Shri Narendra Prahladbhai Patel, Ahmedabad V. The Income tax Officer,Ward-9(1), Ahmedabad

CO 11/AHD/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6042 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 13-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A C SHAH; SAMIR TEKRIWA LA
• Section: 194C

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M INCOME-TAX OFFICER, WD- 9(1), AHMEDABAD. VS. SHRI NARENDRA PRAHLADBHAI PATEL, PROP. NOBLE CONSTRUCTION, A-3, MRUDUL PARK SOCIETY, SOLA ROAD, GHATLODIYA, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SAMIR TEKRIWALA, SR.DR RESPONDENT BY:- SHRI A. C. SHAH, AR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUND:- (1) THE LD. CIT(A)-XV, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN DELETING THE ADDITION OF RS.8,91,236/- MADE U/S 40(A)(IA) OF THE INCOME-TAX ACT, 1961. WHEREAS THE ASSESSEE HAS RAISED FOLLOWING GROUNDS I N HIS CROSS OBJECTION:- (1) THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISA LLOWANCE U/S 40(A)(IA) IN RESPECT OF SWAMINARAYAN TRANSPORT OF R S.1,71,800/- FOR SUPPLY OF SAND INASMUCH AS SEC.194C IS NOT APPL ICABLE FOR SUPPLY OF MATERIAL. THE SWAMINARAYAN TRANSPORT SUPP LIED THE SAND AND DELIVER AT SITE (GUJARAT HIGH COURT IN THE CASE OF CIT VS. GIRNAR FOOD & BEVERAGE (P) LTD. 306 ITR 23 AND CIT VS. HIN DUSTAN LEVER LTD. 306 ITR 25). ITA NO.3364/AHD/2009 ALONG WITH CO NO.11/AHD/2010 ASST. YEAR 2006-07 ITA NO.3364/AHD/2009 ALONG WITH CO NO.11/AHD/2010 ASST. YEAR 2006-07 2 2. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISAL LOWANCE OF RS.8,78,224/- UNDER SECTION 40(A)(IA) IN CASE OF FO LLOWING PARTIES: THUS THE ONLY ISSUE INVOLVED IN REVENUES APPEAL AN D IN THE CO IS ABOUT DISALLOWANCE MADE U/S 40(A)(IA) ON VARIOUS ITEMS ON WHICH TDS WAS NOT MADE. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION IN THE NAME AND STYLE OF M/S NOBLE CONSTRUCTION OF WHICH H E IS THE SOLE PROPRIETOR. DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE AO NOTICED THAT ASSESSEE HAS SHOWN LABOUR INCOME OF RS.1,39,45 ,940/-. IT HAS ALSO INCURRED EXPENDITURE FOR MAKING PAYMENT TO VARIOUS PARTIES AS UNDER:- GROUP A SL. NO. NAME OF THE PARTY NATURE OF PAYMENT AMOUNT CREDITED AMOUNT DISALLOWABLE U/S 40(A)(IA) 1 OM MAHASHAKTI FABRICATORS LABOUR EXPENSES 4,58,144/- 4,58,144/- 2 K. PATEL & CO. LABOUR EXPENSES 53,201/- 53,201/- 3 SWAMINARAYAN TRANSPORT TRANSPORT EXP. 1,71,800/- 1,71,800/- TOTAL 6,83,145/- 6,83,145/- OM MAHASHAKTI FABRICATORS RS.4,58,144/- K. PATEL & CO. RS.53,201/- SHRI MAHENDRABHAI KURESHI RS.25,000/- P. T. PATEL RS.31,122/- SHREENATHJI TRADERS RS.31,122/- M/S DARSHAN WATER PROOFING RS.21,235/- FATESINGH MISTRY RS.50,000/- FAKIRBHAI MISTRY RS.88,200/- RASIDBHAI MISTRY RS.83,500/- SHRI ANILBHAI RS.36,700/- TOTAL RS.8,78,224/- ITA NO.3364/AHD/2009 ALONG WITH CO NO.11/AHD/2010 ASST. YEAR 2006-07 3 GROUN B SL. NO. NAME OF THE PARTY AMOUNT CREDITED ON WHICH TAX NOT DEDUCTED AT SOURCE AMOUNT DISALLOWABLE U/S 40(A)(IA) 1 SHRI JIVRAJ A THAKOR 2,83,150/- 2,83,150 2 SHRI MAHENDRABHAI KURESHI 25,000/-(SINGLE BILL DAT ED 13.06.05) 25,000/- 3 SHRI P.T.PATEL 31,122/- (SINGLE BILL DATED 19.06.05) 31,122/- 4 M/S SHREENATHJI TRADERS 31,122/- (SINGLE BILL DATE D 19.06.05) 31,122/- 5 M/S SHREE BRAHMANI TRADERS 1,28,854/- 1,28,854/- 6 M/S SHREE CHAMUNDA CARTING 4,24,524/- 4,24,524/- 7 M/S DARSHAN WATERPROOFING 21,235/- (SINGLE BILL DA TED 15.10.05) 21,235/- 8 SHRI FATEHSINH MISTRI 50,000/- 50,000/- 9 M/S JAY AMBE EARTH MOVERS 54,708/- 54,708/- 10 SHRI RAFIKBHAI MISTRI 88,200/- 88,200/- 11 SHRI RASHIDBHAI MISTRY 83,500/- 83,500/- 12 SHRI ANILBHAI 36,700/- (SINGLE BILL DATED 31.10.05) 36,700/- TOTAL 12,58,115/- 12,58,115/- IT SEEMS THAT NO REPLY WAS FILED TO THE AO. THE AO, THEREFORE, PROPOSED AN ADDITION OF RS.19,41,260/- (RS.6,83,145/- + RS.1 2,58,115/-) U/S 40(A)(IA) OF THE ACT. 3. THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.6,83 ,145/- ON THE GROUND THAT - (1) COPIES OF BILLS FROM SWAMINARAYAN TRANSPORT CO. INDICATED THAT IT IS A CARTING CONTRACTOR OF SAND AND KAPCHI. THE ASS ESSEE WOULD HAVE ENGAGED THIS CONTRACTOR FOR TRANSPORTING SAND AND E XCAVATING FROM THE CONSTRUCTION SITE. THE PAYMENTS MADE TO THIS PARTY HAVE BEEN DEBITED IN TRANSPORT ACCOUNT AND NOT IN PURCHASE ACCOUNT. THE BILLS ARE OF COMPOSITE NATURE AND IT CANNOT BE BIFURCATED INTO THE PURCHAS E AND CARTING CHARGES SEPARATELY FOR TDS PURPOSES. EVEN THOUGH ASSESSEE H AS DEDUCTED TDS FROM THE PAYMENT MADE TO SWAMINARAYAN TRANSPORT CO. BUT HAS ITA NO.3364/AHD/2009 ALONG WITH CO NO.11/AHD/2010 ASST. YEAR 2006-07 4 DEPOSITED THE SAME LATE IN GOVERNMENT ACCOUNT. SIM ILARLY DEDUCTION OF TAX MADE FROM OM MAHASHAKTI FABRICATORS AND K. PATE L & CO. WERE DEPOSITED LATE. (2) THE LD. CIT(A) EXAMINED THE DISALLOWANCE OF RS. 12,58,115/- AND FOUND THAT PAYMENTS MADE TO SHRI JIVRAJ A THAKOR AT SL.NO.1 AT GROUP-B, M/S SHREE BRAHMANI TRADERS AT SL.NO.5 AT GROUP B AN D M/S SHREE CHAMUNDA CARTING AT SL.NO.6 AT GROUP B WERE FOR PUR CHASE OF MATERIAL ALSO. RELYING ON THE DECISION OF HON. GUJARAT HIGH COURT IN GIRNAR FOOD AND BEVERAGE (P) LTD. 306 ITR 23 (GUJ), DELETED THE ADDITIONS HOLDING THAT WHERE THE CONTRACT IS FOR SUPPLY OF MATERIAL I T CANNOT BE TERMED TO BE A CONTRACT FOR WORK AND IS THEREFORE NOT COVERED BY SECTION 194C. IN RESPECT OF PAYMENT MADE TO JAY AMBE EARTH MOVERS IT EM NO.9 AT GROUP B, THE LD. CIT(A) OBSERVED THAT THIS IS THE PAYMENT MADE FOR MACHINERY RENT WHICH IS COVERED U/S 194-I W.E.F.13.7.2006 AND IS, THEREFORE, NOT APPLICABLE FOR THE PRESENT ASST. YEAR. SHE CONFIRME D THE ADDITIONS IN RESPECT OF OTHER ITEMS FINDING EXPLANATION NOT SATI SFACTORY. 4. WE HAVE HEARD THE PARTIES. WE FIND THAT TAX DEDU CTED ON PAYMENTS TO THREE PARTIES IN GROUP-A IN THE CHART ABOVE WERE DEPOSITED BEFORE FILING OF THE RETURN. THE RETURN OF INCOME WAS FILED ON 31 .12.2006 AND THE PAYMENT OF TAX WAS DONE AS UNDER :- PAYMENT OF TAX THROUGH E-RETURN WAS DONE AS UNDER - DATE AMOUNT TAX 3.10.2006 1,85,000 2,448 -DO- 3,16,800 4,423 4.10.2006 1,95,956 1,999 6,97,756 8,696 ITA NO.3364/AHD/2009 ALONG WITH CO NO.11/AHD/2010 ASST. YEAR 2006-07 5 SINCE TAX HAS BEEN PAID BEFORE FILING OF THE RETURN OF INCOME AND AMENDMENT TO SECTION 40(A)(IA) BY THE FINANCE ACT, 2001 W.E.F. 1 ST APRIL, 2010 WHICH PERMITS THE ASSESSEE TO MAKE THE PAYMENT BEFORE DUE DATE OF FILING OF THE RETURN WAS HELD TO BE RETROSPECTIVE W .E.F. 1 ST APRIL, 2005 AS HELD BY AHMEDABAD B BENCH IN KANUBHAI RAMJIBHAI V S. ITO (2011) 135 TTJ (AHD) 364 AND IF SUCH TDS IS PAID TO THE GO VERNMENT BEFORE DUE DATE OF FILING OF RETURN NO ADDITION U/S 40(A)(IA) CAN BE MADE. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT DUE DATE OF FILING OF RETURN IS 31 ST DECEMBER, 2006 AND, THEREFORE, NO ADDITION U/S 40(A )(IA) SHOULD BE MADE. IN VIEW OF THE ABOVE, ADDITION MADE BY THE AO IS AC CORDINGLY DELETED. 5. ITEM NOS. 1, 5 & 6 IN THE CHART ABOVE (GROUP B) ARE COVERED BY THE DECISION OF HON. GUJARAT HIGH COURT IN THE CASE OF GIRNAR FOOD AND BEVERAGE (P) LTD. (SUPRA). 6. THE LD. DR HAS POINTED OUT THAT IN THAT CASE ASS ESSEE HAD PLACED ORDERS FOR SUPPLY OF PRINTING MATERIAL AND THUS IT WAS A CONTRACT FOR PURCHASE/SUPPLY SIMPLICITOR. THAT ASSESSEE HAD NOT GIVEN A CONTRACT AND THERE WAS OUTRIGHT PURCHASE EITHER BY ORAL OR WRITT EN ORDER BUT IN THE PRESENT CASE THE ASSESSEE HAS PLACED THE ORDER FOR TRANSPORTATION OF SAND. SAND COSTS VERY LITTLE AND MAJOR COST IS OF TRANSPO RTATION AND FURTHER ASSESSEE HAS NOT DEBITED THESE EXPENSES IN THE PURC HASE ACCOUNT BUT ITA NO.3364/AHD/2009 ALONG WITH CO NO.11/AHD/2010 ASST. YEAR 2006-07 6 DEBITED IN THE TRANSPORTATION ACCOUNT. THEREFORE, T HE DECISION OF HON. GUJARAT HIGH COURT IN THE ABOVE CASE WILL NOT BE AP PLICABLE. 7. IN OUR CONSIDERED VIEW THE ISSUE HAS NOT BEEN EX AMINED CORRECTLY BY THE AO. SINCE ASSESSEE DID NOT FURNISH ANY REPLY TO THE AO AND IN REMAND PROCEEDINGS THE LD. CIT(A) DID NOT GIVE SUFF ICIENT OPPORTUNITY TO THE AO, WE ARE OF THE VIEW THAT THE ISSUE WAS NOT P ROPERLY EXAMINED AND, THEREFORE, WE RESTORE THE MATTER BACK TO THE FILE O F AO IN RESPECT OF PAYMENTS TO JIVRAJ A THAKOR, SHRI BRAHMANI TRADERS AND SHRI CHAMUNDA CARTING OF CHART B, FOR EXAMINATION AFRESH. THE AO WILL EXAMINE WHETHER ASSESSEE HAS PLACED ORDER FOR PURCHASE OF M ATERIAL OR FOR TRANSPORTATION OF MATERIAL. HOW THE COSTS WERE WORK ED OUT, WHAT IS THE PROPORTION OF MATERIAL AND TRANSPORTATION, HOW THE ACCOUNTING ENTRIES HAVE BEEN PASSED I.E. HOW THE EXPENDITURE HAS BEEN DEBITED IN THE BOOKS WHETHER IN PURCHASE ACCOUNT OR TRANSPORTATION ACCOU NT. ON THE BASIS OF PARTICULARS TO BE COLLECTED, THE AO WILL APPLY THE DECISION OF HON. GUJARAT HIGH COURT IN THE CASE OF GIRNAR FOOD AND BEVERAGE (P) LTD. (SUPRA) AND IF REQUIRED, WILL CONSIDER THE PAYMENT FOR TRANSPOR TATION ONLY FOR THE PURPOSE OF DISALLOWANCE U/S 40(A)(IA). AS A RESULT, ALL THESE THREE ITEMS ARE RESTORED TO THE FILE OF AO AND ACCORDINGLY THE GROU ND OF APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. ITA NO.3364/AHD/2009 ALONG WITH CO NO.11/AHD/2010 ASST. YEAR 2006-07 7 8. IN RESPECT OF ITEMS AT SL.NOS.2,3,4,7,8 & 12 (OF GROUP B) WE NOTICE THAT EACH ITEM IS LESS THAN RS.50,000/-. THEREFORE, BY VIRTUE OF SUB-SECTION (5) AND PROVISO THEREOF NO TDS IS REQUIRED U/S 194C ON THE PAYMENTS MADE TO THESE PARTIES AS THEY DO NOT EXCEED RS.50,0 00/-. ACCORDINGLY NO ADDITION U/S 40(A)(IA) IS REQUIRED TO BE MADE. 9. PAYMENT MADE TO JAY AMBE EARTH MOVERS BEING ITEM NO.9 IN GROUP-B ABOVE CANNOT BE SUBJECT TO ADDITION U/S 40( A)(IA) BECAUSE IT WAS PAYMENT OF RENT FOR MACHINERY WHICH WOULD BE COVERE D U/S 194-I WHICH IS APPLICABLE W.E.F. 13.7.2006 AND ACCORDINGLY IS N OT APPLICABLE IN ASST. YEAR 2006-07. HOWEVER, LD. AR COULD NOT OFFER ANY E XPLANATION IN RESPECT OF PAYMENT TO PARTIES AT ITEM NOS.10 & 11 I N GROUP B AND ACCORDINGLY DISALLOWANCE U/S 40(A)(IA) IN RESPECT O F THESE TWO ITEMS (RS.88,200/- AND RS.83,500/-) IS CONFIRMED. 10. AS A RESULT, APPEAL FILED BY THE REVENUE IS PAR TLY ALLOWED BUT FOR STATISTICAL PURPOSES AS INDICATED ABOVE AND THE C.O . OF THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER WAS PRONOUNCED IN OPEN COURT ON 17.06.2011. SD/- SD/- (BHAVNESH SAINI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 17.06.2011. ITA NO.3364/AHD/2009 ALONG WITH CO NO.11/AHD/2010 ASST. YEAR 2006-07 8 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 2/6/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 8/6/2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..