THE ACIT, Guntur V. Alla Veera Reddy, Guntur

ITA 107/VIZ/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6579 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 08-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K SETHI
• Assessee Lawyers: K TIRUMALA RAO
• Keywords: Non-deduction of tax
• Section: 142(1); 194C; 147; 148; 144

Judgement Text

ITA NO.107/VIZAG/2016 SRI ALLA VEERA REDDY, GUNTUR 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.107/VIZAG/2016 ( / ASSESSMENT YEAR: 2006-07) ACIT, CIRCLE - 2(1), GUNTUR VS. SRI ALLA VEERA REDDY, GUNTUR [PAN: ADMPA5484D ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI M.K. SETHI, DR / RESPONDENT BY : SHRI K. TIRUMALA RAO, AR / DATE OF HEARING : 09.01.2017 / DATE OF PRONOUNCEMENT : 12.01.2017 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF THE CIT(A), GUNTUR DATED 30.11.2015 AND IT PERTAINS TO THE ASSESSMENT ORDER 2006-07. ITA NO.107/VIZAG/2016 SRI ALLA VEERA REDDY, GUNTUR 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL, DERIVING INCOME FROM TRANSPORT CONTRACT FILED HIS R ETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 30.10.2006 DECLARING TOT AL INCOME OF ` 6,61,492/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') AND REF UND OF ` 1,35,990/- WAS ISSUED TO THE ASSESSEE. SUBSEQUENTLY, THE CASE HAS BEEN RE-OPENED U/S 147 OF THE ACT, FOR THE REASON THAT THE ASSESSEE HA S INCURRED FREIGHT CHARGES OF ` 1,14,01,600/- WITHOUT DEDUCTION OF TAX AT SOURCE U /S 194C OF THE ACT. CONSEQUENTLY, THE EXPENDITURE INCURRED UNDER THE HEAD FREIGHT CHARGES IS NOT ALLOWABLE AS DEDUCTION U/S 4 0(A)(IA) OF THE ACT. SINCE, THE ASSESSEE HAS FAILED TO DEDUCT TDS U/S 19 4C OF THE ACT, INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMEN T WITHIN THE MEANING OF SECTION 147 OF THE ACT, AND ACCORDINGLY, ISSUED NOTICE U/S 148 OF THE ACT. THE ASSESSEE NEITHER FILED ANY RET URN IN RESPONSE TO NOTICE U/S 147 OF THE ACT, NOR COMPLIED WITH THE NO TICE AND HENCE, REMINDER LETTER DATED 29.4.2013 WAS ISSUED TO THE A SSESSEE. SINCE, THE ASSESSEE FAILED TO COMPLY WITH THE NOTICE, ASSESSME NT PROCEEDINGS WERE INITIATED BY ISSUING NOTICE U/S 142(1) OF THE ACT. SINCE, THE ASSESSEE FAILED TO COMPLY WITH NOTICE U/S 142(1) OF THE ACT, NOTICE U/S 144 OF THE ACT WAS ISSUED PROPOSING TO DISALLOW FREIGHT CHARGE S OF ` 1,14,01,600/- U/S 40(A)(IA) OF THE ACT FOR FAILURE TO DEDUCT TDS. ITA NO.107/VIZAG/2016 SRI ALLA VEERA REDDY, GUNTUR 3 3. IN RESPONSE TO NOTICE, THE AUTHORIZED REPRESENTA TIVE OF THE ASSESSEE APPEARED AND FURNISHED WRITTEN SUBMISSIONS , HOWEVER, BOOKS OF ACCOUNTS AND OTHER DETAILS WERE NOT PRODUCED. T HE ASSESSEE SUBMITTED THAT HE UNDERTAKES TRANSPORT WORK OF PEAR L BEVERAGES LTD. FOR TRANSPORTATION OF GOODS. IN THE PROCESS, HE ARRANG ES LORRIES FROM THE OPEN MARKET TO EXECUTE THE WORK. IT WAS FURTHER SU BMITTED THAT HE WAS NEITHER ENTERED INTO AGREEMENT WITH LORRY OWNERS NO R WITH THE COMPANY FOR PROVIDING VEHICLES, THEREFORE, QUESTION OF APPL ICABILITY OF THE PROVISIONS OF SECTION 194C OF THE ACT DOES NOT ARIS E. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE, HELD THAT THERE EXISTS AN AGREEMENT BETWEEN THE ASSESSEE AND THE COMPANY FOR TRANSPORTATION OF GOODS. THE ASSESSEE HAS HIRED LORRIES AND PAID FRE IGHT CHARGES WITHOUT DEDUCTION OF TAX AT SOURCE. SINCE, THE ASSESSEE FA ILED TO DEDUCT TDS ON FREIGHT CHARGES, THE EXPENDITURE IS NOT ALLOWABLE A S DEDUCTION U/S 40(A)(IA) OF THE ACT. ACCORDINGLY, DISALLOWED FREI GHT CHARGES OF ` 1,14,01,600/- UNDER THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSEE FURTHER SUBMITTED ITA NO.107/VIZAG/2016 SRI ALLA VEERA REDDY, GUNTUR 4 THAT THE A.O. WAS ERRED IN DISALLOWING TOTAL FREIGH T CHARGES BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, EVE N THOUGH THE ASSESSEE PROVES THAT THERE IS NO APPLICATION OF THE PROVISIO NS OF SECTION 194C OF THE ACT TO THE IMPUGNED PAYMENTS. THE ASSESSEE FUR THER SUBMITTED THAT THERE IS NO WRITTEN OR ORAL CONTRACT BETWEEN THE LO RRY OWNERS AND HIMSELF AND HENCE THE PROVISIONS OF SECTION 194C OF THE ACT DOES NOT APPLY TO THE FREIGHT CHARGES PAID. ALTERNATIVELY, THE ASSES SEE SUBMITTED THAT THE EXPENDITURE INCURRED UNDER THE HEAD FREIGHT CHARGES HAS BEEN PAID ON OR BEFORE 31 ST MARCH OF THE FINANCIAL YEAR AND IN VIEW OF THE SPE CIAL BENCH DECISION OF ITAT, VISAKHAPATNAM IN THE CASE O F M/S. MERILYN SHIPPING & TRANSPORTERS VS. ACIT 136 ITD 23, NO DIS ALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT, IF THE AMOUNTS INCUR RED HAS BEEN PAID ON OR BEFORE 31 ST MARCH OF THE FINANCIAL YEAR. THE CIT(A) AFTER CON SIDERING THE EXPLANATIONS OF THE ASSESSEE AND ALSO BY FOLLOW ING SPECIAL BENCH DECISION OF VISAKHAPATNAM ITAT, IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTERS VS. ACIT (SUPRA), DELETED ADDITIONS MA DE BY THE A.O. TOWARDS FREIGHT CHARGES U/S 40(A)(IA) OF THE ACT. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US. 5. THE LD. D.R. SUBMITTED THAT THE LD. CIT(A) ERRED IN DELETING ADDITIONS MADE BY THE A.O. TOWARDS FREIGHT CHARGES U/S 40(A)(IA) OF THE ITA NO.107/VIZAG/2016 SRI ALLA VEERA REDDY, GUNTUR 5 ACT, EVEN THOUGH THE CIRCULAR ISSUED BY THE CBDT VI DE CIRCULAR NO.715 DATED 8.8.1995 CATEGORICALLY STATES THAT THE AMOUNT PAID INCLUDES PAYABLE AND HENCE, TDS IS APPLICABLE EVEN IF THE AM OUNT HAS BEEN PAID WITHIN THE SAME FINANCIAL YEAR. THE D.R. FURTHER S UBMITTED THAT THE LD. CIT(A) ERRED IN FOLLOWING THE SPECIAL BENCH DECISIO N OF ITAT, VISAKHAPATNAM IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTERS VS. ACIT (SUPRA), AS THE DEPARTMENT HAS NOT ACCEPTED TH E DECISION OF ITAT AND FURTHER APPEAL WAS FILED BEFORE THE HONBLE HIG H COURT OF ANDHRA PRADESH AND THE ANDHRA PRADESH HIGH COURT HAS SUSPE NDED THE OPERATION OF SPECIAL BENCH DECISION. THE D.R. FURT HER SUBMITTED THAT THE LD. CIT(A) FAILED TO FOLLOW THE DECISIONS OF HONBL E KOLKATA HIGH COURT AND THE HONBLE GUJARAT HIGH COURT IN THE CASE OF C IT VS. CRESCENT EXPORT SYNDICATE AND CIT VS. SIKANDAR PAN M. TANWAN , WHEREIN THE HONBLE HIGH COURT HELD THAT THE PROVISIONS OF SECT ION 40(A)(IA) OF THE ACT WOULD COVER NOT ONLY THE AMOUNTS WHICH ARE PAYA BLE AT THE END OF THE PREVIOUS YEAR BUT ALSO PAYABLE AT ANY TIME DURI NG YEAR. 6. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE STRONGLY SUPPORTING ORDER OF THE CIT(A), SUBMITTED THAT THE EXPENDITURE INCURRED UNDER THE HEAD FREIGHT CHARGES HAS BEEN PAID ON OR BEFORE 31 ST MARCH AND NOTHING IS PAYABLE AT THE END OF THE FINANCIAL YEAR. THE A.R. FURTHER ITA NO.107/VIZAG/2016 SRI ALLA VEERA REDDY, GUNTUR 6 SUBMITTED THAT THE ITAT, VISAKHAPATNAM SPECIAL BENC H IN THE CASE OF MERILYN SHIPPING & TRANSPORTERS VS. ACIT (SUPRA), H ELD THAT NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT, FOR FAILURE TO DEDUCT TDS, IF THE EXPENDITURE INCURRED IS FULLY PAID WITH IN THE SAME FINANCIAL YEAR. THE ASSESSEE HAS PAID THE EXPENDITURE IN FUL L AND NOTHING IS PAYABLE, THEREFORE, NO DISALLOWANCE CAN BE MADE BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. DISALLOWED FREIGHT CHARGES BY INVOKING THE PRO VISIONS OF SECTION 40(A)(IA) OF THE ACT, FOR FAILURE TO DEDUCT TDS U/S 194C OF THE ACT. IT IS THE CONTENTION OF THE ASSESSEE THAT THE EXPENDITURE INCURRED UNDER THE HEAD FREIGHT CHARGES HAS BEEN FULLY PAID WITHIN THE END OF THE FINANCIAL YEAR AND NOTHING IS PAYABLE, THEREFORE, IN VIEW OF THE SPECIAL BENCH DECISION OF ITAT, VISAKHAPATNAM IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTERS VS. ACIT (SUPRA), NO DISALLOWANCE CAN BE MADE IF THE AMOUNT IS PAID ON OR BEFORE 31 ST MARCH. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE COORDINATE BENCH OF ITAT, VISAKHAPATNAM IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTERS VS. ACIT (SUPRA), HAS HELD THAT NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) ITA NO.107/VIZAG/2016 SRI ALLA VEERA REDDY, GUNTUR 7 OF THE ACT, IF THE AMOUNTS HAS BEEN PAID ON OR BEFO RE 31 ST OF THE FINANCIAL YEAR. THEREFORE, WE ARE OF THE VIEW THAT THE A.O. WAS NOT CORRECT IN DISALLOWING FREIGHT CHARGES UNDER THE PR OVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SO URCE. 8. IN SO FAR AS THE ARGUMENTS OF THE LD. D.R., THAT THE DEPARTMENT HAS NOT ACCEPTED THE DECISION OF M/S. MERILYN SHIPP ING & TRANSPORTERS VS. ACIT (SUPRA), WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. MUKUNDARA ENGINEERS & CONTRACTORS VS. ACIT, HAS CONSIDERED THE ISSUE AND AFTER CONSIDERING THE REVE NUE OBJECTION, WITH REGARD TO THE SPECIAL BENCH DECISION OF M/S. MERILY N SHIPPING & TRANSPORTERS VS. ACIT (SUPRA) AND ALSO CONSIDERING THE RATIO OF HONBLE A.P. HIGH COURT IN THE CASE OF M/S. JANAPRIYA ENGIN EERING SYNDICATE, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE R ELEVANT PORTION OF THE ORDER IS REPRODUCED HEREUNDER: WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. CONSISTENT WITH THE VIEW TAKEN BY THE ITAT SPECIAL BENCH VISAKHAPATNAM AND ALSO IN THE LIGHT OF THE VIEW EXP RESSED BY THE HONBLE A.P. HIGH COURT IN THE CASE OF JANAPRIYA ENGINEERIN G SYNDICATE, WE ARE OF THE OPINION THAT THE PROVISIONS OF SECTION 40A(IA) OF THE ACT CANNOT BE MADE APPLICABLE IN RESPECT OF THE AMOUNTS ALREADY P AID BEFORE 31 ST MARCH. IN OTHER WORDS, THE A.O. IS DIRECTED TO RESTRICT THE DISALLOWANCE TO THE AMOUNTS PAYABLE AFTER 31 ST MARCH. WITH THESE OBSERVATIONS, GROUND NO.3 OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. 9. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE C ASE AND ALSO FOLLOWING THE RATIO OF COORDINATE BENCH, WE ARE OF THE VIEW THAT NO ITA NO.107/VIZAG/2016 SRI ALLA VEERA REDDY, GUNTUR 8 DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT, FOR FAILURE TO DEDUCT TDS, IF THE EXPENDITURE INCURRED HAS BEEN PAID ON O R BEFORE 31 ST MARCH OF THE FINANCIAL YEAR. IN THIS CASE, THE ASSESSEE HAS FILED NECESSARY DETAILS TO PROVE THAT EXPENDITURE INCURRED HAS BEEN FULLY PAID AND NOTHING REMAINS PAYABLE AT THE END OF THE FINANCIAL YEAR. THE CIT(A) AFTER CONSIDERING RELEVANT DETAILS RIGHTLY DELETED ADDITIONS MADE BY THE A.O. WE DO NOT SEE ANY ERROR OR INFIRMITY IN THE O RDER PASSED BY THE CIT(A). HENCE, WE INCLINED TO UPHOLD CIT(A) ORDER AND DISMISS THE APPEAL FILED BY THE REVENUE. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 12 TH JAN17. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 12.01.2017 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT, CIRCLE-2(1), GUNTUR 2. / THE RESPONDENT SRI ALLA VEERA REDDY, PROP: M/S . AVR TRANSPORT, D.NO.11-840-5, NAGARALU, GUNTUR 3. + / THE CIT, GUNTUR ITA NO.107/VIZAG/2016 SRI ALLA VEERA REDDY, GUNTUR 9 4. + ( ) / THE CIT (A), GUNTUR 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM