Income Tax Officer 1(2), Jabalpur V. M/s Kishorilal Loomba & Sons, Jabalpur

ITA 117/JAB/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87494 (ITAT-JABALPUR)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-02-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 03-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHISHEK SHUKLA
• Assessee Lawyers: G N PUROHIT
• Section: 143(3); 194C

Judgement Text

INCOME TAX APPELLATE TRIBUNAL, JABALPUR BENCH, JABALPUR BEFORE : SHRI I. C. SUDHIR, JUDICIAL MEMBER A ND SHRI PRAMOD KUMAR, ACCOUNTA NT MEMBER ITA NO.117/JAB./2013 ASSESSMENT YEAR : 2005-06 INCOME-TAX OFFICER, VS. M/S. KISHORILAL LOOMBA & SONS, 1(2), JABALPUR. 1546/1, RATAN COLONY, NARMADA ROAD, JABALPUR. (PAN: AAYPL 5240 K) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ABHISHEK SHUKLA, D.R. RESPONDENT BY : SHRI G.N. PUROHIT, ADVOCATE DATE OF HEARING : 11.02.2015 DATE OF PRONOUNCEMENT : 27 .03.2015 ORDER PER PRAMOD KUMAR, A.M.: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 1 ST NOVEMBER, 2012 PASSED BY CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX A CT, 1961 FOR THE ASSESSMENT YEAR 2005-06 ON THE FOLLOWING GROUND : 1. THE CIT(A) HAS ERRED IN HOLDING THAT ONCE THE S UB-LETTING IS NOT ESTABLISHED; THE PROVISIONS OF SECTION 194C CANNOT BE INVOKED AND DELETED THE ADDITION ON ACCOUNT OF SECTION 40(A)(IA) OF RS.6,62 ,14,367/-. 2. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIA L FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE BEFORE US IS A CONTRACTOR. DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE RECEIVED TOTAL CONTRACT WORK OF RS.6,62,14 ,367/-. THE ENTIRE CONTRACT WORK 2 ITA NO. 117/JAB./2013 WAS ASSIGNED TO M/S. LOOMBA AND BROCA. BY SO ASSIGN ING THE CONTRACTUAL WORK, THE ASSESSEE HAD RECEIVED AN AMOUNT EQUIVALENT TO 4% OF THE CONTRACT WORK. THE ASSESSMENT WAS ONCE COMPLETED UNDER SECTION 143(3), BUT SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED AND IN THE COURSE OF REOPEN ED ASSESSMENT PROCEEDINGS, A DISALLOWANCE UNDER SECTION 40(A)(IA) WAS MADE IN RE SPECT OF PAYMENT MADE BY THE ASSESSEE TO M/S. LOOMBA AND BROCA. THE STAND TAKEN BY THE ASSESSING OFFICER WAS THAT THE PAYMENT SO MADE WAS IN THE NATURE OF PAYME NT TO SUB-CONTRACTOR AND ACCORDINGLY PROVISIONS OF TAX DEDUCTION AT SOURCE U NDER SECTION 194C CAME INTO PLAY. THERE IS NO DISPUTE THAT THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE FROM PAYMENTS MADE TO M/S. LOOMBA AND BROCA. IT WAS IN T HIS BACKDROP THAT A DISALLOWANCE OF RS.6,62,14,367/-, WHICH REPRESENTE D PAYMENT MADE BY ASSESSEE TO M/S. LOOMBA AND BROCA, WAS MADE. 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A). THE CIT(A), TAKING NOTE OF, AND RESPECTFULLY FOLLOWING THE ORDER DATED 12.03.2012 PASSED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07, DELETED THIS DISALLOWANCE BY OBSERVING AS FOLLOWS : DECISION ( GROUND NO. 5): I HAVE PERUSED THE MATERIAL ON RECOR D AND THE SUBMISSIONS OF THE COUNSEL CAREFULLY. ON SIMILA R FACTS AND ISSUES, THE HONBLE ITAT, JABALPUR IN ITA NO. 144/JAB/2009 DATE D 12.03.2012 FOR A. YR. 2006-07 HELD THAT ONCE THE SUB-LETTING IS NOT ESTAB LISHED, THE PROVISIONS OF SECTION 194C CANNOT BE INVOKED AND IN THAT EVENTUAL ITY DISALLOWANCE OF PAYMENTS PASSED ON TO M/S. LOOMBA AND BROKA CANNOT BE DISALLOWED BY INVOKING SECTION 40(A)(IA) OF THE I.T. ACT. THERE B EING NO MERIT FOR DISALLOWANCE, THE ORDER OF THE CIT(A) WAS SET ASIDE DIRECTING THE AO TO DELETE THE ADDITION MADE U/S. 40(A)(IA). RESPECTFULLY FOLL OWING THE SAME, THE ADDITION 3 ITA NO. 117/JAB./2013 MADE OF RS.6,62,14,367/- ON ACCOUNT OF SECTION 40(A )(IA) IS HEREBY DELETED. THIS GROUND OF APPEAL IS ALLOWED. 4. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APP EAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 6. WE FIND THAT THE ISSUE IS SQUARELY COVERED, AS H AS BEEN RIGHTLY NOTED BY THE CIT(A), BY TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006- 07. IN THIS ORDER, TRIBUNAL HAS INTER ALIA OBSERVED AS FOLLOWS : 16. IN THE LIGHT OF AFORESAID VARIOUS JUDGMENTS, I N ORDER TO DETERMINE THE INTENTION OF THE PARTIES ONE HAS TO EXAMINE THE M.O .U. AS A WHOLE AND ITS TERMS AND CONDITIONS ON WHICH THE PARTIES TO THE M.O.U. H AVE AGREED TO EXECUTE THE CONTRACT AWARDED TO THE ASSESSEE. NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO ESTABLISH THAT THE M.O.U. IS NOT GENUINE AND IT WAS EXECUTED AFTER THE AWARD OF CONTRACT AND ALSO THE CONTRACT WAS SUB LET TO THE SUB-CONTRACTOR. ON A CAREFUL PERUSAL OF THE M.O.U., IT IS MANIFESTL Y CLEAR THAT M/S. LOOMBA AND BROCA, PARTNERSHIP FIRM WAS CONSTITUTED TO EXEC UTE CONTRACT TO BE AWARDED TO THE ASSESSEE, AS M/S. LOOMBA AND BROCA DID NOT F ULFILL THE REQUISITE TERMS AND CONDITIONS FOR THE AWARD OF CONTRACT. TWO PARTN ERS ARE COMMON IN THE ASSESSEE-FIRM AS WELL AS M/S. LOOMBA AND BROCA. THO UGH PARTNERSHIP MAY BE SEPARATE ENTITIES, BUT THE ACTIVITIES OF THE PARTNE RSHIP FIRM ARE TO BE PERFORMED BY ITS PARTNERS. THEREFORE, IT IS VERY DIFFICULT TO SAY THAT PARTNERS HAVE SUBLET CONTRACT TO THEMSELVES THROUGH DIFFERENT PARTNERSHI P FIRM. IT WAS A MERE ARRANGEMENT TO EXECUTE CONTRACT AWARDED TO THE ASSE SSEE. THEREFORE, IT CANNOT BE SAID THAT CONTRACT WAS SUBLET TO M/S. LOOMBA AND BROCA. ONCE SUBLETTING IS NOT ESTABLISHED, THE PROVISIONS OF SECTION 194C CAN NOT BE INVOKED AND IN THAT EVENTUALITY DISALLOWANCE OF THE PAYMENTS PASSED ON TO M/S. LOOMBA AND BROCA CANNOT BE DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. WE, THEREFORE, FIND NO MERIT IN THE DISALLOWANCE. A CCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OF FICER TO DELETE THE ADDITIONS MADE ON ACCOUNT OF DISALLOWANCE UNDER SECTION 40(A) (A) OF THE ACT. 4 ITA NO. 117/JAB./2013 7. WE SEE NO REASONS TO TAKE ANY OTHER VIEW IN THE MATTER THAN THE VIEW SO TAKEN BY US IN THE ASSESSMENT YEAR 2006-07. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE RELIEF GRANTED BY THE CIT(A) AND DECLINE TO INT ERFERE IN THE MATTER. 8. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH MARCH, 2015. SD/- SD/- (I.C. SUDHIR) (PRAMOD K UMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 27 TH MARCH, 2015 *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED 4. CIT, CONCERNED 5. DR ITAT, JABALPUR BENCH 6. GUARD FILE //TRUE COPY// BY O RDER, ASSTT. REGISTRAR ITAT, JABALPUR BENCH, JABALPUR