Shri Uday Sharma, New Delhi V. ITO, New Delhi

ITA 1515/DEL/2011

• Counselvise Citation: 151520114 RSA 2011
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 12-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REENA S PURI
• Assessee Lawyers: K SAMPATH
• Keywords: Non-deduction of tax
• Section: 54; 6; 154; 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH H DELHI ] BEFORE MS. DIVA SINGH, JM AND SHRI K. D. RA NJAN, AM I. T. APPEAL NO. 1515 (DEL) OF 2011 ASSESSMENT YEAR : 2006-07. SHRI UDAY SHARMA, THE INCOME-TAX OFFICER , 416 / 5, K A R K A R D O O M A, VS. W A R D : 35 (4), D E L H I - 110 092. N E W D E L H I. PAN/GIR NO. AAOPS0533L. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI K. SAMPATH, ADV.; DEPARTMENT BY : MS. REENA S. PURI [CI T] D. R.; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 20 06-07 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)-XXVII, NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS:- THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN CONFIRMING THE FOLLOWING ACT IONS OF THE ASSESSING OFFICER : (1). IN PASSING THE ORDER UNDER SECTION 1 54 OF THE INCOME TAX ACT, 1961 WHICH IS BAD IN LAW AND ON FACTS; (2) IN ADDING TO INCOME UNDER SECTION 40( A)(IA) OF THE ACT A SUM OF RS.2,00,82,270/- BEING THE AMOUNT OF EXPENDITURE I NCURRED ON ACCOUNT OF LORRY HIRE CHARGES ERRONEOUSLY ON THE GROUND THAT TAX HAS NOT BEEN DEDUCTED ON SUCH PAYMENTS EVEN THOUGH FORM 15-J WAS SUBMITTED; 2 I. T. APPEAL NO. 1515 (DEL) OF 2011 ALL THE ABOVE ACTIONS ARE MOST ARBITRARY, ERRONEOUS AND UNLAWFUL. IT IS PRAYED THAT THE SAME MUST BE QUASHED. 3. THE ONLY ISSUE FOR CONSIDERATION RELATES TO CONF IRMING THE ADDITION OF RS.2,00,82,270/- DISALLOWED UNDER SECTION 40(A)(IA) OF THE ACT. TH E FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS EN GAGED IN THE BUSINESS OF TRANSPORT. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SE CTION 143(3) OF THE ACT ON 10/12/2008 ACCEPTING THE RETURNED INCOME OF RS.2,03,130/-. SU BSEQUENTLY, THE AO PASSED ORDER UNDER SECTION 154 OF THE ACT ON 31 ST MAY, 2010 DISALLOWING THE AMOUNT OF RS.2,00,82,270 /- ON THE GROUND THAT ON LORRY CHARGES OF RS.2,00,82,270/- TH E ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON THE PRETEXT THAT THE ASSESSEE HAD FILED DECLARATION IN FORM NO. 15-J AS PER THIRD PROVISO TO SECTION 194-C(3)(I) OF THE ACT. ON VERIFICATION OF RECORD, IT WAS FOUND THAT DECLARATION IN FORM 15-J WAS FILED BY THE ASSESSEE ON 5/7/2006 I.E. AFTER THE DU E DATE OF FILING OF SUCH DECLARATION. THEREFORE THE ENTIRE AMOUNT OF RS.2,00,82,270/- WAS DISALLOWA BLE. THEREAFTER THE AO ISSUED CORRIGENDUM ON 10/6/2010 TO ORDER UNDER SECTION 154 INDICATING THE DATE OF NOTICE ISSUED UNDER SECTION 154 AND THE REPLY OF THE ASSESSEE. THE SAID CORRIGENDU M WAS ISSUED WITH THE PURPOSE TO SUPPLY MISSING PART OF THE ORDERS WITH REGARD TO ISSUE OF NOTICE AND REPLY OF THE ASSESSEE. 4. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED TH AT TRANSPORTERS HAD SUBMITTED DECLARATION FORM 15-I WELL WITHIN THE TIME AND, THEREFORE, THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE ON THE PAYMENTS. IT WAS ALSO SUBMITTED SINCE NO TAX WAS T O BE DEDUCTED IT WAS NOT DEDUCTED AND CANNOT BE DEDUCTED IN THE SUBSEQUENT YEAR. LAW CANNOT BE HARSH THAT IT WOULD ALLOW DEDUCTION OF EXPENSES IN SUBSEQUENT YEAR WHEN TAX IS DEDUCTED AN D PAID. IT WAS ALSO SUBMITTED THAT IN CASE OF A DEFAULTER PAYING TAX IN SUBSEQUENT YEAR HE GETS D EDUCTION AND A PERSON WHO WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE THE AMOUNT IS DISALLOWED. THE AO HAD DISALLOWED ENTIRE EXPENDITURE ON THE GROUND THAT FORM NO. 15-J WAS FILED BELATEDLY BY 5 DAYS. THE LD. CIT (APPEALS) ON CONSIDERATION OF SUBMISSIONS MADE BY THE ASSESSEE OBSERVED THAT A S PER PROVISIONS OF SECTION 194-C THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE AT THE RATE OF 2 PER CENT ON THE AMOUNT OF LORRY HIRE CHARGES. SINCE NO TDS WAS MADE BY THE ASSESSEE ON THE SAID AMOUNT OF RS.2,00,82,270/- AND THE DECLARATION FILED IN FORM NO. 15-J WAS OUT OF TIME, THEREFORE, THE AO HAD ACTED AS PER PROVISIONS 3 I. T. APPEAL NO. 1515 (DEL) OF 2011 OF LAW AND RECTIFIED THE ORDER UNDER SECTION 154 OF THE ACT CORRECTLY. THE LD. CIT (APPEALS) THEREFORE, UPHELD THE ORDER OF THE AO UNDER SECTION 154 OF THE ACT. 5. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED T HAT THE ASSESSEE DURING THE RELEVANT PERIOD WAS ENGAGED IN THE BUSINESS OF TRANSPORTATION OF G OODS. HE SUBMITTED THAT THERE WAS DELAY OF THREE DAYS IN SUBMITTING FORM NO. 15-I. MERELY BEC AUSE THE ASSESSEE HAD NOT FILED FORM NO. 15I WITHIN TIME, THE DISALLOWANCE COULD NOT BE MADE. H E FURTHER SUBMITTED THAT PROVISIONS OF SECTION 194C(3) ARE MACHINERY/DIRECTORY AND NOT MANDATORY. THE ASSESSEES CASE IS COVERED BY SECOND PROVISO TO SECTION 194C(3)(I) AND NOT BY THE THIRD PROVISO. SINCE THE PROVISIONS OF SECTION 194C(3) ARE MACHINERY PROVISIONS AND, THEREFORE, AR E TO BE INTERPRETED LIBERALLY. HE FURTHER SUBMITTED THAT MISTAKE TO BE RECTIFIED UNDER SECTIO N 154 SHOULD BE APPARENT, PATENT AND SHOULD NOT BE DEBATABLE. THE LD. ASSESSING OFFICER HAD IN VOKED THE PROVISIONS OF SECTION 154 WITHOUT VERIFICATION OF FACTS WHETHER THE MISTAKE WAS APPAR ENT OR PATENT. THEREFORE, PROVISIONS OF SECTION 154 ARE NOT APPLICABLE. THE ASSESSEE HAD MADE PAYM ENT OF AMOUNT LESS THAN RS.20,000/- TOTALING TO RS.2 CRORES AND THE PAYMENT EXCEEDING RS.50,000/ - IS ABOUT RS.41.82 LAKHS. MERELY BECAUSE FORM NO. 15I HAS BEEN FILED BELATEDLY DISALLOWANCE OF THE ENTIRE AMOUNT CANNOT BE MADE. HE FURTHER SUBMITTED THAT PROVISIONS OF SECTION 194- H AS TO BE READ WITH PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 5.1 ON THE OTHER HAND, THE LD. CIT(DR) SUBMITTED T HAT THE ASSESSEE HAD FILED FORM NO. 15J BEYOND THE DUE DATE. THERE WAS NO DEBATE. THE BUR DEN WAS ON THE ASSESSEE TO HAVE DEDUCTED TAX AT SOURCE. THE CONTENTION OF THE ASSESSEE THAT PRO VISIONS OF LAW WERE NEW IS NOT CORRECT. THE PROVISIONS OF LAW HAVE BEEN INSERTED WITH EFFECT FR OM 17/6/2005 AND WERE IN EXISTENCE AS ON THE DATE WHEN THE ASSESSEE WAS TO SUBMIT FORM NO. 15J. THEREFORE, THE ASSESSEE SHOULD HAVE FILED FORM NO. 15J BY 30 TH JUNE, 2006. THE CONTENTION OF THE ASSESSEE THAT T HE ASSESSEE HAD RECEIVED FORM NO. 15J FROM VARIOUS PERSONS IN TIME, BUT IT W AS THE DEFAULT OF THE AR TO FILE SUCH FORMS BELATEDLY. THE ASSESSEE HAD NOT FILED ANY EVIDENCE IN SUPPORT OF HIS CONTENTION. IT WAS ALSO SUBMITTED BY HER THAT WHILE COMPUTATION OF TOTAL IN COME, THE FACTS OF NON-DEDUCTION OF TAX AT SOURCE CAME TO HIS NOTICE AND, THEREFORE, THE AO HA D RIGHTLY INVOKED THE PROVISIONS OF SECTION 4 I. T. APPEAL NO. 1515 (DEL) OF 2011 154 OF THE ACT. IN REJOINDER, THE LD. AR OF THE AS SESSEE SUBMITTED THAT FOR THE PURPOSE TAX DEDUCTED AT SOURCE NO COMPUTATION WAS REQUIRED. PR OVISIONS OF SECTION 40(A)(IA) ARE TO BE READ WITH SECTION 194C OF THE ACT. THE CONTENTION OF TH E ASSESSEE IS CORRECT, SO FAR AS THE RECEIPT OF FORM NO. 15J/15I FROM ITS SUBCONTRACTORS IS CONCERN ED. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE ABOUT THE FACT THAT THE ASSESSMENT UN DER SECTION 143(3) OF THE ACT WAS MADE ON 10/12/2008 ACCEPTING THE RETURNED INCOME. THE ASSE SSING OFFICER HAD DISALLOWED THE PAYMENTS MADE TO TRANSPORT CONTRACTORS AT RS.2,00,82,270/- O N THE GROUND THAT DECLARATION IN FORM NO. 15J WAS FILED ON 5/7/2006 AFTER THE DUE DATE OF FILING OF SUCH DECLARATION. THE LD. AR OF THE ASSESSEE HAS CHALLENGED ORDER UNDER SECTION 154 OF THE ACT O N THE GROUND THAT THE ISSUE BEING DEBATABLE 154 PROCEEDINGS COULD NOT HAVE BEEN INITIATED. THE ASSESSEE IS A CONTRACTOR AND HAD PAYMENTS TO SUB-CONTRACTORS FOR TRANSPORTING OF GOODS WHICH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER IN TOTALITY ON THE GROUND THAT FORM NO-15J/15I WERE NO T FILED WITHIN THE DUE DATE. HENCE THE ISSUE BEFORE US IS TO BE DECIDED IN ACCORDANCE WITH THE P ROVISIONS OF SECTION 194C(2) AND 194C(3)(I) OF THE ACT WHICH ARE REPRODUCED AS UNDER: (2) ANY PERSON (BEING A CONTRACTOR AND NOT BEING A N INDIVIDUAL OR A HINDU UNDIVIDED FAMILY) RESPONSIBLE FOR PAYING ANY SUM TO ANY RESID ENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE SUB-CONTRACTOR) IN PURSUANCE OF A CONTRAC T WITH THE SUB-CONTRACTOR FOR CARRYING OUT, OR FOR THE SUPPLY OF LABOUR FOR CARRYING OUT, THE WHOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR OR FOR SUPPLYING WHETH ER WHOLLY OR PARTLY ANY LABOUR WHICH THE CONTRACTOR HAS UNDERTAKEN TO SUPPLY SHALL, AT T HE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE SUB-CONTRACTOR OR AT THE TIME OF PAY MENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO ONE PER CENT OF SUCH SUM AS INCOME-TAX ON INCOME CO MPRISED THEREIN: XX XX XX XX XX X X (3) NO DEDUCTION SHALL BE MADE UNDER SUB-SECTI ON (1) OR SUB-SECTION (2) FROM 5 I. T. APPEAL NO. 1515 (DEL) OF 2011 (I) THE AMOUNT OF ANY SUM CREDITED OR PAID OR LIK ELY TO BE CREDITED OR PAID TO THE ACCOUNT OF, OR TO, THE CONTRACTOR OR SUB-CONTRACTOR , IF SUCH SUM DOES NOT EXCEED TWENTY THOUSAND RUPEES: PROVIDED THAT WHERE THE AGGREGATE OF THE AMOUNTS OF SUCH SU MS CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR EXCEEDS FIFTY THOUSAND RUPEES, THE PERSON RESPONSIBLE FOR PAYING SUCH SUMS REFERRE D TO IN SUB-SECTION (1) OR, AS THE CASE MAY BE, SUB-SECTION (2) SHALL BE LIABLE TO DED UCT INCOME-TAX UNDER THIS SECTION: PROVIDED FURTHER THAT NO DEDUCTION SHALL BE MADE UNDER SUB- SECTION (2), FROM THE AMOUNT OF ANY SUM CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE PREVIOUS YEAR TO THE ACCOUNT OF THE SUB-CONTRACTOR DURING TH E COURSE OF BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGES, ON PRODUCTION OF A DECLARATION TO THE PERSON CONCERNED PAYING OR CREDITING SUCH SUM, IN THE PRES CRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND WITHIN SUCH TIME AS MAY BE PR ESCRIBED, IF SUCH SUB-CONTRACTOR IS AN INDIVIDUAL WHO HAS NOT OWNED MORE THAN TWO GO ODS CARRIAGES AT ANY TIME DURING THE PREVIOUS YEAR: PROVIDED ALSO THAT THE PERSON RESPONSIBLE FOR PAYING ANY SUM AS AFORESAID TO THE SUB- CONTRACTOR REFERRED TO IN THE SECOND PROVISO SHALL FURNISH TO THE PRESCRIBED INCOME-TAX AUTHORITY OR THE PERSON AUTHORIZED BY IT SUCH PARTI CULARS AS MAY BE PRESCRIBED IN SUCH FORM AND WITHIN SUCH TIME AS MAY BE PRESCRIBED. ON PLAIN READING OF PROVISIONS OF SECTION 194C(2) A ND 194C(3)(I) IT IS CLEAR THAT NO DEDUCTION OF TAX IS REQUIRED IN A CASE WHERE AMOUNT PAID TO CONT RACTOR OR SUB CONTRACTOR DOES NOT EXCEED RS.20,000/-. HOWEVER, WHERE AMOUNT CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID TO A CONTRACTOR OR SUB CONTRACTOR EXCEEDS RS.20,000/- IN SINGLE PAYMENT OR RS.50,000/- IN AGGREGATE DURING A FINANCIAL YEAR TAX HAS TO BE DEDUCTED AT S OURCE. IN CASE OF A SUB CONTRACTOR BEING INDIVIDUAL WHO DOES NOT OWN MORE THAN TWO GOODS CAR RIAGES AT ANY TIME DURING THE YEAR AND GIVES DECLARATION IN FORM 15I NO TAX WILL BE DEDUCT ED. THE PERSON RESPONSIBLE FOR PAYING ANY SUM TO SUB CONTRACTOR SHALL FURNISH IN FORM 15J INF ORMATION TO PRESCRIBED AUTHORITY WITHIN THE TIME PRESCRIBED UNDER RULE 29D OF IT RULES, 1962 I. E. TO THE COMMISSIONER OF INCOME-TAX, SO 6 I. T. APPEAL NO. 1515 (DEL) OF 2011 DESIGNATED BY THE CHIEF COMMISSIONER OF INCOME-TAX, WITHIN WHOSE AREA OF JURISDICTION, THE OFFICE OF THE CONTRACTOR IS SITUATE ON OR BEFORE T HE 30TH JUNE FOLLOWING THE FINANCIAL YEAR. 7. FURTHER IF PERSON RESPONSIBLE FOR DEDUCTING TAX AT SOURCE DOES NOT DEDUCT OR AFTER HAVING DEDUCTED HAD NOT PAID ON OR BEFORE THE DUE DATE OF FILING OF RETURN UNDER SECTION 139(1) THE AMOUNT PAYABLE TO A CONTRACTOR OR A SUB CONTRACTOR WILL NOT BE ALLOWED DEDUCTION UNDER SECTION 40(A)(IA) OF THE ACT. THEREFORE, FOR APPLICABILIT Y OF PROVISIONS OF SECTION 40(A)(IA) THE ENTIRE DETAILS HAVE TO BE EXAMINED. 8. HONBLE SUPREME COURT IN T.S. BALARAM, ITO V. VO LKART BROS. [1971] 82 ITR 50 (SC) HAS HELD THAT A MISTAKE APPARENT ON THE RECORD MUST BE AN OBVIOUS AND PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISH BY A LONG-DRAWN PR OCESS OF REASONING ON POINTS ON WHICH THERE MAY CONCEIVABLY BE TWO OPINIONS. A DECISION ON A DE BATABLE POINT OF LAW IS NOT A MISTAKE APPARENT FROM THE RECORD. IN CIT V. HERO CYCLES (P .) LTD. 228 ITR 463 (SC), HONBLE SUPREME COURT HAS HELD THAT POINT WHICH IS NOT EXAMINED ON FACT OR IN LAW CANNOT BE DEALT WITH AS MISTAKE APPARENT FROM RECORD. RECTIFICATION UNDER SECTION 1 54 CAN ONLY BE MADE WHEN GLARING MISTAKE OF FACT OR LAW HAS BEEN COMMITTED BY THE OFFICER PASSI NG THE ORDER AND IT BECOMES APPARENT FROM THE RECORD. RECTIFICATION IS NOT POSSIBLE IF THE QUESTI ON IS DEBATABLE. MOREOVER, THE POINT WHICH IS NOT EXAMINED ON FACT OR IN LAW CANNOT BE DEALT WITH AS MISTAKE APPARENT ON THE RECORD. 9. WHETHER AMOUNT CAN BE DISALLOWED OR NOT MERELY B ECAUSE THE DECLARATION IN FORM NO 15I RECEIVED BY THE ASSESSEE FROM SUB-CONTRACTORS TOGET HER WITH FORM NO 15J WERE FILED BELATEDLY IS A SUBJECT MATTER OF DISCUSSION/EXAMINATION. WHETHER THE PROVISIONS OF SECOND AND THIRD PROVISO TO SECTION 194C ARE DIRECTORY OR MANDATORY IN NATUR E IS A DEBATABLE ISSUE. THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT UNDER SECTION 143(3) HA S ACCEPTED THE RETURNED INCOME WITHOUT MAKING ANY DISALLOWANCE. HOWEVER, HE HAS SOUGHT TO DISALLOW THE ENTIRE AMOUNT PAID BY THE ASSESSEE UNDER SECTION 154 OF THE ACT. WHETHER THE PROVISIONS OF SECTION 194C OR SECTION 40(A)(IA) ARE APPLICABLE IN THE CASE OF THE ASSESSE E IS A SUBJECT MATTER OF EXAMINATION. ALL THE FACTS WERE NOT AVAILABLE ON RECORD WHEN THE ASSESSI NG OFFICER MADE DISALLOWANCE OF ENTIRE 7 I. T. APPEAL NO. 1515 (DEL) OF 2011 PAYMENTS MADE TO SUB-CONTRACTORS. THE AO HAD RESO RTED TO TAKE RECOURSE OF PROVISIONS OF SECTION 154 BY DISALLOWING THE ENTIRE AMOUNT OF RS. 2,00,82,270/-, THOUGH THIS AMOUNT INCLUDED PAYMENTS LESS THAN RS 20,000/- AMOUNTING TO ABOUT TWO CRORES RUPEE. SINCE PROVISIONS OF SECTION 194- AND 40(A)(IA) OF THE ACT ARE TO BE APP LIED ON EXAMINATION OF FACTS AND WHETHER THEY WILL BE APPLICABLE IN THE CASE OF A PARTICULAR ASSE SSEE, IS A SUBJECT MATTER OF DEBATE AND, THEREFORE, PROVISIONS OF SECTION 154 CANNOT BE RESORTED TO. I N OUR CONSIDERED OPINION, THE ISSUE IS DEBATABLE IN NATURE AND CANNOT BE RECTIFIED UNDER SECTION 154 OF THE ACT. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE AO WAS NOT JUSTIFIED IN TAKING RECOURSE TO PROVISIONS OF SECTION 154 OF THE ACT. ACCORDINGLY, WE DECIDE THE APPEAL IN FA VOUR OF THE ASSESSEE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 30 TH SEPTEMBER, 2011. SD/- SD/- [ DIVA SINGH ] [ K. D. R ANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : _30 TH SEPTEMBER, 2011 . * MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.