ITO, New Delhi V. M/s Trig Steels Pvt. Ltd., New Delhi

ITA 2719/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86760 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 10-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 26-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N O N E
• Assessee Lawyers: J P CHANDRAKAR
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H, NEW DELHI BEFORE SHRI I.P.BANSAL, JUDICIAL MEMBER & SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 2719/DEL /2011 ASSESSMENT Y EAR: 2007-08 ITO WARD-16(4) NEW DELHI (APPELLANT) VS. TRIG STEELS PVT. LTD. 586/6,GOVINDPURI, KALKAJI NEW DELHI (RESPONDENT) ASSESSEE BY : SH. J.P.CHANDRAKAR, SR. DR REVENUE BY : NO NE DATE OF HEARING : 10.02.2015 DATE OF PR ONOUNCEMENT : 13 .02.2015 ORDER PER N.K.SAINI, A.M. : THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST T HE ORDER DATED 07/03/2011 OF C.I.T.(A) XIX, NEW DELHI . . ITA NO. 2719/DEL/2 011 2 2. DURING THE COURSE OF HEARING, NOBODY WAS PR ESENT ON BEHALF OF THE ASSESSEE NEITHER ANY ADJOURNMENT WAS SOUGHT. T HE NOTICE OF HEARING WAS ISSUED TO THE ASSESSEE VIDE RPAD ON 15.10.2014. WE, THEREFORE, PROCEEDED EX- PARTE QUA THE ASSESSEE AND THE APPEAL IS DECIDED ON MERIT AFTER HEARING THE LD. DR. THE ONLY EFFECTIVE GROUND RAISED IN THIS APPEAL READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE O F RS. 14,90,000/- MADE BY THE AO U/S 40(A) (IA) BY INCORR ECTLY HOLDING THAT THE PAYMENT WAS MADE FOR PURCHASE OF S AND AND WAS NOT A CONTRACTUAL PAYMENT TO A CONTRACTOR FOR F ILLING AND LEVELING OF LAND WITH SAND. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASS ESSEE WAS ENGAGED IN THE BUSINESS OF ASSETS STRIPPING, TRADING IN OLD MA CHINERY AND SCRAP SALE. THE RETURN OF INCOME WAS FILED ON 26.10.2007 DECLA RING AN INCOME OF RS. 40,400/-. LATER ON THE CASE WAS SELECTED FOR SCRUT INY DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE A.O. NOTICED THAT THE ASSESSEE HAD CLAIMED EXPENSES OF RS.14.90 LAKHS UNDER THE HEAD DIRECT E XPENSES, HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY PROVISIONS OF SECTIO N 40(A) (IA) OF THE I.T. ACT 1961 (HERE IN AFTER REFERRED AS THE ACT IN S HORT) SHOULD NOT BE APPLICABLE ON THIS PAYMENT. THE ASSESSEE SUBMITTED THAT IT HAD ACQUIRED LAND AT KAVI NAGAR INDUSTRIAL AREA, GHAZIABAD VALUI NG RS. 3 CRORE FROM HONBLE DELHI HIGH COURT AND THEREAFTER INCURRED TH E EXPENSES ON THE DEVELOPMENT OF LAND TO MAKE IT SALEABLE AND IN THE PROCESS INCURRED AN . ITA NO. 2719/DEL/2 011 3 EXPENDITURE OF RS. 14.90 LAKHS FOR THE PURCHASE OF SAND WHICH WAS USED TO FILL THE LAND, HENCE PROVISIONS OF SECTION 40(A) (I A) OF THE ACT WERE NOT APPLICABLE IN ITS CASE. THE AO, HOWEVER, DID NOT FI ND MERIT IN THE SUBMISSIONS OF THE ASSESSEE BY OBSERVING THAT THE A SSESSEE HAD USED THE SERVICES OF THE CONTRACTOR FOR GETTING THIS JOB DO NE THEREFORE THE PROVISIONS OF SECTION 194-C OF THE ACT WERE APPLICABLE AND TH E ASSESSEE HAD NOT DEDUCTED THE TDS, THEREFORE, THE PROVISIONS OF SECT ION 40(A) (IA) OF THE ACT WERE APPLICABLE. HE ACCORDINGLY MADE THE ADDITION O F RS. 14,90,000/-. 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MA TTER OF THE LD. CIT(A) WHO DELETED THE ADDITION BY OBSERVING IN PAR AS 6.2, 6.3 AND 7 OF THE IMPUGNED ORDER AS UNDER :- 6.2 THE ASSESSING OFFICER HAS DISALLOWED THE ABOV E AMOUNT OF RS. 14.90 LAKH FOR PURCHASE OF SAND ON AC COUNT OF THE FACT THAT THE TDS HAS NOT BEEN DEDUCTED ON THE PAYMENTS MADE FOR PURCHASE OF SAND AS PER THE PROVISIONS OF SECTION 40A(IA). 6.3 THE ASSESSEE PURCHASED THE SAND FROM THE FOLLO WING PERSONS/ PARTIES AND MADE THE PAYMENTS; 1. M/S HINDON FORGE PVT. LTD. 2. M/S S.R.INDUSTRIES 3. SHRI MOHD. KHALID QURESHI 7. THE AR STATED THAT THE AO IS NOT CORRECT IN INVOKING PROVISIONS OF SECTION 40A(IA) AS THE PURCHASE OF SA ND IS DIRECT PURCHASE AND THERE IS NO CONTRACT FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR OR CARRYING OUT ANY WOR K) AS ENVISAGED IN PROVISIONS OF SECTION 40A(IA) AND TDS PROVISIONS. THE AO PRESUMED THAT THERE IS CONTRACT FOR GETTING THE JOB OF SUPPLYING OF SAND AND MADE THE DISALLOWANCE. IT IS SEEN THAT THE PURCHASE OF SAND IS ON PRINCIPAL TO PRINCIPAL B ASIS, WHICH DOES NOT REQUIRE ANY TDS ON THE PAYMENTS MADE FOR P URCHASE . ITA NO. 2719/DEL/2 011 4 OF SAND. AFTER CAREFUL CONSIDERATION OF THE FACTS, THERE IS NO CASE FOR INVOKING PROVISIONS OF S. 40A(IA) SINCE THERE I S NO PAYMENT IN TERMS OF ANY CONTRACT FOR SUPPLY OF LABOUR AND PAYM ENT THEREON. THE FACTS OF THE CASE DO NOT WARRANT APPLICATION OF PROVISIONS OF TDS AND DISALLOWANCE U/S 40(A)(IA). THE ACTION OF T HE AO IS NOT JUSTIFIED. 5. NOW THE DEPARTMENT IS IN APPEAL. THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE AO AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER DATED 14.12.2009. WE HAVE CONSID ERED THE SUBMISSIONS OF THE LD. DR AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE IT APPEARS THAT THE ASS ESSEE PURCHASED THE SAND FOR LEVELING LAND FROM THE FOLLOWING PARTIES. 1. M/S HINDON FORGE PVT. LTD. 2. M/S S.R.INDUSTRIES 3. SHRI MOHD. KHALID QURESHI THE AO CONSIDERED THE ABOVE PARTIES WERE CONT RACTORS AND WAS OF THE VIEW THAT THE JOB WAS COMPLETED BY THE ASSES SEE THROUGH CONTRACTORS. HOWEVER, NOTHING WAS BROUGHT ON RECOR D TO SUBSTANTIATE THAT THE PURCHASE OF SAND WAS NOT DIRECT OR THERE WAS AN Y CONTRACT FOR CARRYING OUT ANY WORK. ON THE CONTRARY, THE PURCHASE OF SAND WAS ON PRINCIPAL TO PRINCIPAL BASIS WHICH DID NOT REQUIRE ANY DEDUCTION OF TAX AT SOURCE ON THE PAYMENTS MADE FOR PURCHASE OF SAND. THEREFORE, TH E PROVISIONS OF SECTION 40(A) (IA) READ WITH SECTION 194C OF THE ACT WERE NOT APPLICABLE AND THE . ITA NO. 2719/DEL/2 011 5 ADDITION MADE BY THE AO WAS RIGHTLY DELETED BY THE LD. CIT(A). IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THIS APPE AL OF THE DEPARTMENT. IN THE RESULT APPEAL OF THE DEPARTMENT IS DISMISSED . ( ORDER PRONOUNCED IN THE OPEN COURT ON 13 / 02/2 015. ) SD/- SD/- (I.P.BANSAL) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 13 FEB. 2015 B.RUKHAIYAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. CIT (ITAT), NEW DELHI