THE DCIT, Circle-2(1), Guntur, Guntur V. M/s G.I.Constructions, Guntur

ITA 240/VIZ/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2108 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 04-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G GURUSWAMY
• Section: 143(3); 142(1); 194C; 263

Judgement Text

ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , ' BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.240/VIZAG/2012 ( / ASSESSMENT YEAR : 2006-07) DCIT, CIRCLE-2(1) GUNTUR VS. G.I. CONSTRUCTIONS GUNTUR [ PAN: AAFFG 6663G] ( ) / APPELLANT) ( *+) / RESPONDENT ) / APPELLANT BY : SHRI G. GURUSWAMY, DR #$ / RESPONDENT BY : SHRI G.V.N. HARI, AR ( / DATE OF HEARING : 06.01.2016 ( / DATE OF PRONOUNCEMENT : 28.01.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER PASSED BY THE COMMISSIONER OF INCOMETAX (APPEALS), VISAKHAPATNAM DATED 30-03-2012 AND IT PERTAINS TO THE A.Y. 2006-0 7. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS. ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 2 1. THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ADDITIO N OF RS.91,51,475/- CLAIMED BY THE ASSESSEE TOWARDS DIES EL EXPENDITURE ON THE GROUND THAT THE ASSESSEE HAS NOT PRODUCED PROPER BI LLS AND VOUCHERS. FURTHER, THE ASSESSEE COULD NOT SUBSTANTIATE THE HU GE EXPENDITURE OF RS.91,51,475I CLAIMED TO HAVE INCURRED TOWARDS DIESE L SINCE THE ASSESSEE DOES NOT OWN ANY MACHINERY WHICH CONSUME SUCH HUGE AMOUNT OF DIESEL. 2. THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ADDITIO N OF EARTH DIGGING CHARGES, LABOUR CHARGES AND SOIL MOVI NG CHARGES MADE U/S.! 94C R.W.S.40(A)(IA) ON THE GROUND THAT THE AS SESSEE COULD NOT ADDUCE ANY EVIDENCE VIZ, BILLS/ VOUCHERS IN SUPPORT OF THE LEDGER EXTRACTS FILED TO PROVE THAT THESE PAYMENTS MADE TO DIFFERENT PARTIES AND NO PAYMENT WAS EXCEEDED RS.20,000/- AND RS.50,0 00/- IN AGGREGATE. 3. THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ADDITIO N MADE TOWARDS WORK-IN-PROGRESS ON THE GROUND THAT THE ASS ESSEE COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE VIZ., BILLS / VOUC HERS IN SUPPORT OF THE ASSESSEE'S CONTENTION THAT THE WORK IN PROGRESS WAS THE MATERIAL PURCHASED IN THE FORM OF CEMENT AND IRON. 4. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF H EARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A FIRM, WHICH IS ENGAGED IN THE BUSINESS OF SUB-CONTRACTS OF CIVIL W ORKS, FILED ITS RETURN OF INCOME FOR THE A.Y. 2006-07 ON 31-10-2006 DECLARING TOTAL INCOME OF RS. 19,90,770/. THE CASE WAS SELECTED FOR SCRUTINY AS PER THE CBDT GUIDELINES AND THE ASSESSMENT WAS COMPLETED UNDER S EC. 143(3) ON 12- 12-2008 AND DETERMINED TOTAL INCOME OF RS. 22,90,77 0/-. THEREAFTER, THE CASE WAS TAKEN UP FOR REVISION BY THE CIT, GUNT UR UNDER SEC. 263 OF THE ACT ON THE FOLLOWING ISSUES. (I) TO EXAMINE THE ASSESSEE'S CLAIM UNDER THE HEAD DIES EL EXPENDITURE IN P&L A/C AMOUNTING TO 91,51,475/-, WH ICH WORKS OUT TO ABOUT 25% OF THE TOTAL TURNOVER. (II)TO EXAMINE THE EXPENDITURE ON EARTH DIGGING CHA RGES OF ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 3 51,54,500/-, LABOUR CHARGES OF 1,51,17,029/- AND SO IL MOVING CHARGES OF 32,70,788/- IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) FOR NON DEDUCTION OF TDS U/S 194C OF THE IT ACT. (III)TO EXAMINE THE CREDITWORTHINESS OF THE FOLLOWI NG CREDITORS FOR Z4 LAKHS EACH (I) SRI MONDAMANCHI SRINIVASA RAO (II) SRI NW PRASAD (III) MADDINENI SUDHAKAR (IV) SRI M. VENKATESWARA RAO (IV) TO EXAMINE THE PROFIT DECLARED BY THE ASSESSEE AT 6.21% ON THE GROSS RECEIPTS. (V) THE ASSESSEE HAS NOT ACCOUNTED FOR 438813/- AS WORK IN PROGRESS IN THE P&L A/C. 4. THE CIT, GUNTUR AFTER CONSIDERING EXPLANATION OF FERED BY THE ASSESSEE, PASSED ORDER UNDER SEC. 263 OF THE ACT AN D DIRECTED THE A.O. TO REDO THE ASSESSMENT, AFTER AFFORDING AN OPPORTUN ITY OF HEARING TO THE ASSESSEE. ACCORDINGLY, THE A.O. ISSUED NOTICE U/S 1 43(2) AND 142(1) OF THE ACT TO THE ASSESSEE. IN RESPONSE TO NOTICE, THE ASSESSEE AUTHORISED REPRESENTATIVE APPEARED FROM TIME TO TIME AND FURNI SHED THE DETAILS CALLED FOR. DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE A.O. ISSUED SHOW CAUSE NOTICE AND ASKED AS TO WHY THE ASSESSMEN T SHALL NOT BE COMPLETED, IN LINE WITH THE OBSERVATIONS OF THE CIT . IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE HAS FILED A DETAILED WRI TTEN SUBMISSION AND DEPEND THE ISSUES RAISED BY THE ASSESSING OFFICER. THE A.O., HOWEVER, DID NOT CONVINCED WITH THE EXPLANATION OF THE ASSES SEE, PASSED THE ORDER ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 4 UNDER SEC. 143(3), R.W.S. 263 ON 29-12-2011 AND DET ERMINED TOTAL INCOME OF RS. 3,54,23,375/- BY MAKING FOLLOWING ADD ITIONS. (A) DISALLOWANCE OF DIESEL EXPENSES RS. 91,51,4 75/- (B) DISALLOWANCE OF EARTH DIGGING, SOIL MOVING CHARGES AND LABOUR CHARGES UNDER SEC. 40(A)(IA). RS. 2,35,42,317/- (C) ADDITION TOWARDS WORK IN PROGRESS RS. 4,38, 813/- 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE CIT(A), THE ASSESS EE HAS FILED DETAILED WRITTEN SUBMISSION AND CONTENDED THAT THE DIESEL EX PENDITURE IS INCURRED TOWARDS PURCHASE OF DIESEL FOR PROCLAINERS AND TRAC TORS. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS TAKEN PROCLAINERS AND TRACTORS ON FIXED HIRE CHARGES EXCLUSIVE OF DIESEL AND THE DIESEL EXP ENDITURE WAS DIRECTLY INCURRED BY IT AND TO SUBSTANTIATE ITS CLAIM FURNIS HED BILLS FOR PURCHASE OF DIESEL. AS FOR AS THE SECOND ISSUE, I.E. DISALLOWAN CE OF EARTH DIGGING CHARGES, LABOUR CHARGES AND SOIL MOVING CHARGES, TH E ASSESSEE SUBMITTED THAT EARTH DIGGING AND SOIL MOVING CHARGE S REPRESENTS THE HIRE CHARGES PERTAINS TO PROCLAINERS AND TRACTORS. IT WAS FURTHER SUBMITTED THAT, THE INDIVIDUAL PAYMENTS DID NOT EXC EED THE MONETARY LIMIT OF RS. 20,000/- AND THE AGGREGATE OF SUCH PAY MENTS IN THE FINANCIAL YEAR ALSO DID NOT EXCEED THE MONETARY LIMIT OF RS. 50,000/- AS SPECIFIED ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 5 UNDER SEC. 194C. AS REGARDS THE LABOUR CHARGES, ALL THE LABOUR CHARGES IS PAID TO ITS OWN LABOURERS AND THERE IS NO LABOUR CO NTRACT WAS ENTERED INTO WITH ANY THIRD PARTY. IT IS FURTHER CONTENDED THAT THE INDIVIDUAL PAYMENTS DID NOT EXCEED THE MONETARY LIMIT OF RS. 2 0,000/- AND THE AGGREGATE OF SUCH PAYMENTS IN THE FINANCIAL YEAR AL SO DID NOT EXCEED THE MONETARY LIMIT OF RS. 50,000/- AS SPECIFIED UNDER S EC. 194C OF THE ACT, THEREFORE THE TDS UNDER SEC. 194C OF THE ACT WAS NO T DEDUCTED. IN SUPPORT OF ITS CONTENTION FURNISHED COPIES OF LEDGE R EXTRACTS OF EARTH DIGGING CHARGES, LABOUR CHARGES AND SOIL MOVING CHA RGES. AS REGARDS THE ADDITION OF RS. 4,38,813/- TOWARDS WORK IN PROGRESS IN CONCERNED, THE ASSESSEE SUBMITTED THAT THE WORK IN PROGRESS REPRES ENTS THE MATERIAL AVAILABLE AT THE END OF THE YEAR AND THE SAME WAS N OT DEBITED TO PROFIT AND LOSS ACCOUNT. THE ASSESSEE FURTHER CONTENDED TH AT THE PURCHASE OF MATERIALS WAS DIRECTLY DEBITED TO WORK IN PROGRESS ACCOUNT WITHOUT DEBITED TO PROFIT AND LOSS ACCOUNT AND HENCE, THERE IS NO IMPACT ON THE PROFITS OF THE YEAR. THEREFORE, REQUESTED TO DELET E THE ADDITIONS MADE BY THE A.O. 6. THE CIT(A), AFTER CONSIDERING THE EXPLANATION O F THE ASSESSEE DELETED THE ADDITIONS MADE BY THE A.O. UNDER THE HE AD DIESEL EXPENSES, EARTH DIGGING EXPENSES, LABOUR EXPENSES AND SOIL MO VING EXPENSES AND ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 6 ALSO DELETED ADDITION TOWARDS WORK IN PROGRESS. WHIL E DELETING THE ADDITIONS, THE CIT(A) OBSERVED THAT THE DIESEL EXPE NSES IS FULLY SUPPORTED BY BILLS AND VOUCHERS AND ALSO THE ASSESS EE HAS PROVED BEYOND DOUBT THE GENUINENESS OF SUCH EXPENDITURE, T HEREFORE, THERE IS NO REASON FOR A.O. TO MADE ADDITIONS. AS REGARDS TH E DISALLOWANCE UNDER SEC. 40(A)(IA), THE CIT(A) WAS OF THE OPINION THAT THE AFORESAID EXPENDITURE WERE NOT HIT BY THE PROVISIONS OF SECTI ON 194C, CONSEQUENTLY NO DISALLOWANCE CAN BE MADE UNDER SEC. 40(A)(IA) OF THE ACT. THE CIT(A) FURTHER OBSERVED THAT MERE HIRING OF TRUCKS, LORRIES AND TRACTORS CANNOT BE CALLED TO BE WORK WITHIN THE DEFINITION G IVEN IN EXPLANATION 3 OF SECTION 194C OF THE ACT. AS FOR AS DELETION OF W ORK IN PROGRESS IS CONCERNED, THE CIT(A) OBSERVED THAT THE A.O. DID NO T REBUT THE PLEADING OF THE ASSESSEE THAT IT DID NOT DEBIT THE EXPENDITU RE TO PROFIT AND LOSS ACCOUNT, THEREFORE IT IS NOT REASONABLE TO TREAT TH E WORK IN PROGRESS AS INCOME OF THE ASSESSEE FOR THE YEAR. AGGRIEVED BY T HE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. THE FIRST ISSUE CAME UP FOR OU R CONSIDERATION, IS WHETHER THE CIT(A) WAS RIGHT IN DELETING THE DIESEL EXPENSES OF RS. 91,51,475/-. THE LD. D.R. SUBMITTED THAT THE ASSESS EE HAS NOT PROVED ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 7 THE GENUINENESS OF EXPENDITURE, AS IT DOES NOT OWN ANY MACHINERY TO INCUR SUCH A HUGE EXPENDITURE. THE D.R. FURTHER SUB MITTED THAT THE ASSESSEE HAS NOT PROVED THE HIRING OF PROCLAINERS A ND TRACTORS BY FURNISHING ANY EVIDENCE IN THE FORM AGREEMENTS. JUS T BECAUSE THE EXPENDITURE IS COVERED BY BILLS AND VOUCHERS IT CAN NOT BE ACCEPTED. THE ASSESSEE HAS TO PROVE BEYOND DOUBT THE NECESSITY OF INCURRING SUCH A HUGE EXPENDITURE FOR DIESEL, WHEN ITS TURNOVER IS J UST BELOW FOUR CRORES, THEREFORE, REQUESTED TO SUSTAIN SOME DISALLOWANCE. ON THE OTHER HAND, THE LD. A.R. STRONGLY SUPPORTED THE CIT(A) ORDER. T HE A.R. FURTHER SUBMITTED THAT THE EXPENDITURE IS FULLY SUPPORTED B Y BILLS, THEREFORE, THERE IS NO REASON FOR DOUBTING THE NECESSITY OF IN CURRING THE EXPENDITURE. THE CIT(A) DELETED THE ADDITION BY OBS ERVING AS UNDER. 5.4. ON A CAREFUL CONSIDERATION OF THE FACTUAL AND LEGAL POSITION BROUGHT ON RECORD, I FIND MERIT IN VARIOUS PLEADINGS MADE B Y THE APPELLANT, PARTICULARLY TAKING COGNIZANCE OF THE FACT THAT EVE N ACCORDING TO THE A.O. THE APPELLANT PRODUCED THE RELEVANT BILLS ISSUED BY THE MAJOR SUPPLIER, M/S SRINIVASA AGRO SERVICE STATION AND HE ONLY REJECTED THE SAME ON THE MERE OBSERVATION THAT THE BILL DID NOT CONTAIN THE PARTI CULARS OF THE PURCHASER; AND I FIND THAT THIS OBSERVATION OF THE A.O. MAY NO T STAND TO THE TEST OF ANY REASONING. BY PRODUCING THE RELEVANT MATERIAL, IT C OULD BE CONSTRUED THAT THE APPELLANT DISCHARGED THE INITIAL ONUS WHICH LIE S UPON IT TO PROVE THE EXPENDITURE AND IN CASE OF DISBELIEF; NOTHING PREVE NTED THE A.O. FROM CAUSING INDEPENDENT VERIFICATION WITH THE SUPPLIER( S). FURTHER, THE A.O. DID NOT SUPPORT HIS VIEW, WITH THE SUPPORT OF ANY COGEN T MATERIAL/DOCUMENTARY EVIDENCE THAT THERE WAS NO OBL IGATION LYING UPON THE APPELLANT TO INCUR THE DIESEL EXPEND ITURE FOR OPERATING THE 'PROCLAINER AND TRACTOR' OF OTHERS ON HIRE BASIS. THUS, TAKING INTO ACCOUNT THE TOTALITY OF THE FACTS AND C IRCUMSTANCES OF THE CASE, VIS--VIS THE LEGAL POSITION RELIED UPON BY THE APPELLANT AS CONTAINED IN ITS MEMORANDUM OF WRITTEN SUBMISSIONS AND ALSO GIVING DUE REGARD TO THE DOCUM ENTARY EVIDENCE ALREADY FILED BY THE APPELLANT BEFORE THE AO, I AM OF ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 8 THE VIEW THAT THE ADDITION OF 91,51,475/- IS NOT IN ORDER AND THE AO IS DIRECTED TO DELETE THE SAME. 8. WE HAVE GONE THROUGH THE ASSESSMENT ORDER, CIT(A) ORDER AND PAPER BOOK SUBMITTED BY THE ASSESSEE. ON EXAMINATIO N OF PAPER BOOK, WE FIND THAT THE ASSESSEE HAS SUBMITTED LEDGER EXTR ACTS OF DIESEL EXPENDITURE ALONG WITH COPIES OF BILLS FOR PURCHASE OF DIESEL EXPENDITURE. IT IS THE CONTENTION OF THE ASSESSEE THAT IT HAS TA KEN PROCLAINERS AND TRACTORS ON HIRE EXCLUSIVE OF DIESEL AND INCURRED D IESEL EXPENDITURE BY ITSELF. THE CIT(A) HAS OBSERVED THAT THE EXPENDITUR E IS FULLY SUPPORTED BY BILLS AND ALSO IT HAS BEEN INCURRED FOR THE PURP OSE OF BUSINESS. THE REVENUE HAS FAILED TO CONTROVERT THE FINDINGS OF TH E FACT BY THE CIT(A). THEREFORE, WE ARE OF THE OPINION THAT THE CIT(A) HA S RIGHTLY DELETED THE ADDITION AND HIS ORDER DOES NOT REQUIRE ANY INTERFE RENCE AT THIS STAGE. HENCE, WE INCLINED TO UPHELD THE CIT(A) ORDER AND D IRECTED THE A.O., TO DELETE THE ADDITION. 9. THE NEXT ISSUE CAME UP FOR OUR CONSIDERATION IS DISALLOWANCE OF EARTH DIGGING CHARGES, LABOUR CHARGES AND SOIL MOVI NG CHARGES UNDER SEC. 40(A)(IA) OF THE ACT. THE LD. D.R. SUBMITTED T HAT THE CIT(A) WAS ERRED IN DELETING THE ADDITION, AS THE ASSESSEE HAS FAILED TO DEDUCT TDS UNDER SEC. 194C OF THE ACT, THEREFORE, THE A.O. HAS RIGHTLY DISALLOWED THE ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 9 EXPENDITURE UNDER SEC. 40(A)(IA) OF THE ACT. ON THE OTHER HAND, THE LD. A.R. STRONGLY SUPPORTED THE CIT(A) ORDER. THE A.R. FURTHER SUBMITTED THAT THE EARTH DIGGING AND SOIL MOVING CHARGES REPR ESENTS THE HIRE CHARGES PERTAINS TO PROCLAINERS AND TRACTORS AND TH E INDIVIDUAL PAYMENTS DID NOT EXCEED THE MONETARY LIMIT OF RS. 20,000/- A ND THE AGGREGATE OF SUCH PAYMENTS IN THE FINANCIAL YEAR ALSO DID NOT EX CEED THE MONETARY LIMIT OF RS. 50,000/- AS SPECIFIED UNDER SEC. 194C. AS REGARDS THE LABOUR CHARGES, ALL THE LABOUR CHARGES ARE PAID TO ITS OWN LABOURERS AND THERE IS NO LABOUR CONTRACT WAS ENTERED INTO WITH ANY THIRD PARTY. IT IS FURTHER CONTENDED THAT THE INDIVIDUAL PAYMENTS DID NOT EXCE ED THE MONETARY LIMIT OF RS. 20,000/- AND THE AGGREGATE OF SUCH PAY MENTS IN THE