Mr. Vijay Ramchandra Shirsth, Pune V. ACIT Cir.-II, Nashik

ITA 1241/PUN/2009

• Counselvise Citation: 124124514 RSA 2009
• Duration Of Justice: 1 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 26-10-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY SINGH
• Assessee Lawyers: NILESH KHANDELWAL
• Keywords: Sale consideration of property below Jantri Value; Additional evidence; TDS
• Section: 43B; 50C; 40(a)(ia); 194C

Judgement Text

1 1241/PN/2009 AND 185/PN/2010 A.Y. 2005-06 AND 2006-07 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER I.T.A. NO.1241/PN/2009 : A.Y. 2005-06 I.T.A. NO.185/PN/2010 : A.Y. 2006-07 MR VIJAY RAMCHANDRA SHIRSTH, .... APPELLANT C/O. SHAH KHANDELWAL JAIN & ASSOCIATES, CAS, 1 ST FLOOR, ALANKAR CINEMA BUILDING, PUNE-411 001 PAN ACAPS 3712 R VS. ACIT, CIRCLE -2, .... RESPONDENT VANI HOUSE, 1 ST FLOOR, OLD AGRA ROAD, NASHIK. APPELLANT BY: SHRI NILESH KHANDELWAL RESPONDENT BY: SHRI SANJAY SINGH DATE OF HEARING: 13- 9-2011 DATE OF PRONOUNCEMENT: 29-9-2011 ORDER PER SHAILENDRA KUMAR YADAV, JM BOTH THE APPEALS PERTAIN TO SAME ASSESSEE FOR DIFFE RENT YEARS, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED BY THIS COMMON ORDER FOR THE CONVENIENCE. 2. IN ASSESSMENT YEAR 2005-06, THE ASSESSEE HAS RAI SED FOLLOWING GRIEVANCES: 1. ON FACTS & CIRCUMSTANCES PREVAILING IN THE CASE & A S PER PROVISIONS OF LAW, IT BE HELD THAT THE PROVISIONS O F CHAPTER XVII B OF THE ACT, AND PARTICULARLY PROVISIONS OF S EE. 194C ARE NOT APPLICABLE FOR THE PAYMENTS MADE TO VARIOUS PARTIES BY THE APPELLANT. THE DISALLOWANCE MADE 2 1241/PN/2009 AND 185/PN/2010 A.Y. 2005-06 AND 2006-07 U/S. 40(A)(IA) BY THE AO & CONFIRMED BY THE CIT(A) FOR ALLEGED IRREGULARITY & OR DEFAULT ON THE PART OF TH E APPELLANT IS UNWARRANTED, UNJUSTIFIED, AND CONTRARY TO THE PROVISIONS OF THE ACT AND FACTS PREVAILING IN T HE CASE. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER & CONFIRMED BY THE CIT(A) BE DELETED. JUST AND PROPER RELIEF BE GRANTED TO THE APPELLANT IN THIS RESPECT. 2. ON FACTS & CIRCUMSTANCES PREVAILING IN THE CASE & A S PER PROVISIONS OF LAW, IT BE HELD THAT THE PART OF THE AD HOC DISALLOWANCE / ADDITIONS SUSTAINED BY THE CIT(A) IS UNWARRANTED, UNJUSTIFIED AND CONTRARY TO THE PROVIS IONS OF THE ACT AND FACTS PREVAILING IN THE CASE. IT FUR THER BE HELD THAT NO ADDITION IS WARRANTED & JUSTIFIED ON F ACTS & CIRCUMSTANCES PREVAILING IN THE CASE. THE APPELLANT BE GRANTED JUST & PROPER RELIEF IN THIS RESPECT. THE P ART OF ADDITION SUSTAINED BY THE 1 ST APPELLATE AUTHORITY BE DELETED. 3. ON FACTS & CIRCUMSTANCES PREVAILING IN THE CASE & A S PER PR VISIONS OF LAW, IT BE HELD THAT THE OBSERVATIONS MADE BY THE CIT(A) & INFERENCES DRAWN THE CIT(A) IN PARA 5.3 OF THE ORDER IS UNJUSTIFIED, UNWARRANTED & PERVERSE . IT FURTHER E HELD THAT PROVISIONS OF SEE. 50C(2) HAS N OT BEEN COMPLIED WITH. IT FURTHER BE HELD THAT E ADDITION SUSTAINED BY THE FIRST APPELLATE AUTHORITY TO THE PROVISIONS OF LAW AND FACTS PREVAILING IN THE CASE & THE ADDITION IN THIS RESPECT BE DELETED. IN ASSESSMENT YEAR 2006-07, ASSESSEE HAS RAISED FOL LOWING GROUNDS: 1. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CAS E AND AS PER PROVISIONS OF LAW, IT BE HELD THAT THE DISALLOW ANCE OF RS. 1,56,25,046/- MADE BY THE A.O U/S 40(A)(IA) AND CON FIRMED BY THE FIRST APPELLATE AUTHORITY IS IMPROPER, INCORREC T AND CONTRARY TO THE PROVISONS AND SCHEME OF THE ACT. I T FURTHER BE HELD THAT THE PAYMENTS MADE TO VARIOUS PARTIES WHIC H HAVE BEEN TREATED AS PAYMENTS TO SUB-CONTRACTORS ARE NOT COVERED BY THE PROVISIONS OF CHAPTER XVII OF THE ACT. ON T HE FACTS PREVAILING IN THE CASE AND AS PER THE PROVISIONS OF LAW THE DISALLOWANCE/ADDITION MADE BY THE A.O AND THAT CONF IRMED BY THE FIRST APPELLATE AUTHORITY BE DELETED. IT FURTH ER BE HELD THAT AMOUNT OF RS. 1,13,14,748.50 PAID BY THE APPELLANT IS NOT HIT BY MISCHIEF OF PROVISIONS OF SECTION 40(A)(IA) OF T HE ACT WARRANTING DISALLOWANCE IN TERMS OF THE SAID SECTIO N. JUST AND PROPER RELIEF BE GRANTED TO THE APPELLANT IN THIS R ESPECT. 3 1241/PN/2009 AND 185/PN/2010 A.Y. 2005-06 AND 2006-07 2. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CAS E AND AS PER PROVISIONS OF LAW, IT BE HELD THAT, THE DISALLO WANCE OF RS. 5,78,000/- PERTAINING TO THE PAYMENT MADE TO THE PE TTY CONTRACTOR DISALLOWED BY THE A.O IS UNJUSTIFIED AND IS CONTRARY TO THE SCHEME AND THE PROVISIONS OF THE ACT. THE D ISALLOWANCE MADE BY THE A.O AND CONFIRMED BY THE FIRST APPELLAT E AUTHORITY BE DELETED. THE APPELLANT BE GRANTED JUST AND PROP ER RELIEF IN THIS RESPECT. 3. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CAS E AND AS PER PROVISIONS OF LAW, IT BE HELD THAT THE ESTIMATI ON OF INCOME FROM COMMISSION FROM SO CALLED SUB CONTRACTORS WORK ED OUT BY THE A.O IS CONTRARY TO THE PROVISIONS AND SCHEME OF THE ACT AND BEING BASED ON SURMISES AND GUESSWORK AND WITHO UT ANY EVIDENCE IS UNJUSTIFIED, UNWARRANTED AND IMPROPER. THE ADDITIONS SO MADE BE DELETED. THE APPELLANT BE GRA NTED JUST AND PROPER RELIEF IN THIS RESPECT. 4. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CAS E AND AS PER PROVISIONS OF LAW, IT BE HELD THAT THE ADHOC DI SALLOWANCE MADE OUT OF SAND AND LABOUR CHARGES OF RS. 1,00,000 /- OUT OF PETROL EXPENSES OF RS. 50,000/- OUT OF TELEPHONE EX PENSES OF RS. 20,000/- MADE ARBITRARILY AND AT RANDOM AND PAR TLY CONFIRMED BY THE FIRST APPELLATE AUTHORITY BE DELET ED IN FULL. THE APPELLANT BE GRANTED JUST AND PROPER RELIEF IN THIS RESPECT. 5. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CAS E AND AS PER PROVISIONS OF LAW, IT BE HELD THAT THE ADDITION MADE ON ACCOUNT OF ESIC AND PF OF RS. 7,220/- MADE BY THE A .O AND CONFIRMED BY THE FIRST APPELLATE AUTHORITY BE DELET ED. JUST AND PROPER RELIEF BE GRANTED TO THE APPELLANT IN THIS R ESPECT. 3. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE L IKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD MADE THE FOLLOWING PAYMENTS F OR THE WORKS PERFORMED BY THEM: NAME AMOUNT WORK PERFORMED SHRI RAMESH NARWADE RS.2,46,000 CENTRING WORK SHRI ABU ALAM KHAN RS.1,06,500 FABRICATION WORK SHRI RAGHUNATH KUMAWAT RS.1,89,050 TILING WORK RS.6,80,532 4 1241/PN/2009 AND 185/PN/2010 A.Y. 2005-06 AND 2006-07 THE AO WAS OF THE OPINION THAT SINCE THE ASSESSEE I S ENGAGED IN UNDERTAKING CONTRACT WORKS, THE PAYMENTS WERE CLEAR LY IN THE NATURE OF SUB-CONTRACT PAYMENTS AND HENCE LIABLE FO R DEDUCTION OF TAX AT SOURCE U/S. 194C(2) OF THE ACT. ACCORDINGLY, HE MADE A DISALLOWANCE OF RS.6,80,532 UNDER SECTION 40(A)(IA) OF THE ACT WHICH WAS CONFIRMED BY THE CIT(A). BEING AGGRIEVED, THE A SSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, LEARNED A.R. HAS CONTENDED AS UNDER:- (I) THE ASSESSEE IS AN INDIVIDUAL AND IS AWARDED CONTRA CTS ON THE BASIS OF TENDERS THAT HE FILES WITH VARIOUS ENTITIES. (II) THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE T O THE APPELLANT FOR THE PAYMENTS IN QUESTION. THE PROVISI ONS OF TDS ARE APPLICABLE ONLY IF THE PAYMENTS ARE MADE TO SUB- CONTRACTORS IN TERMS OF PROVISIONS OF SECTION 194C( 2). (III) THE LEARNED AR DREW OUR ATTENTION TOWARDS SAMPLE CO PY OF TENDER DOCUMENTS OF SAGUNA WHERE IN ONE OF THE CONDITION BETWEEN THE PRINCIPAL AND THE APPELLANT I N RESPECT OF THE CONTRACT TO BE EXECUTED IS THAT THE APPELLANT WAS PROHIBITED TO SUBCONTRACT ANY PART OF HIS WORK WITHOUT WRITTEN PERMISSION OF THE ARCHITECT/COMPANY. NO SUCH WRITTEN PERMISSION WAS EITHER TAKEN BY THE APPELLANT OR GRANTED TO THE APP ELLANT PERMITTING TO APPOINT SUBCONTRACTOR. THE FIRST APP ELLATE AUTHORITY HAD CALLED A REMAND REPORT FROM THE AO FO R THE ADDITIONAL EVIDENCE SUBMITTED BY THE APPELLANT AND NOTHING CONTRARY WAS FOUND. 