TaxTMI 
TaxTMI 
2021 (12) TMI 1165
X X X X Extracts X X X X
X X X X Extracts X X X X
..../- for non-deduction of TDS u/s 194C from labour charges invoking provisions of section 40(a)(ia) of the Act. 3. Ld. CIT (A) erred in law and on facts confirming disallowance of interest expenses of Rs. 36,000/- made by AO u/s 36(i)(iii) of the Act. 4. Ld. CIT (A) erred in law and on facts partly confirming addition of Rs. 12,01,595/- out of total addition of Rs. 1,59,89,202/- made by AO as unexplained credit u/s 68 of the Act. 5. Levy of interest u/s 234A, 234B, 234C & 234D of the Act is unjustified. 6. Initiation of penalty proceedings u/s 271(1) (c) of the Act is not justified. The assessee craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal." 3. This appeal filed by the assessee for AY 2010-11, is barred by limitation by twenty six days. The assessee has moved a petition for condonation of delay and request, the bench to condone the delay. We have heard both the parties on this preliminary issue and having regard to the reasons given in the petition for condonation of delay, we condone the delay and admit the appeal for hearing on merits. 4. Ground No.1 raised by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... month of August 2009, at Rs. 15,919/- on dated 19.09.2009, which falls within the grace period. The learned Counsel also submits that for the Month of March,2010, the payment of Rs. 15,696/- was made on 17.04.2010, which is within the grace period, therefore the same should be allowed. We find merits in the submissions of the assessee, that the payment within grace should be allowed. Therefore, total amount to be allowed within grace period comes to Rs. 31,615/- ( Rs. 15,919 + Rs. 15,696) which are paid by the assessee within the grace period, therefore, addition to the extent of Rs. 31,615/- is hereby deleted and we direct the assessing officer to make the disallowance of the balance amount of Rs. 35,496/- (Rs. 67,111- Rs. 31,615). Thus, ground no.1 raised by the assessee is partly allowed. 8. Ground no.2 raised by the assessee relates to disallowance of Rs. 7,93,836/- on account of non-deduction of TDS from payment of labour charges under section 194C of the Act. 9. Succinct facts are that during assessment proceeding, on perusal of labour charges it was noticed by the assessing officer that assessee has made payment to the following persons on account of labour charges: Sr. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....DS on total amount of Rs. 1,58,728/- out of the total payment of Rs. 9,52,564/-. I find the force in the argument of the Ld. A.R. and addition of Rs. 1,58,728/- is deleted and the balance amount of Rs. 7,93,836/- confirmed." 11. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. 12. Learned Counsel for the assessee submits before the Bench that entire amount of Rs. 7,93,836/- should not be disallowed and only 30% of payment to be disallowed as per the amended provisions of the Finance Act, 2014. Learned Counsel also stated that the amendment under section 40(a)(ia) of the Act is retrospective in nature and therefore 30% disallowance should be made. For that she relied on the judgment of the SMC Bench of Ahmedabad in the case of Amruta Quarry Works, in ITA No.1481/AHD/2013 for AY.2008-09, dated 19.07.2016 wherein it was held as follows: "6.2 Since the amendment has been brought to remove the hardship caused to the assessee, the amendment assumes the character of being clarifactory in nature and is retrospectively applicable. Reliance is placed on Five Members Constitution Bench of Supreme Court in the case of CIT vs. Vatika Township Private Limited, r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to provide relief to a bonafide assessee who could not make deposit of deducted tax within prescribed time. In fact, even before the year 2010, the said proviso was amended by the Finance Act 2008 and that amendment of the year 2008 was provided retrospective operation by the legislature itself. For ready reference, we may reproduce in juxtaposition the main part of Section 40(a) (ia) of the Act as it would read after the amendments of 2008, 2010 and 2014 respectively, as under:- (i) After the amendment by Finance Act, 2008 "40. Amounts not deductible. - Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",- (a) in the case of any assessee- *** *** *** (ia) any interest, commission or brokerage, rent, royalty14 , fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139: Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, thirty per cent of such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid: 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. *** *** *** 19.2. The aforesaid amendment by the Finance (No.2) Act of 2014 was specifically made applicable w.e.f. 01.04.2015 and clearly represents the will of the legislature as to what is to be deducted or what percenta....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1, 2005, i.e., from the very date of substitution of the provision. 