A.Senthil Kumar, CHENNAI V. DCIT, Coimbatore

ITA 776/CHNY/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1215 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 30-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K HARI GOVIND
• Assessee Lawyers: ARJUN RAJ CA SHRI S SRIDHAR
• Keywords: Reopening of assessment; Non-deduction of tax; Set aside
• Section: 40(a)(ia)

Judgement Text

, / , IN THE INCOME TAX APPELLATE TRIBUNAL C SMC BENCH, CHENNAI ... , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER ./ ITA NO.776/CHNY/2017 ' #$' / ASSESSMENT YEAR : 2007-08 SHRI A. SENTHIL KUMAR, 107-A, SENGUPTA STREET, RAMNAGAR, COIMBATORE 641 009. PAN : ATRPS 9670 A V. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2, COIMBATORE. (&'/ APPELLANT) (()&'/ RESPONDENT) &' * + / APPELLANT BY : SHRI ARJUNRAJ, CA FOR SHRI S. SRIDHAR, ADVOCATE ()&' * + / RESPONDENT BY : SHRI K. HARI GOVIND, JCIT , # * -. / DATE OF HEARING : 10.07.2019 /0$ * -. / DATE OF PRONOUNCEMENT : 04.09.2019 / O R D E R THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -1, COIMBA TORE, DATED 22.08.2016 AND PERTAINS TO ASSESSMENT YEAR 2007-08. 2. THERE WAS A DELAY OF 160 DAYS IN FILING THIS APP EAL BY THE ASSESSEE. THE ASSESSEE HAS FILED A PETITION FOR CO NDONATION OF DELAY. WE HAVE HEARD THE LD. REPRESENTATIVE FOR TH E ASSESSEE AND 2 I.T.A. NO.776/CHNY/2017 THE LD. D.R. WE FIND THAT THERE WAS SUFFICIENT CAU SE FOR NOT FILING THE APPEAL BEFORE THE STIPULATED TIME. THEREFORE, WE C ONDONE THE DELAY AND ADMIT THE APPEAL. 3. SHRI ARJUNRAJ, THE LD. REPRESENTATIVE FOR THE AS SESSEE, SUBMITTED THAT THERE ARE TWO ISSUES ARISE FOR CONSI DERATION IN THIS APPEAL. THE FIRST ISSUE IS VALIDITY OF REOPENING O F ASSESSMENT AND OTHER ISSUE IS WITH REGARD TO ADDITION OF 15,20,042/- UNDER SECTION 40(A)(IA) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'TH E ACT'). 4. WITH REGARD TO REOPENING OF ASSESSMENT, SHRI ARJ UNRAJ, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT ORIGINALLY THE ASSESSMENT WAS COMPLETED UNDER SECTION 153C OF THE ACT. IN THE ABSENCE OF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH, THERE CANNOT BE ANY ASSESSMENT UNDER SECTION 153C OF THE ACT. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER WITHOUT ANY MATERIAL FOUND DURING THE COURSE OF SEARCH OPER ATION, REOPENED THE ASSESSMENT ON THE BASIS OF THE PROFIT & LOSS AC COUNT WHICH IS AVAILABLE ON RECORD, THEREFORE, THE REOPENING OF AS SESSMENT IS NOT VALID. 5. COMING TO THE MERIT OF THE APPEAL, THE LD. REPRE SENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE RECIPIENT HAS ALREA DY PAID TAXES. 3 I.T.A. NO.776/CHNY/2017 ADMITTEDLY, THE ASSESSEE HAS NOT DEDUCTED ANY TAX, THEREFORE, IN VIEW OF THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT, WHICH IS RETROSPECTIVE IN OPERATION, ACCORDING TO THE LD. RE PRESENTATIVE, THERE CANNOT BE ANY DISALLOWANCE WHEN THE RECIPIENT HAS I NCLUDED THE RECEIPT IN THEIR TOTAL INCOME AND PAID TAXES. THE LD. REPRESENTATIVE PLACED HIS RELIANCE ON THE JUDGMENT OF DELHI HIGH C OURT IN CIT V. ANSAL LAND MARK TOWNSHIP (P.) LTD. (2015) 377 ITR 6 35. 6. ON THE CONTRARY, SHRI K. HARI GOVIND, THE LD. DE PARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE SECOND PROVISO T O SECTION 40(A)(IA) OF THE ACT IS PROSPECTIVE IN OPERATION, T HEREFORE, IT CANNOT BE APPLICABLE DURING THE YEAR UNDER CONSIDERATION. PLACING RELIANCE ON THE JUDGMENT OF KERALA HIGH COURT IN THOMAS GEOR GE MUTHOOT V. CIT (2015) 63 TAXMANN.COM 99, THE LD. D.R. SUBMITTE D THAT SECTION 40(A)(IA) IS AUTOMATICALLY ATTRACTED ON FAILURE OF THE ASSESSEE TO DEDUCT TAX AND THE SECOND PROVISO TO SECTION 40(A)( IA) OF THE ACT IS OPERATIVE ONLY FROM 01.04.2013 AND NOT APPLICABLE F OR EARLIER ASSESSMENT YEARS. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) HAS RIGHTLY REJECTED THE CONTENTION OF THE ASSESSEE. 7. COMING TO THE ISSUE OF OPENING, THE LD. D.R. SUB MITTED THAT THE CIT(APPEALS) EXAMINED THE ISSUE ELABORATELY AND FOUND THAT TAX 4 I.T.A. NO.776/CHNY/2017 WAS NOT DEDUCTED ON PAYMENT OF INTEREST TO TWO COMP ANIES, THEREFORE, THE ASSESSMENT WAS RIGHTLY REOPENED. 