T. Jagadeeswara Rao & Co., Warangal, Hyderabad V. JCIT, Warangal Range, Warangal

ITA 1123/HYD/2012

• Counselvise Citation: 112322514 RSA 2012
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 26-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI SOLGY JOSE T KOTTARAM

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1123/HYD/2012 : ASSTT. YEAR 2008 - 09 M/S. T. JAGADEESWARA RAO & CO., WARANGAL. ( PAN - AA NFM 0584 G ) V/S. JOINT COMMISSIONER OF INCOME - TAX WARANGAL. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SAMUEL NAGADESI RESPONDENT BY : S HRI SHRI SOLGY JOSE T.KOTTARAM DR DATE OF HEARING 1 0 . 2 .201 4 DATE OF PRONOUNCEMENT 10.2.2014 O R D E R PER B. RAMAKOTAIAH, ACCOUNTANT MEMBER: THIS IS AN ASSESSEES APPEAL A GA INST THE ORDER OF THE COMMISSIONER OF INCOME - TAX(APPEALS) VI, HYDERABAD DATED 15.5.2012. 2. ASSESSEE RAISED FIVE GROUNDS ON THE ISSUE OF DISALLOWANCE S MADE UNDER S.37, S.40A(3) AND S. 40(A)(IA) OF THE INCOM E - TAX ACT, 1961. 3. BRIEFLY STATED, ASSESSEE IS A FIRM , ENGAGED IN THE BUSIN E SS OF EXECUTION OF GOVERNMENT CIVIL CONTRACTS MAINLY FOR RAILWAYS. DURIN G THE Y E AR, ASSESSEE SEEMS TO HAVE UNDERTAKEN C IRCULATING AREA EARTH WORKS AND RETAINING WALL WORKS BETWEEN KAR I MNAGAR AND JAGATITYAL , ON THE PROPOSED NEW BROAD GAUGE LINE CONNECTING PEDDAPALLI AND NIZAMABAD VIA KARIMNAGAR; CONSTRUCTED A MAJOR BRIDGE NO.607 ACROS S K ORUTLA - P EDA VAGU ; AND ALSO A RAIL OVER BRIDGE NEAR ONGOLE RA I LWAY STATION. AS PART OF CONTRACT WORKS, ASSESSEE SEEMS TO HAVE PAID VARIOUS AMOUNTS TOWARDS CEMENT, METAL, L ABOU R CHARGES, VEHICLE CHARGES, ETC. THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS, DISALLO W E D AMOUNTS NO T ICIN G THAT THEY ARE IN VIOLATION OF S.40A(3). THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF R S .44,99,365 UN D ER S.40A(3) AND AN AMOUNT O F R S .25,57,897 ON ACCOUNT OF NON - GENUIN E EXPENDITURE IN RESPECT OF ITA NO. 1123 / HYD/2012 M/S T.JAGADEESWARA RAO & CO. WARANGAL. 2 CEMENT AND METAL PURCHASES UNDER S.37(1) ON THE REASON THAT THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE REGARDING SUCH PURCHASES. F URTHER AMOUNTS OF RS.1,45,62 0 AND RS.2,18,000 WERE DISALLO WED UNDER S.40A(3) AND S.40(A) (IA) RESPECTIVELY. THE ASSESSING OFFICER ALSO MADE AN ADDITION OF RS.2,16,326 TOWARDS DIFFERENCE IN WORK IN PROGRESS ON THE BASIS O F BILLS RECEIVED IN THE MONTH OF APRIL. 4. BEFORE THE LEARNED CIT(A), ASSESSEE MADE VARIO US SUBMISSIONS JU S TIFYING WHY IT HAS TO PU R CH AS E IN CASH; THE REASONS FOR UNDERTAKING PROJECTS AT RURAL AREA S AND ALSO CLARIFYING THA T THE ROL LER EXPENSES ARE NO T EXACTLY ROLLER EXPENSES, B U T LABOR EXPENSES, AND ALSO RECONCILED THE DIFFERENCES THE WORK I N PROGRESS. TH E CIT(A) R E JE C TED ALL THE GROUNDS, EXCEPT THE ADDITION WITH REFERENCE TO WORK - IN - PROGRESS. 5. ASSESSEE IS AGGRIEVED AND HENCE PR O CE E D THE PRESENT APPEAL BEFORE THE TRIB U NAL. 6. BEFORE US, THE LEARNED COUN SE L , EXPLAINING THE N A TURE OF WOR K UNDERTAKEN AND ALSO T H E ARGUM E NTS TAKEN BEFORE THE LEARNED CIT(A) , SUBMITTED THA T THE ASSESSEE WAS IN A POSITION TO PR O DUCE THE BILLS FOR THE ADDITION MADE UNDER S.37(1) OF RS.25,57,897 , ON THE GROUND OF NON - GENUINE EXPENDITURE . HE FURTHER EXPLAINED THE CIRCUMSTANCES, UNDER WHICH THE PAYM E N T S WERE MADE, BUT THE SAME WERE NOT CON S I DE RED BY THE LEARNED ASSESSING OFFICER AND THE CIT(A). EVEN THOUGH HE TRIED TO ANALYSE THE P R OVISION S O F S.40A ( 3), ITS STATUTORY AND CONSTITUTIONAL IMPORTANCE AND THE CA S E - LAW ON VARIOUS PRINCIPLES, PRIMA - FACIE HE SUBMI T TED T HAT THE ASSESSING OFFICER DID NO T EXAMINE MANY O F THE CONT E NTION S RAISED. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUP P O R TED THE ORDERS OF THE RE VENUE AUTHO R ITI E S. ITA NO. 1123 / HYD/2012 M/S T.JAGADEESWARA RAO & CO. WARANGAL. 3 8. HAVING CONSIDERED THE RIVAL SUBMI S SION S AND PERUSING THE DETAILS ON RECO R D, WE ARE OF THE OPINION THAT THE ISSUE IS TO BE RE - EXAMIN E D BY THE ASSESSING OFFICER. T HE SUBMISSION S OF THE ASSESSEE ON FACTUAL ASPECTS, AS TAKEN FROM THE WRITTEN ARGUMENTS FILED BEFORE US, ARE THAT - . ( I ) THE ASSESSEE MADE PAYM E NTS TO THE PARTNER WHO I S AN AGENT OF THE FIRM AND WHO I S REQUIRED TO MAKE PAYMENTS AT SITE IN CASH TO THE LABOR, USE O F AGRICULTURAL IMPLEMENTS LIKE TRACTOR, PURCHASE OF METAL AND CEMENT THUS CAN B E CON S I D ERED AS COVERED BY CLAUSE (K) OF THE RULE 6DD. ( II ) NO DISALLOWANCE O F THE LABOR C HARGES FOR T HE SUPPLY OF METAL FROM THE LABOR AS THE SAME FALLS UNDER CLAUSE (F) AND THEY PRODUCE METAL BY CHIPPING THE LARGE ROCKS WITH MANUAL LABOR AND NO T BY THE USER OF THE POWER AND AS A GROUP THEY C OME UN D ER COTTAGE INDUSTRY. ( III ) NO DISALLOWANCE IN RESPECT OF CEMENT PURCHASES ON CASH AS THE PAYM E N T S WERE MADE FOR D ISPATCH FROM THE FACTORY TO TH E SITE OF EXECUTION OF THE CON T RA C T WHERE THE AGENT OF THE SUPPLIER OF THE CEMENT HAS TO CONFIRM THE RECEIPT OF CASH BEFORE THE FACTORY DELI V ERS PRODUCT ACCORDINGLY SHALL B E COVER E D UNDER CLAUSE (J) OF RULE 6DD. ( IV ) NO DISALLOWANCE SHALL BE MADE UNDER SECTION 40(A)(IA ) FOR THE T R ACTOR HIRE CHAR G ES AS THEY ARE NO T PAID UNDER A TRANSPORT CONTRACT AND THE T RACTOR IS NO T A TRANSPORT VEHICLE BUT AN AGRICULTURAL IMPLEMEN T . ( V ) O V ERALL THE CASH PAYM E N TS M ADE AT THE SITE WHERE TH E CONTRACTS ARE EXECUTED FALLS UN D ER CLAUSE (G) OF THE R U LE 6DD AND THE PL A CE ITA NO. 1123 / HYD/2012 M/S T.JAGADEESWARA RAO & CO. WARANGAL. 4 WHERE THE PAYMENTS ARE MADE NEITHER THE PAYER NOR RECIPIENT HAS ACCESS TO BA NKING FACILITIES AND THE SITE IS NEITHER A VILLAGE NOR A TOWN HAVING SERVED BY A BANK. ( VI ) MERE SERVICE OF A VILLAGE OR TOWN BY A BANK IS NO T JUST SUFFICIENT, AND THE PAYER AND PAYEE SHALL BE PERSONS OR D IN A RILY RESIDING IN SUCH VILLAGE OR TOWN. THE CONTRACT SITE IS NEITHER SUCH PLACE. 9. IT WAS THE SUBMISSION THAT ALL TH E SE ASPECTS REQUIRE DETAILED EXAMINATION BY THE ASSESSING OFFICER, AS HE HAS NOT GIVEN ENOUGH OPPORTUNIT Y IN THE COU R SE OF ASSESSMENT PROCEEDINGS. 10. MOREO V ER, THE LEARNED CIT(A) IN PARA 6.6 CONSIDERED THE DISALLOWANCE UNDER S.37(1) AS IF IT IS A DISALLOWANCE UNDER S .40 A (3). EVEN THOUGH THE ASSESSEE REQUE S TED FOR GIVING AN OP P ORTU N ITY TO SUBMIT THE BILLS, THE SAME WAS ALSO NOT ACCEPTED. FURTHER, AS SEEN FROM THE ASSESSMENT ORDER AT PAGE 7, THE VOUCHERS PERTAINING TO PAYMENT TO VASEEM IS FOR ROLLER RENT FROM 16.2.2007 TO 17.3.2008. EVEN THOUGH THIS INDICATES THAT THE PAYMENT IS FOR MORE THAN ONE YEAR, AND PARTLY COVERS THE PREVIOUS Y E AR, TH E ASSESSING OFFICER SEEMS TO HAVE NOT NOTICED THIS AND D I S ALLO W ED THE ENTIRE AMOUNT UNDER S.40A ( 3 ) . IF THE PAYMENTS ARE MADE ON LABOUR ACCOUNT AND NOT ON VEHICLE ACCOUNT, AND THE AMOUNTS OF EXPENDITURE RELATE TO MORE THAN ONE YEAR, AS NOTED BY THE ASSESSING OFFICER ON PAGE 7 OF THE ASSESSMENT ORDER, THESE ASPECTS REQUIRE EXPLANATION FROM THE ASSESSEE, AND EXAMINATION BY THE ASSESSING OFFICER. FOR THESE R E ASONS, WITHOUT GOING INTO THE MERITS OF THE VARIO US CONTENTION S R AISED BY TH E ASSESSEE , WE SET ASIDE THE ORDERS OF THE REVENUE AUTHORITIES AND R E STORE THE MATTER TO THE FILE O F THE ASSESSING OFFICER FOR FRESH EXAMINATION, AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE, TO EXPLAIN THE NATURE OF PAYM E N T S AND WHY PROVISION S OF RULE 6DD APPLY TO EACH OF THE CASH PAYMENTS. THE ASSESSEE IS FREE TO SUBMIT THE NECESSARY DETAIL S FOR THE AMOUNTS ITA NO. 1123 / HYD/2012 M/S T.JAGADEESWARA RAO & CO. WARANGAL. 5 DISALLO W E D UNDER S.37(1). WITH TH ES E DIRECTIO N S, THE G R OUNDS RAISED BY THE ASSESSEE IN THIS APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 1 1. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 10 TH FEBRUARY, 2014 SD/ - SD/ - (ASHA VIJAYARAGHAVAN) (B.RAMAKOTAIAH ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/ - 10 TH FEBRUARY, 2014 COPY FORWARDED TO: 1. M/S. T. JAGADEESWARA RAO & CO., (WARANGAL) C/O. SAMUEL NAGADESI, CHARTERED ACCOUNTANT, 302,GODLEN GREEN APARTMENTS, ERRAM MANZIL COLONY, PUNJAGUTTA, HYDERABAD 500 082 . 2. JOINT COMMISSIONER OF INCOME - TAX , W ARANGAL 3. COMMISSIONER OF INCOME - TAX(APPEALS) V I , HYDERABAD 4. COMMISSIONER OF INCOME - TAX V HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S