5 1241/PN/2009 AND 185/PN/2010 A.Y. 2005-06 AND 2006-07 (IV) THE ASSESSEE ALSO SUBMITTED COPIES OF VARIOUS TENDE R COPIES, WHERE IT HAS BEEN CLEARLY STATED TO THE EFF ECT THAT THE APPELLANT IS PROHIBITED FROM SUBCONTRACTING WIT HOUT THE WRITTEN PERMISSION OF THE PRINCIPAL. (V) THE APPELLANT HAD ENGAGED VARIOUS AGENCIES IN THE CAPACITY OF PRINCIPAL EXECUTOR TO EXECUTE WORK FOR HIM. THE APPELLANT WAS FULLY RESPONSIBLE FOR EXECUTING T HE MAIN CONTRACT AND THE AGENCIES THAT HE HAD ENGAGED HAD NO PRIVACY OF CONTRACT WITH THE PRINCIPAL. ONE OF T HE MAIN FEATURES FOR A CONTRACT TO QUALIFY AS A SUBCONTRACT IS THAT THE SUBCONTRACTOR SHOULD BE ELIGIBLE NOT JUST FOR T HE REWARDS BUT ALSO RISK ASSOCIATED WITH THE EXECUTION OF THE MAIN CONTRACT OF THE PRINCIPAL. THE MAIN ELEMENT O F RISK OF THE ALLEGED SUBCONTRACT IS MISSING IN ASSESSEES CASE AND THEREFORE, THE PAYMENTS MADE BY THE APPELLANT T O VARIOUS AGENCIES FOR ABOVE MENTIONED WORKS CANNOT S AID TO BE AS PAYMENT TO SUBCONTRACTOR. 5. IN THIS BACKGROUND, IT WAS SUBMITTED THAT DISALL OWANCE U/S 40(A)(IA) ARE NOT JUSTIFIED. SAME SHOULD BE DELETED . ON THE OTHER HAND, LD. D.R. SUPPORTED THE ORDERS OF THE AUTHORIT IES BELOW AND SUBMITTED THAT THE ASSESSEE HAD MADE PAYMENTS AMOUN TING TO RS.6,80,532 TO DIFFERENT PERSONS FOR UNDERTAKING CENTRING/FABRICATION WORK ETC. THE PAYMENTS MADE B Y THE ASSESSEE AMOUNTS TO WORK CONTRACT AS PER THE PROVISIONS OF S ECTION 194C(2) OF THE ACT AND THEY ARE CLEARLY LIABLE FOR TDS. SO , THE AO WAS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 40( A)(IA) OF THE ACT. 5. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE WAS A WARDED THE CONTRACT ON THE BASIS OF PARTICIPATION IN VARIOUS T ENDERS. FOR EXECUTING THE CONTRACT, THE ASSESSEE HAD TO ENGAGE THE SERVICES OF OUTSIDE PARTIES IN VARIOUS WORKS. TO BE PRECISE, T HE ASSESSEE 6 1241/PN/2009 AND 185/PN/2010 A.Y. 2005-06 AND 2006-07 ENGAGED THE SERVICES OF OUTSIDE PARTIES FOR CENTRIN G, TILING AND FABRICATION WORK AND TILING WORKS, FOR WHICH PAYMEN TS EXCEEDED RS.50,000 IN EACH CASE. THE ASSESSEE IS CARRYING O N CIVIL WORK IN INDIVIDUAL CAPACITY. 5.1. THE PROVISIONS OF SECTION 194C(2), DEALS WITH PAYMENTS TO CONTRACTORS . ACCORDINGLY, IN CASE ANY PERSON RESP ONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT FOR CARRYING OUT ANY WORK I N PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND SPECIFIED PE RSON SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CO NTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CH EQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT TAX AT SOURCE AS STIPULATED UNDER THE PROVISIONS OF SECTION 194(2) O F THE ACT. THE PROVISIONS OF SECTION 40(A)(IA) DEALS WITH THE DEDUCTABILITY OF AMOUNT DEDUCTIBLE AND RELEVANT CLAUSE READS AS UNDE R: NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIO NS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND G AINS OF BUSINESS OR PROFESSION. (A). IN THE CASE OF ANY ASSESSEE --... (I).......... (IA) ANY INTEREST, COMMISSION OR BROKERAGE[RENT, RO YALTY], FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SER VICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR O R SUB- CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WO RK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK) ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVI I-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION ( HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SU B-SECTION (1) OF SECTION 139. 7 1241/PN/2009 AND 185/PN/2010 A.Y. 2005-06 AND 2006-07 5.2. THE ISSUE BEFORE US IS WHETHER PAYMENT HAS BEE N MADE FOR CENTRING, TILING AND FABRICATION WORK AMOUNTS TO PA YMENT TO CONTRACTOR OR SUB-CONTRACTOR SO AS TO INVOKE PROVIS IONS OF SECTION 194C (2) FOR THE PURPOSE OF TDS AND ALLOWABILITY OF SAME AS PER PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. WE FIN D FROM THE SAMPLE COPY OF TENDER DOCUMENT OF SAGUNA WHERE IN ONE OF T HE CONDITION BETWEEN THE PRINCIPAL AND THE ASSESSEE IN RESPECT O F THE CONTRACT TO BE EXECUTED IS THAT THE ASSESSEE WAS PROHIBITED TO SUBCONTRACT ANY PART OF HIS WORK WITHOUT WRITTEN PERMISSION OF ARCH ITECT/COMPANY. THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY SUC H WRITTEN PERMISSION OR OTHER WORK WAS CLAIMED BY THE ASSESS EE. EVEN THE REMAND REPORT IN THIS REGARD WAS CALLED FOR IN A.Y. 2006-07, HOWEVER, THE CIT(A) CONCLUDED BY STATING THAT THE A SSESSEE COULD NOT TAKE SHELTER OF THIS CLAUSE AND THE PAYMENTS MA DE WERE PAYMENTS TOWARDS SUBCONTRACTING. THIS APPROACH OF THE REVENUE IS NOT JUSTIFIED BECAUSE THE BURDEN IS ON THE REVENUE TO ESTABLISH THAT THE ASSESSEE, IN FACT, HAS VIOLATED THE TERMS OF CO NDITIONS OF SUBCONTRACTING THE CONTRACT GRANTED BY THE PRINCIPA L. THE ASSESSEE HAS IN FACT ENGAGED VARIOUS AGENCIES AS DISCUSSED A BOVE FOR WHICH, THE ASSESSEE ITSELF WAS RESPONSIBLE FOR EXECUTING T HE CONTRACT AND ALLEGED AGENCIES OF SUBCONTRACT HAD NO PRIVACY OF C ONTRACT WITH PRINCIPAL. NO RISK FACTOR WAS ASSOCIATED WITH THE A LLEGED SUBCONTRACT. THE WHOLE CONTROL OF THE WORK WAS IN THE HANDS OF THE ASSESSEE AND ALLEGED SUBCONTRACT WORK WAS EXECUTED I.E. CENTRING, TILING AND FABRICATION WORK UNDER THE FULL CONTROL OF THE ASSESSEE ITSELF. THERE ARE NO SUCH DISCRETION WITH ALLEGED S UBCONTRACTOR FOR EXECUTING THE ABOVE WORKS. THEY WERE EXECUTING THE WORK AS PER REQUIREMENT OF TENDER UNDER FULL CONTROL AND SUPERV ISION OF ASSESSEE. THIS VIEW IS FORTIFIED BY THE DECISION I N THE CASE OF MYHTRI TRANSPORT CORPORATION VS. ACIT, 124 ITD 40(VISHAKHA PATNAM), WHEREIN THE TRIBUNAL HAS HELD THAT FOR A CONTRACT T O QUALIFY AS A SUBCONTRACTOR, THE SUBCONTRACTOR SHOULD SPEND THEIR TIME AND ENERGY AND