N.Ramalingam & Co., Erode V. ACIT, Erode

ITA 1249/CHNY/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4899 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 06-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: B PARTHASARATHY
• Keywords: Difference of opinion; Non compliance; Reason to believe; Change of opinion
• Section: 143(3); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , , BEFORE SHRI DUVVURU RL REDDY , JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NO. 1249/MDS/2016 / ASSESSMENT YEAR : 2012-13 N. RAMALINGAM & CO., NO. 252 CHANDRAN STUDIO BUILDING, GANDHIJI ROAD, ERODE 638 001. [PAN: AABFN 3298A] VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, ERODE. ( / APPELLANT) ( / RESPONDENT) ' ( / APPELLANT BY : SHRI. B. PARTHASARATHY, ADVOCATE +,' ( / RESPONDENT BY : SHRI. N. MADHAVAN, ADDL. CIT ( /DATE OF HEARING : 02.11.2017 ( /DATE OF PRONOUNCEMENT : 30.01.2018 /O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-3, COIMBATORE IN ITA NO. 28 /2015-16 DATED 22.01.2016 FOR ASSESSMENT YEAR 2012-13. :-2-: ITA NO. 1249/MDS/2016 2. M/S. N. RAMALINGAM & CO., THE ASSESSEE, IS A FI RM DOING CIVIL ENGINEERING CONTRACT WORKS. IN THE ASSESSMENT YEAR 2007-08, THE ASSESSMENT WAS COMPLETED U/S. 143(3) DATED 14.12.2009. SUBSEQ UENTLY, THIS ASSESSMENT WAS RE-OPENED U/S. 148 ON 28.03.2014, AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR FOR WHICH THE A SSESSMENT WAS MADE U/S. 143(3), AND THE RE-OPENED ASSESSMENT WAS COMPLETED U/S. 143(3) R.W.S. 148 ON 12.03.2015. AGGRIEVED AGAINST THE ORDER, THE AS SESSEE FILED AN APPEAL CHALLENGING THE VALIDITY OF RE-OPENING THE ASSESSME NT ETC., BEFORE THE CIT(A) AND CIT(A) DISMISSED THE APPEAL. AGGRIEVED AGAINST THE CIT(A) ORDER, THE ASSESSEE FILED THIS APPEAL PRIMARILY CHALLENGING TH E VALIDITY OF RE-OPENING THE ASSESSMENT. 3. THE AR INVITED OUR ATTENTION TO THE COPIES OF OR DERS SHEET ENTRIES AND TO THE RELEVANT ORIGINAL ASSESSMENT ORDER PASSE D U/S. 143(3) DATED 14.12.2009 WHICH IS EXTRACTED AS UNDER: THE ASSESSEE FIRM IS DOING CIVIL ENGINEERING CONT RACT WORKS. THE DETAILS CALLED FOR SUCH AS THE ASSESSMENT DETAILS OF PARTNE RS, COPIES OF PARTNERS CAPITAL AND CURRENT AMOUNT, INTEREST ON CAPITAL AND REMUNER ATION TO PARTNERS, DETAILS OF GROSS RECEIPTS AND ITS RECONCILIATION WITH TDS CERT IFICATES FILED, DETAILS OF TDS MADE ON PAYMENT MADE TO SUB-CONTRACTORS, DETAILS OF OPENING STOCK AND CLOSING WORK IN PROGRESS, DETAILS OF PURCHASE OF MA TERIALS, DETAILS OF WAGES, SALARY & BONUS, INTEREST, LABOUR, WELFARE, RENT, AD VERTISEMENT & GENERAL EXPENSES HAVE BEEN FURNISHED BY THE ASSESSEE. THE OTHER DETAILS OF ADDITION MADE TO FIXED ASSETS ALONGWITH COPY OF INVOICES, DE TAILS OF SECURED AND UNSECURED LOAN AVAILED, BILLS ON HAND, BANK FIXED D EPOSITS, LIST OF SUNDRY CREDITORS HAVE BEEN FURNISHED FOR PERUSAL. :-3-: ITA NO. 1249/MDS/2016 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH VOUCHERS FOR EXPENSES CLAIMED AND THE SA ME WERE VERIFIED. ON VERIFICATION, IT IS SEEN THAT THE ASSESSEE HAS CLAI MED LORRY MAINTENANCE EXPENSES OF RS. 37,92,773 WHICH ARE PARTLY SUPPORTE D BY SELF VOUCHERS AND ARE NOT CAPABLE OF VERIFICATION. AS THE SAME APPEARS T O BE EXCESSIVE, 10% OF SUCH EXPENSES AMOUNTING TO RS. 3,79,277 IS DISALLOWED. 4. THEREAFTER, THE AR INVITED OUR ATTENTION TO THE REASONS RECORDED FOR RE-OPENING THE ASSESSMENT, WHICH IS EXTRACTED AS UN DER: THE ASSESSEE IS LIABLE TO DEDUCT TDS U/S. 1941 FO R THE PAYMENTS EXCEEDING RS. 1,20,000/- IN RESPECT OF PAYMENTS TOW ARDS MACHINERY HIRE CHARGES AMOUNTING TO RS. 2,50,06,123/-. AS THE ASS ESSEE HAD FAILED TO DEDUCT TDS ON SUCH PAYMENTS, THE EXPENSES ARE BOUND TO BE DISALLOWED U/S. 40(A)(IA) OF INCOME TAX ACT. ALSO IT IS SEEN IN THE FORM 3CD , AGAINST ITEM NO. 27(B) THE AUDITOR WAS REQUIRED TO REPORT THE DETAILS OF NON-C OMPLIANCE WITH THE TDS PROVISION IN CHAPTER XVII B OF THE IT ACT. THE AUD ITOR HAS STATED NIL IN THE SAID COLUMN. HE HAS OMITTED TO MENTION THE ITEMS S UCH AS MACHINERY HIRE CHARGES PAID IN EXCESS OF THE PRESCRIBED LIMITS. T HIS FAILURE ON THE PART OF THE ASSESSEE RESULTED IN UNDER ASSESSMENT OF INCOME. I HAVE THEREFORE, REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE INCOME TAX ACT, DUE T O THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MA TERIAL FACTS NECESSARY FOR THE ASSESSMENT YEAR 2007-08. 5. THE AR SUBMITTED THAT THE ASSESSEE FILED ENTIRE MATERIAL WHICH WERE AVAILABLE BEFORE THE AO. THE AO AFTER CONSIDE RING ALL THE MATERIAL FILED BY THE ASSESSEE INCLUDING THE ISSUE ON DEDUCTION OF TAX CONCLUDED THE ASSESSMENT AND DETERMINED THE INCOME, THE RELEVANT PORTION IS ALREADY EXTRACTED IN PARA 3, SUPRA. REFERRING TO THE ABOVE PORTION THE AR SUBMITTED :-4-: ITA NO. 1249/MDS/2016 THE ASSESSING OFFICER, IN FACT EXAMINED EACH AND EV ERY ASPECT AND THEREAFTER ONLY CONCLUDED THE ASSESSMENT. 5.1 THE AR SUBMITTED THAT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE AO WITHOUT ANY FRESH OR NEW INFORMATION, ON THE BASIS OF MATERIAL ALREADY AVAIL ABLE ON THE RECORDS, CAME TO A CONCLUSION THAT THE ASSESSEE HAS NOT DEDUCTED TAX . THE AR SUBMITTED THAT THERE WAS NO NEGLIGENCE ON THE PART OF THE ASSESSEE IN FURNISHING THE RELEVANT MATERIAL WHILE COMPLETING THE ORIGINAL ASSESSMENT. HENCE, THE RE-ASSESSMENT MADE BY THE ASSESSING OFFICER IS NOTHING BUT CHANGE OF OPINION ON THE PART OF ASSESSING OFFICER AND HENCE PLEADED THAT THE ASSESS MENT HAS TO BE QUASHED AS IT IS BARRED BY LIMITATION. ON THE OTHER HAND, THE DR SUBMITTED THAT ALTHOUGH THE ASSESSING OFFICER ACCEPTED THE CLAIM O F THE ASSESSEE IN THE ORIGINAL ASSESSMENT, ALTHOUGH THE AO HAS RE-OPENED THE ASSESSMENT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, AS PER THE REASONS EXTRACTED ABOVE, IT IS CLEAR THAT THERE IS FAILURE ON THE PART OF THE ASSESSEE IN FURNISHING THE NECESSARY PARTICULARS WHICH WERE REQ UIRED FOR COMPLETING THE ASSESSMENT. REFERRING TO PARA 6.4 OF THE ORDER OF THE CIT(A), THE DR SUBMITTED THAT THE NOTICE U/S. 148 IS NOT BARRED BY LIMITATION WHEN THERE IS CLEAR FAILURE ON THE PART OF THE ASSESSEE TO DISCLO SE FULLY AND TRULY ALL THE MATERIAL FACTS AS REQUIRED UNDER FIRST PROVISO TO S ECTION 147. EXPLANATION 1 TO SECTION 147 WHICH IS RELEVANT IN THIS CIRCUMSTANCE IS EXTRACTED BELOW: :-5-: ITA NO. 1249/MDS/2016 PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUN T BOOKS OR OTHER EVIDENCE FORM WHICH MATERIAL EVIDENCE COULD WITH DU E DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESS ARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. 6. THE AR SOUGHT OUR ATTENTION TO THIS TRIBUNAL DEC ISION IN THE CASE OF M/S. URC CONSTRUCTION PVT. LTD., AND M/S. BHARATHI CONSTRUCTIONS LTD., IN ITA NOS. 2759, 2760 & 1870/MDS/2016 FOR ASSESSMENT YEAR S 2008-09, 2012-13 & 2007-08 AND ITA NO. 1871/MDS/2016 FOR ASSESSMENT YE AR 2007-08 DATED 20.04.2017 AND RELIED ON SUCH ORDER AS THE FACTS AR E SIMILAR. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE R ELEVANT MATERIAL. THE RELEVANT PORTION OF THE ABOVE CITED CASES ARE E XTRACTED AS UNDER: 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. A COPY OF THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT IN THE CASE OF THE ASSESSEE, M/S URC CONSTRUCTION (P) LTD., IS AVAILABLE AT PAGE 52 OF THE PAPER-BOOK. FOR THE PU RPOSE OF CONVENIENCE, THE REASONS RECORDED BY THE ASSESSING OFFICER IS REPRODUCED HER EUNDER:- THE ASSESSEE IS LIABLE TO DEDUCT TDS U/S 194I FO R THE PAYMENTS EXCEEDING `1,20,000/- IN RESPECT OF PAYMEN TS TOWARDS MACHINERY HIRE CHARGES AMOUNTING TO `4,89,06,168/-. AS THE A SSESSEE HAD FAILED TO DEDUCT TDS ON SUCH PAYMENTS, THE EXPENSES ARE BOUND TO BE DISALLOWED U/S. 40(A)(IA) OF INCOME-TAX ACT. ALSO IT IS SEEN IN TH E FORM 3CD, AGAINST ITEM NO.27 (B) THE AUDITOR WAS REQUIRED TO REPORT THE DE TAILS OF NON-COMPLIANCE WITH THE TDS PROVISION IN CHAPTER XVII B OF THE I.T . ACT. THE AUDITOR HAS QUANTIFIED ONLY CERTAIN ITEMS OF NON-COMPLIANCE AND OMITTED TO MENTION THE OTHER ITEMS SUCH AS MACHINERY HIRE CHARGES PAID IN EXCESS OF THE PRESCRIBED LIMITS. THIS FAILURE ON THE PART OF THE ASSESSEE R ESULTED IN UNDER ASSESSMENT OF INCOME. I HAVE THEREFORE, REASON TO BELIEVE THA T INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTIO N 147 OF THE INCOME-TAX :-6-: ITA NO. 1249/MDS/2016 ACT, DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR THE ASST. YEAR 2007-08 . SIMILAR REASONS HAVE BEEN RECORDED BY THE ASSESSING OFFICER IN THE CASE OF OTHER ASSESSEE, M/SBHARATHI CONSTRUCTIONS, ALSO. 8. FROM THE ABOVE IT APPEARS THAT THE ALLEGATION AG AINST THE ASSESSEES IS NON- DEDUCTION OF TAX AT THE TIME OF PAYMENT. A COPY OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT IN THE CASE OF M/S URC CO NSTRUCTION PVT. LTD. IS AVAILABLE AT PAGE 68 OF THE PAPER-BOOK. THE ASSESSING OFFICER, AFTER CONSIDERING THE FACTS THAT THE ASSESSEE BEING CIVIL CONTRACTORS, ASKED THE ASSESSE E TO FURNISH LIST OF SHAREHOLDERS, TDS CERTIFICATE, DETAILS OF OPENING STOCK, WORK IN PROG RESS DETAILS, PURCHASE DETAILS, DETAILS OF SUB-CONTRACT PAYMENTS, PAYMENT OF WAGES, INTEREST, ETC. BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS ALSO CALLED UPON THE ASSE SSEE TO PRODUCE THE DETAILS OF SECURED LOAN AVAILED FROM BANK AND OTHER FINANCIAL INSTITUTIONS. THE ASSESSING OFFICER HAS ALSO CONDUCTED ENQUIRY THROUGH INSPECTOR OF INC OME-TAX IN ORDER TO ASCERTAIN GENUINENESS OF SUNDRY CREDITORS. AFTER EXAMINING T HE MATERIAL, THE ASSESSING OFFICER OBSERVED AS FOLLOWS AT PAGE 2 OF THE ASSESSMENT ORD ER, COPY OF WHICH IS AVAILABLE AT PAGE 69 OF THE PAPER-BOOK IN THE CASE OF M/S URC CO NSTRUCTION PVT. LTD.:- ON A PERUSAL OF DETAILS FILED, IT IS SEEN THAT TH E ASSESSEE HAS NOT INCLUDED TDS RECEIPTS OF `13,57,306 AS INCOME. HEN CE, THE SAME IS BROUGHT TO TAX. (ADD: `13,57,306) THE ASSESSEE HAS DEFAULTED IN TDS PAYMENTS ON AUDIT FEES AND HIRE CHARGES PAID OF `44,45,185. HENCE THE SAID SUM OF `44,45,1 85 IS DISALLOWED U/S. 40(A)(IA) OF THE INCOME-TAX ACT, 1961. (ADD: `44,45,185) 9. THEREFORE, IT IS OBVIOUS THAT THE ENTIRE TDS CER TIFICATES, OPENING STOCK, GROSS RECEIPTS FROM CONTRACTORS, DETAILS OF PURCHASE, LIS T OF SHAREHOLDERS, COPY OF CURRENT ACCOUNT, COPY OF SALES TAX, GENERAL EXPENSES CLAIME D BY THE ASSESSEE, VEHICLE HIRE CHARGES WERE AVAILABLE BEFORE THE ASSESSING OFFICER . 10. NOW THE CONTENTION OF THE REVENUE BEFORE THIS T RIBUNAL IS THAT THE AUDIT REPORTS UNDER SECTION 44AB OF THE ACT DO NOT DISCLO SE CORRECT AND FULL PARTICULARS. THE ASSESSEES HAVE FURNISHED ALL THE DETAILS BEFORE THE ASSESSING OFFICER. THE AUDITOR, WHO PREPARED THE REPORT UNDER SECTION 44AB OF THE ACT, IS EXPECTED TO EXAMINE ALL THE MATERIALS AND RECORD THE SAME IN THE REPORT PREPARE D UNDER SECTION 44AB OF THE ACT. IF THE AUDITOR FAILS TO RECORD THE LAPSES COMMITTED BY THE ASSESSEE, THE ASSESSEE CANNOT BE BLAMED FOR THE SAME. AUDITOR BEING EXPERT IN AC COUNTANCY, HE HAS TO EXAMINE THE MATERIAL INDEPENDENTLY AND PREPARE THE REPORT AS RE QUIRED UNDER SECTION 44AB OF THE :-7-: ITA NO. 1249/MDS/2016 ACT. THE ASSESSEE, AT THE BEST, CAN PRODUCE ALL TH E RELEVANT MATERIAL BEFORE THE AUDITOR FOR THE PURPOSE OF PREPARING THE AUDIT REPORT. 11. PREPARATION OF AUDIT REPORT IS THE EXCLUSIVE FU NCTION OF AUDITOR, THEREFORE, IF AT ALL THERE WAS ANY NEGLIGENCE AND OMISSION TO DISCLO SE CORRECT FACT IN THE REPORT PREPARED UNDER SECTION 44AB OF THE ACT, THIS TRIBUN AL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE CANNOT BE FOUND FAULT. IF THE ASSESSE E SUPPRESSES ANY MATERIAL EITHER BEFORE THE AUDITOR OR BEFORE THE ASSESSING OFFICER, THEN WE MAY SAY THERE WAS NEGLIGENCE ON THE PART OF THE ASSESSEE. IN THIS CAS E, THE ASSESSING OFFICER HIMSELF CALLED UPON THE ENTIRE DETAILS OF GROSS RECEIPTS, TDS CERT IFICATES, DETAILS OF OPENING STOCK, WORK IN PROGRESS, PAYMENT OF WAGES, PAYMENT OF INTEREST, PAYMENT OF VEHICLE HIRE AND MACHINERY CHARGES, COPY OF SALES TAX ORDER, ETC. T HEREFORE, WHEN THE ASSESSEE HAS FURNISHED ALL THE DETAILS WHICH ARE REQUIRED IN COM PLETING ASSESSMENTS, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT MERE OMISSION OF AUD ITOR TO MENTION CERTAIN ITEMS IN THE AUDIT REPORT PREPARED UNDER SECTION 44AB OF THE ACT , THAT ALONE CANNOT BE A REASON TO SAY THAT THERE WAS NEGLIGENCE ON THE PART OF THE AS SESSEE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE ASSESSEES FURNISHE D ALL THE DETAILS, THERE WAS NO NEGLIGENCE ON THE PART OF THE ASSESSEES, HENCE, PRO VISO TO SECTION 147 OF THE ACT WOULD COME INTO OPERATION. IN VIEW OF THE ABOVE, THE ORD ER PASSED BY THE ASSESSING OFFICER IS BARRED BY LIMITATION. THEREFORE, IT CANNOT STAND I N THE EYE OF LAW. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW FOR ALL THE TH REE YEARS ARE SET ASIDE AND THE APPEALS OF THE ASSESSEES STAND ALLOWED. 8. SINCE, THE FACTS AND LEGAL POSITION IN THIS ASSE SSEES CASE IS ALMOST SIMILAR, FOLLOWING THE ABOVE DECISION, WE HOLD THAT THE ASSESSING OFFICER HAS CLEARLY RECORDED A FINDING THAT THE DETAILS OF TDS MADE ON PAYMENT TO SUB- CONTRACTORS WERE FURNISHED BY THE ASSESSEE AND AFTE R EXAMINING THEM HE PASSED THE ORIGINAL ASSESSMENT ORDER. FURTHER, IN THIS CASE, IN FORM 3CD, AGAINST ITEM NO. 22(B), IN RESPECT OF THE DETAILS I N NON COMPLIANCE WITH TDS PROVISIONS OF CHAPTER XVII-B, THE AUDITOR HAS REPOR TED AS NILL. WHEN THE FACTS ARE SO, FOR VALIDLY RE-OPENING THE ASSESSMENT CERTA INLY THERE SHOULD BE FRESH OR NEW MATERIAL BEFORE THE OFFICER. FROM THE REASO NS RECORDED WHICH IS :-8-: ITA NO. 1249/MDS/2016 EXTRACTED ABOVE, IT IS CLEAR THAT THE ASSESSING OFF ICER HAS NOT INDICATED ANY SUCH MATERIAL AND HENCE THE RE-ASSESSMENT MADE AMOU NTS TO CHANGE OF OPINION BARRED BY LIMITATION AND HENCE IT CANNOT BE UPHELD. THE CORRESPONDING APPEAL GROUNDS ARE ALLOWED. 9. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON TUESDAY, THE 30 TH DAY OF JANUARY, 2018 AT CHENNAI. SD/- ( . ' ) (DUVVURU RL REDDY) $ % /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) % /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED: 30 TH JANUARY, 2018 JPV ( +34 54 /COPY TO: 1. '/ APPELLANT 2. +,' /RESPONDENT 3. 6 ( )/CIT(A) 4. 6 /CIT 5. 4 + /DR 6. 9 /GF