IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI G.S.PANNU (AM) AND SHRI. RAM LAL NEGI (JM) ITA No.6237/MUM/2012 Assessment Year: 2009-10 ACIT Circle-4, Shri. Amol Antony Periera. 2nd Floor, Qureshi Mansion, Shop No. 4,5,6, Ground Floor, Gokhale Road, Naupada, Bldg. No. 21, Amol Nagar, Thane (W)- 400 602. Vs. Nr. Naigaon Station (W), Vasai, Dist- Thane. PAN:- AMCPP5236D (Appellant) (Respondent) Appellant by : Shri. A. Ramchandran Respondent by : Ms. Neha Paranjpe Date of Hearing: 08/09/2016 Date of Pronouncement: 19/09/2016 ORDER PER RAM LAL NEGI, JM This appeal has been preferred by revenue against order dated 12/06/2012 passed by CIT (Appeals)-II, Thane, for Asst. Year 2009-10 whereby Ld. CIT(A) partly allowed appeal filed by assessee against assessment order dated 22/12/2011 passed u/s 143(3) of Income Tax Act, 1961 (in short Act ). 2. Brief facts of case are that assessee/appellant builder having two partnership concerns i.e., Amol Constructions and Pereira Builders, filed its return of income for relevant A.Y. 2009-10 on 24/09/2009 declaring total income of Rs. 10,36,500/-. On 04/02/2010, during survey action at 2 ITA No.6237/MUM/2012 Assessment Year: 2009-10 head office of Pereira Builders, documentary evidence indicating cash receipt was recovered. On basis of said document assessee s father declared unaccounted income of Rs. 18,50,000/-. assessee admitted same and filed revised return on 25/03/2010 declaring total income of Rs. 28,86,500/-. During assessment proceedings it was found that assessee has not deducted TDS in respect of following expenses claim in P&L account. AMOL CONSTRUCTIONS:- 1) Labour Charges Rs. 8,48,419/- 2) Painting Charges Rs. 2,41,250/- Total Rs. 10,89,669/- PEREIRA BUILDERS:- 1) Labour Charges Rs. 23,70,135/- 2) Transport Charges Rs. 3,33,590/- 3) Painting Charges Rs. 77,000/- Total Rs. 27,80,725/- Accordingly, A.O assessed total income of assessee at Rs. 67,56,894/- i.e Rs. 28,86,500/- returned income plus addition of Rs. 38,70,394/- (10,89,669+27,80,725) 3. Aggrieved, assessee challenged assessment order before first appellate authority. appeal of assessee was partly allowed. revenue is in appeal before Tribunal against impugned order passed by Ld. CIT(A) passed in first appeal on following effective grounds:- 3 ITA No.6237/MUM/2012 Assessment Year: 2009-10 1. On facts and circumstance of case and in law (IT (A)-II, Thane has erred in deleting addition of Rs. 38,70,394/- made u/s 40(a)(ia) of I.T. Act being failure on part of assessee to deduct tax at source as per provisions of section 194 C of IT Act, 1961. 2. On facts and circumstance of case and in law (IT(A)- II, Thane erred in that provisions of section 40(a)(ia) can be invoked only to disallow expenditure of nature referred to therein which is shown as payable as on date of balance sheet. 3. On facts and circumstance of case and in law (IT(A)- II, Thane erred in not fact that provisions of section 40(a)(ia) can be invoked not only to disallow expenditure of nature referred to therein which is shown as payable as on date of balance sheet but also to disallow such expenditure which become payable at any time during relevant previous year and was actually paid within previous year. 4. Before us, Ld. DR relying on findings of A.O submitted that CIT(A) has erred in holding that provisions of section 40(a)(ia) can be invoked not only to disallow such expenditure of nature referred to therein which is shown as payable as on date of balance sheet but also to disallow such expenses which become payable at any time during relevant previous year and was actually paid within previous year. Hence, impugned order is liable to be set aside. 5. On other hand, Ld. Authorised Representative (AR) submitted that in case of ITO vs. Shri. Chandrakant J. Mandale, ITA No. 1708/PN/2012 for 4 ITA No.6237/MUM/2012 Assessment Year: 2009-10 A.Y. 2008-09, following decision of Pune Bench of ITAT in case of M/s Gaurimal Mahajan & Sons, ITA No 1852/PN/2012, ITAT Mumbai has restored back similar issue to file of A.O. with direction to adjudicate afresh in accordance with direction issued by the. 6. We have heard rival submissions and also gone through material placed before us by parties. only issue in dispute is with regard to disallowance on account labour charges, transport charges and painting charges aforesaid made by AO by invoking section 40(a)(ia) of Act which has since been deleted by CIT(A). We notice that coordinate Bench has restored similar matter to file of AO to adjudicate issue by following decision of Pune Bench of Tribunal in ITO vs. Shri. Chandrakant J. Mandale(supra) holding as under:- 5. At time of hearing, both parties pointed out that similar controversy has been decided by Pune Bench of Tribunal in case of ITA vs. Mis Gaurimal Mahajan & Sons vide ITA NO.1852/PN/2012 dated 06.01.2014 and placed reliance in this regard. following discussion in order of Tribunal is relevant:- 8. We have considered rival arguments made by both sides perused orders of Assessing Officer and CIT(A) and Paper Book filed on behalf of assessee. We have also considered various decisions brought to our notice by both sides. There is no dispute to fact that assessee has not deducted TDS on amount of Rs. 58,81,847/- for which Assessing Officer applying provisions of section 40(a)(ia) made addition of above amount. We find Ld. CIT(A) 5 ITA No.6237/MUM/2012 Assessment Year: 2009-10 deleted addition made by Assessing Officer on ground that provisions of section 40(a)(ia) are not applicable since no amount is payable at end of year. While doing so, he relied upon decision of Special Bench of Tribunal in case of Merilyn Shipping and Transport (supra). Coordinate Bench in case of Vinay Ashwinkumar Joneja (supra) has already taken view that provisions of section 40(a)(ia) are applicable even if no amount is payable at end of year. Therefore, order of CIT(A) has to be reversed. 6. After having reversed order of CIT(A}, Tribunal in case of Mis Gaurimal Mahajan & Sons (supra) dealt with another argument of assessee to effect that second proviso to section 40(a)(ia) of Act inserted by Finance Act, 2012 w.e.f. 01.04.2013 be applied retrospectively. Notably, said second proviso to section 40(a)(ia) of Act prescribes that disallowance u/s 40(a)(ia} of Act could not be made if assessee is not deemed to be assessee in default under first proviso to section 201 (1) of Act. Tribunal dealt with plea of assessee that such amendment was intended to eliminate undue hardships to taxpayers and therefore it should be held as retrospective in nature. On this aspect, Tribunal in case of Mis Gaurimal Mahajan & Sons (supra) referred to decision of Cochin Bench of Tribunal in case of Antony D. Mundackal vs. ACIT vide ITA No. 38/Coch/2013 dated 29.11.2013 and held as under:- "8.2 We find some force in above argument of Ld. Counsel for assessee. We find Cochin Bench of Tribunal in case of Antony D. Mundackal (Supra) relied on by Ld. Counsel for 6 ITA No.6237/MUM/2012 Assessment Year: 2009-10 assessee, had occasion to decide issue in light of above argument and has restored issue to file of Assessing Officer with certain directions. relevant observation of Tribunal at Para 7 of order read as under: 7. We have heard rival contentions and carefully perused record. According to assessee, there is no written contract between him and persons doing polishing works. According/y, assessee has contended before us that provisions of sec. 194C shall not apply to polishing charges. However, we notice that assessing officer has given clear finding that essential ingredients of contract are very much available in polishing works entrusted by assessee. Further we notice that CBDT, vide circular No.433 dated 25 09-1985 (1986)(157 ITR St. 27) has clarified that provisions of sec. 194C are wide enough to cover oral contracts also. contract is normally reduced in writing in order to make clear terms and conditions, obligations of parties to contract etc. If conditions of contract are otherwise understood by parties, in view of repeated transactions, in our view, absence of written contract would not make any difference. In instant case, assessee is repeatedly given works to polishing people and hence terms and conditions of work would be clearly understood by both parties. Accordingly, we reject this contention of assessee and hold that provisions of sec. 194C shall apply to polishing works given by assessee. 7 ITA No.6237/MUM/2012 Assessment Year: 2009-10 7.1 According to Ld A.R, assessee has acted as conduit pipe in connection with polishing works between customers and person doing polishing job. Accordingly, it was submitted that there is no profit element in said transactions. Ld AR further submitted that assessee has included cost of polishing works in sale value of aluminium extrusions, without knowing tax implications. However, we notice that assessee did not furnish any proof to substantiate above said claims. assessee, being dealer in aluminium extrusions, has only supplied products after carrying out polishing works according to taste and requirement of customers. It is only one of many business techniques normally adopted by business man to improve his sales, since it will be very difficult for customers to identify polishing people and get work done by themselves. Hence, we are of view that it may not be correct to argue that contract existed between customers and polishing people. In fact, customer may not have any contact with polishing people in this type of transactions. Hence, it is hard to believe claim of assessee that he has acted as mere conduit pipe between customers and polishing people, accordingly, claim that assessee stands in fiduciary capacity is also liable to be rejected. In this kind of factual situation, in our view, existence or absence of profit element in polishing works does not make any difference. 7.2 Ld Counsel, by placing reliance on decision of special bench in case of Meryline Shipping and transports (supra) contended that provisions of sec. 40(a)(ia) shall apply only to 8 ITA No.6237/MUM/2012 Assessment Year: 2009-10 amount payable and not to amount paid. However, Hon'ble Gujarat High Court in case of CIT Vs. Sikandar Khan N Tunvar (357 ITR 312) and Hon'ble Calcutta High Court in case of CIT Vs. Crescent Export Syndicate (ITAT 20 of 2013) have held that decision rendered by Special Bench in case of Meryline Shipping & Transports is not good law. Ld A.R, however, placed reliance on decision of Hon'ble Allahabad High Court in case of Vector Shipping Services (357 ITR 642). On careful perusal of decision given by Hon'ble Allahabad High Court, we notice that High Court has decided issue referred to it on different footing and has made passing comment about decision rendered by Special Bench. Thus, ratio of said decision is different from that rendered in case of Meryline Shipping and Transports by Special bench. Hence, we are inclined to reject contentions of assessee on this point also. 7.3 assessee placed reliance on decision of Hon'ble Supreme Court in case of Hindustan Coco-Cola beverages Ltd (supra) in order to contend that revenue is not entitled to recover taxes, if recipient has declared payments in his return of income. We notice that above said decision was rendered in context of provisions of sec. 201(1) and hence, we are of view that ratio of said decision cannot be applied to disallowance made u/s 40(a)(ia) of Act, 7.4 last contention of assessee is that second proviso to sec, 40(a)(ia) of Act, inserted by Finance Act, 2012 with effect from 1.4.2013 is clarificatory in nature and hence 9 ITA No.6237/MUM/2012 Assessment Year: 2009-10 benefit of same should be applied retrospectively. However, correctness of this contention has not been examined by tax authorities. Hence, in interest of natural justice, we are of view that this contention of assessee requires examination at end of assessing officer. Accordingly, we modify order of Ld.CIT(A) and set aside this ground to file of Assessing Officer with direction to examine above said contention of assessee and decide same in accordance with law, after affording necessary opportunity of being heard. We make it clear that we have, in effect, rejected all contentions of assessee except ground relating to applicability of second proviso to sec.40(a)(ia} of Act to year under consideration". 8.3 Since above arguments are being advanced before Tribunal for first time and correctness of contention has not been examined by tax authorities, therefore, respectfully following decision of Cochin Bench of Tribunal cited (Supra) and in interest of justice, we restore this issue to file of Assessing Officer with direction to examine above contention of assessee and decide issue afresh and in accordance with law. Needless to say, Assessing Officer shall give due opportunity of being heard to assessee. We hold and direct accordingly." 7. Following aforesaid decision in present case too, we restore matter back to file of Assessing Officer to adjudicate issue afresh in accordance with directions of Tribunal in case of M/s Gaurimal Mahajan & Sons (supra) and as per law. 10 ITA No.6237/MUM/2012 Assessment Year: 2009-10 7. Since issue involved in present case is identical to issue involved in case of in ITO vs. Shri. Chandrakant J. Mandale (supra) and coordinate Bench has restored issue to file of AO for fresh adjudication, we respectfully following decision of decision of coordinate Bench of Tribunal rendered in ITO vs. Shri. Chandrakant J. Mandale (supra), restore matter back to file of A.O to adjudicate issue afresh in accordance with directions of Tribunal after affording opportunity of being heard to assessee. In result appeal filed by revenue for Asst. Year 2009-10 is allowed for statistical purposes. Order pronounced in open court on 19th September, 2016 Sd/- Sd/- (G.S.PANNU) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated : 19/09/2016 Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT(A)- 4. CIT 5.DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai Pramila ACIT Circle-4, Thane (W) v. Amol Antony Periera