A.C.I.T Cir - 2,Durgapur, Durgapur V. Sri Rajan Babu, Durgapur

ITA 2196/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1891 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-11-2016
• Assessment Year: misc
• Appeal Filed On: 02-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VARKEY JUDIC IA L M EMBER
• Keywords: Business expenditure; Fair market value
• Section: 143(3); 133(6); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI ABY.T VARKEY, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 2196 / KOL / 2013 ASSESSMENT YEAR :2010-11 ACIT, CIRCLE- 2,DURGAPUR, AAYAKAR BHAWAN ANNEXE, CITY CENTRE, DURGAPUR-16 V/S . SRI P.RAJAN BABU GN-43, GRISSOM STREET, BIDHAN NAGAR, DURGAPUR-12 [ PAN NO.AICPB 5668 H ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI JOHN VINCENT DONKUPAR LANGSTICH, CIT-DR /BY RESPONDENT SHRI MIRAJ D SHAH, AR /DATE OF HEARING 08-02-2017 /DATE OF PRONOUNCEMENT 26-04-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-DURGAPUR DATED 15.05.2013. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-2 DURGAPUR U/ S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 28.03.2013 FOR ASSESSMENT YEAR 2010-11. SHRI JOHN VINCENT DONKUPAR LANGSTICH, LD. DEPARTMEN TAL REPRESENTATIVE REPRESENTED ON BEHALF OF REVENUE AND SHRI MIRAJ D. SHAH, LD. AUTHORIZED REPRESENTATIVE APPEARED ON BEHALF OF ASSESSEE. ITA NO.2196/KOL/2013 A.Y. 2010-11 ACIT, CIR-2,DGP VS. SH P.RAJAN BABU PAGE 2 2. FIRST ISSUE IN GROUND NO. 1 TO 3 ARE INTER-RELA TED AND THEREFORE BEING TAKEN UP TOGETHER WHERE THE DISPUTE WAS RAISED BY T HE REVENUE IS WHETHER THE LD CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO FOR RS. 40 CRORES ON ACCOUNT OF NON-BUSINESS EXPENSES. 3. IN THIS CONTEXT THE RELEVANT FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF CONTRACT JOBS AND SA LES. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CLAIMED THE EXPENSES U NDER THE HEAD ERECTION AND COMMISSIONING AND ENGINEERING SERVICES FOR AN AMOUNT OF RS. 44.12 CRORES. THE SAID EXPENSES WAS CLAIMED TO HAVE PAID TO M/S RAUNAK INFRASTRUCTURE LIMITED (FOR SHORT RIL) FOR GETTING THE ASSISTANCE TO CARRY OUT FABRICATION JOB. HOWEVER, ON QUESTION BY THE AO ABO UT THE DETAILS OF QUANTUM AND VOLUME OF WORKS/ASSISTANCE PROVIDED BY RIL, THE ASSESSEE FAILED TO FURNISH THE SAME. RIL, IN RESPONSE TO THE NOTICE ISSUED U/S 133(6) OF THE ACT HAS CONFIRMED THAT THE AFORESAID PAYMENT WAS MADE BY THE ASSESSEE ON A CCOUNT OF ENGINEERING SERVICES PROVIDED BY IT IN THE FINANCIAL YEAR 2009- 10. 3.1 HOWEVER, THE AO MADE CERTAIN OBSERVATIONS DURIN G ASSESSMENT PROCEEDINGS AS DETAILED UNDER:- 1) ON PERUSAL OF AGREEMENT BETWEEN THE ASSESSEE AND RIL, IT WAS FOUND THAT THE ACTIVITY WAS LIMITED TO THE SUBMISSI ON OF TENDERS AND LIAISON WORK. THERE WAS NO CLAUSE IN THE AGREEMENT SPEAKING ABOUT THE FABRICATION WORK OR ENGINEERING SERVICES. 2) MOREOVER RIL ALSO FAILED TO PROVIDE THE NAMES AN D ADDRESSES OF THE PROFESSIONALS ENGAGED IN PROVIDING THE SERVICES TO THE ASSESSEE. 3) RIL IS PRIMARILY ENGAGED IN THE BUSINESS OF PURC HASE AND SALE OF SHARES. THUS RIL HAD NO RESOURCES, EXPERTISE OR EXP ERIENCE FOR RENDERING THE SERVICES IN THE NATURE OF FABRICATION OR ENGINEERING. ITA NO.2196/KOL/2013 A.Y. 2010-11 ACIT, CIR-2,DGP VS. SH P.RAJAN BABU PAGE 3 4) RIL IN THE YEAR UNDER CONSIDERATION HAS SHOWN NE T PROFIT OF RS. 53,19,121.00 ONLY IN SPITE OF THE FACT THAT IT HAS RECEIVED AN INCOME EXCEEDING RS. 44.12 CRORES. IN THE LIGHT OF THE ABOVE OBSERVATION OF AO, THE AS SESSEE ALSO RESPONDED THAT THE PAYMENT WAS MADE TO RIL FOR THE IMPLEMENTATION OF FERRO ALLOYS PLANT CONSISTING OF DESIGNING, ENGINEERING SUPPLY ELECTIO N SUPERVISION AND INSTALLATION TESTING COMMISSIONING OF THE ENTIRE SY STEM. RIL RAISED THE INVOICES TO THE ASSESSEE INCLUDING THE AMOUNT OF SERVICE TAX WHICH WAS PAID GOVERNMENT EXCHEQUER. SIMILARLY THE ASSESSEE MADE T HE PAYMENT TO RIL AFTER DEDUCTING THE TDS. HOWEVER THE AO OBSERVED THAT NO ENGINEERING SERVICE S WERE PROVIDED BY RIL AND THE PURPOSE OF MAKING THE PAYMENT IS TO REDUCE THE PROFIT OF THE ASSESSEE. MOREOVER, THE AMOUNT OF PAYMENT IS EXCESS IVE & UNREASONABLE AS PER THE PROVISIONS OF SECTION 40A(2) OF THE ACT. AC CORDINGLY, THE AO DISALLOWED THE SUM OF RS. 40 CRORES AND ADDED TO THE TOTAL INC OME OF THE ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. C IT(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT THE IMPUGNED P AYMENT WAS MADE FOR THE EXECUTION OF THE WORK AWARDED TO RIL. THERE WAS NO RELATION BETWEEN THE ASSESSEE AND RIL AS ENVISAGED UNDER SECTION 40A(2) OF THE ACT. THUS THERE IS QUESTION OF INVOKING THE PROVISIONS OF SECTION 40A( 2) OF THE ACT. THE ENTIRE TRANSACTION WAS MADE AFTER COMPLYING THE PROVISIONS OF SERVICE TAX AND TDS. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HAS DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- IN MY OPINION, THERE IS A CONTRADICTION IN THE A.O' S STAND. WHILE NOTING HIS ARGUMENTS HE IS SEEN TO ARGUE THAT THE SAID EXPENDI TURE IS BOGUS WHEREAS THE DISALLOWANCE HAD BEEN MADE ON THE GROUNDS THAT IT I S EXCESSIVE OR UNREASONABLE KEEPING IN VIEW THE FAIR MARKET VALUE OF GOODS AND SERVICES. HOWEVER, THE ENTIRE AMOUNT OF COMMISSION CHARGED IN THE APPELLANT'S P&L ALE. IS SEEN TO HAVE BEEN DISALLOWED. THE A.O. HAS ALSO MENTIONED THAT IT HAS BEEN ESTABLISHED THAT NO FABRICATION AND ENGINEERIN G SERVICES HAVE BEEN PROVIDED. HOWEVER, IN THE ASSESSMENT ORDER [ DO NOT FIND ANY FACTS BROUGHT ON RECORD BY THE A.O. WHICH CAN BE SAID TO HAVE ESTABL ISHED THIS PROPOSITION. NO FACTS ARE ON RECORD TO HOLD THAT TRANSACTION IN QUE STION IS A SHAM TRANSACTION ENTERED INTO BY THE APPELLANT TO REDUCE HIS PROFIT. IN MY OPINION, SUSPICION CANNOT BE A SUBSTITUTE FOR FACTS. THE ASSESSMENT OR DER IS SILENT ON ANY ITA NO.2196/KOL/2013 A.Y. 2010-11 ACIT, CIR-2,DGP VS. SH P.RAJAN BABU PAGE 4 ENQUIRIES MADE WITH THE PRINCIPAL WHO HAD AWARDED T HE CONTRACT TO THE APPELLANT. NO MENTION OF ANY FURTHER CORRESPONDENCE WITH ACIT, CENTRAL CIRCLE-2, WHO HAD GIVEN THE INITIAL INFORMATION, IS ON RECORD. THE A.O. APPEARS TO HAVE ACTED IN ISOLATION. RATHER THE A.O. APPEARS TO BE ARGUING THAT THE PROVISION OF FABRICATION AND ENGINEERING SERVICES D O NOT FIND ANY PLACE IN THE AGREEMENT BETWEEN THE APPELLANT'S PROPRIETARY CONCE RN AND M/S. RAUNAQ INFRASTRUCTURE LTD. AND THEREFORE, BY IMPLICATION T HE PAYMENT COULD NOT HAVE BEEN MADE FOR SUCH SERVICES. WHAT THE PRINCIPAL CON TRACT WAS OR WHAT IT ENTAILED DOES APPEAR TO HAVE BEEN GONE INTO BY THE A.O. AS DISCUSSED IN THE ASSESSMENT ORDER, THE AGREEMENT CALLED FOR SPECIFIC DUTIES TO BE CONDUCTED BY THE CONSULTANT. THERE ARE NO FINDINGS OF FACT IN TH E ORDER TO THE EFFECT THAT SUCH DUTIES WERE NOT PERFORMED BY THE SAID CONSULTANT. I ALSO FIND THAT ULTIMATELY THE A.O. HAS NOT DOUBTED THAT CERTAIN SERVICES WERE IND EED PROVIDED TO THE APPELLANT BY M/S.RAUNAQ INFRASTRUCTURE LTD. THIS IS CLEAR FROM HIS INVOCATION OF SECTION 40A(2) WHICH CALLS FOR A DISALLOWANCE OF SU CH EXPENDITURE WHICH IS FOUND TO BE UNREASONABLE OR EXCESSIVE GIVEN THE NAT URE OF SERVICES PROVIDED. SECTION 40A(2)(B) FURTHER IDENTIFIES THE PERSONS TH E PAYMENTS TO WHOM WOULD COME UNDER THE AMBIT OF SECTION 40A(2). IN THE CASE OF AN INDIVIDUAL, IT WOULD BE ANY RELATIVE OF SUCH INDIVIDUAL OR ANY INDIVIDUA L WHO HAS A SUBSTANTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THE ASSES SEE OR ANY OTHER RELATIVE OF SUCH INDIVIDUAL. IN THIS CASE THE APPELLANT HAS CLA IMED THAT HE HAS NO FAMILY RELATIONSHIP WITH THE DIRECTORS OF M/S.RAUNAQ INFRA STRUCTURE LTD. NOR DOES HE HAVE ANY FINANCIAL INTEREST IN ITS BUSINESS OR VICE VERSA. IT IS SEEN THAT THE A.O'S ORDER IS SILENT ON THESE ASPECTS. IT IS PRESU MED THEREFORE THAT NO SUCH RELATIONSHIP AS IS ENVISAGED IN THE PROVISIONS OF S ECTION 40A(2)(B) EXISTS BETWEEN THE APPELLANT AND M/S. RAUNAQ INFRASTRUCTUR E LTD. THIS IN MY VIEW IS THE MAJOR IMPEDIMENT TO THE INVOCATION OF SECTION 4 0A(2) WHICH THE A.O. APPEARS TO HAVE OVERLOOKED. FURTHERMORE, I FIND NO ENQUIRY IN THE ORDER TO ESTABLISH WHAT COULD BE THE ALL MARKET VALUE OF THE GOODS AND SERVICES PROVIDED. THIS BECOMES IMPORTANT BECAUSE BY THE A.O 'S OWN ADMISSION CERTAIN SERVICES HAVE UNDENIABLY BEEN PROVIDED TO T HE APPELLANT BY M/S. RAUNAQ INFRASTRUCTURE LTD. WHAT APPEARS TO HAVE BEE N CALLED INTO QUESTION BY THE A.O. IS THE REASONABLENESS OF PAYMENT MADE FOR SUCH SERVICES. AS ALREADY DISCUSSED NO YARDSTICK FOR DECIDING SUCH RE ASONABLENESS HAS BEEN DELIBERATED UPON BY THE A.O. IN HIS ORDER MUCH LESS ANY FACTS OR EVIDENCE BEING BROUGHT ON RECORD TO SHOW THAT THE PAYMENT HA S BEEN EXCESSIVE OR UNREASONABLE. IN VIEW OF THE DISCUSSION ABOVE, IT I S HELD THAT THE RELATIONS BETWEEN M/S. RAUNAQ INFRASTRUCTURE AND THE APPELLA NT DO NOT COME WITHIN THE PROHIBITED BOUNDARIES AS DISCUSSED IN SECTION 40A(2 )(B). IT IS FURTHER HELD THAT NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO HOLD THAT THE PAYMENT MADE HAS BEEN EXCESSIVE. IN VIEW OF THAT THE DISALLOWANCE MA DE IS DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. BEING AGGRIEVED BY THE ORDER OF LD CIT(A) THE REVEN UE IS IN APPEAL BEFORE US. 5. THE LD DR BEFORE US SUBMITTED THAT THE COMMISSIO N WAS PAID TO THE RIL FOR LIAISON OF THE TENDER WORK AND NO SERVICES IN F ACT WERE RENDERED BY THE ITA NO.2196/KOL/2013 A.Y. 2010-11 ACIT, CIR-2,DGP VS. SH P.RAJAN BABU PAGE 5 PARTY TO THE ASSESSEE. THE LD. DR RELIED ON THE ORD ER OF AO WHEREAS THE LD AR REITERATED THE ARGUMENTS THAT WERE MADE BEFORE THE LD CIT(A) AND HE RELIED ON THE ORDER OF LD CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE SUBMISSIONS MADE BY BOTH THE SIDES AND ORDERS OF THE LOWER AUTH ORITIES. PUT SHORTLY, THE FACTS NECESSARY FOR ADJUDICATION OF THE PRESENT APP EAL AS NARRATED THEREIN ARE THAT THE AO HAS TREATED THE IMPUGNED PAYMENT AS UNR EASONABLE AND EXCESSIVE. THUS, THE AO OBSERVED THAT THE IMPUGNED PAYMENT WAS TO REDUCE THE AMOUNT OF PROFIT OF THE ASSESSEE UNDER SECTION 40A(2) OF THE ACT. HOWEVER, THE LD CIT(A) FOUND THAT THE PROVISIONS OF SECTION 40A(2) TO THE INSTANT TRANSACTION ARE NOT APPLICABLE. THERE WAS N O DEFECT IN THE EXPENSES CLAIMED BY THE ASSESSEE FOR THE IMPUGNED PAYMENT. T HE EXPENSES WERE DULY DISCLOSED BY THE PAYEE AND THE PAYER IN ITS BOOKS O F ACCOUNTS. IN THE LIGHT OF ABOVE DISCUSSIONS, WE, AT THE OUTSE T FIND THAT THE PROVISIONS OF SECTION 40A(2) ARE NOT APPLICABLE TO THE INSTANT TR ANSACTION. THE PROVISIONS OF SECTION 40A(2) OF THE ACT CAN BE INVOKED IN THE SPE CIFIED FACTS AND CIRCUMSTANCES, IF A PARTICULAR TRANSACTION DOES NOT MEET THE CONDITIONS LAID DOWN UNDER THE PROVISIONS OF SECTION 40A(2) OF THE ACT THEN THE SAME PROVISIONS CANNOT BE APPLIED. THE RELEVANT EXTRACT OF THE PROVISIONS OF SECTION 40A(2) OF THE ACT READS AS UNDER : [ EXPENSES OR PAYMENTS NOT DEDUCTIBLE IN CERTAIN CIRC UMSTANCES . 40A . (1) THE PROVISIONS OF THIS SECTION SHALL HAVE EF FECT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER PRO VISION OF THIS ACT RELATING TO THE COMPUTATION OF INCOME UNDER THE HEAD ' PROFITS AND GAINS OF BUSINESS OR PROFESSION '. (2)(A) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REF ERRED TO IN CLAUSE (B) OF THIS SUB-SECTION, AND THE [ASSESSING] OFFICE R IS OF OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVIN G REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILIT IES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSI NESS OR PROFESSION OF THE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUI NG TO HIM THERE FROM, SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY H IM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION .' ITA NO.2196/KOL/2013 A.Y. 2010-11 ACIT, CIR-2,DGP VS. SH P.RAJAN BABU PAGE 6 [PROVIDED THAT NO DISALLOWANCE, ON ACCOUNT OF ANY EXPENDITURE BEING EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE AIR MARKET VALUE, SHALL BE MADE IN RESPECT OF A SPECIFIED DOMESTIC TRANSACT ION REFERRED TO IN SECTION 92BA, IF SUCH TRANSACTION IS AT ARMS LENGT H PRICE AS DEFINED IN CLAUSE (II) OF SECTION 92F.] A PLAIN LOOK AT THE ABOVE STATUTORY PROVISION MAKES IT CLEAR THAT THE AO HAS TO JUSTIFY THAT THE EXPENDITURE IS EXCESSIVE OR UNREAS ONABLE HAVING REGARD TO THE FAIR MARKET VALUE. BESIDES THE PAYMENT SHOULD BE TO THE PERSONS AS SPECIFIED UNDER SECTION 40A(2)(B) OF THE ACT. IN THE INSTANT CASE THE AO HAS NOT BROUGHT ANYTHING ON RECORD BY WHICH THE SAID PROVISIONS CAN BE ATTRACTED TO THE INSTANT TRANSACTIONS OF COMMISSION PAYMENT. BESIDES THE ABOVE, WE ALSO FIND THE PAYMENT HAS BEE N MADE BY THE ASSESSEE TO RIL WHICH HAS BEEN DISCLOSED BY THE ASSESSEE AND THE PARTY. RIL HAS ALSO CONFIRMED THE SAID TRANSACTIONS IN RESPONSE TO THE NOTICE ISSUED U/S 133(6) OF THE ACT. CONSIDERING THE FACTS IN TOTALITY, WE ARE OF THE VIEW THAT THE AO HAS MADE THE DISALLOWANCE ON HIS SURMISE AND CONJECTURE . THE AO ALSO FAILED TO BRING ANYTHING ON RECORD TO JUSTIFY THE SAID PAYMEN T AS EXCESSIVE AND UNREASONABLE. TO CLAIM ANY PAYMENT AS UNREASONABLE OR EXCESSIVE, THERE HAS TO BE SOME BASIS FOR FRAMING SUCH ALLEGATION. IN VI EW OF ABOVE REASONING, WE HOLD THAT THE ORDER OF THE LD. CIT(A) IS CORRECT AN D IN ACCORDANCE WITH LAW AND NO INTERFERENCE IS CALLED FOR. WE HOLD ACCORDINGLY. HENCE, THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 7. NEXT ISSUE RAISED BY REVENUE IN GROUND NO. 4 & 5 IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY AO FOR 1,20,975/- ON ACCOUNT OF NON- DEDUCTION OF TAX DEDUCTED AT SOURCE (TDS FOR SHORT) . 8. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS INCURRED EXPENSE UNDER THE HEAD TRANSPORT CHARGES DETAILED AS UNDE R:- ON 13.01.2010 NIRMAL KANTI A/C RS. 25,000/- ON 15.03.2010 SIVAM TRANSPORT A/C RS. 47,339/- ON 31.03.2010 BISWAS TRANSPORT RS. 48,636/- TOTAL RS.1,20,975/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE PAYMENTS IN EACH CASE HAS BEEN MADE EXCEEDING 20,000/- AND THEREFORE ITA NO.2196/KOL/2013 A.Y. 2010-11 ACIT, CIR-2,DGP VS. SH P.RAJAN BABU PAGE 7 SUCH EXPENSES ARE SUBJECT TO THE DEDUCTION OF TDS. ACCORDINGLY, AO DISALLOWED THE SAME ON ACCOUNT OF NON-DEDUCTION OF TDS AND ADDED THE AMOUNT OF 1,20,975/- TO THE TOTAL INCOME OF ASSESSEE. 9. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO DELETED THE ADDITION MADE BY AO BY OBSERVING AS UND ER:- IN THIS GROUND THE APPELLANTS ACTION IN DISALLOWI NG U/S. 40(A)(IA) TRANSPORTATION CHARGES PAID BY HIM. THE ASSESSING O FFICER'S CASE IS THAT NO TDS HAS BEEN MADE ON THESE PAYMENTS INCURRED BY THE APPELLANT AND CONSEQUENTLY HE HAD DISALLOWED THE PAYMENTS MAD E. THE APPELLANT HAS NOT DENIED THAT TDS WAS NOT MADE. HIS CONTENTIO N IS THAT NO CONTRACT EXISTED BETWEEN HIM AND THE PERSONS TO WHO M THE PAYMENTS WERE MADE. THE APPELLANT HAD CITED THE CASE OF M/S RAKSHIT TRANSPORT ( 261/KOL/2009 DATED 11.09.2009 ) DECIDED BY HON'BLE ITAT KOLKATA, IN SUPPORT OF ITS STAND. PERUSAL OF THE FACTS OF THE C ASE REVEALED THAT IT IS NOT THE ASSESSING OFFICER'S CASE THAT THERE EXISTED ANY CONTRACT BETWEEN THE PERSONS TO WHOM THE PAYMENTS HAD BEEN MADE AND THE APPELLANT. IN VIEW OF THAT, IN MY OPINION, THE DECISION OF THE HON'BLE ITAT, KOLKATA, IN THE CASE OF M/S RAKSHIT TRANSPORT APPLIES SQUARE LY TO THE ACTS OF THE PRESENT CASE. RESPECTFULLY FOLLOWING THE SAID DECIS ION THE DISALLOWANCE MADE IS DIRECTED TO BE DELETED. THIS GROUND OF APPE AL IS ALLOWED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 4. THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWIN G RELIEF AGAINST ADDITION MADE TO THE SCORE OF RS.1,20,975/- PURSUANT TO PROV ISION OF SEC. 40(A)(IA) WITHOUT APPRECIATING THE FACT THAT VERBAL CONTRACT IS ALSO A CONTRACT. 5. THAT THE RELIEF ALLOWED BY LD. CIT(A) AGAINST AD DITION MADE FOR VIOLATION OF SEC. 40(A)(IA) CHALLENGES THE BASIC STATUTE OF THE CONCERNED PROVISION AS ENACTED IN IT ACT, 1961. 10. BEFORE US BOTH PARTIES RELIED ON THE ORDER OF A UTHORITIES BELOW AS FAVORABLE TO THEM. 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORDS. T HE ISSUE IN THE INSTANT CASE RELATES TO THE NON-DEDUCTION OF TDS ON THE AMOUNT O F PAYMENT MADE TO THE TRANSPORTERS. IN THE INSTANT CASE THE FACT IS NOT I N DISPUTE THAT THE PAYMENT WAS MADE BY THE ASSESSEE TO THE TRANSPORTERS AND THERE WAS NO CONTRACTOR BETWEEN THE ASSESSEE AND THE SAID TRANSPORTERS. IN SIMILAR FACTS AND ITA NO.2196/KOL/2013 A.Y. 2010-11 ACIT, CIR-2,DGP VS. SH P.RAJAN BABU PAGE 8 CIRCUMSTANCES OF THE CASE, THE HON'BLE JURISDICTION AL HIGH COURT HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE IN THE CASE OF CIT VS. M/S STUMM INDIA IN ITA NO. 127 OF 2009 AND RELEVANT EXTRACT IS REPRODUCED BELOW:- IT IS URGED BEFORE US THAT THE LEARNED TRIBUNAL OU GHT NOT TO HAVE ACCEPTED THE JUDGMENT AND ORDER OF THE CIT (APPEAL) WHO HAS QUASHED THE DISALLOWANCE OF DEDUCTION OF RS.41,33,710/- AND ON ACCOUNT OF TAX DEDUCTION AT SOURCE. THE LEARNED TRIBUNAL HAS RECOR DED THE FACT THAT THE DEPARTMENT HAS NOT BEEN ABLE TO BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS MADE THE PAYMENT TO THE TRANS PORTERS IN PURSUANCE OF CONTRACT FOR CARRIAGE OF GOODS OF THE ASSESSEE AND THE QUESTION OF DEDUCTION AT SOURCE UNDER SECTION 194C DOES NOT AND CANNOT ARISE. IN VIEW OF ABOVE, WE FIND THAT THE FACTS OF ASSESSE ES CASE ARE EQUALLY APPLICABLE TO THE FACTS OF THE CASE OF M/S STUMM INDIA (SUPRA). CONSIDERING THE FACTS AND CIRCUMSTANCES AND CITED CASE LAW, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). THE GROUND RA ISED BY REVENUE IS DISMISSED. 12. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 26/ 04/2017 SD/- SD/- (ABY. T. VARKEY) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 26 / 04 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ACIT, CIRCLE-2, DURGAPUR, AAYAKAR BHAWAN , AANNEXE, CITY CENTRE, DURG APUR-16 2. /RESPONDENT-SRI P.RAJAN BABU, GN-43, GRISSOM STREET BIDHAN NAGAR, DURGAPUR-12 3. ) *+ , , - / CONCERNED CIT KOLKATA 4. , , -- / CIT (A) KOLKATA 5. 012 33*+, , *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , , /TRUE COPY/ / , *+ ,