ALSO UNDERTAKE THE RISK ATTACHED WITH TH E MAIN CONTRACT. AS THE ELEMENT OF RISK TAKING WAS MISSIN G, THE CONTRACT 8 1241/PN/2009 AND 185/PN/2010 A.Y. 2005-06 AND 2006-07 COULD NOT BE HELD AS SUBCONTRACT. WHILE PASSING THE ABOVE SAID ORDER, THE TRIBUNAL HAS TAKEN INTO CONSIDERATION TH E DECISION REPORTED IN 163 ITR 702 (HIMACHAL). SIMILARLY, IN T HE CASE OF R.R. CARRYING CORPORATION VS. ACIT, 126 TTJ 2240(/CTK), IT HAS BEEN HELD BY THE TRIBUNAL THAT THE AO HAS TO ESTABLISH T HAT RELATIONSHIP WAS THAT OF A CONTRACTOR AND SUBCONTRACTOR. THERE WAS NO WRITTEN NOR REAL AGREEMENT TO SUBSTANTIATE THE VIEW TAKEN B Y THE AO AND THEREFORE, IT CANNOT BE HELD TO BE A CONTRACT. WE A RE AWARE OF THE FACT THAT THE AGREEMENT CAN BE ORAL BUT THE ESSENC E OF CONTRACT LIES ON THE FACT WHETHER ASSESSEE HAD THE CONTROL OF TH E WORK I.E. THE MANNER IN WHICH THE WORK HAS TO BE DONE. IN CASE I T LIES WITH THE ASSESSEE THEN IT IS NOT THE SUBCONTRACT SO AS TO AT TRACT THE PROVISIONS OF SECTION 194C(2) OF THE ACT AND SUBSEQ UENTLY THE RIGOUR OF SECTION 40(A)(IA) WOULD NOT COME INTO PLAY FOR E XECUTING CENTRING, TILING AND FABRICATION THROUGH DIFFERENT PERSONS. I N INSTANT CASE, THE CONTROL LIES WITH THE ASSESSEE AND THE ALLEGED SUBC ONTRACTOR ARE MERELY EXECUTING THE WORK OF CENTRING AND FABRICATI ON UNDER THE FULL CONTROL OF THE ASSESSEE ITSELF. EVEN NOMENCLATURE U SED BY PARTIES AS SUBCONTRACT DOES NOT CHANGE THE REAL SPIRIT OF CONT RACT. UNDER FACTS AND CIRCUMSTANCES, REVENUE AUTHORITIES WERE NOT JUS TIFIED IN MAKING DISALLOWANCE BY INVOKING PROVISIONS OF SECTION 40(A )(IA) OF THE ACT. SAME IS DIRECTED TO BE DELETED. SIMILAR DISALLOWAN CE HAS BEEN MADE IN THE YEAR 2006-07. FACTS BEING SIMILAR SO FOLLOWI NG SAME REASONING, DISALLOWANCE IN QUESTION ARE DIRECTED TO BE DELETED. 6. THE NEXT ISSUE IS WITH REGARD TO ADDITION OF RS. 2,47,325 ON ACCOUNT OF LONG TERM CAPITAL GAINS FOR A.Y. 2005-06 MADE BY THE AO BY RESORTING TO THE PROVISIONS OF SECTION 50C OF TH E ACT. 6.1. BRIEFLY STATED THE FACTS ARE LIKE THIS. THE AS SESSING OFFICER NOTICED THAT THE ASSESSEE HAD SHOWN LONG TERM CAPIT AL GAINS OF RS.1,88,655 ON SALE OF PLOTS OF LAND WHEREAS THE VA LUE OF THE PROPERTY AS PER STAMP VALUATION SHOWN AT RS.8,69,96 2. THEREFORE, THE AO ADOPTED THE DIFFERENCE OF RS.2,47,325 AS INC OME FROM LONG 9 1241/PN/2009 AND 185/PN/2010 A.Y. 2005-06 AND 2006-07 TERM CAPITAL GAIN. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 6.2. THE CIT(A) DIRECTED THE AO VIDE LETTER DATED 2 4.10.2008 TO MAKE REFERENCE TO THE DVO, THANE UNDER SECTION 50C OF THE ACT. ACCORDINGLY, THE AO REFERRED THE MATTER TO THE DVO. SINCE THE ASSESSEE DID NOT COOPERATE WITH THE DVO, THEREFORE, THE DVO FINALISED HIS REPORT BY HIS LETTER DATED 15.4.2009 ADOPTING THE SAME VALUE AS WAS ADOPTED BY THE STAMP VALUATION AUTHORI TIES. THE CIT(A) WAS OF THE OPINION THAT PROPER OPPORTUNITY W AS GIVEN TO THE ASSESSEE FOR CONSIDERING HIS SUBMISSION BUT THE ASS ESSEE DID NOT UTILISE THE OPPORTUNITY IN ARRIVING AT THE FAIR MAR KET VALUE OF THE LANDS SOLD. ACCORDINGLY, THE CIT(A) UPHELD THE STAN D TAKE BY THE AO. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6.3. HAVING HEARD THE RIVAL SUBMISSIONS AND HAVING PERUSED THE MATERIAL ON RECORD, WE FIND THAT PROPER OPPORTUNITY WAS PROVIDED TO THE ASSESSEE TO PUTFORTH HIS GRIEVANCE BEFORE THE D VO. HOWEVER, THE ASSESSEE HAS NOT BEEN ABLE TO TAKE THAT OPPORTU NITY. NO OTHER MATERIAL WAS PLACED ON RECORD FOR REBUTTING THE FIN DINGS OF THE CIT(A). IN VIEW OF THIS, WE DO NOT SEE ANY REASON TO INTERFERE IN THE WELL REASONED OF THE CIT(A) AND, ACCORDINGLY, WE UP HOLD THE SAME. 6.4. THIS GROUND IS THUS DISMISSED. 7. THE NEXT ISSUE IN A.Y. 2006-07 IS WITH REGARD TO THE DISALLOWANCE OF RS.5,78,000 PERTAINING TO THE PAYME NT MADE TO THE PETTY CONTRACTOR. 7.1. THE ASSESSING OFFICER DISALLOWED RS.5,78,000 B Y INVOKING THE PROVISIONS OF SECTION 40(A)(IA),WHICH WAS CONFIRMED BY THE CIT(A). 7.2. THE CONTENTION OF THE ASSESSEE WAS THAT THE IS SUE IS NOT COVERED BY MISCHIEF OF PROVISIONS OF SECTION 40(A)( IA) WARRANTING ANY ADDITION IN TERMS OF THE SAID SECTION. THE ASSESSE E HAS TAKEN ASSISTANCE TO CARRY OUT SOME PART OF THE WORK FROM OUTSIDERS ON PRINCIPAL TO PRINCIPAL BASIS. AT THE MOST THE ARRA NGEMENT CAN BE 10 1241/PN/2009 AND 185/PN/2010 A.Y. 2005-06 AND 2006-07 CONSIDERED AS ARRANGEMENT OF APPOINTING THE CONTRAC TOR FOR CARRYING OUT SUCH WORK. THE ASSESSEE IS NOT REQUIRED TO DED UCT ANY TAX AT SOURCE FOR PAYMENT MADE BY SUCH PERSONS. THEREFORE , IT WAS SUBMITTED THAT THE ADDITION IS CONTRARY TO THE PROV ISIONS OF LAW & FACTS PREVAILING IN THE CASE. 7.3. ON THE OTHER HAND, LEARNED D.R. SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7.4 THE ISSUE RAISED IN THIS GROUND IS THE SAME AS THAT FOR THE EARLIER YEAR WHEREIN IT HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN PRECEDING PARAGRAPHS OF THIS ORDER. FACTS BEING SI MILAR, SO FOR THE SAME REASONING THIS ISSUE IS ALSO DECIDED IN FAVOUR OF THE ASSESSEE. 8. THE NEXT ISSUE IN A.Y. 2006-07 IS WITH REGARD TO ADHOC DISALLOWANCE MADE OUT OF SAND AND LABOUR CHARGES OF RS.1,00,000, OUT OF PETROL EXPENSES OF RS.50,000 AND OUT OF TELE PHONE EXPENSES OF RS.20,000. 8.1. ON VERIFICATION OF RECORD, THE AO NOTICED THAT SOME OF THE BILLS FOR THE BILLS IN RESPECT OF LABOUR CHARGES, PETROL EXPENSES AND TELEPHONE EXPENSES WERE NOT AVAILABLE AND THE VOUCH ERS WERE SELF MADE. THE AO WAS OF THE OPINION THAT ELEMENT OF PE RSONAL USE AND NON BUSINESS USE OF TELEPHONE AND VEHICLES COULD NO T BE RULED OUT. THEREFORE, THE AO MADE THE DISALLOWANCE OF RS.1,00, 000 OUT OF LABOUR CHARGES, RS.50,000 OUT OF PETROL EXPENSES AN D RS.20,000 OUT OF TELEPHONE EXPENSES. WHEN THE MATTER WAS CARRIED ON BEFORE THE CIT(A), THE DISALLOWANCE WAS RESTRICTED TO 50% OF T HE TOTAL EXPENSES. AGGRIEVED, THE ASSESSEE IS IN APPEAL FOR PARTIAL RE LIEF GRANTED BY THE CIT(A). 8.2. HAVING CONSIDERED THE RIVAL CONTENTIONS AND HA VING PERUSED THE MATERIAL ON RECORD, WE DO NOT SEE ANY REASON TO INTERFERE IN THE WELL REASONED ORDER OF THE CIT(A). THE AO HAS MADE THE DISALLOWANCE ON THE GROUND THAT THE ELEMENT OF PERS ONAL USE WITH REGARD TO TELEPHONE, VEHICLE COULD NOT BE RULED OUT . THE BILLS WITH REGARD TO LABOUR CHARGES WERE ALSO NOT FULLY VERIFI ABLE. HOWEVER, TO 11 1241/PN/2009 AND 185/PN/2010 A.Y. 2005-06 AND 2006-07 MEET THE ENDS OF JUSTICE, THE CIT(A) RESTRICTED THE DISALLOWANCE TO 50% OF THE DISALLOWANCE MADE BY THE AO ON THE GROUN D THE DISALLOWANCE IS ON THE HIGHER SIDE. IN VIEW OF TH IS, WE UPHOLD THE SAME. 8.3. THIS GROUND IS THUS DISMISSED. 9. THE NEXT ISSUE IS WITH REGARD TO ADDITION MADE O N ACCOUNT OF ESIC AND PF OF RS.7,220. 9.1. THE AO DISALLOWED THE AN AMOUNT OF RS.7,220 ON THE GROUND THAT THE AMOUNT WAS NOT PAID WITHIN THE STIPULATED PERIOD AS PER PF ACT AND THE ACTION OF THE AO WAS CONFIRMED BY THE C IT(A). 9.2. HAVING HEARD THE RIVAL CONTENTIONS, WE FIND TH AT THE ISSUE IS COVERED BY THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF CIT V. ALOM EXTRUSIONS LTD., (2009 185 TAXMAN 416 ( SC), WHEREIN, IT HAS BEEN HELD THAT DELETION OF SECOND PROVISO TO SECTION 43B BY FINANCE ACT, 2003 IS RETROSPECTIVE AND IT WOULD OPE RATE WITH EFFECT FROM 1.4.1988. ACCORDINGLY, THE AMOUNT PAID BEFORE THE DATE OF FILING OF THE RETURN UNDER THE ACT THEN DEDUCTION I S ALLOWABLE. WE, THEREFORE, DIRECT THE AO TO DELETE THE ADDITION IF THE PAYMENT IS MADE BEFORE THE DATE OF FILING THE RETURN OF INCOME . 9.3. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE S. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE STANDS PARTLY ALLOWED AS INDICATED ABOVE. DECISION PRONOUNCED IN THE OPEN COURT ON 29 TH SEPTEMBER 2011. SD/- SD/- ( G.S. PANNU) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER 12 1241/PN/2009 AND 185/PN/2010 A.Y. 2005-06 AND 2006-07 PUNE DATED THE 2 9 TH SEPTEMBER 2011 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) PUNE 4. THE CIT PUNE 5. THE D.R, ITAT PUNE BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL