Mr. M.Ashok, V. ITO-Ward-1, Tiptur

ITA 1481/BANG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9257 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 12-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS
• Keywords: Non-deduction of tax; Difference of opinion; Reason to believe; Change of opinion
• Section: 37(1); 194C; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER ITA NO.1481/BANG/2016 ASSESSMENT YEAR : 2008-09 MR. M. ASHOK, CONTRACTOR, OPP: ANJANEYA SWAMY TEMPLE, MARUTHI NAGARA, HULIYAR-572 218, C. N. HALLI TALUK. PAN: AKAPA 8367 J VS. THE INCOME TAX OFFICER, WARD 1, TIPTUR. APPELLANT RESPONDENT ASSESSEE BY : SMT. SOUMYA, ADVOCATE REVENUE BY : SMT. SWAPNA DAS , JCIT DATE OF HEARING : 18.05.2017 DATE OF PRONOUNCEMENT : 26.05.2017 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST TH E ORDER OF THE CIT(A), INTERALIA, ON FOLLOWING GROUNDS: ITA NO. 1481/BANG/2016 PAGE 2 OF 5 1. THE CIT (A) ERRED IN PASSING THE ORDER IN THE MA NNER WHICH HE DID. 2. THE CONDITION PRECEDENT FOR REOPENING BEING ABSE NT, THE REOPENING SA47 OF THE ACT BY THE AO WHICH WAS CONFIRMED BY THE LEARNE D CIT (A) IS BAD IN LAW. 3. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED TH E REOPENING U S.147 WAS ON MERE CHANGE OF OPINION AND ACCORDINGLY OUGHT TO HAV E CANCELLED THE ASSESSMENT ORDER. 4. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED T HE FACT THAT THERE WAS NO REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESS MENT AND HENCE THE PROCEEDINGS INITIATED U/ S. 148 WAS BAD IN LAW. 5. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T THERE WAS NO DEFAULT ON ACCOUNT OF FAILURE TO DEDUCT TAX AT SOUR CE WHICH IS EVIDENT FROM THE ASSESSMENT AND CONSEQUENTLY THE REOPENING ON THE SAID REASON WAS OPPOSED TO LAW. 6. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT A MERE PAYMENT OF FREIGHT CHARGES WAS NOT CONCLUSIVE TO HO LD THAT THE PROVISIONS OF SECTION 194C WAS APPLICABLE TO THE ASSESSEE AND THE CIT(A) NOT HAVING MADE FURTHER INVESTIGATIONS TO ASCERTAIN THE DEFAUL T PAYMENT, THE IMPUGNED DISALLOWANCE CONFIRMED BY THE CIT(A) WAS B AD IN LAW. 7. THE LEARNED CIT (A) FAILED TO APPRECIATE THE FAC T THAT THE PROVISION OF SECTION 194C OF THE ACT IS NOT APPLICABLE TO THE APPELLANT, ACCORDINGLY PROVISION OF SECTION 40 (A) (IA) HAS NO RELEVANCE. 8. THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE ENTIRE PAYMENT MADE WAS VERIFIABLE AND THAT THERE WAS NO R EQUIREMENT FOR THE CIT(A) TO CONFIRM THE IMPUGNED DISALLOWANCE. 9. WITHOUT PREJUDICE THE ADDITION/ DISALLOWANCE ARE EXCESSIVE, ARBITRARY AND IRREASONABLE AND OUGHT TO BE DELETED IN TOTO. 10. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING OF THE APPEAL THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. 2. THE ASSESSEE HAS CHALLENGED THE REOPENING OF THE ASSESSMENT AT THE THRESHOLD ON THE GROUND THAT THE ASSESSMENT WAS REO PENED HAVING RECORDED THE REASONS THAT THE ASSESSEE IS A LABOUR CONTRACTO R AND HAS RECEIVED CONTRACT ITA NO. 1481/BANG/2016 PAGE 3 OF 5 RECEIPT OF RS.1,37,76,400/- AND HAS MADE THE PAYMEN T TO SUBCONTRACTORS ON SUBCONTRACT BASIS OR JOB BASIS BUT HAS NOT DEDUCTED THE TDS. THEREFORE THE EXPENDITURE SAID TO BE DISALLOWED IN TERMS OF PROVI SIONS OF SECTION 40(A)(IA) OF THE IT ACT (HEREAFTER TO BE CALLED AS AN ACT). WHEREAS THE ASSESSMENT WAS FRAMED HAVING RECORDED THAT THE ASSESSEE WAS EN GAGED IN TRANSPORT BUSINESS AND THE AO DISALLOWED 10% OF TOTAL TRANSPO RTATION CHARGES UNDER SECTION 37(1) OF THE ACT. NO DISALLOWANCE WAS MADE UNDER SECTION 40(A)(IA) OF THE ACT. THEREFORE THE REOPENING ITSELF IS BAD IN LAW AND THE ASSESSMENT FRAMED CONSEQUENT TO THE REOPENING IS NOT SUSTAINAB LE IN THE EYES OF THE LAW. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER CONTEN DED THAT IT IS A SETTLED POSITION OF LAW THAT IF THE AO IS NOT ABLE TO MAKE AN ADDITION ON THE POINT ON WHICH THE ASSESSMENT IS REOPENED, ENTIRE ASSESSMENT IS NOT SUSTAINABLE IN THE EYES OF LAW. 3. THE LEARNED DR ON THE OTHER HAND HAS PLACED RELI ANCE UPON THE ORDER OF THE CIT(A). 4. HAVING CAREFULLY EXAMINED THE ORDER OF THE LOWER AUTHORITIES AND THE DOCUMENTS PLACED ON RECORD, WE FIND THAT THE AO HAS REOPENED THE ASSESSMENT AFTER RECORDING THE REASONS AS EXTRACTED HERE UNDER: ITA NO. 1481/BANG/2016 PAGE 4 OF 5 THE ASSESSEE, AN INDIVIDUAL, IS A LABOUR CONTRACT AND HAS RECEIVED CONTRACT RECEIPTS OF RS.1,37,76,400/-. IT IS OBSERVED FROM THE RECORDS THAT THE CONTRACT EXPENSES/PAYMENTS MADE CL AIMED SHOULD EITHER BE EXECUTED ON SUB CONTRACT BASIS OR JOB WOR K BASIS AS PRESCRIBED IN SECTION 194C OF THE IT ACT. HOWEVER, AS VERIFIED FROM THE RETURN IT IS OBSERVED THAT NO TDS HAS BEEN MADE ON THE EXPENDITURE/PAYMENTS MADE BY THE ASSESSEE ON CONTRA CT PAYMENTS. IN VIEW OF THE SAME, THE EXPENDITURE HAD TO BE DISALLO WED IN TERMS OF PROVISION OF SECTION 40(A)(IA) OF THE INCOME TAX AC T. IN THE INSTANT CASE, EXPENDITURE CLAIMED ON SUB CONTRACT PAYMENTS MADE HAS TO BE BROUGHT TO TAX. ACCORDINGL Y, I HAVE REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT W ITHIN THE MEANING OF SECTION 147 OF THE IT ACT. WHILE COMPLETING THE ASSESSMENT, THE AO HAS NOT EXA MINED THIS ASPECT. HE RATHER OBSERVED THAT THE ASSESSEE IS A TRANSPORTER AND HE WAS ENGAGED IN TRANSPORT BUSINESS AND THE TOTAL CONTRACT RECEIPTS WAS OF RS.1,37,76,400/-. HE HAS NOT MADE ANY DISALLOWANCE BY INVOKING PROVIS IONS UNDER SECTION 40(A)(IA) OF THE ACT. HE HAS SIMPLY DISALLOWED THE TRANSPORTATION CHARGES AT 10%. THEREFORE UNDISPUTEDLY THE AO HAS NOT MADE AN Y ADDITIONS BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WHEREAS THE ASSESSMENT WAS REOPENED ON THE GROUND THAT TDS WAS NOT DEDUCTED AND THEREFORE EXPENDITURE ARE TO BE DISALLOWED UNDER SE CTION 40(A)(IA) OF THE ACT. 5. IT IS A SETTLED POSITION OF LAW THAT IF THE AO D OES NOT MAKE ADDITION ON AN ISSUE OR A POINT ON WHICH THE ASSESSMENT WAS REO PENED, THE ASSESSMENT FRAMED CONSEQUENT TO SUCH REOPENING IS BAD IN LAW A ND OBSERVED TO BE ITA NO. 1481/BANG/2016 PAGE 5 OF 5 QUASHED. IN THE INSTANT CASE THE ASSESSMENT WAS RE OPENED ON THE GROUND THAT TDS WAS NOT DEDUCTED ON PAYMENTS. THEREFORE THE SA ME SHOULD BE DISALLOWED UNDER SECTION 40(A)(IA) OF THE ACT. BUT THERE IS NO ADDITION IN THIS REGARD IN THE ASSESSMENT ORDER. THUS THE REOPENING OF THE ASSESSMENT IS BAD AND CONSEQUENT TO THE BAD REOPENING, THE ASSESSMENT FRAMED IS ALSO BAD IN LAW AND DESERVES TO BE SET ASIDE. WE ACCORDINGLY A NNUL THE ASSESSMENT. SINCE THE ASSESSMENT HAS BEEN ANNULLED, WE FIND NO JUSTIFICATION TO DECIDE THE ISSUE ON MERIT. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. PRONOUNCED IN THE OPEN COURT ON 26 TH MAY, 2017. SD/- ( SUNIL KUMAR YADAV ) JUDICIAL MEMBER BANGALORE. DATED: 26 TH MAY, 2017. /NSHYLU/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.