT OF RS. 2,50,000/- TO M/S THE WEST COAST PAPER MILLS LTD. F OR MANUFACTURING OF DANDY. THE SAID PAYMENT WAS MADE WITHOUT DEDUCTIN G TAX AT SOURCE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE EXPLAINED THAT THE PAYMENT OF RS. 2,50,000/- WAS MADE FOR PURCHASE OF DANDY. IT IS A BIG METAL SLAB WITH WATER-MARK LOGO EMBOSSED ON IT WHICH IS P LACED IN THE PAPER MACHINERY TO GET WATER-MARK IMPRINT ON THE PAPER. T HE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT WATER-MARK DANDY IS A PART OF MACHINERY AND HENCE, PAYMENT MADE FOR PROCURING THE SAME IS ON CAPITAL A CCOUNT. THEREFORE, NO TDS WAS REQUIRED TO BE DEDUCTED ON SUCH PAYMENT. THE LD. AR OF ASSESSEE RAISED AN ALTERNATE PLEA TH AT SINCE THE RECIPIENT OF THE AMOUNT HAS OFFERED THE AMOUNT TO TAX IN ITS RET URN OF INCOME, THEREFORE, IN THE LIGHT OF SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT, NO DISALLOWANCE FOR NON-DEDUCTION OF TAX AT SOURCE IS WARRANTED. THE LD . AR SUBMITTED THAT M/S THE WEST COAST PAPER MILLS LTD. HAS FILED A CONFIRM ATION STATING THAT THE AMOUNT HAS BEEN OFFERED TO TAX. THE LD. AR POINTED THAT THOUGH SECOND PROVISO TO SECTION 40(A)(IA) WAS INSERTED BY THE FINANCE AC T, 2012 W.E.F. 01.04.2013, THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S ANSAL LAND MARK TOWNSHIP (P) LTD. REPORTED AS 377 ITR 635(DEL.) AND THE HON BLE BOMBAY HIGH COURT IN THE CASE OF PCIT VS. PERFECT CIRCLE INDIA PVT. LTD. IN INCOME TAX APPEAL NO. 707 OF 2016 DECIDED ON 07.01.2019 HAS HELD THAT THE SEC OND PROVISO IS DECLARATORY AND CURATIVE IN NATURE AND WOULD OPERATE RETROSPEC TIVELY W.E.F. 01.04.2005 I.E. THE DATE FROM WHICH SUB-CLAUSE (IA) OF SECTION 40(A ) WAS INSERTED BY THE 3 . 7666 //20 219 (. .2011-12 ) ITA NO.7666/MUM/2019 (A.Y.2011-12) FINANCE ACT, 2004. THE LD. AR CONTENDED THAT THE MA TTER CAN BE RESTORED TO THE AO FOR VERIFICATION. 3. ON THE OTHER HAND, THE SH. SANJAY J. SETHI REPRE SENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE ON THE PAYMENT OF RS. 2,50,000/- MADE TO M/S THE WEST COAST PAPER MILLS LTD. NO DOCU MENT WAS PLACED ON RECORD BY THE ASSESSEE TO SUBSTANTIATE THAT THE REC IPIENT HAS OFFERED THE AMOUNT SO RECEIVED TO TAX. THEREFORE, THE AO RIGHTL Y DISALLOWED THE ENTIRE PAYMENT UNDER SECTION 40(A)(IA) OF THE ACT. SIMILAR WAS THE SITUATION BEFORE THE CIT(A), THEREFORE, THE CIT(A) UPHELD THE FINDINGS O F AO AND CONFIRMED THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. 4. BOTH SIDES HEARD, ORDERS OF THE AUTHORITIES BELO W EXAMINED. THE SHORT ISSUE IN THE PRESENT APPEAL IS WITH REGARD TO DISAL LOWANCE OF RS. 2,50,000/- UNDER SECTION 40(A)(IA) OF THE ACT. ADMITTEDLY, THE ASSESSEE HAD MADE PAYMENT OF AFORESAID AMOUNT WITHOUT DEDUCTING TAX AT SOURCE . NOW, THE ASSESSEE HAS FILED CONFIRMATION FROM M/S THE WEST COAST PAPER MI LLS LTD. (PAYEE) THAT AMOUNT HAS BEEN OFFERED TO TAX. I DEEM IT APPROPRIA TE TO RESTORE THIS ISSUE BACK TO THE FILE OF AO FOR THE LIMITED PURPOSE OF V ERIFICATION OF THE CONFIRMATION FILED BY THE RECIPIENT OF THE AMOUNT. IN CASE, IT I S FOUND THAT THE AMOUNT HAS BEEN OFFERED TO TAX BY PAYEE, NO ADDITION UNDER SEC TION 40(A)(IA) IN THE HANDS OF ASSESSEE IS WARRANTED. 5. IT IS RELEVANT TO MENTION THAT THOUGH SECOND PR OVISO TO SECTION 40(A)(IA) WAS INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01.04. 2013, THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S ANSAL LAND MARK T OWNSHIP (P) LTD. (SUPRA) HAS 4 . 7666 //20 219 (. .2011-12 ) ITA NO.7666/MUM/2019 (A.Y.2011-12) HELD THAT SECOND PROVISO TO SECTION 40(A)(IA) IS DE CLARATORY AND CURATIVE AND WOULD APPLY RETROSPECTIVELY W.E.F. 01.04.2005. SIMI LAR VIEW HAS BEEN TAKEN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F PCIT VS. PERFECT CIRCLE INDIA PVT. LTD. (SUPRA). 6. THUS, IN LIGHT OF THE FACTS OF CASE AND DECISION S CITED ABOVE, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON TUESDAY , THE 27 TH DAY OF JULY, 2021. SD/- (VIKAS AWASTHY) / JUDICIAL MEMBER / MUMBAI, 1/ DATED: 27/07/2021 SK, PS ( 2 ( 2 ( 2 ( 2 COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT , 2. (* / THE RESPONDENT. 3. 3 ( )/ THE CIT(A)- 4. 3 CIT 5. ( , . . . , / DR, ITAT, MUMBAI 6. 7 / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI