1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 31ST DAY OF AUGUST 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.407 OF 2010 BETWEEN: M/S. C.S. RAGHOJI (BELLARY) REP. BY ITS PARTNER ADITYA RAGHOJI, # 35 WARD NO.18, JANATHAKAL COMPOUND NEAR DURGAMMA TEMPLE KAPPAGAL ROAD, BELLARY. ... APPELLANT (BY SRI. A. SHANKAR, SR. COUNSEL A/W SRI. M. LAVA, ADV.,) AND: DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1, AAYAKAR BHAVAN STAFF ROAD, FORT, BELLARY-583102. ... RESPONDENT (BY SRI. K.V. ARAVIND, ADV.) --- THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 30.06.2010 PASSED IN ITA NO.100/BANG/2010 FOR ASSESSMENT YEAR 2006-07, PRAYING THAT THIS HON BLE COURT MAY BE PLEASED TO: (I) FORMULATE SUBSTANTIAL QUESTION OF LAW STATED THEREIN. (I) ALLOW APPEAL AND SET ASIDE ORDER PASSED BY ITAT, BANGALORE IN ITA NO.100/BANG/2010 2 DATED 30-06-2010, ANNEXURE , IN INTEREST OF JUSTICE AND EQUITY. THIS ITA COMING ON FOR FINAL HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT This appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act for short) has been preferred by assessee. subject matter of appeal pertains to Assessment year 2006-07. appeal was admitted by bench of this Court vide order dated 18.11.2010 on following substantial question of law: (i) Whether Tribunal was justified in law in remanding matter back to file of learned CIT(A) for re-verification of documents when all documents and details were produced by appellant in relation to payment of handling charges of Rs.18,80,762/- made to Sri.T.Shivakumar before authorities and there was no need to remand matter under facts and circumstances of case? 3 (ii) Whether Tribunal was justified in law in not appreciating fact that payments made to Sri.Srinivas of Rs.3,85,535/- were only towards disbursement of payments towards wages amount various labourers and Sri.Srinivas only supervised work for which he received commission under facts and circumstances of case? (iii) Whether Tribunal was justified in not appreciating fact that payment made to Sri.Abdul Rahim was only towards reimbursement of handling charges of Rs.1,23,000/- incurred at Hospet Branch which was occasional incurred by appellant under facts and circumstances of case? (iv) Whether Tribunal was justified in law in not holding that when provisions of Chapter XVII B of Act is not invoked consequently provisions of Section 40(a)(ia) of Act is not attracted as appellant is not held as assessee in default under Chapter XVII B 4 of Act under facts and circumstances of case? (v) Whether Tribunal failed to appreciate that for purpose of invoking provisions of Section 40(a)(ia) of Act firstly there should be finding that provisions Chpater XVII B is attracted for purpose of disallowance under Section 40(a)(ia) of Act under facts and circumstances of case? 2. Thereafter additional substantial question of law was framed: Whether amendment to Section 40(a)(ia) of Act by Finance Act 2012 by insertion of second proviso is to be interpreted as clarifactory in nature and applied retrospectively and consequently no disallowance has to be made on facts and circumstances of case? 3. Facts leading to filing of this appeal briefly stated are that assessee is engaged in business of 5 clearing and forwarding agency for M/s ACC Ltd for distribution of cement and other allied projects. assessee filed return of income declaring total income of Rs.26,58,480/- for Assessment year 2006-07 under head of income from business. Assessing Officer vide order dated 27.11.2008 determined total income of assessee at Rs.53,50,291/- by making addition of Rs.27,84,324/- , by disallowing sum of Rs.22,84,324 under provisions of Section 40(a)(ia) of Act and amount of Rs.5 Lakhs as adhoc disallowance was made towards transportation charges. Being aggrieved, assessee filed appeal. Commissioner of Income Tax (Appeals) by order dated 11.11.2009 affirmed order of Assessing Officer. assessee thereupon filed appeal before Income Tax Appellate Tribunal (hereinafter referred to as Tribunal , for short). Tribunal vide order dated 30.06.2010 inter alia held that assessee has 6 produced evidence in case of payment made to one T.Shivakumar and matter was therefore, remitted for re-examination, on parameters indicated in paragraph 7 of order. In result, appeal was partly allowed. Being aggrieved, assessee is in appeal before us. 4. Learned Senior counsel for assessee submitted that in facts and circumstances of case, assessee could not have treated as assessee in default by invoking provisions of Section 40(a)(ia) of Act. It is also submitted that during course of assessment proceedings, assessee had contended that assessee had made payment of handling charges to T.Shivakumar, Abdul Rahim and Srinivas and aforesaid payments were made as agents who in turn paid labour charges to multiple labourers. It is further submitted that aforesaid aspect of matter has not been appreciated by Tribunal and limited remand has been made with regard to 7 payments made to T.Shivakumar. It is also submitted that matter be remitted to Assessing Officer for decision afresh. On other hand, learned counsel for revenue submitted that Tribunal has already remitted matter to Commissioner of Income Tax (Appeals) and in case, assessee wants to adduce any evidence with regard to payments made to aforesaid Abdul Rahim and Srinivas, it may adduce same before Commissioner of Income Tax (Appeals) and Commissioner of Income Tax (Appeals) if required may call for remand report. It is argued that matter be remitted to Commissioner of Income Tax (Appeals) and he may be directed to examine issues raised by assessee including issue arising out of additional substantial questions of law afresh. 5. We have considered submissions made by learned counsel on both sides and have perused record. Admittedly, assessee had produced copy of agreement entered between it and 8 T.Shivakumar as well as affidavit of T.Shivakumar stating that he acted only as commission agent. However, Commissioner of Income Tax (Appeals) refused to accept evidence adduced by assessee. Therefore, Tribunal directed remand of matter to Commissioner of Income Tax (Appeals). In view of submissions made and in facts of case, remand of case is imperative. Accordingly, it is directed that assessee shall be at liberty to adduce evidence with regard to payments made to Abdul Rahim and Srinivas before Commissioner of Income Tax (Appeals). aforesaid evidence shall be considered by Commissioner of Income Tax (Appeals) and in case, Commissioner of Income Tax (Appeals) deems it appropriate, he shall be at liberty to seek remand report from Assessing Officer and thereafter to decide matter afresh in accordance with law. To aforesaid extent, order passed by Tribunal is modified. 9 In view of preceding analysis, it is not necessary for us to answer substantial questions of law framed by this court. In result, appeal is disposed of. Sd/- JUDGE Sd/- JUDGE ss C.S. Raghoji v. Deputy Commissioner of Income-tax Circle-1, Bellary