The ITO,GNR Ward-1, Gandhinagar V. Shri Babuji Laxman Dabhi, Gandhinagar

ITA 2040/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1665 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 22-04-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 10-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS SOMUGYAN PAL
• Assessee Lawyers: PRITESH L SHAH
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 142(1); 194C; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: S H RI ANIL CHATURVEDI , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER THE ITO, GNR WARD - 1, GANDHINAGAR (APPELLANT) VS SHRI BABUJI LAXMAN DABHI, H - 2, HARIHAR FLAT, SECTOR 22, GANDHINAGAR - 382022 PAN: ACLPD7026N (RESPONDENT) REVENUE BY : MRS. SOMUGYAN PAL , SR. D . R. ASSESSEE BY: S H RI PRITESH L. SHAH , A.R. DATE OF HEARING : 22 - 04 - 2 016 DATE OF PRONOUNCEMENT : 06 - 05 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS REVENUE S A PPEAL FOR A.Y. 20 06 - 07 , AR IS ES FROM ORDER OF THE CIT(A), GANDHINAGAR DATED 25 - 06 - 2012 IN APPEAL NO. CIT(A)/GNR/219/2011 - 12 , IN PROCEEDINGS UNDER SECTION 147 R.W.S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 2040 / A HD/20 12 A SSESSMENT YEAR 200 6 - 07 I.T.A NO . 2040 /AHD/20 12 A.Y. 2006 - 07 PAGE NO ITO VS. SHRI BABUJI LAXMAN DABHI 2 2. THE REVENUE S TWIN SUBSTANTIVE GROUNDS CHALLENGE THE LOWER APPELLATE ORDER HOLDING THE IMPUGNED REOPENING AS INVALID THEREBY DELETING SEC TION 40(A )( I A) DISALLOWANCE OF RS. 86,34,086/ - . 3. WE COME TO RELEVANT FACTS FIRST . THE ASSESSE E - INDIVIDUAL IS ENGAGED IN CONSTRUCTION WORK THROU GH HIS PROPRIETARY CONCERN. HE FILED RETURN ON 31 - 12 - 2006 STATING INCOME OF RS. 6,40,490/ - . THE SAME WAS SUMMARILY PROCESSED . THE ASSESSING OFFICER THEREAFTER TOOK UP SCRUTINY. HE COMPLETED A REGULAR ASSESSMENT O N 11 - 12 - 2008 ASSESSING TAXABLE I N CO M E OF RS. 6,72,440/ - . FIRST ROUND OF ASSESSMENT APPEARS TO HAVE ATTAINED FINALITY AT THIS STAGE. 4. IT TRANSPIRES FROM THE CASE FILE THAT THE ASSESSING OFFICER THEREAFTER FORMED REASON TO BELIEVE THAT ASSESSEE S INCOME LIABLE TO BE ASSESSED HAD ESCAPED ASSES SMENT . HE ISSUED SECTION 148 NOTICE DATED 07 - 03 - 2011 FOR THE FOLLOWING REASONS: - 2. AS REQUIRED, THE REASONS FOR REOPENING OF ASSESSMENT U/S. 147 IS AS MENTIONED BELOW: 'DURING TH E PREVIOUS YEAR RELEVANT TO A.Y. 2006 - 07, THE TURNOVER OF T HE ASSESSEE W A S RS.127,56,584/ - (CONTRACT RECEIPT AS PER P&L A/C) OUT OF WHICH CONTRA CT RECEIPTS AMOUNTING TO RS.1,26,56,584/ - W AS COVERED BY THE TDS CERTIFICATES ISSUED BY EXECUTIVE ENG INEER, CA PITAL PROJECT 4,. GANDHINAGAR AND DURING THE PERIOD BETWEEN 1 /4/2005 AND 31/3/06. IT WAS NOTICED THAT THE A SSESSEE HAS NOT SHOWN ANY CLOSING STOCK OR WORK - IN - PROGRESS IN THEIR ACCOUNTS (P& L A S WELL AS BA LANCE SHEET) THOUGH THE ASSESSEE HAD O NGOING WORKS. HOWEVER, IN THE ASSET SIDE OF THE BALANCE SHEET, AN AMOUNT O F RS.36,88,466/ - HAS BEEN SHOWN AS RECEIVABLE(SU NDRY DEBTOR) FROM THE EXECUTIVE ENG INEER, CAPITAL PROJECT, GNNDHINAGAR. SINCE THE ASSESSEE WAS FOLLOWING 'MERCANTILE' SYSTEM OF ACCOUNTING, I.T.A NO . 2040 /AHD/20 12 A.Y. 2006 - 07 PAGE NO ITO VS. SHRI BABUJI LAXMAN DABHI 3 AN AMOUNT OF RS.36,88,466/ - WAS ALSO REQUIRED TO BE INCLUDED IN T HE TOTAL RECEIPTS AS THE SAME WAS ACCRUED. IT WAS ALSO NOTIC ED THAT US PER SECTION 40(A)(IA) OF THE ACT, 1961 ANY PAYMENTS I.E. INTEREST, COMMISSION, PROFESSIONAL SERVICE, FEES, OR AMOUNTS PAYABLE TO CONTRACTOR OR SUB CONTRACTOR FOR CARRYING OUT ANY WORK (I NCLUDING SUPPLY OF LABOUR FOR CARYING OUT ANY WORK). TDS IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XV II B. SUCH PAYMENT WILL NOT BE ALLOWED AS A DEDUCTION IF TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE PREVIOUS YE AR, OR IN THE SU BSEQUENT YEAR BEFORE EX PIRY OF THE TIME PRESCRIBED U/S. 200(1) OF THE ACT. IT WAS OBSERVED FROM RECORD THAT DURING THE PREVIOUS YEAR R ELEVANT TO A.Y.2006 - 07, THE TURNOVER OF THE A SSESSEE WAS RS.127,56,5844/ - AND THE ASSESSEE HAD MADE 'JOB WORK PAYMENTS TO SUB - CONTRACTORS AMOUNTING TO RS,86,34,086/ - . AS PER SECTION 194C(2) OF THE ACT, TDS WAS DEDUCTIBLE FROM TH E ABOVE PAYMENTS. HO WEVER, THE AUDITORS HAVE STATED IN THE CERTIFIC ATE IN FORM 3CD THAT NO T DS HAS BEEN DEDUCTED BY THE ASSESSEE DURING THE PREVI OUS YEAR RELEVANT TO A .Y .2006 - 07. SINCE THE ASSESSEE HAD MADE THE ABOVE PAYMENTS WITHOUT DEDUCTING TAX THERE FROM, THESE EXPENSES WE RE REQUIRED TO BE DISALLOWED AS PER SECTI ON 40(A )(II). THE FAILURE TO DEDUCT TA X AT SOURCE RESULTED IN UNDER ASSESSMENT OF IN COME AMOUNTING TO RS.86,34,086/ .' YOU ARE REQUESTED TO FURNISH THE DETAILS REGARDING THE ABOVE MATTER ALONGWITH DOCUMENTARY EVIDENCES BY 23 .11.2011 , FAILING WHICH THE ASSESSME NT WILL BE FINALIZED ON THE BASI S OF THE RECORDS AVAILABLE ON MERITS. 5. B OTH PARTIES INFORM US THAT THE INSTANT APPEAL DOES NOT RAISE ANY ISSUE QUA FORMER REASON OF REOPEN ING. THE ASSESSEE HAD PAID THE IMPUGNED AMOUNT OF RS. 86,34,086/ - FOR JOB WORK PAYMENT TO SUB - CONTRACTORS WITHOUT DEDUCTING TDS. THE ASSESSING OFFICER IN VOK ED THE IMPUGNED DISALLOWANCE THEREUPON U/S. 40(A )( I A) BY CONCLUDING THAT THESE PAYMENTS OUGHT TO HAVE BEEN SUBJECTED TO TDS DEDUCTION U/S. 194C(2) OF THE ACT. I.T.A NO . 2040 /AHD/20 12 A.Y. 2006 - 07 PAGE NO ITO VS. SHRI BABUJI LAXMAN DABHI 4 6. THE ASSESSEE PREFERRED APPEAL. HIS FIRST GROUND CHALLENGED VALIDITY OF REOPENING BY TERMING IT AS MERE CHANGE OF OPINION. HE CONTENDED ON MERITS T HAT NON E OF THE PAYMENTS MADE TO SUB - CONTRACTORS EXCEEDED SPECIFIED LIMIT OF RS. 50,000/ - IN ANY OF THE PAYEES CASE. THE C IT(A) ACCEPTS BOTH THESE CONTENTIONS AS UNDER: - 7. NOW, COMING TO THE FIRS T GROUND OF APPEAL WHICH IS AGAINST VALIDITY OF PASSING REASSESSMENT ORDER U/S 147 RW 143(3). THE APPELLANT HAS BASICALLY DISPUTED THE REOPENING ON THE FOLLOWING GROUNDS: I) THE RELEVANT ISSUES WERE CONSIDERED AND VERIFIED BY THE THEN AO IN THE REG ULAR ASSESSMENT PROCEEDINGS AND NO ADVERSE VIEW WAS TAKEN. THIS IS A CLEAR CASE OF CHANGE OF OPINION. II) THE CASE HAS BEEN REOPENED NOT ON LOGICAL BELIEF BUT ON THE BASIS OF PRESUMPTIONS AND SURMISES WHICH ARE NOT TRUE. I HAVE GONE THROUGH THE REL EVANT FACTS OF THE CASE, THE REASONS RECORDED FOR REOPENING, THE REGULAR ASSESSMENT ORDER PASSED U/S 143(3 ), THE AUDIT REPORT FILED WITH THE RETURN, THE REASSESSMEN T ORDER, THE SUBMISSIONS OF THE ASSESSEE AND THE LAW RELATED TO THE ISSUE. THE REASONS REC ORDED, AS REPRODUCED EARLIER IN PARA.3.1. THE REOPENING IS WITHIN 4 YEARS OF THE END OF THE ASSESSMENT YEAR IN QUESTION AND THERE IS NO REQUIREMENT THAT THERE SHOULD BE FAILURE OF THE ASSESSEE TO DISCLOSE TRUE AND FULL MATERIAL FACTS, BEFORE REOPENING. THE CONTENTIONS OF THE ASSESSEE ON THIS COUNT ARE THEREFORE REJECTED. THE AO HAS FORMED HIS BELIEF THAT INCOME HAS ESCAPED ASSESSMENT ON TWO COUNTS. THE FIRST COUNT IS RELATED TO THE SECOND GROUND OF APPEAL REGARDING ADDITION OF RS.36,88,466/ - BASED ON RECEI VABLE SHOWN IN THE BALANCE SHEET. THE ISSUE HAS BEEN DISCUSSED WHILE DECIDING THE GROUND IN PARA.6, ABOVE. I HAVE ALREADY HELD THAT THE BELIEF OF THE AO ON THIS COUNT IS NOT AN HONEST BELIEF AND THE ADDITION IS BASED ON ILLOGICAL CONJECTURES I.T.A NO . 2040 /AHD/20 12 A.Y. 2006 - 07 PAGE NO ITO VS. SHRI BABUJI LAXMAN DABHI 5 AND INCOMPLETE UNDERSTANDING OF ACCOUNTANCY TO SAY THE LEAST. CIRCUMSTANCES MUST EXIST AND CAN'T BE DEEMED TO EXIST AND BELIEF SHOULD BE HONEST AND NOT BASED ON SUSPICION, GOSSIP OR CONJECTURE; EAST WEST COMMERCIAL CO LTD 128 ITR 326 (CAL). IN THE LIGHT OF THESE FACTS A ND CIRCUMSTANCES, THE REOPENING CANNOT BE HELD VALID ON THE BASIS OF REASON RECORDED OF THIS PART OF INCOME HAVING ESCAPED ASSESSMENT. THE SECOND COUNT IS REGARDING THE AO'S BELIEF THAT THE EXPENSES RELATED TO JOBWORK PAYMENTS AMOUNTING TO RS.86,34,086/ - HAVE NOT BEEN SUBJECTED TO TDS AND THEREFORE, THE EXPENSE WERE REQUIRED TO BE DISALLOWED AS PER SECTION 40A(IA) (SIC). THE ORIGINAL ASSESSMENT WAS FRAMED UNDER SECTION 143(3). THE AO HAS CALLED FOR THE DETAILS OF THE VERY EXPENSES (QUESTIONED WHILE REOPENI NG] THE CASE AT THE TIME OF REGULAR ASSESSMENT PROCEEDINGS FOR ORDER U/S 143(3) [QUERY NO. 10 OF LETTER ISSUED U/S 142(1)] DATED 27 - 07 - 2008 AND ALSO ASKED FOR THE DETAIL OF THE AMOUNTS OUTSTANDING UNDER T HIS HEAD AMOUNTING TO RS.26,93,500/ - [QUERY NO. 15 O F LETTER ISSUED U/S 142(1)]. HE HAD ALSO COMMENTED IN THE ASSESSMENT ORDER THAT THESE HAVE BEEN VERIFIED. THE FOLLOWING COMMENTS / OBSERVATIONS MADE IN THE ASSESSMENT ORDER MAKE IT APPARENT THAT THE EXPENSES HAVE BEEN EXAMINED IN THE ORIGINAL PROCEEDINGS: > DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WRITTEN EXPLANATIONS HAVE BEEN FURNISHED AND BOOKS OF ACCOUNTS/BILLS/ VOUCHERS/FOR EXPENSES HAVE BEEN PRODUCED FOR VERIFICATION AND THE SAME HAVE BEEN PERUSED. (PARA.2, PAGE - 1 OF THE ASSESSMENT ORDER) > THE SUBMISSIONS AND DETAILS FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAVE BEEN EXAMINED IN VIEW OF VARIOUS ISSUES RAISED AND THE RELEVANT FACTS AND CIRCUMSTANCES HAVE BEEN TAKEN INTO CONSIDERATION (PARA.3, PAGE - 1 & 2 OF THE ASSESSMENT ORDER) AS FAR AS THE AUDIT REPORT IN FORM 3CD AND COMMENTS IN COL.27 READ TOGETHER IN SUB - COLUMN (A) & (B) ARE CONCERNED, THE COMMENTS ARE NOT VERY SPECIFIC. IF THERE WAS IN FACT SOME INFRINGEMENT OF TDS PROVISION AS PER LAW THEN THE DETAILS WAS REQUIRED TO BE GIVEN IN COLUMN 27(B), WHICH HE HAS NOT GIVEN. READ WITH THE CONSIDERATION OF THE VERY EXPENSES BY THE AO IN THE V ORIGINAL ASSESSMENT, AS DISCUSSED ABOVE, IT IS BUT APPARENT THAT THE I.T.A NO . 2040 /AHD/20 12 A.Y. 2006 - 07 PAGE NO ITO VS. SHRI BABUJI LAXMAN DABHI 6 ISSUE HAS BEEN CONSIDERED AND DECIDED IN FAVOUR OF THE APPELLANT IN THE REGULAR ASSESSMENT PROCEEDINGS. IN LIGHT OF THE ABOVE, IT IS CLEAR THAT THE EXPENSES HAVE BEEN CONSIDERED IN THE ORIGINAL ASSESSM ENT ALSO AND THE REOPENING IS ME RE CHANGE OF OPINION AND IS NOT LEGAL [KELVINATOR INDIA LTD (SC) 321 ITR 561] THEREFORE , THE REOPENING IS HELD INVALID ON THE FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE . THE REOPENING IS HELD BAD IN LAW. THE RE - ASSESSMENT PROCEEDINGS ARE THEREFORE DIRECTED TO BE ANNULLED. 8. GROUND NO. 3 IS ON THE MERITS OF THE DISALLOWANCE U/S 40A(IA). T HE DISALLOWANCE DEPENDS ON WHETHER THE PAYMENTS ARE ACTUALLY TO THE PERSONS AS CLAIMED BY THE ASSESSEE OR NOT. EVEN IF FOR ARGUMENT SAKE, IF THE EXPENSES ARE NOT HELD VERIFIABLE; FOR DISALLOWANCE U/S 40(A)(IA) IT REQUIRES TO BE PROVED THAT THE PAYMENTS/PAY ABLES TO SOME OTHER PERSONS WAS ABOVE RS.50,000/ - EACH. AS THE RE - OPENING OF THE CASE AND THEREFORE THE SUBSEQUENT ASSESSMENT ARE HELD INVALID, THE ISSUE THEREFORE DOES NOT REQUIRE SEPARATE ADJUDICATION AND IS DECIDED AS SUCH. THIS LEAVES THE REVENUE AG GRIEVED. 7. WE HAVE HEARD BOTH THE PARTIES. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY ARGUES IN FAVOUR OF THE ASSESSING OFFICER S ACTION IN REOPENING THE REGULAR ASSESS MENT FRAMED IN ASSESSE E S CASE RESULTING IN SECTION 40(A )( I A) OF RS. 86,34,086/ - MA DE ON SUB - CONTRACTORS PAYMENTS BECAUSE OF HIS FAILURE IN DEDUCTING TDS. THE ASSESSEE SUPPORTS THE CIT(A) S ORDER. HE TAKES US TO PAGE 55 OF PAPER BOOK CONTAINING ASSESSING OFFICER S NOTICE U/S. 142(1) DATED 21 - 07 - 2008 SEEKING SPECIFIC DETAILS OF THESE PA YMENTS AT SERIAL NO. 10 ALONG WITH DOCUMENTARY EVIDENCE. THIS IS FO LLOWED BY HIS OBSERVATIONS IN ASSESSMENT FRAMED ON 11 - 12 - 2008 THAT THE ABOVE I.T.A NO . 2040 /AHD/20 12 A.Y. 2006 - 07 PAGE NO ITO VS. SHRI BABUJI LAXMAN DABHI 7 STATED NOTICE AS WELL AS ASSESSEE S EXPLANATION HAD BEEN PRODUCED FOR VERIFICATION AND THE SAME STOOD PERUSED. IT IS EVIDENT TO US THAT ASSESSEE S P & L ACCOUNT AT PAGE 75 OF THE PAPER BOOK AS WELL AS ALL PAYMENTS INSTANCES FORM PART OF THE CASE FILE AT PAGES 79 TO 165 OF THE PAPER BOOK. THE REVENUE FAILS TO HIGHLIGHT EVEN A SINGLE CASE INVOLVING PAYMENT EXCEEDIN G THE THRESHOLD PECUNIARY LIMIT OF RS. 50,000/ - U/S. 194C(5) PROVISO OF THE ACT. WE HOLD IN THESE FACTS AND CIRCUMSTANCES THAT THE REVENUE S CONTENTIONS IN SUPPORT OF BOTH OF ITS SUBSTANTIVE GROUNDS ARE DEVOID OF MERITS. WE REITERATE OUR FINDINGS HEREINA BOVE THAT THE ASSESSING OFFICER HAD CALLED FOR SPECIFIC D ETAILS, ASSESSEE FI L E D THE SAME FOLLOWED BY ASSESSMENT ORDER NOTING THAT THE ASSESSING AUTHORITY HAD PERUSED ALL THE MATERIAL IN RECORD. WE ARE OF THE OPINION THAT THE IMPUGNED REOPENING ON THIS TDS ISSUE AMOUNTS TO CHANGE OF OPINION NOT SUSTAINABLE AS PER HON BLE APEX COURT DECISION IN KALVENATOR S CASE 320 ITR 561 (SC). COUPLED WITH THIS, THE REVENUE IS UNABLE TO MAKE OUT A CASE IN SUPPORT OF INVOKING TDS PROVISION U/S. 194C OF THE ACT (SUPRA). W E AFFIRM CIT(A) S ORDER ON VALIDITY OF IMPUGNED REOPENING AS WELL AS MERITS. THE REVENUE S TWO SUBSTANTIVE GROUNDS RAISED IN THE APPEALS FAILS. 8. THIS REVENUE S APPEAL IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 06 - 05 - 201 6 SD/ - SD/ - ( ANIL CHATURVEDI ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 06 /05 /2016 I.T.A NO . 2040 /AHD/20 12 A.Y. 2006 - 07 PAGE NO ITO VS. SHRI BABUJI LAXMAN DABHI 8 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,