Ayub Abdul Khandar Tamatgar, Dharwad V. JCIT, Hubli

ITA 854/BANG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0188 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 04-06-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Keywords: Search and seizure; Question of law; Non-deduction of tax; Ignorance of law
• Section: 40A(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO.854/BANG/2015 ASSESSMENT YEAR : 2010-11 AYUB ABDUL KHANDAR TAMATGAR, 01, LINES NEAR MARC PLOT, COTTON MARKET, DHARWAD. PAN: ACGPT 0817Q VS. THE JOINT COMMISSIONER OF INCOME TAX, RANGE 2, HUBBALLI. APPELLANT RESPONDENT APPELLANT BY : NONE RESPONDENT BY : DR. P.K. SRIHARI, ADDL. CIT(DR) DATE OF HEARING : 12.07.2016 DATE OF PRONOUNCEMENT : 27.07.2016 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 2 9.01.2015 OF THE CIT(APPEALS), HUBLI FOR THE ASSESSMENT YEAR 2010-11 . 2. THOUGH THE ASSESSEE HAS RAISED VARIOUS GROUNDS, HOWEVER, WE FIND THAT THE ONLY EFFECTIVE GROUNDS ARE NOS.10 & 11 AS UNDER:- 10) THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS), HUBBALLI, HAS ERRED IN APPROVING THE DISALLOWANCE O F ENTIRE ITA NO.854/BANG/2015 PAGE 2 OF 14 EXPENSES MADE BY THE APPELLANT IN RESPECT OF HIS OW N THREE VEHICLES AT RS.20,72,000/-, THOUGH HE HIMSELF ADMIT THAT AS PER THE PROVISIONS THE ENTIRE AMOUNT CANNOT BE ADDED BU T ONLY THE PROFIT EMBODIED HAVE TO BE ADDED AND TAXED. THEREFO RE, THE DISALLOWANCE OF ADDITION OF ENTIRE AMOUNT INCLUDING THE PROFIT AT RS. 20,72,200 IS ERRONEOUS IN LAW. 11) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ), HUBBALI, HAS ERRED IN FAIRLY INTERPRETING THE PROVI SIONS OF SECTION 40(A)(3) AND READ THE SAID PROVISIONS IN ISOLATION. THE PROVISIO NS OF THE SECTION 40(A)(3) ARE ALSO CONTROLLED AND CON DITIONED BY THE SPIRIT AND LETTER OF THE PROVISIONS OF SECTION 40A OF THE IT ACT, WHICH BESTOWS ON THE ASSESSING OFFICER, A WELL REAS ONED DISCRETION TO ALLOW THE EXPENSES IF THE SAID OFFICE R IS OF THE OPINION THAT SUCH EXPENSES ARE REASONABLE AND NOT E XCESSIVE OR WHEN THE SERVICES OR FACILITIES FOR WHICH THE PAYME NT IS MADE IS DUE TO LEGITIMATE NEEDS OF THE BUSINESS OF THE A SSESSEE . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), HUBBA LLI, HAS OVERLOOKED THE APPLICATION OF THIS PROVISION ALSO T O THE CASES FALLING UNDER SECTION 40A(3) OF THE IT ACT. THEREFO RE, THE CONCLUSION ARRIVED IS ERRONEOUS. ' 3. NOBODY HAS APPEARED WHEN THIS APPEAL WAS CALLED FOR HEARING REPEATEDLY. WE FURTHER NOTE THAT ON THE LAST DATE OF HEARING, THE MATTER WAS ADJOURNED AT THE REQUEST OF THE LD. AR OF THE ASSES SEE. DESPITE THE ADJOURNMENT GRANTED TO THE ASSESSEE, THE ASSESSEE D ID NOT CHOOSE TO CAUSE APPEARANCE TO REPRESENT AND PROSECUTE ITS APP EAL. 4. WE HAVE HEARD THE LD. DR AND CAREFULLY PERUSED T HE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. SINCE NONE HAS AP PEARED ON BEHALF OF THE ASSESSEE, THEREFORE WE DO NOT HAVE THE PRIVILEGE OF HEARING THE ASSESSEE OR ITS AR. ITA NO.854/BANG/2015 PAGE 3 OF 14 5. AS REGARDS THE DISALLOWANCE MADE U/S. 40(A)(IA) IN RESPECT OF EXPENDITURE ON ACCOUNT OF HIRING OF TRUCKS, THE ASS ESSEE CONTENDED BEFORE THE AUTHORITIES BELOW THAT WHEN THE ASSESSEE HAS AL READY PAID THE ENTIRE EXPENSES AND NOTHING WAS PAYABLE AS ON 31 ST MARCH, 2010, THEREFORE THE PROVISIONS OF SECTION 40(A)(IA) CANNOT BE APPLIED. WE FIND THAT THIS ISSUE IS NOW COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF RYATAR SAHAKARI SAKKARE KARKHANE NIYAMIT V. ACIT, 383 ITR 561 (KARN) WHEREIN THE HONBLE HIGH COURT HAS HELD IN PARA 27 TO 34 AS UNDER:- 27. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT IN THE CASE OF VECTOR SHIPPING SERVICES (P.) LTD . ( SUPRA ). IN THE SAID CASE, HON'BLE HIGH COURT OF ALLAHABAD WAS CONSIDERING AN ISSUE WITH REGARD TO NON-COMPLIANCE OF PROVISIONS OF SECTION 1 94C BY THE ASSESSEE THEREIN. THE SAID COMPANY HAD ADVANCED A C ONTENTION THAT WORK WAS CARRIED OUT BY ONE M/S. MERCATOR LINE S LTD., ON BEHALF OF VECTOR SHIPPING SERVICES (P.) LTD . ( SUPRA ) AND M/S. MERCATOR LINES LTD., HAD DEDUCTED TDS IN THE SALARY OF ITS EMPLOYEES AND FULLY COMPLIED WITH THE PROVISIONS RE LATING TO DEDUCTION OF TAX AT SOURCE. IT WAS ALSO CONTENDED T HAT NO AMOUNT HAD REMAINED PAYABLE AT THE YEAR END. THUS, IT WAS IN THE FACTS AND CIRCUMSTANCE OF THAT CASE, THE HON'BLE HIGH COU RT OF ALLAHABAD HAD RENDERED THE SAID DECISION. IN CONTRA ST, IN THE INSTANT CASE, IT IS AN ADMITTED POSITION AS BORNE O UT ON RECORDS THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE AS REQU IRED UNDER SECTION 194C, 194I AND 194J OF THE ACT. HOWEVER, NO N- COMPLIANCE OF THE SAID PROVISIONS IS SOUGHT TO BE J USTIFIED ON THE GROUND THAT THE AGREEMENT INTER SE BETWEEN THE ASSE SSEE AND THE HARVESTER IS NOT A VALID CONTRACT INASMUCH AS THE F ARMER IS NOT A PARTY TO THE SAID AGREEMENT UPON WHOSE LAND THE HAR VESTER WORKS AND WHOSE PRODUCE IS PURCHASED BY THE ASSESSEE. IT IS ALSO ARGUED THAT THE SAID AGREEMENT IS NOT RATIFIED BY THE FARM ER. IN OUR CONSIDERED VIEW, THE SAID ARGUMENT ADVANCED ON BEHA LF OF THE ASSESSEE IS FALLACIOUS AND IS NOTED ONLY TO BE REJE CTED. WE SAY SO BECAUSE, THERE IS NO DISPUTE WITH REGARD TO THE FAC T THAT THE ITA NO.854/BANG/2015 PAGE 4 OF 14 ASSESSEE HAS ENTERED INTO SPECIFIC AGREEMENT/S FOR HARVESTING AND TRANSPORTATION OF SUGARCANE AND THE HARVESTER HAS B EEN ADMITTEDLY PAID HARVESTING AND TRANSPORTATION CHARGES BY THE A SSESSEE. THIS LEADS TO AN IRRESISTIBLE INFERENCE THAT THE PRODUCE NAMELY THE SUGARCANE HAS BEEN HARVESTED AND TRANSPORTED BY THE CONTRACTOR. HARVESTING AND TRANSPORTATION CAN BE EFFECTED ONLY WITH CONSENT OF THE OWNER OF THE SUGARCANE NAMELY FARMER. 28. ONE OTHER GROUND PRESSED INTO SERVICE BY THE ASSES SEE IN SUPPORT OF ITS CASE IS THAT, ASSESSEE IS A CO- OPER ATIVE SUGAR FACTORY ESTABLISHED FOR THE BENEFIT OF ITS MEMBERS AND THER EFORE, THE VIEW TAKEN BY THE ASSESSING AUTHORITY WOULD ADVERSELY EF FECT THE PROFIT MARGIN TO THE MEMBERS OF THE SOCIETY AS THE SOCIETY WILL HAVE TO PAY TAX, INTEREST AND PENALTY FOR NON-COMPL IANCE OF SECTION 194C, 194I AND 194J OF THE ACT. THIS WOULD CREATE ADDITIONAL BURDEN OF TAX, PENALTY AND INTEREST AND THE SAME WOULD RUN COUNTER TO THE INTEREST OF CO-OPERATIVE MOVEMEN T. 29. WE ARE AFRAID, WE MAY NOT BE ABLE TO PERSUADE OURS ELVES TO ACCEPT THE AFORESAID ARGUMENT SEEKING CONCESSION OR WAIVER FROM COMPLIANCE OF STATUTORY OBLIGATIONS ON THE PART OF A CO-OPERATIVE ENTITY. IN OUR VIEW, IT IS HARDLY ANY LEGAL GROUND FOR CONSIDERATION. NON-COMPLIANCE OF STATUTORY OBLIGATI ONS SHALL ALWAYS HAVE THEIR OWN CONSEQUENCES TO FLOW. THEREFO RE, THE INSTANT GROUND DOES NOT ADVANCE THE CASE OF THE ASS ESSEE ANY FURTHER. 30. ADVERTING TO YET ANOTHER GROUND URGED ON BEHALF OF THE ASSESSEE SUGGESTING THAT IT DID NOT HAVE THE BENEFI T OF PROPER LEGAL ADVICE DUE TO ITS LOCATIONAL DISADVANTAGE, WE ARE O F THE VIEW THAT THIS ARGUMENT IS TOO FEEBLE TO COUNTENANCE. WHILE C ANVASSING THIS GROUND, IT IS ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT SINCE THE FACTORY IS SITUATED IN A REMOTE AREA, IT DID NOT HAVE ACCESS TO COMPETENT CONSULTANTS. ADMITTEDLY, ASSESS EE WAS REPRESENTED BY A CHARTERED ACCOUNTANT SHRI PRAVEEN GHALI BEFORE THE TAX AUTHORITY. IN ADDITION, BOOKS OF THE ASSESS EE ARE AUDITED AS REQUIRED UNDER SECTION 