PMS CONSTRUCTION COMPANY, JHUNJHUNU V. ACIT, JHUNJHUNU

ITA 311/JPR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1956 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 04-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P P MEENA JCIT DHK
• Assessee Lawyers: K L MULCHANDANI
• Keywords: Non-deduction of tax
• Section: 40A(3); 143(3); 194C

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH HKKXPUN] YS[KK LNL; ,OA JH DQY HKKJR] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 311/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 M/S PMS CONSTRUCTION COMPANY, B-33, RIICO RESIDENTIAL COLONY, JHUNJHUNU. CUKE VS. ACIT, JHUNJHUNU CIRCLE-JHUNJHUNU. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AALFP 0852 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI K.L. MULCHANDANI (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHRI P.P. MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 23.10.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 26/10/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDERS OF THE LD. CIT(A)- 3, JAIPUR DATED 07.01.2016 PERTAINING TO A.Y. 2011- 12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. UNDER THE FACTS AND CIRCUMSTANCES, THE HONBLE CIT(A) HAS LEGALLY AND FACTUALLY ERRED BY CONFIRMING THE ADDITION ON CONTR AVENTION OF THE SECTION 40(A)(IA) OF THE ACT FOR MAKING PAYMENT TO THE SO-CALLED CONTRACT LABOUR EXPENSES WITHOUT APPRECIATING FACTS OF THE CASE IN RIGHT PERSPECTIVE. 2. UNDER THE FACTS & CIRCUMSTANCES, THE HONBLE CIT (A) HAS CONFIRMED THE ADDITION OF 3% OF THE CONTRACT EXPENSES I.E. A SUM OF RS. 8,26,630.00 ON ESTIMATION BASIS WITHOUT GIVING ANY JUSTIFICATIO N AND REASONABLENESS OF THE CASE. 3. THE ASSESSEE MAY CRAVE TO AMEND, ALTER, MODIFY O R RAISE ANY OTHER GROUND OF APPEAL. 2 ITA NO.311/JP/2016. M/S PMS CONSTRUCTION COMPANY, JHUNJHUNU. 2. BRIEFLY STATED THE FACTS ARE THAT THE CASE OF TH E ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S 143(3) ( HEREINAFTER REFERRED TO AS THE ACT) INCOME TAX ACT, 1961 WAS FRAMED VIDE ORDER DAT ED 21.03.2014. WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD MADE PAYMENT OF LABOUR CHARGES TO VARIOUS PERSONS AMOUNT ING TO RS. 81,45,754/-. THEREFORE, THE ASSESSING OFFICER PROCEEDED TO DISAL LOW THIS EXPENDITURE AND MADE ADDITION OF RS. 81,45,754/-. FURTHER, THE ASSESSIN G OFFICER OBSERVED THAT THE ASSESSEE MADE PAYMENT OF RS. 78,89,109/- IN CASH IN CONTRAVENTION TO SECTION 40A(3) OF THE INCOME TAX ACT. THE ASSESSING OFFICE R OBSERVED THAT THE CONTRACT PROPORTION OF THE CONTRACT EXPENSES OF THE TOTAL RE CEIPTS IS CONSIDERED TO BE DISPROPORTIONATELY EXCESSIVE, HENCE, MADE ADDITION OF RS. 8,26,630/-. AGAINST THIS, THE ASSESSEE PREFERRED AN APPEAL BEFO RE LD. CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS, DISMISSED THE APPEAL. THEREBY, THE LD. CIT(A) CONFIRMED THE ADDITION, AS MADE BY THE ASSESSING OF FICER. AGAINST THIS, THE ASSESSEE IS IN FURTHER APPEAL BEFORE THIS TRIBUNAL. 3. GROUND NO.1 IS AGAINST CONFIRMING THE ADDITION ON ACCOUNT OF N ON-DEDUCTION OF TAX BY INVOKING THE PROVISION OF SECTION 40(A)(I A) OF THE ACT. 3.1 LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS AS MADE IN THE WRITTEN BRIEF. THE SUBMISSIONS OF THE ASSESSEE ARE REPRODUCED AS UNDER:- (I) WITHOUT PREJUDICE TO THE FACTUAL AND LEGAL OBJ ECTIONS AS MADE IN OUR EARLIER SUBMISSIONS DATED 19.9.2016, WHEREIN IT HAD BEEN CONTENDED THAT IN THE PRESENT CASE, THE WAGE PAYMENTS WERE NOT MADE T O THE ` CONTRACTED LABOR' AS ENVISAGED U/S 194C OF THE ACT . IN THE CIRCUMSTANCES, THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT ATTRACTED. THIS FACT STOOD PROVED WITH THE HELP OF THE SUPPORTING VOUCHERS AND ATTENDANCE REGISTER ETC. AS 3 ITA NO.311/JP/2016. M/S PMS CONSTRUCTION COMPANY, JHUNJHUNU. SUBMITTED BEFORE THE ID. CIT (A) WHICH COULD NOT BE NEGATED BY THE AUTHORITIES BELOW. DESPITE OF SUCH FACTUAL POSITION , EVEN OTHER-WISE ALSO, THESE PAYMENTS ARE NOT HIT BY THE PROVISIONS OF SEC TION 194C READ WITH SECTION 40(A)(IA) OF THE ACT AS HELD BY THE HONORAB LE ITAT, JAIPUR BENCH, JAIPUR IN THE CASE OF ITO V TULSI RAM MODI (APPEAL NO.960(JP) OF 2011 (COPY OF JUDGMENT IS PLACED IN THE PB AT PAGE NO.3 TO 7 FOR YOUR KIND PERUSAL AND RECORD) . HAVING CONSIDERED SUCH FACTS OF THE ABOVE CASE, NO DISALLOWANCE WHATSOEVER IS CALLED FOR U/S 40(A)(IA) OF THE ACT EVEN IF THE PAYMENTS MADE TO THE LABOR ARE TAKEN AS CONTRACTED LABOR BY ANY STRETCH OF IMAGINATION. (II) OF-LATE, THE PROVISIONS OF SECTION OF SECTION 40(A)(IA) OF THE ACT HAVE COME UP FOR DETAILED AND GREATER DISCUSSIONS AND IN TERPRETATION BEFORE THE VARIOUS JUDICIAL AUTHORITIES. FINALLY THE CONTROVERSY REGARDING THESE PROVISIONS HAVE BEEN PUT TO REST BY THE HONORABLE S UPREME COURT IN THE SLP FILED AGAINST THE RULING OF HONORABLE ALLA HABAD HIGH COURT IN THE CASE CIT VS VECTOR SHIPPING SERVICES LTD. TH E HONORABLE COURTS HAVE POINTEDLY AND SPECIFICALLY OPINED THAT THESE PROVISIONS WOULD COME INTO PLAY IN RESPECT OF THE AMOUNTS 'PA YABLE' AT THE END OF THE FINANCIAL YEAR AND NOT TO THE AMOUNTS ALREA DY 'PAID' DURING THE YEAR. THE HONORABLE TERRITORIAL BENCH OF JAIPU R HAVE ALSO BEEN TAKING THE SAME VIEW CONSISTENTLY IN NUMBER OF CAS ES; TWO INSTANCES ARE GIVEN FOR READY REFERENCE (I) JAIPUR VIDHUT VITRAN LTD. VS. DCIT 123 TTJ 888 . (II) LAXMI NARAYAN AGARWAL, JAIPUR VS. DCIT CIRCLE-6, JAIPUR ITA NO.395/JP/2014. OF LATE, THE C OMMISSIONERS (APPEALS) ARE TAKING THE SAME VIEW. FOR THE PURPOS E, RELIANCE IS ALSO PLACED ON THE FINDINGS OF THE HONORABLE COURT S IN THE CASES OF (I) ACIT VS. KALINDI AGRO BIOTECH LTD & (II) DCIT V VEERA ASSOCIATES WHICH HAVE DIRECT BEARING ON THE FACTS OF THE PRESE NT CASE. (COPIES OF ABOVE JUDGMENTS (PLACED IN THE PB AT PAGES NO.8 TO 28) AND COMMENTARY THEREON (PLACED IN THE PB AT PAGES NO. 1 & 2) FOR READY 4 ITA NO.311/JP/2016. M/S PMS CONSTRUCTION COMPANY, JHUNJHUNU. REFERENCE AND RECORD).THESE JUDGMENTS AND COMMENTAR Y ELABORATELY DEALS WITH THE POINT AT ISSUE REGARDING DISALLOWAN CE U/S 40(A)(IA) OF THE ACT AT LENGTH AND HAVE POINTEDLY OBSERVED T HAT THE PROVISIONS OF SECTION 40(A)(IA) WOULD NOT COME INTO PLAY IN R ESPECT OF THE AMOUNTS ALREADY 'PAID' . IN THE PRESENT CASE, ALL THE WAGES STOOD ALREADY PAID AND NOT A SINGLE PENNY IS 'PAYABLE' AT THE END OF THE YEAR. IN THE CIRCUMSTANCES, DISALLOWANCE OF THE WAGES WITHIN THE MEANING OF SECTION 40(A)(IA) OF THE ACT FOR THE ALLEGED DEFAULT U/S 19 4C IS TOTALLY UNCALLED FOR AND DESERVES TO BE DELETED SUMMARILY. ON THE APPEAL, IT IS EVIDENT THAT THE TAX WAS NOT D EDUCTABLE AS NO AMOUNT WAS PAYABLE BY THE ASSESSEE. 3.2 ON THE CONTRARY, LD. D/R OPPOSED THE SUBMISSION S AND SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE REVENUE BY THE HONBLE SUPREME COURT RENDERED IN THE CASE OF PALAM GAS SERVICE VS. CIT [2017] 394 ITR 300(SC). THE ONLY EXPLANATION FOR NON-DEDUCTION OF TAX AS SU BMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THAT NO AMOUNT WAS PAYABLE. IT IS FU RTHER SUBMITTED BY THE LD. COUNSEL THAT WAGES WERE PAID DIRECTLY TO THE LABOUR , THEREFORE, IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT RENDERED I N THE CASE OF CIT VS. DEWAN CHAND (2009) 173 TAXMAN. 3.3 WE HAVE HEARD THE RIVAL CONTENTIONS. WE FIND T HAT LD. CIT(A) GIVEN A FINDING ON FACT THAT EVIDENCES WERE PRODUCED BY THE ASSESSE E DO NOT INSPIRE CONFIDENCE. WE FIND THAT LD. CIT(A) WAS NOT DECIDED THE ISSUE W HETHER THE TAX WAS DEDUCTIBLE AND THE PROVISION OF SECTION 40(A)(IA) OF THE ACT W AS APPLICABLE. THEREFORE, CONSIDERING THE TOTALITY OF THE FACT, WE DEEM IT PR OPER TO RESTORE THIS ISSUE TO THE FILE 5 ITA NO.311/JP/2016. M/S PMS CONSTRUCTION COMPANY, JHUNJHUNU. OF THE LD. CIT(A) TO DECIDED AFRESH, AFTER CONSIDER ING THE SUBMISSIONS OF THE ASSESSEE. THIS GROUND OF ASSESSEES APPEAL IS ALLO WED FOR STATISTICAL PURPOSE. 4. GROUND NO. 2 IS AGAINST CONFIRMING THE ADDITION OF 3% OF THE CO NTRACT EXPENSES. 4.1 LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAVE NOT REJECTED BOOKS OF ACCOUNTS. THEREFORE, THERE WAS NO BASIS TO MAKE DISALLOWANCE OUT OF CONTRACT EXPENSES MEREL Y BECAUSE IN THE OPINION OF THE AO THE EXPENSES SO CLAIMED BEING DISPROPORTIONATELY EXCESSIVE, WITHOUT ANY CORROBORATIVE EVIDENCE. 4.2 PER CONTRA LD. D/R OPPOSED THE SUBMISSIONS AND SUPPORTED THE FINDING OF THE AUTHORITIES BELOW. 4.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND THAT ASSESSING OFFICER ON THE ONE HAND THEY HAD STATED THAT THE ASSESSEE HAS CONTRAVENED PROVISION OF SECTION 40A ( 3) OF THE ACT ON THE OTHER HAND HE PROCEEDED TO MAKE DISALLOWANCE OF 3% OF THE TOTA L CONTRACT EXPENSES. LD. CIT(A) CONFIRMED THE SAME BY OBSERVING AS UNDER:- 5.3 I HAVE CAREFULLY CONSIDERED THE FINDINGS OF TH E AO AS ALSO ARGUMENTS OF THE LD. AR OF THE APPELLANT. REGARDING THE DISALLO WANCE OF 3% OF EXPENSES BY THE AO, THE APPELLANT CLAIMED RS. 2,75,54,326/- UNDER THE HEAD CONTRACT EXPENSES OUT OF WHICH DISALLOWANCE OF RS. 8,26,630/ - WAS MADE ON ACCOUNT OF DIESEL, BAJARI, CEMENT & GRIT BY AO. THESE ARE CASH PAYMENTS, MADE BY SELF MADE VOUCHERS, GENUINENESS OF WHICH IS DOUBTFU L AND DESPITE OF REPEATED REQUEST AND OPPORTUNITIES GIVEN ASSESSEE HAS FAILED TO GET VERIFIED THESE EXPENSES. EVEN IN APPELLANT PROCEEDINGS LD. AR REI TERATED THE SAME ARGUMENTS AND NO DETAILS/ EVIDENCE WERE FURNISHED. THE AO HAS TAKEN MOST REASONABLE APPROACH AND HAS DISALLOWANCE ONLY 3% OF THE EXPENSE LOOKING TO 6 ITA NO.311/JP/2016. M/S PMS CONSTRUCTION COMPANY, JHUNJHUNU. THE FACT THAT EXPENSES OF RS. 78,89,109/- WAS MADE IN CASH FOR WHICH A TABLE IS ALSO APPENDED WITH ASSESSMENT ORDER. LOOKING TO THESE FACTS THE ACTION OF THE AO IS JUSTIFIED AND DISALLOWANCE OF RS. 8,26,63 0/- MADE OUT OF TOTAL CONTRACT EXPENSES AT RS. 2,75,54,326/- IS HERBY UPH ELD. FROM THE FINDING OF THE AUTHORITIES BELOW, IT IS EV IDENT THAT DISALLOWANCE IS MADE ON ADHOC BASIS WITHOUT SPECIFYING AS WHAT WERE THE EXP ENSES WERE THAT NOT GOT VERIFIED BY THE ASSESSEE. UNDER THESE FACTS, THE ADDITION S O MADE CANNOT BE SUSTAINED. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO DELET E THE ADDITION OF RS. 8,26,630/-. THIS GROUND OF THE ASSESSEES APPEAL IS ALLOWED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 311/JP/2016 IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON THURSDAY, THE 26TH DAY OF OCTOBER 2017. SD/- SD/- ( HKKXPUN ( DQY HKKJR ) ( BHAGCHAND) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 26/10/2017 POOJA/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S PMS CONSTRUCTION COMPANY, JHU NJHUNU. 2. THE RESPONDENT ACIT, JHUNJHUNU, CIRCLE-JHUNJHU NU. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 311/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 7 ITA NO.311/JP/2016. M/S PMS CONSTRUCTION COMPANY, JHUNJHUNU.