TMI Blog2016 (2) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... ish the assessees for non-deduction of tax at source by declining the deduction in respect of related payments, even when the corresponding income is duly brought to tax - That will be going much beyond the obvious intention of the section - the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has 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 – thus, the matter is remitted back to the AO for fresh adjudication - ITA No. 3182/Del/2013 - - - Dated:- 16-2-2016 - G. D. Agrawal, VP And Sudhanshu Srivastava, JM For the Appellant : Shri Kapil Goel, Adv For the Respondent : Ms Rakhi Vimal, Sr. DR ORDER Per Sudhanshu Srivastava, JM This appeal has been preferred by the assessee against the order dated 18.2.2013 passed by the ld. CIT(A)-II, Faridabad. 2. The assessee RAASFA-JV (A) is a joint venture through a partnership agreement dated 17.01.2006 between R. Agarwal Associate and SFA Associates. The joint venture was to execute the work of Civil construction, erecting, commissioning of sewage treatment plant. Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of notice u/s 143(2) being issued by non jurisdictional officer as admitted in initial part of the impugned order and later on case was taken up by jurisdictional officer, which hits at the root of the matter, as it is must that right AO not only completes the proceedings but also right AO initiates the proceedings in valid manner. Addition for trade outstanding u/s 68 of the Act (Rs. 10,29,891) 2. That on the facts and in the circumstances of the case and in law, learned CIT-A erred in upholding the addition made by Ld AO u/s 68 of the Act being alleged unexplained cash credit in respect of genuine trade outstanding, duly accepted to be genuine in subsequent year scrutiny assessment. Disallowance u/s 40(a)(ia) of the Act for ₹ 727,215 duly covered by retrospective amendment in 40(a)(ia) 3. That on the facts and in the circumstances of the case and in law, learned CIT-A erred in upholding the disallowance made by Ld. AO u/s 40(a)(ia) of the Act in relation to direct business costs and otherwise also TDS stands deposited within extended period as provided by retrospective amendment in section 40(a)(ia) of the Act. 4. That on the facts and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lained and correlated by the assessee, if given a chance to do so. Therefore, in the interest of justice, we restore the matter to the file of the Assessing Officer for fresh adjudication. As far as the issue of disallowance u/s 40(a)(ia) of the Act is concerned, we find that the Agra Bench of the ITAT in the case of Rajiv Kumar Agrawal (supra) has held as follows:- 6. However, the stand so taken by the special bench was disapproved by Hon'ble Delhi High Court in the case of CIT Vs Rajinder Kumar (362 ITR 241). While doing so, Their Lordships observed that, The object of introduction of Section 40(a)(ia) is to ensure that TDS provisions are scrupulously implemented without default in order to augment recoveries ..Failure to deduct TDS or deposit TDS results in loss of revenue and may deprive the Government of the tax due and payable (Emphasis by underlining supplied by us) . Having noted the underlying objectives, Their Lordships also put in a word of caution by observing that, the provision should be interpreted in a fair, just and equitable manner . Their Lordships thus recognized the bigger picture of realization of legitimate tax dues, as object of Section 40( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Delhi High Court, in view of legislative amendments made from time to time, which throw light on what was actually sought to be achieved by this legal provision, and in the light of the above analysis of the scheme of the law, we are of the considered view that section 40(a)(ia) cannot be seen as intended to be a penal provision to punish the lapses of non deduction of tax at source from payments for expenditure- particularly when the recipients have taken into account income embedded in these payments, paid due taxes thereon and filed income tax returns in accordance with the law. As a corollary to this proposition, in our considered view, declining deduction in respect of expenditure relating to the payments of this nature cannot be treated as an intended consequence of Section 40(a)(ia). If it is not an intended consequence i.e. if it is an unintended consequence, even going by Bharti Shipyard decision (supra), removing unintended consequences to make the provisions workable has to be treated as retrospective notwithstanding the fact that the amendment has been given effect prospectively . Revenue, thus, does not derive any advantage from special bench decision in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs 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 as retrospective 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 deduction in respect of related payments, even when the corresponding income is duly brought to tax. That will be going much beyond the obvious intention of the section. Accordingly, we hold that the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1stApril, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004. 10. In view of the above discussions, we deem it fit and proper to remit the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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