M/s. M.B. Shyani & Co., Ahmedabad V. The Income Tax Officer, Ward-5(3)(1), Ahmedabad

ITA 2171/AHD/2016

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5736 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 19-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P M PATEL
• Keywords: Rejection of books of accounts; Business income; Depreciation; TDS; Set aside
• Section: 40A(3); 143(3); 40(a)(ia); 194C; 37; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER ./ ITA NO.2171/AHD/2016 ( / ASSESSMENT YEAR : 2008-09) M/S. M.B. SHYANI & CO. 16, SANJIVBAUG SOCIETY NR.SANJIVANI HOSPITAL NEW SHARDA MANDIR ROAD PALDI, AHMEDABAD 380 007 / VS. THE INCOME TAX OFFICER WARD-5(3)(1) AHMEDABAD ./ ./ PAN/GIR NO. : AACFM 4772 D ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI P.M. PATEL, AR / RESPONDENT BY : SHRI VINOD TANWANI, SR.DR / DATE OF HEARING 01/11/2018 !'# / DATE OF PRONOUNCEMENT 03/12/2018 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS)5, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)-5 /ITO, WD- 5(3)(1)/129/2015-16 DATED 01.06.2016 ARISING IN TH E ASSESSMENT ORDER PASSED UNDER S.143(3) R.W.S.147 OF THE INCOME TAX A CT, 1961(HEREINAFTER REFERRED TO AS 'THE ACT') DATED 27.03.2015 RELEVANT TO ASSESSMENT YEAR (AY) 2008-09. ITA NO.2171/AHD/2016 M/S.M.B.SHYANI & CO. VS.ITO ASS T.YEAR 2008-09 - 2 - 2. THE ONLY ISSUE RAISED BY THE ASSESSEE TO THIS A PPEAL IS THAT THE LD. CIT(A) HAS ERRED IN MAKING THE DISALLOWANCE OF RS. 1,10,26,087/- FOR LABOUR EXPENSES ON ACCOUNT OF NON-DEDUCTION OF TDS. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IN TH E PRESENT CASE IS A PARTNERSHIP-FIRM AND ENGAGED IN THE BUSINESS OF CIV IL CONSTRUCTION. THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS OBSERVED THAT FINANCIAL STATEMENTS OF THE ASSESSEE ARE NOT AUDITE D AS REQUIRED UNDER THE PROVISIONS OF SECTION 44AB OF THE ACT. ACCORDINGLY , THE ASSESSING OFFICER DID NOT BELIEVE THE BOOK RESULTS SHOWN BY T HE ASSESSEE. THUS, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS AN D ESTIMATED THE PROFIT AT THE RATE OF 10% OF THE GROSS RECEIPTS AMOUNTING TO RS.19,28,956/- ONLY. 3. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAD CLAIMED LABOUR EXPENSES AMOUNTING TO RS.1,10,26,087 /- WITHOUT DEDUCTING THE TDS U/S 194C OF THE ACT. THEREFORE, VIDE ORDER SHEET ENTRY DATED 27.3.2015, THE ASSESSEE WAS SHOW-CAUSED AS TO WHY THE TDS HAS NOT BEEN MADE ON THIS EXPENSES. 4. IN COMPLIANCE TO IT, THE ASSESSEE CLAIMED THAT T HE PAYMENT TO THE LABOUR WAS NOT EXCEEDING RS.20,000/-. THEREFORE, TH ERE IS NO QUESTION OF DEDUCTING TDS U/S 194C OF THE ACT. HOWEVER, THE AS SESSING OFFICER DISAGREED WITH THE SUBMISSION OF THE ASSESSEE AND M ADE THE DISALLOWANCE OF RS.1,10,26,087/- ON ACCOUNT OF NON-DEDUCTION OF TDS. THUS, THE AMOUNT WAS DISALLOWED AND ADDED BACK TO THE TOTAL I NCOME OF THE ASSESSEE. ITA NO.2171/AHD/2016 M/S.M.B.SHYANI & CO. VS.ITO ASS T.YEAR 2008-09 - 3 - 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE LD. CIT(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT O NCE THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED, THEN THERE CANNOT BE A NY DISALLOWANCE ON ACCOUNT OF NON-DEDUCTION OF TDS U/S 194C OF THE ACT . 6. THE ASSESSEE ALSO CLAIMED THAT IN NONE OF THE CA SE THE PAYMENT EXCEEDED RS.20,000/-. ACCORDINGLY NO LIABILITY FOR DEDUCTION OF TDS U/S 194C OF THE ACT ARISES UPON THE ASSESSEE. THE ASSE SSEE BEFORE THE LD. CIT(A) RELIED ON CERTAIN ORDERS WHICH ARE EXTRACTED ON PAGE NOS.7 & 8 OF THE LD. CIT(A)S ORDER. HOWEVER, LD. CIT(A) DISREG ARDED THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ORDER OF THE ASSE SSING OFFICER BY OBSERVING AS UNDER:- 5.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND S UBMISSION MADE BY THE APPELLANT. VIDE GROUND NOS.6 & 7 THE APPELLANT HAS OBJECTED THE DISALLOWANCE OF LABOUR EXPENSES OF RS.1,10,26,087/- U/S.40(A)(IA ) OF THE ACT. THE AO HAS NOTICED THAT THE ASSESSEE HAS MADE PAYMENTS TO SUB- CONTRACTORS FOR RS.1,10,26,087/- AND THE ASSESSEE WAS REQUIRED TO M AKE TDS U/S.194C OF THE ACT, AFTER SCRUTINY OF DETAILS ON RECORD AND SUBMIS SIONS OF THE ASSESSEE, THE AO HAS HELD THAT THE ASSESSEE HAS NOT DEDUCTED TAX U/S.194C OF THE ACT AND THE CASE OF THE ASSESSEE IS COVERED UNDER THE PROVI SIONS OF SECTION 40(A)(IA) OF THE .ACCORDINGLY THE EXPENDITURE OF RS.1,10,26,087/ - IS DISALLOWED. 5.4. DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E APPELLANT HAS SUBMITTED THAT ON ONE HAND THE AO REJECTED BOOKS OF ACCOUNT A ND ACCOUNTING MATERIALS WHILE ESTIMATING NET PROFIT AT 10% AND ON OTHER HAN D HE MADE SPECIFIC ADDITION ON ACCOUNT OF PAYMENT TO SUB-CONTRACTORS M AINLY LABOUR CHARGES. IT IS FURTHER CONTENDED THAT DURING THE ASSESSMENT PRO CEEDINGS THE ASSESSEE HAS CONTENDED THAT NO LABOUR PAYMENT EXCEEDING RS.20,00 0/- WAS MADE TO ANY INDIVIDUAL THAN IT IS THE DUTY OF THE AO TO BRING C ONTRARY EVIDENCE ON RECORD TO PROVE THAT CONTENTION OF THE ASSESSEE REGARDING LAB OUR PAYMENT WAS FALSE AND UNTRUE. IT IS ALSO CONTENDED THAT IT IS THE DUTY OF THE AO TO PROVE THAT THE ASSESSEE HAS MADE DEFAULT U/S.194C OF THE ACT AND T HE AO SHOULD BRING ITA NO.2171/AHD/2016 M/S.M.B.SHYANI & CO. VS.ITO ASS T.YEAR 2008-09 - 4 - CONCRETE EVIDENCE THAT A LABOUR PAYMENT EXCEEDING R S.20,000/- WAS MADE TO PARTICULAR PERSON WITH PARTICULAR ADDRESS AND PARTI CULAR AMOUNT AND THE TDS WAS NOT DEDUCTED. THE APPELLANT HAS ALSO CONTENDED THAT WHILE ASSESSMENT HAS BEEN MADE AS ESTIMATE BASIS IT IS CONSIDERED ALL DE DUCTION ON ACCOUNT OF PURCHASES, LABOUR CHARGES AND ALL OTHER EXPENSES AL LOWED TO ASSESSEE AND THEREAFTER NOTHING REMAINED FOR ADDITION OR DISALLO WANCE. THE APPELLANT HAS RELIED UPON CERTAIN JUDGMENTS WHICH WERE IN CONNECT ION TO SECTION 40A(3) OF THE ACT. THE JUDGMENTS ARE AS UNDER:- 1. CIT VS. BANWARILAL BANSIDHAR 229 ITR 229 2. CIT VS. SANTOSH JAIN 296 ITR 324 3. GIRDHARILAL GOENKA VS. CIT 197 ITR 0122 IT IS THE CONTENTION OF THE APPELLANT THAT THOUGH T HESE JUDGMENTS ARE IN CONNECTION OF SECTION 40A(3)OF THE ACT, THE RATIO D ECIDED BY THESE JUDGMENTS EQUALLY APPLICABLE TO THE PROVISIONS OF SECTION 194 C AS WELL AS SECTION 40(A)(IA) OF THE ACT. 5.5. THE FACTS OF THE CASE AND THE SUBMISSIONS A RE CONSIDERED. THE APPELLANT PAYMENT OF RS.1,10,26,087/- TO THE SUB-CO NTRACTORS AND NO TAX WAS DEDUCTED U/S.194C OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS SUBMITTED THAT IT HAD EXECUTED THIS WO RK WITH THE HELP OF SMALL LABOUR CONTRACTORS AS RESULT IT WAS NOT POSSIBLE FO R TO DEDUCT TDS OF SUCH WORK AS WORK WAS LESS THAN RS.20,000/- AMOUNT FOR E ACH SUCH CONTRACTOR. IN THE ASSESSMENT PROCEEDINGS AS WELL AS APPELLATE PRO CEEDINGS NOWHERE IT IS CONTENDED THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX U/S.194C OF THE ACT ON THE PAYMENTS MADE TO SUB-CONTRACTORS. RATHER THE AS SESSEE HAS SIMPLY SUBMITTED THAT IT WAS NOT POSSIBLE TO DEDUCT TDS AS WORK WAS LESS THAN RS.20,000/-. IN THE APPELLATE PROCEEDINGS ALSO THE APPELLANT HAS SIMPLY SUBMITTED THAT IT IS THE DUTY OF THE AO TO PROVE TH AT THERE WAS A VIOLATION OF SECTION 194C BY BRINGING DETAILED EVIDENCE. THE PRI MARY ONUS WHICH LIES ON THE ASSESSEE WAS NOT DISCHARGED BY THE ASSESSEE FIR M. IN THE ABSENCE OF THAT IT IS NOT JUSTIFIED TO CONTENDED THAT IT IS THE DUTY O F THE AO TO PROVE THAT THERE IS A VIOLATION OF SECTION 194C OF THE ACT. 5.6. NOW THE SECOND QUESTION ARISES WHETHER THE AO CAN MAKE SPECIFIC DISALLOWANCES WHEN INCOME IS ESTIMATED. THE APPELLA NT HAS RELIED UPON CERTAIN JUDGMENTS BUT THESE JUDGMENTS ARE RELATED T O SECTION 40A(3) OF THE ACT WHEREAS IN THE INSTANT CASE THE DISALLOWANCE IS MAD E U/S.40(A)(IA) OF THE ACT. THERE IS NOTHING TO SHOW THAT DISALLOWANCE OF EXPEN DITURE U/S.40(A)(IA) WAS FACTORED INTO WHILE ESTIMATING THE INCOME ON GLOBAL BASIS WHICH EXERCISES THUS EVENTUALLY TOWARD ASCERTAINING COMMERCIAL PROFIT ON NOTIONAL BASIS, IT CANNOT AT ALL BE CONSIDERED, ON FACTS, THAT DEDUCTION U/S. 40(A)(IA) STOOD ALREADY EFFECTED. IT WOULD EQUALLY INCORRECT TO SAY THAT SE CTION 40(A)(IA) OF THE ACT IS ITA NO.2171/AHD/2016 M/S.M.B.SHYANI & CO. VS.ITO ASS T.YEAR 2008-09 - 5 - NOT ATTRACTED MERELY BECAUSE THE INCOME STANDS ESTI MATED, THE SAME BEING ONLY ON A SUMMARY BASIS, TO BE MADE, TAKING INTO AC COUNT ALL THE RELEVANT FACTS AND CIRCUMSTANCES, CONSISTENT WITH THE RELEVA NT PROVISIONS OF THE LAW. 5.7. CONSIDERING THE ABOVE DISCUSSION, THE ACTION OF THE AO OF DISALLOWING EXPENDITURE U/S 40 (A)(IA) OF THE ACT IS JUSTIFIED AND THE ADDITION MADE BY THE AO IS CONFIRMED. THUS, THE GROUNDS RAISED BY THE AP PELLANT IS DISMISSED. 7. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 8. THE LD. AR BEFORE US FILED A PAPER-BOOK RUNNING FROM PAGE NOS.1 TO 17 AND SUBMITTED AS UNDER:- FACTS OF THE CASE THE ASSESSEE IN A PARTNERSHIP FIRM DOING THE BUSINE SS AS CIVIL CONTRACTOR MOSTLY DOING CIVIL CONTACT WORK OF GOVER NMENT, SEMI- GOVERNMENT AND CORPORATE SECTOR. DURING THE ASSESSMENT YEAR 2008-09, NO REGULAR BOOK S WERE MAINTAINED WHICH ARE REQUIRED TO BE MAINTAINED AS P ER PROVISION OF SEC 44AA OF INCOME TAX ACT, NATURALLY WHEN THERE WERE NO BOOK OF ACCOUNT AVAILABLE, AN AUDIT U/S 44AB COULD NOT B E MADE. NO RETURN WAS FILED FOR ASSESSMENT YEAR 2008-09. AN ASSESSMENT WAS MADE U/S 143(3) R.W.S. 147 OF INC OME TAX ACT BY ESTIMATING NET PROFIT RATE AT 10% OF LOCAL TURNO VER WHICH WAS REDUCED BY LD. COMMISSIONER OF INCOME TAX (APPEALS) TO 8%. DURING THE ASSESSMENT PROCEEDING TOTAL TURNOVER WAS DETERMINED FROM THE AIR INFORMATION AND ALSO DETAILS SUBMITTED BY THE ASSESSEE. THE ASSESSEE FIRM SUBMITTED A ROUGH PROFI T AND LOSS FIGURES WHICH WERE REJECTED BY THE LD. ASSESSING OF FICER AND ASSESSMENT WAS MADE ONLY ON ESTIMATION OF NET PROFI T RATE OF 10% WHICH WAS REDUCED TO 8% BY LD. COMMISSIONER OF INCO ME TAX (APPEALS). THE PENALTY OF RS. 25,000/-WAS IMPOSED U /S 271A WHICH ITA NO.2171/AHD/2016 M/S.M.B.SHYANI & CO. VS.ITO ASS T.YEAR 2008-09 - 6 - WAS ALSO CONFIRMED BY LD. COMMISSIONER OF INCOME TA X (APPEALS). A PENALTY OF RS. 96,450/- WAS MADE BY LD. ASSESSING OFFICER U/S 27IB WHICH WAS DELETED BY LD. COMMISSIONER OF INCOM E TAX (APPEALS). OVER AND ABOVE ESTIMATION OF TOTAL INCOM E, THE LD. ASSESSING OFFICER MADE ADDITION OF RS. 1,10,26,087/ - ON ACCOUNT OF LABOUR EXPENSES U/S 40(A)(IA) BY ALLEGING THAT THE ASSESSEE FAILED TO DEDUCT TAX U/S 194C OF INCOME TAX ACT. GROUNDS OF APPEAL THOUGH SIX GROUNDS OF APPEAL WERE RAISED IN APPEAL MEMO, THE EFFECTIVE GROUND IS ONLY ADDITION OF RS. 1,10,26,08 7/- U/S 40(A)(IA) OF INCOME TAX ACT. THE LD. ASSESSING OFFICER ESTIMA TED PROFIT BY APPLYING 10% NET PROFIT RATE ON TOTAL RECEIPTS IS O F RS.1,92,28,950/- AND BUSINESS INCOME WAS DETERMINED AT RS. 19,22,895 /-. IN PARA 3 SUB PARA 4 OF HIS ASSESSMENT ORDER, THE L D. ASSESSING OFFICER MENTIONED THE FOLLOWING WORDS. 