ACIT, Ludhiana V. Sh. Urjit Singh Mundi, Ludhiana

ITA 989/CHANDI/2012

• Counselvise Citation: 98921514 RSA 2012
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 28-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AKHILESH GUPTA
• Keywords: Non compliance
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 989/CHD/2012 ASSESSMENT YEAR: 2008-09 ACIT, CIRCLE-1, V SHRI URJIT SINGH MUNDI, LUDHIANA. PROP.MUDIAN CARRIERS (INDIA) LUDHIANA. PAN: AGTPM-3724C (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI AKHILESH GUPTA ASSESSEE BY : NONE DATE OF HEARING : 10.12.2012 DATE OF PRONOUNCEMENT : 13.12.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 26.07.2012 PASSED BY THE LD . CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT'). 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND O N FACTS IN DELETING THE DISALLOWANCE MADE BY THE A.O. AT RS. 1 9,97,5017- BY APPLYING PROVISIONS OF SECTION 40(A)(IA) OF THE I.T. ACT, 19 61 READ WITH RULE 29D OF I.T. RULES BECAUSE ASSESSEE FAILED TO SUBMIT FORM N O. 151 & 15J WITH THE CONCERNED CIT/ITO (IDS). 2. THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT O F A.O. BE RESTORED. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 2 3. NONE ATTENDED ON BEHALF OF THE ASSESSEE. 4. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'DR' CONTENDED THAT CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE MADE BY THE AO AT RS.19,9 7,501/- BY APPLYING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT RED WITH RULE 29D OF I.T.RULES, AS THE ASSESSEE FAILED TO SU BMIT FORM NO. 151 & 15J. 5. THE CIT(APPEALS) DELETED THE DISALLOWANCE OF RS.19,97,501/-, MADE BY THE AO, BY GIVING DETAILED FINDINGS. FOR PROPER APPRECIATION OF THE ISSUE, THE SAME ARE REPRODUCED HEREUNDER : 4. I HAVE CONSIDERED THE BASIS OF DISALLOWANCE MAD E BY THE ASSESSING OFFICER AND THE ARGUMENTS OF THE AR ON TH E ISSUE. THE ASSESSING OFFICER HAS ACCEPTED THE FACT THAT THE APPELLANT HA D OBTAINED FROM NO. 15-1 FROM THE TRUCK OWNERS TO WHOM THE FREIGHT PAYMENT H AD BEEN MADE WITHOUT DEDUCTION OF TDS, HOWEVER THE SUBSEQUENT REQUIREMEN T OF SUBMISSION OF FORM NO. 15-J HAS NOT BEEN COMPLIED WITH BY THE APP ELLANT AS VERIFIED BY THE ASSESSING OFFICER. THE NON COMPLIANCE OF THE SA ID REQUIREMENT OF SUBMISSION OF FORM NO. 15-J BEFORE THE DUE DATE DOE S NOT ALTER THE FACT THAT ASSESSEE WAS NOT LIABLE TO DEDUCT TDS ONCE FORM NO. 15-1 IS SUBMITTED BY THE INDIVIDUAL TRUCK OWNER. THE CONSEQUENT NON COMPLIAN CE HAS ITS OWN RAMIFICATIONS UNDER THE ACT, BUT DISALLOWANCE U/S 4 0(A)(IA) IS NOT WARRANTED. THE JUDICIAL PRONOUNCEMENT RELIED UPON B Y THE AR ESPECIALLY THE JUDGEMENT OF HON'BLE ITAT AHMEDABAD A-BENCH IN THE CASE OF VALLABHAI KHANBHAI MANKAD VS DEPUTY COMMISSIONER OF INCOME TA X, ITAT, ALLAHABAD 'A' BENCH IS DIRECTLY ON THE ISSUE UNDER CONSIDERAT ION. IT HAS BEEN HELD AS UNDER:- 'ONCE ASSESSEE HAS OBTAINED FORM NO. 15-1 FROM THE SUB-CONTRACTORS WHOSE CONTENTS ARE NOT DISPUTED OR WHOSE GENUINENES S IS DOUBTED THEN ASSESSEE IS NOT LIABLE TO DEDUCT TAX FROM THE PAYME NTS MADE TO SUB- CONTRACTORS. ONCE ASSESSEE IS NOT LIABLE TO DUCT TA X U/S 194C THE ADDITION U/S 40(A)(IA) CANNOT BE MADE. THE CONDITIONS LAID D OWN U/S 40(A)(IA) FOR MAKING ADDITION ARE THAT TAX IS DEDUCTIBLE AT SOURC E AND SUCH TAX HAS NOT BEEN DEDUCTED. IF BOTH THE CONDITIONS ARE SATISFIED THEN SUCH PAYMENT CAN BE DISALLOWED U/S 40(A)(IA). IN OTHER WORDS WHERE TAX IS NOT DEDUCTIBLE ADDITION U/S 40(A)(IA) CANNOT BE MADE. FROM THIS IT FOLLOWS THAT SECOND PROVISO TO SECTION 194C(3)(I) ALONE WOULD BE OPERAT IVE FOR DECIDING 3 WHETHER TAX IS DEDUCTIBLE OR NOT DEDUCTIBLE. NON FU RNISHING OF FORM NO. 15-3 TO THE CIT IS AN ACT POSTERIOR IN TIME TO PAYM ENTS MADE TO SUB- CONTRACTORS. THIS CANNOT BY ITSELF UNDO THE ELIGIBI LITY OF EXEMPTION CREATED BY SECOND PROVISO BY VIRTUE OF WHICH SUB-CO NTRACTORS HAVE SUBMITTED FROM NO. 15-L THE DEDUCIBILITY OF TAX IS, THEREFORE, CONFINED OR LIMITED TO APPLICABILITY OF SECOND PROVISO ONLY BEC AUSE IT IS AT THAT POINT OF TIME WHEN ASSESSEE HAS TO DECIDE WHETHER IT HAS TO DEDUCT THE TAX OR NOT. WHERE FORM NO. 15-1 IS NOT SUBMITTED, IT HAS TO DED UCT TAX. CONVERSELY WHERE FROM NO. 15-1 IS SUBMITTED TO THE ASSESSEE BY THE SUB- CONTRACTORS, THE TAX IS NOT DEDUCTIBLE AND ONCE TAX IS NOT DEDUCTIBLE NO ADDITION U/S 40(A)(IA) CAN BE MADE. FROM THIS IT FO LLOWS THAT THIRD PROVISO TO SECTION 194C(3)(I) WHICH REQUIRES THE AS SESSEE TO SUBMIT FROM N. 15-J IS ONLY PROCEDURAL FORMALITY AND CANNO T UNDO WHAT HAS BEEN DONE BY SECOND PROVISO. NON SUBMISSION OF FORM NO. 15-J TO THE CIT WITHIN THE TIME PRESCRIBED IN R. 29D CANNOT HAVE AN Y EFFECT ON DECIDING AS TO WHETHER TAX WAS DEDUCTIBLE OR NOT DEDUCTIBLE FROM THE PAYMENTS MADE BY THE ASSESSEE TO THE SUB-CONTRACTORS. THIS C AN BE DECIDED UNDER SECOND PROVISO ALONE. EVEN THOUGH THE LEGISLATURE I N THEIR WISDOM HAVE ADDED THIRD PROVISO AS ADDENDA TO THE SECOND PROVIS O BY MENTIONING 'PROVIDED ALSO' MEANING THEREBY THAT LEGISLATURE IN TENDED TO PUT BOTH THE CONDITIONS MENTIONED IN SECOND AND THIRD P ROVISOS TOGETHER TO BE SATISFIED BY THE ASSESSEE BUT IN EFFECT BOTH THE CONDITIONS CANNOT BE SATISFIED TOGETHER AS BOTH ARE NOT THE EVENTS TAKIN G PLACE SIMULTANEOUSLY AT THE SAME TIME. ONE EVENT IS THE SUBMISSION OF FO RM NO. 15-1 BY THE SUB-CONTRACTORS TO THE CONTRACTOR AND TAKES PLACE A T THE TIME PRIOR TO THE PAYMENT MADE TO THEM BY THE CONTRACTOR. THE OTH ER EVENT IS THE SUBMISSION OF FORM NO. 15J BY THE CONTRACTOR TO THE CIT GIVING THE DETAILS CONTAINED IN FORM NO. 15-1. THIS EVENT IN P RACTICE TAKES PLACE AFTER THE CONTRACTOR HAS RELEASED THE PAYMENT TO TH E SUB-CONTRACTOR AFTER RECEIVING FROM NO. 15-1. THE TIME-LIMIT FOR SUBMITT ING SUCH FROM NO. 15J TO THE CIT AS LAID N IN THE RULES IS ON OR BEFO RE 30 TH JUNE FOLLOWING THE FINANCIAL YEAR. THE TWO EVENTS ARE SPATIALLY KE PT APART BY THE LEGISLATURE THUS GIVING TO THE ASSESSEE TO SUBMIT F ORM NO. 15-J TO THE CIT MUCH AFTER HE RECEIVES FROM NO. 15-1 FROM THE SUB-C ONTRACTORS. APPARENTLY THE LEGISLATURE INTENDED THAT THE CONTRA CTOR SHOULD NOT ONLY OBTAINED THE FROM NO. 15-1 FROM THE SUB-CONTRACTORS BUT SHOULD ALSO SUBMIT FORM NO. 15-J TO THE CIT IMMEDIATELY AFTER R ELEASING THE PAYMENTS TO THE SUB-CONTRACTORS WITHOUT DEDUCTING THE TAX ON THE STRENGTH OF FROM NO. 15-1 AND IF BOTH THE CONDITIONS ARE SATISFIED, THEN THE ASSESSEE MAY NOT BE TREATED AS IN DEFAULT FOR NOT COMPLYING THE PROVISIONS OF SECTION 194C. THUS SATISFACTION OF THE CONDITIONS IN SECOND AND THIRD PROVISO OF SECTION 194C(3)(I) MAY BE NECESSARY FOR AN ASSESSEE TO SAVE HIMSELF FROM BEING DECLARED AS AN ASSESSEE IN DEFAULT BUT CONDIT IONS LAID DOWN FOR INVOKING SECTION 40(A)(IA) ARE NOT THE SAME AS CUMU LATIVE CONDITIONS MENTIONED IN SECOND AND THIRD PROVISOS O F SECTION 194C(3)(I). FOR INVOKING SECTION 40(A)(IA) IT IS TO BE DECIDED WHETHER TAX WAS DEDUCTIBLE OR NOT, IT YES, WHETHER DEDUCTED /PAID OR NOT. WHEN ONE 4 LOOKS INTO SECTION 194C(3)(I) FOR THE PURPOSES OF I NVOKING SECTION 40(A)(IA), ONE FINDS THAT ONLY SECOND PROVISO TO IT IS SUFFICIENT TO DECIDE WHETHER TAX WAS DEDUCTIBLE OR NOT. THERE IS ANOTHER REASON FOR HOLDING SO. TIME FACTOR INVOLVED FOR COMPLIANCE OF THE CONDITIO NS MENTIONED IN TWO PROVISOS ARE DIFFERENT. SECOND PROVISO IS TO BE COM PLIED WITH AT THE TIME OF MAKING PAYMENT TO THE SUB-CONTRACTOR, WHEREAS COMPL IANCE OF THIRD PROVISO CAN BE DEFERRED TILL 30 TH JUNE OF NEXT FINANCIAL YEAR. IN OTHER WORDS THE CONTRACTOR CAN WAIT TO COMPLY WITH THIRD PROVISO TILL 30 TH JUNE OF NEXT FINANCIAL YEAR AFTER COMPLYING WITH SE COND PROVISO. HOWEVER, THE DECISION ON DEDUCTIBILITY OF TAX FROM THE PAYME NT MADE TO THE SUB- CONTRACTOR CANNOT BE DEFERRED TILL 30 TH JUNE OF NEXT FINANCIAL YEAR. HE HAS TO TAKE THIS DECISION (ABOUT DEDUCTIBILITY OF TAX F ROM PAYMENT BEING MADE BY IT TO THE SUB-CONTRACTORS) JUST AT THE TIME WHEN HE IS RELEASING THE PAYMENT TO THE SUB-CONTRACTORS. IT IS AT THIS POINT OF TIME SECOND PROVISO WOULD COME INTO PLAY AND WHEN FROM N O. 15-1 IS SUBMITTED BY THE SUB-CONTRACTORS TO THE CONTRACTOR THEN CONTRACTOR IS NOT REQUIRED TO DEDUCT TAX FROM SUCH PAYMENTS. ONCE DEDUCTIBILITY OF TAX DEPENDS UPON SUBMISSION OR NON-SUBMISSION OF FROM N O. 15-1 FROM THE SUB-CONTRACTOR TO THE ASSESSEE THEN NON -COMPLIANCE OF THIRD PROVISO BECOMES MERELY TECHNICAL WITHOUT AFFECTING SUBSTANC E THE DEDUCTIBILITY OR NON-DEDUCTIBILITY OF TAX ON PAYMENTS MADE BY THE ASSESSEE TO THE SUB- CONTRACTORS. NON COMPLIANCE OF THIRD PROVISO BECOME S MERELY A TECHNICAL DEFAULT, WHICH EVEN IF, REMAINED -COMPLIED WOULD NO T AFFECT THE OPERATION OF SECTION 40(A)(IA). THEREFORE, TAX WAS NOT LIABLE TO BE DEDUCTED FROM THE PAYMENTS MADE TO THE SUB-CONTRACT ORS ON ACCOUNT OF THEIR SUBMITTING FROM NO. 15-1 TO THE CONTRACTOR AN D NO ADDITION U/S 40(A)(IA) COULD BE MADE . 6. WE FIND THAT THE ISSUE OF DEDUCTIBILITY OF EXPENDITURE WHERE THE PAYMENT HAS BEEN MADE DURING THE YEAR AND NOTHING IS OUTSTANDING AT THE CLOSE OF THE YEAR, WAS CONSIDERED AND THE SPECIAL BENCH OF VISHAKHAPATNAM TRIBUNAL IN ACIT VS. MERILYN SHIPPIN G & TRANSPORTS (SUPRA) HAVE LAID DOWN THE PRINCIPLE T HAT IN CASES WHERE THE EXPENDITURE HAS BEEN PAID, THEN EVEN WHERE NO TAX HAS BEEN DEDUCTED AT SOURCE OR AF TER DEDUCTION HAS NOT BEEN PAID, THE PROVISIONS OF SECT ION 40(A)(IA) OF THE ACT ARE NOT APPLICABLE. THE MAJOR ITY 5 VIEW OF THE BENCH AS PER PARA 12 OF THE ORDER DATED 14.3.2012 IS AS UNDER: 12. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS O F HON'BLE SUPREME COURT AND HON'BLE HIGH COURTS, MATERIALS PL ACED BEFORE US, ARGUMENTS MADE BY BOTH THE SIDES AND IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, ON COMPARISON BETWEEN THE PROPOSED AND ENACTED PROVISION, THE ONLY CONCLUSION WHICH I CAN REACH IS THAT THE LEGISLATURE CONSCIOUSLY REPLACED THE WORDS 'AMOUNTS CREDITED OR PAID' WITH THE WORD 'PAYABLE' IN THE FI NAL ENACTMENT. BY CHANGING THE WORDS FROM 'CREDITED' OR 'PAID' TO 'PA YABLE', THE LEGISLATIVE INTENT HAS BEEN MADE CLEAR THAT ONLY OU TSTANDING AMOUNTS OR THE PROVISIONS FOR EXPENSES LIABLE FOR TDS UNDER CH APTER XVII-B OF THE ACT IS SOUGHT TO BE DISALLOWED IN THE EVENT THERE I S A DEFAULT IN FOLLOWING THE OBLIGATIONS CASTED UPON THE ASSESSEE UNDER CHAPTER XVII-B OF THE ACT. I AGREE WITH THE ARGUMENTS MADE BY ID. COUNSEL FOR THE ASSESSEE AND OTHER COUNSELS FOR THE INTERVE NES THAT WHILE INTERPRETING THE WORD 'PAYABLE' IN THIS PROVISION, THE WORD OF A STATUTE MUST BE UNDERSTOOD IN ITS NATURAL, ORDINARY OR POPU LAR SENSE AND CONSTRUED ACCORDING TO ITS GRAMMATICAL MEANING. ACC ORDING TO ME, SUCH CONSTRUCTION WOULD NOT LEAD TO ABSURDITY BECAU SE THERE IS NOTHING IN THIS CONTEXT OR IN THE OBJECT OF THIS STATUTE TO SUGGEST TO THE CONTRARY. IT IS A CARDINAL PRINCIPLE OF INTERPRETATION THAT T HE WORDS OF A STATUTE MUST BE PRIMA FACIE GIVEN THEIR ORDINARY MEANING, W HEN THE WORDS OF THE STATUTE ARE CLEAR, PLAIN AND UNAMBIGUOUS THEN T HE COURTS ARE BOUND TO GIVE EFFECT TO THAT MEANING. THE LITERAL RULE OF INTERPRETATION REALLY MEANS THAT THERE SHOULD BE NO INTERPRETATION OF THE STATUTE, RATHER IN OTHER WORDS, WE SHOULD READ THE STATUTE AS IT IS WI THOUT DOING ANY VIOLENCE TO THE LANGUAGE. IN THE PRESENT DISPUTE BE FORE US, THE WORD 'PAYABLE' USED IN SECTION 40(A)(IA) OF THE ACT IS T O BE ASSIGNED STRICT INTERPRETATION, IN VIEW OF THE OBJECT OF LEGISLATIO N, WHICH IS INTENDED FROM THE REPLACEMENT OF THE WORDS IN THE PROPOSED AND EN ACTED PROVISION FROM THE WORDS 'AMOUNT CREDITED OR PAID' TO 'PAYABL E'. HENCE, IN MY VIEW, MY ANSWER TO THE QUESTION REFERRED BY HON'BLE PRESIDENT TO THE SPECIAL BENCH IS AS UNDER: THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE APPLICABLE ONLY TO THE AMOUNTS OF EXPENDITURE WHICH ARE PAYABLE AS ON THE DATE 31 ST MARCH OF EVERY YEAR AND IT CANNOT BE INVOKED TO DI SALLOW WHICH HAD BEEN ACTUALLY PAID DURING THE PREVIOUS YE AR, WITHOUT DEDUCTION OF TDS. 7. IN VIEW OF THE ABOVE, THE ISSUE IN QUESTION IS T O BE CONSIDERED AND ADJUDICATED IN THE LIGHT OF RATIO LA ID DOWN BY THE DECISION OF THE SPECIAL BENCH, IN THE MATTER, A S DISCUSSED ABOVE. CONSEQUENTLY, HAVING REGARD TO TH E FACTS OF THE CASE, THE ISSUE IS RESTORED TO THEFILE OF TH E AO, FOR THE PURPOSE OF CONSIDERING THE ISSUE IN QUESTION IN THE APPEAL, 6 IN ACCORDANCE WITH THE RATIO LAID DOWN IN THE DECIS ION OF THE SPECIAL BENCH. THE AO, IS FURTHER DIRECTED TO COND UCT VERIFICATION OF THE AMOUNT, ACTUALLY PAID VIS--VIS THE AMOUNT PAYABLE FROM THE RELEVANT RECORDS AND ADJUDI CATE THE ISSUE AFRESH. THE APPELLANT IS ALSO DIRECTED T O RENDER NECESSARY CO-OPERATION TO THE AO, IN THE MATTER. T HUS, THE ISSUE IS RESTORED TO THE FILE OF THE AO. 8. GROUND NOS. 2 & 3, RAISED BY THE REVENUE ARE GENERAL IN NATURE AND NO SEPARATE ADJUDICATION IS REQUIRED. ACCORDINGLY, THE SAME ARE DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH DEC.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 13 TH DEC.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH