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Income Tax Appellate Tribunal, “B” BENCH : KOLKATA
Before: Hon’ble Shri P.M.Jagtap, AM & Sri N.V.Vasudevan, JM ]
m IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : KOLKATA [Before Hon’ble Shri P.M.Jagtap, AM & Sri N.V.Vasudevan, JM ] S.A.No.08/Kol/2016 (A/o ITA No.1492/Kol/2015) Assessment Year : 2012-13 M/s. Abhoy Charan Bakshi -vs.- D. C.I.T., Circle-27, Kolkata Haldia [PAN : AAEFM9711E) (Respondent) (Appellant) ITA No.1492/Kol/2015 Assessment Year : 2012-13 M/s. Abhoy Charan Bakshi -vs.- A. C.I.T., Circle-27, Kolkata Haldia [PAN : AAEFM9711E) (Respondent) (Appellant)
For the Appellant : Shri Miraj D.Shah, FCA For the Respondent : Md. Ghyas Uddin, JCIT, Sr.DR
Date of Hearing : 18.03.2016. Date of Pronouncement : 06.04.2016.
ORDER Per N.V.Vasudevan, JM The Assessee has filed the above application for grant of stay of recovery of outstanding demand of a sum of Rs.54,34,801/- for AY 2012-13. With the consent of the parties, the appeal was taken up for hearing.
The Assessee has filed the above appeal against the order dated 26.11.2015 of CIT(A)-7, Kolkata, relating to AY 2012-13.
The only issue that arises for consideration in this appeal is as to whether the CIT(A) was justified in sustaining addition to the extent of RS.1,81,96,525/- made by the AO
2 SA.No.8/Kol/2016&ITA No.1492/Kol/2015 M/s. Abhoy Charan Bakshi. A.Yr.2012-13 invoking the provisions of Sec.40(a)(ia) of the Income Tax Act, 1961 (Act). The Assessee is a partnership firm engaged in the business of executing civil contracts. The Assessee filed its return of income for AY 2012-23 on 31/03/2013 declaring total income of Rs.14,00,570. In an order of assessment passed u/s.143(3) of the Act, dated 29/01/2015, the AO determined the total income of the assessee at Rs.2,17,39,410. The Ld. AO made the following additions in the said assessment order : On account of disallowance u/s 40(a)(ia) of the Act Rs.1,99,30,315 On account of interest u/s 244A of the Act Rs. 4,08,524 Total Rs.2,03,38,389
As already stated the assessee is in the business of executing civil contracts. As a contractor it debited an amount of Rs.1,99,84,060/-under the head ‘cost of execution ‘ and deducted the TDS as per the following details :- TABLE-1: Details of payment of execution charges w/o TDS SI. Name of the payees Amount TDS (Rs) no. paid (Rs) 1 Ananda Sankar Sahoo 18,80,188 18,803 2 Chitaranjan Dwirbedy 2,75,835 2,759 3 Prasanta Kumar Sahoo 5,73,796 5,738 4 Kanchan Bala Biswal 5,57,705 5,577 5 Maheswar Parida 31,08,762 31,088 6 Manmath Kumar Bhutia 48,92,262 48,924 7 Sushant Kumar Behara 9,11,590 9,116 8 Babuli Behera 12,13,786 12,138 9 Dilip Kumar Patra 56,800 568 10 Supreme Industrial 7,65,400 7,654 11 Manoranjan Parida 37,500 375 12 Bijpya Kumar Dehury 10,80,881 10,809 13 Magic Pool 1,90,400 1,904 14 Monalisa Construction 9,30,056 9,301 15 Asha Communication 8,600 86 16 Siba Prasad Satapathy 17,57,486 17,575 17 Prasanta Kumar Pati 16,77,468 16,775 18 Debabrata Dutta 11,800 118 Sub-total 1,99,30,315 1,99,308 2
3 SA.No.8/Kol/2016&ITA No.1492/Kol/2015 M/s. Abhoy Charan Bakshi. A.Yr.2012-13
19 Miscellaneous 53,745 - Total 1,99,84,060 1,99,308
The assessee filed the details of the name, address, PAN and AO of the parties to whom the above payment were which are as follows:- Details of payment of execution charges without TDS Sl.No. Name of the Nature of Amount PAN of the AO of the Persons to payment paid (Rs.) payees payees Whom payment Was made by the assessee
Ananda Sankar Job charges 18,80,188 BUKPS3454F Ward Angul Sahoo
Chitaranjan Job charges 2,75,835 AGUPD4758JWard Angul Dwirbedy
Prasanta Kumar Job charges 5,73,796 DHAPS6717N Ward Angul Sahoo
Kanchan Bala Biswal Job charges 5,57,705 BANPB8695J Ward Angul
Maheswar Parida Job charges 31,08,762 APFPP1461C Ward Angul
Manmath Kumar Job charges 48,92,262 AMEPB5909P Ward Angul Bhutia
Sushant Kumar Job charges 9,11,590 ARGPB3954M Ward 2(3), Behara Bhubaneswar
4 SA.No.8/Kol/2016&ITA No.1492/Kol/2015 M/s. Abhoy Charan Bakshi. A.Yr.2012-13
Babuli Behera Job charges 12,13,786 ANMPB5110B Ward Angul
Dilip Kumar Patra Job charges 56,800 AXFPP5490F Ward Angul
Supreme Industrial Job charges 7,65,400 AAVFS5007Q Ward 27(1), Haldia
Manoranjan Parida Job charges 37,500 ASQPP7625N Ward Angul
Bijaya Kumar Dehury Job charges 10,80,881 ABSPD9982F Ward Angul
Magic Pool Job charges 1,90,400 AEAPG1301A Ward 30(3), Kolkata
Monalisa Job charges 9,30,056 AANFM9224B Cir 4(1), Construction Bhubaneswar
Asha Job charges 8,600 AAWPL3427A Cir-52(1 ), Communication Kolkata
Siba Prasad Job charges 17,57,486 BIRPS4210G Ward Angul Satapathy
Prasanta Kumar Job charges 6,77,468 ADQPP4563L Ward Angul Pati
18 Debabrata Dutta Job charges 11,800 AHYPD5610Q Ward 27(3), Haldia
Total 1,99,30,315
5 SA.No.8/Kol/2016&ITA No.1492/Kol/2015 M/s. Abhoy Charan Bakshi. A.Yr.2012-13
The prayer of the Assessee before the AO was to verify if the payees have declared the receipt from the Assessee in their return of income and if they have so declared then the addition u/s.40(a)(ia) of the Act should be deleted by the AO. The above submission was made in the context of the amendments to the provisions of Sec.40(a)(ia) of the Act by the Finance Act, 2012 w.e.f. 1-4-2013, whereby a second proviso was inserted which provided that if the payees have filed their return of income showing the receipts from the Assessee in their return of income than the it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in Sec.40(a)(ia) of the Act. The assessee also made attempt to collect form 26A from these parties and the assessee could succeed to collect the same from 3 parties to whom payment of Rs.17,33,790 was made and the same was submitted before the Ld CIT Appeals. The details of these parties are as follows:
Parties who gave 26A Form before CIT (A): Sl.No. Payee Disallowance Payment Total income E-filing u/s.40A(a)(ia) acknowledged as per return Acknowledgement By the payee No.
Sushanta Kr 9,11,590 9,11,590 84,370 831862850081113 Behra
Dilip Kumar 56,800 56,800 1,78,220 623930880050613 Patra
Supreme 7,65,400 7,65,400 1,15,500 50340771290912 Industrial 17,33,790
6 SA.No.8/Kol/2016&ITA No.1492/Kol/2015 M/s. Abhoy Charan Bakshi. A.Yr.2012-13 7. The Ld. CIT Appeals accepted the contention of the assessee that the amendment to 2nd proviso the Section 40(a)(ia) of the IT Act 1961 was curative and hence retrospective in nature. However the Ld CIT Appeals held that that as the assessee had not given the form 26A with respect to other parties the disallowance of Rs.1,99,30,315 was restricted to Rs.1 ,81 ,96,525.
It was pointed out by the learned counsel for the Assessee before us that subsequent to the passing of the appellate order, the assessee collected a few more form 26A from the above parties and the assessee could in total succeed to collect the same from 6 parties to whom payment of Rs.1,14,92,300. The details of these parties are as follows :- Parties who gave 26A form (Available as on date)
S.No. Payee Disallowance Payment Total E-filing u/s 40(a)(ia) acknowledged income as per Acknowledgement No. by the payee return
5.Maheswar 31,08,762 31,08,762 4,11,220 842492020301113 Parida
6.Manmath 48,92,262 48,92,262 10,63,020 754532931190813 Kr Bhutia
7.Sushanta 9,11,590 9 ,11,590 84,370 831862850081113 Kr Behra
9.Dilip Kr Patra 56,800 56,800 1,78,220 623930880050613
10.Supreme 7,65,400 7,65,400 1,15,500 50340771290912 Industrial
16.Siba Prasad 17,57,486 17,57,486 4,19,610 795190401270913 Sathpathy
1,14,92,300 6
7 SA.No.8/Kol/2016&ITA No.1492/Kol/2015 M/s. Abhoy Charan Bakshi. A.Yr.2012-13
It was submitted that out of 18 parties the assessee collected form 26A from 6 parties where the payment was Rs.1,14,92,300 and the balance 12 parties where the payment was Rs.84,38,015 the form 26A could not be collected. This is because the other parties did not cooperate with the assessee and hence the copies of form 26A could not be collected from them. It was also contended that the assessee did not have powers to force the other parties to submit Form 26A and therefore due to lack of statutory powers the assessee could not collect the same.
It was argued that the Assessing Officer and first appellate authorities are vested with statutory powers u/s 133(6) or 131 and or other provisions and they could have made inquires with the parties or their respective Assessing Officer. In this regard it was submitted that all the relevant details of the payees were furnished and are available on record with their PAN and AO details.
It was pointed out that ITAT, Kolkata in the case of Ramakrishna Vedanta Math v. Income-tax Officer, Ward 59 (1), Kolkata, [2012] 24 taxmann.com 29 (Kol.) has taken a view that once assessee furnishes lawfully maintained information about recipients, Assessing Officer should first ascertain related facts about payment of taxes directly from recipients before invoking section 201 (1). The ITAT in its order held:
“5. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable position. 6. Learned counsel's vehement reliance is on Hon'ble Allahabad High Court's judgment in the case of Jagran Prakashan Ltd. v. Dy.CIT (TDS) [2012] 21 taxmann.com 489 wherein Their Lordships have, inter alia, observed as follows: ........... it is clear that deductor cannot be treated an assessee in default till it is found that assessee has also failed to pay such tax directly. In the present case, the Income tax authorities had not adverted to the Explanation to Section 191 nor had applied their mind as to whether the assessee has also failed to pay such tax directly. Thus, to 7
8 SA.No.8/Kol/2016&ITA No.1492/Kol/2015 M/s. Abhoy Charan Bakshi. A.Yr.2012-13 declare a deductor, who failed to deduct the tax at source as an assessee in default, condition precedent is that assessee has also failed to pay tax directly. The fact that assessee has failed to pay tax directly is thus, foundational and jurisdictional fact and only after finding that assessee has failed to pay tax directly, deductor can be deemed to be an assessee in default in respect of such tax ..... 7. It is thus argued that the onus is on the revenue to demonstrate that the taxes have not been recovered from the person who had the primarily liability to pay tax, and it is only when the primary liability is not discharged that vicarious recovery liability can be invoked. Learned counsel contends that once all the details of the persons to whom payments have been made, it is for the Assessing Officer, who has all the powers to requisition the information from such payers and from the income tax authorities, to ascertain whether or not taxes have been paid by the persons in receipt of the amounts from which taxes have not been withheld. It is learned counsel's submission that as a result of Hon 'ble Allahabad High Court's judgment in the case of Jagran Prakashan Ltd's case (supra), this paradigm shift in the interpretation of Section 201 (1) has been brought about.
The plea is indeed well taken. Learned counsel is quite right in his submission that, as a result of the judgment of Hon 'ble Allahabad High Court in Jagran Prakashan Ltd.'s case (supra) and in the absence of anything contrary thereto from Hon'ble jurisdictional High Court, there is a paradigm shift in the manner in which recovery provisions under section 201 (1) can be invoked. As observed by Their Lordships, the provisions of Section 201(1) cannot be invoked and the "tax deductor cannot be treated an assessee in default till it is found that assessee has also failed to pay such tax directly". Once this finding about the non payment of taxes by the recipient is held to a condition precedent to invoking Section 201(1), the onus is on the Assessing Officer to demonstrate that the condition is satisfied. No doubt the assessee has to submit all such information about the recipient as he is obliged to maintain under the law, once this information is submitted it is for the Assessing Officer to ascertain whether or not the taxes have been paid by the recipient of income. This approach, in our humble understanding, is in consonance with the law laid down by Hon 'ble Allahabad High Court. 9. It is important to bear in mind that the lapse on account of non deduction of tax at source is to be visited with three different consequences - penal provisions, interest provisions and recovery provisions. The penal provisions in respect of such a lapse are set out in Section 271 C. So far as penal provisions are concerned, the penalty is for lapse on the part of the assessee and it has nothing to do with whether or not the taxes were ultimately recovered through other means. The provisions regarding interest in delay in depositing the taxes are set out in Section 201 (1A). These provisions provide that for any delay in recovery of such taxes is to be compensated by the levy of interest. As far as recovery provisions are concerned, . these provisions are set out in Section 201 (1) which seeks to make good any loss to revenue on account of lapse by the assessee tax deductor. However, the question of making good the loss of revenue arises 8
9 SA.No.8/Kol/2016&ITA No.1492/Kol/2015 M/s. Abhoy Charan Bakshi. A.Yr.2012-13 only when there is indeed a loss of revenue and the loss of revenue can be there only when recipient of income has not paid tax. Therefore, recovery provisions under section 201(1) can be invoked only when loss to revenue is established, and that can only be established when it is demonstrated that the recipient of income has not paid due taxes thereon. In the absence of the statutory powers to requisition any information from the recipient of income, the assessee is indeed not always able to obtain the same. The provisions to make good the shortfall in collection of taxes may thus end up being invoked even when there is no shortfall in fact. On the other hand, once assessee furnishes the requisite basic information, the Assessing Officer can very well ascertain the related facts about payment of taxes on income of the recipient directly from the recipients of income. It is not the revenue's case before us that, on the facts of this case, such an exercise by the Assessing Officer is not possible. It does put an additional burden on the Assessing Officer before he can invoke Section 201(1) but that's how Hon 'ble High Court has visualized the scheme of Act and that's how, therefore, it meets the end of justice. 10. The matter thus stands restored to the file of the Assessing Officer fro fresh adjudication in accordance with the law and in the light of our observations above. While doing so, the Assessing officer will give a due and fair opportunity of hearing to the assessee and dispose of the matter by way of a speaking order. We direct so.”
It was submitted that the above decision ITAT Kolkata in the above mentioned case will also apply for the purposes of Section 40(a)(ia) of the Act. Further reliance was also placed on the decision of the ITAT Kolkata in the case of Vas Electronics Vs. ACIT, ITAT Kolkata in I.T.A No. 662/Kol/2013 dated 24-11-2015 wherein it was held as follows: “3. Briefly stated facts are that assessee has claimed labour charges at Rs. 55, 440/-, carriage inward charges amounting to Rs. 62,07,498/- and hire charges amounting to Rs.29, 12, 123/- in the P&L Account, but no TDS was deducted u/s. 194C of the Act. Ld. Counsel for the assessee before us now clearly admitted that the assessee has not deducted TDS u/s. 194C but he is obliged to deduct TDS u/s. 194C of the act. The AO applied the provisions of section 40(a)(ia) of the Act on the above three payments and made disallowance. Aggrieved, assessee preferred appeal before CIT(A) , who also confirmed the action of AO. Aggrieved, now assessee is in second appeal before us. 4. At the outset, Ld. Counsel for the assessee fairly conceded the grounds but requested only on the issue of applicability of second proviso to section 40(a)(ia) of the Act, which is held to be retrospective by Hon'ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township P. Ltd. (2015) 377 ITR 635 (Del), wherein the AO is directed to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. When this plea of
10 SA.No.8/Kol/2016&ITA No.1492/Kol/2015 M/s. Abhoy Charan Bakshi. A.Yr.2012-13 the Ld. Counsel for the assessee was confronted to Ld. Sr. OR, he fairly conceded the position and urged the bench to set aside the matter to the file of the AO 5. We have heard rival submissions and gone through facts and circumstances of the case. We are inclined to set aside the issue to the file of the AO and accordingly, we direct the AO to verify whether the recipients have included the income in their respective returns and also paid taxes on the same. The assessee will provide the details of recipients i.e. their assessment particulars etc. to the AO so that the AO can verify. In case the recipient parties are not cooperating in providing details, the AO can call for the information u/s. 133(6) of the Act for verification of the same. Accordingly, this issue is remitted back to the file of AO to decide in terms of the above directions. This issue of assessee's appeal is allowed for statistical purposes.”
It was therefore submitted that the disallowance u/s.40(a)(ia) of the Act to the extent sustained by the CIT(A) should be set aside and remanded to the AO to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. To the extent the recipients from the Assessee have so included the sum in their returns of income and filed the same, no disallowance u/s.40(a)(ia) of the Act should be made by the AO. In case the recipient parties are not cooperating in providing details, the AO should be directed to call for the information u/s. 133(6) or 131 of the Act, for verification of the same.
The learned DR relied on the order of the CIT(A) and submitted that the benefit of the second proviso should not be allowed to the Assessee as the tax deducted at source has not been paid on or before the due date for filing the return of income u/s.139(1) of the Act.
We have given a very careful consideration to the rival submissions. The CIT(A) has held that the second proviso to Sec.40(a)(ia) of the Act will apply in the present case and that applicability of the second proviso to Sec.40(a)(ia) of the Act which was introduced by the Finance Act, 2012 w.e.f. 1.4.2013 was retrospective in operation and was to apply w.e.f. 1-4-2005, being the date from which sub-clause (ia) of section 40(a) 10
11 SA.No.8/Kol/2016&ITA No.1492/Kol/2015 M/s. Abhoy Charan Bakshi. A.Yr.2012-13 was inserted by the Finance (No. 2) Act, 2004. The Hon’ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (I) Pvt.Ltd., in ITA No.160/2015 judgment dated 26.8.2015 has taken the view that the insertion of the second proviso to Sec.40(a)(ia) of the Act is retrospective and will apply from 1.4.2005. Once it is held that the Assessee is entitled to the benefit of 2nd proviso to Sec.40(a)(ia) of the Act, the CIT(A) ought to have directed the AO to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. To the extent the recipients from the Assessee have so included the sum in their returns of income and filed the same, no disallowance u/s.40(a)(ia) of the Act ought to have been sustained by the CIT(A). The CIT(A) ought to have also directed the AO that in case the recipient parties are not cooperating in providing details, the AO should call for the information u/s. 133(6) or 131 of the Act, for verification of the same. In this regard we also find that the Assessee has furnished all the details of assessment particulars of the recipients of payment from the Assessee. The AO therefore should not have any difficulty in making the required verification. We therefore set aside the order of the CIT(A) to the extent to which he had sustained the order of the AO on the disallowance u/s.40(a)(ia) of the Act and remand the issue to the AO to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. To the extent the recipients from the Assessee have so included the sum in their returns of income and filed the same, no disallowance u/s.40(a)(ia) of the Act should be made by the AO. In case the recipient parties are not cooperating in providing details, the AO should be directed to call for the information u/s. 133(6) or 131 of the Act, for verification of the same.
In the result, appeal by the Assessee is treated as allowed for statistical purpose. In view of the fact that the appeal has been decided and the impugned order of the CIT(A)
12 SA.No.8/Kol/2016&ITA No.1492/Kol/2015 M/s. Abhoy Charan Bakshi. A.Yr.2012-13 set aside, the stay application has become infructuous and is therefore dismissed as infructuous.
Order pronounced in the Court on 06.04.2016.
Sd/- Sd/- [P.M.Jagtap] [ N.V.Vasudevan ] Accountant Member Judicial Member
Dated : 06.04.2016. [RG PS]
Copy of the order forwarded to:
1.M/s. Abhoy Charan Bakshi, C/o D.J.Shah & Co., Kalyan Bhawan, 2, Elgin Road, Kolkata-700020. 2. A.C.I.T., Circle-27, Haldia.. 3. CIT(A)-7, Kolkata 4. CIT-9, Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.