M/s Infra Developers, Shivpuri V. A.C.I.T., Circle - III, Shivpuri

ITA 396/AGR/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62859 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-10-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 13-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Assessment record
• Section: 40A(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 396/AGRA/2011 ASSTT. YEAR : 2008-09 M/S. INFRA DEVELOPERS, VS. A.C.I.T., CIRCLE-III, CHATRI ROAD NARENDRA NAGAR, GWALIOR. SHIVPURI.(PAN : AABFI 5834 R). ITA NO. 420/AGRA/2011 ASSTT. YEAR : 2008-09 A.C.I.T., CIRCLE-3(1), VS. M/S. INFRA DEVELOPERS , GWALIOR CHATRI ROAD NARENDRA NAGAR, SHIVPURI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJENDRA SHARMA, ADVOCATE. REVENUE BY : SHRI WASEEM ARSHAD, JR. D.R. DATE OF HEARING : 10.10.2012 DATE OF PRONOUNCEMENT OF ORDER : 19.10.2012 ORDER PER BHAVNESH SAINI, J.M.: BOTH THE CROSS APPEALS ARE DIRECTED AGAINST THE OR DER OF LD. CIT(A), GWALIOR DATED 09.08.2011 FOR THE ASSESSMENT YEAR 2008-09. ITA NO. 396 & 420/AGRA/2011 2 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED TH E MATERIAL ON RECORD. BOTH THE APPEALS ARE DECIDED ISSUE-WISE AS UNDER : ISSUE NO.1 : 3. ON GROUND NO.1 IN APPEAL OF THE ASSESSEE, THE AS SESSEE CHALLENGED THE UPHOLDING OF DISALLOWANCE OF HIRE CHARGES OF RS.38, 65,490/- U/S. 40(A)(IA) FOR NOT MAKING DEDUCTION OF TAX AT SOURCE U/S. 194-I OF THE IT ACT. THE ASSESSEE IS A CONTRACTOR DERIVING INCOME FROM CIVIL WORK ASSIGNED BY THE GOVERNMENT AND IS ALSO A SUB-CONTRACTOR. DURING THE YEAR TOTAL CONTRACTUAL RECEIPTS OF RS.5,76,23,108/- HAVE BEEN SHOWN ON WHICH GROSS PROFIT AND NET PROFI T OF RS.31,54,276/- AND RS.19,52,991/- RESPECTIVELY HAVE BEEN DECLARED. THE AO MADE ADDITION OF RS.38,65,490/- ON ACCOUNT OF DISALLOWANCE OF HIRE C HARGES. ACCORDING TO THE ASSESSMENT ORDER, THE ASSESSEE HAS PAID THE SAID AM OUNT TO SHRI GIRRAJ SHARMA, ON WHICH NO TDS HAS BEEN DEDUCTED. THE ASSESSEES SUBM ISSION THAT PAYMENT HAS BEEN MADE TO 39 PARTIES FOR LIFTING OF EARTH (MITTI ) BY TRACTORS HAS NOT BEEN ACCEPTED BY THE AO ON THE BASIS OF LABOUR ACCOUNT P RODUCED BY THE ASSESSEE. THEREFORE, DISALLOWANCE WAS MADE AS PER SECTION 40( A)(IA) OF THE IT ACT. THE ASSESSEE REITERATED THE SAME SUBMISSIONS BEFORE THE LD. CIT(A) AND ALSO SUBMITTED THAT EACH PAYMENT IN EACH CASE WAS BELOW RS.1,20,00 0/-. THEREFORE, NO TDS WAS ITA NO. 396 & 420/AGRA/2011 3 REQUIRED TO BE DEDUCTED FROM SUCH PARTIES. THE ASSE SSEE ALSO SUBMITTED COPY OF THE ORDER U/S. 143(1) OF SHRI GIRRAJ SHARMA FOR ASSESSM ENT YEAR 2008-09 AND 2009-10 ALONG WITH COPY OF RETURN FOR THE ASSESSMENT YEAR 2 009-10 AND 2010-11. THE LD. CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE CONFIRMED THE ADDITION. HIS FINDINGS IN PARA 3.2 OF THE APPELLATE ORDER ARE REP RODUCED AS UNDER : 3.2. APPELLANTS SUBMISSIONS HAVE BEEN CONSIDERED CAREFULLY. ASSESSMENT RECORDS HAVE ALSO BEEN PERUSED. THE APPE LLANT HAS DEBITED HIRE CHARGES OF RS.38,93,638/- AS PER ITS P & L ACCOUNT. AS PER LETTER DTD. 23.11.10 SUBMITTED BEFORE THE A.O., THE APPELLANT HAS ENCLOSED COPY OF HIRE CHARGES ACCOUNT GIVING NAMES OF 30 DIFFERENT PARTIES TO WHOM PAYMENT HAS BEEN MADE FOR LIFTING O F MITTI ETC. BY TRACTOR. EACH PAYMENT IS LESS THAN RS.1 