Raj Veer Singh, New Delhi V. ACIT, New Delhi

ITA 965/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2868 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 17-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Retrospective amendment; Right to appeal
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: F , NEW DELHI BEFORE SHRI N. S .SAINI , ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 96 5 /DEL/201 5 A.Y. 20 11 - 12 SH. RAJ VEER SINGH PROP. NUTECH BUILDERS 25, SHANTI KUNJ BEHIND POCKET D - 3 VASANT KUNJ NEW DELHI 110 070 PAN: ABBPS1866N VS . ACIT, CIRCLE 24(1) ROOM NO.1305 CIVIC CENTRE NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. SATYAJEET GOEL, C.A. RESPONDENT BY SH. ATIQ AHMED, SR.D.R. DATE OF HEARING 14.03.2018 DATE OF PRONOUNCEMENT 16.03.2018 ORDER PER BEENA PILLAI, JUDICIAL MEMBER T HE PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER DATED 31/03/14 PASSED BY LD.CIT (A) - 11, NEW DELHI FOR ASSESSMENT YEAR 2011 - 12 ON THE FOLLOWING GROUNDS OF APPEAL: ITA 965/DEL/15 A.Y. 2011 - 12 SH. RAJ VEER SINGH, PROP. NUTECH BUILDERS, NEW DELHI 2 L(I). THAT ON THE F ACT S AND CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING DISALLOWANCE OF RS. 6,14,197/ - IN TERMS OF PROVISIONS OF SEC. 40(A)(IA) OF THE INCOME TAX ACT , 1961 ON THE ALLEGED GROUND THAT THERE WAS DEFAULT IN COMPLIANCE TO PROVISIONS OF SEC. 194C OF THE INCOME TAX ACT , 1961. (II) THAT FINDING AND CONCLUSION OF THE LOWER AUTHORITI ES IS WITHOUT PROPER APPRECIATION OF F ACT S AND PROVISIONS OF SEC. 194C OF THE INCOME TAX ACT , 1961. (III) THAT THERE WAS NO DEFAULT IN TERMS OF PROVISIONS OF SEC. 194C AS VARIOUS PAYMENTS MADE UNDER REFERENCE WERE NOT COVERED FOR ANY TDS U / S. 194C OF TH E INCOME TAX ACT , 1961. 2. THAT IN THE ALTERNATIVE, THERE BEING NO CASE OF ANY OUTSTANDING PAYMENT AS AT THE CLOSE OF THE YEAR AND THERE BEING NO DISPUTE ABOUT THE GENUINENESS OF THE CLAIM, THERE IS NO CASE OF ANY DISALLOWANCE U / S. 40(A)(IA) OF THE INCOME TAX ACT , 1961. 3. THAT ORDER OF THE LOWER AUTHORITIES ARE NOT JUSTIFIED ON F ACT S AND SAME ARE BAD IN LAW. 2. B RIEF F ACT S OF THE CASE ARE AS UNDER : A SSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.21,43,790/ - ON 30/09/11. THE CASE WAS SEL ECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED UNDER SECTION 143 (3) OF THE INCOME TAX ACT , 1961 (THE ACT ) AT AN INCOME OF RS. 89, 3,270/ - BY MAKING VARIOUS DISALLOWANCES IN THE HANDS OF ASSESSEE. ITA 965/DEL/15 A.Y. 2011 - 12 SH. RAJ VEER SINGH, PROP. NUTECH BUILDERS, NEW DELHI 3 3. AGGRIEVED BY THE ADDITIONS MADE BY LD. AO ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT (A) WHO PARTLY ALLOWED THE APPEAL OF ASSESSEE. 4. AGGRIEVED BY THE ORDER OF LD.CIT(A) ASSESSEE IS IN APPEAL BEFORE US NOW. 5. THE ONLY GROUND THAT HAS BEEN RAISED BY AS SESSEE IS AGAINST THE DISALLOWANCE OF RS. 6,14, 1 97/ - IN TERMS OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ON THE GROUND THAT THERE WAS A DEFAULT IN COMPLIANCE TO PROVISIONS OF SECTION 19 4 C OF THE ACT . 6. LD. AR SUBMITTED THAT DURING THE YEAR UNDER CONSIDE RATION ASSESSEE HAS SHOWN INCOME FROM CIVIL CONSTRUCTION AND ALSO INCOME FROM OTHER SOURCES. HE SUBMITTED THAT IN THE PROFIT AND LOSS ACCOUNT, ASSESSEE HAD DEBITED A SUM OF RS. 1,65,28,376/ - UNDER THE HEAD LABOUR AND WAGES CHARGES , WHERE THE TDS WAS NOT D EDUCTED AS ASSESSEE HAD EMPLOYED ITS OWN LABOUR AND THE AMOUNT BEING SALARY DOES NOT EXCEED THE BASIC EXEMPTION LIMIT FOR DEDUCTING TD S WHILE MAKING PAYMENT AS PROVIDED IN THE STATUTE. 6.1. LD. AR FURTHER SUBMITTED THAT DURING THE FIRST APPELLATE PROCEEDIN GS, THE LD. CIT(A) HAD RESTRICTED THE DISALLOWANCE TO THE EXTENT OF PAYMENTS MADE BY CHE QUE TO TWO PERSONS NAMELY, SH. HUKUM SINGH AND SH. TOHID KHAN, INVOLVING AN AMOUNT OF RS.6, 1 4,197/ - . LD. CIT (A) HAD GRANTED RELIEF AMOUNTING TO RS.59,97,153/ - AS THESE PAYMENTS WERE MADE TO THE LABOURERS IN CASH. ITA 965/DEL/15 A.Y. 2011 - 12 SH. RAJ VEER SINGH, PROP. NUTECH BUILDERS, NEW DELHI 4 6.2. LD. AR THUS SUBMITTED THAT THE DISALLOWANCE RESTRICTED BY LD. CIT (A) MAY BE DELETED AS THESE ARE VERIFIABLE, AS THE PAYMENT HAS BEEN MADE THROUGH BANKING CHANNELS. 6.3. ON THE CONTRARY LD. DR SUBMITTED THA T THE PAYMENTS MADE BY CHE QUE TO THESE TWO PEOPLE IS IN VIOLATION OF THE PROVISIONS OF SECTION 194C OF THE ACT AS THE PAYMENTS EXCEED THE STATUTORY LIMIT FOR WHICH NO TDS HAS BEEN DEDUCTED. HE THUS SUPPORTED THE ORDER OF LD. CIT (A). 7. WE HAVE PERUSED TH E SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US . 8. LD. AR HAS CONTENDED BEFORE US THAT THE PAYMENTS MADE TO THE TWO PARTIES BY WAY OF CHE QUE ARE VERIFIABLE. THEREFORE, IN VIEW OF THE SECOND PROVISO TO SECTION 40 (A)( IA ) OF THE ACT , NO DISALLOWANCE IS CALLED FOR IN RESPECT OF THIS AMOUNT IF IT IS PROVED BY ASSESSEE THAT THE RECIPIENTS HAVE PAID THE TAXES ON SUCH SUM RECEIVED BY THEM. THE ASSESSEE URGED THAT THE SECOND PROVISO TO SECTION 40 (A)( IA ) IS REMEDIAL IN NATURE AND THEREFORE, THE SAID AMENDMENT WILL HAVE RETROSPECTIVE EFFECT. 9. WE FIND THAT HON'BLE DELHI HIGH COURT IN CASE OF CIT VS. NARESH KUMAR REPORTED IN (2013) 39 TAXMANN.COM 182 WHILE DEALING WITH AN IDENTICAL ISSUE HELD AS UNDER: 14. PROVISIONS RELATING TO DEDUCTION OF TAX AT SOURCE ARE IMPORTANT AS THIS ENSURES THAT TAX SO DEDUCTED GETS DEPOSITED WITH THE GOVERNMENT AND NON - TAXPAYERS/FILERS CAN BE IDENTIFIED. THE DEDUCTEE DO NOT SUFFER AND ARE NOT DEPRIVED OF CREDIT OF DEDUCTION MADE FROM THEIR INCOME. SECTION 40(A)(IA) IS A PROVISION INCORPORATED WITH THE SAID OBJECTIVE AND PURPOSE IN MIND. IT IS NOT BASICALLY A PENAL PROVISION AS WHEN THE TDS IS DEPOSITED, THE AMOUNT ON WHICH ITA 965/DEL/15 A.Y. 2011 - 12 SH. RAJ VEER SINGH, PROP. NUTECH BUILDERS, NEW DELHI 5 DEDUCTION WAS MADE IS ALLOWED AS AN EXPENDITURE INCURRED IN PREVIOUS YEAR IN WHICH THE PAYMENT OF TDS IS MADE. THUS, IT RESULTS IN SHIFTING OF THE YEAR IN WHICH THE EXPENDITURE CAN BE CLAIMED, EVEN IF PAYMENT HAS BEEN MADE TO THE RECIPIENT AND IS TO BE ALLOWED AS EXPENDITURE IN ANOTHER YEAR. PRINCIPLE OF MATCHIN G I.E. MATCHING OF RECEIPTS WITH EXPENDITURE TO THE EXTENT INDICATED IN SECTION 40(A)(IA), THEREFORE, GETS AFFECTED. THE PROVISION CAN WORK HARSHLY AND MAY BE VERY STRINGENT IN SOME CASES AS IS APPARENT FROM THESE F A CT S STATED IN THE CASE OF NARESH KUMAR. STRICT COMPLIANCE OF SECTION 40(1)(IA) MAY BE JUSTIFIED KEEPING IN VIEW THE LEGISLATIVE OBJECT AND PURPOSE BEHIND THE PROVISION BUT A PROVISION OF SUCH NATURE SHOULD NOT BE ALLOWED TO BE CONVERTED INTO AN IRON ROD PROVISION WHICH METES OUT STERN PUNISHMENT AND RESULTS IN MALEVOLENT RESULTS, DISPROPORTIONATE TO THE OFFENDING ACT AND AIM OF THE LEGISLATION. LEGISLATIVE PURPOSE AND THE OBJECT IS TO ENSURE PAYMENT AND DEPOSIT OF TDS WITH THE GOVERNMENT. TDS RESULTS IN COLLECTION OF TAX. LEGISLATURE CAN AND DO E XPERIMENT AND INTERVENE FROM TIME TO TIME WHEN THEY FEEL AND NOTICE THAT THE EXISTING PROVISION IS CAUSING AND CREATING UNINTENDED AND EXCESSIVE HARDSHIPS TO CITIZENS AND SUBJECTS OR HAVE RESULTED IN GREAT INCONVENIENCE AND UNCOMFORTABLE RESULTS. OBEDIENCE TO LAW IS MANDATORY AND HAS TO BE ENFORCED BUT THE MAGNITUDE OF PUNISHMENT MUST NOT BE DISPROPORTIONATE BY WHAT IS REQUIRED AND NECESSARY. THE CONSEQUENCES AND THE INJURY CAUSED, IF DISPROPORTIONATE DO AND CAN RESULT IN AMENDMENTS WHICH HAVE THE EFFECT OF STREAMLINING AND CORRECTING ANOMALIES. THE AMENDMENTS MADE IN 2010 WERE A STEP IN THE SAID DIRECTION AND THIS ASPECT HAS TO BE KEPT IN MIND WHEN WE EXAMINE AND CONSIDER WHETHER THE AMENDMENT SHOULD BE GIVEN RETROSPECTIVE EFFECT OR NOT. 15. QUESTION WHETHE R THE AMENDMENT IS RETROSPECTIVE OR PROSPECTIVE IS VEXED AND RIGID RULE CAN BE APPLIED UNIVERSALLY. VARIOUS RULES OF INTERPRETATION HAVE DEVELOPED IN ORDER TO DETERMINE WHETHER OR NOT, AN AMENDMENT IS RETROSPECTIVE OR PROSPECTIVE. FISCAL STATUTES IMPOSING LIABILITIES ARE GOVERNED BY NORMAL PRESUMPTION THAT THEY ARE NOT RETROSPECTIVE. THE CARDINAL RULE IS THAT THE LAW TO BE APPLIED, IS THAT WHICH IS IN FORCE ON THE FIRST DAY OF THE ASSESSMENT YEAR, UNLESS OTHERWISE MANDATED EXPRESSLY OR PROVIDED BY NECESSARY IMPLICATION. THE AFORESAID DICTUM IS BASED UPON THE PRINCIPLE THAT A NEW PROVISION CREATING A LIABILITY OR AN OBLIGATION, AFFECTING OR TAKING AWAY ITA 965/DEL/15 A.Y. 2011 - 12 SH. RAJ VEER SINGH, PROP. NUTECH BUILDERS, NEW DELHI 6 VESTED RIGHTS OR ATTACHING NEW DISABILITY IS PRESUMED TO BE PROSPECTIVE. HOWEVER, IT IS ACCEPTED THAT LEGISL ATURES HAVE PLENARY POWER TO MAKE RETROSPECTIVE AMENDMENTS, SUBJECT TO CONSTITUTIONAL RESTRICTIONS. 16. BASED UPON THE AFORESAID BROAD DICTUM, JUDGES AND JURISTS HAVE DRAWN DISTINCTION BETWEEN PROCEDURAL AND SUBSTANTIVE PROVISIONS. SUBSTANTIVE PROVISIONS D EAL WITH RIGHTS AND THE SAME ARE FUNDAMENTAL, WHILE PROCEDURAL LAW IS CONCERNED WITH THE LEGAL PROCESS INVOLVING ACT IONS AND REMEDIES. AMENDMENTS TO SUBSTANTIVE LAW ARE TREATED AS PROSPECTIVE, WHILE AMENDMENTS TO PROCEDURAL LAW ARE TREATED AS RETROSPECTIVE . THIS DISTINCTION ITSELF IS NOT FREE FROM DIFFICULTIES AS RIGHT TO APPEAL HAS BEEN HELD TO BE A SUBSTANTIVE LAW, BUT LAW OF LIMITATION IS REGARDED AS PROCEDURAL. THERE IS AN INTERPLAY AND INTERCONNECT BETWEEN WHAT CAN BE REGARDED AS SUBSTANTIVE AND PROCED URAL LAW [SEE CIT V. SHRAWAN KUMAR SWARUP & SONS [1998] 232 ITR 123(ALL.) ]. 17. THERE ARE DECISIONS, WHICH HOLD THAT PROCESS OF LITIGATION OR ENFORCEMENT OF LAW IS PROCEDU RAL. SIMILARLY, MACHINERY PROVISION FOR COLLECTION OF TAX, RATHER THAN TAX ITSELF IS PROCEDURAL. READ IN THIS CONTEXT, IT CAN BE STRONGLY ARGUED THAT SECTION 40(A)(IA) AT LEAST TO THE EXTENT OF THE AMENDMENT IS PROCEDURAL AS BY EN A CT ING SECTION 40(A)(IA) THE LEGISLATURE DID NOT WANT TO IMPOSE A NEW TAX BUT WANTED TO ENSURE COLLECTION OF TDS AND THE AMENDMENTS MADE STREAMLINE AND REMEDY THE ANOMALIES NOTICED IN THE SAID PROCEDURE BY ALLOWING DEDUCTION IN THE YEAR WHEN THE EXPENDITURE IS INCURRED PROVIDED TD S IS PAID BEFORE THE DUE DATE FOR FILING OF THE RETURN. REMEDIAL STATUTES ARE NORMALLY NOT RETROSPECTIVE, ON THE GROUND THAT THEY MAY AFFECT VESTED RIGHTS. BUT THESE STATUTES ARE CONSTRUED LIBERALLY WHEN JUSTIFIED AND RULE AGAINST RETROSPECTIVITY MAY BE AP PLIED WITH LESS RESISTANCE [SEE BHARAT SINGH V. MANAGEMENT OF NEW DELHI TUBERCULOSIS CENTRE [1986] 2 SCC 614 AND WORKMEN FIRESTONE TYRE & RUBBER CO. OF INDIA (P.) LTD. V. MANAGEMENT AIR 1973 SC 1227. 9.1. HENCE, RESPECTFULLY FOLLOWING THE SAME WE SET ASIDE THIS ISSUE TO LD. AO FOR LIMITED PURPOSE TO VERIFY THE F A CT THAT THE INCOME RECEIVED BY TWO PARTIES HAVE BEEN INCLUDED BY THEM IN THE RETURN OF INCOME AND OFFERED TO TAX AND THEN DECIDE THIS ISSUE IN LIGHT OF ITA 965/DEL/15 A.Y. 2011 - 12 SH. RAJ VEER SINGH, PROP. NUTECH BUILDERS, NEW DELHI 7 ABOVE OBSERVATION. NEEDLESS TO SAY THAT ASSESS EE SHALL PRODUCE THE RELEVANT EVIDENCE IN RESPECT OF THE SAME , FROM SH.HUKUM SINGH AND SH. TOHID KHAN . 9.2. ACCORDINGLY THE GROUNDS RAISED BY ASSESSEE STAND ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 1 6 . 0 3 . 2 0 1 8 . S D / - S D / - ( N. S .SAINI ) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 6 T H MARCH, 201 8 . MV ITA 965/DEL/15 A.Y. 2011 - 12 SH. RAJ VEER SINGH, PROP. NUTECH BUILDERS, NEW DELHI 8 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT, DELHI BENCHES, NEW DELHI