ACIT, Chandigarh V. M/s Bhardwaj Builders, Chandigarh

ITA 280/CHANDI/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5466 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 17-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LAGANPREET SANDHU
• Keywords: TDS
• Section: 40A(3); 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 280/CHD/2011 ASSESSMENT YEAR: 2006-07 THE ACIT, VS. M/S BHARDWAJ BUILDERS, CIRCLE 5(1), CHANDIGARH CHANDIGARH PAN NO. ACNPS7888M (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. LAGANPREET SANDHU RESPONDENT BY: SHRI TEJ MOHAN SINGH ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF C IT(A), CHANDIGARH DATED 17.9.2010 RELATING TO ASSESSMENT YEAR 2006-07 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. A CT, 1961. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOU T APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 1,30,935/- FOR NON DEDUCTION OF TDS ON PAYMENTS MAD E FOR SUPPLY OF SHUTTERING MATERIAL. THE ASSESSEE HA S NOT PRODUCED ANY EVIDENCE AT ANY STAGE TO ESTABLISH THA T THE PAYMENTS WERE MADE FOR PURCHASES AND NOT FOR WORK D ONE ON CONTRACTS. 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 12,10,475/- ON ACCOUNT OF PAYMENTS MADE IN CASH FOR VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE IN COME TAX ACT. 3. THE GROUND NO.1 RAISED BY THE REVENUE BEING GENE RAL IS DISMISSED. 4. THE ISSUE IN GROUND NO.2 IS AGAINST DELETION OF RS. 1,30,935/-. . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER HAD INVOKED THE PROVISIONS OF SECTION 194C OF THE ACT IN RESPECT OF SHUTTERING MATERIAL SHOWN TO BE PURCHASED FROM M/S BHARADWAJ ENGINEERI NG CORPORATION, SISTER CONCERN OF THE ASSESSEE AMOUNTING TO RS. 1,3 0,935/-. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS ENTERED INTO A BUILDING CONTRACT WITH ITS SISTER CONCERN FOR THE SUPPLY OF SHUTTERIN G MATERIAL AND HAS NOT DEDUCTED THE TAX AT SOURCE, HENCE, THE SAME WAS NOT ALLOWED AS DEDUCTION. 5. THE CIT(A) HELD AS UNDER:- 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND I FI ND THAT THE ASSESSING OFFICER ONLY PRESUMED THAT THERE WAS A CONTRACT FOR SUPPLY OF SHUTTERING MATERIAL WITHOUT ESTABLISHING THAT THERE WAS ACTUALLY A WRITTEN / OR AL CONTRACT. IN MY VIEW, A CONTRACT WOULD NEED SHUTTERING MATERI AL AND IF IT IS OBTAINED FROM SISTER CONCERN, THIS WOULD NOT BRING IT WITHIN THE AMBIT OF SECTION 194C. IF THE CONTENTIO N OF THE ASSESSING OFFICER IS ACCEPTED, THEN EVERY PURCHASE WOULD BE LIABLE FOR DEDUCTION OF TDS. IT IS QUITE CLEAR THAT IN ORDER TO INVOKE 194C, IT HAS TO BE PROVED THAT THE CHARGES P AID WERE IN PURSUANCE OF A CONTRACT FOR SPECIFIC PERIOD, QUA NTITY OR PRICE. IN THE ABSENCE OF THE SAME, APPLICATION OF S ECTION 194C IS NOT IN ORDER. AS SUCH, THE ADDITION ON ACCO UNT OF DISALLOWANCE OF RS. 1,30.935/- IS DELETED, ALLOWING ASSESSEES PLEA ON THIS GROUND. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE DURING THE PERIOD UNDER CONSIDERATION HAD PURCHASED SHUTTERING MATERIAL FROM ITS SISTER CONCERN AMOUNTING TO RS. 1 ,30,935/-. THE LD. AR 3 FOR THE ASSESSEE HAS STRESSED BEFORE US THAT THE SH UTTERING MATERIAL WAS PURCHASED BY THE ASSESSEE AND NO CONTRACT FOR THE S AME WAS ENTERED WITH THE SISTER CONCERN. THE LD. DR FOR THE REVENUE HAS FAILED TO POINT OUT ANY CONTRARY FINDING TO THE SAME. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO MERIT IN THE ORDER OF ASSESSING OF FICER IN INVOKING THE PROVISIONS OF SECTION 194C OF THE ACT IN THE PRESEN T CIRCUMSTANCES WHERE THE ASSESSEE HAD MADE PURCHASES FROM ITS SISTER CON CERN AND THE SAME ARE NOT EXIGIBLE TO DEDUCTION OF TAX AT SOURCE. UPHOLD ING THE ORDER OF CIT(A), WE DISMISS THE GROUND OF APPEAL NO.2 RAISED BY THE REVENUE. 7. AS REGARDS GROUND NO.3, THE ASSESSING OFFICER HA D DISALLOWED THE EXPENDITURE BY OBSERVING AS UNDER:- DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS MADE PURCHASES FOR AN AMOUNT OF RS. 4,77,71,334/- OUT OF WHICH PAYMENT OF RS. 60,52,377/- HAS BEEN MADE IN CASH TO DIFFERENT PARTIES. KEEPING IN VIEW THE NATURE OF BUSINESS OF THE ASSESSEE, 20% OF CASH PURCHASES OF RS. 60,52,377/- WHICH WORK S OUT TO RS. 12,10,475/- IS DISALLOWED AND ADDED TO THE INCO ME OF THE ASSESSEE. 8. BEFORE THE CIT(A), THE SUBMISSIONS OF THE LD. CO UNSEL WAS AS UNDER:- THE NATURE OF TRADE IS SUCH THAT CASH PURCHASES HA VE TO BE MADE IN RESPECT OF THE ROHRI, BAJRI, SAND BRICKS ET C. IT IS THE NOT THE CASE OF THE ASSESSING OFFICER THAT THE EXPE NDITURE HAS NOT BEEN INCURRED AND IS NOT VOUCHED. ALL THE SUPP ORTING DOCUMENTS WERE PRODUCED BEFORE THE ASSESSING OFFICE R. THE VOUCHERS AND BILLS IN RESPECT OF CASH PURCHASE ARE BEING PRODUCED FOR YOUR KIND PERUSAL. IT IS FURTHER SUBMI TTED THAT THE CASE OF THE ASSESSEE HAS BEEN REGULARLY SCRUTIN IZED IN THE ASSESSMENT YEARS 2002-03, 2003-04 & 2004-05 AND NO SUCH ADDITION HAS EVER BEEN MADE KEEPING INTO VIEW THE N ATURE OF THE BUSINESS OF THE ASSESSEE. 9. THE CIT(A), ON CONSIDERATION OF THE FACTS AND CI RCUMSTANCES HELD AS UNDER:- 4 16. I HAVE CONSIDERED THE RIVAL CONTENTIONS. IN MY VIEW, LOOKING AT THE NATURE OF BUSINESS AND PAST HISTORY OF THE CASE, A DISALLOWANCE OF 20% SEEMS QUITE REASONABLE. AFTE R PURSING THE BILLS & VOUCHERS, I AM OF THE VIEW THAT 5% OF THESE PURCHASES BE DISALLOWED, GIVING PART RELIEF T O THE ASSESSEE ON THIS GROUND. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. IN THE TOTALITY OF FACTS AND CIRCUMSTANCES, WE ARE IN CONF ORMITY WITH THE ORDER OF CIT(A) THAT IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE BE RESTRICTED TO 5% OF THE PURCHASES A ND HENCE THE GROUND NO.3 RAISED BY THE REVENUE IS DISMISSED. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF APRIL, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH APRIL, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH 5