LAKH. HOWEV ER, COPY OF HIRE CHARGES ACCOUNT AS SUBMITTED EARLIER VIDE LETTER SU BMITTED IN RESPONSE TO HEARING ON 08.11.2010 IS REPRODUCED AS UNDER : HIRE CHARGES (TO BE READ AS HIRE) LEDGER ACCOUNT 1 APR. 2007 TO 31 MARCH 2008 DATE PARTICULARS VCH. TYPE VCH NO. DEBIT CREDI T 11.4.2007 CR ANU CONSTRUCTION A/C JOURNAL 21,65 4.00 07.5.2007 CR AVTAR SINGH A/C JOURNAL 63,615.00 13.7.2007 DR JAGDISH PRASAD BANSAL A/C JOURNAL 82,121 30.11.2007 CR GERAJ SHARMA A/C JOURNAL 38 ,65,490.00 BEING HIRE CHARGES PAID 31.3.2008 CR KULDEEP SINGH A/C JOURNAL 25,000.0 0 _____ 39,75,790.00 82,121 38,93,638 39,75,759.00 39,75,759 FURTHER, COPY OF ACCOUNT OF SHRI GIRRAJ SHARMA PROD UCED DURING THE COURSE OF APPEAL PROCEEDINGS ALSO CLEARL Y MENTIONS THE FACT OF PAYMENT OF RS.38,65,490/- MADE ON ACCOUNT OF HIR E CHARGES ITA NO. 396 & 420/AGRA/2011 4 WHEREAS AMOUNT OF RS.1,20,904/- HAS BEEN CREDITED O N ACCOUNT OF MATERIAL PURCHASE ACCOUNT. VIDE LETTER DTD. 25.07.2 001, THE APPELLANT HAS SUBMITTED COPY OF RETURNS, INTIMATION SHEET IN RESPECT OF SHRI GIRRAJ SHARMA STATING THAT PAYMENT ON ACCOUNT OF HI RE CHARGES HAS BEEN MADE TO HIM BY CHEQUE. THE SAID COPY OF ACCOUN T OF SHRI GIRRAJ SHARMA IS REPRODUCED AS UNDER: GERAJ SHARMA (TO BE READ AS GIRRAJ SHARMA) LEDGER ACCOUNT 1 APR. 2007 TO 31 MARCH 2008 DATE PARTICULARS VCH. TYPE VCH NO. DEBIT CREDIT 11-2007 DR MATERIAL PURCHASE A/C JOURNAL 55,44 0.00 BEING MATERIAL PURCHASE 11-2007 DR HIRE CHARGES JOURNAL 38,65,4 90.00 BEING HIRE CHARGES PAID 12-2007 CR STATE BANK OF INDIA A/C PAYMENT 15, 00,000.00 CHEQUE NO.982883 1-2008 DR MATERIAL PURCHASE A/C JOURNAL 65, 464.00 BEING MATERIAL; PURCHASE 1-2008 CR STATE BANK OF INDIA A/C PAYMENT 24 ,72,126.00 CHEQUE NO. 982887 3-2008 CR CASH PAYMENT 14,268.00 BEING CASH PAID _____________________________ 39,86,394.00 39,86,394.00 _____________________________ THUS, THE APPELLANTS SUBMISSIONS THAT PAYMENT TO D IFFERENT 39 PARTIES REQUIRING NO TDS IS NOT FOUND ACCEPTABLE. THE FACT THAT THERE IS NO WRITTEN CONTRACT WITH SHRI GIRRAJ SHARMA AND THE TR ANSACTIONS HAVE BEEN DONE IN PURSUANCE OF ORAL AGREEMENT DOES NOT A BSOLVE THE APPELLANT OF THE STATUTORY REQUIREMENT OF DEDUCTING TDS AT PRESCRIBED PERCENTAGE IN RELATION TO PAYMENTS MADE FOR HIRE CH ARGES INCURRED FOR TRANSPORTATION OF EARTH. THUS, THE PROVISIONS OF SE C. 40(A)(IA) ARE FOUND CLEARLY APPLICABLE IN CASE OF THE APPELLANT I N RESPECT OF PAYMENTS MADE TO SH. GIRRAJ SHARMA ON WHICH NO TDS HAS BEEN DEDUCTED. ACCORDINGLY, ADDITION OF RS.38,65,490/- M ADE U/S. 40(A)(IA) IS, HEREBY, CONFIRMED. 3.1 THE ASSESSEE ALSO RAISED ADDITIONAL GROUND, IN WHICH THE ASSESSEE HAS RAISED THE ISSUE THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE IT ACT CAN BE INVOKED IN ITA NO. 396 & 420/AGRA/2011 5 RESPECT OF THE EXPENDITURE, WHICH IS SHOWN AS PAYAB LE AS ON THE DATE. THE BALANCE SHEET SHOWS THAT IN THE CASE OF ASSESSEE, THE EXPEN DITURE DISALLOWED AT RS.38,65,490/- WAS NOT PAYABLE AND WAS ACTUALLY PAI D DURING THE YEAR. THEREFORE, THE ABOVE PROVISIONS ARE NOT APPLICABLE. THEREFORE, NO DISALLOWANCE CAN BE MADE. THE ASSESSEE SUBMITTED THAT THE ADDITIONAL GROUND I S LEGAL IN NATURE AND MAY BE ADMITTED FOR HEARING, WHICH IS CONNECTED WITH GROUN D NO.1 ABOVE IN THE APPEAL OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE, THE REFORE, SUBMITTED THAT IT IS AN ADMITTED FACT THAT THE AMOUNT IN QUESTION HAS BEEN PAID BY THE ASSESSEE DURING THE ASSESSMENT YEAR, THEREFORE, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT, AGRA BENCH IN THE CASE OF SURAJ BHAN AGENCIES (P) LTD. VS. DY. CIT, IN ITA NO. 28/AGRA/2012 DATED 31.08.2012 AND A LSO THE DECISION OF ITAT VISHAKHAPATNAM SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDL. CIT, 70 DTR 81. 4. ON THE OTHER HAND, THOUGH THE LD. DR RELIED UPON THE ORDER OF THE AUTHORITIES BELOW, BUT DID NOT HAVE ANY OBJECTION FOR ADMISSION OF ADDITIONAL GROUND OF APPEAL, WHICH IS LEGAL IN NATURE. 5. ON CONSIDERATION OF THE SUBMISSIONS OF BOTH THE PARTIES, WE ARE OF THE VIEW THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE I S CONNECTED WITH GROUND NO. 1 OF ITA NO. 396 & 420/AGRA/2011 6 APPEAL OF THE ASSESSEE AND IS LEGAL IN NATURE. THE FACTS ARE ALREADY AVAILABLE ON RECORD TO SHOW THAT THE ASSESSEE HAS MADE ALLEGED P AYMENTS OF HIRE CHARGES DURING THE ASSESSMENT YEAR UNDER APPEAL AND SUCH FACTS HAV E BEEN MENTIONED BY THE AO AS WELL AS THE LD. CIT(A) IN THEIR ORDERS AND EVEN THE ORDER OF THE LD. CIT(A) IS VERY SPECIFIC WITH REGARD TO THE FACT OF PAYMENT OF RS.38,65,490/- IN THE ASSESSMENT YEAR UNDER APPEAL. THEREFORE, THE ADDITI ONAL GROUND IS ADMITTED FOR HEARING SUBJECT TO VERIFICATION OF ALLEGED PAYMENT BY THE AO. ON CONSIDERATION OF THE DECISION CITED BY THE LD. COUNSEL FOR THE ASSES SEE, WE ARE OF THE VIEW THAT THE ISSUE IS COVERED BY THE ORDER OF ITAT, AGRA BENCH I N THE CASE OF SURAJ BHAN AGENCIES PVT. LTD. VS. DCIT (SUPRA) IN WHICH IN PAR A NO. 9 TO 12, IT IS HELD AS UNDER : 9. AT THE OUTSET, THE LD. AUTHORISED REPRESENTATI VE SUBMITTED THAT THE ISSUE IS COVERED BY THE ORDER OF I.T.A.T. AGRA BENCH IN ITA NO.434/AGR/2011 IN THE CASE OF M/S. PE E CEE COSMA SOPE LIMITED VIDE ORDER DATED 11.05.2012. THE LD. AUTHORISED REPRESENTATIVE DREW OUR ATTENTION ON THE RELEVANT G ROUNDS OF APPEAL OF M/S. PEE CEE COSMA SOPE LIMITED WHICH ARE REPRODUCE D AS UNDER FOR READY REFERENCE:- 1. BECAUSE THE LD. CIT(A) HAS WRONGLY, ILLEGALLY A ND ARBITRARILY CONFIRMED THE ADDITION OF RS.14,93,965/- MADE BY TH E ASSESSING OFFICER BY APPLYING THE PROVISION OF SECTION 40(A) (IA) OF THE ACT. THE LD. CIT(A) HAS ERRED IN REJECTING THE APPELLANTS S UBMISSION AND IN IGNORING THE FACTS OF THE CASE. 2. BECAUSE THE LD. CIT(A) WHILE CONFIRMING THE ADDI TION OF RS.14,93,965/- HAS ERRED IN IGNORING THE LEGAL POSI TION THAT SECTION 40(A)(IA) IS APPLICABLE ONLY IN THE CASE WHERE THE AMOUNT IS PAYABLE ON THE LAST DAY OF PREVIOUS YEAR. ALL THE PAYMENTS AS REIMBURSEMENT ITA NO. 396 & 420/AGRA/2011 7 OF EXPENSES HAS BEEN MADE TIME TO TIME DURING THE Y EAR AND N AMOUNT IS PAYABLE ON THE LAST DAY OF PREVIOUS YEAR. THE A DDITION ON THIS GROUND IS TOTALLY UNWARRANTED AND DESERVES TO BE DE LETED. 3. BECAUSE THE LD. CIT(A) HAS ERRED IN NOT ADJUDICA TING GROUND NO.5 TAKEN BEFORE HIM. 10. THE FINDING OF I.T.A.T., AGRA BENCH IN THE SAID CASE POINTED OUT BY THE LD. AUTHORISED REPRESENTATIVE FROM THE S AID ORDER AT PARAGRAPH NOS.5, 6 & 7 WHICH ARE REPRODUCED AS UNDE R :- 5. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. THE EFFECTIVE GROUND RAISED IN TH E APPEAL RELATE TO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT, TH EREFORE, ALL SUPPORTING GROUNDS OF APPEAL ARE DECIDED TOGETHER. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF I.T.A.T., SPECIAL BENCH VISAKHAPATNAM W HEREIN IT HAS BEEN HELD THAT SECTION 40A(IA) OF THE ACT IS APPLIC ABLE IN RESPECT OF AMOUNT REMAINED PAYABLE. THERE IS NO DISALLOWANCE UNDER SECTION 40A(IA) OF THE ACT WITH RESPECT TO PAYMENT WHICH WE RE ACTUALLY PAID DURING THE FINANCIAL YEAR. IN RESPECT OF GROUND NO .2, THE LD. AUTHORISED REPRESENTATIVE HAS EMPHASIZED THAT THERE WAS NO AMOUNT PAYABLE AT THE END OF PREVIOUS YEAR. IN GROUND NO. 3, THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESS EE RAISED THE ISSUE BEFORE THE CIT(A) WHICH HAS NOT BEEN ADJUDICATED. THE GROUND NO.5 TAKEN BEFORE THE CIT(A) WHICH READS AS UNDER :- 5. BECAUSE WITHOUT PREJUDICE TO THE GROUNDS AS MENTIONED ABOVE SECTION 40A(IA) IS APPLICABLE ONLY IN THE CASES WHERE THE AMOUNT IS PAYABLE ON THE LAST DAY O F PREVIOUS YEAR. ALL THE PAYMENTS AS REIMBURSEMENT O F EXPENSES HAS BEEN MADE TIME TO TIME DURING THE YEAR AND NO AMOUNT IS PAYABLE ON THE LAST DAY OF PREVIOUS YE AR. ON THIS GROUND ALSO THE ADDITION IS WRONG, ILLEGAL AND DESERVES TO BE DELETED. 6. THE ABOVE GROUND NO.5 RAISED BEFORE THE CIT(A) I S IDENTICAL TO THE GROUND NO.2 RAISED BEFORE US. ITA NO. 396 & 420/AGRA/2011 8 7. IN THE LIGHT OF ABOVE DISCUSSION AND AFTER CONSI DERING TOTALITY OF THE FACTS OF THE CASE, WE FIND THAT FACTUAL VERIFIC ATION IS REQUIRED IN THE LIGHT OF DECISION OF I.T.A.T. CITED SUPRA. WE, THE REFORE, THINK IT PROPER TO SEND THIS ISSUE BACK TO THE FILE OF THE ASSESSIN G OFFICER WITH THE DIRECTION TO VERIFY THE FACTS OF THE CASE AND DECID E THE ISSUE IN ACCORDANCE WITH THE DECISION OF I.T.A.T., SPECIAL B ENCH VISAKHAPATNAM AFTER PROVIDING OPPORTUNITY OF HEARIN G TO THE ASSESSEE. 11. THE LD. DEPARTMENTAL REPRESENTATIVE DID NOT DIS PUTE REGARDING THE FACTS OF THE CASES UNDER CONSIDERATION AND THE FACTS OF THE CASE IN THE CASE OF M/S. PEE CEE COSMA SOPE LIMITED. 12. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. WE NOTICE THAT ON IDENTICAL SET OF FACTS, THE ISSUE HAS ALREADY BEEN DECIDED BY I.T.A.T., AGRA BENCH IN THE CASE OF M/S. PEE CEE COSMA SOPE LIMITED IN ITA NO.434/AGR/2011 ORDER DAT ED 11.05.2012. SINCE THE FACTS ARE IDENTICAL, THEREFO RE, TO MAINTAIN CONSISTENCY, WE FOLLOW THE ABOVE ORDER DATED 11.05. 2012 OF I.T.A.T. AGRA BENCH IN THE CASE OF M/S. PEE CEE COSMA SOPE L IMITED IN ITA NO.434/AGRA/2011. IN THE LIGHT OF THAT, THE ISSUE RAISED IN GROUND NOS.1 TO 5 IN ITA NO.29/AGR/2009 IN THE CASE M/S. P EE CEE SOAP & CHEMICALS (P) LIMITED AND GROUND NOS.1 TO 5 IN ITA NO.28/AGR/2009 IN THE CASE OF M/S. SURAJ BHAN AGENCIES (P) LIMITED ARE DECIDED ACCORDINGLY WITH IDENTICAL DIRECTIONS. THE A.O. IS DIRECTED ACCORDINGLY. THE ITAT, VISHAKHAPATNAM SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDL. CIT (SUPRA) HELD AS UNDER : THE PROVISIONS OF SECTION 40A(IA) CANNOT BE INVOKE D WITH RESPECT TO THE AFORESAID PAYMENTS WHICH WERE ACTUAL LY PAID DURING THE FINANCIAL YEAR BUT IT CAN BE INVOKED WITH RESPECT T O THE AMOUNT WHICH REMAINED PAYABLE AS ON 31.3.2005 AND NO TDS WAS DED UCTED THEREFROM. ITA NO. 396 & 420/AGRA/2011 9 5.1 SINCE IN THE CASE OF THE ASSESSEE, THE PAYMENT IN QUESTION IS ALLEGED TO HAVE BEEN MADE DURING THE CURSE OF ASSESSMENT YEAR UNDER APPEAL ITSELF, THEREFORE, THE PROVISIONS OF SECTION 40(A)(IA) MAY NOT BE APPLICAB LE. NO DISALLOWANCE CAN BE MADE UNDER THE ABOVE PROVISION WITH RESPECT TO THE PAYMENTS WHICH ARE ACTUALLY PAID DURING THE FINANCIAL YEAR. THE ISSUE IS, THERE FORE, COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE DECISION OF THE TRIBUNAL REFE RRED TO ABOVE. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND R ESTORE THE ISSUE TO THE FILE OF THE AO FOR DOING THE NEEDFUL IN THE MATTER AFTER VERIFY ING THE PAYMENTS MADE IN QUESTION DURING THE COURSE OF ASSESSMENT YEAR UNDER APPEAL. THE AO SHALL PASS THE ORDER AFTER GIVING REASONABLE AND SUFFICIENT OPPORT UNITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT, GROUND NO. 1 AND THE ADDIT IONAL GROUND ARE ALLOWED FOR STATISTICAL PURPOSES. ISSUE NO. 2 : 6. THE ASSESSEE ON GROUND NO. 2 CHALLENGED THE ORDE R OF THE LD. CIT(A) IN UPHOLDING 5% DISALLOWANCE OF RS.83,415/- OUT OF PLA NT REPAIR AND MAINTENANCE, SITE AND WATER EXPENSES. THE REVENUE ON GROUND NO.3 CHALLENGED THE DELETION OF ADDITION OF RS.2,49,246/- ON THE SAME ISSUE. THE AO MADE DISALLOWANCE OF RS.3,32,661/- ON ACCOUNT OF 20% DISALLOWANCE OUT OF PLANT REPAIRING AND MAINTENANCE EXPENSES, SITE AND WATER EXPENSES. THE SAID DISALLOWANCES HAVE BEEN ITA NO. 396 & 420/AGRA/2011 10 MADE IN THE ABSENCE OF COMPLETE VOUCHERS IN RESPECT OF ABOVE EXPENSES. IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT ADHOC ADDITION HAS BEEN MADE. THE LD. CIT(A) FOUND THAT BOOKS OF ACCOUNT ARE AUDITED AND BILLS/V OUCHERS HAVE BEEN PRODUCED BEFORE THE AO. NO DEFECTS HAVE BEEN POINTED OUT IN THE BOOKS OF ACCOUNT. THE LD. CIT(A), CONSIDERING THE NATURE AND TURNOVER OF BUSI NESS OF THE ASSESSEE ALONG WITH THE FACT THAT VOUCHERS IN RESPECT OF THESE EXPENSES ARE NORMALLY NOT MAINTAINED COMPLETELY, HELD THAT 5% DISALLOWANCE IS JUSTIFIED AND ACCORDINGLY, RESTRICTED THE ADDITION OF RS.83,515/- OUT OF THE ADDITION OF RS.3 ,32,661/-. THE ASSESSEE AS WELL AS REVENUE ARE IN APPEAL ON THE ABOVE GROUNDS. 7. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN RESTR ICTING THE PART ADDITION ON THIS ISSUE. THE AO SPECIFICALLY NOTED THAT COMPLETE VOUC HERS OF THESE EXPENSES HAVE NOT BEEN PRODUCED BEFORE HIM AND EVEN THIS FACT IS ADMITTED BY THE COUNSEL FOR THE ASSESSEE BEFORE HIM. THEREFORE, ENTIRE ADDITION COU LD NOT HAVE BEEN DELETED ON THIS ISSUE. THE LD. CIT(A) ALSO NOTED THAT FOR THESE EXP ENSES, NORMALLY VOUCHERS ARE NOT COMPLETELY MAINTAINED. THESE FINDINGS OF THE LD. CI T() HAVE NOT BEEN REBUTTED BY THE LD. COUNSEL FOR THE ASSESSEE. THE LD. CIT(A), H OWEVER, CONSIDERING THAT THE ASSESSEE MAINTAINED PROPER BOOKS OF ACCOUNT, WHICH ARE ALSO AUDITED AND SUBSTANTIAL VOUCHERS HAVE BEEN PRODUCED RIGHTLY RED UCED THE DISALLOWANCE FROM ITA NO. 396 & 420/AGRA/2011 11 20% TO 5% ON THIS ISSUE. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) ON THESE GROUNDS O F APPEAL OF BOTH THE PARTIES. THE ORDER OF THE LD. CIT(A) IS MAINTAINED AND GROUND NO . 2 OF APPEAL OF THE ASSESSEE AND GROUND NO. 3 OF REVENUES APPEAL ARE, ACCORDING LY, DISMISSED. 7.1 THERE IS NO OTHER EFFECTIVE GROUND OF APPEAL IN THE APPEAL OF THE ASSESSEE. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. ISSUE NO.3 : 8. THE REVENUE ON GROUND NO.1 OF ITS APPEAL CHALLEN GED THE DELETION OF ADDITION OF RS.42,70,290/- MADE U/S. 40(A)(IA) OF T HE IT ACT. THE AO MADE ABOVE ADDITION ON ACCOUNT OF DISALLOWANCE OF LABOUR EXPEN SES. THE ASSESSEE HAS SHOWN PAYMENT OF RS.40,45,290/- TO M/S. RAVI CONSTRUCTION CO. AND OF RS.2,25,000/- TO MR. UTTAM SINGH AS LABOUR CHARGES, ON WHICH NO TDS HAS BEEN DEDUCTED. THE ASSESSEE SUBMITTED BEFORE THE O THAT NUMBER OF LABO URERS INCLUDING CASUAL LABOUR EMPLOYED WAS APPROXIMATELY 200 FOR EXECUTION OF WOR K AND PAYMENTS TO SHRI UTTAM SINGH IS MADE FOR SUPPLY OF GITTI INCLUDING H ANDLING AND TRANSPORTATION CHARGES. THEREFORE, THE PROVISIONS OF SECTION 194C ON THESE TWO PAYMENTS ARE NOT APPLICABLE. THE AO REJECTED THE CONTENTION OF THE A SSESSEE AS THE PAYMENT IS MADE TO M/S. RAVI CONSTRUCTION AND NOT TO INDIVIDUAL LAB OURERS. SIMILAR WAS THE VIEW IN ITA NO. 396 & 420/AGRA/2011 12 THE CASE OF SHRI UTTAM SINGH BECAUSE IT WAS MADE FO R LABOUR EXPENSES AND NOT FOR SUPPLY OF GITTI. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT THE LABOUR CHARGES WERE DEBITED FROM 30.04.2007 TO 23.08.2007. IT WAS SUBMITTED THAT IN THE BOOKS OF ACCOUNT WERE CONSOLIDATED ON ACCOUNT OF LA BOUR CHARGES PAID/PAYABLE FOR A PARTICULAR PERIOD IS DEBITED. AS A MATTER OF FACT , THE NUMBER OF LABOURERS INCLUDING CASUAL LABOURERS EMPLOYED BY THE ASSESSEE FIRM IS APPROXIMATE OF 200 LABOURERS TO WHOM PAYMENT IS MADE IN CASH PERIODICA LLY AND INDIVIDUALLY FOR SINGLE LABOURER, THE PAYMENT DID NOT EXCEED RS.50,0 00/- TO 60,000/- DURING THE YEAR. THE ASSESSEE HAS MAINTAINED MUSTER ROLL SHOWI NG PAYMENT TO INDIVIDUAL EMPLOYEES. THE SAME WAS ALSO PRODUCED BEFORE THE AO . IT WAS SUBMITTED THAT THE LABOUR CHARGES AND WAGES FALL UNDER THE HEAD SALARY AND TDS IS ONLY REQUIRED ON SALARY IF SALARY PAID/PAYABLE TO INDIVIDUAL PERSON EXCEEDS THE TAXABLE LIMIT OF RS.1,50,000/-. IT WAS SUBMITTED THAT SINCE PAYMENT TO EACH LABOURER WAS BELOW TAXABLE LIMIT, THEREFORE, THERE WAS NO OBLIGATION T O DEDUCT TDS. THE ADDITION IS, THEREFORE, LIABLE TO BE DELETED. THE LD. CIT(A) CON SIDERING THE EXPLANATION OF THE ASSESSEE AND THE MATERIAL ON RECORD DELETED THE ADD ITION. HIS FINDINGS IN THE APPELLATE ORDER IN PARA 4.2 ARE REPRODUCED AS UNDER : 4.2. APPELLANTS SUBMISSIONS HAVE BEEN CONSIDERED CAREFULLY. AS PER COPY OF LABOUR EXPENSES ACCOUNT, THE APPELLA NT HAS MADE CASH PAYMENT ON VARIOUS DATES AS PER ITS LABOUR PAYMENT SHEETS MAINTAINED ON THE SITE. NONE OF THE AMOUNT IS FOUND EXCEEDING THE PRESCRIBED LIMIT REQUIRING THE APPELLANT TO DEDUCT TDS. PAYMENT OF R S.75,000/- EACH HAS BEEN DEBITED THROUGH JOURNAL ENTRIES IN THE NAM E OF SHRI UTTAM ITA NO. 396 & 420/AGRA/2011 13 SINGH ON 12.02.08 & 31.03.08. THUS, THOUGH THE APPE LLANTS SUBMISSIONS MADE DURING THE COURSE OF ASSESSMENT PR OCEEDINGS THAT PAYMENT MADE TO SHRI UTTAM SINGH IS FOR SUPPLY OF G ITTI IS NOT FOUND ACCEPTABLE, AS THE SAID PAYMENT HAS ADMITTEDLY BEEN MADE FOR SUPPLY OF LABOUR BY HIM; BUT AT THE SAME TIME, THERE IS NO EVIDENCE ON RECORD EITHER TO SHOW THAT HE HAS BEEN PAID IN VIOLATION O F PROVISIONS OF SEC. 40(A)(IA) OR THAT HE HAS MADE PAYMENT OF RS.2,25,00 0/- TO LABOUR. A.O. IS ACCORDINGLY NOT FOUND JUSTIFIED IN MAKING D ISALLOWANCE OF RS.2,25,000/- MADE U/S. 40(A)(IA) FOR PAYMENT MADE TO SHRI UTTAM SINGH AT RS.2,25,000/-. THE SAME IS, HEREBY, DELETE D. IN RESPECT OF PAYMENT MADE TO M/S. RAVI CONSTRUCTI ON FOR RS.40,45,290/-, IT IS SEEN THAT THE APPELLANT HAS E NTERED INTO AN AGREEMENT ON 11.02.2006 WITH M/S. RAVI CONSTRUCTION CO., A PARTNERSHIP FIRM HAVING REGISTERED OFFICE AT MORENA AND ADMINISTRATIVE OFFICE AT GWALIOR MAKING THE APPELLA NT SUB-CONTRACTOR OF M/S. RAVI CONSTRUCTION CO. WHO HAS BEEN AWARDED CONTRACT WORKS WORTH RS.3.94 CRORES BY MPRRDA VIDE AGREEMENT DTD. 10.02.2006. THE APPELLANT HAS EXECUTED THIS WORK AS SUB-CONTRAC TOR @ 2% BELOW THAN THE RATES QUOTED BY M/S. RAVI CONSTRUCTION CO. REQUIRED TDS ON THIS AGREEMENT FOR EXECUTION OF WORKS HAS ALSO BEEN DEDUCTED AND DEPOSITED ACCORDINGLY AS PER TDS CERTIFICATES. COPY OF ACCOUNT STATEMENT OF THE APPELLANT AS APPEARING IN BOOKS OF ACCOUNTS OF M/S. RAVI CONSTRUCTION CO. HAS ALSO BEEN SUBMITTED SHOWI NG VARIOUS PAYMENTS MADE FOR EXECUTION OF CONTRACT WHICH INCLU DES SALARY PAID TO SITE STAFF, IMPUGNED LABOUR CHARGES, COST OF GIT TI AND OTHER MATERIALS ETC. AO IS NOT FOUND JUSTIFIED IN MAKING THE ADDITION SOLELY ON THE GROUND THAT AMOUNT OF RS.40,45,290/- HAS BEE N MADE AS PER LABOUR EXPENSE ACCOUNT. ACCORDINGLY, AFTER PERUSAL OF RECORDS AND SUBMISSIONS OF THE APPELLANT, ADDITION OF RS.40,45, 290/- IS, HEREBY, DELETED. 9. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE HAS SUBMITTED THAT LARGE NUMB ER OF LABOURERS WERE EMPLOYED TO WHOM THE PAYMENTS ARE MADE IN CASUAL PERIODICALL Y. IT IS SUPPORTED BY THE MUSTER ROLL AND NONE OF THE PAYMENTS ARE FOUND TO H AVE EXCEEDED THE PRESCRIBED ITA NO. 396 & 420/AGRA/2011 14 LIMIT REQUIRING THE ASSESSEE TO DEDUCT TDS IN THE C ASE OF UTTAM SINGH. IN THE CASE OF RAVI CONSTRUCTION CO., THE ASSESSEE IS SUB-CONTR ACTOR OF THIS COMPANY AND HE HAD DONE WORK FOR THEM AND THE GROSS WORK DONE AS P ER RA BILL WAS RS.1,68,65,966/-, WHICH IS EVIDENT FROM PB-17 IS AC COUNT STATEMENT OF ASSESSEE IN THE BOOKS OF RAVI CONSTRUCTION CO., ON WHICH TDS HA S BEEN DEPOSITED. FORM 16A ISSUED BY THIS COMPANY IS FILED AT PAGE 19 OF THE P APER BOOK. AS REGARDS THE PAYMENT OF RS.40,45,290/- PAID TO M/S. RAVI CONSTRU CTION COMPANY FOR LABOUR CHARGES, THIS WORK WAS DONE BY THE PRINCIPAL COMPAN Y WHICH WAS DEPOSITED AND ADJUSTED FROM THE ACCOUNT OF THE ASSESSEE AND NO AC TUAL PAYMENT WAS MADE WHICH IS ALSO EVIDENT FROM THE COPY OF ACCOUNT IN THE BOO KS OF THE PRINCIPAL COMPANY (PB 17 & 18). HE HAS SUBMITTED THAT THE LD. CIT(A) RIGHTLY DELETED BOTH THE ADDITIONS BECAUSE THERE IS NO VIOLATION OF SECTION 40(A)(IA) OF THE IT ACT. 10. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE A RE OF THE VIEW THAT THE MATTER HAS NOT BEEN PROPERLY CONSIDERED BY THE LD. CIT(A). THE AO FOUND THAT THE ASSESSEE HAS MADE PAYMENT TO MR. UTTAM SINGH FOR LA BOUR EXPENSES AND NOT FOR THE PURCHASE OF GITTI. THE ASSESSEE HAS, HOWEVER, TAKEN THE CONTRARY PLEA BEFORE THE AO THAT THE PAYMENT MADE TO SHRI UTTAM SINGH WAS FO R SUPPLY OF GITTI, INCLUDING HANDLING AND TRANSPORTATION CHARGES. THE LD. CIT(A) DID NOT TAKE INTO CONSIDERATION SUCH CONTRARY PLEA OF THE ASSESSEE AND JUST BY GOIN G THROUGH THE COPY OF LABOUR ITA NO. 396 & 420/AGRA/2011 15 EXPENSES ACCOUNT, DELETED THE ADDITION