TMI Blog2016 (5) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to above is accepted. - Decided in favour of assessee for statistical purpose. Undisclosed purchases - assessee submitted that only the profit element embodies in these purchases should be brought to tax and not the unrecorded value of purchases - Held that:- CIT(A) correctly held that the above arguments can apply only in case where there are regular unaccounted purchases and sales. He held that in the case of the assessee the entire sum of ₹ 5,97,436/- have been paid out of the books and therefore the assessee had to explain the source of funds from which these purchases were made. Since the source was not explained the entire sum is liable to be taxed. - Decided against assessee - ITA No.504/Kol/2014 - - - Dated:- 6-4-2016 - Shri N.V.Vasudevan, JM Shri M.Balaganesh, AM For The Appellant: Shri Soumitra Chowdhury, Advocate For The Respondent: Shri Rajat Kumar Kureel, JCIT, Sr.DR ORDER PER N.V.VASUDEVAN, JM: This is an appeal by the Assessee against the order dated 06.02.2014 of CIT(A) XXXII, Kolkata, relating to AY 2010-11. 2. At the time of hearing of the appeal the learned counsel for the assessee submitted that ground nos.4 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 7. Since provisions of Section 40(a)(ia) as amended by Finance Act, 2012 is linked to Section 201 of the Act, in which a proviso was inserted, it is necessary to look into those provisions which read thus: Sec.201: (1) Where any person, including the principal officer of a company (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of Section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax , as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction under section 40(a)(ia). The deduction as per amended section will be allowed only if the - (i) payee has furnished his return of income under section 139; (ii) payee has taken into account such sum for computing income in such return of income; and (iii) payee has paid the tax due on the income declared by him in such return of income, and the payer furnishes a certificate to this effect from an accountant in such form as may be prescribed. 10. The question is as to whether the amendment made as above is prospective or retrospective w.e.f. 1.4.2005 when the provisions of Sec.40(a)(ia) were introduced. Keeping in view the purpose behind the proviso inserted by the Finance Act, 2012 in section 40(a)(ia) of the Act, it can be said to be declaratory and curative in nature and therefore, should be given retrospective effect from 1st April, 2005, being the date from which sub-clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004. In CIT Vs. Alom Extrusions Ltd. 319 ITR 306 (SC) , the Hon ble Supreme Court had to deal with the question, whether omission (deletion) of the second proviso to s. 43B of the IT Act, 1961, by the Finance Act, 2003, oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provident Fund Act on account of second proviso to S. 43B. The situation created further difficulties and as a result of representations made by the industry, the amendment of 2003 was carried out which deleted the second proviso and also made first proviso applicable to contribution to employees welfare funds referred to in S. 43B(b). 15. We find no merit in these civil appeals filed by the Department for the following reasons : firstly, as stated above, s. 43B (main section), which stood inserted by Finance Act, 1983, w.e.f. 1st April, 1984, expressly commences with a non obstante clause, the underlying object being to disallow deductions claimed merely by making a book entry based on mercantile system of accounting. At the same time, s. 43B (main section) made it mandatory for the Department to grant deduction in computing the income under s. 28 in the year in which tax, duty, cess, etc., is actually paid. However, Parliament took cognizance of the fact that accounting year of a company did not always tally with the due dates under the Provident Fund Act, Municipal Corporation Act (octroi) and other tax laws. Therefore, by way of first proviso, an incentive/relaxation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be inserted w.e.f. 1st April, 1988, it was entitled to the benefit of that proviso because it operated retrospectively from 1st April, 1984, when s. 43B stood inserted. This is how the question of retrospectivity arose in Allied Motors (P) Ltd. Etc. (supra). This Court, in Allied Motors (P) Ltd. Etc. (supra) held that when a proviso is inserted to remedy unintended consequences and to make the section workable, a proviso which supplies an obvious omission in the section and which proviso is required to be read into the section to give the section a reasonable interpretation, it could be read retrospective in operation, particularly to give effect to the section as a whole. Accordingly, this Court, in Allied Motors (P) Ltd. Etc. (supra), held that the first proviso was curative in nature, hence, retrospective in operation w.e.f. 1st April, 1988. It is important to note once again that, by Finance Act, 2003, not only the second proviso is deleted but even the first proviso is sought to be amended by bringing about an uniformity in tax, duty, cess and fee on the one hand vis-a-vis contributions to welfare funds of employee(s) on the other. This is one more reason why we hold that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. 17. For the aforestated reasons, we hold that Finance Act, 2003, to the extent indicated above, is curative in nature, hence, it is retrospective and it would operate w.e.f. 1st April, 1988 (when the first proviso came to be inserted). For the above reasons, we find no merit in this batch of civil appeals filed by the Department which are hereby dismissed with no order as to costs. 12. We are of the view that the reasoning of the Hon ble Supreme Court in the case of Alom Extrusions Ltd(supra) will equally to the amendment to Sec.40(a)(ia) of the Act whereby a second proviso was inserted in sub-clause (ia) of clause (a) of Section 40 by the Finance Act, 2012, w.e.f. 1-4-2013. The provisions are intended to remove hardship. It was argued on behalf of the revenue that the existing provisions allow deduction in the year of payment and to that extent there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.06.2009 63,393.13 Total: 5,97,436.41 16. The AO called upon the Assessee to show casue as to the amount of ₹ 5,97,436/- should not be added back to the total income for the A.Y.2010-11 as income from undisclosed sources. According to the AO in his submission on 27.12.2012 the A.R. had admitted the above discrepancies. In view of the above, the amount of ₹ 5,97,436/- is added. back to the total income of the assessee firm as income from undisclosed sources and therefore the AO added the aforesaid sum to the total income of the Assessee. 17. On appeal by the assessee CIT(A) confirmed the order of AO. Before CIT(A) the assessee submitted that only the profit element embodies in these purchases should be brought to tax and not the unrecorded value of purchases. CIT(A) held that the above arguments can apply only in case where there are regular unaccounted purchases and sales. He held that in the case of the assessee the entire sum of ₹ 5,97,436/- have been paid out of the books and therefore the assessee had to explain the source of funds from whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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