M/s. S & S Wire Products, Nashik V. Income-tax Officer,

ITA 779/PUN/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2916 (ITAT-PUNE)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 12-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 26-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDYA SAGAR R PATIL
• Keywords: Opportunity of being heard; Non-deduction of tax
• Section: 143(3); 201(1)

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !, # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.779/PN/2015 ASSESSMENT YEAR : 2010-11 M/S S. & S. WIRE PRODUCTS, F-96, M.I.D.C., SATPUR, NASHIK 422 007. PAN : AAJFS1697N . APPELLANT VS. THE INCOME TAX OFFICER, WARD 2(1), NASHIK. . RESPONDENT / APPELLANT BY : NONE / RESPONDENT BY : SHRI VIDYA SAGAR R. PATIL / DATE OF HEARING : 12.01.2016 / DATE OF PRONOUNCEMENT: 15.01.2016 % / ORDER PER PRADIP KUMAR KEDIA, AM : THE PRESENT APPEAL PREFERRED BY THE ASSESSEE IS AGA INST THE ORDER OF CIT(A)-2, NASHIK DATED 06.01.2015 RELATING TO ASSES SMENT YEAR 2010-11 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL :- THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE TO EACH OTHER ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, 1. THE LEARNED INCOME TAX OFFICER, WARD 2(1), NASHI K HAS ERRED IN MAKING ADDITION/ DISALLOWANCE OF RS.2,00,377/- AND THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS)-2, NASHIK ERRED IN CONFIRMING THE SAME. 2. THE LEARNED INCOME TAX OFFICER, WARD 2(1), NASHI K HAS ERRED IN DISALLOWING AN AMOUNT OF RS.2,00,377/- UNDER SECTION 40(A)(IA) OF THE ACT, BEING NON DEDUCTION OF TDS ON INTEREST PAID ON BORROWING TO I NDIA BULLS FINANCE LIMITED, A NBFC (NON BANKING FINANCE COMPANY), AND THE LEARNED 2 ITA NO.779/PN/2015 COMMISSIONER OF INCOME TAX (APPEALS)-2, NASHIK ERRE D IN CONFIRMING THE SAME. 3. THERE IS AN ERROR IN IGNORING THAT THE ASSESSEE FIRM CANNOT BE TREATED AS ASSESSEE IN DEFAULT FOR NON DEDUCTION OF TAX SINCE THE RECIPIENT HAD DISCHARGED THE TAX ON ITS INCOME. 4. THERE IS AN ERROR IN IGNORING THAT THE AMENDMENT MADE BY THE FINANCE ACT, 2012 FOR NOT TREATING THE ASSESSEE TO BE AN ASSESSE E IN DEFAULT WHICH IS CURATIVE IN NATURE AND SHOULD HAVE RETROSPECTIVE EF FECT AND WHERE THE RECIPIENT OF PAYMENT I.E. THE NBFC HAD DISCHARGED T AX LIABILITY ON ITS INCOME AND THEREFORE THE ASSESSEE FIRM CANNOT BE SUBJECTED TO DISALLOWANCE UNDER SECTION 40(A)(IA). 5. THE COMMISSIONER OF INCOME TAX (APPEALS)-2, NASH IK ERRED IN CONFIRMING THE DISALLOWANCE UNDER SECTION 40(A)(IA) UNDER PRETEXT THAT THE CERTIFICATE CUM CONFIRMATION FOR TAX PAID AND ACCOUNTING OF INTERES T ON BORROWING FROM THE NBFC WAS IN THE NAME OF OTHER CONCERN AND NOT IN NA ME OF ASSESSEE FIRM. 6. THE ASSESSMENT ORDER DATED 06.01.2015 IS BAD IN LAW AND NEEDS TO BE KEPT ASIDE. 7. THE APPEALED CRAVES TO LEAVE, ADD/AMEND OR ALTER ANY OF THE ABOVE GROUND OF APPEAL. 3. BEFORE US, NONE APPEARED FOR THE ASSESSEE. NO A DJOURNMENT APPLICATION WAS MOVED EITHER. IT IS SEEN FROM THE RECORDS THAT THE NOTICES FOR HEARING HAVE BEEN SERVED ON THE ASSESSEE. THUS, IT CAN BE INFER RED THAT THE ASSESSEE IS RECALCITRANT IN COMPLIANCE WITH THE APPOINTED DATE OF HEARING. HENCE, WE PROCEED TO DECIDE THE PRESENT APPEAL AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE IN TERMS OF RULE 24 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963. 4. IN THIS APPEAL, THE SOLITARY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OF RS.2,00,377/- UNDER SECTION 40(A)(I A) OF THE ACT MADE ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE (TDS) ON INTEREST PAID ON BORROWINGS FROM INDIA BULLS FINANCE LTD., A NON-BAN KING FINANCE COMPANY (NBFC). 5. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN TH E BUSINESS OF MANUFACTURING OF G.I. AND S. S. WIRE MESHES. DURIN G THE ASSESSMENT YEAR UNDER CONSIDERATION, ASSESSEE FILED ITS RETURN OF I NCOME ON 25.09.2010 DECLARING TOTAL INCOME OF RS.7,05,168/-. THE RETUR N WAS SELECTED UNDER SCRUTINY. THE ASSESSING OFFICER FINALIZED THE ASSE SSMENT ORDER UNDER SECTION 3 ITA NO.779/PN/2015 143(3) OF THE ACT ON 04.03.2013 AND INTER-ALIA MADE DISALLOWANCE OF RS.3,07,951/- UNDER SECTION 40(A)(IA) OF THE ACT ON ACCOUNT OF INTEREST PAID TO NON-BANKING FINANCIAL COMPANIES/INSTITUTIONS OWING TO NON-DEDUCTION OF TAX AT SOURCE AS PER SECTION 194A OF THE ACT ON EXPENDITUR E INCURRED TOWARDS INTEREST. 6. AGGRIEVED BY THE ACTION OF THE ASSESSING OFFICER , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) GRANTED PA RTIAL RELIEF OF RS.1,07,574/- IN RESPECT OF INTEREST AND FINANCE CH ARGES CREDITED IN THE NAME OF ONE OF THE PARTIES NAMELY M/S CHOLAMANDALAM DBS FIN ANCE LTD., AFTER TAKING COGNIZANCE OF CERTIFICATE UNDER SECTION 197(1) OF T HE ACT ENABLING THE ASSESSEE TO MAKE PAYMENT WITHOUT DEDUCTION OF INCOME-TAX. H OWEVER, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN RE SPECT OF INTEREST OF RS.2,00,377/- RELATABLE TO ANOTHER PARTY NAMELY M/S INDIABULLS FINANCIAL SERVICES LTD. BY FOLLOWING THE CBDT CIRCULAR NO.10 DATED 16.12.2013. 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN FURTHER APPEAL BEFORE US. 8. THE LIMITED ISSUE THAT ARISES FOR OUR CONSIDERAT ION IS WHETHER THE ASSESSING OFFICER IS JUSTIFIED IN RESORTING TO SECT ION 40(A)(IA) OF THE ACT IN RESPECT OF EXPENDITURE TOWARDS INTEREST CHARGES ATT RIBUTABLE TO M/S INDIABULLS FINANCIAL SERVICES LTD.. WE NOTICE THAT THE ASSESS EE HAS SET UP A CONTENTION THAT AS PER AMENDMENT MADE BY FINANCE ACT, 2012, W. E.F. 01.04.2013 THE ASSESSEE OUGHT NOT TO BE TREATED IN DEFAULT WHEN TH E PAYEE HAS DISCHARGED THE TAX LIABILITY ON ITS CORRESPONDING INCOME AS PER GR OUND NO.4 OF THE GROUNDS OF APPEAL. 9. WE FIND THAT THE CO-ORDINATE BENCH OF THE TRIBUN AL ON THE IDENTICAL POINT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESS EE IN THE CASE OF THE BEED DISTRICT CENTRAL CO-OP. BANK LTD. VS. ACIT IN ITA N OS.1108 & 1109/PN/2011, ORDER DATED 31.12.2015. THE RELEVANT EXTRACT OF THE OPERATIVE PARA ON THE POINT IS REPRODUCED HEREUNDER :- 4 ITA NO.779/PN/2015 51. NOW, COMING TO THE SECOND ASPECT OF THE ISSUE I.E. NEW LEGAL PLEA RAISED BY THE ASSESSEE IN VIEW OF SECOND PROVISO TO SECTION 4 0(A)(IA) OF THE ACT, WHICH WAS INSERTED BY THE FINANCE ACT, 2012. THE TRIBUNAL IN ACIT VS. BHAVOOK CHANDRAPRAKASH TRIPATHI (2015) 43 CCH 292 (PUNE-TRI B) WHILE ADJUDICATING SIMILAR ISSUE HAD OBSERVED AS UNDER:- 4. FOLLOWING THE AFORESAID PRECEDENT, WE HEREBY RE VERSE THE DECISION OF THE CIT(A). HOWEVER, AT THE TIME OF HEARING, THE LD. RE PRESENTATIVE FOR THE RESPONDENT-ASSESSEE MADE A NEW LEGAL ARGUMENT THAT SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT WAS INSERTED BY FINANC E ACT, 2012 W.E.F. 01.04.2013, WHEREBY IT IS PROVIDED THAT THE DISALLO WANCE U/S 40(A)(IA) OF THE ACT WOULD NOT BE MADE IF THE ASSESSEE IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SECTION 201(1) O F THE ACT. THE STAND OF THE ASSESSEE IS THAT THE SAID PROVISO SHOULD BE UNDERST OOD AS RETROSPECTIVE IN NATURE AS IT HAS BEEN INTRODUCED TO ELIMINATE UNINT ENDED CONSEQUENCES WHICH MAY CAUSE UNDUE HARDSHIPS TO THE TAX PAYERS. IT WAS POINTED OUT THAT IN SIMILAR CIRCUMSTANCES, THE PUNE BENCH OF THE TRIBUN AL IN THE CASE OF ITO VS. M/S GAURIMAL MAHAJAN & SONS VIDE ITA NO.1852/PN/201 2 DATED 06.01.2014 FOLLOWING THE DECISION OF THE COCHIN BENCH OF THE T RIBUNAL IN THE CASE OF ANTONY D. MUNDACKAL VS. ACIT VIDE ITA NO.38/COCH/20 13 DATED 29.11 .2013 HAS RESTORED THE MATTER BACK TO THE FILE OF THE ASS ESSING OFFICER. IN THE PRECEDENT DATED 06.01.2014 (SUPRA), THE TRIBUNAL NO TED THAT SUCH A PLEA WAS RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL AND T HE CORRECTNESS OR OTHERWISE OF THE CONTENTIONS RAISED WAS NOT EXAMINED BY THE L OWER AUTHORITIES. THEREFORE, THE TRIBUNAL RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINATION AFRESH, FOLLOWING THE DECIS ION OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF ANTONY D. MUNDACKAL (SU PRA) IN A SIMILAR CIRCUM STANCE. THE LD. REPRESENTATIVE SUBMITTED THAT THE M ATTER BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER IN THE LIGHT OF T HE ORDER OF THE TRIBUNAL DATED 06,01.2014 (SUPRA). THE AFORESAID PLEA OF THE RESPO NDENT-ASSESSEE HAS NOT BEEN SERIOUSLY OPPOSED BY THE LD. DEPARTMENTAL REPR ESENTATIVE APPEARING FOR THE REVENUE. 5. FOLLOWING THE AFORESAID PRECEDENT, WE THEREFORE DEEM IT FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSIN G OFFICER WHO SHALL CONSIDER THE PLEA OF THE ASSESSEE BASED ON THE SECOND PROVIS O TO SECTION 40(A)(IA) OF THE ACT INSERTED BY THE FINANCE ACT W.E.F. 01.04.20 13 IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL CONTAINED IN ITS ORDER D ATED 06.01.2014 (SUPRA). NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD BEFORE PASSING AN ORDER AFRESH ON THIS ASPECT AS PER LAW. 10. THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUAR ELY COVERED BY THE ORDER OF TRIBUNAL (SUPRA). FOLLOWING THE PARITY OF REASONIN G, WE DEEM IT FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER, WHO SHALL CONSIDER THE PLEA OF THE ASSESSEE BASED ON THE PROVISIONS OF THE ACT INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01.04.2013 AND IN LINE WIT H EARLIER ORDER OF THE TRIBUNAL DATED 31.12.2015 (SUPRA). THE ASSESSING O FFICER IS DIRECTED TO ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW AFTER A FFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 5 ITA NO.779/PN/2015 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 15 TH DAY OF JANUARY, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE ; DATED : 15 TH JANUARY, 2016. % & '() *)' / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-2, NASHIK; 4) THE CIT-2, NASHIK; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. %+ / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE