Shri Himanshu H. Thakkar, Baroda V. The Income tax Officer,Ward-2(4), Baroda

ITA 1335/AHD/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6131 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 31-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 24-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA SRDR
• Assessee Lawyers: N M DARJI
• Keywords: TDS
• Section: 44AD; 40(a)(ia); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.1335/AHD/2009 ASSESSMENT YEAR :2005-06 DATE OF HEARING:31.5.10 DRAFTED:31.5.10 HIMANSHU H THAKKAR, PROP. LAXMINARAYAN ENGINEERING CO. 11, PARAM PARK, B/H. TAKSHA COMPLEX, VASNA ROAD, BARODA-390015 PAN NO.ABAPT7877K V/S . INCOME TAX OFFICER, WARD-2(4), BARODA (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI N.M. DARJI, AR RESPONDENT BY:- SHRI C.K. MISHRA, SR-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-II, BARODA IN APPEAL NO.CAB/II -168/07-08 DATED 04-02-2009. THE ASSESSMENT WAS FRAMED BY ITO, WARD-2(4), BARODA U/S.143(3) OF THE INCOME- TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 24-09-2007 FOR ASSESSMENT YEAR 2005-06. 2. AT THE OUTSET, IT IS TO BE NOTED THAT THE ASSESS EE HAS FILED THREE SET OF GROUNDS OF APPEAL AND FINALLY HE STATED THAT THE GROUND FIL ED ON 08-06-2009 I.E. REVISED GROUNDS ARE TO BE TAKEN AS FINAL AND ON THIS THE LD . SR-DR HAS RAISED NO OBJECTION. THE GROUNDS READS AS UNDER:- 1. AS PER ORIGINAL GROUND OF APPEAL. (THE LD. CIT( A)-II, BARODA HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THAT THE CASE OF THE APPELLANT IS COVERED BY THE PROVISION OF SECTION 194C(2) OF THE ACT AS AGAINST THE CONTENTION OF THE APPELLANT THAT HIS CASE IS COVERED BY THE PROVISION S OF SECTION 194C(1) OF THE ACT. ITA NO.1335/AHD/2009 A.Y. 2005-06 HIMANSHU H THAKKAR V. ITO WD-2(4) BRD PAGE 2 THE LD. CIT(A) HAS IGNORED THE FACTS THAT AS PER TE RMS OF AGREEMENT THE APPELLANT SHALL NOT SUBLET THE WORK OR PART THEREOF . SINCE SUBLETTING OF CONTRACT WOULD RESULT INN RESCINDING OF THE CONTRACT.) 2. AS PER ORIGINAL GROUND OF APPEAL. ( THE LD. CIT (A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE DISALLOWANCE OF RS.10,50,00 0/- MADE BY THE AO U/S.40A(IA) OF THE ACT AS HE CASE OF THE APPELLANT IS NO COVERED BY HE PROVISION OF SECTION 194 C(2) OF THE ACT AS CONTEND ED IN GROUNDS OF APPEAL NO.1 AS ABOVE. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN DE CLINING TO ATTRACT HE PROVISIONS OF SECTION 44AD OF THE ACT HOLDING THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WILL CONTINUE TO APPLY EVEN TH OUGH THE PROVISIONS OF SECTION 44AD IS ATTRACTED. 3.THE LD. CIT(A) HAS IGNORED THE FACTS THAT THE TUR NOVER OF THE APPELLANT WAS ONLY RS.33,03,946/- DURING THE PREVIOUS YEAR RELEVA NT TO A.Y. UNDER CONSIDERATION AND THE PROVISIONS OF SECTION 44AD OF THE ACT ITSELF PROVIDES THAT THE CONTRARY CONTAINED IN SECTION 28 TO 43(C) OF TH E ACT HAS NOTHING TO DO. 4. AS PER ORIGINAL GROUND OF APPEAL. 