JAVERILAL M NOGIA, MUMBAI V. ITO 22(2)(1), MUMBAI

ITA 1077/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7931 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 08-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 10-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S G SINGH
• Assessee Lawyers: K GOPAL SHRI SATENDRA PANDE
• Keywords: Rectification of order
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI T.R. SOOD (AM) AND SMT. ASHA VIJAYARAGH AVAN (JM) ITA NO. 1077/MUM/2010 ASSESSMENT YEAR- 2005-06 SHRI JAVERILAL M. NOGIA, M.G. 14, VATSALA TAI NAIK NAGAR, CST ROAD, S.G. BARVE MARG, CHEMBUR, MUMBAI-400 071 PAN-ACBPN 3504F VS. THE ITO 22(2)(1), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K. GOPAL SHRI SATENDRA PANDE RESPONDENT BY: SHRI S.G. SINGH O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 17.11.2009 PASSED BY THE LD. CIT(A)-33 FOR TH E ASSESSMENT YEAR 2005-06. 2. IN THIS CASE, RETURN OF INCOME WAS FILED ON 26.1 0.2005 DECLARING TOTAL INCOME AT RS. 3,53,077/- AND THE ASSESSMENT WAS COMPLETED U/S.143(3) DATED 29.08.2007 DETERMINING THE TOTAL I NCOME OF THE APPELLANT AT RS. 5,27,010/-. ORDER U/S.154 OF THE ACT DATED 22.01.20 07 WAS PASSED, DETERMINING THE TOTAL INCOME OF THE ASS ESSEE AT RS . 7,17,790/-. SUBSEQUENTLY, ANOTHER ORDER U/S.154 DAT ED 13.08.2008 WAS PASSED BY THE ASSESSING OFFICER DETERMINING THE TOT AL INCOME AT RS .15,27,650/-. ITA NO. 1077/M/10 2 3. AGGRIEVED BY THE ORDER OF THE AO PASSED U/S. 154 , ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE ASSESSEE FILED T HE FOLLOWING GROUNDS BEFORE THE LD. CIT(A). 1. THE ASSESSMENT FOR ASSESSMENT YEAR 2005-06 WAS COMP LETED U/S.143(3) BY ORDER DATED 29.08.2007. SUBSEQUENTLY AN ORDER U/S.154 WAS PASSED ON 22.01.2007 FOR DISALLOWANCE U /S. 40(A)(IA) DUE TO NON DEDUCTION OF TAX AT SOURCE FOR ` .1,90,778/-. AGAIN AN ORDER U/S.154 WAS PASSED ON 13.08.2008 FOR DISALLOW ANCE U/S.40(A)(IA) DUE TO NON DEDUCTION OF TAX AT SOURCE FOR ` .8,09,866/- . 2. PURSUANT TO ORDER U/S.143(3) PASSED ON 29.08.2007, A DEMAND WAS RAISED FOR S.52,428/- WHICH WAS PAID BY ASSESSE E. PURSUANT TO ORDER U/S.154 PASSED ON 22.01.2007 A DEMAND WAS RAISED FOR RS, .69,980/- WHICH WAS ALSO PAID PRESENTLY A DEMAND FO R RS. .3,84,980/- IS RAISED. 3. THE ASSESSEE SUBMITS THAT FOR SAME PROVISION U/S.40 (A)(IA) TWO ORDERS HAVE BEEN PASSED ON THE SAME SUBJECT MATTER. 4. THE ASSESSEE SUBMITTED THE REPORT U/S.44AB TOGETHER WITH AUDITED FINAL ACCOUNTS AND OTHER DETAILS ALONG WITH RETURN. BESIDES, THE ASSESSEE HAS CO-OPERATED IN THE ASSESSMENT PROCEEDI NGS. 5. THE ASSESSEE SUBMITS THAT WHEN AN ASSESSMENT IS COM PLETED U/S.143(3) WITHOUT CONSIDERATION OF RELEVANT PROVIS ION, A SUBSEQUENT ORDER FOR RECTIFICATION OF MISTAKE U/S.1 54 IS NOT PROPER. THESE IS NOT ANY FURTHER INFORMATION FRESHLY AVAILA BLE. 6. THE ASSESSEE SUBMITS THAT AT THE TIME OF THIS ORDER APPEAL WAS NOT SUBMITTED BY ASSESSEE AS HE DID NOT DESIRE TO HAVE LITIGATION AND PROLONG PROCEEDINGS BUT SINCE ANOTHER ORDER IS NOW PASSED FOR SAME PROVISION ASSESSEE FILED THE APPEAL. 7. THE ABOVE PAYMENTS ARE NOT IN THE NATURE OF LABOUR CHARGES BUT IT IS PIECERATE WAGES. 8. THE PAYMENTS ARE MADE TO THE LEADER OF THE TIME AND HE SUBSEQUENTLY DISTRIBUTES THE AMOUNTS AMONG HIS SUBM ITS IN THE ITA NO. 1077/M/10 3 TEAM, AS A RESULT THE AMOUNT WILL BE LESS THAN RS. .50,000/- TO ONE PERSON IN THE ACCOUNTING YEAR. 2.2 THE APPELLANT HAS FILED THE FOLLOWING ADDITIONAL GR OUNDS OF APPEAL : 1. THE ASSESSING OFFICER HAS PASSED THREE ORDERS : SR. NO. ORDER DATE AMOUNT OF DEMAND 1. 1 ST ORDER 22.01.07 69980/- 2. 2 ND ORDER 29.08.07 52428/- 3. 3 RD ORDER 12.02.08 384980/- 2. AS THE OFFICER HAS PASSED THREE ORDERS FOR THE SAME ASSESSMENT YEAR WHICH ITSELF INDICATES THAT THE ITO IS CONFUSED REGARDING THE PROVISIONS OF INCOME TAX ACT , 1961. 3. THE PROVISIONS OF SECTION 40(A) OF THE INCOME TAX A CT, 1961 ARE NOT APPLICABLE IN THE CASE, AS THE PAYMENT DO N OT ATTRACT THE PROVISIONS OF TDS U/S.194C. 4. THE ADDITION MADE ON ACCOUNT OF SECTION 40(A) IS VE RY HARSH AND CONFISCATORY IN NATURE, IT IS ARBITRARY AND TAK ING AWAY RIGHT OF PROPERTY GUARANTEED UNDER THE CONSTITUTION OF INDIA. IT IS ARTIFICIALLY CREATING INCOME WHICH ONE HAS NEVER DREAM OFF. IT SHOULD BE READ DOWN AND INCOME TAX IS TAX ON REA L INCOME EARNED BY THE APPELLANT AND OR SAME TO BE DECLARED NULL AND VOID OR ILLEGAL. 5. THE PAYMENTS ARE MADE TO ASSOCIATION OF PERSON, PAI D TO MUKADON TO BE DISTRIBUTED AMONG THE WORKERS WORKING UNDER HIM. SO SECTION 194C IS NOT APPLICABLE IN OUR CASE. 6. THEY WERE WORKING TOGETHER AS PER MUTUAL UNDERSTAND ING AMONG THEMSELVES. ALL THE PARTIES HAVE DIVIDED THEI R WORK AS PER MUTUAL UNDERSTANDING AND WORK HAS DIVIDED ACCOR DING TO THE WORK BASIS. THEREFORE, PROVISION OF SECTION 194 C IS NOT APPLICABLE TO APPELLANT. THERE IS NO SPECIFIC WRITT EN CONTRACT BETWEEN THE PARTY TO WHOM LABOUR CHARGES ARE PAID. 4. THE LD. CIT(A) CALLED FOR THE REMAND REPORT FRO M THE AO ON THE ADDITIONAL GROUNDS OF APPEAL. 5. THE LD. CIT(A) HELD AS FOLLOWS: ITA NO. 1077/M/10 4 I HAVE CAREFULLY CONSIDERED THE ORDER OF THE ASSESS ING OFFICER U/S.154 AND THE SUBMISSION MADE BY THE APPELLANT IN CLUDING ADDITIONAL GROUNDS RAISED AND THE REMAND REPORT OF THE ASSESSING OFFICER ON THE SAME. I FIND THAT THE GRIEVANCE OF T HE APPELLANT IS IN RESPECT OF INVOCATION OF PROVISIONS OF SECTION 40(A )(IA) IN HIS CASE REGARDING NON DEDUCTION OF TDS AND SUBSEQUENT DEPOS IT IN GOVERNMENT TREASURY ON PAYMENTS MADE TO CONTRACTORS BY HIM. I FIND THAT DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E APPELLANT HAS NOT BEEN ABLE TO BRING ANYTHING ON RECORD TO REBUT THE FINDING OF THE ASSESSING OFFICER THAT THE CONCERNED AMOUNT DID NOT ATTRACT THE PROVISIONS OF SECTION 40(A)(IA). SECTION 40(A)(IA) IS A MANDATORY SECTION INTRODUCED IN THE INCOME TAX ACT, 1961 TO D ETER THE APPELLANTS FROM DEFAULT IN NON DEDUCTION OF TDS AND ITS SUBSEQUENT DEPOSIT INTO THE GOVERNMENT TREASURY. THE HONBLE C OURTS HAVE NOT DECLARED THE SECTION TO BE UNCONSTITUTIONAL. IT HAS TO BE FOLLOWED STRICTLY IN SPIRIT AND COMPLIANCE TO THE SAME IS NE CESSARY. IN VIEW OF THIS, I AM NOT INCLINED TO INTERFERE WITH THE ORDER THE ASSESSING OFFICER ON THIS ISSUE. HOWEVER, SEEN TO THE PROVISI ONS OF SECTION 40(A)(I) OF THE ACT, THE ASSESSING OFFICER IS DIREC TED TO GIVE BENEFIT OF DEDUCTION TO THE APPELLANT IN THE ASSESSMENT YEAR 2 009-10 AS IT IS SEEN THAT THE TDS HAS BEEN PAID IN THE FINANCIAL YE AR RELEVANT TO THE SAID ASSESSMENT YEAR, AFTER VERIFICATION. IN THE REMAND REPORT DATED 05.08.09 OF ITO 22(1)-1, MUMBAI FOR THE CONCERNED ASSESSMENT YEAR 2005-06, WHICH HA S BEEN FORWARDED BY THE ADDL. CIT RANGE 22(2), MUMBAI VIDE LETTER DATED 07.08.09, I FIND THAT THE ASSESSING OFFICER HAS REQ UESTED FOR ENHANCEMENT OF THE SAID INCOME BY RS .19,75,130/- . THE FACTS REGARDING THE ISSUE HAS BEEN REPRODUCED EARLIER IN THIS ORDER. THE APPELLANT WAS GIVEN COPY OF THE REMAND REPORT DURIN G THE COURSE OF APPELLATE PROCEEDINGS ON 03.11.09 AND WAS REQUESTED TO GIVE HIS REPLY ON THE SAME. ON 16.11.09, THE APPELLANT ATTEN DED ALONG WITH AUTHORIZED REPRESENTATIVE AND FIELD LETTER DATED 16 .11.09 IN REPLY TO THE REMAND REPORT. I FIND, IN THIS LETTER, THE APPE LLANT HAS MADE NO MENTION OF THE ENHANCEMENT PROPOSED IN HIS INCOME I N FACT, THE APPELLANTS LETTER IS TOTALLY SILENT ON THIS ISSUE. NO EXPLANATION OR REBUTTAL OF THE ASSESSING OFFICERS OBSERVATION HAS BEEN MADE EXCEPT FOR SAYING THAT THE SECTION IS VERY HARSH AND SHOUL D BE DECLARED NULL AND VOID. IN VIEW OF THIS, I FIND THAT THE ASSESSIN G OFFICERS OBSERVATION THAT COMPLIANCE TO THE TDS SECTION HAS NOT BEEN MADE BY THE APPELLANT RELATING TO THE ADDITIONAL AMOUNT, AS IDENTIFIED BY THE ASSESSING OFFICER ON THE BASIS OF RECORDS AVAIL ABLE WITH HIM, NEEDS TO BE ADDED TO THE TOTAL INCOME OF THE APPELL ANT FOR VIOLATION OF SECTION 194C R.W.S 40(A)(IA) OF THE ACT. THIS ADDIT ION IS BEING MADE AS THERE HAS BEEN MISTAKE IN THE ORDER WHICH IS APP ARENT FROM ITA NO. 1077/M/10 5 RECORD AND NEEDS RECTIFICATION. THIS ISSUE DOES NOT INVOLVE ANY DEBATE OR ARGUMENT AND IS SQUARELY COVERED U/S.154 OF THE INCOME TAX ACT, 1961. IT IS TO BE KEPT IN MIND THAT THE LA W DOES NOT PROHIBIT MULTIPLE ACTIONS U/S.154 IN A CASE, PROVIDED IT IS RELATED TO AN ISSUE WHICH IS COVERED UNDER MISTAKE APPARENT FROM RECORD . THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE INCOME OF THE APPELLANT ACCORDINGLY, KEEPING THE ABOVE ISSUES IN MIND STRIC TLY AS PER THE PROVISIONS OF SECTION 154 OF THE INCOME TAX ACT, 19 61. IN THE RESULT THE APPEAL IS DISMISSED AND THE INCOM E IS ENHANCED. 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE U S. THE LD. COUNSEL FOR THE ASSESSEE SHRI K. GOPAL SUBMITTED TH AT THE ASSESSMENT HAD BEEN COMPLETED U/S. 143(3) WHEREIN THEY HAVE NO T CONSIDERED THE APPLICATION OF PROVISIONS U/S. 40A(IA) AND THEREAFT ER SUBSEQUENT ORDER FOR RECTIFICATION OF MISTAKE UNDER SECTION 154 IS NOT P ROPER AS ALL THE PARTICULARS HAVE BEEN VERIFIED WHILE COMPLETING THE ASSESSMENT U/S. 143(3) OF THE I.T. ACT. THE LD. COUNSEL FOR THE AS SESSEE FURTHER SUBMITTED THAT THE PAYMENTS ARE NOT IN THE NATURE OF LABOUR C HARGES BUT ARE PIECERATE WAGES. HE FURTHER EXPLAINED THAT THE PAY MENTS ARE MADE TO ASSOCIATION OF PERSON I.E. PAYMENT IS MADE TO THE L EADER OF THE TEAM AND HE SUBSEQUENTLY DISTRIBUTES THE AMOUNTS AMONG THE MEMBERS OF THE TEAM AND AS A RESULT THE AMOUNT WILL BE LESS THAN R S. 50,000/- TO ANY ONE PERSON OF THE TEAM. THEREFORE THE LD. COUNSEL F OR THE ASSESSEE ARGUED THAT THE PROVISIONS OF THE APPLICABILITY OF SEC. 40A(IA) IS A DEBATABLE ISSUE AND CANNOT BE RECTIFIED U/S. 154. 7. WE HEARD BOTH THE PARTIES. WE FIND FORCE IN THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN THE CASE OF A DEBATABLE ISSUE WHEN THE PAYMENTS ARE MADE TO THE LEADER TO BE DISTRIBU TED AMONG WORKERS WORKING UNDER HIM, THE PROVISIONS OF SEC. 40A(IA) O F THE I.T. ARE NOT APPLICABLE AS THE PAYMENTS DO NOT ATTRACT THE PROVI SIONS OF TDS U/S. 194C IN SUCH A CASE. HOWEVER, THE MATTER BEING DEB ATABLE ISSUE, AS HELD ITA NO. 1077/M/10 6 IN THE CASE OF ITO VS VOLKART BROTHERS 82 ITR 50 WHEREIN IT HAS BEEN HELD AS FOLLOWS: A MISTAKE APPARENT ON THE RECORD MUST BE AN OBVIOU S AND PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY B E CONCEIVABLY TWO OPINIONS. A DECISION ON A DEBATABLE POINT OF LAW IS NOT A MISTAKE APPARENT FROM THE RECORD. RESPECTFULLY FOLLOWING THE ABOVE DECISION IN THE C ASE OF VOLKART BROTHERS, WE ALLOW ASSESSEES APPEAL. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 25 TH DAY OF MARCH, 2011 SD/- SD/- (T.R. SOOD) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 25 TH MARCH, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR I BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 1077/M/10 7 DATE INITIALS 1 DRAFT DICTATED ON: 9 . 0 3 .201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 15 .0 3 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10 . DATE OF DISPATCH OF ORDER: _________ ______