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Income Tax Appellate Tribunal, ‘C’ SMC BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN
आदेश /O R D E R
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -1, Coimbatore, dated 22.08.2016 and pertains to assessment year 2007-08.
There was a delay of 160 days in filing this appeal by the assessee. The assessee has filed a petition for condonation of delay. We have heard the Ld. representative for the assessee and the Ld. D.R. We find that there was sufficient cause for not filing the appeal before the stipulated time. Therefore, we condone the delay and admit the appeal.
Shri Arjunraj, the Ld. representative for the assessee, submitted that there are two issues arise for consideration in this appeal. The first issue is validity of reopening of assessment and other issue is with regard to addition of ₹15,20,042/- under Section 40(a)(ia) of the Income-tax Act, 1961 (in short 'the Act').
With regard to reopening of assessment, Shri Arjunraj, the Ld. representative for the assessee, submitted that originally the assessment was completed under Section 153C of the Act. In the absence of any material found during the course of search, there cannot be any assessment under Section 153C of the Act. according to the Ld. representative, the Assessing Officer without any material found during the course of search operation, reopened the assessment on the basis of the Profit & Loss account which is available on record, therefore, the reopening of assessment is not valid.
Coming to the merit of the appeal, the Ld. representative for the assessee submitted that the recipient has already paid taxes.
Admittedly, the assessee has not deducted any tax, therefore, in view of the second proviso to Section 40(a)(ia) of the Act, which is retrospective in operation, according to the Ld. representative, there cannot be any disallowance when the recipient has included the receipt in their total income and paid taxes. The Ld. representative placed his reliance on the judgment of Delhi High Court in CIT v.
Ansal Land Mark Township (P.) Ltd. (2015) 377 ITR 635.
On the contrary, Shri K. Hari Govind, the Ld. Departmental Representative, submitted that the second proviso to Section 40(a)(ia) of the Act is prospective in operation, therefore, it cannot be applicable during the year under consideration. Placing reliance on the judgment of Kerala High Court in Thomas George Muthoot v.
CIT (2015) 63 taxmann.com 99, the Ld. D.R. submitted that Section 40(a)(ia) is automatically attracted on failure of the assessee to deduct tax and the second proviso to Section 40(a)(ia) of the Act is operative only from 01.04.2013 and not applicable for earlier assessment years. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly rejected the contention of the assessee.
Coming to the issue of opening, the Ld. D.R. submitted that the CIT(Appeals) examined the issue elaborately and found that tax was not deducted on payment of interest to two companies, therefore, the assessment was rightly reopened.
I have considered the rival submissions on either side and perused the relevant material available on record. The assessee claims that initially the order of assessment was passed under Section 153C of the Act after the search. However, a copy of the assessment order is not available on record. To find out whether there was any search material on record, it is necessary for the assessee to file a copy of assessment order. From the impugned order of the Assessing Officer dated 24.02.2015, it appears that there was search in the premises of the assessee’s father. In response to the notice issued under Section 153C of the Act, the assessee filed return of income. There was reference about agricultural income also. The Assessing Officer found that no tax was deducted in respect of the payment of interest made to M/s Senthil Enterprises and M/s Ambal Complex. Therefore, the interest payment was disallowed under Section 40(a)(ia) of the Act.
Since the copy of the assessment order said to be passed under Section 153C of the Act is not available on record, this Tribunal is unable to find out whether there was any search material available on record with regard to interest payment as the Assessing Officer refers only Profit & Loss account as the base for the order of the assessment after reopening. Therefore, to decide whether the reopening of assessment is valid after the order was passed under Section 153C of the Act, this Tribunal needs to go through the assessment order passed under Section 153C of the Act. Since copy of the said order is not available on record, the matter needs to be re-examined. Accordingly, orders of both the authorities below are set aside the issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the same and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.
Now coming to non-deduction of tax and disallowance was made under Section 40(a)(ia) of the Act. In view of the claim of the assessee that the recipient has already paid taxes, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer. With regard to second proviso to Section 40(a)(ia) of the Act, there is a conflict in judicial opinion between Kerala High Court and Delhi High Court. The Delhi High Court says that second proviso to Section 40(a)(ia) of the Act is retrospective in operation. However, the Kerala High Court says that the second proviso is only prospective in operation, therefore, not applicable to the earlier assessment years. Since two different High Courts have taken two different views, in the absence of any judgment from jurisdictional High Court, this Tribunal is of the considered opinion that the judgment which favours the assessee has to be followed in view of the judgment of Apex Court in CIT v. Vegetable Products Ltd. (88 ITR 192). Therefore, by following the judgment of the Delhi High Court in Ansal Land Mark Township (P.) Ltd. (supra), this Tribunal is of the considered opinion that the second proviso Section 40(a)(ia) of the Act is retrospective in operation, therefore, applicable for earlier years also.
Even though the assessee claims that the recipient has included the amount in their total income and paid taxes, no material is available on record. Therefore, the matter needs to be re-examined by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the disallowance made under Section 40(a)(ia) of the Act is also remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter and bring on record whether the recipient has paid the taxes or not and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes.