Shri Valibhai Khanbhai Mankad, Ahmedabad V. The ACIT.,(OSD)Circle-9, Ahmedabad

ITA 298/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76800 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-04-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 04-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: A C SHAH
• Keywords: Additional evidence; Non-deduction of tax
• Section: 143(3); 194C; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVE DI, A.M.) I.T. A. NO. 298/AHD/2011 (ASSESSMENT Y EAR: 2007-08) VALIBHAI KHANBHAI MANKAD PROP. A BAD ROADWAYS, 35- A, TASLIM SOCIETY, NR. BIBI TALAV, VATVA, AHMEDABAD V/S THE ACIT (OSD), CIRCLE-9, AHMEDABAD. (APPELLANT) (RESPONDENT) PAN: AFAPM 0480P APPELLANT BY : SHRI A.C. SHAH. A.R. RESPONDENT BY : SHRI O.P. BATHEJA, SR. D.R. ( )/ ORDER DATE OF HEARING : 28-04-2014 DATE OF PRONOUNCEMENT : 30 -05-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A)-XV, AHMEDABAD DATED 16.10.2010 FOR A.Y. 2007-08. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS AN INDIVIDUAL STATED TO BE ENGAGED IN T HE PROFESSION OF TRANSPORT CONTRACTOR AND COMMISSION AGENT. ASSESSEE FILED HIS RETURN OF INCOME FOR A.Y. 07-08 ON 21.09.2008 DECLARING TOTAL INCOME OF RS. ITA NO 298/AHD/2011 . A.Y. 2007-0 8 2 54,65,300/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORD ER DATED 02.12.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS. 2,22,76, 200/-. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFOR E CIT(A). CIT(A) VIDE ORDER DATED 16.12.2010 GRANTED PARTIAL RELIEF TO TH E ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A), ASSESSEE IS NOW I N APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING ADDIT ION OF RS. 1,67,08,372 UNDER SECTION 40(A)(IA) MADE BY AO IN TWO PARTS NAMELY RS. 1,06,20,979,UNDE R SEC. 40(A)(IA) AND RS. 60,87,393 UNDER SECTION 37 IN AS MUCH AS THE ADDITION MADE BY AO ITSELF IS NOT AS PER LAW. 2. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING ADDIT ION OF RS. 1,06,20,979 OUT OF RS. 1,67,08,372 MADE BY AO, BEING THE PAYMENT MADE TO SUB-CONTRACTORS UN DER SEC. 40(A)(IA) IN AS MUCH THE THERE IS NO FAILURE TO DEDUCT TAX AT SOURCE UNDER SECTION 194C AND THAT ASSESSEE HAS RECEIVED FORM NO. 15-1 FROM THE SUBCONTRACTORS. THERE MAY BE A FAILURE TO FILE FORM NO. 15-1 IN FORM NO. 15-J BUT THERE IS NO FAILURE TO DEDUCT TAX AT SOURCE. THEREFORE, THE ADD ITION MADE IS NOT PROPER. 2.1 THE APPELLANT SAYS AND SUBMITS THAT FORM NO. 15 -J IS FILED ON 17-04-2009 WITH CIT. 3. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE A DDITION OF RS. 60,87,393 UNDER SECTION 37 AS BOGUS EXPENDITURE OUT OF ADDITION OF RS. 1,67,08,372 MADE BY AO UNDER SECTION 40(A)(IA) WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE FOR CHANGING THE STAND THAT HAS BEEN TAKEN BY AO. 3.1 THE APPELLANT SAYS AND SUBMITS THAT THE ASSESSE E HAS ACCEPTED FORM NO. 15-1 AS SUBMITTED BY THE SUB-CONTRACTORS. IF THERE IS ANY DEFECT THEN THE RE SPONSIBILITY IS WITH THE DECLARENT AND NOT WITH THE ASSESSEE. 3.2 THE APPELLANT FURTHER SAYS AND SUBMITS THAT THE LEARNED CIT(A) HELD THAT FORM NO. 15-I IS WITH INCOMPLETE ADDRESS WITHOUT MAKING ANY INQUIRY. 3.3 THE LEARNED CIT(A) HAS GONE BEYOND THE SUBJECT MATTER OF APPEAL IN AS MUCH AS THE SUBJECT MATTER OF THE APPEAL IS DISALLOWANCE UNDER SEC. 40(A)(IA) AND NOT THE DISALLOWANCE AS BOGUS EXPENDITURE UNDER SEC. 37(1). 4. THOUGH THE ASSESSEE HAS RAISED SEVERAL GROUNDS BUT THE ONLY ISSUE IS WITH RESPECT TO DISALLOWANCE U/S. 40(A)(IA) AND THE CONF IRMATION OF ADDITION OF RS. 60,80,393/- AS BOGUS EXPENDITURE OUT OF TOTAL A DDITION OF RS. 1,67,08,372/- MADE UNDER SECTION 40(A)(IA) OF THE A CT. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD MADE PAYMENT TO SUB CONTRACTORS/ TRANSPORTERS, OUT OF WHICH SUM OF RS. 1,93,33,215/- WAS STATED HAVE BEEN MADE TO INDI VIDUAL (TRANSPORTERS) WHERE THE PAYMENT INDIVIDUALLY WAS LESS THAN 20,000 /- AT A TIME AND LESS ITA NO 298/AHD/2011 . A.Y. 2007-0 8 3 THAN 50,000/- ON ANNUAL BASIS AND THEREFORE AS PER THE ASSESSEE NO TDS WAS DEDUCTIBLE FROM THESE PAYMENTS. A.O. ALSO NOTIC ED THAT ASSESSEE HAD OBTAINED FORM-15 I FROM THE TRANSPORTERS BUT THE SA ME WERE NOT FURNISHED TO THE COMMISSIONER OF INCOME TAX IN FORM-15J AS PE R RULE 29 OF THE I.T. RULES, 1962 BEFORE THE SPECIFIED TIME I.E. BE FORE 30.06.2007. A.O. WAS THEREFORE OF THE VIEW THAT ASSESSEE HAS NOT COM PLIED WITH THE PROVISIONS OF SECTION 194C OF THE ACT AND THEREFORE PROVISIONS OF SECTION 40(A)(IA) WERE ATTRACTED. HE ACCORDINGLY HELD THAT THE AMOUNT OF RS. 1,67,08,372/- WAS NOT ALLOWABLE AND ACCORDINGLY DIS ALLOWED THE SAME. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) UPHELD THE ACTION OF THE A.O. BUT HO WEVER HELD THAT OUT OF TOTAL DISALLOWANCE OF RS. 1,67,08,372/-, ADDITIO N OF RS. 60,87,393/- TO BE BOGUS EXPENDITURE AND BALANCE OF RS. 1,06,20,979 /- WAS DISALLOWABLE UNDER SECTION 40(A)(IA) OF THE ACT. THE REASON FOR CONSIDERING THE EXPENDITURE TO BE BOGUS BY CIT(A) WAS THAT ON THE S CRUTINY OF FORM 15 I IT WAS NOTED THAT IN SEVERAL CASES INCOMPLETE ADDRE SSES OF THE TRANSPORTERS WERE STATED AND THEY WERE STATED TO BE RESIDING AT FAR OFF PLACES IN SOUTH INDIA, THE ADDRESSES WERE ALSO INCOMPLETE AND IT WA S ALSO NOTICED BY HER THAT AT LEAST 35 PERSONS WERE STATED TO BE STAYING AT ONE ADDRESS IN BANGLORE. THE LIST OF SUCH CASES IS REPRODUCED AT PAGE 5 TO 10 OF THE ORDER OF CIT(A). 6. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS N OW IN APPEAL BEFORE US. 7. BEFORE US, THE LD. A.R. SUBMITTED THAT AS FAR AS TH E ADDITION OF RS. 1,06,20,979/- IS CONCERNED, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE ITA NO 298/AHD/2011 . A.Y. 2007-0 8 4 BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 06-07. IT WAS FURTHER SUBMITTED THAT AGAINST THE ORDER OF TRI BUNAL FOR A.Y. 06-07, REVENUE HAD PREFERRED APPEAL BEFORE HONBLE HIGH CO URT WHICH WAS DISMISSED BY HONBLE HIGH COURT. HE PLACED ON RECOR D THE COPIES OF THE AFORESAID DECISIONS OF TRIBUNAL AS WELL AS HIGH COU RT. 8. WITH RESPECT TO DISALLOWANCE OF RS. 60,87,393/- WHI CH CIT(A) HAS HELD TO BE BOGUS EXPENDITURE, THE LD. A.R. SUBMITTED WIT H THE ADDITION HAS BEEN MADE BY CIT(A) WITHOUT MAKING ANY ENQUIRY AND ONLY ON THE BASIS OF PRESUMPTION. HE PLACED ON RECORD THE COPIES OF F ORM 15J ALONG WITH THE SAMPLE COPIES OF RC BOOK OF THE VEHICLES OF THE INDIVIDUAL TRUCK OWNERS. HE ALSO PLACED ON RECORD, THE COPY OF FORM 15I ON SAMPLE BUSINESS AND SUBMITTED THAT IN VIEW OF THE FACT THA T THE ASSESSEE HAD FURNISHED FORM 15I, COPY OF RC BOOK AND COPY OF PAN CARD IN SOME CASES, THE EXPENDITURE CANNOT BE HELD TO BE BOGUS A ND THEREFORE DELETED. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O. AND CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. IT IS SEEN THAT A.O DURING THE COURSE OF ASSESSMENT MADE TOTAL DISALLOWANCE OF RS. 1,67,08,372/- U/S. 40(A)(IA) OF THE ACT BUT WHEN THE MATTER REACHED BEFORE CIT(A), CIT(A) OUT OF THE TOT AL DISALLOWANCE MADE BY A.O, TREATED THE EXPENSES OF RS. 60,87,393/- TO BE BOGUS AND THE ACTION OF A.O WAS UPHELD WITH RESPECT TO BALANCE DI SALLOWANCE OF RS. 1,06,20,979/- U/S. 40(A)(IA). WE ALSO FIND THAT DI SALLOWANCE ON ACCOUNT OF NON SUBMISSION OF FORM 15I/J WAS MADE BY A.O IN A.Y . 06-07 AND THEREAFTER THE MATTER WAS DECIDED IN FAVOUR OF ASSE SSEE BY THE HONBLE TRIBUNAL IN ITA NO. 2228/AHD/2009 ORDER DATED 29.04 .2011. AGAINST ITA NO 298/AHD/2011 . A.Y. 2007-0 8 5 THE ORDER OF TRIBUNAL, REVENUE PREFERRED APPEAL BEF ORE HONBLE HIGH COURT WHICH WAS DISMISSED BY HIGH COURT AND THUS TH E ORDER OF TRIBUNAL ATTAINED FINALITY. THE DECISION IS REPORTED ON (2 012) 28 TAXMAN. COM. 119 (GUJ) AND THE HONBLE HIGH COURT HAS DECIDED TH E ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER:- 7. THE EXCLUSION PROVIDED IN SUB-SECTION (3) OF SECTIO N 194C FROM THE LIABILITY TO DEDUCT TAX AT SOURCE UNDER SUB-SECTION(2) WOULD THUS BE COMPLETE THE MOMENT THE REQUIREMENTS CONTAINED THEREIN ARE SATISFIED. SUCH REQUIREMENTS, PRINCIPAL LY, ARE THAT THE SUB-CONTRACTOR, RECIPIENT OF THE PAYMENT PRODUCES A NECESSARY DECLARATION IN THE PRE SCRIBED FORMAT AND FURTHER THAT SUCH SUB- CONTRACTOR DOES NOT OWN MORE THAN TWO GOODS CARRIAG ES DURING THE ENTIRE PREVIOUS YEAR. THE MOMENT, SUCH REQUIREMENTS ARE FULFILLED, THE LIABIL ITY OF THE ASSESSEE TO DEDUCT TAX ON THE PAYMENTS MADE OR TO BE MADE TO SUCH SUB-CONTRACTORS WOULD CEASE. IN FACT HE WOULD HAVE NO AUTHORITY TO MAKE ANY SUCH DEDUCTION. 8. THE LATER PORTION OF SUB-SECTION (3) WHICH FOLLOW T HE FURTHER PROVISO IS A REQUIREMENT WHICH WOULD ARISE AT A MUCH LATER POINT OF TIME. SUCH RE QUIREMENT IS THAT THE PERSON RESPONSIBLE FOR PAYING SUCH SUM TO THE SUB-CONTRACTOR HAS TO FURNIS H SUCH PARTICULARS AS PRESCRIBED. WE MAY NOTICE THAT UNDER RULE 29D OF THE RULES, SUCH DECLA RATION HAS TO BE MADE BY THE END OF JUNE OF THE NEXT ACCOUNTING YEAR IN QUESTION. 9. IN OUR VIEW, THEREFORE, ONCE THE CONDITIONS OF FURT HER PROVISO OF SECTION 194C(3) ARE SATISFIED, THE : LIABILITY OF THE PAYEE TO DEDUCT TAX AT SOURCE WOU LD CEASE. THE REQUIREMENT OF SUCH PAYEE TO FURNISH DETAILS TO THE INCOME TAX AUTHORITY IN THE PRESCRIBED FORM WITHIN PRESCRIBED TIME WOULD ARISE LATER AND ANY INFRACTION IN SUCH A REQUIREMEN T WOULD NOT MAKE THE REQUIREMENT OF DEDUCTION AT SOURCE APPLICABLE UNDER SUB-SECTION (2) OF SECTI ON 194C OF THE ACT. IN OUR VIEW, THEREFORE, THE TRIBUNAL WAS PERFECTLY JUSTIFIED IN TAKING THE VIEW IN THE IMPUGNED JUDGMENT. IT MAY BE THAT FAILURE TO COMPLY SUCH REQUIREMENT BY THE PAYEE MAY RESULT INTO SOME OTHER ADVERSE CONSEQUENCES IF SO PROVIDED UNDER THE ACT. HOWEVER, FULFILLMENT OF SUCH REQUIREMENT CANNOT BE LINKED TO THE DECLARATION OF TAX AT SOURCE. ANY SUC H FAILURE THEREFORE CANNOT BE VISUALIZED BY ADVERSE CONSEQUENCES PROVIDED UNDER SECTION 40(A)(I A) OF THE ACT. 10. WHEN ON THE BASIS OF THE RECORD IT IS NOT DISPUTED THAT THE REQUIREMENTS OF FURTHER PROVISO WERE FULFILLED, THE ASSESSEE WAS NOT REQUIRED TO MAKE AN Y DEDUCTION AT SOURCE ON THE PAYMENTS MADE TO THE SUB-CONTRACTORS. IF THAT BE OUR CONCLUSION, APP LICATION OF SECTION 40(A)(IA) WOULD NOT ARISE SINCE, AS ALREADY NOTICED, SECTION 40(A)(IA) WOULD APPLY WHEN THERE IS A REQUIREMENT OF DEDUCTION OF TAX AT SOURCE AND SUCH REQUIREMENT IS EITHER NOT FULFILLED OR HAVING DEDUCTED TAX AT SOURCE IS NOT DEPOSITED WITHIN PRESCRIBED TIME. 10. IN VIEW OF THE FOREGOING, WE ARE OF THE VIEW THAT S INCE THE ISSUE THE YEAR UNDER CONSIDERATION WITH RESPECT TO DISALLOWANCE U/ S. 40(A)(IA) IS IDENTICAL TO THAT OF EARLIER YEARS, NO ADDITION WITH RESPECT TO RS. 1,06,20,979 IS CALLED FOR. WITH RESPECT TO THE ADDITION OF RS. 60 ,87,393/- WHICH HAS BEEN HELD BY THE CIT(A) TO BE BOGUS, BEFORE US ASSE SSEE HAS PLACED COPIES OF FORM 15J, 15I COPIES OF RC BOOKS AND PAN CARDS OF THE TRUCK OWNERS. THESE DOCUMENTS WHICH ARE PLACED BY LD. A. R. BEFORE US WERE ITA NO 298/AHD/2011 . A.Y. 2007-0 8 6 NOT BEFORE LOWER AUTHORITIES. WE ARE THEREFORE OF T HE VIEW THAT SINCE THE AFORESAID DOCUMENTS WERE NOT BEFORE CIT(A), IN THE INTEREST OF JUSTICE, THE EVIDENCE SUBMITTED BEFORE US, BEING IN THE NATU RE OF ADDITIONAL EVIDENCE NEEDS VERIFICATION AT THE END OF A.O. WE T HEREFORE REMIT THE ISSUE OF ADDITION OF RS. 60,87,393/- TO THE FILE OF A.O FOR HIM TO DECIDE AFRESH AFTER EXAMINING THE EVIDENCES SUBMITTED BY T HE ASSESSEE BEFORE US AND AS PER THE PROVISIONS OF LAW. THE ASSESSEE IS A LSO DIRECTED TO FURNISH PROMPTLY ALL THE NECESSARY EVIDENCE CALLED BY THE A .O. THE A.O IS DIRECTED TO CONSIDER THE EVIDENCES SUBMITTED BY THE ASSESSEE AND ANY ADDITIONAL EVIDENCE SUBMITTED BY IT AND THEREAFTER DECIDED THE ISSUE AFRESH. NEEDLESS TO STATE, THAT A.O SHALL GRANT ADE QUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. IN THE RESULT, THIS GROUND OF ASSESSEE IS PARTLY ALLOWED. 11. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON 30 - 05 - 2014. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT ,AHMEDABAD