20. Therefore, the assesses were, after the said amendment in 2008, classified in two categories namely: one, those who have deducted that tax during the last month of the previous year and two, those who have deducted the tax in the remaining eleven months of the previous year. It was provided that in the case of assessees falling under the first category, no disallowance under section 40(a)(ia) of the Income-tax Act shall be made if the tax deducted by them during the last month of the previous year has been paid on or before the last day of filing of return in accordance with the provisions of section 139(1) of the Income-tax Act for the said previous year. In case, the assessees are falling under the second category, no disallowance under section 40(a)(ia) of Income-tax Act where the tax was deducted before the last month of the previous year and the same was credited to the Government before the expiry of the previous year. The net effect is that the assessee could not claim deduction for the TDS amount in the previous year in which the tax was deducted and the benefit of such deductions can be claimed in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he anomalies that the insertion of section 40(a)(ia) was causing to the bona fide tax payer. The amendment, even if not given operation retrospectively, may not materially be of consequence to the Revenue when the tax rates are stable and uniform or in cases of big assessees having substantial turnover and equally huge expenses and necessary cushion to absorb the effect. However, marginal and medium taxpayers, who work at low gross product rate and when expenditure which becomes the subject matter of an order under section 40(a)(ia) is substantial, can suffer severe adverse consequences if the amendment made in 2010 is not given retrospective operation, i.e., from the date of substitution of the provision. Transferring or shifting expenses to a subsequent year, in such cases, will not wipe out the adverse effect and the financial stress. Such could not be the intention of the Legislature. Hence, the amendment made by the Finance Act, 2010 being curative in nature is required to be given retrospective operation, i.e., from the date of insertion of the said provision." 19.5. A bare look at the extraction aforesaid makes it clear that what this Court has held as regards "retrospecti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble to the case at hand relating to the assessment year 2005-2006; and that the benefit of amendment made in the year 2014 to the provision in question is not available to the assessee in the present case. These answers practically conclude the matter but we have formulated Question No. 4 essentially to deal with the last limb of submissions regarding the prejudice likely to be suffered by the assessee. 21. The suggestion on behalf of the assessee about the likely prejudice because of disallowance deserves to be rejected for three major reasons. In the first place, it is clear from the provisions dealing with disallowance of deductions in part D of Chapter IV of the Act, particularly those contained in Sections 40(a)(ia) and 40A(3)17 of the Act, that the said provisions are intended to enforce due compliance of the requirement of other provisions of the Act and to ensure proper collection of tax as also transparency in dealings of the parties. The necessity of disallowance comes into operation only when default of the nature specified in the provisions takes place. Looking to the object of these provisions, the suggestions about prejudice or hardship carry no meaning at all. Seco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....these facts it is crystal clear that assessee has given interest free loan to Mr. Ajay Shah of Rs. 3,00,000/-, out of its interest free funds, therefore addition should not be made. Accordingly, the addition made by A.O. to the tune of Rs. 36,000/- is deleted. 18. Ground no.4 raised by the assessee relates to addition of Rs. 12,01,195/- sustained by ld.CIT(A) under section 68 of the Act. 19. Brief facts qua the issue are that during the assessment stage the assessee was asked to submit unsecured loan confirmation of R R Construction with IT Return and bank statement. In response, assessee firm submitted its explanation before AO, which is reproduced as under: "Unsecured loan confirmation from R R Construction is already given to Partner (Vinayak Mehta) of Shree R R Construction is also the Proprietor of R R Construction and all transaction are done by a/c payee cheque and ledger of the party is given to you. However, if you want further information then you can concern the party directly." Further, AO issued a letter dated 19/03/2013, u/s133(6) of the Act, which was sent to R R Construction requiring ledger account of Shree R R Construction, copy of Return of Income, and bank ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed any source / explanation/ details submitted by the assessee during the remand. Further, the assessee has disclosed in its return of income that income of Rs. 53,63,318/- is paid to Mr Vinayak R. Mehta, who is proprietor of R.R. Construction as his share of profit in firm. The nexus between the assessee and R.R. construction is proved and the argument of the assessee that the customers erroneously issued payment cheques in favour of R.R. Construction instead of M/s Shree R.R. Construction, the assessee has Deposited those payments in his bank account of proprietor of R.R. Construction.The ld CIT(A) noted that addition of Rs. 1,59,89,020/- made by the A.O. is divided into two parts. One is Rs. 83,79,425/- which is received by the assessee from bank accounts of R.R. Construction and another is Rs. 76,09,595/- which is credit to R.R. Construction through journal entries. The assessee has sufficiently demonstrated the sources of receipts from R.R. Construction and it is also verified by the A.O. during remand proceedings. The A.O. has not found any defect in the sources submitted by the assessee during remand proceedings. 21. Before ld CIT(A), in respect of the another part of the a....