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TMI Blog2017 (11) TMI 1827X X X X Extracts X X X X X X X X Extracts X X X X ..... f interest paid by the assessee and that are offered by the respective recipients of interest in their income and that there are certain difference which the assessee has not been able to reconcile. We therefore find force in the argument of Ld.A.R. that to the extent the amounts have been reconciled, the assessee be allowed the expenditure. There is no finding on this issue by the lower authorities. In such a situation, we are of the view that the matter be remanded back to AO to verify the contention of the assessee - Appeal of assessee allowed for statistical purposes. X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2010-11, ITA.No.23/PUN/2016 for A.Y. 2011-12 and ITA No.1371/PUN/2015 for A.Y. 2012-13. 6.1 The relevant facts as culled out from the material on record are as under :- A search action u/s 132 of the Act was conducted on 24.11.2011 at the business and residential premises of M.B. Patil group at Aurangabad / Pune. During the course of search, various registered documents belonging to the assessee were seized. Consequently, a notice u/s 153C of the Act was issued on 27.09.2013 requiring the assessee to file the return of income. In response to the aforesaid notice, assessee inter-alia submitted that the return of income originally filed u/s 139 of the Act be treated as return in response to notice u/s 153C of the Act. Thereafter, the case was taken up for scrutiny and the assessments were framed u/s 143(3) r.w.s. 153(C) of the Act for various years and the total income for various years were determined as under : A.Y. Date of Assessment Order Order passed u/s Assessed Income 2010-11 18-03-2014 143(3) r.w.s 153C ₹ 2,21,36,560/- 2011-12 -do- -do- ₹ 2,05,10,280/- 2012-13 -do- -do- ₹ 3,01,73,770/- Aggrieved by the orders of AO, assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the grounds raised by the assessee reads as under : "1] The learned CIT(A) erred in confirming the adhoc disallowance of amounting to ₹ 1,79,930/- out of the labour expenses. 2] The learned CIT(A) failed to appreciate that the expenses were reasonable and just because some of the vouchers were self made, there was no need any disallowance. 3] The learned CIT(A) erred in confirming the disallowance u/s 40(a)(ia) of ₹ 67,68,277/- on account of the interest payable to the finance companies on the ground that the appellant had not deducted TDS thereon. 4] The learned CIT(A) failed to appreciate that - a. Having estimated the income by disallowing adhoc labour expenses, there was no warrant to disallow the interest u/s 40(a)(ia) separately. b. If the payee companies had paid the taxes on their income for this year which included the interest receivable from the assessee, there was no reason for disallowance u/s 40(a)(ia). c. The appellant had no access to the records of the payee companies and therefore, having made the contention, the A.O. could have been directed to make enquiries from the payee companies and check whether they had paid the taxes or n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Finance Ltd. for purchase of machinery I trucks and debited interest of ₹ 5,76,066/- and ₹ 1,92,244/- respectively, without deducting tax at source u/s 194A of the Act. The appellant before the AO contended that deductee companies might have paid taxes on their income. The AO further gathered information from the deductee companies i.e. NBFCs who expressed inability to furnish copy of ITR-V. The AO, therefore, disallowed such interest expenditure totaling to ₹ 7,68,310/- u/s 40(a)(ia) of the Act. 6.4 As discussed earlier, this disallowance u/s 40(a)(ia) although not based on the seized documents but it is definitely based on the information gathered by the AO in the course of assessment proceedings. The failure of appellant to deduct tax would definitely have given jurisdiction to initiate proceedings u/s 147 and since assessment u/s 153C being consolidated proceeding which includes reassessment total income as well, the disallowance falls under the scope of assessment u/s 153C in view of the ratio of Bombay High Court in case of M/s. Murli Agro products (Supra). 6.4.1 On careful reading of the finding of the A.O. in the assessment order it is found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Finance Act, 2012, which is retrospective in nature, no disallowance of interest is called for in the hands of assessee. In support of his contention that the proviso to Sec. 40(a)(ia) is retrospective in nature, he relied on the decision of CIT Vs. Ansal Land Mark Township (P) Ltd. 377 ITR 635 (Del) which had upheld the view of the Agra Bench of the Tribunal holding that the 2nd proviso to Sec.40(a)(ia) is declaratory and curative and has retrospective effect from 01.04.2005. In support of his contention that the respective recipients have offered the interest received from assessee in their respective income, he pointed to the C.A. Certificate of the recipient of income which are placed in the paper book. He further submitted that the Ld.CIT(A) while upholding the order of AO had relied on the decision of Hon'ble Kerala High Court in the case of Prudential Logistics and Transports Vs. Income Tax Officer [(2014) 364 ITR 689 (Ker)]. He submitted that Pune Tribunal in the case of Yamazaki Mazak India Pvt. Ltd Vs. PCIT in ITA No.153/PN/2016 dt.28.10.2016 after considering the aforesaid decision of Kerala High Court in the case of Prudential Logistics (supra) and the decision of Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts of interest paid by the assessee have been offered to tax by the respective recipients and as proof of the amount offered by the respective recipient to tax is also certified by their Chartered Accountants and the necessary C.A. Certificates were also filed by the assessee before Ld.CIT(A) and also before us. We find that there is no finding of Ld.CIT(A) on the aforesaid issue. We further find that Ld.CIT(A) while upholding the order of AO had relied on the decision of Hon'ble Kerala High Court in the case of Prudential Logistics (supra) whereby it has held that amendment made to proviso to Sec. 40(a)(ia) is prospective. On the other hand, we find that Hon'ble Delhi High Court in the case of Ansal Land Mark Township (supra) has held that the insertion of the second proviso to Sec.40(a)(ia) is declaratory and curable in nature and it has retrospective effect from 1st April, 2005 being the date from which sub-clause (ia) of Sec.40(a) was inserted by the Finance (No.2) Act, 2004. It further held that as the payee has filed the return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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