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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
O R D E R
PER PAVAN KUMAR GADALE JM:
The assessee has filed the appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi / CIT(A) passed u/s201(1)&201(1A) of the Act for the A.Y 2018-19.The assessee has raised the following grounds of appeal:
General:
Nhava Sheva (Ind) Gateway Terminal Pvt Ltd, Mumbai. - 2 -
1. erred in confirming the action of the AO in treating the appellant as 'Assessee-in-default' for non-deduction of tax at source in relation to year-end provision of INR 22,88,55,030 created on the account of various expenses recorded, under mercantile system of accounting; Tax Deducted at Source ('TDS') Provisions not applicable on year-end provisions 2. erred in holding appellant as 'Assessee-in-default' without appreciating that TDS provisions are not applicable on year-end provisions and should have appreciated that merely because on a conservative basis, 30% of the amount was disallowed under section 40(a)(ia) of the Act, the same would not itself trigger to apply TDS on year-end provision; 3.without prejudice to the above, should have appreciated that once disallowance under section 40(a)(ia) of the Act is been made, no separate proceedings can be initiated under section 201 of the Act and for default of non- deduction of TDS either disallowance under section 40(a)(ia) or proceedings under section 201 of the Act can be invoked; Demand if any, should be restricted to interest in delay of deposit of TDS 4. should have appreciated that the year-end provisions were reversed in subsequent financial years and actual payments were made to the parties on which TDS has been deducted and thereby, demand if any, should be restricted to interest under section 201(1A) of the Act from the date of provision created till the date of actual payment of tax; 5. without prejudice to above, should have appreciated that the parties for which provision for expenses has been Nhava Sheva (Ind) Gateway Terminal Pvt Ltd, Mumbai. - 3 -
created, have already considered the same as income while filing Return of Income and thereby demand if any, should be restricted to interest under section 201(1A) of the Act from the date of provision created till the date of actual payment of tax; Penalty under section 271C of the Act: 6. erred in initiating penalty proceedings under section 271C of the Act. The above grounds of appeal are mutually exclusive and without prejudice to one another. The Appellant craves leave to add/ alter/ amend/ delete withdraw any or all of the grounds at or before the hearing of the appeal so as to enable the ITAT to decide the appeal according to law.
2. The Brief facts that the assessee company is engaged in the business of providing container terminal on a DFBOT model and in the business of loading and unloading for containerized cargo at port. The AO on perusal of the income tax return and tax audit report (Form 3CD) found that the assessee has made year end provisions of different/ various nature of expenses on which TDS liability is applicable. However the assessee failed to deduct TDS and in the computation of income made disallowance of expenses@ 30% which works out to Rs.6,86,56,508/- under section 40 (a)(ia) of the Act. The AO has issued show cause notice to treat the company as “Assessee
Nhava Sheva (Ind) Gateway Terminal Pvt Ltd, Mumbai. - 4 - in-default” for non deduction of TDS and invoke the provisions u/s 201(1)/201(1A) of the Act. In compliance, the assessee has filed the detailed submissions on 22.01.2020, 10.02.2020 and 17.02.2020 referred at Para 4 of the Assessment order as under:
The company follows mercantile method of accounting. The financial statements of the company are prepared and presented in accordance with the Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standard) Rules, 2015 notified under section 133 of the Companies Act, 2013. As per Ind AS 37 which deals with Provisions, Contingent Liabilities and Contingent Assets, a provision for expense is recognized as an expense if the company has a present obligation as a result of past event which can be estimated reliably; and it is probable that an outflow of resources will be required to settle this obligation These provisions are determined based on the judgment and past experience. The use of estimates is an essential part of the preparation of financial statements and does not undermine their reliability This is especially true in the case of provisions, which by their nature are more uncertain than most other items in the financial statements. The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the financial year 3. Whereas the AO has dealt on the facts and the provisions and observed that the submissions of the Nhava Sheva (Ind) Gateway Terminal Pvt Ltd, Mumbai. - 5 - assessee are not acceptable as the assessee company has made provision of expenses against the parties and defaulted in non deduction of TDS and finally worked out the TDS liability along with the interest aggregating to Rs.2,37,55,354/- and passed the order u/s 201(1) &201(1A) of the Act dated 20.02.2020.
Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas in the appellate proceedings the CIT(A) considered the grounds of appeal, submissions of the assessee and findings of the AO. Whereas the appellate authority has confirmed the liability of deduction of TDS on expenses and granted partial relief in other grounds of appeal and partly allowed the assessee appeal. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Hon’ble Tribunal.
5. At the time of hearing, the Ld. AR made submissions on the admission of the additional evidence. The contentions of the Ld.AR are that the assessee was prevented by sufficient cause in submitting the information before the A.O in respect of provision of expenses, detailed chart of party-wise
Nhava Sheva (Ind) Gateway Terminal Pvt Ltd, Mumbai. - 6 - break up of year end provisions and the corresponding invoices raised by the parties in the subsequent years and ledger account copies etc and emphasized on the merits of the case and prayed for an opportunity of hearing to substantiate the case with the evidences before the lower Authorities. Contra, the Ld. DR relied on the order of the CIT(A).
We heard the rival submissions and perused the material on record. The sole crux of the disputed issue is in respect of admission of additional evidence which could not be filed for various reasons. The contentions of the Ld. AR are that the additional evidence play a vital role in decision making and in the assessment proceedings.Therefore considering the facts, circumstances, additional evidences and the paper book, we are of the opinion that the assessee should not suffer for non filing of material information, as the evidences played vital role and we admit the additional evidence. Accordingly, to meet the ends of justice and considering the principles of natural justice, we set aside the order of the CIT(A) and restore the entire disputed issue along with the additional evidence to the file of the Assessing officer to decide on merits and Nhava Sheva (Ind) Gateway Terminal Pvt Ltd, Mumbai. - 7 - the assessee should be provided adequate opportunity of hearing. The assessee should cooperate in filling the information and allow the grounds of appeal of the assessee for statistical purposes.
In the result, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 09.01.2023.