Sri Rahim Sab Hiriyur Hyder Ali , Chitradurga V. The Income Tax Officer Ward-1 , Chitradurga

ITA 3435/BANG/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0641 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-12-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 31-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KARUPPUSAMY
• Assessee Lawyers: V SRINIVASAN
• Keywords: Opportunity of being heard; Audit objection; Set aside
• Section: 40(a)(ia); 194C; 44AB; 194A; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.3435/BANG/2018 ASSESSMENT YEAR : 2010-11 SRI RAHIM SAB HIRIYUR HYDER ALI, PROP : M/S AFRA TRANSPORT, MIRZA EXTN., HIRIYUR, CHITRADURGA DIST. PAN ACKPH 4805 L VS. THE INCOME-TAX OFFICER, WARD-1, CHITRADURGA. APPELLANT RESPONDENT APPELLANT BY : SHRI V SRINIVASAN, ADVOCATE RESPONDENT BY : SHRI KARUPPUSAMY, ADDL. CIT DATE OF HEARING : 17.12.2019 DATE OF PRONOUNCEMENT : .12.2019 O R D E R O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 25/4/2016 PASSED BY LD CIT(A), DAVANGERE AND IT RELATES TO ASST. YEAR 2010-11. 2. THE ASSESSEE HAS RAISED FOLLOWING ISSUES IN THIS APPEAL. ITA NO.3435 /BANG/2018 PAGE 2 OF 9 A) VALIDITY OF REOPENING OF ASST. U/S 148 OF THE ACT. B) DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT. 3. THE ASSESSEE IS A TRANSPORT CONTRACTOR. HE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING T OTAL INCOME OF RS.1,90,900/-. THE ASSESSMENT WAS COMPLETED U/S 14 3(3) OF THE ACT DETERMINING THE TOTAL INCOME AT RS.4,88,626/-. SUBSEQUENTLY THE AO REOPENED THE ASST. U/S 148 OF THE ACT ON THE BASIS OF INTERNAL AUDIT OBJECTIONS, WHEREIN IT WAS POINTED O UT THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE FROM TRANSP ORT PAYMENTS AND HENCE ADDITION U/S 40(A)(IA) OF THE ACT IS WARR ANTED. 3. BEFORE THE AO THE ASSESSEE SUBMITTED THAT THE PR OVISIONS OF SEC. 194C SHALL NOT APPLY TO HIM, SINCE IN THE IMME DIATELY PRECEDING YEAR (I.E., IN FY 2008-09 RELEVANT TO AY 2009-10), THE ASSESSEE WAS NOT LIABLE TO GET HIS ACCOUNTS AUDITED U/S 44AB OF THE ACT. THE AO NOTICED THAT THE ASSESSEE DECLARED TUR NOVER OF RS.1.51 CRORE IN FY 2007-08 RELEVANT TO ASST. YEAR 2008-09. ACCORDINGLY HE TOOK THE VIEW THAT THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE U/S 194C OF THE ACT IN THE YEAR UNDER CONSIDERATION. SI NCE THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE FROM TRANSPORT PAYME NTS, THE AO DISALLOWED A SUM OF RS.91.32 LAKHS TO THE INCOME OF THE ASSESEE. THE LD CIT(A) ALSO CONFIRMED THE SAME. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD . THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSE E IS AN INDIVIDUAL. THE PROVISIONS OF SEC.194C SHALL NOT APPLY TO INDIV IDUAL EXCEPT IN A SITUATION MENTIONED IN SEC.194C OF THE ACT. WE NOT ICE THAT THE ITA NO.3435 /BANG/2018 PAGE 3 OF 9 PROVISION OF SEC.194C HAS UNDERGONE CHANGE W.E.F 1/ 10/2009 AND IT WILL APPLY TO INDIVIDUAL, IF HE FALLS UNDER THE CATEGORY OF SPECIFIED INVIDIDUAL. AS PER EXPLANATIONS (I) OF AMENDED SE C.194C, THE SPECIFIED PERSON SHALL MEAN -; (I) ANY PERSON, BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS, IF SUCH PERSON, - A) DOES NOT FALL UNDER ANY OF THE PRECEDING SUB- CLAUSES; AND B) IS LIABLE TO AUDIT OF ACCOUNTS UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH SUM IS CREDITED OR PAID TO THE ACCOUNT OF THE CONTRACTOR; 5. PRIOR TO AMENDMENT, THE PROVISO TO SECTION 194C (2) WAS APPLICABLE AND THE SAME READS AS UNDER:- PROVIDED THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOV ER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE ( A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEA R IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH SUM IS CREDITED OR PAID TO THE ACCOUNT OF THE SUB-CONTRACTOR, SHALL BE LIABLE TO DEDUCT INCOME-TAX UNDER THIS SUB-SECTION. ITA NO.3435 /BANG/2018 PAGE 4 OF 9 6. A READING OF AMENDED PROVISIONS AS WELL AS PRE- AMENDED PROVISIONS WOULD SHOW THAT THE PROVISION OF 194C SH ALL APPLY IN RESPECT OF AN INDIVIDUAL IN A PARTICULAR YEAR, ON LY IF HE IS LIABLE TO GET HIS ACCOUNTS AUDITED U/S 44AB OF THE ACT FOR TH E FINANCIAL YEAR IMMEDIATELY PRECEDING THAT YEAR IN QUESTION. 7. BEFORE THE AO THE ASSESSEE SUBMITTED THAT IN THE IMMEDIATELY PRECEDING YEAR, I.E IN AY 2009-190 (F.Y 2008-09) H IS ACCOUNTS ARE NOT LIABLE TO BE AUDITED U/S 44AB OF THE ACT. IN S UPPORT OF THE SAME THE ASSESSEE HAS FILED A LETTER DATED 28/3/201 6 BEFORE AO, WHICH READS AS UNDER:- WITH RESPECT TO ABOVE CITED SUBJECT, I SUBMIT AS UNDER: AS MY GROSS RECEIPTS FOR THE PREVIOUS YEAR 2008-09 (ASSESSMENT YEAR 2009-10) IS NOT LIABLE FOR TAX AUD IT U/S 44AB OF INCOME TAX ACT,1961. FURTHER, FOR FINANCIAL YEAR 2008-09, TOTAL CREDITS IN MY STATE B ANK OF MYSORE CA NO. 64021877345 ACCOUNT IS RS.8,00,502/- AND THE KARNATAKA BANK SB A/C NO. 23860 ACCOUNT IS RS.7,97,169/-. TOTAL AMOUNTS RS.15,97.671/- FOR THE FINANCIAL YEAR 2008-09. HENC E, I HAVE NOT COMES UNDER THE PURVIEW OF SECTION 44AB OF INCOME TAX ACT,1961 FOR THE ASSESSMENT YEAR 2009- 10. COPY OF THE BANK STATEMENTS IS ENCLOSED FOR YOU R REFERENCE. ITA NO.3435 /BANG/2018 PAGE 5 OF 9 FURTHER, FOR THE FINANCIAL YEAR 2009-10 (ASSESSMENT YEAR 2010-11) LIABLE FOR TAX AUDIT U/S 44AB OF INCO ME TAX ACT, 1961. HOWEVER. AS PER 194C EXPLANATION (I) (B) LIABLE TO AUDIT OF ACCOUNTS UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEA R IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH SUM IS CREDITED OR PAID TO THE ACCOUNT OF THE CONTRACTOR: SINCE, I AM NOT COMES UNDER THE PURVIEW OF SECTION 44AB OF INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2009-10. HENCE. I AM NOT LIABLE TO DEDUCT THE TAX AT SOURCE FOR THE FINANCIAL YEAR 2009-10 (ASSESSMEN T YEAR 2010-11). 8. HOWEVER, THE AO HAS TAKEN THE VIEW THAT SINCE TH E ASSESSEE WAS LIABLE TO GET HIS ACCOUNTS AUDITED U/S 44AB OF THE ACT IN THE ASST. YEAR 2008-09 (FIN. YEAR 2007-08), I.E., THE Y EAR PRECEDING THE IMMEDIATELY PRECEDING YEAR, THE ASSESSEE WOULD BE L IABLE FOR DEDUCTION OF TAX AT SOURCE FROM TRANSPORT PAYMENT M ADE DURING THE YEAR UNDER CONSIDERATION. WE FIND THAT THE ABOVE SA ID INTERPRETATION MADE BY AO AND CONFIRMED BY LD CIT(A) IS NOT IN ACC ORDANCE WITH THE PROVISIONS OF SEC. 194A OF THE ACT. 9. HOWEVER, WE NOTICED THAT THE ASSESSEE HAS NOT FI LED HIS RETURN OF INCOME FOR ASST. YEAR 2009-10 AND HE HAS CLAIMED THAT THE TRANSPORT RECEIPTS TO BE RS.15.97 LAKHS FOR FINANCI AL YEAR RELEVANT TO THE ASST. YEAR 2009-10 ON THE BASIS OF AMOUNTS C REDITED TO HIS ITA NO.3435 /BANG/2018 PAGE 6 OF 9 BANK ACCOUNTS. WHEN A SPECIFIC QUERY WAS ASKED BY THE BENCH AS TO WHETHER THE ASSESSEE WAS MAINTAINING THE BOOKS O F ACCOUNTS, EVEN THOUGH THE ASSESSEE HAS NOT FILED A RETURN OF INCOME, THE LD AR SUBMITTED THAT, ACCORDING TO THE INFORMATION GIVEN TO HIM, THE ASSESSEE HAS NOT MAINTAINED THE BOOKS OF ACCOUNT. HOWEVER, WE NOTICED FROM THE PAPER BOOK FILED BY THE ASSESSEE T HAT THE ASSESSEE HAS FURNISHED FINANCIAL STATEMENTS VIZ. BALANCE SHE ET, PROFITS AND LOSS ACCOUNT, CAPITAL ACCOUNT ETC., ALONG WITH THE RETURN FILED FOR THE YEAR UNDER CONSIDERATION. HENCE THE POSSIBILITY IS THAT THE ASSESSEE COULD HAVE MAINTAINED BOOKS OF ACCOUNT IN THE IMMED IATELY PRECEDING FINANCIAL YEAR ALSO. ACCORDINGLY THE BEN CH EXPRESSED THE VIEW THAT THE MATTER MAY BE RESTORED TO THE FILE O F THE AO FOR LIMITED PURPOSE OF EXAMINING AS TO WHETHER THE ASSE SSEE HAS MAINTAINED BOOKS OF ACCOUNT FOR ASST. YEAR 2009-10 AND IF SO, WHETHER THE TURNOVER OF THE ASSESSEE FOR THAT YEAR DID NOT EXCEED LIMIT PRESCRIBED U/S 44AB OF THE ACT IN THAT YEAR. THE LD AR ALSO AGREED TO THE SAME. 10. WE HEARD THE LD DR AND PERUSED THE RECORD. 11. WE HAVE ALREADY HELD THAT THE ASSESSEE SHALL N OT BE LIABLE FOR DEDUCTING TAX AT SOURCE FROM TRANSPORT PAYMENT, IF HIS ACCOUNTS OF THE IMMEDIATELY PRECEDING FINANCIAL YEAR I.E FY 200 8-09 (A.Y 2009- 10) ARE NOT BE LIABLE FOR AUDIT U/S 44AB OF THE ACT . IN THE LETTER FURNISHED BY THE ASSESSEE BEFORE THE AO, THE ASSESS EE HAS CLAIMED THAT HE WAS NOT LIABLE FOR GETTING HIS ACCOUNTS AUD ITED U/S 44AB OF EH ACT IN THE IMMEDIATELY PRECEDING FINANCIAL YEAR. ITA NO.3435 /BANG/2018 PAGE 7 OF 9 12. IN VIEW OF THE DISCUSSION MADE SUPRA, FOR TH E LIMITED PURPOSE OF EXAMINING THE ABOVE SAID CLAIM OF THE ASSESSEE, WE RESTORE THIS ISSUE TO THE FILE OF THE AO. IF THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT FOR THE IMMEDIATELY PRECEDING YEAR AND HE W AS NOT LIABLE FOR GETTING HIS ACCOUNTS AUDITED U/S 44AB OF THE AC T, THEN THE IMPUGNED DISALLOWANCE IS NOT WARRANTED. IF THE AO WAS SATISFIED THAT THE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOU NTS, THEN THE CLAIM OF THE ASSESSEE NEEDS TO BE ACCEPTED THAT THE PROVISIONS OF SEC.44AB SHALL NOT APPLY IN THE IMMEDIATELY PRECEDI NG YEAR. IN THAT CASE ALSO, THE IMPUGNED DISALLOWANCE IS NOT WARRANT ED. IF THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNTS FOR THE I MMEDIATELY PRECEDING YEAR AND THE SAME IS LIABLE TO AUDIT U/S 44AB OF THE ACT, THEN THE IMPUGNED DISALLOWANCE NEEDS TO BE SUSTAINE D. 13. ACCORDINGLY WE DIRECT THE AO TO EXAMINE ALL THESE ASPECTS IN THE LIGHT OF DISCUSSIONS MADE SUPRA, AFTER AFFORDIN G ADEQUATE OPPORTUNITY OF BEING HEARD. THE ORDER PASSED BY TH E LD CIT(A) ON THIS ISSUE IS ACCORDINGLY SET ASIDE. 14. WITH REGARD TO ISSUE RELATING TO VALIDITY OF RE OPENING OF ASSESSMENT, THE ASSESSEE DID NOT FURNISH THE COPY O F REASONS RECORDED BY THE AO. IN THE ABSENCE OF THE SAME WE ARE UNABLE TO EXPRESS ANY VIEW ON THIS ISSUE. ITA NO.3435 /BANG/2018 PAGE 8 OF 9 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER, 2019. SD/ - (PAVAN KUMAR GADALE) JUDICIAL MEMBER SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, THE DECEMBER , 2019. /VMS/ COPY TO: 1. APPELLANT (S) / CROSS OBJECTOR(S) 2. RESPONDENT(S) 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT, BANGALORE