2016 (12) TMI 1145

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....urther appeal before me. 4. I have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position. 5. So far as disallowance under section 40(a)(ia) is concerned, in view of Hon'ble Delhi High Court's judgement in the case of CIT vs. Ansal Landmark Townships Pvt. Ltd. [(2015 377 ITR 635 (Del)], second proviso is required to be treated as retrospective in effect, and, therefore, a long as recipient has discharged his tax liability, disallowance under section 40(a)(ia) of the Act cannot be invoked. A division bench of this Tribunal has, in the case of RKP & Co. vs. ITO (ITA No.106/RPR/2016, order dated 24.06.2016), observed as follows :- "4. We find that Hon'ble Delhi High Court has specifically approved the stand taken by a coordinate bench of this Tribunal, in the case of Rajeev Kumar Agarwal Vs ACIT [(2014) 149 ITD 363 (Agra)], and upheld the action of the Tribunal in following the same. 9. ............................ Now that the legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the we....

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....ore us, had three points to make- first, that there are decisions in support of the stand of the Assessing Officer's stand, by way of Hon'ble Kerala High Court's decision in the case of Thomas George Muthoot Vs CIT [(2015) 63 taxmann.com 99 (Kerala)]; second, that even if insertion of second proviso to Section 40(a)(ia) can be construed as retrospective in effect, the corresponding rule in the Income Tax Rules 1962 is not, and has not been held to be, retrospective, and the second proviso to Section 40(a)(ia) cannot, therefore, be give retrospective effect; and, third, that there is no decision on this issue by Hon'ble jurisdictional High Court and, as such, the stand of the Assessing Officer cannot be faulted. 7. As for Hon'ble Kerala High Court's decision in the case of Thomas George Muthoot (supra), undoubtedly, outside the jurisdiction of Hon'ble Kerala High Court and outside the jurisdiction of Hon'ble Delhi High Court- which has decided the issue in favour of the assessee, there are conflicting decisions on the issue of restrospectivity of second proviso to Section 40(a)(ia). It is thus evident that views of these two High Courts are in direct conflict with each other. Cle....

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.... apply where the interpretation in favour of assessee will have to treat the provisions unconstitutional, as held in the matter of State of M.P. vs. Dadabhoy's New Chirmiry Ponri Hill Colliery Co. Ltd. AIR 1972 (SC) 614. Therefore, what follows is that in the peculiar circumstances of the case and looking to the nature of the provisions with which we are presently concerned, the view expressed by the Hon'ble Delhi High Court in the case of Ansal Landmark (supra), which is in favour of assessee, is required to be followed by us. Revenue does not, therefore, derive any advantage from Hon'ble Kerala High Court's decision in the case of Thomas George Muthoot (supra). 8. The second issue is with respect to the second proviso to Section 40(a)(ia) being held to be retrospective, without corresponding enabling provision in the rules being held to be retrospective. That is a hyper technical argument and too pedantic an approach. The second proviso to Section 40(a)(ia) was held to be retrospective in in the context of finding solution to the problem to the taxpayer, and the matter was set aside to the file of the Assessing Officer with certain directions about factual verifications on the....

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....ision bench and in the light of Hon'ble Delhi High Court decision in the case of Ansal Landmark Township (supra), I remit the matter to the file of the Assessing Officer for adjudication de novo in the light of our above observations. Order accordingly. 7. Ground no.1 is thus allowed. 8. In ground no.2, the grievance is as follows :- "2) The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the additions to the tune of Rs. 4,57,875 /- on account of alleged balance sheet difference." 9. During the course of assessment proceedings, the Assessing Officer noted that the capital expenditure of Rs. 4,57,875/- for purchase of machinery was wrongly debited to profit and loss account, but subsequently reversed. The proof of machinery purchase was also filed before the Assessing Officer. Yet, the Assessing Officer proceeded to make addition of Rs. 4,57,875/- as balance sheet difference. Aggrieved, assessee carried the matter in appeal before the learned CIT(A) who confirmed the action of the Assessing Officer by observing a follows :- " 6.2.1 The contention of the appellant is misplaced in view of the accounting principles and taxation provision....