M/s. Park International, Kolkata V. ITO, Ward - 32(3), Kolkata

ITA 152/KOL/2009

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4983 (ITAT-KOLKATA)
• Duration Of Justice: 7 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 01-03-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 09-02-2009
• Court: TRIBUNAL
• Department Lawyers: S SRIVASTAVA
• Assessee Lawyers: MANJU LATA SHUKLA
• Keywords: Retrospective amendment
• Section: 40A(3); 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KO LKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M. BALAGANES H, AM] I.T.A NOS.152 & 153/KOL/2009 ASSESSMENT YEARS: 2004-05 & 2005-06 PARK INTERNATIONAL (PAN:AADFP8469R) VS. INCOME-TA X OFFICER, WD-32(3), KOLKATA (APPELLANT) (RESPONDENT) DATE OF HEARING: 01.03.2016 DATE OF PRONOUNCEMENT: 04.03.2016 FOR THE APPELLANT: SMT. MANJU LATA SHUKLA, FCA FOR THE RESPONDENT: SHRI S. SRIVASTAVA, CIT ORDER PER SHRI MAHAVIR SINGH, JM: BOTH THESE APPEALS BY ASSESSEE ARE ARISING OUT OF S EPARATE ORDERS OF CIT(A)-XIX, KOLKATA VIDE APPEAL NOS. 124/CIT(A)-XIX/ITO,WD-32(3),KOL/06 -07 & 157/CIT(A)-XIX/ITO,WD- 32(3),KOL/07-08 BOTH DATED 28.11.2008. ASSESSMENTS WERE FRAMED BY ITO, WARD-32(3), KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEARS 2004-05 AND 2005-06 VIDE HIS SEPAR ATE ORDERS DATED 27.12.2006 AND 20.12.2007 RESPECTIVELY. 2. THE FIRST COMMON ISSUE IN THESE TWO APPEALS OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF PAYMENT MADE ON ACCO UNT OF PURCHASE OF HIDES AND SKINS BY THE AO BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT AMOUNTING TO RS.86,01,073/- IN AY 2004-05 AND RS.22,43,717/- IN AY 2005-06. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS I N THE BUSINESS OF MANUFACTURING AND EXPORT OF LEATHER GOODS. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS FOR THESE TWO ASSESSMENT YEARS, THE ASSESSEE FOUND TO HAVE MADE PURCHASES OF RAW HIDES AND SKINS AMOUNTING TO RS.4,40,84,954/- IN AY 2004-05 AND RS.1,12,18,583/- IN AY 2005-06. ACC ORDING TO AO, THE ASSESSEE HAS CONTRAVENED THE PROVISION OF SECTION 40A(3) OF THE ACT BY MAKING CASH PAYMENTS TO THE SUPPLIERS OF RAW HIDES THROUGH OTHERWISE THAN CROSS ED ACCOUNT PAYEE CHEQUE HAVING AMOUNT EXCEEDING RS.20,000/- IN EACH OCCASION IN THESE TWO ASSESSMENT YEARS AND HENCE, HE PROPOSED TO DISALLOW THE SUM EQUIVALENT TO 20% OF THIS PURCHASE AMOUNT. THE ASSESSEE REPLIED THAT ASSESSEES CASE FALLS UNDER EXCEPTION CLAUSE AS PRO VIDED IN RULE 6DD(F) AND HENCE, THE PURCHASES MADE DIRECTLY FROM THE PRODUCERS OF HIDES AND SKINS IS NOT COVERED UNDER THE PROVISIONS OF SECTION 40A(3) OF THE ACT BUT THE AO MADE DISALLOWANCE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) FOR BOTH THE YEARS A ND CIT(A) ALSO CONFIRMED THE ACTION OF AO BY STATING THAT THE ASSESSEE IS UNABLE TO PROVE THA T IT HAS PURCHASED FROM THE PRODUCERS BUT IT PROVES OTHERWISE FROM THE PURCHASE BILL THAT THE PA RTIES FROM WHOM PURCHASES WERE MADE WERE 2 ITA NO.152 & 153/KOL/2009 PARK INTERNATIONAL AY 2004- 05 & 2005-06 2 TRADERS OF HIDES AND SKINS. ACCORDINGLY, HE CONFIRM ED THE DISALLOWANCE IN BOTH THE YEARS. AGGRIEVED, NOW ASSESSEE IS IN SECOND APPEAL BEFORE TRIBUNAL. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BEFORE US, LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THERE IS NO ORGANIZED MARKET FOR RAW HIDES AND SKINS AND THE SOURCES ARE ONLY IN ISOLATED FAR FLUNG VILLAGES WHERE SMALL BUTCHERS COLLECT HIDES FROM SLAUGHTERED AND DEAD CARCASSES. ACCORDIN G TO HIM, THE STOCK OF EACH INDIVIDUAL BUTCHER IS TOO SMALL FOR INDEPENDENT MARKETING AND THEY BRING THEIR SMALL PRODUCT TO BIGGER BUTCHER IN THE RURAL HAAT AND ENTRUST THE MARKETI NG OF THEIR STOCK TO HIM AS THEIR AGENT. SUCH LEADING BUTCHER BEING RESOURCEFUL IN CONTACTS, PROC URES FOR ASSESSEE THE RAW HIDES AND SKINS. THESE PAYMENTS ARE MADE DIRECTLY TO THE BUTCHER WHO COLLECTS THE HIDES AND SKINS. IT IS A FACT THAT THE PAYMENTS ARE MADE THEN AND THERE AT THE TI ME OF PURCHASE IN CASH BECAUSE THESE SMALL BUTCHERS THEY SLAUGHTER ANIMALS AND COLLECT HIDES A ND SKINS AND ALSO FROM DEAD CARCASSES. LD. COUNSEL FOR THE ASSESSEE STATED THAT IN VIEW OF THE SE FACTS IT IS CLEAR THAT THE PURCHASE IS DIRECTLY MADE FROM THE PRODUCERS BY THE ASSESSEE AS IS EVIDE NT FROM THE BILLS AND VOUCHERS. LD. COUNSEL FOR THE ASSESSEE ALSO STATED THAT THE ISSUE OF ASSE SSEES APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 2099/KOL/2006 FOR AY 2003-04 DATED 04.05.2007, WHER EIN ON EXACTLY IDENTICAL FACTS TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE VIDE PARA 15 OF I TS ORDER BY OBSERVING AS UNDER: 15. SINCE IN THE PRESENT CASE ALSO, THE ASSESSEE HAS DULY SUBMITTED ALL THE EVIDENCES AND DOCUMENTS IN SUPPORT OF ITS CLAIM THAT THE HIDES WERE PURCHAS ED FROM THE SELLERS, WHO WERE ALSO THE PRODUCERS OF THE SAME, THEREFORE, THE ACTION OF AO IN DOUBTING S UCH CLAIM OF THE ASSESSEE WITHOUT REBUTTING THE SAME WITH HELP OF SUBSTANTIAL MATERIAL FINDING ON R ECORD IS NOT CORRECT AND THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING SUCH ACTION OF AO. WHILE CO MING TO SUCH CONCLUSION, WE FIND SUPPORT FROM THE RECENT JUDGMENT OF THIS TRIBUNAL IN THE CASE OF SHR I PYARELAL BAJAJ VS. ACIT (SUPRA) RELIED BY THE ASSESSEE, WHEREIN THIS TRIBUNAL HAD ACCEPTED THE CL AIM OF THE ASSESSEE. SINCE FACTS OF THE PRESENT CASE ARE IDENTICAL AND THE REVENUE HAS NOT DISPUTED OR CONTROVERTED THE CONTENTION OF THE ASSESSEE AS DISCUSSED HEREINABOVE, WE CONSIDERING THE TOTALITY OF THE FACTS INVOLVED IN THIS CASE AND CONSIDERING THE VARIOUS DECISIONS OF THIS TRIBUNAL ARE OF THE O PINION THAT THE CASH PAYMENT MADE BY THE ASSESSEE FOR PURCHASING OF RAW HIDES IS WELL COVERED UNDER E XCEPTION CLAUSE OF RULE 6DD OF THE INCOME TAX RULES, 1962. WE, THEREFORE, HOLD THAT THE DISALLOW ANCE OF RS.94,00,412/- MADE BY THE AO IS NOT CORRECT AND THEREFORE, SET ASIDE THE ORDER OF LD. C IT(A) AND ACCEPT THE GROUND RAISED BY THE ASSESSEE AND DIRECT THE AO TO DELETE SUCH DISALLOWANCE. 5. LD. SR. DR ALSO AGREED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNALS DECISION IN ASSESSEES OWN CASE AND HE I S NOT AWARE WHETHER THE REVENUE HAS FILED ANY APPEAL BEFORE HONBLE HIGH COURT OR NOT ON THIS ISS UE. WE FIND FROM THE ABOVE THAT THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY TRIBUNALS DECISIO N IN ASSESSEES OWN CASE AND NOTHING 3 ITA NO.152 & 153/KOL/2009 PARK INTERNATIONAL AY 2004- 05 & 2005-06 3 CONTRARY TO THE SAME WAS BROUGHT BEFORE US AND ACCO RDINGLY, WE DELETE THE DISALLOWANCE AND ALLOW THIS COMMON ISSUE OF BOTH THE APPEALS OF ASSE SSEE. 6. ONE ISSUE REMAINS IN AY 2005-06 IS AS REGARDS TO THE ORDER OF CIT(A) CONFIRMING THE ACTION OF AO IN DISALLOWING LABOUR CHARGES AT RS.65 ,16,215/- AND SECURITY GUARD EXPENSES OF RS.77,691/- FOR NON-DEDUCTION OF TDS U/S. 194C OF T HE ACT THEREBY APPLYING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE HAS INCURRED LABOUR CHARG ES TO THE TUNE OF RS.65,16,215/- PAID TO LABOUR SARDAR NUMBERING 78. WE FIND THAT THE AO DI SALLOWED THESE EXPENSES FOR WANT OF DEDUCTION OF TDS BY INVOKING THE PROVISIONS OF SECT ION 40(A)(IA) OF THE ACT. THE CIT(A) ALSO CONFIRMED THE ACTION OF AO. AGGRIEVED, NOW ASSESSE E IS IN SECOND APPEAL BEFORE TRIBUNAL. WE FIND THAT THIS ISSUE STANDS COVERED IN FAVOUR OF RE VENUE AND AGAINST THE ASSESSEE BY THE DECISION OF THIS TRIBUNAL IN THE CASE OF DCIT VS. KAMAL MUKH ERJEE & CO. (SHIPPING) (P) LTD. ITA NO. 199/KOL/2010, WHEREIN IT IS HELD AS UNDER: ( FROM HEAD NOTES) . UNDOUBTEDLY, THESE DECISIONS DO INDICATE THAT THERE IS A WORKMAN EMPLOYER RELATIONSHIP BETWEEN THE DOCK WORKERS AND THE STEVE DORES LIKE ASSESSEE WHEN THEY EMPLOY THOSE WORKERS, BUT BE THAT AS IT MAY, THE FA CT REMAINS THAT THE ASSESSEE HAS MADE PAYMENTS TO THE CDLB FOR SUPPLY OF LABOUR, EVEN WHEN THIS LABOUR MAY BE TREATED AS EMPLOYED BY THE ASSESSEE FOR ALL PRAC TICAL PURPOSES, THE PROVISIONS OF SECTION 194C ARE CLEARLY ATTRACTED. IN SUCH A SI TUATION, I.E. WHEN LABOUR HIRED BY THE ASSESSEE THROUGH CDLB IS CONSIDERED TO BE IN ASSESSEES EMPLOYMENT, THE PAYMENTS MADE TO CDLB CANNOT BE TREATED AS PAYMENTS FOR ANY WORK, BUT NEVERTHELESS THESE PAYMENTS COULD STILL BE COVERED BY THE PROVISIONS OF SECTION 194C BECAUSE THESE ARE PAYMENTS MADE FOR SUPPLY OF LABOUR WHICH ARE SPECIFICALLY COVERED BY SECTION 194C(1). CDLB IS AN AGENT OF THE STEVEDORES LIKE THE ASSESSEE IN THE SENSE THAT THE LABOUR IS RECRUI TED BY THE ASSESSEE THROUGH CDLB, BUT WHEN THIS FACT DOES NOT AFFECT THE NATURE OF PAYMENT BY THE ASSESSEE TO THE CDLB WHICH IS ADMITTEDLY IN THE NATURE OF PAYME NT FOR SUPPLY OF LABOUR. THE REASONING ADOPTED BY THE COMMISSIONER (APPEALS), TH OUGH SOMEWHAT IMPRESSIVE AT FIRST GLANCE, IS FALLACIOUS. THERE IS NO CAUSE A ND EFFECT RELATIONSHIP BETWEEN WORKERS ASSIGNED BY THE CDLB HAVING EMPLOYER WORKMA N RELATIONSHIP WITH THE ASSESSEE, AND THE PAYMENTS BEING MADE BY THE ASSESS EE TO CDLB BEING NOT IN THE NATURE OF PAYMENT FOR SUPPLY OF LABOUR. IT MEANS THAT THERE IS NO QUESTION OF ASSESSEE ARGU ING THAT THERE IS NO CONTRACT EXISTS BETWEEN THE PARTIES. THERE EXISTS CONTRACT BETWEEN THE PARTIES AND ASSESSEE CANNOT ESCAPE FROM THE DEDUCTION OF TDS. HOWEVER, CLAIM MADE BY ASSESSEE BEFORE US IS THAT THE INDIVIDUAL PAYMENTS ARE BELOW THE PRESCRIBED LIMIT AS PRESCRIBED U/S. 194C OF THE ACT. MOREOVER, LD. COUNSEL FOR THE ASSESSEE ALSO ARGUED FOR SETTING ASIDE THIS ISSUE TO THE FIL E OF THE AO TO APPLY THE RETROSPECTIVE AMENDMENT 4 ITA NO.152 & 153/KOL/2009 PARK INTERNATIONAL AY 2004- 05 & 2005-06 4 AS BROUGHT OUT BY THE FINANCE ACT 2012 BY BRING SEC OND PROVISO TO SECTION 40(A)(IA) OF THE ACT. THIS HAS BEEN HELD TO BE RETROSPECTIVE BY HONBLE D ELHI HIGH COURT IN THE CASE OF ANSAL LAND MARK TOWNSHIP (P) LTD., ITA NOS. 160 & 161/KOL/2015 , WHEREIN IT HAS BEEN HELD AS UNDER: NO S. 40(A)(IA) DISALLOWANCE FOR FAILURE TO DEDUCT TDS ON PAYMENT IF PAYEE HAS OFFERED AMOUNT TO TAX. SECOND PROVISO TO S. 40(A)(I A) INSERTED BY FINANCE ACT 2013 W.E.F. 1.4.2013 SHOULD BE TREATED AS CURATIVE AND TO HAVE RETROSPECTIVE EFFECT FROM 1.4.2005. ITAT PRAISED FOR 'THOROUGH AN ALYSIS' OF THE PROVISION IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF CIT (A) AND RESTORE THE MATTER TO THE FILE OF AO FOR FRESH ADJUDICATION IN TERMS OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ANSAL LAND MARK TOWNSHIP (P) LTD. CITED SUPRA WHEREIN IT IS HELD THAT IN CASE THE RECIPIENTS OF THESE EXPENSES HAVE INCLUDED THE RECEIPTS IN THEIR RESPEC TIVE RETURNS OF INCOME FILED WITH THE DEPARTMENT AND PAID TAXES ON THE SAME IN THAT CASE THE DISALLOWANCE IN THE HANDS OF THE ASSESSEE IS TO BE DELETED. THE INFORMATION REGARDING THE REC IPIENTS INCOME TAX PARTICULARS, THEIR PAN ETC. ARE TO BE GIVEN BY THE ASSESSEE TO THE AO. THIS GR OUND OF APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.03.2016. SD/- SD/- (M. BALAGANESH) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 4TH MARCH, 2016 JD. SR. P.S COPY OF THE ORDER FORWARDED TO: 1. APPELLANT PARK INTERNATIONAL, 42/1, SHAMSUL HUDA ROAD, KOLKATA-700 017.. 2. RESPONDENT ITO, WARD-32(3), KOLKATA. 3. CIT(A), , KOLKATA 4. CIT, , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA /TRUE COPY, BY ORDER, ASSTT. REGISTRAR .