ACIT, Visakhapatnam V. S Satyanarayana Raja & Co, Visakhapatnam

ITA 156/VIZ/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0689 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-12-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 01-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUBRATA SARKAR
• Assessee Lawyers: N O N E
• Keywords: Additional evidence; TDS; Set aside
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.156/VIZAG/2009 ASSESSMENT YEAR : 2005-06 ACIT, CIRCLE-3(1) VISAKHAPATNAM S. SATYANARAYANA RAJU & CO. VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO.AACFS 6181N APPELLANT BY: SHRI SUBRATA SARKAR, DR RESPONDENT BY: N O N E ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) ON VARIOUS GROUNDS WHICH ARE AS UNDER:- 1. THE CIT(A) HAS ERRED IN LAW AND FACTS OF THE CASE. 2. THE CIT(A) OUGHT TO HAVE CONFIRMED THE ADDITION MAD E ON ACCOUNT OF BOGUS SUB-CONTRACTORS. 3. THE CIT(A) ERRED IN HOLDING THAT MERE FILING OF IT RETURNS IS A CONCLUSIVE PROOF OF EXECUTING THE SUB-CONTRACT WORK S. 4. CIT(A) OUGHT TO HAVE GIVEN AN OPPORTUNITY TO THE AO BEFORE ADMITTING ADDITIONAL EVIDENCE. 2. AT EARLIER OCCASION I.E. ON 4.5.2010 NONE APPEAR ED ON BEHALF OF THE ASSESSEES DESPITE VALID SERVICE OF NOTICE OF HEARIN G THROUGH D.R. AND THE TRIBUNAL HAS PROCEEDED EX-PARTE AGAINST THE ASSESSE E ON THE SAME DAY. THEREAFTER THE MATTER WAS ADJOURNED FOR HEARING ON 21.6.2010 AND ACCORDINGLY THE REVENUE WAS HEARD ON 21.6.2010. 3. THROUGH VARIOUS GROUNDS OF APPEAL THE REVENUE HA S ASSAILED THE ORDER OF CIT(A) BUT ALL THE GROUNDS RELATE TO A PROPER OP PORTUNITY NOT GIVEN BY THE CIT(A) BEFORE ADMITTING THE ADDITIONAL EVIDENCE AN D ALSO THE CIT(A) HAS ERRED IN HOLDING THAT MERE FILING OF I.T. RETURN IS A CONCLUSIVE PROOF OF EXECUTING THE SUB-CONTRACT WORKS. 2 4. THE BRIEF FACTS RELATING TO THE CONTROVERSIES RA ISED IN THIS APPEAL ARE THAT THIS APPEAL IS FILED AGAINST THE CONSEQUENTIAL ORDER OF THE ASSESSING OFFICER GIVING EFFECT TO THE ORDER OF THE CIT(A) DA TED 10.7.2008. IN THIS CONSEQUENTIAL ORDER THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.1,18,21,419/- REPRESENTING PAYMENTS MADE TO SUB- CONTRACTORS BY TREATING THE SAME AS BOGUS PAYMENTS. IN THE ORIGINAL ASSESS MENT COMPLETED U/S 143(3) OF THE ACT DETERMINING THE TOTAL INCOME AT R S.2,41,00,750/- AS AGAINST THE RETURN INCOME OF RS.20,99,111/- THE MAJOR ADDIT ION WAS U/S 40A(IA) OF THE ACT OF RS.2,10,03,784/- WHICH REPRESENTED SUB-CONTR ACT PAYMENTS ON WHICH THE TAX WAS DEDUCTED AT SOURCE BUT WAS NOT REMITTED TO THE GOVERNMENT ACCOUNT WITHIN THE STIPULATED TIME PERIOD. BESIDES THIS THE ASSESSING OFFICER HAS ALSO GIVEN A FINDING THAT SUB-CONTRACT PAYMENTS CLAIMED TO HAVE BEEN MADE TO 8 SUB-CONTRACTORS AMOUNTING TO RS.1,18,21,4 19/- WAS BOGUS IN NATURE. SINCE THE ENTIRE SUB-CONTRACT PAYMENT WAS DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40A(IA) OF THE ACT NO SEP ARATE ADDITION TOWARDS SUCH BOGUS SUB-CONTRACT PAYMENT WAS MADE IN THE ORIGINAL ASSESSMENT ORDER. ON APPEAL PREFERRED BY THE ASSESSEE, THE CIT(A) CONFIR MED THE DISALLOWANCE MADE U/S 40A(IA) OF THE ACT THEREAFTER RECTIFICATIO N APPLICATION WAS FILED BEFORE THE CIT(A) WHEREIN IT WAS CONTENDED THAT OUT OF THE TOTAL PAYMENT OF RS.2,11,48,784/- MADE TO THE SUB-CONTRACTORS AN AMO UNT OF RS.1,22,00,840/- WAS MADE IN THE MONTH OF MARCH AND THE TDS DEDUCTED THERE ON WAS DEPOSITED ON OR BEFORE THE DUE DATE OF FILING OF TH E RETURNS AND A REQUEST WAS MADE TO ALLOW THE DEDUCTION OF RS.1,22,00,840/-. A FTER CONSIDERING THE SAID RECTIFICATION PETITION THE CIT(A) VIDE ITS ORDER DA TED 10.7.2008 DIRECTED THE A.O. TO ALLOW A DEDUCTION OF RS.1,22,00,840/- AND R ESTRICT THE DISALLOWANCE U/S 40A(IA) TO RS.89,47,944/- ONLY. WHILE PASSING A CONSEQUENTIAL ORDER, THE ASSESSING OFFICER HAS ALLOWED A DEDUCTION OF RS.1,2 2,00,840/- AS DIRECTED BY THE CIT(A) BUT MADE AN ADDITION OF RS.1,18,21,419/- WHICH REPRESENT THE BOGUS SUB-CONTRACT PAYMENT WITHOUT VERIFYING THE FA CTS WHETHER ANY PART OF ALLEGED BOGUS SUB-CONTRACT PAYMENTS FORMS PART OF T HE DISALLOWANCE MADE U/S 40A(IA) OF RS.89,47,944/-. 3 6. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) WITH THE SUBMISSIONS THAT WHILE PASSING THE CONSEQUENTIAL OR DER THE ASSESSING OFFICER WAS REQUIRED ONLY TO GIVE AN EFFECT BY ALLOWING DED UCTION OF RS.1,22,00,840/- AND HE HAS NO JURISDICTION TO MAKE AN ADDITION ON A CCOUNT OF BOGUS SUB- CONTRACT PAYMENTS. FINDING FORCE IN THE CONTENTION S OF THE ASSESSEE THE CIT(A) DELETED THE ADDITIONS MADE BY THE A.O. ON AC COUNT OF BOGUS SUB- CONTRACT PAYMENT. 7. NOW THE REVENUE IS BEFORE US WITH THE SUBMISSION THAT IN THE ORIGINAL ASSESSMENT, THE DISALLOWANCE WAS MADE ON TWO COUNTS . I. U/S 40A(IA) OF THE ACT FOR NON-REMITTANCE OF THE DE DUCTED TDS WITHIN THE STIPULATED TIME. II. BOGUS SUB-CONTRACT PAYMENTS. 8. THE ADDITION ON ACCOUNT OF BOGUS SUB-CONTRACT PA YMENTS WERE NOT MADE BECAUSE THE ENTIRE PAYMENT WAS DISALLOWED U/S 40A(IA) OF THE ACT ON ACCOUNT OF NON-REMITTANCE OF TDS WITHIN THE STIPULA TED PERIOD. BUT NOW WHEN THE PART OF THE ADDITION U/S 40A(IA) OF THE AC T WAS DELETED ON VERIFYING THE FACTS THAT REMITTANCE WAS DONE WITHIN THE STIPU LATED TIME THE ANOTHER ASPECT ON WHICH DISALLOWANCE WAS MADE I.E. BOGUS SU B-CONTRACT PAYMENTS, STILL SURVIVE AND THE DISALLOWANCE CAN BE MADE ON T HIS GROUND. THEREFORE THE ADDITION WAS RIGHTLY MADE BY THE ASSESSING OFFICER. 9. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWE R AUTHORITIES IN THE LIGHT OF REVENUES CONTENTION WE FIND THAT THE SUB- CONTRACT PAYMENTS WAS DISALLOWED ON TWO GROUNDS: I. ON NON-REMITTANCE OF THE TDS WITHIN THE STIPULATED PERIOD AND II. THE GENUINENESS OF SUB-CONTRACT PAYMENT WAS DOUBTED AND IT WAS TREATED TO BE BOGUS PAYMENT. 10. THE CIT(A) HAS ALLOWED THE PAYMENT OF RS.1,22,0 0,840/- HAVING CONVINCED THAT THE TDS DEDUCTED THEREON WAS REMITTE D TO THE GOVERNMENT ACCOUNT WITHIN THE STIPULATED PERIOD. THE BALANCE SUB-CONTRACT PAYMENT OF RS.88,47,944/- WAS NOT ALLOWED BY THE CIT(A). SO F AR AS DISALLOWANCE ON ACCOUNT OF BOGUS PAYMENT, CIT(A) HAS NOT GIVEN ANY FINDING IN HIS ORDER. THEREFORE, THE OBSERVATION OF THE ASSESSING OFFICER ATTAINED THE FINALITY AND 4 THE DISALLOWANCE OF SUB-CONTRACT PAYMENT CAN BE MAD E ON THE GROUND THAT THE GENUINENESS WAS NOT PROVED. BUT BEFORE MAKING THE ADDITIONS IN THIS REGARD THE ASSESSING OFFICER SHOULD HAVE VERIFIED T HE FACT WHETHER ANY PART OF THIS BOGUS SUB-CONTRACT PAYMENTS FORMS PART OF THE DISALLOWED PAYMENT ON ACCOUNT OF NON-REMITTANCE OF TDS TO GOVERNMENT ACCO UNT. THIS EXERCISE WAS NOT DONE BY THE ASSESSING OFFICER WHILE PASSING A C ONSEQUENTIAL ORDER AND STRAIGHT AWAY MADE THE ADDITION OF RS.1,18,21,419/- ON ACCOUNT OF BOGUS PAYMENT. WE THEREFORE OF THE VIEW THAT THE ADDITIO N ON ACCOUNT OF BOGUS SUB-CONTRACT PAYMENT CAN BE MADE BUT BEFORE MAKING IT, IT SHOULD BE VERIFIED BY THE A.O. WHETHER ANY PART OF IT ALREADY DISALLOW ED U/S 40A(IA) OF THE ACT. IF IT IS DISALLOWED IT CANNOT BE FURTHER ADDED ON AC COUNT OF BOGUS PAYMENT. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) IN T HIS REGARD AND RESTORE THE MATTER TO THE FILE OF THE A.O. WITH A DIRECTION TO RE-EXAMINE THE ISSUE IN TERMS INDICATED ABOVE. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 25.6.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 25 TH JUNE, 2010 COPY TO 1 THE ACIT, CIRCLE-3(1), VISAKHAPATNAM 2 SHRI S. SATYANARAYANA RAJU & CO., 51-8-40, BEHIND BOC LTD., SEETHAMMADHARA, VISAKHAPATNAM 3 THE CIT, VISAKHAPATNAM 4 THE CIT(A)-I, VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM