2022 (8) TMI 144 - HC - Income Tax

Disallowance u/s 40(a)(ia) - Delayed deposit of TDS colected in government exchequer - scope of amended provision of section 40(a)(ia) - HELD THAT - The proviso was originally inserted by Finance Act, 2008 with retrospective effect from April 1, 2005. The proviso was again amended by Finance Act, 2010 with effect from April 1, 2010. A bare perusal of the aforesaid proviso clearly indicates that the amendment is retrospective in nature which means that if the TDS has been deposited prior to filing of the return then there shall be no disallowance. The Supreme Court in the case of Commissioner of Income Tax Vs. Calcutta Export Company 2018 (5) TMI 356 - SUPREME COURT has clearly observed that the amended provision of section 40(a)(ia) should be interpreted liberally and equitably and applied retrospectively from the date when section 40(a)(ia) with effect from assessment year 2005-06 so that an assessee should not suffer unintended and deleterious consequences beyond the object and purpose of the provision mandates. As in the present case there are concurrent findings of fact of the CIT(A) and the Tribunal that the subject TDS in the present case was deposited in the state exchequer before the due date of filing of return which is not disputed by the revenue. Also no material or facts have been brought before us even to suggest that the deduction has been granted twice to the assessee. Therefore, there cannot be any disallowance on this count. Assessing Officer could not have made a disallowance under section 40(a)(ia) in view of the retrospective nature of the proviso to the said section. We do not find any error apparent or perversity in the order of the Tribunal in confirming the order of the CIT (A) holding that no disallowance is called for under section 40(a)(ia) of the Act. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening the assessment beyond the period of four years under Section 147 of the Income Tax Act, 1961.
2. Applicability of disallowance under Section 40(a)(ia) of the Income Tax Act, 1961 for Assessment Year 2005-06.
3. Alleged double deduction of Rs.3,97,76,005/- under Section 40(a)(ia) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment Beyond Four Years:

The Tribunal addressed the issue of reopening the assessment beyond the prescribed period of four years under Section 147 of the Income Tax Act, 1961. The assessee contended that the reopening was invalid as it was done beyond the statutory period. The Tribunal, after evaluating the facts and the law, concluded that there was no justification for reopening the assessment beyond four years since the material facts were duly disclosed by the assessee, and the tax deducted at source was deposited before the due date of filing the return. This finding was not challenged in the present appeal, and thus, the reopening of the assessment was deemed invalid.

2. Applicability of Disallowance under Section 40(a)(ia) for AY 2005-06:

The Tribunal examined whether the disallowance under Section 40(a)(ia) of the Income Tax Act, 1961 could be applied for the Assessment Year 2005-06. The revenue argued that the amendment to Section 40(a)(ia) by the Finance Act, 2010, which allowed TDS payments to be made by the due date of filing the return under Section 139(1), was prospective and not applicable for AY 2005-06. However, the Tribunal, relying on precedents from the Calcutta High Court (Virgin Creations), Bombay High Court (Commissioner of Income Tax, Vidarbha Vs. Smt. Godavaridevi Saraf), and Delhi High Court (Commissioner of Income Tax Vs. Rajinder Kumar), held that the amendment was retrospective from 1st April 2005. Therefore, if the TDS was deposited before the due date of filing the return, no disallowance under Section 40(a)(ia) could be made. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal and confirming that the disallowance of Rs.5,30,91,745/- was not justified.

3. Alleged Double Deduction of Rs.3,97,76,005/-:

The revenue contended that the assessee was granted relief of Rs.3,97,76,005/- under Section 40(a)(ia) in AY 2006-07 based on provisions applicable for AY 2005-06, which resulted in a double deduction. The Tribunal observed that no contrary facts were presented by the revenue to substantiate the claim of double deduction. The Tribunal noted that mere allegations were insufficient without factual substantiation. Consequently, the Tribunal upheld the CIT(A)'s decision, finding no basis for the disallowance under Section 40(a)(ia) for AY 2005-06.

Conclusion:

In conclusion, the High Court observed that the Tribunal and CIT(A) had concurrent findings that the TDS was deposited before the due date of filing the return, and no material evidence suggested that the deduction was granted twice. The retrospective nature of the proviso to Section 40(a)(ia) was affirmed, and the disallowance of Rs.5,30,91,745/- was deemed incorrect. The appeal did not raise any substantial questions of law and was therefore dismissed without costs.