BY HOLDING T HAT NONE OF THE PAYMENTS HAVE EXCEEDED THE PRESCRIBED LIMIT. IT APPEARS THAT THE ASSESSEE HAS MANIPULATED AND CONCOCTED RECORD JUST TO CIRCUMVENT THE TDS PROVISI ONS BY DEBITING THE AMOUNT IN THE NAME OF SHRI UTTAM SINGH. THE LD. CIT(A) ALSO W ITHOUT ANY REASONS HELD THAT THERE IS NO VIOLATION OF PROVISIONS OF LAW. THE ASS ESSEE, THEREFORE, MADE CONTRARY PLEA. THEREFORE, THE LD. CIT(A) WITHOUT VERIFYING T HE FACTS AND WITHOUT GOING THROUGH THE FINDINGS OF THE AO SHOULD NOT HAVE DELE TED THE ADDITION OF RS.2,25,000/-. IN THE CASE OF M/S. RAVI CONSTRUCTIO N CO. ALSO, THE AO FOUND THAT THE ASSESSEE HAS MADE PAYMENT TO M/S. RAVI CONSTRUC TION CO. AND NOT TO THE INDIVIDUAL LABOURERS. BUT BEFORE THE LD. CIT(A), TH E ASSESSEE CLAIMED THAT PAYMENTS HAVE BEEN MADE TO LARGE OF LABOURERS WHICH IS BELOW THE PRESCRIBED LIMIT. THE COPY OF THE ACCOUNT OF RAVI CONSTRUCTION CO. ALSO SUPPOR TS THE CASE OF THE AO THAT IN FACT PAYMENT HAS BEEN MADE TO M/S. RAVI CONSTRUCTIO N CO. AND NOT TO THE INDIVIDUAL LABOURERS. THEREFORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.40,45,290/-. IT WAS NOT THE PAYMENT MADE TO PETTY LABOURERS. THE ASSESSEE TOOK CONTRARY PLEA ON THIS ISSUE ALSO BEFO RE THE LD. CIT(A). THE LD. CIT(A) INSTEAD OF VERIFYING THE FACTS IN PROPER PERSPECTIV E, WRONGLY DELETED THE ADDITION. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A ) AND RESTORE THE ORDER OF THE AO. GROUND NO. 1 OF THE DEPARTMENTAL APPEAL IS ALLOWED. ISSUE NO.4 : ITA NO. 396 & 420/AGRA/2011 16 11. ON GROUND NO.2 OF THE DEPARTMENTAL APPEAL, THE REVENUE CHALLENGED THE DELETION OF ADDITION OF RS.5,11,632/- U/S. 40A(3) O F THE IT ACT. THE AO MADE THE ABOVE ADDITION BECAUSE THE ASSESSEE HAS INCURRED SA ID EXPENDITURE IN CASH ON 31.03.2008 IN VIOLATION OF SECTION 40A(3) OF THE AC T. THEREFORE, THE ADDITION WAS MADE. IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT S ITE HAS BEEN CONSTRUCTED TEMPORARILY AND NO PAYMENT EXCEEDING RS.20,000/- HA S BEEN MADE. THE ENTIRE AMOUNT WAS CONSOLIDATED AT THE END OF THE FINANCIAL YEAR SHOWING THE CONSOLIDATED PAYMENT BY MAKING GENERAL ENTRY. THEREFORE, THE ADD ITION IS UNJUSTIFIED. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE BY V ERIFYING THE FACTS. THE LD. CIT(A) ON THE BASIS OF THE BILLS, VOUCHERS AND DETA ILS ETC. FOUND THAT NO PAYMENTS IN CASH HAVE EXCEEDED RS.20,000/- ON ANY SINGLE DAY . CONSOLIDATED ENTRY IS PASSED AT THE END OF THE FINANCIAL YEAR AND ACCORDINGLY, A DDITION WAS DELETED. 12. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE D O NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN DELET ING THE ADDITION. THE LD. CIT(A) FOUND IN HIS FINDINGS THAT NO PAYMENT MADE IN CASH EXCEEDED RS.20,000/- ON ANY SINGLE DAY. IT IS THE DEPARTMENTAL APPEAL AND NO MA TERIAL IS PRODUCED BEFORE US TO CONTRADICT THE FINDINGS OF THE LD. CIT(A). THEREFOR E, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. IN THE RESULT, GROUND NO. 2 O F APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 396 & 420/AGRA/2011 17 12.1 THERE IS NO OTHER POINT RAISED IN THE DEPARTME NTAL APPEAL. IN THE RESULT, THE DEPARTMENTAL APPEAL IS PARTLY ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES AND DEPARTMENTAL APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY