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2016 (6) TMI 327

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..... a party without deducting TDS - Held that:- Considering the case of the assessee that the interest paid to M/s Methoni Tea Ltd on unsecured loan and debited to the P/L account and did not deduct the tax U/Sec 194A of the Act, we hold that the assessee cannot be a defaulter in view of the first proviso to section 201(1) r/w second proviso to section 40(a)(ia) of the Act. The second proviso to Section 40(a)(ia) is declaratory and curative in nature having retrospective effect from 01-04-2005 and the case on hand being for A.Y 2005-06, in our view, the matter shall go back to AO. Therefore, we remand ground no. 3 to AO for examination and for verification of the required details of the resident i.e M/s Methoni Tea Ltd and direct the assessee to cooperate in completing the assessment.- Decided in favour of assessee for statistical purposes. - I.T.A No. 361/Kol/2014 - - - Dated:- 31-5-2016 - Shri Waseem Ahmed, Accountant Member And Shri S.S.Viswanethra Ravi, Judicial Member For the Appellant : Shri S. Jhajharia, FCA, ld.AR For the Respondent : Shri Dinabandhu Naskar, JCIT, ld.DR ORDER Shri S. S. Viswanethra Ravi, JM This appeal of the asessee arises out of the .....

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..... issue despite the fact that the appeal filed before the tribunal (ITA No.549/Kol/2011), which is still pending, the AO passed the impugned assessment order on 17-08-2011. 5. As regards, ground no.1, we may refer to the relevant provision which prescribes time limit for assessments and reassessments which is reproduced as below: Time limit for completion of assessments and reassessments. 153. (1) : Provided : Provided further.. (i) ; or (ii) , [Provided also .] (1A). (1B). (2): Provided : Provided further : Provided also (i) (ii), [Provided also.] (2A) Notwithstanding anything contained in sub-sections (1), (1A), (1B) and (2), in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment year, an order of fresh assessment in pursuance of an order under section 250 or section 254 or section 263 or section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of one year from the end of the financial year in which the order under section 250 or section 254 is received by the [Principal Chief Commissio .....

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..... unsel for the assessee submitted that the said issue is covered by the earlier order of the Tribunal in assessee s own case in ITA No. 1729/Kol/2011 for the A.Y 2005-06. 10. On the contrary, the ld.DR has relied on the orders of the lower authorities. 11. Heard the rival submissions and perused the relevant material available on record. We find that the ld. Counsel for the assessee has rightly submitted that the issue on hand is covered by the order of this Tribunal vide order dated 1-8- 2014 in assessee s own case, wherein it had decided the issue by following the ratio laid down by the Hon ble Special Bench, ITAT Mumbai Bench in the case of ACIT Vs. Bhaumik Colors Pvt. Ltd reported in (2009) 118 ITD 1(SP) ITAT Mumbai. The relevant portion of the said order at para 4 is reproduced hereunder:- 4. We have heard rival submissions and gone through facts and circumstances of the case. Before us also assessee produced the shareholders register for the relevant year and filed copy of the relevant shareholders register of Hooghly Mills Project Ltd. i.e. the assessee and also produced copy of shareholders register of Mega Resources Ltd., wherein the registered shareholders are t .....

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..... h, ITAT Mumbai supra relating to the expression shareholder referred in section 2(22)(e) of the Act and answered the same that if a person is a registered shareholder but not the beneficial shareholder then the provisions of section 2(220(e) will not apply. Further it also expressed that if a person is a beneficial shareholder but not a registered shareholder then also the provisions of section 2(22)(e) of the Act will not apply. In the present case, the assessee is holding 10,99,300 shares in M/s. Mega Resources Ltd as per register produced by the assessee before the lower authorities. This fact was examined by the Tribunal in the above case. When the assessee is holding the shares as indicated above, which comes to less than 10% of total equity shares of M/s. Mega Resources Ltd., the reasoning of the AO as it is noticed from the assessment order that both the assessee and M/s. Mega Resources Ltd are closely holding shares belonging to same to avoid the tax. But, no contrary evidence brought on record against to the assessee s claim. In the light of the observations made by the Tribunal in assessee s own case in ITA No. 1729/Kol/2011 for A.Y 2005-06 vide its order dated 01-08-20 .....

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..... or on the sum credited to the account of a resident such person shall not be deemed to be an assessee in default in respect of such tax if such resident has furnished his return of income under Section 139 of the Act. No doubt, there is a mandatory requirement under Section 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in default subject to the fulfillment of the conditions as stipulated in the first proviso to Section 201(1). The insertion of the second proviso to Section 40(a) (ia) also requires to be viewed in the same manner. This again is a proviso intended to benefit the Assessee. The effect of the legal fiction created thereby is to treat the Assessee as a person not in default of deducting tax at source under certain contingencies. 12. Relevant to the case in hand, what is common to both the provisos to Section 40 (a) (ia) and Section 210 (1) of the Act is that the as long as the payee/resident (which in this case is ALIP) has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the As .....

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..... due to tax withholding lapse. The penalty for tax withholding lapse per se is separately provided for in Section 271 C, and, section 40(a)(ia) does not add to the same. The provisions of Section 40 a)(ia1 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. 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 well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced. In view of these discussions, as also for the detailed reasons set out earlier, we cannot subscribe to the view that it could have been an intended consequence to punish the assessees for non deduction of tax at source by declining the de .....

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