TAWAKKAL WOOD PRODUCTS P. LTD, MUMBAI V. ACIT CIR 5(3), MUMBAI

ITA 948/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4279 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 14-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SACHIDANAND DUBEYDR
• Keywords: Principle of natural justice; Retrospective amendment; Non-deduction of tax
• Section: 40A(3); 143(3); 80IB; 139

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI- E,BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & SANDEEP GOSAIN,JUDICIAL MEMBER /.ITA NO.948/MUM/2013 /ASSESSMENT YEAR-2009-10 TAWAKKAL WOOD PRODUCTS P.LTD. 24, MOHAMMEDI OLD TIMBER MARKET NO.1, MAULANA, SHAUTKATALI ROAD,MUMBAI-400 008. PAN:AAACT 5193 N VS. ACIT, CIRCLE-5(3) AAYAKAR BHAVAN, M.K. ROAD MUMBAI. ( / ASSESSEE ) ( / RESPONDENT) /ASSESSEE BY :NONE. / REVENUE BY :SH. SACHIDANAND DUBEY-DR / DATE OF HEARING :17 - 11 -2015 /DATE OF PRONOUNCEMENT :01.01.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER 16.10.12 OF CIT(A)-9,MUMBAI T HE ASSESSEE HAS FILED THE PRESENT APPEAL RAISING THREE GROUNDS. ASSESSEE-COMAPNY,ENGAGED IN THE BUSINESS OF MANUFAC TURING OF BOARDS AND PLY WOOD,FILED ITS RETURN OF INCOME ON 30.9.2009 DECLARING INCOME OF R S.73.12 LACS.THE ASSESSING OFFICER(AO) COMPLETED THE ASSESSMENT ON 27.12.11 U/S. 143(3) OF THE ACT, DETERMINING THE INCOME OF THE ASSESSEE AT RS.1.13 CRORES. 2. FIRST EFFECTIVE GROUND OF APPEAL IS ABOUT VALIDITY OF THE ASSESSMENT AND BREACH OF PRINCIPLES OF NATURAL JUSTICE.DURING THE ASSESSMENT PROCEEDING S,THE AO MADE CERTAIN ADDITIONS TO THE INCOME OF THE ASSESSEE . 2.1 AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,IT WAS CONTENDE D THAT THE AO HAD MADE VARIOUS ADDITIONS/DISALLOWANCE IN VERY ARBITRARY AND CRYPTI C MANNER,THAT HE HAD NOT GIVEN PROPER OPPORTUNITY OF HEARING,THAT EVIDENCES PRODUCED BY I T SHOULD BE CONSIDERED FOR ARRIVING AT PROPER ADJUDICATION. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ASSESSMENT ORDER,THE FAA HELD THAT THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY OF BE ING HEARD DURING THE APPELLATE PROCEEDINGS, THAT THE FIRST NOTICE OF HEARING WAS ISSUED ON 28.3 .12 FIXING THE HEARING OF APPEAL ON 30.4.12, THAT THE ASSESSEE AVAILED SUFFICIENT OPPORTUNITIES OF HEARING AND WAS GIVEN ADJOURNMENTS WITH REGARD TO ITS LETTER DT.25.4.12,24.7.12,17.9.12, AN D 3.10.12,THAT THE AUTHORISED REPRESENTATIVE (AR)ATTENDED THE HEARING ON 9.8.12,3.10.12 AND16.10 .12,THAT HE FURNISHED WRITTEN SUBMISSION ON 16.10.12 AND ARGUED THE MATTER, THAT THE GRIEVAN CE OF THE ASSESSEE HAD BEEN TAKEN CARE OF DURING THE COURSE OF APPELLATE PROCEEDINGS.FINALLY, HE HELD THAT THE GROUND RELATED TO BREACH OF PRINCIPLE OF NATURAL JUSTICE WAS NOT MAINTAINABLE. 2.2. AS STATED EARLIER NOBODY APPEARED ON BEHALF OF THE ASSESSEE THOUGH THE NOTICE OF HEARING WAS SENT AT THE ADDRESS GIVEN BY THE ASSESSEE.THE A SSESSEE HAS NOT FILED ANY APPLICATION FOR ADJOURNING THE MATTER, THEREFORE, WE ARE DECIDING T HE APPEAL AFTER CONSIDERING THE AVAILABLE MATERIAL.THE DEPARTMENTAL REPRESENTATIVE (DR)SUPPOR TED THE MATTER OF THE FAA. ITA/948/2013-TAWAKKAL WOOD PRODUCTS ,AY.2009-10 2 AFTER CONSIDERING THE MATERIAL ON RECORD WE ARE OF THE OPINION THAT THE FAA GAVE AMPLE OPPORTUNITY OF HEARING TO THE ASSESSEE, THE MATTER WAS ADJOURNED FROM TIME TO TIME AS PER THE REQUEST MADE BY IT ,THAT THE AR HAD APPEARED BEFORE THE FAA, THAT HE HAD ARGUED THE CASE AND FILED WRITTEN SUBMISSIONS,THAT THE EVIDENCE PRODUCE D BY ASSESSEE WERE CONSIDERED BY FAA BEFORE DECIDING THE APPEAL,THAT HE HAD ALLOWED ONE OF THE GROUNDS WITH REGARD TO DISALLOWANCE MADE U/S. 80IB OF THE ACT.CONSIDERING THESE FACTS,WE ARE OF THE OPINION THAT THE ASSESSEE WAS GIVEN AMPLE OPPORTUNITY OF HEARING BY THE FAA.THEREFORE, UPHOLDING THIS ORDER IN THAT REGARD WE DECIDE EFFECTIVE GROUND NO.1 AGAI NST THE ASSESSEE. 3. NEXT GROUND OF APPEAL IS ABOUT DISALLOWANCE MADE U/ S.40(A)(IA) OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THERE WAS DELAY IN PAYMENT OF TDS DEDUCTED AND DEPOSITED TO THE CREDIT OF THE GOVERNMENT,THAT THE DUE DATE OF PAYMENT OF TDS DEDUCTED ON CONTRACTUAL PAYMENT/PROFESSIONAL FEE WAS 7.3.2009,T HAT DATE OF PAYMENT OF TDS AS PER THE RECORD WAS 8.4.2009.HE HELD THAT TDS AMOUNTING TO R S.27.02 LACS WOULD BE DISALLOWED FOR THE YEAR UNDER APPEAL AND WOULD BE ALLOWED IN AY 20 10-11. 3.1. DURING THE APPELLATE PROCEEDINGS,THE ASSESSEE CONTE NTED THAT TAX DEDUCTED AT SOURCE WAS PAID MUCH BEFORE THE DUE DATE SPECIFIED IN SUB SECT ION-1 OF SECTION 139 OF THE ACT, THAT NO DISALLOWANCE WAS CALLED FOR.THE FAA,RELYING UPON TH E CASE OF BHARATI SHIPYARD (132 ITD 53) HELD THAT AMENDMENT TO SECTION 40(A)(IA) OF THE ACT WERE APPLICABLE FROM AY 2010-11, THAT THE AMENDMENT WAS NOT CURATIVE.FINALLY, HE UPH ELD THE ORDER OF THE AO. 3.2. BEFORE US, THE DR LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. WE HAVE PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD PAID DEDUCTED TAX ON 8.4.2009,THAT THE PAYMENT WAS MADE WELL BEFORE THE DUE DATE OF FILING OF RETURN AS PER SECTION 139(1) OF THE ACT.IN OUR OPINION IF THE PAYMENT WAS MADE BEFORE THE DUE DATE OF FILING OF THE RETURN NO DISALLOWANCE COULD BE MADE U/S.40(A) (IA) OF THE ACT.IN THE CASE OF RAJINDER KUMAR.(362 ITR 241) DELIVERED BY THE HONBLE DELHI HIGH COURT THE HONBLE COURT HAS DEALT AND DELIBERATED UPON THE ISSUE AT LENGTH.WE WOULD L IKE TO REPRODUCE THE RELEVANT PORTION OF THE ORDER AND SAME READS AS UNDER: SECTION 40(A)(IA) OF THE INCOME-TAX ACT, 1961, AND THE PROVISO THERETO, AS AMENDED BY THE FINANCE ACT, 2008, WITH RETROSPECTIVE EFFECT FROM A PRIL 1, 2005, ACKNOWLEDGED THAT WHERE TAX WAS DEDUCTIBLE AND WAS DEDUCTED DURING THE LAST MON TH OF THE PREVIOUS YEAR BUT WAS PAID BEFORE THE DUE DATE SPECIFIED UNDER SUB-SECTION (1) OF SECTION 139 , DEDUCTION SHALL BE ALLOWED IN THE YEAR. CLAUSE (A) OF THE PROVISO TO SECTION 40(A)(IA) OF T HE ACT , AS AMENDED BY THE FINANCE ACT, 2008, WITH RETROSPECTIVE EFFECT FROM APRIL 1, 2005, HAS TO BE READ WITH CLAUSE (A) OF THE MAIN SECTION AND NOT IN ISOLATION. CLAUSE (A) OF THE MAI N SECTION AND CLAUSE (A) OF THE PROVISO WILL APPLY IN DIFFERENT FACTUAL MATRICES OR SITUATIONS. CLAUSE (A) OF THE MAIN SECTION APPLIES WHEN THE TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING T HE LAST MONTH OF THE ASSESSMENT YEAR AND WAS PAID ON OR BEFORE THE DUE DATE FOR FILING OF TH E RETURN UNDER SECTION 139(1) . THE PROVISO APPLIES WHEN TAX HAS BEEN DEDUCTED IN ANY SUBSEQUEN T YEAR OR HAS BEEN DEDUCTED IN TERMS OF CLAUSE (A) DURING THE LAST MONTH OF THE PREVIOUS YE AR BUT HAS BEEN PAID AFTER THE DUE DATE. THE EXPRESSION SAID DUE DATE CANNOT MEAN THE DATE ON WHICH TAX DEDUCTED AT SOURCE IN ACCORDANCE WITH CHAPTER XVIII-B SHOULD HAVE BEEN PA ID. IT REFERS TO THE DUE DATE FOR FILING OF THE RETURN UNDER SECTION 139(1) OF THE ACT. ANY OTH ER INTERPRETATION WOULD LEAD TO DIFFICULTIES, INCONGRUITIES AND CONFLICT BETWEEN CLAUSE (A) OF TH E MAIN SECTION AND CLAUSE (A) OF THE PROVISO. BOTH WOULD BE APPLICABLE TO THE SAME FACTU AL MATRIX/SITUATION WITH CONTRADICTORY STIPULATIONS OR CONSEQUENCES. THE PROVISIONS, AS AMENDED BY THE FINANCE ACT, 2010 , ARE CLEAR AND FREE FROM ANY AMBIGUITY AND DOUBT. THEY CLEARLY SUPPORT THE VIEW THAT THE E XPRESSION SAID DUE DATE USED IN CLAUSE (A) OF THE PROVISO TO THE UNAMENDED SECTION REFERS TO THE TIME SPECIFIED IN SECTION 139(1) OF THE ACT. THE AMENDED SECTION 40(A)(IA) EXPANDS AND FURTHER LIBERALISES THE STATUTE WHEN IT ITA/948/2013-TAWAKKAL WOOD PRODUCTS ,AY.2009-10 3 STIPULATES THAT DEDUCTIONS MADE IN THE FIRST ELEVEN MONTHS OF THE PREVIOUS YEAR BUT PAID BEFORE THE DUE DATE OF FILING OF THE RETURN, WILL CONSTITU TE SUFFICIENT COMPLIANCE. THE INTENTION BEHIND SECTION 40(A)(IA) IS TO ENSURE THAT TAX IS DEDUCTED AT SOURCE AND PAID. THE OBJECT OF INTRODUCTION OF SECTION 40(A)(IA) IS TO ENSURE THAT THE PROVISIONS FOR TAX DEDUCTION AT SOURCE ARE SCRUPULOUSLY IMPLEMENTED WI THOUT DEFAULT IN ORDER TO AUGMENT RECOVERIES. IT IS NOT TO PENALISE AN ASSESSEE WHEN PAYMENT HAS BEEN MADE WITHIN THE TIME STATED. FAILURE TO DEDUCT TAX AT SOURCE OR DEPOSIT IT RESULTS IN LOSS OF REVENUE AND MAY DEPRIVE THE GOVERNMENT OF THE TAX DUE AND PAYABLE. THE PROV ISION SHOULD BE INTERPRETED IN A FAIR, JUST AND EQUITABLE MANNER. IT SHOULD NOT BE INTERPRETED IN A MANNER WHICH RESULTS IN INJUSTICE AND CREATES TAX LIABILITIES WHEN TAX DEDUCTED HAS BEEN DEPOSITED AND THE ASSESSEE WHO WAS FOLLOWING THE CASH SYSTEM OF ACCOUNTANCY HAS MADE A CTUAL PAYMENT TO THE THIRD PARTY FOR SERVICES RENDERED. CLAUSE (C) OF THE EXPLANATION TO SECTION 194J WHICH STATES THAT CREDIT TO A SUSPENSE ACCOUNT OR ANY OTHER ACCOUNT IN THE BOOKS WOULD BE DEEMED T O BE CREDIT TO THE ACCOUNT OF THE PAYEE IS MEANT TO CURTAIL THE POSSIBILITY OR CHANCE OF NON-D EDUCTION IF AN ASSESSEE CREDITS A THIRD ACCOUNT INSTEAD OF CREDITING THE ACCOUNT OF THE PAY EE TO AWAIT DEDUCTION OF TAX THE AMENDMENT TO THE SECTION HAS BEEN HELD BY THE C OURTS AS CURATIVE AND HAVING RETROSPECTIVE EFFECT.THEREFORE, REVERSING THE ORDER OF THE FAA WE ARE DECIDING GROUND NO.1 IN FAVOUR OF THE ASSESSEE. 4. THE LAST GROUND OF APPEAL PERTAINS TO DISALLOWANCE OF RS.12.99 LACS, BEING 20% OF TOTAL LOADING/UNLOADING CHARGES AND WAGES PAID IN CASH.DU RING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD PAID RS.55.98 LACS AND RS.8.97 LACS IN CASH UNDER THE ABOVE MENTIONED TWO HEADS.HE DISALLOWED 20% OF THE TOTAL PAYMENTS MADE IN CASH I.E.RS.12,99, 200/-. 4.1. IN THE APPELLATE PROCEEDINGS BEFORE THE FAA,THE ASS ESSEE CONTENDED THAT ITS CASE DID NOT FALL WITHIN SECTION 40A(3) OF THE ACT, THAT EACH OF THE PAYMENT WAS LESS THAN RS.20,000/-.THE FAA REFERRED TO THE CASES OF GREENWOODS EXPORTS GLO BAL P. LIMITED (32 CCH 187) AND ANANDKUMAR RAWATRAM JOSHI (49 SOT 235), THAT THE AS SESSEE HAD FAILED TO EXPLAIN AS TO HOW THE CASE WAS COVERED BY AMENDED RULE 6D/6DD(K).FINA LLY, HE UPHELD THE ORDER OF THE AO. 4.2. BEFORE US, THE DR SUPPORTED THE ORDER OF THE FAA.WE FIND THAT THE AO HAD NOT CALLED FOR ANY EXPLANATION WITH REGARD TO THE CASH PAYMENTS BE FORE MAKING DISALLOWANCE.BEFORE THE FAA,THE ASSESSEE HAD SPECIFICALLY CONTENDED THAT TH E PAYMENTS MADE BY IT WERE LESS THAN RS.20,000/- THE FAA HAD NOT DEALT WITH THE SUBMISSI ON. IN OUR OPINION IT WAS A PERTINENT FACTOR TO UPHOLD/DELETE THE ADDITION.THEREFORE, WE ARE OF THE OPINION THAT,IN THE INTEREST OF JUSTICE,THE MATTER SHOULD BE RESTORED BACK TO THE F ILE OF THE AO FOR FRESH ADJUDICATION.HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEAR ING TO THE ASSESSEE.THE ASSESSEE IS DIRECTED TO PRODUCE NECESSARY EVIDENCES/DETAILS WITH REGARD TO PAYMENTS MADE IN CASH.GROUND NO.3 IS DECIDED IN FAVOUR OF THE ASSESSEE IN PART. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PA RTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST JANUARY, 2016. 01 , 2016 SD/- SD/- ( /SANDEEP GOSAIN ) ( / RAJENDRA ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER MUMBAI, DATE: 01.01.2016 . . . JV.SR.PS. ITA/948/2013-TAWAKKAL WOOD PRODUCTS ,AY.2009-10 4 / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.