'THE ZEROX COPY OF ACCOUNT SET FURNISHED BY THE ASS ESSEE VIDE LETTER DATED 15-9-2014 IS NOT TREATED AS AUTHENTIC RELIABL E ACCOUNTS FOR THE YEAR ENDED 31-3-2008 SO IN ABSENCE OF AUTHENTIC RELIABLE ACCOUNT, THE BOOKS RESULT IS NOT ACCEPTABLE, THE EX PENSES CLAIMED BY THE ASSESSEE ALSO NOT TREATED AS GENUINE EXPENSE S IN ABSENCE OF DOCUMENTARY EVIDENCES, VOUCHERS ETC AND STATUTORY A UDIT REPORT.' IN PARA 4 OF HIS ORDER, HE MENTIONED AS FOLLOW. THE SCRUTINY OF NON AUDITED ACCOUNTS COPY OF WHICH HAS BEEN FURNISHED REFLECTS THAT THE ASSESSEE HAS MADE PAYME NTS TO SUB CONTRACTORS FOR RS. 1,10,26,087/- THE ASSESSEE WAS REQUIRED TO MAKE TDS U/S 194C OF INCOME TAX ACT. THE ABOVE MENTIONED TWO STATEMENTS OF LD. ASSESSING OFFICER IS CONTRADICTORY. ITA NO.2171/AHD/2016 M/S.M.B.SHYANI & CO. VS.ITO ASS T.YEAR 2008-09 - 7 - ON THEONE HAND THE LD. ASSESSING OFFICER TOTALLY RE JECTED THE DETAILS OF EXPENSES SUBMITTED TO HIM WHICH RS.1,10, 26,087/- LABOUR PAYMENTS AND ESTIMATED NET PROFIT OF BUSINESS AND O N OTHER HAND HE Y MADE ADDITION OF RS. 1,10,26,087 U/S 40(A)(IA) TREATING LABOUR EXPENSE OF RS.1,10,26,087/- AS GENUINE AND HELD THA T THE ASSESSEE WAS LIABLE TO DEDUCT TAX ON SAID LABOUR PAYMENTS. H E HIMSELF MENTIONED IN THE ORDER THAT EXPENSES WERE NOT GENUI NE, THEN HOW HE MENTIONED THAT WE HAVE MADE LABOUR PAYMENTS ON W HICH TDS U/S 194C WAS DEDUCTIBLE. IT IS VERY UNREASONABLE FOR LD. ASSESSING OFFICER T O ADOPT TWO DIFFERENT STANDARDS FOR SAME ITEM ONCE HE BELIEVED THAT LABOUR EXPENSE WERE NOT GENUINE AND FOR SAME EXPENSE TREAT ING THE GENUINE HE MADE ADDITION U/S 40(A)(IA). WHILE LD. ASSESSING OFFICER TOTALLY REJECT BOOKS OR ANY MATERIAL PRODUCED BEFORE HIM DURING ASSESSMENT PROCEEDING AN D HE MADE ESTIMATE OF TOTAL INCOME, HE FACTORS ALL INCOME AND ALL EXPENSE WHILE ESTIMATING THE INCOME, AND THERE REMAINED NOT HING TO CONSIDER SEPARATELY. THE HON'BLE ALLAHABAD HIGH COURT IN CASE OF CIT V/S BANWARILAL BANSIDHAR, IN PARA 9 OF SAID JUDGEMENT HELD AS UNDE R; 'WHEN THE GROSS PROFIT RATE IS APPLIED, THAT WOULD TAKE CARE OF EVERYTHING AND THERE WAS NO NEED FOR ASSESSING OFFI CER TO MAKE SCRUTINY OF THE AMOUNT INCURRED ON THE PURCHASES BY THE ASSESSEE.' WE HEREWITH SUBMIT THE COPY OF SAID JUDGEMENT AS PE R ANNEXURE-A. THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN CASE O F CIT V/S SMT. SANTOSH JAIN CONFIRMED THE VIEW TAKEN BY HON'B LE ALLAHABAD HIGH COURT IN PARA 6 OF THE JUDGEMENT, THE HONTILE COURT HELD AS FOLLOW; 'WE ARE OF THE VIEW THAT WHEN INCOME OF THE ASSESSE E WAS COMPUTED BY APPLYING GROSS PROFIT RATE, THERE WAS N O NEED TO LOOK ITA NO.2171/AHD/2016 M/S.M.B.SHYANI & CO. VS.ITO ASS T.YEAR 2008-09 - 8 - INTO THE PROVISIONS OF SECTION 40A(3) OF THE ACT, A S APPLYING THE GROSS PROFIT RATE TAKES CARE OF EXPENDITURE OTHERWI SE BY WAY OF CROSS CHEQUE ALSO. WE ARE IN AGREEMENT WITH THE VIE W TAKEN BY THE ALLAHABAD HIGH COURT IN BANWARILAL BANSHIDHAR'S CAS E (SUPRA) TO THE FOLLOWING EFFECT: THE QUESTION FOR CONSIDERATION IS WHEN NO DEDUCTION WAS SOUGHT AND ALLOWED UNDER SECTION 40A(3), WAS THERE ANY NEE D TO GO INTO SECTION 40A(3) AND RULE 6DD(1). WE SEE FORCE IN THE VIEW I BY THE APPELLATE TRIBUNAL THAT WHEN THE INCOME OF THE ASSE SSEE WAS COMPUTED APPLYING THE PROFIT RATE AND WHEN NO DEDUC TION WAS ALLOWED IN REGARD TO THE PURCHASES OF THE ASSESSEE, WAS NO NEED TO LOOK INTO THE PROVISIONS OF SECTION 40A(3) AND RULE 6DD(J). NO ALLOWANCE COULD HAVE BEEN MADE IN VIEW OF THE PROVI SIONS OF SECTION 40A(3), READ WITH RULE 6DD(J) AS NO DEDUCTI ON WAS ALLOWED TO AND CLAIMED BY THE ASSESSEE IN RESPECT O F THE PURCHASES. WHEN THE GROSS PROFIT RATE IS APPLIED, THAT WOULD T AKE CARE OF EVERYTHING AND THERE WAS NO NEED FOR THE ASSESSING OFFICER TO MAKE SCRUTINY OF THE AMOUNT INCURRED ON THE PURCHASES BY THE ASSESSES.' WE HEREWITH SUBMIT THE COPY OF SAID JUDGEMENT AS PE R ANNEXURE-B. FROM THE ABOVE, IT IS EVIDENT THAT WHILE INCOME IS ESTIMATED BY ADOPTING RATE OF PROFIT AND NO SEPARATE EXPENSES AR E ALLOWED, THEN NO SEPARATE ADDITION CAN BE MADE IN SEC 29 TO SEC 4 0. EVEN ON FACTS, IN THIS CASE THE LD. ASSESSING OFFIC ER TOTALLY FAILED TO BRING ANY EVIDENCES WHICH PROVED THAT THE ASSESS EE FIRM HAS VIOLATED PROVISION OF SEC 194C CONSEQUENTLY ATTRACT S PROVISION OF SEC 40(A)(IA) OF INCOME TAX ACT. IN THE ORDER, IN PARA 4 OF THE ASSESSMENT ORDER HE SIMPLY MENTIONED AS FOLLOWS; ' THE SCRUTINY OF NON-AUDITED ACCOUNTS WHICH HAS BE EN FURNISHED REVEALS THE ASSESSEE HAS MADE PAYMENTS TO SUB-CONTR ACTOR FOR RS.1,10,26,0877-. THE ASSESSEE WAS REQUIRED TO MAKE TDS U/S ITA NO.2171/AHD/2016 M/S.M.B.SHYANI & CO. VS.ITO ASS T.YEAR 2008-09 - 9 - 194C WHICH HE DID NOT MAKE, HENCE ADDITION OF RS. 1 ,10,26,087/- WAS MADE.' PERUSAL OF PARA 4 REVEALS THAT NO IOTA OF EVIDENCES WERE BROUGHT ON FILE WHICH INDICATED THE VIOLATION OF SEC 194C. HE MADE ADDITION OF TOTAL LABOUR PAYMENTS OF RS.1,10,26,087 /- AS IF CONTRACT RECEIPTS OF RS.1,92,89,5607- WAS RECEIVED WITHOUT I NCURRING ONE RUPEE FOR LABOUR PAYMENT. THE LD. ASSESSING OFFICER HAS NOT CAREFULLY READ TH E PROVISION OF SEC 194C OF INCOME TAX ACT. ALL LABOUR PAYMENTS ARE NOT SUBJECT MATTER OF TDS. IF LABOUR PAYMENT OF NOT EXCEEDING RS. 20,0007- IS MADE TO AN Y ONE PERSON, NO TDS IS REQUIRED TO BE MADE. FURTHER, IF LABOUR P AYMENTS NOT EXCEEDING RS. 50,0007- IS MADE PROVIDED EACH PAYMEN T IS LESS THAN RS. 20,0007-, NO TDS WAS REQUIRED TO BE MADE. THIS ASPECT OF PROVISION WAS NOT AT ALL CONSIDERED BY THE LD. ASSESSING OFFICER, WHILE THE SPECIFICALLY TOLD ASSE SSING OFFICER THAT EACH LABOUR PAYMENT WAS LESS THAN RS. 20,000/-. THE PROVISION OF SEC 40(A)(IA) WAS VERY STRINGENT W HICH SHOULD BE STRICTLY ADHERED, WHILE 100% OF EXPENSES MAY BE DIS ALLOWED. FURTHER, THE LD. ASSESSING OFFICER IS REQUIRED TO B E PROVED THAT ON PARTICULAR DAY, A PARTICULAR PERSON WITH PARTICULAR ADDRESS WAS PAID EXCEEDING RS. 20,000/- IN CASH, THEN AND THEN, THE PROVISION OF SEC 194C IS ATTRACTED. THE LD. ASSESSING OFFICER TOTALLY FAILED TO PROVE A LLEGATION, HENCE ADDITION MAY BE DELETED. VIEW OF LD. COMMISSIONER OF INCOME TAX (APPEALS) IT IS SURPRISING, ONE CAN UNDERSTAND THAT ASSESSING OFFICER MAY TAKE REVENUE MINDED VIEW BUT THE LD. COMMISSIONER O F INCOME TAX ITA NO.2171/AHD/2016 M/S.M.B.SHYANI & CO. VS.ITO ASS T.YEAR 2008-09 - 10 - (APPEALS) CANNOT BE ADOPTED NON-PRAGMATIC VIEW OF T HE MATTER. IT IS VERY UNFORTUNATE ON THE PART OF THE ASSESSEE. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN HIS ORDER OBSERVED THE FOLLOWING IN PARA 5.5 (LAST LINE); ' IN THE APPELLATE PROCEEDINGS ALSO THE APPELLANT H AS SIMPLY SUBMITTED THAT IT IS THE DUTY OF THE AO TO PROVE TH AT THERE WAS A VIOLATION OF SEC 194C BY BRINGING DETAILED EVIDENCE . THE PRIMARY ONUS WHICH LIES ON THE ASSESSEE WAS NOT DISCHARGED BY THE ASSESSEE FIRM. IN THE ABSENCE OF THAT IT IS NOT JUSTIFIED TO CONTEND THAT IT IS THE DUTY OF THE AO TO PROVE THAT IT IS THE VIOLATION OF SEC 194C OF THE ACT.' FURTHER, IN PARA 5.6 OBSERVED AS FOLLOW; 'NOW THE SECOND QUESTION ARISES WHETHER THE AO CAN MAKE SPECIFIC DISALLOWANCES WHEN INCOME IS ESTIMATED. THE APPELLA NT HAS RELIED UPON CERTAIN JUDGMENTS BUT THESE JUDGMENTS ARE RELA TED TO SECTION 40A(3) OF THE ACT WHEREAS IN THE INSTANT CASE THE D ISALLOWANCE IS MADE U/S.40(A)(IA) OF THE ACT. THERE IS NOTHING TO SHOW THAT DISALLOWANCE OF EXPENDITURE U/S.40(A)(IA) WAS FACTO RED INTO WHILE ESTIMATING THE INCOME ON GLOBAL BASIS WHICH EXERCIS ES THUS EVENTUALLY TOWARD ASCERTAINING COMMERCIAL PROFIT ON NOTIONAL BASIS, IT CANNOT AT ALL BE CONSIDERED, ON FACTS, TH AT DEDUCTION U/S.40(A)(IA) STOOD ALREADY EFFECTED. IT WOULD EQUA LLY INCORRECT TO SAY THAT SECTION 40(A)(IA) OF THE ACT IS NOT ATTRAC TED MERELY BECAUSE THE INCOME STANDS ESTIMATED, THE SAME BEING ONLY ON A SUMMARY BASIS, TO BE MADE, TAKING INTO ACCOUNT ALL THE RELEVANT FACTS AND CIRCUMSTANCES, CONSISTENT WITH THE RELEVA NT PROVISIONS OF THE LAW.' IT IS SURPRISING THAT THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) DID NOT UNDERSTAND THE BASIC PRINCIPLE OF JURISPRUD ENCE. IT IS COMMONLY UNDERSTOOD THAT A PERSON WHO PUT CHARGE IS REQUIRED TO BE PROVED BY BRINGING ALL EVIDENCES ON FILE. WHERE AS THE LD. COMMISSIONER OF INCOME TAX (APPEALS) PUTS BURDEN ON ASSESSEE ITA NO.2171/AHD/2016 M/S.M.B.SHYANI & CO. VS.ITO ASS T.YEAR 2008-09 - 11 - FIRM. THE ASSESSEE HAS ALREADY TOLD THAT EACH LABOU R PAYMENT WAS BELOW RS. 20,0007-. AND IT IS THE LD. ASSESSING OFF ICER ALLEGATE THAT THE ASSESSEE FIRM HAS VIOLATED THE PROVISION O F SEC 194C THEN IT IS HIS DUTY TO PROVE ALLEGATION. WHERE AS THE LD . COMMISSIONER OF INCOME TAX (APPEALS) ASKED THE ASSESSEE FIRM TO BRING NEGATIVE POOF WHICH IS TOTALLY UNREASONABLE AND ILLEGAL. IN PRESENT CASE, NO BOOKS OF ACCOUNTS, NO BILLS, NO VOUCHERS, ETC. HENCE, ASSESSEE SUFFERED LOSS BY ESTIMATING THE INC OME AT THE RATE OF 8% OF TOTAL RECEIPTS, IN PAST YEAR, THE RATE OF NET PROFIT WAS BELOW 5% (AUDITED ACCOUNT). WHAT OTHER EVIDENCES WOULD BE BROUGHT BY THE ASSESS EE FIRM. FOR SEPARATE ADDITION OF LABOUR PAYMENTS, THE LD. C OMMISSIONER OF INCOME TAX (APPEALS) CONTENDED AS FOLLOW; 'THERE IS NOTHING TO SHOW THAT DISALLOWANCE OF EXPE NDITURE U/S 40(A)(IA) WAS FACTORED INTO WHILE ESTIMATING THE IN COME ON GLOBAL BASIS, IT CANNOT AT ALL BE CONSIDERED ON FACTS THAT DEDUCTION U/S 40(A)(IA) STOOD ALREADY EFFECTED.' THE LD COMMISSIONER OF INCOME TAX (APPEALS) CAREFUL LY READ THE ASSESSMENT ORDER. PARA 3 OF THE ASSESSMENT ORDER DE TERMINED ESTIMATED TO BUSINESS INCOME AT RS. 19,28,956/-. IT COVERED ALL PROVISION OF DETERMINATING OF BUSINESS INCOME OF IN COME TAX ACT. THERE REMAINED NOTHING FOR DETERMINATION OF BUSINES S INCOME OF THE ASSESSEE FIRM. PARA 6 OF ASSESSMENT ORDER IN TOTALLY SEPARATE AND DISTINCT FROM THE PARA 5. THE LABOUR PAYMENT ARE ALREADY CONSIDERED W HILE ESTIMATING BUSINESS INCOME OF THE ASSESSEE FIRM. FURTHER TWO JUDGMENT CITED ABOVE ALSO RULED THAT 'W HEN THE GROSS PROFIT RATE IS APPLIED, THAT WOULD TAKE CARE OF EVE RYTHING AND THERE WAS NO NEED FOR THE ASSESSMENT OFFICER TO MAKE SCRU TINY OF THE AMOUNT INCLUDE ON THE PURCHASE BY THE ASSESSEE.' ITA NO.2171/AHD/2016 M/S.M.B.SHYANI & CO. VS.ITO ASS T.YEAR 2008-09 - 12 - THE DETERMINATION BY ESTIMATING BUSINESS INCOME END ED THE MATTER THEN REMAINED NOTHING TO THINK FURTHER. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD T HAT TWO JUDGMENT CITED BY THE ASSESSEE IN INDICATED PROVISI ON OF SECTION 40 A(3) OF INCOME TAX ACT. THE LD. COMMISSIONER OF INC OME TAX (APPEALS) MISCONSTRUED THE JUDGEMENT IT SAID THAT O NCE ESTIMATED OF INCOME IS MADE, IT COVERED ALL PROVISION OF DETE RMINATION OF BUSINESS INCOME UNDER INCOME TAX ACT. IT MAY BE SEC TION 40A(3) OR SECTION 40(A)(IA) OF ANY RELEVANT PROVISION. FURTHER, THE LD. ASSESSMENT OFFICER AS WELL AS LD. COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO CONSIDER AN APPRE CIATE THE JUDGEMENT HON'BLE CALCUTTA HIGH COURT IN CASE OF GI RDHARLAL GOENKA V/S COMMISSIONER OF INCOME TAX 197 ITR 0122. COPY OF SAID JUDGEMENT IS ATTACHED HEREWITH AS PER ANNEXURE -C. 'THE ITO HAS TO TAKE A PRAGMATIC VIEW OF THE MATTER . THE ITO SHOULD TAKE A PRACTICAL APPROACH TO PROBLEM AND STR IKE A BALANCE BETWEEN THE DIRECTION OF LAW AND HARDSHIP TO THE AS SESSEE. HE SHOULD NOT ENMESH HIMSELF IN TECHNICALITIES WITHOUT CONSIDERING PRACTICAL ASPECT ABSURD RESULT ARISES. THE CIVIL CO NTRACT WORK CANNOT BE POSSIBLE WITHOUT INCURRING OF EXPENSES ON ACCOUNT OF LABOUR.' IT IS THEREFORE REQUESTED TO DELETE RS.1,10,26,087/ - WRONGLY CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) AND OBLIGE. 9. ON THE OTHER HAND, LD. DR VEHEMENTLY SUPPORTED T HE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORDS. THE ISSUE IN THE INSTANT CAS E RELATES WHETHER THE ITA NO.2171/AHD/2016 M/S.M.B.SHYANI & CO. VS.ITO ASS T.YEAR 2008-09 - 13 - ASSESSEE HAS DEFAULTED ON ACCOUNT OF NON-DEDUCTION OF TDS IN THE GIVEN FACTS AND CIRCUMSTANCES. THERE IS NO AMBIGUITY THA T THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE REJECTED BY THE ASSES SING OFFICER, AND THE ASSESSEE DID NOT DISPUTE THIS FACT. IT MEANS THE D ECISION OF THE ASSESSING OFFICER HAS ATTAINED ITS FINALITY. 11. HOWEVER, THE ASSESSING OFFICER SUBSEQUENTLY FRO M THE SAME SET OF BOOKS OF ACCOUNTS OBSERVED THAT THE ASSESSEE HAS CL AIMED LABOUR EXPENSES AMOUNTING TO RS. 1,10,26,087/- WHICH WERE CLAIMED WITHOUT DEDUCTING THE TDS. ACCORDINGLY, THE DISALLOWANCE U/ S.194C OF THE ACT OF THE ACT WAS MADE. 12. IN OUR CONSIDERED VIEW, ONCE THE BOOKS OF ACCOU NTS HAS BEEN REJECTED, THEN THE ASSESSING OFFICER CANNOT PLACE H IS RELIANCE ON THE SAME SET OF BOOKS OF ACCOUNTS FOR MAKING THE DISALLOWANC E U/S 194C OF THE ACT ON ACCOUNT OF NON-DEDUCTION OF TDS. IN THIS REGARD WE FIND SUPPORT AND GUIDANCE FROM THE JUDGEMENT OF POWER LINERS, JAIPUR VS ACIT, JAIPUR IN ITA NO. 194/JP/2014 WHEREIN IT WAS HELD WAS UNDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIALS AVAILABLE ON THE RECORD. THERE IS NO DISPUTE THAT T HE INCOME OF THE ASSESSEE WAS DETERMINED BY THE ASSESSING OFFICER ON THE BASIS OF THE ESTIMATION AND BEST JUDGMENT AFTER REJECTING THE BOOKS OF ACCOUNT U/S 1 45(3) OF THE ACT. THE ASSESSING OFFICER HAS APPLIED N.P. RATE OF 8% ON TH E TOTAL RECEIPTS OF RS. 1,53,44,942/- AND ACCORDINGLY, THE ADDITION OF RS. 2,18,277/- WAS MADE BY THE ASSESSING OFFICER. THE LD CIT(A) HAS CONFIRMED THE ADDITION OF THE ASSESSING OFFICER BY REJECTING THE CONTENTION OF THE ASSESSEE . THE AMOUNT WAS ALREADY PAID DURING THE PREVIOUS YEAR AND NOT PAYABLE AT THE END OF THE YEAR. THUS, IT IS CLEAR THAT THE CONTENTION RAISED BY THE ASSESSEE BEFORE U S THAT AFTER REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF INCOME OF THE ASSESSEE , NO FURTHER ADDITION CAN BE ITA NO.2171/AHD/2016 M/S.M.B.SHYANI & CO. VS.ITO ASS T.YEAR 2008-09 - 14 - MADE BY THE ASSESSING OFFICER, HAS NOT BEEN CONSIDE RED OR DECIDED BY THE LD. CIT(A). WE FIND THAT THE COORDINATE BENCH OF THIS T RIBUNAL IN THE CASE OF RAKESH CONSTRUCTION CO. VS. ACIT (SUPRA) WHILE DEALING WIT H THE IDENTICAL ISSUE HAS HELD IN PARA 2.4 AS UNDER: '2.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE BOOKS OF ACCOUNTS WERE REJECTED U/S 145(3) OF THE ACT AND THEREAFTER THE AO HAS ESTIMATED NET PROFIT @ 5.05% ON CONTRACT RECEIPT AFTER DEDUCTION OF DEPRECIATION, INTEREST AND REMUN ERATION PAID TO PARTNERS AS AGAINST NET PROFIT OF 2.39% DECLARED BY THE ASSESSE E. FROM THE PERUSAL OF THE ASSESSMENT ORDER, IT IS NOTED THAT THERE HAVE BEEN DISCUSSIONS BETWEEN THE AO AND THE ASSESSEE IN TERMS OF ESTIMATING THE NET PRO FIT RATE ONCE THE BOOKS OF ACCOUNT HAVE BEEN REJECTED. AS PART OF THAT DISCUSS ION, IT IS NOTED THAT IN RESPONSE TO AO'S SHOW-CAUSE AS TO WHY 8.5% NET PROFIT RATE S HOULD NOT BE ALLOWED, THE ID. AR HAS SUBMITTED THAT IF THE NET PROFIT AT THE RATE OF 8.5% IS APPLIED, THEN THE DEDUCTION ON ACCOUNT OF PAYMENT OF HIRING CHARGES F OR MACHINERY TAKEN ON RENT AMOUNTING TO RS. 22,41,600/- AND RS. 21,60,000/- AR E ALSO TO BE ALLOWED. THE LD. AO FINALLY DECIDED TO APPLY NET PROFIT OF 5.05% WHI CH HAS BEEN AGREED UPON BY THE ASSESSEE. IT IS THEREFORE SEEN THAT ISSUE OF AL LOWANCE OF PAYMENTS OF MACHINERY HIRE CHARGES HAS BEEN DULY TAKEN INTO CON SIDERATION BY THE AO WHILE ESTIMATING THE N.P. RATE OF 5.05% FURTHER, IT IS NO TED THAT THE DECISION OF HON'BLE KOLKATTA HIGH COURT IN THE CASE OF ARJUN BHOWMICK ( SUPRA) DIRECTLY SUPPORT THE CASE OF THE ASSESSEE. IN THAT CASE, THE VIEW TAKEN BY THE KOLKOTTA BENCH OF THE ITAT HAS BEEN CONFIRMED BY THE HONBLE HIGH COURT WH EREIN IT HAS HELD THAT 'ONCE THE N.P. RATE IS ESTIMATED, THE AO CANNOT BAS ED THIS DISALLOWANCE ON THE SAME BOOKS OF ACCOUNTS FOR THE PURPOSE OF DISALLOWA NCE BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT OR GENERAL DISALLOWANCE U/S 37 OF THE A CT. THE ESTIMATION MADE BY THE AO OF NET PROFIT WILL TAKE C ARE OF EVERY ADDITION RELATED TO BUSINESS INCOME OR BUSINESS RECEIPTS AND NO FURTHER DISALLOWANCE CAN BE MADE.' IT IS ALSO NOTED THAT JAIPUR BENCH OF ITAT IN THE C ASE OF BANAS SAND TOLL TAX COLLECTION (SUPRA) HAS TAKEN A SIMILAR VIEW IN THE MATTER FOLLOWING THE DECISION IN CASE OF HON'BLE ANDHRA PRADESH HIGH COURT IN THE CA SE OF INDWELL CONSTRUCTION (232 ITR 776). IN LIGHT OF ABOVE, WE SEE NO REASON FOR AO TO INVOKE PROVISIONS OF SECTION 154 OF THE ACT. HENCE, THE ORDER PASSED BY THE AO U/S 154 IS QUASHED AND THE ORIGINAL ORDER PASSED U/S 143(3) OF THE ACT IS SUSTAINED.' FOLLOWING THE ORDER OF THE COORDINATE BENCH OF THIS TRIBUNAL (SUPRA) WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT. 13. IN VIEW OF ABOVE FACTS OF THE CASE AND AFTER CO NSIDERING THE RELEVANT DETAILS IN TOTALITY, WE ARE OF THE OPINION THAT NO DISALLOWANCE CAN BE MADE FOR THE LABOUR EXPENSES CLAIMED BY THE ASSE SSEE UNDER THE ITA NO.2171/AHD/2016 M/S.M.B.SHYANI & CO. VS.ITO ASS T.YEAR 2008-09 - 15 - PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IN THE G IVEN FACTS & CIRCUMSTANCES. THEREFORE, WE SET ASIDE THE ORDER O F THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE BY HIM. HENCE, THE GROUND OF APPEAL IS ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 03/12/2018 SD/- SD/- (MS.MADHUMITA ROY) (WASEEM AH MED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 03/12/2018 &.., .(.. / T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-AHMEDABAD-5 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) $%, / ITAT, AHMEDABAD ITA NO.2171/AHD/2016 M/S.M.B.SHYANI & CO. VS.ITO ASS T.YEAR 2008-09 - 16 - 1. DATE OF DICTATION 5.11.2018 (DICTATION PAD 14- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 8.11.2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.10.12.2018 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 10.12.2018 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER