HEMANT MENGALDAS BHNUSHALI, MUMBAI V. ITO 23(2)(3), MUMBAI

ITA 2367/MUM/2009

• Counselvise Citation: 236719914 RSA 2009
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 06-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 15-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIVAS RAO
• Keywords: Assessment record
• Section: 194C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI R.K.PANDA (A .M) ITA NO.2367/MUM/2009(A.Y 2005-06) MR.HEMANT MANGALDAS BHANUSHALI, 601, YASHWANT SMRITI, OPP. TARA PATIL HOSPITAL, S.N.ROAD, TAMBE NAGAR, MULUND (W), MUMBAI 80. PAN:AADPG 3194J (APPELLANT) VS. THE ITO 23(2)(3), MUMBAI. (RESPONDENT) APPELLANT BY : SHRI K.GOPAL RESPONDENT BY : SHRI GOLI SRINIVAS RAO ORDER PER N.V.VASUDEVAN, J.M, THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER DATED 6/3/2009 OF CIT-XXIII, MUMBAI PASSED UNDER SECTIO N 263 OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE CIRCUMSTANCES UNDER WHICH THE ORDER U/S. 26 3 OF THE ACT, WAS PASSED BY THE CIT ARE AS FOLLOWS: THE ASSESSEE IS AN INDIVIDUAL. HE IS ENGAGED IN TH E BUSINESS OF TRANSPORTATION OF CARGO IN HEAVY LOAD CONTAINERS FR OM AND TO VARIOUS PORTS, YARDS, GODOWN, FACTORIES ETC. THE ASSESSEE FILED T HE RETURN OF INCOME FOR A.Y 2005-06 ON 29/10/2005 DECLARING TOTAL INCOME OF RS. 8,20,360/-. THE A.O ISSUED A QUESTIONNAIRE DATED 28/11/2006. ONE OF TH E QUERIES RAISED BY THE AO WAS CALLING UPON THE ASSESSEE TO FURNISH DETAILS OF ANNUAL RETURNS OF TDS ALONG WITH COPY OF CHALLAN FOR PAYMENT MADE TO THE GOVERNMENT ACCOUNTS. THE ASSESSEE WAS ALSO ASKED TO INDICATE WHETHER ANY INTEREST UNDER SECTION ITA NO.2367/MUM/2009(A.Y 2005-06) 2 201(1A) WAS INCLUDED IN THE PAYMENT ON ACCOUNT OF DELAYED DEPOSIT OF TDS. THE ASSESSEE VIDE LETTER DATED 14/11/2007 GAVE A RE PLY ON THE ABOVE ASPECT AS NOT APPLICABLE. THE ASSESSMENT WAS COMPLETED BY THE AO BY ORDER DATED 26/12/2007. 3. THE CIT IN EXERCISE OF HIS POWERS UNDER SECTION 263 OF THE ACT NOTICED THAT THE ASSESSEE HAD MADE A PAYMENT ON ACCOUNT OF MOTOR FLEET HIRE CHARGES AMOUNTING TO RS. 3,14,41,098/- AND CLAIMED THE SAME AS EXPENDITURE IN P&L ACCOUNT. IN THIS REGARD IT HAS TO BE MENTIONED THAT THE ASSESSEE IS IN THE BUSINESS OF TRANSPORTATION OF CA RGO FROM PORTS, YARDS, GODOWNS, FACTORIES AND VICE-VERSA. IN THE COURSE O F ITS BUSINESS IT USES ITS OWN CONTAINERS. ON SOME OCCASIONS THE ASSESSEE ALS O USES THE SERVICES OF OTHER OWNERS OF CONTAINERS. A SUM OF RS.3,14,41,09 8/- IS NOTHING BUT THE AMOUNT PAID AS CHARGES TO THE OWNERS OF CONTAINERS WHOSE CONTAINERS WERE USED BY THE ASSESSEE FOR THE PURPOSE OF TRANSPORTA TION OF CARGO. 4. AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AMOUNT PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR BEING RESIDENT FOR CARRYING OUT ANY WORK ON WHICH TAX IS DEDUCTIBLE AT SOURCE AND WHERE NO SUCH TAX HAS NOT BEEN SO DEDUCTED THE SAID SUM WAS NOT TO BE ALLOWED AS DEDU CTION AS EXPENSES IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. ACCORD ING TO THE CIT, THE SUM OF RS.3,14,41,098/- PAID BY THE ASSESSEE TO OTHER C ONTAINER OWNERS WAS A PAYMENT IN PURSUANCE OF A SUB-CONTRACT AND THEREFOR E THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE IN TERMS OF SECTION 194 -C OF THE ACT. THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE THE AO OUGH T TO HAVE DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF THE SUM OF RS.3,14,41,098/- UNDER THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT. ACCORDING TO THE CIT, THE AO WHILE COMPLETING THE ASSESSMENT DID NOT MAKE ANY EN QUIRIES WITH REGARD TO THE ABOVE. ITA NO.2367/MUM/2009(A.Y 2005-06) 3 5. FURTHER CIT ALSO NOTICED THAT THE AO HAD DISALLO WED 10% OF THE EXPENSES OF RS.1,66,25,805/- OUT OF DIESEL AND LOAD EXPENSES, REPAIRS AND SPARE PARTS EXPENSES AND SALARY OF DRIVERS. BUT WH ILE MAKING THE COMPUTATION OF TOTAL INCOME THE AO HAD ADDED ONLY R S. 1,66,258/- IN PLACE OF RS.16,62,580/-. THUS THE CIT FOUND THAT THERE W AS AN UNDER ASSESSMENT OF RS. 14,96,322/-. THE CIT, THEREFORE, PROPOSED T O REVISE THE ORDER OF THE AO AS IT WAS ERRONEOUS AND PREJUDICIAL TO THE INTER EST OF THE REVENUE. A SHOW CAUSE NOTICE U/S.263 OF THE ACT WAS ACCORDINGL Y ISSUED BY THE AO. 6. IN REPLY TO THE SHOW CAUSE NOTICE THE ASSESSEE S UBMITTED BEFORE THE CIT(A) THAT THE ASSESSEE WAS ENGAGED IN THE BUSINES S OF TRANSPORTATION OF GOODS FOR IMPORTERS AND EXPORTERS. THE NATURE OF W ORK, AS PER CONTRACT WITH PARTIES, WAS TO TRANSPORT CONTAINERS CONTAINING GOO DS BY ROAD FROM PORTS, YARDS ETC. TO FACTORY, DEPOT ETC. AND RETURN OF THE EMPTY CONTAINERS TO THE SHIPPING LINES IN THEIR DESIGNATED PLACES. TO CARR Y OUT SUCH CONTRACT, THE ASSESSEE USED TO ENGAGE HIS OWN VEHICLES AND VEHICL ES FROM OTHER TRUCK OWNERS AS AND WHEN REQUIRED. THIS ACTIVITY WAS REC ORDED IN TRIPS SHEET OR GR (GOODS RECEIPT NOTE). THE ASSESSEE CONTENDED TH AT WHENEVER HE RECEIVED TRANSPORTATION DELIVERY ORDER, THE CONTRACT WAS ENT RUSTED TO OTHER TRUCK OWNERS PURSUANT TO THE WORK ORDER AS A SOLE, SINGLE SEPARATE AND INDIVIDUAL CONTRACT, EXECUTED AND COMPLETED BY THE OTHER TRUCK OWNER HAVING NO RELATION TO OTHER CONTRACT, PERIOD OR QUANTITY. HE WAS UNDER NO OBLIGATION TO HIRE VEHICLE FROM ANY PARTICULAR TRUCK OWNER. HE H AD NEVER EXECUTED ANY ORAL OR WRITTEN CONTRACT WITH ANY SUB-CONTRACTOR FO R CONTINUOUS DEPLOYMENT OF THEIR VEHICLES AND THEIR BUSINESS WAS MERELY TO SUPPLY VEHICLES TO THE PRINCIPAL TRANSPORTERS I.E. TRANSPORT CONTRACTORS. EVERY TRIP OF WORK WAS COMPLETED BY THE OTHER TRUCK OWNER AS A SEPARATE AN D SINGLE CONTRACT HAVING NO CONTINUITY OF CONTRACT FOR ANY SPECIFIC PERIOD O R QUANTITY. THE ASSESSEE DREW ATTENTION TO QUESTION NO.9 OF BOARDS CIRCULAR NO.715 DATED 08.08.1995 ON APPLICABILITY OF SEC. 194C AND CONTENDED THAT TD S DEDUCTION WAS RIGHTLY ITA NO.2367/MUM/2009(A.Y 2005-06) 4 NOTE MADE AS PER PROVISIONS OF SEC. 194C(2). THE A SSESSEE ARGUED THAT THE CONSIDERATION OF SINGLE ENGAGEMENT OF OTHER TRUCK O WNER DID NOT EXCEED THE AMOUNT OF RS.20,000/- QUA EACH OTHER TRUCK OWNER. 