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Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
Before: Shri Mahavir Singh, & Shri M. Balaganesh
SHRI M.BALAGANESH, AM :
This appeal of the revenue and cross objection of the assessee arise out of the order of the Learned CIT(A)-XX, Kolkata in Appeal No. 211/XII/Cir.11/12-13 dated 19-03- 2014 against the order of assessment framed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) for the Asst Year 2010-11. 2. At the outset, it is seen that the tax effect on the disputed additions before us is less than Rs. 10 lacs. 3. We have heard the parties and perused the materials available on record. It is seen from the perusal of the records that the total tax effect on the additions disputed before us is admittedly below the tax effect limit prescribed by CBDT vide Circular
ITA No.1327/Kol/2014 & CO No.84/Kol/2014 1 B-AM T.E.L.T Rs. 10 lacs M/s. Premier Irrigation Adriitec Pvt. Ltd
prescribed monetary limits in any of the year(s), if it is decided to file appeal in respect of the year(s) in which ‘tax effect’ exceeds the monetary limit prescribed. In case where a composite order / judgement involves more than one assessee, each assessee shall be dealt with separately.
Adverse judgements relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect:
(a) Where the Constitutional Validity of the provisions of an Act or Rule are under challenge, or (b) Where Board’s order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or (c) Where Revenue Audit Objection in the case has been accepted by the Department, or (d) Where the addition relates to undisclosed foreign assets / bank accounts.
This instruction will apply retrospectively to pending appeals and appeals to be filed henceforth in High Courts/ Tribunals. Pending appeals below the specified tax limits in para 3 above may be withdrawn / not pressed. Appeals before the Supreme Court will be governed by the instructions on this subject, operative at the time when such appeal was filed.
3.1 We find that intention behind the Circular No.21/2015 dated 10-12-2015 needs to be understood in the following perspective:-
By passage of time, the money value has gone down, the cost of litigation expenses has gone up, number of assesses on the files of the department have been increased and consequently, the burden on the department is also increased to a tremendous extent. The Corridors of the Superior Courts are choked with huge pendency of cases. In this view of the matter, the CBDT has rightly taken a decision to revise the monetary limits in tune with the present value of money and with a view to reduce the litigation and offering relief to small tax payers. This is also in view of the fact that time and energy of the department could be used more productively and efficiently to
ITA No.1327/Kol/2014 & CO No.84/Kol/2014 3 B-AM T.E.L.T Rs. 10 lacs M/s. Premier Irrigation Adriitec Pvt. Ltd
embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. Hence, section 40(a)(ia) is not a penalty provision for tax withholding lapse but it is a provision introduced to compensate any loss to the revenue in cases where deductor hasn’t deducted TDS on amount paid to deductee and, in turn, deductee also hasn’t offered to tax income embedded in such amount. The penalty for tax withholding lapse per se is separately provided under section 271C, and, therefore, section 40(a)(ia) isn’t attracted to the same. Hence, an assessee could not be penalized under section 40(a)(ia) when there was no loss to revenue. The Agra Tribunal in the case of Rajiv Kumar Agarwal v. ACIT [2014] 45 taxmann. com 555 (Agra-Trib) had held that the second proviso to Section 40(a)(ia) is declaratory and curative in nature and has retrospective effect from 1st April, 2005, being the date from which sub-clause (ia) of section 40(a) was inserted by the Finance (No.2) Act, 2004, even though the Finance Act, 2012 had not specifically stated that proviso is retrospective in nature. The High Court affirmed the ratio laid down by The Agra Tribunal and held that said proviso is declaratory and curative in nature and has retrospective effect from 1st April 2005”.
4.1 Respectfully following the decision of the Hon’ble Delhi High Court we set aside the cross objection of the assessee to the file of the AO to decide the same based on the evidences submitted by the assessee with regard to the inclusion of subject mentioned receipts in the hands of respective payees. If it is so, we hold that no disallowance u/s. 40(a)(ia) of the Act would operate in the hands of the assessee. Thus, the cross objection of the assessee is allowed for statistical purpose. 5. In the result, the appeal of the revenue is dismissed in limine and cross objection of the assessee is allowed for statistical purpose. Order pronounced in the open court on 29. 12.15.
Sd/- Sd/- ( Mahavir Singh, Judicial Member ) ( M.Balaganesh, Accountant Member)
Date :29.12.15
ITA No.1327/Kol/2014 & CO No.84/Kol/2014 5 B-AM T.E.L.T Rs. 10 lacs M/s. Premier Irrigation Adriitec Pvt. Ltd