Universal Embroidery, CHENNAI V. ITO, CHENNAI

ITA 219/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9057 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 29-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 08-02-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: R PADMANABHAMC A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , . ! '# BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.219/MDS./16 / ASSESSMENT YEAR : 2007-08 M/S.UNIVERSAL EMBROIDERY, NO.14, OLD NO.11/2, VALLUVAR STREET, OLD WASHERMENPET, CHENNAI 600 021. VS. INCOME TAX OFFICER, BUSINESS WARD VII(3), [NEW JURISDICTION-6(3)] CHENNAI-6 [PAN AABFU 0671 N ] ( $% / APPELLANT) ( &'$% /RESPONDENT) / APPELLANT BY : SHRI R.PADMANABHAM,C.A /RESPONDENT BY : SHRI SUPRIYO PAL, JCIT DR / DATE OF HEARING : 29 - 06 - 201 6 !' / DATE OF PRONOUNCEMENT : 30 - 06 - 2016 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-5,CHENNAI DATE D 18.01.2016 PERTAINING TO ASSESSMENT YEAR 2007-08. ITA NO.219/MDS./16 :- 2 -: 2. THE MAIN GROUND IN THIS APPEAL IS WITH REGARD T O CONFIRM THE ADDITION OF ` 15,24,800/- BY INVOKING THE PROVISIONS OF THE SECTI ON 40(A)(IA) OF THE ACT IN RESPECT OF PAYMENTS MADE TO WARDS LABOUR CHARGES WITHOUT DEDUCTING TDS U/S.194C OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE FIRM IS ENGAGED IN THE BUSINESS OF EMBROIDERY WORK AND FILED THE RE TURN OF INCOME ON 31.01.2007 ADMITTING A TOTAL INCOME OF ` 14,256/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE SCRUTINY ASSESSMENT W AS COMPLETED ON 30.12.2009 RESULTED A DEMAND OF ` 9,82,240/-. AGGRIEVED, THE ASSESSEE CARRIED THE APPEAL BEFORE THE CIT(A) AND CIT(A) DIS MISSED THE APPEAL. THE ASSESSEE PREFERRED AN APPEAL BEFORE ITAT. THE I TAT, CHENNAI VIDE ORDER DATED 11.01.2011 FOR ASSESSMENT YEAR 2007-08 HAD STATED THAT WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND IN THE INTEREST OF THE JUSTICE, RESTORE BACK THE ENTIRE ISSUE TO THE FILE OF THE AO WITH A DIRECTION THAT HE SHALL MAKE AN ASSESSMENT ORDER D E NOVA AFTER HEARING THE ASSESSEE. CONSEQUENT TO THE ORDER OF T HIS TRIBUNAL, THE AO PASSED ORDER U/S.143(3) R.W.S.246 OF THE ACT ON 30.12.2011 BY MAKING DISALLOWANCE U/S.40(A)(IA) AND DISALLOWANCES OF SOME PORTION OF THE EXPENDITURES FOR NOT PRODUCING THE SUPPORTIN G BILLS/VOUCHERS DETERMINING THE TOTAL INCOME AT ` 19,11,545/-. 4. AGGRIEVED BY THE ORDER OF AO, ONCE AGAIN, THE A SSESSEE WENT ON APPEAL BEFORE THE LD.CIT(A). ON APPEAL THE LD.CIT( A) OBSERVED IN ITA NO.219/MDS./16 :- 3 -: RESPECT OF DISALLOWANCE U/S.40(A)(IA) OF THE ACT TH AT DURING THE COURSE OF SECOND INNINGS OF FIRST APPELLATE PROCEEDINGS, T HE BOOKS OF ACCOUNTS WERE PRODUCED BY LD.A.R. ON VERIFYING THE BOOKS OF ACCOUNTS, IT WAS FOUND THAT ALTHOUGH THEY WERE NAMED AS LABOUR CHARG ES, THE SAME WERE IN FACT PAID TO 11 AGENCIES TOWARDS THE EMBROI DERY WORKS. THOSE AGENCIES IN TURN INCURRED EXPENDITURE ON VARIOUS WO RKERS WHO DID THE EMBROIDERY WORK. HOWEVER, THAT DOES NOT ALTER THE NATURE OF THE PAYMENTS MADE BY THE ASSESSEE TO THE 11 AGENCIES FR OM EMBROIDERY CHARGES TO LABOUR CHARGES. HENCE, CIT(A) CAME TO A CONCLUSION THAT TDS IS ATTRACTED ON LABOUR CHARGES AND UPHELD THE A CTION OF THE AO TO DISALLOW LABOUR CHARGES PAID TOWARDS EMBROIDER WORK AMOUNTING TO ` 15,24,800/- U/S.40(A)(IA) OF THE ACT FOR NOT DEDUCT ING TDS. AGGRIEVED, THE ASSESSEE IS AGAIN IN APPEAL BEFORE T HIS TRIBUNAL. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE AO INVOKED THE PROVISIONS OF THE SECTI ON 40(A)(IA) OF THE ACT ON THE REASON THAT PAYMENTS TOWARDS LABOUR CHAR GES ARE LIABLE FOR DEDUCTION OF TDS U/S.194C OF THE ACT AND THE ASSESS EE MADE PAYMENTS WITHOUT DEDUCTING TDS. BEFORE US, LD.A.R SUBMITTED THAT THE IMPUGNED AMOUNT IS ALREADY PAID AND NOTHING IS OUTS TANDING AT THE END OF THE CLOSE OF THE ASSESSMENT YEAR UNDER CONSI DERATION. HE RELIED ON THE JUDGEMENT OF THE SPECIAL BENCH OF THE TRIBUN AL IN THE CASE OF ITA NO.219/MDS./16 :- 4 -: MERILYN SHIPPING AND TRANSPORTS V. ADDL. CIT [2012] 16 ITR (TRIB) 1 (VISAKHAPATNAM) [SB]. LD.D.R RELIED ON THE ORDER OF CIT(A). THE SIMILAR ISSUE CAME BEFORE THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI N.PALANIVELU VS. ITO REPORTED IN [2015 ] 40 ITR (TRIB) 325 [CHENNAI] VIDE ORDER DATED 29.04.2015 WHEREIN HELD THAT:- 4. WE HAVE HEARD BOTH SIDES AND PERUSED THE MATERI AL ON RECORD. WE FIND THAT THE SPECIAL BENCH OF THE TRIBU NAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL. CI T [2012] 16 ITR (TRIB) 1 (VISAKHAPATNAM) [SB] AND JUDGMENT O F THE GUJARAT HIGH COURT IN THE CASE OF CIT V. VECTOR SHI PPING SERVICES (P.) LTD. IN I. T. A. NOS. 122 OF 2013 DAT ED JULY 9, 2013 [2013] 357 ITR 642 (ALL) HELD THAT SECTION 40( A)(IA) IS NOT APPLICABLE WHEN THERE IS NO OUTSTANDING BALANCE AT THE END OF THE CLOSE OF THE YEAR RELEVANT TO THE ASSESS MENT YEAR IN RESPECT OF THESE PAYMENTS. HOWEVER, THE ASSESSEE HAS NOT BROUGHT ON RECORD, THE DETAILS OF OUTSTANDING EXPEN SES OR SCHEDULE OF SUNDRY CREDITORS SHOWING WHETHER THE IM PUGNED AMOUNT IS OUTSTANDING AT THE END OF THE CLOSE OF TH E PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR EITHER IN THE NAME OF THE PARTY OR OUTSTANDING EXPENSES. HENCE, IN THE IN TEREST OF JUSTICE, WE ARE REMITTING THE ISSUE BACK TO THE FIL E OF THE ASSESSING OFFICER WITH DIRECTION TO VERIFY THE CLAI M OF THE ASSESSEE AND THE ASSESSEE SHALL PLACE NECESSARY EVI DENCE IN SUPPORT OF HIS CLAIM. 5. FURTHER, WE MAKE IT CLEAR THAT IF THE IMPUGNED A MOUNT IS NOT OUTSTANDING AT THE END OF THE CLOSE OF THE ASSE SSMENT YEAR IN RESPECT OF THE EXPENSES EITHER AS OUTSTANDI NG ITA NO.219/MDS./16 :- 5 -: EXPENSES OR AS SUNDRY CREDITORS, THIS AMOUNT CANNOT BE DISALLOWED. THIS GROUND IS REMITTED BACK TO THE ASS ESSING OFFICER FOR FRESH CONSIDERATION. IN VIEW OF THIS WE ARE INCLINED TO REMIT THE ISSUE TO THE FILE OF AO TO EXAMINE WHETHER THE IMPUGNED AMOUNT IS OUTSTANDING AT THE END OF THE CLOSE OF THE ASSESSMENT YEARS UNDER CONSIDERATI ON AND DECIDE IN THE LIGHT OF ABOVE ORDER OF THE TRIBUNAL. THIS GRO UND IS ALLOWED FOR STATISTICAL PURPOSES. 6. NO OTHER GROUND IS PRESSED BY THE LD.A.R. ACCOR DINGLY, OTHER GROUNDS ARE NOT CONSIDERED FOR ADJUDICATION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 30 TH JUNE, 2016, AT CHENNAI. SD/ - SD/ - ( . ) ( G.PAVAN KUMAR ) ! / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 30 TH JUNE, 2016 K S SUNDARAM &'(()*( +* / COPY TO: ( 1 . / APPELLANT 3. ( ,(- . / CIT(A) 5. */0 (1 / DR 2. / RESPONDENT 4. ( , / CIT 6. 02(3 / GF