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Income Tax Appellate Tribunal, ‘D’ BENCH
Before: Shri M.Balaganesh & Shri S.S.Viswanethra Ravi
Shri S.S. Viswanethra Ravi, JM :-
This appeal by the assessee is directed against the order dated 16-03-2015 passed by the Commissioner of Income Tax(Appeals),Asansol for the assessment year 2010-11.
None appeared for Respondent Revenue. Revenue had sought adjournment in 14 cases out of 16 cases listed for hearing today. Hence, adjournment application of revenue was rejected. Therefore, we proceed to dispose off the appeal after hearing the Ld. AR of the Assessee and based on the material available on record.
The assessee has raised the following grounds of appeal:-
“1. For that on the facts of the case the ld. CIT(A) was not justified in sustaining the addition of Rs.23,72,327/- u/s. 40(a)(ia) of the Act’61, when the provisions of the section is not attracted and the addition may please be deleted.
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For that on the facts of the case the ld. CIT(A) was not justified in sustaining the addition of Rs.2,05,102/- u/s.69A of the Act’61, and the addition may please be deleted. 3. For that on the facts of the case the assessment order dated 26/03/2013, remained in the custody and in control of the A.O beyond the time barring limit, till 19th April, 2013, is barred by limitation, and may please be cancelled. 4. For that the appellant craves leave to add, alter, amend any further grounds of appeal before or at the time of hearing.
It was submitted by the Ld.AR that no orders are required in ground no-3 and accordingly, it is dismissed as not pressed.
Ground no-1 is relates to disallowance of expenditure u/s. 40(a)(ia) of the Act.
The Assessee is a firm, does work under contract and conducts its business in the name and style as Dhameja mining. The Assessee filed its return declaring a total income of Rs,1,36,904/- on 28-03-2012 and under scrutiny notices u/section 143(2) and 142(1) of the Act were issued, in response to which, the Assessee produced relevant documents as sought. The AO found the assessee debited an expenditure of Rs.25,59,525 under the head ‘Machine hire charges’ in the Profit & Loss account and not deducted any tax from the payment made to following parties:
Sl.No. Name of the Party Amount ( in Rs.) 1. OTIF 3,00,000 2. Baron Kr Mondal 5,97,000 3. Ashok Kr Chandak 9,12,975 4. Mukesh Kr. Singh 1,35,000 5. Sohan Lal Ruprai 4,27,352 Total 23,72,327
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In explanation, the Assessee submitted written submissions on 18.12.2012 as under:
"The assessee firm have paid Rs. 25,59,52 as "Machine Hire Charges to various parties, the details of which is already furnished to you good offices. No amount of Machine Hire Charges is outstanding as on 31st March,2010. The assessee firm has not deducted any tax at source. But failure to deduct tax at source on Machine Hire Charges should not qualify for disallowance of the entire expenditure which has already been paid. In support of this I on behalf of my client submitting before you the judgment of ITAT, Vishakhapatnam Bench, Vishakhapatnam in the case of M/s Marilyn Shipping & Transporters, Vishakhapatnam, which is self-explanatory.( ITA No - 477/Vizag 12008)"
The AO rejected the contention of the Assessee in view of interim order by the Hon'ble High Court of Andhra Pradesh in I.T.A. No.384 of 2012 preferred appeal against the order of the Vishakhapatnam Bench of Tribunal in the case of M/s Merilyn Shipping & Transport and treated the payment of Rs. 23,72,327/- in contravention of section 194 I of the Act and disallowed and added the same to the income of the Assessee under section 40(a) (ia) of the Act. The CIT-A confirmed the addition by observing as under:
The effect of non admission of SLP is as under: a. Rejection of SLP does not mean that decision of HC has been approved.[CIT Vs Quality (Pat) 224 ITR 77,CIT Vs Shree Manjunatheswara Packing Products & Camphor Works (SC) 231 ITR 53,J.K Charitable Trust Vs WTO & Ors. (All) 222 ITR 523] b. Special Leave petition dismissed with speaking order is declaration of law by Supreme Court - After rejection of SLP, lower Courts can review its order - Once SLP is admitted, lower Courts have no jurisdiction to review the order [Kunhayammed & Ors. Vs State of Kerala & Anr. (SC) 245 ITR 360] It can be seen in the instant case, there is no detailed order and further rejection of SLP does not mean decision of High Court is approved. Further the decision of Hon. High Court of Allahabad is not final as the power to seek review exists. 8. In the decisions reported in CIT v. Crescent Export Syndicate [2013] 33 taxmann.com 250 (Cal), CIT v. Md. Jakir Hossain Mandal [2013] 33 taxmann.com 123 (Cal) and CIT v.Sikandarkhan N. Tunvar [2013] 33 taxmann.com 133 (Guj) have given reasoned ruling distinguishing the decision of Merilyn Shipping & Transport. The High Courts have held that the views expressed in the case of Merilyn Shipping & Transports are not acceptable. In view of discussion above the decision of Hon. High Court of Allahabad is to be compared with that of Hon. High Court of Kolkota . The latter is the jurisdictional High Court and its decision has to prevail. The decision of jurisdictional High Court is that the decision in Merilyn Shipping & Transports v. ACIT [2012] 20 taxmann.com 244(Visakhapatnam) (SB) is not acceptable. This being the case, the reliance by Authorised Representative of the assessee to decision in Merilyn Shipping & Transports v. ACIT [2012] 20 taxmann.com 244(Visakhapatnam) (SB) in the case is not accepted by me. Hence ground 2 is dismissed.
ITA No. 701/Kol/15 M/s. Dhameja Mining
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Before us the ld.AR submits that the assessee gathered information regarding the payee disclosing such payment as income in return of income and the same was brought to the notice of CIT-A. He also submits that the reliance was placed on in the case of Merlyn Shipping & Transport reported in 20 taxmann.com 244(Visag)(SB). Inspite of which the CIT-A dismissed the ground involving the same.
Heard the ld.AR and perused the material available on record. We find that the Assessee relied on the decision of a Special Bench in the case of Merilyn Shipping & Transports held that if all the amounts have been paid, no addition shall be made. The CIT-A after going through the various decisions as relied on by the Assessee found the principle laid down by the Hon’ble Jurisdictional High Court of Calcutta in the case of CIT Vs. Crescent Export Syndicate reported in (2013) 33 taxmann.com 250(Cal) is binding on him and applied the ratio therein to the facts of the present issue. The Hon’ble Jurisdictional High Court of Calcutta in the case of CIT Vs. Crescent Export syndicate did not agree with the finding of the Special Bench that the Assessing Officer can disallow only when if any amount is found to be payable as on the year end and was pleased to hold the provisions of section 40(a)(ia) of the Act are applicable not only to the amount which is shown as payable on the date of balance-sheet, but it is applicable to such expenditure, which become payable at any time during the relevant previous year and was actually paid within the previous year. We find that the issue in hand is squarely covered by the decision supra.
In the present case, the only word put in the provision of section 40(a)(ia) of the Act is "payable" and not "paid" or "credited", rather Legislature consciously replaced the words "amounts credited or paid" with the word "payable" in the final enactment and such change was done with a purpose. I am of the view that presumption that enactment brought in by the Legislature is well-thought off and properly worded in order to give meaning to its intent. The Legislature by consciously replacing the words from "credited" or "paid" or "payable", the intent has been made clear that only the outstanding amount or the provision for expenses are liable for TDS are to be disallowed in the event there is default in not following the TDS provisions under Chapter XVII-B of the Act. No doubt the object of section 40(a)(ia) of the Act is to ensure that the TDS provision as provided in Chapter XVII-B is implemented without any default. As per section 40(a)(ia) of the Act any interest, commission or brokerage, rent, ITA No. 701/Kol/15 M/s. Dhameja Mining . 4
royalty, fees for professional services or fees for technical services "payable" on which tax is not deducted or the tax is deducted but the same is not paid within the time allowed such amount shall be disallowed while computing the income. The sub-section speaks of the amount "payable" on which the tax is not deducted and therefore it should apply only if any amount is "payable", but if the amount is already paid the provisions of this section should not apply. The crucial word is "payable". The question arises "whether payable means payable at the end of the year or payable at any time during the year though paid during the year itself? If one looks into the TDS Provisions from sections 194A to 194K, it will be apparent that as per the language of those sections, tax is to be deducted at the time the amount is paid or at the time when the amount is credited, i.e. when the liability is admitted and it becomes payable. Therefore wherever the payment is covered by aforesaid sections whether paid or credited, tax has to be deducted. Sections 194 L and 194 LA may also be looked into which says that tax has to be deducted only at the time of payment. The language in these sections therefore shows that the Legislature has used different language in different sections. It is trite law that each and every word of the section has its own meaning and while drafting section 40(a)(ia) was meant to be applicable only if the amounts covered therein was "payable" at the end of the year. Reference may be made, for the scope and effect of section 40(a)(ia) as clarified by CBDT in Circular No.5 of 2005, date 15th July, 2005 to show that the intention to introduce this provision was brought to curb bogus payments by creating bogus liability."
12.4 In our considered opinion, there is no ambiguity in the Section and term 'payable' cannot be ascribed narrow interpretation as contended by assessee. Had the intentions of the legislature were to disallow only items outstanding as on 31st March, then the term 'payable' would have been qualified by the phrase as outstanding on 31st March. However, no such qualification is there in the section and, therefore, the same cannot be read into the section as contended by the assesse
When we examine Section 40(a)(ia) in the backdrop of these sections, we find that it refers to the amount 'payable' 'on which tax was deductible at source under Chapter XVII-B'. Applying the principles of eujesdem generis, it can easily be inferred that term 'payable' in section 40(a)(ia) has to be interpreted in the light of sum referred to in various sections contained in Chapter XVII-B noted above, on which tax was deductible and, therefore, the term 'payable' in Section 40(a)(ia) refers to entire amount on which tax was required to be deducted. Keeping in view the principles of harmonious construction, the term 'payable' in Section 40(a)(ia) cannot be read separately from the provisions relating to TDS as pleaded on behalf of assessee. In our opinion, ld. CIT (Appeals) has rightly observed that taking the spirit of TDS provision into account and Section 40(a)(ia) being directly related to such TDS provision, a harmonious construction of the word 'payable' leads to inevitable conclusion that the said word also includes the 'paid' amount.
In view of above discussion, we answer the question as under:- The provisions of section 40(a)(ia) of the Income Tax Act, 1961, are applicable not only to the amount which is shown as payable on the date of balance-sheet, but it is applicable to such expenditure, which become payable at any time during the relevant previous year and was actually paid within the previous year. In the result the question is decided in favour of revenue and against the assessee."
Hence, respectfully following the decision of the Hon’ble Calcutta High Court in the case of supra we dismiss the plea of the assessee that provisions of section 40(a)(ia) of the Act cannot be made applicable in respect of amounts paid before the end of the previous year.
However, the assessee had submitted the information before the CIT-A that the payees have duly reflected this subject mentioned receipts in their returns of income and paid taxes thereon. We find that the amendment in ITA No. 701/Kol/15 M/s. Dhameja Mining
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section 40(a)(ia) of the Act has been held to be retrospective in operation in the light of the decision of the Hon’ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (P) Ltd reported in 377 ITR 635 (Del). Respectfully following the said decision, we deem it fit and proper and in the interest of justice and fair play set aside this issue to the file of the AO for examination of subject mentioned receipts in the hands of the respective payees based on details provided to that effect by the assessee. Once, if it is proved to be correct then no disallowance u/s. 40(a)(ia) of the Act would be operative in the hands of the assessee. Accordingly, ground no.1 of assessee’s appeal is allowed for statistical purpose.
Ground no. 2 is relating to addition of Rs.2,05,102/- being the income from undisclosed source u/s. 69A of the Act.
During the course of assessment the AO obtained information from M/s. S.K Enterprises, Bokaro Steel City, Jharkhand u/s. 133(6) of the Act. On verification of such information the AO found that the closing balance of assessee in the books of said M/s. S.K Enterprises. But the same was not reflected in assessee’s audited balance sheet. Further he found that the said amount was cleared on 14-04-2010 through cheque relevant to FY 2009-10. The AO treated the same as income from undisclosed source for not reflecting the same in the balance sheet of the assessee u/s. 69A of the Act and added the same to the total income of the assessee.
Before the CIT-A the assessee submitted that it has received the entire payments and nothing was remained payable during the year. The submissions of which is reproduced herein below:-
As per the books of M/s.S.K Enterprise the closing entry of Rs.2,05,102/- resulting thereby that out of total bills raised amounting to Rs.62,72,102, the payments were received to the extent of Rs.60,67,000/- and a sum of Rs.2,05,102/- was yet to be paid. A good amount of cash payment was made by S.K Enterprise, which payment might have not been correctly. Since the assessee is claiming that he has received the entire payments during the year and there was nothing receivable, there is no question of any doubts to be raised as all ITA No. 701/Kol/15 M/s. Dhameja Mining . 6
gross bill have been disclosed and offered for taxation. There is no reason to disbelieve the appellant’s books and relied on the books of S.K Enterprise, which entry have been made suiting to his convenience.
The CIT-A doubted the veracity of the submission whether it was taken into profit and loss account and taxed there on or not considering the above submissions of the assessee in respect of gross bill was disclosed and offered for taxation and confirmed the addition made by the AO in this regard. The observation of which is reproduced herein below:-
“11. The explanation offered by the appellant has been considered. The fact is that the finding of the Assessing Officer that the sum received by cheque after the end of the financial year against business receiavables at the end of financial year is not figuring in the balance sheet. Thus an incontrovertible fact of an asset not recorded in the books of account exists. This fact is independent of whether the sum is included as a business receipt or not. The fact of existence of unaccounted assets in the form of business receivables stands substantiated. This is independent of whether it is already taken to profit and loss account and profit element of same is taxed or not. Hence, I uphold the addition made by the Assessing Officer. “
The ld.AR submits that the contention of the assessee was that he did not receive such amount. The cheque was filed before the CIT-A to prove that the said cheque was never received by the assessee. Without considering the same the CIT-A confirmed the impugned addition made by the AO. The CIT-A also observed that the explanation offered by the assessee before him was independent and doubted whether it was taken to profit and loss account and offered to tax or not. In such circumstances, the ld.AR submits that the assessee undertakes to appear before the AO for verification of such details and urged to remand the issue to the AO.
Heard the ld.AR and perused the material available on record. We find that the AO added the impugned addition for not disclosing the same in the balance sheet and by observing the same was settled through cheque on 14- 04-2010. Admittedly, the submission as made by the assessee before the CIT- A that assessee has taken into consideration the gross bill, which was disclosed and offered for taxation, wherein the said impugned amount is part ITA No. 701/Kol/15 M/s. Dhameja Mining . 7
and parcel of said gross bill. The CIT-A found the same as independent and doubted the same is taxed or not. In view of such observations and taking into considerations the submission as advanced by the ld.AR of the assessee, we are of the view that the issue requires fresh examination in terms of the contention of the assessee the gross bill amount have been disclosed and offered the tax or not. Hence, AO is directed to decide this issue afresh in accordance with law, uninfluenced by earlier decision and decision of CIT-A in this regard. Therefore, ground no. 2 of assessee’s appeal is allowed for statistical purpose.
In the result, the appeal of assessee is allowed for statistical purposes. 19.
ORDER PRONOUNCED IN OPEN COURT ON 21-12-2016
Sd/- Sd/- M.Balaganesh S.S. Viswanethra Ravi Accountant Member Judicial Member
Dated 21/12/ 2016 Copy of the order forwarded to: 1. The Appellant/assessee: M/s. Dhameja Mining 276 Sarada Pally, Santadangal, PIN 713325. The Respondent/revenue: Income Tax Officer 2 Ward 2(4), Parmar Building G.T Road, Asansol 713304. 3 /The CIT(A) 4.The CIT 5. DR, ITAT, Kolkata Bench
Guard file. **PP/SPS True Copy, By order, Asstt Registrar ITA No. 701/Kol/15 M/s. Dhameja Mining . 8
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