8. I HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHE R SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMS THAT INITIALLY THE ORDER OF ASSESSMENT WAS P ASSED UNDER SECTION 153C OF THE ACT AFTER THE SEARCH. HOWEVER, A COPY OF THE ASSESSMENT ORDER IS NOT AVAILABLE ON RECORD. TO FI ND OUT WHETHER THERE WAS ANY SEARCH MATERIAL ON RECORD, IT IS NECE SSARY FOR THE ASSESSEE TO FILE A COPY OF ASSESSMENT ORDER. FROM THE IMPUGNED ORDER OF THE ASSESSING OFFICER DATED 24.02.2015, IT APPEARS THAT THERE WAS SEARCH IN THE PREMISES OF THE ASSESSEES FATHER. IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 153C OF THE ACT, THE ASSESSEE FILED RETURN OF INCOME. THERE WAS REFEREN CE ABOUT AGRICULTURAL INCOME ALSO. THE ASSESSING OFFICER FO UND THAT NO TAX WAS DEDUCTED IN RESPECT OF THE PAYMENT OF INTEREST MADE TO M/S SENTHIL ENTERPRISES AND M/S AMBAL COMPLEX. THEREFO RE, THE INTEREST PAYMENT WAS DISALLOWED UNDER SECTION 40(A) (IA) OF THE ACT. SINCE THE COPY OF THE ASSESSMENT ORDER SAID TO BE P ASSED UNDER SECTION 153C OF THE ACT IS NOT AVAILABLE ON RECORD, THIS TRIBUNAL IS UNABLE TO FIND OUT WHETHER THERE WAS ANY SEARCH MAT ERIAL AVAILABLE ON RECORD WITH REGARD TO INTEREST PAYMENT AS THE AS SESSING OFFICER 5 I.T.A. NO.776/CHNY/2017 REFERS ONLY PROFIT & LOSS ACCOUNT AS THE BASE FOR T HE ORDER OF THE ASSESSMENT AFTER REOPENING. THEREFORE, TO DECIDE W HETHER THE REOPENING OF ASSESSMENT IS VALID AFTER THE ORDER WA S PASSED UNDER SECTION 153C OF THE ACT, THIS TRIBUNAL NEEDS TO GO THROUGH THE ASSESSMENT ORDER PASSED UNDER SECTION 153C OF THE A CT. SINCE COPY OF THE SAID ORDER IS NOT AVAILABLE ON RECORD, THE MATTER NEEDS TO BE RE-EXAMINED. ACCORDINGLY, ORDERS OF BOTH THE AU THORITIES BELOW ARE SET ASIDE THE ISSUE IS REMITTED BACK TO THE FIL E OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE TH E SAME AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WI TH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 9. NOW COMING TO NON-DEDUCTION OF TAX AND DISALLOWA NCE WAS MADE UNDER SECTION 40(A)(IA) OF THE ACT. IN VIEW O F THE CLAIM OF THE ASSESSEE THAT THE RECIPIENT HAS ALREADY PAID TAXES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. WITH REGARD TO SECOND PR OVISO TO SECTION 40(A)(IA) OF THE ACT, THERE IS A CONFLICT IN JUDICI AL OPINION BETWEEN KERALA HIGH COURT AND DELHI HIGH COURT. THE DELHI HIGH COURT SAYS THAT SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT IS RETROSPECTIVE IN OPERATION. HOWEVER, THE KERALA HIGH COURT SAYS THA T THE SECOND PROVISO IS ONLY PROSPECTIVE IN OPERATION, THEREFORE , NOT APPLICABLE TO 6 I.T.A. NO.776/CHNY/2017 THE EARLIER ASSESSMENT YEARS. SINCE TWO DIFFERENT HIGH COURTS HAVE TAKEN TWO DIFFERENT VIEWS, IN THE ABSENCE OF ANY JU DGMENT FROM JURISDICTIONAL HIGH COURT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE JUDGMENT WHICH FAVOURS THE ASSESSEE HAS TO BE FOLLOWED IN VIEW OF THE JUDGMENT OF APEX COURT IN CIT V. VEGETA BLE PRODUCTS LTD. (88 ITR 192). THEREFORE, BY FOLLOWING THE JUD GMENT OF THE DELHI HIGH COURT IN ANSAL LAND MARK TOWNSHIP (P.) LTD. (S UPRA), THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE SECO ND PROVISO SECTION 40(A)(IA) OF THE ACT IS RETROSPECTIVE IN OP ERATION, THEREFORE, APPLICABLE FOR EARLIER YEARS ALSO. 10. EVEN THOUGH THE ASSESSEE CLAIMS THAT THE RECIPI ENT HAS INCLUDED THE AMOUNT IN THEIR TOTAL INCOME AND PAID TAXES, NO MATERIAL IS AVAILABLE ON RECORD. THEREFORE, THE MA TTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE DISALLO WANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT IS ALSO REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AND BRING ON RECORD WHETHER THE RECIPIENT HA S PAID THE TAXES OR NOT AND THEREAFTER DECIDE THE ISSUE AFRESH IN AC CORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE A SSESSEE. 7 I.T.A. NO.776/CHNY/2017 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 4 TH SEPTEMBER, 2019 AT CHENNAI. SD/- ( ... ) (N.R.S. GANESAN) /JUDICIAL MEMBER /CHENNAI, 2 /DATED, THE 4 TH SEPTEMBER, 2019 KRI. * (-34 54$- /COPY TO: 1. &' /APPELLANT 2. ()&' /RESPONDENT 3. , 6- () /CIT(A)-1, COIMBATORE 4. PRINCIPAL CIT-1, COIMBATORE 5. 4#7 (- /DR 6. 8' 9 /GF.