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Income Tax Appellate Tribunal, HYDERABAD ‘A’ BENCH, HYDERABAD
Before: S/SHRI A .MOHAN ALANKAMONY & CHANDRA MOHAN GARG
O R D E R Per Bench This is an appeal filed by the assessee against the order of the CIT(A)-2, Hyderabad dated 28.5.2018 for the assessment year 2013-14 .
The only effective ground taken by the assessee is that the ld CIT(A) is not justified in confirming the disallowance of Rs.2,96,988/- made under section 40(a)(ia) of the Act.
The appeal is time barred by 798 days. The assessee has filed condonation petition for condoning the delay in filing the appeal. It is stated in the petition that the first appellate order for the assessment year
P a g e 1 | 9 2013-14 was received on 11.6.2018 and same could not be filed in time as the papers had been misplaced by one of office staff and same could be traced out and thereafter could be filed on 16.10.2020 with the delay of 798 days. In support of this, the assessee has filed affidavit sworn by Sripad Deshpande, Managing Director of the assessee company.
Reiterating the contention stated in the condonation petition, ld A.R. of the assessee the delay in filing of the appeal may be condoned.
On the other hand, ld D.R. opposed the condonation petition and further submitted that the assessee has not given sufficient cause for filing the appeal to condone the delay. Therefore, the appeal may not be admitted for adjudication.
We have heard the rival submissions and perused the record of the case. The contention of the assessee is that the order of the ld CIT(A) was received by the assessee on 11.6.2018 and same was misplaced and traced out after a time period of 798 days. In this connection, we note that the burden to prove the existence of sufficient cause is always on the assessee. The law of limitation is prescribed by the I.T. Act under the provisions of Section 249(3) of the Act which envisages that there should have been a sufficient cause for not presenting the appeal within that period as prescribed. Where the applicant has failed to show sufficient cause for condonation of delay, the application for condonation of delay is liable to P a g e 2 | 9 be rejected. The assessee must show that he was diligent all along in taking appropriate steps and the delay was caused notwithstanding his due diligence and if he appears to be guilty of laches or negligence and does not take appropriate steps for pursuing his remedy then he must be prepared to have his remedy barred without expecting condonation. The Hon'ble Apex Court in the case of Binod Bihari Singh v. Union of India, AIR 1993 SC 1245 (SC) was of the view that it was not at all a fit case where the anxiety to render justice to a party so that just cause was not defeated, a pragmatic view should be taken by the Court in considering the sufficient cause for condonation of delay under Section 5 of the Limitation Act. The appellate authority has to examine, whether sufficient cause has been shown by the party for condoning the delay and whether such cause is acceptable or not. The word "sufficient cause" as enumerated in Section 249(3) in the context of condonation of delay should be a liberal construction so as to give substantial justice but only when no negligence or inaction or want of bona fide is imputable to the party concerned. In the present case in hand, the assessee is only stating that the order of the ld CIT(A) was misplaced and later on it was found and appeal was filed with condonation petition. As the Managing Director, Shri Sripad Deshpande has filed his affidavit, which has not been controverted by the AO or any other competent authority that the cause shown by the assessee to condone the delay in filing appeal is not plausible and justified by way of any counter
P a g e 3 | 9 affidavit or by any other mode, respectfully following the decision of Hon’ble Supreme Court in the case of Collector, Land Acquisition vs Mst. Katiji (1987) 167 ITR 471 (SC), the delay of 798 days is condoned and the appeal is admitted for adjudication.
Facts of the case are that the assessee company is running a hotel in the name of one Continental. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has paid an amount of Rs.2,96,988/- towards interest to M/s. Deewan Housing Finance Corporation Ltd., and no TDS was deducted. Before the AO, the assessee contended that the receiver of the interest i.e. M/s. Deewan Housing Finance Corporation Ltd., would have offered the income in its return of income in the respective financial year. Therefore, if the assessee deducted TDS, it would amount to double deduction. The Assessing Officer did not find the explanation of the assessee plausible and, therefore, he disallowed the same invoking section 40(a)(ia) of the Act. The addition was upheld in the first appeal.
Ld A,.R. of the assessee reiterated the submissions made before the lower authorities. Ld A.R., further submitted that the second proviso to section 40(a)(ia) of the Act is introduced by the Finance Act 2012, being retrospective in operation. Without prejudice to above, ld A.R. submitted that the disallowance of Rs.2,98,988/- u/s.40(a)(ia) of the Act is invalid without initiating proceedings u/s.201(1) of the Act in the present case. Ld P a g e 4 | 9 A.R of the assessee relied on the decision of Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverage P Ltd. Vs CIT, 163 Taxman 355 (SC),wherein, it was held that the assessee cannot be treated as “as assessee in default” u./s 201(1) if the recipient has offered the income and has paid the taxes thereon. He also relied on various decisions, including the decision of ITAT Hyderabad in the case of Country Club Hospitality & Holiday Ltd vs Addl. CIT in for A.Y. 2008-09 and others order dated 27.4.2018 and submitted the issue is covered in favour of the assessee.
Replying to above, ld DR submitted that since the assessee has failed to deduct tax on the interest payment, both the authorities below are justified in disallowing the same.
We have heard the rival contentions and perused the materials placed on the record of the Tribunal, as well as various decisions relied on by ld A.R. of the assessee. In the instant case, the assessee has paid Rs.2,96,988/- towards interest to M/s. Deewam Housing Finance Corporation ltd., and since the assessee has not deducted TDS on the said amount, the Assessing Officer by invoking the provisions of section 40(a)(ia) of the Act, disallowed the payment of Rs.7,96,988/-, which was confirmed in first appeal.
P a g e 5 | 9
11. Before us, ld A.R. relied on the decision of Co-ordinate Bench in the case of Country Club Hospitality & Holiday Ltd(supra), wherein, on similar issue, it was held as under:
“8. As regards Grounds of appeal
Nos.3 to 6, brief facts are that on verification of the details filed by the assessee, the AO observed that the assessee has not made TDS from various payments totaling to Rs.5,21,75,632. He therefore, disallowed the same u/s 40(a)(ia) of the Act. On appeal, the CIT (A) has deleted the disallowance with a direction to the AO to verify whether the payment towards the expenditure, was actually paid or payable and to allow the same if it is found to have been actually paid, before 31st of March i.e. the end of the relevant accounting year. For giving such a direction, the CIT (A) followed the decision of the Special Bench of the ITAT, Visakhapatnam in the case of Merilyn Shipping & Tran sport vs. ACIT in ITA No.477/Viz/2008. The AO, while passing the consequential order, has verified the details and has allowed relief to the extent of Rs.5,01,61,399/-. In the grounds of appeal, the assessee’s argument is that the CIT (A) ought to have deleted the disallowance by himself, instead of directing the AO to verify the claim of the assessee. Further, in the additional ground of appeal No.10, the assessee is claiming that if the assessee has not been treated as an “assessee in default” u/s 201(1), no disallowance u/s 40a(ia) can be made
9. We find that the Hon'ble Supreme Court in the case of Palam Gas Service vs. CIT reported in (2017) 81 Taxmann.com 43 (S.C) has held that irrespective of the amount being paid, the same is disallowable u/s 40(a)(ia) if no TDS has been made. Therefore, the decision of the CIT (A) on this point has to be set aside. In such circumstances, the alternate plea of the assessee assumes importance.
10. The learned Counsel for the assessee has placed reliance upon the decision of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd vs. CIT, reported in (163 Taxmann.355) wherein the Hon'ble Supreme Court was considering the case of the assessee who was considered as an assessee in default u/s 201(1) and interest u/s 201(1A) was also made. The Hon'ble Supreme Court has held that the assessee therein, cannot be treated as “as assessee in default” u/s 201(1), if the recipient has offered the income and has paid the taxes thereon. However, with regard to the interest u/s 201(1A), the Hon'ble Supreme Court has held that the same is P a g e 6 | 9 payable till the date of payment of taxes by the deductee assessee. He submitted that in the case of the assessee before us, the recipients of the payment, have already offered the income in their hands and therefore, the assessee cannot be treated as “as assessee in default”. Further, the learned Counsel for the assessee also argued that by virtue of the second proviso to section 40(a)(ia), where the assessee is not deemed to be “an assessee in default” under the provisions of sub-section 201 (1), then for the purpose of this sub- clause i.e. 40a(ia), it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing returned income by the recipient. By referring to the said proviso, he submitted that though this proviso has been inserted by the Finance Act of 2013, various Benches of the Tribunal have held this proviso to be clarificatory in nature and applicable retrospectively. He placed reliance upon the decision of the Hon'ble Delhi High Court in the case of CIT vs. Ansal Land Mark Township reported in 61 Taxman.com 45 (Del.) in support of this contention. He therefore, submitted that since the assessee has not been treated as an “Assessee in Default” u/s 201(1) of the Act, it is to be presumed that the recipients have offered the said income to tax and in such circumstances, no disallowance u/s 40a(ia) is to be made.
The learned DR however, supported the order of the authorities below.
Having regard to the rival contentions and the material on record, we find that the Hon'ble Delhi High Court in the case of CIT vs. Ansal Land Mark Township (Supra) has considered the applicability of the second proviso to section 40a(ia) and has held to be declaratory and curative and to have retrospective effect from 1.4.2005. The assessment order before us is the A.Y 2008- 09. The relevant provision is reproduced hereunder for ready reference: “[Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, [thirty per cent of] such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid :] [Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it
P a g e 7 | 9 shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso.]” In view of the above provision and since the assessee has not been treated as an “assessee in default” u/s 201(1) of the Act, we hold that no disallowance u/s 40a(ia) can be made. The assessee’s additional ground of appeal
No.10 is accordingly treated as allowed for statistical purposes. “
12. In the present case, since the assessee has not been treated as an “assessee in default u/s.201(1)” of the Act, and the assessment year involved is 2012-13 and second proviso is retrospective w.e.f 1.4.2015, respectfully following the decision of Co-ordinate Bench in the case of Country Club Hospitality & Holiday Ltd(supra, we set aside the orders of lower authorities and restore the matter to the file of the AO to verify whether the recipient of the interest amount has paid tax thereon or not. If the recipient has paid tax on the said amount, then no disallowance is called for u/s.40(a)(ia) of the in the hands of the assessee.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced u/s. 34(4) of I.T.A.T.Rules, 1963 on 06/01/2022.