ACIT, Circle-1, Warangal V. Sri Kavuri Prasad, Warangal

ITA 1176/HYD/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1406 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 17-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Assessee Lawyers: S RAMA RAO
• Keywords: Onus to prove
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1176/HYD/2011 ASSESSMENT YEAR: 2007-08 ASST. COMMISSIONER OF INCOME-TAX, ASSESSEE CIRCLE 1, WARANGAL VS. KAVURI PRASAD, RESPONDENT WARANGAL. (PAN AFDPK9109C) APPELLANT BY : SMT. VIDISHA KALRA RESPONDENT BY : SHRI S. RAMA RAO DATE OF HEARING : 10/12/2012 DATE OF PRONOUNCEMENT : 04/01/ 2013 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXECUTIO N OF RAILWAY CONTRACTS. WHILE COMPLETING THE ASSESSMENT U/S.143(3) FOR THE ASSESSMENT YEAR 2007-08 THE ASSE SSING OFFICER MADE VARIOUS DISALLOWANCES. 2. THE FIRST OF THE DISALLOWANCE IS SUM OF RS.26,01 ,482/- ON THE GROUND THAT THE ENTRIES FOR THESE EXPENDITURE W ERE MADE IN THE SUSPENSE ACCOUNT AND NOT IN THE INDIVIDUAL EXPE NDITURE ACCOUNTS. THE ASSESSING OFFICER HAD HELD THAT THE AR HAD NOT 2 ITA NO. 1176/HYD/2011 SRI KAVURI PRASAD FURNISHED ANY DETAILS TO SUBSTANTIATE THIS CLAIM AC COUNTED UNDER SUSPENSE ACCOUNT. 3. ON APPEAL BEFORE CIT(A) THE ASSESSEE SUBMITTED A S UNDER: THE ASSESSING OFFICER MADE AN OBSERVATION THAT CER TAIN AMOUNTS WERE DEBITED TO THE SUSPENSE ACCOUNT WHEN T HE AMOUNT WAS PAID AND THE SAID SUSPENSE ACCOUNT WAS TRANSFERRED TO VARIOUS ACCOUNTS IN THE PROFIT AND L OSS ACCOUNT. IT IS HUMBLY SUBMITTED THAT WHEN THE AMOU NTS HAVE BEEN PAID TO THE SITE IN-CHARGE TILL SUCH TIME THAT THE ACTUAL ACCOUNT FOR WHICH THE AMOUNT WOULD BE DE BITED ARE KNOWN THE AMOUNT WOULD BE LYING IN THE SUSPENSE ACCOUNT. ON RECEIPT OF THE INFORMATION WITH REGARD TO EACH OF THE ITEM OF THE EXPENDITURE INCURRED FROM O UT OF THE SUSPENSE ACCOUNT, THE REQUIRED EXPENDITURE ACCO UNT WOULD BE DEBITED AND THE SUSPENSE ACCOUNT WOULD BE CREDITED. THE SUSPENSE ACCOUNT WOULD FINALLY BE NU LLIFIED BY TRANSFER OF THE AMOUNTS TO THE RESPECTIVE ACCOUN T OF EXPENDITURE. THE ASSESSEE HUMBLY SUMMITS THAT THE PROCEDURE IS VERIFIED BY THE ASSESSING OFFICER AND HE MENTIONED THAT THE AMOUNTS WERE TRANSFERRED TO THE RESPECTIVE EXPENDITURE ACCOUNTS. THIS IS THE PROCE DURE ADOPTED IN RESPECT OF ALL THE AMOUNTS PAID IN ADVAN CE WHICH WERE ADJUSTED LATER TOWARDS EXPENDITURE. IN THE CIRCUMSTANCES, THE ASSESSEE HUMBLY SUBMITS THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWING T HE AMOUNT OF RS.26,01,482/-. THE ASSESSEE, HOWEVER, SUBMITS THAT THE AMOUNT IN THE SUSPENSE ACCOUNT IS NOT DIRECTLY DEBITED TO THE PROFIT AND LOSS ACCOUNT. T HEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING AN Y DISALLOWANCE WITH REGARD TO SUSPENSE ACCOUNT. 4. THE ASSESSEE SUBMITTED THAT IT UNDERTOOK WORKS A T VARIOUS PLACES. THE AMOUNT REQUIRED BY EACH SITE I S GIVEN TO THE SITE IN-CHARGE. AT THE TIME OF MAKING THE PAYM ENT TO THE SITE IN-CHARGE, THE AMOUNT IS DEBITED TO THE SUSPEN SE ACCOUNT. 3 ITA NO. 1176/HYD/2011 SRI KAVURI PRASAD WHEN THE ACCOUNTS FOR ALL THESE AMOUNTS IS RECEIVED FROM THE SITE IN CHARGE, THE RESPECTIVE EXPENDITURE ACCOUNT IS DEBITED AND THE SUSPENSE ACCOUNT IS CREDITED. IN THE CIRCU MSTANCES, THE ASSESSEE PLEADED THAT THE ADDITION BE DELETED. 5. ON THE BASIS OF ABOVE SUBMISSION THE CIT(A) HELD THAT AS THE AMOUNTS DEBITED TO SUSPENSE ACCOUNT HAVE BEEN SUBSEQUENTLY TRANSFERRED TO RESPECTIVE ACCOUNTS THE DISALLOWANCE IS NOT SUSTAINABLE AND ACCORDINGLY DEL ETED THE ADDITION. 6. ON APPEAL, THE REVENUE HAS RAISED A SPECIFIC GRO UND BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE HAS NEITHER OFFERED ANY EXPLANATION NOR PROVIDED ANY DETAILS AN D HENCE HE COULD NOT VERIFY THE ALLOWABILITY OF THE CLAIM. WH ILE WE HOLD THAT THE EXPENDITURE IS TO BE ALLOWED IN THE YEAR I N WHICH THEY WERE INCURRED, EVEN THOUGH IN THE ACCOUNTS IT MAY N OT HAVE BEEN REFLECTED IN THE PROPER ACCOUNTS ON ACCOUNT OF ADMINISTRATIVE DIFFICULTIES, WE ACCEPT THE OBJECTIO N OF THE REVENUE THAT THESE EVIDENCES DO NOT SEEM TO HAVE BE EN EXAMINED BY THE AO. IN THIS VIEW OF THE MATTER, WE DEEM IT FIT TO SET ASIDE THE ISSUE TO THE FILES OF ASSESSING OF FICER TO VERIFY THE ASSESSEES SUBMISSIONS AND EVIDENCES MADE BEFOR E CIT(A) AND IF FOUND CORRECT DELETE THE ADDITION. WITH THE ABOVE DIRECTION THE APPEAL OF THE DEPARTMENT ON THIS ISSU E IS DEEM TO BE ALLOWED FOR STATISTICAL PURPOSES. 7. THE NEXT ISSUE IS REGARDING THE DISALLOWANCE OF LABOUR CHARGES. THE ASSESSEE HAD CLAIMED RS.1,19,61,186/- ON 4 ITA NO. 1176/HYD/2011 SRI KAVURI PRASAD ACCOUNT OF LABOUR CHARGES UNDER VARIOUS HEADS. ON VERIFICATION OF ACCOUNTS THE ASSESSING OFFICER FOUND THAT ALL TH E VOUCHERS WERE SELF MADE VOUCHERS. IT WAS SUBMITTED BY THE A SSESSEE THAT IT IS NOT POSSIBLE TO OBTAIN SEPARATE VOUCHERS FOR THE EXPENDITURE INCURRED. THE ASSESSING OFFICER HAS ST ATED THAT THE AR HAD ACCEPTED THE DISALLOWANCE OF 15% (RS.17, 94,178/-) UNDER THIS HEAD. BEFORE THE CIT(A) THE ASSESSEE SU BMITTED THAT THE LABOUR CHARGES HAVE BEEN PAID TO LABOURERS IN AN UNORGANIZED SECTOR. VOUCHERS WERE OBTAINED FROM EA CH INDIVIDUAL LABOURER AND WERE PRODUCED BEFORE THE AS SESSING OFFICER. THE LABOURERS DO NOT MAINTAIN THEIR OWN V OUCHERS. THEREFORE THE ASSESSEE SUBMITTED THAT THE VOUCHERS ARE TO BE OBTAINED ON THE VOUCHERS PREPARED BY THE ASSESSEE. ON THE BASIS OF ABOVE SUBMISSION THE CIT(A) REDUCED THE DI SALLOWANCE FROM 15% TO 5% OF THE TOTAL EXPENDITURE. 8. AGAINST THIS THE REVENUE HAD COME ON APPEAL AND THE REVENUE HAVE RAISED A SPECIFIC GROUND THAT THE ASSE SSEES AR HAS ACCEPTED FOR DISALLOWANCE OF 15% OF THE EXPENDI TURE. 9. ON THE MERITS OF THE CASE, IT WAS CONTENDED BY T HE LEARNED COUNSEL THAT SUCH LINE OF BUSINESS ENGAGED BY THE ASSESSEE REQUIRES THE EMPLOYMENT OF LABOURERS FROM RURAL AREAS AND IT MAY NOT BE POSSIBLE TO OBTAIN DOCUMENT ATION TO THE SATISFACTION OF THE ASSESSING OFFICER. IN THIS CONNECTION, WE REFER TO THE DECISION OF HONBLE AP HIGH COURT IN THE CASE OF CIT VS. TRANSPORT CORPORATION OF INDIA LTD., 256 ITR 701 WHEREIN THE HONBLE COURT HELD THAT MERE PAYMENT BY ITSELF WOULD NOT ENTITLE THE ASSESSEE TO DEDUCTION OF EXPE NDITURE 5 ITA NO. 1176/HYD/2011 SRI KAVURI PRASAD UNLESS THE SAME WAS PROVED TO BE PAID FOR COMMERCIA L CONSIDERATIONS. THE BURDEN OF PROOF IS ALWAYS UPON THE ASSESSEE. IT IS FOR THE TAXPAYER TO ESTABLISH BY EV IDENCE THAT A PARTICULAR ALLOWANCE IS JUSTIFIED. IT IS NOT FOR TH E ITO TO INDEPENDENTLY COLLECT EVIDENCE AND PROVE THAT THE D EDUCTION CLAIMED BY THE ASSESSEE IS BASELESS. THEREFORE, WE SET ASIDE THE ORDER OF THE CIT(A) AND CONFIRM THE ORDER OF TH E ASSESSING OFFICER IN MAKING 15% OF THE DISALLOWANCE OUT OF EX PENDITURE CLAIMED BY THE ASSESSEE. THE COORDINATE BENCH HAS B EEN CONSISTENTLY DISALLOWING 15% OF EXPENDITURE CLAIMED BY THE ASSESSEE ON SIMILAR CIRCUMSTANCES. THUS, THIS GROUN D OF APPEAL OF THE REVENUE IS ALLOWED. 10. THE NEXT ISSUE IS REGARDING DISALLOWANCE OF CER TAIN EXPENDITURE AMOUNTING TO RS.37,92,350/- U/S.40(A)(I A) OF INCOME TAX ACT FOR NON DEDUCTION OF TAX AT SOURCE. THE ASSESSING OFFICER HAS DISALLOWED THE SAME ON THE GR OUND THAT NO PARTICULARS ABOUT THE PARTY TO WHOM THE PAYMENTS WERE MADE FURNISHED. HE WAS OF THE OPINION THAT DEDUCTI ON U/S.194C OUGHT TO HAVE BEEN MADE IN RESPECT OF ABOV E PAYMENTS AND HENCE DISALLOWED THE SAME AS NO TDS WA S MADE. BEFORE CIT(A), THE ASSESSEE SUBMITTED THAT IN RESPE CT OF TIPPER AND TRACTOR HIRE CHARGES THE RECIPIENTS HAVE FILED CERTIFICATE IN FORM NO.15 AND HENCE NO TAX NEED BE DEDUCTED. IN RE SPECT OF MIXTURE HIRE CHARGES AND PROCLAIM HIRE CHARGES THE SAME HAS BEEN PAID TO SEVERAL PERSONS AND HENCE DEDUCTION OF TAX AT SOURCE DOES NOT ARISE. IN SO FAR AS ON SITE CHARGE S ARE CONCERNED IT WAS SUBMITTED THAT THE AMOUNT WAS PAID TO AN EMPLOYEE TOWARDS RENT PAYABLE. IT IS PART OF SALAR Y AND HENCE 6 ITA NO. 1176/HYD/2011 SRI KAVURI PRASAD PROVISION OF SEC.40(A)(IA) HAVE NO APPLICATION. WE FIND THAT THESE DETAILS WERE NOT FURNISHED BEFORE THE ASSESSI NG OFFICER OR IF FURNISHED WERE NOT EXAMINED BY HIM. 11. IN SO FAR AS TIPPER AND TRACTOR HIRE CHARGES TH E ASSESSING OFFICER WHILE VERIFYING THE CERTIFICATE RECEIVED BY THE ASSESSEE AND EVEN FOUND CORRECT DELETED THE ADDITION OF RS.1 3,50,250/- AND RS.7,56,000/-. 12. IN RESPECT OF MIXTURE AND PROCLAIM HIRE CHARGES THE ASSESSING OFFICER WILL VERIFY WHETHER PAYMENTS MADE TO INDIVIDUAL PERSONS IS LESS THAN LIMITS PRESCRIBED U NDER SEC 194C AND IF SO, SUCH PAYMENTS WILL NOT REQUIRE DEDUCTION OF TAX AT SOURCE U/S.194C. ACCORDINGLY AO MAY VERIFY IF THE S UBMISSIONS OF THE ASSESSEE BEFORE THE CIT(A) AND IF FOUND TO B E CORRECT THE ADDITIONS WILL BE DELETED. 13. IN SO FAR AS HOUSE RENT TO THE SUPERVISOR IS CO NCERNED THE ASSESSING OFFICER WILL VERIFY THE PARTICULARS OF PA YMENTS AND IF IT IS THE PART OF SALARY PAID TO THE SUPERVISOR THE SAME WILL BE SUBJECT TO DEDUCTION ONLY U/S.192. THE SAME CAN BE VERIFIED AND THE ADDITION DELETED IF THE CLAIM OF THE ASSESS EE IS FOUND TO BE CORRECT. 14. AS REGARDS SITE ENGINEERING CHARGES THE ASSESSE E HAD SUBMITTED THAT THE SITE PAYMENTS WERE NOT MADE TO ANY OUTSIDERS FOR RENDERING THE WORK AND THE CHARGES WE RE INCURRED BY THE ASSESSEE IN THE PROCESS OF VERIFICATION OF T HE SITE. THE PURPOSE OF THIS EXPENDITURE WILL ALSO BE VERIFIED B Y THE 7 ITA NO. 1176/HYD/2011 SRI KAVURI PRASAD ASSESSING OFFICER TO DECIDE WHETHER TAX HAS TO BE D EDUCTED AT SOURCE OR NOT. 15. WITH THE ABOVE DIRECTION THE ISSUE OF DISALLOWA NCE OF EXPENDITURE ON ACCOUNT OF NON DEDUCTION OF TAX AT S OURCE OF RS.37,92,350/- IS REMITTED BACK TO THE FILES OF ASS ESSING OFFICER. 16. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS ALLOWED PARTLY FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 04/01/2013. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAV AN) ACCOUNTANT MEMBER JUDICIAL MEMBE R HYDERABAD, DATED: 4 TH JANUARY, 2013 KV COPY TO:- 1) ACIT, CIRCLE 1, AAYAKAR BHAVAN, STATION ROAD, WARANGAL. 2) SHRI KAVURI PRASAD, H.NO. 1-1-414, PRASANTH NAGAR, NEAR KAZIPET, WARANGAL. 3) THE CIT (A)-VI, HYDERABAD 4) THE CIT-VI, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 8 ITA NO. 1176/HYD/2011 SRI KAVURI PRASAD 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.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER