DCIT, New Delhi V. M/s. Power Plant Engineers Ltd., New Delhi

ITA 2028/DEL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 3638 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 05-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C P SINGH
• Assessee Lawyers: V K TULSIAN
• Keywords: Set aside
• Section: 271(1)(c); 143(3); 40(a)(ia); 194C; 201; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI F BEN CH, NEW DELHI BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, ITA NO. 2028/DEL/2017 [ASSESSMENT YEAR: 2010-11] DCIT, CIRCLE - 20(1), ROOM NO. 219, 2 ND FLOOR, C.R. BUILDING, I.P. ESTATE, NEW DELHI POWER PLANT ENGINEERS LTD., 28, NAJAFGARH ROAD, NEW DELHI PAN - AADCP3971H APPELLANT RESPONDENT APPELLANT BY S H . C.P. SINGH, ADDL. CIT RESPONDENT BY SH. V.K. TULSIAN, FCA DATE O F HEARING 2 7 /08 /2019 DATE OF PRONOUNCEMENT 27 /08 /2019 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, WITH THIS APPEAL, THE REVENUE HAS CHALLENGED THE CO RRECTNESS OF THE LD. CIT(A)-7, NEW DELHI. 2. THUS THE SOLITARY GROUND OF THE REVENUE READ AS UNDER:- ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE PENALTY OF RS. 1,18,72,790/- LEVIED UNDER SECTION 271(1)(C) WHEN THE DISALLOWANCE MADE U/S 40(A)(IA) WAS ALSO S USTAINED BY THE LD. CIT(A). 3. THE ROOTS FOR THE LEVY OF PENALTY LIE IN THE ASS ESSMENT ORDER DATED NIL FRAMED UNDER SECTION 143(3) OF THE ACT. WHILE SCRUTINIZING THE RETURN OF INCOME, THE AO FOUND 2 ITA NO.2028/DEL/2017 THAT THE ASSESSEE COMPANY HAS PAID TO M/S JINDAL PO WER LIMITED IN LIEU OF THE DEBIT NOTES RAISED BY M/S JINDAL POWER LIMITED WITH RESPE CT TO SALARY EXPENSE AND TRAVELLING EXPENSES. THE AO WAS OF THE OPINION THAT THE PAYMEN TS TO M/S JINDAL POWER LIMITED FOR CARRYING OUT THE WORK OF SUPPLYING THEIR PERSONNEL AND BEARING THEIR TRAVELLING EXPENDITURE WHILE THEY WERE ENGAGED FOR THE ASSESSEE COMPANY AM OUNTED TO CONTRACTUAL PAYMENTS FOR RENDERING CERTAIN SERVICES OF THE ASSESSEE COMP ANY. 4. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED TO T HE ASSESSEE TO EXPLAIN AS TO WHY THE PAYMENTS COULD NOT BE HELD LIABLE TO BE SUB JECTED TO THE PROVISIONS OF SECTION 194C OF THE ACT. 5. IN ITS REPLY, THE ASSESSEE STATED THAT THE ACTUA L COST TO THE COMPANY M/S JINDAL POWER LIMITED HAS BEEN REIMBURSED TO THAT COMPANY A ND THAT COMPANY HAS DULY DEDUCTED THE TAX AT SOURCE WHILE MAKING PAYMENTS TO THE CONCERNED EMPLOYEES THEREFORE, THE PROVISIONS OF SECTION 193(C) OF THE ACT DID NOT APPLY. 6. THE SUBMISSIONS DID NOT FIND ANY FAVOUR WITH THE AO WHO WAS THE FIRM BELIEF THAT PAYMENTS MADE TO JINDAL POWER LIMITED ARE COVERED W ITHIN THE MEANING OF ANY WORK AS ENVISAGED WITHIN THE PROVISIONS OF SECTION 194(C) O F THE ACT. THE AO DISALLOWED RS. 3,49,30,243/- UNDER SECTION 40(A)(IA) OF THE ACT. 7. THE QUARREL TRAVELLED UP TO THE TRIBUNAL AND THE TRIBUNAL IN ITA NO. 634/DEL/2014 VIDE ORDER DATED 4.10.2017 REMITTED THE MATTER BACK TO THE FILE OF THE AO. THE RELEVANT PART OF THE ORDER OF THE TRIBUNAL READ AS UNDER:- 22. THEREFORE IN VIEW OF THE ABOVE DECISION OF THE HON'BLE DELHI HIGH COURT WE DO NOT HAVE ANY DIFFICULTY IN ACCEPTING THE ARGUMEN T OF THE LD. AUTHORIZED REPRESENTATIVE THAT IF THE TAX HAS BEEN PAID BY THE RECIPIENT OF THE INCOME ON THE 3 ITA NO.2028/DEL/2017 INCOME IN HOLDING THE TRANSACTIONS AND NO DISALLOWA NCE SHOULD BE MADE IN THE HANDS OF THE ASSESSEE. IN VIEW OF THIS WE SET ASIDE THIS ISSUE BACK TO THE FILE OF THE LD. ASSESSING OFFICER TO ALLOW THE BENEFIT OF T HE 2ND PROVISO TO THE SECTION 40 A (IA) OF THE INCOME TAX ACT AND IF THE ASSESSEE I S ABLE TO SATISFY THE LD. ASSESSING OFFICER THAT THE RECIPIENT OF THE INCOME HAS OFFERED THE INCOME IN ITS RETURN OF INCOME ON FURNISHING THE SECTION 139 OF T HE INCOME TAX , INCORPORATED SUCH INCOME IN ITS RETURN OF INCOME , HAS PAID THE DUE TAX THEREON AND HE FURNISHES REQUISITE CERTIFICATE AS PRESCRIBED THERE IN THAT NO DISALLOWANCE BE MADE. THEREFORE, IF THE ASSESSEE WOULD LIKE TO HAVE THE BENEFIT OF THIS PARTICULAR PROVISO BY FURNISHING REQUISITE CERTIFICATE IS AN M ENTIONED IN THE PROVISIONS OF SECTION 201 OF THE INCOME TAX ACT, THE APPELLANT MAY FURNISH TO THE LD AO SAME WITHIN 60 DAYS OF THE ORDER AND THE LD. ASSESS ING OFFICER MAY CONSIDER THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH THE LAW. I N VIEW OF THIS GROUND NO. 5 OF THE APPEAL OF THE ASSESSEE IS ACCEPTED AND ALLOWED. 8. PURSUANT TO THE DIRECTIONS OF THE TRIBUNAL THE A O WHILE GIVING THE EFFECT IN HIS ORDER FRAMED UNDER SECTION 143(3) READ WITH SECTION 254 OF THE ACT DELETED THE ENTIRE ADDITIONS MADE IN THE FIRST ROUND OF LITIGATION AND ACCEPTED THE RETURNED INCOME. 9. IN THE LIGHT OF THE AFORESAID STATED FACTS, ONCE THE FOUNDATION HAS BEEN REMOVED, THE SUPERSTRUCTURE MUST FALL. SINCE THE BASIS FOR T HE LEVY OF PENALTY I.E. THE DISALLOWANCES MADE IN THE ASSESSMENT ORDER HAS BEEN REMOVED, THE PENALTY SO LEVIED DESERVES TO BE DELETED. THEREFORE, WE DECLINE TO INTERFERE WITH TH E FINDINGS OF THE LD. CIT(A). APPEAL FILED BY THE REVENUE IS DISMISSED. 10. IN THE RESULT, APPEAL BY THE REVENUE IS DISMISS ED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 27/08/ 2019. SD/- SD/- [SUSHMA CHOWLA] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DELHI; DATED: 27/08/2019. SH 4 ITA NO.2028/DEL/2017 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI DATE OF DICTATION 27/08/2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 27/08/2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEB SITE OF ITAT 29/08/2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER