M/s. CCL Products (India)Ltd. vs The Commissioner of Income Tax I

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 31ST DAY OF AUGUST 2020

PRESENT

THE HON’BLE MR. JUSTICE ALOK ARADHE

AND

THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD

I.T.A. NO.407 OF 2010 BETWEEN:

M/S. C.S. RAGHOJI (BELLARY) REP. BY ITS PARTNER ADITYA A RAGHOJI, # 35 WARD NO.18, JANATHAKAL COMPOUND NEAR DURGAMMA TEMPLE KAPPAGAL ROAD, BELLARY. ... APPELLANT (BY SRI. A. SHANKAR, SR. COUNSEL A/W SRI. M. LAVA, ADV.,)

AND:

THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1, AAYAKAR BHAVAN STAFF ROAD, FORT, BELLARY-583102. ... RESPONDENT (BY SRI. K.V. ARAVIND, ADV.) - - -

THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 30.06.2010 PASSED IN ITA NO.100/BANG/2010 FOR THE ASSESSMENT YEAR 2006-07, PRAYING THAT THIS HON’BLE COURT MAY BE PLEASED TO: (I) FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED THEREIN. (I) ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN ITA NO.100/BANG/2010

DATED 30-06-2010, ANNEXURE ‘A’, IN THE INTEREST OF JUSTICE AND EQUITY.

THIS ITA COMING ON FOR FINAL HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING:

JUDGMENT

This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee. The subject matter of the appeal pertains to the Assessment year 2006-07. The appeal was admitted by a bench of this Court vide order dated 18.11.2010 on the following substantial question of law: (i) Whether the Tribunal was justified in law in remanding the matter back to the file of the learned CIT(A) for re-verification of documents when all the documents and details were produced by the appellant in relation to the payment of handling charges of Rs.18,80,762/- made to Sri.T.Shivakumar before the authorities and there was no need to remand the matter under the facts and circumstances of the case?

(ii) Whether the Tribunal was justified in law in not appreciating the fact that payments made to Sri.Srinivas of Rs.3,85,535/- were only towards disbursement of payments towards wages amount various labourers and Sri.Srinivas only supervised the work for which he received commission under the facts and circumstances of the case?

(iii) Whether the Tribunal was justified in not appreciating the fact that the payment made to Sri.Abdul Rahim was only towards reimbursement of handling charges of Rs.1,23,000/- incurred at Hospet Branch which was occasional incurred by the appellant under the facts and circumstances of the case?

(iv) Whether the Tribunal was justified in law in not holding that when the provisions of Chapter XVII B of the Act is not invoked consequently provisions of Section 40(a)(ia) of the Act is not attracted as the appellant is not held as assessee in default under Chapter XVII B

of the Act under the facts and circumstances of the case?

(v) Whether the Tribunal failed to appreciate that for the purpose of invoking the provisions of Section 40(a)(ia) of the Act firstly there should be a finding that the provisions Chpater XVII B is attracted for the purpose of disallowance under Section 40(a)(ia) of the Act under the facts and circumstances of the case?

Thereafter an additional substantial question of law was framed: Whether the amendment to Section 40(a)(ia) of the Act by Finance Act 2012 by insertion of second proviso is to be interpreted as clarifactory in nature and applied retrospectively and consequently no disallowance has to be made on the facts and circumstances of the case?

Facts leading to filing of this appeal briefly stated are that assessee is engaged in the business of

clearing and forwarding agency for M/s ACC Ltd for distribution of cement and other allied projects. The assessee filed the return of income declaring total income of Rs.26,58,480/- for the Assessment year 2006-07 under the head of income from business. The Assessing Officer vide order dated 27.11.2008 determined total income of the assessee at Rs.53,50,291/- by making an addition of Rs.27,84,324/- , by disallowing a sum of Rs.22,84,324 under the provisions of Section 40(a)(ia) of the Act and an amount of Rs.5 Lakhs as an adhoc disallowance was made towards transportation charges. Being aggrieved, the assessee filed an appeal. The Commissioner of Income Tax (Appeals) by an order dated 11.11.2009 affirmed the order of the Assessing Officer. The assessee thereupon filed an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as ‘the Tribunal’, for short). The Tribunal vide order dated 30.06.2010 inter alia held that the assessee has

produced the evidence in case of payment made to one T.Shivakumar and the matter was therefore, remitted for re-examination, on the parameters indicated in paragraph 7 of the order. In the result, the appeal was partly allowed. Being aggrieved, the assessee is in appeal before us.

Learned Senior counsel for the assessee submitted that in the facts and circumstances of the case, the assessee could not have treated as an assessee in default by invoking the provisions of Section 40(a)(ia) of the Act. It is also submitted that during the course of the assessment proceedings, the assessee had contended that assessee had made payment of handling charges to T.Shivakumar, Abdul Rahim and Srinivas and the aforesaid payments were made as agents who in turn paid labour charges to multiple labourers. It is further submitted that the aforesaid aspect of the matter has not been appreciated by the Tribunal and limited remand has been made with regard to the

payments made to T.Shivakumar. It is also submitted that the matter be remitted to the Assessing Officer for decision afresh. On the other hand, learned counsel for the revenue submitted that the Tribunal has already remitted the matter to the Commissioner of Income Tax (Appeals) and in case, the assessee wants to adduce any evidence with regard to payments made to aforesaid Abdul Rahim and Srinivas, it may adduce the same before the Commissioner of Income Tax (Appeals) and Commissioner of Income Tax (Appeals) if required may call for the remand report. It is argued that the matter be remitted to Commissioner of Income Tax (Appeals) and he may be directed to examine the issues raised by the assessee including the issue arising out of additional substantial questions of law afresh.

We have considered the submissions made by learned counsel on both the sides and have perused the record. Admittedly, the assessee had produced a copy of the agreement entered between it and

T.Shivakumar as well as affidavit of T.Shivakumar stating that he acted only as a commission agent. However, the Commissioner of Income Tax (Appeals) refused to accept the evidence adduced by the assessee. Therefore, the Tribunal directed the remand of the matter to the Commissioner of Income Tax (Appeals). In view of submissions made and in the facts of the case, the remand of the case is imperative. Accordingly, it is directed that the assessee shall be at liberty to adduce the evidence with regard to the payments made to Abdul Rahim and Srinivas before the Commissioner of Income Tax (Appeals). The aforesaid evidence shall be considered by the Commissioner of Income Tax (Appeals) and in case, Commissioner of Income Tax (Appeals) deems it appropriate, he shall be at liberty to seek the remand report from the Assessing Officer and thereafter to decide the matter afresh in accordance with law. To the aforesaid extent, the order passed by the Tribunal is modified.

In view of preceding analysis, it is not necessary for us to answer the substantial questions of law framed by this court.

In the result, the appeal is disposed of.

Sd/- JUDGE

Sd/- JUDGE ss

M/s. CCL Products (India)Ltd. vs. The Commissioner of Income Tax I