ITO, Pune V. Shri Chandraknt J Mandale, Pune

ITA 1708/PUN/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93678 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-03-2015
• Assessment Year: misc
• Appeal Filed On: 17-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 143(3); 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.1708/PN/2012 (ASSESSMENT YEAR : 2008-09) INCOME TAX OFFICER, WARD 8(3), PUNE. . APPELLANT VS. SHRI CHANDRAKANT J. MANDALE, PROP. BHAGYALAXMI BUILDERS & CONTRACTORS, AT POST MANCHAR, T- AMBEGAON, PUNE. PAN : ABAPM9930C . RESPONDENT DEPARTMENT BY : SHRI RAJESH DAMOR ASSESSEE BY : SHRI SHARAD SHAH DATE OF HEARING : 02-03-2015 DATE OF PRONOUNCEMENT : 10-04-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL PREFERRED BY THE REVENUE AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DATED 28.05.2012 WHICH, IN TURN, HAS ARISEN FROM THE ORDER DATED 22.12.2010 PA SSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2008-09. 2. IN THIS APPEAL, THE SOLITARY DISPUTE IS WITH REG ARD TO DISALLOWANCE OF RS.18,23,975/- ON ACCOUNT OF PETTY CONTRACT CHARGES AND RS.13,52,950/- ON ACCOUNT OF HIRE CHARGES MADE BY THE ASSESSING OFFIC ER BY INVOKING SECTION 40(A)(IA) OF THE ACT WHICH HAS SINCE BEEN DELETED B Y THE CIT(A). 3. IN BRIEF, THE RELEVANT FACTS ARE THAT ASSESSEE I S A CIVIL CONTRACTOR ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. DUR ING THE YEAR UNDER CONSIDERATION, ASSESSEE FILED A RETURN OF INCOME DE CLARING TOTAL INCOME OF RS.9,06,137/- WHICH WAS SUBJECT TO A SCRUTINY ASSES SMENT U/S 143(3) OF THE ACT. THE ASSESSING OFFICER NOTED THAT IN THE PROFI T & LOSS ACCOUNT, ASSESSEE ITA NO.1708/PN/2012 HAD DEBITED RS.18,23,975/- AND RS.13,52,950/- ON AC COUNT OF PETTY CONTRACT CHARGES AND HIRE CHARGES RESPECTIVELY WITHOUT DEDUC TION OF TAX AT SOURCE AS PER THE REQUIREMENT OF SECTION 194C OF THE ACT AND THEREFORE HE INVOKED SECTION 40(A)(IA) OF THE ACT AND DISALLOWED AN AMOU NT OF RS.18,23,975/- AND RS.13,52,950/- ON THIS COUNT. 4. ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) AND CONTENDED THAT OUT OF RS.18,23,975/-, BEING PETTY CONTRACT CH ARGES CLAIMED ONLY RS.2,08,964/- REMAINED OUTSTANDING AS ON 31.03.2008 AND HENCE DISALLOWANCE SHOULD HAVE BEEN MADE BY THE ASSESSING OFFICER ONLY FOR THIS AMOUNT. REGARDING PAYMENT OF HIRE CHARGES, HE CONT ENDED BEFORE THE CIT(A) THAT THERE WAS NO AMOUNT OUTSTANDING IN THE BALANCE SHEET AS ON 31.03.2008, AND THEREFORE NO DISALLOWANCE WAS REQUIRED TO BE MA DE. THE CIT(A) AGREED WITH THE CONTENTIONS OF THE ASSESSEE AND BY FOLLOWI NG THE DECISION OF THE VISAKHAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ACIT, 70 DTR 81 (VISAKHAPATNAM) (S B) DIRECTED THE ASSESSING OFFICER TO DELETE THE AFORESAID IMPUGNED ADDITION. NOT BEING SATISFIED WITH THE DECISION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 5. AT THE TIME OF HEARING, BOTH THE PARTIES POINTED OUT THAT THE SIMILAR CONTROVERSY HAS BEEN DECIDED BY THE PUNE BENCH OF T HE TRIBUNAL IN THE CASE OF ITO VS. M/S GAURIMAL MAHAJAN & SONS VIDE ITA NO. 1852/PN/2012 DATED 06.01.2014 AND PLACED THE RELIANCE IN THIS REGARD. THE FOLLOWING DISCUSSION IN THE ORDER OF THE TRIBUNAL IS RELEVANT :- 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS BROUGHT TO OUR NOTICE BY BOTH THE SIDES. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON AN A MOUNT OF RS.58,81,847/- FOR WHICH THE ASSESSING OFFICER APPLYING THE PROVIS IONS OF SECTION 40(A)(IA) MADE ADDITION OF THE ABOVE AMOUNT. WE FIND THE LD. CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THE GROUN D THAT PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE SINCE NO AMOUN T IS PAYABLE AT THE END OF THE YEAR. WHILE DOING SO, HE RELIED UPON THE DECIS ION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TR ANSPORT (SUPRA). THE ITA NO.1708/PN/2012 COORDINATE BENCH IN THE CASE OF VINAY ASHWINIKUMAR JONEJA (SUPRA) HAS ALREADY TAKEN A VIEW THAT PROVISIONS OF SECTION 40( A)(IA) ARE APPLICABLE EVEN IF NO AMOUNT IS PAYABLE AT THE END OF THE YEAR. THERE FORE, THE ORDER OF THE CIT(A) HAS TO BE REVERSED. 6. AFTER HAVING REVERSED THE ORDER OF THE CIT(A), T HE TRIBUNAL IN THE CASE OF M/S GAURIMAL MAHAJAN & SONS (SUPRA) DEALT WITH A NOTHER ARGUMENT OF THE ASSESSEE TO THE EFFECT THAT THE SECOND PROVISO TO S ECTION 40(A)(IA) OF THE ACT INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01.04.2013 BE APPLIED RETROSPECTIVELY. NOTABLY, THE SAID SECOND PROVISO TO SECTION 40(A)(I A) OF THE ACT PRESCRIBES THAT THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT COULD NOT BE MADE IF AN ASSESSEE IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE F IRST PROVISO TO SECTION 201(1) OF THE ACT. THE TRIBUNAL DEALT WITH THE PLE A OF THE ASSESSEE THAT SUCH AMENDMENT WAS INTENDED TO ELIMINATE UNDUE HARDSHIPS TO THE TAXPAYERS AND THEREFORE IT SHOULD BE HELD AS RETROSPECTIVE IN NAT URE. ON THIS ASPECT, THE TRIBUNAL IN THE CASE OF M/S GAURIMAL MAHAJAN & SONS (SUPRA) REFERRED TO THE DECISION OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF ANTONY D. MUNDACKAL VS. ACIT VIDE ITA NO.38/COCH/2013 DATED 2 9.11.2013 AND HELD AS UNDER :- 8.2 WE FIND SOME FORCE IN THE ABOVE ARGUMENT OF TH E LD. COUNSEL FOR THE ASSESSEE. WE FIND THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF ANTONY D. MUNDACKAL (SUPRA) RELIED ON BY LD. COUNSEL FOR THE ASSESSEE, HAD AN OCCASION TO DECIDE AN ISSUE IN THE LIGHT OF THE ABO VE ARGUMENT AND HAS RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFF ICER WITH CERTAIN DIRECTIONS. THE RELEVANT OBSERVATION OF THE TRIBUNAL AT PARA 7 OF THE ORDER READ AS UNDER: 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFU LLY PERUSED THE RECORD. ACCORDING TO THE ASSESSEE, THERE IS NO WRIT TEN CONTRACT BETWEEN HIM AND THE PERSONS DOING POLISHING WORKS. ACCORDINGLY, THE ASSESSEE HAS CONTENDED BEFORE US THAT THE PROVISION S OF SEC. 194C SHALL NOT APPLY TO THE POLISHING CHARGES. HOWEVER, WE NOTICE THAT THE ASSESSING OFFICER HAS GIVEN A CLEAR FINDING THAT ES SENTIAL INGREDIENTS OF A CONTRACT ARE VERY MUCH AVAILABLE IN THE POLISHING WORKS ENTRUSTED BY THE ASSESSEE. FURTHER WE NOTICE THAT THE CBDT, VIDE CIRCULAR NO.433 DATED 25-09-1985 (1986)(157 ITR ST. 27) HAS CLARIFI ED THAT THE PROVISIONS OF SEC. 194C ARE WIDE ENOUGH TO COVER OR AL CONTRACTS ALSO. A CONTRACT IS NORMALLY REDUCED IN WRITING IN ORDER TO MAKE CLEAR THE TERMS AND CONDITIONS, OBLIGATIONS OF THE PARTIES TO THE CONTRACT ETC. IF THE CONDITIONS OF CONTRACT ARE OTHERWISE UNDERSTOOD BY THE PARTIES, IN VIEW OF THE REPEATED TRANSACTIONS, IN OUR VIEW, THE ABSENCE OF A WRITTEN CONTRACT WOULD NOT MAKE ANY DIFFERENCE. IN THE INST ANT CASE, THE ASSESSEE IS REPEATEDLY GIVEN WORKS TO THE POLISHING PEOPLE AND HENCE THE TERMS AND CONDITIONS OF THE WORK WOULD BE CLEAR LY UNDERSTOOD BY BOTH THE PARTIES. ACCORDINGLY, WE REJECT THIS CONTE NTION OF THE ASSESSEE ITA NO.1708/PN/2012 AND HOLD THAT THE PROVISIONS OF SEC. 194C SHALL APP LY TO THE POLISHING WORKS GIVEN BY THE ASSESSEE. 7.1 ACCORDING TO LD A.R, THE ASSESSEE HAS ACTED AS A CONDUIT PIPE IN CONNECTION WITH THE POLISHING WORKS BETWEEN THE CUSTOMERS AND THE PERSON DOING POLISHING JOB. ACCORDINGLY, IT WAS SUB MITTED THAT THERE IS NO PROFIT ELEMENT IN THE SAID TRANSACTIONS. THE LD A.R FURTHER SUBMITTED THAT THE ASSESSEE HAS INCLUDED THE COST OF POLISHIN G WORKS IN THE SALE VALUE OF ALUMINIUM EXTRUSIONS, WITHOUT KNOWING TAX IMPLICATIONS. HOWEVER, WE NOTICE THAT THE ASSESSEE DID NOT FURNIS H ANY PROOF TO SUBSTANTIATE THE ABOVE SAID CLAIMS. THE ASSESSEE, B EING A DEALER IN ALUMINIUM EXTRUSIONS, HAS ONLY SUPPLIED THE PRODUCT S AFTER CARRYING OUT THE POLISHING WORKS ACCORDING TO THE TASTE AND REQU IREMENT OF CUSTOMERS. IT IS ONLY ONE OF THE MANY BUSINESS TECH NIQUES NORMALLY ADOPTED BY A BUSINESS MAN TO IMPROVE HIS SALES, SIN CE IT WILL BE VERY DIFFICULT FOR CUSTOMERS TO IDENTIFY THE POLISHING P EOPLE AND GET THE WORK DONE BY THEMSELVES. HENCE, WE ARE OF THE VIEW THAT IT MAY NOT BE CORRECT TO ARGUE THAT THE CONTRACT EXISTED BETWEEN THE CUSTOMERS AND THE POLISHING PEOPLE. IN FACT, THE CUSTOMER MAY NOT HAVE ANY CONTACT WITH THE POLISHING PEOPLE IN THIS TYPE OF TRANSACTI ONS. HENCE, IT IS HARD TO BELIEVE THE CLAIM OF THE ASSESSEE THAT HE HAS AC TED AS MERE CONDUIT PIPE BETWEEN THE CUSTOMERS AND POLISHING PEOPLE, AC CORDINGLY, THE CLAIM THAT THE ASSESSEE STANDS IN A FIDUCIARY CAPAC ITY IS ALSO LIABLE TO BE REJECTED. IN THIS KIND OF FACTUAL SITUATION, IN OUR VIEW, THE EXISTENCE OR ABSENCE OF PROFIT ELEMENT IN THE POLISHING WORKS DOES NOT MAKE ANY DIFFERENCE. 7.2 THE LD COUNSEL, BY PLACING RELIANCE ON THE DEC ISION OF SPECIAL BENCH IN THE CASE OF MERYLINE SHIPPING AND TRANSPOR TS (SUPRA) CONTENDED THAT THE PROVISIONS OF SEC. 40(A)(IA) SHA LL APPLY ONLY TO AMOUNT PAYABLE AND NOT TO THE AMOUNT PAID. HOWEVER, THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIKANDAR KHAN N TUNVAR (357 ITR 312) AND THE HON'BLE CALCUTTA HIGH COURT I N THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (ITAT 20 OF 2013) HAV E HELD THAT THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF MERYLINE SHIPPING & TRANSPORTS IS NOT A GOOD LAW. THE LD A.R , HOWEVER, PLACED RELIANCE ON THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING SERVICES (357 ITR 642). ON A CAREFU L PERUSAL OF THE DECISION GIVEN BY HON'BLE ALLAHABAD HIGH COURT, WE NOTICE THAT THE HIGH COURT HAS DECIDED THE ISSUE REFERRED TO IT ON A DIFFERENT FOOTING AND HAS MADE A PASSING COMMENT ABOUT THE DECISION R ENDERED BY THE SPECIAL BENCH. THUS, THE RATIO OF THE SAID DECISION IS DIFFERENT FROM THAT RENDERED IN THE CASE OF MERYLINE SHIPPING AND TRANS PORTS BY THE SPECIAL BENCH. HENCE, WE ARE INCLINED TO REJECT THE CONTENTIONS OF THE ASSESSEE ON THIS POINT ALSO. 7.3 THE ASSESSEE PLACED RELIANCE ON THE DECISION O F HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCO-COLA BE VERAGES LTD (SUPRA) IN ORDER TO CONTEND THAT THE REVENUE IS NOT ENTITLED TO RECOVER TAXES, IF THE RECIPIENT HAS DECLARED THE PAYMENTS I N HIS RETURN OF INCOME. WE NOTICE THAT THE ABOVE SAID DECISION WAS RENDERED IN THE CONTEXT OF THE PROVISIONS OF SEC. 201(1) AND HENCE, WE ARE OF THE VIEW THAT THE RATIO OF THE SAID DECISION CANNOT BE APPLI ED TO THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT, 7.4 THE LAST CONTENTION OF THE ASSESSEE IS THAT TH E SECOND PROVISO TO SEC, 40(A)(IA) OF THE ACT, INSERTED BY THE FINAN CE ACT, 2012 WITH EFFECT FROM 1.4.2013 IS CLARIFICATORY IN NATURE AND HENCE THE BENEFIT OF THE SAME SHOULD BE APPLIED RETROSPECTIVELY. HOWEVER , THE CORRECTNESS OF THIS CONTENTION HAS NOT BEEN EXAMINED BY THE TAX AUTHORITIES. ITA NO.1708/PN/2012 HENCE, IN THE INTEREST OF NATURAL JUSTICE, WE ARE O F THE VIEW THAT THIS CONTENTION OF THE ASSESSEE REQUIRES EXAMINATION AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE MODIFY THE ORDE R OF THE LD.CIT(A) AND SET ASIDE THIS GROUND TO THE FILE OF THE ASSESS ING OFFICER WITH THE DIRECTION TO EXAMINE THE ABOVE SAID CONTENTION OF T HE ASSESSEE AND DECIDE THE SAME IN ACCORDANCE WITH LAW, AFTER AFFOR DING NECESSARY OPPORTUNITY OF BEING HEARD. WE MAKE IT CLEAR THAT WE HAVE, IN EFFECT, REJECTED ALL THE CONTENTIONS OF THE ASSESSEE EXCEPT THE GROUND RELATING TO APPLICABILITY OF THE SECOND PROVISO TO SEC.40(A) (IA) OF THE ACT TO THE YEAR UNDER CONSIDERATION. 8.3 SINCE THE ABOVE ARGUMENTS ARE BEING ADVANCED BE FORE THE TRIBUNAL FOR THE FIRST TIME AND THE CORRECTNESS OF THE CONTENTIO N HAS NOT BEEN EXAMINED BY THE TAX AUTHORITIES, THEREFORE, RESPECTFULLY FOLLOW ING THE DECISION OF THE COCHIN BENCH OF THE TRIBUNAL CITED (SUPRA) AND IN THE INTE REST OF JUSTICE, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WIT H A DIRECTION TO EXAMINE THE ABOVE CONTENTION OF THE ASSESSEE AND DECIDE THE ISS UE AFRESH AND IN ACCORDANCE WITH LAW. NEEDLESS TO SAY, THE ASSESSIN G OFFICER SHALL GIVE DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOL D AND DIRECT ACCORDINGLY. 7. FOLLOWING THE AFORESAID DECISION IN THE PRESENT CASE TOO, WE RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO ADJUDICATE THE ISSUE AFRESH IN ACCORDANCE WITH THE DIRECTIONS OF THE TRIBUNAL IN T HE CASE OF M/S GAURIMAL MAHAJAN & SONS (SUPRA) AND AS PER LAW. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 10 TH APRIL, 2015. SD/- SD /- (SUSHMA CHOWLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 10 TH APRIL, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE