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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: HON’BLE SHRI MANU KUMAR GIRI & HON’BLE SHRI S.R. RAGHUNATHA
Year: 2014-2015 Thenmozhi Ganesan, The Principal Commissioner of 13A, Collectorate, Vs. Income Tax, Indira Nagar, Madurai. Dindigul 624 004. PAN: ADTPT 8145C (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/Appellant by : Shri. S. Bhupendran, Advocate ��यथ� क� ओर से/Respondent by : Shri. Nilay Baran Som, IRS, CIT. सुनवाई क� तारीख/Date of Hearing : 25.09.2024 घोषणा क� तारीख/Date of Pronouncement : 30.09.2024 आदेश /O R D E R PER MANU KUMAR GIRI (Judicial Member) The appeal filed by the assessee is directed against the order of the Ld. Principal Commissioner of Income Tax, Madurai-1 [‘PCIT’ I short] dated 25.03.2024 for Assessment Years 2014-15.
The assessee has assailed the impugned order on 1-5 grounds which are as under:
The order of the learned PCIT is bad and erroneous in law. 2) The learned PCIT erred in not considering the submission filed by the appellant in proper perspective. 3) The learned PCIT erred in not considering the scope and effect of the amendment made in Section 40(a)(ia) in proper perspective. 4) The order by the learned PCIT directing the Assessing Officer to pass a fresh assessment order by disallowing 100 percent u/s. 40(a)(ia), WITHOUT CANCELLING THE EARLIER ASSESSMENT ORDER, as mandated by Section 263 is bad in law. 5) Invoking Section 263, when the issue of disallowance u/s. 40(a)(ia), at the time of passing the assessment order dated 10/03/2022 u/s.148, was not free from doubt, is not legally tenable’.
3. Brief facts are as under: Assessee is an individual carrying on the business of exporting coconut fibre. The assessee e-filed her return of income for the Assessment Year[AY] 2014- 15 on 11.10.2014 declaring a total income of Rs.4,19,060/- and agricultural income of Rs.2,59,655/-. The case was selected for scrutiny under the CASS and assessment was completed u/s 143(3) of the Income Tax Act, 1961 (in short ‘’the Act’’) on 09.12.2016 accepting the income admitted by the assessee. Later, it was noticed that the assessee had made payments towards baling and pressing charges to M/s. Shri SRM Press Factory and M/s.Hari Tec to the tune of Rs.10,13,550/- and Rs.8,57,660/- respectively without deducting tax at source. Hence, assessment was reopened and order u/s 147 r.w.s 144B of the Act was completed by the Faceless Assessing Officer (FAO) on 10.03.2022 by disallowing Rs.5,61,363/-, being 30% of the payments made towards baling and pressing charges of Rs.18,71,210/- for non-compliance of provisions of Section 40(a)(ia) of the Act. An amendment was made to section 40(a)(ia) of the I.T.Act, 1961 restricting disallowance u/s 40(a)(ia) to 30% with effect from 01.04.2015. Prior to the amendment, the rate of disallowance u/s 40(a)(ia) was 100%. However, while making disallowance u/s 40(a)(ia), the FAO erroneously disallowed 30% as per the amended provisions applicable with effect from the AY 2015-16 instead of making 100% as applicable to pre-amended provisions applicable for the Asst. Year 2014-15. Due to this said reason, the assessment order passed by the Faceless Assessing Officer u/s 147 read with section 144B of the Act on 10/03/2022 was considered to be erroneous and prejudicial to the interests of revenue. After taking into the above findings of facts and observations, a show-cause notice u/s 263 of the Act, was issued on 02.02.2024. The contents of the same are reproduced hereunder:- "The examination of records for Assessment Year (A.Y.) 2014-15 revealed that you have e-filed the return of income on 11.10.2014 declaring income of Rs.4,19,060/-. The assessment was completed under section (u/s) 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) accepting the income returned on 09.12.2016.
2. On verification of Assessment records, it is seen from the P/L a/c for the AY 2014-15, you have claimed expenses for baling and pressing charges of Rs.29,58,708/- out of which you have not deducted Tax at source on amount paid to M/s.SRM Press Factory and M/s. Hari Tec of Rs. 10,13,550/- and Rs.8,57,660/- respectively totalling to Rs. 18,71,210/- as per the provisions of section 194C of the Act. Hence, the assessment was reopened u/s 147 for the reason that you have incurred total expenses of Rs. 18,71,210/- towards baling and pressing charges and has not deducted Tax at source as per provisions of the section 194C of the Act on the said amount of Rs. 18,71,210/- but 40(a)(ia) was not made. The assessment was completed by NFAC u/s 147 read with section 144B of the Act on 10.03.2022 by making addition of Rs.5,61,363/- (30% of 18,71,210/-) u/s 40(a)(ia) of the Income tax Act. However, it is observed that since the A. Y. involved is 2014-15, the disallowance u/s 40(a)(ia) should have been done at 100% of the total expenses incurred on account of transport charges for the non-compliance of provisions of section 194C of the Act.
During the scrutiny proceedings, the above aspect was not examined by the Assessing Officer. Without proper enquiry and non-application of mind, the Assessing Officer had completed the assessment u/s 147 by making disallowance u/s 40(a)(ia) @30% of the said amount of Rs. 18,71,210/- as against 100% of the same. In view of the above, the assessment order under section 147 read with section 1448 of the Income Tax Act passed by assessing officer on 10/03/2022 for the assessment year 2014- 15 is held to be erroneous insofar as prejudicial to the interests of revenue. Hence, it is proposed to initiate proceedings u/s 263 of the Income tax Act 1961 for the reasons cited supra.
4. You are therefore given an opportunity on 06.02.2024 at 11.45 a.m. to show -cause why the assessment order should not be subject to proceedings under section 263 of the Income Tax Act, 1961 for the reasons discussed in the foregoing paras. You are requested to appear personally or through your Authorized Representative along with your written submissions and supporting documents, failing which, the case will be decided on merits without any further reference to you. If you do not wish to appear personally, you may also submit your written submissions along with supporting documents on or before 06.02.2024 either through e-mail or speed post 4. In response to the notice show Cause notice RTMENT the assessee has submitted her written submission by mail on 12.03.2024 which are hereunder: Respected Sir, As has been held in the following decisions by the ITAT, the amendment made in sec.40(a)(ia) is retrospective and the disallowance made in the assessment is correct. The copies of the decisions are attached for your consideration. Hence, the proceedings initiated may be dropped, also keeping in mind the principle that if at all, there is any change in the above, it would amount to change of opinion, which, as you are aware, is outside the scope and ambit of sec.263. Thanking You Yours faithfully THENMOZHI GANESAN Encl. Copy of Judgements 1. Dipak Parui v. Jt CIT (IT Appeal No. 767 (Kol.) of 2016, dated 20.07.2018) 2. Rajendra Yadav v. ITO (IT Appeal No. 895 (Jp) of 2012, dated29.1.2016) 3. Tripura State Electricity Corpn. Ltd., v. Dy. CIT (IT Appeal No.30, 31 &32/Gau/2015, 167/Gau/2016, 242 and 243/Gau/2017, 63 and 64/Gau/2018 dated 18.10.2019)"
The ld. PCIT after considering the facts of the case, the provisions of the law and the material information available on records stated that the phrase 'thirty percent of any sum payable' was substituted in the Finance (No.2) Act, 2014, w.e.f. 01.04.2015 by way of amendment to section 40(a)(ia) of the Income-tax Act, 1961. It is a settled principle that any amendment made to existing Act will have prospective effect unless it is expressed otherwise. Moreover, the phrase substituted 'thirty percent of any sum payable' to section 40(a)(ia) cannot be stretched anterior to the date of substitution. Ld.PCIT further noted that the contention of the assessee in the written submission that the amendment made to section 40(a)(ia) is retrospective effect is devoid of merits. Moreover, the Hon'ble ITAT "SMC" Bench, Kolkata in in the case of M/s.Purulia Central Co- Op Bank Ltd Vs ACIT, Circle-3(2), Purulia, by relying on the decision of the Hon'ble Apex Court in the case of Shree Choudhary Transport Company Vs ITO reported in [2020] 118 taxmann.com 47 (SC), has answered the question 'whether the amendment made by the Finance (No.2) Act, 2014 to Section 40(a)(ia) of the Act is to be applied retrospectively or not that the amendment made has prospective effect only. In view of the above Finance Act and judicial precedents, ld. PCIT was satisfied with the order dated 10.03.2022 passed by the ld. Assessing Officer u/s.147 r.w.s144B of the Act is erroneous in so far as it is prejudicial to the interest of the revenue. Accordingly, in exercise of powers conferred u/s 263 of Income Tax Act, 1961, ld. PCIT set aside the aforesaid order with the direction to the Assessing Officer to pass a fresh assessment order by disallowing 100% u/s 40(a)(ia). The Assessing Officer was also directed to afford opportunity of being heard to the assessee before passing the order and pass fresh assessment order accordingly. Aggrieved, assesseee preferred an appeal before us.
The ld.Counsel of the assessee reiterated the same arguments as referred in para 4 of the impugned order of PCIT. He further contended and prayed that in case impugned order is upheld then the direction of the PCIT may be varied to the extent to find out by AO whether liability of the assessee to deduct TDS if any, arises or not as per law.
Per contra, the ld. Departmental Representative Mr. Nilay Baran Som, CIT vehemently supported the order of the ld.PCIT and filed a judgment of the Hon’ble Supreme Court in the case of ‘Shree Chaudhary Transport Co. Vs Income Tax Officer dated 29.07.2020 [AIR 2020 SC 4003, AIRONLINE 2020 SC 665] and contended that the issue is no longer res integra, hence, ld.PCIT is right in invoking section 263 of the Act setting aside the order u/s 147 r.w.s 144B dated 10.03.2022 to AO for fresh assessment order and treated the orderu/s 147 r.w.s 144B dated 10.03.2022 as erroneous so far as prejudicial to the interest of revenue.
We have also gone through the findings of the ld.PCIT and order u/s 147 r.w.s 144B dated 10.03.2022 passed by the AO, perused the record of the appeal, section 263 of the Act and case law cited at bar.
We are of the considered opinion that when order u/s 147 r.w.s 144B dated 10.03.2022 was passed, the judgment of the Hon’ble Supreme Court in the case of ‘Shree Chaudhary Transport Co. Vs Income Tax Officer dated 29.07.2020 [AIR 2020 SC 4003, AIRONLINE 2020 SC 665] was available, binding which has already settled the controversy whether amendment in section 40(a)(ia) of the Act by Finance (No.2) Act, w.e.f. 01.04.2015 is retrospective or prospective. The Hon’ble Supreme Court in an authoritative held that the aforesaid amendment is prospective and not retrospective.
Therefore, in the light of above referred judgment of the Hon’ble Supreme Court we upheld the order of the ld.PCIT and find the explanation 2(d) of section 263 applicable in this case. Since, we upheld the order of the ld.PCIT, however, while making fresh assessment ld.AO is directed to see
In the result, the appeal filed by the assessee is dismissed in above terms.
Order pronounced in the open court on 30th day of September, 2024 at Chennai.