M/s. Star Constructions, Srinagar (KMR) V. The Asstt. Commissioner of Income-tax, Srinagar (KMR)

ITA 105/ASR/2012

• Counselvise Citation: 10520914 RSA 2012
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-05-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 20-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PASS ROAD SRINAGAR KASHMIR
• Assessee Lawyers: S K KAUL ADV SH MAHAVIR SINGH
• Keywords: Additional evidence; Reasonable cause
• Section: 40A(3); 142(1); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P. JAIN, ACCOUNTANT MEMBER I.T.A. NO. 105(ASR)/2012 ASSESSMENT YEAR: 2006-07 PAN: AATFS0796A M/S STAR CONSTRUCTIONS, VS. THE ASSISTANT COMMIS SIONER ALNOOR SHOPPING COMPLEX, OF INCOME TAX, SRIN AGAR, KASHMIR HYDERPORA BY PASS ROAD, SRINAGAR, KASHMIR (APPELLANT) (RESPONDENT) AND I.T.A. NO. 125(ASR)/2012 ASSESSMENT YEAR: 2006-07 PAN: AATFS0796A DEPUTY COMMISSIONER OF VS. M/S STAR CO NSTRUCTIONS, OF INCOME TAX, CIRCLE-3, SRINAGAR, CHOWDHARY BAGH, RAINWARI SRINAGAR. (APPELLANT) (RESPONDENT) ASSESSEE BY: SH. S.K. KAUL, ADV. DEPARTMENT BY: SH. MAHAVIR SINGH, SR. DR DATE OF HEARING: 05.05.2014 DATE OF PRONOUNCEMENT: 23.05.2014 ORDER PER BENCH 1. THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE AGAINST THE IMPUGNED ORDER 06.02.2012 P ASSED BY LEARNED 2 I.T.A. NOS. 105 & 125(ASR)/2012 ASSESSMENT YEAR: 2006-07 CIT(A), JAMMU, FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: I. THE ORDER PASSED BY THE AUTHORITIES BELOW IS BAD I N LAW AS NOTICE U/S 143(2) IS NEITHER ISSUED OR SERVED. II. THAT THE AUTHORITIES BELOW HAVE IN AN ARBITRARY AND FLIMSY MANNER REJECTED THE CLAIM U/S 40(A)(3) ON THE PRETEXT OF N ON-ADMISSION OF THE EVIDENCE FOR PAYMENTS EXCEEDING 25,000/-. THE D ISALLOWANCE IS UNJUST, ARBITRARY AND WITHOUT PROPER APPLICATION OF MIND. III. THAT THE INTEREST U/S 234A/B AND C HAS BEEN CHARGED ERRONEOUSLY AS THERE IS NO DEFAULT UNDER THE PROVISIONS OF THE ACT AS THE PAYMENTS ARE DEDUCTED AT SOURCE IN RESPECT OF THE O NLY INCOME THAT IS TAXED BY THE AUTHORITIES BELOW. IV. THAT THE APPELLANT CRAVES LEAVE TO ADD/AMEND ANY GR OUND OF APPEAL AT THE TIME OF HEARING OF THE APPEAL. PRAYER:- THEREFORE, IN THE PREMISES, IT IS PRAYED THAT THE G ROUNDS OF APPEAL URGE BE CONSIDERED AND RELIEF GIVEN TO THE APPELLAN T. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: I. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEARNED CIT(A) WAS RIGHT IN ADMITTING THE ADDITIONAL EVIDEN CE FILED BY THE ASSESSEE IN THE SHAPE OF SIGNED AND CE RTIFIED COPY OF PARTNERSHIP DEED WHEN THE ASSESSEE HAD FAIL ED TO FILE THE SAME DURING ASSESSMENT PROCEEDINGS DESPITE SUFFICIENT TIME GIVEN TO FILE THE SAME. II. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEARNED CIT(A) WAS RIGHT IN ADMITTING THE ADDITIONAL EVIDEN CE FILED BY THE ASSESSEE IN THE SHAPE OF ATTENDANCE R EGISTERS IN RESPECT OF LABOURERS WHEN THE SAME WERE NOT PROD UCED DURING ASSESSMENT PROCEEDINGS TO SUBSTANTIATE ITS C LAIM THAT THE PAYMENTS HAVE BEEN MADE TO THE LABOURERS A ND NOT TO THE LABOUR CONTRACTOR DESPITE SUFFICIENT TIM E AVAILABLE WITH THE ASSESSEE. III. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE P AYMENT 3 I.T.A. NOS. 105 & 125(ASR)/2012 ASSESSMENT YEAR: 2006-07 TO THE LABOURERS HAS BEEN MADE THROUGH THE HEADS OF THE LABOURERS WHO ARE NOT THE EMPLOYEES OF THE ASSESSEE . IV. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEARNED CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE MADE U/S 40(A)(IA) WHEN THE PAYMENTS HAVE BEEN MADE TO THE HEADS OF THE LABOUR WHO ARE LABOUR CONTRACTOR AND PROVISIONS OF SECTION 194C OF THE INCOME TAX ACT, 1 961 ARE ATTRACTED. THE APPELLANT CRAVES TO AMEND OR ADD ANY ONE OR MOR E GROUNDS OF APPEAL. 3. THE FACTS NARRATED BY LEARNED FIRST APPELLATE AU THORITY IN PARA NOS. 3 & 4 (PAGE NOS. 2 & 4) OF THE IMPUGNE D ORDER ARE NOT DISPUTED BY BOTH THE PARTIES, THEREFORE FOR THE SAKE OF CONVENIENCE, THE SAME ARE REPRODUCED AS UNDER:- 3. BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED ON 23.11.2007 DECLARING AN INCOME OF RS. 41,70,930/-. THE ASSESSEE IS A CIVIL CONTRACTOR. DU RING THE ASSESSMENT THE A.O. FOUND THAT THERE WERE PAYMENTS MADE IN CASH BY THE ASSESSEE TO THE TUNE OF RS. 2,31,52,746 /-. THE ASSESSEE COULD EXPLAIN BEFORE THE A.O. THAT TO THE TUNE OF RS. 59,37,471/- THERE WAS NO VIOLATION OF SECTION 40A(E ) OF THE I.T. ACT. THIS CLAIM WAS ACCEPTED BY THE A.O. AS TH E SAME WAS SUBSTANTIATED BY THE BANK ACCOUNT. THE A.O. ADDED 2 0% OF THE BALANCE AMOUNT AND ADDED RS. 34,43,055/- U/S 40A(3) OF I.T. ACT. FURTHER, THE A.O. HAS MADE AN ADDITION OF RS. 25,20,443/- U/S 40(A)(IA) OF THE I.T. ACT, 1961 ON THE PAYMENTS MADE BY ASSESSEE IN FAVOUR OF LABOUR CHARGES. THE RELEVANT PART OF ASSESSMENT ORDER IS REPRODUCED HEREWITH FOR APPRECI ATION OF THE ISSUE INVOLVED. A..DURING THE YEAR UNDER REFERENCE, THE ASSESSEE HAS MADE PAYMENTS SHOWN AS LABOUR PAYMENTS. THE DETAIL OF T HE SAME EXCEEDING RS. 50,000/- IS GIVEN AS UNDER: S.NO. NAME OF THE PERSON GROSS AMOUNT OF PAYMENTS PERIOD OF PAYMENT PERIOD OF JOB/WORK. 4 I.T.A. NOS. 105 & 125(ASR)/2012 ASSESSMENT YEAR: 2006-07 1. SH. ABDUL QAYOOM 89,340/- 2-1-2005 TO 31-1-2006 3 MONTHS 2. SH. ABDUL RASHID WANI 59,675/- 12-8-2005 TO 3-10-2005 1.5 MONTHS 3. SH. FAROOQ AHMED WANI 14,84,443/- 1-5-2005 TO 27-3-2006 11 MONTHS 4. SH. FAYAZ AHMED MIR 3,28,825/- 18-8-2005 TO 29-12-2005 4 MONTHS 5. SH.GH. MOHD. WANI 87,500/- 16-8-2005 TO 1-10-2005 1.5 MONTHS 6. SH. GH. QADIR 1,05,650/- 13-08-2005 TO 22-2-2006 6 MONTHS 7. SH. NAYEEM AHMED 1,80,000/- 5-8-2005 TO 9-3-2006 7 MONTHS 8. SH. RAYAZ AHMED 1,40,000/- 11-8-2005 TO 13-3-2006 7 MONTHS TOTAL RS. 25,20,443/- FROM THE ABOVE STATED DETAILS I.E., THE AMOUNT OF P AYMENTS AND PERIOD OF JOBS, IT IS AMPLY EVIDENT THAT THESE PAYM ENTS ARE NOT IN THE NATURE OF LABOUR PAYMENTS BUT CONTRACTUAL PA YMENTS. THE PAYMENTS ARE VERY HUGE AND AT AN AVERAGE PAYMEN T OF RS. 1,34,950/- PER MONTH HAS BEEN MADE BY THE ASSESSEE. IT IS BEYOND ANY DOUBT THAT ANY TYPE OF LABOUR CANNOT REC EIVE SUCH TYPE OF BIG PAYMENTS EXCEPT IN CASES OF LABOUR CONT RACTS. THE ASSESSEE WAS ASKED ABOUT THE NATURE AND JUSTIFICATI ON OF THESE PAYMENTS VIDE ORDER SHEET ENTRY DATED 26.12.2008. I T HAS BEEN STATED BY THE COUNSEL OF THE ASSESSEE THAT CONSOLID ATED PAYMENT IS MADE TO THE HEAD OF THE LABOURERS WHO FU RTHER DISBURSES THE SAME TO THE CONCERNED PERSONS ENGAGED BY THE ASSESSEE FIRM. THE EXPLANATION OFFERED BY THE ASSES SEES COUNSEL ITSELF ESTABLISHES THAT THE ASSESSEE WAS RE QUIRED TO DEDUCT TAX AT SOURCE ON THESE PAYMENTS WHICH WERE M ADE TO THE LABOUR CONTRACTORS I.E. LABOUR MATES AS PROVIDE D UNDER SECTION 194C OF THE I.T. ACT, 1961 IT IS PERTINENT TO NOTE HERE THAT THE PAYMENTS TO LABOURERS HAVE NOT BEEN DISBUR SED THROUGH THE EMPLOYEE OF THE ASSESSEE, BUT HAVE BEEN MADE THOUGH LABOUR CONTRACTORS AND LABOUR MATES. THUS, T HE ASSESSEE HAS FAILED TO COMPLY WITH THE PROVISIONS O F SECTION 194C, AS SUCH, THE EXPENSES/PAYMENTS AS STATED ABOV E ARE 5 I.T.A. NOS. 105 & 125(ASR)/2012 ASSESSMENT YEAR: 2006-07 DISALLOWED IN VIEW OF THE PROVISIONS OF SECTION 40( A)(IA) OF THE I.T. ACT, 1961, AND HENCE ADDED BACK TO THE RETURN ED INCOME OF THE ASSESSEE. THEREFORE, A NET ADDITION OF RS. 2 5,20,443/- IS MADE TO THE RETURNED INCOME OF THE ASSESSEE ON THIS ACCOUNT. 4. FURTHER, THE A.O. NOTICED AND DISCUSSED IN THE ASSESSMENT ORDER THAT THE ASSESSEE FURNISHED THE COPY OF PARTN ERSHIP DEED DATED 31.03.2001 AND THE SAME WAS FURTHER SUPPORTED BY A SUPPLEMENTARY DEED DATED 01.04.2004 IN VIEW OF DEAT H OF PARTNERS AND INTRODUCTION OF NEW PARTNERS. THE SUP PLEMENTARY DEED WAS NOT SIGNED AND CERTIFIED. AFTER PROVIDING THE OPPORTUNITY THE A.O. TREATED THE FIRM AS A.O.P. AND DISALLOWED AN AMOUNT OF RS. 6,66,249/- CLAIMED AS INTEREST PAI D TO PARTNERS U/S 184(4) OF THE I.T. ACT READ WITH SECTI ON 185 OF THE I.T. ACT. 4. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT O N 31.12.2008 FOR THE ASSESSMENT YEAR 2006-07 UNDER SE CTION 143(3)/185 OF THE INCOME-TAX ACT, 1961 (IN SHORT T HE ACT) AND MADE THE ADDITION IN DISPUTE. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE LEAR NED FIRST APPELLATE AUTHORITY, WHO VIDE IMPUGNED ORDER DATED 06.02.2012, PARTLY ALLOWED THE APPEAL OF THE ASSESS EE. NOW, BEING AGGRIEVED WITH THE IMPUGNED ORDER, BOTH THE A SSESSEE AND THE REVENUE HAVE FILED THE APPEALS. 5. AT THE TIME OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE GROUNDS OF APPEAL RAISED B Y THE ASSESSEE AND ON THE CONTRARY LEARNED DR RELIED UPON THE ORDER PASSED BY THE ASSESSING OFFICER. 6 I.T.A. NOS. 105 & 125(ASR)/2012 ASSESSMENT YEAR: 2006-07 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS PASSED BY THE REVENUE AUTHORITY AND WE ARE OF THE V IEW THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS ADJUDICAT ED AND DECIDED THE ISSUES IN DISPUTE RAISED BY THE PARTIES ON THE BASIS OF WRITTEN SUBMISSION FILED BY THE ASSESSEE AS WELL AS AFTER TAKING REMAND REPORT FROM CONCERNED ASSESSING OFFIC ER AND GAVE ITS FINDINGS IN PARA NOS. 8 TO 19 (PAGES 17 TO 23), FOR THE SAKE OF CONVENIENCE, THE SAME ARE REPRODUCED AS UND ER: 8. I HAVE CAREFULLY CONSIDERED THE DETAILED WRITT EN SUBMISSIONS MADE FROM TIME TO TIME, THE ASSESSMENT ORDER AND THE REMAND REPORT. I HAVE ALSO CALLED FOR THE CASE RECORDS AND HAVE GONE THROUGH IT CAREFULLY. THE ISSUES ARE DECI DED AS UNDER VIZ-A-VIZ THE VARIOUS GROUNDS OF APPEAL ARE T AKEN. 9. GROUNDS NO. 1 AND 2 RELATES TO THE NON SERVIC E OF NOTICE U/S 143(2) OF IT ACT, 1961. AFTER GOING THROUGH TH E SUBMISSIONS MADE AND THE REMAND REPORT WHICH IS CAT EGORICAL IN STATING THAT A NOTICE U/S 143(2) OF THE I.T.ACT, 1961 WAS SERVED WELL WITHIN TIME, I HAVE ALSO GONE THROUGH T HE CASE RECORDS. I FIND THAT A NOTICE U/S 143(2) OF I.T. AC T WAS ISSUED ON 23.10.2007 WHICH WAS SERVED ON 30.10.2007. THE NOTICE IS DULY SIGNED BY THE RECIPIENT. IN VIEW OF THIS, THE NON SERVICE IS NOT PROVED AND THESE GROUNDS OF APPEAL ARE DISMISSE D. IT IS TO BE ADDED HERE FOR THE CLARITY THAT NO SUCH PLEA WAS EVER MADE BEFORE THE A.O. AND THERE WAS A CONSCIOUS COMPLIANC E BY THE ASSESSEE BEFORE HIM. IN VIEW OF THIS, NO GRIEVANCE ON THIS COUNT REMAINS. ANOTHER PLEA, THAT AFTER CHANGE IN I NCUMBENT A FRESH NOTICE U/S 143(2) OF I.T. ACT SHOULD HAVE BEE N ISSUED, IT MAY BE OBSERVED THAT THE SAME A.O., WHO ISSUED INIT IALLY NOTICE U/S 143(2) OF THE I.T. ACT HAS COMPLETED THE 7 I.T.A. NOS. 105 & 125(ASR)/2012 ASSESSMENT YEAR: 2006-07 ASSESSMENT. THE ADDL. CIT, WHO FOR A PART OF THE PR OCEEDINGS WAS ASSIGNED THE CASE HAS NO OCCASION TO ISSUE ANY NOTICE U/S 142(1) OF THE I.T. ACT. ONCE THE NOTICE U/S 143(2) OF I.T. ACT WAS ISSUED AND SERVED IN TIME, EVEN A CHANGE IN INC UMBENT WOULD NOT MAKE IT MANDATORY TO ISSUE U/S 143(2) NOT ICE AGAIN AS IT WAS ONLY IN CONTINUATION OF THE PROCEEDINGS. IN VIEW OF THIS ALSO THE GROUNDS BEARING NO. 1 AND 2 ARE DISMI SSED. 10. GROUND NO. 3 IS REGARDING DISALLOWANCE OF RS. 6,66,249/- AS INTEREST PAYABLE TO PARTNERS FOR WANT OF A SIGNED AND CERTIFIED SUPPLEMENTARY COPY OF PARTNERSHIP DEE D IN VIEW OF A CHANGE IN PARTNERSHIP PATTERN. AFTER CAREFULLY CONSIDERING, I FIND THAT ON THIS ISSUE, THE ASSESSEE IS TO SUCCE ED. THE A.O. HIMSELF HAS ADMITTED IN THE ASSESSMENT ORDER THAT P ARTNERSHIP DEED DATED 31.03.2001 AND A SUPPLEMENTARY DEED DATE D 01.04.2004 WAS FILED BUT THE SAME WAS NOT SIGNED AN D CERTIFIED, I ALSO FIND FROM THE CASE RECORDS THAT O NLY ON 26.12.2008 (AS PER ORDER SHEET OF EVEN DATE) THE QU ERY REGARDING PARTNERSHIP DEED WAS RAISED (THOUGH THE O RDER SHEET IS NOT SIGNED BY ASSESSEES REPRESENTATIVE). ON 29. 12.2008 THE POSITION IS SAME AND IT IS NOTED IN THE ORDER SHEET THAT NO SIGNED AND CERTIFIED DEED IS FILED. IT IS CLEAR THA T THE TIME AVAILABLE WAS NOT ENOUGH. I ALSO FIND THAT THE AFFI DAVIT OF A PARTNERS ALONG WITH THE SIGNED AND CERTIFIED DEED A S FILED BEFORE MY PREDECESSOR WAS SENT TO A.O. WHO HAD NOT MADE ANY COMMENTS ON MERITS BUT REQUESTED THAT SINCE SUCH DO CUMENTS WERE NOT PRODUCED BEFORE A.O. THE SAME SHOULD NOT B E ADMITTED IN VIEW OF RULE 40A OF THE I.T. RULES. 11. I HAVE ALREADY POINTED OUT THAT ONLY 26.12.200 8 THE A.O. ASKED THE ASSESSEE REGARDING THE CERTIFIED DEE D THE TIME WAS NOT SUFFICIENT AND THIS ALONE WAS A REASONABLE CAUSE. ALSO IN VIEW OF NON REBUTTAL OF THE AFFIDAVIT, THE CASE OF ASSESSEE HAS A LOT OF FORCE. MOREOVER, THE MISTAKE IS TECHNI CAL IN NATURE. THE CIRCULAR NO. 14(XL-35) 11.04.1955 WHICH READS AS UNDER CLARIFIES THE POSITIONS: OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF THE IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS ON E OF THEIR DUTIES TO ASSIST THE TAX PAPER IN EVERY REASONABLE WAY, 8 I.T.A. NOS. 105 & 125(ASR)/2012 ASSESSMENT YEAR: 2006-07 PARTICULARLY IN MATTER CLEANING AND SECURING RELIEF AND IN THIS REGARD THE OFFICERS SHOULD TAKE THE INITIATIVE IN GUIDING A TAX PAYER WHERE PROCEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICATE THAT SOME REFUND OR RELIEF IS DUE TO HIM. THIS ATTITUDE WOULD IN LONG RUN, BENEFIT THE DEPARTMENT FOR IT WOULD INSPIRE CONFIDENCE IN HIM THAT HE MAY BE SURE OF GETTING A SQUARE DEAL FROM THE DEPARTMENT ALTHOUGH THEREFORE, THE RESPONSIBILITY FOR CLAIMING REFUND A ND RELIEF REST WITH ASSESSEE ON WHOM IT IS IMPOSED BY LAW. OF FICERS SHOULD DRAW THEIR ATTENTION TO ANY REFERENCE OR REL IEFS TO WHICH THEY APPEAR TO BE CLEARLY ENTITLED BUT WHICH THEY HAVE OMITTED TO CLAIM FOR SOME REASON OR OTHER. FREELY ADVISE THEM WHEN APPROACHED AS TO THEIR RIGH TS AND LIABILITIES AND AS TO THE PROCEDURE TO BE ADOPTED F OR CLAIMING REFUNDS AND RELIEFS. 12. IN VIEW OF THIS DISCUSSION AS ABOVE, THE ADDIT IONAL EVIDENCE IS ADMITTED AND THE A.O. IS DIRECTED TO TR EAT THE ASSESSEE AS A PARTNERSHIP FIRM AND ALLOW THE INTERE ST TO PARTNERS AS CLAIMED. 13. GROUND NO. 4 RELATES TO THE DISALLOWANCE OF RS . 34,43,055/- MADE UNDER SECTION 40A(3) OF I.T. ACT. AFTER CAREFULLY CONSIDERING THE SUBMISSIONS FACTUALLY POS ITION AND MATERIAL ON RECORDS AND FIND THAT ASSESSEE IS NOT T O SUCCEED IN RESPECT OF THIS GROUND DESPITE THE DETAILED SUBMISS IONS MADE. THE FACTUAL POSITION AS PER RECORDS IS THAT DURING THE YEAR THE ASSESSEE HAS MADE PAYMENTS TO THE TUNE OF RS. 59,37 ,471/- IN CHEQUE AS EVIDENCED BY ITS BANK ACCOUNT AND AS IT S TANDS ACCEPTED BY THE A.O. AND NO ADDITION IN RESPECT OF THIS IS MADE. IN VIEW OF THIS THE LONG DISCUSSION AS TO THE SITUATION PREVAILING IN KASHMIR WOULD NOT HELP AS TO THE EXT ENT THE TRANSACTION THROUGH CHEQUES WERE NOT HAMPERED BY TH IS SITUATION. IT IS NOT SHOWN BY THE ASSESSEE AS TO HO W THE SITUATION IN KASHMIR COULD SELECTIVELY AFFECT SOME OF THE SELLERS. SECONDLY THE PLEA THAT THE CERTIFICATE SUB MITTED FROM THE SELLERS TO BE ACCEPTED AS ADDITIONAL EVIDENCE I T IS SEEN THAT THEY ARE IN RESPECT OF THE PARTIES WHO ARE NOT A ON E TIME OR NEW SELLERS FOR THE ASSESSEE. THE LIST OF CREDITORS AS PER 9 I.T.A. NOS. 105 & 125(ASR)/2012 ASSESSMENT YEAR: 2006-07 RECORDS INCLUDE ALMOST ALL SUCH SELLERS WHO HAVE GI VEN CERTIFICATES TO THE EFFECT THAT THEY HAVE INSISTED ON CASH PAYMENTS. IN SOME CASES AMOUNTS PAYABLE ARE MORE TH AN THE AMOUNTS PAID DURING THE YEAR. THUS, THESE SELLERS A RE SUCH THAT THEY HAD A RUNNING ACCOUNT WITH ASSESSEE. IT IS ALS O NOT THE CASE OF ASSESSEE THAT THEY DID NOT HAVE A BANK ACCO UNT. THE CIRCULAR OF CBDT AS CITED BY THE ASSESSEE IS ALSO O F NO HELP AS THE INITIAL CONDITIONS STIPULATED ARE AS UNDER: (A) DUE TO EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTA NCES; OR (B) BECAUSE PAYMENT IN THE MANNER AFORESAID WAS NO T PRACTICABLE, OR WOULD HAVE CAUSED GENUINE DIFFICULT Y TO THE PAYEE, HAVING REGARD TO THE NATURE OF THE TRANSACTION AND THE NECESSITY FOR EXPEDITIOUS SETTLEMENT THEREOF. 14. IN THE PRESENT CASE NO EXCEPTIONAL OR UNAVOIDA BLE CIRCUMSTANCES ARE ESTABLISHED. NEITHER, IT IS SHOWN AS TO HOW IT WAS IMPRACTICAL TO PAY THROUGH CHEQUE HAVING REG ARD TO THE NATURE OF TRANSACTION AND NECESSITY FOR EXPEDITIOUS SETTLEMENT. IN THE TRANSACTIONS OF THE SAME NATURE THE ASSESSEE HAD MADE PAYMENTS THROUGH CHEQUES. IN THE CASE WHERE CASH IS PAID THEY WERE NOT FINALLY SETTLED. IN VIEW OF THIS BOTH THE BASIC CONDITIONS ARE NOT FULFILLED. THE ILLUSTRATIVE LIST OF CONDITIONS IN WHICH THE RULE 6DDJ WOULD BE APPLICABLE, AS PER THE CIRCULAR NO. 2 20(F.NO. 2061/17/76-IT/ DATED 31.05.1977) 4. ALL THE CIRCUMSTANCES IN WHICH THE CONDITIONS LAID DOWN IN RULE 6DD(J) WOULD BE APPLICABLE CANNOT BE S PELT OUT. HOWEVER, SOME OF THEM WHICH WOULD SEEM TO MEET A. THE REQUIREMENTS OF THE SAID RULE ARE: A. THE PURCHASER IS NEW TO THE SELLER, OR B. THE TRANSACTIONS ARE MADE AT A PLACE WHERE EITHER THE PURCHASER OR THE SELLER DOES NOT HAVE A BANK ACCOUNT OR C. THE TRANSACTIONS AND PAYMENTS ARE MADE ON A BANK HOLIDAY; OR 10 I.T.A. NOS. 105 & 125(ASR)/2012 ASSESSMENT YEAR: 2006-07 D. THE SELLER IS REFUSING TO ACCEPT THE PAYMENT BY WAY OF CROSSED CHEQUE/DRAFT AND THE PURCHASERS BUSINESS INTEREST WOULD SUFFER DUE TO NON- AVAILABILITY OF GOODS OTHERWISE THAN FROM THIS PARTICULAR SELLER OR E. THE SELLER, ACTING AS A COMMISSION AGENT, IS REQUIRED TO PAY CASH IN TURN TO PERSONS FROM WHOM HE HAS PURCHASED THE GOODS AND F. SPECIFY DISCOUNT IS GIVEN BY THE SELLER FOR PAYMENT TO BE MADE BY WAY OF CASH. IT CAN BE SAID THAT IT WOULD, GENERALLY, SATISFY THE REQUIREMENTS OF RULE 6DD(JA), IF A LETTER TO THE AB OVE EFFECT IS PRODUCED IN RESPECT OF EACH TRANSACTION FALLING WIT HIN THE CATEGORIES LISTED ABOVE FROM THE SELLER GIVING FULL PARTICULARS OF HIS ADDRESS, SALES TAX NUMBER/PERMANENT ACCOUNT NUMBER. 16. NONE OF THE CONDITIONS FROM (A) TO (F) IS SATI SFIED IN THIS CASE. NO PROPER DETAILS AS PER THE CIRCULAR I. E. COMPLETE ADDRESS, ST NUMBER, PAN ETC. ARE GIVEN EXCEPT A GEN ERAL AVERMENT. (THE CASE LAWS AS CITED, ALL RELATE TO SI TUATIONS WHERE THE BASIC CONDITIONS ARE SATISFIED. IT IS TRU E THAT LIST (A) TO (F) ABOVE IS NOT EXHAUSTIVE YET IN THE CASE OF T HE ASSESSEE IT IS OBVIOUS THAT CASH PAYMENTS WERE MADE BECAUSE OF A MUTUAL UNDERSTANDING HAVING NO REGARD TO CONDITIONS AS SET IN CIRCULAR OF CBDT. IN VIEW OF THIS I HOLD THAT THE DISALLOWAN CE MADE FOR VIOLATION OF SECTION 40A(3) OF I.T. ACT WHICH H AS NOTHING TO DO WITH GENUINENESS OF PAYMENTS OR OTHERWISE, WA S RIGHTLY MADE AND HENCE HEREBY CONFIRMED. THE ADDITIONAL EVI DENCE IS NOT ADMITTED IN VIEW OF THE FACT THAT ASSESSEE WAS ALLOWED DUE TO OPPORTUNITY BY THE A.O. AND THERE WAS NO REASONA BLE CAUSE FOR NOT FILING THE SAME. EVEN OTHERWISE, FOR THE RE ASONS AS DISCUSSED ABOVE, THE DISALLOWANCE TO BE CONFIRMED. 17. GROUND NO. 5 RELATES TO DISALLOWANCE U/S 40(A) (IA) OF THE I.T. ACT, MADE BY A.O. IN THE WRITTEN SUBMISSIO N MADE BEFORE MY LEARNED PREDECESSOR AND ME THE ASSESSEE H AS EXPLAINED THAT THE PAYMENT OF LABOUR CHARGES WERE M ADE TO VARIOUS LABOURERS THROUGH MATE/SUPERVISORS AND WAS NOT PAID UNDER ANY CONTRACT TO A LABOUR CONTRACTOR. IN SUPPO RT, THE A/R 11 I.T.A. NOS. 105 & 125(ASR)/2012 ASSESSMENT YEAR: 2006-07 OF THE ASSESSEE HAS FILED DOCUMENTS IN SHAPE OF PAY MENT DETAILS, AS PER WHICH THE TOTAL PAYMENT MADE TO ONE SUCH MADE WAS FOR DISBURSAL TO VARIOUS LABOUR. THIS PAYMENT A LSO INCLUDE THE MATE/SUPERVISOR WAGES WHICH WERE RS. 200/- PER DAY. THE A/R HAS ALSO SUBMITTED THE COMPLETE DOCUMENTS SUCH AS PAGES FROM THE ATTENDANCE REGISTERS. THESE DOCUMENTS ALON G WITH THE WRITTEN SUBMISSIONS WERE SENT TO A.O. FROM REMAND R EPORT BUT THE A.O. IN HER REPORT HAS STATED (AS ALREADY QUOTE D IN THE ORDER) THAT ON 26.12.2008 THE ASSESSEE WAS CONFRONT ED AND REPRESENTATIVE OF THE ASSESSEE HAS ADMITTED ON 29.1 2.2008 THAT THE ASSESSEE WAS REQUIRED TO DEDUCT THE TAX AT SOUR CE ON THESE PAYMENTS BECAUSE THESE PAYMENTS WERE VERY HUGE AND WAS AT AN AVERAGE PAYMENT OF RS. 1,34,950/- PER MONTH. IN THIS REGARD, I HAVE GONE THROUGH THE CASE RECORDS ONCE A GAIN AND FIND THAT NO SUCH ADMISSION APPEARS TO HAVE BEEN MA DE AS NOTHING IS ON RECORDS. I REPRODUCE THE ORDER SHEET ENTRIES MADE ON 26.12.2008 AND 29.12.2008 RESPECTIFELY:25 26.12.2008 PRESENT: SH. BASHIR AHMED LONE, CA COUNSEL OF THE ASSESSEE. PRODUCED BOOKS OF ACCOUNTS, BILLS ETC. FOR TEST CHECK. IT WAS OBSERVED THAT AT 52 INSTANCES, P AYMENTS (EXCEEDING RS. 20,000/-) HAVE BEEN MADE THROUGH CASH/BEARER CHEQUES. THE LIST OF SOME AMOUNTING TO RS. 2,31,52,746/- HAS BEEN PREPARED (PLACED ON RECORDS) AND CONFRONTED TO THE A. THE A HAS BEEN ASKED TO FU RNISH HIS EXPLANATION TO THE NEXT DATE OF HEARING. HE IS FURTHER REQUESTED TO PRODUCE DOCUMENTARY EVID ENCE IN SUPPORT OF ITS CLAIM OF STATES AS PARTNERSHIP FIRM IN VIEW OF THE CHANGE IN CONSULTATION OF THE A FIRM. SH. BASHIR LONE, CA IS FURTHER REQUESTED TO STATE T HE NATURE OF PAYMENTS AMOUNTING TO RS. 25,20,443/- MADE UNDER THE HEAD LABOUR TO EIGHT PERSONS. HE IS ALSO REQUESTE D TO JUSTIFY THE PAYMENTS AND IN CASE IT PERTAINS TO LAB OUR CONTRACTOR, WHETHER TDS HAS BEEN DEDUCTED U/S 194C. IT WAS MADE CLEAR THAT IN CASE OF LABOUR CONTRACTORS/M ATES AND NON TDS, THE SAME SHALL NOT BE ALLOWED OF SECTI ON 40(A)(IA). CASE IS ADJOURNED TO 29.12.2008. 12 I.T.A. NOS. 105 & 125(ASR)/2012 ASSESSMENT YEAR: 2006-07 29.12.2008 : PRESENT SH. BASHIR AHMED LONE, CA FILED REPLY WHICH IS PLACED ON RECORDS. HE HAS STATED IN 16 CASES AMOUNTING TO RS. 59,37,471/- THERE IS NO VIOLATION AS STATED IN SECTION 40A(3)(A). THE CLAIM OF THE ASSESSEE AS SUBSTANTIATED FROM THE BANK STATEMENT. WITH REGARD TO INSTRUMENT OF PARTNERSHIP DEED THE A SSESSEE HAS NOT BEEN ABLE TO PRODUCE THE SAME, AS SUCH THE CASE OF THE ASSESSEE IS PROPOSED TO BE ASSESSED AOP REGARDING QUERY TO THE LABOUR PAYMENTS THE ASSESSEE HAS STATED THAT CONSOLIDATED PAYMENTS WERE MADE TO THE HEAD OF THE LABOURERS WHO FURTHER DISBURSES IT TO THE CONCE RNED PERSONS ENGAGED BY THE ASSESSEE FIRM. THE ASSESSEE IS ASKED TO PRODUCE THE WAGES/LABOUR REGISTER FOR FURTHER VERIFICATION. CASE ADJOURNED TO 31.12.2008. 18. IT IS CLEAR FROM THE ABOVE THAT THE QUERY WAS MADE AT THE FAG END OF THE ASSESSMENT YEAR, YET THE ASSESSE E IN HIS REPLY HAS CLEARLY EXPLAINED THAT THE PAYMENTS WERE MADE THROUGH HEAD OF THE LABOURERS. THERE IS NOTHING ON RECORDS WHICH COULD SUGGEST THAT THEY WERE LABOUR CONTRACTO RS. THE DOCUMENTS IN SHAPE OF PAYMENT DETAILS AND ATTENDANC E REGISTER WHICH SUBMITTED BEFORE MY LEARNED PREDECESSOR COULD HAVE BEEN EXAMINED BY THE A.O. IN VIEW OF THIS, I AM INC LINED TO ADMIT THIS ADDITIONAL EVIDENCE NOT EXAMINED AND COM MENTED BY THE A.O. THROUGH AN OPPORTUNITY TO HIM WAS AVAIL ABLE AS PROVIDED BY MY PREDECESSOR. NEEDLESS TO REPEAT THAT INSUFFICIENT TIME AND OPPORTUNITY WAS PROVIDED TO A SSESSEE. CONSIDERING THE ABOVE, I HOLD THAT THERE WAS NO DEF AULT U/S 40(A)(IA) OF THE I.T. ACT AND DELETE THE DISALLOWAN CE SO MADE. BEFORE PARTING IT WOULD BE DISCUSSED THAT THE ASS ESSEE DURING HEARING SOUGHT TO RAISE ADDITIONAL GROUNDS A S UNDER: 1. THAT THE APPELLANT DENIES THE LIABILITY TO B E ASSESSED AS AOP AS AGAINST THE STATUS OF FIRM DECLARED BY THE APPELLANT IN HIS RETURN OF INCOME. 13 I.T.A. NOS. 105 & 125(ASR)/2012 ASSESSMENT YEAR: 2006-07 2. THAT THE BENEFIT OF THE STATUS OF FIRM HAS BE EN DENIED FOR WRONG REASONS WHICH ARE UNJUST AND ARBITRARY. 19. IN THIS REGARDS, IT MAY BE SEEN THAT GROUND NO . 3 RAISED IN ORIGINAL GROUNDS OF APPEAL IS IDENTICAL T O THE ADDITIONAL GROUNDS SOUGHT. THE GROUND NO. 3 IS ALREADY DECIDED HENCE THESE ADDITIONAL GROUNDS BECOME INFRUCTUOUS. GROUND NO. 6 RELATES TO CHARGING OF INTEREST U/S 23 4B OF THE IT ACT, WHICH IS CONSEQUENTIAL IN NATURE. 7. AFTER GOING THROUGH THE AFORESAID FINDINGS GIVEN BY THE LEARNED FIRST APPELLATE AUTHORITY ON THE ISSUES IN DISPUTE WE ARE OF THE VIEW THAT AS REGARDS TO THE NON-SERVI CE OF NOTICE UNDER SECTION 143(2) OF THE ACT, THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE LEARNED FIRST APPELLATE AUTHORITY AFTER EXAMINING THE RECORD AND HE HELD THAT THE NOT ICE UNDER SECTION 143(2) OF THE ACT WAS SERVED WELL WITHIN TI ME AND THERE IS NO NEED TO ISSUE AND SERVE THE NOTICE ON T HE CHANGE OF INCUMBENT. WE AGREE WITH THE FINDING GIVEN BY THE L EARNED FIRST APPELLATE AUTHORITY. 8. SECONDLY, AS REGARDS TO THE DISALLOWANCES OF INT EREST PAYABLE TO THE PARTNER WHICH HAS BEEN MADE FOR WANT OF A SIGNED AND CERTIFIED SUPPLEMENTARY COPY OF PARTNERS HIP DEED 14 I.T.A. NOS. 105 & 125(ASR)/2012 ASSESSMENT YEAR: 2006-07 IN VIEW OF A CHANGE IN PARTNERSHIP PATTERN, WE FIND THAT THE VALID SUPPLEMENTARY COPY OF PARTNERSHIP DEED HAS BE EN FILED BY THE ASSESSEE BEFORE THE LEARNED FIRST APPELLATE AUTHORITY AND COMMENTS OF THE CONCERNED ASSESSING OFFICER HAS ALS O BEEN TAKEN BY THE LEARNED FIRST APPELLATE AUTHORITY AND THE LEARNED FIRST APPELLATE AUTHORITY HAS DIRECTED THE ASSESSIN G OFFICER TO ALLOW THE INTEREST TO THE PARTNERS OF THE PARTNERSH IP FIRM. WE FIND NO INFIRMITY IN THE FINDING OF THE LEARNED FIR ST APPELLATE AUTHORITY. 9. THE NEXT ISSUE INVOLVED IN THE PRESENT APPEAL IS THAT REGARDING DISALLOWANCE MADE UNDER SECTION 40(A)(3) OF THE ACT. THE LEARNED FIRST APPELLATE AUTHORITY HAS CONF IRMED THIS DISALLOWANCE BY HOLDING THAT THE ASSESSEE HAS NOT E STABLISHED ANY EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES UNDER WHICH THE ASSESSEE WAS COMPELLED TO MAKE THE CASH PAYMENT. TH EREFORE, THE FINDING OF THE LEARNED FIRST APPELLATE AUTHORIT Y IS CONFIRMED AND THE ISSUE HAS BEEN DECIDED AGAINST TH E ASSESSEE. 10. AS REGARDS TO THE DISALLOWANCE UNDER SECTION 40(A )(IA) OF THE ACT MADE BY THE ASSESSING OFFICER AND DELETE D BY THE LEARNED FIRST APPELLATE AUTHORITY, WE ARE OF THE VI EW THAT THE 15 I.T.A. NOS. 105 & 125(ASR)/2012 ASSESSMENT YEAR: 2006-07 ASSESSEE HAS EXPLAINED THAT THE PAYMENT OF LABOUR C HARGES WAS MADE TO VARIOUS LABOURERS THROUGH MATE/SUPERVISOR A ND WAS NOT PAID UNDER ANY CONTRACT TO A LABOUR CONTRACTOR. THE ASSESSEE HAS ALSO FILED COMPLETE DOCUMENTS BEFORE T HE LEARNED FIRST APPELLATE AUTHORITY WHO HAS TAKEN THE REMAND REPORT FROM THE ASSESSING OFFICER. AFTER GIVING OPPORTUNITY TO THE ASSESSING OFFICER, LEARNED FIRST APPELLATE AUTHORIT Y HAS HELD THAT THE PAYMENTS WERE MADE THROUGH HEAD OF THE LAB OURERS AND THERE WAS NO DEFAULT UNDER SECTION 40(A)(IA) OF THE ACT AND HE HAS RIGHTLY DELETED THE DISALLOWANCES MADE B Y THE ASSESSING OFFICER. THUS, WE UPHOLD THE FINDING OF T HE LEARNED FIRST APPELLATE AUTHORITY ON THIS VERY ISSUE. 11. AS REGARDS TO THE LAST GROUNDS RAISED BY THE ASSE SSEE, REGARDING CHARGING OF INTEREST UNDER SECTION 234A/B AND C OF THE ACT, THIS IS CONSEQUENTIAL IN NATURE. 12. KEEPING IN VIEW THE AFORESAID FACTS AND CIRCUMSTA NCES AND THE RELEVANT FINDINGS OF LEARNED FIRST APPELLAT E AUTHORITY REPRODUCED ABOVE, WE ARE OF THE VIEW THAT NO INTERF ERENCE IS CALLED FOR IN THE WELL REASONED ORDER PASSED BY THE LEARNED FIRST APPELLATE AUTHORITY. THEREFORE, THE IMPUGNED ORDER DATED 16 I.T.A. NOS. 105 & 125(ASR)/2012 ASSESSMENT YEAR: 2006-07 06.02.2012 PASSED BY LEARNED CIT(A), JAMMU IS UPHEL D AND THE APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE ARE DISMISSED. 13. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E AS WELL AS BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MAY, 2014 SD/./- SD/./- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23 RD MAY, 2014 /RK/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: M/S STAR CONSTRUCTIONS, ALNOOR SHOP PING COMPLEX, HYDERPORA BY PASS ROAD, SRINAGAR, KMR 2. ACIT, SRINAGAR, KASHMIR 3. DCIT, CIRCLE-3, SRINAGAR 4. THE CIT(A), 5. THE CIT, 6. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.