Shree Hindustan Fabricator, Surat vs Assessee

ी एन0एस0 सैनी, लेखा सद य एवं ी कुल भारत, या%यक सद य के सम& BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 3826/Ahd/2008 %नधा)रण वष)/Assessment Year: 2005-2006 M/s.Shree Hindstan Fabricator ACIT, Cir.3 107, 1st Floor, Chancellor Vs Surt. Op: RTO, Ring Road Surat.

अपीलाथ,/ (Appellant) -.यथ,/ (Respondent)

Assessee(s) by : None Revenue by : Shri Nimesh Yadav, Sr.DR

सन ु वाई क तार ख/ Dateof Hearing : 25/03/2015 घोषणा क तार ख / Date of Pronouncement: 10/04/2015

आदे श/O R D E R

PER N.S. SAINI, ACCOUNTANT MEMBER: This is an appeal

filed by the assessee against the order of the Commissioner of Income-Tax (Appeals)-II, Surat dated 17.9.2008.

2. This appeal was disposed of by the Tribunal vide order dated 5.10.2012 passed in ITA No.3826/Ahd/2008 in Asstt.Year 2005-06. The Tribunal restricted the disallowance to Rs.4,85,252/- being the amount payable as on 31.3.2005 in place of Rs.50,27,336/- sustained by the CIT(A) under section 40(a)(ia) of the Act. The Revenue carried the matter in appeal before the Hon'ble Gujarat High Court and the Hon'ble Gujarat High Court held that the decision of Vishakhapatnam Special Bench of the Tribunal in the case of M/s.Merilyn Shipping & Transports Vs. ACIT, does not lay down the correct law, and ITA No.3826/Ahd/2008 2

quashed and set aside the order of the Tribunal dated 5.10.2012 and remanded the matter to the Tribunal for fresh consideration of other issues, if any, regarding disallowance under section 40(a)(ia) of the Act.

3. Brief facts of the case are that the AO observed that the assessee had failed to deduct TDS under section 194C and 194J of the Act as well as pay the TDS before the prescribed time under section 200 of the Act on Rs.78,37,140/-, and therefore, the AO disallowed the deduction for the expenditure of Rs.78,37,140/- by invoking the provision of section 40(a)(ia) of the Act.

4. On appeal, the CIT(A) restricted the disallowance to Rs.50,27,336/- on the basis of the details filed by the assessee after reducing the amounts being less than Rs.20,000/- prior to 1.10.2004 and Rs.50,000/- after 1.10.2004.

5. The DR relied on the order of the AO.

6. The AR of the assessee filed adjournment petition for adjournment of the hearing and the same was rejected by the Bench as the reason for the adjournment is not found to be plausible one, and the appeal was heard ex parte qua the appellant-assessee.

7. We have heard the DR and perused the orders of the lower authorities and material available on record. We find that the AO made disallowance of Rs.78,37,140/- by invoking the provisions of section 40(a)(ia) of the Act as the assessee failed to deduct tax at source under section 194C and 194J of the Act and deposit ITA No.3826/Ahd/2008 3

the same with the Government within the prescribed time under section 200 of the Act. The same was restricted to Rs.50,27,336/- by the CIT(A). We find that the second proviso below section 40(a)(ia) inserted by the Finance Act, 2012 w.e.f. 1.4.2013 reads as under:

"[Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, 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 the said proviso.]" .

The Agra Bench of the Tribunal in the case of Rajeev Kumar Agarwal Vs. ACIT in ITA No.337/Agra/2013 has held that "the provisions of Section 40(a)(ia), as they existed prior to insertion of second proviso thereto, went much beyond the obvious intentions of the lawmakers and created undue hardships even in cases in which the assessee's tax withholding lapses did not result in any loss to the exchequer". Therefore, the Tribunal held that insertion of second proviso is a curative amendment to avoid unintended consequences is to be treated as retrospective in nature. As both the lower authorities have not looked into the matter from this angle, we set aside the orders of the lower authorities and restore the matter to the file of the AO for re- adjudication of the issue afresh in light of the discussion made hereinabove, after allowing reasonable and proper opportunity of ITA No.3826/Ahd/2008 4

hearing to the assessee. Thus, this ground is allowed for statistical purpose.

8. In the result, this ground of the appeal of the assessee is allowed for statistical purpose.

Order pronounced in the Court on Friday, the 10th April, 2015 at Ahmedabad.

Sd/- Sd/-

(KUL BHARAT) ( N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Ahmedabad; Dated 10 /04/2015