M/s Palco Automobiles, Paschim Medinipur V. JCIT Range - 1, Paschim Medinipur

ITA 84/KOL/2013

• Counselvise Citation: 8423514 RSA 2013
• Duration Of Justice: 2 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 15-01-2013
• Court: TRIBUNAL
• Department Lawyers: AMITABH ROY JCIT LD
• Assessee Lawyers: SUNIL SURANA
• Keywords: Rejection of books of accounts; Business income; Opportunity of being heard; Retrospective amendment; Additional evidence; Question of law
• Section: 68; 143(3)

Judgement Text

IT A NOS. 84/& 211KOL/2013-C-AM M/S.PALCO AUTOMOBILES 1 IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, K OLKATA BEFORE : SHRI MAHAVIR SINGH,JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER I.T.A NO. 84/KOL/2013 A.Y 2009-10 M/S PALCO AUTOMOBILES VS. J.C.I.T, RANGE-1, PASCHIM MEDINIPUR PAN: AAFFP7650L ( APPELLANT/ASSESSEE ) ( RESPONDENT/DEPARTMENT ) I.T.A NO. 211/KOL/2013 A.Y 2009-10 A.C.I.T, CIR-1, MEDNIPUR VS. M/S PALCO AUTO MOBILES ( DEPARTMENT ) ( RESPONDENT/ASSESSEE ) FOR THE APPELLANT/ASSESSEE: SHRI SUNIL SURANA, FCA FOR THE RESPONDENT/DEPARTMENT: SHRI AMITABH ROY , JCIT/LD.DR DATE OF HEARING: 05-11-2015 DATE OF PRONOUNCEMENT: 18-11-20 15 ORDER SHRI M.BALAGANESH, AM THESE APPEALS OF BOTH THE ASSESSEE AND THE REVENU E ARISE OUT OF THE ORDER OF THE LEARNED CIT(A)-XXXVI, KOLKATA IN APPEAL NO. 462/CIT (A)-XXXVI/KOL/R-1, MID./11-12 DATED 19/11/2012 AGAINST THE ORDER OF ASSESSMENT FOR THE ASST YEAR 2009- 10 FRAMED BY THE LEARNED AO U/S 143(3) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. BOTH THE APPEALS ARISE OUT OF THE COMMON ORDER OF THE LEARNED CITA AND THEY ARE TAKEN UP TOGETHER FOR ADJUDICATION HEREIN AND D ISPOSED OFF BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE. IT A NOS. 84/& 211KOL/2013-C-AM M/S.PALCO AUTOMOBILES 2 ITA NO. 84 / 2013 ASSESSEE APPEAL 3. DURING THE COURSE OF HEARING BEFORE US, THE LEA RNED AR INFORMED THE BENCH THAT HE IS NOT WILLING TO PRESS GROUND NOS. 1 TO 7. THE SAME IS TAKEN AS STATEMENT FROM THE BAR AND ACCORDINGLY, THE GROUND NUMBERS 1 TO 7 RAISED BY THE ASSESSEE ARE DISMISSED AS NOT PRESSED. 4. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER AN ADDITION COULD BE MADE IN THE SUM OF RS. 2,27,246/- TOWARDS DIFFERENC E IN VALUATION OF CLOSING STOCK IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE AS SESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE TRADING OF MOTOR CYCLES, SERVICING AND REPAIRIN G, MOBILE SERVICES AND AUTHORIZED AGENT OF P C CHANDRA JEWELLERY APEX P LTD . THE ASSESSEE HAS BEEN VALUING THE CLOSING STOCK BY CONSIDERING THE COST PRICE OF THE GOODS ALONE REGULARLY OVER THE YEARS. THE LEARNED AO DURING THE COURSE OF ASSESSMENT PROC EEDINGS HELD THAT DIRECT EXPENSES INCURRED ARE ALSO TO BE INCLUDED IN THE VA LUATION OF CLOSING STOCK AND ACCORDINGLY MADE AN ADDITION OF RS. 2,27,246/-. O N FIRST APPEAL, THE LEARNED CITA HELD THAT ALL DIRECT EXPENSES ARE TO BE INCLUDED FO R DETERMINING THE FINAL COST PRICE FOR THE PURPOSE OF VALUATION OF CLOSING STOCK. THE LEA RNED CITA ALSO HELD THAT THE ASSESSEE HAD AGREED FOR THE SAID DISALLOWANCE IN TH E ASSESSMENT. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GR OUND:- 8. THE CIT(A) IS WRONG TO CONFIRM THE ADDITION OF RS. 2,27,246/- TO RAISE THE VALUE OF THE CLOSING STOCK WITHOUT CORRESPONDING DIRECTION THAT THE OPENING STOCK FOR THE NEXT YEAR WOULD HAVE ARISE WITH THAT ADDITION. HE ALSO FAILED TO HOLD VALUATION OF CLOSING STOCK MADE AT COST OR MARKET P RICE NEED NOT BE DISTURBED. 4.2. THE LEARNED AR ARGUED THAT THE VALUATION OF CLOSING STOCK HAS BEEN MADE AT THE LOWER OF COST OR MARKET PRICE IN ACCORDANCE WITH TH E GENERALLY ACCEPTED BUSINESS IT A NOS. 84/& 211KOL/2013-C-AM M/S.PALCO AUTOMOBILES 3 PRACTICES AND THE SAID METHOD IS REGULARLY EMPLOYED BY THE ASSESSEE OVER THE YEARS. HE ARGUED THAT THERE IS NO CHANGE IN THE METHOD OF VAL UATION OF CLOSING STOCK ADOPTED BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER APPEA L. HE FURTHER ARGUED THAT THE LEARNED AO HAD STATED ERRONEOUSLY IN RESPECT OF ALL THE ADDITIONS THAT THE ASSESSEE HAD AGREED FOR THE DISALLOWANCE. HENCE THE FACT STATE D BY THE LEARNED AO IN THIS REGARD AND RELIANCE PLACED ON THE SAME BY THE LEARNED CITA IS GROSSLY MISPLACED. IN RESPONSE TO THIS, THE LEARNED DR VEHEMENTLY SUPPORT ED THE ORDERS OF THE LOWER AUTHORITIES. 4.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FIND LOT OF FORCE IN THE ARGUMENTS OF THE LEARNED AR THAT THE LEARNED AO HAD STATED IN THE ASSESSMENT ORDER IN RE SPECT OF THE ADDITIONS MADE THAT THE ASSESSEE HAD AGREED FOR THE DISALLOWANCES. HE NCE THE RELIANCE PLACED BY THE LEARNED CITA ON THIS ASPECT WHILE UPHOLDING THE ADD ITIONS IS NOT APPRECIATED. ON MERITS, WE FIND THAT THE ASSESSEE HAS BEEN CONSISTE NTLY VALUING ITS CLOSING STOCK AT THE LOWER OF COST OR MARKET PRICE. BUT WHILE DETERMINI NG THE COST PRICE, THE DIRECT EXPENSES INCURRED BY THE ASSESSEE ARE NOT INCLUDED IN THE VALUATION OF CLOSING STOCK BY THE ASSESSEE CONSISTENTLY. IT IS FURTHER FOUND THA T THE BOOKS OF ACCOUNTS WERE NOT REJECTED BY THE LEARNED AO AS ADMITTEDLY THE STOCK REGISTERS ARE ALSO PART OF THE BOOKS OF ACCOUNTS TO BE RELIED UPON FOR DETERMINING THE P ROFITS OF THE ASSESSEE. WE HOLD THAT THE VALUATION METHOD PRESCRIBED BY THE LEARNED AO IS IN ORDER AS THE VALUATION OF CLOSING STOCK SHOULD BE MADE AT THE LO WER OF COST OR MARKET PRICE. HOWEVER, THE COMPONENTS OF COST WOULD OBVIOUSLY INC LUDE ALL THE DIRECT EXPENSES INCURRED BY THE ASSESSEE FOR BRINGING THE GOODS INT O WORKING CONDITION. WE ARE IN COMPLETE AGREEMENT WITH THE ARGUMENTS OF THE LEARNED AR THAT IF THE CONSISTENT METHOD FOLLOWED BY THE ASSESSEE IS DISTU RBED BY THE LEARNED AO FOR VALUATION OF CLOSING STOCK OF GOODS, THEN THE SAME METHOD SHOULD BE EQUALLY ADOPTED IT A NOS. 84/& 211KOL/2013-C-AM M/S.PALCO AUTOMOBILES 4 FOR VALUATION OF OPENING STOCK IN THE ASSESSMENT YE AR UNDER APPEAL ALSO IN ORDER TO DETERMINE THE TRUE PROFITS FOR THE ASSESSMENT YEAR. RELIANCE IS PLACED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS MAH ALAXMI GLASS WORKS (P) LTD REPORTED IN 318 ITR 116 (BOM ) IN SUPPORT OF THIS PROPOSITION, WHEREIN IT WAS HEL D THAT :- THE SUBSTANTIAL QUESTION OF LAW AS RAISED IN THIS APPEAL IS AS UNDER : 'WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE HON'BLE TRIBUNAL WAS JUSTIFIED IN CONFIRMING THE ORDER OF T HE COMMISSIONER OF INCOME-TAX (APPEALS) WHEREBY HE DIRECTED THE ASSESSING OFFICER TO MAKE ADJUSTMENT OF UNUTILIZED MODVAT CREDIT TO THE OPENING STOCK AND T HUS IGNORING THE RATIO LAID DOWN IN MELMOULD CORPORATION V. CIT [1993] 202 ITR 789 (BOM) WHEREIN IT WAS HELD THAT CHANGING THE VALUE OF OPENING STOCK WILL LEAD TO CHAIN REACTION AND HENCE THE SAME SHOULD NOT BE DONE ?' 2. THIS QUESTION HAS BEEN DEALT WITH AND ANSWERED BY T HE DELHI HIGH COURT IN THE CASE OF CIT V. MAHAVIR ALLUMINIUM LTD. [2008] 297 I TR 77 (DELHI). THIS QUESTION CONCERNS THE METHOD OF VALUATION OF INVENTORY AS CO NTEMPLATED BY SECTION 145A OF THE INCOME-TAX ACT. IN THE CASE BEFORE THE DELHI HI GH COURT, THE ASSESSING OFFICER CONTENDED THAT SECTION 145A DID NOT PERMIT THE ASSE SSEE TO MAKE A CHANGE IN THE VALUATION OF THE OPENING STOCK AS ON APRIL 1, 1998, THOUGH IT PERMITTED A CHANGE IN THE CLOSING STOCK AS ON MARCH 31, 1999. THE QUES TION BEFORE THE DELHI HIGH COURT WAS THAT THE ADJUSTMENT OF EXCISE DUTY COULD BE MADE IN THE OPENING STOCK ALSO. IN THIS CONNECTION, RELYING UPON THE DECISION OF THE PRIVY COUNCIL IN THE CASE OF CIT V. AHMEDABAD NEW COTTON MILLS CO. LTD. AIR 1 930 PC 56, THE DELHI HIGH COURT TOOK A VIEW THAT TO GIVE EFFECT TO SECTION 14 5A, IF THERE IS ANY CHANGE IN THE CLOSING STOCK AT THE END OF THE YEAR THEN THERE MUS T NECESSARILY BE A CORRESPONDING ADJUSTMENT MADE IN THE OPENING STOCK OF THAT YEAR. IT HAS BEEN HELD THAT THIS WOULD NOT AMOUNT TO GIVING DOUBLE BENEFIT TO THE ASSESSEE AND WOULD BE NECESSARY TO COMPUTE THE TRUE AND CORRECT PROFIT FO R THE PURPOSE OF ASSESSMENT. 3. WE MAY REPRODUCE HERE, THE RELEVANT OBSERVATION IN THE JUDGMENT OF THE PRIVY COUNCIL IN THE CASE OF CIT V. AHMEDABAD NEW C OTTON MILLS CO. LTD. REPORTED IN AIR 1930 PC 56 WHICH WAS RELIED UPON BY THE DELHI HIGH COURT AND WHICH IS AS UNDER (PAGE 56) : 'IF THE METHOD OF ALTERING BOTH VALUATION IS NOT AD OPTED IT IS PERFECTLY PLAIN THAT THE PROFIT WHICH IS BROUGHT FORWARD IS NOT THE REAL ONE. IT MAY BE MORE OR IT MAY BE LESS, BUT IT HAS NO RELATION TO THE TRUE PRO FIT IF THE STOCK IS VALUED ON ONE BASIS WHEN IT GOES OUT WITHOUT CONSIDERING THE VALU E OF THE STOCK WHEN IT COMES IN. WHEN, THEREFORE, THERE IS UNDERVALUATION AT ONE END , THE EFFECT IS TO CAUSE BOTH A SMALLER DEBIT IN RESPECT OF THE STOCK INTRODUCED IN TO THE NEXT ACCOUNT AND A LARGER SUM FOR PROFITS REALISED BY THE SALE, CHANGE IN MAR KET VALUE BEING IMMEDIATELY REFLECTED IN THE PRICE OBTAINED FOR THE GOODS THAT ARE SOLD ; IN THESE CIRCUMSTANCES TO CONTEND THAT THERE SHOULD BE UNDERVALUATION AT O NE END AND NOT AT THE OTHER IS TO RAISE AN ARGUMENT WHICH THEIR LORDSHIPS CANNOT A CCEPT.' IT A NOS. 84/& 211KOL/2013-C-AM M/S.PALCO AUTOMOBILES 5 4. WE ARE IN RESPECTFUL AGREEMENT WITH THE REASONING A ND THE FINDING GIVEN BY THE DELHI HIGH COURT. 5. APART FROM THIS, WE FIND FROM THE JUDGMENT OF TH E INCOME-TAX APPELLATE TRIBUNAL THAT WHEN COUNSEL FOR THE ASSESSEE CONTEND ED THAT THE CLOSING STOCK OF THE PREVIOUS YEAR BE TAKEN AS OPENING STOCK OF THE NEXT YEAR AND THAT THE ASSESSING OFFICER BE DIRECTED TO ESTABLISH THE VALU ATION FOR CLOSING STOCK AS OPENING STOCK OF THE NEXT YEAR, THE DEPARTMENTAL RE PRESENTATIVE STATED THAT HE HAS NO OBJECTION FOR THE SAME. THIS CONCESSION HAS BEEN RECORDED IN THE ORDER. . RESPECTFULLY FOLLOWING THE DECISION OF BOMBAY HIGH COURT AS STATED SUPRA, WE HOLD THAT THE METHOD OF VALUATION OF CLOSING STOCK ADOPT ED BY THE LEARNED AO IN THIS ASSESSMENT YEAR SHOULD BE ADOPTED FOR VALUATION OF OPENING STOCK FOR THE ASSESSMENT YEAR UNDER APPEAL. HENCE WE DEEM IT FIT AND APP ROPRIATE TO SET ASIDE THIS ISSUE TO THE FILE OF THE LEARNED AO TO FOLLOW THE AFORESAID DIRE CTION IN RESPECT OF VALUATION OF OPENING AND CLOSING STOCK OF GOODS. ACCORDINGLY, THE GROUND NO. 8 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER AN ADDITION COULD BE MADE IN THE SUM OF RS. 7,82,442/- TOWARDS CASH FOUN D DURING THE COURSE OF SURVEY. 5.1. THE BRIEF FACTS OF THIS ISSUE IS THAT DURING THE COURSE OF SURVEY, CASH OF RS. 5,48,923/- IN AUTOMOBILES DIVISION AND RS. 2,33,519 /- IN TELECOM DIVISION WAS FOUND AND INVENTORISED BY THE SURVEY TEAM. THE LEARNED AO ASKED THE ASSESSEE FIRM TO RECONCILE THE ABOVE CASH FOUND AT THE TIME OF SURVE Y WITH ITS REGULAR BOOKS OF ACCOUNTS AND THE ASSESSEE COULD NOT DO SO DURING ASSESSMENT PROCEEDINGS. ACCORDINGLY, AN ADDITION U/S 68 OF THE ACT WAS MADE TOWARDS UNEXPLA INED CASH CREDIT. ON FIRST APPEAL, THE LEARNED CITA UPHELD THE ADDITION MADE BY THE LE ARNED AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GR OUND:- 9. THE CIT(A) IS WRONG TO CONFIRM THE ADDITION OF RS.7,82,442/- BEING THE CASH FOUND AT THE CLOSE OF THE SURVEY WORK AT THE RESPECTIVE COUNTERS ON THE DATE OF SURVEY DESPITE THE FACT THAT THE CASH WERE THE BUSINESS CASH (SURVEY DID N OT STOP NORMAL IT A NOS. 84/& 211KOL/2013-C-AM M/S.PALCO AUTOMOBILES 6 BUSINESS RATHER ALLOWED TO CARRY ON) AND FOR THAT THE SURVEY OFFICIALS DID NOT LEAVE ANY ADVERSE REMARK OR ANY APPRAISAL REPORT THAT THE CASH WAS NOT FOUND TO BE NOT BUSINESS CASH BUT HAVING COME FROM SOME UNKNOWN SOURCE; 5.2. THE LEARNED AR ARGUED THAT THE SURVEY TEAM F OUND THESE CASH AT THE COUNTER. THERE IS NO FINDING HOLDING THAT THE CASH FOUND DID NOT RELATE TO THE BUSINESS RECEIPTS AND THE BUSINESS WAS NOT STOPPED WHILE THE SURVEY W AS GOING ON. INSTEAD THE BUSINESS WAS ALLOWED TO BE CARRIED ON BY THE SURVEY TEAM AND CASH FOUND AT THE CLOSE OF THE SURVEY OPERATION MUST BE THE OPENING CASH AND CASH COLLECTED FROM CURRENT SALES SUBJECT TO CERTAIN DISBURSEMENTS. THERE IS NO FIND ING WITH PROOF THAT THE CASH OR PART THEREOF FOUND AT THE COUNTER WAS NOT BUSINESS RECEI PTS OF THE ASSESSEE. HE FURTHER ARGUED THE ADDITION WAS MADE U/S 68 OF THE ACT IN R ESPECT OF CASH FOUND AT THE TIME OF SURVEY WHICH IS TOTALLY NOT APPLICABLE AS CORRECT SECTION IF AT ALL COULD BE ONLY SECTION 69A OF THE ACT. HE FURTHER ARGUED THAT THE ENTIRE BOOKS OF ACCOUNTS HAVE BEEN PRODUCED BY THE ASSESSEE BEFORE THE LEARNED AO WHIC H WERE NOT REJECTED BY THE LEARNED AO. ADMITTEDLY, THE CASH FOUND DURING THE SURVEY STANDS EXPLAINED FROM THE CASH BOOK SUBMITTED BEFORE THE LEARNED AO AND HENCE THERE IS NO NEED TO MAKE ANY ADDITION IN THIS REGARD. IN RESPONSE TO THIS, THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 5.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT THE LEARNED AO HAD WRONGLY INVOKED SECTION 68 OF THE ACT IN ORDER TO MAKE THIS ADDITION WHICH IS NOT APPLICABLE FOR CASH FOUND . ON SPECIFIC QUERY FROM THE BENCH WITH REGARD TO THE FA CT THAT MERELY BY MENTIONING A WRONG SECTION IN THE ASSESSMENT ORDER WOULD NOT AUT OMATICALLY LEAD TO A SITUATION THAT THE CASH FOUND DURING SURVEY STANDS EXPLAINED. W E FIND THAT THE LEARNED AO HAD NOT REJECTED THE BOOKS OF ACCOUNTS PRODUCED BY THE ASSE SSEE. THE CASH WAS FOUND AND THE BUSINESS WAS ALLOWED TO BE CONTINUED BY THE SURVEY TEAM. HENCE THERE COULD BE A SITUATION THAT CERTAIN BUSINESS RECEIPTS AND PAYMEN TS COULD NOT HAVE BEEN PROPERLY IT A NOS. 84/& 211KOL/2013-C-AM M/S.PALCO AUTOMOBILES 7 ENTERED ON THE DAY OF SURVEY ITSELF. HOWEVER, THE CASH BOOK HAS BEEN PREPARED AND FINAL BALANCE SHEET IS PREPARED LATER ON AND PRESEN TED BEFORE THE LEARNED AO WHICH ARE NOT REJECTED BY THE LEARNED AO. HENCE IN THESE FAC TS AND CIRCUMSTANCES , WE DEEM IT FIT AND APPROPRIATE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, TO SET ASIDE THIS ISSUE TO THE FILE OF THE LEARNED AO TO DECIDE THIS ISSUE AFRESH IN ACCORDANCE WITH LAW. THE ASSESSEE IS AT LIBERTY TO FILE ADDITIONAL EVIDENCES AND DOCUMENTS TO EXPLAIN THE CASH FOUND DURING THE COURSE OF SURVEY WITH REFERENCE TO ITS CASH BOOK OF VARIOUS DIVISIONS BEFORE THE LEARNED AO. ACCORDINGLY, THE GROUND NO. 9 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THIS APPEAL OF TH E ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 211 / 2013 REVENUE APPEAL 6. THE REVENUE HAS RAISED THE FOLLOWING GROUND BE FORE US :- THE LD. CIT(A) HAS ERRED IN LAW AND CIRCUMSTANCES OF THIS CASE IN HOLDING THE PROVISIONS OF SEC.40A(IA) ARE APPLICABLE ONLY TO AMOUNTS OF EXPENDITURE WHICH ARE PAYABLE AS ON 3 1 ST MARCH OF EVERY YEAR AND IT CANNOT BE INVOKED TO DISALLOW EXP ENDITURE WHICH HAS BEEN ACTUALLY PAID DURING PREVIOUS YEAR W ITHOUT DEDUCTION OF TDS. 6.1. WE FIND THAT THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT HAVE BEEN HELD TO BE APPLICABLE EVEN FOR AMOUNTS PAID BEFORE THE END OF THE PREVIOUS YEAR BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS CRESCENT EXPORT SYNDICATE (2013) 33 TAXMANN.COM 250 (CAL). ACCORDINGLY THE GROUND R AISED BY THE REVENUE STANDS ALLOWED. HOWEVER, THE ALTERNATIVE ARGUMENT OF THE LEARNED AR THAT THE SECOND PROVISO TO SECTION 40(A)(IA) INSERTED WITH EFFECT F ROM 1.4.2013 IN THE STATUTE WHEREIN IF THE PAYEE HAS INCLUDED THE RELEVANT RECEIPTS IN HIS BOOKS AND FILED RETURNS THEREON, THEN THE ASSESSEE SHOULD NOT BE INVITED WITH DISALLOWANC E U/S 40(A)(IA) OF THE ACT CONTAINS LOT OF FORCE. THIS AMENDMENT HAS BEEN HELD TO RETR OSPECTIVE IN NATURE BY THE DECISION IT A NOS. 84/& 211KOL/2013-C-AM M/S.PALCO AUTOMOBILES 8 OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS ANS AL LAND MARK TOWNSHIP (P) LTD REPORTED IN 61 TAXMANN.COM 45 (DEL) WHEREIN IT WAS HELD AS FOLLOWS:- SECTION 40(A)(IA) WAS INTRODUCED BY THE FINANCE (N O.2) ACT, 2004 TO ENSURE THAT AN EXPENDITURE SHOULD NOT BE AL LOWED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATIO N WHERE INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED 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 ALSO 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)(IA) 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 SECTION 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 A CT, 2012 HAD NOT SPECIFICALLY STATED THAT PROVISO IS RETROSPECTI VE IN NATURE. THE HIGH COURT AFFIRMED THE RATIO LAID DOWN BY THE AGRA TRIBUNAL AND HELD THAT SAID PROVISO IS DECLARATORY AND CURATIVE IN NATURE AND HAS RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005 . RESPECTFULLY FOLLOWING THE DECISION OF THE DELHI HI GH COURT AS STATED SUPRA FOR THE ALTERNATIVE SUBMISSIONS MADE BY THE LEARNED AR, WE SET ASIDE THIS ISSUE TO THE FILE OF THE LEARNED AO TO DECIDE THIS ISSUE IN THE LIGHT OF THE DELHI HIGH COURT DECISION. NEEDLESS TO MENTION THAT THE ASSESSEE BE GIVEN REAS ONABLE OPPORTUNITY OF BEING HEARD. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS AL LOWED FOR STATISTICAL PURPOSES. IT A NOS. 84/& 211KOL/2013-C-AM M/S.PALCO AUTOMOBILES 9 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 84 / 2013 IS ALLOWED FOR STATISTICAL PURPOSES AND APPEAL OF THE REVENUE IN I TA NO. 211 / 2013 IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 18 /1 1/2015 COPY OF THE ORDER FORWARDED TO: 1. . THE APPELLANT /ASSESSEE: M/S. PALCO AUTOMOBILES 501, JUDGES COURT ROAD, P.O MIDNA PORE, DIST PASCHIM MEDINPUR PIN 721101. 2 THE RESPONDENT / DEPARTMENT: J CIT, RANGE - 1/ACIT, CIR - 1 AMRABATI LODGE, P.O MEDINIPORE, PASCHIM MEDINIPUR PIN 721101 (WB). 3 4.. / THE CIT, / THE CIT(A) 5 . DR, KOLKATA BENCH 6 . GUARD FILE . TRUE COPY, BY ORDER, ASSTT REGISTRAR ** PRADIP SPS SD/- ( MAHAVIR SINGH, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE 18 /11/2015