M/s North Himalayan Environment Protection & Education Society, Panchkula V. ITO, Panchkula

ITA 883/CHANDI/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5212 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 06-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 08-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Retrospective amendment; Additional evidence; Question of law
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.883/CHD/2015 (ASSESSMENT YEAR : 2011-12) M/S NORTH HIMALAYAN ENVIRONMENT VS. THE INCOME T AX OFFICER, PROTECTION & EDUCATION SOCIETY, WARD-1, SCF-14, 2 ND FLOOR, SECTOR-15, PANCHKULA. PANCHKULA. PAN: AAATN9704G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMITOZ SINGH KAMBOJ RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 10.01.2017 DATE OF PRONOUNCEMENT : 06.04.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAIN ST THE ORDER OF CIT(A) , PANCHKULA DATED 30/09/2015 RE LATING TO A.Y 2011-12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN ALLEGING THAT THE ADDITIONS ARE REQUIRED TO BE MADE ON ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE U/S 40(A)(IA) OF THE INCOME TAX ACT,1961(THE ACT). 2. THAT THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT CONSIDERING THAT THE PAYMENTS HAVE BEEN MADE TO A STATUTORY BODY M/S H.P. BUS STANDS MANAGEMENT AND DEVELOPMENT 2 AUTHORITY, SHIMLA WHICH IS A GOVERNMENT DEPARTMENT. THUS, THERE IS NO QUESTION OF A BOGUS PAYMENT, THE MOOT POINT TO CURB BOGUS PAYMENTS WHEN THE LAW WAS ENACTED. 3. THAT THE LD. A.O HAS ERRED ON FACTS AND LAW IN ALLEGING AS ABOVE WITHOUT APPRECIATING THAT THE SAID GOVT. ORGANIZATION HAS DULY SHOWN THE SAID PAYMENTS IN ITS RETURN OF INCOME. THE LD. CIT(A) WAS OF THE VIEW THAT THE ASSESSEE IS REQUIRED TO DEDUCT TDS U/S 194(C) ON THE PAYMENTS MADE TO M/S H.P.BUS STANDS MANAGEMENT AND DEVELOPMENT AUTHORITY, SHIMLA. WHEREAS THE CONTENTION OF THE ASSESSEE WAS THAT TDS WAS NOT REQUIRED TO BE DEDUCTED ON PAYMENTS MADE TO M/S H.P.BUS STANDS MANAGEMENT AND DEVELOPMENT AUTHORITY, SHIMLA. WHICH IS A GOVERNMENT DEPARTMENT. 4. IN VIEW OF ALL THESE AND SUCH OTHER GROUNDS, WHICH MAY BE TAKEN AT THE TIME OF HEARING, THE APPEAL MAY PLEASE BE ALLOWED AND JUSTICE RENDERED. TOTAL PAYMENT MADE IS RS. 36,50,133/- WHICH IS DISALLOWED. 4. THE ONLY ISSUE IN THE PRESENT APPEAL IS AGAINST THE ACTION OF THE LD. CIT(A) IN UPHOLDING THE ADDITION OF RS. 36,50,133/- MADE U/S 40(A)(IA) OF THE ACT. 5. BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT THE ASSESSEE HAD CLAIMED DISPLAY RIGHTS PAYMENT OF RS . 36,50,133/- WHICH AS PER THE ASSESSEE WERE PAID TO M/S H.P.BUS STANDS MANAGEMENT AND DEVELOPMENT AUTHORITY , SHIMLA FOR OBTAINING DISPLAY RIGHTS WHICH WAS ALLOT TED THROUGH TENDER. THE A.O DISALLOWED THE SAME U/S 40( A)(IA) OF THE ACT SINCE NO TAX HAD BEEN DEDUCTED ON THE SAME BY THE ASSESSEE. LD. CIT(A), IN APPELLATE PROCEEDINGS BEFO RE HIM, UPHELD THE DISALLOWANCE MADE . 3 6. AGGRIEVED BY THE SAME, THE ASSESSEE HAS NOW COM E UP IN APPEAL BEFORE US. 7. DURING THE COURSE OF HEARING BEFORE US, LD. COUNSEL FOR THE ASSESSEE TOOK THE PLEA THAT NO DISA LLOWANCE COULD BE MADE U/S 40(A)(IA) SINCE THE PAYEE I.E M/S H.P.BUS STANDS MANAGEMENT AND DEVELOPMENT AUTHORITY, SHIMLA HAD INCLUDED THE SAID PAYMENTS IN ITS INCOME AND HAD PA ID TAXES ON THE SAME. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS PLEADING HAD BEEN TAKEN BEFORE THE LD. CIT(A) ALSO BUT IN THE ABSENCE OF EVIDENCE PROVING THAT THE PAYEE H AD PAID TAXES ON THE SAME, LD. CIT(A) HAD NOT ACCEPTED THE ASSESSEES CONTENTION. LD. COUNSEL FOR THE ASSESSEE THEREAFTER STATED THAT IT HAD EVIDENCE TO PROVE AND SUBSTANTIATE ITS CLAIM WHICH IT WISHED TO NOW PRODU CE BEFORE US BY WAY OF ADDITIONAL EVIDENCE. LD.COUNSEL FOR TH E ASSESSEE FILED AN APPLICATION IN THIS REGARD DATED 06/09/201 6. LD. COUNSEL FOR THE ASSESSEE FURTHER PLEADED THAT SINCE THESE DOCUMENTS WERE TO BE PROCURED/ OBTAINED FROM THE PA YEE, THEY COULD NOT BE SUBMITTED DURING APPELLATE PROCEE DINGS AND THEREFORE, REQUESTED THAT THE SAME MAY NOW BE A DMITTED SINCE THEY WENT TO THE ROOT OF THE MATTER TO DECIDE THE ISSUE. LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF THE AO AND CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES. THE SOLE ISSUE BEFORE US IS RELATING TO DISALLOWANCE MADE U/S 40(A )(IA) ON 4 ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE VIS--VIS EXPENSE INCURRED ON ACCOUNT OF DISPLAY RIGHTS PAYMENT AMO UNTING TO RS. 36,50,133/- MADE TO M/S H.P.BUS STANDS MANAG EMENT AND DEVELOPMENT AUTHORITY, SHIMLA. THE SOLE CONTENT ION RAISED BY THE LD. COUNSEL OF THE ASSESSEE IS THAT N O DISALLOWANCE IS PERMISSIBLE U/S 40(A)(IA) SINCE THE PAYEE I.E M/S H.P.BUS STANDS MANAGEMENT AND DEVELOPMENT AUTHORITY, SHIMLA HAS INCLUDED THE SAID PAYMENT IN ITS INCOME AND PAID TAXES ON THE SAME. THE LD. COUNSEL HAS FURTHER ADDUCED THE FOLLOWING EVIDENCES BEFORE US T O SUBSTANTIATE ITS AFORESAID CLAIM. CERTIFICATE FROM M/S H.P. BUS STANDS MANAGEMENT AND DEVELOPMENT AUTHORITY, SHIMLA REGARDING RECEIPTS FROM THE ASSESSEE ON ACCOUNT OF ADVERTISEMENT RIGHTS DURING THE YEAR AND FURTHER CERTIFYING THAT THE SAID AMOUNT WAS DULY ACCOUNTED FOR IN ITS BOOKS. COPY OF INCOME TAX RETURN OF M/S H.P. BUS STANDS MANAGEMENT AND DEVELOPMENT AUTHORITY, SHIMLA FILED DURING THE YEAR. 9. WE ARE IN AGREEMENT WITH THE CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE VIS--VIS THE PROPOSITION O F LAW THAT WHERE THE PAYEE HAS INCLUDED THE IMPUGNED PAYMENT I N ITS INCOME AND PAID TAXES ON THE SAME AND DISCLOSED IT IN ITS RETURN OF INCOME, NO DISALLOWANCE ON ACCOUNT OF THE SAID PAYMENT/ EXPENSES IS TO BE MADE IN THE HANDS OF THE PAYER. 5 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT -1 VS ANSAL LAND MARK TOWNSHIP (P) LTD IN ITA NO.160/2015 & 161 /2015 DT.26-08-2015, HAS LAID DOWN THE SAID PROPOSITION H OLDING AS UNDER: 12. RELEVANT TO THE CASE IN HAND, WHAT IS COMMON T O BOTH THE PROVISOS TO SECTION 40 (A) (IA) AND SECTION 210 (1) OF THE ACT IS THAT THE AS LONG AS THE PAYEE/RESIDENT (WHICH IN THIS CASE IS ALIP) HAS FIL ED ITS RETURN OF INCOME DISCLOSING THE PAYMENT RECEIVED BY AND IN WHICH THE INCOME EARNED BY IT IS EMBEDDED AND HAS ALSO PAID TAX ON SUCH INCOME, THE ASSESSEE WOULD NOT BE TREATED AS A PERSON IN DEFAULT. AS FAR AS THE PR ESENT CASE IS CONCERNED, IT IS NOT DISPUTED BY THE REVENUE THAT THE PAYEE HA S FILED RETURNS AND OFFERED THE SUM RECEIVED TO TAX. 13. TURNING TO THE DECISION OF THE AGRA BENCH OF IT AT IN RAJIV KUMAR AGARWAL V. ACIT (SUPRA ) , THE COURT FINDS THAT IT HAS UNDERTAKEN A THOROUGH ANALYSIS OF THE SECOND PROVISO TO SECTION 40 (A)(IA) OF THE ACT AND ALSO SOUGHT TO EXPLAIN THE RATIONALE BEHIND ITS INSERTION. IN PARTICULAR, THE COURT WOULD LIKE TO REFER TO PARA 9 OF THE SAID ORDER WHICH READS AS UNDER: 'ON A CONCEPTUAL NOTE, PRIMARY JUSTIFICATION FOR SU CH A DISALLOWANCE IS THAT SUCH A DENIAL OF DEDUCTION IS TO COMPENSATE FO R THE LOSS OF REVENUE BY CORRESPONDING INCOME NOT BEING TAKEN INTO ACCOUNT I N COMPUTATION OF TAXABLE INCOME IN THE HANDS OF THE RECIPIENTS OF TH E PAYMENTS. SUCH A POLICY MOTIVATED DEDUCTION RESTRICTIONS SHOULD, THE REFORE, NOT COME INTO PLAY WHEN AN ASSESSEE IS ABLE TO ESTABLISH THAT THE RE IS NO ACTUAL LOSS OF REVENUE. THIS DISALLOWANCE DOES DEINCENTIVIZE NOT D EDUCTING TAX AT SOURCE, WHEN SUCH TAX DEDUCTIONS ARE DUE, BUT, SO FAR AS TH E LEGAL FRAMEWORK IS CONCERNED, THIS PROVISION IS NOT FOR THE PURPOSE OF PENALIZING FOR THE TAX DEDUCTION AT SOURCE LAPSES. THERE ARE SEPARATE PENA L PROVISIONS TO THAT EFFECT. DEINCENTIVIZING A LAPSE AND PUNISHING A LAP SE ARE TWO DIFFERENT THINGS AND HAVE DISTINCTLY DIFFERENT, AND SOMETIMES MUTUALLY EXCLUSIVE, CONNOTATIONS. WHEN WE APPRECIATE THE OBJECT OF SCHE ME OF SECTION 40(A)(IA), AS ON THE STATUTE, AND TO EXAMINE WHETHE R OR NOT, ON A 'FAIR, JUST AND EQUITABLE' INTERPRETATION OF LAW- AS IS THE GUI DANCE FROM HON'BLE DELHI HIGH COURT ON INTERPRETATION OF THIS LEGAL PR OVISION, IN OUR HUMBLE UNDERSTANDING, IT COULD NOT BE AN 'INTENDED CONSEQU ENCE' TO DISALLOW THE EXPENDITURE, DUE TO NON DEDUCTION OF TAX AT SOURCE, EVEN IN A SITUATION IN WHICH CORRESPONDING INCOME IS BROUGHT TO TAX IN THE HANDS OF THE RECIPIENT. THE SCHEME OF SECTION 40(A)(IA), AS WE S EE IT, IS AIMED AT ENSURING THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATION IN WHICH INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED DUE TO TAX WITHHOL DING LAPSES BY THE ASSESSEE. IT IS NOT, IN OUR CONSIDERED VIEW, A PENA LTY FOR TAX WITHHOLDING LAPSE BUT IT IS A SORT OF COMPENSATORY DEDUCTION RE STRICTION FOR AN INCOME GOING UNTAXED DUE TO TAX WITHHOLDING LAPSE. THE PEN ALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEPARATELY PROVIDED FOR IN SECTION 271 C, AND, SECTION 40(A)(IA) DOES NOT ADD TO THE SAME. THE PRO VISIONS OF SECTION 40(A)(IA), AS THEY EXISTED PRIOR TO INSERTION OF SE COND PROVISO THERETO, WENT MUCH BEYOND THE OBVIOUS INTENTIONS OF THE LAWMAKERS AND CREATED UNDUE HARDSHIPS EVEN IN CASES IN WHICH THE ASSESSEE'S TAX WITHHOLDING LAPSES DID 6 NOT RESULT IN ANY LOSS TO THE EXCHEQUER. NOW THAT T HE LEGISLATURE HAS BEEN COMPASSIONATE ENOUGH TO CURE THESE SHORTCOMINGS OF PROVISION, AND THUS OBVIATE THE UNINTENDED HARDSHIPS, SUCH AN AMENDMENT IN LAW, IN VIEW OF THE WELL SETTLED LEGAL POSITION TO THE EFFECT THAT A CURATIVE AMENDMENT TO AVOID UNINTENDED CONSEQUENCES IS TO BE TREATED AS R ETROSPECTIVE IN NATURE EVEN THOUGH IT MAY NOT STATE SO SPECIFICALLY, THE I NSERTION OF SECOND PROVISO MUST BE GIVEN RETROSPECTIVE EFFECT FROM THE POINT OF TIME WHEN THE RELATED LEGAL PROVISION WAS INTRODUCED. IN VIEW OF THESE DISCUSSIONS, AS ALSO FOR THE DETAILED REASONS SET OUT EARLIER, WE C ANNOT SUBSCRIBE TO THE VIEW THAT IT COULD HAVE BEEN AN 'INTENDED CONSEQUEN CE' TO PUNISH THE ASSESSEES FOR NON DEDUCTION OF TAX AT SOURCE BY DEC LINING THE DEDUCTION IN RESPECT OF RELATED PAYMENTS, EVEN WHEN THE CORRESPO NDING INCOME IS DULY BROUGHT TO TAX. THAT WILL BE GOING MUCH BEYOND THE OBVIOUS INTENTION OF THE SECTION. ACCORDINGLY, WE HOLD THAT THE INSERTIO N OF SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NA TURE AND IT HAS RETROSPECTIVE EFFECT FROM 1ST APRIL, 2005, BEING TH E DATE FROM WHICH SUB CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY THE FI NANCE (NO. 2) ACT, 2004.' 14. THE COURT IS OF THE VIEW THAT THE ABOVE REASONI NG OF THE AGRA BENCH OF ITAT AS REGARDS THE RATIONALE BEHIND THE INSERTION OF THE SECOND PROVISO TO SECTION 40(A) (IA) OF THE ACT AND ITS CONCLUSION THAT THE SAID P ROVISO IS DECLARATORY AND CURATIVE AND HAS RETROSPECTIVE EFFE CT FROM 1ST APRIL 2005, MERITS ACCEPTANCE. 15. IN THAT VIEW OF THE MATTER, THE COURT IS UNABLE TO FIND ANY LEGAL INFIRMITY IN THE IMPUGNED ORDER OF THE ITAT IN ADOP TING THE RATIO OF THE DECISION OF THE AGRA BENCH, ITAT IN ( RAJIV KUMAR AGARWAL V. ACIT ). 16. NO SUBSTANTIAL QUESTION OF LAW ARISES IN THE FA CTS AND CIRCUMSTANCES OF THE PRESENT CASE. THE APPEAL IS DISMISSED. 10. FURTHER, WE FIND THAT THE ASSESSEE HAS ADDUCED EVIDENCES BEFORE US BY WAY OF ADDITIONAL EVIDENCES TO PROVE THAT THE PAYEE HAD INCLUDED THE AFORESAID PAYMENT I N ITS INCOME AND PAID TAXES ON THE SAME ALSO. SINCE WE AG REE WITH THE LD. COUNSEL OF THE ASSESSEE THAT THESE EVIDENCE S GO TO THE ROOT OF THE MATTER AND ARE NECESSARY FOR THE AD JUDICATION OF THE ISSUE IN THE PRESENT APPEAL, WE THEREFORE AD MIT THE SAME AND FURTHER RESTORE THE ISSUE TO THE FILE OF T HE A.O TO EXAMINE THE ISSUE AFRESH IN THE LIGHT OF THE PROPOS ITION AS LAID DOWN BY THE HONBLE DELHI HIGH COURT IN ANSAL LAND MARK TOWNSHIP (P) (LTD)(SUPRA) AND IN THE LIGHT OF EVIDENCES PRODUCED BY THE ASSESSEE IN THIS REGARD. WE MAY ADD THAT 7 THE ASSESSEE BE GIVEN DUE OPPORTUNITY OF HEARING AN D IS FREE TO ADDUCE ALL EVIDENCES WHICH IT WISHES TO RELY UPO N TO SUBSTANTIATE ITS CLAIM. THE A.O. IS DIRECTED TO DEC IDE THE MATTER THEREAFTER IN ACCORDANCE WITH LAW. 11. IN EFFECT, THE APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 6 TH APRIL, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH 8