M/S.MAGNUM BUILDTECH,ALAPPUZHA vs. THE DCIT, ALAPPUZHA

Per CHANDRA POOJARI, AM:

This appeal filed by the assessee is directed against the order of the CIT(A),

Kottayam dated 31/01/2018 and pertain to the assessment year 2006-07.

AR has filed condonation petition wherein it was stated that the assessee received

the copy of the order of the CIT(A) on 05/03/2018. The assessee had discontinued

the business and there was delay in engaging legal counsel for preferring appeal

before the Tribunal and also for the reason that the authorized representative who

appeared for the assessee before the CIT(A) was not keen in representing the

I.T.A. No.317/Coch/2018 assessee before the Tribunal. It was stated that the new counsel engaged by the

assessee though was entrusted with the papers on 20/05/2018 took time for

studying the papers and preparation of the appeal. This resulted in delay of 61

days in filing the appeal before the Tribunal. It was submitted that the delay was

not deliberate and beyond the control of the assessee. Hence, it was prayed that

the Tribunal may condone delay of 61 days in filing the appeal and the appeal may

be disposed of on merits.

2.1 We have heard the rival submissions and gone through the reasons advanced

by the assessee for filing the appeal belatedly before this Tribunal. We are satisfied

with the reasons explained by the assessee for filing the appeal belatedly.

Accordingly, we condone the delay of 61 days in filing the appeal and admit the

appeal for adjudication.

A) The order of the Commissioner of Income Tax (Appeals) is against law and facts and circumstances of the case. The order, if allowed to stand, would occasion a travesty of justice and cause irreparable loss and hardship to the appellant.

B) The Appellate Commissioner ought to have found that going by the provisions of the 2nd proviso to Section 40(a)(ia) the appellant is entitled to deduction of the payments made to M/s. Born Builders Pvt. Ltd. as the said sub-contractor (Born Builders) have duly filed returns by including the payments made by the appellant as their income.

I.T.A. No.317/Coch/2018 C) The Appellate Commissioner erred in holding that the 2nd proviso to Section 40(a)(ia) is not prospective in nature. It has been the settled law that the amendment to the machinery provision to cure any anomaly or to prevent undue hardship to the assessees would always be retrospective in nature. The law in this regard is fairly settled by the Hon'ble Supreme Court right from the decision in CIT Vs. Alom Extrusions 305 ITR 227 (SC). When the proviso to Section 40(a)(ia) was introduced to mitigate undue hardship caused to the assessees, the Appellate Commissioner ought to have found that the same is curative in nature and therefore would have retrospective application.

D) The Appellate Commissioner erred in upholding the order of the assessing authority issued under Section 154 of the Income Tax Act, 1961 on an issue which is highly disputed and in any case where two views are possible and the view-taken in the order dated 31.03.2008 passed under Section 143(1) was a possible view. There are also conflicting decisions on the point and the majority of the same is in favour of the appellant and supports the order dated 31.03.2008. Therefore, it was not within the powers of the assessing authority to vary the decision in a proceedings under Section 154 of the Act, which is intended only to rectify mistake apparent from the record. Consequently, the Appellate Commissioner ought to have set aside the proceedings under Section 154 of the Act as issued clearly beyond jurisdiction.

4 The facts of the case are that the assessee firm had not deducted TDS from the

labour charges paid amounting to Rs.2434192/- for AY 2006-07. The assessment

proceedings were completed u/s. 154 of the Act on 02/08/2010. The Assessing

Officer made the addition of Rs.2434192/- on account of disallowance of labour

charges u/s. 40(a)(ia) of the Act.

that the second proviso is applicable retrospectively from 01/04/2005 has relied on

various decisions of non-jurisdictional Tribunals and High Courts. However, the

I.T.A. No.317/Coch/2018 CIT(A) was of the view that the High Court of Kerala in the case of Thomas George

Muthoot (235 taxman.com 246) while considering this question held as under:

“15. A statutory provision, unless otherwise expressly stated to be retrospective or by intendment shown to be retrospective, is always prospective in operation. Finance Act, 2012 shows that the second proviso to section 40(a)(ia) has been introduced with effect from 01/04/2013. Reading of the second proviso does not show that it was meant or intended to be curative or remedial in nature, and even the appellants did not have such a case. Instead, by this proviso, an additional benefit was conferred on the assesses. Such a provision can only be prospective as held by this Court in Prudential Logistics and Transports(supra). Therefore, this contention raised also cannot be accepted.”

issue in dispute is a debatable issue and cannot be dealt by the Assessing Officer

vide proceedings u/s. 154 of the I.T. Act. He drew our attention to the following

judgments:

1) CIT vs. Ansal Landmark Townships (P) Ltd. (ITA Nos.160 & 161/2015 dated 26th August, 2015 (Del.)

2) CIT vs. Shraddha & S.S. Kale, Joint Venture (377 ITR 635) (Bom.)

6.1 The Ld. AR submitted that the judgment of the Delhi High Court in the case of

Ansal Landmark Townships (P) Ltd. cited supra was the subject matter of litigation

before the Supreme Court wherein the Supreme Court in Diary No. 24249/2017 dated 25th August, 2017 granted leave in respect of the judgment of the Delhi High

Court cited supra. As such, according to him, this issue is a debatable issue and

the Assessing Officer should not have dealt the issue in dispute u/s. 154 of the Act.

I.T.A. No.317/Coch/2018 The Ld. AR also relied on the judgment of the Supreme Court in the case of CIT vs.

Alom Extrusions Ltd. (319 ITR 306)wherein it was held that the omission of the

second proviso to section 43B of the Income Tax Act, 1961 by the Finance Act,

2003, operated, retrospectively, with effect from april 1, 1988 and not prospectively

from April, 2004. Earlier under the second proviso to section 43B as amended by

the Finance Act, 1989, assesses were entitled to deduction only if the contribution

stood credited on or before the due date given in the Provident Funds Act. This

created further difficulties and on a representation made to the finance Ministry one

more amendment was made by the Finance Act, 2003. Though this amendment

was made applicable with effect from April 1, 2004, the amendment was curative in

nature and applied retrospectively with effect from April 1, 1988. When a proviso in

a section is inserted to remedy unintended consequences and to make the section

workable, the proviso which supplies an obvious omission therein is required to read

retrospectively in operation, particularly to give effect to the section as a whole.

this issue was considered by the Jurisdictional High Court in the case of CIT vs.

Thomas George Muthoot (235 taxman 246). Being so, within the jurisdiction of

Kerala High Court, the issue in dispute cannot be said to be a debatable issue. In

our opinion, the Assessing Officer is justified in making addition u/s. 40(a)(ia) of the

I.T.A. No.317/Coch/2018 Act vide proceedings u/s. 154 of the Act dated 02/08/2010. Accordingly, this

ground of appeal of the assessee is dismissed.

sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Place: Kochi Dated: 15th May, 2019

GJ Copy to: 1. Magnum Buildtech, XII/358, Ezhupunna, Alleppey-688 548. 2. The Deputy Commissioner of Income-tax, Circle-1, Alappuzha. 3. The Commissioner of Income-tax(Appeals), Kottayam. 4. The Pr. Commissioner of Income-tax, Kottayam. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order

(ASSISTANT REGISTRAR) I.T.A.T., Cochin

I.T.A. No.317/Coch/2018