Shree Hindustan Fabricators,, Surat vs Department Of Income Tax

DCIT, Cir.3 Shree Hindustan Fabricates Surat. Vs 107, 1wst Floor, Chancellor Opp: RTO, Ring Road Surat.

PAN AABFH 4833 R

अपीलाथ&/ (Appellant) '(यथ&/ (Respondent)

Revenue by : Shri Narendra Singh, Sr.DR Assessee by : Shri Mehul Shah

सन ु वाई क तार ख/ Dateof Hearing : 17/07/2015 घोषणा क तार ख / Date of Pronouncement: 24/07/2015

आदे श/O R D E R

PER RAJPAL YADAV, JUDICIAL MEMBER:

The Revenue is in appeal before us against the order of the ld.CIT(A)-II, Surat dated 4.8.2011 passed for Asstt.Year 2005-06.

2. The solitary grievance of the Revenue is that the ld.CIT(A) has erred in deleting the penalty of Rs.18,39,630/- imposed under section 271(1)(c) of the Income Tax Act.

3. Brief facts of the case are that the assessee has filed its return of income on 28.10.2005 declaring total income at Rs.19,42,100/-. The assessment order was passed under section 143(3) of the Act on 24.12.2007 determining total income at Rs.1,23,53,732/-. According to ITA No.2625/Ahd/2011 2

the AO, the assessee had failed to deduct TDS under section 194C and 194J of the Act as well as failed to pay TDS before the prescribed time under section 200 of the Act. He made addition of Rs.78,37,140/- under section 40(a)(ia) of the Act.

4. On appeal, the ld.CIT(A) has restricted the disallowance to Rs.50,27,336/-.

5. The assessee carried the matter before the Tribunal, and the Tribunal vide order dated 5.10.2012 passed in ITA No.3826/Ahd/2008 restricted the disallowance to Rs.4,85,252/-. The Revenue took the matter in the Hon'ble High Court and the Hon'ble High Court has set aside the order of the Tribunal and restored the issue back to the Tribunal for adjudication. The Tribunal has set aside the order of the CIT(A) in the quantum appeal, and restored the issue to the file of the AO. The findings of the Tribunal read as under:

"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 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 ITA No.2625/Ahd/2011 3

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 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/-"

6. Since the Tribunal has set aside the quantum addition to the file of the AO for re-adjudication in the light of retrospective amendment carried out in section 40(a)(ia) of the Income Tax Act by way of Finance Act, 2012, thus, the addition is yet to be finalized. Sub-clause (iii) of section 271(1) contemplates that if it is held that the assessee concealed the particulars of income or furnished inaccurate particulars of income, then in addition to tax, if any, payable by him, a sum which shall not be less than, but shall not exceed three times, the amount of tax sought to be evaded by the reason of the concealment of particulars of his income or furnishing of inaccurate particulars of income, be directed to be paid. Meaning thereby, the penalty equivalent to the tax sought to be evaded or three times of the tax is to be computed on the addition for which a charge is to be proved that the assessee has concealed the particulars of this income. The addition is yet to be made. In that situation, there cannot be any question of computing the penalty unless an amount is determined, on which, allegation of evading tax can be leveled. There may not be any penalty in the present situation in this case. The learned AO, while finalising the ITA No.2625/Ahd/2011 4

order, comes out a decision whether any disallowance under section 40(a)(ia) on account of non-deduction of tax is to be made or not. After working of that amount only, it will be open for the AO to initiate or not initiate the penalty proceedings.

7. In view of the above situation, this appeal of the Revenue is allowed for statistical purpose. The order of the CIT(A) is set aside. It is left to wisdom of the AO to initiate or not initiate the penalty proceedings after finalization of quantum addition, if any, made to the income of the assessee. With the above observations, the appeal of the Revenue is treated as allowed for statistical purpose.

8. In the result, the appeal of the Revenue is allowed for statistical purpose.

Order pronounced in the Court on 24th July, 2015 at Ahmedabad.

Sd/- Sd/- (ANIL CHATURVEDI) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 27/07/2015