44AB OF THE ACT. DEDUCTIO N OF TAX AT SOURCE UNDER SECTION 194C, 194I AND 194J ARE ELEMEN TARY ASPECTS AND SHALL BE WITHIN THE KNOWLEDGE OF ALL PRACTICING CHARTERED ACCOUNTANTS. WE NOTICE THAT THE ASSESSEE HAS SPENT LARGE SUMS OF MONEY TOWARDS LEGAL ADVICE. ASSESSEE HAS NOT COMPLI ED WITH SECTION 194J EVEN WHILE MAKING PAYMENTS TOWARDS PRO FESSIONAL CHARGES TO THE ADVOCATES. IT IS FAIRLY WELL SETTLED THAT IGNORANCE OF ITA NO.854/BANG/2015 PAGE 5 OF 14 LAW IS NO EXCUSE. WE HASTEN TO ADD THAT WE ARE CONS CIOUS OF THE FACT THAT THE DOCTRINE 'IGNORANTIA JURIS NEMINEM EX CUSAT', HAS BEEN INTERPRETED BY THE HON'BLE SUPREME COURT AND ENGLIS H COURTS IN SEVERAL CASES. THERE CANNOT BE AN UNIVERSAL, STRICT AND STRAIGHT JACKET APPLICATION OF THIS DOCTRINE. IT MAY BE USEF UL TO REFER TO THE PRONOUNCEMENT OF THE HON'BLE SUPREME COURT IN THE C ASE OF MOTILAL PADAMPAT SUGAR MILLS CO. LTD. V. STATE OF UTTAR PRADESH [1979] 18 ITR 326, WHEREIN, IT IS HELD AS FOLLOWS: '6. SECONDLY, IT IS DIFFICULT TO SEE HOW, ON THE FA CTS, THE PLEA OF WAIVER COULD BE SAID TO HAVE BEEN MADE OUT BY TH E STATE GOVERNMENT. WAIVER MEANS ABANDONMENT OF A RIGHT AND IT MAY BE EITHER EXPRESS OR IMPLIED FROM CONDUCT, BUT ITS BASIC REQUIREMENT IS THAT IT MUST BE 'AN INTENTIONA L ACT WITH KNOWLEDGE'. PER LORD CHELMSFORD, L.C. IN EARL OF DARNLEY V . LONDON, CHATHAM AND DOVER RLY. CO . [(1867) LR 3 HL 43, 57 : 16 LT 217] THERE CAN BE NO WAIVER UNLESS THE PERSON WHO IS SAID TO HAVE WAIVED IS FULLY INFO RMED AS TO HIS RIGHT AND WITH FULL KNOWLEDGE OF SUCH RIGHT, HE INTENTIONALLY ABANDONS IT. IT IS POINTED OUT IN HAL SBURY'S LAWS OF ENGLAND (4TH EDN.) VOLUME 16 IN PARA 1472 A T P. 994 THAT FOR A 'WAIVER TO BE EFFECTUAL IT IS ESSENT IAL THAT THE PERSON GRANTING IT SHOULD BE FULLY INFORMED AS TO H IS RIGHTS' AND ISAACS, J. DELIVERING THE JUDGMENT OF T HE HIGH COURT OF AUSTRALIA IN CRAINE V. COLONIAL MUTUAL FIRE INSURANCE CO. LTD. [(1920) 28 CLR 305 (AUS)] HAS ALSO EMPHASISED THAT WAIVER 'MUST BE WITH KNOWLEDGE, AN ESSENTIAL SUPPORTED BY MANY AUTHORITIES'. NOW IN TH E PRESENT CASE THERE IS NOTHING TO SHOW THAT AT THE D ATE WHEN THE APPELLANT ADDRESSED THE LETTER DATED JUNE 25, 1970, IT HAD FULL KNOWLEDGE OF ITS RIGHT TO EXEMPTI ON UNDER THE ASSURANCE GIVEN BY RESPONDENT 4 AND THAT IT INTENTIONALLY ABANDONED SUCH RIGHT. IT IS DIFFICULT TO SPECULATE WHAT WAS THE REASON WHY THE APPELLANT ADDRESSED THE LETTER DATED JUNE 25, 1970 STATING TH AT IT WOULD AVAIL OF THE CONCESSIONAL RATES OF SALES TAX GRANTED UNDER THE LETTER DATED JANUARY 20, 1970. IT IS POSS IBLE THAT THE APPELLANT MIGHT HAVE THOUGHT THAT SINCE NO NOTIFICATION EXEMPTING THE APPELLANT FROM SALES TAX HAD BEEN ISSUED BY THE STATE GOVERNMENT UNDER SECTION 4 -A, THE APPELLANT WAS LEGALLY NOT ENTITLED TO EXEMPTION AND THAT IS WHY THE APPELLANT MIGHT HAVE CHOSEN TO ACCE PT WHATEVER CONCESSION WAS BEING GRANTED BY THE STATE GOVERNMENT. THE CLAIM OF THE APPELLANT TO EXEMPTION COULD BE SUSTAINED ONLY ON THE DOCTRINE OF PROMISSO RY ESTOPPEL AND THIS DOCTRINE COULD NOT BE SAID TO BE SO WELL ITA NO.854/BANG/2015 PAGE 6 OF 14 DEFINED IN ITS SCOPE AND AMBIT AND SO FREE FROM UNCERTAINTY IN ITS APPLICATION THAT WE SHOULD BE CO MPELLED TO HOLD THAT THE APPELLANT MUST HAVE HAD KNOWLEDGE OF ITS RIGHT TO EXEMPTION ON THE BASIS OF PROMISSORY ESTOP PEL AT THE TIME WHEN IT ADDRESSED THE LETTER DATED JUNE 25 , 1970. IN FACT, IN THE PETITION AS ORIGINALLY FILED, THE R IGHT TO CLAIM TOTAL EXEMPTION FROM SALES TAX WAS NOT BASED ON THE PLEA OF PROMISSORY ESTOPPEL WHICH WAS INTRODUCED ONLY BY WAY OF AMENDMENT. MOREOVER, IT MUST BE REMEMBERED THAT THERE IS NO PRESUMPTION THAT EVERY PERSON KNOWS THE LAW. IT IS OFTEN SAID THAT EVERYONE IS PRESUMED TO KNOW THE LAW, BUT THAT IS NOT A CORRECT STATEMENT: THERE IS NO SU CH MAXIM KNOWN TO THE LAW. OVER A HUNDRED AND THIRTY YEARS A GO, MAULE, J., POINTED OUT IN MARTINDALE V. FALKNER [(1846) 2 CB 706 : 135 ER 1124] : 'THERE IS NO PRESUMPTION IN THIS COUNTRY THAT EVERY PERSON KNOWS THE LAW: IT WOULD BE CONTRARY TO COMMO N SENSE AND REASON IF IT WERE SO.' SCRUTTON, L.J., ALSO ONCE SAID: 'IT IS IMPOSSIBLE TO KNOW ALL THE STATUTORY LAW, AN D NOT VERY POSSIBLE TO KNOW ALL THE COMMON LAW.' BUT IT WAS LORD ATKIN WHO, AS IN SO MANY OTHER SPHER ES, PUT THE POINT IN ITS PROPER CONTEXT WHEN HE SAID IN EVANS V. BARTLAM [(1937) AC 473, 479 : (1937) 2 ALL ER 646] : ' THE FACT IS THAT THERE IS NOT AND NEVER HAS BEEN A PRESUMPTION THAT EVERY ONE KNOWS THE LAW. THERE IS THE RULE THAT IGNORANCE OF THE LAW DOES NOT EXCUSE, A M AXIM OF VERY DIFFERENT SCOPE AND APPLICATION.' IT IS, THEREFORE, NOT POSSIBLE TO PRESUME, IN THE A BSENCE OF ANY MATERIAL PLACED BEFORE THE COURT, THAT THE. APP ELLANT HAD FULL KNOWLEDGE OF ITS RIGHT TO EXEMPTION SO AS TO WARRANT AN INFERENCE THAT THE APPELLANT WAIVED SUCH RIGHT BY ADDRESSING THE LETTER DATED JUNE 25, 1970. WE ACCORDINGLY REJECT THE PLEA OF WAIVER RAISED ON BEH ALF OF THE STATE GOVERNMENT.' SO FAR AS STRICT APPLICATION OF THE MAXIM IGNORANTI A JURIS NEMINEM EXCUSAT IS CONCERNED, THE HON'BLE SUPREME COURT IN THE CASE OF PANKAJ JAIN AGENCIES V. UNION OF INDIA AIR 1995 SC 360 WHILE REPELLING AN ARGUMENT THAT THE PETITIONER DID NOT H AVE KNOWLEDGE OF AN ENACTMENT HELD THAT A PUBLICATION IN A GAZETT E IS A SUFFICIENT ITA NO.854/BANG/2015 PAGE 7 OF 14 NOTICE. PRECISELY, THE HON'BLE SUPREME COURT HAS HE LD AS FOLLOWS: '14. IN LIM CHIN AIK V. REGINAM [(1963) 1 ALL ER 223, 226 : 1963 AC 160 : (1963) 2 WLR 42 (PC)] , THE PRIVY CO UNCIL ALSO OBSERVED: 'IT WAS SAID ON THE RESPONDENT'S PART THAT THE ORDE R MADE BY THE MINISTER UNDER THE POWERS CONFERRED BY SECTI ON 9 OF THE ORDINANCE WAS AN INSTANCE OF THE EXERCISE OF DELEGATED LEGISLATION AND THEREFORE THAT THE ORDER, ONCE MADE, BECAME PART OF THE LAW OF SINGAPORE OF WHICH IGNORANCE COULD PROVIDE NO EXCUSE ON A CHARGE OF CONTRAVENTION OF THE SECTION. THEIR LORDSHIPS ARE U NABLE TO ACCEPT THIS CONTENTION. IN THEIR LORDSHIPS' OPIN ION, EVEN IF THE MAKING OF THE ORDER BY THE MINISTER BE REGAR DED AS AN EXERCISE OF THE LEGISLATIVE AS DISTINCT FROM THE EXECUTIVE OR ADMINISTRATIVE FUNCTION (AS THEY DO NOT CONCEDE) , THE MAXIM CANNOT APPLY TO SUCH A CASE AS THE PRESENT WH ERE IT APPEARS THAT THERE IS IN THE STATE OF SINGAPORE NO PROVISION, CORRESPONDING, FOR EXAMPLE, TO THAT CONT AINED IN SECTION 3(2) OF THE ENGLISH STATUTORY INSTRUMENT S ACT, 1946, FOR THE PUBLICATION IN ANY FORM OF AN ORDER O F THE KIND MADE IN THE PRESENT CASE OR ANY OTHER PROVISIO N DESIGNED TO ENABLE A MAN BY APPROPRIATE INQUIRY TO FIND OUT WHAT 'THE LAW' IS.' 15. BUT THEN IN STATE OF MAHARASHTRA V. MAYER HANS GEORGE [AIR 1965 SC 722, 742 : (1965) 1 CRI LJ 641 : (1965 ) 1 SCR 123] RAJAGOPALA AYYANGAR, J. REFERRED TO THE FOLLOW ING COMMENT OF PROF. C.K. ALLEN ON JOHNSON V. SARGANT & SONS [(1918) 1 KB 101 : 87 LJ KB 122 : 118 LT 95] : 'THIS WAS A BOLD EXAMPLE OF JUDGMENT-MADE LAW. THER E WAS NO PRECEDENT FOR IT, AND INDEED A DECISION, JONES V . ROBSON [(1901) 1 KB 673 : 70 LJ KB 419 : 84 LT 230], WHICH, THOUGH NOT ON ALL FOURS, MILITATED STRONGLY AGAINST THE JUDGE'S CONCLUSION, WAS NOT CITED; NOR DID THE JUDGE ATTEMPT TO DEFINE HOW AND WHEN DELEGATED LEGISLATIO N BECAME KNOWN. BOTH ARGUMENTS AND JUDGMENT ARE VERY BRIEF. THE DECISION HAS ALWAYS BEEN REGARDED AS VER Y DOUBTFUL, BUT IT NEVER CAME UNDER REVIEW BY A HIGHE R COURT.' AND OBSERVED: ITA NO.854/BANG/2015 PAGE 8 OF 14 'WE SEE GREAT FORCE IN THE LEARNED AUTHOR'S COMMENT ON THE REASONING IN SARGANT CASE [(1918) 1 KB 101 : 87 LJ KB 122 : 118 LT 95]. TAKING THE PRESENT CASE, THE QUES TION WOULD IMMEDIATELY ARISE IS IT TO BE MADE KNOWN IN I NDIA OR THROUGHOUT THE WORLD, FOR THE ARGUMENT ON BEHALF OF THE RESPONDENT WAS THAT WHEN THE RESPONDENT LEFT GENEVA ON NOVEMBER 27 HE WAS NOT AWARE OF THE CHANGE IN THE CONTENT OF THE EXEMPTION GRANTED BY THE RESERVE BAN K. IN A SENSE THE KNOWLEDGE OF THE EXISTENCE OR CONTENT O F A LAW BY AN INDIVIDUAL WOULD NOT ALWAYS BE RELEVANT, SAVE ON THE QUESTION OF THE SENTENCE TO BE IMPOSED FOR ITS VIOL ATION. IT IS OBVIOUS THAT FOR AN INDIAN LAW TO OPERATE AND BE EFFECTIVE IN THE TERRITORY WHERE IT OPERATES, VIZ., THE TERRITORY OF INDIA IT IS NOT NECESSARY THAT IT SHOU LD EITHER BE PUBLISHED OR BE MADE KNOWN OUTSIDE THE COUNTRY. EVE N IF, THEREFORE, THE VIEW ENUNCIATED BY BAILHACHE, J. IS TAKEN TO BE CORRECT, IT WOULD BE APPARENT THAT THE TEST TO F IND OUT EFFECTIVE PUBLICATION WOULD BE PUBLICATION IN INDIA , NOT OUTSIDE INDIA SO AS TO BRING IT TO THE NOTICE OF EV ERYONE WHO INTENDS TO PASS THROUGH INDIA. IT WAS 'PUBLISHE D' AND MADE KNOWN IN INDIA BY PUBLICATION IN THE GAZETTE O N THE 24TH NOVEMBER AND THE IGNORANCE OF IT BY THE RESPON DENT WHO IS A FOREIGNER IS, IN OUR OPINION, WHOLLY IRREL EVANT.' 16. AGAIN IN B.K. SRINIVASAN V. STATE OF KARNATAKA [(1987) 1 SCC 658, 672 : AIR 1987 SC 1059, 1067] IT WAS OBSER VED: (SCC P. 672, PARA 15) 'THERE CAN BE NO DOUBT ABOUT THE PROPOSITION THAT W HERE A LAW, WHETHER PARLIAMENTARY OR SUBORDINATE, DEMANDS COMPLIANCE, THOSE THAT ARE GOVERNED MUST BE NOTIFIE D DIRECTLY AND RELIABLY OF THE LAW AND ALL CHANGES AN D ADDITIONS MADE TO IT BY VARIOUS PROCESSES. WHETHER LAW IS VIEWED FROM THE STANDPOINT OF THE 'CONSCIENTIOUS GO OD MAN' SEEKING TO ABIDE BY THE LAW OR FROM THE STANDP OINT OF JUSTICE HOLMES'S 'UNCONSCIENTIOUS BAD MAN' SEEKING TO AVOID THE LAW, LAW MUST BE KNOWN, THAT IS TO SAY, I T MUST BE SO MADE THAT IT CAN BE KNOWN. WE KNOW THAT DELEG ATED OR SUBORDINATE LEGISLATION IS ALL PERVASIVE AND THA T THERE IS HARDLY ANY FIELD OF ACTIVITY WHERE GOVERNANCE BY DE LEGATED OR SUBORDINATE LEGISLATIVE POWERS IS NOT AS IMPORTA NT IF NOT MORE IMPORTANT, THAN GOVERNANCE BY PARLIAMENTARY LEGISLATION. BUT UNLIKE PARLIAMENTARY LEGISLATION W HICH IS PUBLICLY MADE, DELEGATED OR SUBORDINATE LEGISLATION IS OFTEN MADE UNOBTRUSIVELY IN THE CHAMBERS OF A MINIS TER, A SECRETARY TO THE GOVERNMENT OR OTHER OFFICIAL DIGNI TARY. IT ITA NO.854/BANG/2015 PAGE 9 OF 14 IS, THEREFORE, NECESSARY THAT SUBORDINATE LEGISLATI ON, IN ORDER TO TAKE EFFECT, MUST BE PUBLISHED OR PROMULGA TED IN SOME SUITABLE MANNER, WHETHER SUCH PUBLICATION OR PROMULGATION IS PRESCRIBED BY THE PARENT STATUTE OR NOT. IT WILL THEN TAKE EFFECT FROM THE DATE OF SUCH PUBLICA TION OR PROMULGATION.' 17. IN THE PRESENT CASE INDISPUTABLY THE MODE OF PU BLICATION PRESCRIBED BY SECTION 25(1) WAS COMPLIED WITH. THE NOTIFICATION W AS PUBLISHED IN THE OFFICIAL GAZETTE ON THE 13-2-1986. AS TO THE EFFECT OF THE PUBLICATION IN THE OFFICIAL GAZETTE, THIS COURT HELD [ SRINIVASAN CASE [(1987) 1 SCC 658, 672 : AIR 1987 SC 1059, 1067] AIR AT P. 1067 : SCC PP. 67 2-73, PARA 15] : 'WHERE THE PARENT STATUTE IS SILENT, BUT THE SUBORD INATE LEGISLATION ITSELF PRESCRIBES THE MANNER OF PUBLICA TION, SUCH A MODE OF PUBLICATION MAY BE SUFFICIENT, IF REASONABLE. IF THE SUBORDINATE LEGISLATION DOES NOT PRESCRIBE THE MODE OF PUBLICATION OR IF THE SUBORDI NATE LEGISLATION PRESCRIBES A PLAINLY UNREASONABLE MODE OF PUBLICATION, IT WILL TAKE EFFECT ONLY WHEN IT IS PU BLISHED THROUGH THE CUSTOMARILY RECOGNISED OFFICIAL CHANNEL , NAMELY, THE OFFICIAL GAZETTE OR SOME OTHER REASONAB LE MODE OF PUBLICATION.' 18. WE, THEREFORE, SEE NO SUBSTANCE IN THE CONTENTI ON THAT NOTWITHSTANDING THE PUBLICATION IN THE OFFICIAL GAZ ETTE THERE WAS YET A FAILURE TO MAKE THE LAW KNOWN AND T HAT, THEREFORE, THE NOTIFICATION DID NOT ACQUIRE THE ELE MENTS OF OPERATIVENESS AND ENFORCEABILITY. THIS CONTENTION O F SHRI GANESH IS UNACCEPTABLE.' (UNDERLINING IS BY US) IN THE INSTANT CASE, ASSESSEE IS INVOLVED IN MANUFA CTURING SUGAR AND ITS BYPRODUCTS IN A LARGE SCALE. THEREFORE, THE ASSESSEE HAS NO ESCAPE BUT TO COMPLY WITH VARIOUS FISCAL STATUES SU CH AS INCOME TAX, SALES TAX, CUSTOMS ACT, CENTRAL EXCISE ACT ETC ., AND LABOUR LAWS SUCH AS FACTORIES ACT, ESI ACT, PF ACT ETC. FURTHER, THERE IS CLEAR EVIDENCE ON RECORD TO SHOW THAT THE ASSESSEE HAS PAID LARGE SUMS OF FEE TO THE LAWYERS AND AVAILED S ERVICES OF CHARTERED ACCOUNTANT ALSO. THESE TWO ASPECTS NAMELY , EVIDENCE OF EXPENDITURE TOWARDS FEE PAID TO THE LAWYERS AND ENGAGEMENT OF SERVICES OF CHARTERED ACCOUNTANT ARE SUFFICIENT CIR CUMSTANCES TO HOLD THAT NON-DEDUCTION OF TAX AT SOURCE IS NOT DUE TO IGNORANCE OF LAW. THE PRONOUNCEMENTS OF THE HON'BLE SUPREME COUR T IN THE FOLLOWING TWO CASE ARE APTLY APPLICABLE IN THE INST ANT CASE. ITA NO.854/BANG/2015 PAGE 10 OF 14 SWADESHI COTTON MILLS CO. LTD . V . GOVT. OF U.P. [1975] 4 SCC 378 AT PAGE 379, WHEREIN IT IS HELD AS FOLLOWS: '3. WE DO NOT THINK THAT IN THIS CASE IT IS NECESSA RY FOR US TO CONSIDER WHETHER ARTICLE 226 CAN BE USED FOR CHALLENGING THE VALIDITY OF THE ORDERS PASSED PRIOR TO JANUARY 26, 1950. BUT WE ARE IN AGREEMENT WITH THE HIGH COURT ON THE OTHER TWO GROUNDS. AS MENTIONED EARLIER , THE IMPUGNED ASSESSMENTS WERE MADE IN 1949. THE WRIT PETITION WAS FILED IN 1956. THE EXPLANATION GIVEN B Y THE PETITIONER FOR THIS LONG DELAY IS THAT HE DID NOT K NOW THE CORRECT LEGAL POSITION AND HE CAME TO KNOW ABOUT TH E SAME AFTER THE DECISION OF THE ALLAHABAD HIGH COURT IN TH E COMMISSIONER OF SALES TAX, U.P . V. MODI FOOD PRODUCTS LTD . [(1955) 6 STC 287]. EVERY INDIVIDUAL IS DEEMED TO KNOW THE LAW OF THE LAND. THE COURTS MERELY INTERPR ET THE LAW AND DO NOT MAKE LAW. IGNORANCE OF LAW IS NOT AN EXCUSE FOR NOT TAKING APPROPRIATE STEPS WITHIN LIMI TATION. THEREFORE THE ARGUMENT THAT THE APPELLANT DID NOT K NOW THE TRUE LEGAL POSITION IS NOT ONE THAT CAN BE ACCE PTED IN LAW. THAT APART, EVEN AFTER THE HIGH COURT RENDERED ITS DECISION IN MODI FOOD PRODUCTS' CASE [(1955) 6 STC 287] THE PETITIONER DID NOT MOVE THE HIGH COURT FOR OVER SEVERAL MONTHS. THERE IS NO SATISFACTORY EXPLANATIO N FOR THAT DELAY. THAT BEING SO, THE HIGH COURT WAS FULLY JUSTIFIED IN REFUSING TO EXERCISE ITS DISCRETION UN DER ARTICLE 226 OF THE CONSTITUTION IN FAVOUR OF THE APPELLANT. ' (UNDERLINING IS BY US) STATE OF A.P. V. TWIN CITY JEWELLERS ASSN. [2005] 13 SCC 552 AT PAGE 554, WHEREIN IT IS HELD AS FOLLOWS: '8. IT COULD NOT BE DENIED THAT GO NO. 303 DATED 15 -4- 1997 WAS PUBLISHED IN THE OFFICIAL GAZETTE ON 23-4- 1997. IT IS SETTLED LAW THAT ONCE PUBLICATION IN THE OFFICIA L GAZETTE TAKES PLACE, IT IS DEEMED TO BE KNOWN TO ALL. IGNOR ANCE OF LAW CAN BE NO EXCUSE. ONCE THE GO WAS PUBLISHED, FR OM THE DATE IT WAS PUBLISHED, IT BECAME EFFECTIVE. AS I T BECAME EFFECTIVE FROM THAT DATE, THE TAX WAS LEVIABLE AT T HE RATE OF 4%. IF SOME ASSESSING OFFICERS, DUE TO THEIR OWN IG NORANCE OR LAXITY ACCEPTED RETURNS AT THE RATE OF 2% IT DID NOT PERMIT THE HIGH COURT TO IGNORE THE LAW AND CONTINU E SUCH LAXITY TO PREVAIL. IT MUST BE REMEMBERED THAT THE A SSESSING OFFICER, WHO HAD ASSESSED WRONGLY, COULD ALWAYS REO PEN THE ASSESSMENT. ITA NO.854/BANG/2015 PAGE 11 OF 14 9. ALL THAT THE ERRATA, ISSUED ON 4-5-1998, DOES IT REDUCE THE RATE OF TAX FROM 4% TO 3%. THE HIGH COURT HAS THEREFORE ALSO ERRED IN CONCLUDING THAT THE RATE OF TAX HAS BEEN INCREASED. THE WHOLE JUDGMENT PROCEEDS ON THE BASIS THAT THE RATE OF TAX HAS BEEN INCREASED WHEN IN FACT IT HAS BEEN REDUCED. 10. WE ARE UNABLE TO ACCEPT THE SUBMISSION THAT AS GO NO. 304 IS AN ERRATA, IT NECESSARILY MEANS THAT GO NO. 303 HAD NEVER COME INTO EXISTENCE. THE WORD ERRATA, IN OUR VIEW, IMPLIES THAT THERE WAS SOMETHING IN EXISTENCE WHICH IS BEING CORRECTED. THE FACT THAT THIS WAS AN ERRATA I TSELF SHOWED THAT THERE WAS SOMETHING IN EXISTENCE WHICH WAS BEING CORRECTED. THIS ASPECT HAS ALSO BEEN OVERLOOK ED BY THE HIGH COURT. 11. IT WAS ALSO SUBMITTED THAT SINCE THERE WAS A LO T OF CONFUSION AND THAT NUMBER OF PARTIES INCLUDING ASSE SSING OFFICERS WERE NOT CLEAR AS TO WHAT WAS THE RATE OF TAX, THIS COURT SHOULD NOT INTERFERE WITH THE JUDGMENT OF THE HIGH COURT WHICH HAS BEEN PASSED ON EQUITABLE BASIS. WE SEE NO SUBSTANCE IN THIS SUBMISSION. IF THE LAW IS CLEA R THEN IT MUST BE GIVEN EFFECT TO. MERELY BECAUSE THE PARTIES WERE UNAWARE OF THE LAW DOES NOT MEAN THAT COURTS CAN IG NORE THE LAW AND PROVIDE TO THE CONTRARY.' (UNDERLINING IS BY US) 31. THE FOLLOWING JUDGMENTS ARE RELIED UPON BY THE REV ENUE IN SUPPORT OF THEIR CASE: ( I ) IN THE CASE OF THOMAS GEORGE MUTHOOT V. CIT [2015] 93 CCH 0151 KER HC. IT IS HELD BY THE HON'BLE HIGH COURT OF KARNATAKA THAT SECTION 40(A)(IA) MAKES IT CLEAR THAT THE CONSEQUENCE OF DISALLOWANCE IS ATTRACTED WHEN AN INDIVIDUAL, WHO I S LIABLE TO DEDUCT TAX ON ANY INTEREST PAYABLE TO A RESIDENT ON WHICH TAX DEDUCTIBLE AT SOURCE COMMIT DEFAULT. ( II ) IN THE CASE OF SIKANDARKHAN N. TUNVAR ( SUPRA ) IT IS HELD BY THE HON'BLE HIGH COURT OF GUJARAT T HAT: 'THE TERM USED IS INTEREST, COMMISSION, BROKERAGE ETC. IS PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTR ACTOR OR SUB-CONTRACTOR FOR CARRYING OUT ANY WORK. THE LANGU AGE USED IS NOT THAT SUCH AMOUNT MUST CONTINUE TO REMAIN PAY ABLE TILL THE END OF THE ACCOUNTING YEAR. ANY SUCH INTERPRETA TION WOULD REQUIRE READING WORDS WHICH THE LEGISLATURE H AS NOT USED. NO SUCH INTERPRETATION WOULD EVEN OTHERWISE B E JUSTIFIED BECAUSE IN OUR OPINION, THE LEGISLATURE C OULD NOT ITA NO.854/BANG/2015 PAGE 12 OF 14 HAVE INTENDED TO BRING ABOUT ANY SUCH DISTINCTION N OR THE LANGUAGE USED IN THE SECTION BRINGS ABOUT ANY SUCH MEANING. IF THE INTERPRETATION AS ADVANCED BY THE A SSESSEES IS ACCEPTED, IT WOULD LEAD TO A SITUATION WHERE THE ASSESSEE WHO THOUGH WAS REQUIRED TO DEDUCT THE TAX AT SOURCE BUT NO SUCH DEDUCTION WAS MADE OR MORE FLAGRANTLY DEDUCTIO N THOUGH MADE IS NOT PAID TO THE GOVERNMENT, WOULD ES CAPE THE CONSEQUENCE ONLY BECAUSE THE AMOUNT WAS ALREADY PAID OVER BEFORE THE END OF THE YEAR IN CONTRAST TO ANOT HER ASSESSEE WHO WOULD OTHERWISE BE IN SIMILAR SITUATIO N BUT IN WHOSE CASE THE AMOUNT REMAINED PAYABLE TILL THE END OF THE YEAR. WE SIMPLY DO NOT SEE ANY LOGIC WHY THE LEGISL ATURE WOULD HAVE DESIRED TO BRING ABOUT SUCH IRRECONCILAB LE AND DIVERSE CONSEQUENCES. WE HASTEN TO ADD THAT THIS IS NOT THE PRIME BASIS ON WHICH WE HAVE ADOPTED THE INTERPRETA TION WHICH WE HAVE GIVEN. IF THE LANGUAGE USED BY THE PA RLIAMENT CONVEYED SUCH A MEANING, WE WOULD NOT HAVE HESITATE D IN ADOPTING SUCH AN INTERPRETATION. WE ONLY HIGHLIGHT THAT WE WOULD NOT READILY ACCEPT THAT THE LEGISLATURE DESIR ED TO BRING ABOUT AN INCONGRUOUS AND SEEM