Dy CIT, Kolhapur V. M/s V.S. Joshi & Associates, Kolhapur

ITA 2381/PUN/2012

• Counselvise Citation: 238124514 RSA 2012
• Duration Of Justice: 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 30-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIB JAIN
• Keywords: Sale consideration of property below Jantri Value; Non-deduction of tax
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.2381/PN/2012 (ASSESSMENT YEAR : 2009-10) DY. COMMISSIONER OF INCOME TAX, CIRCLE 2, KOLHAPUR . APPELLANT VS. M/S V. S. JOSHI & ASSOCIATES 1156, E WARD, MANIK CHAMBERS, SYKES EXTENSION, KOLHAPUR PAN : AADFV3050C . RESPONDENT DEPARTMENT BY : MR. RAJIB JAIN ASSESSEE BY : MR. M. K. KULKARNI DATE OF HEARING : 20-09-2013 DATE OF PRONOUNCEMENT : 24-09-2013 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL HAS BEEN PREFERRED BY THE REV ENUE WHICH IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS), KOLHAPUR DATED 06.09.2012 WHICH, IN TURN, HAS ARISE N FROM AN ORDER DATED 09.12.2011 PASSED BY THE ASSESSING OFFICER, UNDER S ECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINI NG TO THE ASSESSMENT YEAR 2009-10. 2. IN THIS APPEAL, ALTHOUGH THE REVENUE HAS RAISED MULTIPLE GROUNDS OF APPEAL BUT THE SOLITARY ISSUE IS WITH REGARD TO THE DISALLOWANCE OF RS.37,71,436/- MADE BY THE ASSESSING OFFICER INVOKI NG SECTION 40(A)(IA) OF THE ACT WHICH HAS SINCE BEEN DELETED BY THE CIT(A). 3. IN BRIEF, THE FACTS ARE THAT THE ASSESSEE IS A P ARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF ENGINEERS AND CONTRACTORS. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE T AX DEDUCTED BY THE ASSESSEE UNDER SECTION 194C OF THE ACT ON PAYMENTS MADE BY WAY OF LABOUR CHARGES WAS AT A RATE LOWER THAN THAT PRESCRIBED IN LAW. IN PARA 2 OF THE ITA NO.2381/PN/2012 A.Y. 2009-10 ASSESSMENT ORDER, THE ASSESSING OFFICER HAS TABULAT ED THE AMOUNTS WHEREIN THE TAX HAS BEEN DEDUCTED @ 1% PLUS SURCHARGE WHERE AS AS PER THE ASSESSING OFFICER THE SAME WAS REQUIRED TO BE DEDUC TED @ 2% PLUS SURCHARGE. NOTICING THE AFORESAID SHORTFALL FOR DED UCTION OF TAX AT SOURCE, THE CORRESPONDING EXPENDITURE UNDER THE HEAD LABOUR CH ARGES AMOUNTING TO RS.37,71,436/- WAS DISALLOWED BY INVOKING SECTION 4 0(A)(IA) OF THE ACT. 4. ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) AND ASSAILED THE DISALLOWANCE ON FACTS AND IN LAW. APART FROM OT HER ARGUMENTS, ASSESSEE POINTED OUT THAT THIS IS A CASE WHERE THERE WAS SHO RT-DEDUCTION OF TAX AT SOURCE AND NOT A CASE OF NON-DEDUCTION OF TAX AT SO URCE AND THEREFORE THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT COULD NO T BE APPLIED TO MAKE THE IMPUGNED DISALLOWANCE. THE AFORESAID ARGUMENT OF TH E ASSESSEE HAS BEEN ACCEPTED BY THE CIT(A) FOLLOWING THE DECISIONS OF T HE TRIBUNAL : (I) DCIT VS. S.K. TEKRIWAL (2011) 48 SOT 515 (KOL); AND, (II) SA NDVIK ASIA LTD. VS. JCIT (2012) 146 TTJ 644 (PUNE). ACCORDINGLY, THE DISALLO WANCE OF RS.37,71,436/- HAS BEEN DELETED. AGGRIEVED WITH THE SAME, REVENUE IS IN APPEAL BEFORE US. 5. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE APPEARING FOR THE REVENUE HAS STRONGLY CONTENDED THAT SECTION 40(A)(I A) OF THE ACT WAS JUSTIFIABLY INVOKED BY THE ASSESSING OFFICER IN THE PRESENT CASE, INASMUCH AS THE ASSESSEE HAD CLEARLY NOT DEDUCTED THE TAX AT SO URCE, AS REQUIRED BY SECTION 194C OF THE ACT AND THEREFORE THE CORRESPON DING EXPENDITURE WAS RIGHTLY DISALLOWED. ACCORDING TO THE LEARNED DEPART MENTAL REPRESENTATIVE, SHORT-DEDUCTION OF TAX AT SOURCE ALSO AMOUNTS TO NO N-COMPLIANCE WITH THE REQUISITE PROVISIONS OF TDS AND THEREFORE, SECTION 40(A)(IA) OF THE ACT WAS RIGHTLY INVOKED BY THE ASSESSING OFFICER. 6. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE R ESPONDENT-ASSESSEE SUPPORTED THE ORDER OF THE CIT(A) AND POINTED OUT T HAT TRIBUNAL IN THE CASE OF DCIT VS. CHANDABHOY & JASSOBHOY (2012) 49 SOT 448 ( MUMBAI) ALSO TOOK A ITA NO.2381/PN/2012 A.Y. 2009-10 SIMILAR VIEW TO THE EFFECT THAT SECTION 40(A)(IA) O F THE ACT CAN BE INVOKED ONLY IN THE EVENT OF NON-DEDUCTION OF TAX AT SOURCE BUT NOT FOR LESSER DEDUCTION OF TAX AT SOURCE. ACCORDINGLY, THE LEARNED COUNSEL SUB MITTED THAT THE APPEAL OF THE ASSESSEE WAS RIGHTLY ALLOWED BY THE CIT(A). 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. OSTENSIBLY, THE POINT MADE OUT BY THE ASSESSEE, AND WHICH FOUND FAV OUR WITH THE CIT(A), IS TO THE EFFECT THAT SECTION 40(A)(IA) OF THE ACT CAN BE INVOKED ONLY IN CASES WHERE THERE IS A NON-DEDUCTION OF TAX AT SOURCE AND NOT I N CASES WHERE THERE IS SHORT- DEDUCTION OF TAX AT SOURCE. IN THE PRESENT CASE, TH E CHARGE MADE BY THE ASSESSING OFFICER IS THAT ASSESSEE HAS NOT DEDUCTED TAX AT APPROPRIATE RATE UNDER SECTION 194C OF THE ACT. AS PER THE ASSESSING OFFICER, ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE @ 2% PLUS SURCHARG E ON LABOUR CHARGES CONSIDERING THE SAME TO BE PAYMENT TO CONTRACTORS W HEREAS AS PER THE ASSESSEE, TAX HAS BEEN DEDUCTED UNDER SECTION 194C OF THE ACT @ 1% PLUS SURCHARGE CONSIDERING THE PAYMENTS MADE TO SUB-CONT RACTORS. WITHOUT GOING INTO THE MERITS OF THE RIVAL CLAIMS, FOR THE PRESEN T, IT IS SUFFICIENT TO OBSERVE THAT THE ASSESSEE HAS BEEN HELD TO BE AN ASSESSEE IN DEF AULT FOR THE REASON THAT IT DEDUCTED TAX AT SOURCE ON PAYMENTS MADE BY WAY OF L ABOUR CHARGES WHICH WAS LOWER THAN THE RATE PRESCRIBED IN LAW, AS PER T HE VIEW OF THE ASSESSING OFFICER. THE CONTROVERSY IS AS TO WHETHER IN SUCH A SITUATION, PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CAN BE ATTRACTED SO AS TO DISALLOW THE CORRESPONDING EXPENDITURE, WHICH ACCORDING TO THE A SSESSING OFFICER HAS SUFFERED DEDUCTION AT LOWER RATE OF TAX AT SOURCE. 8. TO ANSWER THE AFORESAID CONTROVERSY, ONE MAY NOT ICE THE CRUCIAL EXPRESSION IN SECTION 40(A)(IA) OF THE ACT WHICH PR ESCRIBES THAT THE EXPENDITURE SPECIFIED THEREIN SHALL BE DISALLOWED ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BE EN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE D ATE SPECIFIED IN SUB- SECTION (1) OF SECTION 139. CLEARLY, THE PHRASEOLOGY TO SECTION 40(A)(IA) OF ITA NO.2381/PN/2012 A.Y. 2009-10 THE ACT SEEKS TO DISALLOW AN EXPENDITURE ONLY IN SI TUATIONS WHERE THE TAX IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDU CTED OR AFTER DEDUCTION HAS NOT BEEN PAID AS PER THE PERIOD PRESCRIBED THER EIN. THE PHRASEOLOGY USED IN SECTION 40(A)(IA) OF THE ACT CLEARLY REMOVES FRO M ITS PURVIEW CASES WHERE TAX HAS BEEN SHORT-DEDUCTED. THEREFORE, THE INFEREN CE DRAWN BY THE CIT(A) IS BORNE OUT OF A PLAIN READING OF SECTION 40(A)(IA) O F THE ACT. MOREOVER, THE DECISIONS OF KOLKATA BENCH OF THE TRIBUNAL IN THE C ASE OF S.K. TEKRIWAL (SUPRA); THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SANDV IK ASIA LTD. (SUPRA); AND, ALSO THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE O F CHANDABHOY & JASSOBHOY (SUPRA) SUPPORT THE AFORESAID PREMISE. TH US, IN THE PRESENT CASE THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT ATTRACTED AS THIS IS A CASE OF SHORT-DEDUCTION OF TAX AT SOURCE UNDER SECTION 1 94C OF THE ACT AND NOT A CASE OF NON-DEDUCTION OF TAX AT SOURCE. 9. AS A RESULT OF THE AFORESAID DISCUSSION, WE HERE BY AFFIRM THE ORDER OF THE CIT(A) DELETING THE DISALLOWANCE OF RS.37,71,43 6/- MADE BY THE ASSESSING OFFICER BY INVOKING UNDER SECTION 40(A)(IA) OF THE ACT. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH SEPTEMBER, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 24 TH SEPTEMBER, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), KOLHAPUR; 4) THE CIT, KOLHAPUR; 5) THE DR, A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE