The DCIT, Circle-1, Rajahmundry V. Shri Kothuri Subba Raju, Rajahmundry

ITA 228/VIZ/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50209 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 01-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SINGH
• Section: 194C

Judgement Text

ITA NO 228 OF 2010 KOTHURI SUBBA RAJU RAJAHMUNDRY PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.228/VIZAG/2010 ASSESSMENT YEAR: 2007-08 DY.COMMISSIONER OF INCOME TAX CIRCLE-1 RAJAHMUNDRY VS. KOTHURI SUBBA RAJU, RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO: AERPK 2584 G DEPARTMENT BY: SHRI R.K. SINGH, DR ASSESSEE BY: SHRI G.V.N. HARI, CA ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 18.1.2010 PASSED BY LEARNED CIT(A), RAJAHMUNDRY AND IT RELATES TO THE ASSESSMENT YEAR 2007-08. 2. THOUGH THE REVENUE HAS RAISED AS MANY AS 9 GROUN DS, ALL OF THEM ARE DIRECTED AGAINST THE DECISION OF THE LEARN ED CIT (A) IN DELETING THE ADDITION OF ` 1.78 CRORES MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF THE ACT. 3. THE FACTS RELATING TO ISSUE CASE ARE STATED IN B RIEF. THE ASSESSEE IS AN INDIVIDUAL AND IS CARRYING ON THE BUSINESS OF UNDERTAKING CIVIL CONTRACT WORKS. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE ASSESSING OFFICER NOTICED THAT MOST OF THE VOUCHERS PRODUCED IN SUPPORT OF EXPENDITURES ARE NOT VERIFIABLE. ACCORDI NGLY HE REJECTED THE ITA NO 228 OF 2010 KOTHURI SUBBA RAJU RAJAHMUNDRY PAGE 2 OF 5 BOOKS OF ACCOUNT AND ESTIMATED THE INCOME. THE ASSE SSEE HAD CLAIMED A SUM OF `1.78 CRORES AS EXPENDITURE TOWARDS LABOUR PAYMENTS IN HIS PROFIT AND LOSS ACCOUNT. ON VERIFIC ATION OF CONCERNED VOUCHERS, THE ASSESSING OFFICER HAS NOTICED THAT TH E PAYMENT HAS BEEN MADE IN EXCESS OF ` 20,000/- TO A SINGLE PERSON AND THE AGGREGATE PAYMENTS MADE TO SUCH PERSON IN THE FINAN CIAL YEAR EXCEEDED ` 50,000/-. ACCORDINGLY THE ASSESSING OFFICER FORMED THE VIEW THAT THE ASSESSEE SHOULD HAVE DEDUCTED THE TAX AT SOURCE UNDER SECTION 194C OF THE ACT ON SUCH PAYMENTS. SINCE TH E ASSESSEE HAS FAILED TO DEDUCT THE TAX AT SOURCE, THE ASSESSING O FFICER DISALLOWED THE SAID SUM OF ` 1.78 CRORES BY INVOKING THE PROVISIONS OF SEC.40(A) (IA) OF THE ACT. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT (A) AND WON IN THE APPEAL. HENCE TH E REVENUE IS IN APPEAL BEFORE US ASSAILING THE DECISION OF THE LEAR NED CIT (A). 4. THE LEARNED CIT, WHO WAS GIVEN TRIBUNAL CHARGE, HAS FILED WRITTEN SUBMISSIONS AND THE SAME WAS TAKEN ON RECOR D. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSING OFFICER HAS ERRED IN ASSUMING THAT THE IM PUGNED LABOUR CHARGES HAS BEEN PAID TO A SINGLE INDIVIDUAL WITHOU T APPRECIATING THE FACT THAT THE SAID LABOUR CHARGES HAVE BEEN PAID TO MANY WORKERS THROUGH THE LABOUR MAISTRIES AND ONLY FOR THE SAKE OF CONVENIENCE, THE ASSESSEE HAS ENTERED THE NAME OF CONCERNED LABOUR M AISTRY IN THE BOOKS OF ACCOUNT. THE LEARNED AUTHORISED REPRESENTATIVE ALSO ITA NO 228 OF 2010 KOTHURI SUBBA RAJU RAJAHMUNDRY PAGE 3 OF 5 SUBMITTED THAT THE ASSESSING OFFICER, AFTER REJECTI NG THE BOOKS OF ACCOUNT OF THE ASSESSEE, SHOULD NOT HAVE RELIED UPO N THE SAME BOOKS FOR MAKING IMPUGNED DISALLOWANCE UNDER SECTION 40(A )(IA) OF THE ACT. THE LEARNED AUTHORISED REPRESENTATIVE ALSO SUBMITTE D THAT THE PROVISIONS OF SEC.194C DO NOT APPLY TO THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AS THE ASSESSEE HEREIN IS AN IN DIVIDUAL. IN THIS REGARD, HE SUBMITTED THAT THE PROVISIONS OF SEC.194 C WERE MADE APPLICABLE TO THE INDIVIDUAL ASSESSEES ONLY W.E.F. 1.6.2007. HENCE THE ASSESSING OFFICER IS WRONG IN LAW IN MAKING THE IMP UGNED DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT FOR NON-COMPLIANCE OF THE PROVISIONS OF SEC. 194C, AS THE SAID SECTION IS NOT APPLICABLE TO THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 6. WE HAVE HEARD THE LEARNED AUTHORISED REPRESENTAT IVE AND ALSO GONE THROUGH THE WRITTEN SUBMISSIONS FILED BY THE L EARNED CIT AND RECORD. THE UNDISPUTED FACT IS THAT THE PROVISIONS OF SEC.194C ARE MADE APPLICABLE TO INDIVIDUAL ASSESSEES W.E.F. 1.6. 2007, MEANING THEREBY THE SAID PROVISIONS ARE NOT APPLICABLE TO T HE ASSESSEE HEREIN FOR THE YEAR UNDER CONSIDERATION, I.E. ASSESSMENT Y EAR 2007-08. IN SUPPORT OF THIS CONTENTION, THE LEARNED A.R RELIED UPON THE ORDER DATED 18.8.2009 PASSED BY THIS IN THE CASE OF K. SA NDILYA IN ITA NO.522/VIZAG/2008, WHEREIN SIMILAR VIEW HAS BEEN EX PRESSED. THE NEXT CONTENTION OF THE ASSESSEE IS THAT THE IMPUGNE D PAYMENTS HAVE NOT BEEN MADE TO A SINGLE INDIVIDUAL AS ASSUMED BY THE ASSESSING OFFICER, BUT THE SAME HAS BEEN PAID TO VARIOUS WORK ERS THROUGH LABOUR MAISTRIES. THE QUESTION IS WHETHER SUCH TYPE OF PAYMENTS ATTRACTS THE PROVISIONS OF 194C OF THE ACT. IN THI S REGARD, THE LEARNED A.R PLACED RELIANCE ON THE ORDER DATED 18.11.2010 P ASSED BY THIS ITA NO 228 OF 2010 KOTHURI SUBBA RAJU RAJAHMUNDRY PAGE 4 OF 5 BENCH IN THE CASE OF R. SUBBA RAJU IN ITA NO.235/VI ZAG/2008. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE RELEV ANT OBSERVATIONS MADE IN THE ORDER OF R.SUBBA RAJU, CITED (SUPRA). 10. FROM A CAREFUL PERUSAL OF THE ORDERS OF THE LO WER AUTHORITIES, WE DO NOT FIND THAT REVENUE HAS EVER DOUBTED THE GENUINENESS OF THE PAYMENT TO THE LABOURERS. THEREFORE, THE ISSUE BEFORE US IS; WHETH ER SUCH TYPE OF PAYMENTS ATTRACTS THE DEDUCTION OF TDS UNDER SECTION 194C OF THE ACT?. NOTHING IS PLACED O N RECORD BY THE REVENUE TO ESTABLISH THAT ASSESSEE HA S EVER SUBLETTED OR ASSIGNED ITS CONTRACT TO THE PERS ONS TO WHOM THE PAYMENTS WERE MADE. IN THE ABSENCE OF THE EVIDENCE, THE CONTENTION OF THE ASSESSEE THAT HE HA S MADE THE PAYMENT TO GROUP LEADERS OF THE LABOURERS I.E. MISTRIES OR THE BELDARS ON THEIR BEHALF AND THEY WE RE WORKING AT THE JURISDICTION OF THE CONTRACTOR I.E. ASSESSEE OR ITS AGENT CANNOT BE OUT RIGHTLY REJECTE D. THEREFORE, PROVISIONS OF SECTION 194C ARE NOT ATTRA CTED. WE ACCORDINGLY DO NOT FIND OURSELVES IN AGREEMENT W ITH THE OBSERVATION OF THE CIT (A) MADE IN THIS REGARD. WE THEREFORE, SET ASIDE THE ORDER OF THE CIT (A) ARE D IRECT THE A.O TO ALLOW THE PAYMENT MADE UNDER THE HEAD LABOUR CHARGES TO THE GROUP LEADERS OF THE LABOUR ERS. FROM THE DETAILS AVAILABLE AT PG.NO. 7 & 8 OF THE ASSESSMENT ORDER WITH REGARD TO THE DISALLOWANCE UN DER SECTION 40(A)(IA) OF THE ACT, WE FIND THAT ASSESSEE HAS ALSO MADE PAYMENT TO SOME OTHER PARTIES WHICH WERE ALSO DISALLOWED AFTER INVOKING THE PROVISIONS OF SEC.194C OF THE I.T. ACT. BUT IN THIS REGARD NO ARG UMENT WAS ADVANCED BY THE LEARNED COUNSEL FOR THE ASSESSE ES. WE THEREFORE, CONFIRM THE ORDER OF THE CIT (A) ON T HOSE ISSUES. ACCORDINGLY, THE MATTER IS RESTORED TO THE FILE OF THE A.O FOR RECALCULATION OF THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT IN TERMS INDICATED ABO VE. FROM THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER IS NOT CORRECT IN INVOKING THE PROVISIONS O F SEC. 40(A)(IA) OF THE ACT FOR NON-COMPLIANCE OF SEC. 194C IN RESPECT OF LABOUR PAYMENTS. WE NOTICE THAT THE LEARNED CIT(A) HAS DELETED THE I MPUGNED ADDITION ITA NO 228 OF 2010 KOTHURI SUBBA RAJU RAJAHMUNDRY PAGE 5 OF 5 AFTER TAKING A SIMILAR VIEW. HENCE WE DO NOT FIND ANY REASON TO INTERFERE WITH THIS DECISION. SINCE WE HAVE AFFIRM ED THE ORDER OF THE LEARNED CIT(A), WE DO NOT FIND IT NECESSARY TO ADDR ESS THE THIRD LIMB OF CONTENTION OF THE LEARNED A.R. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON 25 TH MAY, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT M EMBER PVV/SPS VISAKHAPATNAM, DATE:25-05-2011 COPY TO 1 THE DY.COMMISSIONER OF INCOME TAX CIRCLE - 1 RAJAHMUNDRY 2 SHRI KOTHURI SUBBA RAJU, 79 - 7 - 4, OFFICIAL COLONY, SYAMALA NAGAR, RAJAHMUNDRY 3 4. THE CIT RAJAHMUNDRY THE CIT(A), RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM