Ghosh & Chakraborty Transport, Hooghly V. ITO, Ward 2(1), Burdwan

ITA 1604/KOL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54508 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2011
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 29-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-09-2009
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Corroborative evidences
• Section: 40A(3); 194C

Judgement Text

1 , A , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- A, KOL KATA [ , . .. . . .. . , , , , !' ] BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER & SRI C.D. RAO, ACCO UNTANT MEMBER # # # # / ITA NO. 1604 (KOL) OF 2009 $% &' / ASSESSMENT YEAR 2006-07 GHOSH & CHAKRABORTY TRANSPORT BURDWAN. (PAN-AAEFG6342K) INCOME-TAX OFFICER, WARD-2(1), ASANSOL. (*+ / APPELLANT ) - $ - - VERSUS - (./*+/ RESPONDENT ) *+ 0 1 !/ FOR THE APPELLANT: / SRI SOMNATH GHOSH ./*+ 0 1 ! / FOR THE RESPONDENT: / SRI A.K. SINGH !2 / ORDER ( . .. . . .. . ), !' (C.D. RAO), ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. C.I.T.(A), ASANSOL DATED 19/6/2009 FOR ASSESSMENT YEAR 2006-07. THE GR OUNDS RAISED IN THIS APPEAL BY THE ASSESSEE ARE ON TWO COUNTS, FIRST, AGAINST UPHO LDING THE ADDITIONS OF RS.61,65,119/- AND RS. 37,81,639/-, TOTALLING TO RS.99,46,758/- BY THE LD. C.I.T.(A) U/ S. 40(A)(IA) R.W.S. 194C OF THE ACT AND SECONDLY AGAINST ENHANCEMENT OF INCOME BY THE LD. C.I.T.(A) BY INVOKING PROVISIONS OF SEC. 251(1)(A) OF THE ACT TO THE EXTENT OF RS.13,82,541/-, BEING 20% OF THE CASH PAYMENTS OF RS.69,12,706/- U/S. 40A (3) OF THE ACT. THE GROUNDS RAISED BY THE ASSESSEE, HOWEVER, READ AS UNDER :- I . FOR THAT ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ASANSOL ERRED IN UPHOLDING THE IMPUGNED ADDITION OF RS. 99,46,758/- INVOKING THE PROVISION OF S. 40(A)(IA) OF THE INCOME TAX ACT, 1961 MADE BY THE LD. INCOME TAX OFFICER, WARD 2(1), ASAN SOL ON ACCOUNT OF ALLEGED INFRINGEMENT OF THE PROVISION OF S. 194C OF THE INC OME TAX ACT, 1961 AS NONE OF THE CONDITIONS PRECEDENT FOR SUCH ALLEGED ACTION EX ISTED AND/OR HAS BEEN COMPLIED WITH AND/OR FULFILLED IN THE INSTANT CASE AND HIS A LLEGED ACTION ON THAT BEHALF IS AB INITIO VOID, ULTRA VIRES AND NULL IN LAW. II . FOR THAT THE LD. COMMISSIONER OF INCOME TAX ( APPEALS) ASANSOL MANIFESTLY ERRED IN UPHOLDING THE IMPUGNED ADDITION OFRS.61,65,119/- INVOKING THE PROVISION OF S. 40(A)(IA) OF THE INCOME TAX ACT, F961 MADE BY THE L D. INCOME TAX OFFICER, WARD 2 2(1), ASANSOL ON ACCOUNT OF ALLEGED INFRINGEMENT OF THE PROVISION OF S. 194C OF THE INCOME TAX ACT, 1961 WITHOUT ESTABLISHING ON RECORD THE APPLICABILITY OF SUCH PROVISION IN THE FACTS AND CIRCUMSTANCES OF THE INS TANT CASE AND THE PURPORTED ACTION ON THAT BEHALF ARE ABSOLUTELY ARBITRARY, UNR EASONABLE, INFIRM AND PERVERSE. III . FOR THAT THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) ASANSOL ACTED UNLAWFULLY IN UPHOLDING THE ALLEGED DISALLOWANCE OF RS. 37,81, 639/- MADE BY THE LD. INCOME TAX OFFICER, WARD 2(1), ASANSOL INVOKING THE PROVIS ION OF S. 40(A)(IA) OF THE INCOME TAX ACT, 1961 ON MERE PRESUMPTION AND IN GRO SS VIOLATION OF THE PROVISION OF S. 142(3) OF THE INCOME TAX ACT, 1961 AND THE IM PUGNED FINDINGS IN THIS REGARD ARE WHOLLY ARBITRARY, UNSUSTAINABLE, BIASED, CAPRIC IOUS, ERRONEOUS AND PERVERSE. IV . FOR THAT THE LD. COMMISSIONER OF INCOME FAX (AP PEALS) ASANSOL ASSUMED JURISDICTION U/S. 251(1)(A) OF THE INCOME TAX ACT, 1961 ILLEGALLY AND THEREBY ENTRANCED THE INCOME OF THE APPELLANT BY INVOKING T HE PROVISIONS OF S. 40A(3) OF THE INCOME TAX ACT, 1961 WITHOUT REFERRING TO THE B OOKS OF ACCOUNTS OF THE APPELLANT AND THE PURPORTED ACTION ON THAT BEHALF I S ULTRA VIRES, AB INITLO VOID AND PERVERSE. V . FOR THAT THE LD. INCOME TAX OFFICER, WARD 2(1 ), ASANSOL WAS CORRECT IN LAW IN NOT APPLYING THE PROVISION OF S. 40A(3) OF THE INCO ME TAX ACT, 1961 TO THE IMPUGNED AMOUNTS BEING MERE WITHDRAWALS FROM BANK A ND NOT EXPENDITURE AS REQUIRED FOR APPLICATION OF S. 40A(3) OF THE INCOME TAX ACT, 1961 AS WAS WRONGLY RESORTED TO BY THE LD. COMMISSIONER OF INCOME TAX ( APPEALS) ASANSOL IN INVOKING THE MISCHIEF OF SUCH PROVISION WITHIN THE SCOPE AND AMBIT OF S. 251(1)(A) OF THE INCOME TAX ACT, 1961 WITHOUT CONSIDERING THE CASH B OOK OF THE APPELLANT AND THE IMPUGNED FINDINGS IN THIS REGARD ARE TOTALLY WRONG, INFIRM AND PERVERSE. 2. THE FACTS OF THE CASE AS ARE THAT THE ASSESSEE- FIRM IS A SUB-CONTRACTOR TO SHRI HARJIT SINGH TALWAR FOR TRANSPORTATION OF COAL FROM ONE DESIGNATED SITE TO ANOTHER, WHO HAD OBTAINED CONTRACT FROM G.S. ATWAL & CO. (ENGINE ERS) PVT. LTD. IN PURSUANCE OF ITS ACTIVITIES OF CARRYING OUT TRANSPORTATION WORK UNDE R THE WORK ORDER UNDERTAKEN FROM ITS PRINCIPAL SHRI HARJIT SINGH TALWAR, THE ASSESSEE WA S REQUIRED TO DEPLOY SEVERAL TRUCKS/DUMPERS OBTAINED FROM NUMBER OF TRUCK OWNERS ON HIRE BASIS, APART FROM THE TRUCKS OWNED BY EITHER THE PARTNERS OF THE ASSESSEE -FIRM OR THEIR RELATIVES. DURING THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAD INCU RRED TWO COMPONENTS OF EXPENDITURE FOR CONDUCTING ITS ACTIVITIES OF TRANSP ORTING GOODS ON BEHALF OF ITS PRINCIPAL, VIZ., (I) EXPENDITURE ON MAKING PAYMENTS FOR VEHICLES TAKEN ON HIRE WHICH AMOUNTED TO RS.61,65,119/- AND (II) EXPENSES INCURR ED FOR RUNNING OF SUCH VEHICLES IN THE SUM OF RS.37,81,639/-. THE ASSESSEE DEBITED TH E EXPENDITURE OF RS.61,65,119/- ON ACCOUNT OF VEHICLE HIRE CHARGES PAID TO SEVERAL VEH ICLE OWNERS AND RUNNING COST OF SUCH 3 VEHICLES OF RS.37,81,639/-, TOTALLING TO RS.99,46,7 58/- UNDER THE NOMENCLATURE TRANSPORTATION CHARGES IN ITS P/L ACCOUNT. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. ISSUED SEVERAL NOTICES REQUIR ING THE ASSESSEE TO FURNISH DOCUMENTS AS MENTIONED IN THOSE NOTICES AND THE ASS ESSEE ALSO REPLIED THOSE NOTICES EXPLAINING ITS CASE AND FURNISHING DOCUMENTS, THE C OPIES OF WHICH ARE FILED IN THE PAPER BOOK AT PAGES 27 TO 55. THE A.O., HOWEVER, OBSERVE D THAT THE ASSESSEE ALTHOUGH FILED COPIES OF BANK ACCOUNT, AGREEMENT WITH THE CONTRACT EE, SRI HARJIT SINGH TALWAR, BUT COULD NOT FILE CASH BOOK, COMPLETE DETAILS OF BILLS /VOUCHERS IN SUPPORT OF EXPENSES OF RS.37,81,939/- DEBITED TO P/L ACCOUNT. HE FURTHER ALLEGED THAT THE ASSESSEE FURNISHED INCOMPLETE LIST CONSISTING OF NAMES OF TRUCK OWNERS AND SOME TRUCK NUMBERS. HOWEVER, THE ASSESSEE IN ITS WRITTEN SUBMISSIONS FILED BEFOR E THE A.O. ON SEVERAL OCCASIONS HAS STATED THAT IT HAS, INTER ALIA, ALREADY PRODUCED/FI LED BOOKS OF ACCOUNTS, CASH BOOK, LEDGER BILLS, BILLS/VOUCHERS ETC. HOWEVER, IN THE ASSESSMENT ORDER, THE A.O. HAS DENIED SUCH CLAIM OF THE ASSESSEE IN ITS ENTIRETY AND STAT ED THAT, IN FACT, THE ASSESSEE HAS PRODUCED ALL PARTY LEDGER ONLY AND SOME COPIES OF B ILLS FOR TRUCK CHARGES AND SOME ORIGINAL VOUCHERS IN SUPPORT OF PURCHASING DIESEL F OR RESPECTIVE TRUCKS. HE HAS FURTHER ALLEGED THAT THE ASSESSEE COULD NOT PRODUCE BOOKS O F ACCOUNTS WITH SUPPORTING EVIDENCES IN RESPECT OF THE EXPENDITURE OF RS.37,81 ,939/- CLAIMED TO HAVE BEEN INCURRED IN PURSUANCE OF ITS ACTIVITIES AND HENCE H E PRESUMED DISCREPANCY RESULTING IN INFLATION IN RESPECT OF THE FOLLOWING EXPENSES :- 1. REPAIRS & MAINTENANCE RS. 3,15,816 2. FUEL AND LUBRICANTS RS.27,00,372 3. TYRE AND FITTINGS RS. 60,915 4. RUNNING EXPENSES RS. 3,43,916 5. DRIVERS AND HELPERS RS. 3,60,920 RS.37,81,939/- 2.1. IN ADDITION TO THE ABOVE, THE A.O. OBSERVED, AS DETAILED ON PAGE-3 OF THE ASSESSMENT ORDER, THAT THE ASSESSEE HAD MADE PAYMEN TS BY BEARER CHEQUES TO 35 PERSONS IN THE TOTAL SUM OF RS.75,00,761/-, OUT OF WHICH A SUM OF RS.5,88,055/- WAS PAID ON DIFFERENT DATES UPTO RS.20,000/- AND THE BA LANCE CASH PAYMENTS EXCEEDING RS.20,000/- IN SINGLE TRANSACTION AMOUNTED TO RS.69 ,12,706/-. HE, THEREFORE, SHOW CAUSED TO THE ASSESSEE AS TO WHY 20% OF RS.69,12,70 6/- SHOULD NOT BE DISALLOWED U/S. 4 40A(3) OF THE ACT AND ADDED TO ITS TOTAL INCOME. IN REPLY, THE ASSESSEE SUBMITTED THAT AS PER CASH BOOK MAINTAINED BY THE ASSESSEE, NONE O F THE PERSONS WAS HAVING MORE THAN ONE TRUCK OR DUMPER GIVEN ON HIRE AND AGGREGATE PAY MENT TO EACH OF SUCH PERSONS WAS BELOW RS.50,000/- DURING THE RELEVANT FINANCIAL YEA R AND, THEREFORE, AS PER PROVISIONS OF SEC. 194C(3) OF THE ACT, DEDUCTION OF TDS FROM S UCH OWNERS OF TRUCKS WAS NOT NECESSARY. THE A.O., HOWEVER, DID NOT SEPARATELY A DD BACK 20% OF RS.RS.69,12,706/-, BEING THE CASH PAYMENT EXCEEDING RS.20,000/- IN ONE SINGLE TRANSACTION U/S. 40A(3) OF THE ACT. 2.2. THE A.O. ALSO DEPUTED INSPECTOR TO ENQUIRE ABO UT THE BUSINESS ACTIVITIES OF THE ASSESSEE-FIRM AND AS PER INSPECTORS REPORT, THE A. O. OBSERVED THAT THE ASSESSEE COULD NOT GIVE COMPLETE DETAILS, I.E. NAMES & ADDRESSES O F THE TRUCK OWNERS AND NUMBERS OF THE TRUCKS ENGAGED IN ITS TRANSPORTATION BUSINESS. THE A.O. WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND FOUND LACK OF EVIDE NCE BEING FILED/PRODUCED IN SUPPORT OF THE CLAIM OF THE ASSESSEE. HE, THEREFORE, OBSERV ED THAT IT IS CLEAR THAT THE ASSESSEE HAS PAID THE AMOUNT OF RS.37,81,639/- ON BEHALF OF THE TRUCK OWNERS AND HAD THE ABOVE EXPENSES HAS BEEN INCURRED BY THE TRUCK OWNERS INDI VIDUALLY, THE ASSESSEE HAD NOT TO PAY THE IDENTICAL AMOUNT ON ACCOUNT OF TRANSPORT CH ARGES IN ADDITION TO RS.61,65,119/-. HE, THEREFORE, HELD THAT THE ACTUAL TRANSPORT HIRE CHARGES PAID BY THE ASSESSEE WAS FOR RS.99,46,758/- [RS.61,65,119 + RS. 37,81,639] WHICH WAS IN CONTRAVENTION OF PROVISIONS OF SEC. 194C OF THE ACT AND ON SUCH PREMISE, THE A. O. MADE AN ADDITION OF RS.99,46,758/- BY WAY OF DISALLOWANCE U/S. 40(A)(IA ) OF THE ACT. 3. ON APPEAL, THE ASSESSEE FURNISHED BEFORE THE LD . C.I.T.(A) DETAIL LIST OF TRUCK OWNERS COMPRISING OF NAMES OF THE OWNERS, THEIR ADD RESSES, TRUCK NOS. AND GROSS AMOUNT PAID TO EACH OF THEM AGGREGATING TO RS.61,65 ,119/-, A COPY OF WHICH HAS ALSO BEEN FILED IN THE PAPER BOOK AT PAGES 21 TO 26. TH E LD. C.I.T.(A) ISSUED SHOW CAUSE NOTICES U/S. 251(2) OF THE ACT (PAGES 11 TO 13 OF T HE PAPER BOOK) AND THE ASSESSEE FILED ITS WRITTEN SUBMISSION, WHICH IS ALSO PLACED AT PAG ES 14 TO 20 OF THE PAPER BOOK, WHEREIN THE ASSESSEE HAS EXPLAINED AS TO WHY ITS CASE SHALL NOT FALL UNDER THE MISCHIEF OF SEC. 40(1)(IA) OF THE ACT R.W.S. 194C OF THE ACT. IN IT S SUBMISSION BEFORE THE LD. C.I.T.(A), 5 THE ASSESSEE SUBMITTED THAT THE ASSESSEE PAID TRANS PORT CHARGES OF RS.61,65,119/- IN THE ASSESSMENT YEAR UNDER CONSIDERATION TO VARIOUS TRUCK OWNERS, WHICH ARE EVIDENCED BY THE LEDGER OF EACH PARTIES. THE DETAILS OF DISB URSEMENT OF TRANSPORT CHARGES WERE FILED BEFORE THE A.O. CONTAINING NAMES OF TRUCK OWN ERS/DRIVERS, THEIR ADDRESSES, REGISTRATION NOS. OF THE VEHICLES AND THE GROSS AMO UNT RECEIVED. THE A.O. ABDICATED HIS DUTIES OF ISSUING SUMMONS TO THE PERSONS CONCER NED AND MAKING ENQUIRIES AS PER POWER CONFERRED UPON HIM BY THE STATUTE. IT WAS FU RTHER SUBMITTED THAT PROVISION OF SEC. 40(A)(IA) OF THE ACT ATTRACTS WHERE TAX IS NOT DEDUCTED AS PER SEC. 194C(2) OF THE ACT ON PAYMENT TO SUB-CONTRACTORS, WHICH INCLUDES S UPPLY OF LABOUR FOR CARRYING OUT ANY WORK. IN THE INSTANT CASE, THE ASSESSEE ITSELF IS A TRANSPORT SUB-CONTRACTOR WILL BE EVIDENCED BY THE TDS CERTIFICATE ISSUED BY THE CONT RACTOR, SRI HARJIT SINGH TALWAR. THEREFORE, IT IS NOT THE REQUIREMENT IN LAW THAT TH E PAYMENTS OF TRANSPORT CHARGES IF PAID BY A SUB-CONTRACTOR TO A TRUCK OWNER/ DRIVER W ILL ATTRACT DISALLOWANCE U/S. 40(A)(IA) OF THE ACT AND AS SUCH THE GENUINE BUSINESS EXPEND ITURE BY WAY OF TRUCK HIRE CHARGES CANNOT BE REGARDED AS INCOME OF THE ASSESSEE. IT W AS FURTHER SUBMITTED BEFORE THE LD. C.I.T.(A) THAT ADMITTEDLY THERE WAS NO CONTRACT/AGR EEMENT ENTERED INTO BETWEEN THE ASSESSEE AND THE TRUCK OWNERS AND AS SUCH THE FINDI NG OF THE A.O. TO DISALLOW THE EXPENSES WITHOUT PROVING EXISTENCE OF ANY SUCH CONT RACT HAS NO VALIDITY IN THE EYES OF LAW. IT WAS FURTHER CONTENDED THAT THE ASSESSEE DI D NOT ENGAGE ANY TRUCK OWNER OR DRIVER UNDER ANY CONTRACT OR AGREEMENT TO EXECUTE T HE WORK ORDER GIVEN BY THE ASSESSEES PRINCIPAL, SRI HARJIT SINGH TALWAR AND F URTHER THE TRUCK OWNERS/DRIVERS HAVE NO LOCUS STANDI AS CONTRACTORS. THEREFORE, THE COND ITIONS PRECEDENT TO ATTRACT THE PROVISIONS OF SEC. 194C OF THE ACT ARE TOTALLY MISS ING IN THE CASE OF THE ASSESSEE. IT WAS, THEREFORE, SUBMITTED THAT THE ASSESSEE HAD NO LEGAL LIABILITY TO DEDUCT TAX AT SOURCE U/S. 194C OF THE ACT AND AS SUCH THE ALLEGED INVOCATION OF SEC. 40(A)(IA) OF THE ACT IN THE INSTANT CASE IS ULTRA VIRES THE SCOPE AN D AMBIT OF SUCH ENACTMENT. IN SUPPORT OF THE SUBMISSIONS, THE ASSESSEE RELIED ON THE DECI SIONS IN THE CASES OF (I) CIT VS. MAHARAJADHIRAJA KAMESWAR SINGH OF DARBHANGA [(1933) 01 I.T.R.94]; (II) DAKESHWARI COTTON MILLS LTD. VS. CIT [(1954) 26 ITR 775 (SC)]; (III) ITO VS. RAMA NAND & CO. [163 ITR 702 (HP)] AND (IV) CITY TRANSPORT CORPN. VS. IT O [(2007) 13 SOT 479 (MUM)]. 6 3.1. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE, THE LD. C.I.T.(A) AT THE OUTSET OPINED THAT THE ASSESSEE HAS NOT PRODUCED TH E BOOKS OF ACCOUNTS, BILLS/VOUCHERS, COMPLETE POSTAL ADDRESSES OF THE TRUCKERS ETC. BEFO RE THE A.O. AND THE ASSESSEE DID NOT ENABLE THE A.O. TO VERIFY THE CORRECTNESS AND C OMPLETENESS OF BOOKS OF ACCOUNTS AS WELL AS THE SUBMISSIONS MADE BY THE ASSESSEE. HE F URTHER REJECTED THE SUBMISSION AND/OR EXPLANATION OF THE ASSESSEE ABOUT NON-APPLIC ATION OF PROVISIONS OF SEC. 40(A)(IA) R.W.S. 194C OF THE ACT ON THE FACTS OF THE ASSESSEE S CASE. HE POINTED OUT THAT BEFORE THE A.O. THE ASSESSEE HAS FURNISHED LIST OF 54 TRUC K OWNERS/DRIVERS, WHEREAS BEFORE HIM THE ASSESSEE HAS FILED SUCH LIST OF SUCH 132 TR UCK OWNERS/DRIVERS. HE, THEREFORE, DID NOT ACCEPT THE LIST, OVER & ABOVE 54 NAMES, PRO DUCED BEFORE HIM AND TREATED THE SAME AS AN ACT OF AFTERTHOUGHT AND HENCE INCORRECT. ACCORDING TO HIM FURTHER, THE LIST PRODUCED BEFORE HIM TO BRING DOWN THE TRUCK PAYMENT S BELOW RS. 50,000/- IN F.Y. 2005- 06 WAS NOT RELIABLE BECAUSE IT WAS PREPARED FOR KEE PING THE ASSESSEE OUTSIDE THE AMBIT OF PROVISIONS OF SEC. 40(A)(IA) R.W.S. 194C OF THE ACT. HE HAS ALSO HELD THAT THE ASSESSEE WAS HAVING DUAL STATUS IN ONE STATUS IT WAS A SUB -CONTRACTOR OF ITS CONTRACTOR SRI HARJIT SINGH TALWAR AND IN OTHER STATUS IT WAS A CO NTRACTOR OF THE TRUCK OWNERS/DRIVERS (ON BEHALF OF THE TRUCK OWNERS), WHO WERE THE SUB-C ONTRACTORS OF THE ASSESSEE FOR THE WORKS CONTRACT BETWEEN THE ASSESSEE AND THEM. HE, THEREFORE, HELD THAT THE A.O. HAS RIGHTLY INVOKED THE PROVISIONS OF SEC. 40(A)(IA) R. W.S. 194C OF THE ACT FOR MAKING THE DISALLOWANCE OF RS.61,65,119/- ON ACCOUNT OF TRUCK HIRE CHARGES AND RS.37,81,636/- ON ACCOUNT OF RUNNING EXPENSES OF THE HIRED OUT VEHICL ES, AGGREGATING TO RS.99,46,758/-. 3.2. HE HAS ALSO RESORTED TO FURTHER DISALLOWANCE OF RS.13,82,541/- BEING 20% OF RS.69,12,706/- AND THEREBY ENHANCED THE TOTAL ASSES SED INCOME BY THE SAID AMOUNT BY APPLYING THE PROVISIONS OF SEC. 40A(3) OF THE ACT A ND BY INVOKING PROVISIONS OF SEC. 251(1)(A) OF THE ACT AS, ACCORDING TO HIM, THE A.O. HAS FAILED TO MAKE DISALLOWANCE U/S. 40A(3) OF THE ACT FOR PAYMENTS MADE TO 35 PERSONS B Y BEARER CHEQUES EXCEEDING RS.20,000/-. IT WAS CONTENDED BY THE ASSESSEE BEFO RE THE LD. C.I.T.(A) THAT AMOUNTS WERE WITHDRAWN BY SEVERAL PERSONS INCLUDING PARTNER S OF THE ASSESSEE-FIRM FROM BANKS THROUGH BEARER CHEQUES. THESE WITHDRAWALS FROM THE BANKS WERE NOT THE EXPENDITURE INCURRED BY THE ASSESSEE AND, THEREFORE, THE A.O. H AS RIGHTLY APPRECIATED THAT 7 PROVISIONS OF SEC. 40A(3) OF THE ACT ARE NOT ATTRAC TED AND NO ADDITION WAS MADE ON THIS ACCOUNT. HOWEVER, THE LD. C.I.T.(A) DIRECTED THE A .O. TO ENHANCE THE ASSESSEES INCOME BY FURTHER SUM OF RS. 13,82,541/- FOR ALLEGED VIOLA TION OF PROVISIONS OF SEC. 40A(3) OF THE ACT. 4. AT THE TIME OF HEARING BEFORE US, THE LD. COUNS EL FOR THE ASSESSEE REITERATED THE ARGUMENTS MADE BEFORE THE LD. C.I.T.(A). HE FURTHE R SUBMITTED THAT THE ASSESSEE IS A TRANSPORT SUB-CONTRACTOR OF SRI HARJIT SINGH TALWAR AND ACCORDING TO THE WORK ORDER, THE ASSESSEE ONLY TRANSPORTED COAL FROM ONE DESIGNA TED PLACE TO ANOTHER. THE LOADING & UNLOADING OF THE GOODS TRANSPORTED WERE DONE BY THE PRINCIPAL HIMSELF. TO GET THIS WORK ORDER DONE, THE ASSESSEE HIRED OUT EMPTY TRUCK S/DUMPERS ON PAYMENT OF HIRE CHARGES OF RS.61,65,119/- AND ALL RUNNING EXPENSES ON SUCH HIRED OUT VEHICLES WERE INCURRED BY THE ASSESSEE ON ITS OWN WHICH AMOUNTED TO RS.37,81,639/-. THESE EXPENSES WERE COMBINEDLY DEBITED IN THE P/L ACCOUNT AS TRANS PORT CHARGES. THE PAYMENTS RECEIVED BY THE ASSESSEE IN EXECUTION OF WORK ORDER ISSUED BY SRI HARJIT SINGH TALWAR WERE SUBJECT TO TDS, AS WOULD BE EVIDENT FROM PAGE- 70 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT DETAILED LIST OF TRUCK OWNERS FROM W HOM THE ASSESSEE HIRED OUT VEHICLES AND OTHER DOCUMENTS IN REGARD TO RUNNING EXPENSES O N SUCH VEHICLES WERE PRODUCED/FURNISHED BEFORE THE A.O. AS WELL AS BEFOR E THE LD. C.I.T.(A). REFERRING TO REPLIES IN RESPONSE TO NOTICES ISSUED BY THE A.O., PLACED IN THE PAPER BOOK, THE LD. COUNSEL SUBMITTED THAT BOOKS OF ACCOUNTS, CASH BOOK , BILLS/VOUCHERS ETC. WERE PRODUCED/FILED BEFORE THE A.O. WITHOUT APPRECIATIN G ALL THESE EVIDENCES, THE REVENUE AUTHORITIES HAVE PROCEED WITH A PRECONCEIVED NOTION THAT THE ASSESSEE BEING A CONTRACTOR GAVE TRANSPORT SUB-CONTRACT TO SEVERAL T RUCK OWNERS/DRIVERS FOR EXECUTION OF HIS WORK ORDER RECEIVED FROM SRI HARJIT SINGH TA LWAR. NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO ESTABLISH THAT MAN POWER W AS ALSO PROVIDED ALONG WITH HIRED OUT TRUCKS BY THE OWNERS AND RUNNING COSTS HAVE BEE N INCURRED BY THEM. HE FURTHER SUBMITTED THAT THE ASSESSEE ALONE UNDER ITS CONTROL AND SUPERVISION HAD EXECUTED THE ENTIRE WORK ORDER UNDERTAKEN FROM ITS PRINCIPAL AND THE VEHICLE OWNERS IN NO WAY WERE RESPONSIBLE FOR ALL THE ACTS AND DEFAULTS COMMITTED IN EXECUTING SUCH WORK AND THEY HAVE SIMPLY PLACED THEIR VEHICLES ON HIRE AT THE DI SPOSAL OF THE ASSESSEE WITHOUT 8 INVOLVING THEMSELVES IN CARRYING OUT ANY PART OF TH E WORK UNDERTAKEN BY THE ASSESSEE. HE, THEREFORE, SUBMITTED THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE AS PER THE PROVISIONS OF SEC. 194C(2) OF THE ACT ON PA YMENT OF VEHICLE HIRE CHARGES AND IN SUCH CIRCUMSTANCES PROVISIONS OF SEC. 40(A)(IA) OF THE ACT WOULD NOT APPLY TO THE CASE OF THE ASSESSEE. IN SUPPORT OF HIS SUBMISSIONS, THE L D. COUNSEL RELIED ON SEVERAL DECISIONS, COPIES OF WHICH HAVE BEEN FILED BEFORE US, AND SOME OF THEM ARE (I) MYTHRI TRANSPORT CORPN. VS. ACIT [124 TTJ 970 (VISHA)]; (II) DCIT VS . SATISH AGGARWAL & CO. [124 TTJ 542 (ASR.)]; (III) R.R.CARRYING CORPN. VS. ACIT [12 6 TTJ 240 (CTK.)]; (IV) CHANDRAKANT THACKAR VS. ACIT [129 TTJ 1 (CTK.UO)]. HE, THEREFOR E, SUBMITTED THAT THE DISALLOWANCE MADE OF RS. 99,46,758/- U/S. 40(A)(IA) OF THE ACT B EING CONTRARY TO LAW SHOULD BE DELETED. IN REGARD TO LD. C.I.T.(A)S ACTION IN ENHANCING THE INCOME BY RS.13,82,541/- BEING 20% OF RS.69,12,706/- ALLEGING VIOLATION OF PROVISI ONS OF SEC. 40A(3) OF THE ACT, THE LD. COUNSEL SUBMITTED THAT SUCH SUM WAS MERELY WITHDRAW AL FROM BANK ACCOUNTS AND NOT EXPENDITURE AND AS SUCH THE PROVISIONS OF SEC. 40A( 3) OF THE ACT ARE NOT APPLICABLE. HE FURTHER SUBMITTED THAT THE ALLEGATION OF LD. C.I.T. (A) THAT THE WITHDRAWALS FROM BANK WERE MADE BY WAY OF PAYMENT TO TRUCK OWNERS FOR HIR E CHARGES IS ON BASELESS PRESUMPTION, BECAUSE THESE WITHDRAWALS HAD NOTHING TO DO WITH THE PAYMENTS OF HIRE CHARGES TO TRUCK OWNERS. HE FURTHER SUBMITTED THAT THE ASSESSEES BANK WAS SITUATED AT ASANSOL, WHICH WAS FAR AWAY FROM THE ASSESSEES PLACE OF OPERATION AND AS A MATTER OF CONVENTION FOLLOWED, THE ASSESSEE USED TO REQUES T THE PERSONS INCLUDING ITS DRIVERS ETC. TO ENCASH THE BEARER CHEQUES FROM THE BANK AND TO DELIVER THE CASH ON THEIR RETURN AT THE ASSESSEES PLACE. WITHOUT LINKING SUCH WIT HDRAWAL WITH ANY EXPENDITURE IN CASH EXCEEDING RS.20,000/-, THE LD. C.I.T.(A) HAS WRONGL Y ASSUMED POWER U/S. 251(1)(A) AND THUS ARBITRARILY INVOKED PROVISIONS OF SEC. 40A(3) OF THE ACT. HE, THEREFORE, SUBMITTED THAT THE DISALLOWANCE MADE ON THAT ACCOUNT BY ENHAN CING THE INCOME OF RS.13,82,541/- SHOULD BE QUASHED. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE RELIED ON THE ORDER OF LD. C.I.T.(A). HE HAS FURTHER SUBMITTED THAT THE L D. C.I.T.(A) HAS ELABORATELY DEALT WITH THE ISSUES INVOLVED IN THIS APPEAL IN GREAT DETAIL AND JUSTIFIABLY UPHELD THE ACTION OF THE 9 A.O. IN MAKING ADDITION OF RS.99,46,758/- BY INVOKI NG PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. HE HAS FURTHER SUBMITTED THAT THE A.O. ALTHOU GH DISCUSSED IN HIS ASSESSMENT ORDER ABOUT VIOLATION OF PROVISIONS OF SEC. 40A(3) OF THE ACT BY THE ASSESSEE, BUT HE OMITTED TO ULTIMATELY ADD BACK THE AMOUNT OF RS. 13 ,82,541/- BEING 20% OF RS.69,12,706/-. ACCORDING TO HIM, THEREFORE, THE L D. C.I.T.(A) HAS RIGHTLY ENHANCED THE ASSESSEES INCOME BY THE SAID AMOUNT OF RS.13,82,54 1/-, WHICH SHOULD BE UPHELD. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL PLACED ON RECORD. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IS A TRANS PORT SUB-CONTRACTOR. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE E XECUTED WORK ORDER OF TRANSPORTING COAL FROM ONE DESIGNATED PLACE TO ANOT HER, ISSUED BY ASSESSEES CONTRACTOR SRI HARJIT SINGH TALWAR. THE ASSESSEE FOR EXECUTIN G SUCH SUB-CONTRACT WORK TOOK ON HIRE SEVERAL TRUCKS/DUMPERS AND INCURRED TRUCK HIRE EXPENSES OF RS.61,65,119/-. THE ASSESSEE ALSO CLAIMED THAT IT HAD INCURRED VEHICLE RUNNING EXPENSES UNDER DIFFERENT HEADS OF EXPENDITURE IN THE TOTAL SUM OF RS.37,81,6 39/- AND THUS DEBITED ITS P/L ACCOUNT BY THE TOTAL SUM OF RS.99,46,758/- UNDER TH E HEAD TRANSPORT CHARGES. ACCORDING TO THE REVENUE AUTHORITIES, THE ASSESSEE EXECUTED ITS TRANSPORTATION WORK RECEIVED FROM SRI HARJIT SINGH TALWAR THROUGH SEVER AL TRUCK OWNERS/DRIVERS UNDER SUB- CONTRACT WITH THEM AND THE ASSESSEE AS PER PROVISI ONS OF SEC. 194C(2) OF THE ACT FAILED TO DEDUCT TDS FROM THE PAYMENTS MADE TO THEM. HENC E THE AUTHORITIES BELOW DISALLOWED THE ENTIRE EXPENDITURE OF RS.99,46,758/- AND ADDED THE SAME U/S. 40(A)(IA) OF THE ACT TO ITS TOTAL INCOME. WE OBSERVE THAT TH E A.O. IN HIS ASSESSMENT ORDER HAS STATED THAT IN SPITE OF OPPORTUNITY PROVIDED, THE A SSESSEE COULD ONLY FILE INCOMPLETE LIST CONSISTING OF NAMES OF TRUCK OWNERS AND SOME TRUCK NUMBERS. IT IS FURTHER ALLEGED BY THE A.O. THAT BOOKS OF ACCOUNT, CASH BOOK AND BILLS /VOUCHERS IN SUPPORT OF THE ENTIRE EXPENDITURE COULD NOT BE PRODUCED BY THE ASSESSEE T O SUBSTANTIATE THE EXPENSES INCURRED. THE LD. C.I.T.(A) HAS POINTED OUT THAT A LIST CONTAINING 132 NAMES OF TRUCK OWNERS/DRIVERS ALONG WITH THEIR ADDRESS AND AMOUNT PAID TO EACH OF THEM HAS BEEN FILED, WHEREAS BEFORE THE A.O. A LIST OF 54 OF SUCH TRUCK OWNERS/DRIVERS WITHOUT ANY ADDRESS ETC. WAS FILED. THE LD. C.I.T., THEREFORE, DID NOT ACT ON THE LIST OF 132 TRUCK OWNERS/DRIVERS FILED BEFORE HIM, NOR THE SAME WAS S ENT TO A.O. FOR VERIFICATION AT HIS 10 END. A COPY OF THE ABOVE LIST OF 132 TRUCK OWNERS/D RIVERS HAS ALSO BEEN FILED IN THE PAPER BOOK AT PAGES 21 TO 26. ON PERUSAL OF THE OR DERS OF THE AUTHORITIES BELOW AND DOCUMENTS FILED BY THE ASSESSEE BEFORE THEM AS WELL AS BEFORE US IN THE PAPER BOOK, WE OBSERVE THAT THERE IS ALLEGATION AND COUNTER ALLEGA TION ABOUT SUBMISSION OF VARIOUS DETAILS IN RESPECT OF INCURRING OF TRUCK HIRE EXPEN SES AND RUNNING EXPENSES, THE DETAILS OF WHICH HAVE ALREADY BEEN GIVEN ABOVE. WE FURTHER OBSERVE THAT THE A.O. DID NOT ENQUIRE FROM ANY OF THE TRUCK OWNERS ABOUT THE ACTU AL NATURE OF TRANSACTION ENTERED INTO WITH THEM BY THE ASSESSEE. THE COMPLETE LIST OF 132 TRUCK OWNERS/DRIVERS WITH ADDRESSES ETC. WAS FILED BEFORE THE LD. C.I.T.(A), WHICH HAS BEEN MADE ANNEXURE TO HIS IMPUGNED APPELLATE ORDER. ON THE GIVEN FACTS AND C IRCUMSTANCES OF THE CASE AND EVIDENCE ON RECORD, IT IS REQUIRED TO BE FIRST ASCE RTAINED WHETHER THE ASSESSEE CARRIED ON THE TRANSPORTATION WORK AS SPECIFIED IN THE WORK ORDER ON ITS OWN BY ENGAGING VEHICLES AND INCURRING EXPENSES, AS CLAIMED BY THE ASSESSEE, OR MERELY SUB-CONTRACTED THE WORK TO THE VEHICLE OWNERS SO AS TO ATTRACT THE MISCHIEF OF PROVISIONS OF SEC. 40(A)(IA) R.W.S. 194C OF THE ACT, BECAUSE THE AUTHO RITIES BELOW HAVE MAINLY RELIED ON THE HYPOTHESIS THAT THERE WAS A CONTRACTUAL RELATION EX ISTED BETWEEN THE ASSESSEE AND THE TRUCK OWNERS FOR TRANSPORTING GOODS VIDE WORK ORDER RECEIVED FROM SRI HARJIT SINGH TALWAR. IN FACT, THE CONDITIONS PRECEDENT TO ATTRAC T THE PROVISION OF SEC. 194C OF THE ACT, AS ENUMERATED BY HONBLE SUPREME COURT IN THE CASE OF BIRLA CEMENT WORKS VS. CBDT [248 ITR 216 (SC)] ARE - I) THERE MUST BE A C ONTRACT BETWEEN THE PERSONS RESPONSIBLE FOR MAKING PAYMENT AND THE CONTRACTOR; II) THE CONTRACT MUST BE FOR CARRYING OUT ANY WORK; III) THE WORK IS BEING CAR RIED OUT THROUGH THE CONTRACTOR; IV) THE CONSIDERATION FOR THE CONTRACT SHOULD EXCEED RS. 10 ,000/- I.E. THE AMOUNT FIXED BY SEC. 194C OF THE ACT AND V) THE PAYMENT IS MADE TO THE C ONTRACTOR FOR THE WORK CARRIED OUT BY HIM. ON PERUSAL OF THE ORDERS OF THE AUTHORITIE S BELOW, WE ARE OF THE CONSIDERED OPINION THAT THEY HAVE NOT DEALT WITH THE ISSUE IN TERMS OF THE ABOVE SETTLED POSITION BEFORE INVOKING PROVISIONS OF SEC. 40(A)(IA) R.W.S. 194C OF THE ACT. IT IS FOR THE REVENUE TO PROVE THAT THE CONDITIONS PRECEDENT TO APPLY PRO VISIONS OF SEC. 194C(2) OF THE ACT ARE SATISFIED IN THE INSTANT CASE SO AS TO ATTRACT THE MISCHIEF OF SEC. 40(A)(IA) OF THE ACT. 11 6.1. CONSIDERING THE TOTALITY OF THE FACTS AND CIR CUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT IT WOULD MEET THE ENDS OF JUSTICE IF THE MATTER IS SET ASIDE TO THE FILE OF A.O. FOR RE-EXAMINATION AND READJUDI CATION AS TO WHETHER THE ASSESSEES CASE FALLS WITHIN THE GUIDELINES ENUMERATED BY THE HONBLE SUPREME COURT IN THE CASE OF BIRLA CEMENT WORKS VS. CBDT (SUPRA) SO AS TO ATTRAC T PROVISIONS OF SEC. 40(A)(IA) R.W.S. 194C OF THE ACT. WE, THEREFORE, ASIDE THE ORDERS O F THE AUTHORITIES BELOW ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF A.O., WHO IS DIRECTED TO CONSIDER THE LIST OF 132 TRUCK OWNERS/DRIVERS AND MAKE NECESSARY ENQUIRIES B Y WAY OF TEST-CHECK TO ASCERTAIN AS TO WHETHER THE ASSESSEE CARRIED ON THE TRANSPORT ATION WORK AS SPECIFIED IN THE WORK ORDER ON ITS OWN BY ENGAGING VEHICLES AND INCURRING EXPENSES OR MERELY SUB-CONTRACTED THE WORK TO THE VEHICLE OWNERS. IT IS PERTINENT TO MENTION HERE THAT ALTHOUGH THE REVENUE AUTHORITIES HAVE DOUBTED THE QUANTUM OF EXP ENDITURE OF RS.37,81,639/- CLAIMED TO HAVE BEEN INCURRED ON TRUCK RUNNING EXPE NSES AND PRESUMED THE SAME TO BE INFLATORY, BUT AT THE SAME TIME THEY HAVE ADDED THE SAID AMOUNT WITH THE TRUCK HIRE EXPENSES FOR ADDING THE SUM OF RS.99,46,758/- U/S 4 0(A)(IA) OF THE ACT. IN THIS VIEW OF THE MATTER, THE A.O. IS ALSO DIRECTED TO RE-EXAMINE THE DETAILS ALREADY ON RECORD AND FURTHER EVIDENCE THAT MAY BE FURNISHED BY THE ASSES SEE DURING REMAND PROCEEDING. NEEDLESS TO MENTION, THE A.O. SHALL PROVIDE ADEQUAT E OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6.2. THE ASSESSEE HAS ALSO OBJECTED THE ENHANCEMEN T OF INCOME BY THE LD. C.I.T.(A) BY INVOKING PROVISIONS OF SEC. 251(1)(A) OF THE ACT TO THE EXTENT OF RS.13,82,541/-, BEING 20% OF THE CASH PAYMENTS OF RS.69,12,706/- U/S. 40A (3) OF THE ACT. WE OBSERVE THAT ALTHOUGH THE A.O. HAS DISCUSSED THIS ISSUE IN HIS A SSESSMENT ORDER, BUT ULTIMATELY DID NOT SEPARATELY ADD THE SAID AMOUNT TO THE TOTAL INC OME OF THE ASSESSEE. HOWEVER, THE LD. C.I.T.(A) HAS STATED THAT THERE WERE PAYMENTS B Y BEARER CHEQUES TO 35 PERSONS, AS DETAILED ON PAGE-3 OF THE ASSESSMENT ORDER IN CONTR AVENTION OF PROVISIONS OF SEC.40A(3) OF THE ACT AND THUS HE DIRECTED THE A.O. TO ADD BAC K THE SUM OF RS.13,82,541/- TO THE ASSESSEES TOTAL INCOME. WE OBSERVE THAT THE LD. C .I.T.(A) HIMSELF HAS UPHELD THE DISALLOWANCE OF RS.99,46,758/- U/S. 40(A)(IA) OF TH E ACT ON ACCOUNT OF TRANSPORTATION 12 CHARGES. WE ARE OF THE VIEW THAT THE ADDITION CANN OT BE MADE SIMULTANEOUSLY BY APPLYING PROVISIONS OF SEC. 40A(3) AS WELL AS SEC. 40(A)(IA) OF THE ACT, WHICH THE LD. C.I.T.(A) HAS DONE IN THIS CASE. SUCH ACTION OF TH E LD. C.I.T.(A) IS NOT IN ACCORDANCE WITH LAW. SINCE WE HAVE ALREADY SET ASIDE THE ISSUE ON ACCOUNT OF DISALLOWANCE U/S. 40(A)(IA) OF THE ACT TO THE FILE OF THE LD. A.O. AND THE LD. A.O. HAS ALREADY DISCUSSED THE APPLICABILITY OF SEC. 40A(3) OF THE ACT IN HIS ORDE R AND DROPPED THE PROCEEDINGS THEREOF, WE CONSIDER IT TO SET ASIDE THIS ISSUE ALS O TO THE FILE OF LD. A.O. TO DECIDE AFRESH AFTER GIVING OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. !2 '3! 4 3$ 5 6 THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 01.9. 2011. SD/- SD/- ( ) ( . .. . . .. . ) !' (MAHAVIR SINGH) JUDICIAL MEMBER (C.D. RA O), ACCOUNTANT MEMBER ( (( ( ' ' ' ') )) ) DATE: 01-09-2011 !2 0 .7 8!7&9- COPY OF THE ORDER FORWARDED TO: 1. *+ / THE APPELLANT : GHOSH & CHAKRABORTY TRANSPORT, C/O. SRI SOMNATH GHOSH, ADVOC ATE, SEVEN BROTHERS LODGE, BUROSHIBTALA , PS- CHINSURAH, HOOGHLY-712 105. 2 ./*+ / THE RESPONDENT : I.T.O., WARD-2(1), ASANSOL. 3. 2$ () : THE CIT(A), ASANSOL. 4. 2$/ THE C.I.T., ASANSOL 5 =5 .$ / D.R., ITAT, KOLKATA BENCHES, KOLKATA 6 GUARD FILE . /7 ./ TRUE COPY, !2$3/ BY ORDER, (DKP) > ? / DY/ASSTT. REGISTRAR .