M/s Vidut Electrical SuppliersContractors, Secunderabad V. Income Tax Officer, Ward-10(1), Hyderabad

ITA 243/Hyd/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4299 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 10-04-2019
• Assessment Year: 2006-2007
• Appeal Filed On: 05-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: G V V S MURTY
• Keywords: Principle of natural justice; TDS
• Section: 142(1); 40(a)(ia); 143(1); 147; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A ', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO. 243 / HYD/201 8 ASSESSMENT YEAR: 20 06 - 07 V IDUT ELECTRICAL SUPPLIER CONTRACTORS, SECUNDERABAD . PAN A A EFV 0753 D VS. INCOME - TAX OFFICER, WARD 10(1), HYDERABAD APPELLANT RESPONDENT ASSESSEE BY: S HRI GVVS MURTY REVENUE BY: S MT. AMISHA S. GUPT DATE OF HEARING: 10 / 0 4 / 201 9 DATE OF PRONOUNCEMENT: 10 / 0 5 /201 9 O R D E R PER S. RIFAUR RAHMAN , AM: T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) 9 , HYDERABAD, DATED, 06 /0 7 /201 7 FOR AY 20 06 - 07 . 2. BRIEF FACTS OF THE CASE ARE, THE ASSESSEE FIRM FILED ITS RETURN OF INCOME ON 30/10/2006 FOR THE AY 2006 - 07 DECLARING TOTAL INCOME AT RS. 7,11,670/ - , WHICH WAS PROCESSED U/S 143(1) OF THE ACT ON 29/03/2007. HOWEVER, THE AO NOTICED THAT AS PER THE AUDIT REPORT U/S 44AB AT COL. NO. 27, NO TDS WAS DEDUCTED FROM THE PAYMENT MADE TO SUB - CONTRACTOR AMOUNTING TO RS. 13,63,842/ - . THE AO INVOKED TO SECTION 40(A)(IA) OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT) AND REOPENED THE ASSESSMENT U/S 147 AND ISSUED N OTICE U/S 142(1) TO THE ASSESSEE. IN RESPONSE, THE ASSESSEE FILED A LETTER STATING THAT TAX WAS NOT DEDUCTED AT SOURCE FROM THE I.T.A. NO. 243 /HYD/1 8 VIDUT ELECTRICAL SUPPLIER CONTRACTORS, SECBAD. 2 PAYMENTS MADE TO THE SUB - CONTRACTORS TO THE EXTENT OF RS. 13,63,842/ - . ACCORDINGLY, THE AO COMPLETED THE ASSESSMENT DISALLOWING THE SAID EXPENDITURE CLAIMED BEING THE PAYMENTS MADE TO THE SUB - CONTRACTORS, FROM THE PAYMENTS, TDS WAS NOT DEDUCTED. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND SUBMITTED THAT THE ASSESSEE FIRM EXECUTED ELECTRICAL CONTRACT WORKS BY USING THEIR OWN EMPLOYEES AND TEMPORARY LABOURERS. THE PAYMENTS MADE TO THEM WERE WRONGLY GROUPED UN DER THE HEAD PAYMENTS TO SUB - CONTRACTORS IN P&L A/C, BASED ON WHICH, THE AO DISALLOWED THE PAYMENT U/S 40(A)(IA) OF THE ACT, WITHOUT PROVIDING ENOUGH OPPORTUNITY OR WITHOUT VERIFYING THE BOOKS OF ACCOUNT. BEFORE THE CIT(A), THE ASSESSEE FILED COPIES OF LE DGER ACCOUNTS OF THE PARTIES TO WHOM SUCH PAYMENTS WERE MADE ALONG WITH COPIES OF SOME VOUCHERS. THE SAME WERE FORWARDED TO THE AO BY CIT(A) FOR VERIFICATION AND REPORT. SINCE NO REPORT WAS RECEIVED FROM AO, THE CIT(A) PROCEEDED TO ADJUDICATE THE ISSUE BAS ED ON THE INFORMATION AVAILABLE ON RECORD . 3.1 AFTER CONSIDERING THE SUBMISSIONS AND EXAMINING THE MATERIAL FILED BEFORE HIM, THE CIT(A) HELD THAT THE PAYMENTS MADE ARE IN THE NATURE OF PAYMENTS TO LABOUR CONTRACTORS/SUB - CONTRACTORS AND HENCE IT IS NECES SARY TO DEDUCT TAX AS PER THE PROVISIONS OF SECTION 194C. ACCORDINGLY, THE CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO U/S 40(A)(IA). 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER PASSED B Y THE COMMISSIONER OF INCOME - TAX (APPEALS) - 9 WAS CONTRARY TO THE FACTS ON RECORD AND THE EVIDENCE SUBMITTED BEFORE HIM. I.T.A. NO. 243 /HYD/1 8 VIDUT ELECTRICAL SUPPLIER CONTRACTORS, SECBAD. 3 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENDITURE AMOUNTING RS.13,63,842 MADE BY THE A.O. IN TERMS OF SECTION 40(A)(IA) ON THE GROUND THAT TDS WAS NOT MADE ON THESE PAYMENTS MADE TO THE SUB - CONTRACTORS. 3. THE CIT(A) WAS NOT JUSTI FIED IN CONFIRMING THE DISALLOWANCE HAVING ACCEPTED THE PLEA OF THE ASSESSEE BASED ON THE EVIDENCE SUBMITTED THAT THESE PAYMENTS WERE IN THE NATURE OF SALARIES, BUT WRONGLY GROUPED AS 'SUB - CONTRACTORS' IN THE BOOKS OF ACCOUNT HOLDING THAT SUCH PAYMENTS DID NOT ADHERE TO THE PATTERN OF SALARY PAYMENTS. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE IMPUGNED DISALLOWANCE OF RS.13,63,842 BE DIRECTED TO BE DELETED. 5. BEFORE US, L D. AR SUBMITTED THAT ASSESSEE HAS FILED ALL THE INFORMATION RELATING TO THESE TRANSACTIONS. ALL THE PAYMENTS ARE MADE TO ITS OWN EMPLOYEES, SINCE THESE ARE TEMPORARY EMPLOYEES, THEY WERE PAID TO THE INDIVIDUAL EMPLOYEES BASED ON THE WORK COMPLETION. THESE INFORMATIONS WERE SUBMITTED B EFORE CIT(A) AND LD. CIT(A) HAS CALLED FOR REMAND REPORT, FROM AO. BUT, NO SUCH REPORT WAS SUBMITTED BY THE AO AND SUBSEQUENTLY, CIT(A) HAS DISMISSED THE APPEAL WITHOUT SUCH REMAND REPORT. HE PRAYED THAT IT MAY BE REMITTED BACK TO CIT(A) SO THAT HE CAN CAL L FOR REMAND REPORT AND DEAL WITH THE ISSUE ACCORDINGLY. 6. LD. DR , ON THE OTHER HAND, RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON REC ORD. WE NOTICE THAT LD. CIT(A) HAS CALLED FOR REMAND REPORT BUT NO SUCH REPORT WAS SUBMITTED BY THE AO. WE DO AGREE THAT CIT(A) HAS CO - TERMINUS POWER, BUT, WHEN A REPORT IS CALLED FOR AND SUCH REPORT WAS NOT SUBMITTED, THE CIT(A) SHOULD HAVE GIVEN REASONS FOR NO T WAITING FOR THE REPORT I.T.A. NO. 243 /HYD/1 8 VIDUT ELECTRICAL SUPPLIER CONTRACTORS, SECBAD. 4 AND HE CAN COMPLETE THE PROCEEDIN GS AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE AND HE SHOULD HAVE CARRIED OUT PROPER VERIFICATION TO COME TO A CONCLUSION. IN OUR VIEW, CIT(A) SHOULD HAVE VERIFIED THE ISSUE HIMSELF BY CALLING FOR PROPER RECORDS FROM THE ASSESSEE AND HE SHOULD HAVE GIV EN ONE MORE OPPORTUNITY TO THE ASSESSEE BEFORE DISMISSING THE APPEAL. THE PRINCIPLES OF NATURAL JUSTICE DEMAND FOR A PROPER OPPORTUNITY TO THE ASSESSEE. THEREFORE, WE REMIT THIS ISSUE BACK TO CIT(A) TO INVESTIGATE OR VERIF Y OF THE INFORMATION SUBMITT ED BY THE ASSESSEE AND GIV ING THE ASSESSEE PROPER OPPORTUNITY OF H E A R ING TO ASSESSEE BEFORE ADJUDICATING THE APPEAL. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 10 TH MAY , 201 9. SD/ - ( P. MADHAVI DEVI ) JUDICIAL MEMBER SD/ - ( S. RIFAUR RAHMAN ) ACCOUNTANT MEMBER HYDERABAD, DATED 10 TH MAY , 201 9. KV COPY FORWARDED TO: 1. M/S VIDUT ELECTRICAL SUPPLIER CONTRACTORS, 1 - 3 - 20 1 ST FLOOR, CEMENT BUILDING, MAHANKALI STREET, SECUNDERABAD 500 00 3 2 . IT O , WARD 1 0 ( 1 ), IT TOWERS, AC GUARDS, HYD . - 04 3 . CIT (A) - 9 , HYDERABAD 4. PR. CIT 6 , HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE