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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH AHMEDABAD
PER S. S. GODARA, JUDICIAL MEMBER This assessee’s appeal for assessment year 2010-11 arises against the CIT(A)-8, Gandhinagar’s order dated 05.11.2014, in case no. CIT(A)/GNR/130/2013-14, upholding Section 40(a)(ia) disallowance of Rs.7,04,010/- on account of non deduction of TDS, Section 40A(3) disallowance of
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freight outward expenditure of Rs.2,90,636/- and freight inward expenditure of Rs.11,89,328/-; respectively made in assessment order dated 05.03.2013, in proceedings u/s. 143(3) of the Income Tax Act, 1961; in short “the Act”. Heard both sides. Case file perused.
We come to former issue of Section 40(a)(ia) disallowance of Rs.7,04,010/- on account of assessee’s inaction in deducting TDS upon the freight/commission payments in question. There is no dispute about the impugned non deduction of TDS. The Assessing Officer therefore invoked the disallowance provision u/s.40(a)(ia) of the Act. The assessee pleaded in course of the lower appellate proceedings hat this disallowance is not to be made qua the amount already paid as on 31.03.2010 but the same has to be restricted to the sum remaining payable on the said date. The CIT(A) quotes hon’ble jurisdictional high court’s decision in CIT vs. Sikandarkhan N Tunvar ITA No. 218 of 2013 decided on 02.05.2013 adjudicating the instant issue in Revenue’s favour. He thereafter partly accepts assessee’s claim in directing the Assessing Officer to verify actual TDS payments in assessment year 2013-14 qua the instant issue.
Learned counsel representing assessee reiterates the above legal argument of “paid and payable aspect”. The same is no longer res integra in view of hon’ble apex court’s recent judgment in M/s. Palam Gas Service vs. CIT Civil Appeal No. 5512 of 2017 decided on 03.05.2017 again adjudicating the issue in Revenue’s favour. We therefore find no merit in assessee’s instant legal argument.
Learned counsel thereafter submits that the payees in question already stand assessed qua the impugned freight/commission payment. It is no more stated to be an assessee in default u/s.40(a)(ia) second proviso r.w.s. 201 of the Act stipulating non application of the former disallowance provision in case an assessee is not the assessee in default u/s.201(1) of the Act. The Revenue on the other hand contends that the above second proviso to Section 40(a)(ia) applies only w.e.f. 01.04.2013
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and not with retrospective effect. We find that a co-ordinate bench in case of Rajeev Kumar Agarwal vs. Addl.CIT, ITA No. 337/Agra/2013 has upheld in extempore and hon’ble Delhi high court’s decision in CIT v. Ansal Landmark Townships Pvt. Ltd. [2015] 377 ITR 635 (Del) has already settled the law that the above second proviso carries retrospective effect since curative in nature. We therefore accept assessee’s arguments in principle and remitting the issue back to the Assessing Officer for carrying out necessary verification as per law after affording adequate opportunity to the assessee for producing necessary details. This first substantive ground is taken as accepted for statistical purposes.
We now advert to assessee’s latter substantive ground seeking to delete Section 40A(3) disallowance(s) of Rs.2,90,636/- and Rs.11,89,328/- pertaining to freight outward and inward expenditure. The CIT(A) upholds Assessing Officer’s action after holding that the assessee’s explanation in question does not come under various genuine and bonafide instances enumerated under Rule 6DD of the Income Tax Rules. This leaves the assessee aggrieved.
Both the learned representatives reiterate their respective cases in the course of hearing against and in support of impugned disallowance. We notice in this backdrop that neither the Assessing Officer nor the CIT(A) advert to assessee’s bonafide requirements in making the impugned cash payments exceeding Rs.29000/- inviting the disallowance in question. We reiterate that the assessee’s case has been that it had paid its transport service provider hiring outside truck in cash. We find that hon’ble jurisdictional high court’s decision in Anupam Tele Services vs. ITO (2014) 366 ITR 122 (Guj) considers the impugned disallowance provision to hold that Rule 6DD does not intend to restrict an assessee’s business expediency and other relevant factors in making bonafide and genuine business transactions through cash payments. We observe in view of all these facts that larger interest of justice would be made in case the Assessing Officer reexamines the instant issue as well as per law after affording adequate opportunity of hearing
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to the assessee for explaining relevant facts and circumstances inviting cash payments subject matter of the instant issue.
This assessee’s appeal is accepted for statistical purposes.
[Pronounced in the open Court on this the 22nd day of September, 2017.]
Sd/- Sd/- (MANISH BORAD) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 22/09/2017