The ACIT, Circle-2, JAMNAGAR V. Swastik Construction Co., JAMNAGAR

ITA 334/RJT/2011

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0195 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-10-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 05-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: PRASHANT MAHARISHI
• Keywords: Non-deduction of tax; Reasonable cause
• Section: 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. . .. . . .. . , , , , . .. . . .. . , , , , $ $ $ $ BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAV A, AM ITA NOS.334/RJT/2011. / ASSESSMENT YEARS 2005-06 THE ASSTT.COMMISSIONER OF INCOME TAX- CIRCLE-2 JAMNAGAR ( * / APPELLANT) VS. SWASTIC CONSTRUCTION COMPANY, PANCHMUKHI HANUMAN SHOPPING CENTER, NEAR AMBER CINEMA, JAMNAGAR, PAN: AAOFSO370H +,* / RESPONDENT CO NO.5/RJT/2012 IN ITA NOS.334 /RJT/2011 / ASSESSMENT YEARS 2005-06 SWASTIC CONSTRUCTION COMPANY, . ( * /CROSS - OBJECTOR ) VS. THE ASSTT.COMMISSIONER OF INCOME TAX- CIRCLE-2 JAMNAGAR +,* / RESPONDENT - / REVENUE BY SHRI AVINASH KUMAR /- / ASSESSEE BY SHRI PRASHANT MAHARISHI - / DATE OF HEARING 4.10.2012 - / DATE OF PRONOUNCEMENT 5. 10.2012 / / / / ORDER PER T. K. SHARMA, JM THIS APPEAL OF THE REVENUE AND CROSS-OBJECTION BY THE ASSESSEE ARE AGAINST THE ORDER OF THE LD. CIT(A)-JAMNAGAR, DAT ED 30.6.2011 FOR THE ASSESSMENT YEAR 2005-06. SINCE APPEAL OF THE REVENUE AN D CROSS- OBJECTION BY THE ASSESSEE WERE HEARD TOGETHER WE PROC EEDS TO DECIDE THE SAME BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENC E. CO NO.5/RJT/12 ITA NOS.334 /RJT/2011 2 ITA NOS.334/RJT/2011. (BY REVENUE) 2. THE GROUNDS TAKEN BY THE REVENUE ARE REPRODUCED BELOW : 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACT I N DELETING THE DISALLOWANCE OF RS.7,76,209/ U/S 40(A)(IA) O F THE ACT, MADE BY THE AO FOR NON-DEDUCTION OF TAX FROM INTER EST PAID U/S 194A OF THE ACT. 2. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACT IN DELETING THE DISALLOWANCE OF RS.14,55,970/- OUT OF TOTAL DISALLOWANCE OF RS.39,36,600/- MADE BY THE AO U/S 40(A)(IA) OF TH E ACT FOR NON-DEDUCTION OF TAX U/S 194C OF THE ACT FROM PAYM ENTS MADE TO SUB-CONTRACTORS. 3. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACT IN HOLDING THAT BOTH THESE PAYMENTS WERE NOT LIABLE TO TDS UN DER THE PROVISIONS OF SECTION 194 AND 194C OF THE ACT RES PECTIVELY. 4. ON FACT AND IN THE CIRCUMSTANCES OF THE CASE, TH E CIT(A OUGHT TO HAVE UPHELD THE ORDER OF THE AO 5. IT IS THEREFORE PRAYED THAT THE ORDER OF THE CI T(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORE 6. THAT THE REVENUE CRAVES LEAVE TO ADD, AMEND, ALT ER OR WITHDRAW ANY GROUNDS OF APPEAL 3. SHRI AVINASH KUMAR, THE LD. DR APPEARED FOR THE REVENUE AND POINTED OUT THAT THE AO HAS RIGHTLY DISALLOWED A N AMOUNT OF RS.7,76,209/-. HE COULD NOT BRING ANY MATERIAL CONT RARY TO THE FINDING OF THE LD. CIT(A). AS AGAINST THIS SHRI PRASHANT MAHARISHI, LD. COUNSEL FOR THE ASSESSEE APPEARED AND VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). 4. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE T HROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT T HE LD. CIT(A) HAS DELETED THE ADDITION MADE BY THE AO U/S 40(A)(IA) OF THE ACT BY GIVING COGENT REASONS. WE, THEREFORE, DECLINE TO INTERFERE IN THE ORDER OF THE LD. CO NO.5/RJT/12 ITA NOS.334 /RJT/2011 3 CIT(A). THE GROUND NO.1 IS REJECTED. 5. THE FACTS RELATING TO THE GROUND NO.2 OF THE APP EAL IS IN RESPECT OF HIRE CHARGES PAID AMOUNTING TO RS. 14,55,970/-. IN THE ASSESSMENT ORDER, THE AO DISALLOWED HIRE CHARGES PAID AMOUNTIN G TO RS.14,55,970/- BY INVOKING THE PROVISIONS OF SECTIO N 40(A)(IA). ON APPEAL, THE LD. CIT(A) DELETED THE SAME FOR THE DET AILED REASONS GIVEN IN PARAGRAPH 9 OF THE IMPUGNED ORDER AT PAGE 4 WHIC H READS AS UNDER : 9. I HAVE CAREFULLY CONSIDERED THE SUBMISSION MADE BY THE AR OF THE APPELLANT AND THE FACTS MENTIONED BY THE AO IN THE ASSESSMENT ORDER. IT IS NOTICED THAT THE APPELLANT FILED A CHART IN THE PAPER BOOK ON PAGE 47 SHOWING DETAILS OF VARIOU S PAYMENTS AND THEIR NATURE AND ALSO THE PROVISIONS OF SECTION 194 I/C. AFTER PERUSAL OF THE CHART IT IS FOUND THAT, SO FAR AS TH E HIRE CHARGES ARE CONCERNED, WHICH ARE MENTIONED AT SL.NO.1,2, 4 AND 6 THE PROVISIONS OF SECTION 194C CANNOT BE APPLIED. THE PROVISIONS OF SECTION 194C ARE APPLICABLE WITH EFFECTIVE DATE FROM 1.7.1995. BUT THAT COVERS ONLY SUB-CONTRACTS AND NOT THE HIRE CHARGES AND SAME IS ALSO INTERPRETED FROM THE FACT THAT A SEPAR ATE SECTION 194 I WAS INTRODUCED WITH EFFECT FROM 1.6.2007 SP ECIFICALLY FOR HIRE CHARGES. THE AO CANNOT COVER HIRE CHARGES UND ER THE PROVISIONS OF SECTION 194C AND THEREFORE, IT IS HEL D THAT THESE PAYMENTS ARE HIRE CHARGES AND HIRE CHARGES AMOUNTIN G TO RS.14,55,970/- ARE NOT COVERED U/S 194C AND, THEREF ORE, PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WILL NOT APPLY. TO THAT EXTENT, ADDITION MADE BY THE AO IS ORDERED TO BE D ELETED. 6. AT THE TIME OF HEARING, THE LD. DR APPEARED ON BEHALF OF THE REVENUE. HE COULD NOT POINT OUT HOW THE VIEW TAKEN B Y THE LD. CIT(A) IS NOT ACCEPTABLE. AS AGAINST THIS SHRI PRASHANT MAHARISHI, LD. COUNSEL FOR THE ASSESSEE APPEARED AND VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). 7. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GON E THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE HI RING CHARGES AMOUNTING TO RS.17,31,820/- OF EXCAVATORS IS COVERED BY SECTION 194- I AND NOT BY SECTION 194-C. THE PROVISIONS OF SECTION 194-I FOR DEDUCT ION OF TAX ON CO NO.5/RJT/12 ITA NOS.334 /RJT/2011 4 PAYMENT FROM RENT WAS AMENDED W.E.F. 13.7.2006. TH EREFORE, DURING THE YEAR UNDER APPEAL WHEN THE ASSESSEE MADE PAYMENT OF HI RE CHARGES, THERE WAS NO MENTIONED UNDER SECTION 194-I REGARDING THE DEDUCTION OF TAX FROM THE SAME. THEREFORE, THE ASSESSEE WAS NOT LIAB LE TO DEDUCT TAX AT SOURCE FROM HIRE CHARGES PAID AMOUNTING TO RS.17,31, 820/- PRIOR TO 13.7.2006. EVEN OTHERWISE, SECTION 40(A)(IA) APPLIES TO THE PAYMENTS WHICH ARE PAYABLE ONLY ON 31 ST MARCH AND NOT ACTUALLY PAID DURING THE YEAR. SINCE ALL THESE PAYMENTS HAVE ALREADY BEEN PAID AND NONE OF THEM IS PAYABLE AT THE END OF THE YEAR I.E. ON 31 ST MARCH, THEREFORE, AS PER THE JUDGMENT OF INCOME TAX APPELLATE TRIBUNAL, VISAKH APATNAM, SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS V/S ADDITIONAL COMMISSIONER OF INCOME-TAX, RANGE-1, VISAKHAPATNAM [2012 ] 20 TAXMANN.COM 244 (VISAKHAPATNAM - TRIB.) (SB), THE DISA LLOWANCE CANNOT BE MADE. IN THIS VIEW OF THE MATTER, WE INCLINE TO UPHOLD THE VIEW TAKEN BY THE LD. CIT(A). THE GROUND NO.2 IS REJECTED. CO NO.5/RJT/2012 8. GROUNDS TAKEN BY THE ASSESSEE IN THE CROSS-OBJECTION READS AS UNDER : THE LD. AO ERRED IN LAW AS WELL AS ON FACTS IN D ISALLOWING AMOUNT OF RS.39,36,600/- U/S 40(A)(IA) OF THE ACT FOR NON- DEDUCTION OF TAX FOR PAYMENTS MADE TO SUB-CONTRACTO RS U/S 194C OUT OF WHICH HONBLE CIT(A) ERRED IN CONFIRMIN G THE DISALLOWANCE OF RS.24,80,630/- U/S 40(A)(IA) THOUG H AMOUNT IS PAID AND NOT PAYABLE ON THE DATE OF BALANCE SHEET. 9. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE POINT ED OUT THAT THERE IS A DELAY OF 219 DAYS IN FILING THE CROSS-OBJECT ION. THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY. THE LD. COUNSEL FOR THE CO NO.5/RJT/12 ITA NOS.334 /RJT/2011 5 ASSESSEE EXPLAINED THAT THE APPEAL MEMO FILED BY THE DE PARTMENT, THE SAME WAS RECEIVED BY THE ASSESSEE ON 17.9.2011. AT THAT T IME THE ASSESSEE DID NOT CONSULT ANY ADVISOR AS ASSESSEE WAS UNDER BON AFIDE BELIEF THAT ONLY ON RECEIPT OF HEARING OF NOTICE, THE PROPER ACTION IS REQUIRED TO BE TAKEN. THE FIRST NOTICE OF HEARING DATED 24.4.2 012 FIXING THE DATE OF HEARING ON 25.5.2012 WAS RECEIVED. ON RECEIPT OF THIS NOTICE, THE ASSESSEE HAS CONSULTED ITS CHARTERED ACCOUNTANT WHO ADVISED THE ASSESSEE TO FILE CROSS-OBJECTION. IMMEDIATELY WITHIN 30 DAYS ON RECEIPT OF FIRST NOTICE, AS ADVISED BY THE ASSESSEES COUNSEL, THE ASSESSE E FILED CROSS-OBJECTION ON 23.5.2012. HE ACCORDINGLY SUBMITTED T HAT SINCE THE ASSESSEE WAS NOT AWARE OF THE INTRICACY OF LAW REGARDING THE FILING OF THE CROSS-OBJECTION AND HENCE OCCURRED THE DELAY OF 219 DAY S IN FILING THE CROSS-OBJECTION. HE THEREFORE PRAYED THAT THE DELAY OF 219 DAYS IN FILING THE CROSS-OBJECTION BE CONDONED. AS AGAINST THIS THE LD. DR STR ONGLY OBJECTED TO THIS PRAYER AND CONTENDED THAT SINCE ASSESSEE COULD NOT B RING ON RECORD ANY REASONABLE CAUSE HOW THE DELAY OF 219 DAYS OCCU RRED IN FILING THE CROSS-OBJECTION, THE CROSS-OBJECTION FILED BY THE ASSESSE E BE DISMISSED. 10. HAVING HEARD BOTH THE SIDES, WE HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. FROM THE REASONING GIVEN BY THE ASSE SSEE, WE ARE CONVINCED THAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUS E IN FILING THE CROSS-OBJECTION IN THE TIME PRESCRIBED UNDER THE ACT, THER EFORE, WE CONDONE THE DELAY OF 219 IN FILING THE CROSS-OBJECTION AND ADMIT IT. 11. ON MERITS, THE LD. COUNSEL FOR THE ASSESSEE CONTENTE D THAT THE ISSUE RAISED IN THIS CROSS-OBJECTION STANDS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE SPECIAL BENCH OF THE CO NO.5/RJT/12 ITA NOS.334 /RJT/2011 6 TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS V/S ADDITIONAL COMMISSIONER OF INCOME-TAX,(SUPRA). 12. ON THE OTHER HAND, THE LD. DR CONTENDED THAT T HE MATTER NEEDS VERIFICATION AT THE END OF THE AO, THEREFORE, THE ISSU E MAY BE RESTORED TO THE FILE OF THE AO FOR VERIFICATION AND FRESH ADJUDI CATION. 13. HAVING HEARD BOTH THE PARTIES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ISSUE RAISED IN THIS GROUND STANDS COVERED BY THE DECISION OF THE SPECIAL BENC H OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS V/S ADDITIONAL COMMISSIONER OF INCOME-TAX,(SUPRA). WE ALSO FIND MERIT S IN THE CONTENTION OF THE LD.DR THAT THE ISSUE NEEDS VERIFICATI ON AT THE LEVEL OF AO. ACCORDINGLY, WE DEEM IT FIT AND PROPER TO SET ASIDE TH E ORDER OF THE LD. CIT(A) AND RESTORE BACK THE ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE. TH EREFORE, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND DIRECT THE AO T O VERIFY THE ISSUE AND DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING OP PORTUNITY OF BEING HEARD TO THE ASSESSEE. RESULTANTLY, CROSS-OBJECTION FILED BY THE ASSESSEE, FOR STATISTICAL PURPOSES, STANDS ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED AND CROSS- OBJECTION FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICA L PURPOSES. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DAT E MENTIONED HEREINABOVE. SD SD ( D.K.SRIVASTAVA) ( T. K. SHARMA) / ACCOUNTANT MEMBER /JUDICIAL MEMBER 3/ ORDER DATE 5.10.2012. /RAJKOT CO NO.5/RJT/12 ITA NOS.334 /RJT/2011 7 SRL - -- - +4 +4 +4 [phone] / COPY OF ORDER FORWARDED TO:- 1. * / APPELLANT-, 2. +,* / RESPONDENT- 3. : / CONCERNED CIT. 4. :- / CIT (A). 5. 4 +, , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.