Sri. N. Muddaiah, Tumkur V. ACIT, Tumkur

ITA 1527/BANG/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51327 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 29-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUMAR AJEET JT
• Assessee Lawyers: H GURUSWAMY ITP
• Section: 44AD; 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.1527/BANG/2010 ASSESSMENT YEAR : 2007-08 SHRI N. MUDDAIAH, PWD CONTRACTOR, CHIKKONAHALLI, KORA POST, TUMKUR. PAN : ALOPM 7657G VS. THE INCOME TAX OFFICER, WARD 1, TUMKUR. APPELLANT RESPONDENT APPELLANT BY : SHRI H. GURUSWAMY, I.T.P. RESPONDENT BY : SHRI KUMAR AJEET, JT.CIT(DR) DATE OF HEARING : 20.10.2011 DATE OF PRONOUNCEMENT : 31.10.2011 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 30.9.2010 OF THE CIT(APPEALS)-II, BANGALORE. 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS A PPEAL: ITA NO.1527/BANG/10 PAGE 2 OF 5 1. THE APPELLATE ORDER DATED 30-09-2010 IS OPPOSED TO LAW AND FACTS OF THE CASE IN SO FAR AS IT IS AGAINST TH E INTEREST OF THE APPELLANT. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) -II, BANGALORE OUGHT TO HAVE NOT HELD THAT THE LABOUR CH ARGES WERE IN THE NATURE OF SUB-CONTRACT PAYMENTS LIABLE FOR DEDU CTION OF TAX AT SOURCE WITHOUT APPRECIATING THE LAW, FACTS AND C IRCUMSTANCES OF THE CASE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) -II, BANGALORE OUGHT TO HAVE CONSIDERED THE PROVISO PROV IDED TO SECTION 194C(2) OF THE ACT, WHICH EXEMPTS THE DEDUC TION OF TAX AT SOURCE. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND DELETE ANY OF THE GROUNDS AT THE TIME OF HEARING. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT T HE TIME OF HEARING, THE APPELLANT RESPECTFULLY PRAYS THAT Y OUR HONBLE AUTHORITY BE PLEASED TO PASS ORDERS DELETING THE AD DITION OF RS.36,63,341/-, WHICH WAS UPHELD FOR THE ALLEGED FA ILURE OF NON- DEDUCTION OF TAX AT SOURCE AND FURTHER BE PLEASED T O PASS SUCH OTHER ORDERS GRANTING SUCH OTHER RELIEF THAT YOUR H ONBLE AUTHORITY MAY DEEM FIT IN THE INTEREST OF EQUITY AN D JUSTICE. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE WAS ENGAGED IN THE BUSINESS OF CIVIL CONTRACT AND HAD UNDERTAKEN A CONTRACT WITH THE PWD, STATE GOVERNMENT OF KARNATAKA, FOR THE FORMATION OF ROADS. THE ASSESSEE FILED HIS RETURN OF INCOME ALONG WITH TAX AUDIT REP ORT U/S. 44AB OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS T HE ACT IN SHORT] ON 17.12.2007 DECLARING TOTAL INCOME OF RS.5,43,511. 4. THE ASSESSING OFFICER COMPLETED THE SCRUTINY ASS ESSMENT U/S. 143(3) OF THE ACT ON 07.12.09 DETERMINING TOTAL INC OME AT RS.69,66,370 AS AGAINST THE DECLARED INCOME OF RS.5,43,511. THE AO MADE DISALLOWANCE OF LABOUR PAYMENTS U/S. 40(A)(IA) OF THE ACT AMOUNT ING TO RS.36,63,341. BESIDES THIS DISALLOWANCE, THE AO ALSO MADE CERTAIN OTHER ADDITIONS WHICH ITA NO.1527/BANG/10 PAGE 3 OF 5 WERE DELETED BY THE LD. CIT(A) VIDE ORDER DATED 30. 9.2010. THE ONLY ADDITION OF RS.36,63,341 BEING THE LABOUR CHARGES A LLEGED TO HAVE BEEN PAID AS CONTRACT PAYMENTS WITHOUT DEDUCTION OF TAX AT SOURCE @ 1% AS REQUIRED U/S. 194C(2) OF THE ACT WAS CONFIRMED BY T HE LD. CIT(A). 5. NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) HAD NOT APPRECIATED T HE CONTENTION OF THE ASSESSEE THAT HE WAS NOT LIABLE FOR DEDUCTION OF TA X AT SOURCE IN RESPECT OF LABOUR CHARGES WHICH WERE HELD TO BE AS SUB-CONTRAC T PAYMENTS BY THE AO. IT WAS CONTENDED THAT EVEN IF SUCH PAYMENTS WERE HE LD TO BE AS SUB- CONTRACT PAYMENTS, THE ASSESSEE WAS NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE ON THE LABOUR CHARGES PAID, IN VIEW OF THE P ROVISO PROVIDED TO SECTION 194C(2) OF THE ACT. IT WAS CONTENDED THAT THE ACCOUNTS OF THE ASSESSEE WERE LIABLE FOR AUDIT U/S. 44AB OF THE ACT FOR THE FIRST TIME FOR THE FINANCIAL YEAR ENDING ON 31.3.2007 AND WERE NOT LIA BLE FOR AUDIT U/S. 44AB OF THE ACT FOR THE FINANCIAL YEAR ENDING ON 31.3.20 06, BECAUSE THE TURNOVER OF THE ASSESSEE IN THE SAID YEAR WAS AT RS.30,98,19 8 AND THE INCOME WAS DECLARED U/S. 44AD OF THE ACT BY APPLYING NET PROFI T RATE OF 8% I.E., THE INCOME WAS DECLARED AT RS.2,47,858. IT WAS ACCORDI NGLY SUBMITTED THAT THE ASSESSEE WAS NOT LIABLE FOR DEDUCTION OF TAX AT SOU RCE ON THE LABOUR CHARGES AS PER THE PROVISO TO SECTION 194C(2) OF TH E ACT AND THEREFORE THE DISALLOWANCE MADE BY THE AO U/S. 40(A)(IA) OF THE A CT AND CONFIRMED BY THE LD. CIT(A) WAS NOT IN ACCORDANCE WITH THE PROVISION S OF LAW. 6. THE LD. DR, IN HIS RIVAL SUBMISSIONS, STRONGLY S UPPORTED THE ORDERS OF THE AUTHORITIES BELOW. ITA NO.1527/BANG/10 PAGE 4 OF 5 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND THE MATERIAL ON RECORD. IT APPEARS THAT THE AO WHILE F RAMING THE ASSESSMENT HAD NOT CONSIDERED THE PROVISIONS CONTAINED IN PROV ISO TO SUB-SECTION (2) OF SECTION 194C OF THE ACT APPLICABLE TO THE ASSESSEE S CASE, BECAUSE THE SAID SECTION I.E., SECTION 194C OF THE ACT HAS BEEN AMENDED SEVERAL TIME AND CURRENTLY NO PROVISO IS THERE BELOW SUB-SECTION (2) OF SECTION 194C OF THE ACT. IT ALSO APPEARS THAT THE LD. CIT(A) WHIL E DECIDING THE APPEAL OF THE ASSESSEE HAD NOT CONSIDERED THE CONTENTION OF THE A SSESSEE IN THE RIGHT PERSPECTIVE. WE, THEREFORE CONSIDERING THE TOTALIT Y OF FACTS, DEEM IT APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A ) ON THIS ISSUE AND RESTORE IT TO THE FILE OF THE ASSESSING OFFICER, TO BE ADJU DICATED AFRESH IN ACCORDANCE WITH THE LAW, AFTER PROVIDING DUE AND REASONABLE OP PORTUNITY OF BEING HEARD TO THE ASSESSEE. THE AO WHILE DECIDING THE ISSUE S HALL CONSIDER THE RELEVANT PROVISIONS OF SECTION 194C OF THE ACT WHIC H WERE APPLICABLE TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND THEN DECIDE THE ISSUE. 8. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2011. SD/- SD/- ( SMT. P. MADHAVI DEVI ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 31 ST OCTOBER, 2011. DS/- ITA NO.1527/BANG/10 PAGE 5 OF 5 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.