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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI JAMLAPPA D BATTULL
आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the CIT (Appeals)-I, Raipur dated 06.04.2015, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (in short ‘the Act’), dated 24.01.2013 for assessment year 2010-11. Before us the assessee has assailed the impugned order on the following grounds of appeal : “1. On the facts and in the circumstances of the case and in law that the ld.CIT(A) has erred in sustaining the addition made by the ld. Assessing Officer at Rs.3,95,301/- u/s.40(a)(ia) being interest paid to NBFC. 2. On the facts and in the circumstances of the case and in law, that the ld. CIT(A) has erred in sustaining the addition made by the ld. Assessing Officer at Rs.50,000/- out of the expenses claimed towards brick, cement, murum&labour expenses. 3. The assessee craves leave to add, urge, alter, modify and withdraw any ground/grounds before or at the time of hearing of the appeal.” 2. Succinctly stated, the assessee who is engaged in the business of construction work had e-filed his return of income for the assessment year 2010-11 on 27.03.2011, declaring an income of Rs.33,52,050/-. The return of income filed by the assessee was processed as such u/s.143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s.143(2) of the Act. During the course of assessment proceedings, it was, inter alia, observed by the Assessing Officer that the
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assessee had in its profit & loss account debited an amount of Rs.3,95,301/- towards finance charges/interest that was payable/paid to M/s. Magna Finance Ltd. It was observed by the Assessing Officer that the assessee had failed to deduct tax at source while making payment/crediting the aforesaid amount of interest to the account of the above mentioned party. Backed by the aforesaid facts the Assessing Officer disallowed the aforementioned amount of finance charges/interest of Rs.3,95,301/- u/s.40(a)(ia) of the Act and vide his order passed u/s.143(3), dated 24.01.2013 assessed the income of the assessee at Rs.38,47,350/-.
Being aggrieved the assessee carried the matter before the CIT(Appeals), but without any success.
The assessee being aggrieved with the order of the CIT (Appeals) has carried the matter in appeal before us.
At the very outset, it was submitted by the Ld. Authorized Representative (for short “A.R”) for the assessee that the present appeal involves a delay of 268 days. As regards the reasons leading to the aforesaid delay, it was submitted by the Ld. AR, that the same had occasioned, for the reason, that one of the partner of the assessee firm, viz. Shri Milind Kumar Rana had expired on 10.09.2014, as a result whereof
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all its business activities had remained stalled for a period of more than six months. It was submitted by the Ld. AR that as neither the other partner of the assessee firm nor the widow of the deceased partner were aware about the income tax proceedings, thus, the same had resulted to the delay in filing of the present appeal before the Tribunal. In order to buttress his aforesaid claim the Ld. AR had drawn our attention to the application filed by Smt. Anamika Rana, Wd/o Late Shri Milind Kumar Rana a/w her ‘affidavit’ wherein the aforesaid facts were duly deposed by her. Backed by the aforesaid facts, it was submitted by the Ld. AR that as the delay involved in filing of the present appeal was for reasons beyond the control of the assessee, therefore, the same in all fairness be condoned.
Per contra, the Ld. Departmental Representative (in short ‘DR’) did not object to the aforesaid seeking of condonation of delay involved in filing of the appeal by the assessee.
We have heard the ld. Authorized Representatives for both the parties and perused the reasons leading to the delay in filing of the present appeal. After giving a thoughtful consideration, we are of the considered view that as the delay in filing of the present appeal had occasioned for reasons which were beyond the control of the assessee and not on account of any lackadaisical approach on its part, therefore, its request for condonation of the delay involved in filing of the appeal merits acceptance.
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At the very outset of the hearing of the appeal, it was submitted by the Ld. Authorized Representative (in short ‘AR') for the assessee that as per instructions the Ground of appeal No.2 is not being pressed. In the backdrop of the aforesaid concession the Ground of appeal No.2 is dismissed as not pressed.
Before us, it was submitted by the Ld. AR that an application for admission of additional evidence u/s.29 of the ITAT Rules, 1963 had been filed before the Tribunal on 28.01.2022. It was submitted by the Ld. AR that the solitary issue involved in the present appeal was the disallowance u/s.40(a)(ia) of the Act of the finance charges/interest of Rs.3,95,301/- that was paid by assessee firm to M/s. Magna Finance Ltd. Adverting to the contents of the aforesaid application, it was submitted by the Ld. AR that same was a certificate of the Chartered Accountant, dated 09.06.2016, wherein he had certified under the ‘first proviso’ to sub- section (1) of Section 201 of the Act that the payee, viz. M/s Magna Finance Ltd. had duly accounted for the finance charges/interest received from the assessee firm in its return of income that was duly filed u/s 139 of the Act and had paid the corresponding tax on the same. It was submitted by the Ld. AR that as the aforesaid documentary evidence would have a substantial bearing on the adjudication of the issue in hand, therefore, the same may kindly be admitted.
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We have given a thoughtful consideration, and are of the considered view, that as the aforesaid certificate of the Chartered Accountant, dated 09.06.2016 (supra) as has been filed by the assessee before us as additional evidence would have substantial bearing on the adjudication of the issue in hand, therefore, the same merits to be admitted. We, thus, in terms of our aforesaid observations admit the additional evidence placed on our record by the assessee under Rule 29 of the Income-Tax Appellate Tribunal Rules, 1962.
Adverting to the solitary issue, i.e, disallowance made by the Assessing Officer u/s.40(a)(ia) of the Act of Rs.3,95,301/-, it was submitted by the Ld. AR that as the payee, viz. M/s. Magna Finance Ltd. (supra) had duly accounted for the aforesaid interest/finance charges received from the assessee firm in its return of income for the year under consideration and had paid the corresponding, therefore, the said amount was not liable to be disallowed u/s 40(a)(ia) of the Act. In order to support his submission the Ld. AR had relied on the judgment of the Hon'ble Supreme Court in the case of M/s. Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CIT, CA NO.3765 of 2007 dated 16.08.2007. It was submitted by the Ld. AR that the Hon'ble Apex Court in its aforesaid order had after considering the Circular No. 275/201/95- IT(B) dated 29.1.1997 issued by the Central Board of Direct Taxes (CBDT), had observed, that once it is
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proved that the payee had paid the taxes due on the amount in question, then, the recovery of the demand visualized u/s.201(1) of the Act cannot be enforced against the assessee, i.e, the deductor. Backed by his aforesaid contention, it was submitted by the Ld. AR that as aperusal of the certificate of Chartered Accountant, dated 09.06.2016 (supra) proved to the hilt that the payee, viz. M/s. Magna Finance Ltd. (supra.) had duly accounted for the interest/finance charges in its return of income for the year under consideration and had paid the taxes on the said amount, therefore, the assessee cannot be held as an assessee-in-default within the meaning of sub section (1) of Section 201 of the Act, and thus, the said amount could not be disallowed in the hands of the assessee u/s.40(a)(ia) of the Act. In order to drive home his aforesaid claim the Ld. AR had drawn our attention to the “2nd proviso” to section 40(a)(ia) of the Act.
We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements pressed into service by the Ld. AR in support of his aforesaid contention. Admittedly, it is a matter of fact borne from the record that the assessee firm had failed to deduct tax at source on the interest/finance charges of Rs.3,95,301/- that was paid/credited by it to M/s. Magna Finance Ltd. (supra.). However, we find that the aforementioned payee M/s. Magna
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Finance Ltd. (supra.) had duly accounted for the aforesaid interest/finance charges received from the assessee firm in its return of income for the year under consideration and had paid the corresponding taxes on the same. The aforesaid factual position can safely be gathered from the Certificate of Chartered Accountant, dated 09.06.2016(supra.) that has been filed by the assessee before us.
In our considered view, now when the aforesaid payee, viz. M/s. Magna Finance Ltd. (supra.) had duly accounted for the interest/finance charges in its return of income and had paid the corresponding taxes on the same, therefore, as per the ‘2nd proviso’ to section 40(a)(ia) of the Act, the aforementioned amount could not have been brought within the realm of disallowance as contemplated under the aforesaid statutory provision. Apart from that, as stated by the Ld. AR, and rightly so, we find that the Hon'ble Supreme Court in the case of M/s. Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CIT (supra.), had observed, that in case if the payee of the amount in question had paid the taxes on the same, then, the payer i.e. the assessee cannot be held as an assessee-in-default as regards the said amount for the purpose of enforcing the recovery of the corresponding tax liability u/s. 201(1) of the Act.
We, thus, in terms of our aforesaid observations are unable to subscribe to the disallowance of Rs.3,95,301/-made by the Assessing
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Officer u/s.40(a)(ia) of the Act. Accordingly, we herein set-aside the order of the CIT(Appeals) and vacate the disallowance of Rs.3,95,301/- made by the Assessing Officer. The Ground of appeal No.1 is allowed.
The Ground of appeal No.3 being general in nature and hence, 15. dismissed as not pressed.
Resultantly, the appeal of the assessee is allowed in terms of our observations recorded hereinabove.
Order pronounced on 21st day of February, 2022.
Sd/- Sd/- JAMLAPPA D BATTULL RAVISH SOOD ACCOUNTANT MEMBER JUDICIAL MEMBER रायपुर/ RAIPUR ; �दनांक / Dated : 21st February, 2022 **SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant. 2. ��यथ� / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G) 4. The CIT-1, Raipur (C.G) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण,रायपुरब�च, रायपुर / DR, ITAT, Raipur Bench, Raipur. 6. गाड� फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // �नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur.
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Date 1 Draft dictated on 03.02.2022 Sr.PS/PS 2 Draft placed before author 08.02.2022 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order