The DCIT, Circle-1, Surat V. Engineering Professional Pvt.Ltd., Surat

ITA 3418/AHD/2010

• Counselvise Citation: 341820514 RSA 2010
• Duration Of Justice: 4 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 22-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 27-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: M K PATEL
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD BEFORE S/SHRI G. D. AGARWL, VP AND RAJPAL YADAV, JM. ITA NO.3418/AHD/2010 ASST. YEAR 2007-08 DY. CIT, CIRCLE - 1, SURAT. VS M/S ENGINEERING PROFESSIONAL PVT. LTD., 307-310 CITY SHOPPING CENTRE, OPP. UDHANA CITIZEN ARTS & COMM. COLLEGE, UDHANA NAVSARI MAIN ROAD, SURAT. (APPELLANT) (RESPONDENT) PA NO. AABCE 0313Q APPELLANT BY SMT. SONIA KUMAR, SR.DR RESPONDENT BY SHRI M. K. PATEL, AR DATE OF HEARING: 22.06.2015 DATE OF PRONOUNCEMENT: 24/06/2015 O R D E R PER SHRI RAJPAL YADAV, JUDICIAL MEMBER. THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD. CIT(A) DATED 30.09.2010 PASSED FOR AY 2007-08. 2. IN THE FIRST GROUND OF APPEAL, THE REVENUE HAS P LEADED THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY ITA NO.3418/AHD/2010 ASST. YEAR 2007-08 2 AO UNDER SECTION 40(A)(IA) OF THE INCOME-TAX ACT, 1 961 (HEREIN AFTER THE ACT). 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED ITS RETURN OF INCOME ELECTRONICALLY ON 29.10.2007 S HOWING TOTAL INCOME AT RS.41,93,170/- THE CASE OF THE ASSE SSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143( 2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY O F THE ACCOUNTS IT REVEALED TO THE AO THAT ASSESSEE COMPAN Y IS ENGAGED IN THE BUSINESS OF EXECUTION OF VARIOUS PRO JECTS ON TURNKEY BASIS IN THE FIELD OF OIL, GAS, WATER PIPEL INE ETC. THE ASSESSEE WAS HAVING ITS OWN MACHINERY NAMELY JCB AN D OTHERS. HOWEVER, ON REQUIREMENT BASIS, IT HAD TAKEN MACHINERIES FROM THE MARKET ALSO. THE AO FOUND THAT ASSESSEE HAS MADE PAYMENT OF RS.10,28,002/- TOWARDS EQUIPMENT RENT CHARGES. THE ASSESSEE FAILED TO DEDU CT TDS ON THE PAYMENT AND ACCORDINGLY THE AO HAS DISALLOWE D THE CLAIM OF EXPENSES AMOUNTING TO RS.10,28,002/-. 4. ON APPEAL, LD. CIT(A) HAS DELETED THE DISALLOWAN CE OBSERVING THAT MACHINERIES WERE HIRED BY THE ASSESS EE THROUGH DIFFERENT PARTIES ACCORDING TO THE REQUIREM ENTS. THERE WAS NO ROUTINE CONTRACT WITH THOSE PARTIES. T HE OWNERS OF EQUIPMENTS WERE NOT INVOLVED THEMSELVES I N CARRYING ON ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE BY SPENDING THEIR TIME AND ENERGY AND BY TAKING THE RISK ITA NO.3418/AHD/2010 ASST. YEAR 2007-08 3 ASSOCIATED WITH MAIN CONTRACT WORK. THUS LD. CIT(A) OBSERVED THAT THERE IS NO SUB-CONTRACTORSHIP IN THI S CASE AND, THEREFORE, NO TDS OUGHT TO BE DEDUCTED. 5. THE LD. DR CONTENDED THAT THE ASSESSEE DID NOT P RODUCE ANY DETAIL BEFORE THE AO ABOUT THE NATURE OF CONTRA CT. HOW THE LD. FIRST AUTHORITY HAS APPRECIATED THE CONTROV ERSY IS NOT DISCERNIBLE. SHE SUBMITTED THAT THE ORDER OF LD. CI T(A) BE SET ASIDE AND THE ISSUE BE FURTHER INVESTIGATED AT THE LEVEL OF AO. 6. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF CIT(A). 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS. T HE COPY OF AGREEMENT, IF ANY, ENTERED INTO BY THE ASSE SSEE WITH THE OWNER(S) HAS NOT BEEN PRODUCED EITHER BEFORE TH E AO OR BEFORE US. IF THE ASSESSEE HAS TAKEN THE MACHINERIE S ALONG WITH MAN-POWER WHO HAS OPERATED THE MACHINERY CARRY ING OUT THE WORK OF ASSESSEE THEN IT WILL COME WITHIN T HE AMBIT OF SECTION 194C. IF ASSESSEE HAS TAKEN THE MACHINER IES SIMPLICITY ON RENT THEN PROBABLY UNDER SECTION 194- I TDS HAS TO BE DEDUCTED. IN OTHER WORDS IT IS NOT ASCERT AINABLE, WHETHER ASSESSEE HAS ASSIGNED THE WORK TO THE OWNER S OF THE MACHINERIES OR IT HAS TAKEN THE MACHINERIES ON RENT? OBLIGATION OF THE ASSESSEE TO DEDUCT THE TAX CANNOT BE ITA NO.3418/AHD/2010 ASST. YEAR 2007-08 4 DETERMINED, IF REQUISITE DETAILS ARE NOT AVAILABLE. THE FINDINGS OF THE LD. CIT(A) ARE NOT SUSTAINABLE IN T HE GIVEN CIRCUMSTANCES. WE HAVE CONFRONTED THE LD. COUNSEL F OR THE ASSESSEE TO SHOW US THE DETAILS BUT HE EXPRESSED HI S INABILITY OF SUBMITTING THE SAME AT THIS STAGE, RAT HER CONSENTED THAT IF THE ISSUE IS SET ASIDE TO THE FIL E OF AO THEN ASSESSEE WILL SUBMIT THE DETAILS. TAKING INTO CONSI DERATION THE FACTS AND CIRCUMSTANCES, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE ISSUE TO THE FILE OF AO FOR READJUDICATION. THE OBSERVATIONS MADE BY US WILL NO T IMPAIR OR INJURE THE CASE OF AO AND WILL NOT CAUSE ANY PRE JUDICE TO THE DEFENCE/EXPLANATION OF THE ASSESSEE. THIS GROUN D OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE NEXT GROUND OF APPEAL, GRIEVANCE OF THE R EVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING ADDITION O F RS.42,595/-. WE FIND THAT ASSESSEE HAS DEBITED DEVE LOPMENT EXPENSES AT RS.4,25,950/-. THE LD. AO HAS DISALLOWE D A SUM OF RS.42,595 ON AD HOC BASIS @ 10%. 9. ON APPEAL, LD. CIT(A) HAS DELETED THE DISALLOWAN CE BY OBSERVING THAT SMALL PAYMENTS WERE MADE BY THE ASS ESSEE WHICH WERE NECESSARY FOR RUNNING ITS BUSINESS ON DA Y TO DAY BASIS. WE FURTHER FOUND THAT TURNOVER OF THE ASSESS EE IS OF MORE THAN RS.32 CRORES. IT HAS SHOWN GP AT 02.60 CR ORES ITA NO.3418/AHD/2010 ASST. YEAR 2007-08 5 WHICH IS 8% OF THE TURNOVER. IN ACHIEVING SUCH A HU GE TURNOVER WHILE EXECUTING TURNKEY PROJECTS AT DIFFER ENT SITES, THE SMALL EXPENDITURE INCURRED AT RS.4,25,950/- CAN NOT BE CONSTRUED ON HIGHER SIDE. THE LD. CIT(A) HAS RIGHTL Y DELETED THE DISALLOWANCE MADE BY THE AO AT 10% OF THIS AMOU NT ON AD HOC BASIS. THE DISALLOWANCE HAS BEEN MADE ON THE GROUND THAT THE DETAILS ARE NOT VERIFIABLE. TO OUR MIND, SOMETIME IT IS QUITE DIFFICULT TO SUBMIT MINUTE DET AILS OF SMALL EXPENDITURE. THEREFORE, WE DO NOT SEE ANY REA SON TO INTERFERE ON THE ORDER OF CIT(A) ON THIS ISSUE. 10. IN THE RESULT, APPEAL OF REVENUE IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24/6/2015 SD/- SD/- ( G. D. AGARWAL ) VICE PRESIDENT ( RAJPAL YADAV ) JUDICIAL MEMBER DATED 24/6/2015 MAHATA/- ITA NO.3418/AHD/2010 ASST. YEAR 2007-08 6 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 22/06/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 23/06/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 24/6/2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: