ACIT, Circle-9(1), Hyderabad V. Sri Garlapati Chalapathi Reddy, Nalgonda District

CO 104/HYD/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 8000 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 24-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C R PATI
• Assessee Lawyers: S RAMA RAO
• Keywords: Additional evidence
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.543/HYD/2012 : ASSESSME NT YEAR 2008-09 INCOME-TAX OFFICER, WARD-1, NALGONDA. V/S. SHRI GARLAPATI CHALAPATHI REDDY, NALGONDA. ( PAN - AHZPG 0838 Q) (APPELLANT) (RESPONDENT) C.O. NO.104/HYD.2012 (IN ITA NO.543/HYD/2012 : ASSESSME NT YEAR 2008-09 SHRI GARLAPATI CHALAPATHI REDDY, NALGONDA. ( PAN - AHZPG 0838 Q) V/S. ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE 9(1), NALGONDA. (CROSS-OBJECTOR) (APPELLANT-IN-APPEAL) ASSESSEE BY : SHRI S.RAMA RAO DEPARTMENT BY : SHRI C.R.PATI CIT-DR DATE OF HEARING 8.11.2012 DATE OF PRONOUNCEMENT 30.11.2012 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THE APPEAL BY THE REVENUE AND CROSS-OBJECTION BY THE ASSESSEE THEREIN ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIO NER OF INCOME- TAX(APPEALS)-VI, HYDERABAD DATED 25.1.2012 FOR THE A SSESSMENT YEAR 2008- 09. 2. THE ONLY ISSUE INVOLVED IN THE APPEAL OF THE REVE NUE RELATES TO THE ADDITION MADE BY THE ASSESSING OFFICER IN TERMS OF S. 40(A)(IA) OF THE ACT, ITA NO.543/HYD/2012 & CO 104/HYD/2012 SHRI GARLAPATI CHALAPATHI REDDY,NALGONDA. 2 ON ACCOUNT OF NON-COMPLIANCE BY THE ASSESSEE WITH THE PROV ISIONS OF S.194C OF THE ACT. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS A TR ANSPORT CONTRACTOR AND FILED RETURN OF INCOME FOR THE YEAR UND ER APPEAL ON 22.10.2008 DECLARING AN INCOME OF RS.6,45,230. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSING OFFICER NOTICED FROM THE PRO FIT & LOSS ACCOUNT FURNISHED ALONGWITH THE RETURN THAT THE ASSESSEE CL AIMED AN AMOUNT OF RS.2,36,49,647 TOWARDS TRANSPORT CHARGES. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH PARTICULARS OF TRANSPORT CHARGES ALO NGWITH COMPLETE DETAILS SUCH AS SUPPORTING VOUCHERS, EVIDENCE, I.E. VEHI CLE- WISE DETAILS ALONG WITH AMOUNTS AND DATES OF PAYMENT, L.R.S/PAYMENT VOU CHERS, ETC. IN RESPONSE, THE ASSESSEE FURNISHED DETAILS OF TRANSPORT CHARGE S ALONGWITH A STATEMENT SHOWING TRANSPORT CHARGES WITH COPIES OF VOUCHE RS FOR THE TOTAL EXPENDITURE INCURRED. HOWEVER, THE ASSESSING OFFICER NOTICE D THAT THE STATEMENT OF THE ASSESSEE DOES NOT CONTAIN ANY INFORMATION REGARDING TDS, IF ANY DEDUCTED OR NOT. HE FURTHER NOTICED THAT NO PAR TICULARS OF HAVING FILED FORM 15 I AS PER INCOME TAX ACT/RULES, IF ANY, FILED B Y THE PARTIES BEFORE THE ASSESSEE ARE AVAILABLE. THE TAX AUDIT REPORT WAS ALSO SILE NT ABOUT DEDUCTION OF TDS. FROM THE VOUCHERS FURNISHED BY THE ASSESSEE IN S UPPORT OF PAYMENT OF TRANSPORT CHARGES, THE ASSESSING OFFICER OBSERVED THAT THE VOUCHERS ARE SELF MADE AND CONTAINED THE NAMES OF THE PARTIES WITH DATE AND AMOUNT PAID IN FIGURES AND WORDS. THEY ARE STAMPED AS CASH PAID WITH TH E SIGNATURES OF THE CASHIER AND SEAL OF M/S. KODANDARAMA TRANSPORT AND PARTY SIGNATURES. IT WAS FURTHER NOTICED THAT THE PAYMENT VOUCHERS ARE NOT N UMBERED AND MOST OF THE AMOUNTS ARE ALSO PAID IN CASH AS PER THE DETAIL S FURNISHED BY THE ASSESSEE. IN THE CIRCUMSTANCES, CONSIDERING THE PROVISIONS OF S.40(A)(IA) OF THE ACT AND THE ASSESSEES LIABILITY TO DEDUCT TAX AT SOURCE UNDER S.194C OF THE ACT IN RESPECT OF PAYMENTS MADE IN EXCESS OR RS.20,000 OR IN AGGREGATE OF RS.50,000, AND CONSIDERING THE ASSESSEES FAILURE TO CO MPLY WITH THE TDS ITA NO.543/HYD/2012 & CO 104/HYD/2012 SHRI GARLAPATI CHALAPATHI REDDY,NALGONDA. 3 PROVISIONS, THE ASSESSING OFFICER MADE A DISALLOWANCE OF RS.2 ,35,31,365 UNDER S.4)(A)(IA) OF THE ACT, AND ACCORDINGLY COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF RS.2,41,76,595, AS AGAINST RETURNED INCO ME OF RS.6,45,230. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT (A). IN THE COURSE OF APPELLATE PROCEEDINGS, ASSESSEE FURNISHED FORMS 15 -I OBTAINED FROM THE TRANSPORTERS TO WHOM TRANSPORT CHARGES HAVE BEEN PA ID. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THIS EVIDENCE H AD NOT BEEN FILED BEFORE THE ASSESSING OFFICER, SINCE THE ASSESSING OFFICER HAD N EVER RAISED ANY QUERY REGARDING THE APPLICABILITY OF S.40(A)(IA). GR OUNDS WERE ALSO TAKEN BEFORE THE CIT(A) WITH REGARD TO THE FAILURE OF TH E ASSESSING OFFICER TO INFORM THE ASSESSEE ABOUT THE PROPOSED DISALLOWANCE AND THE RESUL TANT LACK OF OPPORTUNITY TO THE ASSESSEE TO RESPOND TO IT. SINCE THE FORMS 15I ARE CRUCIAL TO THE MAIN ISSUE IN APPEAL, VIZ. THE DISALLOWANCE UND ER S;40(A)(IA), THE CIT(A) ADMITTED THE ADDITIONAL EVIDENCE AND FORWARDE D THE SAME TO THE ASSESSING OFFICER FOR SUBMITTING A REMAND REPORT OFFERING HIS COMMENTS THEREON. 5. IN HIS REPORT DATED 12.9.2011, THE ASSESSING OFFICER SUBMITTED THAT PAYMENT HAD BEEN MADE TO 11 PARTIES AS PER THE I NFORMATION CONTAINED IN THE FORMS AND AS SUBMITTED BY THE ASSESSEE. SUMMONS WER E ISSUED TO THE PARTIES FOR VERIFICATION OF THE INFORMATION. SOME OF THE SUMMONS WERE RETURNED BY THE POSTAL AUTHORITIES WITH THE ENDORSEMEN T THAT THE PARTIES HAD LEFT OR THAT THE ADDRESS WAS INSUFFICIENT. ENQUIRIES WERE MADE WITH THE THREE COMPANIES FROM WHOM THE ASSESSEE HAD RECEIVED TRANSPORT CHAR GES. TWO OF THESE COMPANIES RESPONDED AND IT WAS FOUND THAT THE RC N UMBERS OF THE VEHICLES MENTIONED IN THE FORM 15-I TALLIED WITH THE RC NUMBERS RECORDED BY THE COMPANIES IN THEIR GATE PASSES REGISTERS. RC NUMBERS FO R PAYMENTS AMOUNTING TO RS.2,74,650 COULD NOT BE TALLIED AND TH E ASSESSING OFFICER SPECULATED THAT THIS AMOUNT MAY BE RELATED TO THE THIR D COMPANY, M/S. ITA NO.543/HYD/2012 & CO 104/HYD/2012 SHRI GARLAPATI CHALAPATHI REDDY,NALGONDA. 4 GOLDGREY CEMENTS LTD., WHICH HAD FAILED TO RESPOND TO THE SUMMONS. THE ASSESSEE HAD FAILED TO RESPOND TO A SPECIFIC QUERY TO FURN ISH INFORMATION AND EVIDENCE FOR FURNISHING THE FORMS TO THE PRESCRIBED AU THORITY BEFORE THE DUE DATE. THE SIGNATURES ON THE CASH RECEIPTS DID NOT TALLY WITH THE SIGNATURES ON THE FORMS 15I. THE ASSESSING OFFICER IN THE CIRCUMSTANCES CONCLUDED IN HIS REMAND REPORT AS FOLLOWS- (A) IN VIEW OF THE NON-AVAILABILITY OF THE CURRENT/CORRECT ADDRESSES OF THE PAYEES FOR TRANSPORT CHARGES, THE GENUINENESS OF THE DECLARATIONS IN THE FORM 15I COULD NOT BE VERIFIED. (B) THE ASSESSEE HAD FAILED TO FURNISH ANY INFORMATION WHETH ER IT HAD FILED THE FORM 15I BEFORE THE PRESCRIBED AUTHORI TY. (C) THE TRANSPORT CHARGES ARE PAID IN CASH AS EVIDENT FOR M THE PAYMENT VOUCHERS AND AS ADMITTED BY THE ASSESSEE. (D) THE VEHICLES MENTIONED IN THE FORM 15I HAD ACTUALLY B EEN ENGAGED IN TRANSPORT OF GOODS TO THE COMPANIES FRO M WHOM THE ASSESSEE HAD RECEIVED TRANSPORT CHARGES. 6. THE CIT(A) FORWARDED THE REMAND REPORT OF THE ASSESSING OFFICER ON THE ABOVE LINES TO THE ASSESSEE FOR HIS COMMENTS. THE L EARNED AUTHORISED REPRESENTATIVE, IN REPLY VIDE LETTER DATED 17.1.201 1 SUBMITTED THAT- (I) FAILURE TO FILE THE FORM 15 I IS A TECHNICAL FAILURE THAT HAS NO BEARING ON SEC.40(A)(IA). ALL THAT SEC.40(A)(IA) REQUI RES IS THAT TDS SHOULD HAVE BEEN MADE, EXCEPT IN CASES WHERE FORM 15 I IS OBTAINED FROM THE PARTIES CONCERNED. THE AR RELIED ON THE DECISION IN THE CASE OF SHYAM SUNDER KAILASH CHAND V/S. ITO(60 DTR 270(JAIPUR). (II) THOUGH THE ASSESSING OFFICER COULD NOT EXAMINE THE PARTIE S TO WHOM TRANSPORT CHARGES HAD BEEN PAID, THE FACT THAT THE VEHICLE ITA NO.543/HYD/2012 & CO 104/HYD/2012 SHRI GARLAPATI CHALAPATHI REDDY,NALGONDA. 5 NUMBERS IN THE FORMS TALLIED WITH THE NUMBERS MAINTAIN ED BY THE COMPANIES (PAYING TRANSPORT CHARGE WAS TO THE ASSESSEE) SHOWE D THAT THE CLAIMS IN THE FORMS WERE CORRECT. (III) THE ASSESSEE CANNOT BE HELD RESPONSIBLE FOR CHANGE OF ADDRE SS BY THE PARTIES TO WHOM TRANSPORT CHARGES HAD BEEN PAID. (IV) THE DIFFERENCE IN SIGNATURES ON THE FORMS AND ON THE PA YMENT VOUCHERS WAS DUE TO THE FACT THAT THE FORMS WERE ISSUED BY THE OWNERS OF THE VEHICLES WHILE THE PAYMENT VOUCHERS WERE SIGNED BY THE LORRY DRIVERS. THE LEARNED AUTHORISED REPRESENTATIVE ALSO PLACED RELIA NCE ON THE DECISIONS OF THE TRIBUNAL IN THE CASE OF MAITHRI TRANSPORT (124 ITD 40) AND IN THE CASE OF CHANDRAKANT THACKKER (129 TTJ(UO) 1(CTK) AND SUBMI TTED THAT THERE WAS NO CONTRACT WITH THE VARIOUS PARTIES TO WHOM TRANSPORT CH ARGES HAD BEEN PAID. 7. THE CIT(A), TAKING NOTE OF THE PROVISIONS OF S.19 4C AS APPLICABLE FOR ASSESSMENT YEAR 2008-09, CONCLUDED THAT SECOND PROVISO T O S.194C ABSOLVES THE ASSESSEE FROM ITS LIABILITY TO DEDUCT TAX AT SO URCE ON PRODUCTION OF THE PRESCRIBED DECLARATION. DEALING WITH THE OBJECT ION OF THE ASSESSING OFFICER BASED ON NON-PRODUCTION OF SUCH DECLARATIONS, THE CIT(A) OBSERVED AS FOLLOWS- 5.2 THAT SUCH DECLARATIONS IN FORM 15I HAD BEEN OBTAIN ED BY THE ASSESSEE IS NOT IN DISPUTE. THE ASSESSING OFFICER H AS PLACED RELIANCE ON THE FACT THAT THESE FORMS WERE NOT SUBMITTED BEFORE THE PRESCRIBED AUTHORITY IN TERMS OF THE THIRD PROVISO. HOWEVER, A READING OF THE PROVISIONS SHOWS THAT THE LIABILITY OF THE ASSESSEE TO DEDUCT TAX IS CONTINGENT ONLY ON PRODUCTION OF THE DECLARATION AS PER THE SECOND PROVISO. THE THIRD PROVISO IS M ERELY A PROCEDURAL REQUIREMENT AND DOES NOT IMPACT ON THE LIABILITY OF THE ASSESSEE T O DEDUCT TAX. THE FAILURE OF THE ASSESSEE TO SUBMIT THE FORMS BEFORE THE PRESCRIBED AUTHORITY WITHIN THE DUE DATE AS REQUIRED BY THE TH IRD PROVISO TO SEC.194C(3) IS, THEREFORE, IRRELEVANT FOR DECIDING THE LIABILITY OF THE ASSESSEE TO DEDUCT TAX. IT IS, THEREFORE, HELD THA T THE ASSESSEE HAVING OBTAINED 15-I FORMS, THE GENUINENESS OF WHICH HAS N OT BEEN DOUBTED, THERE WAS NO LIABILITY TO DEDUCT TAX ON THE ASSESSE E AND SO, DISALLOWANCE U/S. 40A(IA) WAS NOT WARRANTED. ITA NO.543/HYD/2012 & CO 104/HYD/2012 SHRI GARLAPATI CHALAPATHI REDDY,NALGONDA. 6 8. AS FOR RETURN OF SUMMONS ISSUED BY THE ASSESSING OFFICER TO SOME OF THE PARTIES, THE CIT(A) AGREED WITH THE LEARNED A UTHORISED REPRESENTATIVE THAT ASSESSEE CANNOT BE MADE ACCOUNTABLE FOR THE CHANGE OF ADDRESSES OF THE PARTIES. DEALING WITH A MINOR SUM OF RS.2.74 LAKHS WHI CH COULD NOT BE TALLIED AND WHICH WAS PRESUMED BY THE ASSESSING OFFICER TO BE PERT AINING TO THE THIRD COMPANY GREYGOLD CEMENTS LTD., WHICH HAD FAILED TO RESP OND TO THE ASSESSING OFFICER, THE CIT(A) NOTED THAT THE ASSESSEE HAS SUBSE QUENTLY FURNISHED A COPY OF THE LETTER DATED 3.9.2011 FROM GR EYGOLD CEMENTS, WHEREIN THE VEHICLE NUMBERS HAVE BEEN TALLIED AND FO R THE BALANCE AMOUNT AS WELL, AND THESE FACTS ACCORDING TO THE CIT(A) PROVED THA T THE FACTS STATED IN THE FORMS 15-I WERE CORRECT. HE ALSO OBSERVED THAT THE VARIATION IN THE SIGNATURES ON THE PAYMENT VOUCHERS AND 15-I FORMS TO BE VERY TRIVIAL, AND EVEN THAT HAS BEEN EASILY EXPLAINED AWAY BY THE ASSESSEE. FOR THESE REASONS, THE CIT(A) FOUND THAT THE DISALLOWANCE IN TERM S OF S.40(A)(IA) IS NOT WARRANTED, AND ACCORDINGLY DELETED THE SAME, ALLOWING THE GROUNDS OF THE ASSESSEE ON THAT ASPECT. 9. HOWEVER, THE CIT(A) TOOK NOTE THE FOLLOWING OBSER VATIONS OF THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT ORDER- EVEN THOUGH PROVISIONS OF S.40A(3) OF THE IT ACT A LSO APPLICABLE, THEY ARE NOT APPLIED AS DISALLOWANCE HAS ALREADY MADE U/ S. 40(A)(IA) OF IT ACT. THE CIT(A) TAKING NOTE OF THE FACTS RELEVANT TO DISALL OWANCE UNDER S.40A(3) AND ALSO THE REITERATION MADE BY THE ASSESSING OFFICER IN HIS REMAND REPORT DATED 12.9.2011, HELD THAT THE MOMENT THE DISALLOWAN CE MADE UNDER S.40(A)(IA) HAS BEEN DELETED BY HIM, THE DISALLOWANCE UNDER S.40A(3) COMES INTO OPERATION, AND SINCE THE ASSESSEE HAS NOT RAISED ANY G ROUNDS ON THE APPLICABILITY OF PROVISIONS OF S.40A(3), THE SAME DOES N OT ARISE FOR ADJUDICATION BY HIM IN THE APPEAL BEFORE HIM. ITA NO.543/HYD/2012 & CO 104/HYD/2012 SHRI GARLAPATI CHALAPATHI REDDY,NALGONDA. 7 10. AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A), WH ILE THE REVENUE HAS COME IN APPEAL QUESTIONING THE RELIEF GRANTED BY T HE CIT(A) DELETING THE ADDITION MADE BY THE ASSESSING OFFICER IN TERMS OF S.40(A )(IA) OF THE ACT, THE ASSESSEE IN ITS CROSS OBJECTIONS OBJECTED TO THE OBSERVATIONS O F THE CIT(A) WITH REGARD TO DISALLOWANCE UNDER S.40A(3) OF THE ACT. 11. THE LEARNED DEPARTMENTAL REPRESENTATIVE, SUBMI TTED BEFORE US THAT THE CIT(A) HAS DELETED THE DISALLOWANCE MADE IN T ERMS OF S.40(A)(IA) WITHOUT PROPERLY CONSIDERING THE ISSUES RAISED BY THE AS SESSING OFFICER IN THE REMAND REPORT. HE SUBMITTED THAT WHEN THE ASSESSING OFF ICER ON VERIFICATION OF THE DECLARATIONS IN FORM 15-I, HAS FOUND THEM TO BE NOT GENUINE, THE CIT(A) SHOULD NOT HAVE ACCEPTED THE ASSESSEES CLAIM IGNORI NG THE COMMENTS MADE BY THE ASSESSING OFFICER IN THE REMAND REPORT. THE LEARNED DEPARTMENTAL REPRESENTATIVE THEREFORE, ASKED FOR SUSTAI NING THE DISALLOWANCES MADE BY THE ASSESSING OFFICER UNDER S.40(A)( IA) OF THE ACT, BY SETTING ASIDE THE ORDER OF THE CIT(A) IN THIS BEHALF. 12. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE A SSESSEE, ON THE OTHER HAND, SUBMITTED THAT DURING THE ASSESSMENT PROCEED INGS, THE ASSESSING OFFICER, HAVING NOT SPECIFICALLY MADE ANY PROPOSA L OF THE DISALLOWANCE UNDER S.40(A)(IA) OF THE ACT, THERE WAS NO OCCASION FOR THE ASSESSEE TO FILE THE RELEVANT DECLARATIONS IN FORM 15-I. HOWEVER, THE REQUIRED DECLARATIONS WERE SUBMITTED BEFORE THE CIT(A) , AND THE CIT(A), AFTER CONSIDERING THE DECLARATIONS SUBMITTED HAS DELETED THE ADDITION MADE UNDER S.40(A)(IA) OF THE ACT. HOWEVER, THE LEARNED AUTH ORISED REPRESENTATIVE FOR THE ASSESSEE, CHALLENGING THE OBSERVATIONS OF THE CIT(A) W ITH REGARD TO THE APPLICATION OF S.40A(3) OF THE ACT, THE MOMENT THE DI SALLOWANCE UNDER S.40(A)(IA) MADE BY THE ASSESSING OFFICER WAS DELETED, SUB MITTED THAT THE ASSESSING OFFICER HAVING NOT MADE ANY DISALLOWANCE UNDER S .40A(3), EITHER IN THE COURSE OF ASSESSMENT ORDER OR NOT HAVING OFFERED AN Y COMMENT IN THIS ITA NO.543/HYD/2012 & CO 104/HYD/2012 SHRI GARLAPATI CHALAPATHI REDDY,NALGONDA. 8 REGARD IN HIS REMAND REPORT, THE CIT(A) WAS NOT JUSTIF IED IN OBSERVING THAT PROVISIONS OF S.40A(3) GETS AUTOMATICALLY ATTRACTED. T HE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE, FURTHER CHALLENGING THE ACTION OF THE CIT(A) IN THIS RESPECT, SUBMITTED THAT THE CIT(A) WAS NOT JUSTI FIED IN DECIDING ON APPLICATION OF S.40A(3), WITHOUT GIVING AN OPPORTUNI TY TO THE ASSESSEE IN THIS REGARD. 13. THE LEARNED DEPARTMENTAL REPRESENTATIVE, IN REP LY, SUBMITTED THAT SINCE PAYMENTS HAVE ADMITTEDLY BEEN MADE IN CASH, P ROVISIONS OF S.40A(3) OF THE ACT ARE AUTOMATICALLY ATTRACTED. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT TH E ASSESSING OFFICER, AT THE VERY FIRST INSTANCE, DISALLOWED THE EXPENDITURE CLAIMED TOWARDS TRANSPORT CHARGES UNDER S.40(A)(IA) OF THE ACT, ONLY ON THE GROUND THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE. IT IS NOT EVIDE NT FROM THE ASSESSMENT ORDER AS TO WHETHER HE HAS GIVEN ANY OPPORTUN ITY TO THE ASSESSEE TO SUBMIT THE DECLARATIONS IN FORM 15-I. THE ASSESSEE HAS SUBMITTED THE DECLARATIONS IN FORM 15-I BEFORE THE CIT (A). AS SEEN FROM THE REMAND REPORT, THE ASSESSING OFFICER, THOUGH HAS ACCEPTED THE FACT THAT IN SOME CASES THE RC NUMBERS OF THE VEHICLES MENTIONED IN FORM 1 5-I TALLIED WITH THE RC NUMBERS RECORDED BY THE COMPANIES IN THEIR GATE PASS REGISTERS, HOWEVER, HE EXPRESSED HIS DOUBT WITH REGARD TO GENUINENESS OF THE DECLARATION, WHERE SUMMONS ISSUED TO THE PARTIES WERE RETURNED UNSERVED AND AS A RESULT, THE DECLARATIONS COULD NOT BE INDEPENDENTLY VERIFIED. IN SOME CASES, THE ASSESSING OFFICER ALSO COMMENTED THAT THE ORIGINAL PAYMENT VOUCHERS REVEALED THAT THOUGH THE TRANSPORT CHARGES WERE PAID T O OTHER PERSONS (DRIVERS) AND NOT TO THE PARTIES WHO HAVE GIVEN THE D ECLARATIONS IN FORM 15-I. THOUGH THE CIT (A) HAS ACCEPTED THE CLAIM OF THE ASSESSEE W ITH REGARD TO THE DECLARATIONS FURNISHED IN FORM 15-I, WHILE DELETING TH E ADDITION MADE UNDER ITA NO.543/HYD/2012 & CO 104/HYD/2012 SHRI GARLAPATI CHALAPATHI REDDY,NALGONDA. 9 S.40(A)(IA) OF THE ACT, THE FACT REMAINS THAT THE A FORESAID DECLARATIONS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS AND NON-PRODUCTION OF THE SAME PREVENTED TH E ASSESSING OFFICER FROM EXAMINING THE GENUINENESS OF THE DECLARATIONS. BE SIDES, THE SUBMISSIONS OF FORM 15-I BY THE ASSESSEE IS SUGGESTIVE OF THE FACT THAT THE ASSESSEE ACCEPTS THAT THE PAYMENTS MADE WERE OTHERWISE SUBJECT TO DEDUCTION OF TAX AT SOURCE. THAT APART AFTER INCORPORAT ION OF EXPLANATION TO SEC. 194C OF THE ACT WITH EFFECT FROM 1-7-1995, SUCH TYPE OF PAYMENTS IS SUBJECT TO TDS U/S 194C OF THE ACT. WE ARE THEREFORE O F THE VIEW THAT IF THE DECLARATIONS IN FORM 15-I ARE FOUND TO BE IN ORDER, T HEN NO DISALLOWANCE U/S 40(A)(IA) CAN BE MADE. SIMILARLY, WE ARE ALSO OF THE VIEW THAT THE CIT(A) WAS NOT JUSTIFIED IN OBSERVING THAT S.40A(3) IS AUTOMAT ICALLY ATTRACTED ONCE THE DISALLOWANCE UNDER S.40(A)(IA) IS DELETED, SINCE T HE PROVISIONS CONTAINED UNDER S.40A(3) AND S.40(A)(IA) ARE DISTINCT AND SEPARA TE PROVISIONS OPERATING IN THEIR OWN FIELD. DISALLOWANCE UNDER ONE PROVISION DOES NOT DEPEND ON THE OTHER. ADDITION UNDER S.40A(3) DEPENDS ON VARIOUS CIR CUMSTANCES AND CANNOT BE INVOKED WITHOUT EXAMINING EACH OF THE PAYMENTS MAD E KEEPING IN VIEW THE CIRCUMSTANCES AS MENTIONED IN RULE 6DD. IN THE PRESEN T CASE, THE CIT(A) HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESSEE TO EXPLAIN AS TO WHETHER THE CASH PAYMENTS MADE COMES WITHIN ANY OF THE E XCEPTIONS TO S.40A(3), ENUMERATED UNDER RULE 6DD OF THE RULES. W E MAY ALSO OBSERVE THAT THE CIT (A)S ORDER IN THIS REGARD IS RATHER AMBI GUOUS, IN AS MUCH AS IN ONE BREATH THE CIT (A) OBSERVES THAT THE PROVISIONS OF S.40A(3) ARE AUTOMATICALLY ATTRACTED ONCE DISALLOWANCE UNDER S.40(A) (IA) IS DELETED, AND AT THE SAME TIME, OBSERVES THAT SHE IS NOT ADJUDICATING UPO N THE APPLICABILITY OF THE PROVISIONS OF S.40A(3) OF THE ACT IN THE ABSENCE OF ANY GROUND OF THE ASSESSEE ON THAT ASPECT. IT IS ALSO A FACT TO BE TAKEN NOTE OF THAT THE ASSESSING OFFICER HIMSELF IN THE REMAND REPORT HAS SUGGESTED FOR ESTIMATING THE ASSESSEES PROFIT FROM TRANSPORT BUSINESS BY APPLYING A RATE OF 5% , PROBABLY, CONSIDERING THE CASH PAYMENTS MADE BY THE ASSESSE E AND ITA NO.543/HYD/2012 & CO 104/HYD/2012 SHRI GARLAPATI CHALAPATHI REDDY,NALGONDA. 10 UNVERIFIABLE NATURE OF THE CLAIM MADE BY THE ASSESSEE WI TH REGARD TO VARIOUS EXPENSES, INCLUDING TRANSPORT CHARGES. CONSIDERING THE T OTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE DEEM IT PROPER TO SET ASIDE TH E IMPUGNED ORDER OF THE CIT (A) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO FRAME THE ASSESSMENT DE-NO VO IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARI NG TO THE ASSESSEE. 15. IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS T HE CROSS- OBJECTION OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURP OSES. ORDER PRONOUNCED IN THE COURT ON 30.11.2012 SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED/- 30 TH NOVEMBER, 2012 COPY FORWARDED TO: 1. SHRI GARLAPATI CHALAPATHI REDDY, PROP. KODANDARAMA TRANSPORT, MAIN ROAD, HUZURNAGAR, NALGONDA DIST. 2. 3. 4. 5. INCOME TAX OFFICER, WARD-1, NALGONDA, ASST. COMMISSIONER OF INCOME-TAX CIRCLE 9(1), HYDERABAD COMMISSIONER OF INCOME-TAX(APPEALS) IV HYDERABAD COMMISSIONER OF INCOME-TAX III, HYDERABAD 6 DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S.