INGLY IRRECONCILABLE CONSEQUENCES.' ( III ) IN THE CASE OF CRESCENT EXPORT SYNDICATE ( SUPRA ) IT IS HELD BY THE HON'BLE HIGH COURT OF CALCUTTA THAT: '21. IN VIEW OF ABOVE DISCUSSION, WE ANSWER THE Q UESTION AS UNDER: THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961, ARE APPLICABLE NOT ONLY TO THE AMOUNT WHICH I S SHOWN AS PAYABLE ON THE DATE OF BALANCE- SHEET, BUT IT IS APPLICABLE TO SUCH EXPENDITURE, WHICH BECOME PAYABLE AT ANY TI ME DURING THE RELEVANT PREVIOUS YEAR AND WAS ACTUA LLY PAID WITHIN THE PREVIOUS YEAR. IN THE RESULT THE QUESTIO N IS DECIDED IN FAVOUR OF REVENUE AND AGAINST THE ASSESSEE.' 32. WHILE CITING THE AFORESAID JUDGMENTS, THE LEARNED COUNSEL FOR THE REVENUE ALSO EMPHASIZED THAT THE JUDGMENT IN TH E CASE OF VECTOR SHIPPING SERVICES (P.) LTD . ( SUPRA ), IS NOT APPLICABLE TO THE FACTS OF THIS CASE. HE SUBMITTED THAT IN THE LIGHT OF THE UNAMBIGUOUS AND ADMITTED FACTS NON-COMPLIANCE OF ST ATUTORY COMPLIANCE OF STATUTORY PROVISIONS OF SECTIONS 194C , 194I AND 194J OF THE ACT STAND PROVED. THEREFORE, IN THE LIG HT OF THE SETTLED POSITION OF LAW THE ONLY CONSEQUENCE THAT FLOWS IS TO INVOKE SECTION 40(A)(IA) OF THE ACT AS HAS BEEN RIGHTLY HE LD BY THE ASSESSING AUTHORITY AND AFFIRMED BY THE FIRST APPEL LATE AUTHORITY. ITA NO.854/BANG/2015 PAGE 13 OF 14 33. IN VIEW OF THE AFORESAID DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT THE IMPUGNED ORDER PASSED BY THE TRIBUNAL IS UNSUSTAINABLE IN LAW. THE JUDGMENT RENDERED BY THE HON'BLE HIGH COURT OF ALLAHABAD IN THE CASE OF VECTOR SHIPPING SERVICES (P.) LTD . ( SUPRA ),. IS NOT APPLICABLE TO THE FACTS OF THESE CASES. CONSEQUENTLY, THE FIRST SUBSTANTIAL QUESTION OF LAW , RAISED BY THE REVENUE MERITS CONSIDERATION. 34. IN THE RESULT, THE APPEALS FILED BY THE REVENUE AR E ALLOWED BY ANSWERING THE FOLLOWING SUBSTANTIAL QUESTION OF LAW IN ITS FAVOUR AND IT IS HELD THAT IN THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE TRIBUNAL WAS NOT CORRECT IN INTERPRETING THE LANGUA GE OF SECTION 40(A)(IA) TO MEAN THAT THE CONSEQUENCE OF DISALLOWA NCE IS ATTRACTED ONLY IN RESPECT OF AMOUNTS WHICH REMAIN P AYABLE ON THE LAST DAY OF THE FINANCIAL YEAR. 6. WE FURTHER NOTE THAT THE CIT(APPEALS) HAS GIVEN THE DETAILS OF THE PAYMENT MADE BY THE ASSESSEE TOWARDS HIRING OF THE VEHICLES AND THEREFORE THE CIT(APPEALS) HAS FOUND THAT THE CLAIM OF THE ASSESSEE THAT THE EXPENDITURE WAS INCURRED FOR THE ASSESSEES OWN VEHICLE WAS NOT CORRECT SO FAR AS THE DETAILS HAVE BEEN REPRODUCED BY THE CIT(APPEALS) IN THE IMPUGNED ORDER. ACCORDINGLY THE ORDER OF THE CI T(APPEALS) QUA THIS ISSUE IS UPHELD. 7. THE NEXT ISSUE IS REGARDING DISALLOWANCE MADE U/ S. 40A(3) OF THE ACT FOR PAYMENT MADE IN CASH. WE FIND THAT THE CIT( APPEALS) HAS GIVEN THE FULL DETAILS OF THE PAYMENT IN THE IMPUGNED ORDER, WHICH IS MORE THAN THE MINIMUM LIMIT OF EXEMPTION PROVIDED UNDER THE PROVI SIONS OF SECTION 40A(3). THEREFORE, IN THE ABSENCE OF ANY CONTRARY FACT OR MATERIAL, WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF FACT GI VEN BY THE CIT(APPEALS), ITA NO.854/BANG/2015 PAGE 14 OF 14 WHEREIN ALL THE INDIVIDUAL AMOUNTS WERE FOUND TO BE MORE THAN THE MINIMUM PRESCRIBED LIMIT OF RS.20,000. THERE IS NO DISPUTE THAT ALL THESE PAYMENTS WERE MADE IN CASH. THEREFORE, THE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS CLAIM. ACCORDINGLY THE ORDER OF T HE CIT(APPEALS) QUA THIS ISSUE IS UPHELD. 8. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF JULY, 2016. SD/- SD/- ( A.K. GARODIA ) (VIJAY PAL RAO ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 27 TH JULY, 2016. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.