JITENDRA MANSUKHLAL SHAH, MUMBAI V. DCIT CIR 45, MUMBAI

ITA 2293/MUM/2013

• Counselvise Citation: 229319914 RSA 2013
• Duration Of Justice: 1 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 28-08-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 22-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Assessee Lawyers: PRAKASH JHUNJHUNWALA; KETA N JAIN
• Section: 234B; 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI . . , . . , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI R.C.SHARMA , ACCOUNTANT MEMBER ITA NO.2293/MUM/2013(A.Y. 2005-06) ITA NO.2294/MUM/2013(A.Y. 2006-07) SHRI JITENDRA MANSUKHLAL SHAH, 191, PILLA BUILDING, NAGDEVI STREET, MUMBAI 400 003. PAN:AADPS 1282P (APPELLANT ) VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 45, MUMBAI. (RESPONDENT) APPELLANT BY : S/SHRI PRAKASH JHUNJH UNWALA & KETA N JAIN RESPONDENT BY : SHRI A KHILENDRA YADAV DATE OF HEARING : 04/03/2015 DATE OF PRONOUNCEMENT : 04 /03/2015 ORDER PER I.P.BANSAL, J.M: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AND THEY ARE DIRECTED AGAINST CONSOLIDATED ORDER PASSED BY LD. CIT(A)-38, MUMBAI DATED 19/12/2012 FOR ASSESSMENT YEAR 2005-06 AND 2006-07. 2. IT MAY BE MENTIONED HERE THAT APART FROM MAIN G ROUNDS OF APPEAL THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND AGITAT ING THE VALIDITY OF REOPENING OF THE ASSESSMENT. HOWEVER, DURING THE COURSE OF HEAR ING LD. AR DID NOT PRESS ANY ITA NO.2293/MUM/2013(A.Y. 2005-06) ITA NO.2294/MUM/2013(A.Y. 2006-07) 2 GROUNDS EXCEPT GROUND NO. 4(B) AND THE FACT THAT HE DID NOT PRESS OTHER GROUNDS IS MENTIONED ON THE GROUND OF APPEAL ITSELF ON THE DAT E OF HEARING. GROUND NO.4 IN BOTH THE APPEALS READ AS UNDER: GROUND NO.4: IN ITA NO.2293/MUM/2013: 4.0 THE LD. CIT(A) BEFORE CONFIRMING THE DISALLOWA NCE U/S. 40(A)(IA) R.W.S. 194C OF LABOUR CHARGES OF RS. 1,35,05,623/- OUGHT T O HAVE APPRECIATED THE UNDERSTATED VITAL FACTS, BEING; A) THERE IS NO ORAL OR WRITTEN CONTRACT EXECUTED B Y THE APPELLANT WITH THE LABOURERS. B) THE PROVISION OF SEC. 40(A)(IA) SHALL APPLY ONL Y IN RESPECT OF THE AMOUNTS PAYABLE AT THE END OF THE YEAR AND SHALL NOT APPLY ON THE AMOUNTS ACTUALLY PAID BY THE APPELLANT DURING THE YEAR. C) THE LABOUR CHARGES HAD BEEN PAID AGAINST THE LAB OUR RECOVERIES THEREBY HAVING PROFIT NEUTRAL EFFECTS. GROUND NO.4: IN ITA NO.2294/MUM/2013: 4.0 THE LD. CIT(A) BEFORE CONFIRMING THE DISALLOWA NCE U/S. 40(A)(IA) R.W.S. 194C OF LABOUR CHARGES OF RS.97,93,037/- OUGHT TO H AVE APPRECIATED THE UNDERSTATED VITAL FACTS, BEING; A) THERE IS NO ORAL OR WRITTEN CONTRACT EXECUTED B Y THE APPELLANT WITH THE LABOURERS. B) THE PROVISION OF SEC. 40(A)(IA) SHALL APPLY ONL Y IN RESPECT OF THE AMOUNTS PAYABLE AT THE END OF THE YEAR AND SHALL NOT APPLY ON THE AMOUNTS ACTUALLY PAID BY THE APPELLANT DURING THE YEAR. C) THE LABOUR CHARGES HAD BEEN PAID AGAINST THE LAB OUR RECOVERIES THEREBY HAVING PROFIT NEUTRAL EFFECTS. 3. THE AMOUNT MENTIONED IN GROUND NO.4 FOR EACH OF THE ASSESSMENT YEAR WAS DISALLOWED ON ACCOUNT OF APPLICATION OF SECTION 40( A)(IA) OF THE INCOME TAX ACT, 1961 (THE ACT) FOR THE REASON THAT ASSESSEE DID NOT DEDUCT TAX UNDER SECTION 194C ITA NO.2293/MUM/2013(A.Y. 2005-06) ITA NO.2294/MUM/2013(A.Y. 2006-07) 3 OF THE ACT. LD. AR HAS FURNISHED A CHART DESCRIBIN G THE POSITION, COPY OF WHICH WAS ALSO GIVEN TO LD. DR. THE CHART READ AS UNDER : SUMMARY OF LABOUR CHARGES PAID AND PAYABLE FOR THE ASSESSMENT YEAR 2005-06 & 2006-07: A.Y. 2005-06: PARTICULARS AMOUNT (RS.) LABOUR CHARGES ON WHICH TDS IS NOT DEDUCTED (DISALLOWED IN ASSESSMENT) RS. 1,35,05,623 LESS: LABOUR CHARGES PAID RS. (65,83,283) BALANCE LABOUR CHARGES PAYABLE ON WHICH TDS IS NOT DEDUCTED RS. 69,22,340 A.Y. 2006-07: PARTICULARS AMOUNT (RS.) LABOUR CHARGES ON WHICH TDS IS NOT DEDUCTED (DISALLOWED IN ASSESSMENT) RS. 97,93,037 LESS: LABOUR CHARGES PAID RS. (96,65,685) BALANCE LABOUR CHARGES PAYABLE ON WHICH TDS IS NOT DEDUCTED RS. 1,27,353 IT WAS MENTIONED BY LD. AR THAT TO THE EXTENT LABO UR CHARGES ARE PAID DURING THE YEAR THE ISSUE MAY BE TAKEN AS COVERED IN FAVOUR OF THE ASSESSEE BY THE FOLLOWING DECISIONS: (1) CIT VS. VECTOR SHIPPING SERVICES (P) LTD., ITA- 122/2013 (SC) AND 262 CTR 545 (HC-ALL) (2) MERILYIN SHIPPING & TRANSPORTS VS. ADDL. CIT, 136 ITD 23 (ITAT VISAKHAPATNAM)(SB) COPIES OF THESE DECISIONS ARE FILED IN THE PAPER BO OK AT PAGE 31 TO 33 AND 34 TO 37 RESPECTIVELY. THUS, IT WAS CLAIMED THAT TO THE EX TENT THE AMOUNT IS PAID DURING THE RESPECTIVE YEARS NO DISALLOWANCE SHOULD BE MADE. ITA NO.2293/MUM/2013(A.Y. 2005-06) ITA NO.2294/MUM/2013(A.Y. 2006-07) 4 3.1 FOR THE REMAINING AMOUNT, IT WAS SUBMITTED BY L D. AR THAT DISALLOWANCE MAY BE UPHELD. IT WAS FURTHER SUBMITTED BY LD.AR THAT FOR VERIFICATION OF THE AFOREMENTIONED FACTS THE MATTER MAY BE SENT TO THE AO. 4. ON THE OTHER HAND, LD. DR SUBMITTED THAT DISALLO WANCE HAS TO BE MADE IRRESPECTIVE OF THE FACT THAT WHETHER PAYMENT IS M ADE DURING THE YEAR OR NOT AND FOR THIS PURPOSE LD. DR HAS RELIED UPON THE DECISIO N OF MUMBAI TRIBUNAL IN THE CASE OF ITO VS. PRATIBHUTI VINIYOG LTD. ORDER DATE D 22/08/2014 IN ITA NO.1689/MUM/2011. THUS, IT WAS PLEADED BY LD. DR T HAT ENTIRE DISALLOWANCE SHOULD BE SUSTAINED. 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. RECENTLY, MUMBAI TRIBUNAL HAS DECIDED SUCH ISSUE IN FAVOUR OF THE ASSESSEE BY CONSIDERING THE EARLIER DECISIONS. JUD ICIAL MEMBER IS ONE OF THE PARTY TO THE SAID DECISION THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE AS UNDER: 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. AFTER CAREFUL CONSIDERATION, RE SPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF M/S. V IVIL EXPORTS P. LTD. VS. ITO (SUPRA), WE DELETE THE DISALLOWANCE. FOR THE SAKE OF COMPLETENESS RELEVANT OBSERVATION OF THE TRIBUNAL FROM THE SAID DECISION ARE REPRODUCED BELOW: 