Kamlachand T Baid, Mumbai vs Assessee

आयकर अपीलीय अिधकरण, अिधकरण मुंबई IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES 'A' MUMBAI सव ौी आय.पी. बंसल, याियक सदःय एवं ौी चं पुजारी, लेखा सदःय के सम । BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER

ITA NO.7565/Mum/2012 (A.Y.2008-09)

Mr. Kamalchand T. Baid The Income tax Officer Prop. M/s. Nine Line Offsets Ward-24(3)(1) J-3/12, Jalmangal Co-op Soc., Bangur Vs. Room No.507, Pratyakshakar Nagar, Goregaon (W) Bhavan, C-13, Bandra Kurla Mumbai-400 062. Complex, Bandra (W) GIR No./PAN : AACPB 9267 G Mumbai-400 051. (Appellant ) (Respondent)

Appellant by : Shri R.N. Mehta Respondent by : Ms. S. Padmaja

Date of hearing : 18/02/2015 Date of pronouncement : 25/02/2015

ORDER

PER CHANDRA POOJARI, A.M:

This appeal by the assessee is directed against the order dated 09/10/2012 passed by CIT under section 263 of the Income tax Act .

2. The assessee raised ground with regard to invoking of provision under section 263 of the Income tax Act so as to revise the order of assessment passed under section 143(3) of the Act, though it is not erroneous and prejudicial to the interest of the revenue. Facts of the case are that assessee has deducted tax at source on the expenses covered under Chapter XVII-B in some cases but not deducted TDS in some other cases. The TDS is not paid as per provisions of section 40(a)(ia) in the following cases :-

2 ITA No.7565/M/12 S.No. Name of the Nature of Dt. of payment Due date of Dt. Of TDS Amount of Corresponding party Expenditure to party depositing TDS payment TDS amount of (Rs.) allowance u/s.

40(a)(ia) (Rs.)

1. G.R. Co. Bldg. exp. Jan.'08 31.3.08 7.4.08 1262 61,262

2. Prakruti Labour charges Jan.'08 31.3.08 7.4.08 2236 1,08,570 Graphic

3. Priya Graphic Labour charges Jan.'08 31.3.08 31.3.08 54 2,612

4. Siddhivinayak Labour charges Jan.'08 31.3.08 31.3.08 89 4,330 Enterprises

2.1 According to CIT the amendment to section 40(a)(ia) is not retrospective and though the assessee paid the TDS before the due date of filing of return of income and it is to be disallowed as it is not paid within due date for deposit of TDS i.e. 31.3.2008.

Accordingly, he directed the AO to verify the date of payment and decide accordingly. Against this, the assessee is in appeal before us.

3. We have heard both the parties, perused the material on record. The ld. AR submitted that at the time of passing of assessment order on 26/11/2010, there are decisions in favour of the assessee regarding the allowability of deduction though the TDS is not paid within a stipulated time. The ld. AR submitted that TDS amount was deposited to Government account/treasury before the due date of filing of return, the same be allowed. According to the ld. AR of the assessee what is to be seen is legal position prevailing as on the point of time when the revision order is passed. According to him, the amendment by Finance Act 2010 to section 40(a)(ia) is retrospective in nature and benefit is to be given to the assessee . Further, he submitted that the CIT passed a revision order on 09/10/2012 . At that time also the following judgments are available in favour of the assessee :-

i) CIT vs. Virgin Creations (Cal.) ITAT No.302 of 2011 dated 23/11/2011 ;

ii) Piyush C. Mehta vs. ACIT (Mum) [2012] 52 SOT 27(Mum.)[2012] 20 taxmann.com 473 and order dated 11th April 2012 for assessment year 2005-06 3 ITA No.7565/M/12

iii) ITO vs. Taru Leading Edge(P) Ltd. in ITA No.3592/Del/2011 order dated 22/5/2012 for assessment year 2008-09.

4. On the other hand the ld. DR submitted that the amendment to section 40(a)(ia) by Finance Act 2010 is only retrospective in nature. Being so, that the TDS is not paid in accordance with IT Rule 30, CIT is justified in exercising jurisdiction under section 263 of the Income tax Act.

5. We have heard both parties perused the material available on record. Under section 236 CIT can exercise revisional jurisdiction, if he is satisfied that the order of the AO is sought to be revised on the reason that :

i) it is erroneous; and also

ii) prejudicial to the interest of the revenue.

5.1 Section 263 of the Act empowers the Commissioner to initiate suo-moto proceedings either where AO takes a wrong decision without considering material available of record or he takes a decision without making enquiry into matters where such enquiry prima facie was warranted. At the same time if the AO has taken any decision contrary to the law as applicable at the time of assessment and the decision of AO is not in accordance with the law, it is incumbent upon CIT to correct such error committed by the AO. In the present case, the AO allowed the expenditure listed in earlier para, though, TDS was remitted not in accordance with Rule 30 and the same was paid before due date of filing of return of income. According to CIT the above payments should have been made within the stipulated period mentioned in Rule 30. On the other hand it is brought to our notice that the assessee has remitted the same within the due date for filing of return of income and in view of the amendment to section 40(a)(ia) brought out by Finance Act 2010, the assessee is entitled for deduction of above amount while computing the income of the assessee. We find force in the arguments of the assessee's counsel. It was held by the Hon'ble Calcutta High Court vide their decision dated 23.11.2011 in ITAT No.302 of 2011 in CIT vs. Virgin 4 ITA No.7565/M/12

Creation that amendment to the provision to section 40(a)(ia) was retrospective from 01/04/2005. Same decision was followed by the co-ordinate Bench of this Tribunal in the case of Piyush C. Mehta vs. ACIT [in ITA No.1321(Mum)2009 order dated 11/4/2012].

5.2 Further Bangalore Bench of the Tribunal in their decision dated 10/5/2012 in ITA No.717/Bang./11 for assessment year 2008-09 in the case of ACIT vs. M.K. Gurumurthy also held that the aforesaid amendment is applicable retrospectively w.e.f. 1/4/2005. Being so, in our opinion the amendment to section 40(a)(ia) by Finance Act, 2010, no difference can be made under sec. 40(a)(ia) if the assessee made the payment of TDS before due date for filing of return of income under section 139(1) of the Act and this amendment is retrospective in nature and consequently, when the assessee made payment of tax deducted at source to the Government treasury before the due date of filing of return of income under section 139(1), it cannot be disallowed in terms of provisions of sec. 40(a)(ia) of the Act. One has to see the legal position prevailing at that point of time when revision order is passed by CIT and in the instant case it was on 9/10/12. At that time, there were decisions available in favour of the assessee on this issue and the AO has taken one possible view and in that CIT cannot find fault with. In our considered opinion, the ld. CIT is not justified in exercising jurisdiction under section 263 of the Act. Accordingly, we are inclined to annul the order passed by CIT under section 263 of the Income tax Act.

6. In the result, assessee's appeal is allowed.

Order pronounced in the open court on 25/02/ 2015 आदे श क घोषणा खुले यायालय म# $दनांकः 25/02/2015 को क गई ।

Sd/- Sd/- (आय.पी. बंसल / I.P. BANSAL) (चं पुजारी /CHANDRA POOJARI ) याियक सदःय / JUDICIAL MEMBER लेखा सदःय / ACCOUNTANT MEMBER मुंबई Mumbai; $दनांक Dated 25/02/2015 व.िन.स./Jv, Sr. PS 5 ITA No.7565/M/12

आदे श क ूितिल*प अमे*षत/Copy षत of the Order forwarded to : 1. अपीलाथ- / The Appellant 2. ू.यथ- / The Respondent. 3. आयकर आयु/(अपील) / The CIT(A)- 4. आयकर आयु/ / CIT

5. *वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai

6. गाड फाईल / Guard file.

आदे शानुसार/ ार BY ORDER, स.या*पत ूित //True Copy//

उप/सहायक उप सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण मुंबई / ITAT, Mumbai