3. FROM THE ABOVE GROUNDS, ONLY ISSUE ARISES IS, WH ETHER THE CIT(A) HAS RIGHTLY UPHELD THE ORDER OF ASSESSING OFFICER IN DISALLOWIN G THE CONTRACT PAYMENTS TREATED THE SAME AS PAYMENT FOR SUB-CONTRACT OF NON-PAYMENT OF TDS U/S.40(A)(IA) OF THE ACT IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CAS E. 4. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSEE IS AN ELECTRICAL CONTRACTOR AND CARRYING ON JOB WORK, REP AIRS AND MAINTENANCE ASSIGNMENT UNDER THE NAME & STYLE OF M/S. LAXMINARAYAN ENGINEE RING CO. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS VERIFIED THE DETAILS AND NOTED FROM THE ACCOUNTS THAT ASSESSEE HAD MADE PAYMENTS T O THE FOLLOWING PERSONS FOR LABOUR CONTRACT WORK:- (I) SHRI BHARA NAI RS.4,40,000/- (II) SHRI BHARAT WALIYA RS.3,55,000 (III) SHRI TANGAPPAN RS.2,55,000 THE ASSESSING OFFICER FURTHER NOTED THAT THE TDS WA S DEDUCED AND TO THAT EFFECT A GENERAL ENTRY WAS PASSED ON 31-03-2005 IN THE BOOKS OF ACCOUNT OF THE ASSESSEE REGULARLY MAINTAINED. HE ALSO NOTED THAT TDS DEDUC TED, WAS NOT DEPOSITED IN THE GOVT. ACCOUNT AND REQUIRED THE ASSESSEE TO SHOW CAU SE AS TO WHY THE PROVISION OF SECTION 40 (A)(IA) OF THE ACT SHOULD NOT BE INVOKED AND THE ENTIRE PAYMENTS SHOULD ITA NO.1335/AHD/2009 A.Y. 2005-06 HIMANSHU H THAKKAR V. ITO WD-2(4) BRD PAGE 3 NOT BE DISALLOWED IN VIEW OF THIS PROVISION. THE AS SESSEE BEFORE ASSESSING OFFICER AS WELL AS BEFORE CIT(A) CONTENDED THAT HE IS NOT REQU IRED TO DEDUCT TAX AT SOURCE IN VIEW OF PROVISION OF SEC.194 C(1) OF THE ACT AND TH E TAX WAS DEDUCTED BY MISTAKE AND HAS NOT PAID INTO GOVT. ACCOUNTS AND FURTHER WI LL BE REFUNDED TO THE ABOVE THREE PARTIES. HE ALSO STATED THAT NO WORK HAS BEEN SUB-C ONTRACTED BY HIM TO ABOVE THERE PARTIES, HENCE, 194C(2) OF THE ACT WILL NOT APPLY. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS ENGAGED ABOVE SAID THREE CONTRACT WHO HAS SUPPLIED THE LABOURERS AS MENTIONED ABOVE AND THE ASSESSEE WAS DOING THE C ONTRACT WITH THE FOLLOWING FOUR PARTIES:- I) BSNL, MEHSANA II) BSNL, AHMEDABAD III) BSNL, TELECOM ELECTRICAL DIV. II, AHMEDABAD IV) GUJARAT STATE POLICE HOUSING CORPORATION LTD., GANDHINAGAR THE ASSESSING OFFICER ALSO NOTED THAT IN PREVIOUS Y EAR 2003-04 RELEVANT TO ASSESSMENT YEAR 2004-05, THE ASSESSEE HAS DECLARED TURNOVER OF RS.1,03,98,316/- AND THE TAX AUDIT WAS DONE. IN THIS YEAR ALSO THE ASSESSEES ACCOUNTS ARE MAINTAINED AS THE TURNOVER IS RS.33,03,946/-. IT W AS NOTED BY CIT(A) THAT THE ASSESSEES TURNOVER IS MORE THAN RS.40 LAKH AND ASS ESSEE CONTINUED TO MAINTAIN BOOKS OF ACCOUNT, WHICH WERE ACCEPTED BY THE ASSESS ING OFFICER AND EVEN THE EXPENSES CLAIMED WERE BY AND LARGE ACCEPTED BY AO W ITH MARGINAL DISALLOWANCES. ACCORDINGLY, CIT(A) DISMISSED THE CLAIM OF THE ASSE SSEE BY GIVING FOLLOWING FINDING IN PARA-3.2 OF HIS APPELLATE ORDER:- 3.2 I HAVE CONSIDERED THE SUBMISSION OF THE AUTHOR IZED REPRESENTATIVE. SECTION 44AD WAS INSERTED IN HE INCOME-TAX AC WITH A VIEW TO PROVIDE FOR A METHOD OF ESTIMATING INCOME FOR HE BUSINESS OF CIVI L CONSTRUCTION. THE ASSESSEE IS REQUIRED TO FILE THE RETURN OF INCOME, ESTIMATING INCOME AT 8% OF GROSS RECEIPT. HE WAS NOT REQUIRED TO MAINTAIN BOOK S OF ACCOUNTS. HOWEVER, THIS SCHEME WAS OPTIONAL. A SYSTEM OF REBUTTAL HAS BEEN PROVIDED IN THE SECTION BY WHICH A PERSON CAN CLAIM INCOME TO BE LO WER THAN THE SPECIFIED ESTIMATE OF 8%. IN SUCH A CASE HE MUST PRODUCE NECE SSARY EVIDENCE TO PROVE HIS CLAIM. IN THE CASE OF THE APPELLANT HE HAS MAIN TAINED REGULAR BOOKS OF ACCOUNT. IN THE YEAR PREVIOUS TO THE CURRENT YEAR I NCOME HIS TURNOVER WAS ABOVE RS.40 LAKHS BY WHICH HIS BOOKS WAS SUBJECTED TO TAX AUDIT ALSO. HE APPELLANT CONTINUED TO MAINTAIN BOOKS OF ACCOUNT WH ICH WERE ACCEPTED BY THE ASSESSING OFFICER. THE EXPENSES CLAIMED BY THE APPE LLANT WERE BY AND LARGE ALSO ACCEPTED BY THE ASSESSING OFFICER. HENCE HIS C LAIM OF INCOME BEING LESS THAN 8% OF THE GROSS RECEIPT WAS FOUND TO BE CORREC T. THE ONLY DISCREPANCY LAY IN THE NON CREDITING OF THE TDS DEDUCTED ON LAB OUR CHARGES WHICH RESULTED IN INVOCATION OF THE PROVISION OF SECTION 40(A)(IA) . TO ESCAPE THE PROVISION OF ITA NO.1335/AHD/2009 A.Y. 2005-06 HIMANSHU H THAKKAR V. ITO WD-2(4) BRD PAGE 4 SECTION 40(A)(IA) THE APPELLANT IS CHOOSING TO TAKE RECOURSE TO SECTION 44AD. EVEN OF THIS STAND IS ACCEPTED HE CAN AT BEST ESCAP E THE PROVISIONS OF SECTION 30 TO 38. HOWEVER, SECTION 40(A)(IA) WILL CONTINUE APPLY TO HIM. HENCE THERE IS NO MERIT IN THE SUBMISSION THAT THE INCOME SHOULD B E COMPUTED U/S.44AD. THIS GROUND IS DISMISSED. 5. BEFORE US LD. COUNSEL FOR THE ASSESSEE MAINLY RE LIED ON THE DECISION OF TRIBUNAL IN THE CASE OF GOPALSINGH R RAJPUROHIT V. ACIT (2005) 94 TTJ 865 (AHD) AND STATED THAT TRIBUNAL HAS HELD AS UNDER:- 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ED THE ORDERS OF LOWER AUTHORITIES. HOWEVER, AGREED TO THE LAST PROPOSITIO N OF THE ASSESSEE THAT THE INCOME OF THE ASSESSEE MAY BE TAXED AT 5 PER CENT N ET PROFIT ON THE TOTAL TURNOVER, IE., RS.30,76,348 AND MAY BE ASSESSED ACC ORDINGLY. THEREFORE, PROVISIONS OF SS. 28 TO 43C MAY NOT BE APPLIED. 5. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE MATERIALS AVAILABLE ON RECORD. I FIND MERIT IN THE ARGUMENTS OF BOTH THE P ARTIES, THE LEGISLATURE HAS INTENDED TO TAX THE RETAIL TRADERS IN A PRESUMPTIVE MANNER AT THE RATE OF 5 PER CENT PROFIT ON TOTAL TURNOVER THEREBY THE PROVISION S OF SS. 28 TO 43C [INCLUDING S. 40A(3)] WILL NOT BE APPLICABLE. SINCE BOTH THE P ARTIES HAVE AGREED TO MAKE THE ASSESSMENT UNDER S. 44AF(1), THE AO IS DIRECTED TO APPLY 5 PER CENT OF NET PROFIT ON TOTAL TURNOVER AND THEREBY DELETE THE ADD ITION MADE UNDER S. 40A(3). THE AO IS DIRECTED ACCORDINGLY, ASSESSEES APPEAL I S PARTLY ALLOWED. HE FURTHER STATED THAT ONCE THE PROVISION OF SEC.44 AD ARE APPLICABLE, THE DISALLOWANCE U/S.40(A)(IA) OF THE ACT WILL NOT BE M ADE. ON THE OTHER HAND, LD. SR-DR HEAVILY RELIED ON THE ORDERS OF LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESS EE HAS MAINTAINED THE BOOKS OF ACCOUNT FOR THE PREVIOUS YEAR RELEVANT TO THIS ASSE SSMENT YEAR. EVEN THE ASSESSEE HAS MAINTAINED THE BOOKS OF ACCOUNT IN EARLIER YEAR AND THOSE WERE SUBJECT TO TAX AUDIT U/S.44AB OF THE ACT. THE ASSESSING OFFICER HA S ACCEPTED THE BOOKS OF ACCOUNT AND APPLIED THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT AND MADE DISALLOWANCE ONLY ON THE TRANSACTIONS, WHICH ARE SUBJECT TO TDS U/S.1 94C OF THE ACT. THE CLAIM OF THE ASSESSEE THAT HIS CASE FALLS U/S.44AD OF THE ACT, I S WITHOUT ANY BASIS AS THE ASSESSEE HIMSELF HAS FILED RETURN OF INCOME ON THE BASIS OF BOOKS OF ACCOUNT AND CLAIMED THE EXPENDITURE ON THAT BASIS. ONCE THE AS SESSEE HAS MAINTAINED THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER HAS NO OPTI ON IN VIEW OF THE PROVISION OF SEC.44AD(5) OF THE ACT AS INSERTED BY SEC.6 OF INC OME-TAX (SECOND AMENDMENT) ITA NO.1335/AHD/2009 A.Y. 2005-06 HIMANSHU H THAKKAR V. ITO WD-2(4) BRD PAGE 5 ACT, 1998 RETROSPECTIVE W.E.F.1-4-1997 I.E. FOR AN FROM ASSESSMENT YEAR 1997-98. THE RELEVANT PROVISION READS AS UNDER:- (5) NOTHING CONTAINED IN THE FOREGOING PROVISIONS OF THIS SECTION SHALL APPLY, WHERE THE ASSESSEE CLAIMS AND PRODUCES EVIDENCE TO PROVE THAT HE PROFITS AND GAINS FROM THE AFORESAID BUSINESS DURING THE PR EVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1 ST DAY OF APRIL, 1997, OR ANY EARLIER ASSESSMENT YEAR, ARE LOWER THAN THE PROFITS AND GAI NS SPECIFIED IN SUB-SECTION (1), AND THEREUPON THE ASSESSING OFFICER SHALL PROC EED TO MAKE AN ASSESSMENT OF THE TOTAL INCOME OR LOSS OF THE ASSES SEE AND DETERMINE THE SUM PAYABLE BY THE ASSESSEE ON THE BASIS OF ASSESSM ENT MADE UNDER SUB- SECTION (3) OF SECTION 143. WE FIND THAT THE DECISION CITED BEFORE US OF THIS T RIBUNAL SMC BENCH IN THE CASE OF GOPALSINGH R RAJPUROHIT (SUPRA), IS NOT APPLICABLE AS THE SUB-SECTION 5 WA S NOT CONSIDERED IN THAT DECISION. WE FURTHER FIND THAT THE ASSESSING OFFICER HAS MADE ASSESSMENT ONLY ON THE BASIS OF BOOKS OF ACCOUNT AN D THE ASSESSEES CLAIM OF INCOME LESS THAN 8% OF THE GROSS RECEIPT WAS FOUND TO BE CORRECT AND ACCEPTED AS IT IS. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE A RE OF THE VIEW THAT THE ORDERS OF THE LOWER AUTHORITIES ARE AS PER LAW AND NEEDS NO I NTERFERENCE. ACCORDINGLY, THIS APPEAL OF THE ASSESSEE IS DISMISSED. 7. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 04/06/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 04/06/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- II, BARODA 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD