M/s Kerbs - N- Cubes Continental, Bangalore V. ITO, Bangalore

ITA 1184/BANG/2011

• Counselvise Citation: 118421114 RSA 2011
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 01-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SARAVANAN V
• Section: 194C

Judgement Text

ITA.1184/BANG/2011 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI. N. V. VASUDEVAN, JUDICIAL MEMBER I.T.A NO.1184/BANG/2011 (ASSESSMENT YEAR : 2006-07) M/S. KERBS-N-CUBES CONTINENTAL, NO.15, (NEW NO.30/11, VITTAL MALLYA ROAD, BANGALORE 560 001 .. APPELLANT PAN : AABFL3191H V. INCOME-TAX OFFICER, WARD -1(3), BANGALORE .. RESPONDENT APPELLANT BY : SHRI. BALRAM R. RAO, ADVOCATE RESPONDENT BY : SHRI. SARAVANAN. V, JCIT DATE OF HEARING : 04.07.2012 DATE OF PRONOUNCEMENT : 04.07.2012 O R D E R PER N. BARATHVAJA SANKAR, VICE PRESIDENT : THIS IS AN APPEAL PREFERRED BY THE ASSESSEE, M/S. KERBS-N-CUBES CONTINENTAL, BANGALORE, FOR THE ASSESSMENT YEAR 200 6-07, AGAINST THE APPELLATE ORDER DATED.12.10.2011 OF THE CIT(A)-I, B ANGALORE. ITA.1184/BANG/2011 PAGE - 2 02. THE BRIEF FACTS ARE THAT WHILE FRAMING THE ASSE SSMENT U/S.143(3) OF THE IT ACT, 1961, THE AO NOTICED FROM THE BOOKS OF ACCO UNT AND THE DETAILS OF LEDGER ACCOUNT FILED DURING THE COURSE OF HEARING T HAT THE ASSESSEE HAD INCURRED EXPENDITURE ON WHICH THE ASSESSEE HAS GOT THE WORK/SERVICE DONE THROUGH ANOTHER PERSON FOR WHICH THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 194C OF THE ACT. AS THIS HAD NOT BEEN DONE, THE AO WAS OF THE VIEW THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE AUTOMATICALLY ATTRACTED AND THE ENTIRE AMOUNT OF RS .23,94,667/- WAS DISALLOWED. 03. AGGRIEVED BY THIS ORDER OF THE AO THE ASSESSEE MOVED THE MATTER BEFORE THE FIRST APPELLATE AUTHORITY AND MADE ELABO RATE SUBMISSIONS BEFORE THE CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE AND THE AFFIDAVITS FILED BEFORE HIM, THE CIT(A) CONFIRMED T HE ORDER OF THE AO. STILL AGGRIEVED, THE ASSESSEE IS ON SECOND APPEAL BEFORE US WITH THIS ISSUE. 04. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL BEFORE US : 2. THE LEARNED AO ADDED THE FOLLOWING UNDER SECTIO N 40(1)(IA) OUT OF PAYMENTS FOR NOT DEDUCTING TDS UND ER SECTION 194C : ITA.1184/BANG/2011 PAGE - 3 STONE HANDLING -- RS. 3,67,823 DRESSING WAGES -- RS. 7,95,094 KERB STONE DRESSING -- RS. 11,39,375 QUARRYING -- RS. 92,375 TOTAL -- RS. 23,94,667 3. THE APPELLANT SUBMITS THAT THEIRS IS A LABOUR O RIENTED INDUSTRY. PAYMENTS ARE WAGES AT PLACES WHERE NO BA NKING FACILITIES ARE AVAILABLE. THESE PAYMENTS WERE MADE THROUGH APPELLANTS EMPLOYEES TO ACTUAL WORKERS. SOME TOTA L OF PAYMENTS MADE TO DIFFERENT PEOPLE ON A PARTICULAR DAY THROUG H APPELLANT/SISTER CONCERNS EMPLOYEES. NO ONE WORKE R GOT MORE THAN RS.50,00/- IN WHOLE YEAR. HUNDREDS OF WORKERS WORK AT THE WORK SPOT. THEIR WAGES ARE CALCULATED AND SENT TO WORK SPOT THROUGH ASSESSEES EMPLOYEE. IN TURN THEY DISBURSE IT. THE WORKERS DO NOT STICK ON PERMANENTLY. THEY CHANGE M ANY A TIME IN A YEAR FROM ONE EMPLOYER TO ANOTHER EMPLOYER AND FROM ONE PLACE TO ANOTHER PLACE. THEY CAME FROM DIFFERENT S TATES AND DO NOT STICK ON TO ONE EMPLOYER AND AT ONE PLACE. AT ANY RATE NO WORKER GOT MORE THAN RS.50,000/- IN A YEAR ATTRACTI NG TDS UNDER SECTION 194C. 4. THE APPELLANTS AUTHORIZED REPRESENTATIVE EXPLAI NED IT TO THE ASSESSING OFFICER. ALL THE ITEMS MENTIONED IN THE ASSESSMENT ORDER DOES NOT ATTRACT TDS UNDER SECTION 194C. THE LEARNED AO ERRED IN TREATING THE PAYMENTS MADE THROUGH APPELLA NTS EMPLOYEES AS PAID TO THEM. NONE OF THE PERSONS WHO SE NAMES ARE THERE ARE NOT WORKERS AND IT IS NOT PAID TO THE M. IT IS ONLY TO ITA.1184/BANG/2011 PAGE - 4 FACILITATE EMPLOYEES NAMES WERE PUT FOR REFERENCE W HO IN TURN PAID TO VARIOUS WORKERS WHO WORKED ON THE SPOT. NO WORKER GOT MORE THAN RS.50,000/- IN A YEAR. 5. THE ENTIRE ADDITION MADE IS UNDER MISAPPREHENSIO N WITHOUT UNDERSTANDING ACTUAL FACTS AND CIRCUMSTANCE S. THE LEARNED AO HAS NOT GIVEN SUFFICIENT OPPORTUNITY TO EXPLAIN OR A SHOW CAUSE NOTICE AS IS USUALLY GIVEN PROPOSING THE DISALLOWANCE CALLING OBJECTIONS FROM THE APPELLANTS. IT HAS TO BE DELETED. 04. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE PLACED ON RECORD AN ADDITIONAL GROUND OF APPEAL, WHICH READS AS UNDER : THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE DISALLOWANCE UNDER SECTION 40(A)(IA) IS POSSIBLE ON LY ON THE AMOUNT WHICH IS PAYABLE AS ON 31 ST MARCH OF THE RELEVANT ACCOUNTING YEAR AND NOT ON THE AMOUNTS THAT HAVE AL READY BEEN PAID, AS HELD BY THE ITAT VISAKHAPATNAM SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL. CI T (2012) 16 ITR (TRIB) 1 (VISHAKHAPATNAM) (SB). THE LEARNED COUNSEL HAS STATED IN THE MEMO FILED AL ONG WITH THE ADDITIONAL GROUND THAT THIS GROUND WAS OMITTED TO BE RAISED IN THE ORIGINAL APPEAL BY OVER SIGHT AND HENCE THE SAME MAY BE ADMITTED. WE HAVE HEARD THE LEARNED DR ALSO ON THE ADMISSION OF THIS ADDITIONAL GROUND. ITA.1184/BANG/2011 PAGE - 5 05. WE FIND THAT THIS BEING A LEGAL GROUND, IS TO B E ADMITTED AND DEALT WITH BY US. HENCE, WE ARE ADMITTING THIS ADDITIONAL GRO UND. HAVING ADMITTED THE ADDITIONAL GROUND, LET US FIRST DEAL WITH THE SAME. 06. WE HAVE ALSO GONE THROUGH THE DECISION OF THE S PECIAL BENCH IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL. CI T (2012) 16 ITR (TRIB) 1 (VISAKHAPATNAM). IN THE SAID ORDER, THE SPECIAL B ENCH HAS HELD THAT SECTION 40(A)(IA) IS APPLICABLE ONLY TO EXPENDITURE PAYABLE ON 31 ST MARCH OF EVERY YEAR AND CANNOT BE EVOKED DURING THE PREVIOUS YEAR WITHOUT DEDUCTING TAX AT SOURCE. THE MAJORITY VIEW IN THAT ORDER ALSO IS TH E SAME. THUS, LEGALLY THE SPECIAL BENCH DECISION IS BINDING ON US AND FOLLOWI NG THE SAME DECISION, WE HAVE TO HOLD THAT SECTION 40(A)(IA) IS NOT APPLICAB LE ON THE AMOUNTS THAT HAVE ALREADY BEEN PAID. THUS THE ADDITIONAL GROUND RAIS ED BY THE ASSESSEE IS TO BE ALLOWED. HOWEVER, THE LEARNED DR SUBMITTED THAT TH E AO, THOUGH HAS STATED THAT THE ASSESSEE HAS INCURRED EXPENSES OF A TOTAL AMOUNT OF RS.23,94,667/- WITHOUT DEDUCTING TAX, IT IS NOT CLEAR FROM THE ORD ER WHETHER THE AMOUNT MENTIONED BY THE AO IS PAYABLE OR HAS ALREADY BEEN PAID. HENCE, HE PLEADED THAT EVEN THOUGH THE ADDITIONAL GROUND IS T O BE ALLOWED IN FAVOUR OF THE ASSESSEE, THE FACTS AS TO HOW MUCH HAD ALREADY BEEN PAID DURING THAT YEAR AND HOW MUCH IS YET TO BE PAYABLE IS TO BE VERIFIED AND HENCE, THE SAME MAY BE REMITTED BACK TO THE AO FOR THIS LIMITED PURPOSE . AFTER GOING THROUGH THE ITA.1184/BANG/2011 PAGE - 6 RECORDS, WE ALSO FIND THAT THERE IS NO CLEAR FINDIN G WHETHER THIS AMOUNT HAS ALREADY BEEN PAID OR IT CONSISTS OF ANY AMOUNT PAYA BLE ALSO. HENCE, THOUGH ON LEGAL ISSUE WE ALLOW THE ADDITIONAL GROUND OF TH E ASSESSEE, YET WE DEEM IT FIT AND PROPER TO REMIT THE MATTER BACK TO THE FILE OF THE AO FOR THE LIMITED PURPOSE OF ASCERTAINING AS TO HOW MUCH HAD ALREADY BEEN PAID DURING THE YEAR ENDING 31 ST MARCH 2006 AND HOW MUCH IS PAYABLE ON THAT DATE. THE AO WILL FOLLOW THE DECISION OF THE TRIBUNAL (SUPRA), A S FAR AS THE AMOUNT PAID IS CONCERNED AND ON THE REMAINING AMOUNT AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF HEARING, THE SAME MAY BE DECIDED BY THE AO BY PRODUCING NECESSARY DETAILS THAT WOULD BE REQUIRED BY HIM FOR DECIDING THIS ISSUE. 07. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE ONLY. ORDER PRONOUNCED IN THE OPEN COURT AFTER THE HEARIN G, ON 04.07.2012. SD/- SD/- (N. V. VASUDEVAN) (N. BARATHVAJA SANKAR) JUDICIAL MEMBER VICE PRESIDENT