4. THOUGH NUMBER OF GROUNDS WERE URGED BEFORE US I N THE GROUNDS OF APPEAL ANNEXED TO FORM NO. 36, AT THE TIME OF HEARI NG THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSES SEE HAVING MADE THE PAYMENT, SECTION 40(A)(IA) CANNOT BE ATTRACTED BECA USE IT SPEAKS OF THE AMOUNT PAYABLE AND IT DOES NOT COVER THE AMOU NT ALREADY PAID. IN THIS REGARD HE RELIED UPON THE FOLLOWING DECISIO NS OF THE ITAT CHENNAI BENCHES WHEREIN THE BENCH HAD TAKEN INTO CO NSIDERATION THE DECISION OF THE ITAT SPECIAL BENCH IN THE CASE OF M ERILYN SHIPPING & TRANSPORT, THE ORDER OF WHICH WAS SUSPENDED BY THE HIGH COURT BUT AT THE SAME TIME THERE WAS A SUBSEQUENT JUDGEMENT OF T HE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF M/S. VECTOR SHI PPING SERVICES ITA NO.2293/MUM/2013(A.Y. 2005-06) ITA NO.2294/MUM/2013(A.Y. 2006-07) 5 (P) LTD. WHEREIN IT WAS HELD THAT SECTION 40(A)(IA) APPLIES ONLY TO THOSE AMOUNT WHICH REMAINS PAYABLE BY THE END OF TH E PREVIOUS YEAR. IN OTHER WORDS, IN RESPECT OF PAYMENTS ALREADY MADE SECTION 40(A) (IA) IS NOT ATTRACTED: - I. ACIT VS. M/S. ESKAY DESIGNS - ITA NO. 1951/MDS/2012 DATED 09.12.2013. II. ITO VS. THEEKAT HIR PRESS ITA NO. 2076/MDS/2012 & CO NO. 155/MDS/2013 DATED 18.09 .2013. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THA T THOUGH THERE ARE CONTRARY DECISIONS OF THE OTHER HON'BLE HIGH COURTS , I.E. HON'BLE CALCUTTA HIGH COURT AND HON'BLE GUJARAT HIGH COURT, IN THE LIGHT OF THE DECISION OF THE HON'BLE ALLABAHAD HIGH COURT IT CAN BE SAID THE THERE CAN BE TWO VIEWS POSSIBLE IN THIS MATTER IN W HICH EVENT THE ONE WHICH IS IN FAVOUR OF THE ASSESSEE HAS TO BE FOLLOW ED IN THE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F VEGETABLE PRODUCTS LTD. 88 ITR 192. ACCORDINGLY THE CHENNAI B ENCH HELD THAT SECTION 40(A)(IA) IS NOT ATTRACTED IN RESPECT OF TH E AMOUNT ALREADY PAID BY THE ASSESSEE. 5. THE LEARNED D.R., ON THE OTHER HAND, COULD NOT PLACE BEFORE US ANY CONTRARY JUDGEMENT ON THIS ISSU E. THOUGH THE LEARNED D.R. PROMISED TO FILE WRITTEN SUBMISSIONS W ITHIN ONE DAY, IT WAS NOT FILED. IN OTHER WORDS, THERE IS NO CONTRARY DECISION ON THIS ISSUE. 6. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE, WITHOUT GOING INTO THE OTHER ASPECTS, WHICH WERE IN FACT NO T ARGUED EITHER BY THE ASSESSEE OR BY THE REVENUE, WE HOLD THAT SECTIO N 40(A)(IA) IS NOT ATTRACTED IN RESPECT OF PAYMENT ALREADY MADE BY THE END OF THE PREVIOUS YEAR. THE AO IS DIRECTED TO VERIFY THE C LAIM OF THE ASSESSEE AND IF IT IS IN LINE WITH THE VIEW TAKEN HEREIN THE SAME MAY BE CONSIDERED ACCORDINGLY. AS REGARDS LEVY OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT, THE SAME IS CONSEQUENTIAL IN NATURE AND NEED NOT TO BE CONSIDERED INDEPENDENTLY. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STA TISTICAL PURPOSES 5.1 MOREOVER, HONBLE ALLAHABAD HIGH COURT IN THE C ASE OF CIT VS. VECTOR SHIPPING SERVICES (P) LTD.(SUPRA) HAS HELD THAT FOR DISALLOWING EXPENSES FROM BUSINESS AND PROFESSION ON THE GROUND THAT TDS HA S NOT BEEN DEDUCTED, AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY E ND OF THE YEAR. THE SAID DECISION OF HONBLE ALLAHABAD HIGH COURT WAS MADE S UBJECT TO SPECIAL LEAVE PETITION FILED BEFORE HONBLE SUPREME COURT AND TH EIR LORDSHIPS VIDE THEIR ORDER ITA NO.2293/MUM/2013(A.Y. 2005-06) ITA NO.2294/MUM/2013(A.Y. 2006-07) 6 DATED 02/07/2014 IN CC NO.8068/2014 HAVE DISMISSED THE SLP AND COPY OF THIS ORDER IS FILED BY THE ASSESSEE AT PAGE 31 OF THE PA PER BOOK AND THE SAID ORDER READ AS UNDER: SUPREME COURT OF INDIA RECORD OF PROCEEDINGS PETITION(S) FOR SPECIAL LEAVE TO APPEAL (C).. CC NO.(S) 8068/2014 (ARISING OUT OF IMPUGNED FINAL JUDTMENT AND ORDER D ATED 09/07/2013 IN ITA 122/2013 PASSED BY THE HIGH COURT OF JUDICATURE AT ALLAHABAD) COMMISSIONER OF INCOME TAX-MUZAFFAR NGR.PETITIONER( S) VERSUS M/S. VECTOR SHIPPING SERVICES (P) LTD. RESPONDENTS( S) WITH APPLN.(S) FOR C/DELAY IN FILING SLP AND OFFIC E REPORT) DATE:02/07/2014 THIS PETITION WAS CALLED ON FOR HEA RING TODAY. CORAM: HONBLE THE CHIEF JUSTICE HONBL E MR. JUSTICE MADAN B LOKUR HONBLE MR. KURIAN JOSEPH FOR PETITIONER(S) MR. MUKUL ROHATGI, ATTORNEY GENE RAL MR. RUPESH KUMAR, ADV. MR. SAHIL T AGOTRA, ADV. MRS. ANIL KATIYA, ADV. FOR RESPONDENT(S) UPON HEARING THE COUNSEL THE COURT MADE THE FOLLOWI NG ORDER HEARD MR.MUKUL ROHATGI, LEARNED ATTORNEY GENERAL, O R THE PETITION. DELAY IN FILING AND REFILLING SPECIAL LEAVE PETITIO N IS CONDONED. SPECIAL LEAVE PETITION IS DISMISSED. DIGITALLY SIGNED BY RAJESH DHAM DATE: 2014.07.02 5.2 IN VIEW OF ABOVE DISCUSSION, THE DECISION RELIE D UPON BY LD. DR WOULD HAVE NO APPLICATION AND WE HAVE TO ACCEPT THE CLAIM OF THE ASSESSEE TO THE EXTENT OF LABOUR PAYMENTS ARE MADE DURING THE YEAR UNDER CONS IDERATION AND TO THAT EXTENT NO DISALLOWANCE SHOULD BE MADE. FURTHER THE FIGURE GIVEN BY THE ASSESSEE IN THE ITA NO.2293/MUM/2013(A.Y. 2005-06) ITA NO.2294/MUM/2013(A.Y. 2006-07) 7 AFOREMENTIONED CHART MAY BE VERIFIED BY THE AO AND TO THE EXTENT PAYMENTS ARE MADE DURING THE RESPECTIVE YEARS UNDER CONSIDERATIO N NO DISALLOWANCE SHOULD BE MADE AND ONLY REST OF THE AMOUNT SHOULD BE DISALLOW ED. WITH THESE DIRECTIONS WE PARTLY ALLOW THE APPEALS FILED BY THE ASSESSEE. 6. IN THE RESULT, THE APPEALS ARE PARTLY ALLOWED FO R STATISTICAL PURPOSES IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 0 4/03/2015 ! ' 04/03/2015 # $ SD/- SD/- ( . . /R.C.SHARMA ) ( . . / I.P. BANSAL ) /ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; %& DATED 04/03/2015 '() '() '() '() *)!( *)!( *)!( *)!( / COPY OF THE ORDER FORWARDED TO : 1. +, / THE APPELLANT 2. '-+, / THE RESPONDENT. 3. . ( ) / THE CIT(A)- 4. . / CIT 5. )/# '(& , , / DR, ITAT, MUMBAI 6. #0 1 / GUARD FILE. & & & & / BY ORDER, -)( '( //TRUE COPY// 2 22 2 / 3 3 3 3 4 4 4 4 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . & . ./ VM , SR. PS