M/s Krypton Datamatics Ltd., Delhi V. CIT, Ludhiana

ITA 363/CHANDI/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1607 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 07-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Opportunity of being heard; Non-deduction of tax; Assessment record
• Section: 143(3); 142(1); 194C; 27; 6; 263; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.363/CHD/2014 (ASSESSMENT YEAR : 2005-06) M/S KRYPTON DATAMATICS LTD., VS. THE D.C.I.T., 981, AGGARWAL MILLENIUM TOWER-II, CENTRAL CIRCLE, NETAJI SUBHASH PLACE, DISTRICT PATIALA. CENTRE WAZIRPUR, OPP. T.V.TOWER, PITAMPURA, DELHI. PAN: AABCK1660N (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI ASHWANI KUMAR & ASHOK GOYAL RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 16.11.2015 DATE OF PRONOUNCEMENT : 30.11.2015 O R D E R PER RANO JAIN, A.M . : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (CENTRAL), LUDHIANA DATED 6.3.2014 MADE UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSMENT IN THIS CASE WAS COMPLETED ON 21.12.2011 AT RS.27,250/- AGAINST THE RETURNED INCOME OF RS.430/- 2 UNDER SECTION 143(3) R.W.S. 153C OF THE ACT. LATE R ON THE LEARNED COMMISSIONER OF INCOME TAX EXAMINED THE ASSESSMENT RECORDS AND FORMED A PRIMA FACIE VIEW TH AT THE ASSESSMENT MADE WAS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF THE REVENUE AND ISSUED A SHOW CAUSE NOT ICE DATED 12.9.2013 TO THE ASSESSEE, WHICH READS AS UND ER : THE ASSESSEE RELATES TO MADHAV GROUP OF CASES, MAN DI GOBINDGARH ON WHICH A SEARCH & SEIZURE OPERATION U/ S 132 OF THE I.T. ACT WAS CONDUCTED ON 10.02.2010, ACCORD INGLY, THE CASE WAS CENTRALIZED U/S 127 OF THE I.T. ACT, 1 961 VIDE CIT-I, KOLKATA'S ORDER NO. CIT/KOK-1/TRANS OF JURIS (MADHAV GROUP, MANDI GOBINDGARH)/127/10-LL/64 DATED 30.11.2011.AFTER RECORDING DUE REASONS/SATISFACTION NOTICE U/S 153C OF THE I.T. ACT, 1961 WAS ISSUED IN THE CA SE OF ASSESSEE COMPANY ON 07.01.2011. ASSESSEE FILED ITS RETURN DECLARING INCOME OF RS.430/- ON 07.03.2011. IN THI S CASE, ASSESSMENT U/S 143(3)/153C OF THE I.T. ACT, 1961 WAS COMPLETED ON 21.12.2011 AT RS.27,250/- AS AGAINST R ETURNED INCOME OF RS.430/-. 2. ON PERUSAL OF RECORDS, IT IS NOTICED THAT ASSESS MENT ORDER HAS BECOME ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF FOLLOWING ISSUES : (I) IN COURSE OF THE SAID ASSESSMENT PROCEEDINGS, THE THEN ASSESSING OFFICER OBSERVED THAT THE ASSESSEE H AD IN ITS PROFIT & LOSS ACCOUNT CLAIMED 'EXPENSES INCURRED IN CONNECTION WITH COMMISSION' TO THE TUNE OF RS.5,91,40,500/-. ON THE OTHER HAND, SUM OF RS.5,99,78,310/- HAS BEEN SHOWN AS 'COMMISSION RECEIVED' ON CREDIT SIDE OF PROFIT AND LOSS ACCOUNT. ON BEING ASKED TO FURNISH THE NATURE AND DETAILS OF THE SAME, THE ASSESSEE, VIDE ITS LETTER DATED 01.11.201.1 SUB MITTED THAT 'ACTUALLY THIS IS EXPENSES AGAINST JOB WORK INC OME OF DATA 3 ENTRY ETC. DETAILS OF JOB WORK INCOME IS ENCLOSED. AG AINST TOTAL RECEIPT OF RS.5,99,78,310/- EXPENSES IS RS.5, 91,40,500/-.' IT IS SEEN THAT JOB CHARGES HAVE BEEN MADE TO 20 DIFFERENT CONCERNS. TOTAL SUM OF RS.5,91,40,500/- WAS P AID TO 20 OTHER CONCERNS TO WHOM THE JOB WAS SUBCONTRACTED , THE JOB WHICH WAS TAKEN ON CONTRACT FROM M/S SAHARA INDIA COMMERCIAL CORPORATION. HOWEVER, NO TDS WAS MADE ON THIS, PAYMENT, AS STATUTORILY REQUIRED UNDER CHAPTER XVII -B OF THE I. T. ACT, 1961. IT HAS BEEN HELD BY THE THEN ASSESSING OFFICER IN PA RA 3 OF THE ASSESSMENT ORDER, RELEVANT PART OF WHICH IS REPRODUCED HEREUNDER, THAT THE ASSESSEE HAS NOT DEDUCTED TAX A T SOURCE ON THE CONTRACT AMOUNT AND PROVISIONS OF SECTION 27 1COFTHE I.T. ACT, 1961 ARE THEREFORE, ATTRACTED: '3. THE ASSESSEE AS PER THE COMPUTATION OF INCOME HAS SHOWN INCOME FROM TRADING, INVESTMENT AND CONTRACT WOR K. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HA S UNDERTAKEN CONTRACT WORK FROM SAHARA INDIA COMMERCI AL CORPORATION. THIS CONTRACT WAS FURTHER SUBCONTRACTED BY THE ASSESSEE. FROM THE PERUSAL OF THE INFORMATION SUBMI TTED BY THE ASSESSEE, IT HAS BEEN NOTICED THAT NO TDS HAS BEEN DEDUCTED BY THE ASSESSEE WHILE PAYING THE AMOUNT TO SUB CONTRAC TORS FOR THE JOB CHARGES UNDER TAKEN BY THEM. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASS ESSEE WAS SPECIFICALLY ASKED AS TO WHY NO TDS HAS BEEN DE DUCTED FROM THE PARTIES FROM WHOM THE JOB WORK HAS BEEN GO T DONE. THE ASSSSSEE HAS STATED THAT THE PROJECT FOR WHICH THE PAYMENTS WERE MADE WAS NOT LIABLE FOR TDS. THE ASSE SSEE WAS HENCE ASKED TO SUBMIT COPY OF CONTRACT/AGREEMEN T TO SUBSTANTIATE THE CLAIM. THE ASSESSES HAS NOT SUBMITTED ANY AGREEMENT/CONTRACT BETWEEN THE COMPANY AND THE SUB CONTRACTOR FOR THE JOB WORK. THE ASSESSEE HAS ONLY F ILED THE CONFIRMATIONS OF ACCOUNTS. SINCE THE ASSESSEE HAS NO T SUBMITTED ANY COGNIZABLE REPLY AND HAS ALSO NOT DEDU CTED TDS ON THE CONTRACT AMOUNT THE PROVISIONS OF SECTIO N 271C OF 4 I.T. ACT FOR NON DEDUCTION OF TAX AT SOURCE ARE ATTRA CTED. AS SUCH PENALTY PROCEEDINGS U/S 27 1C ARE HEREBY INITIAT ED SEPARATELY. 4.. 5. 6. PENALTY NOTICE U/S 27 1C HAS BEEN ISSUED SEPARATELY .' AS PER SECTION 40(A)(IA), NO DEDUCTION OF EXPENDITUR E DEBITED TO PROFIT AND LOSS ACCOUNT ON WHICH TAX AS DEDUCTIBLE AT SOURC E UNDER CHAPTER-XVII-B IS ALLOWED IF THE TAX HAS NOT BEEN DEDUCT ED OR AFTER DEDUCTION, NOT PAID ON OR BEFORE DUE DATE OF FILING OF RE TURN OF INCOME. RELEVANT PART OF SECTION 40(A)(IA) IS REPRODUCED AS UNDER :- (IA) ANY INTEREST, COMMISSION OR BROKERAGE, [RENT, ROYALTY,] FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT,' OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUBCO NTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPP LY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE A T SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED O R, AFTER DEDUCTION, [HAS NOT BEEN PAID ON OR BEFORE THE DUE D ATE SPECIFIED IN SUB- SECTION (1) OF SECTION 139:] [PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TA X HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCT ED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139, SUCH SUM SHALL BE ALLOWED AS A DEDUCT ION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUC H TAX HAS BEEN PAID]' IT IS CLEAR FROM THE FACTS OF THE CASE AND AS HELD IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS NOT DEDUCTED TA X AT SOURCE ON THE AMOUNT OF CONTRACT/SUB-CONTRACT PAYMENT OF RS.5,9 1,40,500/- AS REQUIRED UNDER CHAPTER XVII-B AS PER SECTION 194C OF THE I.T. ACT, 1961. EVEN IF THE ASSESSEE COMPANY'S NOMENCLATURE OF 'COMMISSION' AS USED IN THE PROFIT & LOSS ACCOUNT IS ACCEPTED, TAX IS REQUIRED TO BE DEDUCTED AS PER SECTION 194H WHICH HAS NOT BEEN DON E. THEREFORE, SUM OF RS.5,91,40,500/- WAS REQUIRED TO BE DISALLOW ED U/S 40(A)(IA) 5 OF THE I. T, ACT, 1961 WHICH HAS BEEN OMITTED. FURT HER, A.O. HAS INITIATED PENALTY PROCEEDINGS U/S 27 1C OF THE I.T. AC T, 1961 EVEN THOUGH JURISDICTION FOR LEVYING SUCH PENALTY IS WITH JCIT(TDS). IN THE LIGHT OF THE AFORESAID FACTS, IT IS CONSIDERE D THAT THE ORDER PASSED U/S 143(3)/ 153C OF THE I. T. ACT DATED 21.1 2.2011 BY THE DOT, CENTRAL CIRCLE, PATIALA IS PRIMA FACIE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF ISSUES RAISED ABOVE. YOU ARE, THEREFORE, REQUESTED TO SHOW CAUSE AS TO WHY THE AFORESAID ORDER DATED 21.12.2011 PASSED U/S 143(3)/1 53C OF THE I. T. ACT, 1961 FOR THE A. Y.2005-06 SHOULD NOT BE REVISED/MODIFIED/ENHANCED OR SET ASIDE WITH THE DIRE CTIONS TO MAKE THE ASSESSMENT DENOVO. FOR THIS PURPOSE, YOU ARE HEREBY GIVEN AN OPPORTUNI TY OF BEING HEARD EITHER IN PERSON OR THROUGH AN AUTHORIZED REP RESENTATIVE IN MY OFFICE SITUATED AT DANDI SWAMI CHOWK, LUDHIANA ON 24.09.2013 AT 11.30 A.M.. ON THAT DATE, YOU MAY SUBMIT YOUR OBJECTIONS WITH EVIDENCE, IF ANY, TO THE PROPOSED ACTION IN WRITING. I N CASE OF YOUR FAILURE TO ATTEND ON THE AFORESAID DATE OR TO SUBMIT WRITTEN REPLY BY THAT DATE, IT WILL BE PRESUMED THAT YOU HAVE NO OBJECT ION TO THE PROPOSED ACTION AND MATTER SHALL BE DECIDED ON MERITS '. 3. THE ASSESSEE MADE DUE REPLIES TO THE LEARNED COMMISSIONER OF INCOME TAX SUBMITTING THE FACT THA T THE MATERIAL WAS SUPPLIED DURING THE YEAR BY THE ASSESS EE TO SAHARA INDIA COMMERCIAL CORPORATION LTD. FOR THEIR SILIGURI PROJECT IN WEST BENGAL. SAHARA INDIA COM MERCIAL CORPORATION LTD. DID NOT DEDUCT ANY INCOME TAX ON T HE PAYMENT AS IT WAS A CASE OF SUPPLY OF MATERIAL. T HE SAID MATERIAL WAS PROCURED FROM VARIOUS PARTIES AND TDS WAS NOT DEDUCTED ON THE SAME AS IT IS A CASE OF SUPPLY OF MATERIAL. SUBMISSIONS WERE ALSO MADE ON THE LINES THAT SINCE THE ORIGINAL ASSESSMENT WAS MADE UNDER SECTIO N 6 153C OF THE ACT, WHEREBY IT IS NECESSARY TO RESTRIC T THE ADDITION TO THE INCRIMINATING MATERIAL FOUND AS A R ESULT OF SEARCH AND SINCE NO SUCH MATERIAL WAS FOUND, NO SUC H DISALLOWANCE CAN BE MADE. AS REGARDS THE PAYMENT M ADE TO VARIOUS SUPPLIERS, IT WAS SUBMITTED THAT DISALLO WANCE UNDER SECTION 40(A)(IA) OF THE ACT CANNOT BE MADE. FURTHER, DETAILED SUBMISSIONS WERE MADE AS TO THE L EGALITY OF SHOW CAUSE ISSUED UNDER SECTION 263 OF THE ACT. IT WAS SUBMITTED THAT SINCE THE ISSUE OF PAYMENT OF TH ESE VARIOUS PARTIES WERE QUITE OPEN TO THE ASSESSING OF FICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE ASSESSING OFFICER HAVING TAKEN ONE OF THE PERMISSIB LE VIEWS, PROVISIONS OF SECTION 263 OF THE ACT CANNOT BE INVOKED IN THIS CASE. SUBMISSIONS WERE ALSO MADE ON THE MERITS OF THE ISSUE STATING THAT SINCE THE PAYMENTS HAVE BEEN MADE FOR PROCUREMENT OF RAW MATERIAL, THE PROV ISIONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT APPLICABLE TO THE SAME. REJECTING ALL THE CONTENTIONS OF THE ASSESSE E, THE LEARNED COMMISSIONER OF INCOME TAX FORMED AN OPINI ON THAT THE ASSESSEE HAS CLAIMED EXPENSES OF RS.5,91,40,500 /-, WHICH HAS BEEN SHOWN IN THE PROFIT & LOSS ACCOUNT AS EXPE NSES IN CONNECTION WITH COMMISSION ON WHICH TAX AT SOURCES WAS LIABLE TO BE DEDUCED UNDER SECTION 194H OF THE ACT. WITHO UT PREJUDICE TO THE ABOVE, THE TDS WAS LIABLE TO BE DE DUCTED UNDER SECTION 194C OF THE ACT, WHICH IS IN FACT IN THE NATURE OF CONTRACT OR SUB-CONTRACT PAYMENTS AND SINCE NO TAX HAS BEEN DEDUCTED ON THE SAID EXPENSES, THE ORDER OF THE ASS ESSING OFFICER DATED 21.12.2011 MADE UNDER SECTION 143(3) OF THE A CT R.W.S. 7 153C OF THE ACT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THIS MANNER, THE LEARN ED COMMISSIONER OF INCOME TAX SET ASIDE THE SAID ORDE R WITH THE DIRECTION TO THE ASSESSING OFFICER TO MAKE A F RESH ASSESSMENT PROPERLY VERIFYING THE FACTS AND DISALLO WANCE OF EXPENSES OF RS.5,91,40,500/- UNDER SECTION 40(A) (IA) OF THE ACT ON WHICH NO TDS HAS BEEN DEDUCTED AS PER TH E PROVISION OF LAW AFTER PROVIDING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. 4. AGGRIEVED BY THE SAID ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX , THE ASSESSEE HAS COME UP IN APPEAL BEFORE US. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE ARGUING BEFORE US FIRSTLY REITERATED ALL THE SUBMISSIONS MADE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX AND IN ADDITION TO THAT, OUR ATTENTION WAS INVITED TO VARIOUS PAGES OF PAPER BOOK FILED BY THE ASSESSEE TO SHOW HOW THE ISSUE OF THESE EXPENSES WA S DEALT WITH IN THE ORIGINAL ASSESSMENT PROCEEDINGS. IT WAS SUBMITTED THAT AT PAGE 42 OF THE PAPER BOOK, THERE IS A NOTICE UNDER SECTION 142(1) DATED 20.6.2011, WHEREB Y AN ANNEXURE IS ATTACHED IN WHICH THE ASSESSING OFFICER HAS RAISED A NUMBER OF QUERIES. QUERY NO.3 WAS SPEC IFICALLY SHOWN TO US, WHEREBY THE ASSESSING OFFICER HAS ASKE D FOR DETAILS OF EXPENSES AMOUNTING TO RS.5,91,40,500/- S HOWN UNDER THE HEAD COMMISSION IN A FORMAT GIVEN BY HIM. AT PAGE 45 OF THE PAPER BOOK IS THE COPY OF REPLY TO T HE SAID NOTICE, WHERE AT POINT NO.3, THE ASSESSEE HAS REPLI ED TO 8 THE ASSESSING OFFICER THAT ACTUALLY THESE EXPENSES ARE AGAINST JOB WORK INCOME OF DATA ENTRY, ETC. THE D ETAILS OF JOB WORK INCOME WAS ENCLOSED AND IT WAS ALSO CLARIF IED THAT AGAINST THE TOTAL RECEIPTS OF RS.5,99,78,310/- , THE EXPENSES ARE OF RS.5,91,40,500/-. IN ANOTHER LETTER IS ATTACHED AT PAGE 48 OF THE PAPER BOOK, WHICH IS DAT ED 14.11.2011, AT POINT NO.2 CLARIFICATION WITH REGARD TO IDENTIFICATION OF PARTIES TO WHOM JOB CHARGES OF RS.5,91,40,500/- WERE PAID DURING THE YEAR WAS GIVE N. THE ASSESSEE HAD SPECIFICALLY REPLIED THAT THE WORK OF SAHARA INDIA COMMERCIAL CORPORATION LTD. WAS MAINLY FOR THEIR PROJECT AT SILIGURI, WEST BENGAL. A CERTIFI CATE IN RESPECT OF THE SAME WAS ENCLOSED WITH THIS LETTER. IT WAS FURTHER CLARIFIED THAT WITH REGARD TO PAYMENT AGAIN ST SUB- CONTRACT, CONFIRMATIONS OF VARIOUS PARTIES TO WHOM PAYMENTS WERE MADE WERE ENCLOSED AND ALL THE PAYMEN TS WERE MADE THROUGH CHEQUES ONLY. IN ANOTHER LETTER DATED 6.11.2011 ATTACHED AT PAGE 50 OF THE PAPER BOOK, AT PARA 2 REGARDING TDS, IT HAS BEEN SUBMITTED BY THE ASSES SEE BEFORE THE ASSESSING OFFICER THAT DURING THE YEAR M AJOR WORK WAS SUPPLY OF EARTH(MITTEE) AND STONES TO SAHA RA INDIA COMMERCIAL CORPORATION LTD. FOR THEIR PROJECT AT SILIGURI, WEST BENGAL. AS THIS WAS SUPPLY OF MATE RIAL, NO TDS WAS DEDUCTED BY OUR COMPANY FROM THE PARTIES WH O SUPPLIED THE SAID MATERIAL. IN A SEPARATE LETTER D ATED 16.11.2011 PLACED AT PAGE 51 OF THE PAPER BOOK FILE D BEFORE THE JCIT, THE ASSESSEE HAS AGAIN CLARIFIED T HAT SINCE THE PAYMENTS WERE MADE FOR SUPPLY OF MATERIAL , NO 9 TDS WAS REQUIRED TO BE DEDUCTED. ALL THESE PAPERS WERE SHOWN TO US TO EMPHASIZE THE FACT THAT THE ISSUE OF TDS WAS THERE WITH THE ASSESSING OFFICER. THE ISSUE W AS SPECIFICALLY TAKEN UP BY THE ASSESSING OFFICER, SPE CIFIC QUERIES WERE RAISED AND SPECIFIC REPLIES WERE FIL ED. THEREFORE, REVISION UNDER SECTION 263 OF THE ACT IS NOT WARRANTED UNDER THE SAID CIRCUMSTANCES. ANOTHER G LARING FACT WAS BROUGHT TO OUR NOTICE THAT DURING THE ASSE SSMENT PROCEEDINGS THE ASSESSING OFFICER MADE ENQUIRIES BY ISSUING NOTICE TO VARIOUS PERSONS FROM WHOM THE MAT ERIAL WAS ACQUIRED AND THESE NOTICES WERE DULY REPLIED TO BY THESE PARTIES TO THE ASSESSING OFFICER. SINCE THE LEARNED COUNSEL FOR THE ASSESSEE EXPRESSED HIS INABILITY TO PRODUCE SAID QUERY LETTERS AND REPLIES THERETO, THE ASSESSM ENT RECORD WAS CALLED FOR BY THE LEARNED D.R. THE ASSE SSMENT RECORD WAS BROUGHT BY THE LEARNED D.R. AND IT WAS S HOWN TO US THAT QUERY LETTERS WERE ISSUED TO VARIOUS PAR TIES BY THE ASSESSING OFFICER WHICH WERE DULY REPLIED BY TH EM. IN THIS WAY, IT WAS ARGUED THAT THE ASSESSING OFFIC ER HAVING TAKEN ONE OF THE PLAUSIBLE VIEWS UNDER THE F ACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSI ONER OF INCOME TAX CANNOT IMPOSE HIS VIEW UNDER THE GAR B OF PROVISIONS OF SECTION 263 OF THE ACT. RELIANCE WA S PLACED ON THE ORDER OF THE JODHPUR BENCH OF THE TRIBUNAL I N THE CASE OF CHHITA SINGH SHEKHAWAT VS. ITO (2014) 166TT J (JD)(UO) 76 AND ANOTHER ORDER OF THE CHANDIGARH BEN CH OF THE TRIBUNAL IN THE CASE OF M/S VED PARKASH CONTRA CTORS VS. CIT IN ITA NO.573/CHD/2015 DATED 3.11.2015 WAS 10 BROUGHT TO OUR NOTICE TO THE EFFECT THAT THE COMMIS SIONER HAS EXCEEDED HIS JURISDICTION IN REASSESSING THE CA SE INSTEAD OF REMANDING THE MATTER TO THE ASSESSING OF FICER FOR FRESH ASSESSMENT ORDER WITHOUT RECORDING HIS FI NAL CONCLUSION ON THE POINTS OF THE ISSUES INVOLVED. WITH THIS, IT WAS PRAYED THAT THE ORDER UNDER SECTION 26 3 OF THE ACT MADE BY THE LEARNED COMMISSIONER OF INCOME TAX BE HELD NOT AS PER LAW. 4. THE LEARNED D.R. RELIED UPON ON THE ORDER OF TH E LEARNED COMMISSIONER OF INCOME TAX. 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE UNDISPUTED FACTS OF THE CASE AS ADMITTED BY THE LEARNED COMMISSIONER OF INCOME TAX HIMSELF IN THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 263 OF THE ACT AR E THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AD UNDERTAKEN CONTRACT WORK FROM SAHARA INDIA COMMERCI AL CORPORATION LTD. THIS CONTRACT WAS EXECUTED THROUG H THE MATERIAL SUPPLIED BY VARIOUS PARTIES. THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE FROM THE SAID PAYMENTS. THIS IS ALSO NOT DISPUTED BY THE LEARNED COMMISSIONER OF INCOME TAX THAT THE ASSESSING OFFICER WAS WELL AWAR E OF THESE FACTS AS HE HIMSELF IN HIS SHOW CAUSE NOTICE UNDER SECTION 263 OF THE ACT HAS QUOTED FROM THE ORDER OF THE ASSESSING OFFICER. THIS IS ALSO NOT DISPUTED THAT ISSUE OF NON-DEDUCTION OF TDS WAS SPECIFICALLY RAISED BY THE 11 ASSESSING OFFICER TO THE ASSESSEE WHICH WAS ALSO DU LY REPLIED BY THE ASSESSEE. IN THE SAID CIRCUMSTANCE S, THE ASSESSING OFFICER HAD APPLIED THE PROVISIONS OF SEC TION 271C OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE. HOWEVER, THE BONE OF CONTENTION IN THE MIND OF THE LEARNED COMMISSIONER OF INCOME TAX IS THAT EVEN AF TER OBSERVING THAT THE TDS WAS REQUIRED TO BE DEDUCTED FROM THE SAID PAYMENTS, THE ASSESSING OFFICER HAS NOT IN VOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. N OW THE ISSUE TO BE DECIDED BY US IS THAT WHETHER IN THE SA ID FACTS AND CIRCUMSTANCES OF THE CASE, THE INVOKING OF PROV ISIONS OF SECTION 263 OF THE ACT ARE WARRANTED OR NOT. 6. IT IS A TRITE LAW THAT THE COMMISSIONER OF INCO ME TAX CAN ASSUME JURISDICTION UNDER SECTION 263 OF TH E ACT IF HE FINDS THE ORDER OF THE ASSESSING OFFICER TO B E ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE TWO CONDITIONS OF THE ORDER BEING ERR ONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVEN UE ARE TO BE SATISFIED SIMULTANEOUSLY AS PER SECTION 263 OF T HE ACT. IN CASE THE COMMISSIONER OF INCOME TAX FINDS THE OR DER TO BE ERRONEOUS, HE HAS TO GIVE A SPECIFIC FINDING WHE Y THE ORDER IS ERRONEOUS AND THE ORDER IS SAID TO BE ERRO NEOUS IF ON AN IMPORTANT ISSUE, THE ASSESSING OFFICER FAILS TO MAKE ANY ENQUIRY. HOWEVER, THERE ARE CASES WHERE THOU GH THE ASSESSING OFFICER MAKES ENQUIRY ON A PARTICULAR ISS UE BUT THE COMMISSIONER OF INCOME TAX FEELS THAT THE ASSES SING OFFICER HAD MADE INADEQUATE ENQUIRY IN SUCH CASES, IF THE 12 ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIE WS IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX CANNOT IMPOSE HIS VIEW AND HOLD THE ORDE R TO BE ERRONEOUS. IN SUCH CASES IF THE ASSESSING OFFI CER MAKES ENQUIRIES BUT FAILS TO APPLY THE LAW PROPERLY , THE ORDER CAN BE HELD TO BE ERRONEOUS. HOWEVER, IN SU CH CASES, THE COMMISSIONER OF INCOME TAX IS BOUND TO G IVE HIS FINDING ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AS PER LAW. ONCE THE ORDER IS HELD TO BE ERRONEOUS, THE COMMISSIONER OF INCOME TAX ALSO HAS TO SHOW THAT SO ME PREJUDICE IS CAUSED TO THE REVENUE BECAUSE OF THE O RDER BEING SO ERRONEOUS. NOW, WE WILL TRY TO APPLY THE LAW ON THE FACTS OF THE PRESENT CASE. IT IS NOT THE CASE OF ABSENCE OF ANY ENQUIRY SINCE THE ASSESSING OFFICER HAS RAISED THE ISSUE OF NON-DEDUCTION OF TDS DURING THE ASSESSMENT PROCEEDINGS, WHICH WERE DULY REPLIED BY THE ASSESSEE. THE ASSESSING OFFICER HAS CONDUCTED INDEPENDENT ENQUIRIES FROM THE SUPPLIERS OF THE MAT ERIAL ALSO. THEREFORE, THIS IS DEFINITELY NOT A CASE OF NO ENQUIRY AT ALL. EVEN THE LEARNED COMMISSIONER OF INCOME TA X HAS NO QUARREL ABOUT THE SAME AS HE HIMSELF MENTIONED THESE FACTS IN HIS SHOW CAUSE NOTICE. THIS IS ALSO NOT A CASE OF INADEQUATE ENQUIRY AS QUERY RAISED BY THE ASSESSING OFFICER REGARDING NON-DEDUCTION OF TDS HAS BEEN PRO PERLY ADDRESSED BY THE ASSESSEE AND THE ASSESSING OFFICER ALSO PREFERS TO ISSUE LETTER TO THE CONCERNED PARTIES, W HICH WERE DULY REPLIED BY THEM DIRECTLY TO THE ASSESSING OFFICER. ON THIS BASIS, THE ASSESSING OFFICER DECI DED NOT 13 TO MAKE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. THEREFORE, JUDGING THIS CASE ON THE SCALE OF NO ENQ UIRY OR INADEQUATE ENQUIRY ETC. WOULD NOT SERVE THE PURPOSE . AT THIS JUNCTURE, WE REFER TO THE CASE RECORDS BROUGHT BY THE LEARNED D.R. DURING THE COURSE OF HEARING. ENQUIRI ES WERE MADE BY THE ASSESSING OFFICER BY ISSUING QUERY LETT ERS TO THE PERSONS TO WHOM IMPUGNED PAYMENTS HAVE BEEN MAD E. DUE REPLIES FROM THEM HAVE ALSO BEEN RECEIVED. A F EW COPIES OF THE SAID REPLIES HAVE ALSO BEEN PLACED ON RECORD. ON PERUSAL OF THESE REPLIES, WE FIND THAT ALL THESE PAYEES HAVE CONFIRMED THAT THE PAYMENT TO THEM HAVE BEEN M ADE FOR SUPPLY OF EARTH, MITTI AND STONES ETC. SINCE P AYMENT FOR SUPPLY OF MATERIAL IS NOT EXIGIBLE TO TDS, THER E WAS NO NEED FOR THE ASSESSEE TO DEDUCT SUCH TAX AT SOURCE AND RESULTANTLY THE PROVISIONS OF SECTION 40(A)(IA) DO NOT COME INTO PLAY. IN THIS WAY, THERE WAS NO NEED FOR THE ASSESSING OFFICER TO MAKE DISALLOWANCE OF THESE EXP ENSES. SINCE THESE LETTERS ARE A PART OF ASSESSMENT RECORD S, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER DID NOT INVOKE THE PROVISIONS OF SECTION 40(A)(IA) AND DID NOT MAK E DISALLOWANCE, GETTING CONVINCED BY THE FACT THAT TH E PAYMENTS WERE MADE FOR SUPPLY OF MATERIAL. THE FA CT THAT THE ASSESSING OFFICER IN HIS ORDER DID NOT MENTION THESE INVESTIGATIONS MADE BY HIM DOES NOT ITSELF MAKE HIS ACTION ILLEGAL. HE MAY NOT HAVE REFERRED TO THESE DOCUME NTS MAY BE BECAUSE HE WAS CONVINCED THAT NO DISALLOWANC E IS CALLED FOR. THEREFORE, IN SUCH A SCENARIO, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY ERROR IN THE 14 ORDER OF THE ASSESSING OFFICER. IN THIS CASE, THE LEARNED COMMISSIONER OF INCOME TAX HAD TRIED TO READ TOO M UCH FROM THE MIND OF THE ASSESSING OFFICER. ONCE, WE R EACH TO A CONCLUSION THAT PROVISIONS OF SECTION 40(A)(IA) O F THE ACT ARE NOT APPLICABLE ON THE FACTS AND CIRCUMSTANCES O F THIS CASE, WHATEVER WAS GOING THROUGH IN THE MIND OF THE ASSESSING OFFICER AT THAT TIME, IT IS A FACT THAT H E HAS REACHED TO A CORRECT CONCLUSION. IN THIS BACKGROUN D, THE ORDER OF THE ASSESSING OFFICER CANNOT BE SAID TO CO NTAIN ANY ERROR ON THIS COUNT. THE FACT THAT THE PAYMEN TS WERE MADE FOR SUPPLY OF MATERIAL ALSO GOT STRENGTHEN BY THE FACT THAT THE ASSESSEE WAS ENGAGED IN SUCH KIND OF PROJE CT FROM SAHARA INDIA COMMERCIAL CORPORATION LTD. DURIN G THE YEAR. THE ISSUE OF NOMENCLATURE COMMISSION GIVE N TO THE SAID PAYMENTS ALSO GOT CLARIFIED DURING THE ASS ESSMENT PROCEEDINGS. THEREFORE, THERE IS NO QUESTION OF I NVOKING THE PROVISIONS OF SECTION 194H OF THE ACT. FURTHER , THERE BEING NO CONTRACT OR SON-CONTRACT, THE PROVISIONS O F SECTION 194C ARE ALSO NOT APPLICABLE. THE NATURE OF PAYMENTS IS QUITE CLEAR FROM THE REPLIES SENT BY TH E SUPPLIER TO THE ASSESSING OFFICER DIRECTLY. 7. THE FACT THAT THE ASSESSING OFFICER HAS INITIAT ED PROCEEDINGS UNDER SECTION 271C, MAY HAVE WEIGHED TO O MUCH IN THE MIND OF THE COMMISSIONER OF INCOME TAX, WHILE HOLDING THE ORDER TO BE ERRONEOUS. BUT IN OU R VIEW, INITIATING PENALTY PROCEEDINGS UNDER SECTION 271C O F THE ACT BY THE ASSESSING OFFICER IS NOT A RELEVANT FACT OR TO 15 DECIDE WHETHER THE DISALLOWANCE UNDER SECTION 40(A) (IA) WAS CALLED FOR OR NOT. SINCE AS ALREADY HELD BY US, THE PAYMENTS WERE NOT PRONE TO INVOKING THE PROVISIONS UNDER SECTION 40(A)(IA) OF THE ACT, THE DISALLOWANCE, IN ANY CASE, WAS NOT CALLED FOR. 8. IN VIEW OF THE ABOVE, THERE BEING NO ERROR IN T HE ORDER OF THE ASSESSING OFFICER, THE JURISDICTION AS SUMED BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT IS NOT AS PER LAW. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF NOVEMBER, 2015. SD/- SD/- (BHAVNESH SAINI) (RANO JAIN) JUDICIAL MEMBER ACOUNTANT MEMBER DATED : 30 TH NOVEMBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 16