VIVEK AGARWAL,JHARSUGUDA vs. ITO, JHARSUGUDA

For that the learned Commissioner of Income Tax (Appeals) is wholly unjustified to confirm the addition made by Assessing Officer u/s. 40(i)(ia) amounting to Rs. 14,44,064/- u/s. 194C and Rs(78,668/-) u/s. 194A which is against the spirit of law, is illegal, arbitrary and bad in law and should be deleted in the facts and circumstances of the case.

For that learned Commissioner of Income Tax (Appeals) is not correct to confirm addition of Rs.2,80,126/- alleging undisclosed gross receipt from SEPCO which is wholly incorrect, is because of non-appreciation of facts and evidence and therefore unwarranted, unreasonable and unsustainable and should be deleted in the facts and circumstances of the case.

For that confirmation of addition of Rs.3,42,000/- being small hand loans taken from friends and relatives is the result of 2 erroneous presumption without any material and evidence and should be deleted in the facts and circumstances of the case.

For that other grounds if any shall be urged at the time of hearing.

Brief facts of the case are that the assessee carries business of transportation and contract work and filed his return of income for A.Y.2010-2011 on 27.03.2011 showing total income at Rs.11,09,650/-.

Feeling aggrieved from the assessment order, the assessee

Feeling further aggrieved from the order of the CIT(A), the assessee is in appeal before the Income Tax Appellate Tribunal.

This case was originally decided by this Bench of the Tribunal

After hearing both the sides and perusing the entire material on record and the orders of authorities below along with the case laws

On careful perusal of the amendment brought to the Section 40(a)(ia) of the Act by the Finance Act, 2014 w.e.f. 01.04.2015, it is clear that the intent of legislature to reduce the hardship, it is proposed that in case of non-deduction or non-payment of TDS on payments made to residents as specified in section 40(a)(ia) of the Act, the disallowance shall be restricted to 30% of the amount of expenditure claimed. The Hon’ble Supreme Court in the case of Allied Motors (P) Ltd. [1997] 224 ITR 677 (SC) has held that amendment was remedial in nature, designed to eliminate unintended consequences which may cause undue hardship to the assessee and which made the provision unworkable or unjust in a specific situation. Finally, after considering various case laws, the Hon’ble Supreme Court held that the purpose of amendment would not serve its object in such a situation unless, it is construed as retrospective after observing as under :-

Therefore, in the well-known words of Judge Learned Hand, one cannot make a fortress out of the dictionary; and should remember that statutes have some purpose and object to accomplish whose sympathetic and imaginative discovery is the surest guide to their meaning. In the case of R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570 , this Court said that one should apply the rule of reasonable interpretation. A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole.

This view has been accepted by a number of High Courts. In the case of CIT v. Chandulal Venichand [1994] 209 ITR 7/ 73 Taxman 349 , the Gujarat High Court has held that the first proviso to section 43B is retrospective and sales-tax for the last quarter paid before the filing of the return for the assessment year is deductible. This decision deals with the assessment year 1984-85. The Calcutta High Court in the case of CIT v. Sri Jagannath Steel Corpn. [1991] 191 ITR 676 , has taken a similar view holding that the statutory liability for sales-tax actually discharged after the expiry of the accounting year in compliance with the relevant statute is entitled to deduction under section 6 43B. The High Court has held the amendment to be clarificatory and, therefore, retrospective. The Gujarat High Court in the above case held the amendment to be curative and explanatory and hence retrospective. The Patna High Court has also held the amendment inserting the first proviso to be explanatory in the case of Jamshedpur Motor Accessories Stores v. Union of India [1991] 189 ITR 70/ 54 Taxman 521. It has held the amendment inserting first proviso to be retrospective. The special leave petition from this decision of the Patna High Court was dismissed. The view of the Delhi High Court, therefore, that the first proviso to section 43B will be available only prospectively does not appear to be correct. As observed by G.P. Singh in his Principles of Statutory Interpretation, Fourth edn., page 291, "It is well-settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended". In fact the amendment would not serve its object in such a situation unless it is construed as retrospective. The view, therefore, taken by the Delhi High Court cannot be sustained.

Respectfully following the above decisions of the Tribunal as well as Hon’ble Supreme Court, we direct the AO to restrict the 100% disallowance confirmed by the CIT(A) to the extent of 30% only taking into account the actual claim of the assessee in its profit and loss account. We order accordingly. Thus, the sole ground of appeal of the assessee is partly allowed.

Respectfully following the above observations of the Tribunal

In the result, appeal of the assessee is partly allowed.

Cuttack गार्ा पाईल / Guard file. 6. सत्यावऩत प्रनत //// आदेशािुसार/ BY ORDER,