7. FURTHER, THE ASSESSEE SUBMITTED THAT THE AO PASS ED AN ORDER OF ASSESSMENT AFTER PROPER APPLICATION OF MIND AND, TH EREFORE, IT CANNOT BE TERMS AS PREJUDICIAL TO THE INTEREST OF REVENUE. T HE ASSESSEE ALSO SUBMITTED THAT FOR ASSESSMENT YEAR 2005-06 SECTION 194C(1) DI D NOT APPLY TO INDIVIDUALS. 8. AFTER CONSIDERING THE ABOVE SUBMISSIONS, THE CI T HELD THAT THE AO HAD ISSUED A QUESTIONNAIRE DATED 18/11/2006 ASKING THE ASSESSEE TO FURNISH MONTH-WISE AND PARTY-WISE DETAILS OF ALL MAJOR EXPE NSES EXCEEDING RS. 10,000/- DEBITED UNDER EACH HEAD OF THE P&L A/C. AT SR.NO.17 OF THE SAID QUESTIONNAIRE, THE AO HAD REQUIRED THE ASSESSEE TO FURNISH DETAILS OF ANNUAL RETURN OF TDS ALONG WITH EVIDENCES OF PAYMENTS ETC. THE CIT FOUND ON PERUSAL OF THE ASSESSMENT RECORDS THAT ON 16/11/200 7 THE A/R OF THE ASSESSEE FILED DETAILS AND AT SR.NO.17 OF THE REPLY MONTH-WISE BREAKUP OF MOTOR FLEET HIRE CHARGES WAS GIVEN. THE ASSESSEE I NFORMED THAT SUCH CHARGES WERE PAID TO LOCAL SUPPLIERS OF VEHICLES DURING THE YEAR. THE ASSESSEES LETTER DATED 15/09/2007, AT ITEM NO.16 CONTAINED A NOTING THAT MAJOR EXPENSES EXCEEDING RS.10,000/- WAS SEPARATELY ATTACHED, BUT THESE DETAILS WERE NOT ATTACHED TO THE SUBMISSIONS FILED BEFORE THE AO. A CCORDING TO THE CIT, FROM THESE QUESTIONS POSED BY THE AO AND REPLIES GIVEN B Y THE ASSESSEE, IT WAS CLEAR THAT THE AO HAD NEVER ASKED THE ASSESSEE TO S UBMIT DETAILS OF MOTOR FLEET HIRE PAYMENT WHICH CONSTITUTED THE MAJOR EXPE NDITURE BEING AT RS.3,14,41,096/-. THE EARLIER REPLY AT ITEM NO.16 WAS GENERAL IN NATURE. THE AO HAD ALSO NOT TAKEN CARE TO FIND OUT WHETHER THE ASSESSEE HAD ANY LIABILITY TO DEDUCT TAX AT SOURCE U/S. 194C ON PAYM ENTS MADE BY HIM TO THE SUB-CONTRACTORS ENGAGED BY HIM FOR CARRYING OUT THE WORK OF TRANSPORTATION OF GOODS FOR HIS PRINCIPALS. THE CIT FOUND THAT TH E ASSESSMENT RECORD WAS ITA NO.2367/MUM/2009(A.Y 2005-06) 5 SILENT AS TO SUCH QUESTION BEING RAISED EITHER IN T HE NOTICE ISSUED FOR HEARING, IN THE QUESTIONNAIRE LETTERS OR IN THE ORD ER SHEET, RECORDING THE DISCUSSIONS HELD AT THE TIME OF HEARING. THEREFORE , HE HELD THAT THE NEITHER THE AO MADE PROPER ENQUIRES NOR DID THE ASSESSEE FU RNISH THE REQUIRE DETAILS WITH REGARD TO MOTOR FLEET HIRE PAYMENTS. CONSEQUENTLY HE HELD THAT THERE WAS NO PROPER APPLICATION OF MIND BY THE AO A S TO THE APPLICABILITY OF SEC.40(A)(IA) OF THE ACT. THE CIT THEREFORE HELD T HAT THE ACCEPTANCE OF ASSESSEES CLAIM FOR MOTOR FLEET HIRE PAYMENT OF RS . 3,14,41,096/- WITHOUT EXAMINING THE APPLICABILITY OF SEC. 40(A)(IA) VIS- -VIS SEC. 194C WAS NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST OF R EVENUE. HE THEREFORE HELD THAT PROCEEDINGS U/S.263 OF THE ACT WERE APPROPRIAT E. 9. ON MERITS OF THE SUBMISSIONS MADE BY THE ASSESS EE, THE CIT AGREED WITH THE ASSESSEE THAT PROVISIONS OF SEC. 194C(1) OF THE ACT, WERE NOT APPLICABLE TO INDIVIDUAL FOR A.Y 2005-06. THE CIT HOWEVER FOUND THAT THE ASSESSEE HAD DISCLOSED CONTRACT RECEIPTS ON ACCOUNT OF EXECUTION OF TRANSPORT CONTRACT FOR SEVERAL PARTIES. THE ASSESSEE HAS ALSO DISCLOSED P AYMENT OF FLEET HIRE CHARGES AND HAS NOT DENIED ENGAGING OTHER TRUCK OWN ERS FOR TRANSPORTATION OF CONTAINERS TO PARTIES. AS PER THE PROVISO TO SE C. 194C(2), WHERE THE GROSS RECEIPTS OF THE ASSESSEE IN THE IMMEDIATELY PRECEDI NG FINANCIAL YEAR EXCEEDED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE (A) OR C LAUSE (B) OF SEC. 44AB OF THE ACT, PROVISIONS OF SUB-SEC.2 OF SECTION 194C W ERE APPLICABLE TO THE ASSESSEE WHO IS AN INDIVIDUAL. THE CIT HELD THAT I N THE CASE OF THE ASSESSEE THIS PROVISO WAS FULLY APPLICABLE. THE CIT ALSO FO UND THAT CLAUSE (I) OF SUB- SECTION (3) OF SEC. 194 C HAD BEEN CITED BY THE ASS ESSEE TO EXPLAIN THAT INDIVIDUAL PAYMENT FOR EACH ENGAGEMENT OF OTHER TRU CK OWNERS WERE EACH LESS THAN RS. 20,000/- AND AGGREGATE AMOUNT OF SUCH PAYMENTS PAID WAS LESS THAN RS.50,000/- SO THAT MAJOR PORTION OF THE FLEET HIRE CHARGES PAYMENT WERE OUTSIDE THE AMBIT OF 194C(2) OF THE ACT. ON T HE ABOVE SUBMISSION, THE CIT HELD AS FOLLOWS: ITA NO.2367/MUM/2009(A.Y 2005-06) 6 3.3 THE ASSESSEE HAS INITIALLY CONTENDED THAT HE HAD ENGAGED OUTSIDE CONTRACTORS TO CARRY OUT THE TRANSPORTATION OF CONTAINERS AS A SINGLE CONTRACT, VALUE OF WHICH WAS LESS THAN 20,00 0/- AND THEREFORE, TAX WAS NOT REQUIRED TO BE DEDUCTED AT SOURCE U/S. 194C, MORE PARTICULARLY U/S. 194C(2). THE SUBMISSIONS OF THE ASSESSEE QUALITATIVELY CHANGED DURING THE HEARING ON 4/03/20 09. THE ASSESSEE POINTED OUT THAT MAJOR PORTION OF THE TRANSPORTATIO N WORK WAS EXECUTED BY SUB-CONTRACTS VALUE OF WHICH WAS LESS T HAN RS.20,000/- IN EACH CASE. PAYMENTS MADE FOR SUCH SUB-CONTRACTS AMOUNTED TO RS.2,80,05,170/- AS PER EXHIBIT-I OF THE PAPER BOOK . SECONDLY, THE ASSESSEE ALSO POINTED OUT THE AGGREGATE VALUE OF PA YMENTS MADE DID NOT EXCEED RS.50,000/- IN RESPECT OF PAYMENTS MADE TO SUB- CONTRACTORS. THE AGGREGATE AMOUNT OF SUCH SUB-CONT RACTORS WAS RS.7,08,105/- AS PER EXHIBIT II OF THE PAPER BOOK. THUS, THE CONTENTION OF THE ASSESSEE WAS THAT HE HAD NO LIABI LITY TO DEDUCT TAX U/S.194C(2) FOR AN AGGREGATE AMOUNT OF RS.2,87,13,2 75/- OUT OF THE TOTAL FLEET HIRE CHARGES PAYMENT OF RS. 3,14,41,096 /-. HOWEVER, THERE REMAINS AN AMOUNT OF RS. 27,27,821/- IN RESPECT OF WHICH THE ASSESSEE DID NOT SPECIFICALLY PROVIDE ANY DETAILS. MERE CONTENTION THAT SUCH PAYMENTS WERE MADE TO AGENTS WHO ARRANGED VEHI CLES FOR THE ASSESSEE AND TDS WAS NOT REQUIRED TO BE MADE ON SUC H PAYMENTS AS PER DECISION CITED IN THIS REGARD, DOES NOT ESTABLI SH ABSENCE OF LIABILITY TO DEDUCT TAX U/S. 194C(2). 3.4 FROM THE AFORESAID SUBMISSION MADE ON 4/3/2009, IT IS CLEAR THAT THE ASSESSEE DID NOT HAVE ANY EVIDENCE TO SHOW ENGAGEMENT OF AGENTS/SUPPLIERS FOR SUPPLY OF VEHICLES TO WHOM PAY MENT OF RS.27,27,821/- WAS MADE. THUS, IT IS CLEAR THAT TH E ASSESSEE IS UNABLE TO CORROBORATE HIS CLAIM OF ABSENCE OF LIAB ILITY U/S. 194C(2) TO DEDUCT TAX AT SOURCE, AT LEASE, ON SUCH PAYMENTS. IT IS INTERESTING TO NOTE THAT THE ASSESSEE HAD NOWHERE MADE SUCH CLAIM BEFORE THE AO. REGARDING PAYMENT TO THE PARTIES FOR AMOUNTS BELOW RS. 20,000/- PERUSAL OF EXHIBIT-I & EXHIBIT II SHOWS THAT THE AS SESSEE HAD PAID TRANSPORT CHARGES AT AN AMOUNT LESS THAN 20,000/- P ER EACH BILL BUT THE CUMULATIVE TOTAL OF PAYMENTS MADE TO MANY OF SU CH PARTIES DURING THE YEAR EXCEEDED RS.50,000/-. THUS, CONTENTION OF THE ASSESSEE THAT HE HAD NO LIABILITY TO DEDUCT TAX BECAUSE UNDER PRO VISIONS OF SEC. 194C(3) AGGREGATE AMOUNTS OF PAYMENTS TO THE PARTIE S DID NOT EXCEED RS. 50,000/- IS ALSO FOUND NOT TOTALLY CORRECT. LA STLY, THE CLAIM THAT EACH PAYMENT WAS MADE TO A SUPPLIER OF VEHICLE AS A SINGLE CONTRACT, NO CONNECTED WITH ANY QUANTITY OF GOODS OR PERIOD O F TIME, IS NOT ACCEPTABLE WITHOUT VERIFICATION OF THE WORK DONE IN RESPECT OF TRANSPORTATION OF GOODS UNDERTAKEN BY THE ASSESSEE EITHER FOR IMPORTER OR EXPORTERS AT A PARTICULAR POINT OF TIME. THE AS SESSMENT RECORD SHOWS NO EVIDENCE OF ANY EXAMINATION MADE IN THIS R EGARD BEFORE ITA NO.2367/MUM/2009(A.Y 2005-06) 7 ACCEPTING THE CLAIM OF THE ASSESSEE REGARDING ALLOW ABILITY OF FLEET HIRE CHARGES EXPENDITURE. 8. WITH REGARD TO THE ISSUE OF DISALLOWANCE OF 10% OF DIESEL AND LOAD, REPAIR AND SPARE PARTS EXPENSES ETC. THE ASSESSEE T OOK A STAND THAT ONLY 1% OF THE EXPENSES SHOULD BE DISALLOWED AND THAT THE R EFERENCE TO 10% OF THOSE EXPENSES IN THE ORDER OF ASSESSMENT IS TYPOGRAPHICA L ERROR. THE CIT HELD AS FOLLOWS: 5. IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD TH AT THE ASSESSMENT ORDER DTD. 26.12.2007 PASSED IN THE CASE OF THE AS SESSEE FOR A.Y 2005-06 WAS ERRONEOUS AND PREJUDICIAL TO THE INTERE ST OF REVENUE. THE ASSESSMENT ORDER IS SET ASIDE FOR REDOING AFRESH. WHILE REDOING THE ASSESSMENT SO THE AO HAS (I) TO EXAMINE WHETHER THE ASSESSEE HAD GIVEN SUB-CONTRACT OF FLEET HIRE AS A SINGLE AND SE PARATE CONTRACT IN RESPECT OF EACH VEHICLE OR SEPARATE SUB-CONTRACT TO CARRY OUT ANY WORK OF TRANSPORTATION WITH REFERENCE TO SPECIFIC QUANTI TY OR PERIOD, (II) ALSO TO EXAMINE ASSESSEES LIABILITY UNDER CHAPTER XVII- B OF THE ACT FOR DEDUCTION OF TAX AT SOURCE WITH A VIEW TO FINDING O UT THE AMOUNT NOT ALLOWABLE AS DEDUCTION UNDER SECTION 40(A)(IA) OF T HE AT, AND (III) TO EXAMINE WHETHER IN THE PAST, DISALLOWANCE OUT OF EX PENDITURES ON ACCOUNT OF DIESEL & ROAD, REPAIRS & SPARE PARTS, & SALARIES TO DRIVER WAS MADE @ 10% FOR THE REASONS STATED IN THE ASSESS MENT ORDER OR @1% OF THE SAME. IF NOTHING IS FOUND IN THE ASSESS MENTS MADE FOR THE THREE PRECEDING ASSESSMENT YEARS, THEN AO HAS TO R ETAIN DISALLOWANCE @ 10% OF THE AFORESAID EXPENDITURE I.E. AT RS. 16,6 2,580/- IN PLACE OF RS.1,66,258/-. 9. AGGRIEVED BY THE ORDER UNDER SECTION 263 THE ASS ESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 10. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT PROVISIONS OF SECTION 194C(1) OF THE ACT, WERE NOT APPLICABLE BECAUSE PRI OR TO THE AMENDMENT TO THE PROVISIONS OF SECTION 194C OF THE ACT, BY THE F INANCE BILL 2007 W.E.F. 1/6/2007 SEC.194-C(1) OF THE ACT, WAS NOT APPLICAB LE TO INDIVIDUALS OR HUF. IT WAS FURTHER SUBMITTED THAT WHERE AMOUNT OF ANY S UM PAID TO A CONTRACTOR OR A SUB-CONTRACTOR DOES NOT EXCEED RS. 20,000/- AN D WHERE THE OVERALL PAYMENTS MADE DURING THE FINANCIAL YEAR TO A PERSON DOES NOT EXCEED ITA NO.2367/MUM/2009(A.Y 2005-06) 8 RS.50,000/- THEN THE PROVISIONS OF SECTION 194C WOU LD NOT BE APPLICABLE. IT WAS FURTHER SUBMITTED THAT AS BETWEEN THE ASSESSEE AND THE OTHER TRUCK OWNERS THERE WAS A PRINCIPAL TO PRINCIPAL RELATION SHIP AND, THEREFORE, IT CANNOT BE SAID THAT THE PAYMENT MADE BY THE ASSESSE E TO THE OTHER TRUCK OWNERS WERE IN PURSUANCE OF A SUB-CONTRACT. IN TH IS REGARD IT WAS ALSO ARGUED THAT THERE WAS NO CONNECTION BETWEEN THE PER SONS WHO ENGAGED SERVICES OF THE ASSESSEE AND THE TRUCK OWNERS THROU GH WHOM THE ASSESSEE EFFECTED TRANSPORTATION OF CARGO. THE LD. COUNSEL FOR THE ASSESSEE FURTHER DREW OUR ATTENTION TO THE BILLS RAISED BY THE OTHER TRUCK OWNERS WHICH WOULD SHOW THAT THEY WERE DEALING WITH THE ASSESSEE ON PR INCIPAL TO PRINCIPAL BASIS AND NOT AS SUB-CONTRACTOR. HEAVY RELIANCE WAS PLAC ED BY THE LD. COUNSEL FOR THE ASSESSEE ON THE DECISION OF THE ITAT VISAKHAPAT NAM BENCH IN THE CASE OF MYTHRI TRANSPORT CORPORATION VS. ACIT 124 ITD 40 (V ISAKHA). IN THAT CASE, THE ASSESSEE, A TRANSPORT CONTRACTOR, ENTERED INTO AN AGREEMENT WITH SOME PARTIES WHEREBY THE ASSESSEE UNDERTOOK TO TRANSPORT BITUMEN TO VARIOUS POINTS AS PER THEIR DIRECTIONS. SINCE THE ASSESSEE DID NOT HAVE REQUIRED NUMBER OF LORRIES, IT HAD TO HIRE LORRIES FROM OTHE RS WHO SIMPLY PLACED THE VEHICLES AT THE DISPOSAL OF THE ASSESSEE. AS PER T HE PROVISIONS OF SECTION 194C(2), THE SUB-CONTRACTOR SHOULD CARRY OUT THE WH OLE OR ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE. IN THAT CASE, VA RIOUS CLAUSES IN THE WORK ORDER SUGGESTED THAT THE ASSESSEE WAS SOLELY RESPON SIBLE FOR ALL THE ACTS AND DEFAULTS COMMITTED BY THE ASSESSEE AND/OR ITS EMPLO YEES. ON THE ABOVE FACTS, THE TRIBUNAL HELD THAT IT WAS NOT ESTABLISHE D BY THE REVENUE THAT OTHER LORRY OWNERS FROM WHOM THE VEHICLES WERE HIRED HAVE ALSO BEEN FASTENED WITH ANY SUCH LIABILITY. FURTHER, IT WAS HELD THAT THERE WAS NO MATERIAL TO SUGGEST THAT THE OTHER LORRY OWNERS INVOLVED THEMSE LVES IN CARRYING OUT ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE BY SPEN DING THEIR TIME AND ENERGY AND BY UNDERTAKING THE RISKS ASSOCIATED WITH THE MAIN CONTRACT WORK. HENCE, IT WAS HELD THAT IT CANNOT BE SAID THAT THE PAYMENTS MADE FOR HIRING OF VEHICLES FELL IN THE CATEGORY OF PAYMENTS TOWARD S SUB-CONTRACTS. ITA NO.2367/MUM/2009(A.Y 2005-06) 9 THEREFORE, ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 194C(2) FROM THE PAYMENTS MAD E TO THE LORRY OWNERS AND PROVISIONS OF SECTION 40(A)(IA) WERE NOT APPLIC ABLE TO SUCH PAYMENTS. 11. FURTHER RELIANCE WAS ALSO PLACED ON THE DECISIO N OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. GREWAL BR OTHERS (2011) 11 TAXMAN.COM 174(P&H) IN IT APPEAL NO.662 OF 2010 DAT ED 5/4/2011. IN THE AFORESAID CASE THE ASSESSEE WAS A PARTNERSHIP F IRM ENGAGED IN THE BUSINESS OF TRANSPORTATION. IT ENTERED INTO A CONT RACT WITH PETROLEUM COMPANIES FOR CARRIAGE OF LPG. THE ASSESSEE PASSED ON TRANSPORTATION WORKS TO ITS PARTNERS AND MADE PAYMENT RECEIVED FRO M THE PETROLEUM COMPANIES TO ITS PARTNERS. THE HONBLE PUNJAB & HA RYANA HIGH COURT HELD THAT THERE WAS NO SEPARATE SUB-CONTRACT BETWEEN THE FIRM AND PARTNERS AND THEREFORE, THERE WAS NO REQUIREMENT TO DEDUCT TAX U NDER SECTION 194C OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT THE ORDER PASSED UNDER SECTION 263 OF THE ACT, CANNOT BE SUST AINED AND THE SAME SHOULD BE CANCELLED. 12. THE LD. D.R SUBMITTED THAT THE MAIN REASON FOR THE CIT TO HAVE EXERCISED HIS JURISDICTION UNDER SECTION 263 WAS BE CAUSE THE ASSESSING OFFICER DID NOT MAKE ANY ENQUIRIES WHILE COMPLETING THE ASSESSMENT ON THE QUESTION OF APPLICABILITY OF PROVISIONS OF SECTION 194C OF THE ACT AND THE POSSIBLE CONSEQUENT DISALLOWANCE THAT COULD BE MADE UNDER SECTION 40(A)(IA) OF THE ACT. IT WAS FURTHER SUBMITTED BY HIM THAT T HE LAW IS WELL SETTLED THAT FAILURE TO MAKE ENQUIRIES BY THE ASSESSING OFFICER ON A PARTICULAR ISSUE ON WHICH, IN A GIVEN FACTS AND CIRCUMSTANCES, WHERE TH E ASSESSING OFFICER SHOULD HAVE MADE ENQUIRIES, IS ITSELF SUFFICIENT TO HOLD THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDING TO HIM THE ORDER OF THE CIT UND ER SECTION 263 HAS TO BE UPHELD ON THIS GROUND. IT WAS SUBMITTED BY HIM TH AT THE QUESTION WHETHER ITA NO.2367/MUM/2009(A.Y 2005-06) 10 THERE WAS A SUB-CONTRACT AND PROVISIONS OF SECTION 194C(2) IS APPLICABLE ON ALL MATTERS WHICH THE ASSESSING OFFICER WILL EXAMIN E IN THE ASSESSMENT PROCEEDINGS PURSUANT TO THE ORDER UNDER SECTION 263 OF THE ACT AND THE ASSESSEE WILL HAVE FULL OPPORTUNITY IN THIS REGARD. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS R IGHTLY CONTENDED BY THE LD. D.R., THE MAIN GROUND ON WHICH THE CIT EXE RCISED JURISDICTION UNDER SECTION 263 OF THE ACT, WAS THE FAILURE ON THE PART OF THE ASSESSING OFFICER TO MAKE ENQUIRIES WITH REGARD TO THE APPLICABILITY OF THE PROVISIONS OF SECTION 194C TO THE PAYMENTS MADE BY THE ASSESSEE TO OTHER TRUCK OWNERS IN THE COURSE OF HIS BUSINESS OF TRANSPORTATION OF CARGO A ND THE CONSEQUENT DISALLOWANCE THAT COULD BE MADE UNDER THE PROVISION S OF SECTION 40(A)(IA) OF THE ACT. IN PARA 3.1 OF THE IMPUGNED ORDER OF THE CIT, THE CIT HAS CONCLUDED THAT THE ORDER WAS ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF THE REVENUE BECAUSE OF THE LACK OF ENQUIRY AND APPLICAT ION OF MIND BY THE ASSESSING OFFICER ON THE ABOVE ASPECT. THE FACT TH AT THE CIT IN THE ORDER UNDER SECTION 263 OF THE ACT, HAS DISCUSSED THE OT HER CONTENTIONS RAISED BY THE ASSESSEE, DOES NOT MEAN THAT THE CIT HAS PRONOU NCED ON THE APPLICABILITY OF THE PROVISIONS OF SECTION 194C TO THE PAYMENTS MADE BY THE ASSESSEE TO THE OTHER TRUCK OWNERS. IN PARA 3.2, 3.3 AND 3.4 OF THE IMPUGNED ORDER OF THE CIT, THE APPLICABILITY OF THE PROVISION HAS BEEN CONSIDERED, BUT THE CIT HAS NOT EXPRESSED ANY OPINI ON AND HAS MERELY HELD THAT THE REQUIRED DETAILS WERE NOT FILED BY THE ASS ESSEE. THUS THE ASSESSEE IS AT LIBERTY TO RAISE ALL THE PLEA THAT HE HAS SOUGHT TO PUT FORTH BEFORE US IN THE PROCEEDINGS PURSUANT TO THE ORDER UNDER SECTION 263 . SIMILARLY THE DISALLOWANCE OF EXPENSES WHETHER THEY ARE TO BE 1% OR 10% IS ALSO A MATTER WHICH REQUIRES EXAMINATION BY THE ASSESSING OFFICER . WE ARE, THEREFORE, OF THE VIEW THAT THE ORDER PASSED UNDER SECTION 263 OF THE ACT IS PROPER AND HAS TO BE UPHELD. AS ALREADY STATED THE ASSESSEE W ILL BE AT LIBERTY TO RAISE ALL THE ISSUES WITH REGARD TO THE APPLICABILITY OF THE PROVISIONS OF SECTION 194C ITA NO.2367/MUM/2009(A.Y 2005-06) 11 BEFORE THE ASSESSING OFFICER IN THE PROCEEDINGS CON SEQUENT TO THE ORDER UNDER SECTION 263 OF THE ACT. WITH THESE OBSERVATI ONS THE APPEAL OF THE ASSESSEE IS DISMISSED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 15 TH DAY OF JUNE, 2011. SD/- SD/- (R.K.PANDA ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 15 TH JUNE.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RH BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.2367/MUM/2009(A.Y 2005-06) 12 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 6-7/6/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 8/6/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER