The ACIT.,Cir-16(3), Hyderabad V. M/s PLR Projects Private Limited, Hyderabad

ITA 1079/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74677 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 18-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K HARITA
• Assessee Lawyers: PAWAN KUMAR CHAKRA
• Keywords: Recovery proceedings; Opportunity of being heard; Principle of natural justice; Condonation of delay
• Section: 143(3); 14A; 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1079/HYD/2013 ASSESSMENT YEAR 2007-08 THE ASST. CIT CIRCLE-16(3) HYDERABAD VS. M/S. PLR PROJECTS PVT. LTD. HYDERABAD PAN: AADCP9069L [APPELLANT] [RESPONDENT] C.O. NO. 03/HYD/2014 ARISING OUT OF ITA NO. 1079/HYD/2013 ASSESSMENT YEAR 2007-08 THE ASST. CIT CIRCLE-16(3) HYDERABAD VS. M/S. PLR PROJECTS PVT. LTD. HYDERABAD PAN: AADCP9069L [APPELLANT] [CROSS OBJECTOR] REVENUE BY: SMT. K. HARITA ASSESSEE BY: SRI PAWAN KUMAR CHAKRAPANI DATE OF HEARING: 12.02.2014 DATE OF PRONOUNCEMENT: 12.03.2014 ORDER PER CHANDRA POOJARI, AM: THE ABOVE APPEAL BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE CIT(A)-V, HYDERABAD DATED 15.4.2013 FO R A.Y. 2007-08. THE ASSESSEE FILED THE CROSS OBJECTION ( CO) AGAINST THE SAME ORDER OF THE CIT(A). 2. THE REVENUE RAISED THE FOLLOWING GROUNDS: (1) THE ORDER OF THE CIT(A) IS ERRONEOUS BOTH IN LAW AN D IN FACTS OF THE CASE. ITA NO. 1079/HYD/2013 & C.O. NO. 03/HYD/2014 M/S. PLR PROJECTS PVT. LTD. ===================== 2 (2) THE CIT(A) IS NOT CORRECT IN DIRECTING THE ASSESSIN G OFFICER TO ALLOW THE EXPENDITURE OF RS. 1,29,980 ON WHICH T DS IS NOT MADE U/S. 194C OF THE IT ACT AND WHICH WAS ACCE PTED BY THE ASSESSEE. (3) THE CIT(A) IGNORED THE PROVISIONS OF TDS BY DELETIN G THE ADDITION OF RS. 1,52,09,336 ONLY ON THE REASON THAT THE PAYMENT DIRECTLY CREDITED TO THE BOOKS OF CONSTITUE NTS OF OF JV BY ANOTHER CONSTITUENT OF JV AND THE SITUATION O F DEDUCTING THE TDS DOES NOT ARISE. (4) THE CIT(A) ERRED ON THE MECHANISM OF JVS ADOPTED BY THE ASSESSEE, JUST TO EVADE TAXES. (5) THE CIT(A) SHOULD HAVE DISALLOWED THE EXPENDITURE O F RS. 1,52,09,336 BY INVOKING THE PROVISIONS OF SEC. 14A OF THE IT ACT. 3. THE ASSESSEE RAISED THE FOLLOWING GROUNDS IN ITS CO : 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] IN SO FAR AS IT IS AGAINST THE RESPONDENT 1 CROSS OBJECTOR ARE OPPOSED TO LAW, WEIGHT OF EVIDENCE, NA TURAL JUSTICE, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE RESPONDENT 1 CROSS OBJECTOR DENIES ITSELF LIABL E TO BE 'ASSESSED OVER AND ABOVE THE TOTAL INCOME REPORTED BY THE RESPONDENT 1 CROSS OBJECTOR OF RS. 5,96,42,217 UNDE R THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS NOT JUSTIFIED IN LAW IN CONFIRMING THE DISALLOWANCE OF RS. 49,70,460 MADE BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, BEING T HE PAYMENT MADE BY THE APPELLANT TO SHRI. CH. VENKAT R EDDY AND CHALAPATI & CO., UNDER THE FACTS AND CIRCUMSTAN CE OF THE CASE. 4. THE LEARNED AUTHORITIES FAILED TO APPRECIATE THE FA CT THAT THE PROVISIONS OF SECTION 40[A][IA] OF THE ACT IS NOT A PPLICABLE TO THE FACTS OF THE INSTANT CASE SINCE THE RECIPIEN T/PAYEE I.E. SRI. CH. VENKAT REDDY AND CHALAPATI & CO., HAS ALRE ADY DECLARED THE PAYMENTS MADE BY THE APPELLANT IN HIS RESPECTIVE RETURNS HENCE NO DISALLOWANCE IS WARRANT ED UNDER THE PROVISIONS OF SECTION 40[A][IA] OF THE ACT UNDE R THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO. 1079/HYD/2013 & C.O. NO. 03/HYD/2014 M/S. PLR PROJECTS PVT. LTD. ===================== 3 5. THE LEARNED AUTHORITIES BELOW ARE NOT JUSTIFIED IN LAW IN NOT APPRECIATING THAT THE DEDUCTION OF TAX IS ONLY ONE MODE OF RECOVERY OF TAX AND ONCE THE TAX IS RECOVERED BY AN Y OTHER MODE AND THE RECOVERY OF TAX ON THE AMOUNT WHICH HA S SUFFERED TAX IN THE HANDS OF PAYEE IS NOT PERMISSIB LE SINCE THE SAME WILL AMOUNT TO TAXING THE SAME INCOME TWIC E I.E. ONCE DISALLOWANCE OF EXPENDITURE IN THE HANDS OF TH E PAYER AND ONCE AGAIN THE AMOUNTS BEING TAXED IN THE HANDS OF THE PAYEE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE . 6. WITHOUT PREJUDICE, THE LEARNED AUTHORITIES BELOW FA ILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 40[A][IA] OF THE ACT IS ATTRACTED ONLY TO THE AMOUNTS WHICH ARE PAYABLE AT THE END OF THE YEAR AND NOT TO THE ENTIRE ACTUAL PAYMEN TS PAID DURING THE YEAR UNDER THE FACTS AND CIRCUMSTANCES O F THE CASE. 7. WITHOUT PREJUDICE, THE LEARNED COMMISSIONER OF INCO ME- TAX [APPEALS]-V, HYDERABAD, OUGHT OF HAVE CONSIDERE D THAT THE AMOUNT OF RS. 49,70,460 WAS PAID TO THE CONTRAC TS DURING THE IMPUGNED ASSESSMENT YEAR 2007-2008, AND THERE IS NO OUTSTANDING AS ON THE DATE OF THE BALANCE SHE ET AS PAYABLE, UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE. 8. THE RESPONDENT / CROSS OBJECTOR DENIES ITSELF LIABL E TO BE CHARGED TO INTEREST UNDER SECTION 234 A & 234 B OF THE INCOME TAX ACT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. FURTHER THE LEVY OF INTEREST UNDER SECTION 23 4 A & 234 B OF THE ACT IS ALSO BAD IN LAW AS THE PERIOD, RATE , QUANTUM AND METHOD OF CALCULATION ADOPTED ON WHICH INTEREST IS LEVIED ARE ALL NOT DISCERNABLE AND ARE WRONG ON THE FACTS OF THE CASE. 9. THE RESPONDENT / CROSS OBJECTOR CRAVES LEAVE OF THI S HON'BLE TRIBUNAL TO ADD, ALTER, DELETE OR SUBSTITUT E ANY OF THE GROUNDS URGED ABOVE. 10. IN VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE CROSS OBJECTION, YOUR RESPONDENT / CROSS OBJECTOR HUMBLY PRAY THAT THE CR OSS OBJECTION MAY BE ALLOWED IN THE INTEREST OF EQUITY AND JUSTICE. ITA NO. 1079/HYD/2013 & C.O. NO. 03/HYD/2014 M/S. PLR PROJECTS PVT. LTD. ===================== 4 4. AT THE OUTSET IT WAS POINTED OUT THAT THERE WAS A D ELAY IN FILING THE CO BY 48 DAYS. THE ASSESSEE FILED A PETITION STATING AS FOLLOWS: 1. AN ORDER OF ASSESSMENT WAS PASSED UNDER SECTION 143 [3] R.W.S. 263 OF THE INCOME-TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2007-08 WAS PASSED BY THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 16[3], HYDERAB AD ON 23.11.2012. 2. AGGRIEVED BY THE ORDER OF ASSESSMENT PASSED UNDER SECTION 143[3] R.W.S. 263 OF THE ACT, FOR THE ASSES SMENT YEAR 2007-08 AN APPEAL WAS FILED BEFORE THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] - V, HYDERABAD , BY THE RESPONDENT CROSS OBJECTOR FOR THE ASSESSMENT YEAR 2007-08, WAS HEARD AND THE APPEAL FILED CAME T O BE PARTLY ALLOWED. THE ORDER OF THE FIRST APPELLATE AUTHORITY WAS PASSED ON 15.4.2013, AND THE SAME WAS RECEIVED BY THE RESPONDENT/CROSS OBJECTOR. 3. THE ORDER OF THE FIRST APPELLATE AUTHORITY WAS RECE IVED AND COLLECTED BY THE AUTHORIZED REPRESENTATIVE OF T HE RESPONDENT/ CROSS OBJECTOR. SUBSEQUENTLY, THE REVEN UE BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT [A] FILED AN APPEAL BEFORE THIS HON'BLE INCOME-TAX APPELLATE TRIBUNAL, BANGALORE BENCH, BANGALORE. THE NOTICE OF APPEAL FILED BEFORE THIS HON'BLE TRIBUNAL BY THE RE VENUE CHALLENGING THE ORDER OF THE LEARNED CIT [A] DATED 18.07.2013 WAS RECEIVED BY THE RESPONDENT/CROSS OBJECTOR ONLY ON 25.10.2013 IN ITA NO. 1079/HYD/201 3 [DEPARTMENT APPEAL]. 4. THE ENTRE FILES PERTAINING TO THE ASSESSMENT YEAR 2 007-08 WHICH WERE IN APPEAL BEFORE THE CIT [A] WAS WITH TH E AUTHORIZED REPRESENTATIVE WHO REPRESENTED THE RESPONDENT/CROSS OBJECTOR BEFORE THE LEARNED CIT [A ]. THE SAID AUTHORIZED REPRESENTATIVE WHO REPRESENTED THE MATTER BEFORE THE LEARNED CIT [A] DID NOT GUIDE THE RESPONDENT I CROSS OBJECTOR AS REGARD TO THE NEXT COURSE OF ACTION. THE RESPONDENT I CROSS OBJECTOR OUGHT TO HAVE FILED THE CROSS OBJECTION WITHIN 30 DAYS FROM THE R ECEIPT OF THE COMMUNICATION FROM THE HON'BLE TRIBUNAL I.E. ON OR BEFORE 24.11.2013. ITA NO. 1079/HYD/2013 & C.O. NO. 03/HYD/2014 M/S. PLR PROJECTS PVT. LTD. ===================== 5 5. SUBSEQUENT, TO THE ORDER OF THE FIRST APPELLATE AUT HORITY, THE REVENUE PREFERRED AN APPEAL BEFORE THIS HON'BLE INCOME-TAX .A:PPELLATE TRIBUNAL, HYDERABAD BENCH, HYDERABAD, AS AGAINST THE ORDER OF THE LEARNED CIT [A], TO THE EXTENT WHICH IS AGAINST THE REVENUE. THE SAME W AS COMMUNICATED TO THE RESPONDENT I CROSS OBJECTOR ON 25.10.2013. THE RESPONDENT I CROSS OBJECTOR THEREAFTER GAVE THE BRIEF TO THE PRESENT COUNSEL AND THE PRESE NT COUNSEL AFTER VERIFYING THE CASE EXPRESSED THAT A C ROSS OBJECTION IS REQUIRED TO BE FILED AS AGAINST THE OR DER OF THE FIRST APPELLATE AUTHORITY TO THE EXTENT WHICH IS AG AINST THE RESPONDENT I CROSS OBJECTOR. SOON AFTER OBTAINING THE PROFESSIONAL ADVICE FROM THE PRESENT COUNSEL THE RESPONDENT/CROSS OBJECTOR WITHIN A REASONABLE TIME HAS FILED THIS PRESENT CROSS OBJECTION BEFORE THIS HON' BLE TRIBUNAL. . 6. IT IS SUBMITTED THAT DUE TO THE WRONG PROFESSIONAL ADVICE THE RESPONDENT/CROSS OBJECTOR COULD NOT FILE THE CR OSS OBJECTION BEFORE THIS HON'BLE TRIBUNAL WELL IN TIME I.E. ON OR BEFORE 24.11.2013 AND BY THE TIME THE RESPONDENT / CROSS OBJECTOR SOUGHT THE PRESENT COUNSEL'S ADVICE, THERE AROSE 78 DAYS DELAY IN FILING THE CROSS OBJECTION B EFORE THIS HON'BLE TRIBUNAL. 7. IT IS HUMBLY PRAYED THAT THIS HON'BLE TRIBUNAL TAKE S A LENIENT AND COMPASSIONATE VIEW AND CONDONE THE DELA Y OF 78 DAYS IN FILING THE CROSS OBJECTIONS BEFORE THIS HON'BLE TRIBUNAL AND HEAR THE SAME ON MERITS FOR THE ADVANC EMENT OF SUBSTANTIAL CAUSE OF JUSTICE. 8. IT IS SUBMITTED THAT IF THIS APPLICATION FOR CONDON ATION OF DELAY IN FILING THE CROSS OBJECTION IS NOT ALLOWED, THE RESPONDENT/CROSS OBJECTOR WOULD BE PUT TO GREAT HARDSHIP AND IRREPARABLE INJURY AND ON THE OTHER HA ND NO HARDSHIP OR INJURY WOULD BE CAUSED TO THE APPELLANT IF THIS APPLICATION OF CONDONATION OF DELAY IS ALLOWED. REL IANCE IS PLACED ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF COLLECTOR, LAND ACQUISITION VS. MST KATIJI AND OTHERS (1987) 167 ITR 471 AND ALSO IN THE CASE OF CONCORD OF INDIA INSURANCE CO. LTD., VS SMT. NIRMAL A DEVI AND OTHERS 118 ITR 507. THE ASSESSEE ALSO FILED AN AFFIDAVIT CONFIRMING THE REASONS ADVANCED BY THE ASSESSEE ARE TRUE AND CORRECT. ITA NO. 1079/HYD/2013 & C.O. NO. 03/HYD/2014 M/S. PLR PROJECTS PVT. LTD. ===================== 6 5. WE HAVE CAREFULLY GONE THROUGH THE REASONS ADVANCE D BY THE ASSESSEE FOR FILING THE CO BELATEDLY IS THAT THE ASSESSEE'S COUNSEL WHO REPRESENTS THE CASE BEFORE T HE CIT(A) DID NOT GUIDE THE ASSESSEE PROPERLY AND ONLY AFTER WHEN THE ASSESSEE ENGAGED THE PRESENT COUNSEL, HE HAS ADVISE D HIM TO FILE THE CO. WE FIND THERE IS NO EVIDENCE OR SUPPO RTING DOCUMENT TO SUGGEST THAT THE EARLIER COUNSEL HAS WR ONGLY ADVISED THE ASSESSEE. THERE IS NO CONFIRMATION FRO M THE EARLIER COUNSEL WHAT HE HAS ADVISED THE ASSESSEE. IT IS OBSERVED THAT NOTHING HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE WITH REGARD TO THE FACT THAT WHICH COUNSEL HAS ADVISED THE ASSESSEE AS STATED IN THE AFFIDAVIT AND THERE IS NO AFFIDAVIT OR LETTER FROM THE CONCERNED COUNSEL, WHO HAS WRONGLY ADVISED THE ASSESSEE. THE LAW ASSISTS THOSE WHO ARE VIGILANT, NOT THOSE WHO SLEEP OVER THEIR RIGHTS. TH E DELAY CANNOT BE CONDONED SIMPLY BECAUSE THE ASSESSEE'S CA SE IS HARD AND CALLS FOR SYMPATHY OR MERELY OUT OF BENEVO LENCE TO THE PARTY SEEKING RELIEF. IN GRANTING THE INDULGENC E AND CONDONING THE DELAY, IT MUST BE PROVED BEYOND THE S HADOW OF DOUBT THAT THE ASSESSEE WAS DILIGENT AND WAS NOT GU ILTY OF NEGLIGENCE, WHATSOEVER. THE SUFFICIENT CAUSE WITHIN THE CONTEMPLATION OF THE LIMITATION PROVISION MUST BE A CAUSE WHICH IS BEYOND THE CONTROL OF THE PARTY INVOKING T HE AID OF ITA NO. 1079/HYD/2013 & C.O. NO. 03/HYD/2014 M/S. PLR PROJECTS PVT. LTD. ===================== 7 THE PROVISIONS. THE CAUSE FOR THE DELAY IN FILING T HE APPEAL, WHICH BY DUE CARE AND ATTENTION, COULD HAVE BEEN AV OIDED, CANNOT BE A SUFFICIENT CAUSE WITHIN THE MEANING OF THE LIMITATION PROVISION. WHERE NO NEGLIGENCE, OR INACT ION, OR WANT OF BONA FIDES CAN BE IMPUTED TO THE ASSESSEE, A LIBERAL CONSTRUCTION OF THE PROVISIONS HAS TO BE MADE IN OR DER TO ADVANCE SUBSTANTIAL JUSTICE. SEEKERS OF JUSTICE MUS T COME WITH CLEAN HANDS. IN THE PRESENT CASE, AS STATED IN THE AFFIDAVIT, THE REASONS ADVANCED BY THE ASSESSEE ARE NOT SUPPORTED BY ANY COGENT EVIDENCE AND HENCE, WE DECL INE TO CONDONE THE DELAY IN FILING THE AFORESAID APPEALS O F THE ASSESSEE ON THE GROUND THAT THE ASSESSEE WAS NOT AB LE TO ESTABLISH THAT IT HAS PREVENTED BY A REASONABLE CAU SE IN FILING THESE APPEALS BELATEDLY. IN VIEW OF THE ABOVE DISCU SSION, THE CO FILED BY THE ASSESSEE IS DISMISSED. 6. NOW, WE WILL TAKE UP THE REVENUE APPEAL. BRIEF FAC TS OF THE CASE ARE THAT FOR THE A.Y. 2007-08, THE ASSESSE E FIRM FILED ITS RETURN OF INCOME ON 16.11.2007 ADMITTING TOTAL INCOME OF RS. 4,53,74,330. ORIGINAL ASSESSMENT U/S. 143(3) OF THE ACT WAS COMPLETED ON 30.11.2009 DETERMINING THE INCOME AT RS. 20,83,52,228. THEREAFTER, AN ORDER U/S. 263 WAS PAS SED BY THE CIT DIRECTING THE AO (I) TO DISALLOW A SUM OF R S. 49,70,460 OUT OF THE SUB-CONTRACT CHARGES U/S. 194C (II) TO V ERIFY ITA NO. 1079/HYD/2013 & C.O. NO. 03/HYD/2014 M/S. PLR PROJECTS PVT. LTD. ===================== 8 WHETHER TDS WAS MADE OR NOT U/S. 194C FOR A SUM OF R S. 5,40,51,832. ACCORDINGLY, THE AO COMPLETED THE ASS ESSMENT U/S. 143(3) R.W.S. 263 OF THE ACT DETERMINING THE TO TAL INCOME AT RS. 7,99,51,993 BY MAKING FOLLOWING DISALLOWANCE S: (A) DISALLOWANCE U/S. 40(A)(IA) RS. 49,70,460 (B) DISALLOWANCE U/S. 40(A)(IA) RS. 1,29,980 (C) DISALLOWANCE U/S. 40(A)(IA) RS. 1,52,09,336 7. ON APPEAL, THE CIT(A) OBSERVED THAT THE ISSUE RELAT ING TO DISALLOWANCE OF RS. 49,70,460 DOES NOT REQUIRE ADJU DICATION AS THIS DISALLOWANCE IS CONSEQUENT TO THE ORDER U/S. 263 OF THE ACT WHEREIN THE ASSESSEE ADMITTED THAT NO TDS W AS MADE. ACCORDINGLY, THERE IS NO ADJUDICATION BY THE CIT(A) AND MATTER HAS REACHED FINALITY. 8. REGARDING DISALLOWANCE OF RS. 1,29,980 U/S. 40(A)(IA ) IT WAS OBSERVED BY THE AO THAT NO TDS ON THIS AMOUNT W AS PAID TO BABU TATA HITACHI. HOWEVER, IT WAS OBSERVED BY THE CIT(A) THAT THIS ISSUE WAS ALREADY SUBJECT MATTER OF APPEA L BEFORE THE TRIBUNAL IN QUESTIONING THE 263 ORDER BY THE AS SESSEE AND THE TRIBUNAL HAS DELETED THE DISALLOWANCE. BEING S O, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE BY THE C IT(A). AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. WE DO NOT FIND ANY MERIT IN THE PLEA OF THE REVENUE AS THIS I SSUE WAS ITA NO. 1079/HYD/2013 & C.O. NO. 03/HYD/2014 M/S. PLR PROJECTS PVT. LTD. ===================== 9 ALREADY DECIDED IN FAVOUR OF THE ASSESSEE WHILE DEC IDING THE ORDER PASSED U/S. 263 BY THE TRIBUNAL. 9. COMING TO THE NEXT GROUND RELATING TO DISALLOWANCE OF RS. 1,52,09,336 U/S. 40(A)(IA) OF THE ACT. THE FACT S RELATING TO THIS ADDITION ARE THAT AS PER TDS CERTIFICATE ENCLO SED, THE ASSESSEE IS IN RECEIPT OF GROSS AMOUNT OF RS. 18,49 ,40,581 VIDE 6 BILLS - 3 RD BILL TO 8 TH BILL FROM EXECUTIVE ENGINEER, PJP EXECUTIVE DIVISION - 3, PEBBAIR, MAHABOOBNAGAR DIST RICT. THE ISSUE FOR CONSIDERATION IS THAT NO TDS WAS MADE ON THE THIRD BILL NETTED AT RS. 1,52,09,336/- BY THE ASSESSEE. W HEN THE SAME QUESTIONED, IT WAS REPLIED BY THE ASSESSEE THA T THIS AMOUNT WAS DIRECTLY PAID TO M/S KRANTHI CONSTRUCTION S BY THE DEDUCTEE AND THEREFORE NO TDS WAS REQUIRED TO BE MA DE BY THEM. THE ASSESSEE ALSO PRODUCED A COPY OF THE MOU FOR EXECUTION OF PROJECT OF WATER RESOURCE DEVELOPMENT, CONFIRMATION LETTER FROM M/S KRANTHI CONSTRUCTIONS T HAT THE WORK WAS EXECUTED BY THEM AND THE AMOUNT OF RS. 1,52,09,336/- WAS RECEIVED BY THEM AND OFFERED TO T AX IN THEIR HANDS. HOWEVER, AS THE ASSESSING OFFICER COU LD NOT GET ANY CLARITY, FROM THE ABOVE SUBMISSIONS OF THE ASSE SSEE, DISALLOWED THE AMOUNT OF RS. 1,52,09,336/- UNDER SE CTION 40(A)(IA} OF THE ACT. ITA NO. 1079/HYD/2013 & C.O. NO. 03/HYD/2014 M/S. PLR PROJECTS PVT. LTD. ===================== 10 10. ON APPEAL, THE CIT(A) OBSERVED THAT THERE IS MERIT IN THE SUBMISSIONS OF THE ASSESSEE. THE TDS CERTIFICATE WA S ISSUED BY EXECUTIVE ENGINEER, PEBBAIR, MAHABOOBNAGAR DISTR ICT IN THE NAME OF M/S P LAKSHMU REDDY AND KRANTHI CONSTRUCTION S (JOINT VENTURE), HYDERABAD - P LAKSHMU REDDY ACCOUN T. THE GROSS AMOUNTS AS PER THE STATEMENT ENCLOSED TO THE MAIN TDS CERTIFICATE IS RS. 18,49,40,581/- AND THE NET FIGUR E IS RS. 13,89,91,796. AS PER THE TDS CERTIFICATE, THE AMOU NTS WERE PAID TOWARDS PACKAGE NO. 108 WORK BILLS. THIS NET F IGURE CONSISTS OF SIX AMOUNTS PAID VIDE SIX BILLS STARTIN G FROM 3 RD BILL TO 8 TH BILL. THE ISSUE FOR CONSIDERATION IS THE 3 RD BILL FOR NET FIGURE OF RS. 1,52,09,336. THE ASSESSEE SUBMITTED THAT THIS FIGURE WAS DIRECTLY CREDITED TO THE BOOKS OF ANOTHE R CONSTITUENT OF JOINT VENTURE M/S KRANTHI CONSTRUCTIO NS. WHEN THE SIX BILLS STANDING IN THE NAME OF JV THERE SHOU LD BE SOME BASIS TO CLAIM THAT FIVE BILLS STARTING FROM 4 TH TO 8 TH BILLS WERE OFFERED BY ONE CONSTITUENT AND ANOTHER ONE IS OFFER ED IN THE HANDS OF THE OTHER CONSTITUENT OF JV. FOR THIS DIV ISION, THE ASSESSEE PRODUCED A COPY OF THE MOU ENTERED BY THE CONSTITUENTS OF JV. AS PER THE CONTENTS OF MOU, WHI CH WAS ALSO PRODUCED BEFORE THE ASSESSING OFFICER, IT CAN BE SEEN FROM PAGE 4 CLAUSE 1(III) THAT THE PARTIES HERETO A GREE TO DISTRIBUTE ALLOTTED WORKS AS PER THE DETAILS GIVEN HEREUNDER: ITA NO. 1079/HYD/2013 & C.O. NO. 03/HYD/2014 M/S. PLR PROJECTS PVT. LTD. ===================== 11 PARTY WORK VALUE (IN RS.) PLR PACKAGE NO. 5 (ENTIRE) 72,90,00,000 KC PACKAGE NO. 101 (ENTIRE) 62,91,25,110 11. IN CLAUSE 2 AT PAGE 5 OF THE MOU, THE WORK DIVISION RELATING TO 108 PACKAGE IS ALSO MENTIONED, WHICH IS FOLLOWS: THAT INSOFAR AS PACKAGE NO. 108 IS CONCERNED PLR SH ALL UNDERTAKE A PORTION OF THE WORK WHICH IS OF A TENDE RED VALUE OF RS. 37.70,00,000/- OF THE TATIKUNTA RESERVOIR (TOTA L PROJECT). WHICH SHALL BE REFERRED TO AS PART-A OF PACKAGE NO. 108 AND KC SHALL UNDERTAKE A PORTION OF THE WORK IT IS OF T HE TENDER VALUE OF RS. 17,59,46,240/- OF NAGARDODDI RESERVOIR TOTAL PROJECT WHICH SHALL BE REFERRED AS PART-B THE PACKA GE NO. L08' 12. THE CIT(A) OBSERVED THAT AS PER THE TDS CERTIFICATE WHICH WAS ISSUED IN THE NAME OF JV AND NOT IN THE NAME OF ASSESSEE ALONE, THE PAYMENTS WERE MADE TOWARDS PACKAGE NO. 1 08 WORK BILLS, HE OBSERVED THAT THERE IS NO REASON TO DISAGREE WITH THE SUBMISSIONS OF THE ASSESSEE. WHEN THE PAYM ENTS WERE MADE TOWARDS PACKAGE NO. 108 WORK BILLS AND TH E CONSTITUENTS OF THE JV HAVE A CLEAR UNDERSTANDING O F THE TOTAL WORKS TO BE CARRIED OUT BETWEEN THEMSELVES, INCLUDI NG PACKAGE NO. 108, THERE IS NO POINT TO DISAGREE TO T HE CLAIM THAT SOME PAYMENTS WERE DIRECTLY PAID TO M/S. KRANTH I CONSTRUCTIONS BY THE ASSESSEE BASED ON MOU. THE OTH ER EVIDENCES FILED BY THE ASSESSEE LIKE BANK STATEMENT S OF M/S. KRANTHI CONSTRUCTION AND CONFIRMATION FROM THEM ALS O INDICATE THE SAME. IN VIEW OF THE FOREGOING DISCUSS IONS, HE WAS IN AGREEMENT WITH THE CLAIM OF THE ASSESSEE THA T OUT OF ITA NO. 1079/HYD/2013 & C.O. NO. 03/HYD/2014 M/S. PLR PROJECTS PVT. LTD. ===================== 12 SIX WORK BILLS SHOWN IN THE TDS CERTIFICATE AMOUNT RELATING TO 3 RD BILL REPRESENTING RS. 1,52,09,336/- WAS PAID DIREC TLY TO M/S KRANTHI CONSTRUCTIONS AND IN SUCH A SITUATION DEDUC TING TAX ON A PAYMENT DIRECTLY CREDITED TO THE BOOKS OF CONS TITUENT OF JV BY ANOTHER CONSTITUENT OF JV DOES NOT ARISE. AC CORDINGLY, NO DISALLOWANCE UNDER SECTION 40(A){IA) IS ATTRACTE D IN RESPECT OF THIS TRANSACTION AND HE DIRECTED THE ASSESSING O FFICER TO DELETE THE DISALLOWANCE OF 1,52,09,336/-. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE IT IS ADMITTED TH AT PAYMENT IS RELATING TO PACKAGE NO. 108 AND WORK WAS EXECUTED B Y KRANTHI CONSTRUCTIONS LTD. AND THE PAYMENT HAS BEEN RECEIVED BY THE PRINCIPAL JV P. LAKSHMU REDDY AND M/S. KRANTHI CONSTRUCTIONS LTD. AND DEPOSITED INTO JV B ANK A/C. ON 7.2.2006 WITH THE SYNDICATE BANK A/C. NO. 30361010002650 AND THE SAME WAS PAID TO JV TO M/S. K RANTHI CONSTRUCTIONS ON 10.7.2006. HOWEVER, AN ENTRY WAS MADE BY WAY OF JOURNAL ENTRY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE ON 5.7.2006 DEBITING M/S. KRANTHI CONSTRUCTIONS CRE DITING EE GADWAL (SUB CONTRACT ACCOUNT) AT RS. 1,52,09,336. LATER, THE ENTRY WAS REVERSED ON 10.7.2006 BY DEBITING SUB-CON TRACT ACCOUNT CREDITING KRANTHI CONSTRUCTIONS ACCOUNT AT RS. ITA NO. 1079/HYD/2013 & C.O. NO. 03/HYD/2014 M/S. PLR PROJECTS PVT. LTD. ===================== 13 1,52,09,336. THE RECEIPT OF MONEY BY KRANTHI CONST RUCTIONS AND TREATING THE SAME AS INCOME OF IT WAS EVIDENCED BY THE CONFIRMATION LETTER ISSUED BY KRANTHI CONSTRUCTIONS WHICH READS AS FOLLOWS 'TO WHOM SO EVER IT MAY CONCERN THIS IS TO STATE THAT, AN RA BILL DATED 06/07/2006 OF OUR PACKAGE NO. 108 LIFT IRRIGATION PROJECT SITUATED AT GADWAL, GROSS VALUE OF WHICH IS RS. 1,85,55,663/- AND THE N ET PAYMENT AFTER ALL RECOVERIES RS. 1,52,09,336/- RELATES TO O UR OWN PROJECT, BUT NOT AS A SUB-CONTRACT FROM M/S. PLR PROJECTS PV T. LTD. WE HEREBY CERTIFY THAT, THE BILL RELATES TO THE PAC KAGE NO. 108 PROJECT AWARDED TO US AND THE RECEIPT FROM CLIENT I S DEPOSITED IN OUR BANK ACCOUNT. THE SAID BILL IS ASSESSED TO T AX IN OUR HANDS FOR THE AY 2007-08. WE ONCE AGAIN CLARIFY TH AT, THE BILL RELATES TO OUR OWN PROJECT, BUT NOT A SUB-CONTRACT FROM M/S. PLR PROJECTS PVT. LTD. THANKING YOU, FOR KRANTHI CONSTRUCTIONS SD/ AUTHORISED SIGNATORY ' 14. IT IS AN ADMITTED FACT THAT THE AMOUNT HAS BEEN TAX ED IN THE HANDS OF KRANTHI CONSTRUCTIONS ONLY. THERE MAY BE SO MANY REASONS FOR ACCOUNTING THIS CONTRACT RECEIPT I N THE HANDS OF THE ASSESSEE AND IT WAS PLEADED BEFORE US THAT BECAUSE OF MISTAKE IN 26AS ISSUED BY THE CONTRACTOR , THE ENTRY WAS MADE IN THE BOOKS OF ACCOUNT OF THE ASSES SEE. HOWEVER, IT IS AN ADMITTED FACT THAT THE AMOUNT WAS OFFERED FOR TAXATION IN THE HANDS OF KRANTHI CONSTRUCTIONS AND IT CANNOT BE BROUGHT TO TAX IN THE HANDS OF THE ASSESS EE. BEING ITA NO. 1079/HYD/2013 & C.O. NO. 03/HYD/2014 M/S. PLR PROJECTS PVT. LTD. ===================== 14 SO THERE IS NO QUESTION OF DEDUCTION OF TDS BY THE ASSESSEE ON THE PAYMENT RECEIVED BY THE KRANTHI CONSTRUCTION S. FURTHER THERE IS INSERTION OF SECOND PROVISO TO SEC TION 40(A)(IA) BY FINANCE ACT, 2012 W.E.F. 1.4.2013 WHER EIN STATED THAT DISALLOWANCE U/S. 40(A)(IA) OF THE ACT NEED NOT BE MADE IF THE ASSESSEE IS NOT DEEMED TO BE AN ASSESSEE IN DEF AULT UNDER THE FIRST PROVISO TO SECTION 201(1) OF THE ACT. IT WAS HELD BY VARIOUS JUDICIAL AUTHORITIES THAT ITS RETROSPECTIVE IN NATURE SINCE IT HAS BEEN INTRODUCED TO ELIMINATE UNINTENDE D CONSEQUENCES WHICH MAY CAUSE UNDUE HARDSHIP TO THE TAX PAYER. FOR THIS PURPOSE WE REFER TO THE ORDER OF T HE TRIBUNAL COCHIN BENCH IN THE CASE OF ANTONY D. MUNDACKAL VS. ACIT VIDE ITA NO. 38/COCHIN/2013 DATED 29.11.2013 FOR A.Y. 2009- 10 WHEREIN IT WAS HELD AS FOLLOWS: '7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFUL LY PERUSED THE RECORD. ACCORDING TO THE ASSESSEE, THERE IS NO WRITTEN CONTRACT BETWEEN HIM AND THE PERSONS DOING POLISHIN G WORKS. ACCORDINGLY, THE ASSESSEE HAS CONTENDED BEFORE US T HAT THE PROVISIONS OF SEC. 194C SHALL NOT APPLY TO THE POLI SHING CHARGES. HOWEVER, WE NOTICE THAT THE ASSESSING OFFI CER HAS GIVEN A CLEAR FINDING THAT ESSENTIAL INGREDIENTS OF A CONTRACT ARE VERY MUCH AVAILABLE IN THE POLISHING WORKS ENTRUSTE D BY THE ASSESSEE. FURTHER WE NOTICE THAT THE CBDT, VIDE CIR CULAR NO.433 DATED 25-09-1985 (1986)(157 ITR ST. 27) HAS CLARIFIED THAT THE PROVISIONS OF SEC. 194C ARE WIDE ENOUGH TO COVER ORAL CONTRACTS ALSO. A CONTRACT IS NORMALLY REDUCED IN W RITING IN ORDER TO MAKE CLEAR THE TERMS AND CONDITIONS, OBLIG ATIONS OF THE PARTIES TO THE CONTRACT ETC. IF THE CONDITIONS OF C ONTRACT ARE OTHERWISE UNDERSTOOD BY THE PARTIES, IN VIEW OF THE REPEATED TRANSACTIONS, IN OUR VIEW, THE ABSENCE OF A WRITTEN CONTRACT WOULD NOT MAKE ANY DIFFERENCE. IN THE INSTANT CASE, THE ASSESSEE IS REPEATEDLY GIVEN WORKS TO THE POLISHING PEOPLE A ND HENCE THE ITA NO. 1079/HYD/2013 & C.O. NO. 03/HYD/2014 M/S. PLR PROJECTS PVT. LTD. ===================== 15 TERMS AND CONDITIONS OF THE WORK WOULD BE CLEARLY U NDERSTOOD BY BOTH THE PARTIES. ACCORDINGLY, WE REJECT THIS CO NTENTION OF THE ASSESSEE AND HOLD THAT THE PROVISIONS OF SEC. 1 94C SHALL APPLY TO THE POLISHING WORKS GIVEN BY THE ASSESSEE. 7.1 ACCORDING TO LD A.R, THE ASSESSEE HAS ACTED AS A CONDUIT PIPE IN CONNECTION WITH THE POLISHING WORKS BETWEEN THE CUSTOMERS AND THE PERSON DOING POLISHING JOB. ACCOR DINGLY, IT WAS SUBMITTED THAT THERE IS NO PROFIT ELEMENT IN TH E SAID TRANSACTIONS. THE LD A.R FURTHER SUBMITTED THAT THE ASSESSEE HAS INCLUDED THE COST OF POLISHING WORKS IN THE SAL E VALUE OF ALUMINIUM EXTRUSIONS, WITHOUT KNOWING TAX IMPLICATI ONS. HOWEVER, WE NOTICE THAT THE ASSESSEE DID NOT FURNIS H ANY PROOF TO SUBSTANTIATE THE ABOVE SAID CLAIMS. THE ASSESSEE , BEING A DEALER IN ALUMINIUM EXTRUSIONS, HAS ONLY SUPPLIED T HE PRODUCTS AFTER CARRYING OUT THE POLISHING WORKS ACCORDING TO THE TASTE AND REQUIREMENT OF CUSTOMERS. IT IS ONLY ONE OF THE MANY BUSINESS TECHNIQUES NORMALLY ADOPTED BY A BUSINESS MAN TO IMPROVE HIS SALES, SINCE IT WILL BE VERY DIFFICULT FOR CUSTOMERS TO IDENTIFY THE POLISHING PEOPLE AND GET THE WORK DONE BY THEMSELVES. HENCE, WE ARE OF THE VIEW THAT IT MAY N OT BE CORRECT TO ARGUE THAT THE CONTRACT EXISTED BETWEEN THE CUST OMERS AND THE POLISHING PEOPLE. IN FACT, THE CUSTOMER MAY NOT HAVE ANY CONTACT WITH THE POLISHING PEOPLE IN THIS TYPE OF T RANSACTIONS. HENCE, IT IS HARD TO BELIEVE THE CLAIM OF THE ASSES SEE THAT HE HAS ACTED AS MERE CONDUIT PIPE BETWEEN THE CUSTOMERS AN D POLISHING PEOPLE. ACCORDINGLY, THE CLAIM THAT THE A SSESSEE STANDS IN A FIDUCIARY CAPACITY IS ALSO LIABLE TO BE REJECTED. IN THIS KIND OF FACTUAL SITUATION, IN OUR VIEW, THE EX ISTENCE OR ABSENCE OF PROFIT ELEMENT IN THE POLISHING WORKS DO ES NOT MAKE ANY DIFFERENCE. 7.2 THE LD COUNSEL, BY PLACING RELIANCE ON THE DECI SION OF SPECIAL BENCH IN THE CASE OF MERYLINE SHIPPING AND TRANSPORTS (SUPRA) CONTENDED THAT THE PROVISIONS OF SEC. 40(A) (IA) SHALL APPLY ONLY TO AMOUNT PAYABLE AND NOT TO THE AMOUNT PAID. HOWEVER, THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIKANDAR KHAN N TUNVAR (357 ITR 312) AND THE HO N'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (ITAT 20 OF 2013) HAVE HELD THAT THE DECI SION RENDERED BY THE SPECIAL BENCH IN THE CASE OF MERYLI NE SHIPPING & TRANSPORTS IS NOT A GOOD LAW. THE LD A.R, HOWEVER , PLACED RELIANCE ON THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING SERVICES (357 ITR 642). ON A CAREFUL PERUSAL OF THE DECISION GIVEN BY HON'BLE AL LAHABAD HIGH COURT, WE NOTICE THAT THE HIGH COURT HAS DECID ED THE ISSUE REFERRED TO IT ON A DIFFERENT FOOTING AND HAS MADE A ITA NO. 1079/HYD/2013 & C.O. NO. 03/HYD/2014 M/S. PLR PROJECTS PVT. LTD. ===================== 16 PASSING COMMENT ABOUT THE DECISION RENDERED BY THE SPECIAL BENCH. THUS, THE RATIO OF THE SAID DECISION IS DIFF ERENT FROM THAT RENDERED IN THE CASE OF MERYLINE SHIPPING AND TRANS PORTS BY THE SPECIAL BENCH. HENCE, WE ARE INCLINED TO REJECT THE CONTENTIONS OF THE ASSESSEE ON THIS POINT ALSO. 7.3 THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCO-COLA BE VERAGES LTD (SUPRA) IN ORDER TO CONTEND THAT THE REVENUE IS NOT ENTITLED TO RECOVER TAXES, IF THE RECIPIENT HAS DECLARED THE PAYMENTS IN HIS RETURN OF INCOME. WE NOTICE THAT THE ABOVE SAID DECISION WAS RENDERED IN THE CONTEXT OF THE PROVISIONS OF SE C. 201(1) AND HENCE, WE ARE OF THE VIEW THAT THE RATIO OF THE SAI D DECISION CANNOT BE APPLIED TO THE DISALLOWANCE MADE U/S 40(A )(IA) OF THE ACT. 7.4 THE LAST CONTENTION OF THE ASSESSEE IS THAT THE SECOND PROVISO TO SEC. 40(A)(IA) OF THE ACT, INSERTED BY T HE FINANCE ACT, 2012 WITH EFFECT FROM 1.4.2013 IS CLARIFICATORY IN NATURE AND HENCE THE BENEFIT OF THE SAME SHOULD BE APPLIED RET ROSPECTIVELY. HOWEVER, THE CORRECTNESS OF THIS CONTENTION HAS NOT BEEN EXAMINED BY THE TAX AUTHORITIES. HENCE, IN THE INTE REST OF NATURAL JUSTICE, WE ARE OF THE VIEW THAT THIS CONTE NTION OF THE ASSESSEE REQUIRES EXAMINATION AT THE END OF THE ASS ESSING OFFICER. ACCORDINGLY, WE MODIFY THE ORDER OF THE LD CIT(A) AND SET ASIDE THIS GROUND TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE ABOVE SAID CONTENTION OF T HE ASSESSEE AND DECIDE THE SAME IN ACCORDANCE WITH THE LAW, AFT ER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD. WE MAKE IT CL EAR THAT WE HAVE, IN EFFECT, REJECTED ALL THE CONTENTIONS OF TH E ASSESSEE EXCEPT THE GROUND RELATING TO APPLICABILITY OF THE SECOND PROVISO TO SEC. 40(A)(IA) OF THE ACT TO THE YEAR UN DER CONSIDERATION.' 15. FURTHER THIS VIEW IS ALSO UPHELD BY PUNE BENCH OF T HIS TRIBUNAL IN THE CASE OF M/S. GAURIMAL MAHAJAN & SONS IN ITA NO. 1852/PN/2012 ORDER DATED 6.1.2014 FOR A.Y. 2008-0 9. FROM THIS POINT OF VIEW ALSO THERE CANNOT BE ANY DI SALLOWANCE U/S. 40(A)(IA) OF THE ACT. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A). ITA NO. 1079/HYD/2013 & C.O. NO. 03/HYD/2014 M/S. PLR PROJECTS PVT. LTD. ===================== 17 16. IN THE RESULT, REVENUE APPEAL IN ITA NO. 1079/HYD/ 2013 AND ASSESSEE'S CO IN CO NO. 03/HYD/2014 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH MARCH, 2014. SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 12 TH MARCH, 2014 TPRAO COPY FORWARDED TO: 1. THE ASST. CIT, CIRCLE-16(3), 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. PLR PROJECTS PVT. LTD., PLOT NO. 130 INWINEX TOWERS, 3B 3 RD FLOOR, ROAD NO. 12, BANJARA HILLS, HYDERABAD. 3. THE CIT(A)-V, HYDERABAD. 4. THE CIT-IV, HYDERABAD 5. THE DR BENCH 'A', ITAT, HYDERABAD