FINANCIAL YEAR ALSO DID NOT EXCEED THE MONETARY LIMIT OF RS. 50,000/- AS SPECIFIED UNDER SEC. 194C OF THE ACT, THEREFORE THE TDS UNDER SEC. 194C OF THE ACT WAS NOT DEDUCTED. IN SUPPORT OF ITS CONTENTION FURNISHED COPIES OF LEDGER EXTRACTS OF EARTH DIGGING CHARGES, LABOUR CH ARGES AND SOIL MOVING CHARGES. THE A.R. FURTHER SUBMITTED THAT THE EXPEND ITURES INCURRED UNDER THE HEAD EARTH DIGGING CHARGES, LABOUR CHARGE S AND SOIL MOVING CHARGES ARE PAID WITHIN THE FINANCIAL YEAR AND NOTH ING IS OUTSTANDING AT THE END OF THE FINANCIAL YEAR. THE A.R. FURTHER SUB MITTED THAT IN VIEW OF THE SPECIAL BENCH DECISION OF VISAKHAPATNAM ITAT, I N THE CASE OF MERLYN SHIPPING & TRANSPORTS VS. ACIT, (2012) 136 ITD 23 A ND ALSO THE ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 10 DECISION OF MUKUNDARA ENGINEERS & CONTRACTORS VS. A CIT, IN ITA NO. 657/V/2014, NO DISALLOWANCE CAN BE MADE FOR THE AMO UNTS ALREADY HAS BEEN PAID DURING THE FINANCIAL YEAR. THE LD. D.R. S TRONGLY OPPOSED THE CONTENTION OF THE A.R. AND ARGUED THAT THE HONBLE ANDHRA PRADESH HIGH COURT SUSPENDED THE OPERATION OF SPECIAL BENCH DECI SION, THEREFORE, DISALLOWANCE UNDER SEC. 40(A)(IA) IS APPLICABLE, EV EN IF THE AMOUNTS HAS BEEN PAID. 10. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIE S BELOW. THE A.O. DISALLOWED THE EXPENDITURE UNDER THE HEAD EARTH DIG GING CHARGES, SOIL MOVING CHARGES AND LABOUR CHARGES UNDER SEC. 40(A)( IA), FOR NON DEDUCTION OF TDS UNDER SEC. 194C OF THE ACT. THE A. O. WAS OF THE OPINION THAT THE ABOVE EXPENDITURES ATTRACTS TDS UN DER SEC. 194C, BUT THE ASSESSEE HAS FAILED TO DEDUCT TDS, THEREFORE, D ISALLOWED THE AMOUNT. THE CONTENTION OF THE ASSESSEE IS THAT EART H DIGGING AND SOIL MOVING CHARGES REPRESENTS HIRE CHARGES PAID AND THE INDIVIDUAL AND THE AGGREGATE OF SUCH PAYMENTS DID NOT EXCEED THE MONET ARY LIMITS SPECIFIED UNDER SEC. 194C, THEREFORE, THE PROVISION S OF SEC. 194C WOULD NOT BE APPLICABLE TO THESE PAYMENTS. THE ASSESSEE F URTHER CONTENDED THAT THESE EXPENDITURES ARE PAID DURING THE FINANCI AL YEAR AND NOTHING IS ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 11 OUTSTANDING AND HENCE, NO DISALLOWANCE CAN BE MADE UNDER SEC. 40(A)(IA), IN VIEW OF THE SPECIAL BENCH DECISION OF VISAKHAPATNAM ITAT, IN THE CASE OF MERLYN SHIPPING & TRANSPORTS VS. ACI T, (2012) 136 ITD 23 AND ALSO THE DECISION OF MUKUNDARA ENGINEERS & CONT RACTORS VS. ACIT, IN ITA NO. 657/V/2014. 11. WE HAVE GONE THROUGH THE ASSESSMENT ORDER, CIT(A ) ORDER AND PAPER BOOK FILED BY THE ASSESSEE. ON VERIFICATION O F LEDGER EXTRACTS, WHICH IS AVAILABLE IN PAPER BOOK FILED BY THE ASSES SEE, WE FIND THAT INDIVIDUAL PAYMENTS DID NOT EXCEED THE MONETARY LIM IT OF RS. 20,000/- AND THE AGGREGATE OF SUCH PAYMENTS IN THE FINANCIAL YEAR ALSO DID NOT EXCEED THE MONETARY LIMIT OF RS. 50,000/- AS SPECIF IED UNDER SEC. 194C OF THE ACT. HOWEVER, IT WAS THE CONTENTION OF THE R EVENUE THAT THE ASSESSEE HAS FAILED TO PROVE WITH EVIDENCE THAT THE SE PAYMENTS ARE MADE TO DIFFERENT PERSONS AND INDIVIDUAL PAYMENT AN D AGGREGATE OF SUCH PAYMENT DOES NOT EXCEED THE MONETARY LIMITS AS SPEC IFIED UNDER SEC. 194C. THE CIT(A) HAS RECORDED A FINDING OF THE FAC T THAT THESE PAYMENTS ARE SUPPORTED BY BILLS AND VOUCHERS AND TH E INDIVIDUAL AND THE AGGREGATE OF SUCH PAYMENTS DID NOT EXCEED THE MONET ARY LIMITS SPECIFIED UNDER SEC. 194C, THEREFORE, THE PROVISION S OF SEC. 194C WOULD NOT BE APPLICABLE TO THESE PAYMENTS. THE CIT(A) FUR THER OBSERVED THAT ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 12 MERE HIRING OF TRUCKS AND LORRIES CANNOT BE CALLED TO BE THE WORK AS PER THE DEFINITION GIVEN IN EXPLANATION 3 OF SECTION 19 4C. THE RELEVANT PORTION OF CIT ORDER IS REPRODUCED HEREINUNDER. 6.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT, GONE THROUGH THE ORDER OF THE AO AND HEARD THE AR IN PER SON. THE ADDITION COMPRISES OF THE FOLLOWING EXPENSES: (A) EARTH DIGGING CHARGES 51,54,500 (B) LABOUR CHARGES 1,51,17,029 (C) SOIL MOVING CHARGES 32,70,788 TOTAL 2,35,42,317 6.3. IT IS CLARIFIED BY THE APPELLANT THAT THE 'EART H DIGGING CHARGES' ONLY REPRESENTED 'HIRE CHARGES' PERTAINING TO THE USER O F 'PROCLAINERS OF OTHERS'; WHILE SOIL MOVING CHARGES REPRESENT 'HIRE CHARGES' INCURR ED FOR USING THE 'TRACTORS OF OTHERS'. THE A.O. DISALLOWED THE ABOVE EXPENDITURE U/S. 40(A) (IA) OF THE ACT ON THE OBSERVATIONS THAT THE ABOVE EXPENSES ARE HIT BY SEC.194C OF THE ACT; THAT THE APPELLANT FAILED TO PRODUCE ANY EVIDENCE THAT E ACH PAYMENT DID NOT EXCEED THE MONETARY LIMITS PRESCRIBED BY SEC.194C O F THE ACT. 6.4 ON THE OTHER HAND, IT IS PLEADED BY THE APPELLA NT THAT THOSE VEHICLES/EQUIPMENT BELONGED TO DIFFERENT PERSONS AN D IN NONE OF THE CASE, THE MONETARY LIMIT OF RS.20,000/- ON AN OCCASION AND RS .50,000/- IN AGGREGATE PRESCRIBED BY THE SEC.194C OF THE ACT WAS EXCEEDED; THAT NO LABOUR CONTRACT WAS GIVEN AS PER THE 'LEDGER EXTRACTS' FILED BEFORE THE A.O. IT IS ALSO PLEADED BY THE APPELLANT THAT THE A.O. FORMULATED A DISALLOWANCE O F 3,00,000/- WHILE COMPLETING THE ORIGINAL ASSESSMENT TOWARDS DISALLOW ANCE OF LABOUR CHARGES, EARTH DIGGING CHARGES AND SOIL MOVING CHAR GES ETC. AND HENCE THE ISSUE CANNOT BE REVIVED AT THIS STAGE OF COMPLETING THE ASST. U/S.143(3) READ WITH SEC.263 OF THE ACT AS PER THE WELL ESTABL ISHED JUDICIAL PRECEDENTS EXISTING ON THE ISSUE, REFERRED TO IN THE MEMORANDU M OF WRITTEN SUBMISSIONS DT.13.3.2012. 6.5. ON THE CAREFUL CONSIDERATION OF THE FACTUAL AN D LEGAL POSITION PREVALENT IN THE INSTANT CASE, I FIND MERIT IN VARI OUS AVERMENTS MADE BY THE APPELLANT. IN SUPPORT OF ITS CONTENTIONS THAT THOSE PAYMENTS WERE NOT HIT BY SEC.194C OF THE ACT, THE APPELLANT FILED 'LEDGER EX TRACTS' DURING THE COURSE OF ASST. PROCEEDINGS EVEN AS PER THE OBSERVATIONS MADE BY TH E A.O. IN PARA 6 AND PAGE 5 THE IMPUGNED ASST. ORDER AND IN CASE OF SUSP ICION OR DOUBT, NOTHING PREVENTED THE A.O. FROM CAUSING INDEPENDENT VERIFIC ATION AT LEAST ON RANDOM BASIS. IT IS THE CLAIM OF THE APPELLANT THAT IN NONE OF THE CASES, THE PAYMENTS EXCEEDED THE ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 13 MONETARY LIMITS PRESCRIBED BY SEC.194C OF THE ACT A ND THIS PLEADING WAS NOT REBUTTED BY THE A.O. WITH THE AID OF ANY COGENT MAT ERIAL / EVIDENCE. IT IS ALSO CLAIMED BY THE APPELLANT THAT HE DID NOT GIVE ANY L ABOUR CONTRACT AND THOSE PAYMENTS WERE MADE TO THE RECIPIENTS ON ITS OWN ACC OUNT WITHOUT ENGAGING THE SERVICE OF ANY 'CONTRACTOR' FOR THIS PURPOSE; A ND THERE IS NO MATERIAL ADDUCED TO REBUT THIS CLAIM, BY THE A.O. 6.6. ABOVE ALL, THE APPELLANT PUT-FORTH EFFECTIVE A RGUMENTS DURING THE COURSE OF HEARING OF THE APPEAL, PLEADING TO THE EFFECT TH AT THE PROCLAINERS/TRACTORS WERE TAKEN ON HIRE BASIS IN TH AT THOSE OWNERS SIMPLY SUPPLIED VEHICLES TO THE APPELLANT FOR A CONSIDERAT ION OF SPECIFIED CHARGES AND THUS THERE WAS NO 'CONTRACT' BETWEEN THEM FALLI NG WITHIN THE MISCHIEF OF SEC.194C OF THE ACT AS THERE WAS NO OBLIGATION CAST UPON SUCH 'OWNERS' TO SPEND THEIR TIME, ENERGY AND MONEY ETC. WHILE THE APPELLA NT WAS USING THOSE VEHICLES. REFERRING TO THESE ASPECTS, THE APPELLANT VEHEMENTL Y ARGUED THAT ITS CASE IS NOT HIT BY SEC.194C OF THE ACT AS OBSERVED BY THE HON'B LE ITAT, VISAKHAPATNAM IN ITS LANDMARK JUDGEMENTS IN THE CASE OF M. SEETHARAMAIAH I.T.A NO. 355!V12008, DT.10-5-2008 THE DECISION OF THE HON'BLE ITAT IN MY THRI TRANSPORTATION CORPORATION. IT ALSO REFERRED TO THE DECISION OF TH E HON'BLE ITAT, VISAKHAPATNAM IN ACIT, CIRCLE-5(1), VISAKHAPATNAM VS. P. RAMACHANDRA RAO, VISAKHAPATNAM (ITA. NO.387/VIZAG/2009), DT.7-4-20111ION OF THE HON'BLE ITAT, VISAKHAPATNAM IN KRANTI ROAD TRANSPORT PVT. LTD. VI JAYAWADA VS. ACIT, CIRCLE-2(1), VIJAYAWADA (L.T.A. NO.35/VIZAG/2008), DT.11-8-2011, THE SUBSTANCE OF WHICH IS THAT 'THE HIRING OF TRUCKS AND LORRIES CANNOT BE CA LLED TO BE THE WORK AS PER THE DEFINITION GIVEN IN EXPLANATION 3 OF SEC.194C O F THE ACT' AND CONSEQUENT THERETO, THE ASSESSEE IS NOT LIABLE FOR DEDUCTION OF TDS ON PAYMENT TO LORRY/ TRUCK OWNERS AS PER SEC.194C OF THE ACT. IN THIS FACTUAL BACKGROUND AND ALSO RELYING UPON THE VARIOUS DECISIONS OF THE JURISDICTIONAL TRIBUNAL, I AM OF THE VIEW THAT THE AFORESAID PAYMENTS ARE NOT HIT BY SEC.194C OF THE ACT AND ACC ORDINGLY THE DISALLOWANCE OF T2,35,42,317/- IS ORDERED TO BE DEL ETED. 12. COMING TO THE ALTERNATIVE ARGUMENTS OF THE ASSE SSEE. THE LD. A.R. SUBMITTED THAT THE EXPENDITURES INCURRED UNDER THE HEAD EARTH DIGGING CHARGES, LABOUR CHARGES AND SOIL MOVING CHARGES ARE PAID WITHIN THE FINANCIAL YEAR AND NOTHING IS OUTSTANDING AT THE EN D OF THE FINANCIAL YEAR AND HENCE, NO DISALLOWANCE CAN BE MADE UNDER SEC. 4 0(A)(IA), IN VIEW OF THE SPECIAL BENCH DECISION OF VISAKHAPATNAM ITAT, I N THE CASE OF MERLYN ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 14 SHIPPING & TRANSPORTS VS. ACIT, (2012) 136 ITD 23 A ND ALSO THE DECISION OF MUKUNDARA ENGINEERS & CONTRACTORS VS. A CIT, IN ITA NO. 657/V/2014. THE REVENUE DID NOT DISPUTE THE FACT WI TH REGARD TO PAID AND PAYABLE. THE CONTENTION OF THE LD. D.R. IS THAT THE HONBLE ANDHRA PRADESH HIGH COURT SUSPENDED THE OPERATION OF SPECI AL BENCH DECISION, THEREFORE, DISALLOWANCE UNDER SEC. 40(A)(IA) IS APP LICABLE, EVEN IF THE AMOUNTS HAS BEEN PAID. WE HAVE EXAMINED THE CASE LA WS RELIED UPON BY THE LD. A.R. IN THE LIGHT OF THE FACT OF THE PRESEN T CASE. THE CO-ORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF MUKUNDARA EN GINEERS & CONTRACTORS VS. ACIT, IN ITA NO. 657/V/2014, HAS CO NSIDERED THE ISSUE, AND AFTER CONSIDERING THE REVENUE OBJECTION WITH RE GARD TO SPECIAL BENCH DECISION OF MERLYN SHIPPING & TRANSPORTERS (S UPRA) AND ALSO CONSIDERING THE RATION OF HONBLE A.P. HIGH COURT D ECISION IN THE CASE OF M/S JANAPRIYA ENGINEERING SYNDICATE, DECIDED THE IS SUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION IS REPRODUCED HEREIN UNDER. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. CONSISTENT WITH THE VIEW TAKEN BY THE ITAT SPECIAL BENCH VISAKHAPATNAM AND ALSO IN THE LIGHT OF THE VIEW EXPRESSED BY THE HONBLE A .P. HIGH COURT IN THE CASE OF JANAPRIYA ENGINEERING SYNDICATE, WE ARE OF THE OPIN ION THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CANNOT BE MADE APPLICABLE IN R ESPECT OF THE AMOUNTS ALREADY PAID BEFORE 31 ST MARCH. IN OTHER WORDS, THE A.O. IS DIRECTED TO RES TRICT THE DISALLOWANCE TO THE AMOUNTS PAYABLE AFTER 31 ST MARCH. WITH THESE OBSERVATIONS, GROUND NO.3 OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 15 13. THE CIT(A) HAS RECORDED FINDING OF THE FACT THA T THESE PAYMENTS ARE SUPPORTED BY BILLS AND VOUCHERS AND THE INDIVID UAL AND THE AGGREGATE OF SUCH PAYMENTS DID NOT EXCEED THE MONET ARY LIMITS SPECIFIED UNDER SEC. 194C, THEREFORE, THE PROVISION S OF SEC. 194C WOULD NOT BE APPLICABLE TO THESE PAYMENTS. THE FACTS REMA IN SAME EVEN BEFORE US. THE REVENUE HAS FAILED TO CONTROVERT THE FINDINGS OF THE FACT BY THE CIT(A). THE CIT (A) HAS RIGHTLY DELETED THE ADDITION. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO RESPECTFULLY FOLLOWING THE CO-ORDINATE BENCH DECISION IN ITA.NO. 657/V/2014 (SUPRA), WE DIRECT THE A.O. TO DELETE THE ADDITION MADE UNDE R SEC. 40(A)(IA) OF THE ACT. 14. THE NEXT ISSUE IS WITH REGARD TO ADDITION TOWAR DS WORK IN PROGRESS. IT WAS THE CONTENTION OF THE ASSESSEE THAT WORK IN PROGRESS REPRESENTS MATERIAL AVAILABLE AT THE END OF THE YEAR AND THE S AME WAS NOT DEBITED TO PROFIT AND LOSS ACCOUNT. THE PURCHASE OF MATERIA LS WAS DIRECTLY DEBITED TO WORK IN PROGRESS ACCOUNT WITHOUT DEBITED TO PROFIT AND LOSS ACCOUNT AND HENCE, THERE IS NO IMPACT ON THE PROFIT S OF THE YEAR. WE HAVE GONE THROUGH THE PROFIT & LOSS ACCOUNT WHICH I S AVAILABLE IN PAPER BOOK FILED BY THE ASSESSEE. ON GOING THROUGH THE FI NANCIAL STATEMENTS, WE FIND THAT THE ASSESSEE HAS NOT DEBITED ANY EXPEN DITURE TOWARDS ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 16 PURCHASE OF MATERIALS, CONSEQUENTLY NOT RECOGNISED WORK IN PROGRESS IN THE PROFIT AND LOSS ACCOUNT. HOWEVER, WE FIND THAT THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE FOR ACCOUNTING MATERIALS PURCHASE AND RECOGNISING WORK IN PROGRESS IS QUITE OPPOSED T O THE PRINCIPLES OF ACCOUNTING AND ALSO METHOD OF ACCOUNTING PRESCRIBED FOR ACCOUNTING WORK IN PROGRESS. BUT, KEEPING IN VIEW OF THE FACT THAT THERE IS NO IMPACT ON THE PROFITABILITY OF THE YEAR BY NOT ROUTING THE WORK IN PROGRESS THROUGH PROFIT AND LOSS ACCOUNT, WE DO NOT APPRECIA TE THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION TOWARDS WORK I N PROGRESS. THEREFORE, WE DIRECT THE A.O. TO DELETE THE ADDITIO N. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 28 TH JAN16. SD/- SD/- (. ) ( . ) ( V. DURGA RAO ) ( G. MANJUNATHA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER , /VISAKHAPATNAM: 0 / DATED : 28.01.2016 VG/SPS ITA NO.240/VIZAG/2012 G.I. CONSTRUCTIONS, GUNTUR 17 # 2, 3,/ COPY OF THE ORDER FORWARDED TO :- 1. / THE APPELLANT THE DCIT CIRCLE-2(1), GUNTUR 2. #$ / THE RESPONDENT M/S. G.I. CONSTRUCTIONS, 10-2-10, 2 ND LANE, SAMBASIVAPET, GUNTUR 3. 5 / THE CIT, GUNTUR 4. 5 () / THE CIT (A), GUNTUR 5. , # :, ( : , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // >? : ( SR.PRIVATE SECRETARY ) ( : , , / ITAT, VISAKHAPATNAM