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2016 (9) TMI 389 - ITAT KOLKATA

2016 (9) TMI 389 - ITAT KOLKATA - TMI - Disallowances u/Sec 40(a)(ia) - retrospectivity - Held that:- The Hon’ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (I) Pvt. Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT ] has taken the view that the insertion of the second proviso to Sec.40(a)(ia) of the Act is retrospective and will apply from 1.4.2005. Once it is held that the Assessee is entitled to the benefit of 2nd proviso to Sec.40(a)(ia) of the Act, the CIT(A) ought to have dire .....

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e AO should call for the information u/s. 133(6) or 131 of the Act, for verification of the same. We therefore set aside the order of the CIT(A) to the extent to which he had sustained the order of the AO on the disallowance u/s.40(a)(ia) of the Act and remand the issue to the AO to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. To the extent the recipients from the Assessee have so included the .....

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The Assessee : Shri Subhash Agarwal, Advocate For The Department : Shri SallongYaden, Addl.CIT, Sr. D.R. ORDER Per Shri S.S. Viswanethra Ravi :- This appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-XXIV, Kolkata dated 15.02.2011 for the assessment year 2008-09 on the following grounds:- (1) For that on the facts and in the circumstances of the case, the ld. CIT(A) was not just i f ied in conf irming the disal lowance of ₹ 25,31,998/ - made .....

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es of the case, the ld. CIT(A) was not just i f ied in conf irming the disal lowance of ₹ 38,12,856/ - made by the AO being payments made to M/s. The shipping Corporat ion of India Ltd. by wrongly invoking the provisions of sect ion 40(a)(ia). (4) For that the appel lant assessee was under a bonaf ide bel ief that the impugned payments were not subject to TDS provisions, as such, ld. CIT(A) ought to have deleted addi t ions made u/s 40(a) (ia). (5) For that the ld. CIT(A() ought to have co .....

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he Assessee is a company and engaged in manufacturing and trading of Jute, Jute blended and flax goods. The Assessee had filed its return of income for the A.Y. 2008-09 on 29.03.2009 declaring a total income at ₹ 6,22,04,220/-. Under scrutiny, notices under section 143(2) and 142(1) were issued to the assessee. In response to the said notices, ld. A.R. of the assessee appeared and filed different details in support of return. The assessee produced documentary evidences to establish that th .....

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e Logistic Ltd U/Sec 40(a)(ia) of the Act . 4. Aggrieved by the assessment order framed by the AO, the assessee preferred an appeal before the CIT-A confirmed the disallowances of ₹ 38,12,856/- made against M/s The Shipping Corporation of India and ₹ 25,31,998/- made towards M/s Gordon Woodroffe Logistic Ltd U/Sec 40(a)(ia) of the Act against which the assessee before us by raising above mentioned grounds of appeal. 5. At the time of hearing, the Ld.AR prayed before us to direct the .....

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ir return of income than the 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 Sec.40(a)(ia) of the Act. 6. It was submitted that the Assessing Officer and first appellate authorities are vested with statutory powers u/s 133(6) or 131 and or other provisions and they could have made inquires with the parties or their respective Assessing Officer. In this regard it was submitted that th .....

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201 (1). The ITAT in its order held: 5. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable position. 6. Learned counsel's vehement reliance is on Hon'ble Allahabad High Court's judgment in the case of Jagran Prakashan Ltd. v. Dy.CIT (TDS) [2012] 21 taxmann.com 489 wherein Their Lordships have, inter alia, observed as follows: ........... it is clear that deductor cannot be treated an assessee in d .....

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thus, foundational and jurisdictional fact and only after finding that assessee has failed to pay tax directly, deductor can be deemed to be an assessee in default in respect of such tax ..... 7. It is thus argued that the onus is on the revenue to demonstrate that the taxes have not been recovered from the person who had the primarily liability to pay tax, and it is only when the primary liability is not discharged that vicarious recovery liability can be invoked. Learned counsel contends that .....

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pra), this paradigm shift in the interpretation of Section 201 (1) has been brought about. 8. The plea is indeed well taken. Learned counsel is quite right in his submission that, as a result of the judgment of Hon 'ble Allahabad High Court in Jagran Prakashan Ltd.'s case (supra) and in the absence of anything contrary thereto from Hon'ble jurisdictional High Court, there is a paradigm shift in the manner in which recovery provisions under section 201 (1) can be invoked. As observed .....

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ipient as he is obliged to maintain under the law, once this information is submitted it is for the Assessing Officer to ascertain whether or not the taxes have been paid by the recipient of income. This approach, in our humble understanding, is in consonance with the law laid down by Hon 'ble Allahabad High Court. 9. It is important to bear in mind that the lapse on account of non deduction of tax at source is to be visited with three different consequences - penal provisions, interest prov .....

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the levy of interest. As far as recovery provisions are concerned, . these provisions are set out in Section 201 (1) which seeks to make good any loss to revenue on account of lapse by the assessee tax deductor. However, the question of making good the loss of revenue arises only when there is indeed a loss of revenue and the loss of revenue can be there only when recipient of income has not paid tax. Therefore, recovery provisions under section 201(1) can be invoked only when loss to revenue i .....

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on, the Assessing Officer can very well ascertain the related facts about payment of taxes on income of the recipient directly from the recipients of income. It is not the revenue's case before us that, on the facts of this case, such an exercise by the Assessing Officer is not possible. It does put an additional burden on the Assessing Officer before he can invoke Section 201(1) but that's how Hon 'ble High Court has visualized the scheme of Act and that's how, therefore, it mee .....

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of the Act. Further reliance was also placed on the decision of the ITAT Kolkata in the case of Vas Electronics Vs. ACIT, ITAT Kolkata in I.T.A No. 662/Kol/2013 dated 24-11-2015 wherein it was held as follows: 3. Briefly stated facts are that assessee has claimed labour charges at ₹ 55, 440/-, carriage inward charges amounting to ₹ 62,07,498/- and hire charges amounting to ₹ 29, 12, 123/- in the P&L Account, but no TDS was deducted u/s. 194C of the Act. Ld. Counsel for the .....

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e issue of applicability of second proviso to section 40(a)(ia) of the Act, which is held to be retrospective by Hon'ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township P. Ltd. (2015) 377 ITR 635 (Del), wherein the AO is directed to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. When this plea of the Ld. Counsel for the assessee was confronted to Ld. Sr. OR, he fairly conced .....

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AO can verify. In case the recipient parties are not cooperating in providing details, the AO can call for the information u/s. 133(6) of the Act for verification of the same. Accordingly, this issue is remitted back to the file of AO to decide in terms of the above directions. This issue of assessee's appeal is allowed for statistical purposes. 9. It was therefore submitted that the disallowance u/s.40(a)(ia) of the Act to the extent sustained by the CIT(A) should be set aside and remanded .....

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Act, for verification of the same. 10. The learned DR relied on the order of the CIT(A) and submitted that the benefit of the second proviso should not be allowed to the Assessee as the tax deducted at source has not been paid on or before the due date for filing the return of income u/s.139(1) of the Act. 11. Heard rival submissions and perused the relevant material on record. The Hon ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (I) Pvt. Ltd., in ITA No.160/2015 Judgment .....

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