PRABHAKAR MISHRA,KOLKATA vs. ACIT, CIRCLE-44, KOLKATA, KOLKATA

PER RAKESH MISHRA, ACCOUNTANT MEMBER:

This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-2, Bhubaneswar [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2013-14 dated 24.03.2023. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:

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“13. Considering the decisions relied upon and as the amendment to section 40(a)(ia) of the Act is considered to be retrospective in nature, the disallowance made u/s 40(a)(ia) of the Act for non-deduction of TDS u/s 194C and 194H of the Act is restricted to 30% of the claim, even though for the disallowance u/s 194H of the Act, the assessee had conceded the entire addition to be disallowed and Ground No. 4 of the appeal is allowed in favour of the assessee.”

We have considered the submissions made, gone through the facts of the case and perused the records and the order of the Ld. CIT(A). However, it has been held in the case of Principal Commissioner of Income-tax vs. Asphalt India Corporation [2024] 167 taxmann.com 460 (Bombay)[03-07-2024] that benefit of amendment as inserted by Finance Act, 2014 would not be available to assessee and accepting retrospective applicability of such provisions would be preposterous. It has been held as under: “■ From the submissions as urged at the bar, it appears to be not in dispute that section 40(a)(ia), not only, as it stood prior to its amendment as inserted by the Finance (No. 2) Act, 2004, but also by the subsequent amendment to the said provisions by the Finance Act, 2010 and the Finance Act, 2014 had fell for consideration of the Supreme Court in the case of Shree Choudhary Transport Company v. ITO [2020] 118 taxmann.com 47/272 Taxman 472/426 ITR 289 (SC). One of the question which fell for consideration of the Supreme Court in the context of section 40(a) was as follows: ‘As to whether sub-clause (ia) of section 40(a), as inserted by the Finance (No. 2) Act, 2004 with effect from 1-4-2005 is applicable only from the financial year 2005- 06 and, hence, is not applicable to the present case relating to the financial year 2004-05; and, at any rate, whole of the rigour of this provision cannot be applied to the present case.’ [Para 7] ■ In answering such issue and in the context of what was earlier held by the Supreme Court in the case of CIT v. Calcutta Export Company [2018] 93 taxmann.com 51/255 Taxman 293/404 ITR 654 (SC), the Supreme Court, considering the effect of amendment brought about by the Finance Act, 2010 to the provisions of section 40(a)(ia), observed that the amendment as brought about by the Finance Act, 2010 was retrospective in operation, being curative in nature and hence the same would become applicable from the date of insertion of the provision of sub-clause (ia) of section 40(a). The Supreme Court while examining the issue of law and taking such view held that insofar as the amendment brought about to section 40(a)(ia) by the Finance Act, 2014 was concerned, the position in law as laid down in Calcutta Export Company (supra) would not become applicable, as the amendment was not a curative amendment, relating to any procedural aspects concerning deposit of the deducted TDS, as the amendment was to the substantive provision. It was held that the assessee cannot escape from the rigour of the substantive provisions of the Act providing for disallowance. In similar circumstances as in hand, the Supreme Court observed that the benefit of amendment as inserted by the Finance Act, 2014 would not be available to the assessee and accepting the retrospective applicability of such provisions would be preposterous. [Para 8] ■ In view of the position in law as laid down by the Supreme Court in Shree Choudhary Transport Co. (supra), it is absolutely clear that the approach of the Tribunal in the instant case was fundamentally flawed inasmuch as what has been undertaken by the Tribunal is to give a retrospective application of the substantive provisions of law, which has been held to be not permissible as held by the Supreme Court in Shree Choudhary Transport Co. (supra). This Court may also observe that the logic and applicability of a curative amendment which was brought about by the Finance Act, 2010, was certainly not a situation in hand which was the case that had fell for consideration before the Supreme Court in Calcutta Export Company (supra). [Para 9] ■ In this view of the matter, the appeal deserves to succeed. The impugned order passed by the Tribunal is quashed and set aside. The question of law stands answered in favour of the revenue and against the assessee. [Para 10]”

We have considered the submission made. The Bench was of the view that certain disallowance was called for as the bills and vouchers were not available and were not produced and for disallowance of expenses, the books of account were not required to be rejected as it was a question of estimated disallowance of specific expenditure claimed. Since the assessee admitted that all the bills and vouchers were not available, therefore, the Bench was of the view that the expenditure claimed could not be allowed in the absence of supporting bills and vouchers. However, the disallowance made at 20% of the expenditure claimed being also without any justification and the same being excessive, the same is directed to be restricted to 10% of the claim with consequential relief to the assessee. The Ld. AO is directed to recompute the disallowance accordingly. Hence, this Ground of appeal is partly allowed for statistical purpose.

“4. During the relevant period, the assessee has debited Rs.4,51,124/ as Bank interest and Rs.65,686/- as interest on term loans in the P/L A/c but in the balance sheet, there was no bank loan has been reflected. Accordingly, to verify the genuineness of such interest payments, a show cause notice was issued to the assessee on 08-03-2016 fixing the date of hearing on 10-03-2016 and asked to file his explanation along with supporting material evidence. The A/R of the assessee filed an adjournment petition and asked for adjournment of hearing to 14-03-2016. The assessee's petition is considered as a natural justice and accordingly the date of hearing adjourned to 14-03-2016. But, on 14-03-2016, the assessee failed to produce any supporting evidences in respect of such interest payments. Even upto the date of passing this order, the assessee neither filed any submission nor produced any supporting evidence in respect of interest payments which articulates the fact that he has virtually nothing to say in this regard. As such, the interest payments of Rs.5,16,810/- [4,51,124 + 65,686 is treated as bogus and added to the total income of the assessee. Penalty proceedings u/s 271(1)(c) are being initiated separately for furnishing inaccurate particulars/concealment of income.”

We have considered the submission made. In the interest of justice and fair play and since the Ld. AR states that the assessee has now collected the required evidence, the Bench was of the view that one more opportunity may be provided. Therefore, the findings of the Ld. CIT(A) on this issue are set aside and this issue is also remanded to the Ld. AO. The assessee shall furnish necessary evidence for incurring of bank interest and other expenses for the purpose of business by filing the required evidence which shall be considered by the Ld. AO and if found in order, the addition is directed to be deleted. Hence, for statistical purposes, this ground of appeal is partly allowed.

Copy of the order forwarded to: