M/s. United Computerised Emboridery, CHENNAI V. ITO, CHENNAI

ITA 1705/CHNY/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51820 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 05-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 12-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR I VIJAYAKUMAR
• Assessee Lawyers: R PADMANABHAN
• Section: 244A; 234B; 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO.1705/MDS/2010 (ASSESSMENT YEAR : 2007-08 ) M/S UNITED COMPUTERISED EMBROIDERY RAJA STORES NO.136, AUDIAPPA NAICKEN STREET CHENNAI 600 001 VS THE INCOME TAX OFFICER BUSINESS WARD VII(3) CHENNAI [PAN AABFU1940L] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.PADMANABHAN, CA RESPONDENT BY : DR. I.VIJAYAKUMAR, CIT/DR DATE OF HEARING : 05-09-2011 DATE OF PRONOUNCEMENT : 05-09-2011 O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE, FOR ASSESSMENT YE AR 2007-08, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), DATED 5.7.2010. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE-FIRM IS DOING EMBROIDERY WORK USING COMPUTERIZED MACHINE S. IT FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION A DMITTING TOTAL LOSS ITA 1705/10 :- 2 -: OF ` 3,38,477/- ON 30.10.2007, BUT IN THE REGULAR ASSES SMENT ORDER THE ASSESSING OFFICER HAS ADDED A SUM OF ` 11,98,995/- UNDER VARIOUS HEADS AS UNDER: TDS NOT DEDUCTED, AS PER PROVISIONS OF SECTION 40(A)(IA) NOT ALLOWABLE LABOUR CHARGE OUT ` 8,53,254 LABOUR EMBROIDERY WORK ` 98,765 LABOUR CHARGE CONTRACT WORK ` 59,957 ` 10,11,976 SALES COMMISSION TDS NOT DEDUCTED ` 50,200 VOUCHERS/BILLS NOT TALLIED PURCHASE VOUCHERS ARE NOT AVAILABLE ` 51,970 MISCELLANEOUS EXPENSES OFFICE EXPENSES CHENNAI ` 6,972 RANIPET ` 4,723 ` 11,695 ELECTRICITY BILL CHARGES ` 13,652 SALARY DISCREPANCIES ` 20,415 GENERAL EXPENSES ` 5,719 TOTAL ADDITIONS ` 11,98,985 3. AGAINST THESE ADDITIONS, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A), BUT IN VAIN. BEING AGGRIEVED THIS SECO ND APPEAL HAS BEEN FILED RAISING THE FOLLOWING GROUNDS: THE ORDER OF THE INCOME - TAX OFFICER IN DETERMINI NG THE TOTAL INCOME AT RS.8,60,510 AS AGAINST THE RETURNED LOSS OF ` 3,38,477 IS CONTRARY TO LAW, ERRONEOUS AND UNSUSTAI NABLE ON THE FACTS OF THE ITA 1705/10 :- 3 -: 1. TDS ON LABOUR CHARGES OF ` 10,11,976 THE ITO ERRED IN DISALLOWING THE AN AMOUNT OR ` 10,11,976 UNDER SEC 40(A) (IA) FOR NOT EFFECTING TD S. 2. TDS ON SALES COMMISSION OF ` 50,200/- THE ITO ERRED IN DISALLOWING THE AN AMOUNT OR ` 50,200 UNDER SEC 40(A) (IA) FOR NOT EFFECTING TDS. 3. THE LEARNED OFFICER BELOW HAS NOT ADJUDICATED TH E BREAK UP OF THE ABOVE TWO ADDITIONS BY PUTTING THE DETAIL S BEFORE THE ASSESSEE . 4. THE LEARNED HAVE NOT FURNISHED THE BREAK UP OF THE ABOVE TWO ADDITIONS IN THE ASSESSMENT ORDER. 5. (A) THE ITO FAILED TO APPRECIATE THAT SEC 194C H AS NO APPLICATION TO THE FACTS OF THE ASSESSE'S CASE AND HENCE INVOKING THE PROVISIONS OF SEC.40(A) (IA) IS UNWARRANTED AND UNTENABLE IN LAW. (B) THE ITO FURTHER FAILED TO APPRECIATE THAT PART OF THE EMBROIDERY WORK GOT DONE FROM OTHER EMBROIDERS UNDER THE CONTROL AND SUPERVISION OF THE ASSESSEE CANNOT BE TERMED TO BE ON SUB CONTRACT BASIS AND HENCE THE PAYMENT MADE TOWARDS LABOUR. 6. THE ITO FURTHER FAILED TO APPRECIATE THAT IN TER MS OF EXECUTING THE EMBROIDERY WORK FROM THE PRINCIPAL, AMARAVATHI GARMENTS, THE OTHER EMBROIDERS ARE PART AND PARCEL OF THE ASSESSEE'S NOT RECEIVING THE LABO UR PAYMENTS AND THAT IN THE ABSENCE OF A CONTRACTUAL OBLIGATION, SEC.194C(2) CANNOT BE PUT INTO OPERATIO N AND HENCE THE DISALLOWANCE OF THE AMOUNTS IS WHOLLY UNWARRANTED. 7. THE ITO OUGHT TO HAVE SEEN THAT BUT FOR THIS HUG E DISALLOWANCE, THE INTIMATION U/S 143(1) RESULTED ON LY IN A REFUND AND HENCE THE RETURN OF THE ASSESEE STANDS INDICATED. 8. THE ITO OUGHT TO HAVE SEEN THAT CONSIDERING THIS ASPECT OF THE MATTER, THE DISALLOWANCE OF WHOLE OF THE AMOUNT IS NOT IN THE OVERALL SPIRIT OF THE STATUTE OF COLLECTING ONLY THE LEGITIMATE TAX DUE FROM THE TAX PAYER AND HENCE MAKING FURTHER DEMAND DUE TO TDS, ITA 1705/10 :- 4 -: AMOUNTS TO UNJUST ENRICHMENT AND UNDUE BURDEN ON THE ASSESSEE. 9. THE ITO, IN THE ALTERNATIVE, OUGHT TO HAVE SEEN THAT THE TDS, OF AT ALL DEDUCTIBLE ON THE PAYMENT WAS 1% OF ` 10,11,976, I.E. ` 10,120 AND THAT AT THE TIME OF FILING OF THE RETURN, THE ASSESSEE HAVING PAID AN ADVANCE TAX OF ` L,12,756 THE NON-DEDUCTION OF TDS DID NOT RESULT IN ANY LOSS TO THE REVENUE AND IS ONLY A VENIAL BRE ACH NOT WARRANTING THE HUGE DISALLOWANCE. 10. THE LEARNED ITO HAS NOT VERIFIED THE BILLS WHIC H ARE AVAILABLE. ADDITION OF ` 51,970 - DIFFERENCE IN PURCHASE ACCOUNTS 11. THE ITO ERRED IN DISALLOWING THE PURCHASE OF RS.51,970 AS BILLS NOT AVAILABLE. 12. THE BILLS ARE AUTHENTICATE AND IT IS NOT POSSIBLE T O EFFECT SALES WITHOUT PURCHASES. THE LEARNED ITO HAVING ACCEPTED THE OUGHT TO HAVE ALLOWED SALES THE PURCHASES ALSO. 13. ADDITION OF ` 11,695 - DIFFERENCE IN MISCELLANEOUS EXPENSES THE ITO ERRED IN DISALLOWING THE MISCELLANEOUS EXPENSES OF ` 11,695 AS BILLS NOT AVAILABLE AND IS WITHOUT ANY BASIS. 14. THE EXPENDITURE IS INCIDENTAL TO EARNING OF REVENUE . 15. ADDITION OF ` 13,652 - ELECTRICITY EXPENSES ELECTRICITY EXPENSES CLAIMED IS FOR BUSINESS PURPOS ES AND IS ALLOWABLE AND THE LEARNED OFFICER HAVE NOT ASSIGNED ANY REASONS FOR DISALLOWANCE. 16. NO PERSONAL EXPENDITURE IS TRACEABLE. 17. THE ITO FAILED TO APPRECIATE THE DETAILS AND M ATERIAL EVIDENCES FOR ALL THESE EXPENSES WHICH ARE AVAILABL E WITH THE ASSESSEE AND HENCE THE DISALLOWANCE OF THE SAME WITHOUT APPRECIATING THEM IS WHOLLY UNJUSTIFIE D AND NOT WARRANTED. ITA 1705/10 :- 5 -: 18. THE ITO, IN ANY EVENT, OUGHT TO HAVE CONSIDERED THE EXPLANATIONS OF THE ASSESSEE IN THE PROPER PERSPECT IVE AND ACCEPTED THE INCOME RETURNED WITHOUT MAKING THE DISALLOWANCES. 19. INTEREST U/S 234A, 234B, 244A AND 234D THE CHARGING OF INTEREST U/S 234ARS.45,994, 234B ` 58,377 244A ` 13,536 AND 234D ` 6,315 IS NOT CORRECT AND PROPER. THE ADDITIONS WERE NOT ACCEPTED AT THE TIME OF FILING OF THE RETURN. 20. THE LEARNED CIT APPEALS HAS NOT DISCUSSED THE GROUNDS RAISED BY THE APPELLANT IN THE APPEAL MEMO AND HAS OMITTED TO PASS A SPEAKING ORDER. 21. THE LEARNED ASSESSING OFFICER HAS NOT PASSED A SPEAKING ORDER AND OUGHT TO HAVE ACCEPTED THE VOUCHER PRODUCED. AND HAS FURNISHED THE DETAILS OF ADDITION FOR EACH ITEM. 22. THE ADDITION MADE IS ARBITRARY AND WITHOUT ANY LEGA L REASONINGS. 23. THE APPELLANT PRAYS THAT ADDITION MADE MAY BE DELET ED WHICH ARE VERIFIED WITH THE BOOKS AND VOUCHERS. 24. THE APPELLANT CRAVES LEARNED TO FILE ADDITIONAL GRO UNDS OR SUBMISSION AND IF NECESSARY. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE C AREFULLY GONE THROUGH THE ORDERS OF ASSESSING OFFICER AS WEL L AS THE LD. CIT(A). WE ARE UNABLE TO CULL OUT FULL AND FINAL FACTS FRO M THE ORDERS OF THE AUTHORITIES BELOW, THEREFORE, IT IS NECESSARY THAT THE ENTIRE APPEAL SHOULD BE REMITTED BACK TO THE FILE OF THE ASSESSI NG OFFICER FOR DECIDING AFRESH. ACCORDINGLY, AFTER SETTING ASIDE THE ORDERS OF THE AUTHORITIES BELOW, WE REMIT THE ENTIRE ISSUE TO THE FILE OF THE ASSESSING ITA 1705/10 :- 6 -: OFFICER WITH A DIRECTION THAT HE SHALL DECIDE EACH ISSUE DE NOVO BY PASSING A SPEAKING ORDER. NEEDLESS TO MENTION THAT THE ASSESSING OFFICER IS BOUND TO GIVE OPPORTUNITY OF HEARING TO THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT O N 05-09-2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 5 TH SEPTEMBER, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR