M/s. Siddhi Vinayak Sarees, Kolkata V. ITO, Ward - 43(4), Kolkata, Kolkata

CO 33/KOL/2010

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9855 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 4 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-09-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 11-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 07-04-2010
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA
• Assessee Lawyers: S M SURANA
• Keywords: Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , KOLKATA [BEFORE HONBLE SRI SHAMIM YAHYA, AM & HONBLE SR I GEORGE MATHAN, JM] ITA NO.592/KOL/2010 ASSESSMENT YEAR : 2006-07 ( APPELLANT ) (RESPONDENT) I.T.O., WARD-43(4) .. -VS- M/S.SIDDHI VINAYAK SA REES KOLKATA KOLKATA (PAN:AATFS 6588 A) C.O.NO.33/KOL/2010 A/O ITA NO.592/KOL/2010 ASSESSMENT YEAR : 2006-07 ( CROSS OBJECTOR) (RESPONDENT) M/S.SIDDHI VINAYAK SAREES .. -VS- I.T.O., WARD-43 (4), KOLKATA KOLKATA (PAN:AATFS 6588 A) FOR THE DEPARTMENT SHRI VARINDER MEHTA, CIT(DR) FOR THE ASSESSEE SHRI S.M.SURANA, ADVOCATE DATE OF HEARING : 02.09.2014 DATE OF PRONOUNCEMENT : 04. 09.2014. ORDER PER SHRI SHAMIM YAHYA, AM THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE EMANATE FROM THE ORDER OF LD. C.I.T.(A)- XXX, KOLKATA DT. 18.01. 2010 AND PERTAIN TO ASSESSMENT YEAR 2006-07. 2. THE GROUNDS OF APPEAL RAISED IN REVENUES APPEAL READ AS UNDER :- I.THAT THE LD.CIT(A)-XXX, KOLKATA HAS ERRED IN ALL OWING THE DISALLOWANCE MADE U/S 40(A)(IA) AND PARTLY ALLOWING THE PROCESSI NG CHARGES TO THE TUNE OF RS.8,96,450/- AND RS.4,76,350/- RESPECTIVELY. 2. THAT ON BOTH THE POINTS INVOLVES SUBSTANTIAL QUE STION OF LAW WHICH WERE CLEARLY NARRATED IN THE ASSESSMENT ORDER. 3. THAT THE TAX EFFECT IN THIS IS OF RS.4,62 ,000/- 2.1. THE GROUNDS OF APPEAL RAISED IN ASSESSEES APP EAL READ AS UNDER :- ITA.NO.592 &CO.33/KOL/2010 M/S.SIDDHI VIN AYAK SAREES,KOL A.YR.2006-07 2 I.FOR THAT THE LD.CIT(A) IS ARBITRARY, ILLEGAL AND BAD AND NOT IN ACCORDANCE WITH LAW. 2. FOR THAT THE LD.CIT(A) ERRED IN IGNORING THE EVI DENCE AND VOUCHERS PRODUCED PROVING THE FACT THAT SEPARATE PAYMENTS WERE MADE T O EACH OF THE LABOURERS AGGREGATE OF WHICH WAS BELOW RS.50,000/- A SINGLE PAYMENT BEL OW RS.20000/- AND THE PROVISIONS OF SEC.194C WERE NOT APPLICABLE. 3. FOR THAT THE LD.AO ERRED IN APPLYING THE PROVISI ONS OF SEC.194C WHEN THERE WAS NO CONTRACT WITH ANY OF THE LABOURERS. 4. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,50,000/- FROM PROCESSING CHARGES WHEN THE ENTIRE PAYMENT WAS DULY EXPLAINED AND THE PAYMENT WAS NOT EXCESSIVE. 5. FOR THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER OR AMEND ANY GROUND BEFORE OR AT THE TIME OF HEARING.` 3. APROPOS : DISALLOWANCE FOR NON DEDUCTION OF TAX AT SOURCE : ON THIS ISSUE THE AO NOTED THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE IN CONNECTION WITH THE PAYMENTS MADE BY THE ASSESSEE TO THE JOB WORKERS. T HE DETAIL THEREOF WAS AS UNDER :- SL.NO . NAME OF THE JOB WORKERS AMOUNT OF JOB WORK PAYMENT 1) JAGDISH BAG, HOWRAH RS.3,45,965/- 2) AJIBUR RAHMAN, HOWRAH RS.1,93,315/- 3) DHRUVA PRAMANIK,24-PARGANAS(S) RS. 78,895/- 4) JASMUDDIN MULLA, HOOGHLY RS. 32,725/- 5) SK.KAMRUL ISLAMA, HOWRAH RS.1,65,510/- 6) TAPAS PANJA, HOWRAH RS. 80,040/- THE ASSESSEE SUBMITTED THAT THE JOB WORKERS WERE IL LITERATE, LIVING IN RURAL AREAS AND HAVING NO BANKING FACILITIES. THEY DO NOT KNOW HOW TO MANAGE THE PAYMENT OR INCOME TAX. SO THEY COMPLETELY DENIED TO ACCEPT ANY PAYMENT THROUGH BANK OR TDS. HOWEVER AO WAS NOT SATISFIED. HE MADE DISALLOWANCE U/S 40(A)(IA) OF THE ACT. 4. AGAINST THE ABOVE ORDER ASSESSEE APPEALED BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED THAT THE PAYMENT MADE TO THESE PERSONS IS NOT ONLY FOR THE WORK UNDERTAKEN BY THEM. IT WAS SUBMITTED THAT THE JOB WORKERS UNDERTOOK THE WORK ALONG WITH OTHER PERSONS. IT WAS SUBMITTED THA T PAYMENTS RECEIVED BY THEM IS DISTRIBUTED TO VARIOUS LABOURERES. IT WAS FURTHER S UBMITTED THAT THE TAX IS DEDUCTIBLE FROM THE AMOUNTS PAYMENTS AS PER THE LANGUAGE USED IN SECTION 40(A)(IA) OF THE ACT. IT WAS CONTENDED THAT TAX IS NOT DEDUCTIBLE FORM THE A MOUNTS THAT ARE PAID BUT ARE DEDUCTIBLE ONLY FROM THE AMOUNTS PAYABLE. IN THIS R EGARD RELIANCE WAS PLACED ON THE ITA.NO.592 &CO.33/KOL/2010 M/S.SIDDHI VIN AYAK SAREES,KOL A.YR.2006-07 3 DECISION OF ITAT, JAIPUR IN THE CASE OF JAIPUR VIDY UT VITRAN NIGAM LTD. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS THE LD. CIT( A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY PLACING RELIANCE UPON THE DECISION OF ITAT, JAIPUR THAT PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE APPLICABLE WHEN TH E AMOUNTS ARE PAYABLE AND ARE NOT APPLICABLE WHERE EXPENDITURE IS PAID. AGAINST THE ABOVE ORDER THE REVENUE AND THE ASSESSE E ARE IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND CAREFULLY PER USED THE RECORDS. THE LD. DR RELIED ON THE ORDER OF THE AO. THE LD. COUNSEL OF T HE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT PAYMENTS WERE MADE TO LABOURER SARDA RS AND EACH PAYMENT DOES NOT EXCEED RS.50,000/-. IN THIS REGARD HE SUBMITTED THA T THE BILLS AND VOUCHERS WERE ALSO SUBMITTED. 5.1. UPON CAREFUL CONSIDERATION WE NOTE THAT LD.CIT (A)S DECISION THAT DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT IS NOT SUSTAINAB LE SINCE THE AMOUNT IS PAID OR NOT PAYABLE IS NOT TENABLE IN THE LIGHT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS CRESCENT EXPORTS SYNDICATE IN ITAT NO.20 OF 2013 IN GA NO.190 OF 2013 DATED 3 RD APRIL, 2013. THE LD. COUNSEL OF THE ASSESSEE DID N OT CONTRADICT THIS PROPOSITION. AS REGARDS THE SUBMISSIONS THAT THE P AYMENTS WERE MADE TO LABOUR SARDARS AND THE PAYMENTS WERE BELOW RS.50,000/-, WE NOTE THAT THIS IS ENTIRELY A NEW GROUND AND THESE WERE NOT AT ALL BEFORE THE AO. MOR EOVER, THE VOUCHERS SUBMITTED IN THIS REGARD ARE MADE IN VARIOUS NAMES AND ARE SELF MADE VOUCHERS OF THE ASSESSEE. THE VERACITY OF THE VOUCHERS REMAINS TO BE EXAMINED. IN THIS CIRCUMSTANCE WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE TO THE FILE OF AO. AO IS DIRECTED TO EXAMINE THE ISSUE AFRESH IN THE LIGHT OF THE NEW SUBMISSIONS BEING MA DE BY THE LD. COUNSEL OF THE ASSESSEE. 6. APROPOS : PROCESSING CHARGES : ON THIS ISSUE THE AO DISALLOWED HOLDING AS UNDER :- ITA.NO.592 &CO.33/KOL/2010 M/S.SIDDHI VIN AYAK SAREES,KOL A.YR.2006-07 4 THIS CASE WAS ACTUALLY TAKEN UP FOR SCRUTINY TO VE RIFY THE GENUINENESS OF PAYMENT UNDER THE HEAD LABOUR CHARGES I.E. PROCESSING CHARG ES AMOUNTING TO RS.1.25 CRORES. DESPITE SEVERAL OPPORTUNITIES GIVEN TO THE FIRM, TH EY WERE ABLE TO PRODUCE ONLY 14 NUMBERS OF JOB WORKERS OUT OF 20 NUMBERS. MOREOVER, IF ANY ONE KEEP A CLOSE LOOK IN THE LIST OF 170 NUMBERS OF JOB WORKERS, HE WILL CER TAINLY FIND THAT THERE IS NO SPECIFIC/COMPLETE ADDRESS AGAINST THEIR NAMES. IT W AS REPEATEDLY ASKED TO FILE SPECIFIC ADDRESS OF THEM. BUT THAT WAS NOT FILED. UNDER THE CIRCUMSTANCES, IT COULD BE CONCLUDED THAT THE PAYMENT OF RS.1.25 CRORES HAS NO AUTHENTIC ITY. THERE IS EVERY CHANCE TO INFLATE THE COST OF LABOUR PAYMENT. SO, IT IS NOT UNJUSTIFI ABLE IF A SUM OF 6,26,350/- EQUAL TO 5% OF THE GROSS CLAIM OF RS.1,25,26,900/- IS DISALLOWE D AND ADDED BACK TO THE TOTAL INCOME. 7. BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED THA T EXPENDITURE CLAIMED BE VERIFIABLE. IT WAS CONTENDED THAT DISALLOWANCE MADE BY THE AO WAS EXCESSIVE. THE LD. CIT(A) CONSIDERED THE ISSUE HOLDING AS UNDER :- IT IS SEEN THAT THE APPELLANT DISCLOSED A TURNOVER OF RS.1.33 CRORES FOR THIS YEAR AGAINST THE TURNOVER DISCLOSED DURING THE EARLIER Y EAR OF RS.95 LACS. FURTHER, THE GROSS PROFIT DISCLOSED IS RS.6.67 LACS AGAINST RS.5 .23 LACS OF THE EARLIER YEAR. THE APPELLANT HAS DISCLOSED A HIGHER GROSS PROFIT. IT I S SEEN THAT THE GROSS PROFIT RATE DISCLOSED FOR THE EARLIER YEAR WAS 5.5% AGAINST THE GROSS PROFIT DISCLOSED FOR THIS YEAR OF 5%. THERE IS A FALL IN THE GROSS PROFIT DIS CLOSED BY THE APPELLANT. THERE IS INCREASE IN THE TURNOVER BY 40% AND ALSO A HIGHER G ROSS PROFIT DISCLOSED FOR THIS YEAR. SINCE THE APPELLANT DISCLOSED A LOWER PERCENT AGE OF GROSS PROFIT FOR THIS YEAR, A DISALLOWANCE OUT OF THE PROCESSING CHARGES TO THE EXTENT OF THE GROSS PROFIT FALL WOULD MEET THE ENDS OF JUSTICE. CONSIDERING TH E FALL, AN ADDITION OF RS.1.50 LACS WOULD TAKE CARE OF THE REDUCED GROSS PROFIT RA TE. THE ADDITION TO THE EXTENT OF RS.1.50 LACS IS SUSTAINED. THE APPELLANT GETS RELIE F OF RS.4,76,350/- (626350 150000). AGAINST THE ABOVE ORDER THE REVENUE AND ASSESSEE AR E IN CROSS APPEALS BEFORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND CAREFULLY PER USED THE RECORDS. WE FIND THAT DISALLOWANCE HAS BEEN MADE BY THE AO ON THE GROUND THAT THE PAYMENTS INVOLVED WAS NOT FULLY VERIFIABLE. AO HAS OBSERVED THAT DESPITE SEVERAL OPPORTUNITIES GIVEN TO THE FIRM THEY WERE ABLE TO PRODUCE ONLY 14 NUMBERS OF J OB WORKERS OUT OF 20 NUMBERS. MOREOVER, THE AO NOTED THAT IN THE LIST OF 170 NUMB ERS OF JOB WORKERS THERE IS NO SPECIFIC OR COMPLETE ADDRESS AGAINST THEIR NAMES. R EPEATED REQUEST BY THE AO TO FILE SPECIFIC ADDRESS WAS NOT COMPLIED WITH. IN THESE CI RCUMSTANCES, IN OUR CONSIDERED OPINION, DISALLOWANCE IN THIS REGARD TO THE EXTENT SUSTAINED BY THE LD. CIT(A) IS FAIR AND A REASONABLE ONE. ACCORDINGLY WE UPHOLD THE ORD ER OF THE LD. CIT(A) ON THIS ISSUE. ITA.NO.592 &CO.33/KOL/2010 M/S.SIDDHI VIN AYAK SAREES,KOL A.YR.2006-07 5 9. IN THE RESULT THE APPEAL OF REVENUE IS PARTLY AL LOWED FOR STATISTICAL PURPOSES AND AND CROSS OBJECTION OF THE ASSESSEE STANDS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 04.09.2014. SD/- SD/- [ GEORGE MATHAN ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 04.09.2014. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. M/S.SIDDHI VINAYAK SAREES, 23B, KALAKAR STREET,. KO LKATA-700007. 2 I.T.O., WARD-43(4), KOLKATA. 3 . CIT(A)-XXX, KOLKATA. 4. CIT KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY, BY ORDER, ASST. REGISTRAR , ITAT, KOLKATA BENCHES