Ecoasfalt S.A, New Delhi V. Addl. DIT, New Delhi

ITA 3248/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61645 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 16-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Keywords: Presumptive income; Depreciation
• Section: 44AD; 194C; 201(1); 37; 6; 12; 2; 11; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.D. RANJAN ITA NO. 3248/DEL/2011 ASSTT. YR: 2007-08 ECOASFALT SA VS. ADDL. DIRECTOR OF INCOME-TAX, 1304, 13 TH FLOOR, CHIRANJIV TOWER, INTERNATIONAL TAXATION, 43, NEHRU PLACE, NEW DELHI-110019. RANGE-3, NEW DE LHI. PAN/GIR NO. AABCE8457B (APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI KAPIL GOEL ADV. RESPONDENT BY : SHRI N.K. CHAND CIT (DR) O R D E R PER R.P. TOLANI, J.M : THIS IS ASSESSEES APPEAL AGAINST CIT(A)S ORDER DATED 1-4-2011 RELATING TO A.Y. 2007-08. FOLLOWING GROUNDS ARE RAI SED: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, LEARNED CIT(A) ERRED IN CONFIRMING THE ACTI ON OF ASSESSING OFFICER/ AO IN MAKING DISALLOWANCE U/S 40 (A)(IA) OF THE ACT AMOUNTING TO RS. 1,55,47,512/- ON MERE MATE RIAL PURCHASES MADE FROM M/S RADHEY SHYAM GUPTA INDIA (P ) LTD. (RSGIPL). 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, LEARNED CIT(A) ERRED IN CONFIRMING THE ACTI ON OF ASSESSING OFFICER/ AO IN MAKING DISALLOWANCE U/S 40 (A)(IA) OF THE ACT AMOUNTING TO RS. 1,55,47,512/- WHERE ADMITT EDLY NO PROCEEDINGS U/S 201(1) OF THE ACT ARE INITIATED (BE COMING TIME BARRED ON 31-3-2011). 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, LEARNED CIT(A) ERRED IN CONFIRMING THE ACTI ON OF ASSESSING OFFICER/ AO IN MAKING DISALLOWANCE U/S 40 (A)(IA) OF THE ACT AMOUNTING TO RS. 1,55,47,512/- WITHOUT APPR ECIATING ITA 3248/DEL/11 ECOASFALT SA 2 THAT SAID AMOUNT BEING COST OF MATERIAL PURCHASED F ORMS PART OF DIRECT COST U/S 28(I) AND HENCE BEYOND THE PURVIEW OF SECTION 40(A)(IA) OF THE ACT. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, LEARNED CIT(A) ERRED IN CONFIRMING THE ACTI ON OF ASSESSING OFFICER/ AO IN MAKING DISALLOWANCE U/S 40 (A)(IA) OF THE ACT AMOUNTING TO RS. 1,55,47,512/- WITHOUT APPR ECIATING THE BASIC DIFFERENCE BETWEEN WORD PAYABLE AND PAID FOR PURPOSES OF SECTION 40(A)(IA). 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, LEARNED CIT(A) ERRED IN CONFIRMING THE ACTI ON OF ASSESSING OFFICER/ AO IN MAKING DISALLOWANCE U/S 40 (A)(IA) OF THE ACT AMOUNTING TO RS. 1,55,47,512/- WITHOUT APPR ECIATING THAT PURCHASES ARE TREAT ED AS GENUINE FOR PURPOSES OF SECTION 37 OF THE ACT. 2. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT GROUND NO. 2 AMOUNTS TO ADDITIONAL GROUND AS IT WAS NOT RAISED BEFORE LD . CIT(APPEALS). IT IS AN ADMITTED FACT THAT IN CASE PROCEEDINGS U/S 201(1) O F THE ACT ARE NOT INITIATED, THE ISSUE ABOUT 40(A)(IA) BECOMES PURELY LEGAL IN N ATURE AND DOES NOT REQUIRE ANY ADJUDICATION OF FACTS, THE SAME MAY KINDLY BE A DMITTED. RELIANCE IS PLACED ON HONBLE SUPREME COURT JUDGMENT IN THE CAS E OF NTPC VS. CIT 229 ITR 383 (SC). 3. LD. DR, ON THE OTHER HAND, CONTENDS THAT THIS IS SUE WAS NOT RAISED BEFORE LD. CIT(APPEALS), THEREFORE, THE SAME MAY NO T BE ADMITTED. 4. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN OUR VIEW THE RELAT ABILITY OF SEC. 40(A)(IA) WITH THE PROCEEDINGS U/S 201(1) IS PURELY A QUESTIO N OF LAW AND HAS A BEARING ON THE LEGAL ASPECTS OF SEC. 40(A)(IA). IN VIEW THE REOF, RESPECTFULLY FOLLOWING HONBLE SUPREME COURT JUDGMENT IN THE CASE OF NTPC (SUPRA), WE ARE INCLINED TO ADMIT THE ADDITIONAL GROUND. ITA 3248/DEL/11 ECOASFALT SA 3 5. BRIEF FACTS ARE: THE ASSESSEE IS A PROJECT OFFIC E IN INDIA OF THE PARENT COMPANY SITUATED IN SPAIN. THE ASSESSEE UNDERTAKES CONTRACTS FROM VARIOUS GOVT. BODIES LIKE NDMC, DDA AND PWD ETC. DURING THE YEAR IN QUESTION, THE ASSESSEE OBTAINED A CONTRACT FROM NDMC FOR STRE NGTHENING AND RESURFACING OF ROADS IN NDMC AREA. THE ASSESSEE DER IVED CONTRACT RECEIPTS OF RS. 1,53,48,608/-. ACCORDING TO P&L A/C OF THE A SSESSEES COMPUTATION AN AMOUNT OF RS. 1,53,48,608/-(NET OF TAXES-VAT) AN D TDS OF RS. 3,87,476/-. THUS THE GROSS RECEIPT AMOUNTED TO RS. 1,57,36,084/-. ACCORDING TO ASSESSEE IT HAS EXECUTED THE WORK BY PURCHASING THE RAW MATERIAL I.E. BITUMINOUS MIX FROM ONE M/S RADHEY SHYAM GUPTA INDI A (P) LTD. (RSGIPL IN SHORT), HIRED MACHINERY FROM ANOTHER COMPANY M/S STC CONSTRUCTION AND CEMENT, GRIT ETC. FROM OTHER PARTI ES, CLAIMED TO HAVE EXECUTED WORK BY ITSELF BY PURCHASE OF THE MATERIAL FROM RSGIPL AND BY USING THE HIRED MACHINERY. 5.1. THE ASSESSEE FILED ITS RETURN DECLARING NIL INCOME. DURING THE COURSE OF ASSESSMENT, AO FOUND THAT THE ASSESSEE HAD NOT D EBITED ANY SALARY EXPENSES SO AS TO SUPPORT THE THEORY OF THE ASSESSE E THAT IT HAD EXECUTED THE CONTRACT WORK. THERE WAS NO STAFF DEPLOYED BY THE A SSESSEE, ACCORDING TO ASSESSEE ONLY ONE PERSON MR. MARIANO DE LASA WAS LO OKING AFTER THE WORK ON EXPATRIATE BASIS WHO WAS ALSO NOT PAID SALARY I N THIS YEAR. AO WAS OF THE VIEW THAT ASSESSEE HAS EXECUTED THE CONTRACT WORK B Y EMPLOYING RSGIPL AS SUB CONTRACTOR AND SKIRT TDS PROVISION OF SEC. 194 HAD CAMOUFLAGED THE NATURE OF EXECUTION. THE AO HELD THAT THE AMOUNT OF PURCHASE OF MATERIAL DEBITED BY THE ASSESSEE AS PURCHASES FROM RSGIPL W AS ACTUALLY SUB CONTRACT AMOUNT. RSGIPL WAS GIVEN THE ENTIRE WORK O N SUBCONTRACT BASIS AND ASSESSEE COULD EXECUTED THE WORK ON ITS OWN. AS SESSEE WAS LIABLE TO DEDUCT TDS U/S 194C.SINCE THE ASSESSEE HAS NOT DEDU CTED TDS WHILE ITA 3248/DEL/11 ECOASFALT SA 4 MAKING THE PAYMENT OF SUBCONTRACT AMOUNT OF RS. 1,5 5,47,512/-, TO RSGIPL, THE SAME WAS DISALLOWED U/S 40(A)(IA) BY FOLLOWING OBSERVATIONS: THE ASSESSEE HAS NOT FURNISHED ANY SUCH STATEMENT SHOWING TAX DEDUCTED AT SOURCE ON VARIOUS PAYMENTS. THE ASS ESSEE, HOWEVER, FURNISHED COPIES OF INVOICES SHOWING PAYME NTS MADE TO M/S RADHEY SHYAM GUPTA INDIA (P) LTD. FOR PURCHA SE OF BITUMINOUS MIX. IN THE COURSE OF DISCUSSION THE A R STATED THAT TAX WAS NOT REQUIRED TO BE DEDUCTED AT SOURCE ON SUCH PAYMENTS AS THESE WERE FOR PURCHASE OF MATERIALS. THIS EXPLANATION OF THE ASSESSEE IS NOT ACCEPTED. I T IS A FACT THAT THE ASSESSEE HAS SUB-CONTRACTED THE ENTIRE CONTRACT TO M/S RADHEY SHYAM GUPTA INDIA (P) LTD. FOR PURCHASE OF M ATERIAL AND SUPPLY OF LABOUR AND TO M/S STC CONSTRUCTION FO R HIRING OF MACHINERY. THIS HAS BEEN ACCEPTED BY THE ASSESSEE V IDE LETTER DATED 22-12-2009. IT IS FURTHER OBSERVED THAT VIDE AGREEMENT DATED 15-02-2007, THE ASSESSEE HAS AWARDED THE WORK OF STRENGTHENING AND RESURFACING OF ROADS IN NDMC ARE A DURING 2005-06, MICRO SURFACING TO M/S RADHEY SHYAM GUPTA INDIA (P) LTD., ALL THE PAYMENTS MADE BY THE ASSESSEE TO M/S RADHEY SHYAM GUPTA INDIA (P) LTD. IS UNDER THE TERMS OF TH IS CONTRACT. THEREFORE, THE PAYMENT ON ACCOUNT OF PURCHASE OF MA TERIALS IS ALSO MADE UNDER THE SUBCONTRACT AGREEMENT ENTERED W ITH M/S RADHEY SHYAM GUPTA INDIA (P) LTD. THE ASSESSEE WAS THEREFORE, REQUIRED TO DEDUCT TAX AT SOURCE ON SUCH PAYMENTS U/S 194C OF THE CT. IN VIEW OF THIS FACT AND PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, THE AMOUNT OF RS. 1,55,47,512 /- ON WHICH NO TAX DEDUCTED AT SOURCE IS DISALLOWED AND ADDED B ACK TO THE TOTAL INCOME OF THE ASSESSEE. 5.2. THE INCOME WAS COMPUTED AS UNDER: TOTAL INCOME DECLARED BY THE ASSESSEE (-) 4,10,539 ADD: DISALLOWANCE U/S 40(A)(IA) OF THE ACT 1,55,47 ,512 TOTAL INCOME: 1,51,36,973 ROUNDED OFF TO 1,51,36,970 5.3. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL. CI T(A), HOWEVER, CONFIRMED THE ORDER OF AO BY FOLLOWING OBSERVATIONS : ITA 3248/DEL/11 ECOASFALT SA 5 2.7. THE COURT LOOKS AT THE SUBSTANCE OF THE TRANS ACTION AND NOT THE LABEL WHICH THE PARTIES MAY HAVE AGREED TO PUT ON THE TRANSACTION. THE COURT IS ENTITLED TO DECIDE WHETHE R OR NOT THE AGREEMENT BETWEEN THE PARTIES IS A MERE CAMOUFLAGE TO GET ROUND THE RIGORS OF THE TDS LEGISLATION. IRRESPECTI VE OF THE LABEL MAY HAVE BEEN PUT UPON THE TRANSACTION BY THE PARTI ES, THE DOUBT WOULD GATHER THE TRUE INTENTION OF THE PARTIE S AS TO WHETHER THE TRANSACTION HAS BEEN MADE TO CIRCUMVENT THE PROVISION OF SEC. 194C OF THE ACT. THE RECORD FURTH ER REVEALS THAT THE JOB WAS GIVEN TO THE SAME CONTRACTOR IN TH E FOLLOWING YEAR AND IT IS IMPOSSIBLE TO GET THE PURCHASE DONE FROM THE CONTRACTOR AND GETTING THE JOB DONE BY ITSELF WITHO UT INCURRING A SINGLE PIE EXPENDITURE ON SALARY, WAGES AND REMUNER ATION OR CLAIMING DEPRECIATION ON ASSETS WHICH LEAD TO RECEI PT OF RS. 1,53,48,608/- FROM THE PRINCIPAL I.E. NDMC. 2.8. IT HARDLY MATTERS IN WHAT FORM THE TRANSACTION IS PRESENTED BEFORE THE REVENUE AUTHORITY. IT IS IMPORTANT TO LO OK BEHIND THE TRANSACTION AND TO FIND THE SUBSTANCE AND IN SUCH T YPE OF CASES WEIGHTAGE TO BE GIVEN ON THE SUBSTANCE OVER FORM. I N REALITY THE APPELLANT HAS GOT THE JOB DONE THROUGH THE SAID CO NTRACTOR BY GIVING IT SOME OTHER NAME TO CIRCUMVENT THE PROVIS ION OF THE TAX STATUTE. THE PRESENT QUESTION IS ESSENTIALLY A QUESTION OF FACT AS WELL OF LAW. IN FACT IT HAS BEEN PROVED BEYOND A NY IOTA OF DOUBT THAT SUCH JOB AS CLAIMED UPON COULD NOT BE DO NE WITHOUT SPENDING BASIC EXPENDITURES ON THE ESSENTIAL ITEMS AS BROUGHT ON RECORD BY THE LD. AO. ON LEGAL QUESTION ALSO IT HAS BEEN PROVED IN A NUMBER OF DECISION BY APEX COURT THAT W HAT IS TO BE LOOKED INTO SUCH TYPE OF CASES IS THE SUBSTANCE AND NOT THE FAADE OF FORM AS CREATED BY THE APPELLANT. 2.9. JUDGING FROM ANY POINT OF VIEW EITHER LEGAL OR FROM FACTUAL EVIDENCE AS BROUGHT ON RECORD BY THE LD. AO , THERE IS NO ESCAPEMENT OF THE FACT THAT THE PRESENT CASE IS A C ASE WHERE SUB- CONTRACT WORK WAS DONE BY THE SAID CONTRACTOR FOR T HE APPELLANT AND THE APPELLANT WAS DULY BOUND AS PER THE PROVISI ONS OF THE LAW TO DEDUCT TDS WITHIN THE MEANING OF SEC. 194C O F THE ACT. THIS IS A CASE WHERE THE AO HAS RIGHTLY ESTABLISHED THE FACT THAT A CONTRACT/SUB-CONTRACT WORK HAS BEEN THROUGH THE A ID PARTY AND ITA 3248/DEL/11 ECOASFALT SA 6 THE APPELLANT HAS VIOLATED THE PROVISIONS OF THE LA W AND HENCE THE GROUNDS OF THE APPELLANT FAIL. 6. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT: (I) IF THE ASSESSEE WAS LIABLE TO DEDUCT TDS U/S 194C, DEPARTMENT HAS NOT INITIATED ANY PROCEEDINGS U/S 201(1) FOR FAILUR E TO DEDUCT THE TAX AND TO DECLARE THE ASSESSEE IN DEFAULT. THE TIM E FOR TAKING ACTION U/S 201(1) HAS EXPIRED ON 31-3-2011. THE PRO CEEDINGS HAVE BECOME TIME BARRED. WITHOUT TAKING UP THESE PROCEE DINGS U/S 201(1) AND DECLARING THE ASSESSEE LIABLE FOR TDS, H AVING NOT DEDUCTED THE TDS, HOLDING IT TO BE ASSESSEE IN DEFA ULT. 40(A)(IA) CANNOT BE APPLIED IN THE ASSESSMENT PROCEEDINGS ON ASSUMPTION THAT THE ASSESSEE HAS DEFAULTED U/S 40(A)(IA). (II) THE ASSESSEE HAD PRODUCED THE SALES BILLS ISSUED BY RSGPIL FOR SALE OF BITUMINOUS MIX; BILLS OF LABOUR CHARGES, BI LLS OF CEMENT, SAND, GRIT ETC. THEY CLEARLY DEMONSTRATE THAT THE PARTIES HAVE SOLD BITUMINOUS MIX AND OTHER MATERIAL. THEY HAVE COLLE CTED VAT THEREON WHEREVER APPLICATION, WHICH HAS BEEN DULY D EPOSITED BY THEM IN THE GOVT. TREASURY,. NO SUPPLIER WILL CHARG E VAT ON THE GOODS UNLESS THE TRANSACTION IS OF SALE OF THE GOOD S. IN CASE OF WORKS CONTRACT VAT IS NOT LEVIABLE. LD. COUNSEL REF ERS TO THE INVOICES PLACED ON PAPER BOOK IN THIS BEHALF. (III) SIMILARLY, ASSESSEE HAD HIRED MACHINERY LIKE JCB/ LOADER, CEMENT FROM M/S TRIVENI ENTERPRISES. APART FROM SUPPLY OF BITUMINOUS MIX, RSGIPL HAS SUPPLIED LABOUR ALSO FOR WHICH 2 IN VOICES AMOUNTING TO RS. 4,50,000/- AND RS. 5,45,000/- ARE ON RECORD. THE ASSESSEES LIABILITY FOR DEDUCTION OF TAX MAY BE AP PLICABLE ONLY IN ITA 3248/DEL/11 ECOASFALT SA 7 RESPECT OF LABOUR SUPPLY BY THE RSGIPL WHICH AMOUNT S TO RS. 10 LACS. THE REMAINING AMOUNT IS UNDISPUTEDLY SALE OF BITUMINOUS MIX WHICH IS EVIDENCED BY PROPER INVOICES AND ON WH ICH VAT HAS BEEN CHARGED. BITUMINOUS MIX WAS SEPARATELY SUPPLIE D BY RSGIPL. MACHINERIES WERE HIRED AND STONE DUST WERE PURCHASED. ALL THE BILLS ARE ON RECORD, THEREFORE, WITHOUT CON TROVERTING THEM, ON ASSUMPTION IT CANNOT BE HELD THAT RSGIPL EXECUTE D THE ENTIRE WORK ON SUB CONTRACT BASIS. LOWER AUTHORITIES HAVE NOT PROVED THE FACTUM OF CAMOUFLAGE AND ERRED IN HOLDING THE THEO RY OF SUBSTANCE OVER FOR FORM. 6.1. IT IS PLEADED THAT EVEN IF IT IS ASSUMED THAT RSGIPL WAS A SUB- CONTRACTOR, IN THAT CASE ALSO THE VALUE OF MATERIAL SHOULD BE EXCLUDED FOR WORKING THE AMOUNT LIABLE FOR TDS. IN THIS CASE, TH E INVOICES THEMSELVES MENTION THE VALUE OF BITUMINOUS MIX, THEREFORE, THE SAME SHOULD BE EXCLUDED. ON THIS EXCLUSION, THE BALANCE AMOUNT COM ES TO NIL. CONSEQUENTLY, THERE WILL BE NO TDS LIABILITY. ACCOR DING TO LD. COUNSEL, EVEN GOING BY SEC. 194C, THERE IS NO LIABILITY AS THE AM OUNTS WERE ALREADY PAID AT THE END OF YEAR. RELIANCE IS PLACED ON ITAT HYDERAB AD BENCH JUDGMENT IN THE CASE OF K. SRINIVAS NAIDU VS. ACIT (2010) 131 T TJ (HYD)(UO) 17, HOLDING AS UNDER: IN THE ABSENCE OF EVIDENCE ON RECORD TO PROVE THAT THE ASSESSEE INDIVIDUAL HAD MADE PAYMENT OF FREIGHT CHARGES TO T HE OWNERS OF THE TRUCK IN PURSUANCE OF ANY CONTRACT AS A CONTRACTOR AND NOT AS A SUB- CONTRACTOR, IT CANNOT BE HELD THAT THE ASSESSEE WAS A CONTRACTOR AND THE PROVISIONS OF S. 194C(1) APPLIED TO SUCH PAYMENT AN D NOT S. 194C(2); HOWEVER, AMOUNT HAVING BEEN PAID AND NOT PAYABLE, S . 40(1)(IA) COULD NOT BE INVOKED TO DISALLOW THE CLAIM. ITA 3248/DEL/11 ECOASFALT SA 8 6.2. SECTION 40(A)(IA) READS AS UNDER: 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SEC TIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND G AINS OF BUSINESS OR PROFESSION,- (A) IN THE CASE OF ANY ASSESSEE __ . . (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, R OYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SER VICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB- CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WO RK INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK, ON WHIC H TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XDVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID. 6.3. IT IS PLEADED THAT THE CONTRACT RECEIPT WILL B E OF TWO TYPES (I) WHICH ARE ALREADY PAID; AND (II) WHICH ARE PAYABLE. ACCO RDING TO LEARNED COUNSEL FOR THE ASSESSEE, A PLAIN READING OF THIS SECTION R EFERS TO DEDUCTION OF TDS FROM THE AMOUNTS WHICH ARE PAYABLE AND DOES NOT INC LUDE THE AMOUNTS PAID. THIS IS BECAUSE OF LEGISLATIVE SCHEME I.E. IF THE A MOUNT HAS BEEN PAID BY THE ASSESSEE IN THAT CASE, THE PROCEEDINGS U/S 201(1) A RE TO BE INITIATED TO HOLD THE ASSESSEE IN DEFAULT AND RECOVER THE TAX. ACTIO N U/S 201(1) IS NOT TAKEN BY DEPARTMENT IN ASSESSEES CASE. IN CASE OF AMOUNT RE MAINING PAYABLE, THE SAME CAN BE DISALLOWED U/S 40(A)(IA). RELIANCE IS P LACED ON ITAT DELHI BENCH G ORDER DATED 25-4-2011 FOR THIS PROPOSITIO N, IN THE CASE OF M/S SRS REAL ESTATE LTD. RENDERED IN ITA NO. 2218/DEL/2 010 AS UNDER: THEREFORE, IN OUR CONSIDERED OPINION THE CIT(A) ER RED IN NOT FOLLOWING JAIPUR VIDYUG VITRAN NIGAM LTD. (SUPRA) . THE LD. CIT(A) HAS HELD, WHILE OBSERVING THAT JAIPUR VIDYU G VITRAN NIGAM LTD. (SUPRA) WAS NOT BINDING ON HIM, AS IT WA S NOT FROM THE JURISDICTIONAL BENCH OF THE TRIBUNAL, THAT WHET HER THE AMOUNT FOR TDS PURPOSES IS PAID OR PAYABLE, THE PRO VISION OF ITA 3248/DEL/11 ECOASFALT SA 9 SECTION 40(A)(IA) ARE ATTRACTED IN BOTH CASES, DUE TO THEIR PENAL IMPLICATIONS. HOWEVER, THE CIT(A) HAS NOT CITED ANY DECISION IN FAVOUR OF THIS PROPOSITION AS OPPOSED TO JAIPUR VID YUG VITRAN NIGAM LTD. (SUPRA). MOREOVER, AS OBSERVED, K. SRIN IVAS NAIDU (SUPRA) HAS FOLLOWED JAIPUR VIDYUG VITRAN NIGAM LT D. (SUPRA). EVEN OTHERWISE, IT IS TRITE LAW THAT NOTHING CAN BE ADDED TO OR SUBTRACTED FROM THE BARE PROVISIONS OF A SECTION OF A STATUTE, UNLESS THE CONTEXT IS SHOWN TO BE OTHERWISE. THE LE GISLATURE CHOOSES ITS WORDS DELIBERATELY AND SPECIFICALLY. TH E EXPRESSION IMPLIED IN SECTION 40(A)(IA) OF THE ACT IS PAYABLE AND NOT PAID. IN THE PRESENT CASE, THE COMMISSION INVOLVE D UNDISPUTEDLY STANDS PAID. ALSO, AS OBSERVED IN JAIP UR VIDYUG VITRAN NIGAM LTD. (SUPRA), SECTION 40(A)(IA) IMBIBE S A LEGAL FICTION AND IT NEEDS TO BE CONSTRUED STRICTLY. 6.4. ALTERNATIVELY IT IS PLEADED THAT THE ACTION OF THE LOWER AUTHORITIES HAS RESULTED INTO AN ILLOGICAL CONCLUSION BY TREATING T HE ENTIRE CONTRACT RECEIPT AS THE INCOME OF THE ASSESSEE. AUTHORITIES BY ASSUMPTI ONS AND TECHNICAL CONSIDERATIONS HAVE FRAMED A VERY HIGH PITCH ASSESS MENT ON APPLYING THE REAL INCOME THEORY ALSO THE ENTIRE RECEIPTS OF THE ASSESSEE CANNOT BE TAXED AS INCOME IN ANY CIRCUMSTANCE. THE AO AND LD. CIT(APPE ALS) BOTH HAVE ACCEPTED THE FACT THAT THE ASSESSEE HAS EXECUTED TH E CONTRACT AND ROADS HAVE BEEN CONSTRUCTED, IT IS ARBITRARY TO ASSUME THAT THE ENTIRE CONTRACT RECEIPTS OF THE ASSESSEE ARE ITS INCOME. 7. LD. DR, ON THE OTHER HAND, VEHEMENTLY ARGUES THA T: (I) PROVISIONS OF SEC. 201(1) AND 40(A)(IA) ARE INDEPEN DENT OF EACH OTHER AND THE DEPARTMENT HAS LIBERTY TO APPLY ANY OF THESE PROVISIONS. IT IS THE POWER TO HOLD THE ASSESSEE AS DEEMED IN DEFAULT AND/OR DISALLOW THE EXPENDITURE U/S 40(A)(I A) IF THE TDS HAS NOT BEEN DEDUCTED AND PAID. MERELY BECAUSE THE ASSE SSEE HAS BEEN SAVED FROM THE RIGOR OF SEC. 201(1)(A), WHICH IS IN DEPENDENT ITA 3248/DEL/11 ECOASFALT SA 10 SECTION, ASSESSEE CANNOT CAPITALIZE THIS SAVING FRO M A TROUBLE TO CLAIM EXEMPTION FROM THE OPERATION OF STATUTORY PRO VISION. (II) BOTH THE AUTHORITIES HAVE HELD THAT ASSESSEE HAS CA MOUFLAGED ITS ACCOUNT AND CONVERTED THE SUBCONTRACT WORK INTO THE SALE OF BITUMINOUS MIX. ASSESSEE HAS NOT CLAIMED ANY EXPEND ITURE FOR SUPERVISORY AND EXECUTORY STAFF AND HAS FAILED TO DEMONSTRATE THE EXECUTION OF CONTRACT WORK BY ITSELF. THE ONLY ALLE GED PERSON MR. MARIANO DE LASA IS NON-EXISTENT AS HE HAS NOT BEEN PAID SALARY. (III) THE CONTRACT WAS INDIVISIBLY FOR LAYING OF THE ROAD S. IN THE ABSENCE OF ANY SUPPORTING EXECUTORY SET UP, THE ASSESSEE DE LEGATED THE WORK TO RSGIPL. THE CONTRACT BEING INDIVIDUAL, MERE LY BY SHOWING THE BILLS OF LABOUR CHARGES AND BITUMINOUS MIX, ASSESSEE HAS TRIED TO CAMOUFLAGE ITS OPERATION. IT CANNOT BE HELD THAT THE CONTRACT OF THE ASSESSEE WITH RSGIPL WAS DIVISIBLE. (IV) APROPOS THE USE OF WORDS PAID/ PAYABLE IN SEC. 40(A )(IA), IT IS PLEADED THAT WORD PAID INCLUDES PAYABLE BY GENERAL CLAUSES ACT. 8. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. BOTH THE AUTHORITIES HAVE HELD THAT THE BOOKS OF ACCOUNT OF THEE ASSESSEE ARE NON-RELIABLE AND THEY HAVE BEEN PREPARED IN SUCH A MANNER SO AS TO MAKE IT AS A CAMOUFLAGE. THE WORK HAS BEEN BY CONVERTING INTO SELF EXECUTION WORK BY AN ACT OF SP LITTING OF WORK INTO A TRANSACTION OF PURCHASE AND SALE. THE PROVISIONS OF LAW CANNOT BE INTERPRETED IN SUCH A MANNER TO CONVERT A POSSIBLE TASK INTO IM POSSIBLE TASK BY SUCH INTERPRETATION. ONCE THE BOOKS ARE HELD TO BE CAMOU FLAGED AND NOT REPRESENTING THE ASSESSEES PROPER INCOME, IN THAT CASE THE PROPER COURSE IS TO REJECT THE BOOKS OF A/C AND ESTIMATE THE INCOME. THE ACTION OF THE LOWER AUTHORITIES HAS RESULTED INTO AN IMPOSSIBLE SITUATI ON I.E. HOLDING THE ENTIRE ITA 3248/DEL/11 ECOASFALT SA 11 ROAD CONTRACT RECEIPTS AS THE INCOME OF THE ASSESSE E. MORE SO WHEN BOTH THE AUTHORITIES HAVE UNEQUIVOCALLY ACCEPTED THE FACT TH AT THE ROADS WERE IN FACT CONSTRUCTED AND THE ASSESSEE EXECUTED ITS CONTRACT WITH NDMC. THAT IS WHY THE NDMC RELEASED THE PAYMENTS TO ASSESSEE. 8.1. WITH THESE FACTS, GLARING AT THE RECORD, IT WI LL BE ARBITRARY AND UNJUST TO HOLD ASSESSEES ENTIRE RECEIPTS AS INCOME. SINCE TH E BOOKS OF ACCOUNTS ARE NOT RELIABLE, THEY DESERVE TO BE REJECTED AND IN TH AT CASE A REASONABLE ESTIMATE OF INCOME HAS TO BE MADE. LEGISLATURE HAS PROVIDED ALTERNATE METHOD OF PRESUMPTIVE RATE U/S 44AD IN RESPECT OF C ONTRACTS AT 8%. THOUGH THESE PRESUMPTIVE RATES ARE NOT TECHNICALLY APPLICA BLE TO ASSESSEE AS ITS TURN OVER EXCEEDS RS. 40 LACS, NEVERTHELESS THESE PROVIS IONS CAN THROW SOME LIGHT ON THE ESTIMATE TO BE MADE IN THIS EVENTUALITY. 8.2. IT IS ALSO A FACT ADMITTED BY BOTH THE AUTHOR ITIES THAT RSGIPL WAS GIVEN SUB CONTRACT WORK. IN OUR VIEW, ENDS OF JUSTI CE WILL BE MET IF A FAIR AND REASONABLE ESTIMATE IS MADE IN PLACE OF TECHNICALIT IES OF APPLICABILITY OF SEC. 40(A)(IA); THE DEBATE ABOUT WORDS PAID AND PAYABLE AND THE DEBATE ABOUT REVENUE HAVING NOT PROCEEDED AGAINST THE ASSESSEE U /S 201(1). TO PUT REST TO THESE TECHNICAL DEBATES, IT WILL BE IN THE INTEREST OF JUSTICE TO MAKE A REASONABLE ESTIMATE OF ASSESSEES INCOME, WHEN ITS WORK EXECUTION HAS NOT BEEN QUESTIONED. IN VIEW OF ALL THESE OBSERVATION W E DO NOT GO INTO TECHNICAL ARGUMENT, WHICH IN OUR VIEW, WOULD LEAD TO ARBITRA RY RESULTS AND ILLOGICAL CONCLUSIONS. THEREFORE, WE HOLD THAT THE ASSESSEES BOOKS HAVE BEEN RIGHTLY REJECTED. INCOME IS ESTIMATED AT THE RATE PRESCRIBE D BY PRESUMPTIVE TAXATION 8% LESS PROFIT ATTRIBUTABLE TO THE HELP OF SUBLETT ING, IF ANY, BY RSGIPL @ 2%= 6% TO THE TURN OVER IS APPLIED . IN OUR VIEW E NDS OF JUSTICE WILL BE MET IF NET PROFIT OF 6% IS APPLIED TO ASSESSEES TURN OVER OF RS. 1,53,48,608/- ITA 3248/DEL/11 ECOASFALT SA 12 WHICH COMES TO AROUND RS. 9,21,000/- IN PLACE OF L OSS OF RS. 4,10,539/- RETURNED BY THE ASSESSEE. WE ORDER ACCORDINGLY. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT ON 27-04-2012. SD/- SD/- ( K.D. RANJAN ) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27-04-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR