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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Per CHANDRA POOJARI, AM: These two appeals by the assessee are directed against the common order of the CIT(A)-IV dated 29/04/2017 and pertains to 2011-12 and 2012-13.
At the outset, there was a delay of 633 days in filing both the appeals before the Tribunal. The Ld. AR has filed a condonation petition accompanied by an affidavit stating that the time for filing of the appeal before the Tribunal expired on 19/06/2017. The assessee recently came across the decision of the Bombay High Court in the case of PCIT vs. Perfect Circle India Pvt. Ltd. dated 07/01/2019 and
I.T.A. Nos.195&196/Coch/2019 again consulted some other tax expert and he advised him to prefer the appeals along with the petition for condonation of delay.
We have gone through the condonation petition filed by the assessee. There was an inordinate delay of 633 days and it was explained that the assessee waited for some judgment to come in favour of him. Finally, he came across a judgment from the Bombay High Court in the case of PCIT vs. Perfect Circle India Pvt. Ltd. dated 07/01/2019. Thereafter, he consulted the tax experts and on their advice, the assessee filed the appeals belatedly. This reason advanced by the assessee for such an inordinate delay cannot assist the assessee. The law assists those who are vigilant and not those who sleep over their rights. The delay cannot be condoned simply because the assessee’s case is hard and calls for sympathy or merely out of benevolence to the party seeking relief. In granting the indulgence and condoning the delay it must be proved beyond the shadow of doubt that the assessee was diligent and was not guilty of negligence whatsoever. The sufficient cause within the contemplation of the limitation provision must be a cause which is beyond the control of the party invoking the aid of provisions. The Supreme Court in the case of Ramlal v.s Rewa Coalfields Ltd. AIR 1962 SC 361 has held that the cause for delay in filing the appeal which by due care and attention could have been avoided cannot be sufficient cause within the meaning of the limitation provision. Where no negligence, nor inaction or want of bona fides can be imputed to the assessee a liberal construction of the provisions has to be made in order to advance substantial justice. Seekers of justice must come with clean hands. In the present case, the 2
I.T.A. Nos.195&196/Coch/2019 assessee was negligent and the delay was due to the inaction on the part of the assessee. The assessee could have very well avoided the delay by the exercise of due care and attention. In our opinion, there exists no sufficient and good reasons for the delay of 633 days. Therefore, we are not inclined to condone the delay of 633 days.
Without prejudice to the above, the learned AR argued the case on merits also. Since the facts in both the assessment years are similar, we consider the facts as narrated in assessment year 2011-2012.
The facts of the case are that out of the total sum debited in the profit & loss account under the head interest, a sum of Rs. 1,00,13,656/- was towards the sister concerns of the assessee. The assesses had not deducted TDS as per section I94A of the Act. Accordingly, this sum of Rs. 1,00,13,656/- was disallowed under section 40(a)(ia) as expense.
Before the CIT(A), the assessee contended that no TDS was deducted on the interest paid to M/s Thomson Granites Pvt. Ltd, as it is a sister concern. Further Managing Partner of the Firm Mr. P. T. Johnson was also acting as the Managing Director of M/s Thomson Granites Pvt. Ltd. and both business entities are managing by very closely related family members. And whereas the assessee had created only provision for interest in the books of accounts, and no cash transactions took place.
I.T.A. Nos.195&196/Coch/2019 The CIT(A) was of the opinion that the TDS provisions contained in the Income Tax Act do not differentiate between sister concerns and unrelated concerns. According to the CIT(A), it is immaterial whether the same person or group of persons are managing affairs of both entities, i.e. the loan receiver and loan creditor and tax needs to be deducted at source whenever the interest is paid or credited, whichever is earlier. In the instant case, interest was credited and expenses claimed and, therefore, tax was deductible at source. It is also not known, whether the recipient of interest had disclosed it as its income, even though not received, on accrual basis. In view of these facts, the CIT(A) did not find any infirmity in the decision of the Assessing Officer and confirmed the disallowance of Rs.1,00,13,656/-.
6.1 Before us the learned AR submitted that the recipient of the interest income has been included in the return of income and paid tax thereon on or before the due date of filing of the return of income u/s 139(1) of the I.T.Act. As such, the said amount cannot be disallowed. In our opinion, on merits, the assessee has no case. Moreover, this issue was considered by the Jurisdictional High Court in the case of Prudential Logistics and Transports vs. ITO 364 ITR 690 wherein it was held as under: “5. Reading of section 40(a)(ia) along with second proviso and section 201(1) along with the proviso, it would mean that the mandate or requirement on the part of the payer to deduct tax at source is not so strict if they are able to show that the payee or the recipient of the amounts has paid tax in accordance with the provisions of section 201(1) and the proviso. 6. This was not the claim made by the assessee before the Assessing Officer. The claim was on a different stand, initially reflecting the amounts as loan in the account books though shown as freight charges in the returns and 4
I.T.A. Nos.195&196/Coch/2019 later explained that it was not the loan amount but freight charges. It was never the case of the assessee that there was no mandate subsequent to the amendment, to deduct tax as TDS in the light of above provisions. The assessment year in question is 2007-08 and the amendment giving breathing space to payer of amounts is with effect from April 1, 2013. Therefore, the said benefit is not applicable to the assessee. Even otherwise, on factual situation, the very fact that these amounts were claimed as loan initially, till the scrutiny came up for consideration before the firm, i.e., not to disclose this amount as freight charges but something else as repayment of loan. In the light of the above observation, we are of the opinion that the Tribunal did not err so far as the assessment year 2007-08 with reference to disallowance under section 40(a)(ia). Accordingly this appeal is dismissed”.
6.2 In the present case, the assessment years involved are 2011-12 & 2012-13. Hence, the second proviso to section 40(a)(ia) of the Act cannot be applied to the assessee’s case and it is only applicable with effect from 01.04.2013. The amendment is not retrospective and it is only prospective in nature as held by the Hon’ble jurisdictional High Court in the case cited supra. Thus, on merits also, this ground taken by the assessee is dismissed.
In the result, both the appeals of the assessee are dismissed. Order pronounced in the open court on 14th January, 2020
Sd/- Sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER Place: Kochi Dated: 14th January, 2020 5
I.T.A. Nos.195&196/Coch/2019 GJ Copy to: 1. M/s. Thomson Industries, Kombodinjamakkal, Thazhekkad, Thrissur-680 697.. 2. The Assistant Commissioner of Income-tax, Central Circle-2, Ernakulam, Kochi. 3. The Commissioner of Income-tax(Appeals)-IV, Kochi. 4. The Commissioner of Income-tax, Central, Kochi. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order
(ASSISTANT REGISTRAR) ITAT, Cochin