2018 (2) TMI 1926 - HC - Income Tax

Revision u/s 264 by PCIT - Scope of amendment to Second proviso to Section 40(a)(ia) - retrospective or prospective effect - HELD THAT - Against the impugned assessment order under Section 143 (3) of the Act the assessee does not appear to have filed any regular appeal before the Commissioner of Income Tax (Appeals) as per the provisions of Section 246 of the Income Tax Act 1961 but instead chose to file a Revision Petition under Section 264 of the Income Tax Act 1961 on 20/02/2015 which came to be partly allowed by the Respondent Principal Commissioner of Income Tax as indicated above. For the issues not decided by the learned Principal Commissioner it is still open to the petitioner assessee to prefer a regular Appeal and the only objection regarding expiry of limitation as that the period has expired for preferring such regular appeal which may be an issue. Present writ petition is therefore disposed of relegating the petitioner assessee back to the appellate remedy before the learned Commissioner of Income Tax (Appeals) and if such first Appeal is filed before the learned CIT (Appeals) against the impugned assessment order dated 28/02/2014 within a period of 30 days from today the same shall be entertained by the said Appellate Authority without raising any objections on the ground of bar of limitation

Summary

Issues:
1. Claim for retrospective effect of Second proviso to Section 40(a)(ia) of the Income-tax Act, 1961.
2. Disallowance of payment of interest under Section 40(a)(ia) of the Income-tax Act, 1961.
3. Failure to file a regular appeal before the Commissioner of Income Tax (Appeals) within the prescribed period.

Analysis:

1. The petitioner, an assessee, challenged the order of the Principal Commissioner of Income Tax-5, Bangalore under Section 264 of the Income Tax Act, 1961 for AY 2012-13. The issue of retrospective effect of the Second proviso to Section 40(a)(ia) was raised. The Commissioner declined to grant relief as the law on this matter was unsettled due to pending appeals and the Revenue's stance. The petitioner's claim was rejected based on the lack of acceptance by the Revenue of the retrospective effect of the proviso.

2. Regarding the disallowance of payment of interest under Section 40(a)(ia), the Commissioner referred to a High Court decision stating that non-filing of Form No.15G for payments to sub-contractors was a technical defect, not attracting the provisions of Section 40(a)(ia). Following this precedent, the Commissioner directed the Assessing Officer to delete the disallowance made under Section 40(a)(ia) for the petitioner. The decision in this regard favored the petitioner based on the applicable legal precedent.

3. The petitioner had not filed a regular appeal before the Commissioner of Income Tax (Appeals) against the assessment order dated 28/02/2014 under Section 143(3) of the Act. Instead, a Revision Petition under Section 264 was filed, which was partly allowed by the Principal Commissioner. The Court noted that for issues not decided by the Principal Commissioner, the petitioner could still file a regular appeal. The Court disposed of the writ petition, directing the petitioner to pursue appellate remedy before the Commissioner of Income Tax (Appeals) within 30 days from the judgment date, without objections on the ground of limitation if other conditions were met.

In conclusion, the judgment addressed the issues of retrospective effect of a statutory provision, disallowance of interest payments, and the failure to file a regular appeal within the prescribed period. The Court provided guidance on the legal principles applicable to each issue, directing the petitioner on the appropriate course of action for seeking redress.